1Q2017 RESULTS OF OPERATIONS · branch is expecting to zero out inventory in the coming quarter....
Transcript of 1Q2017 RESULTS OF OPERATIONS · branch is expecting to zero out inventory in the coming quarter....
1Q2017 RESULTS OF OPERATIONSTHE PRESIDENT’S REPORTMay 9, 2017Makati Shangrila, Manila B
“We are willing to sacrifice growth in exchange for cash flow”
- JJ Atencio President & CEO
1Q17 REVENUES DIP 26% FROM SLOWER TONDO SALES AND PERMIT DELAYS
InPhp M 1Q17 1Q16 GrowthRate
Gross Revenue P 1,604 P 2,176 (26%)Gross Profit 935 1,230 (24%)
Operating Expense 315 375 (16%)
Net Income Before Tax 808 1,094 (26%)
Net Income After Tax 736 1,032 (29%)
Gross Profit Margin 58% 57%
Net Income Margin 46% 47%
Slower than expected sales of UDH Manila as wellas the delays in the processing of new projectpermits last year were the main causes of thedecrease in revenues for 1Q17.
Higher sales for UDH Manila is expected as we areable to deliver the first building by 3Q17 when thesales force and construction teams havenormalized. We also expect the launching of newprojects that were delayed in 2016 to finally comeon board and contribute to revenues in the nextquarters.
Net Income Margin, higher than the 40%guidance, was affected by income tax due fromUrban Deca Towers EDSA’s sales which is noteligible for BOI Income Tax Holiday incentive.
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1Q17 SALES RESERVATIONS UP 6%
Inunits/Php M 1Q2017 1Q2016 GrowthRate
Sales Reservations 1,978 1,870 6%
HousingProduction 1,508 1,988 (24%)
HousingDelivered 1,119 1,753 (36%)
HousingRevenues P1.59B P2.17B (36%)
CTSIncome P0.39B P0.34B 15%
Total RevenuesfromHousingOperations P 1.98B P2.24B (12%)
PAR 95% 96%
Strong sales reservations continue in 1Q17indicating robust demand for Deca Homesnationwide.
The delays in project launches in Davao, the lackof skilled labor for finishing for HRB in Manilaand MRB in Cebu, and the adjustedconstruction schedule in Marilao, contributed tothe drop in housing production and deliveries.
Performing account ratio (PAR) indicatingcollection efficiency year on year down by 1percentage point.
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SalesReservation 1Q17 1Q16 GrowthRate
N.Luzon 365 84 335%S.Luzon 132 299 -56%NCR 527 205 157%Iloilo 459 338 36%Cebu 155 291 -47%Davao 165 488 -66%Gensan 175 165 6%Total 1,978 1,870 6%
NORTH LUZON GROWS SALES RESERVATION BY 335% IN 1Q17
The 335% jump in North Luzon is mainlyattributed to high acceptance of the newproject in Marilao. In addition to this,DCRR gained momentum in 1Q17.
Contribution from UDH Manila helpedpush NCR sales reservation by 157%.
South Luzon, Cebu and Davao sales werelower in 1Q17 because of limited freshinventory, which will improve starting2Q17 when the delayed projects arefinally launched, and as the recentlylaunched projects gain momentum.
HDMF TAKE OUT VALUE INCREASES 105% IN 1Q17
Inunits/Php M 1Q2017 1Q2016 GrowthRate
HDMF TakeOut 914 461 98%
HDMFTakeOutValue P917M P448M 105%
CTSPurchase 534 0 na
CTS PurchaseValue P507M 0 na
The good news in 1Q17 is the record-breakingperformance of HDMF take-outs of P900Million, which now accounts for about 38% of2016 actual annual take-out.
Change in organizational structure andbusiness focus on cash flow are the maindrivers for the tremendous increase in HDMFtake-outs. As of 1Q17, another 448 unitsvalued at P446 Million have already beendelivered to HDMF, awaiting take-out.
A total of 534 accounts were purchased byBDO without recourse during the quarter withan equivalent value of P507 Million.
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HDMF TAKE-OUT IS NOW 57% OF GROSS SALES
8990’s focus on increasing HDMF take-outto increase cash generation broughtHDMF’s contribution to gross sales to 57%in 1Q17.
