Consumer sales outpace ads to drive

ABS-CBN's first-quarter profit

By: Darwin G. Amojelar, InterAksyon.com
May 16, 2014 8:09 AM

ABS-CBN president Charo Santos and chairman Gabby Lopez during 2014 stockholders meeting last May 14. Photo courtesy of
ABS-CBN
InterAksyon.com means BUSINESS
MANILA - ABS-CBN Corps first quarter net income climbed in the single-digits on higher
revenues from its consumer business.
In a statement, the Lopez-led broadcast company said profit rose seven percent to P538 million
in the January to March period from P503 million in the same three months of last year.
Growth was driven by its film, global distribution, and pay TV businesses.
Revenues rose to P8.2 billion this year from P7.9 billion in the same period last year. Of the
total, consumer sales amounted to P4.21 billion, outflanking advertising at P3.99 billion.
We are off to a good start in 2014. I am particularly pleased that we were able to grow our net
income by seven percent considering that last years results included election-related revenues,
Aldrin M. Cerrado, ABS-CBN's chief financial officer said.
ABS-CBN is the clear leader in terms of national audience share, and we continue to capture a
relatively large chunk of total advertising expenditure in the country, he said.
The network's cost and expenses amounted to P7.41 billion, up 2.8 percent from last year's P7.2
billion.
I am confident that our company will deliver strong results this year. We are undertaking
various initiatives to generate revenues beyond advertising, as well as control our costs, and I
believe we will reap the rewards from these efforts in the coming years, Ronald Valdueza,
ABS-CBN Group chief financial officer, said.
The company targets a P2 billion profit this year.
Our O Shopping channel, which we launched only last year, is likely to break even this year,
while our educational theme park, KidZania, is expected to open for business at the Fort
Bonifacio, Global City during the first quarter of 2015, Valdueza said.
Shifting to consumer revenues
During Wednesdays stockholders meeting, ABS-CBN chairman Eugenio Lopez III said half of
revenues in 2013 was derived from consumer sales.
"Were moving away from the reliance on advertising to consumer revenues. Theres only so
much growth you can get out of advertising, its limited to 18 minutes to an hour. And so, we
want to monetize our content beyond just advertising by directly relating it to what consumers
want," he said.
Last year, consumer sales amounted to P14.47 billion, up 13.58 percent from P12.74 billion in
2012. But ad revenues still climbed faster at 16.44 percent to P18.91 billion from P16.24 billion
over the same period.
"We expect that trajectory to continue in the future. We expect although our advertising
continues to grow in the next five to 10 years. It represents only 25 percent of our total revenues
and that majority of those revenues and profitability will come from the consumer sectors of our
businesses," he added.
The broadcasting firm's consumer portfolio include mobile, pay TV, movie, publishing,
merchandising, Kidzania and O Shopping.
"Anything that has to do with consumers paying us. In fact all the new businesses that we are in
are in the consumer side of the business," Lopez said.
He cited Star Cinema, which released 16 films last year with one movie making over P200
million at the box office and two movies breaking the P300 million level.
Valdueza said the company's focus into consumer sales is part of its diversification, which
started five years ago.
"The growth of the consumers will be faster than the advertising because you are talking about
retail business. Look at the retail business. For example, the telco business, that's P250 billion
[revenue] when youre talking about advertising between us, GMA and ABC 5, its about P30 to
P35 billion. The growth in the retail is exponential compared to the [advertising] airtime
business," he said.
Globe Telecom reported a total revenue of P82.7 billion last year, while Philippine Long
Distance Telephone Co (PLDT) had P164.1 billion.
Big potential
Astro del Castillo, managing director of First Grade Finance Inc said consumer business has a
"big potential" for ABS-CBN given the technology available.
"I think they are looking at the model overseas. I think the potential is big," Del Castillo said.
He said that maybe ABS-CBN is preparing for the eventual shift of advertising to the digital
platform from the traditional media.
ABS-CBN president Ma. Rosario Santos-Concio said the network will continue to invest in
developing, delivering, and maximizing opportunities for its content, stories and news and
information products across all media and platforms.
"We will focus on our customers and the new ways that they consume content and demand
service," she said.
Internal plans, instead of competitive dynamic
Lopez brushed off talks between GMA Network Inc. and San Miguel Corp president Ramon S.
Ang for the diversifying food-and-beverage firms possible investment in the broadcast firm.
"We're not really focused on that competitive dynamic. We're really more focused on our own
internal plans to roll out a number of different activities across all the different platforms. We'll
have to see," Lopez said.
GMA Chairman Felipe Gozon earlier confirmed that he is in talks with Ang to invest in GMA
Network.
ABS-CBN is allocating P6 billion in capital expenditures this year, of which P2 billion will be
allocated for SkyCable Corp.
Sky Cable revenues last year amounted to P6.94 billion, up 17 percent from P5.91 billion in
2012.
ABS-CBN posted a net income of P2.03 billion in 2013, or 25 percent up from P1.62 billion in
2012. Consolidated revenues rose by 15 percent to P33.38 billion from P28.98 billion last year.

