Management Discussion and Analysis

Transcription

1 24 Annual Report 2017 Management Discussion and Analysis Overview of the Group s Business and Operations JKG Land Berhad Group ( JKG or the Group ) is involved in property development, cultivation of oil palm and investment holding. However, property development contributes significantly to the Group s results. JKG has approximately 1,268 acres of land bank out of which 255 acres are on-going mixed developments in progress, 65 acres have been approved for developments but yet to be launched, and the remaining area are lands held for future development with 942 acres of Dato Teh Kean Ming Managing Director

2 JKG Land Berhad ( K) 25 them are oil palm estates. Currently, the Group has a very strong presence in Kedah with projects offering mostly medium to low range residential properties such as single-storey terraced houses, semi-detached houses, double storey shops and factories. As part of geographical diversification, the Group started venturing into Klang Valley with its signature development, The Duta North ( The ERA ), a high rise mixed development project in Jalan Segambut, Kuala Lumpur. The operations from Kedah was the main contributor to the revenue and profit of the Group. We achieved revenue of 53.1 million from the property development segment, an increase of 34% as compared to the revenue of 39.6 million in the preceding financial year despite the subdued property market sentiments. The Group recorded the strongest sales performance in the first quarter of FY17 with registered sales of 33.7 million. This was mainly contributed from the build then sell project, Phase 4E of Taman Lagenda in Padang Serai, offering 198 units of terraced houses with 100% sales when launched in the first quarter of FY17. This is a promising result which shows the strength of JKG in Kedah even though in such a challenging time the property market in general. The ability to constantly achieve high performance is attributed to the continuous support from the key stakeholders as well as our loyal purchasers, who often recommend our properties to relatives and friends, making them so saleable with minimal advertising and promotion costs incurred. JKG will continue to build and deliver products that are strategically located, well planned and easily accessible. Achieved Revenue of 53.1million from the property development segment +34%

3 26 Annual Report 2017 Management Discussion and Analysis registered Revenue of 3.2million from the cultivation of oil palm +28% Review of Financial Results and Financial Condition The Group recorded revenue of 57.4 million and profit before tax ( PBT ) of 13.1 million in FY17 compared to revenue of 43.4 million and PBT of 23.8 million in FY16. The increase in revenue and the decrease in PBT were mainly attributed to the operating results from the property development segment. Other segments namely cultivation of oil palm and investment holding had minimal impact to the operating results. Property Development This segment registered revenue of 53.1 million and operating profit of 10.6 million in FY17 compared to revenue of 39.6 million and operating profit of 21.9 million in the preceding financial year. The increase in revenue by 34.1% from 39.6 million to 53.1 million was mainly attributed to the strong sales for the affordable houses namely Phase 4E Taman Lagenda, Padang Serai (a build then sell project), Phase 1S, Phase 1A and Phase 1B of Taman Desa Cinta Sayang, Padang Meha, and Phase 1A and Phase 1B of Taman Puteri, Padang Serai. Although the revenue increase significantly, the operating profit decreased by 51.6% from 21.9 million to 10.6 million. The decrease in operating profit was mainly due to higher administrative costs incurred by our flagship project in Kuala Lumpur, The ERA. Besides, the decrease in operating profit was also due to lower other operating income posted during the financial year. The lower other operating income was mainly due to the cessation of leasing income from the Segambut land which had been cleared for the development of The ERA and also lower interest income from reduced of fixed deposit placements. In addition, the lower other operating income was also due to the recognition of

4 JKG Land Berhad ( K) 27 expected share of distributions of 7.8 million from the liquidation of Keladi Teck Guan Sdn. Bhd., an associated company, made in the previous financial year. Cultivation of Oil Palm This segment registered revenue of 3.2 million and operating profit of 1.7 million in FY17 compared to revenue of 2.5 million and operating profit of 1.0 million in the preceding financial year. The increase in revenue was mainly due to the average increase in commodity prices by approximately 35.5% despite the marginal drop in the sales of fresh fruit bunches by 145 metric tons, or about 2.5% as compared to preceding financial year. Investment Holding This segment registered the revenue of 1.1 million and operating profit of 0.8 million in FY17 compared to revenue of 1.3 million and operating profit of 0.9 million in the preceding financial year. The decrease in revenue was mainly due to decrease in rental income from Wisma Keladi. Statement of Financial Position The Group s total borrowings increased from million in FY16 to million in FY17. The increase of 51 million was due to the drawdowns of Term Loan 2 ( TL 2 ) and Short Term Revolving Credit ( STRC ) amounting to 26 million and 25 million respectively. The borrowings were mainly used for the development of The ERA. With the above additional borrowings, JKG s gearing ratio (total Group s borrowings over Group s total equity) has increased to about 0.54 times as compared to 0.38 times in the previous financial year. The Group remains prudent and will maintain a sound financial position that enables the execution of our strategic objectives in creating value over the coming years. During FY17, the Group s current other investment has decreased by 18.9 million subsequent to a receipt of final distribution of 19.1 million from the liquidators pertaining to the liquidation of its other investment in Keladi Teck Guan Sdn. Bhd. The increase in property development cost and land held for property development amounting to 20.9 million and 36.6 million respectively was mainly due to development cost from The ERA being capitalised. Development costs for Phase 1 of The ERA are capitalised in property development cost while development costs pertaining to remaining phases are capitalised in land held for property development. The property, plant and equipment has also increased by about 8.5 million compared to last financial year. This was mainly due to the construction of a sales gallery for The ERA and will be amortised over its estimated useful life. Trade receivables has also increased by 4.7 million from 10.2 million in the previous financial year to 14.9 million. The increase was mainly due to the addition of accrued billings from Phase 1A and Phase 1B of Taman Puteri, Padang Serai.

