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ANNUAL REPORT


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Index

Message from the President and Chairman of the Executive Board General Information Board and Executives Organization of Project Planning Service PCL Vision, Mission, Value, and Strategy 2013 Business Objectives Current Overview of Corporate and Subsidiaries Businesses Significant Performance and Progress in the Past Years 2012 Corporate Activities Marketing and Challenges Risk Factors Business Management Related Transactions Financial Statement and Performance Results Description and Analysis of Financial Statement and Performance Results Report of the Audit Committee Annual Risk Management Report Auditor and Budget’s Report Financial-proof Budget Remarks for Budget Auditor’s Report

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Message from the Chairman of the Board of Directors and CEO In early 2012, Thai economy was slowing down due to the effect of floods in late 2011. Despite the concern about global economic situation, Thai economic growth remained resilient . Our main customers in the retail business, i.e. Tesco Lotus and Central Department Store, managed to maintain their branch expansion, leading to estimated income of 260.34 Million Baht in 2012 compared to 295.99 Million Baht in 2011, and the net profit of 15.28 Million Baht in 2012 compared to 22.05 in 2011.

is one of our key expenses. The problem is twofold when some of the contracts with customers have been agreed long before the minimum wage policy came into effective.

In 2013, government plans several infrastructure projects, for instance, airport expansion and express network rail way system. We expects that we will have an opportunity to engage in such projects. At the same time, we also expands our scope to engineering and architectural design. On top of that, we continue to In September 2012, we transformed from private improve ourselves by leveraging more IT into working company to public company and announced the plan process and we are confident that the IT solution can for IPO, making us the first company in this industry to become our new business line. be listed on mai. This is a reflection of our strong Lastly, on behalf of board of directors, I would like commitment in professionalism and transparency since to thank our customers, our shareholders, our partners and the establishment of the company. our employees that have supported us for all this time. Reduction of profit in 2012 is due to non-recurring We would like to ensure you that we will keep doing expenses such as expense for the 25 year anniversary business sincerely and transparently while maintaining celebration and the fee for Market for Alternative high standard of being “Trustworthy project manager” Investment (mai) listing. In addition, we recruited many new employees to prepare for future expansion. All the aforementioned led to increase in expenses of 27% from 2011. Without negligence, we set up our cost management committee consisting of two independent directors and one accounting executive. This committee successfully formulated the cost reduction plan that became effective from the start of 2013. Furthermore, we expanded scope of our services to design services as well as IT engineering services. …………………………………. (Prasong Tharathai) For 2013, there remains uncertainties and vol atility in global economy. Even though Thailand has Chairman of the Board of Directors and CEO decreasingly depended on international market, there are unfavourable factors that might negatively affect our clients; for example, higher minimum wage. We are no exception to this challenge since employee compensation

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

General Information

Project Planning Service PLC

Headquarter address Telephone Fax Website (URL) Business Characteristics

Registered capital Common share Par value Paid up capital

: 381/6 Soi Rama 9 58 (Soi 7 Seree 7), Rama 9 Road, Suanluang, Bangkok 10250 : 0-2718-2785-9 : 0-2300-5545-6 : www.pps.co.th : Provide engineering consulting service and project construction management service for project owner in construction buildings and infrastructure projects especially those required expertise in engineering skills. : 100 Million Baht (One hundred million baht) : 400 Million shares (Four hundred million shares) : 0.25 Baht (Twenty five satang) : 100 Million Baht (One hundred million baht)

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Board of Directors

Prasong Tharachai

Chairman of the Board of Directors Chairman of the Executive Committee

Dr. Phongthon Tharachai

Arthit Hongchintakul

Pol.Lt.Gen Dr. Nukool Jeamanukoolkit

Vipavee Boonyaprasit

Director, Executive committee member, Executive Vice President (Finance and Administration)

Independent Director, Chairman of the Audit Committee

Kachen Benjakul

Independent Director, Audit Committee member

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Somphant Hongchintakul

Director, Vice Executive Chairman, Managing director

Annual Report 2012

Director

Independent Director, Audit Committee member


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Executive Committee

Prasong Tharachai

Chairman of the Board of Directors Chairman of the Executive Committee

Dr. Phongthon Tharachai

Director, Executive committee member, Executive Vice President (Finance and Administration)

Tat Thongpakdi

Executive committee member Vice Managing Director

Wanchai Ruengsap-anek Executive committee member Project director

Somphant Hongchintakul

Director, Vice Executive chairman, Managing director

Dr. TheerathonTharachai Executive committee member

Somchai Vongsavangrasame

Executive committee member Executive Vice President (Project)

Nopparat Narin

Executive committee member Executive Vice President (Business Development) Annual Report 2012

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1. Prasong Tharachai 2. Somphant Hongchintakul 3. Dr. Phongthon Tharachai 4. Arthit Hongchintakul 5. Pol.Lt.Gen Dr. Nukool Jeamanukoolkit 6. Kachen Benjakul 7. Vipavee Boonyaprasit

Annual Report 2012

Project Director

Project Director

Project Director

Project Director

Project Director

Somchai Vongsavangrasme

Internal Audit Department

Audit Committee

ผู้ช่วยกรรมการผู ้จัดการ Vice Managing Director (Project) ฝ่ายโครงการ

Board of Directors

and Training Director

ผู้อ�ำนวยการ Knowledge ฝ่ายการบริ หารจัManagement ดการความรู้

New Business Director

Procurement Director Uthai Siriwiwat

ผู้อ�ำนวยการฝ่ ายบุand คคล HR Director HR Development และพั ฒนาบุ คลากร Uthai Siriwiwat

Accounting Director Voraporn Chaona

Rachanee Sinborisut

Director ผู้อ�ำFinance นวยการฝ่ ายการเงิน

Division Design Director ฝ่ายงานออกแบบ Dr. Songphon Jaruvisit

ผู้อ�ำนวยการ

ผู้ช่วยกรรมการ Vice Managing Director (Finance and Accounting) สายงานบั ญชีTharachai และการเงิน Phongthon

Risk Management Department

Risk Management Comittee

1. Prasong Tharachaiบริหาร 2. Somphant Hongchintakul 3. Dr. Phongthon Tharachai 4. Dr. Theerathon Tharachai 5. Tat Thongpakdi 6. Somchai Vongsavangrasme 7. Wanchai Ruengsap-anek 8. Nopparat Narin

Executive Committee

ผูVice ้ช่วยกรรมการผู ้จัดการ Managing Director (Business Development) ยพัฒนาธุรกิจ Nopparatฝ่าNarin

Vice Managing Director Tat Thongpakdi

Managing Director Somphant Hongchintakul

Exectutive Committee

Board of Directors

Organization Chart Project Planning Service PCL

PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Vision, Mission, Core Value and Strategy

To become leader in all branches of professional engineering service while being learning organization and sharing knowledge to the society

Prasong Tarachai Chairman of the Board of Directors and CEO

Mission

- Deliver service to customers with integrity and knowledge - Maintain our professional service that aligns with international standard and corporate governance - Continue to improve working process as well as human resource

Core value

Teamwork Benefit to all stakeholders Integrity and ethic Trustworthy

Strategies for year 2012

1. 2. 3.

Diversify sources of revenue into other types of services as well as customer bases in order to enhance income and profit stability. More effort will be put in infrastructure design Develop company’s academic training department to become a public training center. We believe that it will help promoting professional image of the company Standardize working process by fully leveraging IT. This will facilitate the company to audit, search and historical data with ease resulting in competitive advantage over competitors

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Business Target in 2013 In 2013, PPS aims to diversify its business by emphasizing more on engineering consulting and project management service for infrastructure project, instead of a current focus on commercial buildings. PPS started to send several quotations for new type of project beginning in late 2012. We are determined to improve our project management working process, so that such system can be applied with other construction projects. In 2012, we planned to adopt IT to help auditing, searching, analyzing historical data in certain projects that we provide services. This project will be operated by our subsidiary company PPS Information Consultant Co., Ltd. and our partners. In terms of corporate image, we will deliver “professional”, “reliability” and “knowledge organization” image by developing “PPS training center” as a training center for the public. In 2013, we will begin to do marketing campaign for this center. Furthermore, we estimates the revenue from engineering and architectural design services through Swan and Maclaren (Thailand) and PPS design to be approximately 10% of the company’s total income.