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http://www.interaksyon.com/business/86934/consumer-sales-outpace-ads-to-drive-abs-cbns-first-
quarter-profit


http://www.rappler.com/business/24316-abs-cbn-2012-profit-down-on-absence-of-one-time-gain
ABS-CBN 2012 profit falls
29% to P1.7-B
The consolidated net income of the countrys biggest media conglomerate fell 29% in 2012 to
P1.708 billion
Cai Ordinario
Published 2:29 PM, Mar 21, 2013
Updated 7:56 PM, Mar 21, 2013
LOWER. ABS-CBN's earnings are down 29% in 2012 due to the absence of one-time gain
MANILA, Philippines (UPDATED) The consolidated net income of ABS-CBN Corp., the
countrys biggest media conglomerate, fell 29% in 2012 to P1.708 billion from P2.42 billion in
2011.
In a media briefing on Thursday, March 21, the Lopez-owned company said the decline was
due to the absence of a one-time gain. In 2011, ABS-CBN booked additional income from the
sale of part of its stake in cable unit Skycable Corp.
Taking this gain out, ABS-CBNs 2012 core net income rose 23% to P1.032 billion.
The companys consolidated revenues meanwhile grew 13% to P31.7 billion in 2012, owing to
strong advertising revenues and consumer sales.
Ad revenues grew 8% to P19.1 billion, while consumer sales jumped 19% to P12.7 billion.
Total operating and other expenses increased 12% to P26.2 billion brought about by increases
in production costs, cost of sales and services, and general and administrative expenses.
ABS-CBN executives at the 2012 earnings report
2013 outlook
ABS-CBN sees better earnings for 2013, an election year.
This is despite a projected decrease in political advertisements following the Commission on
Elections rule that limits candidates ads on all television and radio stations to 120 minutes. In
the 2004 and 2010 elections, candidates were given 120 minutes airtime per station.
ABS-CBN CFO Rolando Valdueza said the decrease would be offset by growth in regular ad
spending.
If you look at the first 3 months of 2013, [earnings are] significantly better than the last quarter
of last year and the same period of 2012, Valdueza said. [Earnings are] being driven by the
growth in regular ad spending, he said.
However, he said they would know the extent of the Comelec rules impact only by April. We
expect [pol] ads to come in by April next month right after Holy Week.
Capital expenditures
Valdueza said ABS-CBN allotted P5 billion for capital expenditures in 2013, higher than the
P4.9 billion in 2012.
The budget will be spent for equipment replacement, transmission facilities, and film and
program rights acquisitions, among others.
The executive said the capex includes P2 billion for the operations of SkyCable.
He noted the capex would be funded through internal cash. We continue to assess and weigh
our options with regards to our fund raising activities, he said. Rappler.com

Comparative Priceearnings ratio of ABS CBN and GMA network
Definition: Priceearnings ratio is an equity valuation measure defined as market price per share divided by
annual earnings per share
*PSE current Priceearnings ratio of GMA network: 24.6459 vs. ABS CBN: 10.3679
Legends and Interpretation
N/A A company with no earnings has an undefined P/E ratio. By convention, companies with losses (negative
earnings) are usually treated as having an undefined P/E ratio, even though a negative P/E ratio can be
mathematically determined.
010 Either the stock is undervalued or the company's earnings are thought to be in decline. Alternatively,
current earnings may be substantially above historic trends or the company may have profited from selling
assets.
1017 For many companies a P/E ratio in this range may be considered fair value.

1725 Either the stock is overvalued or the company's earnings have increased since the last earnings figure
was published. The stock may also be a growth stock with earnings expected to increase substantially in the
future.
25+ A company whose shares have a very high P/E may have high expected future growth in earnings, or this
year's earnings may be considered to be exceptionally low, or the stock may be the subject of a speculative
bubble.

GMA network: 24.6459
Interpretation: Either the stock is overvalued or the company's earnings have increased since the last earnings
figure was published. The stock may also be a growth stock with earnings expected to increase substantially in
the future.

ABS CBN: 10.3679
Interpretation: For many companies a P/E ratio in this range may be considered fair value
http://pse.com.ph/stockMarket/companyInfo.html?id=610&security=533&tab=0
http://pse.com.ph/stockMarket/companyInfo.html?id=114&security=123&tab=0

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