Dear Shareholders,
2020 is the most challenging year for the Company since its inception some 45 years ago. The pandemic’s impact on lives, businesses and livelihoods was swift and devastating. Indonesia’s economy, similar to all other economies around the world, plummeted. With the exception of a handful of sectors, all other sectors ranging from trade, industry, services, and manufacturing, to finance and investment, continue to struggle to survive. Almost all employees were required to work from home whilst many others were laid off.
Indonesia’s property market was already experiencing a slowdown in the previous five years. The pandemic dealt a severe blow to the property sector as sales plunged and rentals were hit as businesses suffered. Before the onset of the pandemic, the uncertainty relating to some regulatory changes and constraints resulted in customers adopting a cautious approach. With the onset of the pandemic, all property development segments, from housing, apartments, offices, industrial estates, to other services, plummeted. The Government’s policy to minimize the risk of the spread of pandemic through Large-Scale Social Restrictions hit the sector swift and hard.
According to REI’s records, 2020 was one of the darkest times in national property development, apart from the economic crisis in 1998. The decline in sales hit all types of property. Sales from the housing sub-sector fell 50% to 60%. The retail hotel sector experienced the most extreme contraction, with some seeing a drop of up to 95%. National property growth in 2020 was mainly supported by sales of the housing segment, especially the middlelower class, at prices below Rp1 billion per unit.
DYNAMICS OF THE NATIONAL PROPERTY INDUSTRY
Apart from being severely affected by the Covid-19 pandemic, the dynamics of the domestic economy were also directly affected by the slowing pace of global economic growth. In 2020, all countries faced the same set of problems and thus were focused on efforts to mitigate the impacts of the Covid-19 pandemic. The World Bank reported that the global economic growth rate was negative 4.3%, far below the initial projection of positive 2.5%, even though in 2019, the global economy had still managed to grow by 2.4% amid the adverse impacts of the trade war between the US and China.
The same situation was also seen in the domestic economic growth. Based on data from Bank Indonesia, the national economy experienced a slowdown with a growth rate of negative 2.07%, or slightly better than the previous projection of negative 2.2%. This figure was truly incomparable with the achievements in 2018 and 2019, given the emergency situation that occurred throughout 2020. The inflation rate in 2020 was recorded at merely 1.68% YoY,, the lowest in the last decade. In 2018, the inflationrate was recorded at 3.31% and in 2019 at 2.27% YoY. The low inflation rate was in line with weak domestic demand and Bank Indonesia’s consistent policy in directing inflation expectations to be within the target range and in maintaining exchange rate stability. BI’s 7-Day (Repo) benchmark interest rate throughout 2020 was slashed from 5% at the beginning of the year to 3.75%.
In dealing with this dire situation, we would like to express our appreciation to the Government for issuing a number of policy stimuli in the form of the Income Tax (PPh) Article 21 (DTP) waiver, Article 22 PPh exemption, reduction of Article 25 PPh installments, and acceleration refund of value added tax (VAT). The Government also issued incentives to ease the burden on consumers in the form of housing incentives through Interest Difference Subsidies and Down Payment Subsidies. These subsidies have been provided to help the low and medium income people in repaying their housing loans. Government stimuli were also rolled out through the National Economic Recovery program, which also targeted the housing sector, through the placement of state funds worth Rp5 trillion in banks. This stimulus was intended to shore up the channeling of loans with lower interest rates for national economic recovery in the form of purchase of houses for low-income people.
A number of incentives from the Government were a welcome add-on to a number of policy incentives it had issued earlier, in 2019. These policies include an incentive that relaxes housing price limits entitled to value added tax (VAT) exemption, as regulated in the Minister of Finance Regulation No. 81/2019, relaxation of limits for luxury residential value subject to Luxury Goods Sales Tax (PPnBM) to Rp30 billion, as well as a reduction in the Income Tax (PPh) 22 rate for super-luxurious residences from 5% to only 1%. However, these various government policy incentives seemed to have lacked efficacy in bolstering a meaningful growth in the property market.
