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Financial Review of AGT For 4th Quarter And Full Year Ended 31 March 2018

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Profit & Loss

Balance Sheet

Review of performance for the 4th quarter and full year ended 31 March 2018.

4Q FY17/18 vs 4Q FY16/17

Operating income for 4Q FY17/18 was JPY 9,555 million, 3.6% lower than 4Q FY16/17. This is mainly because of under-performance of the golf courses due to snowfall in January 2018, rain and cold weather in March 2018.

Operating expenses for 4Q FY17/18 was JPY 12,484 million, 2.1% higher than 4Q FY16/17. The increase is mainly due to the impairment loss recognized in the current year amounting to JPY 1,720 million as compared to impairment loss recorded in Q4 FY16/17 of JPY 1,499 million.

Operating loss for 4Q FY17/18 was JPY 2,929 million, which was 26.2% higher than 4Q FY16/17. Loss attributable to Unitholders had also increased from JPY 2,838 million to JPY 2,876 million translating to a 1.3% increase.

Total distributable income available during 4Q FY17/18 was JPY 493 million. The total distributable cash flow was positive despite the operating loss due to receipt of membership fees during the period. However, total distributable income available for 4Q FY17/18 was 62.0% lower than 4Q FY16/17 due to decline in cash flows from operating activities which was caused by cold weather and decrease in proceeds relating to membership revenue.

FY17/18 vs FY16/17

Operating income for FY17/18 was JPY 51,450 million, which was 0.9% lower than FY16/17. We had maintained good operating performance in revenue and profit for the first half of the financial year. The decrease in annual revenue for FY17/18 from FY16/17 was due to typhoons on consecutive weekends in October 2017 and rain and snowfall in 4Q FY17/18.

Operating expenses for FY17/18 was JPY 45,379 million, which was similar to prior year. Some items in operating expenses increased such as utility expenses due to price hike in crude oil and commissions paid to external service vendors for increase in online golf bookings, however, total operating expenses remained constant due to our efforts to reduce costs such as getting rebates for bulk purchases.

Operating profit for FY17/18 was JPY 6,071 million, which was 7.6% lower than FY16/17. Profit attributable to Unitholders was JPY4,095 million, 2.4% higher than FY16/17.

Total distributable income available during FY17/18 was JPY 3,436 million, 33.6% lower than prior year. The decline in AGT’s annual distribution is mainly due to one-off payment of borrowing transaction costs and significant redemption of membership deposits. AGT makes distributions on a semi-annual basis and the next distribution is for the period from 1 October 2017 to 31 March 2018 and payable by the Trustee-Manager within 90 days from the end of the said period.

Commentary on the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months

The Japanese economy will likely continue its recovery as consumer spending, exports and capital expenditure improve further. Private consumption, which accounts for about two-thirds of the gross domestic product (GDP), is expected to pick up as the government calls for wage rise by at least 3% to spur consumer spending. In addition, Japan’s high employment rate of 97% should continue to support consumer spending.

Exports should continue to expand in the coming months, led by demand for the semiconductor-related products amid weaker yen. Capital expenditure, a key component of GDP, is expected to continue its upward trend and boosts business investment. Against this backdrop, the International Monetary Fund expects the Japanese economy to grow approximately 1.2% and 0.9% year-on-year, respectively, in 2018 and 2019.

The stable economic performance alongside increasing inbound tourism1 bodes well with the sponsor’s objective to promote its golf courses to attract foreign tourists. In the short to medium term, the number of golfers is expected to stay stable due to increasing number of senior golfers. However, aging population remains a challenge in the golf industry worldwide as younger golfers are not increasing in proportion to senior golfers. To sustain the golf business, the sponsor plans to introduce initiatives to reach out to the next-generation and female golfers.

AGT continues to enhance the management of the operation of its golf courses so as to generate long-term and stable cash flow for unitholders.

(1) Based on Japan Tourism Statistics – Trends in Visitor Arrivals to Japan, the number of tourist arrivals in 2017 was 28.7 million, up 19.3% year-on-year.