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.

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.

For the fiscal year ending March 2024, consolidated revenue was JPY 36,983 million, up 6.1% from the previous year, operating profit was JPY 4,880 million, up 25.9% from the previous year, ordinary profit was JPY 4,923 million, up 21.1% from the previous year, and net income attributable to parent company shareholders was JPY 3,643 million, down 31.2% from the previous year. Revenue has increased for four consecutive periods, while operating profit and ordinary profit have increased for two consecutive periods. Revenue fell 11.9% short of the company's plan due to lower-than-expected sales of pachinko gaming machines. However, cost improvements and the suppression of selling and administrative expenses have resulted in mostly planned profits. The decline in net income attributable to parent company shareholders is due to a backlash resulting from an increase in deferred tax assets and other factors in the previous fiscal year.

The breakdown of revenue showed that although revenue from pachinko gaming machines decreased by 6.1% from the previous year to JPY 23,741 million, revenue increased due to a 38.0% increase in revenue from pachislot gaming machines to JPY 13,242 million. In addition, the gross profit margin increased by 1.4 points year-on-year to 52.7%, as planned, as a result of selling new models at expected prices and an increase in the panel sales ratio for pachinko gaming machines from around 30% in the previous year to around 70%. Gross profit increased by 8.9% to JPY 19,502 million.

※There are two types of sales formats: body sales, which include the outer frame (main body), the board (panel), and the side unit set, and panel sales, which only contain the board (panel) and side unit. The first model to change the main body frame will be sold as a body sales only. The gross profit margin is higher for panel sales, which have lower material costs.

Selling and administrative expenses increased by 4.2% from the previous year to JPY 14,621 million, with research and development expenses increasing by JPY 1,025 million, personnel expenses by JPY 130 million, and advertising and publicity expenses by JPY 19 million, while sales commissions decreased by JPY 22 million and other sales and administrative expenses decreased by JPY 557 million. Research and development expenses increased due to the strengthening of smart gaming machine development and the recording of deferred items from the previous year. The decrease in sales commissions was due to the increase in the direct sales ratio from around 70% in the previous year to around 75%, which is expected to continue at around 75% in the future. It resulted in a JPY 1,379 million decrease in planned sales compared to the beginning of the period and offset the decrease in gross profit due to the shortfall in sales. The company was able to reduce expenses by JPY 323 million for sales commissions, JPY 228 million for research and development expenses, JPY 147 million for advertising and publicity expenses, JPY 134 million for personnel expenses, and JPY 549 million for other sales and administrative expenses. A special loss of JPY 52 million was recognized as a valuation loss on shares of related companies engaged in the development of pachislot gaming machine software※.

※Valuation loss on shares of related companies engaged in the development of pachislot gaming machine software.

(Written by FISCO guest analyst, Jo Sato)