Latest / Investor Exchange / Incredible Holdings: Q3 2025 Financials and Business Outlook

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Incredible Holdings: Q3 2025 Financials and Business Outlook · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  All right, let's dive in. Imagine
• 0:09
  you've got a company's latest financial report right in front of you.
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  Not the shiny summary, but, you know, the actual statement. This one says all the numbers. Exactly.
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  The kind that really tells the story, if you look closely. That's what we're doing today.
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  We're looking at incredible holdings, LTD's unaudited interim financials.
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  For the third quarter and nine months, ending 31 March 2025.
• 0:32
  Right. And this isn't just any filing, is it? No, it's actually required by the regulators.
• 0:37
  You might remember they had that auditor's disclaimer opinion back for FY 2022.
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  Ah, yes. Important context. Shows there's been some, well, scrutiny needed.
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  Definitely. That history hangs in the background.
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  But today, our focus, our mission, really, is on the current picture.
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  What do these latest numbers tell us about their performance now?
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  Yeah, what happened financially, why did it happen according to them,
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  and crucially, what's the outlook?
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  Exactly. We'll walk through the usual suspects, profit and loss,
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  the balance sheet, their financial position cash flow, and then tie it into
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  what the company says about the market and their strategy.
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  Sounds good. Getting that full snapshot from their own reporting.
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  Okay, let's start with the P&L, the profit and loss.
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  Top-line revenue. Looking at the nine months ending March 2025 compared to last year, wow.
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  What jumps out immediately? Well, jumps out is putting it mildly.
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  It's staggering, really.
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  The revenue collapsed. Collapse? How bad?
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  For the full nine months, total revenue just plummeted.
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  It went from S2,362,000 down to just $185,000.
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  Wait, S185,000 from over, S2.3 million dollars? Yes.
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  That's a drop of over 92%. 92%. Wow.
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  And if you look just at the most recent quarter, the three months, same story.
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  Down from S203,000 to only $17,000 $17,000 in revenue for a whole quarter Down
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  91.6% Well, it's almost a complete halt in sales activity Okay,
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  okay, let's unpack that How does that happen?
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  The report breaks it down by business segment, right? Where did the damage come from?
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  It does And the company says the main reason is simply decrease customer demand
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  Cross the board Pretty much.
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  The luxury goods segment, trading watches, got hit incredibly hard.
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  Revenue there for the nine months fell from S2.1 million dollars to just $28,000.
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  28,000? From millions? Yeah.
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  Distribution revenue also downed significantly, from S241,000 dollars to S155,000 dollars.
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  Even the small loan financing bit dropped, send dollars to two dollars.
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  So demand just vanished. And they also explicitly mention fierce competition
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  making things worse. OK, so with revenue basically wiped out,
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  you'd expect gross profit revenue minus direct cost to just disappear,
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  too, did it? Well, this is where it gets kind of weird.
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  Despite that massive revenue drop, the gross profit actually increased for the nine months.
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  Increase how? It went up from $24,000 last year to $60,000 this year.
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  So the profit margin must have soared then. Exactly.
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  Gross profit margin jumped from about 1% to over 32%, 32.43% to be precise.
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  How on earth do you do that with no sales? The report says it's down to a reduction
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  in cost of sales resulting from discounts offered by our suppliers.
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  Wait, so they sold hardly anything, but the cost of the few things they did
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  sell dropped so much that the profit on those few items actually went up.
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  That seems to be the story, yeah.
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  Lower cost per unit sold thanks to supplier discounts. That feels precarious,
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  relying on supplier discounts like that. Yeah.
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  Is that sustainable, do you think? That's the million-dollar question,
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  isn't it? Is this a temporary thing, maybe clearing old stock or a real shift?
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  If those discounts disappear, that margin improvement vanishes,
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  too. Right. It highlights that the only thing propping up gross profit were those discounts.
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  OK, so below gross profit, what about other income and just general running
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  costs? Did they slash expenses?
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  Oh, absolutely. They had to. Other operating income did decrease from S-961,000
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  to $677,000, partly because of less demand for their digital marketing services.
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  OK. But the expense cuts were drastic.
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  Administrative expenses were slashed. For the nine months, they went from S$2.2
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  million down to just $617,000.
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  Huge cut. Where did that come from?
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  Mostly lower wages and salaries down S$24,000 just in the last quarter and consultancy
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  fees, which were down S$77,000 in the quarter. Big savings there.
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  And finance costs also came down quite a bit. S$193,000 to S$143,000 for the nine months.
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  They mentioned an interest-free period for Janmar 2025, which.
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  So dramatic cost-cutting across the board, combined with that weird gross profit situation.
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  What did it mean for the bottom line, the overall loss? Well,
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  for the nine months, the group reported a net loss of S$34,000.
