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.

2024 FY Performance Overview 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. Changes in the ratio of revenues - while the revenue composition ratio increased by 0.8 points from the previous year, 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 factors affecting selling, general and administrative expenses were a drop of 600 million yen in energy costs due to subsidies from rising electricity rates and an increase of 1 billion yen in labor costs due to increases in treatment and education expenses for employees. Depreciation expenses also rose by just under 600 million yen due to increased costs of construction materials and opening new stores. The EBITDA (earnings before interest, taxes, depreciation, and amortization) margin rose 0.1 points from the previous year. Lastly, the reason for the increase in the net income of the parent company's shareholders attributable to the current period was due to the elimination of the 500 million yen for executive retirement bonuses paid in the previous period, the reduction of impairment losses by 455 million yen, and the realization of gains on investment securities of 127 million yen in FY3/2024.

The performance of Face Network <3489> in March 2024 fiscal year showed a 6.3% increase in revenue to 2,228.4 million yen compared to the previous year, a 17.0% decrease in operating income to 2,090 million yen, a 22.5% decrease in ordinary income to 1,784 million yen, and a 40.8% decrease in net income attributable to parent company shareholders to 943 million yen.

The company focused on strengthening its business foundation by promoting the planning and development of the new single-structure condominium series "GranDuo" and the luxury rental residence series "THE GRANDUO" with the center in the Jonan 3rd district and promoting efforts for synergies with the newly established subsidiary Iwamoto-gumi. However, due to the negotiation of conditions for the largest property ever in the past that took time, sales during the period were unable to be made, and both revenue and operating profit were below expectations, resulting in a failure to achieve performance plan. However, the property development has been progressing smoothly, and the average sales price has also increased from 0.71 billion yen to 0.99 billion yen. Efforts were made to enhance the property value by incorporating large-scale properties and a new design concept called "Wellbeing".

In addition, to promote diversification of their exit strategy, they sold three properties they developed to Jonan Fund established and supported by Mizuho Trust & Banking Co., Ltd. and Mizuho Real Estate Investment Advisory Co., Ltd., and promoted property sales to private funds. They also acquired all the shares of Iwamoto-gumi, which has a 90-year history since its founding in 1933 and has received high praise for its construction technology, including being nominated by architects, and made it a subsidiary on July 14, 2023. As a result, it became possible to promote joint construction mainly with THE GRANDUO series of high-class rental residences developed by the company. Personnel expenses increased due to an increase in personnel costs in selling expenses and general administrative expenses, and investment securities valuation losses of 432 million yen were recorded as a special loss. This loss is related to the capital alliance with Hash DasH Holdings Co., Ltd., which was made in May 2023.

Though the performance for 2024 fiscal year was downgraded and had decreased profits due to the long negotiation of the largest properties, it has no effect on their medium- to long-term growth trajectory because they are expecting to sell it in 2025 fiscal year. The present procurement and development situation is progressing smoothly, and various efforts to increase the value of properties, such as the enlargement of property and the adoption of the new design concept called "Wellbeing," are also working well. Therefore, it is expected that the growth will continue even more after 2025 fiscal year.

2. Financial situation. When looking at the financial situation of Inaboholdings <7539> as of the end of the second quarter of the fiscal year ending September 2024, the current assets increased by 1,954 million yen compared to the previous period end, reaching 32,121 million yen. In major subjects, cash and deposits decreased by 33 million yen, while the receivables from bills and unfinished construction work and other unearned income increased by 1,946 million yen, and construction costs of incomplete construction increased by 28 million yen. Fixed assets decreased by 700 million yen to 13,134 million yen. The breakdown is that tangible fixed assets decreased by 30 million yen to 6,575 million yen, intangible fixed assets increased by 231 million yen to 449 million yen (including goodwill increased by 223 million yen), and investment and other assets decreased by 901 million yen to 6,109 million yen. As a result of these, the total assets increased by 1,253 million yen to 45,255 million yen.

The total assets at the end of the March 2024 period increased by 6,011 million yen from the previous period to 26,609 million yen. The real estate property under development for sales increased by 4,079 million yen and the real estate property for sales increased by 1,806 million yen due to the large real estate property that is expected to be sold in March 2025 period and the favorable procurement situation. The increase in real estate property under development for sales was due to the purchase of development land, and efficient land procurement was promoted by strengthening sales power and DX. The total liabilities were increased by 5,459 million yen to 19,177 million yen. Due to the purchase of the land, short-term loans payable within one year increased by 3,083 million yen, construction payables increased by 387 million yen, and long-term loans increased by 2,803 million yen, while advances received decreased by 775 million yen. The total equity increased by 552 million yen to 7,431 million yen. As a result, the self-capital ratio was 27.9% (the end of the previous period was 33.4%).

(Author: FISCO Guest Analyst Ryoji Mogi)