RLAST UPDATE【2016/5/11】

Aeon Delight | 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 | 9787 |Shared Research Report

LAST UPDATE【2016/5/11】

INDEX
Key financial indicators ---------------------------------------------------------------------------------------------- 3
Recent updates --------------------------------------------------------------------------------------------------------- 4
Highlights ----------------------------------------------------------------------------------------------------------------------- 4
Trends and outlook --------------------------------------------------------------------------------------------------- 5
Quarterly trends and results----------------------------------------------------------------------------------------------- 5
Full-year company forecasts --------------------------------------------------------------------------------------------- 18
Medium/long-term Outlook -------------------------------------------------------------------------------------------- 28
Business ----------------------------------------------------------------------------------------------------------------- 33
Business description ------------------------------------------------------------------------------------------------------- 33
Strengths and weaknesses ----------------------------------------------------------------------------------------------- 43
Market and value chain --------------------------------------------------------------------------------------------------- 44
Strategy ------------------------------------------------------------------------------------------------------------------------ 48
Historical financial statements ----------------------------------------------------------------------------------- 52
Summary ---------------------------------------------------------------------------------------------------------------------- 52
Income statement ---------------------------------------------------------------------------------------------------------- 81
Balance sheet ---------------------------------------------------------------------------------------------------------------- 83
Statement of cash flows -------------------------------------------------------------------------------------------------- 85
Other information---------------------------------------------------------------------------------------------------- 86
History -------------------------------------------------------------------------------------------------------------------------- 86
News & topics --------------------------------------------------------------------------------------------------------------- 86
Major shareholders --------------------------------------------------------------------------------------------------------- 89
Top management----------------------------------------------------------------------------------------------------------- 90
Employees -------------------------------------------------------------------------------------------------------------------- 90
Investor relations ------------------------------------------------------------------------------------------------------------ 90
By the way -------------------------------------------------------------------------------------------------------------------- 90
Company profile ------------------------------------------------------------------------------------------------------------ 92

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Aeon Delight | 9787 |Shared Research Report

Aeon Delight ＞ Key financial indicators

LAST UPDATE【2016/5/11】

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
Net Cash
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%

FY2/16
Cons.
281,041
5.4%
37,390
6.5%
13.3%
16,707
5.3%
5.9%
16,684
4.6%
5.9%
9,658
10.7%
3.4%

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

54,170
184
183
52
1,553

7,673
28,764
1,885
3,411
13,35647,418
10,293
22,533
2,395
24,92922,488

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

6,472-2,190-6,094

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

10,303-3,255-2,821

9,173
17.1%
21.0%
47.4%

1,744
7,747
20.3%
19.9%
54.1%

111
10,853
20.3%
18.9%
64.2%

55
31,963
18.1%
15.5%
62.3%

56
36,971
15.5%
12.5%
61.9%

15
28,019
14.4%
12.5%
62.6%

5
44,980
14.2%
12.3%
62.0%

56,906
13.4%
12.0%
59.8%

57,748
13.0%
12.3%
62.1%

FY2/17
Est.
305,000
8.5%

17,5004.7%
5.7%
17,5004.9%
5.7%
10,000
3.5%
3.3%
190
55

12,565
15,58020,386
90,347 104,477 105,674
4,258
4,361
7,086
5,829
6,268
8,190
11,687
10,937
10,397112,122 126,044 131,349
26,70130,90228,457
539,306
46,64044,821
1,500
1,908
2,527
40,80648,54947,34871,31677,49584,000Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

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Aeon Delight | 9787 |Shared Research Report

Aeon Delight ＞ Recent updates

LAST UPDATE【2016/5/11】

Recent updates
Highlights
On May 11, 2016, Shared Research updated the report following interviews with AEON DELIGHT, Co., Ltd..

On April 13, 2016, the company announced Full-Year earnings results for FY02/16; see the results section for details.

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

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Aeon Delight | 9787 |Shared Research Report

Aeon Delight ＞ Trends and outlook

LAST UPDATE【2016/5/11】

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

Q1

66,711
13.9%
8,173
17.0%
12.3%
4,782
22.9%
7.2%
3,390
9.6%
5.1%
3,403
9.7%
5.1%
1,858
4.0%
2.8%

Segment Results(JPYmn)Q1
66,711
Sales
10,622
Facilities management
Securities management
8,438
10,539Cleaning services
Construction work
15,888Materials & supplies sourcing 10,721
7,498
Vending machine services
3,002
Support services
13.9%
YoY
Facilities management
2.4%
6.8%
Securities management
4.1%
Cleaning services
Construction work
43.4%
Materials & supplies sourcing 12.6%
Vending machine services
-0.1%
44.7%
Support services
Operating profit
3,390
Facilities management
1,151
642
Securities management
Cleaning services
1,397
Construction work
851
Materials & supplies sourcing
573
Vending machine services
535
Support services
154-87
Elimination
Amortization of goodwill-285
Corporate expenses-1,543
YoY
9.6%
Facilities management
4.2%
6.8%
Securities management
Cleaning services
-3.1%
84.6%
Construction work
Materials & supplies sourcing 109.9%
Vending machine services
17.8%
Support services
100.0%
OPM
5.1%
Facilities management
10.8%
7.6%
Securities management
Cleaning services
13.3%
Construction work
5.4%
Materials & supplies sourcing
5.3%
Vending machine services
7.1%
Support services
5.1%
OP composition
Facilities management
21.7%
Securities management
12.1%
Cleaning services
26.3%
16.0%
Construction work
Materials & supplies sourcing 10.8%
Vending machine services
10.1%
2.9%
Support services

FY02/14Q2
Q3

66,841
-2.0%
8,808
10.1%
13.2%
4,624
16.2%
6.9%
4,185
4.1%
6.3%
4,168
3.6%
6.2%
2,289
6.1%
3.4%

Q4

Q1

61,256
-6.7%
7,984
2.5%
13.0%
4,589
2.0%
7.5%
3,395
3.2%
5.5%
3,411
3.7%
5.6%
1,657
6.1%
2.7%

62,435
10.5%
8,749
17.4%
14.0%
4,604
16.4%
7.4%
4,145
18.5%
6.6%
4,110
18.1%
6.6%
2,357
17.6%
3.8%

66,475
-0.4%
8,306
1.6%
12.5%
4,766
-0.3%
7.2%
3,540
4.4%
5.3%
3,558
4.6%
5.4%
2,015
8.4%
3.0%

FY02/14
Q2
Q3

Q4

Q1

FY02/15Q2
Q367,574
1.1%
8,972
1.9%
13.3%
4,809
4.0%
7.1%
4,162
-0.5%
6.2%
4,167
-0.0%
6.2%
2,365
3.3%
3.5%

Q4

65,237
6.5%
8,429
5.6%
12.9%
4,828
5.2%
7.4%
3,601
6.1%
5.5%
3,614
6.0%
5.5%
2,003
20.9%
3.1%

67,419
8.0%
9,410
7.6%
14.0%
4,853
5.4%
7.2%
4,558
10.0%
6.8%
4,604
12.0%
6.8%
2,342
-0.6%
3.5%

FY02/15Q2Q3

Q466,841 61,256 62,435 66,475 67,574 65,237 67,419
10,848 11,198 10,790 11,228 11,642 11,532 11,437
8,367
8,481
8,956
8,935
8,891
9,305
9,491
10,485 10,642 10,654 10,942 10,960 11,129 11,256
13,9298,254
7,559 11,858 11,133
9,366
9,615
11,023 11,542 11,257 11,713 11,609 12,175 12,121
8,716
7,479
9,636
8,330
9,471
8,003
9,021
3,473
3,660
3,583
3,466
3,870
3,726
4,488
-2.0%
-6.7% 10.5%
-0.4%
1.1%
6.5%
8.0%
0.9%
5.2%
5.0%
5.7%
7.3%
3.0%
6.0%
5.8%
6.5% 11.5%
5.9%
6.3%
9.7%
6.0%
4.0%
4.3%
5.4%
3.8%
4.5%
4.6%
5.7%
-26.2% -47.7%
3.0% -25.4% -20.1% 13.5% 27.2%
12.8% 14.8% 13.3%
9.3%
5.3%
5.5%
7.7%
1.7%
0.8% 25.1% 11.1%
8.7%
7.0%
-6.4%
56.6%
2.8% 16.0% 15.5% 11.4%
1.8% 25.3%
4,185
3,395
4,145
3,540
4,162
3,601
4,558
1,266
1,188
1,120
1,029
1,098
1,074
1,016
700
761
762
695
717
824
866
1,404
1,425
1,490
1,469
1,552
1,592
1,676
764
474
491
741
754
678
634
636
533
591
464
490
436
721
812
433
1,288
551
894
506
1,014
410
395
201
352
420
179
441
-132
-233
-167
-176
-108
-72
-81
-287
-284
-282
-276
-275
-288
-286
-1,386 -1,301 -1,347 -1,309 -1,381 -1,374 -1,303
4.1%
3.2% 18.5%
4.4%
-0.5%
6.1% 10.0%
3.8% 10.0% -10.8% -10.6% -13.3%
-9.6%
-9.3%
4.6% 16.0%
-0.5%
8.3%
2.4%
8.3% 13.6%
-6.9%
-1.5%
-2.2%
5.2% 10.5% 11.7% 12.5%
-4.0%
5.3%
-2.2% -12.9%-1.3% 43.0% 29.1%
98.8% 39.9% 21.1% -19.0% -23.0% -18.2% 22.0%
11.5%
0.2% 64.7%
3.0% 10.1% 16.9% -21.3%
76.7%
5.9% 240.7% 128.6%
2.4% -54.7% 119.4%
6.3%
5.5%
6.6%
5.3%
6.2%
5.5%
6.8%
11.7% 10.6% 10.4%
9.2%
9.4%
9.3%
8.9%
8.4%
9.0%
8.5%
7.8%
8.1%
8.9%
9.1%
13.4% 13.4% 14.0% 13.4% 14.2% 14.3% 14.9%
5.5%
5.7%
6.5%
6.2%
6.8%
7.2%
6.6%
5.9%
5.8%
4.6%
5.3%
4.0%
4.2%
3.6%
9.3%
5.8% 13.4%
6.6%
9.4%
6.3% 11.2%
11.8% 10.8%
5.6% 10.2% 10.9%
4.8%
9.8%
21.1%
11.7%
23.4%
12.8%
10.6%
13.6%
6.8%

22.8%
14.6%
27.4%
9.1%
10.2%
8.3%
7.6%

18.8%
12.8%
25.1%
8.3%
9.9%
21.7%
3.4%

19.4%
13.1%
27.7%
14.0%
8.8%
10.4%
6.6%

18.5%
12.1%
26.2%
12.7%
8.3%
15.1%
7.1%

20.3%
15.6%
30.1%
12.8%
8.2%
9.6%
3.4%

16.0%
13.6%
26.3%
10.0%
11.3%
15.9%
6.9%

FY02/16Q1
Q2
70,529 72,254
6.1%
6.9%
8,864
9,734
6.7%
8.5%
12.6% 13.5%
5,239
5,237
9.9%
8.9%
7.4%
7.2%
3,625
4,496
2.4%
8.0%
5.1%
6.2%
3,652
4,487
2.6%
7.7%
5.2%
6.2%
2,078
2,604
3.1% 10.1%
2.9%
3.6%

FY02/16Q3
67,906
4.1%
8,923
5.9%
13.1%
5,076
5.1%
7.5%
3,848
6.9%
5.7%
3,876
7.2%
5.7%
2,292
14.4%
3.4%

Q4
70,352
4.4%
9,869
4.9%
14.0%
5,130
5.7%
7.3%
4,738
3.9%
6.7%
4,669
1.4%
6.6%
2,684
14.6%
3.8%

FY02/16Q1Q2Q3
Q470,529 72,254 67,906 70,352
12,103 12,291 12,126 12,442
9,306
9,294
9,522 10,334
11,656 11,723 11,811 12,680
13,059 13,194
9,649
7,953
12,080 12,445 12,990 13,001
8,107
8,848
7,507
8,279
4,215
4,458
4,302
5,664
6.1%
6.9%
4.1%
4.4%
7.8%
5.6%
5.2%
8.8%
4.2%
4.5%
2.3%
8.9%
6.5%
7.0%
6.1% 12.7%
10.1% 18.5%
3.0% -17.3%
3.1%
7.2%
6.7%
7.3%
-2.7%
-6.6%
-6.2%
-8.2%
21.6% 15.2% 15.5% 26.2%
3,625
4,496
3,848
4,738
1,045
1,109
1,080
972
696
731
782
823
1,482
1,535
1,599
1,415
932
1,061
709
516
568
664
670
904
450
775
372
1,249
355
556
510
551
-140
-165
-201
-130
-285
-293
-292
-292
-1,478 -1,479 -1,381 -1,270
2.4%
8.0%
6.9%
3.9%
1.6%
1.0%
0.6%
-4.3%
0.1%
2.0%
-5.1%
-5.0%
0.9%
-1.1%
0.4% -15.6%
25.8% 40.7%
4.6% -18.6%
22.4% 35.5% 53.7% 25.4%-18.3% -13.3% -26.5% 23.2%
0.9% 32.4% 184.9% 24.9%
5.1%
6.2%
5.7%
6.7%
8.6%
9.0%
8.9%
7.8%
7.5%
7.9%
8.2%
8.0%
12.7% 13.1% 13.5% 11.2%
7.1%
8.0%
7.3%
6.5%
4.7%
5.3%
5.2%
7.0%
5.6%
8.8%
5.0% 15.1%
8.4% 12.5% 11.9%
9.7%
18.9% 17.2% 18.9% 15.1%
12.6% 11.4% 13.7% 12.8%
26.8% 23.9% 27.9% 22.0%
16.9% 16.5% 12.4%
8.0%
10.3% 10.3% 11.7% 14.1%
8.1% 12.1%
6.5% 19.4%
6.4%
8.6%
8.9%
8.6%

% of FYFY Est.

100.4%

280,000
5.0%

98.3%

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

98.1%

102.7%

FY02/16% of FYFY Est.

100.4%

280,000

98.3%

17,000Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

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Aeon Delight | 9787 |Shared Research Report

Aeon Delight ＞ Trends and outlook

LAST UPDATE【2016/5/11】

Full-year performance
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

FY02/17

FY02/08
Segment Results(JPYmn)Cons.
Sales137519
Facilities management
40,202
Securities management
35,848
Cleaning services
41,098Construction work
16,777
Materials & suppies sourcing
Vending machine services
Support services
3,591
YoY
23.7%
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
Operating profit
8330
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
Elimination
YoY
49.4%
Facilities management
Securities management
Cleaning services
Construction work
Materials & suppies sourcing
Vending machine services
Support services
OPM
6.1%
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

FY02/09

FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

5,846
5.9%
5.1%
2.3%
3.2%
10.4%

5,412
-3.7%
-1.4%
-6.5%
6.2%
-25.0%

62.8%
9946

-7.4%
9970
4,507
2,738
5,780
1,321

Cons.
13751923.7%
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.
1456905.9%
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.
14569042,25336,67042,403
18,515

19.4%

6.8%

Cons.
140299-3.7%
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.
14029941,66634,28145,05013,889Cons.
17090521.8%
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%

7.1%
10.8%
8.0%
12.8%
9.5%

7.0%
12.8%
8.6%
14.4%
7.4%
3.3%
8.6%
11.1%

Cons.
21979742,14732,23539,85228,51336,73032,280
8,037
28.6%
5.3%
0.5%
-3.1%
73.6%
96.2%
87.8%
50.9%
13762
5,084
2,823
5,882
1,936
1,234
2,330
312
-5,843
14.4%
-0.6%
2.1%
-0.9%
59.5%
96.8%
57.4%
-47.1%
6.3%
12.1%
8.8%
14.8%
6.8%
3.4%
7.2%
3.9%

29.9%
18.1%
38.3%
8.8%

28.9%
15.6%
33.5%
6.8%
3.5%
8.3%
3.3%

25.9%
14.4%
30.0%
9.9%
6.3%
11.9%
1.6%

-5,1250.2%

Cons.
17090540,01932,08841,142
16,42018,71817,188
5,327
21.8%
-4.0%
-6.4%
-8.7%
18.2%

Cons.
21979728.6%
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%

-1.6%
12031
5,115
2,764
5,937
1,214
627
1,480
590
-5,698
20.7%
13.5%
0.9%
2.7%
-8.1%

Cons.
24887613.2%
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.
24887642,05031,80540,51953,071
39,284
31,20010,942
13.2%
-0.2%
-1.3%
1.7%
86.1%
7.0%
-3.3%
36.1%
13901
4,661
2,692
5,918
2,209
1,462
2,396
741
-6,180
1.0%
-8.3%
-4.6%
0.6%
14.1%
18.5%
2.8%
137.5%
5.6%
11.1%
8.5%
14.6%
4.2%
3.7%
7.7%
6.8%
23.2%
13.4%
29.5%
11.0%
7.3%
11.9%
3.7%

Cons.
257243
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%

Cons.
25724343,45834,24242,32045,63044,54333,32913,718
3.4%
3.3%
7.7%
4.4%
-14.0%
13.4%
6.8%
25.4%
15115
4,725
2,865
5,716
2,580
2,333
3,068
1,160
-7,334
8.7%
1.4%
6.4%
-3.4%
16.8%
59.6%
28.0%
56.5%
5.9%
10.9%
8.4%
13.5%
5.7%
5.2%
9.2%
8.5%
21.0%
12.8%
25.5%
11.5%
10.4%
13.7%
5.2%

Cons.
266705
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%

Cons.
26670545,83936,62244,287
41,972
47,61834,825
15,540
3.7%
5.5%
7.0%
4.6%
-8.0%
6.9%
4.5%
13.3%
15861
4,217
3,102
6,289
2,807
2,111
2,965
1,297
-6,9294.9%-10.8%
8.3%
10.0%
8.8%
-9.5%
-3.4%
11.8%
5.9%
9.2%
8.5%
14.2%
6.7%
4.4%
8.5%
8.3%
18.5%
13.6%
27.6%
12.3%
9.3%
13.0%
5.7%

Cons.
281041
5.4%
37,390
6.5%
13.3%
20,682
7.4%
7.4%
16,707
5.3%
5.9%
16,684
4.6%
5.9%
9,658
10.7%
3.4%

Cons.
281041
48,96238,45647,87043,85550,51632,741
18,639
5.4%
6.8%
5.0%
8.1%
4.5%
6.1%
-6.0%
19.9%
16707
4,206
3,032
6,031
3,218
2,806
2,846
1,972
-7,406
5.3%
-0.3%
-2.3%
-4.1%
14.6%
32.9%
-4.0%
52.0%
5.9%
8.6%
7.9%
12.6%
7.3%
5.6%
8.7%
10.6%

Est.
3050008.5%
17,5004.7%
5.7%
17,5004.9%
5.7%
10,000
3.5%
3.3%

Est.
305000

8.5%

17500

4.7%

5.7%

17.4%
12.6%
25.0%
13.3%
11.6%
11.8%
8.2%

Source: Shared Research based on company data

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Aeon Delight ＞ Trends and outlook

Aeon Delight | 9787 |LAST UPDATE【2016/5/11】

FY02/16 full-year results (announced April 13, 2016)
Earnings
Sales:

JPY281.0bn (up 5.4% YoY)

Operating profit:

JPY16.7bn (up 5.3%)▶ FY02/17：FY02/16: External factors depress revenues from Construction Work in Q4, but earnings still finish closely inline with initial estimates▶ FY02/17: The company sees overseas businesses and Support Services business driving top-line growth and earnings

growth across all segments; will continue to actively invest in future growth initiatives▶ Overseas: The company sees 30% YoY growth in sales; in China, looking for continued strong growth outside of Aeon

Group, enhancement in area strategies; in ASEAN, looking for more work from group companies▶ Support Services: Kajitaku accounts for majority of gross profit from subsidiaries (JPY1.5-2.0bn); full-scale rollout of

Kaji Cloud’s B2B initiative▶ Other: At Cleaning Services, focus on sanitary cleaning services and cleaning robots; at Vending Machine Services,focus on ad revenues; at Construction Work, focus on projects for Aeon Group, expansion into new business areas▶ Hakuseisha: Becomes wholly owned subsidiary in January 2016; synergies not included in earnings estimates for

FY02/17; improvements in earnings structure expected from FY02/18

Earnings set new record high; growth continues overseas
Sales were up year-on-year for the sixth year in a row, while operating profit, recurring profit, and net income rose
year-on-year for the 12th consecutive year. Overseas, the company surpassed JPY10.0bn in sales, with the businessgrowing rapidly in Asia.

