STRATEGIC REPORT

Strategy, objective and business model

The Group provides managed telecommunications services using the network infrastructure owned by other network operators to enable cost effective and rapid connectivity to large bandwidth consumers in Malaysia, Thailand and Singapore. Over time the Group aims to be a leading regional network telecommunications provider offering connectivity and selling managed network services across Southeast Asia. The Group's service offering and the construction of its overlay network requires low capital expenditure and management believe this will enable it to offer attractive pricing to customers in the region. With the new development in the field of AI, the Group has embarked onto development and commercialisation of AI based solutions as described above.

Fair review of business development and performance

A comprehensive and fair review of the business development and performance of the Group reveals a positive financial outlook, primarily attributed to its prudent management of cash resources. The Group's financial stability is dependent on the available cash reserves and future projected secured earnings, which provide a solid foundation for supporting the organization's various corporate objectives and day-to-day operational activities.

One key aspect contributing to the favourable assessment is the Group's ability to meet its general corporate needs. These may include strategic investments, research and development initiatives, marketing campaigns, and other essential activities crucial for the growth and expansion of the business. By maintaining sufficient cash resources for these purposes, the Group demonstrates a proactive approach to securing its position in the market and capitalizing on emerging opportunities.

Moreover, the Group's cash resources play a pivotal role in sustaining its operational activities. These encompass a wide range of ongoing costs and expenses necessary for the smooth functioning of the business. From routine operating expenses like rent, utilities, and maintenance to crucial business expenditures such as raw materials, production costs, and logistical expenses, the availability of adequate cash reserves ensures the Group's day-to-day operations run efficiently.

Another notable aspect highlighted in this review is the Group's commitment to its human capital. By allocating resources for the payment of Directors' fees and salaries, the organization acknowledges the importance of attracting and retaining top talent. Competent and motivated Directors and employees are instrumental in driving the Group's success and fostering a productive and innovative work culture.

The prudent management of cash resources demonstrates the Group's foresight and responsibility in safeguarding against financial risks and uncertainties. In an ever-changing business landscape, having sufficient cash reserves provides a buffer against potential economic downturns or unexpected challenges. This financial preparedness enables the Group to weather adverse market conditions and seize opportunities when they arise, enhancing its competitive edge.

The initial years of the business, particularly from 2017 until 2020, the Company recorded some operational losses, as it was in the process of finding its footing in the managed telecommunication service business, especially in establishing its relationships with the potential customers of the Company. The Company was also in the development stage of some proprietary managed services products and services, which was ready for the market sometime in 2020. As planned and expected, the Company managed to turn around its fortune and from 2021 onwards, the Company has been profitable - a trend that the board is confident to continue for many years to come. This is because, the Company has already established itself as a known managed telecommunication services provider and has built many good business relationships with potential customers in the region. Additionally, the Company had over the last few years, launched several of the its flagship products and services which is well received by its customers.

In conclusion, a fair review of the Group's business development and performance underscores the significance of its sufficient cash resources. With a responsible approach to managing its finances, the Group can confidently pursue its strategic objectives, cover ongoing operational costs, and ensure the well-being of its valuable human resources. This positive financial standing bodes well for the Group's long-term growth and sustainability, positioning it for continued success in its industry. However, it is essential for the Group to remain vigilant in monitoring its financial health, staying adaptable to market dynamics, and continuing to make informed decisions to maintain its positive trajectory.

Principal risks and uncertainties

The Directors have identified the following as the key risks facing the business:

Business Operation Risk

-     Dependency on public customers

The Group is dependent on customers within the telecommunication segment as these customers operate in a regulated industry. This group of customers from telecommunications segment accounted for approximately 53% and 62% of our total revenue for FYE 2024 and FYE 2023 respectively. Any material changes in the telecommunication policy mainly in Malaysia could adversely affect the Group business, financial condition and financial performance.

The Group will strive to enhance our service quality and adopt change management readiness to keep the company robust enough to adapt with the changes in any regulator's policy with regards to telecommunications industry.

-     Dependency on our major customer, Bharti International (Singapore) Pte Limited (Bharti)

The Group is dependent on Bharti, a global operator providing telecommunication service especially in Malaysia, Singapore and Thailand. The Group has been generating revenue from a Marketing Agreement signed between Orient Telecoms and Bharti since 2022, accounting for 31% and 25% of our total revenue for FYE 2024 and FYE 2023 respectively. Strong business relationship with Bharti has made the engagement stable.

As the Group is currently dependent on the business from few major customers, the strategy is to expand the customer base with various new potential customers.

