9220.T

Core Operational Updates

• The company executed aggressive growth strategy during the half-year period: launched a new重度訪問介護 (intensive home care) service in April 2025, opened the グループホームエフビーゆいの杜 group home in June 2025, and acquired 2 welfare equipment sales locations via M&A business transfer in June 2025. It also secured public selection for a new 9-person group home (グループホームエフビー御嶽堂第2 (仮称)) planned to open in March 2027 via converting an existing residential care facility to control construction costs.
• Successfully regained compliance with Tokyo Stock Exchange Standard Market listing maintenance requirements after six months of improvements including enhanced IR activities and an earlier announced dividend increase, with share price recovering to meet standards as of September 2025.

Welfare Equipment Business Initiatives

• Continues expanding in-house purchased rental product sales, which offers higher margins, faster delivery, guaranteed safety, higher product reuse rates, and lower user costs compared to wholesale-sourced rental products.
• Focuses on developing new users, especially for low-care-level needs such as handrails and walkers, to capture early demand and lock in users for future higher-need services, aligned with trends of aging population growth and preference for home care.
• Prioritizes strengthening existing locations rather than new full construction to control costs, and expands growth at subsidiary Silver Assist in the fast-growing high-aging Tama City, South Kanto region via split-branch and satellite office models.

Nursing Care Business Initiatives

• Is undergoing a return-to-basics restructuring, retraining staff on care skills and service quality to improve operational performance amid industry headwinds of soaring prices and labor shortages.
• Adapts growth strategy to soaring construction costs by converting existing surplus facilities into new group homes instead of new construction, and completed the first conversion of a community-based day care center to a regular-size facility to expand service coverage amid temporary demand declines.
• Is testing intensive home care service expansion with a strict focus on profitability, with plans to expand into disabled care if the business model proves viable.

Shared Growth Strategy

• Targets M&A of peer businesses to build dominant clustered service areas to support the company's core one-stop full care service offering, expanding market share and operational efficiency.

• Full-year 2026 March Fiscal Year Consolidated Guidance (maintained, on track):
  • Expects total consolidated revenue of 11.735 billion yen, a 7.0% increase year-over-year.
  • Expects operating profit of 684 million yen, a 3.7% increase year-over-year.
  • Expects ordinary profit of 742 million yen, a 9.5% increase year-over-year, including 61 million yen in construction subsidy revenue for the new group home.
  • Expects net profit attributable to parent shareholders of 460 million yen, a 13.2% increase year-over-year, with EPS forecast at 184.96 yen.
• Segment Full-year Guidance:
  • Welfare Equipment Business: 4.849 billion yen revenue (+5.7% YoY), 320 million yen operating profit (+2.2% YoY), in-line with plan as the acquired locations have been fully integrated smoothly.
  • Nursing Care Business: 6.885 billion yen revenue (+7.9% YoY), 363 million yen operating profit (+5.1% YoY), with low first-half operating profit progress driven by one-time opening costs, expected to improve in the second half with no additional large one-time costs projected.
• Interim Progress:
  • First-half revenue progress is slightly below 50%, ordinary profit progress is 54.3% and net profit progress is 58.1%, both above 50% and on track.
• Dividend Guidance:
  • Announced a 5 yen per share increase to full-year annual dividend of 38 yen (13 yen interim, 25 yen year-end), and will continue considering future dividend increases alongside business growth.
• Mid-term 5-year (2025-2029 Fiscal Year) Guidance:
  • Targets total 150 billion yen revenue by final year, with 140 billion yen from organic growth (6.3% average annual growth) and 10 billion yen from M&A. Targets 10 billion yen adjusted operating profit (operating profit plus construction subsidies).
  • Segment targets: Welfare Equipment Business: 60 billion yen revenue, 460 million yen segment profit; Nursing Care Business: 80 billion yen organic revenue + 10 billion yen from M&A, 540 million yen adjusted operating profit.

1. Welfare Equipment Business (福祉用具事業):
   • Absolute revenue: 2.435 billion yen, a 6.9% increase year-over-year.
   • Absolute operating profit: 160 million yen, a 14.9% increase year-over-year.
   • Revenue contribution to total consolidated revenue: ~42.7%.
2. Nursing Care Business (介護事業):
   • Absolute revenue: 3.269 billion yen, a 2.8% increase year-over-year.
   • Absolute operating profit: 99 million yen, a 50.4% decrease year-over-year, driven by one-time costs.
   • Revenue contribution to total consolidated revenue: ~57.3%.

• Industry-wide headwinds: Sustained price inflation has pushed up food, construction and procurement costs, with nursing care fees effectively flat, squeezing margins industry-wide. Chronic labor shortages continue to challenge operations and growth.
• Construction cost inflation: New group home construction costs have doubled compared to previous levels, making new construction unprofitable even with maximum cost cutting, forcing a shift to lower-cost facility conversion to meet demand.
• Long-term demand trends: Aging population growth is expected to slow in many regional markets where the company operates, and existing users will eventually shift to residential care and cancel welfare equipment rental contracts, increasing pressure on new user acquisition.
• Regulatory and policy risk: The sustainability of nursing care services is increasingly threatened by price inflation and labor shortages, and the company is relying on new government policy support to address industry headwinds.
• M&A requires internal capital accumulation: The company's M&A growth strategy depends on retaining sufficient internal capital to fund acquisitions, putting pressure on near-term dividend payout ratios.

Q: Why did ordinary profit and net profit increase year-over-year (16.7% and 25.4% respectively) but operating profit decreased 23.7% in the first half? / A: The operating profit decline is caused by three one-time costs: brokerage fees for the M&A acquisition of two welfare equipment locations, opening costs for the new group home, and bonus expenses paid using the local government's human resource subsidy. These subsidies are recorded as non-operating revenue (not offset against operating cost) under accounting rules, so they increase ordinary profit while the full bonus cost reduces operating profit. No large one-time costs are expected in the second half, so operating profit progress will improve.

Q: How is the company addressing severe industry-wide labor shortages that could limit growth? / A: The company is improving work-life balance via converting non-regular staff to regular, implementing 120 annual holiday schedules, and changing to flexible working hour systems for residential care staff. It uses government subsidies to improve staff pay, has actively recruited overseas talent since 2019 (currently ~90 staff from 6 countries), and is investing in DX to reduce staff workload and improve the job appeal of nursing roles.

Q: The 20.5% forecast dividend payout ratio is still low compared to other listed firms even after the 5 yen increase; will you continue increasing dividends going forward? / A: The company previously targeted 25% payout ratio while working to reach 50% equity ratio to support M&A funding needs and financial health. It now recognizes the need to re-evaluate the optimal capital structure and dividend policy from the perspective of capital cost and share price awareness. It will continue reviewing dividend policy, including future increases, considering the tough industry environment and peer payout practices.