Chairman's Message
Extract from Annual Report 2016
Dear Fellow Stakeholders:

Throughout 2016, Minor International remained committed to the execution of our five-year strategic plan in order to build the foundation to grow our sustainable earnings, while at the same time contributing to the economy, society and environment of Thailand and the many other countries in which we operate. Amidst challenges in many of our key markets throughout the year, including the softness of the hospitality industry in the Maldives, the weak macro environment and high competition within the restaurant segment in Singapore and the mourning period and the floods in the South of Thailand, Minor International reported net profit of Baht 6,590 million in 2016, a decline of 6% from the prior year. However, core profit declined by a lower magnitude of a mere 3% from the prior year.

It is with the deepest sadness of all Thais, including the Board of Directors, management and employees of Minor International, that we endure the passing of His Majesty the Late King Bhumibol Adulyadej in October of 2016. His Majesty was the greatest source of strength and inspiration to all Thais and to countless others around the world. One of His Majesty’s enduring aspirations is the sustainable development of Thailand and the Thai people. Minor International is proud to take part in this. We are committed to delivering sustainable earnings for our shareholders, and at the same time to support and grow alongside our stakeholders, be they business partners, employees, suppliers, customers or communities.

At Minor International, delivering sustainable earnings means not only driving revenues and net profit in the long-term, but also disciplined investment and deployment of capital. Our five-year strategic plan calls for over 15 - 20% compounded annual growth rate (CAGR) of net profit over the next five years and return on invested capital (ROIC) of over 14% by 2021. In order to achieve such targets, we are building the foundation through our three strategic pillars: (1) drive a portfolio of owned brands, with additional contribution from selected international brands, (2) maximize asset value and productivity and (3) expand through existing and future strategic investments and acquisitions. In addition to the strategy above, we are developing the capability to support such rapid growth through three strategic enablers: (1) build our organizational capabilities, (2) maximize operational excellence and synergy and (3) link our business practice to sustainability.

I would like to take this opportunity to summarize the key progress in 2016 that has contributed to building the foundation to grow our long-term sustainable earnings.

We continued to drive our portfolio of owned brands, which in 2016, contributed 71% of total-system-sales. During the year, Minor Hotels expanded the strength of its brand portfolio with additions of several new hotels. We added four new Anantara hotels, bringing the total number of Anantara properties to 38 in 12 countries by the end of 2016. The Anantara brand was introduced in two countries: Sri Lanka, with the opening of Anantara Peace Haven Tangalle Resort and Anantara Kalutara Resort, and also Oman, with the launch of Anantara Al Jabal Al Akhdar Resort and Al Baleed Resort Salalah by Anantara. Furthermore, we continued to strengthen our five-year-old AVANI brand with the launch of our first purpose-built flagship AVANI Riverside Bangkok Hotel, the rebrand of Minor International’s very first property from Pattaya Marriott Resort & Spa to AVANI Pattaya Resort & Spa, and the management of AVANI Khon Kaen Hotel & Convention Centre in Thailand and AVANI Deira Dubai Hotel in the United Arab Emirates. Today’s portfolio of 17 AVANI hotels in 11 countries will serve as a platform for the brand to leap forward in the coming years. Oaks Hotels & Resorts also continued to expand its portfolio in Australia with the addition of two properties in 2016, resulting in a total of 55 properties in the portfolio by year-end.

Minor Food expanded its network, which included both its own brands and international brands by growing the number of outlets to 1,996 by the end of 2016, an increase of 8% from the prior year. Today, Minor Food is present in 19 countries. The Pizza Company saw significant success with its innovative product launches, including the new product line, crispy thin pizza, and the new dine-in menus, which boosted sales of all categories including appetizers, pastas, main dishes and drinks. Burger King’s strategy to expand its target market to domestic customers in addition to tourists also proved an accomplishment. As a result, both brands reported total-system-sales growth of over 20% in 2016. In China, Riverside led the turnaround with positive same-store-sales growth throughout the year. In addition, 2016 was the first year that we consolidated the performance of our Australia hub, after the increase in shareholding from 50% to 70%.

