Sasbadi Annual Report 2017

SASBADI HOLDINGS BERHAD (1022660-T) 10 Review of Operating Segments Academic Print Publishing – National Schools Collectively, SSB and MBPSB recorded a drop in revenue of RM11.15 million (equivalent to 16.3%) from RM68.42 million for FYE 31 August 2016 to RM57.27 million for FYE 31 August 2017 mainly due to the weak retail market conditions. To address the weak retail market, the Group has continued to publish a variety of quality titles/books at affordable prices for students and teachers. In addition, the Group has continued to leverage on our in-house developed technology such as augmented reality (“AR”) and mobile applications to enhance our academic books, thus making learning and teaching more fun and interactive. The Group has also stepped up our efforts to open up new distribution channels and market segments, and to undertake collaboration initiatives. The distribution agreement that we have entered into with Marshall Cavendish Education Pte Ltd (“MCE”) in November 2017 for the exclusive right to distribute certain MCE-published titles in Malaysia for a term from 1 November 2017 to 30 September 2020 (with renewal options) is an example of collaboration initiatives undertaken by the Group to enter a new market segment, i.e. the private and international schools in Malaysia. In addition, in March 2017, we have been granted the exclusive licence by Majlis Peperiksaan Malaysia (“MPM”) for a period of three (3) years from 1 January 2017 to 31 December 2019 to publish, distribute and sell the collections of past year question papers for the Sijil Tinggi Persekolahan Malaysia (“STPM”) examination (both Science stream and Social Science stream) and the Malaysian University English Test (“MUET”), and the reports on the STPM examination and MUET. On the textbook publishing front, as announced by us on 4 April 2017 and 9 May 2017, SSB won three (3) new textbook contracts from the Ministry of Education Malaysia (“MoE”) with total estimated contract values of RM7.11 million for FYE 31 August 2017 vis-à-vis one (1) new textbook contract with an estimated contract value of RM3.89 million for FYE 31 August 2016. The Group will continue to participate in textbook tenders offered by the MoE in the financial year ending (“FYE”) 31 August 2018. Academic Print Publishing –National-type (Chinese) Schools The SUSB Group recorded an increase in revenue of RM2.27 million (equivalent to 15.7%) from RM14.43 million for FYE 31 August 2016 to RM16.70 million for FYE 31 August 2017 mainly due to higher revenue from the supply of textbooks to the MoE. The Group recognised the full year’s results of the UPH Group for FYE 31 August 2017 vis-à-vis less than a month’s results of the UPH Group for FYE 31 August 2016 given that we only acquired the UPH Group in August 2016. In this regard, the revenue of the UPH Group consolidated into the Group’s results increased from RM0.86 million for FYE 31 August 2016 to RM8.24 million for FYE 31 August 2017. During FYE 31 August 2017, the Group has embarked on restructuring and realigning the resources of the SUSB Group and the UPH Group to enable them to operate more efficiently and effectively, given that both the SUSB Group and the UPH Group operate in the same segment, i.e. the SJKC segment. In this regard, duplication of resources and distribution channels is reduced and cross leveraging of resources is enhanced during the exercise. In order for the Group to have full control over how we can leverage on our competitive strengths such as our online and digital technological capabilities, extensive distribution network, economies of scale, etc, to enhance the product offerings and drive growth in the SUSB Group, we have, in July 2017, acquired the remaining 30% equity interest in SUSB. In this regard, the SUSB Group is now wholly-owned by us. The restructuring and realignment exercise is still on-going, and the SUSB Group and the UPH Group are expected to show better performance in FYE 31 August 2018 as a result of the exercise. On the textbook publishing front, as announced by us on 4 April 2017 and 9 May 2017, the SUSB Group won two (2) textbook contracts from the MoE valued at an estimated total sum of RM4.03 million for FYE 31 August 2017 vis-à-vis three (3) new contracts totaling RM5.45 million for FYE 31 August 2016. MANAGEMENT DISCUSSION AND ANALYSIS