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2016 Annual Report

On behalf of the Board of Directors, I have great pleasure in presenting to you the Annual Report and Audited Financial Statements of SEG International Bhd (“SEGi”) and the Group for the year ended 31 December 2016.

Market Outlook

Malaysia’s ongoing commitment to education is evident in the amount it invests in the sector each year, usually at least 20% of the annual budget for all levels of learning. The education reforms in Malaysia result in more opportunities for private sector participation.

The rise in private colleges and vocational training institutions has allowed more Malaysians to continue into higher education and has also drawn more international students. However, the level of competition between institutions for students has raised concerns about the quality of education provided and the financial stability of some institutions.

The Malaysia Qualifications Agency, the body that accredits academic programmes, ensures programmes are of high quality. Maintaining high standards is crucial to achieving the goal of attracting more foreign students since the intakes at public universities are mainly locals.

In short, the Malaysian government’s reform plans are a sign of its determination to improve the quality of education it provides to young people. There is also plans to strengthen its position as a global education provider, offering students, both at home and overseas, the opportunity to gain quality education at an affordable price.

Financial Performance

Over the years, we are prudent in developing our business models. With our strong leadership and foresight, the Group has demonstrated its resilience during this economically challenging season.

I am pleased to report that the Group achieved a revenue of RM260.1 million and a profit before taxation of RM30.0 million in 2016, an increase of 2.75% and 12.12% respectively, as compared to the corresponding period in 2015.

The increase in revenue is a reflection of the stronger new enrolments, particularly international students, registered during the year under review. The improvement in revenue has contributed positively to the overall results.

Despite the overall challenges throughout 2016, the Group has continued to maintain a strong financial position with shareholders’ funds at RM203.5 million, bank balances and deposits of RM107.1 million and a low gearing ratio. A strong balance sheet, built on the efficient management of capital and assets, allows the Group the financial flexibility to capitalise on growth opportunities and maximise shareholders’ value.

The Group has also increased its efforts to reduce the operational costs through various cost saving initiatives, as we strive for efficiency and to enhance our stakeholders’ value.

Dividends and Cash Distributions

The Board maintains a balanced approach to dividend payments, ensuring that sufficient funds are maintained for future growth, whilst recognising the need to provide reasonable returns to shareholders.

On 25 February 2016, the Board has declared an interim single tier dividend of RM0.06 per ordinary share in respect of the financial year ended 31 December 2016. This interim single tier dividend was paid on 20 April 2016.

The Board has also recommended a capital repayment of RM0.15 to our shareholders on 29 August 2016 (“Capital Repayment”). This was completed and paid out to the shareholders on 18 January 2017.

Operational Review

SEGi has been building up a wide network of agents and collaborations with international partners over the last few years. This has resulted in a notable growth in our international student enrolment in 2016 and we foresee the trend to continue in the coming years.

I also wish to report that SEGi supports the government’s Economic Transformation Programme (ETP) that public-private partnerships (“PPP”) have an important role to play in reforming Malaysia’s education system. On that note, with the support of Ministry of Higher Education (MOHE), SEGi University have collaborated with Yayasan Sime Darby, Agrobank and Malaysia Building Society Berhad (MBSB) in rewarding sponsorship to outstanding and underprivileged Bumiputera students in the B40 income group. This complements existing sponsorships by SEGi University for B40 students to obtain private education in the university. This academia-industry initiative has a common goal to enhance graduate employability through financial support, innovative academic programmes, training and talent management.

I am pleased to announce here that QS (Quacquarelli Symonds), in its 2016 QS Stars rating, has given SEGi University the status of “The first Malaysian University that earned 5 stars for prioritising society’s needs in Malaysia”. The above collaboration is indeed a testimonial of that recognition.

SEGi has also collaborated with Avon, a world renowned beauty product manufacturer and distributor in establishing a teaching lab at our campus to provide hands on approach in learning to our students in the areas of entrepreneurship and business management.

In line with our strategy to expand our range of programmes and services, SEGi has invested in research and development. SEGi recently signed a Memorandum of Understanding with Asia’s largest integrated insulin manufacturer, Biocon Sdn Bhd, with the support of MIDA to develop the Pharmacy Centre of Excellence at SEGi University.

SEGi University has made history as the first university in Malaysia to collaborate with MIDA, to provide advisory services on human resources development needs of the nation for SEGi to design academic programmes in line with industry expectations.

The Group’s quest for excellence never ceases. I am pleased to announce that during the financial year under review, SEGi University was rated 5 Stars in the categories of teaching, facilities, social responsibility and inclusiveness in QS stars audit and achieved a stunning 3 Stars overall. SEGi University & Colleges was also awarded Bronze for the Most Creative Corporate Institution Video.

Besides QS, SEGi has also garnered a string of accolades. In 2016 SEGi gained the Bronze trophy in the Education & Learning category at the Putra Brand Awards 2016.

Corporate Developments

On 29 August 2016, the Company announced the following Capital Repayment exercise:-

  • capital reduction and repayment of RM0.15 in cash for each ordinary share in SEGi to the shareholders of SEGi by way of a reduction of the issued and paid-up share capital of SEGi under Section 64 of the Companies Act, 1965, whereby the par value of each ordinary share in SEGi will be reduced from RM0.25 to RM0.10 per share; and
  • amendment to the memorandum and articles of association of SEGi to facilitate the implementation of the proposed capital reduction and repayment.

