RLAST UPDATE【2015/10/07】

Aeon Delight Co., Ltd. | 9787 |Research Report by Shared Research Inc.
Shared Research Inc. has produced this report by request from the company discussed in the report. The
aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide
an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data
and findings. We will always present opinions from company management as such. Our views are ours
where stated. We do not try to convince or influence, only inform. We appreciate your suggestions andfeedback. Write to us at sr_inquiries@sharedresearch.jp or find us on Bloomberg.

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Aeon Delight Co., Ltd. | 9787 |Shared Research Report

LAST UPDATE【2015/10/07】

INDEX
Key financial indicators ---------------------------------------------------------------------------------------------- 3
Recent updates --------------------------------------------------------------------------------------------------------- 4
Highlights ----------------------------------------------------------------------------------------------------------------------- 4
Trends and outlook --------------------------------------------------------------------------------------------------- 5
Quarterly trends and results----------------------------------------------------------------------------------------------- 5
Full-year outlook ------------------------------------------------------------------------------------------------------------ 10
Business ----------------------------------------------------------------------------------------------------------------- 21
Business description ------------------------------------------------------------------------------------------------------- 21
Strengths and weaknesses ----------------------------------------------------------------------------------------------- 31
Market and value chain --------------------------------------------------------------------------------------------------- 32
Strategy ------------------------------------------------------------------------------------------------------------------------ 35
Historical financial statements ----------------------------------------------------------------------------------- 37
Summary ---------------------------------------------------------------------------------------------------------------------- 37
Income statement ---------------------------------------------------------------------------------------------------------- 68
Balance sheet ---------------------------------------------------------------------------------------------------------------- 70
Statement of cash flows -------------------------------------------------------------------------------------------------- 72
Other information---------------------------------------------------------------------------------------------------- 73
History -------------------------------------------------------------------------------------------------------------------------- 73
News & topics --------------------------------------------------------------------------------------------------------------- 73
Major shareholders --------------------------------------------------------------------------------------------------------- 74
Top management----------------------------------------------------------------------------------------------------------- 74
Employees -------------------------------------------------------------------------------------------------------------------- 75
Investor relations ------------------------------------------------------------------------------------------------------------ 75
By the way -------------------------------------------------------------------------------------------------------------------- 75
Company profile ------------------------------------------------------------------------------------------------------------ 77

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Aeon Delight Co., Ltd. | 9787 |Shared Research Report

Aeon Delight Co., Ltd. ＞ Key financial indicators

LAST UPDATE【2015/10/07】

Key financial indicators
Income Statement(JPYmn)Total Sales
YoY
Gross Profit
YoY
GPM
Operating Profit
YoY
OPM
Recurring Profit
YoY
RPM
Net Income
YoY
Net Margin
Per Share Data
Number of Shares
EPS
EPS (Fully Diluted)
Dividend Per ShareBook Value Per Share
Balance Sheet (JPYmn)
Cash and Equivalents
Total Current Assets
Tangible Fixed Assets, net
Other Fixed Assets
Intangible Assets
Total Assets
Accounts Payable
Short-Term Debt
Total Current Liabilities
Long-Term Debt
Total Fixed Liabilities
Total Liabilities
Net Assets
Cash Flow Statement (JPYmn)
Operating Cash Flow
Investment Cash Flow
Financing Cash Flow
Financial Ratios
Interest-Bearing Debt
ROA
ROE
Equity Ratio

FY02/08Cons.
137,51923.7%
18,827
18.1%
13.7%
8,330
49.4%
6.1%
8,186
49.2%
6.0%
4,379
46.1%
3.2%

FY02/09Cons.
145,690
5.9%
20,955
11.3%
14.4%
9,946
19.4%
6.8%
9,812
19.9%
6.7%
4,876
11.3%
3.3%

FY02/10Cons.
140,299-3.7%
21,118
0.8%
15.1%
9,970
0.2%
7.1%
9,912
1.0%
7.1%
5,466
12.1%
3.9%

FY02/11
Cons.
170,905
21.8%
23,98913.6%
14.0%
12,03120.7%
7.0%
12,089
22.0%
7.1%
6,495
18.8%
3.8%

FY02/12Cons.
219,797
28.6%
28,631
19.4%
13.0%
13,762
14.4%
6.3%
13,784
14.0%
6.3%
6,912
6.4%
3.1%

FY02/13Cons.
248,876
13.2%
30,227
5.6%
12.1%
13,901
1.0%
5.6%
13,892
0.8%
5.6%
7,509
8.6%
3.0%

FY02/14Cons.
257,243
3.4%
33,714
11.5%
13.1%
15,1158.7%
5.9%
15,092
8.6%
5.9%
8,161
8.7%
3.2%

FY02/15Cons.
266,705
3.7%
35,117
4.2%
13.2%
15,861
4.9%
5.9%
15,943
5.6%
6.0%
8,725
6.9%
3.3%

41,400110
25567

41,400
123
123
22
669

41,400
138
138
27
788

54,170
143
142
39
1,006

54,170
132
132
40
1,096

54,170
143
143
46
1,202

54,170
156
155
48
1,325

54,170
166
166
50
1,436

7,673
28,764
1,885
3,411
13,35647,418
10,293
22,533
2,395
24,92922,512

6,991
30,1502,602
3,658
12,62349,035
10,551
1,688
20,131
56
824
20,95628,0797,964
30,026
2,741
3,977
11,924
48,6708,974
80
16,28131
1,024
17,306
31,364

13,09864,524
3,756
4,766
11,577
84,62422,42449
30,724
6
1,012
31,73752,887

9,707
72,486
3,773
4,276
12,27292,80923,72041
33,64315983
34,62658,182

10,01479,323
3,796
5,257
12,321
100,699
24,544
10
34,955
5
1,195
36,15164,547

12,56590,347
4,258
5,829
11,687112,122
26,701
5
39,3061,500
40,806
71,316

15,580104,477
4,361
6,268
10,937126,044
30,902
46,6401,908
48,54977,4956,472-2,190-6,094

6,668-2,087-5,255

7,031-1,966-4,1696,808-3,000-1,321

9,639-10,051-2,722-4,3587,086-2,257

21,359-16,632-2,475

17,234-11,365-2,594

17.3%
21.0%
47.4%

1,744
20.3%
19.9%
54.1%

111
20.3%
18.9%
64.2%

55
18.1%
15.5%
62.3%

56
15.5%
12.5%
61.9%

15
14.4%
12.5%
62.6%

5
14.2%
12.3%
62.0%

13.4%
12.0%
59.8%

FY2/16
Est.
280,000
5.0%

17,000
7.2%
6.1%
17,000
6.6%
6.1%
9,400
7.7%
3.4%

179
52

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

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Aeon Delight Co., Ltd. ＞ Recent updates

LAST UPDATE【2015/10/07】

Recent updates
Highlights
On October 7, 2015, Aeon Delight Co., Ltd. announced 1H earnings results for FY02/16; see the results section for
details.

On July 28, 2015, Shared Research updated the report following interviews with management.

For corporate releases and developments more than three months old, please refer to the News and topics
section.

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Aeon Delight Co., Ltd. ＞ Trends and outlook

LAST UPDATE【2015/10/07】

Trends and outlook
Quarterly trends and results
Quarterly Performance(JPYmn)Sales
YoY
Gross Profit
YoY
GPM
SG&A Expenses
YoY
SG&A / Sales
Operating Profit
YoY
OPM
Recurring Profit
YoY
RPM
Net Income
YoY
NPM

FY02/14Q2Q3

FY02/15Q1Q2

FY02/16Q1
Q2
67,419 70,529 72,254
8.0%
6.1%
6.9%
9,410
8,864
9,734
7.6%
6.7%
8.5%
14.0% 12.6% 13.5%
4,853
5,239
5,237
5.4%
9.9%
8.9%
7.2%
7.4%
7.2%
4,558
3,625
4,496
10.0%
2.4%
8.0%
6.8%
5.1%
6.2%
4,604
3,652
4,487
12.0%
2.6%
7.7%
6.8%
5.2%
6.2%
2,342
2,078
2,604
-0.6%
3.1% 10.1%
3.5%
2.9%
3.6%

FY02/16% of 1H 1H Est. 1H Est.

FY02/14
FY02/15
Segment Results
FY02/16(JPYmn)
Q1
Q4
Q1
Q2
Q2
Q3
Q4
Q1
Q2
Q3
Sales
66,711 66,841 61,256 62,435 66,475 67,574 65,237 67,419 70,529 72,254
Facilities management
10,622 10,848 11,198 10,790 11,228 11,642 11,532 11,437 12,103 12,291
Securities management
8,438
8,367
8,481
8,956
8,935
8,891
9,305
9,491
9,306
9,294
Cleaning services
10,539 10,485 10,642 10,654 10,942 10,960 11,129 11,256 11,656 11,723
Construction work
15,888 13,929
8,254
7,559 11,858 11,133
9,366
9,615 13,059 13,194
Materials & suppies sourcing 10,721 11,023 11,542 11,257 11,713 11,609 12,175 12,121 12,080 12,445
Vending machine services
7,498
8,716
7,479
9,636
8,330
9,471
8,003
9,021
8,107
8,848
Support services
3,002
3,473
3,660
3,583
3,466
3,870
3,726
4,470
4,215
4,458
YoY
13.9% -2.0% -6.7% 10.5% -0.4%
1.1%
6.5%
8.0%
6.1%
6.9%
Facilities management
2.4%
0.9%
5.2%
5.0%
5.7%
7.3%
3.0%
6.0%
7.8%
5.6%
Securities management
6.8%
5.8%
6.5% 11.5%
5.9%
6.3%
9.7%
6.0%
4.2%
4.5%
Cleaning services
4.1%
4.0%
4.3%
5.4%
3.8%
4.5%
4.6%
5.7%
6.5%
7.0%
Construction work
43.4% -26.2% -47.7%
3.0% -25.4% -20.1% 13.5% 27.2% 10.1% 18.5%
Materials & suppies sourcing 12.6% 12.8% 14.8% 13.3%
9.3%
5.3%
5.5%
7.7%
3.1%
7.2%
Vending machine services
-0.1%
1.7%
0.8% 25.1% 11.1%
8.7%
7.0% -6.4% -2.7% -6.6%
Support services
44.7% 56.6%
2.8% 16.0% 15.5% 11.4%
1.8% 24.8% 21.6% 15.2%
Operating profit
3,390
4,185
3,395
4,145
3,540
4,162
3,601
4,558
3,625
4,496
Facilities management
1,151
1,266
1,188
1,120
1,029
1,098
1,074
1,016
1,045
Securities management
642
700
761
762
695
717
824
866
696
Cleaning services
1,397
1,404
1,425
1,490
1,469
1,552
1,592
1,676
1,482
Construction work
851
764
474
491
741
754
678
634
932
Materials & suppies sourcing
573
636
533
591
464
490
436
721
568
Vending machine services
535
812
433
1,288
551
894
506
1,014
450
Support services
77
323
312
117
308
369
179
252
YoY
9.6%
4.1%
3.2% 18.5%
4.4% -0.5%
6.1% 10.0%
2.4%
8.0%
Facilities management
4.2%
3.8% 10.0% -10.8% -10.6% -13.3% -9.6% -9.3%
1.6%
Securities management
6.8%
4.6% 16.0% -0.5%
8.3%
2.4%
8.3% 13.6%
0.1%
Cleaning services-3.1% -6.9% -1.5% -2.2%
5.2% 10.5% 11.7% 12.5%
0.9%
Construction work
84.6% -4.0%
5.3% -2.2% -12.9% -1.3% 43.0% 29.1% 25.8%
Materials & suppies sourcing 109.9% 98.8% 39.9% 21.1% -19.0% -23.0% -18.2% 22.0% 22.4%
Vending machine services
17.8% 11.5%
0.2% 64.7%
3.0% 10.1% 16.9% -21.3% -18.3%
Support services
100.0% 76.7%
5.9% 240.7% 128.6%
2.4% -54.7% 25.4%
0.9%
OPM
5.1%
6.3%
5.5%
6.6%
5.3%
6.2%
5.5%
6.8%
5.1%
6.2%
Facilities management
10.8% 11.7% 10.6% 10.4%
9.2%
9.4%
9.3%
8.9%
8.6%
Securities management
7.6%
8.4%
9.0%
8.5%
7.8%
8.1%
8.9%
9.1%
7.5%
Cleaning services
13.3% 13.4% 13.4% 14.0% 13.4% 14.2% 14.3% 14.9% 12.7%
Construction work
5.4%
5.5%
5.7%
6.5%
6.2%
6.8%
7.2%
6.6%
7.1%
Materials & suppies sourcing
5.3%
5.8%
4.6%
5.3%
4.0%
4.2%
3.6%
5.9%
4.7%
Vending machine services
7.1%
9.3%
5.8% 13.4%
6.6%
9.4%
6.3% 11.2%
5.6%
Support services
5.1% 11.8% 10.8%
5.6% 10.2% 10.9%
4.8%
5.6%
8.4%
OP composition
Facilities management
21.7% 21.1% 22.8% 18.8% 19.4% 18.5% 20.3% 16.4% 18.9%
Securities management
12.1% 11.7% 14.6% 12.8% 13.1% 12.1% 15.6% 14.0% 12.6%
Cleaning services
26.3% 23.4% 27.4% 25.1% 27.7% 26.2% 30.1% 27.1% 26.8%
Construction work
16.0% 12.8%
9.1%
8.3% 14.0% 12.7% 12.8% 10.3% 16.9%
Materials & suppies sourcing 10.8% 10.6% 10.2%
9.9%
8.8%
8.3%
8.2% 11.7% 10.3%
Vending machine services
10.1% 13.6%
8.3% 21.7% 10.4% 15.1%
9.6% 16.4%
8.1%
Support services
2.9%
6.8%
7.6%
3.4%
6.6%
7.1%
3.4%
4.1%
6.4%
-

FY02/16% of 1H 1H Est. 1H Est.

Q1

Q4

Q3

66,711 66,841 61,256 62,435 66,475 67,574 65,237
13.9% -2.0% -6.7% 10.5% -0.4%
1.1%
6.5%
8,173
8,808
7,984
8,749
8,306
8,972
8,429
17.0% 10.1%
2.5% 17.4%
1.6%
1.9%
5.6%
12.3% 13.2% 13.0% 14.0% 12.5% 13.3% 12.9%
4,782
4,624
4,589
4,604
4,766
4,809
4,828
22.9% 16.2%
2.0% 16.4% -0.3%
4.0%
5.2%
7.2%
6.9%
7.5%
7.4%
7.2%
7.1%
7.4%
3,390
4,185
3,395
4,145
3,540
4,162
3,601
9.6%
4.1%
3.2% 18.5%
4.4% -0.5%
6.1%
5.1%
6.3%
5.5%
6.6%
5.3%
6.2%
5.5%
3,403
4,168
3,411
4,110
3,558
4,167
3,614
9.7%
3.6%
3.7% 18.1%
4.6% -0.0%
6.0%
5.1%
6.2%
5.6%
6.6%
5.4%
6.2%
5.5%
1,858
2,289
1,657
2,357
2,015
2,365
2,003
4.0%
6.1%
6.1% 17.6%
8.4%
3.3% 20.9%
2.8%
3.4%
2.7%
3.8%
3.0%
3.5%
3.1%

Q4

103.5%

101.5%

101.7%

104.0%

103.5%

101.5%

142,783
6.5%
18,5987.6%
13.0%
10,476
9.4%
7.3%
8,121
5.4%
5.7%
8,139
5.4%
5.7%
4,682
6.9%
3.3%

142,783
24,39418,60023,37926,25324,525
16,955
8,673
6.5%
6.7%
4.3%
6.7%
14.2%
5.2%
-4.8%
18.2%
8,121

138,000
2.9%

8,000
3.9%
5.8%
8,000
3.6%
5.8%
4,500
2.7%
3.3%

138,000

8,000

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

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Aeon Delight Co., Ltd. | 9787 |Aeon Delight Co., Ltd. ＞ Trends and outlook

LAST UPDATE【2015/10/07】

1H FY02/16 results (announced October 7, 2015)
Earnings
Sales:

JPY142.8bn (up 6.5% YoY)

Operating profit:

JPY8.1bn (up 5.4%)

Sales were up year-on-year in six segments, and were 3.5% higher than company forecasts. Facilities Management(+14.2% YoY) and Support Services (+18.2%) saw double digit growth, pushing up overall earnings. Winning non-Aeon
clients, brisk demand for new Aeon Group store openings and renovation of existing stores, as well as growth at
subsidiary Kajitaku all contributed to earnings. The company kept its full-year forecasts unchanged.

Winning non-Aeon clients, structuring Support Services and overseas business progressing
Sales to new non-group clients were up 42% YoY (JPY1.3bn) to JPY4.5bn. The company increased large-scale facility
orders, including from hospitals for sanitary cleaning services. Support Services was up 18.2% YoY at JPY1.3bn, withsubsidiary Kajitaku contributing JPY800mn of the growth. Kaji Cloud housework services for individual households
centered in urban areas were expanding.
Overseas, business continued to expand, and sales were up 55% (JPY2.4bn) to JPY5.1bn. In China, strengthened local
management meant earnings maintained solid growth due to government-related orders (not easily affected by realestate market conditions), and orders for new Aeon mall stores. In Malaysia, the company began business cleaning
business partnerships with major local companies in October 2015, and acquired the ability to take on orders for Aeon
Group’s stores, which is growing to be one of the largest retailers in Malaysia.
Gross profit was up 7.6% YoY, due to higher sales and improved cost-to-sales ratios. Operating profit was up 5.4% YoY
and outperformed forecasts by 1.5%, despite strategic human resource investments pushing up personnel costs andincreased SG&A expenses from investments due to the growth in new orders.
Of the JPY3.0–4.0bn growth in FY02/16 operating profit, the company plans for JPY1.0–1.5bn from winning new
non-Aeon Group clients; JPY1.0–1.5bn from improved margins at each business; JPY500mn from growth at a subsidiary;and JPY500mn from more transactions within the Aeon group.
Quarterly performance

Source: Shared Research based on company data

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Aeon Delight Co., Ltd. ＞ Trends and outlook

LAST UPDATE【2015/10/07】

Number of projects overseas

500
450
400
350
300
250
200
150
100
50
-

China

Malaysia

Vietnam

Source: Shared Research based on company data

AEON Mall overseas business
2015

China

ASEAN
2016

China

Name
AEON MALL Suzhou Yuenqu Hudong
AEON MALL Beijing Fengtai
AEON MALL Guangzhou Hanyu Guangchang
AEON MALL Suzhou Xinqu
AEON MALL Hanzhou Liangzhu Xincheng
AEON MALL Wuhan Jingkai
AEON MALL Long Bien
AEON MALL Binh Tan
AEON MALL Hebei Yangjiso (tentative)
AEON MALL Wuhan Shiqiao (tentative)
AEON MALL Guangzhou Jinshasu (tentative)
Other 2 more malls

Location
Suzhou, Jiangsu
Fengtai, Beijing
Guangzhou, Guangdong
Suzhou, Jiangsu
Hanzhou, Zhejiang
Wuhan, Hubei
Hanoi, Vietnam
Ho Chi Minh, Vietnam
Sanhe, Hebei
Wuhan, Hubei
Guangzhou, Guangdong

Lot area
99,300m²
63,800m²
51,400m²
approx.153,000m²
approx.94,800m²
approx.129,900m²
approx.96,000m²
approx.46,800m²
approx.84,000m²
approx.46,200m²
approx.84,500m²

Total floor space
218,000m²
approx.153,300m²
approx.172,900m²
approx.162,000m²
approx.176,000m²
approx.274,600m²
approx.110,000m²
approx.114,000m²
approx.175,000m²
approx.120,900m²
approx.187,700m²

ASEAN

Source: Shared Research based on company data

Facilities Management
Facilities Management(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/16
FY02/14
FY02/15
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
10,622 10,848 11,198 10,790 11,228 11,642 11,532 11,437 12,103 12,291
2.4%
0.9%
5.2%
5.0%
5.7%
7.3%
3.0%
6.0%
7.8%
5.6%
1,151 1,266 1,188 1,120 1,029 1,098 1,074 1,016 1,045
4.2%
3.8% 10.0% -10.8% -10.6% -13.3% -9.6% -9.3%
1.6%
10.8% 11.7% 10.6% 10.4%
9.2%
9.4%
9.3%
8.9%
8.6%
-

Q4
-

Source: Shared Research based on company data

In addition to new orders for maintenance and inspection, it expanded its contract fluorocarbon management services, its
energy management system through BEMS, and introduced and developed its remote control system.

Contract fluorocarbon management services adding value to existing FM services
The company is looking at net increase of gross profit by having existing employees add contract fluorocarbon
management services. There are indications that the Aeon Group will continue to increase stores with these services, andthe company aims to expand outside the group using its track record. Elsewhere in the energy management system, thecompany is angling to beat its competitors by sharpening its energy solutions technology. The company received over
1,300 orders in 1H.

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Aeon Delight Co., Ltd. ＞ Trends and outlook

Security Services
Security Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
8,438
6.8%
642
6.8%
7.6%

FY02/14Q2
Q38,367 8,481
5.8%
6.5%
700
761
4.6% 16.0%
8.4%
9.0%

LAST UPDATE【2015/10/07】

Q4
8,956
11.5%
762
-0.5%
8.5%

Q1
8,935
5.9%
695
8.3%
7.8%

FY02/15Q2Q38,891 9,305
6.3%
9.7%
717
824
2.4%
8.3%
8.1%
8.9%

Q4
9,491
6.0%
866
13.6%
9.1%

Q1
9,306
4.2%
696
0.1%
7.5%

FY02/16
Q2
Q3
9,294
4.5%
-

Q4
-

Source: Shared Research based on company data

In addition to on-site security services at new facilities, expanding in contract temporary security services
The company won new contracts for its “Attender” services, which combine security with customer information services,from multiple existing clients as well as for five new commercial facilities, bringing the total number of locations using its
Attender services to 36. Attender services in multiple languages were adopted by the resort-style shopping mall AEON
MALL Okinawa Rycom, which opened in April 2015. The company will keep promoting Attender-based improvement insecurity to its new and existing clients.

Cleaning Services
Cleaning Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/15
FY02/14
FY02/16
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
10,539 10,485 10,642 10,654 10,942 10,960 11,129 11,256 11,656 11,723
4.1%
4.0%
4.3%
5.4%
3.8%
4.5%
4.6%
5.7%
6.5%
7.0%
1,397 1,404 1,425 1,490 1,469 1,552 1,592 1,676 1,482-3.1% -6.9% -1.5% -2.2%
5.2% 10.5% 11.7% 12.5%
0.9%
13.3% 13.4% 13.4% 14.0% 13.4% 14.2% 14.3% 14.9% 12.7%-

Q4-

Source: Shared Research based on company data

In addition to new contracts, the company also increased the number of contracts in the hospital/nursing home market
with the help of its new sanitary cleaning services devised especially for medical facilities. In regular cleaning services, thecompany will continue standardization to attain a 20% GPM, while it sustains concerted effort to improve quality andprofitability by forming small size teams and facilitating an easy-to-work environment. The small teams were initiated last
fall. This seems to be improving cleaning materials management and workflow.

Construction Work
Construction Work(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/14Q1Q2
Q3
15,888 13,929 8,254
43.4% -26.2% -47.7%
851
764
474
84.6% -4.0%
5.3%
5.4%
5.5%
5.7%

FY02/15Q4Q1Q2Q37,559 11,858 11,133 9,366
3.0% -25.4% -20.1% 13.5%
491
741
754
678
-2.2% -12.9% -1.3% 43.0%
6.5%
6.2%
6.8%
7.2%

FY02/16Q4Q1Q2Q39,615 13,059 13,194
27.2% 10.1% 18.5%
634
932
29.1% 25.8%
6.6%
7.1%
-

Q4
-

Source: Shared Research based on company data

Renovation business may become an earnings driver starting in FY02/16
The number of large-scale renovation projects significantly increased. The company also won more orders formaintenance work due to its sales efforts. In particular, renovation services remained strong and contributed to overall
earnings.
The sudden growth stems from the company receiving an increasing number of orders to renovate aging generalmerchandise stores nationwide. Aeon Retail is renovating its existing stores to bolster its supermarket operations; sales are
increasing as a result.

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Aeon Retail may continue to open more large-scale stores
Sales at Aeon Retail’s 13 large-scale renovated stores rose 3.3% YoY during the first three quarters of FY02/15. In contrast,
average comparable store sales fell 3.8% YoY. The company, which wants to make store-renovation projects a regular partof its operations while expanding new outlets, has announced that it would increase investments in renovation projects
by 20% in FY02/16. It reported that in Q1, 33 out of the 43 stores that were part of large-scale renovations since FY02/14
attained increase in sales and profits YoY (14 out of 15 in Q1 FY02/15), and plans to press on with investment inrenovation. Aeon Delight considers this an opportunity to expand its own business.

Materials and Supplies Sourcing
FY02/14
FY02/15
FY02/16
Materials and Supplies Sourcing(JPYmn)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Sales
10,721 11,023 11,542 11,257 11,713 11,609 12,175 12,121 12,080 12,445
YoY
12.6% 12.8% 14.8% 13.3%
9.3%
5.3%
5.5%
7.7%
3.1%
7.2%
Operating profit
573
636
533
591
464
490
436
721
568
YoY
109.9% 98.8% 39.9% 21.1% -19.0% -23.0% -18.2% 22.0% 22.4%
OPM
5.3%
5.8%
4.6%
5.3%
4.0%
4.2%
3.6%
5.9%
4.7%
-

Q4
-

Source: Shared Research based on company data

In addition to new orders, the company capitalized on demand from existing clients with new stores. The company also
supplied more packaging materials for Aeon’s private brand, Top Value. The company continued to focus on increasing
margins by revising logistics costs, and cutting procurement costs with the use of electronic negotiation tools.

