MK Restaurant Group Public Company Limited and its ...m.listedcompany.com/misc/FS/20160811-m-fs-2q2016-en.pdfMK Restaurant Group Public Company Limited and its subsidiaries Statements

MK Restaurant Group Public Company Limited

and its subsidiaries

Review report and interim financial statements

For the three-month and six-month periods ended 30 June 2016

Independent Auditor’s Report on Review of Interim Financial Information

To the Shareholders of MK Restaurant Group Public Company Limited

I have reviewed the accompanying consolidated statement of financial position of MK Restaurant

Group Public Company Limited and its subsidiaries as at 30 June 2016, the related consolidated

statements of income and comprehensive income for the three-month and six-month periods then

ended, the related consolidated statements of changes in shareholders’ equity and cash flows for

the six-month period then ended, as well as the condensed notes to the consolidated financial

statements. I have also reviewed the separate financial information of MK Restaurant Group

Public Company Limited for the same periods. Management is responsible for the preparation

and presentation of this interim financial information in accordance with Thai Accounting

Standard 34 Interim Financial Reporting. My responsibility is to express a conclusion on this

interim financial information based on my review.

Scope of review

I conducted my review in accordance with Thai Standard on Review Engagements 2410, Review

of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of

interim financial information consists of making inquiries, primarily of persons responsible for

financial and accounting matters, and applying analytical and other review procedures. A review

is substantially less in scope than an audit conducted in accordance with Thai Standards on

Auditing and consequently does not enable me to obtain assurance that I would become aware of

all significant matters that might be identified in an audit. Accordingly, I do not express an audit

opinion.

Conclusion

Based on my review, nothing has come to my attention that causes me to believe that the

accompanying interim financial information is not prepared, in all material respects, in accordance

with Thai Accounting Standard 34 Interim Financial Reporting.

Kamontip Lertwitworatep

Certified Public Accountant (Thailand) No. 4377

EY Office Limited

Bangkok: 11 August 2016

MK Restaurant Group Public Company Limited and its subsidiaries

Statements of financial position

As at 30 June 2016

(Unit: Thousand Baht)

30 June 31 December 30 June 31 December

Note 2016 2015 2016 2015

(Unaudited (Audited) (Unaudited (Audited)

but reviewed) but reviewed)

Assets

Current assets

Cash and cash equivalents 3 142,734 287,234 104,735 230,610

Short-term investments 4 8,874,766 8,590,995 8,642,086 8,210,908

Trade and other receivables 2, 5 104,510 108,414 212,339 215,437

Inventories 231,170 282,133 219,116 268,852

Other current assets 364,481 339,373 288,410 282,685

Total current assets 9,717,661 9,608,149 9,466,686 9,208,492

Non-current assets

Advances for purchases of building and equipment 14,659 20,884 14,659 11,824

Investments in subsidiaries 6 - - 451,480 451,480

Investment in joint venture 7 111,874 118,318 149,207 149,207

Other long-term investment 8 - - - -

Property, plant and equipment 9 4,356,802 4,494,044 3,650,257 3,852,688

Intangible assets 10 99,734 97,762 94,250 94,864

Leasehold rights 11 263,825 283,352 244,158 262,689

Deferred tax assets 153,978 142,362 142,236 131,662

Deposits 361,113 357,429 283,396 283,910

Total non-current assets 5,361,985 5,514,151 5,029,643 5,238,324

Total assets 15,079,646 15,122,300 14,496,329 14,446,816

The accompanying notes are an integral part of the financial statements.

Director Director

Rit Thirakomen

Separate financial statementsConsolidated financial statements

Somchai Hanjitkasem


Statements of financial position (continued)

As at 30 June 2016



Note 2016 2015 2016 2015



Liabilities and shareholders' equity

Current liabilities

Trade and other payables 2, 12 1,088,416 1,390,727 943,482 1,238,619

Income tax payable 254,985 200,454 230,890 178,076

Current portion of deferred income of

membership fee 40,067 41,778 33,586 33,384

Other current liabilities 194,236 202,205 164,505 173,475

Total current liabilities 1,577,704 1,835,164 1,372,463 1,623,554

Non-current liabilities

Deferred income of membership fee -

net of current portion 10,206 10,103 10,206 10,103

Provision for long-term employee benefits 13 284,403 269,736 264,202 253,232

Other non-current liabilities 10,664 9,406 12,294 9,406

Total non-current liabilities 305,273 289,245 286,702 272,741

Total liabilities 1,882,977 2,124,409 1,659,165 1,896,295


Director Director

Rit Thirakomen Somchai Hanjitkasem

Consolidated financial statements Separate financial statements


Statements of financial position (continued)

As at 30 June 2016



Note 2016 2015 2016 2015



Shareholders' equity

Share capital

Registered

925,850,000 ordinary shares of Baht 1 each 925,850 925,850 925,850 925,850

Issued and fully paid

910,249,500 ordinary shares of Baht 1 each 910,250 910,250 910,250 910,250

Share premium 8,785,028 8,785,028 8,785,028 8,785,028

Capital reserve for share-based payment

transactions 14 581,789 526,725 581,789 526,725

Retained earnings

Appropriated - statutory reserve 92,585 92,585 92,585 92,585

Unappropriated 2,817,072 2,675,814 2,467,512 2,235,933

Other component of shareholders' equity 9,945 7,489 - -

Total shareholders' equity 13,196,669 12,997,891 12,837,164 12,550,521

Total liabilities and shareholders' equity 15,079,646 15,122,300 14,496,329 14,446,816


Director Director


Consolidated financial statements Separate financial statements

(Unaudited but reviewed)


Income statements

For the three-month period ended 30 June 2016

(Unit: Thousand Baht except earnings per share expressed in Baht)

