COMPANY RESEARCH AND ANALYSIS REPORT

Riso Kyoiku Co., Ltd.
4714
Tokyo Stock Exchange First Section

5-Jan.-2022
FISCO Ltd. Analyst

Yuzuru SatoFISCO Ltd.
https://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Overview of 1H FY2/22 results. . ...................................................................................................................

01

2. FY2/22 forecasts. . .................................. ......................................................................................................

01

3. Medium-term management plan............ ......................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Company history. . ........................................................................................................................................

03

2. Business overview................................. ......................................................................................................

04

3. Characteristics and strengths......................................................................................................................

07■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 10
1. Overview of 1H FY2/22 results. . ...................................................................................................................

10

2. Segment trends...........................................................................................................................................

12

3. Financial situation.................................. ......................................................................................................

14■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. FY2/22 forecasts. . .................................. ......................................................................................................

16

2. Medium-term management plan............ ......................................................................................................

18■Shareholder returns------------------------------------------------------------------------------------------------------------------------------------------------- 22

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/█ Summary
Results continue to be strong, centered on TOMAS and Shingakai,
while the FY2/22 forecasts are for new record highs for the first timein two fiscal years
Riso Kyoiku Co., Ltd. <4714> (hereinafter, “the Company”) is an educational service company that has establisheda unique business model by combining “genuinely one-on-one instruction” and “academic advancement” and issteadily broadening its scope. The Company’s subsidiaries include Shingakai Co., Ltd., which provides entrance
exam preparation for kindergartens and elementary schools; Meimonkai Co., Ltd., which dispatches professional
home tutors; School TOMAS Co., Ltd., which provides in-school one-on-one instruction; and Plus One Kyoiku Co.,
Ltd., which plans tour-style experiences and runs gymnastics classes.
1. Overview of 1H FY2/22 results
In the 1H FY2/22 (March to August 2021) consolidated results, sales and profits increased significantly, with net sales
rising 31.5% year-on-year (YoY) to ¥14,612mn and operating profit of ¥1,331mn (compared to an operating loss of¥460mn in the same period in the previous fiscal year). Amid the ongoing novel coronavirus (hereinafter, COVID-19)
pandemic, the Company has been highly evaluated for conducting thorough infection-prevention measures toestablish safe learning environments, as well as for providing high quality “authentic” educational services, so student
numbers in each of the Group’s businesses steadily grew. In addition, TOMAS and Shingakai contributed as a resultof the fee revisions implemented in March 2021. At the end of August 2021, the Group’s number of students had
increased by 10.7% YoY to 26,645 students, a new record high.
2. FY2/22 forecasts
For the FY2/22 consolidated results, the Company has announced the second upward revisions to the initial
forecasts (which were net sales of ¥29,000mn and operating profit of ¥2,510mn) and is forecasting record highs
for the first time in two fiscal years, with net sales to increase 19.0% YoY to ¥30,000mn and operating profit torise 197.8% to ¥3,010mn. This is mainly because in each business, it will actively move ahead with opening new
schools and expanding capacity, which it temporarily stopped in the previous period due to COVID-19, so student
numbers are expected to grow at a pace higher than anticipated. However, the impression is that even the upwardly
revised forecasts are conservative, and we at FISCO think that they can be exceeded. For School TOMAS, whichis expected to become a potential mainstay business in the future, a system has been put in place to accelerate
the speed at which this service is implemented. This is because in June 2021, a business collaboration between
School TOMAS Co., Ltd., and KDDI Matomete Office Co., Ltd., was announced, through which the networks of bothcompanies will be mutually utilized to advance proposals to introduce School TOMAS’s services. KDDI Matomete
Office has a track record in this field, including introducing tablets and other devices to 250 schools nationwide,
and School TOMAS is proposing introductions of its service into these schools. At the end of August 2021, thenumber of contracted schools was 82, while the target for FY3/23 is 100. However, due to the announcement of
this collaboration, achieving this target is already in sight and may be further exceeded through these introductions.

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01 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Summary

3. Medium-term management plan
In April 2021, the Company announced its three-year medium-term management plan, in which it set numericalresults targets of net sales of ¥35,500mn and operating profit of ¥3,710mn in FY2/24. But in FY2/22, the plan’s
first fiscal year, progress is being made at a pace higher than expected, so depending on conditions in the future, it
is possible that it will upwardly revise these results targets. In terms of growth strategy, there has been no change
to the policy of aiming for annual double-digit rates of increase for sales and profits through providing high quality“authentic” educational services and actively opening new schools. Also, through the business collaboration with
Hulic <3003> and Konami Sports Co., Ltd. that was announced in September 2020 for the Kodomo Department
Store (provisional name) concept, which is an education-specialist building for the provision to children of one-stop
educational services, the plan is to start phase one of this business in 2022 and to expand to 20 schools in the Tokyo
metropolitan area by 2029. By moving ahead with this strategy, it will be possible to provide several of the Group’s
educational services at one location, which is expected to increase the number of students through a “retention
strategy” as well as improvements to lifetime value and expansion of earnings even further by further improving work
efficiency. Attention will be given to future developments.
Key Points
Earnings have rapidly recovered, centered on TOMAS and Shingakai, while sales and profits increased
significantly in the 1H FY2/22 results• Even though the FY2/22 results forecasts have been upwardly revised, there is still room for results to exceed
them• Based on the excellent growth of student numbers, it is highly likely that the medium-term results targets will
also be upwardly revised•

Trends in operation results
Net sales (left)

Ordinary profit (right)(¥mn)
35,000

3,000

2,749

30,00025,000

3,500

3,000

2,540

2,500

2,139

20,000

2,000

1,192

15,00010,000(¥mn)

22,58424,496

26,70430,000

1,500
1,000

25,201

5,000

500

0

0
FY2/18

FY2/19FY2/20FY2/21

FY2/22 E

Source: Prepared by FISCO from the Company’s financial results and press releases

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02 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/█ Company profile
Established in 1985 for the purpose of delivering high-quality
educational services
1. Company history
Mitsugu Iwasa, currently a director and chairman, took over 14 classrooms from Kodomo Pia, a business in which he
was part of the management team. When this business switched to an emphasis on selling educational equipment,
he used the opportunity to establish Nihon Kyoiku Kosha K.K. in July 1985 for the purpose of delivering high-quality
one-on-one educational services.
The Company initially started with a group learning format of classrooms under the name of Riso Kyoiku Kenkyusho(Risoken) that consisted of six students per class, with classes organized by academic capabilities and 100% fulltime teachers. In March 1990, the Company developed and began providing a unique “entirely one-on-one individual
instruction system” and changed the service name to Tokyo Man-to-man School. Management subsequently
changed the service name to TOMAS (initially adopted as a nickname in 1997 and then as the official name in 2000),
which has continued since then.
The Company has actively diversified educational services as well. It opened the Meimonkai home tutor centerand entered the home tutoring market in May 1989. In 2000, it established Nihon Edunet Co., Ltd. (now, School
TOMAS Co., Ltd.) which offers entirely one-on-one instruction in a real-time, interactive format utilizing internet
teleconferencing. It also established School Tour Ship Co., Ltd., which provides character-building training camp
education (now, Plus One Kyoiku Co., Ltd.), in 2002 and acquired shares of Shingakai, which offers entrance exam
preparation for well-known kindergartens and elementary schools, making it into a subsidiary in 2003. In recent
developments, the Company concluded a capital and business alliance with Surugadai Gakuen Educational Institutein July 2019 and established Sundai TOMAS, a joint venture (with the Company owning a 51% stake), in September
2019 in an aim to further develop Spec. TOMAS, an individualized instruction school with focus on entrance exams
for the most difficult schools.
In the stock market, the Company registered its stock as an over-the-counter security with the Japan Securities
Dealers Association in 1998, moved to the Second Section of the Tokyo Stock Exchange (TSE) in 2001, and thenswitched to TSE’s First Section, where it is currently listed, in June 2002. It has been selected for the Prime Market
in the new market categories that the TSE will introduce from April 2022.

