TKP Corporation Earnings briefing materials for Q1 of the year ending February 2021 ｘ 0
Contents 2 Executive summary 3 Topics 5 Business overview 21 Management policy in FY02/21 36 Appendix ｘ 1
Executive summary Q1 FY02/21 (March – May) Due to the spread of COVID-19, the Japanese government declared a state of emergency on April 7. This move greatly changed our business environment, prompting many of our customers to cancel or postpone the use of rental conference rooms. However, on May 25, the state of emergency was lifted across Japan and demand for conference rooms has been recovering since June. Owing to uncertainty over when the COVID-19 pandemic will end and how it will affect our performance, we have refrained from making full-year forecasts at this time. ｘ 2
FY02/21 Q1 Highlights ‣ Announced downward revision to full-year earnings forecast for FY02/20 and revisions to the medium- Mar. 6 term business plan ‣ Announced a new management structure with executive appointments Publicized “BCP support office” and other measures to address COVID -19 Mar. 11, 12, 13 Mar. 31 Signed a syndicated loan agreement with Sumitomo Mitsui Banking Corporation (¥2.5 billion) Apr. 6 Signed a commitment line agreement with Mizuho Bank (¥5.0 billion) Entered into a special overdraft agreement with Sumitomo Mitsui Banking Corporation (¥10.0 billion) Apr. 10 ‣ Announced differences between actual and forecast results for FY02/20 and the decision to suspend the Apr. 21 medium-term business plan ‣ Announced voluntary reductions in executive compensation (for May – July 2020, a 50% reduction in representative director compensation and a 40% reduction for full-time directors) ‣ Announced the issuance of preferred shares in a subsidiary to APA Holdings (¥1.8 billion increase in net assets) Apr. 27 On April 24, in response to investee First Cabin Co., Ltd. filing for bankruptcy with the Tokyo District Court, we announced details on the handling of and outlook for two facilities under franchise contracts (Extraordinary loss of ¥180 million in Q1) ‣ Launched live broadcasting support packages for shareholders’ meetings May 5 ‣ Opened APA Hotel Fukuoka Tenjin Nishi May 29 Held our general shareholders meeting with live broadcasting. Shinichi Saijo appointed as new outside director Reference: Q2 FY02/21 Highlights July 14 Opened APA Hotel Ueno Hirokoji July 15 Announced Q1 earnings July 16 Concluded a capital and business alliance with bridal business operator Escrit Inc. (TSE1: 2196) for joint development of banquet halls for corporate clients in the COVID-19 era (shareholding ratio: 12.59%) ｘ 3
COVID-19-related developments in Japan since March 2020 Measures to deal with COVID-19 gained steam in Japan in March. The April 7 declaration of a state of emergency prompted cancellation/postponement of conference room usage, but demand has been recovering since the state of emergency was lifted on May 25. Date Details The WHO declared a pandemic. Mar. 11 Q1 A government expert panel opined that organizers should judge and response seriously to the risk of holding events. Mar. 20 The Tokyo metropolitan government asked residents to refrain from non-essential, non-urgent outings and Mar. 25 recommends working at home on weekdays. The Tokyo metropolitan government asked people to refrain from outings, where possible, as the national Apr. 6 government prepares to declare a state of emergency. The Japanese government declared a one-month state of emergency, through May 6, for seven prefectures (Tokyo, Apr. 7 Kanagawa, Saitama, Chiba, Osaka, Hyogo, and Fukuoka). Following the state of emergency declaration, the Tokyo metropolitan government asked some facilities to close. Apr. 10 The Japanese government extended the state of emergency declaration nationwide. Apr. 16 May 4 The Japanese government extended the state of emergency through May 31. May 14 The state of emergency is lifted in 39 prefectures. May 21 The state of emergency is lifted in all except five prefectures. Q2 May 25 The state of emergency is lifted in all of Japan “Tokyo Alert” is issued in Tokyo. June 2 Recovery in conference room demand “Tokyo Alert” is lifted. June 11 June 19 Event restrictions are reduced to Step 2 (indoor and outdoor events limited to 1,000 attendees) ｘ July 10 Event restrictions are reduced to Step 3 (indoor and outdoor events limited to 5,000 attendees) 4
