■Performance Trends of CSS Holdings＜2304＞

2. Trends by business segment

(1) Steward business

Net sales were 4,200 million yen (up 35.9% from the same period last year), operating profit was 321 million yen (up 133.2% from the same period), and operating profit margin was 7.7% (up 3.2 points from the same period), which led to strong overall performance. Demand for domestic tourists and inbound tourism remained at a high level following the 2023/9 fiscal year, and hotel guest rooms and restaurants continued to operate at a high level. Many ultra-luxury and lodging-specific hotels were opened, mainly by foreign investors, and inquiries for outsourcing to the company were also strong, and the number of new contracts in the first half was 7. The importance of maintaining stable delivery quality and work environment safety in response to the rapid rise in occupancy rates and the opening of new business establishments is increasing, and the company is strengthening responses such as close on-site inspections, information sharing, and escalation (seeking judgment/support from superiors and experts for issues and projects). Thirty-five new graduate employees joined the company on 2024/4/1, and they are scheduled to be assigned not only to the Tokyo metropolitan area but also to the Kansai/Tokai/Kyushu area.

Looking at changes in the number of clients composition ratio by sales scale, the ratio of 12 million yen or less for the 2023/9 fiscal year and 2024/9 fiscal year was lower compared to before the COVID-19 pandemic of the same business, and the ratio of hotels larger than that is higher. It shows that there is a shortage of manpower in large-scale hotels in response to the rapid recovery in hotel demand.

Furthermore, at the beginning of the second quarter, the company's contractors were also affected by the Reiwa 6 Noto Peninsula Earthquake. The impact on overall business results is minor, but information is closely exchanged with business partners in order to restore employee employment.

(2) Food service business

Net sales were 1,877 million yen (up 24.4% from the same period last year), operating profit was 54 million yen (up 6.2% from the same period), and operating profit margin was 2.9% (down 0.5 points from the same period). Demand for domestic customer tourism and inbound tourism has maintained a high level since the previous fiscal year, and business performance has expanded drastically, centering on contract services for breakfast restaurants, due to the trend of further expansion. Outsourcing inquiries to the company have also been steadily increasing, and the number of new entrustments in the first half was 8. In order to respond to soaring food prices, cost management is being watched more closely than before, and price transfer is being promoted. Seventeen new graduates joined the company on 2024/4/1 and are scheduled to be assigned to the Tokyo metropolitan area/Kansai/Tokai/Chugoku areas. Above all, in the Tokyo metropolitan area, we are continuously working to diversify the value provided to customers, with an emphasis on strengthening the life care area.

Looking at the ratio of the number of business partners by service type, contracts (entrustment of employee cafeterias) accounted for 70% or more in 2018 before the COVID-19 pandemic, but restaurants increased to half of the total in 2024 after COVID-19. In recent years, there has been an increase in the number of hotels that specialize in lodging, and there seems to be a need for differentiation with breakfast on the hotel side.

(3) Space production business

Net sales were 3,062 million yen (up 7.9% from the same period last year), operating profit was 263 million yen (up 94.9% from the same period), and operating profit margin was 8.6% (up 3.8 points from the same period). Opportunities have been steadily increasing as the COVID-19 pandemic has subsided, and the company's update frequency of collaboration with construction companies, large-scale business negotiations such as watching exhibitions and demonstrations, manufacturer meetings, workshops, etc. have been realized as specific business negotiations and projects. Also, the execution environment was changed internally due to the renewal of the office environment and personnel affairs within the group. Profit contributions from past projects were taken into account, and management and internal discussions that focused on securing final profits rather than the top line progressed, and profitability improved significantly. However, in the same business, there are many customers with March financial results, and since earnings peak in the 2nd quarter, sales and profit for the second half are low.

At Toyo Media Links, demand for equipment renewal related to IVT (surveillance cameras), centered on surveillance cameras, is strong at both financial institutions and corporate facilities. Communication with construction companies has been strengthened by expanding cooperation with external companies for new space production solutions, such as greens and lighting. Professional sound equipment handling in sound specialty equipment is increasing in line with the revitalization of the box office. There is an increasing number of cases where foreign companies construct global standard telecommunications equipment designated as overseas brand products handled exclusively by the company. At Mood Media Japan, in addition to evaluating construction quality in the hotel/tourism/leisure industry, business negotiations and construction from inquiries for opportunities such as referrals, seminars, and study sessions are increasing as the industry is booming.

3. Financial Status and Management Indicators

As for the financial situation at the end of the second quarter of the fiscal year ending 2024/9, total assets were 6,459 million yen, an increase of 758 million yen from the end of the previous fiscal year. The main reason for the increase or decrease was an increase in current assets of 763 million yen. This is due to an increase of 691 million yen in notes receivable, accounts receivable, and contract assets. Also, there was a decrease of 5 million yen in fixed assets. While investment securities increased by 30 million yen, this was due to a decrease of 31 million yen in deferred tax assets and a decrease of 7 million yen in others.

Total liabilities increased 466 million yen from the end of the previous fiscal year to 3,820 million yen. The main reason for the increase or decrease was an increase of 456 million yen in current liabilities. This is due to an increase of 236 million yen in notes payable and accounts payable, an increase of 200 million yen in short-term loans, an increase of 74 million yen in unpaid accounts, etc. There was an increase of 9 million yen in fixed debt. This is due to an increase of 11 million yen in liabilities related to retirement benefits, etc. Total net assets increased 292 million yen from the end of the previous fiscal year to 2,638 million yen. The main factors are due to the fact that retained earnings increased due to the recording of quarterly net income of 323 million yen attributable to parent company shareholders, while it decreased due to dividends of 51 million yen from surplus.

As a result of the above, total loans were 950 million yen, an increase of 200 million yen from the end of the previous fiscal year. There are no long-term loans, and the group is able to operate the business with short-term loans. The capital adequacy ratio, which is an indicator of safety, is 40.8%, which is higher than the average of 33.7% of all industries listed on the Prime Standard Growth Market for the 2024/3 fiscal year. Also, it is well above 6.2% of the service industry average to which the company belongs. The DE ratio is also 0.38 times, interest-bearing debt is well below equity, and financial soundness can be assessed as extremely high. In terms of profitability indicators, ROA for the fiscal year ending 2023/9 is 5.8% and ROE is 10.2%, which exceeds 4.5% and 9.5% of the average of all industries listed on the prime standard growth market for the 2024/3 fiscal year, and 0.7% and 6.7% of the service industry average, and it can be evaluated that profitability is also high.

Cash and cash equivalents for the second quarter of the fiscal year ending 2024/9 increased 37 million yen from the end of the previous fiscal year to 815 million yen. As for cash flow from operating activities, quarterly net profit before tax adjustments was 520 million yen, and funds used were 74 million yen (acquisition of 99 million yen in the same period last year) due to an increase of 691 million yen in sales receivables, an increase of 236 million yen in purchase debt, a decrease of 51 million yen in bonus provisions, and a decrease of 82 million yen in unpaid consumption tax, etc. Cash flow from investment activities was 27 million yen (use of 15 million yen in the same period last year) due to expenses such as 23 million yen due to the acquisition of tangible fixed assets. Cash flow from financial activities was 139 million yen (use of 103 million yen in the same period last year) due to a net increase in short-term loans of 200 million yen, dividend payments of 51 million yen, etc.

From the above, free cash flow is an expenditure of 102 million yen, which shows that there are few funds that can be freely used in the profits generated by the company.

(Written by FISCO Visiting Analyst Shigeki Kuni)