PRESIDENT’S MESSAGE TO SHAREHOLDERS
Dear Valued Shareholders,
We are pleased to inform you that despite various challenges in 2016, the total revenues of your Company grew by 17 percent from P9.27 billion to P10.89 billion. As a result, there was a consolidated increase in net income by 2 percent from P1.03 billion in 2015 to P1.06 billion in 2016. The increase in net income amounting to P25.00 million was mainly contributed by the significant growth of bingo operations, increase in hosting and service fees and favorable operations of VIP slot arcades.
Change in regulatory policies made a major impact on your Company which effected a modest growth in net income. There were closures of some sites due to the revision on distance restriction between gaming venues and the closure of a major e-casino supplier. Thus, consolidated results for the year included the impact of non-cash provisions and impairment of fixed assets in closed sites.
For nine consecutive years, the Company distributed cash dividends to its shareholders as your Company does not have any restrictions which limit the ability to pay dividends on common and preferred shares. During the year, the Board of Directors (BOD) declared cash dividends to common shareholders payable in two tranches: P0.08 per share with record date of September 30, 2016 payable on October 25, 2016 and P0.07 per share with record date of March 03, 2017 payable on March 28, 2017. The BOD also declared two cash dividends at P0.0425 to preferred stockholders payable on July 08, 2016 and January 18, 2017, respectively.
The major businesses of your Company are grouped into RETAIL, ONLINE, CASINO, and PROPERTY.
The RETAIL Group was most affected by the new distance restrictions policy of government. In spite of this limitation, revenues were robust. This group is comprised of AB Leisure Exponent, Inc. (ABLE) and Total Gamezone Xtreme Incorporated (TGXI). Their contribution to net income was P318.50 million or a growth of 24 percent from 2015 of P256.20 million, with the Electronic Bingo as the main driver.
ABLE posted total sales of P7.13 billion, a growth of P1.15 billion or 19 per cent from last year’s P5.98 billion. The Electronic Bingo games of ABLE was the principal driver of sales of P4,512.00 million in 2016, or an increase of 31 percent. At the end of 2016, there were a total of 9,790 E-bingo machines in 138 bingo parlors. The traditional bingo though registering a slower growth contributed 33 per cent of ABLE revenues. As a result, ABLE posted a consolidated net income of P353.80 million in 2016, a significant increase of P109.60 million or 45 percent.
TGXI, as operator and licensee of PAGCOR eGame stations (PeGS), contributed gross revenues of P257.49 million in 2016, representing its full-year share in revenues from the management and operation of PeGS. Due to the expiration of IPLMA license of Philweb their major supplier, accompanied by distance restriction policies, there was a decline of P37.56 million in revenues. By year-end, TGXI was operating 39 PeGS with 1,416 terminals.
The ONLINE Group consists of First Cagayan Leisure and Resort Corporation (FCLRC) and its subsidiary First Cagayan Converge Data Center Inc. (FCCDCI). The total contribution of this group to net income is P624.00 million, which grew by P108.00 million or 21 percent. For the year 2016, FCLRC posted gross revenues of P1.90 billion, which is P264.70 million or 16 percent higher than the revenues in 2015. The principal growth driver was the increase in the number of operating locators, thus generating increases in hosting and service fees. Its 60 percent owned subsidiary, FCCDCI, posted a net income of P164.20 million in 2016, a P39.00 million or 31 percent improvement over 2015.
The total contribution of the CASINO Group to net income is P170.00 million in 2016, a growth of 100 percent from last year’s P85.00 million. The Casino group is comprised of Hotel Enterprises of the Philippines Inc, (HEPI), Prime Investment Korea Inc. (PIKI), and Blue Chip Gaming and Leisure Corporation (BCGLC). HEPI is the operator of Midas Hotel with a lease contract and marketing agreement with Pagcor for a casino. HEPI generated net income of P45.00 million. BCGLC, our gaming arcade arm had a consolidated income of P106.00 million which is 4.3 times higher compared to the previous year’s net income of P24.20 million. This breakout performance is due to the full-year operation of the 4 new arcades acquired in the middle of 2015. Total revenues for the year of all 5 arcades amounted to P381.40, a growth of P199.90 million. Thus at year-end, BCGLC had 825 slot machines. The Pagcor VIP Clubs only caters to its registered members. The revenues of our junket operator, PIKI, declined by 14% to P894.40 million from last year’s P1,046 million due to lower Gross Gaming Revenue (GGR) from junket operations. As a result PIKI posted a net income of P18.50 million, a decline of P14.50 million or 44 percent from last year’s P33.00 million.
Total contribution of the PROPERTY Group to net income is P293.00 million. Mixed results were reported for this group. As part of the Property group, AB Leisure Global, Inc. (ABLGI), posted net revenues of P621.46 million or a growth of 62 percent compared to P382.67 million in 2015. The increase was mainly due to rent escalation and higher share in gaming revenue due to better performance of City of Dreams. Binondo Leisure Resources, Inc. (BLRI) contributed rental income of P7.80 million. Through LR Land Developers, Inc. (LRLDI) your Company has a 50 percent investment in Techzone Philippines, Inc. (Techzone), which has a world-class building project located in Makati City. The building has 28 floors with a construction floor area of 75,300 sqm., catering to the high standards set by the international gaming market for their business processing operations, thus equipped with high capacity power service and telecommunications connectivity, among others. LRLDI posted a net income of P22.30 million in 2016.
Your Company faced major challenges in 2016 due to changes in regulatory policies in the gaming sector. But once again we have proven our resiliency through our strategy of expansion in various sectors within the gaming landscape. While some sectors exhibited mixed results, our over-all performance show a robust growth in revenues and income. Our expansion is to a market segment that demand games with a more frequent winning experience. This was through the use technology and our network of suppliers with world class product offerings in state of the art facilities. These factors continuously sustain the gaming experience of our customers.
Our employees are our main resource to deliver our products. Through their unstinting service and dedication, we are able to meet the needs of a demanding market. They have enabled us to be a dominant force in the gaming and leisure industry.
On behalf of the Board of Directors and Management, we once again thank you our dear Stockholders, for your loyal support without which, we would not have been able to be on top of our game.
REYNALDO P. BANTUG
Chairman and President
July 28, 2017