R

Aeon Delight / 9787
COVERAGE INITIATED ON:

2013.06.06

LAST UPDATE:

2019.06.28

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

Research Coverage Report by Shared Research Inc.

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

INDEX
How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company’s most recent
earnings. First-time readers should start at the business section later in the report.

Key financial indicators ------------------------------------------------------------------------------------------------------------------------------ 3
Recent updates ---------------------------------------------------------------------------------------------------------------------------------------- 4
Highlights ------------------------------------------------------------------------------------------------------------------------------------------------------------4
Trends and outlook ----------------------------------------------------------------------------------------------------------------------------------- 6
Quarterly trends and results -----------------------------------------------------------------------------------------------------------------------------------6
Aeon Delight Vision 2025 ------------------------------------------------------------------------------------------------------------------------------------ 16
Medium-term business plan (FY02/18–FY02/20) ----------------------------------------------------------------------------------------------------- 22
FY02/19 company forecasts (initial forecast) ----------------------------------------------------------------------------------------------------------- 24
Business ------------------------------------------------------------------------------------------------------------------------------------------------ 42
Business description -------------------------------------------------------------------------------------------------------------------------------------------- 42
Business overview ----------------------------------------------------------------------------------------------------------------------------------------------- 43
Strengths and weaknesses------------------------------------------------------------------------------------------------------------------------------------ 50
Market and value chain ---------------------------------------------------------------------------------------------------------------------------------------- 51
Financial Statements ------------------------------------------------------------------------------------------------------------------------------- 54
Income statement ----------------------------------------------------------------------------------------------------------------------------------------------- 54
Balance sheet ----------------------------------------------------------------------------------------------------------------------------------------------------- 56
Statement of cash flows --------------------------------------------------------------------------------------------------------------------------------------- 58
ROE and dividends---------------------------------------------------------------------------------------------------------------------------------------------- 59
Other information ---------------------------------------------------------------------------------------------------------------------------------- 61
History -------------------------------------------------------------------------------------------------------------------------------------------------------------- 61
Major shareholders --------------------------------------------------------------------------------------------------------------------------------------------- 61
Top management ----------------------------------------------------------------------------------------------------------------------------------------------- 61
Employees --------------------------------------------------------------------------------------------------------------------------------------------------------- 62
Investor relations ------------------------------------------------------------------------------------------------------------------------------------------------ 62
By the way --------------------------------------------------------------------------------------------------------------------------------------------------------- 62
Historical financial statements and news ---------------------------------------------------------------------------------------------------- 64
Historical financial statements ------------------------------------------------------------------------------------------------------------------------------- 64
News & topics ---------------------------------------------------------------------------------------------------------------------------------------------------- 71
Company profile ------------------------------------------------------------------------------------------------------------------------------------- 73

02/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Key financial indicators
Income statement(JPYmn)Sales
YoY
Gross profit
YoY
GPM
Operating profit
YoY
OPM
Recurring profit
YoY
RPM
Net income
YoY
Net margin
Per share data
Shares issued (year-end; '000)
EPS
EPS (fully diluted)
Dividend per share
Book value per share
Balance sheet (JPYmn)
Cash and cash equivalents
Total current assets
Tangible fixed assets
Investments and other assets
Intangible fixed assets
Total assets
Accounts payable
Short-term debt
Total current liabilities
Long-term debt
Total fixed liabilities
Total liabilities
Total net assets
Cash flow statement (JPYmn)
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Financial ratios
Total interest-bearing debt
Net cash
ROA (RP-based)
ROE
Equity ratio

FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Est.

21.8%
23,98913.6%
14.0%
12,03120.7%
7.0%
12,089
22.0%
7.1%
6,495
18.8%
3.8%

28.6%
28,631
19.4%
13.0%
13,762
14.4%
6.3%
13,784
14.0%
6.3%
6,912
6.4%
3.1%

13.2%
30,227
5.6%
12.1%
13,901
1.0%
5.6%
13,892
0.8%
5.6%
7,509
8.6%
3.0%

3.4%
33,714
11.5%
13.1%
15,1158.7%
5.9%
15,092
8.6%
5.9%
8,161
8.7%
3.2%

3.7%
35,117
4.2%
13.2%
15,861
4.9%
5.9%
15,943
5.6%
6.0%
8,725
6.9%
3.3%

5.4%
4.9%
37,390 38,995
6.5%
4.3%
13.3%
13.2%
16,707 17,257
5.3%
3.3%
5.9%
5.9%
16,684 17,381
4.6%
4.2%
5.9%
5.9%
9,658 10,238
10.7%
6.0%
3.4%
3.5%

-0.8%
34,871-10.6%
11.9%
12,909-25.2%
4.4%
13,381-23.0%
4.6%
6,397-37.5%
2.2%

3.6%
4.0%
35,452
1.7%
11.7%
13,030 18,000
0.9%
38.1%
4.3%
5.7%
13,362 18,000
-0.1%
34.7%
4.4%
5.7%
6,415 10,800
0.3%
68.4%
2.1%
3.4%

54,170
142.6
142.3
39
1,006

54,170
131.8
131.5
40
1,096

54,170
143.2
142.7
46
1,202

54,170
155.5
155.2
48
1,325

54,170
166.2
165.8
50
1,436

54,170
183.9
183.4
52
1,553

54,170
121.7
121.3
61
1,637

54,170
122.9
122.6
63
1,466

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

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

10,014 12,565 15,580 20,386 31,717 39,536 44,233
79,323 90,347 104,477 105,674 112,405 118,311 108,771
3,796
4,258
4,361
7,086
9,089 10,041 10,161
5,257
5,829
6,268
8,190
8,915
8,512
7,578
12,321 11,687 10,937 10,397
9,095
7,813
8,103

6,808
-3,000-1,321

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

21,359-16,632-2,475

17,234-11,365-2,594

10,303-3,255-2,821

11,7032,233-2,40013,568-2,666-3,264

12,373
12,256-19,686

55
31,963
18.1%
15.5%
62.3%

56
36,971
15.5%
12.5%
61.9%

15
28,019
14.4%
12.5%
62.6%

5
44,980
14.2%
12.3%
62.0%

56,906
13.4%
12.0%
59.8%

57,748
13.0%
12.3%
62.1%

564
62,866
12.8%
12.0%
64.0%

225
71,311
9.4%
7.3%
59.5%

407
59,826
9.6%
8.1%
54.4%

170,905 219,797 248,876 257,243 266,705 281,041 294,725 292,396 302,915 315,000

54,170
194.8
194.3
55
1,700

216.4
65
-

100,699 112,122 126,044 131,349 139,505 144,678 134,614

24,544 26,701 30,902 28,457 28,607 25,820 25,967
10
5
271
225
392
34,955 39,306 46,640 44,821 44,065 49,060 51,408
5
293
15
1,195
1,500
1,908
2,527
3,350
6,474
7,667
36,151 40,806 48,549 47,348 47,416 55,535 59,075
64,547 71,316 77,495 84,000 92,089 89,143 75,539

Source: Shared Research based on company data
Note: In June 2019, the company announced corrections to earnings results for FY02/14 onward. Figures prior to FY02/17 in the chart above are based on information
obtained before the corrections were made.

03/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Recent updates
Highlights
On June 28, 2019, Aeon Delight Co., Ltd. announced earnings results for full-year FY02/19, the special investigationcommittee’s investigation report, and corrections to its historical financial statements; see the results section for details.

On May 31, 2019, the company announced that its request for extending the submission deadline of its annual securities report
was approved and the new deadline was set for July 1, 2019.
The company had announced on May 29, 2019 its decision to apply to the Kinki Local Finance Bureau for an extension to thesubmission deadline of its annual securities report. The approval received from the bureau at this time extended this deadline toJuly 1, 2019 (originally May 31, 2019).
The special investigation committee, established to investigate the improper accounting practice at Aeon Delight’s consolidated
subsidiary Kajitaku, is scheduled to issue a final report at the end of June 2019. The company explained that it planned to prepare
its annual securities report based on the results of the final investigation and submit it to the authorities by July 1, 2019 uponcompleting the audit procedures.

On May 24, 2019, the company announced the receipt of interim report from the special investigation committee on improperaccounting at consolidated subsidiary Kajitaku.
The company received a report from the special investigation committee regarding inappropriate accounting at consolidated
subsidiary Kajitaku Co., Ltd. According to the special committee report, the accounting problem was found to have an effect of-JPY9.6bn in total (including modification of claims for uninstalled properties, adjustment for fictitious sales, and adjustment topurchase of certification photo machines) on net assets of the consolidated financial statements for the period under review(March 2013–February 2019). Net assets at Aeon Delight’s latest result announcement (end-Q3 FY02/19) was JPY99.3bn; bysimple calculation, 9.7% of the net assets was affected by inappropriate accounting.

On May 10, 2019, the company announced that the agenda of its annual general meeting of shareholders will not be the sameas usual, and that it had set a base date (for voting rights determination) for the convocation of an extraordinary general meetingof shareholders.
On April 5, 2019, the company announced that the release of its full-year FY02/19 results would be delayed due to the possibility
that a consolidated subsidiary may have engaged in improper accounting. An investigation is underway by the company andcommittee of independent experts with whom it has no conflict of interest. For this reason, the company will not be able tocomplete all procedures for announcing its earnings results by May 30, 2019, the scheduled date of its annual general meeting ofshareholders. The company will therefore take the following steps:
1)

Change part of its articles of incorporation at the annual general meeting of shareholders

2)

Secure stable dividends by passing a resolution at the annual general meeting of shareholders to pay a year-end dividend of
JPY32 per share (up JPY1 per share from the previous year)3)

Not report FY02/19 earnings results at the annual general meeting of shareholders

4)

Set May 31 as the base date of voting rights determination at an extraordinary general meeting of shareholders to be held
within three months of that date.

Shared Research understands that the company plans to announce FY02/19 earnings results by the end of August 2019.

04/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

On April 5, 2019, the company announced that the release of full-year FY02/19 results scheduled to be out on April 10 will bedelayed due to the possibility that consolidated subsidiary Kajitaku Co., Ltd. may have engaged in improper accounting. The new
announcement date remains undecided.
The possibility that Kajitaku may have engaged in improper accounting came to light in late March 2019. According to Aeon
Delight, research following this discovery exposed the likelihood of a cumulative loss of roughly JPY1.8bn, primarily due to errors
found in accounting procedures for inventory disposals in the used copy machine resale business of Kajitaku’s storefront
promotions segment. The company is still in the process of calculating the final impact on earnings. Aeon Delight says it will
announce the results of further internal investigations and the impact on earnings as soon as more facts are uncovered. Aeon
Delight made Kajitaku, which mainly operates housekeeping services, a consolidated subsidiary in April 2011 after acquiring 90%
of its outstanding shares. As of the end of February 2018, it owned 97.8% of Kajitaku’s outstanding shares.

For previous releases and developments, please refer to the News and topics section

05/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Trends and outlook
Quarterly trends and results
FY02/17

Cumulative

FY02/18

FY02/19

FY02/19Sales

Q1
75,472Q2
151,400

Q3
222,872Q4
294,725Q1
75,514Q2
151,801Q3
223,842Q4
292,396

Q1
76,480Q2
153,884Q3
229,917Q4
302,915Gross profit

9,471

19,54428,87838,995

9,794

20,03529,41434,871

10,223

20,30730,31335,452

5,560

11,03916,423

21,738

5,711

11,22816,75521,961

5,585

11,246

17,02822,421

Operating profit

3,911

8,505

12,455

17,257

4,082

8,806

12,65812,909

4,637

9,060

13,285

13,03018,000Recurring profit

3,908

8,506

12,471

17,381

4,116

8,878

13,06013,381

4,668

9,134

13,67913,36218,000

5,342

7,637

10,238

2,773

5,573

7,651

2,908

5,628

8,287

6,415

10,800(JPYmn)
YoY

7.0%

YoY
GPM

6.8%
12.5%

YoY
SG&A ratio

6.1%
7.4%

SG&A expenses

YoY
OPM

YoY
RPM

Net income

YoY
Net margin

7.9%
5.2%

7.0%
5.2%

2,681

29.0%
3.6%

6.0%

5.1%
12.9%
5.4%
7.3%
4.7%
5.6%

4.5%
5.6%

14.1%
3.5%

5.8%

4.9%

4.9%
13.0%
5.6%
7.4%
4.1%
5.6%

4.3%
13.2%

3.4%
13.0%

5.1%
7.4%

2.7%
7.6%

3.3%
5.9%

3.8%
5.6%

4.2%
5.9%

9.5%
3.4%

0.1%

6.0%
3.5%

4.4%
5.4%

5.3%
5.5%

3.4%
3.7%

0.3%

2.5%
13.2%
1.7%
7.4%
3.5%
5.8%

4.4%
5.8%

4.3%
3.7%

FY02/17

Segments

0.4%

1.9%
13.1%
2.0%
7.5%
1.6%
5.7%

4.7%
5.8%

0.2%
3.4%

-0.8%

-10.6%
11.9%
1.0%
7.5%

1.3%

4.4%
13.4%
-2.2%
7.3%

-25.2%
4.4%

13.6%
6.1%

-23.0%
4.6%

13.4%
6.1%

-37.5%
2.2%

4.9%
3.8%

6,397

1.4%

1.4%
13.2%
0.2%
7.3%
2.9%
5.9%
2.9%
5.9%

1.0%
3.7%

FY02/18

2.7%

3.1%
13.2%
1.6%
7.4%
5.0%
5.8%
4.7%
5.9%

8.3%
3.6%

FY Est.
315,000

3.6%

4.0%

1.7%
11.7%
2.1%
7.4%
0.9%
4.3%

38.1%
5.7%

-0.1%
4.4%

34.7%
5.7%

0.3%
2.1%

68.4%
3.4%

FY02/19Q1
75,472Q2
151,400

Q3
222,872Q4
294,725Q1
75,514Q2
151,801Q3
223,842Q4
292,396

Q1
76,480Q2
153,884Q3
229,917Q4
302,915

Facilities Management

12,71925,451

38,04450,551

13,165

26,15939,571

52,69914,102

28,11642,56356,364

Security Services

10,292

20,40830,48841,06811,001

21,79932,511

43,29011,07422,06533,28544,492

Cleaning Services

13,323

26,74340,05153,365

13,74327,451

41,371

55,297

14,24728,63743,09358,185Construction Work

13,51826,58836,62145,814

11,724

24,12032,73740,897

10,503

21,68130,966

41,470Materials and Supplies Sourcing

13,03725,85938,63850,74012,63825,14037,83650,265

12,90626,01238,78351,007

7,810

16,911

24,51032,8798,017

17,01024,554

32,834

8,106

16,392

24,006

31,955

4,771

9,437

14,28520,306

5,223

10,11915,20017,141

5,538

10,977

17,21819,439

3,911

8,505

231
12,455

17,257

4,082

8,806

165
12,658184
12,909

4,637

9,060

13,285

13,030

1,006

2,157

3,259

4,350

1,121

2,263

3,514

4,644

Cumultive (JPYmn)

Saels

YoY

YoY
YoY
YoY
YoY
YoY

Vending Machine Services
YoY

Support Services
YoY

Other
Operating profit
YoY
OPM

Facilities Management

7.0%
5.1%

10.6%

14.3%
3.5%
7.9%

-3.7%

13.3%

7.9%
5.2%

6.0%
4.3%
9.7%

14.4%
1.3%
5.4%

-0.3%
8.8%

4.7%
5.6%

5.8%

4.2%
8.4%

13.8%
2.0%
3.0%

0.2%

10.1%

4.1%
5.6%

4.9%
3.2%
6.8%

11.5%
4.5%
0.4%
0.4%
8.9%

3.3%
5.9%

0.1%

3.5%
6.9%

3.2%

-13.3%
-3.1%
2.7%
9.5%

4.4%
5.4%

0.3%

2.8%
6.8%
2.6%

-9.3%
-2.8%
0.6%
7.2%

3.5%
5.8%

0.4%

4.0%
6.6%
3.3%

-10.6%
-2.1%
0.2%

6.4%

1.6%
5.7%

-0.8%

4.2%
5.4%
3.6%

-10.7%-0.9%-0.1%-15.6%

1.3%

7.1%
0.7%

3.7%

-10.4%
2.1%
1.1%
6.0%

-25.2%
4.4%

13.6%
6.1%

1,477

1.4%
7.5%
1.2%
4.3%

-10.1%
3.5%

-3.6%
8.5%

2.9%
5.9%

2,812

2.7%
7.6%
2.4%
4.2%

-5.4%
2.5%

-2.2%

13.3%

5.0%
5.8%

4,250

3.6%
7.0%

2.8%

5.2%
1.4%
1.5%

-2.7%

13.4%

0.9%
4.3%

5,558

YoY
OPM
% of OP

-3.7%
7.9%
25.7%

0.1%
8.5%
25.4%

0.8%
8.6%
26.2%

3.4%
8.6%
25.2%

11.4%
8.5%
27.5%

4.9%
8.7%
25.7%

7.8%
8.9%
27.8%

6.8%
8.8%
36.0%

31.8%
10.5%
31.9%

24.3%
10.0%
31.0%

20.9%
10.0%
32.0%

19.7%
9.9%
42.7%

YoY
OPM
% of OP

3.6%
7.0%
18.4%

-0.6%
6.9%
16.7%

-2.5%
7.1%
17.3%

2.6%
7.6%
18.0%

7.2%
7.0%
18.9%

4.4%
6.8%
16.8%

-1.7%
6.5%
16.7%

-8.1%
6.6%
22.1%

-6.6%
6.5%
15.6%

-5.3%
6.4%
15.5%

0.0%
6.4%
16.0%

0.8%
6.5%
22.1%

YoY
OPM
% of OP

0.1%
11.1%
37.9%

-0.3%
11.2%
35.4%

-1.8%
11.3%
36.4%

-0.3%
11.3%
34.8%

5.8%
11.4%
38.5%

2.9%
11.3%
35.1%

2.6%
11.2%
36.7%

3.6%
11.3%
48.2%

7.2%
11.8%
36.3%

6.8%
11.5%
36.5%

7.6%
11.6%
37.6%

7.5%
11.5%
51.4%

YoY
OPM
% of OP

0.3%
6.9%
23.9%

-10.4%
6.7%
21.0%

-8.7%
6.7%
19.8%

-0.2%
7.0%
18.6%

-2.6%
7.8%
22.3%

8.1%
8.0%
21.9%

6.3%
8.0%
20.7%

3.0%
8.1%
25.6%

8.6%
9.4%
21.3%

4.4%
9.3%
22.3%

9.9%
9.3%
21.7%

20.7%
9.6%
30.6%

YoY
OPM
% of OP

24.6%
5.4%
18.1%

9.0%
5.2%
15.8%

8.3%
5.3%
16.5%

-1.1%
5.5%
16.1%

0.3%
5.6%
17.4%

4.0%
5.6%
15.9%

2.8%
5.6%
16.7%

3.4%
5.7%
22.2%

4.6%
5.8%
16.0%

7.0%
5.7%
16.5%

0.9%
5.5%
16.1%

-3.1%
5.4%
21.3%

YoY
OPM
% of OP

1.1%
5.8%
11.6%

15.8%
8.4%
16.7%

15.8%
7.5%
14.9%

-1.2%
8.6%
16.3%

-7.5%
5.3%
10.3%

-9.5%
7.5%
14.6%

-18.9%
6.1%
11.9%-25.1%
6.4%
16.3%

-0.5%
5.2%
9.0%

-58.5%
3.3%
5.9%-49.1%
3.2%
5.8%-44.7%
3.6%
8.9%

YoY
OPM
% of OP

62.0%
12.1%
14.7%

26.7%
12.2%
13.6%

23.1%
12.2%
14.0%

20.5%
11.7%
13.8%

11.1%
12.2%
15.7%

14.7%
13.1%
15.0%

15.3%
13.3%
15.9%

-8.6%
-11.4%

-6.4%
10.8%
12.9%

-4.2%
11.6%
14.0%

4.0%
12.2%
15.8%

-11.7%-17.4%

Security Services

Cleaning Services

Construction Work

Materials and Supplies Sourcing

Vending Machine Services

Support Services

Eliminations, other
Eliminations
Goodwill amortization
Corporate expenses

721

1,484

935

708

455

575

-1,903-129-228-1,617

1,418

3,008

1,786

1,343

1,418

1,154

1,903
-238
-430
-3,112

2,154

4,531

2,467

2,059

1,850

1,749

-336
-630
-4,650

3,110

6,012

3,210

2,774

2,812

2,377

-457
-830
-6,102

773

1,570

911

710

421

639

-134
-200
-1,730

1,481

3,095

1,931

1,397

1,283

1,324

-354
-400
-3,215

2,118

4,649

2,622

2,116

1,500

2,016

-553
-599
-4,727

2,857

6,228

3,305

2,868

2,105

-1,466-799-715-6,118

722

1,683

989

743

419

598

-209
-198
-1,586

1,403

3,305

2,016

1,495

533

1,269

-378
-408
-2,990

2,119

5,000

2,881

2,136

764

2,097

-

2,881

6,694

3,989

2,779

1,164

-2,270-768-759-6,238Source: Shared Research based on company data
Note: The company changed its distribution method of SG&A expenses in FY02/16. The change pushes up profits at Materials and Supplies Sourcing Services andVending Machines Services segments, while pulling down profits for all other segments, compared to the conventional method.
Note: In June 2019, the company announced corrections to earnings results for FY02/14 onward. Figures for FY02/18 and FY02/19 in the chart above are retrospectively
adjusted. All other figures are based on information obtained prior to the corrections.

06/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Full-year performance(JPYmn)Sales
YoY
Gross profit
YoY
GPM
SG&A expenses
YoY
SG&A ratio
Operating profit
YoY
OPM
Recurring profit
YoY
RPM
Net income
YoY
Net margin
Segment results(JPYmn)Sales
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services
YoY
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services
Operating profit
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services
Elimination, other
YoY
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services
OPM
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services% of total OP
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services

FY02/10Act.
140,299-3.7%
21,1180.8%
15.1%
11,148
1.3%
7.9%
9,970
0.2%
7.1%
9,912
1.0%
7.1%
5,466
12.1%
3.9%

FY02/10Act.
140,299
41,66634,28145,05013,889

5,412
-3.7%
-1.4%
-6.5%
6.2%
-25.0%
-7.4%
9,970
4,507
2,738
5,780
1,321
748
0.2%

7.1%
10.8%
8.0%
12.8%
9.5%
13.8%
29.9%
18.1%
38.3%
8.8%
5.0%

FY02/11

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

FY02/11

Act.
170,905
40,01932,08841,142
16,42018,71817,188
5,327
21.8%
-4.0%
-6.4%
-8.7%
18.2%

FY02/12

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

FY02/12-1.6%
12,031
5,115
2,764
5,937
1,214
627
1,480
590
20.7%
13.5%
0.9%
2.7%
-8.1%
-21.1%
7.0%
12.8%
8.6%
14.4%
7.4%
3.3%
8.6%
11.1%

Act.
219,797
42,14732,23539,85228,51336,73032,280
8,037
28.6%
5.3%
0.5%
-3.1%
73.6%
96.2%
87.8%
50.9%
13,762
5,084
2,823
5,882
1,936
1,234
2,330
312
14.4%
-0.6%
2.1%
-0.9%
59.5%
96.8%
57.4%
-47.1%
6.3%
12.1%
8.8%
14.8%
6.8%
3.4%
7.2%
3.9%

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

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

FY02/13

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

FY02/13

Act.
248,876
42,05031,80540,51953,071
39,284
31,20010,942
13.2%
-0.2%
-1.3%
1.7%
86.1%
7.0%
-3.3%
36.1%
13,901
4,661
2,692
5,918
2,209
1,462
2,396
741
-6,180
1.0%
-8.3%
-4.6%
0.6%
14.1%
18.5%
2.8%
137.5%
5.6%
11.1%
8.5%
14.6%
4.2%
3.7%
7.7%
6.8%
23.2%
13.4%
29.5%
11.0%
7.3%
11.9%
3.7%

FY02/14Act.
257,243
3.4%
33,714
11.5%
13.1%
18,59913.9%
7.2%
15,1158.7%
5.9%
15,092
8.6%
5.9%
8,161
8.7%
3.2%

FY02/14Act.
257,243
43,45834,24242,32045,63044,54333,32913,718
3.4%
3.3%
7.7%
4.4%
-14.0%
13.4%
6.8%
25.4%
15,115
4,725
2,865
5,716
2,580
2,333
3,068
829
-7,334
8.7%
1.4%
6.4%
-3.4%
16.8%
59.6%
28.0%
11.9%
5.9%
10.9%
8.4%
13.5%
5.7%
5.2%
9.2%
6.0%
21.4%
13.0%
25.8%
11.7%
10.5%
13.9%
3.7%

FY02/15

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

FY02/15

Act.
266,705
45,83936,62244,287
41,972
47,61834,825
15,539
3.7%
5.5%
7.0%
4.6%
-8.0%
6.9%
4.5%
13.3%
15,861
4,217
3,102
6,289
2,807
2,111
2,965
1,108
-6,9294.9%-10.8%
8.3%
10.0%
8.8%
-9.5%
-3.4%
33.7%
5.9%
9.2%
8.5%
14.2%
6.7%
4.4%
8.5%
7.1%
18.7%
13.7%
27.8%
12.4%
9.3%
13.1%
4.9%

FY02/16Act.
281,041
5.4%
37,390
6.5%
13.3%
20,682
7.4%
7.4%
16,707
5.3%
5.9%
16,684
4.6%
5.9%
9,658
10.7%
3.4%

FY02/16Act.
281,041
48,96238,45647,87043,85550,51632,741
18,639
5.4%
6.8%
5.0%
8.1%
4.5%
6.1%
-6.0%
19.9%
16,707
4,206
3,032
6,031
3,218
2,806
2,846
1,972
-7,406
5.3%
-0.3%
-2.3%
-4.1%
14.6%
32.9%
-4.0%
78.0%
5.9%
8.6%
7.9%
12.6%
7.3%
5.6%
8.7%
10.6%
17.4%
12.6%
25.0%
13.3%
11.6%
11.8%
8.2%

FY02/17Act.
294,725
4.9%
38,995
4.3%
13.2%
21,7385.1%
7.4%
17,257
3.3%
5.9%
17,381
4.2%
5.9%
10,2386.0%
3.5%

FY02/17Act.
294,725
50,551
41,06853,36545,81450,74032,87920,306
4.9%
3.2%
6.8%
11.5%
4.5%
0.4%
0.4%
8.9%
17,257
4,350
3,110
6,012
3,210
2,774
2,812
2,377
-7,389
3.3%
3.4%
2.6%
-0.3%
-0.2%
-1.1%
-1.2%
20.5%
5.9%
8.6%
7.6%
11.3%
7.0%
5.5%
8.6%
11.7%
17.7%
12.6%
24.4%
13.0%
11.3%
11.4%
9.6%

FY02/18

Act.
292,396-0.8%
34,871-10.6%
11.9%
21,961
1.0%
7.5%
12,909-25.2%
4.4%
13,381-23.0%
4.6%
6,397-37.5%
2.2%

FY02/18

Act.
292,396
52,69943,29055,29740,89750,26532,834
17,325
-0.8%
4.2%
5.4%
3.6%
-10.7%-0.9%-0.1%-14.7%
12,909
4,644
2,857
6,228
3,305
2,868
2,105
-1,466-7,632-25.2%
6.8%
-8.1%
3.6%
3.0%
3.4%
-25.1%
4.4%
8.8%
6.6%
11.3%
8.1%
5.7%
6.4%
-8.5%
22.6%
13.9%
30.3%
16.1%
14.0%
10.2%
-7.1%

FY02/19

Act.
302,915
3.6%
35,452
1.7%
11.7%
22,421
2.1%
7.4%
13,0300.9%
4.3%
13,362
-0.1%
4.4%
6,415
0.3%
2.1%

FY02/19

Act.
302,91556,36444,492
58,18541,47051,007
31,955
19,439
3.6%
7.0%
2.8%
5.2%
1.4%
1.5%
-2.7%
12.2%
13,030
5,558
2,881
6,694
3,989
2,779
1,164
-2,270-7,765
0.9%
19.7%
0.8%
7.5%
20.7%
-3.1%
-44.7%
4.3%
9.9%
6.5%
11.5%
9.6%
5.4%
3.6%
-11.7%

FY02/20Est.
315,000
4.0%

18,00038.1%
5.7%
18,00034.7%
5.7%
10,80068.4%
3.4%
FY02/20Est.
315,000

4.0%

18,000

38.1%

5.7%

26.7%
13.9%
32.2%
19.2%
13.4%
5.6%
-10.9%

Source: Shared Research based on company data

07/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Full-year FY02/19 results (out June 28, 2019)
Summary▷▷

On June 28, 2019, Aeon Delight announced earnings results for full-year FY02/19, the special investigation committee’s
investigation report regarding improper accounting at subsidiary Kajitaku Co., Ltd., and corrections to its historical financial
statements.
Kajitaku: The investigation report revealed that Kajitaku’s improper accounting inflated company profits by JPY16.3bn on a
cumulative basis between FY02/14 and FY02/19. The company also announced corrections to its historical financial statements.
As of end-FY02/19, the company reported BPS of JPY1,466 (JPY1,853 in FY02/18 prior to corrections) and an equity ratio of
54.4% (66.4%). Aeon Delight dismissed involved parties and held management responsible through dismissals andcompensation reductions. In response to the special investigation committee’s recommendations, the company will work to▷strengthen the group’s governance system and formulate effective measures to prevent reoccurrence.
FY02/19 results: The company reported sales of JPY302.9bn (+3.6% YoY), operating profit of JPY13.0bn (+0.9% YoY), and net
income of JPY6.4bn (+0.3% YoY). If excluding Kajitaku’s performance, Aeon Delight booked approximately JPY17.0bn inoperating profit (+6.1% YoY). Considering Kajitaku’s operating profit forecast for FY02/19 was JPY1.2bn before theinvestigation, the company’s performance net of Kajitaku was in line with the original operating profit forecast of JPY18.5bn.
Aeon Delight repurchased 2.7mn shares for a total of JPY9.9bn through a tender offer between December 5, 2018 and January▷

8, 2019.
FY02/20 forecast: The company expects sales of JPY315.0bn (+4.0% YoY), operating profit of JPY18.0bn (+38.1% YoY), net
income of JPY10.8bn (+68.4% YoY), EPS of JPY216.35, and dividend per share of JPY65 (dividend payout ratio of 30.0%). Aeon
Delight expects Kajitaku-related one-time expenses to drop out, and Construction Work, Facilities Management, and Cleaning
Services to drive business performance.

