Varia Berhad’s Q3 FY2025: Strong Revenue Growth Amidst Strategic Shifts and Non-Cash Charges
Varia Berhad, a familiar name on Bursa Malaysia’s Main Market, has just released its unaudited results for the third quarter ended 31 March 2025. This report offers a fascinating look into the company’s performance, revealing a dynamic interplay of robust revenue growth, strategic operational shifts, and the impact of significant non-cash expenses.
While the top line surged with an impressive 81% increase in quarterly revenue, the period also saw the Group report a loss before tax, primarily due to the amortization of intangible assets. However, the year-to-date figures paint a picture of substantial growth and improved operational cash flow, highlighting Varia Berhad’s underlying strength and strategic positioning.
Unpacking the Numbers: A Deep Dive into Varia Berhad’s Performance
Quarterly Performance (Q3 FY2025 vs. Q3 FY2024)
The current quarter showcases a significant jump in Varia Berhad’s revenue, primarily driven by its construction segment. Let’s look at the key figures:
Current Quarter (31 Mar 2025)
Revenue: RM119.113 million
Gross Profit: RM12.500 million
(Loss) Before Tax: RM(5.861) million
(Loss) After Tax: RM(4.332) million
Basic/Diluted Earnings per Share: (1.00) sen
Corresponding Quarter (31 Mar 2024)
Revenue: RM65.780 million
Gross Profit: RM7.694 million
Profit Before Tax: RM1.987 million
Profit After Tax: RM1.967 million
Basic/Diluted Earnings per Share: 0.47 sen
As you can see, revenue soared by 81% and gross profit increased by 62%. However, the Group recorded a loss before tax of RM5.86 million, a stark contrast to the RM1.99 million profit in the corresponding quarter last year. This shift was largely attributable to a substantial amortization of intangible assets amounting to RM10.13 million during the quarter. Despite this, the gross profit margin remained stable, hovering between 9% and 11%, indicating consistent project-level profitability.
Year-to-Date Performance (9 Months FY2025 vs. 12 Months FY2024)
For the nine-month period ended 31 March 2025, Varia Berhad showed remarkable growth, even when compared to a longer twelve-month period from the previous year. This highlights the accelerated pace of their operations:
Current Period (9 Months Ended 31 Mar 2025)
Revenue: RM377.017 million
Gross Profit: RM37.850 million
EBITDA: RM23.329 million
Profit Before Tax: RM5.635 million
Profit After Tax: RM5.651 million
Basic/Diluted Earnings per Share: 1.31 sen
Preceding Period (12 Months Ended 31 Mar 2024)
Revenue: RM148.311 million
Gross Profit: RM23.764 million
EBITDA: RM12.656 million
Profit Before Tax: RM8.386 million
Profit After Tax: RM4.922 million
Basic/Diluted Earnings per Share: 1.18 sen
Revenue surged by 154%, and EBITDA grew by 89%. While the year-to-date profit before tax was lower than the previous longer period, the Group maintained a robust EBITDA, demonstrating strong operational performance before factoring in non-cash expenses, taxes, and financing costs. This further underscores the impact of the RM10.13 million intangible asset amortization.
Comparison to Immediate Preceding Quarter (Q3 FY2025 vs. Q2 FY2025)
Looking at the sequential performance, Varia Berhad’s revenue saw a slight dip, while profitability was significantly affected:
Current Quarter (31 Mar 2025)
Revenue: RM119.113 million
Gross Profit: RM12.500 million
EBITDA: RM7.037 million
(Loss) Before Tax: RM(5.861) million
(Loss) After Tax: RM(4.332) million
Immediate Preceding Quarter (31 Dec 2024)
Revenue: RM143.144 million
Gross Profit: RM12.532 million
EBITDA: RM7.780 million
Profit Before Tax: RM4.869 million
Profit After Tax: RM5.484 million
Revenue decreased by 17% from the immediate preceding quarter, while profit before tax declined by a significant 220%. This sharp drop is again primarily due to the RM10.13 million intangible asset amortization. Despite this, EBITDA remained relatively stable, reflecting consistent underlying operational performance.
