Mr. Chairman, members of the Board, fellow stockholders, ladies and gentlemen, good morning.
As the global economy bounces back from the economic slowdown, companies are scurrying to take advantage of an empowered market. Competition is quick to replicate new products and innovations. Thus, the differentiating key is in creating solutions that will keep the customers happy and strengthen loyalty. Companies are increasingly looking to their customers to drive growth in such a highly competitive and fast-paced environment.
According to Harvard Business School's Ranjay Gulati, firms who focus on the customer are the most resilient even during turbulent times. Customer-centricity is a necessity for survival, especially today when customers have more choices and more information. To remain competitive, companies need to creatively deliver something of value to customers, rather than focus simply on products and sales. They need to understand not only what the customer values, but also the value the customer represents to their bottomline.
In 2010, Cebu Holdings capitalized on the favorable business atmosphere by shifting to a more bullish strategy. The year was marked by new investments and aggressive build-up and expansion, thus generating a better portfolio for your Company.
The execution of our strategy is honed with management tools like the Balanced Scorecard and the Value Delivery Chain, anchored on delivering results through value added marketing. With these we are able to maximize the value of every customer relationship – and reap long-lasting value. Value is the sum total of product attributes, price, brand equity, and more importantly, relationship with the customer.
In CHI, we have created a customer-centric culture where people development and integrated management systems are geared towards achieving customer high satisfaction, earning the loyalty of existing customers, as well as acquiring new ones. All these in turn, lead to financial performance results.
This has been employed by the Company for almost a decade now and has reaped very concrete results. This has allowed us to remain the overall market leader, as well as the market leader in the areas where we have product presence.
I am pleased to report that 2010 was a record year of business growth in CHI’s 22-year history. Your Company posted an all-time high of P406 million in consolidated net income. This was 34 percent higher than that of the previous year. Consolidated revenues, on the other hand, registered a 12 percent improvement at P1.4 billion.
2010 revenues are a mix of recurring income from leasing business and developmental projects. Fifty-eight percent was derived from retail and office leasing, 32 percent from the sale of residential and commercial lots, and 10 percent from interest and other income.
CHI’s balance sheet remains strong as the financial ratios indicate. Total assets grew by four percent, reaching over six billion pesos at year-end, while total liabilities of P1.3 billion was one percent lower than the 2009 level.
With the business environment just beginning to recover from the slowdown, we continued to implement tighter overhead control and cost reduction initiatives. Substantial cost savings were gained from implementing guaranteed maximum price contracts for major construction projects. These and other cost-saving measures have contributed significantly to margins for the year.
Our strong performance allowed us to declare cash dividends of P0.07 per share last December, while retaining earnings for planned projects of the Company. Stockholders’ equity increased by seven percent net of the total P134.4 million cash dividend paid.
The price of the CHI stocks increased from a closing of P2.50 per share in 2009 to P2.70 per share last year.
Ayala Center Cebu, continues to be the main revenue source of the Company. Last year, the mall registered total revenues of P677 million due to higher occupancy rate and sales growth. We continue to diversify the retail mix at the mall, ending the year with a 97 percent lease occupancy.
Ayala Center Cebu maintains its status as the preferred lifestyle destination in the region with an average foot traffic of almost 90,000 a day and carpark occupancy growth at seven percent compared to the previous year.
Early last year, we launched new components in the mall to address the needs of the changing market. The Active Zone, inaugurated early in the year, features sports and fitness brands for an active lifestyle. Other areas launched include the Services hub, a 3D digital cinema and the PUV Terminal.
The Terraces continues to be a favorite among Cebuanos and tourists alike with its variety of dining and lifestyle options. The Terraces ended the year with an award of recognition from the International Council of Shopping Centers for its outstanding achievement in marketing and design development.
Equity take-up of CHI in associate, Cebu Insular Hotels Inc. contributed P17.2 million to the Company’s bottomline. Cebu Insular Hotels Inc. operates the Cebu City Marriott Hotel, the premier business hotel in the city which had a 71.8 percent occupancy in 2010.
One of the major highlights of the year was the proclamation of the 50-hectare Cebu Business Park as a PEZA-accredited economic zone - the largest IT business park in the country to date. Presidential Proclamation 2053, signed in May of last year grants fiscal and non-fiscal incentives to encourage investment within the park. As a result, the Cebu Business Park experienced accelerated build-up. In 2010, gross leasable area at the business park grew by 18.5 percent to a total of almost 129,000 square meters. Five construction projects are currently underway and three more plans have been submitted for review. This will increase gross floor area significantly, attracting more business and investors to the area.
The Cebu Business Park, and Asiatown I.T. Park will see its highest activity levels ever as we intensify our operations as one of Ayala Land’s major growth centers south of Metro Manila.
Last year, your Company partnered with other Ayala Land subsidiaries to produce projects in an unprecedented pace. This was strategic to produce the needed capital for the magnitude of the development, while capitalizing on the product expertise of the various brands to bring in a wider range of options for the customer.
2010 signaled the entry of the three Ayala Land residential brands in Cebu. Avida Towers Cebu at Asiatown I.T. Park, launched in June of last year, experienced fast take-up, prompting the accelerated launch of its second tower less than three months later.
Before the year ended, we also announced the entry of Alveo and Ayala Land Premier. In partnership with Alveo Land, CHI launched Sedona Parc, which will offer 114 residential condo units attuned to a dynamic, urban lifestyle. And to complete the line-up, we also partnered with Ayala Land Premier for 1016 Residences to bring in distinctive club community living yet unseen in Cebu.
The variety of options provides Cebuanos the opportunity to find a home that suits them at the heart of Cebu’s premier business districts.
