Kuala Lumpur, Malaysia-based services provider Integrated Logistics (BM: 5614) has reported a third quarter total comprehensive loss of just under 2.95 million Malaysian ringgit ($700,000). For the nine months to the end of September 2019, the company reported a total comprehensive loss of 6.1 million ringgit ($1.46 million). So, barring positive developments in the final quarter of the year, it seems that the company is likely to deliver a loss for the year.
If so, 2019 would see the company deliver its fifth set of losses in six years.
It made a small profit of just under 5.85 million ringgit ($1.3 million) in 2016 but made much larger losses in 2014 through to 2018. In total, in the five years 2014 to 2018 (inclusive) the company lost 154.19 million ringgit and, on a five-year average, about 31.01 million ringgit a year. That translates to about $38 million or $39 million in total, depending upon exactly how the conversion from ringgit to U.S. dollars is handled, and losses of about $7.64 million a year.
Slowdown of the bleed-out
If there is good news for the company, it is that the bleed-out is, at least, slowing down. The quarter-on-quarter total comprehensive loss fell by 90%, from 29.6 million ringgit ($7.2 million) in the third quarter of 2018 to 2.9 million ringgit ($700,000) in the third quarter. The nine-month trend was more pronounced. On a nine-month basis, by the end of September 2018, the company had made a total comprehensive loss of 39.6 million ringgit ($9.56 million) and that fell by 84% to just under 6.1 million ringgit ($1.46 million) in 2019.
Based on its reported numbers this year, Integrated Logistics’ main problem appears to be that its direct operational costs have far exceeded its revenues. For instance, in the nine months to the end of September 2018, the company incurred 28.28 million ringgits ($6.8 million) of operational costs for 6.18 million ringgits ($1.5 million) of revenue generated. That’s roughly equivalent to incurring $4.50 of expenses for every dollar of revenue generated.
Still, the company may, possibly, be turning a corner.
Even though, so far, the company has made a total comprehensive loss, in the nine months to the end of September this year, revenues have outpaced direct costs. So far, it has generated 19.4 million ringgit of revenue ($4.64 million) compared to 17.77 million ringgit ($4.24 million) of direct expenses.
That said, in the third quarter, direct costs have crept ahead of revenue by the equivalent of a few thousand dollars.
On a nine-months to September 30 basis, the company generated 19.4 million ringgit ($4.6 million) which is a 4.1% increase compared to the same time frame in the previous year.
Commenting on its revenue performance, the management of Integrated Logistics said “the higher revenue was mainly due to revenue increase from the warehousing & related value added services segment of the Group’s operations in the People’s Republic of China and the solar energy and related business segment of the Group’s operations in Malaysia.”
Looking forward, the company added that, “in view of the current global economic conditions, the Board foresees the market conditions will continue to remain challenging for the year.”
Balance sheet: current accounts
Jumping over to the balance sheet shows that the company has more assets than liabilities. The total value of all assets has declined slightly, by about 4.6% to about 324.5 million ringgit ($77.5 million). Total liabilities has crept down too by about 8.1% to 129.6 million ringgit.
But what is interesting is that current liabilities – i.e. debts that are due to be paid in less than 12 months – are greater than current assets (cash on hand and assets that can quickly be converted into cash).
Integrated Logistics’ current liabilities as of September 30, 2019, were 63.6 million ringgit ($15.37 million) and its current assets were 41.5 million ringgit ($9.9 million). Therefore the company has a working capital deficit and an acid test ratio of 0.65, meaning that the company does not have a dollar of cash (or highly liquid asset) immediately on hand to pay each dollar of debt as it falls due.
About 29% of the company’s current assets are either “trade receivables” or “other receivables, deposits and prepayments”; about 24% is in a “short-term” fund and cash accounts for about 46%.
Meanwhile, short-term borrowings account for 88% of the company’s current liabilities and the rest is mostly “other” (i.e. non-trade) payables, deposits and accruals.
About Integrated Logistics
Founded in 1973 and listed on the Bursa Malaysia (Malaysia Stock Exchange) since 1993, Integrated Logistics operates in the solar renewable energy industry (a relatively new diversification for the company), warehousing and related value added services, transportation and distribution.
Integrated Logistics operates nine warehouses in China with a total warehouse space of 76,000 square meters. It was also formerly part-owner of a warehousing company in Dubai; however the company sold its share earlier this year. The decision was taken to cut its operations in the United Arab Emirates to end continuing losses.
Today, the company operates in Mainland China, Hong Kong and Malaysia.