President's Report 2010

President's Report 2010
2010 Regular Annual Stockholders’ Meeting

Mr. Chairman, honorable members of the Board, fellow stockholders, colleagues, ladies and gentlemen, good afternoon.

IT and business process outsourcing is one of the two industries that kept Cebu afloat during the recent global financial crisis. In a way, we actually benefited from multinational companies downsizing and moving part of its operations to more cost-effective locations.

This fueled the continuing demand for office space in a facility that could provide uninterrupted support to the 24/7 operations of many of these companies.

Being a pioneer in the IT industry in Cebu, your Company’s flagship project, Asiatown I.T. Park was at a prime position to take advantage of this opportunity. We saw the potential in this industry as early as the year 2000 and began harnessing what is today a world-class I.T. facility.

We believe that the Philippines is poised for global leadership in business process outsourcing, thanks in large part to the professionalism of the Filipino knowledge worker. Cebu, in particular, combines all the elements of an investment haven - talent, location and a favorable business environment. Harnessing this kind of potential presents numerous strategic opportunities for CPVDC to create truly innovative real estate products and support services.

Growth in this industry is evidenced by build-up at Asiatown I.T. Park. The 12-storey mid-rise eBloc Tower and Skyrise 3 were completed in 2009. This brings the total leasable area at the I.T. park to more than 127,644 square meters. eBloc Tower was fully-leased out last year to leading multi-national companies, NCR Cebu Development Center Inc. and JP Morgan Chase Bank N.A.

As of the end of 2009, there were 12 buildings in Asiatown I.T. Park which is home to 71 locators, representing 70 percent of Cebu’s BPO industry. These include some of the biggest names in the IT and BPO industry like NEC Telecom Software, IBM Philippines and Epson Software and Microsoft.

Customer care and contact centers generate many of the jobs thus, fueling the local economy with higher disposable income. At Asiatown I.T. Park, these companies include Aegis PeopleSupport, eTelecare Global Solutions, Qualfon, Xlibris Philippines and Convergys. Other major locators in Asiatown I.T. Park are Bombardier Transportation, Dash Engineering, SPI Technologies and ACS of the Philippines.

These companies generated a total of over 13,000 jobs as of the end of 2009. We are now able to generate more jobs for higher value services. This translates to higher spending power among the working population, providing the much needed impetus in a time of economic challenge.

Support services to compliment this growing industry continue to grow as well. Last year, your Company sold one commercial lot at phase two of Asiatown I.T. Park which contributed P 97.3 million to total revenue. This lot will soon be the site of affordable residential condominiums intended to fully complement the other amenities within the IT park. This residential project will be executed in a partnership between your Company and Avida Land.

After its first full year of operations in 2009, retail center, The Walk retains its unique charm and popularity with a steady stream of patrons – a mix of BPO workers, executives, families, teenagers, and tourists – foreign and local alike. The Walk was 93 percent leased out as of yearend 2009. This retail facility combines a strong mix of affordable dining options and convenient services, making it the favorite hangout at Asiatown I.T. Park.

Rental income from modular units at eOffice One, and retail center, The Walk, contributed P 55.9 million and P 16.9 million, respectively.

In light of the economic environment we managed costs and overhead, resulting in a seven percent decrease in general and administrative expenses compared to last year’s level.

In all, your Company generated total revenue of P 217.9 million in 2009. Though this is relatively lower than the previous year’s performance, this is just the initial effect as the Company shifts strategy from short-term bulk revenue to long-term recurring income.

Net income reached P115.1 million for the year, with after-tax margin improving to 53 percent from 50 percent of last year.

Your Company remains to have a strong financial position with total assets increasing by P40.0 million to P1.387 billion at year-end, 26 percent of which is current. Current ratio thus improved to 6.33 is to one. On the other hand, debt-to-equity ratio improved to 0.11 is to one with liabilities only at P138.2 million at the end of the year.

