brewing new horizons

142 Pages·2016·2.8 MB·English

B R E W I N G
N E W H O R I Z O N S
ENVICTUS INTERNATIONAL HOLDINGS LIMITED
ANNUAL REPORT 2016

CONTENTS
2 Corporate Profile
8 Key Milestones
12 Message from the Chairman
16 Review of Operations
26 Financial Highlights
28 Risk Factors
31 Group Structure
32 Corporate Information
33 Board of Directors
36 Key Management
38 Corporate Governance
50 Financial Statements
132 Statistics of Shareholdings
134 Notice of Annual General Meeting
• Proxy Form
2 Annual Report 2016 // Envictus International Holdings Limited
CORPORATE PROFILE
Listed on SGX Catalist Founded in 1997, the Group started as a operations in Malaysia to be centralised
manufacturer and distributor of sweetened in the Selangor Halal Hub, Pulau Indah
(previously known as
condensed milk and evaporated milk (“SHHP”).
the SGX-SESDAQ) on and in the years following its listing, has
evolved into a diversified F&B player vide Apart from Malaysia, the Group’s
23 December 2004 several acquisitions. products can be found elsewhere such
as New Zealand, Australia, China, Dubai,
and upgraded to the
In June 2014, the Group unlocked Singapore, Pacific Islands, Brunei,
Mainboard on shareholders’ value in the business Thailand, Indonesia, Papua New Guinea,
through the disposal of its investment in Pakistan and Vietnam. The Group’s
18 June 2009, Envictus
the Dairies and Packaging divisions and products are traded under various
the relevant intellectual properties to Asahi brand names like San Francisco Coffee,
International Holdings
Group Holdings Southeast Asia Pte. Ltd. Gourmessa, Polygold, Hearty Bake,
Limited (“Envictus” Family, Daily Fresh, Horleys, Sculpt,
The Group’s current business divisions Replace, Covet, Pro-Fit, Air Champ and
or “the Group”), is
comprise Trading and Frozen Food, Power Champ.
an established Food Food Services (Texas Chicken and
San Francisco Coffee), Nutrition as Helmed by an experienced management
and Beverage (“F&B”)
well as Food Processing. The Food team of industry veterans who possess a
Processing Division’s business segments wide range of expertise in strategic planning,
Group. The Group has an
are Bakery, Butchery, Beverages, business development, operational and
established portfolio of and Contract Packing for Dairy and production skills, the Group is well-
Juice-based drinks. positioned to tap on its established standing
businesses and brands
in the F&B industry to further enhance its
operating under its key Envictus’ operating facilities are located strong brand names.
in Malaysia and New Zealand, with plans
business divisions. in the pipeline for a number of its existing
Envictus International Holdings Limited // Annual Report 2016 3
CORPORATE PROFILE
TRADING AND Pok Brothers started as a general store Most of Pok Brothers’ supplies are
business in Petaling Jaya in 1963 and from sourced internationally, in particular, from
FROZEN FOOD this humble beginning, it has successfully the United States, Europe, Australia, New
transformed itself into one of the leading Zealand and Brazil.
DIVISION frozen food companies in Malaysia.
It operates out of Glenmarie, Shah Alam
As a premium food wholesaler, Pok in Selangor, and has branches in Penang,
With over 50 years of track Brothers imports and distributes food Johor, Pahang and Langkawi to cover the
products, both in raw and processed form, length and breadth of Peninsular Malaysia.
record, Pok Brothers Sdn
with particular emphasis on servicing the All the branches have cold room facilities.
Bhd (“Pok Brothers”) is hospitality and consumer-based food
industry. Its products include frozen/chilled Pok Brothers is constructing a new
today a household name beef and lamb cut, dairy products, seafood, warehouse on a plot of land in Selangor
condiments, vegetables, bakery products Halal Hub, Pulau Indah. This is to cope
and is one of Malaysia’s
and cold cuts among many others. Its major with the increased internal demand from
leading frozen food and clients include major 5-star hotels, airlines, the Food Services Division as well as to
cruise ships, hyper/supermarkets, bakeries, accommodate future expansion plans
premium food wholesaler.
butcheries, fast-food chains, grocery stores, of the business. Construction of the
food processors and other wholesalers. warehouse has already commenced in July
Pok Brothers is the sole distributor of major 2016 and is expected to be completed by
imported brands like Lamb-Weston, Emmi, mid-2017.