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Overview of PPS business and PPS’s subsidiary Project Planning Service PCL (PPS) provides engineering consulting and construction project management service for construction projects such as high rise buildings, hotels, department stores, infrastructure constructions as well as renovating buildings and constructions. Currently PPS has two subsidiaries “PPS design Co., Ltd” and “PPS information consultant Co., Ltd.” Furthermore, we have one joint venture “PPQ Joint Venture” and one associate company “Swan and Maclaren (Thailand).” Project Planning Service (PPS)

99.99%

PPS Design (PPSD)

90%

PPS Information Consultant (PIC) Registered Capital 1 Million Baht IT services *Established in January 4, 2013

Registered Capital 3 Million Baht Engineering Design Service

35%

80%

Swan and Maclaren (Thailand) Registered Capital 25 Million Baht Architectural design and interior design service *Expect to establish in April 2013

PPQ Joint Venture (PPQ) Registered Capital 3.3 Million Baht Supreme Court building project management

Subsidiary Company PPS Design Co., Ltd (PPSD) was established on July 31, 1990 with registered capital of 3 Million Baht (Ordinary share of 30,000 at par value of 100 baht/share). PPS has 29,998 shares or equal to 99.99% in PPSD. PPSD is located at 381/6 58, Rama 9 Road, Suanluang, Bangkok 10250. PPSD aims to provide engineering design services. The board of directors of PPSD are as follows No. 1. 2. 3. 4. 5.

Name Prasong Tharachai Somphant Hongchintakul Wanchai Ruengsap-anek Somchai Vongsavangrasme Tanint Sribenjarat

Title Chairman Vice Chairman Director Director Director

Joint Venture PPQ Joint Venture (PPQ) was established on March 16, 2009 by 3 parties; that are, PPS (80%), ETF Services Co., Ltd (15%) and Qbic Engineers & Architects Co.,Ltd (5%). We specfically set up PPQ to bid for Supreme Court building project management. Currently, PPQ has registered capital of 3.3 Million Baht, 80% or 2.64 Million Baht of which is invested by PPS. ETF Services and Qbic Engineers & Architects Co.,Ltd. are not related or have no relationship with major shareholders, directors, executive members, PPS and its subsidiaries. Supreme court building project began in December 2012. Annual Report 2012

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

PPS Information Consultant Co., Ltd PPS Information Consultant Co., Ltd (PIC) was established on January 4, 2013 with registered capital of 1 Million Baht (Ordinary share of 100,000 at par value of 10 baht). PPS has 89,999 shares or equal to 90% in PIC. PIC is located at 381/6 Soi Rama 9 58 (Soi 7 Seree 7), Rama 9 Road, Suanluang, Bangkok 10250. PPSD aims to provide engineering design services. The board of directors of PIC are as follows No. Name 1. Phongthon Tharachai 2. Prapoj Poonsripattana

Title Chairman Vice Chairman

Swan and Maclaren (Thailand) Co., Ltd Swan and Maclaren (Thailand) Co., Ltd (Swan & Maclaren Thailand) is being registered with capital of 25 Million Baht by 3 parties; that are, Swan and Maclaren (Singapore)(49%), PPS (35%) and Si Phaya Construction Co., Ltd (16%). Swan & Maclaren Thailand was established mainly to provide architectural and interior design services. Currently PPS already paid 2.19 Million Baht which accounted for 0.88%. Swan and Maclaren Thailand have no relationship with major shareholders, directors, executive members, PPS and it’s subsidiaries. Presently Swan & Maclaren Thailand starts to provide service, while the registering process is expected to be completed in April 2013.

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Past projects and developments Project Planning Service PCL (PPS) was established on June 25, 1987 with registered capital of 1 Million Baht with the purpose to provide engineering consulting and construction project management service for building construction and infrastructure construction especially those that require engineering specialty. PPS group has grown continuously and completed more than 100 projects as of 2012. Some of our achievements are passenger building and terminal buildings of Suvarnabhumi Airport, Bank of Thailand headquarter buildings, Baiyok Tower 2, The Office @ Central World. PPS group completed several projects in 2012 such as Thanya Shopping Park, Central Surat Thani, Central Rama 9, Amway Headquarter Thailand, Mega Bangna and 26 branches of Lotus department stores. Projects under operation include the extension of Bangkok Mass Transit - Blue Line, Sri-rat Expressway, Central Embassy and Lotus RDC Khon Kaen.

Thanya Shopping Park

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Central Surat Thani

Central Rama 9

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Amway Headquarter Thailand

Mega Bangna

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

26 branches of Lotus Department Stores

Bangkok Mass Transit - the Blue Line

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Sri-rat Expressway

Central Embassy

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Lotus RDC Khon Kaen

Supreme Court Buildings

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

In 2012, PPS group established PPS Training Center to provide employee specialized skills. As a prerequisite for anyone who would like to get promoted to a project manager position, one has to pass 84 hour training at the minimum. In 2012, PPS held 15 courses accounting for 105 hours of training, taught by both internal and external lecturers.

On June 5, 2012, PPS converted from private company to become public company limited and was subsequently listed on Market of Alternative Investment (mai) on September 26, 2012 with registered capital of 100 Million Baht,raising 84 Million Baht from IPO. Net proceeds from the IPO would be used for developing and hiring personnel with expertise in engineering design and architectural design. The recruits will be assigned to PPS Design (PPSD), a subsidiary which was established in 1990. In 2012, PPSD did not have any revenue stream from design service yet, however, we expect that income from design service will significantly increase in 2013.

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

swan + maclaren Thailand

In order to expand into architectural design service as well as extend our business market into ASEAN, board of directors approved the establishment of Swan and Maclaren (Thailand) Co., Ltd (Swan & Maclaren). Swan & Maclaren LLP, Singapore, our partner, is an architectural design consultant with longest track record in Singapore. Several renown landmarks are Raffles hotel in Singapore and Victoria Monument. Today, Swan & Maclaren engages in several projects in ASEAN including Singapore, Malaysia, Vietnam and China. By setting up joint venture with Swan and Maclaren, PPS will not only be able to offer complete solutions to clients but also use it as a foundation to penetrate to regional market. We expect that Swan & Maclaren (Thailand) will start to operate in quarter 2, 2013.  

While the adoption of IT in other industries are surging exponentially, construction industry is considered far behind. Foreseeing an opportunity in this segment, PPS decided to set up PPS Information Consultant (PIC) to provide professional advices in project management as well as IT system setup. PIC began to operate since January 2013.

PPS INFORMATION CONSULTANT

PIC

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Company Activities in 2012 Employee Training No.1/ 2012 Location Attendants

No2 /2012 Location Attendants

: : :

: : :

Petchaboon during March 23-25 Phu Hin Rong Kla National Park, Phutub berk, Khao kor, Yod khaoya, B.N. farm, Pagoda Relics, That pa kaew temple 40-60 people

Chiangrai during May 4-9 Chaing Khong, Luangnamtha province Laos PDR, Jinghong (China), Man Ting Gong Yuan, Ganlanpa, Xishuangbanna Meng Le Buddhist Temple, Tropical botanical garden 40 people

25 year Anniversary party at Centara Hotel at Central World May 21, 2012

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Buddist Ceremony at Company Headquarter July 8, 2012

PPS Cup annual soccer game December 27, 2012

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

PPS New Year Party December 27, 2012

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Market and Competitiveness Market for design consulting and project management services in 2012 continued to prosper due to the expansion of all real estate segment ranging from residential, commercial building, retail to hospitality. Government infrastructure projects will also have major impact on our business for at least 2-3 years ahead. Even though the competition in the market is still high, it is unlikely to see price competition. For the residential segment, there were expansion in both high rise and low rise. Research from Agency for Real Estate Affairs (AREA) stated that new residential for sale in 2012 stood at 100,151 units, an increase of 19% from the year earlier. In condominium segment alone, it showed a surge of up to 50%. Data from K-Research in Q4 of 2012 revealed that there were several positive factors that led to growth in residential market such as good level of household income, better consumer confidence and low cost of mortgage as well as the ease to access the loan due to low NPLs level of financial institutions. With upcoming infrastructure investments, the adoption of AEC, and the expansion of trade along country borders, the real estate expansion is expected to continue its momentum through early 2013. Regarding pricing, we forecast an increase of 10-15%. Real Estate Information Center (REIC) surveyed real estate entrepreneurs’ expectations and found that expectation in the next 6 month (Expectation index) in Q4 of 2012 increased to 71.0, while Q3 of 2012 and Q4 of 2011 were 69.9 and 60.8 respectively. For the commercial segment, data from Real Estate Information Center (REIC) revealed that there were rising numbers of construction licenses equal to 6.81 Million Sq. M. or 24% increase. Data from K-Research in 2012 showed investment in retail sector and modern trade worth approximately 78,000-80,000 Million Baht while the investment in hotel and boutique hotels were estimated at 700-1,200 Million Baht and condominium at 18,480-20,880 Million Baht. This data was as of April 2012, which we expect that the current estimates should be higher from the increase in consumer confidence and better economy. As for office building segment, rise of both rental rate and occupancy rate reported by CBRE Thailand also confirms that this market is still healthy. For the department store, its expansion plan to serve higher consumption of the country also positively affects demand for our services. Another key factor that undoubtedly has an impact on the market is government infrastructure mega project worth approximately 2 Trillion Baht (20% of GDP), 25%-40% of which is expected for bidding in 2012. This has direct effect to real estate industry including design, consulting, and project management services. While the design and consulting occur before the construction phase, project management and engineering supervision will start as soon as the construction begins. We believe that real estate investment in 2013 will be approximately 900 Billion Baht, majority of which is from the government sector. From all the information stated above, we conclude that design consulting and project management services will see another good year in 2013. With favourable market condition like this, it will inevitably attract many new entrants, This might also cause the lack of skilled persons in the industry. However, as demand of services still surpasses supply, it is less likely to have price competition..

