MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Results of Operation as of 1Q 2022 versus 1Q 2021
Ayala Land (ALI) posted consolidated revenues of P24.62 billion in the 1st quarter of 2022, similar to the P24.64 billion generated in the 1st quarter of 2021. This topline reflects the slight contraction in property development, which outweighed the resurgence in commercial leasing. Meanwhile, net income registered at P3.17 billion, 14% higher than P2.78 billion, due to continuing cost-efficiency measures.
Real Estate revenues, composed of Property Development, Commercial Leasing, and Services revenues, amounted to P22.56 billion, a 7% increase from P21.13 billion, lifted by the commercial leasing and services segments.
Capital expenditures reached P14.01 billion, supporting the buildup of residential and commercial projects.
Net gearing stood at 0.79:1 as Ayala Land continued to carefully manage its debt to maintain the strength of its balance sheet.
Business Segments
The details of the individual performance of each business segment are discussed as follows:
Property Development. This segment includes the sale of residential lots and units, office spaces, commercial and industrial lots, and operations of MCT Bhd, Ayala Land’s consolidated subsidiary based in Malaysia. Property development revenues reached P14.20 billion, a 1% dip from P14.36 billion in the same period last year. ALI received a strong take-up for commercial lots but recorded lower residential bookings during the quarter.
Residential. Due to lower project bookings, revenues from the sale of residential lots and units and MCT Bhd’s operations totaled P11.36 billion, 5% lower than P11.99 billion.
AyalaLand Premier (ALP) posted revenues of P2.82 billion, 33% lower than P4.23 billion in 2021, due to almost sold out inventory in The Courtyards Phase 3A and Phase 4A in Vermosa, Cavite and Ayala Greenfield Estates Phase 8B in Laguna.
Alveo recorded revenues of P2.40 billion, an increase of 7% from P2.24 billion owing to higher incremental POC Ametrine Portico in Pasig City, Corvia at Alviera, Pampanga, and Solinea Tower 4 in Cebu City.
Avida meanwhile registered revenues of P4.39 billon, a 44% higher from P3.05 billion, attributed to higher bookings of Avida Towers Cloverleaf in Quezon City and Avida Towers Verge in Mandaluyong City, combined with higher incremental in POC of Avida Greendale Settings in Alviera, Pampanga, Averdeen Estates in Nuvali, Laguna and Avida Verra Settings in Vermosa, Cavite.
Amaia reached P1.07 billion in revenues, a 9% reduction from P1.18 billion relating to lower net bookings from Steps Alabang Esperanza in Las Pinas City and Steps Pasig Blanca. Bellavita recorded revenues of P231.60 million, 16% lower than P274.76 million on account of lower incremental POC from its project in Iloilo and lower sales of projects in Capas, Tarlac and Tayabas, Quezon Province.
MCT Bhd recorded a contribution of P444.69 million, 56% lower than P1.01 billion, mainly due to incremental contribution of nearly completed projects and early-stage completion of newly launched projects.
Office for Sale. Revenues from the sale of office units decelerated 56% to P687.73 million, from P1.56 billion due to the full completion and sold-out inventory of Alveo’s Park Triangle Tower at BGC.
Commercial and Industrial Lots. Revenues from the sale of commercial and industrial lots more than doubled to P2.15 billion from P817.92 million on strong take-up of commercial lots at Nuvali and Broadfield in Laguna.
Sales Reservations. It totaled P24.11 billion, 16% lower than the blockbuster sales performance of P28.55 billion in the first quarter of 2021 during the pandemic. This take-up translates to an average of P8.04 billion per month, or 66% of the 2019 monthly average. Nonetheless, this sales take-up is 9% higher than P22.14 billion in the 4th quarter of 2021.
