Report of the Board of Directors

We have also set 2015 as the year of standardization. This means that all the strategies that the Company has made were executed through the standardization system and procedures toward achieving sustainability in business performance.

Valuable Shareholders and Stakeholders,

2016 was still a less-conducive year for the domestic property sector. The volatility in national political climate caused the market to take wait-and-see approach. Despite the government’s efforts in issuing several policies deemed to support the property sector, i.e. the regulation on property ownership by foreign citizen and implementation of tax amnesty program, there had been a relatively small amount of positive indications in the sales of property sector.

In spite of the fact that property sector performance during the year was not quite satisfactory, the domestic economy began to slowly recover. Global economic condition was also deemed to demonstrate improvement supported by the growth of US’ economy, from 1.7% to 1.9%, and China’s economy, from 6.7% to 6.8%. All of these contributed to the growth of Indonesia’s economy as the business partner of both countries. Statistics Indonesia stated that domestic economic growth during the year managed to reach 5.02%, higher than the growth of 2015 at 4.88% and of 2014 at 5.01%. In 2016, inflation rate was maintained at low level under the minimum limit of inflation target for 2016 (4±1%). Overall, the 2016’s inflation rate was at 3.02% (yoy).

The Company certainly faced various challenges during the year; however, we remained optimistic in tackling them in order to gain sustainable growth. Several measured and directed strategic initiatives had been implemented by the Board of Directors to maintain the Company’s performance to remain in a positive trend.

During the reporting year, the Company continued its strategic plan by performing standardizations on our systems and procedures and had been implemented in a consistent manner in 2016. Such implementation aimed to ensure transparency and accountability of the Company, enhance human resources’ competence and mitigate risks.

As a form of responsibility to the Shareholders and all Stakeholders, through this annual report, we would like to deliver the Company’s performance as well as target achievements throughout the course of 2016, as well as the efforts to boost quality and initiatives that had been implemented.

Performance of the Company

Amidst the national economic condition that has yet been stable, the Company managed to recorded marketing sales amounting to Rp1.63 trillion, 13% lower than that of last year at Rp1.87 trillion.

The declining income of marketing sales in 2016 was attributable to several factors, such as the weakening property market condition and the delay in the launching of two new projects, namely mixeduse and high-rise projects in Jakarta and Surabaya. This delay was one of the strategies taken by the Company.

Fluctuating political condition in the Q4 of 2016 forced the Company to postpone the marketing activity for Kebon Melati and Darmo Harapan projects. Meanwhile, the delay in reclamation project of H Island was the form of Company’s compliance with the government’s decision to make a more thorough research on reclamation projects.

Other than these challenges, the Company was successful in booking a stable performance throughout the year. The segment of residential development segment was the largest contributor to the income from marketing sales in 2016 which was recorded at Rp648 billion or 40% of the total achievements. This segment was supported by the sales of housing units in Graha Natura in Surabaya and Serenia Hills in Jakarta.

The second largest contributor was the segment of mixed use and high rise development with total value of Rp590 trillion or around 36%. Other business segment, such as industrial area development and property investment segments, consisting of office leasing, retail, facilities, warehouses and industry, management of golf course and sport center, each contributed around Rp81 billion or 5%, and Rp313 billion or 19%, respectively, to the total income from marketing sales.

Based on the type, the development income remained as the largest contributor to the income from marketing sales, totaling Rp1.32 trillion or 81%.

The contribution from recurring income was booked at Rp313 billion or around 19%. The operations of South Quarter offices and the leasing of standard factory building facilities in Ngoro Industrial Park were the additional contributors to the recurring income of the Company aside from the operations of the existing Intiland Tower Jakarta and Intiland Tower Surabaya. The Company is committed to improving this recurring income as it provides stability to the Company’s operations and growth.

In consolidation, the Company managed to book revenues amounting to Rp2,276.46 billion in 2016, grew by 3.43% compared to that of 2015 at Rp2,200.90 billion.

Meanwhile, net profit of the Company in 2016 was Rp298,89 billion, declined 25,5% from Rp401.48 billion recorded in 2015. The decline in net profit was attributable to the increase in operating expenses and interest expenses.

Over the course of 2016, the Company has also implemented several other strategic policies; one of which was to strengthen our capital structure. On June 30, 2016, the Company issued Bonds II of Intiland Development for 2016 which had been listed on Indonesia Stock Exchange with principal bonds value amounted to Rp590 billion. Proceeds from the bonds issuance will be used to pay the debts and strengthen the Company’s working capital. The bonds were issued with ratings of Id[A-] (Single A Minus) from PT Pemeringkat Efek Indonesia (Pefindo).

