SYNERGY HOUSE BERHAD: Navigating Growth and Challenges in Q1 2025
Greetings, fellow investors and market enthusiasts! Today, we’re diving deep into the latest financial performance of SYNERGY HOUSE BERHAD, a prominent player in the ready-to-assemble (RTA) home furniture sector. Their unaudited interim financial report for the first quarter ended 31 March 2025 has just been released, and it presents a mixed bag of continued revenue growth alongside a significant dip in profitability. While the company saw a commendable increase in overall sales, its profit before tax experienced a sharp decline, largely influenced by external factors and strategic investments. Let’s unpack the details and understand what this means for the company’s trajectory.
Key Highlight: Despite a challenging quarter for profitability, SYNERGY HOUSE BERHAD managed to grow its revenue by 5.3% year-on-year, reaching RM88.1 million. Furthermore, the company continued to return value to shareholders with a second interim single-tier dividend of 0.74 sen per ordinary share paid during the quarter.
Unpacking the Numbers: A Closer Look at Q1 2025 Performance
SYNERGY HOUSE BERHAD’s financial report reveals a dynamic quarter. While revenue continued its upward trend, profitability faced headwinds. Here’s a breakdown:
Overall Financial Performance (Q1 2025 vs. Q1 2024)
Current Quarter (31 Mar 2025)
Revenue: RM88,086,000
Profit Before Tax (PBT): RM3,386,000
Profit After Tax (PAT): RM2,445,000
Earnings Per Share (EPS): 0.49 sen
Corresponding Quarter (31 Mar 2024)
Revenue: RM83,677,000
Profit Before Tax (PBT): RM12,260,000
Profit After Tax (PAT): RM9,013,000
Earnings Per Share (EPS): 1.80 sen
The Group’s revenue for the first quarter of 2025 increased by 5.3% to RM88.1 million compared to RM83.7 million in the same period last year. This is a positive sign of continued sales growth. However, Profit Before Tax (PBT) saw a significant drop of 72.4%, from RM12.3 million to just RM3.4 million. Consequently, Profit After Tax (PAT) also declined by 72.9%, leading to a lower Earnings Per Share (EPS) of 0.49 sen, down from 1.80 sen a year ago.
Segmental Performance: B2C Shines, B2B Faces Headwinds
| Segment | Q1 2025 Revenue (RM’000) | Q1 2024 Revenue (RM’000) | Change (%) |
|---|---|---|---|
| B2B (Business-to-Business) | 36,886 | 40,014 | -7.8% |
| B2C (Business-to-Consumer) | 51,200 | 43,663 | 17.3% |
| Total Revenue | 88,086 | 83,677 | 5.3% |
The growth in overall revenue was primarily driven by a robust performance in the Business-to-Consumer (B2C) segment, which saw an impressive 17.3% increase in revenue to RM51.2 million. This was fueled by higher sales in North America, Europe, and Malaysia. In contrast, the Business-to-Business (B2B) segment experienced a 7.8% decrease in revenue to RM36.9 million. The report attributes this B2B moderation to softer contributions from Europe and certain Asian markets, with businesses adopting a “wait-and-see” approach following the U.S. Presidential inauguration.
Factors Behind the Profitability Dip
The significant decline in PBT is attributed to several key factors:
- Foreign Exchange Impact: The strengthening of the Malaysian Ringgit (RM) against the US Dollar (USD) (weighted average exchange rate declined by approximately 4.1%) negatively impacted reported revenue when foreign currency sales were translated back to RM. Furthermore, the Group recorded a net foreign exchange loss of RM0.4 million in Q1 2025, a stark contrast to a RM1.6 million gain in the corresponding quarter last year.
- Increased Operating Expenses: Depreciation and employee benefits, which are major fixed operating expenses, rose by RM1.0 million (approximately 19.2%). This increase is due to higher manpower costs (headcount grew from 194 to 250) and strategic investments in Information Technology (IT), including the implementation of Robotics Process Automation (RPA), Artificial Intelligence (AI) tools, and enhancements to their Enterprise Resource Planning (ERP) system. These investments, while impacting short-term profitability, are aimed at enhancing long-term operational efficiency and growth.
- Expected Credit Loss (ECL) Provision: The Group made a provision of RM0.8 million for expected credit loss on trade receivables, reflecting a proactive approach to financial health and regulatory compliance.
