Marui Group Co Ltd Ord

We'd like to start the financial results briefing for the sixth month ended September 30th, 2023. Twenty-five minutes will be spent for presentation followed by Q&A. Let me introduce our presenters. First, Mr. Tato, Director, Managing Executive Officer and CFO, will give you a presentation about our results and business status. And our CEO, Mr. Aoi, will discuss the outlook of our business and progress to achieve our mid-term business plan. And to answer your questions, we have Saito-san, President and Representative Director, e-Postcard, and Mr. Aono. President and Representative Director, Marui Corporation Limited, and Ms. Kutsukake, General Manager, Investor Relations Department. Those will answer your questions. So first, CFO Mr. Kato will give you the overview of our financial results over the second quarter of fiscal year 2024, March.

I am Kato. I'll be talking about financial results and overview of each segment for Q2 of the year ending March 2034. First, the consolidated results. There are four major points. The total transaction volume exceeded 2 trillion for the first half, for the first time. Operating income was 18.7 billion yen, down 17% or 3.7 billion yen year-on-year. Excluding liquidated accounts receivable, actual operating income was down 1.2 billion yen. Then income was down 14% at 11.5 billion or 1.9 billion yen. year on year. Full year plan is now revised based on the progress in fintech. I'll explain more when I get to the fintech. This is the main financial indicators. Group total transaction was 2,172.5 billion yen, setting a new record high again. Fintech transaction increase made great contribution. Operating income exceeded the previous year by 3.7 billion at 18.7 billion yen. And from this fiscal year, we changed the timing of funding through liquidation of account receivable, which led to 2.5 billion yen drop in the first half. And excluding that impact, it was 1.2 billion yen drop. And factors for the drop will be explained at fintech segment. Net income was 11.5 billion yen down 1.9 billion yen year-on-year. If you had this... account receivable liquidation at the same time as previous year, net income would have been on par with the previous fiscal year. I will explain the factors affecting operating income. The operating income is ¥18.7 billion, down ¥7.3 billion year-on-year, excluding ¥-¥2.5 billion impact of liquidated accounts receivable. Actual drop was 1.2 billion yen. In breakdown, retailing saw 800 million yen increase, while fintech saw drop of 1.3 billion yen. Corporate eliminations were negative 700 million yen due to granting of stock to employees and other increase in human capital. Liquidation of accounts receivable is now explained. From this fiscal year, in order to improve capital efficiency and even out gain on transfer, we decided to do this liquidation every quarter instead of once in first half. Therefore, in this first half, it resulted in 2.5 billion drop for the full year. It will be done in Q3 and Q4. And when in last year, it was not done. In total, gain on transfer equivalent to the write-off is scheduled. Hardly any P&L impact is expected. And this is a segment income and revenue and operating income in retailing due to the end of directly managed private plant revenue dropped by 600 million yen. Operating income went up by 800 million yen. due to increasing revenue from tenants. In fintech, revenue increased by 9%, steady progress was done, but there was increasing expenses, and due to the extraordinary factors, even considering the liquidated accounts receivable, there was a drop of 1.3 billion yen. and retailing business and factors affecting operating income. Despite the negative 900 million yen impact in revenue due to the voluntary PV withdrawal, fixed-term tenant revenue increase and personnel expense decline resulted in 800 million yen increase in operating income to reach 2 billion yen. Factors affecting revenue from the fixed rental contract tenants in the fiscal year now operating floor space decreased and average monthly rent increased year-on-year resulting in 900 million grossing revenue. And this is a specific non-operating floor segment. It is now 8,700 Tsubo, way down from the 10,200 Tsubo yen, and average for the full year is expected to be reduced to 8,400 Tsubo. And there's a progress in stores that don't sell. Non-retailing tenant floor area composition went up by 2%. And so there has been steady progress in category conversion toward the plan of bringing up this floor composition to 70% in March 2026, fixed-term rental contract tenant, monthly use prices going up in line with the plan. Thank you very much. E-commerce transfer, we have increased hiring of professional talent further and enhanced efforts to increase the site visits and we will continue to grow the business. And with this, the retail segment is in the second half, forecast is shown here. In the first half, we had a growth of 800 million yen from second half, we expect. Revenue from tenants to increase further and also facility and other assets related expenses drop and the posting of sales promotion expenses to be carried over. So we expect to accomplish the planned 7 billion yen.

