Message from the President and CEO
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The financial results for the first six months progressed to approximately 70% of the full-year profit projections. However, forecasts for the fiscal year under review were revised downward due to the recording a valuation loss in consideration of upcoming business risks attributable to the COVID-19 crisis.
During the six months ended May 31, 2020, the Tosei Group promoted its businesses aggressively. This was despite the temporary closure of hotels operated by the Group and a delay in purchasing and sales operations for a period of time in the Revitalization Business and Development Business amid considering the health and safety of customers and employees under the condition of state of emergency in April and May due to the spread of COVID-19. The Company established an operation structure, ensuring that employees take infection prevention measures to serve customers while simultaneously taking other steps, including the introduction of remote work. In doing so, it completed the delivery of 240 housing units of THE Palms Sagamihara Park Brightia, a condominium of 243 units in total, in May as scheduled. In addition, with the acquisition of new orders for management, it succeeded in steadily increasing assets under management in the Fund and Consulting Business. Thanks to the initiatives, each segment recorded a solid improvement in profitability and full-year profit before tax and is expected to reach at least ￥11.7 billion even reflecting the effect of suspended hotel operations, among other factors, towards the initial projection of ￥13.0 billion.
Although, the impact of COVID-19 is difficult to accurately grasp the timing of convergence and the effect to the real estate market. Given that a decline in the liquidity of income-generating properties in the future were expected due to a worldwide deterioration in the business climate, the Company decided to record a valuation loss of ¥7,680 million in real estate held for sale, based on conservative scenarios among the several scenarios considered by Tosei at the present time. The valuation loss mainly concerns hotel facilities and commercial facilities, for which the risk of a decline in market prices is especially high. As a result, consolidated revenue for the six months ended May 31, 2020 totaled ¥45,050 million (up 30.8% year on year), profit before tax was ¥1,890 million (down 75.2%), and profit for the period was ¥1,147 million (down 78.1%). In addition, the Company has decided to postpone sales of some properties originally planned for sale during the second half of the fiscal year, until the next fiscal year or later. As a result, its full-year revenue forecast to ¥64,897 million, down ¥15,456 million from the previous forecast, the full-year profit before tax forecast to ¥4,070 million, down ¥8,976 million from the previous forecast, and the full-year profit for the year forecast to ¥2,411 million, down ¥6,396 million from the previous forecast. As a result of the revision, the expected year-end dividend per share declined by ￥34 from the previous forecast, to ￥13 per share (payout ratio of 25.6%).
Going forward, efforts will be made to advance businesses while simultaneously paying more attention to trends in the real estate market.
The current adjustment in the real estate investment market is expected to continue. Tosei will use cash flows from stable businesses such as its Rental Business and Fund and Consulting Business to cover selling, general and administrative expenses, and strive to recover its real estate sales and acquisitions business while ensuring sufficient liquidity on hand and financial soundness. Also, seeing social changes brought about by the impact of COVID-19 as new business opportunities, Tosei will proceed to diversify its asset types in response to changing market conditions.
The Group will continue to work together to raise corporate value through aiming for further growth. We look forward to your continued support.
President and CEO