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Performance review and future efforts

On November 10, 2023, we published a financial result for the fiscal year ending September 2023.

The followings are detailed result and our future efforts.

About the profit announcement of the 21st period (the fiscal year ending September 2023)

  As for Japan’s economy during the consolidated fiscal year, business conditions DI (latest) of non-manufacturing industry have become better for six consecutive quarters according to Tankan survey issued in October, making it the highest level since the survey in November 1991. The business confidences have improved especially in hotel and food service industries because of recovery of sightseeing demand and increase of inbound demand in the gradual resolution of restrictions on business activities due to the spread of COVID-19. On the other hand, a cautious approach to the economic prospect of the entire non-manufacturing industry has been taken due to concerns over decreased demand and increase in cost caused by a rise in prices as well as a serious understaffing problem.

 In these circumstances, we have been implementing active measures suited for characteristics of each segment and business style aiming at business recovery. As stated in “Notice regarding acquiring 100% ownership of iiy Co., Ltd. through acquisition of share and short-form share-for-share exchange” announced on January 13th, 2023, iiy Co., Ltd., which develops and sells original products utilizing unique market research methods, joined our group and became a part of our consolidated accounting on the same day.

 As a result, sales of the mail-order business improved on sales of the previous consolidated fiscal year and restored profitability partly because iiy Co., Ltd. became our affiliate subsidiary and became a part of the segment. As for the wholesale business, sales became slightly lower than the previous consolidated fiscal year as inbound demand from China was lower than expected, but operating profit improved significantly and restored profitability. As a new move, we entered into the business to offer our products as the return gift of hometown tax donation program in order to boost sales by expanding sales channel and ensure repeat customers. It has been deployed in Yamatokoriyama City (Nara Prefecture), Tosu City (Saga Prefecture), Kanazawa City (Ishikawa Prefecture), Ashiya County, Onga District (Fukuoka Prefecture). However, the store concept focused on sundries to increase customers, and due to the retail business whose cost rate deteriorated and M&A advisory cost and unexpected cost of holding an extraordinary general shareholders’ meeting, our business performance of the consolidated fiscal year was 2,136,884,000 yen in sales (decrease of 8.1% compared to the same period of the previous year), while the operating loss was 214,214,000 yen (Operating loss of the same period of the previous year was 119,080,000 yen), the ordinary loss was 216,931,000 yen (ordinary loss of the same period of the previous year was 116,993,000 yen), and the net loss in this period attributable to shareholders of the parent company was 272,624,000 yen (the net loss attributable to shareholders of the parent company of the same period of the previous year was 156,527,000 yen).

 As for segments, as stated in “Notice regarding business segment change” announced on November 11th, 2022, we changed from segments by brand to segments by sales method, like “Mail order business”, “Wholesale business”, “Retail business” and “Hygiene consulting business”, and we reflect the administration cost including the cost to maintain listing which cannot be allocated to other segments in the adjustment section. Then, we changed business segment to report, and the comparison and analysis of this consolidated fiscal year are based on the segment after change.

 The administration department including R&D department of each segment is promoting product development speed-up and development of low-cost OEM products, along with the cost reduction project which has become our group’s culture.

 We also absorbed Cure on January 1st, 2023. We will carry out new measures to improve synergy effect of our brands. In addition, we keep on focusing more on M&A toward start-up business to enhance our group’s value as well as promoting measures to restore profitability of existing business. 

 

■ Mail order business

 The sales was 889,685,000 yen (increase of 12.6% compared to the same period of the previous year) and the segment profit was 204,574,000 yen (decrease of 6.7% compared to the same period of the previous year).

 As for the measures of the mail order business, we aimed at enlarging revenue by improving prevention ratio of cancellation by regular customers, finding dormant customers, inauguration of telephone business service utilizing skills of phone operators in telephone selling, and by gaining new customers by advertisements and sample distribution to influencers in EC sales. As for telephone selling, finding potential customers and prevention of cancellation of regular customers are considered to be the top priority because investment in web promotion was held down in terms of cost efficiency. From December 2022, we started telephone business service to optimize the use of sales capacities of phone operators. As for EC sales, we tried to improve recognition of existing brands and share customer list with the retail business as well as promoting interaction among measures, but it took longer than planned to reflect new measurement to sales. However, we succeeded in establishing stable and profitable management structure because iiy Co., Ltd. with a good track record in EC sales, joined our group, although sales of the whole mail-order business was lower than the same period of the previous year and operating profit decreased compared to the same period of the previous year due to increase in investment in the web.