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03 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Company profile

Company history
Date

History

July 1985

Established Nihon Kyoiku Kosha K.K. to accommodate the acquisition of 14 classrooms from Kodomo Pia with the purposeof providing high-quality one-on-one educational instruction services and started opening classrooms under the Riso Kyoiku
Kenkyusho nameMay 1989

Established the Meimonkai home tutor center and entered the home tutor market, began individual instruction with a professionaltutor group that differs from student tutors

March 1990
October 1998
December 1998
July 2000

Developed the unique “one-on-one individual instruction system (each equipped with a whiteboard)” and changed the service
name to “Tokyo Man-to-man School.”
Renamed from Nihon Kyoiku Kosha K.K. to Riso Kyoiku Co., Ltd.
Conducted OTC registration of shares with the Japanese Securities Dealers Association
Established Nihon Edunet Co., Ltd. with the aim of conducting genuine one-on-one instruction in an interactive environment
utilizing Internet video conferencing

March 2001

Listed shares on the Tokyo Stock Exchange Second Section (TSE-2)

June 2002

Reassigned to the Tokyo Stock Exchange First Section (TSE-1)

December 2002
January 2003

Established School Tour Ship Co., Ltd. with the aim of conducting character-building training camp education
Established Meimonkai Co., Ltd. as a spin-off of the home tutor dispatching business, acquired Shingakai Co., Ltd., which
provides kindergarten and elementary school entrance exam preparation, as a wholly owned subsidiary

July 2005

Transferred the student recruitment business division to School Tour Ship Co., Ltd. and renamed it as Riso Kyoiku Kikaku Co.,
Ltd.

October 2013

Established Inter TOMAS Co., Ltd. as a spin-off of the English school division, established Plus One Kyoiku Co., Ltd. as a spinoff of the character-building training camp education business, renamed Nihon Edunet Co., Ltd. as School TOMAS Co., Ltd.,
renamed Riso Kyoiku Kikaku Co., Ltd. as TOMAS Kikaku Co., Ltd.

November 2016

Established TOMAS ENGLISH TRAINING CENTER, INC. (99.9% owned by School TOMAS), an online English conversation
business for school operators, in Cebu IT Park

September 2019

Established joint-venture company Sundai TOMAS (owns a 51% stake) based on a capital and business alliance with Surugadai
Gakuen Educational InstituteFebruary 2020

Opened the first school for Spec. TOMAS, a new brand, in Jiyugaoka under Sundai TOMAS. Absorbed Inter TOMAS Co., Ltd.
and TOMAS Kikaku Co., Ltd.

August 2020
September 2020

Established Cocokara Teachers Co., Ltd. as a firm specializing in hiring, training and placing teachers to Group companies
Formed a capital and business alliance with Hulic Co., Ltd. and is involved in a business alliance with Hulic and Konami Sports.

April 2021

Shingakai Co., Ltd., and Konami Sports Co., Ltd., announced a business collaboration aiming for the joint development ofKonami Sports Shinga’s Academies

June 2021

School TOMAS Co., Ltd., and KDDI Matomete Office Co., Ltd., announced a business collaboration to jointly advance theestablishment of ICT environments for schools and introductions of an in-school learning-support system

Source: Prepared by FISCO from the Company’s securities report and press releases

Building educational service businesses mainly through TOMAS,
Meimonkai, and Shingakai
2. Business overview
The Company and its five major subsidiaries are steadily building educational services mainly driven by educational
instruction schools. In terms of business segments, the Company provides disclosure for the educational instruction
school business, home tutor dispatching education business, young child education business, in-school one-on-one
instruction business, and character-building training camp education business. In sales distribution by business inthe past five years, the educational instruction school business has continued to make up just over 50% of total
net sales, while the three main businesses of educational instruction school business, home tutor dispatchingeducational business and young child education business made up roughly 90% of overall sales.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.

5-Jan.-2022

4714 Tokyo Stock Exchange First Section

https://www.riso-kyoikugroup.com/en/ir/

Company profile

B re ak do w n by b u s i n e s s s e g m e n t s
Educational instruction school
Young child education
Character-building training camp education
100.0%

Home tutor dispatching education
In-school one-on-one instruction
2.5%
5.3%

90.0%

6.5%
5.0%

6.4%
4.8%

6.7%
4.7%

6.3%
5.6%

80.0%

16.0%

16.7%

17.7%

18.0%

22.1%

21.3%

19.9%

19.3%

50.5%

50.8%

51.0%

50.9%

54.0%

FY2/17

FY2/18

FY2/19FY2/20FY/2/21

19.2%

70.0%
60.0%

18.9%

50.0%
40.0%

30.0%
20.0%
10.0%
0.0%

Note: Ratios are calculated excluding “other”
Source: Prepared by FISCO from the Company’s financial resultsThe educational instruction school business consists of 88 entirely one-on-one instruction TOMAS schools, which
are its mainstay business, in the Tokyo metropolitan area (as of the end of August 2021, same below), 10 English
conversation Inter TOMAS schools, and 4 one-on-one instruction MEDIC TOMAS schools for medical school
exam preparation. Additionally, it opened Spec. TOMAS (a school located in Jiyugaoka), a provider of one-on-one
instruction that specializes in entrance exams for the most difficult schools, in February 2020 under subsidiary
Sundai TOMAS.
TOMAS, an entirely one-on-one instruction school for elementary students to high school students, has been themost successful at getting students accepted to the most difficult schools as an individual instruction school thanks
to preparation and provision of a curriculum that works backward from acceptance for individuals tailored to the skillsof each student, according to the Company. With university student and adult part-time instructors as the majorityof teaching staff, and full-time employees in charge of academic consultation and support, the Company is capableof delivering trusted, reliable service with a high level of customer satisfaction. Additionally, Spec. TOMAS schools
implement an entrance exam and refer students who fail the exam to nearby TOMAS schools. The Jiyugaoka school
focuses on 1st–6th year elementary students with the aim of preparing them to pass exams for the toughest middle
schools and hires teachers as full-time employees to support this process.
In the home tutor dispatching education business, Meimonkai operates 35 schools in major cities nationwide.
Professional adult teachers provide service as home tutors, and the Company asserts that it is the only home tutor
center capable of disclosing advancement results. It has many accepted candidates each year, including particularlyhigh acceptance results to medical schools. It also operates 11 TOMEIKAI schools as individualized instruction
schools with service areas outside of the Tokyo metropolitan area (5 schools in the Kyushu area, 3 schools in the
Tokai area, 2 school in the Koshinetsu area and 1 school in the Kinki area). TOMEIKAI schools hire university student
teachers and thus seek locations near medical universities or other universities that have many talented students
nearby.

