Business Process Outsourcing
Message from the Company President
Our strategy is to acquire or invest in global business process outsourcing (BPO) companies that have the potential to become a Global Top Five leader in attractive sectors and can leverage the Philippines.
All of our investee companies made progress with their growth objectives. Stream grew its revenues by 37% to US$800 million, as it completed the first full year of its merger with eTelecare, and became one of the largest global voice BPO companies. Integreon grew its revenues by 41% to US$87 million and is now the leading global provider of legal support, research and business services to law firms, financial institutions and corporations. Affinity Express grew its revenues by 15% to US$15 million and continues to be the multi-shore leader in the emerging advertising and marketing production services sector. HRMall grew its revenues by 24% to US$2.6 million and has become a leading provider of outsourced HR services in the Philippine market.
Although the global environment remained challenging in 2010, economic activity in our main target markets of the U.S. and Europe improved in the second half of the year, and LiveIt’s BPO companies experienced an improving trend in both revenues and EBITDA. On a combined basis, revenues grew to US$473 million in the second half of 2010, up 47% over second half of 2009 and 9% over first half of 2010, and EBITDA grew to US$39 million in second half of the year, up 41% over the same period the prior year and 65% over first semester of 2010.
Looking ahead to 2011, we are cautiously optimistic that the advanced economies will continue to improve moderately, which should benefit our companies. Although we expect competition to remain strong, and consider a weakening dollar to be a real risk, we expect that, overall, we will experience a continuing improvement in revenues and profitability as our companies reap the benefits of greater scale and efficiency.
Finally, we expect the ongoing trend of consolidation in the BPO sector to continue, which may result in attractive opportunities for our companies. We are also looking carefully at opportunities in the Healthcare, Finance and Accounting sectors, which are both experiencing high-growth rates and are well suited to the Philippines.
ALFREDO I. AYALA
Chief Executive Officer
In 2010, combined revenues of the BPO businesses increased by 84% to US$906 million, and combined EBITDA increased by 55% to US$63 million, primarily because of the merger between eTelecare and Stream in October 2009.
LiveIt’s share of revenues was US$274.5 million, 21% higher than in 2009, and its share of EBITDA was US$14.4 million, 11% lower than in 2009. LiveIt’s share of revenues and EBITDA was reduced in Stream because of the merger between eTelecare and Stream, and in Integreon because of the investment by Actis.
LiveIt’s net income improved to US$4.9 million versus last year’s loss due primarily to the net revaluation gain of US$37 million from Integreon and Stream.
STREAM GLOBAL SERVICES
In 2010, Stream’s revenues grew by 37% to US$800 million, reflecting the full year impact of the merger with eTelecare, which was completed in October 2009. The combination created a leading customer relationship management (“CRM”) BPO company.
Stream provides sales, customer care and technical support services to Fortune 1000 companies. Its service programs are delivered by a highly skilled multilingual workforce of over 30,000, capable of supporting over 35 languages across 50 locations in 22 countries, including the Philippines, its largest delivery location with over 10,000 employees.
Stream serves leading companies in its target markets of North America, Latin America, Asia, Europe, Africa, and the Middle East. In the past year, it won several new logo clients in the computing, telecommunications, media distribution, healthcare, and travel industries.
Stream’s commitment to quality and value has been recognized throughout the industry, making Stream one of the most honored call center service providers in the world. In 2010, Stream received recognition and awards from several of the most influential associations and media sources in the outsourcing industry, including the International Association of Outsource Professionals (IAOP), International Quality and Productivity Center (IQPC), Customer Interactions Solutions Magazine and the Asian-Oceania Computing Industry Organization (ASOCIO).
Stream's financial results improved significantly in the second half of 2010 versus the same period last year and relative to the first half of 2010. As the global economy recovered, Stream achieved higher revenues as the transaction volumes of its existing clients increased and new clinets ramped.
Integreon’s revenues grew by 41% to US$87 million in 2010. This was mainly due to the full year impact of its contract with Osborne Clarke, which is the first U.K. onshore shared services center for the legal sector launched in March 2009, its acquisition of ONSITE3 ™ in April 2009, and its acquisition of Grail Research in October 2009. These complemented its organic growth.
Integreon continues to be the leading global provider of legal support, research and business services to law firms, financial institutions and corporations with close to 2,000 associates in its U.S., U.K., India, and Philippine sites. Integreon expanded its global footprint, with new offices in Japan and China and an expanded facility in Bristol, U.K. The company also opened a state-of-theart electronic evidence laboratory in Los Angeles that augments the company’s existing industry-leading labs in New York andWashington, D.C.
Integreon achieved several key customer wins in 2010, including a 10-year multi-service contract with U.K. law firm CMS Cameron McKenna which will commence in 2011 and is the legal industry’s largest outsourcing agreement ever. Other marquee customer engagements won include deals with leading U.S. software firm Microsoft for legal support services; major U.K. law firms Foot Anstey for library and information services; Lewis Silkin for IT project consulting; and professional research services engagements with mobile communications industry organization GSMA and leading beauty company Estée Lauder.
Integreon garnered further industry recognition in 2010. Leading analyst firm Gartner recognized the company as a “Cool Vendor” in business process services; Indian research organization ValueNotes ranked the company as a pacesetter among Legal Process Outsourcing (LPO) providers; and The Black Book of Outsourcing recognized Integreon as the leading provider of Knowledge Process Outsourcing (KPO) for the fourth consecutive year. Integreon was also winner of the 2010 LPO Awards and achieved a LexisNexis Concordance Partners in Excellence Award.
In February 2010, Actis Partners, an emerging markets private equity specialist, invested US$50 million to acquire a 37.68% stake in Integreon which diluted LiveIt’s ownership stake to 56.36%.
In 2010, Affinity Express’s revenues grew by 15% to US$15 million and margins improved. It achieved leading provider status in outsourced advertising production of both print and interactive services for multi-media publishers. This was based on the company’s innovative “cloud computing” (Internet-based) workflow, bundled with speed of delivery, support, scalability and predictable client return on investments. It also expanded its roster of recognizable North American clients in all segments, with agreements that have recurring revenues and high switching costs.
To increase its market reach, Affinity Express expanded its service offerings by introducing new interactive, pre-media and editorial support services. In order to support its service expansions, it completed the first phase of its relocation into a world-class special economic zone campus in Pune, India, which complements its new facilities in UP TechnoHub in Quezon City, Philippines.
Affinity Express was also named in to the 2010 Global Services 100, which identifies the companies that define outsourcing. It is the only provider on the list which is 100% dedicated to advertising and marketing production services.
In 2010, HRMall grew revenues by 24% to US$2.6 million in 2010 largely due to the increase in employee-users from 20,000 to 27,000. HRMall also achieved improved margins.
HRMall currently provides outsourced HR services to clients across a wide variety of industry sectors. These include telecommunications, banking and financial services, utilities, BPO, real estate, retail, construction, property management, management services and high-tech manufacturing, with clients ranging from 100 to 12,000 employees, with either full-scale Enterprise Resource Planning (ERP) implementations or preconfigured Software-as-a-Service (SaaS) type solutions.
In 2010, HRMall won its first overseas contract, with one of the largest shopping mall developers, owners and managers in Asia, based in Singapore. In addition, its new HRisReady package, a preconfigured HR and Payroll solution, was piloted in two new local logo accounts.