Next is OP breakdown. Revenue and expenses were categorized into those linked to transaction, those that are not. Thanks to transaction growth, those linked to transaction went up by $2.6 billion. Those that are not linked to volume went up by $4 billion. Total revenue went up by $6.6 billion, but expenses went up by $7.6 billion. Therefore, operating profit excluding the liquidity. Receivables impact, the number was down by $1.3 billion to $23.5 billion. There are some factors such as margin fee and point expenses, which I will elaborate more later. First with margin fee, first half commission rate was 1.21%, down by 0.04% year-on-year. generating the impact of 500 million yen in the first half, out of which 0.02% is attributable to some merchants' rate cut, which was not baked into our midterm business plan. Therefore, the impact is not expected to linger. And also, companies are trying to expand the share of household finances that will continue to give impact on our business. And I Remaining 0.02% comes from travel, entertainment, recovery, as well as prepaid charge. And we reviewed point program systems, so prepaid charge impact is not going to repeat in the coming quarters. And regarding point expenses, we reviewed the calculation method of provision as a result. Expense went up by 800 million yen in the first half of this fiscal year, and this impact is not going to be repeated in the second half. And also prepaid card charge increased in order to gain points. As a result, point expenses went up by 200 million yen. So to respond to that, the company reviewed our point program in September. Therefore, there will be no impact in the second half. Excluding those one-off factors, it's fair to say that point expenses have been controlled within expectation. Lastly, I'd like to touch on commission fee and labor cost. In the first half, because of weaker yen, commission rate over transaction increased by 200 million yen year-on-year. and this side effects impact is likely to linger in the second half. Regarding labor costs, we reviewed retail format, and strategic reallocation has led to increase of 100 headcounts, and in the first half of this fiscal year, we increased the headcount by 80 people for the new businesses, and as a result, cost went up by 300 million. But there will be no more impact in the second half. And here are some one-off factors summary. The impact margin fee cut will linger to a certain extent, but there are other measures that would not be repeated. So excluding one-off factors, profit would increase by 2.9 billion, which is almost on par with pre-COVID level of 3 billion yen. Therefore, In mid-term business bond, we were expecting fintechs contribution to profit, and this trend will remain the same, no change with expectation. And a full year profit outlook is shown on this slide. Given the margin fee revenue, we decided to lower the guidance down to $43 billion. down by 3 billion. Next is about co-creative investment. In March 2025, 100 million was invested to startups. Another 100 million went to the fund. A total of 200 million yen worth of investment was made. Accumulated investment amount has now reached 27.2 billion since 2017 March. And as for co-creative it would contribute to the core business by 1.2 billion, out of which 700 went to retailing, 500 went to fintech. And 2023, March, we are expecting 5.5 billion. Next is about balance sheet. Operating receivable increased by 32.5 billion in March 2023, with that total asset to 1.7 billion yen. Next is capital allocation. Basic operating cash flow stood at 14.5 billion, out of which 7 billion was allocated to growth investment. 5.7 billion was allocated to dividend. Regarding expenses, the company invested 4.7 billion yen in human capitals, representing 800 million yen increase year-on-year, or 26% of total labor cost. Profit outlook by segment retailing profit is 7 billion in line with the plan. Fintech profit is down by 3 billion from the original guidance, down to 43 billion. Total company expenses, 8 billion, showing 500 million yen negative values due to expansion of capital, human capital investment. Consolidating OP will be revised down to 42 billion yen by 3.5 billion. Although three KPIs are likely to be behind our original plan, we are aiming at top-line, bottom-line growth. Regarding dividend, DOE stays at 8%, so DPS will stay the same at 101 yen. Lastly, I'd like to talk about full-year 2026 March. That is the last fiscal year of mid-term business plan. Again, for some merchants... lower commission rate is expected. I mean, impact will linger and new impacts will be reviewed. Therefore, we are expecting a negative 3 billion in variance against the original expectation. However, we believe that we can catch up with the following measures, so we are not going to change the guidance.