TKP Corporation (3479) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you so much for waiting. We'd like to start the financial results presentation for the year ended in February 2024 for TKP Corporation. First, I'd like to introduce attendees from TKP. To your left, Representative Director, Chief Executive Officer; Mr. Takateru Kawano. Next, Director, CFO, Mr. Koji Nakamura. Based upon the financial results that we announced today, we are going to take you through the briefing of the business and the financial results. And we are going to have the Q&A session after the presentation. We are going to end the session at around 5:00 Japan time. Now let's begin. Mr. Nakamura, would you please?

This is Director, Mr. Nakamura. Now we'd like to start the presentation for the financial results for the full year ended in February 2024. As usual, I'm going to take you through the numbers and the financial results, followed by the comments about the topics and the future direction and our strategy by Mr. Kawano. Now let's begin. This is the summary page. So we have two sessions. First, we're going to take you through the financial results for the year. And then, at the bottom of this page, these are the topics that I'd like to cover. First, as usual, the COVID category changed to Category 5 in May last year. As a result, the rental space demand has recovered, especially driven by the face-to-face demand. So we've been seeing the recovery trend for a while. In addition, for the Leisure and Lodging business, similarly as the Rental Space business, we see the recovery, and we see the strong demand of inbound-related demand. So for the first time, for the annual revenue, we broke to the JPY 8 billion mark. And for the Rental Space business, the banquets demand has started to recover very well. And the demand has recovered to about 80% of the pre-COVID level. So that's about the top-line revenue. And because of the top-line recovery, after-tax net income has achieved the record high level. Also for the balance sheet, the interest-bearing debt has been reduced. As a result, equity ratio has recovered to more than 50%. And business and management topics. So we have stopped openings, but we resumed new location openings, and we've been actively opening new locations. As a result, we were able to open our new locations or expansion of the existing locations worth about 13,000 tsubo. For the Leisure and Lodging business, APA Hotel Oita Station front, is going to be newly owned and we have concluded the franchise contract for this location. And for this particular location, Mr. Kawano is going to take you through the details. Next, let's go over the consolidated PL. Would you please go to Page 4. Please take a look at the red box, which shows the financial results. The revenue, JPY 36.5 billion and ordinary profit -- operating profit, 4.9 -- JPY 4.5 billion and our ordinary profit, JPY 4.5 billion; and net income, JPY 6.9 billion, a record high level. So the profit has recovered to 95% compared to pre-COVID. So we've been on the very steady recovery phase, as you can see from those top line and the bottom line profits. From the last fiscal year, we showed this PL excluding Regus, on the parent basis, which is on the next page. Probably this is the easier page for you to understand. So just similarly, revenue and OP, please take a look. Compared to the last fiscal year, net sales increased year-on-year and cost of goods sold and SG&A increased more than the revenue growth. Because of that, OP and also ordinary profit were down -- lower compared to our guidance. And as we have been explaining to the market in each quarter, this is due to the in-house operation. As a result, [ labor ] cost, wage cost is increasing, we are hiring more people. So human resource cost is increasing, although it's controllable, but we've been increasing the human resource cost. But in-house operation ratio has not fully recovered yet. So we are delivering in-house operation at higher cost. And also, as I mentioned at the beginning of this meeting, we've been actively opening new locations. So start-up cost is weighing on the profitability at this moment, and we replaced the IT system to improve the operational efficiency. So there is a onetime loan cost associated with the new IT system. So all in all, those costs are included in the cost of goods sold and SG&A. So the profit level did not achieve our guidance. But there's a massive market needs or recovered market needs including banquet demand. So we are investing in those costs stepping stones to capture those recovery of demand. So for February 2025, we think we can harvest from these investments that we made in the year just ended. And this is the quarterly trend after adjustment, which means excluding Regus. This shows consolidated revenue as well as consolidated OP. As you can see, net sales has been on the recovery path. And soon, we are going to surpass the pre-COVID level for net sales. On the other hand, to prepare for the recovery of the revenue, operating profit has not fully recovered to pre-COVID level yet. However, year-on-year, our revenue is up by 12.4%. So top line has been steadily recovering. We see very steady order trend. So we've been capturing recovery of the