Asset impairment drags Kronologi into loss-making 1Q

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KUALA LUMPUR (May 15): Kronologi Asia Bhd reported a net loss in the first quarter of its financial year 2020, despite a 60% jump in revenue, as it recognised an RM11.64 million one-time non-cash impairment "out of prudence" amid the economic slowdown and uncertainties caused by the pandemic outbreak.

Hence, it incurred a net loss of RM11.24 million during the three months ended March 31, 2020 (1QFY20), from a net profit of RM3.69 million a year ago, despite revenue jumping to RM51.97 million from RM32.5 million.

The group’s profit from operations stood at RM1 million in 1QFY20, down 77.9% from RM4.53 million last year.

Like most companies faced with the Covid-19 pandemic, its operating results for 1QFY20 had been impacted, Kronologi Asia said in a press statement filed to Bursa Malaysia today.

“The group registered Ebitda (earnings before interest, tax, depreciation and amortisation) of RM4.672 million (before the one-time impairment), reflecting the impact of economic and business uncertainties associated with the pandemic resulting from movement restrictions, order delays, cash flow conservation, reduced budgets, margin tightening and business slowdown experienced by our customers,” said Kronologi.

"Taking into account the group’s intentions to present a fair and transparent view of our operating assets relative to a combined impact of the significant economic slowdown and uncertainty from the pandemic, coupled with expected changes in customer requirements and behaviour, the group underwent a thorough review of the economic value of our installed infrastructure against our business strategy and generally accepted accounting standards (MFRS136).

Based on this, the group has decided out of prudence to recognise a one-time, non-cash impairment to PPE (Property, Plant and Equipment) amounting to RM11.636 million. Management believes that this singular accounting treatment of our PPE will help enhance the group’s overall future competitiveness through a refresh of our IT infrastructure aimed at providing our customers in EDM IT and EDM Managed Services with the latest possible data solutions offerings and performance," Kronologi said.

Going forward, it remains confident on its long-term opportunities, strategy and return to profitable growth, it said, despite there being considerable uncertainty for the rest of FY2020.

“Our services and solutions are mission critical; our large enterprise customer base remains strong and our employees are resilient. All of this, when combined with financial stability will enable us to weather these challenges and continue to deliver industry-leading solutions and values to our customers and shareholders,” said Kronologi.

Kronologi shares closed one sen or 1.64% higher at 62 sen today, valuing the company at RM323.87 million. Some 11.15 million shares were traded today. The counter, which sank to as low as 34 on March 19, has risen some 81% since. Just a month before the MCO, however, the stock was trading as high as 91 sen.