Minor International Public Company Limited (MINT) Earnings Call Transcript & Summary

[Foreign Language] Good morning, and welcome to Minor International's First Quarter 2020 Analyst Meeting. It is my pleasure of introducing our presentation in which you will hear from Mr. Dillip Rajakarier, the CEO of Minor International and CEO of Minor Hotel. Joining Mr. Dillip during the Q&A session are Mr. Brian Delaney, Corporate CFO; Mr. Chaiyapat Paitoon, Chief Strategy Officer; Mr. Kosin Chantikul, Chief Investment Officer; and Mrs. Jutatip Adulbhan, Vice President of Investor Relations. [Operator Instructions] And at the end of our presentation, we will open the floor for Q&A session. And now I would like to hand over to Kun Dillip for the presentation.

Good morning, everyone, and hope everyone is safe and keeping well. The agenda item today is mainly to cover Q1 of 2020 and then go into the business units, namely Minor Hotels, Minor Food, Lifestyle; and then also to share the corporate information we have in terms of funding, debt and some of the additional initiatives which we have relaunched. And lastly, it's also to share our response in terms of COVID-19. Both the immediate and the long-term plans, which we have because we've already started working on it going back in Feb when we actually started getting impacted by COVID in some of our restaurants, namely in China. So based on that, I would jump straight into the Q1 review. So today, as you know, COVID has had an unprecedented impact on all the businesses, including ours, mainly on the hospitality side. But since the outbreak, we have been impacted globally. Minor continues to minimize costs, postpone capital expenditure in order to reduce our cash burn and negative cash flow. And the main motivation is to preserve cash and focus on liquidity and that's our key focus since the COVID. And whilst -- and all this is happening whilst we are preparing also for the reopening of our business. So just to give you a road map. In Jan 2020, we had the news on COVID-19. Feb, Wuhan and China, the lockdown happened. And of course, our businesses in China, namely the restaurants, were impacted and we had to close down. In March, Italy went into a lockdown followed by other European countries. In April, many of the other countries followed suit and entered the lockdown. And then in May, some countries are starting to loosen their lockdown measures, and the loosening of the lockdown measures vary from country to country. So -- and the next stage is on Feb, as you know, majority of our food outlets in China were closed or we were asked to close. In March, majority of our food outlets in China reopened. And so far, we are performing better than our best case scenario and what we call the best case, which is quite positive. In March, again, 2/3 of our outlets in Thailand and Australia, we went into operations only for delivery and takeaway. So our restaurants, we had shut down in these countries. And then in May, we've started to see gradual reopening of dining facilities, especially Thailand, which announced the malls can open as of Sunday last week. And then we dialed down, further down, into hotels. So we've seen temporary closure of hotels in Europe, starting in Italy and Spain and gradually extended to other European countries and LatAm as well and this started in March. The hotels' closure in Thailand started in April, on the 1st of April, and the Maldives and other countries as well. And those which remained open had very minimal operations and with minimum staff, and we had to keep some guests because there were some long stays as well. In May, we have started to do, on a selective basis, reopening of our hotels in China and also Vietnam has opened as well. And also in May, we've started to reopen our restaurants in hotels -- in our hotels in Bangkok as well. Over this period, 90% -- over 90% of our lifestyle outlets been temporarily shut. The next page, we go into Q1 performance recap. So in Q1, our core revenues declined by 22% year-on-year, and all 3 businesses were impacted by the COVID outbreak. And consequently, with severe and sudden revenue declines, while costs did not fall as fast, the compounding negative flow-through resulted -- it means net loss, both pre- and post-COVID and post-IFRS 16 in the quarter as well. So as I said before, we were actually -- we started to get impacted in our restaurant business in China in Feb. We started to have closures. The outlets were closed as well. And then in April, we had most of our hotels closed, and also in March, again, some of our hotels in Europe and other countries were closed. So that actually impacted our numbers severely in March. If you then look at our revenues. Q1 reported revenues last year was THB 29 billion. This year, core pre-IFRS or TFRS 16 is THB 22 billion. We see Q1 core at THB 28 billion. Minor Hotels, excluding NH, dropped by THB 2.4 billion. NH dropped by THB 3 billion. Minor Food dropped THB 700 million, and Minor Lifestyle dropped by THB 265 million compared to 2019. And then we walk to the right. Our core reported revenues is THB 22.5 billion, out of which we had THB 113 million of noncore items, which has been reflected in our books. Q1 contribution, Minor Hotels contributed 70% of our revenues. Minor Food contributed 25% and Minor Lifestyle contributed 5%. And then we go to the water flow -- waterfall chart of net profit. Net profit Q1 last year was THB 583 million. We had noncore items of THB 50 million. So therefore, Q1 last year, core revenues was THB 633 million. Minor Hotels, excluding NH, was down by THB 1.5 billion. NH was down by THB 1.2 billion. Minor Food was THB 557 million negative. Minor Lifestyle was negative THB 109 million, which resulted in a negative net profit of THB 2.834 billion core pre-TFRS 16. And then once we add TFRS impact, both on NH and Minor Hotels, the actual core post-TFRS loss is THB 3.1 billion. There was noncore of THB 1.4 billion, which was positive, and that resulted in a net -- in a reported net loss of THB 1.7 billion negative. The next page, we look at our international presence, which we started our journey a few years ago in terms of our diversification. 2019, we were 27% in Thailand and 73% international. 2020 Q1, that has grown to 33% and 67% international and mainly because of the international hotels were shut down, and also our international food outlets were also shut down. But Thailand continued to operate on the -- on our delivery business and takeaway business as well. So that segment has grown and therefore that contribution led to about 33% of our contribution from Thailand and 67% international. Our 5-year goal is to take Thailand to 29% and international to 71%, and that remains the same. We then move to Minor Hotels. So key financial highlights in terms of Minor Hotels. Q1, our revenue decline was 26%, attributable to most businesses and most geographies as well and which was predominantly driven by COVID-19 pandemic, which is -- which started in March. Both EBITDA and net profit pre-TFRS 16 were negative in first quarter, again starting predominantly in Feb. So we started seeing the decline pre-Chinese New Year as well, which impacted our businesses because China was not allowed to travel. And the negative flow-through with the decline in revenues was further dampened by a soft quarter and the leases -- and the lease structure in Europe. As you know, Q1 predominantly is a strong quarter for Minor Hotels, and it's the weakest quarter for NH because of the low season. And that low season got impacted more because in March, our revenues dropped and our lease obligations remained. Since then, we managed to reduce our leases going back from April, May and June, which I will explain a little bit later. So as such, almost 80% of the Minor Hotels net loss was attributable to NH. And post-COVID, post-TFRS, Minor Hotels reported a net core loss of THB 3 billion. So again, you can see the chart in terms of revenue from THB 21.23 billion dropped to THB 15.7 billion. And then you look at NH, and then you look at the net PAT as well. So net PAT dropped to THB 2.998 billion compared to last year as well. And that's -- and mainly the revenue change, the owned and leased hotels dropped by 26%. The management letting rights actually increased by 6% in terms of revenues. The managed hotels dropped by 34%. And the mixed-use business, which includes Anantara Vacation Club and the residential business, dropped by 43%. And if we then dissect this further, if I look at Thailand, Thailand dropped by 38%, Europe dropped by 26%, Australia increased by 6%, Maldives dropped by 26% and the Americas dropped by 25%. So we've pretty much seen an average of about 25% to 35% drop in our businesses right across our geographies, except Australia. And then if I move to Minor Hotels, the international presence, where we show where we have invested, where we manage, where we have a combination of both investment and management, and there are the new destinations or the pipeline properties as well and some of the hubs we operate today. So here, the revenue contribution Q1, 14% is Thailand, 86% is international. We remain bullish about 2024 as per our 5-year plan. 12% will come from Thailand, and 88% will come from international, mainly driven by NH Hotels and some of the other businesses where we have diversified over the last few years. Going back to 2014, we had 67% coming from Thailand and 33% coming from international, and that has completely changed for Minor Hotels. The next slide. If you dial down into owned and leased hotels, in terms of our business model for owned and leased hotel which contribute 85% of Minor Hotels revenues, in terms of geography, Europe is the major driver, which contributes 59% of our revenues. And Thailand is the second contributor, followed by Australia and New Zealand, which is pretty much driven by Oaks Hotels in Australia and New Zealand. So systems-wide rooms contribution by ownership or hotels contribute 26%; lease contribute 46%, predominantly driven by Europe, by NH; joint ventures, 2%; managed hotels, 17%; and management letting rights, which is mainly based in Australia and New Zealand, contributes 9% of our system-wide contribution. And if I look at geography, 62% of our revenues come from Europe; And Asia accounts for 11%; Middle East and Africa, 6%; Oceania is 10%; and Americas is 11%. Q1 revenue contribution, of course, as I said before, 85% of our contribution came from leased -- owned and leased hotels, and the others were quite small. Revenue contribution by geography, again, 59% came from Europe, Thailand is 14%, and the others were -- the rest were coming from Maldives, others and Australia. We then move to the next segment, which is our owned and leased hotels. So the number of rooms on that when we look at the number of rooms, in 2019, first quarter, we had 52,000 -- close to 53,000 rooms. In 2020, we've increased that to close to 55,000 rooms. Occupancy, actually, if you look at 2019, was 65% and dropped to 46%. So our key driver of the decline was mainly because of the occupancy drop due to COVID-19. The number of -- actually, the number of hotel rooms increased by 3%. And then the RevPAR, excluding ForEx, declined by 25%, mainly driven by the decline in occupancy as a result of COVID. Systems-wide revenue and owned/leased declined by 28%. And from the addition of the new rooms and slightly