Keikyu Corporation (9006) Earnings Call Transcript & Summary

[Interpreted] I am [ Kawamura ] of the Management Strategy Department. I will explain the financial results for the first quarter of the fiscal year ending March 31, 2026. Now please turn to Page 4 for executive summary. Please refer to financial results with year-on-year changes. Revenue increased due to strong performance in the Transportation and Leisure Services segment. However, profits decreased due to the absence of the sale of business sites in the Real Estate segment in the same period of the previous fiscal year. Profits attributable to owners of parent decreased due to the absence of the tax effect associated with the decision to transfer the Nagano Keikyu Country Club business in the same period of the previous fiscal year. Please refer to progress against the full year business forecast in the middle. Revenue from operations was JPY 0.5 billion higher than the initial forecast due to higher unit prices in the business hotel operations and the Retailing segment. Operating profit was JPY 0.9 billion higher than the forecast due to revenue growth trend and the deferral of some expenses. Please refer to Q1 topics below. First, construction has started on the Shinagawa Station West Area Exit District A or so-called the Takanawa 3-Chome new construction plan. I will explain about it later. Second, in the business hotel operations, since May, we have been renovating the Keikyu EX Hotel Takanawa in front of Shinagawa Station to meet diversifying accommodation needs from such as inbound tourists as well as to increase the unit price of guest rooms. Third, we conducted a share buyback of approximately JPY 6.2 billion by the end of July in accordance with the return policy in the management plan updated in May. Fourth, we have decided to adopt the stock benefit trust for managers in the position of senior manager and above to raise their awareness of business performance and the share value further for sustainable enhancement of corporate value. The bottom part of the page shows the major figures of PL and BF, which will be explained later. Now please turn to Page 6 for consolidated statements of income. Revenue from operations was JPY 73.1 billion, up JPY 0.2 billion year-on-year. Operating profit was JPY 8.5 billion, down JPY 0.1 billion. Ordinary profit was JPY 7.8 billion, down JPY 0.6 billion and profit attributable to owners of parent was JPY 5.4 billion, down JPY 1.4 billion. The reasons for the profit decrease are as explained earlier in the summary. Capital investment was JPY 20.8 billion out of the annual plan of JPY 142.1 billion. Of this amount, JPY 6.8 billion was invested in SPC. Next, I will explain the status of each segment. Please turn to Page 9. This page is about the Transportation segment. Its revenue from operations was JPY 30.2 billion, up JPY 0.6 billion year-on-year, and operating profit was JPY 5 billion, up JPY 0.2 billion year-on-year. While the railway and bus operations performed well, the taxi operations posted a loss of JPY 60 million. In the railway operations, revenue increased due to growing transportation demand for Haneda Airport and strong mobility demand. In the bus operations, revenue increased due to the fare revision on general routes, et cetera. Next, Page 10 shows a breakdown of the number of passengers carried and revenue from the railway operations. The number of passengers carried shown on the upper table increased 2.3% year-on-year. And the revenue from the railway operations in the middle, revenue from both commuters and non-commuters increased 2.4% year-on-year. In the operating expenses of the railway operations provided in the lower right, personnel expenses increased due to an increase in salaries. Repair expenses decreased, and this is due to the deferral of expenses to the second quarter or later. Next page, Page 11 shows the number of passengers carried at the 2 Haneda Airport stations. It increased 8.1% year-on-year, reflecting the continuously strong mobility demand. Next, please turn to Page 12 for the Real Estate segment. The total revenue from operations from real estate sales and leasing operations was JPY 12.1 billion, down JPY 4.4 billion year-on-year, and operating profit was JPY 0.8 billion, a decrease of JPY 1.4 billion. In the Real Estate sales operations, both revenue and profit declined due to the absence of sales of sites for condominium buildings in the same period of the previous fiscal year. Condominium sales have been below expectations and will enhance our sales activities going forward. In the Real Estate leasing operations, revenue increased due to the growth in occupancy rate of YOKOHAMA SYMPHOSTAGE, which opened May last year and opening of a new rental condominium complex. However, profit decreased due to depreciation and expenses for these properties. Next, please turn to Page 13. Major condominium properties to be delivered in this fiscal year are shown on the map of the Keikyu line. Among these properties, we have started the delivery of number two, PRIME Yokosuka Chuo in this first quarter under review. Delivery of some units were postponed to the second quarter, but all the units are already sold out. Number four, Park Tower Omori has also been sold out and its delivery is scheduled to take place from March 2026 to the next fiscal year. At the bottom of the page, I'll explain the progress of the real estate turnover business, which was set as a pillar of the real estate business strategy in the management plan updated in May. In May, we