Research Coverage Report by Shared Research Inc.

9787

AEON Delight
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Coverage initiated on: 2013-06-06
Last update: 2022-01-13

INDEX
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.
Key financial indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.
Recent updates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.
Trends and outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.
Quarterly trends and results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.
FY02/22 company forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11..
Medium- and long-term outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13..
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17..
Business description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17..
Business overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17..
Strengths and weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22..
Market and value chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23..
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48..
Company profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51..

AEON Delight/ 9787
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Executive summary
Aeon Delight Co., Ltd. mainly operates a facilities management business through which it provides various solutions forfacilities and their surrounding environment. The company is the largest facilities management company in Japan with
operations in overseas as well, primarily in China and ASEAN member states. The company also provides services for
integrated facilities management and ancillary work that is non-core for the customer. This streamlines overall facility costs
and generates rationalization benefits for the customer. Its reporting segments are Facilities Management, Security Services,
Cleaning Services, Construction Work, Materials and Supplies Sourcing Services, Vending Machine Services, and Support
Services. Aeon Delight, owned more than 50% by the Aeon group, is a major group company, deriving 64% of its sales in
FY02/21 from transactions within the group.
Breaking down FY02/21 sales and operating profit by segment, Cleaning Services accounted for 20.8% and 32.2%
respectively, Facilities Management 19.4% and 22.8%, Materials and Supplies Sourcing Services 17.7% and 10.9%, Security
Services 14.8% and 14.5%, Construction Work 13.5% and 17.1%, Vending Machine Services 8.5% and 2.9%, and Support
Services/other 5.3% and operating loss. Customers from outside the Aeon group include commercial facilities, officebuildings and offices, hotels and accommodation facilities, medical and welfare facilities, education facilities, factories andworkshops, warehouses and distribution centers, public facilities, and events. The company operates a recurring revenue
business model. Contracts typically last for one year and are usually renewed, maintaining low cancellation rates.
Most of the company’s overseas operations are in China and ASEAN, and all overseas operations together accounted for
6.7% of sales in FY02/21. In recent years, the company has been using 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 Central andSouth China to boost the Aeon Delight brand profile.
In late March 2019, signs of accounting irregularities emerged at subsidiary Kajitaku. Aeon Delight established a special
investigation committee comprised of independent outside experts, which subsequently confirmed the findings of fraudulent
accounting. In response, the company restated prior year earnings (a total of JPY16.3bn over FY02/14–FY0219) and put inplace measures to prevent a recurrence in the future.

Trends and outlook
In FY02/21, sales were JPY300.1bn (-2.8% YoY), operating profit was JPY15.2bn (-4.8% YoY), and net income was JPY11.7bn(+24.9% YoY). The partial closure or temporary shutdown of facilities, cancelations of events and people refraining fromgoing out because of the pandemic all severely affected performance especially in 1H, and full-year sales and operating
profit failed to match the record highs of the previous year. However, net income was at record levels due to a reduction intax. The infrastructure for the next stage of growth has been put in place with the introduction of “new standard cleaning”
based on cleaning standards for the with-COVID era, area management to aid labor-saving and unmanned management offacilities, and organizational restructuring to improve management efficiency (such as streamlining and integration ofsubsidiaries). The annual dividend was JPY82.0 per share (dividend payout ratio 35.1%).
The company’s forecast for FY02/22 is sales of JPY325.0bn (+8.3% YoY), operating profit of JPY16.5bn (+8.3% YoY) and net
income of JPY10.5bn (-10.1% YoY). The EPS forecast is JPY210.0 and the annual dividend forecast is JPY84.0 per share(including commemoration dividend of JPY10 per share). Sales and operating profit are expected to reach record highs: thenegative impact of COVID-19 on operating profit is expected to fall to JPY500mn from JPY1.5bn in the previous year, andsales are expected to benefit from initiatives to secure new customers, as well as boost revenue from existing customers, andmeasures to improve profitability.
The company released its Aeon Delight Vision 2025 plan. This aims to make Aeon Delight a company that createsenvironmental 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. It aims to raise the dividend payout ratio to the 40% level by FY02/24.
In April 2021, the company formulated a medium-term plan covering the next three years (FY02/22–FY02/24) as it moves
toward achieving the goals of Aeon Delight Vision 2025. The medium-term plan targets FY02/24 sales of JPY361.0bn(CAGR of 6.4%), operating profit of JPY22.0bn (CAGR of 13.0%), and net income of JPY14.0bn. By FY02/24, the company
aims to increase sales within the Aeon group by JPY25.0bn versus FY02/21 to approximately JPY220.0bn (60% of total sales,-5pp versus FY02/21), while growing sales outside the Aeon group by JPY35.0bn to about JPY140.0bn (40% of total sales,+5pp versus FY02/21) and raising OPM to 6.0% (+0.9pp versus FY02/21). As detailed hereinafter, it aims to achieve thisAEON Delight/ 9787
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3

sales growth and OPM improvement by putting customer-oriented group management into practice and promoting digitaltransformation (DX).

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
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4Key financial indicators
Income statement(JPYmn)Sales

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

FY02/22Est.

219,797248,876

256,654

265,572

277,926

292,607292,396

302,915

308,582

300,085

325,000
8.3%

YoY

28.6%

13.2%

3.1%

3.5%

4.7%

5.3%

-0.1%

3.6%

1.9%

-2.8%

Gross profit

28,63130,22733,24534,29034,83635,73634,87135,452

38,57037,175

YoY

19.4%

5.6%

10.0%

3.1%

1.6%

2.6%

-2.4%

1.7%

8.8%

-3.6%

Gross profit margin

13.0%

12.1%

13.0%

12.9%

12.5%

12.2%

11.9%

11.7%

12.5%

12.4%

Operating profit

13,762

13,901

14,622

15,39014,556

14,13912,90913,03016,001

15,23016,500

YoY

14.4%

1.0%

5.2%

5.3%

-5.4%

-2.9%

-8.7%

0.9%

22.8%

-4.8%

8.3%

Operating profit margin

6.3%

5.6%

5.7%

5.8%

5.2%

4.8%

4.4%

4.3%

5.2%

5.1%

5.1%

Recurring profit

13,784

13,892

14,60015,472

14,534

14,263

13,381

13,362

15,94915,26816,500

YoY

14.0%

0.8%

5.1%

6.0%

-6.1%

-1.9%

-6.2%

-0.1%

19.4%

-4.3%

8.1%

Recurring profit margin

6.3%

5.6%

5.7%

5.8%

5.2%

4.9%

4.6%

4.4%

5.2%

5.1%

5.1%

Net income

6,912

7,509

7,039

7,965

7,247

7,093

6,397

6,415

9,348

11,68010,500

YoY

6.4%

8.6%

-6.3%

13.2%

-9.0%

-2.1%

-9.8%

0.3%

45.7%

24.9%

-10.1%Net margin

3.1%

3.0%

2.7%

3.0%

2.6%

2.4%

2.2%

2.1%

3.0%

3.9%

3.2%

Shares issued (year-end; '000)

54,17054,17054,17054,17054,17054,17054,17054,17054,17054,170

EPS

131.8

143.2

134.2

151.7

138.0

135.0

121.7

122.9

187.2

233.7

EPS (fully diluted)

131.5

142.7

133.8

151.3

137.6

134.6

121.3

122.6

186.9

233.5

Per-share data

Dividend per share

40

46

48

50

52

55

61

63

65

82

Book value per share

1,096

1,202

1,303

1,400

1,471

1,559

1,637

1,466

1,579

1,747

210.0
84

Balance sheet (JPYmn)
Cash and cash equivalents

9,707

10,014

12,565

15,58020,386

31,71739,53644,23362,35559,773

Total current assets

72,486

79,32389,914

103,634

104,190111,098

118,311

108,771

112,362

110,008

Tangible fixed assets

3,773

3,796

4,258

4,361

7,061

9,064

10,041

10,161

9,671

9,481

Investments and other assets

4,276

5,257

5,829

6,268

8,176

8,904

8,512

7,578

7,698

11,557

Intangible assets

12,272

12,321

11,008

10,32010,006

8,802

7,813

8,103

7,185

5,518

Total assets

92,809100,699

111,010

124,584

129,434

137,870

144,678

134,614

136,917

136,565

Accounts payable

23,72024,544

21,87624,93428,457

25,11425,82025,967

23,38822,170

Short-term debt

41

10

5

-

-

271

225

394

252

299

33,643

34,95539,30946,63945,83447,05149,06051,40848,864

44,123Long-term debt

15

5

-

-

-

293

-

15

11

-

Total fixed liabilities

983

1,195

1,556

2,387

3,925

6,214

6,474

7,667

6,767

4,160

Total liabilities

34,62636,15140,86549,02649,76053,26655,53559,07555,631

48,283

Total net assets

58,18264,547

70,14575,55879,67484,604

89,14375,53981,28688,281

Cash flows from operating activities

9,639-4,35821,35917,234

10,303

11,703

13,56812,373

7,371

10,403

Cash flows from investing activities-10,051

7,086-16,632-11,365-3,2552,233-2,666

12,256

13,838-7,325

Cash flows from financing activities-2,722-2,257-2,475-2,594-2,821-2,400-3,264-19,686-3,392-5,324

Total current liabilities

Cash flow statement (JPYmn)

Financial ratios
Total interest-bearing debt

56

15

5

-

-

564

225

409

263

299

Net cash

36,97128,01944,98056,90657,74862,866

71,311

59,82462,09259,474

ROA (RP-based)

15.5%

14.4%

13.8%

13.1%

11.4%

10.7%

9.5%

9.6%

11.7%

11.2%

ROE

12.5%

12.5%

10.7%

11.2%

9.6%

8.9%

7.6%

8.1%

12.3%

14.1%

Equity ratio

61.9%

62.6%

61.6%

59.0%

59.7%

59.4%

59.5%

54.4%

57.6%

64.0%

Source: Shared Research based on company data

AEON Delight/ 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

5Recent updates
Announcement of Application for the Prime Market in TSE’s New
Market Category2021-12-01

On November 30, 2021, AEON Delight Co., Ltd. made an announcement concerning its selection of and application for thePrime Market in the Tokyo Stock Exchange’s new market category.
In July 2021, the company received the results of its initial assessment from the Tokyo Stock Exchange (TSE), confirming that
it was in compliance with the listing criteria for the Prime Market in the new market category. Based on these results, thecompany resolved at its Board of Directors meeting held on November 30 to select and apply for listing on the Prime
Market as its new TSE market category scheduled to take effect April 4, 2022.

Received credit ratings
2021-10-29

Aeon Delight Co., Ltd. announced it received credit ratings from Rating and Investment Information, Inc.
On October 29, 2021, the company received its first credit rating as detailed below from Rating and Investment Information.
Rating agency: Rating and Investment Information, Inc.
Rating assigned: Issuer rating
Rating: A- (newly assigned)
Rating outlook: Stable

Change to subsidiary companies held by an overseas subsidiary(due to a share purchase and subscription to new shares)
2021-10-25

Aeon Delight Co., Ltd. announced the change of subsidiary companies held by its own overseas subsidiary (due to a sharepurchase and subscription to new shares).
At a meeting of the board of directors held on October 25, 2021, the company resolved that its consolidated
subsidiary Aeon Delight China would acquire a 51% stake in Zhejiang Metelan Property Management Co., Ltd. by purchasing
shares and subscribing to new shares.

Reason for the change
Zhejiang Metelan Property Management has a high level of experience and expertise in the management of medical
facilities, and investment in making it a second-tier subsidiary is intended to expand medical facility operations in the China
business and accelerate growth.

Overview of the second-tier subsidiary
Company name: Zhejiang Metelan Property Management Co., Ltd.
Business: Cleaning, internal transportation, security, facility management, patient attendance, etc. for medical facilities.

FY12/20 results
Net assets: JPY4mn
Total assets: JPY140mn
Sales: JPY716mn
Operating loss: JPY35mn
Recurring loss: JPY34mn
Net loss: JPY34mn

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6Investment amount and stake before and after investment
Investment amount: CNY28,050,000 (approximately JPY484mn)
This investment will bring Aeon Delight China's stake in Zhejiang Metelan Property Management from 0% to 51%.

Schedule
Board of directors' resolution: October 25, 2021
Expected contract execution date: November 2021
Expected investment date: December 2021 to February 2022

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7

Trends and outlook
Quarterly trends and results
Cumulative

FY02/20(JPYmn)FY02/21

FY02/22

FY02/22

Q1

Q1–Q2

Q1–Q3

Q1–Q4

Q1

Q1–Q2

Q1–Q3

Q1–Q4

Q1

Q1–Q2

Q1–Q3

Sales

79,048

157,482

232,643

308,582

73,532

149,734

224,398

300,085

79,688

163,907240,715

YoY

3.5%

3.2%

2.6%

1.9%

-7.0%

-4.9%

-3.5%

-2.8%

8.4%

9.5%

7.3%

Gross profit

9,632

19,76329,014

38,5708,963

18,23927,561

37,175

9,765

20,462

29,832

YoY

3.1%

13.2%

12.3%

8.8%

-6.9%

-7.7%

-5.0%

-3.6%

8.9%

12.2%

8.2%

Gross profit margin

12.2%

12.5%

12.5%

12.5%

12.2%

12.2%

12.3%

12.4%

12.3%

12.5%

12.4%

SG&A expenses

5,832

11,16816,90922,5695,507

10,73816,347

21,945

6,036

12,035

17,979

YoY

5.0%

-0.2%

-0.1%

0.7%

-5.6%

-3.9%

-3.3%

-2.8%

9.6%

12.1%

Q1–Q4

% of Est.

FY Est.

74.1%

325,000
8.3%

10.0%

SG&A ratio

7.4%

7.1%

7.3%

7.3%

7.5%

7.2%

7.3%

7.3%

7.6%

7.3%

7.5%

Operating profit

3,800

8,594

12,10416,001

3,455

7,500

11,214

15,230

3,728

8,427

11,852

YoY

0.4%

37.0%

35.8%

22.8%

-9.1%

-12.7%

-7.4%

-4.8%

7.9%

12.4%

5.7%

Operating profit margin

4.8%

5.5%

5.2%

5.2%

4.7%

5.0%

5.0%

5.1%

4.7%

5.1%

4.9%

Recurring profit

3,822

8,655

12,18915,949

3,459

7,496

11,245

15,268

3,751

8,489

11,943

YoY

0.2%

36.3%

31.0%

19.4%

-9.5%

-13.4%

-7.7%

-4.3%

8.4%

13.2%

6.2%

Recurring profit margin

4.8%

5.5%

5.2%

5.2%

4.7%

5.0%

5.0%

5.1%

4.7%

5.2%

5.0%

Net income

2,070

5,181

7,369

9,348

2,991

3,943

6,326

11,680

2,507

5,557

8,495

YoY

0.1%

82.6%

89.3%

45.7%

44.5%

-23.9%-14.2%

24.9%-16.2%

40.9%

34.3%

-10.1%Net margin

2.6%

3.3%

3.2%

3.0%

4.1%

2.6%

2.8%

3.9%

3.1%

3.4%

3.5%

3.2%

Quarterly

FY02/20(JPYmn)Sales

FY02/2171.8%

16,500
8.3%
5.1%

72.4%

16,500
8.1%
5.1%

80.9%

10,500FY02/22

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

79,04878,43475,16175,93973,532

76,202

74,66475,687

79,68884,21976,808

YoY

3.5%

2.9%

1.4%

-0.3%

-7.0%

-2.8%

-0.7%

-0.3%

8.4%

10.5%

2.9%

Gross profit

9,632

10,131

9,251

9,556

8,963

9,276

9,322

9,614

9,765

10,697

9,370

YoY

3.1%

24.8%

10.4%

-0.6%

-6.9%

-8.4%

0.8%

0.6%

8.9%

15.3%

0.5%

Gross profit margin

12.2%

12.9%

12.3%

12.6%

12.2%

12.2%

12.5%

12.7%

12.3%

12.7%

12.2%

SG&A expenses

5,832

5,336

5,741

5,660

5,507

5,231

5,609

5,598

6,036

5,999

5,944

YoY

5.0%

-5.2%

-

3.0%

-5.6%

-2.0%

-2.3%

-1.1%

9.6%

14.7%

6.0%

SG&A ratio

7.4%

6.8%

7.6%

7.5%

7.5%

6.9%

7.5%

7.4%

7.6%

7.1%

7.7%

Operating profit

3,800

4,794

3,510

3,897

3,455

4,045

3,714

4,016

3,728

4,699

3,425

YoY

0.4%

92.5%

33.1%

-5.3%

-9.1%

-15.6%

5.8%

3.1%

7.9%

16.2%

-7.8%

Operating profit margin

4.8%

6.1%

4.7%

5.1%

4.7%

5.3%

5.0%

5.3%

4.7%

5.6%

Recurring profit

3,822

4,833

3,534

3,760

3,459

4,037

3,749

4,023

3,751

4,738

3,454

YoY

0.2%

90.8%

19.5%

-7.3%

-9.5%

-16.5%

6.1%

7.0%

8.4%

17.4%

-7.9%

Q4

4.5%

Recurring profit margin

4.8%

6.2%

4.7%

5.0%

4.7%

5.3%

5.0%

5.3%

4.7%

5.6%

4.5%

Net income

2,070

3,111

2,188

1,979

2,991

952

2,383

5,354

2,507

3,050

2,938

YoY

0.1%

303.5%

107.4%-21.5%

44.5%-69.4%

8.9%

170.5%-16.2%

220.4%

23.3%

Net margin

2.6%

4.0%

2.9%

2.6%

4.1%

1.2%

3.2%

7.1%

3.1%

3.6%

3.8%

Source: Shared Research based on company data
Segment performance

FY02/20

Cumulative (JPYmn)
Sales
YoY
Facilities Management
YoY
Security Services
YoY
Cleaning Services
YoY
Construction Work

