SR Research Report
2013/11/28

Aeon Delight Co., Ltd. (9787)
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 andfindings. 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 and feedback. Write to us at
sr_inquiries@sharedresearch.jp or find us on Bloomberg.

Aeon Delight Co., Ltd. (9787)

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Contents
Recent Updates .......................................................................................................4
Highlights ............................................................................................................4
Trends & Outlook .................................................................................................4
Business ............................................................................................................... 12
Business Description ........................................................................................... 12
Market and Value Chain ...................................................................................... 21
Strategy ............................................................................................................ 25
Historical Financial Statements................................................................................ 29
Income Statement.............................................................................................. 29
Balance Sheet .................................................................................................... 31
Statement of Cash Flows..................................................................................... 33
Other Information ................................................................................................. 35
History .............................................................................................................. 35
News & Topics ................................................................................................... 35
Major Shareholders ............................................................................................ 37
Top Management ............................................................................................... 37
Employees ......................................................................................................... 37
Investor Relations .............................................................................................. 37
By the Way ........................................................................................................... 38
Company Profile ................................................................................................. 40

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Aeon Delight Co., Ltd. (9787)

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Income Statement(Million Yen)
Total Sales

FY02/09Cons.
145,690

FY02/10Cons.
140,299

FY02/11
Cons.
170,905

FY02/12Cons.
219,797

FY02/13Cons.
248,876

FY02/14Est.
260,000
4.5%

YoY

5.9%

-3.7%

21.8%

28.6%

13.2%

Gross Profit

20,955

21,11823,98928,63130,227

YoY
GPM

11.3%
14.4%

0.8%
15.1%

13.6%
14.0%

19.4%
13.0%

5.6%
12.1%

Operating Profit
YoY
OPM

Recurring Profit
YoY
RPM

9,946

9,970

12,031

13,762

13,901

15,500

19.4%
6.8%

0.2%
7.1%

20.7%
7.0%

14.4%
6.3%

1.0%
5.6%

11.5%
6.0%

9,812

9,912

12,08913,784

13,892

15,500

19.9%
6.7%

1.0%
7.1%

22.0%
7.1%

14.0%
6.3%

0.8%
5.6%

11.6%
6.0%

Net Income

4,876

5,466

6,495

6,912

7,509

8,300

YoY
Net Margin

11.3%
3.3%

12.1%
3.9%

18.8%
3.8%

6.4%
3.1%

8.6%
3.0%

10.5%
3.2%

41,400
122.9
122.8
22.0
669.3

41,400
137.8
137.6
27.0
787.8

54,170
142.6
142.3
39.0
1,005.6

54,170
131.8
131.5
40.0
1,095.6

54,170
143.2
142.7
46.0
1,202.4

6,991
30,1502,602
3,658
12,62349,035
10,551
1,688
20,131
56
824
20,95628,0791,744

7,964
30,026
2,741
3,977
11,924
48,6708,974
80
16,28131
1,024
17,306
31,364111

13,09864,524
3,756
4,766
11,577
84,62422,42449
30,724
6
1,012
31,73752,88755

9,707
72,486
3,773
4,276
12,27292,80923,72041
33,64315983
34,62658,182
56

10,01479,323
3,796
5,257
12,321
100,699
24,544
10
34,955
5
1,195
36,15164,54715

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

10.1%
19.9%
54.1%

11.2%
18.9%
64.2%

9.7%
15.5%
62.3%

7.8%
12.5%
61.9%

7.8%
12.5%
62.6%

Per Share Data
Number of Shares
EPS
EPS (Fully Diluted)
Dividend Per ShareBook Value Per Share
Balance Sheet (Million Yen)
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
Interest-Bearing Debt
Cash Flow Statement (Million Yen)
Operating Cash Flow
Investment Cash Flow
Financing Cash Flow
Financial Ratios
ROA
ROE
Equity Ratio

158.2
48.0

Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.

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Aeon Delight Co., Ltd. (9787)

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

On October 9, 2013, SR Inc. updated comments on Q2 FY02/14 results of the company following ourmeeting with management; click here to go to the results section.

On October 2, 2013, the company announced Q2 FY02/14 results; click here to go to the results
section.

Trends & Outlook
Quarterly Trends and Results
Quarterly Performance(million yen)
Sales
YoY
GP
YoY
GPM

SG&A
YoY
SG&A / Sales
OP
YoY

Q1
58,584
10.6%
6,984
3.0%

FY02/13Q2
Q3
68,18765,620
19.7%
19.0%
7,998
7,790
3.5%
10.5%

Q4
56,485
3.2%
7,455
5.3%

Q1
66,711
13.9%
8,173
17.0%

FY02/14Q2
66,841
-2.0%
8,808
10.1%

11.9%

11.7%

11.9%

13.2%

12.3%

13.2%

3,890
5.4%
6.6%
3,093
0.2%

3,979
2.1%
5.8%
4,020
5.0%

4,500
16.8%
6.9%
3,289
2.9%

3,957
15.5%
7.0%
3,499
-4.1%

4,782
22.9%
7.2%
3,390
9.6%

4,624
16.2%
6.9%
4,185
4.1%

OPM

5.3%

5.9%

5.0%

6.2%

5.1%

6.3%

YoY

3,102
-1.2%

4,022
4.9%

3,288
2.4%

3,480
-3.3%

3,403
9.7%

4,168
3.6%

RPM

5.3%

5.9%

5.0%

6.2%

5.1%

6.2%

YoY

1,786
4.8%

2,158
7.3%

1,561
-1.0%

2,004
23.7%

1,858
4.0%

2,289
6.1%

NPM

3.0%

3.2%

2.4%

3.5%

2.8%

3.4%

RP
NI

Q3

Q4

FY02/14% of 1H
1H Est.
104.3%
128,000

98.4%

7,700

98.3%

7,700

101.1%

4,100

Source: Company data, SR Inc. Research; figures may differ from company materials due to differences in rounding methods.

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Aeon Delight Co., Ltd. (9787)

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Quarterly Sales(Million Yen)
Facilities Management
YoY
Security Services
YoY
Cleaning Services
YoY
Construction WorkYoY
Materials/Supplies Sourcing
YoY
Vending Machine Services
YoY
Support Services
YoY

1Q
10,622
2.4%
8,438
6.8%
10,5394.1%
15,88843.4%
10,721
12.6%
7,498
-0.1%
2,964
43.1%

FY02/14
2Q
10,848
0.9%
8,367
5.8%
10,485
4.0%
13,929-26.2%
11,023
12.8%
8,716
1.7%
3,433
54.8%

3Q

4Q

Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.

1H (Q2) FY02/14 Results (announced on October 2, 2013; please refer to the preceding table)
The company maintained its full-year forecasts.
Sales in 1H FY02/14 were 133.5 billion yen (+5.3% YoY), operating profit 7.6 billion yen (+6.5% YoY),
recurring profit 7.6 billion yen (+6.3% YoY) and net income of 4.1 billion yen (+5.1% YoY). Gross profit
margin improved 0.9 percentage points over the previous year to 12.7%.
An overview of each segment is as follows:
Sales in the Facilities Management segment were 21.5 billion yen (+1.6% YoY), and the segment grossprofit margin was 15.5% (14.7% in 1H FY02/13). Sales growth was mainly attributable to new contracts
from the Aeon group to manage large-scale facilities from March 2013, coupled with favorable demand
from outside the Aeon group such as servicing a large sports stadium, government and public officefacilities. In addition, facilities management of newly added resort hotel and prefectural hospital during
the previous term contributed to the increase in segment sales.
Sales in the Securities Services segment were 16.9 billion yen (+6.3% YoY), and the segment gross profit
margin was 12.8% (13.1% in 1H FY02/13). In addition to new securities services contracts, the company
added “attender” services (i.e., attendant staff functioning as an information and security provider) tonine new stores. As of the end of the period, the company was offering attender services at 11 stores.
Aeon Delight plans to provide attender services at 15 stores by the end of FY02/14. The company addedthat it won many contracts for security services at large events (e.g., J-League soccer games).
Sales in the Cleaning Services segment were 21.0 billion yen (+4.0% YoY), and the segment gross profit
margin was 18.4% (18.9% in 1H FY02/13). Supported by the company’s promotion of its original coating
agent, which replaces floor wax, and added 174 new stores using this new product. In addition, thecompany continued to prepare for mass producing its “recirculating, water-saving urinals” that it
developed last year, although the preparations were slightly behind schedule.
Sales in the Construction Work segment were 29.8 billion yen, 0.5% lower YoY largely due to
exceptionally strong LED-related sales (16.0 billion yen) a year earlier. The company said that the sales

