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

[Foreign Language] Good morning, everyone, and welcome to Minor International's Second Quarter 2021 Analyst Meeting. It is the pleasure of introducing the presentation, in which you will hear from Mr. Dillip Rajakarier, our group CEO. Joining Mr. Dillip for Q&A session are Mr. Chaiyapat Paitoon, Chief Strategy Officer; Mr. Brian Delaney, Corporate CFO; Mr. Kosin Chantikul, Chief Investment Officer; and Mrs. Jutatip Adulbhan, Vice President of Investor Relations. As each of our management has dialed in from outside for the first time, we have been preparing this virtual meeting to be seamless for all analysts and investors. However, if there is any technical problem, please accept our apologies. [Operator Instructions] And now I would like to hand over to Mr. Dillip for the presentation.

Good morning, everyone. I hope everyone is well, and thank you for joining our company presentation today with our Q2 results or the first half year results as well. So without any delays, I would just like to jump into the presentation. So if you look at the agenda items today to cover, we'll look at Q2, the review, Minor Hotels, Minor Food, Minor Lifestyle, corporate information with regards to balance sheet management and cash flow, and then our response strategy for COVID and also the business outlook for rest of the year. Okay. So just to give you an overview. In terms of some of the highlights, what we are seeing now for Q2 is that, at the end of quarter 2, our net earnings or net operating profit has been improving quite significantly on a Q-on-Q basis. So the trend has been quite -- has been positive and it's upwards. The performance for the month of June, again, has been quite strong as well, as you have seen. Minor Food has been profitable since last year, the third quarter of last year. In terms of our other businesses, NH Hotels, which form quite a significant part of Minor Hotels and also last year was quite impacted because of COVID, we are seeing very positive trends. The month of August has been quite good. I'm actually -- at the moment, I'm in London at the moment, traveling around within Europe, and the restrictions have started to ease. Travel is becoming quite easier compared to the previous quarters and also the travel restrictions have been eased as well. And what we are seeing is we're seeing quite a strong pickup because for NH, August, September, October are the key months, as we all know, because of the high summer season. And we are seeing bookings coming quite strong. And one of the positive things is we're also seeing the ADR is trending upwards. So in some of our hotels, our ADR is actually better than 2019, which is a normalized year. So that's quite a positive trend, which we are seeing in Europe, so -- where we will have quite a significant improvement in quarter 3 and also going into quarter 4 as well. Anantara Vacation Club, also the performance has been profitable at NOP level as well, which is also good in spite of the COVID impact we've had in Thailand and also in other countries in Asia as well. The cash and CapEx controls continue to be there in terms of -- to make sure that we are quite careful with regards to cash flow management and also balance sheet management. Our asset rotation strategy has been quite successful. And as you have seen, we are ahead of our asset rotations schedule, what we actually disclosed early this year to the market. So June and July, we managed to do some asset disposals. In June, we did a sale and leaseback of one of our properties in Spain. And then in July, we've also done 2 of our hotels on a sale and manage-back of our hotels in the Algarve, in Portugal. So again, this has released cash into the business and -- in terms of reducing debt. The cash flow -- so for us, as I said, the cash flow for -- as at end of Q2 for the first time has also turned into positive. So we were almost THB 1 billion in the green by -- for Q2 '21. And our cash in hand has, of course, increased to now THB 27 billion as at end of July. So these are some of the key highlights I would like to highlight for this presentation today. And then coming back to this slide. So in terms of signs of recovery, I'm sure like you've got the deck, and you can see it. The loss has improved. The loss continues to improve year-on-year, but more importantly, the loss has also -- continues to reduce Q-on-Q as well. So our loss in Q2 was THB 3.4 billion and the performance turning into profit in June '21. The Food continues to be profitable in spite of the situation in Thailand. The Hotels improved performance, again, as I stated, and the back of the European portfolio coming quite strong, and the EBITDA also turned positive in Q2 '21. The residential and timeshare also continues to be profitable as well. We then look at the 4 pillars, which I have identified. So signs of recovery, which I've covered; long-term positive outlook, which I have actually stated as well. The vaccination has been distributed globally. We see, especially in Europe and the U.S., the drive in terms of vaccination has been quite remarkable. And as a result of that, we're seeing travel coming back quite strong. Especially like if you look at countries like London, more than 75% of the population has had double vaccination or both shots and more than 85% have had the first shot as well. And in Europe, it's trending about 70%, which is quite good. We then look at -- and also Thailand, what's important to see in Thailand is the Phuket Sandbox and the Samui Sandbox will start to see -- we will start to see some positive results in Q3 and Q4 because it's very early days at the moment. But the Sandbox -- opening of the Sandbox has been quite beneficial for Thailand as well as a test case. We continue to -- as I said, we continue to be disciplined in terms of our cash flow, CapEx and cost control measures are still in place, asset rotation has been successful and ahead of schedule. And our medium- to long-term plans in terms of post COVID, our strategies under the business beyond COVID has been implemented. And we are in progress. And we are seeing the longer term, both for Minor Food and Minor Hotels in terms of responding to what we call the normal trend. We will see that the customer experience, the product innovation and the technology and the digital transformation and the sustainability initiatives what we have done will pave the way for success in Q3 and Q4. Okay. Next. So this slide here, actually, you can see the Minor -- at MINT level, the performance recap on a year-on-year basis. Again, the core revenues for the quarter more than doubled in quarter 2, which is quite positive. So Q2 last year, we reported THB 6.7 billion of revenues. And Q2 this year, we are reporting about almost THB 16 billion of revenue. So it's about a 133% increase in revenues. Again, it's stemming from, as I stated, like the European business sort of rebounding quite strongly. And therefore, as you can see, NH Hotels has contributed THB 5 billion of that increase. Minor Hotels has, excluding NH, contributed about THB 2.6 billion and also the Food, Minor Food is about THB 1.2 billion and that helped us with the revenue increase for Q2. In terms of profits, our reported profits for last year was about THB 8.4 billion loss. This year, Q2, we've managed to reduce it by more than half. Like, it's about THB 3.3 billion -- THB 3.4 billion loss for the year -- for the quarter. Again, NH contributing THB 2.3 billion of positive performance and Minor Hotels contributing almost THB 1 billion of that as well. So here, net profit loss has reduced from THB 7.2 billion to THB 3.4 billion. And also the monthly net -- if you look at the monthly net PAT trend or net profit trend in the chart on your right-hand side below, if you look at the monthly net profit trend. And for the first time in June, that is positive at THB 0.2 billion. Okay. Next one, please. So this one -- this slide is a Q-on-Q performance. So again, our revenues on a quarter-to-quarter basis is up by 25% and NH going from THB 12.5 billion is an increase of almost THB 4 billion to -- in terms of revenue contribution, almost THB 16 billion. And net profit or net loss on a quarter -- last quarter, the net loss, what we reported was THB 5.2 billion. And this quarter, our net loss has reduced to THB 3.4 billion, which is a 35% reduction on a Q-on-Q basis for -- in terms of both revenue and profits. Okay. Next one, please. Okay. Going to Minor Hotels and looking at Minor Hotels, the financial highlights. I think some of the notable trends are, as we stated before, the revenues are up. As you can see on the right-hand side, owned and managed hotels, the revenues were up by 107%. Management letting rights, which is predominantly a business which is based in Australia, also were showing quite strong positive trends, up by 14%. Our managed hotels up by 18% and also the mixed-use business because of the timing of sale of residences was down compared to the previous quarter where we had a few of our residences, which we sold, is down by about 39%. Year-on-year, all the increases are quite strong. Year-on-year, leased and owned hotels were up by 400%; management letting rights was up by 23%; managed hotels up by 58%; and also the mixed-use business on a year-on-year basis was up by almost 300%. Again, mixed-use includes residential and Anantara Vacation Club, which Anantara Vacation Club also the performance has been quite strong. The trend below, if you look at the snapshot by geography, you can see clearly the touch points where -- which regions were performing strong and which regions has been quite slow. So of course, we -- as we all know, Thailand for the Q because of the restrictions and the third wave, which has affected the country, our performance in Thailand was about -- it was down -- on a Q-on-Q basis, was down 68%. But Europe, the trend is quite strong. It's up by 183%. Australia and New Zealand, which is a business which we have under the management letting rights and also the Hotel business, is up by 21%. Maldives and Middle East is down by 33%, and this is mainly because of seasonality. But Maldives and Middle East continue to perform strong and even sometimes stronger than 2019 numbers as well. And the Americas, which is NH business in South America and places again, it's affected by seasonality and also, to a certain