Performance Trend 1. Overview of performance for FY3/2024 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.

3. Financial Condition and Management Indicators

Regarding the financial situation at the end of the second quarter of the 2024 fiscal year ending in December, total assets increased by 10,909 million yen compared to the previous period to 312,226 million yen. Looking at the main factors of increase and decrease, cash and deposits increased by 4,416 million yen, and inventory assets increased by 2,782 million yen in current assets. Fixed assets increased with tangible fixed assets by 3,168 million yen, investment and other assets by 1,579 million yen, while intangible fixed assets such as goodwill and customer-related assets decreased by 712 million yen.

Total liabilities increased by 5,744 million yen compared to the previous period to 204,469 million yen. Unpaid corporate taxes decreased by 977 million yen, while interest-bearing liabilities increased by 5,477 million yen, bonus reserve by 338 million yen, and asset retirement obligations by 371 million yen. Total net assets increased by the same 5,164 million yen to 107,756 million yen. Profit surplus increased by 3,875 million yen due to the recognition of quarterly net profit attributable to parent company shareholders, and exchange translation adjustment account by 722 million yen, while non-controlling interests increased by 407 million yen.

Looking at the financial indicators, the self-capital ratio indicating safety increased from 26.4% at the end of the previous period to 27.0%, while the net D/E ratio decreased from 0.90 times to 0.87 times, showing an ongoing improvement trend in financial health. Since the fiscal year ending in December 2021, there have been no large investment projects, and the improvement in financial health has been driven by enhancing fund efficiency through the real estate liquidation scheme, leading to a positive trend in free cash flow. Regarding M&A, the acquisition of NSK Logistics Co., Ltd. shares is expected within 2024, and there is potential progress in overseas M&A projects, which could temporarily turn the free cash flow for the December 2024 period negative depending on these developments. SBS Holdings <2384> aims to increase the self-capital ratio to 30% by the end of the 2025 fiscal year.

(Written by FISCO guest analyst, Jo Sato)