SM Prime continues Servicing the Nation amid Crises
(15 May 2020, Pasay City, Philippines) SM Prime Holdings, Inc. (SM Prime), recorded a consolidated net income of PHP8.3 billion in the first quarter of 2020, down by 5% compared to PHP8.8 billion in the first quarter of 2019. The Company’s consolidated revenue from January to March is PHP25.8 billion, 3% lower than PHP26.5 of the same period last year. SM Prime continues to work with the national government, various multi-sectoral groups, communities and other stakeholders to provide essential services and needs to all of its customers across the country.
“The Company’s first quarter results reflect the business disruption impact of the quarantine measures implemented last March 16, which affected primarily our leasing businesses. The residential segment has still shown strong growth in the first three months, abating the effect of revenue losses in the malls segment. The balance between our recurring and developmental income streams sustains our healthy financial position during this pandemic,” said SM Prime President Jeffrey C. Lim.
Mall Business Segment
SM Prime’s mall business, which accounts for 47% of the consolidated revenues, has temporarily closed operations since the implementation of the enhanced community quarantine (ECQ) due to Coronavirus Disease 2019 (COVID-19), except for stores that offer essential products and services.
SM Prime’s Philippine malls revenues recorded PHP11.3 billion in the first three months of 2020, 16% down from PHP13.5 billion of the same period last year. Mall rental income registered PHP10.1 billion, 12% lesser from last year’s PHP11.5 billion.
SM Prime’s China mall business which reported closure in January 25 due to the spread of COVID-19 in the region, has now all seven malls running at 80% capacity, with foot traffic gradually going back to normal since its gradual reopening from February 10 to March 11 when lockdowns in China were being lifted.
Residential Business Segment
SM Prime’s residential group, led by SM Development Corporation (SMDC), which accounts for 44% of the Company’s consolidated revenues, recorded a 23% increase in revenue in the first quarter of 2020 to PHP11.4 billion from PHP9.3 billion in the same period last year. SMDC’s reservation sales in the first quarter of 2020 amounted to PHP24.8 billion.
With available inventory of 16,000 units, equivalent to 12 months of sales, SM Prime has enough supply to cushion the effect of construction delays in the residential projects due to the ECQ.
Other Business Segments
SM Prime’s other business segments reported a consolidated revenue of PHP2.2 billion in the first three months of the year. Operating income of these businesses in the first three months of the year recorded PHP1.1 billion, 9% down from PHP1.2 billion of the same period last year. The Company’s office business segment continues to operate during ECQ with 90% of its tenants being business process outsourcing (BPO) offices, which were allowed by the Philippine’s Inter-Agency Task Force (IATF) to conduct business. Meanwhile, SM Prime’s hotels, reported the closure of Taal Vista Hotel in Tagaytay City last January 15 to 28 due to period of intense unrest of Taal Volcano. The Company’s hotels remain operational during ECQ, with some catering to BPO employees and returning overseas Filipino workers who are affected by the community quarantine measures in the country.
The declaration of COVID-19 by the World Health Organization (WHO) as a pandemic and declaration of nationwide state of calamity and implementation of ECQ measures in the areas of Luzon starting March 16 have caused disruptions in the Company's business activities, and its impact continues to evolve. Considering the evolving nature of this outbreak, the Company is continuously monitoring the situation.
SM Prime’s strategic development of integrated properties proved to be resilient as this allowed the Company to be prepared during time of crisis. With low gearing and strong residential market, the Company is able to maintain strong financial position that enables it to weather the adverse economic effects of COVID-19. Despite limited revenues, having waived PHP 8.8 billion in mall rent from March 16 to May 15, 2020, the Company has sufficient cash flow to support necessary operating expenses. All obligations for completed works are settled to support agency personnel, suppliers and contractors
Moreover, SM Group, through SM Foundation, has donated a total of PHP270 million since the implementation of ECQ. The conglomerate also constructed and turned over emergency quarantine facilities (EQF) in Metro Manila to bolster the country’s response in curbing the spread of the disease.
On preparations for business resumption, President Jeffrey C. Lim said, “We fully support the government in nation-building and pump priming the economy after the ECQ. Our topmost priority is still the safety of all our customers and people working under our developments. We ensure that proper safety measures are in place and will be implemented across all SM properties.”
SM Prime will maintain its budget of PHP 80 billion capital expenditures for 2020 to focus on projects that will deliver sustainable returns in the long term. Furthermore, the Company will continue to explore opportunistic acquisitions and/or investments.
“We believe that in crisis like this, flight to quality will be the driver for consumers and buyers, and SM has the solution and right product,” said SM Prime Chairman of the Board, Henry T. Sy, Jr.
SM Prime remains committed to being a catalyst for economic growth by delivering innovative and sustainable lifestyle cities, thereby enriching the quality of life for millions of people.