Category: News

Ayala Corporation’s consolidated net income in the third quarter of 2009 rose by 13% versus the same period last year to P1.7 billion. This put net income in the first nine months of the year at P5.8 billion, 26% lower year-on-year, but 14% higher excluding gains from share sales realized last year.

Combined equity earnings from core business units, Ayala Land, Inc. (ALI), Bank of the Philippine Islands (BPI), and Globe Telecom (Globe) grew by 16% during the quarter as their net incomes registered strong growth during the period. This was, however, offset by the mixed performance of units under AC Capital. Equity earnings in the nine month period ending September remained stable at P6.8 billion.

Ayala Corporation President and Chief Operating Officer, Mr. Fernando Zobel de Ayala, said “Our core business units remained resilient despite the difficult operating environment. With positive trends in the third quarter, we are optimistic about the continued growth trajectory of our businesses particularly as they tap new market segments and explore new geographies. We also continue to support their growth initiatives as part of a broader plan to constantly enhance and optimize value from our portfolio.”

Ayala recently announced it increased its stake in Manila Water to 43.3% from 31.7% as it signed a Sale and Purchase Agreement with United Utilities, Inc. to acquire the latter’s 11.6% interest in the water company. The move is viewed value accretive given the growth potential of Manila Water as it looks to expand beyond its concession area.

Ayala has also continued to actively invest in the business process outsourcing (BPO) space. Recently, it announced the merger of its contact center investment, eTelecare Global Solutions, with US based Stream Global Services, Inc., a leading global call center company. This combination creates one of the five largest global call center companies, with approximately 30,000 employees in more than 50 sites in 22 countries worldwide, and revenues of approximately $800 million. LiveIt, Ayala’s holding company for its BPO investments, has a 25.5% ownership in the combined entity.

Subsequently, Ayala’s knowledge process outsourcing (KPO) unit, Integreon, announced the acquisition of Grail Research, the captive Strategic Research and Decision Support unit of the Monitor Group, one of the world’s leading management consulting companies, who will enter into a 5 year contract to buy research services from Integreon. The acquisition accelerates the expansion of Integreon’s business intelligence, research and analytics business into high-end, custom market research, and strengthens Integreon’s position as one of the leading integrated KPO companies globally. Grail is headquartered in Cambridge, Massachusetts and has 200 employees in the US, India, China and South Africa.

These transactions are part of Ayala’s strategy to invest in global BPO companies that are in the top 5 in their respective sectors worldwide, and can leverage the Philippines’ competitive advantages. In the third quarter, the combined revenues of Ayala’s BPO companies, excluding Stream and Grail, grew by 6% to $93.5 million versus the second quarter, and their combined EBITDA grew by over 20% to $8.7 million, as they continued to recover from the impact of the global recession. Ayala’s share of their net loss for the first three quarters of 2009 was P648 million, which includes P439 million in merger and acquisition related transaction costs, amortization of intangibles, and interest expense.

Ayala’s core business units continued to achieve robust earnings growth, offsetting losses in its international real estate unit, AG Holdings. The latter booked a net loss of P336 million for the nine month period due to provisions for several projects in the US, given the persistent weakness in the U.S. property market.

BPI’s net income in the first nine months of the year grew by 38% to P7.3 billion with revenues up 16%. An increase in the bank’s average asset base coupled with a 13-basis point improvement in spreads contributed to the growth in net interest income, while the declining interest rate environment allowed the bank to realize trading gains from the sale of part of its securities inventory. Business remained brisk, with average loans up 8% driven mainly by its middle market and consumer clients.

Globe’s net income rose by 12% to P9.9 billion with core earnings stable at P9.4 billion year-to-date September. Revenue growth was underpinned by its consumer broadband business, which increased by 69% year-on-year with a significant expansion in subscriber base. Globe’s broadband subscribers nearly tripled versus last year to over 500,000, while its wireless mobile subscriber base contracted to 23.1 million at the end of the period. Globe continues to invest in network expansion to improve service delivery to consumer, allow better reach, and enhance network quality. It recently declared a special cash dividend of P50 per share, equivalent to a pay-out of 134% or a yield of 14%.

