Summary of Business Results

Net sales increased 3.1% year on year to 135,139 million yen, mainly due to M&A activities in the Elderly Care Business in FY2022 and FY2023, thereby achieving sales growth for the 11th consecutive year.

Operating profit decreased by 12.8% from the previous year to 5,517 million yen due to an increase in personnel expenses resulting from higher-than-usual compensation, start-up costs incurred from new contracts in the Medical Outsourcing Business, and an increase in corporate expenses.

EBITDA decreased by 6.4% year on year to 8.856 billion yen.

Ordinary profit decreased by 17.5% year on year to 5.564 billion yen.

Regarding extraordinary profit/loss, in the Elderly Care Business, a gain on negative goodwill of 2,828 million yen was recorded due to the acquisition of Solasto Care Co.,Ltd. (former name: Mitsui Sumitomo Insurance Care Network Co.,Ltd) and Solasto Care Network Co., Ltd. (former name: Sogo Care Network Co., Ltd) as its subsidiaries in June 2023. However, the Company recorded impairment losses on the consolidation of offices and elderly care offices, business restructuring costs in the Smart Hospital Business and the Education Business and other costs related to reorganization within the Company. As a result, net income decreased by 28.8% year-on-year to 2,257 million yen.

Net sales in the Medical Outsourcing Business decreased by 2.2% from the previous year to 70,464 million yen.This was mainly due to COVID-19 related services decreasing JPY 5.2 billion from the previous year, because of the reclassification of COVID-19 as a class five infectious disease, despite favorable growth due to new contracts in the contracted service and worker dispatching services. Operating profit decreased 8.4% from the previous year to 8,204 million yen despite the increased profit due to the growth of sales of contracted services and worker dispatching services. This was mainly due to the decrease in profit from COVID-19 related services, increased personnel costs because of the improvement of compensation which was higher than usual, start-up costs related to new contracts, and an increase in sales supporting system-related costs due to initiatives to shift to next-generation operations.

Net sales increased 11.0% from the previous year to 53,895 million yen due to M&As activities in FY2022 and FY2023, the contributions of newly opened offices to the business’s performance, and an improvement in the number of users of day care services, which had been stagnant due to the prolonged COVID-19 pandemic. Operating profit increased 10.2% from the previous year to 2,777 million yen due to a recovery from COVID-19 as seen in the increase in the number of users of elderly care services such as day care services, and the absence of the effect of accounting treatment related to the Wage Improvement Support Subsidy for elderly care and childcare workers in FY2022, despite the negative factors such as increased personnel costs following the improvement of compensation, the cost of due diligence and brokerage commissions incurred in M&A activities.

There was a decrease in sales mainly due to the absence of the five months of results from February to June 2022 recorded in the first quarter of FY2022 (due to the accounting treatment associated with a change in the fiscal year period) following the change in the fiscal year period of Cocoro Care Plan Corporation, which became a subsidiary of the Company in February 2022. On the other hand, net sales increased 2.5% year on year to 10,174 million yen, exceeding 10 billion yen for the first time, mainly due to higher unit prices resulting from the revision of official prices in 2023 and an increase in the number of children due to the opening of two new licensed centers in April 2023. Operating profit increased 8.4% from the previous year to 546 million yen due to an improvement in the utilization ratio resulting from an increase in the number of children in childcare centers, despite a decrease in profit due to the impact of the accounting treatment associated with the change in the fiscal year end.

Total assets increased by JPY 5,346 million compared to the end of FY2022, mainly due to an increase in property, plant and equipment which includes land as a result of M&A activities, as well as an increase in cash and deposits and accounts receivable.

Total liabilities increased by JPY 6,434 million, mainly due to an increase in long-term and short-term borrowings and an increase in accounts payable and deposits received due to the payment of social insurance contributions being carried over to FY2024, as the end of FY2023 was a bank holiday.

Net assets decreased by JPY 1,087million due to dividend payments of JPY 1,887 million and the acquisition of treasury shares of JPY 1,499 million, despite the recording of net income of JPY 2,257 million.

Net cash provided by operating activities amounted to 7,858 million yen as a result of adjusting income before income taxes and minority interests of 4,141 million yen for impairment loss, recording of non-cash items such as amortization of goodwill and gain on bargain purchase, and an increase in accounts payable and deposits due to the fact that payments of social insurance premiums were carried forward due to the impact of the financial institution holiday, and income taxes paid. Net cash provided by operating activities in FY2022 totaled 9,012 million yen.

Net cash used in investing activities amounted to 2,762 million yen due to M&A and purchases of property, plant and equipment. Net cash used in investing activities was 2,171 million yen in FY2022.

Net cash used in financing activities was 1,837 million yen due to cash dividends paid and the purchase of treasury stock, while net cash provided by financing activities was 1,765 million yen due to the net inflow of new loans and repayment of loans payable. Net cash used in investing activities was 5,211 million yen in FY2022.

As a result, the year-end balance of cash and cash equivalents increased by 3,258 million yen from the end of FY2022 to 15,115 million yen.