Five-point recovery strategy bared at AGI’s first-ever virtual stockholders’ meeting

Alliance Global Group, Inc. (AGI), in light of the pandemic and current quarantine restrictions, and with a keen focus on the health and safety of its shareholders, executives, employees and other stakeholders, held its 2020 Annual Stockholders’ Meeting virtually on August 6. The meeting was streamed live via Zoom to registered participants.

Dr. Andrew L. Tan, chairman, AGI, set the tone of the meeting by underlining the conglomerate’s strength in constantly transforming the way it does business—keeping pace with advances in technology while innovating operations and making them future-ready.

AGI chief executive officer Kevin L. Tan then presented a comprehensive report, through a pre-recoded video, detailing the Group’s achievements last year and its short- and medium term recovery plans moving forward.

Put on the spotlight was AGI’s five-point strategy, which is aimed at the conglomerate’s recovery.

Strategy #1: Sustainability and Well-being
Megaworld’s township model is the best for sustainable development. People living in townships felt more safe and secure, and were also able to cope better with the pandemic as all their needs are found within the community. The company’s Grade-A, LEED-certified buildings, branded as “Healthy Buildings,” command premium rent in the market, while its lifestyle malls fit the township lifestyle very well. An important factor in this sustainability strategy is the wellness and well-being of employees. AGI has vowed to continue to take care of its 85,000-strong workforce all over the Philippines, as it believes that its people are the most precious resource, and its major partner in steering the Group toward a faster recovery.

Strategy #2: Earnings Diversity
AGI is diversifying and expanding its revenue mix to provide for future growth without sacrificing earnings stability. Recurring income, the ever-rising demand for province-based properties, and the increasing share of international sales in the real estate and liquor markets give AGI access to various growth drivers.

Strategy #3: Digitalization
AGI’s initial dive into a digitalization strategy two years ago has started to pay off as its applicability has been expanded to various aspects of the Group’s operations—from digital selling platforms (for both Megaworld and McDonald’s, as well as Emperador through Boozy.ph) and automated experiences in the realm of property management (First Oceanic Property Management’s IFAE), to cashless and contactless transactions and partnerships with third-party shopping and delivery suppliers. This year, Megaworld is creating AGILE Digital Ventures, a wholly-owned subsidiary that will spearhead the company’s investments into digital innovations and technology. With a start-up capital of US$5 million dollars, its first start-up project is called Pickaroo, an all-in-one, on-demand premium lifestyle app that will be rolled out on August 18.

Strategy #4: Financial Flexibility
AGI has been aggressive in its expansion projects in recent years, but it has remained focused on growing the business within its core competence. It exercised financial prudence, keeping its borrowings within comfortable levels. In view of the pandemic, AGI has decided to preserve its cash, thereby cutting its capex this year by almost half to P42 billion from its original budget of P78 billion. It is focusing on projects that are already committed for completion this year. It will delay the initiation of new projects some time next year when the situation improves.

Strategy #5: Adaptability
Backed by its healthy balance sheet, AGI has remained nimble and ready to take advantage of opportunities when they present themselves, either in terms of land banking or business acquisitions. The respective histories of the Group’s subsidiaries showcase big moves—from the creation of the township by Megaworld, and AGI’s entry to the quick service restaurant industry through McDonald’s, to the launch of Resorts World Manila, as well as the acquisition of Whyte and Mackay and Fundador—all proof of AGI’s culture of adaptability.

According to Tan: “Our Group is ready to face the future with optimism and confidence, as we hurdle the current challenges and strengthen our leadership position in this new reality. Whether through difficulty or opportunity, we are unified in our commitment to provide long-term value for our stakeholders, and to take care of the different communities that are the fabric and lifeblood of our nation.”

Watch the full speech of Mr. Kevin L. Tan during the AGI annual stockholders’ meeting in this video:

Below are the other salient points in Tan’s presentation.

