Sasbadi Annual Report 2019

MANAGEMENT DISCUSSION AND ANALYSIS (continued) PAGE 11 Digital/Online & Technology-enabled Solutions and our Direct Selling Business The Group’s digital and direct selling segment showed a decrease in revenue for the current financial year due to a lower number of new members joining our direct selling team. The combined revenue of MindTech Education Sdn Bhd (“MTE”) and Sasbadi Online Sdn Bhd decreased from RM6.393 million for FYE 31 August 2018 to RM4.428 million (equivalent to 30.7%) for FYE 31 August 2019. The digital and direct selling segment has not unleashed its full potential as yet. Notwithstanding this, the Group continues to explore new products that can be suitably sold through our distribution channel. Following the launch of i-LEARN Ace Junior for national primary school students from Standard 1 to 3 in August 2018, MTE launched the contents for national-type schools in January 2019. The product is now able to cater to the demand of students from both the national and national-type schools. i-LEARN Ace Junior is a learning engagement platform designed to nurture the intellectual, spiritual, and emotional development of primary school students from Standard 1 to 3. It is also built to integrate parents/guardians into the learning ecosystem of pupils at this crucial development stage by allowing parents/guardians to conveniently assess and reward their children based on their progress. In place of workbooks which are banned in schools for Standard 1 to 3 students, i-LEARN Ace Junior can be a suitable solution to complement their academic learning. Applied Learning Products and STEM Education Services The Group’s ALP segment recorded an increase in revenue from RM3.638 million for FYE 31 August 2018 to RM4.170 million for FYE 31 August 2019 (equivalent to 14.6%). The increase was mainly attributable to a heightened interest from both the public and private schools towards our STEM products for elementary school. The Group’s flagship applied learning programme with the MoE, i.e. the National Robotics Competition ("NRC"), has continued to win accolades year after year. The Malaysian contingent has won a gold and bronze medal for the Open Category - Junior High, and the Open Category - Elementary respectively at the prestigious World Robot Olympiad ("WRO" OLSK PU .`͇Y /\UNHY` PU 5V]LTILY WRO 2019 was well attended by around 400 teams from over 60 countries. This programme has consistently generated interest among students, parents, and teachers for the STEM field. In regards to the Group’s collaborative research and product development efforts with the University of Malaya for the Professional Robotics Skills Certificate ("PRSC") Level 1 to Level 5 certification programme, the Group has done a third pilot during the NRC Finals in 2019 and decided to further improvise and enhance the contents of the certification programme. Currently the programme is under review by the University of Malaya. The PRSC certifies STEM related skills such as technical, creativity, innovation, and higher order thinking skills ("HOTS"). Anticipated or Known Risks Competition We face competition from existing competitors as well as potential new entrants in the educational publishing industry. The barriers to entry into the industry are relatively low based on the capital requirements since most of the functions within the publishing processes may be outsourced to third parties. However, the product development and operating costs can be high as there is a long lead time between writing manuscripts and transforming them into end products ready for sale to customers. Our competitive strengths such as our established track records from our 34 years in the industry, brand awareness among students, teachers and parents, extensive distribution network, large customer base, diverse product range, in-house content development, experienced management and editorial personnel, economies of scale and, in particular, in-house technology development put us in a strong position to fend off competition. Seasonality The Group’s business operations are exposed to seasonality patterns as the Group generally experiences significantly higher quarterly sales in the second financial quarter (December to February) and lower quarterly sales in the fourth financial quarter (June to August) compared to the other two (2) financial quarters. This is primarily caused by the timing of the national school’s academic year period. As a result, the seasonal sales patterns may adversely impact the Group’s quarterly revenue, profit and cash flow. The Malaysian Contingent to World Robot Olympiad 2019 Robots ready for action at the national finals of National Robotics Competition 2019 Presentation of token by Yang Berhormat Dr. Maszlee Malik to Mr Law King Hui, Sasbadi Group Managing Director ANNUAL REPORT 2019