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.

1. Company Overview

Unirita <3800> handles the development, sales, and support of package software for IT system operation management and data utilization solutions for a wide range of industries, including finance and manufacturing. As IT's role changes from "defense" (such as improving business efficiency and reducing costs) to "offense" (a means of achieving a competitive advantage in business), the company has leveraged its strengths in the fields of "system operation" and "data utilization" to provide solutions that directly address the business challenges of companies that take on digital transformation (DX). Recently, under the management policy of "service shift," the company has been working on businesses such as transitioning to a new service model (a recurring revenue model that provides its own services through cloud utilization), and business models that use digital technology to solve social issues (such as workstyle reform, regional revitalization, and primary industry activation), and promoting the transformation of its business model.

On May 14, 2024, the company announced a new 3-year medium-term management plan. Under the basic policy of "Re.Connect 2026," and to achieve the vision of "creating uniqueness by embodying empathy for the Unirita Group", the company has further evolved its three business strategies of "expanding service-oriented businesses," "establishing new value propositions," and "transforming business processes." In addition, the company intends to strengthen its sustainability foundation for sustainable growth, including accelerating investments in human capital, and realizing both economic value as a business company and social value through the solution of social issues through business activities that utilize the group's management resources and IT solution capabilities.

3. Overview of the 2024 fiscal year financial results

In the fiscal year ending March 2024, net sales increased 3.7% year-on-year to 11,982 million yen, and operating profit increased by 11.7% to 1,023 million yen. Net sales grew for each of the three businesses: "Product Service," "Cloud Service," and "Professional Service." The main automated account and billing products had a favorable trend, partly thanks to advances in DX and movements towards electronic adaptation in accordance with legal reform. Similarly, cloud services grew steadily, centered around IT cloud services. Professional services had significant revenue growth due to increased orders for high-value-added projects and lump-sum contracts (system integration) that included all group companies. Despite strengthening investments in the development of management foundation, the company achieved a significant operating profit increase through sales growth, efficiency improvement in research and development expenses and the conversion to a high-profit model (system integration).

Directions for the New Medium-Term Management Plan

In the new medium-term management plan, based on the achievements of the previous medium-term management plan and the challenges revealed, the company redefined its core competencies as "service management" and "data management," and aims to establish a new value proposition model with consulting as its starting point. In particular, the company will continue to invest in the cloud growth area and achieve scale-up in each cloud category through the promotion of value co-creation, including cooperation with partner companies. As a final year target, the plan aims for net sales of 14 billion yen (average annual growth rate of 5.3% over three years), operating income of 1.45 billion yen (12.4% over the same period), and ROE of 8.8% (1.7 points higher than the fiscal year ending March 2024), and is a plan that emphasizes profitability while continuing to invest in the cloud. The company is also enthusiastic about increasing dividends as profit grows, and is considering M&A that would help acquire data management personnel and strengthen service lines.

4. Outlook for the 2025 Fiscal Year

Regarding the financial estimates for the first year of the new medium-term management plan, the fiscal year ending March 2025, we expect revenue to increase by 4.3% compared to the previous year, reaching 1.25 billion yen, and operating profit to increase by 2.6% to 105 million yen. While the mainframe business in the 'Product Service' segment is expected to decline, we plan to contribute to revenue growth through active expansion of the 'Cloud Service' business. We also aim to promote value creation by aggregating the stock sales of the 'Product Service' through a consulting-led strategy, growth of our main Cloud Services, and integration of system integration and outsourcing. On the profitability side, we assume that we will continue to make strategic investments while securing profit growth by promoting the black box operation of the 'Cloud Service', and expanding the high-profit model.

■Key Points

- In the fiscal year ending March 2024, all businesses expanded and achieved increased revenue and profits (achieving the final year target of the medium-term management plan).

- In terms of activities, there is some momentum towards shifting to a high-profit model based on service-providing businesses (such as reports) and service management infrastructure (LMIS, etc.), and consulting-led strategies.

- A new 3-year medium-term management plan has been published. We are aiming to expand investment into Cloud growth areas and establish a new value creation model that leverages our strengths in service and data management.

- We plan to continue achieving increased revenue and profits in the fiscal year ending March 2025, with an annual dividend of 70 yen per share (an increase of 2 yen compared to the previous year).

(Written by Fisco Guest Analyst Ikuo Shibata)