FY02/21

FY02/22

Q1

Q1–Q2

Q1–Q3

Q1–Q4

Q1

Q1–Q2

Q1–Q3

Q1–Q4

Q1

Q1–Q2

Q1–Q3

79,048

157,482

232,643

308,582

73,532

149,734

224,398

300,085

79,688

163,907240,715

3.5%

3.2%

2.6%

1.9%

-7.0%

-4.9%

-3.5%

-2.8%

8.4%

9.5%

7.3%

14,92829,62844,25958,28914,511

29,086

43,831

58,223

15,50731,006

46,474

5.9%

5.4%

4.0%

3.4%

-2.8%

-1.8%

-1.0%

-0.1%

6.9%

6.6%

6.0%

11,14322,18333,30444,647

10,843

21,69532,96644,393

11,63823,64535,422

0.6%

0.5%

0.1%

0.3%

-2.7%

-2.2%

-1.0%

-0.6%

7.3%

9.0%

7.5%

15,40130,92846,52762,362

15,00830,42746,08562,45916,56834,10650,470

8.1%

8.0%

8.0%

7.2%

-2.6%

-1.6%

-0.9%

0.2%

10.4%

12.1%

9.5%

12,014

23,10332,024

41,844

11,52322,12031,02640,657

11,205

24,776

33,697

YoY

14.4%

6.6%

3.4%

0.9%

-4.1%

-4.3%

-3.1%

-2.8%

-2.8%

12.0%

8.6%

Materials and Supplies Sourcing

12,98725,91338,554

51,125

12,957

26,60939,64653,06014,126

28,77942,771

YoY

0.6%

-0.4%

-0.6%

0.2%

-0.2%

2.7%

2.8%

3.8%

9.0%

8.2%

7.9%

Vending Machine Services

7,699

16,07523,76031,544

4,725

12,054

19,05725,453

6,529

13,535

19,789-5.0%-38.6%-25.0%-19.8%

-1.9%

-1.0%

-1.3%

-19.3%

38.2%

12.3%

3.8%

Support Services

YoY

4,872

9,647

14,211

18,768

3,963

7,739

11,784

15,837

4,113

8,055

12,090

YoY-10.3%

-0.6%

1.2%

-3.5%

-18.7%-19.8%-17.1%-15.6%

3.8%

4.1%

2.6%

Other

-

-

-

-

-

-

-

-

-

-

-

Operating profit

3,800

8,594

12,10416,001

3,455

7,500

11,214

15,230

3,728

8,427

11,852

YoY

0.4%

37.0%

35.8%

22.8%

-9.1%

-12.7%

-7.4%

-4.8%

7.9%

112.4%

5.7%

Operating profit margin

4.8%

5.5%

5.2%

5.2%

4.7%

5.0%

5.0%

5.1%

4.7%

5.1%

4.9%

Facilities Management

1,433

2,789

4,039

5,293

1,256

2,549

3,916

5,175

1,275

2,622

4,038

YoY

-3.0%

-0.8%

-5.0%

-8.6%

-3.0%

-4.8%

-12.4%

-2.2%

1.5%

Operating profit margin

9.6%

9.4%

9.1%

9.1%

8.7%

8.8%

8.9%

8.9%

8.2%

8.5%

8.7%

Security Services

730

1,412

2,207

3,038

763

1,594

2,387

3,307

796

1,702

2.9%

2,596

YoY

1.1%

0.6%

4.2%

5.4%

4.5%

12.9%

8.2%

8.9%

4.3%

6.8%

8.8%

Operating profit margin

6.6%

6.4%

6.6%

6.8%

7.0%

7.3%

7.2%

7.4%

6.8%

7.2%

7.3%

Cleaning Services

1,724

3,510

5,291

6,967

1,646

3,430

5,340

7,324

1,974

4,276

6,172

3.1%

YoY

2.4%

6.2%

5.8%

4.1%

-4.5%

-2.3%

0.9%

5.1%

19.9%

24.7%

15.6%

Operating profit margin

11.2%

11.3%

11.4%

11.2%

11.0%

11.3%

11.6%

11.7%

11.9%

12.5%

12.2%

Construction Work

1,094

2,174

2,843

3,816

1,139

2,081

2,879

3,880

1,067

2,250

2,861

YoY

10.6%

7.8%

-1.3%

-4.3%

4.1%

-4.3%

1.3%

1.7%

-6.3%

8.1%

-0.6%

Operating profit margin

9.1%

9.4%

8.9%

9.1%

9.9%

9.4%

9.3%

9.5%

9.5%

9.1%

8.5%

Materials and Supplies Sourcing

712

1,355

1,946

2,489

612

1,284

1,851

2,467

656

1,362

1,932

YoY

-4.2%

-9.4%

-8.9%

-10.4%-14.0%

-5.2%

-4.9%

-0.9%

7.2%

6.1%

4.4%

Operating profit margin

5.5%

5.2%

5.0%

4.9%

4.7%

4.8%

4.7%

4.6%

4.6%

4.7%

4.5%

Vending Machine Services

256

705

948

1,396

-10

357

563

653

116

353

414

-38.9%

32.3%

24.1%

19.9%

-

-49.4%-40.6%-53.2%--1.1%-26.5%

Operating profit margin

3.3%

4.4%

4.0%

4.4%

-0.2%

3.0%

3.0%

2.6%

1.8%

2.6%

2.1%

Support Services

-124

254

441

416

8

-100

-171

-75

119

255

-

-

-

-

-

-

-

-

-

-

-

Operating profit margin

-2.5%

2.6%

3.1%

2.2%

0.2%

-1.3%

-1.5%

-0.5%

2.9%

3.2%

2.7%

Eliminations, goodwill, other-2,025-3,605-5,611-7,414-1,959-3,695-5,551-7,502-2,277-4,394-6,491

YoY

YoY

Segment performance

FY02/20

FY02/21

Q1–Q4

330

FY02/22

AEON Delight/ 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

8

Quarterly (JPYmn)
Sales
YoY
Facilities Management
YoY
Security Services
YoY
Cleaning Services
YoY
Construction Work

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

79,04878,43475,16175,93973,532

76,202

74,66475,687

79,68884,21976,808

3.5%

2.9%

1.4%

-0.3%

-7.0%

-2.8%

-0.7%

-0.3%

8.4%

10.5%

2.9%

14,92814,70014,631

14,03014,511

14,575

14,745

14,392

15,507

15,49915,468

5.9%

4.9%

1.3%

1.7%

-2.8%

-0.9%

0.8%

2.6%

6.9%

6.3%

4.9%

11,143

11,04011,121

11,343

10,843

10,852

11,271

11,427

11,63812,007

11,777

0.6%

0.4%

-0.9%

1.2%

-2.7%

-1.7%

1.3%

0.7%

7.3%

10.6%

4.5%

15,401

15,527

15,59915,83515,00815,41915,65816,374

16,56817,53816,364

8.1%

7.9%

7.9%

4.9%

-2.6%

-0.7%

0.4%

3.4%

10.4%

13.7%

4.5%

12,014

11,089

8,921

9,820

11,523

10,597

8,906

9,631

11,205

13,571

8,921

YoY

14.4%

-0.8%

-3.9%

-6.5%

-4.1%

-4.4%

-0.2%

-1.9%

-2.8%

28.1%

0.2%

Materials and Supplies Sourcing

12,987

12,926

12,641

12,571

12,957

13,652

13,037

13,414

14,126

14,653

13,992

0.6%

-1.4%

-1.0%

Vending Machine Services

YoY

7,699

8,376

7,685

7,784

4,725

7,329

7,003

6,396

6,529

7,006

6,254

YoY

-5.0%

1.1%

0.9%

-2.1%

2.8%

-38.6%-0.2%-12.5%

5.6%

-8.9%

3.1%

-17.8%

6.7%

38.2%

9.0%

-4.4%

7.3%

-10.7%

7.3%

Support Services

4,872

4,775

4,564

4,557

3,963

3,776

4,045

4,053

4,113

3,942

4,035

YoY

-10.3%

11.7%

5.1%

-15.5%-18.7%-20.9%-11.4%-11.1%

3.8%

4.4%

-0.2%

Other
Operating profit
YoY

-

-

-

-

-

-

-

-

-

-

-

3,800

4,794

3,510

3,897

3,455

4,045

3,714

4,016

3,728

4,699

3,425

0.4%

92.5%

33.1%

-5.3%

-9.1%

-15.6%

7.9%

16.2%

-7.8%

5.8%

3.1%

Operating profit margin

4.8%

6.1%

4.7%

5.1%

4.7%

5.3%

5.0%

5.3%

4.7%

5.6%

4.5%

Facilities Management

1,433

1,356

1,250

1,254

1,256

1,293

1,367

1,259

1,275

1,347

1,416

YoY

-3.0%

1.6%

-13.1%-4.1%-12.4%

-4.6%

9.4%

0.4%

1.5%

4.2%

3.6%

Operating profit margin

9.6%

9.2%

8.5%

8.9%

8.7%

8.9%

9.3%

8.7%

8.2%

8.7%

9.2%

Security Services

730

682

795

831

763

831

793

920

796

906

894

YoY

1.1%

0.1%

11.0%

9.1%

4.5%

21.8%

-0.3%

10.7%

4.3%

9.0%

12.7%

Operating profit margin

6.6%

6.2%

7.1%

7.3%

7.0%

7.7%

7.0%

8.1%

6.8%

7.5%

7.6%

Cleaning Services

1,724

1,786

1,781

1,676

1,646

1,784

1,910

1,984

1,974

2,302

1,896

YoY

2.4%

10.1%

5.1%

-1.1%

-4.5%

-0.1%

7.2%

18.4%

19.9%

29.0%

-0.7%

Operating profit margin

11.2%

11.5%

11.4%

10.6%

11.0%

11.6%

12.2%

12.1%

11.9%

13.1%

11.6%

Construction Work

1,094

1,080

669

973

1,139

942

798

1,001

1,067

1,183

611

YoY

10.6%

5.2%

-22.7%-12.2%

4.1%-12.8%

19.3%

2.9%

-6.3%

25.6%

-23.4%

Operating profit margin

9.1%

9.7%

7.5%

9.9%

9.9%

8.9%

9.0%

10.4%

9.5%

8.7%

6.8%

Materials and Supplies Sourcing

712

643

591

543

612

672

567

616

656

706

570

-4.2%

-14.5%-7.8%-15.6%-14.0%

4.5%

-4.1%

13.4%

7.2%

5.1%

0.5%

5.0%

4.7%

YoY
Operating profit margin

4.3%

4.7%

4.6%

4.6%

256

449

243

448

-10

367

206

90

116

237

61

-38.9%

5.5%

293.9%

5.2%

12.0%

-

-18.3%-15.2%-79.9%--35.4%-70.4%

Operating profit margin

3.3%

5.4%

3.2%

5.8%

-0.2%

5.0%

2.9%

1.4%

1.8%

3.4%

1.0%

Support Services

-124

378

187

-25

8

-108

-71

96

119

136

75

-

-

-

-

-

-

-

-

-

-

-

Operating profit margin

-2.5%

7.9%

4.1%

-0.5%

0.2%

-2.9%

-1.8%

2.4%

2.9%

3.5%

1.9%

Eliminations, goodwill, other-2,025-1,580-2,006-1,803-1,959-1,736-1,856-1,951-2,277-2,117-2,097

Vending Machine Services
YoY

YoY

4.9%

4.3%

4.8%

Q4

4.1%

Source: Shared Research based on company data

Cumulative Q3 FY02/22 results
Summary
Sales: JPY240.7bn (+7.3% YoY)
Operating profit: JPY11.9bn (+5.7% YoY)
Recurring profit: JPY11.9bn (+6.2% YoY)
Net income: JPY8.5bn (+34.3% YoY)

Segment trends
Sales increased YoY across all segments. Profit improved YoY in the five segments other than Construction Work and Vending
Machine Services.
Facilities Management
Sales improved 6.0% YoY to JPY46.5bn, while operating profit expanded 3.1% YoY to JPY4.0bn.
Sales and profit in the segment improved due to an increase in orders for a variety of maintenance services from existingcustomers and newly acquired customers. The company promoted area management directed toward reforming its work
processes.
Security Services
Sales improved 7.5% YoY to JPY35.4bn while operating profit expanded 8.8% YoY to JPY2.6bn.
Sales and profit improved YoY amid a recovery in demand for event security. Profitability improved as a result of ongoing
initiatives to optimize unit prices through price negotiations and progress in automating systems to handle routine tasks suchas facility entry/exit management and store closings.

AEON Delight/ 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

9Cleaning Services
Sales improved 9.5% YoY to JPY50.5bn while operating profit expanded 15.6% YoY to JPY6.2bn.
Sales and profit improved as the company received more orders from existing customers and acquired new customers. The
company worked to expand the implementation of “new standard cleaning” and disinfectant cleaning using alcohol in linewith efforts to prevent the further spread of COVID-19.
Construction Work
Sales improved 8.6% YoY to JPY33.7bn while operating profit fell 0.6% YoY to JPY2.9bn.
While planned construction work experienced delays due to the COVID-19 pandemic, the company stepped up its sales
activities to win renovation contracts within and outside the Aeon group.
Materials and Supplies Sourcing Services
Sales improved 7.9% YoY to JPY42.8bn, while operating profit expanded 4.4% YoY to JPY1.9bn.
Sales and profit increased on the continued provision of quarantine-related materials such as masks, gloves, alcohol for
professional use, and acrylic partitions to prevent droplet spread. The segment continued to focus on expanding its market
share within the Aeon group.
Vending Machine Services
Sales improved 3.8% YoY to JPY19.8bn, while operating profit fell 26.5% to JPY414mn.
The operating environment remained tough due to restrictions on movement and changes in consumer purchasing behavior
under the COVID-19 pandemic. The company installed more of its own multi-brand vending machines (which offer products
from several different brands) to improve profitability per unit.
Support Services
Sales improved 2.6% YoY to JPY12.1bn while operating profit came to JPY330mn (versus a loss of JPY171mn in cumulative Q3
FY02/21).
Sales and profit improved as the company worked to expand the provision of a variety of services in order to meetoutsourcing needs related to the management and operation of contracted facilities and their surroundings.
Overseas business
Sales improved 24.5% YoY to JPY17.8bn while operating profit expanded 1.2% YoY to JPY1.2bn.
Business expanded mainly in China. Earnings from the overseas business are included within each segment.
In China, under the oversight of Aeon Delight China (AD China; a company established in April 2021 for this purpose),
Aeon Delight Jiangsu and Wuhan Xiaozhu Property Management expanded their businesses by focusing on bolstering
contracts for priority facilities such as medium- to high-end shopping centers, hospitals and nursing homes, and facilities
in areas undergoing redevelopment. At the same time, the subsidiary expanded its business domains to include property
management operations, catering services, cleaning services, and services for residents at nursing homes, while focusing
on facility management operations. This led to growth in the China business.
The spread of COVID-19 continued in the ASEAN region, and there were restrictions on economic activity in Malaysia,
Indonesia, and Vietnam, where the company has local entities. This means that the company continued to face a toughoperating environment in the region, with measures including the suspension of operations at facilities and shorter
operating hours. Although there was an effect on the employment of staff at each of these local subsidiaries and atpartner companies, the company ensured operations at contracted facilities by taking thorough epidemic prevention
measures.

AEON Delight/ 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp

10

FY02/22 company forecast
Full-year company forecast
FY02/20

FY02/21

FY02/22(JPYmn)1H Act.

2H Act.

FY Act.

1H Act.

2H Act.

FY Act.

1H Act.

2H Est.

FY Est.