stronger Thai baht during the first quarter as well. So organic, excluding ForEx, RevPAR decline was 25%, mainly driven by occupancy decline, and system-wide RevPAR decline was 28% for the first quarter compared to the same time last year. We then go down to looking at our owned hotels in Thailand and the Maldives, which is our 2 geographies -- 2 largest geographies outside Europe. It's mainly Thailand and the Maldives. With the Chinese tourists contributing more than 20% of our hotels, so RevPAR declined in Feb, predominantly again, driven by the occupancy decline and during Chinese New Year, when the Chinese were not allowed to travel. The outstanding performance of the hotels in the Maldives in Jan was offset by the decline in RevPAR in Feb and March. Jan was a very strong month for us in the Maldives, but that was offset by Feb and March decline. And then since the beginning of April, hotels, both in Thailand and the Maldives, have been temporarily shut down. So again, looking at operational statistics, occupancies, same quarter last year, we've dropped from 82% to 54%, driven mainly in the months of Feb and mostly in March. ADR was flat, so we maintain ADR in spite of the occupancy drop. And the RevPAR drop was 34%, predominantly driven by the drop in occupancy. And then if I then look at Maldives, Maldives occupancies dropped by 13% from 73% to 60% same quarter. ADR actually was plus 1%. ADR increased by 1%, and the RevPAR actually declined, again driven by the occupancy of 16% for Maldives. We then move to owned and leased hotels, so we're still in owned and leased hotels segments for Europe and Americas, which is mainly NH. And Europe and -- as you know, Europe and Americas are the largest contributor of owned and leased hotels for our portfolio. Q1 RevPAR of Europe and Americas declined by 24% in euros and predominantly, again, driven by the occupancy drop because of COVID-19 and mainly the countries which were hard hit were mainly Italy and Spain. Since early April, over 90% of our hotels in Europe and about 75% of the hotels in LatAm have been temporarily shut down. Occupancy, again, dropped by 19%, from 65% to 46%. ADR actually went up from EUR 95 to EUR 101, and that's a 6% increase, and the RevPAR decline was 24%, predominantly driven by the drop in occupancy. And if you look at the revenue contribution between the segments, Spain actually contributes 33%; Italy contributes 13%; Benelux, 20%; and Central Europe is 23% with Americas contribute 16% -- sorry, 11%. And then if you look at the decline in terms of organic RevPAR, 26% was Spain; Italy was 36%, Benelux was 24%, Central Europe was 21% and LatAm was negative 20%. We then go to our asset-light business, which includes management letting rights, predominantly based in Oaks in Australia and New Zealand, together with the hotel management contracts under Minor Hotel under our different brands. Though management letting rights business remain operational, similar to others, both businesses were also impacted by COVID-19. A number of rooms in our letting rights slightly increased from same quarter last year by 3%. RevPAR, in Aussie dollars or Australian dollars, actually declined by 16%. And RevPAR in Thai baht declined by 20%. And managed hotels, the number of rooms declined from the same quarter last year. RevPAR actually declined on an organic basis by 20%; and system-wide, negative 30%. And then if you look at the statistics, you can see that the main decline was in Feb. We saw 5% decline in the management letting rights in Australia and 11% decline in managed hotels for Minor and 37% decline in the management letting rights in Australia and a 55% decline in our managed hotels portfolio, predominantly driven by the closure of the -- starting the closure of the businesses. The next page is our pipeline. So our pipeline continues to remain strong. And 2020, the projects we have might slightly be delayed because of our strategy in terms of preserving cash and preserving liquidity, but these projects will open. And then we also have -- on the top sheet, you see the owned and the leased hotels, 12 hotels this year with 1,600 rooms. And on the managed, or MLR, we have 13 hotels with about 1,900 rooms coming into inventory. And the next year, you see 7 hotels on owned and leased, it is about 1,000 rooms. And about 16 hotels, about 3,400 rooms. And then you see the pipeline beyond 2022 and 2023. And these are actual hotels which have been signed and are under construction. We then move to our mixed-use business, which is mainly our Anantara Vacation Club and also our residential development business in addition to our current projects. MINT has a pipeline of branded residences for sale in order to ensure that we continue on the revenue stream in the coming years and make it a scalable business segment, which will also become one of our core segments as well. Anantara Vacation Club provides a stable revenue growth, driven by membership growth as well. Q1, the mixed-use revenues declined by 43% and mainly because of the timing of our residential sales and some decline in sales activities in the vacation club, driven by COVID-19. In particular, through the Chinese tourists, who are one of our key markets for the Anantara Vacation Club. The vacation club has started to reopen its sales operations gradually in China and Taiwan, and we see that April, there was positive improvement, which is quite good. We switched our operations to China, and we've also capitalized a new market in Taiwan as well. And if you look at the current projects we have today, we have Layan Residences in Phuket, 100% owned, 15 villas; Avadina, 16 luxury pool villas, again, based in Phuket. It's a 50-50 joint JV, and that we continue to develop. We also have Chiang Mai, which was launched back in 2016, 44 units, and that's a 50% JV. And the last one is we also have a residential and an office block in Mozambique, in Maputo, which is about 181 keys and 6 penthouses and a 21-story office tower. So there's 2 towers there. That's a 49% JV, and that was launched in 2015. Our pipeline, we have Anantara Desaru, which is ready, and the hotel opened towards the end of last year as preopening. We have 20 residential villas, which are completed. We also have Anantara Ubud where we have 15 residential villas, which are in the process of completion, and it will be ready to launch this year. And then in addition to that, we have also, in Thailand, the [ Ceylon ] office complex, which we'll launch in 2023. So if I then look at the Anantara Vacation Club, as you can see, the membership actually grew from the same quarter last year by 16%. So we now have close to 15,000 members. Mainly 40% of that is coming from China. And then we have Singapore, Hong Kong, Malaysia and other countries as well, which includes Europe and some U.S. We then have the inventory. So if I look at the residential inventory, last year, we had 229 for AVC. This year, we have 241 because we launched the Phuket Phase 3. And our plan is to increase that to 350 units in the next 5 years by adding in Bali, Sanya, Samui, Phuket, Bangkok and Chiang Mai. We then move to Minor Food, the highlights of Minor Food. The first quarter, our revenues declined by 11% due to COVID. On a like-for-like basis, the EBITDA, pre-TFRS, declined at a faster rate of 46% whilst its bottom line turned to a net loss, pre-IFRS, of THB 82 million, mainly from China because we had to shut down our restaurants in China when the Chinese government asked us to do so in Feb. So -- and it was mainly driven by China hub. So the post net loss of THB 234 million, with temporary closure of the majority of the outlets were particularly in Feb, again in China, including TFRS, the food group reported a net loss of THB 97 million in '20 -- in the first quarter. So revenues on a like-for-like basis, pre-TFRS, is 11% drop. EBITDA, the margins went from 17.3% to 10%. And then net profit or net PAT has gone from 5.7% of THB 475 million to negative THB 97 million. Operational statistics, our outlets actually increased by 5%, from 2,200 outlets to 2,362. Same-store sales growth was negative 10% compared to 2019 was negative 4%. And total system sales last year was 5.3 versus negative 5.8 this year. And it's predominantly the outbreak in Feb and March, resulting in a same-store sales growth of -- declining of same-store sales growth. So the next page. Again, we go to Minor Food international presence. So Minor Food is the reverse of Minor Hotels in terms of its international presence. In 2020 quarter 1, we have 75% coming from Thailand and 25% coming from the international hub. Whilst our 5-year plan, we aim to get that to 64% from Thailand and 36% international, mainly purely driven by the expansion of the international hubs in the future. So Minor Food has a reverse of the Minor Hotels trend. So the restaurant business now, we have a presence in 26 countries across the region, operating both owned and franchised businesses, and we continue to look for opportunities to expand, especially in existing markets. And one of the success factors we've had is the launch of Bonchon in Thailand. We then go to Minor Food, the portfolio. So if you look at the outlook, we have 50% is owned, 50% is franchised. And if you look at the geography, 74% of the outlets are predominantly based in Thailand, 16% in Australia and 4% in China and then 6% in other countries. Of course, our revenue contribution, 75% comes from Thailand, 9% comes from China -- sorry, from Australia and 6% comes from China. And out of that, 93% of the revenue contribution comes from our owned outlets and 7% of the revenue contribution comes from the franchised outlets, mainly driven by the franchise fees. In terms of operational statistics by hub. Thailand, we saw the same-store -- you look at same-store sales growth is negative 6.9%. Total system sales was actually up by 5.5% compared to the same quarter last year, which was positive. China, due to the reasons I mentioned before, we had to go into shutdown in Feb. And therefore, total system sales was negative 60%, and same-store was negative 49% or 50%. Australia also showed a decline because of the store closures in March, both in terms of same-store and total system sales as well. And then if you look at some of the brands, the closure of the dining restaurants, you can see how it's impacted both the total system sales, the decline coming -- starting from March -- starting from Feb and then continuing to April as well. But the positive trend is in China, as I said before, in Feb, we hit the bottom when we had to shut down all our restaurants. And you see the trend moving quite fast compared to pre-COVID levels, both in terms of total system sales and same-store sales growth as well. If you look at Australia, it continues to decline, predominantly driven by the closure of the restaurants, The Coffee Club. We then move to Lifestyle. Q1 revenues of Lifestyle declined by 21%. Again, driven by 2 factors: the soft retail business and the COVID outbreak impact as well. The contract manufacturing side was quite resilient, and we managed to move our production into sanitizers and sanitizer-related products, which we managed to sell quite quickly as well. So as a result of the decline in the retail business, both EBITDA and pre- and post-TFRS declined to a net loss of THB 41 million and THB 78 million, respectively. The situation in April got worsened