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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 three months ended 31 March 2022 and 2021

Rockwell Land Corporation (“the Group”) registered Php3,311 million in consolidated revenues, higher by 1% from last year’s Php3,266 million. Residential development accounted for 66% of the total revenues in 2022, lower than last year’s 84%.

Total EBITDA reached Php1,272 million, slightly lower than last year’s Php1,296 million driven by lower EBITDA from residential development. Overall EBITDA margin registered at 38% of total revenues, which is lower compared to last year’s 40% mainly due to higher costs. The total revenues used as basis for the EBITDA margin excludes gross revenues from the joint venture with Meralco as the latter is reported separately under “Share in Net Losses (Income) in JV”. Share in net income in the joint venture contributes 3% to the Company’s total EBITDA.

Residential development and commercial development contributed 40% and 60% to the total EBITDA, respectively.

Consolidated net income after tax registered at Php617 million, slightly lower from last year’s Php647 million. NIAT to Parent for the three months is Php524 million, 1% higher from same period last year of Php521 million.

Business Segments

Residential Development generated Php2,171 million, contributing 66% 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 Php514 million, 44% lower than the same period last year at Php925 million mainly attributable to projects with significant bookings which were significantly completed as of yearend of 2021.

Commercial Development revenues amounted to Php1,140 million, 123% higher than 2021’s Php511 million primarily due to recognition of sale of One Proscenium and improved performance of retail segment. This segment contributed 34% 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 Php367 million, 45% higher than last year’s Php253 million due to improved average rental and occupancy rate. Office Operations generated Php742 million which is equivalent to 22% of the total revenues. Office operations include office leasing, sale of office and other office revenues.


Hotel Operations, contributed 1% of the total revenues. Its revenues amounted to Php32 million and costs and expenses at Php27 million which includes housing costs for the Company’s employees. Resulting EBITDA is at Php5 million.


The segment’s EBITDA amounted to Php758 million, 104% higher from the same period last year due to recognition from sale of One Proscenium in 2022. This includes the share in net income in the joint venture amounting to Php92 million, contributing 12% to the segment’s EBITDA.

Costs and Expenses

Cost of real estate and selling amounted to Php1,705 million. The cost of real estate and selling to total revenue ratio is at 52%, higher than 2020’s 51%.

General and administrative expenses (G&A) amounted to Php411 million, 8% higher than last year mainly due to higher manpower costs, and occupancy and admin costs.

Interest Expense amounted to Php298 million, higher by 9% than last year’s Php275 million. The increase was mainly due to higher loan balance and average interest rate.

Share in Net Income (Losses) in JV associates realized share in net income of JV and associate amounted to Php94 million, higher than last year’s Php89 million. The 6% 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 Php149 million and share in net income of Php92 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 Php1.8 billion (gross of VAT) for project and capital expenditures for the three months of 2022. Bulk of the expenditures pertained to development costs, mainly that of Proscenium, Balmori Suites, The Arton, Rockwell South and The Vantage. These were funded mainly by internally generated funds.

Financial Condition

The Group’s total assets as of March 31, 2022 amounted to Php64.9 billion, slightly higher from 2021’s year-end amount of Php64.8 billion. On the other hand, total liabilities amounted to Php38.8 billion, almost the same as 2021. The increase in total assets were mainly from contract assets and other current assets.

Current ratio as of March 31, 2022 increase to 3.45x from 3.28x as of end 2021. Net debt to equity ratio is at 0.92x as of March 31, 2022, same as 2021’s yearend ratio of 0.92x.

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

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

15% decrease in Interest Income
Mainly due to sell out and completion of Proscenium and The Vantage.

27% increase in Lease Income
Due to higher average rental and occupancy rate of retail segment.

44% increase in Other Revenues
Mainly driven by recognition of management fee from Rockwell Nepo and improved performance of serviced apartments, Rockwell Club and Cinema.

8% increase in General and Administrative Expenses
Due to higher manpower and occupancy and admin costs.

9% increase in Interest Expense
Primarily due to higher loan balance and higher average interest rate.

6% increase in Share in Net Income of JV
Due to higher revenues from higher average rental and occupancy rates.

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

22% decrease in Cash and Cash Equivalents
Primarily due to CAPEX and net repayment of loans.

8% increase in Contract Assets
Primarily due to revenue recognition of One Proscenium, The Arton and Balmori Suites.

11% increase in Other Current Assets
Due to payment of prepaid taxes and commissions.

25% decrease in Other Noncurrent Assets
Due to collection of other receivables from JV partners

7% increase in Deferred Tax Liabilities
Due higher income recognition from Rockwell South & Arton.

8% increase in Pension Liability
Due to accrual of retirement expense for the quarter.

7% increase in Deposit and Other Liabilities
Due to collection from pre-selling and excess collections over recognized receivables from Mactan Villa, Balmori and Terreno South Ph3.

13% 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 three months ended March 31
  2022 2021
ROA (*) 3.8% 4.2%
ROE (*) 9.9% 10.3%
  As of March 31, 2022 As of March 31, 2022
Current ratio (x) 3.45 3.29
Debt to equity ratio (x) 1.00 1.03
Net debt to equity Ratio (x) 0.92 0.92
Asset to equity ratio (x) 2.48 2.50
Interest coverage ratio (x) 3.34 4.00


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 lower vs 2021 at 3.7% and 9.9% mainly from 5% lower consolidated net income.

Current ratio improved to 3.45x from 3.29x yearend due to lower current portion of loans payable.

Debt to equity ratio slightly decreased to 1.00x from 1.03x, but net debt to equity ratio is maintained at 0.92x, due to net repayment of loans and lower cash balance as of March 2022.

