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With the first 25 years of the OLC’s history devoted to land reclamation and attracting Disney theme parks, and the second 25 seeing the development of the Tokyo Disney Resort, the third quarter century is about sustainable growth starting with a medium term plan for cash generation and investment.
OLC benefits from considerable assets, including 500 acres of land 6 miles from Tokyo and, although there is no capital relationship between Disney and OLC, OLC holds the licence to operate Tokyo Disney Resort until 2046. However, with Japan’s declining and ageing population demographic, OLC will be challenged to find continued growth. Over 97% of the 26 million visitors in 2010 were from Japan, with the proportion of guests aged 40+ currently accounting for 18% and rising.
OLC has a target to generate ¥120 billion free cash flow over the three years to 2014 by creation of new value, market development and efficiencies. Key elements of the strategy include:
- Attraction of overseas visitors, particularly from China.
- Promotion of value-added vacation packages including hotel accommodation and access to both Tokyo Disneyland and Tokyo DisneySea. Significantly, these will be targeted at the “post-family” over 40 segment.
- Efficient investment: Of the ¥200 billion to be invested to 2021, investment in new products will be concentrated in the period to 2016, whilst between 2017 to 2021 the focus will be on renewals and improvements.
Investment in sustainable growth:
Uses of the cash generated are prioritised as follows:
1. Investments with IRR of 8% or more – development of new businesses that enhance value and divestment of non-core/ poorly performing investments
2. Stockholder returns –
• stock repurchase – target to increase ROI from 6.9% (March 2010) to 8%
• dividends – dividend policy: >35% of consolidated net income
3. Reduction of interest-bearing debt –
• current debt at ¥173 billion and debt/equity at 0.47x
• repayments of ¥105 billion scheduled between 2011 and 2014
President and COO, Kyoichiro Uenishi says: “we are determined to remain focused on innovation and “bring happiness” not only to our guests, but to … our investors as well”.
Source: OLC Group Investor Relations: 2013 Medium-term Plan & Message from President