Separate

financial statements

Note 2016 2015 2016 2015

Revenues

Sales and service income 4,038,286 3,748,513 3,577,907 3,337,239

Interest income 27,945 55,747 27,654 55,521

Dividend income - - 188,000 191,500

Other income 69,153 57,532 93,998 74,818

Total revenues 4,135,384 3,861,792 3,887,559 3,659,078

Expenses

Cost of sales and services 1,325,684 1,277,282 1,339,083 1,289,157

Selling expenses 1,805,492 1,692,185 1,470,756 1,401,651

Administrative expenses 243,940 249,822 207,330 216,322

Total expenses 3,375,116 3,219,289 3,017,169 2,907,130

Profit before share of loss from investment in

joint venture and income tax expenses 760,268 642,503 870,390 751,948

Share of loss from investment in joint venture (3,607) (1,323) - -

Profit before income tax expenses 756,661 641,180 870,390 751,948

Income tax expenses 15 (143,428) (125,311) (128,357) (109,477)

Profit for the period 613,233 515,869 742,033 642,471

Profit attributable to:

Equity holders of the Company 613,233 515,869 742,033 642,471

Earnings per share 16

Basic earnings per share

Profit attributable to equity holders of

the Company 0.67 0.57 0.82 0.71

Diluted earnings per share


the Company 0.67 0.56 0.81 0.70


Director Director

Rit Thirakomen

Consolidated


Somchai Hanjitkasem



Statements of comprehensive income

For the three-month period ended 30 June 2016


Separate


2016 2015 2016 2015

Profit for the period 613,233 515,869 742,033 642,471

Other conprehensive income:

Other comprehensive income to be reclassified to

profit or loss in subsequent periods

Exchange differences on translation of

financial statements in foreign currency 89 6,848 - -

Other comprehensive income for the period 89 6,848 - -

Total comprehensive income for the period 613,322 522,717 742,033 642,471

Total comprehensive income attributable to:

Equity holders of the Company 613,322 522,717 742,033 642,471


Director Director


Consolidated




Income statements

For the six-month period ended 30 June 2016

(Unit: Thousand Baht except earnings per share expressed in Baht)

Separate


Note 2016 2015 2016 2015

Revenues

Sales and service income 7,627,845 7,333,060 6,782,869 6,542,043

Interest income 55,775 114,406 55,245 113,532

Dividend income - 199 188,000 191,699

Other income 136,982 115,610 178,719 140,267

Total revenues 7,820,602 7,563,275 7,204,833 6,987,541

Expenses

Cost of sales and services 2,500,615 2,495,309 2,548,403 2,517,010

Selling expenses 3,522,886 3,322,598 2,876,651 2,747,280

Administrative expenses 489,561 499,181 415,247 437,744

Total expenses 6,513,062 6,317,088 5,840,301 5,702,034

Profit before share of loss from investment in

joint venture and income tax expenses 1,307,540 1,246,187 1,364,532 1,285,507

Share of loss from investment in joint venture 7 (8,900) (9,194) - -

Profit before income tax expenses 1,298,640 1,236,993 1,364,532 1,285,507

Income tax expenses 15 (247,135) (241,321) (222,706) (211,991)

Profit for the period 1,051,505 995,672 1,141,826 1,073,516

Profit attributable to:

Equity holders of the Company 1,051,505 995,672 1,141,826 1,073,516

Earnings per share 16



the Company 1.16 1.10 1.25 1.18



the Company 1.14 1.08 1.24 1.17


Director Director

Rit Thirakomen

Consolidated


Somchai Hanjitkasem



Statements of comprehensive income



Separate


2016 2015 2016 2015

Profit for the period 1,051,505 995,672 1,141,826 1,073,516

Other comprehensive income:

Other comprehensive income to be reclassified to

profit or loss in subsequent periods

Exchange differences on translation of

financial statements in foreign currency 2,456 526 - -

Other comprehensive income for the period 2,456 526 - -

Total comprehensive income for the period 1,053,961 996,198 1,141,826 1,073,516

Total comprehensive income attributable to:

Equity holders of the Company 1,053,961 996,198 1,141,826 1,073,516


Director Director

Rit Thirakomen

Consolidated


Somchai Hanjitkasem



Statements of cash flows



Separate


2016 2015 2016 2015

Cash flows from operating activities

Profit before tax 1,298,640 1,236,993 1,364,532 1,285,507

Adjustments to reconcile profit before tax to net cash

provided by (paid from) operating activities:

Gain on sales of short-term investments (23,323) (12,788) (20,445) (10,355)

Gain on revaluation of short-term investments (12,015) (645) (12,400) (536)

Share of loss from investment in joint venture 8,900 9,194 - -

Loss from damaged inventories 427 1,293 427 1,293

Amortisation of prepaid expenses 9,914 11,580 8,573 10,564

Depreciation and amortisation 428,558 400,045 353,933 331,134

Allowance for impairment of property, plant and equipment - 702 - 702

Loss (gain) on disposals of equipment (204) 4,376 (605) (568)

Loss on write-off of equipment 4,234 9 4,206 9

Expenses for share-based payment transactions 55,064 83,407 53,578 80,014

Provision for long-term employee benefits 19,646 17,145 15,609 15,425

Realisation of gift voucher, net of sales

and cash received during the period (13,532) (20,682) (12,921) (19,999)

Realisation of deferred income, net of sales

and cash received during the period (24,968) (30,257) (19,168) (19,721)

Dividend income - (199) (188,000) (191,699)

Interest income (55,775) (114,406) (55,244) (113,532)

Profit from operating activities before changes in

operating assets and liabilities 1,695,566 1,585,767 1,492,075 1,368,238


Director Director

Rit Thirakomen

Consolidated


Somchai Hanjitkasem



Statements of cash flows (continued)



