Minor International Public Company Limited (MINT) announced its fourth quarter financial results for the year 2020 having a net losses of Baht 5.6 billion in 4Q20, stable compared to 3Q20 amidst the ongoing impact of the second wave COVID-19 pandemic globally.
On a like-for-like basis (core and before the effect of TFRS 16 accounting impact), MINT’s net loss was Baht 4.7 billion in 4Q20, compared to a net loss of Baht 4.4 billion in 3Q20, as many regions around the globe, particularly Europe and South America, continued to be impacted by the second wave of the pandemic with lockdowns and restrictions imposed.
For the full-year 2020, MINT reported a core pre-TFRS 16 loss of Baht 18.8 billion, with the second quarter being the hardest-hit quarter as countries across the globe announced lockdowns and travel effectively came to a standstill. Although the short-term outlook remains uncertain with the virus impacting each major geography differently, the longer-term outlook is becoming increasingly promising with positive news on the effectiveness and the rollout of vaccines, as well as the business on the books showing a positive trend.
In the meantime, MINT continues its strategy on balance sheet management, cost control, rationalization of capital expenditure, and will remain disciplined and agile through this volatile period and as the global economic recovery gains speed.
Mr. Dillip Rajakarier, Group CEO of Minor International commented, “MINT has proved its resilience. We have implemented proactive smart planning with the second wave outbreak in Europe and South America in the fourth quarter, and we continued to adapt and pivot quickly to the highly volatile environment. Despite these challenges, we continue to see areas of positive news within our business portfolio. For example, Minor Food’s performance continued to improve and following its return to profitability at pre-COVID levels in the third quarter, Minor Food’s core net profit in 4Q20 doubled that of 4Q19 boosted by the strong performance of its China hub and strict cost control measures. For Minor Hotels, the Maldives and Australia have been the key highlights. Both geographies saw strong traction on a monthly basis during the fourth quarter, with December 2020 RevPar coming very close to December 2019 levels. The gradual recovery of Anantara Vacation Club and residential sales resulted in profitable real estate business at the net profit level in 4Q20.”
Minor Food reported net profit of Baht 540 million in 4Q20, which was more than double from net profit of Baht 258 million in 4Q19. The positive momentum continues on the same-store-sales growth of the China hub since third quarter into the fourth quarter, with 3.4% same-store-sales growth in 4Q20 compared to 3.0% in 3Q20, driven by strong recovery of domestic consumption together with the hub’s continued strategic focus on improved food concepts.
Furthermore, the Australia hub’s same-store-sales improved month-on-month, with same-store-sales returning to pre-COVID levels in December 2020. Although Thailand experienced political protests and a new wave of COVID-19, Minor Food’s delivery business, both on its own 1112 Delivery platform as well as through third-party aggregators, together with The Pizza Company’s successful promotional campaigns and the rapid build-out of the Bonchon store network, helped support the Thailand hub’s sales. With effective cost savings across brands, together with the scale achieved for Bonchon brand, Thailand hub’s profitability improved significantly and more than doubled in 4Q20 compared to 4Q19.
Minor Hotels has guided its business through the volatile fourth quarter, which was particularly challenging due to the reemergence of the second wave of COVID-19 which hit Europe particularly hard. Nevertheless, Minor Hotels saw growth in other geographies. The Maldives has experienced the quickest recovery, where within three months of the hotels’ reopening in October, RevPar in December 2020 was only 5% below the December 2019 high-season level.
In addition to the Maldives being one of the few countries where quarantine is not required, Minor Hotels has also invested its efforts in promoting and launching campaigns in the key markets to drive room nights to its hotels in the Maldives. In Australia, domestic marketing campaigns resulted in an increase in room nights since the reopening of interstate borders. As a result, with the Australian serviced-apartment and hotel business being driven by domestic demand, RevPar of Minor Hotels’ Australia portfolio improved to reach the pre-COVID levels in December 2020. Although Minor Hotels’ European portfolio has experienced business slowdown and restrictions because of the second wave which resulted in lockdowns in many cities, NH Hotel Group has been effectively capturing the business using its strong distribution platform.
Moreover, the sales activities of the real estate business have helped support Minor Hotels’ overall performance. The real estate sales together with the improvement of Anantara Vacation Club’s performance have resulted in the return of the mixed-use business to profitability at the net profit level during the quarter. Notwithstanding tight cost controls, with the overall revenue decrease, Minor Hotels reported core losses pre-TFRS 16 of Baht 5.1 billion in 4Q20, compared to core losses of Baht 4.4 billion in 3Q20.
Throughout the fourth quarter of 2020, MINT continued to focus on controlling costs, minimizing cash outflows and preserving liquidity. With the onset of the second wave of the virus, monthly cash outflow increased slightly from Baht 1.5 billion on average in 3Q20 to Baht 1.6 billion in 4Q20. Nevertheless, with cash on hand of Baht 25 billion combined with unutilized credit facilities of Baht 28 billion as at end of January 2021, MINT has sufficient reserves to sustain its operations going forward for over two years. Business recovery will further add to this cash position.
MINT continues to proactively manage its balance sheet. In early February, MINT secured the approval from its bondholders to extend the financial covenant testing waiver for another two years until the end of 2022.
In addition, MINT’s bondholders approved the change in definition of its covenant to exclude the COVID-19 impairment impact to its equity in the debt-to-equity ratio calculation until the end of 2024. The move demonstrated bondholders’ strong support and confidence in the company.
Furthermore, the Board of Directors has also approved the issuance of warrants to existing shareholders, with maturities in 2023 (MINT-W8 Warrants) and 2024 (MINT-W9 Warrants). The conversion of the warrants will strengthen MINT’s equity base of an additional Baht 10 billion over the next two to three years, at a dilution of only 6.2%.
Such measures will allow MINT the flexibility to effectively deploy other balance sheet management measures, which includes the ongoing asset rotation transactions which are well underway with an expected timeline for completion in the second and third quarters of 2021.
Two months into 2021, MINT’s expectation is that the first half of the year will continue to be challenging, until the vaccine is widely distributed. As borders start to reopen slowly and tourism starts to recover, MINT is well-positioned to capitalize on the opportunity.
For Minor Hotels, Europe is expected to see a quick recovery, supported by the regional intra-European travel which makes up the majority of its business.
Minor Food will continue to aggressively target and expand the fast-growing delivery market, while refreshing its dine-in business offering as social distancing restrictions are relaxed. In the short term, the strong momentum of real estate sales is expected to support MINT’s overall revenue and cash flow in the upcoming financial quarters as the demand is robust.
At the same time, MINT will continue to focus on minimizing cash outflow through cost control and CAPEX reduction, while remaining disciplined and strategic in its balance sheet management.
Mr. Rajakarier added, “I believe that the worst is now behind us. During a difficult 2020, we have taken the opportunity to rationalize our cost structure to become a leaner, more efficient company while ensuring that we continue to improve the quality of our products and services to better serve our customer expectations. In addition, we have taken proactive measures to strengthen our balance sheet and create flexibility during these uncertain times. We are well-positioned for business activity to resume so that we can leverage on our high-quality brands and assets, to generate revenues and drive profits and returns for all of our stakeholders in the long term.”