Sasbadi Annual Report 2018

08 MESSAGE TO SHAREHOLDERS On behalf of the Board of Directors (“the Board”) of Sasbadi Holdings Berhad (“Sasbadi Holdings” or “the Company”), it is our pleasure to present to you the Annual Report and the Audited Financial Statements of Sasbadi Holdings and its subsidiaries (“the Group”) for the financial year ended (“FYE”) 31 August 2018. Financial Review Stemming from the weak third and fourth quarters of FYE 31 August 2017, retail market sentiments did not improve but continued to worsen. Coupled with the workbook “ban” enforced by the Ministry of Education Malaysia (“MoE”) and interruptions caused by the more than usual public holidays, the Group registered a drop in revenue of RM5.212 million (equivalent to 5.6%) from RM93.053 million for the preceding financial year to RM87.841 million for the current financial year. However, it is to be noted that the preceding financial year’s revenue included a one-off contract of RM3.850 million for the supply of robotics sets to the MoE and the textbook reprint orders of approximately RM2.530 million from the MoE which were delayed from the fourth quarter of FYE 31 August 2016 to the first quarter of FYE 31 August 2017. In that regard, if these two (2) revenue items were excluded, the Group would have recorded a slight increase in revenue of RM1.168 million (equivalent to 1.3%) for the current financial year. During the current financial year, the Group’s digital and network marketing segments achieved an increase in revenue of RM2.292 million (equivalent to 37.7%) but it was partly offset by the decline in the print publishing segment. For FYE 31 August 2018, the Group recorded a profit before tax (“PBT”) of RM4.210 million vis-à-vis a PBT of RM11.451 million for the preceding financial year, representing a decrease of RM7.241 million (equivalent to 63.2%). The decrease in PBT was mainly due to higher finance costs, provision for impairment of inventories of RM4.045 million, and lower revenue. It is to be noted that the Group’s measures to control cost has resulted in lower distribution, administrative and other operating expenses incurred by the Group during the current financial year. In terms of earnings per share (“EPS”), the Group’s EPS decreased by 1.43 sen from 1.92 sen for FYE 31 August 2017 to 0.49 sen for FYE 31 August 2018. The equity attributable to owners of the Company was RM156.267 million as at 31 August 2018 vis-à-vis RM145.383 million as at 31 August 2017, while the Group’s debt-to-equity ratio was 0.27 times as at 31 August 2018 vis-à-vis 0.25 times as at 31 August 2017. Further details on the review of the Group’s financials and operations are presented in the Management Discussion and Analysis section of this Annual Report. Prospects Despite the Group’s efforts in pursuing growth for our other segments, i.e. (i) network marketing business; (ii) non-academic print publishing; (iii) early education and private/international schools products; and (iv) rights licensing and export market, the revenue generated during the current financial year was not sufficient to spur the Group’s revenue growth. Besides weak market conditions, these segments are relatively new to our Group and we have yet to achieve the optimum efficiency desired. For FYE 31 August 2019, the Group will continue to pursue growth for all the segments mentioned above by focusing on these markets. The Group will also heighten its participation in textbook and other tenders being offered by the MoE. To mitigate the impact of seasonality patterns and the declining lower primary school workbook market, the Group has reallocated its resources to produce workbooks that target the retail market and contents for the export market. Going forward, the Group will step up its marketing efforts in the rights licensing and export market by participating in all major international book fairs to grow export-based revenue. Premised on the above and barring any unforeseen circumstances, the Group is optimistic about our prospects and performance for FYE 31 August 2019. Appreciation In January 2018, Mr Lee Eng Sang retired from the Board as our non-independent non-executive director. We wish to take this opportunity to extend our sincere appreciation to Mr Lee for his counsel, wisdom and contributions to the Group. We are also grateful and appreciative to all our shareholders, our fellow Board members, the leadership team and employees, our customers and suppliers, associates and business partners for their unwavering support during FYE 31 August 2018. The Group humbly requests for your continuous contribution, support and trust for the years ahead. Law King Hui Group Managing Director Dato’ Salleh Bin Mohd Husein Independent Non-Executive Chairman