■ The growth strategy of Innovation Holdings <3484>

3. Shareholder Return Policy

Regarding shareholder returns, the dividend policy will be changed from the fiscal year ending March 2024, setting the payout ratio for the fiscal years ending March 2024 and March 2025 at 40% to 50%. Furthermore, there is a policy to continuously increase dividends to match profit growth. Based on this policy, the dividend forecast for the fiscal year ending March 2025 is an increase of 1.0 yen compared to the previous period, totaling 21.0 yen (to be paid at the end of the fiscal year). This marks the fourth consecutive dividend increase, with an expected payout ratio of 42.3%.

In addition, on the shareholder benefit program (for shareholders holding stocks for more than one year as of March 31 each year), changes in content were announced in August 2023. For the fiscal year ending March 2024, shareholders holding more than 500 shares of the company's stock as of March 31, and continuing to hold more than 100 shares for more than one year, will receive a Jeff Gourmet Card worth 10,000 yen. From the fiscal year ending March 2025 onwards, shareholders holding more than 500 shares of the company's stock as of March 31 each year, and continuing to hold more than 500 shares for more than one year, will receive a Jeff Gourmet Card worth 10,000 yen.

"Utilization of 'former' stores contributes to waste reduction.

4. Sustainability Management

The company is also strengthening sustainability management. As part of its CSR activities, since June 2019, the company has been promoting the children's cafeteria "Store's Children's Cafeteria" using restaurants that it has sublet. This initiative aims not only to provide meals to children who cannot get enough food but also to create a safe haven for children who have nowhere to go until their parents return home, supporting parenting and becoming a more open social infrastructure. This initiative was recognized, winning the 2022 Good Design Award. As of the end of September 2024, the cumulative results are 74 participating stores and 8,066 meals provided.

Additionally, the store subletting business utilizes "former" properties, contributing to the reduction of waste from fixtures (kitchen equipment, Air Conditioner, tables, concrete flooring, drainage pipes, exhaust ducts, signs, etc.). Generally, fixtures are removed every time a lease ends and newly installed every time a contract begins; however, by subletting former properties (where fixtures remain and can be immediately operational) to food tenants, it allows for the reuse and reduction of fixtures, thereby facilitating waste reduction. The estimated amount of waste reduced from fixtures by the company over the past five years is 15,255,000 kg, equivalent to about 1,525 large trucks (10 tons each).

Aiming to enhance corporate value through the steady implementation of various measures.

5. A plan to meet the listing maintenance standards of the Tokyo Stock Exchange Main Board.

The company transitioned to the Main Board in April 2022 due to the market restructuring of the Tokyo Stock Exchange; however, the Market Cap of circulating stocks did not meet the Main Board's listing maintenance standards as of the transition standard date (June 30, 2021). Therefore, on December 15, 2021, it disclosed a plan to meet the Main Board's listing maintenance standards. By steadily implementing the various measures outlined in the mid-term management plan, the company aims to achieve continuous performance improvement and enhancement of corporate value, while also strengthening initiatives for aggressive shareholder returns and IR activities, with the goal of meeting the listing maintenance standards for Market Cap of circulating stocks by the end of March 2028.

Subsequently, aiming to improve the ratio of circulating stocks, it was resolved to issue the third subscription rights through a third-party allocation using treasury shares in November 2023. The allocation partner is Tokai Tokyo Securities Co., Ltd., with a total of 9,000 subscription rights issued (100 shares per subscription right), an exercise price of 1,340 yen, a lower exercise price of 1,198 yen, and an exercise period from December 7, 2023, to December 7, 2026. The expected procurement amount (estimated net amount) is 1,077 million yen. New shares will not be issued to utilize the 900,608 treasury shares held by the company. Improving the ratio of circulating stocks is expected to have a positive impact on increasing the Market Cap of circulating stocks and the average daily trading value, contributing to the fulfillment of the listing maintenance standards of the Tokyo Stock Exchange Main Board.

In June 2024, progress based on the plan to meet the listing maintenance standards was released. As of March 31, 2024, the Market Cap of circulating stocks does not meet the listing maintenance standards; therefore, the company continues to aim for continuous performance improvement and enhancement of corporate value through the steady implementation of various measures outlined in the mid-term management plan, seeking to comply with the listing maintenance standards by the end of the planned period in March 2028.

The increase in the number of sub-leased properties is evaluated positively, and the situation of synergy creation is being observed.

6. Analyst's perspective.

The scale of the restaurant industry is large, and small businesses targeted by the company occupy the majority in terms of the number of stores. Additionally, due to the high turnover of openings and closures, there are abundant business opportunities in the company's 'Tokyo, Restaurants, Sub-leasing' area, and there is significant room for further market expansion. Under such a business environment, the increasing number of sub-leased properties, which is the basis for stock revenue, shows a positive upward trend, and stable revenue expansion is expected in the future. Furthermore, by transitioning to a holding company system, the policy is to accelerate the development and synergy creation of three businesses (sub-leasing business, real estate sales business, and rental guarantee business) that connect real estate operators and owners, and it is believed that attention should be directed towards the future situation of synergy creation.

(Authored by FISCO guest analyst Masanobu Mizuta)