Kyushu Railway Company · TSE:9142
Kyushu Railway — H1 FY19.3 Earnings Presentation
51 slides from Kyushu Railway's earnings presentation, Dec 18, 2018
Slide 1: FY19.3 Semi-Annual Investors Meeting
FY19.3 Semi-Annual Investors Meeting December 18, 2018 Kyushu Railway Company 11
Slide 2: Illegal Activity by JR Kyushu Housing Company
Illegal Activity by JR Kyushu Housing Company Establishment of Third-Party Committee in Response to Illegal Activity by JR Kyushu Housing Company Employees of JR Kyushu Housing are alleged to have taken part in the conclusion and execution of construction contracts based on housing sales contracts b
Slide 3: Illegal Activity by JR Kyushu Housing Company: Measures for Preventing Reoccurrence
Illegal Activity by JR Kyushu Housing Company Measures for Preventing Reoccurrence 1. Instituting rigorous compliance education for the JR Kyushu Group ・Internal training adapted to the housing industry, including specific examples, for all employees of JR Kyusyu Housing, etc. 2. Strengthening and e
Slide 4: Contents
Contents Highlights 5 Ⅰ Financial Results for the Six-month Period Ended September 30, 2018 6 Ⅱ Forecasts for FY19.3 14 Ⅲ Segment Information 19 Ⅳ Progress of the Medium-term Business Plan and Preparation for the Next Medium-term Business Plan 31 APPENDIX 40 4
Slide 5: Highlights
Highlights Operating revenues and net income both increased Results Increase operating revenues due to benefits of the consolidation of Caterpillar Kyushu and revenues from sales of condominiums For Increase in net income as the absence of previously recorded losses associated with the heavy FY1
Slide 6: Financial Results for the Six-month Period Ended September 30, 2018
Ⅰ. Financial Results for the Six-month Period Ended September 30, 2018 6
Slide 7: Consolidated Financial Highlights for the Six-Month Period
Consolidated Financial Highlights for the Six-Month Period Ended September 30, 2018 (Year on Year) Operating revenues up for second consecutive year (record high) Operating income up for sixth consecutive year (record high) Net income attributable to owners of the parent up for second consecut
Slide 8: Consolidated Income Statements
Consolidated Income Statements （\bil） 6 months ended 6 months ended September 30, September 30, YoY Major factors 2017 2018 Increase due to consolidation of Caterpillar Kyushu Operating revenues 189.4 210.2 20.8 111.0% Increase in revenue from sales of condominiums Increase due to consolidation of C
Slide 9: Segment Information [Summary]
Segment Information 【Summary】 6 months ended 6 months ended September 30, September 30, YoY Major factors 2017 2018 Operating revenues 189.4 210.2 20.8 111.0% Transportation 89.5 89.7 0.2 100.2% Increase in railway transportation revenues, etc. Construction 27.8 31.5 3.7 113.4% Increase in Shinkanse
Slide 10: Balance Sheet and Cash Flow Statement
Balance Sheet and Cash Flow Statement Balance sheet (\bil) 6 months ended Increase/ FY18.3 Major Factors September 30, 2018 (decrease) Total Assets 749.3 747.0 (2.2) Cash and time deposits 15.0 14.9 (0.0) Short-tem securities 65.0 54.5 (10.4) Decrease in negotiable certificates of deposit Money held
Slide 11: Non-consolidated Income Statements
Non-consolidated Income Statements (\bil) 6 months ended 6 months ended YoY Majour Factors September 30, 2017 September 30, 2018 Operating revenues Increase in revenue from sales of condominiums, etc. 104.1 106.6 2.4 102.3% Railway transportation revenues 75.3 75.4 0.0 100.1% Other revenues 28.8 31.