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were better than its estimate. The segment gross profit margin was 8.2% (7.9% in 1H FY02/13).
LED-related sales and installation work reached 12.0 billion yen, due to stronger than initially expectedenergy-savings related investments and measures to reduce electricity costs by each of its customers.
According to Aeon Delight, the bulk of LED-related sales were made to the Aeon group. Although thecompany’s initial plan for full-year LED-related sales to the Aeon group was 10.0 billion yen, the company
appeared to be experiencing LED-related sales per store climbing higher than initially expected.
Sales in the Materials and Supplies Sourcing segment were 21.7 billion yen (+12.7% YoY), and thesegment gross profit margin was 8.0% (6.8% in 1H FY02/13). The company started providing hygieneand packaging materials to newly added customers, including Aeron Market Co., Ltd., whose stores
became part of the Aeon group last year. Furthermore, as a result of concentrated demand for trays andpackaging materials for fresh foods and delicatessen items, sales jumped 61.2% YoY to 4.2 billion yen.
Sales in the Vending Machine Services segment were 16.2 billion yen (+0.8% YoY), and the segment
gross profit margin was 10.2% (9.9% in 1H FY02/13). The number of soft drink vending machines under
the company’s management increased 1,400 units. This significant increase was due to installations of
new machines (e.g., electric money-capable, lower-price) and to new installations at stores run by newgroup companies since last year (e.g., Marunaka Co., Ltd., Daiei, Inc.). In 1H, Aeon Delight installed about
200 units at Daiei stores, adding that it would install roughly 2,000 units in 2H.
Sales in the Support Services segment were 6.4 billion yen (+49.1% YoY), and the segment gross profit
margin was 26.3% (16.3% in 1H FY02/13). Demographic changes (i.e., growing elderly population) anddiversified lifestyle in urban areas contributed to a significant increase in housekeeping services, which
recorded a sales increase of 68.2% YoY, and contributed to the improvement of segment sales andprofitability.

October 3, 2013 1H Results Meeting Summary
Initiatives in 1H FY02/14
Restructuring Efforts
1. Cost Reductions
 Cleaning Services: Profitability improved on lower costs at directly managed properties and lower
commissions paid to partner companies
Directly managed properties: Optimized work scheduling and process standardizationPartner companies: Lowered commissions
 Materials and Supplies: Profitability improved on standardized materials and supplies used at groupcompanies, streamlined logistics network, and better ordering processes
2. New Product/Service Development
 Aeon Delight Coat
Plans to use this new floor coating agent at 500 properties (mainly of the Aeon group) andhave related sales of 250 million yen
 Aeon Delight Hard Coat (Upgraded Coating Agent)This coating agent eliminates “puffing” work on floors. Due to this feature, the company has
begun talks with new potential customers (e.g., specialty stores).
Attender Services
The Securities Services segment’s new service line combining securities and information services
 Launched at nine stores during 1H, winning high evaluations
 Launched also at MaxValu Tsingtao at the Wangban Center Building in China, gaining high evaluations

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and many enquiries
Lifestyle Support Services
 Popular housekeeping service options were packaged and sold at 3,000 locations nationwide (e.g.,large home appliance stores, Aeon group stores) with 1H sales surging 68% YoY.
Eco Businesses Because LED light bulbs do not dissipate heat, they help reduce air-conditioning costs in spring andsummer. Due to this power-saving feature, investment in LED lighting can pay off in less than two
years, though requiring installation of peripheral equipment on existing fluorescent lamps. Therefore,
demand is likely to increase going forward.
 With its LED light bulbs, Aeon Delight intends to target non-Aeon group clients (e.g., hospitals, hotels)
and new applications (i.e., those other than fluorescent lamp replacements).
Electric Vehicle Chargers at Aeon Malls Aeon Delight plans to add electric money WAON compatibility to its EV chargers (2014 target: 1,150
chargers at 490 stores).
New Clients
Aeon Delight gained new clients through solutions sales push.
 Solutions sales: Many of target clients are corporates, meaning efficient and effective businesspropositions are key to success. The company distributed iPads to about 1,000 sales staff, and sales
staff are now able to show target clients movies of Aeon Delight services.
 The company increased transactions with new Aeon group stores and new group companies. The
company plans to open 35 new stores in 2H.
ASEAN/China
Aeon Delight provided services in Japan, China, and ASEAN by giving equal emphasis on each region.
 China: The company won new contracts for 49 locations (a total of 136 locations). In July, thecompany established a joint venture with the leading company in Wuhan.
 Malaysia: The company provided services at 45 locations (mainly vending machine and cleaning
services).
 Vietnam: Aeon Delight was developing new businesses there.

Initiatives Planned for 2H FY02/14
Additional Restructuring Efforts BEMS Upgrades
In 1H, Aeon Delight jointly developed a new, cooler/chiller control-enabled Building Energy Management
System (BEMS) with a large equipment manufacturer. The new BEMS helps reduce power consumption
during thawing processes. The company plans to begin selling and installing the new BEMS at Aeon groupstores from this 2H, with an eye to selling to non-group clients (e.g., drugstores).
 Urinal Revolution
The company improved its “recirculating, water-saving urinals” further in 1H, claiming that they cut water
usage by 90%. The company plans to begin the shipment of the urinals in 2H. In fact, Aeon Delightdelivered 14 units to the AEON Shinagawa Seaside Shopping Center (currently being installed).
Expanding Client Base
Aeon Delight plans to begin providing comprehensive facilities management services (FMS) to flagship
AEOM stores (AEON Mall Makuhari Shin-toshin in December 2013).

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Creating New Markets in Asia
China
 China has yet to see oligopoly in the comprehensive FMS market, thus likely offering business
opportunities. Aeon Delight was ranked 10th in the market as of the end of 1H FY02/14.
 Aeon Delight believes that its services are much needed in China, considering Beijing’s PM2.5 andother problems.
 Aeon Delight was cooperating with local partners in preparation for new businesses, such as Energy
Service Company (ESCO) services. In fact, the company was receiving many enquiries from potential
clients in South China and Hong Kong.
 China’s Ministry of Commerce is planning to develop about 300 shopping malls with estimated total
investment of two trillion yen.
Malaysia
Due to instable electricity supply, ESCO services may provide ample opportunities.
Next Medium-Term Plan
Aeon Delight intends to announce its new medium-term plan (FY02/15-FY02/17) next spring.

Q1 FY02/14 Results (announced on July 3, 2013; please refer to the preceding table)
Consolidated sales were 66.7 billion yen (+13.9% YoY), gross profit was 8.2 billion yen (+17.0% YoY),
and gross profit margin was 12.2% (11.9% a year earlier). Sales rose after the company added Aeon
Market Co., Ltd. (Peacock Stores) to the Aeon group while winning new clients such as a large stadium,
headquarters buildings of major corporations, and commercial facilities. Gross profit margin improved
attributable to greater cooperation with partner companies in an effort to lower costs and streamline
operations. Gross profit appeared to have exceeded the company’s forecast (Q1 guidance not disclosed),mainly due to stronger-than-expected results in the Facilities Management segment.
An overview of each segment is as follows:
Sales in the Facilities Management segment were 10.6 billion yen (+2.4% YoY), with gross profit of 1.6
billion yen (+9.0% YoY, gross profit margin of 15.5%). This segment was supported by new contracts
from the Aeon group to manage large-scale facilities from March 2013, as well as favorable demand fromoutside the Aeon group such as servicing a large stadium, and new contracts for government and public
office facilities. In addition, segment sales were also supported by favorable contributions frommanagement services of a resort hotel, which started in the previous term, and a prefectural public
hospital.
Sales in the Security Services segment were 8.4 billion yen (+6.8% YoY), gross profit was 1.1 billion yen(+2.1% YoY, gross profit margin of 12.5%). In addition to new security services contracts, the company
added “attender” services to four new stores. The company stated that the attender services received
positive customer feedback and that such services may expand going forward.
Sales in the Cleaning Services segment were 10.5 billion yen (+4.1% YoY), with gross profit of 1.9 billion
yen (+2.0% YoY, gross profit margin of 18.3 %). The company promoted its original coating agent, which
replaces floor wax, and introduced the product at six additional stores. Furthermore, the company ispreparing to market its “recirculating, water-saving urinal,” which was developed last year; during thelatter half of this fiscal year (the company has not changed its plan to sell 1,500 urinals during FY02/14).
Sales in the Construction Work segment were 15.9 billion yen (+43.4% YoY), with gross profit of 1.3