Improper Accounting at Kajitaku
Impact of improper accounting
Kajitaku was founded in August 2008 and became an Aeon Delight subsidiary when the company acquired 90% of issued sharesin April 2011. As of March 1, 2019, Aeon Delight owned 97.8% of outstanding shares. Kajitaku’s key businesses are storefront
promotions (sales, installation, maintenance and management of coin-operated copy machines and photo booths insidesupermarkets and drug stores) and household support services (housekeeping and laundry services for consumers). In FY02/18,
prior to the investigation, the storefront promotions business generated sales of JPY7.0bn and operating profit of JPY1.2bn while
the household support services business generated sales of JPY1.2bn and an operating loss of JPY84mn. The improper accounting
occurred in the storefront promotions business.

08/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Cumulative corrections for past five years (FY02/14–FY02/18) and FY02/19

No.
1
2
3
4
5
6
7
8
9

10

11

Item
Billing correction for not-yet-installed devices
Correction of fictitious sales
Correction of photo booth purchases
Correction of used copy machine purchases
Correction of miscellaneous purchases
Devaluation of inventory
Correction of receivables balance
Correction of temporary account
Other corrections
Cumulative impact of corrections made by special
investigation (Subtotal)
Amount difference due to correctoins to revenue recognition
Cumulative impact of corrections (FY02/14–FY02/19)(Subtotal)
Recorded loss provisions
Cumulative impact (Grand Total)

Summary
Amount (JPY mn)-2,281-2,601
Cumulative impact on net-1,722
assets for the entire period-1,298under review-248-1,296-46
Period under review:
50 From March 2013 through endof February 2019)-281-9,721-3,780-13,502-2,750-16,252

Source: Shared Research based on company data

The investigation uncovered and corrected improper accounting across various aspects of the business, including billing for
not-yet-installed devices, fictitious sales, and inventory valuations. The improper accounting started small, recognizing sales early
to meet financial targets. This gradually escalated to various aspects of the business in greater scale.
According to Aeon Delight’s announcement on May 24, 2019, the special investigation committee estimated an impact on net
assets of roughly JPY9.6bn, but the June 28, 2019 announcement revised this figure to JPY16.3bn. Upon closer examination of
Kajitaku’s contract details, part of Kajitaku’s recognized sales should have been recorded as advances received. The company
made corrections to its revenue recognition, in which it previously recorded prepayment for future maintenance services as sales
upon completing the installation of devices. Additionally, Kajitaku had contracts that required loss provisions. Despite a low
possibility of recording sufficient sales from its devices after installation, Kajitaku contractually guaranteed its customers a sales
minimum in an attempt to drive unit sales. The sales would be supplemented by Kajitaku if the minimums were not met, resulting
in a loss for the company. Aeon Delight recorded additional expenses for the losses that are likely to be incurred, expanding theimpact on earnings.

Clarifying management responsibility
People involved in the improper accounting practice at Kajitaku were punished, including the dismissal of the former CEO andformer director of the storefront promotions business. Similar measures were taken at Aeon Delight, including the dismissal of theboard chairperson and the director in charge of overseeing Kajitaku. Additionally, the company announced compensation
reductions for other directors.

Special investigation committee’s recommendations and Aeon Delight’s prevention plan
Upon completing its investigation, the special investigation committee made several recommendations in order to prevent
reoccurrence. The recommendations include a change of mindset of officers, curbing excessive emphasis on budget control
when managing subsidiaries, and developing compliance system for subsidiaries.

09/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Recommendations made by Special Investigation Committee
1. Recommendation for improvements on subsidiary management
1 Change of mindset of officers
2 Curb excessive emphasis on budget control when managing subsidiaries
3 Clarification of department and director responsible for compliance management system ofsubsidiaries
4 Expansion of compliance, subsidiary management, and management audit departments
5 Dispatch full-time officer and staff to subsidiaries
2. Recommendations for reoccurrence prevention for Kajitaku
1 Renewal of Kajitaku management team, increase number of directors
2 Improve corporate culture and compliance awareness3 Reinforcement of Administration Division, especially Accounting Department
4 Develop compliance system and conduct organizational reform at Kajitaku
5 Clarify operating procedures and enforce compliance
Basic policy for reoccurrence prevention
1. Reoccurrence prevention plan for Aeon Delight
1 Promote further improvement in compliance system through changing mindset of officers
2 Revise subsidiary management system for solid and sustained growth of group companies
3 Develop compliance system for group companies
4 Reform organizations to provide to group companies support for solid management, appropriatemonitoring, and audits with fraud prevention in mind
5 Dispatch full-time officers and staff for daily involvement in operations, detect fraud early throughpersonnel exchanges, improve organizational culture
2. Reoccurrence prevention plan for Kajitaku
1 Renewal of Kajitaku management team, emphasis on compliance by new CEO
2 Improve corporate culture and compliance awareness
3 Ensure reliability and visualize operations of finance, accounting, and budgeting duties
4 Develop compliance system, enforce compliance and monitoring of company rules
5 Clarify operating procedures and enforce compliance
Source: Shared Research based on company data

Aeon Delight established basic management policies to change the executive team’s mindset for further improvement ofcompliance, revisit subsidiary management strategies to drive stable and sustainable group company growth, and develop acompliance system across the group in order to prevent reoccurrence. Going forward, the company intends to develop adetailed action plan.
When questioned about the risk of reoccurrence at the results briefing, the special investigation committee made several
comments such as “if the company adopts reoccurrence prevention measures in line with our recommendations, the risk ofreoccurrence will be low” and “we also conducted simple investigations at subsidiaries other than Kajitaku and found no fraud.”
Based on the investigation report and discussions during the results briefing, Shared Research believes the risk of additional losses
and reoccurrence of fraud is low.
Meanwhile, Kajitaku will stop accepting new orders for its office equipment business (coin-operated copy machines and photobooths) for the time being. As a result, the company expects sales to decline and not cover fixed costs. For FY02/20, Aeon Delightanticipates the storefront promotions business to record an operating loss of JPY500mn and the household support services
business to break even.

FY02/19 results (comparison with revised FY02/18 results)
In FY02/19, Aeon Delight reported sales of JPY302.9bn (+3.6% YoY), operating profit of JPY13.0bn (+0.9% YoY), and net incomeof JPY6.4bn (+0.3% YoY). The Support Services segment, which includes Kajitaku, reported an operating loss of JPY2.3bn in
FY02/19 compared to JPY1.5bn in FY02/18, deteriorating by JPY804mn YoY. Excluding the impact of the Support Services
business, operating profit was up JPY925mn YoY.

10/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Business performance was driven by the Facilities Management, Construction Work, and Cleaning Services businesses. The
Facilities Management business generated JPY5.6bn in operating profit, up JPY914mn from FY02/18. The primary drivers wereincreased orders of routine fire protection equipment inspections and emergency power generator load tests from customers
looking to strengthen disaster prevention systems. The Construction Work business delivered JPY4.0bn in operating profit, up
JPY684mn from FY02/18, as the company started providing value-added services such as design proposals for commercial facility
renovation projects from the planning stage. Cleaning Services operating profit came in at JPY6.7bn, up JPY466mn from FY02/18,
with improved productivity and service quality as a result of rolling out small group activities and developing facility-specificstandard operating procedure manuals. Additionally, the company started introducing and selling automatic floor cleaning
robots.
Meanwhile, the Vending Machine Services business posted weaker performance, with operating profit at JPY1.2bn, down
JPY941mn from FY02/18. This was largely due to the abnormal frequency of heavy rain and typhoons during the FY02/19 summer
season, resulting in inventory shortages in some regions. Rising personnel expenses for inventory restocking also pressured
margins.

FY02/20 forecast
For 02/20, Aeon Delight forecasts sales of JPY315.0bn (+4.0% YoY), operating profit of JPY18.0bn (+38.1% YoY), and net incomeof JPY10.8bn (+68.4% YoY).
Full-year company forecasts(JPYmn)Sales
YoY
Cost of sales
Gross profit
YoY
GPM
SG&A expenses
SG&A ratio
Operating profit
YoY
OPM
Recurring profit
YoY
RPM
Net income
YoY

FY02/18
1H
151,801
0.3%
131,765
20,0352.5%
13.2%
11,228
7.4%
8,806
3.5%
5.8%
8,878
4.4%
5.8%
5,573
4.3%

2H
140,595-1.9%
125,759
14,836-23.7%
10.6%
10,7337.6%
4,103-53.1%
2.9%
4,503-49.3%
3.2%
824-83.2%

FY
292,396-0.8%
257,524
34,871-10.6%
11.9%
21,961
7.5%
12,909-25.2%
4.4%
13,381-23.0%
4.6%
6,397-37.5%

FY02/19
1H
153,884
1.4%
133,577
20,307
1.4%
13.2%
11,246
0.2%
9,060
2.9%
5.9%
9,134
2.9%
5.9%
5,628
1.0%

2H
149,0316.0%
133,886
15,145
2.1%
10.2%
11,175
4.1%
3,970
-3.2%
2.7%
4,228
-6.1%
2.8%
787
-4.5%

FY
302,915
3.6%
267,463
35,452
1.7%
11.7%
22,421
2.1%
13,0300.9%
4.3%
13,362
-0.1%
4.4%
6,415
0.3%

FY02/201H
158,000
2.7%

2H
157,000
5.3%

FY
315,000
4.0%

8,500
-6.2%
5.4%
8,500
-6.9%
5.4%
5,100
-9.4%

9,500
139.3%
6.1%
9,500
124.7%
6.1%
5,700
624.3%

18,00038.1%
5.7%
18,00034.7%
5.7%
10,80068.4%

Source: Shared Research based on company data

The company expects Kajitaku’s operating losses to narrow by JPY3.5bn from around JPY4.0bn in FY02/19 to JPY500mn in
FY02/20. Excluding Kajitaku, Aeon Delight expects an operating profit increase of around JPY1.5bn for FY02/20. While thecompany does not disclose operating profit forecasts by segment, it expects the Construction Work, Cleaning Services, andFacilities Management businesses to drive business growth.
For the Construction Work business, the company expects increased synergistic effects with U-COM Co., Ltd., which became asubsidiary in May 2018. U-COM has a track record for store design and interior-related work on many domestic and overseas
commercial facilities. With the acquisition, Aeon Delight is in a better position to vertically integrate these value-added services
with its existing services. The company is likely to have an increased amount of order backlog already. Furthermore, it is now
capable of promptly making decisions and responding to customers as it has converted to a community-focused organization.
This will also boost orders going forward. In the Cleaning Services business, in addition to previous efforts to improve service
quality and productivity, the company anticipates reduced personnel expenses through the implementation of automatic floor
cleaning robots. In the Facilities Management business, the company expects increased orders to raise earnings.

11/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Reference
Facilities Management
1,600

Operating profit

1,400
1,200 10.8%

11.7%

10.6% 10.4%

1,000

9.2% 9.4% 9.3% 8.9%

8.6% 9.0% 8.9%

800

7.8% 7.9%

16%

OPM (right axis)

9.0% 8.8% 8.7%

14%
9.3%

8.5% 8.8%

10.5%
8.6%

9.5% 10.0% 9.5%

12%
10%
8%

600

6%

400

4%

200

2%

(JPYmn)

Q1 Q2
FY02/14

Q3

Q4

Q1 Q2
FY02/15

Q3

Q4

Q1 Q2
FY02/16

Q3

Q4

Q1 Q2
FY02/17Q3

FY02/17

Facilities Management

Q4

Q1 Q2
FY02/18

Q3

Q4

Q1 Q2
FY02/19

FY02/18Q3Q4-

FY02/19

Sales

Q1
12,719Q2
12,732

Q3
12,593Q4
12,507Q1
13,165

Q2
12,994

Q3
13,412

Q4
13,128Q1
14,102Q2
14,014

Q3
14,447Q4
13,801

Operating profit

1,006

1,151

1,102

1,091

1,121

1,142

1,251

1,130

1,477

1,335

1,438

1,308

Quarterly (JPYmn)
YoY

5.1%

YoY
OPM

3.6%

-3.7%
7.9%

Facilities Management(JPYmn)Sales
YoY
Operating profit
YoY
OPM

3.9%

3.8%
9.0%

2.0%
8.8%

0.5%

12.2%
8.7%

3.5%

11.4%
8.5%

2.1%

6.5%

-0.8%
8.8%

13.5%
9.3%

5.0%

3.6%
8.6%

7.1%

31.8%
10.5%

7.8%

7.7%

16.9%
9.5%

14.9%
10.0%

5.1%

15.8%
9.5%

FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
41,66640,01942,14742,05043,45845,83948,96250,551
52,69956,364
-1.4%
-4.0%
5.3%
-0.2%
3.3%
5.5%
6.8%
3.2%
4.2%
7.0%
4,507
5,115
5,084
4,661
4,725
4,217
4,206
4,350
4,644
5,558
13.5%
-0.6%
-8.3%
1.4%
-10.8%
-0.3%
3.4%
6.8%
19.7%
10.8%
12.8%
12.1%
11.1%
10.9%
9.2%
8.6%
8.6%
8.8%
9.9%

Source: Shared Research based on company data

Security Services
1,200
1,000

7.6%

8.4%

9.0%

8.5%

7.8% 8.1%

Operating profit

8.9% 9.1%
7.5%

OPM (right axis)

9.0%

8.2% 8.0%
7.9%
7.0% 6.9%

7.3%

7.0%

800

6.6%

6.9%
5.9%

6.5%

6.2% 6.4%

6.8%

600
400
200
(JPYmn)

Q1 Q2
FY02/14

Q3

Q4

Q1 Q2
FY02/15

Q3

Sales

YoY

Operating profit
YoY
OPM

Security Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1 Q2
FY02/16

Q3

Q4

Q1 Q2
FY02/17

FY02/17

Security Services
Quarterly (JPYmn)

Q4

Q3

Q4

Q1 Q2
FY02/18

Q3

Q4

Q1 Q2
FY02/19

FY02/18Q3Q4

FY02/19

Q1
10,292Q2
10,116

Q3
10,080Q4
10,580Q1
11,001

Q2
10,798Q3
10,712

Q4
10,779Q1
11,074

Q2
10,991

Q3
11,220

721

697

736

956

773

708

637

739

722

681

716

10.6%

3.6%
7.0%

8.8%

-4.7%
6.9%

5.9%

-5.9%
7.3%

2.4%

16.2%
9.0%

6.9%

7.2%
7.0%

6.7%

1.6%
6.6%

10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
-

6.3%

-13.5%
5.9%

1.9%-22.7%
6.9%

0.7%

-6.6%
6.5%

1.8%

-3.8%
6.2%

4.7%

12.4%
6.4%

Q4
11,207
4.0%

762

3.1%
6.8%

FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
34,281
32,08832,23531,80534,242
36,62238,456
41,06843,29044,492
-6.5%
-6.4%
0.5%
-1.3%
7.7%
7.0%
5.0%
6.8%
5.4%
2.8%
2,738
2,764
2,823
2,692
2,865
3,102
3,032
3,110
2,857
2,881
0.9%
2.1%
-4.6%
6.4%
8.3%
-2.3%
2.6%
-8.1%
0.8%
8.0%
8.6%
8.8%
8.5%
8.4%
8.5%
7.9%
7.6%
6.6%
6.5%

Source: Shared Research based on company data

12/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Cleaning Services
Operating profit

1,800

OPM (right axis)

18%

1,600

16%

1,400

1,200 13.3% 13.4% 13.4% 14.0% 13.4%
1,000

14.2% 14.3%

14.9%

14%
13.5%
12.7% 13.1%

800

11.2% 11.1% 11.4% 11.4% 11.1% 11.4% 11.1% 11.2% 11.3%

11.8% 11.3% 11.7%

12%
11.2%

10%
8%

600

6%

400

4%

200

2%

(JPYmn)

Q1 Q2
FY02/14

Q3

Q4

Q1 Q2
FY02/15

Q3

Q4

Q1 Q2
FY02/16

Q3

Q4

Q1 Q2
FY02/17

FY02/17

Cleaning Services

Q3

Q4

Q1 Q2
FY02/18

Q3

Q4

Q1 Q2
FY02/19

FY02/18Q3-Q4

FY02/19

Sales

Q1
13,323

Q2
13,420Q3
13,308Q4
13,314Q1
13,743

Q2
13,708Q3
13,920Q4
13,926

Q1
14,247

Q2
14,390Q3
14,456

Q4
15,092

Operating profit

1,484

1,524

1,523

1,481

1,570

1,525

1,554

1,579

1,683

1,622

1,695

1,694

Quarterly (JPYmn)
YoY

14.3%

YoY
OPM

14.5%

0.1%
11.1%

Cleaning Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

12.7%

-0.7%
11.4%

5.0%

-4.8%
11.4%

3.2%

4.7%
11.1%

2.1%

5.8%
11.4%

4.6%

0.1%
11.1%

2.0%
11.2%

4.6%

6.6%
11.3%

3.7%

7.2%
11.8%

5.0%

3.9%

6.4%
11.3%

9.1%
11.7%

8.4%

7.3%
11.2%

FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
45,05041,14239,85240,51942,32044,28747,87053,36555,29758,185
6.2%
-8.7%
-3.1%
1.7%
4.4%
4.6%
8.1%
11.5%
3.6%
5.2%
5,780
5,937
5,882
5,918
5,716
6,289
6,031
6,012
6,228
6,694
2.7%
-0.9%
0.6%
-3.4%
10.0%
-4.1%
-0.3%
3.6%
7.5%
12.8%
14.4%
14.8%
14.6%
13.5%
14.2%
12.6%
11.3%
11.3%
11.5%

Source: Shared Research based on company data

Construction Work
1,200

Operating profit

12%

OPM (right axis)

1,000

10.5%

800
600
400

5.4% 5.5%

5.7%

6.5% 6.2% 6.8%

7.2%

6.6%

7.1%

8.0%

7.3%

6.5%

6.9%

6.5% 6.8%

8.1% 7.8% 8.2% 8.0% 8.4%

9.4% 9.2% 9.3%

8%
6%
4%
2%

200
(JPYmn)10%

Q1 Q2
FY02/14

Q3

Q4

Q1 Q2
FY02/15

Q3

Sales

YoY

Operating profit
YoY
OPM

Construction Work(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1 Q2
FY02/16

Q3

Q4

Q1 Q2
FY02/17

FY02/17

Construction Work
Quarterly (JPYmn)

Q4

Q2
13,070Q3
10,033

935

851

681

0.3%
6.9%

-0.9%

-19.8%
6.5%

Q4

Q1 Q2
FY02/18

Q3

Q4

Q1 Q2
FY02/19

FY02/18Q1
13,518
3.5%

Q3

Q4
9,193

Q1
11,724

Q2
12,396

743

911

1,020

4.0%

15.6%

-3.9%
6.8%

44.0%
8.1%

-13.3%

-2.6%
7.8%

Q3

Q4

-

FY02/19
Q3
8,617

Q4
8,160

Q1
10,503

Q2
11,178

Q3
9,285

683

989

1,027

865

-5.2%

-14.1%-11.2%

19.9%
8.2%

1.5%
8.0%

-8.1%
8.4%

691

-10.4%

8.6%
9.4%

-9.8%

0.7%
9.2%

7.8%

25.2%
9.3%

Q4
10,504
28.7%

1,108

62.2%
10.5%

FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
13,88916,42028,51353,071
45,63041,97243,85545,81440,897
41,470-25.0%
18.2%
73.6%
86.1%
-14.0%
-8.0%
4.5%
4.5%
-10.7%
1.4%
1,321
1,214
1,936
2,209
2,580
2,807
3,218
3,210
3,305
3,989
-8.1%
59.5%
14.1%
16.8%
8.8%
14.6%
-0.2%
3.0%
20.7%
9.5%
7.4%
6.8%
4.2%
5.7%
6.7%
7.3%
7.0%
8.1%
9.6%

Source: Shared Research based on company data

13/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Materials and Supplies Sourcing Services
1,000
900
800
700
600
500
400
300
200
100
(JPYmn)Operating profit
5.3%

5.8%
4.6%

5.9%

5.3%
4.0%

4.2%

8%

OPM (right 7.0%
axis)

4.7%

5.4%

5.3% 5.2%

5.0%

5.6%

5.9%

5.6% 5.5% 5.7%

6.1%

5.8% 5.7%7%
5.0% 5.3%

3.6%

6%
5%
4%
3%
2%
1%

Q1 Q2
FY02/14

Q3

Q4

Q1 Q2
FY02/15

Q3

Sales

YoY

Q1 Q2
FY02/16

Q3

Q4

Q1 Q2
FY02/17Q3

FY02/17

Materials and Supplies Sourcin
Quarterly (JPYmn)

Q4

Q4

Q1 Q2
FY02/18

Q3

Q4

Q1 Q2
FY02/19

FY02/18Q3Q4

FY02/19Q1
13,037Q2
12,822

Q3
12,779Q4
12,102

Q1
12,638Q2
12,502

Q3
12,696

Q4
12,429Q1
12,906

Q2
13,106

Q3
12,771

708

635

716

715

710

687

719

752

743

752

641

7.9%

Operating profit
YoY
OPM

3.0%

24.6%
5.4%

-1.6%

-4.4%
5.0%

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

-6.9%

6.9%
5.6%

-3.1%

-20.9%
5.9%

-2.5%

0.3%
5.6%

-

-0.6%

8.2%
5.5%

0.4%
5.7%

2.7%

5.2%
6.1%

2.1%

4.6%
5.8%

4.8%

9.5%
5.7%

Q4
12,224

0.6%

-1.6%

643

-10.8%
5.0%-14.5%
5.3%

FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
18,71836,73039,28444,54347,61850,51650,74050,26551,007
96.2%
7.0%
13.4%
6.9%
6.1%
0.4%
-0.9%
1.5%
627
1,234
1,462
2,333
2,111
2,806
2,774
2,868
2,779
96.8%
18.5%
59.6%
-9.5%
32.9%
-1.1%
3.4%
-3.1%
3.3%
3.4%
3.7%
5.2%
4.4%
5.6%
5.5%
5.7%
5.4%

Source: Shared Research based on company data

Vending Machine Services
Operating profit

1,400
1,200

600

16%

11.2%

1,000
800

15.1%

OPM (right axis)

13.4%

9.4%

9.3%
7.1%

6.6%

5.8%

14%

11.5%

10.6%

12%

9.6%

8.8%

10%

7.3%

6.3%

5.6%

5.8%

5.0%

5.7%

5.3%

8%
5.2%

400

3.0%

2.9%

(JPYmn)

Q1 Q2
FY02/14

Q3

Q4

Q1 Q2
FY02/15

Q3

Q4

Q1 Q2
FY02/16

Q3

Q4

Q1 Q2
FY02/17

Q3

Q4

Q1 Q2
FY02/18

Q3

Q4

Q1 Q2
FY02/19

6%
4%

1.4%

200
-

5.0%

2%
Q3

Q4

-

Source: Shared Research based on company data
FY02/17

Vending Machine Services
Quarterly (JPYmn)

Sales

YoY

Operating profit
YoY
OPM

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

FY02/18

FY02/19

Q1
7,810

Q2
9,101

Q3
7,599

Q4
8,369

Q1
8,017

Q2
8,993

Q3
7,544

Q4
8,280

Q1
8,106

Q2
8,286

Q3
7,614

455

963

432

962

421

862

217

605

419

114

231

-3.7%

1.1%
5.8%

2.9%

24.3%
10.6%

1.2%

16.1%
5.7%

1.1%

-23.0%
11.5%

2.7%

-7.5%
5.3%

-1.2%

-10.5%
9.6%-0.7%-49.8%
2.9%-1.1%-37.1%
7.3%

1.1%

-0.5%
5.2%

-7.9%

-86.8%
1.4%

0.9%

6.5%
3.0%

Q4
7,949
-4.0%

400

-33.9%
5.0%

FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
Act.
17,18832,28031,20033,32934,82532,74132,87932,834
31,955
87.8%
-3.3%
6.8%
4.5%
-6.0%
0.4%
-0.1%
-2.7%
1,480
2,330
2,396
3,068
2,965
2,846
2,812
2,105
1,164
57.4%
2.8%
28.0%
-3.4%
-4.0%
-1.2%
-25.1%-44.7%
8.6%
7.2%
7.7%
9.2%
8.5%
8.7%
8.6%
6.4%
3.6%

Source: Shared Research based on company data

14/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Support Services
900
800
700
600
500
400
300
200
100
(JPYmn)Operating profit
11.8%

16%

OPM (right axis)
12.5%

10.8%

12.4%

14.0%

11.8% 9.7% 12.1%

10.9%
10.1%

9.8%

11.7%

10.8%

12.2%

14%
13.2%

12.3%
9.6%

8.4%

12%

13.3%

10%

10.8%

8%
6%

5.6%

5.1%

4%

4.8%

2%
Q1 Q2
FY02/14

Support Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Support Services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q3

Q4

Q1 Q2
FY02/15

Q3

Q4

Q1 Q2
FY02/16

Q3

Q4

Q1 Q2
FY02/17

FY02/16
FY02/17
Q3
Q4
Q1
Q2
Q2
Q1
4,214
4,459
4,304
5,662
4,771
4,666
21.0% 15.8% 15.5% 26.4% 13.2%
4.6%
355
556
510
551
575
579
0.9% 32.4% 125.7% 400.9% 62.0%
4.1%
8.4% 12.5% 11.8%
9.7% 12.1% 12.4%

Q3

Q3
5,079
18.0%
595
16.7%
11.7%

Q4

Q1 Q2
FY02/18

Q4
5,790
2.3%
628
14.0%
10.8%

Q3

FY02/18
Q1
Q2
5,223
4,896
9.5%
4.9%
639
685
11.1% 18.3%
12.2% 14.0%

Q4

Q1 Q2
FY02/19

Q3
Q4
5,246
5,218
3.3% -9.9%692
502
16.3% -20.1%
13.2%
9.6%

Q3

FY02/19
Q1
5,538
6.0%
598
-6.4%
10.8%

Q4

-

Q2
5,439
11.1%
671
-2.0%
12.3%

Q3
6,241
19.0%
828
19.7%
13.3%

FY02/10Act.

