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Message from the chairman

Dear Shareholders

In the preceding 2016, Hot Pot Public Company Limited, reported revenue from sales of Baht 2,054.34 million, showing a decline of Baht 78.37 million or 3.67% from 2015. The factors attributed to the decrease in sales was remaining slowdown of consumers' purchasing power and awareness of their spending due to gradual recovery of economic condition, and high level of household debt. Meanwhile competition was more intense arising from the increasing number of both existing and new restaurant operators, from both local and aboard. As a consequence, the Company arranged marketing activities, especially discount promotion, to stimulate customer spending, resulting in the Company's revenues from sales not declining in significant amount. Meanwhile, proportion of cost of goods sold to net revenues from sales rose from 47.22% to 48.69% due to higher price discount as well as increasing prices of goods and raw materials. Gross Profit Margin, therefore, dropped from 52.78% to 51.31% y-o-y. However, the Company has implemented cost management, resulting lower sales and administrative expenses in amount of Baht 70.92 million or 5.78%. In addition, in 2016, the Company recorded loss on impairment of fixed assets totaling Baht 11.19 million, which was the allowance for impairment of assets relating to building improvement under lease agreement of branches having loss from their operations and having tendency to be closed. The Company also recorded tax expenses amounting to Baht 23.36 million, resulting from writing off deferred tax assets for unused tax losses, and the Company shall consider to reverse such transaction whenever the Company's operating result shows the explicit trend in order to evaluate likelihood and probability to utilize such tax benefits. As a result, the Company reported net loss of Baht 148.23 million and comprehensive expense of Baht 129.01 million, compared to net loss of Baht 94.99 million in 2015.

The Company's operation in 2016 could be summarized as follows.

  1. The Company remained selectively opening new stores by considering only stores, located in potential shopping centers. Additionally, the Company reduced capital expenditure of new store expansion without affecting service quality by reusing assets of closed branches and some stores were partly invested by shopping centers. In 2016, the Company opened 8 new stores, compared to 11 stores in 2015. New stores opened in 2016 consisted of 2 stores of Hot Pot Inter Buffet, which one of them serving both boiling and grill, 5 stores of Signature and one store of Daidomon. Average investment amount per store of such newly opened stores was approximately Baht 2 million. Furthermore, the Company rebranded 7 stores of Hot Pot Inter Buffet which 4 of them were rebranded to Signature, and each 1 store was rebranded to Shabu Suki, Daidomon, and Pot Jung.
  2. The Company closed 10 stores, compared to 12 stores in 2015. Stores closed in 2016 comprised 7 stores which had operating loss, 2 stores which the shopping centers did not renew the rental contracts, and 1 store which was closed for renovation by the shopping center. As a result, as at December 31, 2016, the company operated 141 stores, decreased from 143 outlets at the ending of the previous year. The active stores consisted of 113 stores of "Hot Pot", 11 stores of "Daidomon" and 17 stores of "Signature", located in department stores, modern trades, and shopping malls in Bangkok Metropolitan Region and up-countries in the percentage proportion of 41:59.
  3. The Company continually improved and developed food menus to meet customers' demand such as Tom Yum Mun Goong soup which has been received good feedback from customers, Tom Yum Yentafo soup, and seafood sauce etc., including new food menus for several food festivals such as European food menus for Euro Football Festival and prosperity food menus for Vegetarian Festival.
  4. The Company has firstly expanded its business aboard by selling its franchise of Hot Pot Inter Buffet brand to a restaurant operator in the Lao People's Democratic Republic, which has been operated since June 6, 2016.
  5. The Company has added new distribution channels for Suki sauce thru more than 600 outlets of Tesco Lotus Express since June 2016.

In 2017, economic situation is forecasted to be improved supported by ongoing government's spending and investment, together with gradual increase in household purchasing power and private investment. Meanwhile, internal as well as external risk factors will affect economic overview resulting in lessen household spending and finally affect the Company's operating results. More intense competition, together with the continuous increase in raw material costs will also have impact on the Company's performance. Therefore, the Company will closely monitor and evaluate the situations so that the business strategies and policies will be established properly and prudently for the optimum interests of the Company. Additionally, since the beginning of the year 2017, our new major shareholder as strategic partner, who has experience in operating restaurant business, have become our directors and executive. Our new business plan will emphasis on improvement of our restaurant outlets by developing or rebranding our existing brands to be more premium, and creating distinction and identity of each brand. New brands will be developed, and local and offshore brands will be acquired. Such new brands will be restaurant styles fulfilling consumers' satisfaction, focusing mainly on location around the heart of the city, which will create opportunities to enhance the Company's revenues.

Finally, on the behalf of the representative of the Board of Directors, we would like to express our sincere gratitude to shareholders, customers, financial institutions, business partners, business alliances, and all our stakeholders to continuously cooperate and support operation of the Company and hope that we will always receive your strong support in the future. We also thank to all directors, executives and staffs who have exceedingly dedicated and collaborated to perform their duties. The Company assures to all of you that our operations shall be aimed to improve our operating results to be turnaround, together with compliance with the principles for good corporate governance, adherence to business code of conduct and focus on corporate social responsibilities for maximum benefits of all stakeholders with fairness henceforth.