The Seibu Group aims to achieve sustainable and strong growth. To achieve this, under the Seibu Group’s Long-Term Strategy, the Group expands the areas and added value in which it can provide a combination of various businesses and services in order to develop as a corporate group that will support customers in all scenarios of their everyday lives.
In these circumstances, on 14 May, 2019, the Seibu Group formulated a three-year plan,the “FY2019-FY2021 Seibu Group’s Medium-term Management Plan” (the “current plan”). In accordance with this plan, we have worked to address two key issues of “creating new business areas” and “expanding existing business fields,” under the basic policies of “pursuing innovations from a new viewpoint and with speed” and “establishing a growth platform from a long-term perspective.” The Company positions the current plan as the “plan that cements our initiatives from FY2017 onward and leads on to a new management phase and management plan,” and in addition to reaping benefits from investments to increase value, we have carried out initiatives for future business growth designed to strengthen our financial structure and accelerate our expansion into new business areas and fields.
In line with this, looking ahead to the new era of the 2020s, we also proceeded with the formulation of “FY2020-FY2022 Seibu Group’s Medium-term Management Plan” (the “new medium-term management plan”), a three-year plan with FY2020 as the initial year.
Since the latter half of January 2020, however, the spread of COVID-19 has weighed heavily on business conditions in the short-term, and the outlook for the economy is also supposed to remain quite severe. As the business environment has changed dramatically, the Company decided that it is necessary to review the plan contents, and we canceled the formulation of the new medium-term management plan and withdrew the current plan.
As a result of the state of emergency declared by the Japanese Government on April 7, 2020, the Seibu Group is experiencing a decline in passenger numbers in its railway transportation and bus services due to the public refraining from going out. And with some exceptions, the operations of hotels, golf courses, leisure facilities and so forth are being temporarily suspended. Given the future uncertainty as to how long it will take until there is a full recovery, for the time being the Company will focus its efforts on getting through these difficult circumstance. To this end, the Group is now committed to four priority issues affecting the entire Group’s business under two categories as follows:
(1) Dedicating efforts to minimum required business operations until the current turmoil settles down
Placing utmost priority on focusing our efforts to the minimum required business operations until the current turmoil settles down, we are working to secure necessary working capital and deliver services that bring “smiles and good spirits” to customers and society.
(a) Securing necessary working capital
Under the current conditions where the earnings are weighed down and the timeframe for recovery is uncertain, we will assume that the situation will last for some time and work to secure the required working capital through financing and controlling cash outflows.
In addition to cash deposits, we executed borrowings of \33.0 billion from our major lenders in April 2020, and we have also established an additional commitment line, expanding the total facility from \60.0 billion to a maximum of \150.0 billion. Going forward, we will enhance our on-hand liquidity appropriately as necessary through financing, such as new borrowings.
In addition to delaying unnecessary and non-urgent costs and capital investment until the turmoil eases, we will also strive to secure necessary working capital by controlling cash outflows by improving the profit structure through fixed-cost cutting such as decreasing labor costs.
(b) Seibu Group business management policy during COVID-19 pandemic
We will return to the basics of our Group philosophy: “All of us at the Seibu Group work to help develop the local communities, as well as society at large, to protect the environment, and to provide safe, pleasant services for memorable experiences. We also proudly and responsibly meet the challenge of creating the kind of new services that will move customers.” At the same time, we will thoroughly implement the following three measures to conduct business operations that will be able to bring “smiles and good spirits” to customers and society.
【1】 Place top priority on securing safety and security of customers and employees in conducting our business
【2】Grasp changing needs quickly and accurately from the customers’ perspective, and work swiftly to develop services
【3】 Actively pursue profits through above measures
Under the state of emergency, the Group has temporarily closed hotels, golf courses, ski resorts, leisure facilities and commercial facilities, with some exceptions. Sports and other events at Seibu Lions and Yokohama Arena are also suspended. However, we continue to operate railway, bus and taxi, which function as infrastructure supporting people’s daily lives, while implementing measures to prevent infection such as disinfecting and ventilation. We are determined to overcome these difficult times in cooperation with our clients; we now consider implementing relief measures, including extending the period of collecting receivables and reducing rent for tenants.