Vending Machine Services
Vending Machine Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,498
-0.1%
535
17.8%
7.1%

FY02/14Q2
Q38,716 7,479
1.7%
0.8%
812
433
11.5%
0.2%
9.3%
5.8%

Q4
9,636
25.1%
1,288
64.7%
13.4%

Q1
8,330
11.1%
551
3.0%
6.6%

FY02/15Q2Q3Q4Q19,471 8,003 9,021 8,107
8.7%
7.0% -6.4% -2.7%
894
506 1,014
450
10.1% 16.9% -21.3% -18.3%
9.4%
6.3% 11.2%
5.6%

FY02/16
Q2
Q3
8,848
-6.6%
-

Q4
-

Source: Shared Research based on company data

In March, the company established a special sales team to develop new customers and aggressively push vending
machine location proposals at client facilities, a step that was deemed necessary to help counter the ongoing decline invending machines sales across the industry. The company also installed value-added vending machines—such as thosewith digital displays—at major new commercial facilities, and developed private brand drinks specifically for vending
machines. These private brand drinks are being developed for 2H.

Support Services
Support Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
3,002
44.7%
154
100.0%
5.1%

FY02/14Q2Q3Q4Q13,473 3,660 3,583 3,466
56.6%
2.8% 16.0% 15.5%
410
395
201
352
76.7%
5.9% 240.7% 128.6%
11.8% 10.8%
5.6% 10.2%

FY02/15Q2Q33,870 3,726
11.4%
1.8%
420
179
2.4% -54.7%
10.9%
4.8%

Q4
4,470
24.8%
252
25.4%
5.6%

Q1
4,215
21.6%
355
0.9%
8.4%

FY02/16
Q2
Q3
4,458
15.2%
-

Q4
-

Source: Shared Research based on company data

Subsidiaries continued to make significant contributions to growth in profits. The company focused on growing sales ofKajitaku’s Kaji Cloud housework services, with the result that Kaji Cloud sales rose over 1.3x YoY, and so sales showedsigns of steady growth.

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LAST UPDATE【2015/10/07】

For details on previous quarterly and annual results, please refer to the Historical financial statements section.

Full-year outlook
FY02/16 Forecasts(JPYmn)
Sales
YoY
CoGS
Gross Profit
YoY
GPM
SG&A
SG&A / Sales
Operating Profit
YoY
OPM
Recurring Profit
YoY
RPM
Net Income
YoY

FY02/14
FY02/16
1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Est. 2H Est.
FY Est.
133,552 123,691 257,243 134,049 132,656 266,705 142,783 137,217 280,000
5.3%
1.3%
3.4%
0.4%
7.2%
3.7%
6.5%
3.4%
5.0%
116,570 106,958 223,528 116,771 114,817 231,588 124,185
16,981 16,733 33,714 17,278 17,839 35,117 18,598
13.3%
9.8%
11.5%
1.7%
6.6%
4.2%
7.6%
12.7%
13.5%
13.1%
12.9%
13.4%
13.2%
13.0%
9,406
9,193
18,5999,575
9,681
19,256
10,476
7.0%
7.4%
7.2%
7.1%
7.3%
7.2%
7.3%
7,575
7,540 15,115
7,702
8,159 15,861
8,121
8,879 17,000
6.5%
11.1%
8.7%
1.7%
8.2%
4.9%
5.4%
8.8%
7.2%
5.7%
6.1%
5.9%
5.7%
6.2%
5.9%
5.7%
6.5%
6.1%
7,571
7,521 15,092
7,725
8,218 15,943
8,139
8,861 17,000
6.3%
11.1%
8.6%
2.0%
9.3%
5.6%
5.4%
7.8%
6.6%
5.7%
6.1%
5.9%
5.8%
6.2%
6.0%
5.7%
6.5%
6.1%
4,147
4,014
4,380
4,345
4,682
4,718
8,161
8,725
9,400
5.1%
12.6%
8.7%
5.6%
8.2%
6.9%
6.9%
8.6%
7.7%
FY02/14

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Business environment
Aeon Delight regards the business environment of FY02/16 as promoting (1) concentration of the industry to a few major
players due to adverse business conditions such as cost increase driven by inflation and the shortage of new hires; (2)tendency of large-scale facilities to consolidate and outsource all FM functions and the resulting increase in the number ofoutsourcing businesses consolidating FM services; (3) a stronger watchfulness about emergency response and security inreaction to the increased frequency of extreme weather and natural disasters; (4) desire to invest in store renovation incommercial facilities; and (5) competition revolving around facilities management in accordance with the international
standard ISO41000 and imaginative renovation.
The company takes these trends as an opportunity for expansion and growth. It is poised to take larger shares in thedomestic and Asian markets. Strategic priorities are winning more non-group clients; attaining competitive advantage;and expanding business in Asia.

Versus the medium-term management plan (through FY02/17)
JPY2bn operating profit increase for FY02/16 may pave the way for JPY21bn profit
FY02/16 is the second year of the medium-term management plan, which covers the period through FY02/17. The plancalls for sales and operating profit of at least JPY330bn and JPY21bn. For FY02/15, the company missed its goal of
JPY270bn in sales and JPY16bn in operating profit.
The FY02/16 target calls for operating profit of JPY17bn. That means the company must try harder for the following fiscal
year to achieve the medium-term goal. But the company may post a better operating profit than forecast for this fiscal
year, depending on the progress of current measures being implemented. The company, which projects an operating
profit increase of JPY1.1bn, may in fact post an increase of JPY2bn. If that is achieved, an increase of JPY3bn for the

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Aeon Delight Co., Ltd. ＞ Trends and outlook

LAST UPDATE【2015/10/07】

following year is also possible. Thus, operating profit of JPY21bn could be attained. Shared Research suspects, however,that the company also plans business acquisitions to achieve this target.

Measures to improve operating profit
The company is taking the following measures to increase operating profit by JPY2bn. The company will 1) expand
businesses with clients outside the Aeon Group; 2) improve the profitability of each operation; 3) grow operations ofsubsidiaries; 4) expand transactions with Aeon Group companies. The goal is to increase gross profit by between JPY3bn
and JPY4bn. After deducting JPY2bn in SG&A expenses, operating profit would rise by between JPY1bn and JPY2bn.
Measures to grow operating profit
Total YoY growth of gross profit
1） Increase new customers outside group2） Improve profit margins at each segment
3） Expand subsidiaries' businesses
4） Expand the Aeon group's market
Amount from higher SG&A expenses
Operating profit YoY growth

YoY
JPY3bn-4bn
JPY1bn-1.5bn
JPY1bn-1.5bn
JPY500mn
JPY500mn▲JPY2bn
JPY1bn-JPY2bn

Source: Shared Research based on company data

Win more non-group clients
Shared Research believes that the company will seek to win facility-management contracts from operators of large-scale
facilities and win cleaning contracts from medical institutions.

Facility-management contracts for large facilities nationwide
The company will seek to manage not only commercial facilities but also universities, factories, hotels, and public
institutions. Aeon Delight will rely on its name recognition as the largest facility-management company, its network ofpartner companies, its cost-competitiveness, and its technological prowess.
Aeon Delight also approaches companies that already have building-maintenance subsidiaries. The company wants toform partnerships with such subsidiaries.
Aeon Delight has a business-process outsourcing subsidiary called General Services Inc. Aeon Delight will utilize theconsulting services of General Services to win new clients. General Services, meanwhile, is increasing mid-career hiring to
expand workforce. Shared Research will closely observe the effects of these and other measures as it to achieve its
medium-term goal.

Gaining competitive edge
To gain a competitive edgegpg
Measures
Labor force and partner companies

Creation and innovation with added value

Details・Gain trust and and brand recognition as one of Japan's major FM companies
・Acquire a network of partner companies throughout Japan・Further improved competitive edge (e.g., improved ability to respond to natural disasters)
・On-site improvements (e.g., standardized cleaning in FY02/15)
・R&D for cleaning equipment and next-generation business models such as eco-friendly
and remote-controlled monitoring management
・Nationwide network, global management network including ASEAN countries and China

Source: Shared Research based on company data

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The company wants to become a comprehensive facility-management company, rather than focusing on cleaning
operations alone. The company, which already serves major medical institutions, can appeal this track record to win more
contracts. The company could also expect referrals from existing customers. It won a contract to manage 17 facilities for
JA Hokkaido during FY02/15. As of March 2014, JA-related organizations had 111 hospitals and 61 clinics. JA also operates
nursing homes and elderly care facilities.
These medical institutions already have cleaning services. The company, in order to compete with these rivals, must hire
more workers and train them and purchase various kinds of equipment. Aeon Delight has financial resources to make suchinvestments.
Hospital and clinics in Japanpp
From Oct. 1, 2013 to May 1, 2015
Total
National
Public medical institutions
Social insurance-related organizations
NGOs
Medical corporations
Private schools
Social welfare services
Individuals
Other

Hospitals
8,540
273
1,242
115
312
5,722
109
193
320
254

Hospital beds ('000)
1,574
115
325
34
74
855
55
34
31
51

Clinics
100,528
573
3,591
545
747
38,544177
8,423
45,006
2,922

Source: Ministry of Health, Labour and Welfare, Shared Research data

Improving profitability at each segment
The company has always been seeking to improve the profitability of each segment. In particular, Shared Research is
closely monitoring the following measures, which may have an effect as early as FY02/16.
▶ The Facility Management segment offers new value to the existing clients without increasing fixed costs.
▶ The Security Service segment has lowered the turnover rate among older employees.

▶ The Cleaning Service segment has improved the efficiency of directly managed centers and partner companies with astandardized business model▶ The Vending Machine segment has deployed machines with enhanced features, such as those with a digital signage

function. The company has also developed its own private brand drinks.

Adding more value to facility management services; CFC-related businesses planned
The company will train technicians dealing with CFC refrigerants—it now has over 400 technicians nationwide—as it looks
to centralize refrigeration and air conditioning facilities management before the revised Act for Rationalized Use andProper Management of Fluorocarbons is enacted for April 2015. The company plans to increase gross profit by assigning
additional duties to existing employees. In addition, the company will also expand its ESCO and energy management
operations to enhance the quality of its services in areas other than facility management businesses.
Aeon Delight also began CFC-related services at 444 stores, including those operated by Aeon Retail, in April 2015. There
were 618 general merchandise stores operated by the Aeon Group as of the end of February 2015 (of which 77 wereoutside Japan). The group also had 2,030 supermarkets (101 outside Japan). Aeon Delight will provide CFC services atonly 30% of the group’s general merchandise stores during this fiscal year. Thus, there is room for expansion within thegroup. Shared Research will closely monitor the company’s efforts to increase businesses with non-Aeon clients and enter
into other fields.

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Among other services, energy solutions operations may have growth potential. Aeon Delight wants to build anenergy-saving package that comes with facility-management services. This package does not feature centralized
monitoring. Instead, the company will reduce costs by providing control services from dispersed locations. An
experiment will be conducted at a supermarket in eastern Japan during 1H FY02/16.

Standardized model in the cleaning operations
The company adopted a standardized model for its cleaning services during FY02/15. The new system has achieved 60%
or 70% of the efficiency target at directly operated centers. The company wants to raise the ratio to 80% in FY02/16 while
encouraging partners companies to also adopt the system. In addition, the company will also study the use of robots in aneffort to change the existing, labor-intensive business model.

Growth of subsidiary businesses
Shared Research is paying particular attention to Aeon Compass and Kajitaku in the support services segment. We
estimate that Aeon Compass and Kajitaku generated more than two-third of the JPY1.1bn operating profit for thissegment during FY02/15. Sales of Kajitaku’s Kaji Cloud housework services increased 40% in FY02/15. For FY02/16, thecompany will continue to expand this service. At the same time, the company may start new services for residents ofhigh-rise condominiums in the Tokyo area. The company said that it would provide services aimed at working women,
without elaborating.

Expansion of businesses within the Aeon Group
Aeon Delight generated sales of JPY162.9bnin FY02/15 from businesses within the group, 61.1% of the company’s overallsales. Aeon Delight wants to increase its businesses with other Aeon companies, while expanding sales to clients outside
the group.

Stronger ties with group companies; brisk demand for renovation work
The company’s facility-management segment began to strengthen businesses with other group companies, such as Aeon
Mall Co., Ltd., during FY02/15. Aeon Delight will continue to increase its cooperation with other Aeon companies during
this fiscal year. Aeon Group is undertaking major renovation projects nationwide to increase sales at aging stores. Shared
Research estimates that Aeon Delight generated sales of JPY4.5bn from businesses related to store renovation during
JPY02/15. Aeon Group has announced that it would increase investments for store renovation projects by 20% for
FY02/16. We will observe whether Aeon Delight will be able to win orders related to store renovation.

Overseas expansion
Business environment
China
The ongoing changes in the Chinese real estate market have brought about a decline in demand for condominiums inlarge cities, with a shift in focus from expansion to quality. In commercial facilities, energy saving has become a priority.
Aeon Delight is looking to expand its business around companies that have joined the group through acquisitions, and isseeking additional partners in energy saving.

ASEAN
The development of FM services differs by country. FM services have spread in Singapore and Malaysia. US and European
companies have made inroads into the ASEAN markets, but there is no single dominant company. Aeon Delight is intent

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on building a firm business foundation as a major player in the industry, while the power balance is still in flux.

Expansion in Asia
Double-digit sales growth may continue into FY02/16; focus is on China
Aeon Delight has been increasing sales (including through acquisitions) for two years in a row. For the past two years,
sales have increased by tens of billion yen (including a sales increase due to corporate acquisitions) in Asia. For FY02/15,
sales reached JPY9bn, a twofold increase from a year earlier. China is the biggest market for Aeon Delight, whichaccording to the company, ranked 30th in market share among the 59,000 building maintenance companies operating in
the country. The company’s success in China may be a result of its alliance with a major company in the nation.

China
The company will give local subsidiaries more management autonomy, expand business fields, and carry out
reorganization, as well as form partnerships with major local companies to develop an energy saving package (consistingof LED, heat source, air conditioning). The company will enter Phase 2 of its China operations by entering into new
business fields, in addition to pursuing geographical expansion.

Malaysia
The company will win more clients for its cleaning and ESCO businesses by urging Aeon Group companies in the country
to switch services and by adding non-Aeon clients. The company expects a sales decline for FY02/16 from a year earlier,when the company received many orders related to LED installation.

Vietnam
The company will create a new facility in Hanoi. Corporate acquisitions are also in view to quickly expand operations in a
growing market.
Overseas orders

Overseas sales (JPY mn)
14,000500
450

12,000400
350

10,000

300

8,000

250

6,000

200
150

4,000

100

2,000

50
-

FY02/12

FY02/13

China

Malaysia

FY02/14

FY02/15

Vietnam

FY02/12

FY02/13
China

FY02/14
Malaysia

FY02/15

FY02/16
Est.

Vietnam

Source: Shared Research based on company data

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AEON Mall overseas business
2015

China

ASEAN
2016

China

Name
AEON MALL Suzhou Yuenqu Hudong
AEON MALL Beijing Fengtai
AEON MALL Guangzhou Hanyu Guangchang
AEON MALL Suzhou Xinqu
AEON MALL Hanzhou Liangzhu Xincheng
AEON MALL Wuhan Jingkai
AEON MALL Long Bien
AEON MALL Binh Tan
AEON MALL Hebei Yangjiso (tentative)
AEON MALL Wuhan Shiqiao (tentative)
AEON MALL Guangzhou Jinshasu (tentative)
Other 2 more malls

Location
Suzhou, Jiangsu
Fengtai, Beijing
Guangzhou, Guangdong
Suzhou, Jiangsu
Hanzhou, Zhejiang
Wuhan, Hubei
Hanoi, Vietnam
Ho Chi Minh, Vietnam
Sanhe, Hebei
Wuhan, Hubei
Guangzhou, Guangdong

Lot area
99,300m²
63,800m²
51,400m²
approx.153,000m²
approx.94,800m²
approx.129,900m²
approx.96,000m²
approx.46,800m²
approx.84,000m²
approx.46,200m²
approx.84,500m²

Total floor space
218,000m²
approx.153,300m²
approx.172,900m²
approx.162,000m²
approx.176,000m²
approx.274,600m²
approx.110,000m²
approx.114,000m²
approx.175,000m²
approx.120,900m²
approx.187,700m²

ASEAN

Source: Shared Research based on company data

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LAST UPDATE【2015/10/07】

OutlookIn April 2014, Aeon Delight announced a new medium term plan, with FY02/17 as the final year. Targets for FY02/17
include sales of JPY330.0bn or more, operating profit of JPY21.0bn or more, and an operating profit margin of 6.4% or
greater. The company aims to reduce its reliance on the Aeon Group and expand its overseas reach, setting sales
composition targets of 35% and 10% for the two respective categories. In light of recent employment trends, personnel
expenses are expected to rise 2% per year.
The framework for the medium term plan involves:▶ Establishing comprehensive FMS (Creating competitive advantages);▶ Creating inroads into the Asian market;▶ Establishing a foundation for business.

In order to secure prospects for growth in the medium to long term, the company views its cleaning services and energy
solutions businesses as growth drivers. Aeon Delight will allocate significant amounts of management resources to theseareas.

The company may revise its medium-term management plan
The company may revise its FY02/16 medium-term management plan because of concerns that it will miss its FY02/15
operating profit target. If revised, the new plan may have targets that can easily be achieved in preparation for the next
medium-term plan that will likely call for more challenging goals.
(For details regarding expected FY02/16 earnings for each segment based on Q3 FY02/15 results, see the section on Q3
FY02/15 Results.)
The comments that follow were written using the company’s view of its initial medium-term plan as of the beginning of
FY02/15; see this fiscal year’s outlook for views as of the beginning of JPY02/16.

The company’s views on increasing sales by JPY73.0bn in FY02/14
M&A not included
The new medium term plan calls for an over JPY73.0 increase in sales compared to FY02/14. Approximately one-third of
the JPY100.0bn sales increase in the previous medium term plan was composed of M&A activity. However, the new plan
does not include any M&A, and instead is focused on digging deeper into existing revenue sources.

Domestic Aeon Group: 1/3; Overseas: 1/3; Domestic, excluding Aeon Group: 1/3
Although specific figures have not been disclosed, Aeon Delight expects approximately 1/3 of the increase in sales tocome from sales toward the domestic Aeon Group, 1/3 to come from overseas (including overseas Aeon Group
companies), and the remaining 1/3 to come from domestic sales, excluding Aeon Group companies.

Sales toward domestic Aeon Group companies
Aeon Delight believes that there is about JPY50.0bn of potential for contracts with domestic Aeon Group companies. In
order to acquire these contracts, the company is in the process of an organizational restructuring, which includes forminga special sales department that will specifically target the Aeon Group. Sales were concentrated primarily on large groupcompanies in the past, and other medium and small sized companies were not given adequate amounts of attention.
Aeon Delight hopes to capitalize on these previously untapped group companies.

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Aeon Delight Co., Ltd. ＞ Trends and outlook

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Higher overseas sales: aiming to be Asia’s number one company
Number of overseas facilities contracts acquired
Number of projects overseas
250

200

150

100

50

Q1 FY02/12

Q2

Q3

Q4

Q1 FY02/13

China

Q2

Q3

Malaysia

Q4

Q1 FY02/14

Q2

Q3

Q4

Q1 FY02/15

Vietnam

Source: Shared Research based on company data

In the Asian market, the company has established a presence in China and ASEAN nations, and is seeking JPY30.0bn insales from these areas by FY02/17. The above areas accounted for about 2% of sales in FY02/14. The number of facilities
sourced to Aeon Delight were: China, 136; Malaysia, 45; Vietnam, 23. China is the dominant contributor to sales at thistime, but the company plans to increase sales by at least JPY10.0bn each in both China and the collective ASEAN nations.
Although competition is heating up in emerging markets with overseas companies ISS (CPH:ISS) and SODEXO (EPA:SW),
consistent population expansion in urban centers is allowing the Aeon Group to maintain its momentum in shifting focus
to Asia.

Aeon Group plans investment of JPY400.0bn over three years ending in FY02/17
The Aeon Group plans to invest JPY400.0bn over the three years ending in FY02/17 to open large-scale shopping centers(SCs) in Asian countries such as China, Vietnam, and Indonesia. Aeon Delight is aiming to capture opportunities for its
comprehensive FMS business, and believes that the Aeon Group’s investments will provide further opportunities foroverseas sales growth.

Establishing a federalized management structure in China and a comprehensive FMS menu in the
ASEAN region
During the previous medium term plan, the company strengthened its business fundamentals through acquisitions ofpromising local firms in China and the ASEAN nations. Two focal points of the new medium term plan are establishing afederalized management structure in China, and a comprehensive FMS menu in the ASEAN region.
Under the medium term plan, Aeon Delight will continue to press forward with its strategy of acquiring promising local
firms. In addition to current acquisitions in Beijing, Tianjin, Jiangsu, Hubei, and Guangdong, preparations are underway to
expand into Shandong. Since the 2007 establishment of a local office in Beijing, the company has expanded its businessthrough M&A and partnerships with major players in local markets, and the company is moving to further solidify thisstrategy.
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and elevator business. China is the world’s largest market for elevators, and the company is prepped to make inroads
thanks to its acquisition of one of the largest elevator manufacturers in Jiangsu.
As a percentage of sales, the company’s sales activities in the ASEAN region still represent only a small amount. Although
the medium term plan includes sales to Aeon Group companies, the company forecasts an increase in sales for thecollective countries on par with the forecasted sales increase in China. Specifically, Aeon Delight will aim to become themarket leader in the three businesses of cleaning services, vending machines, and energy conservation in Malaysia. In
Vietnam, the company will enhance its services lineup and bolster its sales activities to both Japanese and foreign firms.
Plans are also in place for expansion into Cambodia, Singapore, and Indonesia.

Domestic sales excluding the Aeon Group: 35% of sales to outside of the Aeon Group by FY02/17
As of FY02/14, the percentage of sales that occurs outside of the Aeon Group was 31%. Aeon Delight aims to raise thisfigure to 35% by the end of FY02/17, and to 40% over the long term. Players in the comprehensive FMT market outside of
the Aeon Group have not solidified, and there remains room for the company to enter the market with its uniqueexpertise. Aeon Delight will continue to expand its reach in acquiring new contracts with hotels and hospitals, much as it
did in FY02/14.
The company is working to prevent employees from becoming overly accustomed to working on projects for the Aeon
Group. To foster this culture, Aeon Delight is driving momentum in acquiring market share outside of the Aeon Group. To
this end, the company also plans to restructure fundamental business principles such as sales, business development,
employee training, and IT investment.

Establishing comprehensive FMS (Creating competitive advantages)
One of the focal points of the medium term plan is establishing comprehensive FMS and creating competitive
advantages. In order to find new opportunities for growth, the plan calls for concentration of management resources in
the cleaning services and energy solutions businesses. Although a degree of uncertainty exists in the environment
surrounding comprehensive FMS owing to expansion of large western FM firms into Japan for the 2020 Tokyo Olympic
Games, demand is strong. New sources of demand are led by hospitals and nursing care facilities.

Strengthening the cleaning services business
In FY02/14, the cleaning services business saw sales of JPY42.3bn (16.5% of total sales), operating profit of JPY5.7bn(25%, excluding eliminations, amortization of goodwill, and corporate expenses), and operating profit margin of 13.5%.
The company is aiming to generate sales in excess of JPY180.0bn in FY02/21 (including M&A). Aeon Delight values thecurrent domestic market at JPY1.3tn, and although it does not expect any significant growth in the market size, thecompany will increase sales via expanding its market share to over 10%.
To accomplish this, the company will expand into new areas, and establish a standardized cleaning model. Primary focal
points for new areas will be hospitals and nursing care facilities. Major groups with nationwide hospital networks are
eager to implement management reforms, and Aeon Delight believes that comprehensive FMS is a good fit to matchthese customers’ needs in improving sanitation, environmental conditions, safety, peace of mind, service improvement,
and cost reductions.

Expanding into new areas: taking on major nationwide hospital groups
Through the organizational restructuring described below in FY02/15, the company has created a framework to tackle

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different industries, such as hospitals, with differing strategies for each. It has also changed its marketing approach from a
product out model, in which the company touts the superiority of its products, to a market in model, in which thecompany adjusts its products to meet the needs of the market. Budgets are also no longer set at business headquarters,
but are set based on proposals from individual sales departments, which are more in tune with the unique needs of eachcustomer and market.

Expanding into new areas: Developing service options through cooperation with European manufacturers
To accelerate the fleshing out of its business offerings, the company will also further develop service options incooperation with European manufacturers and health care departments of major domestic trading firms. For instance,
when expanding into hospitals and nursing care facilities, disinfecting and sterilization techniques are essential. Aeon
Delight does not hesitate to partner with European firms and universities, which harbor advanced technology in areas
such as these. The company states that it has already partnered with a Swiss university. Although M&A will be an essential
component of reaching JPY180.0bn in sales by FY02/21, it appears that the company has already determined, to an
extent, targets for future alliances.

Improving gross profit margin by establishing a standardized cleaning model
Aeon Delight has set a goal of improving the gross profit margin of its cleaning services business over 10% by FY02/21.
Developing high value-added services is an integral component, but the company believes that improvements to its cost
structure will yield the largest gains. The cleaning services business is the segment with the highest operating profit
margin (13.5% in FY02/14), but the company believes that there is still room for improvement.
To this end, the company is aiming, for the second time, to develop a standardization model (standardized quality based
upon the optimal amount of labor input). An attempt was made in FY02/10, but after four years of use, its utility
decreased, and a reassessment was deemed necessary.
Between 80-90% of sales are outsourced to external firms, and Aeon Delight is only directly involved with 10-20%.
However, the profit composition is over 20%, and there is a large variation in margins between different offices. As such,the company decided to share its expertise with its outsourcing partners on methods to achieve high margins. The
company also improved cost structures at its internal offices that were suffering from low margins. Through the above
efforts, Aeon Delight expects its gross profit margin to rise. By increasing productivity for the roughly 30,000 persons
employed in its cleaning services, the company will improve profitability as a whole. By reassessing its CoGS on afundamental level, the process has already begun at 93 directly operated locations. SR will keep watch on how these
initiatives progress throughout FY02/15 and FY02/16.

Strengthening the energy solutions businessIn the energy solutions business, the company seeks to establish a proprietary combined facilities management ESCO
business and be a comprehensive manager of energy across the Aeon Group. During the duration of the medium termplan, sales of JPY10.0bn are expected from the ESCO business. Plans to join with other companies in developing abusiness selling electricity are also under consideration, ahead of expected liberalization of the electricity market in 2016.

ESCO business
The ESCO business will be increasingly integrated into the combined facilities management ESCO business. Althoughcompetition is fierce, the company has strengths in its energy conservation technologies in building maintenance.
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possible through addition of its unique facilities management expertise. Aeon Delight aims to expand its business byleveraging strengths such as those above.