Devondale, Dr. Oetker, Pritchitt and other
imported brands as well. Pok Brothers is
also an appointed importer and distributor
of proprietary goods for several American
restaurant chains in Malaysia.
4 Annual Report 2016 // Envictus International Holdings Limited
CORPORATE PROFILE
FOOD SERVICES This marked the Group’s maiden foray into in Malaysia enjoy the same great taste
the fast food segment. These restaurants created 60 years ago by the founder –
DIVISION serve American-styled, big juicy full- Mr. George W. Church, Sr. The attention to
flavoured fried chicken, french fries, detail is seen right down to the choice of the
honey butter biscuits, mashed potatoes, key ingredient – chicken freshly procured
coleslaw, burgers and sundae, to name a from local farms – cooked using an
On 10 July 2012, the Group
few. exclusive technique for a juicy and crunchy
bite. In addition, Texas Chicken’s signature
signed an exclusive
This partnership has expanded Envictus’ 8-piece cut ensures that customers enjoy
10-year International portfolio and will enable the Group to bigger chicken portions at greater value.
continue to tap on synergistic opportunities
Multiple Unit Franchise in its existing Trading and Frozen Food Since the opening of the first flagship
Division and Beverages business. In outlet at Aeon Bukit Tinggi Shopping
Agreement with US-based addition, this downstream expansion Centre, located in Bandar Bukit Tinggi
is part of Envictus’ growth strategy to township, Klang on 31 January 2013,
Cajun Global LLC for
increase the presence of its identity and Envictus has leveraged on the robust
brand in key markets such as Malaysia and demand for the Texas Chicken restaurant
exclusive rights to develop
the neighbouring countries in Asia. concept by growing its presence at a
good pace to reach a total of 31 outlets
and operate Texas Chicken
Texas Chicken sets itself apart from as at 8 December 2016, largely within the
restaurants in Malaysia and the competition, given the substantial Klang Valley area in Malaysia. During the
attention paid to ingredient sourcing and financial year, the Group opened a total of
Brunei from 2013 to 2022. good quality control to ensure freshness 10 outlets.
of food at all times. All spices and
seasoning for Texas Chicken’s great tasting
chicken are imported directly from USA
for consistency in flavour to ensure that
guests who visit Texas Chicken restaurants
Envictus International Holdings Limited // Annual Report 2016 5
CORPORATE PROFILE
Locations of Texas Chicken outlets as at 8 December 2016 On 28 March 2016, Envictus acquired
85% shareholding in Lyndarahim Ventures
Locations 2013 Sdn Bhd (“LVSB”) which in turn owns
San Francisco Coffee Sdn Bhd (“SFCSB”),
Aeon Bukit Tinggi Shopping Centre, Klang 31 January
a specialty coffee chain business that
Sri Gombak, Batu Caves 1 March
serves house roasted coffee in Malaysia.
Sunway Pyramid Shopping Mall, Subang Jaya 12 July
On 19 August 2016, Envictus acquired
The Mines Shopping Mall, Seri Kembangan 19 July
the remaining 15% shareholding in LVSB.
Kajang 12 December
SFCSB operates 28 specialty coffee
Locations 2014 outlets and one licensed outlet in Malaysia
Klang Parade, Klang 14 March under its own brand name “San Francisco
Kuala Lumpur International Airport 2, Sepang 3 May Coffee”. SFCSB’s house roasted coffee can
be found in KLCC, The Sphere at Bangsar
Main Place, Subang Jaya 26 May
South, Mid Valley, Menara Millenium,
Jaya Shopping Centre, Petaling Jaya 26 June
Menara TM, Menara UOA Bangsar, The
Tesco Extra Cheras, Kuala Lumpur 17 July
Intermark, Wisma Rohas Perkasa, Menara
Mid Valley Megamall 29 October
Citibank and Menara Shell among many
IOI City Mall, Putrajaya 20 November
other office buildings. SFCSB has its own
Wangsa Walk Mall, Wangsa Maju 18 December
roasting plant and central kitchen to cater
Locations 2015 to the needs of all its outlets. One of the
major initiatives undertaken upon the
Geo Hotel, Kuala Lumpur 12 February
acquisition is a rebranding exercise which
Damansara Uptown 19 March
will introduce new concept and design of
Tesco Setia Alam, Shah Alam 11 June
upcoming stores. While SFCSB maintains
KL Festival City Mall, Setapak 9 July
the brand promise of freshly roasted coffee
Tesco Extra Jenjarom, Selangor 30 September
and high quality coffee beans, this initiative
PJ New Town 8 October
will allow SFCSB to become competitive in
Evolve Concept Mall, Ara Damansara 5 November the industry.