Sales

157,482

151,100

308,582

149,734

150,351

300,085

163,907

161,093

325,000

7.1%

8.3%

3.2%

0.5%

1.9%

-4.9%

-0.5%

-2.8%

9.5%

Cost of sales

137,719

132,292

270,011

131,494

131,416

262,910

143,444

Gross profit

YoY

19,76318,807

38,57018,23918,93637,175

20,462
12.2%

YoY

13.2%

4.5%

8.8%

-7.7%

0.7%

-3.6%

Gross profit margin

12.5%

12.4%

12.5%

12.2%

12.6%

12.4%

12.5%

SG&A expenses

11,168

11,401

22,56910,738

11,207

21,945

12,035

YoY

-0.2%

1.5%

0.7%

-3.9%

-1.7%

-2.8%

12.1%

SG&A ratio

7.1%

7.5%

7.3%

7.2%

7.5%

7.3%

Operating profit

7.3%

8,594

7,407

16,001

7,500

7,730

15,230

8,427

8,073

16,500

YoY

37.0%

9.7%

22.8%

-12.7%

4.4%

-4.8%

12.4%

4.4%

8.3%

Operating profit margin

5.5%

4.9%

5.2%

5.0%

5.1%

5.1%

5.1%

5.0%

5.1%

8,655

7,294

15,949

7,496

7,772

15,268

8,489

8,011

16,500

YoY

36.3%

4.0%

19.4%

-13.4%

6.6%

-4.3%

13.2%

3.1%

8.1%

Recurring profit margin

5.5%

4.8%

5.2%

5.0%

5.2%

5.1%

5.2%

5.0%

5.1%

5,181

4,167

9,348

3,943

7,737

11,680

5,557

4,943

10,500

82.6%

16.5%

45.7%

-23.9%

85.7%

24.9%

40.9%

-36.1%-10.1%

Recurring profit

Net income
YoY

Source: Shared Research based on company data

The FY02/22 company forecast calls for sales of JPY325.0bn (+8.3% YoY), operating profit of JPY16.5bn (+8.3% YoY), net
income of JPY10.5bn (-10.1% YoY), and EPS of JPY209.99. The company expects the impact of the COVID-19 pandemic toease and aims to boost sales by increasing orders from outside the Aeon group.
The company expects a JPY1.3bn YoY rise in operating profit, mainly due to shrinking negative factors. It expects the
pandemic to have a negative operating profit impact of JPY500mn (versus JPY1.5bn in FY02/21) and the old Kajitaku togenerate loss of JPY300mn (versus loss of JPY1.0bn in FY02/21). On the other hand, it anticipates higher expenses related
to head office relocation and human resource development, along with amortization of investments related to the promotionof digital transformation. The projected full-year dividend is JPY84 per share (versus JPY82 per share in FY02/21).
Aeon Delight had previously set its payout ratio at 30%, but raised that to 35% in FY02/21, and is targeting 40% during its
current three-year plan (FY02/22–FY02/24).

Enhanced sales structure
The company reformed its sales structure in November 2020 with the aim of expanding transactions with companies outside
the Aeon group. It will establish a department for developing new customers, targeting major domestic companies toefficiently capture new customers. Also, instead of continuing to communicate with existing customers on a divisional basis, itplans to improve customer satisfaction and expand transactions by assigning account managers to key customers and centrally
managing customer information. With the aim of expanding its market share, it plans to propose services from multiple
departments in single packages (for example, construction needed in the Facilities Management business would be handled
by the Construction Work business) and stable, quality services on a nationwide scale to customers who operate nationwide.

Reorganization within group
In March 2021, the integration of A to Z Service Co., Ltd. (construction and maintenance provider for small and medium
facilities in East Japan) and Do Service Co., Ltd. (cleaning services provider for small and medium facilities in West Japan)
resulted in the birth of Aeon Delight Connect Co., Ltd., which is set to become a key subsidiary in the small and medium
facility market, helping Aeon Delight accelerate the formation of regional economic zones. Aeon Delight Connect expects
to expand its offerings by proposing new services in addition to the construction, facility maintenance, and cleaning services
that A to Z Service and Do Service already provided. In addition, in March 2021, U-COM (design and interior work forcommercial facilities) underwent an absorption-type merger. By incorporating U-COM’s operations into its construction
business, the company intends to eliminate overlapping operations, consolidate management resources, and enhance theConstruction Work business.

Response on poorly performing properties
Aeon Delight’s main businesses, Facilities Management, Security Services, and Cleaning Services, are labor-intensive, so
costs have been in an upward trend due to the manpower shortage. The company intends to reduce costs while maintaining
or even improving the quality of its services by increasing efficiency through mechanization and automation, and by sharing
management personnel on a regional basis rather than a property basis. In the case of Security Services, the company
encourages customers to systematize entry/exit management and closing operations, thereby reducing the number of
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11permanently stationed personnel while increasing sales per employee and improving margins. In the case of Facilities
Management and Cleaning Services, the company intends to reduce manpower by improving work processes and expanding
the use of autonomous cleaning robots.
The company’s proof of concept (POC) in Hokkaido is a good example of how to move from securing personnel on aproperty-by-property basis to sharing personnel on a regional basis. Conventionally, the company’s facilities management
personnel would be assigned to individual customer facilities (customers would have full control of the employee’s time).
With the new method, facilities management personnel are shared across a region rather than being assigned to specificfacilities. They monitor the operational status of the facilities remotely and can rush to a specific site as needed. Based on the
Hokkaido POC, the company is introducing the initiative mainly at Aeon Malls in Kanto and Kansai (95 stores as of May2021). Although sales have declined, profit is expected to grow due to a cost reduction of about 10%.

Review of initiatives by business
In Facilities Management, Aeon Delight expects enhanced area management and reduced outsourcing costs to lead to
improved profitability, leading to higher sales and profit.
In Security Services, in addition to continuing efforts to improve efficiency, reduce manpower, and mechanize
operations, the company plans to optimize unit prices to pass on the increased costs triggered by a rise in personnel
costs.
In Cleaning Services, with increasing demand for preventive measures amid the pandemic, the company plans toincrease the number of contracts it handles by proposing “new standard cleaning” based on standards for the with-COVID
era not only to commercial facilities, but also to office buildings and other facilities.
In Construction Work, Aeon Delight plans to increase the number of contracts it receives from the Aeon group by
making use of U-COM (responsible for design and planning of buildings for the Aeon group), which underwent anabsorption-type merger in March 2021, and to lower procurement costs by working with Materials and Supplies Sourcing
Services to obtain construction materials in bulk, thereby increasing sales and profit.
In Materials and Supplies Sourcing Services, it plans to reduce procurement costs, improve logistics efficiency, andcoordinate with the Construction Work business to enhance procurement capabilities.
In Vending Machine Services, in light of stagnant demand for beverages due to a decline in the number of customers
visiting commercial facilities, the company will work to improve profitability by replacing unprofitable vending machineswith its own multibrand vending machines.
In Support Services, it expects easing of the pandemic impact and growing demand for home-delivery-type cleaning
services to lead to higher sales and profit.

Historical forecast accuracy
Results vs. Initial Est.
(JPYmn)FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Sales (Initial Est.)

213,000

260,000

260,000

270,000

280,000

305,000

305,000

305,000

315,000

315,000

Sales (Results)

219,797248,876

256,654

265,572

277,926

292,607292,396

302,915

308,582

300,085

3.2%

-4.3%

-1.3%

-1.6%

-0.7%

-4.1%

-4.1%

-0.7%

-2.0%

-4.7%

Operating profit (Initial Est.)

14,30016,60015,50016,00017,00017,50018,00018,50018,00016,500Operating profit (Results)

14,622

15,230Results vs. Initial Est.

13,762

13,901

15,39014,556

14,13912,90913,03016,001Results vs. Initial Est.

-3.8%

-16.3%

-5.7%

-3.8%

-14.4%-19.2%-28.3%-29.6%-11.1%-7.7%

Recurring profit (Initial Est.)

14,30016,60015,50016,00017,00017,50018,00018,50018,00016,500Recurring profit (Results)

13,784

13,892

14,60015,472

14,534

14,263

13,381

13,362

15,94915,268Results vs. Initial Est.

-3.6%

-16.3%

-5.8%

-3.3%

-14.5%-18.5%-25.7%-27.8%-11.4%-7.5%

Net income (Initial Est.)

7,600

8,700

8,300

8,600

9,400

10,00010,70011,00010,80010,000Net income (Results)

6,912

7,509

7,039

7,965

7,247

7,093

6,397

6,415

9,348

11,680Results vs. Initial Est.

-9.1%

-13.7%-15.2%-7.4%-22.9%-29.1%-40.2%-41.7%-13.4%

16.8%

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

AEON Delight/ 9787
Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp12Medium- and long-term outlook
Medium-term plan

FY02/21

FY02/22

FY02/24

FY02/26

3-year5-yearCons.

FY Est.

Targets

Targets

CAGR

CAGR

Sales

300,085

325,000

361,000

471,000

6.4%

9.4%

YoY

-2.8%

8.3%

Operating profit

15,23016,50022,00037,000

13.0%

19.4%

YoY

-4.8%

8.3%
7.9%

(JPYmn)

5.1%

6.1%

Net income

Operating profit margin

11,68010,50014,000

YoY

24.9%

5.1%

-10.1%
3.2%

Net margin

3.9%

Sales: Non-Aeon Group ratio

35%

3.9%
40%

50%

Sales: Overseas ratio

6.7%

Over 8%Over 15%

ROE

14.1%

12%

15%

Source: Shared Research based on company data

Aeon Delight Vision 2025
In October 2018, the company announced Aeon Delight Vision 2025 (“Vision 2025”). Aeon Delight’s management
principle calls for the creation of “environmental value” for clients and regional communities. In accordance with thisprinciple, Vision 2025 aims to transform Aeon Delight into a company that creates environmental value and contributes tosolving social issues, with “safety and security,” “manpower shortage,” and “environment” as three pillars of its growthstrategy. Thereafter, in the face of accounting irregularities at Kajitaku in FY02/20 and pandemic-related delays in somemeasures in FY02/21, Aeon Delight announced new targets when it released its FY02/21 earnings results, although with nochange in the company’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%), and ROE and at least 15% (ROE was 14.1% in FY02/21). (It was previously targeting
sales of JPY525.0bn and operating profit of JPY48.0bn). The company is aiming for top ten sales and top-level OPM globallyand number one sales in Asia in the facility management industry. To become one of the top ten companies in the world, thecompany is aiming to expand its market share in Japan by constructing Aeon Delight (AD) economic zone and concentrating
management resources in China for its overseas operation.

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. The medium-term plan targets FY02/24 sales of JPY361.0bn (CAGR
of 6.4%), operating profit of JPY22.0bn (CAGR of 13.0%), and net income of JPY14.0bn. By FY02/24, the company aims toincrease sales within the Aeon group by JPY25.0bn versus FY02/21 to approximately JPY220.0bn (60% of total sales, -5pp
versus FY02/21), while growing sales outside the Aeon group by JPY35.0bn to about JPY140.0bn (40% of total sales, +5pp
versus FY02/21) and raising OPM to 6.0% (+0.9pp versus FY02/21). 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
Customer-oriented management: Increase in ratio of sales outside Aeon group
Under the medium-term plan, Aeon Delight plans to increase sales outside the Aeon group to approximately JPY140.0bn(+JPY35.0bn versus FY02/21) by FY02/24, raising the ratio to total sales to 40% (+5pp versus 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.

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13

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.
Customer-oriented management: 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
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)
Promotion of 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.

Promotion of DX: Relocation of head office
Aeon Delight will relocate 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 plans to create an environment in which diverse humanresources 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.

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14Group management
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.

Group management: 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.
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 intends to accelerate growth in China by providing support to its companies
operating there, especially in the North, East, Central, and South China areas.
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.

Group management: 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 is considering obtaining a credit rating with a view to financing externally in case it is unable to coverinvestments with its own cash reserves. When financing externally, the company understands that it needs to maintain acertain degree of financial discipline, such as reducing its net assets in line with its ROE target.

Group management: Promotion of shared services and creation of a suitableorganizational 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 will establish an organizational culture committee, because it is critical to have a suitableorganizational culture to complement basic administrative mechanisms and rules.

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15

Dividends
In FY02/21, Aeon Delight changed its targeted payout ratio to 35%. Since its policy is also to avoid reducing dividends, thecompany is planning a dividend of JPY84.0 (including a JPY10.0 commemorative dividend) in FY02/22 (versus JPY82.0 in
FY02/21), for a payout ratio of 40% (versus 35.1% in FY02/21). It aims to keep the payout ratio at 40% for the duration of its
current medium-term plan (FY02/22–FY02/24).

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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 (delisted on September 17, 2001), and became a subsidiary of Aeon in 2003.
Japan Maintenance merged with Aeon Techno Service and the name was changed to Aeon Delight in September 2006. Asof FY02/13, the company derives 60–70% of sales from Aeon Retail Co., Ltd. and other Aeon group companies. Aeon
Delight handles between 80% and 90% of the facilities management work required by Aeon Retail, and about 65% of suchwork required by Aeon Mall Co., Ltd. (TSE1: 8905). Facilities management work at Aeon Mall was previously done by a
subsidiary of Diamond City, a Mitsubishi Corp. (TSE1: 8058) affiliate absorbed by Aeon Mall in 2007. The company is aiming
to increase the share of work handled for Aeon Mall by following its overseas expansion in recent years and keeping a close
relationship. Aeon Delight also handles between 60% and 70% of the facilities management work at MaxValu retail stores
owned by the Aeon group.

M&A activities
Aeon Delight is active in M&A. It has purchased companies in cleaning, building management, and store interior
construction. It has also purchased companies in businesses ancillary to facilities management, and been proactive in seeking
out alliances in other formats. In 2018 it announced collaboration with SECOM (TSE1: 9735) to create a new business model
for small and medium-sized facilities.

Business model
Aeon Delight became a leading integrated facilities management operator through its relationship with the Aeon group. It
has also grown through acquisitions. The company derives its earnings by providing an integrated, all-in-one package offacilities management services to large retail and 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. (TSE2: 4781), and Nippon Kanzai Co., Ltd. (TSE1: 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, support services and other. When thecompany takes on integrated facilities management work, sales and profits will be booked across segments. With the

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17expansion of IFM, sales of catering services (included in Support Services) are expected to increase, for example, and, as aresult, segment analysis is becoming less effective.
Its customers included Aeon Retail, Aeon Mall, and MaxValu companies, while non-Aeon group customers were commercial
facilities, office buildings, hotels, medical and welfare facilities, schools, factories, and warehouses.

Facilities Management
Facilities Management(JPYmn)Sales
YoY

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

42,14742,05043,45845,83948,96250,551

52,69956,36458,28958,223

5.3%

3.4%

-0.1%

5.5%

7.0%

FY02/21

-0.2%

3.3%

6.8%

3.2%

4.2%

Operating profit

5,084

4,661

4,725

4,217

4,206

4,350

4,644

5,558

5,293

5,175

YoY

-0.6%

-8.3%

1.4%

-10.8%

-0.3%

3.4%

6.8%

19.7%

-4.8%

-2.2%

Operating profit margin

12.1%

11.1%

10.9%

9.2%

8.6%

8.6%

8.8%

9.9%

9.1%

8.9%

Source: Shared Research based on company data

This segment is involved in inspection, protection, and maintenance of facilities, providing monitoring support 24 hours aday, 365 days a year. Specific services are tailored to meet the needs of individual clients. This is a staple business for Aeon
Delight 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.

Utilization of technology: Next-generation facilities management model
The next-generation facilities management model refers to an open facilities management network system developed by thecompany. The system is currently in operation at five commercial facilities including one in Suzhou, China and one in Chiba,
Japan. While acquiring contracts for IFM services that integrate management for companies, the company is also enthusiastic
about creating a de facto standard for facilities management in Asia using this platform.
Using IoT, the system performs remote monitoring and automatic control of air conditioning and lighting (and eventuallyrefrigeration). 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 half through multiple vendors); enables lower operation costs by reducing necessary manpower
through remote monitoring; and saves energy (system in China saw 25% energy saving for air conditioning and 16% energy
saving in Chiba, Japan). In China, a 50% reduction is expected after the system is applied to lighting and refrigerators.
Likewise, a 30% reduction is expected in Chiba, Japan. 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 knowhow. It also plans to utilize its big data and AI.
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
not only in IFM but also 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.

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18

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

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

32,23531,80534,242

36,62238,456

41,06843,29044,49244,64744,393(JPYmn)Sales

FY02/21

YoY

0.5%

-1.3%

7.7%

7.0%

5.0%

6.8%

5.4%

2.8%

0.3%

-0.6%

Operating profit

2,823

2,692

2,865

3,102

3,032

3,110

2,857

2,881

3,038

3,307

YoY

2.1%

-4.6%

6.4%

8.3%

-2.3%

2.6%

-8.1%

0.8%

5.4%

8.9%

Operating profit margin

8.8%

8.5%

8.4%

8.5%

7.9%

7.6%

6.6%

6.5%

6.8%

7.4%

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 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.

Cleaning Services
Cleaning Services(JPYmn)FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Sales

39,85240,51942,32044,28747,87053,36555,29758,18562,36262,459

YoY

-3.1%

1.7%

4.4%

4.6%

8.1%

11.5%

3.6%

5.2%

7.2%

0.2%

Operating profit

5,882

5,918

5,716

6,289

6,031

6,012

6,228

6,694

6,967

7,324

YoY

-0.9%

0.6%

-3.4%

10.0%

-4.1%

-0.3%

3.6%

7.5%

4.1%

5.1%

Operating profit margin

14.8%

14.6%

13.5%

14.2%

12.6%

11.3%

11.3%

11.5%

11.2%

11.7%

Source: Shared Research based on company data

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 company, and 80–
90% work performed by outsourcing partners. Primary outsourcing partners are Do Service Co., Ltd. and Kankyouseibi Co.,
Ltd. Approximately 30,000 persons are involved in the cleaning services business. In recent years, the company has beenworking to secure orders in the hygienic cleaning business, previously untapped territory for it, which can lead to high valueadded services.

Hygienic cleaning business
The company believes the hygienic cleaning business will continue to steadily increase sales. There are more than 1.5mn
hospital beds in medical facilities across Japan, out of which the number of hospital beds at medical facilities Aeon Delight

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19

has hygienic cleaning contracts with still make up only 2–3%. Aeon Delight began offering hygienic cleaning services in
FY02/15 and began providing service to two major medical facilities in April 2015. As of April 2015, the company wasproviding hygienic cleaning services for 14,000 beds. In 2018, that number has increased to over 25,000 beds. The
company is in the middle of expanding sales to about 100 hospitals. For sales to hospitals, it takes about three years fromgeneral bidding to winning a project, as many large hospitals are under the jurisdiction of the government.

