20180315 m ar2017 en full by ar.mkrestaurant

ANNUAL

REPORT

2017

MK Restaurant Group Public Company Limited

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INDEX

001 VISION & MISSIONS

002 FINANCIAL HIGHLIGHTS

004 MESSAGE FROM CEO

006 BOARD OF DIRECTORS

008 NATURE OF BUSINESS

023 CORPORATE STRUCTURE OF THE COMPANY AND SUBSIDIARIES

024 NOTABLE EVENTS IN 2017

026 RISK FACTORS

037 REPORT OF THE BOARD OF DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS

038 REPORT OF THE AUDIT COMMITTEE

040 INDEPENDENT AUDITOR’S REPORT

044 FINANCIAL STATEMENTS

102 MANAGEMENT DISCUSSION AND ANALYSIS

108 CONNECTED TRANSACTIONS

114 SHAREHOLDER AND MANAGEMENT STRUCTURE

132 GOOD CORPORATE GOVERNANCE

143 CORPORATE SOCIAL RESPONSIBILITY

150 REPORT OF THE CORPORATE GOVERNANCE, NOMINATING, AND COMPENSATION COMMITTEE

152 INTERNAL CONTROL & RISK MANAGEMENT

154 DETAILS OF DIRECTORS AND EXECUTIVES

168 GENERAL CORPORATE INFORMATION AND OTHER REFERENCES

Vision Missions

VISION MISSIONS

VISION To serve happiness to our customers through delicious, quality meals and extraordinary restaurant experience while working toward the greater good for our employees, community and environment.

MISSIONS • To delight and nourish our customers with healthy, quality and delicious food and excellent service at a reasonable price • To understand our customer’s changing needs and constantly improve our customer experience • To generate a sustainable profit growth for our company’s shareholders • To create long-term relationships with our business partners • To enhance our employee’s excellence, continuous development and happiness • To contribute to our society through initiatives that align with our corporate social responsibility program

Annual Report 2017 l MK Restaurant Group Public Company Limited

FINANCIAL HIGHLIGHTS Financial Highlights

2017

2016

2015

Income Statement (Million Baht) Revenues from Sales and Services

16,073

15,146

14,478

Total Revenues

16,458

15,498

14,923

Gross Profit

10,899

10,193

9,534

Profit before Financial Costs and Income Tax Expenses (EBIT)

2,985

2,603

2,319

Net Profit

2,425

2,100

1,856

16,283

15,642

15,122

2,454

2,265

2,124

13,829

13,377

12,998

921

915

910

3,575

3,090

2,702

Gross Profit Margin (%)

67.8

67.3

65.9

Net Profit Margin (%)

14.7

13.5

12.4

Return on Equity (%)

17.8

15.9

14.5

Return on Assets (%)

15.2

13.7

12.4

Debt to Equity Ratio (Times)

0.2

Current Ratio (Times)

5.0

5.4

5.2

Earning per Share (Baht)

2.7

2.3

2.0

Dividend per Share (Baht)

2.3

2.1

1.9

Dividend Payout Ratio (%)

Balance Sheet (Million Baht) Total Assets Total Liabilities Shareholdersâ&#x20AC;&#x2122; Equity Paid-up Capital Net Cash from Operating Activities

Financial Ratio

Per Share Data Par Value (Baht per Share)

Notes:

Board of Directors had the resolution on February 26, 2018 to propose the 2017 dividend payment per share to the 2018 Annual General Meeting for shareholdersâ&#x20AC;&#x2122; approval on April 27, 2018.

Financial Highlights

Revenue Breakdown by Business:

19% Yayoi

79% 2%

Suki

Others

Revenues from Sales and Services 20,000

16,073

15,146

15,000

3,000 2,500

2,425

2,100

2,000 1,500

10,000

1,000

5,000

500 0

2017

2016

2,454

2,265

2017

2016

Total Assets 20,000

Net Profit

Total Liabilities

16,283

15,642

15,000

3,000 2,500 2,000

10,000

1,500 1,000

5,000

500 0

2017

2016

Annual Report 2017 l MK Restaurant Group Public Company Limited

MESSAGE FROM CEO

MR. RIT THIRAKOMEN Chairman and Chief Executive Officer

Revenue from Sales and Services increased 6.1 %

Earning Per Share 2017

16,073

2.65

million

Net Profit increased

15.5 %

2016

2,425

million

2.30

Baht

Compare to

Baht

Message From CEO

2017. Following the highly successful result of the new restaurant concept, the Company

“Thai economy which grew at a faster pace in 2017 (GDP growth 2016: 3.3%, 2017: 3.9%), the Company was able to achieve another year of satisfactory operating result for the year 2017.

opened its second MK Live restaurant at Mega Bangna shopping mall in December 2017. The Company plans to open more MK Live restaurants in 2018.

This was reflected by the fact that revenue from

Looking forward to the year of 2018, the

sales and services for the year 2017 increased

economic indices of the key economic drivers

6.1% year-on-year to Baht 16,073 million”

of the Thai economy at the start of the year showed signs of continuing robust economic growth as indicated by the fact that the value of exports grew at the fastest rate in the

Dear Shareholders,

last 62 months in January, surging 17.6%

On behalf of the Board of Directors and

who are eligible to receive dividends on May

year-on-year. The Thai industrial confidence

on my personal behalf, I am delighted to

23, 2018.

index also rose for the third straight month

welcome you all to this Annual General

In 2017, the Company has focused on

in January, hitting a three-year high at

Meeting of your Company. I am even more

management and technology developments

91.0, while the consumer confidence index

delighted to inform you that, in line with the

and other initiatives to enhance its

increased for the sixth consecutive month to

Thai economy which grew at a faster pace

competitiveness and to prepare for the

80.0 in January and it is the highest reading in

in 2017 (GDP growth 2016: 3.3%, 2017:

sustainable growth of the Company in the

the last 36 months. Moreover, reputable and

3.9%), the Company was able to achieve

future as follows:

well recognized government and private

another year of satisfactory operating result

1. Implementing the strategic management

organizations all forecast that the Thai

for the year 2017. This was reflected by the

succession plan through the grooming of the

economy in 2018 will continue to grow at a rate

fact that revenue from sales and services for

next generation management team.

not lower than that of 2017. As the business of

the year 2017 increased 6.1% year-on-year

2. Implementing the installation of

the Company is closely linked to the condition

to Baht 16,073 million attributable largely to

the ERP system (Enterprise Resource

of the economy, we are thus optimistic about

the continued network expansion as well as

Planning) to improve the efficiency of various

the operating result of the Company for the

increases in same store sales of both MK and

management functions of the Company.

year 2018. We are also relatively confident

Yayoi restaurant chains. Net income for the

3. I m p l e m e n t i n g t h e M K M o b i l e

that we will be able to achieve our expected

year 2017 reached Baht 2,425 million, up by

Application project to enhance customer

and more challenging operating objective for

15.5% year-on-year which was higher than

service and experience whereby customers

the year 2018. However, we will not be blinded

the rate of increase for revenue from sales

can use their mobile devices to make

by our optimism and will remain cautious and

and services. Such higher rate of increase was

table reservations or make advance queue

make necessary preparations to cope with

due mainly to the increase in revenue from

bookings. It also serves as the platform for

the uncertainty and any disruptions that may

sales and services and the continued rigorous

the Company’s marketing campaigns and

adversely affect the operations of the Company

control of costs and expenses. Earnings per

other promotional activities.

in the year ahead.

share, meanwhile, increased from Baht 2.30

4. Investing in modern machinery and

Lastly, on behalf of the Board of Directors, I

for the year 2016 to Baht 2.65 for the year

equipment for the production of high volume

would like to thank all of our shareholders,

2017. In light of the satisfactory operating

products in order to improve product quality

employees, business partners, and above

performance aforementioned and the solid

as well as to reduce product costs in the

all, our customers for their unfailing trust

financial position of the Company, the Board

long run.

and support through the years. I would also like to take this opportunity to reiterate that

of Directors resolved to recommend a full year dividend of Baht 2.30 per share (2016: Baht

In addition, the Company has initiated a new

the Company is committed to conducting

2.10). As an interim dividend was already

restaurant concept to match the luxurious

its business transparently and efficiently and

paid by the Company to shareholders during

image of the shopping mall and the target

strictly in accordance with the principles of

the year, the final dividend, subject to the

customers where the restaurant is located

good corporate governance for the best

shareholders’ approval at the 2018 Annual

by launching its first MK Live restaurant at

benefits of all our stakeholders.

General Meeting, will be paid to shareholders

The EmQuartier shopping mall in March

Annual Report 2017 l MK Restaurant Group Public Company Limited

BOARD OF DIRECTORS

01. Mr. Rit Thirakomen

Chairman of the Board of Directors

02. Mr. Thanong Chotisorayuth

Independent Director

03. Mr. Sujint Chumpolkanjana

Director

04. Dr. Katiya Greigarn

Independent Director and

Chairman of Corporate Governance,

Nominating and Compensation

Committee

05. Dr. Annop Tanlamai

Independent Director and

Chairman of the Audit Committee

Board of Directors

06. Mr. Attapon Chodchoy

IIndependent Director

Member of the Audit Committee and

Member of Corporate Governance,

Nominating and Compensation

Committee

07. Mr. Pravit Tantiwasinchai

Director

08. Mr. Somchai Hanjitkasem

Director

09. Mrs. Vilai Chattanrassamee

Independent Director and Member

of the Audit Committee

10. Mr. Somchai Pipitvijitkorn

Director and

Member of Corporate Governance,

Nominating and Compensation

Committee

Annual Report 2017 l MK Restaurant Group Public Company Limited

NATURE OF BUSINESS

In 1986, the first MK Suki welcomed its customers for the first time at Central Plaza, Ladprao branch. As not so many restaurants had such a clear position to offer suki menu at that time, the concept of MK restaurant was warmingly received by customers. The introduction of sophisticated restaurant management techniques and marketing strategies to run the business led the Company to consistently expand new branches in both Bangkok and other provinces.

Nature of Business

M K R e s t a u r a n t G ro u p P u b l i c Company Limited (the “Company”) was incorporated on July 10, 1989, with an initial capital of Baht 1 million to operate suki restaurants. Aside from this, the Company started opening Japanese restaurants under the “Yayoi” brand and trademark in 2006. In October 2012, the Company operated two more Japanese restaurants under two different trademarks of “Hakata” and “Miyazaki”. The Company also runs Thai restaurant business under

Restaurants (including 6 MK Gold

nationwide. The Company has also

“Na Siam” and “Le Siam” trademarks

Restaurants and 2 MK Live);

sold MK Suki franchise to overseas

as well as a coffee shop and bakery

165 Yayoi Japanese restaurants;

operators in Japan, Vietnam and

outlet known as “Le Petit.” Finally,

3 Hakata Japanese restaurants;

Laos. In addition, a joint-venture

we have our own training institute

27 Miyazaki Japanese restaurants;

company has been set up to

to train qualified service personnel.

4 L e S i a m T h a i re s t a u r a n t s ;

operate a restaurant business in

As of December 31, 2017, the

1 Na Siam Thai restaurant and 3

Singapore.

Company boasted 435 MK Suki

Le Petit coffee shop and bakery

MK Suki

MK Gold

MK Live

Restaurants Nationwide

Restaurant Nationwide

Yayoi Restaurant

Miyazaki Restaurant

Hakata Restaurant

Restaurants Nationwide

Le Siam

Na Siam

427 165

Performance

2017

Restaurants Nationwide

Le Petit

Restaurants Nationwide

2 3

Annual Report 2017 l MK Restaurant Group Public Company Limited

S UK I R E S TAUR A N T B US I N E S S The suki restaurant business operated by the Company can be classified into three categories as follows:

#Loving Family

#Memorable Moments

Nature of Business

MK SUKI RESTAURANT MK SUKI

427 Restaurants Nationwide

MK Suki is a restaurant run by the Company offering suki as its main dish. More than 100 items of a variety of meat, meatballs and fresh vegetables are offered as suki for customers to simmer in a cast-iron pot. In addition, MK Suki also offers various other dishes; namely dim sum such as steamed buns, pork dumpling, shrimp dumpling and egg roll as well as a la carte dishes such as MK roasted duck, honey-roasted pork, steamed spare ribs roasted with fermented soybean, Hong Kong slow-cooked beef, Jade noodle, wonton soup and a myriad desserts, ice cream and beverages. MK Suki positions itself as a family restaurant whose target customers are family, friends and colleagues in medium to high-income brackets. The restaurant highlights its relaxed ambience where everyone can slowly cook his own suki in a pot on the table while taking time chatting and catching up. Customers can also be office workers whose lunch time is limited and therefore are vying for a quality lunch in less than an hour as one of MK Suki’s service signatures is fast and efficient service. As of December 31, 2017, there were 427 MK Suki restaurants around Thailand, most of which are located in shopping malls, modern trade outlets and community malls such as Big C, Tesco Lotus, Central Department Store, Robinson Department Store, The Mall Department Store, all of which share the same characteristic as a place where medium to high-income earners mostly shop.

MK GOLD RESTAURANT MK GOLD

Restaurants Nationwide

Like MK Suki, MK Gold Restaurant, which is also run by the Company, offers suki as its main dish plus other dishes such as dim sum and a la carte menus. Going beyond the standard, MK Gold’s ingredients are top-graded. MK Gold’s target customers are original customers of MK Suki Restaurant, who, having earned high incomes, long for premium-graded foods and go to MK Gold Restaurant for entertainment. MK Gold Restaurant’s theme of decoration is luxury in gold. The eatery is adorned with elegant and colorful lighting for glittering effect. Dinnerware is porcelain while the Sukiyaki cast-iron pot is golden. The restaurant’s store sign, roasted duck kitchen at the front, placemats and staff’s uniforms have been meticulously designed to reflect the element of gold and an air of luxury. As of December 31, 2017, there were six MK Gold restaurants in major central business districts of Bangkok’s Siam Paragon, Central World, Saladaeng, Esplanade, Ekamai and Phuket’s Jungceylon. Customers may order any dish as they wish and will be charged accordingly. However, buffet is also available at certain branches.

Annual Report 2017 l MK Restaurant Group Public Company Limited

MK LIVE MK LIVE

Restaurants Nationwide

MK LIVE is a new brand under hotpot category of MK Restaurant Group Public Company Limited. MK LIVE is positioned to be a concept store of MK Suki restaurant in which its concept was inspired by the core strength of “MK” mother brand and today’s modern customer’s lifestyle. LIVE means being alive in this concept. There are six main LIVE attributes that MK LIVE designed its restaurant experience upon; LIVE Ingredients, LIVEly Service, Live Showcase, Live Decoration, Live Experiences, and Live Bonding. At MK LIVE, both food and beverages menus are completely different from what offered in MK Suki Restaurant, for example, the restaurant is famous for its signature Steamed Shabu and Original Japanese-styled Sukiyaki. The services at MK LIVE are also unique. Staffs can interact with customers in a ‘lively’ way, recommending signature menu and providing information on the origin of each ingredient. In addition, customers can enjoy MK LIVE Showcase where they can see how their food are being prepared by our chefs. As of December 31 2017, MK LIVE has 2 branches, locating at The EmQuartier Department Store and Mega Bangna.

#Experience

Nature of Business

#Healthy

Annual Report 2017 l MK Restaurant Group Public Company Limited

JA PA N E S E R E S TAUR A N T B US I N E S S

#Friendship Moment

Nature of Business

YAYOI RESTAURANT YAYOI RESTAURANT

165 Restaurants Nationwide

Yayoi Restaurant is run by MK Interfood Co.,Ltd., our subsidiary, which has been franchised a license to run Japanese restaurant under the Yayoi-ken trademark by Plenus Co., Ltd., a listed company in Japan’s stock exchange and one of Japanese’s leading restaurant operators. Yayoi opened its first branch in Thailand in 2006. Yayoi Restaurant is decorated in a bright colorful theme to convey informal and relaxed ambience and provide fast and quality service underlined with freshly-cooked food offered at a reasonable price tag. This very concept is inspired by the Japanese way of living which insists that no matter how fast life is to be, everyday’s living must be handled in a refined and sophisticated manner including food. This truly accords with Thai life style which places much priority to the food we eat. Yayoi Restaurant offers both a la carte Japanese menus and set menus always served with rice, salad and miso soup. Yayoi’s recommended menus are pork Tonkatsu with miso sauce, sizzling grilled pork, rice with a variety of beef, Japanese-styled bento, Udon, Ramen and hors d’oeuvres such as Japanese dumpling, Japanese pizza and a myriad of scrumptious desserts and delightful beverages. Yayoi has regularly collaborated with Japan-based Yayoi-ken’s chefs to introduce seasonal menus while retaining the much unique Japanese element in its food. As of December 31, 2017, there were 165 Yayoi Restaurants nationwide.

HAKATA RESTAURANT HAKATA RESTAURANT

Restaurants Nationwide

MK Restaurant Group Plc. opened the first Hakata Restaurant at Siriraj Hospital. The eatery offers Japanese ramen of various types and forms as well as Japanese dumpling and beverages. Hakata, Siriraj Branch, is part of the Company’s corporate social responsibility (CSR) project as net profit after expenses from the restaurant has been entirely donated to Siriraj Hospital. As of December 31, 2017, MK Restaurant Group Plc. operated three Hakata branches.

MIYAZAKI RESTAURANT MIYAZAKI RESTAURANT

Restaurants Nationwide

It was not until October 2012 when MK Restaurant Group Plc. opened the first Miyazaki Japanese Restaurant at The Scene Town in Town Shopping Center inside Soi Ladprao 94. The restaurant offers Japanese Teppanyaki grilled dishes, desserts and beverages. The Company boasted 27 Miyazaki Restaurant branches as of December 31, 2017.

Annual Report 2017 l MK Restaurant Group Public Company Limited

THAI R E S TAUR A N T B US I N E S S

#Original

Nature of Business

NA SIAM THAI RESTAURANT NA SIAM

Restaurant Nationwide

Run by the Company, Na Siam Thai Restaurant offers a comprehensive Thai menu under a traditional Thai ambience where the atmosphere of the original MK eatery in Siam Square in the old days before the Company started operating suki restaurant business is meticulously preserved. Na Siam Thai Restaurant targets medium to high-end customers who come to enjoy various kinds of chili paste dishes, Thai hot soup of tom yum, curry, sautĂŠ vegetables of all kinds, a la carte menus, a variety of noodles, traditional desserts, and beverages. As of December 31, 2017, there was one Na Siam Restaurant on B1 Floor of Central Plaza Bangna Shopping Center.

LE SIAM THAI RESTAURANT LE SIAM

Restaurants Nationwide

Like Na Siam, Le Siam Thai Restaurant is also operated by MK Restaurant Group Plc. and offers a comprehensive Thai menu. The restaurant is decorated in a luxurious Thai style and offers premium-graded food and beverages. Le Siam targets foreign customers and high-income earners who look for a sophisticated place offering traditional Thai food to entertain. As of December 31, 2017, there were four branches of Le Siam Restaurant at Saladaeng in Bangkok, Jungceylon in Phuket, Central Festival Samui in Surat Thani, and London Street in Bangkok.

Annual Report 2017 l MK Restaurant Group Public Company Limited

COFFEE SHOP A N D BA K E RY B US I N E S S

#Coffee Time

Nature of Business

COFFEE SHOP AND BAKERY BUSINESS LE PETIT

Restaurants Nationwide

In September 2012, MK Restaurant Group Plc. opened Le Petit, the first coffee shop. Bakery bistro developed on its own formula at Siriraj Hospital. The place offers snacks, bakeries, coffee and other beverages. Le Petit is part of the Companyâ&#x20AC;&#x2122;s CSR project as net profit after expenses is entirely donated to the hospital. As of December 31, 2017, there were three branches of Le Petit coffee shop and bakery, locating at Siriraj Hospital, London Street and MKâ&#x20AC;&#x2122;s Head Office.

Annual Report 2017 l MK Restaurant Group Public Company Limited

Home Delivery and Catering Business MK Restaurant Group Plc. and MK

mall) with a minimum order from both

customers can make order in advance

Interfood Co., Ltd. offer home delivery

restaurants of Baht 150. However,

for the seminar or meeting events.

and catering services where food

if fresh food items under MK Suki

Customers can pay by cash or by Visa

from MK Suki Restaurant and Yayoi

Restaurant is ordered, the minimum

credit card of all major banks. They

Restaurant could be home delivered

order will start at Baht 199. There is

can order food by calling the following

between 10 am to 9 pm each day

a charge of Baht 40 per trip for home

numbers or going to the following

(or up to the opening hours of the

delivery including VAT. Moreover,

websites:

Service Areas

Phone Numbers

Bangkok and its vicinity

+66 2248 5555, 1642

Pattaya, Chonburi

+66 2248 5555,

Website http://www.mkrestaurant.com http://www.yayoirestaurants.com

+66 3837 4484, 1642 Chiang Mai

+66 2248 5555, +66 5380 5742, 1642

Phuket

+66 7624 8266

Nakornratchasrima, Khonkaen

+66 2248 5555, 1642

Nakornprathom

+66 2248 5555, 1642

(only MK Restaurant)

Aside from the home delivery

or other events. The Company also

tables and competent service

service, both MK Suki Restaurant

provides a comprehensive catering

personnel are offered and set up

and Yayoi Japanese Restaurant also

service where all equipment and

for customers to make them feel

accept advanced orders and can

accessories such as suki pot,

like they actually dine at MK Suki

provide lunch boxes for party, feast

electronic outlets, chairs and dining

Restaurant.

Nature of Business

Overseas Restaurant Business As of December 31, 2017, the Company had the following MK Suki Restaurants and Yayoi Japanese Restaurants overseas: Countries

Number of

MK Suki

Yayoi

Miyazaki

Operated by

Restaurants Restaurants Restaurants Plenus MK Co.,Ltd. Japan

(The Company holds 12% of its shares; it obtains the

franchise right from the Company) Plenus & MK Pte.Ltd. Singapore

(The Company holds 50% of its shares; the firm is a

joint-venture company) Global Investment Gate Joint-Stock Company (not Vietnam

relating to the Company; it obtains the franchise right

from the Company) Premium Food Co.,Ltd. (not relating to the Company; it obtains the franchise right from the Company to operLaos

ate MK Restaurant). V&V Restaurant (not relating to the

Company; it obtains the franchise right from the Company to operate Miyazaki restaurant).

Suki

Japan

Restaurants

Miyazaki

Suki

Restaurants

Laos Vietnam

Suki

Restaurants

Yayoi

Restaurants

Singapore

Annual Report 2017 l MK Restaurant Group Public Company Limited

Training Center Founded in 2006, the MK Training

at branch restaurants, students,

the Companyâ&#x20AC;&#x2122;s own staff. Trainers

Center is run by MK Service

management or executives. Every

are executives, managers, chiefs

Training Co., Ltd. to offer service

employee will go through training

of sections and experts at various

training and other necessary

and capability building cours-

levels. In addition, there are also

skills for service personnel of the

es that the company specially

third-party experienced trainers

Company and its subsidiaries.

designed to correspond with their

in the service industry to share

Realizing that human resources

career path.

their skills, experiences, thoughts

are the most valuable asset of the

Located on Km. 3, Bangna-Trad

and service mind necessary for

Company, MK Restaurant Group

Highway, opposite to Central

the profession. The goal is to

Plc. puts endless energy into the

Plaza Bangna Shopping Center,

encourage all MK personnel to

recruitment, selection, retention

MK Training Center boasts a

commit to the best possible service

and development of personnel.

variety of training rooms and a

to fulfill customerâ&#x20AC;&#x2122;s needs.

It has developed training cours-

comprehensive range of training

es to intensively train personnel

equipment in the seven-floors

of all departments whether they

building. Most courses depend

are full-time or temporary staff

on knowledge and competency of

Corporate Structure of The Company and Subsidiaries

CORPORATE STRUCTURE OF THE COMPANY AND SUBSIDIARIES

MK Suki MK Gold and MK Live Restaurants Coffee Shop and Bakery - Le Petit

Overseas Franchise

100%

Japanese Restaurants - Miyazaki and Hakata

MK Restaurant Group Public Company Limited (M)

100%

MK Interfood Co.,Ltd.

MK Service Training

International Food

(MKI)

Center Co., Ltd.

Supply Co., Ltd.

(MKST)

(IFS)

Provide Training Service

Food Manufacturer & Distributor

Yayoi Japanese Restaurant

(1) (2)

Plenus Co., Ltd. hold 50% of its shares. Plenus Co., Ltd. hold 87.8% and Bridg Co., Ltd 0.2% of its shares.

Thai Restaurants Na Siam and Le Siam

50%

12%

Plenus & MK Pte(1)

Plenus MK Co., Ltd.(2)

(Plenus & MK)

Restaurants in Singapore

MK Suki Restaurants in Japan

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTABLE EVENTS IN 2017

JANUARY

FEBRUARY

“SUPERBRANDS THAILAND

“THE MOST POWERFUL BRAND

2016”

OF THAILAND 2016”

On January 25, 2017, the Company

On February 22, 2017 the Company

has been awarded “Superbrands

has been awarded “The Most

Thailand 2016” from Thailand

Powerful Brand of Thailand 2016”

Superbrands Council.

in Chained Restaurant category from the survey of 12,000 people by Commerce and Accountancy Faculty, Chulalongkorn University.

2017

MARCH “MK LIVE” On March 1, 2017, the Company has launched new concept “MK Live” at The Emquatier.

Notable Events in 2017

MAY “APPROVED A RESOLUTION TO INCREASE THE REGISTERED SHARE CAPITAL OF

2018

INTERNATIONAL FOOD SUPPLY CO., LTD.” On May 11, 2017, the Board of Director’s Meeting of the Company passed a resolution to increase the registered share capital of International Food Supply Co.,Ltd. from the share from Baht 100 million to Baht 280 million (28 million ordinary shares, at Baht 10 per share) by issuing 18 million new ordinary shares with a par value of Baht 10 per share.

OCTOBER “REGISTERED THE INCREASE OF ITS PAID-UP SHARE CAPITAL TO BAHT 920,878,100” “NO.1 BRAND THAILAND

On October 10, 2017, the Company

2016-2017”

registered the increase of its

On May 22, 2017, the Company has

paid-up share capital from Baht

been awarded “NO.1 Brand Thai-

914,849,400 to Baht 920,878,100

land 2016-2017” in Restaurant cat-

by issuing 6,028,700 new ordinary

egory from “Marketeer Magazine”.

shares with a par value of Baht 1 per share from the exercise of ESOP warrants (M-WA).

Annual Report 2017 l MK Restaurant Group Public Company Limited

RISK FACTORS

L i ke o t h e r b u s i n e s s e s , t h e Company’s business is exposed

Risk from intense competition

to various risks. The following risks are what the Company

contenders in these aspects will have a material and adverse impact to the business and its operation.

The restaurant business that the

However, the fact that the Company

Company is running is indeed a

continues to see its branch, income

highly-competitive business and

and performance expanding for more

and performance in a materi-

competition will be even more intense

than two decades indicates that it

al manner. In addition, there

as days pass by. As a result, the

does have an ability to constantly

could be other risks that the

Company’s success will depend on

and effectively compete with other

Company has no knowledge

its ability to continue to effectively

challengers. In other words, the

of at the moment; or feels, fol-

compete with other contenders.

Company has several competitive

lowing its consideration, that

The Company is to compete with a

advantages; namely (1) strong brand

they could not yet be classified

variety of restaurants that include

recognition as the “MK Brand”

inter national restaurant chains,

is indeed highly recognized and

well-established local restaurant

adored by customers; (2) strong

chains and numerous small-time

financial position which enables the

restaurateurs. In addition, new

Company to expand business both in

o p e r a t o r s e n t e r t h e re s t a u r a n t

the short and long term; (3) capable

business each day due largely to

and experienced management team

the low barrier of entry into this

which has been in the restaurant

business. As a result, competition

business for more than 20 years and

in the restaurant business will be

which helps making the Company’s

based on price and quality of food,

management effective and efficient;

variety and value perception of menu,

(4) own service training center

service quality, number and location

which enhances management skills

of outlets, effectiveness in new

of branch managers and, more

product development, advertising

importantly, trains service staff to

and sales promotion activities,

provide standardized service at all

restaurant decoration and the way

the Company’s restaurants; (5) best

the restaurant is maintained to

strategic locations of more than

continue attracting customers and,

500 branches of “MK” and “Yayoi”

finally, brand reputation and strength.

restaurants nationwide; (6) business

Failure by the Company to constantly

size which is large enough to achieve

and effectively compete with other

the economy of scale in many areas

feels that if occurred, they may adversely affect the Company’s business, financial position

as risks that could materially damage the Company’s business.

Risk Factors

such as sourcing and procurement, transportation and advertising; and (7) construction of a new and sophisticated central kitchen and a distribution center which will increase the Company’s kitchen capability in order to support the future expansion.

Risk from volatility of raw material prices Since costs of food are the Company’s most important cost item as it accounts for as high as 34 percent of the Company’s revenues from sales

are up due to depleting production

delivery schedule; (3) to prevent

and services and since most of them

volumes affected by negative factors

risk from price fluctuation, a future

are costs of raw materials, changes

mentioned above, the Company is

sales contract will be signed with

in raw material prices at a time the

required to buy raw materials at high-

reliable manufacturers or distributors

Company could not hike its sales

er price and volume that it has not

where parties will be bound to each

prices to compensate for the rise or

projected. This could eventually make

other within an agreed timeframe

if it could only partially compensate

a negative impact to the Company’s

such as within three months, six

such rise due to intense competitions

performance.

months or a year; and where the

or weakening purchasing power will

To minimize risk from the fluctuation

contract will clearly specify the

materially and adversely affect the

of raw material prices, the Company

prices, volumes that will change

Company’s performance.

has embarked on several measures

hands and delivery dates; (4) the

Most of the Company’s raw materials

to properly control the costs of raw

sourcing of raw materials of which

are fresh produce such as meat,

materials. Significant measures

prices are seasonally fluctuated

seafood, vegetables, fruits, egg,

are (1) estimating demands of raw

and which could be properly stored

rice and seasoning of which their

materials that could materially affect

without materially jeopardizing their

market prices and quantities fluctuate

the Company’s total costs of raw

quality will be made in advance in

at any time according to demand

materials in order to plan the sourcing

preparation for consumption during

and supply. This is especially the

for an amount and within a timeframe

the period when their prices are up;

case of volumes being produced

as required by the Company’s sales

and (5) a comparative report will be

which could be negatively affect-

plan; (2) the estimated demand of raw

regularly made to inform changes of

ed by unfavorable weather condi-

materials should allow the Company

raw material prices that could make

tion, natural disaster or contagious

to have a better negotiating power

a material impact to the total costs

diseases in animals or plants, all of

with manufacturers or distributors

of raw materials as this will be used

which are beyond the Company’s

thanks to a huge volume of raw

as a guideline to hike menu prices

control. When raw material prices

materials to be bought and a definite

when necessary and if possible.

Annual Report 2017 l MK Restaurant Group Public Company Limited

These measures were carried out to

(2) monitoring each restaurant’s staff

an optimal level vis-à-vis its revenues

reduce volatility from the change of

productivity and ensuring that it is in

and at the same time reduced its loss

raw material prices as well as to keep

line with the productivity standard

resulted from staff oversupply and

the costs of raw material in control.

developed by the Company. In

employee underperformance.

addition, to encourage restaurant

Risk from additional staff costs

managers to pay attention to this s u b j e c t , s t a ff p ro d u c t i v i t y h a s become one of the Key Performance

Risk from the shortage of branch operational employees

The restaurant business is a labor-in-

Indicators (KPI) used in the evaluation

tensive industry which depends very

of each restaurant’s performance;

T h e C o m p a n y ’s b u s i n e s s i s a

much on employees especially ser-

(3) introducing a computerized

service business which heavily relies

vice staff who will make customers

technology to the restaurant which

upon people as its driving force.

happy through their services. As a

will not only enhance staff efficiency

The Company plans to open new

result, costs of employee are the

but will also improve service quality

branches each year and each branch

second most important cost item of

as the technology will speed up

needs approximately 30 - 40 staff.

the business only after the costs of

t h e s e r v i c e a n d m a k e i t m o re

As a result, the Company has to

food. As a result, if the cost keeps

accurate; and (4) staff especially

recruit a large number of new staff to

rising and the Company could not

service employees will be constant-

accommodate new branch opening.

hike its sales price to compensate

ly trained to enhance performance

Therefore, failure to recruit new staff

for an increasing employee expense

and standardize service quality. By

to accommodate expansion or to

or if it could only partially cover

seriously and incessantly pursuing

replace resigning staff in a timely

the expense due largely to intense

these measures and by hiking sales

fashion will materially affect the

competition or weakening purchasing

prices when necessary and if doable,

Company’s service and operation.

power or any other factor that may

the Company has managed to control

However, it has committed to resolve

prevent the Company from raising its

the costs of employees to remain at

this problem by retaining staff to

sales price, this will negatively affect the Company’s performance in a material manner. To minimize the risk from the increase of employee costs as described above, the Company has conducted various measures to keep the cost within an optimal level. The measures are (1) setting and adjusting the number of staff in each restaurant to reflect its traffic volume to maximize efficiency while enabling to maintain quality service to customers at a standard level envisioned by the Company;

Risk Factors

work as long as possible with the Company and by giving priority to the concept of working under the “MK Culture” where employees of all levels are taken care of. Capable staffs are given a chance to rise along their career path to executive positions in the future. In addition, the Company takes a great care by giving employees fair remunerations and welfare as well as skill-enhancing training and by treating them as family members. As such, the Company continues to attract candidates.

However, the Company has been

that the Company and the lessors

New recruits are to attend a training

a business partner with several

sometimes joined force to resolve

course held by the MK Service

lessors who operate shopping

problems of unimpressive branches

Training Center to acknowledge the

malls, modern-trade outlets and

which had to be closed down for

MK corporate culture and to perform

community malls in Bangkok and

the best interest of both parties,

his/her duty based on the Company’s

provinces. Besides, the Company is

the Company therefore is of the

standards. So far, the Company

Thailand’s leading restaurateur who

opinion that the risk from not finding

has had no problem recruiting new

offers products and services highly

leased space and not renewing lease

personnel with required qualifications.

desirable by consumer. As a result,

agreement should not be an obstacle

this is unlikely to prevent the Com-

to continue its business.

Risk from failure to find leased space and to renew the leased space under a condition deemed appropriate by the Company

pany from finding the leased space. Meanwhile, most of the lease agreements offer a lease term of three years

Risk from new branch opening

at a time which is renewable 3 - 5 times for another three years on each

The Company aims to grow constantly

occasion. Failure to renew the lease

and opening new branch is a factor to

agreement may affect the Company’s

achieve the goal. As the competition

As the competition in the industry

operation. Yet, the Company has

in this industry has become tougher

is getting intense and as there is an

had a warm and long-lasting rela-

than before, together with the fact

increasing number of restaurateurs

tionship with the lessors. Together

that newcomers step into the industry

entering the market, leased space

with its excellent rent payment track

every day, the Company therefore

for new restaurant has become rarer.

record, its compliance with the lease

is exposed to a risk that its new

This could expose the Company to a

agreements, the fact that it has never

branch may not generate sales up

risk from not being able to find and

had problem with the lessors and that

to a target and thereby not yield

lease space to open a new branch

it has the lease agreements renewed

a satisfying investment return. It

as planned.

all the time, not mentioning the fact

needs approximately Baht 8 - 10

Annual Report 2017 l MK Restaurant Group Public Company Limited

million to open a branch. The fund is used for design, construction, mechanical & electricity (M&E) system, furniture, kitchen equipment and other office equipment. The Company plans to constantly expand its MK Suki Restaurant and Yayoi Japanese Restaurant. Locations of newly-opened outlets however may overlap with existing branches located nearby and this could affect the Company’s sales and performances in the longer run. However, to open a new branch, the Company has to do a lot of work

Risk from failure to renew the Yayoi franchise

studying the branch opening plan.