5 28 Annual Report 2017 Management Discussion and Analysis Dividend The Group continues to maintain paying dividends to our loyal shareholders. A first interim dividend of 0.3 sen per ordinary share totaling 2,274,930 in respect of the financial year ended 31 January 2017 has been declared by the Directors and paid on 31 March It remains the Group s commitment to ensure its shareholders continue to benefit from good dividend payout balanced with sustainable long term growth of the Group. FY FY Revenue 57,432 43,445 Profit before tax 13,109 23,837 Profit after tax 9,294 19,422 Net profit attributable to owners of the Company 8,827 18,988 Total assets 491, ,685 Total borrowings 166, ,431 Equity attributable to owners of the Company 300, ,549 Total equity 309, ,036 Review of Operating Activities Kedah 1. Phase 4E Taman Lagenda, Padang Serai The project comprises 198 units of affordable single storey terrace houses. This project was under build then sell scheme. The project was completed and launched in February 2016 and achieved 100% sold out rate with GDV of 24.6 million. 2. Phase 4F Taman Lagenda, Padang Serai The project comprises 252 units of affordable single storey terrace houses with an estimated GDV of 33 million. This project is under build then sell scheme. The project was completed in November 2016 and launched in February As of to-date, 66% is sold with approximately 22 million sales achieved. 3. Phase 1S Taman Desa Cinta Sayang, Padang Meha The project comprises 31 units of double storey shop houses. The project was completed in March It was 100% sold out during the financial year with GDV of 11.2 million. 4. Phase 1A Taman Desa Cinta Sayang, Padang Meha The project comprises 232 units of single storey terrace houses. The project was completed in March It was 100% sold out during the financial year with GDV of 23.6 million. 5. Phase 1B Taman Desa Cinta Sayang, Padang Meha The project comprises 191 units of single storey terrace houses. The project was completed in February It was 100% sold out with GDV of 23.0 million.

6 JKG Land Berhad ( K) Phase 1C Taman Desa Cinta Sayang, Padang Meha The project comprises 20 units of single storey terrace houses. This project is under build then sell scheme. The project was completed in February 2017 and launched in March As of to-date, 35% is sold with approximately 1.1 million sales achieved. 7. Phase 1A Taman Puteri, Padang Serai The project comprises 124 units of single storey semi-detached houses. The GDV of this project is 33.4 million. This project is launched in July 2016 and expected to complete in July During the financial year, 42 units or 34% were sold with approximately 11.7 million development value. 8. Phase 1B Taman Puteri, Padang Serai The project comprises 4 units of 1 ½ storey detached houses. The GDV of this project is 1.7 million. This project is launched in July 2016 and expected to complete in July During the financial year, all the units were sold. Projects During FY17 Projects GDV Total Sold Unsold GDV sold rm mil unit unit unit mil Taman Lagenda, Padang Serai Phase 4E Taman Desa Cinta Sayang, Padang Meha Phase 1S Phase 1A Phase 1B Taman Puteri, Padang Serai Phase 1A Phase 1B Projects Launched after FY17 Projects GDV Total Sold Unsold GDV sold rm mil unit unit unit mil Taman Lagenda, Padang Serai Phase 4F Taman Desa Cinta Sayang, Padang Meha Phase 1C Klang Valley The ERA The ERA is a mixed development project comprising 6 blocks of serviced apartment, 3-storey of terraced retail, and boutique offices. It will be developed in 4 phases on a 14.8-acres freehold land located in Jalan Segambut. The estimated GDV for the entire project is approximately 2.2 billion over a period of 7 to 10 years. The ERA is a flagship project for JKG in the Klang Valley. It is set to become the new lifestyle destination as it is located next to Mont Kiara and just 8 kilometers away from KLCC. The connectivity is further enhanced with nearby public transportations. The project has a very unique revolutionary urban forest concept, with 5.2 acres of green and wetland landscaping which offers a unique living environment. The ERA offers 100 lifestyle facilities, including a 100 meters pool, a fiesta walk retail area and also panoramic city metropolis view.

7 30 Annual Report 2017 Management Discussion and Analysis On 15 April 2017, JKG had officially launched Phase 1 of The ERA. Phase 1 of The ERA consists of 2 residential towers offering 921 units of serviced apartments, and part of 3-storey terraced retail. The GDV for Phase 1 is about 580 million over a construction period of 4 years. The response was encouraging during the launch and The ERA will contribute significantly in the coming years. Recently, JKG is in the media spotlight for being awarded the Malaysia Landscape Architecture Awards 2016 Merit Award by the Institute of Landscape Architects Malaysia for Landscape Design Award Professional Category. This was for JKG sales gallery design. This is JKG s first property award in its very first property development project in Klang Valley. Subsequent to the financial year end 2017, JKG completed a Rights Issue exercise in April 2017 raising proceeds amounting to million. The Group will utilise part of the proceeds to part finance Phase 1 of The ERA and also to reduce the existing borrowings of the Group. In addition, the Group intends to have funds readily available to take advantage of the opportunities for future property development projects and acquisition of land bank to further develop and grow the property development business as and when such opportunities arise. Challenges The Malaysian property market was soft in 2016 and we believe it will remain challenging in Due to the local political as well as global economic uncertainties coupled with weaker currency, buyers exercise extra caution in purchasing property be it for investment or own use. Purchasers also find difficulties in securing loan financing in the current market condition mainly due to tighter lending policies by banks. With the introduction of the Build then Sell scheme, the Group s revenue, profit and operating cash flow may fluctuate. As the Group s projects are at different stages of development, together with close monitoring of funds, the Group has sustained its profit and cash flow for the financial year. As the Group expands from Kedah into Klang Valley, the awareness of JKG brand in the Klang Valley is low. The Group may also face stiff competition from other established developers in the Klang Valley. The Group remains focused in delivering quality products to the market. The Group sets to keep abreast of the changing needs so that the Group can build homes that buyers can be proud of, and commercial spaces where investors will see good returns. registered sales of 33.7million from the first quarter of FY17 Forward-Looking Statement Though the property market may see a slowdown in activity, the slowdown will be manageable as market fundamentals remain sound and stable. The stamp duty incentives gazetted under Malaysian Tax Budget 2017 will encourage home ownership in the affordable segment. Despite the challenging market conditions, the Group s existing on-going projects in Taman Puteri and Taman Desa Cinta Sayang have seen encouraging responses. In addition, there are also new housing development projects launched by the Group in the first quarter of FY18, which are Taman Lagenda located in Padang Serai, with a total estimated GDV of 33.0 million and the Phase 1C of Taman Desa Cinta Sayang with a total estimated GDV of 2.6 million. These projects are expected to contribute positively to the earnings of the Group for FY18. While JKG has established its reputation of developing affordable properties mainly in Kedah, it has also expanded its presence to the Klang Valley with its flagship project, The ERA. The ERA is JKG s maiden development project in Klang Valley and is set to transform the Jalan Segambut area into a vibrant growth center that offers an integrated lifestyle for the residents. Given its prime location and competitive pricing, the Group believes that this project will receive favourable responses from the market. The Group expects the prospects of the ERA to be favourable, and able to contribute positively to JKG over the long term.

