Seven & I Hldgs Co Ltd

Good evening, ladies and gentlemen. My name is Isaka of 79 Holdings. I would like to extend my sincere appreciation for your continued understanding and support of our group. And thank you very much for your participation despite this late hours. In some media, In the Board of Directors' meeting of a company this year, it was covered that the decision has been made to sell some Ito Yokado shares. However, there are no such facts. I would first like to clarify this point. I would like to talk about today's executive summary. For the full year of fiscal year 2023, we achieved a record high operating income. Although changes in the consumption environment in Japan and the US have intensified since the latter half of fiscal year 2023, in fiscal year 2024, we will further accelerate our response to these changes, which we have been implementing to date, and we would like to achieve new record highs in both operating income and net income. I would also like to explain the implementation of our action plan to maximize the group's corporate and shareholder value over the medium and long term. This is today's agenda. Mr. Maruyama, CFO, will explain the business results for Fiscoria 2023 and the forecast for Fiscoria 2024, followed by the management policy for the domestic convenience store business from Mr. Nagamatsu, the management policy for the overseas convenience store business from CEO Dipinto, the progress and results of the drastic reform program for the SSD business from CFO Maruyama, and finally, the group strategy from myself. Then, Mr. Maruyama, please explain the business results for fiscal year 23 and the forecast for fiscal year 2024. Good evening. I am Maruyama. First of all, I would like to explain the business results of 2023 My throat condition is not very good, but I would like to ask for your kind cooperation. Please see page 5. These are the highlights of consolidated financial results for the full year of fiscal year 2023. Operating revenues were ¥11,471.7 billion, 97.1% of the previous year's level, up ¥330.7 billion from the plan at the beginning of the fiscal year. Operating income was ¥534.2 billion, 105.5 year-on-year and up 21.2 billion from the initial fiscal year plan. Operating income reached a record high. Net income attributable to shareholders of the parent company was 224.6 billion yen. or 79.9% year-on-year and 78.8% of the plan at the beginning of the period, mainly due to the extraordinary loss resulting from the transfer of Sogo and Cebu shares. Net income on actual basis adjusted for the impact of the transfer of Sogo and Cebu and Barneys Japan shares was 288.3 billion yen and 102.6% of the previous year's level and 101.2% of the plan at the beginning of the fiscal year. Please understand that this is the highest profit level ever and that we are steadily improving our earning power. The impact of the yen's depreciation on operating income was ¥19.2 billion. Please see page 6. This slide shows operating revenues, operating income, and EBITDA by segment compared to the prior year. Revenues from operations were also down on a consolidated basis due to lower revenues in the overseas convenience store operations as a result of the calming of retail gasoline prices in the U.S., which were at historically high levels in fiscal year 2022. Operating income was significantly affected by the historically high gasoline CPG in 2022 in our overseas convenience store operations. However, We secured an increase in income due to gross profit growth from products, reduced SG&A expenses from our cost leadership initiatives, and the impact of foreign exchange rates. In addition, each segment of the domestic business, especially the domestic convenience store business, secured profit growth, driving overall growth. In addition, elimination and corporate income Income decreased from the previous year, mainly due to an increase in depreciation expenses resulting from increased investments related to the group's common infrastructure. EBITDA increased 59.6 billion yen on a consolidated basis, driven by domestic and overseas convenience store operations. Please turn to page 7. This page shows the comparison with the beginning of year plan by segment. Operating income and EBITDA exceeded the beginning-of-year plan in all segments except for the superstore business. Page 8 shows the 2023 Consolidated Financial KPIs actuals. As for quantitative indicators, EVTA exceeded the plan at the beginning of the period due to the increased cash generation capability of the domestic and overseas convenience store operations. On the other hand, operating cash flow and free cash flow fell short of the plan at the beginning of the period. We have confirmed that this does not mean that operating cash flow in the core business decreased, but that the main reason was due to temporary increase or decrease in accrued expenses in accounts receivables and a decrease in deposits received at the end of the period. I would like to state clearly that the ability to generate operating cash flow in the core business has been steadily increasing. ROE and ROIC, the qualitative indicators, were slightly below the plan at the beginning of the period, even after adjusting for the impact of the share transfer of Sogo and Cebu and Barneys Japan. ROE and ROIC were due to SEI's lower than expected net income in dollar terms, as well as an increase in extraordinary losses due to accelerated store-related measures in the SSD business transformation. Debt EBITDA, a financial soundness indicator, was in line with the plan at the beginning of the period due to the planned repayment of debt. Next, I would like to talk about the 2024 forecast. Please turn to page 10. PaceGen shows our consolidated earnings forecast for fiscal year 2024. We have positioned fiscal year 2024 as a pivotal year toward achieving the goals of the mid-term management plan for fiscal year 2025. Revenues for operations, 11 trillion 246 billion yen, 98% year-on-year. Operating income, 545 billion yen, Revenues from operation and net income are expected to be the highest ever despite the decrease in revenues from operations. EPS and EBITDA are also expected to exceed those of the previous year. Foreign exchange effects are expected to have a positive impact of 9.2 billion yen out of the 10.7 billion yen difference in operating income from the previous year.

