Annual Report 2019

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Annual Report 2019 ANNUAL REPORT 2019 CONTENTS 02 Our Philosophy 03 Milestones 04 Chairman’s Statement 06 Management Discussion of Results of Operations and Financial Position 10 Board of Directors 15 Key Executives’ Profiles 16 Financial Profile 19 Corporate Information 20 New Discoveries at Isetan Scotts 22 Sustainability Report 36 Corporate Governance Report 50 Risk Management Policies & Processes 52 Directors’ Statement 55 Independent Auditor’s Report 60 Income Statement 61 Statement of Comprehensive Income 62 Balance Sheet 64 Statement of Changes in Equity 65 Statement of Cash Flows 67 Notes to the Financial Statements 120 Additional Disclosure Requirements 124 Note to Shareholders regarding the Annual General Meeting 125 Statistic of Shareholdings 127 Corporate Directory ANNUAL REPORT 2019 ISETAN (SINGAPORE) LIMITED 01 OUR PHILosopHY CONNECTING PEOPLE AND BRIDGING TIMES. STRIVE TO CHANGE. 1. Observe and study your surrounding facts for constant growth. 2. Innovate and stay ahead of times. 3. Respect others. Be inspired by diverse views and ideas. BE A NEW ONE. 02 ISETAN (SINGAPORE) LIMITED ANNUAL REPORT 2019 MILESTONES STORES & SPECIALTY SHOP DEVELOPMENT 1972 Isetan Havelock made history by being the first Japanese department store in Singapore. 1979 Isetan Orchard opened at Liat Towers. This store established Isetan’s presence along Singapore’s tourist shopping belt. 1983 Isetan Katong opened at Parkway Parade marking the Company’s penetration into suburban Singapore. 1986 Isetan Orchard was relocated to Wisma Atria at a cost of $100 million amidst the economic downturn and recession. 1993 Flagship store at Havelock was relocated to Isetan Scotts which opened at Shaw House. 1995 Isetan Tampines opened at Tampines Mall. This store is situated in Singapore’s first regional centre. 1999 Isetan opened its first stand-alone Mango shop at Shaw Centre. Another successful designer label introduced into Singapore by Isetan. 1999 Isetan began operation of its full scale supermarket at its flagship store, Isetan Scotts. 2006 Isetan invested in Chengdu Isetan, Sichuan Province, People’s Republic of China. 2009 Isetan commenced its online business with the launch of its revamped website. 2010 Isetan Serangoon Central opened at nex Mall, our first foray into the north-eastern part of Singapore. 2013 Isetan Jurong East opened at Westgate Mall, our first department store with a supermarket in the western part of Singapore. 2015 The Company’s own retailing activities at Isetan Orchard ceased in end March and the space was converted for rental purposes. 2015 Isetan Wisma Atria Investment Property opened in phases with its first tenant starting its operations in September. 2019 Phase One of the major renovation in Isetan Scotts is completed. CORPORATE & FINANCIAL DEVELOPMENT 1970 Isetan Emporium (Singapore) Private Limited was incorporated. 1981 Isetan became the first Japanese department store to offer its share to the public. Name was changed to Isetan (Singapore) Limited. 1988 Isetan offered a 1 for 2 Rights issue of 10 million shares. 1989 Isetan made a private placement of 3 million shares. 2002 Isetan made a 1 for 4 bonus issue of 8.25 million shares. ANNUAL REPORT 2019 ISETAN (SINGAPORE) LIMITED 03 CHAIRMAN’S STATEMENT DEAR SHAREHOLDERS, BUSINESS PERFORMANCE The Company’s revenue for the financial year ended 31st December 2019 (“FY2019”) was $111.885 million as compared to $122.171 million for the financial year ended 31st December 2018 (“FY2018”). The lower revenue was attributed to declines in sale of goods and consignment income from the retail business. This followed major renovation works at the Company’s flagship store at Shaw House as well as the general downturn in the retail industry as seen by the government’s 2019 retail statistics. Other income increased from $8.234 million in FY2018 to $10.449 million in FY2019 mainly due to the income arising from recognition of finance leases arrangements in the financial year. The Company recorded impairment charges on property, plant and equipment (“PPE”) and right of use assets and provision for onerous contracts amounting to $4.321 million, $24.795 million and $0.755 million respectively TOYOHIKO TANAKA in FY2019 as compared to an impairment charge on PPE Chairman of $11.887 million and provision for onerous contracts of $2.380 million in FY2018. This led to a loss after tax of $26.532 million in FY2019 as compared to a loss after tax of $13.584 million in FY2018. BUSINESS OUTLOOK Following the change in use of certain portions of the warehouse in Kallang Pudding, the related carrying amount According to government statistics, retail sales (excluding was partly reclassified from PPE to investment properties motor vehicle sales) in Singapore fell in 10 out of the 12 in FY2019. This contributed to the Property segment months in 2019. Furthermore, with the economic fallout rental income increasing from $9.905 million in FY2018 