MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Review of 1Q 2018 operations vs 1Q 2017
Ayala Land, Inc. (ALI or “the Company”) generated a net income after tax (attributable to equity holders of ALI) of P6.52 billion in the first three months of 2018, 17% higher than P5.56 billion posted in the same period in 2017. Consolidated revenues reached P36.98 billion, 17% higher than P31.64 billion wherein real estate revenues increased 19% to P35.27 billion due to the substantial growth of property development and the sustained performance of commercial leasing.
The ratio of General and Administrative Expenses (GAE) to revenues improved further to 5.3% from 5.7% while the Earnings Before Interest and Taxes (EBIT) margin improved to 32.8% from 30.3%.
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 P25.14 billion, 29% higher than P19.42 billion posted in the same period in 2017.
Residential. Revenues from the sale of residential lots and units reached P21.77 billion, 34% higher than P16.27 billion posted in the same period last year, driven by new bookings and project completion.
Ayala Land Premier (ALP) posted revenues of P7.49 billion, 84% higher than P4.06 billion last year due to higher bookings from recently launched projects such as The Courtyards Phase 3 in Vermosa, Cavite, Park Central North Tower in Makati and Cerilo in Nuvali and higher completion progress of The Suites in BGC.
Alveo meanwhile registered revenues of P6.40 billion, 5% higher than P6.12 billion last year due to bookings of recently launched projects such as Orean Place in Vertis North, Travertine at Portico and The Residences at Evo City. Significant revenues were also contributed by the completion progress of High Park Tower 2 in Vertis North, Veranda in Arca South and Aveia in Sta. Rosa, Laguna.
Avida reached P4.56 billion, slightly lower than P4.63 billion last year due to limited inventory.
Amaia registered revenues of P1.38 billion, 2% higher than P1.34 billion last year from higher bookings and completion progress of Amaia Skies Shaw, Amaia Skies Cubao Tower 2, Amaia Steps in Alabang, and Amaia Scapes in General Trias, Cavite. BellaVita meanwhile grew its revenues to P231 million, a substantial 84% growth from P125 million due to higher bookings and completion of its ongoing projects in Cagayan de Oro, Cabanatuan and Iloilo.
MCT Bhd recognized revenues of P1.72 billion in the first quarter of 2018 from the sales and completion progress of its projects in its Cybersouth township development and its Cyberjaya projects, namely Skypark and Lakefront.
Residential Gross Profit (GP) margins of horizontal projects improved to 49% from 46% due to the contribution of ALP’s The Courtyards Phase 3 in Vermosa and Alveo’s The Residences at Evo City, Aveia in Santa Rosa, Laguna and Mondia in Nuvali. GP margins of vertical developments improved to 35% from 33% due to the contribution of ALP’s Park Central North Tower in Makati CBD and Alveo’s High Park Tower 2 in Vertis North.
Office for Sale. Revenues from the sale of office spaces reached P1.37 billion, 9% lower than P1.50 billion as a result of lower take up due to limited inventory. Gross profit margins of offices for sale declined to 35% from 41% as higher project costs were recognized in Alveo’s Park Triangle Tower and Park Triangle Corporate Plaza in BGC.
Commercial and Industrial Lots. Revenues from the sale of commercial and industrial lots reached P2.00 billion, 22% higher than P1.64 billion last year from higher lot prices in Arca South and more industrial lot sales in Alviera. Gross profit margins of commercial and industrial lots increased to 43% from 30% mainly from the contribution of higher margin commercial lots in Arca South and Lio and industrial lots in Alviera.
Sales reservations reached a total of P31.51 billion, 16% higher than P27.27 billion, equivalent to an average monthly sales take-up of P10.5 billion while net booked sales registered at P24.16 billion, 20% higher than P20.20 billion last year.
Commercial Leasing. This involves the operation of shopping centers, office buildings and hotels and resorts.
Total revenues from commercial leasing amounted to P8.16 billion, 11% higher than P7.35 billion last year.
Shopping Centers. Revenues from shopping centers reached P4.21 billion, 10% higher than P3.84 billion last year due to the higher contribution of newly opened Ayala Malls Vertis North, Cloverleaf and The 30th and the improved performance of Tutuban Center and UP Town Center. EBITDA margin registered slightly lower at 66% from 67%.
The average monthly mall lease rate registered at P1,059 per square meter while same mall rental growth is at 5%. The average occupancy rate of all malls is 89% while the occupancy rate of stable malls is 97%. Total gross leasable area (GLA) of shopping centers registered at 1.80 million square meters as of March 2018.
Offices. Revenues from offices reached P2.01 billion, 13% higher than P1.78 billion last year due to the contribution of newly opened offices such as Vertis North Corporate Center 1, The 30th Corporate Center, Circuit BPO Towers 1 and 2 and improved occupancy in Ayala Center Cebu Tower. EBITDA margin registered slightly lower at 90% from 91%.
