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How Versalink Holdings Managed To Stay Cash-Positive Despite A Massive Half-Yearly Loss In 2025 · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  Welcome back to the Deep Dive. Today, we're tackling something specific,
• 0:11
  looking into the half-yearly results for Versalink Holdings Limited, that's a VHL.
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  We're digging into their performance for the six months ending August 31st, 2025.
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  They call it 1HFY2026. Exactly.
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  Our goal today really is to get behind the big, scary headline number.
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  Anyone can read that loss figure.
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  We want to understand the why, what actually drove these results,
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  which parts of the business struggled, what costs blew up, and what does it
• 0:36
  suggest for VHL going forward.
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  Okay, let's get straight to it then. That headline number. It is pretty startling.
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  The group reported a net loss after tax of roughly RM4.14 million.
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  Malaysian Ringgit, that is? Yeah.
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  RM4.14 million. That's the figure that makes you pause. And you have to compare
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  it, right? Last year, same period, 1HFY 2025, the loss was much smaller,
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  only around $0.68 million.
• 0:59
  Wow. Okay. So we're talking about a loss that's multiplied several times over,
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  more than 100% increase. Absolutely.
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  And for shareholders, look, the loss per share reflects that directly.
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  It went from just 0.51 cent, half a Malaysian penny, basically up to 3.07 cent, a big jump.
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  That is a huge spike in the loss. But here's the thing that caught my eye.
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  When you look deeper, the actual top line revenue didn't fall off a cliff in the same way.
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  Overall revenue only decreased by about 5.2%. It went from RM 20.61 million
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  down to RM 19.53 million.
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  And that's the crucial disconnect, isn't it? That's the puzzle.
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  A 5% drop in sales normally doesn't lead to such a massive increase in net loss, not by itself. Right.
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  So that tells you immediately this wasn't just about fewer customers buying
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  things. The core problem here, this period, it's internal.
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  It's got to be about costs or margins or maybe both. We need to break it down.
• 1:51
  Okay, let's do that. Let's unpack the revenue first. Yeah.
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  Where did that 5% drop actually come from? Was it across the board or was one area hit harder?
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  It was definitely localized. And this part's actually quite interesting.
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  If you look at their domestic segment, sales within Malaysia. Yeah.
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  That actually went up. It increased from RM 10.40 million to RM 11.13 million.
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  They say it's because demand for office furniture picked up in Malaysia.
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  Okay, so domestic business is healthy, even growing slightly.
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  That means the export side must have taken a real beating. A real beating is about right.
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  The export segment revenue dropped quite sharply.
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  It went from RM10.21 million down to just RM8.40 million.
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  And do they say where that export pain came from specifically?
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  They do. They pinpoint North America. Sales demand there dropped by about RM2.3 or a million.
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  That's the bulk of the export decline right there. And they're linking that
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  directly to global uncertainty and potentially the tariff situation?
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  Yes, that's the language they use.
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  Global uncertainty, possibly made worse by tariffs. Hmm.
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  It makes you wonder, though, if the Malaysian market is OK for them,
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  is it just global uncertainty hitting North America?
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  Or are there competitiveness issues, too? Maybe the tariffs are just making
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  it really tough to compete there specifically.
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  That's a fair question. It could be a mix. Maybe their product mix isn't quite
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  right for the international market right now or the supply chain costs are hitting them harder there.
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  But they are explicitly calling out those external factors, especially tariffs,
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  as the main drag on their biggest export market.
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  You can't really ignore that statement. True.
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  OK, so export weakness, particularly North America.
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  But that revenue drop alone still doesn't explain the massive loss jump. Let's talk margins.
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  Right, because the gross profit margin also took a significant hit.
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  It fell from 28.0% last year down to 24.5% this half. Ouch.
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  Nearly four percentage points gone. What happened there? The main culprit,
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  according to their report, was a write-off of finished goods.
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  They had to write off about RM0.56 million worth.
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  Half a million ringgit in finished goods written off. What does that typically
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  mean? Stock they couldn't sell.
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  Obsolete. Could be a mix of things, maybe damaged, maybe obsolete,
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  maybe just slow moving stock they realized wasn't going to sell at the expected price.
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  Whatever the reason, taking that RM 0.56 million hit directly reduces your cost
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  of goods sold effectiveness and boom, your gross margin percentage drops.
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  OK, so we've got weaker export sales plus a margin hit from writing off inventory.
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  That explains more of the loss, but.
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  Surely not all of it, that RM4.14 million loss still feels big.
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  It does. And this is where we need to look very closely at the operating expenses,
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  particularly the administrative costs, because there's a real paradox here.
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  Paradox? How so? Well, on one side, they actually showed some really good cost control.
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  Look at marketing and distribution expenses. They managed to cut those by over 20 percent.
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  Saved about RM0.34 million compared to last year.
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  Found savings in sales commissions, logistics, even travel expenses.
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  Seems like good management there. Right. Controlling the controllables. That's positive.