Japanese hospitals and clinics
Hospitals

Clinics

As of October 1, 2019

Number of beds

Total

Number of beds

8,300

1,529,215

102,616

90,825322

126,423

537

2,175

1,202

311,724

3,522

2,419

Social insurance-related organizations

51

15,523450-

Public service corporations

199

49,152509

263
69,070National
Public medical institutions

Medical corporations

5,720

855,804

43,593

Private schools

111

54,068188

Social welfare services

197

33,64010,015352

Individuals

174

16,45741,073

15,969Other

324

66,424

2,729

539

38

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

Because many of the large domestic hospital chains are keen on implementing management reforms, Aeon Delight believes
that its integrated facilities management service can match these hospital chains’ needs for improved sanitation,
environmental conditions, safety, peace of mind, service standardization, and cost reductions. Contract renewal for hygienic
cleaning services typically happens every year, so it is difficult to turn it into a recurring revenue business. That said, alimited 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 1) its roughly 600 bases nationwide; 2) its namerecognition as a publicly traded company and as a member of the Aeon group; 3) its track record with major medical
institutions; and 4) the visible quality of its cleaning services.
Because hospitals and other medical centers must take steps to prevent patients from becoming infected or transmitting theirdisease to others while they are in the hospital, Aeon Delight actually offers clients a numerical scale that gives them a visual
measure of cleaning quality. During FY02/15, most of the marketing for its hygienic cleaning services was done by a special
sales team. However, after receiving training and sharing all the related sales tools, local offices have also been doing theirown marketing since FY02/16. The profitability was low when the company entered the hygienic cleaning business.
However, it appears profitability has been improving as its cleaning staff becomes increasingly proficient at their duties.

Construction Work
Construction Work

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Sales

28,51353,071

45,63041,97243,85545,81440,897

41,47041,84440,657

YoY

73.6%

86.1%

-14.0%

-8.0%

4.5%

4.5%

-10.7%

1.4%

0.9%

-2.8%

(JPYmn)FY02/21

Operating profit

1,936

2,209

2,580

2,807

3,218

3,210

3,305

3,989

3,816

3,880

YoY

59.5%

14.1%

16.8%

8.8%

14.6%

-0.2%

3.0%

20.7%

-4.3%

1.7%

Operating profit margin

6.8%

4.2%

5.7%

6.7%

7.3%

7.0%

8.1%

9.6%

9.1%

9.5%

Source: Shared Research based on company data

This segment conducts large-scale renovation, interior design work, restoration, and installation of energy-saving devices (i.e.,
LED lighting) and solar power systems. This segment generates roughly 60% of its sales from Aeon group companies.
Renovation is remodeling (not designing) of Aeon retail locations, such as replacing signage, or modifying retail floor space.
In recent years, there has been an increasing amount of work related to changeover of tenants inside Aeon Malls (restorationand new interiors). In April 2018, Aeon Delight made store design specialist U-COM a wholly owned subsidiary, and the
upstream approach has enabled it to win an increasing number of contracts from outside the Aeon group.

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Construction work process for commercial facility tenant replacement

Source: Shared Research based on company data

Materials and Supplies Sourcing Services
Materials and Supplies Sourcing

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Sales

36,73039,28444,54347,61850,51650,74050,26551,007

51,12553,060

YoY

96.2%

7.0%

13.4%

6.9%

6.1%

0.4%

-0.9%

1.5%

0.2%

3.8%

(JPYmn)FY02/21

Operating profit

1,234

1,462

2,333

2,111

2,806

2,774

2,868

2,779

2,489

2,467

YoY

96.8%

18.5%

59.6%

-9.5%

32.9%

-1.1%

3.4%

-3.1%

-10.4%-0.9%

Operating profit margin

3.4%

3.7%

5.2%

4.4%

5.6%

5.5%

5.7%

5.4%

4.9%

4.6%

Source: Shared Research based on company data

Through efficient logistics, this business reduces costs for intermediate materials used in offices and retail stores. The
segment deals in items such as plastic bags, gift bags, clothing, and other consumables (employee stationery, cleaningmaterials, etc.). In this business, stock must be maintained at all times, and the company undertakes logistics functions onbehalf of the customer as well. Aeon Delight aims to use efficient logistics to reduce costs for intermediate materials andincrease process efficiency. It is difficult to add value in this area, but the operating profit margin is about 5%.

Vending Machine Services
Vending Machine Services(JPYmn)FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Sales

32,28031,20033,32934,82532,74132,87932,834

31,95531,54425,453-19.3%

YoY

87.8%

-3.3%

6.8%

4.5%

-6.0%

0.4%

-0.1%

-2.7%

-1.3%

Operating profit

2,330

2,396

3,068

2,965

2,846

2,812

2,105

1,164

1,396

653

YoY

57.4%

2.8%

28.0%

-3.4%

-4.0%

-1.2%

-25.1%-44.7%

19.9%-53.2%

Operating profit margin

7.2%

7.7%

9.2%

8.5%

8.7%

8.6%

6.4%

3.6%

4.4%

2.6%

Source: Shared Research based on company data

This segment operates soft drink vending machines. It also creates relaxation areas with foliage plants and air purificationequipment.
The company’s vending machines stock a variety of products from different manufacturers. Aeon Delight operates
approximately 40,000 vending machines (as of the end of FY02/19). About 80% of vending machine sales come frommachine in supermarkets belonging to the Aeon group. The remaining 20% of sales came from machines in shopping malls
operated by Aeon group and non-Aeon companies. In September 2010, 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.
Also, aiming for a business model change, the company seeks to increase the number of vending machines equipped withdigital signage functionality (about 2,700 machines at end-FY02/19) and capture advertising revenues.

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21Support Services
Support Services

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20(JPYmn)

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Act.

Sales

8,037

10,942

13,12914,406

15,52418,18817,325

19,43918,76815,837

YoY

50.9%

Operating profit
YoY
Operating profit margin

36.1%

20.0%

FY02/21

9.7%

7.8%

17.2%

-4.7%

12.2%

-3.5%

-15.6%

312

741

336

281

-580

-850

-1,466-2,270416-75-47.1%

137.5%-54.7%-16.4%

-

-

-

-

-

-

3.9%

6.8%

2.6%

2.0%

-3.7%

-4.7%

-8.5%

-11.7%

2.2%

-0.5%

Source: Shared Research based on company data

This segment provides business process outsourcing (BPO), housework support services, business travel services, training
services, and staffing services. Much of these support services are conducted by companies acquired through M&A.
The company entered the BPO services market with the acquisition of General Services, Inc. Services that BPO undertake
include cost management, salary calculations, administrative functions, social security and welfare, receipt of telephone calls,
and system management.
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) Actia: household support services.
Kajitaku: In 2019, accounting fraud was discovered at subsidiary Kajitaku, which operated storefront promotion andhousework support businesses. The company submitted corrected financial statements covering FY02/14 throughFY02/18. In February 2020, it spun off the housework support business, which got a new start under the name Actia. In
June 2020, the company sold the ID photo machine business of Kajitaku (renamed KJS), and in FY02/21 withdrew fromthe smartphone printing and picture palette businesses of KJS. In February 2021, Aeon Delight conducted anabsorption-type merger with KJS and took over the copy machine business, for which some customers still have contracts
in force.

Additionally, A to Z Service Co., Ltd., a maintenance service provider for small commercial facilities, was converted to a
subsidiary in 2011. In addition to designing small-scale stores for nationwide chains and providing subsequent facility
management, equipment maintenance, and general maintenance services, A to Z Service operates a 24 hour, 365 days ayear call center to provide comprehensive support services for retail chains in small shopping centers. Aeon Delight
Academy, Co., Ltd. operates the “Aeon Delight Academy Nagahama” in Shiga Prefecture to provide real-world training. It
also operates a staffing service for technical professions.

Overseas business
Aeon Delight sees China and ASEAN as main growth drivers. In China, the company mainly operates through its subsidiaries
in Suzhou and Wuhan. It made both wholly owned subsidiaries in 2018 to speed up decision making. For now, it plans totarget the Yangtze River Delta and surrounding regions to build up its brand power as a company that provides quality
facilities management. In the medium term, it plans to expand its business to the northern and southern regions. In ASEAN,
the company has subsidiaries in Indonesia, Malaysia, and Vietnam. The Indonesian business purchased in 2018 is the secondlargest company in the cleaning industry in the promising Indonesian market. Aeon Delight plans to provide its expertise inother facility services and win outsourcing contracts locally.
In April 2021, the company established Aeon Delight China in Suzhou, China to oversee its operations in the country,
aiming to enhance group governance in China, maximize synergy among its operating companies, and establish thecompany brand. Aeon Delight China promotes investment and M&A deals in China, collaborates with its local subsidiaries,
and develops a sales strategy.

Strengths and weaknesses
Strengths
Strong ties with the Aeon group: Aeon Delight is a subsidiary of Aeon Co., Ltd., and almost 70% of sales are generated
from the Aeon group. This provides for stable sales, and the Aeon group’s expansion into Asia is also proving to be apositive factor for Aeon Delight’s growth. The company is able to leverage economies of scale from the Aeon group, andAEON Delight/ 9787
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22

has accumulated expertise in integrated FMS 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 JPY11.0bn perannum, and the company has spent JPY2.8bn per year on the acquisition of tangible fixed assets, generating total
cashflow of about JPY8.0bn. 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 JPY3.0bn in dividend
payments (cash flow basis) yearly. In FY02/19 it spent JPY9.9bn on a share buyback. The company targets a dividend
payout ratio of 35% from FY02/21 onward.

Weaknesses
Limited organic growth: Aeon Delight depends mainly on the domestic market which generates about 95% of sales. The
markets for its existing businesses in Japan are mature, which is a weakness in terms of the company’s growth potential. It
will be challenging to sustain growth, as Aeon Delight must rely on aggressive development overseas and winning
contracts in ancillary businesses as an FMS company and growing market share.
Heavy dependence on the Aeon group: Aeon Delight is a consolidated subsidiary of Aeon, and derives just over 60% of
its sales from the Aeon group. A drawback from such a strong relationship is that the parent company may ask for support
in pursuing its agenda. Recently, Aeon acquired 50% of Tesco Japan, the U.K. supermarket chain operator’s Japan retailbusiness. 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 JPY4.2tn in FY2019 (April 1, 2018 to March 31, 2019), up 7.0% YoY,
according to a survey released in October 2020 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.

AEON Delight/ 9787
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23Source: Shared Research based on Yano Research Institute Ltd. materials (October 2020)

Building maintenance services were mainly used by office buildings (21.8%), shops and commercial facilities (18.3%),
medical and welfare facilities (9.9%), factories and workplaces (9.6%), and education facilities (9.9%). 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 ample scope to grow.
Sales growth rates by end user were up 6.6% YoY for office buildings, up 6.3% YoY for shops and commercial facilities, up
8.4% YoY for medical and welfare facilities, up 5.6% YoY for factories and workplaces, and up 5.1% YoY for education facilities.
Market growth was strong for medical and welfare facilities and 5–6% for others (such as office buildings and commercial
facilities).

Building maintenance market (by building use)
FY2018FY2019Residential

134.7

YoY

7.4%

12.5%

3,860.5

4,124.8

Non-residential

151.5

YoY

6.8%

6.8%

Office buildings

875.4

933.2

YoY
Stores and commercial facilities

6.4%

6.6%

736.8

783.2

YoY

6.5%

6.3%

Educational facilities

403.6

424.1

YoY

5.2%

5.1%

390.8

423.6

Medical and welfare facilities
YoY
Factories and workshops
YoY

8.1%

8.4%

387.4

409.2

6.1%

5.6%

Source: Shared Research based on Yano Research Institute Ltd. materials (October 2020)

Aeon group stores by format (domestic and overseas)
FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

590

598

617

618

625

626

584

583

612

613

Supermarket

1,537

1,708

1,977

2,038

2,121

2,130

2,159

2,166

2,228

2,288

Discount store

105

152

353

381

530

566

568

587

592

599

DIY store

122

123

122

121

120

119

122

122

120

118

Supercenter

29

26

26

29

28

28

28

27

25

Department store

1

1

1

1

1

1

1

1

1

1

Specialty store

4,121

4,462

4,581

4,683

5,061

4,348

4,332

4,039

3,801

3,519

Convenience store

3,424

3,664

3,853

3,932

4,331

5,261

5,436

5,449

5,350

5,300

3,347

3,765

3,980

4,376

4,817

2,392

2,599
1,252

GMS

Drugstore and pharmacy

FY02/21

25

Other retail formats

418

562

756

884

803

856

907

1,015

1,150

Financial services

460

527

641

698

701

705

690

640

658

636

Services

1,383

1,394

1,519

1,640

1,934

2,013

2,045

2,070

2,016

1,938

Total

12,19013,217

14,44018,382

20,02020,633

21,24821,516

18,945

18,888

Aeon Mall

59

62

137

148

161

166

174

180

172

174

Aeon Town

107

115

122

130

134

138

139

140

145

Total

166

177

259

278

295

304

313

320

317

FY02/17

FY02/18

Source: Shared Research based on company data

Stores by Format in China, South Korea, and ASEAN region
FY02/12

FY02/13

FY02/14

FY02/19

FY02/20

FY02/21

GMS

54

61

69

77

84

87

94

96

101

102

Supermarket

44

81

95

101

115

173

150

150

125

122

Discount store

-

22

23

24

24

23

21

22

22

22

2,033

2,294

2,370

2,532

2,840

2,998

3,172

3,252

3,353

3,315

7

10

Specialty store

37

55

61

42

44

52

54

39

5

0

Other retail formats

27

29

29

30

79

97

115

124

148

147

Convenience store

FY02/15

FY02/16

Drugstore

Financial services
Services
Total

236

279

302

339

339

342

324

276

295

269

25

41

95

180

282

335

390

426

446

428

2,456

2,862

3,044

3,325

3,845

4,107

4,320

4,385

4,502

4,416

Source: Shared Research based on company data

AEON Delight/ 9787
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24

Customers
Aeon Delight generates almost 65% of its sales from the Aeon group companies, including Aeon Retail, Aeon Mall (TSE1:
8905), and MaxValu companies. The remainder comes from non-Aeon group customers that include commercial facilities,
offices, hotels, medical facilities, schools, factories, warehouses, public facilities, and event operators.

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%.

Plans for overseas openings of Aeon Malls
FY02/20

FY02/23

FY02/26

Overseas (stores)

30

35

52

China (stores)

21

22

29

ASEAN (stores)

9

13

23

Source: Shared Research based on Aeon Mall data

Overseas businesses of the Aeon group
Overseas stores: Aeon Mall

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

FY02/22
Est.

Total number of stores

2

3

5

9

17

19

24

27

30

32

34

China

2

3

4

6

12

13

17

19

21

21

22

ASEAN

-

-

1

3

5

6

7

8

9

11

12

1

2

3

4

4

4

5

6

6

1

1

1

1

2

2

2

2

1

1

2

2

2

3

4

Vietnam
Cambodia
Indonesia
Total openings

-

China

1

1

2

6

1

5

3

3

1

2

1

1

2

6

1

4

2

2

-

1

1

1

1

1

1

1

1

ASEAN
Vietnam
Cambodia

1

Indonesia111

Source: Shared Research based on company 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. (TSE1: 9735) and Sohgo Security Services Co., Ltd. (TSE1: 2331) insecurity services. It competes with Azbil Corporation (TSE1: 6845), Nippon Kanzai Co. Ltd. (TSE1: 9728), and Tokyu
Community Corporation (not listed) in property management services. There are no major competitors that offer cleaning
services; Aeon Delight competes with smaller, regional cleaning operators. In construction-related work, Aeon Delightcompetes with Azbil in the environmental solutions business, while in the energy-saving business, major rivals are NTT
Facilities, Inc. (not listed) and Hitachi, Ltd. (TSE1: 6501).

Barriers to entry
Property management for residential and small office buildings has relatively low barriers to entry. However, the barriers arehigh for large facilities given the comprehensive services required.
Smaller residential or office building owners are less concerned about having total package of services and usually focus oncleaning or security. However, large facilities require comprehensive services such as maintenance, cleaning, and security,
AEON Delight/ 9787
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25all-in-one. Instead of hiring a contractor for each service, 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 arelatively 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.

