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.

And Do Holdings <3457> has succeeded in developing and commercializing industry-first services and businesses that accurately capture customer needs, leveraging Japan's largest franchise chain network in real estate brokerage. By continuing to actively invest in growth-enhancing businesses (franchise business, house leaseback business, financial business, real estate sales business), they aim to further expand revenues.

1. Business Performance Sales revenue decreased by approximately 4.3 billion yen due to the sale of consolidated subsidiaries engaged in mobile businesses during the period, but revenue from the main water business increased by approximately 4.1 billion yen and sales gross profit increased by 3.4% compared to the previous year, despite the pressure of rising prices for raw materials and resources in sales costs. By improving factory operating rates and reducing costs, including various costs related to the creation of the company's own logistics network that contributes to stabilization of logistics costs, selling, general, and administrative expenses (including other expenses and revenues) increased by only 0.2% relative to the previous year. As a result, the company achieved its highest operating profit since the July 2016 corporate merger. The operating margin was 11.7%, the first time it has reached double digits.

For the consolidated performance for the fiscal year ending June 2024, the revenue increased by 36.4% year-on-year to 67,579 million yen, operating profit increased by 13.0% to 3,587 million yen, ordinary profit increased by 2.9% to 3,457 million yen, and net income attributable to parent company shareholders increased by 12.8% to 2,476 million yen. Both revenue and profits reached record highs for the second consecutive period. The main reason for the strong performance was the continued strength of the real estate sales business, one of the growth-enhancing businesses. Due to an expansion in revenue from residential real estate and successful sales of discounted large properties during the pandemic, the revenue of the real estate sales business increased by 73.1% and operating profit increased by 33.9%, significantly boosting the consolidated performance. Additionally, the reverse mortgage guarantee business, another growth-enhancing business, continued to perform well. By expanding partnerships with financial institutions mainly in the Tokyo metropolitan area, the cumulative guarantee balance at the end of June 2024 increased sharply by 58.3% to 20,841 million yen compared to the previous year.

For the consolidated performance for the fiscal year ending June 2025, they anticipate revenue to increase by 3.6% year-on-year to 70,000 million yen, operating profit to increase by 11.5% to 4,000 million yen, ordinary profit to increase by 15.7% to 4,000 million yen, and net income attributable to parent company shareholders to increase by 6.6% to 2,640 million yen. By further expanding performance primarily through growth-enhancing businesses, they aim to achieve the highest performance record for the third consecutive period. Across all businesses except non-core businesses (real estate distribution business, renovation business), they expect increased revenue and profits. Particularly, the real estate sales business is expected to continue driving growth, with revenue projected to increase by 5.4% to 36,300 million yen and operating profit by 19.4% to 2,850 million yen. Regarding the financial business, they anticipate a return to increased revenue and profits by accelerating the accumulation of the reverse mortgage guarantee balance amid the stabilization of real estate collateral lending reduction. With the high-profit reverse mortgage segment expanding, a sharp increase of 128.2% is expected in operating profit.

2. Further Strengthening of the Used Purchase Resale Business

The company especially focuses on the used purchase resale business within the real estate sales business. For the fiscal year ending June 2024, sales of used homes increased by 116.8% year-on-year to 6,488 million yen, with the proportion of used homes in the residential sales revenue reaching approximately 26.0% (an increase of 6.6 points from the previous period). In the future, by strategically investing management resources into the used purchase resale business, they aim to achieve a sales target of 35 billion yen and 110 employees by the fiscal year ending June 2029, as announced during the June 2023 earnings reports. They plan to announce formal numerical targets in the future. Furthermore, they contribute to the realization of a sustainable society through the used purchase resale business. By focusing on the used purchase resale business to enhance long-term corporate value, they aim to accumulate profits and further increase profitability.

3. Medium-Term Management Plan

In March 2022, the company formulated a medium-term management plan with the fiscal year ending in June 2025 as the final year, aiming to enhance corporate value through further growth and development. In addition to the franchise business, sale-leaseback business, and financial business that have been actively invested in, the real estate trading business was positioned as a growth enhancement business. By promoting further expansion of these businesses, deepening the "real estate x finance" services, and accelerating the shift to a high-profit structure, the company has aimed to achieve sales of 51.81 billion yen, operating profit of 4.17 billion yen, ordinary profit of 4 billion yen, ordinary profit margin of 7.7%, and net income attributable to parent company shareholders of 2.64 billion yen in the fiscal year ending in June 2025. It has also set goals such as accumulating a total of 865 franchise stores in the growth enhancement franchise business, monthly pace of 150 purchase contract in the house leaseback business, 100 partnering financial institutions in the financial business (reverse mortgage guarantee business), and inventory assets of 14 billion yen in the real estate trading business.

■Key Points

・In the fiscal year ending in June 2024, the company achieved two consecutive record-breaking performances led by the real estate business.

・In the fiscal year ending in June 2025, the company aims to achieve another record-breaking performance and reach the target values of the medium-term management plan through the expansion of growth enhancement businesses.

・By further expanding the growth enhancement businesses to promote a higher-profit structure, the company aims to achieve sales of 70 billion yen and ordinary profit of 4 billion yen in the fiscal year ending in June 2025.

(Written by FISCO Guest Analyst Yoichiro Shimizu)