Financial Highlights

MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Results of Operations for the Nine Months Ended September 30, 2017

Ayala Land, Inc. (ALI or “the Company”) delivered consistent earnings growth of 18% in the past nine months of 2017, posting a net income of P17.81 billion. It sustained a healthy topline with P98.93 billion in consolidated revenues, 16% higher than the previous year. Revenues from Real Estate likewise increased 16% to P93.19 billion driven by strong property sales and the steady growth of its leasing business. Meanwhile, Earnings before interest and taxes (EBIT) margin registered at 32% compared to 31% 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 P68.37 billion, 30% higher than P52.61 billion last year.

Residential. Revenues from the sale of residential lots and units reached P57.27 billion, 30% higher than P43.95 billion last year, driven by bookings and project completion across all residential brands.

Ayala Land Premier (ALP) registered revenues of P16.33 billion, 3% lower than P16.84 billion last year as the significant portion of bookings came from new launched projects with lower completion.

Alveo meanwhile recorded revenues of P20.39 billion, a robust gain of 82% from P11.20 billion last year due to higher completion of its subdivision projects such as Ardia in Vermosa, Cavite, Mondia in Nuvali, Santa Rosa Laguna and Montala in Alviera, Porac Pampanga and its condominium projects such as Portico in Pasig, High Park Towers 1 and 2 in Vertis North, Quezon City, Verve Residences 2, Two Maridien and Park Triangle Residences in Bonifacio Global City, Taguig and Kroma and Solstice Tower 2 in Makati.

Avida posted revenues of P14.69 billion, a strong growth of 25% from P11.79 billion last year on the account of combined higher bookings and incremental completion of its condominium projects such as Avida Towers Asten 1 and 2 in Makati City, Avida Towers Turf 1, The Montane and Avida Tower Verte in Bonifacio Global City, Avida Towers Vita 2 and 3 in Vertis North, Avida Towers Riala 3 in Cebu City and its subdivision projects such as Hillcrest Estates, Woodhill Settings, and Southfield Settings in Nuvali.

Amaia generated revenues of P4.11 billion, a significant increase of 66% from P2.47 billion last year as a result of higher bookings and completion of Skies Towers in Avenida, Shaw, Sta Mesa and Cubao and Steps projects in Alabang, Sucat and Capitol Central in Bacolod City. BellaVita meanwhile reached revenues of P424 million, 7% lower than the P458 million posted last year.

The average gross profit (GP) margin of horizontal projects improved to 44% from 42% due to the higher contribution of The Courtyards and Ardia in Vermosa, Riomonte in Nuvali and Montala in Alviera while the average gross profit margin of vertical developments slightly improved to 35% from 34% due to the mix of sold units.

Office for Sale. Revenues from the sale of office spaces reached P6.26 billion, 50% higher than the P4.17 billion registered last year driven by higher completion of Alveo Financial Tower in Makati CBD, Alveo’s High Street South Corporate Plaza 1 and 2 and Avida’s Capital House and One Park Drive all located in Bonifacio Global City, Taguig. Gross profit margins of offices for sale increased to 40% from 38% driven by higher margins from High Street South Corporate Plaza Towers and Alveo Park Triangle Tower.

Commercial and Industrial Lots. Revenues from the sale of commercial and industrial lots reached P4.84 billion, 8% higher than the P4.49 billion posted last year due to higher lot sales in Arca South, Taguig and Vermosa, Cavite. Gross profit margins from Commercial and Industrial lots declined to 33% from 40% due to the higher contribution of lower margin industrial lots in Cavite and commercial lots in Arca South and Vermosa.

Reservation sales reached P94.19 billion, 12% higher than P84.32 billion last year, translating to an average of P10.5 billion in monthly sales while net booked sales registered at P66.94 billion, 16% higher than P57.93 billion last year. Ayala Land launched P53.9 billion worth of residential and office for sale projects in the past nine months of 2017.

Commercial Leasing. This includes the Company’s Shopping Centers and Office Leasing as well as Hotels and Resorts operations.

Total revenues from commercial leasing amounted to P21.07 billion, 10% higher than P19.17 billion last year.

Shopping Centers. Revenues from shopping centers reached P11.77 billion, 11% higher than P10.59 billion last year due to the improved performance of the new malls such as The 30th, Tutuban Center and UP Town Center.

Shopping Centers EBITDA margin slightly decreased to 66% from 68% due to the lower margins of newly-opened malls.

The average monthly lease rate registered at P1,108 per square meter while same mall rental growth is at 4%. The average occupancy rate for all malls is at 91% while the occupancy rate of stable malls is at 97%. Total gross leasable area (GLA) of Shopping Centers registered at 1.66 million square meters as of September 30, 2017. Subsequent to this, Ayala Malls Cloverleaf, which has 38 thousand square meters of GLA, opened last October 2017. This brings the total GLA of Shopping Centers to 1.70 million square meters as of October 31, 2017.

