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.
Terrace Sky <3915> is a cloud integrator that develops and supports cloud systems, with a cumulative number of installations focused on Salesforce alone exceeding 7,000 for the company and more than 18,000 on a consolidated basis. The company also handles self-developed products such as development support tools for cloud systems and groupware service 'mitoco.' In addition, it is expanding into subsidiaries that provide support for AWS, GCP, AI solutions and quantum computing. Its consolidated subsidiary, BeeX <4270>, is listed on the Tokyo Stock Exchange Growth Market, and its equity-method affiliate, KitAlive <5039>, is listed on the Sapporo Ambitious Market.
1. Overview of performance for the fiscal year ending February 2024
In the consolidated results for the fiscal year ending February 2024, the revenue increased by 23.9% YoY to 19,137 million yen, and the operating profit increased by 2.1% YoY to 522 million yen. The revenue growth rate was strong due to the lively DX investment from companies, good demand for cloud integration focusing on Salesforce and human resource dispatch, resulting in a 25.2% increase in solution business. Furthermore, product business, mainly centered around the groupware service 'mitoco,' also steadily grew by 10.5%, achieving its highest growth rate ever. On the profit side, profit margin declined slightly due to the losses of subsidiaries, personnel expenses (including recruitment costs), promotional expenses, and the increase of development expenses for 'mitoco ERP', which caused temporary drop of operational rate due to loss of expects, but it absorbed the effect of revenue increase and turned to profit growth for the first time in three periods. The group employees at the end of the term increased by 256 from the previous year to 1,248, of which 125 were employed by Terrace Sky Technologies, which specializes in staffing specialists in Salesforce and AWS.
Performance Outlook for Fiscal Year Ending February 2025.
For the consolidated results for the fiscal year ending February 2025, the revenue is expected to increase by 25.5% YoY to 24,024 million yen, and the operating profit to increase by 73.3% YoY to 905 million yen. The demand for cloud integration for companies mainly based on Salesforce remains strong, and the revenue growth rate depends on the increase of human resources. The group intends to increase its group workforce by approximately 30% (392 people) from the previous year-end, and if recruitment goes smoothly, the possibility of achieving the plan is perceived as high by the company. The factors contributing to the increase in profit margin include the effects of revenue increase and the reduction of promotional expenses that have been actively invested in previous periods, and the elimination of unprofitable projects. The product business, which has been incurring losses due to upfront investments, has continued to develop 'mitoco ERP' and is expected to contribute to profits only after the fiscal year ending February 2026. 'mitoco ERP' is a cloud-based system that can operate on the Salesforce platform, and we are promoting the development of accounting and personnel payroll systems (mitoco Accounting and personnel payroll), on top of business systems such as sales inventory management (Fujitsu GLOVIA OM ※) and attendance and expense settlement (mitoco Work). We are pursuing improved convenience through assist features using generated AI technology, and we expect it to contribute to revenue in the medium to long term by expanding sales mainly to medium-sized companies that have introduced Salesforce.
* A cloud-based sales/purchase/inventory/production management system of Fujitsu <6702>, where we have been conducting introduction development/support since 2011, and entered into an exclusive sales contract in 2022.
3. Capital business tie-up with NTT Data
On April 12, 2024, the company announced a capital business tie-up with NTT Data <9613> for the purpose of accelerating the growth of its Salesforce business, integrating the resources of both companies to promote joint business expansion in the Asia-Pacific market, and acquiring and nurturing digital talent utilizing their mutual brand power. Initially, the companies plan to jointly collaborate with a target of regional financial institutions that have not introduced Salesforce with NTT Data's clients, and Terrace Sky aims to achieve over 17 billion yen in sales generated over the next three years through the effects of the business partnership (not included in the target for the fiscal year ending February 2025). There is a possibility of introduction of peripheral services such as 'mitoco' when introducing Salesforce, and it is expected that revenue growth will accelerate further if the collaboration proceeds smoothly. The company has issued 670,000 new share subscription rights to NTT Data as a result of the capital tie-up, and if exercised, has an ownership stake of 20.1% combined with the number of shares already acquired through market purchases, making it an equity-method affiliate of NTT Data. The exercise price of the new share subscription rights is 1,400 yen, and the exercise criteria is that it can be exercised only if consolidated operating profit exceeds 2.5 billion yen in any fiscal years until the fiscal year ending February 2027.
■Key Points
In fiscal year 2024 ending February, the company consecutively updated the highest sales record and turned to a profit increase for operating income and ordinary income for the first time in three periods.
In fiscal year 2025 ending February, the company is expected to see a double-digit increase in sales and profit, and to update the highest record in the past four periods for operating income and ordinary income.
The capital business alliance with NTT Data is expected to further accelerate the growth of Salesforce business.
(Written by FISCO guest analyst, Jo Sato)