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Thank you very much for your patience. Ladies and gentlemen, I would like to [indiscernible] Financial Results for TKP Q1 results for the fiscal year ending in 2024. I would like to present the representative from the company Takateru Kawano, the President and CEO,Koji Nakamura, the CFO and Director. Today I would like to cover the financial results that was reported today, and we'd also like to talk about the business strategy. And then we'd like to move on to the Q&A session. [indiscernible] would like to finish in about an hour, now I would like to have Mr. Nakamura present.
Good afternoon, ladies and gentlemen. This is Nakamura speaking. And now I'd like to cover the financial results for Q1 that we announced today. As always, I will cover the first half of the presentation to talk about the results. And later, Mr. Kawano will talk about the business strategy and the policies going forward. So this is how we'd like to proceed today. Now without further ado, let me dive into the subject -- the first, a summary of our results. Here, I have listed for both points. First and foremost, with the sale of Regus, which happened in February last fiscal year, February 1, last fiscal year, and it was completed. And obviously, divestures Regus business, the revenue went down. However, looking at the profit lines below OP, we were able to achieve positive growth. And especially for recurring profit and the quarterly net profit, we were able to achieve the record high -- so we had a very steady Q1. And the second point is a rated matter. But firstly, for the rental meeting room business, the occupancy rate was brisk. And looking at the Q1 of last fiscal year, we had roughly JPY 700 million of sales coming from the rental room business from the vaccine use, but we were still able to grow over the last fiscal year in Q1 and the general rental meeting business was very brisk. In the 12 months, the busy month is April for our business. As we are looking at the April on a single stand-alone basis, both the consolidated and nonconsolidated operating profit achieved a record high. So we are seeing recovery after COVID. So we are now actually over the level that we have observed before COVID. And regarding the second business topic, we are now accelerating new facility openings in order to capture the robust demand. So as we point out here, in Q2, from June onward, we will have accelerated new facility openings, including the large-scale facilities. As for the full year, a new facility opening. The plan is set to 10,000 [ tube ], and we will be able to achieve the target and also that will give us incremental sales. So that is the brief overview of Q1 this fiscal year. And looking at the consolidated results. First this is the quarter 1 consolidated results. The column surrounded by the red line is the quarter 1 results. And as I said earlier, we had sold the Regus business. So the revenue went down. So the gross margin has come down as well, but operating profit -- below the operating profit, we saw a substantial growth, especially the ordinary profit and the net profit have reached record high for the quarter. And also, looking at the net profit for the quarter, we saw a substantial growth. I mentioned this last fiscal year when we announced the financial results for the full year. But with the sales of Regus, we are not able to get the tax benefit last fiscal year, we just booked the sales loss. But in Q1, this fiscal year, we were able to book the tax benefit. So in Q1, the after-tax profit has substantially increased because of that reason. And it's a little hard to see from this table. So we adjusted to the Regus sales from last fiscal year, and you can see the apple-to-apple comparison. And you can see the momentum of our fundamental business for this quarter using this table. And in Q1 of fiscal year, the column at for [ Lyft ], the reporting was JPY 8.04 billion, and OP was JPY 1.559 billion. And here, as I alluded to earlier, the sale of the COVID-19 vaccine center was JPY 700 million, which pushed up the revenue -- so on a fundamental basis, the revenue would have been [ JPY 7.2 billion or JPY 7.3 billion ]. So that would have been the sales for last fiscal year in Q1 -- but in this fiscal year, in Q1, we were able to achieve sales of JPY 9 billion. it jump from roughly JPY 7 billion to JPY 9 billion on a fundamental basis. So it has increased by 25% roughly looking at the real demand. And also during this period, we were still under COVID -- and the COVID was reclassified into Class V in May. So most of Q1, COVID was considered as a very dangerous infectious disease. But despite that, we were able to see a very good recovery of the sales. So that's one point that I wanted to emphasize. And the APA hotel, five of them were leased as a place for the COVID-19 patient to stay, but it's coming back now and the operation was back to normal. But we were not able to immediately normalize the operation because after having the hotels returned to us, we had about one month of downtime when we had to clean up that hotel. Also out of 3 months in Q1, roughly one month. This COVID-19 hotels were 4 of them that were returned to us, they were not operating. So the ability revenue -- we have lost about 1/3 of the ability revenue that we could have booked. So in Q1, there were a lot of constraints -- in reality. But however, despite that adversity, we were able to achieve JPY 9 billion in sales. So not a reflection such as that we had very strong momentum in Q1. Profit was JPY 1.7 billion and the profitability was 19.4% or 14.9%. April was a record high as a single month. was through the profit value and profitability. It's now coming back to something similar to pre-COVID despite the fact that COVID was still not reclassified as Class V and the hotels were still used for pandemic control. And next page is the quarterly trend for the adjusted consolidated revenue and operating profit. Adjusted meaning that we have subtracted the sales of Regus so that we can do an apple to apple comparison