extent, also being affected by some of the restrictions. So that was down by 51%. On a year-on-year basis, all the touch points are green. So on year-on-year basis, as we can see, the performance trend has been very strong compared to the same time last year. Okay. Next one, please. Okay. So the next slide is we're looking at Minor owned and leased hotels. So again here, when you see the chart and when you look at the RevPar increase, our RevPar compared to last year has been -- the trend has been quite good. 2019, our RevPar in Thai baht, and this is mainly seasonality, but when you look at year-on-year, the RevPAR increase is about 400%. The same quarter last year, RevPAR was THB 144 in terms of Thai baht, and this year, it's THB 739, predominantly driven by the European segment and also because of the global countries coming out of the lockdown from last year the same quarter. Last year quarter 2 was a global lockdown. And this year, the European market's pretty much opened up, and we can see the trend moving upwards. The monthly trend of the entire portfolio, as you can see, has been improving on a month-on-month basis. The trend, which started at negative 82%, has now reduced to negative 50%, and the monthly RevPar growth, you can see compared to the same time 2019 as well. So the trend continues to improve and it's quite positive as well. So this is based on our owned and leased hotels. Next slide, please. So this slide here actually looks at our owned and leased hotels, specifically for Europe and the Americas. Again, strong RevPar growth, up by 375% year-on-year, occupancy is up by 17%, ADR up by 14%, predominantly driven by Spain and Italy, as we -- as they opened first and they are emerging out of COVID. And if you look at Q2 occupancies as well, it's about 22%, July was 42% and August is 55%. So again, our occupancies continue to trend upwards. ADR also has been improving quite strong as well on a year-on-year basis as well. So again, you can see the trend in terms of the geographical breakdown has been quite strong and is coming back quite positive as well. Okay. Next one, please. So owned and leased hotels in terms of the European recovery. Although there have been cases -- new cases in Europe and the new variants affecting the whole world globally, because of the vaccination, it's -- we are showing some improvement there. And the vaccination progress has been quite strong in most European countries and also the regulations and the travel -- ease of travel within Europe is becoming quite seamless with regards to COVID restrictions, with regards to COVID passports and also mainly driven by the vaccination program, which is also -- which is going quite fast. And in spite of the cases increasing, the vaccination is also on the up. And therefore -- but -- and we are seeing some positive movements here. The good signage is that the hospitalization and the death rates are starting to decline as well. Like the graph below shows an increase -- the rising new cases versus stable number of deaths, again, as you can see, the number of deaths has been reducing in spite of the rising number of cases, predominantly driven by the younger population, age from 15 to 25 or age from 15 to 30. And now most countries have started vaccinating the younger population as well, which will help to reduce the trend going forward. So -- and the graph below also shows our weekly occupancy trend in our European owned hotels and also the leased hotels. Again, the occupancies is showing a very strong growth, mainly driven by the summer months. And I think July and August, the start of the summer, September, October will peak. And we believe if the trend continues, our performance will also be stronger in the next -- in the coming 2 months and also in Q4 as well because Q4, predominantly Europe has always been a low quarter because of the winter months. But because of the pent-up demand, what we are seeing, we believe that the trend will be much better than a normalized year for Q4 as well. Okay. So moving on, coming back to owned hotels in Thailand and the Maldives. Second quarter, Thailand was up on a RevPar basis of about 608% on a year-on-year basis. But compared to 2019, we're still down. And also, our occupancy has grown on a year-on-year basis by 13% as well. Our ADR has grown by 15%. And again, Thailand continues to cater pretty much for domestic tourists and also the ASQ in Thailand because Thailand is still in a lockdown. And therefore, that has affected the performance of Thailand. But what we are seeing is that because of the restrictions and also the increase in the cases in Thailand, we will see a reduction in Thailand in the coming months as well. When we then move to Maldives, Maldives has been very strong. As you can see, the graph below, our ADR as compared to -- in quarter 2 '21, Q2 2020, our hotels were closed in the Maldives because of COVID, and Q2 '21, our ADR reached USD 755 compared to 2019 was USD 832. So our RevPar trend -- our ADR trend is moving upwards. Occupancy, again, compared to 2019, which was 57%, we ended up at 49% for the quarter. And therefore, we are seeing quite positive movements. Again, July, as you can see, we were above the line in terms of our RevPar growth compared to 2019. So our growth is higher than 2019. So Maldives is coming quite strong. And again, what I would like to highlight here is in the old days or in 2019, Maldives was predominantly driven by the Chinese market. And thankfully, we were -- even though our business is in the Maldives, we had about almost 30% Chinese business. And this year, we have no Chinese business because the Chinese are not allowed to travel outside. And therefore, we have no Chinese business in -- anywhere. In spite of that, we are seeing quite strong growth in the Maldives because we managed to act pretty quick early in the year in terms of looking at other markets, which have contributed quite strongly, not only in terms of increase in the number of days the guests stay, but also in some months, also, we've seen positive ADR compared to 2019 as well. So again, the reliance of the Chinese market has been -- was quickly filled by other markets, which have helped us to really outperform the market for us in the Maldives, which is quite positive, actually. Okay. Next one, please. We then go to the asset-light business. Again, on the asset-light side, which is predominantly management letting rights and also the managed hotels. The number of rooms is almost -- in the management letting rights, it's always up and down, but has been quite stable. Our RevPar -- ADR, even compared to 2019, our ADR -- RevPar was up by 12% in Australia -- in Australian dollars. So last year, 2019 -- not last year, in 2019, our ADR was AUD 121. In 2021, quarter 2, our ADR jumped to AUD 136, which is an increase of 12%. Our RevPar also increased compared to 2019 by 23%. So ADR -- both ADR and -- RevPar in Thai baht increased by 23%, predominantly driven by ADR increase, which is quite strong. And again, when I then move to the managed hotels, again, this is affected by seasonality. And if I look at it on a quarter-to-quarter basis in Q2 2020 compared to Q2 '21, our number of rooms has been stagnant. Our system-wide RevPar has increased from THB 431 to THB 1,300, which is about 200% increase. The graph below, again, shows the trend going upwards, again, affected by seasonality. But the positive thing is that we see the trend moving upwards compared to 2019. So that's pretty much based on our asset, what we call the asset-light business, which is the management letting rights business and the managed hotels as well. EBITDA has been positive, which is quite good to note. EBITDA has been positive in our Australian portfolio, and that has actually contributed towards the earnings of MINT as well. Okay. Next one. Moving on to the pipeline. Again, when we look at opportunities to expand our hotel portfolio, especially more focusing on the asset-light business in the medium to long term, we are seeing some positive movements there in spite of the slowdown on the development side of hotels, the construction because of COVID and some of the hotels have been delayed because of COVID restrictions. Our pipeline continues to be strong on the management -- on the asset-light strategy. So we've got about just over 50 hotels in our pipeline. And these are hotels -- what we disclose are the hotels which we have signed, and they are in construction. We do not disclose the pipeline in terms of the hotels where we are exploring or which are in progress towards an HMA or what we call a hotel management agreement. Recently, as we all know, I think 2 of the significant events are the signing of the hotels, the Funyard, the joint venture with Country Garden, one of the largest developers in China. The joint venture has been signed, and we have kicked off our development pipeline as well. And we will see -- as we believe that China will eventually emerge from COVID and also be one of the strongest markets, both on a domestic and also outbound as well, with the signing of the JV partnership with Funyard, we will see more of our hotels -- hotel presence in China in the coming years, which is quite exciting. We haven't disclosed anything towards that pipeline at the moment. But again, the potential of the Minor Hotel brands in China is quite strong, especially on the luxury side as well. We also -- about last week, we also signed the -- and announced the signing of the hotel management agreement in Bahrain, which is a new country in the Middle East we have entered into. And again, like we are looking at more hotels coming up in those regions. Middle East is quite active. And we will see more management contracts being signed under our different brands in the Middle East as well. So that's for the pipeline. Moving on to -- the next slide is mixed-use. Again, mixed-use comprises both of the Anantara Vacation Club and also the residential development. As you can see on the left-hand side, our residential projects being listed. Our Ubud is -- we -- last year, we had to pause construction of our property in Ubud and also in the Maldives due to COVID and also the restrictions. That has started, and it's in progress. We should be opening that hotel early next year. And the residential side of the Ubud we should be launching by 2022. So that's the new pipeline coming in on the residential