IOI - Annual Report 2018 PDF

Preview

Summary

Download IOI - Annual Report 2018 PDF

Description

In f l u e n ce r

ANNUAL REPORT 2018

OUR C OR E VA L UE S

OUR VI S I ON

In our pursuit of Vision IOI, we expect our people to uphold, at all times,

…is to be a leading

the IOI Core Values which are expressed as follows:

corporation in our core businesses by providing products and services of superior values and by sustaining consistent longterm growth in volume and profitability. We shall strive to achieve responsible commercial success by satisfying our customers’ needs, giving superior performance to our shareholders, providing rewarding careers to our people, cultivating mutually beneficial relationship with our business associates, caring for the society and the environment in which we operate and contributing towards the progress of our nation.

w w w. i o i p r o p e r t i e s . c o m . m y

South Beach, Singapore

1

2

3

4

5

6

7

INTEGRITY which is essential and cannot be compromised

COMMITMENT as we do what we say we will do

LOYALTY is crucial because we are one team sharing one vision

EXCELLENCE IN EXECUTION as our commitments can only be realised through actions and results

SPEED OR TIMELINESS in response is important in our ever changing business environment

INNOVATIVENESS to provide us additional competitive edge

COST EFFICIENCY is crucial as we need to remain competitive

C ON T E N T S

WE’RE A LIFESTYLE INFLUENCER This year’s annual report reflects our passion for designing exciting lifestyle spaces where our residents from all walks of life can stay, work and play – all within the same environment. Guided by our philosophy of creating integrated sustainable townships, we focus on creating living spaces that give residents a place to call home, blending seamlessly with nature, with a wide range of amenities, facilities, ease of accessibility within a safe and secure environment. With our enviable collection of quality homes, hotels, shopping malls, golf courses and Grade A office spaces, we are able to nurture lifestyles and set new benchmarks in sustainable urban living standards across Malaysia, Singapore and the People’s Republic of China (PRC). This is what we mean by being Lifestyle Influencer – creating vibrant, sustainable communities and thriving commercial hubs that deliver value not only to our residents but also to those in the surrounding areas. Backed by our strong track record in property development, property investment as well as hospitality and leisure, we believe we will be able to deliver sustainable long-term growth and value to both our shareholders and stakeholders.

6th ANNUAL GENERAL MEETING

DATE 31 October 2018, Wednesday

TIME 10:00 a.m.

VENUE Millennium Ballroom 1 (Level 1), Le Méridien Putrajaya, Lebuh IRC, IOI Resort City, 62502 Putrajaya, Malaysia

Intro

Who Governs Us

Our Vision Our Core Values Facts at a Glance Key Indicators

146 148 156 157

Business Review

How We Are Governed

006 010 012 013

163 Corporate Governance Overview Statement 173 Audit Committee Report 179 Risk Management Committee Report 182 Statement on Risk Management and Internal Control 188 Statement of Directors’ Interests 189 Shareholdings of Senior Management Team 190 Other Information

014 016 017 018

044 046 047 048 054

Chairman’s Statement Five-Year Financial Highlights Group Financial Position Group Financial and Segmental Performance Highlights Segmental Performance Group Quarterly Results Financial Calendar Management Discussion and Analysis 018 Group Financial Review 020 Group Business Review • Property Development 030 Group Business Review • Property Investment 038 Group Business Review • Hospitality and Leisure 042 How We Manage Our Risks Corporate Information Regional Presence Location of Operations in Malaysia Corporate Calendar Our Social Responsibility Calendar

Board of Directors Profile of Directors Senior Management Team Profile of Senior Management

Financial Reports 192 Directors’ Report 202 Financial Statements 332 Group’s Material Properties

Shareholders’ Information 337 Shareholders’ Information

Creating a Sustainable Future

Notice

069 Sustainability 081 Delivering Excellence 099 Caring for the Environment 109 Creating Value for Our Employees 125 Developing Sustainable Communities 141 Content Index