Separate


2016 2015 2016 2015

Cash flows from operating activities (continued)

Operating assets (increase) decrease

Trade and other receivables 18,983 9,905 19,646 12,954

Inventories 50,536 57,833 49,309 57,914

Other current assets (39,954) 220,321 (19,787) 195,257

Deposits (3,684) (14,527) 514 (9,940)

Operating liabilities increase (decrease)

Trade and other payables (245,549) (253,996) (239,448) (245,176)

Other current liabilities 5,563 3,700 3,951 1,542

Deferred income 23,360 30,442 19,473 26,894

Provision for long-term employee benefits (4,979) (893) (4,639) (893)

Other non-current liabilities 1,258 7,102 2,888 7,102

Cash from operating activities 1,501,100 1,645,654 1,323,982 1,413,892

Cash received from interest income 40,696 20,637 40,182 19,762

Cash paid for income tax (204,220) (295,127) (180,466) (262,720)

Net cash from operating activities 1,337,576 1,371,164 1,183,698 1,170,934


Director Director

Rit Thirakomen

Consolidated


Somchai Hanjitkasem



Statements of cash flows (continued)



Separate


2016 2015 2016 2015

Cash flows from investing activities

Decrease (increase) in short-term investments (248,433) 53,000 (398,333) (7,700)

Decrease (increase) in advances for purchases of

building and equipment 6,225 3,694 (2,835) 3,694

Cash paid for purchases of plant and equipment (322,952) (341,155) (192,676) (296,959)

Cash paid for purchases of computer software (9,575) (47,465) (6,643) (46,811)

Proceeds from disposals of equipment 2,906 1,867 13,161 5,959

Dividend income - 199 188,000 191,699

Net cash used in investing activities (571,829) (329,860) (399,326) (150,118)

Cash flows from financing activities

Dividend paid (910,247) (907,082) (910,247) (907,082)

Cash received from exercised warrants - 4 - 4

Net cash used in financing activities (910,247) (907,078) (910,247) (907,078)

Net increase (decrease) in cash and cash equivalents (144,500) 134,226 (125,875) 113,738

Cash and cash equivalents at beginning of period 287,234 298,554 230,610 222,235

Cash and cash equivalents at end of period 142,734 432,780 104,735 335,973

Supplement disclosure of cash flows information

Non-cash transactions

Decrease in accounts payable for purchases

of plant and equipment (51,830) (58,185) (50,200) (55,638)


Director Director

Rit Thirakomen

Consolidated


Somchai Hanjitkasem



Statements of changes in shareholders' equity



Other component

of equity

Other

Capital reserve comprehensive

Issued and of share-based Appropriated - income

paid-up Share payment statutory Translation

Note share capital premium transactions reserve Unappropriated adjustment Total

Balance as at 1 January 2015 907,081 8,785,028 325,699 92,585 2,563,655 6,653 12,680,701

Ordinary shares issued from exercised warrants 4 - - - - - 4

Recognition of expenses against capital reserve for

share-based payment transactions 14 - - 83,407 - - - 83,407

Total comprehensive income for the period - - - - 995,672 526 996,198

Dividend paid 17 - - - - (907,082) - (907,082)

Balance as at 30 June 2015 907,085 8,785,028 409,106 92,585 2,652,245 7,179 12,853,228

Balance as at 1 January 2016 910,250 8,785,028 526,725 92,585 2,675,814 7,489 12,997,891


share-based payment transactions 14 - - 55,064 - - - 55,064

Total comprehensive income for the period - - - - 1,051,505 2,456 1,053,961

Dividend paid 17 - - - - (910,247) - (910,247)

Balance as at 30 June 2016 910,250 8,785,028 581,789 92,585 2,817,072 9,945 13,196,669


Director Director

Rit Thirakomen

Consolidated financial statements

Somchai Hanjitkasem

Retained earnings



Statements of changes in shareholders' equity (continued)



Capital reserve

Issued and of share-based Appropriated -

paid-up payment statutory

Note share capital Share premium transactions reserve Unappropriated Total

Balance as at 1 January 2015 907,081 8,785,028 325,699 92,585 2,125,262 12,235,655

Ordinary shares issued from exercised warrants 4 - - - - 4


share-based payment transactions 14 - - 83,407 - - 83,407

Total comprehensive income for the period - - - - 1,073,516 1,073,516

Dividend paid 17 - - - - (907,082) (907,082)

Balance as at 30 June 2015 907,085 8,785,028 409,106 92,585 2,291,696 12,485,500

Balance as at 1 January 2016 910,250 8,785,028 526,725 92,585 2,235,933 12,550,521


share-based payment transactions 14 - - 55,064 - - 55,064

Total comprehensive income for the period - - - - 1,141,826 1,141,826

Dividend paid 17 - - - - (910,247) (910,247)

Balance as at 30 June 2016 910,250 8,785,028 581,789 92,585 2,467,512 12,837,164


Director Director


Retained earnings

Separate financial statements


1 ……………………....………Director

Rit Thirakomen ……………………....………Director

Somchai Hanjitkasem


Notes to consolidated interim financial statements

For the three-month and six-month periods ended 30 June 2016

1. General information

1.1 Corporate information

MK Restaurant Group Public Company Limited (“the Company”) was incorporated as a

limited company and subsequently transformed to be a public limited company under Thai

law, and domiciled in Thailand. The Company is principally engaged in sales of foods and

beverages through restaurants, under the trademark “MK Restaurants”. The registered office

address of the Company is at 1200 Bangna-trad Road, Bangna, Bangkok.

As at 30 June 2016, the Company had operated 452 branches (31 December 2015: 452

branches).