Star Avenue Lifestyle Mall, Shah Alam 12 December
Midpoint Shopping Centre, Pandan Indah 15 December Through this strategic acquisition, SFCSB
will enjoy lower costs from internal sourcing
Locations 2016
within Envictus’ Trading and Frozen Food
M3 Residency Mall, Taman Melati, Setapak 28 January
Division, Bakery and Butchery businesses,
Tesco Lukut, Port Dickson 25 February
while these divisions will derive synergistic
Taman Sri Serdang, Sri Kembangan 14 April
benefits from higher production output
SS15 Courtyard, Subang Jaya 28 April
through the supply of its premium products
Utropolis Marketplace, Glenmarie 19 May to complement the specialty coffee chain
Bandar Puchong Jaya 27 June business. This investment is also part of
Seremban Gateway 15 November the downstream expansion of Envictus’
KL Sogo 29 November growth strategy to increase the presence
Sunway Velocity Mall, Sunway Velocity 8 December of its identity and brand in key markets
such as Malaysia and the neighbouring
countries in Asia.
6 Annual Report 2016 // Envictus International Holdings Limited
CORPORATE PROFILE
NUTRITION The key benefits of these products are substantial resources, both financial and
in the areas of weight management non-financial, otherwise required for
DIVISION (both muscle mass gain and weight loss setting up of processing and production
through satiety control), energy delivery centres.
and hydration. Most recently, NNL also
launched a range of nut milks under the By concentrating on its core competencies,
Naturalac Nutrition Limited
Covet™ brand name. The Covet range is NNL has been able to significantly
(“NNL”), a marketer of manufactured by Envictus Dairies NZ Ltd, shorten the time required for product
another subsidiary in Envictus Group. development, from concept to market.
branded nutritional food This ability is considered an edge over
NNL became a “virtual” company in 2002 its competitors. In New Zealand, NNL’s
and beverages including
in order to enable its management to products are primarily distributed through
products marketed focus its efforts on key areas of marketing the route channels (gyms, health food
and product development. As such, this shops, specialty stores and specialty
to athletes and mass marketing company outsources many of nutrition shops) and retail channels
its key functions including manufacturing, (supermarkets, oil and convenience
consumer markets trades
distribution and selling to third party retail outlets) whilst its Australian sales
under the Horleys™ providers, both in New Zealand and are made predominantly through the
Australia. This lean business model, akin route channels.
brand name and other to popular sports apparel brands, has
provided NNL with the needed flexibility
proprietary brands such
and speed in delivering high quality
as Sculpt™ (a weight products to its customers, while focusing
and leveraging on its key competency
management product in product development, advertising
and promotion and customer service.
tailored for women) and
This model has reduced the need for
Replace™ (only available
in powdered format).
Envictus International Holdings Limited // Annual Report 2016 7
CORPORATE PROFILE
FOOD Bakery The operations of Gourmessa are currently
affected by the limited capacity of its
PROCESSING De-luxe Food Services Sdn Bhd, which present facilities. The Group has purchased
is located in Meru, Klang, manufactures several pieces of land in the Selangor Halal
DIVISION speciality European bread for supply to Hub Pulau Indah (“SHHP”) and intends to
hotels, restaurants, cafes and supermarkets. relocate the existing butchery facilities to
It also supplies its products to Subway SHHP whereby bigger production facilities
Malaysia. will be built to cater for increased demand.
Construction at site has commenced in
In addition to the frozen bakery range July 2016 and is expected to complete by
produced by De-luxe Food Services mid-2017.