Construction Work (Aeon Group store renovation) and Support Services (subsidiary Kajitaku) drive growth
Operating profit rose by JPY846mn, with Construction Work (+14.6% YoY, up by JPY411mn), Support Services (+52.0%,
up by JPY675mn) and Materials & Supplies Sourcing (+32.9%, an increase of JPY695mn) all seeing double digit growth,which pushed up overall earnings. Contributors to earnings included winning non-Aeon clients, brisk demand for new
Aeon Group store openings and renovation of existing stores, improved profitability, as well as growth at subsidiary
Kajitaku.
SG&A expenses increased faster than sales, growing 7.4% YoY. Shared Research believes the increase in SG&A is due tohigher investment costs, driven up by an increase in new deals and higher personnel costs.

Outlook for FY02/17
The company has positioned FY02/17 as a year for accelerating reforms. For the year, it revised down its medium-termtargets to JPY305.0bn in sales and JPY17.5bn in operating profit (previous targets: JPY330.0bn or higher in sales and
JPY21.0bn or higher in operating profit). To accelerate reforms further, the company plans to focus resources on highpotential growth markets overseas, and invest in changing its business model.

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Aeon Delight ＞ Trends and outlook

LAST UPDATE【2016/5/11】

Raising operating profit
In FY02/17, the company forecasts operating profit of JPY17.5bn, up JPY793mn YoY. Factors contributing to this increase
are in the following table. The company expects a JPY793mn increase in operating profit, despite roughly JPY1.0bn ininvestments for growth.
Measures to raise operating profit

year-on-year changes
JPY3.5bn-4.5bn

Total growth in gross profit
1） Growth in Aeon Delight parent

JPY1.8bn-2.2bn2） Growth in domestic subsidiaries

JPY1.5bn-2.0bn

3） Growth in overseas subsidiaries

PY200mn-300mn

Impact from higher SG&A expenses
Growth in operating profit

JPY2.7-3.0bn
JPY800mn-JPY1.5bn

Source: Shared Research based on company data

At Shared Research, we would like to focus in particular on the following measures the company is taking to growoperating profit (some of which have been discussed above): 1) expansion of overseas businesses (grow overseas
subsidiaries; 2) at Support Services, full-scale launch of B2B partnership for Kaji Cloud cleaning services (grow domestic
subsidiaries); 3) buildup of advertising business to support Vending machine services business; 4) at Construction work
segment, expansion into new business areas and increase in project work done for Aeon Group companies; 5) at Cleaning
services segment, the introduction of cleaning robots and standardization of cleaning procedures used by partnercompanies; and 6) aggressive investment in growth areas. For a more detailed discussion of these strategies, seediscussion under "Outlook for FY02/17."
Quarterly performance
12,00010,00015.3% 15.5%

Operating profit

SG&A
12.9%

13.4%

12.8%

13.6%

12.8% 12.9%

8,000

7.0%

7.5%

2,000
(JPYmn)11.9% 11.7% 11.9%

13.2%

12.3%

OPM (right-axis)
13.2% 13.0%

14.0%
12.5%

18%

13.3% 12.9%

14.0%

12.6%

4,162 3,601 4,558 3,625
3,390 4,185 3,395 4,145 3,540

6,000
4,000

GPM (right-axis)

Q1
FY02/11

13.5% 13.1%
4,496

3,848

14.0%

12%

4,738

4,020 3,289 3,499
3,829
3,197 3,650 3,093
3,086
3,011 3,999
7.6%
6.8%
6.7%
6.7%
6.7%
6.6%
6.3%
6.2%
6.2%
6.2%
6.1%
5.9%
5.8%
5.8%
5.7%
5.5%
5.5%
5.3%
5.3%
5.1%
5.1%
5.0%

Q3

Q1
FY02/12Q3Q1
FY02/13Q3Q1
FY02/14Q3Q1
FY02/15Q3Q1
FY02/16

15%

9%
6%
3%
0%

Q3

Source: Shared Research based on company data

Looking back at FY02/16 initiatives
The company views the key achievements of FY02/16 as expanding the domestic business, expanding the business inAsia, and increasing competitiveness.
Expanded the domestic business:Increased orders from hospitalsMade Hakuseisha (JASDAQ: 9736) a consolidated subsidiaryGrowth at Kajitaku

Expanded the business in Asia:

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Aeon Delight | 9787 |Shared Research Report

Aeon Delight ＞ Trends and outlook



LAST UPDATE【2016/5/11】

Overseas sales exceeded JPY10.0bn

Increased competitiveness:Strengthened Cleaning business

Built up its fluorocarbon management services



Restructured business portfolio

Making Hakuseisha a consolidated subsidiary
Hakuseisha results(JPYmn)
Sales
Kanto area
Kansai area
Chubu area
Building maintenance
Securities management
Other
Daimaru Matsuzakaya Department Stores
JFR Service
YoY
Gross profit
SG&A
Operating profit
Recurring profit
Net income
Net assets
Total assets
Net cash

FY03/13
9,723
4,893
4,216
613

100.0%
50.3%
43.4%
6.3%

6,983
2,588
242

71.8%
26.6%
2.5%

2,254
NA
1.1%
1,178
823
354
455
296
6,169
8,024
3,123

23.2%

12.1%
8.5%
3.6%
4.7%
3.0%

FY03/14
10,037
4,980
4,286
771

2,339
NA
3.2%
1,121
856
265
449
290
6,501
8,604
3,661

100.0%
49.6%
42.7%
7.7%

23.3%

11.2%
8.5%
2.6%
4.5%
2.9%

FY03/15
9,839
4,610
4,392
837

2,546
NA
-2.0%
1,010
835
175
276
172
6,637
8,821
3,035

100.0%
46.9%
44.6%
8.5%

FY03/16 Est.
9,343

100.0%

25.9%

10.3%
8.5%
1.8%
2.8%
1.8%

-5.0%

140
232
142

1.5%
2.5%
1.5%

Source: Shared Research based on company data
Note: The J-Front Retailing group accounted for approximately one-third of sales in FY03/15.

Acquisition aimed at increasing market share, but Aeon Delight also looking to improve earnings structure at Hakuseisha
In FY03/15, Hakuseisha recorded JPY9.8bn in sales and JPY175mn in operating profit due to expanding its market shares(representing a gross margin of 10.3% and operating profit margin of 1.8%), but expected sales and earnings to be down
in FY03/16. Going forward, Aeon Delight is looking to realize synergies from its acquisition of Hakuseisha and improve
profitability at Hakuseisha through a number of measures including 1) expanding its customer base, starting with thedepartment stores owned by Hakuseisha, 2) scouring Hakuseisha's customer base for opportunities to provide additional
services, and 3) combining the expertise of both Aeon Delight and Hakuseisha in cleaning and other areas.

Large difference in gross margin between Aeon Delight's Cleaning Services business and Hakuseisha
The company believes further top-line growth at Hakuseisha is possible with the help of 1) and 2), and sees plenty ofroom to improve profitability with the help of 3). Aeon Delight reported an overall gross margin of 13.3% for FY02/16,
with its Facilities Management and Security Service business reporting gross margins close to the average and its Cleaning
Services business reporting a gross margin about 5ppts higher. Cleaning and related services account for nearly half ofoverall sales at Hakuseisha, and the gross margin of its cleaning business is only about half that of Hakuseisha as a whole. If
Aeon Delight is able to bring Hakuseisha's gross margin in line with its own, it would make a large contribution toearnings.
Aeon Delight is already taking steps to realize the potential synergies from its acquisition of Hakuseisha and intends toaggressively pursue these initiatives going forward. Aeon Delight completed its takeover of Hakuseisha (making it awholly owned subsidiary) in January 2016, so the acquisition contributed only two months of earnings to consolidated
results in FY02/16.

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Aeon Delight | 9787 |Aeon Delight ＞ Trends and outlook

LAST UPDATE【2016/5/11】

Progress on winning non-Aeon Group clients, structuring Support Services and Overseas businesses
Rise in orders for large-scale facilities from non-Aeon clients drove sales higher; 1H momentum sustained in 2H
The company saw revenues increase from both Aeon Group and non-group companies in FY02/16. In 2H, the company
also launched a new sanitary cleaning services for hospitals and other medical facilities and won its first contract with amajor hospital.

Focus in 2H was new projects to start in FY02/17; orders for additional services from existing projects
Many contracts for projects, such as orders for large facilities, begin in early spring (though some contracts begin in
October), so 2H is when the company pushes sales negotiations to win these contracts from other companies. The
company has many negotiations ongoing and expects to receive orders for additional services from existing projects.
Leveraging its past experience as a subcontractor for sanitary cleaning services, Aeon Delight appears to be enjoying
success marketing itself as a primary contractor, and expects to start a number of new contracts for sanitary cleaning
services in FY02/17.

As Kajitaku continues to grow, Support Services to account for rising share of profits
Sales at the Support Services segment rose JPY3.1bn YoY (+19.9%) and operating profit rose JPY675mn YoY (+52.0%).
Not only did the proportion of sales derived from outside the group increase, it accounted for 8.2% of operating profit
versus only 5.7% in FY02/15. Subsidiary Kajitaku brought a large contribution to the segment growth. In addition toincreases in sales at its copy machine business and other existing businesses, the company also appears to haveexperienced higher sales from its Kaji Cloud housework services for individual households, with most of the growth
coming in urban areas.

Cleaning partnership with major local company in Malaysia; anticipates growth from Aeon Group orders
Business continued to expand overseas as well, with sales surpassing the JPY10.0bn mark. In China, improvement in local
management helped earnings maintain solid growth, driven by government contracts (not easily affected by real estatemarket conditions) and contracts with new Aeon Mall stores. Thanks to the consolidation of its local management
organization in Suzhou and Wuhan and more aggressive marketing, the company also appears to have had some successin winning additional contracts from non-Japanese companies. The company anticipates further contributions to growth
in FY02/17 now that it has begun to service the new Aeon Malls being opened in China (most of which were opened in
2H).
In Malaysia, Aeon Delight began business cleaning partnerships with Malaysian Harvest Sdn. Bhd., a major local company,
in October 2015, and acquired the ability to take on orders for Aeon Group’s stores, which is growing to be one of thelargest retailers in Malaysia: the Aeon Group in Malaysia had 101 stores as of the end of FY02/16, 44 more stores than at
end FY02/15 (AEON CO.(M) BHD. plus AEON BIG (M) SDN. BHD.). Shared Research believes the company appears to be
making progress in getting clients to switch from competitors.

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Aeon Delight ＞ Trends and outlook

LAST UPDATE【2016/5/11】

Facilities Management
1,600
1,400
1,200

12.4% 12.5% 12.1%

OP
11.2%

10.7%

11.3%

1,000

12.2%
10.8%

10.1%

11.7%

10.6% 10.4%

9.2%

16%

OPM (right axis)

9.4%

14%
12%

9.3%

8.9%

8.6%

9.0%

8.9%

800

7.8%

10%
8%

600

6%

400

4%

200

2%

(JPYmn)Q1
Q2
FY02/12

Q3

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

Q4

Q1
Q2
FY02/13Q1
10,622
2.4%
1,151
4.2%
10.8%
FY02/11

Q3

Q4

Q2
Q1
FY02/14

Q3

Q4

Q1
Q2
FY02/15Q3

FY02/15
FY02/14
Q2
Q3
Q4
Q1
Q2
Q3
10,848 11,198 10,790 11,228 11,642 11,532
0.9%
5.2%
5.0%
5.7%
7.3%
3.0%
1,266
1,188
1,120
1,029
1,098
1,074
3.8% 10.0% -10.8% -10.6% -13.3% -9.6%
11.7% 10.6% 10.4%
9.2%
9.4%
9.3%
Act.
40,019
-4.0%
5,115
13.5%
12.8%

FY02/12

Act.
42,147
5.3%
5,084
-0.6%
12.1%

FY02/13

Act.
42,050
-0.2%
4,661
-8.3%
11.1%

FY02/14Q4Q1Q2FY02/16

Q4
11,437
6.0%
1,016
-9.3%
8.9%
Act.
43,458
3.3%
4,725
1.4%
10.9%

Q1
12,103
7.8%
1,045
1.6%
8.6%
FY02/15Q3Q4-FY02/16
Q2
Q3
12,291 12,126
5.6%
5.2%
1,109
1,080
1.0%
0.6%
9.0%
8.9%
Act.
45,8395.5%
4,217-10.8%
9.2%

FY02/16Q4
12,442
8.8%
972
-4.3%
7.8%
Act.
48,962
6.8%
4,206
-0.3%
8.6%

Source: Shared Research based on company data

In addition to receiving new orders for maintenance and inspection, the company continued to train employees as
authorized handlers of Type I fluorocarbon refrigerant with the aim of further expanding contracts. With 500 certified
employees, it continued to build up its system for contract fluorocarbon management services, targeted towards facilities
with equipment that uses fluorocarbon refrigerant, such air conditioning equipment for heat, and refrigeration andfreezing equipment. As a result, the company was receiving more orders for fluorocarbon management services, inaddition to maintenance and inspection services.

Contract fluorocarbon management services adding value to existing FM services
In Q3, the company saw the net increase in gross profit it had been anticipating from its move to have existing employees
take on contract fluorocarbon management services. Having largely finished signing new contracts with the Aeon Groupin this area, the company is aiming to expand outside the group using its track record. Elsewhere in the energy
management system, the company 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 ＞ Trends and outlook

LAST UPDATE【2016/5/11】

Security Services
1,200
1,000

8.5%

8.6%

8.6%

7.6%

800

OP

9.5%

9.3%

8.5%

8.2%

7.6%

8.4%

9.0%

8.5%

12%

OPM (right axis)
7.8%

8.1%

8.9%

9.1%
7.5%

7.9%

8.2%

10%
8.0%

8%

600

6%

400

4%

200

2%

(JPYmn)Q1
Q2
FY02/12Q3

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

Q4

Q1
Q2
FY02/13

Q1
8,438
6.8%
642
6.8%
7.6%
FY02/11

Q3

Q4

Q1
Q2
FY02/14

FY02/14
Q2
Q3
8,367
8,481
5.8%
6.5%
700
761
4.6% 16.0%
8.4%
9.0%
Act.
32,088
-6.4%
2,764
0.9%
8.6%

FY02/12

Q4
8,956
11.5%
762
-0.5%
8.5%
Act.
32,235
0.5%
2,823
2.1%
8.8%

Q3

Q4

Q1
8,935
5.9%
695
8.3%
7.8%
FY02/13Q2
Q1
FY02/15Q3

FY02/15
Q2
Q3
8,891
9,305
6.3%
9.7%
717
824
2.4%
8.3%
8.1%
8.9%
Act.
31,805
-1.3%
2,692
-4.6%
8.5%

FY02/14Q4Q1Q2FY02/16

Q4
9,491
6.0%
866
13.6%
9.1%
Act.
34,242
7.7%
2,865
6.4%
8.4%

Q1
9,306
4.2%
696
0.1%
7.5%
FY02/15Q3Q4-FY02/16
Q2
Q3
9,294
9,522
4.5%
2.3%
731
782
2.0% -5.1%
7.9%
8.2%
Act.
36,622
7.0%
3,102
8.3%
8.5%

FY02/16

Q4
10,334
8.9%
823
-5.0%
8.0%
Act.
38,456
5.0%
3,032
-2.3%
7.9%

Source: Shared Research based on company data

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 38. 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. It could also improve margins if the new Attender services help it establish adominant market position in those areas where it is introduced.
With diversifying security needs, the company was working to develop security systems that utilize sensors andcommunications technologies, as well as predictive systems based on incident and accident analysis.