That’s why the Company has been

A newly-opened branch must yield

offered attractive packages of ideal

a good investment return based on

location, space size and rental term.

required criteria. The Development

The Company studies every leased

MK Interfood Co., Ltd. (“MKI”) has

and Engineering Department will be

premise being offered as well as

been licensed to operate a Japanese

responsible for surveying location,

conducts a financial analysis before

restaurant in Thailand by Plenus Co.,

population density, target groups

making an investment decision at an

Ltd. under the “Yayoi” branch. The

of customers and performance of

appropriate site that could generate

franchise term is three years and is

nearby branches. It will also conduct

high yield. The Company is confident

renewable for three years on each

a financial analysis by looking at, for

that new branch opening that covers

occasion unless either party notifies

example, payback period and return

more extensive service areas should

the other to terminate the agreement

on investment (ROI) which must not

increase its capacity to generate higher

180 days before each expiration

be less than a required level. This

profits to shareholders and to reduce

date. As a result, termination of the

information will be used in considering

its operation risk in the long run. In

franchise agreement could prevent

a new branch opening. In addition,

addition, the Company also takes into

the Company from continuing the

the Company has had experiences in

consideration sales amounts of nearby

Yayoi restaurant business which

this business for more than 25 years

branches and population density in

will inevitably affect the Company’s

with highly-recognized products and

the same area to ensure that a new

operation.

services desirable by customers. At

entrant will not affect the business of

The Company has already operated

the other end, shopping mall owners,

existing branch nearby but rather is

the Yayoi Japanese Restaurant

modern-trade outlet and community

an appealing alternative for customers

business for ten years. As of

mall operators are, too, looking for

living in the area and works strategically

December 31, 2017, it had a total

reputable restaurants to lease their

to expand the Company’s service areas

of 165 Yayoi branches. So far, it

space in order to attract customers.

to help maintain its market share.

has strictly complied with the terms

Risk Factors

and conditions of the franchise

orders to the kitchen to shorten

and deliver it to executives who need

agreement where menus and

service time and to minimize errors.

it for analysis and for making crucial

operation procedures of “Yayoi

The IT system is also a crucial

decisions. As a result, the Company

Ken” under the franchise system of

component of the Company’s home

is confident that as the system has

the rights owner and its know-how

delivery service as it receives orders

been constantly enhanced, in case

are actively implemented in the

from customers before sending

of malfunction, the Company will still

business. Others include style of the

them to various branches to execute

be able to continue its business as

restaurant, menu change, choices of

delivery. The system is also prominent

every unit and function does have

raw materials, product development,

in other management processes.

both manuals and standard operating

s t a ff t r a i n i n g , c o m m e rc i a l a n d

If the system is malfunctioned or in

procedures (SOP) that will help them

production operation as well as

case of an unforeseeable event that

resolve problems and thereby allow

on-time payment of the franchise

may paralyze the system, this could

the business to continue running.

fee. In addition, the Company is

affect the Company’s operation.

truly committed to expand the Yayoi

Having realized the importance of

branch as evident in 2017 where 13

the IT system, the Company has

new branches were opened with

adopted a guideline to modernize

more planned openings in the future.

the technology with a focus at

The Company has invested abroad

More importantly, Yayoi Restaurant’s

systems considered crucial to its

through two joint-venture firms in

operation has been growing quite

business; namely accounting, raw

whichit holds 12 percent in Plenus MK

steadily. Besides, the Company and

material sourcing and procurement,

Co., Ltd.’s shares to operate MK Suki

Plenus Co.,Ltd. are strong business

inventory management, product

Restaurant in Japan and 50 percent

alliances who have joined force to run

distribution and communication

in Plenus & MK Pte. Ltd.’s shares to

MK Suki Restaurant overseas. With a

system between the head office and

run MK Suki Restaurant in Singapore.

long-lasting relationship between us

branches nationwide. The enhanced

Each country is exposed to various

and the fact that the Company has

IT system should gather information

risk factors such as economic and

duly complied with conditions in the concerned agreement, the Company is of the view that it should be trusted to continue having the franchise contract renewed.

Risk from the information technology (IT) system To e n h a n c e t h e C o m p a n y ’s customer’s service capacity, it has introduced the IT system in the food ordering process where the system will directly and immediately send

Risk from overseas investment

Annual Report 2017 l MK Restaurant Group Public Company Limited

political conditions, laws, tax and

high density of population who have

Future epidemic, if any, therefore may

exchange rates. As a result, in case

high purchasing power, this could be

affect the Company’s revenues.

of an event with material impact to

a great opportunity for the Company

The Company places a high priority to

business operation in a concerned

to grow even more and also the

the selection of raw materials which

country, it will inevitably affect the

opportunity to diversify the operation

will be supplied by selected quality

Company’s operation.

risk.

manufacturers and distributors. Every

Yet, the Company conducts an overseas investment study where

piece of raw materials will have a

Risk from epidemic

it surveys the market and looks

traceability where product can be traced back throughout the entire

at population density and target

So far, there have been several bouts

food chain from step one to the final

groups of customers as well as other

of outbreaks that hit the restaurant

stage whether it’s about the origin of

economic factors such as GDP,

business hard. For example, in 2002,

food, production and transportation.

inflation rate, exchange rates, political

Bovine Spongiform Encephalopathy

That’s why the Company is convinced

stability, investment policy governing

or the mad cow disease struck the US

that every piece of its raw materials

foreign entities and tax rates. The

and Europe. Three years later, several

meets the standard, is hygienic

Company also conducts financial

countries suffered from the bird

and, is safe without contaminant.

analysis for ratios and figures which

flu (H5N1) outbreak before the world

In addition, the Company has the

must not be lower than its threshold

witnessed the infectious disease of

Quality Control Department to verify

required for overseas investment. In

swine influenza (H1N1) in Mexico

product quality while the operation

addition, by having a strong partner

in 2008. The rampant epidemic did

of the two central kitchens has been

like Plenus Co., Ltd. who is Japan’s

erode customer’s confidence to

certified by international quality

largest bento lunchbox business

consume meat, chicken and pork, all

assurance systems which among a

operator boasting a network of more

of which are major raw materials of

few include ISO, HACCP and GMP.

than 2,900 branches as well as the

all restaurants under the MK Group.

owner of the ready-to-serve Yayoi Ken Restaurant which commands an overnight success in Japan, the Company therefore is confident in Plenus Co., Ltd.’s leadership vision and management style as well as its potential to make MK Suki brand recognized and to expand MK Suki branches all over Japan. As a result, the Company is of the view that careful investment planning and strong business partnership will help reduce the risk. In addition, by expanding the business into countries enjoying a high growth rate with a

Risk Factors

Risk from natural disasters and accidents

Yet, having realized the effect of natural disaster to its business, the Company has planned protective

Thailand’s major flood which started

measures to handle the risk. This

in late July 2011 and last until the end

includes buying casualty insurance,

of the year extensively damaged the

formulating an emergency operation

Thai economy during the latter half of

plan, training staff to handle natural

2011. Water inundated farming areas

disaster incidents, building a new

in the upper Central Plain and

central kitchen at an ideal site,

industrial sites in the lower Central

adding a distribution center to its

Plain including seven industrial

portfolio to diversify risk, approving

estates in Ayutthaya and Pathum

an emergency fund to assist

Thani provinces. The Company’s

employees and communicating

central kitchen at Nava Nakorn (CK 3)

with all parties of the management’s

located at Nava Nakorn Industrial

readiness to bolster confidence of

Estate, too, was under the water

shareholders, employees, suppliers

ensure that branches learn how to

and had to be closed before part

and customers that the Company can

effectively manage inventories while

of the production was relocated to

indeed continue operating and that

staff at every branch may directly

the central kitchen at Bangna (CK4),

it’s ready should there be a natural

communicate with customers. While

which was able to boast enough

disaster risk.

it’s true that the 2011 major flood did

production capacity to accommodate

As for a plan to handle the shortage

prevent the Company from providing a

demands of all existing branches.

of certain products the Sourcing and

full-scaled service, yet, the Company

However, the Company has already

Procurement Department will select

managed to return the business to

eyed an ideal site for its new central

every manufacturer and distributor

normalcy as quickly as possible.

kitchen (CK5). Meanwhile, 55 MK

who can produce products that meet

All customers understood what

Suki Restaurants and 13 Yayoi

the Company’s required standard

happened and continued trusting

Japanese Restaurants suffered from

before closely communicating with

the Company, which convinces the

the 2011 tragic flood where they were

them to learn which product they can

Company that it can and is ready to

forced to shut down for an average of

produce, their production capacity

handle the risk.

0.5 - 2 months. Most, however, were

and volumes and dates they can

Aside from being prepared to protect

not damaged as they were located

deliver such product. The Sourcing

itself from possible flood and to

in shopping malls and modern-trade

and Procurement Department will

handle the disaster if occurred, the

outlets which had effective flood-

coordinate with the central kitchen

Company has taken out several types

protection measures. Yet, the flood

t o e n c o u r a g e d i re c t a n d c l e a r

of casualty insurance policies such

did temporarily suspend the operation

communication to every branch

as accident insurance, third-party

of certain suppliers which in effect led

of shortage items, replacement

liability insurance and property

to a shortage of certain raw materials

items and expected delivery time

insurance to make itself ready for

for a period of time and this inevitably

if the product cannot be delivered

future incidents.

affected the Company’s sales revenues.

normally. The communication is to

Annual Report 2017 l MK Restaurant Group Public Company Limited

votes of shareholders is needed to pass such resolution. Thus, other shareholders of the Company may face the risk of being unable to gather enough votes in order to examine and to balance the power of major shareholders in respect of the matters presented by the major shareholders to the shareholders’ meeting for consideration. H o w e v e r, t h e a f o re - m e n t i o n e d major shareholders who are also senior executives of the Company are the founder of the Company since 1986 and the prime movers

Risk arising from the Company’s major shareholders who are also senior executives of the Company together holding more than 50% of the Company’s total issued share capital

is Mr.Rit Thirakomen’s wife and

responsible for the Company’s

164,087,977 shares or 17.8% were

continuing growth as shown by the

h e l d b y M r s . Yu p i n T h i r a k o m e n

Company’s impressive performance

on behalf of the estate of

as well as the strong financial status

Mr.Somnuk Hanjitkasem, Mrs.Yupin

since the Company’s inception to

Thirakomen’s deceased brother who

the present, lasting for almost 30

died on June 11, 2014. The remaining

years. It is clear evidence that the

164,494,812 shares or 17.9% were

afore-mentioned major shareholders

held by Mr.Somchai Hanjitkasem

who are also senior executives of the

At the closing date of the Company’s

who is another brother of Mrs.Yupin

Company are qualified to continue to

share register on December 29, 2017,

Thirakomen. As a result of such

lead the Company to achieve further

it is noted that the Company’s major

shareholdings, the afore-mentioned

growth and successful performance

shareholders who are also senior

major shareholders who are also

in the future. Nevertheless, in order

executives of the Company together

senior executives of the Company

to create sustainable growth and

held 503,950,947 shares which

are able to control the vote on almost

value added to the Company, the

accounted for 54.73% of the total

every resolutions at the meeting of

afore-mentioned major shareholders

issued share capital of the Company

shareholders such as the election of

who are also senior executives

of 920,878,100 shares. Of the shares

directors of the Company or other

of the Company decided to bring

held by the major shareholders,

important resolutions which require

the Company listed on the Stock

1 4 0 , 0 5 9 , 3 3 3 s h a re s o r 1 5 . 2 %

the majority vote of shareholders

Exchange of Thailand in 2013 to

were held by Mr.Rit Thirakomen,

except in the case where it is required

ensure that the Company is effectively

199,396,802 shares or 21.7% were

by law or the articles of association

and transparently managed under

held by Mrs.Yupin Thirakomen who

of the Company that a vote of

the good corporate governance

not less than three-fourths of the

principles. Being the listed company

Risk Factors

in the Stock Exchange of Thailand,

out of all 3 directors and the chairman

the Company must comply by the

of the committee shall be the

rules and regulations of the Securities

independent director. The roles and

and Exchange Commission and the

responsibilities of the committees are

Stock Exchange of Thailand which

clearly defined and written to ensure

require that the Company must have

that the committees perform their

the audit committee comprising of

duties efficiently and in accordance

all independent directors and other

with the principles of good corporate

committees as deemed necessary in

governance especially the matter

order to assist the Board of Directors

of the transparent disclosure of

in the corporate governance of the

accurate and complete information,

Company to adhere to the good

the assessment of the transactions

corporate governance principles.

that may cause the conflict of interest,

Presently, the Company is comprised

and the compliance with the laws and

of 2 committees including the

regulations of the Stock Exchange

Audit Committee which consists

of Thailand and the Securities and

o f 3 d i re c t o r s , a l l o f t h e m a re

Exchange Commission in order to

independent directors, and the

create the confidence to shareholders

Corporate Governance, Nominating

on the balance of power among the

and Compensation Committee which

major shareholders who are also

consists of 2 independent directors

senior executives of the Company.

STATEMENTS OF THE FINANCIAL POSITION AND OPERATING PERFORMANCE FOR THE YEAR 2017

Report of the Board of Directors’ Responsibilities for the Financial Statements

REPORT OF THE BOARD OF DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS The Board of Directors of MK Restaurant Group Public Company Limited is responsible for the financial statements of the Company and its subsidiaries which have been prepared in accordance with generally accepted accounting standards in Thailand under Accounting Act B.E.2543 and the Securities and Exchange Act B.E. 2535. The policies pursued are deemed appropriate and applied consistently with adequate disclosure of important information in the notes to the financial statements which the auditors has reviewed and expressed opinions in the auditor’s report. The Board of Directors has appointed the Audit Committee comprising of the independent directors to supervise the financial report, internal control system for the purpose of efficiency and effectiveness and align with the financial reporting standard in Thailand and international Best Practice to ensure that the accounting records are accurate, complete and timely to prevent fraud and materially irregular operations. The opinion of the Audit Committee regarding to these matters appears in the Report of Audit Committee in this Annual Report. The Board of Directors has confidence that the internal control and the internal audit systems of the Company and its subsidiaries present the financial position, results and cash flow accurately.

(Mr. Rit Thirakomen) Chairman of the Board of Directors

Annual Report 2017 l MK Restaurant Group Public Company Limited

REPORT OF THE AUDIT COMMITTEE

The Audit Committee appointed by

The work of the Audit Committee

accounting standard. The financial

the Company’s Board of Directors

during 2017 can be summarized

statements were also presented to

consists of three independent

as follows:

the Company’s Board of Directors

directors. Chaired by Dr. Annop

for approval.

Tanlamai, the Committee has Mrs.

1. Review of quarterly

Vilai Chattanrassamee and Mr.

financial statements

2. Review of internal-control

Attapon Chodchoy as two audit

and full year financial

operations and system:

members with Mr. Pasakorn Lila

statement:

The Audit Committee reviewed the

s e r v i n g a s t h e C o m m i t t e e ’s

The Audit Committee reviewed

internal control based on the report

secretary. The qualifications of all

the quarterly financial statements

from the internal audit department

Audit Committee’s members have

and full year financial statement to

together with executives every

passed the criteria laid down by

ensure the accuracy aligned with

quarter to consider the business

the Office of the Securities and

Thai Financial Reporting Standards

operation, use of resources, asset

Exchange Commission (SEC).

(TFRS) as well as the connected

management, fraud, the reliability

The Audit Committee has carried

transactions and transaction that

of financial reports, and compliance

out its work within the scope

may have a conflict of interest

with laws and regulations. The

of duties and responsibilities

with executives, internal audit

Audit Committee did not find

specified in the Audit Committee

department and auditors. The Audit

any material defect. The Audit

Charter which mainly focusing

Committee inquired and received

Committee also reviewed the

on review of financial statements,

explanations from executives of the

auditor’s report including the

internal control system, compliance

Company’s finance and accounting

Company’s internal control and

with laws and regulations and

units as well as the auditors

information teachnology system

information technology system.

concerning the accuracy of the

which also indicated that there

In 2017, the Audit Committee

Company’s financial statements

was no any material defect, all

convened six meetings with the

and consolidated financial

branches and all units have efficient

Company’s executives, internal

statements, and also the adequacy

processes. The inter nal audit

auditors, and the auditors. In

of information disclosure and notes

department works independently

addition, the Audit Committee

to the financial statements. After

to assess all major systems of the

met with the auditors to discuss

the review, the Audit Committee

Company based on the approved

2016 financial statements without

agreed with the auditors that fair-

audit plan and report directly to the

the presence of the Company’s

ly the financial statements were

Audit Committee.

Management in order to discuss

accurate in all material aspects

and share opinions to ensure that

and were reliable in accordance

the auditor works independently.

with the generally accepted

Report of the Audit Committee

3. Review of compliance

the Audit Committee reviewed

as the Company’s auditor for the

with laws and regulations:

the Company’s compliance with

year 2018. The appointment will

The Audit Committee reviewed

the Securities and Exchange Act,

be subjected to the approval from

the compliance with internal-audit

the regulations of the SEC and

the 2018 Annual General Meeting

team and relevant executives. The

SET, and other relevant laws

of Shareholders.

review showed the audited units

related to the Company’s busi-

In conclusion, after having

proceeded in line with prescribed

ness. The Audit Committee

thoroughly carried out its duties

laws and regulations. They also

concluded that the Company fully

as defined in the Audit Committee

kept abreast of any change in

complied with the aforementioned

Charter, the Audit Committee has

law, accounting standard and

regulatory requirements in all

the opinion that the Company

relevant issues through quarterly

material aspects. In addition, the

accurately reported its financial

consultations with external auditor.

Audit Committee encouraged

information and operations;

Updated knowledge of laws,

executives and employees of the

that not only the Company had

regulations and relevant issues

Company to follow the policy as

internal-control system and internal

allowed the Company to study

good corporate governance shall

audit in place but it also complied

and understand the changed

boost the Company’s efficiency.

with relevant laws, rules and

re q u i re m e n t s w e l l f o r p ro p e r

Moreover, the Audit Committee re-

regulations; that its connected

compliance.

viewed the anti-corruption self-as-

transactions were duly disclosed

sessment form in order to propose

and the Company’s operations

4. Review of connected

to Thai Institute of Directors and in

responded to the principle of

transactions or transactions

this year the Company has certified

good corporate governance in an

that may cause conflict

to be a member of Thailand’s

adequate, transparent and reliable

of interest:

Private Sector Collective Action

manner; and that the Company

The Audit Committee reviewed

Coalition Corruption.

constantly improved its operation systems so as to deliver quality and

the appropriateness of connected transactions or transactions that

6. Consider the

respond well to changing business

may cause conflict of interest. The

appointment of the auditor:

environment.

review showed that the connected

The Audit Committee reviewed

transactions by the Company in

the performance of auditor during

2017 were done based on normal

the past year on the basis of his/

business practice, reasonable, and

her/their reliability, independence,

in the best interest of the Company’s

competency and abilities to provide

business. These connected

services, counseling on accounting

Dr. Annop Tanlamai

transactions were transparent,

standards, auditing, and certifying

Chairman of the Audit Committee

with related information disclosed

financial statements in a timely

fully and accurately.

manner. Based on the review, the Audit Committee recommended

5. Promotion of Good

to the Board of Directors that

Corporate Governance:

EY Office Limited be appointed

Annual Report 2017 l MK Restaurant Group Public Company Limited

INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report

Group Public Company Limited

Key Audit Matters

and its subsidiaries and of MK Restaurant Group Public Company

Key audit matters are those matters

Limited as at 31 December 2017,

that, in my professional judgement,

M K R e s t a u r a n t G ro u p P u b l i c

their financial performance and

were of most significance in my

Company Limited

cash flows for the year then ended

audit of the financial statements of

in accordance with Thai Financial

the current period. These matters

Reporting Standards.

were addressed in the context of

the

Shareholders

Opinion

my audit of the financial statements I have audited the accompanying

Basis for Opinion

consolidated financial statements

as a whole, and in forming my opinion thereon, and I do not

of MK Restaurant Group

I conducted my audit in accordance

provide a separate opinion on these

Public Company Limited and

with Thai Standards on Auditing.

matters.

its subsidiaries (“the Group”),

My responsibilities under those

I have fulfilled the responsibilities

which comprise the consolidated

standards are further described

d e s c r i b e d i n t h e A u d i t o r ’s

statement of financial position as

in the Auditor’s Responsibilities

Responsibilities for the Audit of

at 31 December 2017, and the

for the Audit of the Financial

the Financial Statements section

related consolidated statements

Statements section of my report.

of my report, including in relation

of income, comprehensive income,

I am independent of the Company

to these matters. Accordingly, my

changes in shareholders’ equity and

in accordance with the Code of

audit included the performance of

cash flows for the year then ended,

Ethics for Professional Accountants

procedures designed to respond

and notes to the consolidated

as issued by the Federation

to my assessment of the risks

financial statements, including a

of Accounting Professions as

of material misstatement of the

summary of significant accounting

relevant to my audit of the financial

financial statements. The results of

policies, and have also audited

statements, and I have fulfilled

my audit procedures, including the

the separate financial statements

my other ethical responsibilities

procedures performed to address

of MK Restaurant Group Public

in accordance with the Code. I

the matters below, provide the

Company Limited for the same

believe that the audit evidence

basis for my audit opinion on the

period.

I have obtained is sufficient and

accompanying financial statements

In my opinion, the financial

appropriate to provide a basis for

as a whole.

statements referred to above present

my opinion.

Key audit matters and how audit

fairly, in all material respects, the

procedures respond for each

financial position of MK Restaurant

matter are described below.

Independent Auditor’s Report

Revenue Recognition

period, particularly for accounting

Other Information

Responsibilities of Management and Those Charged with Governance for the Financial Statements

directly affect profit or loss of the

Management is responsible

Management is responsible for the

Group. The Group has numerous

for the other information. The

preparation and fair presentation

sales and services made by cash

other information comprises the

of the financial statements in

and credit cards through a large

information included in annual

accordance with Thai Financial

number of branches nationwide. In

report of the Group, but does not

Reporting Standards, and for such

addition, because of the intensified

include the financial statements

internal control as management

competition of the food and

and my auditor’s report thereon.

determines is necessary to

beverage industry, the Group has

The annual report of the Group is

enable the preparation of financial

to continually adapt its marketing

expected to be made available to

statements that are free from

strategies and promotional

me after the date of this auditor’s

material misstatement, whether

activities in order to boost sales.

report.

due to fraud or error.

I have therefore focused on the

My opinion on the financial

In preparing the financial

revenue recognition of the Group.

statements does not cover the

statements, management is

I examined the Group’s revenue

other information and I do not

responsible for assessing the

recognition by assessing and

express any form of assurance

Group’s ability to continue as a

testing the Group’s information

conclusion thereon.

going concer n, disclosing, as

technology general controls and

In connection with my audit of

applicable, matters related to

internal controls with respect to the

the financial statements, my

going concer n and using the

revenue cycle by making enquires

re s p o n s i b i l i t y i s t o re a d t h e

going concern basis of accounting

of responsible executives, gaining

other information and, in doing

unless management either intends

an understanding of controls and

so, consider whether the other

to liquidate the Group or to cease

selecting representative samples to

information is materially inconsistent

operations, or has no realistic

test the operation of the designed

with the financial statements or my

alternative but to do so.

controls. In addition, I applied a

knowledge obtained in the audit or

Those charged with governance

sampling method to select sales

otherwise appears to be materially

are responsible for overseeing the

and service transactions occurring

misstated.

Group’s financial reporting process.

during the year and near the end of

When I read the annual report of

the accounting period to examine

the Group, if I conclude that there

the supporting documents. I also

is a material misstatement therein,

performed analytical procedures

I am required to communicate

on disaggregated data to detect

the matter to those charged with

possible irregularities in sales and

governance for correction of the

M y o b j e c t i v e s a re t o o b t a i n

service transactions throughout the

misstatement.

re a s o n a b l e a s s u r a n c e a b o u t

entries made through jour nal Revenues from sales and services

vouchers.

are the Group’s main transactions that have significant volume of transactions and amounts, and

Auditor’s Responsibilities for the Audit of the Financial Statements

Annual Report 2017 l MK Restaurant Group Public Company Limited

whether the financial statements

fraud may involve collusion,

conclusions are based on the

as a whole are free from material

forgery, intentional omissions,

audit evidence obtained up

misstatement, whether due to

misrepresentations, or the

to the date of my auditor’s

fraud or error, and to issue an

override of internal control.

report. However, future events or conditions may cause the

auditor’s report that includes my opinion. Reasonable assurance

yy Obtain an understanding of

is a high level of assurance, but

internal control relevant to the

is not a guarantee that an audit

audit in order to design audit

conducted in accordance with Thai

procedures that are appropriate

yy E v a l u a t e t h e o v e r a l l

Standards on Auditing will always

in the circumstances, but not

presentation, structure and

detect a material misstatement

for the purpose of expressing

content of the financial

when it exists. Misstatements

an opinion on the effectiveness

statements, including the

can arise from fraud or error

of the Group’s internal control.

disclosures, and whether the

and are considered material if,

Group to cease to continue as a going concern.

financial statements represent

individually or in the aggregate,

yy Evaluate the appropriateness

the underlying transactions

they could reasonably be expected

of accounting policies used

and events in a manner that

to influence the economic decisions

and the reasonableness of

achieves fair presentation.

of users taken on the basis of these

accounting estimates and

financial statements.

related disclosures made by

As part of an audit in accordance

management.

with Thai Standards on Auditing,

yy Obtain sufficient appropriate audit evidence regarding the financial information of the

I exercise professional judgement

yy Conclude on the appropriateness

entities or business activities

and maintain professional

o f m a n a g e m e n t ’s u s e o f

within the Group to express an

skepticism throughout the audit.

the going concern basis of

opinion on the consolidated

I also:

accounting and, based on

financial statements. I am

the audit evidence obtained,

responsible for the direction,

yy Identify and assess the risks of

whether a material uncertainty

supervision and performance

material misstatement of the

exists related to events or

of the group audit. I remain

financial statements, whether

conditions that may cast

solely responsible for my audit

due to fraud or error, design

significant doubt on the

opinion.

and perform audit procedures

Group’s ability to continue as

responsive to those risks, and

a going concern. If I conclude

I communicate with those charged

obtain audit evidence that is

that a material uncertainty

with governance regarding, among

sufficient and appropriate to

exists, I am required to draw

other matters, the planned scope

provide a basis for my opinion.

attention in my auditor’s report

and timing of the audit and

The risk of not detecting a

to the related disclosures in the

significant audit findings, including

material misstatement resulting

financial statements or, if such

any significant deficiencies in

from fraud is higher than for

disclosures are inadequate,

internal control that I identify during

one resulting from error, as

to modify my opinion. My

my audit.

Independent Auditorâ&#x20AC;&#x2122;s Report

I also provide those charged with

with those charged with governance,

matter should not be communicated

gover nance with a statement

I determine those matters that were

in my report because the adverse

that I have complied with

of most significance in the audit

consequences of doing so would

relevant ethical requirements

of the financial statements of the

reasonably be expected to outweigh

regarding independence, and

current period and are therefore

the public interest benefits of such

to communicate with them all

the key audit matters. I describe

communication.

relationships and other matters that

these matters in my auditorâ&#x20AC;&#x2122;s report

I am responsible for the audit

may reasonably be thought to bear

unless law or regulation precludes

re s u l t i n g i n t h i s i n d e p e n d e n t

on my independence, and where

public disclosure about the

auditorâ&#x20AC;&#x2122;s report.

applicable, related safeguards.

matter or when, in extremely rare

From the matters communicated

circumstances, I determine that a

Kamontip Lertwitworatep Certified Public Accountant (Thailand) No. 4377 EY Office Limited Bangkok: 26 February 2018

Annual Report 2017 l MK Restaurant Group Public Company Limited

STATEMENT OF FINANCIAL POSITION MK Restaurant Group Public Company Limited and its subsidiaries As at 31 December 2017

(Unit: Baht)

Note

Consolidated financial

Separate financial

statements

As at As at As at As at 31 December 31 December 31 December 31 December 2017 2016 2017 2016

Assets Current assets Cash and cash equivalents

Short-term investments

Trade and other receivables Short-term loan to related party Inventories

409,621,832

322,524,253

331,539,955

236,267,152

9,336,129,839 9,288,255,319 8,719,125,103 8,951,572,621

6,9

75,815,284

103,946,584

194,918,683

1,000,000

350,345,201

323,842,992

328,054,301

304,340,386

404,657,837

359,297,051

330,576,094

290,730,656

Other current assets

Total current assets

217,723,217

10,576,569,993 10,397,866,199 9,904,214,136 10,001,634,032

Non-current assets Investments in subsidiaries

631,479,842

451,479,842

Investment in joint venture

75,875,225

98,081,853

149,207,500

Other long-term investments

793,720,094

Property, plant and equipment

Intangible assets

85,501,823

94,854,383

80,641,986

89,528,848

Leasehold rights

266,392,170

283,475,771

249,765,514

264,815,377

Deferred tax assets

73,415,240

135,560,230

64,538,903

125,801,665

399,003,600

370,986,518

307,515,714

289,219,878

Deposits

Total non-current assets Total assets

4,012,251,004 4,261,475,839 3,273,227,436 3,543,441,753

5,706,159,156 5,244,434,594 5,498,971,342 4,913,494,863 16,282,729,149 15,642,300,793 15,403,185,478 14,915,128,895

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

Financial Statements

STATEMENT OF FINANCIAL POSITION

(CONT.)

MK Restaurant Group Public Company Limited and its subsidiaries As at 31 December 2017

(Unit: Baht)

Note

Consolidated financial

Separate financial

statements

As at As at As at As at 31 December 31 December 31 December 31 December 2017 2016 2017 2016

Liabilities and shareholders’ equity Current liabilities Trade and other payables

6,17 1,627,926,195 1,479,548,063 1,436,591,547 1,311,933,354

Income tax payable

208,144,792

209,475,620

176,374,985

186,520,274

39,962,594

36,620,928

29,390,090

32,027,724

232,820,179

215,551,430

195,341,205

181,592,790

Current portion of deferred income of membership fee Other current liabilities

Total current liabilities

2,108,853,760 1,941,196,041 1,837,697,827 1,712,074,142

Non-current liabilities D e f e r re d i n c o m e o f m e m b e r s h i p f e e - net of current portion Provision for long-term employee benefits

Other non-current liabilities

Total non-current liabilities Total liabilities

11,618,345

12,240,558

8,793,234

9,745,203

320,030,716

299,549,797

292,809,902

277,245,094

13,585,521

12,083,724

15,216,255

13,714,458

345,234,582

323,874,079

316,819,391

300,704,755

2,454,088,342 2,265,070,120 2,154,517,218 2,012,778,897

Shareholders’ equity Share capital

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

925,850,000

920,878,100

914,849,400

920,878,100

914,849,400

Issued and fully paid 920,878,100 ordinary shares of Baht 1 each (31 December 2016: 914,849,400 ordinary shares of Baht 1 each) Share premium

8,785,027,903 8,785,027,903 8,785,027,903 8,785,027,903

Capital reserve for share-based payment transactions

656,331,057

626,325,025

656,331,057

626,325,025

92,585,000

Retained earnings Appropriated - statutory reserve Unappropriated Other component of shareholders’ equity

3,367,262,132 2,955,082,401 2,794,015,238 2,487,288,366 6,556,615

3,360,944

(169,038)

(3,725,696)

Total shareholders’ equity

13,828,640,807 13,377,230,673 13,248,668,260 12,902,349,998

Total liabilities and shareholders’ equity

16,282,729,149 15,642,300,793 15,403,185,478 14,915,128,895

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

Annual Report 2017 l MK Restaurant Group Public Company Limited

INCOME STATEMENTS MK Restaurant Group Public Company Limited and its subsidiaries As at 31 December 2017

(Unit: Baht)

Consolidated

Separate financial

financial statements Note

statements

2017

2016

2017

2016

16,072,821,597

15,145,882,364

14,174,533,577

13,436,647,305

113,154,343

109,841,904

112,404,560

108,762,771

Revenues Sales and service income Interest income Dividend income

Other income

Total revenues Expenses

234,999,895

187,999,916

271,767,942

242,640,153

386,653,476

325,920,011

16,457,743,882

15,498,364,421

14,908,591,508

14,059,330,003

5,173,596,160

4,952,433,152

5,320,959,340

5,045,095,693

Cost of sales and services Selling expenses

7,219,232,540

6,941,696,392

5,863,064,517

5,675,070,527

Administrative expenses

1,079,528,303

1,000,774,698

875,636,418

836,693,379

Other expenses

51,125,647

Total expenses

13,472,357,003

12,894,904,242

12,110,785,922

11,556,859,599

2,985,386,879

2,603,460,179

2,797,805,586

2,502,470,404

(21,845,641)

(19,833,042)

2,963,541,238

2,583,627,137

2,797,805,586

2,502,470,404

Profit before share of loss from investment in joint venture and income tax expenses Share of loss from investment in joint venture

Profit before income tax expenses Income tax expenses

Profit for the year

(538,694,922)

(483,864,929)

(478,412,234)

(430,621,314)

2,424,846,316

2,099,762,208

2,319,393,352

2,071,849,090

2,424,846,316

2,099,762,208

2,319,393,352

2,071,849,090

2.65

2.30

2.53

2.27

2.63

2.28

2.52

2.25

Profit attributable to: Equity holders of the Company

Earnings per share

Basic earnings per share Profit attributable to equity holders of the Company Diluted earnings per share Profit attributable to equity holders of the Company Profit attributable to equity holders of the Company

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

Financial Statements

STATEMENTS OF COMPREHENSIVE INCOME MK Restaurant Group Public Company Limited and its subsidiaries As at 31 December 2017

(Unit: Baht)

Note

Consolidated

Separate financial

financial statements

statements

2017

2016

2017

2016

2,424,846,316

2,099,762,208

2,319,393,352

2,071,849,090

(360,987)

(402,794)

(211,298)

(4,657,120)

(211,298)

(4,657,120)

4,657,120

(889,164)

931,424

(889,164)

931,424

3,556,658

(3,725,696)

3,556,658

(3,725,696)

3,195,671

(4,128,490)

3,556,658

(3,725,696)

2,428,041,987

2,095,633,718

2,322,950,010

2,068,123,394

2,428,041,987

2,095,633,718

2,322,950,010

2,068,123,394

Profit for the year Other comprehensive income: Other comprehensive income reclassified or to be reclassified to profit or loss in subsequent periods Exchange differences on translation of financial statements in foreign currency Loss on changes in value of available-for-sale investments Transferred the effect of changes in value of available-for-sale investments disposed during the period to profit and loss Less: Income tax effect Gain (loss) on changes in value of available-for-sale investments - net of income tax

Other comprehensive income for the year Total comprehensive income for the year Total comprehensive income attributable to: Equity holders of the Company

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

Annual Report 2017 l MK Restaurant Group Public Company Limited

CASH FLOW STATEMENTS MK Restaurant Group Public Company Limited and its subsidiaries As at 31 December 2017

(Unit: Baht)

Consolidated financial

Separate financial

statements

2017

2016

2017

2016

2,963,541,238

2,583,627,137

2,797,805,586

2,502,470,404

(71,567,757)

(52,680,938)

(65,272,617)

(48,086,346)

(10,438,892)

(9,081,401)

(9,711,995)

(9,380,565)

(5,474,876)

858,562

(5,474,876)

858,562

159,642

51,125,647

21,845,641

19,833,042

Cash flows from operating activities Profit before tax Adjustments to reconcile profit before tax to net cash provided by (paid from) operating activities: Gain on sales of short-term investments Gain on revaluation of short-term investments Unrealised gain (loss) on exchange Amortised premium on investments in available-for-sale securties Allowance for impairment loss on investment in joint venture Share of loss from investment in joint venture Loss on damaged inventories Amortisation of prepaid expenses Depreciation and amortisation

3,077,541

1,112,467

3,077,541

1,112,467

25,777,440

13,204,199

18,823,629

11,488,863

854,298,254

864,762,333

697,050,960

712,089,064

19,201,205

19,317,417

11,285,635

14,520,244

Loss on disposals and write-off of equipment and intangible assets Expenses for share-based payment transactions

30,006,032

99,600,281

25,530,397

95,036,075

Provision for long-term employee benefits

41,392,099

39,233,362

36,175,988

34,492,408

(61,537)

86,355

(16,639,799)

(16,411,572)

(16,055,919)

(15,661,072)

(36,620,928)

(41,777,654)

(32,027,724)

(33,383,986)

Reduction of inventory to net realisable value (reversal) Realisation of gift voucher, net of sales and cash received during the year Realisation of deferred income, net of sales and cash received during the year Dividend income Interest income

(234,999,895)

(187,999,916)

(113,154,343)

(109,844,903)

(112,404,560)

(108,762,771)

3,705,340,960

3,411,838,687

3,165,087,439

2,968,793,431

Profit from operating activities before changes in operating assets and liabilities

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

Financial Statements

CASH FLOW STATEMENTS

(CONT.)

