Summary: RIZAP Group<2928>The comprehensive enterprise, which is committed to proving that "people can change" as its unique management philosophy, develops a variety of businesses in the three areas of health creation, health care / beauty, lifestyle, and investment. Under the vision of "Global No.1 in the self-investment industry", it has achieved remarkable growth by actively utilizing M&A under the holding company structure and has grown to include 68 group companies, including 5 listed subsidiaries, and 4,606 consolidated employees. Listed on the Sapporo Stock Exchange's Ambitious Market in 2006, it formulated a medium-term management plan in September 2022, but revised it in February 2024 to achieve an operating profit of ¥400 million (fiscal year ending March 2027) by aggressively expanding the new business "chocoZAP". The fiscal 2024 performance was sales revenue of ¥16,629.8 million (+7.6% YoY), operating loss of ¥594 million (compared to a loss of ¥4948 million in the same period of the previous year), pre-tax loss of ¥4524 million (compared to a loss of ¥7,031 million in the same period of the previous year), and net loss attributable to the owners of the parent of ¥4,300 million (compared to a loss of ¥12,673 million in the same period of the previous year). Due to the black ink conversion of the chocoZAP business, it achieved a black ink of ¥417.5 million on an operating profit basis in the fourth quarter alone. As for sales revenue, the RIZAP-related business (including the chocoZAP business) significantly increased its revenue (+¥201 million) by focusing on expanding the convenience gym "chocoZAP". In existing businesses, there was an increase in revenue, including Antiroza Co., Ltd. (+¥419.8 million), while there was a decrease in revenue due to store structure reform in REXT Co., Ltd., etc. (-¥599.8 million) and the impact of selling the Sikata business under the subsidiary BRUNO<3140>at the end of the previous year (-¥511.1 million). As for operating loss, the group as a whole improved due to the transition of the chocoZAP business to the investment recovery period and the success of business portfolio reform such as REXT.

RIZAP Group <2928> is a comprehensive enterprise that operates a diverse range of businesses in the fields of health care, beauty, lifestyle, and investment, with the unique philosophy of "proving that people can change" at its core. With the vision of being the "global No. 1 in self-investment industries", it has achieved significant growth under a holding company structure, actively utilizing M&A to grow exponentially, with 67 group companies including 5 listed subsidiaries and 4,645 consolidated employees. It was listed on the Sapporo Stock Exchange Ambitious Market in 2006. In September 2022, it formulated a medium-term management plan, revised in February 2024, aiming for an operating profit of 40 billion yen (fiscal year ending March 2027), and actively expanding new businesses such as the "chocoZAP" business.

Performance Overview for the 1st quarter of the fiscal year ending March 2025.

In the first quarter of the fiscal year ending March 2025, the performance showed sales revenue of 41,237 million yen (11.2% increase compared to the same period last year), operating loss of 2,894 million yen (loss of 2,992 million yen in the same period last year), pre-tax loss of 3,758 million yen (loss of 3,496 million yen), and quarterly loss attributable to the parent company's owners of 2,853 million yen (loss of 3,325 million yen). Regarding sales revenue, the growth of the convenience gym "chocoZAP" business continues, with significant revenue increase (increase of 4,207 million yen) in RIZAP-related businesses (including chocoZAP business). The number of chocoZAP stores has increased to 1,597 as of August 14, 2024, and consequently the number of memberships reached 1.27 million as of August 15, 2024. Progress is being made with the introduction of new services and enhanced cleaning, leading to an improvement in the withdrawal rate. Also, the chocoZAP Partners business (advertising business) is showing remarkable growth. In existing businesses, there was increased revenue from Antirosa, Shinshin Clock, and MRK Holdings <9980> (an increase of 2,180 million yen), while a decrease in revenue (reduction of 2,491 million yen) was seen due to store restructuring at REXT Holdings. Regarding the operating loss, it is mainly due to strategic investments made in the first half of the year in the chocoZAP business, resulting in losses, but these are mostly one-off and in line with the plan.

2. Financial forecast for the March 2025 period.

The performance outlook for the fiscal year ending March 2025 expects a turnaround to profitability for the full year due to the completion of the early investment phase of the chocoZAP business. Sales revenue is projected to be ¥177.7 billion (a 6.9% increase compared to the previous year), operating profit is projected to be ¥630 million (compared to a loss of ¥594 million in the previous year), pre-tax profit is projected to be ¥310 million (compared to a loss of ¥4.524 billion in the previous year), and net income attributable to the parent company is projected to be ¥200 million (compared to a loss of ¥4.3 billion in the previous year). Regarding sales revenue, it is expected to increase due to continued expansion of new store openings and membership base in the chocoZAP business. For the fiscal year ending March 2025, the focus will be on improving the satisfaction of existing members. Measures such as accelerating the introduction of new services, introducing chocoZAP support, and concierge services will be central. In the first half of the year, investment to improve quality and customer satisfaction will be concentrated, resulting in a slowdown in the growth of operating profit. However, it is anticipated that the company will achieve significant profit growth from the second half of the year to the fiscal year ending March 2026. The chocoZAP business is already profitable on a monthly basis, and the investment in new services and human resources will further strengthen the business model and exceed the profit plan, as we believe.

Growth Strategy and Topics:

On June 7, 2024, the company and SOMPO Holdings <8630> formed a capital and business alliance with the vision of "realizing a society where everyone can feel well-being." SOMPO Holdings is one of the three major general insurance companies and is engaged in core non-life insurance businesses, including life insurance, care services (the largest number of residential facilities in the industry), and medical check-up services. In its new medium-term management plan, the company aims to provide lifelong solutions for extending healthy life expectancy under the theme of "well-being." The company is promoting the chocoZAP development plan with the goal of "social infrastructure for health" and "well-being platform," and this capital and business alliance will greatly accelerate its realization. As part of the capital alliance, new shares were issued through third-party allocation, with SOMPO Holdings investing approximately ¥10 billion in the RIZAP Group and ¥20 billion in RIZAP, for a total investment of approximately ¥30 billion. This has strengthened the company's financial foundation and covers the investment funds for chocoZAP (quantitative expansion, improvement of quality and customer satisfaction). In the short term, it is expected to accelerate the acquisition of new members through mutual referrals with life and non-life insurance policyholders (approximately 25 million people). Furthermore, it is anticipated that new store openings will be accelerated through collaboration with care facilities (over 400 facilities) and agents (approximately 450,000 stores). If a healthcare data platform can be built through data linkage based on customer consent, personalized data utilization can accelerate the expansion into new fields such as advertising business, healthcare and care coordination, and public-private collaboration. In the medium to long term, the company aims to realize Japan's largest healthcare data infrastructure (well-being platform) that connects health, medical, and care, utilizing AI/digital technology to provide optimal services for individuals.

■Key Points

- In the first quarter of the fiscal year ending in March 2025, the chocoZAP business led to an increase in revenue of 11.2% compared to the same period last year. Investments have been made in quality improvement and customer satisfaction, such as introducing new services and strengthening trainers and cleaning.

- In order to accelerate the realization of the "wellbeing platform", a capital business alliance has been formed with SOMPO Holdings.

(Written by FISCO Guest Analyst, Hideo Kakuta)