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Risk factors We put much focus on risk management and set up risk management committee to create strategies to manage risks since 2012. Our company faces risks as follows:1. Risks of Business Competition 1) Risk of business competition Typically, engineering services has low barrier to entry because of low investment cost. Even though there is a requirement for engineer to possess certain license, it is not too hard to obtain. A boom of engineering services company in the past few years can be a good evidence. Any individual with license for professional practice can gain some foothold in this business. Increase in construction projects of big retailers or government could create opportunities for new entry who might employ aggressive pricing strategy to penetrate the market. However, there are not many qualified players who can provide one stop engineering services especially ones with good track records. In addition, having highly skilled engineers who have close and long relationship with the clients also give company certain advantages over competitors. Lastly, PPS’ commitment in quality over price is a strong defense for any price competition should it arise. That being said, we did not overlook any of the above risks. In response to that, we have created risk management scheme since 2012. We increase our scope of services from upstream to downstream of engineering consulting. We invest in engineering and architectural design together with the introduction of IT in the field to increase company’s efficiency. This might be a first stepping stone towards new business in the future. 2) Risk of focusing on limited market segment and a few big clients Since our customers are limited to those medium to large project owners that emphasize on construction quality, most of our customers are normally repeat customers such as CPN Group and Ekachai Distribution (Tesco Lotus), both of which are real estate developesr in retail business. CPN Group contributes 25% of income to the company, while Tesco Lotus accounts for 15%. Therefore, if there is any change in their decision on receiving services as well as scope adjustment, it will have an impact on our sales revenue. We plan to mitigate this risk by re-balancing the work between government and private i.e. focusing more on government work which is currently at only 15%. In addition, we will diversify into other types of construction; for example, factory and infrastructure. 3) Risk of income inconsistency Our main income is derived from consulting and construction management for project owner or contractors on project by project basis, therefore company might face the risk of discontinuity of income when existing projects are completed but there is no new project assigned for the engineers who have just completed. Inevitably, the company still has to bare the cost especially those associating with personnel costs as a major cost of the compan.y Recognizing the risk, we set risk management plan as follows: 1. Increase our scope of services from upstream to downstream of project management; that is, from consulting and project design service to facility management. 2. Re-balance the work between government and private i.e. focusing more on government work, and diversify into other types of construction.

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

3. Maintain quality of projects in terms of construction standard, time and budget in order to build trust and confidence among customers. For the past years we have delivered more than 100 projects, 80% of which are peated customers and those who approached us from reference from existing customers. While we adopted budgeting as a target for yearly budgeting in the year 2010, we changed to project budgeting in 2011. The new method allows us to track income, cost and profit in each project more effectively. Board of directors and executive committee then can have access to useful data and analyze for any discrepancy between the actual performance and budget figures on monthly basis. Project director can also make use of this data for HR planning and project scheduling so that there is less volatility in income after old project finishes and before new project starts. 4) Risk of errors from engineering consulting service In general, ones who provide management service or engineering consulting project management service have no liability to the construction. However, the advice that deviate from engineering profession standard or negligence of the engineer could pose a risk to the company. Knowing that the stated risk could affect our brand equity and our image, we pay lot of attention to qualification of the engineer starting from selection process to training process in every level. So, the company can be confident that they have right knowledge and qualified engineering skills for the customers. We keep this at the heart of our professional consulting services. In addition, the assign at least one project manager, who is responsible for all operations, assigned to each project. As a safeguard measure, project director will be designated to supervise each project manager. On top of everything, we bought professional indemnity insurance in case there are inevitable mistakes occurred in working process. 5) Risks of external uncontrollable factors e.g. natural disaster, political uncertainty, and global economic crisis In case of natural disaster and political uncertainty, company will be affected only if construction area has direct effect from such factors. Project owner might consider postpone or cancel the project. Also, if there are shortage of construction materials or labors such that construction can not be completed in time, project owner might also decide to postpone payment or revoke the contract. Regarding global economic depression, there is no direct impact to the company as we mostly rely on domestic construction market. However, there might be an indirect effect if it slows down future projects of the clients. Realizing the given risk, we make sure that we have adequate working capital to complete the project as well as diversify the source of income. 6) Risk of labor shortage and wage increase As government announced the increase in minimum wage in early 2012, it resulted in an increase of labor cost for the whole construction industry. Also, the boom in construction has created a hard time for company to recruit engineers. To mitigate the risk, we adjusted employee income in early 2012 to prevent our skillful engineer from leaving the company. Although it will affect our profit margin, we try to neutralize the effect by better cost management to maintain our net profit at historical level.

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2. Management risks 1) Risk of dependency on key management figures As our key directors and managements, Prasong Tharachai (Chairman), Somphant Hongchintakul (Management Director), and engineers in management level are well respected in this industry due to their high experience, any change in these key figures can put company at risk of finding new clients. Give the stated risk, we launched active marketing strategies and increased the scope of our company to reduce dependency from the management alone. Career Development Program and management skill training were set up as quality control before promotion. In 2012, we had 4 new project directors that passed career development program. Several key management in designing service have also been filled to diversify such risk. 2) Risk of scarcity in highly skilled engineers It is possible for skilled engineers to change their career, either doing on their own or doing with other companies. We are at risk as our nature of business depends on these key personnel. Timely replacement of key personnel is very critical as it can affect the working project we currently engage in or restrain our ability to secure additional projects. We are concerned about stated risk, so we set up career development program for specialty training and management skill training such that engineers acknowledge that they have ability to grow as a project head or management in the future. We also adjust employee salary and benefits, such as OT, bonus and provident fund, to prevent our skillful engineers from leaving the company. 3) Risk of contractors malpractice From the labor shortage and intense competition in the construction market in 2013, we have to closely review qualifications of each contractor. There are risks that contractors cannot deliver according to plan or perform not according to engineering standard resulting in a loss and negative brand image of our company. In response to this risk, any contractor mistake found by supervisor will be reported immediately according to company’s ISO9001:2008 standard. Letters will be directly sent to contractors. Formal monthly updates to project owner and project by project risk management plan are put into place as extra preventive measures. 4) Risk of investing with partners In late 2012, we expanded our business scope by making a joint venture with Swan & Maclaren Singapore. We can leverage know how from this joint venture as well as market knowledge for ASEAN expansion. However, our know how might be transferred to our partner as well. Moreover, as we are entering into new business territory, we might face some risks amid our inexperience. 3. Financial Risks 1) Risk of Revenue Recognition If the project owner terminate the contract in advance or our company rescind the contract due to contractors’ misconduct in agreements or timely payments, these events will affect our revenue stream and our financial status.

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

To reduce such risk, we are careful in customer selection process by reviewing both their reputation and finance. In return, we ensure the customers with high quality and timely-and-in-budget service. 2) Risk of shortage in working capital Business expansion requires more employees, more training as well as more investments, resulted in higher workin eeded. Nevertheless, proceeds from the IPO last year is sufficient to support all additional activities.

