■Meiho Holdings＜7369＞ Business Overview

3. Trends by segment

The main situation of sales, operating profit, and operating margin by segment in the past 4 periods (fiscal year ending 2021/6 to the fiscal year ending 2024/6) is as follows. Furthermore, construction-related service businesses and construction businesses dealing with public works have seasonal characteristics where profits are biased towards the 3rd quarter, which is the end of the fiscal year, and there is a possibility that earnings from construction businesses will fluctuate depending on the completion of large-scale construction.

Sales are on an upward trend, with each segment contributing to the consolidation of companies newly incorporated into the group. For the fiscal year ending 2022/6, North Giken Co., Ltd. was a construction-related service business, and Arisaka Construction Co., Ltd. joined the group in the construction business, and Alto Co., Ltd. took over the day-care business from Sunlife Co., Ltd. in the nursing care business. In the 2023/6 fiscal year, Aki Construction Consultants Co., Ltd. was a construction-related service business, and Mikawa Construction Co., Ltd. joined the group in the construction business, and Staff Advance Co., Ltd. took over the temporary staffing business from M&M Co., Ltd. in the human resources-related service business. In the 2024/6 fiscal year, Fuji Civil Engineering Design is a construction-related service business, Imada Kensetsu and Hermit in the construction business, and Resona Gate is a group in the human resources-related service business.

As for operating income, until the 2023/6 fiscal year, it was on an upward trend by absorbing increases in labor costs and operating expenses associated with new consolidation, increases in goodwill amortization amounts, etc., but in the 2024/6 fiscal year, in addition to the increase in related expenses associated with large-scale M&A, profit declined due to transient factors such as delays in construction related service businesses and misalignment in order acceptance periods in the construction business Imada Kensetsu.

There is a possibility that the composition ratio will fluctuate due to new M&A. The sales composition ratio for the 2024/6 fiscal year was 23.5%, up 5.6 points from the previous fiscal year due to new consolidation etc. of Resona Gate, etc., and while the construction business rose 9.2 points to 30.8% due to Imada Kensetsu's new consolidation, etc., the construction-related service business fell 12.9 points to 38.0%, and the nursing care business fell 1.9 points to 7.7%.

There is a possibility that operating profit margins will fluctuate due to the profitability of individual projects and the effects of new consolidations. The operating profit margin for the fiscal year ended 2024/6 recorded losses due to transient factors such as the construction related service business being postponed, down 4.0 points from the previous fiscal year, 5.1%, the human resources-related service business falling 2.6 points, and transient factors such as delays in order acceptance in the construction business, and the nursing care business rose 1.5 points to 16.1%. Excluding temporary factors, the construction-related service business and construction business are basically public work-related, and the nursing care business is relatively stable in earnings since the nursing care insurance system is the main force, and the human resources-related service business also continuously receives orders to dispatch construction engineers to major general contractors, so it is a stable source of revenue.

Respond quickly to changes in the business environment

4. Risk Factors, Profit Characteristics, Issues, and Countermeasures

Risk factors in the company's business development include the impact on the performance of group companies due to economic fluctuations, the impact of the M&A market, the impact of interest rate fluctuations in fund raising, and the effects of law and regulation revisions in the human resource-related service business and nursing care business.

Of these, with regard to the impact on the performance of group companies due to economic fluctuations, it is expected that the main construction-related service business and construction business will remain stable since public works are the center. Therefore, it is thought that the impact of economic fluctuations as a whole is relatively small. Regarding the effects of interest rate fluctuations in fund raising, M&A funds are currently procured through bank loans with variable interest rates, but in the future, when an increase in burden is expected due to rising interest rates, etc., we will respond quickly to changes in the business environment, and diversification of fund raising will also be examined. Furthermore, for the stock acquisition of Imada Kensetsu Holdings, which was carried out in November 2023, 2,700 million yen was borrowed through a syndicated loan with Mizuho Bank, Ltd., as the arranger. This is the company's first loan from a megabank, and it is an example showing progress in diversification of fund procurement destinations.

(Author: FISCO Visiting Analyst Masashi Mizuta Exhibition)