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.
3. Performance outlook for the year ending March 2025
For the performance of Ix Knowledge Co., Ltd. (9753) in the fiscal year ending March 2025, it is expected to see solid growth in revenue and operational income, with sales revenue of JPY 22,231 million, a YoY increase of 2.2%, operating income of JPY 1,752 million, up by 5.9%, ordinary income of JPY 1,817 million, up by 4.5%, and net income attributable to parent company shareholders of JPY 1,216 million, down by 4.6%.
Regarding the order-taking environment, the movement of corporate business transformation through digitalization (DX) accelerated by the coronavirus pandemic is expected to continue, and IT investment supporting it is expected to remain robust. Although there is still uncertainty about the future of the economy, such as a volatile world situation and rapid depreciation of the yen leading to inflation, it is considered that the impact on the domestic system integration industry is slight. On the sales side, we aim to expand the order-taking of DX and cloud projects (migration and integration from on-premises to cloud, etc.) along with the expansion of existing cases. We plan to have a composition ratio of 34% for DX project sales. Reinforcement of personnel is key, but we are also strengthening our cooperation with mid-career hires (around 10 per year) and partners, creating a structure that does not miss any opportunities. Regarding education, we will continue to develop PM and acquire new technology skills (including AWS and Azure certification), and in the implementation phase, we will strengthen reskilling (visible skills, re-education, optimal placement, etc.). We will give time for each person to acquire suitable skills considering their career. The reason for the lower-than-expected growth rate of revenue of 2.2% is the preceding investment in human capital for medium to long term.
Operating profit is expected to increase by 5.9% compared to the previous period, with an operating margin of 7.9% (up from 7.6% in the previous period). The gross profit margin is expected to increase by 0.9 points to 21.0%, and the profitability has increased because the number of qualified personnel with high unit prices has increased amidst the increase in DX projects. Although selling, general and administrative expenses are expected to increase by 0.7 points to 13.1%, mainly due to labor costs, the increase in gross profit is expected to exceed this. We intentionally create 'dancing on the spot' as our strategy to restrain the growth speed to a certain degree in the implementation phase. In the short term, we prioritize investments in education, but in the medium term, we believe that we can recover sufficiently through the increase in unit prices of skilled personnel. As KPIs for strategy execution, we would like to focus on the composition ratio of DX project sales revenue (recently 30.4%) and the number of cloud-related qualifications acquired (recently, 588 qualifications).
(Written by FISCO Guest Analyst, Hideo Kakuta)