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05 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Company profile

In young child education business, Shingakai (which is now in its 65th year since being established), which possesses top-class acceptance results as a pioneer in well-known kindergarten and elementary school entrance
tests, operates 24 schools mainly in the Tokyo metropolitan area (Tokyo metro 21 schools, Keihanshin 3 schools).
Furthermore, as after-school care and childcare services with robust demand, this business has 23 locations under
the Shinga’s Club brand (16 after-school care sites, 7 childcare sites). Childcare sites operate extended-lengthchildcare with activities related to entrance exam skills that utilize the Shingakai educational method. These sites
receive strong support from working mothers who want to successfully manage work and child-rearing duties andremain highly popular with available spots filling up once schools open. After-school care sites similarly conduct
activities that include advancement instruction incorporating unique educational curriculum. These sites are nearlyas popular as childcare facilities.
In the in-school one-on-one instruction school business, School TOMAS provides individual instruction service atcontracted schools after normal class hours with teachers that it dispatches to the schools and using the atama+
AI learning assistance system and “Sundai Satellite Network 21” video teaching material system from 2020. It
has been steadily increasing the number of contracted schools, particularly at private schools that cover middle
and high school years faced with the management challenges of recruiting sufficient student numbers amid theshrinking child population and long working hours for instructors. The Company was operating 82 schools at theend of August 2021.
The character-building training camp education business consists of seven schools for soccer and eight schools forgymnastics run by Plus One Kyoiku and planning and provision of School Tour Ship, an experience-type educational
program using weekend days, summer vacation and other extended holidays. This program aims to cultivate
action-taking and decision-making capabilities through participation in various experiences provided by School
Tour Ship. The Company does not emphasize profits in this business because of its positioning as an added-value
service for students at TOMAS and other main businesses.
Overview of business segments and main companies
Businesssegments

Company
nameBusiness description

Service regions

Riso Kyoiku

Educational instruction school business. Mainly operates TOMAS entirely
one-on-one instruction schools as well as MEDIC TOMAS medical department
entrance exam individualized instruction schools and Inter TOMAS English
conversation schools

Tokyo metropolitan area

SundaiTOMAS

Operates Spec. TOMAS one-on-one instruction schools that specialize inentrance exams for the most difficult schools

Tokyo metropolitan area (likely to
expand in the future)

Meimonkai

Operates Meimonkai that dispatches home tutors and TOMEIKAI one-onone instruction schools in regional areas (outside of Tokyo and the threesurrounding prefectures)

Dispatches home tutors
nationwide
TOMEIKAI offers services outsideof the Tokyo metropolitan area

Young childeducationbusiness

Shingakai

Operates Shingakai, a school that handles entrance exam instruction for top
kindergartens and elementary schools, and Shinga’s Club, a childcare andafter-school care business

Shingakai has schools in theTokyo metropolitan area andKeihanshin
Shinga’s Club has locations in theTokyo metropolitan area

In-school
one-on-one
instruction
business

SchoolTOMAS

Offers in-school one-on-one instruction

Characterbuilding
training camp
educationbusiness

Plus OneKyoikuOperates a school business with a soccer school and gymnastics school anda tour business that cultivates action-taking and decision-making capabilities
through various experiences

Educational
instruction
schoolbusiness
Home tutor
dispatchingeducationbusiness

Nationwide

Source: Prepared by FISCO from the Company’s securities report and results briefing materials and others

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06 22

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Company profile

Is continuing to develop high-quality education service that utilizes
an approach of entirely individual instruction as a differentiation
strategy
3. Characteristics and strengths
While the Company has a variety of characteristics and strengths, we think the following two are particularly
important: 1) consistently increasing income over the long term and 2) realizing high profitability. We think theadvantageous business model built by the Company is the source of these two characteristics, and comprehending
them is likely to improve understanding and certainty of the medium- to long-term growth scenario.
The Company reported ¥163mn in net sales in FY6/86, its founding year, and sustained steady sales growth throughFY2/13 (although sales dropped in FY2/06 with its abnormal 8-month period due to the fiscal year change, they werehigher on a real basis that converts sales to a 12-month format). Since then, the Company has sustained a growthtrend over the long term, excluding temporary sluggishness when it revamped internal management operations on
discovery of improper accounting issues and sales decline in FY2/21 due to the impact of the COVID-19 pandemic.
Trends in net sales since the Company’s foundation

Source: From the Company’s results briefing materials

We think an important point is the Company’s success in increasing the number of students in all major businesses(TOMAS, Meimonkai, and Shingakai) and sustaining growth despite a tough industry environment with fierce
competition to acquire students amid what is said to be peaking of the educational advancement and preparatory
school market because of a shrinking youth population and increase in market participants. Even though the numberof domestic elementary and middle school students, the main target segment, fell 1.0% annually from 10.10mn
students in FY2/15 to 9.59mn students in FY2/20, the Company’s net sales in its three main businesses increased
6.5% annually from ¥17,176mn in FY2/15 to ¥23,523mn in FY2/20, with mainstay TOMAS growing by 7.4%. Thisis considered to be because, in a situation in which the future is uncertain, educational costs per child will increasein the future and also students taking entrance exams for private elementary and middle schools will increase, so
the Company is skillfully capturing needs for entrance exam preparation.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.

5-Jan.-2022

4714 Tokyo Stock Exchange First Section

https://www.riso-kyoikugroup.com/en/ir/

Company profile

Trends in the main businesses’ sales and elementary and middle school
student-numbersShingakai (left)
Meimonkai (left)
TOMAS (left)
Elementary and middle school student numbers (right)(¥mn)
30,000

1200

1,010

1,001

989

978

968

25,00020,00015,00010,0005,000(10,000 students)

2,916
4,770

3,092

3,323

4,623

4,590

3,761
4,799

4,330
4,873

959

1000

4,800

800

5,147

600

400

9,488

9,736

10,48011,463

12,497

13,575

FY2/15

FY2/16

FY2/17

FY2/18

FY2/19FY2/20200

00Source: Prepared by FISCO from the Company’s securities reports and the Ministry of Education, Culture, Sports, Scienceand Technology’s Statistical Abstract 2020 (Education, Culture, Sports, Science and Technology)

In operating margin, despite temporary decline in FY2/21 because of COVID-19 impact, the level was stable atabout 10% from FY2/16 through FY2/20. The 10% margin level is higher than the industry average for educational advancement and preparatory schools. While multiple listed peers realize higher operating margins than the
Company, these firms either use group instruction as the core business model or acquire royalty income throughfranchise businesses. Very few peers that mainly conduct one-on-one instruction only in directly run schools, suchas the Company, or utilize a mix of group and individualized instruction have double-digit operating margins.

