We look back at 2022 as a period of recovery and taking deliberate measures to do well in our chosen segments and markets. As a conglomerate, Filinvest Development Corporation (FDC) specifically focuses on the middle market which we believe remains to be underserved but has tremendous growth opportunities in the Philippines. This strategy serves us well not only financially but also has positive social impacts on the customers we serve.
The Philippine macroeconomy provided a solid backdrop for FDC’s recovery, registering a 7.6 percent gross domestic product (GDP) growth in 2022. This surpassed the government’s own growth assumption of 6.5 to 7.5 percent. The expansion was broad based, with all the major production sectors registering positive growth, despite the increase in international and domestic commodity prices. Lifting the economy was a consistently high domestic demand, driven by strong household consumption that was fueled by improving labor and employment conditions, and stronger growth in overseas Filipino remittances.
It is against these conditions that our business units were able to realize a formidable performance in 2022. FDC reported a net income attributable to equity holders of the parent company of P5.7 billion in 2022, driven by a robust topline growth. Revenues and other income rose by 13 percent to P71.1 billion resulting from a recovery across all the major businesses. Together with the cost containment efforts, EBITDA expanded by 5 percent to P21.0 billion. The slight miss in net income from the P6.1 billion of the previous year was only because of the 153 percent higher provision for income tax due to the one-time tax benefit arising from the CREATE law in 2021 for the real estate subsidiaries.
FDC’s banking and financial services subsidiary, EastWest Bank
(EW), delivered a net income contribution to the group of ₱4.4
billion in 2022, higher than the ₱4.3 billion in 2021. EW
generated a net income surge of 42 percent in 2022 not
considering the one-time gain from the sale of its
hold-to-collect investments in 2021. This growth was driven by
the improvement in core revenues brought about by the build-up
of fixed-income securities and the increase in loan releases
during the second half of 2022. The steady increase in the
levels of loans and securities has increased the earning
capacity to almost back to pre-pandemic levels.
The
real estate business likewise recovered with the resumption of
construction activities and the launch of new projects in
2022. FDC’s real estate business, composed of listed
subsidiary Filinvest Land, Inc. (FLI) and Filinvest Alabang,
Inc. (FAI), contributed ₱4.9 billion in net income before tax
to the group in 2022, 15 percent higher than the ₱4.3 billion
in the previous year. Revenues from the residential segment
rose by 11 percent to ₱13.3 billion as a result of
construction progress. Mall and rental revenues saw an
improvement of 15 percent to ₱6.7 billion with the gradual
reduction of rental concessions, reinstatement of escalation
rates and increased mall occupancy levels. Net income after
tax from the real estate business hit ₱4.1 billion.
The
power subsidiary, FDC Utilities, Inc. (FDCUI), contributed a
net income of ₱2.2 billion in 2022 which is equivalent to a 6
percent improvement from the previous year. The net income
growth was on the back of revenues that rose by 37 percent to
₱12.9 billion. The Retail Electricity Supply business was also
able to increase its contracted capacity by 7.5 MW despite a
very competitive and challenging environment.
Unsurprisingly,
the hospitality business also benefited from the reopening of
the economy. Hotel operations under Filinvest Hospitality
Corporation (FHC) saw a rebound in revenues of 60 percent to
₱1.9 billion in 2022 buoyed by the steady resurgence of
tourism. Average room rates increased across the seven
properties while occupancy rates were higher for Crimson
Boracay as well as Quest in Cebu and Tagaytay.
FDC
ended 2022 with total assets of P687.6 billion and
consolidated equity of P165.7 billion, up by 2 percent and 3
percent respectively. FDC remains to be among the country’s
top 10 publicly listed conglomerates in terms of asset size,
based on most recent available data. FDC has adequate
resources to pursue growth opportunities having a comfortable
debt to-equity ratio of 0.83:1. Of total debt, 92 percent is
in local currency while the balance is fully hedged hence the
group has no foreign currency exposure. Prudent financial
management allowed us to lock in our loans earlier, cushioning
us from the sharp spike in interest rates in 2022.
