Synergy House Bhd posted a net loss of RM4.77 million for the second quarter ended June 30, 2024 (2QFY2024) from a net profit of RM6.19 million a year ago, mainly after it made a provision for doubtful debt of RM13.4 million owned by Hillsdale Furniture LLC.

KUALA LUMPUR (Aug 14): Furniture company Synergy House Bhd (KL:SYNERGY) slipped in the red for the first time since its listing in June last year due to provision of bad debts, currency exchanges losses and higher operating costs.

In a filing with Bursa Malaysia on Wednesday, the group posted a net loss of RM4.77 million for the second quarter ended June 30, 2024 (2QFY2024) from a net profit of RM6.19 million a year earlier.

The group said the losses were mainly after it made a provision for doubtful debt amounting to RM13.4 million owned by one of its customers, Hillsdale Furniture LLC. The group also experienced losses of sales opportunity after its inventories were caught into a fire incident at its third party logistics warehouse, and foreign exchange losses.

Nonetheless, Synergy House said the group has taken the necessary actions to recover the debt including initiating debt collection arrangements and sought legal advice.

“Reference is made to the group’s announcement with Bursa Malaysia on July 18, 2024, in response to the unusual market activity (UMA) raised by Bursa, which stated that Hillsdale’s assets were acquired by Mellow River but not the liabilities.

“The group has taken necessary actions such as claiming for the trade credit insurance whereby the expected claim amount is RM3.15 million based on the limit available and subject to final assessment by the insurer,” the company said.

“As the group and the insurer are unable to establish any contact directly with Hillsdale, the group has made the full provision for doubtful debts and recorded the trade credit insurance receivables, amounting to a net impact of RM10.25 million,” it added.

In July, Synergy House received an UMA query from the local bourse after its shares suffered a massive selling activity falling as much as 36 sen or 26% to RM1.02 apiece, the lowest since April 12, 2024. The sharp decline in its share price has also triggered a suspension in intraday short selling for the counter.

In terms of revenue, Synergy House posted a 32.1% jump to RM77.35 million in 2QFY2024 from RM58.57 million previously, thanks to higher revenue from its business-to-business market segment from the US and the UK, as well as the business-to-consumer (B2C) segment.

Cumulatively, for the first half ended June 30, 2024 (1HFY2024), the group’s net profit declined by 51.79% to RM4.25 million as compared with RM8.81 million in 1HFY2023, while revenue jumped 46.19% to RM161.03 million from RM110.15 million.

Despite posting a net loss during the quarter under review, Synergy House believes that this will not deter the group’s revenue growth and potential in the future.

“The group views that the current strategies being implemented will positively contribute to the long-term growth and expansion of its B2C segment.

“The group is well-positioned in the B2C sales segment, having established a robust presence on third-party e-commerce platforms in the US, the UK, Canada and Germany,” it said.

Moreover, the company has also expanded its reach to new markets such as France.

Shares of Synergy closed unchanged at RM1.08 on Wednesday, giving the group a market capitalisation of RM540 million. On a year-to-date basis, its share price has gained 50%.