340 Notice of Annual General Meeting (“AGM”) 345 Statement Accompanying Notice of AGM Proxy Form

FA C T S AT A GLANCE

KEY I N D I C AT O R S

% 10

Profit Before Taxation

Market Capitalisation

RM

8 .8 1

5

0

1.07

RM

billion

-5

billion

-10

RM1.44 billion

RM12.11 billion

(2017)

(2017)

-15

-20

-25

-30

Earnings Per Share

Share Price

1.60

14.23

2018

RM

sen

RM2.20

18.42 sen

(2017)

(2017)

-35

-40

-45

-50 JUL 17

AUG 17

SEPT 17

OCT 17

NOV 17

IOI PROPERT IES GROUP BERHAD

Net Assets Per Share

RM

3.33

DEC 17

JAN 18

FT SE BURSA MALAYSIA

FEB 18

MAR 18

APR 18

MAY 18

JUN 18

BURSA MALAYSIA PROPERT Y

Gross Dividend Per Share

5.00 sen

RM3.31

6.00 sen

(2017)

(2017)

IOI Resort City

BU S I NES S REV I EW

C H A I R M A N ’ S STAT E M E N T

C H A I R MA N ’S S TAT E ME N T

REVENUE FROM THE GROUP’S OPERATING SEGMENTS

PROPERTY DEVELOPMENT

RM2,265 MILLION

PROPERTY INVESTMENT

RM326 MILLION Tan Sri Dato’ Lee Shin Cheng Executive Chairman

Dear Shareholders, HOSPITALITY & LEISURE

On behalf of the Board of Directors and the management, I hereby present to you the Annual Report of IOI Properties Group Berhad (“IOIPG”) for the financial year ended 30 June 2018 (“FY2018”).

RM190 MILLION

GROUP PERFORMANCE For FY2018, the Group recorded revenue and profit after tax of RM2,792 million and RM808 million respectively, which is a decrease of approximately 33% and 17% from the previous financial year, mainly due to lesser units launched for sale for both Singapore and People’s Republic of China (“PRC”) projects. Group revenue contribution continues to be driven by the property development segment (RM2,265 million), followed by property investment (RM326 million), hospitality & leisure (RM190 million) and other operations (RM11 million).

0

0

6

Revenue from our property development segment was contributed from projects in Klang Valley at 37%, Singapore at 25%, Johor at 21%, PRC at 11% and others (i.e. collectively from Penang, Negeri Sembilan and Melaka) at 6%. For the property investment segment, increased revenue contribution was mainly attributable to higher occupancy and rental rates for the retail and office segments. Meanwhile, higher occupancy and room rates achieved for the hotels as well as increased golfing activities, contributed to increased revenue in the hospitality & leisure segments.

IOI PROPERTIES GROUP BERHAD (1035807-A)

Annual Report 2018

The Group achieved total sales of RM1,877 million (2,128 units), a decrease of approximately 34% from the previous financial year of RM2,847 million (2,296 units). Projects in Malaysia and Singapore accounted for 61% and 30% respectively of total sales for the financial year. Sales in Malaysia were mainly from projects in 16 Sierra and Bandar Puteri Bangi in the Klang Valley, and Taman Kempas Utama in Johor while overseas sales were mainly from the Trilinq project in Singapore. The Group’s financial position continued to remain strong with total assets of RM32,696 million, cash and cash equivalents of RM2,683 million and net assets per share of RM3.33. A more detailed analysis of the Group’s performance is available under the section “Management’s Discussion and Analysis” in this Annual Report.

and retail services subsectors. In the second quarter of 2018, the residential property market reflected healthy growth with increased property prices by 3.4% and higher take-up rate of 49.7% for new sales, compared to the previous quarter. New cooling measures recently introduced in July 2018 are expected to moderate price and demand growth. However, expectation of a steady economic and income growth as well as healthy employment condition will continue to support expansion in demand. In addition, projects in choice locations are expected to continue to attract prospective buyers. In Xiamen, the PRC government’s control measures continued to impact property transaction volumes and prices. Nevertheless, the market fundamental in Xiamen is still positive and property prices are anticipated to stabilise with gradual uplifting. BUSINESS DEVELOPMENTS

