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.
1. Performance summary of Q2 FY2024. In Japan during the cumulative period of Q2 FY2024, there has been a moderate recovery in economic activity as tourist demand increased and the employment and income environment improved, but the economic outlook both domestically and internationally remains uncertain due to global financial tightening, rising raw material prices, progress in yen depreciation and consumer price increases. Japanese companies are faced with themes such as DX promotion, innovation, productivity improvement, and customer creation in the midst of population decline, and must re-examine the way they approach marketing amidst rapidly changing market environments. Against the background of these challenges, demand for the marketing support business offered by the company group in the medium to long term is expected to be generated.
MicroAd <9553>'s cumulative consolidated performance for the second quarter of the fiscal year ending September 2024 showed a decrease in sales revenue of 7,086 million yen, a decrease of 1.4% compared to the same period of the previous year, a decrease in operating profit of 41.9% to 411 million yen, a decrease in ordinary profit of 39.6% to 418 million yen, and a decrease in net income attributable to the parent company shareholders of 35.3% to 329 million yen. One of the main services, 'UNIVERSE', was successful in increasing revenue and profit, but the decline in revenue and profit of digital signage due to the renewal of taxi signage contracts had an impact.
The progress rate for the full-year performance estimate was 47.8% for sales revenue, 48.0% for gross profit, 55.5% for operating profit, 56.6% for ordinary profit, and 58.2% for net income attributable to the parent company shareholders, and each income below operating profit showed a trend that exceeded the plan. Although it was expected that the renewal of the taxi signage contract would be a negative factor for the fiscal year ending September 2024, the performance of 'UNIVERSE' covered the decline in digital signage revenue and profit.
(1) Data Product
The sales revenue of the data products for the cumulated second quarter of the fiscal year ending September 2024 was 3,467 million yen, up 3.6% from the previous year's same period, and the gross profit was 1,198 million yen, down 8.6% from the previous year. The sales revenue of the main business, 'UNIVERSE', was strong with a 11.3% increase to 2,975 million yen and a 3.0% increase to 1,087 million yen in gross profit. However, due to the renewal of taxi signage contracts, the digital signage revenue decreased by 26.9% to 493 million yen, and the gross profit decreased by 56.6% to 111 million yen, which pushed down the profit.
Regarding 'UNIVERSE', the key performance indicator, operating account numbers, expanded smoothly and increased revenue and profit. Under an optimized sales system tailored to each customer's attributes, the company focused on developing and providing products that accurately captured customer needs. To make sales activities more efficient and effective, the company held online seminars and conducted marketing activities tailored to each customer's business format. In addition, cooperation with data partners continued to improve the performance of industry-specific products, contributing to the increase in operating account numbers. With a focus on stabilizing performance and strengthening the customer base, the company focused on direct sales to small and medium-sized customers and major customers, which are less affected by economic fluctuations, achieving significant growth in operating account numbers for 'SHIRAREL' for BtoB centered on small and medium-sized customers and 'MACHIAGE' for local government. In addition, sales of EC industry have expanded mainly through major direct sales. Sales by customer attribute for the second quarter alone increased by 46% for major customer direct sales and 6% for small and medium-sized customers compared to the previous year's same period. The progress of various sales strategies and the increase in operating account numbers contributed to the expansion of performance, and the recovery of average customer unit price due to the budget expansion of major customers also contributed to the growth of performance.
Progress with PostCookie has been smooth, and tests of alternative measures have been conducted for 460 accounts in the first half. On the other hand, although efforts were made to launch the new beauty salon service 'OCTAVE' for digital signage, the impact of the taxi signage contract renewal that occurred in the fiscal year ending September 2023 was significant.
(2) Consulting
The sales revenue of consulting was 3,618 million yen, a decrease of 5.9% compared to the same period of the previous year, and the gross profit was 973 million yen, a decrease of 0.5% from the previous year. Consulting for media was strong, with sales revenue increasing by 15.9% to 1,365 million yen and gross profit increasing by 5.4% to 392 million yen. Through 'MicroAd COMPASS', the company expanded top-line revenue by proposing and providing improved advertising services and planning for advertising space for media companies. In addition, the sales of high-margin products proceeded smoothly, contributing to the increase in profit. On the other hand, in overseas consulting, sales revenue was 1,361 million yen, down 21.1% from the previous year, and gross profit was 345 million yen, up 1.2% from the previous year. The decrease in sales was due to a temporary large-scale project in the same period of the previous year, and the sale of products with high gross profit margin increased profits, compared to the same period in the previous year. Currently, inbound demand is expanding rapidly, such as an increase in the number of Chinese visitors to Japan by 496% compared to the same month of the previous year in March 2024. The company is launching various new inbound-related services, and it is expected that vigorous inbound demand will be incorporated into the performance towards the end of the fiscal year.
The proportion of data products, which have a high yield and increasing harvests, in revenue has risen from 32% in September 2021 to 48.9% in the second quarter of September 2024. The company will continue to focus on data products, and we expect profitability to increase.
2. Financial condition and performance indicators.
As of the end of the second quarter of September 2024, the financial situation showed total assets of 80.3 billion yen, an increase of 1.185 billion yen from the previous term. Within this, current assets increased by 550 million yen due to an increase in notes receivable and trade receivables of 586 million yen. Fixed assets increased by 635 million yen due to an increase in investments and other assets of 513 million yen and an increase in tangible fixed assets of 36 million yen.
Total liabilities increased by 857 million yen from the previous quarter to 3,972 million yen. Of this, current liabilities increased by 852 million yen due to an increase in short-term borrowings of 500 million yen and an increase in payment notes and accounts payable of 360 million yen. Fixed liabilities were 86 million yen, with no significant change from the previous quarter. Total net assets increased by 328 million yen to 4,057 million yen, primarily due to an increase in retained earnings of 329 million yen.
The liquidity ratio decreased by 22.1 points from the previous quarter to 143.4%, while the fixed ratio increased by 13.1 points to 71.8%. These are still healthy figures, and we believe there are no problems with the company's ability to pay both short-term and long-term debts. The equity ratio decreased by 2.7 points from the previous quarter to 42.7%. However, we expect the equity ratio to increase in the medium to long term by focusing on data products with high profit margins to add to net income.
(Written by FISCO Guest Analyst Yoichiro Shimizu)