Page 11 is by segment. In 2024, Japan convenience store business expects an increase in sales and profit, taking measures to improve the number of customers. In the overseas convenience store business, due to the fuel retail price decline, we expect a decrease in revenue. but expect to increase the operating income by improving the profitability by enhancing the proprietary products through SEI and initiatives for cost leadership. In superstore business, revenues from operations will decline, but operating income will increase through solid implementation of fundamental transformation measures in the metropolitan SSD business. These initiatives will be explained in more detail later. Page 12 is FY24 Consolidated Financial Forecast First Half-Second Half Breakdown. From the second half of fiscal 23, the impact of the economic environmental change on the consumption sentiment is seen in Japan and the U.S. In fiscal 24, especially in the first half, we think this impact will remain to a certain extent. Under such circumstances, revenues from operations is expected to decline due to the drop in fuel retail price, but operating income will be secured on a full-year basis through solid implementation of our business strategies. And therefore, on a consolidated basis, the first half operating income will decline but will turn positive by carrying out measures that will bear results going forward and will increase our operating income on a year-on-year basis for the full year. Page 13 shows the forecast buy segment. in first half and second half 24. Convenience store business in Japan and overseas will lead the recovery of the performance. The concrete measures will be explained by the heads of business later on. Page 14 is the consolidated financial KPI. Quantitative index, EBITDA, is expected to grow solidly. By the end of fiscal 24, we will achieve 1.1 trillion yen, which is the medium-term plan target. Next, ROE, ROIC, which are the qualitative index. we think low capital efficiency is a problem as we aim to become the global retail group. Therefore, in fiscal 24, we will dispose the low capital efficiency asset and increase front load of the higher capital efficiency asset to achieve the fiscal 2025 target. But 2025 is not the goal. Our most important goal is to improve our management efficiency in the medium to long term, so we will pursue a more capital efficient management going forward. And next, debt EBITDA multiple. As cash generating capability of the group is increasing, we are repaying debt steadily, and debt EBITDA multiple will decline in FY24. Under such circumstances, Based on the recommendation by the strategy committee, which we will talk about later, we updated the debt to EBITDA multiple target looking beyond 2025 to improve the group's medium to long-term corporate value and shareholder value and to promote group-wide growth strategy. Based on the flexible and agile financial discipline, in order to promote growth strategy through strategic investment, including new M&A in the CVS business, we set debt EBITDA multiple at 1.8 to 2.5 times range for FY25 regarding the balance between financial soundness and growth investment debt capacity from optimal capital structure point of view to maximize the corporate and shareholder value. Of course, this is based on the underlying premise to maintain the A rating. So we will consider the investment to grow the Japan and global convenience store qualitatively. based on this financial discipline so that we can maximize the corporate and shareholder value. Next, page 15, shareholder return. From the shareholder return policy based on the payout ratio, we changed our policy where we improve the dividend per share, stably and continuously, and aim for total payout ratio of over 50%. Based on this policy, we have invested in growth and repaid debt within capital allocation and did share buyback. To clarify the intent of basically not cutting dividend, we introduced progressive dividend where we increase dividend along with sustainable profit growth from stability and sustainability point of view. Our share buyback is maximum 110 billion yen up to end of May. And let me add that we plan to conduct another 100 billion yen buyback by FY 2025. Dividend forecast for FY24 is 20 yen interim dividend, 20 yen year-end dividend, full year 40 yen. On March 1st, we did a 3-4-1 stock split, so the dividend is equivalent to 120 yen in pre-split basis, up by 7 yen. That concludes our 23 results and 2024 forecast. Thank you very much.

