Board of Directors Report Fiscal Year 2019
Dear shareholders and stakeholders,
We are proud to present report of the Board of Directors on the results of the management of the Company throughout 2019. In this report, we provide an analysis of the Company's performance and the Company's business prospects. We also report the development of the implementation of good corporate governance and corporate social responsibility throughout 2019.
Performance of the Company in 2019
In 2019, Jasa Marga succeeded in doubling the business, with an indicator of the total length of the toll roads operated by the Company. In 2014, the Company operated 576 km of toll roads, while at the end of 2019, the length of toll roads operated by Jasa Marga reached 1,162 km. This achievement has a profound meaning, namely the Company's success in realizing a commitment to strengthen connectivity in Indonesia, as well as being a strong foundation in maintaining the Company's sustainability.
During 2019, the Company succeeded in adding toll roads operating along 162 km. The operation of the new sections includes the Medan-Kualanamu Section of the High Section of the Sei-Tebing-High Section, the Pandaan-Malang Section of the Pandaan-Pakis Section, the Gempol-Pandaan Section, Serpong-Kunciran Section, Balikpapan Samarinda Section Samboja-Samarinda Section and Jakarta Cikampek II Section Elevated.
Pandaan-Malang Toll Road, which was inaugurated by President Joko Widodo on May 13, 2019, has a significant role in facilitating vehicle travel time from Surabaya to Malang, especially on weekends or holidays, because many residents want to visit the tourist area in Greater Malang. Surabaya-Malang which was previously taken in 4-5 hours became 1-1.5 hours.
Towards the end of the year, on December 6, 2019 President Jokowi inaugurated the Kunciran-Serpong Toll Road. President Joko Widodo in his remarks stated that there were at least three benefits from the operation of the JORR II Toll Road, Kunciran-Serpong Section. First, it will accelerate and expedite Banten connectivity to Jakarta, both industrial estates in Jakarta and Banten will be increasingly integrated so that logistics distribution will be easier and smoother, and third accelerate the movement of the Banten economy as a buffer zone of Jakarta which is ultimately expected to increase the number of fields work.
The achievement of toll road development in 2019 is also marked by the existence of 2 (two) sections that have been inaugurated by the President of the Republic of Indonesia which is functionally operated until the beginning of 2020, namely the Jakarta Cikampek II Elevated section which was inaugurated on 12 December 2019 and the Balikpapan section - Samarinda Section II-IV which was inaugurated on December 17, 2019.
In the financial sector, the Company is still able to maintain good financial performance amid business expansion. This is seen from the net profit in 2019 amounting to Rp2.21 trillion or remaining stable from the realization in 2018 of Rp2.20 trillion, although the Company is currently doing a fairly massive expansion in the toll road business. In addition, the Company recorded a consolidated total non-construction business revenue of Rp10.98 trillion, increasing 12.26% from 2018 of Rp9.78 trillion. The Company's EBITDA on a consolidated basis reached Rp6.88 trillion, increasing 14.12% compared to the previous year of Rp6.02 trillion, with an achievement of EBITDA margin of 62.65%.
This performance is a positive impact of the operation of new toll roads in 2019 and the Company's success in connecting the Trans Java Toll Road network by the end of 2018. The construction of new toll roads has contributed to an increase in assets of Rp99.68 trillion or growing by 20.9 % of 2018 which reached Rp82.42 trillion.
The Company also continues to strive to improve operational performance. In addition to the Parent and Jasa Marga Subsidiaries, PT Jasamarga Tollroad Operator (JMTO), a Subsidiary Entity, has successfully operated toll roads whose concessions are owned by other Toll Road Business Entities (BUJT). So that in 2019, PT JMTO has succeeded in operating 1,417.53 km of toll roads consisting of 1,072.19 km on the Jasa Marga Group toll road and 345.34 km on non Jasa Marga Group toll roads.
In order to increase competitive advantage in the field of toll road operations, the Company has again become a pioneer in electronic payment of Nir Stop or Single Lane Free Flow (SLFF) with RFID-based barriers through the FLO application. At present a limited trial is being conducted by the Company by providing up to 41 SLFF toll booths that are spread across the Jabodetabek Toll Road and Bali-Mandara Toll Road.
