Convenience Store Chain (CVS) 04 Financial Performance In FY2023, the revenue for CVS increased 35.2% to RM861.02 million while PBT grew marginally at 1.7% to RM43.75 million. The sales momentum from the first half was dampened by economic uncertainties, affecting demand and pushing down average sales per store. Additionally, the fourth quarter saw new labour regulations which drove up costs. Outlook With the reopening of economies post pandemic, CVS has set course to have a total of 600 FamilyMart stores by FY2027. Drawing on our data, we stopped selling alcohol at all FamilyMart stores nationwide since March 2023 as the contribution from this beverage to CVS is minimal. We expect upside from this move as it provides greater assurance to the majority of our CVS customers and paves the way for our expansion. We are actively pursuing opportunities to extend our reach into the northern and east coast regions of Peninsular Malaysia. At the same time, we are also identifying suitable locations for FM Mini expansion, which utilises automation and are lower in overheads. The FamiCafé concept will be integrated into existing stores and we target to achieve 50 FamiCafé stores in FY2024. The FamiCafé in Menara U, Shah Alam in Selangor is the first convenience store café in Malaysia to receive halal certification. The weak consumer purchasing power will pose a challenge to achieve better margins. With the strategic addition of more stores, we target to generate better economies of scale and average daily sales, helping to mitigate the impact of higher input costs. CVS is expected to yield a neutral to positive performance in FY2024. Business Review Business Review BUSINESS PILLAR The FamilyMart convenience store chain is a direct-to-consumer channel that offers a wide range of wholesome ready-to-eat (RTE) and easily prepared meals tailored to meet the demands of busy modern lifestyle. Rooted in the konbini concept, FamilyMart has significantly widened QL’s downstream activities. Since its introduction in 2016, FamilyMart has expanded to include FamilyMart Mini (FM Mini), “Food Superstore” concept store, as well as FamiCafé. Supporting these stores are FamilyMart’s own central kitchens which are certified halal by Jabatan Kemajuan Islam Malaysia (JAKIM). FamilyMart stores, FamilyMart Food Superstores, FM Mini and FamiCafé Central kitchens CVS ASSETS 70 FM Mini 16 FamiCafé 2 central kitchens OUR VALUE CHAIN KEY DEVELOPMENTS Second central kitchen received halal certification in December 2022 Over 200 halal certified products available at FamilyMart stores Introduced FamiCafé to provide more convenience to customers Introduced self-service kiosks in stores Continued the Orang Asli Training programme; 53 Orang Asli equipped with skills for employment 357 FamilyMart stores (as at 31 March 2023) where possible and otherwise, optimise food as a resource in a circular approach. FamilyMart offers discount on select food items after 4pm. We also revitalised the expired food collection programme with enhanced Internet of Things (IoT) for vermiculture purposes. Challenges The inflationary environment has had a direct impact on the cost of living, resulting in a notable increase. As a result, spending power deteriorated and consumer demand trended downwards in the second half of our financial year. CVS experienced high turnover in the workforce as the labour market improved, and there was stiffer competition for talents. It also faced difficulties recruiting local talents. New hires in turn increased the need for new employee onboarding. Together with the shortage of staff, maintaining the expected quality of service was a challenge. The imposition of the Imbalance Cost Pass-Through by the national utility company in December 2022 led to a surge in energy expenditure. These combined factors have created additional obstacles for businesses, necessitating an even more agile management and strategic decision-making to manoeuvre the expected service level and economic landscape. Revenue (RM million) FY2021 485.48 FY2021 12.56 FY2022 636.71 FY2022 43.00 FY2023 861.02 FY2023 43.75 PBT (RM million) Operational Review CVS relentlessly pursues innovative touchpoints to improve convenience and meet customers’ evolving needs. This is done through the introduction of various formats, including a drive-through concept store, FamilyMart Food Superstore and FM Mini, which complement the existing FamilyMart stores. Drawing on technology integration, FamilyMart introduced self-service kiosks in its stores. It also helped reduce the burden on in-store staff, especially during peak hours. Building upon this achievement, QL introduced FamiCafé as the next evolution for the stores, serving exclusive café food and drinks in a minimalist ambiance to further enhance customers’ experience. CVS demonstrates resilience, continuing to grow even in the face of challenging consumer sentiment stemming from inflationary pressure. Notably, 76 outlets were added into the fold during the year. Catering to the outlet growth, the second central kitchen was commissioned during the financial year with several production lines producing wholesome meals. The second central kitchen received halal certification in December 2022. Being a food producing company, we are keenly aware of the cost of production and therefore, seek to reduce food waste *CVS only started reporting as a separate business pillar in FY2022 after surpassing the 10% threshold prescribed in MFRS 8.13 for Operation Segment reporting 025 024 QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2023 SEC. PG. PG. MANAGEMENT DISCUSSION AND ANALYSIS 4
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