by more than 95% of our outlets are temporarily shut, and they're all based in Thailand at the moment. So when I look at the financial performance, our revenues dropped from THB 1.2 billion the same quarter last year to THB 986 million post-TFRS, and pre-TFRS was THB 986 million, which is a 21% drop. EBITDA dropped as well from [ THB 84 million ] to negative [ THB 7 million ]. And net profit dropped from [ THB 31 million ] to negative THB 78 million. Operational statistics, we have started to shut down some of our outlets. So we dropped outlets from 486 to 473. Whilst our same-store sales growth and total system sales dropped, mainly driven by the closure of our restaurants -- of our retail outlets. So on our retail base -- on a -- Minor Lifestyle, 70% of our revenues come from trading or retail, and contract manufacturing is only 30%. And then you see the decline of our business starting from Feb onto April, where all our shops or retail outlets were closed. We then move to -- that brings me to the end of the 3 business units. We then move to corporate information where we talk about CapEx and how we're going to strengthen our balance sheet as well. So the CapEx plans includes maintenance, renovation and pipeline of our projects, which are under development. We have suspended the CapEx plan for 2020 in terms of our big CapEx items in terms of developments. And we only continue with the ones which are necessary and which we need to do in order to generate revenues when we come back post-COVID as well. Our -- the adverse impact, of course, on equity and the adoption of TFRS with a net loss of -- in the first quarter. Interest-bearing debt-to-equity, our ratio rose to 1.6x, still below our threshold. And then we have its senior unsecured debentures, which has an A rating by TRIS. So our leverage, as you can see, our internal policy is 1.36, and that went up to 1.61. Our covenants is 1.75, so we are below our covenants for the first quarter. CapEx, you can see how we've shrunk the CapEx of 2020. And because some of these projects are already half-developed, we had to move them into 2021, and we will sort of start to complete these projects early 2021 based on how the outlook turns out to be. In terms of backup of financing, we have equity of THB 80 billion, and we have debt of THB 129 billion. And then you can see how the equity breakdown is as well. Our net cash on hand as at the end of first quarter, we had THB 20.7 billion of net cash. We then move to our response to COVID. So we've embarked on quite a few initiatives post-COVID, both on the operations side, on the people side, on the process side, on the financial side. So every single business unit has been -- we've looked at it. As I said before, China was a true example of the quick recovery we've seen since we shut down in China in Feb. And we're starting -- and the stores started to reopen in March. The sales continue to improve week-on-week in China, which is quite positive. And furthermore, the hub in China actually turned profitable at the store-level contribution in April. So that was 2 months ahead of what we originally projected based on the COVID situation. So the momentum is quite good, even though China contributes a small amount in the Minor Food group, but we see a positive momentum there. So the trend continues to recover to pre-COVID levels, and we've seen that recovery. And as you can see the graph, you can see how we have managed to increase our average daily sales pre-COVID on our China hub on our businesses. So in terms of priorities, the 30 days, we have a strict adherence of safety because we feel employee safety and guest safety is utmost importance. We reopened stores, and we've grown our delivery revenue quite significantly during the COVID situation here in Thailand. We have also secured loan facilities as well. We have initiated cost reduction and payroll, both in payroll and rental and other variable costs, including reducing some of our fixed cost elements as well. And in terms of accelerating business recovery, we've developed the [ Panda ] delivery menu. We've upgraded our CRM and our loyalty program, and we've acquired new A+ locations in key markets as well. The next 30 days, again, the business -- the safety continues. We would -- we're looking at recovering business volume. And also, we're looking to securing government subsidies in certain countries. Spain was a good example where we've managed to sign a facility this month for EUR 225 million and maybe another EUR 25 million, so taking that up to EUR 250 million of additional government-funded subsidy or facility at a very low interest rate of about close to 3%. The next 30 days, we target that for all employees, we are looking at temporary redundancy when we start to resume work. So that's our 30-30-30 days plan since what we have been doing since March to April and now to May as well. So that's what we've been doing in the last 3 months. We then go into the next phase, which is as the governments are starting to relax the lockdown in various cities and various countries, we are looking at the reopening strategy by country and within each geography or within each country, we are also looking at it by hotel, by brand and by restaurant. At the moment, in some countries, the visibility still remains a little bit shady because we're not certain as to how this -- we still have limited visibility. And we still have, as a result of that, the magnitude of the delivery of the recovery might be dampened as a result of this. But we are -- we will ensure that the demand will be sufficient to uplift our performance progressively to remain, to reopen our hotels, our restaurants and our lifestyle outlets as well. If you look at Minor Hotels, the hotels in Vietnam and China have opened successfully, and they are pretty much driven by domestic demand. Selected restaurants in our hotels in Bangkok also reopened in the last 2 weeks with social distancing guidelines. And the recovery, we see a continuous improvement, but not pre-COVID levels, but it is improving on a day-by-day basis. And then if you look at the countries, you see where the demand is coming from. Domestic demand in China -- sorry, in Thailand is about 11%. Regional demand is 54%. So when Thailand opens, we would pretty much focus on both the domestic and the regional demand, which will account for about 65% of our business. We will have less corporate. And then out of which the corporate segment is only 15%, and leisure segment is 85%. So we feel that the corporate segment will take time to come back, but thankfully, in Thailand, our corporate segment only contributes 15% of our total revenues. We look at Maldives. Of course, leisure is 98%, and the regional demand is 36% because Maldives has no domestic demand. So it's mainly -- 36% is regional demand which we will be focusing on. And the balance, we say that it's mainly driven by Europe, South America and other places, which will be slow to come in. We then move to Africa. 63% of our business in Africa comes from regional, and again, 77% of that is leisure. So we will be focusing on that. Middle East, regional is 44%, and out of which 86% is leisure. Australia, predominantly driven by domestic demand, 85%. So we feel that once Australia opens its borders internally, the business will start to kick in from a domestic side, of which 43% is corporate and 57% is leisure. So that's our focus on our reopening strategy on the hotel side. On the food side, we have extended the service to dine-in for all outlets that are already open for delivery and takeaways. And as I said, the delivery and the takeaway business has been very strong over the last 2 months, not enough to compensate for the loss in the dine-in, but cash flow positive. We will reevaluate and reforecast the performance of each outlet that will remain closed. And the strategy is that when we open outlets, if they are not cash flow positive, we will keep them closed for the foreseeable future and also save on rent and other expenses as well, rent and payroll. We then focus on hygiene, health and hygiene for our customers and our team members as well. Minor Lifestyle, pretty much the focus is to drive revenue through online or omnichannel. And then the store opening hours to allow for cleaning and sanitization to protect our customers and our team members as well. The next is how do we minimize our cash flow or cash burn. So MINT continues to focus on cash preservation and liquidity management with initiatives from all business units across all the geographies, and this has been an ongoing process with the objective to minimize our cash outflows throughout the business during the business recovery process. So payroll, the optimization of full-time and part-time manning and workforce productivity, we've done reduction of salaries and we've also deferred the salary merit increase, which happens in March. So that's been deferred by 3 months, but that again will be reviewed on a quarterly basis. We have implemented a temporary redundancy scheme in Europe in order to put some of our payroll on the government subsidy program because, fortunately, in Europe and U.K., we've been able to tap into the government subsidy program to help the employee costs that the governments are paying close to 70%. Or in the U.K., stays up to 80% to a maximum of GBP 2,500 in terms of subsidies. So we've managed to capitalize on that. We are also -- rent and leases is one of our biggest costs next to payroll. We have -- we are negotiating with landlords globally to reduce the rents or to suspend the rent payments, which we have been quite successful. And the reduction so far, if I look at Europe, the landlords are looking at reduction only on a quarter-to-quarter basis. So the first reduction came in April, May and June. The reduction of rents and leases, we managed to achieve about 30% savings on that, which is quite a big amount. Suppliers, we have spoken to all our suppliers and all our key partners to get discounts and delayed payment terms to preserve cash. All the costs, which are not of any priority, has been suspended, including staff travel, some of the training initiatives, reduction in marketing and advertising costs in lower business activities where the businesses are closed. But we continue to focus on the businesses which are open on the food group and spend on marketing and digital initiatives on that. We've cut all the other unnecessary costs as well. In CapEx, we've had a drastic reduction in the CapEx with the exception of looking at prior committed CapEx, including investments for the second phase of the Bonchon, which is done; and also the BreadTalk Singapore delisting, that's also done; and the NH, the Boscolo portfolio, where we signed the lease, and we are committed, that happened pre-COVID. So those are the only 3 big items, which will flow out from a CapEx perspective. And any of the small maintenance and ongoing projects such as Avani+ Khao Lak and Avani Desaru has been reduced as well. Dividend is a big one. So yesterday, the Board has -- the Board meeting -- we now have a Board resolution to cancel our dividend payment for 2019. And -- which is now subject to our shareholder approval, which will be at the AGM. When I look at the cost savings, 35% of our cost savings comes from payroll. 