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26

Financial Statements
Income statement
Income statement

FY02/13(JPYmn)FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Sales

248,876

256,654

265,572

277,926

292,607292,396

302,915

308,582

300,085

YoY

13.2%

3.1%

3.5%

4.7%

5.3%

-0.1%

3.6%

1.9%

-2.8%

Cost of sales

218,648

223,409231,281

243,089

256,871257,524

267,463

270,011

262,910Gross profit

37,17530,22733,24534,29034,83635,73634,87135,452

38,570

YoY

5.6%

10.0%

3.1%

1.6%

2.6%

-2.4%

1.7%

8.8%

-3.6%

Gross profit margin

12.1%

13.0%

12.9%

12.5%

12.2%

11.9%

11.7%

12.5%

12.4%

SG&A expenses

21,945

16,326

18,622

18,90020,28021,596

21,961

22,421

22,569

YoY

9.8%

14.1%

1.5%

7.3%

6.5%

1.7%

2.1%

0.7%

SG&A ratio

6.6%

7.3%

7.1%

7.3%

7.4%

7.5%

7.4%

7.3%

7.3%

13,901

14,622

15,39014,556

14,13912,90913,03016,001

15,230

YoY

1.0%

5.2%

5.3%

-5.4%

-2.9%

-8.7%

0.9%

22.8%

-4.8%

Operating profit margin

5.6%

5.7%

5.8%

5.2%

4.8%

4.4%

4.3%

5.2%

5.1%

-9

-22

82

-22

124

472

332

-52

38

13,892

14,60015,472

14,534

14,263

13,381

13,362

15,94915,268Operating profit

Non-operating income (expenses)
Recurring profit

-2.8%

YoY

0.8%

5.1%

6.0%

-6.1%

-1.9%

-6.2%

-0.1%

19.4%

Recurring profit margin

5.6%

5.7%

5.8%

5.2%

4.9%

4.6%

4.4%

5.2%

5.1%

27

-1,180

-665

-408

-174

-1,135-195-401-4,617

45.3%

46.1%

44.1%

46.0%

45.9%

42.9%

46.2%

38.3%

-8.6%

Extraordinary gains (losses)
Implied tax rate
Minority interests

-4.3%

104

188

310

386

533

598

664

245

-110

Net income

7,509

7,039

7,965

7,247

7,093

6,397

6,415

9,348

11,680

YoY

8.6%

-6.3%

13.2%

-9.0%

-2.1%

-9.8%

0.3%

45.7%

24.9%

Net margin

3.0%

2.7%

3.0%

2.6%

2.4%

2.2%

2.1%

3.0%

3.9%

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.jp27Balance sheet
Balance sheet

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cash and deposits

10,014

Accounts receivable(JPYmn)Assets12,565

15,58020,386

31,71739,53644,23362,35559,77344,67334,44835,75734,32835,36035,73940,08942,612

39,176

Allowance for doubtful accounts

-144

-290

-168

-360

-202

-130

-167

-242

-212

Inventories

2,237

2,575

2,663

2,840

3,218

2,623

2,211

1,822

2,006

Deposits for consumption to subsidiaries andaffiliates

18,02032,42041,32637,362

31,71332,00016,000

-

-

Other

4,523

8,196

8,476

9,634

9,292

8,543

6,405

5,815

9,265

Total current assets

79,32389,914

103,634

104,190111,098

118,311

108,771

112,362

110,008

Buildings

1,089

1,046

1,009

1,629

1,631

1,582

1,479

1,458

1,671

274

238

211

190

175

-

-

-

-

2,079

2,487

2,516

2,651

3,307

4,892

5,064

4,846

4,264

282

278

278

1,978

1,975

1,975

2,032

2,032

2,000

-

-

-

-

-

-

-

-

-

72

209

345

610

1,974

1,591

1,585

1,334

1,545

Total tangible fixed assets

3,796

4,258

4,361

7,061

9,064

10,041

10,161

9,671

9,481

Goodwill

10,801

9,399

8,452

7,654

6,813

6,113

6,865

5,975

3,938

Other

1,520

1,609

1,867

2,352

1,989

1,699

1,338

1,209

1,579

Total intangible assets

12,321

11,008

10,32010,006

8,802

7,813

8,103

7,185

5,518

Investment securities

2,973

3,897

3,768

4,463

4,546

5,334

4,256

3,623

3,960

Deferred tax assets

288

254

284

310

551

330

412

1,763

4,840

Other

2,196

1,877

2,750

3,896

4,342

3,458

3,264

2,347

2,766

Allowance for doubtful accounts

-200

-199

-535

-494

-536

-610

-355

-36

-11

Investments and other assets

5,257

5,829

6,268

8,176

8,904

8,512

7,578

7,698

11,557

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

Total fixed assets

21,37521,096

20,95025,244

26,772

26,367

25,842

24,55426,556

Total assets

100,699

111,010

124,584

129,434

137,870

144,678

134,614

136,917

136,565

-

-

-

-

-

-

-

-

-

24,544

21,87624,93428,457

25,11425,82025,967

23,38822,170Liabilities
Accounts payable
Short-term debt

10

5

-

-

271

225

394

252

299

Other

10,401

12,622

15,771

17,377

21,666

18,541

20,137

20,41017,466

Total current liabilities

34,95539,30946,63945,83447,05149,06051,40848,864

44,123

5

-

-

-

293

-

15

11

-

1,190

1,556

2,387

3,925

5,921

6,474

7,652

6,756

4,160

Long-term debt
Other
Total fixed liabilities

1,195

1,556

2,387

3,925

6,214

6,474

7,667

6,767

4,160

Total liabilities

36,15140,86549,02649,76053,26655,53559,07555,631

48,283

Capital stock

3,238

3,238

3,238

3,238

3,238

3,238

3,238

3,238

3,238

Capital surplus

18,77018,81818,85018,862

18,94919,01913,88813,88013,226

Retained earnings

40,53945,11250,50555,09959,35562,756

65,91072,06380,344

Treasury stock

-458

-449

-443

-441

-436

-430

-10,327-10,208-10,123

Other comprehensive income

992

1,711

1,373

525

799

1,484

466

-86

662

Share subscription rights

205

165

166

221

263

303

299

186

119

Non-controlling interests

1,260

1,547

1,869

2,168

2,434

2,773

2,062

2,213

814

Total net assets

64,547

70,14575,55879,67484,604

89,14375,53981,28688,281

Working capital

22,36615,147

13,486

8,711

13,464

12,542

16,33321,046

19,012

15

5

-

-

564

225

409

263

299

Net cash

28,01944,98056,90657,74862,866

71,311

59,82462,09259,474

Shareholders' equity

63,082

68,43373,52377,285

81,90786,06773,17878,88787,348Equity ratio

62.6%

61.6%

59.0%

59.7%

59.4%

59.5%

54.4%

57.6%

64.0%

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 (JPY62.4bn, FY02/20), accounts receivable (JPY42.6bn),
tangible fixed assets (JPY9.7bn), and intangible fixed assets (JPY7.2bn). The aggregate of cash and deposits and deposits for
consumption from associates is over JPY60.0bn, but interest-bearing debt is just JPY300mn, for a cash-rich balance sheet.
Tangible fixed assets and intangible fixed assets are small as the company’s business structure does not require a largebalance sheet. In FY02/20 the company ended its policy of leaving deposits with Aeon, from a cash governance perspective.
Majority of its investment securities are with Aeon Mall (TSE1: 8905), Aeon Kyushu (TSE JASDAQ: 2653), Aeon Fantasy (TSE1:4343), and MaxValu companies.

Shareholders’ equity
At end-FY02/20, the equity ratio was 57.6%. Although it declined to 54.4% at end-FY02/19 following the restatement ofprior-year earnings accompanying the Kajitaku accounting fraud, it subsequently recovered.

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28

Profitability and financial ratios
Profit margins

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

FY02/21Cons.

Gross profit

30,22733,24534,29034,83635,73634,87135,452

38,57037,175Gross profit margin

12.1%

13.0%

12.9%

12.5%

12.2%

11.9%

11.7%

12.5%

12.4%

Operating profit

13,901

14,622

15,39014,556

14,13912,90913,03016,001

15,230

5.6%

5.7%

5.8%

5.2%

4.8%

4.4%

4.3%

5.2%

5.1%

16,13817,054

17,856

17,014

16,92816,03816,391

19,16818,458

EBITDA margin

6.5%

6.6%

6.7%

6.1%

5.8%

5.5%

5.4%

6.2%

6.2%

Net margin

3.0%

2.7%

3.0%

2.6%

2.4%

2.2%

2.1%

3.0%

3.9%

ROA (RP-based)

14.4%

13.8%

13.1%

11.4%

10.7%

9.5%

9.6%

11.7%

11.2%

ROE

12.5%

10.7%

11.2%

9.6%

8.9%

7.6%

8.1%

12.3%

14.1%

2.6

2.4

2.3

2.2

2.2

2.1

2.2

2.3

2.2

Working capital (JPYmn)

22,36615,147

13,486

8,711

13,464

12,542

16,33321,046

19,012Current ratio

226.9%

228.7%

222.2%

227.3%

236.1%

241.2%

211.6%

229.9%

249.3%

Quick ratio

207.6%

201.3%

198.3%

200.1%

209.5%

218.4%

194.8%

214.3%

223.8%OCF / Current liabilities-12.7%

57.5%

40.1%

22.3%

25.2%

28.2%

24.6%

14.7%

22.4%

OCF / Total liabilities-12.1%

52.3%

35.2%

20.7%

22.0%

24.4%

20.9%

13.2%

21.5%

18.5

22.3

15.4

10.1

9.7

12.4

13.6

18.3

20.8

13,319-7,219-1,661-4,775

4,753

-922

3,791

4,713

-2,034

FY02/21

Operating profit margin
EBITDA

Financial ratios

Total asset turnover

Cash conversion cycle (days)
Change in working capital

Source: Shared Research based on company data

Statement of cash flows
Cash flow statement

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20(JPYmn)

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cash flows from operating activities (1)-4,35821,35917,234

10,303

11,703

13,56812,373

7,371

10,403Pre-tax profit

13,92013,42014,807

16,526

14,08912,247

13,166

15,54810,651

Depreciation

1,130

1,294

1,341

1,699

2,069

2,414

2,602

2,352

2,427

-

678

578

250

122

39

123

175

1,659

Amortization of goodwill

1,107

1,138

770

759

720

715

759

815

801

Change in working capital-13,728

10,386

2,008

-552

449

1,035

-53

-4,745-1,831

Income taxes-6,578-6,114-6,615-6,336-6,602-6,115-5,188-6,506-4,838

-209

557

4,345

-2,043

856

3,233

964

-268

1,534

7,086

-16,632-11,365-3,2552,233-2,666

12,256

13,838-7,325Purchase of tangible/intangible fixed assets-1,607-1,999-1,903-2,414-4,113-3,228-2,059-2,361-2,469Proceeds from sale of intangible/tangible
fixed assets

147

41

18

116

24

14

15

-

39

Impairment losses

Other
Cash flows from investing activities (2)Acquisition of shares in subsidiaries
affecting the scope of consolidation

-694

-388

-

-4,771---1,516--

Payments of deposit for consumption to
subsidiaries and affiliates-170,520-212,400-220,511-218,798-229,151-250,400-284,000-192,500-31,000

Collection of deposit for consumption fromsubsidiaries and affiliates

180,020

198,000

211,605

222,762

234,800

250,113300,000

208,500

31,000

-260

114

-574

-150

673

835

-184

199

-4,895

Free cash flow (1+2)

2,728

4,727

5,869

7,048

13,936

10,902

24,62921,2093,078

Cash flows from financing activities-2,257-2,475-2,594-2,821-2,400-3,264-19,686-3,392-5,324Other

Net change in short-term borrowings
Net change in long-term borrowings

-25

-

-

-

219

-28

179

-143

60

-6

-

-

-

324

90

-2

-3

-14

-2,256-2,464-2,573-2,676-2,842-2,996-3,259-3,195-3,397

Acquisition of treasury stock

2

57

37

14

28

41

-9,906109-

Acquisition of shares in subsidiaries notaffecting the scope of consolidation

-

-

-

-

-57

-21

-6,458--1,853

Payment of dividends

Other

28

-68

-58

-159

-72

-350

-240

-160

-120

Other

26

99

172

-229

-6

80

-228

-98

32

Change in cash and cash equivalent

497

2,351

3,447

3,997

11,530

7,718

4,715

17,719-2,214

Cash and cash equivalent (year-end)

9,676

12,02815,476

19,47331,00438,72243,437

61,15158,937

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.
On the surface, cash flows from investing activities mainly vary with funds deposited at Aeon.

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.
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29

Cash conversion cycle

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

Accounts receivable turnover

6.6

6.5

7.6

7.9

8.4

8.2

8.0

7.5

7.3

Days in accounts receivable

55.7

56.3

48.2

46.0

43.5

44.4

45.7

48.9

49.7

Inventory turnover

116.2

92.9

88.3

88.3

84.8

88.2

110.7

133.9

137.4

Days in inventory

3.1

3.9

4.1

4.1

4.3

4.1

3.3

2.7

2.7

Accounts payable turnover

9.1

9.6

9.9

9.1

9.6

10.1

10.3

10.9

11.5

Days in accounts payable

40.3

37.9

36.9

40.1

38.1

36.1

35.3

33.4

31.6

Cash conversion cycle (days)

18.5

22.3

15.4

10.1

9.7

12.4

13.6

18.3

20.8

Source: Shared Research based on company data

Accounts receivable are mainly from Aeon group companies, while accounts payable are with various suppliers, such as softdrink 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

FY02/12
12.5%

12.5%

10.7%

11.2%

9.6%

8.9%

7.6%

8.1%

12.3%

14.1%

Net margin

3.1%

3.0%

2.7%

3.0%

2.6%

2.4%

2.2%

2.1%

3.0%

3.9%

Total asset turnover

2.48

2.57

2.42

2.25

2.19

2.19

2.07

2.17

2.27

2.19

Financial leverage (equity multiplier)

1.61

1.61

1.61

1.66

1.68

1.68

1.68

1.75

1.79

1.65

15.5%

14.4%

13.8%

13.1%

11.4%

10.7%

9.5%

9.6%

11.7%

11.2%

ROA (RP-based)
ROIC

FY02/1314.7%

FY02/14

13.4%

13.5%

13.1%

12.1%

11.5%

10.2%

10.9%

FY02/20

FY02/21

14.1%

12.4%

NOPAT

8,162

8,245

9,064

9,540

9,368

9,464

8,925

9,040

11,101

10,567

Interest-bearing deb + Net assets

55,59061,40067,35672,854

77,61682,421

87,26882,65878,74985,065

ROIC (before tax)

24.8%

22.6%

21.7%

21.1%

18.8%

17.2%

14.8%

15.8%

20.3%

17.9%

Operating profit margin

6.3%

5.6%

5.7%

5.8%

5.2%

4.8%

4.4%

4.3%

5.2%

5.1%

Sales / Invested capital

3.95

4.05

3.81

3.65

3.58

3.55

3.35

3.66

3.92

3.53

FY02/12Source: Shared Research based on company data

Dividends
FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19

FY02/20

FY02/21

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Total dividends

a)

2,097

2,413

2,519

2,625

2,731

2,890

3,207

3,114

3,246

4,099

Total treasury stock acquired

b)

6

1

1

1

-

-

1

9,906

-

-

Total returns to shareholdersc) = a) + b)

2,103

2,414

2,520

2,626

2,731

2,890

3,208

13,020

3,246

4,099

(JPYmn)Net income attributable to parent
company shareholders

d)

6,912

7,509

7,039

7,965

7,247

7,093

6,397

6,415

9,348

11,680

Dividend payout ratioa) / d)

30.3%

32.1%

35.8%

33.0%

37.7%

40.7%

50.1%

48.5%

34.7%

35.1%

Total shareholder return ratioc) / d)

30.4%

32.1%

35.8%

33.0%

37.7%

40.7%

50.1%

203.0%

34.7%

35.1%

57,46463,082

68,43373,52377,285

81,90786,06773,17878,88787,34855,101

60,27365,75870,97875,404

79,596

83,987

79,62376,033

83,118

Net assets available to commonshareholders (year end)
Average of beginning and end of
year

f)

Before deducting assets available
to holders of Class A preferredshares

57,46463,082

68,43373,52377,285

81,90786,06773,17878,88787,348

EPS

(JPY)

131.8

143.2

134.2

151.7

138.0

135.0

121.7

122.9

187.2

233.7

Dividend per share

(JPY)

40.0

46.0

48.0

50.0

52.0

55.0

61.0

63.0

65.0

82.0

Dividend on equity ratioa) / f)

3.8%

4.0%

3.8%

3.7%

3.6%

3.6%

3.8%

3.9%

4.3%

4.9%

Source: Shared Research based on company data

Shareholder returns
The company said that it pays dividends with a standard payout ratio of 35% based on its basic stance on capital policy. In
FY02/19, it 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 currently aiming at a level of 12%.
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 35%.

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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

November
DecemberFebruary

2020

Source: Shared Research based on company data

Major shareholders
Shares held ('000)

Shareholding ratio

Aeon Co., Ltd.

Top shareholders

27,613

55.2%

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

1,999

4.0%

Aeon Delight Business Partners Stockholding Association

1,127

2.3%

Custody Bank of Japan, Ltd. (Trust account)

1,009

2.0%

Northern Trust Company AVFC Re Fidelity Funds

801

1.6%

Aeon Delight Employees Stockholding Association

497

1.0%

Clearstream Banking S.A.

495

1.0%

Custody Bank of Japan, Ltd. (Trust account 9)

484

1.0%

The Nomura Trust and Banking Co., Ltd.

456

0.9%

The Bank of New York Mellon 140051

401

0.8%

Source: Shared Research based on company data
(As of end-February 2021)

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31

Corporate governanceForm of organization and capital structure
Form of organization
Controlling shareholder
Parent company ticker
Directors

Company with Audit & Supervisory Board
N
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

2
1

Y
Y
Y
10–20%
4
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.

