Marui Group Co Ltd Ord

So we would like to start presentation of the second quarter results of a fiscal year ending March 25 for Marui Group Company Limited. Thank you very much for participating in your busy schedule. The documents we will be using can be downloaded at our corporate website. So please look at our presentation material. We will be spending the first half an hour with our presentation followed by Q&A session. Today, presentation will be given by CFO Director Managing Executive Officer Kato, talking about our business and outlook. And it will be followed by a presentation of a President and Representative Executive Officer Aoi. On top of the two, for Q&A session, Eposu Card President Saito, Aono President of Marui, and General Manager of IR Department, Udaka, will be answering to your questions. These will be the content we will be presenting today. First, CFO Kato will be presenting our financial results and outlook. I will now present an overview of the financial results for the fiscal year ending March 25. This is our consolidated results. We have the three major accents. Total transaction increased 10% to 2.3829 trillion yen, continuing to set new records. Consolidated operating income increased 15% to 21.5 billion yen, the fourth consecutive quarterly increase. Fintech's real operating income increased for the fourth consecutive year, rising ¥1.4 billion to ¥22.5 billion, and real operating income increased steadily, rising ¥1.3 billion to ¥3.3 billion. These are the financial indicators. As explained in the digest, groups at the total transaction volume reached record high for the quarter. Both operating income and net income increased from the previous year, and actual results excluding the impact of liquidation of receivables exceeded the pre-COVID level. This is revenue and operating income by segment. Retail sales revenue was 39.1 billion yen up 3.1 billion yen YOY and operating income was 3.3 billion yen up by 1.3 billion yen YOY. Fintech sales increased 8.5 billion yen YOY to 89.2 billion yen and operating income increased 1.3 billion yen YOY to 22.4 billion yen. Breakdown of changes in operating income. Opening income for the period was ¥21.5 billion, an increase of ¥2.8 billion, excluding the impact of the liquidation of receivables. Real profit increased by ¥2.9 billion, a significant improvement from the previous year's real profit, the decline of ¥1.2 billion. These are the retail businesses. breakdown of changes of boarding income. An increase of 1.3 billion yen was due to the continued increase in tenant rental revenue from the previous year. Strong performance of related business aid had struggled last year. This is a reason for the increase in the tenant revenue. Tenant revenue increased by 900 million yen due to decreasing unoccupied floor space. Status of unoccupied area. The unoccupied area decreased from 8,700 to 6,800. We plan to reduce the size down to 6,500 to 2,000. Progress of the stores that don't sell. In the second quarter, the ratio of floor space occupied by stores that don't sell tenants increased to 4% from the previous year to 62%. With the shift of the category, we plan to increase the composition to 65% by the end of March 25. This is the status of EC transaction volume. Q2 transaction volume increased 4% YOY, starting with the utilization of web specialists. This was the 11th consecutive quarterly increase and continued growth. Now on to the fintech situation. Breakdown of changes of operating income. This year, in addition to increase in revenue due to the growth of transaction volume, we have also seen an increase in the number of customers. The increase of 1.3 billion yen was due mainly to the curbing of labor costs and improving productivity and decreasing the point expenses. Excluding the impact of liquidation of receivables, a real profit increased by 1.4 billion yen, with a significant increase. This is a trend of credit card transaction volume. Second quarter transaction volume was 1.112 trillion yen, a record high for the quarter. Changes for installment revolving fees. Year-on-year growth in installment and revolving transaction volume exceeded growth in card credit transaction volume, and fee income grew steadily by 8% to 29.3%. A billion yen, sorry. Then there is a status of new cardholders. New cardholders in the fiscal year totaled to 390,000, the same level as the previous year.

