Koshidaka HOLDINGS Co., Ltd. (2157) |
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Company |
Koshidaka HOLDINGS Co., Ltd. |
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Code No. |
2157 |
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Exchange |
First Section, Tokyo Stock Exchange |
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Industry |
Service |
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President |
Hiroshi Koshidaka |
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HQ Address |
World Trade Center Building 23rd Floor, 2-4-1 Hamamatsucho, Minato-ku, Tokyo |
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Year-end |
August |
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URL |
* Share price as of close on June 19, 2017. Outstanding shares as of most recent quarter end, excluding treasury stock.
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* Estimates are those of the Company. From fiscal year August 2016, the definition of net profit has been changed to net profit attributable to parent company shareholders.
This Bridge Report presents Koshidaka HOLDINGS's earnings results for the first half of fiscal year August 2017 and other details of the Company. |
Key Points |
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Company Overview |
<Corporate Philosophy - Contribute to the Creation of a Peaceful World by Providing Bountiful Hope and Lifestyles Rich with Entertainment>
Koshidaka maintains a corporate philosophy of "contributing to the creation of a peaceful world by providing bountiful hope and lifestyles rich with entertainment, while continuing to provide evolutionary and significant services and products to people worldwide." Based upon this corporate philosophy, Koshidaka has also established five visions: 1) cultivating new businesses in existing industries to provide easily accessible entertainment that only require short amount of time, and are close and reasonable, 2) developing optimized businesses and structures based upon conditions in each country, area, and industry, 3) continuing to offer surprising and highly satisfying services and products with customers' needs in mind, 4) fostering inspired and entrepreneurial human resources, and 5) seeking to cultivate and maximize synergies between the various businesses of the Group.
<Business Segments and Group Structure>
The Koshidaka HOLDINGS Group currently divides its business into four main segments. In the karaoke business segment, the Company operates both the "Karaoke Honpo Manekineko" clubs (Suburban regions) and the "One Kara" individual use Karaoke clubs (Urban regions). In the Curves Fitness Club business, fitness clubs providing specialized 30 minute workout programs specialized for middle to older aged female users called "Curves" are operated. Furthermore, the hot spring business (Leveraging various hot spring facility operation knowhow), and real estate management businesses are also being undertaken. The Koshidaka Group is comprised of the holding company Koshidaka HOLDINGS, and ten consolidated and four non-consolidated subsidiaries.
<Growth Strategy>
The possibilities within the Japanese leisure related market are considered to be limitless, given its massive size of about ¥72.3 trillion (Source: Japan Productivity Center, Leisure White Paper 2016). Moreover, an increase in the number of baby boomers approaching the age of 75 (Peak number being born between 1947 to 1949) is expected to contribute to strong growth in the market. Based upon the business concept of becoming a "comprehensive leisure services company," Koshidaka seeks to cultivate synergies between the four realms of "amusement (karaoke)," "sports and fitness (Curves)," "tourism and travel (hot springs)," and "hobbies and cultural activities" to promote a strategy of "creating new businesses in existing industries." Koshidaka also maintains a goal of achieving Group sales of ¥100.0 billion at an early stage.According to the "Karaoke White Paper 2016," the karaoke market within Japan in fiscal year 2015 (April 1, 2015 to March 31, 2016) grew on a year-on-year basis to ¥399.4 billion (From ¥397.9, ¥395.7 and ¥391.2 billion in fiscal years 2014, 2013 and 2012 respectively). According to newspaper reports, the fitness club market has continued to trend sideways during the past several years at around ¥410.0 billion. Strategies by Business Segment
Along with the shift from the traditional "regional and suburban existing club take over and refurbishment" strategy to a new "major metropolitan, station front, downtown area new club opening" strategy, Koshidaka is stepping up openings of karaoke clubs in Tokyo and three neighboring prefectures. Based on the favorable reputation of Koshidaka's facilities service characteristics of "safety, security, reasonableness, and friendliness", the Company will conduct efforts to expand its karaoke system developed in-house "Sukitto" (Smart Karaoke Internet Terminal) and its "Zero Kara" clubs targeting high school and younger karaoke users in Tokyo and three neighboring prefectures. While the share of sales booked in Tokyo and three neighboring prefectures during fiscal year August 2012 was 21.1%, it has grown to 31.5% in fiscal year August 2016 and has helped to offset weakness encountered in other outer lying regions.Sales and profits of the Singaporean subsidiary are growing on the back of the injection of knowhow developed in the Japanese karaoke club business and as part of the efforts to leverage profits recorded within Japan to develop the overseas business. As of the end of fiscal year August 2016, there are 457 facilities operated in Japan and 24 facilities operated outside Japan. |
First Half of Fiscal Year August 2017 Earnings Results |
Sales, Operating and Ordinary Profit Rise to Record Highs in First Half
