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Financial Management (Globe Telecom)

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Finals presentation on Globe Telecom
Financial Management
(MBA) Middle Manager Program
Dec 3 2014

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Financial Management (Globe Telecom)

  1. 1. FINALS PRESENTATION CHARLES VINZON RACELIS MM PROGRAM, ATENEO GRADUATE SCHOOL OF BUSINESS FINANCIAL MANAGEMENT, PROF. DENSING III (DEC. 2014) Let’s create a wonderful world
  2. 2. COMPANY BACKGROUND Globe Telecom, Inc. is a major provider of telecommunications services in the Philippines, supported by over 5,900 employees and over 855,000 retailers, distributors, suppliers, and business partners nationwide. The Company operates one of the largest and most technologically-advanced mobile, fixed line and broadband networks in the country, providing reliable, superior communications services to individual customers, small and medium-sized businesses, and corporate and enterprise clients. Globe currently has about 38.5 million mobile subscribers, over 2,000,000 broadband customers, and over 594,000 million landline subscribers.
  3. 3. COMPANY INFORMATION MISSION: We create a wonderful world for people, businesses and the nation. VISION: The happiest customers, employees and shareholders. VALUES: (1) We put our customers first. (2) Our people make the difference. (3) We act with integrity. (4) We care like an owner. (5) We keep things simple. (6) To us, it's be fast or be last.
  4. 4. INCOME STATEMENT PERIOD ENDING 2013 2012 Revenue Service Revenue Php 90,500,137 Php 82,742,565 NonService Revenue Php 4,640,848 Php 3,703,584 Gross Profit Php 95,140,985 Php 86,446,149 Expenses Cost of Sales Php 9,953,106 Php 7,678,359 General, Selling and Administrative Php 37,318,839 Php 33,602,411 Total Operating Expenses Php 47,271,945 Php 41,280,770 Interest Income Php 688,249 Php 579,851 Disposal of property and Equipment Php 64,333 Php 42,447 Other Income Php 475,246 Php 716,371 Php 1,227,828 Php 1,338,669 Depreciation and Amortization Php 27,477,494 Php 23,583,417 Other Expenses Php 12,662,686 Php 11,179,633 Php 40,140,180 Php 34,763,050 Earnings Before Interest and Taxes Php 8,956,688 Php 11,740,998 Interest Expense Php 2,091,915 Php 1,989,451 Income Before Income Tax Php 6,864,773 Php 9,751,547 Provision for Income Tax (Tax Cost) Php 1,904,528 Php 2,906,293 NET INCOME Php 4,960,245 Php 6,845,254 FINANCIAL STATEMENTS *in thousand pesos
  5. 5. *in thousand pesos BALANCE SHEET PERIOD ENDING 2013 2012 ASSETS Current Assets Cash and Cash Equivalents Php 7,420,735 Php 6,759,755 Net Receivables Php 15,200,923 Php 12,105,437 Inventory Php 3,544,887 Php 2,076,176 Other Current Assets Php 9,464,657 Php 13,086,990 Total Current Assets Php 35,631,202 Php 34,028,358 Noncurrent Assets Property and Equipment Php 110,424,072 Php 101,422,364 Investment Property Php - Php - Intangible Assets and Goodwill Php 3,840,660 Php 3,793,958 Deferred Income Tax Assets Php 1,916,878 Php 1,016,856 Other noncurrent assets Php 7,266,121 Php 7,750,243 Total Noncurrent Assets Php 123,447,731 Php 113,983,421 Total Assets Php 159,078,933 Php 148,011,779 FINANCIAL STATEMENTS PERIOD ENDING 2013 2012 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts Payable and Accrued Expenses Php 39,486,830 Php 29,734,126 Notes Payable Php 5,219,900 Php 2,053,900 Current Portion of Long-term debt Php 5,980,300 Php 9,294,888 Income Tax Payable Php 1,028,263 Php 1,341,583 Other Current Liabilities Php 3,274,038 Php 3,401,487 Total Current Liabilities Php 54,989,331 Php 45,825,984 Noncurrent Liabilities Long-term debt - Net of current portion Php 58,100,749 Php 50,430,632 Deferred income tax liabilities Php - Php 2,271,345 Other Non-Current Liabilities Php 4,349,602 Php 3,785,827 Total Noncurrent Liabilities Php 62,450,351 Php 56,487,804 Total Liabilities Php 117,439,682 Php 102,313,788 Stockholders' Equity Paid-up Capital Php 34,402,396 Php 34,095,976 Cost of Share-Based Payments Php 261,144 Php 472,911 Other Reserves Php (739,575) Php (526,539) Retianed Earnings Php 7,715,286 Php 11,655,643 Total Stockholders' Equity Php 41,639,251 Php 45,697,991 Total Liabilities and SE Php 159,078,933 Php 148,011,779
