On behalf of the Board of Directors, I am pleased to
present the Annual Report and Audited Financial Statements
of Versatile Creative Berhad for the financial year ("FY")
ended 31 March 2016.

Business Environment & Prospects
In FY¡¯16, the Malaysian economy grew at slower pace
as compared to FY¡¯15. The Malaysian Gross Domestic
Product (¡°GDP¡±) growth declined from an average

growth of 5.85% in ¡®FY¡¯15 to 4.58% in FY¡¯16, while the manufacturing sector GDP dipped 0.69% from 5.34% in FY¡¯15 to 4.65% in FY¡¯16.

Based on a report of the Malaysia Institute of Economic Research, the GDP for FY¡¯17 is expected to continue maintaining a moderate growth trajectory, fueled mainly by domestic demand.

Against the backdrop of the forecast 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 implementation of a minimum monthly wage of RM1,000; the continuing and prolonged weakness of the Ringgit, as well as the uncertain global economic and geopolitical outlook. All these adverse factors are likely to affect the Group¡¯s performance to varying degrees for the FY¡¯ 17. 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 traction and are promising to engender a positive contribution to the Group¡¯s performance in the ensuing financial year.

Review of Performance
Revenue

FY¡¯16 has been a difficult year for our Group. The Group recorded lower revenue across all its business units, culminating in a 10.78% or RM5.37 million reduction in total revenue to RM44.47 million for FY¡¯16 (FY¡¯15 : RM49.84 million).

Revenue at paper products, plastic products and colour separation & printing segments shrank by 6.95% (RM1.89million), 6.70% (RM1.31 million), 51.41% (RM2.11 million) and 9.79% (RM0.11 million) respectively, mainly due to the weak global and domestic economies.

Loss Before Taxation

The Group registered a loss before taxation of RM2.00 million in FY16, compared against the FY15 loss before taxation of RM15.88 million. The significant reduction in loss before taxation of RM13.89 million achieved in FY¡¯16 was attributable to the impairment write-down in goodwill of RM11.49 million effected in FY¡¯15 and a gain on disposal of fixed assets of RM4.04 million in FY¡¯16.

Paper Products Segment

The lower sales recorded in this segment resulted in an under-utilisation of production capacity, thus increasing the unit cost of production. Further, the adverse impact arising from the depreciation of the Malaysian Ringgit caused an increase in material costs, thereby eroding the gross margin; consequently, the loss before taxation of the Paper Products Segment increased by RM0.73million to RM1.25 million in FY¡¯16, as compared against the loss before taxation of RM0.52 million for FY¡¯15.

Plastic Products Segment

The segment achieved a RM3.63 million favorable turnaround, resulting in a profit before taxation of RM1.02 million in FY16, as compared to a loss before taxation of RM2.62 million in FY¡¯15. This was mainly due to a gain on disposal of fixed assets of RM4.04 million, which more than counterbalanced the negative effect of under-utilisation of production capacity resulting from lower sales volume.

Colour Separation and Printing Segment

The Group registered a loss before taxation of RM0.60 million in FY16, compared against the FY15 loss before taxation of RM0.475 million. The marginal increase in losses of RM0.13million was mainly due to lower sales in FY¡¯16 resulting in the decline in gross profit of RM0.69million (from RM1.24million to RM0.55million).

Operations Review

During the FY¡¯16, the Group invested in new equipment and machineries as part of the Group¡¯s operational strategy of replacing old and obsolete equipment and machinery with modern and more efficient versions of the same, with the objective of significantly improving production efficiency and cost-effectiveness, as well as widening the range of product offering, thereby affording the Group a degree of diversification. The Group will, in the ensuing financial year, strive hard to widen its target market and to increase its market share as a means of improving the Group¡¯s earnings going forward.

Corporate Exercise/Events
Private Placement

During the financial year, the Company issued 6,695,600 new ordinary shares of RM0.50 each at an issue price of RM0.72 per ordinary share by way of a private placement for working capital purposes.

Disposal of investment in IRIS Corporation Berhad (¡°ICB¡±) shares

On 13 August 2015 the Group disposed of 2 million ICB shares, which had a carrying value of RM480,000 on the open market of Bursa Malaysia Securities, realising cash proceeds of RM440,000. By virtue of the share disposal, the Group ceased to be a substantial shareholder of ICB on the same date.

Public Shareholding Spread ("PSS")

On 8 July 2016, the company announced to Bursa that the Company had complied with the public shareholding spread (¡°PSS¡°) requirements pursuant to paragraph 8.02(1) of Listing Requirements of Bursa Malaysia.

The percentage of PSS of the company as at 30 June 2016 was 25.90%, comprising 5,696 public shareholders holding not less than 100 shares each.

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¡±).

The principal terms and conditions of the LOO are as follows:

(a) The contract sum of the Construction Project is amounting to US$69,300,000, equivalent to approximately RM283,125,150 (based on the exchange rate of US$1.0000: RM4.0855);

(b) The scope of work of the Construction Project will include civil engineering, infrastructure, M & E works and process equipment supply, installation and commissioning works ;and

(c) A formal main contractor agreement shall be entered into between the Company and Oriental comprising of the terms and conditions herein and such other terms and conditions in relation to, amongst others, the detailed scope of work, completion period, payment terms and others (¡°Agreement¡±) as the respective solicitors shall advise and agreed upon by both parties, after the acceptance of the LOO by the Company.

On 27 May 2016, the Board of Directors of the Company (¡°Board¡±) has, via the Board meeting on even date, given their consent to pursue further evaluation of the viability and feasibility of the Construction Project.

On 9 June 2016, the Company requested in writing for an extension of time of a minimum of 3 weeks to be granted by Oriental Mace to enable the Company to complete all due processes and procedures prior to making a final decision on the said offer.

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 during a difficult FY16. 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
Executive Chairman
20 July 2016