SCC Holdings Berhad Annual Report 2017

8 SCC Holdings Berhad (511477-A) | Annual Report 2017 MANAGEMENT DISCUSSION & ANALYSIS OVERVIEW OF BUSINESS AND OPERATIONS SCC Holdings Berhad is principally an investment holding company listed on the ACE Market of Bursa Malaysia Securities Berhad since 3rd August 2010 under the Trading/Services category. Our group is involved in the business of distributingwell-known brands of commercial foodservice equipment and food supplies to the F&Bmarkets which arewidely used in restaurants, cafes, fast food chains, cinemas and hypermarkets among others. We also supply non antibiotic feed additive and provide clean feed solution to feed mills and livestock industries while our food manufacturing division produces Halal food premixes. The Group’s principal market is in Malaysia. Our financial results and highlights for the past 5 years are shown on page 4. FINANCIAL PERFORMANCE REVIEW Review on Statement of Comprehensive Income During the year under review, the Group recorded the highest revenue since its inception. The increase was spearheaded by our Animal Health Products Division (AHPD) followed by Foodservice Equipment Division (FSED) and mainly attributed to higher sales volume. Despite the overall increase in revenue by approximately 5%, our gross profit fell marginally by approximately 2% due to a higher Cost of Sales brought about by the unfavourable exchange rate of the Ringgit against the greenback as most of the Group’s purchases are denominated in US Dollar. The Ringgit fell to its lowest level in over a decade during the year. In tandem with the increase in revenue, selling and distribution costs incurred to support the revenue growth have increased as well. The slight increase in administrative expenses is partly due to office renovation and staff expenses. Profit before tax of the Group decreased by approximately 2%, which is in line with the lower operating profit in FYE 2017. Review on Statement of Financial Position Non-current assets decreased by 9.6% mainly due to depreciation of its existing assets as the Group did not embark on any major acquisition during the year under review. The increase in Trade Receivables by RM2.311 million is in line with the increase in revenue of the Group and is primarily due to higher sales towards the end of the financial year. Both inventories and trade payables have decreased mainly due lower purchases towards end of the financial year. The decrease in inventories by more than 17.8% is mainly due to a more prudent inventory re-order approach adopted by the management in view of the outlook mentioned in our future prospect section below. The Company has on 10th July 2017 issued bonus shares of 4,277,580 ordinary shares on the basis of one (1) bonus share for every ten (10) existing shares held by the eligible shareholders of the Company. A share split involving the subdivision of every one (1) ordinary share held after the bonus issue into three (3) ordinary shares in the company took place on the same day. WORKING CAPITAL, LIQUIDITY The Group continues to maintain a healthy cash flows position in FYE2017 with near zero gearing which places it in a favourable financial position to capture any future opportunity and stay one step ahead of the competition. DIVIDEND POLICY The Company does not have a formal dividend policy but the Management envisages a dividend payout ratio of approximately 35% of the company’s profit after tax to shareholders in each financial year. SEGMENTAL BUSINESS REVIEW/ REVIEW OF OPERATING ACTIVITIES AHPD 29,909 32,527 30,314 30,908 FSED 423 250 SCCFM 2017 2016 RM’000 GROUP REVENUE BY BUSINESS SEGMENTS Our business structure is divided into 3 segments: Animal Health Products Division (“AHPD”) Revenue contribution fromAHPD increased by RM2.618million or 9%. Its total revenue contribution for the year represented approximately 51% of the Group’s total revenue. The increase ismainly due to higher demand from its customers and new product’s sales promotion during the financial year.