1Q08 Performance

• In the absence of capital gains in the first quarter of this year, Ayala Corporation posted a net income of P2.6 billion, 53% lower than the same period last year. Earnings in the first quarter of 2007 included gains of P3.3 billion from the sale of shares. Excluding these gains, net income was up 11% year-on-year.
• Strong earnings from its property, telecom, water distribution, electronics, and automotive units were partly offset by lower earnings from its banking and BPO investments, resulting in a 7% decline in equity earnings. This was partly cushioned by lower cost and expenses as parent company interest and financing charges declined by 31%.
• Property subsidiary Ayala Land posted a 42% growth in net income to P1.8 billion as consolidated revenues grew by 28%. Growth was sustained across all key businesses. Revenues from residential development rose by 19% with higher sales across all brands. Ayala Land Premiere, Community Innovations, and Avida posted a 9%, 25%, and 37% revenue growth, respectively. Overall take-up of residential units rose by 17%. Shopping center revenues grew by 6% with higher lease and occupancy rates. Revenues from the corporate business segment also rose by 17% as a result of the sale of three hectares at Laguna Technopark’s expansion phase, higher office occupancy rates and rental rates. Net income during the period was enhanced by gains from the sale of shares in three of its subsidiaries early this year.
• Bank of the Philippine Islands’ (BPI) net income declined by 52% to P1.5 billion. Despite the lower operating expenses, the 26% drop in revenues trimmed profits. Net interest income dropped by 9% notwithstanding the P28 billion expansion in the average asset base. Non-interest income also fell by 46% as the rising interest rate scenario provided limited opportunities to realize securities trading gains. Last year’s income of insurance subsidiaries also included a P416 million gain from the sale of a property. Net loans were up by 14%, ahead of the industry’s 9% growth driven by the middle market, small and medium scale enterprises, and consumer segments. Housing loans was a major growth driver, growing by 26%.
• Globe Telecom’s net income increased by 32% to P3.4 billion. Net subscriber additions reached nearly 1 million putting total wireless subscribers to over 21 million by the end of the quarter. The fixed line business grew by 6%, driven by a 73% and 15% growth in broadband and corporate data revenues, respectively. Cumulative broadband subscribers increased by 86%. Globe continues to strengthen its internal capabilities to support the anticipated growth in the broadband business. EBITDA margin remains high at 64%.
• The financial performance of operating units under AC Capital was mixed. Integrated Microelectronics, Inc. (IMI), Manila Water and Ayala Automotive reported healthy earnings growth but was negated by lower earnings of the BPO units.
• IMI’s net income rose by 48% to US$9.3 million due to higher volumes and lower fixed operating expenses. Revenues increased by 13% as a result of higher volumes from key customers.
• Manila Water’s revenues increased by 16% to P2.0 billion on higher billed volume and continued improvement in non-revenue water. As a result of its continuing capex program, Manila Water connected more than 10,000 new accounts to put total service connections at over 675,000. Cost and expenses were well-contained and rose by only 4%, which put net income to P625 million, 22% higher year-on-year.
• The automotive business reflected healthy underlying demand with auto sales up 5% versus the same period last year. Revenues grew by 6% but higher expenses related to the opening of new dealership operations last year as well as higher interest expense, capped earnings growth. The auto group posted a 4% growth in net income year-on-year.
• Unlisted BPO companies Integreon and Affinity Express both registered top line and bottom line results that were ahead of expectations. Integreon’s revenues were up 49% over the prior year while Affinity Express won new contracts with two of the largest media groups in the US to service 114 newspapers and publications. Listed call center company eTelecare has not yet released its first quarter results but provided guidance during its February earnings call for 2008 revenues of $300-310 million (up 17%) and net income of $16-19 million, and first quarter revenues of $70-72 million (up 15%) and net income of $0.7 million. Margins were projected to be lower in the first quarter due to one-time Sarbanes Oxley related costs and infrastructure investments.