Robert F. Kuan
Item 5: Interest of Certain Persons in Matters to be Acted Upon
4. Management’s Discussion and Analysis or Plan of Operation
Financial Position
As of March 31, 2013, consolidated total assets amounted to P7,027.27 million which was higher than the previous year’s P5,227.89 million. Consolidated total liabilities amounted to P1,362.72 million which was higher than the previous year’s P501.53 million. Consolidated total equity amounted to P5,664.55 million which was higher than the previous year’s P4,726.35 million.
Equity attributable to the owners of the Parent Company amounted to P4,811.87 million and was more than the previous year’s P4,245.05 million. Non-controlling Interests (NCI) amounted to P852.68 million and was more than the previous year’s P481.30 million. Current ratio was 5.93:1 and debt was 24.06% of equity.
As of March 31, 2014, consolidated total assets went up to P8,053.45 million which surpassed previous year’s amount of P7,027.27 million. Consolidated total liabilities likewise increased from P1,362.72 million to P1,515.19 million. Consolidated total equity reached P6,538.26 million which was higher than the previous year’s P5,664.55 million. Total equity is composed of the portion attributable to the owners of the Parent Company and NCI amounting to P5,158.54 and P1,379.72 million, respectively. Current ratio was 4.80:1, while debt was at 23.17% of equity.
For the current year, consolidated total assets further increased to P9,090.88 million, which was 12.88% higher than the previous year’s P8,053.45 million. The increase in consolidated total assets is mainly attributable to the increase in current assets which grew by 24.89% from P3,046.21 million to P3,804.40 million. Non-current assets also contributed to the said increase as it grew by 5.58% from P5,007.24 million as of March 31, 2014 to P5,286.48 million as of March 31, 2015.
Consolidated total liabilities slightly increased by 3.75% to P1,572.05 million as of March 31, 2015 compared to the previous year’s P1,515.19 million. Current liabilities increased by P139.10% while non-current liabilities went down by 93.70%.
As it goes with the growth in the consolidated total assets, consolidated total equity likewise improved by 15%, from P6,538.26 million as of March 31, 2014 to P7,518.83 million as of March 31, 2015. The Group’s consolidated equity is divided into P5,889.36 million and P1,629.47 million which is attributable to owners of the Parent Company and NCI, respectively.
With a current ratio and quick ratio at 2.51:1 and 2.36:1, respectively, and with a debt-to-equity ratio and equity-to-asset ratio of 21% and 83%, respectively, the Group remains strong and financially stable.
For the past four years, consolidated total assets increased at an average annual rate of 18.23% or P1,095.56 million a year, while consolidated total liabilities increased at around P274.40 million or 48.09% a year. The significant increase in assets and liabilities in 2013 was mainly due to a bank loan obtained amounting to P800.00 million; while the significant drop in liabilities in 2015 was due to the full settlement of the same bank loan. For the same periods, consolidated total stockholders’ equity shows an average annual increase of 15.48% or P821.22 million a year.
The Group’s solvency for the past four years has always been favorable. As of March 31, 2015, the Group has P5.78 worth of assets to cover every P1.00 worth of liability.
During the same period of time, the Group remained liquid. As of March 31, 2015, P2.51 worth of current asset is available to cover every P1.00 worth of current liability.
(Amounts in Million Philippine Peso) Fiscal Year Ending
Consolidated Total Current Assets
Consolidated Total Current Liabilities
Consolidated Net Current Assets March 31, 2012 P 2,793.51 P 473.73 P 2,319.78
March 31, 2013 2,946.82 497.30 2,449.52
March 31, 2014 3,046.21 634.27 2,411.94
March 31, 2015 3,804.40 1,516.57 2,287.83 The stability in the Group’s financial condition, both in solvency and liquidity, was largely attributed to the Group’s consolidated net income each year for the past four years which was always more than enough to provide for the usual annual dividends during the same period of time.
