Q2 2020 Seibu Holdings Inc Earnings Presentation
Tokorozawa-Shi, Saitama Nov 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Seibu Holdings Inc earnings conference call or presentation Friday, November 8, 2019 at 6:30:00am GMT
TEXT version of Transcript
* Yoshihide Nakagawa
Seibu Holdings Inc. - Managing Officer & GM of IR Department - Corporate Planning
Yoshihide Nakagawa, Seibu Holdings Inc. - Managing Officer & GM of IR Department - Corporate Planning 
I will now go over the results for the 6 months ended September 30, 2019, using the overview of financial results presentation.
Please turn to Page 2. These are the financial results for the 6 months ended September 30, 2019. Operating revenue was JPY 294.6 billion, up 6 periods in a row. The JPY 11.4 billion growth year-on-year was mainly driven by growth in revenue of the accommodation and food and beverage divisions in the hotel business, sales of the condominium ENVIE-NÉ HOYA, growth in railway transportation revenue, rising attendance at the Seibu Lions baseball games and revenue growth in hotel operations of the Hawaii business.
Thanks to the top line growth, operating profit grew JPY 1.7 billion, ordinary profit grew JPY 1.2 billion, and profit attributable to owners of parent grew JPY 2.1 billion year-on-year.
Please turn to Page 3. This slide explains the operating revenue for each segment. In the Urban Transportation and Regional segment, revenue increased JPY 1.8 billion. The growth in noncommuter revenue was mainly driven by an increase in the number of concerts held at the MetLife Dome, revenue increase of the limited express service and the opening of Moominvalley Park. Commuter revenue grew due to factors including customers purchasing commuter passes before the consumption tax hike.
In the Hotel and Leisure segment, revenue grew JPY 3.4 billion. This was driven by RevPAR growth and the increase in food and beverage customers in the hotel business from factors including leisure travel demand during the long holiday, revenue contribution from AB Hotels Ltd. in London, which was acquired in the previous fiscal year as well as the opening of the Prince Vacation Club.
Real estate revenue grew JPY 2.2 billion. This was due to sales of the condominium ENVIE-NÉ HOYA as well as the opening of DaiyaGate Ikebukuro. Revenue for the Construction segment grew JPY 1.8 billion, Hawaii segment by JPY 1.5 billion and other segment by JPY 1.6 billion for the reasons shown on the slide.
Our consolidated revenue was JPY 100 million higher than our forecast announced in May. We outperformed the forecast in the Construction segment and the Other segment, which includes Seibu Lions. However, the Urban Transportation and Regional and the Hotel and Leisure segments were impacted by the unfavorable weather conditions as well as the accommodation revenue from non-Japanese guests being lower than expected.
Please turn to Page 4. The table at the top is a breakdown of our operating profit by segment. In the Urban Transportation and Regional segment, the rise in labor costs, repair costs and general administrative expenses was more than offset by top line growth and profit grew JPY 500 million. The Hotel and Leisure segment also benefited from top line growth, but profit declined JPY 700 million due to the increase in selling, general and administrative expenses such as the reallocation costs of our headquarters as well as other factors.
In the Real Estate segment, there was positive impact from top line growth, but profit declined due to factors such as the depreciation cost for DaiyaGate Ikebukuro.
The other parts of our business also saw profit growth, driven by revenue growth. We outperformed our consolidated operating profit forecast by JPY 3.6 billion due to higher revenue in the Real Estate, Construction and Other businesses as well as expenses in Urban Transportation and Regional segment being lower than expected.
Please turn to Page 10. These are the results of our railway business. Railway transportation revenue grew for both commuter, up 2.7% year-on-year; and noncommuter, up 3.2% year-on-year for the reasons shown on the slide.
Please turn to Page 12. These are the key indicators of our hotel operations. The overall RevPAR was JPY 13,104, up 4.2% year-on-year, strongly outperforming market growth. ADR was JPY 16,293, up 1.5% and occupancy was 80.4%, up 2.1 points. Our efforts, such as the strategic shift in targeted regions, started to bear fruit. The capturing of demand during the long holiday also led to RevPAR growth.
Please turn to Page 14. These are the inbound trends. The number of non-Japanese guests declined 2.3% year-on-year, and the decline was largest for guests from Taiwan and South Korea. However, South Korea only accounts for around 5% of inbound demand, limiting the overall impact. Meanwhile, room revenue from non-Japanese guests grew 4.7%. We continue to see positive growth year-on-year, thanks to the increase in guests from high ADR regions such as North America and Europe, showing the steady progress we are making in the strategic shift in targeted regions.
Please turn to Page 16. This is the status of MICE, or Meetings, Incentives, Conventions and Exhibitions. Although MICE-related revenue continued to increase, the growth rate slowed down due to some industries holding fewer meetings.
Please see Page 26. We did not change our consolidated earnings forecast for the full year ending in March 2020. There are 2 reasons behind this. The first reason is the Hawaii business. Things are going well, and we are expecting to book operating profit. However, we cannot say for sure that the sale of real estate in the Hawaii business, for which we have already entered negotiations, will actually take place during this fiscal year.