Local and overseas Filipinos accounted for 91% of total sales, with a balance of 9% from other nationalities. Sales from local Filipinos, which comprise 69%, amounted to P16.51 billion, 26% lower, while sales from overseas Filipinos, which represented 22%, amounted to P5.37 billion, a 36% uplift year-on-year. Meanwhile, sales to other nationalities amounted to P2.23 billion, down 3%. Sales to Chinese buyers continue to decelerate, down 53% to P193.56 million, and comprise only 13% of sales to other nationalities.
Project Launches. In the first quarter of 2022, Ayala Land launched seven (7) projects with a total value of P16.97 billion. These are ALP’s Ciela Phase 1A Tranche 2 in Carmona, Cavite and Anvaya Cove Seaside Point in Morong, Bataan, Alveo’s Mondia Expansion in Nuvali, Laguna, Avida’s Patio Madrigal Tower 1 in Pasay City and Serin East Tower 4 in Tagaytay City, Cavite, Amaia’s Series Nuvali S2 in Laguna and Scapes Iloilo S2A. The Company has budgeted P100 billion worth of launches in 2022.
Commercial Leasing. This segment includes the operations of Shopping Centers, Office Buildings, and Hotels and Resorts. Total revenues from commercial leasing totaled P6.43 billion, up 26% from P5.12 billion, as it benefitted from the reopening of the economy.
Shopping Centers. Revenues from shopping centers accelerated 49% to P2.92 billion from P1.96 billion due to higher mobility and tenant sales as the country transitioned to less strict quarantine restrictions. The average occupancy rate for all malls is 79%, and 83% for stable malls. Total Malls’ gross leasable area (GLA) stands at 2.12 million square meters.
Offices. Revenues from office leasing grew by 7% to P2.69 billion from P2.52 billion as BPO and headquarters tenancy and operations remained stable. The average occupancy rate for all offices is 81%, and 85% for stable offices. Total office leasing GLA is at 1.36 million square meters.
Hotels and Resorts. Revenues from hotels and resorts improved 29% to P823.40 million from P640.40 million because of increased domestic travel and higher room rates. The average occupancy for all hotels was 48%. Meanwhile, the average occupancy for all resorts stood at 11%. Hotels and resorts have a total of 4,028 rooms.
The hotels and resorts business manages 660 hotel rooms in its international brand segment—312 from Fairmont Hotel and Raffles Residences and 348 from Holiday Inn & Suites, both in the Ayala Center, Makati CBD.
There are 11 Seda Hotels, operating 2,712 rooms—Atria, Iloilo (152 rooms); BGC, Taguig (521); Centrio, Cagayan de Oro (150); Abreeza, Davao (186); Nuvali, Santa Rosa, Laguna (150); Vertis North, Quezon City (438); Capitol Central, Bacolod (154); Lio, Palawan (153); Ayala Center Cebu (301); Seda Residences Ayala North Exchange (293) and Seda Central Bloc (214); and Circuit Corporate Residences (255).
El Nido Resorts operates 193 rooms from its four island resorts—Pangulasian, Lagen, Miniloc, and Apulit. The Lio Tourism Estate currently has 132 rooms under its Bed and Breakfast (B&B) and Dormitel offerings, while the Sicogon Tourism Estate in Iloilo currently has 76 B&B rooms.
Services. This segment is composed mainly of the Company’s construction business through Makati Development Corporation (MDC), property management through Ayala Property Management Corporation (APMC), and other companies engaged in power services such as Direct Power Services, Inc. (DPSI), Ecozone Power Management, Inc. (EPMI), and Philippine Integrated Energy Solutions, Inc. (PhilEnergy) and airline for the hotels and resorts business, AirSWIFT. Total revenues amounted to P1.93 billion, 18% higher than P1.64 billion, mainly due to higher power consumption of power service clients and increased operations of AirSWIFT.
Construction. Net construction revenues were 25% lower to P710.39 million from P951.75 million as projects with unconsolidated JVs and external clients neared completion, which resulted in incremental contribution.
