Leopalace21 (8848) Q4 2023 earnings summary

Executive summary

• FY2023 net sales reached ¥422.7bn, operating profit ¥23.3bn and net income ¥42.1bn; net income substantially exceeded the revised plan, chiefly due to a ¥26.5bn deferred tax benefit.

• Pricing actions lifted average rent for new contracts 7.1% YoY and rent across occupied units 2.8% YoY; corporate-tenant occupied units reached 300,482 at March 2024-end.

• FY2024 priorities include higher occupancy at appropriate pricing, continued repair of construction defects, sustainability and preparation for resuming development.

Financial highlights

• FY2023 net sales were ¥422,671m (+¥16,222m YoY); gross profit ¥68,835m (+¥15,549m), with gross margin at 16.3% versus 13.1%.

• Operating profit was ¥23,313m versus ¥9,879m in FY2022; operating margin rose to 5.5% from 2.4%.

• EBITDA reached ¥27,974m (+¥11,525m YoY); recurring profit was ¥19,476m versus ¥6,526m.

• Net income was ¥42,062m versus ¥19,810m; EPS was ¥130.91 versus ¥60.22, with the result including ¥26.5bn in deferred tax income.

• FY2023 actual net income exceeded the revised ¥12,000m plan by 251%; operating profit of ¥23,313m also exceeded the ¥18,100m plan.

Outlook and guidance

• FY2024 plan: net sales ¥428.6bn, operating profit ¥26.6bn, EBITDA ¥30.1bn, recurring profit ¥24.9bn and net income ¥14.5bn.

• FY2024 occupancy targets are 87.00% average and 90.00% at year-end; planned rent growth is 0.2% YoY for new contracts and 2.5% for all occupied units.

• FY2024 gross profit is planned at ¥75.9bn and gross margin at 17.7%; SG&A is forecast at ¥49.3bn, up ¥3.7bn YoY, including investment in hiring and base-pay increases.

• FY2024 net income includes a planned Q4 reversal of deferred tax assets; quarterly Q4 net income is forecast at a loss of ¥3.9bn.

• Planned FY2024 dividends total ¥10 per share, comprising ¥5 at each half-year; FY2023 year-end dividend is ¥5 per share, subject to shareholder approval.