ECONOMIC OVERVIEW The global economy continued to expand in the second quarter of 2018 with accelerated growth in the US economy whilst other major countries posted moderate expansions. In the advanced economies, private consumption was driven by steady wage growth and favourable employment conditions. Domestic demand remained resilient in the Asian region attributable to policy support and increased infrastructure expenditures. In the second quarter of 2018, the Malaysian economy expanded by 4.5% year-on-year compared to 5.4% in the previous quarter year-on-year, attributable to supply disruptions in the mining sector, and supply constraints and unfavourable weather conditions lowering agriculture production. Private consumption increased by 8% attributable to continued growth in wage and employment. The construction sector expanded at a moderate pace, supported by growth in the civil engineering sub-sector contributed by the transportation, petrochemical and power plant projects while the residential and non-residential subsectors reflected a soft market sentiment. Singapore’s economy grew 3.8% year-on-year, in the second quarter of 2018 driven by growth in manufacturing, finance and insurance, wholesale

In 16 Sierra, Zentro Residences, a 241-unit service apartment with GDV of approximately RM105 million was launched in October 2017. 16 Sierra is a 535-acre mixed development in the southern part of Puchong and close to Putrajaya, Cyberjaya and Puchong. The township is well connected via the South Klang Valley Expressway whilst Maju Expressway provides accessibility to Kuala Lumpur city centre, and Lebuhraya Damansara Puchong connects to Petaling Jaya and Kuala Lumpur International Airport (“KLIA”). Amenities and facilities within the township include a 7-acre park with 16 themed gardens, a clubhouse and an international school. The township is also close to IOI City Mall, AEON Taman Equine and Giant hypermarket in Seri Kembangan. The first phase of our townhouse project in Bandar Puteri Bangi, Strata 1 comprising 310 units with GDV of approximately RM151 million was launched in September 2017. Bandar Puteri Bangi is a 360-acre freehold integrated mixed development, strategically located in the border of Selangor and Negeri Sembilan, close to Putrajaya, Kajang, Semenyih and Nilai and accessible via major highways such as NorthSouth, North-South Expressway Central Link (“ELITE”) and Kajang-Seremban (“LEKAS”).

0

0

7

BU S I NES S REV I EW

C H A I R MA N ’S S TAT E ME N T

Ayden, the first phase of our townhouse project in Warisan Puteri in Sepang comprising 202 units with GDV of approximately RM99 million was launched in April 2018. Warisan Puteri is a 206-acre freehold integrated mixed development strategically located in Kota Warisan, next to Bandar Salak Tinggi and is accessible via the Maju Expressway and Putrajaya-Cyberjaya Expressway. The township is situated close to amenities and facilities such as KLIA, Express Rail Link Salak Tinggi station, KIP mall and Xiamen University. The on-going construction of an interchange at ELITE highway is expected to further improve connectivity to the township. In addition, a construction of a bypass flyover at Kampung Semarang-Simpang Empat has commenced and is expected to improve traffic flow and provide easy accessibility to Putrajaya, Cyberjaya and via Maju Expressway to Kuala Lumpur. These infrastructure investments and on-going construction of the Aeon mall in Nilai and second phase of the Xiamen University are anticipated to enhance the value propositions of our projects in the township and vibrancy of the southern Klang Valley area. Meanwhile, development of the e-commerce and logistics hub in KLIA Aeropolis under the Digital Free Trade Zone initiative is expected to attract foreign and domestic investments and generate positive spillover effect to developments in the surrounding areas, including our township. For Xiamen, PRC, more launches will be expected from IOI Palm City comprising of high to mid-rise condominiums and town villas for the coming financial year. Meanwhile, the Xiang An project construction has been ongoing since fourth quarter of 2017 and its maiden launch is anticipated for the first half of 2019 which will consist of residential units. Future infrastructure developments that are currently in progress will not only complement the project but will also enhance visibility and connectivity to Xiamen Island. The infrastructure developments include a new Xiang An bridge, subway lines and a new airport in Dadeng Island in Xiang An district. The land is intended for mixed development comprising condominiums, town villas and commercial units within the new Xiang An central business district which is proposed to be an integrated eco-city. The Trilinq project in Singapore continued to perform well with sales of 132 units worth approximately RM570 million in FY2018. To date, more than 98% from a total of 755 available units have been sold. For South Beach in Singapore, an integrated development which is a joint venture with City Developments Limited, the 190-unit South Beach residences was launched in September 2018. South Beach’s office tower and retail spaces are fully

0

0

8

C H A I R MA N ’S S TAT E ME N T

leased, and with the improved performance from the JW Marriott Hotel Singapore South Beach, the joint venture is expected to continue to contribute positively to the future prospects of the joint venture partners.

