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H.I.S. Reports Record Results for the Fifth Consecutive Half; Sales Up 12.9%, Operating Income Up 45.5%.

Tokyo, Japan, June 20, 2006 - (JCN Newswire) - H.I.S. Co., Ltd. (TSE1: 9603), a leading travel and airline ticket agency, has announced record results for the fifth straight half, ended April 30, 2006. As the Group actively sought to increase share in the industry, consolidated net sales for the period improved 12.9% to JPY 148,020 million, operating income increased 45.5% to JPY 2,685 million and ordinary income rose 23.8% to JPY 2,973 million.

"The H.I.S. Group continued to aggressively promote the key points in its business plan this term. Online bookings and sales to groups and corporations continued to be strong, and overseas branches experienced an increase in both sales and ordinary income. Consequently, our sales growth rate of 13.2% significantly exceeded the increase in our SG&A expenses of 7.2%," said Yoshio Suzuki, President of H.I.S. "Although the number of Japanese traveling abroad declined 1.3% overall, H.I.S. successfully capitalized on interest in Asia and saw an 8.6% increase in the number of passengers traveling to various Asian destinations."

The Group continued working throughout the term to improve its brand recognition in corporate and group sales and marketing activities, and increase new contracts with medium/small corporations to large companies, enabling a substantial increase in the number of travelers serviced in the term, even as the industry experienced slowing growth in the number of departures from Japan. As a result, travel operations achieved sales of JPY 147,145 million with an operating profit of JPY 3,663 million.

"I am pleased to say that, as a result of our passenger-focused operation over the past six months, H.I.S. has succeeded in exceeding JTB in the number of outbound passengers. Although many travel agencies take advantage of the summer 'high season', we are focusing our marketing on travel to Europe, the mainland U.S. and Hawaii and utilizing the Internet to encourage inbound travel," said Suzuki. "In addition to the two hotels currently operated by H.I.S. in Australia, we are also preparing to establish two subsidiaries in Japan and aim to start domestic hotel management operations in the coming year."

Sales from hotel operations improved to JPY 883 million with an operating profit of JPY 163 million, both far over levels in the previous period, as a strong Australian economy improved guest room occupancy rates and guest room unit prices, and a hotel in Brisbane was newly acquired in September 2005.

Net profits in this interim period were JPY 1,741 million, a decrease of JPY 830 million from the previous period, however, which had recorded an exceptional profit of JPY 1,474 million following the sale of fixed assets - land and buildings in Tokyo's Ginza district - during that term.

1. Consolidated Financial Results for the First Half Ended April 30, 2006
 (millions of yen)
 First Half ended April 30, FY Oct. 31,
 2006 % 2005 % 2005

Net Sales 148,020 12.9 131,151 13.6 290,593
Operating Income 2,685 45.5 1,845 2.3 5,473
Ordinary Income 2,973 23.8 2,402 18.2 6,483
Net Income 1,741 (32.3) 2,572 176.1 6,340

Net Income/Share (y) 52.17 77.04 188.85


Consolidated Financial Position
 As of April 30, FY Oct. 31,
 2006 2005 2005

Total Assets 87,458 76,604 80,929
Shareholders' Equity 43,075 34,271 41,209
Shlders' Eqty Ratio (%) 49.3 44.7 50.9
Shlders' Eqty/share (y) 1,290.24 1,026.35 1,233.20


Consolidated Cash Flows
 (millions of yen)
 First Half ended April 30, FY Oct. 31,
 2006 2005 2005

Cash Flow from
 Operating Activities 1,006 (1,885) (603)
Cash Flow from
 Investing Activities (2,820) 282 (3,202)
Cash Flow from
 Financing Activities (721) (542) (567)
Cash and Cash Equivalents
 at Period End 31,468 34,627 32,557


2. Financial Position

Cash and cash equivalents as of April 30, 2006 were JPY 31,468 million, less JPY 2,088 million than one year earlier. Positive cash flow from operating activities was JPY 1,006 million, while cash flow from investing activities was minus JPY 2,820 million and cash flow from financing activities was minus JPY 721 million.

Cash Flow from Operating Activities

Cash flow from operating activities during the interim was JPY 1,006 million. The main factors contributing positively were a pre-tax net income of JPY 2,967 million, a JPY 2,215 million increase in trade payables due to higher turnover, and gains of JPY 1,244 million in pre-trip deposits (customer travel prepayments) received due to greater advance reservation receipts. The principal factors contributing negatively to operating cash flow were minus JPY 3,059 million cash flow from higher sales credits due to higher business volumes, and minus JPY 2,532 million cash flow from increases in travel deposits (Company travel prepayments).

Cash flow from operating activities during the previous consolidated interim period was minus JPY 1,885 million, principally due to recorded pre-tax net income of JPY 4,097 million before tax and other adjustments, an increase of JPY 2,163 million yen in trade payables and other positive factors. These were exceeded by factors contributing negatively to cash flow including JPY 1,749 million in increased sales credits, higher travel deposits of JPY 1,545 million and increased corporate and other tax payments of JPY 2,188 million.

