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.

Full Tech <6546> has been founded for over 60 years, engaging in the sales, design, installation, and maintenance services of automatic car door opening/closing devices under the 'automatic car door related business,' as well as manufacturing stainless steel hardware, producing and selling architectural metal fittings under the 'hardware related business,' and expanding the business of planning, developing, and manufacturing control systems such as bicycle parking systems, smoke control systems, and security boxes as "other businesses." Based in Sapporo, it consists of two consolidated subsidiaries and a group. It has established 38 sales and service branches/offices in East Japan and Kyushu, striving to deliver satisfaction to all customers through its technical expertise and human resources. It continues to propose automatic car doors with added value to aim for business expansion and growth.

1. Overview of Performance for the 2nd Quarter of the Fiscal Year Ending December 2024

For the cumulative consolidated performance in the second quarter of the fiscal year ending December 2024, the sales revenue was 6,922 million yen (+7.5% year-on-year), operating profit was 381 million yen (+97.3% year-on-year), ordinary profit was 416 million yen (+91.5% year-on-year), and the interim net profit attributable to parent company shareholders was 275 million yen (+98.3% year-on-year), achieving both increased revenue and significant profit growth. The increase in sales revenue was driven by an increase in new orders for large-scale properties as well as strong demand for renewal orders in the hardware related business※, which saw double-digit growth. On the profit and loss side, the gross profit margin increased by 2.8 points from the same period last year to 33.1%, and the gross profit increased by 17.3% year-on-year, thanks to the thorough selection of orders, cost management, and the effect of price transfers in response to rising purchase prices. Although sales expenses increased by 8.5% due to growth investments such as labor costs, research and development expenses for new product development, and M&A-related costs, they were absorbed by the increase in gross profit, resulting in significant profit growth at all levels of profit. Additionally, the segment profit of the hardware related business, which recorded a loss of 6 million yen in the same period last year, increased by 162 million yen turning into a profit.

※ In recent years, there has been an increase in 'hardware renovation,' so from the fiscal year ending December 2024, 'hardware renovation,' which was previously included in the 'automatic car door related business' segment, has been reclassified into the 'hardware related business' segment. For comparison purposes, the segment information for the fiscal year ending December 2023 has been modified according to the revised classification method.

Performance outlook for the fiscal year ending December 2024.

The consolidated performance for the fiscal year ending December 2024 is expected to achieve increased revenue and profit, with sales revenue of 14,000 million yen (+9.5% year-on-year), operating profit of 520 million yen (+16.0% year-on-year), ordinary profit of 550 million yen (+11.1% year-on-year), and net income attributable to parent company shareholders of 335 million yen (+40.0% year-on-year). The progress rate for the first half of the fiscal year against the full-year plan is steadily advancing, with sales revenue at 49.4% and operating profit at 73.3%, potentially achieving the plan. Sales revenue is expected to see double-digit growth in both the automatic car door related business renewal and the hardware related business order status, increasing by 11.7% and 13.4% year-on-year, respectively. In renewal and maintenance, the plan is to create connections with end-users of automatic doors through strengthened sales efforts and to stimulate demand. In addition, due to the consolidation of Wise Corporation's subsidiaries, other businesses are also expected to achieve a 40.5% increase in revenue. On the profit and loss side, while continuing to implement appropriate price transfers in response to rising purchase prices and focusing on selection orders and cost management, efforts will be made to improve the profit margins of new properties and achieve profit increases at various stages through business digitalization, such as expanding profitable renewal sales, and extending maintenance inspection service contracts for 24/7 remote monitoring service 'Fi-R (Remote).'

Regarding the medium- to long-term growth strategy, the company aims to achieve business expansion and enterprise value improvement based on a growth strategy centered on data utilization, under the slogan 'From an Ad Tech Company to a Comprehensive Data Company'. Specifically, they aim to achieve business expansion and enterprise values by three basic strategies: 'Expanding Data Products,' 'Response to PostCookie,' and 'Data Utilization for New Fields'. Regarding 'Expanding Data Products,' they focus on the 'Data Products,' which are self-developed products that can expect increased harvesting and high profit. They aim to increase the operating account of 'UNIVERSE' by strengthening the sales system and continuously introducing new products. They also aim to build a high-quality human resource pool that can continuously produce high-value-added products by investing in human resources. Regarding 'Response to PostCookie,' considering that support for 3rd party cookies will be discontinued in the Chrome browser provided by Google, the company aims to gain a first-mover advantage by quickly responding to it. Furthermore, they are actively exploring new fields by utilizing vast amounts of data and analysis technology that they have, not just staying in the frame of the advertising service. New services related to inbound and cross-border EC are also expanding successfully. Most recently, they established a joint venture to handle inbound and outbound support to Chinese active senior citizens as a new business in April 2024.

The company is outlining a growth strategy with three main axes of horizontal, vertical, and an additional growth axis. The growth strategy in the horizontal direction focuses on expanding market areas. It aims to increase market share in the Kanto region centered around Tokyo and expand operations to areas with no presence of sales and maintenance service bases such as the Chubu and Western Japan regions. The growth strategy in the vertical direction involves expanding business areas. It aims to develop the stock market and strengthen product development capabilities. In the stock market such as the renewal and maintenance market, the company is focusing on strengthening sales force to end users, promoting total renewal, and building an efficient maintenance system at a low cost through improved contract rates with "Fi-R." The additional growth axis involves expanding into new business areas. It aims to propose automatic car doors with added value and develop new products beyond automatic car doors. While collaborating with other companies in the past to provide new products with new features such as "eMediaDoors" (a combination of image analysis AI and automatic doors) and "Social Eye" (a non-contact barrier-free toilet door switch with information function), the company is advancing the internalization of such product development. The first step of this strategy is the consolidation of WISE Corporation as a subsidiary in January 2024. WISE Corporation specializes in planning, developing, and manufacturing control systems such as storage security systems, remote operation and monitoring, enabling the in-house development of security and control functions for the company's automatic doors and related products. This will also allow for the sale of delivery boxes and office lockers to end users such as building owners and building management companies, along with proposals for enhanced security, creating significant synergy effects for the future.

■Key Points

- For the second quarter of the fiscal year ending December 2024, there was a significant increase in revenue and profit, with the building components related business turning profitable.

- The fiscal year ending December 2024 is expected to see increased revenue and profit driven by the renewal of automatic door-related business and the traction of building components related business.

- Aiming to expand business areas through M&A executions towards internalization of product development.

(Author: FISCO Guest Analyst Shuji Matsumoto)