trend very steadily. So I think this balance between the top line and the bottom line should be resolved soon. Next, let's take a look at consolidated revenue on a quarterly basis, excluding Regus, by service. And accommodation, lodging, this is a third from the top. So data and lodging has been increasing over JPY 8 billion for the full year. So data and lodging has performed very well. And food and beverage and also room rental, rental space has been recovering very well. But as I mentioned earlier, we have not caught up with the full in-house operation yet. So in the current new fiscal year, I think we are going to catch up more for the rental space revenue. Next as I mentioned earlier, cost of goods sold, SG&A, this shows the detailed breakdown as a trend. On the next page, the dotted box represents the outsourcing cost. So food and beverage, we are trying to bring it in-house, and we have not been able to catch up with that. So that's included as the outsourcing cost, but this is much higher cost, which is lower margin compared to in-house operation and also IT system is being replaced fully to improve the efficiency. So we are in the process of making the new IT system. But we launched this new IT system in July last year. So because of this cutover timing, the initial startup cost is now included in the outsourcing cost. So all in all, outsourcing cost is at a high level. And in February 2025, I think outsourcing cost is going to go down. So expense and net sales are going to be well-balanced or better balanced in the new fiscal year. And regarding the trend of the headcount, this is also excluding the Regus operation. [indiscernible] February '24, and if you look at that bar, we increased the number by 300 people. Compared to last fiscal year, the headcount increased by roughly 20%. And we believe that the human assets are key. So we are active in recruiting activities. On top of that, we are training our people to make active investment to our human capital so that they will be contributing to our business. So that said, that is reflected in a number of headcounts. But we are not trying to increase our headcounts massively like we had pre-COVID. So we'll be selective in trying to capture the good talent from the market. And this is our balance sheet and the cash flow. Also, as I said in the summary, the capital adequacy ratio has risen to 50.2%. The profit is building up. And going forward, the cash continue to be at a level of JPY 32 billion. Also we have a very sound balance sheet. And at the bottom, you can see the summary of the cash flow. And for March 2024, the investment cash flow was roughly JPY 5 billion. Also, JPY 5 billion of spending. So we are making active efforts for investment, but we still have roughly JPY 32 billion in cash. So if we see any good strategic investment or alliances or new opportunities for new openings, we see a lot of opportunities in the future, and we hope to capture a good timing to effectively utilize this cash of JPY 32 billion to expand our business. Next, moving on to the summary of the business. I will give you some qualitive trend of our different businesses. So first, new openings and closings, I would like to talk about these contracted space. On the left-hand side, you can see all the new openings and the closures. This fiscal year, we opened 19 facilities with 1,600,000 tsubo, and we closed down 27 facilities, reducing the floor space by 12,000 tsubo. And as I have been explaining from Q1, LecTore [indiscernible], which has a very small effective space, but has a large contracted space, and this is included in the numbers. So it looks like we had a huge closure, but I can see that excluding that, the net increase was 9,000 tsubo. So we have been successful in expanding our floor space. And also, we were able to increase our presence in Shinagawa and other convenient areas, which will be strategic for us. So we have been successful in portfolio reshuffling to include strategic locations. And as a result of that, this is the number of facilities in the rental spaces by different grades. On the far right, you can see, at the bottom, the total number. Also, 235 facilities with 143,000 tsubo. Also, we are supplying a huge amount of space. And this is the KPI for the rental space business. Far right, it's JPY 33,286 as a revenue per tsubo. And looking at the same quarter last fiscal year, Q4 last fiscal year, it increased by JPY 4,259. So after COVID, the sales per tsubo has been rising. But we have not been able to complete the in-sourcing efforts and the revenue is back by roughly 80%. So the unit price has not risen on a full scale yet, but it's a matter of time. And lastly, this is the sales mix by the different purpose of the usage of the rental space. And the current sales mix is now looking very similar to what we saw pre-COVID. So that said, also things are normalizing. And it's a matter of how we can increase the in-sourcing of the F&B services. So we will focus on that because of the market demand is large. Also, we'd like to take initiatives to capture that opportunity with the banquet demand. So that was brief, but the summary of the results from last fiscal year. I'll hand over to Mr. Kawano to give you some updates on the strategies.