for sales and operating profit. And looking at the sales -- compared to the quarter right before COVID, it's still lower. And this is because of food and beverage. Although it is recovering quite strongly in Q1, it's still in the most recovery. So that's why the sales has not reached a high level. But looking at operating profit on the right-hand side, you can see that it's very close to pre-COVID-19 level. And also furthermore, on the left-hand side, looking at the adjusted sales, the far left, the February 2020, which was pre-COVID, looking at Q1 and Q2. You see that on a quarterly basis, the revenue went down from Q1 to Q2. And this is because for Q1, it's the busy season for recruiting and also training for the spring and summer because of those business days, the quarter is relatively weak. And before COVID, the seasonality was very clear. So on quarterly basis, the revenue went down by roughly JPY 500 million. But for this fiscal year, in Q2 this fiscal year, looking at the business debate in Q1 the COVID was still not reclassified as Class V until May 8, another hotel was partially still used for the pandemic control. Also despite that, Q1 was strong. But after the full recovery, Q2 is now becoming stronger -- so the shock, this is not a shock that we normally see from Q1, Q2 may be muted. That is what we are projecting. So in that sense, Q2 is a very quiet period. But -- the demand is really strong. So demand may be outweighing the normal seasonality, looking at the overall business for Q2. Now let's move on to the next page for the adjusted consolidated net sales by service, which is apples-to-apples comparison, excluding sales of the Regus business. As you can see from this graph, -- the impact from APA Hotel you've seen in this graph, as you can see, the sales are similar to the level of the previous quarter due to the impact from APA Hotel. As I mentioned earlier, because for specific APA Hotels, we were dormant for 1 month in those 4 locations. So this shows a very fundamentally strong sales even with that impact. So continuously, accommodation of business is performing very well. For 4 month -- 1 month, multiplied by 4, so there was a dormant month. However, accommodation sales were about the same as the previous quarter, which were very strong. And F&B is still on the path of the recovery. So net sales have not come back to the pre-COVID level. But in Q2, Q3, we are going to see even strong recovery, which is going to be added on additional sales and profits going forward from the next quarter. Let's move on to the next page for the consolidated balance sheet. As you can see from this page, total balance sheet, total amount -- total amount of assets has not really moved much. However, there are some movements within our especially the credit. Net interest-bearing debt was reduced by about JPY 2 billion. On the other hand, net assets increased quite a lot. So equity ratio now exceeded 50%. So the credit has been even more stable compared to the past. Continuously, we have JPY 30 billion also cash position. So we'd like to be active opening locations. In addition, I would like to be active in investing in new businesses. So this completes the explanation for the consolidated balance sheet. From this page onward, I'm going to explain more breakdown by each business. First, opening and closure result. On the left-hand side, we are showing openings and closures. We had three openings and we had 10 closures. -- in Q1. And due to the reason of the owner, [ Victoria ], which is allocated in resort area in Koge was closed, which was 5258 tsubo, which is quite large size. So due to disclosure of LecTore, the total area of the closure looks quite large. However, in reality, we have acceleration of the pace of new openings in Q2. So with that, we have more than 8,000 tsubos to be expanded or to be opened in this fiscal year. which is pretty firm at this point, including the potential pipeline for the rest of the year. 10000 tsubo new openings, which is a planned assumption is quite an easy target. And we see even stronger needs from the customers, which may exceed our target of 10,000 tsubo so we can add additional space for our locations. Next page is on the number of meeting rooms and the locations by grade. At the moment, 230 locations and 230,000 tsubo, 130,000 tsubo or more, which is going to be increased more. In sales principle, if you look at this trend, due to the higher sales as a matter, of course, sales per tsubo have hit the bottom. And after hitting the bottom, sales have been on the recovery trend, which is currently JPY 33,687. And in Q2 onwards, we think this momentum is going to continue. On the other hand, we have been aggressively opening new locations. So there may be some dips and increases time to time, but this increasing momentum is going to continue fundamentally. And lastly, I'm going to touch upon sales of meeting rooms, excluding the hotel business. If you look at this graph, for the meeting room business, -- if you look at dotted box on the left-hand side and the right-hand side, this is the comparison of Q1 before COVID and Q1 of this current fiscal year. If you compare that to, at the moment, the recruitments a purpose is showing the decrease. In April, this is not a decrease due to the recruitment in April, in particular, but our company has now recruit talent throughout the whole year. So demand is more even throughout the quarters. On the other hand, we have strong recovery of the demand for meeting rooms purpose. As a result, if you look at the mix of sales, other which included vaccine center demand. is much lower compared to during COVID and other, the business is now 20%, which is about the same sales mix as before. So I think this is a great balance of sales by purpose. And with a strong increase in sales of the meeting room purpose. So this completes the explanation for the financial results. For the first quarter of this current fiscal year. From this page onward, we are going to give you the update on the business strategy. Mr. Kawano is going to give you the explanation.
