INTEGRATED ANNUAL REPORT 2019 Creating Future Value CMS’ agenda of sustainability comes into its own in 2019 Group Chairman’s perspectives on performance, good governance Leveraging an evolved three-pronged strategy to create future value How CMS intends to support its strategic mandate and other essentials and bolster its competitive edge page 8 pages 12-17 & 90-97 pages 20-22 & 94-101 pages 22-25 SECTION 3: SECTION 1: SECTION 4: STRATEGIC BUSINESS CONTEXT WHO WE ARE THE WAY WE CREATE VALUE Some insights into where CMS has come from, where we are The market outlook and prospects for the Group, detailed today and what is material to us. insights into our strategy to create future value, plus the top risks we face and how we intend to overcome them. 4 WHO WE ARE TODAY 6 CORPORATE INFORMATION 86 MARKET OUTLOOK FOR 2020 7 CORPORATE STRUCTURE 88 DELIVERING VALUE TO SOCIETY AND RETURNS TO 8 DETERMINING WHAT IS MATERIAL TO CMS PAGE 4 OUR SHAREHOLDERS WHO WE 90 CREATING FUTURE VALUE ARE TODAY 98 TOP BUSINESS RISKS AND MITIGATION STRATEGIES SECTION 2: PAGE 90 AT A GLANCE CREATING Snippets of our 2019 performance and the achievements we PAGE 10 FUTURE VALUE are proud of. OUR 2019 PERFORMANCE 10 OUR 2019 PERFORMANCE HIGHLIGHTS HIGHLIGHTS SECTION 5: AND ACHIEVEMENTS AND ACHIEVEMENTS GOVERNANCE & RISK MANAGEMENT Insights into how CMS continues to uphold transparent and ethical business practices, an overview of the Group’s leadership SECTION 3: bench, as well as the details of our good governance and robust STRATEGIC BUSINESS CONTEXT risk management practices. Leadership perspectives on the year that was 2019, our financial and operational performance, plus the Group’s strategy moving 102 GROUP CHAIRMAN’S PERSPECTIVE forward. 105 EXPERIENCED, EFFECTIVE AND DIVERSE LEADERSHIP 113 DELIVERING OUR STRATEGY, DRIVING PERFORMANCE LEADERSHIP STATEMENTS 120 OUR GOVERNANCE FRAMEWORK 12 GROUP CHAIRMAN’S MESSAGE PAGE 12 138 STATEMENT ON RISK MANAGEMENT AND 18 STRATEGIC REVIEW BY GROUP INTERNAL CONTROL THE GROUP MANAGING DIRECTOR CHAIRMAN’S 144 ADDITIONAL COMPLIANCE INFORMATION MESSAGE 145 STATEMENT OF DIRECTORS’ RESPONSIBILITY FINANCIAL REVIEW 26 FINANCIAL OVERVIEW BY THE GROUP CHIEF FINANCIAL OFFICER 34 FIVE-YEAR GROUP FINANCIAL HIGHLIGHTS PAGE 102 35 FIVE-YEAR GROUP FINANCIAL SUMMARY GROUP 36 STATEMENTS OF PROFIT OR LOSS AND OTHER CHAIRMAN’S COMPREHENSIVE INCOME PERSPECTIVE 37 STATEMENTS OF FINANCIAL POSITION 39 STATEMENTS OF CASH FLOWS PAGE 18 SECTION 6: OPERATIONAL REVIEW STRATEGIC REVIEW ADDITIONAL INFORMATION 42 CEMENT DIVISION BY THE GROUP A summary of the Group’s stable of properties and other relevant 46 CONSTRUCTION MATERIALS & TRADING DIVISION MANAGING DIRECTOR company information. 50 CONSTRUCTION & ROAD MAINTENANCE DIVISION 52 PROPERTY DEVELOPMENT DIVISION 146 LIST OF PROPERTIES 58 SAMALAJU DEVELOPMENT DIVISION 152 CMS GROUP DIRECTORY 60 STRATEGIC INVESTMENTS 156 ANALYSIS OF SHAREHOLDINGS 72 NURTURING PEOPLE, SUSTAINING COMMUNITIES 82 TAPPING INNOVATION TO PRESERVE OUR ENVIRONMENT PAGE 26 FINANCIAL OVERVIEW PAGE 146 BY THE GROUP CHIEF LIST OF FINANCIAL OFFICER PROPERTIES The Cover Rationale “Creating Future Value” The year 2019 was a highly challenging one characterised by sluggish economic growth made worse by external and domestic headwinds. Despite the year’s tough operating Today, CMS is well primed to create future value as we leverage on a three-pronged strategy. The first prong of this strategy calls for us to reposition and fortify all traditional conditions, Team CMS delivered a resilient performance. Adapting quickly to marketplace changes, our people maintained a steadfast focus on their targets and the Group’s core businesses; the second prong mandates that we fully implement and grow our strategic businesses; while the third prong dictates that we work to reposition and strengthen strategic direction to ensure CMS remained relevant to its market segments. We also streamlined our top management to give it more clarity and focus. At the same time, we raised the CMS brand. the engagement levels across all our audiences, speaking at length about the positive developments within the Company and the strategic measures we are bringing into play to secure the future of the Group. By fine-tuning our strategies and strengthening our fundamentals, CMS has been laying solid foundations that will result in the creation of future Moving forward, CMS remains one of the best proxy-investment for Sarawak’s accelerating economic growth. We are well-positioned to benefit from the key economic growth value for the Group. drivers within the State. These include the energy-intensive industries under SCORE; impactful infrastructure development projects; upcoming water and electricity grid projects; as well as the rollout of Sarawak’s