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billion yen (+31.3% YoY, gross profit margin of 7.9%), a significant increase over the previous year. In theenvironmental operations, the company posted a 70% sales increase YoY after winning a 6.6 billion yenorder for LED-related work mainly for the Aeon group. In the renovation operations, demand for store
renewal and earthquake-resistant construction work led to a 27% sales increase. It should be mentionedthat LED-related work at the Aeon group is nearing its final stages. Thus, sales contributions from thisbusiness may begin to decline in Q2 and thereafter.
Sales in the Materials and Supplies Sourcing segment were 10.7 billion yen (+12.6% YoY), with grossprofit of 800 million yen (+32.7% YoY, gross profit margin of 7.8%). The company started providing
hygiene and packaging materials to newly added customers, including Aeon Market Co., Ltd., whose
stores became part of the Aeon group last year.
Sales in the Vending Machine Services segment were 7.5 billion yen (-0.1% YoY), basically flat over theprevious year, with gross profit of 700 million yen (+2.7% YoY, gross profit margin of 9.1%). Sales pervending machine were stagnant as consumers remained cautious about spending, despite installing new
vending machines in its customer stores, including Marunaka Co., Ltd., that were added to the Aeon groupduring the previous year. Meanwhile, the company is seeking to install vending machines at Daiei Inc.
stores. Although there had been no negotiations between the two companies as of Q1, progress is
expected now that Daiei is an Aeon Co., Ltd. subsidiary.
Sales in the Support Services segment were 3.0 billion yen (+43.1% YoY), with gross profit of 700 million
yen (+146.1% YoY, gross profit margin of 24.7%), a large increase over the previous year. Kajitaku Co.,
Ltd. favorably expanded its mainstay housework services and recorded an 18.9% YoY growth in sales. In
addition, Aeon Compass Co., Ltd. and General Services Inc., two companies that become consolidated
subsidiaries from the Q2 of last year, also contributed to the strong growth in segment sales. Gross profit
recorded strong growth, as a result of Aeon Compass (business travel, conference support services)
started booking sales commissions as gross profit (previously booked as sales) during the term.
As a result of adding new consolidated subsidiaries and implementing an aggressive investment strategy,
SG&A expenses totaled 4.8 billion yen (+22.9% YoY). Consequently, operating profit was 3.4 billion yen(+9.6% YoY), recurring profit was 3.4 billion yen (+9.7% YoY), and quarterly net profit was 1.9 billion yen(+4.0% YoY).
The company maintained its 1H and full-year earnings forecasts, and conditions remain favorable in Q2(as of July).

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 Delightwon 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 andcleaning 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 tohttp://www.sharedresearch.jp/

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LED work. SG&A expenses rose 9.8% YoY to 16.3 billion yen due to start-up costs mainly related toincreased 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.
For details on previous quarterly and annual results, please refer to the Historical Financial
Statements section.

Full-Year (FY02/14) Outlook
FY02/14 Forecasts(Million Yen)
Sales
YoY

1H
126,771

FY02/132H
122,105

Full-Year
248,876

Company Estimates
FY02/14
1H Actual
2H Full-Year
133,552
126,448
260,000

15.3%

11.2%

13.2%

5.3%

111,789
14,982

106,859
15,245

218,648
30,227

116,570
16,981

YoY
GPM

3.3%
11.8%

7.9%
12.5%

5.6%
12.1%

13.3%
12.7%

SG&A

7,869

8,457

16,326

9,406

SG&A / Sales

6.2%

6.9%

6.6%

7.0%

7,113

6,788

13,901

2.9%
5.6%

-0.9%
5.6%

7,124
2.1%
5.6%

CoGS
Gross Profit

Operating Profit
YoY
OPM

Recurring Profit
YoY
RPM

Net Income
YoY

3.6%

4.5%

7,575

7,925

15,500

1.0%
5.6%

6.5%
5.7%

16.8%
6.3%

11.5%
6.0%

6,768

13,892

7,571

7,929

15,500

-0.6%
5.5%

0.8%
5.6%

6.3%
5.7%

17.2%
6.3%

11.6%
6.0%

3,944

3,565

7,509

4,147

4,153

8,300

6.2%

11.5%

8.6%

5.1%

16.5%

10.5%

Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.

The FY02/14 forecast calls for consolidated sales of 260 billion yen (+5% YoY), operating profit of 15.5
billion yen (+12% YoY), and net income of 8.3 billion yen (+11% YoY).
SR Inc. estimates sales by segments based on the company’s sales breakdown weightings. In the
Facilities Management Services segment, SR Inc. forecasts sales of 44.3 billion yen (+5% YoY), support
by stable demand from the Aeon group companies. SR Inc. forecasts Security Services sales of 32.8 billion
yen (+3% YoY), backed by favorable demand for security cameras, and Cleaning Services sales of 43.7
billion yen (+8% YoY) due to demand for specialized cleaning services from hospitals and othernon-commercial facilities. SR Inc. forecasts Construction Work sales of 49.9 billion yen (-6% YoY), as thecompany expects LED work to decline to 10 billion yen in FY02/14 from 26 billion yen in FY02/13 giventhat most of work installing LED lighting fixtures at Aeon group retail stores is near completion,
contributing to the decline over the previous year. SR Inc. forecasts Materials and Supplies Sourcing salesof 43 billion yen (+10% YoY), supported by stable demand for a wide-range of commercial supplies, andhttp://www.sharedresearch.jp/

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sales of 34.2 billion yen (+10% YoY) in the Vending Machine Services segment, supported by placement
in Aeon group retail stores. SR Inc. forecasts sales of 12.0 billion yen (+11% YoY) in the Support segment,
due in part to contributions from enhanced operations in residential services.
Aeon Delight has developed a recirculating, water-saving plastic urinal in FY02/12. (Please refer to News
& Topics section). The company plans to mass-produce these urinals starting in 2H of FY02/14.Theseurinals are expected to be priced at 120,000 yen per unit, and the company expects to sell 1,500 units
and generate sales of 180 million yen in FY02/14.
The company forecasts operating profit of 15.5 billion yen (+12% YoY). It intends to reduce costs by 1.2
billion yen through efficiency and reviewing outsourcing expenses. It also plans to improve product mix(i.e., avoid cost overruns for LED installment work) to raise profitability. Consequently, operating profit
margin is expected to improve to 6.0% in FY02/14 from 5.6% in FY02/13.
In FY02/14, Aeon Co., Ltd. (TSE1: 8267) intends to open 22 new stores: six Aeon malls, six Aeon Retail
shopping centers, and ten MaxValu retail stores. Aeon Delight will provide services to all these stores.
In April 2013, Aeon announced the purchase of Daiei Inc. (TSE1: 8263). Aeon Delight sold 9 billion yen inservices to Daiei in FY02/13. According to the company, this could rise to at least 1.5 times the current
level if its vending machine services segment is able to gain orders from Daiei after the retailer becomespart of the Aeon group. In addition, Aeon announced that it would make Peacock Store a wholly owned
unit that could also provide Aeon Delight with facilities maintenance services.
The company has not assumed any potential benefits from acquisitions by its parent company, Aeon ofDaiei and Peacock supermarkets. It forecasts recurring profit of 15.5 billion yen (+12% YoY), and net
income of 8.3 billion yen (+11% YoY).

Dividends
Aeon Delight increased dividends for the past nine years, and plans to pay an annual dividend of 48 yen ashare (46 yen in FY02/13) in FY02/14.