side. On the Vacation Club side, again, our membership in spite of COVID has increased. We have now about close to 16,000 members, an increase on a Q-on-Q basis -- sorry, on a year-on-year quarter basis is about 9%. Again, you can see China is quite strong. Thailand is about 15% of the members. And there is also a new inventory coming up for the Anantara Vacation Club as well. The sales trend on the Vacation Club continues to be strong. Q2 has been, again, remarkably good. And we see the results also being positive net PAT for the third consecutive quarter on the Vacation Club business as well. Okay. Next one. So moving on to Minor Food. Again, Minor Food business, which is predominantly based in Thailand and also outside Thailand, the 2 big segments we have, are driven by Australia and also China. The Minor Food revenues actually increased by 31% on a year-on-year basis, driven by the demand of recovery -- a strong recovery, we've seen both in China and Australia compared to the low base, which we had due to the lockdown in the same quarter last year. Our EBITDA has more than doubled on a year-on-year basis, again, mainly driven by top line revenue increase and also some of the cost control measures, which we implemented last year, which has also helped us to drive profitability as well. The bottom line of Minor Food turned profitable for the fourth consecutive quarter. So as I said, Minor Food was profitable. In spite of the seriousness of COVID last year and the lockdown, we became profitable in July last year. And so the last 2 quarters of last year was profitable, and the first 2 quarters of this year is also profitable. So that's been quite strong. Our revenues were up year-on-year by 31%. On a quarter-on-quarter basis, was up by 2%, driven by delivery and the takeaway business as well. Our EBITDA on a year-on-year basis was up by almost 145% and, on a Q-on-Q basis, was up by 8%. So second quarter for Minor Food, the profits were reduced mainly because of the lockdown in Thailand. But we are seeing an improvement on the Food business as we emerge from the restrictions -- coming out of the restrictions in Thailand. Australia and China has contributed to the growth as well and also to the profitability of this business. Actually, Minor Food in China, our performance is almost the same level as 2019, which is quite positive. Okay. Next one, please. So we look at operational stats by hub. So again, as you can see Thailand, the Thailand hub, the hub in China and also the hub in Australia, which is our key -- 3 key drivers of the food business. If I come back, if I look at Thailand, our total system sales growth was less in the second quarter of this year compared to the same quarter last year, again, predominantly driven by the third wave, which was much more stronger than the same quarter last year. Total system sales was up compared to -- this quarter was up compared to the same quarter last year, which is quite positive. If I look at China, again, as we can see, the growth in China has been phenomenal, and the growth is quite strong. Our total system sales growth was up 76%. Compared to same quarter last year, was down by 29% and also 2019 was 15.8%. So that's quite positive. It's quite a positive trend in China. And as we can see, as the countries emerge from COVID, the business comes back quite strong. Australia has also shown a remarkable improvement on both on total system sales and also on system sales as well during the quarter. And partly, yes, last year, also Australia was affected because of the lockdown. But as we see the improvement of the economic conditions and also the activities and the COVID restrictions release -- being released compared to the same quarter last year, the business has come back quite strong in that hub. So like Australia is up, again, China is -- total system sales is up. Australia is up almost back to pre-COVID levels, as I stated before, which is quite good. Okay. That's on the -- mainly on the Food group side. We then move on to Minor Lifestyle, which is our business, which is predominantly based in Thailand or everything Minor Lifestyle is pretty much -- it's -- all our business units are in Thailand. And the -- in quarter 2 last year, our businesses were strong because of the demand for hand sanitizers and also the cleaning products and the cost savings measures, which we introduced, which actually helped us in the same quarter last year. But this year, as we see, with the third wave and also most of our stores being closed, we've got about 432 stores now compared to 496 in the same quarter 2019. But total system sales has declined by 22% and also -- sorry, system sales has declined by 22% and total system sales declined by 7.6%, again, mainly because of the lockdown. And the trend has been negative for -- and it's been negative trending downwards. But as we know, Minor Lifestyle, the contribution for net earnings to MINT is not significant. It's quite small. And the business is predominantly all Thai -- it's all based in Thailand. Okay. Next one, please. We then move on to the corporate information. So mainly, our CapEx and the strength of our balance sheet. So our CapEx plans, as we all know, last year, we did suspend most of our CapEx projects predominantly because of COVID and also in an effort to save cash and preserve cash and drive strong liquidity and balance sheet management. We continue to reinforce our balance sheet management through the issuance of corporate bonds, issuance of perpetual bonds in addition to the 3 tranches of the warrants, which we also issued, which is Warrant 7, Warrant 8 and Warrant 9, to further strengthen our equity base as well, which raised another THB 15 billion over the next 3 years. We have a covenant waiver until 2022. And also, we have a carve-out on the impairment for COVID-19 in terms of our calculation for debt-to-equity covenant as well. So -- and in addition to that, we have maintained TRIS rating of A, rating by TRIS. So that's pretty much for CapEx. Our CapEx has reduced from 2021. And also, we have -- we continue to manage our CapEx plans, and we have reduced it to 2022 as well. Our debt to equity on the right-hand side, as you can see, was 2.17% -- 2.17x on a gross debt basis. But if you carve out the impairment for 2021, it drops to 2.09. And on a net debt basis, our D/E actually drops to 1.3 -- 1.7% -- 1.7x on a net basis. And the reason for such a big drop is because we have been preserving cash, and our cash balances are quite high. And therefore, if you net off the cash against the cash we're holding against our gross debt, our D/E drops to 1.73x, which is below the threshold. But I think in terms of internal threshold, we continue to work towards reducing this further. And you will see this coming down in the coming quarters. And also, as we see recovery coming in quite strong, this will also help us to reduce our debt-to-equity ratio as well. Again, you can see the net cash -- the cash on hand as at end of second quarter was about THB 29 billion. And again, those reserves increased in July because of also the sale and manage-back of our portfolio in Portugal as well. So our cash balance continues to get stronger, and we are preserving cash within -- at the group level as well. Okay. Next one, please. Coming back to response to COVID-19. I think these are some of our 5 key initiatives or strategies, which we implemented early last year. And as a result of that, Minor was able to emerge quite strongly because of the balance sheet protection actions, which we took and the cash flow liquidity management as well. So again, we said that we would continue -- we will resume business activities as quickly as possible. And as we can see, the trend in Europe, business activities continue to be stronger. We will minimize -- we continue to minimize the cash burn and also preserving liquidity, both through cash management and also increasing our liquidity through asset rotation as well. We continue to reduce our breakeven point to speed up the recovery in terms of profit. We continue to manage our balance sheet. And also, we are now -- we have been preparing ourselves in terms of the long-term new normal, change in customer segments, change in customer habits, change in customer demands as well. Clearly, that was demonstrated through our performance in the Maldives. As I said before, where Maldives was predominantly driven by the Chinese market, and this year, there was no travel from China. In spite of that, our performance in the Maldives has continued to strengthen quite strong, both in terms of ADR and occupancy. And that's as a result of the strategies which we implemented early last year as we come out of COVID. Next one, please. So resuming business activities. Again, as we see on the hotel side, we only have now 10% of our hotels, which are closed compared to last year. So last year, in April, we had 115 hotels opened compared to this year, July, we have almost 483 hotels opened. So about 10% of our portfolio is closed -- remains closed. And the good thing is we can open and close hotels within 48 hours because of the way we have introduced systems and procedures into our systems. We can manage the payroll as well between opening and closing hotels by transferring our team members to hotels which are open and who are performing really well from the hotels which are closed and where we have to pay their salaries. So we are able to reduce our payroll exposure by doing such things -- such strategies, initiatives as well. Minor Food, 26% of our outlets were closed and again, as a result of the third wave in Thailand. And Minor Lifestyle, 67% is closed, predominantly. As I said, 100% of Minor Lifestyle business is based in Thailand and only 33% of our outlets remain opened. Next one, please. So the next slide actually shows minimizing cash burn and also preserving liquidity, which is our cash flow control basis as well. Again, on a quarterly -- on a year-on-year basis, when you look at cost control, there are some positive outcomes as per this slide. Our revenues on a Q-on-Q basis increased by 133%. But our costs did not increase significantly based on that because we continue to open more hotels, and therefore, which means our operational costs will increase as a result of opening new hotels -- opening -- sorry, more hotels compared to the same quarter last year. But in terms of cost control