Greetings, fellow investors and market watchers! Today, we’re diving deep into the latest financial performance of Knusford, as revealed in their quarterly report for the financial year ended 31 March 2025. This report presents a fascinating mix of challenges and strategic triumphs, painting a picture of a company navigating a tough economic landscape with targeted adjustments.
While the Group experienced a notable decline in overall revenue, its strategic recalibration of project margins and finalisation of certain project accounts led to a significant surge in quarterly profit. Furthermore, a closer look at the full-year results reveals a commendable increase in net profit, underscoring the resilience of its core operations. This report also highlights a strengthened balance sheet with reduced liabilities and a healthy cash position, alongside ongoing corporate developments that could reshape its future trajectory. Let’s unpack the numbers and insights that truly matter for Malaysian retail investors.
Core Data Highlights: A Tale of Resilience and Strategic Wins
Knusford’s latest report showcases a mixed but ultimately positive picture, particularly in its profitability for the quarter. While revenue faced headwinds, strategic adjustments proved effective.
Quarterly Performance (4Q 2025 vs. 4Q 2024)
Current Quarter (4Q 2025)
- Revenue: RM28,544,000
- Profit Before Tax (PBT): RM4,503,000
- Net Profit After Tax (PAT): RM3,766,000
- Basic Earnings Per Share (EPS): 3.78 sen
Preceding Year Corresponding Quarter (4Q 2024)
- Revenue: RM48,397,000
- Profit Before Tax (PBT): RM4,162,000
- Net Profit After Tax (PAT): RM1,565,000
- Basic Earnings Per Share (EPS): 1.57 sen
Despite a 41.0% decrease in revenue for the current quarter compared to the same period last year, Knusford achieved a remarkable 140.6% surge in net profit after tax. This impressive profit growth was primarily driven by the finalisation of certain project accounts with clients and the strategic recalibration of profit margins for projects nearing completion. Additionally, the construction sector saw a positive impact from a net impairment gain on receivables.
Year-to-Date Performance (FY 2025 vs. FY 2024)
Current Year-to-Date (FY 2025)
- Revenue: RM80,484,000
- Profit Before Tax (PBT): RM11,918,000
- Net Profit After Tax (PAT): RM10,525,000
- Basic Earnings Per Share (EPS): 10.56 sen
Preceding Year-to-Date (FY 2024)
- Revenue: RM148,804,000
- Profit Before Tax (PBT): RM13,625,000
- Net Profit After Tax (PAT): RM9,184,000
- Basic Earnings Per Share (EPS): 9.22 sen
For the full financial year, revenue declined by 45.9%. Profit before tax also saw a 12.5% decrease, mainly due to lower sales volume. However, this was partially offset by a significant one-off gain of RM12.033 million from the disposal of an investment property. Crucially, net profit after tax for the full year increased by 14.6%, primarily due to a lower tax expense incurred during the period.
Segmental Performance Analysis
Delving deeper, the report provides a granular view of how each business segment contributed to the overall performance:
- Construction Sector: Despite a 43.4% revenue decline in the current quarter, this segment was a star performer, registering a 124.7% increase in profit before tax. This impressive turnaround was attributed to project account finalisations, profit margin recalibrations, and a substantial net impairment gain on receivables. For the full year, the construction sector’s profit before tax surged by an astounding 657.0%.
- Investment Property: This segment saw a 37.7% revenue decrease in the current quarter due to a tenancy termination. It also reported a loss before tax, primarily due to a RM2.027 million impairment loss on investment properties. However, for the full year, its profit before tax increased by 5.4%, largely cushioned by a one-off gain from the disposal of an investment property.
- Trading Sector: This segment faced significant headwinds, with revenue declining by 28.1% in the current quarter and 46.9% for the full year. It recorded higher losses before tax, mainly due to lower demand for building materials and increased net impairment losses on receivables.
- Property Development: While no revenue was recorded in the current quarter, the segment swung from a loss to a small profit before tax due to the reversal of over-accrued overhead costs. For the full year, revenue and profit before tax declined significantly due to the absence of a one-off land disposal that occurred in the previous year.
- Other Services: This segment reported lower revenue and a loss before tax in the current quarter and full year, primarily due to significantly lower net impairment gains on receivables compared to the previous year.
Financial Health: A Stronger Foundation
Knusford’s balance sheet reflects a healthy financial position and improved liquidity:
As At 31 March 2025
- Total Assets: RM404,817,000
- Total Equity: RM239,055,000
- Total Liabilities: RM165,762,000
- Cash and Cash Equivalents: RM4,335,000
- Total Borrowings: RM43,364,000
- Net Assets per Share: RM2.3991
As At 31 March 2024
- Total Assets: RM445,542,000
- Total Equity: RM228,530,000
- Total Liabilities: RM217,012,000
- Cash and Cash Equivalents: RM1,700,000
- Total Borrowings: RM60,303,000
- Net Assets per Share: RM2.2934
The Group’s total assets decreased, primarily due to the disposal of an investment property and reduced trade receivables. However, total equity saw a healthy increase, driven by the retained earnings from the year’s profit. More notably, total liabilities significantly decreased, reflecting effective debt management. Cash and cash equivalents more than doubled, providing a stronger liquidity buffer. The net assets per share also improved, indicating enhanced shareholder value.
