Category: News

Ayala Corporation’s consolidated net income reached P2.2 billion in the first quarter, the highest in the past four quarters, excluding capital gains, but 18% lower than the same period last year. Its core business units in telecom and banking registered double-digit expansion in earnings with sustained business volume growth in its key markets. Equity earnings from these units expanded by 7% and 86%, respectively, a reversal of the 35% and 55% decline in the fourth quarter of 2008 and three consecutive quarters of contraction. Equity earnings from its real estate unit, however, declined by 51% as earnings dipped in the absence of one-time gains and slower demand particularly in its residential business.

President and chief operating officer Fernando Zobel de Ayala said, “We are pleased to see some degree of resiliency in domestic demand despite the slowdown in the global economy. This continues to drive the growth of our core business units. However, consumer confidence continues to be tempered relative to pre-crisis levels, but we expect this to eventually turn as macro economic conditions stabilize moving forward.”

Ayala’s telecom unit, Globe, sustained its growth momentum with net income up 17% to P4 billion. Excluding an after-tax gain of P398 million arising from an equipment exchange transaction with an equipment supplier and foreign exchange and mark-to-market gains and losses, core net income was up 5% to P3.7 billion. This quarter’s net income was the highest in the past five quarters. The steady performance of its wireless business and the strong growth of its broadband and wireline data business resulted in net service revenue growth of 3% to P16 billion. Globe’s wireless SIM base continued to expand, reaching 25.7 million subscribers as of end-March. To further gain subscribers, it recently introduced Globe DUO, an innovative service that combines a mobile and wireless landline service into one handset.

Meanwhile, its broadband and wireline data business gained traction. Globe broadband subscribers more than doubled year-on-year with subscribers of the fully mobile broadband service under Tattoo accounting for the bulk of the net additions. Globe has commercially launched its WiMAX (802.16e) service on the 2.5Ghz band, which is one of the first and largest in Southeast Asia. The service is currently available in selected key areas in South Luzon, Visayas, and Mindanao. WiMAX is a leading edge technology solution that provides higher capacity and a dedicated access system that can deliver superior customer experience for Globe’s broadband subscribers. Globe plans to introduce more service innovations that will deliver superior value to its customers and further reinforce its competitive edge in the market.

Its banking unit, Bank of the Philippine Islands (BPI), posted P2.9 billion in net income. This was 86% higher year-on-year, the highest in the past five quarters, and exceeded fourth quarter 2008’s net income by more than 2.6 times. Strong growth in core market segments, better net interest spreads, and trading opportunities amidst a falling interest rate environment drove earnings growth.

Lending activity was strong and broad based with net loans expanding by 12%. Both corporate and consumer loans grew by 13.8% and 18.9%, respectively. Despite the healthy loan expansion, credit quality remained stable with net 30-day non-performing loans ratio at 3.26%, better than the 3.94% a year ago. Total resources as of end-March reached P643 billion, 8% ahead of last year, while deposits expanded by 8.8%. The bank’s remittance inflows increased by over 20%, outpacing industry growth. The bank’s better than expected performance affirms the resilience of the domestic economy and validates the strength of BPI’s banking franchise. BPI maintains the largest market capitalization in the industry at P110.3 billion with a capital adequacy ratio of 14.6% at end-March.

Ayala’s real estate unit, Ayala Land, posted a net income of P907 million. Excluding gains in the first quarter of 2008, net income was 21% lower year-on-year. Consolidated revenues declined by 10% to P7.4 billion as revenues in the first quarter included gains from the said transaction. Overall, most of its core product lines registered healthy revenue growth. Revenues from shopping centers rose by 6%, while corporate business revenues increased by 67%. These were offset by lower residential sales with combined bookings across its three residential brands down by 48% due to slower demand. However, monthly trends show signs that sales are beginning to stabilize with take-up in the first three months significantly better than the prior quarter.

Ayala Land maintains its capital expenditure plan of P17.4 billion this year and is looking to tap more aggressively opportunities where it can expand its geographic footprint in other parts of the country and cater to a broader base of customers.

From its portfolio of companies under AC Capital, Manila Water continued to deliver double-digit earnings growth with net income up 14% to P622 million. Cumulative water sales in the first three months of 2009 was stable and, combined with the partial impact of the inflation rate adjustment, pushed revenues up 6%. The company maintains strong operational efficiencies with non-revenue water down to 20.7% as of March, 2.5 percentage points better than the 23.2% achieved in March 2008.

Manila Water was recently granted a renewal of its concession agreement covering the East Zone for another 15 years. This is expected to benefit all its stakeholders as well as ensure Manila Water’s long-term growth. Beyond this, Manila Water continues to pursue growth opportunities outside of its concession area. Last April, it signed a Memorandum of Agreement with the Philippine Tourism Authority for the management and operation of the wastewater and water distribution facility in Boracay.