The average monthly lease rates of offices registered at P752 per square meter. The average occupancy rate of all offices is 88% while the average occupancy rate of stable offices is 96%. Total GLA of office leasing registered at 1.02 million square meters as of March 2018.
Hotels and Resorts. Revenues from hotels and resorts reached P1.94 billion, 12% higher than P1.74 billion last year due to the contribution of newly opened properties such as Seda Vertis North, Seda Capitol Central, and Lio B&Bs. Overall revenue-per-available-room (REVPAR) of hotels decreased 10% to P3,535 per night; stable hotels REVPAR increased 5% to P4,368 per night. Overall REVPAR of resorts decreased 9% to P9,557 per night; stable resorts REVPAR increased 9% to P12,285 per night. EBITDA margin registered slightly lower at 30% from 31%.
The average room rate of hotels was at P5,128 per night while the average room rate of resorts was at P13,349 per night. The average occupancy rate of hotels registered at 69% while resorts registered at 72%.
Hotels and Resorts currently operates 660 hotel rooms from its internationally branded segment, namely, Fairmont Hotel and Raffles Residences Makati (312) and Holiday Inn & Suites (348) Makati. Seda Hotels operates 1,360 rooms located in Atria in Iloilo (152), BGC in Taguig (179), Centrio in Cagayan de Oro (150), Abreeza in Davao (186), Nuvali in Santa Rosa Laguna (150), Vertis North in Quezon City (438) and Capitol Central in Bacolod (105). Meanwhile, El Nido Resorts operates 193 rooms from its four island resorts, Pangulasian, Lagen, Miniloc and Apulit, while Lio Tourism Estate operates 102 rooms, both in Palawan and Sicogon Tourism Estate in Iloilo operates 26 rooms. Cebu Marriott (301) is undergoing redevelopment and will be branded as Seda Ayala Center Cebu once completed. As a result, the total number of rooms in operation registered at 2,341 as of March 2018.
Services. This is composed mainly of construction represented by Makati Development Corporation (MDC) and property management, represented by Ayala Property Management Corporation (APMC), and power services companies such as Direct Power Services, Inc., Ecozone Power Management, Inc. and Philippine Integrated Energy Solutions, Inc.
Total revenues from the services business amounted to P18.60 billion, 16% higher than P16.10 billion last year.
Construction. MDC generated revenues of P17.43 billion, 16% higher than 14.97 billion, due to the increased order book of projects from Ayala Land Group.
Property Management. APMC and power services companies registered revenues of P1.17 billion, 3% higher than P1.14 billion due to more managed properties from completed projects.
Blended EBITDA margins of the services businesses registered at 8%, lower than 10% last year.
Equity in Net Earnings of Investees, Interest, Fees, Investment and Other Income
Equity in net earnings of associates and JVs registered at P166.54 million, 21% higher than P137.77 million last year given the higher net income contribution of non-consolidated subsidiaries while interest, investment and other income reached P1.54 billion, 15% lower than, P1.82 billion, mainly due to lower interest income from accretion on installment sales.
Total expenses registered at P26.64 billion, 15% higher P23.13 billion last year, mainly due to higher real estate expenses which grew 15% to P22.08 billion from P19.22 billion last year.
GAE reached P1.97 billion, 9% higher than P1.80 billion last year. This resulted in a further improvement of the GAE ratio to 5.3% from 5.7%.
Interest expense, financing and other charges meanwhile registered at P2.60 billion, 23% higher than P2.11 billion as a result of higher interest expense and financing charges.
Project and Capital Expenditures
Ayala Land spent a total of P26.7 billion in capital expenditures in the first three months of 2018. 41% was spent on residential projects, 23% for its equity investments such as MCT Bhd and Prime Orion Philippines, Inc., 22% on commercial leasing projects, 9% for land acquisition and 5% for the development of the estates.
The Company’s balance sheet continues to be solidly positioned to support its growth plans.
Cash and cash equivalents, including short-term investments and UITF investments classified as FVPL, stood at P28.49 billion resulting in a current ratio of 1.15:1.
Total borrowings registered at P180.60 billion which translated to a debt-to-equity ratio of 0.93:1 and a net debt-to-equity ratio of 0.78:1.
Return on Equity was at 16.1% as of March 31, 2018.
|End-March 2018||End-December 2017|
|Current ratio 1||1.15:1||1.18:1|
|Debt-to-equity ratio 2||0.93:1||0.91:1|
|Net debt-to-equity ratio 3||0.78:1||0.77:1|
|Return on assets 4||5.20%||5.07%|
|Return on equity 5||16.13%||16.09%|
|Asset to Equity ratio 6||3.06:1||2.99:1|
|Interest Rate Coverage Ratio 7||5.9||6.0|
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 2018.