■ Growth strategy 1. Business environment Considering the business environment surrounding the "AIAI Three Education Zones" developed by the AIAI group <6557>, AIAI NURSERY in the field of licensed nursery schools is expected to experience a large shift in nursery policies from 2024, as the organization responsible for child and family services was established in April 2023 with the aim of improving the quality of early childhood education and care, and as a response to the "unprecedented decline in the number of children" in Japan. However, despite the encouragement from the government, the saturated market feeling cannot be ignored due to the declining birth rate and the significant reduction in the number of newly opened nursery schools, taking into account factors such as the resolution of the waiting list problem in the industry. We also believe that the elimination of small-scale operating companies, considering the shortage of childcare workers, is a possibility to consider. On the other hand, the number of children with developmental disabilities is increasing even in the declining birth rate, and the demand for facilities for disabled children (child development support, medical child development support, after-school day services, visit support for nursery facilities, etc.) is rapidly increasing. Considering this situation, we believe that, not only is the business environment for AIAI PLUS and AIAI VISIT positive, the business environment for the "AIAI Three Education Zones", which provides integrated child care, therapeutic care, and education, is also favorable. 2. AIAI Group Mid-term Management Plan 2023-2025 The company formulated the AIAI Group Mid-term Management Plan 2023-2025 in May 2023, which incorporated a reconsideration of the position of the tech field, the construction of new business models such as nursery school visit support (AIAI VISIT) and early childhood education programs. The target figures are listed as sales of 12-13 billion yen and operating profit of 300-500 million yen in the final fiscal year ending March 2026, and cumulative investment of 680 million yen over three years. In the first term of the plan, ending in March 2024, sales and operating profit exceeded the final year target value, and the total number of children, the total number of visits to nursery facilities, and the total number of internal license holders all exceeded the plan. The growth strategy is progressing smoothly, and there is no major change in the basic strategy of maximizing group synergy through the "AIAI Three Education Zones". Regarding AIAI NURSERY, considering the situation in which the speed of opening licensed nursery schools is slowing down throughout the industry due to the resolution of the waiting list problem, the company will slow down the speed of opening new facilities with the maturity of the market in mind. However, in addition to continuing to expand into regions with high needs and high investment efficiency, the company will promote efforts to reorganize the industry. On the other hand, due to the growing demand for facilities for disabled children, AIAI PLUS will be developed as a pillar of growth after AIAI NURSERY, and the expansion of AIAI VISIT will be fully implemented in the Tokyo metropolitan area as a new business model. Regarding the expansion of AIAI VISIT, securing specialized visiting support personnel is an important point, so we will strengthen our approach from a variety of channels and promote the excavation of potential qualified persons. 7. Corporate-related initiatives In terms of financial and capital aspects, the company will continue to improve its self-capital and aim to support the stable growth of its business from a financial perspective. In terms of human capital, we will promote the creation of a work environment in which all employees at the facilities and offices can work comfortably and foster human resources. In AIAI NURSERY and AIAI PLUS, we will increase the options for work styles based on the preferences and stages of life of the employees working in the facilities, and establish a workplace environment where work and family can be balanced.

2. The first midterm management plan (fiscal year 2024 to fiscal year 2026).

Riken NPR <6209> formulated the first mid-term management plan (fiscal year 2024 to fiscal year 2026) in February 2024. The midterm management policy includes: 1. Creating synergy through management integration, 2. Reforming business portfolio, 3. Enhancing sustainability management and developing growth foundation. As numerical targets, it aims for sales of 180 billion yen, operating income margin of 9% or higher, and ROE of 8% or higher in its final year ending March 2027. As a target value of "2030Vision", the numerical target for the fiscal year ending March 2031 is set at sales of 200 billion yen, operating income margin of 12% or higher, and ROE of 10% or higher.

As a midterm quantitative target, it aims to achieve ROE that exceeds the cost of shareholders' capital by promoting the reform of business portfolio, synergy creation, and balance sheet optimization, including business integration (scheduled to be fully integrated in April 2026). Sales synergy includes expanding market share in existing businesses through utilizing each other's brand strength and sales network, enriching product lineups, providing various solutions such as establishing a technical proposal-based sales system and responding to hydrogen/alternative fuel, and creating and commercializing new products. Cost synergy is planned to achieve an annual effect of 3 billion yen in the fiscal year ending March 2027 (1.4 billion yen for business divisions and 1.6 billion yen for management divisions by reducing procurement costs through joint purchasing, consolidating logistics bases, optimizing production at domestic and overseas bases, integrating corporate functions and IT infrastructure, and reducing other sales and administrative expenses). In addition, it promotes the reduction of the cost of shareholders' capital through the steady implementation of midterm strategies and the enhancement of IR activities. As for cash allocation, it plans to allocate the cash of 63 billion yen (60 billion yen in operating cash flow and 3 billion yen from the sale of policy-held shares and other assets) generated in three years to appropriate growth and shareholder returns. Specifically, it plans to allocate 20 billion yen for shareholder returns as cash out, 40 billion yen for growth investments such as equipment investment and M&A, and to increase research and development by 3 billion yen from the conventional level.

(Authored by FISCO guest analyst Masanobu Mizuta)