Ayala’s export-oriented units, particularly in electronics manufacturing and business process outsourcing, which are more exposed to the global downturn, faced lower volumes.

Integrated Microelectronics, Inc.’s (IMI) sales contracted by 26% as world demand for electronic products remained muted. While various cost management programs partly cushioned the impact and kept operating income positive, lower volumes and pricing pressures resulted in a net loss of P21 million during the period. IMI maintains a solid balance sheet with cash of US$59 million and first-quarter net cash flow from operations at US$5 million. IMI will continue to pursue its cost and risk management programs as well as its marketing initiatives to expand its customer base with high revenue-generating customers.

Ayala’s BPO companies generated US$82 million in revenues, 3% lower than last year, with operating income excluding depreciation and amortization flat year-on-year at US$7 million. However, interest expense and non-cash charges resulted in a combined net loss for Ayala of P307 million.

Ayala continues to believe in the medium to long term growth potential of the BPO sector in the Philippines as companies worldwide intensify cost cutting initiatives. Ayala is expanding its geographic and service capabilities in this space through its investee companies. Recently, eTelecare acquired The Phone House, a South African contact center company, as it eyes opportunities to tap the strategic U.K. market. Integreon also launched in January its first U.K. onshore shared-services center for the legal sector with Osborne Clarke, a top 50 U.K. law firm, as its anchor client. This was followed by the acquisition of Onsite, a leading global provider of electronic evidence solutions for law firms and corporations, based in Arlington, Virginia.

Ayala ended the quarter with close to P30 billion in cash and net debt of P8.7 billion. Zobel added, “Ayala’s strong financial and cash position give the group the flexibility to pursue growth initiatives at both the holding company level and at the level of the operating units. These initiatives will continue to build on the strong market position we have achieved in our key markets and allow us to achieve a stronger growth trajectory as the economic cycle turns.”

Ayala Corporation and its listed subsidiaries led FinanceAsia’s ninth annual poll of the Philippines’ top companies, the Hong Kong-based publication recently announced.

Ayala retained its leadership as the best managed company and best in corporate governance in the Philippines, while four of the top eight companies in both categories are Ayala subsidiaries, namely, Globe Telecom, Manila Water, Bank of the Philippine Islands (BPI), and Ayala Land, Inc. (ALI).

Chairman and chief executive officer Jaime Augusto Zobel de Ayala was named best CEO, a new category introduced in this year’s polls. Globe Telecom chief finance officer Delfin Gonzalez, Jr. and Ayala treasurer Ramon Opulencia were once again cited as best CFOs in the country.

Ayala also earned high marks in investor relations together with Globe, ALI and Manila Water, and topped another new category, best corporate social responsibility, with Manila Water and ALI. Globe and BPI were considered second and third most committed to a strong dividend policy, respectively, and Manila Water was named best mid-capitalization company.

Other companies that made it to FinanceAsia’s list of best managed companies in the Philippines were PLDT, Banco de Oro, Security Bank, Megaworld, and ICTSI. The FinanceAsia poll was conducted among 238 investors and analysts across the region.

In its Annual Stockholders’ Meeting held today, Ayala Corporation announced its group companies combined are prepared to spend P49 billion in capital expenditure projects in 2009 despite the more challenging economic environment. Chairman and CEO Jaime Augusto Zobel de Ayala said, “we believe there are opportunities that can be realized that will strengthen the foundation for our sustained growth.” He added, “This will position the group appropriately for the next upturn in the economic cycle.” About 35% of this year’s planned capex is allocated to its real estate development projects, with 33% for its telecommunications expansion, and 23% for its water distribution services.

In 2008, Ayala and its business units raised a combined P23 billion in cash at the height of the tightness in credit markets to ensure more than sufficient liquidity to pursue its growth plans in 2009. Of this, the parent company raised P6 billion from its preferred share issue last November, which combined with its other fund raising efforts, raised close to P10 billion in fresh funds for debt prepayment and new investments. By year-end the holding company had cash of P25 billion after US$60 million in debt prepayments. Net debt was at its lowest in five years with net debt-to-equity ratio at 0.09 to 1 by the end of 2008.

Ayala has re-deployed some of its cash into the high growth business process outsourcing (BPO) sector with cumulative investments of around US$200 million to date. Jaime Augusto said, “We continue to believe in the long-term prospects of offshoring and outsourcing and the natural competitive advantages of the Philippines to be a significant player in this robust global market.”

