Greetings, fellow investors and market enthusiasts! Today, we’re diving into the latest financial report from Scicom (MSC) Berhad for their third quarter ended 31 March 2025. This report offers a crucial glimpse into the company’s performance, highlighting both the challenges it currently faces and the strategic moves it’s making to secure future growth.
While the numbers for this quarter show a dip in profitability, largely due to some expected contract non-renewals, Scicom has also announced new project wins and a fresh dividend declaration, signaling confidence in its forward trajectory. Let’s unpack the details and see what’s really happening behind the figures.
Core Data Highlights: A Closer Look at Q3 FY2025
Scicom’s third-quarter results reveal a period of transition. The overall revenue and profit before tax saw a decline when compared to the same period last year. This was primarily influenced by lower transactional volumes in its key Business Process Outsourcing (BPO) segment.
Overall Financial Performance (Q3 FY2025 vs. Q3 FY2024)
Q3 FY2025
Revenue: RM45.39 million
Profit Before Tax: RM5.04 million
Net Profit: RM3.77 million
Earnings Per Share: 1.06 sen
Q3 FY2024
Revenue: RM54.29 million
Profit Before Tax: RM8.13 million
Net Profit: RM6.10 million
Earnings Per Share: 1.72 sen
As you can see, revenue decreased by approximately 16.38%, from RM54.29 million in Q3 FY2024 to RM45.39 million in Q3 FY2025. This naturally led to a more significant impact on the bottom line, with profit before tax falling by 38.04% and net profit by 38.14% compared to the same quarter last year. The earnings per share also mirrored this trend, dropping from 1.72 sen to 1.06 sen.
A notable factor contributing to the decline in profit before tax was a shift in foreign exchange impact: the previous quarter saw a foreign exchange gain of RM798K, whereas the current quarter recorded a foreign exchange loss of RM97K.
Segmental Performance
Scicom operates primarily through two segments: Business Process Outsourcing (BPO) and Education. The BPO segment remains the primary revenue driver, but it also bore the brunt of the challenges this quarter.
| Segment | Q3 FY2025 Revenue (RM’000) | Q3 FY2024 Revenue (RM’000) | Change (RM’000) | Percentage Change |
|---|---|---|---|---|
| BPO | 45,395 | 54,206 | (8,811) | -16.25% |
| Education | 0 | 80 | (80) | -100.00% |
| Total Revenue | 45,395 | 54,286 | (8,891) | -16.38% |
The significant decrease in BPO revenue was mainly due to lower transactional volumes, stemming from the non-renewal of contracts by certain long-term BPO clients who decided to bring their operations in-house. The Education segment also saw a complete cessation of revenue this quarter.
Financial Health and Dividends
On the financial health front, Scicom maintains a strong position with no borrowings or debt securities as of 31 March 2025. This indicates a robust balance sheet and operational efficiency.
For the nine months ended 31 March 2025, the net cash from operating activities stood at RM19.54 million, a decrease from RM28.35 million in the same period last year, reflecting the lower revenue generation.
In a positive note for shareholders, the Board of Directors has approved and declared a third interim dividend of 1.00 sen per ordinary share, amounting to RM3,554,536, payable on 25 June 2025. This demonstrates the company’s commitment to returning value to its shareholders despite the challenging quarter.
Navigating Risks and Charting Future Prospects
While the latest quarter presented headwinds, Scicom’s report also sheds light on its strategic responses and future outlook. The company is actively addressing the challenges and laying the groundwork for renewed growth.
Key Challenges and Risks
- Client Contract Non-Renewals: The primary reason for the revenue decline was certain long-term BPO clients opting to internalize their operations. This highlights the need for continuous client diversification and value proposition enhancement.
- Foreign Exchange Fluctuations: The swing from an FX gain to an FX loss impacted profitability, underscoring the exposure to currency movements.
- Tax Assessment in India: A wholly-owned subsidiary in India has received tax assessment notices totaling RM1.2 million (INR23.8 million) related to transfer pricing adjustments and disallowance of certain expenses. Scicom is challenging these assessments, with the Board of Directors confident that no significant liability will materialize based on expert advice.
- Ongoing Litigation: The case involving Informatics International Limited is still ongoing, with the latest High Court hearing adjourned to 12 June 2025.
Strategic Initiatives and Future Outlook
Despite the current setbacks, Scicom is actively working to mitigate risks and seize new opportunities:
- AI Integration: Scicom is making continued progress in developing and seamlessly integrating advanced AI technologies into its products and services. This is a crucial strategic move to enhance its offerings and secure new projects.
- New Project Wins: The company has successfully secured new projects across its BPO business segment, which are slated to commence in the first quarter of FY2026. These new engagements are expected to offset previous revenue losses.
- Gov-Tech Expansion: In addition to previously announced projects, Scicom has secured further concession-based contracts in the Gov-tech sector during this financial year. These are also projected to significantly enhance the Group’s performance in FY2026.
- Strong Tender Contender: The innovations in AI and service integration have solidified Scicom’s position as a strong contender for several key tenders within the BPO and Enterprise Managed Services industries.
Given the commencement timelines of these new projects, Scicom does not anticipate growth in profitability for the financial year ending 30 June 2025. However, the Group expresses confidence that the initiation of these contracts, along with other confirmed initiatives, will contribute to significant growth in both revenue and profit for FY2026.
Summary and Outlook
Scicom (MSC) Berhad’s Q3 FY2025 report paints a picture of a company in a transitional phase. While the decline in revenue and profitability compared to the same quarter last year is a clear concern, it’s largely attributed to specific, known factors like contract non-renewals. The silver lining, and perhaps the more important takeaway for Malaysian retail investors, lies in the company’s proactive strategies and future prospects.
Scicom is not standing still. Its investment in advanced AI technologies and the successful securing of new BPO and Gov-tech projects are critical indicators of its forward momentum. These initiatives, expected to kick in from FY2026, suggest a potential turnaround and a return to significant growth. The continued dividend payout also signals a commitment to shareholder returns.
However, it’s important to remain mindful of the ongoing challenges. Key risk points to monitor include:
- The successful ramp-up and execution of the newly secured projects to ensure they deliver the projected revenue and profit growth.
- The resolution of the tax assessment issue in India and the ongoing litigation case.
- The ability to continuously innovate and secure new clients to diversify revenue streams and mitigate the impact of future contract non-renewals.
Overall, Scicom appears to be strategically repositioning itself for future expansion, leveraging technology and new market opportunities. The current quarter’s performance is a reflection of past client decisions, but the future seems to hinge on the successful execution of its new ventures.
What are your thoughts on Scicom’s latest performance and its future outlook? Do you think the company can successfully leverage its new projects and AI initiatives to achieve its projected significant growth in FY2026? Share your insights in the comments section below!
For more in-depth analyses and market updates, stay tuned to our blog.