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  $34,000. Okay, still a loss, but how does that compare? Compare that to the
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  loss in the same period last year, S$1,415,000.
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  Wow. So a massive improvement in the loss, even with revenue collapsing. Exactly.
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  Those huge cost cuts in admin and finance, plus the better gross margin percentage,
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  were absolutely critical.
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  They massively shrunk the loss. Still losing money, though, especially in the last quarter.
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  Yes. The loss for the three months ending March 31st was S-180,000,
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  better than the S-372,000 loss in the same quarter last year, but still red ink.
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  It shows how vital that cost control was. A real survival mode situation.
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  But you can't cut forever. Let's shift to the balance sheet then,
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  the snapshot of their financial health. How did assets and liabilities look
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  at 31 March 2025 compared to, say, 30 June 2024?
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  Well, non-current assets, things like property equipment, stayed pretty stable,
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  around $17.6 at $17.7 million.
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  Current assets, the short-term stuff, actually saw a slight increase overall,
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  from $2.56 million up to $2.59 million.
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  Any interesting moves within current assets? The mix sometimes tells a story. Yeah, definitely.
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  Inventories dropped quite a bit, from $59,000 down to $17,000.
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  They link that to managing stock because of the low demand, which makes sense.
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  Right, selling off what they had.
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  But interestingly, cash and cash equivalents increased. Went up from only S-47,000 to S-177,000.
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  Ah, that's notable. Where did that cash come from? And partly related,
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  trade and other receivables money customers owed them decreased a bit.
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  From S-2.45 million dollars to S-2.39 million dollars, The report says that's
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  mainly due to collecting outstanding payments.
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  Okay, so collecting cash from customers and selling down inventory helped boost the cash balance.
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  That's positive, even if the total cash is still, you know, relatively low.
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  What about the other side?
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  Liabilities, what they owe? Current liabilities, the short-term debts edged
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  up slightly from $6.91 million to $6.96 million. Oh, the increase.
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  Mostly due to outstanding professional fees, according to the report.
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  Shows up in trade and other payables. Okay. And long-term debt.
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  Non-current liabilities decreased slightly by $15,000, mainly from loan repayments.
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  So if we put current assets against current liabilities, they're operating with
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  negative working capital, aren't they? They are, yes. And it actually got slightly worse.
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  How so? The negative figure went from S4.35 million dollars to S4.37 million
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  dollars because that small increase in current liabilities is just a bit more
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  than the small increase in current assets.
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  So short-term obligations still significantly outweigh readily available assets.
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  That negative working capital highlights a constant pressure,
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  right? Especially with revenue so low.
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  Absolutely. It means they rely heavily on generating cash quickly or finding
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  financing just to meet their immediate bills.
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  Makes the cash flow statement really important. Right. Let's follow the money then.
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  What does the cash flow statement tell us? Where did the cash actually come
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  from and go during these nine months? Okay, this is another really interesting part.
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  Remember that S$34,000 accounting loss for the nine months?
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  Yeah. Despite that loss, the group actually generated S-156,000 in cash from
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  its operating activities.
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  Generated cash while reporting a loss. How does that work?
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  It happens because of non-cash expenses on the income statement,
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  like depreciation, and importantly, changes in working capital.
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  Ah, like the inventory going down and collecting receivables. Exactly.
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  Those actions turn assets into cash. So selling inventory brought cash in.
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  Collecting money owed brought cash in. These inflows, plus adjustments for non-cash
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  items, were enough to overcome the operating loss in things like paying suppliers,
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  resulting in positive cash flow from operations.
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  So operationally, they managed to bring in some cash despite the sales drought.
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  That's a key positive. It is. A big shift from the prior year when operations
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  used over S1.1 million dollars in cash shows some efficiency in managing what they have.
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  Okay. What about investing or financing activities? Any big moves there?
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  Nothing reported under investing activities, so no major asset buys or sales
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  sucking up or generating cash. Okay.
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  Financing activities used a pretty small amount of cash, just $26,000 over the
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  nine months. That was mostly for repayments on leases and loans.
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  So positive cash from operations, nothing much in investing,
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  small outflow for financing.
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  What was the net effect on the overall cash pile? The net result was that S-130,000
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  increase in cash and cash equivalents over the nine months.
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  Bringing them to that S-177,000 figure we saw on the balance sheet. Exactly.
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  So they managed to build their cash balance a bit, which is quite an achievement
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  given the revenue situation.
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  Drillian by that operating cash flow. Okay, we've dissected the numbers,
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  the performance, the position, the cash. Now let's look at the commentary.
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  What does the company say about the road ahead? The market conditions, their strategy?
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  Yeah, this is where they address those headwinds directly. For distribution,
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  they see potential from Singapore's logistics growth.