-     Credit Risk

Our normal credit period granted to our customers ranges from 30 to 45 day. Any extension of credit terms to customers are assessed based on case-to-case basis by taking into consideration factors such as our relationship, with the customers, their financial position, and payment track record.

We have so far, managed to progressively collect our receivable even though in some cases exceeded the credit period. This is due to the good business relationship and satisfactory service quality. The company has not recorded bad debts for the year 2023 and 2024.

-     Dependency of Executive Directors

The Group success is dependent on the capability and experience of our executive director, Mr Sayed Mustafa Ali. Mr Sayed Mustafa Ali is an industry veteran in telecommunication with more than 25 years of working experience. Mr Sayed Mustafa Ali has held influential leadership positions within prominent telecommunications companies and multinational corporations in India, where he has consistently contributed his technical expertise at senior levels.

Hence the loss of services from the executive director without suitable and timely replacement may adversely affect our business.

As part of our strategy, the Executive Director is assisted by a solid operation team. In order to retain the Executive Director and the team, the Group maintains competitive remuneration packages and provide the necessary training to them. As at the closing of financial year end, the Group has not experienced any loss of our directors and key personnel that has materially impacted our business.

-     Business Strategy

The group profitability and financial performance are dependent on the ability to secure new customers and maintain existing contracts for the provision of managed services. The potential loss of customers, mainly the major ones or risk of facing challenges securing new customers or additional business from existing customers could adversely impact our business performance.

In addressing such risk, with more than five (5) years in operation, the group has taken proactive measures to remain competitive. This includes leveraging experienced management, strategically recruiting a highly competence sales team to secure crucial revenue contracts, and maintaining a rigorous schedule of business plan reviews conducted by the board. These steps are designed to ensure alignment with strategic goals and operational efficiency.

Furthermore, the Group holds a strong belief in the competitive edge of its product, particularly in its ability to effectively support small and medium-sized enterprises (SMEs). With this confidence, the Group anticipates not only maintaining its current performance but also achieving targeted growth objectives. This strategic positioning underscores the Group's commitment to sustainable growth and market leadership in its sector.

-     Outbreaks of any contagious diseases

The COVID-19 pandemic declared by World Health Organisation (WHO) in 2020 which had caused the Malaysian government to impose series of lockdown measure across the states had affected our operations. This was in the form of the challenges in adjusting to a new operation mode mainly in managing our services and customers and also trade receivables.

In the event of any prolonged outbreak of contagious diseases, may result in material adverse effect to our business.

In the case of 2020 lockdown measures, the group had managed to eventually mitigate the risk by putting timely necessary actions in relation to operational support in place.

Industry Risk

-     Competition

The risk arises from competitors are price and packages offering, service quality and technology. The Group competitors may have longer operating histories and superior technological advantages. Therefore, we may experience and expect to continue to face intense competition. At the same time, we have to also face new entrants which possible adopted innovative products and aggressive pricing strategies. These factors may affect our business.

Without having to invest in capex infrastructure, the Group provides managed service to the customer and continue to develop its own overlay network. This strategy has enabled flexibility the group in service offering.

-     Technology Advancement

The telecommunication service industry requires responsiveness to technological advancements and industry standard evolution. If the Group is unable to anticipate changes in new technology and upgrade its capabilities, the business performance may be adversely impacted.

To remain competitive, it is essential for the Group to promptly adapt to the changes in technology and services need alongside with continuous technology training and update.

-     Political and regulatory environment

The Group operates mainly in Malaysia. As such, our business prospect will depend on the political, economic and regulatory conditions in Malaysia. Changes in the political, economic and regulatory could arise from changes in government policies, taxation policies, interest rates and import policies. These factors will lead to an adverse effect on our profitability and growth.

The Group acknowledges the present world major conflicts such as Russian-Ukraine war and Gaza conflict. Current global conflicts, do not materially impact the business operations in Malaysia since our service offering is in Malaysia, Singapore and Thailand. Furthermore, we do not import any equipment or service at the present time.

Key Performance Indicators (KPIs)

Key Performance Indicators (KPIs) are essential metrics that provide insights into the performance and success of the Group. These indicators help measure progress towards the organization's goals and objectives. Here are some potential KPIs for the Group:

1.   Revenue Growth Rate: This KPI measures the percentage increase in the Group's revenue over a specific period. It indicates the effectiveness of the sales and marketing efforts and the Group's ability to generate more income.