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Corporate Governance Board of directors has policy to align with Code of Best Practices and we set corporate governance policy as a platform to achieve efficiency, effectiveness, and fairness to all stakeholders as follows; Right of shareholders We put importance to the right of shareholders. We will not take any action that will violate or lessen the right of shareholders. We provide convenience for shareholders in their usage of rights. We ensures that shareholders are entitled to all basic rights and reliable standards as follows; PPS will provide essential, clear, and up-to-date information for shareholders regarding the Company’s business. Company will notify shareholders of the information directly or through SET. Place and time for shareholders’ meeting will be chosen wisely PPS will acknowledge all shareholders sufficient detailed information concerning the Shareholders’ Meeting date and the Meeting agenda 7 days prior to the date of the meeting according to the company policy and/or the law. In addition, board of directors’ opinion and audit committee opinion in each agenda are required in important issues or as required by law. The shareholders’ right to attend the Meeting and the right to vote on resolutions will be clearly stated in the Meeting notice submitted by the Company. PPS will provide enough time in the meetings such that shareholders have opportunity to freely express their opinions, give suggestions, and raise questions on any agenda items and that shareholders can obtain sufficiently detailed information from board of directors. The meeting resolution will be informed to SET immediately before the next market trading session. Minutes of meetings that have complete details including directors attended, casting votes, questions or opinion such that shareholders can further review. PPS ensures that the minutes will be delivered to SET within 14 days after the meeting Equitable Treatment of Shareholders We assert equal treatment to all shareholder as follows: Shareholders are entitled to authorize others to attend shareholders’ meetings and exercise their rights to vote on their behalf. The authorized parties can attend the shareholders’ meeting and fully exercise their right to vote upon certifying his or her status. PPS provides the opportunity for shareholders to exercise the rights to propose agendas in advance at least 3 days prior to the annual general shareholders’ meeting. PPS then will inform about additional agenda to SET. PPS provides the opportunity for shareholders to exercise the rights to qualified nominees for election as directors at least 3 months prior to the annual general shareholders’ meeting, given that they provide information about their qualification and letter of consent. For safety of internal information, we have code of conduct and ethics as well as punishments stated in employees’ manual. In order to prevent misconduct of data usage by management, the meeting resolution will be informed to SET immediately before the next trading session. Also directors and management must report to SEC about their equity transaction involved with the company within 3 days. Annual Report 2012

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Roles of Stakeholders We respect all stakeholders and put the code of conduct in place to make sure that all stakeholders are treated fairly. In addition, we cooperate with all stakeholders such that we can operate efficiently while remain fairness to all stakeholders in the long run. Our practices are as follows: - Treat employee equally and fairly with appropriate compensation - Trade with partner fairly according to trading rules and agreed contract - Take care and be responsible for customers - Act according to debt covenants - Compete fairly and avoid unethical conduct that could damage competitors - Engage in Corporate Social Responsibility activities Disclosure and Transparency PPS has website www.pss.co.th as a main channel to disseminate information and news. We will provide information that is complete, transparent in timely manners for investors and analysts. After listing on the exchange, more channels will be added as follows: - Information disclosure and related news via SET Website and company website - Financial information via www.setsmart.com the same time it is sent to SET and SEC - 56-1 Report and Annual report Board Responsibilities The Board of Directors is responsible for providing governance and oversight regarding strategy, operations and management of the company as follows; Board of Directors Board of directors consists of 7 directors, 4 of which are executive directors, and 3 of which are independent audit directors, which is More than one-third of Total of number directors providing balance of power. Company has set specific duties for each committee especially executive committee and managing director, therefore none will be have sole power in authorization. Any important agenda will have to be approved either by board of directors or shareholder’s meeting. Directors cannot approve any items that have conflict of interest. Company also appoints internal audit department to be responsible for financial report quality and internal control. Aim to Prosperity Co., Ltd, who is professional internal auditor, is hired to examine our internal control system as well as advise and follow up on our internal control, risk management and corporate governance. It is also their duty to report directly to audit committee at least once in every quarter. Board of directors meeting Company will set up board of directors meeting and continue the meeting according to public limited company act and SET regulations. Extra general meetings will be held as necessary. Chairman will encourage participation from each director, thorough analysis as well as manage timing of the meeting such that all agenda proposed from management can be discussed. Company will send meeting agenda and 28

Annual Report 2012


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

meeting documents to directors at least 7 days before the date of the meeting. All directors are required to attend every meeting except it is beyond one’s ability . The company has to record minutes of meetings accurately and completely such that shareholders can audit later on. Board of Directors’ report Directors are responsible for financial report preparation of the whole group including subsidiaries. Financial statements will be consistently prepared according to Thailand’s acceptable accounting standard with appropriate accounting policies. All the necessary information will be included in the note of financial report. Board of Directors’ self evaluation To increase board’s efficiency, starting in 2012, the board has to perform self-evaluation and analysis in order to mutually find the room and measures for improvement. Directors and Management Development and Training Company encourages directors and high level management to participate in trainings and seminars that are necessary to their duties especially those that provide opportunities to exchange opinions with other companies’ directors and management. For instance, such courses conducted by Thai Institute of Directors (IOD), Directors Certification Program (DCP), Directors Accreditation Program (DAP), Audit Committee Program (ACP) and Executive Development Program (EDP) are perceived as minimum. These skills will be further shared within the company. Relations with investors PPS regards information disclosure as an important task. Disclosed information must be presented transparently and accurately in a timely manner based on good corporate governance. Financial report as well as other information that might have material impact on stock price will be disclosed in several channels such as mail, SEC, SET system as well as our website.

Annual Report 2012

29


30

Annual Report 2012 1.02

1.02

• Guarantor, mutually with Somphant Hongchintakul, on PPS vehical finance lease

- Guarantor, mutually with Prasong Tharachi, on PPS vehical finance lease

0.60

• On September 20, 2011, PPS bought 4,274 ordinary shares of PPSD from Prasong Tharachai at book value of 140 baht per share (par value 100 baht per share)

0.60

Dec 31, 2011

---

---

---

---

Dec 31, 2012

Value (Million Baht)

- Directors - On September 20, 2011, PPS bought 4,274 ordinary - Vice Chairman of management committee shares of PPSD from Somphant Hongchintakul at book - Managing Director value 140 baht per share (par value 100 baht per share) - Major shareholder (14.17%)

Details of transaction

Somphant Hongchintakul

Type of relation

• Chairman of Board of Director • Chairman of executive committee • Major shareholder (9.57%)

Person/Party

1. Transactions with related persons or parties as of 2012 and 2011

Prasong Tharachai

Summary of Related PartyTransactions

- PPS engaged in vehicle leasing agreement for management given that that management shall act as a guarantor. This obligation ended in June 2012.

- PPS bought PPSD ordinary shares from former shareholder to restructure the company for listing on mai. After this transaction, PPS hold 29,998 shares or 99.99% in PPSD. - Book value per share of 140 is considered a fair price.

- PPS engaged in vehicle leasing agreement for management given that that management shall act as a guarantor. This obligation ended in June 2012.

- PPS bought PPSD ordinary shares from former shareholder to restructure the company for listing on mai. After this transaction, PPS hold 29,998 shares or 99.99% in PPSD. - Book value per share of 140 is considered a fair price.

Reason

PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED


- Executive Director - Vice Managing Director, project management

Somchai Vongsavangsrame

---

0.62

0.19

0.08

---

---

0.14

---

0.13 ---

0.12

Dec 31, 2012

1.44

Dec 31, 2011

Value (Million Baht)

- Those cars have been used for over 5 years resulting in book value of zero. In November 2011, board of directors agreed to sell those car to such management at no less than market price for used cars (with at least 2 references). PPS sold these cars in early 2012 at used car market price. However, there will not be such transactions in the future as PPS change to rent cars for management instead.

- PPS sets up employee training no less than 30 times per year both at office and out of office. Pongteerathron has available space near office that is convenient to commute to and from office, which is appropriate for training. Fee is set per market price at 3,000 baht per day, which is the same rate that PPS used to rent elsewhere but less convinient to commute. - In December 2012, PPS engaged in rental contract ended December 2013 with rental fee of 25,000 baht per month, which is in line with market price.

- PPS has to hire special project consultant in some projects as those is in need of specific engineering and consulting skills. The fee is considered on arm-length basis. However, there is no special hiring with Phongtheerathon from Febuary 2012 onwards.

Reason

Annual Report 2012

2) Swiftlet Co., Ltd. is a company that provides IT consulting as well as selling computer software. The major shareholders consist of Arthit Hongchintakul (Director) and Kanchanee Hongchintakul holding 60% shares.

1).Ahead Advisory Co., Ltd. is a company that provides engineering training. The major shareholders consist of Phongthon Tharachai, Theerathon Tharachai (Brother of Phongthon) and Poradee Dumrongpitakkul holding 100% shares.

Remarks: PPS has 2 related companies, which has no related transactions

- Vice-managing director and execu- - PPS sold corporate cars to management who wish to tive director buy, one for Tat Thongpakdi and two for Somchai Vongsavangrasme

- PPS rent office space from Pongteerathorn to use for HR training - PPS has accrued rental expense for Pongteerathorn

Tat Thongpakdi

- PPS hired Phongtheerathon as a special project consultant in certain projects - PPS has accrued expense for hiring Pongteerathorn

Details of transaction

- Company with major shareholders, directors and management of 1. Prasong Tharachai 2. Rewadee Tharachai 3. Phongthon Tharachai 4. Theerathon Tharachai

Type of relation

Phongtheerathon Co., Ltd

Person/Party

PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

31


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

2. Audit committee opinion From audit committee meeting 1/2013 on February 23, 2013, the audit committee and executive committee mutually review and agree upon the stated transactions with related persons or parties in 2012 and conclude that the transactions are reasonable in conditions and price comparing to the market or third parties.