Digital Economy initiative. By leveraging on our three-pronged strategy, continuously reinvesting into our core competencies, and capitalising The cover design of our 2019 Integrated Annual Report seeks to conceptually convey the idea of expansion, growth and progress emanating from a single source. With CMS on the State’s key economic growth drivers, we are confident that we will continue to create good value for our stakeholders, as well as establish a long-term, sustainable growth representing that source, the Group is seen to be creating waves of value as we expand outwards from the centre. pathway for both CMS and Sarawak. ABOUT FORWARD-LOOKING STATEMENT This Report contains forward-looking statements characterised by the use of words and phrases such as “might”, “forecast”, “anticipate”, “project”, “may”, “believe”, “predict”, “expect”, “continue”, “will”, “estimate”, “target”, and other similar expressions. As our business operates THIS REPORT in a changing environment, it is subject to uncertainties that could cause actual results to differ from those reflected in any forward-looking statement. OUR REPORTING PHILOSOPHY REPORTING BOUNDARY AND SCOPE MATERIALITY AND Welcome to Cahya Mata Sarawak’s CMS’ 2019 Integrated Annual Report goes beyond FORWARD-LOOKING REPORTING SUITE FOR 2019 NAVIGATION AND ICONS Integrated Annual Report for Financial Year financial reporting to encompass our non-financial STATEMENT performance, as well as the opportunities, risks For the 2019 reporting cycle, the Group’s value creation process is articulated within a coherent framework (in terms of content and graphics) as 2019 (FY 2019). In this second Integrated and outcomes attributable to or associated with our per the following reporting suite: Annual Report, we seek to present a concise key stakeholders, all of which have a significant Materiality yet comprehensive account of our business influence on our ability to create value. Back in November 2018, we and strategies, as well as demonstrate how conducted a materiality analysis we are continuing to create real value for Our 2019 Integrated Annual Report covers the of our business to gain a better understanding of topics that were our stakeholders over the short, medium period 1 January to 31 December 2019 and builds upon our previous publications. It encompasses the of importance to both CMS and and long-term. primary activities of the CMS Group, namely the its stakeholders. We then went on activities of our five main business divisions and to fine-tune our sustainability efforts This year, we have sought to strengthen our Report our strategic investments. to align with the findings of 2018’s by bringing several new strategic elements into analysis. As we revisited our material play. This includes a new Creating Future Value CMS’ main business divisions comprise the Cement, matters, we also explored the best section that sums up the Group’s three-pronged Construction Materials & Trading, Construction & way to link them to our six capitals, strategy, the key strengths and drivers of our Road Maintenance, Property Development and namely: diverse businesses, as well as several other tangible Samalaju Development Divisions. We also provide elements that will support us in our journey towards Reporting Suite Integrated Annual Report 2019 Sustainability Report 2019 Corporate Governance Report 2019 Audited Financial Statements 2019 an overview of the performance of our Unlisted and sustainable value creation. By portraying our value Listed Associates under our Strategic Investments Reporting • MCCG 2017 • Main Market Listing • MCCG 2017 • IFRS/MFRS creation story in a more formal and transparent Framework portfolio. • Main Market Listing Requirements of Bursa • Main Market Listing • Main Market Listing manner, we intend to bolster the confidence of Financial Capital Requirements of Bursa Malaysia Securities Requirements of Bursa Requirements of Bursa our discerning stakeholders and reinforce CMS’ Malaysia Securities Berhad Malaysia Securities Malaysia Securities status as a preferred company on Bursa Malaysia Berhad • GRI Standards Berhad Berhad Securities Berhad (Bursa Malaysia). Our hope is • IIRC Framework • FTSE4Good Bursa • CA 2016 • CA 2016 REPORTING FRAMEWORKS that our stakeholders will see the good headway • CA 2016 Malaysia Index we are making as we advance forward on our • MSCI ESG Indexes/DJSI Our 2019 Integrated Annual Report complies with Human Capital formal Integrated Reporting journey. prevailing listing regulations and is in accordance with the IIRC’s International <IR> Framework. We We are pleased to join the ranks of thousands apply and take into account the amendments to of companies globally who have published their the Listing Requirements relating to Corporate