15% comes from leases and rent renegotiations. Supply chain, we managed to get about 17% and other OpEx items, like canceling some of the OpEx expenses, has generated about 32% of our savings against our budget and also against last year as well. So the CapEx cancellation alone is about THB 7 billion to THB 10 billion, and the cost savings on the dividend is about THB 2.3 billion by not paying the dividends of last year. We then move to liquidity and debt management. So we have struck on 4 items. One is the covenant waiver. Second one is looking at our debt, which is maturing in 2020 this year. The third one is focusing on our credit rating. And the last one is liquidity management. Our team have been working very hard with the bondholders on the covenant side and the creditors, both with the bondholders and the banks. And we'll have a waiver of the covenant testing, where we have a gross interest-bearing debt to equity of 1.75, which is our covenant. And the waiver we are looking at is for the next 3 quarters. So the first testing of our covenant will be in 2021 first quarter. So the covenant -- we will get a covenant waiver for the next 3 quarters, which our team is working on, and that will be finalized in the coming weeks. In addition to the negative covenants, as I said before, until the end of 2020, we will not do any M&A. One of the conditions is no M&A cumulatively of over 3% of our total assets and total debt of no more than THB 150 billion at the end of every quarter and no dividend payment. So that was the -- one of the testing for the covenants, the covenant waiver, some of the requirements we have. The second one is on the debt maturing in 2020. Again, our teams worked very hard and we're quite successful in either extending the debt. The THB 2 billion term loan, which is paid by short-term loan, we are hoping to refinance that to a long-term loan by June. That's in progress. A THB 4 billion bonds, again, to be refinanced by the long-term euro loan at the end of May, which has happened -- which will happen. And the debts which are due on the second half of 2020, THB 3.6 billion of loans in various currencies, we are in advanced discussions with the banks to extend or refinance these loans. So we're working on both sides, on the covenant side and also on the debt maturing side. On the liquidity management today, as of end of April, we have cash in hand in total, including NH, of THB 22.2 billion. And we have additional working capital facilities of THB 27 billion to see us through for the year and early next year. This is in addition to this -- in addition to the THB 22.2 billion and the THB 27 billion working cap, NH has already secured a EUR 250 million subsidy, as I said before, from the government, a 3-year syndicated loan in May, and that has been secured as well, with a low interest rate of 3% and with a bullet payment of 3 -- at the end of year 3, so which is quite positive. So we've got THB 22.2 billion cash in hand, we've got THB 27 billion of working cap facilities, and we have another EUR 250 million of NH syndicated loan to see us through for our -- on the liquidity side. On the credit rating, the rating is reaffirmed by TRIS at A. The outlook revised down to negative because mainly driven by COVID. The U.S. dollar perpetual bond, the rating downgraded to BBB by Fitch. This was a result of the downgrade of BBL, the guarantor's long-term issuance default rating. So there is no impact on our MINT rating, I have to add on this. We then move to the next one. So strengthening our equity base. So again, we have embarked on a few things. One is to make sure that we have enough liquidity, both from a covenant waiver, and to make sure that we don't breach our covenants in Q2, Q3 and Q4, so we've got -- we will get a covenant waiver. And also, we've got extra liquidity to see us through as well. And the second one is to strengthen our equity base to make sure that we will also comply with the covenants beyond 2020 as well. So MINT has announced 3 structures from a capital structure, restructuring purpose as well. And what we have done is we've taken a proactive approach to ensure that our service obligations due to its commitment on the quality and also strengthen our balance sheet as well. So that because the solid balance sheet will be the foundation for MINT to further build on its first-class quality of assets and also grow its business sustainably in the long-term future as well. So this equity will be coming over the 1 to 3 years period. So the first one is the perpetual bond. The target is to raise either onshore or offshore equity, perpetual bond of THB 10 billion, and that will be issued within the third quarter of this year. The second one is an RO or rights issuance, with an oversubscription mechanism, the RO ratio of not lower than 6.45 existing shares to 1 new share, and the RO price at a discount of no more than 15% to the market price as well. So that will give us another THB 10 billion in terms of real equity. And again, this will be approved -- the AGM will be approving this on the 19th of June, which we will announce. And I have to say, coming off our Board meeting yesterday, our main shareholders, and our 3 of our main shareholders who account for 49% of the holding who sit on our Board, have unanimous support and are willing to oversubscribe, if needed, to show confidence and also the long-term stability and the rebound of our industry in the next 2 years, coming off a very, very strong year in 2019. Our performance was at record high, and we created historic performance records in the last -- every year, we performed really well. 2019 was also a certification of that. We had a fantastic full year, coming up with about THB 10 billion of profit for the first time. And based on that and also based on asset value, the net book value of our assets and everything else, our shareholders, our key shareholders have -- will have overwhelming support to continue to support this RO for -- at our -- at the AGM. The next one is, we're also looking to issue warrants, W7, which will be eligible for our existing shareholders after the RO. The warrant price offering, the warrant price, it's free, the warrant price ratio of 17 shares post RO to 1 new warrant. And this is mainly -- it will be seen as a reward to our existing shareholders. So the pricing, it's not the pricing, and we merely see this mechanism as to reward our existing shareholders who have also given up their dividend from last year. So we -- it's not a price-based, price-driven thing. It's more of a reward to our existing shareholders. And we hope to generate about THB 5 billion of equity raising on that so -- which will take us to about THB 25 billion. But this year, we are hoping to raise THB 20 billion. And then the warrants will be a 3-year warrant, which will give us another THB 5 billion to repay some of the perps and also our reduction in debt as well. In addition to these 3 initiatives, the management continues to work on asset recycling and other methods as well to try and restructure our strengthen our balance sheet, similar to what we did last year. So we were very successful in doing 3 of our hotels under sale and leaseback in July last year with Invesco. And we also sold the Maldives portfolio in December to Blackstone where we will continue to manage the hotel for the next 5 years. So that has not been factored in here, but management continues to work on asset recycling and deploying capital in the growth segments as well. So the last one is our medium to long-term road map. We look at the -- with the changing of consumer behavior, as we've seen, post COVID, we will have to adjust our business to better serve our consumers, our guests and also our customers from the medium to long term. And we have launched a business beyond COVID, what called BBC, with all the business units to look at new ways or new initiatives to be able to recover -- to be able to set us on the recovery path in the light of the -- what we call the new normal of living. So here, if I look at health and hygiene standards and everything else, Anantara launched Peace of Mind. NH launched what's called Feel Safe at NH. And they partnered with SEG, one of the larger reputable companies in Europe for health and sanitization standards. Here, we partnered with Ecolab and [ Diversity ] as well. Avani is launching AvaniSHIELD. Oaks is launching SureStay. And then we feel that wellness, it's going to be the biggest segment coming out of COVID. We've been quite proactive since last year on the wellness side. So we partnered with Verita in Singapore, a listed company for Anantara, where we will focus on boosting immunity. And then the Anantara Riverside as well. St. Regis is launching the la Prairie clinic for aesthetics and medical spa. And also, we have another one which is the VLCC, which will be launched with AVANI as well. And then focusing on keeping our brands on top of the minds of our customers. So we continue to share content and tips for staying well, cooking at home, being healthy at home, and that we continue to do it between all our brands as well. The last one is -- on the road to recovery in terms of BBC or Business Beyond COVID. We feel we are now seeing there is some new emerging trends like home occasion or cooking at home. There is booming of celebratory emotional needs because I think the travel, which will come, will be visiting friends and families and relatives, which will come quite fast. We are also looking at food and safety and nutrition concerns, higher sourcing standards, expansion of our online grocery retailer, growing our delivery through drive-through and pick up as well. Immediate response examples, I can cite a few. So we focused on a 1112 delivery hub, which resulted in our delivery sales of almost 3x up in April compared to Jan 2020. So that was very positive for us. So we managed to switch the channel from dining to delivery pretty quick. We also launched what we call Zero Touch Delivery program with our own delivery system, where the drivers will not touch the food and sanitization standards are maintained. China Hub got into partnership with Panda Delivery. And Australia launched what we call The Coffee Club Pantry and The Coffee Club @ Home, which -- where we have been delivering groceries and coffee bean to our customers at home. The new emerging trends for Minor Lifestyle is we look at -- we know that there's going to be more cautious spending in the next 3 to 9 months or until the end of this year. We know that the emerging products which is health is wealth. And sanitizing and immune-boosting products will be of demand. And we also see that there is a shift to digital channels and the new contingency considerations in these agreements. So we are looking at rental adjustments, rate holidays, and in some cases, even canceling the leases as well. So in the term -- in case of Minor Lifestyle, we shifted to omnichannel or online channel to boost fashion and household sales in spite of all our outlets being closed. And then we focused manufacturing hand sanitizers and cleaning products to take advantage of the near-term demand in this -- on the manufacturing side. We have quite a few emerging trends and responses and initiatives in addition to this which we -- which is part of our BBC program, which touches every single aspect of the 3 businesses, which is hotels, food and retail as well. So that brings to the end of the presentation. And I'm happy to open for any Q&A based on this.