In addition, several achievements of the Company have also been recorded in serving the homecoming travelers during Eid al-Fitr holiday in 2019. The company succeeded in relocating the transaction points at the Cikarang Utama Toll Gate (GT) to the Cikampek Utama GT and the Kalihurip Utama GT. Aside of breaking the record of trafficengineering as the longest ever in length and in time (413 km for 42 hours), the Company also recorded the highest record of traffic volume during the flow back of Eid al-Fitr travelers in 2019 at the Jakarta-Cikampek Toll Road who were passing through the Cikampek Utama Toll Gate(GT) and Kalihurip Utama Toll Gate (GT) which becomes the highest traffic volume so far in the history of toll roads in Indonesia, reaching 166,574 vehicles or an increase of almost three times the normal daily traffic volume (LHR) of the Cikarang Utama Toll Gate (GT) as many as 67,345 vehicles.
To maintain the profitability and capital structure, the Company has again innovated funding alternatives. In July 2019, the Company issued the first Islamic Bond Sukuk Ijarah for the Company's Gempol-Pandaan Toll Road. The Sukuk Ijarah was launched after earlier in Semester I of 2019 the Company successfully issued an equitybased funding alternative of the Investment Contract of Collective Infrastructure Investment Funds (KIK DINFRA) for the same toll road.
Meanwhile in carrying out its role as part of the community and social responsibility, the Company in carrying out its business is committed to caring for the environment by initiating various Corporate Social Responsibility (CSR) programs. Throughout 2019, the Company participated among others in channeling the Partnership program by providing loan assistance worth Rp53.8 billion to 1,442 fostered partners around the toll road.
The Company continues to maintain its commitment in accelerating the construction of new toll roads to support the Government's plan to realize economic growth and connectivity between regions. To that end, the Company continues to make various innovations to improve quality and efficiency, either in the areas of funding, business development and operations so that it can serve the entire community, especially toll road users, more optimally.
Strategic Policies and Strategies
Positive performance that has been able to be maintained by the Company proves that our strategies have gone well. Currently in the field of human resources, the Company has 8 (eight) strategic programs for human capital and transformation namely Fix Fundamentals, Asset Optimization, Toll Road Business Expansion, Other Business Expansion, Organization & Business Process, HR & Capabilities, Portfolio Management and Communication Strategy that will carry out the Jasa Marga Group transformation acceleration programs by involving several work units of Head Office.
The Company continues to transform in order to run business process effectively and efficiently. This was carried out by starting to align the transformation with the Company's strategic direction like in the Fix Fundamental with program details, namely accelerating the Operational transformation with the use of ETC (Electronic Toll Collection) technology, formulating the policy on Over Dimension Over Load (ODOL) with the installation of Predictive Analytics system, and Asset Optimization with the implementation of traffic monitoring for traffic engineering, application of vehicle to everything technology, optimizing the assets related to rest areas, utilities, advertising, and building management.
In addition, the Company's strategy in the field of business development includes the Toll Road Business Expansion and the planning of toll road development that is integrated with businesses in the Toll Corridor Development, as well as the strategy in expansion to other businesses that are still relevant to the Company's core business of toll roads, by developing the Travoy application used for geofencing marketing.
Comparison Between Achievements and Targets
The performance achieved by the Company is based on the 2019 Corporate Work Plan and Budget (RKAP). The realization of several business sectors has increased significantly and exceeds the targets set in the RKAP. However, several other fields were still below the RKAP targets.
Realization of net profit in 2019 amounting to Rp2.21 trillion was recorded far above the target or reached 110% of the planned plan of Rp1.05 trillion. The achieved EBITDA of Rp6.88 trillion also exceeded the target of Rp6.82 trillion or realized 107%. The Company's assets in 2019 were realized at Rp99.68 trillion or reaching 105% of the target set at Rp94.68 trillion. The realization of assets that exceeded the target was in line with the business expansion that was massively held by the Company.
As for toll revenues and other businesses, the Company's achievement of Rp10.98 trillion or 95.5% was below the target set at Rp11.51 trillion. Investment realization of Rp19.51 trillion was 28.39% lower than the target of Rp27.24 trillion. Achievement of the realization of toll revenues and other businesses as well as the realization of investments that are lower than planned is closely related to the obstacles in the process of completing the toll road land acquisition which causes delays in the operation of new toll roads.
Obstacles and Steps to Resolve
Land acquisition is still a major obstacle in the completion of toll road construction. However, with the implementation of Law No. 2 of 2012, certainty in terms of both time and price, it has accelerated the land acquisition process.
In practice, the Company is also active in resolving land acquisition problems, including through coordinating stepswith the related parties and carrying out any necessary processes in accordance with applicable regulations. A number of these steps and policies resulted in quite good progress in land acquisition during 2019.
