Message to Shareholders

James L. Go
James L. Go
Chairman

2018 was a very special year for JG Summit Holdings, Inc. (JGS) as we celebrated 25 years of creating shareholder value as a publicly listed company, while continuously fulfilling our mission of making life better for every Filipino. It was also the year when we have culminated our three-year leadership transition, steering JGS on a transformation journey towards an even higher level of performance in all of our various businesses, both existing and new, in the present and in the future, and in the Philippines and beyond.

JG Summit’s 25 Years of Value Creation

On August 9, 1993, we completed the Initial Public Offering (IPO) of JGS. Prior to the IPO, we have already built a strong business on the back of our food, agro-industrial and real estate segments. Still, our Founding Chairman, Mr. John Gokongwei, my late brothers Henry and Johnson, and myself, made it our objective to access the equity capital markets to raise long-term funds. This was in the pursuit of ambitious projects on telecommunications, air transportation, cement and petrochemicals that we believed would support the Philippine economy then. The listing also enabled us to issue a 10-year US$300 million convertible bond, one of the biggest and lowest-cost issuances out of South East Asia at that time. This bond, along with the proceeds of the IPO, funded our growth amidst the turbulent nineties and the Asian Financial crisis.

..our Founding Chairman, Mr. John Gokongwei, my late brothers Henry and Johnson, and myself, made it our objective to access the equity capital markets to raise long-term funds.

In the last 25 years, we have significantly expanded the JGS portfolio and provided our customers greater access to a number of products and services. We operated Digital Telecommunications Philippines, Inc. (Digitel), which provided Filipinos affordable access to a reliable nationwide telecommunications network and eventually became a compelling challenger to the incumbent players especially on mobile telephony with our brand Sun Cellular. We became a pioneer in the Philippine petrochemical industry through JG Summit Petrochemicals Group (Petrochem). We also began offering quality banking services through Robinsons Bank (RBank), and established the first budget airline in the Philippines – Cebu Air, Inc. (CEB). Apart from developing new legs for the group, we have fortified growth by completing the IPOs of Universal Robina Corporation (URC), our food business, and CEB. Furthermore, we made profitable investments in United Industrial Corporation, Ltd (UIC), a Singapore real estate company, Manila Electric Company (Meralco), the Philippines’ largest electricity distributor, and Global Business Power Corporation (GBP), one of the Philippines’ leading power producers. And in the true spirit of prudent portfolio management and shareholder value creation, we sold some companies such as Apo Cement to focus on industries where we can further scale. We also reduced our exposure in the highly competitive and capital-intensive telecommunications industry by exchanging all our Digitel shares for a minority stake in PLDT, Inc. as well as disposed our minority shares in Far East Bank &Trust Company and Philippine Commercial International Bank (PCI Bank).

In the last 25 years, we have significantly expanded the JGS portfolio and provided our customers greater access to a number of products and services.

Over the same period, we have successfully supported our strategic business units (SBU), which have grown into self-funding organizations. URC has launched strong household brands and innovative products such as Piattos, C2 and Great Taste; expanded in the ASEAN & Oceania and now, is one of the largest snackfoods and beverage companies in the region. Through URC, we also entered into strategic joint ventures with multinational companies such as Nissin Food Group of Japan, Danone of France, and Vitasoy of Hong Kong. RLC has built numerous mixed-use developments and ended 2018 with 51 malls, 18 hotels, 20 office buildings and 54 residential developments. RLC also widened its geographic scope to Chengdu, China and recently formed joint-ventures with Shangri-la and Hongkong Land as well as management contracts with Intercontinental Hotels Group and Marriott International (Westin). CEB has flown millions of domestic and international passengers, introduced e-ticketing and internet & mobile booking, and increased its size through fleet expansion and the acquisition of Tiger Air Philippines. Petrochem completed the construction of the first and only naphtha cracker plant in the country, and has since been operating a fully integrated petrochemical complex that serves the growing requirements of the manufacturing sector both locally and internationally. Finally, RBank became a commercial bank through the acquisition of Royal Bank of Scotland in the Philippines and has now developed its card business and internet/mobile banking platforms. Currently, it is one of the fastest growing commercial banks in the country.

With these milestones, JGS’ stock price has grown around 13 times, from its listing price of Php4.4 per share in 1993, to its 2018 year-end market price of Php55.7 per share. Concurrently, our market capitalization increased significantly from Php18.5 billion to close to Php400.0 billion. In terms of key financial metrics, our revenues grew at a compounded annual growth rate (CAGR) of 14% from Php10.6 billion in 1993 to Php291.9 billion in 2018, while profits were up at a CAGR of 10% from Php1.8 billion to Php19.2 billion. Total Assets and Equity expanded at CAGRs of 18% and 17%, respectively from Php13.0 billion and Php7.0 billion in 1993 to Php819.3 billion and Php367.5 billion in 2018, respectively.

I will continue to remain as Chairman of JG Summit where my involvement is no longer on the day-to-day operations and management of the business. Instead, I will provide oversight, guidance and advice on long-term growth strategies, innovation, Mergers & Acquisitions and capital allocation including major financial decisions.

Leadership Transformation for JG Summit’s Future

We have already completed the three-year journey of passing my Chief Executive Officer (CEO) role to Mr. Lance Gokongwei, last May 2018. I will continue to remain as Chairman of JG Summit where my involvement is no longer on the day-to-day operations and management of the business. Instead, I will provide oversight, guidance and advice on long-term growth strategies, innovation, Mergers & Acquisitions and capital allocation including major financial decisions.

Today, Lance is JG Summit’s President and CEO, and the Chairman of our subsidiaries and operating companies. We have also appointed a combination of professional managers and competent/experienced family members to independently lead our various strategic business units (SBU’s), designated Chief Financial Officers to support the SBU CEOs, and employed seasoned functional professionals to head our Corporate Center Units and Shared Services in order to have a more focused and deliberate view on where we aspire JGS to move forward. We have also embarked on a group-wide Digital Transformation Initiative that will further unlock the value of the group’s eco-system with the application of transformative technologies.

I am very excited about this key transformation as the new management is taking over JGS in such an exciting time with great opportunities in markets and industries where we operate.

I am very excited about this key transformation as the new management is taking over JGS in such an exciting time with great opportunities in markets and industries where we operate.

With our core values intact and the new leadership team in place, I am confident that we can effectively navigate the dynamic environment as well as capitalize on market trends to amplify growth. Our strategic business units also exhibit growth potential in the succeeding years given URC’s new equipment for exciting new products and its expansion plans; RLC’s Bridgetowne development and joint ventures with Hongkong Land and Shang Properties; CEB’s fleet expansion to include new generation aircraft and route network development programs; Petrochem’s capacity expansion and new downstream extraction units; and RBank’s groundbreaking Robinsons Bank DOS credit card launch and partnership with Pru Life UK to offer insurance products. I am looking forward to the future and the next stage of the company.

In closing, I would like to express my gratitude to our board of directors, management and employees of JGS who worked hard over the years, to bring us to where we are now; to the Philippine Stock Exchange for giving us a venue for raising the capital that fueled our growth; and of course, to you, our shareholders who have faithfully supported JGS all these years. Without your support, the value you see today would not have been possible.

Maraming salamat po!

James L. Go
Chairman