So now, I will give you some updates on the business strategies. So first, in February, we did the floor expansion within Kyoto Tower [indiscernible] station, [indiscernible] from the station, there is Kyoto Tower and with the expansion of the floor, we have 1,359 tsubo, we have 6 floors for TKP. This was the Kyoto Tower Hotel by [indiscernible] and the accommodation requires windows. And for the floors with windows, there are accommodations. And in the center, we are using that space for the banquet rooms and also rental spaces for TKP. Well, then this is used for a lot of our academic conferences. For TKP, most of the [ quality basis ] were corporate, starting with the training demand for new graduates for the HR department, but that's hotel banquet that is frequently used for academic conferences. And this is kind of like a pilot case for us, but we'd like to expand this kind of facility to capture a new type of demand. And going to the next page, the strategic investment and business alliances. Last fiscal year, we had [indiscernible] and also in February, we made the investment into APA[indiscernible]. Also like these examples, for businesses which can -- we can expect synergies, we are actively investing. Also, we have relationship with the real estate owners. And with the owners, we will lease the space to lend as office spaces and the former development stores are converted into office spaces. But now we are moving into the apartment and the condo market to be more active in that space. And once we have a more clear strategy, we'd like to offer you more details. But recently, the hotel ADR has been increasing because of the inbound demand. Of course, as a TKP, we have the MICE business to capture the inbound demand for the corporate use. And with that, our business hotels that we offer today with the more inbound travelers coming to Japan, the rate has become very expensive for normal Japanese citizens making business trips. So traditionally, the accommodation budget for the business trips are being like JPY 7,000, JPY 9,000 or JPY 10,000 per night, but the current ADR is higher than that level. Also, what we are trying to do with the apartment housing offering is to address that issue. So we have the office space accommodation and also the accommodations for the business people or a room, which can be used for long stay and to the corporate members, we would like to use these facilities as a sharing facility for corporate housing, for example. And I would like to offer you more details once we have a clear strategy over this. And we are also contributing to sport SDGs. Also, with the Oita [indiscernible], we are the sponsor for the uniform. And we have signed a sponsorship contract with a pro golfer, Mr. SUGIYAMA. He is 30 years old now. And he became a professional golfer in 2015. He has also won some championship in the 2020s, and in 2022, he participated in the U.S. Open. Also, he will help to raise the brand awareness of TKP and through this kind of sports business, I am trying to see if we can move into that space because there is a close coordination that can be achieved through sports and regional revitalization. And for the fund, we are sponsoring [indiscernible] team, but we're hoping to develop this opportunity into something bigger to manage our operator team or to be involved in some kind of sport-related businesses. Now let's talk about financial guidance. Net revenue, for this year, we expecting to go up by 23.1% year-on-year or JPY 45 billion. Operating profit, up 59.5% year-on-year, JPY 7.35 billion. In February 2020, we achieved JPY 6.3 billion, the record high, but we are planning to break that record. For this new fiscal year, we are planning JPY 7.35 billion. For the year to be ended in February 2025, we are planning to break the record high OP, ordinary profit. In February 2020, we had the highest profit, JPY 4.7 billion, but we are planning to break that record. For this fiscal year, February 2025, we are planning JPY 7.5 billion ordinary income. And net income attributable to owners of the parent, the bottom line profit. In the last fiscal year, February 2024, we achieved -- [ JPY 6.975 billion ]. But due to sales of Regus, we had DTA of the subsidiary succeeded by the parent company. So we accounted for the deferred asset. So it's actually JPY 3.2 billion associated with that. So the fundamental after-tax profit was JPY 3.71 billion, would have been JPY 3.71 billion for the year ended in February 2024. So we are planning higher profit. We are planning JPY 5.1 billion bottom line profit. So after tax, fundamentally, virtually, is going to be the record high, after the adjustment for the Regus sales. Moving on to the next page, let me explain the business strategy. For February 2025, which is this new fiscal year, we are planning to achieve JPY 7.2 billion OP. And we revised that upward. And in our guidance, we are planning achieve JPY 7.35 billion. In February 2026, OP, JPY 10 billion, is our target. So we are planning to take priority measures to achieve JPY 10 billion mark. And priority measures are 5 as listed here. First, the rental space, [indiscernible] Rental and the long-term rental flexible space business, that's number one. So this does not mean only the office space, but it includes offices for retail and other purposes. We'd like to offer flexible spaces to our customers. And number two, data and lodging business. So we'd like to enhance existing brand, ISHINOYA [indiscernible] and Apo Hotel, we'd like to enrich those brands. And also, we have just announced the partnership with [ E.ON ], which is a new business format for the lodging business and Shin-Yokohama in Beppu. So this is experience-based lodging and data business, which is a new business model that we'd like to expand. And number three, the entertainment and produce -- production business. So we are going to sell spaces and also we'd like to sell contents to be used in the spaces that we offer, and I'm going to give you the details later on. And number four, inbound and MICE business. So we'd like to attract people from Asia, groups and companies, I would like to attract inbound MICE demand. Number five, strategic investment and a business partnership. Right now, we have budgeted more than JPY 30 billion for strategic investment, so we are going to use the budget to implement priority measures. We'd like to actively invest in unnecessary business areas. Now let's talk about the details of priority matter #1, flexible space business. In this fourth quarter, we have decided to open a new conference center in front of Tamachi Station -- JR Tamachi Station. And also, although we cannot announce, but the large flexible space, new locations are coming up in the pipeline for the office purpose. There's a vacancy of spaces here and there in many locations. So we'd like to take advantage of that as an opportunity to open locations more actively. So we would like to identify specific areas where we'd like to especially focus on to open locations. If we can source spaces at low rent, I would like to offer those flexible spaces for various purposes. Next, Lodging and Leisure business. We