In the meantime, trends in its real estate unit Ayala Land, Inc. were encouraging with net income up 9% quarter-on-quarter and 12% year-on-year in the third quarter coming from two consecutive quarters of decline. ALI’s earnings in the first nine months, however, were still lower than prior year by 24% at P2.9 billion. Aggregate residential bookings continued to improve across all brands, indicative of a convincing reversal from its bottom early this year. In the meantime, overall leased-out rates in Ayala Malls improved to 95% while its office business completed a significant expansion in its BPO portfolio which saw its average leased-out rate dip to 64% due to the influx of new office space in the third quarter. ALI shares the optimism in the medium to long term growth potential of the BPO sector in tandem with the recovery in the global economy and the compelling trend for global offshoring and outsourcing.

The gradual recovery in the electronics sector improved the performance of its electronics manufacturing unit, Integrated Microelectronics, Inc. (IMI). The company posted a turnaround with net income of P170 million, a reversal of the net loss incurred last year. Revenues on a year-to-date basis, however, remained below last year’s levels due to softer global demand for electronics. The third quarter saw notable improvements in revenues and margins compared to the first half of the year. The company recently obtained approval from the Securities and Exchange Commission for a Listing by way of introduction of its shares in the Philippine Stock Exchange and is currently awaiting approval from the stock exchange.

Ayala’s water unit, Manila Water Co. grew net income by 14% to P2.3 billion in the first nine months on the back of a 6% increase in core revenues and better operating and tax efficiencies. The increase in the company’s customer base from the expansion areas helped boost year-to-date sales. Non-revenue water also continued to drop to 15.4% year-to-date. Last September, the company assumed full control of operations of its subsidiary Laguna Water, making significant headway in its domestic expansion outside the East Zone.

Ayala Corporation ended the period with cash at the holding company level of P26 billion and net debt to equity of 0.09 to 1.

Ayala Corporation, United Utilities (UU) and Philwater Holdings Company Inc., a company owned 60% by Ayala and 40% by UU, signed today agreements for Ayala’s acquisition of UU’s 81.9 million common shares and economic interest in 2 billion preferred shares in Manila Water Co. for a total consideration of P3.5 billion.

The acquisition increases Ayala’s economic interest in Manila Water to 43.3% from the current 31.7%. UU, who has been Ayala’s technical partner in Manila Water since it began operating the water concession in Metro Manila’s East Zone in 1997, will continue to provide technical services to Manila Water and retain voting rights in the water company through its 40% ownership in Philwater, which holds Manila Water’s outstanding preferred shares.

Manila Water recently obtained a formal approval for the renewal of its MWSS concession, which is now extended up to 2037, allowing it to implement its aggressive P450 billion investment plan for Metro Manila’s East Zone. The company continues to tap opportunities beyond the East Zone. It recently took over the water concession of Sta. Rosa, Binan and Cabuyao in Laguna, and entered into a joint venture agreement with the Philippine Tourism Authority to develop the water distribution and sewerage facilities in the tourist island of Boracay.

Beyond the Philippines, Manila Water is exploring other water projects in the region where it plans to apply its expertise and track record in the provision of efficient water and wastewater services.

The above statement pertains to the disclosure made to the Philippine Stock Exchange and the Securities and Exchange Commission by Ayala senior managing director and CFO Rufino Luis T. Manotok.

Acquisition Strengthens Integreon’s Leadership in Research and Analytics and Expands Global Footprint to China and South Africa; Enables Monitor Group to Realize Its Vision for Grail

Integreon, the global leader in integrated knowledge process outsourcing (KPO), announced today the acquisition of Grail Research, a global strategic research and decision support firm headquartered in Cambridge, Mass. Integreon acquired the business from Monitor Group, a global advisory, capability-building and capital services firm. Grail Research provides the market intelligence and strategic research that global corporations need to make decisions in today’s rapidly changing business environment. Monitor Group has also signed a five-year contract to buy research services from Integreon. Integreon is owned by its management team and LiveIt Investments, Ayala Corp.’s BPO investment arm.

Grail Research serves the world’s leading technology, consumer products and life sciences organizations, including Microsoft, Estée Lauder and a majority of the top ten pharmaceutical companies. These organizations rely on Grail Research to provide the insights they need to launch products, build brands, assess new opportunities, evaluate M&A/partnership deals, address competitive threats and understand regulatory issues. Grail Research is headquartered in Cambridge, Mass., and in addition to its other offices in North America has offices in Beijing (China), Delhi (India) and Johannesburg (South Africa). The company has 200 employees worldwide.

