SM Posts PHP 12.3 Billion in Net Income in First Half

(07 August 2014. Pasay City, Philippines) SM Investments Corporation (SM) reported a net income of PHP 12.3 billion for the first six months of 2014 from the PHP 12.7 billion reported during the same period last year. Consolidated revenues grew 7.2% to PHP 130.9 billion in the first half from P122.1 billion in the same period last year.

On a recurring basis, however, SM’s net income grew 11.8% to PHP 12.0 billion from PHP10.7 billion. Underlying revenues also grew 9.7% to PHP 130.5 billion from PHP 119.0 billion. The consolidated net income in 2013 included exceptional trading gains in the Group’s banking businesses which boosted earnings of a number of banks during that period, among them BDO Unibank. 

“SM sustained its solid performance in the first half with strong underlying revenue and income growth across our core businesses. The banks continued to drive profitability while the property group delivered steady growth on both top and bottomlines. And even as competition continues to intensify, the retail business has been resilient and posting positive same store sales and gross margins are stabilizing. Overall we are optimistic that we are on track for 2014,” SM President Harley T. Sy said.

Property now accounted for 40.5% of SM’s consolidated net income. The banks accounted for 39.8% while retail contributed about 19.7%.

SM Prime Holdings, Inc. (SM Prime) reported its consolidated net income increased 11.7% to PHP 9.8 billion for the first half from PHP 8.8 billion in the same period last year. Consolidated revenues grew 7.2% to PHP33.4 billion in the first half of 2014 from PHP 31.2 billion, year-on-year.

Rental revenues accounted for 53% of the consolidated revenues, and grew by 12.5% to PHP 17.7 billion in 2014 from PHP 15.7 billion in the same period in 2013. The increase in rental revenue was primarily due to the new malls that opened in 2013 and 2014 as well as the shopping spaces added in existing malls such as SM Megamall which contributed an additional 101,000 sqm. Same-store rental growth was at 7% in the first half.

Real estate sales contributed 36% to total revenues at PHP11.9 billion in the first six months of 2014.    SM Prime sees the residential business sustaining its growth in 2014 as more condominium projects are completed and new housing projects are in the pipeline in the next 12 months.  Gross margin was higher for residential at 43% compared with 39% in 2013. 

Other revenues coming from malls, residential, commercial business, hotels and convention centers and leisure properties contributed 11% at PHP3.8 billion.

BDO Unibank, Inc. recorded a net income of PHP 11.0 billion compared with PHP14.2 billion in the first half of 2013 which reflected non-recurring trading gains.   BDO’s first half core income represents a 19% growth.

Net interest income in the first half grew 24% year-on-year and continued to be the main earnings driver at PHP 24.7 billion. This is primarily due to the bank’s thriving customer loan business which expanded 21% to gross PHP975.1 billion. Total deposits registered PHP1.4 trillion, or a growth of 35% year-on-year.

BDO continues to be well capitalized with a total capital adequacy ratio of 14.5% and common tier 1 ratio of 13.1% under the current Basel III environment. These are well above the regulatory minimum of 10% and 8.5% percent respectively.

Retail Operations

For the first six months of 2014, SM Retail sales grew 9.1 % to PHP 91.2 billion. SM Retail reported a net income of PHP2.8 billion from PHP 2.9 billion last year. SM continues to be a market leader in the Philippines with its stores nationwide. The food retail business in particular is on an aggressive expansion mode to penetrate the informal sector and both urban and rural communities. In the department store business, the SM Store will continue to introduce fresh concepts and expand its stores nationwide through the expansion of SM malls in the provinces.

At the end of the first half, SM Retail opened 8 new stores, bringing the total to 249 stores, consisting of 49 SM Stores, 40 SM Supermarkets, 41 SM Hypermarkets , 97 Savemore stores and 22 WalterMart stores.

SM is making good progress in retail with solid revenue growth of 9.1% in the first half and 16.2% quarter on quarter. SM Retail also showed positive same store sales across both food and non-food formats even as it continues its aggressive expansion plans.  It has also seen gross margins stabilizing in the last quarter. The lower net income in the first half is largely a carryover from the first quarter.
SM Balance Sheet
The total assets of SM grew 6% in the first half to PHP 670.8 billion. As of end-June 2014, SM maintains a very healthy balance sheet with a gearing ratio of only 40% net debt to 60% equity.

In June 2014, SM issued a USD350 million 10-year senior unsecured bond at a fixed rate of 4.875% per annum, a landmark transaction marking the longest-dated USD bond issued by SM and the company’s fourth USD bond issuance since 2009. 

SM also raised PHP15 billion from a public offer of peso-denominated retail bonds with maturity of seven and ten years. The SM bonds are rated PRS Aaa by Philippine Rating Services Corporation, the highest rating assigned by the credit rating firm.

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For further information, please contact:

Ms. Corazon P. Guidote
Senior Vice President for Investor Relations
SM Investments Corporation
E-mail: cora.guidote@sminvestments.com
Tel. No. 857-0117

Thursday, August 7, 2014