8990 aims to expand HDMF Take-Out toGross Sales Ratio to at least 70% by theend of 2017.
6%
23% 26% 28%
57%
0%
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20%
30%
40%
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60%
70%
2013 2014 2015 2016 1Q17
%HDMFTakeouttoSales
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Ø Change Organizational Structure fromCentralized National to 3 Main Regions.
Ø Identify projects for 100% HDMF take-out toraise HDMF level to as much as 70%.
Ø Increase manpower nationwide from 287 to370, which includes personnel for HDMFdocumentation from 45 to 67 personnel,including the hiring of two experiencedexecutives to bring more leadership in theHDMF take-out operations.
OUR ADJUSTMENTS FOR 2017
3 Main Regions (Luzon, Visayas and Mindanao)has been established to take charge of theoperations. Support groups such as Accounting,Finance, Treasury, Audit, Planning and MIS are stillon nationwide scope.
All projects except DCRR, UDH Manila and UDTEDSA, are now being sold under direct to HDMFscheme.
As of Feb 2017, nationwide manpower stands at396. Out of this headcount, 62 are part of thedocumentations team. Noel Limbaga, formerHDMF executive and Receivables Head of MoldexRealty, and Fe Ebiel, former 8990 employee incharge of Pag-IBIG take out, are now on board tolead 8990 Luzon in HDMF take-out.
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Ø Increase the number of production from 58sets of casting forms to 103 sets, therebyincreasing annual capacity from 13,920 to24,720 housing units.
Ø Increase the engineering force from 27 to 39,and establish a Quality Assurance Group toprovide technical support at the site level.
Ø Create a Central Document warehouse formore efficient storage and access of files anddocuments.
46 additional set of forms are currently beingfabricated which will be used to erect houses inUDH Marilao, DH Sta Barbara, DH Bacolod South,DH Mulig, DH Tigatto 2, DH Toril, DH Mactan Primeand DH Leganes
For 2017, each branch has at least one (1) QAEngineer. Nationwide Engineering workforce is nowat 42
4 Records Management Specialist (RMS) are alreadyon board and Records Management software bestsuited for 8990 needs has already been identified.RMS are currently working on the Process WorkFlow while waiting for the Central Documentwarehouse to be fully operational by June.
OUR ADJUSTMENTS FOR 2017
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Ø Retraining of sellers to make sure that they usethe HDMF shift as a favorable marketing tool
Ø Revision of incentive scheme which ties therelease of commission to HDMF take-outmilestones (i.e. upon submission of completeHDMF requirements and receipt of HDMFproceeds)
Ø Retraining of documentation personnel inorder to assure compliance with HDMF rules
Ø Request appraisal with HDMF for the newprojects and re-appraisal of old projects tocatch up with the price increases
Ø Review and revision of legal documents (i.e. CTS,Option Agreement, disclosures, etc.) for therelevant changes necessary due to the change inpayment scheme and turn over of unit
Ø Revision of Financial Literacy Seminar to educatebuyers on the advantages of having HDMF take-out as payment scheme of choice
Ø Discussion with HDMF personnel to ascertainthat their capacity is adequate for the expectedvolume of buyers folder submission
Ø Close coordination with the Engineering team forthe advance and by batch unit inspection byHDMF of units for take-out
HDMF SHIFT ACTIVITIES
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Davao,1%
Cebu,6%
Iloilo,34%NorthLuzon
23%
SouthLuzon4%
NCR,32%
GenSan0%
LUZON DELIVERS 659 HOMES IN 1Q17
MRB15%
HRB33%
MassHousing52%
In 1Q17, we delivered a total of 1,119units to our homeowners.
On a per region basis, housing deliverycontribution of Luzon is at 59% or anequivalent of 659 units. Visayas is at 40%mainly from our new Iloilo project whileMindanao contributed 1% due to limitedinventory.
NCR projects helped expand thecontribution to housing revenue of MRBand HRB from 14% in 1Q16 to 48% in1Q17.
