AYALA LAND ASM SPEECH
2020 ANNUAL STOCKHOLDERS’ MEETING
MESSAGE OF THE PRESIDENT BERNARD VINCENT O. DY
APRIL 22, 2020
Members of the Board, fellow shareholders, ladies and gentlemen, Good Morning!
Our commitment to advance the country’s development goals is best demonstrated in our investments across the various business lines. With these investments, we build sustainable communities and create products and services that enable more Filipinos to partake in the benefits of economic growth and social progress.
In 2019, we continued to live up to this commitment as our investments translated into further expansion of our core businesses. We achieved revenues of PHP168.8 billion, 2% higher than a year-ago. Back-ended residential product launches and nearly completed projects sold out in previous years accounted for the significantly slower revenue growth.
However, strong leasing revenues and commercial lot sales coupled with tight cost management fueled our net income to PHP33.2 billion, 13% higher than a year ago. The strong leasing growth is a result of our strategy rolled out six years ago to invest heavily in commercial assets and we saw many of these completions now bearing fruit.
All these resulted in a return on equity (ROE) of 16.7%, the highest in the Philippine property sector.
Since the rollout of our 2020-40 plan in 2014, I am pleased with how our organization has responded to the challenge and delivered significant growth over this period.
From a net income of PHP11.7 billion in 2013, we have been able to increase our bottom line at a compounded annual growth rate (CAGR) of 19% by the end of 2019.
The net income from property development increased at a CAGR of 17%, lifted by consistent demand for our residential products as reservation sales grew at an annual average of 8%.
Meanwhile, net income from commercial leasing advanced at a CAGR of 25% as our malls’ gross leasable area (GLA) increased by 68% to 2.12 million sq. meters, offices’ GLA doubled to 1.17 million sq. meters, and the number of hotel and resorts rooms increased by 85% to 3,705 rooms.
This consistent strong growth has allowed us to disburse PHP7.7 billion in dividends in 2019, 3% higher than previous year.
Notwithstanding our achievements and strong cash flows, we ensured the stability of our balance sheet through prudent cash management and optimal capital deployment. With this, we ended 2019 with a net debt-to-equity ratio of 0.78:1, affirming our Triple-A credit rating.
These results were made possible as the Philippine economy paved the way for steady progress. The country benefitted from lower inflation and interest rates, a strong peso, robust household consumption, and a growing middle class. These macroeconomic factors have provided for an environment that is supportive of growth, enabling us to sustain our momentum and fulfill our vision of “enhancing land, enriching lives for more people.”
We best demonstrate this through our investments in estate development, residential projects, commercial leasing, and other property-related businesses. In 2019, we spent a total of PHP108.7 billion in capital expenditures.
We introduced three new mixed-use estates, further venturing into more locations—the 120-hectare ALVEO Broadfield in Biñan, Laguna; the 11-hectare The Junction Place in Quezon City; and the 290-hectare Cresendo in Tarlac City.
Broadfield is a mixed-use commercial development located close to Laguna Technopark and adjacent to De La Salle University Canlubang. It is poised to benefit from the completion of the Cavite-Laguna Expressway (CALAX) and the planned Cavite-Tagaytay-Batangas Expressway.
Meanwhile, The Junction Place is a pocket urban development located on Quirino Highway near Tandang Sora Avenue which will host an Amaia neighborhood. We see this strengthening our footprint in Quezon City, following the success of Vertis North and Cloverleaf.
Lastly, Cresendo is our first estate in Tarlac province and will feature a 30-hectare downtown area, a 32-hectare industrial park, a school by Don Bosco Technical Institute, and an Avida community.
We are investing a total of PHP35 billion for the buildup of these estates over the next few years to spur commercial activity, promote job generation, and foster community development.
With these three planned mixed-use projects, Ayala Land will have 29 estates nationwide, cementing its place as the largest mixed-use developer in the Philippines.
To ensure adequate inventory across all market segments we serve and to continue the buildup in our various communities, we launched PHP158.9-billion worth of projects for sale during the year. Eighty-five percent (85%) of the launches were accounted for by residential products, with the balance composed of office units, commercial lots, and industrial land for sale. I am also pleased with our progress in addressing the broader housing market served by Avida, Amaia, and BellaVita. In total, they delivered 11,476 units in 2019, a compounded annual growth rate of 28% over the last five years.
In commercial leasing, we opened new malls and retail spaces, capitalizing on strong local consumption. These are Ayala North Exchange Retail in Makati City, Ayala Malls Central Bloc in Cebu, and our biggest mall to date, Ayala Malls Manila Bay in Parañaque. Altogether, these account for 213,000 sq. meters of GLA.
To meet the demand requirements from various office locators, we completed Ayala North Exchange BPO, Manila Bay BPO, and Central Bloc Corporate Center 1 in Cebu, offering 70,000 sq. meters in total GLA.
In addition, we opened 774 new rooms in our various hotels and resorts such as Seda Residences Makati; Seda BGC expansion; Seda Lio in Palawan, Huni in Lio, Palawan and Sicogon, Iloilo; and Circuit Corporate Residences in Makati.
