Annual Report 2015 Ananda Development Public Company Limited 1 Annual Report 2015 T H E VISION Together, we are passionate about creating vibrant lives by continuously innovating urban living solution based on major transport systems. MISSION We’re number one in mass transit living through ambition, determination & innovation. We pursue optimization of capital, people development & ethical behavior 4 5 CORE VALUES People SELF MASTERY SELF IGNITE Innovation SELF ASSERTION Mindsets 6 Customer Centric SELF REFLECTION Operational Excellence SELF EXAMINATION SELF ADVANCEMENT Organizational / Human Resource 7 Development 8 8 To create a better quality of life by innovating urban living solutions based on mass transport systems. Life is too short for traffic. We want to give back time. So we strive to find the best locations to develop safe, high quality and affordable homes and services. Let’s LIVE WORK & PLAY more. 9 9 ANOTHER RECORD YEAR Mass Transit Living is increasingly recognized as the best way to Live, Work and Play in Bangkok. In its third year as a public company, Ananda has continued its journey to becoming the leading property developer in Thailand with record presales for both condominiums and housing. PRESALES BY SECTOR 10 In 2015, Ananda broke another record with its highest ever launch total of 34.8 billion Baht of new projects including a new record value of condominiums launched with 8 condominium projects launched worth a combined 31.9 billion Baht. This is up from a combined total of 15 billion Baht in 2014 Project Location Quarter of launch Sales Percentage 1. Ashton Chula-Silom Rama IV Road, Q 1 65.5% Bangrak, Bangkok 2. Ashton Residence 41 Soi Sukhumvit 41, Sukhumvit Road, Q 1 57.4% Wattana, Bangkok 3. Unio Charan 3 Chanransanitwong Soi 3, Q 2 46.1% Bangkokyai, Bangkok 4. Arden (3 projects) Ladprao 71, Rama 3, Q 2 34.7% Phattanakarn 20, Bangkok 7. Ideo Sukhumvit 115 Sukhumvit Road, Q 3 45.9% Samut Prakan 8. Q Chidlom-Phetchaburi Phetchaburi Road, Q 3 43.8% Ratchathewi, Bangkok 9. Ideo O2 Sampawut Road, Q 3 28.2% Bangna, Bangkok 11 10. Ideo Mobi Bangsue Bangsue, Bangkok Q 4 23.7% Grand Interchange 11. Ashton Silom Silom Road, Q 4 41.2% Wattana, Bangkok Due to our investment cycle 2015 was not a year of many buildings completing construction and beginning transfer, so revenues & profits remained flat. REVENUE 11,025 12 NPAT 1,207 This is about to change as the capital raised at IPO begins to come through in earnest next 13 year with 5 buildings completing and our five year plan showing a near tripling of transfer over the next 3 years. 5 YEARS BUSINESS PLAN TRANSFER TO BE TRIPLED IN THE NEXT 3 YEARS YEAR OVER YEAR 95% KEYS YEAR OVER YEAR 61% Mitsui’s share in JV Ananda’s share in JV Ananda’s Revenue 2016 2017 Mitsui’s backlog in JV Ananda’s backlog in JV Ananda’s backlog Our continued dedication to “Leadership with Discipline” is showing results with the cost of generating presales down by around a third between 2013 and 2015 and the cost of administration as a percentage of total development value also down by over a third in the same period. Unit: Million Baht 14 26,235 86,944 YEAR OVER YEAR 18% YEAR OVER YEAR 14% YEAR OVER YEAR 40% 2018 2019 2020 15 • Q Chidlom Petchaburi • Ideo Mobi Bangsue Grand Interchange OUR PARTNERSHIP DEEPENS Ananda concluded a joint venture with Mitsui Fudosan, Japan’s largest real estate developer by revenues in 2013 and announced its first joint project - Ideo Q Chula-Samyan in the same year. In 2014, the companies announced three new projects together, Ashton Asoke, Ideo Q Siam- Ratchatewi and Ashton Chula-Silom with a combined project value of 19 billion Baht. The success of the first four projects led Ananda and Mitsui to agree to five new joint venture projects in 2015, bringing the total development value of our joint ventures to 16 over 45 billion Baht in nine projects. • Ananda Urban Pulse Event at Siam Paragon ENVIRONMENTAL RESPONSIBILITY In 2015, the company became the first residential developer to receive “Trees-NC” silver certificate from Thai Green Building Institute for Ideo Mobi Sathorn. 17 TECHNOLOGY LEADERSHIP As well as the financial partnership, Mitsui is known as one of the most technologically advanced developers in the world. They are helping Ananda improve its technology with the raining of Ananda staff by Mitsui’s staff and direct technology transfer where appropriate. This technology transfer began last year with Mitsui engineers beginning training of Ananda staff in their proprietary TQPMS (Total Quality Production Management System) and the training and development continued in 2015 and the first two buildings to benefit were finished at Ideo Wuttakat and Ideo Mobi Charan-Interchange which both saw initial defect rates halved. 