Tosei : Script of FY2024 2Q Financial Results Presentation（PDF 5834KB）

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Tosei Corporation FY2024 2Q Financial Results Presentation July 5, 2024 Event Summary [Company Name] Tosei Corporation [Company ID] 8923-QCODE [Event Language] JPN [Event Type] Earnings Announcement [Event Name] FY2024 2Q Financial Results Presentation [Fiscal Period] FY2024 Q2 [Date] July 5, 2024 [Number of Pages] 32 [Time] 16:00 - 16:51 (Total: 51 minutes, Presentation: 44 minutes, Q&A: 7 minutes) [Venue] Webcast [Venue Size] [Participants] [Number of Speakers] 2 Seiichiro Yamaguchi President and CEO Nobuto Fujiwara Managing Executive Officer, In charge of Corporate Management Department Support Japan 050.5212.7790 North America 1.800.674.8375 Tollfree 0120.966.744 Email Support [email protected] 1 Presentation Moderator : Ladies and gentlemen, thank you very much for attending today's financial results briefing for Q2 of the fiscal year ending November 30, 2024 of Tosei Corporation. First, we would like to inform you about today's proceedings. Today, we will begin with a presentation in line with the documentation, and then move on to a Q&A session. Please refer to our website for the documents. Today's financial results briefing is scheduled to end around 5:00 PM. Next, we would like to introduce the attendees from the company who are at today's meeting: President and CEO, Seiichiro Yamaguchi; and Managing Executive Officer, Nobuto Fujiwara. These two people are representing Tosei Corporation. Managing Executive Officer Fujiwara will now provide an overview of the financial results for H1 of the fiscal year ending November 30, 2024, beginning on page three of the financial results presentation materials. Fujiwara : My name is Fujiwara, as just introduced. I would like to present an overview of the financial results for Q2 of the fiscal year ending November 30, 2024. Please see page four. This shows the financial highlights for Q2 of the fiscal year ending November 30, 2024. Support Japan 050.5212.7790 North America 1.800.674.8375 Tollfree 0120.966.744 Email Support [email protected] 2 The bar graph on the left side of the page shows revenue, operating profit, profit before tax, and profit for the period for the past three years. Revenue increased 9% YoY to JPY57.6 billion, and the dotted-line box shows the forecast for the full year, which is JPY92.1 billion, of which 62.5% has already been achieved. Similarly, operating profit increased 19.1% to JPY14.9 billion, with a progress rate of 84.2%, and profit before tax increased 19% to JPY14.3 billion, with a progress rate of 87.1%, showing extremely steady progress. Operating profit by segment and stable business ratio are shown on the right side of the page. We have six segments. The segments that are boxed off here-the real estate rental business, the real estate property management business, the real estate fund and consulting business, and the hotel business-are designated as stable businesses. For H1 of the fiscal year ending November 30, 2024, the stable business ratio was 35%, as profits from the trading business led the way, but the ratio is expected to increase toward the full-year plan of 47.2%, as stable businesses will generate stable profits over time. I would like to explain each of the six businesses that we are engaged in. Please see page six. This is the real estate revitalization business. We acquire existing assets that have lost value due to their age, etc., renovate and add the value, and sell them to investors and others. Support Japan 050.5212.7790 North America 1.800.674.8375 Tollfree 0120.966.744 Email Support [email protected] 3 H1 revenue totaled JPY29.3 billion, down 13.6% YoY, and operating profit was JPY5.5 billion, down 21.9% YoY. Although the YoY comparison makes it look like a slump, we believe that in reality the market was very favorable, and that trading remained strong. As described on pages 15 and 16, we keep roughly two to three years' worth of inventory in our revitalization business and development business, and from that inventory we formulate sales plans for a mix of properties for sale in the revitalization business and development business so that earnings in the trading business will steadily increase. In the current fiscal year, we had planned to sell large projects in the development business, so we had planned for slightly lower sales in the revitalization business. The forecast for the full year is JPY45.8 billion in revenue and JPY6.1 billion in operating profit, and we have achieved 90% of our operating profit in H1. We sold 28 whole-buildings, like those shown in the photos on the right. In addition, revenue of pre-owned condo units, as shown in the lower, dark-yellow bar graph, totaled JPY8.2 billion as 65 units were sold in Q1 and Q2. Both revenue and profits were very strong as we focused on the three central wards of Tokyo, including Minato ward. Please see page seven. This is the real estate development business. Revenue was JPY14.3 billion, up 124.1% YoY, and operating profit was JPY5.1 billion, up 295.3% YoY. Revenue of whole buildings, shown in the dark yellow portion of the bar graph, for Q1 of the fiscal year ending November 30, 2024, totaled JPY12.7 billion, showing extremely steady progress. Specifically, we sold a logistics facility T's Logi Ome and a commercial facility in Jiyugaoka, which we developed, pictured on the right. Support Japan 050.5212.7790 North America 1.800.674.8375 Tollfree 0120.966.744 Email Support [email protected] 4 The gross profit margin on whole-building sales in H1 of this fiscal year was 38.7%, with whole-building sales driving a significant portion of revenue and profits. In Q2, we sold five detached houses to high-end customers, resulting in revenue of JPY1.3 billion. The gross profit margin of the development business in H1 of the year was 28.7%, just outside the green