Mr. Nagamatsu, 7-11 Japan President, will explain. Good evening to you all. I am Nagamatsu of 7-11 Japan. I would like to talk about the management policy of 7-11 Japan. First of all, about the current situation. I think this is something that you are already aware of. The domestic wages for 22 months consecutively is a negative. Inflation, although there is inflation, wages are not going up. and going to the upper right, Due to COVID, telework or work from home has become popular. However, even after the COVID has become classified into Class 5, the telework ratio has remained pretty high. And also, the decline in population and the low birth rate and aging is progressing rapidly. Ever since the Japanese population has peaked out, it has continued to decline. And in addition, the composition of the population over 65 is more than 30% or 35% and is increasing year by year. And going down to the bottom right, based on this situation, The customer's consumption trend has been changing. They are becoming more cost-conscious. That is the situation that we have been seeing from last year. And given this environment, as for 7-11 Japan, how should we grow? we have a policy. One, that we would like to further improve and polish our products. The strength of 7-Eleven has been the taste and quality of our products, and we would like to further pursue them. In addition, new products and service will be expanded in order to promote more traffic to our stores. And secondly, The employees' productivity is to be improved. 7-Eleven Japan and both franchisees. The employees who are working there should improve their productivity and, in addition, We would like to provide a new shopping experience to customers by DX. So these are the pillars of our business. The concrete policies include to expand our customer base. Those who are not visiting us, we would like to also capture those who are not visiting us today. So in order for that, we would like to expand products and services to meet the demands or potential demands of the market and provide products that will exceed the expectations of consumers. And as we expand our customer base, or customer types, we would also like to improve the or increase the frequency of customers traffic. Have customers become our repeat customers and fixed customers. And in order for that, we will develop new products and provide them with new shopping experience. the marketing products promotion and the floor space. All these will contribute to the customer's experience by franchisees as well as direct stores. And by utilizing DX, we would like to also provide support to franchisees for their operations. We have been continuing to do so the equipment in order to save labor force so that people will have to work short hours to do the same thing in AI order. We would like to improve accuracy of AI order. We have been continuing with Tamping Kandi, but in addition to that, AI's Tamping Kandi is also something that we would like to conduct. And seven now. We have been able to expand 7Now to 12,000 stores and we would like to further increase the adoption of 7Now. Through these countermeasures that we are taking, we would like to acquire new customers and increase frequency of their visits and also increase productivity of workers in order to increase our sales. As for same-store sales, we are aiming at an increase of 2.5% and gross margin plus 0.2%. And operating income, 260 billion yen is what we would like to achieve. We'll expand customer base. We would like to have new customers come. And as for one measure... We are thinking of frozen food. As the society changes, it's not that people will buy frozen food just to store it at home or as bento, but this would be something that will meet the needs of customers who also want to have a very tasty food as well through a frozen food. So 7-11 frozen food over the past 15 years have increased by 20 folds or 1.7 times in the market has grown 1.7 times but 7-11 has grown 20 times we have been increasing the space of our floor, our frozen food space. As you can see on the left-hand side, we have a two frozen food sales floor, two sets, two sets of these chilliers in the frozen food sales floor. However, some stores are not able to have the space to have two. So for those stores, as you can see, we will have gondolas, be replaced with the frozen fixtures so that we will be able to increase the face area by approximately three times and not only the cell space but products are important. The group's product development power will be utilized so that we can provide very tasty food although it is frozen and E-Zap is our development brand and E-Zap will also be introduced into 7-Eleven. This is selling very well. The E-Meat Udon that you can see on the far left is selling very well. So it's not only to store at home but these are very tasty food that people will enjoy eating and these are the types of products assortment that we would like to have. And other than these products, New frozen food that 7-Eleven have not been able to introduce in the past, for example, bread, bakeries, or desserts, or delicatessen, high-value added food. We would like to also have these new frozen food assortments. And also national brand products that are selling well as well. We would like to expand our sales floor, but for smaller stores, we will use different devices. And we would like to have 3,000 island frozen utensils for 3,000 stores. And in order for that, we would like to invest 10 billion yen or more. And next... Our initiatives in expanding customer base. We will introduce products that we have not been introducing in the past. The fresh baked breads. This is selling very well and gross margin is also very high. And at stores only in several minutes, the breads will be baked and we will have these fixtures for that. And on the left-hand side, you will see the product assortments that we are going to provide. And this year we will have 3000 such utensils to allow these fresh bakeries. And we assume that the stores who install these new fixtures will increase sales by 1%. and we also would like to introduce smoothie to all stores where we can.