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  But then you flip to administrative expenses and they just exploded.
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  They surged by almost 60 percent.
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  Fifty nine point four percent to be exact. Sixty percent. From what to what?
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  From about RM four point six five million last year up to RM seven point four
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  one million this period.
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  Wow. OK. What on earth causes admin costs to jump by nearly RM three million in six months?
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  That's not extra coffee and paperclips. No, definitely not. And this is the
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  key amplifier we talked about.
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  It's almost entirely down to one very specific, and you could argue, non-operational item.
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  It was a partial refund they had to make, amounting to RM 1.2 million.
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  A refund of RM 1.2 million related to what?
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  It relates back to a sale and lease back deal they did way back in September 2022.
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  They sold some land and buildings to RHB trustees Burhide and then leased them
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  back. Okay, I think I follow.
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  Sell an asset, get cash, but agree to rent it back. Exactly.
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  But apparently there were certain conditions attached to that original 2022
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  agreement, and VHL didn't meet some of those conditions by the deadline,
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  which looks like it was August 2025.
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  Ah, I see. So because they didn't meet the conditions from the Earl deal.
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  They were contractually obligated to refund RM 1.2 million of the proceeds they
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  originally received, and that refund hit their books in this reporting period,
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  showing up under administrative expenses. Man, that is painful.
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  A big hit from a past transaction completely skewing the current operating picture.
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  It makes those marketing savings look tiny in comparison.
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  It does. It completely overshadows the operational improvements they made elsewhere.
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  It's like a big accounting cleanup charge landed right in the middle of their results.
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  Got it. So that explains the huge admin spike. Were there any other significant
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  non-operational things moving the needle, other income or losses?
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  Yeah, a couple of things to note there.
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  Other income was down quite a bit from about RM 0.81 million last year to only
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  RM 0.29 million this period.
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  That was mainly because they didn't have some writebacks this year that they
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  benefited from last year. Things like writing back provisions for slow moving stock or royalties.
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  Those were one offs last year. OK, so less help from other income.
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  But on the flip side, they did better on other losses, specifically foreign exchange.
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  FX losses were lower this period, about RM 0.55 million compared to RM 0.97 million last year.
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  So an improvement of about RM 0.42 million there.
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  And they attribute that mainly to the Malaysian ringgit strengthening against
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  the U.S. dollar and the Singapore dollar during the period.
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  Right. A stronger ringgit means imported costs might be lower,
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  but it also makes exports priced in ringgit more expensive for foreign buyers.
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  But here it helped reduce FX losses on maybe their dollar or Sing dollar liabilities
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  or transactions. Precisely. It's a double-edged sword.
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  But in this specific line item, other losses, it provided a bit of relief compared to last year.
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  Okay, so pulling this together. A nasty RM1.2 million refund hit.
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  A significant inventory write-off, weaker exports.
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  But offset slightly by better FX results and some decent cost control on the marketing side.
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  Now, how did all this turmoil affect their actual cash? Because sometimes the
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  P&L loss doesn't tell the whole story about liquidity.
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  And that's absolutely the case here. This is where the story gets paradoxical
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  again, despite that big RM4.14 million net loss on paper.
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  Their cash flow from operating activities actually swung positive,
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  quite significantly, in fact.
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  Really? How much? They generated about RM1.45 million in cash from operations in these six months.
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  Compare that to the same period last year where they actually used nearly RM1.8
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  million cash for operations. Wow, that's a huge turnaround.
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  Over RM3 million swing from cash burn to cash generation and operations.
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  Where did that come from, especially with the loss?
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  It mainly came from managing working capital really effectively.
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  Networking capital changes actually provided about RM4.77 million in cash inflow
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  during the period. Okay, working capital inflow, what drove that?
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  Selling off inventory, collecting decks faster. Both, essentially.
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  Inventories decreased, contributing about RM1.47 million to cash.
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  That's partly linked to the write-off
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  we discussed, but also likely better inventory management overall.
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  And trade and other receivables also decreased significantly,
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  providing almost RM1.96 million in cash. Collecting money owed to them.
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  Yes, and interestingly, that receivables figure includes the impact of writing
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  off a deposit of RM1.0 million that they had previously paid out.
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  So clearing that off the books also helped the cash flow from operations calculation.
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  So they cleaned up the balance sheet a bit, wrote off bad inventory,
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  wrote off a bad deposit, and collected cash more effectively.
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  That seems to be the story. And the result is a pretty healthy cash balance at the end of the period.
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  They finished with cash and cash equivalents of approximately RM 17.26 million.
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  RM 17 million in cash. Okay, that's a solid cushion.
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  But, hang on, I remember seeing something else in the notes.
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  Didn't the executive director and CEO, Mr. Jay Shimming, personally loan the
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  company money during this period? Ah, yes.
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  Good catch. He did. He extended a loan totaling S-340,000 dollars that Singapore
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  dollars to the company. OK, S-340,000 dollars.
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  Why would the CEO need to personally inject cash even as a loan if the company
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  is sitting on over RM17 million?
