Research Coverage Report by Shared Research Inc.

9787

Aeon Delight
Shared Research Inc. has produced this report by request from the company discussed in thereport. 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 highlightany biases, we clearly attribute our data and findings. We will always present opinions fromcompany 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.

Coverage initiated on: 2013-06-06
Last update: 2023-07-12

INDEX
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.
Key financial indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
Trends and outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.
Quarterly trends and results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.
FY02/24 company forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.
Medium- and long-term outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13..
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17..
Business description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17..
Business overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17..
Strengths and weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23..
Market and value chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24..
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27..
Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27..
Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28..
Statement of cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29..
ROE and dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30...
Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31..
Historical financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35..
News and topics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66..
Company profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71..

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

2

Executive summary
Aeon Delight Co., Ltd. is Japan's largest facilities management company, providing various solutions for customer facilities
and their surrounding environments. The company provides services for integrated facilities management and ancillary workthat is non-core for the customer. These services improve overall facility costs and streamline the customer's operations.
Aeon Delight is more than 50% owned by Aeon Co., Ltd. (TSE Prime: 8267). Aeon is a large retailing group, comprisingmore than 300 Japanese and overseas companies and generating group sales of more than JPY9tn. In FY02/23, Aeon
Delight derived 63.4% of its sales from transactions within the group.
Looking at performance by segment, in FY02/23 Facilities Management accounted for 21.3% of total sales and 24.5% of
operating profit. The corresponding figures were 16.3% and 13.8% for Security Services, 22.5% and 29.6% for Cleaning
Services, 17.1% and 17.2% for Construction Work, 13.7% and 8.4% for Materials and Supplies Sourcing Services, 3.1% and4.6% for Vending Machine Services, and 5.9% and 1.9% for Support Services. Customers from outside the Aeon group arewide-ranging, including commercial facilities, office buildings and offices, hotels and accommodation facilities, medical andwelfare facilities, education facilities, factories and workshops, warehouses and distribution centers, government offices, andevents. There are many single-year contracts, but the cancellation rate is low. The company's businesses generate recurring
revenue.
Aeon Delight has established account managers for its major customers, and manages customer information in a unified
manner across businesses. Account managers gain a better understanding of their customers and their respective industries,
which leads to improved customer satisfaction and expanded business by sending customers to other businesses. In addition,
the company is able to collectively contract services that span multiple divisions (for example, Construction Work is
contracted to provide services related to the Facilities Management business), and to provide the same services across Japanto customers who operate nationwide, contributing to an increase in its share of customer wallets.
In the facilities management industry, labor shortage has become an industry-wide issue. In this situation, the company has
established customer service centers at all eight branches in Japan to create a system for remote support for customer
facilities. At the same time, it has been promoting automation and labor-saving in on-site management operations byinstalling cameras and sensors at site facilities. The company has also been promoting the introduction of "areamanagement" in which facility managers are shared in a certain area, taking into account customer needs and facility andregional characteristics. This has led to a decrease in the number of facility managers and an increase in unmanned facilities,
which in turn has led to cost reduction and has helped to address the labor shortage.
Overseas, the company is active in China, Malaysia, Vietnam, and Indonesia, operating in the Facilities Management,
Security Services, Cleaning Services, and Support Services segments. Around half of overseas customers are Aeon groupcompanies. Overseas operations accounted for 9.8% of sales in FY02/23. The company uses a three-pronged growth strategy
that addresses safety and security, manpower shortage, and the environment, and aims to expand its contracted facilities
management services throughout the Asian region. In China, the strategy is to provide quality facilities management
centered on North, East, Central, and South China to boost the Aeon Delight brand profile.

Trends and outlook
In FY02/23, the company reported sales of JPY303.8bn (+7.0% YoY; +6.8% YoY based on the previous accounting standard),
operating profit of JPY15.8bn (+0.5% YoY), recurring profit of JPY16.0bn (+1.4% YoY), and net income attributable to ownersof the parent of JPY10.2bn (-4.8% YoY). Sales rose YoY in all seven segments, and operating profit was up in all but three(Security Services, Cleaning Services, and Materials and Supplies Sourcing Services). While operating profit fell in 1H due
to cancellation and postponement of construction projects as well as delays in procuring construction materials, operating
profit increased in 2H thanks to a higher share of existing customer wallets, an increase in new contracts, and more orders
for energy-saving construction projects corresponding with increased energy costs. As a result, the company posted higher
operating profit for the full year. Growth in its share of existing customer wallets and acquisition of new customers alsofueled the sales increase. Net income attributable to owners of the parent fell due to the absence of the JPY1.2bn in gains on
the sale of fixed assets booked in FY02/22. The company paid an annual dividend of JPY85.0 per share (payout ratio of
41.8%).
For FY02/24, the company forecasts sales of JPY310.0bn (+2.0% YoY), operating profit of JPY16.0bn (+1.2% YoY), recurring
profit of JPY16.0bn (flat YoY), net income attributable to owners of the parent of JPY10.4bn (+2.4%), EPS of JPY214.32, andannual dividends per share of JPY86.0 (payout ratio of 40.1%). The company aims to increase sales and profit by continuing
initiatives that align with the three basic policies of the medium-term management plan (customer-oriented management,

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

3promotion of digital transformation [DX], and group management). Through these efforts, it plans to develop a new growthstrategy for the era of coexistence with COVID-19, which brought a significant change in the business environment.
The company established its Aeon Delight Vision 2025 plan in April 2021. This aims to make Aeon Delight a company thatcreates environmental value and contributes to solving social issues, with a three-pronged growth strategy in Asia that
addresses safety and security, manpower shortage, and the environment. The company targets sales of JPY471.0bn, operating
profit of JPY37.0bn, and ROE of 15% in FY02/26.

Strengths and weaknesses
Shared Research believes the company’s strengths are 1) strong ties with the Aeon group, 2) industry leader in facilities
management, and 3) the ability to generate stable cash flows. Weaknesses include its 1) limited organic growth, 2) heavy
dependence on the Aeon group, and 3) mature property management market (see Strengths and weaknesses section for
details).

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

4

Key financial indicators
Income statement(JPYmn)Sales
YoY
Gross profit
YoY
Gross profit margin

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

FY02/23

FY02/24

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Company
forecast

256,654

265,572

277,926

292,607292,396

302,915

308,582

300,085

317,657

303,776

310,000

3.1%

3.5%

4.7%

5.3%

-0.1%

3.6%

1.9%

-2.8%

5.9%

-4.4%

2.0%

33,24534,29034,83635,73634,87135,452

38,57037,17539,49841,437

10.0%

3.1%

1.6%

2.6%

-2.4%

1.7%

8.8%

-3.6%

6.2%

4.9%

13.0%

12.9%

12.5%

12.2%

11.9%

11.7%

12.5%

12.4%

12.4%

13.6%

14,622

15,39014,556

14,13912,90913,03016,001

15,23015,733

15,81416,000

YoY

5.2%

5.3%

-5.4%

-2.9%

-8.7%

0.9%

22.8%

-4.8%

3.3%

0.5%

1.2%

Operating profit margin

5.7%

5.8%

5.2%

4.8%

4.4%

4.3%

5.2%

5.1%

5.0%

5.2%

5.2%

14,60015,472

14,534

14,263

13,381

13,362

15,94915,26815,78916,006

16,000

6.0%

-6.1%

-1.9%

-6.2%

-0.1%

19.4%

Operating profit

Recurring profit
YoY

5.1%

Recurring profit margin

-4.3%

3.4%

1.4%

0.0%

5.7%

5.8%

5.2%

4.9%

4.6%

4.4%

5.2%

5.1%

5.0%

5.3%

5.2%

7,039

7,965

7,247

7,093

6,397

6,415

9,348

11,680

10,665

10,152

10,400

YoY

-6.3%

13.2%

-9.0%

-2.1%

-9.8%

0.3%

45.7%

24.9%

-8.7%

-4.8%

2.4%

Net margin

2.7%

3.0%

2.6%

2.4%

2.2%

2.1%

3.0%

3.9%

3.4%

3.3%

3.4%

Shares issued at year-end (000shares)54,17054,17054,17054,17054,17054,17054,17054,17054,17050,670

EPS

134.2

151.7

138.0

135.0

121.7

122.9

187.2

233.7

213.3

203.5

EPS (fully diluted)

133.8

151.3

137.6

134.6

121.3

122.6

186.9

233.5

213.1

203.4

Net income

Per-share data

Dividend per share

48

50

52

55

61

63

65

82

84

85

Book value per share

1,303

1,400

1,471

1,559

1,637

1,466

1,579

1,747

1,891

1,992

214.3
86

Balance sheet (JPYmn)
Cash and deposits

12,565

15,58020,386

31,71739,53644,23362,35559,773

68,28257,600Total current assets

89,914

103,634

104,190111,098

118,311

108,771

112,362

110,008

121,013

129,534

Tangible fixed assets

4,258

4,361

7,061

9,064

10,041

10,161

9,671

9,481

7,080

6,499

Investments and other assets

5,829

6,268

8,176

8,904

8,512

7,578

7,698

11,557

9,111

8,222

Intangible assets

11,008

10,32010,006

8,802

7,813

8,103

7,185

5,518

5,653

6,371

111,010

124,584

129,434

137,870

144,678

134,614

136,917

136,565

142,859

150,628

21,87624,93428,457

25,11425,82025,967

23,38822,17022,07025,901

Total assets
Accounts payable
Short-term debt

5

-

-

271

225

394

252

299

247

182

39,30946,63945,83447,05149,06051,40848,864

44,12343,892

48,406

-

-

-

293

-

15

11

-

-

-

Total fixed liabilities

1,556

2,387

3,925

6,214

6,474

7,667

6,767

4,160

3,544

2,830

Total liabilities

40,86549,02649,76053,26655,53559,07555,631

48,28347,437

51,237

Total net assets

70,14575,55879,67484,604

89,14375,53981,28688,281

95,421

99,391

Total current liabilities
Long-term debt

Cash flow statement(JPYmn)
Cash flows from operating activities

21,35917,234

10,303

11,703

13,56812,373

7,371

10,403

12,598

8,895

Cash flows from investing activities-16,632-11,365-3,2552,233-2,666

12,256

13,838-7,325-386-10,715

Cash flows from financing activities-2,475-2,594-2,821-2,400-3,264-19,686-3,392-5,324-4,572-6,181

Financial ratios
Total interest-bearing debt

5

-

-

564

225

409

263

299

247

182

Net cash

44,98056,90657,74862,866

71,311

59,82462,09259,474

68,03557,418

ROA (RP-based)

13.8%

13.1%

11.4%

10.7%

9.5%

9.6%

11.7%

11.2%

11.3%

10.9%

ROE

10.7%

11.2%

9.6%

8.9%

7.6%

8.1%

12.3%

14.1%

11.7%

10.5%

Equity ratio

61.6%

59.0%

59.7%

59.4%

59.5%

54.4%

57.6%

64.0%

66.2%

65.3%

Source: Shared Research based on company data
Note: From FY02/23, the company has adopted the new Accounting Standard for Revenue Recognition, which will affect the way sales are recorded. Operating profit and line
items below are not affected.
Note: Accounts payable-trade figures do not include electronically recorded obligations-operating.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

5

Trends and outlook
Quarterly trends and results
Quarterly results (after application of the Accounting Standard for Revenue Recognition)
Cumulative

FY02/22 (new accounting standards)(JPYmn)Sales

FY02/24(new accounting standards)

Q1-Q2

Q1-Q3

Q1-Q4

Q1

Q1-Q2

Q1-Q3

Q1-Q4

Q1

71,146

146,580

215,261

283,787

71,786

147,660

226,833

303,776

79,118YoY
Gross profit

FY02/23 (new accounting standards)

Q1
-

-

-

-5.4%

0.9%

0.7%

5.4%

7.0%

10.2%

9,765

20,462

29,83239,498

9,745

19,60630,291

41,437

10,226

YoY

8.9%

6.2%

-0.2%

4.9%

4.9%

Gross profit margin

13.7%

14.0%

13.9%

13.9%

13.6%

13.3%

13.4%

13.6%

12.9%

SG&A expenses

6,036

12,035

17,97923,764

6,462

13,004

19,47325,623

6,778

YoY

9.6%

12.1%

10.0%

8.3%

7.1%

8.1%

8.3%

7.8%

4.9%

SG&A ratio

8.5%

8.2%

8.4%

8.4%

9.0%

8.8%

8.6%

8.4%

8.6%

Operating profit

3,728

8,427

11,852

15,733

3,282

6,602

10,81815,814

3,447

YoY

7.9%

12.4%

5.7%

3.3%

-12.0%-21.7%

-8.7%

0.5%

5.0%

Operating profit margin

5.2%

5.7%

5.5%

5.5%

4.6%

4.5%

4.8%

5.2%

4.4%

Recurring profit

3,751

8,489

11,943

15,789

3,300

6,602

11,001

16,006

3,487

8.4%

13.2%

3.4%

-12.0%-22.2%

-7.9%

YoY

12.2%

8.2%

6.2%

-4.2%

1.5%

1.4%

Q1-Q2

Q1-Q3

FY02/24

Q1-Q4% of Est.

FY Est.

25.5%

310,000
2.0%

21.5%

1.2%
5.2%
21.8%

16,00022.1%

10,400

5.7%

Recurring profit margin

5.3%

5.8%

5.5%

5.6%

4.6%

4.5%

4.8%

5.3%

4.4%

Net income

2,507

5,557

8,495

10,665

2,246

4,336

7,163

10,152

2,299

YoY

16,000-0.0%
5.2%-16.2%

40.9%

34.3%

-8.7%

-10.4%-22.0%-15.7%

-4.8%

2.4%

2.4%

Net margin

3.5%

3.8%

3.9%

3.8%

3.1%

2.9%

3.2%

3.3%

2.9%

3.4%

Quarterly

FY02/22 (new accounting standards)(JPYmn)FY02/23 (new accounting standards)

FY02/24(new accounting standards)

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Sales

71,14675,434

68,681

68,52671,78675,874

79,17376,943

79,118

YoY

-3.2%

-1.0%

-8.0%

-9.5%

0.9%

0.6%

15.3%

12.3%

10.2%

Gross profit

9,765

10,697

9,370

9,666

9,745

9,861

10,685

11,146

10,226

YoY

8.9%

15.3%

0.5%

0.5%

-0.2%

-7.8%

14.0%

15.3%

4.9%

Gross profit margin

13.7%

14.2%

13.6%

14.1%

13.6%

13.0%

13.5%

14.5%

12.9%

SG&A expenses

6,036

5,999

5,944

5,785

6,462

6,542

6,469

6,150

6,778

YoY

9.6%

14.7%

6.0%

3.3%

7.1%

9.1%

8.8%

6.3%

4.9%

SG&A ratio

8.5%

8.0%

8.7%

8.4%

9.0%

8.6%

8.2%

8.0%

8.6%

Operating profit

3,728

4,699

3,425

3,881

3,282

3,320

4,216

4,996

3,447

YoY

7.9%

16.2%

-7.8%

-3.4%

-12.0%-29.3%

23.1%

28.7%

5.0%

Operating profit margin

5.2%

6.2%

5.0%

5.7%

4.6%

4.4%

5.3%

6.5%

4.4%

Recurring profit

3,751

4,738

3,454

3,846

3,300

3,302

4,399

5,005

3,487

YoY

8.4%

17.4%

-7.9%

-4.4%

-12.0%-30.3%

27.4%

30.1%

5.7%

Recurring profit margin

5.3%

6.3%

5.0%

5.6%

4.6%

4.4%

5.6%

6.5%

4.4%

Net income

2,507

3,050

2,938

2,170

2,246

2,090

2,827

2,989

2,299

YoY

-16.2%

220.4%

23.3%-59.5%-10.4%-31.5%

-3.8%

37.7%

2.4%

3.5%

4.0%

4.3%

3.2%

3.1%

2.8%

3.6%

3.9%

2.9%

Net margin

Q2

Q3

Q4

Source: Shared Research based on company data
Notes: The company adopted the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) from FY02/23.
YoY comparison for FY02/23 sales (based on the new accounting standards) was made against FY02/22 results retroactively adjusted to reflect the new accounting standards.

Quarterly results by segment (after adoption of the Accounting Standard for Revenue
Recognition)
Segment performance

FY02/22 (new accounting standards)

Cumulative (JPYmn)

Q1

Q1-Q2

Q1-Q3

Q1-Q4

Q1

Q1-Q2

Q1-Q3

Q1-Q4

Q1

71,146

146,580

215,261

283,787

71,786

147,660

226,833

303,776

79,118Sales
YoY
Facilities Management
YoY
Security Services
YoY

FY02/23 (new accounting standards)

FY02/24(new accounting standards)

-

-

-4.1%

-5.4%

0.9%

0.7%

5.4%

7.0%

10.2%

15,51131,01146,492

61,533

16,131

32,25149,00364,79417,086

-

-

-

-

4.0%

4.0%

5.4%

5.3%

5.9%

11,63823,64535,422

47,23911,934

24,12436,90949,47812,710

7.3%

9.0%

7.5%

6.4%

2.5%

2.0%

4.2%

4.7%

6.5%

Cleaning Services

16,56834,10650,47066,963

16,57633,76951,13068,336

17,464

YoY

10.4%

12.1%

9.5%

7.2%

0.0%

-1.0%

1.3%

2.0%

5.4%

Construction Work

11,205

24,776

33,69743,015

10,282

23,35038,20752,084

13,388

YoY

-2.8%

12.0%

8.6%

5.8%

-8.2%

-5.8%

13.4%

21.1%

30.2%

Materials and Supplies Sourcing

9,908

20,22230,15039,641

10,205

20,46530,99441,544

11,301

YoY
Vending Machine Services
YoY

-

-

-

-

3.0%

1.2%

2.8%

4.8%

10.7%

2,201

4,766

6,952

9,345

2,199

4,780

7,084

9,466

2,316

-

-

-

-

-0.1%

0.3%

1.9%

1.3%

5.3%

Support Services

4,113

8,055

12,09016,049

4,456

8,918

13,50318,070

4,850

YoY

3.8%

4.1%

2.6%

1.3%

8.3%

10.7%

11.7%

12.6%

8.8%

Operating profit

3,728

8,427

11,852

15,733

3,282

6,602

10,81815,814

3,447

YoY

5.0%

-31.2%

12.4%

5.7%

3.3%

-12.0%-21.7%

-8.7%

0.5%

Operating profit margin

5.2%

5.7%

5.5%

5.5%

4.6%

4.5%

4.8%

5.2%

4.4%

Facilities Management

1,275

2,622

4,038

5,495

1,372

2,825

4,269

5,810

1,335

YoY

1.5%

5.7%

-2.7%

6.2%

7.6%

Operating profit margin

8.2%

8.5%

8.7%

8.9%

8.5%

8.8%

8.7%

9.0%

Security Services

796

1,702

2.9%

2,596

3.1%

3,435

733

1,443

7.7%

2,307

5.7%

3,279

833

YoY

4.3%

6.8%

8.8%

3.9%

-7.9%

-15.2%-11.1%

-4.5%

13.6%

Q1-Q2

Q1-Q3

Q1-Q4

7.8%

Operating profit margin

6.8%

7.2%

7.3%

7.3%

6.1%

6.0%

6.3%

6.6%

6.6%

Cleaning Services

1,974

4,276

6,172

8,106

1,681

3,328

5,036

7,014

1,451

YoY

19.9%

24.7%

15.6%

10.7%

-14.8%-22.2%-18.4%-13.5%-13.7%

Operating profit margin

11.9%

12.5%

12.2%

12.1%

10.1%

9.9%

9.8%

10.3%

8.3%

Construction Work

1,067

2,250

2,861

3,583

694

1,405

2,714

4,080

1,089

YoY

-6.3%

8.1%

-0.6%

-5.1%

-7.7%

-35.0%-37.6%

13.9%

56.9%

Operating profit margin

9.5%

9.1%

8.5%

8.3%

6.7%

6.0%

7.1%

7.8%

8.1%

Materials and Supplies Sourcing

656

1,362

1,932

2,560

615

994

1,455

1,999

630

YoY

7.2%

6.1%

4.4%

3.8%

-6.3%

-27.0%-24.7%-21.9%

2.4%

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

6

Operating profit margin

6.6%

6.7%

Vending Machine Services
YoY
Operating profit margin

6.4%

6.5%

6.0%

4.9%

4.7%

4.8%

116

353

414

608

208

556

5.6%
791

1,083

258

-

-1.1%

-26.5%

-6.9%

79.3%

57.5%

91.1%

78.1%

24.0%

9.5%

11.6%

11.2%

11.4%

11.1%

5.3%

7.4%

6.0%

6.5%

Support Services

119

255

330

441

162

279

419

462

149

YoY

-

-

-

-

36.1%

9.4%

27.0%

4.8%

-8.0%

2.9%

3.2%

2.7%

2.7%

3.6%

3.1%

3.1%

2.6%

3.1%

-2,277-4,394-6,491-8,495-2,183-4,228-6,173-7,913Operating profit margin
Eliminations, goodwill, other
Segment performance

FY02/22 (new accounting standards)

Quarterly (JPYmn)
Sales

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

75,434

68,681

68,52671,78675,874

79,17376,943

79,118

-

-1.0%

-8.0%

-9.5%

0.9%

0.6%

15.3%

12.3%

10.2%

15,511

15,500

15,482

15,04016,131

16,12016,752

15,791

17,086

-

-

-

-

4.0%

4.0%

8.2%

5.0%

5.9%

11,63812,007

11,777

11,817

11,934

12,19012,785

12,56912,710

YoY
Security Services-2,298
FY02/24(new accounting standards)

71,146
YoY
Facilities Management

FY02/23 (new accounting standards)

YoY

7.3%

10.6%

4.5%

3.4%

2.5%

1.5%

8.6%

6.4%

6.5%

Cleaning Services

16,56817,53816,364

16,493

16,576

17,19317,361

17,206

17,464

YoY

10.4%

13.7%

4.5%

0.7%

0.0%

-2.0%

6.1%

4.3%

5.4%

Construction Work

11,205

13,571

8,921

9,318

10,282

13,06814,857

13,877

13,388

YoY

-2.8%

28.1%

0.2%

-3.2%

-8.2%

-3.7%

66.5%

48.9%

30.2%

9,908

10,314

9,927

9,491

10,205

10,26010,52910,55011,301

-

-

-

-

3.0%

-0.5%

6.1%

11.2%

10.7%

2,201

2,565

2,186

2,393

2,199

2,581

2,304

2,382

2,316

-

-

-

-

-0.1%

0.6%

5.4%

-0.4%

5.3%

4,113

3,942

4,035

3,959

4,456

4,462

4,585

4,567

4,850

Materials and Supplies Sourcing
YoY
Vending Machine Services
YoY
Support Services
YoY

3.8%

4.4%

-0.2%

-2.3%

8.3%

13.2%

13.6%

15.4%

8.8%

3,728

4,699

3,425

3,881

3,282

3,320

4,216

4,996

3,447

-31.2%

125.6%

-7.8%

-3.4%

-12.0%-29.3%

23.1%

28.7%

Operating profit
YoY

5.2%

6.2%

5.0%

5.7%

4.6%

4.4%

5.3%

6.5%

4.4%

Facilities Management

1,275

1,347

1,416

1,457

1,372

1,453

1,444

1,541

1,335

YoY

1.5%

4.2%

3.6%

15.7%

7.6%

7.9%

2.0%

5.8%

-2.7%

Operating profit margin

7.8%

8.2%

8.7%

9.1%

9.7%

8.5%

9.0%

8.6%

9.8%

Security Services

796

906

894

839

733

710

864

972

833

YoY

4.3%

9.0%

12.7%

-8.8%

-7.9%

-21.6%

-3.4%

15.9%

13.6%

6.8%

7.5%

7.6%

7.1%

6.1%

5.8%

6.8%

7.7%

Cleaning Services

1,974

2,302

1,896

1,934

1,681

1,647

1,708

1,978

1,451

YoY

19.9%

29.0%

-0.7%

-2.5%

-14.8%-28.5%

-9.9%

2.3%

-13.7%

Operating profit margin

11.9%

13.1%

11.6%

11.7%

10.1%

9.6%

9.8%

11.5%

8.3%

1,067

1,183

611

722

694

711

1,309

1,366

1,089

YoY

-6.3%

25.6%

-23.4%-27.9%-35.0%-39.9%

114.2%

89.2%

56.9%

Operating profit margin

9.5%

8.7%

6.8%

7.7%

6.7%

5.4%

8.8%

9.8%

8.1%

656

706

570

628

615

379

461

544

630

YoY

7.2%

5.1%

0.5%

1.9%

-6.3%

-46.3%-19.1%-13.4%

2.4%

Operating profit margin

6.6%

Vending Machine Services
YoY
Operating profit margin

6.8%

5.7%

6.6%

6.0%

3.7%

4.4%

5.2%

5.6%

116

237

61

194

208

348

235

292

258

-

-35.4%-70.4%

115.6%

79.3%

46.8%

285.2%

50.5%

24.0%
11.1%

5.3%

9.2%

2.8%

8.1%

9.5%

13.5%

10.2%

12.3%

Support Services

119

136

75

111

162

117

140

43

149

YoY

-

-

-

15.6%

36.1%

-14.0%

86.7%-61.3%-8.0%

Operating profit margin
Eliminations, goodwill, other

Q4

6.6%

Construction Work

Materials and Supplies Sourcing

Q3

5.0%

Operating profit margin

Operating profit margin

Q2

2.9%

3.5%

1.9%

2.8%

3.6%

2.6%

3.1%

0.9%

3.1%

-2,277-2,118-2,098-2,004-2,183-2,045-1,945-1,740-2,298Source: Shared Research based on company data
Notes: The company adopted the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) from FY02/23.
Consolidated, Facilities Management, Materials and Supplies Sourcing Services, and Vending Machine Services sales for FY02/22 were retroactively adjusted to reflect the
new accounting standards.

Q1 FY02/24 results
Sales: JPY79.1bn (+10.2% YoY)
Operating profit: JPY3.4bn (+5.0% YoY)
Recurring profit: JPY3.5bn (+5.7% YoY)
Net income attributable to owners of the parent: JPY2.3bn (+2.4% YoY)

Summary
Q1 FY02/24 sales increased in all seven segments due to growth in the share of existing customer wallets (in and outside
the Aeon group) and in the number of newly contracted facilities. As the company worked to strengthen its sales capabilities,
the number of contracts from non-group companies and organizations increased. Sales in Construction Work grew due tothe higher number of contracts for various works, including energy-saving works in line with rising energy costs.
Operating profit grew YoY thanks to sales growth. However, profit fell short of the initial target due to higher costs of sales
caused by rising personnel, raw materials, and logistics expenses. Profit was up in Security Services, Construction Work,
Materials and Supplies Sourcing Services, and Vending Machine Services, but down in Facilities Management, Cleaning,
and Support Services.

Segment trends
Facilities Management
Sales: JPY17.1bn (+5.9% YoY)

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

7

Operating profit: JPY1.3bn (-2.7% YoY)
Sales grew as the company acquired new contracts for contract management and expanded the number of contracts forvarious maintenance services. However, operating profit fell due to investments in newly contracted facilities and rising
personnel and outsourcing expenses. The company promoted initiatives to expand the area management strategy andreform facilities management operations to improve profitability.
Security Services
Sales: JPY12.7bn (+6.5% YoY)
Operating profit: JPY833mn (+13.5% YoY)
Sales were up as the company acquired new contracts for security services and expanded the number of contracts for safety
cameras. It also worked on the systematization of store entry and exit management and closing operations, the priceoptimization through negotiations, and other initiatives aimed at improving profitability. As a result, operating profit
increased.
Cleaning Services
Sales: JPY17.5bn (+5.4% YoY)
Operating profit: JPY1.5bn (-13.7% YoY)
Sales increased due to growth in renewal contracts, but operating profit dropped due to lower profitability caused by rising
personnel expenses. The company plans a change in type of contract with customers (to service level agreement [SLA], aform of contract based on service outcomes agreed upon between the service provider and the customer) to improve
profitability. It is currently under experiment with five commercial facilities.
Construction Work
Sales: JPY13.4bn (+30.2% YoY)
Operating profit: JPY1.1bn (+56.9% YoY)
Sales and operating profit grew substantially as the company expanded contracts for various works, including energy-saving
works in line with rising energy costs, in and outside the Aeon group.
Materials and Supplies Sourcing Services
Sales: JPY11.3bn (+10.7% YoY)
Operating profit: JPY630mn (+2.5% YoY)
Sales and operating profit were up despite rising raw materials and logistics costs, as the company worked to increase its
share within the Aeon group.
Vending Machine Services
Sales: JPY2.3bn (+5.3% YoY)
Operating profit: JPY258mn (+24.1% YoY)
Sales and operating profit rose. The company secured new sites for installation of vending machines as a result of enhanced
sales activities.
Support Services
Sales: JPY4.9bn (+8.8% YoY)
Operating profit: JPY149mn (-8.3% YoY)
The company worked on expanding its services to meet outsourcing needs to manage and operate customer facilities andtheir surrounding environment. Performance of the travel-related service also contributed to sales growth.
Overseas business (within each segment)
Sales: JPY8.4bn (+17.4% YoY)
Operating profit: JPY330mn (-13.6% YoY)

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

8

Sales and profit grew in China and the ASEAN region. Earnings from the overseas business are included within eachsegment.
The company steadily grew the China business as its core business company expanded the share of customer wallets andincreased newly acquired facilities centered on medium- to high-end facilities. The subsidiary also participated in theurban development project, resulting in concentrated contracts for facilities management operations. However, operating
profit declined due to higher personnel expenses.
Sales were up in all ASEAN countries in which the company operates, as economies that had been stagnant amid the
pandemic began to recover. Operating profit in the ASEAN business as a whole declined due in part to higher personnel
costs resulting from the revision of employment laws in Malaysia.

Other
As part of its initiatives to form regional economic zones, in April 2023, the company made askmaintenance Co., Ltd. (which
operates cleaning, facility management, condominium management, and construction businesses in the Kyushu area) awholly owned subsidiary.

FY02/24 company forecast
Full-year company forecast
FY02/22 (previous accounting standards)

FY02/24(newaccounting
standards)

FY02/23 (new accounting standards)(JPYmn)1H Act.

2H Act.

FY Act.

1H Act.

2H Act.

FY Act.

FY Est.

