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

Hello, everyone. This is Kawakami, Head of IR. As for the 5 disclosure materials that I will be explaining today, I will start with the release about the transfer of fixed assets, followed by the release on the booking of extraordinary loss. I will then talk about the revision of the earnings and dividend forecast and finish off with the release on the revision of our policy on directors' remuneration, et cetera. First, please see the material titled Notice Regarding Partial Cancellation of Transfer and Completion of Transfer of Subsidiaries Fixed Assets. As for the securitization of part of our Hotel and Leisure business assets to GIC, which we are promoting as part of our asset-light strategy, we had planned to transfer a total of 31 assets and had been negotiating with GIC with the aim of transferring the remaining 5 assets during the current fiscal year. However, it became evident that it will be hard to obtain the consent in a short period of time within the current fiscal year from the third parties from which the consent is necessary. And following discussions with our counterparty, GIC, it was decided today that the transfer of the subject assets will be canceled. As for these 5 properties, we are assuming, as of this moment that they will continue to be owned and operated by the Seibu Group. With this decision and with the transfers that were conducted by March 1, 2023, the series of asset-light initiatives with GIC has been completed. As a result of the above, the total transfer price of the assets, which have been transferred by March 1, 2023, is JPY 123.7 billion and the profit arising from the transfer is expected to be around JPY 54 billion. The profit of JPY 54 billion is the figure that can be rationally calculated to the extent possible as of today after deducting the transfer expenses, including the advisory costs, et cetera. The profit of JPY 80 billion in the announcement made last June is the figure before deducting expenses such as advisory costs. The full year earnings forecast announced on February 9 included approximately JPY 18 billion of profit expected to arise from the transfers, that were canceled this time and that JPY 18 billion profit will not be booked. We are currently assessing the impact of continuing to own the 5 properties to our earnings in the next fiscal year. It is regrettable that we were not able to transfer all of the 31 assets as initially planned, but we believe the transfer of the 26 assets contributed, as intended at the outset to making us resilient to pandemics as well as improving our financials. We also believe that we are taking the right steps towards future growth, including full-fledged operations of properties owned by others as well as gaining expertise on real estate securitization. Although there is no concrete announcement that we can make as of today, we are continuing to consider the asset-light strategy from multiple perspectives. There will be no end to the asset-light strategy in which we aim to establish a lean and agile management structure by reducing assets owned. Next, please see the material titled, Notice Regarding Recognition of Extraordinary Losses. As stated here, we are expecting to book an impairment loss of JPY 9.6 billion in relation to the Seta Golf course. In terms of the background, the market value of the land of Seta Golf course had been way below its book value. Moreover, when assessing the future cash flow, we reflected the rise in various expenses and lowered its future cash flow projection. As a result, the amount expected to be collected from the asset, ended up being lower than the book value. And we, therefore, decided to book the impairment loss. Next, I will explain our full year earnings forecast. This is the material titled Notice Regarding the Revision of the Full Year Consolidated Earnings Forecast for the year ending March 31, 2023. Based on our recent performance as well as the effect of the 2 items, I just explained, we revised up our operating profit, EBITDA and ordinary profit, while revising down the profit attributable to owners of parent. The numbers are as shown here. For operating profit, the main reasons for the upward revision were depreciation expenses being less than expected in the Urban Transportation and Regional business as well as the demand recovery in the Hotel and Leisure business being stronger than expected. Compared to the February 9 forecast for the Hotel business, demand growth has been especially strong for inbound tourists as well as individual guests from Japan, and the ADR is also trending above expectations. For extraordinary profit and loss, we included the 2 factors explained earlier and extraordinary losses includes impairment losses for Seibuen Amusement Park, et cetera, aside from the Seta golf course. Next, I will explain about our dividend. Please see the document titled Notice Regarding the Revision of Dividend Forecast. We have decided to increase our fiscal year-end dividend following a comprehensive decision, including factors such as how we now have a more clear road map towards improving our financial status, thanks to management reforms progressing quite steadily as well as the transfer of part of our hotel and leisure business assets as part of the asset-light strategy, which we had planned for this fiscal year being completed as well as the current status of our earnings recovery. We are currently assessing our earnings outlook for the next fiscal year. We came to this decision based on our financial policy of prioritizing the reinforcement of our financial status which had deteriorated due to COVID-19, while also focusing on returning to our shareholders. Lastly, the document titled, Notice Regarding Amendment of Remuneration Policy for Directors of Seibu Holdings and Revision to Remuneration Advisory Committee, Nomination Advisory Committee and Corporate Governance Council. As part of our efforts to enhance corporate governance, and with the aim of further improving transparency and objectivity regarding director compensation and thus establishing an even more transparent and fair decision-making process, we have decided to revise and review our current process as outlined in the document. We have received much feedback and proposals through our dialogue with our shareholders and investors. We will reflect this dialogue on our management and will continue to strive to further enhance our corporate governance. That concludes my presentation. Thank you.