ARB IOT (ARBB) - 2023 Q4 - Annual Report

IPO and Shareholding - ARB Berhad completed its initial public offering on April 10, 2023, raising approximately $5.0 million by offering 1,250,000 ordinary shares at$4.00 each [173]. - As of October 2, 2023, ARB Berhad directly holds 94.56% of the outstanding ordinary shares following a series of dividend distributions in specie [174]. - The company aims to distribute up to 23,517,207 ordinary shares to its shareholders, pending approval, at a ratio of 14 shares for every 1,000 shares held [190]. - The company has expanded its share capital through various share issuances, including a subdivision of shares in June 2022, increasing the number of shares from 50,000 to 500,000,000 [172]. Business Operations and Structure - The company operates through various subsidiaries focused on IoT solutions, including IoT Smart Home & Building, IoT Smart Agriculture, IoT System Development, and IoT Gadget Distribution [191]. - ARB IOT Group Limited was incorporated in March 2022 as an indirect wholly owned subsidiary of ARB Berhad, focusing on IoT business operations [171]. - The company has established an IoT development ecosystem to address challenges and opportunities brought by new digital technologies, including AI, cloud computing, and 5G [192]. - ARB Berhad's restructuring and IPO have allowed for clearer segregation of business responsibilities, enhancing resource allocation for IoT growth [196]. - On October 6, 2023, ARB Berhad disposed of its subsidiary ARB Midware Sdn. Bhd. for RM1.00, indicating a strategic shift in its business structure [190]. Financial Performance - Revenue increased from approximately $10.8 million in FY 2021 to approximately$94.9 million in FY 2022, a growth of 780.7%, but decreased to approximately $51.9 million in FY 2023, a decline of 45.3$4.0 million in FY 2021 to approximately $15.7 million in FY 2022, an increase of 288.4$5.9 million in FY 2023, a decrease of 62.4% [197]. - For the year ended June 30, 2023, revenue decreased by RM200.9 million ($48.7 million) or 45.4$51.9 million) compared to RM443.0 million ($100.6 million) for the year ended June 30, 2022, primarily due to a softened domestic construction and property development market [302]. - Total comprehensive income for the year was RM73.4 million ($16.7 million), a decrease of RM44.7 million ($10.5 million) or 63.2$4.7 million), a decrease of RM66.4 million ($15.4 million) or 76.6$20.0 million) for the previous year [299]. Revenue Streams - Revenue from IoT Gadget Distribution increased by RM2.9 million ($0.4 million) or 16.9$4.3 million) for the year ended June 30, 2023, driven by higher sales volumes of mobile gadget accessories [304]. - Revenue from IoT System Development decreased by RM204.9 million ($47.2 million) or 79$11.6 million) for the year ended June 30, 2023, mainly due to the absence of system integration business application services recorded in fiscal 2022 [305]. - IoT Smart Agriculture generated revenues of RM165.5 million ($35.4 million) for the year ended June 30, 2023, a slight decrease of RM0.8 million ($2.3 million) or 0.6% compared to RM166.3 million (37.7 million) for the year ended June 30, 2022 [306]. Research and Development - ARB Lab and ARB R&D are key subsidiaries focused on research and development of IT and IoT solutions, contributing to the company's innovation strategy [176]. - The company is investing significantly in research and development to enhance existing IT solutions and develop new platforms [198]. - The R&D team consists of 6 members and focuses on enhancing existing IT solutions and developing new platforms [232]. - The company has begun exploring new sectors such as digital warehouse management systems and point-of-sale systems since 2021 [215]. Market Strategy and Expansion - The company aims to be a top IoT player in the ASEAN region, focusing on agriculture, property development, and logistics industries [204]. - The company plans to establish sales representative offices in major ASEAN cities including Jakarta, Phnom Penh, Manila, Bangkok, Hanoi, and Ho Chi Minh City [205]. - The company aims to expand its customer base in targeted ASEAN countries, leveraging local resources for market entry [229]. - The company plans to pursue horizontal or vertical acquisitions and strategic partnerships to expand market share and enhance competitive position [228]. Cost Management and Operational Efficiency - Operational improvement initiatives are expected to generate cost savings that will offset inflation in underlying costs [230]. - Cost of revenue decreased by RM152.6 million (37.1 million) or 44.3% to RM192.2 million ($41.2 million) for the year ended June 30, 2023, in line with the decrease in revenue [308]. - Total expenses increased significantly to RM28.8 million ($6.2 million) for the year ended June 30, 2023, up from RM10.2 million ($2.3 million) for the year ended June 30, 2022, representing an increase of RM18.6 million ($3.9 million) or 182.4% [309]. Governance and Compliance - The audit committee consists of three independent directors, ensuring compliance with financial reporting processes [363]. - The compensation committee is responsible for reviewing and approving compensation structures for executive officers [364]. - The nominating and corporate governance committee assists in selecting qualified individuals for the board of directors [367]. - The company meets all regulations and standards prescribed by authorities [346]. Risks and Future Outlook - The company may require additional cash resources in the future for business expansion or acquisitions, which could lead to dilution of shareholders if additional equity is sold [336]. - There are no adverse effects anticipated from external risks such as weather conditions or industrial accidents [346]. - The IoT industry is expected to see rapid technological changes, requiring continuous innovation to remain competitive [238].