Dagang NeXchange Berhad Annual Report 2019

Operational Efficiency Being true to Group’s core values of being lean and agile, the resources within the Group has been put to optimal use. In mitigating the effect of increasing costs of doing business, the Group had been prudent in its spending and had rationalised expenses based on business need and size. With that, the Group had managed to reduce operating expenses by 9% from previous year. Most of the cost reduction comes from stringent matching of resource requirements by project basis in addition to minimising outsourcing where possible. The Group will continue to pursue cost optimisation activities and drive improvements in operational efficiency and ensure earning sustainability to moderate the impact from life cycle of key projects. The Group’s recorded earnings before interest, tax, depreciation & amortisation (“EBITDA”) of RM56.6 million, a decline from RM69.8 million previous year. Despite reporting lower gross profit margins, EBITDA margin sees a lower decline of 2%. This is contributed by improved operating cost administration and increased other income. STATEMENT OF FINANCIAL POSITION Total asset of the Group stands at RM629.0million and is consistent with previous year. Cash position increased to RM54.4 million from RM39.0 million in previous year driven by improved collections in second half of 2019 and lower investing activities during the year. Net cash generated from operating activities is lower compared to previous year due to settlement and payments to the creditors brought forward from previous year in first half of 2019. Total Liabilities decreased primarily driven by reduction in payables. Dividend Policy Since the end of previous financial year, the Company paid a final dividend of 0.5 sen net per ordinary share amounting to RM8,790,178.76 in respect of the financial year ended 31 December 2018 on 31 July 2019. The Management do not recommend payment of any dividend for the financial year ended 31 December 2019. DNeX maintains its dividend policy based on cash availability upon planned allocation for investment, growth and working capital needs. The chosen dividend policy has thus far aided in business growth without crippling planned strategic direction of the Group. MANAGEMENT DISCUSSION & ANALYSIS DAGANG NeXCHANGE BERHAD 16 GROUP FINANCIAL ANALYSIS INCOME STATEMENTS The Group is pleased to report profit after tax of RM35.5 million with net earnings of 1.71 sen per share. The Group also maintains a healthy debt to equity ratio of 0.1 times. Profit Movement The Group has recorded a marginal decline in revenue with completion of several key projects at the first half of 2019. Approximately 70% of the Group’s revenue is generated from the Government sector. Therefore, service charges and transaction fees on services and projects undertaken by the Group are fixed and cannot be adjusted despite the increasing costs. Profit after tax of RM35.5 million sees 32% decline from RM51.89 million reported in previous year. The profits were most impacted by the increased cost of doing business resulting in 7% decline in gross profit margin from 48% in previous year to 41% for the year in review. Share of profit of equity-accounted associates from investment in Ping has declined by 17% due to reduction in net sale margin in 2019.