CONSOLIDATED SALES OF GOODS AND SERVICES
Sale of goods and rendering services posted a 27 percent decrease to ₱193.6 billion mainly because of the pandemic negatively affecting Ayala Land’s construction progress, residential bookings, rental waivers, and occupancy rates as well as AC Industrial’s revenues and operations.

The decrease was partially offset by partial recovery in Q3 2020 and higher revenues stemming from the consolidation of AC Energy Philippines into AC Energy and Generika and Healthway into AC Health. As a percentage of total revenue, this account is at 92 percent and 90 percent in December 31, 2020 and 2019, respectively.

REAL ESTATE
Ayala Land endured the severe impact of COVID-19 to its business operations in 2020 recording a 43 percent decline in revenues to ₱96.3 billion and a 74 percent drop in net income to ₱8.7 billion

Property development revenues were down 47 percent to ₱57.9 billion mainly due to limited construction activity resulting in lower bookings.

• Residential revenues dropped 47 percent to ₱47.8 billion.
• Office for sale revenues declined 72 percent to ₱3.5 billion.
• Commercial and industrial lots sales decreased 42 percent to ₱6.6 billion.

Residential sales reservations in 2020 reached ₱81.9 billion, 56 percent of the previous year’s level, despite the limited selling activity during the quarantine period.

• Fourth quarter sales reservations, which reached 58 percent of pre-COVID levels, totaled to ₱21.1 billion as property demand was sustained on a quarter-on-quarter basis.

Commercial leasing revenues declined 44 percent to ₱21.9 billion because of restricted mall and hotel operations and closure of resorts.

• Shopping center leasing revenues went down 59 percent to ₱9.1 billion.
• Office leasing income was sustained at ₱9.4 billion from ₱9.7 billion
• Hotels and resorts revenues decreased 56 percent to ₱3.4 billion.

Capital expenditures reached ₱63.7 billion in 2020, and was mainly spent for the completion of residential and commercial leasing assets.

Ayala Land has earmarked ₱88 billion in capital expenditures and is prepared to launch ₱100 billion-worth of residential projects in 2021 as it prepares for a V-shaped recovery in the next two to three years.

WATER
Manila Water’s net income decreased 18
percent to ₱4.5 billion in 2020 due to a one-off recognition for additional estimates for probable losses and lower contributions from domestic subsidiaries due to the impact of COVID-19. Excluding one-offs, core net income declined 22 percent to ₱5.8 billion.

• The parent company, which houses the East Zone Concession, saw net profits decline seven percent to ₱4.7 billion driven by the recognition of impairment loss in Manila Water Total Solutions, lower costs and expenses despite higher provisioning for estimated credit losses, and higher depreciation expenses.

Revenues slightly decreased two percent to ₱21.1 billion as improved billed volume in the East Zone was dragged by lower supervision fees from Estate Water.

EBITDA decreased six percent to ₱11.9 billion despite OPEX improvement as the recognition of net foreign exchange losses and provisions for probable losses weighed down on profitability.

EBITDA margin stood at 57 percent.

In December 2020, Manila Water’s consortium with French water distributor Saur Group and Saudi’s Miahona Company inked a seven-year agreement with the Kingdom of Saudi Arabia’s state-run water agency National Water Company to manage the delivery of water and wastewater services, billing and collection, customer service, and the integration and transformation of its human capital in the North West Cluster served by NWC. This initiative is among the first of the country’s plan to privatize its water infrastructure sector.

Last February 2021, Ayala, through its wholly owned subsidiary Philwater and the Razon group through Trident Water executed a share purchase agreement equivalent to the latter’s acquisition of a 39.1 percent voting stake and 8.2 percent economic stake in Manila Water.

POWER
The AC Energy group generated a net income attributable to equity holders of AC Energy’s Parent of ₱6.2 billion1 in 2020, reflecting the group’s strong performance despite the pandemic. This was a decline from ₱25 billion in the prior year, which included gains from its partial divestment in AA Thermal.

• Net income contribution from its listed subsidiary, AC Energy Corporation or ACEN, reversed to ₱2.8 billion from a net loss in the previous year on the back of higher contracted capacity and improved plant availability. ACEN now accounts for half of the group’s net income.
• Equity earnings from international assets increased 68 percent to ₱2.5 billion, supported by full-year operations of the company’s solar assets in Vietnam.
• Other income declined to ₱448 million because of the absence of significant divestment gains booked in the prior year. Other income in 2020 includes earnings from the legacy coal assets offset by bond interest expense and parent overhead.

The AC Energy group has expanded its geographical reach and currently operates in five markets, with the recent start of construction of its first project in Australia.

• ACEN has 990MW of attributable capacity in the Philippines, 45 percent of which are renewable. It aims to expand its portfolio with recently announced joint ventures with Solar Philippines and Citicore.
• The group has approximately 1,400MW of attributable capacity offshore, all of which are renewable.
  • AC Energy has more than 600MW of renewable energy capacity in Vietnam. The expansion of the Ninh Thuan solar project has recently started operations, adding 75MWdc of operating capacity to the portfolio.
  • Marking AC Energy’s first investment in Australia, the group recently announced the start of construction of the first phase of the New England Solar Farm in Uralla, New South Wales, with 521.5MWdc of gross capacity.
  • Indonesia and India have 180MW and 170MW in attributable capacity, respectively.

