1QFY20 revenue declined 59.7% yoy and 55.6% qoq
Destini recorded a sharply lower revenue of RM34.0m in 1QFY20 (-59.7% yoy, -55.6% qoq) due mainly to reduced billings for the aviation services, oil & gas, and manufacturing businesses as the Civid-19 pandemic emerged and spread.

1QFY20 core net loss of RM11.8m
The sharp decline in revenue compressed margins, which together with the group’s high administrative expenses, led to an unexpected large core net loss of RM11.8m in 1QFY20 versus a core net profit of RM0.6m in 1QFY19. Destini reported a huge net loss of RM237.3m in 4QFY19 attributable to: (1) lower revenue from the aviation and MRO sectors as well as lack of orders in marine manufacturing; (2) escalation in costs of manufacturing services; (3) higher interest expense; (4) provisions; and (5) impairment of assets and goodwill amounting to RM145.2m.

Full pandemic impact in 2QFY20 but key projects still in hand
The severe impact of the Covid-19 pandemic and resulting Movement Control Order (MCO) and Conditional MCO introduced by the government is felt fully by businesses in the second quarter. Destini’s expected 2QFY20 losses will however be cushioned by preemptive and cost cutting measures implemented by the company (including pay cuts resulting in savings of around RM3.5m) as well as stimulus packages announced by the government. With key projects (including the six MD530G program and MRO services) still in hand and prospects of new projects rollout by the government, the second half should however see the return of profitability even though billings may be delayed by the government’s strained finances and/or changing spending priorities.

Source: Mercury Research - 1 Jul 2020