ANNUAL REPORT 2025 25 Management Discussion and Analysis To mitigate this risk, we maintain a buffer inventory of paper which can serve our purposes for up to six (6) months while we source for alternative supplies that are more favourable. Infringement of Intellectual Properties (“IPs”) The Group develops and uses various IPs in connection with our business. In this regard, we are susceptible to claims by third parties for copyright infringements and, similarly, we are also susceptible to the copyright of our IPs being infringed by third parties. As such, in defending our legal rights, the Group may be exposed to suits and counter suits by third parties. Such disputes and the resolution of such disputes may be time consuming and costly. Therefore, the Group requires our authors to indemnify us for any losses and damages that arise should their works be found to have infringed on any copyright. We also own the copyrights to all published versions of our titles, which are protected under the Copyright Act 1987. Changes in Educational Curriculum and Policies As the Group is principally an education solutions provider, any changes in education curriculum and policies may have an impact on our operations and would require us to react quickly. Nevertheless, such changes are usually announced ahead of time which provides us sufficient time to align our business activities with the anticipated changes. In addition, having a pool of experienced editors puts us in a good position to respond in a timely manner. Stock Returns and Obsolescence The Group typically publishes new editions of educational materials every year. Some of the educational materials that we sell may be returned to us (subject to compliance with our return policy and stocks are returned in good condition) for either a full refund or an offset against future purchases. Such returned stocks are commonly resold to other customers. Returned stocks that are not resold after a period of time, as with all other slow-moving stocks will become obsolete and may need to be written off and sold as scrap. This may adversely affect our profitability if the volume of obsolete stocks is large. To mitigate this risk, the Group relies on data analytics to monitor the sales and distribution of stocks. This includes analysing historical and current trends of demand for our titles which enables us to manage our supply chain efficiently to reduce the risk of overproduction and sales returns. Foreign Exchange Transaction Risk Our purchases of paper and LEGO® Education robotics products are denominated in United States Dollar ("USD") while purchases of our English upskilling product, Linguaskill, are denominated in Great British Pound (“GBP”). Accordingly, we are exposed to foreign exchange transaction risks and any unfavourable movements in USD and GBP against RM will have an adverse impact on our profitability. For the FYE 31 August 2025, we did not suffer any material losses arising from foreign exchange transactions. Our Group will use forward exchange contracts to hedge against this risk if necessary. Dependency on Key Management Personnel and Experienced Editors The Group's continued success will depend, to a significant extent, on the abilities, skills, experience, competency and continuous efforts of our key management personnel (which include our Executive Directors) and experienced editors. As such, the loss of any of our key management personnel and experienced editors, without a suitable and timely replacement, may have a material adverse impact on our business and our continuing ability to compete effectively. The Group recognises the importance of attracting and retaining our key management personnel and experienced editors, and has put in place competitive compensation packages. In addition, the Group provides a healthy working environment, practices a conducive work culture, upholds good work ethics, and fosters good working relationships among our employees. The Group has also put in place succession planning and provides training and career development opportunities to our employees. Compliance Management During the course of business, the Group is subject to the risk of legal or regulatory sanctions, financial loss or damage to reputation resulting from failure to comply with laws, regulations, rules, other regulatory requirements or codes of conducts. To mitigate this risk, the Group actively identifies and assesses all applicable laws, regulations, rules and policies (including internal policies) applicable to all our operating activities to ensure compliance. Furthermore, we take active steps in implementing good corporate governance in compliance with the Malaysian Code on Corporate Governance ("MCCG") to promote corporate accountability and to build sustainable value.
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