Long-term trends in gross margin, SG&A expenses ratio, and operating
marginGross margin

SG&A expenses ratio

Operating margin

35.0%
30.0%

27.5%

26.9%

26.5%

28.1%

29.0%

28.9%
24.2%

25.0%
20.0%

21.9%

22.5%

22.5%
19.3%

15.0%
10.0%

17.1%

17.3%

17.6%

18.5%

18.7%

18.7%

9.6%

9.9%

9.6%

10.3%

10.2%

5.4%

4.0%

20.2%

4.0%

5.0%
0.0%
-5.0%
FY2/13-2.6%
FY2/14

FY2/15

FY2/16

FY2/17

FY2/18

FY2/19FY2/20FY2/21

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Company profile

Our understanding is that the same source drives the Company’s strengths of stable sales growth and high profitability. When founding the Company, current director and chairman Iwasa took into account the implications ofChina’s one-child policy, which include the prospect of a shrinking youth population and increased spending per
child on education costs as a result. In other words, the Company held a relatively advantageous position from theoutset thanks to launching the business in anticipation of a shrinking youth population and building a business modelfrom this perspective. With its insight into likely increases in the amount spent per child on education costs too, theCompany succeeded in transforming the headwind of a shrinking segment into a tailwind.
Key points in harnessing shrinkage of the youth population as a tailwind are provision of high-quality educational
services with genuine individualized instruction using a one-on-one format and focus on advancement instruction
as the goal. These two are common aspects of the Company’s TOMAS service and other business formats. The
Company is currently the only firm actively promoting individual instruction that combines both aspects. The mosttypical model in the individual instruction market at this point is a quasi-approach with a ratio of one teacher to afew students (2–3) for the purpose of supplementing school coursework. We think high business risk is a major
reason other companies do not adopt this model. Since service fees must be higher in order to achieve profitability
through entirely one-on-one instruction, supplementing coursework is not enough to justify these fees. The toughreality is that only academic advancement results are capable of justifying high course fees. Almost no newcomers
are entering the market with the same business model as the Company for this reason, and this has solidified theCompany’s strong brand strength and position as a one-on-one educational advancement and preparatory school.
The Company’s position in the market

Source: From the Company’s results briefing materials

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Company profile

While the Company’s founding purpose was high-quality individualized instruction, it initially started with a grouplearning format that consisted of six students per class with classes organized by academic capabilities. It was
not until five years later in 1990 that the Company began providing the “entirely one-on-one personalized teachingsystem” envisioned by Mr. Iwasa. While we think executive opinions and policy aims clashed internally during thisperiod, adoption and thorough application of a mentality that the “educational instruction school industry is a service
business” ultimately led to realization of genuine individual instruction. Based on this understanding, the Company
focused on delivering high customer satisfaction. High customer satisfaction in the educational instruction andpreparatory school industry means getting into the desired school. Since its founding and to this day, the Company
has always retained the awareness of being a service business and sees pursuit of academic advancement results
as its management goal as a service company. We think the business model of “pursuing academic advancement
results” is a factor in the Company’s strength and supports the two characteristics of stable sales growth and highprofitability mentioned above.
An example of the Company’s management approach with high awareness as a service company is its style ofhaving full-time employees focus on management. As explained above, the mainstay TOMAS business utilizes
part-time students and adults as instructors and has full-time employees assigned to each classroom site serveas coordinators between instructors and children and students and their guardians. Specifically, they engage inthe following tasks: 1) identify genuine aims and goals of students and guardians, 2) develop curriculum with the
instructor based on this information, and 3) explain progress updates, subsequent instruction policy, and other details
to guardians after lessons begin. Repetition of this cycle maintains a high level of customer satisfaction on a normal
basis and contributes to the biggest customer satisfaction of getting into the desired school.
Whether the Company is capable of sustaining stable growth and high profitability in the future depends on the time
horizon and scale of investments, but we have high expectations for it to achieve these goals within a timeframeof 5 to 10 years. Firstly, consistent existence of a certain amount of demand for the Company’s business model(high-priced, high-quality service) has been shown even amid steady shrinkage of the youth population. Next is theissue of entry by other companies into this market. As mentioned earlier, risk of excess competition is low. This isbecause of the significant business risk involved in copying or recreating the business model that the Company has
built over many years since its founding. The high barrier to entry for the Company’s business model that focuseson advancement results is the third main characteristic and a strength.

█ Results trends
Earnings have rapidly recovered, centered on TOMAS and
Shingakai, and in the 1H FY2/22 results, sales and profits increased
significantly
1. Overview of 1H FY2/22 results
In the 1H FY2/22 consolidated results, net sales increased 31.5% YoY to ¥14,612mn, operating profit was ¥1,331mn(compared to a loss of ¥460mn in the same period in the previous fiscal year), ordinary profit was ¥1,373mn (aloss of ¥416mn), and profit attributable to owners of parent was ¥874mn (a loss of ¥468mn). Therefore, sales andprofits increased significantly and the results were new records highs for a 1H for the first time in two fiscal years.

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10 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.

5-Jan.-2022

4714 Tokyo Stock Exchange First Section

https://www.riso-kyoikugroup.com/en/ir/

Results trends

1H FY2/22 results(¥mn)
1H FY2/21
Results

1H FY2/22

Ratio to sales

Results

Ratio to sales

YoY

Net sales

11,109-14,612-

31.5%

Cost of sales

9,019

81.2%

10,490

71.8%

16.3%

SG&A expenses

2,549

23.0%

2,790

19.1%

9.5%

Operating profit (loss)

-460

-4.1%

1,331

9.1%

-

Ordinary profit (loss)

-416

-3.8%

1,373

9.4%

-

Profit (loss) attributable toowners of parent

-468

-4.2%

874

6.0%

-

Source: Prepared by FISCO from the Company’s financial results

As the COVID-19 pandemic continues, the Group has been implementing thorough infection-prevention measures
to provide safe and secure educational services, while simultaneously continuing to provide high quality educational
services for students aiming to pass the entrance exams for their desired schools. It has also been actively advancing
new schools openings and expanding capacity, which it had temporarily stopped in FY2/21. As a result of these
efforts, student numbers steadily grew in each business, thereby increasing sales. Also, the main reason for theincrease in earnings at TOMAS and Shingakai was that they increased fees by approximately 5% from March. This
increase in fees was to reflect the rise in costs relating to the infection-prevention measures (including a special
allowance for tutors), which was one of the reasons for the decline in profits in FY2/21.
Looking by business segment, sales and profits increased in every business segment, while for operating profit, therecoveries of the educational instruction school business and the young child education business contributed greatly.
At the end of August 2021, student numbers had increased steadily in each of the main businesses, by 8.1% YoY forTOMAS, 15.3% for Meimonkai, and 13.0% for Shingakai, while they had increased 10.7% for the Group as a whole.