Sales

163,907

153,750

317,657

147,660

156,116

303,776

310,000
2.0%

9.5%

2.3%

5.9%

-

-

-

Cost of sales

YoY

143,444

134,714

278,158

128,054

134,284

262,338

Gross profit

20,462

19,03639,49819,606

21,831

41,437

12.2%

0.5%

6.2%

-4.2%

14.7%

YoY

4.9%

Gross profit margin

12.5%

12.4%

12.4%

13.3%

14.0%

13.6%

SG&A expenses

12,035

11,72923,76413,004

12,61925,623

YoY

12.1%

4.7%

8.3%

8.1%

7.6%

7.8%

SG&A ratio

7.3%

7.6%

7.5%

8.8%

8.1%

8.4%

Operating profit

8,427

7,306

15,733

6,602

9,212

15,81416,000

YoY

12.4%

-5.5%

3.3%

-21.7%

26.1%

0.5%

1.2%

Operating profit margin

5.1%

4.8%

5.0%

4.5%

5.9%

5.2%

5.2%

8,489

7,300

15,789

6,602

9,404

16,006

16,000

13.2%

-6.1%

3.4%

-22.2%

28.8%

Recurring profit
YoY
Recurring profit margin

1.4%

0.0%

5.2%

4.7%

5.0%

4.5%

6.0%

5.3%

5.2%

Net income

5,557

5,108

10,665

4,336

5,816

10,152

10,400

YoY

40.9%-34.0%-8.7%-22.0%

13.9%

-4.8%

2.4%

Source: Shared Research based on company data
Note: From FY02/23, the company has adopted the new Accounting Standard for Revenue Recognition, which will affect the way sales are recorded. Operating profit and line
items below are not affected.

Company forecast for FY02/24
Sales: JPY310.0bn (+2.0% YoY)
Operating profit: JPY16.0bn (+1.2% YoY)
Recurring profit: JPY16.0bn (flat YoY)
Net income attributable to owners of the parent: JPY10.4bn (+2.4% YoY)EPS: JPY214.32
Annual dividends per share: JPY86.0 (dividend payout ratio of 40.1%)
Sales
The company forecasts 2.0% YoY growth in sales. In 2H FY02/23, there was special demand for restoration-related
construction work following the 2022 Fukushima earthquake, and although a reactionary decline is expected this fiscal year,
the company expects to increase sales in all seven businesses by expanding its share of existing customer wallets throughenhancing account management, cultivating new customers, and strengthening energy-saving proposals.
Rising energy costs and other factors have prompted customers to cut property management costs and reassess theiroutsourcing contractors. Against this backdrop, the company aims to win new contracts in the form of a switch fromcompetitors in the same industry, based on its ability to reduce total outsourcing costs by providing facilities management,
security, and cleaning services under one contract, and to provide services across Japan, as well as a reputation for quality it
has gained from customers.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

9

Some companies in the same industry are unable to secure enough personnel to accept new contracts due to the serious
labor shortage. The company has introduced an area management strategy to share facility managers in a certain area, and it
is possible to allocate surplus personnel created by having facilities with fewer or no personal to new facilities. The company
will also focus on contracting of new properties.
Operating profit
The company forecasts 1.2% YoY growth in operating profit, with an OPM of 5.2% (flat YoY).
The company expects GPM to be flat YoY. The entire Aeon group announced a plan to raise the hourly pay for part-timeworkers by 7%, and Aeon Delight and its subsidiaries will follow suit. The company forecasts that this will increase costs
but GPM will remain flat YoY due to various initiatives including area management.
The company expects SG&A expenses to be flat YoY. In addition to higher personnel expenses, the company willcontinue to invest in digital transformation and overseas HR development. However, it plans to reduce expenses at thehead office through slimming.
Net income attributable to owners of the parent
The forecast for net income attributable to owners of the parent excludes any extraordinary gains and losses.
Dividend payout ratio
The company anticipates a payout ratio of 40.1% in FY02/24. Previously, the company had sought to maintain a 35% payout
ratio and aimed to reach a 40% level by FY02/24, but it achieved 41.8% in FY02/23 ahead of schedule.
The company expects to pay a dividend of JPY86 per share, a YoY increase of JPY1, and aims to increase dividends for 19
consecutive fiscal years.

Initiatives in FY02/24
The company will continue initiatives that align with the three basic policies of the medium-term management plan(customer-oriented management, promotion of digital transformation [DX], and group management) and carrying out
reforms. Through these efforts, it plans to develop a new growth strategy for the era of coexistence with COVID-19, whichbrought a significant change in the business environment.
Customer-oriented management
As a KPI for customer-oriented management, the company will raise the ratio of sales outside the Aeon group to 40.0% in
FY02/24 (vs 36.6% at end-FY02/23).
The company will promote initiatives to increase market share, respond to rising energy costs, and expand healthcare
solutions.
Efforts to increase market share: The company assigned account managers (salespeople in charge of handling alltransactions for a specific customer) to key customers, and has built a system to centrally manage customer information.
Through account management, it will strengthen its relationships with customers and build and propose customized
solutions for each customer based on an understanding of the customer’s issues. Through these efforts, the company aims
to increase its share of non-group customer wallets. In addition, in order to respond to the expanding needs of customers,
including energy-saving work, both in quality and quantity, the company will strengthen its construction management
system and actively propose renovation and repair work for managed facilities.
Responding to rising energy costs: Aeon Delight will actively propose energy-saving solutions to customers inside andoutside the Aeon group by utilizing the expertise it has cultivated at facilities management sites. It will promote the useof LED lighting and updating of air conditioners, sales of non-CFC cases, and introduction of energy management tools to
help reduce the environmental impact and energy costs of customers.
Expanding healthcare solutions: Leveraging its expertise in implementing quarantine measures at various facilities, Aeon
Delight will strengthen its proposals for hygienic cleaning for health-related facilities and for cleaning including
quarantine measures for accommodation facilities. In April 2022, the company set up an organization tasked with honing
proposals. It will also propose to non-group customers to raise the hygiene level of their facilities, and ensure the safety
and security of the facilities, including measures against infection.
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

10

Promotion of digital transformation
Through the promotion of digital transformation, the company targets an OPM of 6.0% and a full-year ROE of 12%. It alsoplans to introduce the area management system at 360 facilities (273 in FY02/23), reduce the number of people assigned to
specific facilities by 180 (a reduction of 167), reposition 20% of headquarters staff to front positions through concentration offunctions.
Promoting use of the Aeon Delight platform: The Aeon Delight platform provides centralized management of customer
requests, data on facility operation, maintenance and inspection, market trends in customer industries, and external
information on weather and disasters, and enables analysis and processing of the data using AI. In FY02/23, the company
started using information output from the platform, which led to more efficient sales activities and improved work quality.
In FY02/24, it will develop skills to identify the necessary data while developing the system to allow necessary data to beviewed at any time. It will build an in-house system for decision-making and taking actions based on data.
Strengthening efforts to complete the area management system: In Facilities Management, the company will continue tointroduce its area management strategy, where facility manages are shared in a certain area, and reduce the number of
personnel assigned to customer facilities and reassign these employees. In addition, the company aims to improve
productivity at the site by automating routine tasks (such as equipment inspection and report preparation), to alleviatelabor shortages and transform its earnings structure.
Group management
Through the promotion of group management, the company plans to generate JPY65.0bn in sales from domestic groupcompanies (JPY54.5bn in FY02/23). It also aims to generate 8% of total sales overseas (9.8% in FY02/23) and consolidate
group finance and accounting departments in Japan.
Initiatives at group companies in Japan: Progress in this area has been slow, as COVID-19 has had a greater-than-expected
impact. In March 2023, the company established an Affiliated Companies Department to take control of its domestic andoverseas subsidiaries. Each group company will draw on its expertise to formulate a strategy for group-wide growth andclarify its functions and roles within the group.
Aeon Delight Connect: This company resulted from a March 2021 merger between A to Z Service Co., Ltd. (aconstruction and maintenance service provider for small and medium-sized facilities in eastern Japan) and Do Service
Co., Ltd. (a cleaning services provider for small and medium-sized facilities in western Japan). The company's main
customer base is companies that operate small and medium-sized stores throughout Japan, such as restaurant chains.
Aeon Delight Connect is a core subsidiary operating in the medium- and small-sized facilities market. Aeon Delightplans to accelerate the subsidiary's regional dominance across the operating area.
Hakuseisha: Provides services such as cleaning and sanitation management, security, facilities management,
construction, and installation to customer department stores. Aeon Delight expects that the subsidiary will establish acompetitive edge in facilities management operations, expand facilities management and ancillary operations, andstrengthen its business base.
Kankyouseibi: Provides services such as facilities management, construction, security, management of cleaning, anddesignated manager operations. As the subsidiary has a strong presence in the Tochigi area, Aeon Delight plans tostrengthen the subsidiary's sales system in collaboration with the company's Kanto branch. The company will formulate
sales strategies by area for the subsidiary to implement.
Aeon Compass: In addition to handling overseas and domestic travel, the company also plans and manages events.
Although business performance has been sluggish due to the COVID pandemic, it will work to expand its travelrelated business, capture event-related demand, and expand its offerings for business trip support services.
Initiatives to form regional economic zones: The company made askmaintenance Co., Ltd. (FY03/22 sales: JPY1.6bn,
operating profit: JPY31mn) a wholly owned subsidiary in March 2023. It provides cleaning, facility management,
condominium management, construction work, and other services for commercial facilities, hospitals, government
properties, and other facilities for various purposes throughout the Kyushu area. In collaboration with askmaintenance,
Aeon Delight will expand its business base in Kyushu and combine the technologies and expertise cultivated by the twocompanies to improve quality and management efficiency. In the future, Aeon Delight will work on acquisitions andstrengthening relationships with partner companies in other areas as well, with the aim of forming regional economic
zones.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

11

Expanding businesses in Asia: China is expected to drive the overseas business as Asia's largest growth area. The
company will work to strengthen its management base for medium- to long-term growth in the ASEAN region.
China: In China, the company will give top priority to expanding sales. The company expects sales to increase due torecovery from the pandemic. Aeon Delight Jiangsu, the core operating company, will work to strengthen sales totenants and win more contracts to grow its share within the Aeon group.
It will also work to strengthen sales to Japanese and foreign-affiliated companies outside the Aeon group, thereby
expanding its customer base. The subsidiary Wuhan Xiaozhu aims to strengthen service quality through quality
management and HR development, and expand contracts for residences, hospitals, and schools. Aeon Delight aims toacquire expertise, expand its business domain, and strengthen its customer base by acquiring and investing in local
companies.
ASEAN region: The company expects business to grow in this region in the medium to long term, due to the openingof new Aeon group stores and the expansion of Japanese companies. The ASEAN regional headquarters will lead theway in strengthening the management base and planning growth strategies in each country. The Aeon group plans toaccelerate the opening of new stores in Vietnam from 2024. The company therefore will strengthen its system tosecure contracts, including for facilities in Cambodia. In Indonesia, the company is strengthening its efforts toimprove working conditions. In Malaysia, it aims to expand facilities management and repair work services for the
Aeon group. It expects increased sales and profit by shifting to SLA contracts in Cleaning Services.

Business-specific initiatives and forecasts
The company forecasts that all businesses will perform at or above the previous year's level. As it focuses on groupmanagement, the company does not disclose business-specific sales and operating profit.
Facilities Management: The company expects higher sales and profit. It expects sales growth as it increases its share ofexisting customer wallets by strengthening account management, acquires new customers outside the Aeon group, andstrengthens proposal-based sales. It also forecasts a recovery in subsidiaries. The company expects higher operating profit
due to sales growth. It will strive to increase profit margins by improving the profitability of facilities under area
management, reducing outsourcing costs, and improving operational efficiency at sites.
Security Services: The company forecasts higher sales and profit. It aims to increase sales as customer traffic at Aeon Mallfacilities recovers. It also plans to strengthen account management and acquire new customers. The company expects
higher OPM. It will install security systems (unmanned, remotely controlled store entry and exit management at nightwith sensors and cameras) at more facilities to curb the number of security personnel, strengthen account management,
mechanize operations, undertake highly profitable large projects and event security, and promote the pass-through ofrising personnel costs.
Cleaning Services: The company expects higher sales and profit. It will strengthen proposals for hygienic cleaning for
medical facilities and cleaning including quarantine measures for accommodation facilities in Japan and overseas. In April
2022, it established a specialized organization to strengthen the proposals. It plans to expand its proposals to non-group
customers, such as hospitals and hotels, and acquire new contracts. The company aims to improve profit by optimizing
subcontracting costs and strengthening sales of cleaning materials and equipment to partner companies. It also expects
that the full-scale implementation of Service Level Agreements (SLA) will also contribute to improving profitability. In thepast, the number of cleanings and the number of cleaning personnel were incorporated into the contracts with customer
companies, but by switching to contracts that guarantee service quality, the company will be better able to control service
costs.
Construction Work: The company expects sales and operating profit to be flat YoY. In FY02/23, the company performed
restoration work after the 2022 Fukushima earthquake. Despite the absence of such work, the company expects FY02/24
sales to be flat YoY as it takes in store renovation and repair projects that were postponed due to COVID-19 andstrengthens energy-saving proposals amid higher energy costs. On the profit front, it will improve accuracy in estimating
construction costs and reduce costs by strengthening cost negotiations.
Materials and Supplies Sourcing Services: The company expects sales to grow but operating profit to be flat YoY. As
material prices continue to rise, it will curb cost increases by reviewing materials, passing on prices, and consolidating
suppliers.
Vending Machine Services: The company forecasts higher sales and profit. It expects the impact from the pandemic toease, customer traffic at commercial facilities to recover, and beverage demand to increase as customers spend more
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

12

time at such facilities. The company will focus on acquiring new non-group customers in collaboration with otherbusinesses. It will also promote the replacement of vending machines with its own multi-brand machines, which have arelatively high profit margin.
Support Services: The company projects higher sales and profit. In Japan, it forecasts that demand for travel arrangement
services, which had been sluggish due to the pandemic, will recover. The company also expects that the Aeon group's
tree-planting activities and overseas training tours to resume in earnest. For China, the company expects theconsolidation of Zhejiang Metelan Property Management to contribute to earnings. The subsidiary provides nursing care
support at medical institutions.

Historical forecast accuracy
Results vs. Initial Est.

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Sales (Initial Est.)

260,000

270,000

280,000

305,000

305,000

305,000

315,000

315,000

325,000

310,000

Sales (Results)

256,654

265,572

277,926

292,607292,396

302,915

308,582

300,085

317,657

303,776(JPYmn)FY02/23

Results vs. Initial Est.

-1.3%

-1.6%

-0.7%

-4.1%

-4.1%

-0.7%

-2.0%

-4.7%

-2.3%

-2.0%

Operating profit (Initial Est.)

15,50016,00017,00017,50018,00018,50018,00016,50016,50017,00015,814

Operating profit (Results)

14,622

15,39014,556

14,13912,90913,03016,001

15,23015,733Results vs. Initial Est.

-5.7%

-3.8%

-14.4%-19.2%-28.3%-29.6%-11.1%

-7.7%

-4.6%

-7.0%

Recurring profit (Initial Est.)

15,50016,00017,00017,50018,00018,50018,00016,50016,50017,00016,006

Recurring profit (Results)

14,60015,472

14,534

14,263

13,381

13,362

15,94915,26815,789Results vs. Initial Est.

-5.8%

-3.3%

-14.5%-18.5%-25.7%-27.8%-11.4%

-7.5%

-4.3%

-5.8%

Net income (Initial Est.)

8,300

8,600

9,400

10,00010,70011,00010,80010,00010,50010,700Net income (Results)

7,039

7,965

7,247

7,093

6,397

6,415

9,348

11,680

10,665

10,152

Results vs. Initial Est.

-15.2%-7.4%-22.9%-29.1%-40.2%-41.7%-13.4%

16.8%

1.6%

-5.1%

Source: Shared Research based on company data.
Note: Results through FY02/18 have not been retrospectively adjusted.

Medium- and long-term outlook
Medium-term plan
(JPYmn)Sales

FY02/22

FY02/23

FY02/24

Cons. (previous
Cons. (previous
accounting standards) accounting standards)

FY02/21Cons. (new accounting
standards)

Forecast

Targets

303,776

310,000

471,000

300,085

317,657

YoY

-2.8%

5.9%

-

2.0%

Operating profit

15,23015,733

15,81416,000

YoY

-4.8%

3.3%

0.5%

1.2%

Operating profit margin

FY02/26

37,000

5.1%

5.0%

5.2%

5.2%

Net income

11,680

10,665

10,152

10,400

7.9%

YoY

24.9%

-8.7%

-4.8%

2.4%

Net margin

3.9%

3.4%

3.3%

3.4%

Sales: Non-Aeon Group ratio

35.7%

35.6%

36.6%

40.0%

50.0%

Sales: Overseas ratio

6.7%

7.8%

9.8%

Over 8%Over 15%

ROE

14.1%

11.7%

10.5%

12%

15%

Source: Shared Research based on company data
Note: From FY02/23, the company has adopted the new Accounting Standard for Revenue Recognition, which will affect the way sales are recorded. Operating profit and line
items below are not affected.

Aeon Delight Vision 2025
In October 2018, the company announced its Aeon Delight Vision 2025. In line with the company's management principle,
which calls for the ongoing pursuit of "environmental value" for customers and local communities, with Aeon Delight Vision
2025, the company aims to be one that creates environmental value and contributes to solving social issues in Asia, with“safety and security,” “manpower shortage,” and “environment” as three pillars of its growth strategy. Thereafter, in the faceof accounting irregularities at Kajitaku in FY02/20 and pandemic-related delays in some measures in FY02/21, Aeon
Delight announced new targets when it released its FY02/21 earnings results in April 2021, although with no change in thecompany’s overall direction.
The new targets for FY02/26 are sales of JPY471.0bn (CAGR of 9.4%), operating profit of JPY37.0bn (CAGR of 19.4%), andROE of at least 15% (ROE was 14.1% in FY02/21). (The targets announced in October 2018 were sales of JPY525.0bn andoperating profit of JPY48.0bn.) The company is aiming for top-ten sales and top-level OPM globally and number one sales in
Asia in the facilities management industry. To become one of the top ten companies in the world, the company is aiming to
expand its market share in Japan by constructing Aeon Delight economic zone and concentrating management resources in
China for its overseas operation.

Progress of the medium-term management plan (as of April 2023)
In its revised medium-term management plan (announced in April 2021), Aeon Delight aimed for JPY361.0bn in sales and
JPY22.0bn in operating profit for FY02/24, but the full-year forecast for FY02/24 announced in April 2023 set the targets
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

13

at JPY310.0bn in sales and JPY16.0bn in operating profit. The “customer-oriented management,” “promotion of digitaltransformation (DX),” and “group management” initiatives in the plan have steadily penetrated and are beginning tocontribute to business performance. In particular, earnings recovered in 2H FY02/23. However, due to changes in social
conditions such as the outbreak of COVID-19, and delays in delivery of materials and equipment, the company recognizes
that there has been a delay of one to two years in the contribution of various initiatives such as area management to its
earnings. It also recognizes that it was difficult to promote acquisitions as set forth in the medium-term management plan.
In FY02/24, the company will seek to optimize SG&A expenses by reducing expenses at the head office. ROE declined ascapital accumulated due to the recording of profits. The company will promote improvement in capital efficiency byreviewing the status of shareholders' equity and how it is used. It plans for a dividend payout ratio for FY02/24 of 40.1%. It
had set a target of 40% by FY02/24, but achieved it in FY02/23 ahead of schedule. While the basic policy set forth in Aeon
Delight Vision 2025 remains unchanged, in light of changes in the external environment, including the Ukraine issue,
soaring energy prices, and rising personnel costs, the company will promote new measures such as strengthening proposals
for energy-saving and expanding healthcare solutions.

Medium-term plan (FY02/22–FY02/24)
In April 2021, Aeon Delight formulated a medium-term plan covering the next three years (FY02/22–FY02/24) as it moves
toward realizing the goals of Aeon Delight Vision 2025. As described below, it aims to achieve this sales growth and OPM
improvement by putting customer-oriented group management into practice and promoting digital transformation (DX).

Customer-oriented management
Increase in ratio of sales outside Aeon group
Under the three-year medium-term management plan, the company plans to increase the share of sales outside the Aeon
group to 40% (+5pp vs FY02/21).
Since the pace of openings of large new Aeon group stores has slowed in Japan, the company aims to expand its share in
non-Aeon group and overseas markets.
It has already been expanding its presence in the non-Aeon group market (the ratio of sales outside the Aeon group rosefrom 34% in FY02/11 to 36% in FY02/21). However, the allocation of its sales resources to the non-Aeon group market has
been limited because its long-term growth has been specifically linked to the Aeon group’s own aggressive store opening
strategy.
Under the medium-term plan, the sales division will be divided into two teams; one to develop new customers and the otherto expand the share of services provided to existing customers. For existing customers, the company will assign accountmanagers who will be responsible for all transactions with each customer, grasp the needs of that customer, and track andanalyze trends in the industry to which the customer belongs.
In addition, Customer Support Centers (CSCs), which began operating at all eight branches in Japan in March 2021, willconsolidate information about each facility and its requirements. The company will analyze this information by customer andby facility for use in service development and quality assurance, with the aim of providing all customers, new and existing,with optimal solutions for the challenges they face.
Development of Aeon Delight platform
Aeon Delight aims to create a system that transforms customer feedback into organizational strength in service development,
quality assurance, and sales. To that end, the company believes it is necessary to have a mechanism for collecting andanalyzing a range of data (including customer feedback, facility conditions, and market trends in customers’ industries) andprocessing it into valuable information.
At the same time, it will develop Aeon Delight Platform to serve as a conduit for efficiently sharing information and data
analysis results not only internally, but across its entire service network, including group companies and their partners. To
build such a system, in February 2021 the company reorganized its sales and business divisions and all domestic branches,and established a marketing DX division to oversee them.
With Aeon Delight Platform, the sales division will strengthen the company’s relationships with its customers to better
understand their needs, along with trends in the industries to which they belong. Furthermore, as mentioned, CSCs, whichbegan operating at all eight branches in Japan in March 2021, will consolidate and analyze information about each facility

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

14

and its requirements. The information will be used in service development and quality assurance as the company aims toprovide customers with optimal solutions.

Promotion of digital transformation (DX)
Nationwide rollout of area management system centered on CSCs
Aeon Delight established CSCs at all eight domestic branches in March 2021 and will promote area management nationwide
based on the results of proof-of-concept testing at the Hokkaido branch. Under its medium-term plan, it aims to increase thenumber of facilities subject to area management to 360, allowing it to reduce the number of facilities management
personnel by 180 people.
Centered on the CSCs, the company will develop a new facilities management model using DX to address the manpower
shortage and reduce the number of permanently stationed facilities management personnel. It aims to replace theconventional facilities management model (management of individual stores) with an area management model in which
personnel are shared by facilities in a certain area.
Proof of concept at Hokkaido branch: With the cooperation of Aeon Hokkaido, the company conducted proof-of-concept
testing in FY02/21 at its Hokkaido branch to determine the viability of area management. It established a CSC at the
Hokkaido branch first and, in addition to a remote alarm management system, set up a monitoring station that integrates
systems for monitoring the status of equipment within facilities and any anomalies. At Aeon Yoichi, the store used in thetest, the company installed various systems and sensors, and facility inspection operations were shifted to the CSC to be
conducted remotely. By enabling this operating structure centered on the CSC from daily inspection work to
emergency response, Aeon Yoichi has achieved an unmanned management of onsite facilities since November 2020.

Relocation of head office
Aeon Delight relocated its Tokyo head office in September 2021 to consolidate its head office functions. By updating theequipment and layout of the new head office, the company is creating an environment in which diverse human resources
using a variety of work styles can all maximize their performance.
The head office will be constantly in contact with CSCs located in branches, allowing real-time sharing of customer status. In
addition, it will employ energy-saving and BCP measures and be open to the public as an example of an advanced facility
environment, making it a strategic office for disseminating information on facilities management, allowing the company toexpand its business opportunities.
Furthermore, as part of consolidating head office functions, the company will review its business processes, reduce head
office staff by 20%, and reassign those employees directly to relevant departments to improve productivity.

Group management
Establishment of Aeon Delight Connect for management of small and medium facilities
In March 2021, the company merged A to Z Service Co., Ltd., an interior construction and maintenance services provider for
mainly Kanto-area small and medium facilities, with Do Service Co., Ltd., a cleaning services provider for mainly Kansai-areasmall and medium facilities, to create Aeon Delight Connect Co., Ltd. The new company is set to become a core company
within the group providing comprehensive facility management services for small and medium facilities throughout Japan.
The reorganization allows the company to expand the service area of A to Z Service and Do Service and increase theservices available to existing customers. Aeon Delight has mobilized its management team to join sales staff in marketing
activities, targeting nationwide convenience store, restaurant, supermarket, and clothing store chains.
Establishment of company to oversee China business
In April 2021, the company established Aeon Delight China (AD China) to oversee its operations in China. It had alreadyestablished a local subsidiary in Beijing in 2007. Thereafter, it built a business foundation and expanded its service network
in China by adding to the group two local companies; Aeon Delight Jiangsu in 2012 and Wuhan Xiaozhu Property
Management in 2013. Taking advantage of the expertise and energy-saving technologies the company has cultivated inJapan, the two subsidiaries, Aeon Delight Jiangsu and Wuhan Xiaozhu, have expanded their businesses by participating inregional redevelopment projects and providing services in various regions and types of facilities, including largecommercial facilities, upscale residential buildings, and transportation infrastructure facilities.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

15

With the establishment of AD China, the company aims to promote synergies among companies operating in China andenable comprehensive management of the quality of services provided there, so that it can establish the Aeon Delight brandin China as a reliable brand. In addition, it will accelerate growth in China by providing support to its companies operating
there, especially in the North, East, Central, and South China areas.
In October 2022, Aeon Delight made its Chinese subsidiary Aeon Delight (China), whose main line of business was facility
management, an investment company, and renamed the subsidiary Aeon Delight (China) Investment Holdings Co., Ltd. The
company also increased its stake in the subsidiary.
Purpose: The company intends to acquire local facility management companies and new businesses that operate invarious regions in China to expand its China business. Having made Aeon Delight (China) an investment company, thecompany can now invest in local companies operating in other industries, thereby further expanding the scope of its
China operations. It also increased its stake in the subsidiary to actively carry out M&A activities.
Outlook: The company targets FY02/25 sales of JPY60.0bn (versus JPY17.0bn in FY02/22) for its China business. Of the
JPY60.0bn sales target, the company aims to generate JPY40.0bn through organic growth and JPY20.0bn fromacquisitions. It intends to invest in local companies that have expertise and customer bases in the energy andenvironment-related field, parking lot and parking facility operations, and in fields other than facility management where
the company has already developed a business in the country. It aims to grow sales through synergies generated throughcross-selling while continuing to push forward with business diversification. Depending on the project, the company's
headquarters in Japan may further increase its stake in Aeon Delight (China) Investment Holdings.
Aeon Delight also aims to expand its operations in Vietnam, where it expects Aeon Mall to actively open new stores. It will
particularly target Japanese companies entering the Vietnamese market.
Consideration of M&A candidates
The company considers M&A to be an important strategy for achieving the goals of its Vision 2025 plan, so in the five years
from FY02/22 to FY02/26 it will consider M&A, with a maximum ownership limit of about JPY25.0bn. M&A objectives
would be to create regional economic zones and overseas bases and to expand the company’s business domain (for example,
by acquiring companies that conduct facilities management business for hospitals or factories).
In selecting investment projects, the company will take into account the capital cost and implement the following threefinancial measures. First, it will decide a standard for holding a certain level of liquidity on hand; second, it will secure avariety of financing sources; and third, it will establish financial discipline. To ensure adequate liquidity on hand, it maintains
cash and deposits (about JPY50.0bn) equivalent to two months’ sales (1.5 months for working capital and 0.5 months as a risk
reserve), while taking into account the cost of capital. The company plans to use surplus cash and deposits mainly for M&A
and other growth strategies, but may also invest in low risk options such as securities. It intends to invest for growth,
including M&A, and has obtained a credit rating with a view to financing externally in case it is unable to cover investmentswith its own cash reserves. When financing externally, the company understands that it needs to maintain a certain degree offinancial discipline, such as reducing its net assets in line with its ROE target.
Promotion of shared services and creation of a suitable organizational culture
Aeon Delight will continue working to enhance group governance to prevent improper conduct by group companies. As
part of this effort, it will promote the consolidation of finance and accounting departments (shared services) to increase thereliability of financial statements produced by group companies. Based on reflection regarding the accounting irregularities
at the old Kajitaku, the company established an organizational culture committee, because it is critical to have a suitableorganizational culture to complement basic administrative mechanisms and rules.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

16

Business
Business description
Aeon Delight provides 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 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. In FY02/23, the company derived
63.4% of sales from Aeon Retail Co., Ltd. and other Aeon group companies. Aeon Delight handles between 60% and 90% of
the facilities management work required by Aeon group customers such as Aeon Retail, Aeon Mall, and MaxValue.
Aeon Delight is active in acquisitions. It has purchased companies in cleaning, building management, and store interior
construction. It has also purchased domestic and overseas companies in businesses ancillary to facilities management, andbeen proactive in seeking out alliances in other formats.

Business model
Aeon Delight became a leading integrated facilities management operator through its relationship with the Aeon group. The
company derives its earnings by providing an integrated, all-in-one package of facilities management services to large retailand commercial properties. It was able to differentiate itself from competitors by its expertise and costs competitiveness.
Competitors included Tokyu Community Corp. (not listed), Biru Daiko Co., Ltd., Nihon Housing Co., Ltd. (TSE Standard:4781), and Nippon Kanzai Co., Ltd. (TSE Prime: 9728).
There are three type of property management, residential, commercial, and office buildings. Most of these competitors weremainly 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 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, with second- 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 a competitive bidding to keep the process fairand open. However, Aeon Delight is able to provide competitive bids given its knowledge of the client’s needs, and knowhow. Its superior position as a large company with comprehensive reliable services will be further enhanced as the size ofbuildings expands. The company is able to handle large facilities maintenance given its size and economy of scale, whichfurther reinforces its strength and position. Thus, Shared Research believes that Aeon Delight’s position within thecommercial facilities industry is likely to improve, as the company has know-how and expertise.

