Greetings, fellow investors! Today, we’re delving into the latest financial report from Johan Holdings Berhad (JHB) for its third financial quarter ended 30 April 2025. This report reveals a fascinating narrative of a company navigating a challenging market environment while achieving a remarkable profit turnaround. While the headline numbers look impressive, a closer look reveals the key drivers behind this performance.

The most striking highlight from this quarter is JHB’s significant shift from a loss-making position to a healthy profit. This turnaround was primarily driven by a substantial reversal of impairment loss on its plant, machinery, and equipment. Let’s unpack the details.

The Big Picture: Group Financial Performance

Current Quarter Performance (3 Months Ended 30 April)

For the current quarter, Johan Holdings Berhad reported a significant swing in its profitability, largely attributed to a non-recurring item. Here’s how the numbers stack up against the same period last year:

As you can see, the Group recorded a profit before tax of RM15.248 million this quarter, a dramatic improvement from the RM12.688 million loss in the corresponding quarter last year. This remarkable shift was mainly due to a reversal of impairment loss on Dynacare’s plant, machinery, and equipment amounting to RM21.351 million in the current quarter. In contrast, the same period last year saw an impairment loss of RM5.326 million. Without this reversal, the operational performance would show a different picture, as revenue actually decreased by 49.5% from RM6.556 million to RM3.312 million.

Cumulative 9-Month Performance (Ended 30 April)

Looking at the cumulative nine-month performance, the trend of profit recovery is also evident:

The Group also turned around its cumulative 9-month performance, reporting a PBT of RM6.672 million compared to a loss of RM19.846 million last year. This again underscores the significant impact of the impairment reversal on the overall financial results, despite a 34.7% decline in cumulative revenue.

Diving Deeper: Segmental Performance

Johan Holdings operates across several key segments. Let’s examine their individual contributions to the overall revenue and profitability (EBITDA) for the cumulative 9-month period:

While General Trading saw a significant revenue drop and increased losses, the Hospitality and Card Services segment showed a slight revenue increase and a notable improvement in EBITDA. The Property segment also saw a slight revenue increase and a massive swing to positive EBITDA, which likely reflects the impact of the impairment reversal, given its size. The Healthcare segment experienced a slight revenue decline and increased losses.

Financial Health Check: Balance Sheet & Cash Flow

The Group’s financial position strengthened significantly as at 30 April 2025:

Total assets increased by 31.8% and total equity by 12.6% compared to 31 July 2024, leading to a healthier net assets per share. This improvement is partly due to the revaluation of properties and the subscription of shares by non-controlling interests.

From a cash flow perspective for the 9 months ended 30 April 2025, the Group generated a positive net cash flow from operating activities of RM52.487 million, a strong rebound from a net cash outflow of RM782k in the prior year. However, net cash used in investing activities saw a significant increase to RM80.855 million, primarily due to substantial purchases of property, plant, and equipment. Net cash from financing activities also increased to RM12.949 million, boosted by the subscription of shares by non-controlling interests in a subsidiary.

Navigating the Future: Risks & Prospects

Johan Holdings acknowledges the prevailing market weakness, characterized by increased supply and trade-related challenges. However, the company also notes a positive trend in Average Selling Price (ASP) compared to the previous year. Furthermore, ongoing trade dynamics, including tariffs, while introducing uncertainty, have also opened up opportunities for Malaysian manufacturers like JHB, positioning local production as an attractive alternative.

Looking ahead, the Group remains optimistic over the medium to long term. Their strategy focuses on improving cost efficiency, enhancing operational performance, and leveraging innovation to navigate current challenges and capitalize on future growth. The Hospitality segment, in particular, is committed to facility upgrades and expanding its market reach through sales and marketing initiatives.

However, it’s important to note the net fair value loss on investment securities of RM3.302 million for the cumulative nine months, stemming from a decrease in the market value of its investment in George Kent (Malaysia) Berhad shares. This highlights a market-related risk to investment portfolio values.