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FINANCIAL AND OPERATING HIGHLIGHTS

Management’s Discussion and Analysis of Financial Condition and Results of Operation

RESULTS OF OPERATIONS:
For the nine months ended 30 September 2022 and 2021

Rockwell Land Corporation (“the Group”) registered Php12,471 million in consolidated revenues, higher by 39% from last year’s Php8,983 million. Residential development accounted for 72% of the total revenues in 2022, lower than last year’s 84%.

Total EBITDA reached Php4,261 million, higher than last year’s Php3,306 million driven by higher EBITDA from commercial development. Overall EBITDA margin registered at 34% of total revenues, lower than last year’s 37%. The total revenues used as basis for the EBITDA margin excludes gross revenues from the joint venture with Meralco and T.G.N Realty Corporation as these are reported separately under “Share in Net Losses (Income) in JV”. Share in net income in the joint venture contributes 7% to the Company’s total EBITDA.

Residential development and commercial development contributed 47% and 53% to the total EBITDA, respectively.

Consolidated net income after tax registered at Php2,194 million, higher than last year’s Php1,875 million. NIAT to Parent for the nine months is Php2,000 million, 40% higher from same period last year of Php1,433 million.

Business Segments

Residential Development generated Php8,976 million, contributing 72% of the total revenues for the period. Bulk of the revenues came from the sale of condominium units, including accretion from interest income.


EBITDA from this segment amounted to Php1,970 million, 13% lower than the same period last year at Php2,266 million mainly attributable to projects with lower construction progress as they near full completion and higher cost incurred.

Commercial Development revenues amounted to Php3,495 million, 139% higher than 2021’s Php1,463 million primarily due to recognition of sale of One Proscenium and significant improvement in retail segment performance. This segment contributed 28% to total revenues excluding the share in the joint venture with Meralco for the Rockwell Business Center in Ortigas, Pasig City.


Retail Operations which includes retail leasing, interest income and other mall revenues generated revenues of Php1,362 million, 104% higher than last year’s Php666 million due to improved average rental and occupancy rate. Office Operations generated Php1,969 million which is equivalent to 16% of the total revenues. Office operations include office leasing, sale of office units and other office revenues.


Hotel Operations, contributed 1% of the total revenues. Its revenues amounted to Php163 million and costs and expenses at Php131 million. Resulting EBITDA is at Php32 million.


The segment’s EBITDA amounted to Php2,291 million, 118% higher from the same period last year due to recognition from sale of One Proscenium and significant improvement in retail performance. This includes the share in net income in the joint venture amounting to Php290 million, contributing 13% to the segment’s EBITDA.

Costs and Expenses

Cost of real estate and selling amounted to Php7,673 million. The cost of real estate and selling to total revenue ratio is at 62%, higher than last year’s 59% due to higher cost incurred.

General and administrative expenses (G&A) amounted to Php1,394 million, 16% higher than last year mainly due to higher serviced apartment and cinema occupancy and admin costs from improved operations and due to higher manpower related costs.

Interest Expense amounted to Php902 million, higher by 15% than last year’s Php785 million. The increase was mainly due to higher average loan balance and interest rate.

Share in Net Income (Losses) in JV associates realized share in net income of JV and associate amounted to Php297 million, higher than last year’s Php277 million. The 7% growth from last year is mainly due to RBC-Ortigas higher average occupancy and rental rate. At its 70% share, the Company generated total revenues of Php451 million and share in net income of Php290 million. The share in net income is reported net of taxes and represents the Company’s share in the operations generated by RBC.

Project and capital expenditures

The Group spent a total of Php4.9 billion (gross of VAT) for project and capital expenditures for the nine months of 2022. Bulk of the expenditures pertained to development costs, mainly that of The Arton, Proscenium, Rockwell South and Balmori Suites. These were funded mainly by internally generated funds.

Financial Condition

The Group’s total assets as of September 30, 2022 amounted to Php65.0 billion, slightly higher from 2021’s year-end amount of Php64.8 billion. On the other hand, total liabilities amounted to Php37.3 billion, slightly lower from 2021’s year-end amount of Php38.8 billion. The increase in total assets were mainly from cash and cash equivalents, contract assets and other current assets.