Thank you, Khun Dillip. So now we're [Audio Gap] So now so you can either raise your hand with the application or you can chat -- type the chat as well. Here is the first question. What will be the occupancy threshold for reopening the hotel of MINT?

So what we are doing is the occupancy threshold, actually, it's predominantly driven by the country and the hotel. And each hotel has a different occupancy threshold. So we are -- we have a breakeven point by hotel. And if we don't see that we will meet those occupancy thresholds, there's 2 things which will drive this. #1, we will not open all the hotels in the same region or the same country. So we will open less number of hotels. And even with the less number of hotels, we will open less number of rooms in the coming months as we start to ramp up. So our base case is that we're looking at opening with 10% to 15% occupancy, ramping up towards Q4. And don't forget that for Thailand or for Minor Hotels, Q2 and Q3 is our lowest quarters. Q1 is our peak quarter and Q4 is our peak quarter. So we hope to see some come back in Q4. And then if you look at NH, the peak quarter there is Q3 and flowing into Q4. And we hope, based on some of the measures which some of the countries have taken, that we will start to see some of the hotels opening. And we have seen hotels already open in Europe and actually starting to run at about 45% occupancy on a post-COVID level. And again, in Europe, we are being very careful because we have leases on our hotels. So we don't want to rush in and open all the hotels and start paying the leases. So we are negotiating the lease reduction with the landlords, and those hotels will continue to be closed. And we will shift the demand into 1 or 2 of the hotels where we will operate on a reduced inventory and reduced manning and reduced expenses to maximize profit and to reduce our cash burn going forward.