Business Prospects Analysis
Infrastructure development is one of the seven main agendas in the 2020-2024 National Medium Term Development Plan (RPJMN). The infrastructure development agenda, among others, emphasizes connectivity to industrial zones, special economic zones, tourist areas, agriculture, and fisheries. One effort to strengthen national connectivity requires the addition of toll roads. Until 2024, the government plans to construct new toll roads at total length of 2,500 km. The government's strategic plan is an opportunity and challenge for the Company in developing its business in the future.
As a leader in the toll road industry in Indonesia, Jasa Marga Management believes the Company's business prospects in the future to be very good. In addition to the length of toll roads that continues to grow, there are several other factors that make the prospect of the toll road industry more attractive. These factors include: (1) Traffic volume on the toll roads managed by the Company is expected to continue to grow positively; (2) The concessions that are still in long period of time with the nearest ending time in 2044 for the 13 (thirteen) toll roads operated by the Company; (3) new toll roads that will be connected to the existing toll roads; (4) There is potential for additional toll road concessions through acquisitions; (5) Development of the property industry; and (6) Growth in sales of fourwheeled vehicles which is the largest market of toll road users.
Implementation of Good Corporate Governance
The Company consistently applies the principles of Good Corporate Governance (GCG), namely transparency,accountability, responsibility, independency and fairness. In order to improve the quality of GCG implementation, the Company always assesses the implementation of GCG. GCG assessment can be used as a basis for management actions so that the implementation of GCG can be carried out more effectively. The assessment is part of the check and balance mechanism. With the assessment, the achievements of the activity can be known with certainty and further actions to improve the performance of an activity can be determined accurately.
GCG assessment is carried out using the Ministry of SOEs assessment parameters stipulated in SK-16/S. MBU/2012 dated June 6, 2012 pertaining Assessment and its Indicators/Parameters for the Implementation of Good Corporate Governance in State-Owned Enterprises. The assessment has been conducted by an independent party, so the quality of the assessment is expected to be better.
The results of the GCG assessment for fiscal year 2019 showed a score of 98.06 out of a maximum total score of 100, or achieving a "very good" qualification. The achievement of the GCG assessment score for the 2019 fiscal year increased compared to the 2018 fiscal year which reached a score of 97.82.
Based on the GCG assessment results for 2019 fiscal year, the Company will follow up on its recommendations in 2020. While for the GCG assessment of 2018 fiscal year, the Company has followed up on its recommendations, including:
- Reviewing the Standard Operating Procedure (SOP) in accordance with the needs of the Company.
- Improving the quality of Annual Report.
- Implementation of Issuer Compliance Knowledge Sharing in accordance with Capital Market Regulations at Marga Lingkar Jakarta as a subsidiary which is also an Issuer.
- Changes in Management Consultant and Addition of Whistleblowing System Reporting Channels (email, website, SMS, Whatsapp and PO BOX).
- Socialization Related to Anti-Corruption in collaboration with Corruption Eradication Commission (KPK).
- Disseminating new guidelines, policies and regulations.
Performance Assessment for the Committees Under the Board of Directors and the Basis of Assessment
Jasa Marga's Board of Directors are assisted by 2 (two) Committees, namely: the Risk Management Committee and the Information Technology Steering Committee. During 2019, the Board of Directors assessed that the Risk Management Committee has carried out its duties properly, among others by evaluating the Company's risk management policies, reviewing the risks faced by the Company and assessing the Company’s risks.
Likewise with the Information Technology Steering Committee which is considered to carry out their duties properly by the Board of Directors by organizing the meetings for discussion on IT strategy and its strategic alignment in business, IT implementation in accordance with the master plan, IT governance and supervision and periodic IT performance measurement.
Changes in Composition of The Board of Directors
During 2019, the composition of the Board Directors underwent a number of changes, as explained below.