Energy management for the Aeon Group
According to Aeon’s environmental sustainability report, a combined 2,113mn kWh was utilized in FY02/13 by Aeon
Retail, six MaxValu companies, Aeon Super Center, and Aeon Big. Assuming a rate of JPY22 per kWh, this equates to
JPY46.5bn in electrical costs for the year. Adding electrical fees for other group companies will increase this figure evenfurther, and at the Aeon Group’s FY02/14 results presentation, electricity costs for the group were stated to be in excessof JPY80.0bn (within the Kansai Electric Power [TSE1:9503] area, Aeon’s power usage is second only to the West Japan
Railway Company [TSE1:9021]). Through management of this extremely high amount of electrical use, the Aeon Delightwill not only be able to reduce the Aeon Group’s electrical footprint, but also expand and acquire expertise.

Responding to ISO41000, the international standard in the facilities management industry
ISO announced in the first half of 2015 that it would develop a new international standard for facilities management(FM)—ISO41000. The new standard will make possible standardized FM services worldwide.
With the spread of ISO41000 and ISO18480, contract with clients will shift to SLA (service level agreement). This meansthat contract based on service quality and results is expected to be the mainstream, replacing the conventional contract
based on the number of workers, hours, and shifts. Aeon Delight has proactively begun adjusting to ISO18480, apreliminary step to ISO41000, and has already incorporated its content to the company’s FM services. Shared Researchthinks such a proactive response to ISO41000 may well result in a competitive edge over the medium to long term.

Building an organizational baseTo successfully implement the above initiatives outlined in the medium term plan, building an organizational base isoutlined as one of the top priorities. The following three points are seen as focal points:▶ Active business development and organizational restructuring with solutions-based sales in mind;▶ HR development with an emphasis on service quality;▶ IT investment to realize corporate growth and a small headquarters.

In order to proceed with the cleaning services and energy solutions businesses as stated above, the company willconsolidate and restructure its organizational structure, creating a sales structure that is specialized to each customer andindustry. The process began in FY02/15, and Aeon Delight is aiming to develop a market in business model that is in tune
with customer needs. Additionally, approximately JPY3.0bn of investment in IT is planned over the three years of themedium term plan. Investments will be used to develop tools and systems for the cleaning services and energy solutions
businesses, which will in turn drive acceleration of the development of the company as a whole.

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Aeon Delight Co., Ltd. ＞ Business

LAST UPDATE【2015/10/07】

Business
Business description
Aeon Delight provides maintenance services for retail facilities and office buildings. The company, formerly known asJapan Maintenance (a subsidiary of MyCal Corp.), was established mainly to undertake maintenance at Mycal stores in
November 1972. Mycal filed for bankruptcy in September 2001 (delisted on September 17, 2001), and became asubsidiary of Aeon in 2003. Japan Maintenance merged with Aeon Techno Service and the name was changed to Aeon
Delight in September 2006. As of FY02/13, the company derives 65% of sales and 70% of operating profit from Aeon
Retail Co., Ltd. and other Aeon group companies.
Aeon Delight handles between 80% and 90% of the facilities management work required by Aeon Retail, and about 65%
of such work required by Aeon Mall Co., Ltd. (TSE1: 8905). Facilities management work at Aeon Mall was previously done
by a subsidiary of Diamond City, a Mitsubishi Corp. (TSE1: 8058) affiliate absorbed by Aeon Mall in 2007. Aeon Delightalso handles between 60% and 70% of the facilities management work at MaxValu retail stores owned the Aeon.
Aeon Delight is a subsidiary of Aeon, a comprehensive retail operator. Aeon was established in 1926 and moved to aholding company format in order to generate group synergies in August 2009. The Aeon group consists of “Aeon”
flagship general merchandise stores (Aeon Retail), “MaxValu” supermarkets, “Aeon” shopping centers and malls (AeonMall). The company is not only looking to develop its own shopping centers, but also to build its business in facilities
management, which will contract management of retail facilities developed by other companies. Aeon has been
expanded into Hong Kong, Thailand, and Malaysia, and will also expand more broadly in ASEAN countries including
Taiwan, Indonesia, China, Vietnam and Cambodia.

M&A activities
Aeon Delight has pursued growth through acquisitions. In May 2007, the company established a business alliance with A
to Z Service Co., Ltd., maintenance service provider for small commercial facilities, and raised its stake in the company to
54.8% from 20.4% in May 2011. A to Z Service specializes in maintenance services to convenience stores and fast foodrestaurants. Clients include McDonalds Japan (JASDAQ: 2702), Komeri (TSE1: 8218), and Seiyu. A to Z Service contributes
roughly 5 billion yen in sales, but operating profit margin is low at around 3%.
The company took a 90% stake in Kajitaku Co., Ltd., a provider of cleaning, laundry and other household services in April
2011. Kajitaku adds about 500 million yen to 600 million to Aeon Delight’s top line, and strengthened its expansion into
the household segment. It acquired a 40% stake in Kankyouseibi Co., Ltd., operator of maintenance services forlarge-scale buildings in October 2008, and a 40% stake in Do Service Co., Ltd., a building maintenance services operator
in western Japan in April 2009.
It also acquired Certo Corp., a provider of office supplies and operator of soft drink beverage vending machines in
September 2010, and its subsidiary in Beijing, renamed the entity Aeon Delight (Beijing) Commerce Co., Ltd. in
September 2010.
In April 2011, the company acquired 90% of Kajitaku Co., Ltd., a provider of house cleaning and condominium concierge
services. In October 2012, it acquired a 55% stake in a domestic travel services company and renamed it Aeon Compass

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Co., Ltd. The company also bought 51% of General Services Inc., a business-process outsourcing company.

M&A activities by Aeon Holding
On March 4, 2013, Aeon acquired Peacock Store Ltd., a supermarket operator, from J Front Retailing Co., Ltd. (TSE1:3086). There were 82 Peacock stores as of March 2013, providing a potential business opportunity for Aeon Delight. In
April 2013, the company said that it would raise its stake in Daiei to over 40% from 20%. Aeon Delight had 9 billion insales to Daiei in FY02/13, and may expand to 13 billion or more after it is integrated into the Aeon group.
In March 2013, Aeon announced it would raise its stake in Daiei to more than 40% from 20% by April 2013, and would
assume a majority of Daiei’s board seats. Shouhei Murai, who led Aeon’s supermarket operations, will become Daiei’s
president effective May 2013. Mr. Murai became president of Aeon Retail in 2008 and boosted the company’s
profitability.

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Aeon Delight Co., Ltd. ＞ Business

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Business overview
Aeon Delight operates eight main business segments: facilities management, security services, cleaning services,
construction work, materials and supplies sourcing services, vending machines, support services, and other (real estate).
Segment Results(JPYmn)Sales
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
OthersYoY
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
Operating profit
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
OthersElimination
YoY
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
OPM
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
OP composition
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services

FY02/08

FY02/09

FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

Cons.
137,519
40,20235,84841,098
16,777

Cons.
145,690
42,25336,67042,403
18,515

Cons.
140,299
41,66634,28145,05013,889

5,846

5,412

23.7%

5.9%
5.1%
2.3%
3.2%
10.4%

-3.7%
-1.4%
-6.5%
6.2%
-25.0%

62.8%
9,946

-7.4%
9,970
4,507
2,738
5,780
1,321

Cons.
248,876
42,05031,80540,51953,071
39,284
31,20010,823
119
13.2%
-0.2%
-1.3%
1.7%
86.1%
7.0%
-3.3%
35.6%
13,901
4,661
2,692
5,918
2,209
1,462
2,396
504
237
-6,180
1.0%
-8.3%
-4.6%
0.6%
14.1%
18.5%
2.8%
223.1%
5.6%
11.1%
8.5%
14.6%
4.2%
3.7%
7.7%
4.7%

Cons.
257,243
43,45834,24242,32045,63044,54333,32913,551
167
3.4%
3.3%
7.7%
4.4%
-14.0%
13.4%
6.8%
25.2%
15,115
4,725
2,865
5,716
2,580
2,333
3,068
829
331
-7,334
8.7%
1.4%
6.4%
-3.4%
16.8%
59.6%
28.0%
64.5%
5.9%
10.9%
8.4%
13.5%
5.7%
5.2%
9.2%
6.1%

Cons.
266,705
45,83936,62244,287
41,972
47,61834,825
15,522
17
3.7%
5.5%
7.0%
4.6%
-8.0%
6.9%
4.5%
14.5%
15,861
4,217
3,102
6,289
2,807
2,111
2,965
1,108
189
-6,9294.9%-10.8%
8.3%
10.0%
8.8%
-9.5%
-3.4%
33.7%
5.9%
9.2%
8.5%
14.2%
6.7%
4.4%
8.5%
7.1%

Est.
280,000

3,591

Cons.
170,905
40,01932,08841,142
16,42018,71817,188
5,271
56
21.8%
-4.0%
-6.4%
-8.7%
18.2%

23.2%
13.4%
29.5%
11.0%
7.3%
11.9%
2.5%

21.0%
12.8%
25.5%
11.5%
10.4%
13.7%
3.7%

18.5%
13.6%
27.6%
12.3%
9.3%
13.0%
4.9%

8,330

49.4%

19.4%

6.1%

6.8%

7.1%
10.8%
8.0%
12.8%
9.5%

7.0%
12.8%
8.6%
14.4%
7.4%
3.3%
8.6%
7.1%

Cons.
219,797
42,14732,23539,85228,51336,73032,280
7,980
57
28.6%
5.3%
0.5%
-3.1%
73.6%
96.2%
87.8%
51.4%
13,762
5,084
2,823
5,882
1,936
1,234
2,330
156
156
-5,843
14.4%
-0.6%
2.1%
-0.9%
59.5%
96.8%
57.4%
-58.4%
6.3%
12.1%
8.8%
14.8%
6.8%
3.4%
7.2%
2.0%

29.9%
18.1%
38.3%
8.8%

28.9%
15.6%
33.5%
6.8%
3.5%
8.3%
2.1%

25.9%
14.4%
30.0%
9.9%
6.3%
11.9%
0.8%

748
-5,1250.2%-2.6%
12,031
5,115
2,764
5,937
1,214
627
1,480
375
215
-5,698
20.7%
13.5%
0.9%
2.7%
-8.1%

5.0%

17,000

7.2%

6.1%

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Its customers included Aeon Retail, Aeon Mall, and MaxValu companies, while non-Aeon group customers werecommercial facilities, office buildings, hotels, medical and welfare facilities, schools, factories, and warehouses.

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Aeon Delight Co., Ltd. ＞ Business

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Facilities management
Facilities Management(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/11 FY02/12
FY02/13
FY02/14
FY02/15
Act.
Act.
Act.
Act.
Act.
40,01942,14742,05043,45845,839
-4.0%
5.3%
-0.2%
3.3%
5.5%
5,115
5,084
4,661
4,725
4,217
13.5%
-0.6%
-8.3%
1.4%
-10.8%
12.8%
12.1%
11.1%
10.9%
9.2%

FY02/15Q1
11,2285.7%
1,029-10.6%
9.2%

Q2
11,6427.3%
1,098-13.3%
9.4%

Q3
11,532
3.0%
1,074
-9.6%
9.3%

Q4
11,437
6.0%
1,016
-9.3%
8.9%

Source: Shared Research based on company data

This segment is involved in inspection, protection, and maintenance of facilities, providing monitoring support 24 hours aday, 365 days a year. Specific services are tailored to meet the needs of individual clients. This is a staple business for Aeon
Delight, and licensed technicians (such as electricians) are on standby at all times in large-scale shopping centers.
Specifically, the company manages utilities such as electricity, water, and gas, HVAC (operations, repairs, construction,and required inspections), exit and entrance management, anti-theft measures, and automobile parking. Gross profit
margin is about 15%, and operating profit margin is about 11%. Required facilities are purchased by the client (property
owner), and primarily costs incurred by the company are personnel costs and facilities management costs (water andutilities costs and depreciation). The company puts personnel on-site at large retail facilities, while smaller facilities are
visited periodically and monitored remotely.

Security services
Securities Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/11 FY02/12
FY02/13
FY02/14
FY02/15
Act.
Act.
Act.
Act.
Act.
32,08832,23531,80534,242
36,622
-6.4%
0.5%
-1.3%
7.7%
7.0%
2,764
2,823
2,692
2,865
3,102
0.9%
2.1%
-4.6%
6.4%
8.3%
8.6%
8.8%
8.5%
8.4%
8.5%

FY02/15
Q1
8,935
5.9%
695
8.3%
7.8%

Q2
8,891
6.3%
717
2.4%
8.1%

Q3
9,305
9.7%
824
8.3%
8.9%

Q4
9,491
6.0%
866
13.6%
9.1%

Source: Shared Research based on company data

This segment provides comprehensive security services (i.e., security for facilities, security to handle crowds and traffic,
and protection of valuable goods). By combining manual labor and the latest advances in technology, the company
provides customized security solutions to clients.
It places security guards at client facilities. This segment outsources most of its work to Aeon Delight Security, asubsidiary. Gross profit margin was relatively low at 13% due to the large amount of personnel costs. This is incomparison to 23.2% at Sohgo Security Services Co., Ltd (TSE1: 2331) and 34.2% at Secom Co., Ltd. (TSE1: 9735) for
FY03/13.
The company also began an attendant service in 2H FY02/12, which is similar in nature to a concierge service. Attendants
are female security guards that also provide information services to patrons. This service was started in an effort to shed
the old “security guard” image and provide a more hospitable environment. As of FY02/14, approximately 30 guards are
stationed at 17 stores. Due to demand from clients, a new project team was established in March 2014, and plans call for
100 staff members at 53 stores by FY02/15. Although costs will arise from staff training, this business provides high added
value, and is one to watch.
Also beginning in 2H FY02/12, “cockpit” security robots have been stationed to aid in security activities. As of FY02/14,
this program is still in the testing phase, but owing to these robots, facilities that previously required five person teams
now only require three guards.

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Aeon Delight Co., Ltd. ＞ Business

LAST UPDATE【2015/10/07】

Cleaning services
Cleaning Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/11 FY02/12
FY02/13
FY02/14
FY02/15
Act.
Act.
Act.
Act.
Act.
41,14239,85240,51942,32044,287
-8.7%
-3.1%
1.7%
4.4%
4.6%
5,937
5,882
5,918
5,716
6,289
2.7%
-0.9%
0.6%
-3.4%
10.0%
14.4%
14.8%
14.6%
13.5%
14.2%

FY02/15Q1
10,942
3.8%
1,469
5.2%
13.4%

Q2
10,960
4.5%
1,552
10.5%
14.2%

Q3
11,129
4.6%
1,592
11.7%
14.3%

Q4
11,256
5.7%
1,676
12.5%
14.9%

Source: Shared Research based on company data

With an eye to extending the longevity of buildings and facilities, Aeon Delight also places heavy influence on training
staff to provide service in a friendly and courteous manner.
From its experience in managing many large-scale shopping centers for the Aeon Group, the company has implemented
measures to increase efficiency of large machinery such as floor cleaners. These and other initiatives serve to standardize
and increase the efficiency of work performed. This is a staple business that is, on a orders received basis, composed ofabout 10-20% work performed directly by the company, and 80-90% work performed by outsourcing partners. Grossprofit margin was 20% (25% for directly operated services). Service contracts are renewed annually (80% of clients renew
and are long-term customers). Primary outsourcing partners are Do Service Co., Ltd. and Kankyouseibi Co., Ltd.
Approximately 30,000 persons are involved in the cleaning services business.

Construction work
Construction Work(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/11 FY02/12
FY02/13
FY02/14
FY02/15
Act.
Act.
Act.
Act.
Act.
16,42028,51353,071
45,63041,972
18.2%
73.6%
86.1%
-14.0%
-8.0%
1,214
1,936
2,209
2,580
2,807
-8.1%
59.5%
14.1%
16.8%
8.8%
7.4%
6.8%
4.2%
5.7%
6.7%

FY02/15Q1
11,858-25.4%
741-12.9%
6.2%

Q2
11,133-20.1%
754
-1.3%
6.8%

Q3
9,366
13.5%
678
43.0%
7.2%

Q4
9,615
27.2%
634
29.1%
6.6%

Source: Shared Research based on company data

This segment conducts large-scale renovation, interior design work, and installation of energy-saving devices (i.e., LED
lighting) and solar power systems. This segment generates 70% of its sales from Aeon group companies, and has a grossprofit margin of about 10%. Renovation remodeling (not designing) of Aeon retail locations, such as replacing signage, ormodifying retail floor space. Sales for Aeon Mall are not significant, since individual tenant stores perform their own
renovation work.
LED installation is the primary source of orders in the environmental business. Revenues from LED installation work were
JPY26.0bn in FY02/13 (JPY7.4bn in FY02/12). LED lighting is sourced from suppliers, and sales are recorded once
installations are complete at client locations. Personnel costs account for about 30% of overall costs, and the materials
ratio is around 70%.

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Aeon Delight Co., Ltd. ＞ Business

LAST UPDATE【2015/10/07】

LED-related sales (JPYbn)
60

53.1
45.6

50
40

27.0

15.6

26.1

30.0

FY2/13

FY2/14

28.5

30

7.4

16.4
2.0

20
10

21.1

14.4

-

FY2/11

FY2/12
Non-LED

LED

Source: Shared Research based on company data

In April 2012, the company’s initiatives in the field of solar energy were recognized by the Ministry of Economy, Tradeand Industry (METI) and certified as a “BEMS Aggregator” for installation of BEMS in small- and medium-sized buildings tosave energy. BEMS aggregators are companies that conduct energy support services (recognizing energy use andsupporting energy saving) for clients through cloud systems. The cloud systems are linked to a central management
system, and implementing these systems in small- and medium-sized buildings leads to conservation of energy.
Quantifying energy use through BEMS will lead to reduced CO2 emissions and environmental burdens, ultimately
yielding longer building life.
The company’s solar power systems utilize unused land in Kikukawa City, Shizuoka Prefecture. Aeon Delight invested in a
special-purpose company to operate this solar-power generation system, and intends to collect dividends from thisinvestment. As a business, the construction of solar panels is classified as a construction business, and the company
receives panels from suppliers and customizes them to fit its needs. It appears that dividends will not be received until
after FY02/15.

AEON GroupElectric Utility Companies

Profit Sharing

fits

y Sales・ Capital investments
・ Construction
・ Operations
・ Electricity trading

Installation
Operations

Source: Shared Research based on company data

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Aeon Delight Co., Ltd. | 9787 |Shared Research Report

Aeon Delight Co., Ltd. ＞ Business

LAST UPDATE【2015/10/07】

Materials and supplies sourcing services
Materials and Supplies Sourcing(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/14
FY02/15
FY02/13
FY02/11 FY02/12
Act.
Act.
Act.
Act.
Act.
39,28444,54347,61836,73018,718
96.2%
7.0%
13.4%
6.9%
627
1,234
1,462
2,333
2,111
96.8%
18.5%
59.6%
-9.5%
3.3%
3.4%
3.7%
5.2%
4.4%

FY02/15Q1
11,7139.3%
464-19.0%
4.0%

Q2
11,6095.3%
490-23.0%
4.2%

Q4
12,121
7.7%
721
22.0%
5.9%

Q3
12,1755.5%
436-18.2%
3.6%

Source: Shared Research based on company data

Through efficient logistics, this business reduces costs for intermediate materials used in offices and retail stores. The
segment deals in items such as plastic bags, gift bags, clothing, and other consumables (employee stationery, cleaningmaterials, etc.). In this business, stock must be maintained at all times, and the company undertakes logistics functions onbehalf of the customer as well. Aeon Delight aims to use efficient logistics to reduce costs for intermediate materials andincrease process efficiency. Gross profit margin is about 7% to 8%.

Vending machine services
Vending Machine Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/11 FY02/12
FY02/13
FY02/14
FY02/15
Act.
Act.
Act.
Act.
Act.
17,18832,28031,20033,32934,825
87.8%
-3.3%
6.8%
4.5%
1,480
2,330
2,396
3,068
2,965
57.4%
2.8%
28.0%
-3.4%
8.6%
7.2%
7.7%
9.2%
8.5%

FY02/15
Q1
8,330
11.1%
551
3.0%
6.6%

Q2
9,471
8.7%
894
10.1%
9.4%

Q3
8,003
7.0%
506
16.9%
6.3%

Q4
9,021
-6.4%
1,014
-21.3%
11.2%

Source: Shared Research based on company data

This segment operates soft drink vending machines. It also creates relaxation areas with foliage plants and air purificationequipment.
The company’s vending machines stock a variety of products from different manufacturers. Aeon Delight operates
approximately 40,000 vending machines, and its gross profit margin is around 11% (as of FY02/14). About 70% ofsegment sales come from supermarkets belonging to the Aeon group. The remainder of sales came from shopping malls
operated by Aeon group and non-Aeon companies. Aeon Delight acquired Certo Corp. (delisted from JASDAQ after
being acquired) in September 2010, a vending machine operator 66.4% owned by Aeon.

Support services
Support Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/14
FY02/15
FY02/11 FY02/12
FY02/13
Act.
Act.
Act.
Act.
Act.
5,271
7,980
10,823
13,551
15,522
-2.6%
51.4%
35.6%
25.2%
14.5%
504
829
1,108
375
156
-58.4%
223.1%
64.5%
33.7%
7.1%
2.0%
4.7%
6.1%
7.1%

FY02/15
Q1
3,460
16.7%
308
300.0%
8.9%

Q2
3,859
12.4%
369
14.2%
9.6%

Q3
3,735
3.6%
179
-42.6%
4.8%

Q4
4,468
25.9%
252
115.4%
5.6%

Source: Shared Research based on company data

This segment provides business process outsourcing (BPO), housework support services, business travel services, training
services, and staffing services. Much of these support services are conducted by companies acquired through M&A. BPO
services are conducted by General Services, Inc., which was acquired via M&A as well. Services that BPO undertake
include cost management, salary calculations, administrative functions, social security and welfare, receipt of telephone
calls, and system management.

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Aeon Delight Co., Ltd. | 9787 |Aeon Delight Co., Ltd. ＞ Business

LAST UPDATE【2015/10/07】

Kajitaku Co., Ltd., a housework services provider, implemented a comprehensive FMS model for BtoBtoC, and its sales for
FY02/14 were JPY4.7bn, demonstrating almost 20% YoY growth. Sales for “Kaji Cloud,” a housework services package, arecontributing to strong growth. A to Z Service Co., Ltd., a maintenance service provider for small commercial facilities, wasacquired in 2011. A to Z Service operates a 24 hour, 365 days a year call center to provide comprehensive support
services for retail chains in small-scale shopping centers.
Business travel services are provided by Aeon Compass, Co., Ltd. Specific duties include logistics for corporate businesstrips, planning for group holidays, and logistics services for meetings and events. Although orders received are JPY20.0bn,
fees collected are recorded as sales on the company’s books.
Aeon Delight Academy, Co., Ltd. operates the “Aeon Delight Academy Nagahama” in Shiga Prefecture to provide
real-world training. It also operates a staffing service for technical professions.

Overseas business
As of FY02/14, overseas business accounted for about 2% of sales, but Aeon Delight is looking to expand into China andAsia in the medium term. In China, expansion is looked at on a per-province basis, and the company is able to expand
rapidly through cooperation with the largest regional firms. As of FY02/14, the company has expanded into Beijing,
Tianjin, Jiangsu, Hubei, and Guangdong, and preparations are underway to expand into Shandong. Aeon Delight aims tohave overseas sales account for 10% of its overall sales by FY02/17. In China, the company plans to further its relationships
with local firms and differentiate itself via its ESCO and elevator businesses. For the ASEAN region, the company will
establish a comprehensive list of FMS services.

Overseas companies
Aeon Delight (China) Co., Ltd. (facilities management services, 100% owned by Aeon Delight)
Utilizes accumulated expertise from Japan to provide Japanese-quality service that is made in China, yielding unique
Chinese comprehensive FMS.

Aeon Delight (Hangzhou) Service Outsourcing Co., Ltd. (outsourcing services, 70.0% owned)
Utilizes IT to provide outsourced BPO solutions for personnel management, administrative tasks, and accounting.

Aeon Delight Sufang (Suzhou) Comprehensive Facility Management Service Co., Ltd. (maintenance services, 51.0% owned)
After acquisition of a First Class Manufacturing Management License in Suzhou, provides cleaning, road maintenance,parking maintenance, and warehousing services. Acquired an elevator business via M&A in September 2013.

Wuhan Xiaozhu Comprehensive Facility Management Service Co.,Ltd. (management services, 51.0% owned)
Largest provider of manufacturing management in Wuhan. After acquiring a First Class Manufacturing Management
License in Wuhan, also provides meeting room, cafeteria, and building maintenance services, in addition tocomprehensive building management services.

Aeon Delight (Vietnam) Co., Ltd. (facilities management, 100% owned)
Provides Japanese services after becoming the first Japanese firm to acquire multiple licenses. Provides comprehensive
FMS in Vietnam.

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Aeon Delight Co., Ltd. | 9787 |LAST UPDATE【2015/10/07】

Aeon Delight (Malaysia) Sdn. Bhd. (facilities management, 100% owned)
Provides comprehensive FMS primarily in Malaysia, but also in the greater ASEAN region. Also provider of facilities andback office service functions.