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Aeon Delight ＞ Trends and outlook

LAST UPDATE【2016/5/11】

Cleaning Services
1,800

OP

1,600
1,400
1,200

14.2% 14.4%

15.0% 15.5%

14.2%

15.0%

14.2%

18%

OPM (right axis)

15.1%
13.3% 13.4% 13.4%

14.0%

13.4%

16%

14.2% 14.3%

14.9%

1,000

14%
12%

13.5%
12.7% 13.1%
11.2%

10%

800

8%

600

6%

400

4%

200

2%

(JPYmn)Q1
Q2
FY02/12

Q3

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

Q4

Q1
Q2
FY02/13Q1
10,539
4.1%
1,397
-3.1%
13.3%

Q3

Q4

Q1
Q2
FY02/14

FY02/14Q2
Q3
10,485 10,642
4.0%
4.3%
1,404
1,425
-6.9% -1.5%
13.4% 13.4%
FY02/11
Act.
41,142
-8.7%
5,937
2.7%
14.4%

Q4
10,654
5.4%
1,490
-2.2%
14.0%
FY02/12
Act.
39,852
-3.1%
5,882
-0.9%
14.8%

Q3

Q4

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

Q1
Q2
FY02/15

Q3

Q4

Q1
Q2
FY02/16

FY02/15Q2
Q3
10,960 11,129
4.5%
4.6%
1,552
1,592
10.5% 11.7%
14.2% 14.3%

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

FY02/13
Act.
40,519
1.7%
5,918
0.6%
14.6%

FY02/14Act.
42,320
4.4%
5,716
-3.4%
13.5%

Q1
11,656
6.5%
1,482
0.9%
12.7%

Q3

Q4

-

FY02/16Q2
Q3
Q4
11,723 11,811 12,680
7.0%
6.1% 12.7%
1,535
1,599
1,415
-1.1%
0.4% -15.6%
13.1% 13.5% 11.2%
FY02/15
Act.
44,287
4.6%
6,289
10.0%
14.2%

FY02/16
Act.
47,870
8.1%
6,031
-4.1%
12.6%

Source: Shared Research based on company data

In addition to new contracts, the company increased the number of contracts in the hospital and 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 efforts to improve quality and profitability
by forming small size teams and facilitating an easy-to-work environment. The small teams were initiated in fall 2015. Thisseemed to be improving cleaning materials management and workflow. The company stepped up efforts on this front in
Q4 with the aim of initiating a full-scale rollout in FY02/17. The company also made Hakuseisha a consolidated subsidiary
in December 2015, to leverage its experience cleaning department stores to strengthen the segment’s businessfoundations.

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Aeon Delight ＞ Trends and outlook

LAST UPDATE【2016/5/11】

Construction Work
1,200

OP

1,000
800

8.0%

7.7%
6.3%

6.4%

6.8%

6.5%

5.4%

600
4.2%

400

-

5.5%

5.7%

6.5%

6.2%

6.8%

7.2%

7.1%

6.6%

7.3%
6.5%

4.2%

6%

3%
2.9%

200

(JPYmn)9%

OPM (right axis)

Q2
Q1
FY02/12Q3

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

Q4

Q1
Q2
FY02/13

Q3

Q4

Q1
Q2
FY02/14

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%
FY02/11
Act.
16,420
18.2%
1,214
-8.1%
7.4%

Q3

Q4

Q1
Q2
FY02/15Q3

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%
FY02/12
Act.
28,513
73.6%
1,936
59.5%
6.8%

FY02/13
Act.
53,071
86.1%
2,209
14.1%
4.2%

Q4

Q1
Q2
FY02/16

Q4
9,615
27.2%
634
29.1%
6.6%

Q1
13,059
10.1%
932
25.8%
7.1%

FY02/14
Act.
45,630-14.0%
2,580
16.8%
5.7%

Q3

Q4

-

FY02/16
Q2
Q3
Q4
13,194
9,649
7,953
18.5%
3.0% -17.3%
1,061
709
516
40.7%
4.6% -18.6%
8.0%
7.3%
6.5%
FY02/15
Act.
41,972
-8.0%
2,807
8.8%
6.7%

FY02/16
Act.
43,855
4.5%
3,218
14.6%
7.3%

Source: Shared Research based on company data

Construction Work expected to be earnings driver again in FY02/17
The number of large-scale renovation projects significantly increased. The company also won more orders formaintenance work due to its sales efforts. The sudden growth stems from the company receiving an increasing number oforders to renovate aging general merchandise stores nationwide. Aeon Retail is renovating its existing stores to bolster its
supermarket operations; sales are increasing as a result. (One specific example, the newly renovated Ontakesan store ofAeon Style, logged a 15% YoY increase in sales between December 11, 2015 and January 3, 2016.)

Aeon Retail to boost spending on store renovation by 35% in FY02/17
Aeon Retail wants to make store-renovation projects a regular part of its operations while expanding new outlets, andreported that from FY02/14 to FY02/15 a total of 28 stores were part of large-scale renovation projects. There werealready 19 such stores in 1H FY02/16 and the company had targeted a total of 54 stores in FY02/16. The company plansspend heavily on store renovation again in FY02/17, boosting investment spending in this area by 35% versus FY02/16.
Demand related to large-scale renovation projects requires demand for renovation work itself and restoration projects
after an existing tenant has vacated. In order to tap this kind of Group demand, qualified personnel is key, and thecompany is strengthening its sales foundation by acquiring specialized personnel in these growth areas.

Aiming to secure more renovation work at existing malls operated by Aeon Mall
As a general rule, Aeon Mall (8905) undertakes major renovation work at its existing malls once every six years. Along withthis steady workflow, Aeon Delight also intends to focus on winning contracts for large-scale renovation projects
undertaken by Aeon Retail going forward, and work from these two sources within the Aeon Group are expected tocontinue driving growth at its Construction Work business in the year ahead.

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Aeon Delight ＞ Trends and outlook

LAST UPDATE【2016/5/11】

External factors behind double-digit drop in Construction Work revenues in Q4 FY02/16
The aggressive store renovation plans at the Aeon group level notwithstanding, at the individual store level, the work
flow to Aeon Delight from small-scale projects is sometimes subject to delays, particularly when individual stores cut
spending in order to meet their earnings targets. This was especially evident in Q4 FY02/16, and led to a 17.3% YoY
decline in revenues and 18.6% decline in operating profit at the Construction Work business in the last quarter of the
fiscal year. The company emphasized that this was not due to a loss of orders to competitors.

Materials and Supplies Sourcing
1,000
900
800
700
600
500
400
300
200
100
(JPYmn)

OP

4.9%

4.4%
2.8%

7.0%

OPM (right axis)

2.9%

3.3%

2.9%

3.3%

5.3%

5.9%

5.8%
4.6%

5.3%
4.0%

3.8%

4.2%

4.7%

5.3%

8%
7%
6%

5.2%

5%

3.6%

4%
3%
2%
1%

Q1
Q2
FY02/12

Q3

Q4

Q1
Q2
FY02/13

Materials and Supplies Sourcing(JPYmn)Q1
Sales
10,721
YoY
12.6%
Operating profit
573
YoY
109.9%
OPM
5.3%
Materials and Supplies Sourcing(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q3

Q4

Q1
Q2
FY02/14

FY02/14Q2
Q3
11,023 11,542
12.8% 14.8%
636
533
98.8% 39.9%
5.8%
4.6%
FY02/11
Act.
18,718
627
3.3%

Q3

Q4

Q1
Q2
FY02/15Q3

FY02/15Q4Q1Q2
Q311,257 11,713 11,609 12,175
13.3%
9.3%
5.3%
5.5%
591
464
490
436
21.1% -19.0% -23.0% -18.2%
5.3%
4.0%
4.2%
3.6%
FY02/12
Act.
36,730
96.2%
1,234
96.8%
3.4%

FY02/13
Act.
39,284
7.0%
1,462
18.5%
3.7%

Q4

Q1
Q2
FY02/16

Q4
12,121
7.7%
721
22.0%
5.9%
FY02/14
Act.
44,543
13.4%
2,333
59.6%
5.2%

Q1
12,080
3.1%
568
22.4%
4.7%

Q3

Q4

-

FY02/16Q2
Q3
12,445 12,990
7.2%
6.7%
664
670
35.5% 53.7%
5.3%
5.2%
FY02/15
Act.
47,618
6.9%
2,111
-9.5%
4.4%

Q4
13,001
7.3%
904
25.4%
7.0%
FY02/16
Act.
50,516
6.1%
2,806
32.9%
5.6%

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 Valu. The company continued to focus on increasing
margins by revising logistics costs, and cutting procurement costs with the use of electronic negotiation tools. As a result,
FY02/16 sales increased 6.1% YoY, and with profitability improvements pushing up OPM by 1.1pp to 5.6%.

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Aeon Delight ＞ Trends and outlook

LAST UPDATE【2016/5/11】

Vending Machine Services
1,600

OP

1,400

15.1%

OPM (right axis)

13.4%

1,200
9.1%

1,000
800

6.3%

8.5%

7.6%

600

6.0%

5.8%

12%

9.4%

9.3%
7.1%

5.8%

14%
11.2%

10.2%

6.6%

5.8%

16%

10%

8.8%
6.3%

5.6%

8%
5.0%

6%

400

4%

200

2%

(JPYmn)Q1
Q2
FY02/12

Q3

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

Q4

Q1
Q2
FY02/13

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

Q3

Q4

Q1
Q2
FY02/14

FY02/14
Q2
Q3
8,716
7,479
1.7%
0.8%
812
433
11.5%
0.2%
9.3%
5.8%
FY02/11
Act.
17,188
1,480
8.6%

Q4
9,636
25.1%
1,288
64.7%
13.4%
FY02/12Act.
32,280
87.8%
2,330
57.4%
7.2%

Q3

Q4

Q1
8,330
11.1%
551
3.0%
6.6%

Q1
Q2
FY02/15

Q3

Q4

Q1
Q2
FY02/16Q3

Q4-

FY02/15
FY02/16
Q2
Q3
Q4
Q1
Q2
Q3
9,471
8,003
9,021
8,107
8,848
7,507
8.7%
7.0% -6.4% -2.7% -6.6% -6.2%
894
506
1,014
450
775
372
10.1% 16.9% -21.3% -18.3% -13.3% -26.5%
9.4%
6.3% 11.2%
5.6%
8.8%
5.0%
FY02/13
Act.
31,200
-3.3%
2,396
2.8%
7.7%

FY02/14Act.
33,329
6.8%
3,068
28.0%
9.2%

FY02/15
Act.
34,825
4.5%
2,965
-3.4%
8.5%

Q4
8,279
-8.2%
1,249
23.2%
15.1%
FY02/16Act.
32,741
-6.0%
2,846
-4.0%
8.7%

Source: Shared Research based on company data

FY02/16 saw a 6.0% decrease in sales, compared to FY02/15, when sales increased with new vending machine
installations. In March, the company established a special sales team to develop new customers and aggressively pushvending machine location proposals at client facilities, a step that was deemed necessary to help counter the ongoing
decline in vending machines sales across the industry. The company also installed value-added vending machines—suchas those with digital displays—at major new commercial facilities, and developed private brand drinks specifically forvending machines. These private brand drinks were being developed for 2H.

Focus on developing advertising business for vending machines with digital signage displays
For vending machines with digital displays, the company has developed a new business model, including offering video
advertisements in addition to existing drinks. This may become a new revenue source beginning in FY02/17. For further
details see discussion under "Outlook for FY02/17."

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Aeon Delight ＞ Trends and outlook

LAST UPDATE【2016/5/11】

Support Services
700

OP

600
500

10.5%

400

14%

OPM (right axis)
11.8%

10.5% 10.5%

12.5%
10.8%

10.2%

10.9%

9.8%

200
100
-100
(JPYmn)

5.6%

5.1%
3.0%

2.5%
-1.3%

Q2
Q1
FY02/12Q3

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

Q4

10%
9.7%

8.4%

300

12%

11.9%

6%
4%

4.8%

3.7%

2%

1.9%

Q1
Q2
FY02/13

Q1
3,002
44.7%
154
100.0%
5.1%

Q3

Q4

Q1
Q2
FY02/14Q3Q4

FY02/14
Q2
Q3
Q4
Q1
3,473
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%
FY02/11
Act.
5,327
-1.6%
590
-21.1%
11.1%

8%

FY02/12
Act.
8,037
50.9%
312
-47.1%
3.9%

Q1
Q2
FY02/15

Q3

Q4

Q1
Q2
FY02/16

FY02/15
Q2
Q3
Q4
3,870
3,726
4,488
11.4%
1.8% 25.3%
420
179
441
2.4% -54.7% 119.4%
10.9%
4.8%
9.8%
FY02/13Act.
10,94236.1%
741
137.5%
6.8%

Q1
4,215
21.6%
355
0.9%
8.4%

FY02/14Act.
13,718
25.4%
1,160
56.5%
8.5%

Q3

Q4

-2%

FY02/16
Q2
Q3
4,458
4,302
15.2% 15.5%556
510
32.4% 184.9%
12.5% 11.9%
FY02/15Act.
15,540
13.3%
1,297
11.8%
8.3%

Q4
5,664
26.2%
551
24.9%
9.7%
FY02/16Act.
18,639
19.9%
1,972
52.0%
10.6%

Source: Shared Research based on company data

Subsidiaries continued to make significant contributions to growth in profits. Sales of Kajitaku’s Kaji Cloud houseworkservices, including online store sales, continued to be favorable, with the result that Kaji Cloud sales rose over 1.4x YoY.
Kajitaku made a significant contribution to the rise in both sales and earnings in the Support Services segment, generating
sales of roughly JPY2.0bn (+30-40% YoY) and also realizing a higher operating profit margin

Partnership with large company opening new channel for expansion of B2B housework services business
Kajitaku is planning on cooperating with major household appliance and equipment manufacturers in order to open up a
new B2B channel for expanding its housework services business, and this together with continued strong growth at its
copy machine business, is expected to drive growth at Kajitaku in FY02/17. Aeon Compass appears to be enjoying solid
growth as well. The company sees earnings at Kajitaku, Aeon Compass, and the Support Services business as a wholecontinuing to grow.

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

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LAST UPDATE【2016/5/11】

Full-year company forecasts
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
FY02/15
FY02/16
FY02/17
1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Est. 2H Est. FY Est.
133,552 123,691 257,243 134,049 132,656 266,705 142,783 138,258 281,041 150,000 155,000 305,000
8.5%
5.3%
1.3%
3.4%
0.4%
7.2%
3.7%
6.5%
4.2%
5.4%
5.1%
12.1%
116,570 106,958 223,528 116,771 114,817 231,588 124,185 119,466 243,651
16,981 16,733 33,714 17,278 17,839 35,117 18,598 18,792 37,390
13.3%
9.8%
11.5%
1.7%
6.6%
4.2%
7.6%
5.3%
6.5%
12.7%
13.5%
13.1%
12.9%
13.4%
13.2%
13.0%
13.6%
13.3%
9,193
9,406
18,5999,575
9,681
19,256
10,476
10,206
20,682
7.3%
7.2%
7.3%
7.4%
7.4%
7.0%
7.4%
7.2%
7.1%
8,500
9,000 17,500
7,575
7,540 15,115
7,702
8,159 15,861
8,121
8,586 16,707
4.8%
6.5%
11.1%
8.7%
1.7%
8.2%
4.9%
5.4%
5.2%
5.3%
4.7%
4.7%
5.7%
6.1%
5.9%
5.7%
6.2%
5.9%
5.7%
6.2%
5.9%
5.7%
5.8%
5.7%
7,571
7,521 15,092
7,725
8,218 15,943
8,139
8,545 16,684
8,500
9,000 17,500
5.4%
4.0%
4.6%
4.4%
5.3%
4.9%
5.6%
6.3%
11.1%
8.6%
2.0%
9.3%
5.7%
6.1%
5.9%
5.8%
6.2%
6.0%
5.7%
6.2%
5.9%
5.7%
5.8%
5.7%
4,147
4,014
4,380
4,345
4,682
4,976
4,800
5,200 10,000
8,161
8,725
9,658
5.1%
12.6%
8.7%
5.6%
8.2%
6.9%
6.9%
14.5%
10.7%
2.5%
4.5%
3.5%

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

Outlook for FY02/17
The company has positioned FY02/17 as a year for accelerating reforms. It revised down its medium-term targets to
JPY305.0bn in sales and JPY17.5bn in operating profit (previous targets: over JPY330.0bn in sales and over JPY21.0bn inoperating profit). To accelerate reforms, the company plans to focus resources on high potential growth markets
overseas, and invest in transforming its business model.

Raising operating profit
In FY02/17, the company forecasts operating profit of JPY17.5bn, up JPY793mn YoY. Factors contributing to this increase
are in the following table. The company expects a JPY793mn increase in operating profit, despite roughly JPY1.0bn inlarge-scale investments.
Measures to raise operating profit

Total growth in gross profit

year-on-year changes
JPY3.5bn-4.5bn1） Growth in Aeon Delight parent

JPY1.8bn-2.2bn2） Growth in domestic subsidiaries

JPY1.5bn-2.0bn

3） Growth in overseas subsidiaries

PY200mn-300mn

Impact from higher SG&A expenses
Growth in operating profit

JPY2.7-3.0bn
JPY800mn-JPY1.5bn

Source: Shared Research based on company data

At Shared Research, we would like to focus in particular on the following measures the company is taking to growoperating profit (some of which have been discussed above): 1) expansion of overseas businesses (grow overseas
subsidiaries; 2) Support Services, full-scale launch of B2B partnership for Kaji Cloud cleaning services (grow domestic
subsidiaries); 3) buildup of advertising business to support Vending Machine Services business; 4) at the Construction
Work segment, expansion of business areas and increase in project work done for Aeon group companies; 5) at the
Cleaning Services segment, the introduction of cleaning robots and standardization of cleaning procedures used bypartner companies; and 6) aggressive investment in growth areas. Below is an overview of these growth strategies.

