Quarterly Performance: A Turn Towards Reduced Losses

For the individual quarter ended 31 March 2025, Microlink Solutions Berhad showed a notable improvement in its bottom line compared to the same period last year, even as revenue remained relatively flat. This indicates a positive shift in operational efficiency and cost management within the quarter.

While the revenue for the quarter remained largely unchanged, the significant turnaround from a gross loss of RM2.19 million in the previous corresponding quarter to a gross profit of RM16.06 million in the current quarter is a testament to improved operational performance. This also translated into a substantial reduction in the loss before taxation, shrinking from RM26.34 million to RM4.61 million, and a similar improvement in the loss for the period.

Full Financial Year Performance: Revenue Growth Against Challenging Profitability

Looking at the cumulative twelve months ended 31 March 2025, Microlink demonstrated strong revenue growth, albeit overshadowed by a widening loss attributed to significant one-off charges.

The 28% increase in full-year revenue to RM361.15 million is a positive indicator of the company’s business expansion, driven by higher order fulfillments and progress billings. However, the substantial increase in loss before taxation for the full year is primarily due to significant one-off asset write-offs. The report specifically highlights a software development expenditure write-off of RM78.66 million and a goodwill impairment of RM3.33 million, totaling RM81.98 million. Without these one-off charges, the underlying operational performance would appear much healthier.

Segmental Deep Dive: Mixed Performance Across Business Units

Microlink’s business is diversified across several key segments. Here’s how each performed over the twelve months ended 31 March 2025:

• Financial Services: Revenue surged by 49% to RM79.35 million. However, this segment’s loss before taxation widened significantly by 142% to RM31.97 million, indicating potential cost challenges or investments in this growing area.
• Enterprise Solutions: This segment saw a 16% decrease in revenue to RM47.79 million, and its loss before taxation widened by 111% to RM49.13 million. This suggests a challenging period for enterprise-focused offerings.
• Distribution Services: A strong performer, with revenue increasing by 38% to RM257.73 million. However, its profit before taxation decreased by 64% to RM3.22 million, pointing to tighter margins despite higher sales volume.
• Solution Delivery: This segment recorded no revenue or profit before taxation for the current year, indicating a significant shift or cessation of operations compared to the previous year.

The overall group revenue growth was largely propelled by the Financial Services and Distribution Services segments, compensating for the decline in Enterprise Solutions and the cessation of Solution Delivery activities.

Financial Health and Cash Flow Dynamics

As at 31 March 2025, Microlink’s financial position reflects the impact of the year’s activities:

• Total Assets: Decreased to RM265.04 million from RM355.57 million in the previous year. This substantial decrease is largely due to the write-down of software development expenditure and goodwill.
• Total Equity: Reduced to RM109.96 million from RM198.40 million, primarily due to the accumulated losses.
• Borrowings: Short-term bank borrowings increased significantly to RM75.10 million from RM41.10 million, indicating increased reliance on debt.
• Cash Flow from Operations: The company utilized less cash in operating activities, with net cash used improving to RM17.43 million compared to RM27.96 million in the preceding year. This is a positive sign of improving operational efficiency in cash generation.
• Cash Flow from Investing Activities: A significant increase in cash used for investing activities to RM35.94 million from RM2.38 million, largely driven by additions to software development expenditure.
• Cash Flow from Financing Activities: Net cash from financing activities increased to RM20.28 million from RM8.21 million, mainly due to higher net drawdown of borrowings.

Strategic Outlook and Future Prospects

Microlink’s management acknowledges the challenges and has outlined clear strategies to navigate the current environment. They are actively implementing corporate and business strategies focused on optimising costs and, crucially, restoring the Group to operational profitability. This includes a disciplined focus on business execution and ongoing cost optimization initiatives to drive further operational gains.

The company remains optimistic about achieving its targeted revenue for the remainder of the financial year. Their commitment extends to sustaining momentum for long-term recovery, sustainability, and growth. A key corporate exercise in progress is a renounceable rights issue of up to 536,198,080 new ordinary shares with free detachable warrants, on the basis of 1 Rights Share with 1 Warrant for every 2 existing ordinary shares held. The issue price for the Rights Shares and the exercise price for the Warrants have been fixed at RM0.16 each. This exercise aims to strengthen the company’s financial position and provide capital for future growth.