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

Hello, everyone. This is Kawakami, Head of IR. As explained, we made 4 disclosures today. First, I will go over the highlights of 3 of the disclosures, aside from the revision of our earnings forecast and then explain about the revision of our earnings forecast. First of all, please see the documents titled notice regarding progress of items previously disclosed, notice regarding transfer of subsidiaries fixed assets and recognition of extraordinary gain and loss. This disclosure is regarding the disposal of part of our hotel and leisure business assets to GIC, as part of our asset-light strategy. In relation to the disclosure made on June 30, Seibu made a resolution today regarding the transfer of some of the assets and plans to book an extraordinary gain and extraordinary loss in the second quarter. Seibu resolved today to transfer the 4 hotels listed here as of tomorrow, September 30. And we are expecting to book a gain on the sale of fixed assets of around JPY 69 billion as extraordinary gain in the second quarter. These 4 hotels will continue to be operated by Seibu Prince Hotels worldwide. Out of the 31 assets in the June 30 disclosure, there has been no change to the expected date of transfer for the 27 assets excluding these 4 hotels from what was disclosed on June 30. However, we decided to book JPY 14 billion of impairment loss in the second quarter for some of the assets after considering the possibility of recovering our investments in these assets. As for the impact on our earnings forecast, in the previous earnings forecast, we were forecasting the revenues, P&L and disposal gains based on the assumption that the 31 assets will be transferred at the end of March 2023. As for the 4 hotels that will be transferred at the end of September 30, the second-half revenues and profit that we had been expecting will instead be booked as revenue and profit from managing the assets and will be lower than what we had previously expected in the second half. So we have reflected that change in the earnings forecast announced today and out of the disposal gains that we had been expecting to book at the end of the fiscal year, we reflected the disposal gains for the 4 hotels as well as the impairment loss for some of the other assets in the revised forecast for the first half. Next, please see the documents titled notice regarding recognition of extraordinary income at a subsidiary resulting from transfer of noncurrent assets. This disclosure is regarding the sale to the Tokyo Metropolitan Government of part of the land that used to be the Toshimaen Amusement Park and about how we are expecting to book a gain on the sale of fixed assets in the third quarter. Out of the total of around 200,000 square meters for the whole of the former Toshimaen, there is around 90,000 square meters that is now Warner Bros. Studio Tour Tokyo as well as the space that is currently being operated as a spa facility, and we have decided to sell around 40,000 square meters out of the remaining space to the Tokyo Metropolitan Government. We will continue discussions with the Tokyo Metropolitan Government about the remaining portion of the land. We had not factored in most of the estimated disposal gain in our previous forecast, which we have factored into the full-year revised forecast this time. Next, please see the documents titled notice regarding recognition of extraordinary losses. This disclosure is related to the consolidation of part of the assets owned by Seibu Railway to Seibu Realty Solutions with the objective of integrating and improving the efficiency of managing the hotel and leisure business as well as our outlook of booking impairment loss for some of the fixed assets after considering the probability of recovering our investments related to those assets. The impact from this has been factored into the first-half earnings forecast. Lastly, I will explain about the earnings forecast. This is the document titled notice regarding revisions of cumulative consolidated earnings forecast for the 6 months ending September 30, 2022, and full-year consolidated earnings forecast for the year ending March 31, 2023. Based on our business performance as well as the impact of the 3 items I just explained, we have revised down our full-year forecast. And for the first half, we lowered the numbers for the profit items, except for quarterly profit attributable to owners of parent. The numbers are as shown here. Let me explain the background for revising the operating revenue and operating profit numbers for the Urban Transportation and Regional business as well as the Hotel and Leisure business. For the Urban transportation and Leisure business, the main reason for lowering the operating revenue outlook is the transportation revenue being lower than expected. Based on the fact that the recovery in railway use from the first quarter until today has been significantly below our expectations, we lowered our assumptions for transportation revenue as stated in the second page of the document. On the expense side, we expect energy costs for the railway business to trend at levels higher than initially anticipated, and we expect it to be JPY 2.2 billion higher for the full year compared to our previous forecast. Next, the Hotel and Leisure business. In the first quarter, revenue and profit were higher than our expectations, but we were affected by the seventh wave of COVID in the second quarter, which led to the growth in use of our hotels in Japan, not meeting our expectations, resulting in the weaker-than-expected earnings. As shown on Page 2, we have revised our assumptions regarding full-year RevPAR and the quarterly trends in occupancy for our domestic hotel business. We are expecting demand to recover in the second half, driven by the start of nationwide travel support by the government as well as the easing of border restrictions, and we are seeing signs of recovery in the current status of reservations. However, we are assuming that it will take some time for a full-fledged recovery of inbound demand, especially visitors from China and are, therefore, lowering our outlook from the previous forecast. As for the negative impact on revenue and profit from the disposal of the 4 hotels on September 30, which I explained earlier, including the positive impact regarding the management contracts, we are factoring in minus JPY 8.8 billion in revenue and minus JPY 2.6 billion in profit in the revised forecast. In terms of the profit items below operating profit, the main reasons for the changes in extraordinary gains and extraordinary losses are the 3 points, I explained earlier. These are the highlights of this round of disclosures. Seibu is currently working on management reforms, which is the main theme of our midterm management plan. We made this downward revision because the pace of recovery from the COVID pandemic has been slower than expected, but we believe Seibu is steadily evolving into a company that can withstand such pandemics. There are tailwinds such as the border restrictions for foreigners being eased on October 11, as well as the starting of the Nationwide Travel Discount Scheme. We intend to capture that demand, improve our earnings and achieve our targets. Thank you.