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.

SOLIZE<5871> has consistently promoted the digitization of manufacturing since its founding, and is a company that went public on the Tokyo Stock Exchange (TSE) Standard Market in February 2024. The business areas are the design business that provides engineering services and consulting services, and the manufacturing business that provides manufacturing services. A major strength is having top customers in the automotive industry and manufacturing sector. In the medium to long term, growth acceleration is aimed at by combining traditional and new domains.

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

In the consolidated financial results for the second quarter (interim period) of the fiscal year ending December 2024, sales revenue increased by 13.6% year-on-year to 10,747 million yen, operating profit decreased by the same 50.1% to 88 million yen, ordinary profit decreased by the same 67.8% to 60 million yen, and net income attributable to the parent company shareholders decreased by the same 81.9% to 18 million yen, resulting in an increase in revenue but a decline in profit. Sales revenue reached a record high due to strong demand for design and development from major automakers. On the other hand, a significant decrease in profit was attributed to the increase in labor and recruitment expenses due to organizational expansion, as well as strengthening sales operations. However, profits below sales revenue and operating profit exceeded the revised forecast announced in May 2024. This was mainly due to higher than planned sales revenue from domestic engineering services and the Indian subsidiary, cost containment in manufacturing expenses for outsourced projects such as domestic design and development, and the delay in some administrative costs to the latter half of the year.

※ As the company did not prepare interim consolidated financial statements for the fiscal year ending December 2023, the figures for the interim period of December 2023 and the year-on-year comparison for the interim period of December 2024 are reference values.

Performance outlook for the fiscal year ending December 2024.

In the consolidated financial results for the fiscal year ending December 2024, sales revenue increased by 13.2% to 22,739 million yen compared to the previous year, operating profit decreased by the same 60.5% to 350 million yen, ordinary profit decreased by the same 62.7% to 327 million yen, and net income attributable to the parent company shareholders decreased by the same 68.5% to 182 million yen, indicating an expectation of increased revenue but decreased profits. The expected profits for each stage were downwardly revised by 64-73% from the revised forecast announced in May 2024. This was primarily due to additional spending on sales and administrative systems to strengthen staff recruitment in the latter half, incorporating additional costs into selling and administrative expenses. However, the additional expenses are necessary investments for the strengthening of the foundation for medium to long-term growth. On the other hand, the per-share year-end dividend is scheduled to increase by 3.0 yen to 47.0 yen as initially forecasted. Adopting the shareholder capital dividend ratio as the dividend standard, the aim is to implement dividends stably based on approximately 2.5% of the consolidated net assets at the end of the previous period. Regardless of business performance expectations, continuing to increase dividends according to the increase in consolidated net assets will likely be appreciated by shareholders as it signifies that forward-looking investments could lead to returns.

3. Future growth strategy

In the medium to long term, we aim to accelerate revenue expansion and increase profits by combining conventional and new fields. In the conventional field, the number of engineers in the design business, which accounts for the majority of revenue and gross profit, is directly linked to performance. Therefore, we aim to increase recruitment of new graduates and experienced professionals by developing new application channels. Additionally, in the new fields such as embedded systems and third-party verification support in the software business, we plan to promote further growth through division. We also aim to further expand digital risk business in the cybersecurity sector and AI services. The plan is to accelerate growth by combining these conventional and new fields. Furthermore, to enhance the group's corporate value, we have established a group investment strategy department with the aim of actively and timely investing profits gained in existing businesses and promoting M&A activities. In response to business growth, we will open three new offices and aim to enhance technical capabilities through operational efficiency and technology consolidation by integrating factories. We look forward to monitoring the progress of our future growth strategy.

※ As a new company, we will establish STELAQ Co., Ltd. and plan to commence operations on January 1, 2025.

■Key Points

- Since its founding, we have consistently promoted the digitalization of manufacturing.

- The second quarter (interim period) of the fiscal year ending December 2024 is expected to exceed expectations with increased revenue despite a decline. Revenue is at an all-time high.

- The forecast for the fiscal year ending December 2024 includes downward revisions for strengthening the foundation of medium to long-term growth. Based on the shareholder capital dividend ratio, an increase in year-end dividends is planned.

- In the medium to long term, we plan to accelerate growth by combining conventional and new fields. Therefore, we plan to increase the number of engineers, divide the software business, and promote M&A activities.

(Written by FISCO guest analyst Nozomi Kokushige).