Results of Operations for the Nine Months Ended September 30, 2016
Ayala Land, Inc. (ALI or “the Company”) continued to perform steadily in the past nine months of 2016 delivering a net income of P15.06 billion, 17% higher than the P12.83 billion posted in the same period last year. Consolidated revenues for the past nine months reached P85.49 billion, 14% higher than the P75.05 billion posted in the same period in 2015. Revenues from Real Estate increased by 15% to P80.50 billion driven by the sustained growth of the residential and office for sale segments, complemented by the sale of new commercial lots and the strong performance of shopping centers.
The ratio of General and Administrative Expenses (GAE) to revenues improved further to 5.7% from 6.2% while the Earnings before interest and taxes (EBIT) margin registered higher at 31% from 30% during the same period last year.
Business Segments
The details of the individual performance of each business segment are discussed as follows:
Property Development. This includes the sale of residential lots and units, office spaces, as well as commercial and industrial lots. Total revenues from Property Development amounted to P52.61 billion in the past nine months of 2016, 12% higher than the P46.87 billion reported during the same period in 2015.
Revenues from the sale of residential lots and units reached P43.95 billion in the past nine months, 10% higher than the P40.00 billion posted in the same period last year, driven by bookings and project completion across all residential brands.
Ayala Land Premier (ALP) registered revenues of P16.84 billion, 7% higher than the P15.68 billion, posted in the same period in 2015 driven by higher bookings from projects such as Park Central Tower in Makati City and Arbor Lanes in Arca South, Taguig and increased completion of horizontal projects such as Riomonte in Nuvali, The Courtyards in Vermosa, Cavite and residential building projects such as Two Roxas Triangle and Tower 2 of Garden Towers located in the Makati CBD and East and West Gallery Place in Bonifacio Global City, Taguig.
Alveo meanwhile registered revenues of P11.20 billion, 11% higher than the P10.06 billion generated in the same period last year due to the higher completion of subdivision projects such as Lumira and Mondia in Nuvali, Santa Rosa Laguna and Montala in Alviera, Porac Pampanga and condominium projects such as Lerato Tower 3 in Makati CBD, High Park Towers 1 and 2 in Vertis North, Quezon City, Portico in Pasig, Verve Residences 1 and 2, One and Two Maridien and Park Triangle Residences in Bonifacio Global City, Taguig and Solinea Towers 1, 2 and 3 in Cebu.
Avida posted revenues of P11.79 billion, 15% higher than the P10.26 billion posted in the same period last year on the account of higher bookings of projects such as Hillcrest Estates and Southfield Settings in Nuvali, Santa Rosa Laguna, Avida Tower Turf, The Montane and Avida Tower Verte in Bonifacio Global City, Taguig, Avida Towers One Union Place 1 and 3 in Arca South, Taguig and Avida Towers Asten 1 and 2 in Makati City. Higher completions were also recognized from Avida Towers BGC 34th 1 and 2 in Bonifacio Global City, Taguig, Avida Towers Vita 2 and 3 in Vertis North, Quezon City and Avida Towers Davao 2 in Davao City.
Amaia generated revenues of P2.47 billion, 12% lower than the previous year due to the contribution of projects with lower completion.
BellaVita meanwhile significantly increased revenues to P458 million, 68% higher than the P272 million posted in the same period last year due to the substantial bookings generated by its existing projects
in Cagayan de Oro, Cabanatuan and Tayabas, Quezon and higher completion of the projects in General Trias, Cavite and Pililla, Rizal.
The gross profit margins of horizontal projects slightly decreased to 42% from 43% while the gross profit margins of vertical projects also slightly decreased to 34% from 35% due to the higher development and land cost of recently launched projects.
Revenues from the sale of office spaces reached P4.17 billion, 3% higher than the P4.03 billion registered in the same period in 2015 driven by higher bookings from Alveo Financial Tower in Makati CBD, Alveo Park Triangle Tower and Alveo Park Triangle Corporate Plaza and higher completion of High Street South Corporate Plaza 1 and 2 in Bonifacio Global City, Taguig. Avida’s office projects in Bonifacio Global City also contributed significant revenues coming from higher bookings from Capital House and higher completion of One Park Drive. Gross profit margins of offices for sale was sustained at 38%.
Sales from residential and office for sale projects reached a total of P84.32 billion during the period, 2% higher year-on-year, equivalent to an average monthly sales take-up of P9.36 billion. Ayala Land launched P49.2 billion worth of residential and office for sale projects in the past nine months of 2016.
Revenues from the sale of commercial and industrial lots reached P3.92 billion, 50% higher than the P2.62 billion posted in the same period last year due to higher lot sales in Arca South, Taguig and Altaraza, San Jose Del Monte, Bulacan. Gross profit margins from Commercial and Industrial lots declined to 40% from 49% due to the sale of lower-margin lots located in non-prime areas.
Commercial Leasing. This includes shopping centers and office leasing as well as hotels and resorts operations. Total revenues from commercial leasing amounted to P19.17 billion in the past nine months of 2016, 12% higher than the P17.18 billion recorded in the same period last year.