measures on a quarter-to-quarter basis, you can see the cost control measures are producing the results. Our year-on-year payroll cost savings is 24%. Our leases -- sorry, our year-on-year payroll costs actually went up only by 24%. Leases coming from a very low base in quarter 2 2020 when most of our hotels were closed, and we were given some lease concessions. So on a low -- coming from a low basis, our lease costs increased by 180%. And the other operating costs increased by 60% and mainly -- predominantly driven by, we have now more hotels opened in the same quarter of 2021. Okay. Next one, please. So the next one is, again, minimizing cash burn and also preserving liquidity. So here, as we clearly see, our CapEx has been reduced from our previous 5-year plan, 2020 to our new reduction. So again, CapEx has been reduced by almost 29% or 30%. Minor Food has reduced by 52%. And again, Minor Lifestyle by 34%. Minor Hotels by about 30%. So we continue to manage our CapEx and also control our capital expenditure to preserve cash over this COVID period. And once we emerge out of COVID and when we have strong cash balances, we will then continue some of the CapEx projects as well. Most of the CapEx projects, which have been stopped or delayed, are nice to have in terms of our brand. But we continue to spend money where it's essential or it adds revenue to the top line or it brings -- it drives top line. So we continue to invest on CapEx as well, but also, again, managing our CapEx based on the current situation as well. So that's -- okay. That's on the cash burn. So minimizing cash burn is on the next slide. Again, you can see how the cash burn -- the trend. So 2019, free cash flow was THB 11 billion. 2020 was negative THB 24.2 billion. The trend in 2020 continuing into 2021 continues to be positive. And in June '21, this year, it was THB 5.1 billion, mainly also driven by the asset sale which we had in that month as well. But it's nice to see that the operating cash flow has -- is also turning out to be positive as well. So for the first time in the month of June, our operating cash flows turned positive, which was quite good and also our cash burn has also reduced as well. Our cash -- and this was because of -- and especially, as I said, in June, it's because of our asset rotation strategy and also the operating cash flow also turned positive from the month of May. So May, it turned positive in a small way, 0.3. And then in June, it was 2.2 positive on an operating cash flow basis, excluding the asset rotation. Our cash in hand is THB 27 billion, and our working capital facilities, which we have, is about THB 31 billion. So in total, we have about THB 58 billion in terms of cash reserves, which is quite a strong cash flow. And that's why, when I said earlier, on a net debt, including cash in hand, our D/E actually reduces to 1.7. Okay. Next one, please. Coming back to breakeven analysis. Again, as we see -- as we continue to see occupancies moving upwards, we should -- we also start to reduce our breakeven points as well. So again, as we can see, Thailand, Asia, Middle East and Africa, the trend is moving upwards. Europe and Americas, again, compared to second quarter '21 to first quarter '21 and second quarter '21 actuals, it's moved upwards from 14% to 28%. So the trend is moving upwards in terms of breakeven profit, which is quite positive. And also Australia and New Zealand is also quite positive as well. So this is -- and we continue to monitor this in terms of opening and closing hotels in certain regions or in certain geographies as well. Okay. So next one. The next one is balance sheet management. So again, balance sheet management, I'd just like to highlight some of the new initiatives compared to the others, which you have on your deck. So some of the new initiatives are in -- at the MINT level, the corporate bonds issued of THB 10 billion, which was very successful. The 5-year callable perpetual bond was also issued at USD 300 million to repay the 97.6% tender of the existing 3-year callable U.S. dollar bond, which actually -- which was due in December '21. So we took a view that we would do it earlier in order to be cautious, and that strategy actually worked as well, has been quite positive for us. Asset rotation, the sale and manage-back, what's new compared to the previous -- compared to the second quarter, the sale and manage-back of the 2 Tivoli hotels in Portugal for EUR 148 million, again, which happened in July, further strengthens our balance sheet and also the cash flow management as well. Going into NH. At NH level, we did a EUR 400 million senior secured loan -- senior secured notes due on 2026, which was quite successful. And that was predominantly to redeem our EUR 357 million senior secured loan, which is due in 2023. But we took a view to early redeem it, which again proved quite positive in terms of being cautious and also extending our maturity wall as well. The extension of the waiver on the covenants testing for all our material loans is now until 2022 -- December 2022. At the NH level, the sale and leaseback of the NH, the Calderón Hotel, again, gave us about EUR 125.5 million to further strengthen our balance sheet and also the cash flow as well. We also did -- we are also doing a rights offering at NH level for EUR 107 million and MINT or Minor in Thailand, at MINT level, we have given a shareholders' loan of EUR 100 million, which will be recapitalized as the right -- as we do the rights issuance in the fourth quarter of this year. So these are some of the new initiatives which we have done in terms of our balance sheet management and strengthening of the cash flow as well. Okay. Next one, please. So this slide here, again, it's about the asset rotation strategy. So some of the key highlights, if you look at on the right-hand side, the NH Collection, the Calderón, the transaction date was June, we did a sale and leaseback. The selling price was EUR 125.5 million, and we managed to get a 20-year lease -- a 20-year lease -- sale and leaseback lease with a maximum of 60 years. So we pretty much predominantly own the asset for the next 60 years. The second one was, as I mentioned before, was Tivoli Hotels in Portugal, both Vilamoura and Carvoeiro. We did a sale and manage-back. The transaction date was 21st of July, which gave us -- the selling price was EUR 148 million, and the management contract we have is for 20 years up to a maximum of 30 years. So again, these -- we -- our goal of selecting 4 to 5 quality assets and reducing our debt over a period, we are on track or we are actually ahead of schedule, which is up to a value of THB 10 billion to THB 15 billion. So therefore, we continue to look at high-quality assets in prime strategic locations, which are mature and which can give us a good yield in terms of a sale and leaseback or sale and manage-back. And also, the asset base we have today with NH is quite strong. These assets are, as we have always stated -- NH hotels, the assets which we own are in key strategic prime locations where there is high barriers of entry and also there's a high demand for these assets, which are sometimes also classified as trophy assets as well. And also the low interest rate environment also is benefiting us in terms of resulting in a quite a good acceptable yield. We have a strong track record in terms of these assets. So we are able to leverage on that in terms of our selling price and also the ability to scale up or down in terms of our asset sales to about THB 35 billion, which is our target, depending on the situation. Now this doesn't mean that these assets are -- as we have disclosed, these assets are not sold on a distress basis. We have clearly seen the Calderón sale and also the 2 assets in Portugal were not sold on a distress basis. And actually, the pricing has been pretty good even up to pre-COVID levels as well. So we will continue with our asset rotation strategy in order to manage our D/E and also keep reducing that trend going downwards as well. Okay. Next one, please. Business outlook. Again, in terms of the various types -- on various categories we measure. If you look at balance -- so we categorize it under balance sheet management, liquidity management, Minor Hotels and Minor Food. Liquidity (sic) [ liability ] management, as we've stated, we are moving more towards the green because of what we have done. Asset rotation on track or ahead of schedule and also equity-based reinforcement, again, it's on the green zone as well. Liquidity management, cash flow -- cost reduction. As we have seen before, Minor or MINT was the early implementers of cost reduction strategy and cost control measures last year. And therefore, that is on the extreme green, and we continue to monitor our costs as well. Again, cash outflow is moving more and more towards the green because as we see the cash burn now turning into positive, which is good and cash reserves are quite strong, as I stated before. Minor Hotels. Europe and Americas are emerging quite strong, and it's moving more into the green zone. Oceania is still in -- also in the green zone as well, which is predominantly driven by our performance in Australia. And Asia is still -- because of the third wave in different countries and the COVID restrictions, we're still in the yellow zone. Minor Food. Again, Thailand, as we all know, because of the restrictions and also the severity of the third wave, we are in the yellow zone or orange zone. Minor China has moved extreme to the green zone because, again -- because of the positive trend and also the revenues coming quite strong. And again, Minor Australia also is moving more into the green zone in spite of the COVID restrictions and also the lockdowns, which we have in Australia. But Australia is pretty much a domestic market, and the impact has not been that severe. So therefore, as we see Australia is moving more towards the green zone. Minor Thailand is slightly different because we are impacted of the third wave. We are impacted because of the restrictions and also the lockdowns, the closures. And also, we don't have any international tourists in Thailand. So that gives you a sense check or a heat check in terms of where we are today with regards to the 4 of our pillars. Okay. And that comes to -- that brings me to the end of the presentation. And I'm more than happy to open the floor in terms of any Q&A.

