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.

Aoba-BBT <2464> is an EdTech company that provides education to learners and professionals of all ages, from infants to executives, to develop "mindset, knowledge, skills, and practical abilities" to succeed globally as corporate and organizational leaders, primarily utilizing advanced technologies such as the Internet and AI to offer an optimal learning environment.

2024 FY Performance Overview 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. Changes in the ratio of revenues - while the revenue composition ratio increased by 0.8 points from the previous year, 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 factors affecting selling, general and administrative expenses were a drop of 600 million yen in energy costs due to subsidies from rising electricity rates and an increase of 1 billion yen in labor costs due to increases in treatment and education expenses for employees. Depreciation expenses also rose by just under 600 million yen due to increased costs of construction materials and opening new stores. The EBITDA (earnings before interest, taxes, depreciation, and amortization) margin rose 0.1 points from the previous year. Lastly, the reason for the increase in the net income of the parent company's shareholders attributable to the current period was due to the elimination of the 500 million yen for executive retirement bonuses paid in the previous period, the reduction of impairment losses by 455 million yen, and the realization of gains on investment securities of 127 million yen in FY3/2024.

For the consolidated performance for the fiscal year ending in March 2024, sales increased by 3.0% to 74,740 million yen compared to the previous year, and operating profit increased by 16.4% to 3.83 billion yen, achieving both an increase in revenue and profit. Sales revenue increased by 3.2% in the corporate training business with recurring education business, and the platform services business increased by 4.7% due to the expansion of facilities and an increase in the number of existing students, resulting in 15 consecutive periods of revenue growth. On the profit side, although the platform services business experienced a temporary decline, this was offset by the profit increase in the recurring education business, leading to a profit increase for the first time in 2 periods.

2. Forecast for the fiscal year ending March 2025

For the consolidated performance for the fiscal year ending in March 2025, sales increased by 11.2% to 83,130 million yen compared to the previous year, and operating profit increased by 30.8% to 5.01 billion yen, marking double-digit growth in revenue and profit. It is expected that operating profit will reach a record high for the third consecutive period. In the recurring education business, amid an increase in companies focusing on human capital management, the business expects strong growth, particularly in the corporate training business centered around next-generation leadership development programs in which the company specializes. Furthermore, the platform services business had a smooth start with approximately 1,600 students as of April 2024, an increase of 100 students from the same period the previous year. The effects of raising tuition fees (average 6-10%) since the fiscal year 2024 also contributed to the increase in revenue and profit.

3. Growth Strategy of Key Areas

The company focuses on three key areas: corporate training businesses, Intensive Courses under the University business, and International School business, as medium- to long-term growth drivers. In the corporate training business, the company aims to expand new customers and deepen transactions with existing customers, focusing on next-generation leadership development programs. Additionally, the company is promoting wider distribution through partner strategies as a new revenue source. By selling the company's video educational content through Learning Management System (LMS) operating companies, the company has already signed contracts with nearly 10 companies to build a distribution system. Although contributions to revenue will take time, as additional costs are minimal, expansion is expected to contribute to profit growth and improved profitability. Moreover, in the University business, while demand for the main courses has stalled, the company is nurturing Intensive Courses as a new pillar. This program has been certified for governmental subsidies by the Ministry of Health, Labour and Welfare, with an increase in subsidy ratio from 40% to 50% scheduled for October 2024, expected to further expand demand. In the International School business, the company focuses on domestic deployment of the online program "Global Leadership Diploma (GLD)" for high school students established during the spread of the new coronavirus infection (hereinafter referred to as the pandemic), as well as platform expansion for partner schools. Additionally, the company has been certified as a trial implementation school for the International Baccalaureate Diploma Program (IBDP) in an entirely online format overseas, set to commence services starting from the school year 2024. The company aims to reach 100 students in the online DP program by 2027. The number of International Baccalaureate certified schools worldwide continues to grow annually, and there is a certain level of potential demand for online enrollment, indicating significant long-term growth potential.

※1 AJIS has independently developed a higher education program that allows students to obtain a diploma qualification either in-person or online, starting in 2021.

※2 IBDP: Targeted at 16-19 year olds, this program involves completing a prescribed curriculum over a period of 2 years, passing a final exam to achieve the required grades and obtaining internationally recognized university entrance qualifications (International Baccalaureate qualification). There are 5 schools worldwide certified for the online IBDP exams. The eligibility criteria include having academic English proficiency at high school level, residing within a 3-hour time difference from Japan Standard Time, and completing the IB Middle Years Programme (MYP) or an equivalent high school preparatory curriculum.

■Key Points

・For the fiscal year ending March 2024, there is a 15-period consecutive increase in revenue, setting a record high in sales, while operating profit and ordinary profit also turn to double-digit growth.

・For the fiscal year ending March 2025, aiming to achieve a record high profit update for the third time in a row in operating profit and ordinary profit by incorporating corporate training needs.

・Intensive courses in the corporate training business and University business, as well as the platform services business, are the growth drivers for significant advancement.

(Written by FISCO guest analyst, Jo Sato)