SMRT CORPORATION LTD Annual Report 2008 BRAVE NEW DAWN CONTENTS 1 Introduction 14 Group Financial Highlights 16 At a Glance 18 Chairman’s Message 22 Board of Directors 26 Senior Management 30 Organisation Structure 31 Group Structure 32 Corporate Information 33 Corporate Governance 51 Investor Relations 55 Corporate Social Responsibility 62 Signifi cant Events 64 Operating and Financial Review 66 New Routes For Growth 68 Company Overview, Business Objectives 69 Background – Regulatory Framework 71 Group Performance Overview 71 Segmental Performance 72 Discussion and Analysis on Income Statements 73 Quarterly Results 74 Discussion and Analysis on Balance Sheets 74 Capital Expenditure 74 Cashfl ow 75 Capital Structure and Funding 75 Dividend Policy 76 Shareholder Returns 77 Economic Value Added Statement 78 Value Added Statement 79 Productivity Analysis 80 Key Dynamics and Risk Management 82 Sensitivity Analysis 82 Outlook for FY2009 84 SMRT Trains & SMRT Light Rail 93 SMRT Buses 99 SMRT Taxis 103 SMRT Investments (Properties & Media) 106 SMRT Engineering 109 Financial Report 168 Group Properties and Interested Person Transactions 169 Shareholding Statistics 170 Notice of Annual General Meeting 175 Proxy Form Directory of Subsidiaries and Associated Companies VISION CORE VALUES Moving People, Enhancing Lives • Excellence • Respect, Responsibility MISSION and Recognition To be the customer’s choice by • Commitment to the Public, providing a safe, reliable and Shareholders and Employees friendly travel experience that is enhanced through convenient and innovative services SMRT Corporation Ltd (SMRT) is a leading multi-modal public transport operator and a transport engineering and service solutions provider. Established in 1987 and listed on the Singapore Exchange since 2000, SMRT has a market capitalisation of more than $2.5 billion backed by total assets of $1.4 billion. Our annual turnover stands at $802.1 million. In our core transport business in Singapore, our suite of train, bus and taxi services make a positive commuting experience for the public while lifestyle services within our stations bring convenience to our customers. Defi ning our non-fare business are our growing interests in the provision of taxi services, leasing of commercial spaces, advertising within our network, operations and maintenance services, project management and engineering consultancy. A market leader, SMRT continues to distinguish itself through sound corporate governance and transparent practices. In managing its businesses and driving community initiatives, SMRT’s focus is clearly on sustainable development. BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 1 A brave new world awaits us. One where commuters will have a bigger say than ever before. Where keener competition will be felt all round. And where increased frequency and integration of services will demand even greater efficiencyeffi ciency from us. Here at SMRT, we see these challenges as golden opportunities to grow the company further. It is common knowledge that tomorrow starts now. For us, tomorrow starts this very second. 2 BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 5.20am BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 3 Picking Up The Early Birds 6.45am 4 BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 Service guides that make journey planning a joy, express services that shorten travel time: gearing for growth with a premium touch. “ Every morning I meet this Service Leader who greets every passenger “Good Morning”. This is the kind of Service Leader that lifts the image of Singapore and gives bus riding a whole new feeling. ” BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 5 Breezing Through 8.35am 6 BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 Staying focused on the customer with more than 700 additional train trips, enhanced station ambience, and greater selection of lifestyle conveniences – all within the network. “ My experience with your staff has impressed upon me the quality of the SMRT Corporation. I like the professionalism and helpfulness. ” BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 7 Pulling Power 12.00pm Partnering business owners, offering them spaces that add buzz and platforms to stir the imagination and in so doing, enrich the travel experience. 8 BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 “ Our presence in the SMRT system dovetails with SMRT’s own strategy to add value to the commuter experience, realise the value of SMRT’s unique real estate assets, and to strengthen the attractiveness of SMRT’s retail precincts as lifestyle destinations. ” BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 9 Going the Distance 4.00pm Supporting partners through innovative hirer schemes, comprehensive incentive packages and creative customer promotions. 