Why did SP Setia revise its FY2020 sales target downwards?

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SP Setia Revised FY2020 Sales Target Due to Expected Economic Recovery Delays and COVID-19 Impact

SP Setia has revised its sales target for the financial year ending December 31, 2020, to RM3.80 billion from the previously set RM4.55 billion. This downward revision is primarily driven by the expectation that a recovery in economic activities will take a considerable amount of time. The ongoing practice of social distancing, necessitated by the extended conditional movement control order (MCO), is also anticipated to impede construction progress. Furthermore, heightened concerns regarding job security are expected to make consumers more cautious in their spending, particularly on substantial purchases like properties.
Impact of Movement Control Order on Business Operations

The first quarter of 2020 saw SP Setia's net profit decline by 43.78% year-on-year, reaching RM56.12 million, compared to RM99.83 million in the previous year. This reduction was significantly influenced by the MCO implemented to combat the COVID-19 pandemic. The closure of sales offices and construction sites, along with restrictions on social activities, disrupted the company's business operations, leading to a lower profit contribution during this period. Revenue for the first quarter also decreased by 18.76% year-on-year, falling to RM702.66 million from RM864.91 million.
Anticipated Delays in Construction and Consumer Spending Habits

The company anticipates that the continued implementation of social distancing measures throughout the extended conditional MCO period will inevitably affect the pace of construction projects. This, combined with persistent concerns about job security, is projected to result in a more conservative approach to consumer spending. Individuals are likely to be more hesitant to commit to purchasing "big ticket" items, with property purchases being a key area of increased caution.
Financial Standing and Future Strategy

Despite the challenging outlook for FY2020, SP Setia remains in a relatively stable position due to RM9.80 billion in unbilled sales as of March 31, 2020. This substantial backlog is expected to sustain the group's operations over the next two years. Moving forward, SP Setia plans to adopt a prudent approach, focusing on clearing existing completed inventories and limiting new project launches. The company will concentrate on developing mid-range landed properties within established townships, aiming to meet the demand from owner-occupiers. The group currently has 48 ongoing projects and a remaining land bank of 3,528.05 hectares, with a gross development value of RM138.87 billion.

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Why did SP Setia revise its FY2020 sales target downwards?

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