Summary: RIZAP Group<2928>The comprehensive enterprise, which is committed to proving that "people can change" as its unique management philosophy, develops a variety of businesses in the three areas of health creation, health care / beauty, lifestyle, and investment. Under the vision of "Global No.1 in the self-investment industry", it has achieved remarkable growth by actively utilizing M&A under the holding company structure and has grown to include 68 group companies, including 5 listed subsidiaries, and 4,606 consolidated employees. Listed on the Sapporo Stock Exchange's Ambitious Market in 2006, it formulated a medium-term management plan in September 2022, but revised it in February 2024 to achieve an operating profit of ¥400 million (fiscal year ending March 2027) by aggressively expanding the new business "chocoZAP". The fiscal 2024 performance was sales revenue of ¥16,629.8 million (+7.6% YoY), operating loss of ¥594 million (compared to a loss of ¥4948 million in the same period of the previous year), pre-tax loss of ¥4524 million (compared to a loss of ¥7,031 million in the same period of the previous year), and net loss attributable to the owners of the parent of ¥4,300 million (compared to a loss of ¥12,673 million in the same period of the previous year). Due to the black ink conversion of the chocoZAP business, it achieved a black ink of ¥417.5 million on an operating profit basis in the fourth quarter alone. As for sales revenue, the RIZAP-related business (including the chocoZAP business) significantly increased its revenue (+¥201 million) by focusing on expanding the convenience gym "chocoZAP". In existing businesses, there was an increase in revenue, including Antiroza Co., Ltd. (+¥419.8 million), while there was a decrease in revenue due to store structure reform in REXT Co., Ltd., etc. (-¥599.8 million) and the impact of selling the Sikata business under the subsidiary BRUNO<3140>at the end of the previous year (-¥511.1 million). As for operating loss, the group as a whole improved due to the transition of the chocoZAP business to the investment recovery period and the success of business portfolio reform such as REXT.
Performance Outlook for Fiscal Year Ending March 2025: The performance outlook for fiscal year ending March 2025 is sales revenue of ¥177,700 million (+6.9% YoY), operating profit of ¥630 million (compared to an operating loss of ¥594 million in the previous year), pre-tax profit of ¥310 million (compared to a pre-tax loss of ¥4,524 million in the previous year), and net profit attributable to owners of the parent of ¥200 million (compared to a net loss of ¥4,300 million in the previous year), with the expectation of turning a profit for the full year due to the end of the chocoZAP business's advance investment phase. As for sales revenue, we expect an increase due to continued expansion of the new store openings and membership base in the chocoZAP business. In fiscal year ending March 2025, we will focus on "improving the satisfaction of existing members." As measures, the introduction of new services, chocotto support implementation, and concierge services will be the main focus. Profit growth is expected to slow in the first half of the year due to investment in improving quality and customer satisfaction, but significant profit growth is expected from the second half to fiscal year ending March 2026. In our company's opinion, the chocoZAP business has already achieved monthly black ink, and with further investment in new services and human services, we believe that the business model will be strengthened and exceed profit plans.
