SR Research Report
2014/7/18

Aeon Delight Co., Ltd. (9787)
Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is
to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an
accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data andfindings. We will always present opinions from company management as such. Our views are ours where stated.
We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at
sr_inquiries@sharedresearch.jp or find us on Bloomberg.

Aeon Delight Co., Ltd. (9787)

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2014/7/18

Contents
Key financial indicators.............................................................................................3
Recent updates .......................................................................................................4
Highlights ............................................................................................................4
Trends and outlook ..................................................................................................5
Quarterly trends and results ..................................................................................5
Full-year (FY02/15) outlook ................................................................................. 10
Outlook ............................................................................................................. 12
Business ............................................................................................................... 17
Business description ........................................................................................... 17
Market and value chain ....................................................................................... 28
Strategy ............................................................................................................ 32
Historical financial statements ................................................................................. 34
Summary .......................................................................................................... 34
Income statement .............................................................................................. 43
Balance sheet .................................................................................................... 45
Statement of cash flows...................................................................................... 47
Other information .................................................................................................. 48
History .............................................................................................................. 48
News & topics .................................................................................................... 48
Major shareholders ............................................................................................. 50
Top management ............................................................................................... 50
Employees ......................................................................................................... 50
Investor relations ............................................................................................... 50
By the way ........................................................................................................... 51
Company profile ................................................................................................. 53

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Aeon Delight Co., Ltd. (9787)

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Key financial indicators
Income Statement(JPYmn)Total Sales

FY02/10Cons.
140,299

FY02/11
Cons.
170,905

FY02/12Cons.
219,797

FY02/13Cons.
248,876

FY02/14Cons.
257,243

FY02/15
Est.
270,000
5.0%

YoY

-3.7%

21.8%

28.6%

13.2%

3.4%

Gross Profit

21,11823,98928,63130,22733,714

YoY
GPM

0.8%
15.1%

13.6%
14.0%

19.4%
13.0%

5.6%
12.1%

11.5%
13.1%

9,970

12,031

13,762

13,901

15,11516,000

0.2%
7.1%

20.7%
7.0%

14.4%
6.3%

1.0%
5.6%

8.7%
5.9%

5.9%
5.9%

9,912

12,08913,784

13,892

15,092

16,000

1.0%
7.1%

22.0%
7.1%

14.0%
6.3%

0.8%
5.6%

8.6%
5.9%

6.0%
5.9%

Operating Profit
YoY
OPM

Recurring Profit
YoY
RPM

Net Income

5,466

6,495

6,912

7,509

8,161

8,600

YoY
Net Margin

12.1%
3.9%

18.8%
3.8%

6.4%
3.1%

8.6%
3.0%

8.7%
3.2%

5.4%
3.2%

41,400
137.8
137.6
27.0
787.8

54,170
142.6
142.3
39.0
1,005.6

54,170
131.8
131.5
40.0
1,095.6

54,170
143.2
142.7
46.0
1,202.4

54,170
155.5
155.2
48.0
1,324.8

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

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

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

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

12,56590,347
4,258
5,829
11,687112,122
26,701
5
39,30601,500
40,806
71,316
5

7,031-1,966-4,1696,808-3,000-1,321

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

21,359-16,632-2,475

11.2%
18.9%
64.2%

9.7%
15.5%
62.3%

7.8%
12.5%
61.9%

7.8%
12.5%
62.6%

7.7%
12.3%
62.0%

Per Share Data
Number of Shares
EPS
EPS (Fully Diluted)
Dividend Per ShareBook Value Per Share
Balance Sheet (JPYmn)
Cash and Equivalents
Total Current Assets
Tangible Fixed Assets, net
Other Fixed Assets
Intangible Assets
Total Assets
Accounts Payable
Short-Term Debt
Total Current Liabilities
Long-Term Debt
Total Fixed Liabilities
Total Liabilities
Net Assets
Interest-Bearing Debt
Cash Flow Statement (JPYmn)
Operating Cash Flow
Investment Cash Flow
Financing Cash Flow
Financial Ratios
ROA
ROE
Equity Ratio

163.8
50.0

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

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Recent updates
Highlights
On July 18, 2014, Shared Research updated comments on Aeon Delight Co., Ltd.’s earnings results forQ1 FY02/15 following interviews with management; see the results section for details.

On July 2, 2014, the company announced Q1 FY02/15 results.