THE COMPANY’S BUSINESS DEVELOPMENT
Throughout 2020, the Company pursued a range of efforts to maintain its business operations and performance. The main priority was to ensure that all business lines keep progressing and to do whatever it takes to maintain sales performance in all development projects. The Company meticulously explored and seized on every opportunity, innovated and practiced new ways of doing business as an effort to adapt to the situation and changes that had occurred. All levels of the organization were demanded to dispose of their old habits and try out new ways of working, starting from germinating ideas, creating integrated plans, executing programs, to performing detailed evaluations. All units within the Company have been fostering a synergy to jointly face the challenges and changes in the market.
Throughout 2020, the Company took strategic steps to postpone the launching of its development projects that were new and those with a high level of risk. This policy especially applied to the development of projects in the mixed-use & high rise segments, such as apartment buildings and offices. The Company then sets the main focus on the development of ongoing projects, particularly in the residential area segment. This included the launch of new housing types and clusters. In this segment, the Company launched a new housing type in Magnolia Residence residential area and launched a new concept for the development of Talaga Bestari residential area through the launch of the DUO cluster.
The Company also launched the new Dandelion cluster developed in Graha Natura residential area in Surabaya and the Sierra cluster in Serenia Hills residential area, Jakarta. The residential area development segment proved to be the driving force behind the Company’s sales throughout 2020. Meanwhile, in the mixed use & high rise development segment, the main priority was to market the existing product inventory, such as in Regatta, 1Park Avenue, Aeropolis, The Rosebay, Praxis, SQ Res, and Fifty Seven Promenade apartment projects.
Similar to what was faced by almost all developers in the country, the decline in sales was a prominent issue throughout 2020. The Company’s sales performance contracted and decreased in all development
segments. In 2020, the Company recorded marketing sales of Rp937 billion or about 40% lower than the 2019’s figure. The residential development segment contributed Rp638 billion or 68% of the total. Contribution from this segment came from sales of housing units in Graha Natura, Serenia Hills, Talaga Bestari, 1Park Homes, South Grove, and Magnolia Residence projects. The mixed-use & high rise development segment was one of the segments hit hardest by the Covid-19 pandemic. This segment contributed Rp218 billion in marketing sales, from sales of units in Aeropolis, 1Park Avenue, The Rosebay, Graha Golf, SQ Res, and Regatta projects. Meanwhile, the industrial estate development segment contributed Rp71 billion in marketing sales, from the sale of industrial land in Ngoro Industrial Park, Mojokerto.
The marketing sales figure does not include recurring income of Rp598 billion. This source of operating income from the investment property segment has been relatively more stable, although the contribution also contracted. In 2019, the Company recorded a contribution from this segment of Rp623.1 billion. For its financial accounting, the Company has adopted the new Statement of Financial Accounting Standards (SFAS) in 2020 so that it had to perform readjustments to its revenue, debt and profit recordings, with special remarks. In 2020 the Company recorded operating revenues of Rp2.89 trillion, an increase of 5.4% from 2019’s revenues of Rp2.74 trillion. Gross profit and operating profit of Rp1.18 trillion and Rp778.39 billion, respectively.
These figures have increased by 4.2% and decreased 31.2% compared to the figures in 2019 of Rp1.13 trillion and Rp603.55 billion. Meanwhile, the net profit earned by the Company was recorded at Rp76.76 billion, or decreased 105.2% compared to 2019. For a more detailed explanation, please refer to the full financial statements to avoid any misunderstanding. The Jakarta Composite Index (IHSG) on the Indonesia Stock Exchange (IDX) touched the level of 6,313.13 at the opening of trading in early 2020. At the close of the last trading year of 2020, on Wednesday, 30 December 2020, it was recorded at 5,979.07. This position was the lowest compared to the previous two years, namely at 6,299.53 in 2019 and at 6,194.50 in 2018.
The Company’s share price experienced dynamic movements throughout 2020. Listed on the Indonesia Stock Exchange with the share ticker code DILD, the shares reached their highest price in January 2020, of Rp330 per share. Meanwhile, the lowest price was recorded in October, amounting to Rp138 per share. Referring to the stock trading data on the Indonesia Stock Exchange, at the beginning of 2020, the Company’s shares were traded at the level of Rp260 per share. Meanwhile, at the closing of trading in 2020, the Company’s share price was recorded to close at Rp220 per share, with the Company’s market capitalization amounting to Rp2.28 trillion.
