Dear Fellow Shareholders,
There are many ways we can describe the year 2014 for us at FPH. Our consolidated net income attributable to Parent company for the year increased to Php5.6 billion. However, for purposes of better tracking our performance as a holding company, I prefer to keep tabs of recurring net income attributable to the Parent, which in 2014 is at a historic high of Php4.7 billion. Some call it an inflection year; others say it’s even a watershed year. I like to just modestly call it our year of affirmation. I use that word because, although we acknowledge our exciting journey is just beginning, the upward trajectory of our recurring net income signifies that our efforts are bearing fruit and we’re on track.
We saw a much stronger year on the part of our core business of power, whose contribution to recurring net income rose by more than 35% to a historic high of Php4.3 billion. We are similarly energized by the recurring net income contribution of our non-‐ power businesses, which surged more than 55% to Php2.0 billion. These were offset by corporate overhead and finance expenses of Php1.6 billion.
Over the last few years we put three themes at the center of everything we did: Strategic Clarity, Synergy, and Talent Centricity. We believed that the growth of a multi-‐business conglomerate like FPH needed to be moored on tenets that emphasized a clear sense of each company’s strategic positioning, our capabilities and direction, as well as, to use former Stanford Business School professor and best selling author Jim Collin’s words, a keen focus on “getting the right people on the bus and in the right seats.” We also recognized the power of synergy and collaboration amongst our group of companies so we could leverage and amplify each other’s capabilities.
I cannot highlight enough in words the effort and management time we spent collectively around activities that revolved around these three tenets. I have to say that it is the strong belief of your management and your board at FPH that real, sustained growth of our group of companies can only occur when it’s nurtured into a formidable engine-‐-‐having the right people and assets with all cylinders firing in collaborative unison. Getting such an effective combination moving takes patience, time, and effort; but when it does, it will be unstoppable.
Our power subsidiaries under First Gen and EDC saw a consolidated profit surge of almost 100% in 2014 to US$318 million or roughly Php14.1 billion. Most definitely a historic record for them!
As you know we reoriented our construction arm First Balfour toward rebuilding its competencies in synergy with the growing needs of our power business. In the process, First Balfour, including its wholly-‐owned subsidiary ThermaPrime Well Services, built itself a baseload of revenues and strengthened its organization and asset base around our fastest-‐growing business platform. In turn, our power business acquired a strategic partner that’s made them more agile and cost-‐effective. Moreover, our power sector now operates with higher safety standards than when reliance was primarily on too many small, undercapitalized local contractors. In 2014, First Balfour saw its bottom line surge by more than 88% from Php385 million to Php722 million. A historic record for them, too!
The Electric Utilities sector of First Philec also saw a dramatic upturn in its net profits in 2014. With the re-‐establishment of a new and more efficient manufacturing facility in Santo Tomas, Batangas and a renewed focus on getting closer to its customers’ needs, First Philec EU saw its net profit rise more than 130% from Php156 million to more than Php372 million in 2014. Their historic high, too!
Our property sector businesses, FPIP and Rockwell, have likewise built solid brands and reputations in their respective fields of Industrial Parks and Residential/Commercial Real Estate. I see them admirably experimenting with new capabilities and new sources of recurring revenue streams and possibly even new customer segments.
I can see FPIP building up alternative revenue bases as it tests new ground with more ready-‐built factories, land leases, on-‐site strip malls, Business Process Outsourcing (BPO) companies, warehouses, water utilities, and even alternative industrial sites catering to other industrial market segments. I see Rockwell also testing new ground in the leisure segment with its Aruga serviced apartments, with market segments they call “massclusivity,” and in other big cities like Cebu.
Both Rockwell and FPIP are also experiencing excellent years with respective net profits of Php1.56 billion and Php594 million. Their challenge will be to expand their canvasses that will enable higher recurring revenues and repeatable business models that allow their respective brand promises to flourish.
Today’s world sees industries transforming exponentially at mind-‐ numbing speeds. Winners turn into losers overnight as change accelerates with the pace of technology, and disruption has now become the norm. Thus, even if FPH leads in its industries and respective sandboxes we need to build an organization that will stay ahead and adapt to an ever-‐changing world. In the coming year, although we will continue to execute our growth models relentlessly, I expect we will move at a pace and rhythm that ensures we’re nimble and quick to seize new opportunities that build on our vision of “uplifting lives”, through a business platform that’s “powered by good”.
Federico R. Lopez
Chairman & CEO