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Expansion of overseas businesses
Aeon Delight is targeting JPY50bn in total sales from overseas businesses in FY02/21. Of this, the company is looking forroughly JPY30bn from China (representing an average annual growth rate of 30%) and JPY20bn from ASEAN countries(where sales are expected to double in FY02/17 and grow at an average rate of 50% per annum thereafter). This
compares with estimated sales of JPY10.5bn-11.0bn in FY02/16 (representing year-on-year growth of roughly 20% versus
FY02/15). The company is looking for JPY14.0-15.0bn in overseas sales in FY02/17 (year-on-year growth of roughly 30%
versus FY02/16). Of this, the company is looking for about JPY11.0bn in sales in China and sees sales in ASEAN countries
doubling.
Overseas sales trends

Source: Shared Research, based on data from company presentation and management interview

Business in China
In China, the company is targeting JPY30.0bn in sales in FY02/21. This represents an average growth rate of roughly 30%
per annum. Aeon Group companies currently account for about 25% of Aeon Delight's sales and operating profit in China
versus 60%-70% in Japan and ASEAN countries. This means Aeon Delight's business in China derives a much higher
proportion of sales and earnings from outside the Aeon Group and has a much more balanced client portfolio. The
company plans to maintain this balance as its build up its business in China going forward.
In China, property owners are more sensitive to the value of the building than they are in Japan and Aeon Delight sees
facilities management becoming an essential business infrastructure service, much like electric power or water. Since
China is a growth market, the company plans to continue aggressively allocating management resources to China in
FY02/17. Aeon Delight aims to expand its facilities management service network throughout the entire country,
extending its geographical reach with the possible help of acquisitions while strengthening its internal control systems for
effective nationwide management.
With regard to business in China with Aeon Group companies, we note that Aeon Mall will open only one new mall in
FY02/17 versus six in FY02/16. The impact of this on overall results should be relatively small, though, since the Aeon
Group accounts for only about 25% of Aeon Delight's sales and operating profit in China and Aeon Mall had a total of 12
malls in operation in China at the end of FY02/16. Going forward, then, Aeon Delight plans to focus its efforts on
improving in the profitability of facilities management operations at existing Aeon Malls.

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Aeon Delight named facilities manager for Japanese Embassy in Beijing, China: Beginning April 2016, Aeon Delight will serve as the facilities
manager for the Japanese Embassy in Beijing, China. Since the Japanese Embassy in Beijing is quite large, larger than even the US embassy, it islikely that this will raise Aeon Delight's profile and aid its marketing efforts in China.

Aeon Malls in China and ASEAN countries
Openings in China

Malls in China

Openings in ASEAN

10

20

Malls in ASEAN

8
15

12

10
5
0

1
1

FY02/092
1

1

2

FY02/113
1

FY02/1341

6
2

FY02/15

13

6

6

5

4

6
1

FY02/17Est.

3

2
FY02/19
Plan

0

2

1
1

FY02/09

FY02/11

FY02/132
1

FY02/15

FY02/17Est.

FY02/19
Plan

Note: Shared Research estimates for FY02/19 based on company plan as indicated in results presentation materials
Source: Shared Research, based on company data

ASEAN business
In ASEAN countries, Aeon Delight aims to double sales in FY02/17 then grow sales by 50% per year thereafter. Unlike
China, about 70% of the company's sales in ASEAN countries comes from Aeon Group companies (roughly the
proportion as in Japan). The company plans to focus on expanding its business with Aeon Group members in FY02/17 andthen start looking at M&A and expanding into new geographical areas starting in FY02/18.
In Malaysia, Aeon Delight began business cleaning partnerships with Malaysian Harvest Sdn. Bhd., a major local company,
in October 2015 to put it on the fast track to get business from Aeon Group stores, and acquired a license to start a
security service business. In Vietnam, Aeon Delight is looking to expand its share of the cleaning service market forcommercial and other facilities. Growth like that seen in China is unlikely, though, as the regulations governing facilities
differs significantly from country to country. Aeon Delight also intends to expand geographically through acquisitions andestablish a foundation to become the largest industry player in the ASEAN region. Among new areas, at this time thecompany appears to be gearing up to move into Indonesia.

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Overseas businesses of the Aeon Group
Aeon Mall
FY02/2015

China

ASEAN
FY02/2016
FY02/2017

FY02/2018

China
ASEAN
China

ASEAN
China
ASEAN
ASEAN
ASEAN

r AEON group (exc. malls)
FY02/15 1H
ASEAN

FY02/15 2H

China
ASEAN

China

ASEAN

Overseas stores of
AEON Retail
ASEAN
Malaysia
Thailand
Vietnam

China

Name
AEON MALL Suzhou Yuenqu Hudong
AEON MALL Beijing Fengtai
AEON MALL Hanzhou Liangzhu Xincheng
AEON MALL Wuhan Jingkai
AEON MALL Guangzhou Hanyu Guangchang
AEON MALL Suzhou Xinqu
AEON MALL BSD CITY
AEON MALL Long Bien
AEON MALL Hebei Yangjiso (tentative)
AEON MALL Binh Tan
AEON MALL Wuhan Shiqiao (tentative)
AEON MALL Foshan Dali
AEON MALL Tianjin Jinnan
AEON MALL Jakarta Garden City
AEON MALL Guangzhou Jinshasu (tentative)
AEON MALL Deltamas
AEON MALL Cambodia
AEON MALL Sentul City

Location
Suzhou, Jiangsu
Fengtai, Beijing
Hanzhou, Zhejiang
Wuhan, Hubei
Guangzhou, Guangdong
Suzhou, Jiangsu
Jakarta, Indonesia
Hanoi, Vietnam
Sanhe, Hebei
Ho Chi Minh, Vietnam
Wuhan, Hubei
Foshan, Guangdong
Jinnan, Tianjin
Jakarta, Indonesia
Guangzhou, Guangdong
Jakarta, Indonesia
Cambodia, Phnom Penh
Indonesia

Name
MVTJ Sukhumvit 64 Elio
MV Watcharapol Venice
AEON Citi Mart GO VAPAEON Citi Mart Lancaster
AEON Citi Mart Tropic Garden
AEON Fivi Mart Nguyen Trai
AEON ZhongShan ShiDai
AEON Ipoh Klebang
MV Ladplakao the JAS
MV AEON Sriracha Shopping Center
MVTJ Sathorn-Thapara Ideo
MV Ladkrabang V Market
AEON BIG Ipoh Falim
AEON Citi Mart CAO THANG
AEON Fivi Mart Cau Giay
AEON PanYu Plaza
Aeon GuangZhou Central One
Aeon Dongguan Dalang
Aeon Yanjiao
Aeon Suzhou Xinqu
MV Haizhu-Qianjinlu
MV Hesheng-Guangchang
Aeon Shah Alam
Aeon Kota Bharu
Aeon Binh Tan
AEON Fivi Mart Ha Dong

Location
ThailandThailand
VietnamVietnamVietnamVietnamZhongshan, Guangdong
Malaysia
ThailandThailandThailandThailand
Malaysia
VietnamVietnam

Name
AEON Malaysia
AEON BIG Malaysia
AEON Thailand
AEON Vietnam
AEON Citymart
AEON Fivimart

Cambodia AEON Cambodia
Indonesia AEON Indonesia
ASEAN total
AEON Stores Hong Kong
Guangdong AEON
Quingdao AEON
AEON South China
Beijing AEON
AEON Suzhou
AEON Hubei
China total

Malaysia
Malaysia
VietnamVietnam

Lot area
99,300m²
63,800m²
98,000m²
130,000m²
51,400m²
139,000m²
100,000m²
96,000m²
approx. 84,000m²
approx. 46,800m²
approx. 46,200m²
approx. 83,200m²
approx. 91,000m²
approx. 85,000m²
approx. 84,500m²
approx.200,000m²
approx.100,000m²
approx. 78,000m²

Leased space Total floor space
Open date
75,000m²
218,000m²
May 2015
58,000m²
150,000m²
June 2015
66,000m²
175,000m²
November 2015
105,000m²
274,000m²
December 2015
64,500m²
173,000m²
December 2015
74,000m² approx.162,000m²
January 2016
77,000m² approx.177,000m²
May 2015
72,000m² approx.120,000m²
October 2015
- approx.175,000m²
Scheduledapprox. 59,000m² approx.114,000m² Scheduled Summer of 2016
- approx.120,900m²
Scheduled- approx. 181,600m²
Scheduledapprox. 77,000m² approx. 145,000m²
Scheduledapprox. 60,000m² approx.210,000m²
Scheduled- approx.187,700m²
Scheduled- Scheduled summer of 2017
approx. 70,500m²- Scheduled summer of 2018
approx. 71,000m²- Scheduled summer of 2018

Category Directly operated floor
SM
254m²
SM
1,632m²
SM
4,729m²
SM
137m²
SM
500m²
SM
1,200m²
GMS
22,543m²
GMS
20,475m²
SM
1,364m²SM
2,409m²
SM
296m²
SM
1,200m²
DS
9,372m²SM
1,000m²
SM
1,810m²
GMS
22,554m²
GMS
22,506m²
37,715m²
GMS
GMS
14,000m²
GMS
19,268m²
SM
1,804m²SM
1,178m²
GMS
27,000m²
GMS
17,900m²
GMS
SM
1,910m²

Open date
May 2015
July 2015
January 2015
April 2015
June 2015
March 2015
May 2015
October 2015
September 2015
October 2015
December 2015
December 2015
December 2015
August 2015
September 2015
February 2016
TBA
TBA
TBA
January 2016
TBA
TBA
March 2016
TBA
TBA
TBA

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

28
29
57
38
12
7
8
3
68

30
27
58
115
42
15
8
9
4
79

31
28
69
128
43
17
9
11
4
84

33
28
75
2
1
139
43
17
10
10
5
1
1
87

75
26
76
3
30
23
1
1
235
49
18
9
10
6
3
2
97

Source: Shared Research, based on company data

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Support Services business: Full-scale launch of B2B Kaji Cloud services
Trends in Support Services sales and earnings (left figure) and Kajitaku sales (right figure)
24,000Sales

OP

OPM (right axis)

10.6%

20,0008.5%

16,0005.2%
3.3%(JPYmn)

8.2%

3.9%

5.7%

3.7%

1.6%

4,000
0

8.3%

6.8%

12,0008,000

OP composition (right axis)

11.1%

590

312

741

FY02/11

FY02/12

FY02/131,160

FY02/141,297

FY02/15

1,972

FY02/16Sales

12% 10,000

YoY (right axis)

50%

10% 8,000

40%

8%

6,000

30%

6%

4,000

20%

4%

2,000

10%

2%

0

0%

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16(JPYmn)0%

FY02/17
Est.

Note: Kajitaku sales figures are Shared Research estimates based on company results presentation materials
Source: Shared Research, based on company data

As shown in the accompanying figure, earnings at Support Services have been rising steadily, increasing the proportion of
consolidated operating profit accounted for by this segment. Subsidiaries Kajitaku and Aeon Compass have been themain drivers of growth thus far, and Kaijitaku, which operates Kaji Cloud services, is expected to drive earnings growth at
the Support Services segment again in FY02/17.
Kajitaku provides cleaning, laundry, and other household cleaning services, as well as small business support services(such as copy machine sales), and seen double-digit growth in both these areas, as shown in the figure above. Its popular
Kaji Cloud cleaning service package has been a key growth driver and is expected to see rapid growth continue in
FY02/17 with revenues roughly tripling versus last fiscal year.

Support Service business to shift to new business model, expand B2B services
Going forward, Shared Research will be focusing especially on the company's new B2B maintenance/cleaning service
offerings that were developed in conjunction with manufacturers of major household appliances and equipment. The
plan is for these services to be contracted for at the time of the original product purchase. For example, the purchaser ofan air conditioner with this service package would be able to contact Kajitaku one year after the original purchases andhave the air conditioner cleaned at no additional cost. (Because the service package would be offered by the
manufacturer, it would not matter where the product was actually purchased. Kajitaku would only receive payment after
it had performed the service and billed the manufacturer.) In the case of household equipment such as system kitchensand system baths, the cleaning service package offered by the manufacturer would probably be good for multiple
cleanings.
The company has been working together with major manufacturers to offer such a service package since the latter half oflast fiscal year and will be working to extend its reach into new appliance and equipment areas this fiscal year. Goingforward, Shared Research will pay close attention to 1) whether the promotion of this service package leads to higher air
conditioner sales and, if it does, whether the service package starts being offered in conjunction with more air conditioner
models and by more manufacturers; and 2) whether the household kitchen and bath cleaning service package alreadybeing offered by Kajitaku starts being offered as part of the purchase package by manufacturers of household equipment
and replacement units for kitchens or baths.
The Kajitaku "Sleep-Easy" Mold Removal Service Pack is currently being offered online at a price of JPY12,000. Given theprice and the large size of the domestic household air conditioner market (8.08mn units sold in FY02/16), we see
expectations running high for this new B2B business.

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Trends in domestic air conditioner shipments

Source: Shared Research, based on Japan Refrigeration and Air Conditioning Industry Association statistics

Vending Machine Services: Developing advertising businesses
The company sees both sales and earnings at its Vending Machine Services business declining in FY02/17 as beveragesales drop. In the past, the growth prospects of this business were threatened by the rise in personnel and other costs.
Now, however, the company aims to change the business model of its vending machine business by developing anadvertising business to create a new earnings stream.

Addition of advertising business will alter business model of Vending Machine Services business
As of the end of FY02/16, Aeon Delight owned more than 40,000 vending machines. Up until last year, the company has
been busy expanding the selection of private brand goods offered in its vending machines and has also began installing
new vending machines with digital signage (hereafter referred to as DS vending machines). As of the end of FY02/16,
Aeon Delight had roughly 800 DS vending machine, more than any other domestic competitor. By the end of FY02/17
the company aims to increase this number to 2,000 and, to take full advantage of these new machines, is also planning to
use their digital signboards to run motion picture ads.
The DS vending machines Aeon Delight is using are already equipped for motion pictures and, since they are mainly
located in shopping malls, their value as an advertising medium is quite high. It takes about nine seconds from the time
the customer selects a drink and the drink is delivered, enough time to run an effective ad. The company plans to run
trials this fiscal year and, if it appears that the ads are effective, will install more DS vending machines in subsequent years.
According to statistics compiled by the Japan Vending Machine Manufacturers Association, in 2014 there were roughly
2.2mn beverage vending machines installed, generating annual sales of JPY1.87tn. Based on these figures, we estimatethat the average beverage vending machine generates annual sales of JPY850,000. At an average cost per can of JPY120,
this means the average vending machine sells around 7,000 canned drinks a year. During FY02/17, Aeon Delight will havean average of about 1,400 DS vending machine installed. Multiplied by average sales of 7,000 per machine, these DS
vending machine will sell about 10mn canned drinks. This means nine-second commercials will be played, and almost
certainly heard, 10mn times (in addition, other video messages may be playing other times). How the ads will be priced
is as yet unclear, but Aeon Delight does expect to bring in at least some income from running ads on DS vending
machines. We will be following the situation closely to see to what extend these ad revenues contribute to overall
earnings.

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Construction Work: Increase projects done for Aeon Group companies, expand into new business areas
Increase projects done for Aeon Group companies
The company sees its Construction Work business benefiting from ongoing growth in the number projects done for Aeon
Group companies, but it also plans to move into related fields such as architecture and design. Among the work done forgroup companies, we would especially note the work Aeon Delight is doing for Aeon Mall and Aeon Retail. Aeon Mall ispushing ahead with large-scale renovation projects at its existing malls. Because there is a close correlation between the
proportion of shopping malls that have been renovated and YoY growth at specialty store sales, Aeon Mall expects therenovation work to ultimately improve the profitability of its shopping malls. Thinking along the same lines, Aeon Retailplans to increase spending on store renovation by 35% this year.

Aeon Mall says retail sales at its shopping malls tend to peak the third year after a mall is opened and growth then slows in years four and five.
This requires Aeon Mall to undertake renovation work in year six, when special store and fixed-term leases come up for renewal. The entire
mall is renovated, with new specialty stores coming in and some existing specialty stores either renovating their current location or moving.
The cost of this type of mall renovation work, which does not involve any increase in actual floor space, runs between JPY3mn and JPY5mn.

Expansion into new business areas
In addition to secure a steady flow of renovation projects from Aeon Group companies, Aeon Delight is also looking at
expanding into new business areas in order to maximize its business opportunities. For example, when malls are being
renovated, there is restorative construction work on to be done when a tenant moves out, remodeling work to be doneto accommodate the new tenant moving in, and there is of course renovation work on the mall itself. By acquiringexperience and expertise in all these different types of construction work, Aeon Delight has put itself in a position to not
only do the actual work but also supervise the entire construction process. Going forward, Aeon Delight plans to capture
even more of the value-added in the store renovation process by moving into other areas such as architecture and store
design. Towards this end, Aeon Delight has been beefing up its workforce since the beginning of this fiscal year, making
itself more competitive versus major interior design companies and general contractors.

Cleaning Services: Expand sanitary cleaning business, roll out cleaning robots
At its Cleaning Services segment, Aeon Delight is looking to 1) create a more standardized cleaning process and workwith its partner companies to follow those procedures, 2) expand its sanitary cleaning business, 3) begin using cleaning
robots, and 4) realize synergies from its recent acquisition of Hakuseisha. Aeon Delight has been working to standardize
cleaning procedures for some time and through these efforts has successfully improved its gross margin on cleaning
services. Shared Research plans to monitor Aeon Delight’s efforts to partner with companies that have not yet adopted its
standardized practices..

Sanitary cleaning business
The business model of the Cleaning Services business will evolve as the company moves to expand its sanitary cleaning
services and begins using cleaning robots. Aeon Delight began offering sanitary cleaning services in FY02/15 and beganproviding service to two major medical facilities in April 2015. These two major hospitals boosted the number of hospitalbeds for which the company was providing sanitary cleaning services by 7,000 to 14,000. As of the end of April 2016, thecompany is providing sanitary cleaning services for approximately 16,000 beds.
Because many of the large national hospital chains are keen on implementing management reforms, Aeon Delightbelieves that its comprehensive facilities management service can match these hospital chains' needs for improved
sanitation, environmental conditions, safety, peace of mind, service standardization, and cost reductions.