Now I'm going to present the update on our business strategy. Let me first start with initiatives for this fiscal year. The most important initiative, which is the expansion and the new openings. In Q1, we had accelerated new openings. As you can see, in pictures on April 28, we opened a Akasaka Conference Center, which is the property of Mitsubishi Estate. Starting with that, -- we have 620 tsubo opened. And on May 9, we opened Guidance City Premium Tokyo, Eki Marunouchi [chou], which is directly linked and connected to Tokyo. And this is leased from [ Tokai ] -- and this is 471 tsubo. We opened also Tokyo Aki Conference Center on June 8 for the additional floor space of 743 tsubo added. This is right in front of the Tokyo Station, which is the previous site for; Mizuho Yasu branch. So we have converted this property to TKP. And on the same date, on June 8, we opened Garden City Premium Tokyo [ kinombashi ], which used to be HSBC Japan branch. And for the whole floor, we opened this premium Garden City TKP. And we are going to add three more floors. This is a large space on the whole floor, which is well suited for exams. So with that, as TKP, we have activity opening. We have been actively opening locations under the dominant location strategy in Tokyo and our Shinagawa Station. Near Tokyo Station, we have 1,910 new tsubo added. So the total tsubo in Tokyo Station area will be 4,743 tsubo, which is going to be close to double compared to the previous total, which should increase both sales and profits in the future. Also, near Shinagawa Station, due to the redevelopment active initiatives in Shinagawa Station in 2023, the Takanawa Gateway was opened as a station and a big scale redevelopment projects are undergoing. So Shinagawa, which had a large event, but there's still strong demand for MICE and events, which will be even stronger demand in the future. So in Shinagawa area, we'd like to keep a MICE event demand. Therefore, we are expanding the total area, which is currently 1,984 tsubo and we'd like to even double this area in the future. Once we sign the contracts, we can let you know. But Konan Exit and Takanawa Exit of Shinagawa Station, the areas we'd like to be focused opening activity locations. This shows the large whole new opening. Up until now due to COVID, we scaled down the size of the halls from large halls to smaller halls, but now it's reclassified to category #5. So people tend to gather more actively. Therefore, there's demand in large halls, theaters, event halls, which are very core areas of TKP's business. So we'd like to even expand TKP's business domains. And the first of the series of new initiatives is this one; Fukuoka, Hakata, Tenjin Station, directly connected to the Station, which is above Daimaru, which is called Elgala Hall. And this is called TKP Elgala Hall. We started operation in Tenjin, Fukuoka. And 993 tsubo is a size for this new location. And the largest room can accommodate more than 600 people, which is multi-type hall and gradually, we can change the arrangements so that it can be reformatted as theaters. So they can use it as a theater and they can use it as a large halls, so it's a multipurpose hall. And also on July 1, we opened Tokyo Bay Makuhari Hall. So it was formerly Makuhari Prince Hotel. It was [indiscernible] and it was converted into APA Hotel and we have a large banquet and the main building's 48th floor is converted into TKP's new hall, and it will be under our management.
Also in Makuhari, the total area will be 4,101 tsubo; wedding services, banquets, events can be provided and also we can collaborate with Makuhari MICE [indiscernible] per day can be offered and also it can be used as a hotel for offsite training. And also as a hotel, it's a 22nd one for us and as APA Hotel, it will be the 11th. So right in front of Oita -- we acquired the land in front of Oita Station as a long-term lease contract from Oita Kotsu or Oita Trust Board and we are aiming to open a hotel in 2025. So those are the new openings and the new expansions in Q1. And next is the strategic investment in business alliances. So with Shikigaku, we are cooperating to work on a fund. So this is called the [indiscernible] start-up investment vehicle, and we are investing as a limited partner. At TKP, we are going to be supporting our new upcoming start-ups and supporting those companies with Shikigaku. I myself was the member of a J startup. And for the Japanese start-up companies and also to the venture companies, we'd like to offer our support and also with Mitsubishi Estate, this was announced today. This is the collaboration #2. The first one was in Akasaka, opening the space in a building, but as the second round of collaboration, Mitsubishi Estate's Workation facility. Nanki Shirahama, Karuizawa, Hakone Yumoto, Izu Shimoda, Atami, Hokkaido Ballpark F Village. Those are the locations in Mitsubishi Estate's Workation facility there. And the booking and the travel agency type of services for the user service will be consigned to us. And for TKP, we want to exert our capability for being able to provide one-stop solution. So that said, this first quarter was very steady. And as Nakamura mentioned earlier, Q1 was [ up feed ] with great numbers. Especially in April, the operating profit was record high over the past 18 years, including the period during COVID and ordinary profit and net profit was also record high. And also for Q1, the ordinary profit and net profit was record high as a quarter. So the past 3 years were very challenging. But now we are starting to see great recovery. Although we have sold the Regus business, we were able to see a record high profit levels despite the fact that the revenue came down by roughly 30%. So I think additional case is that we are now coming back to the stage of growing again. But this Q1 numbers also include a period before COVID was reclassified as Class V disease.
So we have a lot of expectations for Q2. Looking at the recent business trend, catering demand is very robust, and it's coming back. Right now, we're looking at last month or 2 months ago, the catering demand recovery was like 20% to 30%.
But looking at the current demand, if we look at September or October, it will be coming back to roughly 80% to the previous level. And around the year-end, I think catering demand is going to be roughly 100% compared to pre-COVID. So with such strong demand, we did not have enough manpower. Before, it was done with like 30, 40, 50 people reception.