Davao,1%
Cebu,7%
Iloilo,29%
NorthLuzon21%
SouthLuzon5%
NCR,37%
GenSan0%
In No. of UnitsIn Peso Value
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UNREALIZED SALES REACH 1,478 AS OF 1Q17
These unrealized sales are a combination ofincomplete unit construction and/or actual takeout from HDMF.
Of the total unrealized sales, 875 units will betaken out in 2Q17, 185 units are scheduled in3Q17 while the remaining 418 units arescheduled in 4Q17.
Branch TotalUnits
ValueMillions
North Luzon 495 730
South Luzon 61 48
NCR 550 883
Cebu 284 342
Iloilo 0 0
Davao 77 69
Gensan 11 11
Total 1,478 2,083
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RFO INVENTORY DROPS 7% IN 1Q17
RFO inventory in 1Q17 ended at 351 units,down by 7% or 27 units from 4Q16’s 378 units.
North Luzon successfully decreased its RFO by68% through efficient management ofconstruction and sales.
First MRB project in Cavite has yet to gainmomentum as its target market opt for biggerunits rather than studio units, which wasinitially offered. To date, all MRBs in Cavite offer1BR and 2BR units, which the market demands.
Gensan’s sale is improving since direct to HDMFscheme has been implemented, thus, thebranch is expecting to zero out inventory in thecoming quarter.
Branch 1Q17 4Q16 GrowthRate
NorthLuzon 78 242 (68%)
South Luzon 110 37 197%
NCR 3 0 na
Cebu 5 3 67%
Iloilo 0 0 na
Davao 11 0 na
Gensan 144 96 50%
Total 351 378 (7%)
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In Php M 1Q17 1Q16 Growth Rate
Cash, beginning balance 705 535 32%
Net cash provided by operations 711 1,085 (34%)
Total new borrowings 192 702 (73%)
Net Cash used for capital expenditure 795 1,190 (33%)
Cash balance at the end of the year 813 456 78%
8990 BORROWINGS DECLINES 73% IN 1Q17
8990 posts significant drop in net borrowingsin 1Q17 as working capital and capitalexpenditure were funded mainly through cashinflow from operations.
Internally generated funds are from take-outsfrom the Pag-IBIG Fund, purchase ofreceivables of banks, and the higher levels ofrecurring income from the CTS Portfolio.
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(3,000)
(2,500)
(2,000)
(1,500)
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2015 2016 1Q17
InPhp M
CashflowfromOperationsfrom2015to1Q17
8990 TURNS CASH FLOW POSITIVE IN 1Q17
Cash Flow from Operations hit P 711Million in 1Q17. Receivables liquidationactivities such as HDMF take-outs and CTSreceivables purchased by banks were themain drivers for the positive cash flow fromoperations.
8990 is committed to continue this trend asit targets at least P7 Billion in take-out fromHDMF and more than P2 Billion sale of CTSreceivables to Banks in 2017.
KeyPerformanceIndicators
CovenantRatios 1Q17 1Q16
CurrentRatio 1.0 2.20 1.67
Book ValueperShare - 3.38 3.08
NetDebttoEquity Ratio 1.5 1.33 0.97
AssettoEquityRatio - 2.65 2.22
AssettoDebtRatio - 1.61 1.82
DebtServiceRatio 1.25 1.98 1.45
EPS - 0.13 0.19
8990 MEETS ALL COVENANT RATIOS IN 1Q17
8990 continues to meet its bond covenantratios, in relation to its Corporate Bond issuancein July 2015, such as: (a) minimum Current Ratioof 1.0, (b) maximum Debt-to-Equity Ratio of 1.5,and (c) minimum Debt Service Ratio of 1.25.
Net Debt to Equity is expected to improve in thecoming quarters as the proceeds of thepreferred shares issuance will be used to pay offexisting debts.
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BalanceSheetHighlights(inPhp M) 1Q17 1Q16 Growth
Rate
CurrentAssets 12,960 P 9,930 31%
NoncurrentAssets 36,327 27,771 31%
TotalAssets 49,387 37,701 31%
CurrentLiabilities 5,878 5,947 (1%)
Noncurrent Liabilities 24,783 14,760 68%
TotalLiabilities 30,661 20,707 48%
Equity 18,626 16,995 10%
31% INCREASE IN ASSETS STRENGTHENS 8990 BALANCE SHEET
8990’s asset growth of 31% is mainlyattributed to new land purchases, in-housefinancing receivables and medium and highrise building work in progress inventories.
