1. Envictus is a diversified F&B company, what is the group’s product shelf today?
As an established F&B group, we offer a wide portfolio of businesses and brands operating under three key business divisions — Food Services, Trading, and Frozen Food and Dairies.
Food Services Division — We have held exclusive rights to the Texas Chicken franchise agreement since 2012 and renewed the franchise for a second 10-year period starting May 2022 to develop and operate the Texas Chicken fast food restaurant chain in Malaysia and Brunei. We also own a Malaysian homegrown speciality coffee chain business, San Francisco Coffee (SFCoffee) which serves house-roasted coffee in Malaysia. Presently, the group operates 93 Texas Chicken restaurants and 50 SFCoffee cafes.
Trading and Frozen Food Division — Our wholly-owned subsidiary, Pok Brothers Sdn Bhd, is one of Malaysia’s leading wholesalers of frozen and premium food and a supplier to several major restaurant chains, hotels and supermarkets in Malaysia.
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Dairies Division — We manufacture condensed milk under the SuJohan brand, held by our wholly-owned Motivage Sdn Bhd.
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2. What are Envictus’ key growth opportunities over the next few years?
For Food Services, the group will leverage robust demand to grow our presence, with a further expansion of eight new Texas Chicken outlets and five new SFCoffee cafes in FY2024, to enhance revenue and earnings streams.
For Dairies, we continue to provide competitive pricing, alongside market penetration of the SuJohan brand into major hypermarket chains. Through active marketing, our products have entered major hypermarket chains including Aeon Big, Lotus, Giant and Econsave, which significantly enhanced brand awareness. We continue to open more chains to enhance brand awareness for our dairy products.
For Trading and Frozen Food, we continue to increase e-commerce sales by tapping on digital marketing and price reviews, to navigate challenges and drive sustainable growth. Regarding Food Processing, we have concluded the divestment of the loss-making bakery and butchery businesses and will be directing resources to other group companies as part of our streamlining efforts. The first tranche of proceeds received has been used to pare down bank borrowings, with the balance proceeds of RM34 million ($9.74 million) expected to be received in April 2025.
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Overall, to stay competitive, we will continue our active pursuit of various business strategies, and enhance efficiency through the implementation of cost-control measures to achieve revenue growth.
3. Describe Envictus’ recent financial performance.
We achieved a profitability turnaround of RM16.4 million in 1HFY2024 ended March, from a net loss of RM12.5 million in 1HFY2023.
This was mainly driven by strong revenue growth, increasing 12.2% to RM314.1 million in 1HFY2024, from RM280.1 million in 1HFY2023, due to higher contributions from both the Food Services and Dairies Divisions. Of note, our best-performing Food Services Division saw a 22.7% uplift in revenue to RM185.2 million, contributing close to 60% of 1HFY2024 revenue. As for our Dairies Division, it contributed close to 20% of our revenue for 1HFY2024, surging 34.1% to RM62.4 million y-o-y, driven by volume growth and growing market penetration.
4. How does Envictus manage rising costs and improve the group’s operational efficiency?
We continually monitor and manage costs to improve operational efficiency across our core business segments and are committed to expanding the businesses prudently. To combat margin compressions for our Food Services Division, we take proactive measures to identify suitable areas for store openings and closures of non-performing Texas Chicken stores for cost reduction and optimisations. The performance of SFCoffee remains challenging amid rising operational costs due to inflation and stronger price competition posed by larger chains. To mitigate these rising costs, SFCoffee has implemented various strategies including price increases on selected products, engaging multiple suppliers, and hedging supplies to reduce costs and operate with efficiency.
During the year, the Dairies Division continues to face margin pressures from rising input costs and operational expenses. To mitigate the price volatility, we plan to achieve competitive pricing by sourcing for alternative suppliers and will adjust selling prices as required to align with the market. Meanwhile, our SuJohan brand entrance into major hypermarket chains has significantly enhanced brand awareness.
For Trading and Frozen Food, continual efforts are underway to increase e-commerce sales to address the reduction in margins caused by inflationary pressure and unfavourable foreign exchange. For Food Processing, with the divestment of the butchery business, from the sale of Gourmessa shares, the group will direct resources to other group companies to improve the group’s operational efficiency.