Sales rose by 10.1% year-on-year to ¥26.860 billion. Sales of the karaoke club business rose by 6.6% year-on-year, and sales of the Curves Fitness Club business rose by 15.6% year-on-year on the back of increases in both club and member numbers, and favorable sales of protein and other goods. While no new facilities were opened, sales of the hot spring business rose by 6.6% on the back of various efforts to capture customers.With regard to profits, improvements in operating rates of clubs in Tokyo and surrounding regions in the karaoke club business, and increases in existing facility sales of the hot spring business contributed to a 0.6 point improvement in gross profit margins to 26.9%. Sales, general and administrative expenses rose by only a small margin due in part to efforts to reduce expenses in both the karaoke club and hot spring businesses, allowing operating profit to grow by 22.2% year-on-year. Foreign exchange translation gain amounted to ¥98 million (Compared with a ¥99 million loss in the previous term), and club location transfer subsidy to ¥27 million, allowing non-operating income to improve. Fortification of the club network primarily in the Tokyo metropolitan region, strengthening of unique service lineup, implementation of "Zero Kara" focusing on high school students where room usage is free, "Asa Uta" (Morning karaoke) reduced price karaoke room usage of ¥10 per 30 minutes for elderly customers offered during the morning, and collaboration with contents holders were effective in cultivating specific groups of target customers during specific operating hours. In addition, implementation of smoke free rooms at clubs operating in Tokyo and surrounding regions from September was well received by family and elderly customers, and contributed to a 5% year-on-year increase in customer numbers. Moreover, the consolidated subsidiary Moon Corporation was absorbed through merger with Koshidaka effective September 1, 2016, and "Moon" and "Sincere" brandclubs operated by Moon have been converted to "Manekineko" brand clubs. Existing club sales fell by 2.1% year-on-year. Customer pricing declined by a small margin 0.6% year-on-year and remained basically in line with the previous term. At the same time, customer numbers declined by 1.6% year-on-year. Third Consecutive Year of Number One Ranking in the Japan Consumer Satisfaction Index of the Service Industry Efficiency Promotion Council
The Curves Fitness Club division achieved the third consecutive year of number one ranking in the Japan Consumer Satisfaction Index of the Service Industry Efficiency Promotion Council during fiscal year 2016.
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Fiscal Year August 2017 Earnings Estimates |
Full Year Estimates Remain Unchanged, Call for 10th Consecutive Year of Higher Sales and Profits
Koshidaka HOLDINGS' earnings estimates call for sales to rise by 7.7% year-on-year to ¥55.112 billion. Sales of the karaoke club business are expected to rise by 9.6% year-on-year on the back of various efforts focused upon clubs in the Tokyo metropolitan region. At the same time, sales of the Curves Fitness Club business, which is planning to open 90 new clubs, are expected to rise by 5.6% year-on-year and sales of the hot spring business are anticipated to rise by 5.5% year-on-year on the back of 10% year-on-year increases in customer numbers at the five existing facilities. Consequently, sales of all three businesses are expected to rise.Operating profits are expected to grow by 13.7% year-on-year to ¥5.468 billion. Favorable trends in existing clubs within the karaoke business are expected to boost operating profit by 24.1% year-on-year. In addition, the hot spring business is expected to see a 70.1% year-on-year increase in operating profit on the back of higher sales and energy conservation measures. Advertising expenses to increase the brand awareness of the Curves Fitness Club business are expected to be absorbed to allow operating profit to rise by 7.4% year-on-year. (2) Second Half Business Strategy
Koshidaka has restarted opening "One Kara" clubs along with continued opening of "Manekineko clubs in urban locations in front of stations and busy business districts" in the karaoke club business. Based upon the outlook for an increase in the rate of new "Manekineko" club openings, the first "One Kara" club in Osaka is expected to be opened. With regard to marketing, efforts to boost the "Zero Kara", "Zero Kara +" and "Asa Uta" services are expected to be strengthened. In addition, other services including automated systems for check in and payment are expected to be introduced in the coming term. With regards to overseas business deployment, Koshidaka is considering entering Vietnam, Philippines, Indonesia, and other new markets in Southeast Asia due to the outlook for the earnings contribution of the Singapore operations to accelerate. At the same time, reviews of operations in Korea will be made to resolve the difficult conditions in that market.Establishing a store network to achieve a member network of 1.00 million, Koshidaka expects to open between 90 and 100 clubs in the Curves Fitness Club business with a view to avoiding cannibalization. Moreover, efforts will be implemented to further raise customer satisfaction and help resolve various societal issues by expanding the positive effects of exercise to an even wider group of customers. As part of this strategy, educational activities about the benefits of exercise are being conducted in collaboration with regional governments. In the hot spring business, service contents and facilities will be fortified with a goal of growing sales. Specifically, features such as free admission for elementary school aged children, bingo games, and other measures will be implemented, along with introduction of carbonated spring water at all facilities. In addition, a large lounge space called "Maneki Town", with comic books and relaxation rooms, was opened at the Tokyo Health Land facility. Koshidaka HOLDINGS will endeavor to achieve its goal of 10% operating profit margin by raising sales, and reducing costs through energy conservation measures. Specifically, heat exchangers have been newly introduced, and air conditioning, filtration systems and boiler facilities have been renovated to reduce energy consumption and achieve further increases in efficiency. Furthermore, the Company is considering restarting new facility openings through take over and renovation of existing facilities operated by other companies. (3) Shareholder Returns: Dividend Raised by ¥2 to ¥34 Per Share
Koshidaka HOLDINGS had been expected to pay a yearend dividend of ¥16 per share, but is now expected to raise this to ¥18 per share to commemorate the move of its shares to the First Section of the Tokyo Stock Exchange for a full year dividend payment of ¥34 per share (Dividends of ¥15 and ¥17 per share were paid at the ends of the interim and full year periods in the previous fiscal year). Furthermore, Koshidaka also offers ¥5,000 in shareholder coupons to all shareholders holding more than 100 shares and different catalog gifts in accordance with the number of shares held as of the registry date of August 31, 2016 as part of its shareholder benefit program. Shareholders of over 100 but less than 1,000 shares are offered catalog gifts worth ¥3,000, and those holding over 1,000 share are offered catalog gifts worth ¥5,000.
