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.

Segment trends by business:

In the creative field (japan)

The revenue of the creative field (japan), including internal transactions, increased by 1.0% year-on-year to 17,519 million yen, while operating profit decreased by 21.1% to 1,152 million yen. The main factors contributing to the decrease in profit include increased expenses related to new graduate recruitment and pre-investment in original content development, as well as a decrease in projects from some major game publishers. In particular, with regards to new graduate recruitment, the company has been actively recruiting with 102 recruits in 2022, 277 in 2023, and 316 in 2024 for the second consecutive year, which has been a hindrance to profits in recent periods, but is positioned as an upfront investment for medium-term growth at KURIKU & RIVER Co. <4763>.

Based on the sales composition ratio disclosed by the company to estimate the year-on-year growth rate of performance by domain, the video (television, movies) sector saw a 2.3% increase in revenue but a 5.7% decrease in profit. Although there were some discontinued regular programs, the wide network strength led to an increase in revenue due to the progress in developing new projects. On the profit side, the absence of the retirement allowance return income recorded at the subsidiary Shion in the same period last year led to a decrease in profit, but excluding this factor, the profit base is expected to have remained strong. The gaming sector experienced a 3.1% decrease in revenue and an 8.5% decrease in profit, moving sluggishly due to a decrease in projects from some major game publishers and the industry as a whole being affected by an economic slowdown. However, there are gradual signs of recovery in new outsourced development projects, and to expand into overseas markets, a business base has been established in Canada, with full-scale sales activities also commencing. The web sector (including print media) saw a 12.9% increase in revenue but a 25.7% decrease in profit. Although revenue increased due to the expansion of entrusted web development and promotion projects for corporations and government agencies, the decrease in profit was influenced by the absence of profitable large projects.

E-books, YouTube, etc. saw a 26.3% increase in revenue but a 25.8% decrease in profit. E-books saw growth due to extended sales to electronic bookstores like Amazon, but a decrease in profit was caused by poor sales of original electronic comics through "Manga LABO". Regarding YouTube-related activities, despite a decrease in advertising revenue due to a fall in unit prices, there was an increase in entrusted operations for corporate YouTube channels, as well as a rise in contracted projects such as tie-ups and promotions with YouTube creators, and event planning. The total number of channels (including YouTube creator channels within the network) expanded from around 500 channels to about 530 channels compared to the previous period.

The revenue of new agencies and other fields (construction, AI/DX, life sciences, CXO, athletes, performing arts, XR, etc.) generally remained at the same level, with a slight increase in operating losses due to prior investments. In the construction sector, there was an increase in outsourced projects related to tourist facility design. In the AI/DX sector, there was a rise in DX support projects for large enterprises, along with increased inquiries through the newly opened free AI/DX consultation window "DX no Mori" targeting small and medium-sized enterprises. The company has partnered with 49 companies to develop AI/DX tools and provides support for the introduction of these tools tailored to the needs of the inquiring companies.

In the creative field (south korea)

In the creative field (south korea), revenue decreased by 7.7% year-on-year to 1577 million yen, with an operating loss of 11 million yen (compared to a loss of 14 million yen in the same period last year). The main revenue of the talent dispatch (agency) business for television stations decreased by 7.9% to 1484 million yen due to a decrease in demand for dispatches against the backdrop of the poor performance of television stations. Additionally, although the distribution of original digital comics (Webtoon) in the content business expanded, secondary use such as merchandise sales and video production slumped, leading to a 5.0% decrease to 91 million yen. In terms of profit, after the management restructuring in May 2024, efforts to reduce costs led to a reduction in losses, turning slightly profitable with 0.9 million yen in the second quarter.

(3) Medical Field

In the medical field, the wholly-owned subsidiary Medical Principle Co., Ltd. (October closing, 100% ownership) focuses on the physician introduction business under the "Private Physician Office" brand, offering services such as joint briefing sessions "Reganavi Fair" and "Reganavi Fair Online" for medical students and trainees, a clinical training information site "Reganavi", and a service for young physicians called "Private Physician Office Connect". Furthermore, in June 2021, as a subsidiary, the company established Community Medical Innovation Co., Ltd. (100% ownership) to develop effective regional medical peripheral services including nursing care services and new clinic management support services.

Revenue decreased by 2.4% year-on-year to 3267 million yen, and operating profit decreased by 13.3% to 1019 million yen, resulting in the first revenue and profit decline in four periods since the impact of the pandemic in the fiscal year ending February 2021. The main revenue from the physician introduction business decreased by 5.6% to 2322 million yen, mainly due to a decrease in the number of referrals caused by structural reforms such as the review of sales structures initiated in the previous period. However, these issues were largely resolved after August 2024, and the company anticipates a double-digit increase in referral numbers in the upcoming demand period of spring 2025.

On the other hand, revenue from the production businesses such as "Reganavi Fair" and "Reganavi Fair Online" showed a solid increase of 5.7% to 626 million yen due to an increase in the number of events, while other areas (such as insurance sales agency business for physicians) also steadily increased by 8.5% to 319 million yen.

(4) Accounting and Legal Fields

In the accounting field, through the wholly-owned subsidiary JazzNet Communications Co., Ltd. (100.0% ownership), and in the legal field, through C&R Legal Agency Co., Ltd. (90.0% ownership), the company mainly conducts agency businesses. Revenue decreased by 2.0% year-on-year to 1247 million yen, and operating profit decreased by 33.5% to 61 million yen.

The revenue for the accounting field, estimated from the breakdown of revenue composition disclosed by the company, remained flat year-on-year at 1085 million yen, with an operating profit of 65.1% decrease to 26 million yen. Despite efforts to enhance brand awareness through self-hosted specialized seminars and joint seminars with clients, as well as pursuing new initiatives such as "Business Succession and M&A Support Services", earnings declined due to the prolonged conclusion of referral cases. Conversely, in the legal field, there was a slight decrease in revenue but an increase in profit due to a review of costs. With approximately 0.022 million registered lawyers and a steady increase in customers to 2,600 offices/companies, the company aims for revenue growth through service expansion initiatives such as strengthening the branding and sales support of Business Lawyers through "Business Lawyer's Marketing Service".

(Written by FISCO guest analyst, Jo Sato)