5. Are there any plans to venture into new markets to generate more revenue?
Malaysia remains our group’s biggest market, contributing RM309.1 million or 98.4% of the total revenue in 1H2024. This is followed by Africa, Asean (excluding Malaysia) and America.
We will continue to explore expanding into overseas markets for our Dairies Division, given its increasing market acceptance and branding profile both locally and abroad.
6. What are some key strategies for Envictus’ business segments?
To stay competitive, we have implemented key strategies across our business segments. In Food Services, we focus on menu innovations to cater to evolving consumer preferences. Texas Chicken continues to introduce profitable limited-time offer menu innovations while SFCoffee upholds its distinctive value proposition by enhancing the operations team’s customer service.
Continual efforts are also underway to increase e-commerce sales by leveraging digital marketing to drive traffic flow to Pok Brothers’ Easy Store platform, coupled with the implementation of a loyalty programme to stimulate consumer spending. We are also working to offer competitive pricing for our dairy products by sourcing alternative suppliers.
7. What are some challenges and risks for the business and how do you deal with them?
While the group operates in a fairly defensive F&B industry, there are challenges that the industry faces such as regulatory changes, escalating raw materials and operational costs, and evolving consumer preferences.
Our products are manufactured under stringent control and processes with a strong emphasis on quality and hygiene. Any incidence of contamination or food poisoning in our subsidiaries could lead to criminal prosecution in jurisdictions where our products are exported, a loss in customer confidence and a negative impact on our reputation. To mitigate this risk, we are compliant with International Organization for Standardization (ISO), Department of Veterinary Services Malaysia (DVS) and Hazard Analysis Critical Control Points (HACCP) and we subscribe to Good Manufacturing Practice (GMP).
To counter the escalating operational costs, the group has implemented sales strategies and proactive cost reduction measures, including improving operational efficiencies. As for raw materials such as whey protein concentrate, milk powder, salt, sugar, vitamins, raw meat, palm olein and packaging material, we enter into forward supply contracts.
8. How does Envictus navigate the challenges and opportunities presented by changing consumer preferences?
The group plans to address this in four ways:
Menu innovation — to include healthier options, such as reducing sugar levels in our recipes and offering lower calorie alternatives.
Menu customisation — offering customisable menu options to cater to consumers’ dietary needs and preferences. This flexibility helps us attract and retain a broad customer base.
Sustainable sourcing — sourcing ingredients from sustainable and ethical suppliers who support environmental sustainability and ensure the quality of our products.
Incorporating customer feedback and engagement — this allowed us to stay ahead of trends and adapt our offerings accordingly.
9. Sustainability and Environmental, Social and Governance (ESG) have increasingly been a key focus, how is Envictus committed towards sustainability?
Each year, we look for ways to further strengthen our ESG efforts and achievements. These include:
Energy conservation practices such as equipping restaurants of Texas Chicken (Malaysia) and SFCoffee with LED lighting to reduce power consumption.
Ensuring proper waste management by engaging responsible and ethical waste management contractors for the collection and disposal of waste as well as recycle management contractors for all recyclable items.
Using Forest Stewardship Council (FSC) certified packaging and replacing regular plastic with biodegradable materials.
Sourcing ethical ingredients and participating in environmental protection activities such as “Earth Day” and tree planting. The group is also exploring partnerships with non-governmental and government agencies as part of our corporate social responsibility programmes.
10. Why should investors take a closer look at Envictus?
Founded in 1997, we are a well-established F&B group, with an extensive strong track record featuring a diversified portfolio and strong distribution network in Malaysia. We collaborate with domestic dealers, wholesalers, retailers and on-site customers and are serviced by sales offices cum warehouses in major cities across Malaysia.
We possess strong marketing expertise, having successfully built up market acceptance of brand names including Texas Chicken and SFCoffee throughout Malaysia. Presently, the group operates 93 Texas Chicken restaurants and 50 SFCoffee cafes. This includes effective marketing campaigns ranging from price and menu optimisation to the implementation of digital initiatives to enhance sales as well as targeted promotions to optimise sales.
Envictus is helmed by a management team of industry veterans who possess a wide range and in-depth expertise in strategic planning, business development, and operational and production skills. With strong expertise, the group is well-positioned to tap our solid foundation in the F&B industry to further enhance our established brand names.
Emelia Tan is director of research and FinLit at SGX Group
