ANNUAL REPORT ABOUT US Hap Seng Consolidated Berhad (“HSCB”) is a public company listed on the Main Market of Bursa Malaysia Securities Berhad. HSCB is a diversified group with six core businesses namely plantation, property investment & development, credit financing, automotive, trading and building materials. Progressive and forward-looking, the Group’s emphasis on value creation, operational excellence and sustainability has enabled the Group to consistently deliver value to our shareholders. OUR SIX BUSINESS DIVISIONS 44TH ANNUAL GENERAL MEETING Broadcast Venue Kinabalu Room, Ground Floor Menara Hap Seng Jalan P. Ramlee 50250 Kuala Lumpur, Malaysia Date Thursday, 2 July 2020 PLANTATION AUTOMOTIVE Time 10.00 a.m. MISSION STATEMENTS To provide quality products and excellent services that differentiates us from others. PROPERTY INVESTMENT To be the preferred partner & DEVELOPMENT TRADING and promote win-win business relationships. To achieve sustainable growth and returns for our shareholders over the long term. To be the employer of choice. To be a good corporate CREDIT BUILDING citizen in harmony with FINANCING MATERIALS the environment and the communities we serve. CONTENTS CORPORATE INFORMATION SUSTAINABILITY STATEMENT 02 Corporate Information 87 Sustainability at Hap Seng Group Creating Value for All OUR PERFORMANCE REVIEW 03 Group Financial Highlights DIRECTORS’ RESPONSIBILITY STATEMENT 06 Management Discussion & Analysis 140 Directors’ Responsibility Statement • The Group • The Vision FINANCIAL STATEMENTS AND • Strategies in Creating Value OTHER INFORMATION • Market Landscape 141 Financial Statements • Financial Review 312 Additional Information • Segmental Performance Highlights 316 Particulars of Top Ten Properties of the Group - Plantation 319 Plantation Statistics - Property Investment & Development 321 Analysis of Shareholdings - Credit Financing 324 Director’s Shareholdings - Automotive 325 Notice of Annual General Meeting - Trading Proxy Form - Building Materials • Anticipated or Known Risks • Moving Forward • Acknowledgements HOW WE ARE GOVERNED 48 Board of Directors 49 Directors’ Profile 58 Senior Management Team 59 Senior Management Team’s Profile 64 Corporate Governance Overview Statement 75 Audit Committee Report 77 Nominating Committee Report 79 Remuneration Committee Report 80 Statement on Risk Management and Internal Control HAP SENG CONSOLIDATED BERHAD | ANNUAL REPORT 2019 1 CORPORATE INFORMATION BOARD OF DIRECTORS COMPANY SECRETARY AUDITORS Lim Guan Nee (MAICSA 7009321) Ernst & Young PLT Thomas Karl Rapp SSM Practising Certificate No.: Independent Non-Executive Chairman 202006000003 (LLP0022760-LCA) 202008003410 & AF 0039 Chartered Accountants Datuk Edward Lee Ming Foo, JP Level 23A, Menara Milenium Managing Director REGISTERED OFFICE Jalan Damanlela, Pusat Bandar Damansara 21st Floor, Menara Hap Seng 50490 Kuala Lumpur Lee Wee Yong Jalan P. Ramlee Executive Director 50250 Kuala Lumpur PRINCIPAL BANKERS Tel : 603-2172 5228 Cheah Yee Leng Fax : 603-2172 5286 Executive Director Malayan Banking Berhad E-mail : [email protected] Public Bank Berhad Website : www.hapseng.com RHB Bank Berhad Datuk Simon Shim Kong Yip, JP United Overseas Bank (Malaysia) Non-Independent Non-Executive Berhad Director PLACE OF INCORPORATION OCBC Bank (Malaysia) Berhad HSBC Bank Malaysia Berhad Malaysia Lt Gen (R) Datuk Abdul Aziz Hong Leong Bank Berhad Bin Hasan CIMB Bank Berhad Independent Non-Executive Director SHARE REGISTRAR AmBank (M) Berhad Affin Bank Berhad Boardroom Share Registrars Leow Ming Fong @ Sdn Bhd Leow Min Fong Registration No.: 199601006647 GROUP Independent Non-Executive Director (378993-D) Hap Seng Consolidated Berhad 11th Floor, Menara Symphony together with its subsidiaries Dato’ Wan Mohd Fadzmi No. 5, Jalan Prof. Khoo Kay Kim Bin Che Wan Othman Fadzilah Seksyen 13, 46200 Petaling Jaya Independent Non-Executive Director Selangor Darul Ehsan Tel : 603-7890 4700 Tan Boon Peng Fax : 603-7890 4670 Independent Non-Executive Director 2 ANNUAL REPORT 2019 | HAP SENG CONSOLIDATED BERHAD GROUP FINANCIAL HIGHLIGHTS FINANCIAL YEAR ENDED 31 DECEMBER 2015 2016 2017* 2018 2019 INCOME (RM’000) Revenue 4,393,338 4,891,714 5,293,993 6,246,519 7,096,067 Profit before interest and tax 1,221,408 1,364,423 1,508,877 1,558,123 1,710,592 Profit before tax 1,117,596 1,244,935 1,375,897 1,394,178 1,476,813 Profit attributable to owners of the Company 908,473 1,000,960 1,098,923 1,145,608 1,162,871 FINANCIAL POSITION (RM’000) Assets Total assets 10,034,932 11,725,461 13,169,322 15,575,804 17,372,884 Net assets 4,242,648 5,490,676 6,137,861 7,025,388 7,340,166 