3. Measurements and procedures to approve transactions between related persons or parties In case there are transactions with related persons or parties that cause or may cause benefits to one or another, audit committee has to review whether it is appropriate and necessary. PPS can also hire specialists or auditors to give opinion about such transactions, and use their suggestions as a reference for board of directors or shareholders. PPS will disclose such transactions in the note to the financial report that has been audited by our auditor as well as publish in company 56-1 form.

4. Policy regarding transactions with related persons or parties PPS might consider engaging in transactions with related persons or parties, given that they are agreed upon arm-length basis. However, PPS will comply with securities and exchange act and rules and regulations of mai. PPS will strictly disclose information about such transactions and details of disbursement or proceeds of asset of PPS and its subsidiaries.

5. Future measures to prevent conflict of interest To protect shareholders, if there is any transaction with related persons or parties that might cause conflict of interest, PPS will arrange board of directors meeting including audit committee, or shareholder meeting in some cases, to get resolutions on fair term. Board of directors has the responsibility to follow securities and exchange act and rules and regulations of the stock exchange of Thailand about related-party and acquisition and disposal of assets transaction.

32

Annual Report 2012


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Financial Performance Balance sheet

Balance Sheet

Cash and cash equivalent Current Investment Trade and other receivables Intercompany Loan Other current asset Total Current Asset Retentions Investment in joint venture Investment properties Property, plant and equipment Intangible assets Pledged fixed deposit Other non current asset Total non current asset Total Asset Bank Overdraft Trade and other payables Current portion of financial lease liabilities Accrued income tax Other current liabilities Total Current Liabilities Financial lease liability Employee provision Total non-current liabilities Total liabilities

2010 Million Baht

%

Audited 2011 Million Baht %

8.59

8.60%

10.36

8.57%

34.73 1.79 0.02 45.13 6.33 0.78 1.03 13.34 0.40 27.42 5.50 54.80 99.93 2.88 11.01 1.28

34.75% 1.79% 0.02% 45.16% 6.34% 0.78% 1.03% 13.35% 0.40% 27.43% 5.50% 54.84% 100.00% 2.88% 11.01% 1.28%

53.32 0.00 0.00 63.68 9.84 2.61 0.46 10.90 0.52 27.78 5.13 57.24 120.92 0.00 15.07 0.74

0.17 2.91 18.24 1.31 0.00 1.31 19.54

0.17% 2.91% 18.25% 1.31% 0.00% 1.31% 19.56%

3.67 0.00 19.48 0.56 19.65 20.21 39.69

2012 Million Baht

%

44.09% 0.00% 0.00% 52.66% 8.13% 2.16% 0.38% 9.02% 0.43% 22.97% 4.24% 47.34% 100.00% 0.00% 12.46% 0.62%

66.00 20.00 56.96 0.00 0.00 142.96 12.64 2.75 0.46 10.16 0.59 29.27 9.62 65.49 208.45 0.77 20.19 0.11

31.66% 9.59% 27.33% 0.00% 0.00% 68.58% 6.06% 1.32% 0.22% 4.87% 0.28% 14.04% 4.62% 31.42% 100.00% 0.37% 9.68% 0.05%

3.04% 0.00% 16.11% 0.46% 16.25% 16.71% 32.82%

0.00 0.00 21.07 0.30 20.27 20.57 41.63

0.00% 0.00% 10.11% 0.14% 9.72% 9.87% 19.97%

Annual Report 2012

33


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Balance sheet Balance Sheet

Share capital Issued and paid up capital Premium of share capital Retain earnings Appropriated Unappropriated Total owners of the Company Non-controlling interests Total shareholders’ equity Total liabilities and shareholders’ equity

34

Annual Report 2012

2010 Million Baht

3.00 3.00

%

Audited 2011 Million Baht %

3.00% 3.00%

3.00 3.00

2.48% 2.48%

0.30 0.30% 73.43 73.48% 76.73 76.79% 3.65 3.65% 80.39 80.44% 99.93 100.00%

0.30 77.93 81.23 0.00 81.23 120.92

0.25% 64.45% 67.18% 0.00% 67.18% 100.00%

2012 Million Baht

100.00 100.00 48.31

%

47.97% 47.97% 23.18%

1.13 0.54% 17.37 8.33% 166.82 80.03% 0.00 0.00% 166.82 80.03% 208.45 100.00%


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Income Statement

Services Income Cost of service

2010 Million Baht

%

Audited 2011 Million Baht %

179.48 128.88 50.60 0.95 51.55 50.01

100.00% 71.81% 28.19% 0.53% 28.72% 27.86%

256.16 170.35 85.81 0.54 86.35 52.52

100.00% 66.50% 33.50% 0.21% 33.71% 20.50%

-0.01

-0.01%

-0.01

1.53

0.85%

0.22 1.32 1.56 -0.24 0.00 -0.24

-Owner of the company -Non-controlling interest

Gross Profit Other income Profit before expenses Administrative expenses Directors’ renumeration Share of profit (loss) on investment in joint venture Profit before finance cost and income tax Finance costs Profit before income tax Income tax Profit for the year Other comprehensive income

Total comprehensive income for the year

2012 Million Baht

%

-0.01%

265.29 181.23 84.06 2.91 86.97 66.58 0.89 0.14

100.00% 68.31% 31.69% 1.10% 32.78% 25.10% 0.34% 0.05%

33.82

13.20%

19.64

7.40%

0.12% 0.73% 0.87% -0.13% 0.00% -0.13%

0.24 33.58 11.52 22.05 0.00 22.05

0.09% 13.11% 4.50% 8.61% 0.00% 8.61%

0.10 19.55 4.27 15.28 0.00 15.28

0.04% 7.37% 1.61% 5.76% 0.00% 5.76%

-1.54

-0.86%

170.35

66.50%

15.28

5.76%

1.30

0.72%

85.81

33.50%

-0.00

0.00%

Profit attributed to

Basic earning per share-owner of the company Par value (baht/share) Number of shares (million) Adjusted share price for comparison /1 Basic earning per share-owner of the company Par value (baht/share) Number of shares (million)

-51.17

681.17

0.04

100.00 0.03

100.00 0.03

0.25 400.00

-0.13 0.25 12.00

1.70 0.25 12.00

0.04 0.25 400.00

Remark: 1) Adjusted share price for comparison purpose buy adjusting share price of 2011-2012 from 100 baht per share to 0.25 baht per share Annual Report 2012

35


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Cash Flow Statement

Profit (loss) before income tax Adjustment net profit to cash receipts (disbursement) -Dividend income -Reversed allowance for doubtful accounts -Gain on sales of current investment -Loss on impairment of land -Depreciation of assets -Amortized intangible assets -Employee benefit expenses -Interest expenses -Share of profit (loss) on investment in joint venture (Increase) Decrease in part of operating assets - Trade and other receivables - Other current asset - Retention - Other non-current assets (Increase) Decrease in assets from operation - Trade and other payables - Employee benefit provision - Other current liabilities Increase (Decrease) in liabilities from operation Cash generated (paid) from operation - Interest paid - Corporate income tax paid

36

Annual Report 2012

Audited 2010 2011 2012 Million Baht Million Baht Million Baht

1.31 5.76 0.00 2.91 -0.44 0.00 2.98 0.08 0.00 0.22 0.01 7.07 -0.91 -0.02 -0.48 0.66 -0.76 0.22 0.00 -0.37 -0.15 6.17 -0.22 -6.74

33.58 4.71 0.00 -2.91 0.35 0.57 3.05 0.15 3.26 0.23 0.01 38.29 -15.68 0.02 -3.50 0.37 -18.80 5.60 0.05 0.00 5.65 25.14 -0.23 -8.02

19.55 6.95 0.00 0.98 -2.09 0.00 2.32 0.19 5.59 0.10 -0.14 26.50 -4.62 0.00 -2.81 -0.64 -8.069 5.12 -4.97 0.00 0.15 18.58 -0.10 -11.79


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Cash Flow Statement

Net Cash provided by (used by) operating activities Payments for purchase of current investment Proceeds from sale of current investment Proceeds from investment in joint venture Pledged fixed deposit Proceeds from sales of assets Payments for purchase of property, plant and equipment Payments for intangible assets Net Cash provided by (used in) investing activities Increase (Decrease) in bank overdrafts Increase (Decrease) in financial lease liabilities Payments for investment in subsidiary from non-controlling interests Proceeds from common share increase Dividend paid Dividend paid of non-controlling interests Net cash provided (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents as as January 1 Cash and cash equivalents as as December 31

