Southern Archipelago Ltd. FY2025 Financial Results: Revenue Decline, No Dividend Declared

Southern Archipelago Ltd. FY2025 Financial Review: Navigating Headwinds and Strategic Expansion

Southern Archipelago Ltd., listed on the SGX Mainboard, presents its condensed interim financial statements for the six months and full year ended 31 December 2025. The Group operates across sterilisation and polymerisation services, property development, and hospitality and wellness, with its principal activity as investment holding. The FY2025 report reveals significant challenges, ongoing expansion, and strategic responses to a difficult macroeconomic environment.

Key Financial Metrics and Performance Table

Metric	2H2025	1H2025	2H2024	YoY Change	QoQ Change
Revenue (S\$’000)	1,749	2,212	2,480	-29%	-21%
Net (Loss)/Profit (S\$’000)	(369)	(566)	(178)	+107%	-35%
EPS (Basic, S\$ Cents)	(0.0013)	(0.0021)	(0.0006)	+117%	-38%
Dividend (S\$ Cents)	0	0	0	No Change	No Change

Historical Performance Trends

Revenue: Full-year revenue declined 18% YoY to S\$3.96 million, driven by increased competition, lower sales volume, and unfavorable currency translation effects.
Profitability: The Group reported a full-year net loss of S\$935,000, a significant deterioration from the prior year’s loss of S\$153,000.
Expenses: Finance costs surged 56% YoY, reflecting increased borrowings to fund business expansion. Other expenses reduced due to one-off charges in the prior year.
Net Asset Value: NAV per share fell from 0.0089 cents to 0.0034 cents, underscoring capital erosion.

Exceptional Earnings and Expenses

One-off Loss: A loss of S\$828,000 was recognized from the voluntary liquidation of a dormant subsidiary, impacting net results.
Impairment: Investment in an associate was fully impaired during the year due to sustained net liability position.
Finance Cost Spike: Additional loans (bank and shareholder) taken up to fund expansion led to higher interest charges.

Directors’ Remuneration

Directors of the Company received S\$296,000 in the year. Directors of the Group’s subsidiaries received S\$305,000.

Divestments and Corporate Actions

Subsidiary Struck Off: Eufhoria Pte. Ltd. was struck off in October 2025, with no material impact on earnings or net assets.
Voluntary Liquidation: Raintree Rock Sdn. Bhd.’s liquidation completed in January 2026; no material impact expected.

Events and Risks Affecting the Business

Negative Working Capital: As at 31 December 2025, the Group is in a net current liability position of S\$5.22 million, raising concerns about going concern and liquidity.
Breach of Loan Covenant: The Group breached its minimum net tangible assets covenant (required S\$2.0m, actual S\$0.93m). The bank is reviewing the breach and no notice of default has been received as of the report.
Macroeconomic Headwinds: Management cited increased competition and broader macroeconomic challenges, particularly in Indonesia—the Group’s primary revenue source.
Fundraising Plans: The Board is exploring fundraising options, including additional loans, extensions, and capital raising from shareholders, to address liquidity concerns.
Share Options: No new options or incentive awards were granted in 2025. 1,160,000,000 options remain outstanding, fully vested.

Cash Flow and Balance Sheet Review

Cash and Bank Balances: Decreased to S\$342,000 (from S\$414,000), mainly due to payments for business expansion. Operating cash flow was positive (S\$820,000), but investing activities outflow exceeded S\$2.4 million.
Borrowings: Increased to S\$8.40 million, reflecting reliance on debt for funding expansion.
Trade and Other Receivables: Reduced to S\$275,000, driven by lower sales and tighter credit management.

Forecast and Outlook

Sterilisation Business: Expansion completed in 2026. Management expects improved and continued positive operating cash flow.
Liquidity and Going Concern: The Group expects to meet obligations through internal resources, shareholder loans, and potential capital raising.
Dividend: No dividend declared for FY2025 or FY2024. The Board does not recommend payment of dividends.

Chairman’s Statement

“To the best of our knowledge, nothing has come to the attention of the Board of Directors which may render the unaudited consolidated financial results for the year ended 31 December 2025 to be false or misleading.” — Alan Chin Yu, Executive Director; John Lee Yow Meng, Chief Financial Officer and Executive Director

The tone is factual and cautious, reflecting a focus on accurate reporting and compliance, with no explicit optimism or pessimism.

Conclusion & Investment Recommendation

Overall Assessment: The Group’s FY2025 financial performance is weak, marked by lower revenue, deepening losses, negative working capital, and a breach of loan covenants. While the sterilisation business expansion may support future cash flow, reliance on debt and shareholder support remains high. No dividend and ongoing liquidity challenges underscore a cautious outlook.

Investor Recommendations

If you are currently holding the stock: Consider reducing exposure or holding only if you have a high risk tolerance and believe in the turnaround potential of the sterilisation business. Monitor the Group’s fundraising activities and resolution of the loan covenant breach closely.
If you are not holding the stock: It is prudent to stay on the sidelines until signs of sustainable profitability, improved liquidity, and successful fundraising are evident. The risk profile is elevated given current financial challenges.

Disclaimer: This analysis is based strictly on the company’s published financial report and does not constitute investment advice. Investors should conduct their own due diligence and consult professional financial advisors before taking any action.