Ayala Corporation’s net income in the first half of the year reached P9.8 billion, 34% higher than same period last year. The strong growth was driven by the solid performance of its core businesses, particularly Ayala Land, Globe Telecom, and Manila Water. Equity earnings from Globe, which quadrupled year-on-year, more than offset the decline in the contribution of banking unit, Bank of the Philippine Islands (BPI), which registered lower trading gains in the first half of this year. The substantial improvement in equity earnings from international businesses also boosted earnings in the first semester, which included a P1.8 billion net gain from the sale of Stream Global Services, Inc. by LiveIt. Altogether, these put total equity earnings in the first half of the year at P12.8 billion, up 35% versus the same period last year.
Ayala’s core business units largely outperformed first half last year’s earnings.
Ayala Land’s net income in the first semester grew by 25% to P7.1 billion as the positive momentum in the real estate sector continued. Real estate revenues grew by 24% to nearly P43 billion as its residential, commercial leasing, and construction businesses posted strong double-digit growth. Residential revenues grew by 40% to P24.3 billion on new bookings and completion of existing residential projects. Residential sales take-up remained strong, hitting an all-time high of P48.5 billion in the second quarter, registering an 11% growth year-on-year. Residential bookings also grew by 7% year-on-year to P31.6 billion. Shopping center revenues rose by 10% to P5.5 billion, while Office Leasing was up 31% to P2.1 billion. The opening of new gross leasable areas, full year operations of new offices, and higher average rent largely fuelled the 22% growth of its Commercial Leasing business. Ayala Land’s growing Hotels and Resorts portfolio also contributed as it registered a 48% increase in revenues. Strong revenues coupled with stable gross margins across nearly all its business lines pushed net earnings during the period. Ayala Land continued to launch new projects in the second quarter, bringing to market new offerings in retail, offices, hotels and even healthcare. The company spent a total of P32.9 billion in capex as of the end of the first half of this year as it continued to execute and expand its pipeline of projects.
Globe Telecom continued to sustain momentum as it achieved record-level revenues of P47.7 billion in the first half of the year, 7% higher than the P44.5 billion recorded in the same period last year. The robust revenue expansion was fuelled by the solid growth of all business segments as its mobile and broadband subscriber base expanded. By the end of the first half of the year Globe’s mobile subscriber base reached 42.7 million, a solid 18% growth compared to 36.1 million a year ago. Globe’s mobile segment posted revenues of P37.8 billion, 5% higher than last year due to the strong contribution from both postpaid and prepaid segments. Globe postpaid continued to lead as revenues rose by 11%, while prepaid revenues rose by 2%. Globe continued to reinvest its gains in acquiring and retaining high quality subscribers and in the expansion of its data network. This pushed subsidy and operating expenses, including interconnection charges 12% higher year-on-year, resulting in an EBITDA of P19.1 billion, 1% higher than prior year. Substantially lower depreciation charges, as the accelerated depreciation from the network transformation program tapered, as well as lower replacement cost drove the 385% growth in net income to P6.8 billion in the first half of the year.
Ayala’s water unit, Manila Water, also reported solid earnings growth on the back of a 6% growth in consolidated revenues. The strong top-line expansion was driven by a 16% growth in consolidated billed volume. This was mainly due to the East zone, which increased by 3%, while billed volume growth from new business also registered strong double-digit growth. Consolidated cost and expenses rose by 11%, mainly as a result of higher power and utility costs. Notwithstanding this, EBITDA grew by 5% to P6 billion and consequently, net income was 8% higher to P3.2 billion by the end of the first half. New businesses continued to contribute, accounting for 12% of Manila Water’s consolidated net income.
The strong performance of these core businesses offset the 33% decline in BPI’s net income which was reported at P8 billion in the first half of 2014. This was mainly due to the 32% decline in the bank’s non-interest income as a result of the sharp contraction in trading gains during the period. The bank’s core banking business, however, remained solid as net interest income in the first half increased by 15% relative to the same period in 2013. Total deposits exceeded P1 trillion for the first time, representing a 30% increase over the prior year. Loan growth remained robust, registering a 23% expansion during the period due to a larger average asset base. Net interest margins also improved quarter-on-quarter to 3.1% in the second quarter of the year versus 3.0% in the first quarter. Non-interest income expectedly declined to P9.2 billion, reflecting its reduced reliance on securities trading. Operating expenses rose by 10% as the bank continued to invest in its infrastructure and as it positions itself for future growth. Notwithstanding the increase in its loan portfolio, asset quality continued to improve with gross 90-day NPL ratio down to 1.85% from 2.05% a year ago. The bank’s performance as of the first half of the year translates to a return-on-equity of 12.9%.
Ayala’s international businesses saw significant improvement, contributing to the strong gains during the period. Integrated Microelectronics, Inc. (IMI) posted a five-fold improvement in net income in the first half of the year to US$11.3 million as consolidated revenues rose by 23% to US$431 million. Increased demand from customers in the telecom, automotive electronics, and storage device markets helped lift revenues and earnings. In the meantime, its business process outsourcing unit, LiveIt, posted a net income in the first half of 2014 largely due to the P1.8 billion net gain from the divestment of Stream Global Services, Inc. which was booked in the first quarter of this year.
Ayala Corporation President & Chief Operating Officer, Mr. Fernando Zobel de Ayala noted, “We are very pleased to see our core businesses continuing their strong earnings momentum. This attests to the strength of the broader business environment in the country. We remain optimistic that this momentum can continue given the government’s ongoing reforms and the efforts to push for vital infrastructure projects that can unleash development opportunities and address critical bottlenecks.”
Ayala has recently made significant investments in the power and transport infrastructure sectors and has allotted P24 billion in capex for projects in this space this year. It recently won the LRT 1 bid, together with the Metro Pacific group, and was the highest complying bidder, together with the Aboitiz group, for the Cavite-Laguna Expressway project. Since 2012, the company set out to invest a total of US$1 billion in energy and infrastructure projects through 2016. It has so far committed equity of close to US$500 million in various power and transport infrastructure projects. As of the end of the period Ayala had roughly P38 billion in cash with parent company net debt to equity ratio of 0.44 to 1.
The above press statement pertains to the disclosure submitted today to the SEC, PSE, and PDEx by Ayala Chief Finance Officer Delfin Gonzalez, Jr.