Audited 2010 2011 2012 Million Baht Million Baht Million Baht

-0.79 0.00 0.00 0.00 -0.08 0.44 -1.91 -0.27 -1.82 2.28 -1.42 0.00 0.00 0.00 -2.50 -1.64 -4.25 12.84 8.59

16.89 0.00 0.00 -0.05 -0.36 0.00 -1.00 -0.24 -1.65 -2.88 -1.28 -1.59 0.00 -4.50 -3.23 -13.48 1.77 8.59 10.36

Annual Report 2012

6.69 -30.00 10.00 0.00 -1.49 2.43 -2.17 -0.26 -21.49 0.77 -0.64 0.00 78.31 -8.00 0.00 70.44 55.64 10.36 66.00

37


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Financial Ratios

Liquidity Ratio - Current Ratio - Quick Ratio - Account Receivable Turnover - Average collection period - Inventory turnover - Inventory days Cash cycle Profitability ratio - Gross profit margin - Operating profit margin - Cash conversion ratio - Net profit margin - Return on Equity (ROE) Efficiency Ratio - Return on Asset (ROA) - Return on Fixed Asset - Asset Turnover Financial Policy Ratio - Debt to equity ratio - Interest coverage - Coverage ratio - Dividend payout 1

38

Unit

2010

Audited 2011

2012

เท่า เท่า เท่า วัน เท่า วัน วัน

2.47 -0.05 5.06 71 14.91 24 47

3.27 0.90 5.96 60 14.74 24 36

6.79 0.33 5.35 67 11.22 32 35

% % % % %

28.19% 0.85% -51.50% -0.13% -0.28%

33.50% 13.20% 49.96% 8.61% 27.29%

31.69% 7.40% 34.08% 5.76% 12.32%

% % เท่า

-0.24% 5.38% 1.79

19.97% 45.08% 2.32

9.28% 29.00% 1.63

เท่า เท่า เท่า %

0.24 4.51 -0.22 0.00%

0.49 120.91 2.41 367.02%

0.25 115.18 0.60 52.36%

Remark 1)

Dividend payout = dividend paid / net profit

dend

In case of 75.00 Million Baht dividend payment, dividend paid divided by total comprehensive profit of the company as of De cember 2011 at 76.68 Million Baht would yield dividend payout of 97.81%. This is based on the historical profit prior to listing, according to shareholders’ meeting 1/2011 on April 11, 2011. For dividend in the next period onwards, PPS will adhere to divipayout policy

Annual Report 2012


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Management Discussion and Analysis Operation Performance 1.Overall past performance

PPS engages in engineering consulting and construction project management service for several types of construction. Contract is normally long-term and can be categorized into 2 types: a. Fixed price contract: Revenues are recognized each period based on the construction progress (percentage of completion method). When we can reasonably estimate the progress of work completed and ratio of actual service cost compared to budget cost. Customers will then be billed monthly based on the contract. b. Monthly payment contract: Revenues are recognized when services are rendered each month based on the actual utilization of personnel engaging in the project as stated in the contract. During 2010-2012 PPS and its subsidiaries saw continuous growth in revenue from its service to customers. The group generated income of 179.48 Million baht, 256.7 Million and 265.29 Million Baht in 2010, 2011 and 2012 respectively. For parent company only, PPS turned from net loss of 1.54 Million baht in 2010 to profit of 20.44 Million Baht and 15.28 Million Baht in 2011 and 2012 respectively. Loss in 2010 can be explained by delay and decrease in new investments in construction from political unrest. Besides, there were higher HR and training expenses as well one time listing expense. For 2011, both increase in new projects and resume of delayed constructions helped the company to end the year with profit of 20.44 Million Baht. For 2012, PPS group had service income of 265.29 Million Baht with net profit (parent company only) of 15.28 Million Baht or 5.76% of total income. Net profit declined due to a surge in administrative expense and HR expenses, while some projects did not fully get our services as in the plan.

2. Past performance analysis Revenue PPS group service revenue from consulting and construction project management can be divided into two types based on revenue recognition. 1) Fixed price contract: Revenues are recognized each period based on the construction progress (percentage of completion method), which is aligned with generally accepted accounting standard. 2) Monthly payment contract: Revenues are recognized each month based on the actual construction progress by calculating from rate of each personnel engaging in the project as stated in the contract. PPS group produced revenue of 180.43 Million Baht, 256.70 Million Baht and 268.20 Million Baht in 2010, 2011 and 2012 respectively with details as follows:

Service Income Other income Total Income

2010 2011 2012 Million Baht % Million Baht % Million Baht % 179.48 99.47% 256.16 99.79% 265.29 98.91% 0.95 0.53% 0.54 0.21% 2.91 1.09% 180.43 100.00% 256.70 100.00% 268.2 100.00% Annual Report 2012

39


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Service Income PPS group service revenue consistently grew from 179.48 Million Baht and 256.16 Million Baht in 2010 and 2011 respective to 265.29 Million Baht in 2012. In 2010, PPS group service income expanded by merely 0.84% from previous year due to effect from political unrest even though there was an increase of project under supervision from 34 to 41 projects. Some personals working on project on halt were transferred to work in other projects while some were called back to headquarter for more trainings resulting in the rise of HR expenses.

In 2011, PPS group service income increased 42.7% compared to 2011 due to a surge in project to 51 projects. Many project were back on track after a long delay from political unrest. In 2012, PPS group had service income of 265.29 Million Baht, a gain of 9.13 Million Baht or 3.56%. 38 existing projects, valued at 204.51 Million Baht, and 37 new projects, valued at 60.78 Million Baht were account to this figure. However, revenues in 2012 were mostly from short term construction projects such as branch expansion of Tesco Lotus. To sum up, PPS group had total of 75 projects in 2011, increasing from 51 projects in 2011. Details of existing and new project in each years are as follows:

1. Income from existing projects 2. Income from new projects Total Income

2010 No. Projects 127.92 21 51.56 20 179.48 41

2011 No. Projects 205.10 28 51.06 23 256.16 51

2012 No. Projects 204.51 38 60.78 37 265.29 75

As of December 31, 2012 PPS group had total backlog worth of 334.54 Million Baht from 34 projects. Out of this number, 149.64 Million Baht could be recognized as income by 2013 and the remaining 174.9 during 2014-2017 due to the size of project that needs 3-5 years to complete. These long term contract included Chulalongkorn Hospital expansion project, Central Embassy, Mass Rapid Transit System - Blue Line and University of the Thai Chamber of Commerce project (Delayed from 2011 from the impact of Bangkok flood)

Other Income Other Income of PPS group, consisting of interest income and others, were 0.95 Million Baht, 0.54 Million Baht and 2.91 Million Baht in 2010, 2011 and 2012 respectively. Especially in 2012, other income surged due to profit from selling corporate executive car with selling price based on 3 used car dealers. Since all the that were sold were booked at zero in the financial statement. they resulted in profit of 2.09 Million Baht.

Cost of Services and Gross Profit Major items in cost of services are wages and salaries and expenses related to certain personnel such as project director, project manager, project engineers and technical specialists These type of expenses will be booked per actual time engaging in the project based on the contract. The rest of the cost can be derived project expenses and travel expenses. In certain cases, there might be some additional expenses incurred from specialized services, for example, Chulalongkorn Hospital projects needs to hire special consultant for architecture design, IT specialists, transportation specialists as well as environment specialists. PPS group had cost of services of 128.88 Million Baht (71.81% of service income), 170.35 Million Baht (66.50% of service income) and 181.23 Million Baht (68.31% of service income) in 2010, 2011 and 2012 respectively. Increase in such cost corresponded to increase in service provided in each year.

40

Annual Report 2012


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

PPS group had gross profit of 50.60 Million baht (28.19% of service income), 85.81 Million Baht (33.50% of service income) and 84.06 Million Baht (31.69% of service income) in 2010, 2011 and 2012 respectively. Profit decreased in 2012 from 33.50% to 31.69% amid increase in more recruits to prepare for expansion. Personnel expenses and related items includes salaries and benefits such as provident fund resulted in an 10.88 Million Baht or 6.39% increase to 181.23 Million Baht. However, revenue growth was just 3.56% or 9.13 Million Baht, which is less than expenses as PPS could not deliver service as planed.