But toward the year-end, the customers are wanting to hold receptions with roughly 100 people. So right now, we are now cooking at the [indiscernible] and providing the catered food to the different facilities, and it's now operating at full capacity. So right now, 50% of the demand has been internalized for the catering operations. Going forward, we expect full recovery for catering, especially in the Tokyo metropolitan area. Looking at the regions, looking at Sapporo and Fukuoka, the recovery is still 10% to 20% compared to the previous level. But leading up to the fall of this year, we expect the recovery to come back to about 50% to 80% of the previous level. So in the regions, we outsourced everything for catering, but we are now preparing to internalize the operation. So securing people is a challenge. But for kitchens, well, we are now resigning the contract for kitchens that we were leasing before. Also in Sapporo, we are now ready to internalize operation. And in Sendai, we have the TKP APA Hotel that is directly linked to the Sendai Station. So it's been returned as a facility of recovery. It can be used for banquets and receptions going forward. So for fall, we are also going to internalize the operation for this APA Hotel. In Osaka, we were also leasing the banquet halls and also the hotels. We are trying to get that back. So the operation can be internalized. In Tenjin, we are using the internal kitchen so that the Elgala reception catering can be provided ourselves. And so starting with that, we can fully internalize the operation in Fukuoka market. For kitchens and banquets, we will be challenging ourselves to further grow. And in Chiba, we have the Makuhari capability and also in Chibaminato, we have the kitchen. So we are going back to the internalized operation. So in Q2 and from Q2 forward, the key point is how much recovery you can expect for catering and food and beverage services. If it comes back, that will be incremental sales, but we need to enhance profitability because if we continue to outsource, 80% of the profit will flow out and the COGS of food, if internalized, will be kept at 20% or so. So the profitability can be enhanced as we internalize the process. And like so we can provide high-quality food to our customers. So internalizing the operation is something that we'd like to achieve as soon as possible. And as for the many from fall, we were collaborating with [indiscernible] and we will be receiving the collaboration again so that for the banquet catering, [indiscernible] will be available and also the collaboration, food and drinks will be offered at these facilities. And also as for DX strategy, we are now introducing the new system for dynamic pricing. And then this will be implemented from July in this fiscal year. The impact will be limited, but from next fiscal year, it will help to improve the utilization rate or the occupancy rate, and it will be enhancing the profit. So after Q1, we are back to a record high profit level. And from Q2 and also Q3, we expect the momentum to continue. And out of the fact, we will benefit from expanded floor space. And in Q2, we are expanding by 5,729 tsubo. So that will be incremental in the catering F&B revenue and profit would also be incremental in Q2 and Q3. Also, we want to challenge ourselves to aim for a higher level for business performance, and we hope that you will uphold your expectations. And in Q4, there will be demand for exams -- for things like university exams.
Inquiries are coming to us in a very brisk way. So we have a very strong expectation for this fiscal year. And for next fiscal year, we hope to outperform our numbers in this fiscal year. So we were in the winter period when we announced our results [indiscernible] revenue. Last fiscal year, I was saying that we're still in the morning, 5:29. And in the full year result, I said we were at 8:00.
But now I think we are at 10:00, where everyone's back into the office. So going forward, we will be expanding [indiscernible] TKP, but together with real estate owners, and also the users of the meeting rooms of registered companies, we are serving as a middle person. Also, we also like to consider what kind of services we can provide to the real estate owners and also to our clients who use our meeting rooms, so the general admin department or the HR divisions, we also want to consider additional services that we can provide to those customers. Also, we want to do something extra to be able to provide additional services and solutions so that we can explore new revenue of sales. So M&A and business alliances are things that we are considering. We have cash of JPY 30 billion after the sale of Regus business. So we'd like to make the best use of that to further accelerate the driver for growth. So in that sense, the current TKP business performance in these projections, they do not reflect any potential additional inorganic or business alliances. Also, we hope that we can consider further growth with business alliances and inorganic growth opportunities. Thank you very much.
Now I'd like to move on to the Q&A session. [Operator Instructions].
My name is Tazawa from SMBC Nikko Securities. I have three questions. I'm going to ask you one by one. My first question is Page 12, sales per tsubo, your projection of that in Q2 onwards, F&B is going to recover strongly and during the winter time, you said recovery is going to be close to 100% recovery compared to pre-COVID for F&B. There should be seasonality for that business, but you project strong recovery going forward. In Q1 of the next fiscal year JPY 48,800, is that the level that you're projecting in Q1 next year? Once you get there, do you think that is going to be the saving, that is going to be the top? Or do you expect it to even surpass that? Like JPY 45,000 or do you think you can target at even JPY 50,000? Or do you think sales per tsubo are going to be around there, but you're going to drive profit growth from here because of the cost control. So this JPY 41,000 sales per tsubo, what is the time line for you to reach that level? And do you think you can surpass that level?