have announced APA Hotel Oita Station front having 225 rooms. And we have many twin rooms, 56 twin rooms with Onsen; hot spring and the [ self-taught bath ] for the Leisure and Lodging business. We don't just offer single studios, accommodating two people if it's a single studio and family rooms or twin rooms, attracting families. And the TKP APA Hotel caters to not only the corporations, but also for the tourists. So we'd like to transform our data and lodging business, actively attracting MICE demand, attracting tourist demand. So we'd like to transform APA Hotel -- TKP APA Hotel. And this is a new format of leisure and lodging business, which is called Shoningahama Park. Next month, in May, this year, we are going to start construction. And in Spring, next year, we are going to start operation. So this is just like in [ Yabuki ], hot spring, like [indiscernible] hot spring spa, having lodging facilities. And that this is a new challenge, entering into the new format of the lodging and data business. And also, we have announced our partnership with [indiscernible]. This is a collaboration with [indiscernible]. So in the shopping mall, we are going to open a trailer house lodging business, 30 of them as TKP cottage hotel. And priority measure #3, entertainment and production business. Right now, the sales have increased to JPY 1 billion, and we'd like to increase that to JPY 1.8 billion from this business in this new fiscal year. For company activities, entertainment and events, such as recruitment, human resource or internal training purposes, we'd like to support our clients. For ceremonies, for award ceremonies or incentive parties, we're inviting clients, trade shows, seminars, conferences. I would like to produce highly entertainable events or entertainment events. Specifically, we are helping our clients, the [ Google ], the most at the moment. TKP event produced team is helping them. So we offer them the internal accounts, TKP accounts. And from the event production phase, we collaborate with Google to produce the event. With Google Industria, we had close to JPY 500 million sales from events with Google alone. So we'd like to step up, and we'd like to do such event production business more and more. And this is another recent event example. 2 months ago, we worked with Nissan Motors. We produced their event. So there are so many companies that I cannot really give you the names. But among some of the names that I can mention, this is TKP-hosted event with Nissan, [indiscernible] and we did event planning and facilitation and operation and invitation of the [ Dextra ]. And we did a catering also. And also, we held the lecture relating to decarbonization promotion. And also relating to inbound and MICE business, we are actively addressing this inbound MICE business, Hong Kong, Shanghai, Beijing and Taiwan. We are working with major agencies in those countries to capture the inbound MICE business. And this year, among travel agents, we opened the TKP Desk in each of those countries to attract more and more inbound and MICE demand. In the future, we are planning to open an office or rep office in those countries in the future. And again, this is about inbound MICE business. Beijing, Shanghai, Hong Kong, Taiwan, Southeast Asia and India. Those are the areas where we are attracting inbound MICE demand. And on the recruitment front, we invited 70 -- we had 70 new employees to TKP. And in addition, in summer, we are having 30 from India and 9 from Nepal. We are welcoming those new employees from those countries. And we are currently training them on the hospitality and Japanese language in their country. So in summer, they are joining TKP. So it's not just the Japanese people that we're recruiting, but people from other countries are joining us, and they will be welcoming the inbound tourists and travelers. Also, we are active in recruiting people from overseas countries. And we have Shinagawa Haizen, our group company, which is [ sending ] the people to the luxury hotels in Tokyo, restaurants staff, banquet staff and also the reception staff. And compared to before COVID, we have roughly 6,500 registered people, which is higher compared to pre-COVID. And before COVID, we were [ sending ] about 700 people per day, but now it has increased to about 1,000 to 1,200 people per day. We're sending people to Prince Hotels and Grand Hyatt, to the key luxury hotels in Tokyo. And this is an area that we are going to focus on going forward. Also, human resources are in shortage. This is true for the taxi industry, and it's also true for the accommodation industry. So now business hotels are trying to automate the process. But for the city hotels, hospitality; it will be one appealing point and the high-quality service will be required by the customers. So for that, TKP is recruiting people and also offering training. And also, by converting the TKP hotel office spaces into the banquet, we like to increase our value offering. And for the strategic investment and business alliances, we have roughly JPY 30 billion on hand. So we'd like to use that. And also, we'd like to lever up to effectively use the JPY 30 billion to make investments. Also, looking at the peripheral businesses of TKP, for most the hard assets and the soft assets, we'd like to actively invest into businesses or expand our business coverage for growth. And for February '25, this is the progress to date for the current fiscal year. Right now, looking at the first quarter, for March, April, May of 2024, for Q1, the order trend is including the reception orders, it's already outperforming last fiscal year. It's supposed to be, in April, there are a lot of demand for training new grads, which is at an unprecedentedly high level. And the party interception demand is also increasing. And for the accommodation service business, the inbound demand is a very big tailwind for us. The ADR is going up much higher compared to pre-COVID and the occupancy rate is also increasing. So the inbound is a huge positive for the business. But looking at this, I'm thinking that the sharing business for the corporate housing, for the corporate sector, I think, is going to grow going forward. So we are studying that opportunity. So whilst operating this hotel services, we are thinking what will be the optimal facility for the business travelers and also optimal conferences for business users. And for the food and beverage service, we're in-sourcing. The demand is outpacing our efforts to in-source. So we are not catching up. But hopefully, from Q2, we believe that we will be able to offer the in-house food and beverage operations. We have a newly completed, securing people for the kitchen services and F&B. Also, from Q2, we're expecting the in-sourcing ratio to be close to 60%. So through those efforts, for February '26, we are aiming for an OP of JPY 10 billion. And for that, this fiscal year, we want to achieve these targets for this fiscal year, OP of JPY 7.35 billion. So that for February '26, we will be ready to aim for JPY 10 billion to achieve our targets under the [ MTP ]. So that will be all from myself. Thank you very much for your attention.