FY02/11Act.

FY02/12Act.

FY02/13Act.

FY02/14Act.

FY02/15Act.

FY02/16Act.

FY02/17Act.

FY02/18
Act.

-7.4%
748
13.8%

-1.6%
590
-21.1%
11.1%

50.9%
312
-47.1%
3.9%

36.1%
741
137.5%
6.8%

25.4%
829
11.9%
6.0%

13.3%
1,108
33.7%
7.1%

19.9%
1,972
78.0%
10.6%

8.9%
2,377
20.5%
11.7%

1.4%
2,518
5.9%
12.2%

5,412

5,327

8,037

10,942

13,71815,53918,63920,306

20,583

Source: Shared Research based on company data
Note: Based on information disclosed as of Q3 FY02/19

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

15/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Aeon Delight Vision 2025
Objectives
The company announced Aeon Delight Vision 2025 (“Vision 2025”) at the time it released its 1H FY02/19 earnings results. In thecurrent medium-term plan, the company’s views for the core themes of IFM, Asia, and technology (next-generation facilities
management) were tactics-oriented in nature, whereas the Vision 2025 brings the focus back to Aeon Delight’s management
principle. In Vision 2025, the company remaps the initiatives under the medium-term plan into management strategies with IFM,
Asia, and technology positioned as composing elements. The current medium-term plan reflects a consensus reached throughthree drawn-out discussion sessions led by President Hamada (who became president in May) and attended by all directors,
including Chairman Nakayama (who formerly served as president). On October 1, 2018, the company pushed through structuralreforms and personnel changes aimed at realizing Vision 2025 objectives, and clarified responsibilities for all directors. We
understand the Board of Directors has been engaged in intense debates for hours, which exceed the originally scheduled
meeting time.
Vision 2025
(JPYbn)

Sales

600

YoY (right axis)
525.0

500
360.0
257.2

266.7

281.0

294.7

295.8

305.0

20%

200

10%

100
0

Operating profit

10%
8%

30%

400
300

40%

5.9%

6%
4%

5.9%

YoY (left axis)

5.9%

5.7%

Operating profit (left axis) (JPYbn)
9.1%
70
6.1%

60
48.0

50

5.9%

40

2%
0%

6.1%

15.1

15.9

16.7

17.3

16.8

18.5

30

22.0

20

-2%
FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20
Est.
Est.

FY02/26
Est.

0%

-4%

10
FY02/14 FY02/15 FY02/16 FY02/17 FY02/18 FY02/19 FY02/20
Est.
Est.

FY02/26
Est.

0

Source: Shared Research based on company data

Management principle, strategies, and tactics
Aeon Delight’s management principle calls for the creation of “environmental value” for clients and regional communities. In
accordance with this principle, Vision 2025 aims to transform Aeon Delight into a company that creates environmental value andcontributes to solving social issues, with “safety and security,” “labor shortage,” and “environment” as three pillars of its growthstrategy. Its FY02/26 targets are JPY525.0bn in sales (+JPY230.0bn vs. FY02/18, CAGR of 7.4%), JPY48.0bn in operating profit(+JPY31.2bn vs. FY02/18, CAGR of 14.0%), and a 9.1% OPM (+3.5pp vs. FY02/18, CAGR of 0.4pp). The company is also aiming
for top ten sales and top-level OPM globally and number one sales in Asia in the facility management industry. To become one of
the top ten companies in the world, the company is aiming to expand its market share in Japan by constructing Aeon Delight(AD) economic zone and concentrating management resources in China for its overseas operation.
In Japan, Aeon Delight will construct AD economic zone using the AD platform, improve efficiency and reduce customer costs by
establishing labor-saving/unmanned systems, expand its share in the facility management market through customer-focused sales
activities and collaborations with other companies, and develop an energy management business as the pillar of its new business.
The company is aiming to become a top ten company in China through making two core companies wholly-owned subsidiaries*,
establishing the AD brand in its stronghold of east China to serve as a business foundation to expand across the entire county,
and constructing systems for branding, recruitment, and management in China.
The company will earnestly engage in the energy management business. Aeon group’s annual energy consumption volume is7.4bn kWh (about 1% of the 2016 overall energy consumption in Japan of 850.5bn kWh). Against this backdrop, it participated in
Aeon Decarbonization Vision 2050 as a company in charge of managing energy consumption of the Aeon group. The company
expects this business to include everything from supplying necessary energy to regional communities to reducing energy usageat facilities. In addition, as the issue of plastic pollution in oceans grows more serious, the company plans to evolve its Materials
and Supplies Sourcing Services to an environmental materials business which can make proposals from as early as the stage of
selecting raw materials.

16/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Making two core companies wholly-owned subsidiaries: The company signed a share acquisition agreement on October 10 to acquire the remaining
49% of shares in Aeon Delight Jiangsu and Wuhan Xiaozhu. It aims to accelerate its growth in China by unifying operations, strengthening partnerships,
and accelerating decision-making processes.

Assumptions underpinning targets
The company has set meaningful targets for sales and operating profit that not only factor in the business environment andcompetitive landscape but also reflect accumulated tactical effects. These targets reflect aspirations to become the sales leader in
Asia and achieve top ten sales and top-level OPM globally. The projected sales increase of JPY230.0bn breaks down as (1) a rise ofabout JPY100.0bn in the existing FM business (+JPY60.0bn in Japan, +JPY40.0bn in China), and (2) a rise of about JPY100.0bn inthe new environmental business. Aeon Delight considered sales and growth prospects of leading global companies in Asia, andformulated a strategy to establish itself as the leader in sales in Asia. Its OPM target of 9.1% (+3.4pp from FY02/18) was similarly
set in reference to the 5% level for global leaders such as ISS and SODEXO. The following is an overview of initiatives by segmentto achieve the targets.
Aeon Delight, ISS, SODEXO OPM (left) and operating profit (right)
Aeon Delight

6.6%

SODEXO(DKK mn)ISS

SODEXO

1,400

6.4%

(euro mn)

ISS (right axis)

5,000
4,500

1,200

6.2%

4,000

1,000

6.0%

3,500

800

3,000

5.6%

600

2,000

5.4%

400

5.8%

5.2%
5.0%

2,500
1,500
1,000

200
FY12

FY13

FY14

FY15

FY16

FY17

FY18
Est

FY19
Est

-

500
FY12

FY13

FY14

FY15

FY16

-

FY17

Source: Shared Research based on company data

Existing FM business in Japan
In response to worker shortages, the existing FM business will aim to become the sales leader in the Asian FM market by (1)increasing its FM market share (currently 4.1%) and expanding business areas in Japan, and (2) concentrating management
resources into China to join the top ten companies by sales in that country. Vision 2025 targets an increase in sales of over
JPY100.0bn, which will evidently be difficult to achieve through organic growth alone. The company intends to expand its market
share by leveraging the AD platform to develop AD economic zone.
Market share: Aeon Delight estimates the domestic market is worth JPY3.7tn (based on FY02/18 sales in the Facilities Management, Security Services,
and Cleaning Services businesses).

AD platform
The AD platform is a management platform for customer facilities. It aims to utilize various sensors and IoT systems to control all
aspects of facility management ranging from power supply to air conditioning, equipment, lighting, entrance/exit control,
security and disaster prevention, and digital signage. Its objectives are to make facility management more intelligent, achieve
greater efficiency and reduced costs through automated control, centralize data, and make it visible in real time. In contrast to
traditional closed systems that rely on a central monitoring system, the AD platform stands out because of its open (low-cost)format that does not require a central monitoring system.
The AD platform caters to a wide range of facilities from office building to commercial facilities, proposes optimal solutions that
address specific challenges for each type of facility, and aims to deliver improved efficiency and quality. The company notes that(1) the platform is expected to be deployed at all Aeon stores (albeit with some variation in scale), (2) customers will find it
difficult to cancel the service once they get used to its convenience and efficiency, and (3) a partial deployment in the earlystages will also generate opportunities to secure various types of ancillary FM work. By taking charge of areas ranging from power
supply to management, security and cleaning, interior design and construction work accompanying tenant store openings and

17/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

closures, and operation of other facility infrastructure such as vending machines, the company aims to gain a competitive
advantage and build AD economic zone with affiliated companies and other partners.
AD platform
Customers

Propose solutions optimized forindividual targets and issues

Data Input

Open platform
Share data among Aeon Delight group,partnering companies, and customers

Aeon Delight platform
Data collection, accumulation → analysis, processing → optimal solution
Optimize and improve quality

Data Input

Service structure
Aeon Delightsubsidiaries

Partnering companies,
alliesAeon Delight economy zone
Build Aeon Delight economy zone
by establishing an overwhelming competitive advantage
in the facility management industry

Source: Shared Research based on company data

Initiatives from 2H FY02/18 also conducted as part of AD platform rollout
From 2H FY02/18, Aeon Delight undertook initiatives in the context of the AD platform rollout. In FY02/18, it recognized labor
reduction as the biggest and most urgent issue it faces, since labor shortages impact not only the business environment, but thecompany directly (blunting its ability to capture new contracts). In 2H FY02/18, the company raised the management priority ofdeveloping labor reduction and automation facility management (FM) models as soon as possible. From early FY02/19, it madeconsecutive announcements related to labor reduction and automation. These included the establishment of a joint venture with
DeepBlue Technology (China), an agreement to collaborate with SECOM on a new business model, and the launch of a floor
cleaning robot jointly developed with Tennant Company (US; NSYE: TNC). It will also establish a more efficient model for a major
general supermarket chain that allows reductions in on-site staffing (resulting in cost reductions for the chain and Aeon Delight)
and will test a labor reduction model that reduces client costs by 40% at major commercial facilities and allows the company tohalve the number of on-site staff. These initiatives arose from the sense of urgency surrounding labor shortages.

Platform that confers benefits to Aeon Delight, customer facilities, and partners
The aforementioned initiatives are part of the AD platform efforts. Labor reduction and automation in facility management andfloor cleaning robots are important parts of building the AD platform, and the research lab jointly operated with DeepBlue
Technology will also play a critical role. The company will leverage technology to capture big data comprising information
automatically obtained from various sensors under its labor reduction and automation FM model, and visually collected
information on everyday operations through its dispersed management system Delight Viewer, which is still under development.
It plans to use AI to analyze such data at the jointly operated research lab, and share findings with AD economic zone participants.
This approach is expected to deliver benefits to the company, its customer facilities, and its partners. In short, we understand that
Vision 2025 is not meant to be a departure from the current medium-term plan or management principle, but rather represents acomprehensive strategy that encompasses both.

Overview of targets
Aeon Delight intends to leverage the AD platform to expand its market share and build AD economic zone. According to thecompany, it currently leads the FM sector, but its market share stands at only 4.1%. This is largely because the market ispopulated with a large number of small and medium-sized business operators, but Aeon Delight has a competitive advantage
from its nationwide network and its AD platform, particularly under the business environment in which worker shortages havebecome a major issue. By facility type, the company’s market share is nearly 15% for commercial facilities, but only 2–3% foroffice buildings, and roughly 1% for medical institutions. The company intends to strengthen its market share for commercial
facilities by securing further contracts from Aeon stores under Aeon Decarbonization Vision 2050, and expand its share for officeand other buildings through collaborations with other companies. At the results briefing in April 2018, management revealed
that it was aiming to introduce the AD platform at security service customers of SECOM, and that it may be able to secure ahigher market share if it succeeds in providing bundled services that also include cleaning and other services to these customers.
We look forward to seeing further developments related to SECOM customers.

18/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Collaboration with SECOM: In April 2018, Aeon Delight announced a collaborative effort with SECOM to develop a new FM business model that cancapture FM demand from the 2.2mn companies in Japan that have adopted machine security (remote security using sensors). This demand amounts to
2.2mn companies × JPY30,000/month (an amount similar to the fee for machine security). For example, if the company can win contracts with 2.2mn
companies × 10% market share × JPY30,000/month × 12 months, sales would be about JPY80.0bn. A 20% market share would mean about JPY160.0bn
in sales. The nature of the collaboration is unclear, but a 50:50 split would mean JPY40.0bn or JPY80.0bn respectively for Aeon Delight. At a briefing, thecompany said the sales teams of both companies would try to capture demand for safety and security at medium-sized facilities (20,000sqm andsmaller) and together they are targeting a market share of about 20% by FY02/21. We will be watching related developments.
Details of announcement: On April 10, 2018, Aeon Delight agreed to collaborate with SECOM to establish a new FM business model. The content of
the collaboration includes 1) by leveraging the service bases, technologies, and expertise of both companies, realizing labor reduction and automation
for the management and operation of large facilities conventionally handled by on-site guards; 2) developing a one-stop service for small and medium
facilities to resolve issues related to safety, security, comfort, and convenience; 3) coordinating client development by leveraging the sales abilities ofboth companies; and 4) promoting coordination on the development of overseas businesses by both companies, starting in China, where the market is
growing fast.

Floor cleaning robot
In August 2018, Aeon Delight announced it will begin sales of a floor cleaning robot that was jointly developed with US-based
Tennant Company. The company has completed testing of the robot at its stores, and plans a full-scale launch from 2H FY02/19.
The robot achieves a roughly 70% reduction in labor compared to solutions operated by cleaning staff, and thus helps resolve
worker shortages. Cleaning staff is hard to secure because the bulk of the cleaning work is conducted at night, when stores andoffices are closed. Responding to such demand, the company will start external sales of the robot in November. Aeon Delight will
work with its partners to develop and secure new contracts, and the robot will become another asset to reduce lost opportunities
and expand its AD economic zone.

New environmental business: Energy management businessIn the new environmental business, Aeon Delight will offer renewable-energy management and retail services based on the Aeon
Decarbonization Vision 2050 pursued by Aeon (TSE: 8267). Aeon group’s annual energy consumption volume in FY02/18 is
7.4bn kWh (about 1% of the 2018 overall energy consumption in Japan of 850.5bn kWh), and exceeds over JPY100.0bn. Aeon
Delight will 1) pursue economies of scale in power procurement, 2) secure a position that allows it to reduce peak time demand
for the group’s total energy consumption volume (1% of overall energy consumption in Japan), and 3) utilize projections
obtained from big data. The company aims to redirect savings gained from these efforts into added value. In the future, it aims todevelop the environmental business in regions surrounding group stores, and establish an energy management business that
includes all aspects from supplying necessary energy to regional communities to reducing energy consumption for commercial
facilities. The company’s sales forecasts for the business do not factor in expansion to surrounding regions and assumeconservative targets for sales to group stores.
The two avenues to achieve the Aeon Decarbonization Vision 2050 are promotion of energy conservation and a transition to
renewable energy. Aeon Delight intends to promote energy-saving measures through the AD platform that was discussed above,
and will accordingly take charge of the group’s power supply, the bulk of which goes to air conditioning, refrigerated display
cases for cold and frozen foods, and lighting. Using highly precise, real-time management, the AD platform looks to reducedemand by optimizing demand projections through AI and accumulated data on the group’s energy consumption, which
represents 1% of Japan’s total energy consumption. Turning to renewable energy, the company will utilize the solar power
generation facilities of Aeon stores, procure renewable energy, and leverage the technology of investee Digital Grid Corporation(see Full-year company forecasts section) to demonstrate the viability of renewable energy. We should add that Aeon Delight has
no plans to construct thermal power generation facilities.

Environmental materials business
To help reduce the global environmental load, Aeon Delight intends to go beyond renewable energy initiatives. As the issue ofplastic pollution in oceans is growing more serious, the company plans to evolve its Materials and Supplies Sourcing Services toan environmental materials business which can make proposals from as early as the stage of selecting raw materials.

19/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Overseas FM market
The overseas business is the only area in which the Vision 2025 diverges from the medium-term plan. The latter calls for FY02/20
overseas sales of JPY30.0bn (+JPY18.0bn from FY02/17), breaking down as JPY20.0bn in China (+JPY11.0bn, CAGR of 30%),
JPY10.0bn for the ASEAN region (+JPY7.0bn, CAGR of 40–50%), with both regions expected to deliver strong growth.
Conversely, Vision 2025 looks for sales in the ASEAN region to remain flat, and targets a rise of JPY40.0bn in China. Thisapparently reflects the company’s belief that (1) management resources need to be concentrated in China to rapidly establish afoothold in the massive Chinese market where building construction continues, and (2) the business model for ASEAN operations
needs to be revamped because the company’s independent foray into countries such as Vietnam and Malaysia ultimately has not
led to the acquisition of expertise (in contrast to China, where Aeon Delight achieved growth by acquiring local companies that
already possessed the necessary expertise).

China business
The China business reported sales of nearly JPY10.0bn in FY02/18, and targets sales of JPY50.0bn in FY02/26. This is anothermeaningful target underpinned by the fact that leading companies in China generate sales of JPY20.0–30.0bn (according to thecompany), and the belief that a target of JPY50.0bn is feasible if factoring in growth from the acquisition of a rival. To this end,
Aeon Delight turned two core companies into wholly owned subsidiaries (from previous stakes of 51%) on October 10, 2018,thus establishing the business foundations to accelerate growth in the China business. The company aims to strengthen its brandin China and join the top ten companies in the facility management industry by unifying its Chinese operations, strengthening
cooperation between the two subsidiaries and Japan, and accelerating related decision-making process.
The five markets in China targeted under Vision 2025 correspond to the five strategic markets in the medium-term plan:(1) medium to high-end commercial facilities, (2) medium to high-end residential projects, (3) high-end factories (operated by
Japanese, foreign, or Chinese leading companies), (4) care facilities such as nursing homes and hospitals, and (5) subway andother transport infrastructure facilities. The company has already won contract work in each of these markets. It is expanding thescope of its contract work, and also broadening operations beyond East China. Its aim is to establish the AD platform in East China,
lay the foundations that support business expansion throughout China, and join the top ten companies.
Overseas sales and OPM (left), China sales (right)
China

8%

Malaysia

Vietnam
7.3%

7%
6%
5%

10.6

4%

8.9
3.4%

3%
2%
1%

(JPYbn)OPM (left axis)

5.2%

12.1

12.9

6%

16

5%

14

5.8%

12

3.9%
7.0

3%

8

2%

4
2

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

1H
FY02/190% of sales% of OP

4%

10
6

4.2

0%
-1%

18

1%
0%
-1%

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

1H
FY02/19

Source: Shared Research based on company data

Profit margins
We have discussed the breakdown of the JPY230.0bn sales increase above, but Vision 2025 also looks for sharp growth in profit
margins, calling for OPM of 9.1% in FY02/26 (3.4pp increase from 5.7% in FY02/18). This target is based on comparable margins(5–6%) achieved by global leaders such as SODEXO and ISS. Aeon Delight believes it can achieve such an ambitious level basedon a unique approach that combines technology and AD economic zone. It plans to incrementally improve OPM, mirroring its
approach for sales growth.
By market, Aeon Delight looks for the following:▷

Existing FM market in Japan: Improve profit margins through cost reductions for Aeon Delight and its customers throughdeployment of the AD platform, which is premised on a labor-saving FM model

20/74

R
Coverage▷▷

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Chinese market: Overseas OPM already reached over 8% in 1H FY02/19, exceeding consolidated OPM of 5.9%, but thecompany will leverage its labor-saving model to achieve a further increase in China, a market that is facing worker shortages
like JapanNew businesses: The company will aim for OPM that surpasses consolidated OPM (5.6% in FY02/18) through procurement,
big data utilization, and highly efficient power management of the Aeon group’s energy consumption, which corresponds toroughly 1% of overall energy consumption in Japan. Aeon Delight looks to improve profitability of its subsidiaries in Japan byclarifying each company’s function within the group, with consideration given to organizational restructuring

Vision 2025 does not include any references to IFM. This does not mean the company has abandoned IFM altogether, but rather
that IFM is just one proposal underpinning sales. Because of its transparent cost structure, IFM makes it difficult to secure highmargins. While the medium-term plan calls for IFM-driven sales growth, Shared Research believes Vision 2025 places greater
emphasis on high profit margins achieved through the AD platform and AD economic zone in Japan and through reaping benefitsof growth momentum in China.

21/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Medium-term business plan (FY02/18–FY02/20)
Sales

400

YoY (right axis)
360.0

300
219.8

200

248.9

257.2

266.7

281.0

294.7

295.8

305.0

40% 25%

30%

170.9

0

FY02/10

FY02/12

FY02/14

FY02/16(JPYbn)FY02/18

FY02/20
Est.

15%
12.0
10.0

5%

7.1%

10%

0%

YoY (left axis)

20%

20% 10%

140.3

100

Operating profit

7.0%

13.8

13.9

6.3%

5.6%

15.1

5.9%

15.9

5.9%

16.7

5.9%

Operating profit (left axis)
22.0

17.3

5.9%

16.8

5.7%

20

18.5
14.4%

6.1%

16
12

6.1%

8

0%
-5%

24

4
FY02/10

FY02/12

FY02/14

FY02/16

FY02/180
FY02/20
Est. (JPYbn)

Source: Shared Research based on company data

In April 2017, the company announced a new medium-term business plan which will be in effect through FY02/20. The plantargets sales of JPY360.0bn (6.9% average annual growth rate, JPY65.3bn increase over three years), operating profit of JPY22.0bn(8.4%, JPY4.7bn increase), and net income of JPY12.8bn (7.7%, JPY2.6bn increase). In addition to organic growth, the company
says the targeted JPY65.3bn increase in sales will include 1) a JPY15.0-20.0bn increase in sales, mainly IFM, to clients outside thedomestic Aeon group, 2) a JPY15.0-20.0bn increase from revitalization work for Aeon group companies and remodeling work forincoming tenants, 3) a JPY15.0-20.0bn increase from overseas sales, mainly IFM in China.
The medium-term plan’s priority issues are 1) IFM, 2) Asia, and 3) technology, among which it is aiming for significant increases
in IFM and Asia.

First year of plan (FY02/18) ends
The company positioned FY02/18, the first year of the plan, as one in which to focus resources on high potential growth markets
such as IFM and overseas, and transform its business model, while continuing to make initiatives taken in the previous
medium-term plan profitable. There are three priority initiatives under the plan. One is IFM. The company aims to gain expertise
under a new corporate business model as it provides an IFM service to a major pharmaceutical company. In Japan, lost
opportunities due to a labor shortage have put the company behind schedule as it tries to meet its three-year target of 10
contracts. The second initiative is Asia. The company aims to improve performance and steadily expand businesses in five primarymarkets in China. The third initiative is technology. The company has made steady progress on a number of measures, including
the establishment of a next-generation energy-saving facility management model. However, it has yet to get a labor-saving
model in place, leaving it with the issue of being unable to absorb the rising cost of labor.
Aeon Delight recognizes labor reduction as the biggest and most urgent issue it faces, since labor shortages impact not only thebusiness environment, but the company directly (blunting its ability to capture new contracts). In 2H, it raised the management
priority of developing labor reduction and automation facility management (FM) models as soon as possible.
FY02/18 operating profit was just JPY16.8bn, down JPY400mn YoY and falling short of the initial forecast (JPY18.0bn). Specificfactors were slowing demand for remodeling work at some commercial facilities in the Construction Work segment, rising
personnel costs to improve the workplace environment and establish a new system in the Security Services segment, one-time
expenses and increased depreciation related to the installation of value-added vending machines with digital signage in the
Vending Machine Services segment, and lost opportunities related to IFM. The labor shortage did not directly impact the factors
associated with Construction Work and Vending Machine Services.

22/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Medium-term management plan (FY02/18–FY02/20)
Priority management issues

Solutions

Initiatives

Declining labor force
Aging society

Shift from on-site
to patrol-typesecurity services

Build labor-saving
business model✓ Increase in personnel costs✓ Labor shortage in Japan✓ Aging workforce at
operational sites

Enhance patrol-typebusiness model
Technology

Automate FM(to become unmanned)

Source: Shared Research based on company data

Initiatives undertaken in 2H FY02/18 have begun bearing fruit early in FY02/19.
As it works toward realizing the medium-term management plan, Aeon Delight considers FY02/19 a period for establishing abusiness model that embraces multiple keywords, including efficiency, profitability, labor reduction, and automation. It also
intends to accelerate growth in new business areas.

Approach for FY02/19
Aeon Delight is targeting a 10% YoY increase in operating profit to JPY18.5bn. Admittedly, the company is behind schedule on
the path to its FY02/21 target of JPY22.0bn. However, considering the labor shortage a priority management issue, it is working
to establish an efficient labor reduction business model and develop new business areas using the labor shortage as a tailwind,which will allow it to accelerate growth and bring it closer to achieving the targets of the medium-term management plan. The
following is an overview of initial company forecasts and issue resolution initiatives for FY02/19.

23/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

FY02/19 company forecasts (initial forecast)Targets
For FY02/19, the company forecasts sales of JPY305.0bn (+3.1% YoY, +JPY9.2bn YoY), operating profit of JPY18.5bn (+10.0%,+JPY1.7bn), OPM of 6.1%, net income of JPY11.0bn (+6.6%, +JPY700mn), and NPM of 3.6%. The JPY1.7bn increase in operating
profit is to be the result of a JPY3.0bn increase in gross profit absorbing a JPY1.2bn increase in SG&A expenses. The JPY3.0bn
increase in gross profit is to be the result of measures related to client expansion (JPY800mn), store design and renovation
business (JPY300mn), business expansion in Asia (JPY600mn), labor reduction and cost improvements (JPY700mn), and growth ofdomestic subsidiaries (JPY600mn).

Measures to increase gross profit
▷

▷

▷
▷

▷

Client expansion: Based on lost opportunities in FY02/18, Aeon Delight believes there are numerous contracts it could win if
it could secure personnel with the required skills, and it aims to win clients outside the Aeon group by proposing labor-saving
and energy-saving solutions.
Store design and renovation business: The company expects to see more restorative construction work to be done when
tenants are replaced in shopping malls. Including such work, it forecasts JPY9.2bn (+JPY2.3bn YoY) in gross profit from
revitalization demand.
Business expansion in Asia: The company plans to expand in Asia, with two thirds of the expansion in China and the otherthird in ASEAN.
Labor reduction and cost improvements: This is related to client expansion, but Aeon Delight expects to achieve labor
reduction and cost improvements by establishing a labor reduction business model and conducting various initiatives utilizing
technology to achieve cost improvements.
Growth of domestic subsidiaries: The company expects to achieve improvement across all of its subsidiaries, including
growth at AZS, which handles non-core businesses (including call center services and facility management) under contract forsmall stores, recovery at Kajitaku, improved earnings at Hakuseisha, and continued profit growth at Aeon Compass.

Initiatives related to priority management issues
Aeon Delight aims to establish highly efficient labor reduction, automation, and visiting-type FM business models in FY02/19 toresolve priority management issues. Specifically, the company says it plans to establish two models to enhance services for small
and medium facilities in Japan, a labor reduction model for large commercial facilities in Japan, and an automated FM model(SmartFM) for China.