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

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Trends and outlook
Quarterly trends and results
FY02/13
FY02/14
FY02/15(JPYmn)
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
58,584 68,187 65,620 56,485 66,711 66,841 61,256 62,435 66,475
Sales
YoY
10.6% 19.7% 19.0% 3.2% 13.9% -2.0% -6.7% 10.5% -0.4%
GP
6,984 7,998 7,790 7,455 8,173 8,808 7,984 8,749 8,306
YoY
3.0% 3.5% 10.5% 5.3% 17.0% 10.1% 2.5% 17.4% 1.6%
GPM
11.9% 11.7% 11.9% 13.2% 12.3% 13.2% 13.0% 14.0% 12.5%
SG&A
3,890 3,979 4,500 3,957 4,782 4,624 4,589 4,604 4,766
YoY
5.4% 2.1% 16.8% 15.5% 22.9% 16.2% 2.0% 16.4% -0.3%
SG&A / Sales
6.6% 5.8% 6.9% 7.0% 7.2% 6.9% 7.5% 7.4% 7.2%
OP3,093 4,020 3,289 3,499 3,390 4,185 3,395 4,145 3,540
YoY
0.2% 5.0% 2.9% -4.1% 9.6% 4.1% 3.2% 18.5% 4.4%
OPM
5.3% 5.9% 5.0% 6.2% 5.1% 6.3% 5.5% 6.6% 5.3%
RP3,102 4,022 3,288 3,480 3,403 4,168 3,411 4,110 3,558
YoY-1.2% 4.9% 2.4% -3.3% 9.7% 3.6% 3.7% 18.1% 4.6%
RPM
5.3% 5.9% 5.0% 6.2% 5.1% 6.2% 5.6% 6.6% 5.4%
NI
1,786 2,158 1,561 2,004 1,858 2,289 1,657 2,357 2,015
YoY
4.8% 7.3% -1.0% 23.7% 4.0% 6.1% 6.1% 17.6% 8.4%
NPM
3.0% 3.2% 2.4% 3.5% 2.8% 3.4% 2.7% 3.8% 3.0%

FY02/15% of 1H1H Est.
49.6% 134,000
0.3%

FY02/15% of FY FY Est.
24.6% 270,000
5.0%

46.6%

22.1% 16,000
5.9%
5.9%
22.2% 16,000
6.0%
5.9%
23.4% 8,600
5.4%
3.2%

46.8%

48.6%

7,600
0.3%
5.7%
7,600
0.4%
5.7%
4,150
0.1%
3.1%

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

Q1 FY02/15 Results (out July 2, 2014; see the preceding table)
Key points for Q1 FY02/15
Spread of comprehensive FMS
Although results were affected by a rush in demand prior to the consumption tax hike and a pullback
afterward, demand for comprehensive facility management services (FMS) proved to be a stabilizing
factor, and results were in line with forecasts.
Decrease of 0.4% YoY in sales primarily caused by completion of LED projects
Sales were down 0.4% YoY primarily as a result of LED installations at Aeon Group locations reachingcompletion in the Construction Work segment. However, other segments showed YoY growth, andoperations other than LED installations in the Construction Work segment also had higher sales.
Record quarterly profit through improving productivity and cost controls
Through continued advances in productivity throughout the organization and appropriate cost controls,
operating profit was at a record level on a quarterly basis.
Structural reforms to achieve medium term plan results are scheduled to be complete by Q2
A new organizational structure will be in place to begin operation from 2H FY02/15 onward. The company
will pay particular attention to strengthening sales activities for solutions to revitalize aging buildings.
Aeon Delight has also established an energy conservation system headquarters to concentrate on sales
outside of the Aeon group.

Comprehensive FMS in Asia
In order to accelerate growth for comprehensive FMS in Asia, the company established networks invarious regions throughout Asia, gained knowledge in quality assurance, and made progress on green
technologies. The number of projects in China expanded to 140, Malaysia to 47, and Vietnam to 58.

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Many of the 58 projects in Vietnam are small, irregular projects, and contribution to earnings is limited.
However, past results show that irregular projects often lead to recurring business.
Number of projects overseas
250

