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Quarterly Report For The Financial Period Ended 31 March 2018

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 3-month period ended 31 March 2018 ("Q1 2018"), the Group recorded a higher revenue of RM65.8 million compared to a revenue of RM61.0 million recorded for the corresponding period last year ("Q1 2017"). The revenue of Information & Communications Technology ("ICT") and Travel & Tours divisions increased by RM2.0 million and RM5.6 million respectively partly offset by a decline in revenue from Property Development and Hotels & Resorts divisions of RM0.7 million and RM1.3 million respectively for Q1 2018 compared to Q1 2017. The Group recorded higher loss before tax of RM2.2 million in Q1 2018 compared to RM0.1 million in Q1 2017 mainly due to lower gross profit margin of 30.5% in Q1 2018 compared to 35.6% in Q1 2017 coupled with lower other operating income of RM1.7 million in Q1 2018 compared to RM2.5 million in Q1 2017. The lower other operating income in Q1 2018 compared to Q1 2017 was mainly due to lower interest income and lower foreign exchange gain.

Investment Holding

The division recorded a loss before tax of RM2.9 million for Q1 2018 compared to RM1.9 million for Q1 2017 mainly attributable to higher operating expenses.

Hotels & Resorts

The Hotels & Resorts division registered a lower revenue for Q1 2018 of RM14.4 million compared to RM15.7 million for Q1 2017. The better performance from Holiday Villa Beach Resort & Spa Langkawi and Holiday Villa Hotel & Suites London were offset mainly by the lower revenue from Holiday Villa Alor Setar City Centre and the lower management fee from Holiday Villa Hotel & Residence Doha City Centre. With the lower revenue, the division recorded lower profit before tax of RM0.7 million for Q1 2018 compared to RM1.2 million for Q1 2017.

Information & Communications Technology

The division recorded a higher revenue of RM17.9 million for Q1 2018 compared to the revenue of RM15.9 million in Q1 2017 mainly attributable to higher system sale contract revenue recorded by GlobeOSS business unit ("BU") and higher managed service contract revenue recorded by Unifiedcomms BU, offset by lower system sale contract revenue recorded by Unifiedcomms BU.

The division recorded a lower profit before tax ("PBT") of RM2.2 million for Q1 2018 as compared to a PBT of RM2.6 million in Q1 2017. The reduction in PBT was 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 yield lower gross profit margin as a result of its typically higher third party costs and lower gross profit margin on its managed service contract revenues mainly due to higher third-party costs on certain managed service contracts, coupled with higher foreign exchange loss recorded in Q1 2018.

Property Development

The Property Development division registered a lower revenue for Q1 2018 of RM38,000 compared to RM0.7 million for Q1 2017. The Phase 2 Federal Park, comprising mainly townhouses, is slated to be launched later this year pending the necessary approvals for the amendment in the approved plan. With the lower revenue, this division recorded a loss before tax of RM72,000 for Q1 2018 compared to a profit before tax of RM0.1 million for Q1 2017.

Travel & Tours

For the current period under review, our Travel & Tours division achieved a higher revenue of RM30.4 million as compared to a revenue of RM24.9 million in Q1 2017, an increase of RM5.5 million which was 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 similar profit before tax of RM0.5 million for both Q1 2018 and Q1 2017 mainly due to lower gross profit margin.

Others

The Others division registered a lower revenue of RM2.9 million for Q1 2018 compared to the revenue of RM3.7 million for Q1 2017. Despite the lower revenue, this division recorded a lower loss before tax of RM2.5 million for Q1 2018 as compared to a loss of RM2.6 million for Q1 2017 mainly due to cessation of the loss making traditional chinese medicine subsidiary.

Prospects

Our Board expects the financial year 2018 to be challenging for the Group. However, with our focus on turning around the loss-making business units within a target period, 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 sustainable 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 the remaining period of 2018 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 with the anticipated opening of new Holiday Villa hotels this year will partly mitigate the expected weak local meetings, incentives, conferences and exhibitions (MICE) market for this year and the political events in Qatar which will continue to have an adverse impact on our hotel performance in Doha, Qatar.

The Information & Communications Technology ("ICT") division expects financial year 2018 to be challenging but remains optimistic about growth prospect. Although the growth in system sale business of GlobeOSS BU in 2017 had significantly augmented the slower than desired growth of the division's managed service contract portfolio, uncertainty and hence lumpiness is still to be expected in the contribution of system sale contracts to the division's future results. The need for the division's management to continue to strengthen its managed service contract portfolio and to continue to grow its venture investment portfolio as the basis for delivering steady, if not rapid yet sustainable future growth, remains. The growing interest and opportunity in internet-driven application services for enterprises, fintech as well as internet and handset-app delivered digital media will guide the division's venture investment activities. The division's venture investment plans in the year ahead will continue to focus primarily on these growth businesses in the South East Asia region and will complement the organic growth strategy in place for the Unifiedcomms and GlobeOSS businesses.

Our Property Development division faces continued challenges in 2018 due to the continued delay in the launching of Phase 2, Federal Park but remains 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 and will explore properties management projects.

Our travel and tours division is cautiously optimistic of their performance for the remaining period of 2018 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 2018 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.