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Contract renewal for sanitary cleaning services typically happens every year. That said, few companies replace thecleaning services provided by major groups servicing many medical facilities nationwide. Aeon Delight presents proposals
capitalizing on 1) its roughly 500 bases nationwide; 2) its name recognition as a publicly traded company and as amember of the Aeon Group; 3) its track record with major medical institutions; and 4) the visible quality of its cleaning
services.
Because hospitals and other medical centers must take steps to prevent patients from becoming infected or transmitting
their disease to others while they are in the hospital, Aeon Delight actually offers clients a numerical scale that gives thema visual measure of cleaning quality. During FY02/15, most of the marketing for its sanitary cleaning services was done bya special sales team. However, after receiving training and all the related sales tools, local offices have also been doing
their own marketing since FY02/16. If this marketing effort remains on track, the number of sickbeds for which Aeon
Delight is providing sanitary cleaning services is expected to increase further.
The profitability of sanitary cleaning services was still relatively low in FY02/16, in part because it was the first fiscal yearthat the company serviced a major hospital. However, the company expects profitability to improve from FY02/17 as its
cleaning staff becomes increasingly proficient at their duties.
Japanese hospitals and clinics
as of October 1, 2013
Total
National
Public medical institutions
Social insurance-related organizati
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: Shared Research based on data from Ministry of Health, Labor and Welfare

Introduction of cleaning robots
Aeon Delight has been working together with cleaning equipment makers and system integrators for some time todevelop a self-propelled cleaning robot, and expects to finally put a cleaning robot out in the field in FY02/17. Byeliminating some of the features of the self-propelled AI-controlled cleaning robot that is still under development, thecompany expects to finish development of a simplified cleaning robot sometime this fiscal year.
At the company's results presentation in April, management said that if simple cleaning robots were used to handle all of
the cleaning and vacuuming at 500 shopping malls, personnel costs could be reduced by roughly JPY400mn per annum.
At this time the company is uncertain about just how much it will invest in cleaning robots or even whether it would bebetter off to lease robots rather than buy and then depreciate them over time. In any case, the company does not plan tospend so much on robots that its current profitability will deteriorate. Based on the expectation that the biggest boost to
efficiency will come from using cleaning robots at large malls, the company sees a phased rollout starting with shopping
malls, then proceeding to large general merchandise stores and finally to smaller stores.

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Synergies from acquisition of Hakuseisha
Hakuseisha: Trends in sales and earnings(JPYmn)
Sales
Kanto area
Kansai area
Chubu area
Building maintenance
Securities management
Other
Daimaru Matsuzakaya department stores
JFR Service
YoY
Gross profit
SG&A
Operating profit
Recurring profit
Net income
Net assets
Total assets
Net cash

FY03/13
9,723
4,893
4,216
613

100.0%
50.3%
43.4%
6.3%

6,983
2,588
242

71.8%
26.6%
2.5%

2,254
NA
1.1%
1,178
823
354
455
296
6,169
8,024
3,123

23.2%

12.1%
8.5%
3.6%
4.7%
3.0%

FY03/14
10,037
4,980
4,286
771

2,339
NA
3.2%
1,121
856
265
449
290
6,501
8,604
3,661

100.0%
49.6%
42.7%
7.7%

23.3%

11.2%
8.5%
2.6%
4.5%
2.9%

FY03/15
9,839
4,610
4,392
837

2,546
NA
-2.0%
1,010
835
175
276
172
6,637
8,821
3,035

100.0%
46.9%
44.6%
8.5%

FY03/16 Est.
9,343

100.0%

25.9%

10.3%
8.5%
1.8%
2.8%
1.8%

-5.0%

1.5%
2.5%
1.5%

140
232
142

Note: The J-Front Retailing group accounted for approximately one-third of sales in FY03/15.
Source: Shared Research based on company data

Acquisition aimed at increasing market share, but Aeon Delight also looking to improve earnings structure at Hakuseisha
In FY03/15, Hakuseisha recorded JPY9.8bn in sales and JPY175mn in operating profit (representing a gross margin of
10.3% and operating profit margin of 1.8%), but was expecting sales and earnings to be down in FY03/16. Going forward,
Aeon Delight is looking to realize synergies from its acquisition of Hakuseisha and improve profitability at Hakuseisha
through a number of measures including 1) expanding Hakuseisha’s customer base, starting with the department stores,
2) scouring Hakuseisha's customer base for opportunities to provide additional services, and 3) combining the expertiseof both Aeon Delight and Hakuseisha in cleaning and other areas.

Large difference in gross margin between Aeon Delight's Cleaning Services business and Hakuseisha
The company believes further top-line growth at Hakuseisha is possible with the help of 1) and 2), and sees plenty ofroom to improve profitability with the help of 3). Aeon Delight reported an overall gross margin of 13.3% for FY02/16,
with its Facilities Management and Security Service business reporting gross margins close to the average and its Cleaning
Services business reporting a gross margin about 5ppts higher. Cleaning and related services account for nearly half ofoverall sales at Hakuseisha, and the gross margin of its cleaning business is only about half that of Hakuseisha as a whole. If
Aeon Delight is able to bring Hakuseisha's gross margin in line with its own, it would make a substantial contribution toearnings.
Aeon Delight is already taking steps to realize the potential synergies from its acquisition of Hakuseisha and intends toaggressively pursue these initiatives going forward. Aeon Delight expects to complete its takeover of Hakuseisha (making
it a wholly owned subsidiary) by the end of January 2016, so the acquisition will have only a small impact on consolidated
results for FY02/16.
In FY02/17, the company sees Hakuseisha generating sales of JPY10bn and, with SG&A expenditures running around
JPY930mn, expects operating profit of JPY200-300mn. As more of the synergies outlined above start coming to the fore,
Shared Research would expect to see further additions to both the top and bottom line. That said, the still-low level of thegross margin at Hakuseisha will bring down the gross margin of Aeon Delight's Cleaning Services business as well as thegross margin at the consolidated level.

Aggressive investment in growing markets
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investments in future growth initiatives were in new personnel. The company plans to invest another JPY1.0bn in growth
initiatives in FY02/17, all of which has already been included in its current earnings forecast.
Under its medium-term business plan, Aeon Delight is looking to establish itself as a comprehensive facilities management
service provider (giving it a competitive advantage) and, from there, extend its reach as a comprehensive facilities
management service provider around the world. Although the company had to lower the performance targets in its
medium-term business plan, one of the reasons for this was the shortfall at its overseas businesses. After establishing aplatform for its facilities management service, Aeon Delight plans to use it to expand its share of the domestic market andexpand its presence in China. To accomplish this Aeon Delight will consider investing in new systems, business
partnerships and/or acquisitions of companies outside Japan, and also investments in new management personnel. The
company has hinted that, in some cases this might increase expenses.
That said, the company's initial earnings forecast for FY02/17 incorporates all of the expected increase in spending thisyear. Going forward, Shared Research plans to keep a close eye on how close earnings match the company's projections
and also how closely investments in future growth initiatives track the company's current plans.

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Medium/long-term Outlook
In 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 forecast for FY02/17 announced in April 2016 calls for sales of JPY305.0bn and operating profit of JPY17.5bn(representing an operating profit margin of 5.7%), leaving the company short of the original targets in its medium-termbusiness plan for both sales and earnings. The discussion below reflects the company's thinking behind its medium-term
plan.
Under the medium-term business plan, 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:
1)

Establish itself as a comprehensive facility management service provider (FMS) (creating competitive advantages);2)

Create inroads into the Asian market;

3)

Establish a foundation for organizational structure

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 comments that follow were written using the company’s view of its initial medium-term plan as of April 2014; see thisfiscal year’s outlook for views as of FY02/17.

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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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.
Expansion in China will revolve around the company differentiating itself via strengths in areas such as the ESCO businessand elevator business. China is the world’s largest market for elevators, and the company is prepped to make inroads

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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
different industries, such as hospitals, with differing strategies for each. It has also changed its marketing approach from awww.sharedresearch.jp

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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.
Without merely stopping with installation of control equipment, the company stated that energy savings of 10-15% arepossible through addition of its unique facilities management expertise. Aeon Delight aims to expand its business by

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leveraging 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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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.
In January 2016, the company made Hakuseisha a wholly owned subsidiary. Hakuseisha derives about one-third of its sales
from the J. Front Retailing Group.

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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

3,591

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

8,330

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

49.4%

19.4%

6.1%

6.8%

Cons.
140,299
41,66634,28145,05013,889FY02/11

FY02/12

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%

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%

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%
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%

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%
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%

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%
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%

FY02/16

Est.
280,000

5.0%

17,000

7.2%

6.1%

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

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 ＞ Business

LAST UPDATE【2016/5/11】

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

FY02/11Act.
40,019
-4.0%
5,115
13.5%
12.8%

FY02/12
Act.
42,147
5.3%
5,084
-0.6%
12.1%

FY02/13
Act.
42,050
-0.2%
4,661
-8.3%
11.1%

FY02/14
Act.
43,458
3.3%
4,725
1.4%
10.9%

FY02/15
Act.
45,8395.5%
4,217-10.8%
9.2%

FY02/16
Act.
48,962
6.8%
4,206
-0.3%
8.6%

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
Security Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

FY02/11Act.
32,088
-6.4%
2,764
0.9%
8.6%

FY02/12
Act.
32,235
0.5%
2,823
2.1%
8.8%

FY02/13Act.
31,805
-1.3%
2,692
-4.6%
8.5%

FY02/14
Act.
34,242
7.7%
2,865
6.4%
8.4%

FY02/15
Act.
36,622
7.0%
3,102
8.3%
8.5%

FY02/16
Act.
38,456
5.0%
3,032
-2.3%
7.9%

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 ＞ Business

LAST UPDATE【2016/5/11】

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

FY02/11
Act.
41,142
-8.7%
5,937
2.7%
14.4%

FY02/12
Act.
39,852
-3.1%
5,882
-0.9%
14.8%

FY02/13
Act.
40,519
1.7%
5,918
0.6%
14.6%

FY02/14Act.
42,320
4.4%
5,716
-3.4%
13.5%

FY02/15
Act.
44,287
4.6%
6,289
10.0%
14.2%

FY02/16
Act.
47,870
8.1%
6,031
-4.1%
12.6%

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
Act.
16,420
18.2%
1,214
-8.1%
7.4%

FY02/12
Act.
28,513
73.6%
1,936
59.5%
6.8%

FY02/13
Act.
53,071
86.1%
2,209
14.1%
4.2%

FY02/14
Act.
45,630-14.0%
2,580
16.8%
5.7%

FY02/15
Act.
41,972
-8.0%
2,807
8.8%
6.7%

FY02/16
Act.
43,855
4.5%
3,218
14.6%
7.3%

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 ＞ Business

LAST UPDATE【2016/5/11】

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 ＞ Business

LAST UPDATE【2016/5/11】

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

FY02/11
Act.
18,718627
3.3%

FY02/12
Act.
36,730
96.2%
1,234
96.8%
3.4%

FY02/13
Act.
39,284
7.0%
1,462
18.5%
3.7%

FY02/14
Act.
44,543
13.4%
2,333
59.6%
5.2%

FY02/15
Act.
47,618
6.9%
2,111
-9.5%
4.4%

FY02/16
Act.
50,516
6.1%
2,806
32.9%
5.6%

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
Act.
17,1881,480
8.6%

FY02/12Act.
32,280
87.8%
2,330
57.4%
7.2%

FY02/13
Act.
31,200
-3.3%
2,396
2.8%
7.7%

FY02/14Act.
33,329
6.8%
3,068
28.0%
9.2%

FY02/15
Act.
34,825
4.5%
2,965
-3.4%
8.5%

FY02/16Act.
32,741
-6.0%
2,846
-4.0%
8.7%

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 (as of the end of FY02/16). About 80% of vending machine sales come frommachine in supermarkets belonging to the Aeon group. The remaining 20% of sales came from machines in 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

FY02/11
Act.
5,327
-1.6%
590
-21.1%
11.1%

FY02/12
Act.
8,037
50.9%
312
-47.1%
3.9%

FY02/13Act.
10,94236.1%
741
137.5%
6.8%

FY02/14Act.
13,718
25.4%
1,160
56.5%
8.5%

FY02/15Act.
15,540
13.3%
1,297
11.8%
8.3%

FY02/16Act.
18,639
19.9%
1,972
52.0%
10.6%

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.
Kajitaku Co., Ltd., a housework services provider, is the main growth driver of the Support Services segment. Sales forwww.sharedresearch.jp

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LAST UPDATE【2016/5/11】“Kaji Cloud,” a housework services package, are contributing to strong growth. A to Z Service Co., Ltd., a maintenanceservice provider for small commercial facilities, was acquired 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
Aeon Delight is looking to expand into China and Asia 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. In
China, the company plans to further its relationships with local firms and differentiate itself via its ESCO and elevatorbusinesses. 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.

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

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Aeon Delight | 9787 |LAST UPDATE【2016/5/11】

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 ＞ Business

LAST UPDATE【2016/5/11】

Profitability snapshot, financial ratios
Profit margins (JPYmn)
Gross profit
GPM
Operating profit
OPM
EBITDAEBITDA margin
NPM
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
18,827
20,955
21,11823,98928,63130,22733,714
35,117
13.7%
14.4%
15.1%
14.0%
13.0%
12.1%
13.1%
13.2%
8,330
9,946
9,970
12,031
13,762
13,901
15,115
15,861
6.1%
6.8%
7.1%
7.0%
6.3%
5.6%
5.9%
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%
17.1%
21.0%
2.9
7,394
127.7%
123.6%
29.4%
40.8%
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
11,771224.0%
207.5%
40.1%
73.4%
35.5%
11.7
-1,452

FY2/1637,39013.3%
16,707
5.9%
19,568
7.0%
3.4%
13.0%
12.3%
2.2
13,952235.8%
216.2%
22.5%
68.7%
21.8%
11.3
2,181

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 D irector 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 D irector Retirement Benefits

Other% of sales
Provision for Doubtful Accounts
Salaries
Employee Bonuses
Provision for Bonuses
Provision for Director Bonuses
Retirement Benefits Expenses
P rov ision for D irector Retirement Benefits

Other

FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
10,496 11,008 11,148 11,957 14,868 16,326 18,599
19,256
29
101
77
31
80
80
3,314
3,484
3,650
4,175
5,300
5,897
5,897
615
584
244
206
120
92
251
323
323
114
103
101
121
120
90
90
153
188
195
216
268
295
295
26
21
24
19
15
18
18
6,001
6,321
7,058
7,257
8,883
9,623
11,8964.9%
1.3%
7.3% 24.3%
9.8% 13.9%
3.5%
248.3%-59.7% 158.1%
5.1%
4.8%
14.4%
26.9%
11.3%
-5.0%
-15.6%-41.7%-23.3% 172.8%
28.7%
-9.6%
-1.9%
19.8%
-0.8%
-25.0%
22.9%
3.7%
10.8%
24.1%
10.1%
-19.2%
14.3%-20.8%-21.1%
20.0%
5.3%
11.7%
2.8%
22.4%
8.3%
23.6%
7.6%
7.6%
7.9%
7.0%
6.8%
6.6%
7.2%
7.2%
0.0%
0.1%
0.0%
0.0%
0.0%
0.0%
2.4%
2.4%
2.6%
2.4%
2.4%
2.4%
2.3%
0.4%
0.4%
0.2%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.0%
0.0%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
4.4%
4.3%
5.0%
4.2%
4.0%
3.9%
4.6%

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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LAST UPDATE【2016/5/11】

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 apositive factor for Aeon Delight’s growth. The company is able to leverage economies of scale from the 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 capableof 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 this balance

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, anda 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 and expansion.
The company is able to benefit from economies of scale. It can leverage its balance to buy growth since it has arecurring stable source of revenue from the Aeon group. The company could take on debt to expand its businesssince 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 forsupport in pursuing its agenda. Recently, Aeon acquired 50% of Tesco Japan, the U.K. supermarket chain operator’sJapan 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-scaleretail stores in urban areas offer growth opportunities given the greater number of customer volume. Manysmall-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%

3,698

3,500

3,611
3,611
3,593
0.006
0%
0%

3,636
1%

3,665
1%

1%

0.04

4%
3,906

4,000
3,768
2%

3%
3,649

3,601

3,713

3,692

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

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Market Size (Left)

2012(Est.)

2013(Est.)

2014(Est.)-0.08

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

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billion yen, for a market share of slightly less than 7% in FY02/13.

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 sqm in March 2010. If sales per sqm 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/sqm x 13.4 million sqm).
The ministry data also show that total floor space of non-residential buildings owned by corporations was about 1.7
billion sqm. 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/ sqm x 1.7 billion sqm).
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 sqm, which translates to 355,000 yen in annual sales per sqm for Aeon Delight.
AEON Group stores by format (domestic and overseas)py(
FY02/09 FY02/10
GMS
603
601
Supermarket
1,231
1,267
Discount Store
41
52
DIY 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

AEON MALL
AEON TOWN
Total

51
42
93

53
44
97

)
FY02/11 FY02/12
590
590
1,307
1,537
72
105
127
122
32
29
1
1
3,811
4,121
3,305
3,424
268
418
401
460
1,410
1,383
11,324
12,190
56
45
101

59
107
166

FY02/13
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

Source: Shared Research based on company data

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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
Supermarket
18
19
25
44
81
22
Discount Store
Convenience Store
2,033
2,294
Specialty Store
37
55
Other Retail Format
18
21
24
27
29
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

Source: Shared Research based on company data

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 ofwww.sharedresearch.jp

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entry 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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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

Win more non-group clients
Shared Research believes that the company will seek to win facility-management contracts from operators of large-scalewww.sharedresearch.jp

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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

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

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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 have remained firm, and from FY02/16 thecompany plans to begin a B2B business in conjunction with manufacturers of major household appliances andequipment.

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Historical financial statements
Summary
Q3 FY02/16 results (announced January 8, 2016)
Earnings (cumulative)
Sales:

JPY210.7bn (up 5.7% YoY)

Operating profit:

JPY12.0bn (up 5.9%)

Earnings through Q3 set new record high; growth continues overseas
Sales were up year-on-year in six segments, with the cumulative profit for Q3 being the highest recorded for that period
YoY. Overseas, the company logged approximately JPY7.3bn in sales, with sales in China rising nearly 40% YoY and sales
in ASEAN countries nearly doubling.