200

150

100

50

-

Q1 FY02/12

Q2

Q3

Q4

Q1 FY02/13

Q2

China

Q3

Q4

Malaysia

Q1 FY02/14

Q2

Q3

Q4

Q1 FY02/15

Q4
10,7905.0%
1,120-10.8%
10.4%

FY02/15Q1
11,2285.7%
1,029-10.6%
9.2%

Vietnam

Source: Company data

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

Q1
10,371-2.0%
1,105-16.0%
10.7%

FY02/13Q2
Q3
10,753
10,646
0.4%
1.0%
1,220
1,080
-8.8%
-15.2%
11.3%
10.1%

Q4
10,280
-0.3%
1,256
8.7%
12.2%

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

FY02/14Q2
Q3
10,848 11,198
0.9%
5.2%
1,266
1,188
3.8% 10.0%
11.7% 10.6%

Q2

Source: Company data

New store openings in major shopping centers and higher sales of BEMS machinery
In addition to contracts for new openings of major shopping centers, sales of building energy
management system (BEMS) machinery were up. Aeon Delight also focused on sales of energy-saving
materials after analysis of BEMS data in existing installations. As a result, BEMS received high marks for its
energy savings from clients where it had been installed on an experimental basis. On a nationwide level,
it is notable that the Aeon Delight was successful in acquiring BEMS contracts for clients that had
previously contracted with a competitor. Earnings from BEMS systems are limited, coming mostly frommachinery sales and consultant fees. However, they help build long term relationships with clients.
Improved energy solutions sales structure to come into effect in 2H
Aeon Delight is building ESCO (Energy Service Company), a combined facilities management service, tobolster the energy solutions business. The company aims to grow earnings, including equipment leasing
fees, by promoting ESCO for facilities upgrades at commercial facilities.
In Q2, Aeon Delight completed an overhaul of its organization in preparation for the midterm plan. The
new structure will come into full effect in 2H. Improvements to the solutions business are aimed at
capturing demand for upgrades to outdated commercial facilities, including energy-saving construction.
The company plans to create an energy-saving systems department to increase sales to outside the group.
Shared Research thinks progress in the solutions business may affect earnings.
OPM down as contracts up from major shopping centers and Windows XP expenses increase
Sales were up, but operating profit was down. OPM was down 1.6pp YoY, from 10.8% to 9.2%.

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There are upfront costs before opening on new orders for commercial facilities. Contracts for major
shopping centers tend to result in lower margins, as profitability may be lower than small and midsize
ones. It appears half the fall in OPM was due to an increase in contracts for major shopping centers, andhalf was due to upgrade costs for PCs as support for Windows XP ended. The company has not disclosed
figures, but it appears GPM outperformed initial targets for Q1. The targets anticipate GPM improving
each quarter from Q1 through Q3.

Securities services
Securities services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,898
-3.8%
601
-13.4%
7.6%

FY02/13
Q2
Q3
7,909
7,966
-1.0%
-0.7%
669
656
-3.0%
-5.1%
8.5%
8.2%

Q4
8,032
0.2%
766
2.4%
9.5%

Q1
8,438
6.8%
642
6.8%
7.6%

FY02/14
Q2
Q3
8,367
8,481
5.8%
6.5%
700
761
4.6% 16.0%
8.4%
9.0%

Q4
8,956
11.5%
762
-0.5%
8.5%

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

Q2

Source: Company data

In addition to new contracts, “attender” services that involve female security guards also acting as
information providers were also an area of focus for the company’s sales. The service has also been
introduced in China and Vietnam. It has been praised by clients within Japan and overseas for its ability toincrease both customer service quality and security of facilities. But the service’s share of total sales
remains small, despite higher added-value than regular services. Aeon Delight aims to use the service togain a competitive edge and drive up sales across the securities services segment.

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

Q1
10,122
1.7%
1,441
2.1%
14.2%

FY02/13Q2
Q3
10,084
10,205
2.1%
1.8%
1,508
1,446
6.1%
-3.7%
15.0%
14.2%

Q4
10,108
1.2%
1,523
-1.6%
15.1%

Q1
10,539
4.1%
1,397
-3.1%
13.3%

FY02/14Q2
Q3
10,485 10,642
4.0%
4.3%
1,404
1,425
-6.9%
-1.5%
13.4% 13.4%

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

FY02/15Q1
10,942
3.8%
1,469
5.2%
13.4%

Q2

Source: Company data

New department and a standardized model for more productive cleaning services
In March 2014, Aeon Delight established the cleaning services improvement department. The new
department is tasked with analysis of expended man hours and process methods. In Q1, the company
implemented a system of assigning area managers to specific regions across Japan to increase quality
and standardize efficient cleaning methods for directly managed centers.
Issues remain, but some directly managed stores have achieved gross margins over 10pp above theaverage. As of June, the company is only halfway toward targets, but it is working to resolve issues fromQ2 onward. In order to cut the time spent on such issues, the company plans to implement thestandardized model at contractors concurrently, while also working to improve it.
Aeon Delight anticipates higher GPM from Q3. But it appears GPM was up in Q1, outperforming thetarget; OPM was also up 0.1pp YoY.