Administrative Expense Major administrative expense of PPS group includes salaries, benefits and office staffs wages. Others are expenses related to transportation. PPS group had administrative expense of 50.01 Million Baht, 52.52 Million Baht and 66.58 Million Baht in 2010, 2011 and 2012 respectively. A surge of such cost in 2010 was due to a 4 Million Baht increase from expense of new recruits and 1 Million Baht increase from training expenses in engineer techniques for such recruits. All new recruits need to pass at least one year training in order to officially be PPS engineers or PPS technicians. There was 1 Million Baht donation to Chulalongkorn University and 0.4 Million Baht preparation expenses for listing on mai. Also we recorded bad debts expense of 4 Million Baht from the account receivables that can not be collected more than 12 months. For 2011, an increase in administrative expense was from wage salary of 5 Million Baht and HR training of 0.3 Million Baht. Auditing fees rose by 0.35 million Baht because of preparation of Consolidated financial statement and report of related party transaction that involves with public interest. Moreover there were a loss of land impairment of 0.57 Million Baht and employee provision of 3.17 Million. For 2012, PPS group has administrative expense of 66.58 Million Baht, 14.06 Million Baht or 26.77% increase. This included listing cost of 1 Million Baht from legal consulting fee, financial consulting fee, auditor fee and PR expenses. Also there was a one time transaction of 25 anniversary ceremony valued at 3 Million baht. In addition, with change of policy from buying to leasing car for management, leasing fee of 3 Million Baht was included here. The rest included training expense increase of 1 Million Baht, bad debt expense of 1 Million Baht, employee benefits of 2 Million Baht, director remuneration expense 0.89 Million Baht and finance cost of 0.1 Million Baht.

Net Profit and Profit Margin PPS group net profit attributed to major owners were -1.54 Million Baht (-0.86% of service income) and 20.44 Million Baht (7.98% of service income) in 2010 and 2011 respectively. A loss in 2010 was due to project delayed resulting from political unrest. In the mean time, PPS hired more employees to prepare for company expansion in 2011. In 2012, PPS group net profit attributed to major owners was 15.28 Million Baht or 5.76% of service income decreasing 33.77% from 2011, PPS profit was reduced from selling and administrative expense as well as HR expenses, while revenue could not be recognized from less-than-planned service delivery.

Return on Equity (ROE) PPS group had ROE of -0.28%, 27.29% in 2010 and 2011 respectively, while equity attributed to major owner was 76.73 Million Baht and 81.23 Million Baht in 2010 and 2011 respectively. PPS paid dividend of 75 Million Baht (367.02% of net profit or 97.81 or retain earnings) according to the resolution of board of director meeting 1/2012 on April 11, 2012 for all the performance prior to listing. As of December 31, 2012, Company had ROE of 12.32% with equity attributed to major owner of 166.82 Million Baht. Reduction in ROE was due to the a decrease in net profit as well as higher shareholders’ equity from the IPO.

Annual Report 2012

41


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Financial Status Asset

PPS group had total asset of 99.93 Million Baht and 120.92 Million Baht in 2010 and 2011 respectively. Total asset in 2010 decreased from reserve for bad debt and dividend payment (on the date of dividend payment, PPS held 62.17% share). Total asset in 2011 increased from a surge in account receivables. As of December 31, 2012, PPS group had total asset of 208.45 Million Baht with details as below • Cash and cash equivalents PPS group had cash and cash equivalents of 8.59 Million Baht and 10.36 Million Baht as of December 31, 2010 and 2011 respectively. Most of the cash available were petty cash of 5,000-10,000 Baht from each project. The rest was in form of bank deposit, either saving deposit, current deposit or fixed deposit. PPS group had cash and cash equivalents of 66 Million Baht, increasing 55.64 Million Baht from year earlier. 20 Million Baht was invested in short term financial instruments. These cash and cash equivalents increased from the cash flow from IPO. • Account Receivables, other receivables and allowance for bad debts PPS group had net account receivables and other receivables of 34.73 Million Baht and 53.32 Million Baht in 2010 and 2011 respectively. An increase of 18.59 Million baht was due to a growth of service income of 42.7%. Our credit terms was 30 days from the day that invoice is sent. However, PPS group had an exact schedule for collection process in each month, for example, date of invoice sent and date of cheque collection. This system is set up to ensure that we can collect our revenue as planned. PPS group had net account receivables and other receivables of 56.95 Million Baht. With and increase of account receivables that overdue 365 days of 1.09 Million Baht. Allowance for doubtful account has already been set for this whole amount, resulting in total allowance for bad debt expense of 0.97 Million Baht. We could summarize aging schedule of receivable as follows:

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Time In due During 1-90 Days During 91-190 Days During 181-365 Days Overdue 365 Days

Total Minus Allowance for bad debts Net Account Receivables

December 31, 2011 35.55 12.48 0.48 0.92 0.19 49.63 (0.20) 49.43

31 ธันวาคม 2555 33.48 21.38 0 0 1.09 55.96 (1.18) 54.79

• Retention

PPS group had retention of 6.33 Million Baht and 9.84 Million Baht as of December 31, 2010 and 2011 respectively. This retention was according to contract requirement condition, especially for high value and government projects such as Central project, Rapid Mass Transit System - Blue Line project. Project owner would deduct on average of 5% from PPS group invoice with one year warranty after project delivered. PPS group had retention of 12.64 Million Baht as of December 31, 2012. Most of the increase were attributed to Central Group projects such as Central Embassy Project, Central Surat Thani, Central Chieng Mai and Silom Complex.

• Plant, Property and Equipments (PPE)

PPS group had net PPE of 13.34 Million Baht and 10.90 Million Baht as of Decebmer 31, 2010 and 2011 respectively. PPE consisted of office land, office building, equipments, furnitures, office supplies and vehicles. PPS group had net PPE of 10.16 Million Baht as of December 31, 2012. The net value of PPE decreased from depreciation according to accounting standard from corporate executive car.

• Pledged Fixed Deposit

PPS group had pledged fixed deposit of 27.42 Million Baht and 27.78 Million Baht as of December 31, 2010 and 2011 respectively. An increase in pledged fixed deposit was required as a result of an increase in overdraft and letter of guarantee from bank, which were in line with an increase in number of projects and value of projects. PPS group had pledged fixed deposit of 29.97 Million Baht as of December 2012, an increase of 1.49 Million Baht or 5.35% compared to 2011.

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PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Source of Fund

Liabilities

PPS group had total liabilities of 19.54 Million Baht and 39.69 Million Baht as of December 31, 2010 and 2011 respectively. Liabilities in 2010 increased from overdraft for accrued expense as well as an increase in unearned revenue. For 2011, the increase was resulted from employee provision, which is required by Thai Accounting Standard No. 19 effective from 2011 onwards. Also, there was an increase in account payables and accrued income tax. As of December 2012, PPS group had total liabilities of 41.63 Million Baht with details as follows:

• Account Payables and Other Payables

PPS group had account payables of 11.01 Million Baht and 12.11 Million Baht as of December 31, 2010 and 2011 respectively. PPS had payables according to fixed price contract where PPS needed to outsource certain functions to specialist. For example, in Chulalongkorn Hospital project, PPS hired architectural design specialists, IT spcalialists, logisitcs specialists and environmental specialists. In such project, payables would be unearned revenue and others accrued expenses. PPS group had total account payables of 20.19 Million Baht as of December 31, 2012. They consisted of account payables 2.37 Million Baht and other payables 17.81 Million Baht of unearned revenue, accrued expenses and other loans.

• Employee Provision

From January 1, 2011, PPS group adopted Thai Accounting Standard No. 19 of employee benefits to estimate employee provision. PPS recorded liabilities and employee provision before 2011 by adjusting retain earnings at the beginning of accounting year 2011 according to the accounting standard. As of December 31, 2011 and 2012, PPS group had employee provision of 19.65 Million Baht and 20.27 Million Baht respectively.

Shareholder’s equity

PPS group had equity of 80.39 Million Baht and 80.23 Million Baht as of December 31, 2010 and 2011 respectively. Equity decreased in 2010 from net loss and reduction in retained earnings from dividend payment. Equity in 2011 increased from profit from operations. However, with employee provision record according to Thai accounting standard 19 effective from 2011 onwards, PPS group retained earnings increased only slightly. As of December 2012, PPS group had equity of 166.82 Million baht. PPS group had registered capital of 100 Million baht. Retained earnings was 78.23 and 18.50 Million Baht as of December 13, 2011 and 2012 respectively. Reduction in retained earnings was resulted from dividend payout of 75 Million Baht according to resolutions of board of director meeting 1/2012 on April 11, 2012. PPS group profit attributed to major owner for first 6 months of 2012 was 8.30 Million Baht. As of December 31, 2012, PPS group had equity of 166.82 Million Baht, an increase of 85.59 Million Baht or 105.37% from the IPO at 0.7 Baht per share for 120 Million shares at par value 0.5 Baht per share. Additional paid in net of IPO expenses was 48.31 Million Baht.

