Marui Group Co Ltd Ord

We will now begin the financial briefing of Marui Group Corporation Limited for the fiscal year ended in March 2023. The financial results will be explained for the first 30 minutes and then there will be a Q&A session. Today's presenters, Hirotsugu Kato, Managing Executive Officer, CFO, will give an overview of the financial results for March 2023 and each business segment. Next, Hiroshi Aoi, President and Representative Director, Representative Executive Officer, CFO, will explain the progress of the medium-term management plan and the future outlook. In addition to the above two speakers for the Q&A session, Yoshinori Saito, President and Representative Director, Eposkart Corporation Limited, Masahiro Aono, President and Representative Director, Marui Corporation Limited, and Nahoko Kutsukake, General Manager, Investor Relations Department, will answer your questions. Here is today's agenda. First, CFO Kato will briefly talk about the financial results for March 2023 and each business segment. I'm Kato. I will now give you an overview of the financial results for the fiscal year and the status of each business segment. There are three financial highlights. First, the three main KPIs of EPS, ROE, and LOIC all achieved their targets. Next is operating income. With fintech falling 1.5 billion yen short of plan, consolidated operating income was 38.8 billion yen, 2.2 billion yen less than planned. We are very sorry. I'll mention the factors behind the shortage later. Finally, net income was lower than forecast, mainly due to lower-than-expected extraordinary losses. The plan was achieved with a 21% increase to 21.5 billion yen. Here are the three main KBIs. All indicators recovered to near their pre-COVID-19 levels. ROE exceeded cost of equity, and ROIC was in line with WACC. The main financial indicators, although the group's total transaction volume grew steadily and reached a record high, operating income fell 2.2 billion yen short of the plan at 38.8 billion yen. We couldn't recover to the pre-COVID-19 level. Net income increased 3.7 billion yen to 21.5 billion yen, achieving the plan partly due to an increase in extraordinary losses. revenue and operating income by segment. Retail sales declined due to the impact of the downsizing of directly managed specialty stores, but operating income was 3.6 billion yen, almost as planned. But while sales revenue in fintech expanded almost a span to 150.6 billion yen, operating income increased only slightly by 1.3 billion yen, short of supply by 1.5 billion yen. The breakdown of changes in operating income. Excluding special factors, the real increase in operating income for this fiscal year was up 10% or 3.4 billion yen, up by 2.7 billion yen in retail and 1.6 billion yen in fintech. Corporate eliminations diluted the income by 0.9 billion yen, mainly due to an increase in human capital investment. Recurring revenue has expanded in conjunction with key measures since the previous medium-term management plan. Contracted deferred revenue remained firm despite COVID-19. As a result, gross profit is up 22% from March 2016, and deferred revenue with future cash flow being assured had a significant increase of 80% from March 2016. ESG status. CO2 emissions were reduced by 340,000 tonnes from March 2017, achieving the plan mainly due to the increased use of renewable energy. In addition, the company has been selected as a component of the DJSI World Index for five consecutive years in external evaluations.

The status of each business.

First, the factors behind ups and downs of retail operating income. Excluding special factors, the actual increase was 2.7 billion yen. In addition to an increase in non-operational floor space and lower fixed-term rental contract income than planned, the rising power cost became a drag on the plan, but the issuance of cars tailored to each individual's interest increased. through events greatly exceeded the plan, resulting in a 1.2 billion yen increase in card insurance fees or internal transactions with EPOS card, and a 0.1 billion yen increase in overall retail sales from the plan. Customer traffic, an important indicator, increased 1.1 times from the previous year to 170 million. We will continue to expand non-retail tenants by an average of 10% per year. Our plan is to exceed the pre-COVID-19 level at 210 million in March 2026. The progress of stores that don't sell, which is the key to increasing customer traffic. The floor area of non-retail tenants increased 6% from the previous year to 56%, showing steady progress in category conversion. By the end of March 2026, we will increase the percentage to 70%.

Next, FinTech.