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Creating a hygiene management model for hospitals and elsewhere
Additionally, at medical facilities such as hospitals, cleaning areas are categorized according to the level ofcleanliness, and differing supplies are used depending upon the zone. This is to prevent crosscontamination and to provide baseline data for a hygiene management system. The above measures
were all part of the company’s efforts to create a hygienic model to reduce or eliminate bacteria, andprovide a clean environment.

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

Q1
11,081
96.4%
461
30.6%
4.2%

FY02/13Q2
Q318,884
15,767126.8%
121.7%
796
450
23.6%
-1.7%
4.2%
2.9%

Q4
7,339
-1.3%
502
4.4%
6.8%

Q1
15,888
43.4%
851
84.6%
5.4%

FY02/14Q2
Q3
13,9298,254-26.2% -47.7%
764
474
-4.0%
5.3%
5.5%
5.7%

Q4
7,559
3.0%
491
-2.2%
6.5%

FY02/15Q1
11,858-25.4%
741-12.9%
6.2%

Q2

Source: Company data

Sales fell significantly as a result of the completion of LED installation projects within the Aeon group,
which had been ongoing for the past two years. Construction work that was unrelated to LED installations
was robust, such as renovation work on older buildings, and updates to heat sources for central
ventilation systems, and these unrelated activities demonstrated YoY sales gains. Renovation sales wereparticularly robust.
OPM improved as sales fell, mainly because margins are low on LED related projects.

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

Q1
9,525
5.1%
273
6.2%
2.9%

FY02/13Q2
Q3
9,769
10,057
4.5%
7.3%
320
381
-21.8%
41.6%
3.3%
3.8%

Q4
Q1
9,933 10,721
11.1% 12.6%
488
573
63.2% 109.9%
4.9%
5.3%

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

Q4
11,257
13.3%
591
21.1%
5.3%

FY02/15Q1
11,7139.3%
464-19.0%
4.0%

Q2

Source: Company data

Aeon Delight grew sales as a purchasing agent for many clients, mainly retailers focused on central Japanand Shikoku, and nationwide amusement facility operators. The company also worked to improvemargins by using electronic negotiation tools to cut procurement and logistics expenses for equipment
and materials.
Although sales were up, operating profit fell. This was mainly because low margin sales of food packaging
materials were up, changing the composition of sales by product.

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Vending machine services
Vending machine services(JPYmn)Sales
YoY
Operating profit
YoY
OPM

Q1
7,508
-4.0%
454
-8.5%
6.0%

FY02/13
Q2
Q3
8,571
7,419
-2.1%
-5.9%
728
432
9.8%
-5.9%
8.5%
5.8%

Q4
7,702
-1.6%
782
9.8%
10.2%

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

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

FY02/15
Q1
8,330
11.1%
551
3.0%
6.6%

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

Q2

Source: Company data

Vending machines installed in FY02/14 contributed to sales. Efforts to bolster sales also had an effect,
including added-value vending machines such as those that accept e-money, and the development ofprivate brand (PB) drinks specifically for vending machines.
Sales increased significantly, although this was partly due to sales to Daiei, Inc., now a member of the
Aeon group. OPM was down due to the consumption tax hike.

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

Q1
2,072
23.0%
40
1.9%

FY02/13
Q2
Q3
2,218
3,509
13.5%
62.4%
191
293
33.2%
8.6%
8.3%

Q4
3,024
38.7%
-20
-0.7%

Q1
2,964
43.1%
77
92.5%
2.6%

FY02/14
Q2
Q3
3,433
3,604
54.8%
2.7%
323
312
69.1%
6.5%
9.4%
8.7%

Q4
3,550
17.4%
117
3.3%

FY02/15
Q1
3,460
16.7%
308
300.0%
8.9%

Q2

Source: Company data

Mail order event sales were robust, owing to the development and sale of planned travel (group tours
round Japan and the like) for senior citizens at Aeon Compass Co., Ltd. At Kajitaku Co., Ltd., the numberof Kaji Cloud housework services packages sold was up by 2.5x, contributing to higher sales and margins
in the support services segment as a whole.

