To our fellow Shareholders,
We look upon 2018 with great satisfaction. Over the last decade, we did our homework, took risks, mustered the courage and put in the investments and sweat. We take pride in seeing all this come to fruition as our consolidated net income hit Php13.4B, the group’s highest to date—a robust 31% increase over 2017. Attributable net income to FDC shareholders reached Php9.8B, an annual increase of 48% over last year. In the last 10 years, your company has consistently hit record earnings and experienced a compounded annual growth rate of 18% in consolidated net income. We are confident that we will continue to grow as we believe we are just entering the optimization stage of our investment cycle.
The Philippines has provided fertile ground for growing FDC – with above 6% GDP growth for the seventh year in a row. With this environment, hard work and strategic decisions, we have grown consolidated revenues to Php73.3B, 8% higher than the previous year. While the bulk of revenues was contributed by property (43%) and banking (41%), 13% was contributed by our third leg - power, and the balance of 3% came from the sugar business.
With Philippines embedded in our name, we are intrinsically tied to its economy. Through the years, we have positioned ourselves in industries and areas that contribute to and benefit from the country’s advancement, thoughtfully taking opportunities in growth areas only when the timing is right. Whether it be housing for the affordable and middle income and overseas Filipino workers (OFWs), consumer loans for the mass affluent in a consumption-driven economy, offices for the estimated US$24B* strong business process outsourcing (BPO) industry or power for the revitalized and fast-growing Mindanao region, we have always sought the underserved and growing markets.
While we continue to be strong in our original business areas of property and financial services, we strategically invested in key industries that allowed your company to evolve into what it is today. Our initial foray into the power sector has paid off and after an auspicious start in 2016, our 405MW circulating fluidized bed (CFB) power plant is running smoothly today, supporting Mindanao’s economic growth and putting an end to crippling brownouts in the area. We entered the hospitality industry in 2010 with our first hotel in Mactan. Building up our hospitality portfolio has allowed your company to ride the rising tide of tourism growth in the Philippines. With a pipeline aiming for 5,000 keys by 2023, we continue to expand our successful home-grown Crimson and Quest brands and will be introducing the Grafik brand soon. As the lead consortium member of the Luzon International Premier Airport Development Corporation (LIPAD), we have a 42.5% participation in the O & M concession for the new eight-million passenger terminal of the Clark International Airport. This, together with our involvement with the Ninoy Aquino International Airport (NAIA) consortium, cements our commitment to the tourism sector.
FDC ended 2018 with total assets of Php590.5B and consolidated equity of Php119.7B up 11% and 10% respectively. FDC is among the country’s top 10 publicly listed conglomerates in terms of asset size, based on the most recently available data. We have maintained our strong balance sheet, ending 2018 with a debt-equity ratio of 1.06:1 and a net-debt-to-equity ratio of 0.50:1. The group maintains a long-term debt with an average maturity of 8.0 years where 99% of debt have fixed rates. Of total debt, 91% is in local currency while the balance is fully hedged hence the group has no foreign currency exposure. Prudent financial management allowed us to lock in our loans at an average rate of 5.09% earlier, avoiding the sharp spike in interest rates in 2018.
FDC’s share price reached Php11.80/share at year end 2018 and further rose to Php15.08/ share by first quarter 2019, far outperforming the Philippine Stock Exchange index (PSEi). Over the last 10 years, the PSEi had a CAGR of 15% while FDC net income attributable to equity holders had a CAGR of 20%. As of this writing, the market capitalization of FDC is among the top 30 of Philippine publicly-listed companies. Last year, FDC paid out dividends of 7.65 centavos per share, for a total payout of Php662M, equivalent to a payout rate of 10%. At present, FDC has a free float of 10%, the PSE’s allowable minimum public ownership for listed companies. In March 2019, the Board approved an equity offering to increase the public float of FDC which is expected to increase the trading volume of your shares.
It is in our DNA to be always on the lookout for opportunities to plant the seeds of growth. We identified the central Luzon corridor early on. In 2016, we found ourselves the sole bidder and eventual winner of the lease for the 201-hectare Filinvest Mimosa+ Leisure City in Clark, Pampanga. The group was thereafter granted a provisional license by the Philippine Gaming and Amusement Corporation(PAGCOR) for a casino integrated resort in Filinvest Mimosa+. Building on our experience in developing the 244-hectare Filinvest City in Alabang and tapping on synergies within the group, we have allotted more than US$200M to this project with FDC providing the leisure and hospitality components and Filinvest Land, Inc. (FLI) the retail, office and residential components. Land development and rehabilitation of the Mimosa township have been substantially completed, paving the way for further expansion.
In addition, in 2016, FLI was the pioneer joint venture partner of Bases Conversion Development Authority for a 288-hectare township in New Clark City, Tarlac. The 64-hectare Phase 1 of this mixed-use township started immediately after the land turnover and is targeted for substantial completion by the end of 2019. Phase 1 covers an industrial zone for logistics, tech and light industrial companies. Our early foray proved to be right when the Duterte Administration’s Build Build Build Program contained massive infrastructure projects clustered in the Clark area – in particular the Tutuban to Clark and Clark to Subic Rail projects, and the newly announced second runway for Clark Airport. Topping this commitment, our Clark Airport O&M initiative together with the world-acknowledged leader Changi Airport International as our technical partner will further accelerate the region’s importance
We strive for sustainable and inclusive development in the various communities where we operate. Two common themes among the various subsidiaries are education and care for the environment. Andrew Gotianun Foundation, funded by our founder’s family, has topped off the Andrew L. Gotianun Center for Integrated Technologies (ALGCIT), a technical-vocational track senior high school that aims to provide educational opportunities for the underprivileged in Visayas and Mindanao. The Php500M grant includes board and lodging for 480 live-in scholars from the region. The Filinvest City Foundation continues its yearly scholarship program for southern Metro Manila students now reaching 600 scholars annually. To promote awareness of the environmental impact and provide environmental support for the various communities, FDC Utilities, Inc. (FDCUI), FLI and the hotels participated in coastal cleanups in their respective sites while FLI continued with its annual tree-planting activities. Further, in late 2018, our hotel management joint venture, Chroma Hospitality, Inc. (CHI) launched an Anti-Plastic Pollution Program which aims to reduce plastic use in the hotels.