“I am delighted to welcome the entire Grail Research team to Integreon,” said Liam Brown, CEO of Integreon. “This acquisition accelerates the expansion of our business intelligence, research and analytics business with high-end, custom market research.

“With the addition of Grail’s capabilities, Integreon can meet the most demanding global research requirements of our investment banking, law firm and corporate clients on an enterprise basis. Grail also expands our global delivery and service capability to South Africa and China, which are strategic markets for Integreon,” added Erik Tabuena, President of Integreon Managed Solutions (Philippines), Inc.

Colin Gounden, CEO and Founder of Grail Research, has joined Integreon as Chief Marketing Officer and will report directly to Liam Brown. Gounden brings to Integreon nearly 20 years of strategy consulting and research experience and as a Senior Partner and Board Member of Monitor Group, has advised executives from leading global corporations on their most strategic challenges. “I’m genuinely excited about the growth opportunities that Integreon provides. Together we expect to strengthen Integreon’s market-leading position as the next-generation research and analytics firm,” said Gounden.

“We formed Grail Research in 2006 to provide global corporations and Monitor Group consultants with strategic market intelligence and decision support services,” said Steve Jennings, co-Managing Partner of Monitor Group. “With the rapid growth of Grail Research and the still substantial opportunity to expand its scope and scale of services, we realized that Integreon offers the best platform for Grail to achieve its full potential. We have signed a five-year research contract with Integreon; as a continuing customer of Grail, we look forward to benefitting from the growth in capabilities that Grail’s new owner, Integreon, will help drive.”

“Grail will enable Integreon to further climb the value chain, and will strengthen its position as the leading KPO company,” said Fred Ayala, CEO of LiveIt Investments.

Terms of the transaction were not disclosed. For more information about Integreon’s full range of research and analytic capabilities, please visit us at www.integreon.com or at www.grailresearch.com.

About Integreon
Integreon provides a range of outsourced knowledge services to demanding professionals using Document KPO, Research KPO, Legal KPO and Business Services to transform its customers’ Middle Office, allowing professionals to focus their time and energy on their ‘highest and best use.’ Its customers include many AmLaw 100 and UK top 50 law firms, almost all of the global investment banks, several top-tier private equity firms and hedge funds, as well as many Fortune 100 and FTSE 100 corporations. For more information about Integreon, please visit www.integreon.com.

About Monitor Group
Monitor Group works with the world’s leading corporations, governments and social sector organizations to drive growth on the issues that are most important to them. Founded and based in Cambridge, Massachusetts, the firm offers a range of services – advisory, capability-building and capital services – designed to unlock the challenges of achieving sustained growth. Monitor brings leading-edge ideas, approaches, and methods to bear on clients’ toughest problems and biggest opportunities. For more information, visit www.monitor.com.

Ayala Corporation announced today that SCS Computer Systems Pte Ltd (SEC), a company owned by Singapore Telecommunications Limited (SingTel) has purchased from Azalea Technology Investments, BPI Computer Systems Corporation, and Mitsubishi Corporation, a total of 8,476,400 common shares in the capital of Ayala Systems Technology, Inc. (ASTI), for an aggregate cash consideration of P7,204,940 or P0.85 per common share.

The acquisition represents 21 percent of the issued share capital of ASTI. This increases SCS’s shareholding in ASTI from 30 percent to 51 percent, making ASTI a subsidiary of SingTel. The remaining 49 percent of ASTI continue to be held by Azalea.

ASTI is one of the fastest growing information technology (IT) services companies in the Philippines. It is a subsidiary of Ayala that focuses primarily on the IT industry. Established in 1988, ASTI specializes in offshore software development for companies in Japan, Europe, America and Australia. Ayala is one of the country’s largest business conglomerates and has been in existence for 175 years.

SCS is a wholly owned subsidiary of NCS Pte. Ltd (NCS). NCS is one of Asia Pacific’s top Information and Communications Technology (ICT) services providers. In the latest 2008 report on IT Professional Services, Gartner ranked NCS 8th in terms of market share in Asia Pacific (excluding Japan). NCS has a presence in more than 10 countries across the Asia Pacific and Middle East regions, employing over 7,000 staff. Its customers include international blue chip market leaders and governments. NCS is a wholly owned subsidiary of the SingTel Group.

