RTS Technology Navigates Growth and Challenges in 1H FY2025: A Deep Dive into Their Latest Report
Greetings, fellow investors! Today, we’re putting RTS Technology Holdings Berhad (RTS Technology) under the microscope, as they’ve just released their unaudited condensed consolidated financial statements for the first half-year ended 30 June 2025 (1H FY2025). This report paints a mixed picture, highlighting impressive revenue growth driven by specific segments, alongside a significant increase in pre-tax losses. It’s a classic case of navigating opportunities while confronting operational headwinds. Let’s break down the key takeaways and understand what’s shaping the company’s trajectory.
Core Data Highlights: Revenue Surges, But Profitability Under Pressure
RTS Technology’s latest half-year report shows a company actively growing its top line, but struggling with the bottom line. Let’s delve into the numbers.
Overall Financial Performance
The Group achieved a notable increase in revenue, signaling strong demand in certain areas. However, this growth was unfortunately overshadowed by a substantial rise in pre-tax losses, primarily due to a significant drop in gross profit and increased losses from an associate company.
Revenue for 1H FY2025 climbed by 18.6% to RM4.20 million from RM3.54 million in 1H FY2024.
However, Loss Before Tax (LBT) widened significantly to RM1.77 million, compared to RM0.67 million in the previous corresponding period.
Basic Loss Per Share also increased to (1.41) sen from (0.55) sen.
Revenue Breakdown by Segment
A closer look at the revenue reveals where the growth is coming from and where the challenges lie. The star performer was the “design, engineering and system integration of expressway toll collection system” segment, which more than doubled its contribution.
| Product/Service Category | 1H FY2025 (RM’000) | % | 1H FY2024 (RM’000) | % |
|---|---|---|---|---|
| Design, engineering and system integration of expressway toll collection system | 2,614 | 62.2 | 1,110 | 31.3 |
| Sale of goods and services rendered | 1,588 | 37.8 | 2,433 | 68.7 |
| Total Revenue | 4,202 | 100.0 | 3,543 | 100.0 |
The “design, engineering and system integration of expressway toll collection system” segment saw a massive increase of RM1.50 million, or 135.1%. This was partially offset by a RM0.84 million (34.6%) decline in the “sale of goods and services rendered” segment.
Geographical Revenue Contributions
Malaysia remains the powerhouse, significantly increasing its dominance in revenue contribution. Overseas revenue, particularly from the Philippines and Myanmar, saw a considerable reduction in share.
| Geographical Location | 1H FY2025 (RM’000) | % | 1H FY2024 (RM’000) | % |
|---|---|---|---|---|
| Malaysia | 3,978 | 94.7 | 2,674 | 75.5 |
| Philippines | 107 | 2.5 | 618 | 17.4 |
| Myanmar | 117 | 2.8 | 251 | 7.1 |
| Total Revenue | 4,202 | 100.0 | 3,543 | 100.0 |
Malaysian customers contributed a substantial 94.7% of total revenue, up from 75.5% in 1H FY2024. Conversely, overseas revenue declined from 24.5% to 5.3%.
Deep Dive into Profitability Challenges
The increase in LBT from RM0.67 million to RM1.77 million is a key concern. This was primarily attributed to two factors:
- Decrease in Gross Profit: Despite higher revenue, gross profit actually decreased by RM0.92 million to RM1.46 million (from RM2.38 million in 1H FY2024). This indicates a significant increase in the cost of sales relative to revenue, potentially pointing to higher input costs or less favourable contract terms.
- Share of Loss from an Associate Company: The Group recorded a new share of loss from an associate company amounting to RM0.24 million in 1H FY2025, compared to nil in the previous period.
Financial Position and Cash Flow
While profitability was challenging, the company’s cash flow from operations showed a robust improvement, a positive sign for liquidity.
As at 30 June 2025
Total Assets: RM17.95 million
Total Equity: RM12.57 million
Total Liabilities: RM5.38 million
Net Cash from Operating Activities: RM1.999 million
Cash & Cash Equivalents: RM3.961 million
As at 31 Dec 2024 / 30 June 2024
Total Assets: RM17.37 million
Total Equity: RM14.31 million
Total Liabilities: RM3.06 million
Net Cash from Operating Activities: RM0.262 million
Cash & Cash Equivalents: RM1.724 million
The balance sheet shows a slight increase in total assets, while total equity decreased due to the net loss incurred. Total liabilities, particularly current liabilities like trade payables and contract liabilities, increased significantly. However, the standout positive is the strong improvement in net cash generated from operating activities, which surged from RM0.262 million to RM1.999 million. This indicates better working capital management or a change in payment cycles, leading to a healthier cash and cash equivalents balance at the end of the period.
Risks and Future Prospects: Navigating Headwinds and Strategic Moves
The Board of RTS Technology Holdings Berhad remains cautiously optimistic about the future, acknowledging both potential challenges and strategic opportunities.
Outlook for 2H FY2025
The Board anticipates that the Group’s core business will remain stable in the second half of 2025. They expect the financial performance for 2H FY2025 to be satisfactory, barring any unforeseen circumstances.
Potential Headwinds
A key risk highlighted is the pressure on profit margins. This could be driven by rising component costs, an industry-wide concern. Furthermore, the report specifically mentions the potential impact of renewed U.S. tariffs, which could escalate global economic uncertainty and further exacerbate cost pressures.
Strategic Growth Initiative
In a significant development, RTS Technology announced on 14 April 2025, a non-binding Memorandum of Understanding (MOU) for the proposed acquisition of 100% equity interest in Work At Cloud Sdn Bhd (WAC). This move suggests a strategic initiative to expand the Group’s capabilities or market presence, potentially diversifying revenue streams or strengthening its existing offerings. We’ll be keeping a close eye on further announcements regarding this corporate proposal.
Summary and Outlook
RTS Technology’s 1H FY2025 report presents a mixed bag. On one hand, the company demonstrates strong revenue growth, particularly in its expressway toll collection system segment, and a commendable improvement in operating cash flow. This signals underlying business activity and efficient cash management despite the broader financial results.
However, the significant increase in pre-tax losses, primarily driven by a substantial reduction in gross profit and losses from an associate, is a clear area of concern. The ability to maintain healthy profit margins will be crucial moving forward, especially given the rising component costs and global trade uncertainties mentioned by the Board. The proposed acquisition of Work At Cloud Sdn Bhd could be a pivotal move, potentially opening new avenues for growth or synergy that could bolster future profitability.
Key areas for investors to monitor include:
- The Group’s strategy to address and mitigate rising cost of sales to restore gross profit margins.
- The performance and impact of the associate company on overall profitability.
- Further developments and the successful completion of the proposed acquisition of Work At Cloud Sdn Bhd, and its integration strategy.
- How the company navigates potential global economic uncertainties, such as U.S. tariffs impacting component costs.
While the Board projects a stable core business and satisfactory performance for 2H FY2025, the journey ahead for RTS Technology involves carefully balancing growth ambitions with robust cost control and strategic execution.
What are your thoughts on RTS Technology’s 1H FY2025 performance? Do you believe the strong operating cash flow indicates a more resilient underlying business despite the losses? How do you see the proposed acquisition of Work At Cloud impacting their future trajectory? Share your views and insights in the comments section below!