Services for small and medium facilities in JapanThe company aims to establish two business models with distinct characters for small and medium domestic facilities. The first is a
new FM business model created in collaboration with SECOM (TSE1: 9735). The second is a highly efficient, high-margin modelthat reduces the number of on-site staff, adds staff at visiting service offices, and strengthens sales.

Collaboration with SECOMIn April 2018, Aeon Delight announced a collaborative effort with SECOM to develop a new FM business model that can capture
FM demand from the 2.2mn companies in Japan that have adopted machine security (remote security using sensors). This
demand amounts to 2.2mn companies × JPY30,000/month (an amount similar to the fee for machine security). For example, if thecompany can win contracts with 2.2mn companies × 10% market share × JPY30,000/month × 12 months, sales would be about
JPY80.0bn. A 20% market share would mean about JPY160.0bn in sales. The nature of the collaboration is unclear, but a 50:50
split would mean JPY40.0bn or JPY80.0bn respectively for Aeon Delight. At a briefing, the company said the sales teams of bothcompanies would try to capture demand for safety and security at medium-sized facilities (20,000sqm and smaller) and together
they are targeting a market share of about 20% by FY02/21. We will be watching related developments.

24/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Collaboration with SECOM: On April 10, 2018, Aeon Delight agreed to collaborate with SECOM to establish a new FM business model. The content
of the collaboration includes 1) by leveraging the service bases, technologies, and expertise of both companies, realizing labor reduction andautomation for the management and operation of large facilities conventionally handled by on-site guards; 2) developing a one-stop service for small
and medium facilities to resolve issues related to safety, security, comfort, and convenience; 3) coordinating client development by leveraging the sales
abilities of both companies; and 4) promoting coordination on the development of overseas businesses by both companies, starting in China, where
the market is growing fast.

Establishment of more efficient, high-margin business model
Shared Research believes that with the new model, the company can anticipate improved profitability of the conventional on-site
model through labor reduction and of the visiting model through business expansion and development of a dominant position.
Aeon Delight operates through about 600 sites around the country, with a total of some 20,000 qualified staff members assigned
to those sites (along with a network of about 10,000 cooperating companies). Of the 600 sites, about 450 are involved in FM,
and about 80 of those conduct visiting services. When FM staff members are assigned to work on-site, this increases costs, ties up
qualified staff, and keeps earnings from growing. Establishing a business model that reduces the number of on-site staff would
improve profitability. The reduction can be achieved by consolidating administrative work (the aim is to reduce a four tofive-person team by one).
This sort of service is already being used in commercial facilities. It seems that although sales decline, expenses decline even more,leading to improved profitability. Clients receive the benefit of cost reduction, so if a more efficient, high-margin model isestablished that still guarantees quality, Aeon Delight can anticipate horizontal expansion. It plans to develop the model inearnest starting in FY02/19.
The excess staff members resulting from such labor reduction would then be assigned to sites providing visiting services or to
new projects. Capturing demand in areas near sites providing visiting services helps the company strengthen its dominance,increasing sales and improving profitability. The synergistic effect is sizeable.
More efficient, high-margin model for small and medium facilities (left), labor reduction model for large commercial facilities (right)＜Before＞

Sales
Costs
Personnel
costs＜After＞
Higher unit priceUnderdemonstration test

Less on-site staff

Sales【Customers】

Sales

Costs

Costs

Personnel
costs

Personnel
costs

Introduce
labor-saving
systemReduce facility costs by
40%【Aeon Delight】

Reduce on-site staff by
50%

Source: Shared Research based on company data

Establishment of labor reduction model for large commercial facilities in Japan
Aeon Delight is considering a labor reduction model for large commercial facilities that is similar to the one for small and medium
facilities (in terms of reducing labor through improved efficiency), but in combination with cutting-edge technology. It plans toestablish a model during 1H FY02/19 for deployment at multiple facilities in 2H. This labor reduction model will have initial costs
for sensors and other equipment, but halving the number of on-site staff will result in a 40% reduction in facility costs for clients.
The model is already being tested both inside and outside Japan. An energy saving FM model was tested during FY02/18 as anext-generation FM model, and has now been integrated into the labor reduction model being tested at Aeon Mall Tokoname(total leased area of 86,700sqm). As the model nears its completed form, the company is working to determine the results ofeach of a variety of labor reduction initiatives and to satisfy clients on the safety and security of the model.
A 40% reduction in client costs naturally means a 40% reduction in related sales for Aeon Delight, but the company plans tosecure profit with the establishment of a labor reduction model leveraging technology. In addition, it plans to shift staff released
from on-site duties to new projects. The company feels it had at least 20 lost opportunities in FY02/18 due to the labor shortage.
Being able to respond to such demand will help it generate sales and profit.

25/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Establishment of automated FM model (SmartFM) for China
The aforementioned labor reduction model also anticipates the ultimate move to full automation. In March 2018, the company
announced it plans to establish AeonDelight DeepBlue Technology (Shanghai) Co., Ltd., a joint venture with IT company
DeepBlue Technology (Shanghai) Co., Ltd. (China) on April 26, 2018. Aeon Delight will have a 65% stake in the new company,
while DeepBlue Technology (Shanghai) will have 35%. Aeon Delight says it has a good feeling about the venture’s potential
technological development speed and hopes to have SmartFM up and running in China in about a year. It is also considering
using technology from DeepBlue Technology in its labor reduction model.
Reasons for establishing a new company: DeepBlue Technology (Shanghai) possesses strengths in the basic research and application development for AI andprovides integrated solutions for processes from R&D to product planning, development, and production. The new company will function as an R&D center
specializing in R&D to create SmartFM, a new business model for facilities management (FM) which utilizes the company’s wealth of expertise amassed inJapan, combined with cutting-edge technology. SmartFM will utilize AI and IoT in visual monitoring control systems, security systems, and assorted robot
technology in order to make customer facilities more intelligent, improve convenience for facility users, and significantly increase productivity by automating
and streamlining operations. In the future, the company aims to launch SmartFM in China, Japan, and ASEAN nations.

China’s SmartFM (including operations of DeepBlue Technology)

Source: Shared Research based on company data

TopicsOn March 28, 2018, the company announced that it will participate in the renewable energy pilot project utilizing blockchain
technology to achieve a carbon-free society. The company plans to install dedicated equipment at 35 Aeon group stores in
FY02/19 and at about 1,000 stores in FY02/20. It intends to manage energy and sell it to consumers, utilizing a platform that canidentify the type of electric power being generated and trade the power accordingly (scheduled to be completed in FY02/20).
The Aeon group is the first major retailer in Japan to participate in the international RE100 initiative, which calls for businesses touse 100% renewable energy. It has declared its commitment to reducing CO2 and other greenhouse gas emissions from stores tozero by 2050 (Aeon Decarbonization Vision 2050). As an interim target, the Aeon group hopes to reduce total greenhouse gas
emissions from stores by 35% by 2030 (relative to the 2010 level).
The company says the Aeon group consumes about 7.4bn kWh per year (about 0.9% of the total used in Japan; the Aeon groupitself uses about 2.0bn kWh, with the rest used by tenants and others), costing more than JPY100bn. The company invests in
DIGITAL GRID Corporation (http://www.digitalgrid.com/, President and CEO Rikiya Abe), which was established by Rikiya Abe topromote digital grid technology (after he retired in November 2017 from a position as a specially appointed professor of the
University of Tokyo). DIGITAL GRID plans to use this technology to manage and sell electricity derived from renewable sources. It
plans to operate an energy transaction system based on renewable energy purchased from individual households and companies
and to sell related devices. Aeon Delight’s business model is unclear, but it seems likely the company will handle transactions(sales of electricity and devices) with the Aeon group. Shared Research will be watching related developments, particularly
because of how large the amounts involved would be.

26/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

DIGITAL GRID market
Renewable electric power
exchange (continuous session)
Ask volume
Price
Bid volume(kWh/30min)

1,200,000
845,000
246,000-(JPY/kWh) (kWh/30min)

35
34
33
32
31
30

Digital Grid Platform
Blockchain P2P network

120,000
850,000
250,000

Real time renewableelectric power priceElectricity packet balance sheet
OutputInput
Output
Power
Type
Type
source(kWh)PV-7.0 BAT
BAT
In-house
0.0 SUBSUBSULL (PV) Home B-1 -11.0 BUY
SELL (PV) Home B-2 -20.0
0.0
SELL (other) -15.0
LOAD
In-house
Total (1)-53.0 Total (2)LossesStock-1.0 BAT (PV)In-house
LOSS
BAT (other)
Total (3)-54.0 Total (4)

Input
Power
source(kWh)In-house
42.0
2.0
In-house
0.0
5.0
Aeon (PV)

49.0
5.0
0.0
54.0

In-house
In-house

Retail electricity business operators
PV
power

Retail electricity business operators

Transmission anddistribution operators
Smallwindpower

Factory
RooftopPV
Commercial facilities

Public facilities

Source: DIGITAL GRID Corporation

Initiatives related to medium-term management plan and contribution to FY02/19 earnings
The following are initiatives Aeon Delight will undertake in relation to IFM, Asia, and technology as part of the medium-term
management plan, along with an overview of Construction Work and other segments. Briefly, in regard to IFM, Aeon Delight’s
three-year target of 10 contracts seems likely to be delayed, as the company plans for two new contracts in FY02/19 and four in
FY02/20. In regard to Asia, business is expanding steadily, but the company is actively considering M&A in China and ASEAN toaccelerate the process. In regard to technology, it will continue to strengthen efforts to obtain technology it can use in labor
reduction. In regard to Construction Work, it expects revitalization-related sales of JPY9.2bn, a YoY increase of more than 30%. It
also expects higher profits for its various subsidiaries.

IFM (Integrated Facility Management)
The medium-term plan sets forth a target of ten IFM projects (each project averages roughly JPY1.0bn) over three years. Aeon
Delight has been pursuing the establishment of integrated FMS as one of the main aspects of its previous medium-term plan, withthe aim of securing a competitive advantage. It has begun to refer to this as IFM (integrated facility management), for thefollowing reasons: a) strong demand for full-scale facility management has paved the way for its introduction, b) the closing oflarge, multiple-year contracts with a major domestic global enterprise, c) it is globally referred to as IFM. Shared Research
believes that the latter is an expression of the company’s commitment to global expansion.

Provision of services which integrate management area on top of the company’s conventional area of business
IFM means for the company to provide services integrating management on top of operations–the company’s conventional areaof business. Its features include support of a management strategy-based FM (facilities management) program as a partner of theclient company. The company has been proactive in establishing a foundation for its IFM business, as shown by its prompt
compliance with ISO41000/ISO18480, its increased focus on hiring specialist staff, and the establishment of an operating
structure for consulting services by its subsidiary GSI.

27/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

In September 2016, the company closed a multiple-year IFM contract with a major domestic global pharmaceuticals enterprise,as the client values the efforts Aeon Delight has made thus far and its BCP readiness. The IFM project started operations in
December 2016 and sales seem to be increasing more than initially anticipated, due to taking on additional projects. The
company has established a headquarters for promotion of its IFM business in October 2016 to quickly prepare itself to capture
multiple large orders and manage them. Working closely with GSI, the company expects IFM to be a driver of earnings during thecurrent medium-term plan.
With this future growth in mind, Aeon Delight is also currently focusing on the training of account managers (including external
recruitment), seeing it as an urgent business matter due to a perceived shortage of personnel working in management. It has also
set its sights on global expansion as it accumulates personnel and expertise. Shared Research also believes its training of accountmanagers has the potential to lead to a strengthening of ties with its existing clients. Further, the company intends to commit
multi-lingual personnel to the overseas IFM business.
IFM
Trade partners(Management strategy)

IFM

Proposals on andconstruction of workplace;facility management;
cleaning; security;
construction work;
materials; vending
machines; others

Management(General affairs and property administration)

As FM partners
Comprehensive
servicesManagement
area

Build facility strategies;
SupportOperationarea

Services from management areas
through operation areas

IFM
Aeon Delight (FM proposals)
Energy management

Facility
budgetary control

Vendor management,
evaluation, training

Cost reduction plans

Business continuity
planning (BCP)

Repair planning andmanagement

Aeon Delight
Facility

Cleaning

Maintenance

Energy saving

Affiliates and partner companies
Design andconstruction
Materials

Vending
machines
Workplace

HR, GA, otherclerical works

Housework
outsourcing

Business travel
management

Meeting roomarrangement

Catering

Facility
logistics

MICE

Uniforms

Dormitory
operation

Source: Shared Research based on company data

Advancing multi-year, full-fledged IFM contracts
Aeon Delight, which has developed into a major enterprise based on facilities management, significantly shifted its sales strategy
in FY02/17 due to a domestic economic environment in which deflation persists. What the company aims for is multi-year
contract, full-fledged IFM projects for all-in-one property management. While multi-year contracts have some strict conditions
such as guarantees for cost reduction (for example, a 5% reduction over five years) and quality, they cover a wider range ofdetails and services (such as catering services, for example). In addition to sales growth, multi-year contracts have properties
which can also contribute to profits through effective management.

Launch of IFM sales in China
In FY02/18, the company established an IFM business model at an early stage and expanded sales in Japan and China. Specifically,
it seeks to strengthen its sales structure and work toward the automation of IFM operations. To strengthen its sales structure, itestablished an IFM sales base in Shanghai, China, in February 2017, and launched sales in April. It has advanced sales activities,
with Japanese and foreign companies as its main targets, while seeking to partner with local companies, including major Chinese
firms. Through new proposals and replacement of existing IFM companies, Aeon Delight is aiming to expand business to IFM atcompanies with which it already has some dealings. In order to cover China’s vast geographic territory, the company has also
worked toward standardizing operations through E-learning.
Regarding the positioning of subsidiaries in China, each of the subsidiaries in Suzhou and Wuhan have continued to focus on the marketing of operational
areas such as facilities management, cleaning, and catering—capitalizing on the government-related networks they have cultivated—while the Shanghai
subsidiary provides general management and support of those activities, as well as handling IFM sales.

Developing new routes for capturing demand
Although sales activities proceeded in regard to multiple projects in FY02/18, neither inside nor outside Japan did this result in
the capture of any IFM contracts. However, as a result of IFM sales activities, Aeon Delight did capture one large contract forstandard FM. IFM is deeply involved with clients’ FM strategies at the management level. To those clients, moving to IFM

28/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

represents a profound change to their internal organizations, so although there have been plenty of inquiries, clients often
require significant time before reaching any decision, or else they settle for standard FM.
That said, the company will focus on developing new sales routes in FY02/19 in order to achieve its three-year target of 10
contracts. In Hong Kong and Singapore, the market is being established by companies that introduce IFM contractors tocompanies desiring IFM. Aeon Delight plans to make use of this sort of market (by submitting bids) in order to accumulate
overseas contracts. In Japan, it is teaming up with trust banks. Through these measures, the company is targeting two new IFM
contracts in FY02/19 and four in FY02/20.

Initiatives to increase sales per region
With the abovementioned IFM in mind, the company seeks to also increase sales per region for existing FM business as follows: 1)
Japan: expand construction work (such as revitalization of commercial facilities), 2) China: expand catering business and share of
top five priority markets, 3) ASEAN: enter the Cambodian market and conduct M&A in Indonesia, where market growth isanticipated.
In Japan, the company is focusing on capturing demand for revitalization of commercial facilities. It aimed to increase
revitalization-related sales by JPY3.0bn in FY02/18 but achieved an increase of just JPY100mn after slowed demand for remodelingof supermarkets and general supermarkets. However, the company is targeting JPY9.2bn in sales (+JPY2.3bn) in FY02/19.
Revitalization demand is high priority and holds a key place, along with IFM, in the company’s target of a JPY15.0–20.0bn
increase in non-Aeon group sales under its medium-term plan.

Japan: Expansion of renovation work, demand for revitalization of commercial facilities
Regarding demand for revitalization of commercial facilities, in addition to securing a steady flow of renovation projects from
Aeon group companies such as Aeon Mall (TSE1: 8905) and Aeon Retail, Aeon Delight is also looking at expanding into new
business areas in order to maximize its business opportunities. Although there is only JPY20.0-30.0bn worth of demand forrenovations from roughly 350 shopping malls across Japan, when including construction work for replacement tenants, thecompany estimates that the market expands to JPY200.0bn. Aeon Delight aimed to capture this market under the previous
medium-term plan and advanced the reinforcement of its personnel. Under the current medium-term plan, with a favorable
market environment, the company aims to reap those rewards.

Demand for construction work for replacement tenants
For example, when malls undergo renewals, there is restorative construction work to be done when a tenant moves out,
remodeling work to be done to accommodate the new tenant moving in, and there is of course renovation work on the mall itself.
By acquiring experience and expertise in all these different types of construction work, Aeon Delight has put itself in a position to
not only do the actual work but also supervise the entire construction process. Going forward, Aeon Delight plans to capture
even more of the value-added in the store renovation process by moving into other areas such as architecture and store design.
Toward this end, Aeon Delight had been beefing up its workforce since the beginning of FY02/18, and making itself more costcompetitive versus major interior design companies and general contractors. In FY02/18, with small- and medium-sized tenants
as its targets, the company steadily capitalized on related demand.

FY02/19
Aeon Delight plans to further expand related sales in FY02/19. In April 2018, it made U-COM (JPY550mn in sales in FY2016;
http://www.ucom-web.co.jp/) a wholly owned subsidiary. Aeon Delight says this store design specialist is strong in China and it
hopes U-COM will help it gain traction in capturing demand in Asia. Construction management is now the company’s only
weakness. Aeon Delight says that if it can plug that hole through acquisitions, its Construction Work segment (FY02/18 sales of
JPY40.9bn) could target sales on a level with competing companies (for example, Tanseisha Co., Ltd. [TSE1: 9743], which had
FY02/18 sales of JPY75.2bn).

29/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Construction work process for commercial facility tenant replacement
Moving out
01

02

Temporaryenclosure

03

Restoration

Peripheral work

related to temporary
enclosure andrestoration

construction work

Zoningconstruction work

Moving in
04
Preliminary
research

05
Development
plan

07

06
Planningand design
outline08

Design &construction

Interior
construction
management

Zoning andrestoration work

09
Construction
andmanagement

10
Transfer

11
Maintenance

12

Facility
mgmt.,
cleaning,
security

Source: Shared Research based on company data

Aeon group-related demand
In terms of the Aeon group, projects targeting Aeon Mall are expected to continue to expand. Over the three years from FY02/18
to FY02/20, Aeon Mall plans to invest JPY100.0bn in the revitalization of existing malls in Japan, of which JPY30.0bn was planned
for FY02/18. In fact, it invested JPY70.0bn in FY02/18, JPY40.0bn more than planned, and increased the three-year plan to
JPY140.0bn, with JPY30.0bn to be spent in FY02/19 and JPY40.0bn in FY02/20. Aeon Mall generally does major renovations ofexisting malls once every six years and renovated 12 malls (versus 15 planned) and expanded two in FY02/18. It plans to renovate
eight malls and expand two in FY02/19 and renovate 10 and expand four in FY02/20.
One reason for the shortfall in FY02/18 was projects for Aeon Retail, but Aeon Delight believes FY02/18 represented a bottoming
out and there will be no further decline in FY02/19.
Retail sales at malls tend to peak three years after the opening and slow in the fourth and fifth years. Therefore, Aeon Mall renovates its malls when
six-year regular lease agreements with specialty store tenants expire. The company’s planning takes into account changes in the commercial area, andintroduces new specialty stores and renovates and removes existing specialty stores at malls. Changing almost all of the specialty stores helps to remake
the entire mall. Spending is JPY300mn– JPY500mn per mall.

Number of renovated Aeon Malls
No. of specialty stores

4,000

14

13

12

20

5

FY02/09

14

15

12

11
9

2,000

0

Renovation and expansion of existing malls in Japan (right axis)
20

3,000

1,000

Renovated tenants

10

10

8

6

5

FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

FY02/19Plan

0

FY02/20
Plan

Source: Shared Research based on company data

Expansion of overseas businesses
Aeon Delight is targeting JPY30.0bn in total sales from overseas businesses in FY02/20. Of the JPY18.0bn increase over FY02/17
sales, the company is looking for JPY11.0bn from China (including IFM; representing an average annual growth rate of roughly30%) and JPY7.0bn from ASEAN countries (where sales are expected to grow at 40–50% per annum). This compares withestimated sales of roughly JPY12.0bn in FY02/17 (representing growth of 13.5% YoY), of which an estimated JPY8.0–9.0bn wasfrom China and JPY3.0–4.0bn was from ASEAN. FY02/18 results included sales of JPY12.9bn (+7%), of which more than JPY9.0bn
was from China and just under JPY4.0bn was from ASEAN. Achieving the JPY30.0bn target may prove difficult after IFM orders fell
short of plan, but initiatives related to the five primary markets in China have been progressing well. We would like to continue
watching the company’s enhanced efforts to capture IFM demand, initiatives related to SmartFM, and active M&A efforts.

30/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

While the overseas business continues to see an increase in investments targeting growth, sales are expanding and profitability isimproving.
Overseas business(JPYbn)

China

30

30.0

ASEAN

Operating profit (estimated)

10%
8%

20

10

10.6

12.1

0

FY02/14

0.6
0.4
0.2

0%

1.2

FY02/12

3.4%

3.9%

2%

4.2
0.6

0.8

5.2%

4%

12.9

1.0

7.3%

6%

8.9

(JPYbn)OPM (left axis)

FY02/16

FY02/18

FY02/20
Est.

-2%

0.0

-1.0%

FY02/12

FY02/14

FY02/16

FY02/18

FY02/20Est.

-0.2

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

Business in China
In China, the company is targeting JPY20.0bn in sales in FY02/20. This represents an average growth rate of roughly 30% perannum. In China, property owners are more sensitive to the value of the building than they are in Japan, and Aeon Delight sees
facilities management becoming an essential business infrastructure service, much like electric power or water. Since China is a
growth market, Aeon Delight is working to develop the as-yet untapped areas of Shandong and Guangdong provinces, moveinto the large catering services market, and capture demand in the store design and renovation business.
The company continued to aggressively allocate management resources to China in FY02/17 and FY02/18. At the same time,
Aeon Delight worked to expand its facilities management service network throughout the entire country, extending its
geographical reach with the possible help of acquisitions while strengthening its internal control systems for effective nationwide
management.
In order to reach sales of JPY30.0bn and expand the IFM business, the company cites the necessity to set up a network oflocations in each region of China; it is currently working to establish bases in areas it has not yet done so. In February 2017, Aeon
Delight established a subsidiary in Shanghai which will oversee China operations and promote IFM sales. The subsidiary started
sales from April.
In FY02/17, the Wuhan subsidiary launched catering services, since such services have become common for facilities due torequests from local companies. In FY02/19, the company is considering strengthening this service through acquisitions. It also
started offering property management services at the Suzhou Yuenqu Hudong shopping mall in FY02/18. Aeon Delight installed aplatform, which it developed and leads to energy savings of more than JPY10.0mn annually, and plans to deploy it horizontally
going forward. The company is also apparently considering introducing a system which links to tenants’ marketing. In FY02/19, as
mentioned earlier, it plans to make even greater use of technology to proceed with the adoption of SmartFM, as it deems it likelythat labor reduction will progress in China as well.
Furthermore, Aeon Delight made U-COM a wholly owned subsidiary in April 2018. It believes the store design specialist will help
it expand business in the renovation field.
As part of its strategy to win new clients, the company is focusing on medium- to high-end facilities that require quality services
and redevelopment areas where much facility management demand can be expected. The former includes five primary markets:
medium- to high-end residential projects, shopping centers, care facilities such as nursing homes and hospitals, high-end
factories, and transport infrastructure facilities. Focusing on redevelopment areas with high demand entails the company’s
participation in large urban development projects to win orders. In FY02/18, it steadily captured contracts from major companies,
as well as some contracts in Suzhou and expects these contracts to contribute to earnings in FY02/19.
With regard to business in China and ASEAN with Aeon group companies, we note that Aeon Mall opens more new malls eachfinancial year. This is likely to become a factor which supports earnings.

31/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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

Aeon Malls in China and ASEAN countries
Openings in China

Malls in China

21

20

Malls in ASEAN
10

10

15

12

8

13

6

10
6

5
1
1

0

Openings in ASEAN

12

FY02/09

2
1

1

FY02/112

3
1

FY02/13

4
1

4

6
4

2

FY02/15

1

FY02/175

2

FY02/19
Plan

2

3

2
0

6

2

1

FY02/09

FY02/11

FY02/13

FY02/152

1

1

FY02/172

1

FY02/19
Plan

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

ASEAN business
In ASEAN countries, Aeon Delight aims for sales of JPY10.0bn in FY02/20. Unlike China, most of the company's sales in ASEAN
countries come from Aeon group companies as in Japan. Growth like that seen in China is unlikely, though, as the regulations
governing facilities differs significantly from country to country. Aeon Delight also intends to expand geographically throughacquisitions and establish a foundation to become the largest industry player in the ASEAN region.
In Malaysia, Aeon Delight began business cleaning partnerships with Malaysian Harvest Sdn. Bhd., a major local company, in
October 2015 to put it on a faster track to get business from Aeon group stores and to accelerate its alliance strategy with
Malaysian Harvest. In Vietnam, Aeon Delight is looking to improve the quality of facilities management services it provides andexpand the IFM business. In Q1 FY02/19, it expects to begin facilities management work on behalf of the largest Malaysian resort
operator, and in Vietnam to begin facilities management work at buildings that house Japanese government offices.
Among new areas, the company is considering entering Cambodia with a branch of the Vietnam subsidiary to pursue an area
strategy through M&A of local companies. In Indonesia, in addition to taking on mall-related projects, it is considering allianceswith local companies and M&A targeting business acceleration. In Singapore, it is planning to leverage the IFM market.

32/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Overseas businesses of the Aeon group
Overseas stores: Aeon Mall
Store countOpenings

China
ASEAN

Total
China
ASEAN

FY02/14

FY02/15

FY02/16

FY02/17

2
-

3
-

4
1
1

6
3
2
1

12
5
3
1
1

13
6
4
1
1

2

3
1

5
1

9
2

17
6

19
1

Vietnam
Cambodia
Indonesia
Other

Total

Malaysia
Thailand
Vietnam

China

FY02/13

Vietnam
Cambodia
Indonesia
Other

Cambodia
Indonesia
Myanmar
ASEAN total

FY02/19
Est.
19
8
4
2
2

24
4
1

27
2
2

-

1

1

2

6

1

5

FY02/12

FY02/13

FY02/14

FY02/15

FY02/16

FY02/17

FY02/18

Aeon Malaysia
Aeon BiG Malaysia
Aeon Thailand
Aeon Vietnam
Aeon Citymart
Aeon Fivimart
Aeon Cambodia
Aeon Indonesia
Aeon Orange

28
29

30
27
58

31
28
69

33
28
75
2

73
26
76
3
30
23
1
1

84
25
77
4
30
27
1
1
14
263
55
19
6
10
7
4
2
103

88
21
80
5
30
25
4
2
14
269
65
20
6
10
9
5
4
119

1

57
38
12
7
8
3

115
42
15
8
9
4

128
43
17
9
11
4

68

78

84

139
43
17
10
10
5
1
1
87

233
49
18
9
10
6
3
2
97

FY02/20
Est.
21
10
5
2
3
31
2
2
1

1

1

Aeon Stores Hong Kong
Guangdong Aeon
Quingdao Aeon Dongtai
Aeon South China
Beijing Aeon
Aeon East China
Aeon (Hubei)

China total

FY02/18
Est.
17
7
4
1
2

Name

Overseas stores: Aeon Retail
ASEAN

FY02/121

4

4
FY02/18

YoY change

4
-4
3
1
-2
3
1
6
10
1
2
1
2
16

Source: Shared Research based on company data

Forecast by segment
Facilities Management
Sales(JPYbn)12.8%

60

Operating profit

OPM (right axis)

12.1%

50

12%
11.1%

10.8%

40

10.9%

11%

30

9.2%

20
10
0

5.1

4.5

FY02/09

5.1

FY02/114.7

4.7

FY02/13

4.2

8.6%

8.6%

4.2

4.4

FY02/15

Operating profit(JPYmn)13% 1,400

8.8%

4.6

10%

1,000 9.2%

9.4%

9%

400

9.3%

9.3%
8.9%

800
600

7%

FY02/17

1,200

10%

8%

OPM (right axis)

9.0%

9.0%

8.9%

8.8% 8.7%

8.6%

8.8%

8.6%

8.5%

9%

7.8% 7.9%

8%

200
-

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY02/15
FY02/16
FY02/17
FY02/18

7%

Source: Shared Research based on company data

This segment is mainly composed of IFM business and existing FM business. It is also developing a labor reduction andautomation business model that takes advantage of IoT technologies, various sensors, and cloud computing.

