performance S P SETIA BHD 197401002663 (19698-X) innovation people land banks markets UNLOCKING VALUE Integrated Report 2019 Integrated Report 2019 | S P SETIA BERHAD ABOUT OUR REPORT This report provides information that we believe is of material interest to stakeholders who wish to make an informed assessment of S P Setia Berhad (“S P Setia” or “Company”) ability to generate value in the short, medium and long-term. We have sought to ensure that all information in this report relates to matters that have material bearing on value creation at the Company. It is supplemented by documents published as part of our annual results announcement on our website and the disclosures outlined below. SCOPE AND BOUNDARY APPROVAL BY THE BOARD This Integrated Report encapsulates material information The Board acknowledges its responsibility for the integrity encompassing our strategy and business model, operating of this report. The Directors confirm that they have contexts, material risks, stakeholder interests, performance, collectively assessed the content and believe it addresses prospects and governance from 1 January 2019 until the material matters that substantively affect the 31 December 2019 unless otherwise stated. All financial organisation’s ability to create value over the short, medium statements have been prepared in accordance with the and long-term performance of the Company. This report requirements of the Companies Act 2016 (“CA 2016”) has been presented in accordance with IIRF and is Navigation Icons UNLOCKING and the Malaysian Financial Reporting Standards (“MFRS”). recommended for approval by the Board. Financial Capital REPORTING FRAMEWORK OUR CAPITAL S P Setia Berhad continues to be market-driven Manufactured Capital VALUE In producing this report, we are guided by the International and focused on unlocking value for our business. Financial Capital This Integrated Report is available at Integrated Reporting (“IR”) Framework as well as the Main www.spsetia.com Human Capital As a leading property developer and investment Market Listing Requirements (“MMLR”) of Bursa Malaysia The pool of funds supporting business operations. company, we continue to set the bar in Malaysia’s Securities Berhad (“Bursa Securities”), the CA 2016, and Intellectual Capital property market by taking on new challenges, the Malaysian Code on Corporate Governance (“MCCG”). Manufactured Capital not only in Malaysia but also globally. Social and Relationship Capital OUR TARGETED READERS Manufactured capital refers to our assets, business structure and operational processes, including our This Integrated Report is prepared to cater to the information To unlock greater value, we are adding strength digital and IT infrastructure, that provide the framework Natural Capital needs of our shareholders and the investment community and mechanics of how we do business. to our real estate portfolio by seeking out new at large. It also provides relevant information to other opportunities and venturing into new markets. stakeholders – such as our customers, employees, partners Material Matters Our global expansion aspirations continue as and regulators – who are interested in how we create Human Capital Identification value for them. we embark on our first development in Japan. The competencies, capabilities and experience of our We are also keen to unlock value through new employees and how they innovate, collaborate and Prioritisation MATERIALITY project launches in our flagship townships in align with our objectives. In presenting the information, we have been guided by the Klang Valley and Johor. Validation matters that are material to our targeted readers. These Intellectual Capital matters were identified, prioritised and validated via a Powered by Team Setia, we are focused on four-step materiality assessment. Intellectual capital refers to our brand and franchise Cross References quality and sustainability as we strive to meet value, research and development, innovation capacity, Tells you where you can our reputation, as well as the strategic partnerships find more information customer expectations in both our services and ASSURANCE within the report we forge. products. S P Setia Berhad remains committed The report development process is supported by our robust internal controls and good governance practices. Assurance Tells you where you can to delivering excellence in everything we do as find more information for this report is provided by our management and Board Social and Relationship Capital online at www.spsetia.com well as ensuring long-term value to our of Directors (“Board”), supported by external verification by The strong relationships we create through regular stakeholders. Ernst & Young PLT Malaysia, our auditors for financial