MK Restaurant Group Public Company Limited and its subsidiaries As at 31 December 2017

(Unit: Baht)

Consolidated financial

Separate financial

statements 2017

statements 2016

2017

2016

Cash flows from operating activities (continued) Operating assets (increase) decrease Trade and other receivables Inventories

(375,203)

3,040,399

(444,074)

(1,356,237)

(29,518,213)

(42,908,858)

(26,791,456)

(36,600,789)

Other current assets

(31,780,792)

(36,871,574)

(19,311,633)

(23,535,822)

Deposits

(28,017,082)

(13,558,009)

(18,295,836)

(5,309,736)

Operating liabilities increase (decrease) Trade and other payables

242,339,071

62,047,460

218,342,406

53,142,314

Other current liabilities

33,908,548

29,758,377

29,804,334

23,779,060

Deferred income

39,340,381

38,758,292

28,438,121

31,669,733

Provision for long-term employee (20,911,180)

(9,419,306)

(20,611,180)

(8,798,916)

Other non-current liaibilities

benefits

1,501,797

2,677,145

1,501,797

4,307,879

Cash from operating activities

3,911,828,287

3,445,362,613

3,357,719,918

3,006,090,917

Cash received from interest income Cash paid for income tax

Net cash from operating activities

141,660,846

111,271,786

140,128,803

110,716,845

(478,769,924)

(467,110,324)

(428,183,925)

(415,385,696)

3,574,719,209

3,089,524,075

3,069,664,796

2,701,422,066

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

Annual Report 2017 l MK Restaurant Group Public Company Limited

CASH FLOW STATEMENTS

(CONT.)

MK Restaurant Group Public Company Limited and its subsidiaries As at 31 December 2017

(Unit: Baht)

Consolidated financial

Separate financial

statements

2017

2016

2017

2016

Cash flows from investing activities Decrease (increase) in short-term loan to related party

1,000,000

(1,000,000)

(833,688,905)

(596,509,429)

(560,388,904)

(644,208,429)

(180,000,000)

20,884,196

11,823,596

Increase in short-term investments and other long-term investments Cash paid for investment in subsidiary Decrease in advances for purchases of building and equipment Cash paid for purchases of plant and (619,374,684)

(614,229,960)

(448,511,318)

(407,666,076)

Cash paid for intangible assets

equipment

(6,404,045)

(12,874,997)

(6,059,403)

(9,691,697)

Cash paid for leasehold rights

(24,960,000)

(39,755,000)

(24,960,000)

(39,755,000)

3,443,889

4,145,396

16,165,517

22,626,819

234,999,895

187,999,916

(1,480,983,745)

(1,238,339,794)

(967,754,213)

(879,870,871)

Proceeds from disposals of equipment Dividend income

Net cash used in investing activities Cash flows from financing activities

6,028,700

4,599,900

6,028,700

4,599,900

Dividend paid

Cash received from exercised warrants

(2,012,666,585)

(1,820,494,084)

(2,012,666,480)

(1,820,494,000)

Net cash used in financing activities

(2,006,637,885)

(1,815,894,184)

(2,006,637,780)

(1,815,894,100)

87,097,579

35,290,097

95,272,803

5,657,095

322,524,253

287,234,156

236,267,152

230,610,057

409,621,832

322,524,253

331,539,955

236,267,152

96,988,403

146,444,780

66,800,868

115,980,519

Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year (Note 7) Supplemental disclosure of cash flows information Non-cash items Accounts payable for purchases of plant and equipment

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

Dividend paid

920,878,100 8,785,027,903

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

Balance as at 31 December 2017

for share-based payment transactions

Ordinary shares issued from exercised warrants

Recognition of expenses against capital reserve

Total comprehensive income for the year 6,028,700

19,20

Other comprehensive income for the year

914,849,400 8,785,027,903

Profit for the year

914,849,400 8,785,027,903

Balance as at 1 January 2017

Dividend paid

Balance as at 31 December 2016

for share-based payment transactions -

Ordinary shares issued from exercised warrants 4,599,900

Total comprehensive income for the year

Recognition of expenses against capital reserve

Other comprehensive income for the year

910,249,500 8,785,027,903

premium

share capital

19,20

Note

paid-up

Issued and

Profit for the year

Balance as at 1 January 2016

For the year ended 31 December 2017

MK Restaurant Group Public Company Limited and its subsidiaries

Capital reserve

656,331,057

30,006,032

626,325,025

99,600,281

526,724,744

transactions

payment

92,585,000

3,367,262,132

(2,012,666,585)

2,424,846,316

2,955,082,401

(1,820,494,084)

2,099,762,208

2,675,814,277

6,725,653

(360,987)

7,086,640

(402,794)

7,489,434

in foreign currencies

reserve

Unappropriated

financial statements

on translation of

(169,038)

3,556,658

(3,725,696)

investments

available-for-sale

in value of

Exchange differences Deficit on changes statutory

for share-based Appropriated -

Other comprehensive income

Other component of shareholders’ equity

equity

shareholders

Total

(Unit: Baht)

99,600,281

4,599,900

2,095,633,718

(4,128,490)

2,099,762,208

30,006,032

6,028,700

2,428,041,987

3,195,671

2,424,846,316

6,556,615 13,828,640,807

- (2,012,666,585)

3,195,671

3,360,944 13,377,230,673

- (1,820,494,084)

(4,128,490)

7,489,434 12,997,890,858

ers’ equity

of sharehold-

components

Total other

Other component of shareholders’ equity

Consolidated financial statements

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Dividend paid

920,878,100

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

Balance as at 31 December 2017

for share-based payment transactions

Recognition of expenses against capital reserve

6,028,700

Total comprehensive income for the year 19,20

Other comprehensive income for the year

Ordinary shares issued from exercised warrants

914,849,400

Balance as at 1 January 2017

914,849,400

Dividend paid

Balance as at 31 December 2016

for share-based payment transactions

Recognition of expenses against capital reserve

4,599,900

Total comprehensive income for the year

Ordinary shares issued from exercised warrants

Other comprehensive income for the year

910,249,500

share capital

19,20

Note

8,785,027,903

Share premium

656,331,057

30,006,032

626,325,025

99,600,281

526,724,744

2,235,933,276

2,071,849,090

2,319,393,352

2,487,288,366

92,585,000

2,794,015,238

- (2,012,666,480)

92,585,000

- (1,820,494,000)

92,585,000

(169,038)

3,556,658

(3,725,696)

investments

statutory reserve

transactions

Unappropriated

in value of available-for-sale

Appropriated -

Deficit on changes

income

share-based payment

Retained earnings

Other comprehensive

equity

of shareholdersâ&#x20AC;&#x2122;

Other component

(CONT.)

Capital reserve for

Separate financial statements

Issued and paid-up

Profit for the year

Balance as at 1 January 2016

For the year ended 31 December 2017

MK Restaurant Group Public Company Limited and its subsidiaries

STATEMENTS OF CHANGES IN SHAREHOLDERSâ&#x20AC;&#x2122; EQUITY

13,248,668,260

(2,012,666,480)

30,006,032

6,028,700

2,322,950,010

3,556,658

2,319,393,352

12,902,349,998

(1,820,494,000)

99,600,281

4,599,900

2,068,123,394

(3,725,696)

2,071,849,090

12,550,520,423

equity

Total shareholders

(Unit: Baht)

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

1. General information

Company had operated 473

language are the official statutory

branches (2016: 461 branches).

financial statements of the Company. The financial statements in English

MK Restaurant Group Public Company Limited (“the Company”)

2. Basis of preparation

language have been translated from the Thai language financial

was incorporated as a limited company

statements.

under Thai laws and subsequently

2.1 The financial statements

registered the change of its status to

have been prepared in accordance

The financial statements have been

a public limited company under the

with Thai Financial Reporting

prepared on a historical cost basis

Public Limited Companies Act, and

Standards enunciated under the

except where otherwise disclosed

domiciled in Thailand. The Company

Accounting Professions Act B.E. 2547

in the notes on accounting policies.

is principally engaged in sales of

and their presentation has been made

2.2 Basis of consolidation

foods and beverages through

in compliance with the stipulations of

a) The consolidated financial

restaurants, under the trademark “MK

the Notification of the Department

statements include the financial

Restaurants”. The registered office of

of Business Development dated 11

statements of MK Restaurant

the Company is at 1200 Bangna-trad

October 2016, issued under the

Group Public Company Limited

Road, Bangna, Bangkok.

Accounting Act B.E. 2543.

(“the Company”) and its subsidiaries

As at 31 December 2017, the

The financial statements in Thai

Company’s name

Nature of

Country of

business

Incorporation

(“the subsidiaries”) as follows: Percentage of shareholding 2017

2016

Percent

Subsidiaries (held by the Company) MK Interfood Company Limited

Restaurant

MK Service Training Center

Training service

Company Limited

provider

International Food Supply

Manufacture and

Company Limited

distribution of foods

Thailand

100

Thailand

100

Thailand

100

b) The Company is deemed to

consolidated, being the date on

e) M a t e r i a l b a l a n c e s a n d

have control over an investee or

which the Company obtains control,

transactions between the Company

subsidiaries if it has rights, or is

and continue to be consolidated until

and its subsidiaries have been

exposed, to variable returns from its

the date when such control ceases.

eliminated from the consolidated

involvement with the investee, and it

d) The financial statements

has the ability to direct the activities

of the subsidiaries are prepared

2.3 The separate financial

that affect the amount of its returns.

u s i n g t h e s a m e s i g n i fi c a n t

statements present investments in

c) S u b s i d i a r i e s a r e f u l l y

accounting policies as the Company.

subsidiaries and joint venture under

financial statements.

the cost method.

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

3. New financial reporting

for investments in subsidiaries,

Standards with most of the changes

standards

joint ventures and associates in

and clarifications directed towards

separate financial statements under

disclosures in the notes to financial

(a). Financial reporting standards

the equity method, as described in

statements.

that became effective in the

TAS 28 (revised 2016) Investments

The management of the Company

current year

in Associates and Joint Ventures.

and its subsidiaries believes that the

During the year, the Company and

However, the entity is to apply

revised financial reporting standards

its subsidiaries have adopted the

the same accounting treatment

will not have any significant impact

revised financial reporting standards

for each category of investment.

on the financial statements when

and interpretations (revised 2016) and

If an entity elects to account for

they are initially applied.

new accounting treatment guidance

such investments using the equity

which are effective for fiscal years

method in the separate financial

4. Significant accounting

beginning on or after 1 January

statements, it has to adjust the

policies

2017. These financial reporting

transaction retrospectively.

standards were aimed at alignment

This standard does not have

4.1 Revenue recognition

with the corresponding International

any significant impact on the

Sales and service income

Financial Reporting Standards with

Company’s and its subsidiaries’

These mainly represent revenues

most of the changes directed towards

financial statements because

from sales of foods and beverages

revision of wording and terminology,

the management has decided

through the restaurants which are

and provision of interpretations

to continue accounting for such

recognised upon goods being

and accounting guidance to users

investments under the cost method

d e l i v e re d a n d s e r v i c e s b e i n g

of standards. The adoption of the

in the separate financial statements.

rendered. Sales and service income

revised financial reporting standards

are the invoiced value, excluding

does not have any significant

(b). Financial reporting standards

value added tax, of goods

impact on the Company’s and its

that will become effective in the

supplied and services rendered

subsidiaries’ financial statements.

future

after deducting discounts and

However, one standard involves

During the current year, the Federation

allowances.

changes to key principles, which are

of Accounting Professions issued

summarised below.

a number of the revised financial

Income from membership cards is

reporting standards and interpretations

recognised on a straight-line basis

TAS 27 (revised 2016)

(revised 2017) which are effective

over the membership period.

Separate Financial

for fiscal years beginning on or after

Statements

1 January 2018. These financial

Interest income is recognised on an

reporting standards were aimed at

accrual basis based on the effective

This revised standard stipulates

alignment with the corresponding

interest rate.

an additional option to account

International Financial Reporting

Membership fee

Interest income

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

selling price in the ordinary course

and joint venture are accounted

Dividends are recognised when

of business, less estimated costs

f o r i n t h e s e p a r a t e fi n a n c i a l

the right to receive the dividends

necessary to make the sale.

statements using the cost method

is established.

4.5 Investments

net of allowance for impairment loss

a) Investments in securities

(if any).

Dividends

Other income Other income is recognised on an

held for trading are stated at fair

The fair value of unit trusts is

accrual basis.

value. Changes in the fair value of

determined from their net asset

these securities are recorded in

v a lue . The fa ir v a lue of debt

profit or loss.

instruments is determined based

4.2 Cash and cash equivalents Cash and cash equivalents consist

on yield rates quoted by the Thai

of cash in hand and at banks, and

b) Investments in available-for

all highly liquid investments with an

-sale securities are stated at fair

Bond Market Association.

original maturity of three months or

value. Changes in the fair value of

On disposal of an investment, the

less and not subject to withdrawal

these securities are recorded in

difference between net disposal

restrictions.

other comprehensive income, and

proceeds and the carrying amount

will be recorded in profit or loss when

of the investment is recognised in

the securities are sold.

profit or loss.

4.3 Trade accounts receivable Trade accounts receivable are stated

4.6 Property, plant and

at their net realisable value. Allowance

c) Investments in debt securities,

for doubtful accounts is provided for

both due within one year and expected

equipment and depreciation

the estimated losses that may be

to be held to maturity, are recorded

Land is stated at cost. Plant and

incurred in collection of receivables.

at amortised cost. The premium/

equipment are stated at cost less

The allowance is generally based on

discount on debt securities is

accumulated depreciation and

collection experience and analysis of

amortised/accreted by the effective

allowance for loss on impairment

debt aging.

rate method with the amortised/

of assets (if any).

accreted amount presented as an

Depreciation of plant and equipment

adjustment to the interest income.

is calculated by reference to their

4.4 Inventories Finished goods are valued at the lower of cost (first-in, first-out

d) Investments in non-mar-

costs on the straight-line basis over

method) and net realisable value.

ketable equity securities, which

the following estimated useful lives:

Cost is defined as all the costs of

the Company classifies as other

production including labour cost

investments, are stated at cost net

and attributable factory overheads.

of allowance for impairment loss

Raw materials and supplies are

(if any).

valued at the lower of cost (first-in,

e) Investment in joint venture is

first-out method) and net realisable

accounted for in the consolidated

value, and are charged to production

financial statements using the equity

costs whenever consumed.

method.

Net realisable value is the estimated

f) Investments in subsidiaries

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

Land improvement

5 years

Building

20 years

Leasehold improvement

Lease term

Utility system

10 years

Kitchen utensils and operating equipment

5 years

Machinery and equipment

5 years and 8 years

Furniture, fixtures and office equipment

3 years and 5 years

Motor vehicles

5 years

least at each financial year end. The

A summary of intangible assets

determining income.

amortisation expense is charged to

with finite useful lives is as below.

No depreciation is provided on

the income statement.

Depreciation is included in

land, construction in progress and equipment under installation. An item of property, plant and equipment is derecognised

Useful lives

Computer software

5 years and 10 years

upon disposal or when no future economic benefits are expected

4.8 Leasehold rights and

or enterprises which directly or

from its use or disposal. Any gain or

amortisation

indirectly own a voting interest

loss arising on disposal of an asset

Leasehold rights are stated at cost

in the Company that gives them

is included in the income statement

less accumulated amortisation and

significant influence over the

when the asset is derecognised.

allowance for loss on impairment of

C o m p a n y, k e y m a n a g e m e n t

assets (if any).

personnel, directors, and officers

Intangible assets are carried at cost

Amortisation of leasehold rights

with authority in the planning

less accumulated amortisation and

is calculated by reference to their

and direction of the Companyâ&#x20AC;&#x2122;s

accumulated impairment losses

costs on the straight-line basis over

operations.

(if any).

the lease period and included in

Intangible assets with finite lives

determining income.

4.7 Intangible assets

4.10 Operating leases Leases of assets which do not

are amortised on a systematic

4.9 Related party transactions

transfer substantially all the risks

basis over the economic useful

Related parties comprise individuals

and rewards of ownership to the

life and tested for impairment

or enterprises that control, or

lessee are classified as operating

whenever there is an indication that

are controlled by, the Company,

leases. Operating lease payments

the intangible asset may be im-

whether directly or indirectly, or

are recognised as expenses in the

paired. The amortisation period and

which are under common control

income statement on a straight-line

the amortisation method of such

with the Company.

basis over the lease term.

intangible assets are reviewed at

They also include individuals

When an operating lease is

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

terminated before the lease period

the recoverable amount of an asset,

length of service rendered by

has expired, any payment required

which is the higher of the asset’s fair

employees stipulated in the share-

to be made to the lessor by way

value less costs to sell and its value

based payment plan, together

of penalty is recognised as an

in use, is less than the carrying

with a corresponding increase

expense in the period in which

amount. In determining value in

in “Capital reserve for share-

termination takes place.

use, the estimated future cash flows

based payment transactions“ in

are discounted to their present

shareholders’ equity.

4.11 Foreign currencies The consolidated and separate

value using a pre-tax discount

4.14 Employee benefits

financial statements are presented

rate that reflects current market

Short-term benefits

in Baht, which is also the Company’s

assessments of the time value of

Salaries, wages, bonuses and

functional currency. Items of each

money and the risks specific to

contributions to the social security

entity included in the consolidated

the asset. In determining fair value

fund are recognised as expenses

financial statements are measured

less costs to sell, an appropriate

when incurred.

using the functional currency of

valuation model is used. These

Post-employment benefits and

that entity.

calculations are corroborated by

other long-term employee benefits

Transactions in foreign currencies

a valuation model that, based on

are translated into Baht at the

information available, reflects the

The Company, the subsidiaries

exchange rate ruling at the date of

amount that the Company and

and their employees have jointly

the transaction. Monetary assets

its subsidiaries could obtain from

established a provident fund.

and liabilities denominated in

the disposal of the asset in an

The fund is monthly contributed

foreign currencies are translated

arm’s length transaction between

by the employees, the Company

into Baht at the exchange rate

knowledgeable, willing parties, after

and the subsidiaries. The fund’s

ruling at the end of reporting

deducting the costs of disposal.

assets are held in a separate trust

period.

An impairment loss is recognised

fund and the Company’s and the

Gains and losses on exchange are

in the income statement.

subsidiaries’ contributions are

included in determining income. 4.12 Impairment of assets

4.13 Equity-settled sharebased payment transactions

Defined contribution plans

recognised as expenses when incurred.

At the end of each reporting period,

The Company recognises share-

Defined benefit plans and

the Company and its subsidiaries

based payment transactions as

other long-term employee benefits

perform impairment reviews in

expenses in the income statement

The Company and its subsidiaries

respect of the property, plant and

when services from employees are

have obligations in respect of

equipment, intangible assets and

rendered, based on the fair value of

the severance payments they

leasehold rights whenever events or

the share options on the grant date.

must make to employees upon

changes in circumstances indicate

The expenses are recorded over

retirement under labor law. The

that an asset may be impaired. An

the vesting period, in accordance

Company and its subsidiaries

impairment loss is recognised when

with the conditions regarding

treat these severance payment

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

obligations as a defined benefit

in the accounts at the amount

shareholdersâ&#x20AC;&#x2122; equity if the tax

plan. In addition, the Company

expected to be paid to the taxation

relates to items that are recorded

and its subsidiaries provide other

authorities, based on taxable

directly to shareholdersâ&#x20AC;&#x2122; equity.

long-term employee benefit plan,

profits determined in accordance

4.17 Derivatives

namely long service awards.

with tax legislation.

Forward exchange contracts

The obligation under the defined

Deferred tax

F o r w a rd e x c h a n g e c o n t r a c t s

benefit plan and other long-term

Deferred income tax is provided on

are stated at fair value, which is

employee benefit plan is determined

temporary differences between the

calculated by reliable financial

b y a p ro f e s s i o n a l l y q u a l i f i e d

tax bases of assets and liabilities

institutions. Gains or losses arising

independent actuary based on

and their carrying amounts at the

from changes in the fair value of

actuarial techniques, using the

end of each reporting period, using

the contracts are recognised in the

projected unit credit method.

the tax rates enacted at the end of

income statement.

Actuarial gains and losses arising

the reporting period.

from post-employment benefits are

The Company and its subsidiaries

Fair value is the price that would

recognised immediately in other

recognise deferred tax liabilities for

be received to sell an asset or paid

comprehensive income.

all taxable temporary differences

to transfer a liability in an orderly

Actuarial gains and losses arising

while they recognise deferred tax

transaction between buyer and

from other long-term employee

assets for all deductible temporary

seller (market participants) at the

benefits are recognised immediately

differences and tax losses carried

measurement date. The Company

in the income statement.

forward to the extent that it is

and its subsidiaries apply a quoted

4.15 Provisions

probable that future taxable profit

market price in an active market to

Provisions are recognised when the

will be available against which such

measure their assets and liabilities

Company and its subsidiaries have

deductible temporary differences

that are required to be measured

a present obligation as a result of

and tax losses carried forward can

at fair value by relevant financial

a past event, it is probable that an

be utilised.

reporting standards. Except in

outflow of resources embodying

At each reporting date, the

case of no active market of an

economic benefits will be required

Company and its subsidiaries

identical asset or liability or when

to settle the obligation, and a

review and reduce the carrying

a quoted market price is not

reliable estimate can be made of

amount of deferred tax assets

available, the Company and its

the amount of the obligation.

to the extent that it is no longer

subsidiaries measure fair value

probable that sufficient taxable

using valuation techniques that are

Income tax expense represents

profit will be available to allow all

appropriate in the circumstances

the sum of corporate income tax

or part of the deferred tax asset to

and maximises the use of relevant

currently payable and deferred tax.

be utilised.

observable inputs related to assets

The Company and its subsidiaries

and liabilities that are required to be

record deferred tax directly to

measured at fair value.

4.16 Income tax

Current tax Current income tax is provided

4.18 Fair value measurement

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

All assets and liabilities for which

reported amounts and disclosures;

In determining depreciation of plant

fair value is measured or disclosed

and actual results could differ

and equipment, the management is

in the financial statements are

from these estimates. Significant

required to make estimates of the

categorised within the fair value

judgements and estimates are as

useful lives and residual values of

hierarchy into three levels based

follows:

plant and equipment and to review

on categories of input to be used in

Leases

estimated useful lives and residual

fair value measurement as follows:

In determining whether a lease is to

values when there are any changes.

Level 1 - Use of quoted market

be classified as an operating lease

In addition, the management is

prices in an observable active

or finance lease, the management

required to review property, plant

market for such assets or liabilities

is required to use judgement

and equipment for impairment

Level 2 - Use of other observable

regarding whether significant risk

on a periodical basis and record

inputs for such assets or liabilities,

and rewards of ownership of the

impairment losses when it is

whether directly or indirectly

leased asset has been transferred,

determined that their recoverable

Level 3 - Use of unobservable

taking into consideration terms and

amount is lower than the carrying

inputs such as estimates of future

conditions of the arrangement.

amount. This requires judgements

Fair value of financial

regarding forecast of future

cash flows At the end of each reporting period,

instruments

revenues and expenses relating

the Company and its subsidiaries

In determining the fair value of

to the assets subject to the review

determine whether transfers have

financial instruments recognised in

occurred between levels within

the statement of financial position

Deferred tax assets are recognised

the fair value hierarchy for assets

that are not actively traded and for

for deductible temporary

and liabilities held at the end of the

which quoted market prices are not

differences and unused tax losses

reporting period that are measured

readily available, the management

to the extent that it is probable

at fair value on a recurring basis.

exercises judgement, using a

that taxable profit will be available

variety of valuation techniques and

against which the temporary

5. Significant accounting

models. The input to these models

differences and losses can be

judgements and estimates

is taken from observable markets,

utilised. Significant management

and includes consideration of credit

judgement is required to determine

T h e p re p a r a t i o n o f f i n a n c i a l

risk (both bank and counterparty),

the amount of deferred tax assets

statements in conformity with

liquidity, correlation and longer-term

that can be recognised, based

financial reporting standards at

volatility of financial instruments.

upon the likely timing and level of

times requires management to

Change in assumptions about

estimate future taxable profits.

make subjective judgements and

these factors could affect the

estimates regarding matters that

disclosures of fair value hierarchy.

are inherently uncertain. These judgements and estimates affect

Property, plant and equipment and depreciation

Deferred tax assets

Equity-settled share-based payment transactions In estimating fair value for sharebased payment transactions,

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

the management is required to

benefit plan and other long-term

During the years, the Company

exercise judgement and to apply

employee benefit plan is determined

and its subsidiaries had significant

various assumptions, including the

based on actuarial techniques.

business transactions with related

expected life of the share options,

Such determination is made

parties. Such transactions, which

share price volatility and dividend

based on various assumptions,

are summarised below, arose in the

yield.

including discount rate, future

ordinary course of business and

salary increase rate, mortality rate

were concluded on commercial

and staff turnover rate.

terms and bases agreed upon

Post-employment benefits under defined benefit plans

between the Company and its

and other long-term employee benefits

6. Related party

subsidiaries and those related

The obligation under the defined

transactions

parties. (Unit: Million Baht)

Consolidated

Separate

Transfer pricing

financial statements

policy

2017

2016

2017

2016

Transactions with subsidiaries (eliminated from the consolidated financial statements) Sales of goods

1,101

976

Sublease and subservice income

At the rate stipulated in the agreements

Cost plus margin

Management service income

119

At the rate stipulated in the agreements

Dividend income

235

188

Sales of fixed assets

Net book value plus margin

At the declared rate

Rental income

At the rate stipulated in the agreements

Purchases of goods

152

Market price

Training expenses

110

103

Market price

At the rate stipulated in the agreements

Royalty fee expenses

At the rate stipulated in the agreements

Rental expenses for operating equipment

Market price

Rental expenses for land and construction

At the rate stipulated in the agreement

Transactions with related companies Royalty fee income

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

As at 31 December 2017 and 2016, the balances of the accounts between the Company and its subsidiaries and those related parties are as follows:

(Unit: Baht)

Consolidated financial

Separate financial

statements

2017

2016

2017

2016

Trade and other receivables - related parties (Note 9) Subsidiaries

129,770,000

126,351,799

Related companies (related by common directors)

510,011

541,227

510,011

541,227

Total trade and other receivables - related parties

510,011

541,227

130,280,011

126,893,026

35,540,560

14,900,029

Related companies (related by common directors)

10,601,718

10,095,161

3,979,299

4,001,952

Total trade and other payable - related parties

10,601,718

10,095,161

39,519,859

18,901,981

Trade and other payable - related parties (Note 17) Subsidiaries

Short-term loan to related party As at 31 December 2017 and 2016, the balance of short-term loan to related party and the movements are as follows:

(Unit: Baht)

Separate financial statements

Balance as at 31

Loan to related party

International Food Supply

Relationship

Subsidiary

During the year

Balance as at

Increase

Decrease

1,000,000

22,000,000

(23,000,000)

1,000,000

22,000,000

(23,000,000)

December 2016

31 December 2017

Company Limited Total

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

The short-term loan to related party

The Company entered into a

agreement shall be automatically

is unsecured loan in the form of

management service agreement

extended for another two years

promissory note, carrying interest

with MK Interfood Company Limited

until MKS gives a written notice of

at the rate of 12-month fixed

(“MKI”), whereby the Company

termination three months prior to

deposit rate of a commercial bank

agreed to provide management

its expiration.

plus 0.25% per annum and due

service to MKI in areas of branch

The Company entered into a

for repayment on call. During the

operations, business development,

management service agreement

year, the Company fully received

engineering, procurement,

with International Food Supply

the payment of such loan.

marketing, accounting and finance,

Company Limited (“IFS”), whereby

human resources and quality

the Company agreed to provide

assurance. MKI agreed to pay

management service to IFS in

management fee to the Company

areas of procurement, accounting

at a rate of Baht 9 million per

and finance, human resources

Franchise agreement for use

month. The agreement is effective

and quality assurance. IFS agreed

of trademark, servicemark and

from 1 January 2017 to 28 February

to pay management fee to the

license to operate

2018 (2016: at a rate of Baht 7.6

Company at a rate of Baht 0.15

On 10 February 1994, the Company

million per month). The agreement

million per month. The agreement

entered into a franchise agreement

shall be automatically extended for

is effective from 1 January 2017 to

with Plenus-MK Limited, a related

another two years until MKI gives a

31 December 2017 (2016: at a rate

party in Japan, in order to grant

written notice of termination three

of Baht 0.15 million per month). The

the latter the right to use the

months prior to its expiration.

agreement shall be automatically

trademark and the servicemark of

The Company entered into a

extended for another one year

“MK Restaurants” in its operating of

management service agreement

until IFS gives a written notice of

the Thai-style Sukiyaki restaurants

with MK Service Training Center

termination three months prior to

in Japan. A monthly royalty fee is

Company Limited (“MKS”), whereby

its expiration.

charged at a rate stipulated in the

the Company agreed to provide

agreement. The agreement shall

management service to MKS in

agreements

continue for a term of three years,

areas of procurement, accounting

The Company entered into

and thereafter shall be automatically

and finance, human resources

several sublease and subservice

renewed on a three-year basis until

and service training. MKS agreed

agreements, granting six leasehold

being terminated by either party by

to pay management fee to the

rights to MK Interfood Company

giving a written notice 180 days

Company at a rate of Baht 0.8

Limited (“MKI”). Sublease and

prior to the expiration of such

million per month. The agreement

s u b s e r v i c e f e e s a re c h a r g e d

contract.

is effective from 1 January 2017 to

according to the terms of the

31 December 2017 (2016: at a rate

agreements. The agreements are

of Baht 0.5 million per month). The

effective for a period of three years

Significant agreements with related parties

Management service agreements

Sublease and subservice

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

and will be renewed automatically

31 December 2017. In addition, the

begin to pay the monthly rent

for another three years unless MKI

Company shall give a written notice

from 1 November 2013 onwards.

has breached them.

to extend the agreement at least 90

In addition, the Company shall

days prior to the expiry date.

give a written notice to extend the

On 1 February 2016, the Company

On 16 November 2017, the

agreement at least 90 days prior to

entered into a lease agreement for

Company and Global Asset

the expiry date.

lease of building to International

Development Co., Ltd. entered into

On 18 April 2016, the Company

Food Supply Co., Ltd. (“IFS”),

a new lease agreement, whereby

e n t e re d i n t o a d d i t i o n a l l e a s e

under which IFS agrees to pay

the latter agrees to lease land and

agreement for lease of land with

rental to the Company at a rate of

construction to the Company and

Global Asset Development Co.,

Baht 0.54 million per month. The

the Company agrees to pay the

Ltd., whereby the latter agrees to

lease agreement is for a period of

rental to Global Asset Development

lease land to the Company and the

6 years, from 1 May 2016 to 30

Co., Ltd. In a total amount of Baht

Company agrees to pay the rental

April 2022. Subsequently, on 17

1.94 million per month, from 1

to Global Asset Development Co.,

May 2016, the Company and IFS

January 2018 to 31 December

Ltd. At the rate stipulated in the

agreed to adjust the rental space

2020. In addition, the Company

agreement. The lease agreement

and the rental rate to be Baht 0.37

shall give a written notice to extend

is for a period of 17 years and 6

million per month.

the agreement at least 90 days

months, from 1 May 2016 to 31

On 15 June 2017, the Company

prior to the expiry date.

October 2033. The agreement

Building lease agreement

and IFS agreed to adjust the rental

Land and distribution center

states that the Company shall

space and the rental to be Baht

building lease agreement

begin to pay the monthly rent from

0.46 million per month.

On 1 March 2013, the Company

1 May 2016 onwards. In addition,

entered into a lease agreement

the Company shall give a written

lease agreement

for lease of land and distribution

notice to extend the agreement at

On 1 December 2014, the Company

center building with Global Asset

least 90 days prior to the expiry

entered into a lease agreement for

Development Co., Ltd., whereby

date.

lease of land, building and ware-

the latter agrees to lease land and

house with Global Asset Develop-

distribution center building to the

ment Co., Ltd., whereby the latter

Company and the Company agrees

agrees to lease land and construc-

to pay the rental to Global Asset

tion thereon under six title deeds

Development Co., Ltd. At the rate

During the years ended 31

to the Company and the Company

stipulated in the agreement. The

December 2017 and 2016, the

agrees to pay the rental to Global

lease agreement is for a period of

Company and its subsidiaries had

Asset Development Co., Ltd. In a

20 years, from 1 November 2013 to

employee benefit expenses paya-

total amount of Baht 1.69 million

31 October 2033. The agreement

ble to their directors and manage-

per month, from 1 January 2015 to

states that the Company shall

ment as below.

Land, building and warehouse

Directors and management’s benefits

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

(Unit: Million Baht)

Consolidated financial statements/ Separate financial statements 2017

2016

Short-term employee benefits

131

117

Post-employment benefits

Share-based payment

139

135

Total

During the year 2017, the Company paid post-employment benefits to its directors and management of approximately Baht 15 million (2016: Nil).

7. Cash and cash equivalents (Unit: Baht)

Consolidated financial statements

Separate financial statements

2017

2016

2017

2016

Cash

143,447,079

158,577,057

121,779,125

135,881,696

Bank deposits

266,174,753

163,947,196

209,760,830

100,385,456

Total

409,621,832

322,524,253

331,539,955

236,267,152

As at 31 December 2017, bank deposits in savings accounts carried interests between 0.10 and 0.40 percent per annum (2016: 0.10 and 0.40 percent per annum).