Thank you so much for that question. JPY 41,800 in Q1 for the year ended in February 2023. And currently, JPY 33,687, which is about JPY 7,000 or so difference, which is about 20% increase that we have to achieve to get to that level. So in that sense, what's important is as follows. So currently, JPY 33,687, do we have more sales when sales per tsubo was JPY 48,800. The total base sales are higher and for the additional sales, this is going through directly to the profit. And our occupancy is increasing because of the dynamic pricing. So this should contribute more to the sales. And the flip side is that we are expanding floor area, so the total area for sales per tsubo are much larger. So in my opinion, JPY 33,687 it's profitable enough at this level, however, as a matter of cost, JPY 48,800 we'd like to surpass that level, of course. So we have to add more values to existing locations, trying to sell more options or catering, lunch boxes, accommodations, bundling sales, promoting cost sales and coordinate so that we can increase sales in total.
And due to the dynamic pricing introduction regardless the busy season or not so busy season, we have to propose the appropriate pricing so that we can generate sales efficiently. Therefore, our target is surpassed the previous level, JPY 41,800. Of course, we'd like to do our best to surpass, but once we get there, we are going to see additional 20% profit increase, surpassing JPY 10 billion profit. Once we get there, that will be quite pleasant to me, so we're going to do our best.
So we are looking forward to seeing you achieving JPY 10 billion profit.
My second question is on investments for the future. I think you have plans to invest. You have stronger fundamentals financially. So what is your plan for investments? Your base business, office and the rental meeting rooms, I guess you're accelerating investments in that core area. But do you think you're [indiscernible] their competitive rents? What is the rent market and profit share? Is that something that you are trying to focus on? And what is the market situation for the office space? And it seems like you are adding spaces on advance.
But occupancy in recent month has been increasing to reach breakeven because of your dominant strategy, breakeven point of occupancy ratio is quite low. Am I right?
Well, we sold Regus. So we don't want to stretch ourselves to these new offices by paying high rents. We don't need to do that anymore. Therefore, contracts are not tied to any specific term, like 10 years. We have flexible term for our contracts. So number one, revitalization is our theme for distressed properties or properties and assets that are scheduled to be demolished, the spaces that we would like to lease. And I think this bipolarization of the market, Tokyo Station and Shinagawa Station, those are the areas where we have the dominant strategy, and we have a good prospect of generating good sales in those areas. So the more we open locations, the more profit we can generate. That's why in those specific areas, we'd like to actively open locations. On the other hand, there are some problem assets and locations, which may be put for sale in the future, which are the assets that we can rent at very lower rent and then sublease by our. So at TKP, even though the building is super new, that's not the aim, but location matters and in good location, I would like to create spaces for our customers, which are convenient -- highly convenient to our customers. So location, which is directly connected to Tokyo Station, as an example, it's not so cheap. But if you can [indiscernible] type of space at a reasonable rent, that can contribute so much to the profit. So those are the areas where we'd like to be active renting. So convenient locations, not so convenient locations. So we'd like to have different strategies for openings in those 2 different types.
My third question is also on your investments such as strategic investments up until recently. Shikigaku is the partnership that you explained in Oita revitalization project. So looking at the project by one, the total amount of investment is not so large. So those are the characteristics of the investments that we saw so far. But you said you wanted to capture opportunities, even though the size may be quite large. So do you think the size of the new locations is going to be larger? And I think the average size is becoming better. On the [ 21 ] you are planning to open APA Hotel in Oita, and you have leased land so that you can open a new hotel in Oita. Do you construct a hotel using a balance sheet? And you said you didn't want to get the real estate risks basically, you didn't want to use your balance sheet. But in the future, are you willing to take property risks partially. As long as the location is good, you'd like to be offensive more? So this is also connected to -- related to my earlier question.
So [indiscernible] and Shikigaku partnerships, the size per investment is not so large as we mentioned. So our investment philosophy is diversified investment. And that's the lesson we learned from Japan Regus. However, right now, price to book is quite low. And we have good prospect for good profitability. We'd like to work with companies where we can generate synergies in the future. So those are the types of investments that we are making. If the size of the investment -- even if the size is large, if it's an attractive opportunity, definitely, we'd like to study. But at the moment, we don't have many large investment opportunities. But if the opportunity present itself, of course, I would like to capture those opportunities. In this particular project, which is a hotel project in Oita, I may have told you before, but -- when it comes to the hotel business, we buy land, we build the building itself. That's one pattern of business, which is high investment, but the profitability is quite large. And then lease the land and then construct the building. The profitability is medium, like mezzanine type of profit and we lease the land and also lease the building and rebrand, that third pattern, if the rents are quite low, then profitability can be quite high. So there are different patterns over the real estate business. So we'd like to go for the third pattern, lease both land and building and then rebrand. This is the best pattern for us because it does not really use so much balance sheet.
But do we buy land and then construct a building with our cost, that uses our own balance sheet. So we can generate profit, but it consumes balance sheet. So we are [indiscernible] among these three types. Looking at the balance sheet stage each time, we would like to choose the type, looking at the balance sheet, trying to maximize the profit. So it's a challenge. So in our opinion, the target is that lease land and then construct the building to get more profit. But of course, the first pattern, which is buy both has high profitability. And lease the both, land and building is good balance as well. So we'd like to stick with a good balance among the three types. In the medium to long term, our ROE target is 10%. That is our first milestone of our target of ROE target. So 10% or more ROE is our target. As we announced earlier, that's how we'd like to construct our balance sheet so that we can achieve ROE of 10%.