The rise in total liabilities were primarily fromborrowings related to construction activities,operating expenses and the increase inlandbank to 639 hectares.
Higher growth rate in total liabilities versustotal assets is basically due to minimal growthin equity as there were no 8990 major activityin the equities market for the year.
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8990 CTS INCOME UP 16% IN 1Q17
For 1Q17, 8990’s CTS Portfolio generatedclose to P400 Million in recurring income – a16% increase from last year, while theportfolio size has remained the same fromlast year.
Total value of 8990’s CTS Portfolio stands atalmost P21 Billion, up 7% from 1Q16. Thismarks the smallest increase in CTS since2011.
In 1Q17, 8990 was able to sell P507 Millionof its CTS Portfolio to BDO, and a migrationto HDMF of P436 Million.
1Q17 1Q16 GrowthRate
Units 21,926 21,672 1%
Value(inmillions) P20,880 P 19,500 7%
InterestIncomefromCTS P 393 P338 16%
PerformingAccountsRatio 95% 96%
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Demographic* Subdivision Condominium
Young: 88% 81%20to35YearsOld 53% 51%
36to45YearsOld 35% 30%
CollegeEducatedandLicensedProfessionals 83% 91%
GainfullyEmployed: 100% 100%OfficeWorkers 40% 51%
OFW 27% 15%
BPO 5% 16%
MinimumP26,000GrossFamilyIncome 72% 84%
PrimaryResidencePurpose 93% 75%
DECA HOMEBUYERS DEMOGRAPHICS REMAIN THE SAME
*Actualdatabasedon26,771subdivisionand4,903condobuyersprofile
8990 continues to be the home developer ofchoice for young, gainfully employed Filipinosaged 20 to 45 years old. Breaking this downfurther, millennials account for more than halfof both horizontal and vertical units sold.
Primary motivation of 8990 home buyers isstill to acquire a primary residence.
Locally employed office workers prefercondominium dwellings. BPOs, specifically, aremore inclined to purchase condo units.Meanwhile, OFWs purchase homes insubdivisions more than they do incondominium buildings.
CURRENTLANDBANK
AT639HECTARES
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Location ProjectType Area(inHA) Cost(inMillions)
Meycauayan,Bulacan DecaHomes 44.00 950,000,000.00SanMateo,Rizal DecaHomes 31.20 46,796,250.00BatasanQuezonCity DecaHomes 17.04 159,860,800.00Brgy.OldBalara,QuezonCity UrbanDecaHomes 17.60 527,622,000.00Brgy.Litex,QuezonCity UrbanDecaHomes 2.00 121,128,000.00Cubao,QuezonCity UrbanDecaTower 0.43 366,350,000.00OrtigasAve.Extension UrbanDecaHomes 13.23 2,346,421,680.62AlabangZapoteRd,LasPinasCity UrbanDecaHomes 4.80 858,965,500.00EastAsiaDrive,Filinvest,Alabang UrbanDecaTower 0.12 106,198,500.00Otis,Mendiola UrbanDecaHomes 2.80 2,100,000,000.00Yakal,Makati UrbanDecaTower 1.43 136,164,186.00
SUBTOTAL 134.65 7,719,506,916.62
CebuBusinessPark,CebuCity UrbanDecaTower 0.31 187,020,000.00Vistamar,CebuCity UrbanDecaTower 0.18 18,230,000.00ASFortuna,Banilad,CebuCity DecaHomes 1.80 339,984,000.00Mactan,CebuCity DecaHomes 39.34 897,730,500.00Sta.Barbara,Iloilo DecaHomes 105.75 532,806,774.79Leganes,Iloilo DecaHomes 25.40 152,776,200.00SanMiguel,Ilo-ilo DecaHomes 39.95 206,760,430.00Cabug,Bacolod DecaHomes 55.96 223,842,400.00Granada,Bacolod DecaHomes 62.00 177,500,000.00
SUBTOTAL 330.69 2,736,650,304.79