 

■ Wholesale business

 The sales was 456,968,000 yen (decrease of 1.9% compared to the same period of the previous year) and the segment profit was 150,449,000 yen (increase of 56.8% compared to the same period of the previous year).

 As for the measures for the wholesale business during this period, we aimed at widening overseas sales expanding product range by improving existing products and developing new products. As for domestic wholesale business, already-known Cure brand has been gradually introduced into major chain drug stores through the promotion activities by popular Youtubers. Although we expected recovery of inbound demand in the gradual resolution of restrictions on business activities due to the spread of COVID-19, the number of inbound tourists from China fell far short of our expectation due to problems relating to water treated by ALPS, resulting in sales lower than expected. With respect to overseas wholesale business, as stated in “Notice regarding settlement pertaining to a petition for provisional disposition order against a subsidiary firm” announced on June 28th, production and sales of our flagship product “Natural Aqua Gel” are banned from July 1st, 2022, to July 31st, 2023, in China, Hong Kong, and the United States, and the condition was removed and sales of the product was resumed since August 1st,, and sales of the product is currently expanding into Asia market with a central focus on Southeast Asia. Favorina and Fine Visual, which have proven record in mail order business, and Aroma Bloom already deployed in the retail business, launched wholesale business and we have been working on active promotional activities to expand awareness both domestically and internationally. As a new move to SDGs management, we participated in the sharing shopping app “Kauche”, “Otameshi” operated by netprice.com, Ltd., and hometown tax donation programs under the theme of “Eliminate wasted cosmetics and disposal loss!”. As a result, sales became slightly lower than the same period of the previous year, while segment profit largely surpassed the same period of the previous year because a settlement was reached in the petition for provisional disposition order and we do not need to legal fee.

 

■ Retail business

 The sales was 735,279,000 yen (decrease of 26.3% compared to the same period of the previous year) and the loss by segment was 75,845,000 yen (loss by segment in the same period of the previous year was 21,724,000 yen).

 As for the measures during the period, we aimed at improvement of the efficiency of business operation by integrating stores, and expansion of new customers by test marketing of new concept store. We currently operate 20 stores (as of September 30, 2023) around Tokyo, and newly opened stores in Shinyurigaoka in March 2022 and in Ebina in November 2022 with new concept “Aromatherapy shop to provide assistance with problems”. We also develop OEM products to improve cost rate, aiming at strengthening sales activity focusing on OEM products. In addition, we actively set up events in stores such as “Aroma education workshop” for parents and children where twelve types of aroma good for raising children are introduced, as well as “workshop” to hand-craft aromatherapy items with essential oils of customers’ choice and “Good night-‘sleep education’ starting from reset -” campaign held on “Spring sleep’s day”, resulting in improvement in average customer spend. However, the cost rate significantly deteriorated because the stores focused on sales of sundries again to deal with customers who were slow to return to retail stores due to change in customers’ lifestyles after COVID-19 pandemic, and sales and loss by segment became much lower than expected due to integrating stores, resulting in a persistent deficit.

 

■ Hygiene consulting business

 The sales was 56,479,000 yen (decrease of 13.0% compared to the same period of the previous year) and the loss by segment was 26,668,000 yen (loss by segment in the same period of the previous year was 37,022,000 yen).

 As for the measures during the period, we kept on focusing on HACCP management guidance corresponding to the food hygiene law gradually permeating in the entire food industry, as well as JFSM (Japan Food Safety Management Association) certification acquisition consultation., HACCP is not yet widely spread in the food industry in Japan, and degree of penetration of HACCP management corresponding to the food hygiene law largely depends on customers, and sales became lower than the same period of the previous year while segment loss was improved, resulting in a persistent deficit. In the future, we will increase orders by proposing above-mentioned consultations to customers’ plans to build new or additional plants to expand their business. In addition, since “Adopted as IT introduction support business operator” was announced on December 6, 2022, we have been adopted as “IT introduction support business operator” and capable of offering services and gradually building up a track record, while HACCP management software “HACCP DO” became a subsidized program.

