Annual Report 2018 Saha Pathana Inter-Holding Public Company Limited Report of the Board of Directors

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Annual Report 2018 Saha Pathana Inter-Holding Public Company Limited Report of the Board of Directors Annual Report 2018 ALWAYS MOVING FORWARD TOGETHER SAHA PATHANA INTER-HOLDING PUBLIC COMPANY LIMITED INTER-HOLDING PUBLIC COMPANY SAHA PATHANA UNLOCKING INVESTMENT POSSIBILITIES Annual Report 2018 Good People Good Products Good Society SAHA PATHANA INTER-HOLDING PUBLIC COMPANY LIMITED SAHA PATHANA INTER-HOLDING PUBLIC COMPANY LIMITED 530 Soi Sathupradit 58, Bangpongpang, Yannawa, Bangkok 10120 Tel. +66 2293 0030 Fax. +66 2293 0040 www.spi.co.th VISION To be a leading investment company that serves customers with heartfelt service, dedication to ongoing development and social contribution values MISSION To invest in high-potential business. To increase satisfaction of the supporting trades and services. To develop industrial parks to and international standard level. To incorporate good corporate governance principles, as well as, promote ongoing personnel development in terms of business expertise, morale and ethics, and social and environmental awareness. TARGET To achieve sustainable business growth. Printed on Eco-Friendly Paper Seeking benefits or profits Business Philosophy is not amoral, but it must A GOOD be done reasonably while BUSINESS consumers also benefit from good products and services. Business Philosophy "To conduct a good CONSIDER You must also think of the business, you must disregard benefits to others, not just self-interest and adhere to OTHERS your own. ethical practices." OPERATE You cannot let profitability blind you from morals and ETHICALLY ethics. Principles • Good People • Good Products • Good Society Good People Good Products Good Society We serve with swiftness, politeness, Our products are of good quality, We provide good occupational health, honesty, transparency, and equality. sufficient in number, and developed safety, and environment for our per established goals. employees, as well as the surrounding communities. Content Financial Highlights 4 Report of the Board of Directors 5 Report of the Audit Committee 6 Report of Nomination and Remuneration Committee 7 Report of the Corporate Governance and Risk Management Committee 8 Business Operation 9 • The Policy and Overview of the Company’s Business Operation 9 • Vision, Mission, Targets, and Strategies 10 • Background and Significant Development 12 • Saha Group’s Shareholding Structure 14 • Nature of the Business 17 • Risk Factors 26 • Legal Dispute 28 Management 29 • Securities and Shareholders 29 • Management Structure 32 Corporate Governance 48 • Corporate Governance 48 • Subcommittees 75 • Nomination and Appointment of Company Directors and Executives 86 • Monitoring on Subsidiaries and Associated Companies' Performance 90 • Control of Internal Data Usage 91 • Auditor’s Fee 91 • Compliance with Principles of Good Corporate Governance 2017 92 • Compliance with good corporate governance principles in other matters 92 Internal Control and Risk Management 94 Related Transactions 97 Management Discussion and Analysis: MD&A 110 Report on The Board of Directors' Responsibility for Financial Statements 113 Independent Auditor’s Report 114 Financial Statements 117 Corporate Profile and Other Significant Matters 184 • Investment 186 Board of Directors 191 • Board of Directors 192 • Executive Board 195 • Information of the Directors, Executives, Controlling Persons and • Company Secretary 196 • Company Directors Who Seats in Related Companies as Follow 208 SPI... and Sustainable Development 212 Investors are able to access more information of securities issuer from the annual report (Form 56-1) of Company on www.sec.or.th or Company’s website, www.spi.co.th FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS 2018 2017 2016 (Restated) Consolidated financials (THB million) Total revenue* 5,684 6,643 4,440 Gross profit 3,225 4,127 2,125 EBITDA 3,018 3,794 1,932 Net profit 2,595 3,499 1,698 Total assets 38,788 34,910 25,126 Investments 33,125 29,381 19,916 Real estate and other fixed assets 4,985 4,971 4,643 Total liabilities 9,783 9,847 2,638 Interest-bearing debt 9,017 9,112 1,760 Total shareholders’ equity 29,006 25,063 22,488 Net cash flow from operating activities, including dividend received 1,311 1,127 972 Profitability ratio (%) Gross margin 56.7% 62.1% 47.9% EBITDA margin 53.1% 57.1% 43.5% Net profit margin 45.7% 52.7% 38.2% Return on assets (ROA) 7.1% 11.5% 7.1% Return on equity (ROE) 9.6% 14.7% 7.9% Leverage ratio (Times) Debt to equity ratio 0.34 0.39 0.12 Interest-bearing debt to equity ratio 0.31 0.36 0.08 Interest coverage ratio 18.29 40.43 37.71 Per share data (THB per share) Earnings per share** 4.87 7.08 3.44 Book value per share 50.75 50.73 45.52 Dividend per share*** 0.70 0.65 0.45 Dividend payout ratio (%) 14.4% 9.2% 13.1% Share information as of 31 December Par value (THB per share) 1.00 1.00 1.00 Share price (THB per share) 74.00 75.00 33.00 Outstanding