Quirino,DavaoCity UrbanDecaHomes 0.71 50,000,000.00Tigatto,DavaoCity DecaHomes 24.83 142,743,750.00BrgyMulig,DavaoCity DecaHomes 46.79 144,853,925.00BrgyPuan,DavaoCity DecaHomes 101.28 506,383,000.00
SUBTOTAL 173.61 843,980,675.00
GRANDTOTAL 638.95 11,300,137,896.41
LUZON
VISAYAS
MINDANAO
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Project Type TotalUnits LocationUnitstobeDeliveredfor
2017
Value(inPhp M)
TargetLaunchDate
RevisedLaunchDate
Status
DHMarilao MRB MRB 3,788 Bulacan 320 288 March March25 Onschedule
DHMulig Horizontal 7,005 Davao 380 342 June March30 AheadofSchedule
DHPaviaRR2 Horizontal 2,967 Iloilo 875 963 March March31 Onschedule
DHSta.Barbara Horizontal 10,189 Iloilo 515 232 April April15 AwaitingLicensetoSellrelease
DHMactan Prime Horizontal 6,828 Cebu 400 480 March May30 RefinementofdrainageplanforDP
UDHMactan MRB 3,507 Cebu 80 76 April May30 AwaitingECCandLTSrelease
DHSouthofBacolod Horizontal 9,044 Bacolod 520 416 April April30 AwaitingLicensetoSellrelease
UrbanDHTisa2 MRB 3,803 Cebu 124 149 September June10 AheadofSchedule
DHTalomo* Horizontal 6,800 Davao 220 209 August June30 AheadofSchedule
DHTigatto 2* Horizontal 3,749 Davao 340 323 June July15 LGUHearingforFlood-proneareas
Leganes Horizontal 3,085 Iloilo 220 220 September July30 AheadofSchedule
Total 60,765 3,994 3,698
PROJECT LAUNCHES IN 2017 ON SCHEDULE
*ChangedDHIgnatiustoDHTalomo andDHLorenzotoTigatto 2
1. 6 project launches with a total of 1,859 units• DH Sta Barbara, Iloilo launched on April 15• DH South of Bacolod, Bacolod launched on April 30• DH Mactan Prime, Cebu to be launched on May 30
2. 2,000 units in sales reservation• 50% contribution from NCR• 14% contribution from North Luzon• 13% contribution from Iloilo
3. Php1.6 Billion Gross Revenue projection in 2Q17• This will bring 1H17 Gross Revenue to Php3.2 Billion
4. Php5.2 Billion cash inflow from HDMF and CTS Purchase• Php 4.2 Billion from HDMF• Php1 Billion CTS Purchase
WHAT TO EXPECT IN 2Q17
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• UDH Mactan, Cebu to be launched on May 30• UDH Tisa 2, Cebu to be launched on June 10• DH Talomo, Davao to be launched on June 30
• 7% contribution from South Luzon• 6% contribution from Bacolod• 4% contribution from Davao and General Santos
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AWARDS 2017
BestLowCostHousingDeveloper FirstHighRiseCondoDevelopmentInMetroManila No.1DeveloperMindanaowidebyHDMF
7BranchesNorthLuzon 3
NCR 3
SouthLuzon 2
Cebu 5
Iloilo 3
Davao 3
GeneralSantos 2
Bacolod 1
PROJECTSTATUSUPDATEWehave3LaunchedProjects
Wehave14On-GoingProjectsWehave 8ProjectsforLaunching
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DECAHOMESMARILAO/URBANDECAHOMESMARILAO(MIXEDMRBANDTOWNHOUSES) NORTHLUZON
TotalNo.ofUnits: 4,606UNITSPercentofCompletion: 15 %DatetoFinish: DECEMBER2020
LAUNCHED
TotalNo.ofUnits: 7,005UNITSPercentofCompletion: 5%DatetoFinish: July2019
DECAHOMESMULIG MINDANAO
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LAUNCHED
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DECAHOMESPAVIARESORTANDRESIDENCESPHASE2 VISAYAS
TotalNo.ofUnits: 2,982UNITSPercentofCompletion: 57%DatetoFinish: November2019
LAUNCHED
TotalNo.ofUnits: 5,237UNITSPercentofCompletion: 75%DatetoFinish: DECEMBER2018
DECACLARKRESORTANDRESIDENCES NORTHLUZON
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ON-GOING