Okay. We have Jimin in on the line. Jimin, please go ahead with your questions.

I have 3 broader questions. The first one is, given NH's first quarter is going like a low, low quarter, and historically, you have seen NH kind of doing a cash flow negative business on first quarter. So clearly, you know it's a loss-making business. Given that you've already managed the lease kind of coming down in third quarter, which is the peak season for NH, it seems like things are opening up. What was the rush to do a capital call? Given that for last 1.5 years, we have been hearing is we don't require capital call.

So -- okay. So that's a good question. So what we did was, we're not looking at our first quarter. We're looking at the full year and also we're looking at next year as well. And we do have some capital -- CapEx or capital expenditure projects, which are quite sizable as well. And based on the equity burn this year, we have been very proactive to make sure that we shore up our balance sheet and strengthen our balance sheet fast before there is any dry up in the market from a liquidity perspective. So we want to shore up the balance sheet on the equity side. We want to shore up the balance sheet on the debt side to try and get as much as debt as possible. And then [indiscernible] next 3 years in terms of looking at how do we strengthen our balance sheet and how do we reduce our debt because some of the issues we've had since the acquisition of NH has always been -- the concern has always been our debt, even though our debt-to-equity ratio, we've always maintained it below 1.3, which is our internal covenant, that's always been a concern and also the debt-to-EBITDA as well. So therefore, what we've done is we've been proactive because when we did NH, we never raised any capital. The NH was fully funded by debt. So this time, what we're doing is we're -- the shareholders are fully supportive, as I said before, in terms of shoring up the equity, which will also strengthen our balance sheet going forward as well.

Okay. That's helpful. The other question is on the additional covenants on the M&A side, the 3% rule. I think it's quite heartening given the fact that we have been on a position kind of been for the last 3, 4 years. Would this mean until and unless we kind of get back to a normalcy level, is there a kind of thought process on when this 3% rule or M&A kind of covenant will be kind of taken away?

So okay. So the 3% is -- it's part of the covenant waiver with our banks and our bondholders. And we see that for rest of the year because that pretty much applies for Q2, Q3 and Q4, and that's when we will have the waiver. And we feel that even during the waiver period, our DE will be less than 1 point -- way less than 1.75 because of the initiatives which we are launching on a proactive basis by doing the perp of THB 10 billion and by doing the equity raising of THB 10 billion. So that will reduce. And therefore -- and again, internally, I think this year, we will not be embarking on any of the M&A activities because our focus is to ensure we strengthen our business post-COVID and also make sure that we have the cash burn reduced to a minimum and look at business recovery beyond COVID as well. So I think this year, we will not be looking at any M&As. So therefore, next year is going to be the first covenant test in Q1 2020. And at that time, again, by doing this, the first 2 instruments we have, we will be at a DE of less than our internal threshold, which is 1.3, 1.35% -- 1.35x. So I think it doesn't really matter for us on the M&A activity because I think it's a given, and we've agreed, and we're not looking at any major M&A activities this year.

Okay. Just 1 last question. You mentioned in the press release that you've kind of taken -- taking bookings for NH starting May. I just wanted to check from what period the stairs are allowed in the net.

Okay. So the -- what I have to say is, if I look at NH, and we look at it by country, and in the last 2 weeks is when we have seen a positive trend in our bookings because prior to the last 2 weeks, we've been getting cancellations. And that is a good indication in terms of our bookings. And our bookings are now coming through for the high season, which is September and October. So we're already seeing bookings coming through. And with some of the hotels, as I said before, which are already open in NH, is starting to run at occupancies of 40%, up to 40%. And of course, this is with reduced inventory and reduced number of hotels, and that's what we are seeing. So like say, for example, we are hoping that the NH, on a best case, we're looking at 50% of the hotels coming online by June, and then 60% in July, 75% in August. And then out of which, out of the 50% which will come online, we will only -- we're only looking at 70% occupancy of those hotels. So we are taking a very conservative approach in terms of NH. So far, the trend is positive and it's better than what we are expecting. But it's only been the 2 weeks so we don't want to sort of overestimate our numbers.

Here's a question. Have we seen any improvement of the margins of hotels in April and May after the cost-cutting initiatives have been implemented?

So I think in April because of the shutdown, again, we have to look at it by region. We have managed to reduce -- our revenues are 0, but we managed to reduce the cash burn or the cash loss by reducing rents in Europe. On the leases for April, May and June, we've managed to save about 30% on our lease obligations. We have managed to tap into the government subsidies in these countries as well. And again, as I said before, we are achieving about nearly 25% of savings based on our 2019 costs, not the budget, but savings on 2019, and about 30% savings on our budgets as well. And of which 35% is coming from payroll, leases is 15%. Other OpEx and expenses have been also slashed, saving about 32%. And supply chain contribution is about 17%. So -- and in most countries, the governments are doing subsidies. In Thailand, Thailand has been very slow. And in Thailand, the first time the government stepped up was on social security was in the month of April, and not for the whole of Thailand, only in certain provinces, where they allowed us to furlough employees who earn below THB 15,000 or furlough people and getting social security contribution of -- they will earn up to 60%. And then in May, Bangkok also followed suit and Bangkok also implemented that. We've done it. We've done that again. But unfortunately, these savings are not enough. So we've taken additional measures in terms of actual headcount reductions across all 3 business units because of the phased opening or even some hotels which may not open for the next 2, 3 months. So we are actually reducing headcounts. And even though there is a cost to pay on the severance, in the long term, we will have a payroll savings as these jobs will not be needed for the next 3 to 9 months, and that's how we're looking at it.

There's a lot of questions about cash burn per month, what we're expecting. And with our liquidity, how long do we expect to be able to service all these cash burn?

