PARK24 Co., Ltd. (4666) Earnings Call Transcript & Summary

Hello, everyone. I am Nishikawa of PARK24. Thank you very much for joining our financial results briefing for FY 2023. Let me walk you through the overview of the result in line with the presentation. Starting with the consolidated results released yesterday, net sales was JPY 330.1 billion. Operating profit was JPY 31.9 billion. Recurring profit was JPY 27.6 billion and profit attributable to owners of parent was JPY 17.5 billion. Compared to the plan of revised at Q2 financial briefing, the outperforming result contributed to the extremely strong full year. Both net sales in old profit accounts hit a record high. So given those numbers, we can say that there is a little impact of COVID-19, which started in 2020, an external environment. They hardly affect our business anymore. Page 4 gives you a breakdown of JPY 10.1 billion difference between recurring profit and profit attributable to owners of the parent. To the right are major factors listed. The first one is gain on sales of real estate and the Mobility Business. We sold a part of real estate to use as Times CAR rental sites. In view of consolidating rental car business into our car sharing business under Times CAR, we sold land of sales offices of rental car business as they struggle to secure profit due to poor demand. Some sales offices provide a car sharing service even now. The locations are once ideal as rental car service provider, but that wasn't the case after the business had been shifted to car sharing service. The second factor was gain on sale of shares in which we invested, specifically, or a group company called Times Innovation Capital gained JPY 0.9 billion in profit out of sale of shares they invested in. Also, we recognized impairment losses, which was JPY 3.6 billion, including a loss of JPY 3.2 billion of contract-based intangible assets. As for U.K. business, the external environment in general is on a moderate recovery. There are some regions struggle with a slow pace of recovery. Numbers in such regions were not negative, but not really positive either. And therefore, we recognized impairment losses of JPY 3.2 billion of contract-based intangible assets attributed to the regions with very low profitability. In addition, in Australia, we haven't sued by the Australian Competition and Consumer Committee. We're offering a parking booking service called Secure Spot, but it wasn't a service that allowed complete reservations. And of course, we have indicated that there would be cases we wouldn't be able to secure parking space if it was full. However, consumers complaining to the Australian Competition and Consumer Committee that there was a discrepancy between the image of the word Secure and the actual service and they filed a complaint against us. We may incur a loss in the future. We're posting a provision for the amount as indicated with asterisks mark here, the case is currently pending, and I will refrain from disclosing further details. The above is at the extraordinary profit and loss section. Page 5 shows you the results by Business Segment. You can define net sales and the recurring profit by segment. The recurring profit of the Parking Business International doesn't include amortization of goodwill. With that goodwill amortization, all segments posted profit, but with goodwill amortization, Parking Business International is still in the red. But I should say it turned positive on a business profit basis. Starting from FY 2019 and spending FY 2021 and 2022, it took us 4 years to come back to a positive trajectory. Let me move on to Parking Business Japan. Its performance has been very brisk. FY 2023 is comparable in net sales to FY '19 when we have nearly 1,300 sites attributed to site development, streamline parking business and active cancellation of loss-making properties that we all walked on for the past 3 years. The total number of sites is slightly lower than that of FY 2019, but their quality is extremely good. We're equipped it with a good chunk of quality sites. Now let me move to Page 7 on Mobility Business. The left chart shows net sales, while the right chart shows the number of Times CAR and members. They're all steady. On the right chart, you can find in FY 2019 was 57,000 units. And in FY 2020, when COVID-19 started to affect our business, the number dropped significantly. We took a strategy in FY 2021 and 2022 to keep the number of units almost flat in order to come back to the black at the earliest. And we did come back in the black in FY 2022, which led to increase of cars by 6,985 units in FY 2023. As a result, net sales made significant growth compared to FY '19 and achieved 25.5% increase year-over-year. Regarding profit, it grew by 187.6% year-over-year, which is almost double of the year before. Some people say that more people move around since COVID-19 has diminished, also news media claim overtourism as a reason to bring more people on the street. But when it comes to overtourism, it could affect car sharing a little, but our service is not offered to those with the foreign drivers license. Therefore, the increase of inbound tourists isn't contributed to the increase of the demand. On the other hand, the shortage of taxi drivers has been our serious issue lately, which I assume, gets a positive impact on our business somewhat. The biggest contributors to the remarkable operation result is our fine distribution of cars corresponding to demands. We have also enhanced mass marketing through TV commercials with focus on corporate customers since first half of FY 2023. These initiatives are gradually generating demands and make positive impact on higher operation in