Any other questions, please? The second row -- the person in the second row, please.
This is Ozawa from SBI Securities. I have two questions. I will ask one by one. The first question is about the hotel business. Earlier in Q1, we're not able to operate for about a month for cleaning, but revenue was like JPY 2 billion, and it was almost close to Q4. So what is the business environment of our hotel and also the breakeven and P&L? So generally speaking, hotel business, there may be a shortage of people. So the focus is a [ DR ] rather than the occupancy rate. I think this is true for the hotel REIT as well. So on that note, how are you operating the hotel business today?
So there are two things that I can say about hotel. The first point is the business hotel, the APA Hotel business and also Ishinoya, LecTore business. So there are two categories in our hotel business.
Starting with the hotel, the business -- hotel business, the shortage of people is very serious. And from last year, we started the Sunlife Hotel in Hakata. There are two buildings. And we had over 300 rooms available. But because of shortage of labor, we did not have enough people to clean up the rooms. Also, we were able to only open one building, half of the hotel.
So despite our efforts, we were only able to reach an occupancy rate of 50%. And then, after the year in February and March, we decided not to rely too much on the cleaning companies. Also, we tried to internalize our operation.
We have the TKP properties, which was in the cleaning. Because of COVID, we liquidated this company, but we are now leveraging with that expertise and know-how to do the cleaning process again internally.
So both of the two buildings of Sunlife Hotel in Hakata were opened, and we are now operating at almost full capacity. We will, firstly, use the outsourcing companies for cleaning, but because of the shortage of people and also a very high fee, we have some challenges. As a safety net, we have the capability ourselves to be able to clean up the rooms. So that's how we are operating for our business hotel, the APA Hotel.
And that is our strength. And now looking at the business hotel, including Tokyo, the occupancy rate is almost 100%. Sapporo is now spring, so the occupancy rate is increasing to roughly 90%. In Fukuoka, the occupancy rate is also increasing as well. Going forward, as we expect more inbound travelers to increase not as the occupancy rate, but I think we will see improvement in the ADR. And previously, when it was used for the COVID patient, the ADR -- is much higher now. So the unit price is going up, and I think the ADR will continue to go up further. And for the resort hotel, Ishinoya and LecTore and Ishinoya Atami, around the year-end, we had 5 floors, but we were not selling the three floors. We were renovating the hotel. So two rooms were put into one room. So the room size was doubled and the hot spa and sauna were attached to the rooms. So it's not a high value-added offering. I think that will continue to contribute. So ADR will be higher. And because of the less number of rooms, the utilization rate will go up, and we'll be able to contain personnel expenses. Controlling personnel expenses and also the utility fee are some challenges that I am facing. So I'd like to take into consideration those factors to manage the hotel business.
My second question is on Page 24, your collaboration on the Mitsubishi Estate's Workation service. The travel agency seems not to be too profitable, but what is the intention of Mitsubishi Estate? Are you going to also try to manage a facility not just for the service and consignment, but is this another step before going into the third round of collaboration, what is the intention?
Well, Mitsubishi Estate has this workation facility, and they try to be ahead of the curve to provide new solutions for new work style. So they are trying to offer a cutting-edge service. We want to get on board with them to further utilize the facilities held by Mitsubishi Estate because I see good opportunity. Also, the second round of collaboration, we have now signed a consignment contract to offer the services. And going forward, I would like to propose managing these facilities. The key point is that these accommodation facilities are not within the same location. So it's about how we can follow up on that choking point. Then with LecTore and Ishinoya, I think it will be close to the offering we have with LecTore and Ishinoya brand.
So I'm hoping that we can make proposals on that note. But as the initial step, the workation facility that's owned by Mitsubishi Estate, we have a consignment agreement to offer the booking services. And as we start to better understand the facility, we can do more.
So as Mitsubishi Estate, they're expecting too larger customer base so that they can increase the utilization rate of these workation facilities, is that their intention?
Well, I think for them, it's important for these facilities to be in good operation. So as we start to provide the travel agency services to -- related to the facilities, I think Mitsubishi Estate want to increase the utilization rate of these facilities.
Is there anybody who has more questions.
Anika from Mitsubishi Morgan Sunday Securities. I have two questions. My first question is just to confirm with you. So Page 7 in the presentation material, which is net sales by service type. And gradually across the board using net sales recovery, but we've got room rate, JPY 3.9 billion, which is still 70% compared to pre-Covid, but the total floor space is much lower compared to pre-Covid. So is that the only reason for this? Or are there any other reasons for the lower level compared to pre-COVID? And also,
You mean JPY 3.9 billion .
Yes. So I'm going to pause here, JPY 3.9 billion compared to Q1 before COVID JPY 5.9 billion, which is about 70% compared to Q1, pre-Covid. The total [indiscernible] speed is much smaller. And is that the only reason for the lower level of net sales by this service? Or are there any other reasons?
Well, Gardencity Shinagawa, Back then, we had the large capacity locations, and we closed that capacity locations. I think that's the biggest reason. .