8. Short-term investments 8.1 As at 31 December 2017 and 2016, short-term investments consisted of the following: (Unit: Baht)

Consolidated financial statements 2017

Fixed deposits

2016

Separate financial statements 2017

2016

4,825,636,663

5,963,176,000

4,825,636,663

5,913,176,000

4,510,493,176

2,254,991,095

3,893,488,440

1,968,308,397

1,070,088,224

9,336,129,839

9,288,255,319

8,719,125,103

8,951,572,621

Investments in trading securities (Note 8.2) Investments in private funds (Note 8.3) Total

As at 31 December 2017, fixed deposits carried interests between 1.60 and 2.06 percent per annum (2016: 1.63 and 2.03 percent per annum).

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

8.2 As at 31 December 2017 and 2016, investments in trading securities are summarised below. (Unit: Baht)

Consolidated

Separate

financial statements

2017

2016

2017

2016

4,481,030,650

2,235,967,461

3,865,114,465

1,949,646,417

29,462,526

19,023,634

28,373,975

18,661,980

4,510,493,176

2,254,991,095

3,893,488,440

1,968,308,397

Units of investments in local open-end funds - cost Add: Gain on change in value Total short-term investments in trading securities - fair value

Movements of investments in trading securities for the years ended 31 December 2017 and 2016 are summarised below. (Unit: Baht)

Consolidated

Separate

financial statements

2017

Balance at beginning of year

2016

2017

2016

2,254,991,095

3,740,994,671

1,968,308,397

3,410,908,401

20,313,712,188

16,379,290,114

17,633,912,187

14,347,989,114

(18,116,512,187)

(17,927,056,029)

(15,760,012,187)

(15,848,056,029)

Gain on sales of investments

47,863,188

52,680,938

41,568,048

48,086,346

Gain on change in value

10,438,892

9,081,401

9,711,995

9,380,565

Balance at end of year

4,510,493,176

2,254,991,095

3,893,488,440

1,968,308,397

Purchases Sales

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

8.3 As at 31 December 2017 and 2016, investments in private funds are summarised below. (Unit: Baht)

Consolidated financial statements/ Separate financial statements 2017

2016

Deposits at financial institutions Fixed deposits

971,018,880

Deposits at financial institutions

971,018,880

1,043,275,344

Investments in available-for-sale securities Overseas marketable corporate bonds - cost Local corporate bond - amortised cost Add: Unrealised gain on exchange

148,708,817 -

31,470,000

Less: Amortised premium on securities

(159,642)

Less: Loss on change in value

(211,298)

(4,657,120)

148,377,877

1,070,088,224

1,119,356,757

1,070,088,224

Short-term investments (Note 8)

325,636,663

1,070,088,224

Other long-term investments (Note 13)

793,720,094

Investments in available-for-sale securities - fair value

Total investments in private funds Classified as:

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

ements of investments in available-for-sale securities for the years ended 31 December 2017 and 2016 are summarise below. (Unit: Baht)

Consolidated financial statements/ Separate financial statements 2017

Balance at beginning of year

2016

1,070,088,224

(31,470,000)

4,657,120

148,708,817

1,043,275,344

(1,066,979,913)

23,704,569

(1,043,275,344)

31,470,000

Amortised premium on securities

(159,642)

Loss on change in value

(211,298)

(4,657,120)

Balance at end of year

148,337,877

1,070,088,224

Reversal of unrealised gain on exchange at beginning of year Reversal of loss on change in value at beginning of year Purchases Sales during the year - at cost Proceeds from sales Gain on sales Total Unrealised gain on exchange

The Company had set up private

of investments previously recorded

million). The change in the fair value

funds for investments which are

in other comprehensive income

of such securities is recorded in

managed by asset management

to the income statement of Baht

other comprehensive income in

companies. The investments

4.66 million.

the statement of comprehensive

include bonds in local and overseas

As at 31 December 2017, the

income.

markets. These investments are

Company had assessed the

As at 31 December 2017, the

classified as available-for-sale

fair value of available-for-sale

Company presented investments

investments.

investments by referring to

in private funds due more than 1

During the year ended 31 December

the value quoted by the asset

year totaling Baht 793.7 million

2017, the Company disposed the

management company in which

as â&#x20AC;&#x153;Other long-term investmentsâ&#x20AC;?

available-for-sale investments and

the fair value had decreased by

under non-current assets in the

transferred the change in fair value

Baht 0.21 million (2016: Baht 4.66

statement of financial position.

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

9. Trade and other receivables

(Unit: Baht)

Consolidated

Separate

financial statements

2017

2016

Trade accounts receivable - related parties Aged on the basis of due dates Not yet due

113,750,530

103,331,679

Total trade accounts receivable - related parties

113,750,530

103,331,679

29,492,686

27,589,188

23,501,643

23,763,631

parties

29,492,686

27,589,188

23,501,643

23,763,631

Total trade accounts receivable

29,492,686

27,589,188

137,252,173

127,095,310

510,011

541,227

16,529,481

23,561,347

Advances

11,421,934

11,103,253

10,084,575

9,713,221

Accrued interest receivable

19,605,436

48,111,939

19,605,436

47,329,679

Others

14,785,217

16,600,977

11,447,018

10,023,660

Total other receivables

46,322,598

76,357,396

57,666,510

90,627,907

Total trade and other receivables

75,815,284

103,946,584

194,918,683

217,723,217

Trade accounts receivable - unrelated parties Aged on the basis of due dates Not yet due Total trade accounts receivable - unrelated

Other receivables Other receivables - related parties

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

10. Inventories

(Unit: Baht)

Consolidated financial statements Reduce cost to net realisable value

Cost 2017

2016

Finished goods

222,415,319

Raw materials Supplies

Total

2017

2016

211,710,357

(24,818)

45,990,959

41,364,568

81,963,741 350,370,019

Inventories - net 2017

2016

(86,355)

222,390,501

211,624,002

45,990,959

41,364,568

70,854,422

81,963,741

70,854,422

323,929,347

(24,818)

(86,355)

350,345,201

323,842,992 (Unit: Baht)

Separate financial statements Reduce cost to net realisable value

Cost 2017

2016

Finished goods

205,143,926

194,319,299

Raw materials

43,094,479

40,803,351

Supplies

79,815,896 328,054,301

Total

2017

Inventories - net

2016

2017

2016

205,143,926

194,319,299

43,094,479

40,803,351

69,217,736

79,815,896

69,217,736

304,340,386

328,054,301

304,340,386

During the current year, a subsidiary reversed the write-down of cost of inventories by Baht 0.06 million, to reduce the amount of inventories recognised as expenses during the year (2016: a subsidiary reduced cost of inventories by Baht 0.09 million, to reflect the net realisable value).

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

11. Investments in subsidiaries Details of investments in subsidiaries as presented in the separate financial statements are as follows: (Unit: Baht)

Dividend received Company’s name

for the year ended

Shareholding Paid-up capital 2017

2016

percentage

31 December

Cost

2017

2016

(Percent)

2017

2016

2017

2016

199,999,965

159,999,972

MK Interfood Company Limited

400,000,000 400,000,000

100

100 299,049,977 299,049,977

35,000,000

100

52,429,895

34,999,930

27,999,944

280,000,000 100,000,000

100

100 279,999,970

99,999,970

631,479,842 451,479,842

234,999,895

187,999,916

MK Service Training Center Company Limited

35,000,000

International Food Supply Company Limited Total

On 11 May 2017, the Meeting of the Board of Directors of the Company passed a resolution to approve an additional investment in International Food Supply Company Limited (“the subsidiary”) of Baht 180 million. The registered share capital of such subsidiary increased from Baht 100 million to Baht 280 million (28 million ordinary shares, at Baht 10 per share), in which the Company’s shareholding remains at 100 percent. Such subsidiary registered the share capital increase with the Ministry of Commerce on 1 June 2017.

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

12. Investment in joint venture 12.1 Details of investment in joint venture (Unit: Baht)

Consolidated

Joint venture

MK Pte Ltd.

Separate financial statements

Carrying amount

Allowance

Carrying amount

Nature of

Paid-up

Shareholding

based on

for impairment

based on cost

business

capital

percentage

equity method

loss

method - net

2017 2016

Plenus and

financial statements

2017

2016

Cost

2017

2016

2017

2016

2017

2016

(%)

50 75,875,225 98,081,853

149,207,500 149,207,500 (51,125,647)

98,081,853 149,207,500

75,875,225 98,081,853

149,207,500 149,207,500 (51,125,647)

98,081,853 149,207,500

12.5 million Restaurant Singapore dollar

Total

During the year 2017, the Company recorded allowance for impairment loss of investment in Plenus and MK Pte Ltd. of Baht 51.1 million since the Companyâ&#x20AC;&#x2122;s management considered that there is an indicator of impairment loss of investment.

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

12.2 Share of loss During the years, share of loss from investment in joint venture in the consolidated financial statements was as follows: (Unit: Thousand Baht)

Joint venture

Consolidated financial statements 2017

Plenus and MK Pte Ltd.

2016

21,846

19,833

12.3 Summarised financial information about joint venture Plenus and MK Pte Ltd Summarised information about financial position

(Unit: Thousand Baht)

As at 31 December 2017

Current assets

2016

80,529

129,202

Non-current assets

108,106

106,609

Total assets

188,635

235,811

Current liabilities

36,885

39,647

Total liabilities

36,885

39,647

151,750

196,164

Share of net assets

75,875

98,082

Carrying amounts of joint venture based on equity method

75,875

98,082

Net assets Shareholding percentage (%)

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

Summarised information about comprehensive income (Unit: Thousand Baht))

For the years ended 31 December 2017

Revenue

2016

298,279

345,665

Other income

3,600

5,348

Cost of sales

(81,009)

(93,437)

(264,561)

(297,242)

(43,691)

(39,666)

(43,691)

(39,666)

Comprehensive income as shareholding percentage

(21,846)

(19,833)

Share of loss from investment in joint venture

(21,846)

(19,833)

Selling and administrative expenses Loss for the year Other comprehensive income

Total comprehensive income Shareholding percentage (%)

13. Other long-term investments (Unit: Baht)

Consolidated financial statements/ Separate financial statements 2017

2016

Investments in private funds (Note 8.3) Fixed deposits

645,382,217

Investments in available-for-sale securities

148,337,877

Total investments in private funds

793,720,094

7,278,275

(7,278,275)

793,720,094

Other investment Oversea non-marketable securities - cost Less: Allowance for impairment Other investment - net Other long-term investments - net

As at 31 December 2017, fixed deposits carried interest between 2.01 and 2.06 percent per annum.

333,100,308

Disposals/write-off

31 December 2017

Depreciation for the year

31 December 2016

Depreciation for the year

write-off

31 December 2017

Depreciation on disposals/

write-off

Depreciation on disposals/

depreciation 1 January 2016

Accumulated

333,100,308

31 December 2016

Disposals/write-off

Transfers in (out)

Additions

333,100,308

Additions

Cost 1 January 2016

Land Building

Leasehold improvement

Utility systems

3,124,307 (22,143,625)

134,122,288

16,507,780 (17,835,309)

106,409,092

16,036,874

790,927

639,360

30,890,442 (20,338,301)

102,580,581 (31,328,220)

76,805,442

21,760,731

24,367,979

23,330,568

20,289,083 309,505,632

(25,828)

3,118,295

17,196,616 286,175,064

(9,808)

3,159,068

14,047,356 261,807,085

(12,211,314)

179,152,776

(23,620,311)

181,016,637

970,980,027 1,330,857,294

(9,811,194)

152,774,554

828,016,667 1,173,460,968

(10,144,893)

148,173,259

689,988,301 1,006,519,506

22,204,128 527,595,003 2,548,266,525 2,322,466,419

(33,525)

105,000

22,132,653 526,164,716 2,435,133,803 2,255,228,466

(16,092)

1,474,864,180

(12,221,639)

168,404,472

1,318,681,347

(31,433,137)

186,853,376

1,163,261,108

1,833,744,970

(14,953,055)

12,219,158

107,648,314

1,728,830,553

(35,760,787)

34,982,833

125,704,257

1,603,904,250

equipment

and operating

93,999,078

(58,256)

26,528,489

67,528,845

(112,627)

20,679,676

46,961,796

165,074,684

(59,000)

4,507,318

12,704,659

147,921,707

(245,000)

23,488,883

11,193,714

113,484,110

equipment

2,316,760,046

(22,577,645)

210,674,566

2,128,663,125

(43,724,555)

214,260,632

1,958,127,048

2,744,205,348

(23,315,919)

67,474,415

85,680,118

2,614,366,734

(45,094,103)

105,773,477

56,370,222

2,497,317,138

equipment

and office

Kitchen utensils Machinery and Furniture, fixtures

Consolidated financial statements

22,148,745 523,040,409 2,306,647,360 2,150,617,809

improvement

Land

14. Property, plant and equipment

For the year ended 31 December 2017

MK Restaurant Group Public Company Limited and its subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

196,629,290

(7,190,942)

30,685,646

173,134,586

(18,126,163)

32,701,100

158,559,649

259,734,379

(8,087,710)

16,491,306

1,112,500

250,218,283

(18,130,394)

29,269,065

1,245,000

237,834,612

Total

(139,225,310)

600,242,085

(98,115,730)

569,918,307

(115,762,497)

809,347,866

(75,505,815)

796,533,227

- 6,713,884,630

- 5,992,857,218

- 5,299,271,849

67,855,544 10,824,247,308

(280,869,147)

309,377,183

39,347,508 10,352,444,731

(434,045,638)

370,059,931

103,333,215 9,891,427,956

installation

and equipment under

Motor vehicles Construction in progress

(Unit: Baht)

31 December 2016

31 December 2017

333,100,308

31 December 2017

991,609,125

1,081,767,498

Utility systems

260,769,116

312,037,532

98,111,674

Kitchen utensils and operating equipment

71,075,606

80,392,862

Machinery and equipment

427,445,302

485,703,609

Furniture, fixtures and office equipment

63,105,089

77,083,697

Motor vehicles

67,855,544

39,347,508

Construction in progress and equipment under installation

4,012,251,004

4,261,475,839

98,111,674

Total

796,533,227

1,577,286,498

1,607,117,136

Leasehold improvement

2017 (Baht 155.0 million included in producing cost, and the balance in selling and administrative expenses)

218,089,371

239,989,652

Building

809,347,866

1,915,045

4,936,037

Land improvement

Consolidated financial statements

(Unit: Baht)

2016 (Baht 153.2 million included in producing cost, and the balance in selling and administrative expenses)

Depreciation for the year

333,100,308

31 December 2016

Net book value

1 January 2016

impairment loss

Allowance for

Land

For the year ended 31 December 2017

MK Restaurant Group Public Company Limited and its subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

311,361,198

Disposals/write-off

31 December 2017

Depreciation for the year

31 December 2016

Depreciation for the year

write-off

31 December 2017

Depreciation on disposals/

write-off

Depreciation on disposals/

1 January 2016

depreciation

Accumulated

311,361,198

31 December 2016

Transfers in (out)

Disposals/write-off

Transfers in (out)

Additions

311,361,198

Land

Additions

1 January 2016

Cost

For the year ended 31 December 2017

20,289,083

(25,828)

3,118,295

17,196,616

(9,808)

3,159,068

14,047,356

22,204,128

(33,525)

105,000

22,132,653

(16,092)

22,148,745

improvement

Land

MK Restaurant Group Public Company Limited and its subsidiaries

286,432,500

20,381,749

266,050,751

21,419,161

244,631,590

468,618,642

790,927

639,360

467,188,355

3,124,307

464,064,048

Building

Leasehold

855,700,208

(7,777,763)

130,252,430

733,225,541

(9,825,142)

127,858,336

615,192,347

2,201,101,077

(14,338,705)

71,287,901

27,273,159

2,116,878,722

(20,593,847)

78,361,175

14,268,236

2,044,843,158

improvement

1,150,917,665

(20,851,728)

148,808,908

1,022,960,485

(12,303,403)

148,176,860

887,087,028

1,957,429,974

(25,628,288)

51,990,594

16,313,144

1,914,754,524

(18,044,535)

58,453,462

14,708,109

1,859,637,488

systems

Utility

1,116,917,183

(12,434,011)

114,829,772

1,014,521,422

(31,927,811)

132,868,321

913,580,912

1,352,147,712

(21,474,954)

5,072,432

80,551,919

1,287,998,315

(43,494,851)

17,187,507

80,588,672

1,233,716,987

equipment

89,637,297

(58,256)

23,515,616

66,179,937

(112,627)

19,330,768

46,961,796

131,083,295

(59,000)

10,850,404

120,291,891

(245,000)

(2,116,845)

9,169,626

113,484,110

2,031,322,612

(20,267,437)

170,554,112

1,881,035,937

(42,329,413)

173,939,536

1,749,425,814

2,354,426,804

(20,581,994)

43,607,285

72,291,775

2,259,109,738

(44,279,197)

77,652,690

35,080,184

2,190,656,061

equipment

195,978,885

(7,190,942)

30,639,246

172,530,581

(18,710,768)

32,681,702

158,559,647

259,040,622

(8,087,710)

16,491,306

1,112,500

249,524,526

(18,824,151)

29,269,065

1,245,000

237,834,612

progress and

42,606,327

(5,847,645)

(189,240,445)

190,194,406

47,500,011

(6,868,362)

(258,807,054)

229,150,318

84,025,109

installation

equipment under

Construction in

Motor vehicles

and office

equipment

and operating

Kitchen utensils Machinery and Furniture, fixtures

Separate financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

5,747,195,433

(68,605,965)

642,100,128

5,173,701,270

(115,218,972)

659,433,752

4,629,486,490

9,100,019,779

(96,051,821)

399,331,667

8,796,739,933

(152,366,035)

387,334,452

8,561,771,516

Total

(Unit: Baht)

31 December 2016

31 December 2017

311,361,198

31 December 2017

Land

Leasehold

Utility

806,512,309

891,794,039

systems

155,633,619

193,879,983

79,596,910

equipment

41,445,998

54,111,954

323,104,192

378,073,801

equipment

63,061,737

76,993,945

under

42,606,327

47,500,011

installation

progress and equipment

Construction in

Motor vehicles

and office

equipment

and operating

Kitchen utensils Machinery and Furniture, fixtures

3,273,227,436

3,543,441,753

79,596,910

Total

642,100,128

1,345,400,869

1,383,653,181

improvement

2017 (Baht 147.0 million included in producing cost, and the balance in selling and administrative expenses)

182,186,142

201,137,604

Building

659,433,752

1,915,045

4,936,037

improvement

Separate financial statements

(Unit: Baht)

2016 (Baht 147.5 million included in producing cost, and the balance in selling and administrative expenses)

Depreciation for the year

311,361,198

31 December 2016

Net book value

Land

1 January 2016

impairment loss

Allowance for

For the year ended 31 December 2017

MK Restaurant Group Public Company Limited and its subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

As at 31 December 2017 and 2016, certain equipment items of the Company and its subsidiaries have been fully depreciated but are still in use. The gross carrying amount before deducting accumulated depreciation and allowance for impairment loss of those assets amounted to approximately Baht 3,960 million and Baht 3,394 million, respectively (the Company only: Baht 3,503 million and Baht 3,074 million, respectively).

15. Intangible assets Details of intangible assets which are computer software are as follows: (Unit: Baht)

Consolidated

Separate

financial statements

161,980,450

156,740,654

12,874,997

9,691,697

174,855,447

166,432,351

Additions

6,404,045

6,059,403

Write-off

(246,744)

(193,244)

181,012,748

172,298,510

1 January 2016

64,218,190

61,877,132

Amortisation for the year

15,782,874

15,026,371

31 December 2016

80,001,064

76,903,503

Amortisation for the year

15,721,426

14,940,969

Amortisation on write-off

(211,565)

(187,948)

95,510,925

91,656,524

31 December 2016

94,854,383

89,528,848

31 December 2017

85,501,823

80,641,986

2016

15,782,874

15,026,371

2017

15,721,426

14,940,969

Cost 1 January 2016 Additions 31 December 2016

31 December 2017

Accumulated amortisation

31 December 2017

Net book value

Amortisation for the year

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

16. Leasehold rights

(Unit: Baht)

Consolidated

Separate

financial statements

1,058,827,290

1,022,447,531

39,755,000

1,098,582,290

1,062,202,531

24,960,000

1,123,542,290

1,087,162,531

775,474,926

759,758,213

39,631,593

37,628,941

815,106,519

797,387,154

42,043,601

40,009,863

857,150,120

837,397,017

31 December 2016

283,475,771

264,815,377

31 December 2017

266,392,170

249,765,514

2016

39,631,593

37,628,941

2017

42,043,601

40,009,863

Cost 1 January 2016 Additions 31 December 2016 Additions 31 December 2017

Accumulated amortisation 1 January 2016 Amortisation for the year 31 December 2016 Amortisation for the year 31 December 2017

Net book value

Amortisation for the year

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

17. Trade and other payables

Trade accounts payable -related party

(Unit: Baht)

Consolidated

Separate

financial statements

2017

2016

26,549,881

4,830,991

470,865,552

410,081,588

458,241,773

403,026,513

Other payables - related parties

10,601,718

10,095,161

12,969,978

14,070,989

Other payables - unrelated parties

99,637,763

71,993,853

92,678,174

66,215,988

96,988,403

146,444,780

66,800,868

115,980,519

934,774,279

779,917,988

765,689,404

648,032,772

44,504,562

15,058,480

16,510,131

13,661,469

15,271,020

1,627,926,195

1,479,548,063

1,436,591,547

1,311,933,354

Trade accounts payable - unrelated parties

Accounts payable for purchases of plant and equipment Accrued expenses Derivative contract payable Others Total

18. Provision for long-

Fund Act B.E. 2530. Such fund is

with the fund rules. During the

term employee benefits

monthly contributed by both the

year 2017, the contributions of

employees, the Company and its

the Company and its subsidiaries

subsidiaries at rates of 2 percent of

amounting to Baht 35.3 million

plans

the employeesâ&#x20AC;&#x2122; basic salaries. The

(2016: Baht 38.3 million) and of the

The Company, its subsidiaries

fund, which is managed by TISCO

Company amounting to Baht 31.1

and their permanent employees

Asset Management Company

million (2016: Baht 34.2 million)

have jointly registered a provident

Limited, will be paid to employees

were recognised as expenses.

fund scheme under Provident

upon termination in accordance

18.1 Defined contribution

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

18.2 Defined benefit plans and other long-term employee benefits

(Unit: Baht)

Consolidated financial statements Employee retirement benefits

Other long-term employee benefits

Total

Provision for long-term employee benefits as at 1 January 2016

238,033,059

31,702,682

269,735,741

25,133,924

5,171,561

30,305,485

7,914,204

1,013,673

8,927,877

(4,979,306)

(4,440,000)

(9,419,306)

266,101,881

33,447,916

299,549,797

25,351,032

6,222,127

31,573,159

8,736,041

1,082,899

9,818,940

(15,791,180)

(5,120,000)

(20,911,180)

284,397,774

35,632,942

320,030,716

Included in profit or loss: Current service cost Interest cost Benefits paid during the year

Provision for long-term employee benefits as at 31 December 2016 Included in profit or loss: Current service cost Interest cost Benefits paid during the year

Provision for long-term employee benefits as at 31 December 2017

(Unit: Baht)

Separate financial statements Employee retirement benefits

Other long-term employee benefits

Total

Provision for long-term employee benefits as at 1 January 2016 Included in profit or loss: Current service cost Interest cost

224,372,342

28,859,293

253,231,635

22,094,038

4,091,084

26,185,122

7,392,260

915,026

8,307,286

Transferred out

(1,591,814)

(88,219)

(1,680,033)

Benefits paid during the year

(4,638,916)

(4,160,000)

(8,798,916)

247,627,910

29,617,184

277,245,094

22,068,071

5,067,140

27,135,211

8,089,443

951,334

9,040,777

(15,791,180)

(4,820,000)

(20,611,180)

261,994,244

30,815,658

292,809,902

Provision for long-term employee benefits as at 31 December 2016 Included in profit or loss: Current service cost Interest cost Benefits paid during the year

Provision for long-term employee benefits as at 31 December 2017

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

Line items in the income statements under which long-term employee benefit expenses are recognised are as follows: (Unit: Baht)

Cost of sales and services Selling expenses Administrative expenses

Consolidated

Separate

financial statements

2017

2016

3,861,355

3,641,229

3,427,436

3,214,058

31,678,406

29,398,135

27,311,964

25,470,215

5,852,338

6,193,998

5,436,588

5,808,135

41,392,099

39,233,362

36,175,988

34,492,408

Total expenses recognised in the income statements

The Company and its subsidiaries expect to pay Baht 6.14 million for long-term employee benefits during the next year (separate financial statements: Baht 6.01 million) (2016: Baht 22.31 million, separate financial statements: Baht 21.76 million). As at 31 December 2017, the weighted average duration of the liabilities for long-term employee benefits is 22 years (Separate financial statements: 22 years) (2016: 22 years, separate financial statements: 22 years). (Unit: % per annum)

Consolidated financial statements/ Separate financial statements 2017

Discount rate Future salary increase rate (depending on age of employees)

2016

3.5

4.0-6.0

The results of sensitivity analysis for significant assumptions that affect the present value of the long-term employee benefit obligation as at 31 December 2017 and 2016 are summarised below.

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

31 December 2017

(Unit: Million Baht)

Consolidated financial statements Discount rate

Future salary increase rate

Increase 1%

Decrease 1%

Increase 1%

Decrease 1%

(38.7)

47.4

46.4

(38.7)

(1.7)

1.9

Employee retirement benefits Other long-term employee benefits

(Unit: Million Baht)

Separate financial statements Discount rate

Future salary increase rate

Increase 1%

Decrease 1%

Increase 1%

Decrease 1%

(35.1)

42.9

42.0

(35.1)

(1.4)

1.6

Employee retirement benefits Other long-term employee benefits

31 December 2016 (Unit: Million Baht)

Consolidated financial statements Discount rate Increase 1%

Future salary increase rate

Decrease 1%

Increase 1%

Decrease 1%

Employee retirement benefits

(34.2)

41.8

40.9

(34.2)

(1.6)

1.8

Other long-term employee benefits

(Unit: Million Baht)

Separate financial statements Discount rate Increase 1%

Future salary increase rate

Decrease 1%

Increase 1%

Decrease 1%

Employee retirement benefits

(31.2)

38.2

37.4

(31.2)

(1.3)

1.5

Other long-term employee benefits

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

of the Company and/or employees

The exercise period is within 5

of the subsidiaries of the Company

years commencing on 7 August

As at 31 December 2017, the

at free of charge. Such warrants

2013, and the warrants can be

Company’s issued and paid-up

identify the name of the holder

exercised to acquire the new

share capital had increased from

and are non-transferable unless

ordinary shares of the Company

Baht 914.85 million (914.85 million

being transferred as inheritance

for totaling 17 times. The warrants

ordinary shares of Baht 1 each)

or transferred to heirs or legal

are first exercisable after 1 year

to Baht 920.88 million (920.88

representatives or transferred in

since the date that the Company

million ordinary shares of Baht 1

any case deemed appropriate by

allotted and issued the warrants,

each) as a result of the exercise of

a committee. The warrants are to

with the first exercise date falling on

the warrants (M-WA) to ordinary

be a reward for the work of the

30 September 2014. The following

shares amounting to Baht 6.03

management and staff as well as

exercise dates fall on the last

million (6.03 million ordinary shares

for the warrant holders to take part

working days of March, June,

of Baht 1 each) (2016: Baht 4.60

in the Company’s ownership. The

September and December and the

million, 4.60 million ordinary shares

Company will allocate the warrants

last exercise date is 6 August 2018.

of Baht 1 each).

to its owners within one year from

The exercise ratio is 1 warrant

T h e C o m p a n y re g i s t e re d t h e

the date of approval for issuance

per 1 new ordinary share, and the

corresponding increase in its

of warrants from the meeting of

exercise price is Baht 1 per share.

issued and paid-up share capital

shareholders of the Company

The warrants are exercisable under

with the Ministry of Commerce on

On 26 February 2013, the Meeting

the following conditions.

10 October 2017.

of the Board of Directors of the

19. Share capital

Company passed a resolution

yy Up to 10 percent of all allotted

to amend type of warrants to be

warrants are exercisable after

specific name and non-transferrable

12 months from the allotted

On 18 September 2012, the

warrants. The transfer of warrant

date.

Extraordinary Meeting of

can be conducted only in the

Shareholders of the Company

case when the management and

passed a special resolution

employees pass away.

all allotted warrants are

to issue and offer 20,000,000

On 7 August 2013, the Company

exercisable after 24 months

registered warrants (the warrants

allocated and issued 20,000,000

from the allotted date.

are exercisable within 5 years

warrants to the management

after the warrants are issued with

including the management in the

yy A d d i t i o n a l 3 0 p e r c e n t o f

the exercise price of Baht 1 per 1

director position and employees of

all allotted warrants are

ordinary share) to the management

the Company and/or employees of

exercisable after 36 months

including the management in the

the subsidiaries of the Company at

from the allotted date.

director position and employees

free of charge (“ESOP” or “M-WA”).

20. Warrants

yy A d d i t i o n a l 2 0 p e r c e n t o f

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

yy The remainder of unexercised

are exercisable in accordance

date of Baht 49, exercise price

warrants is exercisable without

with the exercising period until

of Baht 1, expected volatility of

limitation after the 48 months

the expiry date.

38.3%, expected dividend yield of 3%, contractual life of 1 - 5 years,

from the allotted date until the warrants expire.

yy If a warrant holder is transferred

and a risk-free interest rate of 3.5%

to another unit or another

per annum.

yy In the event that a warrant

company as approved by the

During the year ended 31

holder no longer holds a

Board of Directors whereby

December 2017, the Company

position of management or

such director, management

and its subsidiaries recorded ex-

employee of the Company

or employee has remained to

penses related to the ESOP or

and/or employee of the

be management or employee

M-WA scheme of Baht 30 million

subsidiaries of the Company

of the Company and/or of the

(2016: Baht 99.6

due to retirement according

subsidiaries of the Company

for the Company of Baht 25.5

to the Company’s regulations,

as at the exercise date, such

million (2016: Baht 95.0 million) as

such management or employee

management or employee is

employee related expenses in the

is entitled to exercise warrants

entitled to exercise warrants

income statements, together with a

until the expiry date.

corresponding increase in “Capital

million) and

reserve for share-based payment

yy In case a warrant holder passes

The estimated fair value of each

transactions” in the shareholders’

away, heirs or legatees (as the

share option granted is Baht 42.40

equity.

case may be) of such holder is

- 46.38, which was calculated by

As at 31 December 2017 and 2016,

entitled to exercise warrants to

applying the Black-Scholes-Merton

the remaining warrants were as

acquire ordinary shares in an

formula. The model inputs were the

follows:

amount of the warrants that

share price at price determination

(Unit: Thousand Units) 2017

2016

Warrants issued as at 7 August 2013

20,000

Less: Cumulative warrants exercised - beginning of year

(9,000)

(4,400)

Warrants exercised during the year

(6,029)

(4,600)

(15,029)

(9,000)

(4,807)

(4,303)

(164)

(504)

(4,971)

(4,807)

6,193

Cumulative warrants exercised - end of year Less: Cumulative warrants written-off - beginning of year Warrants written off during the year Cumulative warrants written-off - end of year* Warrants at the end of year

* 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.

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

21. Statutory reserve Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside to a statutory reserve at least 5 percent of its net profit after deducting accumulated deficit brought forward (if any), until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for dividend distribution. At present, the statutory reserve has fully been set aside.

22. Expenses by nature Significant expenses classified by nature are as follows: (Unit: Baht))

Consolidated

Separate

financial statements

2017

2016

2017

2016

employee benefits

4,688,656,190

4,482,938,787

3,895,044,826

3,769,582,149

Raw materials and consumables used

2,342,473,909

2,102,367,869

2,169,395,567

2,003,898,688

1,553,566,007

1,468,429,715

1,262,286,422

1,207,168,682

Depreciation and amortisation

854,298,254

864,762,333

697,050,960

712,089,064

Utilities expenses

686,944,023

688,146,198

540,211,525

551,134,483

Advertising expenses

298,401,201

240,040,694

204,876,292

153,782,534

Repair and maintenance expenses

157,260,420

156,809,378

127,108,969

130,632,781

3,225,663

2,853,619

111,410,636

104,662,581

Property tax expenses

81,924,470

77,668,773

67,462,600

65,250,023

Travelling expenses

42,667,640

44,019,100

33,379,567

35,989,151

(10,704,962)

(21,871,611)

(10,824,627)

(14,711,773)

Salaries, wages and other

Rental and service expenses from operating lease agreements

Training expenses

Changes in finished goods

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

23. Income tax 23.1 Income tax expenses for the years ended 31 December 2017 and 2016 are made up as follows: (Unit: Baht)

Consolidated

Separate

financial statements

2017

2016

2017

2016

477,439,096

476,912,584

418,038,636

424,394,226

(780,672)

(564,727)

61,255,826

7,733,017

60,373,598

6,791,815

538,694,922

483,864,929

478,412,234

430,621,314

Current income tax: Current income tax charge Adjustment in respect of income tax of previous year

Deferred tax: Relating to origination and reversal of temporary differences

Income tax expenses reported in the income statements

The amounts of income tax relating to each component of other comprehensive income for the years ended 31 December 2017 and 2016 are as follows:

(Unit: Baht)

Consolidated

Separate

financial statements

2017

2016

2017

2016

Deferred tax relating to change in value of available-for-sale investments

(889,164)

931,424

(889,164)

931,424

(889,164)

931,424

(889,164)

931,424

Income tax charged to other comprehensive income

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

The reconciliation between accounting profit and income tax expenses for the years ended 31 December 2017 and 2016 is presented below. (Unit: Baht)

Consolidated

Separate

financial statements

2017

Accounting profit before tax Applicable tax rate

2016

2017

2016

2,963,541,238 2,583,627,137 2,797,805,586 2,502,470,404 20%

20%

592,708,248

516,725,427

559,561,117

500,494,081

(780,672)

(564,727)

Income not subject to tax

(46,999,979)

(37,599,983)

Non-deductible expenses

11,208,516

10,781,093

16,645,189

5,885,000

181,922

5,655,902

Additional expense deductions allowed

(65,403,764)

(48,516,821)

(50,794,093)

(37,593,057)

Total

(54,013,326)

(32,079,826)

(81,148,883)

(69,308,040)

538,694,922

483,864,929

478,412,234

430,621,314

Accounting profit before tax multiplied by income tax rate Adjustment in respect of income tax of previous year Effects of:

Unrecognised tax losses of subsidiary subsidiary

Income tax expenses reported in the income statements

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

The components of deferred tax assets and deferred tax liabilities are as follows:

(Unit: Baht)

Statements of financial position as at 31 December Consolidated financial statements 2017

Separate financial statements

2016

2017

2016

Deferred tax assets Allowance for impairment of assets

19,622,335

15,919,382

Provision for long-term employee benefits

63,607,061

59,544,854

58,561,980

55,449,019

45,215,764

43,462,157

42,260

931,424

42,260

931,424

8,900,912

3,792,436

5,149,664

3,561,563

4,871,167

87,064,092

139,364,953

78,085,185

129,534,061

trading securities investments

5,777,365

3,804,723

5,674,795

3,732,396

Derivative contract receivable

7,871,487

Total

13,648,852

3,804,723

13,546,282

3,732,396

Net deferred tax assets

73,415,240

135,560,230

64,538,903

125,801,665

Expenses for share-based payment transactions Unrealised loss on changes in value of available-for-sale investments Derivative contract payable Others Total

Deferred tax liabilities Unrealised gain on changes in value of

As at 31 December 2017, the subsidiary has deductible temporary differences and unused tax losses totaling Baht 28.2 million (2016: Baht 29.4 million), on which deferred tax assets have not been recognised as the subsidiary considers that future taxable profits may not be sufficient to allow utilisation of the temporary differences and unused tax losses The unused tax losses of the subsidiary amounting to Baht 28.6 million will expire by 2021.

