economy to benefit stronger demand from these economies and grew at slow recovery pace as compared to FY'16. The Malaysian Gross Domestic Product ("GDP") growth increased marginally from an average growth of 4.58% in FY'16 to 4.60% in FY'17.
Based on the report of the Malaysia Institute of Economic Research, the GDP is expected to rebound slightly to 4.7% to 5.3% in FY'18 at a moderate growth trajectory, fueled mainly by domestic demand.
Despite the positive forecast on Malaysian economic metrics, the Group is likely to continue to face a number of challenges, including measures taken by the Government to curtail recruitment of foreign workers; the continuing and prolonged weakness of the Ringgit, as well as the uncertain global economic and geopolitical. All these adverse factors are likely to affect the Group¡¯s performance to varying degrees for the FY¡¯18. Wherever possible, the Group will strive to mitigate the impact of the said factors operationally and financially.
On a positive note, the Group¡¯s aggressive efforts in seeking to leverage on equipment and product innovations, in tandem with securing new customers and implementing new business strategies, are beginning to gain attraction and are promising to engender a positive contribution to the Group¡¯s performance in the ensuing financial year.Review of Performance
In FY¡¯17, the Group recorded higher revenue across all its business units, culminating in a 6% or RM3.02 million increase in total revenue to RM47.48 million for FY¡¯17 (FY¡¯16: RM44.47 million). Revenue at paper products and colour separation & printing and other segments increased by 13.90% (RM3.52million), 1.20% (RM23,921) and 5.99% (RM59,590) respectively, mainly due to additional orders from the existing customers and new customers resulted by competitive pricing and improved products quality measures taken by the Group. The increased revenue in paper segment and colour separation segment were offset slightly by the drop in plastic products revenue, which shrank by 2.86% (RM0.50million).Loss Before Taxation
The Group registered a profit before taxation of RM0.73 million in FY¡¯17, compared against the FY¡¯16 loss before taxation of RM2.06 million. The turnaround of RM2.73 million in profit before taxation achieved in FY¡¯17 were mainly due to improved performance of all the three divisions and attributable to the gain on disposal of the machines by paper products and plastics product of RM2.21million in FY¡¯17.Paper Products Segment (Versatile Paper Boxes Sdn. Bhd.)
Turnover for the paper products segment has increased to RM28.86 million, as compared to RM25.34 million in FY¡¯16. The segment achieved a RM4.84 million favorable turnaround, resulting in a profit before taxation of RM3.59 million in FY¡¯17, as compared to a loss before taxation of RM1.25 million in FY¡¯16. This was mainly due to gain on disposal of fixed assets of RM1.81 million and improved performance of the paper products division.Plastic Products Segment (Versatile Creative Plastic Sdn. Bhd.)
The Group registered a loss before taxation of RM0.96 million in FY¡¯17, compared against the FY¡¯16 profit before taxation of RM1.02 million. This was mainly due to a gain on disposal of fixed assets of RM0.40 million in FY¡¯16, which more than counterbalanced the negative effect of under-utilisation of production capacity resulting from lower sales volume.Colour Separation and Printing Segment (Imagescan Creative Sdn. Bhd.)
