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Retail Initiative in Action! –Meet Everchanging Needs of Customers
03 Aug 2015

31 July 2015

Flash Note : Retail Initiative in Action!Meet Everchanging Needs of Customers

The 7-Eleven business continued to solidify its position as biggest contributor to the revenue of PT. Modern Internasional Tbk (“Company“) by being a fresh food destination. It contributed approximately 69.8% of Group’s 1HFY2015 revenue, up from 67.9% for the same period in the preceding year. The Group sees promising results from its fresh food focused strategy and expects this to propel the growth of 7-Eleven. SSSG for 1H2015 dipped marginally amid drop in Indonesia’s consumer confidence, ban on sale of alcoholic drinks and seasonal effect from Ramadhan and Lebaran period. In 2H2015, the Group will consolidate its effort to improve its store efficiency and continue its focus on growing its store network and fresh food offerings

I. Unaudited Consolidated Financial Highlights 1H15

(In Rp bil unless otherwise stated )

 

1H14

%

1H15

%

Growth

Consolidated revenue

 702.7

100.0%

 662.5

100.0%

-5.7%

- 7-Eleven business

 467.1

66.5%

 462.5

69.8%

-1.0%

- Trading business

 235.6

33.5%

 200.0

30.2%

-15.1%

           

Gross profit

 283.3

40.3%

 268.6

40.5%

-5.2%

EBITDA

 141.5

20.1%

 133.1

20.1%

-5.9%

EBIT

 85.1

12.1%

 67.7

10.2%

-20.4%

Net profit

 32.0

4.6%

 15.1

2.3%

-52.8%

           

Gearing ratio

68.5%

 

68.5%

   

 

II. Highlights 7-Eleven Business

(In Rp mil unless otherwise stated )

 

2014

2015

 

1Q

2Q

3Q

4Q

1Q

2Q

2Q YOY Growth

Sales

 226,593

467,152

697,602

971,801

242,007

462,468

-1.0%

Gross profit

 86,406

188,340

275,663

378,528

92,290

179,935

-4.5%

Gross profit margin

38.1%

40.3%

39.5%

39.0%

38.1%

38.9%

 

Operating income

 15,849

 40,333

 57,075

 77,861

 26,773

 42,380

5.1%

EBITDA

 39,790

 80,434

120,018

159,360

50,533

 84,167

4.6%

EBITDA margin

17.6%

17.2%

17.2%

16.4%

20.9%

18.2%

 
               

No. of operating stores

160

170

175

190

190

200

17.6%

SSSG

5.3%

9.0%

6.5%

8.0%

4.1%

-4.7%

 
  • The Group’s overall financial performance was significantly affected by the slow down in its industrial trading business due to a further decline in the demand for Graphic Art CTP equipment (Industrial printing business eg; newspaper and magazines)  and related supplies due to increasing trend of digitalization. Furthermore, slower than expected spending by both government and private hospitals contributed to this slow down in 2Q15.  
  • The 7-Eleven business supported the Group’s performance with promising signs of its fresh food focused strategy. In 6MFY15, fresh food products contributed larger to overall 7-Eleven sales, recording 34% of its total sales compared to 28% for the same period in FY2014. Fresh food products also registered revenue growth of 20% in 6MFY15 compared with the same period in FY2014, with 82 new SKUs launched since completion of its Central Kitchen Phase II. The increased contribution of fresh food and proprietary beverage products have led to an increase in gross profit margin to 38.9% for 2QFY2015.

 a. Category Contribution Comparison

b. YTD June 2015 SSSG

 

YTD June 15

Overall SSSG

 -0.3%

Fresh Food

14.48%

Proprietary Beverages

-2.23%

COS – Center of The Stores

-7.32%

 

  • Since the commencement of Central Kitchen Phase II operations, fresh food sales especially in the chilled food category (Ricebowl, Bento, Nasi Tenggo, sandwiches, etc produced by Central Kitchen Phase II) continued to grow with new SKUs launched, extending the in-store core products.
  • The chilled food category recorded  growth of 15 -20% y-o-y compared to last year as a result changing of focused strategy and promotion to more on  “Grab & Go” items and package (Panasku Tenggo, Panasku Ricebowl, Kopdar , etc).  A total of 51 SKUs were launched in 2QFY2015, an increase of 35.2%  q-o-q, bringing to a total of 196 SKUs as of June 2015. The Company expects to roll out at least another 80 new fresh food SKUs by December 2015.
  • Packages in focus :

 

  • The Hot food category (Fried items, Big Bite Hotdog)   slowed down between 5 -10% y-o-y  compared to last year, follow a shift in marketing and promotion focus from this category to the chilled food category.
  • The proprietary beverage category recorded a drop in sales for 1HFY2015 compared to 1HFY2014 led by the decline in cold beverages. 
  • Cold beverage sales declined around 15-20% y-o-y as customers were more inclined towards healthier drinks with less sugar and non-carbonate offerings.
  • Hot beverages registered strong growth in  around 10-15% y-o-y  in 2QFY2015 due to joint promotion carried out with Telkomsel using the Location Based Advertising approach.  In addition , the shift in focus to open smaller stores in commercial area also gain higher sales in this hot proprietary beverages.