During the period of restoration after the state of emergency is lifted, the Group will gradually resume business operations, and first focus on improving/increasing revenues from existing business segments. In doing so, we will remain aware of social distancing while working quickly to develop services that can sweep away “lockdown fatigue.” We will also work with clients to explore new business opportunities.
At this point, the Company’s consolidated earnings forecast and dividend forecast for the fiscal year ending March 31, 2021 are undetermined. However, we will make timely and accurate disclosures as the situation changes, and work to recover and improve our financial structure at an early stage. We will make a group-wide effort to overcome the situation by ensuring that employees practice “safety and security,” “a customer-oriented approach,” and “yielding ethical profits.”
Business management policies for each segment are described below. Since FY2020, reportable segments are revised as shown based on the following four agendas:
●Add the Yokohama Arena business from the Urban Transportation and Regional business to the existing Seibu Lions business, and newly establish the Sports business as a field to grow going forward.
Amid an increasing demand for sports, the Group has identified strengths in its abundant assets including the MetLife Dome, the Yokohama Arena, golf courses, and ski resorts, as well as expertise in baseball team management, among others, and will focus on growing these going forward. In the short-term, the spread of COVID-19 has caused the cancellation of sports events globally, but demand is expected to increase even further during the period of restoration after the state of emergency is lifted. Looking ahead, the Group will strengthen intragroup coordination and work towards establishing a new business model, eyeing the integration of the sports activities within the Urban Transportation and Regional business (fitness centers, etc.) and that within the Hotel and Leisure business (golf clubs, ski resorts, etc.).
●Consolidate the Hawaii business into the Hotel and Leisure business to accelerate global expansion of hotel operations
●Transfer the in-station convenience store “TOMONY” and the close-to-station children’s daycare facility “Nicot,” from the Real Estate business to the Urban Transportation and Regional business to strengthen the lifestyle-related business.
●Transfer Seibu SCCAT (building maintenance and security company) from the Hotel and Leisure business to the Real Estate business to expand the Company’s business domain.
Urban Transportation and Regional
Under the state of emergency, although the Group has temporarily closed its leisure facilities along the railway lines, it has concentrated its management resources on railway, bus and taxi operations in order to fulfill its role as a social infrastructure service provider while take thorough measures to prevent infection with COVID-19. In addition, the Group will work to develop services that make staying home enjoyable, such as proactively distributing information from its leisure and other facilities along railway lines. During the period of restoration after the state of emergency is lifted, the Group will consider developing services that take social distancing into account, such as gradually returning to normal operations of leisure facilities along the railway lines, aiming to recover and expand earnings at an early stage. Hotel and Leisure Under the state of emergency, the Group has temporarily closed its hotels, golf courses, ski resorts and other leisure facilities. The Group, however, is determined to contribute to preventing infection with COVID-19, utilizing its assets, by accommodating patients with mild symptoms, for example. The Group will also work to develop services that make staying at home enjoyable, such as proactively distributing information from its leisure and other facilities. During the period of restoration after the state of emergency is lifted, the Group will establish service standards, called “Prince Safety Commitment,” with awareness of safety and security (avoid three C’s, social distancing), and also aim to open new hotels for which we were making preparations towards scheduled opening, while taking stock of customer needs for them, aiming to recover and expand earnings at an early stage. Real Estate Under the state of emergency, the Group has temporarily closed part of its commercial facilities, but has continued to fulfill its role as a company supporting daily lives of people, through continued operation of offices, residences, and commercial facilities that sell daily necessities while implementing measures to prevent infection with COVID-19. During the period of restoration after the state of emergency is lifted, in our commercial facilities and so forth, consider operations that take into account social distancing and resume operations in stages, aiming to recover and expand earnings at an early stage. We will continue to review the large development projects in central Tokyo (e.g. the Takanawa and Shinagawa area and the Shibakoen area), looking ahead the post COVID-19 era. Construction and Other Even under the state of emergency, in the construction business we have continued construction works while thoroughly implementing measures to prevent infection. During the period of restoration after the state of emergency is lifted, the construction business will further contribute to earnings of the Group, helped by initiatives to improve productivity and margins. Such initiatives include securing more construction contracts from outside the Group, more stringent cost management, more rigorous cost control, and more effective use of i-Construction and ICT technologies.