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

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Full-year (FY02/15) outlook
FY02/15 Forecasts(JPYmn)
Sales
YoY
CoGS
Gross Profit
YoY
GPM
SG&A
SG&A / Sales
Operating Profit
YoY
OPM
Recurring Profit
YoY
RPM
Net Income
YoY

FY02/141H
133,552
5.3%
116,570
16,981
13.3%
12.7%
9,406
7.0%
7,575
6.5%
5.7%
7,571
6.3%
5.7%
4,147
5.1%

2H
123,691
1.3%
106,958
16,733
9.8%
13.5%
9,193
7.4%
7,540
11.1%
6.1%
7,521
11.1%
6.1%
4,014
12.6%

Full-Year
257,243
3.4%
223,528
33,714
11.5%
13.1%
18,5997.2%
15,1158.7%
5.9%
15,092
8.6%
5.9%
8,161
8.7%

1H Est.
134,000
0.3%

FY02/15
2H Est.
136,000
10.0%

FY Est.
270,000
5.0%

7,600
0.3%
5.7%
7,600
0.4%
5.7%
4,150
0.1%

8,400
11.4%
6.2%
8,400
11.7%
6.2%
4,450
10.9%

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

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

FY02/15 marks the first year of a new medium term plan. Targets for the plan are sales of JPY270.0bn (up
5% compared to FY02/14) and operating profit of JPY16.0bn (up 5.9%).
Plan incorporates uncertainty over the consumption tax hike and increases in labor costs
Although the average growth in sales is 8.7% per year for the three years covered by the medium termplan, the goal for the first year will be a 5% rise. The company is remaining cautious, citing uncertainty
over the effect that the April consumption tax increase will have on consumer spending and overall sales,and effects of rising labor costs on profits.
Three main policies will be the focal points for FY02/15:
1. Reforming operational structure in Japan and Asia;
2. Establishing a combined cleaning services and facilities management ESCO business;
3. Strengthening management foundations.
The first two points are detailed below.
Reforming operational structure
As described in the medium term plan, thorough implementation of the solutions business will cause theoperational structure will undergo reform to transition from a product out model to a market in model.
The company is currently aiming to implement a structure which categorizes operations by customer andindustry, and also created a new division which aims to acquire customers from the medical and nursing
facilities sector, areas that Aeon Delight view with increasing importance. Plans are also underway tocontinue development of existing IT systems to create databases via IT investment, with the intent of
increasing monitoring capacity for customers and industries.
Establishing a combined cleaning services and facilities management ESCO business
The cleaning services and facilities management businesses are both areas in which the company has
determined to place additional corporate resources, as stated in its medium term plan. Concerning thecleaning services business, a standardized cleaning model will be established in FY02/15, the first year of
the plan, and Aeon Delight will aim to improve profitability by using this standardized model at both its
directly operated stores and outsourcing partners.
In FY02/14, the company established a separate department tasked with making improvements to the

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cleaning services business. Five domestic area managers will lead a process to improve operational
efficiency at the company’s 93 directly operated stores. Aeon Delight will first assemble a standardized
cleaning model at its directly operated stores, and beginning in August FY02/15, move to implement thismodel across its outsourcing partners, which compose approximately 80 to 90 percent of its cleaning
services business.
The company is aiming for these initiatives to have the following effects during FY02/15: a JPY300mn
improvement at directly operated stores for the nine months beginning in June, and a JPY200mn
improvement at its outsourcing partners for the seven months beginning in August, for a total of
JPY500mn. Over 30,000 persons are involved in the cleaning services business, and there is currently alarge discrepancy in profitability between different directly operated stores and outsourcing partners. As
part of its medium term plan, Aeon Delight is targeting a 25% improvement in efficiency to create a leaner,more profitable operational structure at directly operated stores and outsourcing partners with low
profitability.
Concerning the ESCO business, BEMS facilities will be installed at all MaxValu retail locations of the Aeon
Group during FY02/15, and energy management is planned to commence in May 2014.

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OutlookIn April 2014, Aeon Delight announced a new medium term plan, with FY02/17 as the final year. Targets
for FY02/17 include sales of JPY330.0bn or more, operating profit of JPY21.0bn or more, and an operating
profit margin of 6.4% or greater. The company aims to reduce its reliance on the Aeon Group and expand
its overseas reach, setting sales composition targets of 35% and 10% for the two respective categories.
In light of recent employment trends, personnel expenses are expected to rise 2% per year.
The framework for the medium term plan involves:
1. Establishing comprehensive FMS (Creating competitive advantages);
2. Creating inroads into the Asian market;
3. Establishing a foundation for business.
In order to secure prospects for growth in the medium to long term, the company views its cleaning
services and energy solutions businesses as growth drivers. Aeon Delight will allocate significant amountsof management resources to these areas.

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 wascomposed of M&A activity. However, the new plan does not include any M&A, and instead is focused on
digging deeper into existing revenue sources.