First, a breakdown of changes in operating income. The main reasons for short operating income were rent guarantees and card insurance costs, indicated as valuable cost 2 on this slide. I will elaborate on the rent guarantee in Chapter 2, so let me talk about the gap with the plan in card insurance costs, which investors have been asking about for some time. Card issuance costs are associated with two types of transactions, internal transactions that do not affect consolidated P&L and external transactions that do. The largest gap came from internal transactions, which take place every time a new card is issued in retail and trigger consignment fees. But we hadn't assumed a large expansion of these this year due to shrinking directly managed specialty retail stores. However, the actual growth of cars tailored to each individual's interest through events far exceeded the plan, resulting in more revenue in retail and an increase in expenses in fintech, which created a gap of 1.2 billion yen respectively. On the other hand, there was no gap in insurance costs for external transactions that affect consolidated P&L. The trend of card credit transaction volume expanded almost steadily throughout the year. The third quarter performance appears to have declined a bit year on year, but it demonstrated 144% versus 2019 or pre-COVID-19 level, so it looks the same as other quarters. The fourth quarter also saw the largest quarterly growth of 146% from 2019. The progress of card credit transaction volume, the current fiscal year's total of 3,623,000,000 yen, a new record high is 36,000,000,000 yen higher than planned and on pace to exceed the medium-term management plan of 5.3 trillion yen. In line with the steady expansion of transaction volume, the balance of installment and revolving payment at the end of the year also exceeded the plan at a record high of 399.1 billion yen. The proportion of installment balance is also expanding, and we are on track to reach 500 billion yen in March 2026. This, too, is on pace to be achieved in excess. The cash advance receivables at the end of this year stood at 133.8 billion yen, slightly lower than planned, but since the decline from COVID-19 has been reversed since bottoming out at the end of the previous year, sales revenue is expected to rise in the future. New memberships, the number of cardholders increased by 30,000 from the plan to 740,000, mainly due to more cards tailored to each individual's interest, which is our strategic focus. The proportion of these cards' enrollment has expanded to 37%. The number of cardholders expanded steadily, bringing the total number of cardholders to a record high of 7.31 million at the end of March 2022. The proportion of cards tailored to each individual's interest and gold cards has risen to 52%. These cards are becoming main cards for our users. BAT debt. Although the balance of receivables at the end of the fiscal year increased significantly along with the growth in transaction volume, BAT debt write-offs are down from last year and the BAT debt ratio is improving at an all-time low of 1.6%. Interest repayments. The number of cases accepted, which is a leading indicator, has been declining since the second quarter of March 2022. Its level has remained below the previous year's level consistently. The balance of reserves is still adequate, but we will continue to monitor trends closely. Co-creative investment, we invested 3.7 billion yen in startup companies in March 2023 and 900 million yen in funds, bringing the total investment amount to 4.6 billion yen. The IRR of our startup investments to date is 16%, which is above the hurdle rate. Profit from co-creative investees amounted to 1.3 billion, 200 million less than the plan, will further promote co-creation aiming for 5.5 billion in March 2026.

Finally, capital allocation and balance sheet position.

Capital allocation. This year, we bought back 20 billion yen of our shares to optimize capital. Combined with 30 billion yen repurchased in the previous year, the total amount reached 50 billion yen and enabled us to optimize capital as in the medium-term management plan. The investment in human capital that will lead to future earnings amounted to 9.1 billion yen. which included the provision of the company's shares to employees in February and associated costs during the term. Finally, the balance sheet. In order to realize the relevant capital policy and the idea of balance sheets and the change in business structure from 2015, including 50 billion yen which I described earlier, the company has repurchased approximately 150 billion yen. As a result, the year-end balance sheets have seen optimized capital positions in both retail and fintech. That is all from me. Thank you very much. Next, the progress of the medium-term management plan and the future outlook will be explained by President and Representative Executive Officer Aoi. This is Aoi. First, in previous financial resource briefings, after the financial summary, I usually run you through our future directions. However, this time, given the concern of our shareholders and investors since the third quarter, I'd like to instead talk about the relatively recent progress of the medium-term management plan and the future outlook. Therefore, for the medium and long-term direction, I will explain in detail at the RR Day on June 9. Here is today's agenda. Based on our dialogue with shareholders and investors, I'd like to explain these four points. First, fintech. Number one, factors behind the failure to achieve operating income. Number two, the factors behind the slowdown in profit growth. Fintech's operating income for the year is 42.5 billion yen versus a target of 44 billion yen. We missed our target by 1.5 billion yen. The main reason was a failure to meet rent guarantee targets. Although rent guarantee sales had expanded steadily, growth slowed this fiscal year and fell short of projections. This was due to sluggish growth in new contracts with a higher unit price than ongoing contracts. New contracts have been steadily expanding through introductions from large partner companies such as Eber and Nasik, but have slowed down since COVID-19 due to delays in the development of partner companies. Accordingly, we will achieve our goal of 25 billion yen for the fiscal year of the medium-term management plan by developing new business partners and strengthening land guarantees for offices and tenants. Next, the slowdown in profit growth. Fintech's operating income has increased in the range of 3 to 4 billion yen annually prior to COVID-19. In contrast, the increase in profit for the current year slowed to 1.3 billion yen. There are two factors, the increase in issuance cost due to a sharp recovery in new enrollments and a slow recovery in finance charges on installment and revolving payments. First, the status of new memberships. The number of new members during the current year has recovered to pre-COVID-19 level with a rapid growth of 740,000 new members. On the other hand, the unprecedented 130,000 increase in new members led to a significant increase in insurance costs, up 2.2 billion yen, which put pressure on profits.

