Review of Operations
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REVIEW OF OPERATIONS To promote segment management, on April 1, 2019, we established intermediate holding companies in the station building and hotel businesses, and we implemented segment classification changes. Please note that in this section the reporting is based on the former segments. INTEGRATED REPORT 2019 KYUSHU RAILWAY COMPANY 18 REVIEW OF OPERATIONS TRANSPORTATION GROUP (former segments) FY2019/3 Results Operating Revenues EBITDA YoY YoY ¥185.0 billion 0.7% ¥34.4 billion 0.3% Operating revenues in the Transportation seg- Operating Revenues ment were ¥185.0 billion, an increase of ¥1.2 bil- (Billions of yen) lion, or 0.7%, compared with the previous fiscal year. Operating income came to ¥27.4 billion, down ¥1.7 billion, or 6.0%, compared with the previous fiscal year, and EBITDA edged up 0.3%, to ¥34.4 billion. Operating revenues increased due to higher railway transportation revenues. However, operat- ing income declined as a result of a rise in depre- ciation and other factors, while EBITDA FY ’ ’ ’ ’ ’ registered a small increase. Notes: Segment Overview Consolidated Subsidiaries (as of March 31, 2019) 1. Operating revenues, operating income (loss), and EBITDA are numerical EBITDA / Operating Income (Loss) values before eliminating intersegment transactions. Our Transportation segment consists Holding Company for Houhi Main Line (Billions of yen) 2. Transportation Group EBITDA for FY2016/3 and previous fiscal years mainly of our operation of a network of JR Kyushu Bus Company comprises operating income + cost of depreciation + earnings from use of railway lines constituting key commuter JR Kyushu Jet Ferry Inc. the Management Stabilization Fund, while EBITDA for FY2017/3 lines for the Kyushu regional area cov- comprises operating income + cost of depreciation. JR Kyushu-Rent-A-Car&Parking Co., Ltd. ering a total length of 2,273.0 operating JR Kyushu Service Support Co., Ltd. kilometers (including 288.9 operating kilometers of Shinkansen tracks leased JR Kyushu Linen Co., Ltd. from JRTT) that connects the entirety of the island of Kyushu and all seven of its prefectures as well as a number of Design and Story trains and tour experi- ences. The business also includes long- () distance and local bus operations and ( ) hydrofoil ferry services to South Korea FY FY ’ ’ ’ ’ ’ and Tsushima. EBITDA Operating income (loss) INTEGRATED REPORT 2019 KYUSHU RAILWAY COMPANY 19 REVIEW OF OPERATIONS Transportation Group FY2019/3 Initiatives In the railway business, we continued to develop website, we provided information and offered Strengthening of Measures to Capture Inbound Tourism Demand operations founded on safety and service quality. sales promotions catering to customers from spe- The number of inbound travelers to years individual travel has been increas- At the same time, we fully utilized our network cific countries and regions. Kyushu was 5.11 million in 2018, an ing, and we anticipate further gains in centered on the Kyushu Shinkansen to deploy In transportation, we implemented detailed increase of 170,000 year on year. railway usage going forward. In July sales measures from the customer’s perspective in transportation-oriented initiatives, making con- Through collaboration with overseas 2018, we concluded a strategic alliance order to secure profits. certed efforts to establish an efficient transporta- travel agencies and airlines and the with the Alibaba Group, which provides We promoted sales of all our planned ticketstion organization that meets the demand for each enhancement of specialized reservation Fliggy, a travel site visited by more than with the purpose of encouraging the use of rail- train line. At the same time, we promoted the use sites, we worked to expand sales of the 10 million people a ways, primarily the Kyushu Shinkansen, while of our railways by further enhancing our transpor- JR Kyushu Rail Pass. day. In FY2019/3, sales Looking at our transportation reve- of the JR Kyushu Rail implementing various campaigns aimed at trans- tation network, which is centered on the Kyushu nues, inbound use was primarily by cus- Pass in China were up porting passengers to target areas. Furthermore, Shinkansen. tomers from South Korea, Taiwan, Hong substantially, rising we took steps to promote use of the Internet In our passenger ship business, we began Kong,to and China. Previously, the major- approximately 20% Reservation Service, such as by launching the JR operate Japan’s first ferries combining passengers ity of Chinese tourists visiting Kyushu year on year. Kyushu Internet Train Reservation Business for cor- and cargo. This service is available on some of our JR Kyushu arrived by cruise ship, but in recent Rail Pass porate