So now, we'd like to move on to the Q&A session. [Operator Instructions] So the person in the front row, please.

Hello. My name is Tazawa from SMBC Nikko. I have three questions, some to confirm the numbers. My first question is on the numbers. On Page 7, regarding the rate of the rental spaces. For Q4, the rental space sales were JPY 3.4 billion, which was down year-on-year. What was the reason behind this? Also, the rental space demand seems to be recovering. Also, was thinking that it could be higher. So this was a little bit of a surprise. And the second point or question is, the assumption for the guidance for this fiscal year, including your KPIs. On Page 14, you have the sales per tsubo and other KPIs. Please share the assumptions for your guidance this fiscal year. On a quarterly basis, what kind of recovery are you expecting? And in Q4, is it going to be close to pre-COVID level? And at the same time, expenses. Last fiscal year, I think, we're booked in a big amount. But compared to last fiscal year, how are you going to manage the cost for this fiscal year? So those two questions are just checking the numbers. My third question is regarding the strategic investment. You have a budget of JPY 30 billion, you have a cash of JPY 32 billion as you explained. Also, do you have a good visibility of your investment? What kind of ideas do you have? And to date, you were saying that you're not going to make a big investment, but it's going to be lower that small of less than JPY 1 billion. But do you have anything in mind that's going to be bigger? Or vis-à-vis, the investment, what kind of shareholder return policy are you thinking? I know that you're not paying any dividend this time, but do you plan to change your thinking behind shareholder return?