2024 FY Performance Overview Consolidated performance for FY3/2024 of G-7 Holdings <7508> was 192,992 million yen in increased operating income of 9.1% over the previous year, and increased ordinary income of 7.4% to 7,318 million yen, and attributed to the parent company's net income of 5,175 million yen, an increase of 35.3% over the previous year. Sales were driven by the Business Supermarket Business and the Meat Business, and continued to set a new record high, exceeding the company's plan by 4.3%. However, in terms of profits, the automobile-related business was affected by a decrease in profits due to poor sales of winter tires due to a warm winter, and could not reach the company's plan, it turned to a profit increase for the second time due to the growth of other businesses centered on the Business Supermarket business. The sales cost ratio has increased by 0.8 points over the previous year due to changes in the sales composition ratio; however, the selling, general and administrative expense ratio decreased by 0.7 points due to the effect of increased earnings, and the operating margin decreased by 0.1 points to 3.6%. The main reasons for the increase/decrease of selling, general and administrative expenses were a decrease of 600 million yen in energy costs due to subsidies from rising electricity prices, and an increase of 1 billion yen in labor costs due to improvements in employee treatment and increased education costs. In addition to this, depreciation expenses increased by nearly 600 million yen due to rising construction material costs and rising costs of opening stores etc. The EBITDA margin has increased by 0.1 points from the previous year. Also, the reason for the large increase in the net income of the parent company's shareholders attributable to the current period is due to the elimination of 500 million yen in retirement benefits paid to executives that were recorded as special losses in the previous year, a decrease of 455 million yen in impairment losses, and a gain of 127 million yen on the sale of investment securities in FY3/2024. Changes in the ratio of revenues - while the revenue composition ratio increased by 0.8 points from the previous year, the selling, general and administrative expense ratio decreased by 0.7 points due to the effect of increased earnings, and the operating margin decreased by 0.1 points to 3.6%. The main factors affecting selling, general and administrative expenses were a drop of 600 million yen in energy costs due to subsidies from rising electricity rates and an increase of 1 billion yen in labor costs due to increases in treatment and education expenses for employees. Depreciation expenses also rose by just under 600 million yen due to increased costs of construction materials and opening new stores. The EBITDA (earnings before interest, taxes, depreciation, and amortization) margin rose 0.1 points from the previous year. Lastly, the reason for the increase in the net income of the parent company's shareholders attributable to the current period was due to the elimination of the 500 million yen for executive retirement bonuses paid in the previous period, the reduction of impairment losses by 455 million yen, and the realization of gains on investment securities of 127 million yen in FY3/2024.
Growth Strategy and Topics:
2. Financial forecast for the March 2025 period.
Performance Outlook for Fiscal Year Ending March 2025: The performance outlook for fiscal year ending March 2025 is sales revenue of ¥177,700 million (+6.9% YoY), operating profit of ¥630 million (compared to an operating loss of ¥594 million in the previous year), pre-tax profit of ¥310 million (compared to a pre-tax loss of ¥4,524 million in the previous year), and net profit attributable to owners of the parent of ¥200 million (compared to a net loss of ¥4,300 million in the previous year), with the expectation of turning a profit for the full year due to the end of the chocoZAP business's advance investment phase. As for sales revenue, we expect an increase due to continued expansion of the new store openings and membership base in the chocoZAP business. In fiscal year ending March 2025, we will focus on "improving the satisfaction of existing members." As measures, the introduction of new services, chocotto support implementation, and concierge services will be the main focus. Profit growth is expected to slow in the first half of the year due to investment in improving quality and customer satisfaction, but significant profit growth is expected from the second half to fiscal year ending March 2026. In our company's opinion, the chocoZAP business has already achieved monthly black ink, and with further investment in new services and human services, we believe that the business model will be strengthened and exceed profit plans.
Growth Strategy and Topics:
The company has drawn up development plans divided into three phases and is putting them into practice. There are three phases: Phase 0 (barrier-freeization of gyms), Phase 1 (universalization of services), and Phase 2 (social infrastructure for health). Over two years have passed since its launch, and the company has completed Phase 0 (barrier-freeization of gyms) and is currently in the midst of shifting its focus to Phase 1. In Phase 1 (universalization of services), the company aims to improve quality and upgrade the level of universal service. Specifically, it will add personal services such as "little support" and concierges, and take on the challenge of optimizing "Human x DX". Furthermore, by strengthening the introduction of new services, it aims to improve customer satisfaction for existing and new stores. "Little Support" is an initiative in which RIZAP trainers play various roles such as plan creation, app usage guidance, exercise and diet advice, machine maintenance and cleaning on a rotating basis, and is a reliable presence for new members and training beginners. By the end of June 2024, the company aims to have 500 trainers for "Little Support", and significant strengthening is being implemented. The business model of chocoZAP began with the concept of "unmanned", but it is evolving into a new service model by deploying specialized personnel (about one person for every three stores, calculated based on 500 people for 1,500 stores).
■Key Points
- For the fiscal year ending March 2024, chocoZAP's business has turned profitable, achieving a black ink. chocoZAP has more than 1.2 million members and 1,500 stores as of May 2024.
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- Adds medium-term management plan objectives to aim for operating profit of ¥4 billion for the fiscal year ending March 2027. Starts advertising platform business as chocoZAP's second source of income.
- No dividends are planned until the fiscal year ending March 2024. A policy of resuming dividends from the fiscal year ending March 2025 has been announced, along with the special commemorative privilege of chocoZAP's achievement of being number one in Japan.
(Written by FISCO Guest Analyst, Hideo Kakuta)