Net sales by business segment（¥mn）

1H FY2/21

8,000

1H FY2/22

7,456

7,000
5,947

6,000
5,000
4,000

3,309

3,000

2,062

2,358

2,326

2,000
526

1,000

968
241

511

0
Educational
instruction school

Home tutor
dispatchingeducation

Young childeducation

In-school
one-on-one
instruction

Character-building
training camp
education

Note: Excluding internal transactions
Source: Prepared by FISCO from the Company’s financial results

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11 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Results trends

Operating profit (loss) by business segment
1H FY2/21（¥mn）

1H FY2/22
913

1,000
800
600
400

325

264

200

64

0

0
-44

-200

-107

-12

-210

-400
-600

-558

-800
Educational
instruction school

Home tutor
dispatchingeducation

Young childeducation

In-school one-on- Character-building
one instruction
training camp
education

Source: Prepared by FISCO from the Company’s financial results
Student numbers by business(students)
Compared to end of
August 2019

Compared to end of
August 2020

End of August 2021

TOMAS

9.0%

8.1%

13,781

Meimonkai (including TOMEIKAI)

9.3%

15.3%

4,143

Shingakai (including Shinga’s Club)

20.3%

13.0%

4,939

Group total

10.4%

10.7%

26,645

Source: Prepared by FISCO from the Company’s results briefing materials

Earnings have recovered in all businesses, centered on TOMAS and
Shingakai
2. Segment trends(1) Educational instruction school businessIn the educational instruction school business, net sales increased 25.4% YoY to ¥7,456mn and operating profit
was ¥264mn (compared to a loss of ¥558mn in the same period in the previous fiscal year). The factors behindthe sales increase include a rise in the number of students in newly opened schools and in existing schools,
the closure of schools for two weeks due to the declaration of a state of emergency in April 2020 in the same
period in the previous fiscal year, and the increase in sales unit price per student, including as fees were raisedby approximately 5% in April 2021. Profits also increased significantly, as the increase in sales absorbed the risein costs to expand capacity and to open new schools.

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12 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Results trends

The number of newly opened schools in the 1H FY2/22 period were 7 schools in total, consisting of 4 TOMAS
schools (1 school in March and May, respectively, and 2 schools in July), 2 MEDIC TOMAS schools (2 schoolsin April), and 1 Inter TOMAS school (March). In addition, capacity was expanded at 4 existing TOMAS schools(implemented at one school per month in March, April, June, and July). At the end of August 2021, there were
103 schools in total (93 educational instruction schools and 10 English conversation schools), while the number ofstudents in the educational instruction schools had increased 8.1% YoY to 13,781 students. Student-acquisition
conditions at the newly opened schools appear to be trending favorably, and it is considered that the Company’s
approach of preparing safe and securing learning environments by thoroughly implementing infection-prevention
measures* and providing high quality educational services through one-on-one tuition is supported by many
students as well as their parents and guardians.
*	In addition to infection-prevention measures, from July to August 2021, a workplace vaccination program was conducted
for approximately 10,000 students, tutors, employees, and their families.

(2) Home tutor dispatching education businessIn the home tutor dispatching education business, net sales increased 14.4% YoY to ¥2,358mn and operating
profit was ¥64mn (compared to profit of ¥0.4mn in the same period in the previous fiscal year). The main factor
behind the increase in sales was the rise in the number of students, including due to the openings of new schools.
In 1H FY2/21, due to the declaration of a state of emergency because of COVID-19, Meimonkai and TOMEIKAI
schools were both closed for around two weeks in April 2020. Therefore, the number of students had decreased
and the decline in sales had continued, but they recovered and increased from FY2/22 1Q. Profits also increased,
as the costs for opening new schools and other costs were absorbed by the effects of the higher sales.
Openings of new schools during the 1H FY2/22 period were 2 Meimonkai schools (2 schools in July) and 2
TOMEIKAI schools (1 school in April and June, respectively), and expansions of capacity were implemented at 1
Meimonkai school (May) and 1 TOMEIKAI school (March). At the end of August 2021, there were 35 Meimonkai
schools and 11 TOMEIKAI schools, while the total number of students had increased 15.3% YoY to 4,143
students. The two newly opened Meimonkai schools (in Kagoshima and Kumamoto) were opened within buildings
in which TOMEIKAI is a tenant. Meimonkai is responding to meet a wide range of learning needs. For example,
since the previous period, it has been providing an online individualized instruction service to respond to thelearning needs of students who cannot attend instruction schools due to concerns about going out and of
students in regional areas.
(3) Young child education businessIn the young child education business, net sales increased 42.3% YoY to ¥3,309mn and operating profit increaced
180.9% to ¥913mn. The factors behind the increase in sales were an increase as a rebound to the fact that
Shingakai schools were completely closed for approximately one month from April to May 2020, the rise in thenumber of students following the openings of new schools, and that Shingakai raised its fees by around 5% inMarch 2021. Profits grew significantly due to the effects of the higher sales and set new record highs for a 1H for
the first time in two fiscal years.
The schools newly opened in the 1H FY2/22 period were 1 Shingakai school (May) and 1 each of Shinga’s ClubChildcare and After-School Care schools (April), while Shingakai implemented an expansion of capacity at 1
school (March). At the end of August 2021, there were 24 Shingakai schools, 16 Shinga’s Club After-School Careschools, and 7 Shinga’s Club Childcare schools. Also, the total number of students increased 13.0% YoY to 4,939
students, while among these, Shingakai’s student numbers increased 15.6% and Shinga’s Club’s increased 9%.

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13 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Results trends

There is an increasing trend during the COVID-19 pandemic of parents and guardians who want their children to
take entrance exams for elementary schools. Amid these conditions, Shingakai is responding to meet the needs ofvarious customers. This includes providing one-on-one classes through thoroughly implementing infection-prevention measures, distributing online video courses, including its entrance exam preparation course and the coachingcourse for passing exams, and starting to provide new materials presented as a set of home-learning materials
and videos. It is thought that these efforts are leading to the increase in student numbers.
(4) In-school one-on-one instruction businessIn the in-school one-on-one instruction business, net sales increased 84.0% YoY to ¥968mn and the operating
loss was ¥44mn (compared to a loss of ¥210mn in the same period in the previous fiscal year). Schools wereclosed from March to May in the same period in the previous fiscal year, and the School TOMAS service also had
to be suspended, so sales decreased considerably. However, business has returned to normal in FY2/22, andthe sales-increase factors will be the rise in the number of contracted schools and the extension of the usage
academic year in the schools introducing it. Net sales were a record high for a 1H for the first time in two fiscal
years. In profits also, the extent of the loss contracted due to the effects of the higher sales and also as a result of
the reduction in fixed costs (around ¥100mn annually) due to the online English conversation business becoming
completely outsourced.
The number of contracted schools has been steadily increasing, rising from 70 schools at the end of the previous
period to 82 schools at the end of August 2021. In June 2021, a business collaboration with KDDI Matomete
Office was announced, and the policy is to mutually utilize both companies’ respective networks to progress theincrease in schools concluding contracts to introduce the service. KDDI Matomete Office has introduced tablets
and other ICT devices into approximately 250 schools nationwide, and the plan is to propose the introductionof the School TOMAS service into these schools. They are focusing on realizing the effects of this businesscollaboration from FY2022 at the earliest.
(5) Character-building training camp education businessIn the character-building training camp education business, net sales increased 112.0% YoY to ¥511mn and theoperating loss was ¥12mn (compared to a loss of ¥107mn in the same period in the previous fiscal year). Due
to COVID-19, for a certain period in the same period in the previous fiscal year, this business was requested torestrain from providing experience tours for character building. Additionally, the TOMAS Gymnastics Schools and
TOMAS Soccer Schools were all closed for approximately two months from April to May 2020, thereby significantly
decreasing sales. But in the current 1H, the experience tours gradually recovered and the schools also returned
to normal operating hours, and net sales are also recovering. No schools were newly opened in the 1H FY2/22
period, although 1 TOMAS Gymnastics School was opened in September 2021.