Future Outlook
Aeon Delight is in the last year of its three-year business plan that covers the period from FY02/12 to
FY02/14. The plan called for further growth through an expansion of the comprehensive facilities
management business by targeting three markets: urban areas, the ecology and environmental market,
and Asia outside Japan. In urban areas, the company targets small retail stores. In the ecology andenvironmental market, the focus is on energy-efficient LED lighting and solar power panels. The Asia, thecompany seeks to provide comprehensive facilities management services to high growth countries. At thestart of this medium-term business plan, the company forecast sales of 300 billion yen and operating
profit of 22 billion yen in FY02/14. However, the company announced latest forecast sales of 260 billion
yen and operating profit of 15.5 billion yen in FY02/14 (announced after FY02/13 earnings results on April
9, 2013).
SR Inc. believes that the company will introduce its new medium-term business plan in the current fiscal
year FY02/14. Over the medium and long terms, SR Inc. believes that the company will go beyond its
comprehensive facilities maintenance services, and further develop its three key markets, urban areas,
ecology and environmental market, and Asia outside Japan.

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Business
Business Description
Aeon Delight is providing maintenance services for retail facilities and office buildings. The company,
formerly known as Japan 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 a subsidiary 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, thecompany 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 Delight also 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 andmoved to a holding 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 (Aeon Mall). The company is not only looking to develop its own
shopping centers, but also to build its business in facilities management, which will contract managementof retail facilities developed by other companies. Aeon has been expanded into Hong Kong, Thailand, andMalaysia, 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 businessalliance with A to Z Service Co., Ltd., maintenance service provider for small commercial facilities, andraised its stake in the company to 54.8% from 20.4% in May 2011. A to Z Service specializes inmaintenance services to convenience stores and fast food restaurants. 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, andstrengthened its expansion into the household segment. It acquired a 40% stake in Kankyouseibi Co., Ltd.,
operator of maintenance services for large-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 andcondominium concierge services. In October 2012, it acquired a 55% stake in a domestic travel services
company and renamed it Aeon Compass Co., Ltd. The company also bought 51% of General Services Inc.,a business-process outsourcing company.

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M&A activities by Aeon Holding
On March 4, 2013, Aeon acquired Peacock Store Ltd., a supermarket operator, from J Front Retailing Co.,
Ltd. (TSE1: 3086). There were 82 Peacock stores as of March 2013, providing a potential business
opportunity for Aeon Delight. In April 2013, the company said that it would raise its stake in Daiei to over
40% from 20%. Aeon Delight had 9 billion in sales to Daiei in FY02/13, and may expand to 13 billion ormore after it is integrated into the Aeon group.
In March 2013, Aeon announced it would raise its stake in Daiei to more than 40% from 20% by April
2013, and would assume a majority of Daiei’s board seats. Shouhei Murai, who led Aeon’s supermarket
operations, will become Daiei’s president effective May 2013. Mr. Murai became president of Aeon Retail in2008 and boosted the company’s profitability.

Business Overview
In FY02/13, Aeon Delight operated seven main business segments: facilities management, security
services, cleaning services, construction work, materials and supplies sourcing services, vending
machines, and support services.

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

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Business Segments
Facilities Management (17% of total sales): This segment is involved in maintenance, inspection,
improvement, operation and management of overall facilities. In FY02/13, sales were 42.1 billion yen in
FY02/13 (-0.2% YoY) and operating profit was 4.7 billion yen (-8.3% YoY). Gross profit margin was about
15%, and operating profit margin was about 11%. This business is labor intensive. The company puts
personnel on-site at large retail facilities, while smaller facilities are visited periodically and monitored
remotely.
The company offers everything from permanent, on-site facilities management services in which staff
monitor equipment operations from a control room or disaster prevention center to regular patrol services.
This segments operations are highly automated, and can quickly respond to unexpected problems.
The company operates a nationwide AD solution center that provides security services 24 hours a day,365 days a week. Its network links 600 bases nationwide, and professional technical employees respondto all problems at all hours.
Security Services (13% of total sales): This segment provides comprehensive security services (i.e.,
security for facilities, security to handle crowds and traffic, and protection of valuable goods). It places
security guards at client facilities. In FY02/13, sales were 31.8 billion yen (-1.3% YoY) and operating profit
was 2.7 billion yen (-4.6%) in FY02/13. Gross profit margin was relatively low at 13%, compared with23.5% at Sohgo Security Services Co., Ltd (TSE1: 2331) and 34.8% at Secom Co., Ltd. (TSE1: 9735) forthe latest reported fiscal year. This segment outsources most of its work to Aeon Delight Security, asubsidiary.
The company operates highly sophisticated surveillance cameras similar to what is used at casinos. It isable to combine its expertise in facilities management and security know-how in providing made-to-ordersecurity plans. These innovative services offer high profitability and growth opportunities.
Cleaning Services (16% of total sales): This segment conducts cleaning services to buildings andfacilities. It offers everyday cleaning services and periodic cleaning services on a weekly, monthly or
yearly basis. In FY02/13, sales were 40.5 billion yen (+1.7% YoY) and operating profit was 5.9 billion yen(+0.6% YoY). Gross profit margin was 20% (25% for directly operated services). Service contracts are
renewed annually (80% of clients renew and are long-term customers).
The company considers cleaning to be a basis for building maintenance that can significantly influences
the life of buildings and facilities. Its cleaning services are designated to deliver sanitary control such as
sterile filtration or disinfection, and promote the longevity of buildings and facilities.
Construction Work (21% of total sales): This segment conducts large-scale renovation, interior design
work, and installation of energy-saving devices (i.e., LED lighting) and solar power systems For FY02/13,
sales were 53.1 billion yen (+86.1% YoY) and operating profit was 2.2 billion yen (+14.1% YoY). This
segment generates 70% of its sales from Aeon group companies, and has a gross profit margin of about
10%. Revenues from LED installation work were 26 billion yen in FY02/13 (7.4 billion yen in FY02/12),and has forecasted 10 billion yen of replacement work in FY02/14.
The company also provides diagnostic services that address structural degradation through its proprietary
technology - a comprehensive diagnostic system for buildings and equipment, energy conservation, andenvironmental soundness. This innovation incorporates the latest technology and equipment including
infrared photography, fiberscopes, and ultrasonic flow meters.
Aeon Delight invested in a special-purpose company that operates a solar-power generation system, andintends to collect dividends from this investment. The company is also pursuing contracts to install solar

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panels. It expects sales of 3.5 billion yen from this business in FY02/14 and expects to receive dividends
in FY02/15.

AEON GroupElectric Utility Companies

Profit Sharing

Profits
GMS

Energy Sales
Regional ElectricPower Companies

・ Capital investments
・ Construction
・ Operations
・ Electricity trading

Installation
Operations
SM/DS

Source: Company data, SR Inc. ResearchMaterials and Supplies Sourcing Services (16% of total sales): This segment acts as a purchasing
agent for customers. It purchases everything from office consumables to packing materials. Sales in
FY02/13 were 39.3 billion yen (+7.0% YoY) and operating profit was 1.5 billion yen (+18.5% YoY). Grossprofit margin is about 7% to 8%.
The company proposes ways to reduce costs and streamline operations for purchasing materials andsupplies. Since the company can purchase in bulk and reduce costs, customers are willing to subcontract
out their purchasing operations to the company. Aeon Delight proposes optimal sourcing strategies basedon work schedules to streamline order and delivery systems through its nationwide logistics system,taking advantage of the Aeon group network. The company handles everything from ordering toinventory control and distribution.

Vending Machine Services (13% of total sales): This segment operates soft drink vending machines.
It also creates relaxation areas with foliage plants and air purification equipment. In FY02/13, sales were31.2 billion yen (-3.4% YOY) and operating profit was 2.4 billion yen (+2.8%). Gross margin was 10%.
This segment was created after Aeon Delight acquired Certo Corp. (delisted from JASDAQ after being
acquired) in September 2010, a vending machine operator 66.4% owned by Aeon. As of FY02/13, thecompany had a total 38,000 vended machines, and generated 70% of segment sales from supermarkets
belonging to the Aeon group. The remainder of sales came from shopping malls operated by Aeon group
and non-Aeon companies.