Security Services
Sales(JPYbn)

50
45
40

8.6%

Operating profit

9%
8.5%

30

8.5%

8.4%

8%
7.6%

15

400
200

10
5

2.7

FY02/09

2.8

FY02/112.8

2.7

FY02/133.1

2.9

FY02/15

8.9%

800

7.9%

20

0

1,000

600

8.0%

Operating profit(JPYmn)

1,200

8.8%

35
25

OPM (right axis)

3.0

3.1

FY02/17

2.9

7%

-

7.8%

OPM (right axis)

11%
10%

9.1%

9.0%

8.1%
7.5%

7.9%

8.2%

9%

8.0%
7.0% 6.9%

7.3%

8%
7.0%

6.9%

6.6%
5.9%

7%
6%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY02/15
FY02/16
FY02/17
FY02/18

5%

Source: Shared Research based on company data

33/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

From Q3 FY02/16 onward, the consolidation of Hakuseisha (of about JPY10.0bn in annual sales, about 30% are from Security
Services) was a factor in the declining profitability. In FY02/18, the expanded application of social insurance caused an increase inpersonnel costs for the full year (only five months were impacted in FY02/17). In addition, expenses related to measures toalleviate the strain brought on by an increasingly tight labor market (including the creation of a new system and improving thework environment to assure that the company can continue securing employees in the future) and higher outsourcing costs led
to lower profitability. Rising personnel costs reduced profit by some JPY200mn–300mn, with the impact expected to continue
throughout FY02/19. However, pricing negotiations are under way with clients, and the company expects labor-saving initiatives
to result in personnel reductions even as prices remain constant or even increase. The company expects to keep the GPM at the
FY02/18 level.

Cleaning Services
Sales(JPYbn)

60
50

14.4%

Operating profit

14.8%

OPM (right axis)

14.6%

40

15%

14.2%

12.8%

12.6%

20

11.3% 11.3%

10
0

5.8

FY02/09

5.9

FY02/115.9

5.9

FY02/136.3

5.7

FY02/15

1,650
1,600

6.0

6.0

FY02/17

6.2

12%

OPM (right axis)

16%

14.9%
14.2%14.3%

13.4%
14% 1,550
1,500
13% 1,450

13.5%

30

Operating profit(JPYmn)16% 1,700

13.5%
12.7%
13.1%

1,400

14%

11.2%
11.4%
11.4%
11.1%11.4%
11.1%11.2%11.3%
11.1%

1,350

12%
10%

11% 1,300
10%

1,250

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY02/15
FY02/16
FY02/17
FY02/18

8%

Source: Shared Research based on company data

In Cleaning Services, the company is making efforts in the following areas: 1) expansion due to IFM, 2) improved profitability ofhygienic cleaning, 3) improved cost ratio of regular cleaning services, and 4) improved profitability of Hakuseisha. In regard tohygienic cleaning, although there was no increase in large contracts, the profitability of existing contracts seems to be steadily
improving. The company will also continue to make various improvements to the cost ratio for conventional cleaning. It expects
the GPM to improve about 0.2pp versus FY02/18.

Hakuseisha
The drop in profitability has been in part attributed to the consolidation of Hakuseisha (out of annual sales of roughly JPY10.0bn,
cleaning services account for about 50%) since Q3 FY02/16, but steady improvement was seen in FY02/18. As GPM in
Hakuseisha’s cleaning services differs from Aeon Delight’s cleaning services by over 10pp, reform of Hakuseisha’s income
structure is an important point. In FY02/17, Aeon Delight conducted reforms carefully so that it did not affect clients. However,full-year FY02/17 results showed delayed progress, partly because the company had not yet fully reformed its income structure.
In FY02/18, Aeon Delight actively worked to improve its business structure and profitability, including by adding personnel.
Initially it was looking for an improvement in GPM of at least 2pp, but the actual improvement seems to have been just short of1pp. Although the company sought improvement in existing contracts, there seem to have been some unprofitable projects
among new contracts. It expects ongoing improvement in the cost ratio in FY02/19.
Further, J-Front Retailing accounted for approximately one-third of the company’s sales in FY03/15 and an increase in related sales
is expected as a synergy effect, but such an effect had yet to appear as of FY02/18.

Labor reduction
Like Security Services, labor costs are substantial in the Cleaning Services segment and it is impacted by the expansion ofeligibility for social insurance. The company has, from earlier, been putting effort into the introduction of cleaning robots as away to establish a long-term competitive advantage and as a measure for dealing with issues such as labor costs and the securingof personnel. In a bid to introduce better robots, the company has been collaborating with several manufacturers both in Japanand abroad. In October 2016, the company introduced several units of a simplified cleaning robot, developed by a European
maker, in Japan on a trial basis. In FY02/18, it conducted field testing in cooperation with a US company, with a rollout to facilities
delayed by about six months from the original plan of February or March 2018.

34/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

At this time the company is uncertain about just how much it will invest in cleaning robots or whether it would be better off tolease robots rather than buy and then depreciate them over time. Based on the expectation that the biggest boost to efficiency
will come from using cleaning robots at large malls, the company sees a phased rollout starting with shopping malls, thenproceeding to large general merchandise stores and finally to smaller stores.

Contribution to profit growth and GPM improvement from sales of materials
In the future, the company aims to increase profits through sales of materials, not only of supplies such as wax, but also ofcleaning robots. Under the medium-term plan, it appears that the company anticipates a roughly JPY3.0bn increase in sales.
Although some maintenance of inventory will be required, the GPM is higher than that for overall Cleaning Services. We will pay
attention to sales of materials as a driver of GPM improvement.

Construction WorkSales

(JPYbn)60

Operating profit

OPM (right axis)

50

9%

1,000

8%

800

8.1%

40

7.4%

7.3%
6.8%

30
20

7%
6%

5.7%
4.2%

10
0

7.0%

6.7%

1.3

FY02/09

1.2

2.2

1.9

FY02/11

FY02/13

3.2

2.8

2.6

3.2

FY02/15

Operating profit(JPYmn)10% 1,200

9.5%

3.3

5%

8.1%

8.0%
7.2%
6.8%

600

7.1%

7.3%

6.6%

6.2%

6.5%

6.9%

6.5%

10%
8.2%

7.8%

8.0%

8.4%

9%
8%

6.8%

7%

400

6%

200

5%

-

4%

FY02/17

OPM (right axis)

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY02/15
FY02/16
FY02/17
FY02/18

4%

Source: Shared Research based on company data

As discussed earlier in the report, the company is focusing on capturing demand for revitalization of commercial facilities fromclients within the Aeon group, and on winning construction work for replacement tenants from clients outside the group. It
expects LED-related sales to be similar to the FY02/18 level or to increase slightly.
LED-related sales(JPYbn)Sales excl. LED

60

LED-related sales

OPM (right axis)

53.1

50

45.6

43.9

42.0

45.8

20

10%

16

40.9

40

8%
28.5

30
18.5

20

13.9

6%
4%

16.4

10
-

(JPYbn)12%

Sales excl. LED

18.9

OPM

10%

15.9

15.8

13.9

13.1
11.9
11.1

12 11.1
8.3

7.3

8

LED-related sales

9.4 9.6
7.6

8%

13.513.1

13.2

12.4
11.7

10.0

9.6
8.0

9.2

6%
8.6 8.2

4%
2%

4

2%
FY02/09

FY02/11

FY02/13

FY02/150%

FY02/17-Q1
FY02/14Q1
FY02/14Q1
FY02/15Q1
FY02/16Q1
FY02/170%Q1
FY02/18

Source: Shared Research based on company data

Support Services business
Sales(JPYbn)25

Operating profit

OPM (right axis)

11.7%

11.1%

20

6.8%

10

12%
9%

7.1%
6.0%

6%

3.9%

0.7

FY02/09

0.6

FY02/11

0.3

600
500
400

0.7

FY02/130.8

1.1

FY02/152.0

2.4

FY02/17

2.5

3%
0%

OPM (right axis)

16%

14.0%
13.5%
12.2%

700

14%

12.5%
12.1%12.4%11.7%
11.8%
10.8%
9.7%

10.9%
10.1%

8.4%

12%
9.4%

6.1%

6%
4%

2.5%

2%

100
-

10%
8%

300
200

5
0

12.2%

10.6%

15

Operating profit(JPYmn)15% 800

13.8%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY02/15
FY02/16
FY02/17
FY02/180%Note: Kajitaku sales figures are Shared Research estimates based on company results presentation materials
Source: Shared Research based on company data

35/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

As shown in the accompanying figure, earnings at Support Services have been rising steadily, and, combined with its highprofitability, the proportion of consolidated operating profit accounted for by this segment has been increasing. Subsidiaries
Kajitaku and Aeon Compass were the main drivers of growth. The drivers at Kajitaku to date have been Kaji Cloud services andsmall business support services (expanded introduction of ID photo machines and next-generation multi-function copy
machines), but in 2H FY02/18 small business support services saw a slowdown (reactionary falloff from the favorable performanceof ID photo machines in FY02/17), resulting in lower profit for full-year FY02/18. Aeon Delight expects higher profit in FY02/19
with the launch in earnest of online sales of Kaji Cloud (in a business alliance with VOYAGE GROUP). At Aeon Compass, thecompany anticipates the drivers to be B2B businesses such as Business Travel Management (domestic business trips, support foroverseas assignments) and MICE (planning and management of meetings, seminars, trainings), which have continued to perform
strongly.
It should be noted that part of the IFM business is included in this segment.
Business alliance with VOYAGE GROUP:On December 6, 2016, VOYAGE GROUP, Inc. (TSE: 3688) announced that it is entering a comprehensive operational tie-up for online sales ofhousework support services with Kajitaku Co., Ltd., an Aeon Delight subsidiary (97.7% stake) that operates the Aeon group’s housework support
operations. VOYAGE also announced that on December 8, 2016 it will establish a wholly owned subsidiary, Voyage Nexus, to manage the online salesof housework support services. The service launched in fall 2017.
Operational tie-up:
According to a presentation by the Ministry of Economy, Trade and Industry, the market size for home support services will be roughly JPY600bn. In the
midst of a growing market, Kajitaku bundled and sold its housework support services primarily to retailers, boosting its earnings.
Through the operational tie-up, Kajitaku will focus on developing housework support services and managing those services. Voyage Nexus will be
responsible for features on Kajitaku.com and the Members Personal Page, features that Kajitaku used to run. Voyage Nexus will also improve customer
relations and online sales by redesigning the website, making it smartphone compatible, and creating an app for the site. The company will assist in thedevelopment of a housework support services system for the staff. The tie-up plans to leverage VOYAGE GROUP’s user base of roughly 8.4mn topromote and market its housework support services. VOYAGE GROUP’s user base is primarily women in their 30s and 40s on the group’s websites such
as EC Navi, a point navigation site, and PeX, a point exchange platform.

Vending Machine Services(JPYbn)40

Sales

Operating profit

35

OPM (right axis)

8.6%

8.5%

25

8.7%

9%

8.6%

8%

7.7%
7.2%

15

0

9.4%

7%
1.5

FY02/09

FY02/112.3

600 6.6%
400

10
5

2.4

FY02/13

16%
14%

11.2%

1,000
800

20

OPM (right axis)

15.1%

1,200

9.2%

30

Operating profit(JPYmn)10% 1,400

3.1

3.0

FY02/152.8

2.8

FY02/17

6.4%
2.1

6%

200
-

10.6%

11.5%

8.8%
6.3%

5.6%

5.0%

5.8%

12%
9.6%

10%
7.3%

5.7%
5.3%

8%
6%
4%

2.9%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY02/15
FY02/16
FY02/17
FY02/18

2%

Source: Shared Research based on company data

In Vending Machine Services, we will continue to focus on the advertising business. Aeon Delight plans to proceed with theintroduction of equipped vending machines to expand the business (internal targets are 2,500 vending machines during 1H and3,000 by the end of the financial year).

36/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Materials and Supplies Sourcing Services(JPYbn)60

Sales

Operating profit

OPM (right axis)
5.6%

5.2%

50

5.5%

5.7%

5%

4.4%

40

3.3%

3.4%

3.7%

4%

1,000

600
500

2%

300

10

1%

100

0

FY02/09

FY02/111.5

FY02/132.3

2.1

FY02/152.8

2.8

FY02/172.9

0%5.3% 5.2%
4.7%

700

20

1.2

5.9%

800

3%

OPM (right axis)

8%

7.0%

900

30

0.6

Operating profit(JPYmn)

6%

4.0%

4.2%

5.4%
5.0%

5.6%

5.9%

5.6% 5.5% 5.7%

6.1%

3.6%

4%

400
200
-

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FY02/15
FY02/16
FY02/17
FY02/18

0%

Source: Shared Research based on company data

37/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Reference: Previous medium-term plan (released April 2014)
The company’s views on increasing sales by JPY73.0bn in FY02/14
M&A not included
The new medium-term plan calls for an over JPY73.0 increase in sales compared to FY02/14. Approximately one-third of the
JPY100.0bn sales increase in the previous medium-term plan was composed of M&A activity. However, the new plan does notinclude any M&A, and instead is focused on digging deeper into existing revenue sources.

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

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

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

200

150

100

50

-

Q1 FY02/12

Q2

Q3

Q4

Q1 FY02/13
China

Q2

Q3

Q4

Malaysia

Q1 FY02/14

Q2

Q3

Q4

Q1 FY02/15

Vietnam

Source: Shared Research based on company data

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

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

38/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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

Domestic sales excluding the Aeon group: 35% of sales to outside of the Aeon group by FY02/17
As of FY02/14, the percentage of sales that occurs outside of the Aeon group was 31%. Aeon Delight aims to raise this figure to
35% by the end of FY02/17, and to 40% over the long term. Players in the integrated FMS market outside of the Aeon group havenot solidified, and there remains room for the company to enter the market with its unique expertise. Aeon Delight will continue
to expand its reach in acquiring new contracts with hotels and hospitals, much as it did in FY02/14.
The company is working to prevent employees from becoming overly accustomed to working on projects for the Aeon group. To
foster this culture, Aeon Delight is driving momentum in acquiring market share outside of the Aeon group. To this end, thecompany also plans to restructure fundamental business principles such as sales, business development, employee training, andIT investment.

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

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

39/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Expanding into new areas: taking on major nationwide hospital groups
Through the organizational restructuring described below in FY02/15, the company has created a framework to tackle different
industries, such as hospitals, with differing strategies for each. It has also changed its marketing approach from a product out
model, in which the company touts the superiority of its products, to a market in model, in which the company adjusts its
products to meet the needs of the market. Budgets are also no longer set at business headquarters, but are set based on
proposals from individual sales departments, which are more in tune with the unique needs of each customer and market.

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

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

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

ESCO business
The ESCO business will be increasingly integrated into the combined facilities management ESCO business. Althoughcompetition is fierce, the company has strengths in its energy conservation technologies in building maintenance. Without
merely stopping with installation of control equipment, the company stated that energy savings of 10-15% are possible throughaddition of its unique facilities management expertise. Aeon Delight aims to expand its business by leveraging strengths such as
those above.

Energy management for the Aeon group
According to Aeon’s environmental sustainability report, a combined 2,113mn kWh was utilized in FY02/13 by Aeon Retail, six
MaxValu companies, Aeon Super Center, and Aeon Big. Assuming a rate of JPY22 per kWh, this equates to JPY46.5bn in electrical

40/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

costs for the year. Adding electrical fees for other group companies will increase this figure even further, and at the Aeon group’s
FY02/14 results presentation, electricity costs for the group were stated to be in excess of JPY80.0bn (within the Kansai ElectricPower [TSE1:9503] area, Aeon’s power usage is second only to the West Japan Railway Company [TSE1:9021]). Throughmanagement of this extremely high amount of electrical use, the Aeon Delight will not only be able to reduce the Aeon group’s
electrical footprint, but also expand and acquire expertise.

Responding to ISO41000, the international standard in the facilities management industry
ISO announced in the first half of 2015 that it would develop a new international standard for facilities management(FM)—ISO41000. The new standard will make possible standardized FM services worldwide.
With the spread of ISO41000 and ISO18480, contract with clients will shift to SLA (service level agreement). This means that
contract based on service quality and results is expected to be the mainstream, replacing the conventional contract based on thenumber of workers, hours, and shifts. Aeon Delight has proactively begun adjusting to ISO18480, a preliminary step to ISO41000,
and has already incorporated its content to the company’s FM services. Shared Research thinks such a proactive response toISO41000 may well result in a competitive edge over the medium to long term.

Building an organizational baseTo successfully implement the above initiatives outlined in the medium-term plan, building an organizational base is outlined as
one of the top priorities. The following three points are seen as focal points:▷

Active business development and organizational restructuring with solutions-based sales in mind;▷

IT investment to realize corporate growth and a small headquarters.

▷

HR development with an emphasis on service quality;

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

41/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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. As of 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 subsidiaryof Diamond City, a Mitsubishi Corp. (TSE1: 8058) affiliate absorbed by Aeon Mall in 2007. The company is aiming to increase theshare 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 the Aeon.

M&A activities
Aeon Delight has pursued growth through acquisitions, with aggressive acquisitions overseas in particular in recent years. It has
also proceeded with the establishment of subsidiaries through alliances with other companies and in 2018 announced
collaboration with SECOM to create a new business model for small and medium 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 of facilities
management services to large retail and commercial properties. It was able to differentiate itself from competitors by its expertiseand costs competitiveness. Competitors included Tokyu Community Corp. (TSE1: 4711), Biru Daiko Co., Ltd., Nihon Housing Co.,
Ltd. (TSE1: 4781), and Nippon Kanzai Co., Ltd. (TSE1: 9728).
There are three type of property management, residential, commercial, and office buildings. Most of these competitors 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 smalland 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 fair and open.
However, Aeon Delight is able to provide competitive bids given its knowledge of the client’s needs, and know-how. Its superior
position as a large company with comprehensive reliable services will be further enhanced as the size of buildings expands. The
company is able to handle large facilities maintenance given its size and economy of scale, which further reinforces its strengthand position. Thus, Shared Research believes that Aeon Delight’s position within the commercial facilities industry is likely to
improve, as the company has know-how and expertise.

42/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Business overview
Aeon Delight operates eight main business segments: facilities management, security services, cleaning services, construction
work, materials and supplies sourcing services, vending machines, support services, and other (real estate). When the company
takes on integrated facilities management work, sales and profits will be booked across segments. With the expansion of IFM,
sales of catering services (included in Support Services) are expected to increase, for example, and, as a result, segment analysis isbecoming less effective.
(JPYmn)Sales
YoY
Gross profit
YoY
GPM
SG&A expenses
YoY
SG&A ratio
Operating profit
YoY
OPM
Recurring profit
YoY
RPM
Net income
YoY
Net margin
Segment results(JPYmn)Sales
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services
YoY
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services
Operating profit
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services
Elimination, other
YoY
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services
OPM
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services
OP composition
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services

FY02/08

Act.
137,51923.7%
18,82718.1%
13.7%
10,496
1.2%
7.6%
8,331
49.4%
6.1%
8,187
49.2%
6.0%
4,379
46.1%
3.2%

FY02/09

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

FY02/10Act.
140,299-3.7%
21,1180.8%
15.1%
11,148
1.3%
7.9%
9,970
0.2%
7.1%
9,912
1.0%
7.1%
5,466
12.1%
3.9%

FY02/08

FY02/09

FY02/10

3,591
23.7%

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

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

8,331

62.8%
9,946

49.4%

19.4%

-7.4%
9,970
4,507
2,738
5,780
1,321
748
0.2%

6.1%

6.8%

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

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

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

7.1%
10.8%
8.0%
12.8%
9.5%
13.8%
29.9%
18.1%
38.3%
8.8%
5.0%

FY02/11

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

FY02/11

Act.
170,905
40,01932,08841,142
16,42018,71817,188
5,327
21.8%
-4.0%
-6.4%
-8.7%
18.2%

FY02/12

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

FY02/12-1.6%
12,031
5,115
2,764
5,937
1,214
627
1,480
590
20.7%
13.5%
0.9%
2.7%
-8.1%
-21.1%
7.0%
12.8%
8.6%
14.4%
7.4%
3.3%
8.6%
11.1%

Act.
219,797
42,14732,23539,85228,51336,73032,280
8,037
28.6%
5.3%
0.5%
-3.1%
73.6%
96.2%
87.8%
50.9%
13,762
5,084
2,823
5,882
1,936
1,234
2,330
312
14.4%
-0.6%
2.1%
-0.9%
59.5%
96.8%
57.4%
-47.1%
6.3%
12.1%
8.8%
14.8%
6.8%
3.4%
7.2%
3.9%

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

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

FY02/13

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

FY02/13

Act.
248,876
42,05031,80540,51953,071
39,284
31,20010,942
13.2%
-0.2%
-1.3%
1.7%
86.1%
7.0%
-3.3%
36.1%
13,901
4,661
2,692
5,918
2,209
1,462
2,396
741
-6,180
1.0%
-8.3%
-4.6%
0.6%
14.1%
18.5%
2.8%
137.5%
5.6%
11.1%
8.5%
14.6%
4.2%
3.7%
7.7%
6.8%
23.2%
13.4%
29.5%
11.0%
7.3%
11.9%
3.7%

FY02/14Act.
257,243
3.4%
33,714
11.5%
13.1%
18,59913.9%
7.2%
15,1158.7%
5.9%
15,092
8.6%
5.9%
8,161
8.7%
3.2%

FY02/14Act.
257,243
43,45834,24242,32045,63044,54333,32913,718
3.4%
3.3%
7.7%
4.4%
-14.0%
13.4%
6.8%
25.4%
15,115
4,725
2,865
5,716
2,580
2,333
3,068
829
-7,334
8.7%
1.4%
6.4%
-3.4%
16.8%
59.6%
28.0%
11.9%
5.9%
10.9%
8.4%
13.5%
5.7%
5.2%
9.2%
6.0%
21.4%
13.0%
25.8%
11.7%
10.5%
13.9%
3.7%

FY02/15

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

FY02/15

Act.
266,705
45,83936,62244,287
41,972
47,61834,825
15,539
3.7%
5.5%
7.0%
4.6%
-8.0%
6.9%
4.5%
13.3%
15,861
4,217
3,102
6,289
2,807
2,111
2,965
1,108
-6,9294.9%-10.8%
8.3%
10.0%
8.8%
-9.5%
-3.4%
33.7%
5.9%
9.2%
8.5%
14.2%
6.7%
4.4%
8.5%
7.1%
18.7%
13.7%
27.8%
12.4%
9.3%
13.1%
4.9%

FY02/16Act.
281,041
5.4%
37,390
6.5%
13.3%
20,682
7.4%
7.4%
16,707
5.3%
5.9%
16,684
4.6%
5.9%
9,658
10.7%
3.4%

FY02/16Act.
281,041
48,96238,45647,87043,85550,51632,741
18,639
5.4%
6.8%
5.0%
8.1%
4.5%
6.1%
-6.0%
19.9%
16,707
4,206
3,032
6,031
3,218
2,806
2,846
1,972
-7,406
5.3%
-0.3%
-2.3%
-4.1%
14.6%
32.9%
-4.0%
78.0%
5.9%
8.6%
7.9%
12.6%
7.3%
5.6%
8.7%
10.6%
17.4%
12.6%
25.0%
13.3%
11.6%
11.8%
8.2%

FY02/17Act.
294,725
4.9%
38,995
4.3%
13.2%
21,7385.1%
7.4%
17,257
3.3%
5.9%
17,381
4.2%
5.9%
10,2386.0%
3.5%

FY02/17Act.
294,725
50,551
41,06853,36545,81450,74032,87920,306
4.9%
3.2%
6.8%
11.5%
4.5%
0.4%
0.4%
8.9%
17,257
4,350
3,110
6,012
3,210
2,774
2,812
2,377
-7,389
3.3%
3.4%
2.6%
-0.3%
-0.2%
-1.1%
-1.2%
20.5%
5.9%
8.6%
7.6%
11.3%
7.0%
5.5%
8.6%
11.7%
17.7%
12.6%
24.4%
13.0%
11.3%
11.4%
9.6%

FY02/18

Act.
295,839
0.4%
38,903-0.2%
13.2%
22,091
1.6%
7.5%
16,812-2.6%
5.7%
17,284-0.6%
5.8%
10,3160.8%
3.5%

FY02/18

Act.
295,839
52,69943,29055,29740,89750,26532,834
20,583
0.4%
4.2%
5.4%
3.6%
-10.7%
-0.9%
-0.1%
1.4%
16,812
4,644
2,857
6,228
3,305
2,868
2,105
2,518
-7,707
-2.6%
6.8%
-8.1%
3.6%
3.0%
3.4%
-25.1%
5.9%
5.7%
8.8%
6.6%
11.3%
8.1%
5.7%
6.4%
12.2%

FY02/19

Est.
305,000
3.1%

Change+9,161

18,500
10.0%
6.1%
18,500
7.0%
6.1%
11,0006.6%
3.6%+1,688

FY02/19

Est.
305,000+0.4pp+1,216+0.2pp+684+0.1ppChange+9,161

3.1%

18,500+1,688

10.0%

6.1%

+0.4pp

18.9%
11.6%
25.4%
13.5%
11.7%
8.6%
10.3%

Source: Shared Research based on company data

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.

43/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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

FY02/10Act.

FY02/11Act.

FY02/12Act.

FY02/13Act.

FY02/14Act.

FY02/15Act.

FY02/16Act.

FY02/17Act.

FY02/18
Act.

-1.4%
4,507
10.8%

-4.0%
5,115
13.5%
12.8%

5.3%
5,084
-0.6%
12.1%

-0.2%
4,661
-8.3%
11.1%

3.3%
4,725
1.4%
10.9%

5.5%
4,217
-10.8%
9.2%

6.8%
4,206
-0.3%
8.6%

3.2%
4,350
3.4%
8.6%

4.2%
4,644
6.8%
8.8%

41,66640,01942,14742,05043,45845,83948,96250,551

52,699Source: Shared Research based on company data

This segment is involved in inspection, protection, and maintenance of facilities, providing monitoring support 24 hours a day,365 days a year. Specific services are tailored to meet the needs of individual clients. This is a staple business for Aeon Delight,
and licensed technicians (such as electricians) are on standby at all times in large shopping centers. Specifically, the company
manages utilities such as electricity, water, and gas, HVAC (operations, repairs, construction, and required inspections), exit andentrance management, anti-theft measures, and automobile parking. Gross profit margin is about 15%, and operating profit
margin is about 11%. Required facilities are purchased by the client (property owner), and primarily costs incurred by thecompany 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 two commercial facilities: one in Suzhou, China and one in Chiba, Japan. Whileacquiring contracts for IFM services that integrate management for companies, the company is also enthusiastic about creating ade 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 throughremote 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 know-how. 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 in otherareas including drug stores to secure market share. In Asia ex. Japan, new purchases account for most market demand while inJapan 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 or other measuresexceed a certain level. The company’s next-generation facilities management system, one of its value added services, leads to lessmanpower required for commercial facilities. As such, profitability is expected to rise with sales.
Monitoring screens displayed at a large facility in Chiba (operates in parallel with a central monitor)

Source: Shared Research based on company data

44/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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

FY02/10Act.

