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.

Riso Education <4714> is an education service company that has established a unique high-value-added business model combining "complete individual instruction" and "entrance exam guidance," expanding its business domain. It has subsidiaries such as Shin gakukai, which provides guidance for prestigious elementary schools and kindergartens, Meimonkai, which dispatches home tutors, School TOMAS, which offers in-school individual instruction, and Plus One Education, which operates tour experiences and gymnastics lessons, providing a variety of educational services from preschoolers to adults.

1. Overview of performance for the cumulative second quarter of the fiscal year ending February 2025

For the cumulative consolidated results for the second quarter of the fiscal year ending February 2025 (March-August 2024), revenue increased by 4.1% year-on-year to 16,587 million yen, operating profit grew by 39.9% to 1,458 million yen, ordinary profit rose by 37.7% to 1,456 million yen, and the net income attributable to the parent company's shareholders increased by 10.2% to 893 million yen. Revenue was driven by the increase in students, resulting in increased sales in the cram school business and in-school individual guidance business. Profitability absorbed the increase in personnel costs through the effects of increased sales and a strategic review of expenses, achieving the highest ever for the cumulative second quarter. Although the company has not announced a plan, it is believed that results have surpassed expectations, particularly in the cram school and in-school individual guidance businesses.

2. Performance outlook for the fiscal year ending February 2025

For the consolidated results of the fiscal year ending February 2025, revenue is expected to increase by 5.4% year-on-year to 33,960 million yen, operating profit is projected to rise by 1.6% to 2,670 million yen, ordinary profit is forecasted to increase by 0.5% to 2,670 million yen, and the net income attributable to the parent company's shareholders is estimated to grow by 2.9% to 1,710 million yen, maintaining the initial plan. While the situation regarding winter courses is to be confirmed, it is anticipated that operating profits may reach a new record high if things progress smoothly. Regarding the "Shin gakukai," which has been facing challenges due to intensified competition for student acquisition, in addition to maintaining and improving service quality, there are plans to announce acceptance results starting from the 2025 entrance exams (conducted in autumn 2024) to facilitate the acquisition of new students.

3. Progress Status of Mid-term Management Plan

The medium-term management plan, which started in the fiscal year ending February 2025 and spans three years, sets business performance targets of 38,260 million yen in revenue and 3,360 million yen in operating profit for the final fiscal year ending February 2027. Amid ongoing declining birth rates and increasing competition in the cram school industry, the plan aims for steady growth through the continued provision of high-quality services as a means of differentiation. Growth drivers will be the cram school business and in-school individual guidance business. As of the end of August 2024, the number of schools adopting the in-school individual guidance business is expected to reach 88 schools, and it is predicted to continue expanding steadily as a service that meets the needs of improving students' academic abilities and reducing teachers' workload. The preschool education business is also expected to return to a growth trajectory with the development of the "Kodomo de Part," a collaborative project with Hulic <3003> and Konami Sports, aiming to open two facilities in spring 2025, with plans to expand to 20 facilities in the metropolitan area by 2029. By providing group services such as "TOMAS," "Shin gakai's Club Nursery and After School," and "Shin gakukai" within the same facility, the company aims to maximize customer lifetime value and enhance profitability, targeting further business growth. Furthermore, regarding shareholder returns, the policy is to implement dividends with a payout ratio of over 50%, with a planned dividend of 10.0 yen per share (payout ratio of 97.3%) for the fiscal year ending February 2025.

■Key Points

The learning center business and in-school individual guidance business are driving growth, and in the second quarter cumulative performance for the period ending February 2025, significant profit increase has been achieved.

The financial estimates for the period ending February 2025 exceed the company's plans, and reaching record profits is within range.

By expanding new businesses through the growth of existing operations and cross-industry collaboration, a revenue growth target of high single digits annually is aimed for.

(Written by FISCO guest analyst, Jo Sato)