As a result of the foregoing, consolidated cash flow from operating activities in the interim period under review showed an inflow of JPY 1,006 million, an increase of JPY 2,891 million compared with the previous interim, due mainly to higher pre-trip deposits received of JPY 1,928 million, and a decrease in corporate and other tax payments of JPY 1,422 million.

Cash Flow from Investing Activities

Cash flow from investing activities during the interim period was minus JPY 2,820 million. The principal factors contributing positively to investing cash flow were revenues of JPY 448 million for the partial sale of stock of Kyushu Sangyo Kotsu Holdings Co., Ltd. through the H.I.S.-HS Kyushu Kotsu Jigyo Yugen Sekinin Kumiai, and JPY 254 million for the sale of TGR Investment Inc. stock. The principal negative factors contributing negatively were JPY 1,268 million acquisition of the land and buildings of Hotel Watermark Brisbane, the JPY 733 million investment in Kyushu Sangyo Kotsu Holdings KK and the JPY 500 million purchase of Sumitomo Bank's cash trust for the purpose of asset management.

Cash flow from investing activities in the previous interim was JPY 282 million. The principal factor was income of JPY 3,808 million derived from the sale of land and buildings in Tokyo's Ginza district, which exceeded outlays of JPY 2,000 million for acquisition of Sanko Soflan Company Inc. corporate bonds and JPY 1,000 million for acquisition GMAC International Finance B.V. corporate bonds.

As a result, consolidated investing cash flow in the current interim period recorded an outflow of JPY 2,820 million, a decrease of JPY 3,103 million from the previous period, driven mainly by higher expenditures of JPY 1,234 million for the acquisition of tangible and intangible fixed assets, a decrease in proceeds of JPY 3,781 million from the sale of tangible fixed assets and a decrease in payments for acquisition of investment securities of JPY 1,740 million.

Cash Flow from Financing Activities

Cash flow from financing activities during the current interim showed an outflow of JPY 721 million derived mainly from the Company's dividend payments of JPY 584 million and repayment of JPY 55 million of long-term borrowings by subsidiaries.

Cash flow from financing activities during the previous interim showed an outflow of JPY 542 million. This derived mainly from the Company's dividend payments of JPY 501 million.

The JPY 721 million yen outflow in the current interim period shows a decrease of JPY 179 million compared to the previous interim period. The main contributing factors were an increase in dividend payments of JPY 83 million and an increase of JPY 49 million for prepayment of long-term borrowings.

3. Forecasts for the Full Year

Prospects for travel industry in general are positive. Overseas travel demand in particular is expected to firm with improved corporate earnings, supported by a steady Japanese economy, and rising personal incomes. Travelers to China and Korea, discouraged by April 2005's anti-Japan demonstrations, are expected to return as well as those events recede.

As a result the H.I.S. Group anticipates demand in this year's summer season to exceed levels in the previous year. Management will strive to secure stable seating on scheduled flights, and take aggressive measures to set up charter flights and accommodate demand for popular destinations and departure days. In respect of non-reserved seats, plans call for actively differentiating the Group with competitors not only in air ticket prices but also in the addition of value added services.

With regard to package tours, we will enhance our mainstay moderately priced products with new plans, such as packages involving deluxe hotels, and other packages targeting office ladies, families and other customer groups. In addition, we are actively promoting sales with the senior group, enhancing destinations and packages, and reinforcing advertising for our "Impresso" accompanied tours. Overall, summer reservations are running well ahead of last year's, while we are encouraging early customer concentration through linking early reservations to premiums offered.

The Group remains ever more committed to use of the Internet across the board. As a high priority, we are moving to further expand online reservations and other conveniences for customers, move into the blogging community and reinforce our range of Internet and mobile services for domestic travel.

The Global Business Development Department will be strengthened. Our plan calls for the number of overseas branches to grow to 100 over the next several years, expanding customer support structures in local areas and improving product planning capabilities with the Group's own proprietary network and services.

Hotel operations will strive for stable earnings from its two Australian hotel properties, develop the hotel management outsourcing business in Japan and expand business scale in the mid-term.
 (millions of yen)
Forecast Fiscal Year ending October 31, 2006

Net Sales 336,000
Ordinary Income 8,250
Net Income 4,400
Net Income/Share (y) 131.79


4. Dividends

The intent of the Company's dividend policy is to enable the continuous, stable payment of dividends to shareholders. Company dividend policy includes a provision for the payment of an interim dividend. However, as there is a trend for the proportion of sales, etc. recorded in the second half of the year to be relatively higher, in order to reflect results in dividends fairly the Company is planning at present to make a dividend payment in respect of the whole year of 17.50 yen per share.

Please access the full H.I.S. Consolidated and Non-sonsolidated financial reports at the Company IR website:

About H.I.S. Co., Ltd.

H.I.S. Co., Ltd. was founded in 1980 and pioneered the Japanese discount airline ticket industry. Today the H.I.S. Group is comprised of 45 subsidiaries and 10 affiliated companies around the world, and has become a leader in the Japanese travel industry. For more information, please visit

Source: H.I.S. Co., Ltd.

H.I.S. Co., Ltd.
Takashi Nakatani
Corporate Planning Division
Tel. +81-3-5908-6029
Fax +81-3-5908-2423

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Publication:JCN Newswires
Geographic Code:9JAPA
Date:Jun 20, 2006
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