In addition, in the newly established Sports business, under the state of emergency, we have been forced to postpone the opening of professional baseball games and cancel events, but we will provide services that make staying at home enjoyable, such as proactively distributing information. During the period of restoration after the state of emergency is lifted, the Group intends to provide content that will sweep away “lockdown fatigue” while remaining aware of social distancing. Generally, the same policies as those of the Urban Transportation and Regional business are applied to the Izuhakone and Ohmi businesses.
(2) Pursue initiatives towards the post COVID-19 era, with priorities placed on (a) and (b) above
Until the current turmoil settles down, while giving priority to (1) Dedicating efforts to minimum required business operations, we will continue to pursue key measures envisaged in the new medium-term management plan to every extent possible. We will also press ahead with initiatives for structural reforms informed by our careful observations of how the people’s sense of values change in the post COVID-19 era.
(c) Key measures envisaged in the new medium-term management plan
Regarding key measures envisaged in the new medium-term management plan, we will continue to pursue the following five initiatives to every extent possible, while placing utmost priority on dedicating our efforts to the minimum required business operations until the current turmoil settles down.
ⅰ. Offensive strategy towards DX (digital transformation), marketing strategy
The Group is working to increase the number of customers using multiple services by strengthening its marketing functions using digital technologies. In FY2020, we will promote integration and link services for member programs, centered on the shared “SEIBU PRINCE CLUB” membership program and move forward with the construction of a cashless service platform and Group marketing platform.
ⅱ. Defensive strategy towards DX (digital transformation)
The Group is working to automate, standardize, and increase the sophistication of its operations through the use of digital technology with the goal of achieving diversity and workplace reforms. In FY2020, we will shift management-related operations, etc., to a common Group system and work on visualization and review of operations using robotic process automation (RPA) and artificial intelligence (AI). At the same time, we will move to paperless working and swiftly implement group-wide workplace reforms by widening the scope for introduction of the teleworking system. This will also help to reduce overtime working.
ⅲ. Sustainability actions
Based on the Group Vision, which is the Group’s management philosophy, the Group has been aggressively promoting “Sustainability Action,” initiatives geared towards the realization of a sustainable society. In FY2020, we will work on commercializing our sustainability actions, including entering the field of agriculture through SEIBU AGRIBUSINESS INC., which we established on April 1, 2020, and considering effective use of unused foodstuffs. On the environmental front, we have set targets for reducing environmental impacts (aiming to reduce CO2emissions per unit of operating revenue by 25% below those of FY2018 by FY2030), and we have constructed internal system to achieve these goals. Through this internal system, we will promote Sustainability Action, including CO2 emissions reduction, in a sustainable, proactive, and systematic manner by circulating the PDCA cycle.
ⅳ. Investment that takes into account the cost of capital
Looking ahead, the Group envisages multiple long-term capital investment projects, such as large scale developments in areas of Tokyo including Takanawa and Shinagawa, Shibakoen, and Shinjuku in addition to the development of Tokorozawa area. In promoting these projects, the Group must proceed systematically, giving consideration to the balance of revenue and expenditure and its financial structure. The Group will enhance its investment PDCA cycle by accurately grasping the weighted average capital cost (WACC), while setting and managing individual hurdle rates for each business giving overall consideration to each business’s risks and future funding requirements.
ⅴ. Collaboration inside and outside the Group
Amid changes in society arising from the development of digital technology, the Group will aggressively promote internal and external links to capture the change in society’s values and build business models.
Within the Group, we will change the reportable segments from FY2020 as explained above and promote deeper ties between reportable segments after the change.
To promote our initiatives on use of new technologies such as mobility as a service (MaaS), automated driving technology and 5G, and links with external data to enable the development of cashless payment services, we will collaborate with partners inside and outside the Group to grasp customer needs and acquire management resources such as human resources and business expertise.
(d) Structural reform informed by changed values in the post COVID-19 era
In the past few years, people’s values have been changing driven by factors such as social changes beginning with the development of technology and a global increase in movement towards sustainable development. In the post COVID-19 era, people’s behavior and values may change even further with regard to the penetration of remote working and the format of large-scale events. Anticipating this transformation in values, we will consider structural reforms based on the post-pandemic society, aiming to continue being “the best and strongest lifestyle support corporate group” as we have been up to now.
The Group will continue to conduct corporate operations aimed at maximizing corporate value and shareholder value.