Beyond the BPO space, Ayala continues to explore investment opportunities in other industries. It recently signed a Memorandum of Agreement with its operating units, Bank of the Philippine Islands (BPI) and Globe Telecom, to create the country’s first mobile micro-finance bank. Mr. Zobel said, “This venture builds on BPI’s extensive delivery and infrastructure network and Globe’s tested G-Cash micro payment platform.” He added, “We continue to explore ways to leverage on our group’s strengths and create business models that align our business goals with a broader social and national development agenda.” Ayala takes the view that there are compelling growth propositions in doing business at the base of the wealth pyramid that can be value-enhancing for Ayala and a much wider base of stakeholders.

In 2009, Ayala celebrates its 175th anniversary. The seventh-generation chairman of the business conglomerate said, “As an organization, we have always set our sights on the future and have not sought to take comfort from the past. It is our ability to adjust to changing environments, in a progressive way, that marks our longevity as an institution. However, anniversaries are also important moments for self reflection. 175 years, by any independent standard, is a long period of time in any company’s history. There are few corporate examples globally of institutions with a similar capacity for resiliency over this swath of time. We should take heed of the values that brought us to this point- values of trust and prudence on one hand but imagination and vigor on the other, coupled with a long term commitment to aligning ourselves to a progressive national development agenda. As we reflect on our changing roles; as an institution that now builds environmentally sound communities, rolls out advanced communication networks, creates stable financial securities, implements clean water systems and invests in both technology driven services and manufacturing entities aligned to global markets – I take some pride in being part of an Ayala that remains true to the dreams of those who have built this company before us. I hope we can continue to count on the support of all our stakeholders as we chart our paths, with the same set of core values, well into the future.”

Ayala Corporation reported an unaudited consolidated net income of P8.1 billion for 2008. This was 50% lower than in 2007 as equity earnings from its operating units dropped to P7.8 billion and as capital gains from share sales declined by 63%.

Listed units Ayala Land, Bank of the Philippine Islands (BPI), Globe Telecom, and Manila Water all posted positive results. However, the uncertainties spawned by the global financial crisis as well as some non-recurring items weighed on earnings.

Ayala realized capital gains of P2.7 billion in 2008. In 2007 it booked a record P7.3 billion in gains as the company took advantage of higher asset prices that year to realize values from some of its long-held investments. These value realization efforts, combined with several successful fund raising initiatives in 2008, allowed Ayala to raise its cash to a level of P25 billion by year-end. This would position the company appropriately for potential acquisition opportunities amidst deflating asset prices. Ayala’s net debt has consistently declined over the few past years putting the net debt to equity ratio by year-end at 0.09 to 1.

Ayala Corporation president and chief operating officer, Fernando Zobel de Ayala, commented, “While the operating environment is and will continue to be challenging, these distressed conditions also present opportunities. We continue to explore these and have ensured sufficient liquidity across the group to pursue any compelling opportunity on top of our committed growth targets in the short to medium term.”

Ayala’s real estate unit, Ayala Land, Inc., posted record earnings of P4.8 billion in 2008, 10% higher than the prior year as demand for its middle and affordable residential brands, Alveo and Avida, remained healthy. Higher completion rate for its construction projects also boosted consolidated revenues, which increased by 31% to P33.7 billion. Revenues from its shopping centers and corporate business segments grew by 3% and 10%, respectively, with the strong performance of Market!Market!, Alabang Town Center and TriNoma, and incremental contribution from newly opened malls. Its headquarter and BPO offices continued to achieve high lease and occupancy rates as well as increased gross leasable area with the completion of 6 BPO buildings at UP Technohub, which were substantially leased by year-end.

Its banking unit, BPI, achieved good business volume growth. Loans expanded by an unprecedented 17%, driven by strong demand from corporate and retail consumers. This was the second straight year BPI posted double-digit loan growth. Despite the growth in loans, asset quality continued to improve with net 30-day non-performing loans ratio down to 2.9%. BPI’s deposit base expanded by 5% to hit P540 billion by year-end, with total customer funds and assets held in trust up by 8.9%. The bank’s remittance business also saw strong growth, up 35%, with volume reaching US$4.4 billion, significantly outpacing the industry’s 15%. BPI’s net income however fell by 36% to P6.4 billion due to a P2.8 billion decline in securities trading income and a P1.3 billion decline in non-recurring investment income of the insurance subsidiaries, which included a gain from the sale of the Ayala Life Building as well as sale of shares the prior year. BPI’s capital adequacy ratio of 14.1% remains well above the 10% regulatory minimum. Last December, the bank successfully issued P5 billion in 10-year subordinated debt eligible as Lower Tier 2 capital.

