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.

Heiki Shipping <9362> is an independent marine transportation company. Based in Kobe, the company provides both domestic and international marine shipping, warehousing, and logistics services, with Kobe Port, Himeji Port, and Osaka Port as bases. Its strength lies in the seamless marine and land transportation of steel produced by steelmakers. It was founded in December 1942 and celebrated its 80th anniversary in December 2022. In April of the same year, it moved to the standard market of the Tokyo Stock Exchange.

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.

Performance for the fiscal year ending March 2024 was a sales of 1,463.6 million yen, a 20.3% decrease from the previous year, operating profit of 51.9 million yen, a 7.2% decrease from the previous year, ordinary profit of 67.8 million yen, a 10.9% increase from the previous year, and net income of 51.2 million yen, a 16.8% increase from the previous year. The reclassification of items previously accounted for as sales into advances for expenses due to a review of transaction form in the shipping business and a slump in spot demand for construction machinery in the previous fiscal year had an impact. On the other hand, the company completed the liquidation of K.S.LINES S.A, which operated the shipping route to the Russian Far East for construction machinery transportation, in March 2024 due to management judgment that the route could not be resumed in the medium to long term, which contributed to an increase in non-operating income and special income. Furthermore, since the liquidation of K.S.LINES S.A resulted in the cessation of subsidiaries, the company has changed to non-consolidated accounting from the fiscal year ending March 2024.

2. Financial forecast for the March 2025 period.

For the fiscal year ending March 2025, it expects sales of 1,400 million yen, a 4.3% decrease from the previous year, operating profit of 56 million yen, a 7.7% increase from the previous year, ordinary profit of 60 million yen, an 11.6% decrease from the previous year, and net income of 42 million yen, an 18.0% decrease from the previous year. It expects that the external environment will become an uncertain business environment, as geopolitical tensions, including the Middle East situation, interest rates and exchange rate trends, and the outcome of the U.S. presidential election, and increases in the operating and maintenance costs of domestic shipping, will all have an impact. As for sales, it expects a decrease due to the influence of a review of transaction form in the shipping business throughout the year. However, it will continue to work toward securing appropriate profits through price negotiation in each business while promoting profitability improvement in order to focus on accumulating profits.

3. The company's strengths

We believe that the company's solid business portfolio and flexible all-around sales will lead to solid growth. The company provides comprehensive logistics services in four businesses: domestic shipping, international shipping, port operations, and warehouse operations, and has a balanced business portfolio. By handling these four businesses in parallel, the company has achieved risk diversification as a whole. In addition, being an independent marine transportation company is also a feature of the company. In the marine transportation industry, there are many shipping companies affiliated with corporate shippers, which tend to have inflexible transaction relationships with shippers. The fact that it is not affiliated with any group enables the company to conduct sales activities flexibly and in all directions. In terms of earning opportunities, it can invest management resources all at once, and in case of detecting danger, it can reconsider or execute early retreat. Thus, the company's greatest strength is its flexible business operations that can generate earnings.

■Key Points

・Sales and operating profits declined in FY2024 due to a slump in spot demand and a review of transaction forms in the shipping business.

・The liquidation of a subsidiary resulted in an increase in ordinary profit and net income.

・For FY2025, although a decrease in sales is expected, it will focus on securing appropriate profits through price negotiations in each business while promoting profitability improvement, and expects an increase in operating profit.

・With a balanced business portfolio and all-around sales, we expect steady growth for the company.

(Written by FISCO Guest Analyst Yoichiro Shimizu)