2.   Profit Margin: The profit margin KPI evaluates the Group's profitability by calculating the percentage of profit earned from revenue after deducting all expenses. It reflects the efficiency of cost management and revenue generation.

3.   Customer Acquisition Cost (CAC): CAC measures the average cost required to acquire a new customer. It helps assess the efficiency of the Group's marketing and sales strategies.

4.   Customer Retention Rate: This KPI indicates the percentage of customers who continue to do business with the Group over a specific period. High retention rates are a sign of customer satisfaction and loyalty.

5.   Return on Investment (ROI): ROI assesses the profitability of investments made by the Group. It helps evaluate the success of various projects and initiatives.

6.   Employee Satisfaction and Engagement: This KPI measures employee satisfaction and engagement through surveys or other feedback mechanisms. High employee satisfaction often correlates with increased productivity and reduced turnover.

7.   Market Share: Market share represents the Group's portion of the total market sales within its industry. Monitoring changes in market share helps evaluate the effectiveness of the Group's competitive strategies.

8.   Debt-to-Equity Ratio: This financial KPI indicates the level of debt relative to equity. A healthy ratio suggests a well-balanced capital structure and financial stability.

9.   Customer Lifetime Value (CLV): CLV measures the total value a customer brings to the Group over their entire relationship. It helps assess the long-term impact of customer relationships on the Group's revenue.

10. Average Order Value (AOV): AOV calculates the average value of each customer transaction. Monitoring AOV can help identify opportunities to upsell or cross-sell to increase revenue per customer.

11. Website Traffic and Conversion Rates: These KPIs assess the effectiveness of the Group's online presence and marketing efforts in attracting potential customers and converting them into paying ones.

12. R&D Investment Ratio: This ratio measures the proportion of revenue invested in research and development. A higher ratio indicates a commitment to innovation and potential future growth.

13. Health and Safety Incidents: Tracking the number of health and safety incidents helps ensure a safe working environment for employees and can indicate the effectiveness of safety protocols.

14. Environmental Impact Metrics: These KPIs assess the Group's environmental sustainability efforts, such as carbon emissions reduction and waste management.

Going concern

As outlined in note 2, these financial statements have been prepared under the assumption of a going concern. Following thorough investigation, the directors hold a reasonable expectation that both the Company and the Group possess sufficient resources to sustain operations for at least the next 12 months from the date of approving these financial statements. Therefore, they have chosen to continue preparing the financial statements on a going concern basis.

Capital and returns management

The Company expects that any returns for Shareholders would derive primarily from capital appreciation of the Ordinary Shares and in the medium-term dividends paid pursuant to the Group's dividend policy.

Section 172 Report

The revised UK Corporate Governance Code ('2018 Code') was published in July 2018 and applies to accounting periods beginning on or after January 1, 2019. The Companies (Miscellaneous Reporting) Regulations 2018 ('2018 MRR') require Directors to explain how they considered the interests of key stakeholders and the broader matters set out in section 172(1) (A) to (F) of the Companies Act 2006 ('S172') when performing their duty to promote the success of the Company under S172. This includes considering the interest of other stakeholders which will have an impact on the long-term success of the company. The S172 statement, explains how Directors:

·   have engaged with employees, suppliers, customers and others; and

·   have had regard to employee interests, the need to foster the company's business relationships with suppliers, customers and other, and the effect of that regards, including on the principal decisions taken by the company during the financial year.

The S172 statement focuses on matters of strategic importance to the Group, and the level of information disclosed is consistent with the size and the nature of the business.

The Board has a clear framework for determining the matters within its remit and has approved Terms of Reference for the matters delegated to its committees. Certain financial and strategic thresholds have been determined to identify matters requiring Board consideration and approval. The Manual of Authority sets out the delegation and approval process across the broader business. When making decisions, each Director ensures that he/she acts in the way he/she considers, in good faith, would most likely promote the Group's success for the benefit of its members as a whole, and in doing so have regard (among other matters) to:

The likely consequences of any decision in the long term

The Directors understand the business and the evolving environment in which the Group operates. The strategy set by the Board is intended to strengthen our position as a leading network services provider while keeping safety and social responsibility fundamental to our business approach. In 2020, to help achieve all strategic ambitions, the Board refreshed our strategy to further focus on developing the Group's business. However, while investing for the future, the Board also recognise we must meet today's connectivity and technology demand.

The interests of the company's employees

The Directors recognise that Orient employees are fundamental and core to our business and delivery of our strategic ambitions. The success of our business depends on attracting, retaining and motivating employees. In ensuring that we remain a responsible employer, including pay and benefits to our health, safety and workplace environment, the Directors factor the implications of decisions on employees and the wider workforce, where relevant and feasible.