(Amounts in Million Philippine Peso)
Fiscal Year Ending
Consolidated Total Assets
Increase / (Decrease) Consolidated Total Liabilities
Increase / (Decrease) Consolidated Net Assets
Increase / (Decrease)
Amount % Amount % Amount %
March 31, 2011 P 4,708.38 P - - P 474.44 P - - P 4,233.94 P - -
March 31, 2012 5,227.89 519.51 11.03% 501.53 27.09 5.71% 4,726.36 492.42 11.63%
March 31, 2013 7,027.27 1,799.38 34.42% 1,362.72 861.19 171.71% 5,664.55 938.19 19.85%
March 31, 2014 8,053.45 1,026.18 14.60% 1,515.19 152.47 11.19% 6,538.26 873.71 15.42%
March 31, 2015 9,090.88 1,037.43 12.88% 1,572.05 56.86 3.75% 7,518.83 980.57 15.00%
Average P 1,095.56 18.23% P 274.40 48.09% P 821.22 15.48%
Below is a four-year table which shows the sufficiency of the Group’s net income compared to the total cash dividend declared and paid.
(Amounts in Million Philippine Peso)
Fiscal Year Ending
Consolidated Net Income
Cash
Dividends %
Excess of Net Income Over
Dividends % March 31, 2012 P 741.47 P 311.9 42.1% P 429.57 57.9%
March 31, 2013 890.86 329.6 37.0% 561.26 63.0%
March 31, 2014 902.82 370.7 41.1% 532.12 58.9%
March 31, 2015 1,078.16 398.5 37.0% 679.66 63.0%
Four year average 40.4% 59.6%
Based on the foregoing around 59.6% of the Group’s net income is retained in equity. As a result, the Group’s consolidated stockholders equity steadily improved as shown below.
(Amounts in Million Philippine Peso) Fiscal Year Ending
Consolidated
Stockholders’ Equity Increase / (Decrease) % March 31, 2011 P 4,233.94 P - - March 31, 2012 4,726.36 492.42 11.63%
March 31, 2013 5,664.55 938.19 19.85%
March 31, 2014 6,538.26 873.71 15.42%
March 31, 2015 7,518.83 980.57 15.00%
As of March 31, 2015, the consolidated total stockholders’ equity accounts for 82.71% of the consolidated total assets of the Group. Since 41.85% of the Group’s consolidated total assets is current, the Group is able to pay all its liabilities and still have remaining 24.56% consolidated current assets and the whole of its consolidated non-current assets. As expressed in peso amounts, this would mean P2,232.35 million consolidated current assets and P5,286.48 million consolidated non-current assets after paying all liabilities amounting to P1,572.05 million.
(Amounts in Million Philippine Peso)
Amount % Consolidated Total Assets P 9,090.88 100.00%
Consolidated Current Assets 3,804.40 41.85%
Consolidated Non-current Assets 5,286.48 58.15%
Consolidated Total Liabilities 1,572.05 17.29%
Consolidated Current Assets Net of
Consolidated Total Liabilities 2,232.35 24.56%
Consolidated Total Assets Net of
Consolidated Total Liabilities 7,518.83 82.71%
Results of Operations
For the fiscal year ending March 31, 2013, consolidated operating income increased to P905.19 million which was higher than the previous year’s P663.66 million. On the contrary, other income went down to P158.67 million which was lower compared to the previous year’s P191.67 million. The combined effect was a net profit before tax of P1,063.86 million, higher compared to the previous year’s P855.33 million. Tax expense for the year was at P173.0 million.
Net profit after tax was P890.86 million, out which P800.23 million was attributable to owners of the Parent Company and the balance of P90.63 million to NCI.
For the fiscal year ending March 31, 2014, consolidated operating income was slightly lower at P829.30 million which was lower compared to last year’s P905.19 million. Other income, however, recovered and went up to P201.62 million which was higher than the previous year’s P158.67 million. The combined effect was a net profit before tax of P1,030.93 million. Tax expense for the year was at P128.11 million. Net profit after tax was at P902.82 million, out which P855.02 million was attributable to owners of the parent company and the balance of P47.79 million to NCI.
For the fiscal year ending March 31, 2015, consolidated operating income reached P1,005.59 million, a 21.26% improvement from last year’s P829.30 million. Likewise, other income showed a 10.43% improvement as it reached P222.62 this year compared to last year’s P201.62 million. With both income sources generating positive growth, net profit before tax reached P1,228.24 million, a 19.14% increase from last year’s P1,030.93 million. Tax expense for the current year is at P150.08 million; while the net income after tax was at P1,078.16 million.
