2020 was an unprecedented year. Our sustainability thinking, which has been long embedded in our businesses and articulated in our previous reports, enabled us to quickly make focused stakeholder decisions on how to respond to the events that accompanied the evolution of the pandemic. As a result, we were able to launch an immediate and comprehensive COVID-19 response.
We placed the health and safety of all the stakeholders in our ecosystem top priority. This was reflected in our multi-level approach: we made our employees secure by establishing alternative work arrangements, providing mass testing and reconfiguring their workplaces; we implemented extensive safety protocols for all our tenants and customers; and we assisted with nationwide distribution of health and medical equipment, built quarantine facilities and converted the Mall of Asia Arena into a mass testing facility.
We then focused on the business survival and support of our stakeholders over our own immediate profitability. This considerable and deliberate choice took the form of rental support and waivers in our property business, supplier marketing support and assistance to optimize new distribution channels for our retail partners, loan extensions and added money transfer services by our banks, group-wide donations and on the ground relief efforts for our host communities.
“We firmly believe that our own survival and long-term business growth is anchored on the shared value we create with all these our stakeholder groups.”
In a year like 2020, it has been incumbent on us to help protect and sustain all the parts of our SM ecosystem.
Despite the many challenges, we were still able to report a profitable business year that included numerous innovations and business enhancements.
Building on Years of Financial Prudence
Our many years of financial prudence and careful balance sheet management placed us in a position of strength, which enabled us to offer the support we did. Across our major businesses, we opted to use a portion of our prior year 2019 profits to ensure our and our stakeholders’ financial stability, reducing our dividend payout to half of previous years’ levels accordingly. This was combined with stringent cost focus during the lengthy mid-year period of low revenues, which was particularly felt in our mall and non-food retail businesses. As a result, none of our businesses have had to access financial markets and, as a parent and group, we have maintained our overall balance sheet strength.
Continuing Expansion despite Constraints
Despite severe business and movement restrictions, we continued to expand where conditions allowed. This was particularly the case for Alfamart, which added 258 minimart outlets, surpassing 1,000 stores. Meanwhile, our Property arm also opened two new malls in Mindanao.
Adapting to New Customer Needs and Developing Integrated Channels
We quickly adapted to our customers’ urgently evolving needs. We developed new retail delivery channels online and by phone, supported by social media campaigns and aligned with a range of practical delivery options that were supported by our malls. In banking, we ramped up our electronic channels.
While we believe in-person and in-store based shopping experiences will still be preferred by our customers for the foreseeable future, we continue to work hard to develop innovative online and offline delivery channels that are integrated into our business and enhance our customer service.
Maintaining a Long-Term view on Risk Management and Resiliency
While 2020 has been a year focused especially on addressing social needs, we maintained an overall view of our long-term risk management and resiliency. Our disaster resilience framework was utilized effectively during the eruption of the Taal Volcano in January, just weeks prior the pandemic. Our response was to provide full rehabilitation for our properties and their local environments.
We also faced a series of severe typhoons during the year. As a testament to our ongoing investment in disaster resiliency, one of our most impacted malls, SM City Marikina, remained largely unaffected by Typhoon Ulysses and was able to support relief efforts for its local community despite severe flooding and rising water levels in the area.
Cementing the Stability brought about by Good Governance
We remain committed to good corporate governance and are grateful to be recognized as a leader in this area. This year, among many citations, we were again recognized highly by the ASEAN Corporate Governance Scorecard Initiative. We were also recognized by MORS group as one of the best Community Care Companies in Asia. In Singapore we were rewarded for our excellence in sustainability reporting by The Asset Magazine, along with our bank, BDO.
We are also pleased that Sustainalytics rating agency recognized SMIC as a top global sustainability leader in our industry.
In adopting Integrated Reporting standards this year, we hope to provide a single holistic discussion of our businesses, the value they create, how they have performed and how that value is shared. In all this, we remain committed to our advocacies, to advancing the principles of the UN Global Compact and to contributing material actions towards the 17 UN Sustainable Development Goals.
“Moving forward, we continue to focus on improving the lives of our millions of Filipino customers, creating growth and enabling responsible development nationwide. We are committed to environmental responsibility and to our efforts to tackle climate change. We believe in delivering shared value, providing good governance and to acting on our responsibility as one of the leading groups of companies in the Philippines.”
In all these efforts, especially during this challenging year, my sincere gratitude goes to our many thousands of people and partners for their considerable efforts, and especially to you, our shareholders, for your unwavering support.
Frederic C. DyBuncio
President and CEO
SM Investments Corporation