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The company offers comprehensive services focused on the installation and maintenance of soft drink
vending machines, as well as providing foliage plants, smoke extractors, and toy vending machines. The
company vending machines stock a variety of best-selling products from major manufacturers andachieve per-machine sales that are above the industry average by carrying an optimal product lineup
determined by POS data and accurate operation plans that reduce out-of-stock time. This technology
helps reduce costs by increasing sales and minimizing the number of machines required.
Vending machines are cash cows that are highly profitable. The company is able to place its vending
machine at Aeon group retail stores nationwide that creates a barrier to competitors like Coca-Cola (i.e.,
Coca-Cola may not be able to place its vending machines in such locations).
Support Services (4% of total sales): This segment provides housework support services, businesstravel services, training services, and staffing services. The company offers various services to meet thediverse needs of its customers. In FY02/13, sales were 10.8 billion yen (+35.6% YoY) and operating profit
was 500 million yen (+223.1% YoY).
This segment grew through acquisitions. The company acquired Kajitaku Co., Ltd., a housework services
provider, and A to Z Service Co., Ltd., a maintenance service provider for small commercial facilities, in2011. These purchases contributed to strong operating profit growth in FY02/13.
Related companies
Aeon Delight is a diverse company with a wide-range of companies conducting various services tocustomers. Approximately half of these companies operate outside of Japan.
Domestic companies
Aeon Light Academy Co., Ltd. (training support; 100% owned by Aeon Delight)
Aeon Delight Security Co., Ltd. (security services; 100% owned)
Kankyouseibi Co., Ltd. (Security and services, cleaning services; 100% owned)
Aeon Compass Co., Ltd. (business-travel support; 55.0% owned)
Do Service Co., Ltd. (cleaning services; 100% owned)
A to Z Service Co. Ltd. (facilities maintenance services; owned 55.3% owned)
Kajitaku Co., Ltd. (housework services; 90.0% owned)
FMS Solution Co., Ltd. (IT support; 70.0% owned)
General Services Inc. (outsourcing consulting; 51% owned)
A-Life Support Co., Ltd. (condominium maintenance; owned 85.8% owned)
Overseas Business
In April 2011, Aeon Delight began providing maintenance services to two Aeon group retail operations in
China; combined with existing contracts, the company is currently servicing six Aeon China commercial
facilities. Aeon is one of the most successful retailers in China and Asia. In June 2011, Aeon Delightsecured the contract to provide maintenance for a government operated commercial facility in Beijing. SR
Inc. believes this development shows that the company can compete with local service providers. The
company has established subsidiaries in Vietnam and Malaysia to capitalize on Aeon’s expansion into suchmarkets. The company has expertise in understanding the local markets, sourcing in people, and offering
comprehensive facilities maintenance work in Asian countries.
Despite accelerated growth of overseas facilities management services, contributions from these activities
have yet to make a significant impact on the company’s earnings. SR Inc. estimated that Aeon Delight
generated around 25 billion yen, less than 10% of total sales, from outside Japan in FY02/13. However,the company considers China and other Asian countries as major areas of growth. The company forecasts
sales of 1 trillion yen in FY02/21, of which 300 billion yen is expected from China and 200 billion fromASEAN countries.

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Overseas companies
Aeon Delight (China) Co., Ltd. (facilities management services, 100% owned by Aeon Delight)
Aeon Delight (Hangzhou) Service Outsourcing Co., Ltd. (outsourcing services, 70.0% owned)
Aeon Delight Sufang (Suzhou) Comprehensive Facility Management Service Co., Ltd. (maintenanceservices, 51.0% owned)
Aeon Delight (Vietnam) Co., Ltd. (facilities management, 100% owned)
Aeon Delight (Malaysia) Sdn. Bhd. (facilities management, 100% owned)

Business Model
Aeon Delight became a leading facilities management operator through its relationship with the Aeon
group. It has also grown through acquisitions. The company derives its earnings by providing acomprehensive, all-in-one package of facilities management services to large-scale retail and commercial
properties. It was able to differentiate itself from competitors 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 ofthese competitors were mainly involved in residential management of condominiums. Few other large
companies were focused on commercial 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 of which are small- and medium-sized businesses.
The structure of the building maintenance industry resembles that of the construction industry, withsecond- and third-tier subcontractors working under prime contractors. Aeon Delight, a prime contractor,
uses a number of subcontractors. 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 to offer clients attractive packages. For example, the parent company Aeon conducts acompetitive bidding to keep the process 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 alarge 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 size and economy ofscale, 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 andexpertise.
In response to these changing requirements of its customers, Aeon Delight intends to leverage its
accumulated expertise in areas such as building and equipment diagnostics to expand its operations frombuilding maintenance into building and project management. The company has an in-house developed
system for building and equipment. It uses the system for tasks including the diagnosis of deterioration ina 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 thelatest equipment and technology, such as infrared imaging, fiber optics, X-rays, and ultrasound.
Management now intends to further develop the company’s analysis capabilities in this area.

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Profitability Snapshot, Financial Ratios
Aeon Delight’s overall operating profit margin has been generally stable at 6% to 7%.
of SG&A expenses is labor, which accounted for 40% as of FY02/13.

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

The main driver

FY02/09Cons.
20,955
14.4%
9,946
6.8%
11,441
7.9%
3.3%

FY02/10
Cons.
21,118
15.1%
9,970
7.1%
11,5638.2%
3.9%

FY02/11Cons.
23,98914.0%
12,031
7.0%
13,8188.1%
3.8%

FY02/12Cons.
28,631
13.0%
13,762
6.3%
16,1077.3%
3.1%

FY02/13Cons.
30,22712.1%
13,901
5.6%
16,138
6.5%
3.0%

10.1%
19.9%
3.0
7,502
149.8%
135.8%
0.31-18.7%
0.3
14.3
108

11.2%
18.9%
2.9
7,330
184.4%
166.6%
0.39-25.0%
0.4
14.8
-172

9.7%
15.5%
2.6
7,298
210.0%
195.4%
0.29-24.7%
0.2
10.4
-32

7.8%
12.5%
2.5
9,047
215.5%
201.0%
0.30-16.6%
0.3
8.2
1,749

7.8%
12.5%
2.6
22,366226.9%
207.6%-0.13-15.5%-0.1
18.5
13,319FY02/12
Cons.
31
5,300

FY02/13
Cons.
80
5,897

Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.

SG&A Breakdown(Million Yen)
Provision for Doubtful Accounts
Salaries
Employee Bonuses
Provision for Bonuses
Provision for Director Bonuses
Retirement Benefits Expenses
Provision for Director Retirement Benefits
Other

FY02/09 FY02/10
Cons.
Cons.
101 3,4843,650
584 206
120
103
101
188
195
21
24
6,321
7,058
11,008
11,148

FY02/11
Cons.
77
4,175
92
121
216
19
7,257
11,957

251
120
268
15
8,883
14,868

323
90
295
18
9,623
16,326

Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.

The company outsources most of its facilities management work, such as security and cleaning jobs.
Outsourcing expenses accounted for 59% of total cost of sales as of FY02/13. Its cost of sales increased
28% YoY in FY02/11, as a result of its acquisition of Certo Corp., a provider of office supplies and operatorof soft drink vending machines in September 2010.

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Parent(Million Yen)
Cost of Sales

FY02/09Cons.
22,466
18.7%
94,857
79.2%
2,475
2.1%
119,799

Labor% of Total
Outsourcing% of Total
Other% of Total
Total

FY02/10Cons.
20,28018.7%
86,071
79.2%
2,256
2.1%
108,608

FY02/11Cons.
27,38319.6%
19,64714.0%
87,185
62.3%
5,808
4.1%
140,024

FY02/12Cons.
52,99929.8%
20,215
11.4%
95,676
53.9%
8,766
4.9%
177,658

FY02/13Cons.
54,43327.0%
20,61010.2%
118,200
58.5%
8,687
4.3%
201,933

Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.

In FY02/13, the cleaning services and facilities management segments had the highest operating profit
margins (pre-unallocated corporate expense) of 15% and 11%, respectively, despite being labor intensive.
On the other hand, materials/supplies sourcing and construction work had the lowest operating profit
margin, mainly attributable to servicing the Aeon group companies.