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  Seems a bit strange, doesn't it? It does raise a question. On the surface,
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  RM17 million seems ample.
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  But cash isn't always completely fungible. You know, some of that cash might
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  be tie up, perhaps restricted, maybe held overseas and not easily accessible
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  for immediate ringgit working capital needs.
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  Or maybe they needed Singapore dollars specifically for certain payments or transactions.
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  Ah, OK. So the loan might have been for a very specific, perhaps urgent need,
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  maybe in a specific currency, that the main cash pile couldn't easily meet at that moment.
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  That's a plausible explanation. The loan terms were 5% interest over one year,
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  which seems fairly standard for related party lending.
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  It certainly shows the CEO's commitment and willingness to backstop the company.
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  But yes, it does add a little nuance to that headline cash figure.
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  Maybe liquidity isn't quite as straightforward as just looking at the total balance.
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  Interesting point. OK, so let's look ahead. Given this mixed bag,
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  the big one-off hits, the underlying cash generation, the CEO loan,
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  what's VHL saying about the future?
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  What's the outlook for the next, say, 12 months? Well, they're certainly not
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  painting a rosy picture of the external environment.
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  The company statement emphasizes that the global economy is expected to stay
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  uncertain and volatile.
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  Standard corporate language, maybe, but what specifically are they worried about?
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  They call it a few things explicitly.
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  Prolonged geopolitical conflicts. They mention the Middle East and Russia-Ukraine.
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  Changing tariff rates, which we already saw impacted their North America sales.
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  And currency fluctuations. Right, the usual suspects for an export-oriented
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  company. Any very specific near-term risks they highlighted.
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  Yes, two very concrete ones. First, the disruption in the Red Sea.
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  They state that this is causing spikes in ocean freight and logistics costs,
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  which directly impacts their bottom line as a manufacturer shipping goods globally.
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  Yeah, that's hitting a lot of companies right now. What's the second one?
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  The strengthening Malaysian ringgit against the U.S. dollar.
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  While it helped their FX loss line slightly this period, they see it as a headwind
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  going forward because it makes their products more expensive for U.S.
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  Buyers, potentially hurting that already weak North American demand even further.
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  Okay, so significant macro headwinds and specific logistical cost pressures.
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  What's their plan to navigate this? What are the mitigation strategies?
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  It sounds like a multi-pronged approach, focused on internal control and external growth.
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  Internally, they're going to keep focusing on cost control and enhancing production
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  efficiency, trying to squeeze more margin out of what they can control.
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  Makes sense. And externally.
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  This seems key. They state they will be exploring new markets and developing new products.
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  Actively looking for new business opportunities to, and this is crucial,
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  diversify their revenue streams.
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  Diversify away from the heavy reliance on markets like North America that are
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  proving volatile. That appears to be the strategy.
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  Find new customers in new places, maybe with new types of furniture or products,
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  reduce the concentration risk.
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  And finally, they also mentioned they plan to explore fundraising opportunities
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  to strengthen their cash position further, including talks with potential investors.
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  Interesting. So potentially bringing in more capital, maybe equity to support
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  this diversification push or just bolster the balance sheet against uncertainty?
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  Could be either or both. It suggests they recognize the challenges ahead and
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  are looking at all options to ensure they have the resources to weather the
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  storm and execute the strategy.
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  Okay, so let's try and synthesize this. We have a company that took a really
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  big, specific hit from that RM 1.2 million refund and the inventory write-off
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  that completely masked some genuine successes,
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  like cutting marketing costs and improving FX loss management.
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  And perhaps most importantly, turning around their operating cash flow quite dramatically.
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  Exactly. The underlying operational health, particularly on the cash side,
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  looks much better than the headline net loss suggests.
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  But those exceptional items, combined with the very real pressure on their export
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  markets, created a perfect storm for the P&L this half. Which leads us to the outlook.
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  They know the risks, geopolitics, logistics, currency, and the plan is control
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  costs tightly, but more strategically find new markets and products.
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  That diversification piece feels absolutely critical, doesn't it?
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  Given the specific risks they've called out impacting their traditional export routes and markets.
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  It really does. Which brings us to a final thought for you, the listener,
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  to chew on as you digest these results. Yeah, think about this.
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  VHL is facing clear external pressures, especially in exports.
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  They've outlined two main paths forward, tighter internal cost control,
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  and external diversification into new markets products.
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  So the key question for the next year might be, which of these will be more
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  critical for stabilizing the bottom line?
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  Can they cut costs deep enough to offset the external headwinds?
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  Or is successfully finding and penetrating those new revenue streams the only
• 14:56
  real path back to sustainable profitability?
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  One is about defense, the other about offense. Which one do they need more right now?
• 15:03
  That's a great question. Finding new markets is hard, but may be essential here.
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  Something to watch closely in their future announcements.
• 15:09
  Thank you for walking us through that complex set of results.
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  And thank you all for joining us on The Deep Dive. We'll catch you next time.
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  .