Leopalace21 (8848) Q3 2023 earnings summary

Executive summary

• Q1–Q3 FY2023 net sales and profit exceeded plan; operating profit and net income reached their highest levels in 10 years. Higher rents offset occupancy below plan.

• A price-focused leasing strategy lifted average rent for new contracts 7.6% YoY and rent across occupied units 2.4%.

Financial highlights

• Q1–Q3 FY2023 net sales were JPY 316.6bn, up JPY 13.1bn YoY and JPY 0.8bn above plan; gross profit was JPY 52.9bn.

• Operating profit was JPY 20.0bn, up JPY 9.2bn YoY and JPY 1.9bn above plan; EBITDA was JPY 23.6bn, JPY 0.6bn above plan.

• Recurring profit was JPY 16.6bn and net income JPY 14.9bn, respectively JPY 1.3bn and JPY 1.4bn above plan; EPS was JPY 46.14.

• Gross margin was 16.7%, up 3.0 percentage points YoY; SG&A was JPY 32.9bn, JPY 1.5bn below plan.

Outlook and guidance

• FY2023 revised plan: net sales JPY 421.7bn, operating profit JPY 18.1bn, EBITDA JPY 24.7bn, net income JPY 12.1bn and average occupancy 86.56%.

• FY2024 reference plan: net sales JPY 432.2bn, operating profit JPY 23.8bn, EBITDA JPY 30.4bn, net income JPY 18.1bn and average occupancy 89.62%.

• FY2024 plan anticipates operating profit and EBITDA recovering to levels before construction defects were revealed; no deferred tax assets are assumed in the FY2023 plan.

• FY2023 year-end dividend forecast was revised to JPY 5 per share; Q4 plan reflects seasonal recruitment and restoration costs and conservative H2 profit assumptions.