Employees
At end-FY02/21, Aeon Delight had 20,117 employees (22,062 at end-FY02/20) and an average of 7,191 temporary
employees (7,459 at end-FY02/20) on a consolidated basis. At the parent level, there were 4,118 employees (4,074 at endFY02/20) and 2,915 temporary employees (2,847 at end-FY02/20).
In FY02/21, the average age, average length of employment, and average annual salary on a parent basis were as follows:
Average age: 46.1 years
Average length of employment: 11.8 years
Average annual salary: JPY4.9mn (FY02/21)
In the Aeon group, the Aeon Delight Union (4,577 members in FY02/21) 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 (UA ZENSEN . The Aeon group adopts a union shop system.

）

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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
Aeon Delight is pursuing corporate social responsibility (CSR) activities by strengthening its efforts to protect theenvironment with a management principle of creating “environmental value” for clients.
The following are examples of the company’s environmental initiatives:
Promotion of energy-saving lighting equipment
The company is promoting energy-saving lighting devices, such as light emitting diode (LED) lamps, that significantly reduce
electricity consumption. The company seeks to help clients cut carbon dioxide emissions and reduce expenses by selecting
the most suitable source of lighting depending on the situation and intended use, such as lighting for room interior or aparking space, and for illuminating a billboard.
Proposal for environmentally friendly packaging
The company proposes a variety of packaging materials, including biomass materials obtained during the growth process ofplants that do not increase carbon dioxide when burned, as well as water-based gravure printing that has low environmental
impact.
Introduction of environmentally friendly vending machines
The company introduced environmentally friendly vending machines that can reduce electricity consumption by as much as
45% a year with the use of heat pumps and LED lighting. The company unveiled heat-pump vending machines in 2008, andthose equipped with LED lighting in 2011.
Participation in Aeon 1% Club
Aeon 1% Club supports projects to protect the environment, boost international cultural and human exchange, promote
regional cultural and social activities, and donate to welfare projects. It is an initiative under which group companies
contribute 1% of their pretax profits so that these activities can be maintained regardless of the companies’ businessperformances.
Tree planting through Aeon Environmental Foundation
The company participated in a tree-planting event in Beijing, China in fiscal year 2010, took part in a similar project inJakarta, Indonesia in fiscal year 2011 and 2012, respectively. For the tree planting event in Jakarta held during fiscal year
2012, the company sponsored participation of endorsing companies, in addition to having its employees from Japan
volunteering for the event“Clean Day” on the 11th Day of Each Month
The company designated the 11th day of each month as “Clean Day,” where employees clean streets around their workplaces
before the start of the working day.
The company also conducts a number of social contributions as part of its CSR activities:

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33Volunteering at social welfare facilities
The company conducts volunteer activities at nationwide welfare facilities once a year, using the system of the Aeon Social
Welfare Foundation.
Shopping basket cleaning outsourced to vocational aid facilities
The company outsources cleaning of its shopping baskets to vocational aid centers. Shopping baskets used at its stores aresent to six “washing centers” within the vocational facilities, where the baskets are washed and applied with anti-bacterial
coating.
Construction of a school in Laos (completed in June 2008)
The Aeon Delight group conducted fund raising activities, and through the Aeon 1% Club and the Japan Committee for
UNICEF, constructed and donated a school in Laos named “Aeon Good-Job School.”
In addition, Aeon Delight’s logo is a mascot named “Gu Jo-Kun,” derived from “a good job!” and symbolizes that thecompany wishes to make all people happy.

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Historical financial statements
1H FY02/22 results (out October 6, 2021)
Sales: JPY163.9bn (+9.5% YoY)
Operating profit: JPY8.4bn (+12.4% YoY)
Recurring profit: JPY8.5bn (+13.2% YoY)
Net income*: JPY5.6bn (+40.9% YoY)*Net income attributable to owners of the parent

1H FY02/22 results analysis
Sales: Rose YoY. Sales and profit improved YoY in six segments, with Vending Machine Services the exception. Performance
was helped in particular by sales growth in the Cleaning Services segment.
Gross profit: In 1H, gross profit was JPY20.5bn (+12.2% YoY), and GPM 12.5% (+0.3pp YoY). Demand for services withrelatively high GPMs such as disinfectant cleaning at facilities with COVID-19 exposures increased. There were also signs ofbenefits from automating systems and reducing headcount, especially in the Facilities Management and Security Services.
SG&A expenses: SG&A expenses were JPY12.0bn (+12.1% YoY) in 1H, and SG&A expenses ratio was 7.3% (+0.1pp YoY).
Personnel expenses rose as the company stepped up new graduate and mid-career hires.

Progress versus full-year company forecast
Versus FY02/22 full-year company forecast, 1H sales achieved 50.4% (49.9% of full-year results in 1H FY02/21), operating
profit 51.1% (49.2%), recurring profit 51.4% (49.1%), and net income 52.9% (33.8%). This was generally in line with thecompany forecast, and ahead of progress in 1H FY02/21.
Restoration work related to the February 2021 Fukushima Prefecture Offshore earthquake and unscheduled disinfectant
cleaning at facilities with COVID-19 exposures helped results track above forecast. Overall, the impact of the pandemic on
operating profit was minimal as increased sales in Cleaning Services and Materials and Supplies Sourcing Services offset thenegative impact on the Vending Machine Services and Support Services.

Q2 (June–August 2021) FY02/22 results analysis
Q2 (June–August 2021) FY02/22 sales were JPY84.2bn (+10.5% YoY), operating profit JPY4.7bn (+16.2% YoY), recurring
profit JPY4.7bn (+17.4% YoY), and net income JPY3.1bn (+220.4% YoY).
Gross profit was JPY10.7bn (+15.3% YoY), and GPM 12.7% (+0.5pp YoY). The share in sales of services with relatively highGPMs such as disinfectant cleaning increased.
Net income increased significantly. In addition to higher recurring profit, extraordinary losses declined to JPY284mn (fromJPY2.0bn in Q2 FY02/21) as the JPY1.3bn in loss on sale of businesses associated with the transfer of the former Kajitaku’s ID
photo machine business dropped out.
Cleaning Services and Construction Work drove results at the segment level. In Q2, Cleaning Services booked sales of
JPY17.5bn (+13.7% YoY) and operating profit of JPY2.3bn (+29.0% YoY), and Construction Work sales of JPY13.6bn (+28.1%
YoY) and operating profit of JPY1.2bn (+25.6% YoY). Cleaning Services was contracted to carry out unscheduled disinfectant
cleaning at facilities with COVID-19 exposures. Restoration work related to the February 2021 Fukushima Prefecture
Offshore earthquake in Aeon group facilities boosted Construction Work sales.

Segment trends
Facilities Management
Sales: JPY31.0bn (+6.6% YoY)
Operating profit: JPY2.6bn (+2.9% YoY)
OPM: 8.5% (-0.3pp YoY)
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Sales and profit in the segment rose YoY as the company reviewed services for existing customers and added newcustomers.
The company set up a sales team dedicated to new customer development. It also strengthened its organizational sales
capabilities by visualizing and sharing sales activities and analyzing project processes through to the contract signing stage,
with the aim of boosting sales efficiency.
For existing customers, the company has unrolled account management initiatives covering key customers and area
management initiatives to reform workflow processes.
Account management
Instead of communicating with customers on a segment basis as in the past, account managers are appointed for key clientsto provide services across the segments in a single package (for example, Construction Work carries out an order associatedwith Facilities Management). The company provides consistent quality services nationwide to clients who operate throughout
Japan. It aims to expand transaction volume by centrally managing customer information to improve customer satisfaction
and refer customers to other segments.
Area management
In March 2021, Aeon Delight set up customer service centers at all eight branches in Japan and rolled out remote support
systems. The company also achieved labor-saving on-site as it installed systems and sensors at its facilities. This infrastructure
enabled labor-saving and automation through area management, which involves the sharing of facilities management
personnel in a set area. The company has launched the area management concept first with a focus on Aeon Retail stores
among the several thousand facilities under contract. It has FY02/24 targets of 360 area-managed facilities and the reductionof 180 facilities management personnel. Progress was solid as of Q2 FY02/22. The company had introduced the system at
123 facilities and reduced facilities management headcount by about 100.
In 2H, personnel affected by these changes will be redeployed to new properties or sales positions, and the benefits in termsof higher sales and lower costs should become apparent, according to the company. Area management should reduce thenumber of personnel assigned to customer facilities and reduce the amount customers pay. However, the company has
maintained the quality of facilities management using remote support, so is negotiating to raise fees per on-site personnel
and working to collaborate on providing services with other segments.

Security Services
Sales: JPY23.6bn (+9.0% YoY)
Operating profit: JPY1.7bn (+6.8% YoY)
OPM: 7.2% (-0.1pp YoY)
Sales and profit improved YoY amid a recovery in demand in Japan and overseas. The company continued to win new
customers outside the Aeon group, and increased orders for event crowd control and transport security for sports events.
In the security industry, order unit prices are falling due to price competition even as labor costs rise. The company isworking to optimize unit prices through negotiations and automating systems to handle tasks such as facility entry/exit
management and store opening/closing to improve profitability. Despite a temporary increase in capex for automation, there
are signs of improving margins.

Cleaning Services
Sales: JPY34.1bn (+12.1% YoY)
Operating profit: JPY4.3bn (+24.7% YoY)
OPM: 12.5% (+1.2pp YoY)
Sales and profit improved as demand in Japan and overseas recovered. Margins improved as demand for high-margin special
cleaning services increased.
Orders for preventive cleaning services using alcohol and hygienic cleaning services increased to help prevent the spreadof COVID-19 among both existing and new customers. The overall number of customers grew as some who had requested
one-time services switched to recurring contracts. The company has expanded its special cleaning services such as New
Standard Cleaning and cleaning for disease prevention to customers outside the Aeon group. Orders for unscheduled

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36

disinfectant cleaning at facilities with COVID-19 exposures, primarily in the Aeon group, exceeded company expectations.
Both the price and the profit margin for such cleaning are relatively high, and contributed to higher OPM.
New Standard Cleaning: A cleaning method with procedural guidelines to maintain a hygienic, attractive environment
based on the company's own cleaning service that was previously provided to hospitals.

Construction Work
Sales: JPY24.8bn (+12.0% YoY)
Operating profit: JPY2.3bn (+8.1% YoY)
OPM: 9.1% (-0.3pp YoY)
Sales and profit grew. In Q1 (February–May 2021), some construction work was delayed by the COVID-19 pandemic andsales and profit declined YoY. However, in Q2 (June–August 2021), sales and profit both rose YoY due to restoration work
related to the February 2021 Fukushima Prefecture Offshore earthquake in Aeon group facilities, and an expanded volumeof renovation contracts outside the Aeon group.
In 2H, the company plans to strengthen sales activities and review construction specifications and procedures to tackle workthat has been delayed due to the pandemic and work on new projects. Further, with the aim of improving margins, thecompany plans cost-cutting moves such as scrutinizing expenses more carefully at the construction estimate stage.

Materials and Supplies Sourcing Services
Sales: JPY28.8bn (+8.2% YoY)
Operating profit: JPY1.4bn (+6.1% YoY)
OPM: 4.7% (-0.1pp YoY)
Following the spread of COVID-19, sales and profit increased on still-high demand for quarantine-related materials such asmasks, gloves, alcohol for professional use, and acrylic partitions to prevent droplet dispersion. New customer numbers roseas the segment continued to expand customer numbers inside and outside the Aeon group.
The company expects demand to decline in 2H as the pandemic settles down. It plans to step up sales activities, focusing on
companies that have newly joined the Aeon group, in a bid to become a top supplier able to meet all the needs of materials
for the group.
Aeon Delight plans to redouble its efforts in joint procurement with the Construction Work segment to boost margins. Other
segments acquire supplies that the Materials and Supplies Sourcing Services handles from external companies. The company
is encouraging other segments to purchase such supplies from the Materials and Supplies Sourcing Services. It expects
procurement costs to fall as procurement volume increases.

Vending Machine Services
Sales: JPY13.5bn (+12.3% YoY)
Operating profit: JPY353mn (-1.1% YoY)
OPM: 2.6% (-0.4pp YoY).
Demand for beverages from vending machines slumped in 1H FY02/21 on the closure of facilities, people refraining fromgoing out, and increased teleworking in the wake of the government’s declaration of a state of emergency. In 1H FY02/22,
sales increased as customer traffic began to return to facilities and offices, and demand for beverages from vending
machines recovered.
Profit fell. Fixed costs rose as the company installed more of its own multi-brand vending machines, which feature a mix ofbrands from several beverage companies, in a bid to boost unit profitability.

Support Services
Sales: JPY8.1bn (+4.1% YoY)
Operating profit: JPY255mn (versus an operating loss of JPY100mn in 1H FY02/21)
OPM: 3.2%
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Sales and profit increased on a recovery in demand for event, travel, and business trip support services at company
subsidiary Aeon Compass and exit from a loss-making subsidiary. Demand at household support services company Actia
slumped amid price cuts by competitors.
In 2H, the company plans to meet outsourcing operational needs at customer facilities and expand its service offerings to
improve earnings.

Overseas business
Sales: JPY11.9bn (+25.9% YoY)
Operating profit: JPY870mn (+21.4% YoY)
In the overseas business, individual segments are in charge depending on the type of project. Earnings from the overseas
business are included within each segment.
Sales and profit grew, as the business expanded, mainly in China. The company operates Facilities Management, Security
Services, Cleaning Services, and Support Services overseas. Aeon group companies comprise roughly half of its customers.
OPM is roughly the same as in the company's domestic business.
China
Sales and profit grew. Sales were JPY7.9bn and operating profit JPY700mn. The impact of the pandemic was relatively small,and economic activity rebounded quickly.
In China, under the oversight of Aeon Delight China (AD China; a company established in April 2021), Aeon Delight Jiangsu
and Wuhan Xiaozhu Property Management expanded their businesses by focusing on contracts for priority facilities such as
medium- to high-end shopping centers, hospitals and nursing homes, and facilities in areas undergoing redevelopment.
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 in factories owned by Japanesebusinesses.
ASEAN
In Malaysia, sales were JPY800mn and operating profit breakeven; in Vietnam, sales were JPY1.6bn and operating profit
JPY130mn; and in Indonesia sales were JPY1.6bn and operating profit JPY37mn. The spread of COVID-19 continued in the
ASEAN region, and there were restrictions on economic activity in ASEAN countries where the company has local entities.
This means that the company continued to face a tough operating environment in the region, with measures including thesuspension of operations at facilities and shorter operating hours.
The company thinks that earnings in ASEAN may decline YoY in 2H. The pandemic is severe, and some Aeon group facilities
are temporarily closed. In Malaysia and Indonesia, the company has dispatched personnel from Japan to build infrastructurewith a view to winning more contracts from Aeon group facilities. The company intends to reinforce its infrastructure in
Vietnam, where Aeon Mall is stepping up store openings.

Summary of measures for FY02/22
Improving business with entities outside the Aeon group
The company plans to increase the ratio of sales outside the Aeon group to 40.0% by the end of FY02/24 from 35.7% in
FY02/21 to reduce its dependence on intragroup sales. It reformed its sales structure in November 2020 with the aim of
expanding transactions with external companies, and established a department to efficiently acquire new customers bytargeting major domestic companies. The company has also made use of personnel familiar with target industries tostrengthen sector specific sales. It has gained customers from outside the group in the Facilities Management, Security
Services, and Cleaning Services.
However, the ratio of sales outside the group declined to 34.2% in 1H FY02/22 due to a rise in demand for disinfectant
cleaning and similar services at group companies, despite the company continuing to win orders from outside the group.
Note: There is no difference between service pricing and the company’s margins for services offered within the Aeon groupand externally.

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Head office relocation
The company relocated its head office in September 2021. Head office functions previously divided between Tokyo, Chiba,
and Osaka were consolidated in Tokyo (Chiyoda). Relocation expenses and expenses for relocating employees were booked
through 1H, but were small. The company plans to capitalize renovation expenses in Q3.
The company's interior design department remodeled the premises with the aim of creating a smart office to boost head
office operational efficiency and facilitate work style reforms. The company has built a system enabling smoothcommunication with employees working from home or satellite offices with an enhanced communication environment
throughout the building. It has also established a network environment permanently connected to all eight domestic
branches, enabling instant communication with group companies in Japan and overseas.
Digital transformation progress
In June 2021, the Ministry of Economy, Trade and Industry named the company a digital transformation (DX) certified
business, in recognition of its initiatives in promoting DX aimed at building sustainable business models in facilities
management. With an increasingly acute labor shortage in the facilities management business, the company plans to use DX
to build systems that enable efficient service provision.
The company continues to develop its Aeon Delight platform. It plans to use the platform to collect, analyze, and process
customer feedback, facility conditions, and market trends in customers’ industries. It plans to use the data to strengthen
relationships between the sales department and customers and offer solutions that will solve customer issues.

Q1 FY02/22 results (out July 7, 2021)
Summary
Sales: JPY79.7bn (+8.4% YoY)
Operating profit: JPY3.7bn (+7.9% YoY)
Recurring profit: JPY3.8bn (+8.4% YoY)
Net income: JPY2.5bn (-16.2% YoY)
Sales rose YoY Except for the Construction Work segment, sales and profit improved YoY in each of the company’s segments.
Performance was helped in particular by favorable growth in the Cleaning Services segment.
With the rise in sales, operating profit also increased, but net income fell. This occurred due to earlier accounting
irregularities at Kajitaku and the resulting tax refund of JPY1.1bn recorded in connection with requests for amended returns.
Kajitaku: In late March 2019, accounting irregularities were discovered at Kajitaku, a former company subsidiary. The
company submitted corrected financial statements covering FY02/14 through FY02/19 with a cumulative revised figureof JPY16.3bn.