The Group is also optimistic on its future launches in IOI Palm City and Xiang An, as Xiamen is ideally located which is an attractive hub for economic activity as well as taking into consideration that Xiamen is the second largest city and a main commercial hub in the Fujian province and has one of the busiest ports in the PRC.

DIVIDEND For the financial year under review, an interim dividend of 5 sen per ordinary share amounting to a total payout of approximately RM275 million was declared and subsequently paid on 28 September 2018, which represents approximately 35% distribution of the Group’s net profit attributable to shareholders. PROSPECTS

IOI Palm City, Xiamen

The Malaysian economy is anticipated to continue on a steady growth momentum in the year ahead supported by private sector spending. In the long term, the property market is expected to remain resilient with demand for properties to continue to be positive particularly for developments in strategic locations, supported by an expanding Malaysian economy and improved transportation infrastructure. Property ownership will continue to be the preferred asset to hedge against inflation in Malaysia. With a track record spanning more than three decades in the property development industry and a strong pipeline of development land bank spread across strategic locations and key growth areas in Malaysia and abroad, the Group is confident that it is well positioned to continue to drive growth in its property development business. With successful developments of self-contained townships in Malaysia, as well as residential and commercial developments in Singapore and the PRC, the Group will continue to maximise returns through value enhancements in our products and execution of well planned projects in strategic locations, to cater for different economic conditions and market demand. We will also focus on strengthening marketing initiatives and branding across all platforms to cater to wider customer groups, particularly those utilising social media and digital channels. In addition, we will also embark on sustainable development measures in terms of minimising construction time through utilisation of the Industrial Building System (IBS) which will reduce use of timber and amount of timber waste from landfills. The Group is well-recognised in the Malaysian property sector and has continued to maintain its reputation as one of the leading public-listed property developers and consistently delivered on quality and product excellence in its property business.

IOI PROPERTIES GROUP BERHAD (1035807-A)

Annual Report 2018

For our established townships in Bandar Puteri Puchong and Bandar Puchong Jaya, we have the flexibility of maximising our product portfolio with the option of considering transit oriented developments as our land banks in these townships are located close to LRT stations. The availability of LRT services provide improved connectivity and convenience for residents and businesses as well as enhance visibility and marketability of our future projects in these townships. The Group’s on going infrastructure investment for the upgrading and expansion of the Bandar Puteri interchange is expected to ease traffic flow and improve accessibility for the convenience of our stakeholders. In IOI Resort City, new developments will include Clio 2 Residences and Gems Residences. Clio 2 Residences is a 550-units serviced apartment with an estimated GDV of approximately RM315 million. Gems Residences is a joint venture development with MJR Investment Pte Ltd which is affiliated to the Mitsubishi Estate Group. The first phase will be 334 units with an estimated GDV of approximately RM304 million. These new developments will be complemented by amenities and facilities within IOI Resort City amongst others such as IOI City Mall, Le Méridien Putrajaya and Putrajaya Marriott hotels and Palm Garden golf course. Construction on the second phase of IOI City Mall has also commenced and when completed, will increase total net lettable area from the current 1.5 million square feet to an estimated 2.5 million square feet. The new developments above mentioned is anticipated to support the existing components in this integrated development and further enhance IOI Resort City as a preferred residential and commercial destination for the southern corridor of greater Kuala Lumpur.

On Central Boulevard in Singapore, piling works has commenced since February 2018 and is progressing well. In view of the positive Singapore office market outlook, where central business district rental rates are anticipated to remain on a strong growth momentum, the Group remains optimistic on the prospects of this development as it is strategically located within Marina Bay area, the new financial and business district in Singapore. In ad...