The acquisition will provide NCS/SingTel– Asia’s leading communications group with operations and investments in more than 20 countries and territories around the world–access to a large labor pool that is highly competitive in pricing but gives back excellent value in terms of the employees’ dedication to work, technical competence, learning and growth potential.

ASTI’s experience in the outsourcing and offshoring industry will be the platform for NCS/SingTel to penetrate overseas markets.

The above statement pertains to the disclosure made to the Securities and Exchange Commission and the Philippine Stock Exchange by Ayala Corporation CFO Rufino Luis T. Manotok.

The Ayala group of companies has raised and donated more than P14.5 million in cash and at least P2 million in kind to Tropical Storm Ondoy relief efforts which began on September 26. This includes contributions from Filipinos abroad coursed through Ayala Foundation USA as well as donations from employees, business partners, and suppliers. In addition, Globe received more than P2.5 million from its subscribers through the Donate-a-Load service for the Philippine National Red Cross.

Aside from donating to partner organizations such as ABS-CBN Sagip Kapamilya, GMA Kapuso, Gawad Kalinga, Corporate Network for Disaster Response, Caritas Manila, and the Red Cross, the Ayala group focused its own relief efforts on underserved areas in Rizal, Marikina, Pasig, Bulacan, Novaliches, Pampanga, Bulacan, Old Sta. Mesa, Paranaque, Quezon City, Valenzuela, Mandaluyong, Caloocan, Pasay, Makati, Taguig, and Laguna. Ayala companies have operations in these areas and thus were able to respond immediately.

Other responses from the Ayala group:

• Ayala companies also provided essential services: Globe Telecom set up Libreng Tawag stations and communication support for disaster relief organizations. It also lowered per-minute call fees for a certain period. Manila Water restored water availability in its concession area and deployed water tankers to provide potable water. BPI and Globe’s G-Cash waived transactional fees for remittances.
• Direct donations of relief packages to more than 15,000 families
• Ayala Land conducted medical missions in several affected barangays
• More than 1,200 employees in the Ayala group volunteered to pack and distribute relief goods
• Ayala Malls, Globe Business Centers and select BPI branches accepted in-kind donations from the public
• For employees affected by the typhoon, Ayala companies provided relief packages, direct financial assistance, and/or calamity loans. And in BPI, for example, its Employee for Employee program has so far raised a substantial amount that will be matched by the company. Employees are also given a day off to help clean up homes of their colleagues.

The Ayala group continues to accept donations through Ayala Foundation’s BPI Account # #0011-1490-22 and the Ayala Foundation USA website at www.af-usa.org.

Ayala’s 175th anniversary corporate communications program has been recognized as the most outstanding project in innovative corporate communications by the Asian Multimedia Publishing Awards (AMPA).

Dubbed as the premier awards program for best multimedia publishing practices in Asia, AMPA incorporates the Asian Book Publishing Awards and Asian Corporate Communications Awards. Managing director and head of corporate resources John Philip Orbeta received the award on behalf of Ayala. Bank of the Philippine Islands’ book Herencia was a finalist in the category Best Book/Best Writer on Asian Media.

With emphasis on messaging and content, Ayala’s 175th anniversary program made use of multi-media platforms to reach internal and external stakeholders. These include the distinctive “Never Stop Believing” print ad campaign; internal print publications (Ayala Now, Ayala at 175 special magazine); an anniversary video featuring chairman emeritus Jaime Zobel de Ayala; a special website and online timeline; animated screensavers; and below-the-line collaterals including banners and exhibits.

The Asian Multimedia Publishing Awards was the highlight of the 3rd Asian Publishing Convention held this year in Manila. A total of 74 projects from 44 companies in nine countries competed for the Awards.

Ayala Corporation’s net income in the first half of the year reached P4 billion, 35% lower than the same period last year. However, excluding gains from asset sales last year, net income rose by 14%. Equity earnings from key business units posted healthy growth with equity earnings from Globe Telecom and Bank of the Philippine Islands up by 7% and 27%, respectively, cushioning the 35% fall in equity earnings from Ayala Land, Inc. (ALI). Companies under its AC Capital division also contributed positively as it reversed last year’s loss following a significant improvement in its electronics manufacturing services unit, Integrated Microelectronics, Inc. (IMI), as well as higher earnings from Manila Water.