Business overview
Aeon Delight operates seven main business segments: Facilities Management, Security Services, Cleaning Services,
Construction Work, Materials and Supplies Sourcing Services, Vending Machines, and Support Services.
Customers outside the Aeon group include commercial facilities, office buildings and offices, hotels and lodging facilities,
medical and welfare facilities, school facilities, factories and workshops, warehouses and logistics centers, public facilities,
various events, and others.
Account management
The company is stepping up its initiatives in the area of account management. In the past, the company communicated withcustomers at the segment level. Now, it is assigning account managers to major customers and creating a system to manage
customer information centrally. By better understanding customers and their industries, the company aims to increase
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

17

customer satisfaction and expand its own business through customer referrals to other segments. Through accountmanagement, the company proposes that services covering multiple departments be provided collectively (for instance,
operations related to Facilities Management could be handled by Construction Work) and that the same services areprovided throughout the country to customers that are operating on a nationwide basis.
The company is also promoting industry-specific proposals. The company is analyzing the information it collects on customers
and industries through account management, and has brought in personnel with expertise in the industries it targets.

Facilities Management
Facilities Management(JPYmn)Sales

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

43,45845,83948,96250,551

52,69956,36458,28958,223

61,53864,794

3.4%

5.5%

7.0%

FY02/23

YoY

3.3%

6.8%

3.2%

4.2%

-0.1%

5.7%

5.3%

Operating profit

4,725

4,217

4,206

4,350

4,644

5,558

5,293

5,175

5,495

5,810

YoY

1.4%

-10.8%

-0.3%

3.4%

6.8%

19.7%

-4.8%

-2.2%

6.2%

5.7%

Operating profit margin

10.9%

9.2%

8.6%

8.6%

8.8%

9.9%

9.1%

8.9%

8.9%

9.0%

Source: Shared Research based on company materials
Note: The company adopted the Accounting Standard for Revenue Recognition from Q1 FY02/23. The figures for YoY comparisons for FY02/23 are based on FY02/22 figures
retroactively adjusted under the new accounting standard.

In this segment, the company carries out maintenance, inspection, and servicing of building facilities.
This segment is involved in inspection, protection, and maintenance of facilities, providing monitoring support 24 hours aday, 365 days a year. Specific services are tailored to meet the needs of individual clients. This is a staple business for Aeon
Delight with few contract cancellations. Licensed technicians (such as electricians) are on standby at all times in large
shopping centers. Specifically, the company manages utilities such as electricity, water, and gas, HVAC (operations, repairs,
construction, and required inspections), exit and entrance management, anti-theft measures, and automobile parking.
Operating profit margin is about 9%. Required facilities are purchased by the client (property owner), and primarily costs
incurred by the company are personnel costs and facilities management costs (water and utilities costs and depreciation). The
company puts personnel on-site at large retail facilities, while smaller facilities are visited periodically and monitored
remotely.
Aeon Delight provide services for Aeon group commercial facilities, as well as stores for retailers, manufacturers, and othernon-group companies with multiple locations, factories, and offices.
The facilities management industry is facing a shortage of legally qualified personnel. Aeon Delight is ahead of its
competitors in securing such personnel, as the introduction of area management has enabled labor savings. Further, as thecompany operates nationwide, it is able to recruit legally qualified personnel from all over Japan. Against such background,the company has been receiving an increasing number of new contracts from customers who have switched from othercompanies.
Area management
In March 2021, Aeon Delight set up customer service centers at all eight branches in Japan and rolled out remote support
systems for customer facilities. The company also installed security cameras and sensors at facilities under management toautomate on-site management tasks and save labor. In addition to setting up such a system, the company adopted an area
management strategy, which involves the sharing of facilities management personnel in a given area with reference tocustomers' needs and attributes of each facility and region, and this led to cost reductions through labor savings andautomation. The company first introduced the strategy primarily for Aeon Retail stores among the several thousand facilities
under contract.
Utilization of technology: Next-generation facilities management model
The next-generation facilities management model uses an open facilities management network system the company has
developed. This system introduces IoT into facilities management. Data are measured automatically by sensors installed
throughout customers' facilities. These data are consolidated in the cloud, reducing manpower and time while allowing alldata to be managed at once.
Using IoT, the system performs remote monitoring and automatic control of air conditioning and lighting. It is an open
network utilizing existing control equipment and IoT; it has a low installation cost (in some cases, it can reduce costs by halfthrough multiple vendors); enables lower operation costs by reducing necessary manpower through remote monitoring; andsaves energy. The company is watching out for replacement demand for central monitors (every 15–20 years) to capture
replacement orders with its accumulated commercial facilities management know-how.
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

18

While leveraging its track record for large commercial facilities, its specialty, the company is also rolling out the system inother areas including drug stores to secure market share. In Asia ex. Japan, new purchases account for most market demand
while in Japan most demand is replacement demand. The company intends to make its services the de facto industry standard
in conventional facilities management.
The company appears to be considering several business models such as one that generates more sales and profits at
installation, one that generates sales and profit through operation, and one that generates profit when energy savings orother measures exceed a certain level. The company’s next-generation facilities management system, one of its value-added
services, leads to less manpower required for commercial facilities. As such, profitability is expected to rise with sales.

Monitoring screens displayed at a large facility in Chiba (operates in parallel with a central
monitor)

Source: Shared Research based on company data

Security Services
Security Services(JPYmn)Sales

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

FY02/23
Act.

34,242

36,62238,456

41,06843,29044,49244,64744,393

47,23949,478

YoY

7.7%

7.0%

5.0%

6.8%

5.4%

2.8%

0.3%

-0.6%

6.4%

Operating profit

2,865

3,102

3,032

3,110

2,857

2,881

3,038

3,307

3,435

3,279

YoY

6.4%

8.3%

-2.3%

2.6%

-8.1%

0.8%

5.4%

8.9%

3.9%

-4.5%

4.7%

Operating profit margin

8.4%

8.5%

7.9%

7.6%

6.6%

6.5%

6.8%

7.4%

7.3%

6.6%

Source: Shared Research based on company data

This segment provides comprehensive security services (i.e., security for facilities, security to handle crowds and traffic, andprotection of valuable goods). By combining manual labor and the latest advances in technology, the company provides
customized security solutions to clients.
It places security guards at client facilities, and recurring revenue business with ongoing security services is common. This
segment outsources most of its work to Aeon Delight Security, a subsidiary. Due to heavy personnel costs for security guards,
the operating profit margin is stuck at about 7%. The industry is experiencing a rise in personnel expenses due to chroniclabor shortages. However, the company is promoting the systematization of store entry and exit management and opening
and closing operations to improve profitability.
The company also offers an attendant security service, which is similar in nature to a concierge service. Attendants are female
security guards that also provide information services to patrons. This service was started in an effort to shed the old “security
guard” image and provide a more hospitable environment. Although costs will arise from staff training, this businessprovides high added value.
In Japan, in addition to Aeon group commercial facilities, Aeon Delight provides services to facilities outside the group(automakers, hospitals, hotels, commercial complexes, and business centers of financial institutions), and in China, togovernment-affiliated properties, commercial complexes, and condominiums.

Cleaning Services
Cleaning Services(JPYmn)FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

FY02/23

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Sales

42,32044,28747,87053,36555,29758,18562,36262,45966,963

68,336

YoY

4.4%

4.6%

8.1%

11.5%

3.6%

5.2%

7.2%

0.2%

7.2%

2.1%

Operating profit

5,716

6,289

6,031

6,012

6,228

6,694

6,967

7,324

8,106

7,014

YoY

-3.4%

10.0%

-4.1%

-0.3%

3.6%

7.5%

4.1%

5.1%

10.7%

-13.5%

Operating profit margin

13.5%

14.2%

12.6%

11.3%

11.3%

11.5%

11.2%

11.7%

12.1%

10.3%

Source: Shared Research based on company data

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

19

The company provides cleaning services, mainly in large shopping centers for the Aeon group. Because large commercial
facilities tend to have a wide variety of people passing through and frequent layout changes, it is a relatively difficult area ofthe cleaning industry. Although it is a labor-intensive business, the company has implemented measures to increase
efficiency of large machinery such as floor cleaners. These and other initiatives serve to standardize and increase theefficiency of work performed. This is a recurring revenue business and the company has built long-term relationships with
about 80% of its customers in this segment.
On an orders-received basis, the business is composed of about 10–20% work performed directly by the parent company,
and 80–90% work performed by outsourcing partners. Primary outsourcing partners are Aeon Delight Connect Co., Ltd. andKankyouseibi Co., Ltd. Approximately 30,000 persons are involved in the cleaning services business.
Hygienic cleaning
The company leverages the track record and expertise it has built up through hospital-oriented hygienic cleaning and New
Standard Cleaning, a cleaning method for maintaining a hygienic, attractive environment developed based on thecompany's proprietary cleaning services previously provided to hospitals. It focuses to offer high value-added services toraise facilities' hygiene levels. Since the outbreak of COVID-19, demand for disinfection cleaning, quarantine cleaning, andspecial cleaning to prevent the spread of infection has increased, and the company established a specialized organization in
April 2022 to strengthen related proposals. This has led to development of new non-group customers, such as hospitals andhotels.
Contract renewal for hygienic cleaning services at hospitals typically happens every year, so it is difficult to turn it into arecurring revenue business. That said, a limited number of companies have the scale needed to provide bulk cleaning
services for major groups with many medical facilities nationwide. Aeon Delight presents proposals capitalizing on its bases
nationwide; its name recognition as a publicly traded company and as a member of the Aeon group; its track record withmajor medical institutions; and the visible quality of its cleaning services.

Construction Work
Construction Work

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Sales

45,63041,97243,85545,81440,897

41,47041,84440,65743,01552,084
21.1%(JPYmn)FY02/23

YoY-14.0%

-8.0%

4.5%

4.5%

-10.7%

1.4%

0.9%

-2.8%

5.8%

Operating profit

2,580

2,807

3,218

3,210

3,305

3,989

3,816

3,880

3,583

4,080

YoY

16.8%

8.8%

14.6%

-0.2%

3.0%

20.7%

-4.3%

1.7%

-7.7%

13.9%

Operating profit margin

5.7%

6.7%

7.3%

7.0%

8.1%

9.6%

9.1%

9.5%

8.3%

7.8%

Source: Shared Research based on company data

In this segment, the company conducts large-scale renovation, interior planning and design, and restoration. It also proposes
energy-saving sand CO2 reduction solutions and installs related devices. In addition, it installs solar power systems and offer
energy data management services. In this segment, the company generates roughly 60% of its sales from Aeon groupcompanies. Renovation is remodeling (not designing) of Aeon retail locations, such as replacing signage, or modifying retailfloor space. In recent years, there has been an increasing amount of work related to changeover of tenants inside Aeon Malls(restoration and new interiors). In March 2021, Aeon Delight absorbed store design specialist U-COM, and the upstream
approach has enabled it to win an increasing number of contracts from outside the Aeon group.
With material prices on the rise, the company established a department specializing in estimating construction costs in
FY02/23. It plans to improve profitability by increasing estimate accuracy and strengthening cost negotiations.

Construction work process for commercial facility tenant replacement

Source: Shared Research based on company data

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

20

Materials and Supplies Sourcing Services
Materials and Supplies Sourcing

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Sales

44,54347,61850,51650,74050,26551,007

51,12553,06056,49741,544

YoY

13.4%(JPYmn)

6.9%

6.1%

1.5%

0.2%

FY02/23

0.4%

-0.9%

3.8%

6.5%

Operating profit

2,333

2,111

2,806

2,774

2,868

2,779

2,489

2,467

2,560

1,999

YoY

59.6%

-9.5%

32.9%

-1.1%

3.4%

-3.1%

-10.4%

-0.9%

3.8%

-21.9%

4.8%

Operating profit margin

5.2%

4.4%

5.6%

5.5%

5.7%

5.4%

4.9%

4.6%

4.5%

4.8%

Source: Shared Research based on company data
Note: The company adopted the Accounting Standard for Revenue Recognition from Q1 FY02/23. The figures for YoY comparisons for FY02/23 are based on FY02/22 figures
retroactively adjusted under the new accounting standard.

Through efficient logistics, the company in this business aims to reduce costs and improve operational efficiency at customer
companies in procuring intermediate materials used in offices and retail stores. The company handles materials for sales atstores (plastic shopping bags and gift bags), uniforms, and other consumables (stationery for employees and cleaningmaterials). In recent years, the company has strengthened its handling of environmentally friendly packaging materials.
In this business, stores running out of inventories of materials is not an option. The company also performs logistics functions
for customers. Through efficient logistics operations, it aims to reduce costs and improve operational efficiency related to the
procurement of intermediate materials. Even though this is a business where adding value is difficult, the company maintains
an OPM of around 5%. The rises in crude oil prices, raw materials, and distribution costs will increase the purchase costs ofpackaging materials. In addition to streamlining distribution costs, the company continues to make efforts to reflect risingcosts in selling prices.
Collaborating with other businesses, the company sold cleaning and sanitation materials to customers in Cleaning Services,and materials and equipment to those in Facilities Management and Security Services.

Vending Machine Services
Vending Machine Services

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

33,32934,82532,74132,87932,834

31,95531,54425,45326,353

9,466(JPYmn)Sales

FY02/23

YoY

6.8%

4.5%

-6.0%

0.4%

-0.1%

-2.7%

-1.3%

-19.3%

3.5%

1.3%

Operating profit

3,068

2,965

2,846

2,812

2,105

1,164

1,396

653

608

1,083

YoY

28.0%

-3.4%

-4.0%

-1.2%

-25.1%-44.7%

19.9%-53.2%

-6.9%

78.1%

Operating profit margin

9.2%

8.5%

8.7%

8.6%

6.4%

3.6%

4.4%

2.6%

2.3%

11.4%

Source: Shared Research based on company data
Note: The company adopted the Accounting Standard for Revenue Recognition from Q1 FY02/23. The figures for YoY comparisons for FY02/23 are based on FY02/22 figures
retroactively adjusted under the new accounting standard.

In this segment, the company operates soft drink vending machines. It also creates relaxation areas with foliage plants and air
purification equipment.
The company’s vending machines stock a variety of products from different manufacturers. About 80% of vending machinesales come from machine in supermarkets belonging to the Aeon group. The remaining 20% of sales come from machines
in shopping malls operated by non-Aeon companies. The business started in September 2010, when Aeon Delight acquired
vending machine operator Certo Corp., which spun off from the trading division of Aeon.
The company operates its own vending machines as well as those owned by partners such as beverage makers’ sales
companies. Beverage purchasing and vending machine restocking are outsourced to operators, while the company
determines locations and coordinates the product lineup. The company's sales are roughly tied to beverage sales, withadditional compensation from the manufacturers. Operating profit is the amount left after paying commissions to operatorsand installation sites.

Support Services
Support Services

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Sales

13,12914,406

15,52418,18817,325

19,43918,76815,837

16,04918,070

YoY

20.0%

9.7%

7.8%

17.2%

-4.7%

12.2%

-3.5%

-15.6%

1.3%

12.6%

336

281

-580

-850

-1,466-2,270

416

-75

441

462

-54.7%-16.4%

-

-

-

-

-

-

-

4.8%

2.6%

2.0%

-3.7%

-4.7%

-8.5%

-11.7%

2.2%

-0.5%

2.7%

2.6%

(JPYmn)Operating profit
YoY
Operating profit margin

FY02/23

Source: Shared Research based on company data

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

21

In this segment, the company provides travel agency services, education and human resource services, business process
outsourcing (BPO), housework support services, business travel services, training services, and staffing services. Much ofthese support services are conducted by companies acquired through M&A.
Development of BPO services began with the acquisition of General Services, Inc. Services that BPO undertake include costmanagement, salary calculations, administrative functions, social security and welfare, receipt of telephone calls, and systemmanagement.
The main subsidiaries in the segment are 1) Aeon Compass: mainly B2B services including Business Travel Management(domestic business trips, support for overseas assignments) and MICE (planning and management of meetings, seminars,
trainings), and 2) Aqutia: household support services. Aeon Delight Academy, Co., Ltd. operates the “Aeon Delight Academy
Nagahama” in Shiga Prefecture to provide real-world training. It also operates a staffing service for technical professions.
The company provides a wide rage of services such as travel agency and event-related services for the Aeon group. It alsooffers on-site shipping services for Aeon Mall facilities. The company also addresses non-group customers' outsourcing needs
associated with management and operation of contracted facilities and their surroundings. (e.g., operation of venues for new
employee welcoming ceremonies and employee training, and operations peripheral to building maintenance). In China, it
offers maintenance and peripheral services for government buildings and support services for new buildings.

Overseas business
Overseas, the company is active in China, Malaysia, Vietnam, and Indonesia, operating in the Facilities Management,
Security Services, Cleaning Services, and Support Services segments. Around half of overseas customers are Aeon groupcompanies. Overseas operations accounted for 9.8% of sales in FY02/23. The company uses a three-pronged growth strategy
that addresses safety and security, manpower shortage, and the environment, and aims to expand its contracted facilities
management services throughout the Asian region. In China, the strategy is to provide quality facilities management
centered on North, East, Central, and South China to boost the Aeon Delight brand profile.
Sales from overseas operations are included in each business.

China
In China, the company is expanding its business domain to include property management services (maintenance andoperation of facilities), catering (peripheral operations for building management), cleaning services, and services forresidents in nursing homes, centering on quality facilities management services.
The company operates in Beijing, Hebei, Tianjin, Shandong, Jiangsu, Shanghai, Zhejiang, Hubei, Guangdong, and Hunan. It
provides services to a variety of facilities, including large shopping centers, luxury residences, and transportation
infrastructure facilities. It also participates in community redevelopment projects.
M&A activities
The company targets sales of JPY60.0bn for the China business in FY02/26 (vs JPY22.7bn in FY02/23). The breakdown of
the JPY60.0bn sales is JPY40.0bn from organic growth and JPY20.0bn from acquisitions. In China, the company is actively
utilizing acquisitions and business alliances to acquire expertise, expand its business domain, and strengthen its customer
base. It plans to expand its business throughout China in the future. The company engages in facilities management
operations in China. In addition, it aims to invest in local companies that have expertise and customer bases in energy,
environment, and parking lot management, and companies that provide security and cleaning services for local hospitals andfactories of Japanese companies.
Main subsidiaries
Aeon Delight Jiangsu: One of the core operating companies. It provides security, cleaning, and support services forgovernment-affiliated facilities, offices, and commercial facilities. It is working to contract new properties and increase its
share of customer wallets. In June 2021, Aeon Delight Jiangsu acquired a 60% stake in Suzhou Nakamura Integrated
Facility Management Service (making it a subsidiary), which has a high level of knowledge and success in contracting
services for Japanese-owned factories, in order to expand market share in Suzhou where there is significant growth infactories owned by Japanese businesses.
Wuhan Xiaozhu: One of the core operating companies. It became a subsidiary in 2013. It is a major property
management company in Wuhan, Hubei Province, and holds a first-class license for property management.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

22

Aeon Delight (China): Aeon Delight (China) was established in 2021 to further grow businesses in China. (Its form waschanged from a facilities management company to an investment company, and it was renamed to Aeon Delight (China)
Investment Holdings Co., Ltd.) It overseas the company's businesses in China. It is responsible for strengthening group
governance, generating synergies among operating companies, and controlling the quality of services provided in
China. As an investment company, it is able to invest in local companies in other industries.
Zhejiang Metelan Property Management: Became a subsidiary in March 2022. It is a local company that manages andoperates healthcare facilities in Zhejiang and Jiangxi provinces.

ASEAN
In the ASEAN region, the company has subsidiaries in Indonesia, Malaysia, and Vietnam.
The company is making preparations to establish a head office for the ASEAN business in Malaysia to reinforce group
governance and develop a new growth strategy for the region as a whole. The company's ASEAN business has governanceissues, more so than the China business, and so the company is dispatching personnel from Japan to address these issues andstrengthen governance of the local business.
Malaysia: FY02/23 sales were JPY2.3bn. The company provides facilities management, repair, and cleaning anddisinfecting services for Aeon Malaysia facilities as well as non-group facilities.
Vietnam: FY02/23 sales were JPY4.0bn. Target customers are commercial facilities in Vietnam and Cambodia. Aeon Mallis strengthening store openings in Vietnam and plans to accelerate further store openings from 2025 to 2026. Aeon
Delight is also working to strengthen its system by increasing the personnel headcount.
Indonesia: FY02/23 sales amounted to JPY4.2bn. The company offers its expertise in facilities management. It also aims
to win local contracts. Personnel costs are on an upward trend as the company works to improve working conditions
following the revision of the law. Indonesia is a larger market within the ASEAN region, and the company has access tothe customer base of a cleaning company it purchased in the country in 2018. It is building local infrastructure bydispatching staff from Japan with an eye toward expanding contracts with Aeon group facilities.

Strengths and weaknesses
Strengths
Strong ties with the Aeon group: Aeon Delight is a subsidiary of Aeon Co., Ltd., and 63.4% of sales were generated fromthe Aeon group in FY02/23. This provides for stable sales, and the Aeon group’s expansion into Asia is also proving to bea positive factor for Aeon Delight’s growth. The company is able to leverage economies of scale from the Aeon group,and has accumulated expertise in facilities management from its transactions with Aeon. This provides for a stable
recurring-revenue model.
Industry leader in facilities management: Aeon Delight is the industry leader capable of providing integrated all-in-one
building maintenance services such as facilities management, security, cleaning, and renovations that are non-core
activities for many companies. Its competitors can only provide one to two of these services (i.e., security or cleaning).
The number of companies that can provide one-stop services is limited.
Ability to generate stable cash flows: Over the past five years, average operating cashflow has been JPY10.3bn perannum, and the company has spent JPY2.7bn per year on the acquisition of tangible fixed assets, generating total
cashflow of about JPY7.7bn. The company is using stable cash flow to invest strategically in acquisitions and technologicaldevelopment based on its longer-term vision. If there are no investment outlets that meet its growth strategy, the cash
flow funds shareholder returns. Over the past five years, Aeon Delight has spent an average of JPY3.8bn in dividend
payments (cash flow basis) yearly. In FY02/19 it spent JPY9.9bn on a share buyback. In FY02/23, the company achieved a
dividend payout ratio of 40% or more ahead of schedule, marking the 19th consecutive fiscal year of dividend increases.

Weaknesses
Limited organic growth: Aeon Delight depends mainly on the domestic market; overseas sales accounted for just 9.8% of
total sales in FY02/23. The markets for its existing businesses in Japan are mature, which is a weakness in terms of the

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

23

company’s growth potential. To sustain growth, Aeon Delight must rely on aggressive development overseas and winning
contracts in ancillary businesses as a facilities management company and growing market share.
Heavy dependence on the Aeon group: Aeon Delight is a consolidated subsidiary of Aeon, and the Aeon groupaccounted for 63.4% of sales in FY02/23. A drawback of such a strong relationship is that the parent company may ask forsupport in pursuing its agenda. Recently, Aeon acquired 50% of Tesco Japan, the U.K. supermarket chain operator’s Japanretail business. A joint venture company, Aeon Every Co., Ltd. is in charge of supermarket operations. The parent Aeon
could ask the company for support in future acquisitions.
Mature property management market: The property management market is relatively mature. However, small retail storesin urban areas offer growth opportunities given the greater number of customer volume. Many small retailers arerenovating their stores and upgrading facilities. Aeon Delight’s expertise has been in large facilities, mainly supporting
the Aeon group retail stores such as shopping centers and supermarkets. As smaller commercial facilities emerge inlarge 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.

Market and value chain
Market overview
Japan’s building maintenance market was worth roughly JPY4.3tn in FY2021, up 2.6% YoY, according to a survey released in
November 2022 by Yano Research Institute Ltd.
Building maintenance market includes building cleaning, facilities maintenance, and security services. It also includes
repair work, renovation work, and renewal work undertaken by building maintenance companies. But businesses
unrelated to building maintenance are not included in the data even though they are undertaken by these companies.

Scale of the building management market (prime contractor basis)

Source: Shared Research based on Yano Research Institute Ltd. materials (October 2021)

Building maintenance services were mainly used by office buildings (21.8%), shops and commercial facilities (18.2%),
medical and welfare facilities (10.1%), factories and workplaces (9.4%), and education facilities (9.5%). The company has asignificant share of the shop and commercial facilities market, but low shares in office buildings, medical and welfare
facilities, and factories and work places, leaving room for growth.
Sales growth rates by end user were up 2.9% YoY for office buildings, up 2.1% YoY for shops and commercial facilities, up
3.6% YoY for medical and welfare facilities, up 1.7% YoY for factories and workplaces, and up 0.3% YoY for education
facilities.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

24

Building maintenance market (by building use)
FY2019FY2020Residential

134.7

151.5

153.6

YoY

FY2018
7.4%

12.5%

1.4%

2.8%

3,860.5

4,124.8

4,080.1

4,184.5

Non-residential

FY2021 (Est.)
157.9

YoY

6.8%

6.8%

-1.1%

2.6%

Office buildings

875.4

933.2

919.4

946.0

6.4%

6.6%

-1.5%

2.9%

736.8

783.2

772.2

788.4

YoY
Stores and commercial facilities
YoY
Medical and welfare facilities
YoY
Educational facilities
YoY
Factories and workshops
YoY

6.5%

6.3%

-1.4%

2.1%

390.8

423.6

424.1

439.4

8.1%

8.4%

0.1%

3.6%

403.6

424.1

411.9

413.2

5.2%

5.1%

-2.9%

0.3%

387.4

409.2

401.1

407.6

6.1%

5.6%

-2.0%

1.6%

Source: Shared Research based on Yano Research Institute Ltd. materials (November 2022)

Aeon group stores by format (domestic and overseas)
FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

617

618

625

626

584

583

612

613

618

620

Supermarket

1,977

2,038

2,121

2,130

2,159

2,166

2,228

2,291

2,285

2,309

Discount store

353

381

530

566

568

587

592

599

605

605

DIY store

122

121

120

119

122

122

120

118

117

119

Supercenter

26

29

28

28

28

27

25

25

25

Department store

1

1

1

1

1

1

1

1

1

1

Specialty store

4,581

4,683

5,061

4,348

4,332

4,039

3,801

3,515

4,503

4,447

Convenience store

3,853

3,932

4,331

5,261

5,436

5,449

5,350

5,300

4,661

2,039

3,347

3,765

3,980

4,376

4,817

2,392

2,599

2,868

3,176
1,405

GMS

Drugstore and pharmacy
Other retail formats

756

884

803

856

907

1,015

1,150

1,252

1,341

Financial services

641

698

701

705

690

640

658

636

592

FY02/2325

596

Services

1,519

1,640

1,934

2,013

2,045

2,070

2,016

1,999

1,978

2,049

Total

14,44018,382

20,02020,633

21,24821,516

18,945

18,94819,594

17,391

Aeon Mall

137

148

161

166

174

180

172

174

202

199

Aeon Town

122

130

134

138

139

140

145

147

150

151

Total

259

278

295

304

313

320

317

321

352

350

FY02/15

FY02/16

FY02/17

FY02/18

Source: Shared Research based on company data

Stores overseas by format
FY02/19

FY02/20

FY02/21

FY02/22

FY02/23

GMS

69

77

84

87

94

96

101

103

103

101

Supermarket

FY02/14
95

101

115

173

150

150

125

125

131

131

Discount store

23

24

24

23

21

22

22

22

21

21

2,370

2,532

2,840

2,998

3,172

3,252

3,353

3,315

2,711

138
12

Convenience store
Drugstore

0

0

0

0

0

0

7

10

11

Specialty store

61

42

44

52

54

39

5

0

7

7

Other retail formats

29

30

79

97

115

124

148

147

153

153

Financial services

302

Services
Total

339

339

342

324

276

295

269

225

234

95

180

282

335

390

426

446

431

425

435

3,044

3,325

3,845

4,107

4,320

4,385

4,502

4,422

3,787

1,232

Source: Shared Research based on company data

Customers
In FY02/23, Aeon Delight generated almost 63.4% of its sales from the Aeon group companies, including Aeon Retail, Aeon
Mall (TSE Prime: 8905), and MaxValu companies. The remainder comes from non-Aeon group customers that includecommercial facilities, offices, hotels, medical facilities, schools, factories, warehouses, government offices, and event
operators.

Sales composition by customer

Source: Shared Research based on company data

Outside Japan, Aeon Delight seeks to reduce its reliance on the Aeon group to about 40%.
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

25

Plans for overseas openings of Aeon Malls
FY02/24 FY02/25 FY02/26
Overseas (stores)

2

4

11

China (stores)

1

2

4

ASEAN (stores)

1

2

7

Source: Shared Research based on Aeon Mall data

Overseas businesses of the Aeon group
Overseas stores: Aeon Mall

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

FY02/23

5

9

17

19

24

27

30

32

34

37

China

4

6

12

13

17

19

21

21

22

22

ASEAN

1

3

5

6

7

8

9

11

12

15

1

2

3

4

4

4

5

6

6

6

1

1

1

1

2

2

2

2

3

1

1

2

2

2

3

5

6

Total number of stores

Vietnam
Cambodia
Indonesia, Cambodia

Source: Shared Research based on Aeon Mall data

Competition
Aeon Delight derives some 60–70% of its sales from the Aeon group. Within the group, Aeon Delight’s share in Aeon Retailis about 80%. The company’s share in Aeon Mall is about 60%, while its share in MaxValu companies is between 60% and70%.
Aeon Delight’s competitors include SECOM Co., Ltd. and Sohgo Security Services Co., Ltd. in security services. It competes
with Azbil Corporation (TSE Prime: 6845), Nippon Kanzai Co. Ltd. (TSE Prime: 9728), and Tokyu Community Corporation(not listed) in property management services. There are no major competitors that offer cleaning services; Aeon Delightcompetes with smaller, regional cleaning operators. In construction-related work, Aeon Delight competes with Azbil in theenvironmental solutions business, while in the energy-saving business, major rivals are NTT Facilities, Inc. (not listed) and
Hitachi, Ltd. (TSE Prime: 6501).