This year’s final figure shows a significant improvement in net income of 19.14% compared to last year’s P902.82 million.
The significant growth in this years consolidated operating income is primarily attributable to the commencement of commercial operations of East Asia Computer Center, Inc. (EACCI). It operates the FEU Institute of Technology (FEU Tech) starting on the first term of School Year (S.Y.) 2014-2015.
Still based on the last four fiscal years, Consolidated Net Profit Before Tax is averaging at P1,044.59 million annually. Average contribution based on the same four-year period coming from Operating Income and Other Income amounts to P850.94 million and P193.65 million.
The significant contribution of Operating Income to the Consolidated Net Profit Before Tax is due to the effective control of Costs and Operating Expenses which posted an average annual increase of only 4.41%, or P69.42 million, based on the same four-year period. The average annual increase in revenue reached 7.59%, or P171.69 million, which is well above the average annual increase in cost and operating expenses based on the same four-year period (refer to the succeeding table). Such trend highlights the efficiency of the Groups business operations.
(Amounts in Million Philippine Peso)
Fiscal Year Ending
Consolidated Operating
Income
Periodic
Increase / (Decrease) Consolidated Other Income
Periodic
Increase / (Decrease) Consolidated Net Profit Before Tax
Periodic Increase / (Decrease)
Amount % Amount % Amount %
March 31, 2011 P 596.52 P - - P 159.00 P - - P 755.52 P - -
March 31, 2012 663.66 67.14 11.26% 191.67 32.67 20.55% 855.33 99.81 13.21%
March 31, 2013 905.19 241.53 36.39% 158.67 (33.00) -17.22% 1,063.86 208.53 24.38%
March 31, 2014 829.30 (75.89) -8.38% 201.62 42.95 27.07% 1,030.93 (32.93) -3.10%
March 31, 2015 1,005.59 176.29 21.26% 222.65 21.03 10.43% 1,228.24 197.31 19.14%
Four-year
Average P 850.94 P 102.27 15.13% P 193.65 P 15.91 10.21% P 1,044.59 P 118.18 13.41%
(Amounts in Million Philippine Peso)
Fiscal Year Ending
Consolidated Operating
Revenue
Periodic Increase / (Decrease)
Consolidated Costs and Operating Expenses
Periodic
Increase / (Decrease) Consolidated Operating
Income
Periodic Increase / (Decrease)
Amount % Amount % Amount %
March 31, 2011 P 2,091.72 P - - P 1,495.20 P - - P 596.52 P - -
March 31, 2012 2,225.81 134.09 6.41% 1,562.15 66.95 4.48% 663.66 67.14 11.26%
March 31, 2013 2,531.09 305.28 13.72% 1,625.89 63.74 4.08% 905.20 241.54 36.40%
March 31, 2014 2,448.19 (82.90) -3.28% 1,618.89 (7.00) -0.43% 829.30 (75.90) -8.38%
March 31, 2015 2,778.47 330.28 13.49 1,772.88 153.99 9.51% 1,005.59 176.29 21.26%
Four-year
Average P 2,495.89 P 171.69 7.59% P 1,644.95 P 69.42 4.41% P 850.94 P 102.27 15.13%
A Look at What Lies Ahead
Moving forward, continuous cost efficiency will have to prevail.
Group enrollment is expected to be flat for S.Y. 2015-2016 due to various courses offering across the member schools and continuous academic excellence aspirations resulting in stricter admission and retention policies.
Fully aware of the importance to maintain a satisfactory level of enrollment, the Group is committed to continue to uplift the academic standards in its different schools even more. This will be done through continuously updating of curricula, strengthening faculty competency, improving services to students and providing the best educational facilities. With a reasonable tuition fee hike, the Group is confident that it will maintain its market share in the industry.
Further, with the continuous effective and efficient management of its schools and other entities within the Group, it expects to have a reasonable growth, or at least to maintain, its consolidated net income level.
Top Five (5) Key Performance Indicators