| Pursuing Profitability and Quality and Maintaining Steady Growth |
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Q.Could you provide us with an overview of the Company's performance for the term ended March 31, 2007?
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A.With conditions in the real estate market remaining favorable, the Company recorded increases in both sales and profits for the fifth consecutive term.
In the real estate industry, where the Group operates, there was a substantial flow of funds from institutional and personal investors into J-REITs and private placement funds, and the market expanded in association with the accelerated disposal of nonperforming loans by financial institutions, the liquidation of real estate in response to the introduction of asset-impairment accounting, the development of new financing methods including non-recourse loans, and low interest rates. As for land prices, the value of land facing a thoroughfare, announced in August 2006, rose for the first time in 14 years, and in the official announcement of land prices in March 2007, the national average increased, albeit slightly, after an interval of 16 years. While land prices rose in some center-city areas and certain well-positioned locations, prices in less readily accessible local regions are continuing to fall.
As the size of the real estate liquidation market continues to grow, demand for offices and condominiums is increasing, and an increasing number of domestic and foreign players are entering the market, attracted by the low interest rates. Given the circumstances, competition to acquire profitable properties is intensifying, and the real estate market appears to be shifting from a recovery to a boom. Rental income from properties and selling prices of real estate in good locations are increasing, and business conditions remained favorable for real estate development.
In this environment, the Group took steps to increase the balance of assets under management to achieve stable asset management in the real estate investment advisory business and to focus on its own property development in the real estate development and solutions sections. As a consequence, the Group posted sales of \44,439 million (rising 41.2% year on year), ordinary profit of \11,645 million (up 44.9%), and net income of \6,221 million (an increase of 34.4%). The figures exceeded the full-year forecasts reported in the interim period, and both sales and profits posted their fifth consecutive years of increase, rising in every year since the establishment of the Company. |
Q.How do you evaluate your performance?
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A.The Group was able to record balanced results in the real estate investment advisory business and real estate development business.
The Group's revenues consist mainly of commissions generated from the management of real estate funds in the real estate investment advisory business and revenues from the real estate development and solutions businesses. The main feature of the revenue structure is that the Group can pursue stable revenues while balancing the weight of each business, depending on real estate market trends. We continued to acquire quality properties, mainly office buildings, in the term under review. As a consequence, assets under management at the end of the term reached \622.1 billion, and we were able to continue to generate stable revenue. In the real estate development business, we develop properties using our own funds. In the solutions business, we improve the value of properties and sell them. In the term under review, large properties in Tokyo and Osaka were sold, which helped expand sales. In this way we were able to post well-balanced revenues. |
Assets under management |
(Unit: 100 million yen) |
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Q.Could you provide us with an overview of each business?
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A.Stable revenue from the real estate investment advisory business and a steady increase in sales in the real estate development business contributed to our results.
In the real estate investment advisory business, we launched two new private placement funds and now manage a total of eight private placement funds. We plan to continue to invest in and manage mainly office buildings in the Tokyo metropolitan area and other major cities.
In the golf course investment business, which we are pursuing in cooperation with Mitsui Fudosan Co., Ltd. and Resort Solution Co., Ltd., we are focusing on regenerating the golf courses that we have acquired, with an eye to fund formation in the future. In the real estate development business, we are emphasizing multi-asset development in a wide range of fields, aiming to develop plans that are best suited to the characteristics of the location of each property, thereby maximizing our profits. Towards the end of the term, we sold a large distribution facility in Osaka, which contributed to revenue. We acquired a tower condominium in Kawaguchi, Saitama Prefecture, as the first foray for the Group into condominium sales. We will promote the business as an initiative in the solutions business. |
Q.How do you see performance in the term ending March 31, 2008?
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A.We are revising upward our forecasts for the final year of the medium-term business plan and aim to expand operations.
The favorable conditions in the real estate market are expected to continue for the time being.
In the real estate investment advisory business, as the first fund redemption date is arriving, we expect to receive sales commissions. In addition, rental income from properties held in preparation for fund formation is expected to make a significant contribution to revenue.
In the real estate development and solutions businesses, we plan to remain active given the sustained robustness of the real estate market.
Based on the above expectation, we have revised upward the targets set in the medium-term business plan, and plan to post for the full fiscal year sales of \56,800 million, operating profit of \17,800 million, ordinary profit of \12,500 million, and a net income of \7,100 million. |
Consolidated Forecast for the Fiscal Year Ending March 2008 |
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Q.Do you have a message for your shareholders?
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A.We will continue to pursue profitability and quality and will pursue a steady growth course.
The Company's basic policy on the distribution of profits is to continue to pay dividends in accordance with performance. We paid a year-end dividend of \850 per share for the term under review. By comparison, at the end of the previous fiscal year, we provided a commemorative dividend of \3,000 per share. Since the Company made a 5-to-1 stock split on April 1, 2006, we actually raised the dividend \1,250 per share in the previous fiscal year.
The Company was given a new BBB rating (stable) from the Japan Credit Rating Agency, Ltd. on April 24, 2007. We believe that the rating recognizes the steady expansion of our results, stable financial health and other strengths in evidence over the past five years.
We appreciate the continued support of our shareholders as we pursue profitability and quality, while maintaining steady growth. |
Masamichi Hayashi
CEO & President
Simplex Investment Advisors Inc. |
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