1.2 Basis of preparation of interim financial statements

These interim financial statements are prepared in accordance with Thai Accounting

Standard No. 34 (revised 2015) Interim Financial Reporting, with the Company choosing to

present condensed interim financial statements. However, the Company has presented the

statements of financial position, income, comprehensive income, changes in shareholders'

equity, and cash flows in the same format as that used for the annual financial statements.

The interim financial statements are intended to provide information additional to that

included in the latest annual financial statements. Accordingly, they focus on new activities,

events and circumstances so as not to duplicate information previously reported. These

interim financial statements should therefore be read in conjunction with the latest annual

financial statements.

The interim financial statements in Thai language are the official statutory financial

statements of the Company. The interim financial statements in English language have

been translated from the Thai language financial statements.

1.3 Basis of consolidation

These consolidated financial statements include the financial statements of MK Restaurant

Group Public Company Limited (herein after called “the Company”) and its subsidiaries

which were incorporated in Thailand (herein after called “the subsidiaries”) and have been

prepared on the same basis as that applied for the consolidated financial statements for

the year ended 31 December 2015 with no structural changes related to subsidiaries during

the current period.


2 ……………………....………Director


Somchai Hanjitkasem

1.4 New financial reporting standards

During the period, the Company has adopted the revised and new financial reporting

standards and accounting treatment guidance issued by the Federation of Accounting

Professions which become effective for fiscal years beginning on or after 1 January 2016.

These financial reporting standards were aimed at alignment with the corresponding

International Financial Reporting Standards, with most of the changes directed towards

revision of wording and terminology, and provision of interpretations and accounting

guidance to users of standards. The adoption of these financial reporting standards does

not have any significant impact on the Company’s financial statements.

1.5 Significant accounting policies

The interim financial statements are prepared using the same accounting policies and

methods of computation as were used for the financial statements for the year ended 31

December 2015.

2. Related party transactions

During the periods, the Company and its subsidiaries had significant business transactions

with related parties. Such transactions, which are summarised below, arose in the ordinary

course of business and were concluded on commercial terms and bases agreed upon

between the Company, its subsidiaries and those related parties.

(Unit: Million Baht)

For the three-month periods ended 30 June

Consolidated


Separate

financial statements Transfer pricing policy

2016 2015 2016 2015

Transactions with subsidiaries

(Eliminated from the consolidated

financial statements)

Sales of goods - - 257 206 Cost plus margin at the rate of 8% and 10%

Sublease and subservice income - - 7 6 At the rate stipulated in the agreements

Management service income - - 24 14 At the rate of Baht 7.6 million per month and

Baht 0.5 million per month (2015: At the rate

of 4% of sales and service income (after

output VAT deduction) with a maximum of

Baht 4 million per month and at the rate of

Baht 0.5 million per month)

Dividend income - - 188 191 At the declared rate

Sales of fixed assets - - 2 2 Net book value plus margin

Rental income - - 1 - At the rate stipulated in the agreements

Training expenses - - 22 20 Market price

Transactions with related companies

Royalty fee income 2 1 2 1 At the rate of 0.5% of gross sales per month

Royalty fee expenses 13 12 - - At the rate of 2% of net sales per month

Rental expenses from operating

equipment

10 10 7 7 Market price

Rental expenses for land and

construction

7 7 7 7 At the rate stipulated in the agreement


3 ……………………....………Director


Somchai Hanjitkasem


For the six-month periods ended 30 June

Consolidated


Separate

financial statements Transfer pricing policy

2016 2015 2016 2015

Transactions with subsidiaries

(Eliminated from the consolidated

financial statements)

Sales of goods - - 489 403 Cost plus margin at the rate of 8% and 10%

Sublease and subservice income - - 14 11 At the rate stipulated in the agreements

Management service income - - 41 27 At the rate of Baht 7.6 million per month and

Baht 0.5 million per month (2015: At the

rate of 4% of sales and service income

(after output VAT deduction) with a

maximum of Baht 4 million per month and

at the rate of Baht 0.5 million per month)

Dividend income - - 188 191 At the declared rate

Sales of fixed assets - - 10 4 Net book value plus margin

Rental income - - 1 - At the rate stipulated in the agreements

Training expenses - - 45 46 Market price

Transactions with related companies

Royalty fee income 3 2 3 2 At the rate of 0.5% of gross sales per month

Royalty fee expenses 25 24 - - At the rate of 2% of net sales per month

Rental expenses from operating

equipment

21 20 15 14 Market price

Rental expenses for land and

construction

15 15 15 15 At the rate stipulated in the agreement

As at 30 June 2016 and 31 December 2015, the balances of the accounts between the

Company and its subsidiaries and those related parties are as follows:


Consolidated


Separate


30 June

2016

31 December

2015

30 June

2016

31 December

2015

Trade and other receivables -

related parties (Note 5)

Subsidiary - - 112,158 113,273

Related companies (related by

common directors) 577 708 577 708

Total trade and other receivables -

related parties 577 708 112,735 113,981

Other payables - related parties

(Note 12)

Subsidiaries - - 12,355 4,776

Related companies (related by

common directors) 14,470 15,690 4,549 9,914

Total other payables - related parties 14,470 15,690 16,904 14,690


4 ……………………....………Director


Somchai Hanjitkasem

Significant agreements with related parties

Franchise agreement for use of trademark, servicemark and license to operate

On 10 February 1994, the Company entered into a franchise agreement with Plenus-MK

Limited, a related party in Japan, in order to grant the latter the right to use the trademark and

the servicemark of “MK Restaurants” in its operating of the Thai-style Sukiyaki restaurants in

Japan. An initial franchise fee was Yen 25 million which was fully paid to the Company in

2002. A monthly royalty fee is charged at a rate of 0.5% of gross sales. The agreement shall

continue for a term of three years, and thereafter shall be automatically renewed on a three-

year basis until being terminated by either party by giving a written notice 180 days prior to

the expiration of such contract.