Relevant infrastructure build-up has helped spur development in Cebu. Premier seaside development Amara experienced accelerated take-up due in part to the completion of the Cansaga Bridge and the North Coastal Road, which shortens travel time by half. Amara, an Ayala Land Premier development, registered total revenues of P272.9 million. Last year, we completed the the Serenity Park, a Zen-inspired enclave, and the 3-building sports facilities complex. Together with the main clubhouse, these provide a wide range of amenities for residents and lot owners to enjoy.
Strengthening our Management Systems
To effectively deliver these products of value for our customers, we have crafted and implemented our very own integrated management system which puts together the essential aspects of our business.
Targets are set via the four quadrants of the Balanced Scorecard, which measures and monitors the Company’s progress in the financial, customer, internal business process and learning and growth areas. These are benchmarked and audited against of the triple international standards of quality, environment and health and safety.
The value delivery chain allows different teams within the organization to collaborate in the delivery of products and services. From finding out what the market wants, to product development, to marketing and sales and product delivery and even to soliciting feedback on product and service satisfaction – the customer is central to the way we do things.
Ayala Center Cebu remains the market leader in the AB market with a continued improvement in foot traffic count and carpark occupancy. Our surveys last year reflect shopper satisfaction in the mall’s services and retail offerings. Merchants also cited their appreciation for mall enhancements and programs.
Amara also leads in the high-end residential lot market with 51 percent market share. In 2010, 31 percent of the sales were from repeat buyers, while 69 percent was generated as a result of initiatives to attract new customers. Surveys conducted reflect an average of 8.7 out of 10 satisfaction rating from both internal and external customers.
Our experience in the Cebu market has taught us that our customers are very particular about quality and put a high value in relationships which they trust.
As a business, our primary commitment is to deliver quality products and services to the customer, and drive economic growth for our shareholders. As an entity within a community, it is equally important to operate responsibly in relation to society and to the environment.
Four years ago, CHI made that commitment to be more transparent about these accountabilities by using the triple bottomline framework of reporting of the Global Reporting Initiative.
As we release our fourth integrated annual and sustainability report this year, we are proud to note that this framework of reporting has helped us track our performance with a more encompassing approach, thus allowing us to set clearer targets and see other possible areas where we can improve on.
Encompassing these systems are best practices in governance which serve as our driving mechanism for sustainability. They charter the course towards ensuring the creation of value while providing for accountability and control systems commensurate with possible risks to the business.
These additional accountabilities which we have imposed on ourselves and which have become an integral part of our operations go beyond the compliances required of us as a business. This strengthens our commitment to not only do the right thing, but more importantly, to do things right. By being an example of how effective and beneficial these systems can be, we also aim to widen our circle of influence and encourage other companies to do the same.
Beyond the Bottomline
More than two decades of doing business in the communities we serve has taught us that it’s more than just the bottom line. It’s about the relationships we keep, the lives we help change, and the impact we make on the communities who have opened their doors to us.
As a property developer, a major challenge we have is to minimize, if not neutralize the impacts we have on the environment as we continue to change and enhance the physical landscape.
This responsibility has become integral to the way we do business as we try to ensure that short term returns are not at the expense of environmental stability and social development.
Our systems and regular monitoring shows that through efficient and responsible operations, the Company had even surpassed its targets in 2010 in terms of using our resources efficiently and reducing our emissions and waste.
Our employees are the key to driving success for the Company. We continue to build employee competence with skills and knowledge enhancement to increase productivity. At the same time, we ensure health and safety at the workplace and promote programs for employee wellness to help develop well-rounded individuals.
Our organization is made up of individuals who know the market, who have been trained to have the skills set to address their concerns, and who have the passion to go the extra mile for the satisfaction of a job well done. We blend together almost seamlessly, while encouraging a healthy exchange of ideas as a dynamic and responsive organization. Indeed, Team CHI is a team which I am proud to be part of.
These business initiatives and organizational strengthening, as measured against the four aspects of Balanced Scorecard, work towards making your Company a sustainable investment in the long haul. As we reap the benefits of the initiatives we started in 2010, we are confident that CHI will continue to lead the industry as the premier real estate developer in the region.
As we ride the economic upturn, CHI shall pursue land banking more aggressively in the coming years. We shall continue to expand our leasing portfolio with the redevelopment of Ayala Center Cebu. The major expansion which broke ground early this year will bring in over 36,000 square meters of additional gross leasable space.
Construction of eBloc Tower 2 at CPVDC’s Asiatown I.T. Park is also nearing completion. This 16-level building will soon add over 26,500 square meters of leasable space for BPO and IT offices. With Cebu Business Park declared as an economic zone, we will also be pursuing more projects which will address the continuing demand for office spaces for the BPO industry in this area.
We will also continue to partner with the other Ayala Land subsidiaries to further accelerate the pace of development and respond to the market demand for more residential units.
With Cebu poised to develop full-speed, the need for more sophisticated infrastructure and increased capacity of support facilities arises. As a stakeholder in Cebu’s development, we are looking at areas where we can collaborate with other sectors and contribute in enhancing the business environment.
Your Company’s plans and strategies have been aligned for the eventual implementation of the Real Estate Investment Trust or RIET. This will bring in additional capital to fuel our planned business expansion program as detailed earlier.
As we celebrate a record year in the Company’s 22-year history, we would like to thank all those who have helped us sustain the Company’s growth and even surpass targets. We would like to thank the community, our customers and our partners in business, the members of the Board of Directors for constant guidance, and our shareholders for their trust and confidence.
With your support, we confidently forge ahead in this time of opportunity with even more exciting and dynamic plans for the Company.
Thank you and good day.
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