  6. 6. RATIO ANALYSIS Liquidity 2013 2012 Current 0.65 0.74 Quick 0.58 0.7 Profitability 2013 2012 Gross Profit Margin 50% 52% Operating Profit Margin 9% 14% Growth 2013 2012 Debt to Equity (Gross) 1.66 43.84 21.12 Net Profit Margin EBITDA Margin EPS Price-Earnings Ratio 5% 8% 38% 41% 37.41 51.7 Capital Structure 2013 2012 Debt to EBITDA 1.90 1.76 Debt to Service Coverage 2.83 2.02 1.35 Debt to Equity (Net) 1.49 1.2 Sales 10% 6% Net Income -28% -30% -26% Earnings Per Share -32% Dividends per Share 3% 5% The financial tests under Globe’s loan agreements include compliance with the following ratios: • Total debt to equity not exceeding 2:1; • Total debt to EBITDA not exceeding 3:1; • Debt service coverage exceeding 1.3 times; and. As of 31 December 2013, Globe is well within the ratios prescribed under its loan agreements.
  7. 7. HORIZONTAL ANALYSIS INCOME STATEMENT 2013 - 2012 2012 - 2011 Increase or (Decrease) Increase or (Decrease) PERIOD ENDING Amount Percentage Amount Percentage Revenue Service Revenue Php 7,757,572 9% Php 4,977,601 6% NonService Revenue Php 937,264 25% Php (49,699) -1% Gross Profit Php 8,694,836 10% Php 4,927,902 6% *in thousand pesos Expenses Cost of Sales Php 2,274,747 30% Php 1,790,770 30% General, Selling and Administrative Php 3,716,428 11% Php 4,188,805 14% Total Operating Expenses Php 5,991,175 15% Php 5,979,575 17% Interest Income Php 108,398 19% Php 282,463 95% Disposal of property and Equipment Php 21,886 52% Php (276,803) -87% Other Income Php (241,125) -34% Php 141,603 25% Php (110,841) -8% Php 147,263 12% Depreciation and Amortization Php 3,894,077 17% Php 4,642,190 25% Other Expenses Php 1,483,053 13% Php (1,169,803) -9% Php 5,377,130 15% Php 3,472,387 11% Earnings Before Interest and Taxes Php (2,784,310) -24% Php (4,376,797) -27% Interest Expense Php 102,464 5% Php (70,209) -3% Income Before Income Tax Php (2,886,774) -30% Php (4,306,588) -31% Provision for Income Tax (Tax Cost) Php (1,001,765) -34% Php (1,347,291) -32% NET INCOME Php (1,885,009) -28% Php (2,959,297) -30%
  8. 8. BALANCE SHEET 2013 - 2012 2012 - 2011 Increase or (Decrease) Increase or (Decrease) HORIZONTAL ANALYSIS 2013 - 2012 2012 - 2011 Increase or (Decrease) Increase or (Decrease) *in thousand pesos PERIOD ENDING Amount Percentage Amount Percentage ASSETS Current Assets Cash and Cash Equivalents Php 660,980 10% Php 1,600,709 31% Net Receivables Php 3,095,486 26% Php 1,985,932 20% Inventory Php 1,468,711 71% Php 164,986 9% Other Current Assets Php (3,622,333) -28% Php 6,712,484 105% Total Current Assets Php 1,602,844 5% Php 10,464,111 44% Noncurrent Assets Property and Equipment Php 9,001,708 9% Php 2,154,584 2% Investment Property Intangible Assets and Goodwill Php 46,702 1% Php 202,444 6% Deferred Income Tax Assets Php 900,022 89% Php 151,948 18% Other noncurrent assets Php (484,122) -6% Php 5,165,029 200% Total Noncurrent Assets Php 9,464,310 8% Php 7,482,360 7% Total Assets Php 11,067,154 7% Php 17,946,471 14% LIABILITIES & STOCKHOLDERS' EQUITY Amount Percentage Amount Percentage Current Liabilities Accounts Payable and Accrued Expenses Php 9,752,704 33% Php 6,692,775 29% Notes Payable Php 3,166,000 154% Php 297,140 17% Current Portion of Long-term debt Php (3,314,588) -36% Php (302,479) -3% Income Tax Payable Php (313,320) -23% Php 