concluded a basic agreement for a private REIT business with Sumitomo Mitsui Trust Bank and Sumitomo Mitsui Trust Real Estate Investment Management to strengthen our real estate business strategy. We will make steady progress in preparations for the full-scale formation of the REIT and the real estate turnover business in FY 2026 and grow the real estate turnover business and enhance capital profitability. And in the current quarter, we are promoting sales activities for idle assets and expect to close contracts by the end of the second quarter. In the first quarter, we acquired land for rental apartment projects and invested in private Real Estate funds. Next, please turn to Page 14 for the Leisure Services segment. Revenue from operations was JPY 8.7 billion, up JPY 1.3 billion year-on-year, and operating profit was JPY 1.8 billion, up JPY 0.8 billion. And the business hotel operations, as shown on the right, the occupancy rate based on the number of rooms currently in operation increased 2.5 percentage points year-on-year to 89.7%, exceeding the forecast for this first half of 88%. In addition to the revenue increase due to this recovery in lodging demand, the unit price for guest rooms also rose 13.3%. In the leisure-related facilities operations, both revenue and profit increased due to higher facility rental rates in the boat racing business at Heiwajima. Next, please turn to Page 15 for the Retailing segment. Revenue from operations was JPY 20.9 billion, up JPY 2.5 billion year-on-year, and operating profit rose slightly to JPY 0.6 billion. In the Department Store and SC operations, revenue declined due to the absence of out-of-store sales in department stores in the same quarter of the fiscal year, but revenue increased in the store business due to the sales recognition of F-Climbing, which became a subsidiary in the same quarter of the previous fiscal year as well as strong customer traffic at the supermarket that opened in the previous period and at existing convenience stores. Next, please turn to Page 16 for the Other segment. Despite a decrease in revenue due to the transfer of Keikyu Driving School at the end of the previous fiscal year, both revenue and profit increased due to increase in completed construction projects and other factors. That is all for the status of each segment. Next, please turn to Page 17. This slide shows consolidated statement of income by quarter. In the comparison between the fourth quarter of the previous fiscal year and this first quarter, the Transportation segment recorded higher profit as it recognizes a large amount of repair expenses for the railway operations at the end of fiscal year. In the Real Estate segment, one condominium building in Yokosuka was completed in the first quarter, but a significant decrease in revenue and profit was recognized as we had the completion and delivery of 3 condominium properties in the YOKOHAMA area. In the Leisure Services segment, the increase in the unit price of hotel guest rooms and the increase in the facility rental rate in the board raising business contributed significantly to the increase in revenue and profit. Remarks are provided for other major differences for your later review. Next, please turn to Page 18 for nonoperating and extraordinary income and losses. Nonoperating expenses, although not stated, increased by JPY 0.5 billion year-on-year due to increase in interest expenses and expenses for the corporate bond issuance in April. Extraordinary losses decreased by JPY 1.2 billion year-on-year due to the absence of loss on retirement of noncurrent assets for the demolition and removal expenses associated with the Aburatsubo area redevelopment plan and the absence of loss on transfer of Nagano Keikyu Country Club business, both recognized in the same period of the previous fiscal year. Please turn to Page 19 for the consolidated balance sheet. Cash and deposits decreased JPY 6.1 billion from the end of the previous fiscal year to JPY 68.3 billion due to the share buyback and year-end dividend as well as the payment of the construction costs for the Shinagawa Station consecutive grade separated crossing project despite the fundraising of JPY 25 billion through the corporate bond issuance and cash inflows from the development contribution for the Shinagawa Station consecutive grade separated crossing project. Investment securities increased by JPY 11.5 billion due to increase in the valuation of shares held. Interest-bearing debt and net interest-bearing debt increased as a result of the issuance of corporate bonds. Equity-to-asset ratio increased 0.2 percentage points to 35.9%. The full year business forecast announced in May is provided again in the following pages for your later reference. Lastly, please turn to Page 30. I will explain the Keikyu Shinagawa development project. As I mentioned in the topics section, we started construction on the Shinagawa Station West Exit Area District A or Takanawa 3-Chome new construction plan in May. We will promote the project in collaboration with Toyota Motor Corporation. In launching this project, we have decided our vision for the future of Shinagawa as MINATO Seaside Gathering, where worlds unite, minds move and society changes. And to realize this vision, we have also decided on the Shinagawa development concept of welcome and go. While fulfilling our role of connecting people, cultures and places, we will drive new urban development by co-creating and harmonizing with other companies that have various strengths. That is all from me. Thank you.