Message from the President
On behalf of Leopalace21, I would like to take this opportunity to express our appreciation to our shareholders and investors for their continued support.
"Shifting emphasis to our Leasing business, while at the same time seeking to secure stable profits from stock business." This has been our goal again this fiscal year, while we continued to promote structural reform in our business. As a result, we were able to show a profit in our operating results for 3Q FY2011 for the first time in eleven quarters. This has enabled us to raise our estimate of FY2011 consolidated operating profit.
Two main factors have supported our return to profit.
The first is the robust development of our occupancy rate. Corporate clients, in particular, rose to a record level again at the end of 3Q, after setting a record the quarter before as corporate clients grew 10.8% YoY to 204,415 units. In addition, the number of units under management declined as the restraining of apartment construction, and this too made a positive contribution. Consistently since April 2011, our occupancy rate has shown positive growth from the figures of last year.
The second is the result of various initiatives for improving profitability in our Leasing business. Those include: 1) a variety of peripheral profits (for instance, since last year we have implemented reduction of costs by establishing maintenance contracts for broadband operations and general maintenance services for furnishings and appliances), 2) reduction in property maintenance costs and 3) optimization of master lease rent levels, which we are moving forward with as we gain the understanding of the owners. As a result, as of 3Q we have been able to reverse a cumulative ¥10.6 billion from reserve for apartment vacancy loss, making a major contribution to the restoration of our profitability.
Restraining of apartment construction, however, meant a negative impact on sales in our Apartment Construction Subcontracting business that was by no means small. The fact that we were able to absorb this impact and still show an operating profit in our Leasing business in 3Q means we have taken a major step forward toward realizing our goal of a new business model that shifts emphasis to our Leasing business (stock business).
Even so, this improvement in the profit structure of our Leasing business is no more than a part of our efforts to build a strong foundation for future growth. Even more important is to enhance property value, in other words, to improve the quality of the properties we offer, and in doing so increase the number of Leasing customers we attract, and to generate a fair level of earnings from this business. This is what will enable us to transform our company into one that earns a stable revenue stream from stock business.
Regarding the enhancement of property value, in 3Q we made a certain amount of progress in selling solar power systems. Looking ahead, we see it is important to advance a wide variety of facilities, including installation of home security systems, and we will continue to strengthen our efforts in this direction.
Of course, our current focus is on our FY2011 earnings. 4Q is the busiest quarter for the Leasing business. We are making various efforts to attract new individual customers, including the opening of directly-operated offices and franchise offices, as well as various kinds of campaigns.
Leopalace 21's structural reforms are just getting started. It is our intention to continue to pursue structural reforms in our business, without letting up. In this way we shall bolster our strength in sales in our Leasing operations, with the aim of achieving stable earnings through a profit structure that exhibits a good balance between our Construction business and Leasing business.
I humbly ask for your continued understanding and support for Leopalace21 management.
February, 2012
Leopalace21 Corporation
President and CEO
Eisei Miyama