The number of EPOS cards that support individual interests was 11 in the first half of the year, and for the second half, we currently plan to have 26. As for the new JQ card EPOS design, in addition to the popular Kyushu Shinkansen 800 series Tsubame, we have plans to release cards featuring popular artists and popular games in the future, which we are optimistic will contribute to expanding our new membership. As of September 2024, the total card membership reached a record high of 7.73 million. The number of cars that support individual interests has surpassed 1 million, and the composition of platinum, gold, and cars that support individual interests has expanded to 58%. This is the status of co-creative investments. In the first half of the year, we invested 1.1 billion yen in startup companies and 500 million yen in funds, totaling 1.6 billion yen in investments, bringing the cumulative investment amount to 29.6 billion yen, The profit contribution through co-creative investments has reached ¥1.4 billion. The IRR of the startup companies we have invested in so far is 10%, which is on par with the hurdle rate of 10%. Regarding the balance sheet and capital allocation, this is the status of the balance sheet. Total assets increased by ¥85.9 billion from the end of the previous fiscal year, reaching ¥1.0894 trillion. Additionally, the equity ratio has decreased by 1.8% from the previous fiscal year end to 23.4%. On capital allocation, out of a fundamental operating cash flow of 25.9 billion yen, we allocated 8.3 billion yen for growth investment, 9.6 billion yen for dividends, and conducted a share buyback of 3.2 billion yen, Investment in human capital amounted to 4.6 billion yen, which represents 25% of personal expense. Regarding ESG status, in terms of external evaluation, in the first half of this fiscal year, we were selected for the first time for the highest rating under the Act of Promotion of Women's Participation and Advancement in the Workplace, receiving a Platinum Eruboshi designation. As of the end of September 24, there are 68 companies certified as platinum eruboshi, which is about 2% of the total 3,100 companies certified as eruboshi. We have also received other evaluations as shown. Finally, regarding full-year forecast, for the fiscal year ending March 2025, we expect to achieve the initial targets for the three KPIs, EPS, ROE, and ROIC. As for segment profits, retail is projected to increase by 22% to 8.5 billion yen, and fintech is expected to rise by 5% to 44.5 billion yen, with no changes from the plan set at the beginning of the period. Segment forecast for the second half of the fiscal year. Retail segment forecast. Revenue is expected to continue to grow steadily. However, due to increases in utility costs and strategic expenditures such as system terminal costs, operating income is projected to be limited to an increase of 200 million yen. The full year forecast remains at 8.5 million yen in line with the initial plan. FinTech forecast for the second half. While the increase in operating income will be smaller compared to the first half due to rising data center-related costs and changes in the reward point program, operating income is still expected to reach 44.5 billion yen, consistent with the initial plan. Finally, regarding share buybacks, if the stock price does not adequately reflect Future of profitability. We will continue to maintain a flexible share buyback policy. Following the first half, we will set a maximum share buyback limit of 20 billion yen for the second half. Next, the growth strategies and capital allocation based on the growth strategy will be explained by the representative director and president Aoi. This is Aoi. Thank you for your attention. Many investors have requested an advanced explanation of the outline for the next medium-term management plan. Therefore, today, I will explain the key elements of the upcoming medium-term management plan specifically focusing on the future growth strategy. The content is summarized in three points. First, on the theme of the economy driven by interests. Our company issued Japan's first credit card in 1960, developed fashion retail stores targeting young people in the 1980s, and since 2000, we have expanded our unique business model to include a triad of retail, fintech, and future investments. We have continuously pursued forward-thinking initiatives to achieve growth.

This is due to the basic stance of not competing existing markets, but rather developing new markets of our own. Such is our focus for the future. It's an economy driven by individual interests. In a deflationary economy, with wages not rising, the emphasis has been on function and price balance. This trend is also known as cost performance or COSPA, and consumers have become more cost-conscious over the years. At the same time, however, another trend is emerging. This is a trend known as mixed consumption behaviors. According to the NRA survey, 68% of consumers said that they usually divide themselves between what they save and what they spend money on, more than the 28% who said buy cheap and economical things anyway. In this case of a balanced economy or mixed consumption, there is a tendency to spend as much as possible on things that are important to them, such as hobbies and collections, which is the exact opposite of the cost economy. Now that the deflation is expected to be over, the Bank of Japan and major, I think, banks are also paying attention to moves such as the consumption, mediocre consumption, and trusting activities. Using this as a reference, there is a breakdown of the current economy today. If an economy emphasizes a function, the price is called a cost-buy economy. The non-cost-buy economy that emphasizes emotional value is positioned as the opposite of the spectrum. In contrast to the cost-buy economy, which has become a red ocean due to the prolonged deflationary economy, the non-cost-buy economy is a new market and is considered to be a blue ocean with a good look. We would like to call it the Blue Ocean, an economy driven by individual interest. We will also leave the Red Ocean, one of fierce competition and steer major courses toward a new economy driven by interest as a source of power. To this end, we will place individual interest at the center of the Trinity of retail or fintech future investment. We will then develop a new growth strategy with our investment. So what is a business that supports individual interests? The platform for this is a card to support individual interests. We aim to achieve both customer happiness and profitability by using cards that support individual interests as a platform to connect each customer's individual interests with our business. The number of cards supporting interests currently stands at 88 projects and 1.01 million members. The content of these cards range from social contribution programs such as support for refugees in Ukraine, music, sports, characters such as Chikawa, animation, the games. In addition, only one card was introduced this year. Here is the first of these, the EPOS pet card. The photo shows the actual card face, which was posted with the customers at the pets. It is literally the only card of its kind in the world. Another reason for your support is that the portion of the amount you spend is donated to animal shelters. Households with pets exceed those with children at 10.5 million nationwide. Since pet related expenditures total ¥360,000 per year, the market size multiplied by the number of households is expected to be ¥3.8 trillion a large term. This is the expected market. The so-called Oshikatsu supporting fabs market alone is worth 3 trillion yen, but we envision a larger market that is not limited to supporting fabs, but includes individual interests in a broader sense, such as pets, sports, music, and so on. The size of the market exceeds 10 trillion yen. It is also assumed that the object of liking will expand as the number of people increases. 10 people have 10 likes, the other 100 people have hundreds. The cards of support individual interest have the potential to increase the number of individual interest infinitely by utilizing print-on-demand to develop a long tail of interest. In addition, cards that support interest are more likely to be used as the main cards because of their strong connection to customers' values and emotions, and can be expected to generate two or seven times higher lifetime earnings than general credit cards. In addition, in a business that supports interest, employees' interests are utilized in their work. We will create a new business by connecting employees and customers who are previously divided in the form of service providers and consumers through a common interest. In the recent supporting interest competition, 131 employees participated and competed with their suggestions despite the fact that it was the first time the concept was held. The proposal that won the Excellence Award is currently under development for implementation. In the future, we will continue to develop unique services. Next is the Trinity, the business strategy that places interest at the center. We will maximize group synergy by reorganizing and evolving the business.