 

 

About our future efforts

 As for the future outlook, business conditions of non-manufacturing industry during the fiscal year ending September 2023 have become better for six consecutive quarters according to Tankan survey issued in October, making it the highest level since the survey in November 1991. The business confidences have improved especially in hotel and food service industries because of recovery of sightseeing demand and increase of inbound demand in the gradual resolution of restrictions on business activities due to the spread of COVID-19. On the other hand, a cautious approach to the economic prospect of the entire non-manufacturing industry has been taken due to concerns over decreased demand and increase in cost caused by a rise in prices as well as a serious understaffing problem.

 The mail order business established stable and profitable management structure, and we will restore profitability through accumulation of customer stock by finding dormant customers by telephone operators as well as acquiring new customers by efficiently utilizing promotion cost, and as for EC sales, we will expand sales by improving own online shopping site and strengthening of sales in shopping malls, as well as enhancing recognition of our brands through social media or ad serving.

 The wholesale business also established stable and profitable management structure and raised 50 million yen in funding by exercising the 16th Moving Strike Warrant to strengthen overseas deployment for expansion of overseas sales channel. We also aggressively enter into new market by joining hometown tax donation programs to expand sales.

 As for the retail business, we will increase the number of customers by attracting a new customer segment as well as generating repeat business and improve cost rate and personnel expenditure ratio in order to erase chronic deficits.

 As for the retail business, we will increase the number of customers by attracting a new customer segment as well as generating repeat business and improve cost rate and personnel expenditure ratio in order to erase chronic deficits.

 

 The forecast shown above has been created based on information available on the day of announcement of this material and actual performance results may differ from expected figure due to various factors.


November 2023

 

Financial highlights

Change of business records

Amount of sales

The 13th The 14thThe 15thThe 16thThe 17thThe 18th
2,3734,3112,6682,2481,9581,967

(Unit: one million yen)

Business profit/sales ratio

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
Business profit8727711137△231△397
Sales ratio3.76.44.21.7△11.8△20.2

(Unit: one million yen/%)

Ordinary profit/sales ratio

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
Ordinary profit7726016125△226△405
Sales ratio3.26.06.01.1△11.6△21

(Unit: one million yen/%)

Net income attributable to owners of the parent/sales ratio

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
Net income
attributable to
owners of the parent
31122200△45△367△464
Sales ratio1.32.87.5△2.0△18.8△23.6

(Unit: one million yen/%)

Change of financial condition

Gross asset

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
2,8823,2113,2683,1132,5802,026

(Unit: one million yen)

Net asset

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
1,1621,2821,4781,4341,037673

(Unit: one million yen)

Own capital/gross asset ratio

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
Own capital1,1521,2741,4741,4281,031663
Gross asset ratio40.039.745.145.940.032.7

(Unit: one million yen/%)

Change of cash flow

Cash flow from business operations

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
△14424424093△186△233

(Unit: one million yen)

Cash flow from investments

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
△591344166△12444

(Unit: one million yen)

Free cash flow ※1

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
△735248284260△311△188

(Unit: one million yen)

Cash flow from financial activities

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
623133196△156△177△99

(Unit: one million yen)

Cash and cash equivalents at end of year

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
7241,1031,5861,6901,201969

(Unit: one million yen)

Information per share

Net profit per share

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
4.7917.4929.21△6.67△54.08△68.02

(Unit: yen)

PER ※2

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
53.419.815.6

(Unit: times)

Net asset per share

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
167.76185.56214.75208.04152.1594.99

(Unit: yen)

PBR ※2

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
1.51.82.12.83.24.8

(Unit: times)

Others

Total number of issued shares ※3

(Unit: share)






















The 13th The 14th The 15th
6,973,470 6,973,470 6,973,470
The 16th The 17th The 18th
6,973,470 6,973,470 7,175,570

Number of employees ※4

The 13thThe 14thThe 15thThe 16thThe 17thThe 18th
1171101011039995

(Unit: people)

※1 Free cash flow is calculated as “cash flow from business operations + cash flow from investments”
※2 PER and PBR are calculated from the market price at the end of each fiscal year.
※3 Total number of issued shares at the end of each fiscal year (including treasury shares)
※4 Temporary employees are not included.

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