Implemented a disposal of treasury shares through a thirdparty allocation in November 2021 and plans to raise funds ofapproximately ¥2.8bn
3. Financial situation
Looking at the financial situation at the end of FY2/22 1H, total assets had increased ¥549mn on the end of theprevious fiscal period to ¥14,489mn. The main change factors were that in current assets, cash and deposits
increased ¥206mn, but trade accounts receivable decreased ¥371mn. In non-current assets, there were increases
in property, plant and equipment of ¥483mn, investments and other assets of ¥156mn, and intangible fixed assetsof ¥15mn.

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14 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.

5-Jan.-2022

4714 Tokyo Stock Exchange First Section

https://www.riso-kyoikugroup.com/en/ir/

Results trends

Total liabilities increased ¥1,048mn on the end of the previous fiscal period to ¥8,413mn. In current liabilities,
there were increases of accounts payable-other of ¥247mn, unpaid corporate tax, etc., of ¥174mn, and advances
received, which leads to sales in the future, of ¥394mn. In non-current liabilities, there were increases of retirement
benefit liabilities of ¥85mn and asset removal liabilities of ¥93mn. Net assets decreased ¥499mn compared to theend of the previous fiscal period to ¥6,075mn, because although profit attributable to owners of parent of ¥874mn
was recorded, dividend payments were ¥1,398mn and retained earnings decreased ¥500mn.
Looking at the management indicators, the equity ratio declined from 46.7% at the end of the previous period to41.5% due to the effects of the period-end dividend. Since February 2017, the Company has actively returned
profits to shareholders, such as through dividends and acquisitions of treasury shares, and therefore the equity ratio
has trended at a level below 50%. However, the Company’s financial condition can be judged to be highly soundas it practices debt-free management and has cash-on-hand of more than ¥4bn, and also because it is building abusiness model, centered on the mainstay TOMAS business, that enables it to stably acquire cash.
On October 27, the Company announced that it would carry out a disposal of treasury shares through a third-party
allocation. At the end of August 2021, it held 8.39mn treasury shares from which it would sell 6.5 million shares to
its capital and business collaboration partner Hulic for ¥443 per share in November 2021, raising funds of ¥2,829mn
through this sale. The planned uses of these funds include for capital investment for the Kodomo Department Storeschools that are scheduled to open from 2022 onwards (deposits for the new schools, costs to establish schools
and acquire school equipment, costs to introduce systems, etc.) and also for capital investment for openings of
new schools and for strategic M&A investment. However, the amount of capital investment relating to openings of
new TOMAS schools is not that large at slightly less than ¥30mn per school, so it seems likely that it will take theform of cash of hand in an amount equivalent to the procured amount for the time being. Also, through this disposalof treasury shares and acquisitions of shares by the founder, Hulic’s ratio of voting rights will rise from 11.61% to20.66% and it is scheduled to become the leading shareholder. Therefore, going forward, this will further strengthen
the business collaboration between Hulic and the Company.
Consolidated balance sheet(¥mn)
FY2/19FY2/20FY2/21

1H FY2/22

Changeamounts

6,318

6,644

7,018

6,912

-105

4,716

4,837

3,963

4,170

206

Non-current assets

6,138

6,531

6,922

7,576

654

Total assets

12,51013,214

13,94014,489549

Current liabilities

3,861

4,498

4,600

5,472

871

Non-current liabilities

2,385

2,557

2,764

2,941

176

Total liabilities

6,247

7,056

7,365

8,413

1048

Current assets(Cash and deposits)(Interest-bearing debt)
Net assets

-

-

-

-

-

6,263

6,157

6,575

6,075

-499

49.9%

45.9%

46.7%

41.5%

-5.2pt[Management indicators]
Equity ratio

Source: Prepared by FISCO from the Company’s financial results

Cash flow statements(¥mn)
1H FY2/21

1H FY2/22

Cash flows from operating activities

-623

2,279

Cash flow from investing activities

-354

-674

Cash flow from financing activities-211-1,398Cash and cash equivalents at end of period

3,649

4,170

Source: Prepared by FISCO from the Company’s financial results

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15 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/█ Outlook
Even though the FY2/22 results forecasts have been upwardly
revised, there is still room for results to exceed them
1. FY2/22 forecasts
For the FY2/22 consolidated results forecasts, the Company announced the second upwardly revised forecasts on
October 7, 2021. It did not revise the forecasts at the time it announced the 1H results (October 4, 2021) because
it wanted to confirm the number of students in September, and decided to announce the revised forecasts after
it was able to confirm that student numbers would continue to be maintained in September as well. It upwardly
revised every forecast compared to the previous forecasts, with net sales to increase 19.0% YoY to ¥30,000mn,
operating profit to rise 197.8% to ¥3,010mn, ordinary profit to grow 151.6% to ¥3,000mn, and profit attributable toowners of parent to increase 278.2% to ¥2,100mn, and these forecasts are for new record highs for the first timein two fiscal years. However, it is thought that it has set conservative forecasts for 2H, the same as in the previous
period, and at FISCO we think that results may exceed even the upwardly revised forecasts as long as there are no
major changes to the market environment.
FY2/22 consolidated forecasts(¥mn)
FY2/22

FY2/21Results

Initial forecast

Net sales

25,201

29,00029,50030,000-19.0%

Operating profit

1,010

2,510

2,810

3,010

10.0%

197.8%

Ordinary profit

Previous revision Current revision(July 2021)(October 2021)

Ratio to sales

YoY

1,192

2,500

2,800

3,000

10.0%

151.6%

Profit attributable to owners of parent

555

1,700

1,900

2,100

7.0%

278.2%

Earnings per share (¥)

3.79

11.61

12.98

14.35

Source: Prepared by FISCO from the Company’s financial results

In terms of the factors behind the changes in operating profit, although the hourly salaries of part-time tutors willrise and personnel costs are forecast to increase due to the higher number of personnel following openings of newschools, the factors behind increases in profit will include the increase in the number of students, the effects of thefee revisions at the TOMAS and Shingakai schools, that costs of ¥300mn relating to the business closure of an
overseas subsidiary that were recorded in the previous period will not be recorded in this period, and a reduction in
fixed costs (approximately ¥100mn, including personnel costs and land rent) due to outsourcing. Also, the reasons
why the increase rate of profit attributable to owners of parent will be higher than that of ordinary profit include theeffects of the effective tax rate being lowered due to a subsidiary that recorded a loss in FY2/21 becoming profitable.
For the results forecasts by business segment, in the mainstay educational instruction school business, the forecasts
are for net sales to increase 15% YoY and for profits to rise significantly. Looking only at the 2H, it is calculated thatnet sales will increase 7% YoY, but when considering that the effects of the fee revisions will continue, there is astrong impression that this forecast is conservative. There are no plans to open or expand the capacity of schools
in the 2H.