the entire segment. Page 8 shows monthly usage fee per vehicle and historical trends of unit price per use. The bar charts at the left of the Page 8 represent usage fee per vehicle in a monthly basis, which marks a record high of JPY 121,800. Monthly usage fee is broken down into corporate use and individual use. Individual use was JPY 83,400, while corporate was JPY 38,400 both steadily grew from the previous year. The line chart on the right shows unit price per use. The unit price in FY 2023 increased by JPY 398 to JPY 4,439 from FY 2022 of JPY 4,041, which indicates that the unit price per hour has increased per usage. Page 9 is about Parking Business International. You can find net sales, business profit in number of sites by country. As our U.K. business profit, full year is still negative, but slightly better than the replan by about JPY 0.6 billion, so it's improved. On the other hand, Australia posted JPY 0.2 billion against the replan of JPY 1.5 billion. It didn't grow as much as we initially expected. Regarding Taiwan, Singapore and Malaysia, they recognized additional JPY 0.2 billion as a whole on top of what the replan targeted showing strong performance. As for the progress of Times Parking site development shown to the right, in U.K., as many sites as 231 are under development. Australia is 42 sites, Taiwan is 104 sites and the combined number of sites in Singapore and Malaysia is 34. We want to pick up the pace of localized Times Parking development a little bit in the future. Page 10 is on local currency basis. The numbers on Page 9 are Yen basis ineffective by the ForEx conversion. Page 10 is for your reference to understand those trends in local currency. U.K. business is almost in line with the replan on local currency basis, which means that the largest negative contributors was ForEx. As for Australia, it missed the target even on local currency basis. As the reason for the negative result in Australia is described here, the recovery was rather moderate than we expected, illustrating the normalization of remote work environments after the pandemic. Of course, threat of COVID-19 has diminished and more people moved around, but the scale of the shift back to pre-pandemic time wasn't so significant resulted in a gap against the replan. In addition, prices are increasing so much in Australia as well. We're asked for rent increase, which is another cost driver, along with lower operation than planned. As a result, we failed to hit the target of the replan. Page 11 is a consolidated balance sheet. In FY 2023, we successfully improved our shareholders' equity ratio to 22.8%, which had once dropped to as low as 7.9% in FY 2021. After 2 years, we brought it back to the level of 20%. That was a quick overview of FY 2023 consolidated results. Now I'd like to talk about the plan for FY 2024. Let me start off with basic policies, which are similar to those of recent years. We will accelerate network expansion and increase the number of parking sites in spaces as well as a number of Times cars in the rental sites in Mobility Business. Also, we'll facilitate the evolution of new and existing services by leveraging digital to create new service. As shown on the page, network expansion and evolution of services are the key basic policies. Moving on to consolidated numbers. The plan for FY 2024, our net sales of JPY 357 billion; operating profit, JPY 35 billion; recurring profit, JPY 31 billion; and net profit, JPY 20 billion. Again, we're planning to aim to achieve record highs in both net sales and in each level of profits. We're planning to surpass previous record highs. This is the plan by segment, as described on Page 15. Since this is consolidated basis, Parking Business International does not include amortization of goodwill. We will be aiming for business profit of JPY 800 million overseas. Page 16 explains the Parking Business Japan and its update. On the right, we have the bar graph showing we will develop 1,500 new sites. Last fiscal year also, we had a plan to develop 1,000 new sites. However, we finished a bit short at 974 sites. Number of sites to develop are for us a guideline. We're prioritizing business profit the most. This fiscal year, again, we're planning to selectively develop 1,500 new sites. And our plan is to generate business profit of JPY 33 billion this fiscal year. Next is Mobility Business. We have net sales and business profit planned as shown here. We're aiming for net sales of JPY 109 billion and business profit of JPY 21 billion. As for the number of Times CAR vehicles, we're planning to increase 7,753 vehicles this fiscal year. As of the end of the next fiscal year, the number of vehicles of Times CAR are planned to increase to 67,800. We call them stations, but we're planning to increase the number of rental sites to 18,000. As for membership, we're planning to increase the number of members by 4.76 million to 29 million members. For the usage fees per vehicle and unit price per use, we're planning an increase in usage fees by about 3% Y-o-Y to JPY 125,600. We're also aiming for an increase in unit price per use by JPY 45. JPY 45 increase is almost flattish, but our target is to increase it to JPY 4,484. Next page, Page 19 is Parking Business International. We have the figures by each area. For the U.K., we're assuming that it will still continue to be loss making for the full year of FY 2024. For Australia, we're planning to make significant improvements to achieve business profit of JPY 1.2 billion. And in total, we're to secure business profit of JPY 800 million. In terms of localized Times Parking site development, we're planning to increase the total by 652 sites overseas. The breakdown