Globe Telecom’s revenues remained steady amidst slowing domestic consumption. Consolidated revenues reached P62.9 billion from P63.2 billion the prior year. Wireless revenues were flat amidst a 22% growth in its subscriber base while revenues from its wireline business increased by 7%, driven by its corporate data and broadband businesses. Globe’s broadband subscriber base grew by 84% in 2008 with the highest net adds noted in the fourth quarter. Higher operating expenses capped EBITDA but EBITDA margin remained high at 59% as costs arising from broadband investments lowered margins. Wireless EBITDA margin continues to be robust at 65% while wireline EBITDA margins have been under pressure given the dynamics of the start-up broadband business. This put Globe’s net income 15% lower in 2008 to P11.3 billion. Globe’s free cash flow remains strong. It recently declared its first semi-annual cash dividend of P32 per share, which puts Globe among the highest in dividend yields in the Philippine Stock Exchange.

Ayala’s equity earnings from companies under its AC Capital division declined, weighed by non-recurring losses from its electronics unit, Integrated Microelectronics, Inc. (IMI), AG Holdings and BPO companies under LiveIt. This offset the positive earnings contribution of its water and automotive dealership businesses.

IMI’s revenues expanded by 5% in 2008 due to strong double-digit growth of its operations in China and Singapore which offset slower volumes from Philippine and US operations. Increased business with a leading Chinese telecommunications company and new customer programs cushioned the impact of the general slowdown in demand. IMI’s operating income remained positive at US$18 million, however, a non-recurring loss from currency hedging contracts as well as a one-time provision for manpower expenses and inventory obsolescence expenses resulted in a US$16 million loss in 2008. Excluding these non-recurring items, IMI’s net income would have reached US$32 million.

Manila Water reported a net income of P2.8 billion on the back of higher water sales volume complemented by further improvements in the company’s operating efficiency. This was made possible through the company’s intensive capex program. In 2008 alone, the company spent a total of P4.2 billion as it accelerated the implementation of expansion projects and invested in new systems and processes. Billed volume went up by 4% to 387 million cubic meters as Manila Water expanded its customer base by 46,765 new household connections. In addition, the company managed to further reduce system losses by 6 percentage points to 19.6%, from a high of 63% in 1997. This is the first time that Manila Water has brought its level of water losses to below 20%, which is significantly better than most of the company’s regional counterparts. The company also began construction on a number of sewerage treatment plants in 2008, with the aim of bringing sewerage coverage to 30% by 2012 from the present level of 16% for the East Zone.

On a combined basis, the investee companies of LiveIt, Ayala’s BPO investment arm, recorded revenue growth in US dollar terms of 16%, and achieved revenues of P15.4 billion and EBITDA of P1.4 billion in 2008, LiveIt’s second full year of operations. The BPO units further diversified their client base in 2008 with eTelecare winning 11 new clients and 31 new programs, Integreon adding 14 new customers across the corporate, legal and financial services sectors, and Affinity Express now serving over 140 publications of seven of the top 25 newspaper companies in the US. However, they posted a combined net loss, of which LiveIt’s share was P874 million, due primarily to factors such as one-time non-recurring expenses related to the eTelecare tender offer, non-cash accounting charges, such as stock compensation expenses and the amortization of intangibles related to the investments in investee companies, and unfavorable foreign exchange forward contracts that eTelecare entered into. LiveIt, together with Providence Equity Partners, completed the tender offer for eTelecare’s common shares and American Depositary Shares last December resulting in the acquisition of 98.7% of eTelecare’s shares. Overall, Ayala remains positive about the growth trajectory of the BPO sector. Ayala expects that, as in past recessions, outsourcing will continue to grow in the short term but at a slower pace, and then will experience accelerating growth in the medium to long term, as companies intensify their cost-cutting.

Zobel acknowledged, “The global crisis will no doubt further temper domestic consumption and will inevitably impact demand for some of the products and services of our operating units, in varying degrees. However, we remain optimistic that we can manage through the challenges given the solid business models of each of our operating units, their strong fundamentals and balance sheets, and dominant market positions.”

The above statement refers to the disclosure submitted to the PSE and SEC today, February 16, 2009, by Ayala chief finance officer Rufino Luis T. Manotok.

The board of directors of Ayala Corporation approved today the declaration of the quarterly cash dividends this year of 8.88% per annum on our Preferred Class “A” shares, with the following record and payment dates:

First Quarter
Record Date: Feb 11, 2009
Payment Date: Feb 25, 2009

Second Quarter
Record Date: April 28, 2009
Payment Date: May 25, 2009

Third Quarter
Record Date: July 29, 2009
Payment Date: Aug 25, 2009

Fourth Quarter
Record Date: Oct 29, 2009
Payment Date: Nov 25, 2009

The dividends will be paid from its unappropriated retained earnings as of December 31, 2008.

The above information is based on the disclosure made to the Securities and Exchange Commission, the Philippine Stock Exchange, and the Philippine Dealing and Exchange Corporation, by Ayala general counsel and compliance officer Solomon M. Hermosura.