Sales
Operating Profit
OPM

Facilities
Management

Security
Services

Cleaning
Services

Construction
Work

42,050
4,661
11.1%

31,8052,692
8.5%

40,5195,918
14.6%

53,071
2,209
4.2%

Materials/
Supplies
Sourcing
39,284
1,462
3.7%

Vending
MachineServices
31,2002,396
7.7%

SupportServices
10,823504
4.7%

Source: Company data, SR Inc. Research

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Strengths & Weaknesses
Strengths
 Strong ties with the Aeon Group: Aeon Delight is able to leverage from the Aeon group’s vast
network of commercial facilities, such as supermarkets and shopping malls. The company gained
expertise in providing a wide range of property management services such as maintenance, cleaning,and security. It is able to expand with Aeon, the industry foremost retailer, and also provide expertiseto other large-scale retailers. It provides 70% and 80% of the Aeon group’s facilities-related services.
The company is able to leverage economies of scale from the Aeon group. This provides for a stable
recurring-revenue model.
 Industry leader in comprehensive commercial maintenance services: Aeon Delight is theindustry leader capable of providing comprehensive all-in-one building maintenance services such as
facilities management, security, cleaning, and renovations. Its competitors can only provide one to twoof 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 eachindividual service provider based on their specialty. The company’s ability to provide suchcomprehensive 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, and a realignment of the industry is possible. Aeon
Delight, with its financial strength and industry prowess, would be able to acquire smaller firms withspecialized services in local areas. This could lead to further growth and expansion. The company isable 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 business since it has an under leveraged balance sheet.

Weaknesses
 Organic growth challenging: Aeon Delight has grown through acquisitions. Therefore, organic
growth may be a challenge because the market is relatively mature. There is limited domestic growthand overseas offers one avenue of 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, andderives most of its sales from the Aeon group. A drawback from such a strong relationship is that theparent company may ask for support in pursuing its agenda. Recently, Aeon acquired 50% of Tesco
Japan, the U.K. supermarket chain operator’s Japan retail business. A joint venture company, Aeon
Every Co., Ltd. is in charge of supermarket operations. The parent Aeon could ask the company forsupport in future acquisitions.
 Mature property management market: The property management market is relatively mature.
However, small-scale retail stores in urban areas offer growth opportunities given the greater numberof customer volume. Many small-scale retailers are renovating their stores and upgrading facilities.
Aeon Delight’s expertise has been in large-scale facilities, mainly supporting the Aeon group retailstores 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 to look at this segment
for growth.

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Market and Value Chain
Market Overview
Building maintenance market valued at ¥3.3trn
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 and2010. 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 storesaccounted for 17% of its cleaning business sales, while hotels made up a mere 2%.

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 todrive up the profitability of their facilities, customers have been seeking further progress in minimizationof 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.

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LED
The domestic market for LED lamps was 202.0 billion yen in FY03/12, and 370.0 billion yen in FY03/13,
according to Yano Research Institute. By 2020, the market has the potential to expand to 450 billion yen.
Aeon Delight had sales of about 26 billion yen, for a market share of slightly less than 7% in FY02/13.
Recirculating, water-saving, plastic urinal
According to Aeon Delight, there are 4 million urinals in Japan, most of which are ceramic (as of April2013). The potential market for its water-saving urinals is 500 billion yen (4 million units x 120,000 yen).

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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 was around 13.4 million sq.m. in March 2010. If sales per sq.m. andworkers’ hourly pay were the same across the board (in reality, cleaning hospitals is more expensive), SR
Inc. estimates that potential demand from hospitals and other medical facilities is 50 billion yen (355,000
yen/sq.m. x 13.4 million sq.m.).
The ministry data also show that total floor space of non-residential buildings owned by corporations was
about 1.7 billion sq.m. Such buildings include offices, stores, factories, warehouses, welfare facilities,
hotels/lodging facilities, schools, and buildings used for automobile parking. If these corporations
outsourced all of their cleaning work for that floor space, the potential market would be 6.2 trillion yen(355,000 yen/sq.m. x 1.7 billion sq.m).
Furthermore, the Aeon group’s store openings and acquisition strategy affect Aeon Delight’s businessperformance. Aeon Delight generated 14.1 billion yen in sales from cleaning services to Aeon Retail in
FY02/12. Total floor space of Aeon Retail was 3.97 million sq.m., which translates to 355,000 yen in
annual sales per sq.m. for Aeon Delight.

AEON Group Stores by Format (Domestic & Overseas)Feb. 2009 Feb. 2010 Feb. 2011
GMS
603
601
590
Supermarket
1,231
1,267
1,307
Discount Store
41
52
72
DIY Store
127
125
127
Supercenter
31
33
32
Department Store
1
1
1
Convenience Store
3,270
3,514
3,811
Specialty Store
4,746
4,475
3,305
Other Retail Format
87
180
268
Financial Service
395
386
401
Services
1,621
1,549
1,410
Total
12,153
12,183
11,324
AEON MALL
AEON TOWN

51
42

53
44

56
45

Feb. 2012
590
1,537
105
122
29
1
4,121
3,424
418
460
1,383
12,19059
107

Feb. 2013
598
1,708
152
123
26
1
4,462
3,664
562
527
1,394
13,2170
62
115

Source: AEON Co. data, SR Inc. Research

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Stores by Format in China, South Korea, and ASEAN
Feb. 2009 Feb. 2010 Feb. 2011
GMS
42
46
52
Supermarket
18
19
25
Discount Store
Convenience StoreSpecialty Store
Other Retail Format
18
21
24
Financial Service
Services
Total
78
86
101

Feb. 2012
54
44
2,033
37
27
236
25
2,456

Feb. 2013
61
81
22
2,294
55
29
279
41
2,862

Source: AEON Co. data, SR Inc. Research

Aeon Delight has expanded operations on back of its accumulated expertise and strong track record inmaintaining many commercial facilities for the Aeon group companies. Competitors appear to be focusedon office buildings and condominiums, rather than commercial complexes, which are Aeon Delight’s corecompetence.
The company is affected by the Aeon group’s store openings and acquisitions. The Aeon group organizes
its retail stores into the following segments: general merchandise stores, supermarkets, discount stores,
strategic small stores, specialty stores, and drugstores and pharmacies. Aeon Delight is positioned toprovide services to each of these retail segments.

Customers
Aeon Delight generates most 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 35.9% of its facilities management services segment sales in FY02/13. 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 Services
AEON RETAIL
Facilities Management
12,642
Security Services
15,129Cleaning Services
13,727
Construction Work
26,484
Materials/Supplies Sourcing
11,956
Vending Machine Services
5,609
Support Services
3,720
Total
89,270

Segment Sales % of Segment Sales
42,05030.1%
31,80547.6%
40,51933.9%53,071
49.9%
39,28430.4%31,20018.0%
10,823
34.4%
248,756
35.9%

Source: Company data, SR Inc. Research

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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 usuallyfocus on cleaning or security. However, large-scale facilities require comprehensive services such as
maintenance, cleaning, and security, all-in-one. Instead of hiring a contractor for each service, large-scalebuilding 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 of entry in
its market niche, namely servicing large-scale retail stores and office buildings, due to its expertise inproviding 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 of retention (i.e., customers are reluctant toswitch companies), with most of its contracts renewed.

Strategy
Aeon Delight’s strategy is to grow existing business through expansion of comprehensive services tocustomers inside and outside of the Aeon Group. The company capitalizes on the Aeon group’s expansion
plans and generates 65% of sales from group companies. Over the medium term, the company aims to
expand sales to non-Aeon group companies and lower this weighting to around 40%. It plans to do thisby leveraging its main strength - the ability to take on comprehensive management contracts for large
facilities - and by expanding into airports, factories, hospitals, and other retail facilities. Some of thespecialty 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.
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, andintends to do the same going forward. In addition, the company implemented a three-year medium-term(FY02/12 to FY02/14) business plan aimed at strengthening its comprehensive facilities maintenanceservices. Aeon Delight has targeted three markets: major urban area market, ecology andenvironmentally friendly market, and the Asian market.

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Major urban area market
Small commercial facilities are expected to grow in major urban areas. Aeon Delight has been targeting
this segment by pooling its core competencies of A to Z Service, which became a consolidated subsidiaryin May 2011, and other companies in its group. In addition, it leveraged the strengths of housework
support services provided by Kajitaku, which became a consolidated subsidiary in April 2011, andexpanded 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 havebeen made yet.

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 offering cleaning and security services in these facilities and isdeveloping 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 anelectric vehicle battery charger that uses Aeon Retail’s electronic money, WAON.