The number of new cardholders is expected to reach 1 million in the final year of the medium-term management plan because it exceeded the plan for the fiscal year. Insurance costs increase in line with the increase in the number of new cardholders. However, the increase will be around 500 million yen, which is lower than the current fiscal year's level, thus mitigating the impact on profits. Next is a slow recovery of finance charges on installment and revolving payments. The charges had been stagnant since pandemic, but began to recover this fiscal year with an increase of 3.1 billion yen. Yet the increase was less than pre-COVID increase of 4.5 billion yen. On this matter, we have received a question as to why finance charges have not recovered despite the recovery of installment and revolving transactions. To answer this question, I would like to explain how fintech monetization works. First, fintech incurs issuance costs as new cardholder is acquired. Second, affiliate commissions increase as usage grows. As usage increases, installment and revolving transactions also increase. As the balance increases, finance charges increase. However, there's a time lag between the increase in transactions, balance, and the finance charges. This has led to a slow recovery of finance charges. Therefore, although delayed by about one year, the finance charges are expected to recover to 10% growth in the next fiscal year and beyond, on par with the pre-COVID level. Based on the above, here is the outlook for fintech's operating income. With profit growth returning to the pre-COVID level from the next fiscal year, the target of 53 billion yen for the final year of the medium-term management plan is expected to be achieved.

Then, this is the status of retailing.

Retailing transactions were initially assumed to recover from pandemic in the fiscal year ending March 2024. However, since actual results have been below expectations, the recovery is expected to be delayed by one year. In addition, due to unexpected factors such as the rising cost of electricity, we have revised our operating income plan for the fiscal year ending March 2024 downward from 9 billion yen to 7 billion yen. However, we believe that we can achieve the operating income target of 12 billion yen for the final year through the following four measures. I will explain the details of these measures. The first is the reduction of non-operational floor space. Even after the transition to fixed-term rental contracts, non-operational floor space remained at high level due to the voluntary withdrawal and the impact of COVID-19. However, non-operational floor space is expected to be halved from about 10,000 Tsubo to about 5,000 Tsubo due to the end of the voluntary withdrawal in this fiscal year, in addition to the recovery from pandemic. This is expected to improve profits by about 2 billion yen. Second, the increase of pertinent revenue from fixed-term revenue contract. Pertinent revenue from new tenants increase in line with the change in category from retailing to food and service. In fact, the actual revenue from new tenants in the period was 53,000 yen, 26% increase compared to the previous tenant. In addition, value increase associated with contract renewals will resume after being forced to stagnate due to pandemic impact. The combined profit improvement is expected to be 2 billion yen. The third is to strengthen events. We plan to improve profits by 1.5 billion yen by increasing the floor space and improving occupancy rates and personal revenue through Omemiye, an online store opening service. The fourth is growth in e-commerce. With the active participation of professional talents through mid-career hires, advertising in CRM were improved. This improved SEO measures and the number of store visits increased. Therefore, transactions recovered. We aim to further improve performance by improving UI and UX, and to achieve transactions of 30 billion yen in the final year of the medium-term management plan. This will result in a profit improvement of 1 billion yen. In addition to the above measures 1 through 4, we aim to achieve our mid-term plan target of 12 billion yen in operating income through personnel and other cost reductions. Next, I will explain the competitive situation and future growth potential in fintech from viewpoints of 1. Competition with QR code payment service providers and 2. Competition with other credit card companies. First of all, this is an overview of the cashless market. While credit cards account for 84% of the overall $111 trillion market, QR code payments account for just 7%, and their growth is slowing. The figure here explains why the scale of QR code payments is so small. The vertical axis shows the amount of payment. More than 5,000 yen is large payment, and lower than 5,000 yen is small payment. The horizontal axis indicates whether the payment is one-time or regular payment. When we break down household consumption expenditures of 300 trillion yen with these two axes, we find that the market for large or regular payments, which credit cards are good at, is approximately 240 trillion yen, accounting for 80%, while the market for small and one-time payments, which QR code payment is targeting, is only 60 trillion yen. The reason why the scale of QR code payments is small is because the market they are targeting is small. Therefore, QR code companies are looking to expand into the upper and right domains of the market through the issuance of credit cards as a future strategy. In response to this, EposCard's strategy is to