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Quarterly Report For The Financial Period Ended 30 September 2017

Financials Archive

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Unaudited Condensed Consolidated Income Statements

Unaudited Condensed Consolidated Statements Of Financial Position

Review Of Performance

Overall performance

For the current 9-month period ended 30 September 2017 ("9M 2017"), the Group recorded a lower revenue of RM177.0 million compared to a revenue of RM186.1 million for the corresponding period last year ("9M 2016"). The revenue of Property Development division showed a decrease of RM15.9 million for 9M 2017 compared to 9M 2016 offset by increase in revenue for Information & Communications Technology ("ICT"), Travel & Tours and Hotels & Resorts divisions by RM3.1 million, RM3.2 million and RM0.9 million respectively. Despite the lower Group revenue, the profit from operations improved by 6.3% from RM4.5 million in 9M 2016 to RM4.8 million in 9M 2017 mainly due to improvement in other operating income and reduction in operating expenses. The improved operating results is offset by higher finance costs and the losses substained by the associated companies in the current period under review resulting in the Group recording a lower profit before tax of RM0.2 million for 9M 2017 as compared to a profit before tax of RM1.9 million for 9M 2016.

Investment Holding

The division recorded a higher loss before tax of RM7.1 million for 9M 2017 compared to a loss before tax of RM5.3 million for 9M 2016. This was mainly attributable to the lower results of the associated companies.

Hotels & Resorts

The Hotels & Resorts division registered a higher revenue for 9M 2017 of RM45.8 million compared to RM44.9 million for 9M 2016 and a higher profit before tax of RM5.0 million in 9M 2017 compared to RM1.9 million for 9M 2016. For the period under review, overall, the Hotels & Resorts division achieved a higher average occupancy rate and average room rate for 9M 2017 compared to 9M 2016. The better performance from Holiday Villa Beach Resort & Spa Langkawi and Holiday Villa Hotel & Suites London were offset mainly by the lower revenue from other local hotels, namely, Holiday Villa Beach Resort & Spa Cherating and Holiday Villa City Centre Alor Setar, and the lower management fee from Holiday Villa Hotel & Residence Doha City Centre.

Information & Communications Technology

The division recorded a higher revenue of RM43.1 million for the 9M 2017 compared to the revenue of RM40.0 million in 9M 2016 mainly attributable to higher managed service contracts and new system sale contract revenue recorded by GlobeOSS business unit ("BU"), offset by lower system sale contract revenue recorded by Unifiedcomms BU due to delays in the award of new system sale contracts. The improved revenue, in RM, which was translated from the division's reported revenue in Singapore Dollar ("S$"), was also contributed by the higher foreign currency exchange rate for the conversion of S$ to RM for 9M 2017 compared to the rate in 9M 2016.

The division recorded a lower profit before tax, in S$, for 9M 2017 compared to 9M 2016 mainly attributable to an overall reduction in its gross profit margin primarily due to higher proportionate contribution of system sale contract revenue by GlobeOSS BU, which generally delivers lower gross pofit margin, and higher operating expenses. This was partly offset by higher other operating income from a fair value gain recorded in 9M 2017 in relation to the division's venture investment portfolio. However, upon translation of the profit before tax in S$ to RM, the profit before tax from the division for the period under review was reported at RM7.8 million which was slightly higher compared to the profit before tax in 9M 2016 of RM7.7 million attributable mainly to the higher foreign currency exchange rate for the conversion of S$ to RM for 9M 2017 compared to the rate in 9M 2016.

Property Development

The Property Development division registered a lower revenue for 9M 2017 of RM1.0 million compared to RM16.8 million for 9M 2016. In 9M 2016, there were development and sales in Phase 1 Federal Park which contributed to the revenue in 9M 2016. Phase 1 Federal Park was completed in June 2016. The next phase comprising mainly of townhouses, Phase 2 Federal Park, which is slated to be launched in third quarter in 2017 is pending the necessasy approvals for the amendment in the approved plan. With the lower revenue, this division recorded a small loss of RM23,000 for 9M 2017 compared to a profit before tax of RM3.1 million for 9M 2016.

