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H.I.S. Reports Results for the First Half Ended April 30, 2016

May 31, 2016 Financial No Comments Email Email

H.I.S. Co., Ltd. (TSE1: 9603), a leading travel and airline ticket agency, today announced results for the first half ended April 30, 2016. The Group’s consolidated net sales of 255.974 billion yen were down 1.8% over last year; an operating income of billion yen was down 14.9%; and an ordinary income of 4.493 billion yen was down 60.1%. Net income attributable to owners of parent fell by 98.1% to 99 million yen compared with a year earlier, due to an impairment loss of a cruise ship.

During the first half of the current fiscal year, amid uncertainty in the world economy, with political instability on a global scale, foreign exchange fluctuations and downside risks to emerging economies, the Japanese economy was in a gradual recovery trend but its consumer confidence was at a standstill. In the travel market, with regard to overseas travels, the number of Japanese departures from January to April beat the previous year and trended towards recovery for the first time in four years, supported by the changes in the market conditions, such as the strong yen trend and fuel surcharge dropping to zero for the first time in six and half years. Geopolitical risks still remain in Europe. Domestic travels saw a decline in demand for ski bus trips due to lack of snow, but grew steadily overall, backed by ongoing domestic orientation. The number of foreign tourists visiting Japan hit record high 2 million people monthly in March 2016, and continued to grow at a healthy pace. The Japanese government set a new goal for annual inbound tourist by 2020 to 40 million.

Under these business environments, the Group placed priority on providing customers with safe and secure travel and strived to further improve quality by leveraging its domestic and international network to provide information and services to customers. Furthermore, the Group continued to take on a variety of challenges for the creation of new value, and commit itself to speedily deploying businesses with an eye on the future.

– Travel Business

As for the product deployment, the Group worked to enhance high value-added products, including art appreciation tours of two most popular destinations in France, namely, Palace of Versailles and the Louvre Museum, as well as a chartered tour to an island of Australia. In addition, the Group promoted demand for travel, with the launch of promotion for Cuba, as a new travel destination, as well as ‘Promote Paris’ campaign in cooperation with France Tourism Development Agency and airlines. Furthermore, celebrating the 10th anniversary of its summer travel funds, the Group applied the highest interest rate ever, and has received a great response.

In terms of the branch deployment in Japan, we have further strengthened our offering of highly specialized products and services at special outlets for Bali island and Okinawa, among others. As for initiatives in the IT business, the Group worked to improve services using smartphones by strengthening search functions and renovating a display for package tours.

With regard to corporate or group travels, the Group expanded business travel services to support crisis management, by automatically registering to “tabireg”, or overseas travel registration, provided by the Ministry of Foreign Affairs. On top of that, there was an increase in demand for domestic group travels and group tours visiting Japan. This resulted in steady growth in the business.

As well, domestic travel business grew steadily, as we continued to place priority on Okinawa as a strategic area, and strengthened our offerings in the region with the enhanced optional tours. Moreover, we increased spending on advertisings at an accommodation comparison site, while acquiring Activity Japan Co.,Ltd., which operates one of Japan’s largest activities search and booking websites, thereby enhancing experience-based plans.

In terms of foreign tourists visiting Japan, there has been an increase in the number of visitors from China and Southeast Asian countries. The Lunar New Year season contributed to the increase as well. FIT (Foreign Independent Traveler) type package tours for individual was on the increase, predominantly in the United States and Europe. Given this situation, the Group strengthened sales for day trips and parts, and renewed its website to support individual travels, as well as launching Okinawa’s first “Tourist Information Center” in the capital city of Naha, through which further strengthening its support system for foreign tourists vising Japan. We have also collaborated with central ministries and local governments, namely, Reconstruction Agency on the Tohoku reconstruction project and Kanagawa prefecture on inbound tourism promotion.

Turning to overseas business, the Group expanded LeaLea trolley apps, mainly deployed in Hawaii, to launch in Guam and Bali, and sought to improve convenience and LeaLea brand’s further penetration. In the Southeast Asian region, the Group actively exhibited at local travel fairs, and promoted a multi-tenant deployment, with the launch of three new branches in Indonesia. As such, the Group continued to raise its brand recognition in the local markets. Globally, the Group has expanded its network to Rio de Janeiro, Brazil and Havana, Cuba, as Japan’s first travel agency, setting up tour desks. As of the end of April 2016, the Group has a sales network of 298 branches in Japan and 217 branches in 134 cities across 64 countries.

As a result of these measures, the travel business for the current first half recorded net sales of 225.808 billion yen, down 1.7% over last year, due to a decline in fuel surcharges, and operating income of 4.766 billion yen, down 11.4% over a year ago, due to reduction in handling in profitable Europe.

