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.

3. Performance outlook for the year ending March 2025

Succeed <9256> expects revenue of 34,010 million yen (+5.4% YoY), operating profit of 356 million yen (+7.3% YoY), ordinary profit of 356 million yen (+7.2% YoY), and net income of 230 million yen (+3.1% YoY) for the fiscal year ending March 2025. Although preceding expenses such as investment in human resources will continue to occur, Succeed expects an increase in revenue and profit mainly from the recovery of its private tutor business. In terms of business segment performance outlook, it expects sales of 1,017 million yen (-3.7% YoY) and segment profit of 138 million yen (-2.5% YoY) in the education talent support business, sales of 485 million yen (+12.0% YoY) and segment profit of 94 million yen (+7.1% YoY) in the social welfare talent support business, sales of 1,360 million yen (+10.4% YoY) and segment profit of 281 million yen (-8.0% YoY) in the individual instruction classroom business, and sales of 538 million yen (+6.5% YoY) and segment profit of 59 million yen (+19.7% YoY) in the private tutor business. Although the education talent support business is somewhat bearish due to temporary factors, the remaining three businesses, including the private tutor business, are expected to expand performance smoothly.

In terms of performance outlook by business segment, the sales outlook is expected to be 1,017 million yen (-3.7% YoY) and segment profit of 138 million yen (-2.5% YoY) in the education talent support business, sales of 485 million yen (+12.0% YoY) and segment profit of 94 million yen (+7.1% YoY) in the social welfare talent support business, sales of 1,360 million yen (+10.4% YoY) and segment profit of 281 million yen (-8.0% YoY) in the individual instruction classroom business, and sales of 538 million yen (+6.5% YoY) and segment profit of 59 million yen (+19.7% YoY) in the private tutor business. Although the education talent support business is somewhat bearish due to temporary factors, the remaining three businesses, including the private tutor business, are expected to expand performance smoothly.

(1) Education and human resources support business.

The demand for personnel in education, including schools, remains high. External utilization, such as extracurricular activity instructors, ALT, programming instructors, and other personnel for teachers' workstyle reform, has been steadily increasing, and the external utilization of new occupations, such as education work support personnel and school assistance personnel, has also begun. It is expected that external utilization will continue to increase in the future, but the company, in particular for extracurricular activity instructors, has started the 'Extracurricular Activity Coaching Certification' to further provide more secure and safe services and aims to expand the number of participants attending. In addition, the demand for Japanese language teachers has doubled in response to the demand for Japanese language education for foreign workers and their families, and the company has also strengthened its system to respond to this. Although it is already operating a Japanese language school for children of foreign workers in collaboration with Adachi Ward in Tokyo, it is expected to be an important business to supply personnel to various private Japanese language schools. Demand for ICT support personnel for DX is expected to continue, but due to the loss of a large bidding case related to dispatched ICT support personnel, a decrease in revenue and profit is expected. However, to complement the loss, the company is enhancing its bidding activities during the period and aiming for an expansion of orders through new projects.

(2) Welfare human resources support business.

As the promotion of expansion of certified children's facilities and the establishment of a system in which any child can attend contribute to the expansion of child-rearing support measures, it is expected that the demand for nursery teachers will increase. In addition, it is expected that the demand for school support staff will increase toward the resolution of the 'first-grade wall' problem. Furthermore, the company is also expanding its human resources service for the dispatch of school support staff to local governments and for out-of-school day services. In the social welfare talent support business, it expects relatively strong growth in sales.

(3) Individual instruction classroom business.

Expanding into areas with population growth, and enhancing SEO measures for web pages to strengthen the acquisition of new customers. It plans to expand stores not only in Kanagawa Prefecture, where it has established itself as a location-based store, but also in other areas of the Tokyo metropolitan area, such as Chiba Prefecture, where new stores have been opened. It plans to open 3 to 5 stores, including the second Chiba Prefecture store in Kashiwa, which opened in April 2024. As a result, sales are expected to increase, but the cost of establishing new school buildings and increasing operating costs are expected to reduce profit margins. Regarding the issue of making high school education free, the discussion is increasing, especially in Tokyo, which is ahead of the curve. Succeed plans to incorporate the education funding surplus that will occur through making high school education free if there is a chance to do so.

(4) Home tutor business.

By continuing to improve its internal system to respond to diversified needs such as face-to-face advertisement and promotion and needs such as AO entrance examinations, returnee children, and international schools that prioritize efficiency, it expects to recover its overall business performance. In addition to steadily increasing its online-type offerings, it will also re-challenge external commercial area expansion beyond the Tokyo metropolitan, Kansai, and Chukyo areas for face-to-face type offerings and aim to increase the number of enrolled students if its internal system is put on track.

(Author: FISCO guest analyst Nobumitsu Miyata)