Performance Trend 1. Overview of performance for FY3/2024 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.
Overview of consolidated performance for fiscal year ending March 2024.
For the fiscal year ending in March 2024, Higashi Twenty-One <9029> had a consolidated net sales of JPY 40,635 million, a YoY increase of 16.7%, operating profit of JPY 2,190 million, a 14.8% YoY increase, ordinary profit of JPY 2,309 million, a 14.0% YoY increase, and net income attributable to parent company shareholders of JPY 1,506 million, an 18.8% YoY increase. The company saw a significant increase in revenue and profit, and the results were in line with the upward revision forecast issued on October 27, 2023, which predicted net sales of JPY 40,000 million, operating profit of JPY 2,200 million, ordinary profit of JPY 2,300 million, and net income attributable to parent company shareholders of JPY 1,445 million.
All businesses expanded their sales, especially the warehouse business, which saw an expansion in transactions with Amazon Japan. The office services business had a favorable sales performance due to a strengthened workforce for sales activities, while the other business achieved a significant increase in revenue due to the inclusion of Ryokudo's consolidated results for the full year (compared to the previous year, which included them only for the second half). In terms of profit, in addition to an increase in labor costs due to growth investment and personnel additions, the company absorbed cost increases such as initial costs (fixtures, equipment, and warehouse consumables) associated with the opening of large-scale 3PL centers (the Kita-Osaka LC, Nagareyama LC, and Nariohama LC, opened in April 2023, and the Kobe-Nishi LC, opened in March 2024) with significant increases in revenue and appropriate freight rates. Although gross profit increased by 10.9% YoY, the gross profit margin decreased by 1.0 point to 19.1%. Selling, general, and administrative expenses rose 9.5% YoY, but SG&A expense ratio fell 1.0 point to 13.7%. Non-operating income included subsidy income, which decreased by JPY 190 million YoY, and insurance cancellation refunds, which totaled JPY 150 million. As a result, the operating profit margin fell 0.1 points to 5.4%, and the ordinary profit margin fell 0.1 points to 5.7%.
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2. Trend by report segment
The transportation business had net sales of JPY 22,911 million, a YoY increase of 9.0%, and segment profit (operating profit before adjusting for all society-wide expenses) of JPY 2,800 million, a YoY increase of 19.8%. There was a decline from the previous period due to a decrease in the impact of large office move projects in the Kansai area. However, the office move projects in the Tokyo metropolitan area expanded along with the company's sales activities, and it also contributed to significant sales increases to newly received contracts for digital signage kitting from major convenience stores and to expanding mailroom operations in building delivery services. Warehouse Business had net sales of JPY 10,693 million, a YoY increase of 33.9%, but profits decreased by 10.5% to JPY 854 million. Although the company saw significant revenue increases from transactions with Amazon Japan and large machine manufacturers, the opening of large-scale 3PL centers led to a decrease in profit due to initial costs. The net sales of the product sales business were JPY 4,435 million, a YoY increase of 10.6%, and the profit was JPY 225 million, an 18.6% YoY increase. Thanks to the expansion of the Kansai Electric Power Materials Procurement 3PL business, sales and profits increased by a two-digit percentage. The net sales of welfare services business were JPY 1,066 million, a YoY increase of 9.2%, and the profit was JPY 159 million, a YoY increase of 12.8%. The company saw an increase in the rental of welfare equipment following the opening of the Nagoya Minami Depot in June 2023. Other net sales were JPY 1,527 million, a YoY increase of 87.8%, and profit was JPY 304 million, a YoY increase of 174.1%. The full-year consolidation of Ryokudo contributed to significant increases in revenue and profit.
3PL business and IT service business achieved significant increases in revenue
3. Trend by business area
The net sales of the office services business were JPY 6,547 million, a YoY increase of 8.2%. The office move projects in the Tokyo metropolitan area expanded smoothly, and net sales of the 3PL business were JPY 10,743 million, a YoY increase of 37.2%. Thanks to the opening of the large-scale 3PL center, there was a significant increase in revenue. Net sales of the IT services business were JPY 3,563 million, a YoY increase of 45.7%. The company achieved significant increases in revenue thanks to newly received contracts for digital signage kitting from major convenience stores and the full-year consolidation of Ryokudo. Net sales of the building delivery business were JPY 2,008 million, a YoY increase of 13.6%. Thanks to the newly received contracts for mailroom operations and an expansion of transactions with tenant companies that occupy existing building delivery centers, there was a two-digit increase in net sales. Net sales of the care services business were JPY 1,066 million, a YoY increase of 9.2%. Net sales of the core enterprise business were JPY 16,705 million, a YoY increase of 6.2%. There were smooth increases in revenues due to an increase in the catalog mailing business for large customers and an expansion of overall handling volume.
Financial soundness was maintained while capital efficiency improved.
4. Financial situation
On the financial side, the total assets at the end of March 2024 increased by 43.08 million yen from the previous period to 255.35 million yen. Mainly, due to increase of operating uncollected revenue and contract assets by 658 million yen, machinery and equipment related to the opening of a warehouse increased by 774 million yen, land increased by 646 million yen due to purchase of land for new warehouse construction, and construction temporary accounts increased by 1,350 million yen due to payment of deposits related to new warehouse construction. The total liabilities increased by 28.67 million yen to 132.23 million yen. Mainly, due to an increase of operating unpaid expenses by 358 million yen and an increase of lease liabilities of fixed liabilities by 404 million yen due to new lease agreements, etc. Additionally, the balance of interest-bearing liabilities (total of long and short-term loans) increased by 1,447 million yen to 5,192 million yen due to equipment investment allocation, etc. The total net assets increased by 14.40 million yen to 123.11 million yen due to the increase of retained earnings, etc.
As a result, the equity ratio decreased by 3.0 points to 48.2%, but as the increase in assets accompanying the expansion of operations is the main reason and the cash flow from operating activities continues to maintain a positive value, we at our company believe that the financial soundness is still good. Additionally, ROE (return on equity) increased by 0.8 points to 13.0%. We also evaluate that not only the financial soundness is maintained but also the capital efficiency is improving.
(Authored by FISCO guest analyst Masanobu Mizuta)