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Quarterly Report For The Financial Period Ended 30 June 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 6-month period ended 30 June 2018 ("6M 2018"), the Group recorded a higher revenue of RM130.9 million compared to a revenue of RM117.6 million recorded for the corresponding period last year ("6M 2017"). The revenue of Information & Communications Technology ("ICT") and Travel & Tours divisions increased by RM11.1 million and RM7.5 million respectively partly offset by a decline in revenue from Property Development and Hotels & Resorts divisions of RM0.8 million and RM3.8 million respectively for 6M 2018 compared to 6M 2017. The Group recorded higher loss before tax of RM5.0 million in 6M 2018 compared to RM1.7 million in 6M 2017 mainly due to lower gross profit margin of 28.5% in 6M 2018 compared to 34.5% in 6M 2017 which resulted in a decrease in gross profit of RM3.3 million coupled with lower other operating income of RM4.1 million in 6M 2018 compared to RM6.7 million in 6M 2017 which was partly offset by lower operating expenses of RM43.9 million in 6M 2018 compared to RM45.8 million in 6M 2017. The lower other operating income in 6M 2018 compared to 6M 2017 was mainly due to lower interest income in the 6M 2018 under review coupled with the inclusion of the additional insurance claim of RM2.6 million arising from a fire incident in Arosa in the other operating income for 6M 2017.

Investment Holding

The division recorded a loss before tax of RM4.9 million for 6M 2018 compared to RM4.4 million for 6M 2017 mainly attributable to higher operating expenses. This was partly mitigated by better results from the associated companies.

Hotels & Resorts

The Hotels & Resorts division registered a lower revenue for 6M 2018 of RM25.8 million compared to RM29.6 million for 6M 2017. The better performance from Holiday Villa Beach Resort & Spa Langkawi was 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 a loss before tax of RM0.9 million for 6M 2018 compared to a profit before tax of RM3.2 million for 6M 2017. The 6M 2017 results included the additional insurance claim of RM2.6 million arising from a fire incident in Arosa.

Information & Communications Technology

The division recorded a higher revenue of RM40.5 million for 6M 2018 compared to the revenue of RM29.4 million in 6M 2017 mainly driven by higher revenue from GlobeOSS business unit ("BU") system sale and managed service contracts. Unifiedcomms BU, however, recorded a lower revenue due to lower system sale contract revenue which was only partly mitigated by higher revenue from managed service contracts.

Despite the higher revenue in 6M 2018 compared to 6M 2017, the profit before tax ("PBT") for 6M 2018 was relatively flat at RM3.94 million for 6M 2018 as compared to RM3.87 million recorded in 6M 2017. This was mainly attributable to an overall reduction in the division's gross profit margin primarily due to the significantly lower gross profit margin on GlobeOSS BU system sale contract revenue in 6M 2018 coupled with the lower foreign currency exchange rate for the conversion of PBT in Singapore Dollar ("S$") to Ringgit Malaysia ("RM") for 6M 2018 compared to the exchange rate used for conversion of PBT in 6M 2017.

Property Development

The Property Development division registered a lower revenue for 6M 2018 of RM38,000 compared to RM0.8 million for 6M 2017. The development of Phase 2 Federal Park, comprising mainly townhouses, has been delayed and is now 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 RM0.2 million for 6M 2018 compared to a profit before tax of RM0.1 million for 6M 2017.

Travel & Tours

For the current period under review, our Travel & Tours division achieved a higher revenue of RM58.6 million as compared to a revenue of RM51.1 million in 6M 2017, an increase of RM7.5 million which was mainly from ticketing and outbound travel sales offset by the lower revenue in the inbound tours division. With the higher revenue, the division recorded a higher profit before tax of RM1.5 million for 6M 2018 compared to RM0.7 million for 6M 2017.

Others

The Others division registered a lower revenue of RM5.7 million for 6M 2018 compared to the revenue of RM6.6 million for 6M 2017. Despite the lower revenue, this division recorded a lower loss before tax of RM4.3 million for 6M 2018 as compared to a loss of RM5.1 million for 6M 2017 mainly due to cessation of the loss making traditional chinese medicine unit and an overall improvement in the coach building and card & payment services units offset by the higher loss in the education unit.

Prospects

Our Board expects the financial year 2018 to be challenging for the Group. However, our Board is cautiously optimistic on the implementation of our business plans for our major divisions and non-core loss-making businesses and 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 lossmaking businesses, we will focus on turnaround restructuring plans failing which the business unit will cease operations and/or be divested.

The Hotels & Resorts division views the business outlook for the remaining period of 2018 to be challenging with the expected weak local meetings, incentives, conferences and exhibitions (MICE) market for this year and the political blockade in Qatar which will continue to have an adverse impact on our hotel performance in Doha, Qatar. However, 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.

The Information & Communications Technology ("ICT") division expects financial year 2018 to be challenging but remains optimistic about its 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 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 and once the showhouse for the 15 units of single storey detached houses in Taman Sri Matang which is 52% completed is ready by October 2018 although there may be some weaknesses due to the softening of the property market in Kuching and the cooling measures on the property market.

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