Business model
Aeon Delight became a leading facilities management operator through its relationship with the Aeon group. It has also
grown through acquisitions. The company derives its earnings by providing a comprehensive, all-in-one package offacilities management services to large-scale retail and commercial properties. It was able to differentiate itself fromcompetitors by its expertise and costs competitiveness. Competitors included Tokyu Community Corp. (TSE1: 4711), Biru
Daiko Co., Ltd., Nihon Housing Co., Ltd. (TSE1: 4781), and Nippon Kanzai Co., Ltd. (TSE1: 9728).
There are three type of property management, residential, commercial, and office buildings. Most of these competitors
were mainly involved in residential management of condominiums. Few other large companies were focused oncommercial facilities and building management due the high costs involved.
The company was able to gain expertise in commercial property management through servicing large-scale retail facilities
such as shopping malls and supermarkets. The property maintenance industry includes over 5,000 companies, most ofwhich are small- and medium-sized businesses.
The structure of the building maintenance industry resembles that of the construction industry, with second- andthird-tier subcontractors working under prime contractors. Aeon Delight, a prime contractor, uses a number ofsubcontractors. Most of its contracts are signed on an annual basis, which are almost always renewed. In other words, it
has a recurring-revenue structure.
The company renegotiates contracts once a year, a process that regularly challenges its pricing, quality, and ability tooffer clients attractive packages. For example, the parent company Aeon conducts a competitive bidding to keep theprocess fair and open. However, Aeon Delight is able to provide competitive bids given its knowledge of the client’s
needs, and know-how. Its superior position as a large company with comprehensive reliable services will be further
enhanced as the size of buildings expands. The company is able to handle large-scale facilities maintenance given its sizeand economy of scale, which further reinforces its strength and position. Thus, SR Inc. believes that Aeon Delight’s
position within the commercial facilities industry is likely to improve, as the company has know-how and expertise.
In response to these changing requirements of its customers, Aeon Delight intends to leverage its accumulated expertisein areas such as building and equipment diagnostics to expand its operations from building maintenance into building
and project management. The company has an in-house developed system for building and equipment. It uses thesystem for tasks including the diagnosis of deterioration in a building’s fabric and analysis of its energy consumption
performance. Based on the results, Aeon Delight can carry out any necessary repairs and improvements. It already has
developed expertise in using the latest equipment and technology, such as infrared imaging, fiber optics, X-rays, andultrasound. Management now intends to further develop the company’s analysis capabilities in this area.

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Aeon Delight Co., Ltd. ＞ Business

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Profitability snapshot, financial ratios
Profit Margins (JPYmn)
Gross Profit
Gross Profit Margin
Operating Profit
OP Margin
EBITDAEBITDA Margin
Net Profit Margin
Financial Ratios
ROA
ROE
Total Asset Turnover
Working Capital
Current Ratio
Quick Ratio
OCF / Current Liabilities
Net Debt / Equity
OCF / Total Liabilities
Cash Cycle (days)
Changes in Working Capital

FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15
30,22728,631
33,714
35,117
18,827
20,955
21,11823,989
13.1%
12.1%
13.2%
13.7%
14.4%
15.1%
14.0%
13.0%
15,861
15,115
8,330
9,946
9,970
12,031
13,762
13,901
5.9%
6.1%
6.8%
7.1%
7.0%
6.3%
5.6%
5.9%
9,711
11,441
11,563
13,818
16,107
16,13817,54718,327
7.1%
7.9%
8.2%
8.1%
7.3%
6.5%
6.8%
6.9%
3.2%
3.3%
3.9%
3.8%
3.1%
3.0%
3.2%
3.3%
17.3%
21.0%
2.9
7,394
127.7%
127.6%
29.4%
40.7%
26.0%
14.0
968

20.3%
19.9%
3.0
7,502
149.8%
135.8%
31.3%
27.6%
31.8%
14.3
108

20.3%
18.9%
2.9
7,330
184.4%
166.6%
38.6%
34.6%
40.6%
14.8
-172

18.1%
15.5%
2.6
7,298
210.0%
195.4%
29.0%
60.4%
21.5%
10.4
-32

15.5%
12.5%
2.5
9,047
215.5%
201.0%
30.0%
63.5%
27.8%
8.2
1,749

14.4%
12.5%
2.6
22,366226.9%
207.6%-12.7%
43.4%-12.1%
18.5
13,319

14.2%
12.3%
2.4
13,223229.9%
208.9%
57.5%
63.1%
52.3%
20.3
-9,143

13.4%
12.0%
2.2
12,534224.0%
207.5%
40.1%
73.4%
35.5%
12.3
-689

FY02/11Cons.
11,957
77
4,175
92
121
216
19
7,257
7.3%
14.4%
-23.3%
19.8%
10.8%-20.8%
2.8%
7.0%
0.0%
2.4%
0.1%
0.1%
0.1%
0.0%
4.2%

FY02/12Cons.
14,868
31
5,300
251
120
268
15
8,883
24.3%
-59.7%
26.9%
172.8%-0.8%
24.1%-21.1%
22.4%
6.8%
0.0%
2.4%
0.1%
0.1%
0.1%
0.0%
4.0%

FY02/13Cons.
16,326
80
5,897
323
90
295
18
9,623
9.8%
158.1%
11.3%
28.7%-25.0%
10.1%
20.0%
8.3%
6.6%
0.0%
2.4%
0.1%
0.0%
0.1%
0.0%
3.9%

FY02/14Cons.
18,599
80
5,897
323
90
295
18
11,896
13.9%
23.6%
7.2%
0.0%
2.3%
0.1%
0.0%
0.1%
0.0%
4.6%

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Aeon Delight’s overall operating profit margin has been generally stable at 6% to 7%.
SG&A Breakdown(JPYmn)
SG&A
Provision for Doubtful Accounts
Salaries
Employee Bonuses
Provision for Bonuses
Provision for Director Bonuses
Retirement Benefits Expenses
P rov ision for Director Retirement Benefits

Other
YoY
Provision for Doubtful Accounts
Salaries
Employee Bonuses
Provision for Bonuses
Provision for Director Bonuses
Retirement Benefits Expenses
P rov ision for Director Retirement Benefits

Other
Provision for Doubtful Accounts
Salaries
Employee Bonuses
Provision for Bonuses
Provision for Director Bonuses
Retirement Benefits Expenses
P rov ision for Director Retirement Benefits

Other

FY02/08
Cons.
3,880
29
3,314
244
114
153
26
6,001
7.6%
0.0%
2.4%
0.4%
0.2%
0.1%
0.1%
0.0%
4.4%

FY02/09Cons.
11,008
101
3,484
584
206
103
188
21
6,321
4.9%
248.3%
5.1%-5.0%-15.6%-9.6%
22.9%-19.2%
5.3%
7.6%
0.1%
2.4%
0.4%
0.1%
0.1%
0.1%
0.0%
4.3%

FY02/10Cons.
11,148
3,650
120
101
195
24
7,058
1.3%
4.8%
-41.7%
-1.9%
3.7%
14.3%
11.7%
7.9%
2.6%
0.1%
0.1%
0.1%
0.0%
5.0%

FY02/15Cons.
19,256

3.5%

7.2%

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

The main driver of SG&A expenses is labor, which accounted for 40% as of FY02/13. The company outsources most of its
facilities management work, such as security and cleaning jobs. Outsourcing expenses accounted for 58.5% of total costof sales as of FY02/13. Its cost of sales increased 29% YoY in FY02/11, as a result of its acquisition of Certo Corp., aprovider of office supplies and operator of soft drink vending machines in September 2010.

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Aeon Delight Co., Ltd. ＞ Business

LAST UPDATE【2015/10/07】

Strengths and weaknesses
Strengths◤

Strong ties with the Aeon Group: Aeon Delight is a subsidiary of Aeon Co., Ltd., and almost 70% of sales are
generated form the Aeon Group. This provides for stable sales, and the Aeon Group’s expansion into Asia is also
proving to be a positive factor for Aeon Delight’s growth. The company is able to leverage economies of scale fromthe Aeon group, and has accumulated expertise in comprehensive FMS from its transactions with Aeon. This
provides for a stable recurring-revenue model.

◤

Industry leader in comprehensive commercial maintenance services: Aeon Delight is the industry leader
capable of providing comprehensive all-in-one building maintenance services such as facilities management,
security, cleaning, and renovations. Its competitors can only provide one to two of these services (i.e., security or
cleaning). Owners of large-scale commercial facilities and buildings are would prefer to contract such services to one
service provider rather than negotiate with each individual service provider based on their specialty. The company’s
ability to provide such comprehensive service is a competitive advantage over its competitors.

◤

Financial strength to buy growth:Aeon Delight has a very strong balance sheet. SR Inc. believes that thisbalance sheet could be used aggressively to buy growth. According to the Japan Building Maintenance Association,
there are currently over 5,000 property maintenance service providers throughout Japan. This market is relatively
mature, and a realignment of the industry is possible. Aeon Delight, with its financial strength and industry prowess,would be able to acquire smaller firms with specialized services in local areas. This could lead to further growth andexpansion. The company is able to benefit from economies of scale. It can leverage its balance to buy growth since it
has a recurring stable source of revenue from the Aeon group. The company could take on debt to expand its
business since it has an under leveraged balance sheet.

Weaknesses◤

Organic growth challenging: Aeon Delight has grown through acquisitions. Therefore, organic growth may be achallenge because the market is relatively mature. There is limited domestic growth and overseas offers one avenueof expansion. M&A activities could dry up, and this could have an impact on earnings. The company has been able
to buy growth using its strong financial position.

◤

Overly dependent on the Aeon group:

Aeon Delight is a consolidated subsidiary of Aeon, and derives almost

70% of its sales from the Aeon group. A drawback from such a strong relationship is that the parent company may
ask for support in pursuing its agenda. Recently, Aeon acquired 50% of Tesco Japan, the U.K. supermarket chain
operator’s Japan retail business. A joint venture company, Aeon Every Co., Ltd. is in charge of supermarket
operations. The parent Aeon could ask the company for support in future acquisitions.
◤

Mature property management market: The property management market is relatively mature. However,small-scale retail stores in urban areas offer growth opportunities given the greater number of customer volume.
Many small-scale retailers are renovating their stores and upgrading facilities. Aeon Delight’s expertise has been inlarge-scale facilities, mainly supporting the Aeon group retail stores such as shopping centers and supermarkets. As
smaller commercial facilities emerge in large urban areas, the question remains whether the company can
successfully adapt its facilities maintenance know-how to this segment of the market. The company may need tolook at this segment for growth.

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Market and value chain
Market overview
Building maintenance market valued at JPY3.3tn
Japan’s building maintenance market was worth 3.7 trillion yen in FY03/12 (April 1, 2011 to March 31, 2011), up 3.1 YoY,
according to Yano Research Institute Ltd. This included facilities maintenance, cleaning, and security services, as well as
repairs and renovation work. The market grew steadily until the second half of the 1990s, supported by the expansion in
office buildings. However, the financial crisis caused the real estate market and, consequently, property management
services to contract in 2009 and 2010. The market fell to 3.4 trillion in FY03/10. The market slightly expanded for the
next two years, and has stabilized at 3.6 billion yen to 3.7 billion yen.
According to Aeon Delight, it had 4% of the domestic market for cleaning services at retail stores, hospitals, schools,
hotels, and other facilities that totaled 960 billion yen in FY02/12. Retail stores accounted for 17% of its cleaning businesssales, while hotels made up a mere 2%.
Building Maintenance Market(Billion Yen)
4,500

0.06
5%

4,000
3,698

3,500

0.04

4%
3,906
3,611
3,611
3,593
0.006
0%
0%

3,636
1%

3,665
1%

1%

3,768
2%

3%
3,713

3,649

3,692

3,601

3,681

3,700

1%

3,438
0%

0.02

0

-1%
-0.02

3,000

-0.04
2,500
-6%

-0.06

-7%
2,000

-0.08
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Market Size (Left)

2012(Est.)

2013(Est.)

2014(Est.)YoY (Right)

Source: Yano Research Institute Ltd.,Shared Research data

Instead of agreeing to individual contracts for facilities management, security services, and cleaning activities, customers
now prefer comprehensive agreements covering all their requirements. In order to drive up the profitability of theirfacilities, customers have been seeking further progress in minimization of the maintenance and equipment replacement
costs over the entire lifespan of such facilities. Property maintenance providers are given more freedom to offer an
effective program for facility management, security, and sanitation, based on its accumulated expertise.

LED
The domestic market for LED lamps was 202.0 billion yen in FY03/12, and 370.0 billion yen in FY03/13, according to Yano
Research Institute. By 2020, the market has the potential to expand to 450 billion yen. Aeon Delight had sales of about 26
billion yen, for a market share of slightly less than 7% in FY02/13.

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Aeon Delight Co., Ltd. ＞ Business

LAST UPDATE【2015/10/07】

Recirculating, water-saving, plastic urinal
According to Aeon Delight, there are 4 million urinals in Japan, most of which are ceramic (as of April 2013). The potential
market for its water-saving urinals is 500 billion yen (4 million units x 120,000 yen).

Analysis of potential market
Floor space is a direct measure of potential market size for the company’s facilities maintenance services. According to the
Ministry of Land, Infrastructure, Transport, and Tourism, total floor space of Japan’s hospitals and medical facilities wasaround 13.4 million sq.m. in March 2010. If sales per sq.m. and workers’ hourly pay were the same across the board (inreality, cleaning hospitals is more expensive), SR Inc. estimates that potential demand from hospitals and other medical
facilities is 50 billion yen (355,000 yen/sq.m. x 13.4 million sq.m.).
The ministry data also show that total floor space of non-residential buildings owned by corporations was about 1.7
billion sq.m. Such buildings include offices, stores, factories, warehouses, welfare facilities, hotels/lodging facilities,
schools, and buildings used for automobile parking. If these corporations outsourced all of their cleaning work for thatfloor space, the potential market would be 6.2 trillion yen (355,000 yen/sq.m. x 1.7 billion sq.m).
Furthermore, the Aeon group’s store openings and acquisition strategy affect Aeon Delight’s business performance. Aeon
Delight generated 14.1 billion yen in sales from cleaning services to Aeon Retail in FY02/12. Total floor space of Aeon
Retail was 3.97 million sq.m., which translates to 355,000 yen in annual sales per sq.m. for Aeon Delight.
AEON Group stores by format (domestic and overseas)py(
FY02/09 FY02/10
GMS
603
601
Supermarket
1,231
1,267
41
52
Discount StoreDIY Store
127
125
Supercenter
31
33
Department Store
1
1
Convenience Store
3,270
3,514
Specialty Store
4,746
4,475
Other Retail Format
87
180
Financial Service
395
386
Services
1,621
1,549
Total
12,153
12,183)
FY02/11 FY02/12
590
590
1,307
1,537
105
72
127
122
32
29
1
1
3,811
4,121
3,305
3,424
268
418
401
460
1,410
1,383
11,324
12,190FY02/13
598
1,708
152
123
26
1
4,462
3,664
562
527
1,394
13,217

FY02/14
617
1,977
353
122
26
1
4,581
3,853
756
641
1,519
14,440FY02/15
618
2,030
381
121
29
1
4,683
3,932
889
698
1,640
15,022

62
115
177

137
122
259

148
130
278

Stores by Format in China, South Korea, and ASEAN regiony,,g
FY02/09 FY02/10 FY02/11 FY02/12 1900年1月
GMS
42
46
52
54
61
25
44
81
Supermarket
18
19
22
Discount Store
Convenience Store
2,033
2,294
37
55
Specialty Store
18
21
24
27
29
Other Retail Format
Financial Service
236
279
25
41
Services
Total
78
86
101
2,456
2,862

FY02/14
69
95
23
2,370
61
29
302
95
3,044

FY02/15
77
101
24
2,532
42
30
339
180
3,325

AEON MALL
AEON TOWN
Total

51
42
93

53
44
97

56
45
101

59
107
166

Source: Shared Research based on company data

Source: Shared Research based on company data

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Aeon Delight Co., Ltd. ＞ Business

LAST UPDATE【2015/10/07】

Customers
Aeon Delight generates almost 70% of its sales from the Aeon group companies. The remainder comes from non-Aeon
group customers that include commercial facilities, offices, hotels, medical facilities, schools, factories, warehouses, public
facilities, and event operators. The company’s largest customer is Aeon Retail, which accounted for 33.7% of its facilities
management services segment sales in FY02/14.

Its share of Aeon Mall’s business is about 60%, and its share of

MaxValu’s business is 60% to 70% as of FY02/13. Outside Japan, Aeon Delight seeks to reduce its reliance on the Aeon
group to about 40%. Construction work accounted for the largest portion of segment sales at 49.9% (as of FY02/13).
Facilities Management ServicesgFacilities Management
Security Services
Cleaning Services
Construction Work
Materials/Supplies Sourcing
Vending Machine Services
Support Services
Total

AEON RETAIL
12,642
15,12913,727
26,484
11,956
5,609
3,720
89,270

Segment Sales
42,05031,80540,51953,071
39,284
31,20010,823248,756% of Segment Sales
30%
48%
34%
50%
30%
18%
34%
36%

Source: Shared Research based on company data

Competition
Aeon Delight’s competitors include Secom Co., Ltd. (TSE1: 9735) and Alsok (TSE1: 2331) in security services. It competes
with Azbil Corp. (TSE1: 6845), Nippon Kanzai Co. Ltd. (TSE1: 9728), and Tokyu Community Corp. (TSE1: 4711) and over
5,000 small local operators in property management services. There are no major competitors that offer cleaning services;
Aeon Delight competes with smaller, regional cleaning operators. In construction-related work, Aeon Delight competes
with Azbil in the environmental solutions business. In the energy-saving business, major rivals are NTT Facilities, Inc.
(consolidated subsidiary of NTT (TSE1: 9432)) and Hitachi Ltd. (TSE1: 6501).

Barriers to entry
Property management for residential and small office buildings has relatively low barriers to entry. However, the barriers
are high for large-scale facilities given the comprehensive services required. Smaller residential or office building owners
are less concerned about having total package of services and usually focus on cleaning or security. However, large-scale
facilities require comprehensive services such as maintenance, cleaning, and security, all-in-one. Instead of hiring acontractor for each service, large-scale building owners prefer to contract out these services to one company that is able
to provide all of these services in package. Consequently, this enables Aeon Delight to enjoy a relatively high barrier ofentry in its market niche, namely servicing large-scale retail stores and office buildings, due to its expertise in providing an
all-in-one package of services. The company knows the market, and has a foothold with the Aeon group. It is able to enjoy
economies of scale, and offers comprehensive services (maintenance, cleaning, security, and repairs and renovations),
while its competitors are specialized in one or two areas (i.e., security or cleaning). The company enjoys a high rate ofretention (i.e., customers are reluctant to switch companies), with most of its contracts renewed.

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LAST UPDATE【2015/10/07】

Strategy
The company is looking to invest in sources outside of the Aeon Group, using its stable revenue sources from within the
Aeon Group (such as new store openings and overseas expansion) as a springboard.
Aeon Delight’s strategy is to grow existing business through expansion of comprehensive services to customers insideand outside of the Aeon Group. Over the medium term, the company aims to expand sales to non-Aeon groupcompanies and lower this weighting to around 40%. It plans to do this by leveraging its main strength - the ability to takeon comprehensive management contracts for large facilities - and by expanding into airports, factories, hospitals, andother retail facilities. Some of the specialty store operators also have outlets in non-Aeon shopping centers. SR Inc. expects
the specialty store and services business to expand more quickly than the Aeon group’s shopping centers.
The company adopted a new medium term plan, ending in FY02/17. Please see the Outlook section for details. In themedium term plan ended FY02/14, Aeon Delight concentrated on growth in three main areas, as described below.
Aeon Delight adopted a growth-through-acquisition strategy as mentioned above. (Please refer to M&A Activities
section). The company acquired businesses that strengthened its integrative capabilities, and intends to do the same
going forward. In addition, the company is aiming to strengthen its comprehensive facilities maintenance services. Aeon
Delight has targeted three markets: major urban area market, ecology and environmentally friendly market, and the Asianmarket.

Major urban area market
Small commercial facilities are expected to grow in major urban areas. Aeon Delight has been targeting this segment bypooling its core competencies of A to Z Service, which became a consolidated subsidiary in May 2011, and othercompanies in its group. In addition, it leveraged the strengths of housework support services provided by Kajitaku, whichbecame a consolidated subsidiary in April 2011, and expanded services to residential market for which demand is
expected to increase due to changing demographics.

Ecology and environmentally friendly market
Aeon Delight has provided environmental solutions, such as LEDs and other environmental products. The company’s
initiatives in this field was recognized by the Ministry of Economy, Trade and Industry (METI) and certified as a “BEMS
Aggregator.” METI is expected to introduce BEMS (building energy management system) to more than 60,000
buildings across Japan. The company would be in a good position to benefit from any regulatory or designation changes(i.e., facilities maintenance contracts awarded only to certified service operators). This is still in the works and no
regulatory changes have been made yet.

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BEMS Aggregator(Smart Community Infrastructure)

Ad-BEMS

Source: Shared Research based on company data

Aeon Delight also plans to extend sales of its energy management services, water-based coating agent, and water-saving
urinals to hotels, hospitals, and nursing-care facilities, which are generally environmentally conscious. It is also offeringcleaning and security services in these facilities and is developing a cleaning method to control bacteria more effectively.
Aeon Delight plans to capture 10% of the hospital and nursing-care market.
As part of Aeon group’s energy-saving initiative announced in August 2012, Aeon Delight is developing an electricvehicle battery charger that uses Aeon Retail’s electronic money, WAON.

Source: Company website

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Historical financial statements
Summary
Q1 FY02/16 results (announced 8 July, 2015)
Earnings
Sales of JPY70.5bn (up 6.1% YoY)
Operating profit of JPY3.6bn (up 2.4%)
Quarterly performance(JPYmn)10,000

20%

8,000

16%

6,000

12%

4,000

8%

2,000

4%

-

Q1
FY02/11Q3

Q1
FY02/12
SG&A

Q3

Q1
FY02/13

Operating profit

Q3

Q1
FY02/14Q3

GPM (right-axis)

Q1
FY02/15Q3Q1
FY02/16Q3

0%

OPM (right-axis)

Source: Shared Research based on company data

Sales were slightly higher than forecast due to winning non-Aeon clients. Profits were in line with the projected growth
despite the higher-than-expected initial investment costs due to an increase in new projects. The company further statedthat it had spent JPY100mn-150mn in SG&A expenses although within the projected expenditure.

Favorable business environment, FY02/16 seen as rare opportunity for business expansion and growthAeon Delight regards the business environment of FY02/16 as promoting (1) concentration of the industry to a few major
players due to adverse business conditions such as cost increase driven by inflation and the shortage of new hires; (2)tendency of large-scale facilities to consolidate and outsource all FM functions and the resulting increase in the number ofoutsourcing businesses consolidating FM services; (3) a stronger watchfulness about emergency response and security inreaction to the increased frequency of extreme weather and natural disasters; (4) desire to invest in store renovation incommercial facilities; and (5) competition revolving around facilities management in accordance with the international
standard ISO41000 and imaginative renovation.
The company takes these trends as an opportunity for expansion and growth. It is poised to take larger shares in thedomestic and Asian markets.

Q1 witnesses large-scale business deals and negotiations outside the Aeon GroupIn Q1, the industry operating environment was characterized by (1) a pickup in negotiations with client companies forcomprehensive contracts covering facilities management, cleaning, security services as well as repair work, as a number oflarge client companies, including medical institutions, universities, and manufacturers, started reviewing both the quality
and cost of the facilities the management services they were currently using; and (2) continued strong demand forenergy-saving equipment and services and, in conjunction with the start of new regulations governing the handling of

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fluorocarbon gases, increased demand for contract fluorocarbon management services, especially at commercial facilities.
At the same time, tight conditions in the labor market increased the importance of hiring and training employees.
Top-line growth was underpinned by the launch of new services aimed at several new, large-scale commercial facilities,
medical facilities, financial institutions, and large distribution facilities. Aeon Delight was particularly successful in thehospital/nursing home market, where its dedicated sales team used a newly developed special service menu to win newcontracts to service a total of 21 medical facilities (nearly doubling the floor space at medical facilities under management
versus a year earlier). There are heavy demands on medical institutions to prevent the spread of disease between patientsand cross-contamination. The company has been actively proposing to its clients the quality of its cleaning, supported bynumerical evaluations.

Cinching deals on sanitary cleaning services at contract renewal, profitability expected to rise yearlyContract renewal for sanitary cleaning services typically happens every year. However, only a limited number ofcompanies replace the cleaning services provided by major groups servicing many medical facilities nationwide. Aeon
Delight presents proposals capitalizing on its roughly 500 bases nationwide; its name recognition as a publicly traded
company and as the Aeon Group; its track record with major medical institutions; and the visual improvement of its
cleaning quality. If business continues to expand, the number of sickbeds under its management (approximately 14,000
as of Q1) is expected to increase further.
Profitability may decline in the first year on account of initial investments. However, Shared Research expects it to pick up
from the second year on improved skills and expertise, as is the case with regular cleaning services.

Expanding client base outside group to drive growth this term and in the medium-term plan, accelerate negotiations
Labor shortage persists in the building maintenance sector. The company has the advantage of name recognition in
drawing new hires; furthermore, it invests in employee education and development. This promotes negotiations withmajor manufacturers and switchovers from competitors with declining service quality. The industry seems to be working
in the company’s favor, accelerating negotiations with clients outside the group.
Sales outside of the group have been rising six quarters in a row from Q4 FY02/14 through Q1 FY02/16. Client base
expansion outside the group is an important driver of growth this quarter and in the medium-term plan. Shared Research
will keep an eye on developments.

China as the driver of overseas business development
Overseas, to expand the comprehensive FMS business, the company worked to create networks in each country andregion, as well as develop product quality maintenance and environmental technologies. By country, in China thecompany began offering services related to the construction of large-scale facilities; strengthened it structure to expand
its market share in Malaysia; and expanded its operating area in Vietnam by opening a branch in Hanoi. As a result, it
increased its services, as shown in the following tables, resulting in sales increase over 50% YoY.
AEON MALL Co., Ltd. plans to open six new stores in FY02/16 in China, an increase of four YoY. The company seems to bepromoting its business to consolidate its facilities management services. We understand that it successfully pursued that
objective in Q1. Outside the Aeon Group, it plans to develop and expand its client base by leveraging the network ofacquired local companies. The company opened a branch in Hanoi, Vietnam. Shared Research regards this move as
preparation for its planned opening of AEON MALL Long Bien in fall 2015.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Number of projects overseas

500
450
400
350
300
250
200
150
100
50
-

China

Malaysia

Vietnam

Source: Shared Research based on company data

AEON Mall overseas business
2015

China

ASEAN
2016

China

Name
AEON MALL Suzhou Yuenqu Hudong
AEON MALL Beijing Fengtai
AEON MALL Guangzhou Hanyu Guangchang
AEON MALL Suzhou Xinqu
AEON MALL Hanzhou Liangzhu Xincheng
AEON MALL Wuhan Jingkai
AEON MALL Long Bien
AEON MALL Binh Tan
AEON MALL Hebei Yangjiso (tentative)
AEON MALL Wuhan Shiqiao (tentative)
AEON MALL Guangzhou Jinshasu (tentative)
Other 2 more malls

Location
Suzhou, Jiangsu
Fengtai, Beijing
Guangzhou, Guangdong
Suzhou, Jiangsu
Hanzhou, Zhejiang
Wuhan, Hubei
Hanoi, Vietnam
Ho Chi Minh, Vietnam
Sanhe, Hebei
Wuhan, Hubei
Guangzhou, Guangdong

Lot area
99,300m²
63,800m²
51,400m²
approx.153,000m²
approx.94,800m²
approx.129,900m²
approx.96,000m²
approx.46,800m²
approx.84,000m²
approx.46,200m²
approx.84,500m²

Total floor space
218,000m²
approx.153,300m²
approx.172,900m²
approx.162,000m²
approx.176,000m²
approx.274,600m²
approx.110,000m²
approx.114,000m²
approx.175,000m²
approx.120,900m²
approx.187,700m²

ASEAN

Source: Shared Research based on company data

Progress under medium-term plan
In Q1, one of the company's goals was to strengthen its capabilities in the areas of sanitary cleaning services and energy
solutions, core growth areas under its medium-term business plan. As mentioned above, its sanitary cleaning business has
been on a steady growth track. Furthermore, the company started working toward a visible improvement in cleaning
quality and, towards this end, began putting in place evaluation standards that would prevent cross-contamination in
hospitals and other medical facilities. By quantifying the quality of its cleaning work, the company aims to establish anorganizational structure that will allow it to provide an even higher level of hygienic management services.
At its energy solutions business, the company begin rolling out its own remote control system utilizing its building energy
management system (BEMS) and cloud computing, and also continued working towards creating a comprehensive
remote control system that would not only help reduce energy usage, but would also serve as a management system forvarious networked devices and predict equipment breakdowns with greater accuracy.

