Seibu Holdings Inc. (9024) Earnings Call Transcript & Summary

I will now go over the third quarter results. Despite the challenging business environment due to the impact of COVID-19, operating revenue increased 18.9% year-on-year. As for profit, EBITDA was plus JPY 37 billion, thanks to revenue growth as well as cost control, et cetera. Operating profit and profit attributable to owners of parent were still negative but improved from the previous year. Fixed expenses declined JPY 27 billion compared to the same period 2 years ago. As we show on Page 9, JPY 19.5 billion of the decline came from the Hotel and Leisure segment, and there was a JPY 3.1 billion decline in the Urban Transportation and Regional segment. For extraordinary income, we booked JPY 13.7 billion of gain on sale of noncurrent assets from the sale and securitization of real estate, et cetera. Please see Pages 4 and 5 for the other factors in each segment. Next is the full year forecast. Please turn to Page 29. We have revised the full year forecast based on the current business performance as well as the impact from the transfer of Seibu Construction shares. In the third quarter, the recovery in demand for people going out was stronger than expected. However, due to the current resurgence of infections, we expect the future recovery will be delayed. We have, therefore, lowered our full year operating revenue forecast by JPY 6 billion. And although we will continue cost control, including cutting or pushing back the timing of expenses, we have lowered our operating profit forecast by minus JPY 3 billion. Profit attributable to owners of parent is forecasted to be plus JPY 9 billion, with the share transfer of Seibu Construction through which we are planning to book an extraordinary income of JPY 38 billion in the fourth quarter. The partial transfer of the Hotel and Leisure business assets announced today is expected to take place in the fiscal year ending March 2023, and we have, therefore, not factored it into this year's forecast. Please see Pages 30 and 31 for the outlook by segment and the current trends in the railway and hotel businesses. This concludes my presentation. Thank you very much.

This is Takashi Goto of Seibu Holdings. Based on the medium-term management plan of the Seibu Group, which we announced last May, we have been considering the plan of continuing to own the group's hotel and leisure segment assets which we plan to redevelop and aiming to maximize their values within the Seibu Group, while securitizing the other assets and generating cash, with SEIBU PRINCE HOTELS WORLDWIDE INC. handling the operation and management of the hotels, golf courses and ski resorts. Today, we signed the basic agreement regarding the building of a long-term partnership with GIC for the Hotel and Leisure business. Today, we have asked you to join us so that we can explain the overview of this partnership. In order for you to better understand its objective and strategy, I will first explain Seibu Group's reforms towards further growth in the post COVID society. Please turn to Page 38. First, a review of the past. In response to the impact from COVID-19, the Seibu Group announced bold management reforms in the medium-term management plan for fiscal year 2021 to 2023 made public last May. The main themes are asset-light business operation, lowering the breakeven point and service transformation to suit the new normal. Please turn to Page 39. Based on these initiatives and as one of the management reforms, on December 9, 2021, we came to a decision regarding the group reorganization, which will take effect on the 1st of April 2022. Prince Hotels Inc. will become SEIBU PRINCE HOTELS WORLDWIDE INC. and Seibu Properties, Inc. will become SEIBU REALTY SOLUTIONS, INC. After the reorganization, the 3 companies, Seibu Railway, SEIBU PRINCE HOTELS WORLDWIDE and SEIBU REALTY SOLUTIONS, will become the core entities of our main 3 segments and drive the overall Seibu Group going forward. Please turn to Page 40. SEIBU PRINCE HOTELS WORLDWIDE and SEIBU REALTY SOLUTIONS will focus on their respective roles and create incremental value in the hotel and leisure and real estate businesses. As hotel operator, SEIBU PRINCE HOTELS WORLDWIDE aims to build the industry's #1 quality hotel chain. We will provide services that satisfy customers, generate returns that exceed the expectations of owners and, as a result, strengthen brand value and grow the number of hotels worldwide from the current 84 to 250 in 10 years' time. On the other hand, SEIBU REALTY SOLUTIONS will own numerous real estate properties with strong potential and will use a wide range of measures such as raising funding as well as partnering with others and seek to maximize the value of the group's assets. Moreover, SEIBU REALTY SOLUTIONS will strengthen its asset, property and building management capabilities and evolve into a highly competitive, comprehensive real estate company. Please turn to Page 41. As the second measure of management reforms, we have conducted an even more thorough review of our business portfolio towards our vision for the group in a post-COVID-19 society of, to be the best and strongest lifestyle support corporate group. One of the reforms is in relation to the hotel and leisure segment, which we are announcing this time. Please see Page 42. As mentioned at the beginning, we have selected GIC as joint partner for the securitization of several of our hotel, golf and ski assets, and today signed the basic agreement regarding the long-term partnership in the Hotel and Leisure business. The transaction covers a total of 31 facilities, including the Prince Park Tower Tokyo, Sunshine City Prince Hotel and Naeba Prince Hotel, out of the 76 domestic hotels, golf courses, ski resorts, et cetera, which Prince Hotels currently owns. The disposal price based on the basic agreement is approximately JPY 150 billion, and we are planning to book a capital gain of around JPY 80 billion. GIC owns hotels in Japan, and with their extensive experience investing in Japan as well as in hotels overseas, we believe GIC is the best partner for Seibu. SEIBU PRINCE HOTELS WORLDWIDE will continue to operate the properties that will be sold to GIC. We will work together with GIC to enhance the value of these assets while expanding our network. Please see Page 43. The other highlight of our business portfolio review is the transfer of Seibu Construction shares to MIRAIT Holdings announced on January 27 of this year. This decision was part of our goal of becoming the best and strongest lifestyle support corporate group by focusing our management resources on businesses that are close to our customers' everyday lives. The MIRAIT Group, to whom we are selling Seibu Construction, is seeking to shift its business model from one centered around communications-related construction work to a full value-type model. We believe joining such a group is a positive move for Seibu Construction and will lead to future growth. Please turn to Page 44. This page is about our future growth strategy. By making ourselves asset-light and with the transfer of Seibu Construction shares, we will solidify our financial base for future growth in a short period of time. We believe there are 2 core parts to Seibu Group's growth strategy. The first is to expand the number of hotels throughout the world of SEIBU PRINCE HOTELS WORLDWIDE and its subsidiaries, [ Seibu ] from the current 84 to 250 in around 10 years. The second is to seamlessly realize the large-scale development projects for which we will make full-fledged progress in fiscal year 2024 onwards. This initiative will be driven mainly by SEIBU REALTY SOLUTIONS. Moreover, we will focus on redeveloping the well-known resorts such as Karuizawa, Hakone and Furano, with a focus on sustainability, and we will work on these initiatives with speed. Please see Page 45. So far, I have explained the management reforms we have been working on this fiscal year. We will also move forward with the reform of Seibu Railway in the next fiscal year. With the rapid changes in values and behavior brought about by COVID-19, trends such as teleworking have emerged. And we should assume that transportation revenue, especially commuter revenue, will not go back to pre-COVID levels. We are, therefore, making various efforts to lower the breakeven point. And together with management reforms, we will drive digital transformation and sustainability to maximize corporate and shareholder value. We will continue our challenge of becoming the best and strongest lifestyle support corporate group towards achieving our vision for the Seibu Group in a post COVID-19 society. That's all for me. Thank you for your attention.