MANILA, Philippines – The SM Investments Corporation (SM) of Henry Sy reported a net income of P12.3 billion ($279.82 million*) for the first 6 months of 2014 from the P12.7 billion ($289.01 million) it reported for the same period last year.
On a recurring basis, SM’s net income grew 11.8% to P12 billion ($273.10 million) from P10.7 billion ($243.51 million) while underlying revenues also grew 9.7% to P130.5 billion ($2.97 billion) from P119 billion ($2.71 billion).
SM’s consolidated revenues grew 7.2% to P130.9 billion ($2.98 billion) in the first half from P122.1 billion ($2.78 billion) in the same period last year.
The group reported Thursday, August 7, that its banks continued to drive profitability while the property group delivered steady growth on both top and bottom lines.
And even as competition continues to intensify, the retail business has been resilient and posting positive same store sales, and gross margins are stabilizing, the SM group 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%.
“Overall we are optimistic that we are on track for 2014,” SM President Harley T. Sy said.
Meanwhile, the total assets of SM grew 6% in the first half to P670.8 billion ($15.26 billion). As of end-June 2014, SM maintains a gearing ratio of 40% net debt to 60% equity.
In June 2014, SM issued a $350-million 10-year senior unsecured bond at a fixed rate of 4.88% per annum, a landmark transaction marking the longest-dated US dollar bond issued by SM and the company’s fourth US dollar bond issuance since 2009.
SM also raised P15 billion ($341.23 million) from a public offer of peso-denominated retail bonds with maturity of 7 and 10 years. The SM bonds are rated PRS Aaa by Philippine Rating Services Corporation, the highest rating assigned by the credit rating firm.
Banking, property businesses as profit makers
The group said its consolidated net income in 2013 included exceptional trading gains in the banking businesses, which boosted earnings of a number of banks during that period, among them BDO Unibank, Inc.
BDO Unibank recorded a net income of P11 billion ($250.26 million) compared with P14.2 billion ($323.06 million) in the first half of 2013 which reflected non-recurring trading gains. BDO’s first half core income grew 19%.
Net interest income in the first half grew 24% year-on-year and continued to be the main earnings driver at P24.7 billion ($562.09 million), primarily due to the bank’s thriving customer loan business which expanded 21% to gross P975.1 billion ($22.19 billion). Total deposits registered P1.4 trillion ($31.86 billion), or a growth of 35% year-on-year.
The SM group also reported that 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 – well above the regulatory minimum of 10% and 8.5% respectively.
Meanwhile, SM Prime Holdings, Inc (SMPHI) reported an increase in consolidated net income to 11.7% to P9.8 billion ($223.03 million) for the first half from P8.8 billion ($200.27 million) in the same period last year. Consolidated revenues grew 7.2% to P33.4 billion ($760.13 million) in the first half of 2014 from P31.2 billion ($710.06 million), year-on-year.
Real estate sales contributed 36% to total revenues at P11.9 billion ($270.82 million) in the first 6 months of 2014.
SMPHI 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. The gross margin was also 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 P3.8 billion ($86.42 million).
Rental revenues accounted for 53% of the consolidated revenues, and grew by 12.5% to P17.7 billion ($402.49 million) in 2014, from P15.7 billion ($357 million) in the same period in 2013.
The increase in rental revenue was primarily due to the new malls that opened in 2013 and 2014 and the shopping spaces added in existing malls such as SM Megamall which contributed an additional 101,000 square meters. Same-store rental growth was at 7% in the first half.
Food retail on aggressive expansion
SM retail posted a 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. 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.
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 stores nationwide through the expansion of SM malls in the provinces.
For the first 6 months of 2014, SM retail sales grew 9.1 % to P91.2 billion ($2.07 billion) and a net income of P2.8 billion ($63.64 million) from P2.9 billion ($65.91 million) last year.
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. – Rappler.com
*($1 = P43.99)
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