Yes. Thank you very much for your questions. So the first and second question, I will respond. Also the rental space revenue came down compared to last fiscal year. So last fiscal year, it was JPY 3.7 billion. This was JPY 3.4 billion. In last fiscal year, we were still under COVID. I mean there were some special demand estimate from COVID. For examinations, universities and other spaces were not available. Also, there was some special demand for examinations last fiscal year. But this fiscal year, those exams were now taking place at universities, and they were low rate to start with. And also comparing the two fiscal years, the food and beverage revenue almost doubled. So the sales that has a higher contribution to your business has become bigger in terms of the sales mix, and they will be growing steadily. So F&B and the Rental Space revenue has not recovered fully to pre-COVID, but we expect that to recover and also the insourcing will be catching up. So both the rental space revenue and the food and beverage should increase. So in Q4 last fiscal year, there was some special demand for examinations, and that was the major reason why this fiscal year, the rental space revenue came down. And as for the guidance for this fiscal year, it relates to what I just said, but the sales per tsubo is expected to grow steadily. And having said that, in Q3, Q4, that will be the busy season for F&B and that timing would be one target period for us. And in terms of expenses, the in-store sync is going to really take up on a full scale from this fiscal year. Also, all the cost should not be going up like we saw last fiscal year. Also, we will be managing the cost so that we can actually recruit from our investment to generate profit. But recruiting and training our people and also investing into new businesses, investment for growth -- for future growth is something that we will continue to be active. But that should not have a huge negative impact on our P&L.

And the number that you just mentioned, so in Q3, Q4 is going to be the busy season for F&B. And you said that this is going to be the timing that you're looking at? So at that point, do you think you're going to recover back to pre-COVID level?

Yes, that's the target that we are upholding to change ourselves.

And in building up your guidance, I think to date, you were quite conservative in your guidance, and that was the explanation from you and Kawano-san. Last fiscal year, you were short of the guidance, but this fiscal year, is it conservative? And it seems like you're going to need to make some efforts to achieve this? But -- or is this more of a conservative guidance? Also, for the assumptions, are you a little bit bullish than before?

Well, it's not a bullish assumption and it's not a stretch target for us. But last fiscal year, we fell short of the target. So for this fiscal year, we want to make sure we achieve our guidance. Also, the business assumptions are not excessively bullish in my view.

And on Page 7, if you look at February 2020, Q3 was good, and you started to see a decline from Q4. The rate for the rental spaces came down, and for catering, it was coming down. Also, we are looking at a similar trend although it has normalized. What I want to say is that the rental space revenue trend and the catering revenue trend, the Q3, Q4, the catering revenue is increasing at a much higher pace but we're not catching up with insourcing efforts. So as Mr. Nakamura said, so last fiscal year, we had some special demand for exams. So the rental space revenue for that, it's absent this fiscal year. So the rental space revenue for this fiscal year is more of a fundamental demand from the corporate clients. So effectively, demand for the rental space is increasing, but the catering demand is outpacing that growth. But we did have the rental space sales for municipalities, which will be absent this fiscal year. But we are starting to see growth in demand from the corporate sector, which should be offsetting, the absent of the other demand. And also, as for the usage of the JPY 30 billion investment budget, last time, I said JPY 3 billion in the 10 deals will be JPY 30 billion, but it's case by case. Also one company may be bigger like a few billions of yen and JPY 1 billion of 30 companies, there are different ideas behind the business investments. But small ones can be invested by the fund. And I'm feeling that it's time consuming, and we need to make a lot of efforts for initiatives after the investment, but it's not to say that one big investment is good, but a deal of about JPY 5 billion times 5 deals or 10 deals might be nice for us. But it's also a case by case. Do we want to take 51% or we want 100% ownership? Or is it going to be a minority investment? How much capacity do we have to manage the business? Is it going to create the synergy? Or is the independent operation of the invested company viable? So we'll be looking at these different elements to make the investment decision, but it's been a year since I made that first statement. So going forward, we will be looking at opportunity to expand the business for TKP and generate the profit for TKP. So it will be like 2, 3, 4 engines. Of course, the biggest focus will be on the core business of rental space business, how can we add value, how can we convert the facilities in the station to the banquet usage. And last fiscal year, we were only able to recruit 15 new people. But this year, we had about 70 new people, and there will be roughly 39 people joining us from India and Nepal in summer, and they are very motivated. It's not like they just do their work, but they are very motivated to earn money to make their family happy, for example. Also, I have a lot of expectations for those new people as well. And regarding the dividend policy, also after this fiscal year, we should be enjoying some pool that can be used for dividend payment. So looking at that, we'd like to consider our dividend. But our priority is to make sure that we have a very stable source of profit to grow the business. And on top of that, if we have extra pool for dividend, that will make me happy. So at this point, what I can say is limited, but I hope to grow the business so that we can pay dividend going forward. Also it's for investment.