thoroughly strengthen regular payments, focusing on the first quadrant, which is the opposite of the QR code area. This is a strategy maximizing share of household finances. By promoting card payments for rent, the largest household expense item, as well as for utilities and insurance payments, the transactions of regular payments have tripled over the past seven years to about 1 trillion yen. In addition, we have been expanding QR code payments. Through the promotion of Visa Touch and e-money charges, the transactions of small amount payments have increased sevenfold in four years to approximately 250 billion yen. This is the fastest-growing category of EPOS card usage. In addition, its transactions exceed that of food approaching commercial facilities. In this way, we can confirm that EposCard's strategy has almost no blind spots in the competition with QR code payments. Second, there is competition from other credit card companies that offer large point reward. We have been asked if EposCard can maintain its competitiveness against those who are increasing the number of cardholders by offering large point reward. Let us respond to such a question. Comparing the number of cardholders of major e-commerce cards and QR code cards with those of EposCard, others exceed EposCard, with the major e-commerce card being about four times larger than EposCard. On the other hand, operating income of EposCard is ahead of the major e-commerce card companies and five times ahead of the QR code companies. The reason for this reversal may lie in a large-scale point reward. The e-commerce and QR code companies spend about 600 billion yen annually for rewarding points. In contrast, a postcard spends only about 30 billion yen. This is about one-twentieth of their spending. This difference in point costs leads to the difference in the number of cardholders. On the other hand, however, the point cost also puts pressure on profits, leading to the reversal of operating income. Thus, the strategy of large-scale point revert proves to be a double-edged sword. So, how is it possible for EposCard to realize a large profit with a small number of cardholders? Here is a diagram to explain how it works. With EposCard, many cardholders reach gold card status at a relatively early stage as they increase the card usage. This makes it the main card and accelerate their use at merchants. As the usage at merchants increases, installment and revolving transactions increase, and the balance grows. As the balance grows, revenues from finance charges increase over time. And when rent guarantees and other services are added to these, revenues increase even more. In this way, Apple Scout increases its earnings by building up various transactions in a multi-layered manner as it builds up customer loyalty and long-lasting relationships with its customers. If the point reward strategy is market share focused, ours is LTV focused strategy. The result of this LTV-focused strategy is clearly demonstrated by the measure of contracted future recurring gross profit. Comparing EPS and contracted future recurring gross profit over the seven years from the fiscal year ended March 2016 to this fiscal year, contracted future recurring gross profit has grown by 1.8 times, while EPS has grown by 1.5 times. For your reference, the stock price has increased by 1.3 times. Since corporate value is the discounted present value of the sum of future cash flows, we believe that contracted future recurring gross profit is a better indicator of essential corporate value than EPS or periodic profit and loss. Therefore, we continue to focus on LTB and increase our corporate value by expanding contracted future recurring gross profit. This is the future direction based on those. First, we strengthen cards tailored to each individual's interests for attracting more cardholders. Especially, Heteropony Card, which is a card that helps propel society forward every time it is used, enables customers to donate a portion of their spending to artists with disabilities. This has been supported by many customers. Similarly, the number of cardholders of cards tailored to each individual's interests is increasing, which enables them to donate points to offer support for individual preferences by using a card. We see great potential in this shift in consumer values regarding credit card choices. There's a reason why we say this. Consumers are more focused on the financial benefits to them from their point of view. And cars with large point reward are serving this need. On the other hand, cardholders of cars tailored to each individual's interests emphasize the opposite value, the joy of supporting others. We believe that this shift in values will continue to grow over the mid to long term as the economy matures. Accordingly, by introducing a point donation service for other EPOS cards and gold cards along with cards tailored to each individual's interests, we will expand the numbers of cardholders with our unique differentiation strategy without being caught in the red ocean of point reward competition. In addition, we will develop a new service that follows the rent guarantee for realizing revenues of multiple layers. This is called Embedded Finance, meaning that we embed financial services into non-financial services. By developing and launching these services one after another, we will add further depth to our multi-layered revenue structure. For specific details, please refer to the responsible team in a segment of the medium-term management plan on IR day.

This is shareholder return.