The need to foster the company's business relationships with suppliers, customers and others

Delivering our strategy requires strong mutually beneficial relationships with suppliers, customers, and government agencies. Orient seeks the promotion and application of certain general principles in such relationships. The ability to promote these principles effectively is an important factor in the decision to enter into or remain in such relationships and this alongside other standards are described in The General Business Principles, which are reviewed and approved by the Board periodically. The Board also reviews and approves the Group's approach to suppliers which is set out in the Supplier Principles. The businesses continuously assess the priorities related to customers and those with whom we do business, and the Board engages with the businesses on these topics, for example, within the context of business strategy updates and investment proposals.

Moreover, the Directors receive information updates on a variety of topics that indicate and inform how these stakeholders have been engaged. These range from information provided from the Projects & Technology function to information provided by the businesses.

The impact of the company's operations on the community and the environment

This aspect is inherent in our strategic ambitions, most notably on our ambitions to thrive through the Telecommunication and Technology transition and to sustain a strong societal and business licence to operate. As such, the Board receives information on these topics to both provide relevant information for specific Board decisions (e.g. those related to specific strategic initiatives) and to provide ongoing overviews at the Orient group level (e.g., regular Safety & Environment Performance Updates, reports from the Chief Ethics & Compliance Officer and Chief Internal Auditor). In 2020, certain Board Committee members conducted site visits of various Orient operations and overseas offices and held external stakeholder engagements, where feasible.

The desirability of the company maintaining a reputation for high standards of business conduct

Orient aims to meet the region's growing need of connectivity and cloud-based services with high performance solutions in ways which are economically, technologically, and socially responsible. The Board periodically reviews and approves clear frameworks, such as The General Business Principles, Company's Code of Conduct, specific Ethics & Compliance manuals, and its Modern Slavery Statements, to ensure that its high standards are maintained both within Orient Telecoms businesses and the business relationships we maintain. This, complemented by the ways the Board is informed and monitors compliance with relevant governance standards help assure its decisions are taken and that the Group acts in ways that promote high standards of business conduct.

The need to act fairly as between members of the company

After weighing up all relevant factors, the Directors consider which course of action best enables delivery of our strategy through the long-term, taking into consideration the impact on stakeholders. In doing so, our Directors act fairly as between the Company's members but are not required to balance the Company's interest with those of other stakeholders, and this can sometimes mean that certain stakeholder interests may not be fully aligned.

Culture

The Board recognises that it has an important role in assessing and monitoring that our desired culture is embedded in the values, attitudes, and behaviours we demonstrate, including in our activities and stakeholder relationships. The Board has established honesty, integrity, and respect for people as Orient Telecoms' core values. The General Business Principles, Code of Conduct, and Code of Ethics help everyone at Orient Telecoms act in line with these values and comply with relevant laws and regulations. The Commitment and Policy on Health, Safety, Security, Environment & Social Performance applies across the Group and is designed to help protect people and the environment. We relentlessly pursue Goal Zero, our safety goal to achieve no harm and no leaks across all our operations. We also strive to maintain a diverse and inclusive culture.

The Board considers the People Survey to be one of its principal tools to measure employee engagement, motivation, affiliation, and commitment to Orient Telecoms. It provides insights into employee views and has a consistently high response rate. The Board also utilises this engagement to understand how survey outcomes are being leveraged to strengthen the Group's culture and values.

Stakeholder engagement (including employee engagement)

The Board recognises the important role Orient Telecoms has to play in society and is deeply committed to public collaboration and stakeholder engagement. This commitment is at the heart of the Company's strategic ambitions. The Board strongly believes that Orient Telecoms will only succeed by working with customers, governments, business partners, investors, and other stakeholders.

We continue to build on our long track record of working with others, such as partners, industry and trade groups, universities, government agencies, and in some instances our competitors through mutually beneficial business dealings. We believe that working together and sharing knowledge and experience with others offers us greater insight into our business. We also appreciate our long-term relationships with our customers, investors and acknowledge the positive impact of ongoing engagement and dialogue.

To support strengthening the Board's knowledge of the significant levels of engagement undertaken by the broader business, guidance on information, proposals or discussion items provided to the Board was updated in 2023 to further promote and focus considerations of the views, interests and concerns of our stakeholders and how these were considered by Management. The Board also engaged with certain stakeholders directly, to understand their views.

Sayed Mustafa Ali

Director

31 July 2024