Construction Work (Aeon Group store renovation) and Support Services (subsidiary Kajitaku) drive growth
Construction Work (+11.0% YoY) and Support Services (+17.3%) 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. Only the Vending Machine Services segment booked lower sales(-5.2% YoY), due to rough comparison to the mass installation of new vending machines with digital displays last year.

Q3 results finish closely in line with plan, no changes to full-term company forecast
The company left its full-year forecasts unchanged. Although Aeon Delight has made less progress towards improving
gross margins at its individual business units than we had expected, the shortfalls on this front appear to have been offset
by growth of its subsidiary businesses and dealings with Aeon Group companies, keeping overall sales and earnings inline with plan.
Quarterly performance
12,00010,00015.3% 15.5%

SG&A
12.9%

Operating profit

13.4%

12.8%

13.6%

12.8% 12.9%

8,000

GPM (right-axis)

11.9% 11.7% 11.9%

13.2%

12.3%

OPM (right-axis)
13.2% 13.0%

14.0%
12.5%

18%

13.3% 12.9%

14.0%

12.6%

13.5% 13.1%

12%

6,000
4,000

9%
7.0%

7.6%

7.5%
6.1%

2,000
(JPYmn)15%

Q1
FY02/11

Q3

5.8%

6.7%

Q1
FY02/12

5.8%

6.7%

Q3

5.3%

5.9%

Q1
FY02/13

5.0%

6.2%

Q3

5.1%

6.3%

Q1
FY02/14

5.5%

Q3

6.6%

5.3%

6.2%

Q1
FY02/15

5.5%

Q3

6.8%
5.1%

6.2%

Q1
FY02/16

6%
5.7%

Q3

3%
0%

Source: Shared Research based on company data

Progress in Q3: making Hakuseisha a consolidated subsidiary
Progress during Q3 can be broken down into five main initiatives: 1) expanding domestic network of business partners inorder to increase sales and earnings, resulting in record high profits booked in Q3, 2) making Hakuseisha (JASDAQ
9736)–– a company with experience in cleaning department stores––a consolidated subsidiary in order to strengthen thefoundations of its Cleaning Services segment, 3) establishing a virus and bacteria analysis system for a greater competitivewww.sharedresearch.jp

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edge in the health and sanitation area of its Cleaning Services segment, 4) introducing a water-soluble coating solution
and a demonstration to promote it, as part of efforts to restructure the Cleaning Services segment, and 5) making
progress in its audit leader training program for managers at all domestic facilities, overseen by ISO internal auditors, withthe aim of improving quality control tests.
Hakuseisha results(JPYmn)
Sales
Kanto area
Kansai area
Chubu area
Building maintenance
Securities management
Other
Daimaru Matsuzakaya Department Stores
JFR Service
YoY
Gross profit
SG&A
Operating profit
Recurring profit
Net income
Net assets
Total assets
Net cash

FY03/13
9,723
4,893
4,216
613

100.0%
50.3%
43.4%
6.3%

6,983
2,588
242

71.8%
26.6%
2.5%

2,254
NA
1.1%
1,178
823
354
455
296
6,169
8,024
3,123

23.2%

12.1%
8.5%
3.6%
4.7%
3.0%

FY03/14
10,037
4,980
4,286
771

2,339
NA
3.2%
1,121
856
265
449
290
6,501
8,604
3,661

100.0%
49.6%
42.7%
7.7%

23.3%

11.2%
8.5%
2.6%
4.5%
2.9%

FY03/15
9,839
4,610
4,392
837

2,546
NA
-2.0%
1,010
835
175
276
172
6,637
8,821
3,035

100.0%
46.9%
44.6%
8.5%

FY03/16 Est.
9,343

100.0%

25.9%

10.3%
8.5%
1.8%
2.8%
1.8%

-5.0%

140
232
142

1.5%
2.5%
1.5%

Source: Shared Research based on company data
Note: The J-Front Retailing group accounted for approximately one-third of sales in FY03/15.

Acquisition aimed at increasing market share, but Aeon Delight also looking to improve earnings structure at Hakuseisha
In FY03/15, Hakuseisha recorded JPY9.8bn in sales and JPY175mn in operating profit due to expanding its market shares(representing a gross margin of 10.3% and operating profit margin of 1.8%), but is expecting sales and earnings to be
down in FY03/16. Going forward, Aeon Delight is looking to realize synergies from its acquisition of Hakuseisha andimprove profitability at Hakuseisha through a number of measures including 1) expanding its customer base, starting withthe department stores owned by Hakuseisha, 2) scouring Hakuseisha's customer base for opportunities to provide
additional services, and 3) combining the expertise of both Aeon Delight and Hakuseisha in cleaning and other areas.
The company believes further top-line growth at Hakuseisha is possible with the help of 1) and 2), and sees plenty ofroom to improve profitability with the help of 3). Aeon Delight reported an overall gross margin of 13.2% for FY02/15,
with its Facilities Management and Security Service business reporting gross margins close to the average and its Cleaning
Services business reporting a gross margin more than 5ppts higher. With cleaning and related services accounting ofnearly half of overall sales at Hakuseisha, Aeon Delight could expect an earnings contribution of some JPY200–300mn if itwere able to bring margins at Hakuseisha in line with its own.
Aeon Delight is already taking steps to realize the potential synergies from its acquisition of Hakuseisha and intends toaggressively pursue these initiatives going forward. Aeon Delight expects to complete its takeover of Hakuseisha (making
it a wholly owned subsidiary) by the end of January 2016, so the acquisition will have only a small impact on consolidated
results this fiscal year (FY02/16).

Making good progress on winning non-Aeon Group clients, structuring Support Services and Overseas businesses
Rise in orders for large-scale facilities from non-Aeon clients drove sales higher; 1H momentum seems sustainable in 2H
Sales to new non-group clients were up 37% YoY (JPY1.8bn) to JPY6.8bn through the end of Q3. The company increased
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sanitary cleaning services for hospitals and other medical facilities.
Sales at the Support Services business rose JPY1.9bn YoY (+17.3%), with subsidiary Kajitaku accounting for about
JPY1.1bn of the increase. In addition to increases in sales at its copy machine business and other existing business lines,
the company also saw high sales from its Kaji Cloud housework services for individual households, with most of thegrowth here coming in urban areas.

Focus in 2H will be new projects to start in FY02/17; expects orders for additional services from existing projects
Many contracts for projects, such as orders for large facilities, begin in early spring (though some contracts begin in
October), so 2H is when the company pushes sales negotiations to win these contracts from other companies. The
company has many negotiations ongoing and expects to receive orders for additional services from existing projects.
Leveraging its past experience as a subcontractor for sanitary cleaning services, Aeon Delight appears to be enjoying
success marketing itself as a primary contractor, and expects to start a number of new contracts for sanitary cleaning
services in FY02/17.

Cleaning partnership with major local company in Malaysia; anticipates growth from intergroup orders
Business continued to expand overseas as well, with sales rising 57% YoY (JPY2.9bn YoY) to JPY7.9bn. In China,
improvement in local management helped earnings maintain solid growth, driven by government contracts (not easily
affected by real estate market conditions) and contracts with new Aeon Mall stores. Thanks to the consolidation of its local
management organization in Suzhou and Wuhan and more aggressive marketing, the company also appears to have hadsome success in winning additional contracts from non-Japanese companies. The company anticipates further
contributions to growth in Q4 and FY02/17 as it begins to service the new Aeon Malls being opened in China (most ofwhich are being opened in 2H).
In Malaysia, Aeon Delight began business cleaning partnerships with Malaysian Harvest Sdn. Bhd., a major local company,
in October 2015, and acquired the ability to take on orders for Aeon Group’s stores, which is growing to be one of thelargest retailers in Malaysia: the Aeon Group in Malaysia had 96 stores as of end Q2 FY02/16, 35 more stores than at end
Q4 FY02/15. As of the end of Q3, the company appears to be making good progress getting clients to switch fromcompetitors.

Operating profit above plan despite investments to acquire strategic personnel, prepare for new projects
On the earnings front, gross profit was up 7.1% YoY and operating profit up 5.9%. The gross profit margin rose 0.2ppts
YoY to 13.1%, bolstered by both higher sales and a lower CoGS ratio. The increase in new contracts was a drag on
earnings, but the steady improvement in margins at the company's mainstay Facilities Management and Cleaning
Services business since Q1 tells us the steps management has been taking to improve profitability are bearing fruit.
Operating profit finished 1.5% above plan despite strategic human resource investments pushing up personnel costs andincreased SG&A expenses from investments due to the growth in new orders.

New contracts with non-Aeon Group clients and growth at subsidiary businesses part of strategy to lift operating profit
Of the projected JPY3.0–4.0bn growth in gross profit in FY02/16, the company is looking for JPY1.0–1.5bn to come fromcontracts with new clients outside the Aeon Group (with roughly JPY500mn of this being realized in 1H); JPY1.0–1.5bn
from margin improvement at its various business lines (with about JPY200mn being realized in 1H); JPY500mn fromgrowth at subsidiary companies (with roughly JPY500mn of this being realized in 1H); and JPY500mn from more

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transactions with Aeon Group companies (with roughly JPY100mn of this being realized in 1H), for a total of roughly
JPY1.3bn in contributions to gross profit being realized from these sources as of the end of 1H. Although contributions toearnings from margin improvement are still short of expectations as of the end of Q3, this shortfall appears to have beeneffectively offset by above-plan results at subsidiaries and increased dealings with other Aeon Group companies.
Although contributions from new contracts with Aeon Group members was lagging somewhat as of the end of 1H,
given the jump in expenses related to the Aeon Mall Okinawa Rycom (April 2015 opening) in 1H and the larger numberof stores openings by overseas Aeon Group companies in 2H versus 1H, the company still expects to meet its forecast for
the full term. Shared Research will continue to monitor the company’s progress towards its full-year forecast and thecontributions from the above-mentioned factors from FY02/17 onward.
Measures to increase operating profit
YoY
JPY3bn-4bn

1H Act.
JPY1.3bn

1） Increase new customers outside group

JPY1bn-1.5bn

JPY0.5bn

Increase orders from hospitals, hotels,
universities, and office buildings.

2） Improve profit margins at each segment

JPY1bn-1.5bn

JPY0.2bn

Standardize Cleaning Services, reduce
costs by revising materials logistics.
Contribute to renovation and reformprojects.

3） Expand subsidiaries' businesses

JPY500mn

JPY0.5bn

Contribute to Kajitaku's mail-orderbusiness.

4） Expand the Aeon group's market

JPY500mn

JPY0.1bn

Contribute to profits (1H<2H) withorders from new overseas stores.

▲JPY2bn
JPY1bn-JPY2bn▲JPY0.9bn
JPY0.4bn

Total YoY growth of gross profit

Amount from higher SG&A expenses
Operating profit YoY growth

2H Strategy

Source: Shared Research based on company data

Overseas Aeon Group businesses
Aeon Mall
FY02/2015

China

FY02/2016

China

ASEAN

ASEAN
FY02/2017 or later China
ASEAN
FY02/2016 or later ASEAN
ASEAN
ASEAN
FY02/15 1H

ASEAN

FY02/15 2H

China
ASEAN

Name
AEON MALL Suzhou Yuenqu Hudong
AEON MALL Beijing Fengtai
AEON MALL Hanzhou Liangzhu Xincheng
AEON MALL Wuhan Jingkai
AEON MALL Guangzhou Hanyu Guangchang
AEON MALL Suzhou Xinqu
AEON MALL BSD CITY
AEON MALL Long Bien
AEON MALL Hebei Yangjiso (tentative)
AEON MALL Wuhan Shiqiao (tentative)
AEON MALL Guangzhou Jinshasu (tentative)
AEON MALL Binh Tan
AEON MALL Tianjin Jinnan
AEON MALL Foshan Dali
AEON MALL Jakarta Garden City
AEON MALL Deltamas
AEON MALL Cambodia
AEON MALL Sentul City

Location
Suzhou, Jiangsu
Fengtai, Beijing
Hanzhou, Zhejiang
Wuhan, Hubei
Guangzhou, Guangdong
Suzhou, Jiangsu
Jakarta, Indonesia
Hanoi, Vietnam
Sanhe, Hebei
Wuhan, Hubei
Guangzhou, Guangdong
Ho Chi Minh, Vietnam
Jinnan, Tianjin
Foshan, Guangdong
Jakarta, Indonesia
Jakarta, Indonesia
Cambodia, Phnom Penh
Indonesia

Lot area
99,300m²
63,800m²
98,000m²
130,000m²
51,400m²
approx.153,000m²
approx.100,000m²
approx. 96,000m²
approx. 84,000m²
approx. 46,200m²
approx. 84,500m²
approx. 46,800m²
approx. 91,000m²
approx. 83,200m²
approx. 85,000m²
approx.200,000m²
approx.100,000m²
approx. 78,000m²

Total floor space
218,000m²
150,000m²
175,000m²
274,000m²
173,000m²
approx.162,000m²
approx.177,000m²
approx.120,000m²
approx.175,000m²
approx.120,900m²
approx.187,700m²
approx.114,000m²
approx. 145,000m²
approx. 181,600m²
approx.210,000m²

Name
MVTJ Sukhumvit 64 Elio
MV Watcharapol Venice
Aeon ZhongShanShiDaiQingCheng
MV Qianjinlu (tentative)
AEON Ipoh Klebang
MV AEON Shiracha Shopping Center

Location
ThailandThailandZhongshan, Guangdong
Guangzhou, Guangdong
Malaysia
ThailandCategory

Directly operated floor
254m²
1,632m²
14,082m²
TBC
20,475m²
2,409m²

SM
SM
GMS
SM
GMS
SM

approx.151,000m²

Open date
May 2015
September 2015
November 2015
December 2015
December 2015
January 2016
May 2015
October 2015
Scheduled 2016
Scheduled 2016
Scheduled 2016
Scheduled summer of 2016
Scheduled 2017
Scheduled 2017
Scheduled 2017
Scheduled 2016
Scheduled summer of 2018
Scheduled 2018
Open date
May 2015
July 2015
TBC
TBC
TBC
TBC

Source: Shared Research based on company data

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Number of overseas Aeon Retail stores

ASEAN

Malaysia
Thailand
Vietnam

China

Name

FY02/14

FY02/15

AEON Co. (M) Bhd.
AEON BIG (M) SDN. BHD.
AEON (Thailand) CO., LTD.
AEON VIETNAM Co., Ltd.

31
28
69

33
28
75
2

DONG HUNG INVESTMENT DEVELOPMENT CONSULTANCY JOINT STOCK CO., LTD.
FIRST VIETNAM INVESTMENT JOINT STOCK COMPANY

Cambodia AEON (CAMBODIA) Co., Ltd.
Indonesia PT.AEON INDONESIAASEAN total
AEON Stores (Hong Kong) Co., Limited.
Guangdong Aeon Team Co., Ltd.
Quingdao Aeon Dongtai Co., Ltd.
AEON South China Co., Ltd.
Beijing AEON Co., Ltd.
AEON EAST CHINA (SUZHOU) CO., LTD.
AEON (HUBEI) CO., LTD.
China total

1

43
17
9
11
4

84

139
43
17
10
10
5
1
1
87

FY02/16
1H
68
28
76
2
29
21
1
1
226
47
17
9
10
5
2
1
91

Source: Shared Research based on company data

Outlook for FY02/17
SR sees sales and earnings continuing to rise, but still some hurdles to clear before reaching medium-term targets
FY02/17 is the last year of Aeon Delight's current medium-term business plan, which targets sales of JPY330.0bn or more
and operating profit of JPY21.0bn or more (representing an operating profit margin of 6.4% or better). Although there
are still some high hurdles to clear if the company is to meet these targets, Shared Research believes these targets areachievable, though much will depend on the degree of margin improvement at existing businesses and the extend offurther M&A activity.
Regardless of whether Aeon Delight meets the above targets for sales and operating profit, Shared Research sees sales
and earnings continuing to rise, underpinned by 1) ongoing investments in personnel and measures to sustain growth atexisting businesses including increasing the value-added of existing services and reducing costs; 2) increasing the amountof work done for Aeon Group companies by expanding services offered to existing Aeon Group stores and expanding into
new business lines; 3) increasing the amount of work done for companies outside of the Aeon Group by building on its
track record of providing sanitary cleaning services for hospitals and other medical facilities, and realizing synergies fromits recent acquisition of Hakuseisha.

What to watch at individual business units
At the Facilities Management business, the company aims to strengthen its relationships with Aeon Group members andthereby increase its ability to win comprehensive contracts for facilities management services from group members that
operate large facilities all over Japan. At Security Services, the company is looking to improve margins and continue
working to differentiate itself from competitors with its on-site Attender services. At Cleaning Services, the company islooking to win new contracts for sanitary cleaning services and improve the profitability of existing contracts by rollingout its small work-team approach at its sanitary cleaning services business and realizing greater operating efficiencies. At
Construction Work, the company is looking to continue growing with the help of renovation work at existing storesoperated by Aeon Group companies and, to this end, is also hiring experienced personnel to facilitate growth in this area.
In Materials and Supply Sourcing Services, the company is looking to lower its CoGS ratio by improving its purchasing
processes and also extend into new business areas. And, at Support Services, the company is looking for continued
growth at Kajitaku's copy machine business and housework services business.

Overseas business
Overseas, the company is looking for full-term contributions under contracts signed with the many new Aeon Mall andwww.sharedresearch.jp

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other stores opened in China around the end of this fiscal year and, in Malaysia, contributions from its new partnershipwith Malaysian Harvest as more and more Aeon Group stores switch cleaning contracts from competitors to this newcompany.