FY02/11Act.

FY02/12Act.

FY02/13Act.

FY02/14Act.

FY02/15Act.

FY02/16Act.

FY02/17Act.

FY02/18
Act.

-6.5%
2,738
8.0%

-6.4%
2,764
0.9%
8.6%

0.5%
2,823
2.1%
8.8%

-1.3%
2,692
-4.6%
8.5%

7.7%
2,865
6.4%
8.4%

7.0%
3,102
8.3%
8.5%

5.0%
3,032
-2.3%
7.9%

6.8%
3,110
2.6%
7.6%

5.4%
2,857
-8.1%
6.6%

34,281

32,08832,23531,80534,242

36,62238,456

41,06843,290Source: 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. This segment outsources most of its work to Aeon Delight Security, a subsidiary. Grossprofit margin was relatively low at 13% due to the large amount of personnel costs. This is in comparison to 23.2% at Sohgo
Security Services Co., Ltd (TSE1: 2331) and 34.2% at SECOM Co., Ltd. (TSE1: 9735) for FY03/13.
The company also began an attendant service in 2H FY02/12, which is similar in nature to a concierge service. Attendants arefemale security guards that also provide information services to patrons. This service was started in an effort to shed the old“security guard” image and provide a more hospitable environment. As of FY02/14, approximately 30 guards are stationed at 17
stores. Due to demand from clients, a new project team was established in March 2014, and plans call for 100 staff members at
53 stores by FY02/15. Although costs will arise from staff training, this business provides high added value, and is one to watch.
Also beginning in 2H FY02/12, “cockpit” security robots have been stationed to aid in security activities. As of FY02/14, thisprogram is still in the testing phase, but owing to these robots, facilities that previously required five-person teams now only
require three guards.

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

FY02/10Act.

FY02/11Act.

FY02/12Act.

FY02/13Act.

FY02/14Act.

FY02/15Act.

FY02/16Act.

FY02/17Act.

FY02/18
Act.

6.2%
5,780
12.8%

-8.7%
5,937
2.7%
14.4%

-3.1%
5,882
-0.9%
14.8%

1.7%
5,918
0.6%
14.6%

4.4%
5,716
-3.4%
13.5%

4.6%
6,289
10.0%
14.2%

8.1%
6,031
-4.1%
12.6%

11.5%
6,012
-0.3%
11.3%

3.6%
6,228
3.6%
11.3%

45,05041,14239,85240,51942,32044,28747,87053,36555,297

Source: Shared Research based on company data

With an eye to extending the longevity of buildings and facilities, Aeon Delight also places heavy influence on training staff toprovide service in a friendly and courteous manner.
From its experience in managing many large shopping centers for the Aeon group, the company has implemented measures toincrease efficiency of large machinery such as floor cleaners. These and other initiatives serve to standardize and increase theefficiency of work performed. This is a staple business that is, on an orders-received basis, composed of about 10-20% work
performed directly by the company, and 80-90% work performed by outsourcing partners. Gross profit margin was 20% (25%for directly operated services). Service contracts are renewed annually (80% of clients renew and are long-term customers).
Primary outsourcing partners are Do Service Co., Ltd. and Kankyouseibi Co., Ltd. Approximately 30,000 persons are involved in
the cleaning services business. The following is an overview of the hygienic cleaning business launched in FY02/15.

Hygienic cleaning business
The company believes the hygienic cleaning business will continue to steadily increase sales. There are more than 1.5mn hospitalbeds in medical facilities across Japan, out of which the number of hospital beds at medical facilities Aeon Delight has hygienic
cleaning contracts with still make up only roughly 1%. Aeon Delight began offering hygienic cleaning services in FY02/15 andbegan providing service to two major medical facilities in April 2015. These two major hospitals boosted the number of hospitalbeds for which the company was providing hygienic cleaning services by 7,000 to 14,000. As of the end of April 2016, thecompany is providing hygienic cleaning services for approximately 16,000 beds. As of April 2017, that number has remained flatbut the company is in the middle of expanding sales to about 100 hospitals. For sales to hospitals, it takes about three years from

45/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

general bidding to winning a project, as many large hospitals are under the jurisdiction of the government. The company is in theprocess of finalizing a sales scheme which can win orders in three years, and expects sales to steadily build up during the
medium-term plan period.
Japanese hospitals and clinics
Hospitals

As of January 1, 2017
Total
National
Public medical institutions
Social insurance-related organizations
Public service corporations
Medical corporations
Private schools
Social welfare services
Individuals
Other

8,439
327
1,213
53
229
5,757
111
198
235
316

Clinics

Beds
1,559,948
129,048
317,571
16,006
57,404
863,283
55,63434,31623,41963,267

101,505
540
3,617
483
558
41,445
181
9,376
42,414
2,891

Beds
102,145
2,229
2,572
9
314
74,91657
330
21,143575

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

Because many of the large national hospital chains are keen on implementing management reforms, Aeon Delight believes thatits 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. That said, few companies replace the cleaning services provided by major groups servicing 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 all the related sales tools, local offices have also been doing their own marketing
since FY02/16. The profitability of hygienic cleaning services was still relatively low in FY02/16, in part because it was the firstfiscal year that the company serviced a major hospital. However, it appears profitability has been improving from FY02/17 as its
cleaning staff becomes increasingly proficient at their duties.
In addition, the recent rise in labor costs is providing a tailwind for the company. That is to say, bidding prices for projects atlarge hospitals are often bound to incorporate the rise in labor costs stemming from labor shortage. However, by capitalizing on
its network across Japan, the company can, for example, bring on board managers from regions that are easy to recruit in,enabling the company to demonstrate its competitive advantage compared to local and other companies. Along with otheradvantages, such as cleaning quality visibility, the company expects to steadily increase the number of projects it wins. Aeon
Delight started providing cleaning services at about five hospitals during Q1 FY02/18. As these projects were won by regional
branch sales representatives, it is clear that the results of initiatives on the sales side are starting to show.

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

FY02/10Act.

FY02/11Act.

FY02/12Act.

FY02/13Act.

FY02/14Act.

FY02/15Act.

FY02/16Act.

FY02/17Act.

FY02/18Act.

-25.0%
1,321
9.5%

18.2%
1,214
-8.1%
7.4%

73.6%
1,936
59.5%
6.8%

86.1%
2,209
14.1%
4.2%

-14.0%
2,580
16.8%
5.7%

-8.0%
2,807
8.8%
6.7%

4.5%
3,218
14.6%
7.3%

4.5%
3,210
-0.2%
7.0%

-10.7%
3,305
3.0%
8.1%

13,88916,42028,51353,071

45,63041,97243,85545,81440,897

Source: Shared Research based on company data

This segment conducts large-scale renovation, interior design work, and installation of energy-saving devices (i.e., LED lighting)and solar power systems. This segment generates 70% of its sales from Aeon group companies, and has a gross profit margin of
about 10%. Renovation is remodeling (not designing) of Aeon retail locations, such as replacing signage, or modifying retail floor
space. Sales for Aeon Mall have not been significant, since individual tenant stores perform their own renovation work. However,
Aeon Delight has been steadily gaining experience in related construction and in April 2018 made store design specialist U-COM
a wholly owned subsidiary as it strengthens its efforts to obtain contracts from Aeon Mall facilities and tenants.

46/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

LED installation is the primary source of orders in the environmental business. Revenues from LED installation work were
JPY26.0bn in FY02/13 (JPY7.4bn in FY02/12). LED lighting is sourced from suppliers, and sales are recorded once installations arecomplete at client locations. Personnel costs account for about 30% of overall costs, and the materials ratio is around 70%.
LED-related sales(JPYbn)Sales excl. LED

60

LED-related sales

OPM (right axis)

53.1

50

45.6

42.0

40.9

40

8%
28.5

30
20

10%

45.8

43.9

(JPYbn)

12%

18.5
13.9

6%
4%

16.4

10

2%

-

0%

FY02/09

FY02/11

FY02/13

FY02/15

FY02/17

20

Sales excl. LED

18.9
15.8

16

LED-related sales

10%

15.9
13.9

13.1
11.9
11.1

12 11.1
8.3

7.3

8

OPM

12.4
11.7

10.0

9.6

9.4 9.6

8.0

7.6

8%

13.513.1

13.2

9.2

6%
8.6 8.2

4%
2%

4
-

Q1
FY02/14Q1
FY02/14Q1
FY02/15Q1
FY02/16Q1
FY02/170%Q1
FY02/18

Source: Shared Research based on company data

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

FY02/10Act.

FY02/11Act.

FY02/12Act.

FY02/13Act.

FY02/14Act.

FY02/15Act.

FY02/16Act.

FY02/17Act.

FY02/18
Act.

-

627
3.3%

96.2%
1,234
96.8%
3.4%

7.0%
1,462
18.5%
3.7%

13.4%
2,333
59.6%
5.2%

6.9%
2,111
-9.5%
4.4%

6.1%
2,806
32.9%
5.6%

0.4%
2,774
-1.1%
5.5%

-0.9%
2,868
3.4%
5.7%

-

18,71836,73039,28444,54347,61850,51650,74050,265

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, cleaning materials, etc.). In
this business, stock must be maintained at all times, and the company undertakes logistics functions on behalf of the customer aswell. Aeon Delight aims to use efficient logistics to reduce costs for intermediate materials and increase process efficiency. Grossprofit margin is about 7% to 8%.

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

FY02/10Act.

FY02/11Act.

FY02/12Act.

FY02/13Act.

FY02/14Act.

FY02/15Act.

FY02/16Act.

FY02/17Act.

FY02/18
Act.

-

1,480
8.6%

87.8%
2,330
57.4%
7.2%

-3.3%
2,396
2.8%
7.7%

6.8%
3,068
28.0%
9.2%

4.5%
2,965
-3.4%
8.5%

-6.0%
2,846
-4.0%
8.7%

0.4%
2,812
-1.2%
8.6%

-0.1%
2,105
-25.1%
6.4%-

17,18832,28031,20033,32934,82532,74132,87932,834

Source: Shared Research based on company data

This segment operates soft drink vending machines. It also creates relaxation areas with foliage plants and air purificationequipment.
The company’s vending machines stock a variety of products from different manufacturers. Aeon Delight operates approximately
40,000 vending machines (as of the end of FY02/16). About 80% of vending machine sales come from machine in supermarkets
belonging to the Aeon group. The remaining 20% of sales came from machines in shopping malls operated by Aeon group andnon-Aeon companies. Aeon Delight acquired Certo Corp. (delisted from JASDAQ after being acquired) in September 2010, a
vending machine operator 66.4% owned by Aeon.
Also, aiming for a business model change, the company seeks to increase the number of vending machines equipped with digital
signage functionality (about 1,500 machines at end-FY02/17) and capture advertising revenues.

Addition of advertising business will alter business model of Vending Machine Services business
As of the end of FY02/16, Aeon Delight owned more than 40,000 vending machines. Up until last year, the company has been
busy expanding the selection of private brand goods offered in its vending machines and has also began installing new vending

47/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

machines with digital signage (hereafter referred to as DS vending machines). As of the end of FY02/16, Aeon Delight had
roughly 800 DS vending machine, more than any other domestic competitor. Although falling short of initial plans in FY02/17,
the number of DS vending machines increased to about 1,500. In FY02/18, the company aims to increase that number to 2,500,
and, to take full advantage of these new machines, it plans to continue advancing use of their digital signboards to run video ads.
The DS vending machines Aeon Delight is using are already equipped for video streaming and, since they are mainly located in
shopping malls, their value as an advertising medium is quite high. It takes about nine seconds from the time the customer selects
a drink and the drink is delivered, enough time to run an effective ad. The number of equipped vending machines andadvertising revenues both missed targets in FY02/17. In FY02/18, while still small in size, the company aims to roughly double
advertising revenues. If it appears that the increase in equipped vending machines and ads are effective, the company will installmore DS vending machines in subsequent years.
According to statistics compiled by the Japan Vending Machine Manufacturers Association, in 2014 there were roughly 2.2mn
beverage vending machines installed, generating annual sales of JPY1.87tn. Based on these figures, we estimate that the average
beverage vending machine generates annual sales of JPY850,000. At an average cost per can of JPY120, this means the averagevending machine sells around 7,000 canned drinks a year. During FY02/17, Aeon Delight will have an average of about 1,400 DS
vending machine installed. Multiplied by average sales of 7,000 per machine, these DS vending machine will sell about 10mn
canned drinks. This means nine-second commercials will be played, and almost certainly heard, 10mn times (in addition, othervideo messages may be playing other times). How the ads will be priced is as yet unclear, but Aeon Delight does expect to bringin at least some income from running ads on DS vending machines. We will be following the situation closely to see to what
extent these ad revenues contribute to overall earnings.

Utilization of technology: Micro-markets (unmanned stores)
In Vending Machine Services, the company plans to roll out micro-markets (unmanned stores) as parts of its businessrestructuring to utilize technology. Micro-markets target offices with 300–1,000 workers (offices with fewer than 300 workers arecovered by vending machines, while offices with more than 1,000 workers are covered by convenience stores). The company has
been conducting a demonstration experiment at Aeon Mall Funabashi since August 2017. It had about 50,000 vending machines
in the Vending Machine Services business (90% are installed within the Aeon group) but is looking for a new business structurethat does not center on beverage vending machines. This includes shifting toward digital signage and micro-markets.
Convenience store chains have been installing similar vending machines, but the company’s business model is advantageous inthat even daily sales of JPY100,000 surpass the breakeven point and generate a profit. After the breakeven point, gross profit iseffectively equal to operating profit. Micro-markets have some issues with logistics and supply operations, but the market
deserves a close watch. Competition in intra-office retail space includes the Aeon group, which has a company running retailstores such as My Basket, and convenience store chains, which have also entered this field.
Example of installed micro-market

Source: Shared Research based on company data

48/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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

FY02/10Act.

FY02/11Act.

FY02/12Act.

FY02/13Act.

FY02/14Act.

FY02/15Act.

FY02/16Act.

FY02/17Act.

FY02/18
Act.

-7.4%
748
13.8%

-1.6%
590
-21.1%
11.1%

50.9%
312
-47.1%
3.9%

36.1%
741
137.5%
6.8%

25.4%
829
11.9%
6.0%

13.3%
1,108
33.7%
7.1%

19.9%
1,972
78.0%
10.6%

8.9%
2,377
20.5%
11.7%

1.4%
2,518
5.9%
12.2%

5,327

5,412

8,037

10,942

13,71818,63915,53920,306

20,583

Source: Shared Research based on company data

This segment provides business process outsourcing (BPO), housework support services, business travel services, training
services, and staffing services. Much of these support services are conducted by companies acquired through M&A. BPO services
are conducted by General Services, Inc., which was acquired via M&A as well. Services that BPO undertake include costmanagement, salary calculations, administrative functions, social security and welfare, receipt of telephone calls, and systemmanagement.
The main subsidiaries in the segment are 1) Aeon Compass: mainly B2B services including Business Travel Management(domestic business trips, support for overseas assignments) and MICE (planning and management of meetings, seminars,
trainings), and 2) Kajitaku: mainly small business support services, such as sales of copy machines, and household support
services. Together, these two subsidiaries are the main growth drivers of the Support Services segment. Kajitaku provides “Kaji
Cloud,” a housework services package. In fall 2017, Aeon Delight launched online sales of Kaji Cloud in cooperation withVOYAGE GROUP (TSE1: 3688).
A to Z Service Co., Ltd., a maintenance service provider for small commercial facilities, was acquired in 2011. A to Z Service
operates a 24 hour, 365 days a year call center to provide comprehensive support services for retail chains in small 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.
Further, under comprehensive contracts in IFM, the proportion of sales made up by catering services is expected to increase. As
such, it is important to note that catering services sales will be reported in this segment.

Overseas business
Under its medium-term plan, Aeon Delight is looking to expand into China and Asia. In China, the Shanghai subsidiary is serving
as headquarters for the country and handling IFM sales, while the Suzhou and Wuhan subsidiaries, capitalizing on thegovernment-related networks they have cultivated, continue to focus on sales activities for operational areas such as facilities
management, cleaning services, and catering services. In ASEAN, the company has subsidiaries in Malaysia and Vietnam.
(JPYbn)

China

30

30.0

ASEAN

Operating profit (estimated)

10%
8%

20

10

10.6

12.1

0

FY02/12

0.4
0.2

0%

1.2

FY02/14

0.6

3.9%

2%

4.2
0.6

0.8

5.2%
3.4%

4%

12.9

1.0

7.3%

6%

8.9

(JPYbn)OPM (left axis)

FY02/16

FY02/18

FY02/20
Est.

-2%

0.0

-1.0%

FY02/12

FY02/14

FY02/16

FY02/18

FY02/20Est.

-0.2

Source: Shared Research based on company data

49/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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 a positive

factor for Aeon Delight’s growth. The company is able to leverage economies of scale from the Aeon group, and has
accumulated expertise in integrated FMS from its transactions with Aeon. This provides for a stable recurring-revenue model.
◤ Industry leader in comprehensive commercial maintenance services: Aeon Delight is the industry leader capable ofproviding integrated all-in-one building maintenance services such as facilities management, security, cleaning, andrenovations. Its competitors can only provide one to two of these services (i.e., security or cleaning). Owners of largecommercial facilities and buildings are would prefer to contract such services to one service provider rather than negotiatewith each individual service provider based on their specialty. The company’s ability to provide such integrated service is acompetitive advantage over its competitors.
◤ Financial strength to buy growth: Aeon Delight has a very strong balance sheet. Shared Research believes that this balance

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

Weaknesses◤ Organic growth challenging: Aeon Delight has grown through acquisitions. Therefore, organic growth may be a challenge

because the market is relatively mature. There is limited domestic growth and overseas offers one avenue of expansion. M&A

activities could dry up, and this could have an impact on earnings. The company has been able to buy growth using its strong
financial position.
◤ Overly dependent on the Aeon group: Aeon Delight is a consolidated subsidiary of Aeon, and derives almost 70% of its

sales from the Aeon group. A drawback from such a strong relationship is that the parent company may ask for support inpursuing its agenda. Recently, Aeon acquired 50% of Tesco Japan, the U.K. supermarket chain operator’s Japan retail business.
A joint venture company, Aeon Every Co., Ltd. is in charge of supermarket operations. The parent Aeon could ask thecompany 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 are renovating
their stores and upgrading facilities. Aeon Delight’s expertise has been in large facilities, mainly supporting the Aeon groupretail stores such as shopping centers and supermarkets. As smaller commercial facilities emerge in large urban areas, thequestion remains whether the company can successfully adapt its facilities maintenance know-how to this segment of themarket. The company may need to look at this segment for growth.

50/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Market and value chain
Market overview
Japan’s building maintenance market was worth JPY3.7tn in FY2016 (April 1, 2016 to March 31, 2017), down 2.4% YoY,
according to November 2017 data from Yano Research Institute Ltd.
Building maintenance market includes building cleaning, facilities maintenance, and security services. It also includes repair work, renovation work, andrenewal work undertaken by building maintenance companies. But businesses unrelated to building maintenance are not included in the data eventhough they are undertaken by these companies.

Market size (right axis)

6%
4%
2%

(JPYbn)

YoY

3,977

3,675

3,704

3,738

3,880

3,809

0%

3,702

3,682

3,744

3,773

3,572

3,835
3,663

4,200
3,967

4,000

3,743

3,800
3,600

3,421

-2%

3,400

-4%

3,200

-6%

3,000

-8%

2,800

FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018
Est.
Est.

Source: Shared Research based on Yano Research Institute Ltd., (November 9, 2017)

According to Aeon Delight, it had 4% of the domestic market for cleaning services at retail stores, hospitals, schools, hotels, andother facilities that totaled JPY960bn in FY02/12. Retail stores accounted for 17% of its cleaning business sales, while hotels madeup a mere 2%.

Analysis of potential market
Floor space is a direct measure of potential market size for the company’s facilities maintenance services.
According to data released by the Ministry of Land, Infrastructure, Transport, and Tourism in March 2010, total floor space ofJapan’s hospitals and medical facilities was around 13.4mn sqm.
Aeon Delight generated JPY14.1bn in sales from cleaning services to Aeon Retail in FY02/12. Total floor space of Aeon Retail was
3.97mn sqm, which translates to JPY355,000 in annual sales per sqm for Aeon Delight.
If sales per sqm and workers’ hourly pay were the same across the board (in reality, cleaning hospitals is more expensive), Shared
Research estimates that potential demand from hospitals and other medical facilities is JPY50bn (JPY355,000/sqm x 13.4mn sqm).
The ministry data also show that total floor space of non-residential buildings owned by corporations was about 1.7bn sqm. Suchbuildings include offices, stores, factories, warehouses, welfare facilities, hotels/lodging facilities, schools, and buildings used forautomobile parking. If these corporations outsourced all of their cleaning work for that floor space, the potential market would be
JPY6.2tn (JPY355,000/sqm x 1.7bn sqm).
Aeon Delight’s business environment is affected by the store-opening plans and corporate acquisition strategy of Aeon group.
Therefore, Aeon group’s aggressive M&A strategy would quicken the pace of growth for Aeon Delight.

51/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Aeon group stores by format (domestic and overseas)
GMS
Supermarket
Discount store
DIY store
Supercenter
Department store
Convenience store
Specialty store
Drugstore and pharmacy
Other retail formats
Financial service
Services
Total
Aeon Mall
Aeon Town
Total

FY02/09
603
1,231
41
127
31
1
3,270
4,746

FY02/10
601
1,267
52
125
33
1
3,514
4,475

FY02/11
590
1,307
72
127
32
1
3,811
3,305

FY02/12
590
1,537
105
122
29
1
4,121
3,424

FY02/13
598
1,708
152
123
26
1
4,462
3,664

FY02/14
617
1,977
353
122
26
1
4,581
3,853

FY02/15
618
2,038
381
121
29
1
4,683
3,932

FY02/16
625
2,121
530
120
28
1
5,061
4,331

FY02/17
626
2,130
566
119
28
1
4,348
5,261

FY02/18
584
2,185
568
122
28
1
4,324
5,436

87
395
1,621
12,153

180
386
1,549
12,183

268
401
1,410
11,324

418
460
1,383
12,190

562
527
1,394
13,217

756
641
1,519
14,440

3,347
884
698
1,640
18,382

3,765
803
701
1,934
20,020

3,980
856
705
2,013
20,633

4,376
909
690
2,045
21,268

51
42
93

53
44
97

56
45
101

59
107
166

62
115
177

137
122
259

148
130
278

161
134
295

166
139
305

174
140
314

FY02/11
52
25
24
101

FY02/12
54
44
2,033
37
27
236
25
2,456

FY02/13
61
81
22
2,294
55
29
279
41
2,862

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

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

FY02/16
84
115
24
2,840
44
79
339
282
3,845

FY02/17
87
173
23
2,998
52
97
342
335
4,107

FY02/18
94
175
21
3,172
54
116
324
390
4,346

Source: Shared Research based on company data

Stores by Format in China, South Korea, and ASEAN region
FY02/09
42
18
18
78

GMS
Supermarket
Discount store
Convenience store
Specialty store
Other retail formats
Financial service
Services
Total

FY02/10
46
19
21
86

Source: Shared Research based on company data

Customers
Aeon Delight generates almost 70% of its sales from the Aeon group companies, including Aeon Retail, Aeon Mall, 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. Outside Japan, Aeon Delight seeks to reduce its
reliance on the Aeon group to about 40%.
Sales composition by customer

Aeon Retail versus Aeon group

Aeon
Retail

NonAeon
group

Aeon
group

Aeon
RetailAeon
group
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 Retail isabout 80%. The company’s share in Aeon Mall is about 60%, while its share in MaxValu companies is between 60% and 70%.

52/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Aeon Delight’s competitors include SECOM Co., Ltd. (TSE1: 9735) and Sohgo Security Services Co., Ltd. (TSE1: 2331) in security
services. It competes with Azbil Corporation (TSE1: 6845), Nippon Kanzai Co. Ltd. (TSE1: 9728), and Tokyu Community
Corporation (TSE1: 4711) in property management services. There are no major competitors that offer cleaning services; Aeon
Delight competes with smaller, regional cleaning operators. In construction-related work, Aeon Delight competes with Azbil inthe environmental solutions business, while in the energy-saving business, major rivals are NTT Facilities, Inc. and Hitachi, Ltd.
(TSE1: 6501).

Barriers to entry
Property management for residential and small office buildings has relatively low barriers to entry. However, the barriers are highfor 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,
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 a relatively
high barrier of entry in its market niche, namely servicing large retail stores and office buildings, due to its expertise in providing
an all-in-one package of services.
The company’s market share within the Aeon group is high. Being a group company, Aeon Delight is well aware of the businesspractices and facility characteristics that are common throughout the Aeon group and the risk of its competitors gaining asignificant portion of the market share is fairly slim.