Barriers to entry
Property management for residential and small office buildings has relatively low barriers to entry. However, the barriers arehigh for large facilities given the comprehensive services required. Smaller residential or office building owners are lessconcerned about having total package of services and usually focus on cleaning or security. However, large facilities requirecomprehensive services such as maintenance, cleaning, and security, all-in-one. Instead of hiring a contractor for eachservice, large building owners prefer to contract out these services to one company that is able to provide all of these
services in package. Consequently, this enables Aeon Delight to enjoy a relatively high barrier of entry in its market niche,
namely servicing large retail stores and office buildings, due to its expertise in providing an all-in-one package of services.
The company’s market share within the Aeon group is high. Being a group company, Aeon Delight is well aware of thebusiness practices and facility characteristics that are common throughout the Aeon group and the risk of its competitors
gaining a significant portion of the market share is fairly slim.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

26

Financial Statements
Income statement
Income statement

FY02/14(JPYmn)FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

FY02/23

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Sales

256,654

265,572

277,926

292,607292,396

302,915

308,582

300,085

317,657

303,776

YoY

3.1%

3.5%

4.7%

5.3%

-0.1%

3.6%

1.9%

-2.8%

5.9%

-

Cost of sales

223,409231,281

243,089

256,871257,524

267,463

270,011

262,910278,158

262,338

Gross profit

33,24534,29034,83635,73634,87135,452

38,57037,17539,49841,437

YoY

10.0%

3.1%

1.6%

2.6%

-2.4%

1.7%

8.8%

-3.6%

6.2%

-

Gross profit margin

13.0%

12.9%

12.5%

12.2%

11.9%

11.7%

12.5%

12.4%

12.4%

13.6%

SG&A expenses

18,622

18,90020,28021,596

21,961

22,421

22,56921,94523,76425,623

YoY

14.1%

1.5%

7.3%

6.5%

1.7%

2.1%

0.7%

-2.8%

8.3%

SG&A ratio

7.3%

7.1%

7.3%

7.4%

7.5%

7.4%

7.3%

7.3%

7.5%

8.4%

14,622

15,39014,556

14,13912,90913,03016,001

15,23015,733

15,814

YoY

5.2%

5.3%

-5.4%

-2.9%

-8.7%

0.9%

22.8%

-4.8%

3.3%

0.5%

Operating profit margin

5.7%

5.8%

5.2%

4.8%

4.4%

4.3%

5.2%

5.1%

5.0%

5.2%

Non-operating income (expenses)

-22

82

-22

124

472

332

-52

38

56

193

Non-operating income

163

228

253

434

608

590

339

432

448

446

Non-operating expenses

186

145

275

309

136

258

391

395

392

253

14,60015,472

14,534

14,263

13,381

13,362

15,94915,26815,78916,006

5.1%

6.0%

-6.1%

-1.9%

-6.2%

-0.1%

19.4%

-4.3%

3.4%

1.4%

Recurring profit margin

5.7%

5.8%

5.2%

4.9%

4.6%

4.4%

5.2%

5.1%

5.0%

5.3%

Extraordinary gains (losses)-1,180

-665

-408

-174

-1,135-195-401-4,617566-430

Extraordinary gains

28

15

816

525

170

-

129

469

1,422

53

Extraordinary losses

1,208

680

1,224

699

1,305

195

530

5,086

856

483

Operating profit

Recurring profit
YoY-

Income taxes

6,192

6,530

6,492

6,462

5,251

6,087

5,954

-919

5,790

5,376

Implied tax rate

46.1%

44.1%

46.0%

45.9%

42.9%

46.2%

38.3%

-8.6%

35.4%

34.5%

Net income attributable to non-controllinginterests

188

310

386

533

598

664

245

-110

-99

49

Net income

7,039

7,965

7,247

7,093

6,397

6,415

9,348

11,680

10,665

10,152

YoY

-6.3%

13.2%

-9.0%

-2.1%

-9.8%

0.3%

45.7%

24.9%

-8.7%

-4.8%

Net margin

2.7%

3.0%

2.6%

2.4%

2.2%

2.1%

3.0%

3.9%

3.4%

3.3%

Source: Shared Research based on company data
Note: The company restated prior-year results in June 2019.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

27

Balance sheet
Balance sheet

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

FY02/23

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cash and deposits

12,565

Accounts receivable(JPYmn)Assets

15,58020,386

31,71739,53644,23362,35559,773

68,28257,60034,44835,75734,32835,36035,73940,08942,612

39,17640,70847,065

Allowance for doubtful accounts

-290

-168

-360

-202

-130

-167

-242

-212

-134

-95

Inventories

2,575

2,663

2,840

3,218

2,623

2,211

1,822

2,006

2,074

2,363

Deposits for consumption to subsidiaries andaffiliates

32,42041,32637,362

31,71332,00016,000

-

-

-

-

Other

8,196

8,476

9,634

9,292

8,543

6,405

5,815

9,265

10,083

22,599Total current assets

89,914

103,634

104,190111,098

118,311

108,771

112,362

110,008

121,013

129,534

Buildings

1,046

1,009

1,629

1,631

1,582

1,479

1,458

1,671

1,629

1,494

238

211

190

175

-

-

-

-

-

-

2,487

2,516

2,651

3,307

4,892

5,064

4,846

4,264

3,589

2,967

278

278

1,978

1,975

1,975

2,032

2,032

2,000

466

434

-

-

-

-

-

-

-

-

-

-

Facilities and equipment for area management
Tools, furniture, and fixtures
Land
Construction in progress

209

345

610

1,974

1,591

1,585

1,334

1,545

1,394

1,604

Total tangible fixed assets

Other fixed assets

4,258

4,361

7,061

9,064

10,041

10,161

9,671

9,481

7,080

6,499

Goodwill

9,399

8,452

7,654

6,813

6,113

6,865

5,975

3,938

3,360

3,046

Other

1,609

1,867

2,352

1,989

1,699

1,338

1,209

1,579

2,293

3,324

Total intangible assets

11,008

10,32010,006

8,802

7,813

8,103

7,185

5,518

5,653

6,371

Investment securities

3,897

3,768

4,463

4,546

5,334

4,256

3,623

3,960

3,720

4,021

Deferred tax assets

254

284

310

551

330

412

1,763

4,840

2,951

1,841

1,877

2,750

3,896

4,342

3,458

3,264

2,347

2,766

2,470

2,378

Other
Allowance for doubtful accounts

-199

-535

-494

-536

-610

-355

-36

-11

-30

Investments and other assets

5,829

6,268

8,176

8,904

8,512

7,578

7,698

11,557

9,111

8,222

Total fixed assets

21,096

20,95025,244

26,772

26,367

25,842

24,55426,556

21,84521,093-19

Total assets

111,010

124,584

129,434

137,870

144,678

134,614

136,917

136,565

142,859

150,628

21,87624,93428,457

25,11425,82025,967

23,38822,17022,07025,901

5

-

-

271

225

394

252

299

247

182

Other

12,622

15,771

17,377

21,666

18,541

20,137

20,41017,466

17,156

17,203

Total current liabilities

39,30946,63945,83447,05149,06051,40848,864

44,12343,892

48,406

Liabilities
Accounts payable
Short-term debt

Long-term debt
Other

-

-

-

293

-

15

11

-

-

-

1,556

2,387

3,925

5,921

6,474

7,652

6,756

4,160

3,543

2,827

Total fixed liabilities

1,556

2,387

3,925

6,214

6,474

7,667

6,767

4,160

3,544

2,830

Total liabilities

40,86549,02649,76053,26655,53559,07555,631

48,28347,437

51,237
3,238

Capital stock

3,238

3,238

3,238

3,238

3,238

3,238

3,238

3,238

3,238

Capital surplus

18,81818,85018,862

18,94919,01913,88813,88013,226

13,2394,739

Retained earnings

45,11250,50555,09959,35562,756

65,91072,06380,34486,55991,421

Treasury stock

-449

-443

-441

-436

-430

-10,327-10,208-10,123-10,077-3,415

Other comprehensive income

2,413

1,711

1,373

525

799

1,484

466

-86

662

1,619

Share subscription rights

165

166

221

263

303

299

186

119

86

86

Non-controlling interests

1,547

1,869

2,168

2,434

2,773

2,062

2,213

814

757

908

Total net assets

70,14575,55879,67484,604

89,14375,53981,28688,281

95,421

99,391

Working capital

15,147

13,486

8,711

13,464

12,542

16,33321,046

19,012

20,712

23,527

5

-

-

564

225

409

263

299

247

182

Net cash

44,98056,90657,74862,866

71,311

59,82462,09259,474

68,03557,418

Shareholders' equity

68,43373,52377,285

81,90786,06773,17878,88787,34894,57898,397

Equity ratio

61.6%

59.0%

59.7%

59.4%

59.5%

54.4%

57.6%

64.0%

66.2%

65.3%

Total interest-bearing debt

Source: Shared Research based on company data
Note: The company restated prior-year results in June 2019.

AssetsIn order of value, the company’s assets are cash and deposits, accounts receivable, tangible fixed assets, and intangible assets.
Interest-bearing debt is JPY182mn. The company has a cash-rich balance sheet. Tangible fixed assets and intangible assets are
small as the company’s business structure does not require a large balance sheet. In FY02/20 the company ended its policyof leaving deposits with Aeon, from a cash governance perspective.
Majority of its investment securities are with Aeon Mall (TSE Prime: 8905), Aeon Hokkaido (TSE Standard: 7512), Aeon
Kyushu (TSE Standrd: 2653), Aeon Fantasy (TSE Prime: 4343), and MaxValu companies.

Shareholders’ equity
At end-FY02/23, the equity ratio was 65.3%. Although it declined to 54.4% at end-FY02/19 following the restatement ofprior-year earnings accompanying the Kajitaku accounting fraud, it subsequently recovered.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

28

Profitability and financial ratios
Profit margins

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

FY02/23Cons.

Gross profit

33,24534,29034,83635,73634,87135,452

38,57037,17539,49841,437Gross profit margin

13.0%

12.9%

12.5%

12.2%

11.9%

11.7%

12.5%

12.4%

12.4%

13.6%

Operating profit

14,622

15,39014,556

14,13912,90913,03016,001

15,23015,733

15,814

5.7%

5.8%

5.2%

4.8%

4.4%

4.3%

5.2%

5.1%

5.0%

5.2%

17,05417,501

17,014

16,92816,03816,391

19,16818,45819,21019,105

EBITDA margin

6.6%

6.6%

6.1%

5.8%

5.5%

5.4%

6.2%

6.2%

6.0%

6.3%

Net margin

2.7%

3.0%

2.6%

2.4%

2.2%

2.1%

3.0%

3.9%

3.4%

3.3%

ROA (RP-based)

13.8%

13.1%

11.4%

10.7%

9.5%

9.6%

11.7%

11.2%

11.3%

10.9%

ROE

10.7%

11.2%

9.6%

8.9%

7.6%

8.1%

12.3%

14.1%

11.7%

2.4

2.3

2.2

2.2

2.1

2.2

2.3

2.2

2.3

2.1

Working capital (JPYmn)

15,147

13,486

8,711

13,464

12,542

16,33321,046

19,012

20,712

23,527

Current ratio

228.7%

222.2%

227.3%

236.1%

241.2%

211.6%

229.9%

249.3%

275.7%

267.6%

Quick ratio

201.3%

198.3%

200.1%

209.5%

218.4%

194.8%

214.3%

223.8%

248.0%

216.0%OCF / Current liabilities

57.5%

40.1%

22.3%

25.2%

28.2%

24.6%

14.7%

22.4%

28.6%

19.3%

OCF / Total liabilities

52.3%

35.2%

20.7%

22.0%

24.4%

20.9%

13.2%

21.5%

26.6%

17.4%

22.3

15.4

10.1

9.7

12.4

13.6

18.3

20.8

19.5

22.4

-7,219-1,661-4,775

4,753

-922

3,791

4,713

-2,034

1,700

2,815

Operating profit margin
EBITDA

Financial ratios

Total asset turnover

Cash conversion cycle (days)
Change in working capital

10.5%

Source: Shared Research based on company data

Statement of cash flows
Cash flow statement

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

FY02/23(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cash flows from operating activities (1)21,35917,234

10,303

11,703

13,56812,373

7,371

10,403

12,598

8,895

Pre-tax profit

13,42014,807

16,526

14,08912,247

13,166

15,54810,651

16,355

15,577

Depreciation

1,294

2,483

1,341

1,699

2,069

2,414

2,602

2,352

2,427

2,755

678

578

250

122

39

123

175

1,659

441

77

Amortization of goodwill

1,138

770

759

720

715

759

815

801

722

808

Change in working capital

10,386

2,008

-552

449

1,035

-53

-4,745-1,831-2,311-6,690

Income taxes-6,114-6,615-6,336-6,602-6,115-5,188-6,506-4,838-2,592-3,248557

4,345-2,043

856

3,233

964

-268

1,534

-2,772-112

Cash flows from investing activities (2)-16,632-11,365-3,2552,233-2,666

12,256

13,838-7,325-386-10,715

Purchase of intangible/tangible fixed
assets-1,999-1,903-2,414-4,113-3,228-2,059-2,361-2,469-3,478-3,009Impairment losses

Other

Proceeds from sale ofintangible/tangible fixed assets

41

18

116

24

14

15

-

39

3,254

1

-388

-

-4,771---1,516

-

-

-117

-489

Payments of deposit for consumption to
subsidiaries and affiliates-212,400-220,511-218,798-229,151-250,400-284,000-192,500-31,000--

Collection of deposit for consumption
from subsidiaries and affiliates

198,000

211,605

222,762

234,800

250,113300,000

208,500

31,000

-

-

114

-574

-150

673

835

-184

199

-4,895-45-7,218Acquisition of shares in subsidiaries
affecting the scope of consolidation

Other
Free cash flow (1+2)

4,727

5,869

7,048

13,936

10,902

24,62921,2093,078

12,212-1,820Cash flows from financing activities-2,475-2,594-2,821-2,400-3,264-19,686-3,392-5,324-4,572-6,181

Net change in short-term borrowings

-

-

-

219

-28

179

-143

60

-74

-85

Net change in long-term borrowings

-

-

-

324

90

-2

-3

-14

-

-

-2,464-2,573-2,676-2,842-2,996-3,259-3,195-3,397-4,450-4,200

57

37

14

28

41

-9,906109---1,850

-

-

-

-57

-21

-6,458--1,853

-

-

-68

-58

-159

-72

-350

-240

-160

-120

-48

-45

Payment of dividends
Acquisition of treasury stock
Acquisition of shares in subsidiaries notaffecting the scope of consolidation
Other
Other

99

172

-229

-6

80

-228

-98

32

925

477

Change in cash and cash equivalent

2,351

3,447

3,997

11,530

7,718

4,715

17,719-2,2148,564-7,523

Cash and cash equivalent (year-end)

12,02815,476

19,47331,00438,72243,437

61,15158,93767,52059,996

Source: Shared Research based on company data
Note: The company restated prior-year results in June 2019.

Cash flows from operating activities
Cash flows from operating activities for the company are mainly from net income before tax, depreciation, goodwill
amortization, and changes to working capital. Fluctuations are comparatively small as the company runs a large proportion ofrecurring revenue type businesses.

Cash flows from investing activities
Annual spending on acquiring tangible and intangible fixed assets is about JPY3.0bn, small compared to operating cash flow.
Because the company is relatively aggressive in acquisitions, in some years there is a significant increase in share purchases.

Cash flows from financing activities
The main element in the company’s financing cash flows is dividend payments. There were significant outflows in FY02/19
including JPY9.9bn to buy back the company’s shares and additional amounts to make consolidated subsidiaries fully owned.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

29

Cash conversion cycle

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

FY02/23

Accounts receivable turnover

6.5

7.6

7.9

8.4

8.2

8.0

7.5

7.3

8.0

6.9

Days in accounts receivable

56.3

48.2

46.0

43.5

44.4

45.7

48.9

49.7

45.9

52.7

Inventory turnover

92.9

88.3

88.3

84.8

88.2

110.7

133.9

137.4

136.4

118.3

Days in inventory

3.9

4.1

4.1

4.3

4.1

3.3

2.7

2.7

2.7

3.1

Accounts payable turnover

9.6

9.9

9.1

9.6

10.1

10.3

10.9

11.5

12.6

10.9

Days in accounts payable

37.9

36.9

40.1

38.1

36.1

35.3

33.4

31.6

29.0

33.4

Cash conversion cycle (days)

22.3

15.4

10.1

9.7

12.4

13.6

18.3

20.8

19.5

22.4

Source: Shared Research based on company data

Days in accounts receivable are longer than days in accounts payable (including notes payable and electronically recorded
obligations), which means that working capital will increase and operating cash flow will slow in the short term during thebusiness expansion. Accounts receivable are mainly from Aeon group companies, while accounts payable are with various
suppliers, such as soft drink beverage suppliers.

ROE and dividends
FY02/15

FY02/16

FY02/17

FY02/18

FY02/19(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

ROE

FY02/14
10.7%

11.2%

9.6%

8.9%

7.6%

8.1%

12.3%

14.1%

11.7%

10.5%

Net margin

2.7%

3.0%

2.6%

2.4%

2.2%

2.1%

3.0%

3.9%

3.4%

3.3%

Total asset turnover

2.42

2.25

2.19

2.19

2.07

2.17

2.27

2.19

2.27

2.07

Financial leverage (equity multiplier)

1.61

1.66

1.68

1.68

1.68

1.75

1.79

1.65

1.54

1.52

13.8%

13.1%

11.4%

10.7%

9.5%

9.6%

11.7%

11.2%

11.3%

10.9%

ROA (RP-based)
ROIC

13.5%

13.1%

12.1%

11.5%

10.2%

10.9%

FY02/20

FY02/21

FY02/22

FY02/23

14.1%

12.4%

11.8%

11.2%

NOPAT

9,064

9,540

9,368

9,464

8,925

9,040

11,101

10,567

10,916

10,972

Interest-bearing deb + Net assets

67,35672,854

77,61682,421

87,26882,65878,74985,065

92,124

97,621ROIC (before tax)

21.7%

21.1%

18.8%

17.2%

14.8%

15.8%

20.3%

17.9%

17.1%

16.2%

Operating profit margin

5.7%

5.8%

5.2%

4.8%

4.4%

4.3%

5.2%

5.1%

5.0%

5.2%

Sales / Invested capital

3.81

3.65

3.58

3.55

3.35

3.66

3.92

3.53

3.45

3.11

Source: Shared Research based on company data

Dividends
FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22

FY02/23

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

2,519

2,625

2,731

2,890

3,207

3,114

3,246

4,099

4,201

4,225

b)

1

1

-

-

1

9,906

-

-

-

-

c) = a) + b)

2,520

2,626

2,731

2,890

3,208

13,020

3,246

4,099

4,201

4,225

(JPYmn)Total dividendsa)Total treasury stock acquired
Total returns to shareholders
Net income attributable to parent
company shareholders

d)

7,039

7,965

7,247

7,093

6,397

6,415

9,348

11,680

10,665

10,152

Dividend payout ratioa) / d)

35.8%

33.0%

37.7%

40.7%

50.1%

48.5%

34.7%

35.1%

39.4%

41.6%

Total shareholder return ratioc) / d)

35.8%

33.0%

37.7%

40.7%

50.1%

203.0%

34.7%

35.1%

39.4%

41.6%

EPS

(JPY)

134.2

151.7

138.0

135.0

121.7

122.9

187.2

233.7

213.3

203.5

Dividend per share

(JPY)

48.0

50.0

52.0

55.0

61.0

63.0

65.0

82.0

84.0

85.0

Dividend on equity ratioa) / f)

3.8%

3.7%

3.6%

3.6%

3.8%

3.9%

4.3%

4.9%

4.6%

4.4%

Source: Shared Research based on company data

Shareholder returns
The company achieved its target payout ratio of 40% for FY02/24 ahead of schedule in FY02/23. In FY02/19, the company
spent JPY9.9bn to buy back its own shares.
Aeon Delight’s stance on capital policy
The company will use proactive investments to achieve sustainable growth. It will work to boost shareholder value in thelonger term and increase returns to shareholders as the company grows. Further, the company views return on equity(ROE) as an important benchmark of capital efficiency, and is aiming to maintain a level of 12% through FY02/24.
The company will place importance on the balance in the distribution of annual profit between growth investments andshareholder returns and has a standard stable dividend payout ratio of 40%.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

30

Other information
History
Date
April
February

1973
1976

September

2006

November

2007

October
April
September
April
May

2008
2009
2010
2011

Description
Nichii Japan Development Co., Ltd. established in Higashi, Osaka
Changed name to Japan Maintenance Co., Ltd., following absorption-type merger with Nichii Maintenance Co., Ltd.
Following absorption-type merger with Aeon Techno Service Co., Ltd., Japan Maintenance changed name to Aeon Delight Co.,
Ltd.
Wholly owned subsidiary Aeon Delight (Beijing) Co., Ltd. (now Aeon Delight (China) Co., Ltd.) established
Acquires 40% of shares in Kankyouseibi Co., Ltd. (Utsunomiya, Tochigi) and made it affiliate
Acquires 40% of shares in Do Service Co., Ltd. (Nishinari, Osaka) and made it affiliate
Absorption-type merger with Certo Corp., supplier of vending services to business supply companies
Acquires 90% of shares in Kajitaku Inc. (Chuo, Tokyo) and made it subsidiary
Acquired additional shares in A to Z Service Co., Ltd. (Shinjuku, Tokyo) and made it subsidiary
With 70% stake, established joint venture FMS Solution Co., Ltd. (Mihama, Chiba) with Vinculum Japan Corporation (now VINX
Corp.)
Established wholly owned subsidiary, Aeon Delight (Malaysia) Sdn. Bhd.
Aeon Delight (Beijing) Co., Ltd. (now Aeon Delight (China) Co., Ltd.) and Tianjin Teda Co., Ltd. established joint venture, Aeon
Delight (Tianjin) Co., Ltd.
Acquired 53.7% of shares in General Services, Inc. (Chiyoda, Tokyo) and made it subsidiary

December
March

2012

AugustOctober
October
DecemberAcquired 54.9% of shares in Aeon Compass Co., Ltd. (Mihama, Chiba) via third-party allocation and made it subsidiary
Established A-Life Support Co., Ltd. (Chuo, Tokyo) a 85.8% owned joint venture with Familynet Japan Corporation
Acquired 51% of shares in Aeon Delight Sufang (Suzhou) Comprehensive Facility Management Service Co., Ltd. (now Aeon
Delight (Jiangsu)) and made it subsidiary
Established wholly owned subsidiary Aeon Delight (Vietnam) Co., Ltd.
Acquired 51% of shares in Wuhan Xiaozhu Comprehensive Facility Management Service Co., Ltd. and made it subsidiary

DecemberJanuary
July

2013

Established Kikugawa-Ishiyama Solar Co., Ltd. (Kikugawa, Shizuoka), a 37% owned joint venture with Recycle One Co., Ltd.
(now Renova, Inc.) and one other partner; Kikugawa-Horinouchiya Solar Co., Ltd., a 37% owned joint venture with Recycle One
and two other partners
Acquired shares in Hakuseisha Co., Ltd. (Chiyoda, Tokyo) via tender offer and made it subsidiary
Acquired remaining VINX Corp. stake in FMS Solution Co., Ltd. via tender offer and made it wholly owned subsidiary
Acquired remaining Familynet Japan Corporation stake in A-Life Support Co., Ltd. in September 2016, and conductedabsorption-type merger

November
December
March

2015
2016

December
March

2017

Established wholly owned subsidiary Aeon Delight (Shanghai) Management Co., Ltd.
Wuhan Xiaozhu Comprehensive Facility Management Service Co., Ltd. established wholly owned subsidiary Wuhan Xiaozhu
Hotel Management Service Co., Ltd.
Absorption-type mergers with FMS Solution Co., Ltd. and Aeon Delight Seres Co., Ltd.
Established Aeon Delight DeepBlue Technology (Shanghai) Co., Ltd., a 65% owned joint venture with DeepBlue Technology
Co., Ltd.
Acquired 100% of shares in U-COM Co., Ltd. (Minato, Tokyo) and made it subsidiary

April
June
April

2018

May

Acquired additional shares in Aeon Delight (Jiangsu) Comprehensive Facility Management Service Co., Ltd. and Wuhan
Xiaozhu Comprehensive Facility Management Service Co., Ltd., and made them wholly owned subsidiaries
Acquired 90% of shares in PT Sinar Jernih Sarana, and made it subsidiary
Conducted incorporation-type company split of Kajitaku's housework support business, which was transferred to Aqutia Co.,
Ltd., a newly established wholly owned subsidiary
Absorbed KJS Co., Ltd. (formerly Kajitaku Co., Ltd.)

November
DecemberFebruary

2020

February2021

Do Service Co., Ltd. was merged into A to Z Service Co., Ltd., and the name of the surviving company was changed to Aeon
Delight Connect Co., Ltd.
Merged with U-COM Co., Ltd. in an absorption-type merger
Transferred all stake in Aeon Delight Jiangsu, Wuhan Xiaozhu, and Aeon Delight (Shanghai) to Aeon Delight (China) as acontribution in kind

March

November

Source: Shared Research based on company data

Major shareholders
Shares held ('000)

Shareholding ratio

Aeon Co., Ltd.

27,613

55.2%

The Master Trust Bank of Japan, Ltd. (Trust account)

Top shareholders

4,660

9.3%

Custody Bank of Japan, Ltd. (Trust account)

1,421

2.8%

Aeon Delight Business Partners Stockholding Association

1,246

2.5%

The Nomura Trust & Banking Co.(Trust account)

688

1.4%

SMBC Nikko Securities Inc.

572

1.1%

The Bank of New York Mellon Corporation 140044

570

1.1%

Aeon Delight Employees Stockholding Association

527

1.1%

BNP PARIBAS LONDON BRANCH FOR PRIME BROKERAGE CLEARANCE ACC FOR THIRD PARTY

513

1.0%

SSBTC CLIENT OMNIBUS ACCOUNT

437

0.9%

Source: Shared Research based on company data
(As of end- August 2022)

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

31

Corporate governance(As of May 2022)
Form of organization and capital structure
Form of organization
Controlling shareholder
Parent company ticker
Directors

Company with Audit & Supervisory BoardY
Aeon Co., Ltd. 8267

Number of directors (per Articles of Incorporation)
Directors' term of office (per Articles of Incorporation)
Number of directors
Outside directors

20
1
8
4

Independent outside officers
Audit & Supervisory Board
Existence of Audit & Supervisory Board
Number of Audit & Supervisory Board members per Articles of Incorporation
Number of members of Audit & Supervisory Board

4
Y
5
4

Outside members of Audit & Supervisory Board
Independent outside officers
General shareholders meeting
Participation to electronic voting platform
Preparation of convening notices in English

Y
Y

Investor relations
Corporate disclosure policy
Regular briefings for individual investors
Briefings by representative directors

YYY

Regular briefings for analysts and institutional investors
Online access to IR documents
Dedicated IR section and/or staff
Other current assets
Foreign shareholding ratio
Independent officers
Implementation of measures regarding director incentives
Disclosure of individual director's compensation
Policy to determine amount and calculation method of remuneration
Corporate takeover defenses

3
2

Y
Y
Y
10–20%
6
Stock option
N
YN

Source: Shared Research based on company data

Top management
President and CEO: Kazumasa Hamada (born in 1964)
President and CEO Kazumasa Hamada joined Jusco Co., Ltd. (currently Aeon Co., Ltd.) in 1987. Appointed as head ofmanagement planning department, Posful Corp. (currently Aeon Hokkaido Corp.) in 2006 and executive officer in 2007;
regional office manager of Hokuriku, Shinetsu Regional Company in February 2011 and executive officer in March that year.
In 2013 he was appointed director and control & accounting officer of Aeon Co., Ltd. In 2015, he was named regional officemanager of Kitakanto and Niigata Company of Aeon Retail Co., Ltd. and director and senior managing officer of Aeon Retail.
In 2017 he became senior managing executive officer at Aeon Retail. In March 2018 he was dispatched to Aeon Delight Co.,
Ltd. as an advisor, before being appointed to his current position as president and CEO of Aeon Delight in May 2018. In
December 2018 he was appointed representative commissioner at PT Sinar Jernih Sarana. In June 2019 he was appointed
chief administrative officer, head of business administration division, and head of finance division of Aeon Delight. He has
held his current position since April 2020.

Employees
At end-FY02/22, Aeon Delight had 20,200 employees (20,117 at end-FY02/21) and an average of 7,556 temporary
employees (7,191) on a consolidated basis. At the parent level, there were 4,174 employees (4,118) and 2,862 temporary
employees (2,915).
In FY02/22, the average age, average length of employment, and average annual salary on a parent basis were as follows:
Average age: 45.9 years
Average length of employment: 11.5 years
Average annual salary: JPY5.0mn
In the Aeon group, the Aeon Delight Union (4,870 members) has been organized and belongs to the Aeon Delight Labor
Union and the Japanese Federation of Textile, Chemical, Food, Commercial, Service and General Workers' Unions (UAAeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

32

ZENSEN. The Aeon group adopts a union shop system.
Union shop system: Under this system, an employer requires its employees to join a union within a certain period of
employment. If an employee does not join the union, withdraws from the union, or is expelled from the union, theemployer is obliged to dismiss the employee. Unlike a closed shop system that employs only union members, the union
shop system does not require employees to join a union in order to be hired. On the other hand, an open shop systemdoes not require union membership of employees, leaving it up to their free will.