Progress versus full-year company forecast
Versus FY02/22 full-year company forecast, in Q1 sales achieved 24.5%, operating profit 22.6%, recurring profit 22.7%, andnet income 23.9%. This was generally in line with the company forecast. Operating profit was below 25%. While this appears
lower than expected, it was due to an increase in personnel costs, as the company forecasted in its initial forecast.
In the Construction Work business, the company expects that the postponement of some store renovation projects it hasreceived will delay booking of construction revenue to Q2. In other segments, the results were generally in line with thecompany's initial forecast. Regarding the impact of the COVID-19 pandemic, although the state of emergency lasted longer
than expected in the company’s initial forecast, the impact was within the anticipated range (resulting in a decrease inoperating profit of JPY170mn). The negative impact of the pandemic is expected to reduce operating profit by JPY500mn in
FY02/22, with a JPY250mn decline in Support Services.
All segments appear to be progressing in line with the company forecast in Q2.

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Segment trends
Facilities Management（）

Sales: JPY15.5bn +6.9% YoY
Operating profit: JPY1.3bn +1.5%YoY
OPM: 8.2% (-0.5pp YoY)（）

Sales and profit in the segment increased YoY thanks mainly to an increase in orders for a variety of maintenance services,along with additional orders from major clients. The efforts to enhance account management for key customers during its
medium-term business plan (FY02/22 to FY02/24) turned to be successful.
Account management: Instead of communicating with customers on a segment basis as in the past, account managers
are appointed for key clients to provide services across the segments in a single package (for example, the Construction
Work segment receives an order for a construction project which is handled by the Facilities Management segment). In
this way, the company provides services of stable quality on a national scale to clients who operate throughout Japan. By
centrally managing client information, the company aims to improve customer satisfaction and expand transactions.

In March 2021, customer service centers began operating at all eight branches in Japan, enabling remote support and laborsaving on-site operations using various systems and sensors. Collaboration with Customer Support Centers has enabled area
management, which involves the sharing of facilities management personnel in a certain area. In the past, various facilities
had permanently stationed management personnel assigned to them; area management makes it possible to deal with labor
shortages by reducing or eliminating the need for these permanent assignments. With medium-term targets of 360 areamanaged facilities and the reduction of 180 management personnel, by Q1 FY02/22 the company had introduced thesystem at 95 facilities and reduced the number of facilities management personnel by about 70. The personnel affected bythese changes will be moved to new properties and sales positions. According to the company, the benefits of thesemeasures in terms of cost reductions and boosted revenue are expected to become apparent in Q2 and beyond.

Security Services（）（

Sales: JPY11.6bn +7.3% YoY
Operating profit: JPY796mn +4.3% YoY
OPM: 6.8% (-0.2pp YoY)）

Sales and profit improved YoY amid a recovery in demand in Japan and the overseas markets. In Q1 FY02/21, many facilities
utilizing the company’s Security Services were closed due to the COVID-19 pandemic, and demand for event security
dropped. However, Q1 02/22 saw a rebound.
To improve profitability, the company continued its initiatives to optimize unit prices through price negotiations and progressin automating systems to handle routine tasks such as facility entry/exit management and store closings. The challenge is thatin the security industry, even while labor costs are on the rise, order unit prices are falling due to price competition withcompetitors. Industry companies, including Aeon Delight, are negotiating price increases to help optimize order unit prices.

Cleaning Services（）

Sales: JPY16.6bn +10.4% YoY
Operating profit: JPY2.0bn +19.9% YoY
OPM: 11.9% (+0.9pp YoY)（）

Sales and profit improved as demand in Japan and overseas recovered. Orders for preventive cleaning services using
alcohol and hygienic cleaning services increased to help prevent the spread of COVID-19 among both existing and newcustomers. The overall number of clients grew as some who had requested one-time cleaning services switched to recurring
contracts. The implementation of cleaning for disease prevention and special cleaning services like “new standard cleaning”
is also expanding. Both the price and the profit margin for such cleaning are relatively high, and OPM rose as a result.
New Standard Cleaning: A cleaning method with procedural guidelines to maintain a hygienic, attractive environment
based on the company's own cleaning service that was previously provided to hospitals.

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40

Construction Work（）（

Sales: JPY11.2bn -2.8% YoY
Operating profit: JPY1.1bn -6.3% YoY
OPM: 9.5% (-0.4pp YoY)）

Sales and profit declined YoY on the reduction and delay of store renovation work ordered due to the COVID-19 pandemic.
Although OPM fell compared to Q1 FY02/21 due to a decline in sales, it improved compared to 9.1% in Q1 FY02/20. The
effects of cost reduction measures like more carefully scrutinizing expenses at the construction estimate stage have gradually
become apparent since FY02/21.
The company expects construction revenue that was delayed in Q1 02/22 to be booked in Q2, as well as income from largescale construction. 1H results are anticipated to be in line with the company forecast.

Materials and Supplies Sourcing Services（）（

Sales: JPY14.1bn +9.0% YoY
Operating profit: JPY656mn +7.2% YoY
OPM: 4.6% (-0.1pp YoY)）

Following the spread of COVID-19, sales and profit increased on the rise in demand of quarantine-related materials such asmasks, gloves, alcohol for professional use, and acrylic partitions to prevent droplet dispersion. The segment continued tofocus on expanding its market share within the Aeon group. Customer development progressed, and orders from newcustomers also rose.
Even so, OPM fell 0.1pp YoY. This was due to a deteriorating product mix with higher sales of low-margin products, as well as
higher distribution costs.

Vending Machine Services（）

Sales: JPY6.5bn +38.2% YoY
Operating profit: JPY116mn (versus a loss of JPY10mn in Q1 FY02/21)
OPM: 1.8% (operating loss in Q1 FY02/21)
Demand for beverages from vending machines slumped in Q1 FY02/21 on the closure of facilities and people refraining
from going out in the wake of the government’s declaration of a state of emergency. Although some facilities were closed or
operated with reduced hours in Q1 FY02/22, both sales and profit increased as customer traffic began to return to thefacilities and demand for beverages from vending machines recovered.
OPM was 1.8%. This was down compared to the OPM of 3.3% in Q1 FY02/20 (operating loss in Q1 FY02/21). In order toimprove profitability per unit, the company has been installing more of its own multi-brand vending machines (which offer
products from several different brands), but fixed costs such as labor costs and depreciation became more burdensome assales declined.
There are two types of vending machines in operation: machines owned by the company and machines owned by partnercompanies like sales companies of beverage makers. The purchase of beverages and filling of vending machines areoutsourced to contractors, while the company determines the locations and coordinates the product lineup. The company's
overall sales in this area are tied to beverage sales, with additional compensation from the manufacturers. Operating profit is
the amount remaining after paying commissions to operators and installation sites.

Support Services（）

Sales: JPY4.1bn +3.8% YoY
Operating profit: JPY119mn (15x Q1 FY02/21)
OPM: 2.9% (+2.7pp YoY)
In Q1 FY02/21, the COVID-19 pandemic caused a slump in demand for the event and travel-related services of a company's
subsidiary, Aeon Compass. As the situation improved, both sales and profit increased in Q1 02/22.The company worked to
expand the provision of a variety of services in order to meet outsourcing needs related to the management and operationof contracted facilities and their surroundings.

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41

Overseas business
Sales: JPY5.6bn (+16.7% YoY)
Operating profit: JPY420mn (+16.7% YoY)
OPM: 7.5% YoY
Segments manage their overseas business according to the type of business conducted. The company mainly operates
Security Services business and Cleaning Services business overseas while it is also involved in Facilities Management andSupport Services businesses. OPM is almost at the same level as the company's domestic business.
China
The impact of the COVID-19 pandemic in China was relatively limited, and economic activity recovered quickly. Aeon
Delight Jiangsu and Wuhan Xiaozhu Property Management expanded their businesses by focusing on bolstering contracts forpriority facilities such as medium- to high-end shopping centers, hospitals and nursing homes, and facilities in areas
undergoing redevelopment.
In April 2021, the company established Aeon Delight Jiangsu in Suzhou, China to oversee its operations in the country,
aiming to enhance group governance in China, maximize synergy among its operating companies, and establish thecompany brand. Aeon Delight Jiangsu promotes investment and M&A deals in China and develops a national sales strategy incollaboration with its local subsidiaries.
ASEAN
The spread of COVID-19 in the ASEAN region is ongoing and the company continued to face a tough operating
environment as shorter operating hours, partial closures, idling of facilities, and curfews were in effect in countries like
Malaysian (its government issued travel and movement restrictions in January 2021) and Indonesia where the company
operates.

Summary of measures for FY02/22
Subsidiary reorganization
In March 2021, the integration of A to Z Service Co., Ltd., an interior construction and maintenance services provider for
mainly Kanto-area small and medium facilities, and Do Service Co., Ltd., a cleaning services provider for mainly Kansai-areasmall and medium facilities, resulted in the birth of Aeon Delight Connect Co., Ltd. The new company is set to become acore company within the group that can provide comprehensive management services for small and medium-sized facilities
throughout Japan. The reorganization will allow the company to expand the service area of A to Z Service Co., Ltd. and Do
Service Co., Ltd. and increase the services available to existing customers.
Both sales representatives and top management are engaged in sales activities at national chains, including convenience
stores, restaurants, supermarkets, and apparel shops. Although the company did not see any significant results in Q1, thenumber of estimates requested rose, and it expects to see results in 2H.

Improving business with entities outside the Aeon group
The company plans to increase the ratio of sales outside the Aeon group, thereby reducing its dependence on intragroupsales. The ratio of sales outside the Aeon group in FY02/21 was 35.7%, and the company plans to raise this to 40.0% by theend of FY02/24.
The company reformed its sales structure in November 2020 with the aim of expanding transactions with external
companies, and established a new department to efficiently acquire new customers by targeting major domestic companies.
However, the ratio of sales outside the Aeon group declined to 35.4% in Q1 02/22 due to a rise in demand for disinfectant
cleaning and similar services at companies within the group. Still, sales to companies outside the Aeon group increased byabout 8%.

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Full-year FY02/21 results (out April 9, 2021)
SummaryIn FY02/21, Aeon Delight reported consolidated sales of JPY300.1bn (-2.8% YoY), operating profit of JPY15.2bn (-4.8% YoY),
and net income of JPY11.7bn (+24.9% YoY). Sales and profit fell as some contracted facilities were partially closed or
temporarily shut down, events were canceled, and people refrained from going out due to the impact of the COVID-19
pandemic. Sales and operating profit, which were severely affected in 1H in particular, failed to match the record highs of
FY02/20. While assessing the pandemic’s impact, the company implemented initiatives to capture demand for disease
prevention measures, for example by introducing “new standard cleaning” based on standards for the with-COVID era.
Looking at sales by quarter, we can see a steady recovery trend, since sales were -7.0% YoY in Q1, but then -2.8% YoY in Q2,-0.7% YoY in Q3, and -0.3% YoY in Q4. Operating profit was -9.1% YoY in Q1 and -15.6% YoY in Q2, but +5.8% YoY in Q3 and+3.1% YoY in Q4. Aeon Delight says that the pandemic’s negative impact of JPY1.5bn on operating profit was in line with its
initial estimate. Against this backdrop, the company worked to reduce SG&A expenses through productivity improvements,
the introduction of area management to aid labor-saving and unmanned management of facilities, and organizational
restructuring to improve management efficiency (such as streamlining and integration of subsidiaries). As a result, OPM
improved from 4.9% in 2H FY02/20 to 5.1% in 2H FY02/21, and the infrastructure for the next stage of growth has been
put in place. Net income hit a record high, due in part to a reduced tax burden, so the annual dividend was JPY82.0 per
share (dividend payout ratio of 35.1%), up from an initial projection of JPY70.0 per share.
In Q4, sales were JPY75.7bn (-0.3% YoY) and operating profit was JPY4.0bn (+3.1% YoY), marking another YoY increase at theoperating level following Q3.
The company’s forecast for FY02/22 is sales of JPY325.0bn (+8.3% YoY), operating profit of JPY16.5bn (+8.3% YoY) and net
income of JPY10.5bn (-10.1% YoY). The EPS forecast is JPY210.0 and the annual dividend forecast is JPY84.0 per share(including commemoration dividend of JPY10 per share). Sales and operating profit are expected to reach record highs: thenegative impact of COVID-19 on operating profit is expected to fall to JPY500mn from JPY1.5bn in FY02/21, and sales are
expected to benefit from initiatives to secure new customers, as well as boost revenue from existing customers, andmeasures to improve profitability.
The company updated its Aeon Delight Vision 2025 plan published in October 2018 and announced new targets alongside
the publication of FY02/21 results. There is no change to the fundamental strategy of being a company that createsenvironmental 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 aims to achieve sales of JPY471.0bn (CAGR of
9.4%), operating profit of JPY37.0bn (CAGR of 19.4%), and ROE of over 15% in FY02/26 (FY02/21 ROE was 14.1%). (Theprevious targets were sales of JPY525.0bn and operating profit of JPY48.0bn.) Growth drivers for the business are sales
expansion outside the Aeon group, structural reforms, and M&A. The company plans to achieve sales of JPY361.0bn andoperating profit of JPY22.0bn in FY02/24, and aims for a dividend payout ratio of 40%.

Results by segment
Facilities Management
In the Facilities Management segment, sales were JPY58.2bn (-0.1% YoY) with segment profit of JPY5.2bn (-2.2% YoY). Sales
and profits declined as a result of the drop in sales in 1H due to COVID-19 (sales and profits increased in 2H).
In Q4, the segment posted sales of JPY14.4bn (+2.6% YoY) and segment profit of JPY1.3bn (+0.4% YoY). Sales declined YoY in
Q1 and Q2 with the impact of the pandemic, but rose YoY from Q3 onward with a reduced pandemic impact andcontributions from new contracts. The increase in new customers and capture of ventilation and air conditioning demand led
to higher sales, while a focus on area management to improve profitability led to progress on business model reform.

Security Services
The Security Services segment reported sales of JPY44.4bn (-0.6% YoY) and segment profit of JPY3.3bn (+8.9% YoY). Amid aworker shortage in recent years, the company continued to streamline its business by automating systems to handle routine
tasks such as facility entry/exit management and store closings. Profitability improved as a result of initiatives to optimize unit
prices through price negotiations.
Q4 sales were JPY11.4bn (+0.7% YoY) and segment profit was JPY920mn (+10.7% YoY). The profit margin increased due toautomation of store closings and other efforts to improve efficiency, reduce manpower, and mechanize operations.
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43Cleaning Services
The Cleaning Services segment reported sales of JPY62.5bn (+0.2% YoY) and segment profit of JPY7.3bn (+5.1% YoY). The
company stepped up proposals to expand the rollout of “new standard cleaning” in the with-COVID era and focused on
training specialists in cleaning for epidemic prevention. Profitability improved as a result of efforts to improve profitability ofpoorly performing properties and share successful workplace case studies.
Q4 sales were JPY16.4bn (+3.4% YoY) and segment profit was JPY2.0bn (+18.4% YoY). Growth in new contracts, emergency
disinfection work prompted by the pandemic, and the rollout of “new standard cleaning” all contributed to higher sales YoYfrom Q3 onward. OPM improved due to an increase in highly profitable cleaning for disease prevention, rising 0.8pp YoY in
Q3 and 1.5pp YoY in Q4.

Construction Work
The Construction Work segment reported sales of JPY40.7bn (-2.8% YoY) and segment profit of JPY3.9bn (+1.7% YoY).
Although there was an increase in contracts for various construction work, sales declined due to delayed starts for someprojects due to the COVID-19 pandemic. Profit grew YoY, however, as profitability improved thanks to cost reductions, withimproved accuracy for work estimates and a more standardized approach to procurement.
Q4 sales were JPY9.6bn (-1.9% YoY), and segment profit was JPY1.0bn (+2.9% YoY). The company could not compensate for areactionary decline from the large orders received in Q4 FY02/20 and sales fell YoY, but OPM has improved due tocontinued improvement in the accuracy of estimates calculated when receiving orders.

Materials and Supplies Sourcing Services
The Materials and Supplies Sourcing Services segment reported sales of JPY53.1bn (+3.8% YoY) and segment profit of
JPY2.5bn (-0.9% YoY). Sales grew on orders for products to prevent the spread of COVID-19 (such as commercial-grademasks, gloves, alcohol, and acrylic screens to prevent droplet spread), as well as orders for Aeon’s TOPVALU private brandpackaging materials. Despite lower purchasing costs achieved through economies of scale and improved distribution
efficiency, profit declined, hurt by factors such as the new charge for checkout bags starting in July 2020.
Q4 sales were JPY13.4bn (+6.7% YoY), and segment profit was JPY616mn (+13.4% YoY).

Vending Machine Services
The Vending Machine Services segment reported sales of JPY25.5bn (-19.3% YoY) and segment profit of JPY653mn (-53.2%
YoY). Beverage sales fell sharply due to temporary closure of commercial facilities where vending machines are installed.
Although the company installed more of its own multibrand vending machines (which offer products from a number ofdifferent brands) to improve profitability per unit, this was not sufficient to compensate for lower sales.
Q4 sales were JPY6.4bn (-17.8% YoY), and segment profit was JPY90mn (-79.9% YoY). In addition to a decrease in sales,
expenses increased. As part of anti-COVID measures, the company strengthened support for settlement using QR codes. This
improved convenience and safety.
The company also enhanced safety by applying antimicrobial film to buttons, pickup ports, and other places users may touch.
Such efforts to ensure vending machine users have peace of mind caused expenses to increase.