In January 2021, ACEN completed its stock rights offering, bringing Ayala’s effective stake in ACEN to 70 percent.

In February 2021, ACEN announced a follow-on offering at a price range of ₱6.00 to ₱8.20 per share and submitted a registration statement with the SEC for up to 2,430,248,617 common shares (primary and secondary shares with over-allotment).

INDUSTRIAL TECHNOLOGIES
AC Industrials narrowed its net loss to ₱1.8 billion in 2020 from ₱2.4 billion the previous year mainly due to improved results of IMI and MT Group as well as lower parent impairment provisions. Its Philippine automotive business remained challenged due to the negative effects of the health crisis.

IMI registered a net loss of US$3.5 million in 2020 compared to the US$7.8 million net loss it incurred in the same period the previous year. The improvement was mainly on the back of sound cost management including materials cost, factory overhead, and non-operating expenses.

• Revenues decreased nine percent to US$1.1 billion in 2020 but was trended up since the height of quarantine restrictions and surpassed pre-COVID levels in the fourth quarter. Topline increased 11 percent to US$347 million on a quarter-on-quarter basis.
• Gross profit margin improved by 30 basis points to 8.5 percent in 2020 due to lower materials cost leading to an appreciation of contribution margin. Quarter-on-quarter, it grew by 70 basis points to 10.3 percent.

AC Industrial’s MT CCON narrowed its net loss to EUR10.2 million from EUR10.4 million in the same period the previous year on the back of margin improvement from cost optimization initiatives.

AC Motors incurred a net loss of ₱886 million as demand in the local automotive space softened due to the health crisis.

SHARE IN NET PROFITS OF ASSOCIATES AND JV
Share in net profits of associates and joint ventures declined 21 percent to ₱17.6 billion due to BPI’s aggressive loan loss provisions, which was partially offset by higher net interest income and other fees. This was likewise driven by Globe’s lower mobile revenues and higher depreciation and receivable provisions partially offset by an increase in home broadband demand and remeasurement gain in Mynt. As a percentage of total revenues, this account is at eight percent in December 31, 2020 and 2019.

BANKING
BPI’s net income decreased 26 percent to ₱21.4 billion in 2020 due to the ₱28 billion in loan loss provisions it booked in anticipation of an increase in non-performing loans. The provision is 5x larger than the ₱5.6 billion allocated in the previous year.

Total revenues increased 10 percent to ₱101.9 billion because of net interest income and non-interest income growth.

• Net interest income was up 10 percent to ₱72.3 billion due to a 5.8 percent expansion in average asset base supported by a 14-basis point improvement in net interest margin, which stood at 3.49 percent.
• Non-interest income rose 11 percent to ₱29.7 billion on the back of higher securities trading gains albeit tempered by fee-based income. 1 Y2020 NIAT differs vs. the reported NIAT of ACEIC due to cut-off adjustments taken up at AC consolidated FS. Along with other cut-off adjustments, the net effect to consolidated NIAT is less than 1 percent.

Total loans declined five percent to ₱1.4 trillion primarily on soft corporate lending despite higher mortgage and microfinance loan segments, up 6.6 percent and 6.9 percent, respectively.

Total deposits grew one percent to ₱1.7 trillion with CASA deposits expanding 17 percent.

• CASA ratio stood at 79.6 percent.
• Loan-to-deposit ratio ended at 82.0 percent.

NPL ratio and NPL coverage ratio stood at 2.68 percent and 115.2 percent, respectively.

Operating expenses slightly decreased 0.4 percent to ₱48.2 billion because of lower premises and various discretionary costs.

• Cost-to-income ratio stood at 47.2 percent, a 520-basis point improvement year on year.

Total assets grew one percent to ₱2.2 trillion. Total equity amounted to ₱279.8 billion.

• Common equity tier 1 ratio stood at 16.2 percent.
• Capital adequacy ratio stood at 17.1 percent.
• Return on assets was 0.98 percent.
• Return on equity was 7.7 percent.

BPI’s early investments to bolster its digital infrastructure starting 2017, underscored by spending of at least seven percent of revenues per year, has benefitted from the surge in demand for remote banking amid the global health crisis. As of December 2020:

• Enrollments to its online/mobile platform grew 18 percent to 4.4 million from year ago levels.
• Active users increased 41 percent to 2.7 million users from year ago levels.
• Digital transactions in December accounted for 92 percent of total while branch transactions comprised only eight percent. These were 85 percent and 15 percent, respectively in the same period the previous year.

TELCO
Globe’s net income declined 16 percent to ₱18.6 billion in 2020 due to lower EBITDA and higher depreciation charges and non-operating expenses.