expected from the rapidly evolving COVID-19 situation, to $11.185 million in FY2019. In line with this increase, the the Singapore Government has downgraded its 2020 results of the Property segment increased from $4.449 growth forecast of the Gross Domestic Product to be million in FY2018 to $5.030 million in FY2019. between -4.0% to -1.0%. Against this backdrop, the retail sector is expected to face very challenging operating ASSOCIATED COMPANY conditions in 2020. For the associated company in China, the performance in 2020 is also expected to be Our associated company, Chengdu Isetan Department negatively impacted. Store Company Limited, in the People’s Republic of China, continued to perform well with its sales revenue MOVING FORWARD increasing from $87.576 million in FY2018 to $94.922 million in FY2019. Net profit increased by 52.2% to $1.685 Last year, I reported on the major revamp of our Flagship million in FY 2019 compared to FY2018. As a result, the Isetan Scotts Store. I am glad to inform that phase one share of profit in FY2019 increased by 50.8% to $389,000 of the renovations was completed by the end of 2019. compared to FY2018. 04 ISETAN (SINGAPORE) LIMITED ANNUAL REPORT 2019 CHAIRMAN’S STATEMENT Besides revamps being carried out on the Ladies Sundries, Covid-19 outbreak and poor economic sentiment will Ladies Wear, Men’s and customer service departments, present a challenging environment for our tenants at our more Food and Beverage tenants have been added. The investment properties. We will be monitoring the situation rest of the renovations has resumed after the Chinese of our tenants closely and react accordingly. New Year festive period and is expected to be completed by end of second quarter of 2020. During the last year, we have taken proactive steps to improve the business. These include the upgrading of The Company continuously monitors the performance of the Flagship Scotts store, the closing of our loss-making each store to realign and consolidate its operations so as Jurong East store, increasing our loyalty customer to achieve better deployment of existing resources. We base, digitalization of our operations and working with ceased operations of the Jurong East store (which has new e-wallet vendors to widen our payment choices. been in operation for about six years) in March 2020 as Therefore, despite the many challenges lying ahead, we the store was not profitable and the Company was not are better poised to tackle the difficult times ahead. able to renew its lease at more favourable terms. Retailing continues to be a core business of the Company. Moving The Covid-19 situation is still rapidly evolving and there forward, the Company will continue to restructure and will be a significant degree of uncertainty over the length embrace new concepts of retailing as the business and severity of the outbreak. During these difficult times, evolves. Our online store which complements our brick the health and safety of our customers and employees and mortar stores continues to record improving sales in will be the top priority of the Company. 2019. Having expanded the range of merchandise in the online store, sales have increased by about 17% in FY2019 DIVIDEND as compared to FY2018. The Company will continue its effort to grow the business of its online store in 2020 and For the financial year ended 31st December 2019, the to integrate its online and physical operations so that they Board of Directors has proposed a final dividend of 5.0 can each benefit from the other. cents per ordinary share. The proposed dividend will be subjected to shareholders’ approval at the forthcoming One of the initiatives that we reported last year was the Annual General Meeting. roll out of a mobile platform for our loyalty card members. We are happy to report that the mobile app has been APPRECIATION successfully launched and there has been a fourfold increase in the mobile app member base in FY2019 as On behalf of the Board, I would like to extend my compared to FY2018. The Company will continue to build sincere thanks and appreciation to our stakeholders on the momentum to increase the loyalty card member including our customers, suppliers, business associates base in 2020. and shareholders for their continued support during the past year. I would like to thank my fellow directors for At our Annual General Meeting last year, shareholders their invaluable contributions to the Company, and to had asked about the Company’s intention concerning all employees for their dedication and resilience during the investment property at Isetan Wisma Atria, given the these trying times. The Company looks forward to the remaining lease tenure. As this is a strategic asset of the continued support of all stakeholders in the new financial Company, the Board and management are continually year. assessing the best possible option, bearing in mind factors such as the impact of the upcoming Thomson Thank you.
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