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.

For the fiscal year ending March 2024, Yamatane Holdings (9305) achieved significant revenue growth with sales of 6,451.2 million yen (+26.3% YoY) and net income attributable to parent company shareholders of 2,442 million yen (+13.6% YoY), even though operating income decreased slightly. Operating income declined slightly primarily due to increased costs related to mergers and acquisitions. On the other hand, significant cost reductions were achieved in areas such as depreciation expenses related to the newly established Inzai rice milling center and growth strategy for digital promotion and M&A alliance. The year was a period of steady foundation building for sustainable growth going forward.

The main reason for the significant increase in revenue was the contribution of Shokkai, a 100% consolidated subsidiary since October 2023 due to a large-scale M&A. On the other hand, in terms of profit, there were factors that pushed the profit upwards, such as the consolidated effect of Shokkai, reductions in depreciation expenses related to the Inzai Rice Milling Center established in February 2022, etc. However, personnel expenses increased due to the creation of the Digital Promotion Division responsible for DX and IT infrastructure, and the Business Strategy Division responsible for M&A and alliances in April 2023. Other factors that resulted in loss of profit include outsourcing costs for logistics businesses due to the '2024 problem' and costs related to the M&A of Shokkai, including goodwill accounting. As for net income attributable to parent company shareholders, there were fixed asset depreciation losses and other items, but the sale of idle land in Saitama prefecture in the former Iwatsuki rice mill site by utilization of the Inzai rice milling center's operation recorded fixed asset sales and gains from the sale of investment securities, resulting in a final profit increase. The operating profit margin decreased 1.6% YoY to 5.4%. It is necessary to watch carefully for further decrease in profit margin due to increasing costs in the logistics business, but our company believes that there is little need to have excessive negative views on the operating loss due primarily to costs related to M&A in FY 2024. Rather, it seems that the year was evaluated as a period in which we could steadily build a foundation for sustainable growth going forward.

2. Summary of segment performance

In the logistics business, sales increased by 0.2% YoY to 24,401 million yen, and segment profit decreased by 7.7% YoY to 2,302 million yen. In domestic logistics, there was a trend of reduced storage inventory as social and economic activity normalized after the spread of Covid-19, resulting in lower warehouse rental income than in the previous year. On the other hand, in international business, there was a slight increase in revenue because the number of international transactions, mainly overseas relocation, exceeded the previous year. On the profit side, costs related to responding to the '2024 problem', such as rental and outsourcing expenses, increased, resulting in decreased profits.

In the food business, sales increased 62.9% YoY to 34,143 million yen, and segment profit increased 949.6% YoY to 783 million yen. The results of Shokkai, which joined the group in the second half of the year, contributed to the increase in revenue. In addition, there was tailwind from economic recovery from Covid-19, and an increase in rice sales for the catering industry and food service industry. Rice sales increased by 14.5% YoY to 71 thousand metric tons for both mass merchandisers and food service, while the sale of unmilled rice decreased by 11.4% YoY to 21 thousand metric tons due to a decrease in market circulation caused by rising rice prices, resulting in total sales of 92 thousand metric tons (+7.2% YoY). Profit increased due to the consolidated effect of Shokkai, the increase in revenue from the development in rice business, and cost reductions in power consumption and depreciation expenses due to the utilization of solar power generation system at the Inzai rice milling center.

In the information business, the revenue was 173.5 million yen, a 2.4% increase from the previous year, and the segment profit was 109 million yen, a 6.5% increase from the previous year. There was a steady performance due to the acquisition of new development and operations contracts for general-purpose machine platforms, volume expansion for existing cases, and system development and consignment projects for customer invoice correspondence, as well as the acquisition of other sales contracts. On the other hand, in the shelf inventory rental business handling "Stock Tay-kun", we continued to implement the conversion strategy from conventional handheld types to mobile app services. However, sales decreased due to factors such as reduced store numbers by customers. As for the entire group's IT infrastructure support-related revenue, there was no special change, and the entire segment secured increased sales and profits.

In the real estate business, revenue was 4.232 billion yen, a 3.7% increase from the previous year, and segment profit was 2.058 billion yen, a 1.0% increase from the previous year. For the rental office building market, it was anticipated that vacancy rates would rise significantly due to the infiltration of telecommuting and an increase in supply of new buildings. However, demand for office buildings remained solid, and the upward trend in vacancy rates subsided in the second half of the year, resulting in a flat performance for the full year. Although there were some tenants leaving the rental properties we operate, we maintained a high occupancy rate by actively promoting tenant recruitment. Additionally, we secured increased revenue due to the acquisition of new rental properties. Furthermore, the real estate acquisition tax for the office building "KABUTO ONE" developed jointly with Heiwa Real Estate <8803> and others decreased, contributing to the slight increase in segment profit.

3. Financial position

As of the end of the fiscal year ending March 2024, total assets were 153.687 billion yen, an increase of 27.499 billion yen from the end of the previous year. Current assets increased by 2.790 billion yen to 22.472 billion yen, with the main factors being the receipt of promissory notes, accounts receivable, and contract assets totaling 2.446 billion yen, and an increase of 1.718 billion yen in inventory assets due to the consolidation of Shokai's subsidiary in the food business. In the fixed assets, tangible fixed assets increased by 7.205 billion yen due to the acquisition of new rental properties in the real estate business. As for intangible fixed assets, it increased by 9.000 billion yen due to the posting of goodwill associated with M & A by Shokai, and investment and other assets also increased by 8.516 billion yen due to an increase in the fair value of investment securities. Total liabilities increased by 19.371 billion yen to 97.680 billion yen. The main factors were an increase of 15.745 billion yen in long-term borrowings due to financing for M & A and investment in rental real estate, and an increase of 5.061 billion yen in corporate bonds due to the issuance of green bonds. Net assets increased by 8.127 billion yen to 56.006 billion yen, due to the posting of net income attributable to parent company shareholders and an increase in the difference in valuation of securities. The current ratio, a financial safety indicator, increased by 28.6 points to 105.2%, but the equity ratio decreased by 1.7 points to 33.7%.

Total liabilities increased by 19,371 million yen to 97,680 million yen. The main reasons for this were that long-term borrowings increased by 15,745 million yen due to financing for M&A and investment in rental real estate, and corporate bonds increased by 5,061 million yen due to the issuance of green bonds. Net assets increased by 8,127 million yen to 56,006 million yen due to the posting of net income attributable to parent company shareholders and an increase in the difference in valuation of securities. The current ratio, which is a financial safety indicator, increased by 28.6 points to 105.2%, but the equity ratio decreased by 1.7 points to 33.7%.

(Writer: FISCO analyst Tomoichi Murase)