Offices. Revenues from office leasing reached P4.47 billion, 11% higher than P4.01 billion last year due to the stabilized occupancy of its new offices such as UP Town Center BPO, Cebu eBloc 4 and ATC BPO.

Office Leasing EBITDA margin improved to 91% from 90% given the stabilized occupancy of new offices.

The average monthly lease rate registered at P735 per square meter. The average occupancy rate for all offices is at 89% while the occupancy rate of stable offices is at 97%. Total gross leasable area (GLA) of Office Leasing registered at 909 thousand square meters as of September 30, 2017 with the opening of The 30th Corporate Center and Circuit Makati BPO Tower 2 which has 46 thousand and 27 thousand square meters of GLA, respectively.

Hotels and Resorts. Revenues from Hotels and Resorts reached P4.83 billion, 6% higher than P4.57 billion last year, due to the higher occupancy and average room rate of El Nido resorts. It increased by 6% to P8,252 per night while the REVPAR of hotels decreased by 6% to P3,598 per night mainly due to the lower occupancy of its internationally-branded hotels in Makati.

Hotels and Resorts EBITDA margin was maintained at 27% given its sustained performance from last year.

The average room rate of hotels is at P5,040 per night while the average room rate of resorts is at P13,809 per night. The average occupancy rate of hotels registered at 71% while resorts registered at 60% during the period.

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, 1,255 rooms from Seda Hotels located in Atria in Iloilo, BGC in Taguig, Centrio in Cagayan de Oro, Abreeza in Davao, Nuvali in Santa Rosa Laguna and Vertis North in Quezon City, 213 island resort rooms in El Nido Resorts in Lagen, Miniloc, Apulit and Pangulasian Islands in the province of Palawan, 62 rooms at Lio Tourism Estate in Palawan and 18 rooms in Sicogon Island Tourism Estate in Iloilo. Total rooms under the Hotels and Resorts portfolio registered at 2,509 as of September 30, 2017 with the opening 20 rooms in Balai Adlao, Lio and 12 rooms in Balay Kogon, Sicogon.

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 P51.30 billion, 5% higher than P48.70 billion last year.

Construction. Revenues from Construction reached P49.72 billion, 4% higher than P47.66 billion last year due to the increase in order book of projects within the Ayala Land Group.

Property Management. Revenues from Property Management reached P1.58 billion, a strong 51% increase from P1.05 billion last year due to the increase in managed properties from completed projects.

Blended EBITDA margins of the Services businesses improved to 10% from 8% given the effect of efficiencies and project savings.

Equity in Net Earnings of Investees, Interest, Fees, Investment and Other Income

Equity in net earnings of associates and JVs substantially increased 120% to P758 million from P345 million last year mainly from the earnings contribution from its various investments while Interest, Investment and Other Income reached P4.97 billion, 7% higher than P4.64 billion last year due to the higher interest income on money market placements.

Expenses

Total expenses registered at P71.12 billion, 14% higher than P62.21 billion last year, mainly driven by Real Estate and Hotels expenses which grew by 16% to P59.63 billion from P51.33 billion last year.

General and Administrative Expenses (GAE) grew by only 4% to P5.09 billion from P4.90 billion last year while the GAE-to-revenue ratio further improved to 5.1% from 5.7%.

Interest Expense, Financing and Other Charges meanwhile registered at P6.40 billion, 7% higher than P5.98 billion last year, mainly attributed to higher interest expense resulting from a higher average daily loan balance. The average interest rate registered at 4.7% as of the past nine months of 2017 compared to 4.5% in the same period last year.

Project and Capital Expenditure

Ayala Land spent a total of P63.2 billion for project and capital expenditures in the past nine months of 2017. Of the total capital expenditure, 49% was spent on the completion of residential projects and 28% was spent on commercial leasing projects. 17% was spent on land acquisition, new businesses, services and other investments while 6% was spent on the development of its estates.

Financial Condition

Ayala Land posted a solid balance sheet position as of the past nine months of 2017 which provides adequate capacity to support its growth plans in the coming years.

Cash and Cash Equivalents, including short-term investments and UITF investments classified as FVPL, stood at P25.79 billion resulting in a current ratio of 1.21:1.

Total Borrowings stood at P167.31 billion as of September 2017 from P159.80 billion as of December 2016. This translated to a Debt-to-Equity Ratio of 0.91:1 and a Net Debt-to-Equity Ratio of 0.77:1.

Return on Equity was at 15.6% as of September 30, 2017.

End-September 2017End-December 2016
Current ratio 11.21:11.12:1
Debt-to-equity ratio 20.91:10.93:1
Net debt-to-equity ratio 30.77:10.79:1
Profitability Ratios:
     Return on assets 45.0%5.0%
     Return on equity 515.6%14.9%
Asset to Equity ratio 63.04:13.11:1
Interest Rate Coverage Ratio 76.05.9

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 Total Net income / average total assets
5 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 2017.