Responding to international FM standards; strengthening its medium to long term competitiveness in M&A
Aeon Delight has been actively adjusting to the international standard of the facilities management industry, ISO41000(see Outlook section), thus bolstering its competitiveness in the medium to long term. Likewise in M&A, the company
seems to be taking proactive steps to attain its medium-term plan by reinforcing its special sales team.

Facilities Management

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Aeon Delight Co., Ltd. ＞ Historical financial statements

Facilities Management(JPYmn)Sales
YoY
Operating profit
YoY
OPM

LAST UPDATE【2015/10/07】

FY02/14
FY02/15
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
10,622 10,848 11,198 10,790 11,228 11,642 11,532 11,437 12,103
2.4%
0.9%
5.2%
5.0%
5.7%
7.3%
3.0%
6.0%
7.8%
1,151 1,266 1,188 1,120 1,029 1,098 1,074 1,016 1,045
4.2%
3.8% 10.0% -10.8% -10.6% -13.3% -9.6% -9.3%
1.6%
10.8% 11.7% 10.6% 10.4%
9.2%
9.4%
9.3%
8.9%
8.6%

FY02/16
Q2
Q3
-

Q4
-

Source: Shared Research based on company data

As mentioned above, in addition to new orders for maintenance and inspection, it expanded its contract fluorocarbon
management services, its energy management system through BEMS, and introduced and developed its remote control
system.

Contract fluorocarbon management services adding value to existing FM services
The company is looking at net increase of gross profit by having existing employees add contract fluorocarbon
management services. There are indications that the Aeon Group will continue to increase stores with these services, andthe company aims to expand outside the group using its track record. Elsewhere in the energy management system, thecompany is angling to beat its competitors by sharpening its energy solutions technology.

Security Services
Security Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
8,438
6.8%
642
6.8%
7.6%

FY02/14Q2
Q38,367 8,481
5.8%
6.5%
700
761
4.6% 16.0%
8.4%
9.0%

Q4
8,956
11.5%
762
-0.5%
8.5%

Q1
8,935
5.9%
695
8.3%
7.8%

FY02/15Q2Q38,891 9,305
6.3%
9.7%
717
824
2.4%
8.3%
8.1%
8.9%

Q4
9,491
6.0%
866
13.6%
9.1%

Q1
9,306
4.2%
696
0.1%
7.5%

FY02/16
Q2
Q3
-

Q4
-

Source: Shared Research based on company data

In addition to on-site security services at new facilities, expanding in contract temporary security services
The company won new contracts for its “Attender” services, which combine security with customer information services,from multiple existing clients as well as for five new commercial facilities, bringing the total number of locations using its
Attender services to 35. Attender services were adopted by the resort-style shopping mall AEON MALL Okinawa Rycom,
which opened in April 2015. The company will keep promoting Attender-based improvement in security to its new andexisting clients.

Cleaning Services
Cleaning Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/14
FY02/15
Q1
Q2
Q3
Q4
Q1
Q1
Q2
Q3
Q4
10,539 10,485 10,642 10,654 10,942 10,960 11,129 11,256 11,656
4.5%
4.6%
5.7%
6.5%
4.1%
4.0%
4.3%
5.4%
3.8%
1,397 1,404 1,425 1,490 1,469 1,552 1,592 1,676 1,482
5.2% 10.5% 11.7% 12.5%
0.9%-3.1% -6.9% -1.5% -2.2%
13.3% 13.4% 13.4% 14.0% 13.4% 14.2% 14.3% 14.9% 12.7%

FY02/16
Q2
Q3
-

Q4
-

Source: Shared Research based on company data

In addition to new contracts, the company also increased the number of contracts in the hospital/nursing home market
with the help of its new sanitary cleaning services devised especially for medical facilities. In regular cleaning services, thecompany will continue standardization to attain a 20% GPM, while it sustains concerted effort to improve quality andprofitability by forming small size teams and facilitating an easy-to-work environment. The small teams were initiated last
fall. This seems to be improving cleaning materials management and workflow.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

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Construction Work
Construction Work(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/14Q1Q2
Q3
15,888 13,929 8,254
43.4% -26.2% -47.7%
851
764
474
84.6% -4.0%
5.3%
5.4%
5.5%
5.7%

FY02/15Q4Q1Q2Q37,559 11,858 11,133 9,366
3.0% -25.4% -20.1% 13.5%
491
741
754
678
-2.2% -12.9% -1.3% 43.0%
6.5%
6.2%
6.8%
7.2%

Q4
Q1
9,615 13,059
27.2% 10.1%
634
932
29.1% 25.8%
6.6%
7.1%

FY02/16
Q2
Q3
-

Q4
-

Source: Shared Research based on company data

Renovation business may become an earnings driver starting in FY02/16
The number of large-scale renovation projects significantly increased. The company also won more orders formaintenance work due to its sales efforts. In particular, renovation services remained strong and contributed to overall
earnings.
The sudden growth stems from the company receiving an increasing number of orders to renovate aging generalmerchandise stores nationwide. Aeon Retail is renovating its existing stores to bolster its supermarket operations; sales are
increasing as a result.

Aeon Retail may continue to open more large-scale stores
Sales at Aeon Retail’s 13 large-scale renovated stores rose 3.3% YoY during the first three quarters of FY02/15. In contrast, averagecomparable store sales fell 3.8% YoY. The company, which wants to make store-renovation projects a regular part of its operations
while expanding new outlets, has announced that it would increase investments in renovation projects by 20% in FY02/16. It reported
that in Q1, 33 out of the 43 stores that were part of large-scale renovations since FY02/14 attained increase in sales and profits YoY(14 out of 15 in Q1 FY02/15), and plans to press on with investment in renovation. Aeon Delight considers this an opportunity to
expand its own business.

Materials and Supplies Sourcing
FY02/14
FY02/15
Materials and Supplies Sourcing(JPYmn)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Sales
10,721 11,023 11,542 11,257 11,713 11,609 12,175 12,121 12,080
12.6% 12.8% 14.8% 13.3%
YoY
9.3%
5.3%
5.5%
7.7%
3.1%
Operating profit
573
636
533
591
464
490
436
721
568
YoY
109.9% 98.8% 39.9% 21.1% -19.0% -23.0% -18.2% 22.0% 22.4%
OPM
5.3%
5.8%
4.6%
5.3%
4.0%
4.2%
3.6%
5.9%
4.7%

FY02/16
Q2
Q3
-

Q4
-

Source: Shared Research based on company data

In addition to new orders, the company capitalized on demand from existing clients with new stores. The company also
supplied more packaging materials for Aeon’s private brand, Top Value. The company continued to focus on increasing
margins by revising logistics costs, and cutting procurement costs with the use of electronic negotiation tools.

Vending Machine Services

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Vending Machine Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,498
-0.1%
535
17.8%
7.1%

FY02/14Q2
Q38,716 7,479
1.7%
0.8%
812
433
11.5%
0.2%
9.3%
5.8%

LAST UPDATE【2015/10/07】

Q4
9,636
25.1%
1,288
64.7%
13.4%

Q1
8,330
11.1%
551
3.0%
6.6%

FY02/15Q2Q3Q4Q19,471 8,003 9,021 8,107
8.7%
7.0% -6.4% -2.7%
894
506 1,014
450
10.1% 16.9% -21.3% -18.3%
9.4%
6.3% 11.2%
5.6%

FY02/16
Q2
Q3
-

Q4
-

Source: Shared Research based on company data

In March, the company established a special sales team to develop new customers and aggressively push vending
machine location proposals at client facilities, a step that was deemed necessary to help counter the ongoing decline invending machines sales across the industry. The company also installed value-added vending machines—such as thosewith digital displays—at major new commercial facilities, and developed private brand drinks specifically for vending
machines. These private brand drinks are being developed for 2H.

Support Services
Support Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
3,002
44.7%
154
100.0%
5.1%

FY02/14Q2Q3Q4Q13,473 3,660 3,583 3,466
56.6%
2.8% 16.0% 15.5%
410
395
201
352
76.7%
5.9% 240.7% 128.6%
11.8% 10.8%
5.6% 10.2%

FY02/15Q2Q33,870 3,726
11.4%
1.8%
420
179
2.4% -54.7%
10.9%
4.8%

Q4
4,470
24.8%
252
25.4%
5.6%

Q1
4,215
21.6%
355
0.9%
8.4%

FY02/16
Q2
Q3
-

Q4
-

Source: Shared Research based on company data

Subsidiaries continued to make significant contributions to growth in profits. Aeon Compass logged a decrease in profits
YoY due to the fact that large-scale projects were carried over to Q2, while its performance was consistently sanguine
throughout the preceding quarter. The company focused on growing sales of Kajitaku’s Kaji Cloud housework services,with the result that Kaji Cloud sales rose 48.2% YoY, and so sales showed signs of steady growth. The advertising and PR
portion of SG&A expenses expanded, but was offset by increased sales, resulting to growth in operating profit. The
combined operating profit of the two companies seem to have been up year-on-year.
Shared Research expects the business to continue its successful streak in Q2 as Aeon Compass actively pursues large-scale
projects while Kajitaku will likely reduce its advertising and PR expenses.

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Full-year FY02/15 results (out April 9, 2015)
Quarterly Performance(JPYmn)Sales
YoY
Gross Profit
YoY
GPM
SG&A Expenses
YoY
SG&A / Sales
Operating Profit
YoY
OPM
Recurring Profit
YoY
RPM
Net Income
YoY
NPM

FY02/08

FY02/09

FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15-

FY02/16

Cons.
137,51923.7%
18,82718.1%
13.7%
10,496
1.2%
7.6%
8,330
49.4%
6.1%
8,186
49.2%
6.0%
4,379
46.1%
3.2%

Cons.
145,690
5.9%
20,955
11.3%
14.4%
11,008
4.9%
7.6%
9,946
19.4%
6.8%
9,812
19.9%
6.7%
4,876
11.3%
3.3%

Cons.
140,299-3.7%
21,1180.8%
15.1%
11,148
1.3%
7.9%
9,970
0.2%
7.1%
9,912
1.0%
7.1%
5,466
12.1%
3.9%

Cons.
170,905
21.8%
23,98913.6%
14.0%
11,9577.3%
7.0%
12,03120.7%
7.0%
12,089
22.0%
7.1%
6,495
18.8%
3.8%

Cons.
219,797
28.6%
28,631
19.4%
13.0%
14,86824.3%
6.8%
13,762
14.4%
6.3%
13,784
14.0%
6.3%
6,912
6.4%
3.1%

Cons.
248,876
13.2%
30,227
5.6%
12.1%
16,3269.8%
6.6%
13,901
1.0%
5.6%
13,892
0.8%
5.6%
7,509
8.6%
3.0%

Cons.
257,243
3.4%
33,714
11.5%
13.1%
18,59913.9%
7.2%
15,1158.7%
5.9%
15,092
8.6%
5.9%
8,161
8.7%
3.2%

Est.
270,000
5.0%
16,0005.9%
5.9%
16,000
6.0%
5.9%
8,600
5.4%
3.2%

Cons.
266,705
3.7%
35,117
4.2%
13.2%
19,256
3.5%
7.2%
15,861
4.9%
5.9%
15,943
5.6%
6.0%
8,725
6.9%
3.3%

Est.
280,000
5.0%
17,000
7.2%
6.1%
17,000
6.6%
6.1%
9,400
7.7%
3.4%

Segment Results(JPYmn)Sales
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
OthersYoY
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
Operating profit
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
OthersElimination
YoY
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
OPM
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
OP composition
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services

FY02/08

FY02/09

FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15-

FY02/16

Cons.
137,519
40,20235,84841,098
16,777
3,591
23.7%
8,330
49.4%
6.1%
-

Cons.
145,690
42,25336,67042,403
18,515
5,846
5.9%
5.1%
2.3%
3.2%
10.4%
62.8%
9,946
19.4%
6.8%
-

Cons.
140,299
41,66634,28145,05013,889
5,412
-3.7%
-1.4%
-6.5%
6.2%
-25.0%
-7.4%
9,970
4,507
2,738
5,780
1,321
748
-5,125
0.2%
7.1%
10.8%
8.0%
12.8%
9.5%
29.9%
18.1%
38.3%
8.8%
-

Cons.
170,905
40,01932,08841,142
16,42018,71817,188
5,271
56
21.8%
-4.0%
-6.4%
-8.7%
18.2%
-2.6%
12,031
5,115
2,764
5,937
1,214
627
1,480
375
215
-5,698
20.7%
13.5%
0.9%
2.7%
-8.1%
7.0%
12.8%
8.6%
14.4%
7.4%
3.3%
8.6%
7.1%
28.9%
15.6%
33.5%
6.8%
3.5%
8.3%
2.1%

Cons.
219,797
42,14732,23539,85228,51336,73032,280
7,980
57
28.6%
5.3%
0.5%
-3.1%
73.6%
96.2%
87.8%
51.4%
13,762
5,084
2,823
5,882
1,936
1,234
2,330
156
156
-5,843
14.4%
-0.6%
2.1%
-0.9%
59.5%
96.8%
57.4%
-58.4%
6.3%
12.1%
8.8%
14.8%
6.8%
3.4%
7.2%
2.0%
25.9%
14.4%
30.0%
9.9%
6.3%
11.9%
0.8%

Cons.
248,876
42,05031,80540,51953,071
39,284
31,20010,823
119
13.2%
-0.2%
-1.3%
1.7%
86.1%
7.0%
-3.3%
35.6%
13,901
4,661
2,692
5,918
2,209
1,462
2,396
504
237
-6,180
1.0%
-8.3%
-4.6%
0.6%
14.1%
18.5%
2.8%
223.1%
5.6%
11.1%
8.5%
14.6%
4.2%
3.7%
7.7%
4.7%
23.2%
13.4%
29.5%
11.0%
7.3%
11.9%
2.5%

Cons.
257,243
43,45834,24242,32045,63044,54333,32913,551
167
3.4%
3.3%
7.7%
4.4%
-14.0%
13.4%
6.8%
25.2%
15,115
4,725
2,865
5,716
2,580
2,333
3,068
829
331
-7,334
8.7%
1.4%
6.4%
-3.4%
16.8%
59.6%
28.0%
64.5%
5.9%
10.9%
8.4%
13.5%
5.7%
5.2%
9.2%
6.1%
21.0%
12.8%
25.5%
11.5%
10.4%
13.7%
3.7%

Est.
270,000
5.0%
16,000
5.9%
5.9%
-

Cons.
266,705
45,83936,62244,287
41,972
47,61834,825
15,522
17
3.7%
5.5%
7.0%
4.6%
-8.0%
6.9%
4.5%
14.5%
15,861
4,217
3,102
6,289
2,807
2,111
2,965
1,108
189
-6,9294.9%-10.8%
8.3%
10.0%
8.8%
-9.5%
-3.4%
33.7%
5.9%
9.2%
8.5%
14.2%
6.7%
4.4%
8.5%
7.1%
18.5%
13.6%
27.6%
12.3%
9.3%
13.0%
4.9%

Est.
280,000
5.0%
17,000
7.2%
6.1%-

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Earnings overview
Sales/profits up for the fifth consecutive year with record profits; targets mostly met
Demand for facilities management service companies with significant, well-qualified human resources increased as labor
shortages in the building maintenance industry became increasingly pronounced. Buildings also became larger and more
multi-purposed. As a result, Aeon Delight marked its fifth consecutive year of sales and profit growth, booking its highest

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profits to date.
During Q3, operating profit reached 70.6% of the company’s annual target. In comparison, the ratios were 72.6% and76.6% for Q3 FY02/14 and Q3 FY02/13, respectively. (The company benefitted from increased demand during Q4
FY02/14, prior to the consumption tax increase.) But it managed to mostly meet full-year operating profit targets. Shared
Research estimates that operating profit of the Materials and Supplies Sourcing segment and gross profit margin at the
Cleaning Services segment (operating profit composition of 27.6% in FY02/15) both improved in Q4.

FY02/15 highlights
For FY02/15, the company 1) improved the profitability of the Cleaning Service segment; 2) increased businesses withcompanies outside the Aeon Group and won large-scale contracts; 3) expanded in other Asian nations; and 4)
strengthened the Support Services segment.

Expansion outside the group
Aeon Delight, the largest facility-management company in Japan, has been expanding by leveraging its marketing clout.
During 2H, the company won a large-scale order from a major corporation with nationwide operations. For FY02/16, thecompany will also seek to increase businesses focusing on large-scale facilities. For this purpose, the company will further
strengthen its cooperation with General Services Inc., a subsidiary that provides business-process outsourcing services.

Expansion in Asia: more orders for facility management services overseas
Aeon Delight focused on cooperation between offices in Japan and abroad, in a bid to grow the comprehensive facilities
management services (FMS) business in Asia. The company also restructured its salesforce, creating specialized teams fordifferent regions, facilities, and product types, as well as a team focusing on winning new clients, particularly among
operators of large facilities.
As a result, there was a steady stream of FMS orders for large domestic facilities from outside the Aeon Group. Overseas,
the company continued acquiring contracts, taking the total to 151 in China, 119 in Malaysia, and 169 in Vietnam (mainly
small, irregular projects).
Number of projects overseas

500
450
400
350
300
250
200
150
100
50
Q1
FY2/12

Q2

Q3

Q4

Q1
FY2/13

China

Q2

Q3

Q4

Q1
FY2/14

Malaysia

Q2

Q3

Q4

Q1
FY2/15Q2

Q3

Q4Vietnam

Source: Shared Research based on company data

Double-digit sales growth may continue into FY02/16; focus is on China
Aeon Delight has been increasing sales (including through acquisitions). For the past two years, sales have increased bywww.sharedresearch.jp

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billions of yen (including a sales increase due to corporate acquisitions) in Asia. For FY02/15, sales reached JPY9bn, atwofold increase from a year earlier. China is the biggest market for Aeon Delight, which, according to the company,
ranked 30th in market share among the 59,000 building maintenance companies operating in China. The company’s
success in China may be due to its alliance with a major company there.
Overseas orders

Overseas sales (JPY mn)
14,000500
450

12,000400
350

10,000

300

8,000

250

6,000

200
150

4,000

100

2,000

50
-

FY02/12

FY02/13

China

Malaysia

FY02/14

FY02/15

FY02/12

Vietnam

FY02/13
China

FY02/14
Malaysia

FY02/15

FY02/16
Est.

Vietnam

Source: Shared Research based on company data

Facilities Management
Facilities Management(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/13
FY02/14
FY02/15
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
10,371 10,753 10,646 10,280 10,622 10,848 11,198 10,790 11,228 11,642 11,532 11,437
-2.0%
0.4%
1.0% -0.3%
2.4%
0.9%
5.2%
5.0%
5.7%
7.3%
3.0%
6.0%
1,105 1,220 1,080 1,256 1,151 1,266 1,188 1,120 1,029 1,098 1,074 1,016-16.0% -8.8% -15.2%
8.7%
4.2%
3.8% 10.0% -10.8% -10.6% -13.3% -9.6% -9.3%
10.7% 11.3% 10.1% 12.2% 10.8% 11.7% 10.6% 10.4%
9.2%
9.4%
9.3%
8.9%

Source: Shared Research based on company data

Focusing on energy-saving services and preparing new businesses
As large facilities with new stores placed more orders, the company focused on developing its energy-saving services forcustomers in Japan and abroad. This led to the promotion of building energy management system (BEMS) andenergy-saving equipment.

Adding more value to CFC operations starting in FY02/16
In preparation for future growth, the company will train technicians dealing with CFC refrigerants—it now has over 400
technicians nationwide—as it looks to centralize refrigeration and air conditioning facilities management ahead of the Act
for Rationalized Use and Proper Management of Fluorocarbons, scheduled for April 2015. The company plans to increase
gross profit by assigning additional duties to existing employees. In addition, the company will also expand its ESCO andenergy management operations to enhance the quality of its services in areas other than facility management businesses.

Sales continue to grow, as OPM continues to decline
Although sales grew 5.5% YoY, marking two consecutive years of growth, operating profit was down 10.8% YoY. This isbecause a decline in gross profit margin pulled down operating profit margin.

New services add more value to counter a decline in gross profit margin
Gross profit margin is declining for the following reasons: The company installed new computer-related equipment, awww.sharedresearch.jp

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move that temporarily reduced profitability. The sales composition ratio for projects aimed at large-scale shopping malls(generally less profitable) rose. And the company has been under increasing pressure to reduce prices. The impact onearnings from the equipment installation will disappear at the end of FY02/15, while the other two factors may remain
influential.
Aeon Delight will add more value by shifting emphasis from providing maintenance services for clients’ existing facilities,
to offering new businesses related to its existing energy management and ESCO operations. The company will also launch
new services.

Security Services
Security Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/11 FY02/12
FY02/13
FY02/14
FY02/15
Act.
Act.
Act.
Act.
Act.
32,08832,23531,80534,242
36,622
-6.4%
0.5%
-1.3%
7.7%
7.0%
2,764
2,823
2,692
2,865
3,102
0.9%
2.1%
-4.6%
6.4%
8.3%
8.6%
8.8%
8.5%
8.4%
8.5%

FY02/15
Q1
8,935
5.9%
695
8.3%
7.8%

Q2
8,891
6.3%
717
2.4%
8.1%

Q3
9,305
9.7%
824
8.3%
8.9%

Q4
9,491
6.0%
866
13.6%
9.1%

Source: Shared Research based on company data

The company won new contracts for its “attender” services from multiple domestic stores. Attenders combine security
and customer services, such as information on facilities. These services have been praised by clients at home and abroad,including clients in China and Vietnam.

Lower employee turnover to improve GPM; an increase in stores raises expenses
Full-year sales rose 7.0% YoY, with operating profit increasing 8.3% YoY. Operating profit margin declined slightly in 1H,
but recovered in 2H. In the past, the company did not have enough experienced employees to keep up with store
expansion, and gross profit suffered as a result. Recently, the company has been reducing its employee turnover.
For FY02/15, this decrease in employee turnover led to improved profitability. However, in 1H an increase in store countmeant higher expenses involving store openings. (It usually takes between one and two months to prepare for the
opening of a new store.) These expenses may have pushed down the company’s operating profit margin. Profitability
began to improve during 2H because the company shut down unprofitable businesses, and because employee turnoverdeclined. The company expects that the profitability will continue to improve in FY02/16.

Adding value with multilingual store attendants
The opening of a new Aeon mall is being planned in Okinawa. The 175,000sqm resort-style mall, with parking facilities toaccommodate as many as 4,000 vehicles, will open on April 25, 2015. Aeon Delight will deploy store attendants to serve
foreign customers in multiple languages. The company may also send such attendants to other facilities with many visitorsfrom abroad.

Cleaning Services
Cleaning Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/13
FY02/14
FY02/15
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
10,122 10,084 10,205 10,108 10,539 10,485 10,642 10,654 10,942 10,960 11,129 11,256
1.7%
2.1%
1.8%
1.2%
4.1%
4.0%
4.3%
5.4%
3.8%
4.5%
4.6%
5.7%
1,441 1,508 1,446 1,523 1,397 1,404 1,425 1,490 1,469 1,552 1,592 1,676
5.2% 10.5% 11.7% 12.5%
2.1%
6.1% -3.7% -1.6% -3.1% -6.9% -1.5% -2.2%
14.2% 15.0% 14.2% 15.1% 13.3% 13.4% 13.4% 14.0% 13.4% 14.2% 14.3% 14.9%

Source: Shared Research based on company data

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The company is standardizing and introducing a manual for its cleaning services, in a bid to gain a competitive edge andincrease margins. Gross profit margin also increased as the company standardized operations at directly managed
cleaning centers, resulting in higher productivity. The company also shared its expertise with partner companies.

Cleaning Services: under-target cost cuts but improving GPM; may help FY02/16 earnings
Aeon Delight had planned to reduce annual expenses by about JPY500mn. Shared Research estimates that the company
missed this target (short by about JPY100mn in cumulative Q3) because of an overall scheduling delay. However, grossprofit margin improved every quarter until Q3, and continued this trend in Q4, as the improvement in operating profit
margin shows. Efforts to improve profitability in FY02/15 may benefit the company throughout FY02/16.
The company improved the work efficiency of its directly managed cleaning centers by about 17% during FY02/15.
However, these cleaning centers comprise less than 20% of the company’s overall cleaning business. At the same time,
extra time generated may be used for other duties. Therefore, improved efficiency does not necessarily translate into
reduced costs. It appears that progress has been made in FY02/15 to provide training to partner companies.

Winning orders from hospitals
The company promoted its cleaning services among hospitals during FY02/15 and won orders in Hokkaido (for 17
facilities managed by JA Hokkaido) and in Kansai (16 facilities managed by private medical institutions). The company inJanuary 2014 launched a project to win hospital orders, and in July started experiments at a city-run hospital in Nara
Prefecture. These efforts are beginning to bear fruit.
Aeon Delight won these orders because the company was able to centralize facility management, created a transparent
disinfecting mechanism to prevent infection at hospitals, and reduced costs. The actual work will not begin until at least
April 2015. Thus, the contracts will not contribute to earnings until FY02/16. Costs will rise in the initial year. However,the profitability will increase during the following fiscal year. The company will make the operations even more efficientand further improve earnings.
Aeon Delight executives told Shared Research that winning contracts from a major chain operator requires investments inthe form of hiring and training. Aeon has resources to make such investments. The company’s existing clients may also
introduce it to other potential customers.