8 JKG Land Berhad ( K) 31 Corporate Governance Report The Board of Directors of JKG Land Berhad remains committed to maintaining the principles of corporate governance as a fundamental part of discharging its fiduciary duties to protect and enhance shareholders values and the financial performance of the Group whilst taking into account the interest of other stakeholders. The Group has continued to apply and practise the principles and recommendations as set out in the Malaysian Code of Corporate Governance 2012 ( the Code ) in its conduct of business affairs to ensure that good corporate governance practices are observed throughout the Group during the financial year ended 31 January The Board is pleased to disclose below the application of the principles of good governance and the extent of compliance with the best practices as prescribed by the Code during the financial year ended 31 January ESTABLISH CLEAR ROLES AND RESPONSIBILITIES a) Clear Functions of the Board and Management There is diversity among the Board, as it comprises members from various professions and specialisation in various fields including property development, engineering, construction, management, marketing, administration, finance and accounting. This well-balanced pool of expertise contributes towards making the Board effective and competent in discharging their duties and responsibilities. The Board members profiles are set out on pages 18 to 23 of this Annual Report. The Board has established clear roles and responsibilities in discharging its fiduciary and leadership functions. The principal functions and responsibilities of the Board include the following: Reviewing and adopting a strategic business plan for the Company, aligned to ensure obligations to shareholders and stakeholders are met; Overseeing the conduct of the Company s business to ascertain that the business is being properly managed; Identifying principal risks and ensuring the implementation of appropriate measures to manage the risks. The Board appraises the Company s major risks and oversees that appropriate risk management and internal control procedures are in place; Reviewing the adequacy and the integrity of the Company s internal control systems; Ensuring candidates appointed to key senior management positions are of sufficient calibre; and Adopting effective shareholders communications strategy including encouraging effective participation at general meeting(s) as the key interface between the Company and its shareholders. The Board currently has ten members, comprising seven Non-Executive Directors (including the Chairman), the Executive Deputy Chairman, the Managing Director and the Executive Director. Three out of the seven Non-Executive Directors are independent, which fulfils the prescribed requirement for at least two or one third of the Board to be independent as stated in Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( MMLR ) as well as the requirement for a director who is a member of the Malaysian Institute of Accountants to sit in the Audit Committee. A brief profile of each Director is presented on pages 18 to 23 of this Annual Report. The current composition of the Board is considered fairly balanced to complement itself in providing the industry-specific knowledge, technical and commercial experience. This line up enables the Board to provide clear and effective leadership to the Company and to bring informed and independent judgment to various aspects of the Company s strategies and performance.

9 32 Annual Report 2017 Corporate Governance Report Decisions made by the Board are communicated through the Executive Deputy Chairman and Managing Director to the senior management team. There is a clear division of functions between the Board and the Management. The Board focuses on the strategic direction and overall governance of the Group, whilst the Management is accountable for the execution of the strategies and achieving business performance to meet the objectives of the Group. The Independent Directors play an important role in ensuring impartiality of the Board s deliberations and decision-making process. The presence of Independent Directors fulfills a pivotal role in corporate governance accountability, as they provide unbiased and independent views and advice in ensuring that the strategies proposed by the executive members of the Board and management are fully deliberated and examined in the best interests of the Group, as well as the shareholders, employees, customers, business associates and the community as a whole. b) Board Charter The Board has formalised and adopted a Board Charter. It provides guidance to the Board in relation to the Board s role, duties, responsibilities and authorities which are in line with the principles of good corporate governance. The Board Charter serves as a term of reference for the Board members and the same is accessible by the public on the Company s website. c) Code of Conduct The Code of Conduct adopted by the Group describes the standards of business conduct and ethical behaviour for Directors and employees of the Group in the performance and exercise of their duties and responsibilities. The Code of Conduct is made available on the Company s website. d) Access to information and advice All the Directors are provided with a set of Board papers consisting of the agenda and all other relevant materials seven days prior to the Board Meetings or Committee Meetings or any other time frame agreed with the Board when necessary, to ensure that the Directors receive sufficient relevant information in a timely manner for their detailed review and consideration so as to enable them to participate effectively in the Board s decisions. Board papers are comprehensively prepared covering aspects such as Group financial performance, business plans and proposals, quarterly result announcements, proposed policies and procedures, operational and risk management issues and updates on statutory regulations and requirements affecting the Group. The minutes of each Board and Committee Meeting(s) are circulated to all Directors for their perusal prior to confirmation of the minutes at the respective meetings. The Company Secretaries attend the Board and Committees Meetings and ensure that accurate and proper records of the proceedings of meetings and resolutions passed at the meeting are properly kept at the registered office. In addition, the Board has a schedule of matters specifically reserved for its deliberation and approval, such as approval of corporate plans and budgets, material acquisitions and disposal of assets, major capital projects, financial results, dividend recommendations and board appointments. These procedures ensure that the direction and control of the Group are in the hands of the Board. The Board has access to the Senior Management to seek clarification and understanding of the Group s business affairs to enable the Board to discharge their duties effectively. External independent professionals and legal advisors are also made available to provide their independent views and advice to the Board, whenever necessary. In discharging their duties, the Directors, whether as a full board or in their individual capacity, in furtherance of their duties, may at the Company s expense seek independent professional advice, if deemed necessary.

