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Financial Review Of AGT For The Period For 3rd Quarter FY16/17

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Profit & Loss

Balance Sheet

Review of performance for the 3rd quarter and nine months ended 31 December 2016

3Q FY16/17 vs 3Q FY15/16

Operating income for 3Q FY16/17 was JPY 14,612 million. The performance of the golf course was weaker as compared to 3Q FY15/16 due to warm weather during winter season in previous year. The overall demand for golf has been steady.

Operating expenses for 3Q FY16/17 was JPY 10,897 million. The slight increase was mainly due to increase in labour and outsourcing expenses and increase in selling, general and administrative expenses. Increase in selling, general and administrative was mainly contributed by increase in commission paid to third party booking site, foreign exchange loss and allowance for doubtful debts.

Operating profit for 3Q FY16/17 was JPY 3,715 million, which was 12.3% lower than 3Q FY15/16. This was due to lower overall revenues and higher operating expenses. Profit attributable to Unitholders was JPY 2,950 million, 11.0% lower than 3Q FY15/16.

Total distributable income available for 3Q FY16/17 was JPY 1,858 million. The computation of distributable income available for 3Q FY16/17 is for illustrative purpose only. AGT makes distributions on a semi-annual basis and the next distribution is for the period from 1 October 2016 to 31 March 2017 and payable by the Trustee-Manager within 90 days from the end of the said period.

3Q YTD FY16/17 vs 3Q YTD FY15/16

Operating income for 3Q YTD FY16/17 was JPY 42,007 million. The performance of the golf course was slightly weaker than previous year mainly due to the earthquake in Kyushu area in April 2016, heavy rain in June 2016, torrential rain caused by typhoons in August and September 2016 and warm weather during winter season in 3Q FY15/16. The revenues were slightly affected despite overall steady golf demand.

Operating expenses for 3Q YTD FY16/17 was JPY 33,114 million. The slight decrease was mainly due to decline of utility expenses and other operating expenses.

Operating profit for 3Q YTD FY16/17 was JPY 8,893 million, which was 5.9% lower than 3Q YTD FY15/16. Profit attributable to Unitholders was JPY6,838 million, 6.3% lower than 3Q YTD FY15/16.

Total distributable income available during 3Q YTD FY16/17 was JPY 3,881 million. The computation of total distributable income available for 3Q YTD FY16/17 is for illustrative purpose only. AGT makes distributions on a semi-annual basis and the next distribution is for the period from 1 October 2016 to 31 March 2017 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

According to market report, Japan's economy is expected to recover gradually due to underlying support from domestic factors such as growth in real wages, implementation of an economic stimulus package, etc. However, the downside risk for Japan's economy include factors such as yen appreciation and world economic slowdown. The Bank of Japan raised its gross domestic product (GDP) forecast to 1.4% for the fiscal year, from its previous forecast of 1.0%. For fiscal year 2017, its GDP growth forecast is 1.5% (from 1.3%) and 1.1% (from 0.9%) for fiscal year 2018(1).

The Japanese golf market continues to remain stable with the support of weekdays play demand from senior players.

In addition, the higher healthy life expectancy of seniors has also led to increasing demand as players can continue to play golf at a higher age. On the other hand, younger players are not increasing in proportion to older players due to Japan's aging population. Such a situation is widely recognised in the golf industry.

AGT's sponsor recognised this trend years ago and has focused on building the assets portfolio of golf courses located in key metropolitan area. Such golf courses can generate steadier cash flow. As at 31 December 2016, approximately 70% of AGT's 89 courses are located in the 3 largest metropolitan areas. AGT adopts profit maximisation strategy and promotes larger private group competition to achieve more stable revenue. Furthermore, booming inbound tourism to Japan could have a positive impact on golf demand in the mid to long term. AGT has been making efforts to expand to a more varied player base to generate stable cash flow and distribution.

Source: (1) CNBC News dated 1 February 2017