Envictus Grew Its Revenue by 8.4%—So Why Did Its Profits Plunge by 40%? 5 Surprising Takeaways from its Annual Report

Introduction:

Corporate earnings reports often lead with a simple, powerful number: net profit. But relying on that single figure can be dangerously misleading. A dramatic rise or fall in profit rarely tells the whole story; the real, more interesting narrative is always buried in the details. While a plunging profit might suggest a company in crisis, other key indicators—like revenue growth, asset value, and operating margins—can paint a picture of surprising underlying health. The latest annual report from Envictus International, the parent company of Texas Chicken and San Francisco Coffee in Malaysia, is a perfect case study in the importance of digging deeper.

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1. The Profit Plunge Isn’t What It Seems

The most jarring figure in the Envictus FY2025 report is the bottom line. Net Attributable Profit came in at RM30.2 million, a massive 40.3% drop from the RM50.6 million reported in the previous year (FY2024). A decline of that magnitude would typically signal a major operational crisis.

However, the primary reason for this plunge is a matter of accounting, not a collapse in business performance. The previous year’s profit was artificially inflated by a one-off RM9.0 million net gain from the disposal of assets in Pulau Indah and a subsidiary.

This context immediately changes the story from one of operational failure to one of an unfair year-over-year comparison. That said, the story isn’t entirely rosy. Even after adjusting for the one-off gain, the company’s Adjusted Earnings Per Share (EPS) still fell by 27.3%, indicating that other pressures were squeezing the bottom line—which we will explore.

2. Strong Growth in a Very Tough Room

While the profit figure looks grim, the revenue story is incredibly positive. Against a backdrop of significant economic headwinds, the Group’s total revenue grew by a robust 8.4% to RM744.6 million. Even more impressively, its Gross Profit Margin remained healthy, improving slightly to 45.1%.

This growth was achieved in what the company’s leadership described as a difficult environment. As Group Executive Chairman & Group CEO, Dato’ Jaya Tan, noted:

“Despite a challenging operating environment marked by rising costs which among others include sales and service tax expansion, increase in minimum wages, increase in new based electricity tariff and strong competition, our businesses have remained resilient and disciplined.”

These weren’t vague challenges; the company was battling specific headwinds, including a sales and service tax expansion, an increase in minimum wages, and new electricity tariffs. Crucially, growth wasn’t isolated to one segment; it was broad-based, with all three core divisions delivering solid top-line performance:

• Food Services Division: Grew 7.8% to RM460.1 million.
• Dairies Division: Jumped 12.0% to RM144.7 million.
• Trading and Frozen Division: Increased 6.9% to RM139.8 million.

3. A Tale of Two Brands: The Booming Chicken and the Struggling Coffee

Drilling down into the Food Services division—the Group’s largest revenue contributor—reveals a stark contrast between its two flagship brands.

First, the powerhouse: Texas Chicken. The fast-food chain’s revenue grew by an impressive 10.0% to RM429.5 million. This growth was supported by an expansion of its footprint from 95 to 101 outlets. The brand has ambitious plans to build on this momentum, aiming to open 17 new restaurants in the coming year, including its first-ever expansion into Sabah.

On the other side of the ledger is San Francisco Coffee. Its revenue dropped by 15.9% to RM30.5 million. The company attributes this decline to “intense competition from new coffee entrants who are penetrating the market with low prices.”

However, the brand is not standing still. Management has initiated an explicit turnaround plan that includes pursuing an “aggressive outlet expansion using an asset-light model,” adopting a competitive pricing strategy, and leveraging its “in-house roastery” as a key quality advantage. This strategy, combined with a focus on product innovation and enhanced digital engagement, shows San Francisco Coffee is actively fighting back rather than just weathering the storm.

4. The Hidden Tax Bill That Took a Bite Out of Profits

Another key factor behind the lower net profit is less obvious than the one-off gain comparison but just as significant. The Group’s income tax expense skyrocketed, rising 3.6 times to RM16.9 million from RM4.6 million in the prior year.

The reason for this tax shock is, ironically, a byproduct of success. The Texas Chicken business had become so profitable that its previously available tax losses and capital allowances were fully utilized in the previous financial year. As a result, the company had to pay its full tax liability in FY2025, which took a significant bite out of the final profit figure. This is a classic example of a “good problem to have,” but it demonstrates the real financial impact of a rapidly growing and successful business unit.

5. The Dairies Division is the Unsung Hero

While the Food Services division commands the most attention due to its size, the Dairies Division was the Group’s fastest-growing segment. Its revenue jumped by 12.0% to RM144.7 million, making it the top performer in terms of percentage growth.

This success was driven by the “SuJOHAN” brand, which is gaining strong traction in East Malaysia and has recently secured new listings in 677 retail outlets across West Malaysia. More importantly, this growth is highly profitable. The division’s profit before tax nearly doubled, increasing from RM2.4 million to RM4.6 million. However, this heroic performance is not without its challenges. The company notes that “elevated milk powder costs and competition from larger brands continue to affect margins,” providing a more balanced and realistic view of the road ahead.

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Conclusion:

Envictus’s FY2025 results are a powerful reminder that a company’s performance is rarely captured by a single headline number. Behind the 40% profit drop lies a more complex and compelling story of broad-based revenue growth, healthy margins, and a 15.4% increase in Net Asset Value per share. The company’s short-term financial health also improved dramatically, with net current assets growing from RM2.2 million to RM14.1 million.

The central challenge for Envictus is now one of capital allocation. Can the formidable cash flow from Texas Chicken’s expansion simultaneously fund a capital-intensive 17-store rollout, support the asset-light turnaround of San Francisco Coffee, and defend the Dairies division’s margins against rising commodity costs? That is the real story to watch.

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