Current ratio as of September 30, 2022 increased to 3.47x from 3.28x as of end 2021. Net debt to equity ratio is at 0.74x as of September 30, 2022, lower compared to 2021’s year-end ratio of 0.92x.

Causes for any material changes (+/- 5% or more) in the financial statements

Statement of Comprehensive Income Items – Six Months 2022 vs. Six Months 2021

39% increase in Real Estate Sales
Mainly due to higher sales booking from projects Balmori Suites, One Proscenium and Mactan projects.

58% increase in Lease Income
Due to higher average rental and occupancy rate of retail segment.

79% increase in Other Revenues
Mainly driven by improved performance of Aruga serviced apartments, Rockwell Club and Cinema.

50% increase in Cost of Real Estate
Due to higher cost recognition from Balmori Suites and One Proscenium following higher revenue recognition.

16% increase in General and Administrative Expenses
Due to higher serviced apartment and cinema costs from improved performance and higher manpower related costs.

12% increase in Selling Expenses
Due to higher sales commissions from higher sales booking, and due to higher manpower related costs.

15% increase in Interest Expense
Primarily due to higher average loan balance and interest rate.

7% increase in Share in Net Income of JV
Due to higher revenues from higher average rental and occupancy rates of RBC Ortigas.

Statement of Financial Position items – September 30, 2022 vs. December 31, 2021

27% increase in Cash and Cash Equivalents
Primarily due to collection of receivables.

60% decrease in Trade and other receivables
Primarily due to collections from Proscenium and 32 Sanson.

12% decrease in Real estate inventories
Primarily due to cost recognition of One Proscenium, Balmori Suites and Mactan project.

12% increase in Advances to contractors
Primarily due to advances made for projects 8 Benitez, Mactan, Balmori Suites and Nara.

19% increase in Other Current Assets
Due to payment of prepaid taxes and commissions

38% increase in Contract assets
Primarily due to revenue recognition from new sales and project accomplishments.

6% decrease in Property and equipment – net
Primarily due to depreciation and reclassification to real estate inventories.

28% decrease in Other Noncurrent Assets
Due to collection of other receivables from JV partners

8% decrease in Deferred tax assets
Due to reclassification to income tax expense.

13% increase in Trade and other payables
Due to increase in accrued expense for project development costs, Output VAT and Retention payable.

10% decrease in interest-bearing loans and borrowings
Due to payments made for the nine months of 2022.

5% decrease in Deferred Tax Liabilities
Due lower income recognition vs collections from Proscenium and 32 Sanson.

23% increase in Pension Liability
Due to accrual of retirement expense for the nine months of 2022.

7% increase in Deposit and Other Liabilities
Due to higher excess collections over recognized receivables from Mactan Villa, 32 Sanson and 8 Benitez Suites.

9% decrease in Non-controlling interests
Due to subsidiary’s preferred shares redemption offset by share in net income of minority shareholders.

Key Performance Indicators

As indicated For the nine months ended September 30
  2022 2021
ROA (*) 4.5% 3.9%
ROE (*) 10.9% 9.9%
     
  As of September 30, 2022 As of September 30, 2021
Current ratio (x) 3.47 3.32
Debt to equity ratio (x) 0.87 0.98
Net debt to equity Ratio (x) 0.74 0.86
Asset to equity ratio (x) 2.34 2.51
Interest coverage ratio (x) 5.30 3.15


Notes:
(1) ROA [Net Income/Average Total Assets]
(2) ROE [Net Income/ Average Total Equity]
(3) Current ratio [Current assets/Current liabilities]
(4) Debt to equity ratio [Total interest bearing debt / Total Equity]
(5) Net debt to equity ratio [(Total Interest bearing debt)-(Cash and cash equivalents) / Total Equity]
(6) Asset to equity ratio [Total Assets/Total Equity]
(7) Interest coverage ratio [EBITDA/Interest Payments]
* ROA and ROE are annualized figures

ROA and ROE are higher vs 2021 at 4.5% and 10.9% mainly from 17% higher consolidated net income.

Current ratio improved to 3.47x from 3.30x yearend due to lower current portion of loans payable.

Debt to equity ratio decreased to 0.87x from 1.03x. Net debt to equity ratio decrease to 0.74x from 0.92x, due to net repayment of loans.

Asset to equity ratio is slightly lower at 2.34x vs 2.44x last year due higher increase in equity than total assets.