• Higher non-operating expenses in the period was due to a one-time impairment loss amounting to ₱4.2 billion largely from the network change out covering the full sunset of the 3G assets and the existing copper infrastructure. This was partially offset by a ₱2.3 billion gain mostly from the deemed sale of Globe’s investment in Mynt following a third-part infusion by Bow Wave and loan revaluation.

Globe’s core net income, which excludes the impact of non-recurring charges and foreign exchange and mark-to-market changes, declined 13 percent to ₱19.5 billion.

Total service revenues dipped two percent to ₱146.4 billion on softness in the mobile segment as a result of quarantine restrictions. Total data revenues accounted for 76 percent of Globe’s service revenues compared to the year-ago level of 71 percent.

Growth in demand for data was evident in the upward momentum of Globe’s mobile and home categories despite the softening in corporate due to the prevailing work-from-home setup.

• Mobile data revenues increased one percent to ₱72 billion.
• Mobile data traffic jumped 48 percent to 2,517 petabytes.
• Home broadband revenues surged 23 percent to ₱26.8 billion.
• Home broadband subscriber base increased 88 percent to 3.8 million subscribers.
• Corporate data revenue declined by three percent to ₱12.5 billion.

Operating expenses including subsidies were flat at ₱73 billion.

EBITDA declined by three percent to ₱73.5 billion as a result of lower revenues, slightly dragging EBITDA margin to 50 percent from 51 percent the previous year.

GCash maintained its status as the country’s number one finance app throughout 2020. It has reached record highs amidst the pandemic, with 33 million registered users or one in every three Filipinos. Additionally, it has seen a 3.7x increase in active users as gross transaction value exceeded the ₱1 trillion mark in December. Owing to its success, Mynt has attracted US$175 million in fresh investment capital from existing shareholders and Bow Wave in multiple tranches, with post-money valuation of the final tranches at close to US$1 billion.

Globe’s CAPEX spend grew 18 percent to ₱60.3 billion, representing 41 percent of gross service revenues and 82 percent of EBITDA. The company has allocated ₱70 billion for 2021 capital expenditures.

Despite the impact of COVID-19, Globe accelerated its cell site buildout and upgrades, fiber-to-the-home deployments, and 5G coverage. Globe was able to build close to 1,300 new cell sites or towers compared to 1,100 in the previous year. Also, the aggressive modernization of its existing network infrastructure resulted in a total of 11,529 site upgrades to 4G/LTE this year, higher than the 10,135 in 2019. Moreover, Globe deployed 5G sites in Metro Manila and in select Visayas and Mindanao cities, making 5G available in 1,045 areas in the country. These network improvements enhanced Globe’s customer experience and the Filipino digital lifestyle, addressing the challenges of the new normal.

COST AND EXPENSES
Cost of sales and services declined 24 percent to ₱144.2 billion, which was aligned with the decline in revenues. As a percentage of total costs and expenses, this account is an 82 percent and 86 percent December 31, 2020 and 2019, respectively.

BALANCE SHEET HIGHLIGHTS
Total assets rose five percent to ₱1.41 trillion from end-2019 level. Inventories increased 19 percent due to an increase in attributable to ALI’s higher real estate inventories due to lower sales amid the pandemic. Assets under PFRS 5 increased 14 percent due to MWC’s higher cash and cash equivalents and short-term investments coming from proceeds of loan availments, higher receivables resulting from credit extension of customer payment amid the pandemic and to the increase of property, plant and equipment, and service concession assets due to construction of additional facilities and concession fees. Cash and cash equivalents and short-term investments decreased 16 percent due to lower collections of subsidiaries, AC’s and ALI’s share buy-back programs, infusions to business units, new and additional investments such as the Yoma group and assets under AC Energy, and debt payments and dividend payout. These were partially offset by dividends to AC as well as loan availments of AC and proceeds of ALI on AREIT’s IPO and IMI on VIA’s IPO. These accounts comprise six percent and eight percent of total assets as of December 31, 2020 and 2019, respectively.

Total debt increased nine percent to ₱441.8 billion due to borrowings of Ayala Land for capital expenditures, buy-back of shares, and dividend payments, borrowings of AC Energy and AC Infra for operational expansion, and borrowings of parent for its investment in the Yoma group and FLL bond issuance. These were partially offset by the loan repayments of Ayala Land and IMI as well as AYC’s forex translation difference of foreign loans.

• Parent level cash stood at ₱19.9 billion.
• Net debt stood at ₱104.7 billion.
• Parent* net debt-to-equity ratio stood at 80 percent.
• Group net debt-to-equity stood at 65 percent.

Loan-to-value ratio, the ratio of its parent net debt (excluding the fixed-for-life perpetuals which have no maturity) to the total value of its assets, was at 9.2 percent.

Parent blended cost of debt at 4.5 percent ending December 2020 with average remaining life of 17.4 years.

Consolidated capital expenditure reached ₱152 billion in 2020.

Parent-only CAPEX spending stood at ₱12.1 billion, which went mostly to the newer businesses of Ayala.

For 2021, Ayala has programmed approximately ₱196 billion in group CAPEX, of which ₱11.5 billion has been earmarked under the parent to support the emerging businesses in its portfolio.