Leopalace21 (8848) Q1 2023 earnings summary

Executive summary

• Q1 FY2023 net sales were ¥106.4bn, operating profit ¥7.6bn and net income ¥6.6bn; sales and profit at each stage exceeded plan, with operating profit and net income at Q1 highs since the global financial crisis.

• Average occupancy was 87.03%, broadly in line with plan, while average rent exceeded plan; cash and deposits rose ¥4.5bn QoQ to ¥58.2bn and the equity ratio improved to 18.2%.

Financial highlights

• Net sales were ¥106,375m, up ¥4,968m YoY and ¥1,475m above plan; higher average rents drove the plan beat as occupancy remained near plan.

• Gross profit was ¥18,066m, up ¥3,567m YoY, with gross margin at 17.0% versus 14.3% a year earlier.

• Operating profit was ¥7,622m, up ¥4,043m YoY and ¥3,222m above plan; EBITDA was ¥8,959m, recurring profit ¥6,851m and net income ¥6,627m.

• EPS was ¥20.14 versus ¥4.96 YoY and ¥7.60 plan; ¥320m of repair-provision reversal was recorded as extraordinary income.

Outlook and guidance

• FY2023 plan: sales ¥419.8bn, operating profit ¥13.9bn, EBITDA ¥20.5bn, recurring profit ¥9.4bn and net income ¥7.4bn; average occupancy target 87.20%.

• FY2024 reference plan: sales ¥432.2bn, operating profit ¥23.8bn, EBITDA ¥30.4bn, recurring profit ¥20.1bn and net income ¥18.1bn; average occupancy target 89.62%.

• Operating profit and EBITDA are planned to recover to pre-construction-defect levels in FY2024; no extraordinary income or losses and no increase in deferred tax assets are expected for FY2023.

• FY2023 occupancy plan targets 91.40% at year-end; the FY2024 reference target is 93.66%, approaching the FY2017 year-end level of 93.72%.