10 JKG Land Berhad ( K) 33 e) Company Secretaries The Company Secretaries are suitably qualified and are members of professional body. The Company Secretaries play a supporting role to the Board to ensure the Company s compliance with the MMLR and other rules and regulations whichever applicable to the Company. The Secretaries also ensure that adequate records of proceedings of Board meetings and circular resolutions passed are taken and maintained in the statutory books of the Company. 2. STRENGTHEN COMPOSITION Board Committees The Board has established several Board Committees whose compositions and terms of reference are drawn up in accordance with the best practices prescribed by the Code. The functions as well as authority delegated to the Board Committees are clearly defined in their respective terms of reference. The Board Committees of the Company consist of the Audit Committee, Nomination Committee and Remuneration Committee. a) Audit Committee The composition of the Audit Committee and summary of the work of the Audit Committee are set out on pages 43 to 45 of this Annual Report. b) Nomination Committee The Nomination Committee was established by the Board on 28 March 2002 comprising entirely of Non-Executive Directors with the majority being Independent Directors. Members of the Nomination Committee are: 1) Tan Sri Dato Tan Hua Choon 2) Dato Ismail Bin Hamzah (appointed on 24 October 2016) 3) Encik Mohtar Bin Abdullah 4) Mr Lee Yu-Jin (resigned on 24 October 2016) The main responsibilities of the Nomination Committee are stipulated in the Terms of Reference of the Nomination Committee and include reviewing the Board composition and recommending new nominees to the Board as well as Board Committees for the Board s consideration and reviewing the required mix of skills, experience and other requisite qualities, including core competencies which the Non-Executive Directors can contribute to the Board. The Nomination Committee assess the suitability of candidates for appointment as directors prior to the recommendation to the Board. The Nomination Committee shall evaluate the candidates on the aspects of their skills, knowledge, expertise and experience, professionalism, integrity and for position of independent non-executive director, the candidate s ability to discharge such responsibilities/functions independently as expected from an Independent Non-Executive Director. The Nomination Committee also carries out annual assessment on the effectiveness of the Board as a whole, the Board Committees and contribution of each individual director. In addition, the Nomination Committee also review annually the term of office and performance of the Audit Committee and each of its members to determine whether the Audit Committee and its members have carried out their duties in accordance with their terms of reference.

11 34 Annual Report 2017 Corporate Governance Report All the assessment and evaluation carried out by the Nomination Committee have been properly documented. The Nomination Committee met two (2) times during the financial year ended 31 January 2017 and the meetings were attended by all the members. The Terms of Reference for the Nomination Committee is publicly available on the Company s website at Appointments to the Board Appointment of new Director(s) to the Board will be deliberated on by the full Board based upon the evaluation of the Nomination Committee through a formal and transparent selection procedure. Re-election of Directors In accordance with the Company s Articles of Association, one third (1/3) of the Board members (including the Managing Director) are required to retire from office at every Annual General Meeting and, if they offer themselves for re-election, be subjected to re-election by shareholders. Any Director so appointed shall hold office until the next Annual General Meeting, and shall then be eligible for re-election. All directors shall retire from office at least once in every three (3) years but shall be eligible for re-election. Board Diversity The Board acknowledges the importance of boardroom diversity, including gender, ethnicity and age. The Group practices the selection of suitable candidates as new Board members based on the candidates competency, knowledge, skills, experience, character, time commitment and other qualities in meeting the needs of the Group. The Group is in support of and adopts the policy of non-discrimination on the basis of gender, age, race and religion. c) Remuneration Committee The Remuneration Committee was established by the Board on 28 March 2002 and comprises wholly of Non-Executive Directors. Members of the Remuneration Committee are: 1) Tan Sri Dato Tan Hua Choon; and 2) Mr Lee Yu-Jin. The main responsibilities of the Remuneration Committee are stated in the Terms of Reference of the Remuneration Committee which include reviewing the remuneration and benefits extended to the executive members and non-executive members of the Board to ensure the level of remuneration commensurate with the individual s performance, time commitment, contribution and level of responsibilities undertaken. The remuneration packages of the Non-Executive Directors and Non-Executive Chairman are determined by the Board as a whole. Directors do not participate in making decisions on their own remuneration packages. The Remuneration Committee met once in the reporting financial year with full attendance of the committee members.

12 JKG Land Berhad ( K) 35 The level and make-up of remuneration The Board recognises the need to ensure that the remuneration packages accorded to the directors are sufficient to attract and retain high calibre people needed to run the Group successfully. In the case of Executive Directors, the various components of remuneration are structured to link rewards to corporate and individual performance. In the case of Non-Executive Directors, the level of remuneration reflects the expertise, contribution and level of responsibilities undertaken by the particular non-executive director concerned. Procedure The Board had adopted a standard procedure to assist the Remuneration Committee in carrying out its duties within its terms of reference. The Remuneration Committee reviews and formulates the remuneration packages of the Executive Directors and makes suitable recommendations thereon to the Board for approval. The fees of the Non-Executive Directors, which are subjected to the shareholders approval, are reviewed by the Board after considering the recommendation of the Remuneration Committee. The Directors do not participate in discussion on their own remuneration. Disclosure on Directors Remuneration Details of remuneration of the Directors of the Company during the financial year ended 31 January 2017 are as follows: i) Aggregate remuneration of Directors categorised into the following components: Group company executive Non-Executive Executive Non-Executive Type of Remuneration Directors Directors Directors Directors () () () () (a) Fees 36, , ,000 (b) Salaries 1,824,000 1,824,000 (c) Bonuses 757, ,500 (d) E.P.F. 372, ,500 (e) Estimated value of benefits-in-kind Total 2,990, ,000 2,954, ,000 ii) The number of Directors of the Company whose remuneration fall within the following bands: Group company number of Number of Number of Number of executive Non-Executive Executive Non-Executive Band () Directors Directors Directors Directors 1-50, , , , , , , ,800,000-1,850, Total