53/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Financial Statements
Income statement
Income statement(JPYmn)Total sales
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials and Supplies Sourcing
Vending Machine Services
Support Services, and Other

FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
137,519 145,690 140,299 170,905 219,797 248,876 257,243 266,705
43,45845,83942,14742,05040,01941,66642,25340,202
36,62231,80534,24232,08832,23534,281
36,67035,84844,28740,51942,32039,85245,05041,142
42,40341,09841,972
45,63053,071
28,513
16,42013,88918,515
16,77747,61844,54339,28436,73018,71834,82531,20033,32932,28017,18813,71815,54010,942
5,327
8,037
5,412
5,846
3,591

FY02/16Cons.
281,041
48,96238,45647,87043,85550,51632,741
18,639FY02/17Cons.
294,725
50,551
41,06853,36545,81450,74032,87920,306

FY02/18
Cons.
295,839
52,66943,29055,29740,89750,26532,834
20,584

FY02/19Cons.
305,000

3.1%

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

23.7%

5.9%
5.1%
2.3%
3.2%
10.4%
62.8%

-3.7%
-1.4%
-6.5%
6.2%
-25.0%
-7.4%

21.8%
-4.0%
-6.4%
-8.7%
18.2%
-1.6%

28.6%
5.3%
0.5%
-3.1%
73.6%
96.2%
87.8%
50.9%

13.2%
-0.2%
-1.3%
1.7%
86.1%
7.0%
-3.3%
36.1%

3.4%
3.3%
7.7%
4.4%
-14.0%
13.4%
6.8%
25.4%

3.7%
5.5%
7.0%
4.6%
-8.0%
6.9%
4.5%
13.3%

5.4%
6.8%
5.0%
8.1%
4.5%
6.1%
-6.0%
19.9%

4.9%
3.2%
6.8%
11.5%
4.5%
0.4%
0.4%
8.9%

0.4%
4.2%
5.4%
3.6%
-10.7%
-0.9%
-0.1%
1.4%

Cost of sales

118,692

124,735

119,180

146,916

191,166

218,648

223,528

231,588

243,651

255,729

256,935

18,82718.1%
13.7%

20,955
11.3%
14.4%

21,1180.8%
15.1%

23,98913.6%
14.0%

28,63119.4%
13.0%

30,227
5.6%
12.1%

33,714
11.5%
13.1%

35,1174.2%
13.2%

37,390
6.5%
13.3%

38,995
4.3%
13.2%

38,903-0.2%
13.2%

SG&A expenses
SG&A ratio

10,496
7.6%

11,008
7.6%

11,148
7.9%

11,9577.0%

14,8686.8%

16,326
6.6%

18,5997.2%

19,256
7.2%

20,682
7.4%

21,738
7.4%

22,091
7.5%

Operating profit
YoY
OPM

8,331
49.4%
6.1%

9,946
19.4%
6.8%

9,970
0.2%
7.1%

12,03120.7%
7.0%

13,762
14.4%
6.3%

13,901
1.0%
5.6%

15,1158.7%
5.9%

15,861
4.9%
5.9%

16,707
5.3%
5.9%

17,257
3.3%
5.9%

16,812
-2.6%
5.7%

-144
129
273

-134
108
241

-58
88
147

58
208
149

22
281
260

-9
213
221

-23
163
186

82
228
145

-23
253
275

124
434
309

472
608
136

8,187
49.2%
6.0%

9,812
19.9%
6.7%

9,912
1.0%
7.1%

12,08922.0%
7.1%

13,78414.0%
6.3%

13,892
0.8%
5.6%

15,092
8.6%
5.9%

15,943
5.6%
6.0%

16,6844.6%
5.9%

17,381
4.2%
5.9%

17,284
-0.6%
5.8%

221
58
163
3,702
45.8%
-

1,050
110
940
4,026
44.8%
80

691
457
234
4,618
45.6%
50

990
5
985
4,613
41.5%
-

953
73
880
5,932
45.7%
132

133
80
53
6,306
45.3%
104

557
28
529
6,192
42.4%
237

372
15
357
6,530
41.9%
344

1,790
816
974
6,469
39.1%
398

1,182
525
657
6,463
37.5%
547

1,435
170
1,265
5,261
32.5%
610

4,379
46.1%
3.2%

4,876
11.3%
3.3%

5,466
12.1%
3.9%

6,495
18.8%
3.8%

6,912
6.4%
3.1%

7,509
8.6%
3.0%

8,161
8.7%
3.2%

8,725
6.9%
3.3%

9,658
10.7%
3.4%

10,2386.0%
3.5%

10,3160.8%
3.5%

Gross profit
YoY
GPM

Non-operating income (expenses)
Non-operating income
Non-operating expenses
Recurring profit
YoY
RPM
Extraordinary gains (losses)
Extraordinary gains
Extraordinary losses
Income taxes
Implied tax rate
Minority interests
Net income
YoY
Net margin

18,500
10.0%
6.1%

18,500
7.0%
6.1%

11,000
6.6%
3.6%

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

54/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Profitability and financial ratios
Profit margins (JPYmn)
Gross profit
GPM
Operating profit
OPM
EBITDAEBITDA margin
Net margin
Financial ratios
ROA (RP-based)
ROE
Total asset turnover
Working capital
Current ratio
Quick ratio
OCF / Current liabilities
Net debt / Equity
OCF / Total liabilities
Cash cycle (days)
Changes in working capital

FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18
18,827
20,955
21,11823,98928,63130,22733,714
35,11737,39038,99538,903
14.0%
13.0%
12.1%
13.1%
13.2%
13.3%
13.2%
13.2%
13.7%
14.4%
15.1%
12,031
13,762
13,901
15,115
15,861
16,707
17,257
16,812
8,331
9,946
9,970
6.1%
6.8%
7.1%
7.0%
6.3%
5.6%
5.9%
5.9%
5.9%
5.9%
5.7%
11,563
13,818
16,107
16,13817,54718,327
19,56820,191
20,062
9,712
11,441
8.1%
7.3%
6.5%
6.8%
6.9%
7.0%
6.9%
6.8%
7.9%
8.2%
7.1%
3.2%
3.3%
3.9%
3.8%
3.1%
3.0%
3.2%
3.3%
3.4%
3.5%
3.5%
17.1%
21.0%
2.9
7,394
127.7%
123.6%
29.4%
40.8%
26.0%
14.0
968

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

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

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

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

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

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

13.4%
12.0%
2.2
11,771224.0%
207.5%
40.1%
73.4%
35.5%
11.7
-1,452

13.0%
12.3%
2.2
13,952235.8%
216.2%
22.5%
68.7%
21.8%
11.3
2,181

12.8%
12.0%
2.2
11,401
255.1%
227.4%
26.3%
68.3%
24.7%
10.9
-2,551

12.1%
11.0%
2.1
16,841276.4%
250.3%
31.0%
70.9%
29.3%
13.1
5,440

Source: Shared Research based on company data

Historical forecast accuracy
Results vs. Initial Est.
(JPYmn)Sales (Initial Est.)
Sales (Results)
Results vs. Initial Est.
Operating profit (Initial Est.)
Operating profit (Results)
Results vs. Initial Est.
Recurring profit (Initial Est.)
Recurring profit (Results)
Results vs. Initial Est.
Net income (Initial Est.)
Net income (Results)
Results vs. Initial Est.

FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
120,000 145,000 150,000 181,000 213,000 260,000 260,000 270,000 280,000 305,000 305,000
137,519 145,690 140,299 170,905 219,797 248,876 257,243 266,705 281,041 294,725 295,839
14.6%
0.5%
-6.5%
-5.6%
3.2%
-4.3%
-1.1%
-1.2%
0.4%
-3.4%
-3.0%
9,100
10,10012,05014,30016,60015,50016,00017,00017,50018,000
8,331
9,946
9,970
12,031
13,762
13,901
15,115
15,861
16,707
17,257
16,812
9.3%
-1.3%
-0.2%
-3.8% -16.3%
-2.5%
-0.9%
-1.7%
-1.4%
-6.6%
6,800
9,000
9,900
12,105
14,30016,60015,50016,00017,00017,50018,000
8,187
9,812
9,912
12,08913,784
13,892
15,092
15,943
16,684
17,381
17,284
20.4%
9.0%
0.1%
-0.1%
-3.6% -16.3%
-2.6%
-0.4%
-1.9%
-0.7%
-4.0%
3,600
4,600
5,200
6,470
7,600
8,700
8,300
8,600
9,400
10,00010,700
4,379
4,876
5,466
6,495
6,912
7,509
8,161
8,725
9,658
10,238
10,316
21.7%
6.0%
5.1%
0.4%
-9.1% -13.7%
-1.7%
1.5%
2.7%
2.4%
-3.6%

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

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

55/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Balance sheet(JPYmn)ASSETSCash and deposits
Accounts receivable
Allowance for doubtful accounts
Inventories
Deposits for consumption from associates
Other current assets
Total current assets
Buildings
Facilities and equipment for area management

Tools, furniture, and fixtures
Land
Construction in progress
Other fixed assets
Total tangible fixed assets
Goodwill
Other
Total intangible fixed assets
Investment securities
Deferred tax assets
Other
Allowance for doubtful accounts
Investments and other assets
Total fixed assets
Total assets
LIABILITIES
Accounts payable
Short-term debt
Other
Total current liabilities
Long-term debt
Other
Total fixed liabilities
Total liabilities
Capital stock
Capital surplus
Retained earnings
Treasury stock
Other comprehensive income
Share subscription rights
Minority interests
Total net assets
Working capital
Total interest-bearing debt
Net debt (net cash)
Equity ratio

FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18

6,991
18,025
-188
28
2,500
2,794
30,150
762
343
475
13
1,009
2,602
11,974649
12,623
1,730
534
1,566
-172
3,658
18,88549,035
10,551
1,688
7,892
20,131
56
768
824
20,956
3,238
2,963
20,852
-461
-42
72
1,456
28,079
7,502
1,744
7,747
54.1%

7,964
16,284
-122
20
3,000
2,880
30,026
1,185
305
284
15
952
2,741
11,295629
11,924
2,050
289
1,779
-141
3,977
18,644
48,670
8,974
80
7,227
16,28131
993
1,024
17,306
3,238
2,964
25,366-461
145
110
31,3647,330
111
10,85364.2%

13,09828,246-226
1,476
18,9203,010
64,524
1,234
265
1,791
284
182
3,756
10,546
1,031
11,577
2,983
278
1,701
-196
4,766
20,10084,62422,42449
8,251
30,724
6
1,006
1,012
31,7373,238
18,741
30,575-461
645
149
52,887
7,298
55
31,96362.3%

9,707
31,240-657
1,527
27,3203,349
72,486
1,217
246
1,918
284
108
3,773
11,2491,023
12,272
2,577
406
1,517
-224
4,276
20,32292,80923,72041
9,882
33,64315968
983
34,6263,238
18,75335,285
-460
647
173
545
58,182
9,047
56
36,971
61.9%

10,014 12,565 15,580 20,386 31,717 39,536
44,673 37,420 40,055 39,512 36,958 37,437
-144
-290
-168
-360
-202
-130
2,237
2,504
2,618
2,897
3,050
3,088
18,020 32,420 41,326 37,362 31,713 32,000
4,523
5,728
5,066
5,877
9,169
8,283
79,323 90,347 104,477 105,674 112,405 120,214
1,089
1,046
1,009
1,642
1,644
1,593
274
238
211
190
175
2,079
2,487
2,516
2,663
3,319
4,900
282
278
278
1,978
1,975
1,975
72
209
345
610
1,974
1,591
3,796
4,258
4,361
7,086
9,089 10,060
10,801 10,078
9,069
7,989
7,038
6,255
1,520
1,609
1,867
2,408
2,056
1,780
12,321 11,687 10,937 10,397
9,095
8,036
2,973
3,897
3,768
4,463
4,546
5,334
288
254
284
310
551
330
2,196
1,877
2,750
3,911
4,353
3,462
-200
-199
-535
-494
-536
-610
5,257
5,829
6,268
8,190
8,915
8,516
21,375 21,775 21,567 25,674 27,099 26,613

100,699

112,122

126,044

131,349

139,505

146,828

24,544 26,701 30,902 28,457 28,607 23,684
10
5
271
225
10,401 12,600 15,738 16,364 15,187 15,103
34,955 39,306 46,640 44,821 44,065 43,486
5
293
1,190
1,500
1,908
2,527
3,057
2,780
1,195
1,500
1,908
2,527
3,350
2,780
36,151 40,806 48,549 47,348 47,416 46,267
3,238
3,238
3,238
3,238
3,238
3,238
18,770 18,818 18,850 18,862 18,949 19,020
40,539 46,235 52,388 59,393 66,795 74,115
-458
-449
-443
-441
-436
-430
992
1,711
1,373
525
799
1,484
205
165
166
221
263
303
1,260
1,597
1,922
2,200
2,480
2,829
64,547 71,316 77,495 84,000 92,089 100,561
22,366 13,223 11,771 13,952 11,401 16,841
15
5
564
225
28,019 44,980 56,906 57,748 62,866 71,311
62.6%
62.0%
59.8%
62.1%
64.0%
66.4%

Source: Shared Research based on company data
JPY1.5bn raised from securitization of future receivables in FY02/09 is booked as short-term interest-bearing debt.

AssetsCurrent assets account for approximately 80% of the company’s assets (as of FY02/14). A large portion of receivables are duefrom Aeon Retail, and amounted to about JPY20.0bn as of the end of FY02/13. Majority of its investment securities are with Aeon
Mall, Aeon Kyushu Co., Ltd. (JASDAQ: 2653), Aeon Fantasy Co., Ltd. (TSE1: 4343), and MaxValu companies. There is also a large
amount of goodwill (JPY6.2bn; 4.3% of total assets as of FY02/18) due to the volume of M&A.
Aeon Delight’s assets and liabilities swelled in FY02/11 due to its merger with Certo Corp. It took on assets of JPY31.5bn andliabilities of JPY15.3bn.

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

56/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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

Shareholder returns
Aeon Delight aims to provide dividends that correspond to its financial performance in a stable and continuous manner. It aims toprovide a 20% dividend payout ratio, while keeping a close watch on its net asset ratio.

57/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Statement of cash flows(JPYmn)Cash flows from operating activities (1)Cash flows from investing activities (2)Free cash flow (1+2)
Cash flows from financing activities
Depreciation and amortization (A)Capital expenditures (B)Working capital changes (C)Simple FCF (NI + A + B - C)

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

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

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

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

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

FY02/15
17,234-11,365
5,869-2,594
2,466-1,903-1,452
10,740FY02/16
10,303-3,255
7,048-2,821
2,861-2,4142,181
7,924

FY02/17
11,703
2,233
13,936-2,4002,934-4,113-2,551
11,372

FY02/18
13,568-2,666
10,902-3,264
3,250-3,2285,440-5,418Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Cash flows from operating activities
In FY02/13, net cash used in operations was JPY4.4bn (net cash provided by operations was JPY9.6bn in FY02/12), attributed to a
JPY12.6bn increase in accounts receivables related rise in LED construction work for the Aeon group, and JPY6.6bn paid incorporate income taxes. Prior to FY02/13, cash flows from operating activities ranged from JPY6.5bn in FY02/08 to JPY9.6bn in
FY02/13.

Cash flows from investing activities
A significant portion of cash flows from investing activities stem from M&A activities. There is also a large variance due tocontributions from affiliated companies, but this more significantly affects cash flows from operating activities.

Cash flows from financing activities
In FY02/13, net cashed used in financing activities were dividend payments of JPY2.3bn. Prior to FY02/09, the company used cash
for repayment of funds raised from liquidation of future receivables.

Simple free cash flow
In FY02/13, working capital increased JPY13.3bn YoY (JPY13.4bn increase in accounts receivables and JPY710mn increase ininventories minus JPY820mn increase in accounts payable). Depreciation and amortization of goodwill totaled JPY2.2bn andcapital expenditures were JPY1.6bn. Net income totaled JPY7.5bn. Simple free cash flow was negative JPY5.2bn at the end of
FY02/13.
Cash conversion cycle (days)
Accounts receivable turnover
Accounts receivable days
Inventory turnoverDays in inventory
Accounts payable turnover
Accounts payable days
Cash conversion cycle (days)

FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18
8.0
8.2
8.2
7.7
7.4
6.6
6.3
6.9
7.1
7.7
8.0
45.7
44.7
44.6
47.6
49.4
55.7
58.2
53.0
51.7
47.4
45.9
6,247.0
6,565.0
4,965.8
196.4
127.3
116.2
94.3
90.4
88.4
86.0
83.7
0.1
0.1
0.1
1.9
2.9
3.1
3.9
4.0
4.1
4.2
4.4
11.5
12.0
12.2
9.4
8.3
9.1
8.7
8.0
8.2
9.0
9.8
31.7
30.5
29.9
39.0
44.1
40.3
41.8
45.4
44.5
40.7
37.1
14.0
14.3
14.8
10.4
8.2
18.5
20.3
11.7
11.3
10.9
13.1

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

The company acquired Certo Corp., a provider of office supplies and operator of soft drink beverage vending machines in
September 2010. Inventory turnover rate deteriorated due to increased inventories from acquired company.
Accounts receivable are mainly from Aeon group companies, while accounts payable are with various suppliers, such as soft drink
beverage suppliers. In FY02/13, its cash-conversion cycle increased due to increased LED installation work for Aeon groupcompanies.

58/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

ROE and dividends(JPYmn)ROE

Net margin
Total asset turnover
Financial leverage
ROA (RP-based)
ROIC
NOPAT
Interest-bearing debt＋Net assets
ROIC (before tax)
OPM
Total sales / Invested capital

FY02/05 FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
Cons.
5.7%
8.3%
16.9%
21.0%
19.9%
18.9%
15.5%
12.5%
12.5%
12.3%
12.0%
12.3%
12.0%
11.0%
1.6%
2.1%
2.7%
3.2%
3.3%
3.9%
3.8%
3.1%
3.0%
3.2%
3.3%
3.4%
3.5%
3.5%
2.15
2.26
2.83
2.88
3.02
2.87
2.56
2.48
2.57
2.42
2.24
2.18
2.18
2.07
1.68
1.73
2.21
2.29
1.97
1.69
1.59
1.61
1.61
1.60
1.64
1.64
1.58
1.53
9.9%
10.7%
13.9%
17.1%
20.3%
20.3%
18.1%
15.5%
14.4%
14.2%
13.4%
13.0%
12.8%
12.1%
9.6%
11.0%
18.6%
23.7%
22.6%
19.3%
16.9%
14.7%
13.4%
13.8%
13.2%
13.3%
13.1%
12.0%
1,457
1,749
3,307
4,941
5,899
5,913
7,136
8,162
8,245
9,370
9,832
10,753
11,551
11,624
15,104
15,893
17,791
20,82926,15630,64942,20955,59061,40067,942
74,40880,74888,32796,720
16.6%
18.6%
31.3%
40.0%
38.0%
32.5%
28.5%
24.8%
22.6%
22.2%
21.3%
20.7%
19.5%
17.4%
4.6%
4.7%
5.0%
6.1%
6.8%
7.1%
7.0%
6.3%
5.6%
5.9%
5.9%
5.9%
5.9%
5.7%
3.62
3.92
6.25
6.60
5.57
4.58
4.05
3.95
4.05
3.79
3.58
3.48
3.34
3.06

ROE
23.7%

25%
18.6%

20%
15%
10%
5%
0%

21.0%

ROE

22.6%

ROIC

19.3%
19.9%

18.9%

16.9%
9.6%

ROA (RP-based)

16.9%
14.7%
15.5%

11.0%

12.5%

13.4%

13.8%

13.2%

13.3%

13.1%

12.5%

12.3%

12.0%

12.3%

12.0%

5.7%

FY02/05

FY02/10

25%

2.2
1.7

1.7

15%

FY02/15ROE
Net margin
Total asset turnover (right axis)
Financial leverage (right axis)

2.3
2.0
21.0%

19.9%

16.9%

1.7
18.9%

1.6

0%

1.6

1.6

1.6

1.6

1.6

1.6

12.5%

12.5%

12.3%

12.0%

12.3%

12.0%

3.1%

3.0%

3.2%

3.3%

3.4%

3.5%

3

2

1.5

15.5%

10%
5%

11.0%

8.3%

30%

20%

12.0%

11.0%

1

8.3%
5.7%
1.6%

FY02/05

2.1%

2.7%

3.2%

3.3%

3.9%

3.8%

FY02/103.5%

FY02/15

0

ROIC
45%

ROIC (before tax)

OPM

9Total sales / Invested capital

40%

8

35%

7

30%

6.2

25%
20%
15%

3.6

6

6.6

5

5.6
4.6

3.9

4.0

4.0

4.1

4
3.8

3.6

3.5

10%
5%
0%

4.6%

4.7%

5.0%

6.1%

6.8%

FY02/05

7.1%

7.0%

(JPYbn)Net assets

Interest-bearing debt

13.8

80

5.9%

5.9%

5.9%

5.9%

13.9

15.1

9.9

16.7

17.3

20

16.8

2.9

15.4

16.4

52.9
19.2

22.5

FY02/05

28.1

12

58.2

64.5

71.3

77.5

84.0

92.1

100.6

10
8
6
4

31.4

FY02/10

18
14

10.0

5.6
2.5

0

16

8.3

40

1

(JPYbn)

12.0

60

2

5.7%

Operating profit (right axis)
15.9

3

3.1

FY02/15

100

0

5.6%

FY02/10

120

20

6.3%

3.3

2
FY02/150

Source: Shared Research based on company data

59/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Dividends
FY02/06 FY02/07 FY02/08 FY02/09 FY02/10 FY02/11 FY02/12 FY02/13 FY02/14 FY02/15 FY02/16 FY02/17 FY02/18(JPYmn)Total dividends
Total treasury stock acquired
Total returns to shareholdersc) = a) + b)

Dividend payout ratio
Total shareholder return ratio

Net income attributable to parent company shareholders

d)

Cons.
357
357
1,324

Cons.
595
1
596
2,999

Cons.
694
694
4,379

Cons.
872
9
881
4,876

Cons.
1,071
8
1,079
5,466

Cons.
1,828
1
1,829
6,495

Cons.
2,097
6
2,103
6,912

Cons.
2,413
1
2,414
7,509

Cons.
2,519
1
2,520
8,161

Cons.
2,625
1
2,626
8,725

Cons. Cons. Cons.
2,731
2,890
3,207
2,731
2,890
3,207
9,658 10,238 10,316a) / d)c) / d)

27.0%
27.0%

19.8%
19.9%

15.8%
15.8%

17.9%
18.1%

19.6%
19.7%

28.1%
28.2%

30.3%
30.4%

32.1%
32.1%

30.9%
30.9%

30.1%
30.1%

28.3%
28.3%

a)
b)

Net assets available to common shareholders

31.1%
31.1%

16,413 19,169 22,488 26,551 31,254 52,738 57,464 63,082 69,554 75,407 81,579 89,346 97,429

Average of beginning and end of year
Before deducting assets available toholders of Class A preferred shares
EPS
Dividend per share
Dividend on equity ratio

28.2%
28.2%

f) 15,893 17,791 20,829 24,520 28,903 41,996 55,101 60,273 66,318 72,481 78,493 85,463 93,388
16,413 19,169 22,488 26,551 31,254 52,738 57,464 63,082 69,554 75,407 81,579 89,346 97,429
(JPY)
(JPY)
a) / f)

50%

64.3
18.0
2.2%

151.2
30.0
3.3%

Payout ratio

110.4
25.0
3.3%

122.9
22.0
3.6%

137.8
27.0
3.7%

142.6
39.0
4.4%

Total shareholder return ratio

131.8
40.0
3.8%

143.2
46.0
4.0%

155.5
48.0
3.8%

166.2
50.0
3.6%

183.9
52.0
3.5%

194.8
55.0
3.4%

196.2
61.0
3.4%

5%

DOE

40%

4%

30%

3%

20%

2%

10%

1%

0%

FY02/05

FY02/10

FY02/150%

Source: Shared Research based on company data

60/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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

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

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

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

Major shareholders
Aeon group companies own about 60% of the company.
Top shareholders
Aeon Retail Co., Ltd.
Aeon Co., Ltd.
Reform Studio Co., Ltd.
Goldman Sachs & Co. Regular Account (Standing proxy: Goldman Sachs
Securities Co., Ltd.)ORIGIN TOSHU Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)
Aeon Delight Business Partners Stockholding Association
Aeon Ryukyu Co., Ltd.
Japan Trustee Services Bank, Ltd. (Trust account)
Strate Street Bank and Trust Client Omnibus Account OM02 505002 (Standing
proxy: Mizuho Bank, Ltd. Settlement Department)

Shares held ('000)
16,558
6,103
3,994

Shareholding ratio
30.6%
11.3%
7.4%

2,209

4.1%

1,854
1,003
987
855
688

3.4%
1.9%
1.8%
1.6%
1.3%

606

1.1%

Source: Shared Research based on company data
(As of February 28, 2018)

Top management
President Ippei Nakayama (born in 1954) joined Jusco in 1971 and developed his career in store operations, management, andhuman resources before being seconded to the Ministry of Labor (currently, Ministry of Heath, Labor and Welfare) in 1985. After
returning to Aeon, he continued his career in human resources, and was later involved in establishing Talbot, Inc. in Japan. He
became a director at Aeon Techno Service Co., Ltd. in 2002, and was promoted to executive managing director in 2006.
Furthermore, Mr. Nakayama became a managing director of the newly formed Aeon Delight Co., Ltd., following the merger ofJapan Maintenance Co., Ltd. and Aeon Techno Service in September 2006. He became senior vice president in 2012, and waspromoted president of Aeon Delight in 2013.

61/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Employees
Aeon Delight had 13,430 employees and an average of 6,879 temporary employees on a consolidated basis as of end-FY02/18. At
the parent level, there were 4,034 employees and 2,399 temporary employees. The average age, average length of employment,
and average annual salary on a parent basis were as follows:▷

Average age: 45.9 years▷

Average annual salary: JPY4.8mn▷

Average length of employment: 10.7 years

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 the environment
with a management principle of creating “environmental value” for clients.
The following are examples of the company’s environmental initiatives:

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

Proposal for environmentally friendly packaging
The company proposes a variety of packaging materials, including biomass materials obtained during the growth 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, and thoseequipped 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’ business performances.

Tree planting through Aeon Environmental Foundation
The company participated in a tree-planting event in Beijing, China in fiscal year 2010, took part in a similar project in Jakarta,
Indonesia in fiscal year 2011 and 2012, respectively. For the tree planting event in Jakarta held during fiscal year 2012, thecompany sponsored participation of endorsing companies, in addition to having its employees from Japan volunteering for the
event

62/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp“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:

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 are sent
to six “washing centers” within the vocational facilities, where the baskets are washed and applied with anti-bacterial coating.

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

63/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Historical financial statements and news
Historical financial statements
Q3 FY02/19 results (out January 9, 2019)▷▷▷▷

Q3 FY02/19: Sales up 2.7%, operating profit up 5.0%. Record profit for Q3.
2025: In Japan, expand market share by constructing Aeon Delight (AD) economic zone. Overseas, concentrate management
resources in China and aim to become a top ten company in the industry.
Vision 2025: Aim for above targets with “safety and security,” “labor shortage,” and “environment” as key pillars of growthstrategy in Asia
Q3 progress: Under “safety and security,” in areas struck by disasters such as earthquakes and typhoons, provided building
restoration work, temporary cleaning, and materials delivery services. Under “labor shortage,” launched installations ofdispersed management system “Delight Viewer,” in October, streamlined maintenance and inspection processes, began
installation and sales of floor cleaning robots, built a labor-saving model in collaboration with Secom for security work at
commercial facilities, and began a trial operation of toilet IoT services at Aeon Mall Binh Tan in collaboration with Softbank▷

Telecom Vietnam.
Segment earnings: Six businesses grew profit. Vending Machine Services transitioning to new earnings model. Key driver of
JPY630mn profit growth was Facilities Management (+JPY740mn), followed by Cleaning Services (+JPY350mn, higher
productivity), Construction Work (+JPY260mn, higher margins on growth in comprehensive contracts and provision of highvalue-added service), Materials and Supplies Sourcing Services (+JPY20mn on higher sales), and Support Services (+JPY80mn,▷

growth in service provision). These offset lower profit in Vending Machine Services and other segments.
Vending Machine Services: Operating profit down JPY740mn (-49% YoY). In addition to being midway through transitioning
to a new revenue model, earnings were affected by disruption in the distribution network due to a series of typhoons andproduct shortfall in some areas.

Earnings overview
Q3 FY02/19: Sales up 2.7%, operating profit up 5.0%. Record profit for Q3▷

In Q3 FY02/19, Aeon Delight reported sales of JPY229.9bn (+2.7% or +JPY6.1bn YoY) and operating profit of JPY13.3bn (+5.0%▷

The capital surplus declined by JPY5.2bn to JPY13.9bn. This was due to accounting treatments for business combinations as the▷or +JPY600mn YoY). OPM increased 0.2pp YoY to 5.8%.

company purchased additional stakes in consolidated subsidiaries Aeon Delight Jiangsu and Wuhan Xiaozhu from
non-controlling shareholders on November 30, 2018.
After the end of Q3, the company purchased some of its shares from Aeon (4.98% of issued shares) as treasury stock. Aeon
Delight said it decided to do so to boost ROE, which measures the efficiency of shareholders’ invested capital.

Business environment and company initiatives
Environment
Decarbonization▷

In March 2018, Aeon released Aeon Decarbonization Vision 2050, declaring the group’s ambition to eliminate CO2 and othergreenhouse gas emissions from stores. It also aims to help all stakeholders including customers and suppliers achieve a carbon
free society.

64/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Renewable energy▷

The Aeon group is the first major retailer in Japan to participate in the international RE100 initiative, which calls for businesses
to use 100% renewable energy.

Electricity▷

As a member of the Aeon group, Aeon Delight participates in the vision as a company involved in facilities management that
includes control over electricity use. It aims to establish an energy management service, which will cover a wide range fromenergy supplies needed by local communities to energy-saving operations in facilities management. The company establishedan Electricity Planning Department in October 2018 with the aim of putting this idea into practice as soon as possible. This▷▷

launched its initiatives to commercialize the energy management service and create a new business leveraging electric power.
The Aeon group aims to reduce costs by managing its electric power consumption at the group level. There is a defensive
significance in the company’s participation in multiyear packaged contracts that include electricity, as electricity has highswitching costs.
The company is considering expanding into ancillary businesses including high-margin power storage and electric cars in the
future.

