Tropicana Corporation Berhad Annual Report 2020

ANNUAL REPORT 2020 PERFORMANCE REVIEW TROPICANA CORPORATION BERHAD FINANCIAL HIGHLIGHTS & INSIGHTS In 2020, the global COVID-19 pandemic has imposed unprecedented disruptions on the Group’s operations where many governments around the world, including Malaysia, had imposed various phases of lockdown as a preventive measure to curb the outbreak. Despite the uncertainties brought on by the COVID-19 pandemic, the Group achieved a higher total sales of development properties of RM802.4 million for the financial year (“ FY ”) 2020 as compared to FY2019 on the back of an aggressive marketing and sales campaign, particularly via digital sales channels. The strong sales performance has sustained the Group’s unbilled sales at RM1,089.0 million as at 31 December 2020, where the level of such unbilled sales places the Group in a comfortable position to deliver sustainable earnings performance in the coming year. The Group’s revenue in FY2020 stood at RM1.06 billion compared to RM1.14 billion in FY2019. The performance was in line with expectations as the current economic environment has been very challenging and uncertain. The property market in Malaysia continues to face a multitude of headwinds such as the continued softening of the market, property overhang and housing loan eligibility issue, which has been further exacerbated by the unprecedented COVID-19 pandemic. However, the Group’s steady construction progress as well as the Malaysian Government initiatives such as the Home Ownership Campaign 2020 under the Short-Term Economic Recovery Plan (“ PENJANA ”) together with the reduction of the Overnight Policy Rate from 3.00% to 1.75% in FY2020 as an effort by Bank Negara Malaysia has partially mitigated these weak sentiments. The Group’s PBT decreased to RM238.4 million from RM367.5 million in FY2019 and profit attributable to owners of the parent in FY2020 was RM91.3 million compared to RM320.8 million in FY2019. The lower PBT and PATMI were mainly attributable to the recognition of a one-off gain on bargain purchase in FY2019 which arose when the Group acquired development lands held by twelve acquiree companies from a related party at a favourable price of an average discount of 13.4% to the market value of these Detailed analysis of the various business segments are as follows: Property Development & Property Management The property development and property management segments remain the key contributor to the Group’s revenue, generating RM901.7 million for the full financial year, increased by 0.1% or RM1.2 million from RM900.5 million in FY2019. The segmental operating profit was higher by 128.3% or RM241.8 million to RM430.2 million from RM188.4 million in FY2019. The higher segmental profit was contributed by recognition of one-off fair value gains on investment properties of RM150.9 million. Overall, this segment continued to be the main contributor to total Group revenue at 84.9%. Property Investment, Recreation & Resort The Group revenue from the property investment, recreation & resort segment recorded at RM95.3 million as compared to RM146.2 million in FY2019, which decreased by RM50.9 million or 34.8%. This was mainly due to many countries having imposed significant restrictions on people’s freedom of movement and on hospitality operations in order to curtail the COVID-19 pandemic which resulted in the hotels being closed for several months in FY2020. This segment reported a loss at RM110.6 million as compared to loss of RM64.0 million in FY2019 which was attributed to the one-off impairment loss of W KL and Courtyard by Marriott Penang amounting to a total of RM33.7 million. Overall, the base earnings from this segment continue to remain at sustainable levels through recurring incomes of its investment properties. Investment Holdings & Others The Group revenue from this segment stood at RM65.6 million in FY2020 as compared to RM89.1 million in FY2019; a decrease of RM23.5 million or 26.4%. The revenue from this segment continues to remain at sustainable levels which are contributed from a few subsidiaries namely Tropicana Building Materials Sdn Bhd, Tropicana Innovative Landscape Sdn Bhd and Tropicana SJII Education Management Sdn Bhd. The segmental profit has decreased significantly by RM324.3 million mainly contributed by the recognition of a one-off gain on bargain purchase in FY2019 subsequent to the completion of the corporate exercise in November 2019 whereby there was no such one-off gain in FY2020. Overall, our balance sheet as at 31 December 2020 remained strong with total cash and bank balances and total equity of RM621.9 million and RM5,759.3 million respectively. The Group is well positioned to continue implementing its planned growth strategies. The total equity of the Group improved by 2.0% or RM110.6 million to RM5,759.3 million as at 31 December 2020. The improvement was mainly due to the satisfactory performance and higher retention of the current profit. The gross gearing and net gearing of the Group has increased as compared to 31 December 2019 being 0.62x (2019: 0.45x) and 0.52x (2019: 0.31x) respectively due to issuance of Islamic Medium Term Notes of RM1,207.0 million during FY2020. The Group is expected to continue its satisfactory performance in FY2021 amid a more challenging business environment driven by the momentum created from the Group’s stellar performance in FY2020 and the various pipelines of on-going projects. While prospects for the property sector remains challenging in the short-term, the Group believes that there will still be demand for properties in prime locations that have accessibility to superb amenities and competitive pricing. lands and where the corporate exercise to acquire was completed in November 2019. Besides that, the results also reflected the challenges in the business environment amid the COVID-19 pandemic in FY2020. With unbilled sales of RM1,089.0 million and strategic approaches to unlock the value of 2,144.0 acres of prime land with potential gross development value in excess of RM77.0 billion, the Group is expected to be on track to register positive earnings in FY2020. Although the industry remains challenging in the short term, the Group believes that there will still be demand for properties in prime locations in Tropicana’s established, matured and developing townships, with attractive pricing and innovative ownership packages and offerings, especially first time house buyers. Therefore, the Group will continue to focus on being market-driven in its product offerings whilst continuing to unlock the value of its land bank, at strategic locations across the Klang Valley, Genting Highlands and Southern Regions. In FY2021, the Group plans to introduce new developments and phases across its signature Tropicana townships amounting to a GDV of approximately RM2.0 billion. The upcoming launches include the first phase of Tropicana Grandhill, the TwinPines Serviced Suites with fully furnished serviced apartments in Genting Highlands; Freesia Residences, a contemporary villa series comprising of Lake Villas and Park Villas at Tropicana Aman, Kota Kemuning; a mixed development comprising retail lots and serviced apartments at Tropicana Heights, Kajang; and Summit Commercial Hub, the latest vibrant business centre located at Tropicana Uplands in Gelang Patah, Johor. Key Financial Highlights for Financial Year Ended 31 December 2020 Group Financial Review FY2020 FY2019 RM’000 RM’000 Revenue 1,062,571 1,135,843 Profit before tax (“ PBT ”) 238,404 367,474 Profit attributable to owners of the parent (“ PATMI ”) 91,307 320,759 Group Capital Structure FY2020 FY2019 RM’000 RM’000 Shareholders’ Equity 4,706,181 4,661,982 Total Equity 5,759,306 5,648,688 Gross Borrowings 3,596,771 2,519,115 Cash and Bank Balances 621,892 754,949 Net Borrowings 2,974,879 1,764,166 Gross Gearing ratio 0.62 0.45 Net Gearing ratio 0.52 0.31 Net Assets Per Share (RM) 3.22 3.20 Total sales of RM802.4 million High unbilled sales of RM1,089.0 million 0.31x (2019) to 0.52x (2020) Net gearing increased from 070 071