As part of our initiatives to maximize asset value and productivity, we ensured the continuity of the revenue stream from our real estate business. In 2016, we sold three luxury villas of The Residences by Anantara, Layan, Phuket, bringing the total number of villas sold to six at year-end. In addition, the construction of Anantara Chiang Mai Serviced Suites, our 50% joint-venture project, was completed and 23 units have been sold and transferred by year-end. We also sold one penthouse unit of the Torres Rani Project, another 49% joint-venture property in Maputo, Mozambique. For Anantara Vacation Club, our point-based timeshare business, we increased the total inventory to 160 units by the end of 2016, and added Chiang Mai as the seventh club resort destination. We believe these destination resorts are the foundation for future expansion of the Anantara Vacation Club in the years to come.

We expanded through strategic investments and acquisitions, while ensuring that the returns met our investment hurdle rates. The year 2016 was a landmark year for Minor International on account of the acquisition of Tivoli Hotels & Resorts, which comprised twelve properties in Portugal and two in Brazil. The acquisition strengthened our position as a global company – with an entrance into both Europe and South America. Tivoli’s solid brand name and its operating platform will provide us with the opportunity to expand further not only in the two continents, but also in Minor Hotels’ existing geographic strongholds. Furthermore, Minor Hotels announced plans to increase its shareholding in eight hotels in Africa through the acquisition of the remaining stake from Sun International Limited. Of the eight, the most notable transaction, which was completed in July of this year, was the increase in shareholding in two iconic hotels in Zambia, The Royal Livingstone Victoria Falls Zambia Hotel by Anantara and AVANI Victoria Falls Resort, from 50% to 100%.

Minor Lifestyle selectively invested in a number of new brands as a means to strengthen its portfolio profile as well as its revenue base. In 2016, we launched a total of four brands, including Brooks Brothers, the American fashion apparel brand; Etam, lingerie from France; Radley’s, British leather accessories; and Anello, the Japanese back pack and bags brand. The portfolio of existing and new brands will serve as the growth platform of Minor Lifestyle going forward.

As integrated parts of the five-year plan, the strategic enablers ensure that we have the infrastructure to accommodate our rapid growth. We are building our organizational capability through our human capital management strategy. Being in the service industry, we recognize that people are our backbone. Therefore, we focus on recruiting, developing and retaining the workforce of the future while also instilling our drive culture. We aim to attract the best people worldwide, while offering job opportunities globally. Various training programs are in place with the aspiration to develop competencies of employees at all levels, from mobile learning courses to Business Leader Development Programs for senior executives. Internally, talented individuals were identified for retention and promotion, and career development plans have been put in place for employees at all levels to continuously strengthen human capital and support our team members’ growth.

In order to maximize operational excellence and synergy, we connect the strategies and initiatives across core functions, from front-line customer interface to back-of-house support functions. Many initiatives take place on this front. Case in point: the launch of The Pizza Company mobile application, which was a product and service optimization initiative to help improve the efficiency of the pizza delivery ordering process. We have implemented various information analytics programs with the aim to improve productivity of various functions including revenue management and sales forecast capabilities, inventory management and centralized budgeting and forecasting.

In order to achieve sustainable earnings growth in the long term, it is essential for Minor International to link our business practice to sustainability. We are developing future leaders to ensure our success in delivering quality people to drive business performance and simultaneously improve the economic, social and environmental conditions of our stakeholders, including our employees, customers, business partners and communities. We continue to foster a mindset of social responsibility and improve our good corporate governance practices. Details of our strategy and progress on sustainability can be found in our 2016 Sustainability Report.

Heading into 2017, Thailand is already seeing signs of recovery from the mourning period, both on the domestic consumption front as well as in international tourism trends. Much to the delight of the Thais, the ascension of His Majesty King Maha Vajiralongkorn Bodindradebayavarangkun to the throne since December 2016 has provided continuity of the Late King’s leadership and legacy. However, globally, we will undoubtedly encounter many more headwinds in 2017. Just to name a few, new US government policy, Brexit and various European referenda, will contribute to higher uncertainties and volatilities of the global economy. Nevertheless, we are confident that we will continue to deliver sustainable earnings to our shareholders. Our disciplined execution is driven by a framework that translates our vision and strategy into a coherent and clear set of key performance indicators, which are cascaded down from the highest management levels all the way to individual employees, in order to ensure successful execution.

On behalf of the Board of Directors, I would like to take the opportunity to thank our stakeholders, including shareholders, customers and business partners for their continued support and confidence in Minor International. Last but not least, on behalf of the Board of Directors, I would like to express my sincerest appreciation of our management and staff, who are the driving force behind our success.

William Ellwood Heinecke
Chairman and Chief Executive Officer
March 2017