QUESTION 2

KeepItUp Bhd is a very successful multinational retail company. It has been selling a large range of household and electronic goods for some years. One year ago, it began using new suppliers from China, where labor is very cheap, for many of its household goods. In 2018, KeepItUp Bhd also became a major provider of 'cloud computing' services, investing heavily in cloud technology. These services provide customers with a way of storing and accessing data and programs over the internet rather than on their computers' hard drives.

All KeepItUp Bhd customers have the option to sign up for the company's 'Gold' membership service, which provides next day delivery on all orders, in return for an annual service fee of RM40. In September 2019, KeepItUp Bhd formed its own logistics company and took over the delivery of all of its parcels, instead of using the services of international delivery companies.

Over the last year, there has been worldwide growth in the electronic goods market of 20%. Average growth rates and gross profit margins for cloud computing service providers have been 50% and 80% respectively in the last year.

KeepItUp Bhd's prices have remained stable year on year for all sectors of its business, with price competitiveness being crucial to its continuing success as the leading global electronic retailer.

The following information is available for KeepItUp Bhd for the last two financial years:

Notes 31 August 2020 31 August 2019

RM'000 RM'000

Revenue 1 94,660 82,320

Cost of sales 2 (54,531) (51,708)

Gross profit 40,129 30,612

Administration expenses 3 (2,760) (1,720)

Distribution expenses (13,420) (13,180)

Other operating expenses (140) (110)

Net profit 23,809 15,602

Notes:

1. Breakdown of revenue

31 August 2020 31 August 2019

RM'000 RM'000

Household goods 38,990 41,160

Electronic goods 41,870 32,640

Cloud computing services 12,400 6,520

Gold membership fees 1,400 2,000

94,660 82,320

2. Breakdown of cost of sales

31 August 2020 31 August 2019

RM'000 RM'000

Household goods 23,394 28,812

Electronic goods 26,797 21,216

Cloud computing services 4,240 1,580

Gold membership fees 100 100

54,531 51,708

3. Administration expenses.

Included in these costs are the costs of running the customer service department (RM 860,000 in 2019; RM 1,900,000 in 2020.) This department deals with customer complaints.

4. Non-financial data

31 August 2020 31 August 2019

Percentage of orders delivered on time 74% 92%

No. of customer complaints 1,400,000 320,000

No. of customers 7,100,000 6,500,000

Percentage of late 'Gold' member deliveries 1400% 200%

REQUIRED:

Discuss the Financial and Non-Financial Performance of KeepItUp Bhd for the year ending 31 August 2020.