Understood. My next question, the option sales compared to pre-COVID sales for the option sales increased by JPY 1.2 billion. You are selling IT equipment and the devices, you are selling more options. Is that the reason for the larger options sales? in the future, you said you would like to add more values to your services.
So what types of options are you planning to sell to pushup sales for the option category?
The option sales, the equipments and distribution service. This is dive distribution today. So Internet distribution service. So those are the option examples. Before COVID, compared to before COVID, we have been focusing on option sales for events like planning, designing and events as an example.
So we are proposing more options to our clients. And that's why option sales are increasing. In particular, recently, our preparing prompter device.
As an example, acoustic audio devices are more sophisticated compared to the past. we have better [indiscernible] skills. Our sales reps are trying to upsell to our clients. That's another reason. But F&B JPY 1.8 billion declined to JPY 800 million. So we want that F&B business to recover. So that sales for F&B would recover to JPY 1.8 billion as soon as we can. In Q3 and Q4 I think F&B sales are going to show some strong recovery.
Lastly, your strategic investment. You have a quite large amount of cash and sourcing for meeting rooms does not require so much cash.
So you said you didn't have a pipeline for promising investment opportunities, but if there are no large investment opportunities? Then is there any possibility that you're going to invest in hotels using this cash? Or is there anything else which is more promising than the hotel business using cash in the future. So what is the purpose of having this much cash? And what is the progress of your investments?
Well, investments in the hotels, we can borrow from the banks. So this much cash can be deployed in businesses. So -- as we have been saying, partnership with [indiscernible]. This is one example of the investment in the business. In addition, we are going to seek other investment opportunities in the businesses. Of course, there are candidates, we have risk or potential investments. I have that list, and I'm talking with banks and there are potential transactions that are brought to us. So time to time, we scrutinize those ideas. And there's nothing that we can disclose publicly at the moment.. However, when the profit time comes, we'd like to report to you the investment that we are making. So please keep your eyes.
Any other questions.
This [indiscernible] from [indiscernible]. I have three questions. The first question is on the rental meeting room business. Are the sales per table is increasing.
Looking at the recent occupancy rate for the rental meeting rooms, what is the outlook? Earlier, there was a question around the facilities that are newly opened. The occupancy rate looks like how much and compared to the existing facilities.
How long does it take for the new facilities to reach the occupancy rate of the existing facilities?
The occupancy rate for us. So we have a very low point. Well, so I will not be able to give you the details, but occupancy is good. But when we say good, it will be like 30% to 35%, considering 12 hours per day, and how do we do digital transformation so that the occupancy rate will be 50%, 60% for meeting rooms.
This pretty much means that the sales and profit will double -- so with the [indiscernible] rate of 20% to 30%, that's where we stand today. And for the new openings, my KPI is within 3 months, we want to generate profit with our newly opened facility. That's my policy for new openings. So within 3 months, we need to and go over breakeven, and that's what we are striving to achieve. The interior fee included, we tried to catch up with the return we have the collaboration with [indiscernible] and for interior work, we will be able to get a better designed interior thanks to the collaboration with [indiscernible]. So the TKP's strength is that we can quickly turn into profitability with a very light CapEx. So we want to expand the floor space very quickly so that we can immediately improve the sales and the profit. That is our business model. Also, we will go back to that basic policy to manage our business. Also, Tokyo Station and Shinagawa stations [indiscernible] that they are now opening with their dominant strategy. It takes roughly 3 months for those new facilities to turn into profitability. But -- for those areas where the demand is strong, as [indiscernible] mentioned earlier, would they contribute more quickly to earnings.
With the dominant strategy, the new facility will be built in the vicinity of the existing facility or there is already existing customers?
It will be profitable in one month or two months. That's why we are doing this dominant strategy because if they stay at a loss for a couple of months, then we don't want to expand -- my policy is that we try to have a snowball effect to increase the profit with any openings. For the Q2 profit comes down, then that such as that we are opening the facilities with loss-making trend.
But if the Q2 profit accelerates, it implies that the new facilities are contributing to our earnings. But in areas where it is convenient or -- that's what it is. But for areas which is slightly far from the station and the rent may be lower. but there may be market which may take a little longer to turn into profitability. But then we procure those facility at a very cheap rent. So it will turn into profitability. And also in Akasaka, we consider those options but the new facility in Akasaka bay turned into profitability in the second month. So we don't really have any facility that will not contribute to earnings.
And also, regarding the strategic investment and M&A opportunities, I have a question around that. [indiscernible] have been mentioned, and I think you acquired the stock from [ River field ]. So at the end of the day, as TKP, how much did you invest into [indiscernible]?
Right now, we have a little less than 20% of [indiscernible], which is approximately JPY 1 billion.
Thank you. The reason why I ask is because going forward with your M&A strategy or investment strategy, what is going to be the magnitude of the future M&A or investment?