customers. We also made efforts to Beetle hydrofoil ferries on a domestic route increase awareness of the Kyushu brand and between Fukuoka and Tsushima. In this way, we encourage customers to visit Kyushu, including by worked to expand demand for travel via hydrofoil operating the cruise train Seven Stars in Kyushu on ferries. For our bus business, we rolled out limited- Recovery from Natural Disasters a new route. Moreover, we enhanced the JR time discount campaigns for the high-speed bus The heavy rains that occurred in July earthquakes. We are now coordinating Kyushu Rail Pass, a mainstay product geared B&S Miyazaki, which is connected to the Kyushu 2018, centered on western Japan, restoration initiatives with the national toward customers from overseas. To that end, in Shinkansen, and other high-speed bus routes. In caused damage to the Chikuhi Line, the government and related local govern- addition to a direct online sales system and a seat addition, we worked to further improve earnings Chikuho Main Line, and the Hisatsu ments, and we expect operation to be reservation service offered through JR Kyushu Rail through the revision of certain routes. Line. Consequently, in FY2019/3 the restored in FY2021/3. Pass Online Booking, a specialized reservation Company recorded disaster expenses Moving forward, the JR Kyushu Group totaling approximately ¥1.2 billion.* will continue to focus on initiatives tar- Railway Transportation Revenues Sales Amount and Number of JR Kyushu Operation has since been restarted on geting the building of robust railways in (Billions of yen) Rail Pass Purchased all of these routes. order to minimize the effects of natural (Billions of yen) The heavy rains in northern Kyushu indisasters. July 2017 caused damage to the Kyudai * Approximately ¥400 million of this amount was Main Line and the Hitahikosan Line. provision for loss on disaster. Operation on the Kyudai Main Line was restarted in July 2018, but operation on the Hitahikosan Line is still suspended between Soeda Station and Yoake Station. We are currently discussing the restoration plan with local governments. Moreover, operation on the Houhi Main Line between Higo-Ozu Station and Aso Station was suspended due to FY FY ’ ’ ’ ’ ’ FY FY ’ ’ ’ ’ ’ The Chikuhi Line was damaged the impacts of the 2016 Kumamoto by heavy rain in July 2018. Shinkansen Conventional lines Sales amount Number of tickets purchased (10,000 tickets) INTEGRATED REPORT 2019 KYUSHU RAILWAY COMPANY 20 REVIEW OF OPERATIONS REAL ESTATE GROUP (former segments) FY2019/3 Results Operating Revenues EBITDA YoY YoY ¥72.6 billion 4.7% ¥33.1 billion 3.4% Operating revenues in the Real Estate segment Operating Revenues were ¥72.6 billion, an increase of ¥3.2 billion, or (Billions of yen) 4.7%, compared with the previous fiscal year. Operating income came to ¥23.7 billion, an increase of ¥0.5 billion, or 2.5%, while EBITDA was ¥33.1 billion, up ¥1.0 billion, or 3.4%. Operating revenues, operating income, and EBITDA all increased year on year due to higher revenues from real estate leases. Our real estate lease business recorded ¥52.9 billion in operating revenues before intersegment FY FY ’ ’ ’ ’ ’ eliminations, operating income of ¥21.3 billion, and EBITDA of ¥30.7 billion. Segment Overview Consolidated Subsidiaries (as of March 31, 2019) EBITDA / Operating Income Notes: Our Real Estate segment consists of JR Hakata City Co., Ltd. 1. Operating revenues, operating income, and EBITDA are numerical values (Billions of yen) dedicated station buildings connected Kokura Terminal Building Inc. before eliminating intersegment transactions. 2. Real Estate Group EBITDA comprises operating income + cost of to our primary railway stations through- Nagasaki Terminal Building Inc. out Kyushu and the leasing of commer- depreciation. JR Oita City, Inc. cial retail space located within such Kagoshima Terminal Building Inc. complexes and office space in office buildings, the leasing of residential JR Kyushu Building Management Co., Ltd. apartments through our RJR brand, and JR Kyushu Business Development the sale of condominiums through our (Thailand) Co., Ltd. MJR brand. Our principal real estate JR Kyushu Capital Management holdings include those in highly desir- (Thailand) Co., Ltd. able areas of the major city areas of Kyushu, such as the Hakata District of Note: For JR Kyushu Capital Management (Thailand) Co., Ltd., the proportion of voting rights is 50% or less, Fukuoka. but it is substantially controlled by the Company, FY FY ’ ’ ’ ’ ’ and therefore it is a consolidated subsidiary. EBITDA Operating income INTEGRATED REPORT 2019 KYUSHU RAILWAY COMPANY 21 REVIEW OF OPERATIONS REAL ESTATE GROUP FY2019/3 Initiatives Our real estate lease business centers on commer- and other facilities at each station. In