13 36 Annual Report 2017 Corporate Governance Report 3. REINFORCE INDEPENDENCE a) Annual assessment of Independence The Board recognises the importance of independence and objectivity in its decision making process. The presence of the Independent Non-Executive Directors is essential in providing unbiased and impartial opinion, advice and judgment to ensure the interests of the Group, shareholders and other stakeholders in which the Group conducts its business are well represented and taken into account. The Board has undertaken an annual assessment of the independence of the Independent Directors via disclosed interests and the criterias for assessing their independence developed by the Nomination Committee and adopted by the Board. The current Independent Directors of the Company have fulfilled the criteria of independence as prescribed under Chapter 1 of the MMLR. b) Tenure of Independent Director Recommendation 3.2 of the Code recommends that the tenure of an Independent Director should not exceed a cumulative term of nine (9) years. Upon completion of the nine years, an Independent Director may continue to serve on the Board subject to the Directors re-designation as a Non-Independent Director. The Code also sets out a recommendation that the Board must justify and seek shareholders approval in the event it retains an Independent Director who has served in that capacity for more than nine years. The Board does not have fixed term limit of service for its Independent Directors. Currently, all Independent Non-Executive Directors of the Company have served the Board for less than nine years, in line with Recommendation 3.2 of the Code. The tenures of service of the Directors are set out in the Board members profiles of this Annual Report. c) Separation of the positions of the Chairman and the Executive Directors The Code recommends that the board of directors of a public listed company should comprise majority of independent directors where the chairman of the board is not an independent director. The Board of Directors of the Company, whose Chairman is a Non-Independent Non-Executive Director notwithstanding, is of the opinion that the element of independence which currently exists is adequate to provide assurance that there is balance of power and authority on the Board. The duties and responsibilities of the Chairman, Executive Deputy Chairman and the Managing Director are distinct and separate to ensure a balance of power and authority. The Chairman guides and ensures the effective implementation of the Board policies, while the Executive Deputy Chairman and Managing Director are tasked to run the day to day management of the Group s business as well as the implementation of the Board s policies and decisions. 4. FOSTER COMMITMENT a) Board of Directors Meetings The Board recognises the importance of devoting sufficient time to carry out their responsibilities and regularly updating their knowledge and enhance their skills. Each Director is expected to commit sufficient time as and when required to discharge their responsibilities. The Board meets to review and discuss matters specifically reserved to itself for decision to ascertain the direction and control of the Group. Key matters tabled at Board meetings include review and adoption of the Group s quarterly and year-end financial results, business plan, annual budget, risk management, assets acquisition and disposal, approval of major capital expenditure projects and consideration of significant financial matters, Group policies and delegated authority limits.

14 JKG Land Berhad ( K) 37 During the financial year ended 31 January 2017, two Board meetings were held where various matters in relation to the Group s operational issues, financial performance, business developments and activities were deliberated and considered. All proceedings, deliberations and conclusions of the Board Meetings were clearly recorded in the minutes of meetings by the Company Secretary and were duly signed by the Chairman of the Meeting. The attendance record of each Board member at the Board Meetings held during the financial year ended 31 January 2017 are as follows: Name of Directors status % of Attendance 1. Tan Sri Dato Tan Hua Choon Chairman 100 Non-Independent Non-Executive Director 2. Dato Ir. Chuah Chin Ah JP Executive Deputy Chairman Dato Teh Kean Ming Managing Director Dato Thor Poh Seng Executive Director Dato Sri Tan Han Chuan Non-Independent Non-Executive Director Datin Tan Ching Ching Non-Independent Non-Executive Director Dato Ismail Bin Hamzah Independent Non-Executive Director Mohtar Bin Abdullah Independent Non-Executive Director Lee Yu-Jin Non-Independent Non-Executive Director Minhat Bin Mion Independent Non-Executive Director * (appointed on 24 October 2016) * There was no Board Meeting held since En. Minhat s appointment on 24 October 2016, until the end of the 2017 financial year. b) Directors Training All the Directors of the Company have attended and successfully completed the Mandatory Accreditation Programme accredited by Bursa Malaysia Securities Berhad. Directors are encouraged to participate in seminars, conferences and relevant training programmes to keep them abreast with regulatory updates and developments in the business environment and financial sector. During the financial year under review, the programmes attended by the Directors covered various topics, which include the following: Staying Ahead on Global Transfer Pricing Developments CG Breakfast for Directors: Future of Auditors Reporting The Game Changer for Boardroom Ring the Bell for Gender Equality Focus Group Series: Corporate Governance Disclosure What Makes Good, Bad and Ugly Corporate Governance Reporting CG Breakfast Series with Directors The Strategy, the Leadership, the Stakeholders and the Board Board Chairman Series Part 2: Leadership Excellence from the Chair CG Breakfast Series: Anti-corruption & Integrity Foundation of Corporate Sustainability In addition, the Directors were also updated by the Company Secretaries from time to time on changes of statutory requirements such as amendments to MMLR.

15 38 Annual Report 2017 Corporate Governance Report 5. UPHOLD INTEGRITY IN FINANCIAL REPORTING a) Compliance with the Applicable Financial Reporting Standards The Audit Committee reviews the Group s quarterly results and annual financial statements to ensure completeness, accuracy, adequacy and quality of the financial reporting. In presenting the annual audited financial statements and quarterly results to shareholders, the Board is committed to present a balanced and fair assessment of the Group s position and prospects. The results are released by the Secretaries via BURSA LINK after the Board adopts them. The Statement by Directors pursuant to Section 251(2) of the Companies Act 2016 is set out on page 113 of the Annual Report. b) Assessment of Suitability and Independence of External Auditors The Board via the Audit Committee has always maintained a cordial and transparent relationship with its auditors in seeking their professional advice towards ensuring compliance with the relevant accounting standards. The Audit Committee will continue to review and monitor the suitability and independence of the External Auditors. The External Auditors had confirmed that they were, and had been, independent throughout the conduct of the audit engagement in accordance with the terms of the relevant professional and regulatory requirements. The External Auditors can be engaged to perform non-audit services that are not in conflict with their role as External Auditors. The Audit Committee is satisfied with the competence and independence of the External Auditors. The External Auditors are invited to attend general meetings of shareholders of the Company and are available to answer the shareholders enquiries on the conduct of the statutory audit and the preparation and contents of their audit report. The role of the Audit Committee in relation to the external auditors is described in the Audit Committee Report set out on pages 43 to 45 of this Annual Report. 6. RECOGNISE AND MANAGE RISKS a) Sound Framework to Manage Risks The Board acknowledges risk management and internal control as an integral part of the overall management process. The Group continually reviews its internal control processes and procedures to ensure it maintains a sound system of internal controls to safeguard its assets and the shareholders investments as far as possible. The details of the risk management and internal control system of the Group are set out in the Statement on Risk Management and Internal Control of this Annual Report. b) Internal Audit Function The internal audit function of the Group was outsourced to a professional service firm which is independent of the activities and operations of the Group. The internal auditors responsibilities include providing independent and objective reports on the state of internal controls of the operating unit in the Group to the Audit Committee, with recommendations for improvement to the control procedures. Details on the internal audit function are set out in the Audit Committee Report and the Statement on Risk Management and Internal Control of this Annual Report.