[Operator Instructions] I think we have a raise hand from Khun [indiscernible]. Okay. Maybe some difficulties. We'll get back. How about Khun [ Soraphob ]?

Can you hear me?

Yes, we can.

Yes.

We are very impressed with your strong Q-on-Q improvement, especially on the European hotels seen, right? And the improvements seem to be very obvious in June. So can you provide us a quick outlook for third quarter, whether this June performance will be more representative in the third quarter than for the May and April performance?

Okay. Khun [ Soraphob ], thank you for your question. The outlook, as I said before, in -- for us, the European portfolio, the third quarter is the strongest quarter. And especially August -- starting to ramp up in August and then September, October, it peaks. So thankfully, because of the vaccination progress in Europe, because of the easing of the restrictions of travel within Europe, like as you have seen, U.K. has put most of the European countries into the amber zone, which is great. So people can travel to Europe, get back and they don't have to do self-quarantine or quarantine provided they've been vaccinated, which is really good. And as soon as we -- that was implemented, we saw the bookings actually spiking up. So just to give you an idea, in 2019, for the summer period, we would -- our booking trend is about EUR 4 million a day. At the moment, we are trending about EUR 3-plus million a day, which is quite strong, actually. So we believe that July was strong for Europe. August is stronger. We are seeing our numbers much better than July. And then September and October will be stronger than August. So I think we're quite bullish about the outlook for Q3 and Q4, which will be predominantly driven by the European segment.

And one more question related to this European hotel performance, right. Now you have improved your RevPar and is already half up of pre-COVID-19, right? Given that Europe is more dependent on the local tourists, right, how much further do you think you can improve European RevPar without any help from the international tourist, which is unlikely to occur especially from Mainland China by the end of this year?

Okay. That's a good question. I think, as we all know, for Europe, the Asian tourists or especially the China has been quite low. It's about 7% of the total outbound coming into Europe. So it's quite low. And especially if you look at NH Hotels, it's much lower than that. It's about 3% to 4%. So we're not that affected by Asian or the long haul of the Chinese tourists in Europe. And what's positive to see is that as the countries now start to ease the lockdown measures, actually, the Europeans feel more comfortable and safer to travel within Europe rather than going long haul. So most of the Europeans are not traveling long haul because in the old days, they will be coming to Thailand, they will be doing long-haul travel, whether it's Vietnam, Cambodia, Africa and other places. But now more people feel more comfortable to travel within Europe because they feel that the COVID -- they understand the COVID restrictions, they understand the health and safety requirements and all those. So we are able to capitalize on that. And that has also helped us to drive our RevPar up as well. So just to give you an example, in the month of August, our hotel in Marbella -- the Anantara in Marbella, actually, our ADR is almost 30% higher than 2019, which is quite strong, and that's mainly because of the demand in European travel actually going up. And also, we are starting to get Middle East business coming in as well because again, Middle East has been also taken off the red list, so -- which is also helping also. So I think these trends or the data points what we see are quite positive. And also, we actually see it in the booking trend as well because I look at the bookings on a daily basis to see how much we are picking up on a daily basis, and we see the trend actually improving or even getting stronger.