So the cash burn per month, if I look at NH and MH. NH has about EUR 600 million in terms of cash, which will help us to see us through the whole of this year and next year based on the obligations we have because of the reduced rent, the reduced payroll and everything else. NH is burning about close to about 60 -- about EUR 50 million a month. That's on the worst months in April. And then we see May and June actually getting better because of hotels starting to reopen. And then if I look at Minor Hotels, our cash burn is quite low. And we have facilities of up to 6 point -- like the -- if you look at our negative cash flow, we are looking at about estimate of THB 6.3 billion in April, THB 6.7 billion in May and next -- and THB 13 billion in June. So it is quite low compared to what we have and compared to the cash we already have in hand. Yes. So I think the worst one we see is April because we hope that May and June. We are already seeing the food group actually turning into a profit in the month of April. So therefore, that has reduced our cash burn by a lot.

Even with the delay of the CapEx, for this year, we still have a CapEx level of nearly almost THB 10 billion. Why is that?

So yes, we said it before, the main CapEx this year are 3 items. One is Bonchon, the second one is BreadTalk and the third one is some CapEx overhang on some of the projects we've already started and where we have to pay because some of the residential units are being completed and they will be sold this year so we need to complete them as well. So that's pretty much -- and Boscolo in Europe. So those are the 3 main drivers in terms of CapEx for this year. So it's Boscolo portfolio, which is about EUR 52 million. And then we have Breadtalk. And then we have Bonchon. That's it. So that's the 3 CapEx items. We postponed everything else to next year.

Then we have some questions on PER. So what is going to be the expected interest rates? And also, who are the potential investors?

So on the perp, maybe I can ask Brian, our group CFO, to touch base on that.

Thank you. Yes. So we've been exploring the option of both a domestic onshore and offshore perpetual bond. And at this stage, we are confident we will be able to secure an issuance in the time period up until the end of Q3. In terms of potential transaction, again, we've been exploring similar transactions that we've executed as part of the funding mechanism for the NH acquisition. So again, we're looking at similar domestic instruments or international perpetual bonds. And the investors in such products will be, again, similar to the investors that participate in the products that we launched as part of the NH funding support.

So again, just to go back to the question on the cash burn. I think April is our worst month, as we said before. For us, we've had a cash burn of 6.7%, which is the number I gave. And then we see that May and June sort of recovering or the cash burn will be much less. In addition to that, as I said before, we have THB 23 billion of cash in hand and we have unutilized credit facilities of THB 27 billion. Plus, we have the EUR 250 million of credit facility in NH as well sitting there. So if I look at MINT alone, we have THB 7 billion of cash in hand and we have THB 23 billion of unutilized facilities. So that's about THB 30 billion. And if I look at Europe, NH, we have about EUR 600 million of cash in hand. A combination of cash in hand, the revolving credit facility and the government-funded loan.

The way -- well, I just want to add the way we look at cash burn, we look at negative free cash flow included -- and plus CapEx, too. In April, it hover around like THB 6 billion. But we -- in May and June, with the situation, it could be high. It could be hover around that level. But we're trying every way we can to cut down our costs and expenses that Dillip just mentioned and also suspend of CapEx. That will also improve and alleviate the amount of cash burn that we're going to have in the next 2 months.

Okay. I hope that clarifies the question on cash burn. Thank you.

We have a question on the government subsidy loan of the interest rate, about 3%. So they're asking if we could give more details on that [indiscernible] NH.

Correct. So this is a government-backed loan that they've secured at the NH level. As Dillip said, the quantum of it is EUR 225 million, with the potential to increase to EUR 250 million. Syndicated with a number of the lead banks in Spain, and the interest costs are up to 3%, depending on the -- and some internal covenants as it pertains to debt-to-EBITDA. But again, [ sales are at ] 3%.

With no capital payments for the next 3 years.

Correct.

So it's a bullet payment. So it reduces our cash outflow for the next 3 years, with the bullet payment in after 3 years.

And then a question on our costs. So how many -- how much is fixed costs and how much is variable costs? And how much do we think we can increase in terms of fixed costs?

So most of the fixed costs is predominantly driven by our leases. And again, the leases for the month of April, May and June, we managed to reduce it by about 30% on the lease expense. And then we have other fixed costs, which is depreciation and interest. And again there, we're looking at -- depreciation is not something we can do to reduce it. But all the other costs are pretty much now become variable where we have seen big cost reductions starting from April as well.

Great. I might add. In terms of -- traditionally, we have a mixture of fixed and variable costs, but in reality is, in this environment, we're aggressively negotiating to reduce all our cost base. And as previously guided by Dillip, in terms of our base case assumption, we believe we can deliver cost savings of approximately 25% on our 2019 cost base. And again, depending on any deterioration in the situation, we will deliver more significant cost savings. And the base case assumption is 25% of 2019 costs, which is actually a mixture of previous variable and fixed costs.

So if I look at the hotels, Minor Hotels, 50% is fixed, 50% is variable. Out of which, 86% employees are at full time. If I look at NH, 60% is fixed, 40% is variable. And as I said, on the 60% fixed, it's mainly -- the bigger chunk of that is our lease costs, where have seen a 30% reduction. And then if I look at Minor Food, 45% is fixed and 55% is variable. Of which, 39% of total employees are full-time on the Minor Food because Minor Food operates a pretty good model in terms of managing their fixed and variable employee components. So our fixed employee component is only 39% full time and the balance is variable. And if I look at lifestyle, 63% of our employees at full time. And that's how the cost structures are between fixed and variable and how much the employee full-time costs comes in.

That's the structure which we've seen before COVID. But during the COVID, we have implemented like various cost-cutting initiatives like Brian and Dillip just mentioned. So we've been able to cut down some of the fixed costs and also variable costs as well.

Yes.

So just continuing on the cost and expense side. So the question is negotiations with landlords, that the lease expenses of reducing by 30% coverage till the end of this year?

No. So the 30 -- as I said before, the 30% of the rent reduction is mainly for the month of April, May and June because the landlords are not willing to look at it beyond that. They would like -- the leasing -- the negotiations we've had so far, they would like to look at it on a quarter-by-quarter basis because the situation is quite fluid in terms of countries shutting down, countries reopening hotels, and also like whether we will have bilateral agreements between countries where -- when people do start to travel, whether there is a quarantine requirement or not. So based on this, we will then have to renegotiate again for the next 3 months. So it's an ongoing process. But so far, what's positive is that we've managed to achieve a near-term rent reduction of 30% for the month of April, May and June. That's it.

Okay. Turning on to the flip side. How about the impact on the margin using the food delivery platform?

So on the food side, as I said, like the channel shift has happened from -- we've moved from dine-in to takeaway and delivery. And that has done exceptionally well. As I said, like -- we saw a 70% growth from our 1112 compared to the January numbers. So that's a big jump. Of course, the margins were a little bit squeezed because, on the food side, on pizza, we had to run the BOGO campaign over 2 months, but we had some strong demand on that campaign which actually helped us on the cash flow as well. But what I have to say is that, on the food side, in the month of April, we have managed to turn it around into a net profit for the month of April, so which is quite positive for Thailand. And then we have the other hubs which is mainly Middle East which is shut. Australia is still -- there is some slow pickup. And then we have China which is also showing improvement, and hopefully, we will see that turning into a profit by June or July this year. So on the food side, actually, we're seeing quite strong positive momentum where the trends are looking quite good.

