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.
Performance for Q2 of FY2024, sales volume decreased by 7.0% compared to the same period of last year, reaching 57.18 billion yen. Operating profit decreased by 6.6% to 878 million yen, while ordinary profit decreased by 9.2% to 872 million yen. Net profit attributable to parent company's shareholders decreased by 18.0% to 536 million yen. The sales revenue was 773 million yen lower than the initial estimate of 6.491 billion yen. Although the cyber security business expanded greatly due to the successful promotion of customer support for EC, flea market sites, and expansion of sales of vulnerability diagnosis and WAF, the decrease in revenue was due to the drop in demand for some fintech-related projects and the inability to compensate for the decrease in revenue from existing projects with orders for new projects. However, new projects are being acquired steadily, though they require more time than expected. Cyber security business increased its revenue, while social support and gaming support and other segments decreased their revenue.
In terms of profit, operating profit was ¥70 million lower than the initial estimate of ¥948 million. The operating profit margin was 15.4%, up 0.1 points from the same period of the previous year. Some low-profit contracts that caused a decline in profits in the previous period improved by the end of the previous period. Center structure enhancement, profitability management, and price revision are contributing factors for improving profitability.
Fiscal indicators at the end of March 2024 show a very high safety level with a self-capital ratio of 85.5% and a current ratio of 718.7%. Cash on hand is ¥9,377 million, and there is sufficient financial flexibility with no interest-bearing debt, making it sound for leading industry reorganization and M&A strategies.
Performance forecast for the full year ending September 2024 predicts declining revenue of ¥11,503 million, down 3.4% from the previous year, operating profits of ¥1,758 million, down 1.2% year-on-year, ordinary profits of ¥1,751 million, down 3.1% year-on-year and net income attributable to parent company's shareholders of ¥1,176 million, down 4.4% year-on-year. The forecast was revised downward, reflecting the results of the first half of the year. The internet-related market, which is the company's business area, is expected to continue to grow, including social web services centered on smartphones such as social media and social games, as well as fintech and IoT.
This is the performance forecast for the full year ending September 2024.
Performance for Q2 of FY2024, sales volume decreased by 7.0% compared to the same period of last year, reaching 57.18 billion yen. Operating profit decreased by 6.6% to 878 million yen, while ordinary profit decreased by 9.2% to 872 million yen. Net profit attributable to parent company's shareholders decreased by 18.0% to 536 million yen. The sales revenue was 773 million yen lower than the initial estimate of 6.491 billion yen. Although the cyber security business expanded greatly due to the successful promotion of customer support for EC, flea market sites, and expansion of sales of vulnerability diagnosis and WAF, the decrease in revenue was due to the drop in demand for some fintech-related projects and the inability to compensate for the decrease in revenue from existing projects with orders for new projects. However, new projects are being acquired steadily, though they require more time than expected. Cyber security business increased its revenue, while social support and gaming support and other segments decreased their revenue.
The policy for FY2024 is to strengthen sales structure, build stronger customer relationships with Change Holdings for enterprise-oriented digital business process outsourcing and enhance sales of new products while expanding existing services. Regarding profits, the company aims to improve labor productivity by strengthening the center system, profitability management and other factors to compensate for the impact of low-profit contracts seen in the previous period. In the social support sector, the company will work to develop customers for local governments and large companies and expand digital BPO business in synergy with Change Holdings. In the gaming support sector, the company will focus on enhancing cross-selling such as customer support due to localization. In the ad process sector, the company will focus on capturing demand due to regulations such as stealth marketing and the Pharmaceutical Affairs Law while the internet advertising market continues to grow. With the increasing demand for corporate cyber-security measures, the company will continue to expand its cyber-security services, such as vulnerability diagnosis, WAF, and consulting services, and enhance its service lineup that allows for one-stop cyber-security service offerings. The company plans to strategically invest in enhancing the strengthening of its education system using Change Holdings' strengths in cultivating digital talent and marketing, as well as securing security personnel toward further growth.
The progress rate of Q2 towards the annual revenue plan (revised) is 49.7% (51.6% for the previous period, and 48.8% for the period before the previous one), which is in line with the annual level. As for operating profit, the progress rate of Q2 is also realistic at 50.0% (52.9% for the previous period, and 52.0% for the period before the previous one), at par with previous years. As the external environment in the BPO and cybersecurity areas is generally favorable, we believe that there is a possibility of additional revenue and profits through new business development and synergies with Change Holdings.
(Written by FISCO Guest Analyst, Hideo Kakuta)