Support Services
The Support Services segment reported sales of JPY15.8bn (-15.6% YoY) and a segment loss of JPY75mn (versus profit of
JPY416mn in FY02/20). Earnings of Aeon Compass (subsidiary engaged in travel-related businesses) deteriorated.
Q4 sales were JPY4.1bn (-11.1% YoY), and the segment profit was JPY96mn (versus a loss of JPY25mn in Q4 FY02/20). Weakperformance at Aeon Compass due to the cancellation of events and trips and the sale of the ID photo machine businesswere the main reasons for the decline in sales.

Overseas businesses
Overseas businesses reported sales of roughly JPY19.9bn (+1.0% YoY) and segment profit of about JPY1.6bn (-1.7% YoY). In
China, the Wuhan subsidiary was impacted by the city’s lockdown from the start of the year to early April, but accelerated
marketing activities to cultivate new customers once the lockdown was lifted, and has started providing services at several
facilities. The Jiangsu subsidiary won contracts for mid- to upscale shopping centers, hospitals, nursing homes, andAEON Delight/ 9787
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44redevelopment areas. In the ASEAN region, the company expanded contracts to work mainly on Aeon group stores inIndonesia. Note that overseas subsidiaries’ earnings are for January–December 2020.

Q3 FY02/21 results (out January 13, 2021)
Summary
In cumulative Q3 FY02/21, Aeon Delight reported consolidated sales of JPY224.4bn (-3.5% YoY), operating profit of
JPY11.2bn (-7.4% YoY), and net income of JPY6.3bn (-14.2% YoY). Sales and profit fell as some contracted facilities werepartially closed or temporarily shut down, events were canceled, and people refrained from going out due to the COVID-19
pandemic. The company assumes that the pandemic will have a negative impact of about JPY1.5bn on FY02/21 operating
profit. In cumulative Q3, the drag was about JPY1.3bn (roughly JPY1.1bn in 1H).
Non-cumulative Q3 sales were JPY74.7bn (-0.7% YoY), and operating profit was JPY3.7bn (+5.8% YoY). Q3 sales fell less thanQ1, when they were down by 7.0% YoY, and Q2, when they were down by 2.8%. Sales generated by facilities management,
security, and cleaning began to rise thanks in part to results associated with commercial facilities and new contracts involving
headquarter buildings held by automobile and drug manufacturers, head offices of local banks, hotels, distribution centers,
baseball fields, and other facilities. GPM improved to 12.5% (versus 12.3% in Q3 FY02/20). Gradually contributing to thisimprovement were price negotiations for low-fee deals, cost control achieved through personnel saving, supplierconsolidation, and purchase price optimization. The company reduced SG&A expenses to JPY5.6bn (-2.3% YoY). Travel andtransportation expenses fell thanks to the active application of teleworking and remote conferencing.
FY02/21 company forecast remains unchanged at consolidated sales of JPY315.0bn (+2.1% YoY), operating profit of
JPY16.5bn (+3.1% YoY), net income of JPY10.0bn (+7.0% YoY), and EPS of JPY200.13. The annual dividend forecast is alsounchanged at JPY70 per share. Versus full-year forecast, cumulative Q3 sales were 71.2% (75.4% in Q3 FY02/20), operating
profit 68.0% (75.6%), and net income 63.3% (78.8%). Aeon Delight seeks to grow sales in part by expanding sales ofcleaning for epidemic prevention and related supplies, replacing security cameras, and stepping up proposals related to EV
charger installation. At the same time, it will aim to achieve the projections in its full-year forecast by minimizing costs
through measures such as supplier consolidation, purchase price optimization, and active implementation of teleworking
remote conferencing. The company will also bolster its efforts to achieve targets by raising capital efficiency through asset
sales and other means.

Results by segment
Facilities Management
The Facilities Management segment reported cumulative Q3 sales of JPY43.8bn (-1.0% YoY) and segment profit of JPY3.9bn(-3.0% YoY). To increase sales, the company brought its integrated facility management service using an open network system
into Aeon Style Shin-Urayasu and worked to expand sales of environment-friendly, CFC-free refrigerated display cases, butthese efforts were not sufficient to turn sales around. With the aim of improving profitability, the company is concentrating
on area management and progressing cost reduction measures such as improving profitability of poorly performing
properties, centralizing purchasing, and optimizing purchase unit prices.
Q3 sales were JPY14.7bn (+0.8% YoY), and segment profit was JPY1.4bn (+9.4% YoY). Sales in Q1 and Q2 fell YoY due in partto the COVID-19 pandemic. However, sales began to rise in Q3, benefitting from new contracts as negative impact from thepandemic abated. Earning power in the Facilities Management segment rose thanks in part to personnel saving achieved
through expansion in the areas covered by facility management services (reducing personnel assigned to customer facilities
and undertaking facility management by region instead of individual facility), cost reduction attained through standardizationof replacement equipment and devices, and internalization of repair work. Segment OPM was 9.3%, up from 8.5% in Q3
FY02/20. Aeon Delight installed a variety of systems and sensors targeting automation of resident facility management at
model stores in Hokkaido. Later, the company field tested this equipment and verified its efficacy. Moving forward, thecompany plans to promote a horizontal rollout that will cut back on required personnel and expand the area covered by its
facility management services to include all of Hokkaido. At the same time, it is also planning a nationwide rollout that will
focus on Aeon group stores.

Security Services
The Security Services segment reported cumulative Q3 sales of JPY33.0bn (-1.0% YoY) and segment profit of JPY2.4bn(+8.2% YoY). Amid a worker shortage in recent years, the company continued to streamline its business by automating

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45systems to handle routine tasks such as facility entry/exit management and store closings. Profitability improved as a result of
initiatives to optimize unit prices through price negotiations.
Q3 sales were JPY11.3bn (+1.3% YoY), and segment profit was JPY793mn (-0.3% YoY). Sales in Japan fell slightly YoY, but sales
generated overseas (in China, Vietnam, etc.) rose on a rise in the number of contracts acquired. The company is conducting
negotiations aimed at achieving optimal pricing for nighttime security system installation proposals and other businesspropositions. However, segment profit fell slightly YoY due to a larger fixed cost burden associated with overseas subsidiaries.

Cleaning Services
The Cleaning Services segment reported cumulative Q3 sales of JPY46.1bn (-0.9% YoY) and segment profit of JPY5.3bn(+0.9% YoY). The company stepped up proposals to expand the rollout of “new standard cleaning” (a new cleaning methodthat is based on scientific evidence and produces hygienic environments using equipment that is different from that used intypical cleaning), its cleaning standards in the with-COVID era, focusing on training specialists in cleaning for epidemic
prevention. Profitability improved as a result of efforts to improve profitability of poorly performing properties and sharesuccessful workplace case studies.
Q3 sales were JPY15.7bn (+0.4% YoY), and segment profit was JPY1.9bn (+7.2% YoY). Sales began to rise in Q3 thanks in partto an increase in new contracts, contract acquisitions associated with solutions such as emergency disinfecting conducted in
response to the COVID-19 pandemic, and the launch of “new standard cleaning.” Sources of new added value such as
emergency disinfecting and “new standard cleaning” appear to be contributing to improvement in profitability.

Construction Work
The Construction Work segment reported cumulative Q3 sales of JPY31.0bn (-3.1% YoY) and segment profit of JPY2.9bn(+1.3% YoY). Cumulative results in Q3 were slightly below projections, apparently due to some construction work launchdelays caused by the COVID-19 pandemic. However, the company secured higher profit YoY as earning power in thesegment increased thanks in part to a decrease in cost of sales. Aeon Delight is targeting recovery through acquisition of
construction projects that have not yet been started and construction projects associated with environmental measures,
including the installation of electric vehicle charging stations.
Q3 sales were JPY8.9bn (-0.2% YoY), and segment profit was JPY798mn (+19.3% YoY). The company is steadily receiving
orders for services such as renovation work for the Aeon group, thereby securing relatively stable results. The company isendeavoring to raise earning power in the segment in spite of its present tendency to fluctuate according to the quantity andnature of acquired contracts. In support of this objective, the company is implementing a variety of measures, including
efforts aimed at raising the accuracy of its work estimates and standardizing its procured materials. In December 2020, thecompany announced its absorption of wholly owned subsidiary U-COM Co., Ltd. Through this merger, the company isseeking to improve efficiency.

Materials and Supplies Sourcing Services
The Materials and Supplies Sourcing Services segment reported cumulative Q3 sales of JPY39.6bn (+2.8% YoY) and segment
profit of JPY1.9bn (-4.9% YoY). Sales grew on orders for products to prevent the spread of COVID-19 (such as commercialgrade masks, gloves, alcohol, and acrylic screens to prevent droplet spread), as well as orders for Aeon’s TOPVALU private
brand packaging materials. Despite lower purchasing costs achieved through economies of scale and improved distribution
efficiency, profit declined, hurt by factors such as the new charge for checkout bags starting in July 2020. Q3 sales were
JPY13.0bn (+3.1% YoY), and segment profit was JPY567mn (-4.1% YoY).

Vending Machine Services
The Vending Machine Services segment reported cumulative Q3 sales of JPY19.1bn (-19.8% YoY) and segment profit of
JPY563mn (-40.6% YoY). Beverage sales fell sharply due to temporary closure of commercial facilities where vending
machines are installed. Although the company installed more of its own multibrand vending machines (which offer products
from a number of different brands), this was not sufficient to compensate for lower sales.
Q3 sales were JPY7.0bn (-8.9% YoY), and segment profit was JPY206mn (-15.2% YoY). Ostensibly, these results occurredbecause the COVID-19 pandemic lowered the frequency of visits to commercial facilities and reduced the lengths of timethat visitors spent at these facilities.

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46Support Services
The Support Services segment reported cumulative Q3 sales of JPY11.8bn (-17.1% YoY) and a segment loss of JPY171mn(versus profit of JPY441mn in cumulative Q3 FY02/20). Earnings of Aeon Compass (subsidiary engaged in travel-related
businesses) deteriorated. The Support Services segment excluding the former Kajitaku recorded sales of JPY9.3bn (-11.9%
YoY) and segment profit of JPY584mn (-57.7% YoY).
Q3 sales were JPY4.0bn (-11.4% YoY), and segment loss was JPY71mn (versus profit of JPY187mn in Q3 FY02/20). Excluding
impact from Actier, Inc. and Keiji Shinyoukumiai (formerly known as KAJITAKU), segment sales were JPY3.2bn (-11.7% YoY),
and operating profit was JPY268mn (-47.7% YoY). Curtailment of business trips from Aeon group companies continues toaffect the results generated by Aeon Compass. Aqutia Corporation, which operates the Housekeeping Support Business
formerly handled by KAJITAKU, reported a recovery in demand compared to Q1 and Q2, but future demand has once again
become uncertain due to a second state of emergency declared in January 2021. KJS Corporation, which operates a store
support business formerly handled by KAJITAKU, experienced a contraction in business scale due to the transfer of its ID
photo machine business on June 30, 2020. It is also expected to withdraw from its smartphone printing business and picture
palette business during FY02/21. Starting in FY02/22, it will comprise only the copier business, and the company projects a
decline in operating loss along with this decrease in scale.

Overseas
Overseas businesses reported sales of roughly JPY14.3bn (+2.6% YoY) and segment profit of about JPY1.1bn (-1.9% YoY). In
China, the Wuhan subsidiary was impacted by the city’s lockdown in early 2020, but accelerated marketing activities tocultivate new customers once the lockdown was lifted, and has started providing services at several facilities. The Jiangsu
subsidiary won contracts for mid- to upscale shopping centers, hospitals, nursing homes, and redevelopment areas. In the
ASEAN region, the company expanded contracts to work mainly on Aeon group stores in Indonesia. Note that overseas
subsidiaries’ cumulative Q3 earnings are for January–September 2020.

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47

News and topics
Publication of integrated report2021-10-06

Aeon Delight Co., Ltd. released its first integrated report, Aeon Delight Integrated Report 2021, on the company's corporatewebsite. An English version of this document is to be published toward the end of November 2021.

Crisis management center in the new head office2021-08-31

Aeon Delight Co., Ltd. announced its plan to have the customer support center in its new head office (Chiyoda-ku, Tokyo)
also serve as a crisis management center. This is in preparation for major disasters that may affect large areas, including
natural disasters as well as an earthquake directly beneath the Tokyo Metropolitan Area and Nankai Trough earthquakes
expected to occur in near future.

Structural reforms, personnel change, and new head office
opening
2021-08-30

Aeon Delight Co., Ltd. announced that it will relocate its head office from Minamisenba Heart Building (Osaka, Osaka
Prefecture) to Teitokanda Building (Chiyoda-ku, Tokyo) and will start operations at the new head office from September 1,
2021.
The aim is to improve productivity through consolidating head office functions, which were previously divided between
Osaka, Tokyo and Chiba, and implementing work style reforms.
The company announced structural reforms and a personnel change.
Details of structural reforms (as of September 1, 2021)
The new Group Control Department will be established under the direct management of the president. The Control
Division, Affiliated Companies Management Division and Budget Management Division will be transferred to this new
department and renamed the Parent Company Management Division, Affiliated Companies Division and Consolidated
Management Division respectively. The Affiliated Companies Department and the International Division will be abolished,
and their functions will be divided and transferred to the appropriate departments and divisions.
Executive officer announcement (as of September 1, 2021)
Name
Hiroaki Ochi

New position
Executive Officer, COO of ASEAN
Business

Former position
Executive Officer, COO of ASEAN Business and General
Manager of Affiliated Companies Department

Achievement of the WELL Health-Safety Rating at new
headquarters
2021-08-19

Aeon Delight Co., Ltd. announced that its new headquarters has earned the WELL Health-Safety Rating for the first time.
On August 2021, the company's new head office (due to open in September 2021) was awarded a WELL Health-Safety
Rating. The company intends to utilize the technology and knowledge accumulated through the achievement of the WELL
Health-Safety Rating to create a safe and healthy facility environment for its customers.
The WELL Health-Safety Rating is an international certification system established in response to the COVID-19 pandemic aspart of the WELL Certification, which offers performance evaluations for buildings and facilities on their environmental andenergy efficiency as well as heath and well-being of the users. As of the end of July 2021, 12,000 buildings and facilities

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worldwide and about 30 in Japan have been awarded the certification by the International WELL Building Institute (IWBI) in
the US.
The company's new head office has implemented various measures to prevent the spread of COVID-19 and features toensure employee health, and has earned the certification. In addition, measures have been put in place to ensure business
continuity, including the construction of a power supply and dedicated communication circuits in the event of a disaster.

Basic policies for sustainability
2021-08-02

Shared Research updated the report following interviews with Aeon Delight Co., Ltd.
On August 2, 2021, the company announced that it has formulated Basic Policies for Sustainability.

（click here for a link to the company’s release）
To fulfill its social responsibilities as a corporate citizen and promote ESG management that aims to resolve social issues
through its business activities, Aeon Delight has established the Basic Policies for Sustainability (“the Policies”) based on its
management philosophy. In accordance with the Policies, the company will promote initiatives with a strong awareness ofsustainability in its business models, growth strategy, and business activities.
The company’s press release presented the following outline of its Basic Policies for Sustainability.
Aeon Delight’s management philosophy is "We Pursue the Creation of ‘Environmental Value’ for our Customers and for the
Local Communities.” Based on this management philosophy, the company intends to contribute to solving social issues andachieving a sustainable society by creating “environmental value” in all aspects of its business together with its many
stakeholders.
The company will strive to create a safe, secure, hygienic, and healthy environment in and around its facilities.
By providing solutions that meet society's expectations, the company will contribute to achieving a decarbonized society,conserving biodiversity, and promoting recycling.
The company will comply with laws and social norms, build relationships of mutual trust with business partners, andconduct fair business activities throughout the supply chain.
The company will respect the human rights of each individual and create a vibrant organizational culture in which diverse
human resources can demonstrate their abilities.
As a corporate citizen, the company will engage in social contribution activities that aim for a better environment andsociety

Structural reforms and personnel changes
2021-07-27

Aeon Delight Co., Ltd. announced structural reforms and personnel changes.
Details of structural reforms (effective August 1, 2021)
The company will implement the following structural reforms related to group strategy and ESG, which falls under the directsupervision of its president.
The company will establish a new Office of the President that will be responsible for public relations, IR, and secretarial
operations. This office will be supervised by the managing director responsible for group strategy and ESG.
The Delight Communication Department, which is currently supervised by the managing director responsible for group
strategy and ESG, will be placed under the authority of the new Office of the President and will subsequently be referred
to as the Public Relations and IR Group.

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49Personnel changes (effective August 1, 2021)
Name

New position

Former position

Emiko Ishii

Head of the Office of the President

Head of the Delight Communication Department

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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

03-6895-3892

Tokyo Stock Exchange 1st Section
EstablishedExchange Listing

1972-11-16

1995-09-29
Websitehttps://www.aeondelight.co.jp/

Fiscal Year-End
Feb

IR Contact
IR Web-https://www.aeondelight.co.jp/english/ir/
IR Phone
IR Email--

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51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.

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