Do you have more opportunities in the pipeline that you can actively consider compared to before?

The forward-looking deals and there are many activists. And I think the general trend is, companies are trying to improve their business. We get approaches from different companies and for our payer for businesses, there are talks about M&As and investment opportunities. Also, this fiscal year, I'm hoping to effectively utilize this JPY 30 billion. And if I can lever this up to JPY 50 billion, JPY 60 billion, that will be nice. But on top of the growth strategy of the rental space business, we wanted to grow further with the Regus business, but we divested that business. And now, we would like to find another pillar of business that could offer us more growth to accelerate our expansion as TKP.

Any other questions? Please go ahead.

SBI Securities. My name is Ozawa. I have two questions. So I'm going to ask one question at a time. So my first question is on specific number. Page 6. So on the quarterly basis, our net sales have been recovering, but OP is plateauing a little bit, it looks. So in the fourth quarter, I thought OP would have gone a little bit more. But looking at the profit, I think there's upfront cost. So about this imbalance, around when, in what quarter do you expect it to be balanced? So in the initial year of the medium-term management plan, you initially mentioned that you were planning to expand by 10,000 tsubo, or depending upon the page in the presentation, you are saying that you're going to increase by 13,000 tsubo or 16,000 tsubo. But anyway, because of that strong demand, you are planning to expand the space by quite a lot. But for this new fiscal year, you are going to accelerate the pace of new openings. So do you expect upfront costs, but our revenue is really increasing very steadily. So you can offset this increase in the upfront cost and you think you can increase turnaround OP to the increase year-on-year? So on the right-hand side on Page 6, when do you expect to turn around the profit?

Well, this is rather a chicken or an egg, whichever the first. So last year, in 6,000 tsubo in Kobe with the training center alone, we decided not to do it. And we newly opened locations in Tokyo Station; Meta Osaka or Shinagawa Station in the metropolitan area. So that's going to contribute to sales starting from this fiscal year. And in training center in Kobe, revenue per tsubo was like JPY 20,000 to JPY 30,000. Rent was low, but the space was quite large. But now, we decided to open new locations in the central locations. So the unit price is much higher. So that's #1 driver. And second, there are upfront costs such as IT cost or in-sourcing or catering service. So they are upfront cost. So chicken or egg question. So this is highly -- when the top line grows, then our advance -- our OP started to grow so much. So in this new fiscal year, depending upon when the new employees are going to contribute fully to sales, but we are seeing much more headcounts in businesses. In the last fiscal year, we had 800, 900. But gradually, we are seeing more than 1,000. So once they start to contribute fully to sales, then sales go up, and the IT system does not go up as much as revenue increase. We are investing in IT to be efficient. So we are going to see the effect from that. When our sales go up to 1.2x to 1.5x more compared to the current level of net revenue, then we see the leverage impact on the operating profit. So in this new fiscal year and in the next fiscal year, I think how much revenue can we generate will be the key. So right now, as we mentioned earlier, net sales, as we explained earlier, how can we surpass those levels. JPY 36.5 billion was the revenue last year. So in my part, let's see, February 2025, JPY 45 billion. And in the following year, can we really increase more than that in the following year? So we are assuming 23.1% growth year-on-year. And if we can increase by 50%, that will be a significant increase that will drive the profit more.