Sasbadi Annual Report 2019

The Group’s debt-to-equity ratio was 0.23 times as at 31 August 2019 vis-à-vis 0.28 times as at 31 August 2018. The decrease in the Group’s debt-to-equity ratio was mainly due to the repayment of bank overdrafts, term loans and bankers’ acceptances from the higher net cash generated from operations. The decrease in bank borrowings also resulted in the increase in current ratio from 2.88 times as at 31 August 2018 to 3.10 times as at 31 August 2019. During the financial year, the Group did not incur any other major capital expenditure. Review of Operating Segments Print Publishing Business The Group’s print publishing segment’s revenue increased from RM75.827 million for the preceding financial year to RM79.129 million for the current financial year, which was mainly due to better performance from academic book sales. Academic Print Publishing – National and International Schools The performance from academic book sales has improved from last year. This was mainly due to our efforts in publishing quality books/tittles at affordable prices for students and teachers. In order to address the weak retail market and the workbook “ban” for Standard 1 to 3 students enforced by the MoE, the Group scaled back the number of publications during FYE 31 August 2019 and instead focused on titles which were more popular and favourable to our markets. This was also part of our effort to optimise our cost. The Group has also seen some positive results from our efforts initiated since the previous financial year to obtain new revenue streams via collaborative strategy.Our wholly-own subsidiary, Malaysian Book Promotions Sdn Bhd ("MBPSB") entered into a distribution agreement with Marshall Cavendish Education Pte Ltd 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) as part of our collaborative initiatives to enter a new market segment, i.e. the private and international school market in Malaysia. For the FYE 31 August 2019, the contribution from the sales of MCE products increased from RM1.771 million for the preceding financial year to RM2.717 million for the current financial year (equivalent to 53.4%). The revenue contribution from the new textbook contracts have also increased by RM1.897 million from RM11.475 million for the preceding financial year to RM13.372 million for the current financial year (equivalent to 16.5%). The increase is mainly attributable to tender contracts won in 2018. Similar to 2018, the Group has successfully won six (6) new textbook contracts from the government in 2019. However, the value of the contracts are significantly lower than the prior year’s value due to the nature and scope of Stage 2 education (Standard 4 to 6) which is typically much smaller due to the absence of activity books. Even though the tender business has never been regarded as a growth factor for the Group due to its unpredictability, nevertheless, with increasing tender opportunities under the present government which adopts the “no-direct-negotiations” policy, the Group continually strives to secure more tenders offered by the government. Non-Academic Print Publishing For FYE 31 August 2019, the Group has seen better results from our non-academic related segment partly due to the sales of titles from Pinko Creative Sdn Bhd ("Pinko Creative"). The acquisition of 100% equity interest in Pinko Creative by the Group in May 2018 has enhanced our presence in the segment of Chinese Language comic book publishing and our overall sales of non-academic print publishing. Going forward, the Group will focus on the marketing of non-academic related titles as a strategy for organic growth, especially by capitalising on the marketplace void created from the ban of workbooks where students can use their freed-up time to read non-academic books. In view of the government’s aspiration to cultivate a fun learning environment, we expect to see heightened activity in our non-academic print publishing segment. MANAGEMENT DISCUSSION AND ANALYSIS (continued) PAGE 10 Sasbadi's academic section at the Popular BookFest 2019 Sasbadi's non-academic section at the Popular BookFest 2019 SASBADI HOLDINGS BERHAD