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Quarterly Report For The Financial Period Ended 31 December 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 year ended 31 December 2017 ("FY2017"), the Group recorded a lower revenue of RM265.9 million compared to a revenue of RM276.8 million recorded last year ("FY2016"). The revenue of Property Development and Hotels & Resorts divisions showed a decrease of RM21.0 million and RM1.4 million respectively for FY2017 compared to FY2016 offset by increase in revenue for Information & Communications Technology ("ICT") and Travel & Tours divisions by RM7.4 million and RM10.4 million respectively. The Group's profit before tax increased from RM7.7 million in FY2016 to RM8.4 million in FY2017 mainly due to lower operating expenses in FY2017 for the Group of RM96.2 million in FY2017 compared to RM148.6 million in FY2016 offset by lower revenue in FY2017 compared to FY2016 coupled with lower gross profit margin of 33.8% compared to 35.2% in the previous year which resulted in the decline of gross profit of RM7.6 million. In addition, other operating income was lower in FY2017 by RM42.6 million. The lower other operating income in FY2017 was mainly due to fair value loss assessed on the ICT's venture investment portfolio in FY2017 compared to fair value gain in FY2016 and lower insurance claim compensation recognition in FY2017 arising from the fire incident in Arosa in FY2016. The lower operating expenses in FY2017 was mainly due to a write off of the hotel property in FY2016 due to the fire incident in Arosa.

Investment Holding

The division recorded a loss before tax of RM0.1 million for FY2017 compared to a profit before tax of RM0.9 million for FY2016 mainly attributable to the lower results of the associated companies.

Hotels & Resorts

The Hotels & Resorts division registered a lower revenue for FY2017 of RM60.5 million compared to RM61.9 million for FY2016. 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. However, this division recorded a profit before tax of RM15.6 million in FY2017 compared to a loss before tax of RM4.0 million for FY2016 mainly due to the insurance claim compensation recognised in FY2017 compared to net loss effect in FY2016 whereby the insurance claim compensation recognised in FY2016 arising from the fire incident in Arosa in FY2016 was offset by the write off of the hotel property and fixed assets in FY2016

Information & Communications Technology

The division recorded a higher revenue of RM77.4 million for the FY2017 compared to the revenue of RM70.0 million in FY2016 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 RM8.8 million for FY2017 as compared to a PBT of RM22.1 million in FY2016. 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 delivers lower gross profit margin, and higher revenue contribution of Unifiedcomms BU's lower gross profit margin revenue share contracts coupled with a fair value loss recorded in FY2017 of RM1.1 million in relation to the division's venture investment portfolio as compared to a fair value gain recorded in FY2016 of RM8.8 million.

The fair value loss, which is unrealised, is a result of lower estimated fair valuation of the Group's venture investment portfolio following the adoption of the most appropriate valuation techniques for each investment and may not be reflective of the actual return upon disposal of these investment in the medium to long term.

Property Development

The Property Development division registered a lower revenue for FY2017 of RM1.1 million compared to RM22.2 million for FY2016. In FY2016, there were development and sales in Phase 1 Federal Park which contributed to the revenue in FY2016. Phase 1 Federal Park was completed in June 2016. The next phase, Phase 2 Federal Park, comprising mainly townhouses is slated to be launched in 2018 pending the necessary approvals for the amendment in the approved plan. With the lower revenue, this division recorded a lower profit before tax of RM0.1 million for FY2017 compared to a profit before tax of RM4.2 million for FY2016.

Travel & Tours

For the current year under review, our Travel & Tours division achieved a higher revenue of RM112.2 million as compared to a revenue of RM101.8 million for last year, an increase of RM10.4 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 lower profit before tax of RM2.1 million for FY2017 compared to RM4.6 million for FY2016 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 RM14.6 million for FY2017 compared to the revenue of RM20.6 million for FY2016. Despite the lower revenue, this division recorded a lower loss before tax of RM8.6 million for FY2017 as compared to a loss of RM11.0 million for FY2016 mainly due to improved results from the educational business unit in FY2017 coupled with the loss on disposal of the loss making manufacturing subsidiary of RM1.6 million recognised in FY2016.

Prospects

Our Board expects the financial year 2018 to continue to be challenging for the Group. However, with our focus on turning around any 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 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 2018 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 2017 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 2018. 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's managed service contract revenue and profit and further build on the improvement achieved so 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 the 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 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 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. In this respect, our Traditional Chinese Medicine ("TCM") business has ceased operations at the end of 2017 due to the continued weak sales generated by the business.