183,656 16% Other Current Liabilities Php (127,449) -4% Php (31,040) -1% Total Current Liabilities Php 9,163,347 20% Php 6,840,052 18% Noncurrent Liabilities Long-term debt - Net of current portion Php 7,670,117 15% Php 13,106,053 35% Deferred income tax liabilities Php (2,271,345) -100% Php (1,396,090) -38% Other Non-Current Liabilities Php 563,775 15% Php 1,284,184 51% Total Noncurrent Liabilities Php 5,962,547 11% Php 12,994,147 30% Total Liabilities Php 15,125,894 15% Php 19,834,199 24% Stockholders' Equity Paid-up Capital Php 306,420 1% Php 128,500 0% Cost of Share-Based Payments Php (211,767) -45% Php (100,525) -18% Other Reserves Php (213,036) 40% Php (122,184) 30% Retianed Earnings Php (3,940,357) -34% Php (1,793,519) -13% Total Stockholders' Equity Php (4,058,740) -9% Php (1,887,728) -4% Total Liabilities and SE Php 11,067,154 7% Php 17,946,471 14%
  9. 9. BUSINESS PLAN OBJECTIVE: To offer the best possible, affordable, consistent internet connection for our customers. Based on Akamai State of the Internet report of Q4 2013 showed the Philippines had an average of 2Mbps and being ranked as 108th country in the list of connection speed. Presently, the Philippines has moved up to 2.5Mbps ranking at 103rd as of Q3 2014
  10. 10. PHILIPPINE MOBILE MARKET The Philippine mobile market has an industry SIM base of 109 million. The market is continuously expanding due to the rise in the demand for more non-traditional services especially in the form of mobile internet browsing. The Company ended 2013 with 38.5 million mobile subscribers/SIMs, comprised of 2.0 million postpaid and 36.5 million prepaid subscribers. Meanwhile, Globe has around 595,000 fixed line voice subscribers and around 2.0 million broadband customers.
  11. 11. THE STATE OF PHILIPPINE INTERNET USAGE 2013
  12. 12. THE STATE OF PHILIPPINE INTERNET USAGE 2013
  13. 13. PHILIPPINE MOBILE MARKET CURE Digitel Smart Piltel Innove Bayantel Extelcom
  14. 14. STRATEGY PRODUCT DEVELOPMENT Capital Expenditure is (26%) One Billion spent for investment on international cable systems. 650 Million for IT and network transformation and modernization program MARKET PENETRATION Increasing market share (35% to 50%) by 2016 from the latest products and services for internet connectivity in the growing market. Invest in traditional services; building more sites & incorporating needed in-building solutions to address coverage of blind spots brought about by the changing skyline in urban areas. Continue to offer the best value-for-money services to its subscribers.
  15. 15. 2014 To complete IT and network transformation and modernization program in Metro Manila. To offer the best value-for-money services to its subscribers. (Promotions such as free access to facebook, google search) To develop a team for Research and Development for hardware and software solutions in the telecom industry. To continue to maintain traditional services; building more sites & incorporating needed in-building solutions to address coverage of blind spots.
  16. 16. 2015 To provide higher speed in internet connectivity (5.5Mbps average) at the optimum price. To have the Philippines included in the top 60 global ranking in terms of average Mbps in the Asia Pacific region.. To continue the IT and network transformation and modernization program at key regions in the Philippines . To increase the sales revenue in fixed line, broadband and mobile browsing by 60%. To attain 90% consistency in internet connectivity and speed within Metro Manila.
  17. 17. 2016 To reach 50% market share in the Philippine Mobile Industry. To increase the sales revenue in fixed line, broadband and mobile browsing by 30%. To attain 90% consistency in internet connectivity and speed within urban areas.