Slide 12: Non-consolidated Income Statements (Reprint)
Non-consolidated Income Statements (Reprint) (\bil) 6 months ended 6 months ended September 30, September 30, YoY 2017 2018 Operating revenues 83.5 83.4 (0.0) 99.9% business Railway Operating expenses 65.8 66.8 0.9 101.5% Operating income 17.6 16.6 (1.0) 94.1% Operating revenues 20.6 23.1 2.4 111.9%
Slide 13: Railway business: Transportation Revenues
Railway business Transportation Revenues (\bil) 6 months ended 6 months ended YoY Majour Factors September 30, 2017 September 30, 2018 Total 75.3 75.4 0.0 100.1% Commuter pass 16.5 16.6 0.0 100.5% Non-commuter pass 58.7 58.7 (0.0) 99.9% Shinkansen 26.9 27.5 0.5 102.1% ・Basic trend (approx. 101% ) ・I
Slide 14: Forecasts for FY19.3
II. Forecasts for FY19.3 14
Slide 15: Consolidated Financial Highlights for FY19.3
Consolidated Financial Highlights for FY19.3 (\bil) Forecasts Results FY19.3 YoY FY18.3 （12/13） Operating revenue 413.3 439.7 26.3 106.4% Operating income 63.9 60.7 (3.2) 94.9% Ordinary income 67.0 62.6 (4.4) 93.4% Net income attributable to 50.4 47.5 (2.9) 94.2% Net income per share (yen) 315.07 29
Slide 16: Consolidated Financial Forecasts (By segment)
Consolidated Financial Forecasts (By segment) (\bil) Forecasts Results FY19.3 YoY FY18.3 （12/13） Operating revenue 413.3 439.7 26.3 106.4% Transportation 183.7 186.9 3.1 101.7% Construction 88.0 88.6 0.5 100.7% Real Estate 69.4 70.6 1.1 101.7% (Real Estate Lease) 49.0 51.6 2.5 105.3% Retail and Rest
Slide 17: Non-consolidated Financial Forecasts
Non-consolidated Financial Forecasts (\bil) Forecasts Results FY19.3 YoY FY18.3 （12/13） Operating revenue 219.7 222.8 3.0 101.4% Railway transportation revenues 151.1 151.5 0.3 100.2% Shinkansen 54.1 55.0 0.8 101.6% Conventional Lines 97.0 96.5 (0.5) 99.5% Other revenues 68.5 71.3 2.7 104.0% Operati
Slide 18: Non-consolidated Financial Forecasts (Reprint)
Non-consolidated Financial Forecasts (Reprint) (\bil) Forecasts Results FY19.3 YoY FY18.3 (12/13) Operating revenues 171.3 174.0 2.6 101.6% business Railway Operating expenses 143.0 147.5 4.4 103.1% Operating income 28.2 26.5 (1.7) 93.9% Operating revenues 48.4 48.8 0.3 100.8% businesses Related Ope
Slide 19: Segment Information
Il. Segment Information 19
Slide 20: Transportation Segment
Transportation Segment Transportation Segment performance (\bil) 6 months ended 6 months ended September 30, September 30, YoY Forecasts FY19.3 YoY 2018 2019 Operating revenues 89.5 89.7 0.2 100.2% 186.9 3.1 101.7% Operating expenses 18.0 16.8 (1.2) 93.2% 27.5 (1.7) 94.1% Depreciation costs 2.3 3.2
Slide 21: Initiatives in the Railway Business
Initiatives in the Railway Business —Pursuing Efficient Business Operations Further increase train usage and bolster profitability by encouraging the use of the “JR Kyushu Internet Reservation Service” and actively promoting policies focused on inbound demand Improvement of Profitability by Promot
Slide 22: Initiatives in the Railway Business: Inbound Demand
Initiatives in the Railway Business —Pursuing Efficient Business Operations Inbound Demand Initiatives Promote sales of the JR KYUSHU RAIL PASS Number of JR KYUSHU RAIL PASS Purchased Coordinate with overseas travel agencies and airlines (10,000 tickets) Improve convenience through introduction of
Slide 23: Natural Disasters: Earthquakes and Heavy Rains
Natural Disasters—Kumamoto Earthquakes, July 2017 Heavy Rain in Northern Kyushu, and July 2018 Heavy Rain Hitahikosan Line July 2017 heavy rain in Kumamoto earthquakes July 2018 heavy rain Chikuho Main Kokura Kyudai Main Line northern Kyushu Line (Harada) Hakata Time of April 2016 July 2017 July 201
Slide 24: Real Estate Segment
Real Estate Segment Real Estate Segment performance (\bil) 6 months ended 6 months ended Forecasts September 30, September 30, YoY YoY FY19.3 2017 2018 Operating revenue 30.9 34.2 3.3 110.7% 70.6 1.1 101.7% (Real Estate Lease) 23.9 25.7 1.7 107.2% 51.6 2.5 105.3% Operating income 11.7 12.1 0.4 103.8
Slide 25: Initiatives in the Real Estate Leasing Business
Initiatives in the Real Estate Leasing Business Performance of Tenant Sales at Major Station Buildings Rental Apartments （¥bil） JR博多シティ JR Hakata City その他主要駅ビル Other major station buildings* Secure stable profits by promoting new business development 2,500 250 Develop high-grade apartments capit
Slide 26: Major Development Pipelines
Major Development Pipelines Kumamoto Station Area Development Minami Kyushu (Miyazaki) Development Project (Spring 2021) (Opening in Fall 2020) Kumamoto Station Building Nagasaki Station JR Miyako Twin Building (tentative, joint development project with Lot area: 19,000㎡ (including area below elevat
Slide 27: Retail and Restaurant Segment
Retail and Restaurant Segment Retail and Restaurant Segment performance (\bil) 6 months ended 6 months ended Forecasts September 30, September 30, YoY YoY FY19.3 2017 2018 Operating revenue 51.5 52.3 0.8 101.6% 105.4 2.2 102.2% Operating income 1.8 1.7 (0.0) 95.5% 3.6 (0.0) 98.6% Depreciation expens
Slide 28: Construction Segment
Construction Segment Construction Segment performance (\bil) 6 months ended 6 months ended Forecasts September 30, September 30, YoY YoY FY19.3 2017 2018 Operating revenue 27.8 31.5 3.7 113.4% 88.6 0.5 100.7% Operating income 0.6 1.0 0.4 172.6% 5.1 (1.1) 81.3% Depreciation expense 0.3 0.4 0.0 117.9%
Slide 29: Other Segment
Other Segment Other Segment performance (\bil) 6 months ended 6 months ended Forecasts September 30, September 30, YoY YoY FY19.3 2017 2018 Operating revenue 28.0 42.9 14.8 153.0% 87.2 19.7 129.3% Operating income 0.6 1.7 1.0 266.1% 2.7 0.2 112.0% Depreciation expense 0.5 1.2 0.6 225.7% 2.4 0.8 154.