Performance milestones

  • AGI delivered a stellar performance last year, as it registered record consolidated revenues of P180 billion and net income of P17.7 billion, reflecting increases of 15% and 17%, respectively.
  • AGI’s major subsidiaries delivered strong results in 2019. Megaworld, which celebrated its 30th year anniversary in 2019, posted an unprecedented level in revenues of P67 billion, up 17% year on year, driven by the 18% increase in rental revenues and 12% improvement in real estate sales. The company also hit record reservation sales of P149 billion. Net income amounted to P17.9 billion, some 18% higher year on year.
  • Travellers International Hotel Group Inc. saw a 39% surge in gross revenues to P34.4 billion with the recovery in gross gaming revenues, which went up by 38% to P27.6B, while its non-gaming revenues grew 44% to P6.8 billion. The Grand Wing continued to ramp up its premium/VIP operations, while its Garden Wing enjoyed increased patronage from its mass customers. EBITDA during the year grew by 42% year on year.
  • Emperador, Inc. posted a 10% improvement in consolidated revenues to P51.6 billion, driven by the increasing share of its premium brandy and whisky products, affirming its premiumization strategy, which is a global phenomenon. During the year, Fundador Supremo 18 YO was voted as the best brandy in the world by The International Wine and Spirits Competition. Core net income stood at P7.0 billion.
  • Golden Arches Development Corporation (GADC), or McDonald’s Philippines, a strategic partnership between AGI and the George Yang Group, also clocked in a strong 13% improvement in sales revenues to P32.0 billion as same-store sales grew 5.8%. GADC also continued with its store expansion, bringing its total store count to 669 stores throughout the country, of which 142 are NXTGEN stores. Net income surged 15% to P1.9 billion.
  • As a group, AGI held its first-ever “SustainAGIlity Summit” in February this year, rallying its companies to develop business strategies around the principles of sustainability with clear commitments to scale up AGI’s efforts in support of the UN’s Sustainable Development Goals.

Tan then discussed the initiatives of AGI related in response to the pandemic. He said, “Despite the shutdown in most sectors, several of our business units remained opened to serve our valuable customers and communities in which we operate in.”

Response to the various impacts of COVID-19

  • Through strict safety protocols, 24/7 surveillance system and various digital capabilities, any major outbreaks within Megaworld townships have been successfully controlled and averted to date.
  • Megaworld Premier Offices continued to operate during the community quarantine as BPO tenants remained operational even during the strictest quarantine period.
  • Megaworld Lifestyle Malls also registered some recovery, with 65% of mall tenants now operational. Intensive health protocols have been put in place, ensuring the safety of mall visitors. It is also developing new e-commerce channels to reach out to customers, on top of offering available contactless options for purchases.
  • In the second quarter of this year, Megaworld recorded reservations sales of P17 billion, all of which were transactions done through its online sales platform and mostly contributed by its international sales team. This brought first half sales take-up to P38 billion.
  • Hotels may have suffered booking cancellations due to travel restrictions, but in-city hotels all remained in operation to provide lodgings to BPO employees, repatriated Filipinos, and some stranded foreign visitors. Resort hotels have slowly reopened, but cater primarily to local guests. The hotels have also continued to develop new service offerings to improve occupancy rates, including an E-Concierge mobile app, ‘Work-From-Hotel’ packages, virtual meeting packages, and special food delivery boxes.
  • BPO companies had to provide their work-on-site employees with lodgings within 2 kilometers from their workplace. This was a need that was subsequently fulfilled by the hotels and residential condominiums within Megaworld’s townships.
  • As bars are still temporarily closed, most liquor consumption is done off-premise. Emperador caters mostly to these off-premise customers. The international sales of whisky in Russia, Europe, and some parts of Indo-China during the second quarter pulled Emperador’s profits up by almost 24%, offsetting the slowdown in the domestic market.
  • Only 38% of GADC’s McDonald’s stores remained operational initially. By mid-May, GADC had successfully ramped up its total store openings to up to 81% of existing outlets. About 95% of McDonald’s stores are now operational to serve customers, with one of the highest standards of health and safety protocols among all food and beverage operators.
  • Most of AGI’s workforce continues to work from home, but those that have gone back to the office have been assigned to satellite locations to minimize health and safety risks. Some business units implemented a stay-in township policy, where frontline employees may opt to stay in on a two-week rotation. Employees were also given proper COVID-19 testing to ensure a fit-to-work status.

COVID-19 aid, donations and initiatives

During his presentation, Tan also mentioned AGI’s four-part response to the pandemic, which came in the form of cash and kind: (1) help for the frontliners; (2) food donations to the underprivileged; (3) support for COVID-19 testing initiatives and (4) ongoing support of displaced overseas Filipino workers.

  • AGI has donated a total of P1.1 billion for various projects in support of the efforts of the government and other organizations to protect Filipinos from the further spread of the virus.
  • Megaworld International, which is present in over 60 countries in Europe, Middle East, North America and Asia Pacific, mobilized its own outreach efforts. It initiated food drives and the distribution of personal protective equipment and relief goods.
  • AGI remains supportive of its workforce, providing them with support and health coverage, as well as virtual trainings to help them navigate everyday living under the new reality.

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