 

  • SSSG for 2QFY2015 was -4.7%, mainly due to loss on sale of alcoholic drinks (used to contribute around 15-20% to COS Category and associated effects on the sale of snacks contributes around 10-15% to COS Category.  In addition, 2 weeks of fasting period further exacerbated the drop in sales in June 2015. However, the introduction of new items to the non-alcoholic beverage such as 7-Select and Welch’s Juice (with sales growth around 15-20% every month since the introduction) has helped to mitigate the drop in COS Sales.

III. Operation Updates 2Q15

  • 13 new stores were opened in 1H2015, bringing the total operational stores to 200. 3 stores were closed due to frequent flood incidents. Store opening continued to focus on small compact format (100 – 120 sqm) to reach better capex efficiency as well as store productivity.

 

 

< = 100 sqm

> 100 Sqm

Total Store

68 stores

132 stores

 

  • Store Productivity Review (In Rp) :

 

YTD Dec14 MTD Jan15 MTD Feb15 MTD Mar15 MTD Apr15 MTD May 15 MTD Jun15

Revenue/sqm Overall

 162.815  148.300  149.214  148.272  133.424  127.088  112.572

Rev/sqm (after Jan 2013)

   149.117  157.486  162.986  164.418  178.247  144.636

Rev/sqm (before Jan 2013)

 162.815  169.818  162.434  156.430  130.946  117.214  104.850

 

Store productivity for newly opened stores continued to show better results following the Company’s decision to focus more on opening small format stores in commercial area with Grab & Go concept compared to larger format in residential area with the hang out concept. Related to this, the Company has started to review the performance of each stores and right size its store layout. Underperforming stores particularly those impacted by alcohol sale ban will be closed and relocated to other sites.

The rightsizing effort begun with 7-Eleven Matraman store in July 2015. The improved layout is as shown below:

The 7-Eleven Matraman store has been rightsized by reducing the trading area from 166 sqm into 122 sqm. Excess space is used to accommodate other services by renting it to our partners (eg: ATMs, NEX KITA Digital Locker, printing services etc.) and thus provide opportunity to increase other income.

 

  • The Group started its production and distribution of 7-Select (7-Eleven private label) beverage in May 2015 and Welch’s juice (as part of its distribution agreement with Welch’s Food, Inc.) in June 2015.  These drinks are locally bottled by a 3rd party bottler.  7-Select beverages are sold only through 7-Eleven while Welch’s juice is distributed through modern retail channels with a competitive price of Rp 9.500 (versus Rp 24.500 for the imported one).

  • 7-Eleven entered into a collaboration agreement with Blibli.com and NEX Logistics to offer customers convenience of picking up parcels through NEX KITA that will be placed at 7-Eleven stores. NEX-KITA (NEX Kirim-Titip-Ambil) digital locker was launched on 11 July 2015. 7-Eleven believes that this will provide additional convenience to its customers.

IV. Non – Core Asset Divestment

The Company has entered into a Transfer of Trade Right and Termination Agreement with Fujifilm Corporation (Japan) for the transfer of existing distributorship of Fujifilm products in Indonesia.  This will allow the Group to channel its resources to focus on building up its 7-Eleven business.

 

V. Outlook and Focus for the remaining of 2015

  • Entering the 6th year of 7-Eleven operations in Indonesia, the Company’s strategy will be to focus on developing the “Grab & Go” concept, in line with the changing lifestyle and needs of its customers, and to be supported by the business’ Retail Initiative principle.

 

  • Emphasis will be placed on:
  1. Development of fresh food & proprietary beverages offerings with “Grab & Go” Concept while maintaining the hygienic, delicious and fast proposition
  2. Product range development under the private label of 7-Select to offer better value for customers
  3. Promoting digital services through Sevelin Digital Kiosk & NEX KITA by expanding offerings to improve the convenience proposition to our customers
  4. Deeper engagement with customers through digital and mobile marketing, social media interaction, active engagement and in-store events

 

  • The Company expects its SSSG to recover to +5% region by end of 2015 with its continued efforts in the emphasized areas above.

 

  • The Company remains committed to expand the 7-Eleven stores network with emphasis on developing quality stores under the small store format.  These stores will be concentrated within high density commercial area (office, apartments, train stations, trade malls).

 

  • The Company will continue to review underperforming stores and take the necessary actions (including store closure and relocation) and optimize store layout by rightsizing existing large stores.

 

 

Investor Relation Division

PIC : Tina Novita

Email : tina.novita@moderninternasional.co.id

PT. Modern Internasional Tbk

JL Matraman Raya No 12, Jakarta 11350

Phone 021 -2801000 ext 753