Amended Annual Report for the year ended 31 December 2011 (17-A)

(2) Management’s Discussion and Analysis
2011 compared to 2010
I-Remit realized a consolidated net income of PHP 136.1 million in 2011, an increase of PHP
70.1 million or 106.4% over the consolidated net income of PHP 65.9 million in 2010. The
consolidated net income in 2011 and 2010 are 17.3% and 8.7% of the 2011 and 2010
revenue, respectively.
Revenues increased by 3.4% or PHP 26.1 million from PHP 761.8 million in 2010 to PHP
787.9 million in 2011 mainly due to the increase in realized foreign exchange gains. Foreign
exchange gains increased by 4.6% or PHP 12.1 million from PHP 262.1 million in 2010 to
PHP 274.2 million in 2011. The Company’s revenue from delivery fees grew by 2.9% or PHP
14.5 million from PHP 498.7 million in 2010 to PHP 513.3 million in 2011 largely because of
the appreciation of the Philippine peso against the U.S. dollar. The Company’s fees are
largely settled in U.S. dollars. The average peso-dollar exchange rate was PHP 45.11 in 2010
against PHP 43.31 in 2011, a gain of 4.0% or PHP 1.80 per dollar. In December 2011, the
average peso-dollar exchange rate was PHP 43.65 per dollar. The value of transactions grew
by 16.7% or USD 202.3 million from USD 1.213 billion in 2010 to USD 1.415 billion in 2011.
The number of transactions processed by the Company grew by only 2% from 2.737 million in
2010 to 2.794 million in 2011. Other fees decreased by 60.69% or PHP 0.5 million from PHP
0.9 million in 2010 to PHP 0.4 million in 2011 due to lesser number of amendments and
retrievals recorded in 2011.
Costs of services decreased by 2.3% or PHP 4.7 million from PHP 204.1 million in 2010 to
PHP 199.4 million in 2011. Total costs of services in 2011 and 2010 are 25.3% and 26.8% of
the 2011 and 2010 revenue, respectively. These are mainly due to the decrease in delivery
charges by 49.8% or PHP 14.9 million from PHP 29.9 million in 2010 to PHP 15.0 million in
2011 brought about by the huge reduction in door-to-door transactions in 2011. These are
partly offset by the increase in the cost of fulfilling delivery of remittances to beneficiaries
mostly in the form of bank charges by 5.8% or PHP 10.2 million from PHP 174.2 million in
2010 to PHP 184.4 million in 2011.
Other operating income (loss)-net increased by 56.9% or PHP 9.7 million from PHP 17.0
million in 2010 to PHP 26.8 million in 2011. Total other operating income (loss)-net in 2011
and 2010 are 3.40% and 2.24% of the 2011 and 2010 revenue, respectively. These are
mainly due to the PHP 21.7 million refund of GST previously paid by International Remittance
(Canada) Limited (IRCL) and Worldwide Exchange Pty Ltd (WEPL) to the government of
Canada and Australia, respectively. Both entities are exempt from paying GST. These are
partly offset by the decline in net trading gains by PHP 5.5 million or 223.8% from PHP 2.5
million in 2010 to –PHP 3.1 million in 2011 due to unrealized capital loss accrued from
investment on stocks by Power Star Asia Group Limited (PSAGL). PSAGL invested on stocks
at an average cost of 126.90 marked at 126.30 as of the close of December 31, 2011.
Total operating expenses was higher by PHP 11.4 million (2.6%) from PHP 435.9 million in
2010 to PHP 447.3 million in 2011. Total other operating expenses in 2011 and 2010 are
56.8% and 57.2% of the 2011 and 2010 revenue, respectively. These are mainly on account
of higher rental, salaries, wages and employee benefits, photocopying and supplies,
entertainment, amusement and recreation, communication, light and water and other
operating expenses. The increase in these expense items are related mainly to the
Company’s expansion as it opened new offices in Canada, Italy and Japan. Rental expenses
increased by 15.4% from PHP 46.4 million in 2010 to PHP 53.5 million in 2011 due to the
yearly escalation applied by lessors on rented office premises. Salaries, wages and employee
benefits expenses increased by 2.4% from PHP 208.5 million in 2010 to PHP 213.5 million in
2011. Photocopying and supplies expenses increased by 24.7% from PHP11.7 million in 2010
to PHP 14.6 in 2011 due to higher production of visa cards and kits in 2011. Entertainment,
amusement and recreation expenses increased by 56.6% from PHP 3.8 million in 2010 to
PHP 6.0 million in 2011 mainly due to the development of offices/tie-ups in Japan, Kuwait,
Saudi Arabia and Oman. Communication, light and water increased by 6.4% from PHP 22.1
million in 2010 to PHP 23.5 million in 2011 due to increase in number of remittance
transactions in 2011 which required more communication between the company and its
customers. Along with this, electricity bills also increased as more transactions required
extended processing time. Other operating expenses increased by 34.0% from PHP 21.0
million in 2010 to PHP 28.2 million in 2011 mainly due to disallowed Input VAT for years 2005
and 2006 (PHP 2.1 million), license fee paid for the start in operation of K.K. I-Remit Japan
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