Sdn Bhd, the Group also produces and
distributes fresh breads and buns through Beverages
the Family Group, consisting of Family
Bakery Sdn Bhd and Daily Fresh Bakery Polygold Beverages Sdn Bhd is a
Sdn Bhd. manufacturer of canned and bottled
beverages based in Seremban, Negeri
Family Group’s manufacturing facility is Sembilan. Its plant produces both
located in Meru, Klang and produces fresh carbonated and non-carbonated drinks
breads and buns in Malaysia under the under the brand names of Poly and
brand name of Daily Fresh and Family. Polygold. In addition, it also produces Air
Their products are distributed nationwide Champ energy drink and Power Champ
to hypermarkets, supermarkets, factory isotonic sports drink.
canteens, petrol marts, grocery stores and
convenience shops. Contract Packing for Dairy and
Juice-based drinks
Butchery
The Group entered into the ready-to-drink
Gourmessa Sdn Bhd which is located in segment vide a joint venture in Envictus
Glenmarie, Shah Alam, manufactures and Dairies NZ Limited to establish New
processes cold cuts, sausages, portion Zealand’s first state-of-the-art, UHT
control meat and smoked salmon for Aseptic PET bottling line for dairy, juice and
distribution to supermarkets, hotels and water products with the official opening of
restaurants. Its Gourmessa brand of quality its plant on 1 September 2011. The plant,
cold cuts and sausages are well distributed located at Whakatu Industrial Park, near
and displayed in most supermarkets and Hastings, is ideally-suited for bottling
hypermarket chains across Malaysia. operations with its existing resources,
including bore water rights, trade waste
discharge rights and tanker access.
The plant currently produces UHT milk
for the China and Taiwan markets, flavoured
milk for Australasia, pet milk and fruit juice
for local and Asian markets. It has also
developed and launched its ready-to-drink
sports nutrition beverage including isotonic
drinks, protein drinks, weight loss water and
pre-workout drinks. Most recently, the plant
has expanded into non-dairy alternative nut
milks such as coconut, macadamia and
almond milk.
8 Annual Report 2016 // Envictus International Holdings Limited
KEY MILESTONES
2004 2009 2013
DECEMBER MARCH JANUARY
(2004) (2009) (2013)
Etika International Holdings Limited Entered JV in New Zealand vide Increased equity holding in Etika Dairies
(“EIHL”) was listed on SGX-SESDAQ Etika Dairies NZ Limited, our newly NZ Limited from 60.7% to 63.4% vide
(now known as SGX Catalist) on incorporated subsidiary in New Zealand a wholly-owned subsidiary, Etika (NZ)
23 December 2004. for an initial stake of 50.7% on 18 March Limited on 18 January 2013.
2009, which was later increased to 60.7%
MARCH
in December 2009. (2013)
2006 JUNE (2009) Increased equity holding in Pok
Brothers (Johor) Sdn Bhd from 81.8%
to 100% vide a wholly-owned subsidiary
Upgraded to SGX Mainboard on
of the Group, Pok Brothers Sdn Bhd on
18 June 2009.
FEBRUARY 25 March 2013.
(2006)
Made first acquisition pursuant to listing
2010
- Pok Brothers Group - one of Malaysia’s 2014
leading frozen food and premium food
wholesaler, on 8 February 2006, vide our
wholly-owned subsidiary, Etika Foods (M)
Sdn Bhd. OCTOBER (2010) FEBRUARY (2014)
Acquired of 100% equity interest in Increased equity holding in Etika Dairies
Family Bakery Sdn Bhd, Daily Fresh NZ Limited from 63.4% to 72.3% vide
2007
Bakery Sdn Bhd and Hot Bun Food a wholly-owned subsidiary, Etika (NZ)
Industries Sdn Bhd (“Family Group”) Limited on 27 February 2014.
on 1 October 2010; makes entry into the
manufacturing and distribution of fresh JUNE (2014)
FEBRUARY (2007) baked breads and buns.
Change of name of its wholly-owned
Acquired Naturalac Nutrition Limited subsidiary, Etika Beverages Sdn Bhd to
(“NNL”) based in New Zealand vide Polygold Beverages Sdn Bhd with effect
2012
our wholly-owned subsidiary, Etika (NZ) from 10 June 2014.
Limited on 8 February 2007.
Disposed dairies and packaging
JULY businesses and the relevant intellectual
(2007)
JULY property to Asahi Group Holdings
(2012)
Southeast Asia Pte Ltd on 30 June 2014
Completed acquisition of a canned for US$328,787,704.
beverage manufacturing plant by Etika Signed an International Multiple Unit
Beverages Sdn Bhd on 3 July 2007. Franchise Agreement with US-based
Cajun Global LLC on 10 July 2012 for
exclusive rights to develop and operate
“Texas Chicken” restaurants in Malaysia
and Brunei over next 10 years from 2013
to 2022.