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16 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

OutlookIn the home tutor dispatching education business, the forecasts are for net sales to increase 11% YoY and for profits
to rise by double-digits. Net sales in the 2H will increase 8% YoY. Compared to TOMAS, the recovery of student
numbers in this business has been somewhat slow. However, as of August 2021, they had increased 15.3% and therecovery trend is clear, so in the 2H as well, results may be higher than forecast depending on the pace of increaseof student numbers. In the 2H, the capacity of the TOMEIKAI Nagasaki School will be expanded in November 2021.
In the young child education business, the forecasts are for net sales to increase 24% YoY and for profits to increasesignificantly. In the 2H, it is calculated that net sales will increase 7% YoY. But considering that at the end of August
2021, the number of students had increased 13.0% YoY and that the effects of the Shingakai fee revisions willcontinue, the impression is that this forecast is conservative and at FISCO, we think it is highly likely that the result
will exceed it. For new school openings, the Company opened 1 Shinga’s Club After-School Care school (Omiya
school) in September of this year. As a result, it has a network of 24 Shingakai schools, 7 Shinga’s Club Childcare
schools, and 17 Shinga’s Club After-School Care schools.
In the in-school one-on-one instruction business, the forecasts are for net sales to increase 50% YoY and theprevious period’s operating loss to become operating profit. In the 2H, the Company expects high growth in net sales
to continue, rising 28% YoY, due to the increase in the number of contracted schools and the number of students
attending classes. Also, in the character-building training camp education business, the situation is that due to theimpact of COVID-19, the number of events held, including overseas study trips and some tour planning, has not
yet completely recovered. Therefore, it seems that although net sales will recover by more than ¥1,000mn YoY, they
will not recover to the same level as in FY2/20 (¥1,669mn). However, the emphasis is not placed on profits for thisbusiness, and its impact on results overall will be negligible.

Net sales by business segment&KDUDFWHUEXLOGLQJWUDLQLQJFDPSHGXFDWLRQ,QVFKRRORQHRQRQHLQVWUXFWLRQ<RXQJFKLOGHGXFDWLRQ+RPHWXWRUGLVSDWFKLQJHGXFDWLRQ(GXFDWLRQDOLQVWUXFWLRQVFKRRO（¥mn）
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Note: FY2/22 (forecasts) are estimates by FISCO from an interview with the Company
Source: Prepared by FISCO from the Company’s financial results and interview

We encourage readers to review our complete legal statement on “Disclaimer” page.

17 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.

5-Jan.-2022

4714 Tokyo Stock Exchange First Section

https://www.riso-kyoikugroup.com/en/ir/

OutlookBased on the strong increase in student numbers, is highly likely toalso upwardly revise the medium-term management plan’s results
targets
2. Medium-term management plan
(1) Overview of the medium-term management plan
In the Company’s three-year medium-term management plan that started from FY2/22, it has set results targets
for FY2/24, which is the plan’s final fiscal year, of net sales of ¥35,500mn, operating profit of ¥3,710mn, ordinary
profit of ¥3,700mn, and profit attributable to owners of parent ¥2,500mn. However, due to the upward revisions of
the FY2/22 results forecasts, it plans to review the results targets for FY2/23 and onwards at the appropriate time,
while watching conditions in the future. The main factor behind the revisions to the FY2/22 forecasts was the higher
sales due to the increase in the number of students. Therefore, for the growth rates from FY2/23 and onwards, it
is expected that the same as in the past, the Company will target double-digit increases in both sales and profits.
The FY2/22 to FY2/24 medium-term management plan (values announced in April 2021)(¥mn)
FY2/22

FY2/21Results

Initial forecast

Revised forecast(October 2021)

Net sales

25,201

29,000Operating profit

1,010

2,510

4.0%

Operating margin
Ordinary profit
Profit attributable toowners of parent

FY2/23
TargetFY2/24
TargetAverage annual
growth rates

30,00032,00035,500

12.1%

3,010

3,210

3,710

54.3%

8.7%

10.0%

10.0%

10.5%

-

1,192

2,500

3,000

3,200

3,700

45.9%

555

1,700

2,100

2,100

2,500

65.1%

Source: Prepared by FISCO from the Company’s results briefing materials

There has been no change to the growth strategy, and the Company is continuing with a thorough differentiation
strategy through continuously providing high quality “authentic” educational services and actively opening schools
with the aim of continuously increasing student numbers even with the advance of Japan’s declining birthrate.
It is also targeting annual double-digit increase rates for both sales and profits through the further growth of theexisting mainstay businesses, TOMAS, Meimonkai and Shingakai, and also by even more actively developing
businesses such as School TOMAS and Shinga’s Club. For FY2/24, it is aiming for an operating margin of 10.5%,
higher than the result of 10.2% in FY2/20. This is an achievable level if sales grow as planned, and particularly thegrowth of the highly profitable young child education business and the in-school one-on-one instruction business,
which has significant growth potential, are expected to improve profitability overall.
(2) Growth strategya) Strategy of collaborating with companies in other industries
In September 2020, the Company concluded a three-company business collaboration agreement with Hulicand Konami Sports and for the future, it announced the concept of the Kodomo Department Store, of the joint
provision of the Group’s various educational services, including the Company’s Shinga’s Club Childcare andAfter-School care schools and Shingakai, TOMAS, and Inter TOMAS schools, and the exercise schools* provided
by Konami Sports, within buildings specializing in education for the one-stop provision of educational services
for children developed by Hulic in the Tokyo metropolitan area. Needs are strong for children’s education thatprovides a good balance between study and exercise, so the strategy is to enhance convenience and capture
these needs by providing such services at a single location.
*	Exercise schools for children with 140 locations nationwide.

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18 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Outlook

Toward the start of the first phase of this business from 2022, the current situation is of narrowing down themultiple candidate properties. The Company intends to expand the network of Kodomo Department Stores to
20 buildings in the Tokyo metropolitan area by 2029. If this concept gets on track, it may become a “retention
strategy” for students ranging from infants to high school students, which will lead to improved LTV. In addition, it
can be expected to keep down costs, such as promotion costs to recruit students, and at FISCO, we are focusing
on it as an initiative that will lead to improved profitability alongside the growth of the sales scale.
In particular, despite robust demand for Shinga’s Club Childcare and After-School Care, difficulty finding properties
with suitable facilities had been an issue in expanding business. This issue will be resolved by the Kodomo
Department Store concept, and the growth of the young child education business is expected to accelerate. Also,
through the growth of the young child education business, it will become possible to link its customer base to thenext education services, including those of TOMAS and Meimonkai, which will further increase Group synergies.
For Shingakai, the “school entrance tests” for well-known kindergartens and elementary schools are a nichemarket involving famous teachers who have special expertise, and in many cases, parents want their child to takeclasses with such teachers. Therefore, since the past the Company has adopted a cautious approach to increasing
school numbers, but it seems that it will be possible to develop the Kodomo Department Store business throughstrengthening the training of teachers.
“Kodomo Department Store (provisional name)” educational building concept

Source: From the Company’s results briefing materials

Also, Shingakai and Konami Sports announced a business collaboration in April 2021, and from 2022 onwards,
the plan is to open Konami Sports Shinga’s Academies that will provide the Shinga’s Club After-School Care
service within the facilities of Konami Sports’ exercise schools. This service will meet the needs of parents andguardians, of wanting their children to receive an education with a good balance of both study and sports. The
plan is that in April 2022, 1 school will be opened in Shinagawa, which is the location of Konami Sports’ head
office, and then approximately 20 schools will be opened in the following three years. We will be focusing on thisas an initiative that will lead to the growth of the young child education business.

