Move to Change S P SETIA BHD
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ANNUAL REPORT ANNUAL REPORT move to change S P SETIA BHD Wisma S P Setia 1, Jalan Bandar Satu, Pusat Bandar Puchong (19698-X) 47100 Puchong, Selangor Darul Ehsan, Malaysia www.spsetia.com.my Dynamics of Change The only constant in life is change. By harnessing its power, raw imagination transforms into astoundingly creative outcomes and true potential is released into beneficial tangible results. As change is a necessary consequence of growth, we at S P Setia warmly embrace its positive aspects throughout every facet of our organisation, while staying true to the corporate values which have brought us much success thus far. Contents Corporate Profile.................................................................. 2 Group Financial Summary.................................................... 4 Higher Threshold of Excellence.......................................... 6 Chairman’s Statement....................................................... 10 Group Managing Director’s Report................................... 14 Review of Operations....................................................... 20 Corporate Responsibility Charter....................................... 30 Corporate Responsibility.................................................... 32 Corporate Calendar............................................................ 36 Corporate Information....................................................... 46 Corporate Structure........................................................... 48 Profile of Board of Directors............................................ 50 Corporate Governance Statement.................................... 58 Audit Committee Report................................................... 65 Internal Control Statement................................................ 68 Financial Statements........................................................ 69 Analysis of Shareholdings............................................... 156 List of Properties Held by The Group.............................. 159 Performance Notice of Annual General Meeting.................................. 164 Statement Accompanying Notice of Highlights0 Annual General Meeting.................................................. 167 7 Proxy Form RM1.2b Total Sales RM1.1b Total Revenues RM260m Profit After Tax 38.7sen Earnings Per Share Corporate Profile 2 ANNUAL REPORT 07 Corporate Profile S P Setia Berhad is today recognised as Malaysia’s leading listed real estate developer, with a proven track record of innovation-driven and standard-setting developments spanning the full spectrum of the property market – from master-planned townships to thriving commercial hubs. To date, S P Setia has won several coveted awards of international acclaim, as attested by our 3-year ranking as Malaysia’s No.1 Developer in The Edge Malaysia Top Property Developers Award, and Euromoney Real Estate Awards for the years 2005, 2006 and 2007. Well-established in all three key economic centres of Malaysia, namely the Klang Valley, Johor Bahru and Penang, the Group currently has 10 active projects under development, with another 8 new projects lined up for launching in the near future. The Group is broadening the breadth of its product offering with the introduction of investment-grade, integrated commercial space within vibrant and matured townships, and high-end condominiums in prime inner city locations. In June 2007, S P Setia joined forces with Vietnam’s top state-owned conglomerate, Becamex IDC Corp, to develop its maiden residential project in Vietnam. Vietnam is the first cross-border investment destination for S P Setia, and marks the beginning of a new phase of growth to boost the Group’s international profile and enhance its stream of future earnings. 1. Dusk view of the stunning spa-villas at Setiahills, Ampang 1 S P SETIA BHD 3 Group Financial Summary GROUP FIVE-YEAR SUMMARY Year Ended 31 October 2007 2006 2005 2004 2003 (RM’000) Revenue 1,153,803 1,154,641 1,262,445 1,025,091 821,741 Profit Before Tax 328,491 319,949 #* 285,956 * 231,463 * 174,883 * Profit Attributable to Shareholders 260,070 238,234 # 203,384 161,198 126,031 Paid-Up Capital 504,454 498,513 490,734 568,048 559,422 Shareholders’ Funds 1,840,883 1,702,410 1,574,340 1,392,205 1,267,450 Total Assets Employed 2,882,032 2,625,927 2,435,156 2,624,977 ** 2,310,672 Total Net Tangible Assets 1,839,993 1,701,511 * 1,573,431 * 1,391,286 * 1,266,521 * Earnings Per Share (sen) 38.7 36.1 32.4 28.5 22.7 Gross Dividend Per Share (sen) 25 30 25 20 12 - Taxed Dividend 25 30 25 20 8 - Tax Exempt Dividend - - - - 4 Net Tangible Assets Per Share (RM) 2.74 2.56 2.41 2.45 2.27 Share Price - High (RM) 9.45 4.02 4.58 4.62 3.68 - Low (RM) 3.92 3.06 3.64 3.18 2.01 GROUP QUARTERLY SUMMARY Quarter Ended 31 October 31 July 30 April 31 January (RM’000) 2007 2007 2007 2007 Revenue 317,158 294,637 286,802 255,206 Profit Before Tax 108,731 76,580 80,545 62,635 Profit Attributable to Shareholders 99,797 