Performance trends of Accel Co., Ltd. (6730)

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 consolidated results for the fiscal year ending March 2024, sales increased significantly by 21.4% to JPY 17,570 million, operating income increased 50.3% to JPY 2,426 million, ordinary income increased 35.1% to JPY 2,449 million, and net income attributable to parent company shareholders increased 30.9% to JPY 1,771 million, marking the third consecutive year of double-digit growth in revenue and profit, significantly exceeding the initial plan. Sales hit a record high for the first time in 11 years, and operating income recovered to the JPY 2 billion range for the first time in 10 years. The sales volume of gaming devices (pachinko and pachislot machines) estimated by the company increased from 1.58 million units in the previous year to 1.61 million units, due to the success of the Smart Pachislot, and the sales volume of G-LSI, the main source of revenue, increased by 25% from about 0.51 million units in the previous year to about 0.64 million units, and the average unit price also increased by more than 10% due to changes in the sales mix. Furthermore, the fact that sales of gaming machines (1.5 million units) that were conservatively estimated for the initial plan exceeded expectations was another factor that boosted revenue and profit.

Due to changes in the sales mix, the sales cost ratio decreased from 68.6% in the previous year to 68.1%, and gross profit increased by 23.1% to JPY 5,597 million. Selling, general and administrative expenses increased by JPY 240 million to JPY 3,171 million. Research and development expenses remained slightly increased at JPY 1,579 million, up JPY 27 million from the previous year, while other sales and administrative expenses increased by JPY 213 million to JPY 1,592 million. The main reasons for the increase were the aggressive advertising and publicity costs incurred through television commercials to improve recognition of the AI business in the fourth quarter and the increase in personnel expenses due to the payment of performance-linked bonuses. In addition, non-operating income and expenses decreased by JPY 169 million from the previous year, mainly due to the disappearance of the subsidy income of JPY 114 million recorded in the previous year.

"AI chip and next-generation computing technology development/research project (1) Innovative AI edge computing technology development", which was selected by the National Research and Development Corporation New Energy and Industrial Technology Development Organization (NEDO), and the "Research and development of system-on-chip and software platforms for fully automated driving" project, jointly developed by the University of Tokyo, Saitama University, and Stem Inc. since 2018, ended in March 2023.

By FY2014, sales for the fiscal year were JPY 11,035 million, operating income was JPY 2,067 million, and gaming machine sales were estimated by the company to be 3.6 million units, with G-LSI sales of 1.42 million units. Despite the fact that the market size and sales volume of G-LSI had declined to less than half the level over the past 10 years, the factors behind the increase in sales and operating income were that they had captured other semiconductor demand, such as memory modules, for gaming machines, and successfully expanded sales per unit of gaming machines. Looking at the sales trend of semiconductors for gaming machines, G-LSI decreased to slightly more than 60% compared to 10 years ago, but other semiconductors grew sixfold and became the driving force behind the highest sales ever. Even if the shrinking of the gaming machine market continues in the future, the company aims to gain stable profits in the gaming machine market business by capturing new semiconductor demand, etc.

(Written by FISCO guest analyst, Jo Sato)