shares (shares) 571,515,007 494,034,300 494,034,300 Market capitalisation (THB million) 42,292 37,053 16,303 Remark: * Including revenue from share of profit from investments in associates ** Calculated using weighted average number of ordinary shares *** Dividend per share for 2018 has been consented as per the Board of Directors’ resolution on 11 March 2019 and will be proposed in the Annual General Meeting of Shareholders on 22 April 2019 In 2018, there were extraordinary items, consisting of gain on change in investment classification (THB 434.0 million) mainly as a result of additional investment in Sahacogen (Chonburi) Plc. (Shareholding increased from 16.88% to 20.88% as at 31 December 2018) and disposal of investment in Thai Hoover Industry Co., Ltd. (Shareholding decreased from 33.58% to 19.40% as at 31 December 2018) In 2017, there were extraordinary items,, consisting of gain on change in investment classification (THB 1,015.2 million) and gain on price bargaining (THB 817.6 million), offset with non-recurring expenses (THB 94.7 million after tax) which were related to an entire business transfer ("EBT") of President Holding Co., Ltd. and issuance of convertible debentures in June 2017 4 ANNUAL REPORT 2018 SAHA PATHANA INTER-HOLDING PUBLIC COMPANY LIMITED REPORT OF THE BOARD OF DIRECTORS Report of the Board of Directors The overall Thai economy in 2018 grew by 4.1 percent, the highest growth in 6 years through growth in private consumption which grew quarterly since the beginning of 2018. This is in parallel with the growth in investment in the private sector which grew by 3.9 percent compared to previous year, in the same direction the global economy which grew by 3.7 percent amidst challenges in the country together with changes in the global economy and international trade such as trends on interest rates and international trade wars. The Board of Directors has taken into account all the dimensions to account for the challenges and risks as well as taken all diligent measures by adhering to the Corporate Good Governance for the upmost benefit of the Company and all of its stakeholders. For the fiscal year 2018, the Company continue to expand its investments from the year 2017 restructuring its food related business shareholding structure. The Company has invested in new businesses with value of more than 3,000 million baht under the concept “Unlocking Investment Possibilities” through joint investment with strategic partners to envision a creation of a sharing economy and smart city. As well as to restructured the financial structure towards long-term debt to be in line with the Company’s assets being able to maintain a healthy cost of debt which in turn will mitigate fluctuation interest rates hikes. In addition, the Company has reorganized its core business groups to provide its stakeholders with a coherent perspective into three business lines (1) investment in consumer products (2) investment in food and beverage (3) industrial park development and other businesses. Operating results for the year 2018, the Company had revenue of 5,684 million baht, a decrease of 14.4 percent with a net profit of 2,595 million baht, a decrease of 25.8 percent. However, eliminating extraordinary items in 2017 and 2018, the Company’s revenue increased by 9.1 percent and a net profit of 22.7 percent as a result of share of profit from investment in associates and dividend income. In addition, the Company has gain confidence and support from holders of Convertible Debenture No. 1/2017, Due in 2024 (SPI246A), with a request for conversion into common shares within the first year at 99.5% issued. Moreover, the Company has received an assessment result for Corporate Good Governance for Thai listed companies at “Very good” and an assessment result for quality of the Shareholders’ General Meeting at “Excellent” with the Company resulting in a full 100 points for the 10th consecutive years. 2019 will still be a year of transformation and as a Holding Company of Saha Group the Company has construct various plans to readily support the Company and Saha Group of Companies. This is to be able to respond to customer behavior and customer needs according to the advancement in technology and new business models that may replace current business models. Since the Company’s registration and trading on the Stock Exchange of Thailand in 1977, shareholders’ equity of the Company increase to 28,991 million baht in 2018 or a compounded annual growth rate of 17 percent per year. The Board of Directors would like to express our upmost appreciation and gratitude to all our shareholders, debenture holders, joint-venture partners, business partners, clients, executives, employees, including both domestic and international financial institutions, as well as government agencies and relevant parties for the continued support for the Company. The Company strongly adhere to our principles of “Good People, Good Products, Good Society” to ensure a sustainable growth in the years to come.
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