Property Management and Others. APMC, power services companies, and AirSWIFT registered a 78% increase in combined revenues to P1.22 billion from P687.08 million, driven by improved operations of power service subsidiaries and AirSWIFT
Equity in Net Earnings of Investees, Interest, Fees, Investment, and Other Income
Equity in net earnings of associates and JVs rose 14% to P249.58 million from P218.96 million, on higher contributions from Ortigas Land and joint ventures with Royal Asia Land and Eton Properties.
Interest income from real estate sales declined 9% to P1.67 billion from P1.84 billion due to lower accretion income recognized. Meanwhile, interest and investment income declined by 19% to P38.80 million from P47.95 million due to lower interest income from customer penalties, installment sales, and cash and short-term investment yields.
Other income (mainly of marketing and management fees from joint ventures) fell to P97.84 million, 93% lower than the high base of P1.40 billion in the 1st quarter of 2021. During this period, Ayala Land recorded a P1.31 billion gain from selling its 39.2% economic interest in Qualimed and its hospital buildings to Ayala Corporation.
Expenses
Total expenses registered at P19.48 billion, a 1% increase from P19.31 billion, reflecting the same tepid hike in real estate expenses which amounted to P14.10 billion from P13.93 billion.
Due to reduced corporate costs and cost containment initiatives, general and administrative expenses declined 9% to P1.49 billion from P1.64 billion. This total resulted in a GAE ratio of 6.0%, better than 6.6% in the 1st quarter of 2021. EBIT margin stood at 32.0%, slightly better than 31.6% in the same period.
Interest expense, financing and other charges, including interest expense related to PFRS 16 (Leases) totaled P3.89 billion, 4% higher than P3.75 billion in the same period last year due to the higher discounting cost of the sale of accounts receivables. The average cost of debt registered at 4.2%. Of the total debt, 89% is locked in with fixed rates, while 90% is contracted long-term.
Capital Expenditures
Capital expenditures reached P14.01 billion in the first quarter of 2022, mainly for residential developments, followed by commercial leasing assets. 54% was spent on residential projects, 7% on commercial projects, 14% on land acquisition, 23% on estate development, and 2% on other purposes. The full-year Capex budget is P90 billion.
Financial Condition
The Company’s balance sheet remains strong to ensure financial sustainability during the crisis.
Cash and cash equivalents, including short-term and UITF investments classified as FVPL, stood at P14.73 billion resulting in a current ratio of 1.50:1.
Total borrowings registered at P229.41 billion; the debt-to-equity ratio was 0.84:1, and the net debt-to-equity ratio was 0.79:1 as of the end of March 2022.
Return on equity was at 5.44% as of March 31, 2022.
Project and Capital Expenditures
| End-Mar 2022 | End-Dec 2021 | |
| Current ratio 1 | 1.50:1 | 1.58:1 |
| Debt-to-equity ratio 2 | 0.84:1 | 0.82:1 |
| Net debt-to-equity ratio 3 | 0.79:1 | 0.77:1 |
| Profitability Ratios: | ||
| Return on assets 4 | 2.17% | 2.13% |
| Return on equity 5 | 5.44% | 5.37% |
| Asset to Equity ratio 6 | 2.76:1 | 2.76:1 |
| Interest Rate Coverage Ratio 7 | 3.94 | 4.01 |
1 Current assets / current liabilities
2 Total debt/ consolidated stockholders’ equity (Total debt includes short-term debt, long-term debt and current portion of long-term debt)
3 Net debt/ consolidated stockholders’ equity (Net debt is total debt less cash and cash equivalents, short term investments and financial assets through fvpl)
4 Annualized Total Net income / average total assets
5 Annualized Net income attributable to equity holders of ALI / average total stockholders’ equity attributable to equity holders of ALI
6 Total Assets /Total stockholders’ equity
7 EBITDA/Interest expense
There are no events that will trigger direct or contingent financial obligations that are material to the company, including any default or acceleration of an obligation.
There are no material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the company with unconsolidated entities or other persons created in 2020.