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

By the way
Corporate social responsibility (CSR) activities
The company's management principle calls for the ongoing pursuit of "environmental value" for customers and local
communities. In 2021, the company established its Basic Policies for Sustainability in accordance with this management
principle. These policies stipulate that the company shall contribute to the achievement of a decarbonized society, support
biodiversity conservation, and facilitate resource recycling.
Included below are some examples of efforts the company is performing to improve the global environment.
Proposals concerning energy conservation at facilities
The company offers proposals that it believes will reduce overall facility power consumption by combining its expertise withsystems for conserving energy consumed through facility operations. These systems include LED and other lighting
equipment capable of substantially reducing power usage, as well as energy-saving equipment such as air conditioning
equipment, refrigerated display cases, etc. The company helps its customers reduce their CO2 emissions and energy costs
while contributing to the decarbonization of society.
Renewable energy-related business development
Through its power supply services, the company provides commercial facilities, office buildings, medical institutions, andother extra-high and high-voltage facilities with inexpensive, high-quality, and stable electricity. At the same time, it is striving
to prevent global warming by offering CO2 Emission Reduction Plan and 100% Renewable Energy Plan.
Environmentally-friendly product proposals in materials business
The company is promoting the use of biomass plastic, recycled plastic, and traceable paper.
Participation in Aeon 1% Club
Aeon 1% Club supports projects to protect the environment, boost international cultural and human exchange, promote
regional cultural and social activities, and donate to welfare projects. It is an initiative under which group companies
contribute 1% of their pretax profits so that these activities can be maintained regardless of the companies’ businessperformances. In addition to providing children with opportunities to think about environmental issues, the company is
involved in a number of social contribution activities, including support for school construction and teacher training inSoutheast Asia and for the reconstruction of Shuri Castle in Okinawa.
Tree planting through Aeon Environmental Foundation
The Aeon Environmental Foundation, which celebrated its 30th anniversary in 2020, has been engaged in projects toaddress current global environmental issues. One representative example of the foundation's activities is the Aeon Forest
Program, an ongoing tree-planting project. The foundation is also quite active outside of Japan, where it has conducted its
Project to Revitalize the Forests at the Great Wall of China (a tree planting and growing activity) while also participating intree planting activities in countries including Vietnam, Cambodia, and Malaysia.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

33

“Clean Day” on the 11th Day of Each MonthOn the 11th of every month, all of the company's employees conduct ecologically- and locally-themed community
contribution activities (focused on improving environmental conditions and giving back to the community, respectively).
Acquisition of Eco Mark certification for Cleaning Services
In 2022, the Japan Environment Association (JEA) granted the company Eco Mark certification for its Cleaning Services. The
Eco Mark is an environmental label issued by JEA that indicates products and services that have a low environmental impact
throughout their life cycles (from production to disposal) and are useful in terms of environmental conservation.
In addition, Aeon Delight’s logo is a mascot named “Gu Jo-Kun,” derived from “a good job!” and symbolizes that thecompany wishes to make all people happy.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

34

Historical financial statements
Full-year FY02/23 results
Sales: JPY303.8bn (+7.0% YoY, +6.8% YoY based on the previous accounting standard)
Operating profit: JPY15.8bn (+0.5% YoY)
Recurring profit: JPY16.0bn (+1.4% YoY)
Net income attributable to owners of the parent: JPY10.2bn (-4.8% YoY)
The company adopted the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) effective
Q1 FY02/23. As a result, revenue recognition standard was changed for some operations of the Facilities Management,
Materials and Supplies Sourcing Services, and Vending Machine Services segments. The adoption of the new accounting
standard reduced full-year sales by JPY35.5bn and cost of sales by JPY35.5bn. Meanwhile, operating profit, recurring profit,and pre-tax profit increased JPY11mn each due to applying the new standard. The balance of retained earnings at the
beginning of the fiscal year decreased JPY1.1bn.
YoY comparisons in this report have been calculated after retroactively applying the new accounting standard to FY02/22
results.
Sales
Sales were up 7.0% YoY. Sales increased in all seven segments due to an increase in the share of existing customer wallets
on the back of strengthened account management and sales activities and the development of new customers. In particular,
in 2H FY02/23, Construction Work was awarded an expanded number of contracts for various works, including restorationrelated works following the March 2022 Fukushima earthquake, resulting in increased sales.
Looking at the current industry environment, customers are reassessing their outsourcing contractors as part of measures toreduce property management costs in response to the rise in energy costs and other various costs. Against this backdrop, thecompany is seeing an increase in the number of new contracts in the form of a switch from competitors in the same industry.
This comes because the company is able to reduce total outsourcing costs through all-at-once outsourcing of its Facilities
Management, Security Services, and Cleaning Services, thereby earning a reputation from customers for its operational
quality.
Operating profit
Operating profit was JPY15.8bn (+0.5% YoY). The company posted an operating loss in 1H FY02/23, but turned a profit in
2H.
Gross profit: Gross profit grew 4.9% YoY to JPY41.4bn, with the GPM down 0.3pp YoY to 13.6%. In Cleaning Services,
GPM fell mainly in reaction to the elevated demand seen a year ago for relatively high-margin services, such as
disinfectant cleaning for facilities that had been exposed to COVID-19. In Materials and Supplies Sourcing Services, a risein procurement costs driven by soaring raw material and logistics costs depressed GPM.
SG&A expenses: SG&A expenses were JPY25.6bn (+7.8% YoY), and the SG&A ratio was 8.4% (flat YoY). Personnel
expenses rose, especially in overseas businesses. The rise in SG&A expenses was also attributed to upfront expenditures
including capital, personnel, and digitalization investments the company made as initially planned. In particular, thecompany has strengthened its investment in systems to promote area management (detailed below).
Net income attributable to owners of the parent
Net income attributable to owners of the parent fell YoY. Despite higher recurring profit, net income was down due to areaction to the JPY1.2bn extraordinary gain recorded in FY02/22 from the sale of fixed assets of a consolidated subsidiary as
part of efforts to improve management efficiency.

Achievement against full-year company forecast
The achievement rates against the company's full-year forecast for FY02/23 were 98.0% for sales, 93.0% for operating profit,
94.2% for recurring profit, and 94.9% for net income attributable to owners of the parent.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

35

Sales were slightly below the company's forecast. Amid the harsh business environment, sales in Facilities Management
and Cleaning Services fell short of the plan.
Profits from operating profit downward fell short of the company's forecast. In addition to sales falling short of the plan,
profitability declined in Materials and Supplies Sourcing Services, Cleaning Services, and Construction Work due tohigher procurement costs and an increase in the composition ratio of low-profitability products and services. Although thecompany stepped up efforts to improve profitability in each of its businesses, there was an effect from COVID-19, theRussia–Ukraine crisis, and other external factors, which depressed operating profit by about JPY1.1bn (these factors were
initially forecast to reduce operating profit by about JPY800mn).

Quarterly results
Q1 FY02/23: Sales were JPY71.8bn (+0.9% YoY), and operating profit was JPY3.3bn (-12.0% YoY). The decline inoperating profit was attributed to an increase in SG&A expenses, as the company incurred upfront costs—including
capital, personnel, and digitalization investments—as initially planned. By segment, sales grew in Facilities Management,
Security Services, Cleaning Services, Materials and Supplies Sourcing Services, and Support Services. Operating profit
increased in Facilities Management, Vending Machine Services, and Support Services.
Q2 FY02/23: Sales amounted to JPY75.9bn (+0.6% YoY) while operating profit dipped 29.3% YoY to JPY3.3bn. The drop
in operating profit was due to an increase in SG&A expenses as the company continued to incur upfront costs in the formof capital, personnel, and digitalization investments as it did in Q1. By segment, sales fell in Cleaning Services due to a
falloff in demand for cleaning services using alcohol disinfectants, and sales were also down in Materials and Supplies
Souring Services. Meanwhile, sales grew in Vending Machine Services owed to extreme heat. Operating profit rose in
Facilities Management and Vending Machine Services. The rate of decline in operating profit widened in Security
Services, Cleaning Services, and Construction Work due to sluggish demand for high-margin services. Operating profit
also fell by a greater margin in Materials and Supplies Sourcing Services due to higher procurement costs.
Q3 FY02/23: Sales were JPY79.2bn (+15.3% YoY) and operating profit was JPY4.2bn (+23.1% YoY). As in 1H FY02/23,
SG&A expenses rose due to upfront investments. Still, operating profit grew YoY as sales growth offset higher SG&A
expenses. Sales increased in all seven segments. Facilities Management and Vending Machine Services maintained an
upward trend in profit. Construction Work and Support Services turned profitable on a significant increase in sales due torestoration-related work following the 2022 Fukushima earthquake. Security Services, Cleaning Services, and Materials
and Supplies Sourcing Services continued to see declines in profits, but the margin of decline narrowed.
Q4 FY02/23: Sales were JPY76.9bn (+12.3% YoY) and operating profit was JPY5.0bn (+28.7% YoY). SG&A expenses rosedue to continued upfront investments. Still, operating profit grew YoY as sales growth offset higher SG&A expenses. By
business type, six businesses, excluding Vending Machine Services, increased sales, and five businesses, excluding
Materials and Supplies Sourcing Services and Support Services, increased profit. Construction Work, which expanded
contracts for various construction projects, including energy-saving construction projects, led the increases in sales andprofit. OPM improved due to thorough cost reduction measures.

Segment trends
In FY02/23, sales increased YoY in all seven segments. Operating profit grew in Facilities Management, Construction Work,
Vending Machine Services, and Support Services, while it fell in Security Services, Cleaning Services, and Materials andSupplies Sourcing Services.

Facilities Management
Sales grew 5.3% YoY to JPY64.8bn (+5.1% YoY based on the previous accounting standard), and operating profit
increased 5.7% YoY to JPY5.8bn.
Sales were up YoY. The company continued to win new contracts for Aeon group stores, facilities outside the Aeon group(manufacturers, financial institutions, general hospitals, hotels), and non-group facilities in China. The company's share ofexisting customer wallets increased, in part due to an increase in inspection and maintenance work and its accountmanagement initiatives. Also contributing to the increased share of wallets were new contracts for retailers andmanufacturers that operate multiple outlets, company stores, factories, and offices of corporate customers.
In terms of profits, while costs are trending upward, profitability improved thanks to a reduction in the number of personnel
assigned to customer facilities through area management and outsourcing cost cuts made by reviewing, consolidating, andAeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

36

negotiating prices with facility inspectors.
With the expansion of the customer base, sales and profit increased versus FY02/20, before the outbreak of COVID-19.
The facilities management industry is facing a shortage of legally qualified personnel. Aeon Delight is ahead of its
competitors in securing personnel, as the introduction of area management has enabled labor savings. Further, as thecompany operates nationwide, its ability to recruit legally qualified personnel from all over Japan surpasses its industry
peers. Although there are some companies in the same industry that have been unable to secure new contracts due to a lackof progress in securing legally qualified personnel, Aeon Delight does not count among them.
The performance of domestic subsidiaries engaged in Facilities Management deteriorated. Many of the main customers ofdomestic subsidiaries are small businesses such as restaurants, and sales growth was sluggish due to a higher churn rate aspart of cost-cutting efforts during the COVID-19 pandemic. OPM also declined. Domestic subsidiaries have not introduced
area management and were affected by rising labor costs.
Initiatives in Facilities Management
Account management: Instead of communicating with customers on a business basis as in the past, the company now
appoints account managers for key clients and centrally manages customer information across businesses. It was able toexpand transaction volume by deepening account managers' understanding of customers and various industries, andmade progress in improving customer satisfaction and referring customers to other segments. It is working to provide
services across the segments in a single package (for example, Construction Work carries out an order associated with
Facilities Management), and to provide the same services regardless of region to clients operating nationwide. These
efforts have contributed to the company's increased share of wallets.
Area management: In March 2021, Aeon Delight set up customer service centers at all eight branches in Japan and rolled
out remote support systems for customer facilities. The company also installed security cameras and sensors at facilities
under management to automate on-site management tasks and save labor. In addition to setting up such a system, thecompany adopted an area management strategy, which involves the sharing of facilities management personnel in agiven area with reference to customers' needs and attributes of each facility and region, and this led to cost reductions
through labor savings and automation. The company first introduced the strategy primarily for Aeon Retail stores among
the several thousand facilities under contract. As of end-FY02/23, 273 facilities (versus 178 at end-FY02/22)
implemented the area management strategy, with facilities management personnel down by 167 (115). Following upfront
investments, the company expects profitability to improve from FY02/24 as the number of facilities under area
management grows.

Security Services
Sales were up 4.7% YoY to JPY49.5bn, while operating profit fell 4.5% YoY to JPY3.3bn.
Sales increased YoY, driven by an increase in the number of customer companies as the company won new contracts forgovernment buildings, commercial facilities, and condominiums among others in China. In Japan, lower orders of safety
cameras (surveillance cameras) for the Aeon group adversely affected sales. Meanwhile, newly contracted facilities, including
new Aeon group stores and non-Aeon group facilities (automakers, hospitals, hotels, commercial complexes, and businesscenters of financial institutions), and facilities contracted in 2H FY02/22 contributed to sales growth. As in Facilities
Management and Cleaning Services, the number of new contractors increased as a result of switching from other companies
in the industry. The company captured a larger share of customer wallets and acquired new bases through reinforcing
account management.
Operating profit fell YoY. Profitability deteriorated due to one-time costs incurred when launching large-scale new contracted
projects and delays in passing on the increase in personnel costs to prices. Aeon group is striving to cut costs amid the
pandemic, and its refraining from replacing or installing additional security cameras also had an impact. Under thesecircumstances, profitability has been on an improving trend as the company continues negotiations to optimize unit prices
and works to automate systems to handle tasks such as facility entry/exit management and store opening/closing.
Sales and profit were up versus FY02/20, before the outbreak of COVID-19, due to the expanding customer base.

Cleaning Services
Sales were up 2.1% YoY to JPY68.3bn, while operating profit declined 13.5% YoY to JPY7.0bn.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

37

Sales increased YoY. In 1H FY02/22, demand for alcohol disinfection cleaning, quarantine-related cleaning, and special
cleaning services increased to prevent the spread of COVID-19, becoming a factor that boosted sales, but in 1H FY02/23,
sales decreased in reaction. In 2H FY02/23, the impact was reduced, and sales started to increase due to the new contracts
outside the Aeon group in China, the consolidation effect of Zhejiang Metelan Property Management Co., Ltd. (whichbecame a subsidiary in March 2022), and a recovery in the Indonesian business.
Operating profit declined YoY. This was due to decreased in demand for high-margin alcohol disinfectant cleaning services,
upfront investments to improve overseas working conditions, and higher outsourcing and cleaning staff personnel expenses
in Japan and overseas.
Versus FY02/20, before the outbreak of COVID-19, sales and profit increased. The increase in overseas investment aimed at
improving working conditions put pressure on profit, but profit increased as profitability improved due to progress in pricepass-through.

Construction Work
Sales rose 21.1% YoY to JPY52.1bn, and operating profit rose 13.9% YoY to JPY4.1bn.
Full-year sales increased YoY.
1H saw delays in some construction work due to shortages and delayed procurement of construction materials, such asparts and air conditioning equipment, against a backdrop of the COVID-19 pandemic and the Russian invasion of
Ukraine. Further, orders declined due to customers' cancellation or postponement of capex plans, as well as their cuttingback on minor repair and maintenance works due to rising electricity and other costs, and uncertainties in the external
environment.
In 2H, the same impact as in 1H continued. However, sales grew in 2H as the company in Q3 recorded most of theearnings from restoration-related work for Aeon group stores damaged by the earthquake that occurred off the coast of
Fukushima Prefecture in March 2022. In 2H, the company completed some of the construction work that had been
delayed or postponed in 1H, and strengthened proposals for energy-saving projects, fueling sales. Amid rising electricity
charges, energy-saving proposals that contribute to reducing electricity costs and environmental impact, such as sales ofLEDs, automatic air conditioning control, and non-CFC cases for commercial facilities with large power demand, werereceived well.
Although operating profit increased due to higher sales, OPM declined on higher material prices and a decrease in orders
for minor repair and maintenance works with high margins. Under these circumstances, Aeon Delight established adepartment specializing in estimating construction costs, and the accuracy of the estimates has been improved. In addition,
the company made progress in cost negotiations. All of this had the effect of improving profitability.
Sales and profit were up versus FY02/20, before the outbreak of COVID-19, due to the expanding customer base.

Materials and Supplies Sourcing Services
Sales grew 4.8% YoY to JPY41.5bn, while operating profit fell 21.9% YoY to JPY2.0bn.
Sales increased YoY. Sales in and outside the Aeon goup increased. The company strengthened sales efforts targeting the
Aeon group to increase share within the group. It expanded business with companies that have newly joined the Aeon
group: Fuji Retailing Co., Ltd. (TSE Prime: 8278), which runs supermarkets in the Chugoku/Shikoku region, and Can Do Co.,
Ltd. (TSE Standard: 2698), which has a nationwide chain of 100-yen shops. Collaborating with other businesses, the company
sold cleaning and sanitation materials to customers in Cleaning Services, and materials and equipment to those in Facilities
Management and Security Services.
Operating profit declined YoY. Purchase costs for packaging and other materials rose due to rises in crude oil prices, rawmaterials prices, and logistics costs, but it took time to pass on the price increases, and profitability declined. Another factor
contributing to the OPM decline was an increase in the sales composition of products with low profit margins, such as
packaging materials and food trays for the Aeon group. Under these circumstances, in addition to streamlining logistics
expenses, the company continued efforts to reflect rising costs in appropriate selling prices, and OPM showed signs ofimprovement.
Versus FY02/20, before the outbreak of COVID-19, sales increased but profit decreased.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

38

Vending Machine Services
Sales rose 1.4% YoY to JPY9.5bn (+2.2% YoY based on the previous accounting standard), while operating profit
jumped 78.0% YoY to JPY1.1bn.
Sales increased YoY. Beverage demand began to recover on the lessening impact of COVID-19. In Q2, there was a recovery
in human flows and an impact from the heatwaves in July and August 2022, and in Q3, the company received large orders at
the factories of major manufacturers. The company also serves them in Facilities Management and Cleaning Services, andthe cooperation between the businesses led to the orders. Also, to improve profitability per vending machine, the company
promoted expansion of the installation of its multi-brand vending machines which offer a variety of products from various
beverage manufacturers.
Operating profit increased in Q4 FY02/22 on a decrease in depreciation expenses due to impairment losses on
unprofitable machines.
Both sales and profits were down compared to FY02/20, before the outbreak of COVID-19. Although customer footfall at thecommercial facilities where the company has installed vending machines is recovering, demand for beverages sold fromvending machines in commercial facilities has been slow due to changes in consumer behavior caused by the spread of
COVID-19.

Support Services
Sales were up 12.6% YoY to JPY18.1bn, and operating profit was up 4.9% YoY to JPY462mn.
Sales were up YoY. The company focused on responding to recovering business trip demand in travel-related services andwinning event-related orders. It also won contracts for on-site shipping operations for newly opened Aeon Mall stores.
Outside the Aeon group, the company worked to expand services that were compatible with its other businesses to address
outsourcing needs related to the management and operation of contracted facilities and their surroundings (e.g., operationof venues for new employee welcoming ceremonies and employee training, and operations peripheral to building
maintenance). The company acquired new contracts in China, including for operations peripheral to government building
management and support services for new building constructions. A consolidation effect from making Zhejiang Metelan
Property Management Co., Ltd. a subsidiary in March 2022 was also seen.
Operating profit grew YoY. Profitability improvement at travel business subsidiary Aeon Compass, in addition to sales growth,
contributed to higher profit.

Overseas business (within each segment)
Sales increased 33.9% YoY to JPY33.1bn, while operating profit rose 21.7% YoY to JPY1.9bn.
Sales and profit grew in China and the ASEAN region. Although the yen depreciated, sales and profits also increased on a
local currency basis.
Earnings of the overseas business are included in each segment. The company operates the Facilities Management, Security
Services, Cleaning Services, and Support Services businesses overseas. Aeon group companies comprise roughly half of its
customers.
China
Sales grew 34.3% YoY to JPY22.7bn, benefiting from consolidation of Zhejiang Metelan Property Management, which wasmade a subsidiary in March 2022, and an increase in the number of contracted facilities of Aeon Delight Jiangsu(government facilities, offices, commercial facilities, etc.). The company won contracts for new facilities in Security Services,
Cleaning Services, and Support services, and worked to capture a larger share of customer wallets.
Operating profit increased YoY. Although OPM declined as the company hired additional personnel to strengthen
governance and undertook low-profit projects with the highest priority on securing sales, profit increased due to increased
sales.
The company positions China as the largest growth area in Asia. It is actively seeking out M&A and partnership opportunities
to develop specialty, expand business domains, and strengthen customer base.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

39

Aeon Delight Jiangsu, a core business company, participates in the planning of the urban development strategy "onecore, four cities" by the Suzhou city government and is undertaking facilities management operations. Construction of
office buildings, hotels, amusement facilities, and condominiums is proceeding in a vast area of ​25 square kilometers.
Aeon Delight oversees operations for the facilities management company and is responsible for cleaning and security ofthese facilities. It also manages almost all of the condominiums. Of the four districts, the company began operations in
the Xiangcheng district in 2016 and in the Wujiang district in 2020. In August 2022, it began working on contract
expansion in the Wuzhong district. Aeon Delight Jiangsu is a local joint venture with the Chinese government and has
been contracted for these government-related projects.
In October 2022, the company transitioned Aeon Delight (China) to become an investment company, and renamed thesubsidiary Aeon Delight (China) Investment Holdings. It became easier to enter into cross-industry partnerships, with theaim of expanding the company’s business throughout China. This subsidiary aims to be proactive in acquisition of asset
management companies in each region and companies in different industries.
In March 2022, it acquired a local company (Zhejiang Metelan Property Management) that manages and operates
healthcare facilities in Zhejiang and Jiangxi provinces.
ASEAN
ASEAN as a whole saw increases in both sales and profit. The economies of the countries in which the company operates
have begun to recover from the stagnation caused by the COVID-19 pandemic, with sales and profit increasing in thosecountries. The company made preparations to establish a head office for the ASEAN business in Malaysia to reinforce group
governance and develop a new growth strategy for the region as a whole. The company's ASEAN business has governanceissues, more so than the China business, and so the company is dispatching personnel from Japan to address these issues andstrengthen governance of the local business.
Malaysia: Sales rose 56.2% YoY to JPY2.3bn. Operating profit also increased YoY in both yen and local currency
terms. Sales grew due to recovery from the pandemic, continued orders from FY02/22 for facilities management, repair,and cleaning and disinfecting services at existing Aeon Malaysia stores, and growth in orders mainly from the Aeon
group. Despite higher personnel expenses on increased headcount, profit grew supported by higher sales. Hourly wages
were on an uptrend due to labor shortages caused by stricter border controls imposed on immigrants and foreign
workers amid the COVID-19 pandemic, but hourly wages are gradually coming down to the pre-pandemic levels as
border regulations are relaxed.
Vietnam: Sales rose 29.0% YoY to JPY4.0bn. Operating profit was also up YoY in both yen and local currency terms.
Construction Work fueled the growth. The local subsidiary in Vietnam also has jurisdiction over Cambodia, and Aeon
Mall is promoting store openings in both countries. It plans to further accelerate openings from 2025 to 2026. The
company is also working to enhance its local business structure, such as by increasing the personnel headcount.
Indonesia: Sales amounted to JPY4.2bn (+31.3% YoY). Operating profit also increased YoY in both yen and local currency
terms. Sales grew as the company won contracts for Aeon Mall stores. The company is strengthening efforts to improve
the work environment following the revision of the local labor law, and personnel expenses may increase in FY02/24
due to the revision. Indonesia is a larger market within the ASEAN region, and the company has access to the customer
base of a cleaning company it purchased in the country in 2018. It is building local infrastructure by dispatching staff fromJapan with an eye toward expanding contracts with Aeon group facilities.

Key initiatives for FY02/23
Aeon Delight carried out initiatives to realize the basic policies under its medium-term management plan: “customeroriented management,” “promotion of digital transformation (DX),” and “group management.”
Customer-oriented management
As a KPI for customer-oriented management, the company plans to raise the ratio of sales outside the Aeon group to 40.0%
in FY02/24 (it was 35.6% at end-FY02/22 and 35.7% in FY02/21). This figure marked 36.6% at end-FY02/23.
In FY02/22, the company launched in earnest an account manager system for major customers. This approach created asystem for managing customer information centrally. By using account managers to build stronger customer relationships,
the company has also increased its share of non-group customer wallets.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

40

Contribution to energy cost reduction: While responding to rising energy costs has become an important issue forcustomers, the company has contributed to energy conservation in facilities through the adoption of LED lighting,upgrades to air conditioners, and the sale of non-CFC cases. A tool to visualize the power consumption of each facility
was introduced to 171 facilities.
Reorganizing and strengthening sales function: In April 2022, the company carried out structural reforms to reorganizeand strengthen its sales function. It reorganized business areas covered by its total eight branch offices nationwide tobetter reflect and accommodate regional characteristics. It also redefined the responsibilities of each branch officeposition from the operation to management levels. Further, the company held training sessions for branch managers toenhance their job proficiency and awareness as a manager of each regional unit. Having reorganized its sales structure,
the company aims to increase transactions with both existing and new customers, through reinforcing its accountmanagement initiatives for existing customers and making customer-centric proposals.
Developing healthcare solutions: In this category, the company made proposals for raising facilities’ hygiene levels. Its
solutions leverage the track record and expertise the company has built up through hospital-oriented “hygienic cleaning”
and New Standard Cleaning. In April 2022, the company set up an organization tasked with honing proposals. With thisorganization, the company intends to expand proposals to non-group customers such as hospitals and hotels, and to win
new contracts.
Developing solutions to support decarbonization: In April 2022, the company set up a dedicated team that takes anintegrated approach toward helping customers decarbonize their operations. Efforts to date have focused on individual
steps for shrinking a customer’s carbon footprint: installation of energy saving equipment and other energy-saving
operations at individual facilities. Going forward, the company plans to expand into such areas as buying renewableenergy and issuing environmental certifications.
Promotion of digital transformation
KPIs for the promotion of digital transformation (DX) are to achieve OPM of 6.0% by FY02/24, maintain ROE of 12%,
introduce area management (sharing of facilities management personnel between facilities located in a predetermined area)at 360 facilities, reduce the number of people assigned to specific facilities by 180, and reassign 20% of headquarters staff todirect departmental positions. OPM for FY02/23 was 4.7% and the ROE was 10.5% due to lower profitability in somebusinesses and investment in growth. Process improvements of head office operations led to the redeployment of head
office staff. The number of facilities under area management was 273 (+95 versus end-FY02/22), and reductions in thenumber of people assigned to customer facilities was 167 (+52).
Promoting use of the Aeon Delight platform: The company plans to use the platform to collect and centrally manage
customer feedback, facility conditions, market trends in customers’ industries, and external information about weather
and disasters, and enable AI analysis and processing. It will efficiently share such processed data across the service
network of the company, group companies, and partner companies. In FY02/23, the company raised process efficiency
by promoting links between the Aeon Delight platform and various systems, and enhanced the value of data by increasing
the volume of information. In addition, in the sales department the company aimed to make proposals from thecustomer’s perspective. To this end, the company utilized data from the Aeon Delight platform as well as visualizing andsharing information about customer requests. This has improved the efficiency of sales activities and the quality ofoperations.
Improved profitability at labor-saving facilities: The development of area management has progressed. The company
improved profitability at labor-saving facilities by automating inspection operations using cameras and sensors andintegrating operations into customer support centers equipped with remote monitoring functions.
Group management
KPIs for group management to be achieved by FY02/24 are JPY65.0bn in sales at group companies in Japan, overseas sales
accounting for more than 8% of the total, and a shift toward shared services at the finance and accounting departments ofgroup companies in Japan. In FY02/23, overseas sales accounted for 9.8% of total sales (based on the previous accounting
standard), up from 7.8% at end-FY02/22. The rise in the share of overseas sales is also attributed to the depreciation of theyen.
China: The company aimed to achieve organic growth by bolstering contracts for priority facilities such as medium- tohigh-end shopping centers, hospitals and nursing homes, and facilities in areas undergoing redevelopment. Aeon Delightalso sought to acquire and form business alliances with local companies that provide security and cleaning services for

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

41

local hospitals and the factories of Japanese companies. In these ways, it aimed to acquire expertise, expand its businessdomain, and strengthen its customer base.
ASEAN region: The company expects business to grow in this region in the medium to long term, due to the opening of
new Aeon group stores and the expansion of Japanese companies. As the economy, which had been stagnant due to
COVID-19, turned to a recovery trend, sales and profits increased in each country where the company operates. Aeon
Delight has moved toward the establishment of an ASEAN regional headquarters to strengthen the management baseand help it plan growth strategies in individual countries.

Cumulative Q3 FY02/23 results
Sales: JPY226.8bn (+5.4% YoY, +5.1% YoY based on the previous accounting standard)
Operating profit: JPY10.8bn (-8.7% YoY)
Recurring profit: JPY11.0bn (-7.9% YoY)
Net income attributable to owners of the parent: JPY7.2bn (-15.7% YoY)
The company adopted the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) effective
Q1 FY02/23. As a result, revenue recognition standard was changed for some operations of the Facilities Management,
Materials and Supplies Sourcing Services, and Vending Machine Services segments. The adoption of the new accounting
standard reduced cumulative Q3 sales and cost of sales by JPY26.2bn each. Meanwhile, operating profit, recurring profit, andpre-tax profit increased JPY34mn each due to applying the new standard. The balance of retained earnings at the beginningof the fiscal year decreased JPY1.1bn.
YoY comparisons in this report have been calculated after retroactively applying the new accounting standard to FY02/22
results.
Sales
Sales were up 5.4% YoY. Sales increased in all seven segments due to an increase in the share of existing customer wallets
on the back of strengthened account management and sales activities, an increase in newly contracted facilities, andlessened impact from the COVID-19 pandemic. In particular, from 2H FY02/23, Construction Work has been awarded an
expanded number of contracts for various works, including restoration-related works following the March 2022 Fukushima
earthquake, resulting in YoY sales growth.
Looking at the current industry environment, rising energy costs and other factors have prompted customers to reassess theiroutsourcing contractors as part of cost-cutting measures. Against this backdrop, the company is seeing an increase in thenumber of new contracts in the form of a switch from competitors in the same industry. This comes because the company isable to reduce total outsourcing costs through all-at-once outsourcing of its Facilities Management, Security Services, andCleaning Services, thereby earning a reputation from customers for its operational quality.
Operating profit
Operating profit was JPY10.8bn (-8.7% YoY).
Gross profit: Gross profit grew 1.5% YoY to JPY30.3bn, with the GPM down 0.5pp YoY to 13.4%. GPM declined in
Cleaning Services, Security Services, and Materials and Supplies Sourcing Services. In Cleaning Services, GPM fell in
cumulative Q3 FY02/23 in reaction to the elevated demand seen a year ago for relatively high-margin services, such as
disinfectant cleaning for facilities that had been exposed to COVID-19. In Security Services, GPM declined as demand for
security cameras (so-called surveillance cameras), which are high-margin products, declined. In Materials and Supplies
Sourcing Services, a rise in procurement costs driven by soaring raw material and logistics costs depressed GPM.
SG&A expenses: SG&A expenses were JPY19.5bn (+8.3% YoY), and the SG&A ratio was 8.6% (+0.2pp YoY). The rise in
SG&A expenses was attributed to upfront expenditures including capital, personnel, and digitalization investments thecompany made as initially planned. In particular, the company has strengthened its investment in systems to promote area
management (detailed below).
Net income attributable to owners of the parent
Net income attributable to owners of the parent fell due to a decline in operating profit. Non-operating income/expenses
and extraordinary gains/losses had only a marginal impact on earnings.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

42

Progress versus full-year company forecast
Versus the full-year FY02/23 company forecast, cumulative Q3 sales were 73.2% (75.8% of full-year results in cumulative Q3
FY02/22, based on the previous accounting standard), operating profit 63.6% (75.3%), recurring profit 64.7% (75.6%), andnet income 66.9% (79.7%).
Sales were largely in line with plan, while profits somewhat lagged the plan. In Cleaning Services, orders for high-margin
alcohol sanitizing and cleaning services were stagnant, while procurement costs rose in Materials and Supplies Sourcing
Services. Although the company stepped up efforts to improve profitability in each of its businesses, there was an effect fromCOVID-19, the Russia–Ukraine crisis, and other external factors, which caused a decline in operating profit of JPY860mn.
Initiatives aimed at achieving full-year targets
The company aims to grow sales in all segments for the full year by strengthening proposal-based sales. At the same time, itwill work to improve profitability.
Energy saving proposals: The company will strengthen proposals highlighting energy-saving benefits in Construction
Work. Specifically, it will make proposals that can contribute to reducing energy costs and environmental burden,
including switching over to LED lighting and upgrading air conditioners, as well as the sale of non-CFC cases, forcommercial facilities with high electricity demand, amid rising electricity and other energy costs due to soaring crude oil
prices. Through these measures, the company aims to expand earnings. In particular, the company will strengthen its
proposals to the Aeon group, which is stepping up investment in energy conservation, aiming to win projects andcomplete construction within FY02/23. The enhanced energy-saving proposals are expected to contribute to sales not
only in FY02/23 but also in FY02/24 and beyond.
Proposals to meet safety, security, and aesthetic demand: In Construction Work, the company will propose safetymeasures for facilities, such as the installation of U-shaped poles in parking lots of commercial facilities to prevent
vehicles from crashing into stores. It will also make other proposals to enhance safety and security of facilities, aimed atpreventing accidents and preparing them for a natural disaster.
Minor repair projects: In Facility Management, Construction Work, and Cleaning Services, the company will step up
efforts to make proposals for minute, detailed work (minor repairs, cleaning, etc.) necessary for facility maintenance andmanagement. By focusing on making proposals related to energy savings, safety and security, compliance, and hygiene,
the company aims to enhance the closing rate, or the probability of its proposals being accepted by customers. Minor
repair work refers to irregular, small, detailed work for contracted facilities. While sales per project are small for theminor repair work compared with other contracted projects, many are highly profitable and orders are frequent, andhence are expected to contribute to earnings and profitability growth.
Profitability improvement: In Facilities Management, Aeon Delight will promote labor saving by reducing the number of
personnel assigned to customer facilities through area management, and in Security Services, the company will promotelabor saving by systematizing entry/exit management and store closure operations. In Materials and Supplies Sourcing
Services, it will continue negotiations to improve the efficiency of logistics costs and pass on rising costs to sales prices.
Strengthening collaboration with domestic subsidiaries: Aeon Delight Connect Co., Ltd. (main customers are restaurant
chains, convenience stores, and drug stores), Hakuseisha Co., Ltd. (department stores), and Kankyouseibi Co., Ltd. are themain subsidiaries in the building maintenance business. With energy costs rising, the subsidiaries are struggling with
impacts from the external environment, such as major customers working to reduce costs by holding down outsourcing
costs. Under these circumstances, the company's main management has strengthened its involvement in the managementof these subsidiaries and is promoting initiatives to exert synergy effects by collaborating with them in sales andoperations.