– Huis Ten Bosch Group

In Huis Ten Bosch, we held the “Festival of Tulip”, for which 700 varieties of tulips were planted, the most seen in Japan, and “Masquerade large carnival”. We also renovated a hologram theater. In the Tulip Festival, 4-meter-tall “Tulip Mt. Fuji” was unveiled, and together with organic EL tulips, which can be enjoyed at night, we strived to offer new, more fulfilling value of experience. In the “Henn-na Hotel”, where such cutting edge technology as robots were introduced, with the second phase hotel launching, we have achieved further improvement in the world-class productivity. We also worked to improve value of experience mainly in the following five concepts through the four seasons: “Kingdom of Flowers”, “Kingdom of Light Series”, “Kingdom of Music and Show”, “Kingdom of Game” and “Kingdom of Health and Beauty”. As a result of these efforts, the number of visitors stayed at the same level as last year, of 1.56 million people, a decrease of 2.3% from a year earlier, despite biased demand for travel during the Silver Week in September 2015, and a negative impact on a large-scale group travels handled in a year earlier, as well as the heaviest snow recorded in January 2016.

Towards the entry into the electricity retail market, the Group has promoted its supply and sales system, with HTB ENERGY CO., LTD., which was included in the scope of consolidation in the first quarter of the current fiscal year.

In Laguna Ten Bosch, we launched “Flower Lagoon” and expanded a new area where visitors can enjoy during the day and at night, thereby attracting wide ranging customers.

As a result, the Huis Ten Bosch Group recorded net sales of 16.277 billion yen, down 1.8% over last year; and an operating income of 4.461 billion yen, down 14% over a year earlier.

– Hotel Business

In the hotel business, the Group successfully improved operating rate in Watermark Hotel Nagasaki, driven by an increased number of foreign tourists visiting Japan, as well as raising room unit price by increasing the hotel’s value-added in Guam Reef & Olive Spa Resort (Guam). As a result of the measures taken to improve customer satisfaction and profitability at each hotel, the Group’s results remained robust, with net sales of 3.627 billion yen, up 11.5% over last year, and operating income of 0.468 billion yen, up 36.0% from a year earlier.

– Transportation Business

ASIA ATLANTIC AIRLINES CO., LTD., an international charter carrier, operated flights between Macau (China) and Palau or Bangkok (Thailand) and Chitose, by utilizing the characteristics of charters at maximum, while responding to the needs of each country. As a result, the Group recorded net sales of 1.475 billion yen, up 13.6% over last year, and an operating loss of 0.451 billion yen, compared with an operating loss of 0.505 billion yen a year earlier.

– Kyushu Sanko Group

Kyushu Sanko Group worked to provide customer orientated services in its bus business by increasing convenience, with the launch of National Interoperable Mass Transit IC Card, but was affected by the suspension of traffic center business as well as hotel business, following the full-scale start of the redevelopment of Sakura-machi in Kumamoto prefecture. As a result, the Group recorded net sales of 10.987 billion yen, down 10.3% over last year and an operating income of 0.382 billion yen, down 46.8% over a year earlier.

For the third quarter of this current fiscal year, with regard to the impact of the Kumamoto earthquake, the Group gradually resumed its regular and express bus lines, after the safety is confirmed. In the Kumamoto city area, regular buses run on quake special timetable. Despite partial damage to infrastructure such as buildings, we have launched operation. As to the impact on the redevelopment of Sakura-machi, we are currently under scrutiny. (Kyushu Sanko Group’s fiscal year ends in September. The first half of the fiscal year began on October 1, 2015 and ended on March 31, 2016.)

Forecast for the Full Year

The world economic situation is likely to remain uncertain, with the impact of terrorism in Europe and downside risks to emerging economies affected by China’s slowdown. In the travel business, overseas travel demand in summer is projected to remain firm, pushed by the recent decline in fuel surcharges and the strong yen trend. On the other hand, the competition gets fiercer, with rapidly evolving online travel agencies, and an increase of a new travel-related service, so it is ever more important to keep a close eye on market trends.

Under these business conditions, we will strive to maximize the Group’s synergy and further improve our performance, with focus on providing products and services from a customer’s point of view, including building universal service platform, promoting vertically integrated services, and creating new business opportunities in response to the market’s needs, while also further pursuing productivity and efficiency in deployment.

In Huis Ten Bosch, with this summer’s launch of “Kingdom of Robots”, the sixth of its kind, we will provide visitors with Japan’s first entertainment by the latest robots. As well, we will accumulate expertise through demonstration experiments where visitors can actually touch robots, and contribute to the development of robots in the service industry, with a plan to implement new challenge across the sectors in future.

The Group has revised its forecast for consolidate fiscal year, announced on December 4, 2015, and expects net sales of 535 billion yen, a decrease of 0.5% compared with the previous fiscal year; operating income of 19 billion yen, a decrease of 4.9% compared with the previous fiscal year; and an ordinary income of 16.7 billion yen, a decrease of 26.4% compared with the previous fiscal year. Net income attributable to owners of parent is estimated to be 4.6 billion yen, a decrease of 57.8% compared with the previous fiscal year.

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