In other leasing formats, Clock In, our co-working space provider catering to entrepreneurs, startups, freelancers, and flexible-space users, tripled its capacity to 1,404 seats by opening five new branches—in Vertis North, The 30th, Ayala North Exchange, Alabang Town Center, and Lio. Meanwhile, The Flats, our co-living space offering, opened a new branch in BGC. Together with its first branch in Amorsolo, Makati, The Flats now has 2,044 beds to serve young office professionals who require accessible and affordable housing within the CBDs. We also expanded our standard factory buildings and warehouses, now totaling 175,000 sq. meters of GLA. This is managed and operated by our listed subsidiary, AyalaLand Logistics Holdings, Corp. (ALLHC), accommodating demand for light manufacturing facilities and storage requirements from various industries.
Our ability to execute on these investments would not have been possible without our construction arm, Makati Development Corporation (MDC). I am proud to share that MDC celebrated its 45th anniversary in 2019. MDC managed 193 ongoing projects and completed 44 projects as it continued to improve its safety, quality, and timely delivery performance. It has also significantly increased its design-and-build engagements and has started to gear up for prefabricated, prefinished volumetric construction. With its nine local training facilities accredited by the Technical Education and Skills Development Authority (TESDA), MDC produced 5,139 graduates in 2019, bringing its total to 29,845 graduates since the inception of the program in 2015.
Complementing MDC is Ayala Property Management Corporation (APMC). APMC conducted 13,260 emergency response team drills and 192 night drills, and rolled out a centralized fire detection alarm monitoring system to ensure the safety of residents and tenants. Through these efforts, APMC achieved a “zero major fire incident” record across its 256 managed properties. APMC received an overall satisfaction rating of 89.1% in 2019 from a survey of 5,786 respondents. Both MDC and APMC ensure that we are able to fulfill our customer commitments and maintain the quality of our completed projects over time.
I am also glad to report on the performance of our strategic investments—ALLHC, Ortigas Land, and MCT Bhd. Through ALLHC, we were able to build further on our position as the largest industrial estate developer in the country. In 2019, it launched the 105-hectare Laguindingan Technopark in Misamis Oriental. This brought our total number of industrial estates to five, adding to our portfolio of 29 mixed-use estates. Ortigas Land, on the other hand, launched new projects such as The Galleon in Ortigas Center and Empress in Capitol Commons and opened a new wing in its Estancia Mall. Meanwhile, MCT Bhd is preparing the launch of new projects in Petaling Jaya and Subang Jaya after the strong sellout of its projects in 2019.
2019 was a year of significant investments and business activity for our company. As we continue to build projects and communities, we remain steadfast in our commitment to integrate sustainability in our day-to-day operations. Three years ago, we embarked on our ambitious plan to offset the carbon footprint of all our commercial assets by the year 2022. I am pleased to report that as of end-2019 we have already offset 72% of our carbon emissions through a deliberate shift of 16 properties to renewable energy and allocating 586 hectares of our landbank to become protected forests.
We also rolled out new programs for waste management with the launch of our first eco hub in Arca South to drive segregation and improve waste reduction. In 2019, the facility was able to collect 32,000 kgs of plastic and converted the sub particles into construction materials to be used in our developments. A second hub in Lio, Palawan was also introduced in the last quarter of the year.
Indeed, we realized significant achievements and progress across multiple fronts in 2019. But as I speak to you today, the world is going through the biggest crisis of our generation, a global pandemic brought about by COVID-19. An overwhelming majority of business activity stopped overnight and the entire Luzon region was placed under an enhanced community quarantine, with major cities in Visayas and Mindanao also under quarantine. Filipinos’ movements were restricted to help control the spread of the virus and our operations were brought to a standstill, with the exception of our BPO offices and hotels that continue to operate on a limited basis to accommodate current business needs.
Today, we cannot ascertain the effect this crisis would have on our business. We do know, however, that this will have a major impact on the short term and our performance for the year 2020, with high likelihood of a spillover into 2021. We are now in the process of adjusting our plans to ensure that we adapt quickly to this new reality and remain resilient throughout this crisis.
In the midst of this situation, what gives me comfort is knowing that our balance sheet remains robust and I am confident that this strength would enable us to weather this storm.
As I look back over the last decade, it gives me tremendous pride knowing that our company has undergone an unprecedented period of growth, expanding our product lines and services to benefit more Filipinos, enhance their quality of life, and help bring economic activity to various growth centers in our country.
As we enter this new decade and a new chapter, we will start by creating a plan to adapt to the unprecedented disruption resulting from the COVID-19 crisis.
As I close this report, let me take this opportunity to thank all my colleagues at Ayala Land. All our company’s achievements would not have been possible without your hard work, dedication, and commitment. For this I am truly grateful. I am also confident that this same team will allow us to overcome the challenges brought about by the pandemic and that we will bounce back stronger and more united as a company, “one despite the distance.”
To our Board of Directors, I would like to express my gratitude for your continued engagement, providing the guidance and wisdom that has allowed our company to achieve market leadership and thrive all these years.
Finally, to you, our shareholders and stakeholders, your unwavering support and belief in Ayala Land is what inspires us to be of service to the Filipino people. Thank you for standing by us as we continue our journey to enhance land and enrich lives for more Filipinos.
At this point, I would like to invite everyone to watch our corporate video.
Once again, thank you and good morning.