Current assets 3,951,443 5,105,674 5,397,418 7,092,661 7,878,204 Liabilities Current liabilities 3,114,414 3,433,667 3,976,766 3,832,530 5,022,768 Borrowings 4,191,936 4,425,247 4,478,875 5,428,983 6,381,186 Borrowings (net of money market deposits and cash) 3,678,562 3,386,227 3,739,628 3,788,635 4,073,624 Shareholders’ Equity Paid-up share capital 2,249,731 2,489,682 3,519,554 3,519,554 3,519,554 Shareholders’ equity 4,242,648 5,490,676 6,137,861 7,025,388 7,340,166 Total equity 4,841,394 6,122,455 7,107,201 8,296,743 8,618,856 Total equity (excluding intangible assets) 4,749,719 6,037,306 7,070,465 8,243,896 8,575,053 Number of shares - Weighted average shares in issue net of treasury shares (’000) 2,149,824 2,362,902 2,489,679 2,489,674 2,489,670 - Shares in issue net of treasury shares (’000) 2,156,672 2,489,680 2,489,676 2,489,672 2,489,670 SHARE INFORMATION Per share Basic earnings (sen)# 42.26 42.36 44.14 46.01 46.71 Net assets (RM)@ 1.97 2.21 2.47 2.82 2.95 Dividend (sen) 30.00 35.00 35.00 35.00 35.00 Share price - Year High (RM) 6.70 8.93 9.79 10.20 10.26 - Year Low (RM) 3.55 6.40 8.53 8.70 9.45 - As at 31 December (RM) 6.48 8.86 9.55 9.85 9.98 Market capitalisation (RM’000) 13,975,235 22,058,561 23,776,406 24,523,269 24,846,907 Trading volume (’000) 412,039 362,662 101,444 120,484 102,267 FINANCIAL RATIOS Return on total assets (%) 9.05 8.54 8.34 7.36 6.69 Return on shareholders’ equity (%) 21.41 18.23 17.90 16.31 15.84 Current ratio (times) 1.27 1.49 1.36 1.85 1.57 Net Debt-to-Equity ratio (times)^ 0.77 0.56 0.53 0.46 0.48 * The figures for financial year ended 31 December 2017 have been restated to reflect the application of the Malaysian Financial Reporting Standards framework # Based on weighted average number of shares in issue net of treasury shares (’000) @ Based on number of shares in issue net of treasury shares (’000) ^ Net Debt-to-Equity ratio is computed based on borrowings (net of money market deposits and cash and bank balances) and total equity (excluding intangible assets) HAP SENG CONSOLIDATED BERHAD | ANNUAL REPORT 2019 3 GROUP FINANCIAL HIGHLIGHTS DIVIDEND PER SHARE SHAREHOLDERS’ EQUITY (sen) (RM’million) 7,340.17 7,025.39 35.00 35.00 35.00 35.00 30.00 6,137.86 5,490.68 4,242.65 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 CURRENT RATIO NET DEBT-TO-EQUITY RATIO (times) (times) 0.77 1.85 0.56 0.53 0.48 1.57 1.49 0.46 1.36 1.27 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 4 ANNUAL REPORT 2019 | HAP SENG CONSOLIDATED BERHAD GROUP FINANCIAL HIGHLIGHTS REVENUE PROFIT BEFORE TAX (RM’million) (RM’million) 1,476.8 7,096.1 6,246.5 1,394.2 1,375.9 5,294.0 4,891.7 1,244.9 4,393.3 1,117.6 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 TOTAL ASSETS/NET ASSETS BASIC EARNINGS PER SHARE/ (RM’million) NET ASSETS PER SHARE 46.71 46.01 17,372.9 44.14 15,575.8 42.36 42.26 13,169.3 11,725.5 10,034.9 7,340.2 2.95 2.82 7,025.4 2.47 6,137.9 2.21 5,490.7 1.97 4,242.6 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Total Assets Net Assets Basic earnings per share (sen) Net assets per share (RM) HAP SENG CONSOLIDATED BERHAD | ANNUAL REPORT 2019 5 MANAGEMENT DISCUSSION & ANALYSIS Group Financial Information GROUP REVENUE RM7,096.1 million PROFIT BEFORE TAX RM1,476.8 million GROUP EARNINGS PER SHARE 46.71 sen THE GROUP STRATEGIES IN CREATING VALUE Hap Seng Consolidated Berhad is a diversified group with The Group will continue to build on its six core six core businesses – plantation, property investment businesses by leveraging on its competencies and and development, credit financing, automotive, trading strong market presence. The Group will also continue and building materials. to seek growth opportunities in new product offerings and markets, either directly or through strategic tie- The Group’s operations are predominantly in Malaysia, ups with existing as well as new partnerships. with market presence in four overseas countries, namely Singapore, Indonesia, China and the United Kingdom. The Group believes in adhering to industry best practices in its operations and will continue to optimise VISION operational efficiency and effectiveness in order to derive maximum value from its products and services. Creating Value Together A key strength of the Group is the synergistic value The Group strives to create value together with all its of its core businesses. The Group shall continue to stakeholders, including its shareholders, customers, leverage on these synergies by capitalising on the business partners and employees, by fostering extensive business networks and customer base of partnerships built on trust and confidence.