Ayala Corporation’s consolidated net income in the first nine months of 2008 reached P7.8 billion, 43% lower than the same period last year on lower equity earnings and substantially lower capital gains. However, Ayala’s liquidity position remains strong with cash of P47 billion at the end of the first nine months of the year and net debt at its lowest in the past five years. It maintains a low gearing with net debt to equity ratio at 0.07 to 1.

Ayala chairman and CEO Jaime Augusto Zobel de Ayala said, “Our efforts to aggressively reduce debt levels and lengthen our maturities at the holding company level, coupled with the value realization initiatives we have undertaken the past two years, have allowed us to take advantage of the favorable market conditions last year and significantly strengthen our financial position. These efforts have given us both strength and flexibility in the face of the on-going external shocks and volatility in the market. The treasury and funding strategies we have undertaken in past years have sufficiently mitigated fund sourcing risks, and have given us the flexibility to pursue our growth platforms.”

Earnings of Ayala’s operating units were muted in the first nine months, with mainly the property and water distribution businesses registering double-digit growth.

Ayala’s property unit posted a 23% growth in net income to P3.8 billion with a 37% expansion in revenues underpinned by sustained demand for its residential projects, particularly the middle income and affordable residential brands. Sales of Alveo rose by 29% while Avida’s increased by 45%, offsetting the slight decline on its high-end Ayala Land Premier brand. Demand for middle-income and affordable residential products, particularly from overseas-based Filipinos, remained robust in the first nine months, making up 70% of sales to this market. Ayala Land’s revenues from its Shopping Centers were flat, while revenues from its Corporate Business declined by 15% in the absence of lot sales this year, despite growing revenues from its BPO and headquarter buildings. While overall margins were under pressure from rising construction costs, Ayala Land posted an 11% growth in net operating income.

Ayala’s banking unit, Bank of the Philippine Islands saw its core business resilient amidst the volatility in the financial markets. Its net loans grew by 21% in the first nine months, with all market segments posting double-digit growth. The bank’s remittance volume was up 38%, surpassing industry’s 17% growth and despite the expansion in loans, the bank’s NPL ratio improved to 3.3% by the end of September, better than industry’s 3.9%. BPI does not have any collateralized debt obligation in its books and has no direct exposure to any major US investment bank. It is well capitalized with risk-adjusted CAR at 13.2%. The bank announced plans to issue P10 to P15 billion of Tier 2 capital to further strengthen its capital base and position itself for possible acquisition opportunities. However, due mainly to the absence of securities trading gains, revenues contracted by 9% which put net income at P5.3 billion, 30% lower than the prior year.

Telecom unit Globe posted steady revenues although wireless subscriber base grew by 24%, putting total wireless subscribers at 23.7 million. Wireless revenues slipped by 2% as consumers tempered usage. This was offset by a 5% growth in its wireline revenues, which was driven by the broadband and corporate data businesses. Globe introduced a prepaid version of Visibility, its fully mobile internet service, resulting in broadband subscriber growth of 51% year-on-year. Globe’s WiMax service is also expected to boost broadband revenues with roll-out on track. EBITDA margins remained healthy at 61% but lower than last year’s driven by an 8% increase in operating expenses and subsidy. Net income reached P8.8 billion, 9% lower year-on-year as reductions in interest expense in 2008 coupled with non-recurring charges related to the bond prepayment in 2007, helped offset the impact of the lower operating earnings.

Ayala’s portfolio of companies under AC Capital contributed P125 million in equity earnings driven largely by its water distribution business, Manila Water Company. Manila Water registered a 13% growth in net earnings as operating efficiencies continued to improve. Its capital investments resulted in new connections, thus adding to the sustained growth in billed volume, while system losses were brought down to only 20.2% from 25% at the beginning of the year. Manila Water continues to pursue its projects to improve and expand its network, and has intensified its efforts to implement sewerage and sanitation programs. The Company is also looking at other water and wastewater projects outside of its current concession area. Earlier, it completed a highly successful peso bond issue which raised a total of P4.0 billion for the company.

The company’s electronics subsidiary, Integrated Microelectronics, Inc. saw an 11% growth in revenues fuelled by higher sales volumes from key customers. The company, however, registered a net loss of P373 million in the first nine months due to a one-time loss incurred in the second quarter of this year from currency hedging-related transactions. Excluding these losses, however, IMI’s underlying business remained strong, as earnings would have grown by 15% year-on-year.