To realize the ideal balance sheet, we introduced DOE from this fiscal year to improve capital efficiency and achieve long-term stable dividend. 8% is set as a guide for DOE. This is calculated by multiplying ROE target of 13% or more for the final year of the medium-term management plan by the current dividend payout ratio of 55%. Estimated dividend per share. With the introduction of DOE, the dividend per share for the year ending March 2024 is expected to be 101 yen, 42 yen increase from this fiscal year. Thereafter, the dividend should continue to increase moderately. The dividend in the final year of the mid-term plan is expected to be almost the same as originally planned. In addition, share buybacks limit equivalent to 10% of outstanding shares or a maximum of 40 billion yen is set to allow for flexible share buybacks in case future profitability is not fully factored into the share price. Finally, this is our outlook for the full year. All three KPIs, EPS, ROE, and ROIC, are expected to achieve our original plans. Segment income is expected to increase 94% to 7 billion yen in retailing and 8% to 46 billion yen in fintech. That is all from me. Thank you for your attention.

We will now move on to a Q&A session. Now, the first question from Mizuho Securities. Mr. Takahashi, please. Yes, I'm Takahashi from Mizuho Securities. Thank you for your detailed explanation. I hadn't expected to receive such a detailed explanation from President Aoi. Thank you very much. Let me ask you two questions. There were various issues that you explained in the latter part of your presentation. You also presented some measures to deal with them. Electricity costs are clearly an external factor, but I'm interested in other factors as well. What is causing fintech and retail to lag a little behind? Also, at what point does your management, including President Aoi, anticipate that taking these steps will lead to this improvement in 2024 and beyond? The point is that I don't think facing these problems is a major issue, but what external factors caused... the various problems you just described and please tell me how much action has been taken immediately you explained earlier that although your company is currently behind you can catch up by accumulating numbers i'm sure that there will be some changes in the future external environment as well You have taken various measures this time, but if the external environment causes the results to fall short of the profit forecast, how will you get back to the figures in the original medium-term management plan? Can you switch to flexible operations to achieve it? I'd like to know the causes of the issues and what concrete measures are being taken, as well as the implications and insights for the future. This is the first question. Let me first give you an overall picture. In a nutshell, most of the factors are external, including COVID-19. Electricity costs are slightly different, but I think it is fair to say that almost all differences from the previous year and from the plan are due to one-time factors. However, the budget for rent guarantee may have been a little too aggressive, to be honest. Another thing I mentioned was the lack of progress in the development of large-scale business partners. This was due in part to the impact of COVID-19, and even if we had wanted to do business with them, they were not able to meet with us. I think I can say with confidence that we will be able to make up for the delay and recover from this fiscal year onward. Do you have any supplementary information, Saito-san, please? This is Saito. I'd like to talk about the rent guarantees that were significantly miscalculated for this fiscal year to a point. First, I'd like to apologize for this underperformance. As I mentioned, the main reason for the significant shortfall in the growth and plan of rent guarantee this year was that new customer count did not reach the plan. As you can see on the screen, there was a temporary decline in the number of new customers due to stay-at-home and behavioral restrictions after COVID-19. On the other hand, we assumed that the restrictions would be lifted this year, so we formulated a plan for new visitors thinking that people would start their activities at once. Furthermore, we had been facing a very difficult environment in which we had to largely refrain from sales activities, but assuming that we could finally conduct full-scale sales activities, we made plans, thinking that the development of new partners would also get on track to some extent. Unfortunately, however, those plans did not come to fruition as planned. As for the future, however, our medium-term management plan is just entering its third year, but will make every effort to achieve the 25 billion yen goal during the period. And we hope to use this growth to catch up. Thank you. Yes, thank you for that detailed explanation. I understood. Thank you very much. Second question. I do not fully understand your shareholder return policy, including the 8% DOE that you introduced in the last part, so please let me know if I'm wrong. Looking at your press release and so on, I see that you have achieved the balance sheet figure you had targeted. Therefore, we are entering the next phase. The ROE of 13% or more that you mentioned on page 78 is the same as what you have explained before. The explanation of multiplying this ROE by the dividend payout ratio of 55% also seems unchanged. I understand that not only this DOE of 8%, but also the new shareholder return policy was discussed at this board meeting. It would be helpful if you could provide some additional information including the background. In addition, on page 80, it is stated that you have established a quarter for flexible share repurchases. I believe you have announced a share buyback in the past, but what are the implications of setting a quarter this time? Of course, there are many things that you may or may not say, but a simple question arises. What does it mean when the stock price does not incorporate sufficient profitability? Please tell us, to the extent