Slide 30: Other Segment: Hotel and Caterpillar Kyushu Initiatives
Other Segment Initiatives in the hotel business Initiatives of Caterpillar Kyushu Hotel (Japanese inn) business revenue and no. of New Business Initiatives rooms Consolidated Caterpillar Kyushu, Ltd. in October 2017 (pre- （¥bil） ホテル事業収入 客室数 of rooms （room） acquisition performance: operating revenu
Slide 31: Progress of the Mid-term Business Plan and Preparation for the Next
Ⅳ. Progress of The Mid-term Business Plan and Preparation for The Next Mid- term Business Plan 31
Slide 32: JR Kyushu Group: Positioning Statement
JR Kyushu Group: Positioning Statement Railway business positioned as the foundation for all group operations “Safety and Loyalty”, “Customer Attraction Capabilities”, and “Solid EBITDA” Cultivated the above advantages in the railway business and now developing diversified group operations around ra
Slide 33: Review of the JR Kyushu Group Mid-Term Business Plan 2016–2018
Review of the JR Kyushu Group Mid-Term Business Plan 2016–2018 Current Mid-Term Business Plan Next Mid-Term Business Plan FY17.3 FY18.3 FY19.3 FY20.3 and Beyond Kumamoto earthquakes (Apr. 2016) Heavy rain in northern Kyushu (July 2017) Heavy rains (July 2018) Listing on stock exchange (Oct. 2016)
Slide 34: Financial Targets
Financial Targets Earnings forecasts Operating Revenues: ¥400 billion EBITDA: ¥78 billion （¥bil） （¥bil） 鉄道運輸収入以外 Non-railway revenue Non-railway revenue mix: Over 62% 運輸サービス Transportation 建設 Construction 鉄道運輸収入 4,500 450 Railway revenue 439.7 駅ビル・不動産 Real Estate 413.3 流通・外食 Retail and Restaurant 81
Slide 35: Target Management Indicators
Target Management Indicators Capital Expenditures & Investments [Reference] Total 3-Year Capital Expenditures & 成長投資 Total amounts for FY17.3-FY19.3 (initial plan) Investments (estimates) Growth investments ¥239 billion Investments 維持更新その他投資 for ¥190 billion maintenance, upgrades, etc. （¥bil） Safety
Slide 36: Returns to Shareholders
Returns to Shareholders Dividend Policy Until FY19.3, we will aim for stable dividends per share with a consolidated payout ratio at a level of approximately 30% as the standard guideline. Annual Dividend Amount per Share and Payout Ratio ・Dividend of ¥83.0 per share for FY18.3 ・Planned dividend of
Slide 37: Overview of Current Mid-term Business Plan
Overview of Current Mid-term Business Plan (FY17.3-FY19.3) Target management figures and progress Progress in key businesses Target Results Progress (million passenger-km) FY16.3 FY18.3 FY19.3 FY18.3 (Shinkansen) 1,929 2,004 Operating revenue ¥400 billion ¥413.3 billion 103.3% Railway passenger-km (
Slide 38: Our View: Quest for Sustainable Growth
Our View: Quest for Sustainable Growth Changes in cost structure (JR Kyusyu) Non-consolidated depreciation expense (¥bil) Gradual increase in depreciation expense Amounts affected by special tax treatment (¥bil) 40 400 80 after mark-down of railway assets 8 28.4 28.7 29.3 Expiration of special t
Slide 39: Formulating the Next Mid-term Business Plan
Formulating the Next Mid-term Business Plan Re-verify business risk Changes in cost structure Solid Cash Flow Disciplined Cash Outflow Maintain solid cash flow Build railway infrastructure in railway business to withstand natural disasters Maximizing Boost earning power of Build pipelines urban deve
Slide 40: APPENDIX
APPENDIX 40
Slide 41: Changes in Cost Structure
Changes in Cost Structure Abolishment of Special Tax Measures Abolishment of special tax measures (special tax breaks implemented following the privatization of Japanese National Railways and provisions extending the period of these breaks) effective March 31, 2019 (period extending provisions abo