16 JKG Land Berhad ( K) ENSURE TIMELY AND HIGH QUALITY DISCLOSURE a) Appropriate Corporate Disclosure Policies and Procedures The Board takes cognisance of the need for the Group to comply with the applicable laws and regulations pertaining to corporate disclosures, handling of material information as well as maintenance of confidentiality, and will act accordingly. b) Leverage on Information Technology for Effective Dissemination of Information The Company maintains a website at where shareholders, investors as well as members of public can access to the latest information on the Company and the Group including financial results and announcements to Bursa Malaysia Securities Berhad. 8. RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS a) Shareholders Participation at General Meetings The Board acknowledges the importance of being accountable to the Group s investors and shareholders via effective communication channels. The shareholders are kept informed of the Group s progress from the Annual Report, timely announcements of quarterly financial results and the Annual General Meeting ( AGM ). The AGM of the Company is the principal forum for communication and dialogue with shareholders who are given the opportunity to participate in the questions and answers session and to seek clarifications on the agenda items of the meeting. The members of the Board and Committees of the Company are present to respond to the shareholders questions during the meeting. Extraordinary General Meeting ( EGM ) is held as and when shareholders approvals are required on specific matters. Notices of meetings of shareholders of the Company are always circulated to shareholders within a reasonable and sufficient timeframe before the date(s) of the meeting(s). b) Shareholders Communication and Investor Relations Shareholders can obtain information on the Company by accessing the Company website at All announcements made by the Company and information that are relevant to the shareholders and investors are available in the website. Besides that, the shareholders may also address their concerns, if any, to Dato Ismail Bin Hamzah, the Company s senior independent non-executive director, via fax no or by mail to the Company s registered office. The Company recognises the value of transparent, consistent and coherent communications with the investment community in line with commercial confidentiality and regulatory considerations. In this regard, the Board is committed in ensuring that accurate information relating to business, operations and financial performance of the Company is disseminated in a timely manner. The Board is also committed in ensuring that information required to be lodged with regulators are accurate and submitted in a timely manner in compliance with the applicable legal and regulatory requirements.

17 40 Annual Report 2017 Corporate Governance Report 9. OTHER INFOATION a) Utilisation of Proceeds from Corporate Proposal The Company had raised million cash ( Proceeds ) via its Rights Issue exercise which was completed on 21 April The Company will utilise the Proceeds in the manner as disclosed in the Abridged Prospectus of the Company dated 24 March b) Audit Fee The Company incurred audit fee of 47,000 payable to the external auditors for the financial year ended 31 January On Group basis, the total audit fee payable amounted to 148,400. c) Non-Audit Fee Non-audit fee payable to the external auditors and their affiliated companies for the financial year ended 31 January 2017 by the Company and the Group amounted to 86,100 and 133,300 respectively, comprising professional fees pertaining to the rights issue exercise, tax agent fees, fees for review of Statement on Risk Management & Internal Control and fees for review of realised and unrealised profits and losses. d) Material Contracts There were no material contracts entered into by the Company and its subsidiaries which involve Directors and major shareholders interests since the previous financial year ended 31 January DIRECTORS RESPONSIBILITIES STATEMENT In respect of the preparation of the audited financial statements, the Directors are required by the Companies Act 2016 to prepare financial statements for each financial year which have been made out in accordance with applicable approved accounting standards and give a true and fair view of the state of affairs of the Group and the Company at the financial year end and of the results and cash flow of the Group and Company for the financial year. In preparing the financial statements, the Directors have: adopted appropriate accounting policies and applied them consistently; made judgments and estimates that are reasonable and prudent; ensured that all applicable accounting standards have been complied with; and prepared financial statements on a going concern basis, after having made enquiries that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. The Directors are responsible for ensuring that proper accounting records are kept and that they disclose with reasonable accuracy the financial position of the Company and Group to enable them to ensure that the financial statements comply with the Companies Act The Directors have the overall responsibility of taking such steps as are reasonably available to them to safeguard the assets of the Group, to prevent and detect fraud and other irregularities.

18 JKG Land Berhad ( K) 41 Corporate Social Responsibility Our Group has long recognised our obligations to contribute and work for the betterment of our society as a whole and the community in which we operate. As a responsible corporation, we wish to not only grow our profit but also broaden the scope of our involvement and commitment to all our stakeholders. In many of our development projects, we have planned and created integrated townships with excellent community living considerations. We build affordable houses to cater for different levels of income groups. We help to alleviate the housing needs of the poor and make it possible for them to own the houses that they live in. The Group continuously reviews our working environment, staff development, staff benefits and welfare. Monthly management meetings are held to discuss current affairs of the Group. Management decisions are then disseminated to staff via issuance of circulars, memoranda or other means to keep them well informed. Recruitment of our workforce is made based on candidates competency, knowledge, skills, experience and attitude. The Group is committed to provide an environment where all staff, regardless of age, gender, ethnicity, race and religion have equal opportunity to work and grow together in a successful organisation. The Group monitors closely its working cash management to maintain liquidity level required to repay its suppliers and contractors on time, creating a healthy business environment in the supply chain. The Group continues to support activities that enhance community well-being by way of financial contribution. On a regular basis, the Group has been donating to bona fide charitable and educational organisations. In 2016 these included the MaybankHeart programme and the Bursa Bull Charge MaybankHeart is a first-of-its-kind digital social fund-raising platform built by Maybank to connect well vetted charitable organisations and non-governmental organisations ( NGOs ) with corporate and public donors. To date, NGOs have raised over 400,000 for their projects listed on MaybankHeart, since its launch in September 2016.