You mentioned about a filing for large ownership of companies with more than 5% ownership. Are you imagining like listed companies after destination of investment, what is the magnitude of the investment going forward? And what kind of industry is it going to be investment in the listed companies or private companies. Can you give some color to your investment strategy? And also with [indiscernible], you are building a fund to invest into venture companies. So you set up this new scheme, so -- but this fund is assuming minority investment together with [indiscernible]. What is your intention of this minority investment?
Also, I earlier mentioned the service for the real estate owners and also the peripheral services for the users.
[Shikikaku] is for the users like the HR division or the President of the company, [indiscernible] of the training program for leaders. And [indiscernible] is for the real estate owners -- owners of the office buildings, they may also have condominiums or retail facilities, commercial buildings and office buildings. And there will be demand for renovations. And in the past, I converted a hospital into a hotel. So the conversion of the usage is something that can be offered as a solution for [indiscernible]. So that's the kind of service that we'd like to provide as to the real estate owners. Also [listed a profit], We're going to exit from our investment. So it doesn't matter, it can be both listed or private companies. But in terms of the magnitude, we don't intend to buy something in the magnitude of like JPY 50 billion per 1 shot, plus the [indiscernible] investment was about JPY 1 billion [indiscernible] JPY 1 billion, JPY 2 billion, JPY 3 billion, might be something that could be ideal in terms of size.
And this [indiscernible] start-up investment vehicle that [indiscernible] national policy is that they want to nurture the venture companies. So it will be attached to the national policy as well. But things like we work in [indiscernible]. We're focusing on co-working services. And as TKP, when I set up TKP and the -- if you've worked in a venture company and online brokerage firms. I want to leverage my experience to help nurture the venture companies and the start-ups. And I feel the need for us to work together with the government to extent to support to these new companies. So this is a first step for me in that endeavor. So investing with [indiscernible] through this fund. I would like to offer my hands on and I'm looking to be able to accelerate our M&A opportunity as well. Also this could be applied to our own M&A opportunities and the organizational or training can also be used for us.
But it can be also extended as a service and solution to the venture companies. And at the end of the day, that will contribute to the Japanese economy. So listening to your comment now, building on your expertise or expanding the capacity will take time. You will not be able to quickly build those capacities.
And during the current midterm business plan, you want to get more resources and execute more M&A [indiscernible]. Will you be able to reach that stage during the current midterm business plan? what is the time line?
Well, maybe this effort may take like 5 or 10 years or maybe 20 years even. But on this topic, as TKP, where we see the needs from the society, and we do get projects for business revitalization. Also I felt the need to set up a vehicle to extend support to those businesses.
And if when I'm asked when is this going to contribute to the businesses, we still don't know, and we're not going to put like JPY 10 billion into this vehicle. Also particularly our investment to JPY 250 million per [indiscernible], it's JPY 399 million. So we are starting very small. it's kind of like a small R&D expenses.
And if we say that this is successful, then there might be a discussion to consider an investment of like JPY 5 billion or JPY 10 billion. But this is still an experimental phase.
My last question is with Mitsubishi Estate, the cooperation with Mitsubishi Estate or you have a new agreement to do the travel agency services for them and also the booking services. So you made a progress for the collaboration, but the TKP core business is managing the accommodation facilities and also managing the shared spaces or meeting rooms. So this cooperation is not the core business for you? but the peripheral service. And in that sense when do you think this agreement with Mitsubishi State or [resell phase]? When you will be able to provide your core business services? And right now, what kind of a revenue projection revenue contribution you're expecting from this agency type of services?
Well, with Mitsubishi Estate, when there are idle spaces, we will be making proposals with their new build buildings coming on stream, I think there will be some idle spaces. And if they consign that to us or to manage those rental meeting rooms that will be great for us, and I think that will be beneficial for its which is stated as well -- so I do aspire to offer those solutions.
But this time with Mitsubishi Estate, they wanted to cooperate with us on their location facility. It's a huge company. Also as a first step, or as a first trigger, we did something like this. Also we managed this location cities as a travel agent. And these locations are not in Tokyo, so they need accommodation services. They also need transportation services. Also, if we can make such package and if we can design a good program, we will be able to deepen the relationship many large corporations, will be using this, and I'm hoping that we can get more contact points with the large companies. We do have the travel agency Class 1 certification. And this is mainly of receiving the group travelers from overseas for planned visits or they go to the hotspots and they also do the trainings at their accommodation facilities. Our employees in [indiscernible] Shanghai, Taiwan, are getting [indiscernible] some cost from the [indiscernible], and we serve those requests. So we do this kind of service to the overseas companies. But by having this kind of collaboration with Mitsubishi Estate -- we're hoping that we can get more contact points with the large companies. And I believe those customers will eventually use our facility also in the future, we're hoping to get incremental revenue and sales from those new customer bases -- thank you very much.
Now we don't have much time. So we'd like to take one last question. Is there anybody who has questions -- no more questions. Now we'd like to finish the Q&A session. This concludes the presentation for the financial results for the first quarter of the fiscal year to be ended in February 2024.
If you'd like to exchange your name card with the management, please come forward. And we have distributed the survey on the tables. So would you please cooperate filling in the survey. Once the questioner is filled, please leave it on the table. Thank you once again for coming to this presentation for the financial results. Thank you so much.