Asset to equity ratio is slightly lower at 2.48x vs 2.50x 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 three months ended 31 March 2022 and 2021

Rockwell Land Corporation (“the Group”) registered Php3,311 million in consolidated revenues, higher by 1% from last year’s Php3,266 million. Residential development accounted for 66% of the total revenues in 2022, lower than last year’s 84%.

Total EBITDA reached Php1,272 million, slightly lower than last year’s Php1,296 million driven by lower EBITDA from residential development. Overall EBITDA margin registered at 38% of total revenues, which is lower compared to last year’s 40% mainly due to higher costs. The total revenues used as basis for the EBITDA margin excludes gross revenues from the joint venture with Meralco as the latter is reported separately under “Share in Net Losses (Income) in JV”. Share in net income in the joint venture contributes 3% to the Company’s total EBITDA.

Residential development and commercial development contributed 40% and 60% to the total EBITDA, respectively.

Consolidated net income after tax registered at Php617 million, slightly lower from last year’s Php647 million. NIAT to Parent for the three months is Php524 million, 1% higher from same period last year of Php521 million.

Business Segments

Residential Development generated Php2,171 million, contributing 66% 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 Php514 million, 44% lower than the same period last year at Php925 million mainly attributable to projects with significant bookings which were significantly completed as of yearend of 2021.

Commercial Development revenues amounted to Php1,140 million, 123% higher than 2021’s Php511 million primarily due to recognition of sale of One Proscenium and improved performance of retail segment. This segment contributed 34% 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 Php367 million, 45% higher than last year’s Php253 million due to improved average rental and occupancy rate. Office Operations generated Php742 million which is equivalent to 22% of the total revenues. Office operations include office leasing, sale of office and other office revenues.


Hotel Operations, contributed 1% of the total revenues. Its revenues amounted to Php32 million and costs and expenses at Php27 million which includes housing costs for the Company’s employees. Resulting EBITDA is at Php5 million.


The segment’s EBITDA amounted to Php758 million, 104% higher from the same period last year due to recognition from sale of One Proscenium in 2022. This includes the share in net income in the joint venture amounting to Php92 million, contributing 12% to the segment’s EBITDA.

Costs and Expenses

Cost of real estate and selling amounted to Php1,705 million. The cost of real estate and selling to total revenue ratio is at 52%, higher than 2020’s 51%.

General and administrative expenses (G&A) amounted to Php411 million, 8% higher than last year mainly due to higher manpower costs, and occupancy and admin costs.

Interest Expense amounted to Php298 million, higher by 9% than last year’s Php275 million. The increase was mainly due to higher loan balance and average interest rate.

Share in Net Income (Losses) in JV associates realized share in net income of JV and associate amounted to Php94 million, higher than last year’s Php89 million. The 6% 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 Php149 million and share in net income of Php92 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 Php1.8 billion (gross of VAT) for project and capital expenditures for the three months of 2022. Bulk of the expenditures pertained to development costs, mainly that of Proscenium, Balmori Suites, The Arton, Rockwell South and The Vantage. These were funded mainly by internally generated funds.

Financial Condition

The Group’s total assets as of March 31, 2022 amounted to Php64.9 billion, slightly higher from 2021’s year-end amount of Php64.8 billion. On the other hand, total liabilities amounted to Php38.8 billion, almost the same as 2021. The increase in total assets were mainly from contract assets and other current assets.

Current ratio as of March 31, 2022 increase to 3.45x from 3.28x as of end 2021. Net debt to equity ratio is at 0.92x as of March 31, 2022, same as 2021’s yearend ratio of 0.92x.

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

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

15% decrease in Interest Income
Mainly due to sell out and completion of Proscenium and The Vantage.

27% increase in Lease Income
Due to higher average rental and occupancy rate of retail segment.

44% increase in Other Revenues
Mainly driven by recognition of management fee from Rockwell Nepo and improved performance of serviced apartments, Rockwell Club and Cinema.

8% increase in General and Administrative Expenses
Due to higher manpower and occupancy and admin costs.

9% increase in Interest Expense
Primarily due to higher loan balance and higher average interest rate.

6% increase in Share in Net Income of JV
Due to higher revenues from higher average rental and occupancy rates.

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

22% decrease in Cash and Cash Equivalents
Primarily due to CAPEX and net repayment of loans.

8% increase in Contract Assets
Primarily due to revenue recognition of One Proscenium, The Arton and Balmori Suites.

11% increase in Other Current Assets
Due to payment of prepaid taxes and commissions.

25% decrease in Other Noncurrent Assets
Due to collection of other receivables from JV partners

7% increase in Deferred Tax Liabilities
Due higher income recognition from Rockwell South & Arton.

8% increase in Pension Liability
Due to accrual of retirement expense for the quarter.

7% increase in Deposit and Other Liabilities
Due to collection from pre-selling and excess collections over recognized receivables from Mactan Villa, Balmori and Terreno South Ph3.

13% 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 three months ended March 31
  2022 2021
ROA (*) 3.8% 4.2%
ROE (*) 9.9% 10.3%
  As of March 31, 2022 As of March 31, 2022
Current ratio (x) 3.45 3.29
Debt to equity ratio (x) 1.00 1.03
Net debt to equity Ratio (x) 0.92 0.92
Asset to equity ratio (x) 2.48 2.50
Interest coverage ratio (x) 3.34 4.00


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 lower vs 2021 at 3.7% and 9.9% mainly from 5% lower consolidated net income.

Current ratio improved to 3.45x from 3.29x yearend due to lower current portion of loans payable.

Debt to equity ratio slightly decreased to 1.00x from 1.03x, but net debt to equity ratio is maintained at 0.92x, due to net repayment of loans and lower cash balance as of March 2022.

Asset to equity ratio is slightly lower at 2.48x vs 2.50x last year due higher increase in equity than total assets.