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Public company info - C.P. Lotus Corporation , 00121.HK

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C.P. Lotus Corporation, 00121.HK - Company Profile
Chairman Soopakij Chearavanont
Share Issued (share) 11,019,000,000
Par Currency Hong Kong Dollar
Par Value 0.02
Industry Department Stores & Shopping Malls
Corporate Profile Business Summary: The Group is principally engaged in the operation of large scale hypermarket stores located in the northern, southern and eastern parts of China. Performance for the year: Revenue increased by approximately RMB466.8 million, or 4.8%, to approximately RMB10,122.0 million (2017: approximately RMB9,655.2 million). Gross profit margin comprised front and back margin. Front margin is sales minus direct cost of sales; whereas back margin represents discounts, rebates and other fees the Group receives from suppliers. Loss attributable to equity shareholders of the Company was approximately RMB288.4 million (2017: profit of approximately RMB179.0 million). The change from profit to loss was largely attributable to the impairment losses in the amount of approximately RMB401.5 million on goodwill and intangible assets during the Reporting Period. Business Review: New sectors and new areas The Group opened a total of eleven new stores in 2018, including eight hypermarkets, two boutique supermarkets and one neighbourhood community store. As at 31 December 2018, the Group owned and operated 80 retail stores and three shopping centres and achieved breakthroughs in terms of regions, sectors and commercial models. The Group actively explores multi-sector mode of development. During the Reporting Period, the Group’s strategy shifted from primarily developing the hypermarket sector to a more comprehensive multi-sector development of large, medium, small and micro stores, as Lotus stores now include boutique supermarkets Lotus Plus, neighbourhood stores and Lotus Mini stores. In the online-to-offline sector, the Group continued to promote the integration of online and offline channels and upgrade the operating standard of the self-developed e-commerce shopping app “LOTUS-GO”, while promoting in-depth cooperation with large e-commerce platform vendors such as JD, TMall and Meituan. Providing consumers with convenient services and multi-channel options has been widely recognised by consumers and has a significant future development prospect and potential. Improve operating standards and system efficiency To capture business opportunities and overcome challenges, the Group completed the upgrade of ten stores during the Reporting Period in line with business adjustments, revising the store floor plans, compressed the Lotus store areas, expanded the leasing areas to other lessees, and actively introduced branded merchants to provide customers with a diversified array of products in their shopping experience and create a communal shopping environment. At the same time, the Group optimized the product display within each store and upgraded the fresh products in line with a business strategy for younger target customers. The key operation indicators such as area efficiency and human resources efficiency have been greatly improved. The Group continued to use information technology systems and tools to improve operating standard and system efficiency. The Group worked with IBM and Oracle to create a new ERP system that is more suitable for multi-sector development, established a data warehouse, conducted big data analysis in the development of precision marketing activities, optimized the product category structure and improved overall operating efficiency. The Group’s extensive application of facial recognition payment technology and the “LOTUS-GO” self-service cash register achieved technical advancement and has significantly reduced labor costs and shortened customer queuing time overall to enhance customers’ shopping experience. For online shopping, the Group steadily promoted function expansion and operation standard of the e-commerce shopping app “LOTUSGO” while the Group developed in-depth cooperation with large e-commerce platform vendors such as JD, TMall and Meituan, which further enhanced the Group’s online-to-offline integration. Creating supply chain differentiation through collaboration, focusing on creation of three core product categories and optimising product structure During the Reporting Year, the Group, through synergetic collaboration with CP Group, focused on building three core product categories, optimising the Group’s product structure and enhancing the Group’s product mix and supply. In order to create competitive advantage, the Group continued to focus on the development of a differentiated supply chain through coordinated brand building using available resources, expanding distribution channels, strengthening cooperation with suppliers, thereby creating a new collaborative model which offers quality products to consumers. Improving relationship with suppliers The Group continues to use data-based solutions to select suppliers and conduct procurement. The Group selects its suppliers on an open, fair and transparent basis, and through joint development of new marketing strategies and marketing to target group with the use of new media and other channels continues to strengthen strategic cooperation with its suppliers. The Group’s suppliers are able to receive direct feedback from end users purchasing their products