possible, what was your thinking behind the establishment of this share buyback facility? Thank you. I will give you a brief explanation. First, let me explain the change in return policy to the DOE. This DOE is a very good return policy mechanism. This is because DOE is a method that can both improve capital efficiency and realize long-term stable dividend increases. Therefore, I have wanted to introduce DOE for a long time. However, since the ROE level was low at less than 8%, I had in mind to first firmly achieve ROE of 8% or more with capital policy in addition to profit growth or realize the target of the current medium-term management plan, which is 13% or more, and then introduce DOE. We have achieved the capital policy of acquiring 50 billion yen of our own shares in the first two years of the medium-term management plan ahead of schedule, so in a sense we have introduced DOE with a sense of confidence. Let me explain one more thing about flexible share repurchases. Planned share buybacks, as we have done in the past, will end with the completion of the capital policy, but it is possible that we will be flexible as we go forward. Well, I'm sure you understand this, but in cases where future profitability is not fully factored into the stock price, as you see now, we'd like to be able to flexibly repurchase our own shares. In connection with our PV ratio of one time, the TSE has recently been encouraging management that is conscious of the share price, and I hope you will take this as an expression of our commitment to management that is conscious of the share price. Thank you very much. Your company has made some progress in improving profitability in terms of ROE, and the balance sheet is now in an ideal shape. In other words, the phase in which the balance sheet must be forcibly changed or ROE must be forcibly increased has passed. So you are trying to introduce DOE. Isn't that right? I'd like to ask for confirmation that you are not saying that Malawi will enter a phase of less stable growth from this point on? Yes, you are right. When you hear that we have introduced DOE, some of you may have the impression that we are a mature company that will not grow much. But let me repeat what I said earlier. DOE is an excellent mechanism that combines the continuous improvement of capital efficiency and stable long-term dividend increases, and I have been wanting to introduce it for some time. I'd like to draw your attention to the DOE level of 8%, which is quite a high level. Although I'm sure there are not a few companies on the TSE that have introduced DOE, this is backed by our confidence that we will achieve the target of 13% or more in our medium-term management plan for March 2026. We'd like to enter the next phase of growth by strengthening our investment in human capital. Yes, I understand. Thank you very much. Now I'd like to move on to the next question. Mr. Kanamori from Okasan Securities, please continue. This is Kanamori of Okasan Securities. I'd like to ask you two questions. I have one question each about the retail business and the fintech business. First of all, you explained that the retail business is a little behind schedule overall. Please let me confirm the reasons for this. It is true that the temporary decrease in rent income due to the withdrawal of directly managed sales force was a major factor, but I think another factor was the slower-than-expected introduction of non-retail tenants who should have been placed under fixed-term rental contracts. I understand that you plan to eliminate this problem in the next fiscal year, leading to an increase in profit, but I am not sure to what extent we can realistically expect the introduction of new tenants to meet the goal. The second question is about fintech. You mentioned that there is basically a time lag in installment fee payments relative to the buildup of the balance of trade receivables. I think that is certainly true in view of your business model, but the time lag should have been anticipated when you originally created a plan. Can you then simply say that the reason... The time lag was longer than expected, was due to the impact of COVID-19? These are the two points that I'd like to ask. Yes, then I, Aono, will explain the retail matter. You are correct, Mr. Kanamori. Although we achieved our operating income plan, there was a shortfall of 2.4 billion yen for fixed lease revenue. The reason for this was, as you pointed out, the delay in introducing tenants. I mentioned earlier about the unutilized area of the building. We have withdrawn directly managed specialty stores over the past four years, and this has caused an increase in the unauthorized area along with the expiration of tenants. In both cases, the reason is that we were unable to convert the area into a fixed lease in sufficient balance with the introduction of tenants. However, we are confident that we can really catch up, and you can count on us because the current fixed rent growth revenue and fixed rent revenue have been increasing year-on-year since the third quarter, with 101% year-on-year growth in the third quarter and 103% year-on-year growth in the fourth quarter. The current unauthorized floor space has also been reduced to 8,000 tsubo level. We believe that we will be able to achieve the planned 2.1 billion yen increase in fixed lease revenues this fiscal year. This is Saito. I believe you have just asked a question about the sales revenue from the installment revolving credit business being slower than expected. First of all, I'd like to say that the revenue from installment sales is almost in line with the plan. What I explained earlier was that while transaction volume is growing steadily, the reflection in sales is lagging behind, and I explained the reasons for this. I think Mr. Kanemori's question was probably about the delay in monetizing the company's installment revolving credit. I hope you are aware that the installment revolving credit business is now progressing almost according to the plan, as the shopping transaction volume has also expanded steadily.