19 42 Annual Report 2017 The platform supports social causes in education, arts & culture, community empowerment, healthy living, environmental diversity and disaster relief. The annual Bursa Bull Charge 2016 is a running event that gathers Malaysia s chief executive officers (CEOs) as well as youths and young executives. Already in its third year, the Bursa Bull Charge is a corporate social responsibility programme that involves not only Bursa Malaysia but also public listed companies. In 2016, it raised 1.9 million for 10 deserving beneficiaries and 28 philanthropies which focused on children and women.

20 JKG Land Berhad ( K) 43 Audit Committee Report The Board of Directors of JKG Land Berhad ( JKG or the Company ) is pleased to present the Company s Audit Committee Report for the financial year ended 31 January COMPOSITION OF AUDIT COMMITTEE Members of the JKG Audit Committee are: Dato Ismail Bin Hamzah (Chairman) (appointed on 24 October 2016) (Independent Non-Executive Director) Encik Mohtar Bin Abdullah (Member) (Independent Non-Executive Director) Mr Lee Yu-Jin (Member) (Non-Independent Non-Executive Director) (MIA) Dato Sri Tan Han Chuan (Member) (resigned on 24 October 2016) (Non-Independent Non-Executive Director) TES OF REFERENCE OF AUDIT COMMITTEE The Terms of Reference of the Audit Committee can be viewed on the Company s website at MEETINGS OF THE AUDIT COMMITTEE The Audit Committee of JKG met four (4) times during the financial year ended 31 January The details of attendance of each Audit Committee Member at the Audit Committee Meetings held during the financial year ended 31 January 2017 are as follows: Audit Committee Members status % of Attendance (as at 31 January 2017) 1. Dato Ismail Bin Hamzah Independent Non-Executive Director 100* (appointed on 24 October 2016) 2. Mohtar Bin Abdullah Independent Non-Executive Director Lee Yu-Jin Non-Independent Non-Executive Director Dato Sri Tan Han Chuan Non-Independent Non-Executive Director 100 (resigned on 24 October 2016) * There was one Audit Committee Meeting held since Dato Ismail s appointment on 24 October 2016, until the end of the 2017 financial year. The Group s Internal Audit Consultant, Accountant, Financial Controller, and some non-member Directors were present by invitation at all the meetings. The Committee also invites the external auditors for its meetings as and when necessary. During the financial year under review, the external auditors met with the Audit Committee of JKG twice without the executive board members and management s presence. Minutes of each Audit Committee meeting were documented and distributed to all members of the Board.

21 44 Annual Report 2017 Audit Committee Report SUMMARY OF THE WORK OF THE AUDIT COMMITTEE The following summary sets out the work of the Audit Committee during the financial year under review in discharging its functions and duties: 1. Reviewed the unaudited quarterly reports on the consolidated results and financial statements of the Group prior to tabling of the same to the Board of Directors. 2. Reviewed the assistance given by the management to the external auditors. 3. Reviewed the external auditors report in relation to their audit findings pertaining to results and commentaries, current developments, status of audit and major developments in Accounting Standards arising from the audit of the Group. 4. Discussed with the external auditors, the Group Audit Plan which set out the auditors responsibilities and scope of work in respect of the audit of the Group s financial statements prior to the commencement of the annual audit. 5. Two private sessions with external auditors were held without the presence of management and executive directors to discuss any matters arising from the audit. 6. Discussed with the external auditors, the impact of new accounting standards issued by the Malaysian Accounting Standards Board. 7. Reviewed related party transactions and conflict of interest situation that arose within the Company and the Group. 8. Discussed and considered matters relating to corporate governance to ensure compliance with the MMLR and the Malaysian Code on Corporate Governance Reviewed policies and operating procedures adopted by the Group. 10. Reviewed with the internal audit consultants, external auditors and the management, the adequacy of the existing policies, procedures and systems of internal control of the Group. 11. Reviewed the internal audit reports which covered the following areas: Estate Operations Procurement & Store Management Sales, Billing and Collection Property Development Tendering Process, Contract Awarded and Works in Progress Estate Operations Harvesting and Despatching Fresh Fruit Bunches (FFB) and considered the findings and recommendations of the internal audit consultants on the Group s operations and ensuring shortcomings, if any, were adequately addressed by the management. 12. Reviewed the year-end financial statements of the Company and the Group, prior to the approval of the Board, focusing on, amongst others: significant and unusual events; and compliance with accounting standards and other legal requirements.

22 JKG Land Berhad ( K) 45 INTERNAL AUDIT FUNCTIONS The outsourced internal audit function is principally responsible for the independent assessment of the internal control systems of the Group. This is to ensure that the system of internal controls within the Group are adequate and continue to operate satisfactorily and effectively, towards safeguarding and protecting shareholders investment and the Group s assets. The internal audit function reports directly to the Audit Committee. The internal audit function carries out audit assignments in accordance with the approved internal audit plan. The internal audit function reviews and assesses the operational procedures and effectiveness of internal control of the Group, and conducts compliance tests to ascertain the extent of compliance with control procedures and guidelines. Findings and recommendations for improvement as well as Management s response were presented to the Audit Committee for further deliberation. The total cost incurred for the internal audit function of the Group in respect of the financial year ended 31 January 2017 amounted to 112,000. Details of activities of the internal audit division are set out in the Statement on Risk Management and Internal Control.