Ayala’s direct investments in the business process outsourcing space continue to ramp up. The company recently announced it will pursue a tender offer, together with Providence Equity Partners, to acquire up to 100% of the outstanding common shares of eTelecare. eTelecare provided guidance of US$9-US$11 million in net income in 2008. Ayala remains positive in the long term growth prospects of the BPO industry. While the current global economic slowdown may impact volumes in the interim, there remains an overall global trend to cut cost and favor outsourcing alternatives.

“The impending slowdown in global economic growth coupled with inflation pressures on basic goods in recent months have had a dampening effect on consumer spending. This, to some extent, has impacted topline growth of some of our key businesses,” said Ayala Corporation President Fernando Zobel de Ayala. “But despite the prevailing challenges, each of our business units remains fundamentally sound, with sufficient liquidity and capitalization to keep them on track with their respective growth plans moving forward.”

Ayala Corporation’s net income in the second quarter of 2008 reached P3.7 billion, 38% higher than previous quarter’s net income of P2.7 billion, but 38% lower than net income in the second quarter of 2007. Net income for the first half reached P6.3 billion, 45% lower than the P11.5 billion in the same period last year. Lower earnings during the period were attributed mainly to significantly lower capital gains and lower equity earnings from its key operating units.

Ayala booked P2.7 billion in capital gains from the sale of 3.8 million common shares in Globe. The gains realized were substantially lower than the P7-billion gain booked in the first half of last year. Equity earnings from operating units declined by 23% as net income of certain operating units softened amidst a more challenging economic environment.

“The pressures of rising oil and commodity prices and tightening credit globally have created a much more challenging operating environment,” said Ayala president and chief operating officer Fernando Zobel de Ayala. “electronarnings have been under some pressure this year, we continue to see strong underlying demand in each of our key businesses, particularly in real estate, consumer and corporate loans, telecom services, auto sales, and electronics.”

Ayala Land reported a 37% growth in net income with consolidated revenues up 25% year-on-year buoyed by the sustained growth of its residential and construction businesses. Its strategic landbank management, corporate business, and operations in Visayas and Mindanao also contributed to revenue improvement. ALI’s residential development revenues grew by 12% with unit take-up during the period up by 13% versus the same period last year. Its shopping center revenues remained stable while corporate business revenues registered 8% growth. Ayala Land spent about P7.9 billion in capital expenditure in the first half, 14% higher than in the first half of 2007. The company expects to substantially catch up with its capital expenditure program in the second half of the year.

Its banking unit, Bank of the Philippine Islands (BPI), recently reported net income in the second quarter of P2.3 billion, exceeding first quarter net income of P1.5 billion. However, net income in the first half of the year of P3.8 billion was 33% lower than the P5.7 billion recorded in the first semester of 2007. Margins and securities trading income were tighter amidst a rising interest rate environment which resulted in a 6% drop in net interest income and a 22% decline in non-interest income. Lower operating expenses, however, partly cushioned the revenue shortfall. Loan growth was resilient, expanding by 16% driven by consumer lending, particularly, retail mortgage, credit cards, and auto loans, which rose by 28%, 22% and 17%, respectively. Demand for credit was equally strong from large corporates and SMEs. BPI continued to lead in the remittance business and was awarded for the third straight year by the Bangko Sentral ng Pilipinas as the Top Commercial Bank for OFW Remittances for 2007.

Telecom unit Globe reported a 3% decline in net income in the first half. Consolidated service revenues slipped by 2% due mainly to lower wireless service revenues mitigated by a 5% increase in wireline revenues. The changing pattern in consumer spending tempered revenue growth particularly for voice and value-added services, indicating the shift in consumers’ preference for lower-cost alternatives such as SMS. Overall demand, however, for wireless communications was strong as Globe’s subscriber base expanded by 25% year-on-year, with the highest net adds of 1.5 million achieved in the second quarter. Despite an 11% increase in operating expenses, consolidated EBITDA margins remained high during the period at 62%. Improvements in revenue growth are expected in the second half as key initiatives are in place to focus on priority segments, support a more aggressive broadband roll out, and develop new growth areas. Globe also announced a special cash dividend of P50 per share to its shareholders putting total dividends this year to P125 per share, on top of the regular cash dividend of P37.50.

Equity earnings from companies under AC Capital were lower this year mainly due to a decline in earnings of Ayala Automotive Holdings Corporation, international arm AG Holdings, and one-time loss provisions at Integrated Microelectronics, Inc. (IMI). Double-digit earnings growth of Manila Water, however, partly cushioned the earnings shortfall.

Manila Water reported a 21% increase in net income in the first half of the year to P1.4 billion from P1.1 billion the prior year. Its continued focus on its capital investment plan has allowed it to consistently improve operating efficiencies. Non-revenue water declined to 20% with billed volume up 6%. MWC added 25,000 new service connections during the period in expansion areas within the East Zone. The company continues to explore opportunities beyond its concession zone. It recently signed a contract for technical consulting services with the Boracay Water and Sewerage System and was also awarded a 5-year management contract for a non-revenue water reduction project with the Saigon Water Company in Vietnam.

