Dagang NeXchange Berhad Annual Report 2019

KEY MESSAGES annual report 2019 11 OVERVIEWOF 2019 Financial year 2019 has been a challenging year for DNeX Group brought about by the regional economic slowdown, lower GDP and trade war between the United States and other nations especially the People’s Republic of China. Despite the challenges, we are pleased to announce a profit of RM35.5 million generated by revenue of RM290.5 million. Group revenue and gross profit sees a decline in comparison with 2018 primarily due to key projects seeing contracts changes and project completion in the first half of 2019. The Group continues to pursue cost optimisation activities to drive improvements in operational efficiency, ensuring earning sustainability to dampen the impact from life cycle of key projects. On the upside, DNeX’s wholly owned subsidiary company Dagang Net Technologies Sdn. Bhd. (“Dagang Net”), has received a (2) two-year contract extension from the Government of Malaysia as operator of the National Single Window (“NSW”) for Trade Facilitation until 31 August 2021. Dagang Net has been the operator of the NSW for Trade Facilitation since its launch in 2009, and the NSW contract represents over 30% of Group revenue. DNeX through it’s indirect subsidiary company Innovation Associates Consulting Sdn. Bhd. has received contract from the Accountant General’s Department Malaysia for maintenance of hardware, software and network equipment of the integrated Government Financial and Management System (“iGFMAS”). The extension is for one (1) year, starting from 10 August 2019 to 9 August 2020, and worth RM57.0 million. The earlier contract tenure for iGFMAS maintenance was from 10 August 2018 to 9 August 2019. On 19 November 2019, IAC was awarded a contract to re-engineer the tax self-assessment system by the IRB of Malaysia in a contract worth RM42.8 million. DNeX’s wholly owned subsidiary company DNeX Solutions Sdn. Bhd. (“DSSB”) on 1 October 2019 was awarded a contract worth RM14.5 million to develop big data and data warehousing by Department of Statistics Malaysia. On 1 September 2019, DSSB was also awarded the Big Data Analytics Project by Ministry of Energy and Natural Resources, a contract worth RM6.0 million. The changes in business environment have forced the focus on our core competencies. The Group aims to capture opportunities in the technology sector through Dagang Net Digital Platform, offering a unified business platform connecting customers and businesses through innovative services by embracing technologies such as artificial intelligence, blockchain and big data. We have taken the decision to exit from businesses that would mature in a different place. With that, we disposed of our business as an independent power producer by the sale of Forward Energy Sdn. Bhd. but chose to retain our stake in Bangladesh IPP until a fair price is offered for it. Additionally, DNeX has disposed of its stake in wholly owned subsidiary DNeX Technology Sdn. Bhd. to EC-Council International Ltd (“EC-Council”) in exchange for a 15% stake in EC-Council Global Services Sdn. Bhd. (“EGS”), our cyber security partner since 2018. EC- Council is an award-winning organisation in cyber security training, certification, consulting and services. To promote industry expertise and compliance at Board level, two (2) new directors Dato’ Rosnah Binti Abd Majid and Encik Mohd Azhar Bin Mohd Yusof were appointed. Together they bring to DNeX experience and expertise in government affairs, strategic planning, strategic communications, corporate finance, corporate restructuring and merger and acquisitions. The appointment of Dato’ Rosnah also improves the gender balance in the Boardroom.