Q2 2013 Park24 Co Ltd Earnings Presentation
Tokyo Jul 20, 2020 (Thomson StreetEvents) -- Edited Transcript of Park24 Co Ltd earnings conference call or presentation Friday, May 31, 2013 at 3:00:00am GMT
TEXT version of Transcript
* Koichi Nishikawa
PARK24 Co., Ltd. - President & Representative Director
Koichi Nishikawa, PARK24 Co., Ltd. - President & Representative Director 
Good afternoon, ladies and gentlemen. I am Nishikawa, President of Park24 Company Limited. Thank you very much for joining us for the October 2013 first half financial results briefing meeting of Park24 out of your busy schedule today.
Without further ado, I would like to go right into the presentation on the financial results of the first half, referring to the handouts and the screen on the front.
This is the consolidated results of the first half that we announced on May 30. We posted net sales of JPY 73.89 billion and recurring profit of JPY 8.75 billion, achieving new record highs on a half year basis, both in net sales and recurring profit.
The next page shows the results by business. As for parking business, net sales came in was JPY 58.84 billion; and gross profit, JPY 15.71 billion. On the left bottom, you can see the plan and the actual results. We were slightly behind the plan in the parking business. On the right is the mobility business. Our net sales were JPY 15.05 billion, and gross profit was JPY 4.77 billion, which was slightly better than the plan.
Let me move on to the new parking sites for our parking business. The number of new parking sites developed was 1,017, of which the number of ST sites was 755 and that of TPS sites, 262. Our plan was 685 for ST and 190 for TPS, totaling 875, which means that our actual results significantly outperformed the plan. Especially good was the fact that 3/4 of the total were ST sites. In other words, we were able to develop sites in a way where small and medium-sized parking sites are spreading out nationwide.
On the other hand, the number of new parking spaces, shown on the right, was 42,645, of which 11,097 were ST sites and 31,548 for TPS sites. This compared to the plan of 12,000 for ST, 21,500 for TPS and the total, 33,500, which means that we overachieved the plan by 9,000. Although the number of spaces for ST sites was 11,000 plus compared to the plan of 12,000, down about 9,000, the number of new parking sites was ahead of the plan. This demonstrates our success in developing smaller parking sites, interspersed in wider areas. Our grand strategy has been to develop a large TPS parking site as a core in a particular geographic area first, followed by smaller sites developed in the neighborhoods, so that we can cover the local area like a fine mesh, which was clearly represented in these numbers.
Let us move on to the mobility business. On the left is the results of Times Car PLUS or car-sharing business with sales of JPY 2.58 billion and gross profit of JPY 610 million. We failed to achieve the original plans of JPY 2.7 billion and JPY 800 million in sales and gross profit, respectively, in the first half. In October 2012 term, we had planned to break even at operating profit level on a full year basis. Moreover, while we would increase the number of vehicles available for rent, we hoped to achieve net 0 in operating profit at the same time, but we ended up posting deficits of about JPY 800 million in October 2012 term. The reason is the following.
It was easier for us to carry out promotional activities for and, therefore, acquire individual members. So initially, there were a large number of individual members but individual members tend to rent vehicles on weekends and national holidays. In the hope to even out the utilization as much as possible, since the second half of October 2012 term, we have been focusing on promotional activities targeted at corporations so that we can enhance the utilization on weekdays and during the daytime, and those efforts have been carried on in the first half of this fiscal term. But corporate sales activities take more time and efforts in explaining and making sales proposals, which has led to a time lag before bearing fruits, and we fell short of the plan in the first half of this fiscal term as well.
Now on the right, you can see the number of vehicles and members. Our plan for the October 2013 term is to increase the number of vehicles to 7,000 on a full year basis. We have achieved 5,763 at the end of the second quarter. So if we can increase the number by about 200 per month, we will be able to reach the original target of 7,000 in the second half. So we are currently on the right track.
As for the number of members, we do not have clear targets set, but the membership has been increasing steadily to stand at 197,857 as of the end of the second quarter. In our efforts to acquire members, we will continue to focus on cooperation while trying to increase individual members at the same time so that the total membership will continue to grow.
That was a brief summary of the results of the first half and some highlights.