In light of and responding to the prevailing situations, conditions, and challenges, the Company implemented a more conservative management policy in 2020. The Company reviewed all of its initiatives and strategies, as well as the targets set at the beginning of the year. The Covid-19 pandemic had delivered significant changes to the national property market, including changes in the Company’s target market. The Company took additional precaution in any investment and expansion decisions regarding its
new developments. The Company realigned each of its decisions more carefully and conducted in-depth analyses for the most optimal use of all resources it had. The Company also fostered mutual awareness at all levels in its workforce to deal with challenges and market changes.
In an effort to minimize every risk, the Company opted to focus on the development of ongoing projects. Expansion plans for new projects, particularly in the mixed-use & high rise development segment, have been temporarily suspended. The Company’s priority has been more focused on efforts to boost sales of inventory of existing projects, such as houses, warehouses, and apartments. These efforts have been carried out prudently by implementing strict risk management practices in every strategic plan.
Another key step taken by the Company was to sell certain nonproductive assets, allowing it to focus more on developing its core business. The proceeds from the sale of non-productive assets had been used to reduce bank debts and to finance the Company’s operating needs. In 2020, the Company has been consistently selling its non-productive assets, such as land covering an area of 3.2 hectares in the East Coast area in Surabaya. This sale was a follow up to the sale of 40 hectares of land in the same East Coast area in Surabaya in 2019. In addition, the Company also continuously endeavored to maintain cash flow to support its operations and business activities. One of the crucial steps taken was restructuring its bank loans. This restructuring initiative proved effective in reducing the average loan interest rate paid by the Company in 2020, from 11.5% to 6.5% per year.
Changes in the prevailing situation also encouraged the emergence of new habits in society and consumers. This change has become an issue as well as a prominent challenge for the Company. A number of important steps have been carried out in order to adapt to changes that occur in the market. The Company also continued to explore every opportunity and innovation initiative to ensure that its business operations can continue, and also as an effort to support added value creation for the Company. For example, in terms of marketing, the Company has implemented many new ways to introduce and market its products widely. By utilizing the latest information technology and social media, the Company provided facilities for potential customers to obtain new information and experiences regarding its projects via digital means.
The Company also endeavored to provide the widest possible opportunity to improve the quality of its human resources and their work. Building a climate of innovation through regular competition activities has been one of the ways to initiate breakthroughs and new innovations. This program, which was participated by employees from various job functions, resulted in dozens of brilliant ideas and innovations that could improve the quality and added value of the Company. In addition, the Company is also actively organizing a series of training programs to improve the quality of human resources, both held internally and by other parties, such as workshops, seminars and training.
In an effort to support the Government’s program in tackling the spread of Covid-19, the Company also formed a Covid-19 response task force along all of its business lines. The task force is responsible for ensuring that all operations of the Company comply with health requirements and protocols established by the Government. The implementation of a large-scale social restriction policy has also been anticipated by arranging work schedules for employees at the office and those working from home.
The Company has ensured that these arrangements do not reduce employee productivity and interfere with company operations. This preventive measure has proven to be quite effective in preventing the spread of Covid-19 across the entire working environment as well as projects.
IMPLEMENTATION OF CORPORATE GOVERNANCE
The implementation and enforcement of good corporate governance (GCG) has become one of the most foundational pillars for Intiland. The Company is committed to being pro-active in maintaining long-term relationships and providing added value to Shareholders and Stakeholders. GCG serves as a direction as well as a guide in every implementation of the Company’s operational activities. Realizing the importance of implementing GCG, the Company strives to continuously build awareness at all organs and levels of the organization, including top management and employees. The implementation of GCG is a relentless, unceasing process. The Company simultaneously strives to always update and improve the quality of GCG implementation. The process of continuous evaluation and improvement is carried out to ensure that GCG practices are carried out in accordance with the prevailing laws and regulations. This commitment has been performed well so far as it has obtained the full support of the Board of Commissioners and all organs of the Company’s.