Revenues from shopping centers reached P10.59 billion, 15% higher than the P9.24 billion posted in the same period last year due to the improved performance of the new malls such as UP Town Center in Quezon City and Ayala Malls Solenad in Nuvali, Santa Rosa Laguna and the higher occupancy and average rental rates of existing malls. Monthly average lease rates registered slightly higher to P1,154 per square meter from P1,153 per square meter in the same period last year while the same mall rental growth increased by 5% year-on-year. Shopping Centers EBITDA margin slightly decreased to 68% from 69% due to the lower margins of newly-opened malls. Average occupancy rate registered at 93%. Total gross leasable area (GLA) of Shopping Centers registered at 1.57 million square meters as of September 30, 2016.
Revenues from office leasing reached P4.01 billion, 10% higher than the P3.63 billion posted during the same period last year due to the higher average rental rates of existing buildings and the positive contribution of new offices such as Bonifacio Stopover and BGC Corporate Center in Bonifacio Global City, Taguig. Monthly average lease rates of its BPO offices registered 5% higher to P734 per square meter from 696 per square meter in the same period last year. Office Leasing EBITDA margin improved to 90% from 89%. Average occupancy rate registered at 90%. Total gross leasable area (GLA) of Office Leasing registered at 753 thousand square meters as of September 30, 2016.
Revenues from hotels and resorts reached P4.57 billion, 6% higher than the P4.31 billion posted in the same period last year due to the improved revenue-per-available-room (REVPAR) of hotels and resorts. REVPAR of hotels increased by 1% to P3,845 per night while REVPAR of resorts increased by 5% to P7,775 per night. Hotels and Resorts EBITDA margin slightly decreased to 27% from 28% due to lower overall occupancy of resorts. Average occupancy rate registered at 74% for Hotels and 58% for Resorts. The Hotels and Resorts segment currently operates 961 hotel rooms from its internationally branded segment; Cebu City Marriott, Fairmont Hotel and Raffles Residences Makati and Holiday Inn & Suites Makati, 213 island resort rooms from El Nido Resorts in Lagen, Miniloc, Apulit and Pangulasian Islands in the province of Palawan and 817 rooms from its Seda Hotels located in Bonifacio Global City, Taguig, Centrio Cagayan de Oro, Abreeza, Davao and Nuvali, Santa Rosa Laguna and Atria, Iloilo. Total rooms under the Hotels and Resorts portfolio registered at 1,991 as of September 30, 2016.
Services. This includes the Company’s wholly-owned Construction and Property Management companies; respectively Makati Development Corporation and Ayala Property Management Corporation. Total revenues from the Services business amounted to P48.70 billion, 59% higher than the P30.54 billion reported in the same period in 2015.
Revenues from Construction reached P47.66 billion, 61% higher than the P29.63 billion posted during the same period last year due to the increase in order book of projects within the Ayala Land Group. Revenues from Property Management reached P1.05 billion, 15% higher than the P906 million posted in the same period last year due to the increase in managed properties from completed projects. Blended EBITDA margins of the Services businesses decreased to 7% from 13% as bulk of construction accomplishments are from lower margin contract packages.
Equity in Net Earnings of Investees, Interest, Fees, Investment and Other Income Equity in net earnings of associates and JVs registered at P345 million due mainly from the earnings contribution of MCT BHd. Meanwhile, Interest, Investment and Other Income reached P4.64 billion, 7% lower due to the lower interest income on money market placements.
Expenses
Total expenses registered at P62.21 billion, 14% higher than the P54.71 billion posted in the same period last year mainly driven by Real Estate and Hotels expenses which grew 14% to P51.33 billion from P44.97 billion from the same period last year.
General and Administrative Expenses (GAE) grew by only 5% to P4.90 billion from P4.65 billion last year as a result of efficient cost management measures. GAE-to-revenue ratio further improved to 5.7% from 6.2% last year. Interest Expense, Financing and Other Charges meanwhile registered at P5.98 billion, 18% higher year-on-year from P5.09 billion, mainly attributed to higher interest expense resulting from a higher average daily loan balance. The average interest rate registered at 4.5% as of the past nine months of 2016 compared to 4.8% in the same period last year.
Project and Capital Expenditure
Ayala Land spent a total of P63.9 billion for project and capital expenditures in the past nine months of 2016. Of the total capital expenditure, 17% was spent on land acquisition, 6% was spent on the development of its estates, 40% was spent on the completion of residential projects, 27% was spent on the completion of commercial leasing projects with the remaining 10% of the amount disbursed for new businesses, services and other investments.
Financial Condition
Ayala Land posted a solid balance sheet position as of the past nine months of 2016 which provides adequate capacity to support its growth plans for 2016 and beyond.
Cash and Cash Equivalents, including short-term investments and UITF investments classified as FVPL, stood at P23.68 billion, resulting in a current ratio of 1.09:1. Total Borrowings stood at P158.89 billion as of September 2016 from P131.00 billion as of December 2015, translating to a Debt-to-Equity Ratio of 0.97:1 and a Net Debt-to-Equity Ratio of 0.82:1. Return on Equity was at 14.6% as of September 30, 2016.