Now I'd like to discuss some topics for the first half as well as the plan for the full year. Previously, we used to use the name MAZDA Car Rental for car rental business and Times PLUS for car-sharing business with different logos for those 2 different services. But as of April 1, we have unified the brands by calling the car rental business Times Car Rental and car-sharing business Times Car PLUS, both carrying Times Car as prefix. Rescue Network Co., Ltd., which joined our group 2.5 years ago, has changed its name to Times Rescue Co., Ltd. on November 1, 2012 or at the beginning of this fiscal term. This has allowed us to operate all the businesses in our group under the unified brand name of Times.
The biggest reason why we have unified the brands is because by unifying all the services offered by our group with a single brand of Times, we hope to realize the exposure of our brand in a way more recognizable to users. In other words, this is part of our endeavor to establish the environment where parking sites, car rental, car-sharing services are being provided by Times, and Times club members are entitled to using any of the services.
When we used to develop parking sites only, we were regarded as a parking site service provider, with the aspiration to build as many hourly fee-based parking spaces as possible across the country where there was an absolute shortage of such spaces. But we had come to operate a certain number of parking sites and spaces. We're no longer content with being a mere parking site service provider but thought perhaps we could take advantage of the vast network of parking facilities we have to provide new services. And that is how we decided to enter a new line of business, renting out cars, so that we could transform ourselves into a provider of transport infrastructure service. As part of the process, on April 1 this year, we have unified our brands, and we are now on a steady path toward becoming a transport infrastructure service company.
We have been developing and operating parking sites for more than 20 years now. The more parking sites we have developed, the more acutely we realized that even though our country has well-established public transport infrastructure such as arterial roads and railway networks or, to cite an analogy of the human body I often use, arteries and veins are well developed, capillary blood vessels are the ones desperately missing. And because capillary blood vessels are underdeveloped, despite the well-developed arterial roads and railway networks, more often than not, people find it stressful to travel from one place to another. Now that we have developed parking sites and are now equipped with the tool of renting out vehicles, we have decided that we, as a group, want to support the so-called capillary blood vessels part.
So through measures such as partnerships with railway companies and airlines, we are hoping to provide services to ensure stress-free, comfortable traveling in this country. Based on such thought process, we are now seeking to transform ourselves into a transport infrastructure service company.
That said, let me move to the businesses of renting out vehicles or Times Car. In terms of locations where we rent out vehicles, we are a dominant player, partly because we have so many for car sharing with the total number of locations amounting to 4,374. You can see the breakdown between car rental and car-sharing businesses. The number of outlets for the car rental business is very small compared to the industry peers. On the other hand, however, what we call stations for the car-sharing business is quite numerous. So if you add those 2 together, we are by far the largest in the number of locations for renting out cars. Moving forward, we would like to increase those locations further so that customers can rent vehicles conveniently in many different places.
As for the car-sharing business, we have presence in 29 prefectures in Japan. If we are to purely pursue better profitability, one way to achieve that is to focus only on Tokyo metropolitan area and Kansai centered around Osaka where there's larger population. But as we expand our car-sharing business, we want our members to find our service convenient. To put it more straightforwardly, we want to make sure our members can always find a place to rent a car no matter where they are across the country as if they have a car of their own. Therefore, from the current initial starting-up phase, we are trying to ensure geographic coverage as well. And although it may appear inefficient, we have opened stations in 29 prefectures so far. In the future, our hope is that wherever you go, as long as you are in a major city, you will be sure to find one of the stations of Times Car PLUS, and you as members will be able to rent a vehicle at any time easily without advanced reservation.
There is another benefit from brand unification. Conventionally, we have been providing a loyalty point program for Times Club where members are rewarded with points in return for using Times parking spaces. But we are hoping to establish a scheme, which will award members with points for using any of the services we provide, including Times Car Rental, Times Car PLUS, monthly fee-based parking spaces, road services and Times Spa, which we operate in Ikebukuro Town. We want to create a system where members can earn and redeem their points for purchasing any of those services, and we also hope to increase the opportunities for members to both accumulate and use the points. Obviously, the core of those opportunities will be services our group will provide, but in the future, possible partnerships with various corporations are very much on mind so that we can establish a scheme, which will allow members to accrue and redeem their points for using services at many different places.
The last topic concerning the first half has to do with our capital policy or issuance of euro-yen CBs raising JPY 20 billion. The redemption period is 5 years, and convertible price is JPY 2,644. But we have incorporated a threshold convertible price of JPY 3,173, below which prices, bondholders are not able to convert their whole bonds. In order to realize financing with low interest costs, we issued the bonds with 0 coupon. All of the capital raised is planned to be spent to finance business growth.