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Asian market
Aeon Delight accelerated growth of overseas facilities management services. The company acquired
expertise in the Chinese market through years of operations there and intends to offer facilities
management services. It is winning orders from foreign-affiliated companies in China, increasing
businesses with existing clients, and forming partnerships with local companies in this market. It had 87
projects in China as of the end of FY02/13, of which 57 were outside the Aeon group. The company
intends to continue expanding during FY02/14 by forming ventures with local companies. In addition to
Beijing, Tianjin, Guangdong, and Jiangsu, where it already has a presence, Aeon Delight plans to enter
the Shandong, Hubei, and Zhejiang markets.
The company intends to continue expanding during FY02/14 by forming ventures with local companies.
In FY02/13, Aeon Delight established subsidiaries in Malaysia and Vietnam. However, contributions fromthese activities did not make a significant impact on earnings. SR Inc. estimated that Aeon Delight
generated around 25 billion yen, less than 10% of total sales, from outside Japan in FY02/13. The
company considers China and other Asian countries as major areas of growth, and in the longer term,
forecasts sales of 300 billion yen from China and 200 billion from ASEAN countries by FY02/12.

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Aeon Delight generates 65% of its sales from Aeon group companies in Japan. The company plans to
reduce this figure to around 40% going forward by expanding into new markets.

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Historical Financial Statements
Income Statement
Income Statement(Million Yen)
Sales
Facilities Management
YoY
Security Services
YoY
Cleaning Services
YoY
Construction WorkYoY
Materials/Supplies Sourcing Services
YoY
Vending Machine Services
YoY
Support Services
YoY
Other
YoY
Total Sales

FY02/09Cons.

FY02/10Cons.

FY02/11Cons.

FY02/12Cons.

FY02/13Cons.

FY02/14Est.

42,253
5.1%
36,6702.3%
42,403
3.2%
18,515-41,666-1.4%
34,281-6.5%
45,050
6.2%
13,889
-

-

-

-

-

5,846
62.8%
145,690

5,412
-7.4%
140,299

40,019-4.0%
32,088-6.4%
41,142-8.7%
16,42018.2%
18,71817,1885,271
56
170,905

42,147
5.3%
32,2350.5%
39,852-3.1%
28,51373.6%
36,73096.2%
32,280
87.8%
7,980
51.4%
57
1.8%
219,797

42,050-0.2%
31,805-1.3%
40,5191.7%
53,07186.1%
39,2847.0%
31,200-3.3%
10,82335.6%
119108.8%
248,876

260,000

5.9%

-3.7%

21.8%

28.6%

13.2%

4.5%

CoGS
Gross Profit

124,735
20,955

119,180
21,118146,916
23,989191,166
28,631

218,648
30,227

YoY
GPM

11.3%
14.4%

0.8%
15.1%

13.6%
14.0%

19.4%
13.0%

5.6%
12.1%

16,326

YoY

SG&A

11,008

11,148

11,957

14,868

SG&A / Sales

7.6%

7.9%

7.0%

6.8%

6.6%

Operating Profit
YoY

9,946
19.4%

9,970
0.2%

12,031
20.7%

13,762
14.4%

13,901
1.0%

15,500
11.5%

6.8%

7.1%

7.0%

6.3%

5.6%

6.0%

108
241
9,812
19.9%

88
147
9,912
1.0%

208
149
12,089
22.0%

281
260
13,784
14.0%

213
221
13,8920.8%

15,500
11.6%

6.7%

7.1%

7.1%

6.3%

5.6%

6.0%

110
940
4,026
45%
4,876
11.3%

457
234
4,618
46%
5,466
12.1%

5
985
4,613
42%
6,495
18.8%

73
880
5,932
46%
6,912
6.4%

80
53
6,306
45%
7,509
8.6%

8,300
10.5%

3.3%

3.9%

3.8%

3.1%

3.0%

3.2%

OPM

Non-Operating Income
Non-Operating Expenses
Recurring Profit
YoY
RPM

Extraordinary Gains
Extraordinary Losses
Tax Charges
Implied Tax Rate
Net Income
YoY
Net Margin
Source: Company data, SR Inc. Research

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 FY02/10.
These businesses were designated as Support Services from FY02/11 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.

Earnings Estimates and Results
In FY02/13, earnings fell short of its revised forecasts announced following Q3 FY02/13 results. Sales
were 248.9 billion yen (compared to revised estimate of 260.0 billion yen), operating profit of 13.9 billion
yen (16.6 billion yen), and net income of 7.5 billion yen (8.7 billion yen). The short fall was due to lessthan expected contributions from newly acquired subsidiaries.

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For FY02/14, the company forecasts sales of 260.0 billion yen (+4% YoY), operating profit of 15.5 billion
yen (+12% YoY), and net income of 8.3 billion yen (+11% YoY), supported by favorable expansion ofmainstay facilities management services, and improved efficiencies and cost reductions.

Initial CE vs. Results(Million Yen)
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%

FY02/13Cons.
260,000
248,876-4.3%
16,60013,901-16.3%
16,60013,892-16.3%
8,700
7,509-13.7%

Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.

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Balance Sheet
Balance Sheet(Million Yen)ASSETSCash and Equivalents
Accounts Receivable
Allowance for Doubtful
Inventories
Deposit of Subsidiaries and Affiliates
Other Current Assets
Total Current Assets
Buildings
Machinery for Area Control, net
Tools, Furniture, and Fixtures, net
LandConstruction in Progress
Other Fixed
Total Tangible Fixed Assets
Investment Securities
Deferred Tax Assets
Other
Allowance for Doubtful
Total Other Fixed Assets
Goodwill
Other
Total Intangible 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 Interest-Bearing Debt
Total Liabilities
Shareholder Equity
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)

FY02/09Cons.

FY02/10Cons.

FY02/11Cons.

FY02/12Cons.

FY02/13
Cons.

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

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

9,707
31,240-657
1,527
27,3203,349
72,486
1,217
246
1,918
284
108
3,773
2,577
406
1,517
-224
4,276
11,2491,023
12,272
20,32292,80910,014
44,673-144
2,237
18,0204,523
79,323
1,089
274
2,079
282
72
3,796
2,973
288
2,196
-200
5,257
10,801
1,520
12,321
21,375
100,699

10,551
1,688
7,892
20,131
56
768
824
1,744
20,95628,0793,238
2,963
20,852
-461
-42
72
1,456
28,0797,502
1,744(5,247)

8,974
80
7,227
16,281
31
993
1,024
111
17,306
31,364
3,238
2,964
25,366-461
145
110
31,3647,330
111(7,853)22,42449
8,251
30,724
6
1,006
1,012
55
31,73752,8873,238
18,741
30,575-461
645
149
52,887
7,298
55(13,043)

23,72041
9,882
33,643
15
968
983
56
34,62658,182
3,238
18,75335,285
-460
647
173
545
58,182
9,047
56(9,651)

24,544
10
10,401
34,955
5
1,190
1,195
5
36,15164,5473,238
18,77040,539
-458
992
205
1,260
64,54722,36615(9,999)Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.

AssetsAeon Delight’s assets and liabilities swelled in FY02/11 due to its merger with Certo Corp.
assets of 31.5 billion yen and liabilities of 15.3 billion yen.

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Total assets expanded to 100.7 billion yen at the end of FY02/13 compared to 92.8 billion yen in FY02/12,
attributable to increased accounts receives (+13.4 billion), inventories (+710 million yen), and reduced
deposits to subsidiaries and affiliates (-9.3 billion yen). Almost 80% of assets were liquid assets. Majorityof its 3 billion yen in investment securities are with Aeon Mall, Aeon Kyushu Co., Ltd. (JASDAQ: 2653),
Aeon Fantasy Co., Ltd. (TSE1: 4343), and MaxValu companies.
Liabilities
Total liabilities grew slightly to 36.2 billion yen at the end of FY02/13 from 34.6 billion yen in FY02/12,
mainly due to increased accounts payable (824 million yen). Aeon Delight was basically debt free, with amere 5 million of interest-bearing debt at the end of FY02/13. Cash and deposits exceededinterest-bearing debt for the past six years.
Net Assets
Net assets increased to 64.5 billion yen at the end of FY02/13 from 58.2 billion yen in FY02/12, due toincreased retained earnings of 5.3 billion yen after recording a net income of 7.5 billion yen and paying
dividends of 2.2 billion yen.
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 toacquire additional assets) to expand business and its equity.