Main initiatives in FY02/23
Made a Chinese subsidiary an investment company
In October 2022, Aeon Delight made its Chinese subsidiary Aeon Delight (China), whose main line of business was facility
management, an investment company, and renamed the subsidiary Aeon Delight (China) Investment Holdings Co., Ltd. The
company also increased its stake in the subsidiary.
Purpose: The company intends to acquire local facility management companies and new businesses that operate invarious regions in China to expand its China business. Having made Aeon Delight (China) an investment company, theAeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

43

company can now invest in local companies operating in other industries, thereby further expanding the scope of its
China operations. It also increased its stake in the subsidiary to actively carry out acquisitions.
Outlook: The company targets FY02/25 sales of JPY60.0bn (versus JPY17.0bn in FY02/22) for its China business. Of the
JPY60.0bn sales target, the company aims to generate JPY40.0bn through organic growth and JPY20.0bn fromacquisitions. It intends to invest in local companies that have expertise and customer bases in the energy andenvironment-related field, parking lot and parking facility operations, and in fields other than facility management where
the company has already developed a business in the country. It aims to grow sales through synergies generated throughcross-selling while continuing to push forward with business diversification. Depending on the project, the company's
headquarters in Japan may further increase its stake in Aeon Delight (China) Investment Holdings.
Collaboration with Kao Professional Services Co., Ltd.
In October 2022, the company announced the start of collaboration with Kao Professional Services Co., Ltd. to develop the
new Infectious Disease Risk Assessment Service, with the aim of supporting companies and organizations in the prevention of
infectious diseases.
Kao Professional Services: A wholly owned subsidiary of Kao Corporation (TSE Prime: 4452), a major daily goods
manufacturer in Japan. Kao Professional Services manufactures and sells products and provides consulting services forhygiene management for operators of restaurants, hospitals and long-term care facilities, and hotels.
Collaboration overview: Kao Professional Services will utilize its knowledge of infection risk assessment developed
through its hygiene management business. Aeon Delight will leverage its expertise and service development capabilities
accumulated through providing cleaning solutions to customers. The two companies aim to develop a new service
through which they assess hygiene risks and provide solutions based on behavioral analysis in various situations, including
public spaces and living areas.
Share buyback and grant of shares to employees
In October 2022, the company announced a share buyback. As of the end of December 2022, it had acquired 349,300
shares. The share buyback was in line with the company's goal of improving capital efficiency through implementing aflexible capital policy in response to changes in the business environment and enhancing shareholder returns.
Type of shares to be acquired: Common stock of the company
Total number of shares to be acquired: 1,500,000 shares (maximum; 3.00% of shares outstanding, excluding treasury
stock)
Total value of shares to be acquired: JPY5.3bn (maximum)
Period of acquisition: October 5, 2022 to October 4, 2023
Aeon Delight has decided to grant its shares to employees of the company and its domestic group companies through theemployees stockholding association, with the aim of raising employees' awareness of participation in management. It
aims to increase employees' commitment and loyalty toward the company's performance.

Quarterly results
Q1 FY02/23: Sales were JPY71.8bn (+0.9% YoY), and operating profit was JPY3.3bn (-12.0% YoY). The decline inoperating profit was attributed to an increase in SG&A expenses, as the company incurred upfront costs—including
capital, personnel, and digitalization investments—as initially planned. By segment, sales grew in Facilities Management,
Security Services, Cleaning Services, Materials and Supplies Sourcing Services, and Support Services. Operating profit
increased in Facilities Management, Vending Machine Services, and Support Services.
Q2 FY02/23: Sales amounted to JPY75.9bn (+0.6% YoY) while operating profit dipped 29.3% YoY to JPY3.3bn. The drop
in operating profit was due to an increase in SG&A expenses as the company continued to incur upfront costs in the formof capital, personnel, and digitalization investments as it did in Q1. By segment, sales fell in Cleaning Services due to a
falloff in demand for cleaning services using alcohol disinfectants, and sales were also down in Materials and Supplies
Souring Services. Meanwhile, sales grew in Vending Machine Services owed to extreme heat. Operating profit rose in
Facilities Management and Vending Machine Services. The rate of decline in operating profit widened in Security
Services, Cleaning Services, and Construction Work due to sluggish demand for high-margin services. Operating profit
also fell by a greater margin in Materials and Supplies Sourcing Services due to higher procurement costs.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

44

Q3 FY02/23: Sales were JPY79.2bn (+15.3% YoY) and operating profit was JPY4.2bn (+23.1% YoY). As in 1H FY02/23,
SG&A expenses rose due to upfront investments. Still, operating profit grew YoY as sales growth offset higher SG&A
expenses. Sales increased in all seven segments. Facilities Management and Vending Machine Services maintained an
upward trend in profit. Construction Work and Support Services posted turned profitable on the back of significant
growth in sales. Security Services, Cleaning Services, and Materials and Supplies Sourcing Services continued to see
declines in profits, but the margin of decline narrowed.

Segment trends
In Q3 FY02/23, sales increased YoY in all seven segments. Operating profit grew in Facilities Management, Vending
Machine Services, and Support Services, while it fell in Security Services, Cleaning Services, Construction Work, andMaterials and Supplies Sourcing Services.

Facilities Management
Sales grew 5.4% YoY to JPY49.0bn (+4.9% YoY based on the previous accounting standard), and operating profit
increased 5.7% YoY to JPY4.3bn.
Sales and profit in the segment grew YoY due to an increased share of wallets, driven by growth in renewal contracts and inorders for various maintenance services. With the expansion of the customer base, sales and profit increased versus
cumulative Q3 FY02/20, before the outbreak of COVID-19.
Aeon group stores as well as non-group (manufacturers, financial institutions) facilities contracted in FY02/22 contributed to
the full-year sales. In addition, the company continued to win new contracts for Aeon group stores and non-group facilities in
China in FY02/23. The company's share of existing customer wallets increased, in part due to its account management
initiatives. Also contributing to the increased share of wallets were new contracts for retailers and manufacturers that operate
multiple outlets, company stores, factories, and offices of corporate customers.
The facilities management industry is facing a shortage of legally qualified personnel. Aeon Delight is ahead of its
competitors in securing such personnel, as the introduction of area management has enabled labor savings. Further, as thecompany operates nationwide, it is able to recruit legally qualified personnel from all over Japan. Against such background,the company has been receiving an increasing number of new contracts from customers who have switched from othercompanies.
In terms of profits, while costs are trending upward, the company worked to improve profitability by reducing the number of
personnel assigned to customer facilities through area management and cutting outsourcing costs by reviewing,
consolidating, and negotiating prices with facility inspectors.
Quarterly results
Sales were up 4.0% YoY in 1H and 8.2% YoY in Q3, showing signs of a recovery trend. New facilities contracted in FY02/22
and FY02/23 contributed to the increase. Operating profit increased 7.7% YoY in 1H and 2.0% YoY in Q3. The company
attributed the weaker YoY growth in Q3 versus 1H to seasonality and changes in accounting standards, and maintains thatprofitability has not actually deteriorated.
Full-year outlook
Both sales and operating profit were in line with plan, and are expected to land in a range close to the company's initial
forecast for FY02/23. In Q4, the company will continue to strengthen its sales efforts aimed at winning new contracts and its
efforts to improve profitability.
Initiatives in Facilities Management
Account management: Instead of communicating with customers on a business basis as in the past, the company now
appoints account managers for key clients and centrally manages customer information across businesses. It was able toexpand transaction volume by deepening account managers' understanding of customers and various industries, andmade progress in improving customer satisfaction and referring customers to other segments. It is working to provide
services across the segments in a single package (for example, Construction Work carries out an order associated with
Facilities Management), and to provide the same services regardless of region to clients operating nationwide. These
efforts have contributed to the company's increased share of wallets.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

45

Area management: In March 2021, Aeon Delight set up customer service centers at all eight branches in Japan and rolled
out remote support systems for customer facilities. The company also installed security cameras and sensors at facilities
under management to automate on-site management tasks and save labor. In addition to setting up such a system, thecompany adopted an area management strategy, which involves the sharing of facility management personnel in a given
area with reference to customers' needs and attributes of each facility and region, and this led to cost reductions throughlabor savings and automation. The company first introduced the strategy primarily for Aeon Retail stores among theseveral thousand facilities under contract. As of end-Q3 FY02/23, 269 facilities (versus 178 at end-FY02/22)
implemented the area management strategy, with facility management personnel down by 156 (115). The company plans
to introduce area management at more than 360 Aeon group facilities by end-FY02/24. Following upfront investments,
the company expects profitability to improve from FY02/24 as the number of facilities under area management grows.

Security Services
Sales were up 4.2% YoY to JPY36.9bn, while operating profit fell 11.1% YoY to JPY2.3bn.
Sales increased YoY, driven by an increase in the number of customer companies as the company won new contracts forgovernment buildings, commercial facilities, and condominiums among others in China. In Japan, lower orders of safety
cameras for the Aeon group adversely affected sales. Meanwhile, newly contracted facilities, including new Aeon groupstores and non-Aeon group facilities (automakers, hospitals, hotels, commercial complexes, and business centers of financial
institutions), and facilities contracted in 2H FY02/22 contributed to sales growth. As in Facilities Management and Cleaning
Services, the number of new contractors increased as a result of switching from other companies in the industry. The
company captured a larger share of customer wallets and acquired new customers through reinforcing account management.
Operating profit fell YoY. Profitability deteriorated in cumulative Q3 due to lower orders of high-margin safety cameras in
1H. Aeon group is striving to cut costs amid the pandemic, and as one of its cost-cutting measures, it is refraining from
replacing or installing additional security cameras. Under these circumstances, to improve profitability, the company
continued negotiations to optimize unit prices and worked to automate systems to handle tasks such as facility entry/exit
management and store opening/closing.
Sales and profit ware up versus cumulative Q3 FY02/20, before the outbreak of COVID-19, due to the expanding customer
base.
Quarterly results
Sales were up 2.0% YoY in 1H and 8.6% YoY in Q3, showing stronger growth. Operating profit was down 15.2% YoY in 1H and3.4% YoY in Q3. The YoY profit decline narrowed in Q3 versus 1H as Q3 orders of safety cameras showed signs of recovery
following the deterioration in 1H.
Full-year outlook
Both sales and operating profit were somewhat below projections. The company will continue efforts to improve profitability.

Cleaning Services
Sales were up 1.3% YoY to JPY51.1bn, while operating profit declined 18.4% YoY to JPY5.0bn.
Sales increased YoY. 1H FY02/22 saw a rise in demand for disinfectant cleaning, quarantine-related cleaning, and special
cleaning services, which contributed to the increase in sales. Such demand declined in 1H FY02/23, but the segment saw
growth in renewal contracts, particularly with commercial facilities and medical institutions. Operating profit declined YoY
due to a decreased in demand for high-margin alcohol disinfectant cleaning services, upfront investments to improveoverseas working conditions, and higher outsourcing and cleaning staff personnel expenses in Japan and overseas.
Sales from the Aeon group were sluggish in reaction to increased demand for special cleaning services a year ago, whilesales from outside the group grew due to an upsurge in new contracts in China and Japan.
Versus cumulative Q3 FY02/20, before the outbreak of COVID-19, sales increased but profit decreased. Overseas
investment to improve working environments decreased profit. The company expects profitability to improve as price passthrough progresses.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

46

Quarterly results
In FY02/23, sales declined 1.0% YoY in 1H, but increased 6.1% YoY in Q3. Operating income declined 22.2% YoY in 1H and
9.9% YoY in Q3, narrowing the margin of decline. In 1H, sales and profit decreased in reaction to an increase in demand foralcohol disinfection and cleaning services 1H FY02/22, but the reaction diminished in Q3.
Full-year outlook
The company expects higher full-year sales YoY due to contributions from newly acquired facilities with recurring contracts incumulative Q3. However, both sales and operating profit were slightly below projections. Aeon Delight will propose
healthcare solutions outside the Aeon group (financial institutions, manufacturers, retail stores, hospitals, and other facilities),
offering special cleaning services such as New Standard Cleaning, a cleaning method for maintaining a hygienic, attractive
environment developed based on the company's proprietary cleaning services previously provided to hospitals. In addition,
the company will strengthen account management for introduction to major companies and expand areas where it can win
contracts.

Construction Work
Sales rose 13.4% YoY to JPY38.2bn, and operating profit fell 5.1% YoY to JPY2.7bn.
Sales rose YoY. Although sales were negatively impacted by deferments and postponements of construction and delays in the
procurement of materials and equipment, they grew as the company won orders for restoration-related work following theearthquake. Versus cumulative Q3 FY02/20, before the outbreak of COVID-19, sales were up but operating profit was down.
Operating profit fell YoY. OPM declined on higher material prices and a decrease in orders for minor repair andmaintenance works with high margins. In FY02/23, Aeon Delight established a department specializing in estimating
construction costs. The accuracy of estimates is improving, and cost negotiations are making progress, leading to improved
profitability.
Quarterly results
Sales were down 5.8% YoY in 1H but up 66.5% YoY in Q3. Operating profit was down 37.6% YoY in 1H but up 114.2% YoY in
Q3.
1H saw delays in some construction work due to shortages and delayed procurement of construction materials, such as parts
and air conditioning equipment, against a backdrop of the COVID-19 pandemic and the Russian invasion of Ukraine. Further,orders declined as some retailers cut back on their capital spending in light of uncertainties in the external environment andsoaring electricity and other costs. Orders were also hurt by customers' cancellation or postponement of capex plans, as wellas their cutting back on minor repair and maintenance works. In addition, orders for large-scale construction projects withlower margins were a factor in the OPM decline.
In Q3 FY02/23, the same impact as in 1H continued. However, sales and profit grew in Q3 as the company recorded most of
the earnings from restoration-related work for Aeon group stores damaged by the earthquake that occurred off the coast of
Fukushima Prefecture in March 2022. In addition, the completion in Q3 of some of the construction work that had been
delayed or postponed in 1H also contributed to higher sales and profit.
Full-year outlook
Sales and operating profit were on par with the forecast, and the company expects full-year results to grow YoY. The company
expects projects delayed in 1H to contribute to earnings in the full-year. Earnings from the earthquake restoration-related
construction had been booked by Q3. It intends to step up efforts to offer services that can contribute to lowering electricity
costs and environmental burden, including LED lighting and automatic air-conditioning control services, as well as selling
non-CFC cases, for commercial facilities with high electricity demand amid rising electricity costs.
On the profit front, the company is seeing an increase in material prices. It will continue to work to reduce costs byenhancing the accuracy of its construction cost estimates and by strengthening cost negotiations. It will also strengthen efforts
to acquire high-margin construction projects.

Materials and Supplies Sourcing Services
Sales grew 2.8% YoY to JPY31.0bn (+3.5% YoY based on the previous accounting standard), while operating profit fell
24.7% YoY to JPY1.5bn.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

47

Sales increased YoY. Sales in and outside the Aeon goup increased. The company strengthened sales efforts targeting the
Aeon group to increase share within the group. It expanded business with companies that have newly joined the Aeon
group: Fuji Retailing Co., Ltd. (TSE Prime: 8278), which runs supermarkets in the Chugoku/Shikoku region, and Can Do Co.,
Ltd. (TSE Standard: 2698), which has a nationwide chain of 100-yen shops. Collaborating with other businesses, the company
sold cleaning and sanitation materials to customers in Cleaning Services, and materials and equipment to those in Facilities
Management and Security Services.
Operating profit declined YoY. Profitability deteriorated due to higher purchase costs for packaging and other materials
driven by hikes in crude oil prices, raw materials prices, and logistics costs, which were not passed on to customers. Under
these circumstances, the company continued to streamline logistics and other expenses, while seeking to adjust prices inaccordance with rising costs.
Versus cumulative Q3 FY02/20, before the outbreak of COVID-19, sales increased but profit decreased.
Quarterly results
Sales were up 1.2% YoY in 1H and 6.1% YoY in Q3, showing stronger growth. Operating profit was down 27.0% in 1H and
19.1% in Q3, narrowing the margin of decline. From Q3, the company began to pass on higher procurement costs tocustomers.
Full-year outlook
Sales were as planned, but operating profit was below expectations. There was a delay in price negotiations aimed at passing
on higher costs to customers. The negotiations are underway, and the company expects OPM to improve in Q4.

Vending Machine Services
Sales rose 1.9% YoY to JPY7.1bn (+2.4% YoY based on the previous accounting standard), while operating profit
jumped 91.0% YoY to JPY791mn.
Sales increased YoY. In Q2, beverage demand began to recover due to the upturn in human flows and the impact of the heatwave in July–August 2022, and again in Q3 on the lessening impact of COVID-19.
Operating profit increased in Q4 FY02/22 on a decrease in depreciation expenses due to impairment losses on
unprofitable machines.
Both sales and profits were down compared to Q3 FY02/20, before the outbreak of COVID-19. Although customer footfall at
the commercial facilities where the company has installed vending machines is recovering, demand for beverages sold fromvending machines in commercial facilities has been slow due to changes in consumer behavior caused by the spread of
COVID-19.
Quarterly trends
Sales were up 0.3% YoY in 1H and 5.4% YoY in Q3, showing stronger growth. Operating profit was up 57.5% YoY in 1H and285.2% YoY in Q3. Beverage demand showed signs of recovery in Q3, and the company received large orders from the
major manufacturer factories. The company also serves them in Facilities Management and Cleaning Services, and thecooperation between the businesses led to the orders.
Full-year outlook
Sales were below projections, but operating profit was as planned.
The company will continue installing more of its multi-brand vending machines (which offer beverages from several different
brands) to improve profitability per machine. It recorded impairment losses for loss-making machines in FY02/22, andexpects this to contribute to improved earnings throughout FY02/23.

Support Services
Sales were up 11.7% YoY to JPY13.5bn, and operating profit was up 26.9% YoY to JPY419mn.
Sales were up YoY. The company focused on responding to recovering business trip demand in travel-related services andwinning event-related orders. It also won contracts for on-site shipping operations for newly opened Aeon Mall stores.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

48

Outside the Aeon group, the company worked to expand services that were compatible with its other businesses to address
outsourcing needs related to the management and operation of contracted facilities and their surroundings (e.g., operationof venues for new employee welcoming ceremonies and employee training, and operations peripheral to building
maintenance). The company also acquired new contracts in China, including for operations peripheral to governmentbuilding management and support services for new building constructions.
Operating profit grew YoY. Profitability improvement at travel business subsidiary Aeon Compass, in addition to sales growth,
contributed to higher profit.
Quarterly results
Sales were up 10.7% YoY in 1H and 13.6% YoY in Q3, showing stronger growth. Operating profit was up 9.4% YoY in 1H and
86.7% YoY in Q3. Travel-related demand showed signs of recovery in Q3. The consolidation of Zhejiang Metelan Property
Management Co. Ltd., which became a subsidiary in March 2022, also helped.
Full-year outlook
Sales were in line with the plan, but operating profit was below plan. As the impact of COVID-19 subsides, the number ofcontracts for domestic business trips is expected to rise. The company expects higher sales and operating profit for the fullyear.

Overseas business (within each segment)
Sales increased 35.9% YoY to JPY24.1bn, while operating profit rose 8.6% YoY to JPY1.3bn.
Sales and profit grew in China and the ASEAN region.
Earnings of the overseas business are included in each segment. The company operates the Facilities Management, Security
Services, Cleaning Services, and Support Services businesses overseas. Aeon group companies comprise roughly half of its
customers.
China
Sales grew 36.5% YoY to JPY16.7bn, benefiting from consolidation of Zhejiang Metelan Property Management, which wasmade a subsidiary in March 2022, and an increase in the number of contracted facilities of Aeon Delight Jiangsu(government facilities, offices, commercial facilities, etc.). The company won contracts for new facilities in Security Services,
Cleaning Services, and Support services, and worked to capture a larger share of customer wallets.
Operating profit increased on a yen basis but was almost flat YoY in local currency terms. SG&A expenses increased as thecompany hired additional personnel to strengthen governance, but profit increased on a yen basis due to the impact of the
yen's depreciation.
Although the impact of COVID-19 was limited in cumulative Q3, it has been expanding since December 2022. As of early
January 2023, business is continuing as usual, but there are concerns that an increased number of people traveling in andoutside China around Chinese New Year (January 22, 2023) may cause infections to spread again. The company is closely
monitoring the spread of COVID-19.
The company is actively seeking out M&A and partnership opportunities to develop specialty, expand business domains, andstrengthen customer base. In March 2022, it acquired a local company (Zhejiang Metelan Property Management) thatmanages and operates healthcare facilities under contract in Zhejiang and Jiangxi provinces. In October 2022, the company
made Aeon Delight (China) an investment company, making it easier to enter into cross-industry partnerships.
ASEAN
ASEAN as a whole saw increases in both sales and profit. The economies of the countries in which the company operates
have begun to recover from the stagnation caused by the COVID-19 pandemic, with sales increasing in those countries. The
company made preparations to establish a head office for the ASEAN business in Malaysia to reinforce group governanceand develop a new growth strategy for the region as a whole. The company's ASEAN business has governance issues, moreso than the China business, and so the company is dispatching personnel from Japan to address these issues and strengthen
governance of the local business.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

49

Malaysia: Sales rose 50.5% YoY to JPY1.6bn. Operating profit also increased YoY in both yen and local currency
terms. Sales grew due to growth in orders mainly from the Aeon group. The company continued to win orders from
FY02/22 for various services including facility management, repair, and cleaning and disinfecting at existing Aeon
Malaysia stores. Despite higher personnel expenses on increased headcount, profit grew supported by higher sales.
Hourly wages were on an uptrend due to labor shortages caused by stricter border controls imposed on immigrants andforeign workers amid the COVID-19 pandemic, but hourly wages are gradually coming down to the pre-pandemic levels
as border regulations are relaxed.
Vietnam: Sales rose 29.4% YoY to JPY2.7bn. Operating profit was also up YoY in both yen and local currency terms. Aeon
Mall plans to further accelerate store openings in Vietnam from 2025 to 2026. The company is also working to enhance
its local business structure, such as by increasing the personnel headcount. COVID-19 is subsiding, and the company
expects profitability to improve in Q4.
Indonesia: Sales amounted to JPY3.1bn (+31.1% YoY), but the company posted an operating loss. Operating loss expanded
on a yen basis due to the impact of the yen's depreciation. Sales grew as the company won contracts for Aeon Mall stores,
but operating profit fell into the red due to higher personnel expenses on expanded efforts to improve the work
environment in compliance with the revised local labor law. The increase in personnel expenses stemming from therevised law may also affect earnings in FY02/24. Indonesia is a larger market within the ASEAN region, and the company
has access to the customer base of a cleaning company it purchased in the country in 2018. It is building local
infrastructure by dispatching staff from Japan with an eye toward expanding contracts with Aeon group facilities.

Key initiatives for FY02/23
In FY02/23, Aeon Delight will carry out initiatives to realize the basic policies under its medium-term management plan:“customer-oriented management,” “promotion of digital transformation (DX),” and “group management.” The company will
also step up M&A efforts, both in Japan and overseas.
Customer-oriented management
A KPI for customer-oriented management is to generate 40.0% of sales outside the Aeon group in FY02/24. (This figure was
35.6% as of end-FY02/22 and 35.7% for FY02/21.) This figure marked 36.0% in Q3 FY02/23.
In FY02/22, the company assigned account managers to key customers. This approach created a system for managing
customer information centrally. By using account managers to build stronger customer relationships, the company has also
increased its share of customers outside the Aeon group.
Reorganizing and strengthening sales function: In April 2022, the company carried out structural reforms to reorganizeand strengthen its sales function. It reorganized business areas covered by its total eight branch offices nationwide tobetter reflect and accommodate regional characteristics. It also redefined the responsibilities of each branch officeposition from the operation to management levels. Further, the company held training sessions for branch managers toenhance their job proficiency and awareness as a manager of each regional unit. Having reorganized its sales structure,
the company aims to increase transactions with both existing and new customers, through reinforcing its accountmanagement initiatives for existing customers and making customer-centric proposals.
Developing healthcare solutions: In this category, the company makes proposals for raising facilities’ hygiene levels. Its
solutions leverage the track record and expertise the company has built up through hospital-oriented “hygienic cleaning”
and New Standard Cleaning. In April 2022, the company set up an organization tasked with honing proposals. With thisorganization, the company intends to expand proposals to non-group customers such as hospitals and hotels, and to win
new contracts.
Developing solutions to support decarbonization: In April 2022, the company set up a dedicated team that takes anintegrated approach toward helping customers decarbonize their operations. Efforts to date have focused on individual
steps for shrinking a customer’s carbon footprint: installation of energy saving equipment and other energy-saving
operations at individual facilities. Going forward, the company plans to expand into such areas as buying renewableenergy and issuing environmental certifications.
Promotion of digital transformation
KPIs for the promotion of digital transformation (DX) are to achieve OPM of 6.0% by FY02/24, maintain ROE of 12%,
introduce area management (sharing of facility management personnel between facilities located in a predetermined area)at 360 facilities, reduce the number of people assigned to specific facilities by 180, and reassign 20% of headquarters staff toAeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

50

front positions. In cumulative Q3 FY02/23, OPM was 4.8%, the number of facilities under area management was 269 (+91versus end-FY02/22), and reductions in the number of people assigned to customer facilities was 156 (+41).
Promoting use of the Aeon Delight platform: The company plans to use the platform to collect customer feedback, facility
conditions, market trends in customers’ industries, and external information about weather and disasters. It will use AI toanalyze and process the data and efficiently share them across the service network of the company, group companies, andpartner companies. In FY02/23, the company plans to raise process efficiency by promoting links between the Aeon
Delight platform and various systems, and enhance the value of data by increasing the volume of information. In addition,in the sales department the company aims to make proposals from the customer’s perspective. To do so, the company will
utilize data from the Aeon Delight platform, as well as visualizing and sharing information about customer requests.
Group management
KPIs for group management to be achieved by FY02/24 are JPY65.0bn in sales at group companies in Japan, overseas sales
accounting for more than 8% of the total, and a shift toward shared services at the finance and accounting departments ofgroup companies in Japan. In cumulative Q3 FY02/23, overseas sales accounted for 10.6% of total sales, up from 7.8% at
end-FY02/22. The rise in the share of overseas sales is also attributed to the depreciation of the yen.
Promote growth of each group company in Japan by strengthening intragroup cooperation
Aeon Compass: In addition to handling overseas and domestic travel, the subsidiary also plans and manages events.
Performance recovered as it worked to capture recovering business trip demand and demand arising from theresumption of events.
Building maintenance subsidiary: Building maintenance subsidiaries include Aeon Delight Connect (core subsidiary inthe small and medium-sized facilities market), Hakuseisha (provides cleaning, hygiene management, security, facility
management, and construction services), and Kankyouseibi (handles facility management, construction, security,
cleaning management, designated manager operations). The business environment remained harsh, due tocustomers' postponement or brining forward of capital spending in light of changes in their operating environment,
shortages and procurement delays of materials and equipment caused by the pandemic and Russia–Ukraine war, andhigher initial spending for newly contracted facilities. Under these circumstances, in FY02/23, the company intends
to strengthen Aeon Delight Connect’s foundations by promoting cooperation, such as sharing personnel more
actively, and strengthening sales at companies operating small- and medium-sized stores nationwide. The company
also plans to strengthen the construction department through U-COM (designs commercial facilities and handles
interior construction), which it absorbed in March 2021.
Overseas, expand business in China and strengthen management base in the ASEAN region
China: The company aims to achieve organic growth by bolstering contracts for priority facilities such as medium- tohigh-end shopping centers, hospitals and nursing homes, and facilities in areas undergoing redevelopment. Aeon
Delight also seeks to acquire and form business alliances with local companies that provide security and cleaning
services for local hospitals and the factories of Japanese companies. In these ways, it aims to acquire expertise, expand
its business domain, and strengthen its customer base.
ASEAN region: The company expects business to grow in this region in the medium to long term, due to the openingof new Aeon group stores and the expansion of Japanese companies. Aeon Delight is moving toward theestablishment of an ASEAN regional headquarters to strengthen the management base and help it plan growthstrategies in individual countries.