Through PT Putra Sinar Permaja, a subsidiary of PT Taman Harapan Indah whose 100% of its shares are owned by the Company, Intiland entered into a Joint Venture Agreement with Reco Kris Pte Ltd, subsidiary of GIC Singapore. This corporate action was conducted to develop the South Quarter project in Jakarta. In addition, the Company also transferred the shares gained from the buyback action (treasury stock) to PT Graha Intan Mandiri. This share transfer from buyback action has been assessed to bring positive impact on the Company’s finance as the proceeds from share transfer shall be used to increase the Company’s working capital.

With all of the abovementioned strategic policies conducted by the Company over the course of 2016, the Company is optimistic to be able to score better growth in years to come.

Human Resources and Information Technology

The sustainable development of human resources and implementation of information technology are Intiland’s efforts to maintain its business. The Company provides vast opportunity to all employees to develop their skills and competencies through various trainings that are organized by the Company, both in-house training and external training.

Aside from the improvement of human resources competence, the implementation of information technology is another component needs to be leveraged in order to face the current globalization era. Hence, the Company conducted development in its Enterprise Resource Planning (ERP) in 2016 which covered 5 (five) pillars, namely Quality Management, Performance Management, Continuous Improvement, Enterprise Risk Management and Information Technology.

Development of Corporate Governance Implementation

Our four-decade journey in building the reputation as property developer taught us to continuously uphold our Corporate Values. In a periodical manner, the Company implements Good Corporate Governance (GCG) principles that have been stipulated in the Company’s GCG Guidelines established by referring to the prevailing laws and regulations. Through regular evaluation on GCG implementation, the Company demonstrated a commitment to carrying out GCG principles continuously in its work environment in order to attain sustainable business growth.

Corporate Social Responsibility

As an effort to become good corporate citizen, we carry out Corporate Social Responsibility (CSR) activities that are in line with the Company’s vision. Intiland observes CSR as a company’s method to manage its business process so as to give sustainable positive impact on the surrounding environment. In its implementation, the Company upholds four out of seven CSR aspects standardized in ISO 26000, namely environment, manpower, community empowerment and responsibility of products and to consumers.

To expand our CSR scopes of activity, the Company establishes the Intiland Foundation which is a medium of organization of the Company’s CSR programs and activities, covering the planning, implementation, management and monitoring activities. Furthermore, with this foundation, Intiland develops various CSR programs, among others the Intiland Teduh program aiming at enhancing the life quality of Indonesian people and Intesa School of Hospitality, an education program aiming at creating skilled manpower that is ready to work in hospitality business.

Business Outlook

Global economic condition in 2017 is projected to show improvement from this year. The International Monetary Fund (IMF) predicts that global economy will grow to the level of 3.4%, higher than the growth of 2016 at 3.1%. Such prediction is supported by the increase in global trade volume and rising commodity prices. On domestic front, the 2017 State Budget projects that domestic economy will reach the level of 5.1% with inflation rate at 4%. Moreover, the government’s commitment to develop the nation’s infrastructure will certainly continue to drive the nation’s economy. The rising cash flows coming from the tax amnesty program is predicted to be able to significantly support the property development sector in the next year.

On the basis of these positive economic prospects, the Company observes that property sector performance in 2017 will be more favorable and demonstrate recovery compared to the previous years. Hence, the Company targets an improvement in marketing sales for 2017 at the level of 35-40% higher than the 2016’s achievement.

Changes in the Composition of Board of Directors

The Resolution of Annual General Meeting of Shareholders (AGMS) on June 27, 2016 stated that the Shareholders have approved for the appointment of Mr. Perry Yoranouw as the Company’s new Independent Director, replacing Mrs. Irene P. Rahardjo who has been serving as the Independent Director of Intiland since 2007. This replacement was performed to comply with the regulation of Indonesia Stock Exchange which stipulates that the term of office of an Independent Directors is two periods consecutively at the most.

Appreciation

On behalf of the Board of Directors, I would like to extend our gratitude to all Shareholders, Board of Commissioners, loyal customers and all business partners of Intiland for their supports, trusts and cooperation during the year. The Board of Directors would like to appreciate all employees of the Company who have demonstrated their dedication and professionalism in conducting their duties as well as their consistency in upholding Corporate Values. We are optimistic that with the relentless support from all parties, Intiland will be able to materialize its vision and achieve sustainable business growth in the future.


Jakarta, April 2017
On behalf of the Board of Directors of PT Intiland Development Tbk

Hendro S. Gondokusumo

President Director