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A blend of success

May 19, 2017 - Business World Special Feature By Francis Anthony T. Valentin
Nearly six decades ago, the SM that Filipinos know today was a mere shoe store on Rizal Avenue in Manila. It has evolved, almost mind-bogglingly, to one of the largest conglomerates not just in the Philippines but also in Asia, with synergistic businesses in the retail, property development and banking industries.

The transformation is the fruit of the vision of its founder, Henry Sy, Sr., according to Jose T. Sio, chairman of SM Investments Corp. (SMIC), the parent company of SM Prime Holdings, Inc. (which controls the shopping malls and property businesses), BDO Unibank, Inc., China Banking Corp. and SM Retail Group.

He recalled in a recent interview with BusinessWorld the days when SM only had two completed malls – SM City North EDSA and SM City Sta. Mesa (formerly known as SM Centerpoint) –and one under construction, whichwould soon be SM Megamall.

“Every night after office hours, he would call me up and we would go to Megamall,” he said. Mr. Sy would walk through the site as Mr. Sio trailed behind him. “By the time he finished his walking inspection, he had already so many suggestions in mind,” Mr. Sio said. “That’s the type of person he is very committed, very detailed.”
 
The SM Group that Mr. Sy has painstakingly built, together with his offsprings and a trusted non-family member like Mr. Sio, amidst a volatile political and economic landscape, continues to thrive and achieve market leadership in the industries it operates in.

“We remain optimistic about continued development in the Philippines supported by government investment plans and we will continue to prioritize expansion in underserved regions across the country,” said Mr. Sy, Sr., now the chairman emeritus, along with Henry Sy, Jr. and Teresita Sy-Coson, vice chairpersons, in a message to shareholders.

In 2016, SMIC earned consolidated revenues of P362.8 billion, up by 9% from P332.8 billion in 2015. Likewise, the group’s consolidated net income grew by 8.1% to P31.2 billion. The increase was driven by the strong performance of SMIC’s core investments. Of the total net income, 39.1% was contributed by the property arm, 37.1% by the banking arm and the remaining 23.8% by the retail arm.

In the first quarter of this year, the group posted an 8% growth in net income, from P7.1 billion to 7.7 billion. Its consolidated revenues also grew at roughly the same pace, from P78.4 billion to P84.5 billion.

“SM is off to a strong start in the first quarter with good growth and steady profit margins across our core businesses,” said Frederic C. DyBuncio, president of SMIC. “We are also pleased with recent acquisitions like our stake in 2GO Group, which will help us build our portfolio of investments to capture the high growth of the Philippine economy.”

Although the property business is SMIC’s biggest revenue generator, it hirsutismus is the retail arm that has a greater impact on the society, according to Mr. Sio, because it answers the basic needs of the people. To illustrate the extent of this impact, Mr. Sio said, “The first three words of a baby would be ‘Papa,’ ‘Mama,’ and ‘SM.’”
 
On top of raking in profits, SMIC has also been accumulating awards from different publications and organizations. Mr. Sio alone has brought the company multiple awards while he was still serving as the conglomerate’s chief financial officer. He was often named by various award-giving bodies as the best chief financial officer in the Philippines, and sometimes even in Asia. In 2016 alone, he added three more awards to his collection.

Recently, the SM Group bagged two platinum awards for Best Corporate Communications and Investor Relations and Best Governed & Most Transparent Company at the 9th Annual Global Corporate Social Responsibility (CSR) Summit & Awards held in Malaysia, and seven at the 12th Corporate Governance Asia Recognition Awards 2016, including the Asian Corporate Director Award bestowed on Harley Sy, Ms. Sy-Coson and Hans Sy.

Mr. Sio firmly believes that leadership is the one factor that determines any company’s future.
 
“Look at the leadership of a company, then you can predict where that company will be,” he said. Along with sustainable growth and profitability, SMIC is committed to maintain its transparent and trustworthy corporate governance practices that reveal itself in the way the company treats its stakeholders.

Mr. Sio said that when it comes to their investors, SM should be transparent and be able to provide them with adequate returns. The suppliers, meanwhile, must be paid on time with fair prices, but, Mr. Sio said, they ought to deliver quality merchandise in return.

“To our tenants, we should avoid direct competition with them,” he added. This is the reason why SM, Mr. Sio said, has not gone into manufacturing. “To our people, we should be fair,” Mr. Sio said, adding that they ought to be given opportunities.

The government, meanwhile, deserves to be paid the right taxes. And, finally, Mr. Sio noted that SM has social environmental sustainability responsibilities to fulfill.

Since becoming a premier conglomerate, SMIC has never encountered a serious problem, especially as regards to financing and management, Mr. Sio pointed out. “There must be something that we’re doing right,” he said.

On top of continuing the existing management, Mr. Sio said they will remain “conservative but open to opportunities,” the hallmark of the business philosophy of Mr. Sy, Sr. That openness, at least in terms of opening top management positions to the professionals who don’t have blood ties to the Sy clan, is made evident by Mr. Sio’s appointment as chairman.

Mr. Sio also pointed out that they would continue nurturing the group’s core businesses and increasing activities in its portfolio investments. They are also preparing for technological revolutions and global developments like e-commerce and the ASEAN integration.

And though these developments are redefining the ways in which modern enterprises can attain and maintain success, hard work and trustworthiness will remain any company’s best bets. Mr. Sio believes that these qualities, which Mr. Sy, Sr. demanded from him when he first joined SM, are the basic ingredients for success.
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