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

Sales toward domestic Aeon Group companies
Aeon Delight believes that there is about JPY50.0bn of potential for contracts with domestic Aeon Group
companies. In order to acquire these contracts, the company is in the process of an organizational
restructuring, which includes 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 andsmall sized companies were not given adequate amounts of attention. Aeon Delight hopes to capitalize on
these previously untapped group companies.

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

200

150

100

50

-

Q1 FY02/12

Q2

Q3

Q4

Q1 FY02/13

China

Q2

Q3

Malaysia

Q4

Q1 FY02/14

Q2

Q3

Q4

Q1 FY02/15

Vietnam

Source: Company data

In the Asian market, the company has established a presence in China and ASEAN nations, and is seeking
JPY30.0bn in sales from these areas by FY02/17. The above areas accounted for about 2% of sales in
FY02/14. The number of facilities sourced to Aeon Delight were: China, 136; Malaysia, 45; Vietnam, 23.
China is the dominant contributor to sales at 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-scale
shopping centers (SCs) in Asian countries such as China, Vietnam, and Indonesia. Aeon Delight is aiming
to capture opportunities for its comprehensive FMS business, and believes that the Aeon Group’s
investments will provide further opportunities for overseas sales growth.

Establishing a federalized management structure in China and a comprehensive FMS
menu in the ASEAN region
During the previous medium term plan, the company strengthened its business fundamentals throughacquisitions of promising local firms in China and the ASEAN nations. Two focal points of the new medium
term plan are establishing a federalized management structure in China, and a comprehensive FMS menu
in the ASEAN region.
Under the medium term plan, Aeon Delight will continue to press forward with its strategy of acquiringpromising local firms. In addition to current acquisitions in Beijing, Tianjin, Jiangsu, Hubei, andGuangdong, 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 and partnerships with major
players in local markets, and the company is moving to further solidify this strategy.

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Expansion in China will revolve around the company differentiating itself via strengths in areas such as the
ESCO business and elevator 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 the medium 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 in the three businesses of cleaning
services, vending machines, and energy conservation in Malaysia. In Vietnam, the company will enhance
its services lineup and bolster its sales activities to both Japanese and foreign firms. Plans are also in placefor expansion into Cambodia, Singapore, and Indonesia.

Domestic sales excluding the Aeon Group: 35% of sales to outside of the Aeon Groupby FY02/17
As of FY02/14, the percentage of sales that occurs outside of the Aeon Group was 31%. Aeon Delightaims to raise this figure to 35% by the end of FY02/17, and to 40% over the long term. Players in thecomprehensive FMT market outside of the Aeon Group have not solidified, and there remains room for thecompany to enter the market with its unique expertise. Aeon Delight will continue to expand its reach inacquiring 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 shareoutside of the Aeon Group. To this end, the company also plans to restructure fundamental businessprinciples such as sales, business development, employee training, and IT investment.

Establishing comprehensive FMS (Creating competitive advantages)
One of the focal points of the medium term plan is establishing comprehensive FMS and creatingcompetitive advantages. In order to find new opportunities for growth, the plan calls for concentration ofmanagement resources in the cleaning services and energy solutions businesses. Although a degree of
uncertainty exists in the environment surrounding comprehensive FMS owing to expansion of large
western FM firms into Japan for the 2020 Tokyo Olympic Games, demand is strong. New sources ofdemand are led by hospitals and nursing care facilities.
Strengthening the cleaning services business
In FY02/14, the cleaning services business saw sales of JPY42.3bn (16.5% of total sales), operating profitof JPY5.7bn (25%, excluding eliminations, amortization of goodwill, and corporate expenses), andoperating 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 withnationwide hospital networks are eager to implement management reforms, and Aeon Delight believes
that comprehensive FMS is a good fit to match these customers’ needs in improving sanitation,