The Board is of the view that the Capital Repayment shall enable the Company to:-

  1. reward the shareholders for their continuous support towards the Group through cash distribution and value enhancement by returning equity to shareholders; and
  2. increase the Group’s return on equity (“ROE”) without affecting shareholders’ shareholding.

The Capital Repayment has been completed on 18 January 2017.

Corporate Sustainability

The Board recognises the importance of sustainability and its increasing impact to the business. SEGi believes that the principles and action to promote sustainability should be embedded across the Group in all aspects of the Group’s operations and other activities. It is the Group’s objective to create a culture of sustainability, embracing the community, with an emphasis on integrating the environmental, social and governance considerations into its sustainability strategy. SEGi is committed to balance the environmental, social and corporate governance (ESG) aspects of our business decision making, with the interests of various stakeholders to enhance investors’ perception and public trust.

Social Sustainability

The Group focuses its social sustainability efforts on the development of programmes and processes that promote social interaction and cultural enrichment. SEGi recognises the importance of organisational development and emphasises on:

  • team leader development;
  • team effectiveness workshop;
  • succession planning; and
  • service enhancement entity.

SEGi will recruit and retain talents and high performing employees and nurture them by providing them opportunities for their professional and personal development. The Group has in place comprehensive training programmes to train and develop the staff from all levels, as well as to prepare them for career progression within the Group with emphasis on industry networking for employability.

SEGi also supports charitable activities and believes in giving back to our communities. Amongst others, SEGi, together with the students, participated in the following projects during the financial year:

  • SEGi collected funds raised through the Sri Lanka Relief charity project to aid a children’s welfare home at Kolannawa affected by the recent Sri Lanka flood disaster. 30 of the orphans at the home are children with special needs.
  • SEGi teamed up with Pertubuhan Tindakan Wanita Islam Soup Kitchen (PERTIWI), a local non-governmental organisation (NGO) to help distribute packed food to the homeless and less fortunate people at the Medan Tuanku Feeding Centre, Kuala Lumpur.
  • In conjunction with World Down’s Syndrome Awareness Day on the 21st March 2016, SEGi took the opportunity to raise awareness about Down’s syndrome to fellow SEGians. There was also a hand printing activity for SEGians to show their support.

Environmental sustainability

The Group is committed to identify, manage and minimise the environmental impact of business operations in the following manner:

  • To ensure continuous and on-going efforts are carried out to establish teaching, research, and practices in environmental sustainability throughout the Group.
  • Strive to be at the forefront of sustainability research and education, and continuously developing and engaging our expertise to promote sustainability within and beyond the Group.
  • Strive to ensure increase efficient use of resources and reduce dependence on non-renewable energy and exploring renewable energy for its operation.

SEGi has started implementing the following to encourage sustainable lifestyle among SEGians:

  • Conduct campaign/workshop/seminar/briefing on recycling annually to promote awareness to produce less waste and increase recycling and environmental sustainability;
  • Installation of smart devices or timer control on lighting and air-conditioning in our buildings and renovation projects for efficiency in cost savings; and
  • Regularly inspect the air-conditioning systems of all our campuses.

Governance sustainability

The Group believes the importance of corporate governance in sustainability as accountability is key to a sustainable organisation. The Group incorporates various key governance measures, including the review and approval of Strategic and Risk Management Plans by the Executive Committee members and Board of Directors.

The Group is committed to operate in a responsible and sustainable manner. Moving forward, the Group will continue to enhance its sustainability and corporate responsibility efforts for the benefit of future generations. It will continue to emphasise on responsible and sustainable practices in our business operations, and the Board strongly believes that, in the course of doing so, it will enhance value to its stakeholders.

Future Outlook and Way Forward

The Group will continue to expand our student markets to see further improvements in our performance for the current year. With the continued weakness of the Ringgit, the Group will continue to focus on the strengthening of our international student market. We have also widened our programme offerings as well as target adult learners market in line with our establishment of the Professional And Continuing Education Programme (PACE) and embracing technology as the medium of education delivery.

With this strong foundation, our Board believes that the prospect of the Group is favourable and sustainable for long term growth.

Acknowledgements

The Group continues to remain vigilant and proactive in the management of the operation in the highly competitive business environment. It remains our priority to consistently deliver shareholder value while expanding the Group’s business, mitigating all the necessary risk in its strategy.

On behalf of the Board, I would like to express my gratitude to all our valued shareholders, global partners, students, regulatory authorities, bankers and business associates for their unwavering trust and continuous support throughout the years.

I wish to accord my heartfelt appreciation to my fellow Board members, the management and staff who, through their hard work and unwavering dedication, continue to maximise the value of our assets for our shareholders. On behalf of my fellow Directors, I would like to take this opportunity to welcome Datuk Mohamed Azahari bin Mohamed Kamil to the Board.

On this note, I would like to acknowledge the contribution of our former Board member, Dato’ Sri Chee Hong Leong, for his support and contribution to the Group. We wish him success in his future undertakings.

TAN SRI DATO’ SERI MEGAT NAJMUDDIN BIN DATO’ SERI DR. HAJI MEGAT KHAS
Chairman

6 April 2017