Construction Work
Construction Work(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/13Q1
Q2
Q3
11,081 18,884 15,767
96.4% 126.8% 121.7%
461
796
450
30.6% 23.6% -1.7%
4.2%
4.2%
2.9%

FY02/14Q1Q4Q2Q37,339 15,888 13,929 8,254-1.3% 43.4% -26.2% -47.7%
502
851
764
474
4.4% 84.6% -4.0%
5.3%
6.8%
5.4%
5.5%
5.7%

FY02/15Q4Q1Q2Q37,559 11,858 11,133 9,366
3.0% -25.4% -20.1% 13.5%
491
741
754
678
-2.2% -12.9% -1.3% 43.0%
6.5%
6.2%
6.8%
7.2%

Q4
9,615
27.2%
634
29.1%
6.6%

Source: Shared Research based on company data

LED installation projects within the Aeon Group wound down, resulting in an 8.0% fall year-on-year in segment sales.
Sales would have risen excluding LED-related sales. Still, operating profit margin improved as the number of lessprofitable LED projects fell, raising operating profit by 8.8% YoY.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Renovation business may become an earnings driver starting in FY02/16
The number of large-scale renovation projects significantly increased. The company also won more orders formaintenance work due to its sales efforts. In particular, renovation services remained strong and contributed to overall
earnings. Sales from renovation projects may have reached JPY4.5bn, far exceeding the company’s full-year target of
JPY1.5bn.
The sudden growth stems from the company receiving an increasing number of orders to renovate aging generalmerchandise stores nationwide. Aeon Retail is renovating its existing stores to bolster its supermarket operations; sales are
increasing as a result.

Aeon Retail may continue to open more large-scale stores
Sales at Aeon Retail’s 13 large-scale renovated stores rose 3.3% YoY during the first three quarters of FY02/15. In contrast,
average comparable store sales fell 3.8% YoY. The company, which wants to make store-renovation projects a regular partof its operations while expanding new outlets, has announced that it would increase investments in renovation projects
by 20% in FY02/16. Aeon Delight considers this as an opportunity to expand its own business.

Materials and Supplies Sourcing
Materials and Supplies Sourcing(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/13Q1Q2
Q39,525 9,769 10,057
5.1%
4.5%
7.3%
381
273
320
6.2% -21.8% 41.6%
2.9%
3.3%
3.8%

FY02/14
FY02/15
Q2
Q3
Q4
Q4
Q1
Q2
Q3
Q4
Q1
9,933 10,721 11,023 11,542 11,257 11,713 11,609 12,175 12,121
5.5%
7.7%
11.1% 12.6% 12.8% 14.8% 13.3%
9.3%
5.3%
490
436
721
488
573
636
533
591
464
63.2% 109.9% 98.8% 39.9% 21.1% -19.0% -23.0% -18.2% 22.0%
3.6%
5.9%
4.9%
5.3%
5.8%
4.6%
5.3%
4.0%
4.2%

Source: Shared Research based on company data

In addition to new orders, the company capitalized on demand from existing clients with new stores. The company also
supplied more packaging materials for Aeon’s private brand, Top Value. The company continued to focus on increasing
margins by revising logistics costs, and cutting procurement costs with the use of electronic negotiation tools.

Vending Machine Services
Vending Machine Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,508
-4.0%
454
-8.5%
6.0%

FY02/13Q2
Q38,571 7,419-2.1% -5.9%728432
9.8% -5.9%
8.5%
5.8%

Q4
7,702
-1.6%
782
9.8%
10.2%

Q1
7,498
-0.1%
535
17.8%
7.1%

FY02/14Q2
Q38,716 7,479
1.7%
0.8%
812
433
11.5%
0.2%
9.3%
5.8%

Q4
9,636
25.1%
1,288
64.7%
13.4%

Q1
8,330
11.1%
551
3.0%
6.6%

FY02/15Q2Q3Q49,471 8,003 9,021
8.7%
7.0% -6.4%
894
506 1,014
10.1% 16.9% -21.3%
9.4%
6.3% 11.2%

Source: Shared Research based on company data

Vending machines developed and installed in FY02/14 contributed to full-year results. The company also installedvalue-added vending machines—such as those with digital displays—at major new commercial facilities, and developed
private brand drinks specifically for vending machines.

Support Services

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Aeon Delight Co., Ltd. ＞ Historical financial statements

Support Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
2,072
23.0%
40
1.9%

FY02/13Q2
Q32,218 3,509
13.5% 62.4%
191
293- 33.2%
8.6%
8.3%

LAST UPDATE【2015/10/07】

Q4
3,024
38.7%
-20
-0.7%

Q1
2,964
43.1%
77
92.5%
2.6%

FY02/14Q2
Q33,433 3,604
54.8%
2.7%
323
312
69.1%
6.5%
9.4%
8.7%

Q4
Q1
3,550 3,460
17.4% 16.7%
117
308- 300.0%
3.3%
8.9%

FY02/15Q2Q3Q43,859 3,735 4,468
12.4%
3.6% 25.9%
369
179
252
14.2% -42.6% 115.4%
9.6%
4.8%
5.6%

Source: Shared Research based on company data

Subsidiaries continued to make significant contributions to growth in profits. The company focused on growing sales ofAeon Compass’ events and Kajitaku’s Kaji Cloud housework services, with the result that Kaji Cloud sales rose 63.6% YoY.
Aeon Compass and Kajitaku both posted an increase in sales and profits. Kajitaku made investments in computer systems
to promote growth in FY02/15. Operating profit rose thanks to a sales increase.

Q3 FY02/15 results (out January 9, 2015)▶ Sales:

JPY199.3bn (+2.3% YoY)

▶ Operating profit: JPY11.3bn (+3.0% YoY)
▶ Recurring profit: JPY11.3bn (+3.2% YoY)
▶ Net income:

JPY6.4bn (+10.0% YoY).

Earnings overview
Sales/profits up for the fifth consecutive year with record profits; FY OP may miss target
Demand for facilities management service companies with significant, well-qualified human resources increased as labor
shortages in the building maintenance industry became increasingly pronounced. Buildings also became larger and more
multi-purposed. As a result, Aeon Delight marked its fifth consecutive year of cumulative Q3 sales and profit growth,booking its highest profits to date.
However, the company seems to be struggling to meet its full-year operating profit forecast. During Q3, operating profit
reached 70.6% of the company’s annual target. In comparison, the ratios were 72.6% and 76.6% for Q3 FY02/14 and Q3
FY02/13, respectively. (The company benefitted from increased demand during Q4 FY02/14, prior to the consumption
tax increase.) Operating profit progress may be slow because gross profit margins at the Facilities Management and the
Cleaning Services segments may struggle to meet annual targets. (Facilities Management comprised 21.0% of thecompany’s overall operating profit for FY02/14; Cleaning Services, 25.5%).

Cumulative Q3 sales rise 7.1% YoY excluding the impact of LED installation
In the Construction Work segment, sales fell as LED installation projects wound down. But sales were up year-on-year in
the company’s other six segments. Cumulative Q3 sales would have risen 7.1% YoY if there had not been a decline from
LED installation. For the latest three-month period (Q3), sales would have risen 8.4% YoY.

The company expects to win more orders for facility management services overseas
Aeon Delight focused on cooperation between offices in Japan and abroad, in a bid to grow the comprehensive facilities
management services (FMS) business in Asia. The company also restructured its salesforce, creating specialized teams fordifferent regions, facilities, and product types, as well as a team focusing on winning new clients, particularly among
operators of large facilities.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

As a result, there was a steady stream of FMS orders for large domestic facilities from outside the Aeon Group. Overseas,
the company continued acquiring contracts, taking the total to 148 in China, 118 in Malaysia, and 76 in Vietnam.
Number of project overseas
400
350
300
250
200
150
100
50
Q1
FY02/12

Q2

Q3

Q4

Q1
FY02/13

Q2
China

Q3

Q4
Malaysia

Q1
FY02/14

Q2

Q3

Q4

Q1
FY02/15

Q2

Q3

Vietnam

Source: Shared Research based on company data

Major developments related to Q3 FY02/15 earnings
The Facilities Management segment to launch a new CFC-related service in FY02/16
Gross profit margin continued to decline in Q3 at the Facilities Management segment because 1) The company installed
new computer-related equipment, a move that temporarily reduced profitability. 2) The sales composition ratio for
projects aimed at large-scale shopping malls (generally less profitable) rose. 3) The company has been under increasingpressure to reduce prices.
Aeon Delight plans to add more value by introducing new services. The company, for example, will start operations
related to chlorofluorocarbon (CFC) in FY02/16. The company will train technicians dealing with CFC refrigerants—it now
has over 400 technicians nationwide—as it looks to centralize refrigeration and air-conditioning facilities management
ahead of the Act for Rationalized Use and Proper Management of Fluorocarbons, scheduled for April 2015. The company
plans to increase gross profit by assigning additional duties to existing employees.
In addition, the company will also expand its ESCO and energy management operations to enhance the quality of its
services in areas other than facility management.

Cleaning Services: under-target cost cuts but improving GPM; may help FY02/16 earnings
The company is standardizing its cleaning services. Gross profit margin increased in the Cleaning Services segment as thecompany standardized cleaning procedures at directly managed cleaning centers. The company also shared its expertisewith partner companies. These and other measures may produce cost savings of about JPY400mn, JPY100mn short of theinitial target. However, gross profit margin has been improving every quarter in this segment. Thus, profitability may
continue to increase in Q4. Efforts to improve profitability in FY02/15 may benefit the company throughout FY02/16.

Renovation of aging general merchandise stores may contribute to FY02/16 earnings
The Construction Work segment may benefit from renovation projects in the next fiscal year. For cumulative Q3, sales
from renovation services including revitalization construction reached JPY3.3bn, far exceeding the company’s full-yeartarget of JPY1.5bn. The company is receiving an increasing number of orders to renovate aging general merchandise
stores nationwide.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Aeon Retail, Aeon Delight’s biggest customer, is renovating its large-scale stores because such revamped outlets have
improved its performance. It wants to make store renovation a regular part of its operations while expanding to new
outlets. Aeon Retail may renovate more stores in FY02/16. Aeon Delight considers this as an opportunity to expand its
own business.

Medium-term plan may be revised; the company might miss its FY02/15 target
Aeon Delight may miss its FY02/15 operating profit target. The company has not ruled out the possibility of revising its
medium-term management plan released in 2014. A new medium-term plan may have targets that can be more easily
achieved, in preparation for the next medium-term plan that will call for more challenging goals.

Facilities Management
Facilities Management(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
10,371-2.0%
1,105-16.0%
10.7%

FY02/13Q2
Q3
10,753
10,646
0.4%
1.0%
1,220
1,080
-8.8% -15.2%
11.3%
10.1%

Q4
10,280
-0.3%
1,256
8.7%
12.2%

Q1
10,622
2.4%
1,151
4.2%
10.8%

FY02/14Q2
Q3
10,848
11,198
0.9%
5.2%
1,266
1,188
3.8%
10.0%
11.7%
10.6%

Q4
10,7905.0%
1,120-10.8%
10.4%

Q1
11,2285.7%
1,029-10.6%
9.2%

FY02/15Q2
11,6427.3%
1,098-13.3%
9.4%

Q3
11,532
3.0%
1,074
-9.6%
9.3%

Source: Shared Research based on company data

Sales continue to rise; operating profit margin remains low
Aeon Delight secured a steady stream of new large FMS contracts, and made efforts to grow building energy
management system (BEMS) sales. Sales for cumulative Q3 rose 5.3% YoY. However, operating profit fell 11.2% YoY
because of a decline in gross profit margin, as mentioned above.

New services add more value to counter a decline in gross profit margin
Gross profit margin is declining for the following reasons: The company installed new computer-related equipment, amove that temporarily reduced profitability. The sales composition ratio for projects aimed at large-scale shopping malls(generally less profitable) rose. And the company has been under increasing pressure to reduce prices. The impact onearnings from the equipment installation will disappear at the end of FY02/15, while the other two factors may remain
influential.
Aeon Delight will add more value by shifting emphasis from providing maintenance services for clients’ existing facilities,
to offering new businesses related to its existing energy management and ESCO operations. The company will also launch
new services.

Adding more value to CFC operations starting in FY02/16
The company will train technicians dealing with CFC refrigerants—it now has over 400 technicians nationwide—as it looks
to centralize refrigeration and air conditioning facilities management ahead of the Act for Rationalized Use and Proper
Management of Fluorocarbons, scheduled for April 2015. The company plans to increase gross profit by assigning
additional duties to existing employees.
In addition, the company will also expand its ESCO and energy management operations to enhance the quality of its
services in areas other than facility management businesses.

Securities Services

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Aeon Delight Co., Ltd. ＞ Historical financial statements

Securities Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,898
-3.8%
601
-13.4%
7.6%

FY02/13
Q2
Q3
7,909
7,966
-1.0%
-0.7%
669
656
-3.0%
-5.1%
8.5%
8.2%

LAST UPDATE【2015/10/07】

Q4
8,032
0.2%
766
2.4%
9.5%

Q1
8,438
6.8%
642
6.8%
7.6%

FY02/14
Q2
Q3
8,367
8,481
5.8%
6.5%
700
761
4.6%
16.0%
8.4%
9.0%

Q4
8,956
11.5%
762
-0.5%
8.5%

Q1
8,935
5.9%
695
8.3%
7.8%

FY02/15
Q2
8,891
6.3%
717
2.4%
8.1%

Q3
9,305
9.7%
824
8.3%
8.9%

Source: Shared Research based on company data

The company won new contracts for its “attender” services from multiple domestic stores. Attenders combine security
and customer services, such as information on facilities. These services have been praised by clients at home and abroad,including clients in China and Vietnam.

Lower employee turnover to improve GPM; an increase in stores raises expenses
Cumulative Q3 sales rose 7.3% YoY, with operating profit increasing 6.3% YoY. Operating profit margin declined slightly,
but Shared Research believes that this decline was temporary. In the past, the company did not have enough experienced
employees to keep up with store expansion, and gross profit suffered as a result. Recently, the company has been
reducing its employee turnover.
For FY02/15, this decrease in employee turnover led to improved profitability. However, an increase in store count meant
higher expenses involving store openings. (It usually takes between one and two months to prepare for the opening of a
new store.) These expenses may have pushed down the company’s operating profit margin.

Adding value with multilingual store attendants
A new Aeon mall is being planned in Okinawa. The 175,000sqm resort-style mall, with parking facilities to accommodate
as many as 4,000 vehicles, will open in spring 2015. Aeon Delight will deploy store attendants to serve foreign customers
in multiple languages. The company may also send such attendants to other facilities with many visitors from abroad.

Cleaning Services
Cleaning Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
10,122
1.7%
1,441
2.1%
14.2%

FY02/13Q2
Q3
10,084
10,205
2.1%
1.8%
1,508
1,446
6.1%
-3.7%
15.0%
14.2%

Q4
10,108
1.2%
1,523
-1.6%
15.1%

Q1
10,539
4.1%
1,397
-3.1%
13.3%

FY02/14Q2
Q3
10,485
10,642
4.0%
4.3%
1,404
1,425
-6.9%
-1.5%
13.4%
13.4%

Q4
10,654
5.4%
1,490
-2.2%
14.0%

Q1
10,942
3.8%
1,469
5.2%
13.4%

FY02/15Q2
10,960
4.5%
1,552
10.5%
14.2%

Q3
11,129
4.6%
1,592
11.7%
14.3%

Source: Shared Research based on company data

The company is standardizing and introducing a manual for its cleaning services, in a bid to gain a competitive edge andincrease margins. Per its “Campaign for Ease of Work,” the company established small teams for on-site work as it focusedon increasing quality and productivity. Gross profit margin also increased as the company standardized operations at
directly managed cleaning centers, resulting in higher productivity. The company also shared its expertise with partnercompanies.

Cleaning Services: under-target cost cuts but improving GPM; may help FY02/16 earnings
Aeon Delight had planned to reduce annual expenses by about JPY500mn. As of cumulative Q3, the company was shortof this target by about JPY100mn because of the delay in implementing cost-cutting measures. However, gross profit
margin has been improving every quarter in this segment. Thus, profitability may continue to increase in Q4. Efforts toimprove profitability in FY02/15 may benefit the company throughout FY02/16.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Construction Work
Construction Work(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
11,081
96.4%
461
30.6%
4.2%

FY02/13Q2
Q318,884
15,767126.8% 121.7%
796
450
23.6%
-1.7%
4.2%
2.9%

Q4
7,339
-1.3%
502
4.4%
6.8%

Q1
15,888
43.4%
851
84.6%
5.4%

FY02/14Q2
Q3
13,9298,254-26.2% -47.7%
764
474
-4.0%
5.3%
5.5%
5.7%

Q4
7,559
3.0%
491
-2.2%
6.5%

Q1
11,858-25.4%
741-12.9%
6.2%

FY02/15
Q2
11,133-20.1%
754
-1.3%
6.8%

Q3
9,366
13.5%
678
43.0%
7.2%

Source: Shared Research based on company data

LED installation projects within the Aeon Group wound down, resulting in a 15.0% fall year-on-year in segment sales forcumulative Q3. However, sales would have risen 11.3% YoY if there had not been an LED-installation decline. Still,
operating profit margin improved as the number of less profitable LED projects fell, raising operating profit by 4.0% YoY.

Renovation business may become an earnings driver starting in FY02/16
The number of large-scale renovation projects significantly increased. The company also won more orders formaintenance work due to its sales efforts. In particular, renovation services remained strong and contributed to overall
earnings. Sales from renovation services including revitalization construction reached JPY3.3bn, far exceeding thecompany’s full-year target of JPY1.5bn.
The sudden growth stems from the company receiving an increasing number of orders to renovate aging generalmerchandise stores nationwide. Aeon Retail is renovating its existing stores to bolster its supermarket operations; sales are
increasing as a result.

Aeon Retail may continue to open more large-scale stores
Sales at Aeon Retail’s 13 large-scale renovated stores rose 3.3% YoY. In contrast, average comparable store sales fell 3.8%
YoY. The company wants to make store-renovation projects a regular part of its operations while expanding new outlets,
so it is highly likely that it may renovate more stores in FY02/16. Aeon Delight considers this as an opportunity to expand
its own business.

Materials and Supplies Sourcing
Materials and Supplies Sourcing(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
9,525
5.1%
273
6.2%
2.9%

FY02/13Q2
Q3
9,769
10,057
4.5%
7.3%
320
381
41.6%
-21.8%
3.8%
3.3%

Q4
9,933
11.1%
488
63.2%
4.9%

Q1
10,721
12.6%
573
109.9%
5.3%

FY02/14Q2
Q3
11,023
11,542
12.8%
14.8%
636
533
39.9%
98.8%
5.8%
4.6%

Q4
11,257
13.3%
591
21.1%
5.3%

Q1
11,7139.3%
464-19.0%
4.0%

FY02/15Q2
11,6095.3%
490-23.0%
4.2%

Q3
12,1755.5%
436-18.2%
3.6%

Source: Shared Research based on company data

Results in this segment were robust, due to new clients and more orders from existing clients. The company continued tofocus on increasing margins by revising logistics costs, and cutting procurement costs with the use of electronicnegotiation tools.

Vending Machine Services

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Aeon Delight Co., Ltd. ＞ Historical financial statements

Vending Machine Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,508
-4.0%
454
-8.5%
6.0%

FY02/13
Q2
Q3
8,571
7,419
-2.1%
-5.9%
728
432
9.8%
-5.9%
8.5%
5.8%

LAST UPDATE【2015/10/07】

Q4
7,702
-1.6%
782
9.8%
10.2%

Q1
7,498
-0.1%
535
17.8%
7.1%

FY02/14
Q2
Q3
8,716
7,479
1.7%
0.8%
812
433
11.5%
0.2%
9.3%
5.8%

Q4
9,636
25.1%
1,288
64.7%
13.4%

Q1
8,330
11.1%
551
3.0%
6.6%

FY02/15
Q2
9,471
8.7%
894
10.1%
9.4%

Q3
8,003
7.0%
506
16.9%
6.3%

Source: Shared Research based on company data

Vending machines developed and installed in FY02/14 contributed to results. The company also installed value-added
vending machines—such as those with digital displays—at major new commercial facilities, and developed private branddrinks specifically for vending machines.

Support Services
Support Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
2,072
23.0%
40
1.9%

FY02/13
Q2
Q3
2,218
3,509
13.5%
62.4%
191
293
33.2%
8.6%
8.3%

Q4
3,024
38.7%
-20
-0.7%

Q1
2,964
43.1%
77
92.5%
2.6%

FY02/14
Q2
Q3
3,433
3,604
54.8%
2.7%
323
312
69.1%
6.5%
9.4%
8.7%

Q4
3,550
17.4%
117
3.3%

Q1
3,460
16.7%
308
300.0%
8.9%

FY02/15
Q2
3,859
12.4%
369
14.2%
9.6%

Q3
3,735
3.6%
179
-42.6%
4.8%

Source: Shared Research based on company data

Subsidiaries continued to make significant contributions to growth in profits. The company focused on growing sales ofAeon Compass’ events and Kajitaku’s Kaji Cloud housework services, with the result that Kaji Cloud sales rose 51.2% YoY.

Kajitaku Cloud operations remain strong; investments to increase in FY02/15
Aeon Compass and Kajitaku are the main subsidiaries in this segment. For cumulative Q3, Aeon Compass posted sales thatwere slightly higher year-on-year, and had a double-digit increase in operating profit. Kajitaku had a double-digit increasein sales and a slight decline in operating profit.
Aeon Compass had an increase in operating profit in reaction to weak performance in Q1 FY02/14. Kajitaku had a slightdecline in operating profit because it made investments in computer systems.
Kajitaku appears to be struggling. However, Aeon Delight executives stated that Kajitaku would expand sales and profits
in FY02/16 following the current round of investments.

Q2 FY02/15 Results (out October 3, 2014)▶ Sales:▶ Operating profit :▶ Recurring profit:▶ Net income:

JPY134.0bn (+0.4% YoY)
JPY7.7bn(+1.7%)

JPY7.7bn(+2.0%)

JPY4.4bn(+5.6%)

Results in line with estimates; record 1H profits
In FY02/13 and FY02/14, the company booked robust sales of LED installations to the Aeon Group, but sales wound down
this year, leading to a year-on-year fall in sales in the Construction Work segment. However, sales were up year-on-year in
all other segments, partly due to new domestic contracts and the contribution of consolidated subsidiaries in China andthe ASEAN region.

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LAST UPDATE【2015/10/07】

Profits grew year-on-year as initiatives to improve productivity and efficiency bore fruit. Sales in 1H have now grown
year-on-year for four years in a row, while 1H profits have increased year-on-year for five years in a row. This year thecompany booked its highest 1H profits to date.

Q2 FY02/15 earnings details
Sales growth in Asia
Subsidiaries in China, Malaysia, and Vietnam continued to acquire additional clients, and sales for 1H FY02/15 were up by
a factor of 1.9 year-on-year, to JPY3.0bn. Although approximately 90% of this figure is accounted for by the company’s
subsidiary in China, sales in Malaysia and Vietnam are steadily increasing.
The number of facilities under management as of the end of 1H FY02/15 was 142 in China, 111 in Malaysia, and 73 in
Vietnam. Growth was particularly significant in Malaysia, where Aeon Delight installed energy-saving facility management
equipment for a major shopping center chain. For comparison, the number of facilities managed in Malaysia was 45 at
end FY02/14 and 47 at end Q1 FY02/15.
The composition of facilities under management in Asia that are not affiliated with the Aeon Group reached over 70%,
demonstrating progress in diversifying the company’s client base. On a sales basis for Asian subsidiaries, over half of sales
are toward Aeon Group companies.
With a proven track record providing facilities management services to clients within the Aeon Group, the company has
been able to expand its offerings to clients outside of the group. During 1H FY02/15, Aeon Delight received requests fromJapanese department stores looking to expand into new regions, including Japan, based on its success in providing
services to the same companies overseas. The company does not expect these transactions to have an immediate effecton its results.
Overseas facilities under management (number of facilities)
China

350

Malaysia

Vietnam

326

300

245

250
200
150
100
50
-

6
6
1Q
FY2/12

7
7
2Q

8
8
3Q

33

47

51
3
48

2Q

3Q

4Q

16
16

22
22

33

4Q

1Q
FY2/13

47

109
22

138
19
25

87

94

1Q
FY2/14

2Q

73

194
21
39

204
23
45

134

136

140

142

3Q

4Q

1Q
FY2/15

2Q

58

111

47

Source: Shared Research based on company data

Large-scale projects outside of the Aeon GroupThe company is aiming to increase the amount of its sales to clients outside of the Aeon Group from 31% in FY02/14 to
35% in FY02/17. Progress appeared to be steady in 1H, with Aeon Delight acquiring a contract to manage facilities at the
Fukuoka Anpanman Children’s’ Museum.
The company attributes such success to the following three factors: First, it has gained experience in dealing withmanagement of large-scale facilities due to past contracts with companies in the Aeon Group. Second, it can readilywww.sharedresearch.jp

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operate in any domestic region, and has experience attracting employees. Third, it has modified its organizational
structure to have specialized sales departments for individual clients, areas, and facilities. According to the company,
clients are placing increasing value on the ability of facilities managers to deliver uniform service regardless of location,
and Aeon Delight’s ability to accommodate such demands is leading to rising interest from prospective clients.
Within the Aeon Group, the company deepened ties with existing clients, and worked to broaden its revenue base.
However, its operating profit margin saw declines as costs for raw materials increased, and Aeon Delight made forward
investments in new, energy-related businesses. To increase efficiency, the company is reorganizing its personnel structure
to shift from one in which employees are assigned a specific facility to a model where employees are tasked withmanagement of a broader geographical area.