Facilities Management

Facilities Management(JPYmn)Sales
YoY
Operating profit
YoY
OPM

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

FY02/14
FY02/15
Q2
Q3
Q4
Q1
Q2
Q3
10,848 11,198 10,790 11,228 11,642 11,532
0.9%
5.2%
5.0%
5.7%
7.3%
3.0%
1,266
1,188
1,120
1,029
1,098
1,074
3.8% 10.0% -10.8% -10.6% -13.3% -9.6%
11.7% 10.6% 10.4%
9.2%
9.4%
9.3%

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

Q1
12,103
7.8%
1,045
1.6%
8.6%

FY02/16
Q2
Q3
12,291 12,126
5.6%
5.2%
1,109
1,080
1.0%
0.6%
9.0%
8.9%

Q4
-

Source: Shared Research based on company data

In addition to receiving new orders for maintenance and inspection, the company continued to train employees as
authorized handlers of Type I fluorocarbon refrigerant with the aim of further expanding contracts. With 500 certified
employees, it continued to build up its system for contract fluorocarbon management services, targeted towards facilities
with equipment that uses fluorocarbon refrigerant, such air conditioning equipment for heat, and refrigeration andfreezing equipment.

Contract fluorocarbon management services adding value to existing FM services
In Q3, the company saw the net increase in gross profit it had been anticipating from its move to have existing employees
take on contract fluorocarbon management services. Having largely finished signing new contracts with the Aeon Groupin this area, the company is currently aiming to expand outside the group using its track record. Elsewhere in the energy
management system, the company 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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Security Services

Security Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

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
Q3
8,891
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
9,522
4.5%
2.3%
731
782
2.0% -5.1%
7.9%
8.2%

Q4
-

Source: Shared Research based on company data

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 38. 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. The company might also be able to improve margins if the new Attender services
help it establish a dominant market position in those areas where it is introduced.

Cleaning Services

Cleaning Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

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
Q3
10,960 11,129
4.5%
4.6%
1,552
1,592
10.5% 11.7%
14.2% 14.3%

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

Q1
11,656
6.5%
1,482
0.9%
12.7%

FY02/16
Q2
Q3
11,723 11,811
7.0%
6.1%
1,535
1,599
-1.1%
0.4%
13.1% 13.5%

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. The company has been stepping up
efforts on this front in Q4 with the aim of initiating a full-scale rollout in FY02/17. The company also made Hakuseisha aconsolidated subsidiary in December 2015, to leverage its experience cleaning department stores to strengthen the

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segment’s business foundations.

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
9,615
27.2%
634
29.1%
6.6%

Q1
13,059
10.1%
932
25.8%
7.1%

FY02/16
Q2
Q3
13,194
9,649
18.5%
3.0%
1,061
709
40.7%
4.6%
8.0%
7.3%

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
general merchandise stores nationwide. Aeon Retail is renovating its existing stores to bolster its supermarket operations;sales are increasing as a result. (One specific example, the newly renovated Ontakesan store of Aeon Style, logged a 15%
YoY increase in sales between December 11, 2015 and January 3, 2016.)
Aeon Style: Sales before and after store renovation
FY02/16

Period of renovation
1H
Q3

Sales growth rate
1H (before renovation)
-3.1%
-3.2%

Q3 (after renovation)+1.2%+7.6% (excl. stores renovated in November)

Source: Shared Research based on company data

Aeon Retail may continue to open more large-scale stores
Aeon Retail wants to make store-renovation projects a regular part of its operations while expanding new outlets, andreported that from FY02/14 to FY02/15 there were a total of 28 stores that were part of large-scale renovation projects.
There were already 19 such stores in 1H FY02/16 and the company targets a total of 54 stores in FY02/16. The company
plans to have 70 to 80 stores undergoing large-scale renovations in FY02/17, and plans to press on with investment inrenovation. Demand related to large-scale renovation projects requires demand for renovation work itself and restoration
projects after an existing tenant has vacated. In order to tap this kind of Group demand, qualified personnel is key, andthe company is strengthening its sales foundation by acquiring specialized personnel in these growth areas.

Aiming to secure more renovation work at existing malls operated by Aeon Mall
As a general rule, Aeon Mall (8905) undertakes major renovation work at its existing malls once every four years. Alongwith this steady workflow, Aeon Delight also intends to focus on winning contracts for large-scale renovation projects
undertaken by Aeon Retail going forward, and work from these two sources within the Aeon Group are expected towww.sharedresearch.jp

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continue driving growth at its Construction Work business in the year ahead.

Materials and Supplies Sourcing

Materials and Supplies Sourcing(JPYmn)Q1
Sales
10,721
YoY
12.6%
Operating profit
573
YoY
109.9%OPM
5.3%

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

FY02/15Q4Q1Q2
Q311,257 11,713 11,609 12,175
13.3%
9.3%
5.3%
5.5%
591
464
490
436
21.1% -19.0% -23.0% -18.2%
5.3%
4.0%
4.2%
3.6%

Q4
12,121
7.7%
721
22.0%
5.9%

Q1
12,080
3.1%
568
22.4%
4.7%

FY02/16Q2
Q3
12,445 12,990
7.2%
6.7%
664
670
35.5% 53.7%
5.3%
5.2%

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 Valu. 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%

FY02/14
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
FY02/16
Q2
Q3
Q4
Q1
Q2
Q3
9,471
8,003
9,021
8,107
8,848
7,507
8.7%
7.0% -6.4% -2.7% -6.6% -6.2%
894
506
1,014
450
775
372
10.1% 16.9% -21.3% -18.3% -13.3% -26.5%
9.4%
6.3% 11.2%
5.6%
8.8%
5.0%

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. For vending machines with digital displays, thecompany developed a new business model, including offering video advertisements in addition to existing drinks.

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Support Services

Support Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
3,002
44.7%
154
100.0%
5.1%

FY02/14
Q2
Q3
Q4
Q1
3,473
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%

FY02/15
Q2
Q3
3,870
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
4,302
15.2% 15.5%556
510
32.4% 184.9%
12.5% 11.9%

Q4-

Source: Shared Research based on company data

Subsidiaries continued to make significant contributions to growth in profits. Sales of Kajitaku’s Kaji Cloud houseworkservices, including online store sales, continued to be favorable, with the result that Kaji Cloud sales rose over 1.4x YoY.
Kajitaku made a significant contribution to the rise in both sales and earnings in the Support Services segment.

Partnership with large company opening new channel for expansion of housework services business
Kajitaku is planning on hooking up with a large company in order to open up a new channel for expanding its houseworkservices business and this, together with continued strong growth at its copy machine business, is expected to drive
growth at Kajitaku in FY02/17. Aeon Compass appears to be enjoying solid growth as well. Following the JPY470mn YoY
increase in operating profit through the end of Q3, the company sees earnings at Kajitaku, Aeon Compass, and theSupport Services business as a whole continuing to grow.

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.

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Quarterly performance

Source: Shared Research based on company data

Winning non-Aeon clients, structuring Support Services and overseas business progressing
Rise in orders for large-scale facilities from non-Aeon clients drove sales higher; 1H momentum seems sustainable in 2H
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, and appears likely to continue winning orders in 2H.
Support Services was up 18.2% YoY at JPY1.3bn, with subsidiary Kajitaku contributing JPY800mn of the growth. Kaji Cloudhousework services for individual households centered in urban areas were expanding.

Focus in 2H will be new projects to start in FY02/17; expects orders for additional services from existing projects
Many contracts for projects, such as orders for large facilities, begin in early spring (some orders begin in October), so 2H
is when the company pushes sales negotiations to win these contracts from other companies. The company has manynegotiations and expects to receive orders for additional services from existing projects. Shared Research will keep an eye
on the company’s progress winning orders as it seeks to increase FY02/17 earnings.

Cleaning partnership with major local company in Malaysia; anticipates growth from intergroup orders
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
partnerships with Malaysian Harvest Sdn. Bhd., a major local company, in October 2015, and acquired the ability to takeon orders for Aeon Group’s stores, which is growing to be one of the largest retailers in Malaysia: the Aeon Group in
Malaysia had 96 stores as of end Q2 FY02/16, 34 more stores than at end Q4 FY02/15. The company estimates the FMS
market in Malaysia at JPY240–250bn, and anticipates gaining FMS market share through cleaning services.

Operating profit above plan despite investments to acquire strategic personnel and prepare for new projects
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.

1H: new contracts with non-Aeon Group clients and profit growth at subsidiary businesses part of strategy to lift operating profit
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 subsidiary businesses; JPY500mn from subsidiary
growth; and JPY500mn from more transactions within the Aeon Group.

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2H: contribution expected from increased transactions within the Aeon Group, stronger profitability at individual businesses
Among the methods mentioned above, efforts to increase transactions within the Aeon Group have lagged. However,since expenses for Aeon Mall Okinawa Rycom (April 2015 opening) were weighted in 1H and the opening of overseas
Aeon Group stores concentrated in 2H rather than in 1H, the company expects to meet its full-year forecast. Further, theJPY200mn from improved margins at subsidiaries is expected to continue in 2H. Alongside an additional improvement of
JPY500bn in 2H, the company expects its results to be largely in line with plan. Shared Research will continue to monitor
the company’s progress to meet its full-year forecast and the contribution from these factors from FY02/17 onward.
Measures to increase operating profit
YoY
JPY3bn-4bn

1H Act.
JPY1.3bn

1） Increase new customers outside group

JPY1bn-1.5bn

JPY0.5bn

Increase orders from hospitals, hotels,
universities, and office buildings.

2） Improve profit margins at each segment

JPY1bn-1.5bn

JPY0.2bn

Standardize Cleaning Services, reduce
costs by revising materials logistics.
Contribute to renovation and reformprojects.

3） Expand subsidiaries' businesses

JPY500mn

JPY0.5bn

Contribute to Kajitaku's mail-orderbusiness.

4） Expand the Aeon group's market

JPY500mn

JPY0.1bn

Contribute to profits (1H<2H) withorders from new overseas stores.

▲JPY2bn
JPY1bn-JPY2bn▲JPY0.9bn
JPY0.4bn

Total YoY growth of gross profit

Amount from higher SG&A expenses
Operating profit YoY growth

2H Strategy

AEON Group overseas business
Aeon Mall
FY02/2016

China

ASEAN
FY02/2017

China

ASEAN
FY02/2017 or later ASEAN
FY02/2018 or later ASEAN
ASEAN
FY02/16 1H
FY02/16 2H

ASEAN
China
ASEAN

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 BSD CITY
AEON MALL Long Bien
AEON MALL Hebei Yangjiso (tentative)
AEON MALL Wuhan Shiqiao (tentative)
AEON MALL Guangzhou Jinshasu (tentative)
Other 2 more malls
AEON MALL Binh Tan
AEON MALL Deltamas
AEON MALL Jakarta Garden City
AEON MALL Cambodia

Location
Suzhou, Jiangsu
Fengtai, Beijing
Guangzhou, Guangdong
Suzhou, Jiangsu
Hanzhou, Zhejiang
Wuhan, Hubei
Jakarta, Indonesia
Hanoi, Vietnam
Sanhe, Hebei
Wuhan, Hubei
Guangzhou, Guangdong

Lot area
99,300m²
63,800m²
approx. 51,400m²
approx.153,000m²
approx. 94,800m²
approx.129,900m²
approx.100,000m²
approx. 96,000m²
approx. 84,000m²
approx. 46,200m²
approx. 84,500m²

Total floor space
218,000m²
150,000m²
approx.172,900m²
approx.162,000m²
approx.176,000m²
approx.274,600m²
approx.177,000m²
approx.120,000m²
approx.175,000m²
approx.120,900m²
approx.187,700m²

Ho Chi Minh, Vietnam
Jakarta, Indonesia
Jakarta, Indonesia
Cambodia, Phnom Penhapprox. 46,800m²
approx.200,000m²
approx. 85,000m²
approx.100,000m²

approx.114,000m²

Name
MVTJ Sukhumvit 64 Elio
MV Watcharapol Venice
Aeon ZhongShanShiDaiQingCheng
MV Qianjinlu (tentative)
AEON Ipoh Klebang
MV AEON Shiracha Shopping Center

Location
ThailandThailandZhongshan, Guangdong
Guangzhou, Guangdong
Malaysia
ThailandCategory

SM
SM
GMS
SM
GMS
SM

Open date
May 2015
September 2015

Scheduled end of 2015
May 2015
October 2015

approx.210,000m²
approx.151,000m²

Scheduled summer of 2016
Scheduled 2016
Scheduled 2017
Scheduled summer of 2018

Directly operated floor
254m²
1,632m²
14,082m²
TBC
20,475m²
2,409m²

Open date
May 2015
July 2015
TBC
TBC
TBC
TBC

Source: Shared Research based on company data

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Aeon retail overseas store count

ASEAN

Malaysia
Thailand
Vietnam

China

Name

FY02/14

FY02/15

AEON Co. (M) Bhd.
AEON BIG (M) SDN. BHD.
AEON (Thailand) CO., LTD.
AEON VIETNAM Co., Ltd.

31
28
69

33
28
75
2

DONG HUNG INVESTMENT DEVELOPMENT CONSULTANCY JOINT STOCK CO., LTD.
FIRST VIETNAM INVESTMENT JOINT STOCK COMPANY

Cambodia AEON (CAMBODIA) Co., Ltd.
Indonesia PT.AEON INDONESIAASEAN total
AEON Stores (Hong Kong) Co., Limited.
Guangdong Aeon Team Co., Ltd.
Quingdao Aeon Dongtai Co., Ltd.
AEON South China Co., Ltd.
Beijing AEON Co., Ltd.
AEON EAST CHINA (SUZHOU) CO., LTD.
AEON (HUBEI) CO., LTD.
China total

1
139
43
17
10
10
5
1
1
87

43
17
9
11
4

84

FY02/16
1H
68
28
76
2
29
21
1
1
226
47
17
9
10
5
2
1
91

Source: Shared Research based on company data

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

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

FY02/14
FY02/15
Q2
Q3
Q4
Q1
Q2
Q3
10,848 11,198 10,790 11,228 11,642 11,532
0.9%
5.2%
5.0%
5.7%
7.3%
3.0%
1,266
1,188
1,120
1,029
1,098
1,074
3.8% 10.0% -10.8% -10.6% -13.3% -9.6%
11.7% 10.6% 10.4%
9.2%
9.4%
9.3%

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

Q1
12,103
7.8%
1,045
1.6%
8.6%

FY02/16
Q2
Q3
12,291
5.6%
1,109
1.0%
9.0%
-

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.

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

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
Q3
8,891
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%
731
2.0%
7.9%
-

Q4
-

Source: Shared Research based on company data

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.

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

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%

LAST UPDATE【2016/5/11】

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

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

FY02/15Q2
Q3
10,960 11,129
4.5%
4.6%
1,552
1,592
10.5% 11.7%
14.2% 14.3%

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

Q1
11,656
6.5%
1,482
0.9%
12.7%

FY02/16
Q2
Q3
11,723
7.0%
1,535
-1.1%
13.1%
-

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%

Q4
9,615
27.2%
634
29.1%
6.6%

Q1
13,059
10.1%
932
25.8%
7.1%

FY02/16
Q2
Q3
13,194
18.5%
1,061
40.7%
8.0%
-

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
general merchandise 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
Aeon Retail wants to make store-renovation projects a regular part of its operations while expanding new outlets, andreported that from FY02/14 to FY02/15 there were a total of 28 stores that were part of large-scale renovation projects.
There were already 19 such stores in 1H FY02/16 and the company targets a total of 54 stores in FY02/16. The company
plans to have 70 to 80 stores undergoing large-scale renovations in FY02/17, and plans to press on with investment inrenovation. Demand related to large-scale renovation projects requires demand for renovation work itself and restoration
projects after an existing tenant has vacated. In order to tap this kind of Group demand, qualified personnel is key, andthe company is strengthening its sales foundation by acquiring specialized personnel in these growth areas.

Materials and Supplies Sourcing
Materials and Supplies Sourcing(JPYmn)Q1
Sales
10,721
YoY
12.6%
Operating profit
573
YoY
109.9%OPM
5.3%

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

FY02/15Q4Q1Q2
Q311,257 11,713 11,609 12,175
13.3%
9.3%
5.3%
5.5%
591
464
490
436
21.1% -19.0% -23.0% -18.2%
5.3%
4.0%
4.2%
3.6%

Q4
12,121
7.7%
721
22.0%
5.9%

Q1
12,080
3.1%
568
22.4%
4.7%

FY02/16Q2
Q3
12,445
7.2%
664
35.5%
5.3%
-

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 Valu. The company continued to focus on increasingwww.sharedresearch.jp

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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

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

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

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

Q1
8,330
11.1%
551
3.0%
6.6%

FY02/15
FY02/16
Q2
Q3
Q4
Q1
Q2
Q3
9,471
8,003
9,021
8,107
8,848
8.7%
7.0% -6.4% -2.7% -6.6%
894
506
1,014
450
775
10.1% 16.9% -21.3% -18.3% -13.3%
9.4%
6.3% 11.2%
5.6%
8.8%
-

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

FY02/14
Q2
Q3
Q4
Q1
3,473
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%

Q1
3,002
44.7%
154
100.0%
5.1%

FY02/15
Q2
Q3
3,870
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%
556
32.4%
12.5%
-

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. Despite a rise in advertising costs (TV commercials), Kajitaku generated higher YoY profits thanks
to sales growth, with earnings remaining steady: Support Services segment made a significant contribution with higher
operating profit of JPY13.9mn (+18% YoY).

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

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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 offluorocarbon 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.

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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.
Number of projects overseas

500
450
400
350
300
250
200
150
100
50
-

China

Malaysia

Vietnam

Source: Shared Research based on company data

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AEON Mall overseas business
2015

China

ASEAN
2016

China

ASEAN

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

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
Facilities Management(JPYmn)Sales
YoY
Operating profit
YoY
OPM

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, thewww.sharedresearch.jp

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company 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
Q2
Q3
Q4
Q1
10,539 10,485 10,642 10,654 10,942 10,960 11,129 11,256 11,656
4.1%
4.0%
4.3%
5.4%
3.8%
4.5%
4.6%
5.7%
6.5%
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%

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.

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.