Cash Flow Dynamics
Current Year-to-Date (FY 2025)
- Net cash used in operating activities: (RM2,242,000)
- Net cash from investing activities: RM21,890,000
- Net cash used in financing activities: (RM17,013,000)
Preceding Year-to-Date (FY 2024)
- Net cash used in operating activities: (RM32,947,000)
- Net cash from investing activities: RM14,565,000
- Net cash from financing activities: RM3,463,000
A significant highlight from the cash flow statement is the substantial improvement in net cash used in operating activities, moving from a negative RM32.947 million to a negative RM2.242 million. This indicates much better operational efficiency and working capital management. Cash from investing activities increased, largely due to proceeds from the disposal of investment properties. The net cash used in financing activities reflects a reduction in borrowings, further strengthening the company’s financial position.
Risks and Prospects: Navigating a Challenging Horizon
Knusford operates within an environment that presents both opportunities and significant challenges. The Board acknowledges the prevailing economic conditions and has outlined its strategies to navigate them.
Opportunities
Malaysia’s Budget 2025, with its substantial allocation for development expenditures, particularly in transportation infrastructure (highways, ports, and rail projects), presents a potential avenue for growth. These public sector-led developments could provide new project opportunities for Knusford’s construction segment.
Challenges and Risks
The economic outlook for 2025/2026 remains challenging. Key concerns include:
- Global Trade Tensions: Reciprocal tariffs, particularly from the United States, continue to disrupt global supply chains and contribute to market volatility, with long-term effects remaining unclear.
- Domestic Pressures: Ongoing inflationary pressures, rising material and labour costs, the potential introduction of a carbon tax, and the rationalisation of government subsidies are expected to exert further pressure on the construction and property sectors.
- Litigation: The Group is involved in a material litigation case concerning a claim of RM76.5 million by Tenaga Nasional Berhad against a subsidiary. While the Group believes it has strong grounds for defence, the outcome remains uncertain.
Strategic Responses
To mitigate these risks, Knusford has adopted a “highly selective tendering strategy.” This approach focuses on securing projects with sufficient profit margins to absorb potential cost escalations and ensure operational sustainability. The Group remains steadfast in its commitment to its core business segments: building materials trading, civil construction, and building works. Concurrently, it is actively exploring viable opportunities to replenish its order book and maintain business continuity.
Outlook
Given the soft market and economic outlook, the Board anticipates that the financial performance of the construction and trading sectors for the financial year ending 31 March 2026 may be adversely impacted. This cautious outlook highlights the need for continued vigilance and adaptive strategies.
Corporate Developments
The report also updated on two key corporate proposals:
- Proposed Knusford-ECSB Merger: The proposed merger of the construction and construction-related businesses of Ekovest and Knusford, through Knusford’s acquisition of Ekovest Construction Sdn Bhd (ECSB) for an indicative RM450 million, is still under negotiation. The binding heads of merger agreement has been extended for a final time to 27 July 2025, allowing more time for assessment and deliberation.
- Disposal of Freehold Land: The disposal of a freehold land in Klang for RM28.0 million was successfully completed on 23 October 2024. The proceeds were fully utilised for the repayment of bank borrowings and working capital, demonstrating effective asset monetisation and financial strengthening.
Summary and
Knusford’s latest quarterly report presents a nuanced picture. While the Group faced a significant revenue decline, especially in its trading and construction segments, its ability to boost quarterly net profit and full-year net profit through strategic adjustments and asset disposals is noteworthy. The construction sector, despite lower work done, managed to turn around its profitability impressively due to margin recalibration and impairment gains. The strengthened balance sheet, marked by increased cash and reduced borrowings, provides a solid financial foundation.
However, the path ahead remains challenging. The Group’s forward-looking statements indicate potential adverse impacts on its construction and trading sectors in the next financial year due to persistent inflationary pressures, rising costs, and global trade uncertainties. The ongoing merger discussions and material litigation add layers of complexity that warrant close monitoring.
Key points to consider moving forward:
- The effectiveness of Knusford’s “highly selective tendering strategy” in securing profitable projects amidst rising costs and a competitive landscape.
- The progress and eventual outcome of the proposed Knusford-ECSB merger, which could significantly reshape the Group’s construction capabilities and market position.
- The resolution of the material litigation, as its outcome could have a financial impact on the Group.
- The Group’s ability to replenish its order book and sustain business continuity in its core segments, especially given the cautious outlook for the construction and trading sectors.
What are your thoughts on Knusford’s performance and its strategies for the challenging year ahead? Do you think the company can maintain its profitability momentum by focusing on margin quality over revenue volume? Share your insights in the comments below!