The Group registered a loss before taxation of RM0.30 million in FY¡¯17, compared against the FY¡¯16 loss before taxation of RM0.60 million. The decrease in losses of RM0.30 million was attributed: - recovery of doubtful debts of RM129,390; - improved gross profit margin by 3% or RM72,000 from 28% in FY¡¯16 to 31% in FY¡¯17; and - positive contribution arrived the staff restructuring.Operations Review
During the FY¡¯17, the group had imposed cost saving measures and efficiency enhancement measures in its productivity as well as its product quality controls to reduce production wastages and improve its profitability. The group also recruited the operational expertise and additional marketing staff from the job market to its 3 key business units to support the measures mentioned above.Corporate Exercise/Events
During the financial year, the further extension of time application to Bursa for the remaining private placement shares of 4,368,708 Versatile Creative Berhad (¡°VCB¡±) shares which lapsed on 18 October 2016 was unable to proceed by Bursa as informed by Bursa via a letter dated 13 March 2017.Acquisition of Subsidiary
VCB has on 21 March 2017 acquired a new subsidiary, Versatile Smart Resources Sdn. Bhd. (¡°VSRSB¡±) a company incorporated in Malaysia, via transfer of 2 ordinary shares representing 100% equity interest in VSRSB from VCB¡¯s directors, Dato¡¯ Wong Kong Choong and Dato¡¯ Chew Weng Kit for a total cash consideration of RM2. With this acquisition, VSRSB shall now become a wholly owned subsidiary of VCB.Memorandum of Understanding (MOU)
On 10 January 2017, Versatile Smart Properties Sdn. Bhd. (¡°VSPSB¡±), a wholly owned subsidiary of the VPBSB, which in turn is a wholly-owned subsidiary of VCB entered into MOU with Double Action Ventures Sdn. Bhd. (DAVSB) to explore the feasibility of developing medium cost apartments on a piece of alienated land held under PTD 68889, in Mukim Tebrau, District of Johor Bahru, Johor measuring approximately three point one eight three (3.183) acres with an estimated gross development value (¡°GDV¡±) of Ringgit Malaysia one hundred and ten million only (¡°RM110,000,000¡±) prior to entering into a definitive agreement by both parties.
On 10 April 2017, VCB board announced that due diligence exercise (¡°Due Diligence¡±) was still in progress and VSPSB and DAVSB were in the midst of discussion with YPJ Builders Sdn. Bhd. for the payment of land conversion cost issue.
In addition, the draft definitive agreement was currently being reviewed by both VSPSB and DAVSB and set to be finalised within the deadline of 4 months.
On 10 July 2017, VCB Board announced that the due diligence had been put on hold due to VSPSB was requested by DAVSB to relook into the land conversion cost payment proposal within the deadline of 2 months.
VSPSB will be seeking extension of MOU from DAVSB and finalising the draft definitive agreement upon finalisation of land conversion payment issue with DAVSB.Disposal of investment in IRIS Corporation Berhad (¡°ICB¡±) shares
On 17 May 2017, the Group disposed of 2 million ICB shares, which had a carrying value of RM300,000 on the open market of Bursa Malaysia Securities, realizing gain on disposal of RM92,180 and net cash proceeds of RM398,400 which to be utilised for machine maintenance and machine acquisition.Oriental Mace Sdn. Bhd. Letter of Offer
On 26 May 2016, the Company received a letter of offer (¡°LOO¡±) from Oriental Mace Sdn. Bhd. (¡°Oriental¡±) as the main contractor for the construction of a Halal Vaccine Plant and a Pharmaceutical Plant and Research Centre located at Bandar Enstek, Negeri Sembilan (¡°Construction Project¡±) for the sum of .US$69,300,000, equivalent to approximately RM283,125,150 (based on the exchange rate of US$1.0000: RM4.0855).
On 19 January 2017, the appointment of VCB as a main contractor had been discontinued due to the VCB not officially accepting the offer and had not embarked on the project and Oriental could not grant further extension of time to VCB to complete the feasibility study via a letter from Oriental.A Corporate Governance
The Board is committed to ensuring the key principles of integrity, transparency and accountability are in place in all of its dealings. VCB has and will continue to improve and to align its internal controls with the best practices recommended in the Malaysian Code on Corporate Governance. Human Resources Development The Group recognizes Human Capital is one of our key assets. Staff at all levels are encouraged to attend general and specialist training and seminars conducted internally and select staff are sent for external further training. The Heads of Department are encouraged to monitor the trained staff and coach them further to foster staff job satisfaction and retention and to improve on and increase the Group¡¯s efficiency and productivity levels.Appreciation
On behalf of the Board, I would like to express our appreciation to TEAM VERSATILE (comprising all the Directors, Management and Staff) for their contribution, support and commitment, dedication and loyalty for the turnaround in FY¡¯17. We look forward to TEAM VERSATILE contributing to the Group¡¯s recovery, growth and further success in the coming years.
I also would like to extend my sincere appreciation and gratitude to our shareholders, valued customers, suppliers and financiers for their continued support and confidence in the Group.
Dato¡¯ Lee Kwee Hiang
25 July 2017