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

23.2 Promotional privileges The subsidiary has received promotional privileges from the Board of Investment. Subject to the imposed conditions, the significant privileges are as follows:

International Food Supply Company Limited Certificate No.

58-2617-1-00-1-0

1. Certificate date

18 December 2015

2. Promotional privileges for

Manufactureoffoodsandsemifrozenfoods

3. The significant privileges are: 3.1. Exemption from import duty on machinery as approved by the Board.

Granted

3.1. Exemption from corporate income tax on net income from promoted operations,

Granted

not over a hundred percent of investments excluding cost of land and working capital, for a period of six years from the date on which the income is first derived from such operations. 3.2. Exemption from income tax on dividends paid from the profit of the promoted

Granted

operations, throughout the period in which the corporate income tax is exempted.

4. Date of first earning of operating income

7 July 2016

The subsidiaryâ&#x20AC;&#x2122;s operating revenues for the years ended 31 December 2017 and 2016 are from the promoted operations.

24. Earnings per share Basic earnings per share is calculated by dividing profit for the years attributable to equity holders of the Company (excluding other comprehensive income) by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share is calculated by dividing profit for the years attributable to equity holders of the Company (excluding other comprehensive income) by the weighted average number of ordinary shares in issue during the year 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.

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

24.1 Weighted average number of ordinary shares (Unit: Thousand shares)

Consolidated financial statements/ Separate financial statements 2017

Balance brought forward

2016

914,849

910,249

1,371

1,081

916,220

911,330

Add: The weighted average number of ordinary shares issued during the year Weighted average number of ordinary shares

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

Consolidated financial statements For the years ended 31 December Profit for the year

Weighted average number of ordinary shares

Earnings per share

2017

2016

2017

2016

2017

2016

(Thousand Baht)

(Thousand shares)

(Baht)

2,424,846

2,099,762

916,220

911,330

4,617

8,536

920,837

919,866

Basic earnings per share Profit attributable to equity holders of the Company

2.65

2.30

2.63

2.28

Effect of dilutive potential ordinary shares Warrants (M-WA)

Diluted earnings per share Profit attributable to ordinary shareholders assuming the conversion of warrants to ordinary shares

2,424,846

2,099,762

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

Separate financial statements For the years ended 31 December Profit for the year 2017

2016

Weighted average number of ordinary shares 2017

2016

(Thousand (Thousand (Thousand (Thousand Baht) Baht) shares) shares)

Earnings per share 2017

2016

(Baht)

Basic earnings per share Profit attributable to equity holders of the Company

2,319,393

2,071,849

916,220

911,330

4,370

8,080

920,590

919,410

2.53

2.27

2.52

2.25

Effect of dilutive potential ordinary shares Warrants (M-WA)

Diluted earnings per share Profit attributable to ordinary shareholders assuming the conversion of warrants to ordinary shares

2,319,393

2,071,849

25. Operating segment

that support restaurant business

the operating segments into one

information

including training service provider

reportable segment of restaurant

and manufacture and distribution of

operation.

Operating segment information is

foods. Their operations are carried

Segment performance is measured

reported in a manner consistent

o n i n g e o g r a p h i c a l a re a s o f

based on operating profit or loss,

with the internal reports that are

Thailand. However, the restaurant

on a basis consistent with that used

regularly reviewed by the chief

business in Thailand is the

to measure operating profit or loss

operating decision maker in order to

main business segment and

in the financial statements. As a

make decisions about the allocation

the segment information that

result, all of the revenues, operating

of resources to the segment and

has been considered based on

profits and assets as reflected

assess its performance.

a quantitative basis is over 90

in these financial statements

The Company and its subsidiaries

percent of operating segments

pertain to the aforementioned

are engaged in two business

and geographical areas. For this

reportable operating segment and

segments which are restaurant

reason, the chief operating decision

geographical area.

business and other businesses

maker considers aggregating

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

Major customers For the years 2017 and 2016, the Company and its subsidiaries have no major customer with revenue of 10 percent or more of an entity’s revenues.

26. Dividends Dividends declared during the years ended 31 December 2017 and 2016 consist of the following: Approved by

Total

Dividend

dividends

per share

(Million Baht)

(Baht)

Paid on

Year 2017 Final dividend on 2016 profit

Annual General Meeting of the shareholders on 26 April 2017

1,006

1.1

23 May 2017

30 June 2017

1,006

1.1

8 September 2017

Total

2,012

2.2

910

1.0

19 May 2016

910

1.0

8 September 2016

1,820

2.0

Interim dividends on the profit for Board of Directors’ meeting the six-month period ended

on 10 August 2017

Year 2016 Final dividend on 2015 profit

Annual General Meeting of the shareholders on 22 April 2016

Interim dividends on the profit for Board of Directors’ meeting the six-month period ended

on 11 August 2016

30 June 2016

Total

27. Commitments and contingent liabilities 27.1 Capital commitments As at 31 December 2017, the Company and its subsidiaries had significant outstanding capital commitments in respect of agreements related to leasehold rights and purchase of machinery and equipment of Baht 23.3 million (the Company only: Baht 21.9 million) (2016: Nil).)

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

of building space and equipment

under these non-cancellable

commitments

and other service agreements.

operating lease and service

The Company and its subsidiaries

The terms of the agreements are

contracts were as follows:

have entered into several lease

generally between 3 and 20 years.

agreements in respect of the leases

Future minimum payments required

27.2 Operating lease

(Unit: Million Baht)

As at 31 December 2017

2016

Payable within: Less than 1 year

1,383

1,331

1 to 5 years

1,448

1,358

285

313

More than 5 years

27.3 Futures contracts

27.4 Bank guarantees

million) to guarantee payments

The Company has entered into

As at 31 December 2017, there were

due to creditors and Baht 13.0

futures contracts with many local

outstanding letters of guarantee

million (2016: Baht 11.8 million) to

companies, whereby the Company

issued by the banks on behalf of

guarantee electricity use.

and those companies have agreed

the Company and its subsidiaries

quantity, schedule, place and price

of approximately Yen 19.5 million

of goods to be delivered. The

and Baht 21.3 million (2016: Baht

party

Company has agreed to pay for

20.1 million), in respect of certain

As at 31 December 2017, the

the goods at the rates stipulated

performance bonds as required in

Company had guaranteed bank

in the contracts.

the normal course of businesses.

credit facilities of International Food

These included letters of guarantee

Supply Co., Ltd. (â&#x20AC;&#x153;a subsidiaryâ&#x20AC;?) of

amounting to Yen 19.5 million and

Baht 45 million (2016: Nil).

Baht 8.3 million (2016: Baht 8.3

27.5 Guarantees to related

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

28. Fair value hierarchy As at 31 December 2017 and 2016, the Company and its subsidiaries had the assets and liabilities that were measured at fair value based on levels of inputs as follows: (Unit: Million Baht)

Consolidated financial statements Level 1

Level 2

Level 3

Total

2017

2016

2017

2016

2017

2016

2017

2016

Investments in trading securities - debt instruments

4,510

2,255

4,510

2,255

Available-for-sale investment - debt instruments

148

1,070

148

1,070

Derivatives - forward exchange contracts - gain

Assets measured at fair value

Liabilities measured at fair value Derivatives - forward exchange contracts - loss

(Unit: Million Baht)

Separate financial statements Level 1

Level 2

Level 3

Total

2017

2016

2017

2016

2017

2016

2017

2016

Investments in trading securities - debt instruments

3,893

1,968

3,893

1,968

Available-for-sale investment - debt instruments

148

1,070

148

1,070

Derivatives - forward exchange contracts - gain

Assets measured at fair value

Liabilities measured at fair value Derivatives - forward exchange contracts - loss

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

29. Financial instruments 29.1 Financial risk

how they are managed is described

maximum exposure to credit risk

below.

is limited to the carrying amounts of receivables, as stated in the

Credit risk

statement of financial position.

management

The Group is exposed to credit

The Group’s financial instruments,

risk primarily with respect to trade

as defined under Thai Accounting

and other receivables. The Group

The Group’s exposure to interest

Standard No.107 “Financial

manages the risk by adopting

rate risk relates primarily to its

I n s t r u m e n t s : D i s c l o s u re a n d

appropriate credit control policies

bank deposits that bear floating

Presentations”, principally comprise

and procedures and therefore

interest rates or fixed interest rates

cash and cash equivalents, trade

does not expect to incur material

which are close to the market rate.

and other receivables, investments,

financial losses. In addition,

The interest rate risk is therefore

and trade and other payables.

the Group does not have high

expected to be minimal.

The financial risks associated with

concentrations of credit risk since

these financial instruments and

it has a large customer base. The

Interest rate risk

Significant financial assets and liabilities classified by type of interest rate are summarised in the table below. (Unit: Million Baht)

Consolidated financial statements as at 31 December 2017

Fixed interest rates Within 1 year

Floating Non-interest 1 - 4 years interest rate bearing

Total

Effective interest rate (% per annum)

Financial assets Cash and cash equivalents

262

148

410

0.10-0.40

4,826

4,510

9,336

1.60-2.06

Trade and other receivables

Other long-term investments

794

2.01-2.36

4,826

794

262

4,734

10,616

1,628

Short-term investments

Financial liabilities Trade and other payables

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

(Unit: Million Baht)

Consolidated financial statements as at 31 December 2016 Fixed interest rates - within Floating Non-interest 1 year interest rate bearing

Effective interest rate

Total

(% per annum)

Financial assets Cash and cash equivalents Short-term investments

166

157

323

0.10-0.40

5,963

3,325

9,288

1.63-2.03

104

5,963

166

3,586

9,715

1,480

Trade and other receivables

Financial liabilities Trade and other payables

(Unit: Million Baht)

Separate financial statements as at 31 December 2017 Fixed interest rates Within 1 year

1 - 4 years

Floating Non-interest interest rate bearing

Total

Effective interest rate (% per annum)

Financial assets Cash and cash equivalents

203

129

332

0.10-0.40

4,826

3,893

8,719

1.60-2.06

Trade and other receivables

195

Other long-term investments

794

2.01-2.36

4,826

794

203

4,217

10,040

1,436

Short-term investments

Financial liabilities Trade and other payables

Annual Report 2017 l MK Restaurant Group Public Company Limited

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

(Unit: Million Baht)

Separate financial statements as at 31 December 2016 Fixed interest rates - within 1 year

Floating interest rate

Non-interest bearing

Total

Effective interest rate (% per annum)

Financial assets Cash and cash equivalents Short-term investments

101

135

236

0.10-0.40

5,913

3,039

8,952

1.63-2.03

218

5,913

101

3,392

9,406

1,312

Trade and other receivables Other long-term investments

Financial liabilities Trade and other payables

Foreign currency risk The Groupâ&#x20AC;&#x2122;s exposure to foreign currency risk arises mainly from short-term investments and trading transactions that are denominated in foreign currencies. As at 31 December 2017 and 2016, the balances of financial assets and liabilities denominated in foreign currencies were summarised below.

Foreign currency

Consolidated

Separate

Exchange rate as at

financial statements

31 December

2017

2016

2017

(Million)

2016

2017

(Million)

2016

(Baht per 1 foreign currency unit)

Financial assets US dollar Yen Dirham

20.0

50.0

20.0

50.0

32.5146

35.6588

1.6

0.2860

0.3046

36.0

8.8531

36.7

15.9

1.4

0.2936

0.3113

Financial liabilities Yen

Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

The Group had the following outstanding forward exchange contracts: Foreign currency

Consolidated financial

Contractual

statements/Separate

exchange rate

maturity date

financial statements (Million)

(Baht per 1 foreign currency unit)

As at 31 December 2017 Sold amount US dollar

33.864-34.286

Dirham

8.9905

34.85-35.17

May and July 2018 October 2018

As at 31 December 2016 Sold amount US dollar

29.2 Fair values of financial

July and September 2017

30. Capital management

31. Reclassification

Since the majority of the Group’s

The primary objective of the Group’s

The Company and its subsidiaries

financial instruments are short-term

capital management is to ensure

have reclassified the following

in nature or carrying interest at rates

that it has an appropriate capital

items in the income statements for

close to the market interest rates,

structure in order to support its

the year ended 31 December 2016

their fair value is not expected

business and maximise shareholder

to conform to the current year’s

to be materially different from

value. As at 31 December 2017,

classification.

the amounts presented in the

the Group’s debt-to-equity ratio

statements of financial position.

was 0.18:1 (2016: 0.17:1) and the

instruments

Company’s was 0.16:1 (2016:0.16:1).

Annual Report 2017 l MK Restaurant Group Public Company Limited

100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.) MK Restaurant Group Public Company Limited and its subsidiaries For the year ended 31 December 2017

(Unit: Baht)

Sales and service income Other income

Consolidated

Separate

financial statements

As reclassified

As previously reported

As reclassified

As previously reported

15,145,882,364

15,115,182,444

13,436,647,305

13,397,274,890

242,640,153

273,340,073

325,920,011

365,292,426

The reclassifications had no effect

yy To approve the reduction of

million (130 million ordinary

to previously reported profit for the

the registered share capital

s h a re s o f B a h t 1 0 e a c h ) ,

year or shareholders’ equity

of the Company of Baht 4.97

which will be engaged in the

million from Baht 925.85 million

transportation, warehousing

32. Events after the

(925.85 million ordinary shares

rental and international freight

reporting period

of Baht 1 each) to Baht 920.88

shipping. The Company will

million (920.88 million ordinary

have 49.75 percent interest in

On 26 February 2018, the meeting

shares of Baht 1 each) in order

this new company.

of the Board of Directors of the

to cut the registered shares that

Company No. 1/2018 passed the

have not been issued.

33. Approval of financial

The reduction of the registered

statements

following resolutions.

share capital of the Company will

yy To approve the payment of

later be proposed for approval in

These financial statements

final dividend for 2017 to the

the Annual General Meeting of the

were authorised for issue by the

Company’s shareholders at

Company’s shareholders.

Company’s Board of Directors on

Baht 1.20 per share or a total

yy To approve the co-investment

26 February 2018.

dividend of Baht 1,105 million.

with four companies to establish

The payment of dividend will later

a new company named

be proposed for approval in the

“M-Senko Logistic Company

Annual General Meeting of the

Limited” with the registered

Company’s shareholders.

share capital of Baht 1,300

Financial Statements

STATEMENT OF FINANCIAL POSITION MK Restaurant Group Public Company Limited and its subsidiaries As at 31 December 2017

101

(CONT.)

Annual Report 2017 l MK Restaurant Group Public Company Limited

102

MANAGEMENT DISCUSSION AND ANALYSIS

Performance Overview In 2017, the Company and its subsidiaries recorded total incomes of Baht 16,458 million, up by Baht 959 million or an increase of 6.2 percent from the previous year. The increase of Baht 927 million was mainly due to the continued expansion of MK Suki and Yayoi restaurant outlets, and partly to the increase of same-store sales since the Company launched marketing activities and new menus in order to continuously stimulate sales throughout the year. In addition, due to the lower cost of major raw material in the year 2017, the Company and its subsidiaries recorded the gross profit of Baht 10,899 million, up by 6.9% from the prior year. As a result, the Company and its subsidiaries recorded the net profit of Baht 2,425 million, up by Baht 325 million or an increase of 15.5 percent.

Revenues from Sales and Services 2016 Million Baht

2017 %

Million Baht

% Change

MK Suki/ MK Gold/ MK Live

12,094

79.8

12,686

78.9

4.9

Yayoi Japanese Restaurant

2,709

17.9

3,025

18.8

11.7

343

2.3

362

2.3

5.5

15,146

100.0

16,073

100.0

6.1

Other Restaurants* Revenues from Sales and Services

* Other Restaurants are Miyazaki, Hakata, Na Siam, Le Siam and Le Petit

In 2017, the Company and its subsidiaries recorded revenues from sales and services of Baht 16,073 million, up by Baht 927 million or an increase of 6.1 percent from the previous year. The increase was partly due to the continued expansion of MK Suki and Yayoi restaurant outlets, and partly to the increase of same-store sales. In addition, more than 98 percent of the total incomes generated by the Company and its subsidiaries were from sales and services incomes of MK Suki, MK Gold and MK Live Restaurants operated by the Company as well as Yayoi Japanese Restaurant run by MK Interfood Co., Ltd. Yet, while sales and service incomes from the suki business tended to fall, those from the Yayoi Japanese Restaurant were likely to increase because Yayoi Japanese Restaurant has higher growth rate than MK Suki Restaurant.

Management Discussion and Analysis

103

Performance of the Company’s Suki Restaurant Business (MK Suki, MK Gold and MK Live) 2016

2017

Number of Branches – Suki Restaurant Net newly-opened outlets

424

435

12,094

12,686

Total Sales Growth Rate (%)

2.2

4.9

Same-Store Sale Growth (%)

(0.3)

1.7

Number of Branches at the end of fiscal period

Financial Performance and Growth Rate – Suki Restaurant Revenues from Sales and Services (Million Baht)

Revenues from Sales and Services - Suki Restaurant Business In 2017, the Company recorded Baht 12,686 million total sales and services incomes from the suki restaurant business, up by Baht 592 million or an increase of 4.9 percent, primarily from the new branch expansion (2017: 11 branches) and growth of the same-store sales.

Performance of the Company’s Yayoi Japanese Restaurant Business 2016

2017

Number of Branches – Yayoi Japanese Restaurant Net newly-opened outlets

158

165

2,709

3,025

Total Sales Growth Rate (%)

14.1

11.7

Same-Store Sale Growth (%)

3.6

Number of Branches at the end of fiscal period

Financial Performance and Growth Rate – Yayoi Japanese Restaurant Revenues from Sales and Services (Million Baht)

Annual Report 2017 l MK Restaurant Group Public Company Limited

104

Revenues from Sales and Services - Yayoi Japanese Restaurant Business

Costs of Sales and Services

Gross Profit For the year 2017, gross profit of

More than 90 percent of the

the Company and its subsidiaries

Company’s costs of sales and

amounted to Baht 10,899 million,

In 2017, the Company recorded

s e r v i c e s w e re c o s t s o f f o o d

or up by 6.9 percent year-on-year.

Baht 3,025 million as sales and

and beverages. Other costs

Gross profit as a percentage of

services revenues from Yayoi

included transportation, storage

revenues from sales and services

Japanese Restaurant which

and warehousing expenses,

also increased from 67.3 percent

re p re s e n t e d a n 1 1 . 7 p e rc e n t

depreciation of factory buildings

for the year 2016 to 67.8 percent

increase from the year before. The

and machinery and utilities

for the year 2017. The increase

increase of Yayoi’s incomes was

expenses. The Company has an

of gross profit as a percentage of

largely from the increase of Yayoi’s

efficient sourcing and production

revenues from sales and services

branches where in 2017, the net

process where orders of raw

was due largely to the lower costs

number of Yayoi branches rose

materials and finished products

of major raw materials.

by 7 as a result of strong positive

for the suki restaurants, Yayoi

responses to the Yayoi brand which

Japanese restaurants and other

prompted the Company to expand

eateries have been centralized to

the Japanese restaurant branch in

profit from the economy of scale so

residential areas in Bangkok, its

that huge orders can be made at a

Selling and administrative

vicinity and in the provinces to meet

time while simultaneously enabling

expenses consist mainly of

consumer’s demands. In addition,

the Company to command better

employee expenses, rents, utilities,

the increase was also attributable

purchasing power with distributors.

advertising and sales promotion,

to the same-store sales growth

At the other end, the fact that

restaurant supplies, depreciation

of 3.6 percent compared to the

almost all of the manufacturing is

and amortization. For the year

previous year.

done through the central kitchen

2017, selling and administrative

not only results in an economy

expenses of the Company and

scale production but also helps

its subsidiaries are Baht 8,299

the Company standardizing its

million or increased by 4.5 percent

In 2017, the Company recorded

food quality. The Company also

compared to last year mainly

Baht 385 million as other revenues

actively manages inventories

resulting from the increase in

which mainly comprising of interest

of raw materials and finished

advertising and sales promotion

income amounted Baht 113 million,

products by estimating demands

expenses, rental cost and salaries

increased by Baht 3 million due

of each branch on a daily basis and

and wages due to the increase of

mainly to the increase of fixed

therefore could effectively control

new restaurant outlets during the

deposit, and other income amounted

food delivered to each branch and

year. Selling and administrative

Baht 272 million, increased Baht 29

waste generated from them each

expenses as a percentage of

million, which mainly came from gain

day. The centralized management

total revenues decreased from

from sales and changes in value of

of raw materials and finished

51.2 percent for the year 2016 to

short-term investments and revenue

products helps managing delivery

50.4 percent for the year 2017,

from member card fees.

costs more effectively.

owing mainly to the increase in

Other Revenues

Selling and Administrative Expenses

Management Discussion and Analysis

sales and services income as

Financial Position

105

expenses incurred during the year. As of December 31, 2017, the

mentioned earlier and the decrease of depreciation and amortization as

As of December 31, 2017, the

Company’s total liabilities were Baht

well as the provision of expenses

Company recorded total assets

2,454 million which was up by Baht

related to Employee Stock Option

of Baht 16,283 million, which

189 million or 8.3 percent from the

Program.

represented an increase of Baht

prior year due mainly to an increase

640 million or up by 4.1 per-

of Baht 155 million from accrued

cent from at the end of 2016

expenses, an increase of Baht 61

due mainly to the following:

million from account payable and

As a result of the various factors

1. An increase of long-term

an increase of Baht 20 million from

which affected the operating

investments amounted Baht 794

provision for long-term employee

results of the Company and its

million due mainly from an increase

benefits.

subsidiaries as mentioned above,

of fixed deposits amounted Baht 646

As of December 31, 2017, the

net profit of the Company and its

million and an increase of investment

Company’s shareholders’ equity

subsidiaries increased from Baht

in available-for-sale securities

recorded Baht 13,829 million,

2,100 million for the year 2016

amounted Baht 148 million.

increased Baht 451 million from the

Net Profits

to Baht 2,425 million for the year

2. An increase of cash and

prior year mainly due to an increase

2017, representing an increase

cash equivalents amounted Baht

of retained earnings amounted Baht

of Baht 325 million or up by 15.5

87 million.

412 million as well as an increase

percent.

3. A decrease of property,

of capital reserve for share-based

plant and equipment amounted

payment transactions amounted

Baht 249 million due largely to

Baht 30 million.

the depreciation and amortization

Cash Flows (Unit: Million Baht)

Type of cash flows Net cash from operating activities

2016

2017 3,090

3,575

Net cash used in investing activities

(1,238)

(1,481)

Net cash used in financing activities

(1,816)

(2,007)

Increase (decrease) of net cash and cash equivalent

In 2017, the Company recorded Baht

Meanwhile, the Company spent Baht

financing activities which were up by

3,575 million net cash from operating

1,481 million net cash in investing

Baht 191 million due primarily to the

activities which increased by Baht

activities, up by Baht 243 million from

higher of dividend payment when

485 million or 15.7 percent from

last year. Baht 834 million was for the

compared to last year.

the prior year. Most of which were

short-term investments and Baht 619

As a result of cash movements

from an increase in operating profit

million was paid for the purchase of

in operating activities, investing

before changes in operating assets

property, plant and equipment as a

activities and financing activities,

and liabilities, an increase in trade

result of additional branch expansion.

the Company’s cash and cash

and other payables and a decrease

In 2017, the Company recorded

equivalents in 2017 increased by

in inventories.

Baht 2,007 million net cash used in

Baht 87 million.

Annual Report 2017 l MK Restaurant Group Public Company Limited

106

Financial Ratios Analysis Consolidated Financial Financial Ratios

Statements

Unit 2016

2017

Liquidity Ratios Liquidity Ratio (current ratio)

times

5.4

5.0

Quick Ratio

times

5.0

4.6

Cash Ratio

times

1.6

1.8

Account Receivables Turnover Ratio

times

549

563

Average Collection Period

days

Inventory Turnover Ratio

times

24.7

23.8

Average Sale Period

days

Account Payables Turnover Ratio

times

12.3

11.7

Payment Period

days

Cash Cycle

days

(14)

(15)

Profitability Ratios Gross Profit Margin

67.3

67.8

Operating Profit Margin

14.9

16.2

Operating Cash Flow to Operating Profit Ratio

137.3

137.5

Net Profit Margin

13.5

14.7

Return on Equity

15.9

17.8

Return on Assets

13.7

15.2

Return on Fixed Assets

62.3

72.8

Total Asset Turnover Ratio

times

1.0

Debt to Equity Ratio

times

0.2

Interest-bearing Debt to Equity Ratio

times

0.0

Interest Coverage Ratio

times

N/A

Obligation Coverage Ratio (Cash Basis)

times

1.3

Efficiency Ratios

Financial Policy Ratios

Management Discussion and Analysis

Liquidity Ratios

Efficiency Ratios

107

also have plenty of choices for eating. Moreover, most of the

As of December 31, 2017, the

As for the Company’s Return on

Company and its subsidiaries’

Company had strong liquidity

Assets (ROA), as of December 31,

restaurant outlets are located in

ratios. The current ratio for the

2017, ROA was at 15.2 percent.

department stores, modern trade

year 2017 was 5.0 times which

This was up from 13.7 percent in

and community malls where there

slightly decreased from 5.4 times in

2016 as a result of an increase of

are a lot of competitors including the

2016. Moreover, due to the nature

net profit when compare to last

international restaurant chains from

of the Company’s business which

year.

overseas, well-established local restaurant chains, small restaurants

immediately collected cash after its sales and services, the Company’s

Capital Structure

as well as new restaurant operators who come into the restaurant

average collection period was very brief; namely 1 day while trade

As of December 31, 2017 the

business continuously.

payables from the purchase of raw

Company’s debt to equity ratio

However, the Company and its

and finished products would be

(D/E) was 0.2 times, which was

subsidiaries still aim to grow

made later thanks to the credit term

stable compared to the year before

continuously by focusing on the

policy which the payment period

since the Company had no financial

expansion of both MK Suki and Yayoi

was around 30 days. The average

debt and had cash surplus from

restaurant outlets. The Company’s

sale period was around 15 days.

the capital increase and the share

decision of the branch expansion

Thus, the Company recorded a

premiums from the issuance of

is based on the prudence and the

cash surplus causing its cash cycle

capital-increase shares.

consideration of the investment return. For the expansion of Yayoi

to be negative, namely (15) days.

Profitability Ratios In 2017, the Company’s profitability

Factors that may affect the Company’s operations in the year 2018

branch, the Company also seeks opportunities and channels to expand its customer base into ma ny a re a s e spe c ia lly in the upcountry. The Company still

ratios improved compared to last year. Return on Equity (ROE)

The competition in the restau-

emphasizes on the stores opening

was 17.8 percent, up from 15.9

rant business in the year 2018

in department stores, modern

percent in 2016. This was due

is still intense. All the restaurant

trade and community mall where

mainly to an increase of net profit

business companies including the

the investment cost is lower than

amounted Baht 325 million. In

restaurant chains and other general

the standalone format while traffic

addition, the Company recorded

restaurants need to fine-tune their

is better.

the higher gross profit margin and

strategies in order to compete in

net profit margin of 67.8% and

the market as well as to serve the

14.7% respectively compared to

customers’ needs.

last year which represented the

Due to an uncertainty of Thailand

improvement of the Company’s

e c o n o m y, p e o p l e t e n d t o g o

ability to make profit.

eating out less often and they

Annual Report 2017 l MK Restaurant Group Public Company Limited

108

CONNECTED TRANSACTIONS

Connected Transactions Amount Connected Person

1. Global Asset Development Co., Ltd. (formerly named MK Global Co., Ltd.) (GAD)

Relationship

Type of Transaction

Three directors and/or

Account

executives and major

Preparation

(Million Baht)

2016

2017

0.02

Necessity and Rationale

• The account preparation fee for GAD was Baht 15,000.

shareholders of the

• The fee was determined on the

Company; namely,

basis of estimated service time

Mrs. Yupin Thirakomen,

and costs of staff required in the

Mr. Rit Thirakomen and

service.

Mr. Somchai Hanjitkasem

• Audit Committee’s opinion:

are GAD’s major

The account preparation fee for

shareholders holding 82.9%

GAD was charged on the basis

of its shares

of the costs of staff involving

(combining shares held by

in this service which did not

Mr. Rit, Mrs. Yupin and

deprive the Company of any

Mrs.Yupin on behalf of

interest. The transaction therefore

the estate of

was considered reasonable and

Mrs. Thongkam Mekto and

necessary.

Mr. Somnuk Hanjitkasem) and 17.1% respectively. Common directors; namely, Mr. Rit Thirakomen and Mr. Somchai Hanjitkasem.

Rent for land

34.32

35.72

• T h e m o n t h l y r e n t o f B a h t 1,687,554 a month was paid for a new office building. • T h e m o n t h l y r e n t o f B a h t 1,049,510 a month was paid for the new central kitchen (CK5) on Bangna-Trad Road. • Audit Committee’s opinion: The land rent was a normal transaction. The rate was comparable to market rates of nearby properties. The transaction was considered reasonable and for the best interest of the Company.

Connected Transactions

109

Amount Connected Person

2. MK Worldwide Co., Ltd. (MKWW)

Relationship

Type of Transaction

Three directors and/or

Account

executives and major

Preparation

(Million Baht)

2016

2017

0.02

Necessity and Rationale

• The Account preparation fee for MKWW was Baht 15,000.

shareholders of the

• The fee was determined on the

Company; namely,

basis of estimated service time

Mrs. Yupin Thirakomen,

and cost of staff required in the

Mr. Rit Thirakomen and

service.

Mr. Somchai Hanjitkasem

• Audit Committee’s opinion:

are MKWW’s major shareholders holding

The account preparation fee for

85% of its shares

MKWW was charged on the basis

(combining shares held by

of the costs of staff involving in

Mr. Rit, Mrs. Yupin and

this service which did not deprive

Mrs.Yupin on behalf of the

the Company of any interest. The

estate of Mrs.Thongkam Mekto and Mr.Somnuk

transaction therefore was considered

Hanjitkasem) and 15%

reasonable and necessary.

respectively. Common directors; namely, Mr. Rit Thirakomen and Mr. Somchai Hanjitkasem. 3. Superior Food Service Co., Ltd. (SFS)

The Company’s

Rent for

executive and major

dishwasher

shareholder; namely

and

Mrs. Yupin Thirakomen, is

ice-making

SFS’s director and major shareholder holding 65% of its shares.

53.28

56.40

• This involved rent of dishwashers for all branches of both MK Suki and Yayoi Restaurant. SFS was one of several service providers chosen by the Company. SFT’s price was not different from what

Common director; namely,

other service providers proposed.

Mr. Somchai Hanjitkasem.

• This involved rent of ice-making machines for all branches of both MK Suki and Yayoi Restaurants. SFS was the only supplier offering the rent of ice-making machines with after-sales maintenance service. • Auditor Committee’s opinion: This equipment rent was a normal transaction where the pricing had been compared with what was quoted by other service providers. The transaction therefore was reasonable and was carried out for the Company’s best interest.

Annual Report 2017 l MK Restaurant Group Public Company Limited

110

Amount Connected Person

4. KV Electronic Co., Ltd. (KVE))

Relationship

Type of Transaction

Dr. Katiya Greigarn,

IT advisory

its director, is KVE’s

fee

(Million Baht)

2016

2017

0.72

0.90

Necessity and Rationale

• The Company hired KVE as an IT consultant for Baht 70,000 a

authorized director and

month fee which was not different

major shareholder holding

from what other service providers

60% of its shares.

had proposed.

Common director; namely,

• Auditor Committee’s opinion:

Dr. Katiya Greigarn.

This hiring-of-service transaction was a normal transaction of the Company of which the IT system required constant upgrades to cope with its business expansion. The consulting fee was made in relation to quotations made by other service providers. The transaction therefore was reasonable and for the Company’s best interest.

5. SE-Education Public Company Limited (SE-ED)

Two directors and major

Sponsorship

shareholders namely

fee

Mr. Rit Thirakomen and Mr. Thanong Chotisorayuth are SE-ED shareholders holding 7.1% and 2.5% of its shares respectively.

0.68

0.42

• Sponsorship fee for the Kitty Camp and Robot Competition for Primary School Grade 4. • Audit Committee’s opinion: This hire-of-service item was the Company’s normal transaction

Common directors; namely

where the price was made in

Mr. Thanong Chotisorayuth

comparison with other quotations

(SE-ED’s authorized signatory) and Mr. Pravit Tantiwasinchai.

made by other service providers. The transaction therefore was considered reasonable and for the Company’s best interest.

Connected Transactions

111

Amount Connected Person

Relationship

Type of Transaction

6. National Food

Two directors and/or

Account

Retail Co., Ltd.

executives and major

Preparation

(NFR)

(Million Baht)

2016

2017

0.02

Necessity and Rationale

• The Account preparation fee for NFR was Baht 15,000.

shareholders of the

• The fee was determined on the

Company; namely,

basis of estimated service time

Mrs. Yupin Thirakomen

and cost of staff required in the

and Mr. Rit Thirakomen

service.

are NFR’s major shareholders holding

• Audit Committee’s opinion:

99.9% of its shares

• The account preparation fee for

(combining shares held

NFR was charged on the basis

by Mr. Rit, Mrs. Yupin and

of the costs of staff involving

Mrs. Yupin on behalf of

in this service which did not

Mr. Somnuk Hanjitkasem).

deprive the Company of any

Common director; namely,

interest. The transaction therefore

Mr. Somchai Hanjitkasem.

was considered reasonable and necessary. 7. Mrs.Yupin Thirakomen

The Company’s executive

Rent of

and major shareholder.

property

0.38

0.41

• The premise was rented as a home delivery call center and Chokchai sub-branch. • Audit Committee’s opinion: The property rent was for the Company’s business and was carried out after the location had been considered appropriate to service customers. The rent was comparable to rents offered in the same location. The transaction therefore was reasonable and for the best interest of the Company.

Annual Report 2017 l MK Restaurant Group Public Company Limited

112

Amount Connected Person

8. Mr.Rit Thirakomen

Relationship

Type of Transaction

The Company’s executive

Sales of gift

and major shareholder

vouchers

(Million Baht)

2016

2017

0.11

0.20

Necessity and Rationale

• This involved sales of gift vouchers for use at restaurants of the Company and its subsidiaries with the same price offered to other customers in general. • Audit Committee’s opinion: The transaction in which gift v o u c h e r s w e re s o l d w a s t h e Company’s normal transaction with the same price offered to other customers. The transaction therefore was reasonable and for the best interest of the Company.

9. Mr. Somchai Hanjitkasem

The Company’s executive

Sales of gift

and major shareholder

vouchers

0.27

0.06

• This involved sales of gift vouchers for use at restaurants of the Company and its subsidiaries w i t h t h e s a m e p r i c e o ff e re d to other customers in general. • Audit Committee’s opinion: The transaction in which gift v o u c h e r s w e re s o l d w a s t h e Company’s normal transaction with the same price offered to other customers. The transaction therefore was reasonable and for the best interest of the Company.

