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.

Performance trend for the year ending March 2024.

For the fiscal year ending March 2024, the performance of Succeeded Co., Ltd. (9256) had revenues of ¥3,227 million (up 9.8% from the previous year), operating profit of ¥332 million (down 13.2% from the previous year), ordinary profit of ¥332 million (down 16.8% from the previous year), and net income of ¥223 million (down 17.0% from the previous year). In comparison with the initial forecast, sales fell short by ¥212 million, operating profit fell short by ¥112 million, ordinary profit fell short by ¥112 million, and net income fell short by ¥74 million, mainly due to the struggle of face-to-face home tutor services amid overlapping advanced costs.

The Japanese economy has been recovering from the pandemic situation due to the easing of movement restrictions. On the other hand, the future is still uncertain due to unstable international circumstances, exchange rate fluctuations, rising labor and logistics costs, and high inflation. In this situation, the education industry is facing the reality of long working hours for teachers, and there is no stopping the shortage of teachers. To improve the situation, attention is being paid to regional migration of extracurricular activities and the use of external personnel to reduce the burden on teachers. In addition, the need for digital talent is increasing, with the deployment of ICT support staff falling short of the target of "1 person per 4 schools" set in the "5-year plan for environment improvement toward ICT in education" by the Ministry of Education, Culture, Sports, Science and Technology. The designation of "DX High School", which will serve as a base for digital education, has also begun, further increasing the demand.

In the cram school industry, the market is expected to shrink due to the declining birthrate, but educational system reforms such as university entrance examinations are progressing, and the needs of customers are diversifying, with an increasing demand for higher quality educational services. Therefore, securing excellent personnel who can respond quickly to changing needs has become an increasingly important challenge. In the welfare industry, while efforts are being made to alleviate the waiting list problem by promoting the expansion of certified kindergarten facilities and establishing a system where any child can attend, there are concerns about a shortage of nursery teachers and a decline in the quality of nursery care. In addition, the so-called "first grade wall" problem, where parents are forced to change their work style after their child enters elementary school, is becoming increasingly serious, and there is a rapid increase in demand for after-school childcare, making the social role of childcare support providers even more important.

In the education and welfare fields, where Succeeded Co., Ltd. operates, there is a high level of labor shortage in all areas, and the company's education personnel support business, welfare personnel support business, individual instruction classroom business, and online home tutoring service have all grown as expected. However, advanced costs in the face-to-face home tutor service did not bear fruit, and the company's total sales did not reach double digits. On the profit side, the gross margin ratio decreased due to a shift from the high-profit but unstable "personnel introduction service" to the stable revenue base of "personnel dispatch service", in addition to the decline in revenue from the home tutor business. Although all expenses were contained, and sales and administrative expenses were kept slightly higher than the previous year, the company proactively pursued necessary investments such as opening individual instruction classrooms and after-school childcare facilities and human resource investments in each business, resulting in a decrease in operating profit. It seems that the registration cost of educational personnel is on the rise due to the increase in web advertising unit prices and an increase in job vacancies in the declining birthrate situation.

(Author: FISCO guest analyst Nobumitsu Miyata)