The second reason we did not change our forecast is the negative impact from Typhoon 19, which led to hotel cancellations and the temporary suspension of operations in our railways and buses. Some of our hotels and golf courses in the Hakone, Karuizawa and Manza areas have been affected by the flooding and the suspension of operations together with the restoration costs will have an impact, but the extent of this impact remains unclear. Therefore, we are not revising the forecast we announced at the beginning of the fiscal year.
With that, I would like to conclude my presentation on the results of the second quarter. Thank you for your attention.
Today, I would like to talk about strengthening our marketing capabilities by building our customer platform, promoting digital management and creating new business areas and expanding existing business fields. These are the main themes in our current medium-term management plan as initiatives to build our long-term growth platform.
We have material in the appendix on Page 17 onwards describing our long-term vision and the positioning of the current medium-term management plan.
First, I will talk about strengthening our marketing capabilities. The number of members in the SEIBU PRINCE CLUB, our group-wide membership program, has steadily grown to 1.06 million as of September 2019, exceeding 1 million. Usage of group facilities by members has also increased to JPY 63 billion.
On Page 3, we show the current status of our various membership programs. Within the SEIBU PRINCE CLUB, there are 150,000 gold and platinum members, which is the premium status of the Prince status service. There are also 310,000 members who are residents in the Seibu Railway corridor.
We are steadily building up our individual customer base in our main lines of business. We also have membership programs in other services as well as outside of Japan, through which we are building contact points with customers. We will continue sales promotion and PR activities to the users of various services related to SEIBU PRINCE CLUB as well as cross-selling the Seibu Group's other services.
The data on Page 5 compares the membership continuation rate of the SEIBU PRINCE CLUB between cases where the user used only 1 service against cases where the user used services offered by multiple group companies.
Together with efforts by each of our group companies to increase the number of users of their respective services, we will use the SEIBU PRINCE CLUB as a common platform and encourage users to use multiple services that the Seibu Group offers and pursue further synergies.
We are considering the following measures to further strengthen our customer base: one, improve convenience through apps as well as digitalizing the membership card; two, conduct marketing and make proposals regarding various plans and services customized based on the usage of each customer; three, with the anticipated expansion of mobility as a service, strength in connection with services and apps of our existing businesses such as the Seibu Railway app.
Through these measures, we will increase the number of SEIBU PRINCE CLUB members as well as the number of members that use multiple services, thereby expanding our platform for revenue and profits.
In the Hotel business, we will capture demand from new guest segments through new initiatives such as our international hotel operations, the membership style hotels as well as next-generation limited service hotels. This will lead to strengthening the customer base of our existing hotels as well as improving profitability.
We are already starting to make progress. StayWell, which operates hotels outside of Japan, opened The Prince AKATOKI London this September and has started to capture a new segment of guests.
We also have started initiatives to promote the hotels operated by StayWell to Prince hotel users in Japan and vice versa. Progress is being made in the sales of the PRINCE VACATION CLUB, the membership style hotel business, although somewhat slower than initially expected. We are making steady advances in our coverage of wealthy individuals in Japan.
Next, I will talk about promoting digital management. Together with expanding our customer base, we will make use of the accumulated data and conduct group-wide marketing activities better catered to each customer.
On Page 11, we show an image of what we mean by digital marketing. We have already started this in our hotel operations, and we will expand it to the entire group.
In the Hotel business, we completed the renewal of our hotel system this February and have started utilizing it in each of our hotels. As a result, we have centralized customer data, allowing us to offer services catered to each customer efficiently.
By offering services using this system, we will further improve customer satisfaction, increase repeat customers and achieve higher profitability. This is an example of an additional function we introduced when deploying the new hotel system. In the past, we used to hand out paper coupons to be used at breakfast. With the new system, we have digitized the coupon, and the data is linked to the card key of each guest. This improves the convenience for each guest while lowering the risk of unauthorized use. We also significantly shortened the time needed to issue and collect the paper coupons, leading to better operational efficiency. We will continue to improve efficiency through such digital initiatives.
Lastly, I will talk about the third point, which is expanding into new business areas and fields. I will introduce some of the initiatives by Seibu Lab, which is in charge of new business development. We have conducted trials to create next-generation helicopter transportation business using our properties in resort areas by collaborating with the company selected through the Open Innovation Program in 2017. We conducted trials in Hakone and in Shimoda in the summer of 2019 and in Karuizawa this autumn. We will use the results of the trials to assess the potential of commercializing this business.
Since last year, we have begun SWING, short for Seibu With Idea setter ‘N’ Growth hacker. SWING is a business creation program to turn social issues into business opportunities. In the first round, we selected 10 ideas out of many applications and have begun studies to commercialize these ideas. This program is helping to revitalize the Seibu Group itself with numerous applications and participations from within the group. We have announced that we will be holding the second round, which will be followed by more rounds in the future.
Today, I talked about our growth strategies for each segment as well as the focus initiatives in Seibu Group's management plan. By continuing to work on these measures, we will achieve the long-term growth of the Seibu Group as a whole. Thank you for your attention.