Slide 42: JR Kyushu's Capital Structure
JR Kyushu’s Capital Structure Capital calculated as difference between assets and liabilities at time of privatization of Japanese National Railways in 1987 JR Kyushu established with excessive levels of capital (additional paid-in capital) due to low levels of liabilities Note: The three JR com
Slide 43: Net Cash on September 30, 2018
Net Cash on September 30, 2018 Overview of Net Interest-Bearing Debt Net Interest-Bearing Debt on March 31, 2018*1 (¥mil) Interest bearing debt Cash and cash equivalents Net interest- Borrowings Cash and deposits Securities Money held in trust bearing debt 8,732.4 1,506.4 6,507.7 5,578.3 -4,860.0 Ne
Slide 44: Strong Railway Business as the Foundation for All Business
Strong Railway Business as the Foundation for All Business Stable revenues from railway passenger traffic following establishment of position as an important transportation method connecting all of Kyushu Strong JR Kyushu brand known for safety and reliability in Kyushu to be cultivated by opera
Slide 45: Fukuoka: Fastest Growing City in Japan
Fukuoka: Fastest Growing City in Japan The Fukuoka metropolitan area, the center of Kyushu’s economy, has maintained economic prosperity in recent years [JR Kyushu’s development projects] Population growth of major cities in Japan Commercial complex Condominiums (2000 ～ 2015) Center area of Fukuok
Slide 46: EBITDA by Segment
EBITDA by Segment Transportation Real Estate EBITDA (¥bil) 34.4 (¥bil) 34.3 350 20% 350 32.1 50% EBITDAマージン EBITDA margin 35 35 32.0 31.1 28.5 28.4 27.0 280 28 25.8 280 28 25.1 Notes: Figures for the Transportation 18.7% 18.4% segment EBITDA up to and including FY16.3 contain earnings 210 21 210 21
Slide 47: Progress of Business Initiatives Under Medium-Term Business Plan
Progress of Business Initiatives Under Medium-Term Business Plan Station Building Business Retail and Restaurant Store Hotel (Ryokan) Business Revenues Numbers Revenues (¥bil) （Stores） (¥bil) 450 45 800 14.2 14.0 750 140 14 13.0 13.0 40.3 750 400 40 38.6 38.5 701 120 12 36.7 693 700 100 10 350 35 66
Slide 48: Peripheral Business Initiatives
Peripheral Business Initiatives Rental Apartments Condominiums Acquisition Delivery Name Location Move-in Units Name Location Units date date MJR Kyudai- Higashi Jujo Kita Ward, Nishi Ward, Jun 2017 182 Gakkentoshi Apr 2017 161 Rental Apartments Tokyo Fukuoka City Residence RJR Precia Chuo Ward, Oit
Slide 49: Major Properties
Major Properties Floor space Tenant Opening/ Asset type Name Location Units sales Major tenants Acquisition Rooms FY18.3 Kokura Kita Ward, AMU PLAZA Kokura Mar 1998 Approx. 48,500m2 ¥12.1 bil UNITED ARROWS, Francfranc, etc. Kitta Kyusyu Onoemachi, TOKYU HANDS, MUJI, AMU PLAZA Nagasaki Sep 2000 Appro
Slide 50: Overview of Major Development Pipelines
Overview of Major Development Pipelines Floor space/Lot area Name Location Schedule Units Notes Rooms Area below elevated tracks Lot area: Approx. 70,000m2 Area below elevated tracks: Commercial area opened in Mar 2018 (including area below elevated Sta. building: Commercial area, movie theaters, Ku
Slide 51: Forward-Looking Statements
Forward-Looking Statements These materials contain forward-looking statements concerning business forecasts, targets, etc. of the JR Kyushu Group. The Company decided on these forward-looking statements based on the available information, as well as Company estimates and assumptions, at the time the
Kyushu Railway Company — H1 FY19.3 Earnings Presentation on 6ix