Safety and security▷▷

Natural disasters in Japan caused a great deal of damage due to earthquakes and a series of typhoons making landfall. The
company has worked for the quick recovery of affected areas by establishing a response headquarters and offering building
restoration work, temporary cleaning, and material delivery services.
As a facilities management company whose mission is to provide a safe, secure, comfortable environment in and around thesites it manages, it also worked to help commercial facilities resume their operation swiftly.

Labor shortage
Aeon Delight Platform (AD Platform)▷

Labor shortages are becoming critical in Japan and China, where the company operates. The company has started developing▷

The AD Platform will collect, store, and analyze data obtained from the facilities it manages and others to offer the optimal▷

the Aeon Delight Platform (AD Platform), with the aim of easing the labor shortage in-house and at client companies.

solutions to issues faced by individual client companies.
The company developed Delight Viewer, a dispersed management system, in anticipation of the development of the AD
Platform, and launched it in October 2018. Delight Viewer efficiently collects and stores data obtained from facility
maintenance and inspection operations.

Floor cleaning robot▷

Aeon Delight developed a floor cleaning robot to cope with the labor shortage in the cleaning industry in collaboration with▷

Full installation of the product has begun at facilities where Aeon Delight has operations, and the company has been selling the▷▷the major US cleaning equipment manufacturer Tennant Company.

robot to cleaning companies since November 2018.
The robot is expected to yield a reduction of about 70% in working time, and overall cost savings versus traditional operations
including robot depreciation expenses.
The move is also significant in that it solves the difficulty recruiting nighttime cleaning staff.

65/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Collaboration with Secom Co., Ltd. (TSE1: 9735)▷

The company started collaborating with Secom Co., Ltd. in April 2018 in building a new facilities management business▷

As the first joint initiative, the companies developed a labor-saving model for entry and exit control and store closing▷

model.

operations by conducting pilot tests at Aeon stores with a view to saving labor in security services.
The company aims to roll out this model primarily in commercial facilities, and verify results to yield further labor savings infacilities management operations. The company also said it plans to strengthen its collaboration with Secom and startmarketing activities to small and medium-sized office buildings, leveraging the strengths of the two companies.

Toilet IoT services▷

Overseas, its Vietnamese subsidiary Aeon Delight Vietnam collaborates with SoftBank Telecom Vietnam. In September 2018,
the two companies launched a pilot test of toilet IoT services at Aeon Mall Binh Tan (Ho Chi Minh City). This service aims to
make toilet cleaning operations more efficient while boosting safety by remotely monitoring the operational status ofindividual toilet cubicles.

Accelerating global development
Asian expansion intentions▷

Aeon Delight thinks that expanding in developed countries would be difficult. These economies are mature with low market▷

The company is focusing on expanding in Asia. Market (floor space) growth rates are high in the region, and competitors do(floor space) growth rates, and competitors have established positions.

not have established positions. The company thinks it will be easy to expand in Asia which has a shared business sensibility.

China business: Making two core companies wholly owned subsidiaries▷

The company made its two core Chinese subsidiaries, Aeon Delight Jiangsu and Wuhan Xiaozhu, wholly owned subsidiaries by▷

The move will strengthen collaboration between the two companies and accelerate the decision-making process, as well as▷purchasing the remaining outstanding shares in October 2018, to accelerate its business growth in China.

help establish the Aeon Delight brand in China. The company aims to build a brand image such that Aeon Delight is seen as aJapanese security company synonymous with building maintenance for foreign companies.
The company is steadily growing its business as competing players have low productivity and the market is growing rapidly.

ASEAN business: Purchase of shares in Indonesian cleaning company▷

In October 2018, the company announced its intention to buy 90% of the shares in PT Sinar Jernih Sarana (SJS), a cleaning▷

SJS has posted rapid growth in Indonesia, the largest of the ASEAN markets. It has grown to become one of the largest grossing▷

services company in Indonesia, and formally completed the acquisition in December 2018.

cleaning services companies in the country.
The company thinks that there must be the same sort of market underlying the cleaning market as in Japan, including facilities
management and security. Aeon Delight said that it would leverage its expertise to help SJS branch out from cleaning into
other areas such as facilities management and security services and grow into a facilities management company. SJS has alreadyobtained licenses needed in facilities management from the authorities.

66/74

R
Coverage▷

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Because SJS was originally part of an Indonesian conglomerate, its executives have broad personal contacts throughout Asia.
The company thinks that SJS can become a driving force in the ASEAN region by leveraging the company’s personalconnections.

First ISO 41001 certification in Japan▷▷In April 2018, the International Organization for Standardization (ISO) released the first international standard (ISO 41001) infacilities management. In September 2018 one of Aeon Delight’s integrated facilities management (IFM) customers became
the first facility to acquire the certification in Japan.
The company plans to use ISO 41001 to standardize business processes and expand service provision to the global level.

Initiatives to improve employee engagement▷▷

The company has unrolled small group activities at the individual workplace level. These foster a workplace culture where
members of its Clean Crew (its internal designation for cleaning staff) volunteer information on things they notice day-to-day
and ideas on creating a pleasant working environment.
These are reflected in work processes. In November 2018, the company held a conference at the Tokyo Big Sight to share theresults from Japan and abroad and further promote the program. This was the fourth such conference highlighting initiatives inpursuit of a pleasant working environment.

Segment overview
Building maintenance (Facilities Management, Security Services, Cleaning Services)▷▷

Recurring revenue business; annual contracts are renewed in most years.
Sales are growing especially outside the Aeon group. This is because Aeon Delight has met demand for one-stop contracts forfacilities management, security services, and cleaning services at one company that previously went to separate companies. It
has similarly met needs for nationwide contracts run by one company rather than region-by-region contracts for separate▷

companies. Aeon Delight thinks that it is the only company that can comprehensively satisfy such needs.
The company got its start in building maintenance for commercial facilities, which is more difficult than that for office buildings
or condominiums. This is because commercial facilities attract large, random visitor numbers, so there is a greater likelihood of
the facilities getting soiled than office buildings or condominiums. Aeon Delight has the expertise needed to deal with facilities

▷

▷

▷

such as hospitals, which gives it a competitive edge.
Building maintenance customers are cost-conscious, and usually use competitive tenders when outsourcing work. One sourceof the company’s competitiveness is that its sales team is experienced in building maintenance. They look into the details of
the orders, and engage in proposal based on marketing that will reduce costs as well as meet customer needs.
At present, many of Aeon Delight’s processes are labor-intensive, so funding ability is not a major concern. However, thecompany thinks that in the future it will require funds for mechanization and automation, so funding ability will grow inimportance.
The company’s business is impacted by economic fluctuations with a lag. This is because many of its customers are in the retailindustry and when the sector’s results deteriorate, the company is subject to cost-cutting measures. However, Aeon Delight
does not view downturns in the economy as negative. When the economy is poor, potential clients start considering changing
their building maintenance contractors, opening up an opportunity for the company to win new customers.

67/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Segment conditions▷

Facilities Management (operating profit JPY4.3bn, +JPY740mn YoY): In addition to gaining new contracts, the company
focused on helping customers develop disaster prevention and mitigation systems. It won increased orders for scheduled fire
safety equipment testing (under revised regulations) and emergency generator load testing, as well as associated fault repairs.

▷

Growth was stronger than normal.
Security Services (JPY2.1bn, unchanged YoY): Aeon Delight conducted ongoing initiatives to reform workstyles starting withimproving the workplace environment to facilitate recruitment, and made progress on systematizing services such as building
access control and security patrols, but profit was impacted by higher outsourcing costs.



The availability of manpower is the main limiting factor on sales growth, and for security services in particular. Amid a
spike in Olympics related construction demand, the company is competing with the construction industry for security
personnel.



The company said that earnings have deteriorated due to the personnel shortage, and some contracts are in the red. It is
responding by changing specifications or entering price negotiations. In some cases it is considering ending contracts
that have no prospects for improvement. The company intends to deal with the personnel shortage by increasing the▷

proportion of collaborations with Secom it can operate using equipment.
Cleaning Services (JPY5.0bn, +JPY350mn YoY): In addition to new contracts, the company grew sales of materials developed
in-house, made progress on labor saving in toilet cleaning, and introduced/launched sales of floor cleaning robots.

Other than building maintenance (Construction Work, Materials and Supplies Sourcing Services, Vending Machine Services)▷

Most sales are to the Aeon group.

Segment conditions▷

Construction Work (JPY2.9bn, +JPY260mn YoY): The company preformed restoration work in disaster struck areas, andincreased comprehensive construction contracts as it focused on proposals covering remodeling projects from the planningstage at commercial facilities.
This is a one-time revenue type business. It is hard to control sales because orders depend on renovation work at
customers.



Clients tend to outsource renovation work to companies which handled the original design of their facilities. Having adesign capability would help drive construction work sales growth in the future. To this end, the company madeU-COM Co., Ltd. a wholly owned subsidiary in April 2018.

▷Materials and Supplies Sourcing Services (JPY2.1bn, +JPY20mn YoY): Won more contracts to provide Aeon private brand▷Vending Machine Services (JPY760mn, -JPY740mn YoY): In addition to growth in own vending machines that stock products

packaging materials, focused on reducing logistics costs to improve margins.

from different manufacturers, the company attempted to create added value by using vending machines with digital signage,
but profit fell as business was midway through transition to new revenue model, and natural disasters disrupted distribution
network and caused product shortages.

Support Services (JPY2.1bn, -JPY80mn YoY)▷

Including business of consolidated subsidiaries Kajitaku and Aeon Compass, provided increased outsourcing services inmanagement operations of facilities and surroundings.

68/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

1H FY02/19 results (Out October 10, 2018)▷

1H FY02/19: Sales up 1.4%, operating profit up 2.9%. Results in line with initial forecasts. Announced 2025 targets (sales of
JPY525bn, operating profit of JPY48bn)
▷2025: In Japan, expand market share by constructing Aeon Delight (AD) economic zone. Overseas, concentrate
management resources in China and aim to become a top ten company in the industry

Vision 2025: Aim for above targets with “safety and security,” “labor shortage,” and “environment” as key pillars of growthstrategy in AsiaConvert medium-term initiatives related to IFM, Asia, and technology into management principle and strategies, andrethink tactical approach. In addition to growth in existing FM business, target higher sales and profit in China and new
businesses. Build organizational structure that supports sharing of information among employees and directors andallows directors to execute responsibilitiesJapan (existing businesses): Target sales increase of JPY60.0bn. Leverage open AD platform to develop AD economic
zone and expand market shareJapan (new businesses): Target sales increase of JPY100.0bn. Provide energy management services (tied to AD platform)
to Aeon stores and surrounding areas

Overseas business (China): Target sales increase of JPY40.0bn. Turn two core companies into wholly owned subsidiaries,
and focus on shopping centers, high-end residential projects, factories, medical institutions, and public infrastructureProfit margins: In Japan, aim to substantially raise profit margins by leveraging AD platform in existing businesses,
reducing labor, and improving productivity, while also targeting contributions from new businesses. Overseas, look forfurther growth in profit margins



1H progress: Constructed a labor-saving model for large commercial facilities with an eye toward the AD platform;
developed a dispersed management system; opened an R&D facility through joint investment with China-based AI
company; pushed forward with final tests on cleaning robots; and participated in electricity transaction verification▷

business using blockchain technology
Segment earnings: Key driver of JPY250mn profit growth was Facilities Management (+JPY550mn), followed by Cleaning
Services (+JPY210mn, higher productivity), Construction Work (+JPY90mn, higher margins on portfolio changes and review ofproject estimates), and Materials and Supplies Sourcing Services (+JPY100mn on higher sales). These offset lower profit in
Vending Machine Services and other segments▷Vending Machine Services: Operating profit down JPY750mn (-58% YoY). In addition to being midway throughtransitioning to a new revenue model, results were impacted by Q2 heavy rains and typhoons

2H: Facilities Management, Cleaning Services, and Materials and Supplies Sourcing Services expected to maintain performanceexceeding initial forecasts. Profits in Construction Work expected to grow thanks to large projects concentrated in 2H. Despite
the dropout of one-time factors that had an impact in Q2, Vending Machine Services expected to remain sluggish as it is
midway through transitioning to a new revenue model. Support Services to aim for recovery

69/74

R

Aeon Delight / 9787

Coverage

LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Earnings(JPYbn)Gross profit

11
10
9.0

9
8.3

10.2
10.2
10.1
10.1 10.1
9.9
9.8
9.5
9.5
9.4
9.3

9.7

9.4
8.9

(JPYbn)GPM (right axis)

14%

5

4.6

4.2

4 3.5

8.9

8.4

3.6

4.7

4.5
3.6

3.8

OPM (right axis)

4.0

13%

7

SG&A expenses

SG&A ratio (right axis)
5.7

4.8

4.6
3.9

(JPYbn)

8% 6

4.7
4.1

4.6
3.9

4.2

5.6

4.4

7%

5.2 5.2
5.1

3

8

6

Operating profit

6

5

2

4.8 4.8

5.5

5.4

5.6

5.5 5.5

8%

5.7

5.3

5.3

Q1
FY02/18Q1
FY02/19

5.1

4.8 4.96%

1Q1
FY02/15Q1
FY02/16Q1
FY02/17Q1
FY02/18Q1
FY02/19

12% -Q1
FY02/15Q1
FY02/16Q1
FY02/17Q1
FY02/18Q1
FY02/195% 4

Q1
FY02/15Q1
FY02/16Q1
FY02/17

7%

Source: Shared Research based on company data

Earnings overview
1H FY02/19: Sales up 1.4%, operating profit up 2.9%. Results in line with initial forecasts. Announced 2025 targets (sales of
JPY525.0bn, operating profit of JPY48.0bn)
In 1H FY02/19, Aeon Delight reported sales of JPY153.9bn (+1.4% or +JPY2.1bn YoY) and operating profit of JPY9.1bn (+2.9% or+JPY300mn YoY). OPM increased 0.1pp YoY to 5.9% as initiatives to boost productivity in Japan and abroad have lowered CoGS
and SG&A expenses, compensating for an increase in outsourcing expenses in Security Services as well as delays in productsupply caused by natural disasters and the ongoing alteration of the revenue model in Vending Machine Services. The shortfall in
Vending Machine Services was offset by other businesses. The company notes steady progress in achieving full-year estimates.
Gross profit increased JPY300mn YoY, an underwhelming outcome compared to the initial forecast (+JPY3.0bn over the full year).
Shared Research thinks quarterly trends (Q1: +JPY400mn, Q2: -JPY200mn) suggest Vending Machine Services weighed down
profit. At the same time, the company kept SG&A expenses firmly under control while staying focused on operating profit andcontinuing to secure specialist staff.
Reversal of allowance for doubtful accounts and some reductions in personnel expenses were temporary factors that contributed to the YoY decline in
SG&A expenses in Q1, but initiatives to internally deal with the work previously outsourced were successful. Shared Research thinks the increase in
SG&A expenses in Q2 was partly due to progress steadily being made in securing specialists.

Business environment and company initiatives
In Japan the labor shortage due to the declining working-age population and aging of society is a social issue, and labor shortages
are also becoming apparent in China. The company is taking a number of initiatives to improve productivity in Japan andoverseas. It has also continued to strengthen activities to market IFM to fulfill its customers’ outsourcing needs.
The company has established a joint venture with leading IT company DeepBlue Technology (Shanghai) Co., Ltd., which has
strengths in basic research into artificial intelligence and applications development in China. This will become an R&D center forthe company, and aims to develop SmartFM by fusing expertise Aeon Delight has developed in Japan in facilities managementwith advanced technologies in AI, IoT, and robotics. Aeon Delight says that SmartFM would improve convenience for facilities
users and yield significant gains in productivity (cost cuts for customers and the company itself).
These initiatives are based on the medium-term business plan. At 1H earnings announcement, the company announced new
targets for 2025 and three pillars of its growth strategy under the medium-term plan Aeon Delight Vision 2025. The company
indicated its resolve to take specific initiatives to accelerate implementation of the medium-term plan based on its vision. An
overview of the growth strategy and 1H are as follows.

70/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

News & topics
January 2019
On January 9, 2019, the company announced the results and the conclusion of a tender offer for share repurchase.
As announced on December 4, 2018, the company repurchased its shares through a tender offer, which was completed on
January 8, 2019.

Details of purchase▷ Type of shares repurchased:

Common stock▷ Repurchase amount:

JPY9.9bn▷ Number of shares repurchased:

2,700,000 (4.98% of issued shares)

December 2018
On December 19, 2018, the company announced it has obtained an approval from the Indonesian authorities to acquire sharesin PT Sinar Jernih Sarana (SJS). It was also granted a local license to offer comprehensive real estate-related support services.
On December 11, 2018, the company obtained approval from the Indonesian authorities regarding its acquisition of shares in SJS,
a cleaning services company in Indonesia. On the same day, SJS—ahead of any other foreign companies—was granted a local
business license necessary for operating “comprehensive real estate-related support services” (KBLI 81100) in Indonesia. Thesedevelopments satisfied the terms set forth in the conditional share transfer agreement regarding Aeon Delight’s acquisition of SJS
shares (see the company release dated October 30, 2018), leading to a full conclusion of the agreement.
The subject license allows foreign capital companies to operate facility management (FM) in Indonesia. FM has traditionally beena difficult business area for foreign companies to enter. With this license, however, as a company of the Aeon Delight group, SJS
can now offer such services as cleaning, facility management, and security in Indonesia.
On December 4, 2018, the company announced the purchase and tender offer of treasury shares.
The company announced that it will repurchase up to 2,970,100 of its treasury shares (5.48% of issued shares, purchase price:
JPY10,897,296,900), including 2,700,000 shares (4.98% of issued shares) owned by Aeon Co., Ltd. (Aeon owns a total of
13,195,250 company shares [24.36% of issued shares]). Aeon has informed the company that it intends to hold onto theremaining 10,495,250 shares of the company (19.37% of issued shares). The company had cash and cash equivalents of
JPY38.6bn as of end-August 2018, and even after allocating JPY11.0bn to fund the tender offer, the company maintains it would
have sufficient liquid assets.
Further details are as follows:▷ Repurchase period: December 5, 2018 to February 28, 2019
▷ Tender offer period: December 5, 2018 to January 8, 2019

▷ Tender offer price: JPY3,669 (93% of JPY3,945, simple average of the company’s share price for the last three months)▷ Number of shares as of end-October 2018: 52,612,791 outstanding shares, 1,556,842 treasury shares
October 2018
On October 30, 2018, the company announced its resolution to conclude a conditional share transfer agreement with PT Sinar
Jernih Sarana (SJS), an Indonesian company in the cleaning services business.
Aeon Delight resolved to conclude a conditional (pending the acquisition of licenses from relevant authorities) share transfer
agreement with SJS and acquire stock from the company. Through its medium-term plan Aeon Delight Vision 2025, Aeon Delight

71/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

is aiming for top sales in Asia and envisions becoming a company that creates environmental value and establishes “safety andsecurity,” “labor shortage,” and “environment” as key pillars of its growth strategy. Shared Research understands that this sharetransfer agreement, conducted within the ASEAN, resembles a successful agreement made in China (business expansion throughM&A with prominent local companies) and continues to observe related developments.

Summary
SJS has achieved rapid growth in Indonesia under its management, which has abundant experience in the facility management(FM) industry. It has expanded its business to such a scale that it recorded the second highest cleaning services sales in the
country (FY12/17 sales of IDR368.7bn [about JPY2.7bn at a rate of IDR1,000=JPY7.4], operating profit of IDR22.4bn [JPY170mn]).
Aeon Delight intends to utilize its expertise to spread the FM business approach in Indonesia, which boasts the largest market in
the ASEAN, and expand SJS’s business fields to include facilities management and security services, in addition to its current fieldof cleaning services. This expansion will allow for growth as an FM company. After the transfer, which is scheduled for December
3, 2018, Aeon Delight’s share in SJS will be 90%.
SJS
Earnings(IDRmn)Sales
Operating profit
Net income
IDR ('000)/JPY

FY12/15
233,470
10,6026,208
8.8% of sales
100.0%
4.5%
2.7%

FY12/16
274,817
13,9497,659
8.6% of sales
100.0%
5.1%
2.8%

FY12/17368,695
22,442
13,444
8.3% of sales
100.0%
6.1%
3.6%(JPYmn)Total assets
Net assets
ROE

FY12/15

FY12/16

FY12/17

14,24453,25822,142
74,06844,28699,278

11.7%

10.3%

13.5%

Source: Shared Research based on company data

72/74

R
Coverage

Aeon Delight / 9787
LAST UPDATE: 2019.06.28

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

Company profile
Company Name

Head Office
Minamisemba Heart Bldg.

AEON DELIGHT CO., LTD.

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

Phone

Listed On+81-6-6260-5621

Tokyo Stock Exchange 1st Section

EstablishedExchange Listing

November 16, 1972

September 29, 1995

WebsiteFiscal Year-End

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

February

IR Contact

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

73/74

R

About Shared Research Inc.

Coverage

Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp

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 found on the web at http://www.sharedresearch.jp.
Current Client Coverage of Shared Research Inc.
Accordia Golf Trust

FRONTEO, Inc.

NS TOOL CO., LTD.

ADJUVANT COSME JAPAN CO., LTD.

Fujita Kanko Inc.

OHIZUMI MFG. CO., LTD.

Aeon Delight Co., Ltd.

Gamecard-Joyco Holdings, Inc.

Oki Electric Industry Co., Ltd

Aeon Fantasy Co., Ltd.

GCA Corporation

ONO SOKKI Co., Ltd.

Ai Holdings Corporation

Good Com Asset Co., Ltd.

ONWARD HOLDINGS CO.,LTD.

and factory, inc.

Grandy House Corporation

Pan Pacific International Holdings Corporation

ANEST IWATA Corporation

Hakuto Co., Ltd.

PARIS MIKI HOLDINGS Inc.

AnGes Inc.

Happinet Corporation

PIGEON CORPORATION

Anicom Holdings, Inc.

Harmonic Drive Systems Inc.

RACCOON HOLDINGS, Inc.

Anritsu Corporation

HOUSEDO Co., Ltd.

Raysum Co., Ltd.

Apaman Co., Ltd.

IDOM Inc.

RESORTTRUST, INC.

ARATA CORPORATIONIGNIS LTD.

ROUND ONE Corporation

Arealink Co.,Ltd.

i-mobile Co.,Ltd.

RVH Inc.

Artspark Holdings Inc.

Inabata & Co., Ltd.

RYOHIN KEIKAKU CO., LTD.

AS ONE CORPORATION

Infocom Corporation

SanBio Company Limited

Ateam Inc.

Infomart Corporation

SANIX INCORPORATED

Aucfan Co., Ltd.

Intelligent Wave, Inc.

Sanrio Company, Ltd.

AVANT CORPORATION

ipet Insurance CO., Ltd.

SATO HOLDINGS CORPORATION

Axell Corporation

istyle Inc.

SBS Holdings, Inc.

Azbil Corporation

Itochu Enex Co., Ltd.

Seikagaku Corporation

AZIA CO., LTD.

JSB Co., Ltd.

Seria Co.,Ltd.

AZoom, Co., Ltd.

JTEC Corporation

SHIP HEALTHCARE HOLDINGS, INC.

BEENOS Inc.

J Trust Co., Ltd

SIGMAXYZ Inc.

Bell-Park Co., Ltd.

Japan Best Rescue System Co., Ltd.

SMS Co., Ltd.

Benefit One Inc.

JINS HOLDINGS Inc.

Snow Peak, Inc.

B-lot Co.,Ltd.

JP-HOLDINGS, INC.

Solasia Pharma K.K.

Broadleaf Co., Ltd.

KAMEDA SEIKA CO., LTD.

SOURCENEXT Corporation

Canon Marketing Japan Inc.

Kenedix, Inc.

Star Mica Holdings Co., Ltd.

Career Design Center Co., Ltd.

KFC Holdings Japan, Ltd.

Strike Co., Ltd.

Carna Biosciences, Inc.

KI-Star Real Estate Co., Ltd.

SymBio Pharmaceuticals Limited

CARTA HOLDINGS, INC

Kondotec Inc.

Synchro Food Co., Ltd.

CERES INC.

Kumiai Chemical Industry Co., Ltd.

TAIYO HOLDINGS CO., LTD.

Chiyoda Co., Ltd.

Lasertec Corporation

Takashimaya Company, Limited

Chugoku Marine Paints, Ltd.

LUCKLAND CO., LTD.

Take and Give Needs Co., Ltd.

cocokara fine Inc.

MATSUI SECURITIES CO., LTD.

Takihyo Co., Ltd.

COMSYS Holdings Corporation

Medical System Network Co., Ltd.

TEAR Corporation

CRE, Inc.

MEDINET Co., Ltd.

Tenpo Innovation Inc.

CREEK & RIVER Co., Ltd.

MedPeer,Inc.

3-D Matrix, Ltd.

Daiichi Kigenso Kagaku Kogyo Co., Ltd.

Mercuria Investment Co., Ltd.

TKC Corporation

Daiseki Co., Ltd.

Micronics Japan Co., Ltd.

TOKAI Holdings Corporation

DIC Corporation

Milbon Co., Ltd.

TOYOBO CO., LTD.

Digital Arts Inc.

MIRAIT Holdings Corporation

Toyo Tanso Co., Ltd.

Digital Garage Inc.

Monex Goup Inc.

Tri-Stage Inc.

Dream Incubator Inc.

MORINAGA MILK INDUSTRY CO., LTD.

VISION INC.

Earth Corporation

NAGASE & CO., LTD

VISIONARY HOLDINGS CO., LTD.

Elecom Co., Ltd.
en-Japan Inc.

NAIGAI TRANS LINE LTD.

WirelessGate, Inc.

NanoCarrier Co., Ltd.

YELLOW HAT LTD.

euglena Co., Ltd.

Net One Systems Co.,Ltd.

YOSHINOYA HOLDINGS CO., LTD.

Evolable Asia Corp.

Nichi-Iko Pharmaceutical Co., Ltd.

YUMESHIN HOLDINGS CO., LTD.

FaithNetwork Co., Ltd.

Nihon Denkei Co., Ltd.

Yume no Machi Souzou Iinkai Co., Ltd.

Ferrotec Holdings Corporation

Nippon Koei Co., Ltd.

Yushiro Chemical Industry Co., Ltd.

FIELDS CORPORATIONNIPPON PARKING DEVELOPMENT Co., Ltd.

ZAPPALLAS, INC.

Financial Products Group Co., Ltd.

NIPRO CORPORATIONFreeBit Co., Ltd.

Nisshinbo Holdings Inc.

Attention: If you would like to see companies you invest in on this list, ask them to become our client, or sponsor a report yourself.
Disclaimer: This document is provided for informational purposes only. No investment opinion or advice is provided, intended, or solicited. Shared Research Inc. offers
no warranty, either expressed or implied, regarding the veracity of data or interpretations of data included in this report. We shall not be held responsible for any damage
caused by the use of this report. The copyright of this report and the rights regarding the creation and exploitation of the derivative work of this and other Shared
Research Reports belong to Shared Research. This report may be reproduced or modified for personal use; distribution, transfer, or other uses of this report are strictly
prohibited and a violation of the copyright of this report. Our officers and employees may currently, or in the future, have a position in securities of the companies
mentioned in this report, which may affect this report’s objectivity.
Japanese Financial Instruments and Exchange Law (FIEL) Disclaimer: The report has been prepared by Shared Research under a contract with the company
described in this report (“the company”). Opinions and views presented are ours where so stated. Such opinions and views attributed to the company areinterpretations made by Shared Research. We represent that if this report is deemed to include an opinion by us that could influence investment decisions in thecompany, such opinion may be in exchange for consideration or promise of consideration from the company to Shared Research.
Contact Details
Shared Research Inc.
3-31-12 Sendagi Bunkyo-ku Tokyo, Japan
URL: https://sharedresearch.jp
Phone: +81 (0)3 5834-8787
Email: info@sharedresearch.jp

74/74