Financial and Operating Highlights

FINANCIAL AND OPERATING HIGHLIGHTS

Management’s Discussion and Analysis of Financial Condition and Results of Operation

RESULTS OF OPERATIONS:
For the nine months ended 30 September 2022 and 2021

Rockwell Land Corporation (“the Group”) registered Php12,471 million in consolidated revenues, higher by 39% from last year’s Php8,983 million. Residential development accounted for 72% of the total revenues in 2022, lower than last year’s 84%.

Total EBITDA reached Php4,261 million, higher than last year’s Php3,306 million driven by higher EBITDA from commercial development. Overall EBITDA margin registered at 34% of total revenues, lower than last year’s 37%. The total revenues used as basis for the EBITDA margin excludes gross revenues from the joint venture with Meralco and T.G.N Realty Corporation as these are reported separately under “Share in Net Losses (Income) in JV”. Share in net income in the joint venture contributes 7% to the Company’s total EBITDA.

Residential development and commercial development contributed 47% and 53% to the total EBITDA, respectively.

Consolidated net income after tax registered at Php2,194 million, higher than last year’s Php1,875 million. NIAT to Parent for the nine months is Php2,000 million, 40% higher from same period last year of Php1,433 million.

Business Segments

Residential Development generated Php8,976 million, contributing 72% of the total revenues for the period. Bulk of the revenues came from the sale of condominium units, including accretion from interest income.


EBITDA from this segment amounted to Php1,970 million, 13% lower than the same period last year at Php2,266 million mainly attributable to projects with lower construction progress as they near full completion and higher cost incurred.

Commercial Development revenues amounted to Php3,495 million, 139% higher than 2021’s Php1,463 million primarily due to recognition of sale of One Proscenium and significant improvement in retail segment performance. This segment contributed 28% to total revenues excluding the share in the joint venture with Meralco for the Rockwell Business Center in Ortigas, Pasig City.


Retail Operations which includes retail leasing, interest income and other mall revenues generated revenues of Php1,362 million, 104% higher than last year’s Php666 million due to improved average rental and occupancy rate. Office Operations generated Php1,969 million which is equivalent to 16% of the total revenues. Office operations include office leasing, sale of office units and other office revenues.


Hotel Operations, contributed 1% of the total revenues. Its revenues amounted to Php163 million and costs and expenses at Php131 million. Resulting EBITDA is at Php32 million.


The segment’s EBITDA amounted to Php2,291 million, 118% higher from the same period last year due to recognition from sale of One Proscenium and significant improvement in retail performance. This includes the share in net income in the joint venture amounting to Php290 million, contributing 13% to the segment’s EBITDA.

Costs and Expenses

Cost of real estate and selling amounted to Php7,673 million. The cost of real estate and selling to total revenue ratio is at 62%, higher than last year’s 59% due to higher cost incurred.

General and administrative expenses (G&A) amounted to Php1,394 million, 16% higher than last year mainly due to higher serviced apartment and cinema occupancy and admin costs from improved operations and due to higher manpower related costs.

Interest Expense amounted to Php902 million, higher by 15% than last year’s Php785 million. The increase was mainly due to higher average loan balance and interest rate.

Share in Net Income (Losses) in JV associates realized share in net income of JV and associate amounted to Php297 million, higher than last year’s Php277 million. The 7% growth from last year is mainly due to RBC-Ortigas higher average occupancy and rental rate. At its 70% share, the Company generated total revenues of Php451 million and share in net income of Php290 million. The share in net income is reported net of taxes and represents the Company’s share in the operations generated by RBC.

Project and capital expenditures

The Group spent a total of Php4.9 billion (gross of VAT) for project and capital expenditures for the nine months of 2022. Bulk of the expenditures pertained to development costs, mainly that of The Arton, Proscenium, Rockwell South and Balmori Suites. These were funded mainly by internally generated funds.

Financial Condition

The Group’s total assets as of September 30, 2022 amounted to Php65.0 billion, slightly higher from 2021’s year-end amount of Php64.8 billion. On the other hand, total liabilities amounted to Php37.3 billion, slightly lower from 2021’s year-end amount of Php38.8 billion. The increase in total assets were mainly from cash and cash equivalents, contract assets and other current assets.