Management service agreements

On 17 February 2014, the Company entered into a management service agreement with

MK Interfood Company Limited (“MKI”), whereby the Company agreed to provide

management service to MKI in areas of branch operations, business development,

engineering, procurement, marketing, accounting and finance, human resources and

quality assurance. MKI agreed to pay management fee to the Company at a rate of 4% of

sales and service income (after output VAT deduction) with a maximum of Baht 4 million

per month. The agreement is effective for a period of two years, from 1 March 2014 to 28

February 2016, and shall be automatically extended for another two years until MKI gives a

written notice of termination three months prior to its expiration.

On 29 February 2016, the Company and MKI entered into a new management service

agreement, under which MKI agrees to pay management fee to the Company at a rate of

Baht 7.6 million per month. The agreement is effective for a period of two years, from 1

March 2016 to 28 February 2018, and shall be automatically extended for another two years

until MKI gives a written notice of termination three months prior to its expiration.

On 20 December 2013, the Company entered into a management service agreement with

MK Service Training Center Company Limited (“MKS”), whereby the Company agreed to

provide management service to MKS in areas of procurement, accounting and finance,

human resources and service training. MKS agreed to pay management fee to the

Company at a rate of Baht 500,000 per month. The agreement is effective for a period of

two years, from 1 January 2014 to 31 December 2015, and shall be automatically extended

for another two years until MKS gives a written notice of termination three months prior to

its expiration.


5 ……………………....………Director


Somchai Hanjitkasem

On 29 February 2016, the Company and MKS entered into a new management service

agreement, under which MKS agrees to pay management fee to the Company at a rate of

Baht 500,000 per month. The agreement is effective for a period of two years, from

1 January 2016 to 31 December 2017, and shall be automatically extended for another two

years until MKS gives a written notice of termination three months prior to its expiration.

Sublease and subservice agreements

The Company entered into several sublease and subservice agreements, granting nine

leasehold rights to MK Interfood Company Limited (“MKI”). Sublease and subservice fees

are charged according to the terms of the agreements. The agreements are effective for a

period of three years and will be renewed automatically for another three years unless MKI

has breached them.

Building lease agreement

On 1 February 2016, the Company entered into a lease agreement for lease of building to

International Food Supply Co., Ltd. (“IFS”), under which IFS agrees to pay rental to the

Company at a rate of Baht 0.37 million per month. The lease agreement is for a period of 6

years, from 1 May 2016 to 30 April 2022. Subsequently, on 17 May 2016, the Company and

IFS agreed to adjust the rental space and the rental rate to be Baht 0.37 million per month.

Land, building and warehouse lease agreement

On 1 December 2014, the Company entered into a lease agreement for lease of land,

building and warehouse with Global Asset Development Co., Ltd., whereby the latter agrees

to lease land and construction thereon under six title deeds to the Company and the

Company agrees to pay the rental to Global Asset Development Co., Ltd. in a total amount

of Baht 1.69 million per month, from 1 January 2015 to 31 December 2017. In addition, the

Company shall give a written notice to extend the agreement at least 90 days prior to the

expiry date.

Land and distribution center building lease agreement

On 1 March 2013, the Company entered into a lease agreement for lease of land and

distribution center building with Global Asset Development Co., Ltd., whereby the latter

agrees to lease land and distribution center building to the Company and the Company

agrees to pay the rental to Global Asset Development Co., Ltd. at the rate stipulated in the

agreement. The lease agreement is for a period of 20 years, from 1 November 2013 to 31

October 2033. The agreement states that the Company shall begin to pay the monthly rent

from 1 November 2013 onwards. In addition, the Company shall give a written notice to

extend the agreement at least 90 days prior to the expiry date.


6 ……………………....………Director


Somchai Hanjitkasem

On 18 April 2016, the Company entered into additional lease agreement for lease of land

with Global Asset Development Co., Ltd., whereby the latter agrees to lease land to the

Company and the Company agrees to pay the rental to Global Asset Development Co., Ltd.

at the rate stipulated in the agreement. The lease agreement is for a period of 17 years and

6 months, from 1 May 2016 to 31 October 2033. The agreement states that the Company

shall begin to pay the monthly rent from 1 May 2016 onwards. In addition, the Company

shall give a written notice to extend the agreement at least 90 days prior to the expiry date.

Directors and management’s benefits

During the three-month and six-month periods ended 30 June 2016 and 2015, the

Company and its subsidiaries had employee benefit expenses payable to their directors

and management as below.


Consolidated financial statements / Separate financial statements

For the three-month periods

ended 30 June

For the six-month periods

ended 30 June

2016 2015 2016 2015

Short-term employee benefits 29 26 59 50

Post-employment benefits - - 1 1

Share-based payments 5 7 10 13

Total 34 33 70 64

3. Cash and cash equivalents


Consolidated


Separate


30 June

2016

31 December

2015

30 June

2016

31 December

2015

Cash 63,974 156,910 51,720 135,776

Bank deposits in savings accounts 78,760 130,324 53,015 94,834

Total cash and cash equivalents 142,734 287,234 104,735 230,610

As at 30 June 2016, bank deposits in savings accounts carried interests between 0.10 and

0.40 percent per annum (31 December 2015: between 0.05 and 0.40 percent per annum).


7 ……………………....………Director


Somchai Hanjitkasem

4. Short-term investments

4.1 As at 30 June 2016 and 31 December 2015, short-term investments consisted of the

following:


Consolidated


Separate


30 June

2016

31 December

2015

30 June

2016

31 December

2015

Fixed deposits 5,150,000 4,850,000 5,100,000 4,800,000

Investments in trading securities

(Note 4.2) 3,724,766 3,740,995 3,542,086 3,410,908

Total short-term investments 8,874,766 8,590,995 8,642,086 8,210,908

As at 30 June 2016, fixed deposits carried interests between 1.80 and 2.30 percent per

annum (31 December 2015: 1.90 and 2.60 percent per annum).