I see. And what about the trade fair and the event outlook in European hotels? Are they gradually coming back?

Yes. I think most of the European hotels are coming back. And again, we are quite lucky because we were able to implement cost reductions measures, cash flow measures and everything, and we were able to preserve cash and also ride the wave quite strongly as well. But not all the other operators have done so, and they are struggling a little bit. And what they're doing is they are reducing the rates to get more volume. But that doesn't help because that erodes your margin as well. But we are seeing a positive trend.

Okay. That's very good. And my last question is on the food side, right? Given that there is some renewed COVID-19 cases in both China and Australia, right, will that dampen the performance in the third quarter?

No. I think when I look at Australia, our business has been stronger, and it's getting stronger by the month even due to COVID. July was slightly down, mainly because of the lockdown in New South Wales, Victoria and other regions as well. But I think August is trending upwards as Australia is emerging. China is a business on its own. And in spite of the regional or -- national or regional lockdowns, our business in China continues to be stronger. And people are going out, people are eating, and there is monies being spent. So we are seeing the Chinese business -- we don't see any decline in the trend in China.

I see. Dillip, so when are you coming back? Because it seems like every time we talk to you, you are always in London.

Yes. Well, I left in May, as you know, and I've been traveling within Europe and also the Middle East because we are seeing some strong pipeline in the Middle East and also in Europe, especially on the restructuring side and also the refinancing as well, which we have successfully implemented ahead of schedule. So hopefully, once Thailand, the lockdown measures ease, I will be the first person to come back into the Phuket Sandbox.

I see. Things look very different in Europe than in here, right? It seems like you are back closer to normal life than here.

Yes. Yes, it's almost the reverse. It's almost the reverse. As we all know, last year, Europe went through the same as what we are going through now in Asia. And in Europe, things were quite serious, and it was very bad, as we all know. But it's also sad to see that most of the Asian countries did not learn from what Europe has gone through, and they had 1 year to prepare themselves, but most countries did nothing, which is quite sad. And now we are -- we're being impacted by this. But I hope in most of the Asian countries, including Singapore, including Vietnam, Cambodia, Laos, Thailand, they will start to increase the vaccination program as what Europe did last year. And you can see the results now what Europe is benefiting at the moment.

That's true. So please tell more loudly to the government.

We do voice our opinions to all the governments, not just Thailand, but also all the other countries as well.

Okay. Next, [indiscernible].

I have a few questions. The first question is, I noticed that for NH Hotel, right, it got quite a big subsidy of around EUR 38 million booked in the second quarter, right? I understand that this is big because in other quarter, I don't see any disclosure on this number. My question is that because third quarter and fourth quarter, we will definitely be better in terms of occupancy rate and daily room rate, right, would revenue from this normal business operation be bigger than the subsidy that you received in the second quarter? And as a result, you can still expect improving -- sequentially improving performance for NH Hotel?

Yes. So I think as we know, the subsidy, even though we call it subsidy, it was actually the loss of revenue in -- which we claimed or which we applied for last year. And we were able to get the monies in June. But I think for NH, more specifically for NH, Q3 is the strongest quarter always. If you look at 2019, you will see the trend in quarter 3 is the strongest. Almost -- in 2019, almost 60% of the EBITDA actually came from those 3 months. So what we are seeing today, as I said before, is the trend continues to be stronger in August. And if the trend continues, September and October will be stronger or will be much better as well. So we would hope that we'll be able to increase our revenues on a normalized basis in the third quarter for NH, excluding any subsidies.

Okay. And then my next question is regarding to the QSR business, right. And we have already seen a very strong EBITDA margin has expanded a lot in spite of the weakening same store sales growth. But the question is that once we return to normal situation whereby the same store sales growth could be accelerating a lot from here, do you think that EBITDA margin on a normalized term could be lower than what it is right now, even though it could still be higher than the pre-COVID level because of the cost saving measures that you mentioned, but the same line at the moment is unusually low because it's got a very weak same store sales growth?

Yes. So once the restrictions start to ease and once the dine-in business comes in, we would see our EBITDA margins further strengthening actually because most of the cost control measures we have put in are permanent. It's not temporary, it's permanent. So we would continue to benefit from the cost control measures, which we have put in. Of course, like the hotels you have seen before, when you open more and more hotels, the direct operating costs go up. But that doesn't mean it erodes the EBITDA margin. The EBITDA margin will improve because of the permanent savings we have made in the business. So I think for us, the more we drive the top line, the better the flow-through we will see, which will be -- which means our EBITDA margins will continue to improve.

Okay. Then it would be much higher compared with pre-COVID then?

Yes. It should be higher in terms of the quantum of our permanent cost savings, yes.

Yes, but I understand that some of the cost savings you are enjoying now is the waiver of the rental that the landlord or the shopping mall operator, they don't you charge you and also because our sales are driven primarily because of the online, you can save on a lot of staff costs also. But when you are full -- back to full normal operations, these expenses will be increasing. Yes. Okay. I understand that because top line will be growing a lot, so that should offset the increase in cost, but in terms of the margin, I'm not so sure that it will be accelerating further.

No, because I think -- that's a good question. The answer would be when things get back to normal, our dine-in business will come back quite strong. As we all know, in the past, our dine-in business was about 70%, which comes with high margin and higher spend as well. So that will continue to improve. And when that improves, yes, we have to pay the rent, but the upside we would get on the average spend will be much more. So I think from our perspective, today, yes, we are not getting -- we are getting rent concessions, but not fully. And -- but at the same time, our revenues are 0 in some of our stores because of the closures. And some stores are -- yes, they're doing the delivery business, which is also quite strong. But again, on the delivery business, our average spend is not as high as the dine-in business. And also the cost. The delivery business comes at a cost because we have to pay the cost of aggregators, the cost of transport and all these things as well. So I think when you put all the different elements together and also when the top line starts to increase due to the dine-in business and the permanent cost savings are banked, we believe that our EBITDA margins will continue to improve.

Okay. And my last question is that are you done with the asset rotation program now given the current level of your balance sheet? Or do you still plan to do some more to further strengthen your balance sheet even more?

No, I think we will continue with our asset rotation strategy, what we had planned even prior to COVID in order to reduce our debt because Minor at MINT level, we've always been very conservative and also been cautious. And our internal D/E is about 1.3, and we would like to bring it to 1.3 in the coming years. So we will continue with our asset rotation strategy. But at the same time, as I stated before, it's not about selling assets on a distress basis. It's about selling assets, which are mature, which will give us a good deal and also where we will be able to book a fairly strong profit as well.

Okay. Next one is Khun [indiscernible].

My question is regarding Slide 36. The extension of syndicate credit facility. Could you please kindly share with us the size of the credit facilities and the revolving credit facilities and whether it is committed or not?