IMI registered a net loss of US$16 million due mainly to currency hedging-related transactions which were all fully unwound as of the end of June. Revenue growth, however, remained strong and was up 14% year-on-year due to higher volumes from its key customers. Excluding losses from the currency hedging contracts, IMI’s net income would have been up 31% year-on-year. IMI’s business prospects remain strong and the company is continuing to explore opportunities to expand its geographic footprint and enhance its capabilities through value-adding acquisitions.

Ayala’s BPO investee companies continued to generate positive performance despite tougher economic conditions. Listed customer care company eTelecare will be announcing its second quarter earnings results on August 13 (5pm US Eastern time). When it released its first quarter results last May, it provided guidance of Q208 revenues of US$72-74 million (up 18%) and net income of US$1.5-2.1 million.

Its unlisted BPO unit, Integreon, completed its acquisition of a New York-based eDiscovery company, Datum, Inc., pushing revenues up 44%, post-acquisition, and 38% on a stand-alone basis. Margins improved significantly both at the gross profit and EBITDA levels on the back of favorable foreign exchange rates and Datum’s strong performance. In the meantime, graphics and creative design outsourcer Affinity Express made major customer acquisition wins last quarter, which are ramping up to full volumes.

Ayala chairman and CEO Jaime Augusto Zobel de Ayala said, “We expect operating conditions to remain challenging for the balance of this year and perhaps into early next year as we continue to feel the pressure from higher inflation and interest rates. However, we believe the fundamentals of each of our businesses remains solid and we are optimistic that as global markets adjust and normalize, we are well-positioned, given the group’s scale and financial and market strengths, to achieve our growth targets and value creation objectives.”

The above statement refers to the disclosure submitted to the PSE and SEC today, August 11, 2008, by Rufino Luis T. Manotok, Ayala CFO and senior managing director for strategic planning.

Ayala Corporation is the Philippines’ best managed company, according to FinanceAsia, a regional magazine on Asian financial markets.

In its eighth annual poll of Asia’s top companies among 167 institutional investors and equity analysts in the region, FinanceAsia also cited Ayala as best in corporate governance and third best in investor relations and strong dividend policy among blue-chip Philippine companies.

Globe chief finance officer Delfin Gonzalez, Jr. was once again named best CFO, followed by Ayala treasurer Ramon G. Opulencia.

Listed Ayala companies figured prominently in all categories. Globe Telecom ranked second among the best managed companies in the country while Ayala Land, Inc. (ALI) and Manila Water Company shared seventh place. Globe, ALI, and Bank of the Philippine Islands (BPI) also ranked high in the corporate governance, investor relations, and strong-dividend policy categories.

Manila Water was named second best company with mid-sized capitalization, after ICTSI. Cebu Property Ventures and Development Corporation, a unit of Cebu Holdings, Inc., ranked similarly in the small-capitalization category, following Splash Corporation. Other companies mentioned in the FinanceAsia survey include SM Investments, PLDT, Megaworld, Jollibee Foods, San Miguel, and Meralco.

Ayala’s strong performance in the FinanceAsia poll comes on the heels of the Wall Street Journal’s Asia’s Most Admired Companies list where the conglomerate ranked first in long-term vision and corporate reputation and 3rd most admired company in the Philippines. Earlier in the year, Ayala, Globe, BPI, and ALI obtained four of the five top rankings of the Institute of Corporate Directors’ 2007 Corporate Governance Scorecard Project. Ayala also ranked first in the category “Best for Responsibilities of Management and Board of Directors’ among Philippine companies in AsiaMoney’s Corporate Governance Poll.

Manila Water Company announced that it has been engaged by the Philippine Tourism Authority (PTA) to devise, implement and monitor management plans that will improve the operations of the Boracay Water and Sewerage System (BWSS).

Department of Tourism Secretary and concurrent PTA general manager Joseph Ace H. Durano today signed the contract for management services with Manila Water to help address growing environmental concerns particularly on water supply and wastewater treatment in Boracay Island, a popular tourist destination. BWSS operates a water treatment plant in mainland Caticlan and a sewage treatment plant on the island.

“As wastewater disposal and treatment have become a major concern, we would like to further help the government’s programs on environmental protection by doing what we can to help preserve Boracay as one of the country’s major tourist destinations,” said Manila Water president Antonino T. Aquino. “This private-public partnership also provides us the opportunity to support the government’s thrusts in tourism as a major vehicle for economic development.”