Number, Nomenclature and Composition of the Company's Board Directors Before the Annual General Meeting of Shareholders on May 6, 2019
The number of the Company’s Board of Directors members before the Annual General Meeting of Shareholders (GMS) on May 6, 2019, was 6 (six) people consisting of 1 (one) President Director, 1 (one) Independent Director and 4 (four) Directors, with nomenclature and composition as follows:
|Desi Arryani||:||President Director|
|Mohammad Sofyan||:||Director of Operations I|
|Subakti Syukur||:||Director of Operations II|
|Adrian Priohutomo||:||Director of Development|
|Donny Arsal||:||Director of Finance|
|Alex Denni||:||Director of Human Resources and General Affairs/Independent Director|
The Annual General Meeting of Shareholders on May 6, 2019 decided, among other things, the changes in nomenclature of the Board of Directors positions as follows:
|Old Nomenclature||New Nomenclature|
|Director of Human Resources and General Affairs||Director of Human Capital and Transformation|
|Director of Development||Director of Business Development|
|Director of Operation I||Director of Business|
|Director of Operation II||Director of Operations|
Number, Nomenclature and Composition of The Company's Board Directors After the Annual General Meeting of Shareholders on May 6, 2019
Based on the changes in nomenclature of director positions decided by the Annual General Meeting of Shareholders on May 6, 2019, the number of the Company’s Board of Directors members after the Annual General Meeting of Shareholders on May 6, 2019 becomes 6 (six) people consisting of 1 (one) President Director, and 5 (five) Directors, with the composition as follows:
|Desi Arryani||:||President Director|
|Mohammad Sofyan**||:||Director of Business|
|Subakti Syukur||:||Director of Operations|
|Adrian Priohutomo||:||Director of Business Development|
|Donny Arsal||:||Director of Finance|
|Alex Denni*||:||Director of Human Capital and Transformation|
*) Menjabat sebagai Direktur Human Capital dan Transformasi sampai dengan 03 Maret 2020
**) Merangkap sebagai Direktur Human Capital dan Transformasi sejak 03 Maret 2020
The changes in composition of the Board Directors are implemented with due regard to the Company's vision, mission, and strategic plan to enable effective, precise and fast decision making, and able to act independently.
Changes in Composition of the Board of Directors From After the 2019 Fiscal Year Ends Until the Deadline of Submitting the Annual Report
In the period from after the 2019 fiscal year ended until the deadline for submitting the Annual Report, there was a change in the composition of the Company's Board of Directors. Given the appointment of Alex Denni, Director of Human Capital & Transformation of PT Jasa Marga (Persero) Tbk, to become Deputy of Human Resources, Technology and Information of the Ministry of State Owned Enterprises on March 3, 2020, as stated in the invitation of the Secretary of the Ministry of SOEs No. Und-4/MBU/S02/2020 dated February 28, 2020 which is a follow up of the Presidential Decree No. 49/TPA 2020 concerning Appointment for the Positions in Middle Senior Leadership in the Ministry of State-Owned Enterprises, then through the Board of Directors Letter No. AA.HC04,238 dated March 3, 2020 Regarding Proposed Appointment of Provisional Officials that have been answered with the Board of Commissioners Letter No. DK 029/III/2020 dated 05 March 2020 Regarding the Appointment of Acting Director of Human Capital & Transformation PT Jasa Marga (Persero) Tbk, the Board of Commissioners has appointed Mohammad Sofyan, the Company’s Director of Business Affairs as Acting Director of Human Capital & Transformation of PT Jasa Marga (Persero) Tbk, with the same power and authority.
The appointment of Mohammad Sofyan as Acting Director of Human Capital & Transformation is valid starting from March 3, 2020 until the appointment of new Director of Human Capital Transformation at the General Meeting of Shareholders (GMS). In the context of information disclosure, the change in the members of the Company's Board of Directors has also been reported by the Company's Corporate Secretary to the Financial Services Authority (FSA/OJK) through the Corporate Secretary Letter No. BF KR02. 59 dated March 5, 2020 concerning Report on Information or Material Facts about Changes in the Company's Board of Directors. Due to the change, the composition of the Company's Board of Directors in the period from after the 2019 financial year ended until the deadline for submitting the Annual Report is as follows:
|Desi Arryani||:||President Director|
|Mohammad Sofyan||:||Director of Business|
|Subakti Syukur||:||Director of Operation|
|Adrian Priohutomo||:||Director of Business Development|
|Donny Arsal||:||Director of Finance|
|Alex Denni*||:||Acting Director of Human Capital and Transformation|
In addition to taking into account the Company's Articles of Association, vision, mission, and strategic plan, the change in the composition of the Board of Directors mentioned above has also fulfilled the aspect that determining the Board of Directors is the authority of the Dwiwarna Series A Shareholder.
Closing and Appreciation
The Board of Directors would like to express the highest gratitude to all parties who have supported and given their best contribution. To all employees of the Company, the Board of Directors offers the highest appreciation for the dedication that has been performed. To the Board of Commissioners, the Board of Directors would like to thank the guidance given, so that the Company's business activities can be running effectively.
For the trust of shareholders, the Board of Directors would also like to thank and will continue to strive to increase the value of the Company in a sustainable manner. To the partners and stakeholders, the Board of Directors would like to thank you for the cooperation and support provided.
The Board of Directors is committed to maintaining the Company's position as the leader of the toll road industry and playing an important role in supporting the Government's program to realize connectivity in Indonesia.
On behalf of the Board of Directors
Note: *) Serving as President Director until June 11, 2020