Current ratio as of September 30, 2022 increased to 3.47x from 3.28x as of end 2021. Net debt to equity ratio is at 0.74x as of September 30, 2022, lower compared to 2021’s year-end ratio of 0.92x.

Causes for any material changes (+/- 5% or more) in the financial statements

Statement of Comprehensive Income Items – Six Months 2022 vs. Six Months 2021

39% increase in Real Estate Sales
Mainly due to higher sales booking from projects Balmori Suites, One Proscenium and Mactan projects.

58% increase in Lease Income
Due to higher average rental and occupancy rate of retail segment.

79% increase in Other Revenues
Mainly driven by improved performance of Aruga serviced apartments, Rockwell Club and Cinema.

50% increase in Cost of Real Estate
Due to higher cost recognition from Balmori Suites and One Proscenium following higher revenue recognition.

16% increase in General and Administrative Expenses
Due to higher serviced apartment and cinema costs from improved performance and higher manpower related costs.

12% increase in Selling Expenses
Due to higher sales commissions from higher sales booking, and due to higher manpower related costs.

15% increase in Interest Expense
Primarily due to higher average loan balance and interest rate.

7% increase in Share in Net Income of JV
Due to higher revenues from higher average rental and occupancy rates of RBC Ortigas.

Statement of Financial Position items – September 30, 2022 vs. December 31, 2021

27% increase in Cash and Cash Equivalents
Primarily due to collection of receivables.

60% decrease in Trade and other receivables
Primarily due to collections from Proscenium and 32 Sanson.

12% decrease in Real estate inventories
Primarily due to cost recognition of One Proscenium, Balmori Suites and Mactan project.

12% increase in Advances to contractors
Primarily due to advances made for projects 8 Benitez, Mactan, Balmori Suites and Nara.

19% increase in Other Current Assets
Due to payment of prepaid taxes and commissions

38% increase in Contract assets
Primarily due to revenue recognition from new sales and project accomplishments.

6% decrease in Property and equipment – net
Primarily due to depreciation and reclassification to real estate inventories.

28% decrease in Other Noncurrent Assets
Due to collection of other receivables from JV partners

8% decrease in Deferred tax assets
Due to reclassification to income tax expense.

13% increase in Trade and other payables
Due to increase in accrued expense for project development costs, Output VAT and Retention payable.

10% decrease in interest-bearing loans and borrowings
Due to payments made for the nine months of 2022.

5% decrease in Deferred Tax Liabilities
Due lower income recognition vs collections from Proscenium and 32 Sanson.

23% increase in Pension Liability
Due to accrual of retirement expense for the nine months of 2022.

7% increase in Deposit and Other Liabilities
Due to higher excess collections over recognized receivables from Mactan Villa, 32 Sanson and 8 Benitez Suites.

9% decrease in Non-controlling interests
Due to subsidiary’s preferred shares redemption offset by share in net income of minority shareholders.

Key Performance Indicators

As indicated For the nine months ended September 30
  2022 2021
ROA (*) 4.5% 3.9%
ROE (*) 10.9% 9.9%
     
  As of September 30, 2022 As of September 30, 2021
Current ratio (x) 3.47 3.32
Debt to equity ratio (x) 0.87 0.98
Net debt to equity Ratio (x) 0.74 0.86
Asset to equity ratio (x) 2.34 2.51
Interest coverage ratio (x) 5.30 3.15


Notes:
(1) ROA [Net Income/Average Total Assets]
(2) ROE [Net Income/ Average Total Equity]
(3) Current ratio [Current assets/Current liabilities]
(4) Debt to equity ratio [Total interest bearing debt / Total Equity]
(5) Net debt to equity ratio [(Total Interest bearing debt)-(Cash and cash equivalents) / Total Equity]
(6) Asset to equity ratio [Total Assets/Total Equity]
(7) Interest coverage ratio [EBITDA/Interest Payments]
* ROA and ROE are annualized figures

ROA and ROE are higher vs 2021 at 4.5% and 10.9% mainly from 17% higher consolidated net income.

Current ratio improved to 3.47x from 3.30x yearend due to lower current portion of loans payable.

Debt to equity ratio decreased to 0.87x from 1.03x. Net debt to equity ratio decrease to 0.74x from 0.92x, due to net repayment of loans.

Asset to equity ratio is slightly lower at 2.34x vs 2.44x last year due higher increase in equity than total assets.