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environmental conditions, safety, peace of mind, service improvement, and cost reductions.
Expanding into new areas: taking on major nationwide hospital groups
Through the organizational restructuring described below in FY02/15, the company has created aframework to tackle different industries, such as hospitals, with differing strategies for each. It has alsochanged 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 themarket. Budgets are also no longer set at business headquarters, but are set based on proposals fromindividual sales departments, which are more in tune with the unique needs of each customer andmarket.
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 andsterilization techniques are essential. Aeon Delight does not hesitate to partner with European firms anduniversities, which harbor advanced technology in areas such as these. The company states that it has
already partnered with a Swiss university. Although M&A will be an essential component of reaching
JPY180.0bn in sales by FY02/21, it appears that the company has already determined, to an extent,
targets for future alliances.
Improving gross profit margin by establishing a standardized cleaning model
Aeon Delight has set a goal of improving the gross profit margin of its cleaning services business over
10% by FY02/21. Developing high value-added services is an integral component, but the company
believes that improvements to its cost structure will yield the largest gains. The cleaning services businessis the segment with the highest operating profit margin (13.5% in FY02/14), but the company believes
that there is still room for improvement.
To this end, the company is aiming, for the second time, to develop a standardization model (standardized
quality based upon the optimal amount of labor input). An attempt was made in FY02/10, but after four
years of use, its utility decreased, and a reassessment was deemed necessary.
Between 80-90% of sales are outsourced to external firms, and Aeon Delight is only directly involved with
10-20%. However, the profit composition is over 20%, and there is a large variation in margins between
different offices. As such, the company decided to share its expertise with its outsourcing partners on
methods to achieve high margins. The company also improved cost structures at its internal offices thatwere suffering from low margins. Through the above efforts, Aeon Delight expects its gross profit margin
to rise. By increasing productivity for the roughly 30,000 persons employed in its cleaning services, thecompany will improve profitability as a whole. By reassessing its CoGS 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 business and 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 tojoin with other companies in developing a business selling electricity are also under consideration, aheadof expected liberalization of the electricity market in 2016.
ESCO business
The ESCO business will be increasingly integrated into the combined facilities management ESCO

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business. Although competition is fierce, the company has strengths in its energy conservation
technologies in building maintenance. Without merely stopping with installation of control equipment, thecompany stated that energy savings of 10-15% are possible through addition of its unique facilities
management expertise. Aeon Delight aims to expand its business by leveraging strengths such as thoseabove.
Energy management for the Aeon Group
According to Aeon’s environmental sustainability report, a combined 2,113mn kWh was utilized in
FY02/13 by Aeon Retail, six MaxValu companies, Aeon Super Center, and Aeon Big. Assuming a rate of
JPY22 per kWh, this equates to JPY46.5bn in electrical costs for the year. Adding electrical fees for othergroup companies will increase this figure even further, and at the Aeon Group’s FY02/14 resultspresentation, electricity costs for the group were stated to be in excess of JPY80.0bn (within the Kansai
Electric Power [TSE1:9503] area, Aeon’s power usage is second only to the West Japan Railway Company[TSE1:9021]). Through management of this extremely high amount of electrical use, the Aeon Delightwill not only be able to reduce the Aeon Group’s electrical footprint, but also expand and acquire
expertise.

Building an organizational baseTo successfully implement the above initiatives outlined in the medium term plan, building anorganizational base is outlined as one of the top priorities. The following three points are seen as focal
points:1. Active business development and organizational restructuring with solutions-based sales in mind;
2. HR development with an emphasis on service quality;
3. IT investment to realize corporate growth and a small headquarters.
In order to proceed with the cleaning services and energy solutions businesses as stated above, thecompany will consolidate and restructure 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 todevelop 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.

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Business
Business description
Aeon Delight is providing maintenance services for retail facilities and office buildings. The company,
formerly known as Japan Maintenance (a subsidiary of MyCal Corp.), was established mainly to undertake
maintenance at Mycal stores in November 1972. Mycal filed for bankruptcy in September 2001 (delisted
on September 17, 2001), and became a subsidiary of Aeon in 2003. Japan Maintenance merged with
Aeon Techno Service and the name was changed to Aeon Delight in September 2006. As of FY02/13, thecompany derives 65% of sales and 70% of operating profit from Aeon Retail Co., Ltd. and other Aeon
group companies.
Aeon Delight handles between 80% and 90% of the facilities management work required by Aeon Retail,and about 65% of such work required by Aeon Mall Co., Ltd. (TSE1: 8905). Facilities management work at
Aeon Mall was previously done by a subsidiary of Diamond City, a Mitsubishi Corp. (TSE1: 8058) affiliate
absorbed by Aeon Mall in 2007. Aeon Delight also handles between 60% and 70% of the facilities
management work at MaxValu retail stores owned the Aeon.
Aeon Delight is a subsidiary of Aeon, a comprehensive retail operator. Aeon was established in 1926 andmoved to a holding company format in order to generate group synergies in August 2009. The Aeon
group consists of “Aeon” flagship general merchandise stores (Aeon Retail), “MaxValu” supermarkets,“Aeon” shopping centers and malls (Aeon Mall). The company is not only looking to develop its own
shopping centers, but also to build its business in facilities management, which will contract managementof retail facilities developed by other companies. Aeon has been expanded into Hong Kong, Thailand, andMalaysia, and will also expand more broadly in ASEAN countries including Taiwan, Indonesia, China,
Vietnam and Cambodia.