10 BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 “ We recently adjusted our shift timing with the last shift ending at 1 am. SMRT Taxis helped with the transport arrangements and their staff went the extra mile by being present to ensure the transportation arrangements ran smoothly. ” BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 11 3.35am While You Were Sleeping 12 BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 “ Maintenance crew checks, repairs and gives the all-clear every morning before the sun rises. By the time the fi rst train leaves the depot, everything would have been ironed out. ” Continuing focus on engineering excellence to maintain the highest standards of system reliability and performance. BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 13 Group Financial Highlights FY2008 Financial Performance REVENUE 7.9% increase from $743.1m in FY2007 $802.1m PATMI $149.9m 10.7% increase from $135.4m in FY2007 EPS ¢ 10.0% increase from 9.0 cents per share in FY2007 9.9 EVA $103.3m 33.3% increase from $77.5m in FY2007 CASH AND CASH EQUIVALENTS 37.1% increase from $169.6m in FY2007 $232.5m NET DIVIDEND PER SHARE ¢ 10.7% increase from 7.00 cents 7.75 in FY2007 Revenue PATMI Cash and Cash Equivalents Basic EPS $m $m $m ¢ 149.9 9.9 1000 150 300 10 135.4 9.0 126.7 263.0 8.4 802.1 250 800 743.1 120 232.5 8 711.7 673.5 103.4 6.9 667.3 89.5 200 6.0 600 90 169.6 6 150 131.7 400 60 4 100 72.0 30 200 50 2 0 0 0 0 FY08 FY07 FY06 FY05 FY04 FY08 FY07 FY06 FY05 FY04 FY08 FY07 FY06 FY05 FY04 FY08 FY07 FY06 FY05 FY04 14 BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 FOR THE YEAR $m FY2008 FY2007 FY2006 FY2005 FY2004 Revenue 802.1 743.1 711.7 673.5 667.3 Profi t EBITDA 1 284.1 255.0 247.2 230.0 225.5 Operating profi t 178.0 145.3 138.8 92.8 99.3 Before tax 176.2 142.3 124.1 83.9 86.2 After tax 149.9 135.8 103.6 126.6 90.2 PATMI 2 149.9 135.4 103.4 126.7 89.5 Capital expenditure 118.3 107.9 89.9 138.6 33.4 Cash from operations 286.9 296.7 247.5 223.8 234.6 Free cash fl ow 51.5 110.3 60.0 1.5 157.1 Economic value added (EVA) 103.3 77.5 61.9 47.6 24.6 Financial ratios EBIT margin (%) 22.2 19.5 19.5 13.8 14.9 Net profi t margin (%) 18.7 18.3 14.6 18.8 13.5 Interest cover (times) 35.4 25.7 25.6 16.5 14.3 AT YEAR-END $m FY2008 FY2007 FY2006 FY2005 FY2004 Cash and cash equivalents 232.5 169.6 131.7 72.0 263.0 Short-term and long-term borrowings 250.0 250.0 300.0 300.0 500.0 Shareholders’ funds 677.1 640.2 586.0 553.1 480.7 Net gearing (times) 3 0.03 0.13 0.29 0.41 0.49 PER SHARE Cents FY2008 FY2007 FY2006 FY2005 FY2004 Basic earnings per share (EPS) 9.9 9.0 6.9 8.4 6.0 Net asset value 4 44.7 42.3 38.8 36.8 32.0 Net tangible assets 5 41.9 39.6 36.1 34.0 27.8 SHAREHOLDERS’ RETURN FY2008 FY2007 FY2006 FY2005 FY2004 Gross dividend (cents) 7.75 7.25 7.0 6.5 4.5 Net dividend (cents) 7.75 7.00 5.6 5.2 3.6 Share price at year-end ($) 1.82 1.49 1.12 0.93 0.60 Total shareholder return (%) 6 26.6 39.1 26.9 63.6 23.0 Return on total assets (%) 10.6 9.8 7.5 8.6 5.6 Return on equity (%) 7 22.8 22.1 18.2 24.5 19.7 Notes: 1 EBITDA – Earnings before interest, tax, depreciation and amortisation 2 Profi t after tax and minority interests 3 Net gearing = (total borrowings – cash and cash equivalents) / total equity 4 Net asset value per share excludes minority interests 5 Net tangible assets per share excludes goodwill on consolidation 6 Total shareholder return = capital gain % (based on end-of-year share price) + dividend yield 7 Return on equity = PATMI / average equity BRAVE NEW DAWN — SMRT Corporation Ltd Annual Report 2008 15 At a Glance MRT LRT BUSES Facts • Operates Singapore’s fi rst • Operates Singapore’s fi rst • Operates a fl eet of more than Mass Rapid Transit (MRT) fully-automated Light Rapid 860 buses from three leased system (North South and Transit (LRT) system which depots and six interchanges East West lines) which commenced in 1999 • Provides 83 bus services commenced in 1987 • Network comprises 7.8 between the Western and • Runs and maintains 89.4 kilometres of elevated North-Western areas and the kilometres of double track guideways linking 14 rest of Singapore along 51 stations stations in Bukit Panjang Highlights in FY2008 • Full-year FY2008 ridership • Full-year FY2008 ridership • Full-year FY2008 ridership grew 7.9% to 469.3 million increased 5.7% to 15.1 increased 2.6% to 277.3 million from 434.9 million in FY2007 million from 14.3 million from 270.3 million in FY2007 • Received Best Passenger in FY2007 • Fare increase of 1.8% approved Experience Award at the by Public Transport Council international Metro Awards • Completed mid-life upgrade of 2008 at MetroRail 2008 and 179 buses and purchased Most Customer-Friendly