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19 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Outlookb) Educational instruction school business
The educational instruction school business consists of one-on-one instruction school TOMAS, English conversation school Inter TOMAS, and one-on-one instruction focused on medical school exams at MEDIC TOMAS.
In February 2020, it launched spec. TOMAS as a provider of one-on-one instruction that specializes in entrance
exams for the most difficult schools. From FY2/22 onwards, the Company is targeting annual sales growth of
more than 10% through the increases in the numbers of schools and students.
The Company intends to continue promoting a “strategy of satellite schools in the Tokyo metropolitan area,” which
it has been implementing since FY2/18, as the TOMAS school initiative. While it previously deployed schools at
terminal train stations with about 495–661m 2 of floor space that could accommodate 200–400 students, thesatellite strategy deploys schools at mid-sized train stations around terminal sites with about 165–198m2 of floor
space that can accommodate 100–150 students. The Company operated 88 schools in the Tokyo metropolitan
areas as of end-FY8/21 and has a goal of between 150 and 180 schools through opening satellite schools at apace of 5-10 schools a year from FY2/22. It also plans to steadily expand floor space and implement renovationof existing schools that have become crowded due to rising student numbers.
In Inter TOMAS and MEDIC TOMAS business, the Company intends to open schools in areas where it alreadyhas TOMAS schools and determines that demand opportunities exist. In Spec. TOMAS business, a new brandthat it has ramped up, the Company initially planned to open a second school in FY2/21 but delayed the addition
because of COVID-19 pandemic impact. Instead, it decided to focus on monetizing the existing school (Jiyugaoka).
A key characteristic of Spec. TOMAS business is guiding students interested in the most difficult schools toachieve admission to their desired school by integrating know-how accumulated by Surugadai Gakuen Educational
Institute and the Company to create original curriculum and provide entirely one-on-one instruction with professional teachers. We expect numerous synergies from the alliance with Surugadai Gakuen Educational Instituteby utilizing its teacher personnel and enhancing the quality of original materials in production and publishing.
Since admission results are the main barometer for student recruitment at academic advancement schools, theCompany hopes to solidify Spec. TOMAS as the brand for one-on-one instruction that specializes in entrance
exams for the most difficult schools by building a track record of admission results.
c) Home tutor dispatching education businessIn home tutor dispatching education business, the Company reached 35 Meimonkai (home tutor dispatching)schools at the end of FY8/21 on steady rollout of sites in the Tokyo metropolitan areas, other major cities suchas Osaka and Nagoya, and main regional cities. It plans to accommodate increase in student numbers withadditions to floor space and relocation openings and take a cautious stance toward opening new schools. But
as previously explained, on entering 2021 new schools were opened in buildings in which TOMEIKAI is a tenant
in both Kagoshima Prefecture and Kumamoto Prefecture, and going forward also, new schools may be opened
if this sort of environment is in place.
In TOMEIKAI business, meanwhile, it intends to open schools at a pace of a few sites per year in major cities
outside of the Tokyo metropolitan area with the aim of increasing net sales at a just over 10% annual rate. As ofthe end of August 2021, the Company has developed a total of 11 TOMEIKAI schools, with five in the Kyushu
area, three in the Tokai area, two in the Koshinetsu area, and one in the Kinki area. Going forward, it intends toopen schools mainly in major urban areas such as the Keihanshin area, Nagoya, and Fukuoka. The TOMEIKAI
business has potential for one school per prefecture and thus could surpass 40 schools, giving it ample room for
growth. An issue going forward will be improving the power of the TOMEIKAI brand, but the same as for TOMAS,
the Company intends to improve the power of this brand by accumulating a large track record of students passing
entrance exams through providing them with high quality educational services.

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20 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/

Outlookd) In-school one-on-one instruction business
The Company is focusing on School TOMAS as a business that has the potential to grow to become one of its
mainstay businesses in the future, like TOMAS and Shingakai. In the situation of the advance of the declining
birthrate, a business problem for private schools is acquisitions of students, while at the same time, anotherproblem is teachers working long hours. It seems that the Company is introducing the School TOMAS service
as a solution to these problems. The merit for the Company is that real estate costs and advertising costs torecruit students are not requited. Therefore, it thinks that theoretically, the School TOMAS operating margin canbe maintained at the same high level as that of the young child education business, in a range of 15% to 20%.
School TOMAS was deployed at 82 schools as of the end of August 2021 and is expanding annually. Since theCompany entered-into a capital and business collaboration with Surugadai Gakuen Educational Institute in 2019,it has had in place a system in which it can employ students graduating from Sundai Preparatory Schools as parttime tutors and dispatch them to these contracted schools. Therefore, the increase in the number of contracted
schools seems to be progressing smoothly compared to previously, and the schools introducing the service
range widely from Hokkaido to Kyushu. While the Company has a goal of 100 contracted schools by FY2/23 forthe time being, there is room to expand to about 300 schools, mainly private schools, as latent demand. There
are also the effects of the collaboration with KDDI Matomete Office and the pace of introductions may acceleratefrom FY2/23 onwards, so we shall be paying attention to developments in the future.
e) Strategy to hire and train teachers
Hiring and training high-quality teachers is a key factor in the ability to expand the number of schools at Group
companies. As explained above, teacher recruitment is often an issue for school rollout in regional areas. Therefore,in August 2020 the Company established Cocokara Teachers Co., Ltd., as a subsidiary to hire, train, and placeteachers in Group companies. This subsidiary conducts all of the hiring and training of teachers and deploys themto the various Group companies appropriately as needed. TOMAS, meanwhile, hires teachers independently too,and the Company intends to continue parallel hiring for the time being. Besides improvement in hiring and training
cost efficiencies from conducting integrated hiring and training for the overall Group, this initiative might lead tofaster growth by the Group by effectively allocating instructors to the right spots and supporting regional rollout
in the TOMEIKAI business. For the hiring of part-time teachers as well, even within the industry the Group offers
favorable conditions, so it seems it is able to hire them smoothly without too much problem.

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21 22

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

Riso Kyoiku Co., Ltd.
4714 Tokyo Stock Exchange First Section

5-Jan.-2022
https://www.riso-kyoikugroup.com/en/ir/█ Shareholder returns
In FY2/22, plans to increase the dividend ¥4.5 YoY to ¥14.0
The Company considers returning profits to shareholders to be one of its most important management issues, andfrom FY2/17, it paid a quarterly dividend linked to results using the consolidated dividend payout ratio as an indicator.
However, it discovered that past dividend payments had exceeded the allowable distribution value, so in FY2/21,
it temporarily ceased paying a quarterly dividend and instead paid a single period-end dividend of ¥9.5. It will also
pay a single period-end dividend in FY2/22, and it plans to increase the dividend per share by ¥4.5 YoY to ¥14.0.

Dividend per share and dividend payout ratio
Dividend (left)（￥）

Dividend payout ratio (right)

16.00

320.0%

14.00
14.00
12.00
12.00
10.00

280.0%

250.7%

240.0%

11.00
9.50

9.33

200.0%

8.00
6.00

160.0%
99.7%

103.0%

97.6%

90.6%

120.0%

4.00

80.0%

2.00

40.0%

0.00

0.0%
FY2/18

FY2/19FY2/20FY2/21

FY2/22 E

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

22 22

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
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FISCO and its affiliated companies, as well as the directors, officers and employees thereof,
may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-13-3 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (IR Consulting Business Division)
Email: support@fisco.co.jp