23 46 Annual Report 2017 Statement on Risk Management & Internal Control Introduction In compliance with Paragraph 15.26(b) of Bursa Securities Main Market Listing Requirements and the Statement on Risk Management & Internal Control Guidelines for Directors of Public Listed Issuers, the Board is committed in maintaining a sound system of risk management and internal control in the conduct of its business operations and pleased to present the Statement on Risk Management and Internal Control which outlines the nature and scope of risk management and internal control of the Group during the financial year ended 31 January Board s Responsibility The Board recognises its overall responsibility for the adequacy and effectiveness of the risk management framework and system of internal controls within the Group. The Board, through its Audit Committee, reviews the adequacy and effectiveness of the risk management and internal control system in relation to the internal audits conducted by an independent assurance provider during the financial year under review. The audit observations, together with management s responses and proposed action plans are presented to the Audit Committee on a quarterly basis. In addition, the review of the internal audit reports is part of the agenda of the Board meeting. However, the Board is equally aware that such systems and processes are designed to manage the Group s risks within an acceptable risk appetite, rather than eliminate the risk of failure to achieve the policies, goals and objectives of the Group. In this regard, the risk management framework and internal control system can only provide reasonable assurance, and not absolute assurance against material misstatement of financial information and records or against financial losses or fraud. Risk Management Framework The Group adopts enterprise risk management approach and all the active businesses of the companies within the Group are considered and categorised in accordance with their main functional activities. Responsibility of risk management and control is delegated to the appropriate levels of management within the Group. This process has been in place for the financial year under review and up to the date of approval of the annual report and financial statements. The main features of the risk management process are as follows: a) Establish the context of risk in relation to the Group s risk appetite The amount of risk, on a broader level, acceptable to the Group in pursuing the various business objectives is determined by the senior management. b) Risk identification in relation to the objectives of every business function The risks are identified through a series of interviews and discussions with the risk owners, i.e. key personnel and management of the Group. The risk identification process includes consideration of both internal and external environment factors. External environmental factors include economic and political changes, changes in the behavior of competitors, new regulations or legislation and technological developments. Internal factors include changes in key personnel, introduction of new or revision of existing policies and procedures. c) Assess the potential impact and likelihood of the risks identified and hence their risk levels The impact of the risk is rated on a scale of A to E (A to indicate the lowest impact and the E to indicate the highest impact). Whereas the likelihood of a risk is rated on a scale of 1 to 5 (1 to indicate lowest probability and 5 indicate the highest probability). The risk level shall be rated low, medium and high according to the Risk Analysis Matrix.

24 JKG Land Berhad ( K) 47 d) Ongoing monitor and review risk mitigating measures, risk levels and emerging risks All the identified risk and mitigating measures are documented into a Business Risk Profile. The Business Risk Profile of the Group is updated on an ongoing basis and approved by the Board. The Business Risk Profile serves as a tool for the heads of department/business unit for managing key risks applicable to their areas of business. Key risks and issues are reviewed quarterly and resolved by the Management team at quarterly meetings. Through these mechanisms, key risks identified in the Business Risk Profile are assessed in a timely manner and control procedures are re-evaluated accordingly in order to ensure that the key risks are mitigated to an acceptable level. The Internal Audit Function reviews the effectiveness and adequacy of control procedures adopted by the company on quarterly basis in mitigating the key risks identified in the Business Risk Profile. Any weaknesses noted during the audit review are reported to the Audit Committee. Through these mechanisms, the Audit Committee can be assured that the key risks of the company are reviewed quarterly and appropriately managed to an acceptable level. System of Internal Controls The key elements of the Group s system of internal controls that the Board has established in reviewing the adequacy and effectiveness of the risk management and internal control system are as follows: Clearly defined organisational structure with proper delegation of responsibilities and accountability, including authorisation levels for all aspects of business operations. To ensure the uniformity and consistency of practices and controls within the Group, Standard Operating Procedures have been formalized and documented in the form of Standard Operating Procedures (SOPs) which were endorsed by both the Management and the Board. These include: Procurement; Sales administration; Progress billing and collection; Project management; Tender and award of contracts; Property development receiving of material at site; Estate operation management; Payment; Receipts; Fixed asset management; Personnel administration and payroll; Employee handbook. The SOPs are subjected to review and improvement alongside the internal audit review of the selected area of operations. Appropriate qualified personnel are responsible for the operation and monitoring of effective internal control. Management accounts and progress report are prepared monthly for effective monitoring and decision making. Financial results are prepared and presented to Management and to the Board and Audit Committee on quarterly basis for effective monitoring and decision making. The Executive Deputy Chairman and Managing Director act as the channel of communication between the Board and the Management. The Executive Directors are empowered to manage the businesses of the Group and implement the Board s directives and policies.

25 48 Annual Report 2017 Statement on Risk Management & Internal Control Capital expenditures and investment options are referred to the Board for review and approval. Risk-based internal audits, i.e. focusing on key risk areas are carried out to provide independent assurance on the effectiveness and efficiency of the Group s system of internal controls and advise the management on areas for improvements. During the financial year under review, the risk-based internal audits cover the following areas: Estate Operations Procurement & Store Management; Sales, Billing & Collection; Property Development Tendering Process, Contract Awarded and Works in Progress; Estate Operations Harvesting and Despatching Fresh Fruit Bunches. The Audit Committee meets at least four times a year. The Committee meets with the internal auditors and external auditors to review their reports. The Audit Committee reviews the significant audit observations and/ or area of improvement and ascertains that appropriate remedial actions or improvements are taken by the management. The Committee also evaluates the adequacy, effectiveness and efficiency of the Group s internal control systems. Through the establishment of sound internal control, which includes monitoring reporting systems, the Board reports that the existing system of internal controls is satisfactory. No material losses have occurred during the financial year under review as a result of weakness in internal control. The Board together with management continue to take measures to strengthen the control environment. Assurance from Management In accordance with the Statement on Risk Management & Internal Control Guidelines for Directors of Listed issuers, the Board has received assurance from Executive Deputy Chairman, Managing Director and Financial Controller that to the best of their knowledge the risk management and internal control system of the Group are operating effectively and adequately, in all material respects, based on the risk management and internal control described above. Review of the statement by external auditors The external auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in Recommended Practice Guide ( RPG ) 5 (Revised 2015), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report issued by the Malaysian Institute of Accountants ( MIA ) for inclusion in the annual report of the Group for the year ended 31 January 2017, and reported to the Board that nothing has come to their attention that causes them to believe that the statement intended to be included in the annual report of the Group, in all material respects: (a) (b) has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers, or is factually inaccurate. RPG 5 (Revised 2015) does not require the external auditors to consider whether the Directors Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group s risk management and internal control system including the assessment and opinion by the Board of Directors and management thereon. The auditors are also not required to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the annual report will, in fact, remedy the problems.

26 financial statements Directors Report Consolidated Statement of Financial Position Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Statement of Financial Position Statement of Profit or Loss and Other Comprehensive Income Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Statement by Directors Statutory Declaration Independent Auditors Report