Manila Water took over the operations of the East Zone concession of the Metropolitan Waterworks and Sewerage System in 1997 as part of the government’s biggest privatization project. It was listed in the Philippine Stock Exchange in 2005. Today, Manila Water provides water and wastewater services to nearly six million people in 23 cities and municipalities of the east zone concession of Metro Manila. It operates and manages the country’s biggest sewage treatment facility in Makati, and the largest and most modern septage treatment facility in Southeast Asia, located in Taguig City. Manila Water also operates and manages a water supply and sewerage project in Tirupur, India.

Integreon, a global leader in corporate, legal and financial complex knowledge process outsourcing (KPO), held a ceremony on Wednesday, January 30, to launch its new office in Makati City, Philippines.

The launch, held at the 6750 Office Tower on Ayala Avenue, was led by Jaime Augusto Zobel de Ayala, chairman and chief executive officer of Ayala Corporation. In October 2006, LiveIt Solutions Inc., Ayala group’s investment arm for business process outsourcing, and Integreon announced a management-led buyout transaction that resulted in a majority stake for LiveIt.

Also present were Fred Ayala, LiveIt CEO; Liam Brown, Integreon President and CEO; and Erik Joseph Tabuena, Integreon Philippines Country Manager.

In his keynote address, Zobel cited the Philippines’ capacity to become a “powerhouse” in knowledge process services and stated that, “The Ayala group is convinced that the time is right for the Philippines to re-position itself to become a leading global provider of outsourced high-value, professional services.”

“Our greatest asset is that Filipinos are well-educated and have an excellent ability to operate successfully across both multiple cultures and knowledge domains,” he stressed.

Zobel noted that globally competitive business organizations are investing heavily to enable their workforce to manage knowledge and to be more productive. In the US alone, there are an estimated 48 million knowledge workers out of its total 137 million workers. The value that can be attained even with a one-percent gain in total productivity by its knowledge workers is substantial, he noted.”The Philippines is well-positioned to gain a significant share of outsourcing serving knowledge-intensive businesses. I expect to see rapid KPO growth here.” he stated.

Fred Ayala, LiveIt Solutions’ chief executive officer, said that Integreon has a strong track record in delivering the highest levels of quality outsourcing services for the world’s top legal and financial firms. Integreon’s customers include six of the ten largest global investment banks, two of three largest global law firms, many Fortune 100 and FTSE 100 corporations, several top private equity firms and hedge funds. Integreon’s services enable its corporate clients to spend more time on high-value work such as strategy and competence enhancement.

“The entry of Integreon into the Philippines marks a breakthrough for the country into the high value add and rapidly growing KPO and LPO (Legal Process Outsourcing) sectors. For Integreon, the opening of our new Philippine operation will enable it to expand its geographic footprint, gain access to a large new pool of skilled managers and professionals, and enhance Business Continuity Planning capabilities,” Ayala said.

Liam Brown, Integreon’s CEO, added that Integreon, which has offices in New York, Mumbai, Delhi, London and North Dakota, has long viewed Manila as a potential strategic delivery site. Its relationship with Ayala Corp. brings a host of advantages from recruitment to commercial real estate procurement.

“The quality and abundance of talent as well as the affinity for US legal and financial frameworks are definite advantages in locating here” Brown stated, adding that, among popular offshore destinations, the Philippines offers the highest percent of graduates who are suitable for knowledge intensive tasks.

According to Brown, Integreon’s presence in the Philippines enhances the firm’s ability to seize opportunities in the Offshore Legal Services sector, which is expected to grow to nearly $500 million; E-Discovery, which involves the process of securing electronic data for litigation purposes and which is expected to grow to $3.4 billion within five yeas; as well as in Offshoring Research and Analytics in banking and financial services, which is projected to grow to $620 million within five years.

Founded in 1998, Integreon is a pioneer in the KPO and LPO sectors, and was named last year as the world’s leading provider of Research and Analytics outsourcing for the second year running, and the world’s leading provider of Legal Document outsourcing in the fourth annual “Black Book of Outsourcing” which is the Brown Wilson Group’s prestigious annual survey of outsourcing vendors and advisors.

About Integreon
Integreon provides knowledge support services such as research and analytics, electronic discovery and litigation document review, accounting, and document and graphic services, which enable professionals to focus their time and energy on their “highest and best use”. Clients include leading financial services institutions, major international law firms, and Global 2000 corporations. For more information about Integreon, please visit www.integreon.com.

About LiveIt
LiveIt Solutions, Inc. is the holding company for Ayala Corporation’s investments in business process outsourcing. It owns significant stakes eTelecare, Affinity Express, and Integreon. Founded in 1834, Ayala Corporation is the oldest business house in the Philippines and one of the largest conglomerates in the country. Ayala and its listed subsidiaries have a combined market capitalization of approximately $20 billion.