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Conclusions |
Koshidaka HOLDINGS is working to resolve the difficult conditions in Korea and consideringto expand its business in new markets within Southeast Asia. The Company hopes to be able to access new growth opportunities by expanding its business beyond Singapore. Efforts to increase usage of Curves Fitness Clubs by older customers are gaining success. Consequently, many of the Curves Fitness Clubs achieve full usage by 24 members shortly after they open at 10A.M. because of the strong demand from older customers. Koshidaka seeks to contribute to resolution of societal issues by leveraging its karaoke club service characteristics of "safety, security, reasonableness, and friendliness" and by expanding the awareness of the health benefits of singing and exercise. It also seeks to expand its corporate social responsibility through its various services. At the same time, the Company will expand its club network while seeking to avoid cannibalization. Koshidaka HOLDINGS is considering the restart of new facility openings in hot spring business due to improvement in their operating conditions. Efforts to reduce costs and expand marketing to raise sales have been made to help offset the downward trend in personal consumption. Therefore, the ability of Koshidaka to cultivate this business into the third cornerstone of its overall business should be watched closely. |
<Reference: Regarding Corporate Governance> |
◎ Corporate Governance Report
Updated on Dec. 1, 2016
Basic Policy
The basic policy for corporate governance of our corporate group is to achieve swift decision making and flexible organizational operation for strengthening our corporate competitiveness amid the rapidly changing business environment, while keeping the transparency and soundness of business administration for maximizing the corporate value with respect to shareholders, and we have developed systems and implemented some measures for it. The important mission in our business administration is to achieve sustainable growth and improve our medium and long-term corporate value. In order to fulfill this mission, our corporate group has fostered good relationships with all stakeholders, including shareholders and customers, while respecting their respective standpoints, and set our group's "management philosophy" and "behavioral standards" for following the philosophy.Corporate Mission Our mission is to contribute to the realization of lifestyles full of leisure and to the establishment of a peaceful world filled with hope by continuing to create, offer and provide the world with new and meaningful products and services. Behavioral Standards 1. Have a spirit of entrepreneurship 2. Have a "customers come first" mentality 3. Create new services 4. Refine our spirit of hospitality 5. Have a "morals before profit" mentality 6. Maintain equality and fairness 7. Maintain compliance 8. Maintain awareness of global environmental conservation 9. Encourage staff to educate themselves 10. Offer an abundance of opportunity <Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>
Principle 1-4 The so-called strategically held sharesThe basic policy of our company is not to hold shares strategically. Principle 1-7 Transactions among parties concerned In our company, important transactions with executives and major shareholders (transactions among parties concerned) are determined by the board of directors. For each account settlement, directors and major shareholders are obligated to submit a written confirmation about whether they have conducted any transactions among parties concerned. Principle 5-1 Policy for developing systems and implementing measures for promoting constructive dialogue with shareholders (Basic policy) Through constructive dialogue with shareholders, we will deepen their understanding of our company, achieve sustainable growth, and improve our medium and long-term corporate value. (Division in charge) If a shareholder requests a dialogue (meeting), the division in charge of IR will deal with the request. After confirming the purpose, etc. of the dialogue (meeting) of the shareholder, the management, including the executive in charge of the IR division, will hold a meeting, if necessary. (Means for dialogue other than individual meetings) In our company, directors disclose information regularly through results briefing sessions, etc. (Prevention of the leakage of insider information) As for the management of insider information, our company prevents the leakage of insider information by managing information rigorously in accordance with the in-company regulations for inside information management and the prevention of insider trading. Disclaimer
This report is intended solely for information purposes, and is not intended as a solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and comes from sources that we judge to be reliable. However we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration.Copyright(C) 2017 Investment Bridge Co., Ltd. All Rights Reserved. |