One more on the cost side. What's our kind of guidance on expected overall interest expense for the year 2020?

Well, at this point, well, if you look at last year, we have interest expenses of around THB 4 billion on P&L and another THB 1-ish billion in the equity section as an interest expense on perps. This year, we're probably going to have additional -- well, with the refinancing and then with the issuance of perps bonds, depending on the structure of the curves, we're probably going to have additional interest expenses.

Correct. I guess, as Khun Big is outlining, we will have additional debt over the period which we've put in place, including some defensive measures to boost the liquidity. At the back end, after we secure the perpetual bond transaction, we will also have additional debt. But from a positive perspective, the interest rates we believe we can secure in those facilities will be very competitive and in line with what we achieved on the past transactions. So yes, we have an increase of debt to support liquidity, but the interest cost of those transactions will be similar to the ones that we had pre-COVID. And I guess another point to note is, obviously, the liquidity from the RO, which will obviously provide a buffer and reduce some of that debt obligation, so which will consequently also reduce our interest exposure.

Right. As RDE coming down as expected after the transaction -- or after this comprehensive capital structure strengthening plan, RDE will come down, possibly to our internal policy level. That will help also alleviate the interest burden as well.

Okay. Just -- I think people made a little bit more clarification on the rental expense. So based on the 25% savings of the OpEx in 2019, does this assume these rental cuts of 30% are for rest of the year or just for the second quarter?

So we are assuming a rental reduction is only for the second quarter. We're not assuming that it will be -- it will continue to the third or the fourth quarter, even though we are quite optimistic that our landlords will work with us to find -- to give us more rent free for the next few months. But again, it depends on the opening of these countries as well. So all we have done is we have only taken the 3 months in question. We haven't acted in the rest of the year.

A few questions on the opening of the hotels. When do we plan to open all of the hotels? And what's the RevPAR outlook for next year 2021 compared to 2019? And also, maybe some kind of guidance of how many hotels will be opened by September of this year.

So it's very difficult for us to base on some of the country situations. Like say, for example, can give you a good example, Thailand initially plan to have international flights opening the 1st of June. 2 days ago, that's been shifted to 1st of July. So that, of course, will have an impact in terms of opening of our hotels as well because we are -- we will have to drive both domestic and the regional markets. In other countries, like, say, if I look at Europe, some hotels have already opened. In Holland, we've opened a few hotels. In Germany, we've opened few hotels. And in some of the other European countries, also we've opened, except Spain, we haven't still opened any of our hotels, except 1 or 2 of the hotels, which are -- which have remained open. So I think -- but -- and if you look at September, depending on our plan, our objective is to not to rush and open the hotels and make a cash flow loss. Our objective is to open hotels on the basis that they will be cash flow positive. Otherwise, we would rather keep the hotels closed and claim the rent reductions and cut down on the cost as well. So that's our objective. So at this moment of time, it's a moving target, and we don't know as in the timing. It all depends on some of the governments sort of relaxing the lockdown methods as well.

Moving on to the capital raising program. How confident are we that we will be able to raise the THB 20 billion from the -- by the offering it as a perp bond?

So as I said before, I think our team has been working very hard on the perps. I think we are confident that we can raise the perps of the THB 10 billion. The RO or the rights offering was approved by the Board yesterday unanimously, and also, with the support of the key shareholders, the 3 of our key shareholders who also sit on our Board as well. And we have no doubt that those 2 will materialize this year where we will have an injection of close to about THB 20 billion. So I think we've been working on it for the last few months, and I think it's something we can definitely -- the shareholders will definitely support. The warrants also will be at a very small premium, as I said before. It will be seen as a reward, more of a reward to our shareholders, which will also raise another further THB 5 billion in 3 years. And that's for the warrant. But this year, we are quite confident that we will raise -- we'll be able to get the 2 done. And the waiver also done with our bondholders and our loan and the banks as well.

One on the accounting issue. Do you think that we will need to do an impairment test on key subsidiaries, especially NH Hotel?

Thank you. Yes. Well, I guess, firstly, we have adopted the COVID exemption accounting that the FAP have given the option for it. So over the next period of time, being for the rest of the year, we can effectively look through any impact for COVID-19 as it pertains to impairment. So in terms of our financial results for 2020, there will be no impairments that reflect a COVID-19 position.

The progress on negotiation with bondholders and banks on the covenants, I believe?

Yes. So we've been in dialogue with the bondholders and banks for the last couple of months. Look, they're very -- they understand the situation we're in. And actually, they appreciate the fact that we entered in negotiations with them early on to explain the challenges that we were likely to experience because of COVID-19. And we are confident that we will have that waiver in place before the end of June. We have a bondholder meeting targeted for early June, which we're again confident we can get the approval for a waiver in place. And the banks and syndicated loans, we're expecting to secure the waiver in mid-June.

Okay. One of the last questions. What's the current RevPAR of the hotels in China and Vietnam that have been reopened compared to last year?

Another question we can take.

Okay. Another one is, what's the current capacity of the restaurant in China compared to pre-COVID? Capacity of China restaurants.

[indiscernible] capacity in German offshore.

No, we haven't.

So I guess the positive news is from a Chinese restaurant perspective, the sales and revenue are returning and building strongly over the past period of time, and were actually expected to be at pre-COVID-19 levels over the next couple of months.

Yes. Well, the China closed all of their outlets in February, but also reopening all of their outlets -- or most of their outlets in March. In March, and then I guess, in the beginning of April, they implement similar social distance practice in their restaurant as well, similar to what Thailand is doing now, i.e., cut down capacity at the restaurant by half, like 50%, because people to sit alternatively far away from each other. But since May, beginning of May, some of the cities in China have reduced their epidemic alert to a lower level. That allow a more people to sit close to each other, and then the capacity of the restaurant has increased. So this is going to be a gradual process, but we have seen a good example of the recovery in China, and we hope to see the same in Thailand as well going forward.

Back to a question on the accounting. So apart from the impairment, the accounting exemption has the key impact on what other items in the financial statement?

Yes. So the main exemption that the FAP have approved is in relation to lease expenses. As a result of IFRS 16, in reality, we have switched from lease expense in the P&L through depreciation and interest as a result of the balance sheet now containing the right-of-use assets and the lease liabilities. So traditionally, under IFRS 16, if you negotiated a lease reduction, that lease reduction would be straight-lined over the general lease, and you wouldn't see the benefit in the month. The FAP has given the exemption whereby you can effectively credit that benefit. So any lease negotiations deductions that we've achieved will be in the P&L in a reflective's bond that the landlord has provided these deductions. So that was the key element. So in terms of impact for Minor, as we look forward, the lease reductions that we have secured will be visible in the P&L for the respective months.

So say, for example, on RevPAR, if I look at this month, year-to-date, last year, our RevPAR was about 1 78. And this year, we're looking at 2 58. So actually, the RevPAR has gone up, predominantly driven by occupancy. So the occupancies have gone up compared to last year this month, so we are up. So China. So the 2 -- the China hotels, we're running at, as we said before, about 40% occupancy, and the other one is running at about 30% occupancy during the ramp-up.

I think that's about it for all the questions. I'm sorry, there's been quite a lot of questions coming through. So hopefully, I have asked all of them. But if not, please feel free to contact the IR department from now on, and we'll be able to take any of the additional questions. So on behalf of Minor International, we would like to thank all of you for attending this analyst meeting. And as I said, any more questions, please feel free to get in touch with the IR department. Thank you.

Thank you very much.