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Structure of Fund

PPS group had debt to equity ratio (D/E ratio) of 0.24 and 0.49 at year end 2010 and 2011 respectively (Calculated from total liabilities divided by shareholder’s equity attributed to major owner) D/E ratio increased continuously due to an increase in account payables and other payables as well as accrued expenses. For accounting year 2011 and 2012, PPS group recorded employee provision according to Thai Accounting Standard No. 19 regarding employee benefits. This standard came into effect from January 1, 2011 onwards. After adjusting employee provision with retained earnings at the beginning of 2011, it significantly affected D/E ratio.

A decrease in D/E ratio in 2012 resulting from IPO which increased equity 105.37% while liabilities increase only 4.89%

Liquidity

Cash and cash equivalents Current Assets Current Liabilities Liquidity Ratio Current Ratio Cash flow from operation

Million Baht Million Baht Million Baht Times Times Million Baht

2010 8.59 45.13 18.24 4.18 2.47 (0.79)

December 31 2011 10.36 63.68 19.48 2.47 3.27 16.89

2012 66.00 142.96 21.07 3.27 6.79 6.69

Liquidity ratio at year end 2012 rose to 6.79 from previous year. This current asset growth of 12.45%, resulting from IPO, was more than current liabilities growth of 8.15%, mainly from accrued expenses and account payables, during the same period. PPS group was able to maintain decent liquidity ratio. For cash flow from operations, PPS group had a loss of 0.79 Million Baht in 2010 from an increase in account receivables at year end that was expected to due the following year. PPS had an increase in retention and paid back account payables in 2010. For 2011 and 2012, PPS group had cash flow from operation of 16.89 Million Baht and 6.69 Million Baht respectively. Reduction of cash flow in 2012 was resulted from a decrease in net profit of the group.

Capital Expenditure

PPS group had no significant capital expenditure in 2009-2012. Normal capital expenditures were those for office equipments and investments in office improvements.

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Auditor’s Fee

1. Audit Fee

Audit fees of PPS Group for the period 2010-2012 and estimation of 2013 to DIA International Audit Co., Ltd. can be illustrated as follows: 1. Annual Audit 1.1 PPS and PPS Consolidated 1.2 PPSD 1.3 Joint Venture PPQ 1.4 PIC 2. Interim Audit 2.1 PPS and PPS consolidated 2.2 PPSD 2.3 Joint Venture PPQ 2.4 PIC

3. Other fees PPS 1 Only PPS Total Remarks:

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2010

2011

2012

2013

150,000 100,000 12,000 -

320,000 210,000 18,000 -

320,000 210,000 18,000 -

365,000 80,000 50,000 65,000

0 0 0 0

180,000 120,000 0 0

180,000 120,000 0 100,000

210,000 90,000 45,000 45,000 0

150,000 262,000

500,000 848,000

600,000 948,000

575,000 950,000

Cost associated with working paper preparation and auditor interviewed by SEC were treated as other fees. Fees were paid in lump sum in total of 100,000 Baht, and were already approved in shareholders’ meeting 1/2012 on April 11, 2012.

Annual Report 2012


PROJECT PLANNING SERVICE PUBLIC COMPANY LIMITED

Audit Committee’s Report

Dear Shareholders, The Audit Committee was assigned by board of directors. In 2012, the committee held 3 meetings where all members of audit committee joined. Audit committee considered several issues within their scope of duties as follows; 1. Review of Financial Reports The committee reviewed quarterly and annual financial statements. Each time quarterly and annual financial statements were examined with the external auditor presented, the Committee assessed validity and accuracy of financial statement. The Committee findings determined that financial statements had complied with legal and accounting standard requirements under generally accepted accounting principles, and that adequate information had been in the financial statements which were presented to directors and shareholders. 2. Review of Internal Control Effectiveness The committee reviewed the adequacy and effectiveness of internal control system for each quarter by considering auditor’s report in 2012. The external auditor agreed PSS internal control was sufficient in managing potential risks and that no significant issues or shortcomings had been detected. Minor issues found has all been solved. In 2012, PPS also assessed its internal controls against the regulations of the Auditor Commission on internal control standards. It was agreed that PPS’ internal control system was both adequate and effective for its businesses. 3. Alignment with Legislations PPS had complied with securities and securities exchange legislation, SET’s requirements, and other legislation relevant to its businesses as well as articles of associations and other commitment to external parties. The committee reviewed such legislations and commitments and found that PPS had no practice against such legislations or commitments. 4. Review of Risk Management Directors and management put priority to risk management. The committee examined PPS’s risk management policy and set up risk management system. We believe that continuous review and follow up with potential risks will benefits PPS and its shareholders. 5. Potential conflict of interest The committee reviewed and examined transactions with related persons or parties, and give opinion to such transaction that might lead to conflict of interest. This includes information disclosure according to SET and SEC. 6. Review of corporate governance PPS operates in accordance with corporate governance. As assigned by board of directors, the audit committee has thoroughly reviewed and examined PPS and concluded that PPS accurately disclosed financial report, had efficient internal control system, had risk management plan, complied with legislations and commitments, had appropriate disclosure policy for transactions to related parties or persons and operated in accordance with corporate governance.

(Pol.Lt.Gen Dr. Nukool Jeamanukoolkit) Chairman, Audit Committee Annual Report 2012

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Risk Management Plan Report

Risk management department has analyzed risks in the preceding period and found some risks that are higher than acceptable rate. As a result, the action plan was laid and implemented in 2012 as follows:

Management Risk of Business Competition

Due to high competition in the market, PPS tried to mitigate the risk by organising training for both new recruits and project managers. Trainings were carried out consistently through 2012 to prepare our human resource for the competition. Many business diversification attempts were implemented. The launch of PPS Information Consultant Co., Ltd. (PIC) to supply construction IT system, the establishment of Swan and Maclaren (Thailand) to provide architectural design and interior design service, the investment with partner to support construction industry and the development of PPS Group working process all led to the reduction of business risk to acceptable level.

Risk of relying on limited number of customers

We realized that we heavily rely on certain clusters of customers, so we aimed to expand our customers base to include both government and private sector ranging from infrastructure to building. For government project, there’s risk from the delay of the project. However, PPS assigned staff to keep track on the issue closely.

Risk of dependency on key management figures

As certain senior management, who PPS group heavily relied, is getting older, it subsequently poses the company at risk in case they were no longer available. Thus, we tries to develop younger management for sucession. To do so, we continuously develop HR and maintain knowledge within the company, PPS group develops Career Development Program (CDP) to provide knowledge for employees. CDP is also a measure for employee promotion. With this program, several employees have been promoted leading to a reduction in this risk to an acceptable level.

HR Risk of recruitment

As our success largely depends on human resource that has skills and experiences, HR department tried to recruit many new potentials. However, the result has not been successful. With prevailing risk, PPS group plans to reduce this risk in 2013 by setting up career path plan such that those talents see their opportunities to grow. In order to manage talents within the organization, PPS group adjust salaries and benefits, which will indirectly attract other specialists to work with us.

Accounting Risk in preparing financial report

In order to preparing financial report on schedule, PPS group hired 2 more accountants and prepares all necessary supplies. PPS group also provided external training to improvement their skills for 3 courses e.g. seminar about legal changes, seminar about new accounting standards and other seminar in their interest. We consider that the risk of delay of financial closing is reduced to an acceptable level.

Finance Risk in financial liquidity

By nature of business, PPS group does not require much investment. Thus, the company has no existing loan except for overdraft. On top of that, proceeds from IPO has brought more liquidity to the company. Therefore, this risk is well ned.

Training and HR development

As strong organization cannot thrive without people development, trainings for both new recruits and project manager were scheduled from April to December 2012 in total of 6 courses and 2 seminars. Nonetheless, the conflicts with the time as well as lecturer availability resulted in only 19 successful training sessions cannot be set up, while 11 training sessions were not covered as planned yet.

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STATEMENTS OF FINANCIAL POSITION (Continued) AS AT DECEMBER 31, 2012

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STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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FOR THE YEAR ENDED DECEMBER 31, 2012

STATEMENTS OF CASH FLOWS (Continued)

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FOR THE YEAR ENDED DECEMBER 31, 2012

STATEMENTS OF CASH FLOWS (Continued)

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FOR THE YEAR ENDED DECEMBER 31, 2012

STATEMENTS OF CASH FLOWS (Continued)

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STATEMENTS OF CASH FLOWS (Continued)

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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STATEMENTS OF CASH FLOWS (Continued) FOR THE YEAR ENDED DECEMBER 31, 2012

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