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  There's a big but. Which is? A major electronics customer scaled back way back
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  in 2021, and that's still a material challenge.
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  So their plan is, well, try to find new customers, basically,
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  in Singapore and elsewhere.
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  Okay. Looking for replacements. What about luxury goods and loan financing in Hong Kong?
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  For luxury goods, the watch trading, they mentioned some positive signs,
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  like luxury spending, maybe picking up localized strategies.
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  But again, counterbalance. Competition again. Increased competition.
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  Yeah. Yeah, possibly resources shifting to mainland China.
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  And they also flag weak consumer sentiment generally, uncertainty in Hong Kong tourism.
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  So like distribution, the plan is to look for opportunities in other regions.
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  That's tough. And loan financing in Hong Kong, same theme.
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  Growth in the credit market, virtual banks, means more competition for them.
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  So they're talking about digital transformation, risk management,
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  and again, trying to find new customers in Hong Kong. So across the board,
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  it sounds like significant pressure, and the main plan is find new customers in markets, which...
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  Given the numbers we saw, makes sense they need something new.
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  It does, and that leads directly to the really big strategic piece they mentioned. The RTO.
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  Exactly. On March 11th, 2025, they signed a non-binding memorandum of understanding
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  for a proposed reverse takeover with a company called Shengtai International SDNBHD.
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  And they framed this RTO how?
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  Explicitly as part of their strategy to diversify returns and achieve long-term growth.
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  It's positioned as a potential game changer, a way to bring in a whole new business,
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  presumably because the current ones are struggling so much. A major pivot, potentially. Yeah.
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  And quickly, on dividends for shareholders. None declared. They state clearly
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  it's because the company made a loss for the nine months.
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  Makes sense. Okay, finally, let's loop back to where we started those historical
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  audit issues from the FY 2022 disclaimer.
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  What's the update there? Are they cleaning those up? They provide some updates.
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  On the SGX Notice of Compliance, they say an independent review is done,
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  and they're working with auditors now to assess its impact.
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  Regarding the old inventory balance issue from way back in Descent 2021,
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  the current auditors observe counts from July 2024 and were able to verify inventory
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  quantities as of June 30th, 2024.
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  So, some progress there on establishing a reliable baseline going forward.
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  What about those other tricky ones, the website costs and the money owed between
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  related companies? Right.
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  For the website development costs impairment, that Korean platform they say
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  the project's on hold, focuses Singapore-Hong Kong now.
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  They use language like, they will endeavor to provide sufficient information
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  to auditors on the impairment assumptions for June 2024.
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  Endeavor to provide. Sounds like it's still ongoing. Seems so.
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  Similar language for the loan to a subsidiary and amounts due from related companies.
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  They will endeavor to provide the auditors with the appropriate audit evidence
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  for the impairment assessment as of June 2024. So, still working on providing
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  the necessary proof for those historical items.
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  Yes, but the board states its view that the impact of these issues is adequately
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  disclosed in these unaudited interim results.
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  It points to these being historical items they are still working through with the current auditors.
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  Okay, so let's try to pull this all together. What's the big picture from this report?
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  Well, Incredible Holdings is clearly in a really tough spot.
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  Revenue has absolutely collapsed across their main businesses,
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  hit by low demand and fierce competition. That's the bad news.
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  But they've managed costs incredibly aggressively, admin finance costs slashed,
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  And they got help from supplier discounts, improving their gross margin percentage, even on tiny sales.
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  All that combined meant their net loss shrunk dramatically compared to last
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  year, although they are still loss making.
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  And financially. Financially, they managed to increase their cash balance slightly,
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  mainly by collecting receivables and cutting inventory.
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  But negative working capital actually worsened a bit, showing ongoing short-term
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  pressure, a key positive, though.
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  Operations actually generated cash over the nine months. And the Outlook strategy.
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  The Outlook commentary confirms the tough market conditions.
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  Their stated plan involves hunting for new customers and markets for the existing businesses.
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  But the really big strategic play is that potential reverse takeover with Shengtai.
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  That's positioned as the path to diversification and future growth.
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  Right. So this is a picture of a company whose core operations are facing,
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  frankly, existential challenges, but they're managing costs tightly and trying to generate cash.
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  The RTO looks like the main hope for a different future.
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  Precisely. Which leaves you, the listener, with a pretty big question to ponder
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  as you watch this company.
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  We've seen the numbers. We've heard their commentary about the severe headwinds
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  in their current businesses.
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  So can this proposed RTO, bringing in Shanghai, truly deliver the diversification
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  and long-term growth they need to fundamentally change things?
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  Or is it, you know, trying to graft a new engine onto a struggling ship?
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  Something to definitely keep an eye on as they navigate forward. Thank you.
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  Music.