Last year, CPVDC paid dividends of 10 centavos per share or a total of P94.0 million. Net of dividends declared, stockholders’ equity increased by two percent to P1.249 billion by year-end.

With closing stock price increasing to P1.82 per share at the end of 2009 from P1.26 in 2008, total shareholder return for 2009 was at 51.05 percent.

Your Company moves forward with exciting plans for 2010. With the dwindling inventory of prime land within the city, we are holding on to our inventory and developing projects within these properties to ensure appreciation of land and shareholder value.

To help stabilize the Company’s cash flows and net income during difficult periods, we are shifting our strategy to grow our recurring income base by further expanding our leasing operations.

During the last quarter of 2009, CPVDC already started horizontal development of phase two of Asiatown I.T. Park. The remaining undeveloped land within the I.T. Park will be the Company’s major source of growth in office leasing revenues as CPVDC turns its strategy towards building offices to cater to IT and IT-enabled locators while keeping ownership of the land for future value appreciation.

With the eBloc Tower fully-leased out, we shall also start another vertical development within the year to address the industry's continuing demand for more leasable space. The Company is also finalizing negotiations for the possible expansion of Asiatown I.T. Park.

As we take advantage of the economic upturn, we will be strengthening our competencies in leasing and property management, while continuing to market Asiatown I.T. Park as the ICT and BPO address this side of the globe.

We are also happy to note that more than just a business hub, Asiatown I.T. Park has spurred convergence and social interaction among Cebuanos this side of the city. At any time of the day, colleagues, families and friends get together at The Walk or the different shops and dining outlets inside the I.T. Park. The tree-lined streets and organized traffic flow make the park an ideal venue within the city for an early morning stroll or a sunset jog. With a restriction of retaining at least 20 percent of all lots for open space or greenery, Cebuanos can be assured that Asiatown will retain its character as a ‘park’ despite the aggressive build-up.

Like mother company, Cebu Holdings, we have put sustainability at the core of CPVDC’s operations. Your Company continues to be certified to the three ISO/OHSAS international standards for quality, environment and health and safety, having successfully passed the certification audit in February of last year. We also recently passed a surveillance audit last week and successfully transitioned to the new ISO 9001:2008 standard for quality.

This year, we release our inaugural Integrated Annual and Sustainability Report for the Company which documents our performance against the Global Reporting Initiative (GRI) – Third Generation (G3) guidelines. We are at B Level reporting covering 52 indicators on the economic, social and environment aspects.

Our effort to improve our systems and ensure sustainability of the organization, has gained recognition from esteemed organizations. Your Company’s 2008 annual report was recognized as the third runner up in last year’s Best Annual Report Awards of the Management Association of the Philippines. In the same awards, It also received a special citation as the most-improved annual report, having the highest jump in the scorecard ratings compared to the previous year’s results.

In May of last year, CPVDC also earned the Gold award for the 2008 Corporate Governance Scorecard for publicly-listed companies given by the Institute of Corporate Directors, Philippine Stock Exchange and Ateneo de Manila Law School.

CPVDC’s commitment towards corporate governance aims to ensure accountability, fairness and transparency in the Company’s relationship with its shareholders.

All these efforts solidify our commitment to ensure sustainability of the Company beyond financial targets. We remain well-positioned for the future and are firmly committed to deepening our portfolio through new initiatives while enhancing the value of CPVDC to our various stakeholders. We shall continue to improve our systems and operations to continue to harness the potential, not only of the Company and its projects, but of the society where it operates as well.

I would like to thank our Board of Directors, led by Mr. Antonino Aquino, for their wisdom and guidance in steering the path for the Company; my colleagues in the organization for their dedication and their drive to keep up with the break-neck speed of innovation in this industry; and our partners and the Cebuano community which has been supportive of our vision from the very start.

We would especially like to thank you, our shareholders, for your continued confidence in our capacity to constantly innovate and bring this Company’s potential to even greater heights.

Thank you and good afternoon.