would be the U.K. 314, Australia 171, Taiwan 109 and Singapore and Malaysia, 58. Page 20 is similar to the previous page. These are plans based on local currencies. The plans are laid out on this page. Page 21 is consolidated balance sheet. If we can achieve the plan, shareholders' equity ratio should be 30.1%. This means we will exceed the target of 30%, which we have been talking about from before. Before in the medium-term business plan, we were saying we will not be able to reach 30% in FY 2024. Back then, we were forecasting we will reach the target 30% in FY 2025. And thus been saying, we will think about paying dividends again when we exceed the guideline of 30% equity ratio. Based on this idea, we were assuming resumption of dividend payments from FY 2025. However, we're now able to see that we will be able to achieve the guideline of 30% in FY 2024. Basically, we're a recurring business. Unless there are very big changes in the external environment, it is unlikely that the numbers will be off so much. Taking that into consideration, achieving 30% in FY 2024 is now very likely, and that is why we decided to resume dividend payments at this timing. On Page 22, we have shareholder returns policy. Before COVID-19, we did not retain excess cash as internal reserves. Our policy has been consistent that profits will be returned to shareholders in the form of dividends only. This is what we have been communicating. However, with the spread of infectious diseases in the past 3 years, we experienced something we necessarily did not need to experience. So going forward, we're assuming a certain level of internal reserves and aim for a certain level of dividends to give returns to shareholders. As of now, we're considering a payout ratio guideline of 50%. We would like to give 50% returns to shareholders, and the remainder will be accumulated, which means shareholders' equity will be significant. In some cases, we'd also like to consider other ways of returns to shareholders than dividends. From Page 24 onwards, we have projections of business growth. The diagram on Page 24 is the image of the medium-term business plan that we have been sharing from before. Basically, we generate profits from Parking Business Japan, Mobility Business, and on top of that, profits from Parking Business International will be added. And there are no changes to the image of expansion of profits from each business. For recurring profit, we have FY 2023, FY 2024 and in FY 2025, we plan to generate JPY 35 billion, which is our image as of now. As for shareholders' equity ratio, we're targeting to exceed 30% this fiscal year, and exceed 34% in FY 2025. This is the image we have as of now. The next page is on Strengthening Investments in Human Resources. We would like to create a very positive cycle like the one described here on this page. By strengthening investment in human resources, we intend to maximize human capital value as is described here. Improvement of labor productivity, engagement and others will lead to sustainable business growth and creation of new services. We're keeping in mind creating such a positive cycle and thus be proactive in making investments in this domain from FY 2024. From FY 2023, we have already started investments for human resources, but we'd like to bolster this more. And in the end, expand the business scale and push up unit price. Page 26 is about new business model as our medium-term business strategy. We have already published a press release about this. I would like to give a brief overview about it. Vehicles for car sharing for West Japan Railway Rent-a-Car and Lease will be placed in parking space prepared by West Japan Railway Rent-a-car and Lease. Our system will be used for car sharing operation. We will be offering this service to Times CAR members and those who will newly become Times CAR members. The vehicles to be used for car sharing will be West Japan Railway Rent-a-Car and Leases' brand. As a first step, we signed a business alliance with West Japan Railway Rent-a-Car and Lease, but we would like to proactively enhance this kind of an initiative in the future. Last of all, I would like to explain about sustainability initiatives. For initiatives related to the environment, we have been facilitating the introduction of hybrid vehicles and electric vehicles for the Times CAR service from before. We have a policy to reduce total GHG emission year after year. In FY 2023, we had a total of 29,634 hybrid and EV vehicles. This means almost half of the cars introduced for either hybrid or EV. We plan to continue these initiatives to raise the ratio of EVs and hybrids and reduce total GHG emission. In respect to initiatives related to society, we obtained Eruboshi certification and Kurumin certification and were recognized as a Certified Health & Productivity Management Outstanding Organization. Going forward, in the fields like women participation in society and child-rearing, we would like to proactively collaborate and offer support. As for information disclosure, we renewed the Sustainability page of our corporate website. Please refer to it when you have time. We have continued to be engaged in such initiatives. As a result, we're now recognized by external organizations as well. PARK24 was selected as a constituent of FTSE Blossom Japan Sector Relative Index. We were also selected as a NIKKEI Smart Work company sponsored by Nikkei. Our sustainability initiatives are gradually being recognized by external organizations. We would like to continue to bolster our initiatives related to sustainability going forward. That is all for the briefing meeting of the plan for FY 2024. Thank you very much for your attention.