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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.
Operating profit

573

636

533

591

464

490

436

721

568

5.3%

5.8%

4.6%

5.3%

4.0%

4.2%

3.6%

5.9%

4.7%

Materials
and Supplies Sourcing
YoY
109.9% 98.8% 39.9% 21.1% -19.0% -23.0% -18.2% 22.0% 22.4%
OPM

-

-

-

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 Valu. 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
-

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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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

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

FY02/15Cons.
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.
137,519
40,20235,84841,098
16,777
3,591
23.7%
8,330
49.4%
6.1%
-

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.
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.
140,299-3.7%
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.
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
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.
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
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.
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
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.
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
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%

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%
16,0005.9%
5.9%
16,000
6.0%
5.9%
8,600
5.4%
3.2%

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

-

FY02/16-

FY02/16

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%

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

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

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LAST UPDATE【2016/5/11】

multi-purposed. As a result, Aeon Delight marked its fifth consecutive year of sales and profit growth, booking its highest
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
Malaysia

Q4

Q1
FY2/14

Q2

Q3

Q4

Q1
FY2/15Q2

Q3

Q4Vietnam

Source: Shared Research based on company data

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LAST UPDATE【2016/5/11】

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 bybillions 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-

Vietnam

FY02/12

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

FY02/15
FY02/13
FY02/14
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.

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LAST UPDATE【2016/5/11】

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.

Security Services
Security 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%

Q1
8,935
5.9%
695
8.3%
7.8%

FY02/15
Q2
Q3
8,891
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%

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.

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Aeon Delight ＞ Historical financial statements

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

LAST UPDATE【2016/5/11】

FY02/13
FY02/14
FY02/15
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q4
Q2
Q3
Q1
10,122 10,084 10,205 10,108 10,539 10,485 10,642 10,654 10,942 10,960 11,129 11,256
5.7%
2.1%
1.8%
1.2%
4.1%
4.0%
4.3%
5.4%
3.8%
4.5%
4.6%
1.7%
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

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%

FY02/14Q4Q1Q2Q37,339 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

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Aeon Delight ＞ Historical financial statements

LAST UPDATE【2016/5/11】

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.

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

FY02/13Q3Q1Q29,525 9,769 10,057
5.1%
4.5%
7.3%
273
320
381
6.2% -21.8% 41.6%
2.9%
3.3%
3.8%

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

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 Valu. 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%

FY02/15Q3Q4Q29,471 8,003 9,021
8.7%
7.0% -6.4%
506 1,014894
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.

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Aeon Delight ＞ Historical financial statements

Support Services
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【2016/5/11】

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.

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 humanwww.sharedresearch.jp

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Aeon Delight | 9787 |LAST UPDATE【2016/5/11】

elements 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.

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 andthe energy solutions segment)
Develop the Asian market

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Aeon Delight ＞ Historical financial statements

LAST UPDATE【2016/5/11】

Build an organizational base (organizational restructuring, human resource development, IT investment)
Year

Sales

Operating income

Net income

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 ＞ Historical financial statements

LAST UPDATE【2016/5/11】

Income statement
Income Statement(JPYmn)Total Sales
Facilities Management
Security Services
Cleaning Services
Construction Work

Materials/Supplies Sourcing Services

Vending Machine Services
Support Services and Other
YoY

Facilities Management
Security Services
Cleaning Services
Construction Work

Materials/Supplies Sourcing Services

Vending Machine Services
Support Services and Other
CoGS
Gross Profit
YoY
GPM
SG&A
SG&A / Sales
Operating Profit
YoY
OPM

Non-Operating Income & expenses
Non-Operating Income
Non-Operating Expenses
Recurring Profit
YoY
RPM
Extraordinary Gains and losses
Extraordinary Gains
Extraordinary Losses
Tax Charges
Implied Tax Rate
Minority Interests
Net Income
YoY
Net Margin

FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
137,519 145,690 140,299 170,905 219,797 248,876 257,243 266,705
40,20242,253
41,66640,01942,14742,05043,45845,83935,84836,67034,281
32,08832,23531,80534,242
36,622
41,09842,40345,05041,14239,85240,51942,32044,287
16,777
18,515
13,88916,42028,51353,071
45,63041,972
18,71836,73039,28444,54347,61817,18832,28031,20033,32934,825
3,591
5,846
5,412
5,327
8,037
10,942
13,71815,54023.7%
5.9%-3.7% 21.8% 28.6% 13.2%
3.4%
3.7%
5.1%
-1.4%
-4.0%
5.3%
-0.2%
3.3%
5.5%
2.3%
-6.5%
-6.4%
0.5%
-1.3%
7.7%
7.0%
3.2%
6.2%
-8.7%
-3.1%
1.7%
4.4%
4.6%
10.4% -25.0%
18.2%
73.6%
86.1% -14.0%
-8.0%
96.2%
7.0%
13.4%
6.9%
87.8%
-3.3%
6.8%
4.5%
62.8%
-7.4%
-1.6%
50.9%
36.1%
25.4%
13.3%
118,692 124,735 119,180 146,916 191,166 218,648 223,528 231,588
18,827 20,955 21,118 23,989 28,631 30,227 33,714 35,117
18.1% 11.3%
0.8% 13.6% 19.4%
5.6% 11.5%
4.2%
13.7%
14.4%
15.1%
14.0%
13.0%
12.1%
13.1%
13.2%
10,496
11,008
11,148
11,957
14,86816,326
18,59919,256
7.6%
7.6%
7.9%
7.0%
6.8%
6.6%
7.2%
7.2%
8,330
9,946
9,970 12,031 13,762 13,901 15,115 15,861
49.4%
19.4%
0.2%
20.7%
14.4%
1.0%
8.7%
4.9%
6.1%
6.8%
7.1%
7.0%
6.3%
5.6%
5.9%
5.9%
-134
-58
58
22
-9
-23
82
128
108
88
208
281
213
163
228
272
241
147
149
260
221
186
145
8,186
9,812
9,912 12,089 13,784 13,892 15,092 15,943
49.2%
19.9%
1.0%
22.0%
14.0%
0.8%
8.6%
5.6%
6.0%
6.7%
7.1%
7.1%
6.3%
5.6%
5.9%
6.0%
-830
223
-980
-807
27
-501
-342
57
110
457
5
73
80
28
15
162
940
234
985
880
53
529
357
3,702
4,026
4,618
4,613
5,932
6,306
6,192
6,530
45.8%
44.8%
45.6%
41.5%
45.7%
45.3%
42.4%
41.9%
80
50
0
132
104
237
344
4,379
4,876
5,466
6,495
6,912
7,509
8,161
8,725
46.1%
11.3%
12.1%
18.8%
6.4%
8.6%
8.7%
6.9%
3.2%
3.3%
3.9%
3.8%
3.1%
3.0%
3.2%
3.3%

FY02/16Cons.
281,041
48,96238,45647,87043,85550,51632,741
18,639
5.4%
6.8%
5.0%
8.1%
4.5%
6.1%
-6.0%
19.9%
243,651
37,390
6.5%
13.3%
20,682
7.4%
16,707
5.3%
5.9%
-23
253
-275
16,684
4.6%
5.9%
-158
816
974
6,469
39.1%
398.0%
9,658
10.7%
3.4%

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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Historical forecast accuracy
Initial CE vs. Results(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

FY02/08Cons.
120,000
137,519
14.6%
8,330
6,800
8,186
20.4%
3,600
4,379
21.6%

FY02/09Cons.
145,000
145,690
0.5%
9,100
9,946
9.3%
9,000
9,812
9.0%
4,600
4,876
6.0%

FY02/10Cons.
150,000
140,299-6.5%
10,100
9,970
-1.3%
9,900
9,912
0.1%
5,200
5,466
5.1%

FY02/11Cons.
181,000
170,905-5.6%
12,05012,031-0.2%
12,10512,089
-0.1%
6,470
6,495
0.4%

FY02/12Cons.
213,000
219,797
3.2%
14,30013,762-3.8%
14,30013,784
-3.6%
7,600
6,912
-9.1%

FY02/13 FY02/14 FY02/15 FY02/16
Cons.
Cons.
Cons.
Cons.
260,000
260,000
270,000
280,000
248,876
257,243
266,705
281,041
-4.3%
-1.1%
-1.2%
0.4%
16,60015,50016,00017,00013,901
15,115
15,861
16,707-16.3%
-2.5%
-0.9%
-1.7%
16,60015,50016,00017,00013,892
15,092
15,943
16,684-16.3%
-2.6%
-0.4%
-1.9%
8,700
8,300
8,600
9,400
7,509
8,161
8,725
9,658
-13.7%
-1.7%
1.5%
2.7%

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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LAST UPDATE【2016/5/11】

Balance sheet(JPYmn)ASSETSCash and Equivalents
Marketable securities
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 FY02/16

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
31,240-657
1,527
27,3203,349
72,486
1,217
246
1,918
284
108
3,773
11,2491,023
12,272
2,577
406
1,517
-224
4,276
20,32292,80910,014 12,565 15,580 20,386
44,673 37,420 40,055 39,512
-144
-290
-168
-360
2,237
2,504
2,618
2,897
18,020 32,420 41,326 37,362
4,523
5,728
5,066
5,877
79,323 90,347 104,477 105,674
1,089
1,046
1,009
1,642
274
238
211
190
2,079
2,487
2,516
2,663
282
278
278
1,978
72
209
345
610
3,796
4,258
4,361
7,086
10,801 10,078
9,069
7,989
1,520
1,609
1,867
2,408
12,321 11,687 10,937 10,397
2,973
3,897
3,768
4,463
288
254
284
310
2,196
1,877
2,750
3,911
-200
-199
-535
-494
5,257
5,829
6,268
8,190
21,375 21,775 21,567 25,674

100,699

112,122

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 22,424 23,720
80
49
41
7,227
8,251
9,882
16,281 30,724 33,643
31
6
15
993
1,006
968
1,024
1,012
983
17,306 31,737 34,626
3,238
3,238
3,238
2,964 18,741 18,753
25,366 30,575 35,285
-461
-461
-460
145
645
647
110
149
173
545
31,364 52,887 58,182
7,330
7,298
9,047
111
55
56
10,853 31,963 36,971
64.2%
62.3%
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 30,902 28,457
5
12,600 15,738 16,364
39,306 46,640 44,821
1,500
1,908
2,527
1,500
1,908
2,527
40,806 48,549 47,348
3,238
3,238
3,238
18,818 18,850 18,862
46,235 52,388 59,393
-449
-443
-441
1,711
1,373
525
165
166
221
1,597
1,922
2,200
71,316 77,495 84,000
13,223 11,771 13,952
5
44,980 56,906 57,748
62.0%
59.8%
62.1%

126,044

131,349

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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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 ＞ Historical financial statements

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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
2,466-1,903-1,452
10,740FY2/16
10,303-3,255
7,048-2,821
2,861-2,4142,181
7,924

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 (days)
Accounts Receivable TurnoverDays in Accounts Receivable
Inventory TurnoverDays in Inventory
Payables TurnoverDays in Payables
Cash Conversion Cycle (days)

FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15
8.2
8.2
7.7
7.4
6.6
6.3
6.9
44.7
44.6
47.6
49.4
55.7
58.2
53.0
6,565.0 4,965.8
196.4
127.3
116.2
94.3
90.4
0.1
0.1
1.9
2.9
3.1
3.9
4.0
12.0
12.2
9.4
8.3
9.1
8.7
8.0
30.5
29.9
39.0
44.1
40.3
41.8
45.4
14.3
14.8
10.4
8.2
18.5
20.3
11.7

FY2/16
7.1
51.7
88.4
4.1
8.2
44.5
11.3

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 ＞ Other information

LAST UPDATE【2016/5/11】

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 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

On January 26, 2016, the company announced an agreement to spinoff a business unit to Anabuki Housing Service, Inc(Anabuki Housing) by way of a simplified absorption-type split. The spinoff will only have a minor impact on consolidated
earnings.
AEON DELIGHT has decided that is best going forward to transfer its domestic apartment management business (139
co-ops, 6105 apartment units) to Anabuki Housing, a major real-estate company. The business that will be spun off
generated sales of JPY684mn in FY02/15. Assets worth JPY1mn will be spun off, effective March 31, 2016 (planned).

On December 11, 2015, the company announced the results of the tender offer for Hakuseisha Co., Ltd., (JASDAQ
9736) and that it would be making Hakuseisha a consolidated subsidiary as of December 17.
The company acquired 7,248,971 shares out of the planned 7,619,207 shares (transfer date: December 17), giving it
89.83% of voting rights. It does not expect the tender offer to have a significant impact on its results for FY02/16.

On October 27, 2015, the company announced a tender offer for Hakuseisha Co., Ltd.

Summary of tender offer
AEON DELIGHT is the third largest shareholder of Hakuseisha, owning 450,000 shares (5.58% ownership) through wholly
owned subsidiary Kankyo Seibi Co., Ltd. On October 27, 2015, AEON DELIGHT reached an agreement with J. FRONTRETAILING Co., Ltd., (the parent of wholly owned subsidiary Daimaru Matsuzakaya Department Stores Co., Ltd.,
Hakuseisha’s leading shareholder with 2,046,170 shares [25.36% ownership]). The agreement was on the outsourcing ofHakuseisha’s operations and the transfer of personnel on loan, as well as the acquisition of all Hakuseisha’s common stock(excluding shares held by Kankyo Seibi) and the execution of a tender offer with the intent of making Hakuseisha a wholly
owned subsidiary of AEON DELIGHT.

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Hakuseisha announces acceptance of tender offer and recommendation
At meeting of the board of directors held on October 27, 2015, Hakuseisha decided to support the tender andrecommend acceptance by shareholders.

Tender offer price: JPY800 per share, JPY6.1bn total.
The planned pricing of the tender offer is JPY800 per share (October 27 closing price: JPY335), for a total purchase priceof JPY6,095,365,600 based on the planned acquisition of 7,619,207 shares. The minimum number of shares to beacquired via the tender offer is 3,593,000 (44.53%), so that Hakuseisha can be made a wholly owned subsidiary of AEON
DELIGHT to strengthen the capital partnership and achieve synergies.

Scheduled to become wholly owned subsidiary
If AEON DELIGHT is unable to acquire all of Hakuseisha’s common stock, it intends make it a wholly owned subsidiary,with AEON DELIGHT and Kankyo Seibi as the only shareholders of Hakuseisha. This is under the condition that the total
number of tendered and other shares is greater than the minimum (4,933,000 shares, equivalent to 66.7%) and an
agreement is reached with the majority of shareholders other than those with a conflict of interest.

Background on tender offer
About Hakuseisha
Established in 1954, Hakuseisha is a comprehensive building maintenance company engaged primarily in cleaning,
security, and facilities management. Now an equity-method affiliate of J. Front Retailing, Hakuseisha provides building
maintenance services mainly for large retail facilities, such as the department stores operated by J. Front Retailing.
AEON DELIGHT thinks that Hakuseisha can offer skills gained from over 20 years in clean-room cleaning at facilities
manufacturing precision equipment for industrial applications and at facilities making pharmaceuticals, and from over 13
years' experience in sanitation management systems at food-processing facilities.

Industry environment
AEON DELIGHT expects securing earnings to become more difficult given the limited growth expected in the number ofcommercial facilities and office buildings in Japan, and also given the continual pressure to reduce costs from existingcustomers, which will be exacerbated by anticipated increases in labor and materials costs.
Moreover, the company sees the need to shift from a labor-intensive to a knowledge-intensive business structures, as
customer needs continue to grow more diverse and sophisticated. This is necessary to increase visibility of operations andensure standardized methods; to develop IT technologies, equipment and materials while acquiring more advanced
technology and knowledge; and to improve operation productivity and quality, including through consulting sales andquality-assurance contracts. To achieve this shift, the company requires a network that provides sophisticated andwide-ranging technology, expertise, and staff, as well as major investments to acquire relevant assets.

Events leading to the tender offer
AEON DELIGHT began considering working with Hakuseisha when Aeon, Co., Ltd. acquired all shares of Peacock Stores
Inc. from J. Front Retailing in April 2013. Hakuseisha handled cleaning services and security for Peacock Stores. AEON
Delight and Hakuseisha entered a subcontracting agreement in January 2014. The two companies began pursuing further
cooperation through a capital relationship. Through synergies, the two companies recognized the potential to raise theircorporate values. AEON DELIGHT approached J. Front Retailing in October 2014 about selling all its shares of Hakuseisha’s

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common stock. In June 2015 AEON DELIGHT proposed strengthening the capital alliance and the two companies began
specific talks.
AEON DELIGHT and Hakuseisha concluded that the corporate value and business foundations of each would benefit fromthe tender offer. They also decided that making Hakuseisha a non-listed company would eliminate the expenses
associated with maintaining stock exchange listings.

Expected synergy
Stronger sales capabilities
Reinforced service quality and cost competitiveness
Stronger business development
Improved back-office efficiency
The impact on FY2/2016 consolidated earnings is expected to be limited.
Hakuseisha results summary(JPYmn)
Sales
Kanto area
Kansai area
Chubu area
Building maintenance
Securities management
Other
Daimaru Matsuzakaya Department Stores
JFR Service
YoY
Gross profit
SG&A
Operating profit
Recurring profit
Net income
Net assets
Total assets
Net cash

FY03/13
9,723
4,893
4,216
613

100.0%
50.3%
43.4%
6.3%

6,983
2,588
242

71.8%
26.6%
2.5%

2,254
NA
1.1%
1,178
823
354
455
296
6,169
8,024
3,123

23.2%

FY03/14
10,037
4,980
4,286
771

12.1%
8.5%
3.6%
4.7%
3.0%

2,339
NA
3.2%
1,121
856
265
449
290
6,501
8,604
3,661

100.0%
49.6%
42.7%
7.7%

23.3%

11.2%
8.5%
2.6%
4.5%
2.9%

FY03/15
9,839
4,610
4,392
837

2,546
NA
-2.0%
1,010
835
175
276
172
6,637
8,821
3,035

100.0%
46.9%
44.6%
8.5%

FY03/16 Est.
9,343

100.0%

25.9%

10.3%
8.5%
1.8%
2.8%
1.8%

-5.0%

140
232
142

1.5%
2.5%
1.5%

Source: Shared Research based on company data

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)

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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 to
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 muchwww.sharedresearch.jp

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as 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, promote
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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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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