I'm sorry if my question was not clear. Let me rephrase it. I understand what you just said, and I asked a question about the installment and revolving payments. It has been clear that transactions grew steadily in previous quarters. My question was about your explanation regarding the slow recovery of finance charges on installment and revolving payments. I am aware of the time lag as I asked the question. When I see this business model, there was a case in the past that finance charges recovered after the increase of transactions. So my question is, if you are saying that the recovery of finance charges have been slower than expected, even though you were aware of the time lag and factored that into your plan, what is the reason? As we have explained earlier, revenue from finance charges is not linked to transactions in a timely manner. After the transactions grow steadily, the balance accumulates, and the accumulation of the balance results in sales. So, the sales are realized after transactions increase. The status is largely in line with our expectations. While transactions are growing steadily, finance charges will also increase steadily in the future. I think it is safe to say that we are on track with our medium-term management plan. Understood. I think this may have been a little confusing. I gave two explanations, the difference against the plan and the slowdown of revenue growth. Regarding the finance charges on installment and revolving payments, I was not talking about the difference against the plan, but rather the answer to the question of why the revenue increase has slowed to 3.1 billion yen from 4.5 billion yen. As Mr. Kanamori said, it is factored into the plan. Understood. Thank you. Thank you very much. Now I would like to invite a next person. Mr. Tsuda from Daiwa Securities, please. I also have two questions. The first question is about share buybacks. So far, when you announced share buybacks, I believe you bought back your shares as much as its limit. On the other hand, there are companies that set a limit but do not buy back shares as much. Share buybacks can start on June 1st. Stock price may be quite undervalued in relation to the value of the company. But is it safe to assume that if the stock price rebounds tomorrow or later, share buybacks may not be executed? That's my first question. The second question is about co-creative investment, though I have already asked this question before. Earnings contribution to main business increased to 1.3 billion yen this time, but on the other hand, there are losses on valuation of securities in the extraordinary loss section, which I believe is valuation loss related to co-creative investment. Compared to the earnings contributions, there's an extraordinary loss about 8 billion yen in a cumulative total of three years. I think this is an area where investment in human resources is also relevant. I think the negative impact on EPS is significant. My question is, do you think it is inevitable due to the nature of the business, or are you discussing how to minimize this loss? This is Kato and let me answer the question. For your first question about share buybacks, you are correct that we have bought back shares up to the limits. We have been implementing share buybacks for the purpose of capital optimization in a planned manner. So, we have completed all the share buybacks that had been originally announced. However, we changed our thinking. Since capital optimization has been completed, we will now execute share buybacks when future profitability is not fully factored into the share price. As you said, there's a possibility that we will not execute share buybacks. Is it correct to say that this is a message to the market that you will manage the business being mindful of stock prices? Yes, it has an aspect of the message, but if the stock price is not at the level of what we think it should be, we will execute it. Thank you. I understand that the share buyback you have announced this time has a different meaning from what you did in the past, as you executed buybacks all the way up to its limits. Thank you very much. To answer your second question about co-creative investments, there are quite a few loss-making co-creative investees as they are still small. Then, if the company has a loss and its capital shrinks, impairment loss must be recognized for accounting purposes. On the other hand, if the company has the potential to earn cash flow in the future, it can be evaluated, but this cannot be included in the accounting. So there's a tendency that impairment occurs first. As it is shown here, IRR is 16% when unrealized gains are taken into account. This is to be considered as a timing difference. Eventually, it will bring positive figures. It's not a loss leading to cash out, but you have had constant loss from re-evaluation for the last three years. Let me be blunt to say that it is undermining EPS. The extraordinary losses seem to be more negative than the positive synergies in operating income. However, if you raise the hurdle rate too high, you will lose good partnerships and relationships. I guess we have to look at it as if it can be helped. It is not that we can't help it. We have been able to calculate that the current IRR of 16% is sufficient to generate a return from the investment, with the extraordinary loss taken into account. We hope that you will think in this way. I understand that conservative accounting leads to impairment, which is reflected in PL. But you are saying we should look at the overall values. Is it correct? I think it is a matter of time frame. As you can see in this graph, we started venture capital investments around the fiscal year ended March 2018. So it has only been about 6 years. It depends on the stage, but it takes 5 to 7 years for the first company we invest in to go public or IPO. This means we incur a variation loss for the first 5 to 7 