Quarter-on-Quarter Snapshot (Q1 2025 vs. Q4 2024)
Comparing the current quarter to the immediate preceding quarter (Q4 2024) shows a typical seasonal slowdown:
Current Quarter (31 Mar 2025)
Revenue: RM88,086,000
Profit Before Tax (PBT): RM3,386,000
Immediate Preceding Quarter (31 Dec 2024)
Revenue: RM117,405,000
Profit Before Tax (PBT): RM8,368,000
Revenue decreased by 25.0% from RM117.4 million in Q4 2024 to RM88.1 million in Q1 2025. This is largely expected, as the B2C segment traditionally sees its highest sales towards the end of the calendar year due to holiday seasons. The B2B segment also saw a 34.2% decline, again attributed to the “wait-and-see” approach post-U.S. inauguration and lower contributions from Europe and Middle East markets. The PBT also decreased by 59.5% compared to the immediate preceding quarter due to lower sales volume.
Navigating the Future: Risks, Strategies, and Outlook
SYNERGY HOUSE BERHAD is not just looking at the present; they are actively strategizing for future growth amidst evolving market conditions. Here’s how they plan to tackle challenges and seize opportunities:
Strategic Focus Areas:
- B2C Segment Expansion: The company aims to further grow its B2C segment by expanding customer reach through additional third-party e-commerce platforms, exploring new product categories (including higher price ranges), and penetrating new countries. They also plan to enhance revenue through more advertisements and promotions.
- Leveraging Technology: A key part of their strategy involves utilizing technology and Artificial Intelligence (AI) to stay abreast of market trends and improve efficiency, including subscribing to market intelligence software.
- Product Range Expansion: Continuous design and development efforts are underway to expand their home furniture range, again with a focus on higher price range items.
Market Outlook and Mitigating Risks:
The global furniture e-commerce market presents immense potential, and SYNERGY HOUSE BERHAD is cautiously optimistic. While the recent tariffs imposed by the USA create temporary uncertainties, the Group sees an advantage: Malaysia faces a lower tariff rate compared to China, potentially enhancing the competitiveness of Malaysian exporters in the long run. To mitigate the impact of tariffs, the company is actively reviewing prices on e-commerce platforms and negotiating cost reductions with suppliers across the supply chain.
Despite ongoing global economic challenges, the Group anticipates a lesser impact on its business. This confidence stems from its affordable home furniture products and strong established presence on third-party e-commerce platforms in the USA, UK, and Canada, with ongoing expansion into France and Germany.
E-commerce Enabler Project:
An exciting development is the e-commerce enabler project, a collaboration with Wayfair. Following a cross-border e-commerce conference, the Group is now at various stages of onboarding vendors, including product development, logistics registration, and the commencement of container shipments overseas. This initiative could significantly expand their ecosystem and market reach.
Summary and
SYNERGY HOUSE BERHAD’s first quarter 2025 report showcases a company actively adapting to a dynamic market. While profitability was impacted by a stronger Ringgit, increased operational costs due to strategic IT investments, and an expected credit loss provision, the underlying revenue growth, particularly in the B2C segment, remains a positive indicator. The company’s proactive strategies in expanding its B2C footprint, leveraging technology, and navigating trade challenges position it for future opportunities.
Key points from the report that stand out:
- Despite external pressures, revenue saw a healthy 5.3% year-on-year increase, driven by strong B2C performance.
- Strategic investments in IT and increased headcount are expected to enhance long-term operational efficiency and competitive positioning.
- The company is actively mitigating tariff impacts and expanding its e-commerce ecosystem through collaborations like the Wayfair project.
The immediate profitability dip is a point of concern, but understanding the underlying reasons—such as FX fluctuations and strategic investments—is crucial. The company’s focus on expanding its B2C segment and embracing digital transformation could be key drivers for future performance.
As a Malaysian retail investor, what are your thoughts on SYNERGY HOUSE BERHAD’s latest quarter? Do you believe their strategic investments in technology and B2C expansion will yield significant long-term returns, offsetting the current pressures on profitability?
Share your insights and perspectives in the comments section below! Your views are valuable to our community.
For more detailed analysis on Malaysian companies and market trends, be sure to explore our other articles.
