Financial summary

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.

RSC's consolidated performance for the fiscal year ending March 2024 was a significant increase in both revenue and profit, with revenue increasing 34.3% YoY to 809.7 million yen, operating profit increasing 48.5% YoY to 284 million yen, ordinary profit increasing 51.2% YoY to 300 million yen, and net income attributable to the parent company's shareholders increasing 91.4% YoY to 245 million yen, surpassing expectations for the second time. In terms of product structure, operating income for products within the 10-30 billion yen range was 401/1288/60 million yen, respectively.

Revenue increased significantly due to the successful integration of Tomowork, contributing to the growth of the group business. On a consolidated basis, the decline in revenue of the personnel services business caused by the end of guide services for the COVID-19 vaccine was mitigated by strong growth in facility construction, including renovations and equipment replacement, and by spot facility construction that exceeded expectations, due mainly to Tomowork.

On the profit side, RSC achieved significant operating income growth through an increase in revenue and absorption of fixed costs. Particularly, the increase in operating income for facility construction, which has a relatively high profit margin, improved the operating profit margin to 3.5% (3.2% in the previous fiscal year).

There were no major changes in the financial condition, with total assets decreasing slightly by 1.2% YoY to 4,201 million yen. However, equity increased by 8.9% YoY to 2,057 million yen due to the accumulation of retained earnings, improving the equity ratio to 49.0% (44.7% in the previous fiscal year).

The performance and activity results for each segment are as follows:

(1) Building Comprehensive Management Services Business

Revenue increased significantly by 43.6% YoY to 7,179 million yen, and segment profit increased by 20.9% YoY to 672 million yen. Growth in facility construction, mainly from Tomowork, significantly contributed to revenue increase. On a standalone basis, there was steady growth due to a strong increase in orders for facility construction that included enthusiastic renovation and equipment replacement needs, along with new orders for guarding services starting at Toho Hibiya Promenade and a steady increase in maintenance and cleaning work (Saitama, Nagoya, Osaka areas). The company was also able to receive numerous construction orders for shutter repairs due to store renovations at Sunshine City, for elevator replacement work at large home electronics retail stores, and for equipment repairs at school meal centers. Despite increases in raw material and personnel costs, absorption of costs through increased pricing and effective cost controls resulted in significant profit growth.

*Regular cleaning performed at fixed intervals each month or week. With the limited resources available to the company driven by labor shortages as demand for services expands, taking advantage of economies of scale while broadly expanding home cleaning services makes this an area of focus for the company.

(2) Personnel Services Business

Revenue decreased by 10.6% YoY to 918 million yen, and segment profit decreased by 10.0% YoY to 36 million yen due to the end of guide services for COVID-19 vaccines, despite winning new temporary contracts for event promotions, amusement facility guidance services, and facility parking lot management. Although cost controls were improved via review of registration staffing selection and training methods, in-house event creation, and thorough cost management, decreased revenue led to profit decline.

2. Summary of the 2024 financial year

Looking back on the fiscal year ending March 2024, it is highly commendable that we were able to achieve revenue and profit growth that exceeded our plan by strongly linking the consolidation of Yuwa Shokou's performance. However, it is important to be aware that the reason for the upper end of the range was due to spot construction equipment growth. As mentioned later in the financial estimates, we would like to continue to follow up on how to determine that part. In addition, in terms of business activities, we signed a business alliance with Azira, which develops and sells AI security systems, and started a demonstration experiment at Sunshine City, which led to the order for security services utilizing the AI security system at Sunshine City Prince Hotel, which can be regarded as a significant advancement toward the progress of security DX. Furthermore, the starting of security operations at Toho Hibiya Promenade (Marunouchi/Yurakucho area) and the expansion of patrol cleaning operations can be evaluated as being consistent with the company's strategy to streamline operations through the establishment of area management systems.

(Written by Fisco Guest Analyst Ikuo Shibata)