So you mean for NH, right? The revolving RCF?

Yes. Yes, please.

Yes. So for NH, the RCF was supposed to expire in 2023. We have extended that to 2026. We also issued EUR 400 million of senior notes to redeem our bond, which actually expires in 2023. So what we did was, we moved maturity wall in terms of RCF, in terms of the secured notes to -- and also the government loan, the assistance they gave us. We moved all 3 to 2026. So we've got enough time to better manage and plan our cash flows as well. So -- and that's what we did at NH level.

And we have Khun [indiscernible].

So I have a couple of questions. My first question is about Europe operation. I'm very surprised that the strong recovery in Europe quite last long in the fourth quarter, right? That is low season and the low season, yes, in the first quarter next year as well. So now I believe that MINT can try to turn around the bottom line in the third quarter, but what about the fourth quarter and the first quarter that is the low season? So could we expect a bumpy performance, like a turn down to loss again in the fourth quarter or the first quarter next year? So what should we expect about the operations on the low season in Europe? Are you -- you cut expenses further?

Yes, yes. No problem. Okay. So I think as we all know, Q4 and Q1 are low quarters for Europe, especially Q1. And even in 2019 Q1, we always lose about THB 1 billion, predominantly driven by NH, the performance, because of the low quarter. Now what we are seeing the trend as soon as Europe opened and even though in Q2, we've seen a strong trend upwards, it was not high season yet for Europe. But because of the pent-up demand, we're seeing the demand coming strong. And the reason I'm saying that Q4 and Q1 will be stronger is that compared to the 2019 and the reason I'm saying that is because we are already seeing the B2B business because -- of course, as you all know, like for the last 18 months, conferences, meetings, incentive, business, groups, everything has been canceled and postponed. What we are seeing is that, that is now coming back. Our B2C business is quite strong as we have seen, which actually helps with Q3, because it's mainly driven by B2C. And then we see an increased activity on the B2B business compared to 2019. So we see more conferences, more incentives, business, more groups being booked in quarter 4 and also Q1 of next year. So that's the reason we are saying that the trend will be better than a normalized 2019 year. Yes. But it doesn't mean that we will be profitable for Q1. But what it means is our losses will be much reduced.

Okay. And that's the [Foreign Language]. So like abnormal good next 12 months, right, in early stage of the recovery. Okay. So let's move to the next question about the balance sheet. You said that MINT is deleveraging. I mean, you try to deleverage the balance sheet. So -- and you talked about the normal level, 1.3x gearing ratio. So can I specific to year-end this year, what level gearing that you expect by year-end this year?

I think our gearing will be less than -- yes, I think our gearing will be less than the 1.73, which we have today on a net cash basis because of the better performance coming from Europe. And also, we are hoping -- we also have some in the pipeline in terms of asset rotation. And if that goes ahead in Q4, then that will make our numbers look much better.

Okay. So my last question. It may be a little bit earlier, but I have to ask you about when will you like reconsider about CapEx plan in the future? Now you cut for this year and next year. So I mean, when will you really reconsider to invest, again? I mean, where's the CapEx plan for the long term?

Okay. So in terms of the CapEx plan, we never stopped CapEx on works which are essential and also works which will increase our top line. That will continue. And because of COVID, we had to postpone some of the CapEx things. But what we have cut and saved is nice to have CapEx plans, and that has been cut back for the moment, and we have postponed them. But on the other side, on the project side, for example, a new investment in the Maldives, that continues. So we have kickstarted the project again. We are hoping to open our new AVANI in the Maldives by quarter 1 next year. And last year, we had to put it on hold because of COVID restrictions, and we couldn't continue with the construction. And it's the same with Bali as well. Like -- and that's -- so those are the 2 big projects we have at the moment in terms of new projects, which will continue, and we're hoping to open by quarter 1 next year. But the other normal CapEx expenses, again, as and when the business starts to bring in more and more cash, we will continue to invest. But our main focus was to balance -- to manage our balance sheet and also the cash flow liquidity as well. Any more questions?

Yes. We have one from Khun [indiscernible].

So my first question is on Page 34 on the cash flow. So just would like to know for the positive operating cash flow, is that included or excluded versus from the sell list? And my second question is that what is the free cash flow level you expect going forward? And the third question, I just would like to recap that, yes, you explained earlier that the first Q next year might not be profitable, but just want to make sure on your projection on the fourth Q, again, whether it's like positive or negative?

Okay. So our operating cash flow turned positive in the month of May, excluding any asset sales, as you can see, which is in the blue. And our operating cash flow for June was much better than May. It was positive by THB 2.2 billion. The THB 4.2 billion, actually, we have put in asterixis to say that, that is net of the asset sale of Calderón. I hope that clarifies your question.

The second question is on the projected free cash flow.

So the projected free cash flow going forward, we would hope to see a positive trend as Europe starts to -- because it's a high -- or peak season for Europe. So therefore, the projected cash flow will be stronger in the coming months.

And the last one is on the fourth Q, whether it's going to be profitable or negative as you projected?

So I think it's becoming quite challenging to forecast or to predict outlook because of the business pattern has completely changed. The trend has changed to pretty much last minute. I'll give you a good example. Over the weekend, we had about EUR 9.4 million of bookings at NH level. And out of EUR 9.4 million, EUR 9 million of that was for the month of August and only EUR 400,000 was for the month of September. So we're seeing the bookings which is coming quite strong last minute. And we're not -- so it's very difficult for us to project at this moment of time, Q4. But based on the trends and based on the bookings and based on the inquiries we have, and as I said before, with the B2B business coming back in Q4 and Q1 next year, we would hope that the trend of the loss will reduce. But also, again, it depends on other countries, which will open up in Q4. And for example, like if most of the other Asian countries also open up in Q4, the pent-up demand will also further drive our increase in revenues as we saw in the trend in Europe. So I think Q4, on a normalized basis, should be trending better than, I would say, Q4 of 2019.

Okay. Next person is [ Rajesh ].

I think a lot of the questions so far have been around what would be the normalized trend in EBITDA for you post -- let's say, we are out of the pandemic, and we're back to 2019 levels. You've made some changes in your organization in terms of the leasebacks and so forth. And so -- and also, you cut costs on operating side. Competition has changed. So in your expectation, you say you had a THB 22 billion EBITDA in 2019. In a normalized scenario, would this EBITDA be higher or lower? And to what extent do you think?

In a normalized year, which we believe, if the restrictions are eased and travel is allowed and especially if China opens up as well and based on some of the strategies and initiatives, which we implemented last year, in a normalized year, our EBITDA should be higher than 2019.

Even after adjusting the fact that you've done some sale and leaseback transactions, so those lease costs would come in? I'm looking at pre sort of accounting change EBITDA.