1H FY02/23 results
Sales: JPY147.7bn (+0.7% YoY, +0.9% based on the previous accounting standard)
Operating profit: JPY6.6bn (-21.7% YoY)
Recurring profit: JPY6.6bn (-22.2% YoY)
Net income attributable to owners of the parent: JPY4.3bn (-22.0% YoY)
The company adopted the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) effective
Q1 FY02/23. As a result, revenue recognition standard was changed for some operations of the Facilities Management,
Materials and Supplies Sourcing Services, and Vending Machine Services segments. Due to the adoption of the new
accounting standard, 1H sales were reduced by JPY17.7bn, cost of sales by JPY17.6bn, and operating profit, recurring profit,

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

51

and pre-tax profit by JPY4mn each. The balance of retained earnings at the beginning of the fiscal year was reduced by
JPY1.1bn.
YoY comparisons in this report have been calculated after retroactively applying the new accounting standard to FY02/22
results.
Sales were up 0.7% YoY. Sales increased in five segments—Facilities Management, Security Services, Materials andSupplies Sourcing Services, Vending Machine Services, and Support Services—due to an increase in the share ofexisting customer wallets on the back of strengthened account management and sales activities, an increase in newly
contracted facilities, and lessened impact from the COVID-19 pandemic. Meanwhile, sales fell in Cleaning Services due
to a decline in demand for cleaning with alcohol disinfectants and in Construction Work due to postponement orcancellation of capex plans.
Gross profit: Gross profit fell 4.2% YoY to JPY19.6bn, with the GPM also down 0.7pp YoY to 13.3%, due primarily to a drop
in GPM in Cleaning Services and Materials and Supplies Sourcing Services. In Cleaning Services, GPM fell in reaction
to elevated demand for relatively high-margin services, such as disinfectant cleaning for facilities that have been exposed
to COVID-19, seen a year ago. In Materials and Supplies Sourcing Services, a rise in procurement costs driven by soaring
raw material and logistics costs depressed GPM.
SG&A expenses: SG&A expenses were JPY13.0bn (+8.1% YoY), and the SG&A ratio was 8.8% (+0.6pp YoY). The rise in
SG&A expenses was attributed to upfront expenditures including capital, personnel, and digitalization investments thecompany made as initially planned. In personnel investment, the company expanded hiring of both new graduates andmid-career candidates, and strengthened employee training.
Net income attributable to owners of the parent fell due to a decline in operating profit. Non-operating income/expenses
and extraordinary gains/losses had only a marginal impact on earnings.
Impact from the external enviornment
The impact of changes in the external environment, including rising crude oil prices and forex fluctuations, had a marginal
impact on the cost of sales and SG&A expenses. Meanwhile, earnings contributions from overseas operations expanded due
to a weaker yen, which provided a JPY100mn boost to 1H operating profit. The company expects these contributions to begreater in 2H.

Recent initiatives
Made a Chinese subsidiary an investment company
In October 2022, Aeon Delight made its Chinese subsidiary Aeon Delight (China), whose main line of business was facility
management, an investment company, and renamed the subsidiary Aeon Delight (China) Investment Holdings Co., Ltd. The
company also increased its stake in the subsidiary.
Purpose: The company intends to acquire local facility management companies and new businesses that operate invarious regions in China to expand its China business. Having made Aeon Delight (China) an investment company, thecompany can now invest in local companies operating in other industries, thereby further expanding the scope of its
China operations. It also increased its stake in the subsidiary to actively carry out M&A activities.
Outlook: The company targets FY02/25 sales of JPY60.0bn (versus JPY17.0bn in FY02/22) for its China business. Of the
JPY60.0bn sales target, the company aims to generate JPY40.0bn through organic growth and JPY20.0bn fromacquisitions. It intends to invest in local companies that have expertise and customer bases in the energy andenvironment-related field, parking lot and parking facility operations, and in fields other than facility management where
the company has already developed a business in the country. It aims to grow sales through synergies generated throughcross-selling while continuing to push forward with business diversification. Depending on the project, the company's
headquarters in Japan may further increase its stake in Aeon Delight (China) Investment Holdings.
Collaboration with Kao Professional Services Co., Ltd.
In October 2022, the company announced the start of collaboration with Kao Professional Services Co., Ltd. to develop the
new Infectious Disease Risk Assessment Service, with the aim of supporting companies and organizations in the prevention of
infectious diseases.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

52

Kao Professional Services: A wholly owned subsidiary of Kao Corporation (TSE Prime: 4452), a major daily goods
manufacturer in Japan. Kao Professional Services manufactures and sells products and provides consulting services forhygiene management for operators of restaurants, hospitals and long-term care facilities, and hotels.
Collaboration overview: Kao Professional Services will utilize its knowledge of infection risk assessment developed
through its hygiene management business. Aeon Delight will leverage its expertise and service development capabilities
accumulated through providing cleaning solutions to customers. The two companies aim to develop a new service
through which they assess hygiene risks and provide solutions based on behavioral analysis in various situations, including
public spaces and living areas.
Share buyback
In October 2022, the company announced a share buyback. The share buyback was in line with the company's goal of
improving capital efficiency through implementing a flexible capital policy in response to changes in the businessenvironment and enhancing shareholder returns.
Type of shares to be acquired: Common stock of the company
Total number of shares to be acquired: 1,500,000 shares (maximum; 3.00% of shares outstanding, excluding treasury
stock)
Total value of shares to be acquired: JPY5.3bn (maximum)
Period of acquisition: October 5, 2022 to October 4, 2023

Progress versus full-year company forecast
Versus the full-year FY02/23 company forecast, 1H sales were 47.6% (51.6% of full-year results in 1H FY02/22, based on theprevious accounting standard), operating profit 38.8% (53.6%), recurring profit 38.8% (53.8%), and net income 40.5%(52.1%).
Sales were largely in line with plan, while profits lagged the plan. All profit categories from the operating line down fell
short of their respective targets due to a decline in highly profitable minor repair and maintenance work in Construction
Work and higher procurement costs in Materials and Supplies Sourcing Services.
Initiatives aimed at achieving full-year targets
The company aims to grow sales in all segments for the full year by strengthening proposal-based sales, primarily inConstruction Work where recovery is being delayed. It also intends to implement cost-cutting measures to meet the full-year
operating profit target.
Energy saving proposals: The company will strengthen proposals highlighting energy-saving benefits in Construction
Work. Specifically, it will make proposals that can contribute to reducing energy costs and environmental burden,
including LED lighting and automatic air-conditioning control services, as well as the sale of non-CFC cases, forcommercial facilities with high electricity demand, amid rising electricity and other energy costs due to soaring crude oil
prices. Through these measures, the company aims to recover earnings in Construction Work.
Proposals to meet safety and security demand: In Construction Work, the company will propose safety measures forfacilities, such as the installation of U-shaped poles in parking lots of commercial facilities to prevent vehicles fromcrashing into stores. It will also make other proposals to enhance safety and security of facilities, aimed at preventing
accidents and preparing them for a natural disaster.
Minor repair projects: In Facility Management, Construction Work, and Cleaning Services, the company will step up
efforts to make proposals for minute, detailed work (minor repairs, cleaning, etc.) besides contracted work necessary forfacility maintenance and management. By focusing on making proposals related to energy savings, safety and security,
compliance, and hygiene, the company aims to enhance the closing rate, or the probability of its proposals being
accepted by customers. Minor repair work refers to irregular, small, detailed work for contracted facilities. While sales
per project are small for the minor repair work compared with other contracted projects, many are highly profitable andorders are frequent, and hence are expected to contribute to earnings and profitability growth.

Quarterly results
Q1 FY02/23: Sales were JPY71.8bn (+0.9% YoY), and operating profit was JPY3.3bn (-12.0% YoY). The decline inoperating profit was attributed to an increase in SG&A expenses, as the company incurred upfront costs—including
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

53

capital, personnel, and digitalization investments—as initially planned. By segment, sales grew in Facilities Management,
Security Services, Cleaning Services, Materials and Supplies Sourcing Services, and Support Services. Operating profit
increased in Facilities Management, Vending Machine Services, and Support Services.
Q2 FY02/23: Sales amounted to JPY75.9bn (+0.6% YoY) while operating profit dipped 29.3% YoY to JPY3.3bn. The drop
in operating profit was due to an increase in SG&A expenses as the company continued to incur upfront costs in the formof capital, personnel, and digitalization investments as it did in Q1. By segment, sales fell in Cleaning Services due to a
falloff in demand for cleaning services using alcohol disinfectants, and sales were also down in Materials and Supplies
Souring Services. Meanwhile, sales grew in Vending Machine Services owed to extreme heat. Operating profit rose in
Facilities Management and Vending Machine Services. The rate of decline in operating profit widened in Security
Services, Cleaning Services, and Construction Work due to sluggish demand for high-margin services. Operating profit
also fell by a greater margin in Materials and Supplies Sourcing Services due to higher procurement costs.

Segment trends
In 1H FY02/23, sales increased YoY in the five segments other than Construction Work and Cleaning Services. Operating
profit grew in Facilities Management, Vending Machine Services, and Support Services, while it fell in Security Services,
Cleaning Services, Construction Work, and Materials and Supplies Sourcing Services.

Facilities Management
Sales: JPY32.3bn (+4.0% YoY; +4.2% YoY based on the previous accounting standard)
Operating profit: JPY2.8bn (+7.7% YoY)
Sales and profit in the segment grew due to an increased share of wallets, driven by growth in renewal contracts and inorders for various maintenance services.
Sales growth was attributed to new contracts in 1H for building maintenance work for new Aeon group stores as well as nongroup facilities, and contributions from facilities contracted in 2H FY02/22 (facilities of non-Aeon group manufacturers andfinancial institutions). The company's share of existing customer wallets increased, in part due to its account management
initiatives. Also contributing to the increased share of wallets were new contracts for retailers and manufacturers that operate
multiple outlets, and stores, factories, and offices of corporate customers.
Account management: Instead of communicating with customers on a segment basis as in the past, the company now
appoints account managers for key clients and centrally manages customer information across segments. It was able toexpand transaction volume by deepening account managers' understanding of customers and various industries, andmade progress in improving customer satisfaction and referring customers to other segments. It is working to provide
services across the segments in a single package (for example, Construction Work carries out an order associated with
Facilities Management), and to provide the same services regardless of region to clients operating nationwide. These
efforts have contributed to the company's increased share of wallets.
Area management: In March 2021, Aeon Delight set up customer service centers at all eight branches in Japan and rolled
out remote support systems for customer facilities. The company also installed security cameras and sensors at facilities
under management to automate on-site management tasks and save labor. In addition to setting up such a system, thecompany adopted an area management strategy, which involves the sharing of facility management personnel in a given
area with reference to customers' needs and attributes of each facility and region, and this led to cost reductions throughlabor savings and automation. The company first introduced the strategy primarily for Aeon Retail stores among theseveral thousand facilities under contract. The company targets to have 360 area-managed facilities and reduce facility
management personnel by 180 by the end of FY02/24. Progress toward these targets was largely in line with plan as ofend-1H FY02/23, with 248 facilities (versus 178 at end-FY02/22) covered by the area management strategy and facility
management personnel down by 141 (115).
Outlook for 2H
For 2H, the company expects to maintain sales growth comparable to that of 1H. It expects newly contracted facilities in 1H
to contribute to earnings throughout the year. On the profit front, OPM is projected to improve in 2H as area management
initiatives and measures to cut outsourcing costs bear fruit, and also due to a falloff in one-time expenses booked in 1H. To
reduce outsourcing costs, the company is considering to change or consolidate contract facility inspectors, and negotiate
prices.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

54

Further, the company intends to accelerate the adoption of the area management strategy nationwide. At facilities under area
management in Hokkaido, the use of surveillance cameras, smart meters, temperature and humidity sensors, and othertechnologies is contributing to labor savings for on-site operations. In 2H, the company intends to introduce thesetechnologies to all facilities under its management throughout Japan, with cost savings expected to materialize from
FY02/24 onward.

Security Services
Sales: JPY24.1bn (+2.0% YoY)
Operating profit: JPY1.4bn (-15.2% YoY)
Sales increased YoY, driven by an increase in the number of customer companies as the company won new contracts forgovernment buildings, commercial facilities, and condominiums among others in China. In Japan as well, newly contracted
facilities, including new Aeon group stores and non-Aeon group facilities (automakers, hospitals, hotels, commercial
complexes, and business centers of financial institutions), and facilities contracted in 2H FY02/22 contributed to sales
growth. The company captured a larger share of customer wallets and acquired new customers through reinforcing accountmanagement.
Operating profit fell YoY. Profitability fell due in part to a decline in orders for security cameras mainly from the Aeon group.
Aeon group is striving to cut costs amid the pandemic, and as one of its cost-cutting measures, it is refraining from replacing
or installing additional security cameras. Under these circumstances, to improve profitability, the company continued
negotiations to optimize unit prices and worked to automate systems to handle tasks such as facility entry/exit management
and store opening/closing.
Outlook for 2H
The company expects sales to remain on an uptrend in 2H as well, on contributions from newly contracted facilities in 1H. It
also expects OPM to improve in 2H. Costs incurred in Q1 for the launch of services for newly contracted facilities were a
one-time factor, and efforts to automate systems for facility entry/exit management and store opening/closing as well as
negotiations aimed at optimizing unit prices are expected to begin bearing fruit.

Cleaning Services
Sales: JPY33.8bn (-1.0% YoY)
Operating profit: JPY3.3bn (-22.2% YoY).
Sales were flat YoY despite a falloff in demand for disinfectant cleaning, quarantine-related cleaning, and special cleaning
services which increased a year ago due to the pandemic, as recurring contracts for new facilities both in and outside the
Aeon group increased. The company also worked to introduce and expand special cleaning services at customers outside the
Aeon group (including financial institutions, manufacturers, retailers, and hospitals), such as New Standard Cleaning, acleaning method for maintaining a hygienic, attractive environment developed based on the company's proprietary cleaning
services previously provided to hospitals.
Operating profit was down YoY due to a decline in OPM attributable to a drop in orders for high-margin cleaning services
using alcohol disinfectants.
Outlook for Q2 onward
For 2H, the company expects sales to increase YoY, supported by contributions from recurring contracts acquired in 1H. It
aims to strengthen account management for major corporations and expand areas where it can win contracts. Further, by
utilizing its expertise acquired through providing sanitary cleaning services for hospitals and the New Standard Cleaning
service, it plans to provide Healthcare Solutions that raise hygiene standards. Inbound tourists are projected to increase in
2H, and so the company will focus on providing these solutions to hotels.
Contracts for high-margin special cleaning services were down in 2H FY02/22, and hence the company expects YoY decline
in 2H FY02/23 to be smaller.

Construction Work
Sales: JPY23.4bn (-5.8% YoY)
Operating profit: JPY1.4bn (-37.5% YoY).

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

55

Sales were down YoY due to delays in some construction work caused by shortages and delayed procurement of construction
materials, such as parts and air conditioning equipment, against a backdrop of the COVID-19 pandemic and the Russian
invasion of Ukraine. Further, orders declined as some retailers cut back on their capital spending in light of uncertainties inthe external environment and soaring electricity and other costs. Orders were also hurt by customers' cancellation or
postponement of capex plans, as well as their cutting back on minor repair and maintenance works.
Operating profit fell YoY, due to lower sales and rising raw material prices. The drop in orders for high-margin minor repair
and maintenance work depressed OPM.
Outlook for Q2 onward
Sales and profit are projected to increase in 2H and for the full year.
Some Aeon group store facilities were damaged by the earthquake that struck off the coast of Fukushima Prefecture in March
2022. The company received orders for restoration-related work for the facilities damaged by the earthquake, and expects tobook sales for most of these orders in Q3. In FY02/22 as well, there was an earthquake off the coast of Fukushima Prefecture(in February 2021), which also resulted in an increase in restoration work-related sales, but these sales were booked in Q2
FY02/22. For this reason, the company expects a YoY increase in Q3 FY02/23 sales.
The company expects projects that were delayed in 1H to contribute to earnings in the full-year. It intends to step up efforts
to offer services that can contribute to lowering electricity costs and environmental burden, including LED lighting andautomatic air-conditioning control services, as well as selling non-CFC cases, for commercial facilities with high electricity
demand amid rising electricity costs.
On the profit front, the company is seeing an increase in material prices. It will work to reduce costs by enhancing theaccuracy of its construction cost estimates and by strengthening cost negotiations. It will also strengthen efforts to acquire
high-margin construction projects.

Materials and Supplies Sourcing Services
Sales: JPY20.5bn (+1.2% YoY; +1.6% YoY based on the previous accounting standard)
Operating profit: JPY994mn (-27.0% YoY)
Sales increased YoY, as the company focused on increasing its share within the Aeon group. The company expanded businesswith companies that have newly joined the Aeon group: Fuji Retailing Co., Ltd. (TSE Prime: 8278), which runs supermarkets
in the Chugoku/Shikoku region, and Can Do Co., Ltd. (TSE Standard: 2698), which has a nationwide chain of 100-yen shops.
From existing customers, it won contracts to source new materials and supplies. Sales to non-Aeon group customers also
grew, thanks in part to the sale of building maintenance-related materials, such as materials for floor cleaning and waxing, ata reasonable price.
Operating profit declined on lower OPM, as the company failed to sufficiently pass on higher costs for packing and othermaterials caused by soaring crude oil prices and higher raw material and logistics costs to selling prices.
Outlook for 2H
The company expects to maintain sales growth on an increase in the number of contracts. It expects OPM to improve, as it ismaking progress in negotiating with customers to raise prices to better reflect higher cost of sales.

Vending Machine Services
Sales: JPY4.8bn (+0.3% YoY; +0.5% YoY based on the previous accounting standard)
Operating profit: JPY556mn (+57.3% YoY)
Sales were flat YoY, despite a recovery in customer footfall at commercial facilities where the company has installed vending
machines, as recovery in demand for beverages sold by these vending machines was delayed due to consumer behavior
changes caused by the pandemic. Sales grew in Q2, however, on the back of increased beverage sales owing to a recovery
in out-of-home activities and extreme heat in July–August 2022. Operating profit grew thanks to lower depreciation, as thecompany booked impairment losses for loss-making machines in Q4 FY02/22.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

56

Outlook for 2H
The company will continue installing more of its multi-brand vending machines (which offer beverages from several different
brands) to improve profitability per machine. It recorded impairment losses for loss-making machines in FY02/22, andexpects this to contribute to improved earnings throughout FY02/23.

Support Services
Sales: JPY8.9bn (+10.7% YoY)
Operating profit: JPY279mn (+9.5% YoY)
Sales were up YoY. Business trip demand increased in travel-related services, and the company won contracts for on-site
shipping operations for newly opened Aeon Mall stores. Outside the Aeon group, the company worked to expand services
that were compatible with its other businesses to address outsourcing needs related to the management and operation ofcontracted facilities and their surroundings (e.g., operation of venues for new employee welcoming ceremonies andemployee training, and operations peripheral to building maintenance). The company also acquired new contracts in China,
including for operations peripheral to building management and support services for new building constructions.
Operating profit grew YoY due to higher sales and profit generated by subsidiary Aeon Compass, which operates a travelbusiness, from posting losses previously due to the pandemic.
Outlook for 2H
The company expects higher sales and operating profit driven by an increase in the number of contracts for domestic
business trips as the pandemic settles down.

Overseas business (within each segment)
Sales: JPY15.3bn (+30.2% YoY)
Operating profit: JPY790mn (-7.9% YoY)
Earnings of the overseas business are included in each segment. The company operates the Facilities Management, Security
Services, Cleaning Services, and Support Services businesses overseas. Aeon group companies comprise roughly half of its
customers.
Sales increased in China and the ASEAN region.
China
Sales grew 34.0% YoY to JPY10.6bn, benefiting from consolidation of Zhejiang Metelan Property Management, which wasmade a subsidiary in March 2022, and an increase in the number of contracted facilities managed by Aeon Delight Jiangsu(government facilities, offices, commercial facilities, etc.). The company won contracts for new facilities in Security Services,
Cleaning Services, and Support services, and worked to capture a larger share of customer wallets.
Operating profit fell YoY due to an increase in SG&A expenses as the company hired additional personnel to strengthen
governance.
The company is actively seeking out M&A and partnership opportunities to develop specialty, expand business domains, andstrengthen customer base. In March 2022, it acquired a local company (Zhejiang Metelan Property Management) thatmanages and operates healthcare facilities under contract in Zhejiang and Jiangxi provinces. In October 2022, the company
made Aeon Delight (China) an investment company, making it easier to enter into cross-industry partnerships.
ASEAN
Sales were up in all ASEAN countries in which the company operates, as the economies that had been stagnant amid the
pandemic began to recover. The company made preparations to establish a head office for the ASEAN business in Malaysia
to reinforce group governance and develop a new growth strategy for the region as a whole. The company's ASEAN businesshas governance issues, more so than the China business, and so the company dispatched personnel from Japan to addressthese issues and strengthen governance of the local business.
Malaysia: Sales jumped 43.1% YoY to JPY1.0bn, and operating profit also increased YoY. Sales grew as the company
secured contracts for various services including facility management, repair, and cleaning and disinfecting from existing

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

57

Aeon Malaysia stores for which the company initially won contracts at end-FY02/22. Despite higher personnel expenses
on increased headcount, profit grew supported by higher sales. Hourly wages were on an uptrend due to labor shortages
caused by stricter border controls imposed on immigrants and foreign workers amid the COVID-19 pandemic, but hourly
wages are gradually coming down to the pre-pandemic levels as border regulations are relaxed.
Vietnam: Sales rose 11.3% YoY to JPY1.8bn, and operating profit was also up YoY. Aeon Mall plans to accelerate store
openings in Vietnam between 2025 and 2026 in target areas, and the company accordingly is strengthening its local
business structure to capture demand anticipated to arise from the new stores. The company expects results to improve in
2H, as the pandemic is winding down and Aeon Mall is opening more stores in Vietnam and Cambodia.
Indonesia: Sales amounted to JPY2.0bn (+24.8% YoY), but the company posted an operating loss. Sales grew as thecompany won contracts for Aeon Mall stores, but operating profit fell into the red due to higher personnel expenses on
expanded efforts to improve the work environment in compliance with the revised local labor law. The increase inpersonnel expenses stemming from the revised law may also affect earnings in FY02/24. Indonesia is a larger market
within the ASEAN region, and the company has access to the customer base of a cleaning company it purchased in the
country in 2018. It is building local infrastructure by dispatching staff from Japan with an eye toward expanding contracts
with Aeon group facilities.

Key initiatives for FY02/23
In FY02/23, Aeon Delight will carry out initiatives to realize the basic policies under its medium-term management plan:“customer-oriented management,” “promotion of digital transformation (DX),” and “group management.” The company will
also step up M&A efforts, both in Japan and overseas.
Customer-oriented management
A KPI for customer-oriented management is to generate 40.0% of sales outside the Aeon group in FY02/24. (This figure was
35.6% as of end-FY02/22 and 35.7% for FY02/21.) This figure rose to 36.3% as of end-1H FY02/23, thanks to contributions
from Facilities Management.
In FY02/22, the company assigned account managers to key customers. This approach created a system for managing
customer information centrally. By using account managers to build stronger customer relationships, the company has also
increased its share of customers outside the Aeon group.
Reorganizing and strengthening sales function: In April 2022, the company carried out structural reforms to reorganizeand strengthen its sales function. It reorganized business areas covered by its total eight branch offices nationwide tobetter reflect and accommodate regional characteristics. It also redefined the responsibilities of each branch officeposition from the operation to management levels. Further, the company held training sessions for branch managers toenhance their job proficiency and awareness as a manager of each regional unit. Having reorganized its sales structure,
the company aims to increase transactions with both existing and new customers, through reinforcing its accountmanagement initiatives for existing customers and making customer-centric proposals.
Developing healthcare solutions: In this category, the company makes proposals for raising facilities’ hygiene levels. Its
solutions leverage the track record and expertise the company has built up through hospital-oriented “hygienic cleaning”
and New Standard Cleaning. In April 2022, the company set up an organization tasked with honing proposals. With thisorganization, the company intends to expand proposals to non-group customers such as hospitals and hotels, and to win
new contracts.
Developing solutions to support decarbonization: In April 2022, the company set up a dedicated team that takes anintegrated approach toward helping customers decarbonize their operations. Efforts to date have focused on individual
steps for shrinking a customer’s carbon footprint: installation of energy saving equipment and other energy-saving
operations at individual facilities. Going forward, the company plans to expand into such areas as buying renewableenergy and issuing environmental certifications.
Promotion of digital transformation
KPIs for the promotion of digital transformation (DX) are to achieve OPM of 6.0% by FY02/24, maintain ROE of 12%,
introduce area management (sharing of facility management personnel between facilities located in a predetermined area)at 360 facilities, reduce the number of people assigned to specific facilities by 180, and reassign 20% of headquarters staff tofront positions. As of end-1H FY02/23, OPM was 4.5%, the number of facilities under area management was 248 (+70 versus
end FY02/22), and reductions in the number of people assigned to specific facilities was 141 (+26).
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

58

Promoting use of the Aeon Delight platform: The company plans to use the platform to collect customer feedback, facility
conditions, market trends in customers’ industries, and external information about weather and disasters. It will use AI toanalyze and process the data and efficiently share them across the service network of the company, group companies, andpartner companies. In FY02/23, the company plans to raise process efficiency by promoting links between the Aeon
Delight platform and various systems, and enhance the value of data by increasing the volume of information. In addition,in the sales department the company aims to make proposals from the customer’s perspective. To do so, the company will
utilize data from the Aeon Delight platform, as well as visualizing and sharing information about customer requests.
Group management
KPIs for group management to be achieved by FY02/24 are JPY65.0bn in sales at group companies in Japan, overseas sales
accounting for more than 8% of the total, and a shift toward shared services at the finance and accounting departments ofgroup companies in Japan. In 1H, overseas sales accounted for 10.4% of total sales, up from 7.8% at end-FY02/22. The rise in
the share of overseas sales was also attributed to the depreciation of the yen.
Promote growth of each group company in Japan by strengthening intragroup cooperation
Aeon Compass: In addition to handling overseas and domestic travel, the subsidiary also plans and manages events.
Performance recovered as it worked to capture recovering business trip demand and demand arising from theresumption of events.
Building maintenance subsidiary: Building maintenance subsidiaries include Aeon Delight Connect (core subsidiary inthe small and medium-sized facilities market), Hakuseisha (provides cleaning, hygiene management, security, facility
management, and construction services), and Kankyouseibi (handles facility management, construction, security,
cleaning management, designated manager operations). The business environment remained harsh, due tocustomers' postponement or brining forward of capital spending in light of changes in their operating environment,
shortages and procurement delays of materials and equipment caused by the pandemic and Russia–Ukraine war, andhigher initial spending for newly contracted facilities. Under these circumstances, in FY02/23, the company intends
to strengthen Aeon Delight Connect’s foundations by promoting cooperation, such as sharing personnel more
actively, and strengthening sales at companies operating small- and medium-sized stores nationwide. The company
also plans to strengthen the construction department through U-COM (designs commercial facilities and handles
interior construction), which it absorbed in March 2021.
Overseas, expand business in China and strengthen management base in the ASEAN region
China: The company aims to achieve organic growth by bolstering contracts for priority facilities such as medium- tohigh-end shopping centers, hospitals and nursing homes, and facilities in areas undergoing redevelopment. Aeon
Delight also seeks to acquire and form business alliances with local companies that provide security and cleaning
services for local hospitals and the factories of Japanese companies. In these ways, it aims to acquire expertise, expand
its business domain, and strengthen its customer base.
ASEAN region: The company expects business to grow in this region in the medium to long term, due to the openingof new Aeon group stores and the expansion of Japanese companies. Aeon Delight is moving toward theestablishment of an ASEAN regional headquarters to strengthen the management base and help it plan growthstrategies in individual countries.

Q1 FY02/23 results
Sales: JPY71.8bn (+0.9% YoY, +0.6% based on the previous accounting standard)
Operating profit: JPY3.3bn (-12.0% YoY)
Recurring profit: JPY3.3bn (-12.0% YoY)
Net income: JPY2.2bn (-10.4% YoY)
The company adopted the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) effectivefrom Q1 FY02/23. As a result, revenue recognition standard was changed for some of the Facilities Management, Materials
and Supplies Sourcing Services, and Vending Machine Services segments. Due to the adoption of the new accounting
standard, Q1 sales and cost of sales were each reduced by JPY8.4bn while operating profit, recurring profit, and pre-tax profit
each increased by JPY10mn; the balance of retained earnings at the beginning of the fiscal year was reduced by JPY1.1bn.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

59

YoY comparisons in this report have been calculated after retroactively applying the new accounting standard to FY02/22
results.
Sales were up 0.9% YoY, due to an increase in the share of customers' wallet on the back of strengthened accountmanagement and advances made in acquiring new customers. Meanwhile, recovery was delayed in Construction Work,
with the segment posting a YoY decline in sales.
Gross profit: Gross profit was JPY9.7bn (-0.2% YoY), and GPM was 13.6% (-0.1pp YoY). In Q1 FY02/22, demand forservices with relatively high GPM such as disinfectant cleaning for facilities with COVID-19 exposures increased. Q1
FY02/23 results were affected by the falloff of such demand, but any negative impact from this factor was largely offset by
GPM growth in Facilities Management, Support Services, and Vending Machine Services.
SG&A expenses: SG&A expenses were JPY6.5bn (+7.1% YoY), and the SG&A expenses ratio was 9.0% (+0.5pp YoY). The
rise in SG&A expenses were attributed to upfront spending including capital expenditures as well as investments inpersonnel and digital transformation the company made as initially planned. External factors, such as the rising crude oil
price and changes in operating environment, only had a minor impact.
Net income attributable to owners of the parent fell due to a decline in operating profit. Non-operating income/expenses(JPY18mn) and extraordinary gains/losses (JPY6mn) had only a marginal impact on earnings.