Ayala Corporation president and COO, Mr. Fernando Zobel de Ayala said, “We are encouraged by the earnings trend across our key business units despite the marked slowdown in the economy. While conditions will remain challenging, we are much more optimistic given the resilience displayed by each of our businesses during this challenging period. We will continue to see earnings stabilize in the near term and expect growth to accelerate next year.”

While ALI’s core net income in the first half dropped by 16% to P1.87 billion, core earnings in the second quarter rose by 6% to P964 million, indicative of a more positive trend. This was underpinned by a resurgent property market with buyer confidence returning particularly in the high-end residential segment. Residential Development revenues grew by 19% to P3.71 billion in the second quarter. Ayala Land Premiere, the company’s high-end brand, saw a strong recovery while the middle and affordable brands, Alveo and Avida, performed steadily. Demand from the overseas Filipino market recovered with sales up 36% versus the previous quarter. ALI’s revenues from its Shopping Centers rose by 5% to P2.21 billion in the first semester this year driven by the strong performance of Market! Market! as well as the net expansion in gross leasable area from new malls Greenbelt 5 and Glorietta 5. Revenues from Corporate Business likewise increased by 84% to P788 million with increased contribution from the new BPO buildings that became operational in the second half of last year and early this year.

Bank of the Philippine Islands likewise delivered profitable growth with net income in the first semester reaching P5.3 billion, up 38% over the previous year. Revenues rose by 19% with positive contribution from both net interest and non-interest income. Net interest income increased by 18% boosted by the 7% growth in the bank’s average asset base and a 31 basis point improvement in net interest margin. Non-interest income increased by 21% mainly from trading gains. The bank’s loan portfolio grew by 5% on double-digit expansion of consumer loans but with softer demand from the corporate segment. The bank’s asset quality continues to improve as its non-performing loan ratio continued to fall to 2.8%.

Globe Telecom posted a 17% growth in net earnings to P7.2 billion, with core net earnings up 3% over the same period last year. Service revenues increased by 2% on the back of stable wireless revenues and accelerating growth of the wireline and broadband segments which increased by 16% year-on-year. Globe ended the first semester with 25 million wireless subscribers. The company’s broadband business continued to attain new highs, setting a new record in net subscriber additions. The company ended the first half with about 379,000 broadband subscribers, more than double year-ago levels with revenues up 59% year-on-year. The company recently declared its second semi-annual cash dividend of P32 per share in line with the company’s policy of distributing 75% of prior year’s net income. A total of P4.2 billion in dividends will be paid on September 15, 2009, bringing total dividends paid out this year by the telecom company to P8.4 billion.

Business units under AC Capital contributed P77 million in equity earnings in the first half of the year from a loss of P39 million in the same period last year. This reversal was driven by a significant improvement in the performance of Manila Water and IMI.

Manila Water posted a 16% growth in net income to P1.46 billion. Revenues grew by 6% despite pressure on billed volume growth as commercial and industrial customers offset the growth in volume from residential and semi-commercial customers. The impact of higher tariff rate and lower corporate income tax as well as higher interest income boosted earnings during the period. Manila Water recently acquired Laguna AAA Water Corporation, a 25-year concession to provide water to Sta. Rosa, Binan, and Cabuyao. This is expected to expand Manila Water’s coverage and contribute to Manila Water’s growth and expansion moving forward.

IMI recorded a significant improvement in its bottomline in the first half of this year compared to the same period last year in the absence of foreign exchange losses which weighed on earnings in 2008. Revenues in the first half of this year however was lower by 26% in US dollar terms, impacted by the general slowdown in global demand for electronics. While positive sales performance was noted in March and April, lower sales in the first two months of the year continued to impede revenue growth. IMI’s China and Singapore business showed greater resiliency with dollar revenues from this region up 11% year-on-year. IMI’s cash generation remained strong at around US$8 million, ending the period with a consolidated cash balance of US$66 million.