4.2 Movements in the short-term investments in trading securities during the six-month period

ended 30 June 2016 are summarised below.


Consolidated


Separate


Balance as at 1 January 2016 3,740,995 3,410,908

Cash paid for short-term investments in

trading securities during the period -

at cost 8,560,800 7,487,700

Sales during the period - at cost

Proceeds from sales (8,612,367) (7,389,367)

Gain on sales 23,323 20,445

Total (8,589,044) (7,368,922)

Gain on change in value 12,015 12,400

Balance as at 30 June 2016 3,724,766 3,542,086


8 ……………………....………Director


Somchai Hanjitkasem

5. Trade and other receivables


Consolidated


Separate



2016 2015 2016 2015

Trade accounts receivable - related parties

Aged on the basis of due dates

Not yet due - - 80,824 87,433

Total trade accounts receivable

- related parties - - 80,824 87,433

Trade accounts receivable - unrelated parties

Aged on the basis of due dates

Not yet due 14,958 27,434 14,017 23,855

Total trade accounts receivable

- unrelated parties 14,958 27,434 14,017 23,855

Total trade accounts receivable 14,958 27,434 94,841 111,288

Other receivables

Other receivables - related

parties 577 708 31,911 26,548

Advances 11,311 15,427 9,124 13,691

Accrued interest income 64,618 49,539 64,346 49,284

Others 15,624 17,884 14,695 17,204

Total other receivables 92,130 83,558 120,076 106,727

Less: Allowance for doubtful

accounts (2,578) (2,578) (2,578) (2,578)

Total other receivables - net 89,552 80,980 117,498 104,149

Total trade and other

receivables - net 104,510 108,414 212,339 215,437


9 ……………………....………Director


Somchai Hanjitkasem

6. Investments in subsidiaries

Details of investments in subsidiaries as presented in the separate financial statements are

as follows:


Paid-up capital Shareholding percentage Cost

Dividend received during

the six-month periods ended

30 June 31 December 30 June 31 December 30 June 31 December 30 June

Company’s name 2016 2015 2016 2015 2016 2015 2016 2015

(%) (%)

MK Interfood Company

Limited 400,000 400,000 100 100 299,050 299,050 160,000 160,000

MK Service Training

Center Company

Limited 35,000 35,000 100 100 52,430 52,430 28,000 31,500

International Food

Supply Company

Limited 100,000 100,000 100 100 100,000 100,000 - -

Total 451,480 451,480 188,000 191,500

7. Investment in joint venture

7.1 Details of investment in joint venture

Investment in joint venture represents investment in entity which is jointly controlled by the

Company and other company. Details of this investment are as follows:


Joint venture

Nature of

business Paid-up capital Shareholding percentage

Consolidated


Separate


30

June

2016

31

December

2015

30

June

2016

31

December

2015

30

June

2016

31

December

2015

Percent Percent

Plenus and MK PTE LTD Restaurant SGD 12.5 million 50 50 111,874 118,318 149,207 149,207

Total investment in joint venture 111,874 118,318 149,207 149,207

7.2 Share of loss

During the periods, share of loss from investment in joint venture in the consolidated

financial statements was as follows:



Joint venture For the six-month periods ended 30 June

2016 2015

Plenus and MK PTE LTD 8,900 9,194


10 ……………………....………Director


Somchai Hanjitkasem

8. Other long-term investment


Consolidated financial statements/


30 June

2016

31 December

2015

Other investment

Oversea non-marketable securities - cost 7,278 7,278

Less: Allowance for impairment (7,278) (7,278)

Other investment - net - -

9. Property, plant and equipment

Movements in the property, plant and equipment account during the six-month period

ended 30 June 2016 are summarises below.


Consolidated


Separate


Net book value as at 1 January 2016 4,494,044 3,852,688

Acquisitions - at cost

Decrease in accounts payable for

purchases of equipment during the period (51,830) (50,200)

Cash paid for purchases of plant and equipment 322,952 192,676

Total 271,122 142,476

Disposals and write-off - net book value at

disposal and write-off date

Proceeds from disposals of equipment (2,906) (13,161)

Gain on disposals of equipment 204 605

Loss on write-off of equipment (4,234) (4,206)

Total (6,936) (16,762)

Depreciation for the period (401,428) (328,145)

Net book value as at 30 June 2016 4,356,802 3,650,257


11 ……………………....………Director


Somchai Hanjitkasem

10. Intangible assets

Movements in the intangible assets account during the six-month period ended

30 June 2016 are summarised below.


Consolidated


Separate


Net book value as at 1 January 2016 97,762 94,864

Acquisitions during the period - at cost 9,575 6,643

Amortisation for the period (7,603) (7,257)

Net book value as at 30 June 2016 99,734 94,250

11. Leasehold rights

Movements in the leasehold rights account during the six-month period ended 30 June

2016 are summarised below.


Consolidated


Separate


Net book value as at 1 January 2016 283,352 262,689

Amortisation for the period (19,527) (18,531)

Net book value as at 30 June 2016 263,825 244,158


12 ……………………....………Director


Somchai Hanjitkasem

12. Trade and other payables


Consolidated


Separate


30 June

2016

31 December

2015

30 June

2016

31 December

2015

Trade payables - unrelated parties 275,391 395,301 271,682 391,084

Other payables - related parties 14,470 15,690 16,904 14,690

Other payables - unrelated parties 66,871 111,671 56,150 95,538

Other payables - unrelated parties

(purchases of fixed assets) 107,413 164,176 84,624 140,313

Accrued expenses 608,427 687,928 499,391 581,966

Others 15,844 15,961 14,731 15,028

Total trade and other payables 1,088,416 1,390,727 943,482 1,238,619

13. Provision for long-term employee benefits

Movements of provision for long-term employee benefits for the six-month period ended 30

June 2016 are summarised below.



