Sasbadi Annual Report 2017

MANAGEMENT DISCUSSION AND ANALYSIS ANNUAL REPORT 2017 9 Overview of Operations Sasbadi Holdings Berhad (“Sasbadi Holdings” or “the Company”) is an investment holding company while the Group (i.e. Sasbadi Holdings and our subsidiaries) is an education solutions provider. Please refer to the Corporate Structure section of this Annual Report for details on our subsidiaries. The Group’s history can be traced back to 1985 with the incorporation of Sasbadi Sdn Bhd (“SSB”) and, in the same year, SSB commenced operations as a publisher of printed educational materials. Over the years, the Group has transformed from a pure educational print publisher to a Group with diverse learning and teaching solutions, including technology that enables online learning, digital education products, applied learning tools that facilitate Science, Technology, Engineering and Mathematics (“STEM”) education, education services via learning centres, and a network marketing business, all of which complement the print publishing business. The Company was listed on the Main Market of Bursa Malaysia Securities Berhad on 23 July 2014. Our Head Office is located in Kota Damansara, Petaling Jaya, Selangor, and we also have offices in Sungai Buloh, Selangor (where Sanjung Unggul Sdn Bhd (“SUSB”) and its subsidiaries (“SUSB Group”) operate from), and Seri Kembangan, Selangor (where United Publishing House (M) Sdn Bhd (“UPH”) and its subsidiaries (“UPH Group”) operate from). In addition, MindTech Education Sdn Bhd (“MindTech Education”)’s office is in Cova Square, Kota Damansara, Petaling Jaya, Selangor, while Distinct Element Sdn Bhd (“DE”) operates a STEM learning centre in Atria Shopping Gallery, Damansara Jaya, Petaling Jaya. The Group’s operations are divided into the following segments: (i) Academic print publishing, which is further divided into the following: Financial Review In the past year, the Group has seen increasingly difficult industry and economic situations, culminating in weak retail market conditions. In this regard, the Group recorded only a marginal increase in revenue of RM0.36 million (equivalent to 0.4%) from RM92.69 million for the financial year ended (“FYE”) 31 August 2016 to RM93.05 million for FYE 31 August 2017, while the Group’s gross profit remained at RM45.52 million and the net profit attributable to owners of the Company declined by RM8.65 million (equivalent to 51.8%) from RM16.69 million for FYE 31 August 2016 to RM8.04 million for FYE 31 August 2017. The marginal increase in revenue was due to the consolidation of the full year’s results of the UPH Group (which was acquired by the Company in August 2016), and higher revenue recorded by the SUSB Group and MindTech Education, but offset by lower revenue recorded by SSB, MBPSB, SLS Group and OBSB. The decline in net profit attributable to owners of the Company was mainly due to the lower profits recorded by SSB arising from lower revenue for FYE 31 August 2017, and higher operating costs recorded by the Group in FYE 31 August 2017 arising from, among others, higher cost of amortisation of intellectual properties, impairment loss on trade receivables and higher interest expense. In addition, in FYE 31 August 2016, the Group recognised an exceptional bargain purchase gain of RM4.32 million arising from the acquisition of the UPH Group. Detailed analysis of the operating segments is provided below. The equity attributable to owners of the Company was RM145.38 million as at 31 August 2017 vis-à-vis RM147.64 million as at 31 August 2016. The Company completed a 1-for-2 bonus issue on 14 August 2017, resulting in the increase in the issued and paid-up share capital of the Company from 279.40 million ordinary shares to 419.10 million ordinary shares. The Group’s debt-to-equity ratio was 0.25 times as at 31 August 2017 vis-à-vis 0.14 times as at 31 August 2016. The increase in the Group’s debt-to-equity ratio was mainly due to the additional bank borrowings of RM15.00 million obtained by the Group to finance the acquisition of the remaining 30% equity interest in SUSB for a purchase consideration of RM9.40 million in July 2017 and for working capital purposes. Save for the acquisition of two (2) properties in Cova Square, Kota Damansara, Petaling Jaya, Selangor, for RM2.60 million for MindTech Education’s operations, and renovation works of RM0.59 million carried out on the said properties, the Group did not incur any other major capital expenditure for FYE 31 August 2017. The Group’s current ratio showed a small drop from 3.74 times as at 31 August 2016 to 3.58 times as at 31 August 2017. Academic print publishing focusing on national schools, via SSB and Malaysian Book Promotions Sdn Bhd (“MBPSB”). Academic print publishing focusing on national-type (Chinese) schools (“SJKC”), via the SUSB Group and the UPH Group. (ii) (iii) (iv) (v) Non-academic print publishing, via Orbit Buku Sdn Bhd (“OBSB”), the SUSB Group and the UPH Group. Digital/online and technology-enabled solutions, via Sasbadi Online Sdn Bhd (“SOSB”). Network marketing business, via MindTech Education. Applied learning products and STEM education services, via Sasbadi Learning Solutions Sdn Bhd (“SLS”) and its subsidiaries, i.e. Distinct Motion Sdn Bhd (“DM”) and DE (“SLS Group”). (a) (b)