Mr. Chairman, honorable members of the Board, fellow stockholders, my colleagues in Cebu Holdings, ladies and gentlemen: a pleasant good morning to you all.
Last year was a challenging year for business as the global financial crisis took its toll on the various industries. Real estate, in particular, traces the growth pattern of the economy. Being a high value investment, customers tend to be more cautious about spending their money in real estate, especially during challenging times.
To be sustainable as an organization a company needs to be able to shift strategies and be flexible enough to respond to change without sacrificing quality and the satisfaction of its customers.
As the economic and physical environment changes, we firmly believe that it is high time we also effect change in the way we do things to ensure sustainable development for both the business and the communities where we operate.
To catalyze the change we want to see, we are committed to putting sustainability at the core of our business, taking into account our financial, social and environment goals.
Last year, we launched our sustainability campaign with the theme, “Catalyzing Change: Responding to the Challenges of Sustainable Development” for CHI. The theme puts forward a direct connection between the changes we need to do and the sustainable outcomes we hope to achieve.
Because of this, we are proud to say that despite the dismal economic backdrop, your Company was able to deliver above industry performance in 2009. This is evident in the continued market leadership of our products as well as the market’s enthusiastic response to our new offerings.
In 2009, CHI registered consolidated revenues of P 1.29 billion and a net income after tax of P 302.19 million, lower than the previous year levels. After-tax margin was at 23 percent compared to the previous year’s 27 percent. However, factoring out the effect of the 1.7 hectare one-time Cebu Business Park transaction in 2008, CHI exhibits an actual growth of nine percent in revenues and 18 percent in net income.
CHI’s balance sheet remains healthy and will continue to ensure sustainable growth. Total assets stood at P5.77 billion at yearend, showing a two percent increase of P114.63 million. Of total consolidated assets, P1.84 billion is classified as current, representing an increase of 17 percent from the previous year’s level.
Bank debt at yearend amounted to P275 million, lower by P55 million from the 2008 yearend balance. Thus, CHI’s solvency ratios at yearend improved as bank debt-to-equity and total debt-to-equity ratios registered at 0.07 is to one and 0.32 is to one, respectively.
Your Company declared a cash dividend of seven centavos per share or a total of P134.41 million in 2009. Total stockholders’ equity increased by four percent at yearend, net of such dividend declaration.
CHI stock prices showed an upward trend in the last three quarters of 2009, finally closing at P2.50 per share, a 60 percent increase from the 2008 price. Total shareholder return was at 63.68 percent.
Last year we sold only one lot at Cebu Business Park and one lot at subsidiary, CPVDC’s Asiatown I.T. Park. Revenue from this lot sales amounted to P137.11 million. We did not sell as many commercial lots as compared to the previous year. This is part of our strategic direction to strengthen the Company’s recurring income. With the dwindling inventory of prime land within the city, we saw the need to shift strategies as we capitalized on the value of our prime properties and ensured long-term recurring income by increasing our leasing portfolio in both retail and office.
The BPO industry will continue to be one of the main drivers of growth for Cebu. To capitalize on this, we are working towards the PEZA accreditation of Cebu Business Park to accelerate build-up within the park and further promote integrated development in the area.
At CPVDC’s Asiatown I.T. Park, we will use our existing prime properties to increase our leasing portfolio. Through Asian i-Office Properties, a partnership of CPVDC with Ayala Land, we started with eBloc Tower which was fully-leased out last year. To take advantage of the continuing demand, we will build a sequel to the eBloc Tower within the year.
We also continue to increase our offerings in the retail front to cater to market demand. Ayala Center Cebu marked 15 years in 2009 and continues to be the premier lifestyle destination in the region with its diverse mix of shopping and retail options. We are happy to note that the mall registered a positive sales growth last year despite the slowdown in economic activity. The mall generated total revenue of P 696.77 million, 19 percent higher than last year’s level. This was due to higher rental rates and sales per square meter and the full operation of The Terraces. We are also proud to note that the grand launch campaign of The Terraces also gained special recognition from the International Association of Business Communicators, winning a Philippine Quill Merit Award in Communication Management.
By the 4th quarter of last year, we also launched the Active Zone, formerly the Ayala Food and Entertainment Center. This specialty zone provides more offerings for the growing interest of Cebuanos in fitness and having an active lifestyle. By the end of 2009, the Active Zone was 75 percent leased out.
With all these enhancements to the mall, carpark usage grew by 49 percent and average daily foot traffic grew by 11 percent.
Subsidiary CPVDC’s retail project, The Walk, was 93 percent leased out after its first year of full operation in 2009. This retail facility combines a strong mix of affordable dining options and convenient services, and has become a favorite hangout at Asiatown I.T. Park.