Progress made in standardizing the cleaning business
To improve profitability in the cleaning business, the company is standardizing operating procedures. Specifically, Aeon
Delight is aiming to reduce working hours by 10% as part of efforts to reduce personnel expenses, which comprise asignificant portion of its overall SG&A expenses. As a result, gross profit margin has improved year-on-year andquarter-on-quarter. However, as there are still large discrepancies in GPM between directly managed stores, the company
will work to close these gaps during 2H FY02/15.
Operating profit and OPM in the cleaning business (JPYmn)
1,700

17%
Operating profit

1,600

OPM (Right axis)
16%

16.4%
15.5%

1,500
15.0%
14.6%

1,400

14.2%

13.9%

14.4%

14.2%

15%

15.1%

15.0%
14.2%

1,300

13.3%

14%

14.2%

14.0%
13.4%

13.4% 13.4%

13%

12.9%

1,200

12%
1Q
2Q
FY02/11

3Q

4Q

1Q
2Q
FY02/12

3Q

4Q

2Q
1Q
FY02/13

3Q

4Q

1Q
2Q
FY02/14

3Q

4Q

1Q
2Q
FY02/15

3Q

4Q

Source: Shared Research based on company data

Growth in the support business
Operating profit in the support business was up significantly, from JPY400mn (OPM of 6.3%) in Q2 FY02/14 to JPY677mn(9.2%) in Q2 FY02/15. Significant growth in subsidiaries Kajitaku and Aeon Compass were primary contributors.
Sales were robust at electronics retailers for Kajitaku’s Kaji Cloud packaged housework services, in addition to growth inits existing service lineup. Aeon Compass also saw robust sales in overseas inspection tours for retail businesses andvacation packages for senior citizens.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Sales in the support business (JPYmn)
4,000

16%

3,000

10.2%
8.6%

9.4%

8.3%

8.9%

8.7%

12%

9.6%

2,000

8%

1,000
220

-1,000

1.6%

-0.9%
-15
1Q
FY02/12

-84

40

35

191

1Q
FY02/13

3Q

3.3%

2.6%

1.9%

Sales

293

77

-0.7%

3Q

-20

323

312

4%
308

117

369

1Q
FY02/14

Operating profit

3Q

1Q
FY02/15

3Q-4%

OPM (Right axis)

Source: Shared Research based on company data

Initiatives for 2H
In an effort to seek further growth, Aeon Delight plans to implement the following initiatives during 2H FY02/15:▶ Secure new contracts with large-scale facilities;▶ Promote growth in domestic and foreign affiliates;▶ Provide services to new Aeon stores and increase market share within the Aeon Group;▶ Further improve profitability;▶ Standardize operations in the cleaning business and reduce raw materials costs.

Secure new contracts with large-scale facilities
The company will continue with sales efforts targeting large-scale facilities, and focus on sales in energy solutions.

Growth in domestic and foreign affiliates
Aeon Delight will aim to further expand its FMS offerings via foreign subsidiaries in China and ASEAN countries to capture
new clients and raise the level of service to existing customers. Growth in domestic subsidiaries such as Aeon Compass
and Kajitaku will also be priorities.

Increase market share within the Aeon Group
Openings of four large-scale Aeon Group shopping centers and an Aeon Town are scheduled to take place during 2H
FY02/15. The company hopes to provide comprehensive FMS services to these new stores.
For reference, Aeon Mall Co., Ltd. (TSE1: 8905) is scheduled to open new stores in Okayama, Kyoto, Chiba, and Tokyo,
and plans to open seven new stores during FY02/15. However, for FY02/16, Aeon Mall has revised its store opening plans
downward, from ten to five stores. Plans for FY02/17 remain unchanged, with nine store openings.

Other initiatives
In the FMS business, the company plans to provide comprehensive management services for furniture and refrigeration
units in stores. In materials and supplies sourcing, Aeon Delight will deepen ties with existing clients, and the company
also has plans to expand its offerings for vending machines with digital signage in the vending machine business.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Digital signage vending machine

Source: Shared Research based on company data

Market environment
Uncertainty remained as costs rose, including labor costs and imported materials costs. But according to the company,
labor shortages in many industries have resulted in growing demand for facilities management companies with strong
human resources. Companies are also increasingly seeking out comprehensive facilities management services (FMS) in
order to cut costs, resulting in growing demand for Aeon Delight’s services.

Facilities Management
Facilities management(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
10,371-2.0%
1,105-16.0%
10.7%

FY02/13Q2
Q3
10,753
10,646
0.4%
1.0%
1,220
1,080
-8.8%
-15.2%
11.3%
10.1%

Q4
10,280
-0.3%
1,256
8.7%
12.2%

Q1
10,622
2.4%
1,151
4.2%
10.8%

FY02/14Q2
Q3
10,848 11,198
0.9%
5.2%
1,266
1,188
3.8% 10.0%
11.7% 10.6%

Q4
10,7905.0%
1,120-10.8%
10.4%

FY02/15Q1
Q2
11,228
11,642
5.7%
7.3%
1,029
1,098
-10.6%-13.3%
9.2%
9.4%

Source: Shared Research based on company data

Steady acquisition of new contracts
Aeon Delight secured new FMS contracts, and continued developing its energy-saving comprehensive facilities
management business.
The company’s energy-saving service was popular with clients. In this service the company analyzes energy usage andoffers the most appropriate operations for each facility. The company also expanded sales of energy-saving equipment,
particularly building energy management system (BEMS) machinery. The company won a number of contracts forinspection and maintenance work on solar power systems.

Lower GPM and OPM a concern
Operating profit and operating profit margin were down year-on-year, due to rising procurement costs, a rise in thenumber of new large-scale clients, and expenses associated with transitioning from Windows XP-based systems. Although
the company is working to improve productivity by shifting personnel from specific facilities to broader, regional roles,
forward investment in new energy-related businesses remains a priority, and this is also affecting margins.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Securities Services
Securities services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,898
-3.8%
601
-13.4%
7.6%

FY02/13
Q2
Q3
7,909
7,966
-1.0%
-0.7%
669
656
-3.0%
-5.1%
8.5%
8.2%

Q4
8,032
0.2%
766
2.4%
9.5%

Q1
8,438
6.8%
642
6.8%
7.6%

FY02/14
Q2
Q3
8,367
8,481
5.8%
6.5%
700
761
4.6% 16.0%
8.4%
9.0%

Q4
8,956
11.5%
762
-0.5%
8.5%

FY02/15
Q1
Q2
8,935
8,891
5.9%
6.3%
695
717
8.3%
2.4%
7.8%
8.1%

Source: Shared Research based on company data

The company secured new contracts and introduced its services in many commercial facilities. This was the result of
proposals aimed at selling “attender” services, in contrast to regular security guards. Attender services offer a
combination of security and interaction with customers, such as information services. The company is also selling these
services in China and Vietnam, and they have been praised by both domestic and overseas clients for their effect on
increasing quality and preventing crime.

Cleaning Services
Cleaning services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
10,122
1.7%
1,441
2.1%
14.2%

FY02/13Q2
Q3
10,084
10,205
2.1%
1.8%
1,508
1,446
6.1%
-3.7%
15.0%
14.2%

Q4
10,108
1.2%
1,523
-1.6%
15.1%

Q1
10,539
4.1%
1,397
-3.1%
13.3%

FY02/14Q2
Q3
10,485 10,642
4.0%
4.3%
1,404
1,425
-6.9%
-1.5%
13.4% 13.4%

Q4
10,654
5.4%
1,490
-2.2%
14.0%

FY02/15Q1
Q2
10,942
10,960
3.8%
4.5%
1,469
1,552
5.2%
10.5%
13.4%
14.2%

Source: Shared Research based on company data

Progress in standardizing procedures
In March 2014, Aeon Delight established the cleaning services improvement department and began standardizing
cleaning services in order to increase productivity. The company aims to reduce hours worked by 10% to reduce
personnel expenses, one of the largest contributors to CoGS. According to the company, productivity has increased
significantly with the formation of a special team designed to increase quality and make cleaning services more efficient.

Improvement in GPM
As a result of procedures mentioned above, in Q2 FY02/15 gross profit margin improved both year-on-year andquarter-on-quarter. However, there remain significant gaps in profitability among the company’s directly managed stores,
and Aeon Delight hopes to make improvements during 2H FY02/15. The company has also begun operating in small
teams tailored to the characteristics of each facility in order to further increase efficiency.
The company worked to make its original coating agent longer-lasting. This coating agent removes the need to remove
older wax coatings. The company also tested its self-operating floor cleaning robots.

Providing services to medical facilities
The company focused on building a model for managing hygiene at hospitals, including air purification and reducing andeliminating bacteria. For example, the company collected baseline data for a system of distributing materials separately todifferent cleaning areas zones based on the level of cleanliness, in order to prevent cross contamination.

Construction Work

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Construction work
(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
11,081
96.4%
461
30.6%
4.2%

FY02/13Q2
Q318,884
15,767126.8%
121.7%
796
450
23.6%
-1.7%
4.2%
2.9%

LAST UPDATE【2015/10/07】

Q4
7,339
-1.3%
502
4.4%
6.8%

Q1
15,888
43.4%
851
84.6%
5.4%

FY02/14Q2
Q3
13,9298,254-26.2% -47.7%
764
474
-4.0%
5.3%
5.5%
5.7%

Q4
7,559
3.0%
491
-2.2%
6.5%

FY02/15Q1
Q2
11,858
11,133-25.4%-20.1%
741
754-12.9%
-1.3%
6.2%
6.8%

Source: Shared Research based on company data

Sales fell significantly year-on-year as a result of the completion of LED installation projects within the Aeon group, which
had been ongoing for the past two years. But orders increased for maintenance and renovation work on older buildings
due to ongoing efforts to submit proposals.

Materials and Supplies Sourcing
Materials and supplies sourcing(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
9,525
5.1%
273
6.2%
2.9%

FY02/13Q2
Q3
9,769
10,057
4.5%
7.3%
320
381
-21.8%
41.6%
3.3%
3.8%

Q4
Q1
9,933 10,721
11.1% 12.6%
488
573
63.2% 109.9%
4.9%
5.3%

FY02/14Q2
Q3
11,023 11,542
12.8% 14.8%
636
533
98.8% 39.9%
5.8%
4.6%

Q4
11,257
13.3%
591
21.1%
5.3%

FY02/15Q1
Q2
11,713
11,609
9.3%
5.3%
464
490
-19.0%-23.0%
4.0%
4.2%

Source: Shared Research based on company data

The number of transactions grew due to new contracts and new stores at existing clients. The company also improved
margins by cutting inventories with more accurate demand forecasting, cutting procurement costs for materials withelectronic negotiation tools, and cutting logistics costs.

Vending machine services
Vending machine services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,508
-4.0%
454
-8.5%
6.0%

FY02/13
Q3
Q2
8,571
7,419
-2.1%
-5.9%
728
432
9.8%
-5.9%
8.5%
5.8%

Q4
7,702
-1.6%
782
9.8%
10.2%

Q1
7,498
-0.1%
535
17.8%
7.1%

FY02/14
Q2
Q3
7,479
8,716
0.8%
1.7%
812
433
11.5%
0.2%
9.3%
5.8%

Q4
9,636
25.1%
1,288
64.7%
13.4%

FY02/15
Q1
Q2
8,330
9,471
11.1%
8.7%
894
551
3.0%
10.1%
9.4%
6.6%

Source: Shared Research based on company data

Vending machines installed in FY02/14 contributed to sales. The company also pressed ahead with efforts to bolster sales,
including added-value vending machines such as those that accept e-money, and developing private brand (PB) drinks
specifically for vending machines.

Support services
Support services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
2,072
23.0%
40
1.9%

FY02/13
Q2
Q3
2,218
3,509
13.5%
62.4%
191
293
33.2%
8.6%
8.3%

Q4
3,024
38.7%
-20
-0.7%

Q1
2,964
43.1%
77
92.5%
2.6%

FY02/14
Q3
Q2
3,433
3,604
54.8%
2.7%
323
312
69.1%
6.5%
9.4%
8.7%

Q4
3,550
17.4%
117
3.3%

FY02/15
Q2
Q1
3,460
3,859
16.7%
12.4%
308
369
300.0%
14.2%
8.9%
9.6%

Source: Shared Research based on company data

Operating profit in the support business was up significantly, from JPY400mn (OPM of 6.3%) in Q2 FY02/14 to JPY677mn(9.2%) in Q2 FY02/15. Significant growth in subsidiaries Kajitaku and Aeon Compass were primary contributors.

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LAST UPDATE【2015/10/07】

Sales were robust at electronics retailers for Kajitaku’s Kaji Cloud packaged housework services, in addition to growth inits existing service lineup. Aeon Compass also saw strong sales in overseas inspection tours for retail businesses andvacation packages for senior citizens.

Q1 FY02/15 Results (out July 2, 2014)
Key points for Q1 FY02/15
Spread of comprehensive FMS
Although results were affected by a rush in demand prior to the consumption tax hike and a pullback afterward, demandfor comprehensive facility management services (FMS) proved to be a stabilizing factor, and results were in line with
forecasts.

Decrease of 0.4% YoY in sales primarily caused by completion of LED projects
Sales were down 0.4% YoY primarily as a result of LED installations at Aeon Group locations reaching completion in theConstruction Work segment. However, other segments showed YoY growth, and operations other than LED installationsin the Construction Work segment also had higher sales.

Record quarterly profit through improving productivity and cost controls
Through continued advances in productivity throughout the organization and appropriate cost controls, operating profit
was at a record level on a quarterly basis.

Structural reforms to achieve medium term plan results are scheduled to be complete by Q2
A new organizational structure will be in place to begin operation from 2H FY02/15 onward. The company will pay
particular attention to strengthening sales activities for solutions to revitalize aging buildings. Aeon Delight has alsoestablished an energy conservation system headquarters to concentrate on sales outside of the Aeon group.

Comprehensive FMS in Asia
In order to accelerate growth for comprehensive FMS in Asia, the company established networks in various regions
throughout Asia, gained knowledge in quality assurance, and made progress on green technologies. The number ofprojects in China expanded to 140, Malaysia to 47, and Vietnam to 58.
Many of the 58 projects in Vietnam are small, irregular projects, and contribution to earnings is limited. However, past
results show that irregular projects often lead to recurring business.
Number of projects overseas
250

200

150

100

50

Q1 FY02/12

Q2

Q3

Q4

Q1 FY02/13

China

www.sharedresearch.jp

Q2

Q3

Malaysia

Q4

Q1 FY02/14

Q2

Q3

Q4

Q1 FY02/15

Vietnam

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Source: Shared Research based on company data

Facilities management
Facilities management(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
10,371-2.0%
1,105-16.0%
10.7%

FY02/13Q2
Q3
10,753
10,646
0.4%
1.0%
1,220
1,080
-8.8%
-15.2%
11.3%
10.1%

Q4
10,280
-0.3%
1,256
8.7%
12.2%

Q1
10,622
2.4%
1,151
4.2%
10.8%

FY02/14Q2
Q3
10,848 11,198
0.9%
5.2%
1,266
1,188
3.8% 10.0%
11.7% 10.6%

Q4
10,7905.0%
1,120-10.8%
10.4%

FY02/15Q1
11,2285.7%
1,029-10.6%
9.2%

Q2

Source: Shared Research based on company data

New store openings in major shopping centers and higher sales of BEMS machinery
In addition to contracts for new openings of major shopping centers, sales of building energy management system(BEMS) machinery were up. Aeon Delight also focused on sales of energy-saving materials after analysis of BEMS data inexisting installations. As a result, BEMS received high marks for its energy savings from clients where it had been installedon an experimental basis. On a nationwide level, it is notable that the Aeon Delight was successful in acquiring BEMS
contracts for clients that had previously contracted with a competitor. Earnings from BEMS systems are limited, coming
mostly from machinery sales and consultant fees. However, they help build long term relationships with clients.

Improved energy solutions sales structure to come into effect in 2H
Aeon Delight is building ESCO (Energy Service Company), a combined facilities management service, to bolster theenergy solutions business. The company aims to grow earnings, including equipment leasing fees, by promoting ESCOfor facilities upgrades at commercial facilities.
In Q2, Aeon Delight completed an overhaul of its organization in preparation for the midterm plan. The new structure will
come into full effect in 2H. Improvements to the solutions business are aimed at capturing demand for upgrades to
outdated commercial facilities, including energy-saving construction. The company plans to create an energy-saving
systems department to increase sales to outside the group. Shared Research thinks progress in the solutions business may
affect earnings.

OPM down as contracts up from major shopping centers and Windows XP expenses increase
Sales were up, but operating profit was down. OPM was down 1.6pp YoY, from 10.8% to 9.2%.
There are upfront costs before opening on new orders for commercial facilities. Contracts for major shopping centerstend to result in lower margins, as profitability may be lower than small and midsize ones. It appears half the fall in OPM
was due to an increase in contracts for major shopping centers, and half was due to upgrade costs for PCs as support for
Windows XP ended. The company has not disclosed figures, but it appears GPM outperformed initial targets for Q1. The
targets anticipate GPM improving each quarter from Q1 through Q3.

Securities services

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Aeon Delight Co., Ltd. ＞ Historical financial statements

Securities services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,898
-3.8%
601
-13.4%
7.6%

FY02/13
Q2
Q3
7,909
7,966
-1.0%
-0.7%
669
656
-3.0%
-5.1%
8.5%
8.2%

LAST UPDATE【2015/10/07】

Q4
8,032
0.2%
766
2.4%
9.5%

Q1
8,438
6.8%
642
6.8%
7.6%

FY02/14
Q2
Q3
8,367
8,481
5.8%
6.5%
700
761
4.6% 16.0%
8.4%
9.0%

Q4
8,956
11.5%
762
-0.5%
8.5%

FY02/15
Q1
8,935
5.9%
695
8.3%
7.8%

Q2

Source: Shared Research based on company data

In addition to new contracts, “attender” services that involve female security guards also acting as information providers
were also an area of focus for the company’s sales. The service has also been introduced in China and Vietnam. It has beenpraised by clients within Japan and overseas for its ability to increase both customer service quality and security offacilities. But the service’s share of total sales remains small, despite higher added-value than regular services. Aeon
Delight aims to use the service to gain a competitive edge and drive up sales across the securities services segment.

Cleaning services
Cleaning services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
10,122
1.7%
1,441
2.1%
14.2%

FY02/13Q2
Q3
10,084
10,205
2.1%
1.8%
1,508
1,446
6.1%
-3.7%
15.0%
14.2%

Q4
10,108
1.2%
1,523
-1.6%
15.1%

Q1
10,539
4.1%
1,397
-3.1%
13.3%

FY02/14Q2
Q3
10,485 10,642
4.0%
4.3%
1,404
1,425
-6.9%
-1.5%
13.4% 13.4%

Q4
10,654
5.4%
1,490
-2.2%
14.0%

FY02/15Q1
10,942
3.8%
1,469
5.2%
13.4%

Q2

Source: Shared Research based on company data

New department and a standardized model for more productive cleaning services
In March 2014, Aeon Delight established the cleaning services improvement department. The new department is tasked
with analysis of expended man hours and process methods. In Q1, the company implemented a system of assigning area
managers to specific regions across Japan to increase quality and standardize efficient cleaning methods for directly
managed centers.
Issues remain, but some directly managed stores have achieved gross margins over 10pp above the average. As of June,the company is only halfway toward targets, but it is working to resolve issues from Q2 onward. In order to cut the timespent on such issues, the company plans to implement the standardized model at contractors concurrently, while also
working to improve it.
Aeon Delight anticipates higher GPM from Q3. But it appears GPM was up in Q1, outperforming the target; OPM was also
up 0.1pp YoY.

Creating a hygiene management model for hospitals and elsewhere
Additionally, at medical facilities such as hospitals, cleaning areas are categorized according to the level of cleanliness,and differing supplies are used depending upon the zone. This is to prevent cross contamination and to provide baseline
data for a hygiene management system. The above measures were all part of the company’s efforts to create a hygienic
model to reduce or eliminate bacteria, and provide a clean environment.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

Construction work
(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/13Q2
Q318,884
15,767
121.7%
126.8%
796
450
23.6%
-1.7%
4.2%
2.9%

Q1
11,081
96.4%
461
30.6%
4.2%

LAST UPDATE【2015/10/07】

Q4
7,339
-1.3%
502
4.4%
6.8%

Q1
15,888
43.4%
851
84.6%
5.4%

FY02/14Q2
Q3
13,9298,254-26.2% -47.7%
764
474
-4.0%
5.3%
5.5%
5.7%

Q4
7,559
3.0%
491
-2.2%
6.5%

FY02/15Q1
11,858-25.4%
741-12.9%
6.2%

Q2

Source: Shared Research based on company data

Sales fell significantly as a result of the completion of LED installation projects within the Aeon group, which had beenongoing for the past two years. Construction work that was unrelated to LED installations was robust, such as renovation
work on older buildings, and updates to heat sources for central ventilation systems, and these unrelated activities
demonstrated YoY sales gains. Renovation sales were particularly robust.
OPM improved as sales fell, mainly because margins are low on LED related projects.

Materials and supplies sourcing
Materials and supplies sourcing(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
9,525
5.1%
273
6.2%
2.9%

FY02/13Q2
Q3
9,769
10,057
4.5%
7.3%
320
381
-21.8%
41.6%
3.3%
3.8%

Q4
Q1
9,933 10,721
11.1%
12.6%
488
573
63.2% 109.9%
4.9%
5.3%

FY02/14Q2
Q3
11,023 11,542
12.8%
14.8%
636
533
98.8%
39.9%
5.8%
4.6%

Q4
11,257
13.3%
591
21.1%
5.3%

FY02/15Q1
11,7139.3%
464-19.0%
4.0%

Q2

Source: Shared Research based on company data

Aeon Delight grew sales as a purchasing agent for many clients, mainly retailers focused on central Japan and Shikoku,
and nationwide amusement facility operators. The company also worked to improve margins by using electronicnegotiation tools to cut procurement and logistics expenses for equipment and materials.
Although sales were up, operating profit fell. This was mainly because low margin sales of food packaging materials wereup, changing the composition of sales by product.

Vending machine services
Vending machine services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,508
-4.0%
454
-8.5%
6.0%

FY02/13
Q2
Q3
8,571
7,419
-2.1%
-5.9%
728
432
9.8%
-5.9%
8.5%
5.8%

Q4
7,702
-1.6%
782
9.8%
10.2%

Q1
7,498
-0.1%
535
17.8%
7.1%

FY02/14
Q2
Q3
8,716
7,479
1.7%
0.8%
812
433
11.5%
0.2%
9.3%
5.8%

Q4
9,636
25.1%
1,288
64.7%
13.4%

FY02/15
Q1
8,330
11.1%
551
3.0%
6.6%

Q2

Source: Shared Research based on company data

Vending machines installed in FY02/14 contributed to sales. Efforts to bolster sales also had an effect, including
added-value vending machines such as those that accept e-money, and the development of private brand (PB) drinks
specifically for vending machines.
Sales increased significantly, although this was partly due to sales to Daiei, Inc., now a member of the Aeon group. OPM
was down due to the consumption tax hike.

Support services

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Aeon Delight Co., Ltd. ＞ Historical financial statements

Support services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
2,072
23.0%
40
1.9%

FY02/13
Q2
Q3
2,218
3,509
62.4%
13.5%
191
293
33.2%
8.6%
8.3%

LAST UPDATE【2015/10/07】

Q4
3,024
38.7%
-20
-0.7%

Q1
2,964
43.1%
77
92.5%
2.6%

FY02/14
Q2
Q3
3,433
3,604
2.7%
54.8%
323
312
69.1%
6.5%
9.4%
8.7%

Q4
3,550
17.4%
117
3.3%

FY02/15
Q1
3,460
16.7%
308
300.0%
8.9%

Q2

Source: Shared Research based on company data

Mail order event sales were robust, owing to the development and sale of planned travel (group tours round Japan andthe like) for senior citizens at Aeon Compass Co., Ltd. At Kajitaku Co., Ltd., the number of Kaji Cloud housework services
packages sold was up by 2.5x, contributing to higher sales and margins in the support services segment as a whole.

FY02/14 Results (announced on April 8, 2014; please refer to the preceding table)
In FY02/14, Aeon Delight recorded its fourth consecutive year of increased sales and its tenth consecutive year ofincreased profits.
▶ Sales:

JPY257.2bn (+3.4% YoY)

▶ Operating profit: JPY15.1bn (+8.7%)▶ Recurring profit: JPY15.1bn (+8.6%)▶ Net income:

JPY8.2bn (+8.7%)

Overall
The company worked to expand its services lineup and start new businesses with a focus on urban areas, ecology andenvironmental market, and Asia outside Japan as its main market and business focal points. As a result, Aeon Delight wasable to expand its businesses via measures such as housekeeping agency services to meet the complex needs of urban
living, and facilities management geared toward small retail facilities. The company also conducted administrative
management support for businesses through business process outsourcing (BPO).
An overview of each segment is as follows:

Facilities Management▶ Sales: JPY43.5bn (+3.3 YoY)

The company fulfilled over 400 orders for its Building Energy Management System (BEMS) to meet customer needs for air
conditioning control functions and features to control fridge-freezer facilities. Additionally, by tracking data for energy
usage by business type and by region enabled Aeon Delight to advance its unique energy management support service.

Securities Service▶ Sales: JPY34.2bn (+7.4% YoY)

In addition to new contracts, the company added 17 stores with “attender” services (i.e., attendant staff functioning as an
information and security provider). The attender service has also been introduced to Beijing and Qingdao in China, and isreceiving high praise from customers. The company is also moving to utilize security systems which integrate humanelements of security with the latest technology (“cockpit”-style), and upon finalization of specifications using existing
contracts as a baseline, will accelerate proposal of this new system to customers.

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LAST UPDATE【2015/10/07】

Cleaning Services▶ Sales: JPY42.3bn (+4.4% YoY)

The company’s original coating agent, which replaces floor wax, was implemented in 121 properties. Other initiatives
included progress in standardization and productivity improvement in product quality by uniformly sharing thecompany’s cleaning expertise with a consolidated pool of consigned firms.

Construction Work▶ Sales: JPY45.6bn (-14.0% YoY)

LED construction work was down YoY due to a lack of orders from the Aeon group, which had been concentrated in theprevious year. Sales for LED construction work to the Aeon group were JPY15.6bn (JPY26.6bn in the previous year).
However, orders received for maintenance for existing stores and scheduled upkeep construction work were healthy,
centered on the Aeon group.