graph line. The 49.4% gross profit margin shown above is the gross profit margin after taking into account the reversal of past valuation loss under LCM. Although the gross profit margin is higher in accounting terms than 28.7% of the actual margin, we believe that we were able to sell at a relatively higher profit margin than ordinary detached houses. Please see page eight. This shows the progress in acquisitions in the revitalization and development businesses that I just explained. In the portion that has already been delivered, acquisition is in progress for an estimated disposition value worth of JPY44.6 billion. Lower down you will find the amount for each individual asset type. We have purchased 41 whole buildings, 61 condo units, and 70 units worth land lots for detached houses. In addition, the dotted line in the bar graph near the middle of the page shows progress to JPY64.3 billion, including JPY19.6 billion that has been contracted but has not yet been delivered. We are 64% of the way toward our full-year acquisition target of JPY100 billion, and we believe we will be able to achieve this target as well. Support Japan 050.5212.7790 North America 1.800.674.8375 Tollfree 0120.966.744 Email Support [email protected] 5 In Q2, we acquired 23 income-generating offices and commercial facilities, estimated at JPY9.5 billion in disposition value, through business succession support. The top photo on the right shows an income- generating office in Chiba City. We have been able to efficiently acquire properties like this in bulk. Please see page nine. This is the third segment, the real estate rental business. This is positioned as one of our stable businesses. The bar graph also shows stable profits. In H1, revenue was JPY3.7 billion, up 15.4% YoY, and operating profit was JPY1.7 billion, up 17.5% YoY. On the right is a breakdown of the number of rental properties, with dark blue being investment properties of fixed assets and light blue being inventories. There was no movement in investment real estate from the end of the previous period. Inventories increased by 9 buildings from the end of the previous period due to new acquisitions and acquisitions through M&A, although 22 buildings were sold, as noted in the bottom line. We are also making good progress in this area. Support Japan 050.5212.7790 North America 1.800.674.8375 Tollfree 0120.966.744 Email Support [email protected] 6 Please see page 10. This is the real estate fund and consulting business. Revenue in H1 totaled JPY3.6 billion, down 12.3% YoY, and operating profit was JPY2.3 billion, down 22.6% YoY. As you can see in the bar graph on the lower left, the reason for the decrease in revenue here is that a large amount of spot income, such as brokerage fees, acquisition fees, disposition fees, etc., was recorded in Q1 and Q2 of last year. In the previous fiscal year, we were able to obtain large projects, such as Otemachi Place, and many spot incomes, but this fiscal year, we do not expect the same spot projects as in the previous fiscal year, so we are planning a decrease in revenues and profit. As operating income for H1 of the fiscal year is 58% of the initial plan, we believe that we are on track. As for assets under management (AUM), the bar graph on the right shows that as of the end of Q2 of this fiscal year, AUM was JPY2,377.8 billion, up JPY25.3 billion from the end of the previous fiscal year. The full- year plan for the current fiscal year calls for an annual increase of JPY350 billion in new accumulation and a decrease of JPY150 billion due to sales and other factors, for a net increase of JPY200 billion. While an increase of about JPY100 billion at the end of H1 would be ideal, the actual results were slightly behind. The bar graph on the upper right shows the increase/decrease in AUM in H1, with an increase of JPY147.6 billion and a decrease of JPY122.3 billion. Although the increase was generally steady, AUM increased by only JPY25.3 billion as sales preceded. Support Japan 050.5212.7790 North America 1.800.674.8375 Tollfree 0120.966.744 Email Support [email protected] 7 Please see page 11. This is the property management business. Revenue was JPY4.2 billion, up 10.5% YoY, and operating profit was JPY637 million, up 23% YoY. As you can see in the bar graph lower down, in addition to the usual management contracts, we also gained a lot of spot works and commissions this fiscal year, especially through proposal-based sales activities such as renovation works. The number of properties managed by the company increased by 105 from the end of the previous fiscal year to 963, mainly due to the takeover of the management business of an operating company in March through business succession support. Support Japan 050.5212.7790 North America 1.800.674.8375 Tollfree 0120.966.744 Email Support [email protected] 8 Please see page 12. This is the hotel business. Revenue was JPY3 billion, up 65.3% YoY; GOP was JPY1.5 billion, up 83.7% YoY; and operating profit was JPY1 billion, up 120% YoY, all very strong. The occupancy rate for the Q2 period was 93.3% for the office area and 86.8% for the tourist area. The Tsukiji Ginza Premier (No. 8) opened in September of last year, and this hotel contributed significantly to the increase in profit this time. The list of hotels held by Tosei is shown on the right. Also, looking at the occupancy rate, you may have the impression that the rate in this year has not increased much from last year. ADR is not shown here, but we have been able to increase ADR by approximately 20%, although there is some variation from hotel to hotel. The hotel business is performing well due to strong demand from within Japan and overseas. That concludes my explanation of our business segments. Support Japan 050.5212.7790 North America 1.800.674.8375 Tollfree 0120.966.744 Email Support [email protected] 9

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