That concludes the special topics from the first half, and now I will turn to key initiatives for the second half.
As for parking business, we will continue to develop parking sites in the second half so that we will be able to achieve the full year plan in both the number of new parking sites and spaces. Since in the first half, our performance was quite strong in terms of the number of sites developed, all we will need to achieve is 733 sites in the second half, making our job of site development much easier than the first half. In terms of the number of new parking spaces, we again wound up way ahead of the plan in the first half, which means we will only need to develop another 27,000 spaces in the second half to achieve the full year plan. As a result of our strong performance in the first half, we will be able to afford to be even more selective and choose properties of prime quality only for new development.
In the second half, as we have done in the first half, in TPS, we would like to continue to develop parking sites for landmark structures in the particular geographic area. In the first half, our Times Group started operating parking sites for Tokyo Dome City. Going forward, we would like to pursue the strategy of bringing parking sites for area-specific landmark structures under Times operation as TPS business and start surrounding neighborhoods with numerous smaller ST parking sites so that we can promote the area dominance in our development efforts in the second half onwards.
On the other hand, in terms of profitability, ramping up the newly developed parking sites will become important, so we will reinforce the starting up of those new sites. Moreover, as for existing parking sites, if it is only 1 or 2 years since they were opened, the environment may be hardly changed, but some sites are 7, 8 or even 10 years old. Obviously, the environment surrounding those parking sites has gone through changes. So it is becoming extremely important to carefully monitor and check each site so we can set the optimum parking fee in response to the changed demand. As the total number of sites increases, we need to review every single site even more meticulously so as to operate them in an optimum fashion, which will ultimately lead to improved profitability. That is what we will continue to carry out in the second half.
In the mobility or Times Car business, as for Times Car PLUS, or car-sharing service, we will increase the number of vehicles available to 7,000, as originally planned. With regard to car rental business, the number of vehicles is planned to be increased to 27,700. That will bring us up to the total of 34,700 vehicles by October this year. In this regard, we are on the right track and foresee no particular problems in achieving this target.
As for Times Car PLUS, or car-sharing service, we are receiving increasing number of inquiries from various entities. One prime example is our alliance with JR-West Group in the car-sharing business. JR-West has been offering its own car-sharing service but decided to discontinue its own car-sharing service and start operating the Times Car PLUS jointly with us. It appears that JR-West has highly appreciated our policy and speed of developing the car-sharing services and decided that rather than competing with us, they would be better off building an alliance with us.
From the perspective of satisfying needs for improving capillary blood vessels, which I referred to earlier, we can expect a strong synergy with the railway service. So we would like to proactively implement these initiatives if there are such offers or opportunities for us to capture.
As I said at the outset, car-sharing business was behind the plan in both sales and profits. In the second half, we are determined to have renewed focus on corporate sales. Times Car PLUS promotion department has been leading this effort so far, but we hope to mobilize our sales forces on a company-wide basis to expedite the acquisition of the corporate members so that we can bring the sales and profits as close to the plan as possible.
As for individuals, the promotional activities have been formulated into a package. And so once the decision is made on where to conduct promotions, all we need to do is to execute them in accordance with the package, and we can acquire the expected number of new members. So for individuals, we will carry on with the conventional sales activities on a routine basis while for corporations, we will reinforce the sales capabilities further to identify and develop new prospects.
Another tactic is to make it easier to use our services. We will monitor the convenience of the website and smartphone applications on a day-to-day basis and, if necessary, modify them to make it even easier to use, which we hope will help bring up the utilization frequency.
This is what has been announced just the other day, but the Japan Brand Strategy Inc. conducts the assessment of customer support of various companies and has rated Times Car Rental as #1 in the comprehensive ranking in the car rental sector. Among many well-known competitors in this industry, we were the only one who received the score of more than 80. Of course, we believe we should not become complacent and would like to continue to seek, providing even more convenient and easy-to-use services in the eyes of the customers.
In the second half, there are activities we need to continue or reinforce, but the full year plan will remain unchanged from the one announced at the beginning of this fiscal term with net sales set at JPY 155 billion; operating profit, JPY 20.5 billion; recurring profit, JPY 20 billion; and net income, JPY 11.2 billion. We have been performing quite well to the end of the first half, and therefore, these full year plans are well within our reach. We will do our best in the second half so as to achieve the full year plan.
That concludes my presentation on the financial results of the first half and key initiatives in the second half. Thank you for your attention.