Materials and Supplies Sourcing▶ Sales: JPY44.5bn (+13.4% YoY)

The company began taking orders for customers in the Kanto region which manage chain stores at small-scale retail
shopping centers, and focused on providing hygiene and packaging materials. Concerning trays and packaging materials
for fresh foods and delicatessen items, Aeon Delight was able to secure a 37.1% YoY increase in sales (JPY8.9bn) byconcentrating demand.

Vending Machine Services▶ Sales: JPY33.3bn (+6.8% YoY)

The company continued to develop low-cost vending machines, and machines capable of accepting electronic money.
Furthermore, the company’s management of soft-drink vending managements saw a net increase of 4,800 units, due tothe installation of new units in Sanyo Marunaka shops and new Aeon Malls.

Support Services▶ Sales: JPY13.6bn (+25.2% YoY)

Demographic changes (i.e., growing elderly population) and diversified lifestyle in urban areas contributed to asignificant increase in housekeeping services, which recorded a sales increase of 50.9% YoY, and contributed to theimprovement of segment sales and profitability. Kajitaku, a group company, expanded sales channels for its “Kaji Cloud”
housekeeping services package, and succeeded in sales of approximately 120,000 packages, up significantly from the
50,000 packages sold in the previous year. From Q2 FY02/13 onward, the business grew at a rapid pace thanks tocontributions from group companies that are now included in the scope of consolidation.
On the same day as the earnings announcement, the company announced its new medium-term plan (for FY02/15
through FY 02/17). The framework for the plan will be centered on:▶ Establish a dominant position in comprehensive FMS and competitiveness (strengthen the cleaning services segment

and the energy solutions segment)▶ Develop the Asian market▶ Build an organizational base (organizational restructuring, human resource development, IT investment)Yearwww.sharedresearch.jp

Sales

Operating income

Net income

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

FY02/14

JPY257.2bn

JPY15.1bn

JPY8.2bn

FY02/15

JPY270.0bn

JPY16.0bn

JPY8.6bn

FY02/17

At least JPY330.0bn

At least JPY21.0bn

At least JPY11.0bn

Sales for FY02/17 will consist of 35% outside of the Aeon group, and 10% to overseas.

FY02/13 Results
Aeon Delight had sales of 248.9 billion yen (+13.2 YoY) in FY02/13. By segment, Facilities Management sales were 42.1
billion yen (-0.2 YoY), Security Services sales were 31.8 billion yen (-1.3% YoY), Cleaning Services sales were 40.5 billion
yen (+1.7% YoY). Construction Work sales rose 86.1% YoY to 53.1 billion yen due to increased orders for energy-saving
projects and repair work. During FY02/13, Aeon Delight won 26 billion yen worth of orders for LED construction, mostly
from the Aeon group companies, compared with 7.4 billion yen a year earlier. Materials/Supplies Sourcing Services sales
were 39.3 billion yen (+7.0% YoY), reflecting increased orders from within the Aeon group. Vending Machine Services
sales were 31.2 billion yen (-3.2% YoY). Support Services sales were 10.8 billion yen (+35.6% YoY), supported by its
consolidated subsidiary, Kajitaku Co., Ltd., which strengthened its housework and cleaning services to individuals.
Gross profit rose 5.6% YoY to 30.2 billion yen due to increased LED construction work from the Aeon Group. However,gross profit margin fell to 12.1% from 13.0% a year earlier due to higher cost related to LED work. SG&A expenses rose
9.8% YoY to 16.3 billion yen due to start-up costs mainly related to increased headcount in environmental and facilities
management operations. Consolidated operating profit rose 1.1% YoY to 13.9 billion yen.
Extraordinary expenses declined to 50 million yen in FY02/13 from the 900 million yen charges recorded in FY02/12(related to the aftermath of the March 2011 Tohoku earthquake). Consolidated net income was 7.5 billion yen (+8.6%
YoY).
In FY02/13, the company expanded through acquisitions, acquiring General Services Inc. and Aeon Compass in October
2012. In the same month, Aeon Delight also set up a company to in Hangzhou, China to expand business in that region.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Income statement
Income Statement(JPYmn)Total Sales
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials/Supplies Sourcing Services
Vending Machine Services
Support Services
Other

FY02/08Cons.
137,519
40,20235,84841,098
16,777
3,591
23.7%
-

FY02/09Cons.
145,690
42,25336,67042,403
18,515
5,846
5.9%
5.1%
2.3%
3.2%
-100.0%FY02/10Cons.
140,299
41,66634,28145,05013,889
5,412
-3.7%
-1.4%
-6.5%
6.2%
-

FY02/11
Cons.
170,905
40,01932,08841,142
16,42018,71817,188
5,271
56
21.8%
-4.0%
-6.4%
-8.7%
18.2%
-

FY02/12Cons.
219,797
42,14732,23539,85228,51336,73032,280
7,980
57
28.6%
5.3%
0.5%
-3.1%
73.6%
96.2%
87.8%
51.4%
1.8%

FY02/13Cons.
248,876
42,05031,80540,51953,071
39,284
31,20010,823
119
13.2%
-0.2%
-1.3%
1.7%
86.1%
7.0%
-3.3%
35.6%
108.8%

FY02/14Cons.
257,243
43,45834,24242,32045,63044,54333,32913,551
167
3.4%
3.3%
7.7%
4.4%
-14.0%
13.4%
6.8%
25.2%
40.3%

FY02/15Cons.
266,705
45,83936,62244,287
41,972
47,61834,825
15,522
17
3.7%
5.5%
7.0%
4.6%
-8.0%
6.9%
4.5%
14.5%
-89.8%

CoGS

118,692

124,735

119,180

146,916

191,166

218,648

223,528

231,588

Gross Profit
YoY
GPM

18,82718.1%
13.7%

20,955
11.3%
14.4%

21,1180.8%
15.1%

23,98913.6%
14.0%

28,63119.4%
13.0%

30,227
5.6%
12.1%

33,714
11.5%
13.1%

35,117
4.2%
13.2%

SG&A
SG&A / Sales

10,496
7.6%

11,008
7.6%

11,148
7.9%

11,9577.0%

14,8686.8%

16,326
6.6%

18,5997.2%

19,256
7.2%

Operating Profit
YoY
OPM

8,330
49.4%
6.1%

9,946
19.4%
6.8%

9,970
0.2%
7.1%

12,03120.7%
7.0%

13,762
14.4%
6.3%

13,901
1.0%
5.6%

15,1158.7%
5.9%

15,861
4.9%
5.9%

-134

-58

58

22

-9

-23

82

8,186
49.2%
6.0%

9,812
19.9%
6.7%

9,912
1.0%
7.1%

12,08922.0%
7.1%

13,78414.0%
6.3%

13,892
0.8%
5.6%

15,092
8.6%
5.9%

15,943
5.6%
6.0%

45.8%

44.8%

45.6%

41.5%

45.7%

45.3%

42.4%

42.8%

4,379
46.1%
3.2%

4,876
11.3%
3.3%

5,466
12.1%
3.9%

6,495
18.8%
3.8%

6,912
6.4%
3.1%

7,509
8.6%
3.0%

8,161
8.7%
3.2%

8,725
6.9%
3.3%

YoY
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials/Supplies Sourcing Services
Vending Machine Services
Support Services
Other

Non-Operating Income & expenses
Recurring Profit
YoY
RPM
Extraordinary Gains and losses
Implied Tax Rate
Net Income
YoY
Net Margin

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.
Engineering-training operations, staffing operations, and document-management operations were part of the “Other” section until FY 02/10. Thesebusinesses were designated as Support Services from FY 02/11 after the company merged with Certo Corp. in September 2010. Materials/Supplies
Sourcing Services and Vending Machine Services, which had been operated by Certo, were also added as separate categories.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Historical forecast accuracy
Initial CE vs. Results

FY02/08

FY02/09

FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16(JPYmn)Sales (Initial CE)
Sales (Results)
Initial CE vs. Results
Operating Profit (Initial CE)
Operating Profit (Results)
Initial CE vs. Results
Recurring Profit (Initial CE)
Recurring Profit (Results)
Initial CE vs. Results
Net Profit (Initial CE)
Net Profit (Results)
Initial CE vs. Results

Cons.
120,000
137,519
14.6%
8,330
6,800
8,186
20.4%
3,600
4,379
21.6%

Cons.
145,000
145,690
0.5%
9,100
9,946
9.3%
9,000
9,812
9.0%
4,600
4,876
6.0%

Cons.
150,000
140,299-6.5%
10,100
9,970
-1.3%
9,900
9,912
0.1%
5,200
5,466
5.1%

Cons.
181,000
170,905-5.6%
12,05012,031-0.2%
12,10512,089
-0.1%
6,470
6,495
0.4%

Cons.
213,000
219,797
3.2%
14,30013,762-3.8%
14,30013,784
-3.6%
7,600
6,912
-9.1%

Cons.
260,000
248,876-4.3%
16,60013,901-16.3%
16,60013,892-16.3%
8,700
7,509-13.7%

Cons.
260,000
257,243-1.1%
15,50015,115-2.5%
15,50015,092
-2.6%
8,300
8,161
-1.7%

Cons.
270,000
266,705-1.2%
16,00015,861-0.9%
16,00015,943
-0.4%
8,600
8,725
1.5%

Cons.
280,000
17,00017,000
9,400
-

S

C

d t

SR I

R

h

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

The company operates under a stock business model, and revenue is stable (and low-risk) since approximately 70% of its
sales are generated by a single group company. There is little difference between estimates and performance.
However, for FY02/13, there were significant shortfalls. Firms acquired under M&A in initial forecasts did not provide
profits as expected in their first year.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Balance sheet(JPYmn)ASSETSCash and Equivalents
Accounts Receivable
Allowance for Doubtful
Inventories
Deposit of Subsidiaries and Affiliates
Other Current Assets
Total Current Assets
Buildings
Machinery for Area Control, net
Tools, Furniture, and Fixtures, net
LandConstruction in Progress
Other Fixed
Total Tangible Fixed Assets
Goodwill
Other
Total Intangible Assets
Investment Securities
Deferred Tax Assets
Other
Allowance for Doubtful
Total Other Fixed Assets
Total Fixed Assets
Total Assets
LIABILITIES
Accounts Payable
Short-Term Debt
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Other Fixed Liabilities
Total Long-Term Liabilities
Total Liabilities
Issued Capital
Reserves
Retained Earnings
Treasury Stock
Total Accumulated Other Comprehensive Income
Share Warrants
Minority Interests
Total Shareholder Equity (Net Assets)
Working CapitalInterest-Bearing Debt
Net Debt (Net Cash)

FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15
6,991
18,025
-188
28
2,500
2,794
30,150
762
343
475
13
1,009
2,602
11,974649
12,623
1,730
534
1,566
-172
3,658
18,88549,035

7,964
16,284
-122
20
3,000
2,880
30,026
1,185
305
284
15
952
2,741
11,295629
11,924
2,050
289
1,779
-141
3,977
18,644
48,67013,09828,246-226
1,476
18,9203,010
64,524
1,234
265
1,791
284
182
3,756
10,546
1,031
11,577
2,983
278
1,701
-196
4,766
20,10084,624

9,707
10,014
12,565
15,58031,24044,67337,42040,055
-657
-144
-290
-168
1,527
2,237
2,504
3,381
27,32018,02032,42041,326
3,349
4,523
5,728
4,303
72,486
79,32390,347 104,477
1,217
1,089
1,046
1,009
246
274
238
211
1,918
2,079
2,487
2,516
284
282
278
278
108
72
209
345
3,773
3,796
4,258
4,361
11,24910,801
10,078
9,069
1,023
1,520
1,609
1,867
12,272
12,321
11,687
10,937
2,577
2,973
3,897
3,768
406
288
254
284
1,517
2,196
1,877
2,750
-224
-200
-199
-535
4,276
5,257
5,829
6,268
20,322
21,375
21,775
21,56792,809 100,699 112,122 126,044

10,551
1,688
7,892
20,131
56
768
824
20,956
3,238
2,963
20,852
-461
-42
72
1,456
28,079
7,502
1,744
7,747
54.1%

8,974
80
7,227
16,28131
993
1,024
17,306
3,238
2,964
25,366-461
145
110
31,3647,330
111
10,85364.2%

22,42449
8,251
30,724
6
1,006
1,012
31,7373,238
18,741
30,575-461
645
149
52,887
7,298
55
31,96362.3%

23,72041
9,882
33,64315968
983
34,6263,238
18,75335,285
-460
647
173
545
58,182
9,047
56
36,971
61.9%

24,544
10
10,401
34,955
5
1,190
1,195
36,151
3,238
18,77040,539
-458
992
205
1,260
64,54722,36615
28,01962.6%

26,701
5
12,60039,3061,500
1,500
40,806
3,238
18,81846,235
-449
1,711
165
1,597
71,316
13,223
5
44,98062.0%30,902
15,73846,6401,908
1,908
48,5493,238
18,85052,388
-443
1,373
166
1,922
77,495
12,53456,906
59.8%

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.
JPY1.5bn raised from securitization of future receivables in FY02/09 is booked as short-term interest bearing debt.

AssetsCurrent assets account for approximately 80% of the company’s assets (as of FY02/14). A large portion of receivables aredue from Aeon Retail, and amounted to about JPY20.0bn as of the end of FY02/13. Majority of its investment securities arewith Aeon Mall, Aeon Kyushu Co., Ltd. (JASDAQ: 2653), Aeon Fantasy Co., Ltd. (TSE1: 4343), and MaxValu companies.
There is also a large amount of goodwill (9% as of FY02/14) due to the volume of M&A.
Aeon Delight’s assets and liabilities swelled in FY02/11 due to its merger with Certo Corp. It took on assets of 31.5
billion yen and liabilities of 15.3 billion yen.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

Aeon Delight Co., Ltd. | 9787 |LAST UPDATE【2015/10/07】

Liabilities
Aeon Delight was basically debt free, with a mere several million of interest-bearing debt at the end of FY02/14. Cash anddeposits exceeded interest-bearing debt. Receivables account for a significant portion of liabilities (68% as of FY02/13).
However, receivables are diversified among a large portion of counterparties, and the largest is JPY1.0bn from Japan
Beverage Holdings.

Equity Capital
Equity capital ratio rose to 64.2% at the end of FY02/10 from 39.9% in FY02/07 due to growth in equity as a result of
acquisitions. The company has maintained a relatively high equity capital ratio for the past four years. However, SR Inc.
believes that the company could use financial leverage (i.e., use of debt to acquire additional assets) to expand businessand its equity.

Shareholder Rewards
Aeon Delight aims to provide dividends that correspond to its financial performance in a stable and continuous manner. It
aims to provide a 20% dividend payout ratio, while keeping a close watch on its net asset ratio. The dividend ratio in
FY02/14 was 30.9%, and the company plans for a ratio of 30.5% in FY02/15.

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Aeon Delight Co., Ltd. ＞ Historical financial statements

LAST UPDATE【2015/10/07】

Statement of cash flows(JPYmn)Operating Cash Flow (1)Investment Cash Flow (2)Free Cash Flow (1+2)
Financial Cash Flow
Depreciation & Amortization (A)Capital Expenditures (B)Working Capital Changes (C)Simple FCF (NI + A + B - C)

FY02/09
6,668-2,087
4,581-5,255
1,495
-707
108
5,556

FY02/10
7,031-1,966
5,065-4,169
1,593
-912
-172
6,319

FY02/116,808-3,0003,808-1,321
1,787
-792
-32
7,522

FY02/12
9,639-10,051-412-2,722
2,345-1,1841,749
6,324

FY02/13-4,3587,086
2,728-2,2572,237-1,607
13,319-5,180FY02/14
21,359-16,632
4,727-2,4752,432-1,999-9,143
17,737

FY02/15
17,234-11,365
5,869-2,594
2,466-1,903-689
9,977

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Operating cash flow
In FY02/13, net cash used in operations was 4.4 billion yen (net cash provided by operations was 9.6 billion yen in
FY02/12), attributed to a 12.6 billion yen increase in accounts receivables related rise in LED construction work for the
Aeon group, and 6.6 billion yen paid in corporate income taxes. Prior to FY02/13, cash flow from operations ranged from
6.5 billion in FY02/08 to 9.6 billion in FY02/13.

Investment cash flow
A significant portion of cash flow from investments stems from M&A activities. There is also a large variance due tocontributions from affiliated companies, but this more significantly affects operating cash flow.

Financial cash flow
In FY02/13, net cashed used in financing activities were dividend payments of 2.3 billion yen. Prior to FY02/09, thecompany used cash for repayment of funds raised from liquidation of future receivables.

Simple free cash flow
In FY02/13, working capital increased 13.3 billion yen YoY (13.4 billion yen increase in accounts receivables and 710
million yen increase in inventories minus 820 million yen increase in accounts payables). Depreciation and amortization of
goodwill totaled 2.2 billion yen and capital expenditures were 1.6 billion yen. Net income totaled 7.5 billion yen. Simple
free cash flow was negative 5.2 billion yen at the end of FY02/13.
Cash Conversion Cycle
FY02/09
Accounts Receivable Turnover
8.2
Days in Accounts Receivabl
44.7
Inventory Turnover
6,565.0
Days in Inventory
0.1
Payables Turnover
12.0
Days in Payables
30.5
Cash Conversion Cycle (days)
14.3

FY02/108.2
44.6
4,965.8
0.1
12.2
29.9
14.8

FY02/11
7.7
47.6
196.4
1.9
9.4
39.0
10.4

FY02/12
7.4
49.4
127.3
2.9
8.3
44.1
8.2

FY02/13
6.6
55.7
116.2
3.1
9.1
40.3
18.5

FY02/14
6.3
58.2
94.3
3.9
8.7
41.8
20.3

FY02/15
6.9
53.0
78.7
4.6
8.0
45.4
12.3

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Inventory turnover rate deteriorated over the past three years due to increased inventories from acquired companies.
Accounts receivable are mainly from Aeon group companies, while accounts payable are with various suppliers, such assoft drink beverage suppliers. In FY02/13, its cash-conversion cycle increased due to increased LED installation work for
Aeon group companies.

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Aeon Delight Co., Ltd. ＞ Other information

LAST UPDATE【2015/10/07】

Other information
HistoryJapan MaintenanceIn 1972, Nichii Co., Ltd. (renamed Mycal Corp. in 1996) established Nichii Maintenance Co., Ltd., to undertake
maintenance at Mycal stores (Aeon Retail acquired Mycal in March 2011). In 1976, Nichii Maintenance changed its nameto Japan Maintenance Co., Ltd. The company listed its shares on the Second Section of the Osaka Securities Exchange in
1995, and on the Second Section of the Tokyo Stock Exchange in 1999. In 2000, it listed its shares on the First Section of
the Tokyo Stock Exchange.

Aeon Techno Service
In 1987, Jusco Maintenance was established after Jusco Kosan Co., Ltd. (currently Aeon Mall) created a subsidiary from its
building maintenance division. The company handled facilities maintenance, cleaning, and security services for retailstores for the Aeon group companies. In 1997, Jusco Maintenance changed its name to Aeon Techno Service Co., Ltd.

MergerMycal, falling under hardship and filed for bankruptcy in 2001, became a wholly owned subsidiary of Aeon in 2003. As aresult, Japan Maintenance merged with Aeon Techno Service, and changed its name to Aeon Delight Co., Ltd. in 2006. In
2006,

Aeon Delight
Prior to the merger, Japan Maintenance generated 40% of its sales from Mycal group companies, while Aeon Techno
Service depended mostly on Aeon group companies for its business. The company derived 65% of total sales from Aeon
group companies as of end of FY02/13, and made several acquisitions to expand its business.

News & topics
In FY02/12, Aeon Delight developed recirculating, water-saving plastic urinals. These urinals reduce water consumption
by 90%. According to Aeon Delight, a train station in which 500 people use the restroom daily could save at least
160,000 yen a year with one urinal (500 people x 1.8 liters x 365 x 0.55 yen x 90%). This calculation is based on theassumption that water and sewage cost 550 yen per 1,000 liters, and that conventional urinals require 1.8 liters of water
per use. Aeon Delight plans to sell these urinals for 120,000 yen per unit. However, after testing in stores, there was room
for improvement, and although experiments continue, it is still not at a stage where it can be implemented en masse.

Source: Shared Research based on company data

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Aeon Delight Co., Ltd. ＞ Other information

LAST UPDATE【2015/10/07】

Aeon Delight also developed a water-based coating agent as an alternative to conventional resin wax. "Aeon DelightCoat" has a high-luster finish without organic solvents or the removal of older wax coatings. Another product, "AD Hard
Coat," which is under development, eliminates the need for buffing.

Conventional
Wax

New
Material

Source: Shared Research based on company data

November 2013
On November 28, 2013, the company announced the launch of a solar power business.
Aeon Delight, Recycle One, Inc., etc. will jointly invest to establish Kikugawa Ishiyama Solar Ltd. and Kikugawa
Horinouchiya Solar Ltd. The 9.4-megawatt facilities of Kikugawa Ishiyama Solar and the 7.5-megawatt facilities of
Kikugawa Horinouchiya Solar will have a total annual output of 20.84 megawatt-hours, equivalent to the annual power
consumption of about 5,000 typical households. Construction is scheduled to begin in December 2013, and electricity
sale is slated to begin in February 2015.

Major shareholders
Aeon group companies own over 60% of the company.
Top Shareholders
Aeon Retail Co., Ltd.
Aeon Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
Aeon Delight Business Partners
BNP Paribas Sec Services Luxembourg/Jasdec/Aberdeen Global Client
AssetsJapan Trustee Services Bank, Ltd. (Trust Account)
Goldman Sachs & Co Regular Account
Aeon Delight Employees
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
HSBC Fund Services Clients Account 006

AmountHeld
42.94%
16.81%
1.98%
1.61%
1.41%
1.27%
1.20%
1.11%
1.01%
0.93%

Source: Shared Research based on company data
(As of February 28, 2015)

Top management
President Ippei Nakayama (born in 1954) joined Jusco in 1971 and developed his career in store operations,management, and human resources before being seconded to the Ministry of Labor (currently, Ministry of Heath, Laborand Welfare) in 1985. After returning to Aeon, he continued his career in human resources, and was later involved inestablishing Talbot, Inc. in Japan. He became a director at Aeon Techno Service Co., Ltd. in 2002, and was promoted towww.sharedresearch.jp

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executive managing director in 2006. Furthermore, Mr. Nakayama became a managing director of the newly formed
Aeon Delight Co., Ltd., following the merger of Japan Maintenance Co., Ltd. and Aeon Techno Service in September
2006. He became senior vice president in 2012, and was promoted president of Aeon Delight in 2013.

Employees
Aeon Delight had 12,087 employees and an average of 5,703 temporary employees on a consolidated basis as of
FY02/15. At the parent level, there were 3,899 employees and 2,268 temporary employees. The average age, average
length of employment, and average annual salary on a parent basis are as follows:▶ Average age: 46 years and 7 months▶ Average length of employment: 10.4 years▶ Average annual salary: JPY4.7mn

Investor relations
Aeon Delight holds earnings briefings twice a year (following half-year and full-year business results).

By the way
Corporate Social Responsibility (CSR) Activities
Aeon Delight is pursuing corporate social responsibility (CSR) activities by strengthening its efforts to protect theenvironment with a management principle of creating “environmental value” for clients.
The following are examples of the company’s environmental initiatives:

Promotion of energy-saving lighting equipment
The company is promoting energy-saving lighting devices, such as light emitting diode (LED) lamps, that significantly
reduce electricity consumption. The company seeks to help clients cut carbon dioxide emissions and reduce expenses byselecting the most suitable source of lighting depending on the situation and intended use, such as lighting for room
interior or a parking space, and for illuminating a billboard.

Proposal for environmentally friendly packaging
The company proposes a variety of packaging materials, including biomass materials obtained during the growth processof plants that do not increase carbon dioxide when burned, as well as water based gravure printing that has low
environmental impact.

Introduction of environmentally friendly vending machines
The company introduced environmentally friendly vending machines that can reduce electricity consumption by as muchas 45% a year with the use of heat pumps and LED lighting. The company unveiled heat-pump vending machines in
2008, and those equipped with LED lighting in 2011.

Participation in Aeon 1% Club
Aeon 1% Club supports projects to protect the environment, boost international cultural and human exchange, promotewww.sharedresearch.jp

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regional cultural and social activities, and donate to welfare projects. It is an initiative under which group companies
contribute 1% of their pretax profits so that these activities can be maintained regardless of the companies’ businessperformances.

Tree planting through Aeon Environmental Foundation
The company participated in a tree-planting event in Beijing, China in fiscal year 2010, took part in a similar project inJakarta, Indonesia in fiscal year 2011 and 2012, respectively. For the tree planting event in Jakarta held during fiscal year
2012, the company sponsored participation of endorsing companies, in addition to having its employees from Japan
volunteering for the event“Clean Day” on the 11th Day of Each Month
The company designated the 11th day of each month as “Clean Day,” where employees clean streets around theirworkplaces before the start of the working day.
The company also conducts a number of social contributions as part of its CSR activities:

Volunteering at social welfare facilities
The company conducts volunteer activities at nationwide welfare facilities once a year, using the system of the Aeon
Social Welfare Foundation.

Shopping basket cleaning outsourced to vocational aid facilities
The company outsources cleaning of its shopping baskets to vocational aid centers. Shopping baskets used at its storesare sent to six “washing centers” within the vocational facilities, where the baskets are washed and applied with
anti-bacterial coating.

Construction of a school in Laos (completed in June 2008)
The Aeon Delight Group conducted fund raising activities, and through the Aeon 1% Club and the Japan Committee for
UNICEF, constructed and donated a school in Laos named “Aeon Good-Job School.”
In addition, Aeon Delight’s logo is a mascot named “Gu Jo-Kun,” derived from “a good job!” and symbolizes that thecompany wishes to make all people happy.

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LAST UPDATE【2015/10/07】

Company profile
Company Name

Head Office
Minamisemba Heart Bldg.

AEON DELIGHT CO., LTD.

2-3-2 Minamisemba Chuo-ku, Osaka City
Osaka, Japan 542-0081

Phone+81-6-6260-5621

Listed On
Tokyo Stock Exchange 1st Section

EstablishedExchange Listing

November 16, 1972

September 29, 1995

WebsiteFiscal Year-End

http://www.aeondelight.co.jp/english/

February

IR Contact

IR Webhttp://www.aeondelight.co.jp/english/ir/

IR Mailwww.sharedresearch.jp

IR Phone

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