Thank you, Mr. Chairman, and to all our shareholders joining us today. I want to express my sincere appreciation for everyone listening in and participating, and for your continued investment in Upson.
I would like to take this opportunity to cover three main points:
- First, a look at our performance. I will explain how we delivered our strongest results in 2022.
- Next, I will touch on why we believe Upson is well positioned in the market, and
- Lastly, I will present the strategic priorities we are working on to ensure continued progress in the future.
In 2022, we saw the return of consumers to in-store shopping. We also witnessed significant improvement in component shortages and global electronics supply chain. All these developments translated into record achievements. Let me offer a few highlights.
Our revenues were up 10% year-on-year to ₱9.5 billion. This was the highest annual revenue in our history, and it reflects the strong demand for IT products that we are seeing across the country. It also reflects the solid execution by our team as shown by the successful opening of 24 new stores during the year which drove our total store count to 207 at the end of the year. At the same time, the positive impact of the eight stores opened in 2021 also contributed to the top-line development.
If we look at the underlying growth drivers by product category, PCs contributed the largest increase in our revenues followed by printing and communication.
Throughout the year, we were able to leverage our scale more effectively. Our gross profit rose 16% to reach ₱2.2 billion and resulted to a gross profit margin of 23% which was up 102 basis points over last year. This was primarily driven by volume gains, higher purchase discounts from suppliers, and better product margins in mobile and networking categories.
Turning to operating profit, this number climbed 15% to ₱649.1 million. As expected, there were additional costs related to expansion such as rent and personnel costs, but overall, our operating efficiency remained intact. As a percentage of revenues, operating expenses increased 73 basis points to 16.2%, and operating profit margin improved 29 basis points to 6.9%.
Now, let me highlight our net income because it also reached an all-time high. In 2022, net income surpassed ₱537 million, growing 33% year-on-year. There are two factors that provided a boost to this result: first is the reduction in our finance costs and second is the growth in other income. Specifically, finance costs decreased 57% in connection with the bank loans paid in 2021, while other income grew 56% mainly from product advertising and promotional support from suppliers.
As we look ahead, 2023 will be a year of great change, perhaps more than any year that came before. It is our first year as a public company. But what gives me confidence is our committed team and our built strengths that will prove invaluable in realizing the potential of the opportunities in this new stage of growth.
Accessibility. We have consistently pointed out our broad geographic footprint as a key competitive advantage. And it is because, with over 200 stores and presence in every region, we are unlike any other IT retailer in the country. But I think it bears repeating because our plans will not only have us growing within our current markets, but it will also add more secondary cities.
Availability. Our product offerings of 13,000 SKUs are varied and at different price points. They are also refreshed frequently, allowing us to be responsive to prevailing market needs and local preferences.
Authenticity. Across our store network, we sell only authentic and untampered products which builds confidence and loyalty among stakeholders. For customers, this reinforces positive perception towards us knowing that their purchases are guaranteed by technology brands that are among the most respected names globally. And for suppliers, this positions them to deliver reliable customer service and support that is consistent with their brand image.
Lastly, we have an effective supply chain. Our competencies in this area are fueled by three things: in-depth know-how, strategically located warehouses and in-house logistics assets, and dynamic supplier collaboration. Taken together, this helps us attain operational excellence and competitive pricing.
To further enhance our presence in growth areas, we will continuously expand our store network and penetrate these markets by adding 50 stores per year from 2023 to 2027 or a total of 25,000 sq.m. This means that in five years, we would have more than doubled our footprint to 450 stores or a total of 50,000 sq.m. in retail space. To achieve this, our focus areas will be Metro Manila, CALABARZON, Central Luzon, Western and Central Visayas, and Mindanao.
Essential to this nationwide expansion is to develop more warehouses, and our plan is to add nine warehouses and distribution facilities in Manila, Cabanatuan, Dagupan, Naga, Palawan, Iloilo, Bacolod, General Santos, and Zamboanga;
As our coverage widens, so does our commitment to ensure availability of complete line of IT products. And we will continue to do that by adding more SKUs in our existing and adjacent product categories, as well as aligning distribution and marketing with anticipated demand and product lifecycle;
For certain markets, we are also prepared to pivot our resources to launch new store formats to meet the distinctive demand of consumers, complement current offerings, and facilitate new in-store experience;
Finally, in this dynamic environment, we will invest behind omni-channel capabilities, and will continuously explore opportunistic acquisitions based on synergy potential and financial performance.
In closing, let me take a look into the past: Since 1995, when our business started as a distribution company, we have always worked with a growth mindset. Find opportunities, invest in the team and capabilities, embrace change, and continually learn. Today, this is also how we approach the future. Our path forward will be defined by more effort, new approaches, and feedback from others.
With that in mind, I want to thank our team for their relentless focus to deliver for our customers, for our company, for each other, and for you, our shareholders. I’m truly excited for the year ahead and I look forward to sharing our progress with you in the months to come.
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