Yes, correct, correct. Because at the end of the day, because most of the sale and leasebacks we've done, we have retained EBITDA. Like maybe 30% of the EBITDA goes towards the lease and the balance 70% is still maintained by us. And also the fact that it also reduces our interest costs and depreciation as well because we don't own the asset anymore. So when you net out all those, there is not much of leakage from an EBITDA perspective for us. So I think that's why -- and also, like we also have a strong pipeline of new assets or new hotels opening, which would further improve our EBITDA as well. Like, say, for example, like last year, the Boscolo portfolio, we acquired with Covivio, and we have 8 hotels which will open in the first quarter or end of this year. That will further contribute to increase in EBITDA. Some of the new hotels, which will open also, will further increase our EBITDA. Next year, our properties in the Maldives, the new hotel in the Maldives will open. The new one in Bali will open from an owned asset perspective. And plus, we will also see some of the management contracts, the new hotels opening as well. So when we look at all that, because we've already looked at the outlook, and we are already planning for the next 2 years in terms of where we will be. So -- and the trend is that even though in spite of the sale and leasebacks, we believe that our EBITDA will continue to increase.

And when we look at the food business, and assuming we come back, but there are changes in the structure in food business due to increasing delivery content. And the pizza company, which used to have an advantage with its own delivery fleet, now some of that may get challenged. So what's your outlook on the food business in a normalized scenario? And how have we address it?

I think the food business -- our -- the pizza delivery, the internal -- the -- I think one of our USPs is that we have our own pizza delivery team. And that has been very successful in terms of managing them and also like using those resources to really leverage on the increase in the delivery business we have seen. So -- but coming -- in a normalized year, when the dine-in business comes in, which comes in with a higher average check and yes, there are some associated costs in terms of payroll and all those things, but the margins will be better, and that's the trend we are seeing. And we have seen this trend now in China, for example, where China is trending almost or maybe above 2019 levels because we have managed to resize the business, we've managed to do some permanent savings, which is also giving us a better EBITDA margin as well. So if the China story continues and also if the Australian story continues for us in Thailand, in a normalized year our EBITDA margins will continue to improve.

Okay. And what is our vision, right? For the last 12, 18 months, we've been struggling to manage through the pandemic, balance sheet issues and just a very challenging time for the industry. But at the same time, things are changing from consumer preference. So from a food business perspective, from a hotel business perspective, what is our thought process? How do we -- what are the investments we want to make or new formats we want to introduce over the next 3 to 5 years based on our understanding of our clients' preferences that might evolve over the next 3 to 5 years?

Right. So this was part of what we call the BBC project, which we launched last year, and we call it Business Beyond COVID, and it's part of our medium- to long-term initiatives. So say, for example, if I may touch base on the hotel side, we see that the consumer or guest preferences have changed, guest experiences have changed. The booking channels have changed. The customer segments have changed. Like, say, for example, like this year, we didn't see any of the travel from China to the Maldives, but we were able to fill up that segment with other geographies, which has been quite successful. And we have implemented quite a few strategies along those lines to make sure that we can deal with customer preferences, we can deal with change in booking demands, we can deal with guest experiences. For example, we are focusing more on wellness projects on the hotel side. We are focusing more on the guest experience side. We are opening up new markets. So these are some of the new trends. And also because of the change in customer behavior, we are also seeing some new trends emerging, which we have identified, and that's being implemented from a technology perspective as well. On the food side, the digital transformation has been key for us in terms of driving top line and also driving our own brand as well because the -- our brand.com on the food side, the delivery business coming through that has significantly increased over the year because of the digital transformation and also what we have done. We are -- on the hotel side, again, we have -- we are introducing a refined loyalty program, which will be launched in Q4 of this year, which is something new which we are doing compared to some of the other bigger players in the industry. And that, again, will help us to drive more top line and guest loyalty as well. And the same on the food side as well, we are looking at loyalty programs across all our brands on the food side. So I think the digital transformation and the technology, the initiatives we have implemented will help us in the coming quarters and the coming years.

Okay. Can I go back to the first person that raised hand, Khun [indiscernible]? Okay. If not, then we have a few more questions from the chat. The first one is how does the spread of Delta variant effect NH and MINT? How does actual data differ from earlier forecast?

Actually, when we -- I'm sitting in Europe, as I said before, and when I look at the Delta variant, it's not something new. I think the virus is mutating and there are various forms of variants, which are coming up. But the positive thing is also the vaccination is speeding up and the speed of vaccination is quite remarkable in Europe. And what we are seeing is, as a result of that, people are now sort of accepting the fact that it's moving from a pandemic to an endemic. And yes, of course, people have to take precautions and everything else, but we see that travel is emerging quite strongly based on the bookings we are seeing. So even during the Delta variants, like the last 2 or 3 months, our trend continues to improve quite strongly in Europe. Every single month is much better than the previous month. May, June, July has been on the upward trend. August, September, October will also be stronger because of the peak of the summer months and also the pent-up demand in terms of traveling. So yes, I think in the future, I think it's more towards -- it's going to be another virus or another flu where people are now talking about a third jab or vaccination once a year. And therefore, it will move from more of a pandemic into a flu situation, and that's what we are seeing at the moment. So we're not seeing the trend declining or moving negative. And we actually see the trend improving or moving quite strongly upwards.

Next question. How much EBITDA -- is the EBITDA expected to decline after the completion of asset rotation?

So again, as I said before, in most of the asset rotations, about -- we will lose about 30% of the EBITDA because of the leases, and we have strong lease coverage as well. But at the same time, we will also eliminate depreciation and interest on these assets as well. So I think the leakage, yes, there will be leakage, but it's not significant. And with the growth of our pipeline and growth of our new hotels opening and also the -- with the lockdown restrictions coming out and the country -- and most countries moving into a new normalized situation, we will continue to see the growth in EBITDA.

Okay. One last question. I recall NH Hotels, 70% business travelers. Is the current leisure tourists able to offset the loss of business travel? How do you think the split will look like in 2022?

I think based on the pandemic, I think people have -- most travelers, it's almost becoming staycation. People are -- there are new trends emerging post pandemic, working from home, change in business habits, meetings through Teams or the other measures as well. But when we look at the NH trends so far, the B2C segment is quite strong as we have seen in the trends for the month of May, June, July and now August. The B2B is coming back, but we don't see it coming back strong until next year to be very realistic. We are seeing booking inquiries. We are seeing new bookings coming for next year. But I think for this year, I would think it will be -- the pace will be slower compared to the previous quarters. But that will be substituted by people traveling on leisure and also the pent-up demand. And when most countries start to ease their restrictions, people will travel as we have seen. As soon as the restrictions for Middle East were lifted, in London, we saw a hike in bookings, and we also saw a hike in our restaurant business as well. Especially like in Portugal, there are a lot of Middle East clients now making bookings. In the past, we didn't have that segment, but it's a new segment, which is coming in. So hopefully, some of the negative factors of the B2B -- slower pace of the B2B will be set off by the B2C segment increase.

Okay. I think that's the last of the question. So with that, we would like to conclude the analyst meeting for the second quarter of this year. Thank you, Khun Dillip for joining us and giving us the insight of the operations and also the outlook. And thank you, everyone, for attending. As usual, if you have any questions, please do direct the questions to IR department directly. And we'll see you next quarter. Thank you.

Yes. And I'd like to thank everyone who joined us in spite of the restrictions and also the current lockdown difficulties you are facing. Again, we believe in Thailand, and we believe in the country and the market. I know it's a very difficult situation at the moment. But hopefully, in the coming months, things will start to ease up and the travel will resume. And Thailand has always been resilient. And we believe that the demand will come strong. So stay safe and hope everything goes well with the families as well and look forward to meeting again soon. Thank you.

Thank you. Bye.

Bye-bye.