53,768 59,759 46,746 Paid-Up Capital 504,454 504,454 504,454 504,454 Shareholders’ Funds 1,840,883 1,790,187 1,736,419 1,774,860 Total Assets Employed 2,882,032 2,690,353 2,626,640 2,666,654 Total Net Tangible Assets 1,839,993 1,789,295 1,735,524 1,773,963 Earnings Per Share (sen) 14.84 7.99 8.88 6.98 Gross Dividend Per Share (sen) 15 - 10 - - Taxed Dividend 15 - 10 - Net Tangible Assets Per Share (RM) 2.74 2.66 2.58 2.64 # In compliance with Financial Reporting Standard 2 - Share-based Payment, profit before tax and profit attributable to shareholders have been restated to reflect the effect of adopting FRS2. * In compliance with new/revised Financial Reporting Standards adopted in FY 2007, the comparative figures have been restated. ** In compliance with Financial Reporting Standard 201 - Property Development Activities, total assets employed have been restated. 4 ANNUAL REPORT 07 Group Financial Summary GROUP FIVE-YEAR FINANCIAL HIGHLIGHTS Revenue Profit before tax Profit attributable to shareholders Shareholders’ funds (RM Million) (RM Million) (RM Million) (RM Million) 328.49 1,262.45 260.07 1,840.88 319.95 238.23 1,154.64 1,702.41 1,153.80 285.96 203.38 1,025.09 1,574.34 231.46 1,392.21 161.20 821.74 174.88 1,267.45 126.03 ‘03 ‘04 ‘05 ‘06 ‘07 ‘03 ‘04 ‘05 ‘06 ‘07 ‘03 ‘04 ‘05 ‘06 ‘07 ‘03 ‘04 ‘05 ‘06 ‘07 GROUP QUARTERLY FINANCIAL HIGHLIGHTS 317.16 108.73 1,840.88 294.64 99.80 1,790.19 286.80 80.55 1,774.86 76.58 255.20 62.63 1,736.42 59.76 53.77 46.74 31 Jan 30 Apr 31 Jul 31 Oct 31 Jan 30 Apr 31 Jul 31 Oct 31 Jan 30 Apr 31 Jul 31 Oct 31 Jan 30 Apr 31 Jul 31 Oct ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 ‘07 S P SETIA BHD 5 Higher Threshold of Excellence J I H K C 2007 2006 •A Malaysia Best Property Developer in •H Malaysia Best Property Developer in Euromoney Euromoney Real Estate Awards 2007 Real Estate Awards 2006 •B World’s Best Master Plan Development •I Best Master Plan Development for Setia Eco Park in for Setia Eco Park in FIABCI International FIABCI Malaysia Property Awards 2006 Prix d’Excellence Awards 2007 •J Best Low-Rise Residential Development for Duta •C Ranked No.1 in The Edge Malaysia Top Nusantara in FIABCI Malaysia Property Awards 2006 Property Developers Awards 2007 •K Ranked No. 1 in The Edge Malaysia Top Property •D Tan Sri Liew Kee Sin voted Property Man Developers Awards 2006 of the Year in FIABCI Malaysia Property Awards 2007 •L Forbes Asia’s Best Under US$1 Billion Award for 2006 •M Top Ten for Corporate Governance Survey Report •E Top Ten Best-Managed Companies in 2006 by MSWG Malaysia in FinanceAsia’s Asia Best Companies 2007 •N 2006 Johor State Landscape Award (Neighbourhood Park Category) for Setia Tropika Johor •F Top Ten Best Corporate Governance in Malaysia in FinanceAsia’s Asia Best •O 2006 Johor State Landscape Award (Private Office Companies 2007 Building Category) for Setia Tropika Johor G • Top Ten Best Investor Relations in Malaysia •P LAMAN Lifestyle Gold Award at The Malaysia in FinanceAsia’s Asia Best Companies 2007 International Landscape & Garden Festival 2006 6 ANNUAL REPORT 07 Higher Threshold of Excellence A B S P SETIA BHD 7 evolve to brilliance Woven into the fabric of the Group’s existence is the constant desire to test and evolve its core competencies, to ensure that S P Setia sets and delivers increasingly greater goals as the ‘Builder of Distinction’. Chairman’s Statement Dear Valued Shareholders I am pleased to report that we achieved an all-time high profit after tax of RM260 million on the back of revenues totalling RM1.1 billion. This stellar performance underscores the dynamism and robustness of S P Setia’s business model which has enabled it to consistently transform growth opportunities into tangible operating results. 10 ANNUAL REPORT 07 Chairman’s Statement Rewarding our Shareholders In line with our excellent performance, I am pleased to announce that the Board of Directors has proposed a final dividend of 15 sen per share less tax at 26% for the financial year ended 31 October 2007. Based on the Company’s enlarged share base following its 1:2 bonus issue, the total dividend payout will account for approximately 62% of profit after tax versus 60% paid out in the previous financial year. As the Group expands, we remain committed to maintaining a high dividend payout policy of at least 50% of profit after tax to strike an optimal balance between the pursuit of growth and the need to continually 1. Illustration of a vibrant night scene at Setia Walk, reward shareholders. Puchong Corporate Exercise During the year, the Group undertook a corporate exercise involving the issuance of redeemable serial bonds with detachable warrants along with the issuance of bonus shares. This corporate exercise will be completed by the first quarter of financial year 2008. The RM500 million raised allows S P Setia to fund its plans to become an integrated regional real estate group efficiently by locking in low fixed interest rates whilst rebalancing the Group’s financing portfolio which was previously reliant on floating rates.