Excel Force MSC Berhad Annual Report 2016

EXCEL FORCE MSC BERHAD ANNUAL REPORT 2016 8 OVERVIEW Business and Operations Excel Force MSC Berhad (“EForce” or “the Group”) is a leading information technology solution provider involved in the design, development, deployment and maintenance of application and system solutions for the financial services industry, specifically the stockbroking and investment banks. EForce organise its’ business activities into three (3) segments. They are: (a) Application Solutions (“AS”) - Sales of software applications and product on an outright purchase basis. (b) Maintenance Services (“MS”) - Provision of maintenance services. (c) Application Services Provider (“ASP”) - Provision of application services on monthly recurring fixed and variable charges The Group’s products include CyberBroker Front Office, CyberBroker Middle Office, CyberBroker Back Office and others, such as StockBanking and Message Based Middleware. The Group’s revenue has grown from strength to strength since its inception 23 years ago. The recurring nature for revenue stream from MS and ASP provides a stable income source and will remain as our main earning for coming years. Business Objectives EForce’smission is to optimise our resources to focus on expansion and growth, and to be in the forefront in promoting technology. We provide reliable and stable solutions to meet the mission critical environment that our customers operate in. Over the years, we earned the trust of our customers by consistently fulfilling our obligations to them. We have a good understanding of our customers’ business needs and strive to response quickly and always with good quality performance. FINANCIAL PERFORMANCE REVIEW For the financial year ended 31 Dec 2016 (“FY 2016”), the Group registered turnover of RM22.5million, a decrease of 11% or RM2.8 million compared to RM25.3 million in the previous financial year (“FY 2015”). The decrease in revenue was mainly attributed to lower sales recorded in our AS and ASP business segments. In FY 2016, profit before tax was RM6.97 million, lowered by 28% or RM2.68 million compared to RM9.65 million in FY 2015. The decrease was mainly due to lower sales, losses incurred by subsidiaries and higher amortisation charged. Profit after tax recorded at RM5.4 million, decrease of RM2.2 million or 28% compared to RM7.6 million in FY 2015. The gross profit margin, net profit margin and return on equity was 62%, 24% and 12% respectively in FY 2016. Amortisations of Product Development Costs Prudent measures initiated by the management to revise the estimated useful life of product development costs had resulted in higher amortisation charges to profit and loss for the financial year under review. Disposal of Subsidiaries In FY 2016, the Group conducted a business performance review and decided to dispose their loss making subsidiaries which were Winvest Global Sdn. Bhd. (“Winvest”) and Capital Market Risk Advisor Sdn. Bhd. (“CMRA”). The financial impact of the disposal has been reflected in Note 33 to the consolidated financial statements for FY 2016 and the impact was immaterial to the Group’s net profit. Assets, Liabilities and Liquidity Inventories decreased by 67% from RM79,497 in FY 2015 compared to RM26,349 in FY 2016. Inventories mainly consist of computer spare parts and accessories. Trade receivables decreased by 54% from RM7.2 million in FY 2015 compared to RM3.3 million in FY 2016, mainly due to more effective debts management and tighten credit control. management discussion and analysis