■Summary

Innovation Holdings <3484> transitioned to a holding company structure on October 1, 2024, through a company split from the former Tempo Innovation Co., Ltd., and changed its name. It promotes the management philosophy of "Creating Contributions - Challenge and Evolution," and is engaged in the transfer rental business of restaurants, real estate sales, and rent guarantee businesses. It is a comprehensive professional group for restaurants and a pioneer in the restaurant transfer rental business.

1. Engaged in transfer rental business, real estate sales, and rent guarantee business.

The business companies after the transition to a holding company structure include the new Tempo Innovation Co., Ltd. engaging in transfer rental business, Asset Innovation Co., Ltd. engaging in real estate sales, and Safety Innovation Co., Ltd. engaging in rent guarantee business. The transfer rental business involves leasing restaurant properties rented from property owners to restaurant tenants. The company specializes in targeting "restaurants and vacant restaurant properties around Tokyo." The revenue model for the transfer rental business is a stock-type business model (number of rental properties × rental margin) that accumulates revenue as the number of rental properties (properties rented with contracts signed with restaurant tenants) increases. Given that the number of rental properties is on an upward trend and that the company possesses a high competitive advantage as a pioneer in the transfer rental business, it can be regarded as a stable and high-growth business model.

2. Significant profit increase exceeding the plan for the second quarter of the fiscal year ending March 2025.

For the consolidated results of the second quarter cumulative (interim period) of the fiscal year ending March 2025, revenue increased by 16.8% year-on-year to 8,288 million yen, operating profit increased by 30.1% to 684 million yen, ordinary profit increased by 24.9% to 698 million yen, and net income attributable to parent shareholders increased by 23.2% to 469 million yen. This was an increase in revenue and a significant profit increase that exceeded the previous financial estimates (the initial estimates dated May 13, 2024). In the transfer rental business, while the number of agreements (the total of new contracts and follow-up contracts) decreased year-on-year due to restructuring of the sales organization, the number of rental properties smoothly increased. The profitability of the properties exceeded expectations during contract renewals and existing updates, and costs for vacant rent and selling, general and administrative expenses were lower than anticipated. The revenue from the real estate sales business also exceeded expectations due to the sale of large properties. The operating margin rose by 0.9 percentage points year-on-year to 8.3%.

3. Full-year profit forecast for the fiscal year ending March 2025 revised upwards, indicating a significant profit increase.

The consolidated performance forecast for the full fiscal year ending March 2025 was revised on November 13, 2024, indicating revenue of 16,657 million yen (an increase of 16.8% from the previous period), operating profit of 1,228 million yen (an increase of 26.1%), ordinary profit of 1,250 million yen (an increase of 23.6%), and net income attributable to parent shareholders of 832 million yen (an increase of 24.9%). Although revenue was slightly revised downwards compared to the previous forecast (the initial estimates dated May 13, 2024), operating profit, ordinary profit, and net income attributable to parent shareholders were all significantly revised upwards, marking a significant profit increase forecast rather than the previous loss forecast. Operating profit is expected to reach an all-time high. Compared to the previous term, both the number of contracts and the number of rental properties at the end of the term are expected to increase, leading to higher revenue. Furthermore, improvements in property profitability due to rent revisions during contract renewals will also contribute to a significant profit increase. The progress rate compared to the revised full-year forecast for the interim period is 49.8% for revenue, 55.7% for operating profit, 55.8% for ordinary profit, and 56.5% for net income attributable to parent shareholders. The effects of restructuring the sales organization and enhancing newly recruited employees are also anticipated, and the steady accumulation of running income is expected to yield favorable results.

Accelerate the accumulation of subleased properties and the creation of synergies among the three businesses.

The company emphasizes a fundamental strategy for growth focused on the 'Tokyo, Restaurants, and Sublease' domain, aiming to accumulate a solid number of quality subleased properties as the foundation for growth. In the four-year medium-term management plan established in May 2024 (Fiscal Year ending March 2025 to Fiscal Year ending March 2028, rolling method), the target figures after transitioning to a holding company structure include revenue of 25,644 million yen, operating profit of 1,645 million yen, ordinary profit of 1,680 million yen, net income attributable to Shareholders of the parent company of 1,094 million yen, and a total of 3,994 subleased properties by the end of the fiscal year 2028.

■Key Points

Transition to a holding company structure effective October 1, 2024, and a change of trade name.

The store subleasing business focuses on 'Tokyo, Restaurants, and Sublease,' establishing a stable and high-growth business model.

The cumulative results for the second quarter of the fiscal year ending March 2025 show significant profit increase beyond plans.

For the fiscal year ending March 2025, profits have been upwardly revised, leading to a significantly increased profit forecast.

Accelerate the accumulation of subleased properties and the creation of synergies among the three businesses.

(Authored by FISCO guest analyst Masanobu Mizuta)