10. Mr. Pravit Tantiwasinchai

The Company’s executive

Sales of gift

and shareholder

vouchers

0.12

0.12 -

Connected Transactions

Necessity and rationality behind the transactions

113

both itself and its subsidiaries and

interest has an interest or conflict

through related committees which

of interest, the director will not

included senior management of

be authorized to approve the

the Company and subsidiaries who

transaction for the Company or

The Company and subsidiaries have

would review impacts and ensured

its subsidiaries as stipulated by

conducted connected transactions

that the pricing was appropriate

the SEC and/or the SET. The

with prudence taking into

as in normal business conditions

Company will disclose major

consideration the best interest of

as if the transaction was executed

connected transactions in Notes

the Company and its shareholders.

at armâ&#x20AC;&#x2122;s length. The significant

to Financial Statements audited by

All connected transactions of

connected transactions will be

the auditor of the Company and its

the Company and subsidiaries

approved by the Board of Director.

subsidiaries.

carried out with persons having

The Company has sought approval

p o t e n t i a l c o n f l i c t o f i n t e re s t

in principle regarding business

therefore were normal, necessary

agreements with general business

and reasonable to be executed to

conditions in a transaction between

support normal business course

the Company and its subsidiaries

The Company and its subsidiaries

of the Company itself and the

vs. director, executive or related

have a policy to execute connected

subsidiaries. Conditions in these

persons. Details are as follows: as

transactions at present and in

connected transactions were

the Company and subsidiaries may

the future with persons having

made on the basis of normal

have transaction with each other in

potential conflict of interest where

business conditions and aligned

the future, thatâ&#x20AC;&#x2122;s why the Company

they will be treated as if they were

with market prices. In addition,

has sought an approval in principle

customers in general. This will be

the transactions were executed in

to allow the management to

carried out through a fair price

the same manner if done at armâ&#x20AC;&#x2122;s

approve such transaction as long

policy and will also correspond with

length with customers having the

as it contains the same business

business conditions in general. The

same or similar nature. Regarding

agreement normal people would

transactions will also be executed

money borrowed from related

execute with contractual parties

t h ro u g h a c l e a r, t r a n s p a re n t

companies, the Company and

under the same circumstance and

and fair approval process which

subsidiaries did so only to increase

as long as there is no influence

corresponds to the principles of

liquidity when required.

from the fact that one is a director,

corporate governance (CG) as

executive or a related person

well as rules and regulations of

over a business negotiation. The

the Company and its subsidiaries.

Company will submit a summary

Finally, the transactions must be

of transactions being executed

done in accordance with approval

The Company approved connected

and report to the meeting of the

authority governing the execution

transactions on the basis of the

Audit Committee and the Board

of connected transactions.

best interest of itself and the

of Directors on a quarterly basis.

subsidiaries. The approval had

If a company director, executive

to go through a review process

director, managing director or

based on related regulations of

anyone with potential conflict of

Connected transaction approval procedure

Future policy on connected transactions

Annual Report 2017 l MK Restaurant Group Public Company Limited

114

SHAREHOLDER AND MANAGEMENT STRUCTURE

Ordinary Shares As of December 31, 2017, the Company was registered with Baht 925,850,000 capital which as divided into 925,850,000 ordinary shares at Baht 1 par value per share. Of this, Baht 920,878,100 was paid-up capital divided into 920,878,100 shares at Baht 1 par value per share.

Shareholders Top ten shareholders in the shareholder registration book as of December 29, 2017 were as follows:

List of Shareholders

No. of Shares

1. Mrs. Yupin Thirakomen

199,396,802

21.7

2. Mr. Somchai Hanjitkasem(1)

164,494,812

17.9

3. Mrs. Yupin Thirakomen on behalf of the estate of

164,087,977

17.8

140,059,333

15.2

5. Aunt Thongkam MK Foundation(4)

31,265,983

3.4

6. N.C.B.TRUST LIMITED-NORGES BANK 11

19,920,200

2.2

7. Social Security Office

17,797,000

1.9

8. Bualuang Long-term Equity Fund

16,618,400

1.8

9. Bualuang Long-term Equity Fund 75/25

9,062,600

1.0

10. DBS Bank LTD

9,002,900

1.0

Mr. Somnuk Hanjitkasem

(2)

4. Mr. Rit Thirakomen(3)

Remark: (1) Mr. Somchai Hanjitkasem is a brother of Mrs. Yupin Thirakomen. (2) Mr. Somnuk Hanjitkasem is a deceased brother of Mrs. Yupin Thirakomen. (3) Mr. Rit Thirakomen is a spouse of Mrs.Yupin Thirakomen. (4) Aunt Thongkam MK Foundation was founded by Mrs. Yupin Thirakomen and Mr. Somchai Hanjitkasem, a daughter and a son of Mrs. Thongkam Mekto. Mrs. Yupin Thirakomen and Mr. Somchai Hanjitkasem are the chairman and vice chairman of Aunt Thongkam MK Foundation respectively.

Shareholder and Management Structure

Warrants The Extraordinary General Meeting of Shareholders No. 1/2013 dated January 3, 2013 resolved to allow the Company to issue and offer 20,000,000 units of warrants to executives (including executive directors) and employees of the Company and its subsidiaries (hereinafter referred to as the “M-WA”) with the following details: Type

• Warrant to purchase ordinary shares of MK Suki Restaurant Group Public Company Limited in a name-registered and non-transferable form except for transfer upon death of directors, executives and employees

Term

• 5 years from the issued and offered date

Quantity

• 20,000,000 units

Offering price

• Baht 0 per unit (Zero Baht)

Offering method

• One-time offering to more than 50 executives (including executive directors) and employees of the Company and/or subsidiaries

Allocation method

• To be allocated to executives (including executive directors) and employees of the Company and/or subsidiaries without going through securities broker. • The number of warrants allotted to each executive (including executive directors) and employee needs not be equal. This will depend on positions, years of service, knowledge and experiences, responsibilities, performances and potential or profits the Company will generate.

Total number of shares

• 20,000,000 shares

reserved for rights exercise Exercise ratio

• One warrant for the rights to exercise one ordinary share (subject to subsequent change based on the rights adjustment condition)

Exercise price

• Baht 1 per share unless the price is adjusted otherwise based on the rights adjustment condition. The exercise price is lower than the market price for an offer of shares calculated from the IPO of capital-increase shares at Baht 49 a share.

Exercise period

• On the last business day of each quarter (March, June, September or December) throughout the warrant’s term. The first exercise date will be on the date when the 12-month period from the date the warrant was issued to executives (including executive directors) and employees of both the Company and/or subsidiaries becomes due (the exercise date) based however on the following conditions:

115

Annual Report 2017 l MK Restaurant Group Public Company Limited

116

Warrants (Cont.) Exercise period

• After 12 months from the allotted date, a warrant holder may exercise no more than 10 percent of the allotted warrants. • After 24 months from the allotted date, a warrant holder may exercise another 20 percent of the allotted warrants. • After 36 months from the allotted date, a warrant holder may exercise another 30 percent of the allotted warrants. • After 48 months from the allotted date, a warrant holder may exercise any number of the warrants until the warrant’s maturity date. • Warrants left from the exercise or not exercised on any exercise date can be accumulated for the next exercise date throughout the term of the warrant. However, on the due date, any warrant not yet exercised will be terminated and voided. • The last exercise date will be the last business day of the five-year period starting from the warrant issuance date.

Period to notify the last

• Not less than 15 days before the last exercise date.

exercise intention Condition of the warrant exercise

1. Warrant holder must be an executive (including executive director) and an employee of the Company and/or subsidiaries on the exercise date. 2. If the warrant holder is no longer an executive (including executive director) or an employee of the Company and/or subsidiaries following his/her retirement based on the Company’s regulations, the executive or the employee may exercise his rights under the warrants until the warrant’s maturity date. 3. If the warrant holder dies, his/her successor or estate may buy ordinary shares under the warrants up to an amount of warrants due for exercise only. The exercise can be done on any exercise date up to the maturity date of such warrants. 4. If the warrant holder is transferred to another department or another company upon the Board of Directors’ approval where the executive or the employee still retains his/her status at the Company and/or subsidiaries, on the exercise date, the executive or employee may exercise his rights under the warrants up to their maturity date. 5. If the warrant holder is no longer an executive (including executive director) or employee of the Company and/or subsidiary before or on any exercise date due to other reasons than stated in Clause 2-4 above, such executive or employee of the Company and/or subsidiary will no longer be able to exercise his rights under the remaining warrants (whose rights have not yet been exercised).The warrants will be considered immediately terminated and void.

Shareholder and Management Structure

Warrants (Cont.) Reason for new shares issuance to accommodate the change of rights exercise

• Whenever the exercise price and the exercise ratio under the rights adjustment condition as stipulated in terms and conditions of the warrants is adjusted. • The adjustment is an event/situation stated in the Capital Market Supervisory Boards’ announcement or any other related notice.

Issuance date and offering period

• The Company will completely allocate warrants to executives (including executive directors) and employees of itself and/or subsidiaries within one year from the day the Shareholders’ Meeting approves such issuance and offering.

Secondary market for warrants

• The Company will not list the warrants on the SET.

Secondary market for ordinary

• The Company will list ordinary shares resulted from the warrant exercise on

shares resulted from the warrant exercise Dilution effect

the SET. Price Dilution: • If the entire 20 million units of warrants allotted to directors, executives and employees of the Company and/or subsidiaries are exercised, the market price of the Company’s shares will be diluted by 2.1 percent based on its IPO price of Baht 49 a share and the warrant’s exercise price of Baht 1 a share. Earnings Per Share Dilution and Control Dilution: • If the entire 20 million units of warrants allotted to directors, executives and employees of the Company and/or subsidiaries are exercised, the Earnings Dilution and the Control Dilution will be 2.2 percent of the original EPS Dilution and the Control Dilution based on the Company’s total 925,850,000 shares sold (paid-up capital after the Company offered capital-increase shares as IPO to existing shareholders and the public and the exercise of all warrants).

117

118

Annual Report 2017 l MK Restaurant Group Public Company Limited

Other rules, conditions and details

or amend terms, conditions and

consolidated financial statements.

of the warrants including a reason

details relating to the warrant

Yet, the Company and subsidiaries

that new shares will be issued

issuance to accord with laws

may pay dividend at a lower rate

to accommodate the adjustment

and announcements of relevant

than whatâ&#x20AC;&#x2122;s stated above or it may

of exercise price and exercise

agencies.

abstain from dividend payment subject to economic condition,

ratio shall be at the discretion of the Board of Directors who may

Dividend Policy

performance, financialposition, liquidity of the Company and its

determine or amend them as deemed appropriate. The Board

The Company and subsidiaries

subsidiaries and an extent to which

shall entrust Chairman of the

will pay no less than 50 percent of

the Company and its subsidiaries

Board to adopt terms governing

net profit after corporate income

require working capital to manage

the rights and responsibilities of

tax and statutory reserves as

and expand business.

warrant issuer as well as to adopt

dividend based however mainly on

Shareholder and Management Structure

119

Management Structure of MK Restaurant Group Public Company Limited As of December 31, 2017, the management structure was as follows:

Board of Directors

Corporate Governance, Nominating and Committee

Audit Committee

Internal Audit Department

Chief Executive Office

Executive Vice President

Japanese Restaurant Operations Division

Executive Vice President

Senior Vice President and Chief Financial Officer

Special Projects

Accounting and Finance Division

Senior Vice President

Restaurant Development and Facilities Maintenance Division

Supply Chain Division

MK Restaurant Operations Division

Marketing Division

Digital Technology Division

Human Resources Division

Quality Assurance and Food Safety Division

Information Technology Division

Product Development Division

Annual Report 2017 l MK Restaurant Group Public Company Limited

120

and mission of the Company,

T h e C o m p a n y ’s m a n a g e m e n t structure consists of the Board of Directors and the Audit Committee.

7. Mr. Thanong Chotisorayuth Independent Director 8. Dr. Katiya Greigarn

roles and responsibilities are as

Independent Director

follows.

Chairman of Corporate

Board of Directors

directors as follows:

the compliance of management on approved policies and plans. 4. To g o v e r n l o n g - t e r m

Governance, Nominating and

business operations, including

Compensation Committee

executive development plan and management succession plan.

As of December 31, 2017, the Board of Directors consisted of 10

major plans of action and budget. 3. To monitor and follow-up

Details of their components, qualifications and clearly-divided

strategy, financial targets, risks,

9. Mr. Sujint Chumpolkanjana Director

5. To set and approve a written corporate governance policy for the Company and review and

1. Mr. Rit Thirakomen Chairman

10. Mr. Pravit Tantiwasinchai Director

enforce the policy regularly, at least annually. 6. To ensure that a written code of business conduct be in place

2. Mr. Somchai Hanjitkasem

Authorized Directors

and all directors, executives and

Authorized directors who may

employees understand business

sign on behalf of the Company are

ethical standards of the Company.

Director Member of Corporate

Mr. Rit Thirakomen, Mr. Somchai

To closely monitor the enforcement

Governance, Nominating and

Hanjitkasem, Mr. Pravit Tantiwasinchai,

of the code of business conduct.

Compensation Committee

Mr.Somchai Pipitvijitkorn totaling

7. To consider any conflict

two persons together with the

o f i n t e re s t t h o ro u g h l y. T h e re

Company’s seal.

should be clear guidelines on

Director 3. Mr. Somchai Pipitvijitkorn

4. Dr. Annop Tanlamai

the approval of transactions with

Independent Director Chairman of Audit Committee

Roles and responsibilities of the Board of Directors

conflict of interests so that the transactions are conducted for the best interests of the Company

5. Mrs. Vilai Chattanrassamee 1. To manage the Company

and all shareholders. The person

in accordance with the laws, the

who has conflict of interest should

Company’s objectives, its Articles

not participate in decision-making

6. Mr. Attapon Chodchoy

of Association and resolutions of

process. The Board should also

Independent Director

the Shareholders’ Meeting with

monitor the regulation regarding

Member of Audit Committee

integrity and care to protect the

criteria, procedures and disclosure

Member of Corporate

Company’s interest.

of transactions with conflict of

Independent Director Member of Audit Committee

Governance, Nominating and Compensation Committee

2. To consider and approve key business matters such as vision

interests. 8. To o v e r s e e a n d e n s u re

Shareholder and Management Structure

121

that the Company has efficient

where absent directors shall notify

proper and effective internal control

risk management and to review

Chairman of the Board or Company

and internal audit systems and to

and evaluate the efficiency of risk

Secretary before the meeting.

review the independence of internal

management regularly and wherever there is change in risk level.

14. To evaluate once a year of its

audit function of the Company; to

work, functions and performance.

approve the appointment, transfer and termination of head of the

9. To ensure that an internal control system is in place, including

Audit Committee

internal audit function or any other

financial, compliance, and policy

As of December 31, 2017, the

functions responsible for internal

controls, and to assign an

Audit Committee consisted of three

auditing.

independent person or department

directors as follows:

compliance with the laws on

to audit and report at least annually. 10. The annual report should

3. To verify the Company’s

1. Dr. Annop Tanlamai

securities and exchange, the SET’s

contain a statement from the

Independent Director &

regulations and laws relating to the

Board of Directors or the audit

Chairman of the Audit

Company’s business.

committee on the adequacy of the

Committee

Company’s major risk with the

Company’s internal controls and risk management.

4. To review and discuss the

2. Mrs. Vilai Chattanrassamee

management and to discuss

Independent Director &

measures the management has

on whistle-blowing for related

member of the Audit

put in place to monitor and control

parties or stakeholders and publish

Committee

the risk.

11. To set up the clear procedures

5. To r e v i e w, s e l e c t a n d

them on the Company’s website or directly report to the Company. One

3. Mr. Attapon Chodchoy

nominate independent person

channel is via independent directors

Independent Director &

as the Company’s auditor and to

or the audit committee, who should

member of the Audit

propose his/her remunerations;

arrange an investigation and report

Committee

to attend the meeting with the auditor without the management’s

findings to the Board.

presence at least once a year.

12. To have clear procedures

The three members of the Audit

on governing its subsidiaries in

Committee are knowledgeable and

6. To r e v i e w c o n n e c t e d

order to protect investor benefits

experienced persons in finance and

transactions or those with potential

including assigning directors of

accounting.

conflict of interest that they comply w i t h t h e l a w s a n d t h e S E T ’s

its subsidiaries to be the director of its subsidiaries to ensure the alignment of the parent company’s

Roles and Responsibilities of the Audit Committee

Exchange laws or SET regulations.

1. To verify that the Company

13. To attend the meeting of

has accurately and adequately

unless in case of force majeure

transactions are reasonable and carried out for the best interest of

policy and under the Securities and

Board of Directors and Shareholders

requirements to ensure that the

reported its financial position. 2. To verify that the Company has

the Company. 7. To p r e p a r e t h e A u d i t Committee’s report and submit it to the Board of Directors after each

Annual Report 2017 l MK Restaurant Group Public Company Limited

122

meeting of the Audit Committee.

designated by the Board upon the

Committee’s report for disclosure in

10. During its performance, if

the annual report. This report must

the Audit Committee finds or is

Corporate Governance, Nominating and Compensation Committee

be signed by Chairman of the Audit

suspicious of the following action

As of December 31, 2017, the

Committee and must consist of the

which could materially affect the

Corporate Governance, Nominating

following information to the least:

Company’s financial position and

and Compensation Committee

(a) Opinion on the accuracy,

performance, it must report the

consisted of three directors as

completion and reliabilityof the

incident to the Board for remedy

follows:

Company’s financial statements

purpose within a deadline deemed

8. To p r e p a r e t h e A u d i t

Audit Committee’s approval.

(b) Opinion on the adequacy

appropriate by the Audit Committee

of the Company’s internal control

(a) Transactions that could lead

Chairman

to conflict of interest

system (c) Opinion on legal compliance

(b) Corruption or unusual or

with the laws on securities and

material defects in the internal

exchange, the SET’s regulations

control system

or laws relating to the Company’s

business ( d ) O p i n i o n re g a rd i n g t h e soundness of the auditor transactions with potential conflict

in the timeframe under paragraph

of interest

one before reporting it to the SEC

(f) Number of meetings

Member 3. Mr. Somchai Pipitvijitkorn Member

Company’s business if the Board or the executives fail to amend it with-

Opinion

2. Mr. Attapon Chodchoy

regulations or laws relating to the

regarding

(e)

1. Dr. Katiya Greigarn

or the SET.

organized by the Audit Committee

11. During its performance, the

and an attendance record of each

Audit Committee may seek advice

member

f ro m t h i rd - p a r t y i n d e p e n d e n t

Roles and Responsibilities of the Corporate Governance, Nominating and Compensation Committee Corporate Governance

(g) Opinion or observation in

a d v i s o r o r e x p e r t i n re l e v a n t

general that the Audit Committee

profession if considered necessary

1. To develop and recommend

receives from its performance

and appropriate at the Company’s

the best practice of the corporate

under the Charter

expense. When performing its

gover nance principles for the

(h) Other items that the Audit

duties mentioned above, the Audit

Company to the Board of Directors

Committee feels that shareholders

Committee is directly liable to the

f o r a p p ro v a l . T h e c o r p o r a t e

and investors should know within its

Board of Directors who shall remain

governance principles should be

scopes of roles and responsibilities

responsible for the Company’s

consistent with SET’s corporate

designated by the Board.

operation to the third party.

governance principles.

9. To d o o t h e r t h i n g s a s

2. To oversee the Company’s

Shareholder and Management Structure

123

operations to ensure the

General Meeting of Shareholders

ensure their qualifications complied

consistency with the Companyâ&#x20AC;&#x2122;s

for approval if necessary.

with the laws and regulations of government agencies.

corporate governance principles

2. I n o r d e r t o s e a r c h f o r

as approved by the Board of

individuals qualified to become

Directors.

members of the Board of Directors

recommendation to the Board

3. To re v i e w, c o m p a re t h e

as well as the Chief Executive

of Directors for the size and the

corporate governance principles of

Officer as mentioned in no.1,

c o m p o s i t i o n o f t h e B o a rd o f

the Company with the international

the Committee shall perform as

Directors to achieve the efficiency

best practice and SETâ&#x20AC;&#x2122;s principles

follows:

in the Board of Directors. For

3. R e v i e w

and

make

a n d re c o m m e n d c h a n g e s a s

2.1. D e f i n e t h e r e q u i r e d

example, there should be

necessary to the Board of Directors.

qualifications and characteristics

enough qualified members to

4. To re v i e w t h e b u s i n e s s

for the directors and the Chief

be assigned by the Board of

philosophy, code of conduct for

Executive Officer by taking

Directors for members of other

the business operation, directors,

into consideration various

sub-committee. In addition, to

and employees as well as other

attributes such as knowledge,

achieve the prudence decisions in

related principles and recommend

experience, expertise in required

any matters, the Board of Directors

changes as necessary to the Board

matter, leadership skill, integrity

shall comprise of directors with

of Directors.

and accountability, professional,

knowledge, capability, experience,

5. To perform any other duty

maturity and stability as well as

and expertise in various aspects.

regarding the corporate governance

ability to express their opinion

F u r t h e r m o re , t h e n u m b e r o f

matters as designated by the Board

differently and independently, etc.

independent directors shall be

2.2. C o n s i d e r a n d e n s u re

considered to conform to the good

of Directors.

the qualification of candidates

Nomination

nominated to be independent 2.3. C o n s i d e r

the

4. To perform any other duty regarding the nominating matters

directors of the Company. 1. To search for individuals

corporate governance principles.

time

as designated by the Board of Directors.

qualified to become members of

dedication to perform duties as a

the Board of Directors as well as

director. The number of meeting

the Chief Executive Officer. The

attendance shall be considered

nominees for the Chief Executive

for the retiring directors to be

Officer and members of the Board

re-appointed for another term

1. To consider the remuneration

of Directors in order to replace

while the number of existing

for the Board of Directors, the

the vacancies caused from any

board memberships with other

sub-committee assigned by the

matters except retiring by rotation

companies shall be considered for

Board of Directors, and the Chief

shall be approved by the Board of

the new candidate.

Executive Office and recommend to

Directors or be proposed by the

2.4. E x a m i n e c a re f u l l y t h e

Board of Directors to the Annual

qualifications of the candidates to

Compensation

the Board of Directors or the Annual General Meeting of Shareholders

Annual Report 2017 l MK Restaurant Group Public Company Limited

124

1. for approval. The remuner-

The chairman of the Board of

Board of Directors for approval.

ations are including (a) Retainer

Directors and the chairman of the

The Committee shall evaluate

which is the monthly compensation

sub-committee should receive

t h e C h i e f E x e c u t i v e O ff i c e r ’s

(b) Attendance fee which is the

the compensation more than the

performance with consideration of

compensation paid only for the

member of the Board of Directors or

the Company’s performance, the

directors attending the meeting

the member of the sub-committee.

performance of other important

2.3 The compensation which

duties and the sustainable return

Company’s performance such as

is paid to directors in accordance

to the Company and shareholders.

annual bonus (d) Other benefits as

with the annual performance of

In addition, the Committee shall

specified by the Board of Directors.

the Company, such as directors’

compare with the performance of

2. I n o r d e r t o c r e a t e t h e

annual bonus, should be linked

other comparable companies in the

t r a n s p a r e n c y, f a i r n e s s , a n d

to the payment of dividends

same industry.

re a s o n a b i l i t y, t h e C o m m i t t e e

to shareholders. If no dividend

5. To perform any other duty

shall consider the remuneration

payments were paid to shareholders

re g a rd i n g t h e c o m p e n s a t i o n

according to the following principles

in any one year, the directors would

matters as designated by the Board

and guidelines:

also not be paid their annual bonus

of Directors.

2.1 The compensation should be reasonable and attractive enough

in that year. 2.4 E x e c u t i v e s

the

The Management Team

to retain the qualified directors

Company who also serve as

As of December 31, 2017, the

and executive management. The

directors of the Company shall

Company had four executives.

compensation shall be compared

not be paid any additional

Their names and titles are as

with that of other companies

compensation in their capacity as

follows:

with good corporate governance

the directors of the Company.

principles and having the same

3. To review and recommend on

size measured by company’s size

an annual basis the remuneration

such as sales size, asset size, etc.,

of directors based on the principles

profitability and complexity.

and guideline mentioned above to

2.2 T h e r e m u n e r a t i o n o f

the Board of Directors to consider

directors should commensurate

before propose to the Annual

with the duties and responsibilities

General Meeting of Shareholders

of each director. Directors with

for approval.

1. Mr. Rit Thirakomen Chief Executive Officer 2. Mr. Somchai Hanjitkasem Executive Vice President 3. Mrs. Yupin Thirakomen Executive Vice President

more responsibilities should receive

4. To e v a l u a t e t h e C h i e f

additional compensation for their

Executive Officer’s performance

increased responsibilities. The

in order to set the Chief Executive

director who is the members of

Officer’s compensation based

the sub-committee should receive

u p o n t he se e v a lua t ion on a n

5. Mrs. Sudarut Patvivatsiri

the additional compensation.

annual basis and propose to the

Senior Vice President

4. Mr. Kiatkong Kungwanwong Senior Vice President

Shareholder and Management Structure

125

Roles and Responsibilities of Chief Executive Officer (CEO)

4. To c o n t ro l a n d m o n i t o r

10. To command all employees

theoperation according to business

and staff; to employ, appoint,

plan, investment plan and budget

transfer, exercise disciplinary

C E O i s t h e C o m p a n y ’s t o p

approved by the Board to achieve

actions and terminate their

executive who has authority, roles

the goal.

employment.However,any action

and responsibilities to manage

5. To s u b m i t a n o p e r a t i o n

affecting employees in the position

the Company’s affairs as entrust-

report; the Company’s monthly,

of director or higher shall be reported

ed by the Board and he directly

quarterly and annual financial

to the Board for acknowledgment.

reports to the Board. The CEO’s

report and other related information

11. To i s s u e r e g u l a t i o n s

authority, roles and responsibilities

deemed crucial for the review of the

r e g a r d i n g t h e C o m p a n y ’s

as designated by the Board shall

Company’s operation to the Board

operation; to adopt, change,

include the following:

for acknowledgement or approval.

amend or terminate regulations,

6. To promptly report the Board

orders or announcements

1. To manage the Company’s

in case of an incident or any event

regarding the Company’s operation

affairs to be in compliance with

that may likely and materially

without conflicting with or against

the laws, objectives, Articles of

make a negative impact to the

regulations or orders of the Board

Association and resolutions of the

Company’s performance or its

of Directors.

Shareholders’ Meeting as well as

financial position or reputation in

12. To authorize other persons

with policy, regulations, orders

the future; to propose measures

to perform or do anything on his

and resolutions of the Board of

or offer advice to remedy such

behalf as deemed appropriate

Directors.

incident for the Board’s approval.

subject however to the CEO’s scopes of authority.

2. To perform duty with integrity

7. To formulate or improve

and care for the best interest of

the executive organizational

13. To approve or act in other

the Company. When performing its

structure; to determine roles and

matters as stated in the table of

duties mentioned above, the Audit

responsibilities of senior executives

authorization already approved by

Committee is directly liable to the

under the CEO’s line of command

the Board.

Board of Directors who shall remain

and to submit it to the Board for

responsible for the Company’s

approval.

operation to the third party. 3. To adopt business plan, investment plan and annual budget

8. To formulate or amend a

14. To perform any other duty as designated by the Board of Directors from time to time.

table of authority and submit it for

However, the CEO’s exercise of

the Board’s approval.

his authority as described above is

of the Company and to amend the

9. To efficiently supervise the

not allowed if the CEO or a person

plan and budget during the year

Company’s operation and daily

with potential conflict of interest as

if necessary to correspond to a

activities; to supervise employees

defined in the notifications of the

material situation change before

for strict compliance with policies,

SEC and the SET has any interest

submitting the amendment to the

regulations, orders and resolutions

or may have a conflict of interest

Board for approval.

of the Board of Directors.

in any other manner with the Company or subsidiaries unless it’s

Annual Report 2017 l MK Restaurant Group Public Company Limited

126

an approval of a normal business

Shareholders so that they are in

supervisory agencies based on the

transaction with general business

compliance with the laws, the

authorities’ regulations.

conditions and unless the Board

Company’s regulations and its best

has already approved the matter in

practices.

principle according to the laws on

3. To record the minutes of the

7. To communicate shareholders’ rights and the Company’s information to shareholders.

meetings of the Board of Directors

8. To provide recommendations

and Shareholders including to

and information relating to laws

Corporate’s Secretary

inform resolutions of these two

and regulations that the Board is

The Board of Directors reviewed

meetings to the management and

required to know and comply with;

and appointed the Corporate’s

monitor the compliance with such

and to regularly monitor accurate

Secretary at the Board of

resolutions through CEO.

compliance.

securities and exchange.

Directors’ Meeting No. 1/2017 where Mrs. Sudarut Patvivatsiri,

4. To prepare and keep the following documents:

9. To oversee activities of the Board of Directors to ensure that

with her proper experience and

4.1 Registration of Directors

directors can effectively perform

qualifications, was designated as

4.2 Invitation letter to attend

their duties.

Corporate’s Secretary to do the

the Board of Directors’ meeting,

following:

minutes of the Board of Directors’ meeting and the Company’s annual

1. To perform duty with care,

report.

prudence and integrity for the best

4.3 Invitation letter to attend

interest of the Company and to

the Shareholders’ meeting and

comply with the laws, objectives

minutes of the Shareholders’

and Articles of Association of

|Meeting.

the Company and resolutions

5. To keep and maintain a report

of the Board of Directors and

of interest as filed by directors and

Shareholders’ meetings.

executives.

2. To manage the meetings

6. To disclose information and

of the Board of Directors and

reports under his responsibility to

Shareholder and Management Structure

127

Table of the Board’s meeting attendance in 2017 Corporate Governance, List of Directors

Board of Directors

Audit Committee

Nominating and Compensation Committee

1. Mr.Rit Thirakomen

5/5

2. Mr. Somchai Hanjitkasem

5/5

3. Mr. Somchai Pipitvijitkorn

5/5

2/2

4. Dr. Annop Tanlamai

5/5

5/6

5. Mrs. Vilai Chattanrassamee

5/5

6/6

6. Mr. Attapon Chodchoy

5/5

6/6

2/2

7. Mr. Thanong Chotisorayuth

5/5

8. Dr. Katiya Greigarn

5/5

2/2

9. Mr. Sujint Chumpolkanjana

5/5

10. Mr. Pravit Tantiwasinchai

5/5

Remunerations of Directors and Executives The Company has clearly and transparently determined director’s remunerations which are in line with their roles and responsibilities to supervise the Company’s business operation. The remunerations were also reviewed taking into consideration the Company’s best interest. Remunerations of directors and executives in 2017 are as follows:

Director’s remunerations In 2017, the Company paid Baht 7,357,700 to its directors. However, based on the rules governing director’s remunerations, executive director was remunerated for his status as an executive only and not as a director.

Annual Report 2017 l MK Restaurant Group Public Company Limited

128

Table of Directorâ&#x20AC;&#x2122;s Remunerations Remunerations Corporate Name

Governance, Board of

Audit

Nominating

Directors

Committee

and

Total

Compensation Committee 1. Mr. Rit Thirakomen

2. Mr. Somchai Hanjitkasem

3. Mr. Somchai Pipitvijitkorn

955,000

30,000

985,000

4. Dr. AnnopTanlamai

955,000

99,000

1,054,000

5. Mrs. Vilai Chattanrassamee

955,000

84,000

1,039,000

6. Mr. Attapon Chodchoy

955,000

84,000

30,000

1,069,000

7. Mr. Thanong Chotisorayuth

955,000

8. Dr. Katiya Greigarn

955,000

45,000

1,000,000

9. Mr. Sujint Chumpolkanjana

955,000

10. Mr. Pravit Tantiwasinchai

300,000

6,985,000

267,000

105,000

7,357,000

Total

Shareholder and Management Structure

129

Executive’s Remunerations In 2017, the Company paid Baht 54,928,651 worth of salaries, bonuses and other remunerations to its executives.

Table of Executives’ Remunerations

Type of Remunerations

No. of Executives

Remunerations (Baht)

Salary

41,351,141

Bonus

12,714,202

Other remunerations*

863,308

Total

54,928,651

*Other remunerations including gas, medical expenses, prvovident fund, etc.

Other Remunerations A s i d e f ro m p a y i n g m o n e t a r y

offer 20 million units of warrants

shares in August 2013. Meanwhile,

remunerations to directors and

(M-WA) to executives (including

executives (including executive

executives as described above,

executive directors) and employees

directors) have been allocated

the Extraordinary General Meeting

of both the Company and/or

1,744,100 units of warrants as

of Shareholders No. 1/2012 held

subsidiaries. The warrants were

follows:

on September 18, 2012 approved

allocated simultaneously with the

to allow the Company to issue and

IPO of the Company’s ordinary

Annual Report 2017 l MK Restaurant Group Public Company Limited

130

Executives allocated

Number of warrant units being

Number of warrant units

the M-WA

allotted

exercised in 2017

1. Mr.Rit Thirakomen

451,300

180,600

2. Mrs.Yupin Thirakomen

406,800

162,800

3. Mr. Somchai Hanjitkasem

406,800

162,800

4. Mr. Sujint Chumpolkanjana

251,200

100,500

5. Mr. Pravit Tantiwasinchai

162,800

65,200

26,100

6. Mr.Kiatkong Kungwanwong

Audit Fee For the year 2017, the Company paid the audit fee amounted Baht 2,130,000 and the non-audit fee for the witness of asset destruction amounted Baht 170,610.

GOOD CORPORATE GOVERNANCE

132

Annual Report 2017 l MK Restaurant Group Public Company Limited

GOOD CORPORATE GOVERNANCE

Being in a food and service

effectively to achieve its objectives.

business, MK Restaurant Group

The essence of the CG is to

Public Company Limited operates

commit to integrity, transparency

restaurant chains in Thailand and

and fairness when doing business

abroad where the service reaches

to reinforce confidence among

a large number of customers. The

shareholders, investors, customers,

Company has been recognized

staff and all stakeholders. Our

not only for quality and safe food

personnel are encouraged to be

b u t a l s o g re a t s e r v i c e w h i c h

aware of the principles and to

have solidly driven its growth

commit to moral practices when

so far. Aside from running the

conduct the service business.

business on this fundamental, the

As this reflects the Companyâ&#x20AC;&#x2122;s

Board of Directors also places an

standards of management, it

extremely high priority to corporate

should be favorable to our business

governance (CG). In other words,

and further enhance our recognition

as the Company firmly believes in

here and abroad. Thatâ&#x20AC;&#x2122;s why the

the CG principles, CG rules and

Board of Directors has adopted the

regulations have been applied in

CG policy which corresponds to

the operation while CG policy is

the CG principles for the business

adopted to manage the business

to grow sustainably and for us to

and supervise internal functions.

remain trusted by our shareholders,

The goal, after all, is to ensure that

investors, customers, staff and all

the business is run efficiently and

stakeholders.

(Mr. Rit Thirakomen) Chairman of the Board of Directors

Good Corporate Governance

MK Restaurant Group Plc.’s Corporate Governance

133

leader in ethical practice and a role

2. To bolster confidence of both

model for corporate governance

local and international investors as

compliance.

the CG should let everyone equally

To make the Company an efficient

5. The Board of Directors will

organization when it comes to

devote to the Company without

3. To b e c o m e a t o o l f o r

business operation, corporate

considering their personal interests.

the Company to measure it

governance practices and

Its actions will be mainly based on

performance and examine its work

management excellence where

outcomes affecting the organization

process to improve its efficiency

shareholders are treated with the

and the public at large.

and achieve its goals.

best interest and stakeholders

6. The Board of Directors will

a re t a k e n i n t o c o n s i d e r a t i o n

disclose the Company’s financial

while the Company’s business

and non-financial information in an

is carried out with transparency

adequate and timely fashion for

and accountability, the Board of

shareholders and stakeholders to

Directors has adopted the following

equally access the information.

share the interest.