18 In addition, Ananda began implementation of Building Information Modeling (BIM) in 2014. This highly advanced system integrates every aspect of design and construction on a single software platform, speeding up time to design and build and reducing errors. The deployment of this system involves 27 companies in Ananda’s supply chain from designers and architects to contractors and construction managers development of this continued throughout the year. 19 SMART HOME In 2015, Ananda announced a partnership with Samsung Electronics that saw Ananda become the first in Thailand to launch Samsung’s Smart- Things SmartHome. The company has engaged in joint research with Samsung to understand and develop Urban Living Solutions for its customers using these exciting new technologies. 20 The CEO of Ananda set a company goal for Ananda for every Ananda home to be a SmartHome and announced that the first projects incorporating SmartHome technology would be launched in 2016. 21 CONTENTS 002 Vision Mission & Core Value 024 Financial Highlights 026 Chairman’s Statement 028 Message from the CEO 030 Report of the Audit Committee 032 Board of Directors 034 Audit Committee 035 Executive Committee 036 Nature of Business 057 Corporate Social Responsibility 065 Revenue Structure 066 Risk Factors 068 General Information 076 Shareholders Structure and Dividend Payment Policy 078 Management 115 Good Corporate Governance 142 Internal Controls and Risk Management 146 Related Party Transactions 163 Management Discussion and Analysis 22 174 Responsibility of the Board of Directors for Financial Reporting 175 Independent Auditor’s Report 176 Financial Statement 23 FINANCIAL HIGHLIGHTS 2015 2014 2013 (Million Baht) Pre-sales 26,235 20,898 21,083 Transfer 9,598 9,678 8,808 Summary of Financial Status (Million Baht) Cash on Hand 2,573 2,477 2,309 Total Assets 20,471 17,088 12,464 Total Liabilities 11,743 10,175 6,586 Shareholders’ Equity 8,727 6,913 5,879 Operational Performance (Million Baht) Revenue from Sale of Real Estate 9,598 9,678 8,808 Revenue from Project Management Services 961 522 214 & Comission Income Total Revenues 11,025 10,580 9,228 Gross Profit 4,159 3,927 3,432 Selling & Administration& Other Expenses 2,166 2,063 2,136 Net Profit (Loss) 1,207 1,301 812 Value/Share (Baht/Share) Book Value Per Share 2.6 2.1 1.8 Earnings Per Share 0.36 0.39 0.24 Financial Ratios Return on Assets (%) 6.4 8.8 7.4 Return on Equity (%) 15.4 20.3 14.8 24 Gross Profit (%) 38.7 37.6 37.4 Net Profit (%) 10.9 12.3 8.8 D/E Ratio (times) 1.3 1.5 1.1 11,743 20,471 Revenues & Net Profit Revenue 25 from Sale of Real Estate CHAIRMAN’S STATEMENT After answering the call to service and spending a period of time as Minster of Energy in the Government of Thailand I am delighted to have returned to my former position of Chairman of Ananda Development Public Co., Ltd. Although I thought my time away from Ananda was brief I was astonished at the progress the company had made during this time. As an example, when I left, the company had announced four joint venture projects with our Japanese partner Mitsui Fudosan; on my return they had already announced a total of nine projects. My return to holding the Chairmanship of Ananda after a period away has been an opportunity for me to reflect upon what it is about Ananda that makes it so different from the many other property and other companies I have seen and worked with over my lifetime. Ananda is clearly a different kind of property company. What myself and the management team agree is that what makes Ananda different and the primary source of Ananda’s competitive advantage is the steady series of innovation that the company develops and introduces. This, I believe, is what sets Ananda apart and gives it a clear and sustainable competitive advantage that will last. Although other companies can also implement any innovation that Ananda introduces, what I know from experience is much more difficult to replicate, is a corporate culture that is able to produce, and more importantly implement a steady pipeline of innovation. A good example of this was the collaboration between Ananda and 26 Samsung Electronics this year. Our Siam Paragon sales event in August of this year had a very special mock up room that consisted of the very latest in Internet of Things Smart Home technology. And by very latest, it was so new that some parts weren’t even officially announced by Samsung until their own announcement at the Berlin Consumer Electronics Show in November. Since the Siam Paragon event Ananda and Samsung have been working together on joint research to understand how this technology can best help our customers and we will introduce Smart Home in to our buildings in 2016.