The last decade was a foundational and capacity building
decade for FDC as a parent company of the many subsidiaries
under the Filinvest group. We witnessed a decade of strong
growth registering a compounded annual growth rate (CAGR) of
19 percent and 21 percent in terms of revenues and net income,
respectively, from 2009 to 2019. This was unfortunately
interrupted by a crisis of unexpected proportions. The
COVID-19 pandemic proved once again our survival instinct.
History
will show that we used the time of the pandemic to our
advantage. It gave us a breather to stop, rethink and
reorganize.
Coming from the throes of this period, this decade will be
built on new leadership capabilities in both FDC and across
the subsidiaries. We look upon the next decade as one of
transformation and change - led by younger leadership,
formed by new mindsets, inspired by ESG goals, and
facilitated by the new digital world.
We welcomed
key executives to occupy the most senior posts in our
subsidiaries in 2022 as a signal of change. In EastWest
Bank, a new leadership team was formed with the appointment
of Jerry Ngo as CEO and the promotion of Jacqueline
Fernandez to President. Their joint task is to bring EW’s
financing products to the next level. In FLI, the position
of President was handed over to Tristan Las Marias, an
organic and veteran talent who has steered FLI towards
greater heights with his contribution to FLI’s growth in the
Visayas and Mindanao region, and later in Luzon.
The
new leadership, supported by Filinvest’s wide ranging
capacities and resources, lays solid ground for growth in
the coming decade.
For our engines, we have an
extensive residential land bank of 1,866 hectares and
commercial land bank which can produce 1.2 million square
meters gross leasable area going forward. This will provide
the fuel to grow and ensure the continuity of the property
business.
Our investments in the Clark Corridor,
where we have first mover advantage, have regained traction.
In 2022, the Industrial and Logistics unit of FLI held a
groundbreaking ceremony in New Clark City for its
ready-built facilities while the newest co-living facility,
The Crib, started its operations within the Mimosa complex.
Both present new business models for the Filinvest
group.
The newly refurbished Mimosa Plus Golf
Course clubhouse under FHC opened its doors to its guests.
The Clark International Airport (CRK), which supports our
businesses in Clark, also unveiled a new terminal building
in 2022. FDC is the lead consortium member, with a 42.5
percent participation, in Luzon International Premier
Airport Development Corporation (LIPAD) that has secured the
O&M concession for the new eight-million passenger
terminal of the Clark International Airport. This, together
with the line-up of hotel projects in Baguio, Mactan, Bohol
and five other major tourist destinations, will benefit from
the expected growth in the tourism sector.
Under
the leadership of Juan Eugenio Roxas, FDC Misamis, with its
existing 161 megawatts (MW) available capacity, will provide
an opportunity for income growth as it is seen to greatly
benefit from the Mindanao-Visayas grid connection slated in
June 2023, and cushion the power shortage expected in the
Visayas and Luzon regions. On top of this, we secured
several wins in 2022. The joint venture business with Engie
Services Philippines won a 10-MW project, thus expanding our
renewable energy business. FDCUI, in close coordination
with the Cotabato sugar plant, also won a 3.4-MW biomass
contract under the government's Green Energy Auction
Program.
We have transformed FDC to support the growth of our
subsidiaries in the areas of mergers and acquisitions, talent
management, financial and risk management, customer centricity
and digital innovation.
We are pleased to have
crafted a sustainability framework that will guide us in our
journey. This is something that has meaning for us and is
aligned with our mission, our history, and what we have
strived to accomplish in the recent past. We will put the
focus of our sustainability efforts on three main areas: being
green, being inclusive and being resilient. This framework
challenges us to be on our toes and to be always ready for
what the future brings.
We look forward to 2023 with reasonable optimism as we take on
new growth opportunities. We will maintain our strategic
direction towards establishing synergies across our different
business units and explore new but allied to the segments
where we are currently invested in. We will strive for
continued growth and value creation, anchoring ourselves on
the strong foundation we have built over the years.
As
we chart a new path for the evolution of FDC, we thank our
fellow board of directors, management and all our employees
for the malasakit and work ethic that make our plans
a reality. We also thank our shareholders, partners, and
customers for the continued trust and support. Your faith
gives us the confidence to expand the legacy that was built by
our founders – our parents, Andrew and Mercedes Gotianun -
many decades ago. We will carry on with our purpose of
empowering Filipinos to attain their dreams.