from the Group’s stores, and accordingly product research and development strategy can be timely adjusted to enable the Group to offer a diversified product mix that meets the end users’ needs. During the Reporting Period, the Group jointly developed customised products with some of its suppliers to provide consumers with featured products. To further consolidate a reliable supplier base, the Group launched a supply chain financing project jointly with its strategic cooperative banks and suppliers, utilising the suppliers' transaction records and credentials with the Group for the suppliers to obtain bank financing. This strategy solved a difficult financing issue faced by many of Group’s upstream suppliers and reduced the overall financing cost in the supply chain, thereby improving settlement between the Group and its suppliers which in turn enhanced the competitiveness of the Group. Optimizing supply chain network management The Group has further enhanced its extensive warehousing and logistics distribution capabilities and infrastructure. During the Reporting Period, the Group opened a new warehouse in Guangdong Province to further improve local fresh product warehousing and distribution capacity. At the same time, the Group constructed a fruit and vegetable processing centre in anticipation of future structural change in consumer fresh product demand. As of 31 December 2018, the Group has nine large warehouses in the PRC reaching a total area of 111,400 square meters, consisting of six dry goods distribution centres with a total area of 100,100 square meters and three fresh distribution centres with a total area of 11,300 square meters. The Group’s logistic company, Shanghai Litai Logistics Company Limited, has the logistics management experience, supporting equipment and capability of long-distance trunk logistics and urban distribution. Through consolidation and optimization of operations in 2018, the Group has improved its logistics and distribution capabilities within the supply chain and effectively supported the ongoing development of large, medium, small and micro stores and online-to-offline, business-tobusiness and business-to-consumer services. Communicating with Customers and Brand Marketing During the Reporting Period, the Group engaged Kantar Consulting, a firm specialises in customer research, to conduct customer satisfaction review to optimise and improve the Group’s strategy and direction. The Group regularly communicates with customers through a wide range of online and offline communication channels to broaden customer reach and uses various popular marketing channels, including social media within neighborhood groups, live webcasts, public news releases, APP push notifications and other multi-channel interactions, to deliver a young and energetic brand image. The Group’s customer base is diversified and, excluding wholesale sales to the subsidiaries of Whole Sino Limited (“WSL”), a related party, there is no customer with whom transactions have exceeded 1% of the Group’s revenue. In 2018, merchandise sold to the retail stores owned and operated by WSL subsidiaries amounted to approximately RMB836.2 million or 8.3% of Group sales (2017: approximately RMB653.6 million or 6.8%). Prospects: In 2019, China's economy is expected to remain at a stable growth level. The relatively relaxed monetary policy in 2018 is expected to continue to stimulate consumption in the following years. With further development in consumer stratification, consumption is expected to increase and provide steady contribution to the economy overall in China. In the retail industry, 2019 is expected to be a year full of new developments and challenges. With wider application of AI technology, the retail market will need to explore new business models to keep up with the development and this leads to increased uncertainties. However, in the last two years, the Group’s restructuring has laid a solid foundation for future development which enable us to remain confident to meet future challenges and to capture market opportunities. In 2019, the Group's business will be more comprehensive as the Group target new opening in each and every sectors. The Group also expects to launch new stores specifically branded for food, and explore new opportunity to open specialty areas within a store. In terms of products, the Group will continue to utilise its available resources to focus on core product categories and build a differentiated and high-quality product mix around younger customers. With this strategy, the Group aims to use AI technology to digitize, automate and streamline work processes, thereby increasing operating efficiency. The Group also aims to enhance supply chain logistics distribution capabilities to support multi-sector growth and development. At the same time, the Group will continue to focus on sustainable and healthy development of the Group while maintaining the core corporate value of the Group – to benefit the country, the people and the group. The Group believe that the Group’s business model and business philosophy will facilitate long-term sustainable development. Under the continuous improvement of organisational structure and talent cultivation, together with a strong capital management practice, the Group has a solid foundation in terms of human capital, finance and facilities, and accordingly the Group are confident in the Group’s performance in 2019.

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