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

Hello, everyone. This is Kiyoto Kawakami, Head of IR. Today, at the same time as the results, we announced a change in representative directors. I will first go over this announcement and then explain our results, earnings forecast and management reforms. First, about the notice of change in representative directors. As stated in the disclosure material, we decided in today's Board meeting that as of April 1, Mr. Goto, who is the current President and Representative Director and CEO, will become Chairman and Representative Director and CEO. Mr. Nishiyama, who is the current Director, Executive Managing Officer and Executive General Manager, Corporate Planning Department, will become President and Representative Director and COO and Executive General Manager, Corporate Planning Department. Mr. Goto, the current President, will continue his role as Representative Director and as CEO, remain in charge of managing Seibu Holdings and the group from a broad and long-term perspective. Meanwhile, the COO will be in charge of business execution and part of our external activities, et cetera. Mr. Nishiyama, current Director and Executive Managing Officer, has been promoting the current midterm management plan and showing leadership in driving forward various initiatives as Executive General Manager of the Corporate Planning Department despite the difficult management environment. As COO, he will focus on executing the currently ongoing management reforms as well as the setting of the new midterm management plan with the aim of enhancing corporate value over the mid- to long term. The Seibu Group is currently promoting management reforms in order to adapt to the current external environment and to sudden changes in the management environment. As we execute the current midterm management plan as well as set the new midterm management plan to achieve sustainable growth of the group, we are appointing 2 representative directors with the aim of strengthening the management structure and establishing a structure that can adapt to such changes with speed as well as make the senior management team younger. We look forward to your continued support. Now let me go over our results, earnings forecast and management reforms using the overview of financial results for the 9 months ended December 31, 2022. Please turn to Page 3. This is the summary of the results. During the 9 months, we achieved growth in both revenue and profit, thanks to the recovery in demand following the lifting of restrictions and achieved profitability at all levels, including operating profit. Please see Pages 5 and 6 for the earnings as well as the reasons for the ups and downs. We booked JPY 79.9 billion of extraordinary income from the sale of noncurrent assets as a result of the disposal being completed by December for 19 out of the 31 hotel and leisure assets, which are to be disposed as part of our asset-light strategy as well as the partial disposal of the former Toshimaen land. Out of the remaining 12 hotel and leisure assets that are to be disposed, we completed the disposal for 6 assets on February 1. We plan to dispose the remaining 6 assets by March end. We outperformed our September forecast, and based on the current business performance trends, et cetera, decided to revise upwards our full year earnings forecast. Please see Pages 35 to 39 for details of the revised forecast. I will explain current trends in the railway and the domestic hotel businesses later. Please turn to Page 9. We have some explanation about preferred shares at the middle right of the page. Due to progress in our management reforms leading to the strengthening of our financial base, we decided that Seibu Railway will acquire and cancel all the preferred shares issued by Seibu Railway in March of this year. Please turn to Page 11. I will talk about management reforms in the Urban Transportation and Regional business using this page and Page 12. With long-lasting changes in people's values and behavior resulting from COVID-19, we do not expect commuter revenue from our Railway business to fully recover. Under these circumstances and with the aim of building the optimal structure to strengthen our profitability and achieve group synergies, we have decided to transfer our real estate assets and review the management structure of the tourism business along our railway lines. As a result, we will establish a structure in which each of the group companies focuses on their core business, and we will seek to further grow each business by consolidating the operational expertise and resources of the group and strengthening the specialization. Please turn to Page 12. There are 2 main points to the organizational and management reforms. The first is the transfer of real estate assets. As disclosed on December 8, we will transfer, through a company split, real estate assets other than the railway assets of Seibu Railway to SEIBU REALTY SOLUTIONS. The size of the asset transfer is expected to be around JPY 80 billion based on book value. Through the transfer of real estate assets, Seibu Railway will focus on the railway business and as well as its function of creating value along its railway lines. While SEIBU REALTY SOLUTIONS will, together with its real estate in Central Tokyo and resort areas, consider how to make best use of real estate along the Seibu Railway lines, thereby maximizing value. The second point is establishing the best management structure for the Seibu Group in the tourism business along railway lines. By consolidating the group's resources and expertise related to business operations, we will strengthen the specialization of each group company, which will lead to further profitability improvement. For example, we have decided to transfer the operations of Seibuen Amusement Park to our group company, Yokohama Hakkeijima Inc., which operates aquariums and amusement parks such as the Yokohama Hakkeijima Sea Paradise. The Seibuen Amusement Park, through the collaboration with Katana Inc., which has strong expertise in marketing, has been focusing on capturing new customer segments since its renewal opening in 2021. With this transfer, we can apply the expertise built up at Yokohama Hakkeijima Inc. over years of managing leisure facilities such as aquariums and amusement parks to Seibuen Amusement Park, thereby further strengthening its operational capabilities and specialization. Through the transfer of real estate, SEIBU REALTY SOLUTIONS, the new asset owner of Seibuen Amusement Park, will collaborate closely with Yokohama Hakkeijima Inc. and its alliance partner, Katana Inc., to further grow the Seibuen Amusement Park. Please turn to Page 14. This is the new organizational structure based on these management reforms. With the organizational change last April for SEIBU PRINCE HOTELS WORLDWIDE and SEIBU REALTY SOLUTIONS and the management reforms of the Urban Transportation and Regional business this time as well as the starting of operations by Seibu Process Innovation, which is the shared services company, we will build a structure that can maximize corporate value and shareholder value in the post-COVID era. We believe it is important to form alliances with partners outside of the group in order to achieve further growth. And the first step will be for each of our group companies to strengthen their own business so that we can negotiate at an equal footing with any partner. Please turn to Page 38. I will close by explaining current trends. First, as for our railway operations, we show at the bottom of the page, the trend in the number of gate passages. If we compare the months of November, December and January with 2019 after making adjustments for the new year holidays, there has not been much of a recovery, with commuter being minus 26% in November and minus 23%, respectively, for December and January. Non-commuter was minus 5.7% in November, minus 10% in December and minus 6% in January. Please see Page 39. This page summarizes our domestic hotel operations. As shown in the middle table, RevPAR in January was 85% of January 2020. The graph at the bottom shows bookings as of February 5 up to the month of April. The number of rooms booked for February was 94% of fiscal year 2018 and 103% in March. Please keep in mind that as we explained in the footnote, the number of hotel rooms has increased from 2018 due to new hotel openings. At the bottom of the page, we have wording regarding inbound reservations for February and March. This data is also as of February 5. In terms of the breakdown by country and region, bookings from the U.S. and Taiwan have been relatively strong. That concludes my presentation. Thank you.