The Corporate Governance Policy Section 1: Shareholders’ Rights

corporate governance (CG) policy

7. Shareholders will be equally

The Board of Directors is aware of

for itself, the Company’s executives

treated for the rights to information

shareholders’ rights to own and

and employees to adhere to. Details

and will be offered appropriate

control the Company through the

are as follows.

channels to communicate with the

Board of Directors appointed to

Company.

perform duty on their behalf and to

1. The Board of Directors,

8. The Board may appoint a

make decisions on the Company’s

executives and employees will

specific committee to carefully

major changes. That’s why the

perform duty with transparency and

s c re e n i m p o r t a n t m a t t e r s a s

Board of Directors has encouraged

integrity towards the organization

deemed appropriate. There will also

shareholders to exercise their rights

and other colleagues.

be an appropriate selection process

based on the following fundamental

2. The Board of Directors’

to recruit important executives of all

rights of shareholders:

first priority is customers, to be

levels as well as a transparent and

followed, respectively, by welfare

fair nomination process.

1. Shareholders’ Meeting

and happiness of employees and best interest of the organization and business partners.

The Importance of Corporate Governance

1.1 The Board will ensure that the Company discloses information, identifies date

3. The Board of Directors strives and

and time of the meeting and

and independence. Roles and

st an da rdiz e t he ma na ge me nt

meeting agendas with supporting

responsibilities of chairman of the

process while making the process

explanations and rationale in each

Board, Chief Executive Officer and

accountable which should enhance

agenda in an invitation letter to

every executive are clearly defined.

the Company’s competitiveness,

attend the Annual General Meeting

4. T h e B o a rd o f D i re c t o r s

prevent and do away with potential

of Shareholders (AGM) and the

conflict of interest.

Extraordinary General Meeting

to perform its duty with responsibility

strives to be respectable. It will be a

1. T o

strengthen

Annual Report 2017 l MK Restaurant Group Public Company Limited

134

of Shareholders (EGM) as well

present voting results to allow the

and answers and voting results

as posts the information on its

meeting to proceed fast, correctly

of each agenda indicating the

website. The Company will refrain

and accurately.

number of shareholders who have

from doing anything that will restrict

2.2 The Company will allow

voted yes, no or abstention will be

shareholders from studying the

shareholders to pose questions

recorded. A list of directors present

Company’s information.

to Chairman of the Board and

at the meeting and absent from the

chairman of sub-committees in

meeting will also be recorded.

1.2 The Board will facilitate the Shareholders’ Meeting which

matters relating to the meeting.

3.2 The Company will disclose

will be held at a place large enough

2.3 Shareholders are entitled

to the public voting results of each

to accommodate shareholders in

to vote separately in each proposed

meeting agenda at both the AGM

Bangkok or nearby provinces not

agenda. For an election of member

and the EGM on the next business

too far away to deter shareholders

of the Board, shareholders are

day on the Company’s website.

from travelling to.

entitled to vote for each individual

shareholders to propose meeting

2.4 The Company will appoint

Section 2: Equal treatment of shareholders

agenda or send questions to the

an independent person to count or

Realizing the importance

Company before the meeting day

check votes at both the AGM and

of equal and fair treatment to

through available channels such as

the EGM before disclosing voting

all shareholders, the Board of

the Company’s website.

result to the meeting and recording

Directors has done the following:

1.3 The Company will allow

1.4 The Company will allow

director.

it in the minutes of the meeting.

shareholders who are unable to

2.5 Chairman of the meeting

1. Giving information prior

attend the meeting themselves

shall appropriately manage the

to the Shareholders’ Meeting

t o a p p o i n t a p ro x y w h o m a y

meeting session while encouraging

vote on their behalf where

shareholders to express their views

1.1 The Board of Directors

absent shareholders will receive

and ask related questions to the

will have the Company submit

documents and explanations on

meeting under a relevant meeting

a meeting schedule, meeting

how to appoint a legal proxy.

agenda.

agendas and the Board’s opinions

Simultaneously, the Company will

to the Stock Exchange of Thailand

propose independent directors as a

3. Minutes of the

(SET) as well as post them on

choice to be appointed as a proxy.

Meeting and disclosure

the Company’s website at least

of resolutions of the

28 days before the date of the

Shareholders’ Meeting

shareholders’ meeting.

2. Procedures on the

1.2 The Board will have the

Shareholders’ Meeting 3.1 Voting procedures and

Company notify shareholders all

presentation of counted votes

rules and regulations to be applied

will

will be explained to the meeting

at the meeting including how to

i n t ro d u c e t e c h n o l o g y a t t h e

before it starts. Shareholders will be

adopt a resolution and voting rights

Shareholders’ Meeting to register

allowed to ask questions or raise

of different classes of shares held

shareholders, count votes and

an issue. In addition, questions

by shareholders.

Date 2.1 T h e

Company

Good Corporate Governance

1.3 An i n v i t a t i o n l e t t e r t o attend the Shareholders’ Meeting

135

3. Protection against the

minors who have access to the

use of insider information

Company’s material information and its financial statements are

will be entirely made both in Thai To p ro m o t e e q u a l a c c e s s t o

prohibited to buy, sell, transfer

information and to prevent the use of

or take transfer the Company’s

2. Protecting the rights of

insider information for the benefit of

securities within one month prior

minority shareholders

directors, executives and employees

to the disclosure of the Company’s

including their spouse and children

financial statements to the public

2.1 The Board of Directors will

not yet legally matured as well as

and 24 hours after the release

adopt clear rules to allow minority

to strengthen our CG practice, the

(Blackout Period). The Company

shareholders to propose additional

Company has adopted the insider

will inform all concerned persons of

meeting agendas in advance prior

information policy as follows:

the blackout period 14 days prior to

and English.

such period.

to the meeting day for the purpose of fairness and transparency when

3.1 D i re c t o r s , e x e c u t i v e s

deciding whether or not the agenda

and employees including their

proposed by minority shareholders

spouses and children not yet

will be added into existing meeting

legally matured who have access

4.1 At the Board of Directors’

agendas.

to material information and the

meeting, a director having an

2.2 The Board of Directors

Company’s financial statements

interest in a meeting agenda must

will adopt procedures to allow

not yet disclosed to the public

report his interest to the meeting

minority shareholders to nominate

are prohibited to disseminate or

for the Board’s acknowledgment.

a person as a director. For example,

disclose the information to other

He/she has to leave the meeting

a nomination can be made through

persons both in and outside the

room during the agenda.

the Nomination Committee 3-4

organization. In addition, there

4.2 The Board of Directors

months prior to the Shareholders’

shall be the Chinese Wall among

has a duty to review and resolve an

Meeting where qualification sheets

departments to prevent premature

issue of potential conflict of interest

and consents from the nominee will

disclosure of material information

and connected transactions for

also be submitted.

not yet disclosed to the public

the benefit of the Company and

2.3 The Board of Directors

unless such department is required

all stakeholders where it may

will proceed with the meeting

by its duty to access the information

designate the Audit Committee to

based on the agendas notified in

which it shall take a good care

review the issue and express an

the invitation letter to attend the

of the information the same way

opinion regarding the transaction

Shareholders’ Meeting and will not

the information owner does. This

with potential conflict of interest and

add any meeting agenda during

however excludes the disclosure

any item relating to the Company’s

the meeting without notifying

of information to the supervising

transaction. The Audit Committee

shareholders in advance.

authorities.

should inform the Board on a

2.4 The Board of Directors

3.2 The Company’s directors,

will allow shareholders to appoint

executives and employees including

a director on an individual basis.

their spouses and children who are

4. Director’s interest

quarterly basis.

Annual Report 2017 l MK Restaurant Group Public Company Limited

136

Section 3: Roles of Stakeholders

In addition, the Company also

resources regardless of their

focuses at keeping supplier’s

levels both in terms of knowledge

The Board of Directors has given

information confidential.

and skill enhancement as well as

priority to the rights of all groups of

yy Competitors The Company

work attitude. The Company

stakeholders; namely customers,

aims to compete on quality and

will take care of safety and

suppliers, competitors, the society,

service efficiency for the best

healthcare issues of factory

employees and shareholders.

interest of customers. It will not

workers. All employees will

Realizing its roles and responsibilities,

destroy competitor’s reputation

be subject to a competency

the Board has formulated the Code

just for the Company’s interest.

evaluation system. Besides,

of Conduct and best practices

Simultaneously, the Company

the Key Performance Indicators

for employees to be aware of the

considers other firms both

(KPIs) have been introduced

stakeholders, to be faithful to their

as a supplier and a person

t o e v a l u a t e e m p l o y e e ’s

duties and to refrain from corruption.

sharing the same profession

performance vis-à-vis the

In order to protect the interest of all

who has mutually committed

Company’s goals.

parties in an honest and fair manner,

to the ratification governing the

various groups of stakeholders are

profession.

yy Shareholders The Company commits to maintain the

yy Society Realizing that the

interest of shareholders for

Company is a component in a

their maximum satisfaction

yy Customers The Company

society, the Board of Directors

through remarkable returns and

commits to make customers

has instructed the Management

a steady growth. In addition,

satisfactory and confident in us.

to adopt the CSR (corporate

information will be accurately

It will develop quality products

social responsibility) policy to

and transparently disclosed to

and provide excellent services to

provide assistance and support

investors and shareholders in an

customers. It will also facilitate

and to create something

accurate and reliable manner. All

customers. The Company is

beneficial for communities

shareholders are given a chance

responsible for customers

and the society. In addition,

to equally exercise their rights.

through a department set up

employees are urged to be

to follow up with customers

aware of their responsibilities to

grievances to further improve

every sector of the society.

treated as follows:

its services.

yy Employees Equal opportunity

Section 4: Disclosure of information and transparency

yy S u p p l i e r s T h e C o m p a n y

is given to employees at all

commits to create a mutual

levels. Human resources

1. The Board of Directors has a

relationship with suppliers

management is carried out on

duty to equally disclose all financial

through which both may share

the basis of ethics and fairness.

and non-financial information in

reciprocal benefits and which the

Remunerations, welfare and the

a timely and reliable manner to

Company may honestly maintain

provident fund will be provided for

shareholders and stakeholders

supplier’s rights in the service

employee’s secured future. The

via the Company’s annual report,

business because it places high

Company also pays attention to

the SET’s electronic notification

priority to supplier’s integrity.

the development of human

system and the Company’s website.

Good Corporate Governance

137

Information to be disclosed will

This includes reviewing an auditing

This however depends on what

cover what’s stated in the SET’s

fee which shall also be disclosed in

the Shareholders’ Meeting may

best practices which requires the

the annual report.

determine from time to time. Of this, at least half shall be independent

Company to disclose significant and

6. The Board of Director is

necessary information on a regular

required to disclose a policy under

basis in Thai and English through

which remunerations are paid to

1.2 Directors shall possess

the SET’s communication channels

directors and senior executives

qualifications and shall not have

and on the Company’s website.

that can reflect each individual’s

p ro h i b i t e d c h a r a c t e r i s t i c s a s

2. The Company has set up the

roles and responsibilities. The

stated in the laws on public limited

Investor Relations Unit to coordinate

disclosure shall include nature or

company. Nor shall they possess

with institutional investors, securities

characteristics of the remunerations

any feature that indicates the lack

analysts and shareholders of the

as well as what each director

of qualifications to be trusted to

Company to provide them with

receives from his/her directorship

manage a business whose shares

the Company’s performance and

of subsidiary companies.

are held by the public under the

directors.

laws and the SEC’s notification on

investment information through a

7. The Board of Directors must

convenient, fast and easy-to-ac-

report changes in the Company’s

cess channel of communication.

shareholding ratio based on the

1.3 The Board of Directors

3. Significant information with

regulations of the Securities and

shall adopt rules and regulations

effect to the Company’s securities

Exchange Commission (SEC) and

that carefully allow directors to hold

p r i c e o r w h i c h c o u l d a ff e c t

the SET.

positions at other companies taking

securities and exchange.

investment decision or make an

8. The Board of Directors requires

into consideration how efficient

impact to shareholders’ rights and

the Audit Committee to examine

directors who work for several firms

benefits will only be disclosed after

and oversee risk management

will be and how reassuring that

the information has been officially

where a risk assessment analysis

directors can adequately dedicate

disseminated to the SET.

will be conducted and risk is to be

themselves for the Company.

kept at an acceptable level.

As such, each director may hold

4. The Board of Directors is

position complementary to the

responsible for reporting its liability to the financial statements where such report must be published with the Annual Report. It is to report

Section 5: Responsibilities of the Board of Directors

nature of the Company’s business in no more than five listed companies. In other words, efficiency of a person as the Company director may fall

remunerations of each director in the annual report and to disclose the

1. Components and

if he/she holds directorship in too

number of meetings held annually.

qualifications of the Board

many companies. In addition, the

of Directors and appoint-

rule must be disclosed to the public.

5. The Board of Directors has entrusted the Audit Committee

ment

1.4 The Board of Directors will assign Company Secretary to

to oversee the Management Discussion and Analysis (MDA)

1.1 The Board of Directors

inform legal and regulatory advice

i n c o n j u n c t i o n w i t h fi n a n c i a l

shall consist of no fewer than five

that it had better learn. The Company

statements on a quarterly basis.

members but not exceeding 12.

Secretary will oversee the Board’s

Annual Report 2017 l MK Restaurant Group Public Company Limited

138

activities and coordinate with

directorship and a number of com-

cy for the Company and review and

other parties to ensure compliance

panies they may sit at. All of this is

enforce the policy regularly, at least

with the Board’s resolutions. The

subject to the Board’s approval.

annually.

Company Secretary shall be a law

1.10 The Board of Directors

2.6 To ensure that a written

or accounting graduate or has

has designated the Company

code of business conduct be in

attended training relating to the

Secretary to summarize and brief

place and all directors, executives

Company Secretary’s functions.

new information to new directors

and employees understand business

1.5 The Board of Directors

via the Board of Directors’ Manual.

ethical standards of the Company.

may appoint an unlimited number of

New directors will make a company

To closely monitor the enforcement

sub-committee as necessary to help

visit to better understand the Com-

of the code of business conduct.

it screen and oversee work under its

pany’s business.

2.7 To consider any conflict o f i n t e re s t t h o ro u g h l y. T h e re

responsibility.

2. Roles and

should be clear guidelines on

be appointed with transparency. The

responsibilities of the

the approval of transactions with

Nomination Committee shall start a

Board of Directors

conflict of interests so that the

nomination process where a person

The following are major roles and

transactions are conducted for

with appropriate qualifications will

responsibilities of the Board of

the best interests of the Company

be nominated as the Company’s

Directors:

and all shareholders. The person

1.6 Members of the Board shall

who has conflict of interest should

director together with detailed resume. The Nomination Committee

2.1 To manage the Company

not participate in decision-making

will then submit a list of nominees to

in accordance with the laws, the

process. The Board should also

the Board who will propose them

Company’s objectives, its Articles of

monitor the regulation regarding

to the Shareholders’ Meeting for

Association and resolutions of the

criteria, procedures and disclosure

approval and appointment.

Shareholders’ Meeting with integrity

of transactions with conflict of in-

and care to protect the Company’s

terests.

1.7 Resumes of all directors will be posted on the Company’s

interest.

2.8 To oversee and ensure

2.2 To consider and approve

that the Company has efficient

1.8 Newly-appointed directors

key business matters such as

risk management and to review

will attend an orientation session

vision and mission of the Company,

and evaluate the efficiency of

within three months after the

strategy, financial targets, risks,

risk management regularly and

appointment in which information

major plans of action and budget.

wherever there is change in risk

proven beneficial and necessary to

2.3 To monitor and follow-up

their performance will be presented

the compliance of management on

to them.

approved policies and plans.

website.

level. 2.9 To ensure that an internal control system is in place, including

1.9 The Board of Directors

2.4 To g o v e r n l o n g - t e r m

financial, compliance, and policy

will clearly adopt a policy and

business operations, including

controls, and to assign an

procedures governing the way

executive development plan and

independent person or department

the Company’s CEO and senior

management succession plan.

to audit and report at least annually.

executives hold directorship at other

2.5 To set and approve a

2.10 The annual report should

companies. This will include types of

written corporate governance poli-

contain a statement from the

Good Corporate Governance

139

Board of Directors or the audit

3.1 The Audit Committee - At

4.2 The Board of Directors will

committee on the adequacy of the

least three independent directors

receive information relating to the

Company’s internal controls and

are appointed as members of the

meeting in advance. The Company

risk management.

Audit Committee, one of whom

Secretary will prepare an invitation

2.11 To s e t u p t h e c l e a r

must be knowledgeable in finance

letter to attend the meeting plus

procedures on whistle-blowing for

and accounting. They shall be

meeting agendas and supporting

related parties or stakeholders and

independent as defined in the SET’s

documents at least five days before

publish them on the Company’s

announcement and according to the

the meeting date to allow the

website or directly report to the

definition of independent director

Board enough time to study the

Company. One channel is via

specifically for company. The Au-

information before attending the

independent directors or the audit

dit Committee will audit internal

meeting unless it’s an emergency

committee, who should arrange an

control system, financial reporting

meeting.

investigation and report findings to

system and risk management and

the Board.

will select and appoint auditor.

4.3 Chairman of the Board shall approve meeting agendas

2.12 To have clear procedures

3.2 The Corporate Governance,

where he is to consult with the

on governing its subsidiaries in

Nomination and Compensation

CEO. Each director has liberty to

order to protect investor benefits

Committee – All members are

propose a matter into the meeting

including assigning directors of

appointed from the Board of

agendas. The Company Secretary

its subsidiaries to be the director

Directors. At least three of them

will gather proposed agendas from

of its subsidiaries to ensure the

shall be independent non-executive

each director.

alignment of the parent company’s

directors and at least 50% of them

4.4 Directors having an interest

policy and under the Securities and

as well as the chairman of the

in an agenda are required to abstain

Exchange laws or SET regulations.

committee shall be the independent

from voting or refrain from expressing

2.13 To attend the meeting of

director. Moreover, the chairman of

opinion in the agenda. At the Board

Board of Directors and Shareholders

the Board of Directors should not

of Directors’ meeting, if a director

unless in case of force majeure

be the chairman or the member

is having an interest in an agenda,

where absent directors shall notify

of the Corporate Governance,

Chairman of the Board will ask the

Chairman of the Board or Company

Nomination and Compensation

director to comply with the policy

Secretary before the meeting.

Committee.

by acknowledging his interest in the agenda to the meeting before

2.14 To evaluate once a year of its work, functions and performance.

3. Specific Committee

4. The Board of Directors’

he/she is invited to step out of the

Meeting and information

meeting during the agenda.

provided for the Meeting

4.5 The Board of Directors has designated the Company Secretary

One of the Board of Directors’ duties is to thoroughly and effectively

4.1 The Board of Directors

to record a minutes of the meeting

review and approve important

will schedule meeting dates of the

in a complete, accurate and timely

matters relating to the Company’s

Board of Directors in advance on

fashion. The minutes must be clear

operation. As a result, the Board

an annual basis. The Company

in terms of meeting results and

has decided to set up the following

Secretary will inform each director

opinions of the Board for further

specific committees:

accordingly.

use as reference.

Annual Report 2017 l MK Restaurant Group Public Company Limited

140

5. Remunerations of the

5.3 The Board of Directors

actions under the development

and senior executives are required

and succession plan so that the

to report principles and rationale

Company is constantly ready for a

The Board of Directors and CEO

regarding director’s remunerations

successor in case the CEO could

may not set their own remunerations

in the Company’s Annual Report

no longer perform his duty.

since this is obviously a conflict of

and its financial statements.

Board and CEO

interest. To do so, the Corporate

7.3 The Board will ensure that a system is in place to properly

Gover nance, Nominating and

6. Evaluation of the Board

Compensation Committee will

and CEO

determine the rates and propose

select responsible personnel.

8. Enhancement of

them for the Board to approve

6.1 The Board of Directors

before the matter is presented

will evaluate itself on an annual

to shareholders for their approval

basis. Directors will discuss what

8.1 The Board will promote

based on the Board’s performance.

they have achieved and problems

and facilitate CG training to enhance

5.1 The Corporate Governance,

they are confronting for further

knowledge on this subject.

Nominating and Compensation

improvement. An evaluation of the

8.2 The Board will regularly

Committee has a duty to provide

Board of Directors’ performance

attend knowledge-enhancement

advice regarding remunerations of

will be based on evaluation

courses organized by supervisory

the Board and CEO to the Board

guidelines as suggested by the SET.

agencies where the Company

of Directors. Other advice includes

Improvement will be made to suit

Secretary is designated to

s t r u c t u re / c o m p o n e n t s o f t h e

the Company’s nature of business.

coordinate with directors to inform

remunerations proven fair to the

6.2 The Board of Directors

Board’s responsibilities and in line

will evaluate CEO’s performance

with its performance at an amount

and compared it with the Board’s

9. Roles and

that can effectively retain qualified

performance. The evaluation will be

Responsibilities of

directors in the same industry.

made on the basis of performance.

Company Secretary

Meanwhile, structure/components

Chairman of the Board is designated

of the remunerations shall be clear,

to inform evaluation result to CEO

transparent and easy to understand.

and the Board of Directors.

5.2 Shareholders are entitled t o re v i e w r u l e s a n d p o l i c i e s

directors and executives

them of relevant courses.

9.1 To perform duty with care, prudence and integrity for the best interest of the Company and to comply

7. Succession plan

regarding remunerations of each

with the laws, objectives and Articles of Association of the Company and

director annually. The Board of

7.1 The Board of Directors

Directors is to submit director’s

has entrusted CEO and the

remunerations to shareholders who

management to adopt a succession

9.2 To manage the meetings

will review the information as part of

plan for executives and positions in

of the Board of Directors and

the meeting agendas at the Annual

line operation.

Shareholders so that they are in

General Meeting of Shareholders (AGM).

resolutions of the Board of Directors and Shareholders’ meetings.

7.2 The Board of Directors has

compliance with the laws, the

designated CEO to regularly report

Company’s regulations and its best

Good Corporate Governance

practices. 9.3 To record the minutes of the meetings of the Board of Directors and Shareholders including to inform resolutions of these two meetings to the management and monitor the compliance with such resolutions through CEO. 9.4 To prepare and keep the following documents: (a) Registration of Directors (b) Invitation letter to attend the Board of Directors’ meeting, minutes of the Board of Directors’ meeting and the Company’s annual report (c) Invitation letter to attend the Shareholders’ meeting and minutes of the Shareholders’ Meeting. 9.5 To keep and maintain a report of interest as filed by directors and executives. 9.6 To disclose information and reports under his responsibility to supervisory gencies based on the authorities’ regulations. 9.7 To communicate share holders’ rights and the Company’s information to shareholders.

9.9 To oversee activities of the

9.8 To provide recommendations

Board of Directors to ensure that

and information relating to laws

directors can effectively perform

and regulations that the Board is

their duties.

required to know and comply with; and to regularly monitor accurate compliance.

141

CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility

143

CORPORATE SOCIAL RESPONSIBILITY

Forward-looking business leaders

CSR-in-Process

words, the Company requires

are working across sectors to

Traditional business and CSR tend

that remunerations and benefits

map a collective route towards

to be more focused on one or the

involved be on the basis of equality

sustainability, prioritizing key

other separately. MK Restaurant

and fairness to suppliers as well

technologies, reviewing resource

Group Public Company Limited

as all parties involved in the whole

management efficiency and

believes that companies could

supply chain.

developing new skill profiles to

bring business and society together

The Company also has a

gear up for a transition. Reflecting

if they redefine their purpose

policy to proceed in line with

t h e f o u n d e r ’s v a l u e s a n d

as creating “shared value.” The

fair competition framework.

compassion throughout its 32

concept of CSR-in-process builds

The Company is committed to

years in operation, MK Restaurant

on the idea that economic value

engage with its suppliers to solve

Group Public Company Limited

can be generated in a way that also

significant issues fairly and timely.

has continued to place a strong

produces value for the society and

In addition, the Company shall

emphasis on good corporate

reconnects company success with

neither violate nor acquire through

governance, ethical principles

social progress.

unscrupulous means trade secrets of its competitors and never seek

and long-term commitment to be a responsible business. Through

Governance

its competitors’ confidential

engaging in socially responsible

Corporate governance is essential

information via dishonest or

internal management practices

in business because it is a system

improper methods. Strictly, the

and sharing some of its profits with

that instills policies and rules for

Company shall not damage its

external partners, the Company

maintaining cohesiveness of an

competitors’ reputation with false

believes that a stable, competitive

organization. Good corporate

and malicious accusations.

performance and sustainability

gover nance holds a company

go hand-in-hand. Aligned with its

accountable for its financial, legal

Anti-Corruption Practice

vision, “To serve happiness to our

and ethical conducts as well as

Corruption is a national issue that

customers through delicious, quality

drives an organization towards

roots deep within the Thai society.

meals and extraordinary restaurant

organizational excellence.

It lowers economic growth, erodes

experience while working toward

trust, discourages investment,

the greater good for our employees,

Fair Business Practice

and marginalizes markets. Due

community and environment,”

To ensure fair and transparent

to this persisting problem, heavy

the Company is dedicated to

business practice, MK Restaurant

economic burden is put on the

integrating both CSR-in-process

Group Public Company Limited

poor and social and economic

and CSR-after-process into various

has laid down policies to treat

development has only been able

aspects of its business practice.

suppliers fairly and equally. In other

to progress at a slow pace. In a bid

Annual Report 2017 l MK Restaurant Group Public Company Limited

144

to effectively combat this problem,

and enacted as guidance for

which employs staff with hearing

leaders from both government and

directors, management teams

impairment and communication

private sectors have joined forces

and employees. In addition, on

disorders. Along with the hope to

to pursue corruption-free practice

August 18, 2017, the Company

help them attain a better quality

on a serious and continued basis.

has certified to be a member of

of life and empower them with

Such cooperation has also been

Thailand’s Private Sector Collective

job opportunities, the Company

embraced by the business sector.

Action Coalition against Corruption

is confident that the disabled

Listed on The Stock Exchange

which the certification is valid for

community holds a potential to

of Thailand (SET), MK Restaurant

3 years.

contribute to the society within the

Group

Company

In addition to setting a policy

scope of their capabilities.

Limited makes it an important

against corruption, the Company

mission to set good example

has also instilled in its employees

Fair Labor Treatment

of corruption-free practice for

an attitude of not taking bribes

Recognizing that employees are

other members in the private

or gift from other parties. In the

valuable assets, the Company treats

sector. The Company is committed

event that employees must accept

all employees fairly and commits

to conducting its business in

gifts on special occasions, all

to provide fair compensation,

line with good ethics, corporate

received items shall be commonly

remunerations, transfers, promotions,

governance, transparency and

redistributed.

as well as opportunities for personal

Public

accountability that is free from

development as follows:

any form of corruption. In order

Respect for Human Rights

(1) The Company is polite to

to hold itself accountable, the

“MK Culture” serves as a key value

its employees and respects their

Company has pledged under the

and guideline for the Company’s

individuality as well as human

Declaration on Thailand’s Private

promotion of respect for human

dignity

Sector Collective Action Coalition

rights. As the driving force behind

against Corruption on September

the Company’s operation, the MK

23, 2014. The chairman and CEO

Culture instills respect, teamwork

(3) T h e C o m p a n y p ro v i d e s

of the Company also established an

and management style that unites

safe working environment to its

anti-corruption panel on October

all members to work toward shared

employees both in terms of their

24, 2014 for the purpose of

goals. The Company treats all its

lives and their property

suppressing corruption with greater

employees equally and does not

(4) Any appointment, transfer,

efficiency. The panel is tasked

discriminate on the basis of social

reward or punishment for the

with the responsibility to review

class, ethnicity, nationality, domicile,

Company’s employees are done, in

the Company’s anti-corruption

complexion, sexual preference and

good faith, based on their knowledge,

measures and formulate practical

religion. The Company is well aware

abilities, and qualifications

guidelines on anti-corruption. In

that these factors are not indicators

(5) The Company recognizes

2015, the anti-corruption policy

of human value and firmly believes

the importance of human resource

and guideline, developed by

that all humans have honor, dignity,

development, thus offering

the anti-corruption panel, was

rights and liberty.

comprehensive and regular

approved by the Board of Directors

The Company also runs a program

opportunities for its employees

(2) The Company offers fair remunerations to its employees

Corporate social responsibility

145

to enhance their knowledge and

programs to enhance fitness and

abilities

raise food nutrition awareness.

Responsibility to Consumers

(6) T h e C o m p a n y l i s t e n s

The Company started the Fat to

Aligned with its vision, MK Restaurant

to employees’ opinions and

Fit Healthy Body Project to help

Group Public Company Limited

re c o m m e n d a t i o n s w h e n t h e y

employees with high BMI Index

aims to delight and nourish our

are based on their occupational

combat obesity and learn the

customers with quality food and

knowledge

benefits of exercise and of eating

excellent service. Food at the

(7) T h e C o m p a n y s t r i c t l y

well. Through the project, it also

Company comes from a simple idea.

complies with laws and regulations

promotes simple everyday fitness

It wants to serve quality ingredients

related to its employees

to employees company-wide. The

with great taste. With this idea,

(8) T h e C o m p a n y r e f r a i n s

Company also made available for

the Company has always placed a

from any unfair action, which

free to its employees a gym at

special focus on customer’s health

otherwise could affect employees’

its headquarter and sponsored

and food safety. The Company

job security, intimidate employees

exercise equipment. Additionally,

employs expert team to ensure

or put them under pressure

the Company holds an annual

compliance of food safety standards

With the emphasis on occupational

Badminton and Soccer Tournament

at all stages, starting from ingredient

s a f e t y, t h e C o m p a n y m a k e s

to promote fitness and teamwork.

delivery, handling, cooking and food

sure that all its workplaces and

The Company believes in career

delivery to storage and preparing at

processing plants are equipped

development and internal

each location.

with adequate tools and protocols

promotion. In collaboration with

The Company also provides training

to ensure employee safety and

partner universities, the Company

to all its employees so that they

provide good work environment.

offers educational loans to

understand and adhere to the

A d d i t i o n a l l y, t h e C o m p a n y

employees who wish to pursue

C o m p a n y ’s s t a n d a r d s . T h e

established an Employee Relations

an advanced degree. Under this

Company has been certified by

Department to provide employees

program, employees not only get a

various institutions:

with a channel to seek counseling

chance to earn a bachelor’s degree,

or discuss grievances.

but also gain an opportunity to

People are an organization’s key

excel in their career path.

certifies that MK central kitchens

d r i v e r. A s t ro n g a n d h e a l t h y

The Company also annually awards

use quality management and

workforce raises productivity, rates

scholarships to employees’ family.

food safety systems that are on

of retention and customer

With the intention to open a wider

par with international standards

satisfaction. Empowered and

opportunity for our employee’s

yy Hazard Analysis Critical Control

engaged employees have

family and enable a higher quality

Point (HACCP) certification:

potential to introduce creativity

of life, the Company gave out 931

ensures food safety by verifying

and bottoms-up innovation. In

scholarships, totaling Baht 5.1

critical control points and

line with its intention to promote

million in 2017.

procedures in food manufacturing

yy ISO 9001:2015 certification:

good health for its employees,

industry. HACCP standards apply

the Company monitors employee

to all organizations that handle

BMI Index and designs various

food, from primary producers

Annual Report 2017 l MK Restaurant Group Public Company Limited

146

on food samples, seasonings

its supply chain. For the purpose

yy Good Manufacturing Practices

and sauces. Lab results showed

of protecting the ecological system

(GMP) certification: certifies for

all MK dishes are free from MSG

and the environment of communities

quality products by validating

or Monosodium Glutamate. The

in which it operates, the following

m a n u f a c t u r i n g p ro c e s s e s ,

Food Institute has now granted

actions have been taken:

equipment and delivery process

“No MSG” certification signboard

to end consumers

to all MK branches

to retailers

yy Fruit/Vegetable Contaminant

yy Stringent process is put in place to dispose of infected waste.