years. However, after the 5 to 7 years, the profit will increase through IPO, M&A, and other exits. Therefore, as you pointed out, there are more variation losses and realized profits are limited now. But if we look at the time horizon of 10 years or longer, profits will be realized in the future. I hope you understand that we are entering the latter half of this phase. I am sorry to ask a mean question after you have explained that co-creative investment is going well. It would be helpful if you could give us the summary explanation. For example, the risk occurs first, then followed by expected return over a long term with variation losses taken into account. I believe it is a good investment looking ahead, as it is not run for one year only. It would be better if there was an explanation that would enable us to evaluate the investment over a longer period. Understood. There are plans for some companies to go public starting at the end of the fiscal year and in March 2024 after delays due to COVID-19. We will make sure that presentation materials give you overall status toward the second half of the year. Thank you very much. Thank you. Next person is Ms. Kanamori of SMBC Nikko Securities. Please go ahead. My name is Kanamori from Nikko Securities, and I would like to ask two questions. The first question is about the fixed-term rental contracts for retailing. You mentioned non-operational floor space as a factor for underachievement. I think there was an impact from not being able to end the rent reductions. Slide 58 shows something about improving the value of the fixed-term rental contracts and pertinent revenue through changing tenant mix. Please tell me if we can expect that rent reductions will end with contract renewals and so forth in the new fiscal year. Is it more likely to happen? My second question is about fintech. We can see the diagram on slides 64 and 65. I believe the stock market is more concerned that the younger generation targets of EposCard may be using QR codes more rather than amount or frequency of payments. I think you have had a position as the first card for the younger generation, but I was wondering if QR code payments have changed competitive environment as to first cashless payment method for younger generation. QR code payment companies also have a credit card business, and they are very flexible in setting up credit using e-commerce data. I think they now have what was regarded as your strengths or unique features. It would be helpful if you could tell us about your company's share of card issuance among the young generation. Thank you. Thank you for your questions. This is Aono, and I would like to answer your question about revenue from the fixed-term rental contracts. As you, Ms. Kanamori, asked, non-operational floor space and pertinent revenue are very important factors for revenue from the fixed-term rental contracts. Failure to reduce the non-operational floor space sufficiently can be also seen that we did not choose to have new tenants with the lower rent. If we decide and go ahead with just filling the non-operational floor space, we could do it right away. But we didn't do that. Rather, we brought in 250 new tenants, and their rents were 26% higher than the previous tenants. This will have a significant impact on the fixed-term rental contracts for the fiscal year ending March 2024. Therefore, we regret that we were not able to meet our revenue target from the fixed-term rental contracts for the last fiscal year, but you can have better expectations this year. This is Saito. I will answer your second question. As Ms. Kanamori pointed out, I think there's a fact that QR code payment is used by a lot of young people. Their advantages include that it does not require special credit and its usability. It can be easily downloaded and used right away with a smartphone. And you asked whether this has significant impact on the younger cardholders of EposCard. The answer is no, we have not been affected. Rather, I want to point out that criteria for young people to choose a card is becoming more rigorous. They look at whether the card bring them benefit in the long term, including a support for their preferences, rather than short-term and financial incentives. I think there are many such young people. In this context, cars tailored to each individual's interests are now growing steadily. The share of new young cardholders has been increasing rapidly. In fact, I think it would be better to say that the share of young people has even improved compared to the share before the introduction of the cars tailored to each individual's interests. Did I answer your question? Yes, thank you. I think you are saying that it is the non-youth population who is looking for short-term benefits from your perspective. You had a graph showing that the number of new cardholders is increasing. Yes, the number of cardholders has increased, but not significantly compared to the pre-COVID level. So is it fine to assume that you are acquiring young cardholders, but some are cancelling the membership, or the people in older age prefer other companies? The share of young customers among 740,000 new cardholders is steadily increasing. It's not that the number of cardholders in other age groups is declining. The overall number of cardholders increased by 130,000 this fiscal year, so there is an increase in new cardholders in all age groups. Did I answer your question? Okay, I'll follow up on IR team later, so that's fine. Thank you very much. Thank you. Since there seems to be no other person who wants to ask questions, we will now conclude this Q&A session. This concludes the financial results briefing. Please note that we ask all participants to complete the questionnaire about the briefing. We will send you the link for the questionnaire by email, and your cooperation will be highly appreciated. Thank you very much for taking your time to join us today.