  18. 18. FORECAST ASSUMPTIONS 2016 2015 2014 2013 Capital Expenditure (15%) Php 54,417 Php 47,319 Php 41,147 Php 35,780 International Cable System (20%) Php 1,728 Php 1,440 Php 1,200 Php 1,000 Transformation and Modernization Program Php 650 Php 650 Php 650 Php 650 *in Million pesos
  19. 19. FORECAST ASSUMPTIONS Sales Revenue 2016 2015 2014 2013 Internet Connectivity Mobile Browsing Php 29,444 Php 22,649 Php 14,156 Php 11,603 Broadband Php 26,493 Php 20,379 Php 12,737 Php 10,440 Fixed Line Php 11,904 Php 9,157 Php 5,723 Php 4,691 *in Million pesos
  20. 20. FORECAST ASSUMPTIONS 2016 2015 2014 2013 Service and Non-Service Php 91,050 Php 82,772 Php 75,248 Php 68,407 Internet Connectivity Php 67,840 Php 52,185 Php 32,615 Php 26,734 Total Sales Revenue Php 158,890 Php 134,957 Php 107,863 Php 95,141 *in Million pesos
  21. 21. FORECAST INCOME STATEMENT *in thousand pesos INCOME STATEMENT PERIOD ENDING 2014 2015 2016 Revenue Service Revenue Php 102,678,180 Php 127,671,238 Php 149,758,915 NonService Revenue Php 5,815,305 Php 7,286,981 Php 9,131,093 Gross Profit Php 108,493,485 Php 134,958,219 Php 158,890,009 Expenses Cost of Sales Php 12,901,757 Php 16,723,958 Php 21,678,502 General, Selling and Administrative Php 41,446,304 Php 46,030,267 Php 51,121,216 Total Operating Expenses Php 54,348,061 Php 62,754,225 Php 72,799,719 Interest Income Php 816,911 Php 969,625 Php 1,150,888 Disposal of property and Equipment Php 97,504 Php 147,777 Php 223,972 Other Income Php 592,330 Php 738,260 Php 738,260 Php 1,506,745 Php 1,855,662 Php 2,113,120 Depreciation and Amortization Php 32,014,558 Php 37,300,779 Php 43,459,857 Other Expenses Php 14,342,476 Php 16,245,101 Php 18,400,122 Php 46,357,034 Php 53,545,880 Php 61,859,980 Earnings Before Interest and Taxes Php 9,295,135 Php 20,513,776 Php 26,343,431 Interest Expense Php 2,199,656 Php 2,312,947 Php 2,432,072 Income Before Income Tax Php 7,095,479 Php 18,200,830 Php 23,911,359 Provision for Income Tax (Tax Cost) Php 1,986,734 Php 5,096,232 Php 6,695,180 NET INCOME Php 5,108,745 Php 13,104,597 Php 17,216,178
  22. 22. FORECAST BALANCE SHEET *in thousand pesos BALANCE SHEET PERIOD ENDING 2014 2015 2016 ASSETS Current Assets Cash and Cash Equivalents Php 14,926,986 Php 13,728,474 Php 22,924,174 Net Receivables Php 19,087,957 Php 23,968,946 Php 30,098,054 Inventory Php 6,052,581 Php 10,334,247 Php 17,644,814 Other Current Assets Php 6,844,945 Php 4,950,341 Php 3,580,142 Total Current Assets Php 46,912,469 Php 52,982,008 Php 74,247,184 Noncurrent Assets Property and Equipment Php 120,224,724 Php 130,895,229 Php 142,512,791 Investment Property Intangible Assets and Goodwill Php 3,887,937 Php 3,935,796 Php 3,984,244 Deferred Income Tax Assets Php 2,253,637 Php 1,195,498 Php 1,016,856 Other noncurrent assets Php 6,812,240 Php 6,386,711 Php 5,987,762 Total Noncurrent Assets Php 133,178,538 Php 142,413,233 Php 153,501,653 Total Assets Php 180,091,007 Php 195,395,242 Php 227,748,837 LIABILITIES & STOCKHOLDERS' EQUITY Total Current Liabilities Php 62,252,643 Php 67,542,907 Php 78,726,679 Total Noncurrent Liabilities Php 70,699,158 Php 76,707,212 Php 89,408,412 Total Liabilities Php 132,951,800 Php 144,250,119 Php 168,135,091 Total Stockholders' Equity Php 47,139,206 Php 51,145,122 Php 59,613,745 Total Liabilities and SE Php 180,091,007 Php 195,395,242 Php 227,748,837
  23. 23. REFERENCES o www.abs-cbnnews.com/business/10/02/14/philippines-still- has-one-slowest-internet-speeds-asia o www.akamai.com/dl/akamai/akamai-soti-q413.pdf o www.forward.ph/blog/the-state-of-philippine-internet-usage- 2013-infographic/ o SEC FORM 17A GLOBE 2013 (Annual Report)

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