Segmental Performance: The Engines of Growth
Varia Berhad’s performance is largely driven by its core business segments:
| Business Segment (9 Months Ended 31 Mar 2025) | Revenue (RM’000) | Profit/(Loss) Before Tax (RM’000) |
|---|---|---|
| Construction | 364,471 | 24,934 |
| Property Development | 12,459 | (376) |
| Property Investment | 87 | 56 |
| Maintenance, Facility Management and Services | – | 26 |
| Infrastructure | – | (166) |
| Investment Holding | – | (8,672) |
The Construction segment remains the primary revenue driver, contributing RM364.47 million in revenue and RM24.94 million in profit before tax for the year-to-date. This was fueled by accelerated progress on existing projects like Perkeso Ipoh and Puspahanas, along with contributions from newly commenced projects. The Property Development segment generated RM12.46 million in revenue, mainly from Taman Arowana Phase 1. The Investment Holding segment reported a loss before tax, primarily due to financing costs and staff expenses.
Financial Health and Cash Flow
Varia Berhad’s balance sheet reflects a healthy position. Total assets increased to RM661.304 million as at 31 March 2025, up from RM650.701 million at 30 June 2024. Total equity also grew to RM406.118 million, resulting in a net asset per share of RM0.94 (compared to RM0.93 previously).
A significant positive note is the improvement in cash flow from operating activities, which turned positive at RM15.183 million for the nine-month period, a substantial recovery from a negative RM5.054 million in the corresponding period last year. This indicates better operational efficiency in generating cash. Total borrowings saw a slight increase to RM118.377 million from RM113.470 million.
It is worth noting the significant increase in corporate guarantees provided by the Company to licensed banks for subsidiary banking facilities, which rose to RM278.74 million (from RM98.24 million). The utilised portion also increased substantially to RM167.60 million (from RM22.43 million). This represents a notable increase in contingent liabilities that warrants attention.
Navigating Challenges and Charting the Future: Risks and Prospects
Varia Berhad acknowledges the challenging landscape of the construction sector but expresses confidence in its robust business model and experienced leadership team. The company’s strategy focuses on prudent and agile management to navigate economic uncertainties and ensure long-term performance.
A key strength highlighted in the report is Varia Berhad’s outstanding order book, which stands at an impressive RM2.83 billion as of 31 March 2025. This includes a substantial RM2.73 billion in the construction segment, covering diverse projects in infrastructure, education, rehabilitation, and environmental initiatives. This strong pipeline provides significant revenue visibility for the coming periods.
The Economic Outlook Report 2025 projects a 9.4% sector growth, driven by strategic infrastructure developments, which aligns well with Varia Berhad’s core business. The company is actively tendering for new projects to further strengthen its portfolio and align with national development goals.
In property development, the positive demand for Taman Arowana Phase 1 has led to the launch of Phase 2, consisting of 142 double-storey homes, which is expected to attract sustained interest. Looking ahead, Varia Berhad is focused on securing more high-value contracts and delivering strong financial results for its shareholders.
Summary and
Varia Berhad’s Q3 FY2025 report presents a mixed yet ultimately promising picture. The company has demonstrated exceptional top-line growth and improved operational cash flow, driven by its robust construction segment and a substantial order book. While the reported loss before tax for the quarter was a direct consequence of non-cash amortization of intangible assets, the underlying operational strength, as reflected by EBITDA, remains solid.
Key points from this report include:
- Strong Revenue Momentum: Significant year-on-year and year-to-date revenue growth, primarily from the construction segment.
- Operational Resilience: Despite the non-cash charge impacting net profit, EBITDA remained strong, indicating healthy core operations.
- Robust Order Book: A substantial outstanding order book provides clear visibility for future revenue streams.
- Improved Cash Flow from Operations: A positive shift in operating cash flow highlights better cash generation efficiency.
- Strategic Project Pipeline: Active tendering for new, high-value contracts aligns with positive industry outlooks.
- Increased Contingent Liabilities: The substantial rise in corporate guarantees and their utilized portion for subsidiaries is a point for stakeholders to monitor.
The company’s strategic focus on infrastructure and property development, coupled with a healthy pipeline of projects, positions it to capitalize on the projected sector growth. While the non-cash charges present a short-term accounting impact, the long-term prospects appear positive given the operational strengths and strategic initiatives.
Please note: This analysis is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.
From a professional standpoint, Varia Berhad appears to be effectively leveraging its operational capabilities to secure and execute large-scale projects, as evidenced by its burgeoning order book and significant revenue increase. The impact of intangible asset amortization, while affecting the bottom line in the short term, is a non-cash item that doesn’t reflect the day-to-day operational efficiency. However, the notable increase in contingent liabilities is an area that warrants continued monitoring by investors to understand its potential implications on the company’s financial risk profile.
What are your thoughts on Varia Berhad’s latest performance? Do you think the company can maintain this growth momentum and manage its financial exposures effectively in the coming quarters? Share your views in the comments below!
