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.
Delica Foods Holdings <3392> is the largest domestic wholesaler of processed fruits and vegetables for the food service and catering industry in Japan. By distributing agricultural products, it contributes to the development of agriculture and the creation of healthy lifestyles. Since the spread of COVID-19, the company has successfully expanded its business while transforming its portfolio of businesses.
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 year ending March 2024, the company achieved a record high for the second consecutive year with net sales of ¥52,823 million, up 10.2% from the previous year and operating income of ¥1,258 million, up 63.5% from the previous year. Considering that net sales for the fiscal year ending March 2020 before the spread of COVID-19 were ¥40,413 million and operating income was ¥641 million, the company is evaluated as one of the successful companies that have expanded their earnings through their portfolio transformation in response to the COVID-19 pandemic. The increase in net sales was due to the recovery of the main sales destination, the food service industry, and the increasing demand for cut vegetables due to labor shortages. Despite the effects of an increase in labor and logistics costs, the temporary suspension of operations at the Nara plant due to a fire, and a rise in the market price of some vegetables due to the hot summer, the increase in quantity, decrease in cost, and improvement in selling price in the second half resulted in increased earnings.
2. Financial forecast for the March 2025 period.
For the year ending March 2025, it is expected that the net sales will increase by 4.1% to ¥55,000 million, and the operating income will decrease by 16.6% to ¥1,050 million compared to the previous year. Net sales are expected to continue to expand, mainly in the food service industry, but the depreciation of the new Osaka FS center that started operations in April 2024 and the cost burden of the start-up are expected to have a negative effect. EBITDA, which shows the effective revenue, is expected to increase by 2.9% to ¥2,200 million.
*The FS (Fresh & Speedy) Center is a base with both logistics functions and manufacturing and processing functions for cut vegetables, etc. It has already been established in Tokyo, Saitama, Nagoya, Nara, Fukuoka, and Sendai (partner base), and its establishment in Osaka has completed the establishment of FS centers in major cities.
3. Medium-Term Management Plan
The company has announced its fifth medium-term management plan for the fiscal year ending March 2027. As a long-term vision (future state in 10 years), it aims to establish itself as a comprehensive processing manufacturer of vegetables, achieve sustainable agriculture, and achieve both personal happiness and corporate prosperity, with a goal of becoming a ¥100 billion ($895 million) company in 10 years, and has launched a new growth strategy. As a business strategy, it will work on three points:1) transformation of various portfolios, 2) restructuring of the fresh produce supply chain, and 3) expansion of investment in research and development departments, and aim to further leap forward as a processed vegetables distribution company while building a cooperative system with business partners ※. As a management numerical target, it aims for net sales of ¥60 billion, operating income of ¥1.8 billion, and ROE (return on equity) of 10.2% for the fiscal year ending March 2027. It is expected to enter a stage of growth based on profits from 2026 after completing large-scale capital investments. As for shareholder returns, it is the company's basic policy to continue to provide stable and continuous dividends. From the fiscal year ending March 2025, the consolidated dividend payout ratio will be increased from about 20% to about 30%, and the planned dividend per share for the fiscal year ending March 2025 will be ¥12.0 per share (with a dividend payout ratio of 30.1%), the same as the previous year. Expectations are rising for an increase in dividends with growth in earnings. The company has also introduced a shareholder benefit scheme, which grants its own products, etc., depending on the number of shares held and the length of time they have been held.
*Following the business partnership agreement in February 2023 with Air Water and Vegetech, Kyomei Holdings also joined the partnership agreement in March 2024, forming a four-company cooperative system. The company has also signed a business partnership agreement with Zennoh (National Federation of Agricultural Cooperative Associations) in 2018.
■Key Points
-In the year ending March 2024, it updated the highest performance with the tailwind of a full-scale recovery in external restaurant demand.
-The year ending March 2025 is expected to have a planned profit decline due to increased costs with the opening of a new factory, but it is expected to secure an increase in profits in terms of EBITDA.
-Nationwide deployment of FS centers is complete, and a new growth strategy has been launched to achieve the long-term sales target of ¥100 billion. For the fiscal year ending March 2027, it aims for an operating income of ¥1.8 billion.
From the consolidated fiscal period of March 2025, the target of the consolidated dividend payout ratio will be raised from about 20% to about 30%.
(Written by FISCO guest analyst, Jo Sato)