Retirement

benefits plan

Long service

awards plan Total

As at 1 January 2016 238,033 31,703 269,736

Current service cost 12,188 2,994 15,182

Interest cost 3,957 507 4,464

Benefit paid (4,979) - (4,979)

As at 30 June 2016 249,199 35,204 284,403


13 ……………………....………Director


Somchai Hanjitkasem



Retirement

benefits plan

Long service

awards plan Total

As at 1 January 2016 224,373 28,859 253,232

Current service cost 10,668 2,467 13,135

Interest cost 3,696 458 4,154

Transfer (1,592) (88) (1,680)

Benefit paid (4,639) - (4,639)

As at 30 June 2016 232,506 31,696 264,202

Long-term employee benefit expenses included in the consolidated income statements for

the six-month periods ended 30 June 2016 and 2015 amounted to Baht 19.6 million and

Baht 17.1 million, respectively (Separate financial statements: Baht 17.3 million and Baht

15.4 million, respectively).

14. Warrants

On 7 August 2013, the Company allocated and issued 20,000,000 warrants to the

management including the management in the director position and employees of the

Company and/or employees of the subsidiaries of the Company at free of charge (“ESOP”

or “M-WA”). The exercise period is within 5 years commencing on 7 August 2013, and the

warrants can be exercised to acquire the new ordinary shares of the Company for totaling

17 times. The warrants are first exercisable after 1 year since the date that the Company

allotted and issued the warrants, with the first exercise date falling on 30 September 2014.

The following exercise dates fall on the last working day of March, June, September and

December and the last exercise date is 6 August 2018.

The exercise ratio is 1 warrant per 1 new ordinary share, and the exercise price is Baht 1

per share. The exercise conditions and fair value of share option were disclosed in the

notes to financial statements for the year ended 31 December 2015.

During the six-month period ended 30 June 2016, the Company and its subsidiaries

recorded expenses related to the ESOP or M-WA scheme of Baht 55.1 million (2015: Baht

83.4 million) and for the Company of Baht 53.6 million (2015: Baht 80.0 million) as

personnel expenses in the income statement, together with a corresponding increase in

“Capital reserve for share-based payment transactions” in the shareholders’ equity.


14 ……………………....………Director


Somchai Hanjitkasem

Presented below is a summary of movements in the number of the Company’s warrants.

(Unit: Thousand Units)

30 June

2016

31 December

2015

Warrants issued as at 7 August 2013 20,000 20,000

Less: Number of exercised warrants - beginning of period (4,400) (1,235)

Warrants exercised during the period - (3,165)

Cumulative number of exercised warrants - end of period (4,400) (4,400)

Less: Warrants written-off - beginning of period (4,303) (3,289)

Warrants written-off during the period (374) (1,014)

Cumulative warrants written-off - end of period * (4,677) (4,303)

Warrants at the end of period 10,923 11,297

* The Company wrote-off M-WA of director, management and employees of the Company and its subsidiaries

that were not eligible for the privilege due to resignation before the warrants matured.

15. Income tax

Interim corporate income tax was calculated on profit before income tax for the period,

using the estimated effective tax rate for the year.

Income tax expenses for the three-month and six-month periods ended 30 June 2016 and

2015 are made up as follows:



Consolidated


Separate


2016 2015 2016 2015

Current income tax:

Interim corporate income tax charge 150,210 135,440 134,504 119,122

Adjustment in respect of income tax of

previous year (781) - (565) -

Deferred tax:

Relating to origination and reversal of

temporary differences (6,001) (10,129) (5,582) (9,645)

Income tax expenses reported in the

income statements 143,428 125,311 128,357 109,477


15 ……………………....………Director


Somchai Hanjitkasem



Consolidated


Separate


2016 2015 2016 2015

Current income tax:

Interim corporate income tax charge 259,532 262,720 233,845 232,394

Adjustment in respect of income tax of

previous year (781) - (565) -

Deferred tax:

Relating to origination and reversal of

temporary differences (11,616) (21,399) (10,574) (20,403)

Income tax expenses reported in the

income statements 247,135 241,321 222,706 211,991

16. Earnings per share

Basic earnings per share is calculated by dividing profit for the period attributable to equity

holders of the Company (excluding other comprehensive income) by the weighted average

number of ordinary shares in issue during the period.

Diluted earnings per share is calculated by dividing profit for the period attributable to

equity holders of the Company (excluding other comprehensive income) by the weighted

average number of ordinary shares in issue during the period plus the weighted average

number of ordinary shares which would need to be issued to convert all dilutive potential

ordinary shares into ordinary shares. The calculation assumes that such conversion took

place either at the beginning of the year or on the date the potential ordinary shares were issued.