Equity Capital
Ratio
ROE

FY02/07

FY02/08

FY02/09

FY02/10

FY02/11

FY02/12

FY02/13

39.9%

47.4%

54.1%

64.2%

62.3%

61.9%

62.6%

16.9%

21.0%

19.9%

18.9%

15.5%

12.5%

12.5%

Source: Company data, SR Inc. Research

Outstanding Shares
Aeon Delight completed a two-for-one stock split in December 2007 (FY02/08). Its outstanding shares
increased by 12,769,000 following its September 2010 acquisition of Certo Corp., a transaction that called
for 1.3 shares for each Certo share. Aeon group companies owned 60% of the company’s shares
outstanding as of FY02/13.
(in thousands)
Outstanding
shares

FY02/07

FY02/08

FY02/09

FY02/10

FY02/11

FY02/12

FY02/13

20,70041,40041,40041,40054,17054,17054,170Source: Company data, SR Inc. Research

Shareholder Rewards
Aeon Delight paid a dividend of 46 yen per share in FY02/13, and plans to pay 48 yen per share in
FY02/14, the ninth straight year of increased dividend payments. Aeon Delight provides shareholders with
gift packages and Aeon gift certificates.

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Statement of Cash Flows
Cash Flow Statement(Million Yen)
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
Cons.
6,668-2,087
4,581-5,255
1,495
-707
108
5,556

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

FY02/11Cons.
6,808-3,0003,808-1,321
1,787
-792
-32
7,522

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

FY02/13Cons.
-4,3587,086
2,728-2,2572,237-1,607
13,319-5,180Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.

Operating Cash FlowIn 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, including 1.2 billion yen
used in acquisitions in FY02/12. In FY02/13, net cash provided by investing activities was 7.1 billion yen,
attributable to a net inflow of 9.5 billion yen in deposit collections from subsidiaries, and outflow of 1.6
billion for acquisition of assets.
Financial Cash FlowIn FY02/13, net cashed used in financing activities were dividend payments of 2.3 billion yen. Prior to
FY02/09, the company used cash for repayment of funds raised from liquidation of future receivables.
Simple Free Cash FlowIn 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 theend of FY02/13.

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

FY02/09
Cons.
8.2
44.7
6565.0
0.1
12.0
30.5
14.3

FY02/10
Cons.
8.2
44.6
4965.8
0.1
12.2
29.9
14.8

FY02/11
Cons.
7.7
47.6
196.4
1.9
9.4
39.0
10.4

FY02/12
Cons.
7.4
49.4
127.3
2.9
8.3
44.1
8.2

FY02/13
Cons.
6.6
55.7
116.2
3.1
9.1
40.3
18.5

Source: Company data, SR Inc. Research
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 acquiredcompanies. Accounts receivable are mainly from Aeon group companies, while accounts payable are withvarious suppliers, such as soft 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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Other Information
HistoryJapan MaintenanceIn 1972, Nichii Co., Ltd. (renamed Mycal Corp. in 1996) established Nichii Maintenance Co., Ltd., toundertake maintenance at Mycal stores (Aeon Retail acquired Mycal in March 2011). In 1976, Nichii
Maintenance changed its name to Japan Maintenance Co., Ltd. The company listed its shares on theSecond 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 retail stores 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 a result, 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 reducewater consumption by 90%. According to Aeon Delight, a train station in which 500 people use therestroom 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 the assumption 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 theseurinals for 120,000 yen per unit.

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Source: Company data, SR Inc. Research

Aeon Delight also developed a water-based coating agent as an alternative to conventional resin wax.
"Aeon Delight Coat" 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: Company data, SR Inc. Research

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Major Shareholders
Aeon group companies own over 60% of the company.
As of February 28, 2013
Top Shareholders
Aeon Retail Co., Ltd.
Aeon Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
Aeon Delight Business Partners
Japan Trustee Services Bank, Ltd. (Trust Account)
The Bank of New York Treaty JASDEC Account
Aeon Delight Employees
Japan Trustee Services Bank, Ltd. (Trust Account 9)
Northern Trust Company (AVFC: Sub-account British Client)
JP Morgan Chase US Pension Treaty JASDEC

AmountHeld
42.94%
16.81%
1.91%
1.33%
1.31%
1.27%
1.24%
1.15%
1.09%
1.06%

Source: Company data, SR Inc. Research

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, Labor and Welfare) in 1985. After returning to Aeon, he continued his career inhuman resources, and was later involved in establishing 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 9,018 employees and an average of 5,184 temporary employees on a consolidated basis
as of FY02/13. At the parent level, there were 3,777 employees and 2,169 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 6 months
 Average length of employment: 10.0 years
 Average annual salary: 5.2 million yen

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

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By the Way
Corporate Social Responsibility (CSR) Activities
Aeon Delight is pursuing corporate social responsibility (CSR) activities by strengthening its efforts toprotect the environment 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, thatsignificantly reduce electricity consumption. The company seeks to help clients cut carbon dioxide
emissions and reduce expenses by selecting the most suitable source of lighting depending on thesituation and intended use, such as lighting for room interior or a parking space, and for illuminating abillboard.
▪
Proposal for environmentally friendly packaging
The company proposes a variety of packaging materials, including biomass materials obtained during the
growth process of 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 much 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 humanexchange, 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’ business performances.
▪
Tree planting through Aeon Environmental Foundation
The company participated in a tree-planting event in Beijing, China in fiscal year 2010, took part in asimilar project in Jakarta, 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, inaddition 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 streetsaround their workplaces 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 systemof 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 stores are sent to six “washing centers” within the vocational facilities, where the baskets are

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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!” andsymbolizes that the company wishes to make all people happy.

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Company Profile

Company NameAEON DELIGHT CO., LTD.

Phone

Head Office
Minamisemba Heart Bldg.
2-3-2 Minamisemba Chuo-ku, Osaka City
Osaka, Japan 542-0081
Listed On+81-6-6260-5621

Tokyo Stock Exchange 1st Section

Established
November 16, 1972
Websitehttp://www.aeondelight.co.jp/english/
IR Contact

Exchange Listing
September 29, 1995
Fiscal Year-End
February
IR Webhttp://www.aeondelight.co.jp/english/ir/
IR Phone

IR Mail
Main Consolidated Segments (% of total sales)
Facilities Management
16.90 %
Security Services
12.79 %
Cleaning Services
16.29 %
Construction Work21.33 %
Others
32.69 %
(as of February 2013)
Directors
Ippei Nakayama, President & Chief Executive Officer
Ryuichi Yamada, Director & Vice President
Shigeyuki Hayamizu, Director & Executive Managing Officer
Tajiro Yashi, Director & Executive Managing Officer
Yutaka Furutani, Executive Officer & Corporate Advisor
Manabu Oshima, Executive Officer
Kazunaka Watanabe, Auditor (Outside Corporate)
Koushi Yamaura, Auditor (Outside Corporate)
Hiroharu Kinoshita, Auditor (Outside Corporate)(as of May 2013)
Employees (consol.)
Employees (parent)
Average age (parent)
Average salary (parent)

9,018
3,777
46.6 years
5.1 million yen(as of February 2013)

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Shares Outstanding(including treasury shares)
54,169,633 shares(as of February 2013)
Shareholders Capital
3.2 billion yen(as of February 2013)
Main Subsidiaries
AEON DELIGHT Academy Co., Ltd.
AEON DELIGHT Security Co., Ltd.
Kankyouseibi Co., Ltd.
AEON DELIGHT (China) Co., Ltd.
Do Service Co., Ltd.
Main Banks
Mizuho Bank Ltd.

Auditors
Deloitte Touche Tohmatsu LLC

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This document is provided for informational purposes only. No investment opinion or advice is provided, intended, or solicited. Shared
Research Inc. offers no warranty, either expressed or implied, regarding the veracity of data or interpretations of data included in thisreport. Shared Research Inc. shall not be held responsible for any damage caused by the use of this report.
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The initial version of this report has been prepared by Shared Research Inc. (“SR”) under a contract with the company described in thisreport (“the Company”). Opinions and views presented are SR’s where so stated. Such opinions and views attributed to the Company areinterpretations made by SR. SR represents that if this report is deemed to include an opinion by SR that could influence investment
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