Seaside residential subdivision, Amara, also continues to be a leader in the local high-end market segment. As of yearend, more than 40 percent of its latest phase launched in October 2009 was sold. We continue to drive the sustained market enthusiasm in Amara with innovative features at every phase. The 2nd tranche of Amara North features highly coveted horizon lots which give infinite views of the sea. Residents at this new cluster of prime lots will also enjoy close access to an existing wharf.
At the core of operations is our thrust towards sustainability. Two years ago we began documenting our performance against the triple bottom line approach of the Global Reporting Initiative standards. This puts equal emphasis on economic, social and environment initiatives. We believe that to be truly sustainable, a company has to look beyond just financial targets and see the larger picture in the context of the society where it operates.
In our Integrated Annual and Sustainability Report this year, we have almost doubled the number of indicators from 28 last year to 52 in 2009. This is largely because of the Company’s expanded economic, social and environment programs. We hope to seek third party assurance our report in the future as we move towards achieving full compliance reporting.
So passionate is our belief that we have inculcated this into our Integrated Management System which also uses the Balanced Scorecard and is benchmarked against the international ISO standards of quality, environment and health and safety. All together, this has become a template which allows us to have a more structured approach towards sustainability. This is our commitment as a company and has become a way of doing things for every employee in the organization.
The seamless integration of our systems was recognized last year with the Best in Corporate Governance Disclosure Award from the Management Association of the Philippines and the Silver Award for Corporate Governance Disclosure for Publicly-Listed Companies from the Institute of Corporate Directors.
The integration of these systems with sustainability at the core has been the foundation of your Company’s sustained growth through the years and despite the challenging economic environment.
With the interlinked management systems in place, the Company develops a sustainable development strategy to manage key challenges and identify opportunities. As a real estate company, it is also important for us to focus on managing our environmental footprint. We have initiated and measured specific strategies to manage energy efficiency and emissions, water and wastewater management, resource conservation, sustainable technologies and the environmental impact of the Company’s products and services.
The 2009 E3 (Excellence in Economy and Ecology) Award from the Philippine Chamber of Commerce and Industry has inspired us to enhance further our management systems, particularly concerning our impact to the environment within the framework of the GRI or triple bottomline reporting, and hopefully inspire other companies to do the same.
Our systems have also allowed us to maintain customer satisfaction as reflected in high survey ratings and continued leadership of our products in the markets they serve. Internally, we ensure that our employees develop as well-rounded individuals with wellness and volunteerism programs. Enhancing their career paths and thus, the sustainability of the organization, we have assessed competencies of each member of the organization. This has been our guide in re-tooling the team to equip them for the challenges of our operations.
We also continue to work with our neighboring communities and mutually learn from each other to inspire change in programs for education, entrepreneurship and the environment. Our community partnerships, such as the Solid Waste Management Program with Barangay Luz for the garbage collection of Ayala Center Cebu and CBP, have been an inspiration for public-private partnership in other areas in the country.
To catalyze the change we want to see, this has also become our advocacy. We have started and continue to influence our suppliers, our partners in business and the rest of the community in general to see this as THE way to do business. This is a very different way of doing business, but this we believe, will be most rewarding for everyone in the long term.
We forge on towards 2010 with renewed confidence in the recovering global economy. We will take bolder strides to address the changing demands of the market, while making sure that we manage risks and strengthen land and shareholder value.
At Ayala Center Cebu, we are finalizing plans to add even more leasable space with an expansion project that will complete the full circle design of the mall. This will provide additional leasable space for local and international brands to the mall’s merchandise mix.
This year will even be more rewarding as we synergize with other companies within the Ayala Group. We will forge partnerships with the other strategic business units of Ayala Land to maximize industry expertise within the group as we set up new projects and explore various markets.
We have already started, through CPVDC, to partner with the Ayala Land Businesscapes to create the eBloc Tower which was fully-leased out last year. A partnership with Avida is also underway for the development of affordable residential condominiums in Asiatown I.T. Park intended to fully complement the other amenities in the park.
This year, we will also embark on two residential condominium projects within CBP to take advantage of the emerging demand in the market. One will be here at the City Sports Club Cebu and will allow us to unlock the value of the land as well as boost the value of ownership at the club. Here, residents will enjoy a strategically located address complemented with full access to a range of leisure and sports amenities.
The other residential condominium will be at the Park Tower area, an addition to the two other towers in the enclave which have already been sold out.
As the economy bounces back from the crisis, 2010 looks to be an exciting challenge ahead. Let me take this opportunity to thank our Board of Directors, headed by our chairman Mr. Tony Aquino, for their guidance and active involvement in the Company’s affairs; the management team and our employees for the dedication and hard work; our shareholders for their confidence even in difficult times; and the rest of our stakeholders and partners in the community for the continued support.
To all of you we express our sincerest appreciation and we hope to deliver and even exceed your expectations in the years to come.
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