Ayala’s BPO investee companies grew their combined revenues by 8%, from US$82 million in Q109 to US$89 million in Q209, largely due to Integreon. Ayala’s share of the BPO companies’ combined reported loss decreased by 53% from P306 million in the first quarter of 2009 to P143 million in the second quarter, primarily due to improvements in the performance of Affinity Express and Integreon. Ayala’s share of the BPO companies’ combined net loss in the first half of the year was P449 million, which included P156 million in interest expense and P72 million in non-cash amortization of intangibles related to the acquisition of eTelecare, and P44 million in one off transaction costs related to Integreon’s acquisition of Onsite.

Ayala’s BPO investee companies are continuing to build scale, through both organic and inorganic initiatives. To date, Ayala has invested approximately US$200 million in the BPO sector, which it expects to experience stronger growth going forward, as the global economy recovers and outsourcing becomes increasingly important to companies’ cost reduction initiatives.

Ayala’s balance sheet remains strong. The company ended the semester with parent net debt of P9 billion and net debt to equity ratio of 0.09 to 1.

Manila Water Company’s “Tubig Para Sa Barangay” Program received the main award of the Management Association of the Philippines’ 1st Corporate Social Responsibility (CSR) Leadership Challenge.

Manila Water was cited for the successful and strategic integration of social, economic and environmental objectives into its day-to-day business operations. “Tubig Para Sa Barangay” helps uplift the quality of life of low-income communities by providing them with 24-hour supply of potable water at an affordable rate, while addressing business needs such as high rate of water losses due to illegal connections. Moreover, the program has lessened the incidence of water-borne diseases and improved the overall health and sanitation conditions for over 1.5 million people in poor communities.

Globe Telecom, whose “Bridgecom sa Bayan” was a finalist for the main award, also won in the category Best in Enterprise Development for the program, “Empowering Micro-Entrepreneurs in the Countryside,” for using entrepreneurship and microfinance as a enabler for economic self-sufficiency. Globe promotes values-based leadership and entrepreneurial skills among barangay leaders in communities nationwide and helps micro-entrepreneurs put up new home- or community-based businesses.

The MAP CSR Leadership Challenge searched among the group’s member-companies for the most outstanding CSR programs in in the context of good business management. Nearly 80 percent of the participating companies entered programs related to environment, education, and skills training, and more than 40 percent described their owners or chief executives as the prime movers of corporate social responsibility in the organization.

Winners were announced at the joint League of Corporate Foundations-Management Association of the Philippines general membership meeting on July 8 at InterContinental Manila. Other organizations cited by the awards program include Phinma and Planters Development Bank for the main award; Union Bank, Smart, and Shell for education; Citibank for enterprise development; Phoenix Sun, Philamlife, and Phillips-Gawad Kalinga for sustainable community development; and Far Eastern University for Environment.

Hong Kong-based publication Corporate Governance Asia once again recognized Ayala Corporation as among Asia’s best companies for corporate governance.

At the 5th Corporate Governance Asia Recognition Awards held on June 26, 2009 in Hong Kong, Ayala Corporation and subsidiaries Ayala Land, Globe Telecom, and Manila Water were cited as among “The Best of Asia,” a roster of 55 companies from 9 countries noted for their “continuing commitment to the development of corporate governance in the region.” The Ayala group has consistently placed in the rankings since 2007.

Corporate Governance Asia is the region’s most authoritative journal on corporate governance. The quarterly publication provides news and analysis on corporate governance issues, boardroom practices and shareholder activism.

This is the third citation for corporate governance that Ayala and its companies have received this year, following top rankings in a separate poll by FinanceAsia and the Institute of Corporate Directors’ Corporate Governance Scorecard Project.

Ayala ranked second among the Philippines’ most-admired companies in the annual Wall Street Journal Asia 200 survey.

In addition to the outstanding overall performance in this year’s survey, Ayala also earned top rankings in other categories. It was considered best in long-term vision, a category it has consistently led since 1997. It was also viewed as one of the top three companies in terms of quality of products and services, corporate reputation, and innovation, and ranks fifth in financial reputation.

Ayala Land, Bank of the Philippine Islands, and Globe Telecom also figured prominently in the survey, placing third, fifth, and sixth, respectively, in the overall rankings, and in the top five of each category.

The Asia 200 survey, which was conducted from December 2008 to January 2009, was taken in the midst of the global economic downturn. A total of 2,622 executives and professionals in 12 Asia-Pacific countries responded to the poll. This survey of business readers in the region had been conducted since 1993 by the Far Eastern Economic Review until it changed format in 2005.