Progress versus full-year company forecast
Versus the full-year FY02/23 company forecast, Q1 sales were 23.2% (25.1% of full-year results in Q1 FY02/22, based on theprevious accounting standard), operating profit 19.3% (23.7%), recurring profit 19.4% (23.8%), and net income 21.0%(23.5%). Progress rates in Q1 fell short of those in Q1 FY02/22.
Sales and earnings fell short of projections in Construction Work due to delayed business recovery, but results were in linewith plan in other segments.
Initiatives aimed at achieving full-year targets
The company aims to grow sales in all segments for the full year by strengthening proposal-based sales, primarily inConstruction Work where recovery is delayed.
Energy saving proposals: The company will strengthen proposals highlighting energy-saving benefits in Construction
Work. Specifically, it will make proposals that can contribute to reducing energy costs and environmental burden,
including LED lighting and automatic air-conditioning control services, as well as the sale of non-CFC cases, forcommercial facilities with high electricity demand, amid rising electricity and other energy costs due to soaring crude oil
prices. Through these measures, the company aims to recover earnings in Construction Work.
Proposals to meet safety and security demand: In Construction Work, the company will propose safety measures forfacilities, such as the installation of U-shaped poles in parking lots of commercial facilities to prevent vehicles fromcrashing into stores. It will also make other proposals to enhance safety and security of facilities, aimed at preventing
accidents and preparing them for a natural disaster.
Minor repair projects: In Facility Management, Construction Work, and Cleaning Services, the company will step up
efforts to make proposals for minute, detailed work (minor repairs, cleaning, etc.) besides contracted work necessary forfacility maintenance and management. By focusing on making proposals related to energy savings, safety and security,
compliance, and hygiene, the company aims to enhance the closing rate, or the probability of its proposals being
accepted by customers. Minor repair work refers to irregular, small, detailed work for contracted facilities. While sales
per project are small for the minor repair work compared with other contracted projects, many are highly profitable andorders are frequent, and hence are expected to contribute to earnings and profitability growth.

Segment trends
Sales increased YoY in the five segments other than Construction Work and Vending Machine Services, owing to an increasein the share of wallets of existing customers on strengthened account management and advances made in new customer
acquisitions. Overall sales were up only 0.9% YoY, however, due to delays in earnings recovery in Construction Work.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

60

Operating profit fell YoY, due to an increase in initial spending required for the launch of operations at newly contracted
facilities in Security Services, a decline in high-margin projects in Cleaning Services, and lower sales in Construction Work.

Facilities Management
Sales: JPY16.1bn (+4.0% YoY; +3.9% YoY based on the previous accounting standard)
Operating profit: JPY1.4bn (+7.6% YoY)
OPM: 8.5% (+0.3pp YoY)
Sales and profit in the segment grew owing to an increased share of customer wallets driven by growth in orders for various
maintenance services and new orders for contract management.
Sales growth was attributed to orders for building maintenance work for new Aeon group stores as well as non-groupfacilities, and contributions from facilities contracted in 2H FY02/22 (facilities of non-Aeon group manufacturers andfinancial institutions). The company's share of existing customer wallets increased, in part due to its account management
initiatives. It won new contracts for retailers and manufacturers that operate multiple outlets, and stores, factories, and officesof corporate customers.
Account management: Instead of communicating with customers on a segment basis as in the past, the company now
appoints account managers for key clients and centrally manages customer information. It aims to expand transaction
volume by deepening its understanding of customers and various industries, and accordingly improve customer
satisfaction and refer customers to other segments. To achieve this, it plans to provide services across the segments in asingle package (for example, Construction Work carries out an order associated with Facilities Management), and provide
the same services regardless of region to clients operating nationwide.
In March 2021, Aeon Delight set up customer service centers at all eight branches in Japan and rolled out remotesupport systems. The company also installed systems and sensors at facilities under management to promote labor saving.
This infrastructure enabled cost reductions through labor-saving and automation based on area management, which
involves the sharing of facilities management personnel in a set area. The company first launched the area management
concept with a focus on Aeon Retail stores among the several thousand facilities under contract. The company targets tohave 360 area-managed facilities and reduce 180 facilities management personnel by the end of FY02/24. Progress
toward these targets was largely in line with plan, with 231 facilities (versus 178 at end-FY02/22) covered by the area
management scheme and facilities management personnel down by 135 (115) as of end-Q1 FY02/23
Outlook for Q2 onward
From Q2 onward, the company expects to maintain a sales growth rate comparable to that of Q1. It expects newly contracted
facilities in Q1 to contribute to earnings throughout the year. OPM is also projected to improve from Q2 onward, as theeffects of area management initiatives and outsourcing expense cuts become apparent.

Security Services
Sales: JPY11.9bn (+2.5% YoY)
Operating profit: JPY733mn (-7.9% YoY)
OPM: 6.1% (-0.7pp YoY)
Sales increased YoY. The number of customer companies under contract increased owing to the acquisition of new contracts
for new Aeon group stores as well as non-group facilities (hospitals, hotels, commercial facilities, administrative centers offinancial institutions). The company's share of existing customer wallets increased supported by enhanced accountmanagement, and progress was made in new customer acquisitions. In China as well, the number of customer companies
under contract grew as the company won contracts for new facilities such as commercial facilities and condominiums.
Operating profit fell YoY, as subsidiary Aeon Delight Security incurred higher initial expenses for facilities, equipment, andpersonnel for the launch of services at newly contracted facilities. Labor cost is rising in the security sector due to chronic
worker shortages. The company continued negotiations to optimize unit prices and worked to automate systems to handletasks such as facility entry/exit management and store opening/closing, with the aim of improving profitability.
Outlook for Q2 onward
The company expects the rate of sales growth from Q2 onward to be slightly higher than that of Q1, due to contributions
from newly contracted facilities. It also expects OPM to improve, as the expenditures accompanying the launch of services

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

61

for newly contracted facilities incurred in Q1 were a one-time factor and the efforts to automate systems for facility entry/exit
management and store opening/closing are expected to begin bearing fruit.

Cleaning Services
Sales: JPY16.6bn (flat YoY)
Operating profit: JPY1.7bn (-14.8% YoY)
OPM: 10.1% (-1.8pp YoY)
Sales were flat YoY despite a fall in demand for disinfectant cleaning, quarantine-related cleaning, and special cleaning
services which increased a year ago due to the pandemic, as recurring contracts for new facilities both in and outside the
Aeon group increased. The company also worked to introduce and expand special cleaning services at customers outside the
Aeon group such as New Standard Cleaning, a cleaning method to maintain a hygienic, attractive environment based on thecompany's own cleaning service that was previously provided to hospitals.
Operating profit was down YoY, due to lower OPM attributable to a decline in orders for high-margin cleaning anddisinfectant services using alcohol.
Outlook for Q2 onward
Achieving YoY sales growth in 1H may be difficult due to the absence of special demand that boosted results a year ago, but
the company expects 2H sales to expand YoY on the back of an increase in the number of new recurring contracts. OPM is
expected to fall below the previous year's level.

Construction Work
Sales: JPY10.3bn (-8.2% YoY)
Operating profit: JPY694mn (-35.0% YoY)
OPM: 6.7% (-2.8pp YoY)
Sales were down YoY, due to delays in some construction work caused by shortages and procurement delays of construction
materials, such as parts and air conditioning equipment, against a backdrop of the COVID-19 pandemic and Russian invasionof Ukraine. Further, orders declined as some retail companies cut back on their capital spending in light of uncertainties inthe external environment and soaring electricity and other costs.
Operating profit fell YoY, due to lower sales and rising raw material prices.
Outlook for Q2 onward
Some Aeon group store facilities were damaged by the earthquake that struck off the coast of Fukushima Prefecture in March
2022. The company received orders for restoration-related work, and expects to book sales for these orders in Q2 and Q3.
In FY02/22 as well, there was an earthquake off the coast of Fukushima Prefecture (in February 2021), which resulted in an
increase in restoration work-related sales in Q2 FY02/22. However, this year's sales from restoration work are expected to behigher YoY.
The company expects projects that were delayed in Q1 to contribute to earnings in the full-year. Further, it intends to step up
efforts to offer services that can contribute to reduced electricity costs and environmental burden, including LED lighting andautomatic air-conditioning control services, as well as the sale of non-CFC cases, for commercial facilities with high electricity
demand, amid rising electricity costs. These measures are expected to contribute to earnings in Q3 and Q4.
On the profit front, the company is seeing an increase in material prices. It will work to reduce costs by enhancing theaccuracy of its construction cost estimates and by strengthening cost negotiations. It will also strengthen efforts to acquire
high-margin construction projects.

Materials and Supplies Sourcing Services
Sales: JPY10.2bn (+3.0% YoY; +2.6% based on the previous accounting standard)
Operating profit: JPY615mn (-6.3% YoY)
OPM: 6.0% (-0.6pp YoY)
Sales increased YoY. The company expanded business with companies that have newly joined the Aeon group: Fuji RetailingCo., Ltd. (TSE Prime: 8278), which runs supermarkets in the Chugoku/Shikoku region, and Can Do Co., Ltd. (TSE Standard:
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

62

2698), which has a nationwide chain of 100-yen shops. With existing customers, it won orders to source new materials andsupplies.
Operating profit declined on lower OPM, as the company failed to sufficiently pass on higher costs for packing and othermaterials caused by soaring crude oil prices and higher raw material and logistics costs to selling prices.
Outlook for Q2 onward
The company expects to maintain sales growth, supported by an increase in the number of contracts. To improve operating
profit, it is negotiating with customers to pass on the increase in costs to selling prices.

Vending Machine Services
Sales: JPY2.2bn (-0.1% YoY; -2.9% YoY based on the previous accounting standard)
Operating profit: JPY208mn (+79.3% YoY)
OPM: 9.5% YoY (-4.2pp YoY)
Sales were flat YoY, as recovery in demand for beverages sold by vending machines located in commercial facilities wasdelayed due to changes in consumer purchasing behavior brought about by the pandemic. Profit grew, however, owing to a
decline in depreciation, as the company booked impairment losses for loss-making machines in Q4 FY02/22.
Outlook for Q2 onward
The company will continue installing more of its multi-brand vending machines (which offer beverages from several different
brands) to improve profitability per machine. It recorded impairment losses for loss-making machines in FY02/22, andexpects this to contribute to improved earnings throughout FY02/23.

Support Services
Sales: JPY4.5bn (+8.3% YoY)
Operating profit: JPY162mn (+36.1% YoY)
OPM: 3.6% (+0.7pp YoY)
Sales and profit increased YoY. Business trip demand increased in travel-related services, and the company won contracts for
in-facility shipping operations for newly opened Aeon Mall stores. It worked to expand services that were compatible with thecompany's other businesses to address outsourcing needs related to the management and operation of contracted facilities
and their surroundings. The company also acquired new contracts in China.
Outlook for Q2 onward
The company expects higher sales and operating profit, based on its projection that contracts for domestic business trip will
increase if the pandemic comes under control.

Overseas business (January–March 2022)
Sales: JPY7.1bn (+26.8% YoY)
Operating profit: JPY380mn (-9.5% YoY)
Earnings of the overseas business are included in each segment. The company operates the Facilities Management, Security
Services, Cleaning Services, and Support Services businesses overseas. Aeon group companies comprise roughly half of its
customers.
Sales increased in China and the ASEAN region.
China
Sales grew 34.3% YoY to JPY5.0bn while operating profit fell YoY. Orders for contracted operations declined as commercial
facilities in Wuhan were temporarily closed due to the pandemic, but Aeon Delight Jiangsu secured a higher number offacility contracts (offices, commercial facilities, and government affiliated facilities). Further, the company worked to expand
its share of customer wallets in the region.
Profit fell YoY due to a one-time increase in infection countermeasure-related costs due to the spread of COVID-19 in
Wuhan.
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

63

The impact of lockdowns in Shanghai was limited, as the company had only a few facilities under contract in the city.
The company is actively seeking out M&A and partnership opportunities to develop specialty, expand business domains,and strengthen customer base. In March 2022, Aeon Delight China acquired a local company (Zhejiang Metelan Property
Management) that manages and operates healthcare facilities under contract in Zhejiang or Jiangxi provinces.
ASEAN
Sales in the ASEAN region as a whole grew thanks to the company's efforts to expand orders in each country it operates in.
The company began preparing to establish a head office in the region, with the aims of reinforcing group governance andforming a new growth strategy for the region as a whole.
Malaysia: Sales came to JPY450mn (+148% YoY), and operating profit also increased YoY. Sales grew as the company
secured contracts for services including facility management, repairs, and cleaning and disinfecting services from existing
Aeon Malaysia stores for which the company initially won contracts at end-FY02/22. Despite higher personnel expenses
on increased headcount, profit grew backed by higher sales.
Vietnam: Sales were JPY800mn (-5.7% YoY), and operating profit fell YoY. Performance deteriorated as restaurants andother facilities under contract were not able to operate normally due to the spread of COVID-19. Aeon Mall is stepping
up store rollouts in Vietnam, so the company is strengthening its local sales structure. The company expects results toimprove in 2H, as the pandemic is winding down and Aeon Mall is opening more stores in Vietnam and Cambodia.
Indonesia: Sales amounted to JPY930mn (+22.3% YoY), but the company posted an operating loss. Sales grew as thecompany won contracts for Aeon Mall stores, but operating profit fell into the red due to higher personnel expenses on
expanded efforts to improve the work environment in compliance with the revised local labor law. The increase inpersonnel expenses stemming from the revised law may also affect earnings in FY02/24. Indonesia is a larger market
within the ASEAN region, and the company has access to the customer base of a cleaning company it purchased in the
country in 2018. It is building local infrastructure by dispatching staff from Japan with an eye toward expanding contracts
with Aeon group facilities.

Key initiatives for FY02/23
In FY02/23, Aeon Delight will carry out initiatives to realize the basic policies under its medium-term management plan:“customer-oriented management,” “promotion of digital transformation (DX),” and “group management.” The company will
also step up M&A efforts, both in Japan and overseas.
Customer-oriented management
A KPI for customer-oriented management is to generate 40.0% of sales outside the Aeon group in FY02/24. (This figure was
35.6% as of end-FY02/22 and 35.7% for FY02/21.) This figure rose to 36.3% as of end-Q1 FY02/23, thanks to contributions
from Facilities Management.
In FY02/22, the company assigned account managers to key customers. (Account managers are salespeople in charge ofhandling all transactions for a specific customer.) This approach created a system for managing customer information
centrally. By using account managers to build stronger customer relationships, the company has increased its share of nongroup customer wallets.
Reorganizing and strengthening sales function: In April 2022, the company carried out structural reforms to reorganizeand strengthen its sales function. It reorganized business areas covered by its total eight branch offices nationwide tobetter reflect and accommodate regional characteristics. It also redefined the responsibilities of each branch officeposition from the operation to management levels. Further, the company held training sessions for branch managers toenhance their job proficiency and awareness as a manager of each regional unit. Having reorganized its sales structure,
the company aims to increase transactions with both existing and new customers, through reinforcing its accountmanagement initiatives for existing customers and making customer-centric proposals.
Developing healthcare solutions: In this category, the company makes proposals for raising facilities’ hygiene levels. Its
solutions leverage the track record and expertise the company has built up through hospital-oriented “hygienic cleaning”
and New Standard Cleaning. In April 2022, the company set up an organization tasked with honing proposals. With thisorganization, the company intends to expand proposals to non-group customers such as hospitals and hotels, and to win
new contracts.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

64

Developing solutions to support decarbonization: In April 2022, the company set up a dedicated team that takes anintegrated approach toward helping customers decarbonize their operations. Efforts to date have focused on individual
steps for shrinking a customer’s carbon footprint: installation of energy saving equipment and other energy-saving
operations at individual facilities. Going forward, the company plans to expand into such areas as buying renewableenergy and issuing environmental certifications.
Promotion of digital transformation
KPIs for the promotion of digital transformation (DX) are to achieve OPM of 6.0% by FY02/24, maintain ROE of 12%,
introduce area management (sharing of facility management personnel between facilities located in a predetermined area)at 360 facilities, reduce the number of people assigned to specific facilities by 180, and reassign 20% of headquarters staff tofront positions. In Q1, OPM was 4.6%, the number of facilities under area management was 231 (+53 versus end FY02/22),
and the number of people assigned to specific facilities was 135 (+20).
Promoting use of the Aeon Delight platform: The company plans to use the platform to collect customer feedback, facility
conditions, market trends in customers’ industries, and external information about weather and disasters. It will use AI toanalyze and process the data and efficiently share them across the service network of the company, group companies, andpartner companies. In FY02/23, the company plans to raise process efficiency by promoting links between the Aeon
Delight platform and various systems, and enhance the value of data by increasing the volume of information. In addition,in the sales department the company aims to make proposals from the customer’s perspective. To do so, the company will
utilize data from the Aeon Delight platform, as well as visualizing and sharing information about customer requests.
Group management
KPIs for group management to be achieved by FY02/24 are JPY65.0bn in sales at group companies in Japan, overseas sales
accounting for more than 8% of the total, and a shift toward shared services at the finance and accounting departments ofgroup companies in Japan. In Q1, overseas sales accounted for 9.0% of total sales, up from 7.8% at end-FY02/22.
Promote growth of each group company in Japan by strengthening intragroup cooperation
Aeon Compass: In addition to handling overseas and domestic travel, the subsidiary also plans and manages events.
Performance recovered as it worked to capture recovering business trip demand and demand arising from theresumption of events.
Building maintenance subsidiary: Building maintenance subsidiaries include Aeon Delight Connect (core subsidiary inthe small and medium-sized facilities market), Hakuseisha (provides cleaning, hygiene management, security, facility
management, and construction services), and Kankyouseibi (handles facility management, construction, security,
cleaning management, designated manager operations). The business environment remained harsh, due tocustomers' postponement or brining forward of capital spending in light of changes in their operating environment,
shortages and procurement delays of materials and equipment caused by the pandemic and Russia–Ukraine war, andhigher initial spending for newly contracted facilities. Under these circumstances, in FY02/23, the company intends
to strengthen Aeon Delight Connect’s foundations by promoting cooperation, such as sharing personnel more
actively, and strengthening sales at companies operating small- and medium-sized stores nationwide. The company
also plans to strengthen the construction department through U-COM (designs commercial facilities and handles
interior construction), which it absorbed in March 2021.
Overseas, expand business in China and strengthen management base in the ASEAN region
China: The company aims to achieve organic growth by bolstering contracts for priority facilities such as medium- tohigh-end shopping centers, hospitals and nursing homes, and facilities in areas undergoing redevelopment. Aeon
Delight also seeks to acquire and form business alliances with local companies that provide security and cleaning
services for local hospitals and the factories of Japanese companies. In these ways, it aims to acquire expertise, expand
its business domain, and strengthen its customer base.
ASEAN region: The company expects business to grow in this region in the medium to long term, due to the openingof new Aeon group stores and the expansion of Japanese companies. Aeon Delight is moving toward theestablishment of an ASEAN regional headquarters to strengthen the management base and help it plan growthstrategies in individual countries.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

65

News and topics
Acquisition of shares in askmaintenance2023-03-28

Aeon Delight Co., Ltd. announced the acquisition of shares in askmaintenance Co., Ltd.
At a meeting held on March 28, 2023, the company's Board of Directors resolved to acquire all shares of askmaintenance,
thereby converting it into a subsidiary. The effect of this acquisition on the company's future performance is expected to beminimal.
Purpose of share acquisition
The conversion of askmaintenance into a consolidated subsidiary will accelerate the formation of a regional economic zone
for facility management in Japan's Kyushu area. As an operator of cleaning, facility management, condominium management,
and construction businesses in the Kyushu area, askmaintenance provides services to commercial facilities, hospitals,
government properties, and various other types of establishments, and has garnered a particularly strong reputation for its
cleaning services.
askmaintenance has been providing services to commercial facilities for some time and has also maintained a collaborative
relationship with Aeon Delight, targeting improvement in technologies and quality through participation in contests
sponsored by the company and other activities. Given this history, the company will convert askmaintenance into a subsidiaryin an effort to expand its business base in Kyushu and further improve quality.
Overview of askmaintenance
Location: 5-4-6 Tamukae, Minami-ku, Kumamoto, Kumamoto Prefecture
Representative: Kiyoaki Inoue, president and representative director
Date of establishment: February 1974
Major shareholder: Kiyoaki Inoue (stake: 100%)
Schedule
March 28, 2023: Board of Directors resolution, conclusion of share transfer agreement
April 27, 2023 (tentative date): Execution of share transfer

Planned reorganization
2023-02-21

Aeon Delight Co., Ltd. made an announcement regarding planned reorganization.
The company will conduct reorganization on March 1, 2023, to enhance the effectiveness of various initiatives, including thepromotion of digital transformation (DX), strengthening of the group management structure, promotion of environmental,social, and governance (ESG) management, expansion into growth markets, and enhancement of its human resources
strategy.
Details of reorganization
Under director control of president
Eliminate COO for domestic group companies
Establish Affiliated Companies Department
Change name of managing director responsible for group strategy and ESG to managing director responsible forgroup strategy
Change name of Office of the President to Office of the President and ESG Promotion and transfer to direct controlof the president
Change name of Group Personnel, General Affairs and IT Department to Group Personnel and General Affairs
Department
Establish Group Recruiting and Training Department

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

66

Under officer in charge of Marketing DX
Establish IT Department
Eliminate Regional Offices Department
Change name of Business Promotion Division to Business Strategy Division
Eliminate Partner Relations Division and transfer functions to Quality Control Department
Transfer DX Promotion Division from under Marketing Department
Transfer IT Infrastructure Division from under Group Personnel and General Affairs Department
Under Affiliated Companies Department
Transfer Affiliated Companies Division from under control of COO for domestic group companies
Establish International Division
Under Group Control Department
Combine Parent Company Management Division and Consolidated Management Division and transfer to Group
Control Division
Under Group Recruiting and Training Department
Transfer Recruiting and Training Division from under control of Group Personnel and General Affairs Department

Plans for stock grants to employees via employee shareholding
association
2022-12-26

Aeon Delight Co., Ltd. announced plans to make stock grants to employees via its employee shareholding association.
In commemoration of the 50-year anniversary of the company’s founding, Aeon Delight decided to make stock grants to its
employees and the employees of its domestic subsidiaries via its employee shareholding association (hereinafter, theprogram).
Purpose of the program
On the 50-year anniversary of its founding, the company is looking to increase the awareness of all employees of theimportance of their individual contributions to the running of its business by offering them the opportunity to acquire sharesin the company.
This follows the share buybacks the company has been engaged in since October 2022 as a way of making additional returns
to shareholders. With employees being an important stakeholder in the company, the program offering each an opportunity
to acquire the company's stock is aimed at boosting employee loyalty and commitment to growing earnings going forward.
Employee share grants under the program
In commemoration of the 50-year anniversary of its founding, the company plans an incentive award in the form of 30 sharesof its common stock to members of its employee shareholding association, described below. The stock grant will be includedin the company’s budget for FY2023.
Name: Aeon Delight Employee Stockholding Association
Address: 1-1-1 Kandanishiki-cho, Chiyoda-ku, Tokyo
Association chairman: Shigeki Higashi
Number of Aeon Delight shares held: 527,000 (as of August 31, 2022)
Ownership stake in Aeon Delight: 1.05% (of shares outstanding)Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

67

Aeon Delight awarded Excellent Facility Management Award
2022-12-15

Aeon Delight Co., Ltd. announced that it had been named as the recipient of Excellent Facility Management Award at the17th Japan Facility Management Awards.
Sponsored by the Japan Facility Management Association, the award is made to companies and organizations in recognitionof excellence in facility management. In its naming of Aeon Delight as the recipient of Excellent Facility Management Award,
the association cited in particular the DX-inspired layout of the new head office building into which the company had moved
in August 2021.

Release of Aeon Delight Integrated Report 2022
2022-11-04

On November 2, 2022, Aeon Delight Co., Ltd. announced the release of Aeon Delight Integrated Report 2022.
The report provides information on the progress of the company's medium-term plan for 2021–2023, the history of thecompany on its 50th anniversary, and the results of scenario analysis per recommendations from the Task Force on ClimateRelated Financial Disclosures (TCFD).
Aeon Delight Integrated Report 2022 can be viewed here (Japanese only).

Decision on acquisition of treasury stock and commencement ofcollaboration with Kao Professional Services
2022-10-05

On October 4, 2022, Aeon Delight Co., Ltd. announced that the Board of Directors had resolved at a meeting held on thesame day to undertake the repurchase of treasury stock.
Reason for acquisition of treasury stock
To improve capital efficiency through implementing a flexible capital policy in response to changes in the businessenvironment and to enhance shareholder returns.
Details relating to the acquisition of treasury stock
Type of shares to be acquired: Common stock of the company
Total number of shares to be acquired: 1,500,000 shares (maximum; 3.00% of shares outstanding, excluding treasury
stock)
Total value of shares to be acquired: JPY5.3bn (maximum)
Period of acquisition: October 5, 2022 to October 4, 2023
Method of acquisition: Market purchases on the Tokyo Stock Exchange based on discretionary agreements
Other: Shares acquired as part of this transaction will be cancelled by a resolution of the Board of Directors inaccordance with Article 178 of the Companies Act.
On the same day, the company announced the start of a collaboration with Kao Professional Services Co., Ltd. to develop a
new service, the Infectious Disease Risk Assessment Service, to support companies and organizations in the prevention of
infectious diseases. Kao Professional Services provides hygiene management services for businesses in Japan.
Kao Professional Services will utilize its knowledge of assessment methods developed through its hygiene managementbusiness. Aeon Delight will leverage its expertise and service development capabilities accumulated through the provisionof cleaning methods to its customers. The two companies aim to develop a new service to assess hygiene risks and provide
solutions based on behavioral analysis in various situations, including public spaces and living areas.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

68

Expansion of scope of Eco Mark certification for Cleaning
Services2022-10-03

On September 30, 2022, Aeon Delight Co., Ltd. announced that, as of September 29, 2022, the scope of certification for
Eco Mark Product Category No. 510 "Cleaning Services Version 1.0" (Eco Mark Cleaning Services), which is certified by theJapan Environment Association, has been expanded to 440 commercial facilities.
The Eco Mark is an environmental label certified by the Japan Environment Association for products and services that are
acknowledged as having a lower environmental impact throughout their life cycle—from production through disposal—andas contributing to environmental conservation. Eco Mark Cleaning Services covers cleaning services for specified buildings
as stipulated in the Act on Maintenance of Sanitation in Buildings, and is certified based on criteria for environmental
considerations for materials and equipment used, waste disposal, and overall operations, and cleaning quality standards.
Upon the initial certification in January 2022, 46 commercial facilities for which the company provided cleaning services
were covered. With the expansion of scope, 394 commercial facilities for which partner companies provide cleaning
services are now covered under the certification.
Based on the partnership building declaration unveiled in March 2022, the company has extended the environmental
impact reduction initiative to its partners. Aeon Delight aims to improve the quality of operations and achieve coexistence
and co-prosperity by sharing the social significance of Eco Mark certification criteria and initiatives with its partnercompanies.
The company aims to expand Eco Mark Cleaning Services to around 2,000 facilities by FY02/26. This includes commercial
facilities, offices, hotels, and factories.

Change of trade name and corporate form (to investmentcompany) of Chinese subsidiary, and capital increase2022-07-27

On July 26, 2022, Aeon Delight Co., Ltd. announced that it would change the name of a subsidiary in China and convert it
into an investment company.
The company held a board meeting today and decided to change the name of Aeon Delight (China) Co., Ltd. (AD China), a
consolidated subsidiary, and convert it into an investment company. The parent company also decided to raise thesubsidiary’s capital. The move comes as the company seeks to strengthen its customer-oriented group management structure
and achieve further growth in China.
Objective of the change
The company will seek to achieve further growth in China by accelerating business expansion throughout the country. The
company will aggressively acquire facility management companies that have operations in various regions and purchasecompanies in different industries to enter new business domains. The company will change the name of AD China to Aeon
Delight (China) Investment Holdings Co., Ltd. (planned) and convert it into an investment company so that it can engage inwide-ranging operations. The company will also raise the subsidiary's capital as it aggressively acquires new businesses.
Outlook
Aeon Delight targets FY2025 revenue of JPY60.0bn (versus JPY17.0bn in FY02/22) for its China business. The figure breaks
down as JPY40.0bn from organic growth and JPY20.0bn from acquisitions. The company aims to invest in local companies
operating in the fields where its expertise lies, including facility management, energy and environment, and automobile
parking.

Launch of DX Education Program for about 500 employees
2022-07-22

On July 21, 2022, Aeon Delight Co., Ltd. announced the launch of a DX Education Program for approximately 500
employees.
Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE69

As of July 2022, Aeon Delight launched a DX Education Program for approximately 500 employees in their 20s, to develop
human resources to take responsibility for the next-generation facility management industry.
The program is the first phase of developing digital transformation (DX) human resources, and participation is required offull-time employees under the age of 30 who are in their second year of employment or later. During the program,participants will learn the basics of DX through video-based e-learning. Taking the IT Passport certification examination after
completion of the program is also part of the curriculum. In the future, Aeon Delight plans to train leaders to spearhead DX
promotion by conducting ongoing education for those who have acquired the IT Passport.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

70

Profile
Company Name

Head Office

Aeon Delight Co., Ltd.

Teitokanda Building. 1-1-1 Kandanishiki-cho, Chiyoda-ku, Tokyo,
Japan 101-0054

Phone
Listed On

03-4360-3558

Tokyo Stock Exchange, Prime Market
EstablishedExchange Listing

1972-11-16

1995-09-29
Fiscal Year-End
Feb

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

71

About Shared Research Inc.
We offer corporate clients comprehensive report coverage, a service that allows them to better inform investors and other stakeholders by
presenting a continuously updated third-party view of business fundamentals, independent of investment biases. Shared Research can be foundon the web at https://sharedresearch.jp.

Contact Details
Company namePhone

Shared Research Inc.

+81 (0)3 5834-8787

AddressEmail2-6-10 Kanda-Sarugakucho Chiyoda-ku Tokyo, Japan

info@sharedresearch.jp

Websitehttps://sharedresearch.jp

Disclaimer
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 this report.
We shall not be held responsible for any damage caused by the use of this report. The copyright of this report and the rights regarding thecreation and exploitation of the derivative work of this and other Shared Research Reports belong to Shared Research. This report may be
reproduced or modified for personal use; distribution, transfer, or other uses of this report are strictly prohibited and a violation of the copyrightof this report. Our officers and employees may currently, or in the future, have a position in securities of the companies mentioned in thisreport, which may affect this report’s objectivity.
Japanese Financial Instruments and Exchange Law (FIEL) Disclaimer: The report has been prepared by Shared Research under a contract with thecompany described in this report (“the company”). Opinions and views presented are ours where so stated. Such opinions and views attributed
to the company are interpretations made by Shared Research. We represent that if this report is deemed to include an opinion from us that
could influence investment decisions in the company, such an opinion may be in exchange for consideration or promise of consideration fromthe company to Shared Research.

Aeon Delight 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp | Subscribe for FREE

72