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URBANDECATOWER- EDSA NCR
TotalNo.ofUnits: 1,148UNITSPercentofCompletion: 94%DatetoFinish: JULY2017
ON-GOING
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URBANDECAHOMESCAMPVILLE NCR
TotalNo.ofUnits: 1,024UNITSPercentofCompletion: 90%DatetoFinish: September2017
ON-GOING
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URBANDECAHOMESMANILA NCR
TotalNo.ofUnits: 13,212UNITS(Totalof13Buildings)PercentofCompletion: 32%DatetoFinish: DECEMBER2020
ON-GOING
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TotalNo.ofUnits: 1,988UNITSPercentofCompletion: 23%DatetoFinish: DECEMBER2018
URBANDECAHOMESHAMPTON SOUTHLUZON
ON-GOING
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TotalNo.ofUnits: 548UNITSPercentofCompletion: 10%DatetoFinish: DECEMBER2018
URBANDECAHOMESMAHOGANY SOUTHLUZON
ON-GOING
URBANDECAHOMESH.CORTES VISAYAS
TotalNo.ofUnits: 1,400UNITSPercentofCompletion: 22%DatetoFinish: October2019
ON-GOING
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DECAHOMESPAVIARESORTANDRESIDENCESPHASE1 VISAYAS
TotalNo.ofUnits: 2,125UNITSPercentofCompletion: 95%DatetoFinish: 2018
ON-GOING
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URBANDECAHOMESTISAPHASE1 VISAYAS
TotalNo.ofUnits: 976UNITSPercentofCompletion: 99%DatetoFinish: May2017
ON-GOING
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DECAHOMESBAYWALKTALISAY3
TotalNo.ofUnits: 729UNITSPercentofCompletion: 71%DatetoFinish: December2017
VISAYAS
ON-GOING
TotalNo.ofUnits: 3,239UNITSPercentofCompletion: 99%DatetoFinish: May2017
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DECAHOMESINDANGAN MINDANAO
ON-GOING
TotalNo.ofUnits: 649UNITSPercentofCompletion: 99%DatetoFinish: May2017
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DECAHOMESCATALUNANGRANDE MINDANAO
ON-GOING
TotalNo.ofUnits: 2,778UNITSPercentofCompletion: 80%DatetoFinish: December2017
DECAHOMESGENSAN1 MINDANAO
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ON-GOING
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DECAHOMESSTA.BARBARA
TotalNo.ofUnits: 10,187UNITSPercentofCompletion: 7%DatetoFinish: July2021
VISAYAS
ON-GOING
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DECAHOMESSOUTHBACOLOD
TotalNo.ofUnits: 7,066UNITSPercentofCompletion: 2%DatetoFinish: December2020
VISAYAS
ON-GOING
DUPLEX MODEL
ROWHOUSE MODEL
ACTUAL STATUS PERSPECTIVE
ACTUAL STATUS PERSPECTIVE
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DECAHOMESMACTANPRIME VISAYAS
TotalNo.ofUnits: 3,507UNITSPercentofCompletion: 0%DatetoFinish: March2020
FOR LAUNCHING
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URBANDECAHOMESMACTAN VISAYAS
TotalNo.ofUnits: 6,828UNITSPercentofCompletion: 0%DatetoFinish: September2022
FOR LAUNCHING
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URBANDECAHOMESTISAPHASE2 VISAYAS
TotalNo.ofUnits: 3,803UNITSPercentofCompletion: 0%DatetoFinish: June2021
FOR LAUNCHING
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DECAHOMESLEGANES
TotalNo.ofUnits: 3,085UNITSPercentofCompletion: 0%DatetoFinish: September2020
VISAYAS
FOR LAUNCHING
TotalNo.ofUnits: 6,800UNITSPercentofCompletion: 0%DatetoFinish: September2023
DECAHOMESTALOMO MINDANAO
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FOR LAUNCHING