engagements with all our key stakeholders. information and providers of limited assurance on the selected non-financial information. Natural Capital FORWARD-LOOKING STATEMENTS Renewable and non-renewable resources consumed by the Company. This report contains certain forward-looking statements relating to future performance and prospects. While these statements represent our judgements and future expectations at the time of preparing this report, a number of emerging risks, uncertainties and other important factors could cause actual results to differ materially from our expectations. These include factors that could adversely affect our business and financial performance. About Our Report KEY MESSAGE 6 Chairman’s Message pg 6 pg 21 pg 88 pg 121 OVERVIEW CHAIRMAN’S BUSINESS SUSTAINABILITY GOVERNANCE 12 Who We Are MESSAGE HIGHLIGHTS STATEMENT 12 Vision, Mission and Values 13 What We Do 14 Where We Operate 16 Our Property Portfolio 18 Why Invest In Us 18 What Differentiates Us 19 Our Stakeholders MANAGEMENT DISCUSSION & ANALYSIS SUSTAINABILITY STATEMENT 19 Our Shareholders Strategic Review 121 Sustainability Statement Our Operating Environment 134 Economic KEY HIGHLIGHTS 32 33 Key Risks and Mitigation 140 Environmental 20 Financial Highlights 34 Stakeholder Engagement 148 Social 21 Business Highlights 35 Material Matters 167 Sustainability Statement Mapping 22 Accolades to GRI 24 Our Value Creation Model Performance Review 26 Corporate Structure FINANCIAL STATEMENTS 5-Year Financial Summary 29 Corporate Information 36 37 5-Year Financial Highlights 170 Corporate Information 38 Investor Information 171 Directors’ Report 177 Statements of Financial Position Business Review 179 Statements of Comprehensive Income 180 Consolidated Statement of Changes 41 Key Developments in 2019 WHAT’S in Equity 43 Financial Review 182 Statement of Changes In Equity 44 Project Updates 184 Statements of Cash Flows 44 Malaysia 188 Notes to the Financial Statements 63 International INSIDE 310 Statement by Directors 310 Statutory Declaration ENSURING INTEGRITY & GOVERNANCE 311 Independent Auditors’ Report 68 Our People Board at A Glance 69 SHAREHOLDERS’ INFORMATION 70 Profile of Board of Directors 317 Analysis of Shareholdings 80 Key Management Team 323 List of Material Properties Held 86 Organisation Structure by the Group 324 Group Directory GOVERNANCE 88 Chairman’s Introduction to Corporate Governance 90 Corporate Governance Overview Statement 93 Nomination and Remuneration Committee Report 98 Audit Committee Report 104 Directors’ Training 107 Additional Compliance Information 112 Statement on Risk Management and Internal Control 01 Key Message 6 Chairman’s Message Key Message Overview Key Highlights Management Discussion & Analysis Ensuring Integrity & Governance Governance Sustainability Statement Financial Statements Shareholders’ Information CHAIRMAN’S MESSAGE OVERVIEW The property industry in Malaysia continued to be very challenging due to a contraction in the economy, sluggish wage growth, and increasing cost of living. Together with stringent loan requirements by banks, Malaysians were hesitant to make purchases of big-ticket items, including homes. To spur the market, and help reduce the overhang, the Government ran a year-long Home Ownership Campaign (“HOC”), exempting buyers from stamp duties and offering discounts on the list price of selected properties. S P Setia Berhad was also a beneficiary of the HOC, reaping RM1.82 billion in sales from the campaign. This, together with healthy sales in a number of our new launches, saw us surpass our sales target of RM4.55 billion, with total sales of RM4.56 billion. MEETING MARKET NEEDS A key advantage of being a township developer is the ability to align our product launches with market needs and trends. As a result of engaging with our customers and potential buyers, and observing purchasing behaviour, we had determined that the most significant demand in the Malaysian market was for mid-priced landed properties. DEAR VALUED We therefore, focused on this particular segment and were SHAREHOLDERS, pleased with the results. A number of our new offerings during the year were IT GIVES ME GREAT PLEASURE TO PRESENT AN entirely taken up on the day or weekend of their launches while others achieved strong take-up rates, especially in Setia Sky Ville, Penang ACCOUNT OF THE PERFORMANCE OF S P SETIA our established townships of Setia Alam, Setia Eco Park, BERHAD FOR THE FINANCIAL YEAR 2019. Setia Eco Glades, Bandar Kinrara, Alam Impian and Setia Alamsari in the Central region. Setia Tropika and Bukit Indah, in the Southern region, and Setia Fontaines on DESPITE THE INDUSTRY CHALLENGES DURING Penang mainland also performed well. Our sales clearly THE YEAR, NOT JUST IN MALAYSIA BUT ALSO demonstrated