Testing certification from the

A d d i t i o n a l l y, t h e C o m p a n y

Infected waste is only disposed

Department of Medical Sciences,

closely monitors the level of polar

of at the microbiological lab

the Public Health Ministry: certifies

compounds in cooking oil used for

within the Company’s factory,

the Company’s qualification to

deep-frying. No reuse is allowed

applying a sterilization method

conduct contaminant tests on

when the level exceeds safety

at a temperature of 121 degrees

fresh vegetables and fruits in a

limits. To further demonstrate its

Celsius

systematic manner

commitment to the health of the

yy T h e C o m p a n y t r e a t s i t s

yy Food Safety certification from the

community, the Company makes

wastewater with water-quality

Department of Medical Sciences,

sure only to sell its used cooking

tests to ensure that it passes

the Public Health Ministry: certifies

oil for the production of biodiesel.

proper standards under the Factory Act of B.E. 2535, the

the Company’s qualification to conduct contaminant tests

Guided by this same principle to

Ministry of Industry, before any

(borax, salicylic acid, sodium

take care of its customer’s health,

discharge to public waterways

h y d ro s u l f i t e , f o r m a l i n a n d

the Company has worked with

yy The Company strictly complies

pesticide) on food items

Mahidol University’s Food Institute

with the standards of the

yy “Q Restaurant” certification from

to develop a calorie-calculation

Department of Industrial Works,

a program of the National Bureau

program. This program counts

international standards, and all

of Agricultural Commodity and

the calorie of what customers

applicable laws and regulations. A

Food Standards, Ministry of

have eaten in their meal at MK

policy is set in place to track and

Agriculture and Cooperatives:

restaurant, and at the end of each

reduce energy usage at its central

encourages restaurants to

meal, provides a slip showing

kitchens and restaurant outlets

use Q products, or materials

the calorie intake of each diner.

yy Since late 2013, the Company

produced in line with good

Health-conscious customers

has started installing and

manufacturing practices, to

particularly value this data because

replacing LED light bulbs at

ensure product safety

the provided nutritional information

its branches as LED bulbs

assists them in controlling their

are more energy efficient and

diets.

durable

yy “No MSG” project certification, the Food Institute, the Ministry of

yy To improve energy efficiency

Industry: awarded this certification after the Food Institute inspected

Environmental Care

in our logistics system, the

the Company’s food handling

The Company tries to minimize its

Company conducted a fleet

systems and conducted tests

environmental impact throughout

optimization program. The

Corporate social responsibility

147

logistics team did a study to

its produce. Since 2015, it has

abilities and qualifications required

redraw delivery routes in order

been doing contract farming with

by entrepreneurs prior to their

to minimize fuel usage and

the Royal Project Foundation. More

graduation. This project is open to

maximize carriage space. The

than half of its produce supply is

students of vocational-certificate,

Company has also enacted a

currently being sourced from farms

high-vocational-certificate and

speed limit policy and installed

under the Royal Project Foundation

bachelor degree levels to gain

technology to monitor its fleet

in Chiang Mai. The Company’s

a real-world work experience in

so that its speed range falls

partnership with the foundation

the service sector. The Company

between 80–90 kilometers

goes beyond being just buyer

participates in the program full-loop

per hour. Its drivers have been

and seller. It has been engaged

from recruiting, creating mutual

trained fuel-saving driving

with the Royal Project Foundation

understanding with teachers,

technique. All delivery vehicles

in social development projects

parents, and students, supervising

are equipped with GPS (Global

and has funded to help farming

students during the term, funding

Positioning System) devices,

communities improve access to

for academic terms and living

which allow the Company

agricultural infrastructure and

expenses, providing prep curriculum

to conveniently manage its

childcare. Future projects include

before training and organizing

logistics network

supporting programs related to

commencement ceremony. In

agricultural innovations, education

2017, over 604 students graduated

and water.

from the program and 49 from the

yy The Company continues to encourage its employees

graduating class further their career

to use available resources

with the Company.

with prudence through daily

2. P roviding educa tional

actions; for example, recycling

scholarship and career

paper, saving water, reducing

opportunities for vocational

The Company’s collaboration with

electricity usage and separating

students under the Dual

vocational colleges has extended

garbage

Education System Project

further. In 2017 the Company with

Hand in hand with the Office of

Ovec, kicked off the Vocational

Community Development

Vocational Education Commission

Classroom Thailand 4.0 Project,

True to the Company’s belief in

(Ovec) and 45 participating

a public-private collaboration to

the value of CSR-in-process,

colleges, the Company offers

align vocational curriculum with

the Company builds on the idea

educational scholarships and

the national strategy. In line with

of integrating social value with

job opportunities for vocational

the Thailand 4.0 strategy, the

the way its value chain functions

students under the Dual Education

project offers work experience in

and tries to connect its business

System Project. This collaboration

the strategic value-added service

success with social progress.

between educational institutions

industry along with additional

and business organizations

opportunities to learn through

1. Sourcing fresh produce

integrates vocational education

specialized tracks. Since 2015,

from The Royal Project

with on-the-job training right on

the Company has been engaged

Foundation

business premise to ensure students

with Chiang Rai Vocational College

The Company tries to locally source

a c q u i re p r a c t i c a l k n o w l e d g e ,

to explore its community need

148

Annual Report 2017 l MK Restaurant Group Public Company Limited

and funded a training center,

smooth transition and to specially

system made the work of its service

“MK Brain Center,” with a goal to

address any unique issues that may

staff smoother by automating the

provide the community a restaurant

arise. At present, the Company

food-ordering process, thereby

service learning space that closely

provides career opportunities to

increasing staff efficiency, reducing

simulates a real working place and

200 students with disabilities.

human error and cutting down customer wait time. The Company

offers service training classes as

Innovations

has also partnered with Bangkok

Ever since the start of its journey, the

University to fund a student research

3. Providing job opportunities

Company has always put a focus

program in inventing a serving

for students with disabilities

on design and process innovation.

robot. The inventive program not

The Company tries its best to

In the past, one of the main causes

only has brought a unique and

support and empower communities

for explosions and fires in Thailand

fun experience to the restaurants

with disabilities by offering job

were related to gas. Concerned with

through its serving robots, but also

opportunities to students from

worker and customer safety, the

allowed the student team to hone

more than 18 institutions,

Company tackled the issue of gas

technical skills, practice real world

including schools for the hearing

stove, invented its own electric suki

problem-solving and enable them

impaired, Panyanukun schools

pots, and was able to ban gas usage

to see the project come to life.

and schools for students with

in both front of house and kitchen

As the digital trend has arrived, MK

communication disorders. In line

operations in all restaurants. This red

Restaurant Group Public Company

with the Company’s hope to help

suki pot has also since then grown

Limited continues to challenge itself

students with disabilities attain a

to become the signature icon. The

to come up with innovations that

better quality of life, the Company

Company has continued to improve

redefine our service experience.

ap p lies M K Tr a i n i n g Ce n t e r ’s

the design of its pot and eventually

The Company has experimented

dual-education curriculum for

introduced an induction system,

with customer self-ordering

senior secondary education in

which completely prevents the risk

system since 2013 and constantly

providing service training to these

of an electric shock.

advanced the capability of the

students in order to help them

In order to alleviate the problem

program. At present, self-order

acquire necessary skills. As part of

of limited tabletop space, MK has

tablets have been installed in over

the course, students and parents

also created an innovative serving

110 branches and are smoothly

are oriented, toured around training

plate called “condo.” Inspired by

servicing customer orders.

site and participated in on-the-

the design of a condominium, the

job training at restaurant outlets.

condo plates can be stacked high

CSR-After-Process

Following training, students are

on top of one other. They not only

Aligned with its vision, the Company

open to options to apply for a job

immensely helped free up table

is dedicated to create a positive

at the Company if they wish to

space, but also help control food

impact on the communities it serves.

earn more income and experience.

safety standards.

In partnership with Aunty Thongkam

Visits by the Company’s Employee

M K R e s t a u r a n t G ro u p P u b l i c

Foundation, MK Restaurant

Relations unit are conducted

Company Limited equips all its

Group Public Company Limited

regularly to ensure students’

branches with the PDA system. The

annually extends assistance to

well as related curriculums.

Corporate social responsibility

various organizations. In 2017, the Company and Foundation donated over Baht 40 million. Causes that the Company supports include:

yy Phibun Mangsahan Hospital Surgery Operation Unit

yy K h a m Ta K l a H o s p i t a l Ambulance Fund

149

continued learning as follows:

yy Mahidol University Library yy A d i t y a d h o r n A g r i c u l t u r a l Learning Center

yy Chonburi Hospital Medical 1. Healthcare for Underserved Communities

Appliances

yy Wat Phrabat Nampu Fund

With an ambition to deliver a good quality of life through its food service business, the Company has also

As part of our commitment to improving health, we support

2. Reinforcing Education

committed to donate a hundred

healthcare organizations that are

Young people have a lot to contribute

percent of its net income after

devoted to aiding underserved

to their communities, and the way

expense, from its four restaurants

communities. Our grants specifically

education shapes young minds will

(MK Restaurant, Yayoi, Hakata

support underfunded public hospitals.

be the basis of how our society

Ramen and Le Petit) established at

yy T h a i R e d C r o s s S o c i e t y

evolve in the future. We make grants

Siriraj Hospitalâ&#x20AC;&#x2122;s Piyamaharajkarun

to institutions and programs that

Building, to the hospital foundation.

Medicine Fund

yy Kao Kon La Kao Charity Run Project

aim to strengthen the foundation of national education and advance

Annual Report 2017 l MK Restaurant Group Public Company Limited

150

REPORT OF THE CORPORATE GOVERNANCE, NOMINATING AND COMPENSATION COMMITTEE The Corporate Governance, Nominating and Compensation Committee (the “Committee”) was established by the Board of Directors of the Company (the “Board”) on November 11, 2015 for the purpose of assisting the Board in the oversight of the Company’s corporate governance, nomination and compensation functions. Pursuant to the Company’s Charter of the Corporate Governance, Nominating and Compensation Committee (the “Charter”), the Committee shall be comprised of at least three Board members appointed by the Board and not less than half of the members and the Chairman of the Committee shall be independent directors. The term of office of the member of the Committee is 3 years starting from the appointed date. In case of member substitution, the substitute member shall hold office only for the remaining term of office of the member whom he/she replaces. The current Committee consists of three Board members appointed by the Board on November 11, 2015 as follows: 1. Dr. Katiya Greigarn

Chairman

2. Mr. Attapon Chodchoy

Member

3. Mr. Somchai Pipitvijitkorn

Member

To perform its duties as specified in the Charter, during February 3, 2017 to February 12, 2018 two meetings were held by the Committee and the results of the meetings may be summarized as follows: 1. As the Committee is required to review the compensation of the Chief Executive Officer (CEO) on an annual basis, the annual payment of bonus for 2017 and the salary adjustment for the year 2018 of the CEO were considered by the Committee based on the evaluation of the yearly operating performance of the Company as a whole, the CEO’s performance in other key functions as well as the creation of long term returns to the Company. In addition, the appropriateness of the CEO’s total compensation was also reviewed by the Committee based on the comparison of the CEO’s compensation with the compensation of executives in comparable positions of other organizations having comparable size which may be measured in terms of total sales or total assets. The meeting concluded that the current compensation of the CEO was appropriate whereas the annual payment of bonus for 2017 and the salary adjustment for the year 2018 of the CEO should be in line with the resolution of the Board in respect of the annual payment of bonus and the salary adjustment for executives of the Company.

Report of the Corporate Governance, Nominating and Compensation Committee

2. As required by the Charter, the compensations of directors of the Company and members of the sub-committees established by the Board were reviewed based on the guidelines stated in the Charter. The Committee concluded that the current monthly retaining fee for the Company directors and the attendance fee for the members of the audit committee and other sub-committees were still appropriate. For the Directorsâ&#x20AC;&#x2122; compensation in the form of bonus, the meeting recommended that the annual bonus for the Companyâ&#x20AC;&#x2122;s directors for the year 2017 should vary proportionally to the change of the annual dividend for the year 2017 to be proposed to the 2018 Annual General Meeting of Shareholders for approval. 3. In respect of the nomination of qualified persons to replace the directors retiring by rotation, the Committee reviewed the candidatesâ&#x20AC;&#x2122; qualifications in accordance with the guidelines provided in the Charter and recommended that the retiring directors namely, Mr. Annop Tanlamai, Mrs. Vilai Chattanrassamee, and Mr. Somchai Pipitvijitkorn, be reappointed as the directors of the Company for another term because they meet the required qualifications, attended Board meetings regularly, and were able to provide constructive and useful recommendations to the meetings.

(Dr. Katiya Greigarn) Chairman of the Corporate Governance, Nominating and Compensation Committee

151

152

Annual Report 2017 l MK Restaurant Group Public Company Limited

INTERNAL CONTROL AND RISK MANAGEMENT

The Board of Directors has placed

Exchange Commission (SEC) and

at all levels in the Company.

much importance on internal-control

the Stock Exchange of Thailand

In addition, the Company has

system on a continued basis and

(SET) and COSO framework

continued to reinforce the good

assigned the Audit Committee to

(The Committee of Sponsoring

corporate governance principles

supervise in order to ensure that

Organizations of the Treadway

to all executives and employees

the internal control of the Company

Commission) which comprised of

to ensure the work transparency

is satisfied for the business. The

five components including Control

and the fairness to all stakeholders.

internal-control division has the

Environment, Risk Assessment,

duty to audit operations systems

Control Activities, Information and

2. Risk Assessment

used by each unit of the Company

Communication and Monitoring

The Company has continue to

and reports directly the Audit

Activities. There is no significant

place much importance on the

Committee. It aims to ensure that

defect found to the Company’s

risk management which may affect

the operations of the Company

internal control.

its business and prevent from

are effective and efficient; that the

achieving its goals. The Board

Company’s resources are used

1. Control Environment

of Directors had the resolution

efficiently for maximum benefits;

The Company’s organizational

to setup the risk management

that the Company’s assets are well

structure is properly designed to

working panel comprising of

protected and maintained; and that

support the good internal control.

the managements from various

any risk of mistake is minimized and

Also, the Company’s business goals

functions responsible for defining,

damages are prevented. The audits

and key performance indicators

measuring and monitoring the risks

are also carried out to supervise

(KPIs) are clearly defined to ensure

regularly and report to the Board

the Company’s operations, to

the efficiency of work and the

of Directors. The risk management

ensure that financial statements

alignment of the Company’s target.

detail is described in the “Risk

are accurate, reliable, and prepared

The authority delegation manuals

Factors” topic.

in a timely manner, as well as to

and the operation manuals for all

ensure compliance with policies,

functions are clearly defined and

3. Control Measures

rules, regulations and laws so as

written. The Company’s targets

The Company has adequate and

to prevent any damage from being

are communicated through all

proper control measures. It has

done to the Company. In addition,

divisions and functions. Efforts also

formulated policies and guidelines

the Board of Directors performs the

have been made to encourage the

in a way that clearly prescribes

internal control assessment of the

environment for good operations

the scope of duties, authority and

Company every year based on the

so as to promote good attitudes,

power to approve and delegation

guidelines from the Securities and

honesty and ethics among staff

of duties. Control measures also

Internal Control and Risk Management

153

include manuals that offer work

asset appraiser or lawyer who is

5. Monitoring System

guideline at every stage, as well

independent from the Company or

Assigned by the Board of Directors,

as audits of financial statements

the parties that may have conflict

the Audit Committee is responsible

and reports on the Company’s

of interest to have opinion on that

for monitoring and assessing

nonfinancial operating results to

transaction and propose to the

the Company’s internal control

ensure compliance with rules and

Board of Directors for approval.

system driven by the internal audit

regulations. All the accounting

department based on the annual

transactions are recorded

4. Information System and

internal-audit plans approved by

a c c u r a t e l y a n d c o m p l e t e l y.

Communications

the Audit Committee to ensure that

The accounting information

The Company recognizes the

the flaw detected has been properly

a n d d o c u m e n t s a re re t a i n e d

important of the information

notified and improved instantly and

systematically and legally. Each

systems and communications,

reported to the Audit Committee and

function especially the key function

therefore the information systems

executives quarterly. In addition,

has the checks and balances

are continuously improved to

the Audit Committee has invited the

systems to ensure the accuracy

ensure the accuracy, up to date

Company’s auditor to its meeting to

such as the financial transactions,

and effectiveness. The systems

review and acknowledge the results

sales, procurement, assets etc.

have stored information and kept

of financial-statement audits and

The information systems are also

documents in an efficient manner

internal-control issues which no

implemented to improve the work

to ensure the data accuracy and

significant issues found.

efficiency. The Company also

adequacy for the management

implemented the human resource

and stakeholders to utilize it. The

management system to effectively

Company also has the policy for

control

the

the information security and data

employees’ performance and

utilization in order to prevent the

human development to ensure that

risk from information technology

employees have the knowledge

and prepare for the new technology

of work and can perform their

in the future. In addition, the

work efficiently. In addition, the

Company’s Investor Relations

management must propose the

Unit is in place to coordinate with

transaction with the parties that

investors ensuring that they can

may have conflict of interest to

get information on the Company’s

the Audit Committee in order

operations and investments

to consider the suitability of the

promptly and conveniently through

transaction. In case that the Audit

highly accessible channels such as

Committee has no expertise to

Company’s website, e-mail, call

consider that transaction, the

center, etc. The whistle-blowing or

Company would provide the expert

complaints from outside also are

from outside such as auditor,

reported via these channels.

and

monitor

Annual Report 2017 l MK Restaurant Group Public Company Limited

154

DETAILS OF DIRECTORS AND EXECUTIVES Details of Directors and Executives 1. Mr.Rit Thirakomen Position

• Chairman of the Board of Directors • Chief Executive Officer • Director (Authorized Signature)

Date of the first appointment

• June 2012

as director Age

• 66 years

M Shareholding

• Held personally 140,059,333 shares or 15.2% • Held by spouse or minor children 199,396,802 shares or 21.7%

Family Relationship

• Spouse of Mrs.Yupin Thirakomen

Education

• Bachelor’s Degree (Electrical Engineering), Chulalongkorn University

Related Training Program held

• Director Accreditation Program (DAP) 97/2555

by Thai Institute of Directors Association (IOD) Experience

• Positions in Listed Companies 2012-Present Chairman of the Board of Directors and Chief Executive

Officer, MK Restaurant Group Pcl.

1989-2012

Director, MK Restaurant Group Pcl.

1986-2012

Managing Director, MK Restaurant Group Pcl.

1987-1999

Chairman of the Board of Directors, SE-EDUCATION Pcl.

1974-1987

Managing Director, SE-EDUCATION Pcl.

• Positions in Non-Listed Companies • 1994-Present Director, MK Worldwide Co.,Ltd. • 1999-Present Director, Global Asset Development Co.,Ltd. • 2006-Present Director, MK Interfood Co.,Ltd. • 2006-Present Director, MK Service Training Center Co.,Ltd. • 1990-Present Director, Precision Manufacturing Co.,Ltd. • 1991-Present Director, Totems Co.,Ltd. • 2012-Present Director, Hanthi Unity Group Co.,Ltd. • 2015-Present Director, International Food Supply Co.,Ltd. • 2016-Present Director, Unity Global Development Co.,Ltd.

Details of Directors and Executives

2. Mr.Somchai Hanjitkasem Position

• Director • Director (Authorized Signature) • Executive Vice President

Date of the first appointment as

• June 2012

director Age

• 56 years

M Shareholding

• Held personally 164,494,812 shares or 17.9% • Held by spouse or minor children (None)

Family Relationship

• Brother of Mrs.Yupin Thirakomen

Education

• Bachelor’s Degree, Bangkok University • Master’s Degree (MS), Abilene Christian University, USA

Related Training Program held

• Director Accreditation Program (DAP) 97/2555

by Thai Institute of Directors

• Director Accreditation Program (DAP) 6/2546

Association (IOD) Experience

• Financial Statements for Directors (FSD) 9/2547

• Positions in Listed Companies 2015-Present Executive Vice President, MK Restaurant Group Pcl. 1989-Present Director, MK Restaurant Group Pcl. 2012-2015

Managing Director, MK Restaurant Group Pcl.

1992-2012

Executive Vice President, MK Restaurant Group Pcl.

• Positions in Non-Listed Companies 1994-Present Director, MK Worldwide Co.,Ltd. 1999-Present Director, Global Asset Development Co.,Ltd. 2006-Present Director, MK Interfood Co.,Ltd. 2006-Present Director, MK Service Training Center Co.,Ltd. 2004-Present Director, Dawiburi Villa Owner Association Co.,Ltd. 2007Present Director, Shellhut Entertainment Co.,Ltd. 2012-Present Director, Hanthi Unity Group Co.,Ltd. 2015-Present Director, International Food Supply Co.,Ltd. 1994-Present Director, National Food Retail Co.,Ltd. 1996-Present Director, Kipson Intertech Co.,Ltd. 2005-Present Director, Superior Food Service Co.,Ltd. 2016-Present Director, M Performance Co.,Ltd. 2016-Present Director, M HQ Co.,Ltd.

155

Annual Report 2017 l MK Restaurant Group Public Company Limited

156

3. Mr.Somchai Pipitvijitkorn Position

• Director • Director (Authorized Signature) • Member of Corporate Governance, Nomination and Compensation Committee

Date of the first appointment

• June 2012

as director Age

• 78 years

M Shareholding

• Held personally (None) • Held by spouse or minor children 3,700,000 shares or 0.4%

Family Relationship

• Uncle of Mr.Rit Thirakomen

Education

• Bachelor’s Degree (Accounting) (Second Class Honors), Chulalongkorn University • Master’s Degree (Business Administration), Michigan State University, USA

Related Training Program held

• Director Compensation Survey 2004

by Thai Institute of Directors Association (IOD) Experience

• Positions in Listed Companies 2012-Present Director, MK Restaurant Group Pcl. 2003-Present Director, Sahaviriya Steel Industries Pcl. 2009-2014

Chairman of the Board of Directors,

Bangsaphan Barmill Pcl.

2004-2009

Director, Bangsaphan Barmill Pcl.

1986-1998

Director, Siam City Cement Pcl.

1984-1999

Director, Bank of Ayudhya Pcl.

1983-1999

Director, The Ayudhya Life Assurance Pcl.

• Positions in Non-Listed Companies 2004-Present Director, Sahaviriya Plate Mill Pcl. 2009-2012

Director, Thai Cold Rolled Sheet Pcl.

Details of Directors and Executives

4. Dr.Annop Tanlamai Position

• Independent Director • Chairman of Audit Committee

Date of the first appointment as

• June 2012

director Age

• 67 Years

M Shareholding

• Held personally (None) • Held by spouse or minor children (None)

Family Relationship

• -None-

Education

• Bachelor’s Degree (Mechanical Engineering), Chulalongkorn University • Master’s Degree (Engineering Management), University of Missouri, USA • MBA (Quantitative Business Analysis), Indiana University, USA • Ph.D. (Engineering Management), University of Missouri, USA

Related Training Program held

• Director Certification Program (DCP) 154/2554

by Thai Institute of Directors Association (IOD) Experience

• Positions in Listed Companies 2012-Present Independent Director and Chairman of Audit Committee,

MK Restaurant Group Pcl.

2015-Present Director and Member of Audit Committee,

Bangkok Expressway and Metro Pcl.

2011-2015

Director and Member of Audit Committee,

Bangkok Expressway Pcl.

• Positions in Non-Listed Companies 2016-Present Dean, Chitralada Technology College 2016-Present Director, Tor Or Co.,Ltd. 2006-2017

Director, Ex.19 Co.,Ltd.

2012-2016

Dean, College of Management Mahidol University

2007-2011

Dean, Faculty of Commerce and Accountancy,

Chulalongkorn University

1999-2007

Director of the Master of Business Administration (MBA)

Program, Faculty of Commerce and Accountancy,

Chulalongkorn University

1995-1999

Head of Department of Commerce, Faculty of

Commerce and Accountancy, Chulalongkorn University

1989-1995

Director of the Master of Business Administration (MBA)

Program,Faculty of Commerce and Accountancy,

Chulalongkorn University

157

Annual Report 2017 l MK Restaurant Group Public Company Limited

158

5. Dr.Katiya Greigarn Position

• Independent Director • Chairman of Corporate Governance, Nomination and Compensation Committee

Date of the first appointment

• June 2012

as director Age

• 65 years

M Shareholding

• Held personally (None) • Held by spouse or minor children (None)

Family Relationship

• -None-

Education

• Bachelor’s Degree (Electrical Engineering), Chulalongkorn University • Master’s Degree (Electrical Engineering), University of Missouri – Rolla, USA • Ph.D. (Electrical Engineering), University of Missouri – Rolla, USA

Related Training Program held

• Director Accreditation Program (DAP) 37/2548

by Thai Institute of Directors

• Financial Statements for Directors (FSD) 3/2551

Association (IOD)

• Advanced Audit Committee Program (AACP) 34/2554 • Director Certification Program (DCP) 110/2551 • Director Certification Program Update (DCPU) 5/2558

Experience

• Positions in Listed Companies 2017-Present Independent Director, Kulthorn Kirby Pcl. 2012-Present Independent Director, MK Restaurant Group Pcl. 2011-Present Independent Director and Chairman of Audit Committee,

Planet Communications Asia Pcl.

2007-Present Independent Director and Chairman of Audit Committee,

Premier Marketing Pcl.

2005-2014

Independent Director and Chairman of Audit Committee,

Premier Technology Pcl.

• Positions in Non-Listed Companies 2013-Present Director, Lynx Corporation Co.,Ltd. 2008-Present Director, Mekfah Development Co.,Ltd. 2008-Present Director, Viptel Co.,Ltd. 2002-Present Director, Sab Udom Properties Co.,Ltd. 1988-Present Director and Managing Director, KV Electronics Co.,Ltd.

Details of Directors and Executives

6. Mr.Thanong Chotisorayuth Position

• Independent Director

Date of the first appointment

• June 2012

as director Age

• 64 years

M Shareholding

• Held personally (None) • Held by spouse or minor children (None)

Family Relationship

• -None-

Education

• Bachelor’s Degree (Electrical Engineering), Chulalongkorn University • Master’s Degree (Education in Educational Administration), Chulalongkorn University • Honorary Doctorate in Business Administration, National Institute of Development Administration

Related Training Program held

• Director Certification Program (DCP) 33/2546

by Thai Institute of Directors Association (IOD) Experience

• Positions in Listed Companies 2012-Present Independent Director, MK Restaurant Group Pcl. 1993-Present Director and Managing Director, SE-EDUCATION Pcl.

Positions in Non-Listed Companies

2013-Present Director, BaesLab Co.,Ltd. 2010-Present Director, Plearnpattana School, Plearn Patt Co.,Ltd. 2006-Present Chairman of Executive Directors, Plearnpattana School,

Plearn Patt Co.,Ltd.

2001-Present Director, SE-ED Book Center Co.,Ltd. 1984-Present Director, M&E Co.,Ltd. 2003-2006

Director and Executive Director, Plearnpatt Co.,Ltd.

1987-1993

Director and Managing Director, SE-EDUCATION Co.,Ltd.

159

Annual Report 2017 l MK Restaurant Group Public Company Limited

160

7. Mrs.Vilai Chattanrassamee Position

• Independent Director • Member of Audit Committee

Date of the first appointment as

• June 2012

director Age

• 64 years

M Shareholding

• Held personally (None) • Held by spouse or minor children (None)

Family Relationship

• -None-

Education

• Bachelor’s Degree (Accounting), Chulalongkorn University • Master’s Degree (Accounting), Thammasart University • Certified Public Accountant

Related Training Program held

• Fellow (FIOD)

by Thai Institute of Directors

• DCP Refresher 2/2549

Association (IOD) Experience

• Director Certification Program (DCP) 13/2544

• Positions in Listed Companies 2017-Present Independent Director and Chairman of Audit Committee,

Sahathai Terminal Pcl.

2012-Present Independent Director and Member of Audit Committee,

MK Restaurant Group Pcl.

2015-Present Independent Director and Chairman of Audit Committee,

BCPG Pcl.

2013-2015

Independent Director and Member of Audit Committee,

Shun Thai Rubber Gloves Industry Pcl.

2010-2012

Independent Director and Member of Audit Committee,

Asian Seafoods Coldstorage Pcl.

• Positions in Non-Listed Companies 2017-Present Director, Sahathai Steel Pipe Pcl. 2016-Present Member of Audit Committee, King Mongkut’s Institute of

Technology Ladkrabang

1997-Present Director, Horton International Co.,Ltd. 1992-Present Director, Executive Search Services Co.,Ltd. 2014-2017

Financial Accounting Specialist for Audit Committee,

Metropolitan Waterworks Authority

2011-2017

Secretary General, Federation of Accounting Professions

under the Royal Patronage of His Majesty The King

2002-2011

Director and Treasurer, Federation of Accounting

Professions under the Royal Patronage of

His Majesty The King

Details of Directors and Executives

8. Mr.Attapon Chodchoy Position

• Independent Director • Member of Audit Committee • Member of Corporate Governance, Nomination and Compensation Committee

Date of the first appointment

• June 2012

as director Age

• 61 years

M Shareholding

• Held personally (None) • Held by spouse or minor children (None)

Family Relationship

• -None-

Education

• Bachelor’s Degree (Cost Accounting), Chulalongkorn University

Related Training Program held

• Director Certification Program (DCP) 54/2548

by Thai Institute of Directors Association (IOD) Experience

• Positions in Listed Companies 2012-Present Independent Director and Member of Audit Committee,

MK Restaurant Group Pcl.

2013-Present Independent Director and Member of Audit Committee,

M Pictures Entertainment Pcl.

1982-1999

Director and Chief Finance Officer, Minor Corporation Pcl.

• Positions in Non-Listed Companies 2017-Present Director, Veranda Resort And Spa Co.,Ltd. 2012-Present Financial Advisor, Unique Plastic Industry Co.,Ltd. 2001-2011

Director and Director of Finance Department,

Molnlycke Health Care (Thailand) Co.,Ltd.

1999-2001

Director of Accounting and Finance Department,

The British Dispensary (L.P.) Co.,Ltd.

161

Annual Report 2017 l MK Restaurant Group Public Company Limited

162

9. Mr.Sujint Chumpolkanjana Position

• Director

Date of the first appointment as

• June 2012

director Age

• 66 years

M Shareholding

• Held personally 4,200,500 shares or 0.5% • Held by spouse or minor children 3,000,000 shares or 0.3%

Family Relationship

• -None-

Education

• Bachelor’s Degree (Electrical Engineering), Chulalongkorn University

Related Training Program held

• Director Accreditation Program (DAP) 97/2555

by Thai Institute of Directors Association (IOD) Experience

• Positions in Listed Companies 2012-Present Director, MK Restaurant Group Pcl. 2012-2014

Executive Vice President – Restaurant Development

Division, MK Restaurant Group Pcl.

2006-2012

Executive Vice President – International Business

Development Division, MK Restaurant Group Pcl.

1992-2006

Vice President, MK Restaurant Group Pcl.

Details of Directors and Executives

10. Mr.Pravit Tantiwasinchai Position

• Director • Director (Authorized Signature) • Accounting and Finance Advisor

Date of the first appointment as

• June 2012

director Age

• 61 years

M Shareholding

• Held personally 4,112,800 shares or 0.4% • Held by spouse or minor children (None)

Family Relationship

• -None-

Education

• Bachelor’s Degree (Accounting-Finance and Banking), Chulalongkorn University • Graduate Diploma (Auditing), Chulalongkorn University

Related Training Program held

• Director Accreditation Program (DAP) 97/2555

by Thai Institute of Directors

• Director Accreditation Program (DAP) 6/2546

Association (IOD) Experience

• Positions in Listed Companies 2017-Present Director, MK Restaurant Group Pcl 1999-Present Independent Director and Member of Audit Committee,

SE-EDUCATION Pcl.

2012-2016

Director and Corporate Secretary,

MK Restaurant Group Pcl.

2015-2016

Chief Financial Officer, MK Restaurant Group Pcl.

2006-2015

Executive Vice President – Accounting and Finance

Division, MK Restaurant Group Pcl.

1994-2006

Director of Accounting and Finance Department,

MK Restaurant Group Pcl.

• Positions in Non-Listed Companies 2015-Present Director, MK Interfood Co.,Ltd.

163

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164

11. Mrs.Yupin Thirakomen Position

• Executive Vice President

Date of the first appointment

• -

as director Age

• 61 years

M Shareholding

• Held personally 199,396,802 shares or 21.7% • Held by spouse or minor children 140,059,333 shares or 15.2%

Family Relationship

• Spouse of Mr.Rit Thirakomen • Sister of Mr.Somchai Hanjitkasem

Education

• Honorary Master’s Degree (Business Administration), Kalasin Rajabhat University

Related Training Program held

• -None-

by Thai Institute of Directors Association (IOD) Experience

• Positions in Listed Companies 2015-Present Executive Vice President, MK Restaurant Group Pcl. 2012-2015

Managing Director-Japanese Food Restaurant Group,

MK Restaurant Group Pcl.

2006-2012

Executive Vice President – Supply Chain and

Japanese Restaurant, MK Restaurant Group Pcl.

1986-2006

Vice President, MK Restaurant Group Pcl.

• Positions in Non-Listed Companies 1999-Present Director, Global Asset Development Co.,Ltd. 1994-Present Director, National Food Retail Co.,Ltd. 1996-Present Director, Kipson Intertech Co.,Ltd. 2005-Present Director, Superior Food Service Co.,Ltd. 2012-Present Director, Hanthi Unity Group Co.,Ltd. 2014-Present Directora Health Plus Creation Co.,Ltd. 2015-Present Director, International Food Supply Co.,Ltd. 2016-Present Director, Unity Global Development Co.,Ltd.

Details of Directors and Executives

12. Mr.Kiatkong Kungwanwong Position

• Senior Vice President – Development and Maintenance Division

Date of the first appointment as

• -

director Age

• 50 years

M Shareholding

• Held personally 21,100 shares or 0.0% • Held by spouse or minor children 400,000 shares or 0.0%

Family Relationship

• -None-

Education

• Bachelor’s Degree (Mechanical Engineering), Kasetsart University

Related Training Program held

• -None-

by Thai Institute of Directors Association (IOD) Experience

• Positions in Listed Companies 2017-Present Senior Vice President – Development and Maintenance

Division, MK Restaurant Group Pcl.

2012-2017

Vice President – Development and Engineering

Department, MK Restaurant Group Pcl.

165

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166

13. Mrs.Sudarut Patvivatsiri Position

• Senior Vice President – Accounting and Finance Division

Date of the first appointment

• -

as director Age

• 45 years

M Shareholding

• Held personally 920,000 shares or 0.1% • Held by spouse or minor children (None)

Family Relationship

• Niece of Mr.Rit’s Mother

Education

• Bachelor’s Degree (Statistics), Chulalongkorn University • Master’s Degree (Business Administration), University of Illinois at Urbana-Champaign, USA

Related Training Program held by

• Company Secretary Program Class 82/2017

Thai Institute of Directors Association (IOD) Experience

• Positions in Listed Companies 2017-Present Senior Vice President – Accounting and Finance Division,

MK Restaurant Group Pcl.

2013-2017

Vice President – Accounting and Finance Department,

MK Restaurant Group Pcl.

Details of Directors and Executives

167

Change in M Shares Held by Directors and Executives No.

Name

Mr.Rit Thirakomen

Position

Chairman of the Board

M shares

Increase/

Percentage

held as of

(Decrease)

of shares

December

in M Shares

held (%)

30, 2016

29, 2017

held

139,878,733

140,059,333

180,600

15.2%

199,234,002

199,396,802

162,800

21.7%

164,332,012

164,494,812

162,800

17.9%

3,700,000

0.40%

20,000

-20,000

4,136,000

4,200,500

64,500

0.5%

3,000,000

0.3%

4,047,600

4,112,800

65,200

0.4%

199,234,002

199,396,802

162,800

21.7%

139,878,733

140,059,333

180,600

15.2%

30,000

21,100

-8,900

0.0%

400,000

0.0%

1,040,000

920,000

-120,000

0.1%

of Directors Chief Executive Officer Spouse and minor children

Mr.Somchai Hanjitkasem

Director Executive Vice President

Spouse and minor children

Mr.Somchai Pipitvijitkorn

Director

Spouse and minor children

Dr.Annop Tanlamai

Independent Director Chairman of Audit Committee

Spouse and minor children

Dr.Katiya Greigarn

Independent Director

Spouse and minor children

Mr.Thanong Chotisorayuth

Independent Director

Spouse and minor children

Mrs.Vilai Chattanrassamee

Independent Director Member of Audit Committee

Spouse and minor children

Mr.Attapon Chodchoy

Independent Director Member of Audit Committee

Spouse and minor children

Mr.Sujint Chumpolkanjana

Director

Spouse and minor children

10 Mr.Pravit Tantiwasinchai

Director Accounting and Finance Advisor

Spouse and minor children

Mrs.Yupin Thirakomen

Executive Vice President

Spouse and minor children

Mr.Kiatkong Kungwanwong

Senior Vice President

Spouse and minor children

Mrs.Sudarut Patvivatsiri Spouse and minor children

Senior Vice President

Annual Report 2017 l MK Restaurant Group Public Company Limited

168

GENERAL CORPORATE INFORMATION AND OTHER REFERENCES

Company Name

MK Restaurant Group Public Company Limited

Primary Business

Restaurant

Head Office

1200 Bangna-Trad Road, Bangna, Bangna, Bangkok 10260

Registration No.

0107555000317

Homepage

: www.mkrestaurant.com

Telephone

+66 2836 1000

Fax

+66 2836 1099

Share Capital as of December 31, 2017 Registered Capital

Baht 925,850,000 comprising of 925,850,000

shares with a par value of Baht 1 each

Issued and Paid-up Capital

Baht 920,878,100 comprising of 920,878,100

shares with a par value of Baht 1 each

Registrar

Thailand Securities Depository Co.,Ltd.

The Stock Exchange of Thailand Building

93 Rachadapisek Road, Dindaeng, Dindaeng, Bangkok 10400

Tel: +66 2009 9000

Fax: +66 2009 9991

Auditors

EY Office Limited

33rd Floor, Lake Rajada Office Complex

193/136-137 Rajadapisek Road, Klongtoey, Bangkok 10110

Tel: +66 2264 0777

Fax: +66 2264 0789

MK Restaurant Group Public Company Limited Head Office : 1200 Bangna-Trad Road, Bangna, Bangna, Bangkok 10260 Telephone : +66 2836-1000 l Fax : +66 2836-1099 www.mkrestaurant.com