Financial highlights in Q1 of the year ending February 2021 (March 1 – May 31, 2020) ｘ 5
Q1 FY02/21 Consolidated Results (March – May) Main TKP Group sales fell substantially due to precipitous decline in demand following the state of emergency declaration. Despite reducing various costs, goodwill amortization caused losses at profit lines from operating profit on down. However, EBITDA (our most emphasized metric) was in the black thanks to the consolidation of Regus Japan. Q1 Q1 YoY Change (FY02/20) (FY02/21) (Million yen ） (Factors affecting non-operating Sales 10,405 10,447 +0.4% income/expenses) ■ Non-operating expenses 4,562 2,744 Gross profit -39.8% Syndicated loan arrangement fees: ¥120mn (43.8%) (26.3%) Forex losses: ¥182mn 2,475 3,712 SG&A +50.0% (23.8%) (35.5%) 2,383 367 (Factors affecting extraordinary EBITDA * -84.6% income/losses) (22.9%) (3.5%) ■ Extraordinary income 2,087 -968 Gain on sale of real estate: ¥128mn - Operating profit (20.1%) (-9.3%) Employment adjustment subsidy: ¥218mn 1,053 -1,291 ■ Extraordinary losses - Ordinary profit (10.1%) (-12.4%) Impairment loss: ¥100mn Loss on valuation of investment securities: Profit attributable to 409 -1,471 ¥180mn (First Cabin) - owners of the (3.9%) (-14.1%) Loss on liquidation of subsidiaries: ¥70mn parent** *EBITDA is calculated as operating profit/loss plus depreciation, goodwill amortization, amortization of long-term prepaid expenses, and amortization of intangible assets such as customer-related assets. **Quarterly profit/loss attributable to owners of the parent ｘ 6
Consolidated results for Q1 FY02/21 (Regus results shown separately) Main TKP Group performance was severely affected by COVID- 19, but the pandemic’s impact on Regus was limited. Regus Taiwan was in the red at the operating profit level due to the recording of goodwill amortization associated with the acquisition, but Regus Japan was in the black (as in the previous quarter) with solid results absorbing goodwill amortization. Q1 Q1 YoY change Q1 Q1 (FY02/20 ） (FY02/21 ） (FY02/21) (FY02/21) (Million yen ） Main TKP Group Main TKP Group Regus Japan Regus Taiwan 10,405 5,693 4,456 297 Net sales -45.3% 4,562 1,149 1,547 47 Gross profit -74.8% (43.8%) (20.2%) (34.7%) (16.1%) 2,475 2,321 1,275 116 SG&A -6.2% (23.8%) (40.8%) (28.6%) (39.1%) 2,383 -828 1,034 161 EBITDA - (22.9%) (-14.6%) (23.2%) (54.2%) 2,087 -1,171 271 -68 Operating profit or - loss (20.1%) (-20.6%) (6.1%) (-23.0%) Notes: The main TKP Group refers to consolidated results minus figures for Regus Japan and Regus Taiwan. EBITDA is calculated as operating profit/loss plus depreciation, goodwill amortization, amortization of long-term prepaid expenses, and amortization of intangible assets such as customer-related assets. Regus Japan operating profit factors in deduction of goodwill amortization and amortization of customer-related assets Regus Taiwan operating loss factors in deduction of goodwill amortization (forex rate: TWD1 = JPY3.62) ｘ 7
Consolidated Q1 FY02/21 (March – May): Main expenses Rent and personnel expenses account for the greater part of expenses across the company, while advertising expenses are extremely low due to the high ratio of repeat customers. Amortization (mainly goodwill) has increased since the consolidation of Regus Japan. During Q1, personnel expenses decreased due to the temporary closure of some facilities. Change in main expenses (consolidated ） (Million yen ） 16,000 Consolidation of Consolidation of Regus Taiwan Regus Japan 14,000 advertising expense to sales ratio 1.1% 3,853 12,000 2,860 2,942 2,080 10,000 1,460 1,003 157 978 153 Other 579 1,318 479 165 111 8,000 521 Amortization 364 2,645 2,260 3,021 3,119 2,774 Advertising and 2,265 2,987 2,463 depreciation 2,355 6,000 280 285 198 Utilities 240 81 383 80 174 72 373 405 361 82 327 79 Personnel 4,000 2,541 2,252 2,268 2,191 1,999 Rent 5,392 5,232 5,080 4,796 2,000 2,683 2,467 2,493 2,522 2,418 0 18Q1 Q1 18Q2 Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 20Q1 Q3 Q4 Q1 Q2 Q3 Q4 Q1 FY02/19 FY02/19 FY02/19 FY02/20 FY02/20 FY02/20 FY02/19 FY02/20 FY02/21 ｘ 8
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