Accompanying this Annual Report, for the first time, the Company has also published a Sustainability Report. This Sustainability Report is a form of report on the Company’s commitment to carrying out business practices and activities in a sustainable manner throughout 2020. The Company has conducted dissemination regarding this to the entire scope of the Company’s business.
The Company realizes that one of the most important factors in business development has been the emergence of awareness from all organs within the Company towards the principles of sustainable development. The Company also understands that the management of Corporate Social Responsibility (CSR) is an Seintegral part of creating a sustainable business. Efforts have been made to implement CSR programs and activities to have a strong direct impact on the community and the environment. In 2020, the Company’s CSR activities were more focused on providing assistance to the community in the context of overcoming and preventing the spread of Covid-19.
CHANGES IN THE DIRECTORS COMPOSITION
To continue to maintain the sustainability of the Company’s performance, the Company changed the composition of the Directors in 2020. Through the resolution of the Annual General Meeting of Shareholders held on 15 August 2020, the Shareholders approved the appointment of Ms. Ping Handayani Hanli as Director of Finance from her previous position as Commissioner of the Company, replacing Mr. Ricky Holil, who had resigned. Mr. Sinarto Dharmawan, who previously served as Vice President Director of the Company, was then appointed as President Commissioner of the Company.
AWARDS FOR THE COMPANY
As a property developer with more than 45 years of experience in the national property industry, the Company has a strong commitment and motivation to provide the best property products for the community. This is in line with the Company’s vision to always strive to provide the best property work as well as ample opportunities for people to have a comfortable life. For the real commitment and contribution given so far, the Company has received several awards from various institutions, at home and abroad. These awards are a form of accolade and respect for the contributions made by Intiland so far. In 2020, the Company were conferred with four awards, covering the areas of property, design and architecture, as well as corporate social responsibility programs. The Company also received another award as one of the Top Ten Developers in 2020 from BCI Asia Awards.
BUSINESS PROSPECTS
2021 will remain rife with challenges. The impact of the Covid-19 pandemic is expected to continue, even though the Government has launched a national vaccination program. The Government considers that handling Covid-19 and restoring public health are prerequisites for national economic recovery and reform.
The Company is of the opinion that it will still take a long time to recover from the Covid-19 pandemic that has been an emergency and an extraordinary condition affecting all parts of the globe. However, the Company believes that in 2021 the situation will gradually be improving. A number of government policies in tackling the spread of Covid-19 have been proven effective. The Government has also issued a number of policy stimuli which are expected to boost national growth.
The World Bank projected global growth to reach 3.5% in 2021. This economic recovery will mainly be underpinned by China’s economic growth, which is expected to grow rapidly again this year. Meanwhile, domestically, the Government is projecting national economic growth to reach 4.5% – 5.5% (yoy). This projection by the Government is more optimistic than the projections from a number of global institutions, such as the World Bank, which estimated the national economic growth at 4.4%, and the Asian Development Bank, at 4.5%.
This positive signal provides a gust of fresh air to the national property market. A number of research institutions, associations, and businesses have projected that the property sector will be able to grow again this year. Apart from being driven by increasing public demand and investment, this growth will also be bolstered by a number of government policy stimuli in terms of taxation and banking interest rate. Taking these facts into account, the Company believes that the property sector will continue to flourish onwards. The Company has anticipated these changes by enacting a number of strategic policies to be implemented in 2021.
ACKNOWLEDGEMENTS
On behalf of the Directors, I would like to thank the Board of Commissioners and all the Committees for their unwavering support and counsel. I would also like to thank our shareholders, customers, business partners, and regulators, for their support and trust.
Lastly, I would like to express my gratitude to the management and employees for their contributions and loyalty in carrying out their duties. The challenges that we are still facing will remain this year. But, I believe, by fostering collaboration and building on our commitment together, we will be able to weather this storm and emerge triumphantly. In line with the theme of the 2020 Annual Report, the Company will continue to make every effort to strengthen the Company’s resilience through innovation and new ways of doing business.
Hendro S. Gondokusumo
President Director