Travel & Tours

For the current period under review, our Travel & Tours division achieved a higher revenue of RM74.9 million as compared to a revenue of RM71.7 million for the corresponding period last year, an increase of RM3.2 million mainly from ticketing and outbound travel sales offset by the lower revenue in the inbound tours division. Despite the higher revenue, this division recorded a lower profit before tax of RM1.2 million for 9M 2017 compared to RM3.3 million for 9M 2016 mainly due to lower gross profit margin and a higher loss from the inbound tours division due to the flowdown effect of a reduction in revenue.

Others

The Others division registered a lower revenue of RM12.1 million for 9M 2017 compared to RM12.5 million for 9M 2016. This division recorded a lower loss before tax of RM6.7 million for 9M 2017 as compared to a loss of RM9.4 million for 9M 2016 mainly due to lower operating expenses for 9M 2017 and that the operating expenses in 9M 2016 included a loss on disposal of the loss making manufacturing subsidiary of RM1.6 million.

Prospects

Our Board expects the remaining period of 2017 to be challenging for the Group with expected volatility in the global economy and increasing inflationary pressures in our domestic market.

With the expected challenging environment, our Board is cautiously optimistic on the implementation of our business plans. Our Group will continue its focus on measures to improve operational efficiencies and productivity coupled with cost reduction efforts. To deliver substainable growth in revenues and profits of our major divisions, the Group will pursue its strategic plans which are already in place to grow our established core businesses and explore attractive opportunities to expand operations. For the non-core loss-making businesses, we will focus on turnaround restructuring plans failing which the business unit will cease operations and/or be divested.

Although the Hotels & Resorts division views the business outlook for 2017 to be challenging, the division is cautiously optimistic taking into consideration our focus on certain encouraging trends in the industry and the anticipated increased online sales from direct online bookings on our recently launched upgraded website. The division will also focus on developing business from the Asia region by working with tour operators, local corporate businesses, and be innovative in securing more residential meetings. Our focus to grow the hotels and resorts businesses regionally will partly mitigate the anticipated weak local meetings, incentives, conferences and exhibitions (MICE) market for 2017 and the recent political events in Qatar which have an adverse impact on our hotel performance in Doha, Qatar.

The Information & Communications Technology ("ICT") division expects the remainder of financial year 2017 to be challenging but remain optimistic about growth prospect. Although 2016 proved to be another unexpectedly good year for business generated from system sale contracts, the division does not expect this to be a trend that can be readily extended into 2017. Significant uncertainty and hence lumpiness is still to be expected in the contribution of system sale contracts to the performance of both Unifiedcomms and GlobeOSS businesses. The management of this division will continue to work on improving execution in respect of strategies and tactics to grow the division managed service contract revenues and profit and further build on the improvement achieved for this year. The growing interest and opportunity in internet-driven application services, new media and applications delivered on an advertisement-supported or advertisement-funded model continues to be recognised by management of this division. The division's strategic and venture investment plans in the year ahead will continue to focus primarily on these growth businesses in the South East Asia and South Asia regions and will complement the growth initiatives of existing businesses.

Our Property Development division expects to face continued challenges in the remaining period of 2017 due to the continued delay in the launching of Phase 2, Federal Park but remain optimistic about its prospects once Phase 2, Federal Park is launched although there may be some weaknesses due to the softening of the property market in Kuching and the cooling measures on the property market. The division will focus on developing and launching Phase 2 of its Federal Park project, to drive the earnings of the division for 2018.

Our travel and tours division is cautiously optimistic of their performance for the remaining period of 2017 as they continue to remain focused on building its corporate client base and the wholesale market segment for the ticketing business and in developing and adapting its products to sustain growth in the leisure and corporate group markets for both inbound and outbound travel and tours.

The Others division will remain focused on its key strategies to drive the revenue growth plan although the continued challenges in 2017 may cause significant uncertainty in the achievement of such revenue growth plan this year. In addition, the division will focus on improving the execution process and implementing cost saving measures to address the challenge of rising cost pressure. Further restructuring plans to turnaround non-performing businesses (which may include cessation of such business and/or divestment if the restructuring is not successful within a targeted period) will be implemented to improve the performance of this division. In this respect, our Traditional Chinese Medicine ("TCM") business will cease operations by end of this year due to the continued weak sales generated by the business.