Performance outlook. For the fiscal year ending December 2024, consolidated business revenue is expected to be 1,280 million yen (+12.0% YoY), operating profit is expected to be 740 million yen (-8.2% YoY), pre-tax profit is expected to be 820 million yen (-16.1% YoY), and net income attributable to owners of the parent company is expected to be 640 million yen (-60.8% YoY). The initial performance forecast for J Trust <8508> is extremely conservative. For operating revenue, we plan to achieve the highest ever update due to stable revenue in the Japanese financial industry, an expected increase in interest revenue due to increased loan amounts in banking business in Southeast Asia, and the strengthening of our revenue base through the results of our M&A activities. Regarding operating profit, while it is unclear if there will be an extreme decline in our financial business in South Korea and Mongolia, and banking business in Southeast Asia due to the implementation of the standard interest rate cut, we have made provisions for credit loss reserves in preparation for the worsening business environment, and we expect to recover our performance. However, due to the negative effects such as the decline in negative goodwill arising from the absorption merger of Mirainovate in the real estate business recognized in the fiscal year ending December 2023, we expect a decrease in performance. We plan to achieve an increase in profit in the fiscal year ending December 2024 with operating profit based on actual strengths, excluding negative goodwill arising. Regarding net income attributable to owners of the parent company, we had a deferred tax liability refund due to the absorption merger of Nexus Bank in the fiscal year ending December 2023, but it is expected to result in a significant decline in the fiscal year ending December 2024 due to further increases in corporate income tax expenses.

1. Fiscal year-end March 2025 Performance estimate

For the consolidated performance forecast of RSC Co., Ltd. <4664> for March 2025, it is expected that revenue will increase by 0.1% year-on-year to 810.3 billion yen, operating profit will decrease by 46.5% year-on-year to 152 million yen, ordinary profit will decrease by 49.3% year-on-year to 152 million yen, and net income attributable to shareholders of the parent company will decrease by 67.7% year-on-year to 79 million yen, with expected revenue growth and profit decline. On the product structure side, products with operating income of 10-30 billion yen are expected to be 401/1288/60 million yen, respectively.

On the revenue side, it is assumed that despite the negative impact of the backlash reduction of spot equipment construction (mainly Yuya Shokko) that was a favorable factor in the previous period and the contract expiration of large long-term government agency projects, which was a minus factor of about 1 billion yen, it will secure revenue growth through new large-scale event business and new orders for hotel security, etc.

On the other hand, the reason why profit will decrease is due to the expected human investment of about 100 million yen as a growth investment. There is an aim to achieve growth from the next period onwards, amid a shortage of human resources hindering growth. We see the company's performance forecast as being based on a conservative premise and easily achievable. Rather, as in the previous period, spot equipment construction orders could become a favorable factor. Spot equipment construction orders that could not be read at the beginning of the previous period, such as office replacements and store layout changes, were a favorable factor of about 600 million yen. Originally, the company's performance forecasts tended to be conservative, but with the consolidation of Yuya Shokko, there is a need to carefully monitor the possibility that the spot equipment construction order could become a new factor in the fluctuation of performance. Moreover, although about 100 million yen in human investment is a factor that puts pressure on current profits, it is a reasonable strategy considering the future growth prospects. Especially next year, the Osaka-Kansai Expo and so on are scheduled, so it is necessary to prepare a solid system for expanding demand. In any case, in the industry where the shortage of human resources is a hindrance, in the final year of the medium-term management plan, the March 2026 period, and for sustained growth thereafter, the strengthening of human investment and the extent to which security DX can be realized will be major themes. In addition, the movement of the M&A/alliance strategy, which is also listed in the basic strategy (strengthening management foundation) mentioned later, should also be noted. For security DX, it is expected that a strategy will be developed to add the necessary technology centering on alliances, while for the cleaning business, such as patrol cleaning work, which has come on track, there is ample room for business expansion, and there is a sufficient possibility that M&A will be implemented for securing human resources in the deployment area.

Based on the recovery of the previous period's performance (especially in the fourth quarter) and the current economic situation, we see that the company's performance forecast is easily achievable. Same-store sales (monthly) in March, when the company started, is also on track with a 111.3% increase compared to the same period last year. The rebranding of "3S HOTEL ATSUGI" is also expected to increase sales and profits. However, the somewhat unsatisfactory impression of the top line growth is mainly due to the end of the COVID-19 recovery in addition to having reduced new store openings in recent years. The plan for opening new stores in the 2025 February period is limited to four stores, and it is expected that the company will continue to prioritize the transition to a muscular earnings structure and financial improvement. On the other hand, it should be noted that the increased profitability is a positive point, and going forward, the balance between top-line growth and profits is a point of focus. On the strategic side, we should also pay attention to innovative moves unique to the company, such as the development of new business formats that lead to the creation of brand value and the strengthening of group management power through DX promotion, including collaboration with Google Cloud.

We believe that the company's performance forecast is based on a conservative premise and is easily achievable. Rather, as in the previous period, it is not possible to deny the possibility that spot equipment construction orders, which were a favorable factor, will become a favorable factor. In any case, in the industry where the shortage of human resources is a hindrance, in addition to the strengthening of human investment, the extent to which security DX can be realized and the movement of the M&A/alliance strategy, which is also listed in the basic strategy (strengthening management foundation), should also be noted.

(Written by Fisco Guest Analyst Ikuo Shibata)