16.1 Weighted average number of ordinary shares

(Unit: Thousand shares)

Consolidated financial statements /


For the three-month periods

ended 30 June

For the six-month periods

ended 30 June

2016 2015 2016 2015

Balance brought forward 910,250 907,085 910,250 905,081

Add: The weighted average

number of ordinary shares

issued during the period - - - 3

Weighted average number of

ordinary shares 910,250 907,085 910,250 907,084


16 ……………………....………Director


Somchai Hanjitkasem

16.2 Reconciliation of diluted earnings per share

The following table sets forth the computation of basic and diluted earnings per share:



Weighted average number

Profit for the period of ordinary shares Earnings per share

2016 2015 2016 2015 2016 2015

Thousand

Baht

Thousand

Baht

Thousand

shares

Thousand

shares

Baht Baht


Profit attributable to equity

holders of the Company 613,233 515,869 910,250 907,085 0.67 0.57

Effect of dilutive potential

ordinary shares

Warrants (M - WA) 9,243 11,334


Profit of ordinary

shareholders assuming

the conversion of warrants

to ordinary shares 613,233 515,869 919,493 918,419 0.67 0.56





2016 2015 2016 2015 2016 2015

Thousand

Baht

Thousand

Baht

Thousand

shares

Thousand

shares

Baht Baht



holders of the Company 742,033 642,471 910,250 907,085 0.82 0.71


ordinary shares

Warrants (M - WA) 8,715 10,639


Profit of ordinary

shareholders assuming the

conversion of warrants to

ordinary shares 742,033 642,471 918,965 917,724 0.81 0.70


17 ……………………....………Director


Somchai Hanjitkasem





2016 2015 2016 2015 2016 2015

Thousand

Baht

Thousand

Baht

Thousand

shares

Thousand

shares

Baht Baht



holders of the Company 1,051,505 995,672 910,250 907,084 1.16 1.10


ordinary shares

Warrants (M - WA) 9,376 11,562


Profit of ordinary



ordinary shares 1,051,505 995,672 919,626 918,646 1.14 1.08





2016 2015 2016 2015 2016 2015

Thousand

Baht

Thousand

Baht

Thousand

shares

Thousand

shares

Baht Baht



holders of the Company 1,141,826 1,073,516 910,250 907,084 1.25 1.18


ordinary shares

Warrants (M - WA) 8,835 10,840


Profit of ordinary



ordinary shares 1,141,826 1,073,516 919,085 917,924 1.24 1.17


18 ……………………....………Director


Somchai Hanjitkasem

17. Dividends

Dividend declared for the six-month periods ended 30 June 2016 and 2015 consist of the

following:

Approved by

Total

dividends

Dividend

per share Paid on

(Million Baht) (Baht)

Year 2016

Final dividend on

2015 profit

Annual General Meeting of the

shareholders on 22 April 2016 910 1.0 19 May 2016

Total 910 1.0

Year 2015

Final dividend on

2014 profit

Annual General Meeting of the

shareholders on 24 April 2015 907 1.0 21 May 2015

Total 907 1.0

18. Operating segment information

Operating segment information is reported in a manner consistent with the internal reports

that are regularly reviewed by the chief operating decision maker in order to make

decisions about the allocation of resources to the segment and assess its performance.

The Company and its subsidiaries are engaged in two business segments which are

restaurant business and other businesses that support restaurant business including

training service provider and manufacture and distribution of foods. Their operations are

carried on in geographical areas of Thailand. However, the restaurant business in Thailand

is the main business segment and the segment information that has been considered

based on a quantitative basis is over 90 percent of operating segments and geographical

areas. For this reason, the chief operating decision maker considers aggregating the

operating segments into one reportable segment of restaurant operation.

Segment performance is measured based on operating profit or loss, on a basis consistent

with that used to measure operating profit or loss in the financial statements. As a result, all

of the revenues, operating profits and assets as reflected in these financial statements

pertain to the aforementioned reportable operating segment and geographical area.


19 ……………………....………Director


Somchai Hanjitkasem

19. Commitments and contingent liabilities

29.1 Operating lease commitments

The Company and its subsidiaries have entered into several lease agreements in respect

of the lease of building space and equipment and other service agreements. The terms of

the agreements are generally between 3 and 20 years.

As at 30 June 2016, future minimum payments required under these non-cancellable

operating lease contracts and other service contracts were as follows:


Consolidated


Separate


Payable within:

Less than 1 year 1,108.8 876.3

1 to 5 years 1,227.5 994.9

More than 5 years 365.0 355.5

19.2 Futures contracts

The Company and a subsidiary have entered into futures contracts with many local

companies, whereby the Company, its subsidiary and those companies agreed quantity,

schedule, place and price of inventories to be delivered. The Company and its subsidiary

agreed to pay for inventories at the rates stipulated in the contracts.

19.3 Guarantees

As at 30 June 2016, there were outstanding bank guarantees issued by the banks on behalf

of the Company and its subsidiaries of approximately Baht 17.9 million (31 December

2015: Baht 17.6 million), in respect of certain performance bonds as required in the normal

course of businesses. These included letters of guarantee amounting to Baht 6.3 million

(31 December 2015: Baht 6.3 million) to guarantee payments due to creditors and Baht

11.6 million (31 December 2015: Baht 11.3 million) to guarantee electricity use.


20 ……………………....………Director


Somchai Hanjitkasem

20. Fair value hierachy

As of 30 June 2016, the Company and its subsidiaries had the assets that were measured

at fair value as follows:


Consolidated


Separate


Level 2 Level 2

Financial assets measured at fair value

Investments in trading securities - debt

instruments 3,725 3,542

Valuation techniques and inputs to Level 2 valuation

The fair value of investments in debt instruments has been determined by using the yield

curve as announced by the Thai Bond Market Association or by other relevant bodies.

During the current period, there were no transfers within the fair value hierarchy.

21. Events after the reporting period

On 11 August 2016, the Meeting of the Board of Directors of the Company passed a

resolutions to approve an interim dividend payment in respect of the profit for the six-month

period ended 30 June 2016 to the Company’s shareholders at Baht 1 per share, totaling

Baht 910.2 million, which will be paid to the shareholders on 8 September 2016.

22. Approval of interim financial statements

These interim financial statements were authorised for issue by the Company’s Board of

Directors on 11 August 2016.

Documents

MK Restaurant Group Public Company Limited and its ...m.listedcompany.com/misc/FS/20160811-m-fs-2q2016-en.pdfMK Restaurant Group Public Company Limited and its subsidiaries Statements