M&A activities
Aeon Delight has pursued growth through acquisitions. In May 2007, the company established a businessalliance with A to Z Service Co., Ltd., maintenance service provider for small commercial facilities, andraised its stake in the company to 54.8% from 20.4% in May 2011. A to Z Service specializes inmaintenance services to convenience stores and fast food restaurants. Clients include McDonalds Japan(JASDAQ: 2702), Komeri (TSE1: 8218), and Seiyu. A to Z Service contributes roughly 5 billion yen in sales,
but operating profit margin is low at around 3%.
The company took a 90% stake in Kajitaku Co., Ltd., a provider of cleaning, laundry and other household
services in April 2011. Kajitaku adds about 500 million yen to 600 million to Aeon Delight’s top line, andstrengthened its expansion into the household segment. It acquired a 40% stake in Kankyouseibi Co., Ltd.,
operator of maintenance services for large-scale buildings in October 2008, and a 40% stake in Do
Service Co., Ltd., a building maintenance services operator in western Japan in April 2009.
It also acquired Certo Corp., a provider of office supplies and operator of soft drink beverage vending
machines in September 2010, and its subsidiary in Beijing, renamed the entity Aeon Delight (Beijing)
Commerce Co., Ltd. in September 2010.
In April 2011, the company acquired 90% of Kajitaku Co., Ltd., a provider of house cleaning andcondominium concierge services. In October 2012, it acquired a 55% stake in a domestic travel services
company and renamed it Aeon Compass Co., Ltd. The company also bought 51% of General Services Inc.,a business-process outsourcing company.

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

Business overview
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).
(JPYmn)Sales
Facilities Management
Security Services
Cleaning Services
Construction Work
M aterials/S upplies S ourcing S erv ices

Vending Machine Services
Support Services
Other

YoY
Facilities Management
Security Services
Cleaning Services
Construction Work
M aterials/S upplies S ourcing S erv ices

Vending Machine Services
Support Services

FY2/11
170,905
40,01932,08841,142
16,42018,71817,1885,271
56

FY2/12219,797
42,14732,23539,85228,51336,73032,2807,980
57

FY2/13248,876
42,05031,80540,51953,071
39,284
31,20010,823119

FY2/14257,243
43,45834,24242,32045,63044,54333,32913,551
167(JPYmn)OP
Facilities Management
Security Services
Cleaning Services
Construction Work

21.8%
-1.2%
-6.3%
-6.4%
18.2%
-4.3%
2.4%
-

28.6%
5.3%
0.5%
-3.1%
73.6%
96.2%
87.8%
51.4%

13.2%
-0.2%
-1.3%
1.7%
86.1%
7.0%
-3.3%
35.6%

3.4%
3.3%
7.7%
4.4%
-14.0%
13.4%
6.8%
25.2%

OPM
Facilities Management
Security Services
Cleaning Services
Construction Work

M aterials/S upplies S ourcing S erv ices

Vending Machine Services
Support Services
Other

M aterials/S upplies S ourcing S erv ices

Vending Machine Services
Support Services

FY2/11
12,031
5,115
2,764
5,937
1,214
627
1,480
375
215
-5,698

FY2/12
13,762
5,084
2,823
5,882
1,936
1,234
2,330
156
156
-5,843

FY2/13
13,901
4,661
2,692
5,918
2,209
1,462
2,396
504
237
-6,180FY2/14
15,115
4,725
2,865
5,716
2,580
2,333
3,068
829
331
-7,334

7.0%
12.8%
8.6%
14.4%
7.4%
3.3%
8.6%
7.1%

6.3%
12.1%
8.8%
14.8%
6.8%
3.4%
7.2%
2.0%

5.6%
11.1%
8.5%
14.6%
4.2%
3.7%
7.7%
4.7%

5.9%
10.9%
8.4%
13.5%
5.7%
5.2%
9.2%
6.1%

Source: Company materials, SR research

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

Facilities management(JPYmn)
Sales
YoY
OP
YoY
OPM

FY2/11

FY2/12

FY2/13

FY2/1443,4583.3%

FY2/14
1Q
10,6222.4%

40,019-1.2%

42,147
5.3%

42,050-0.2%

2Q
10,8480.9%

3Q
11,198
5.2%

4Q
10,790
5.0%

5,115
12.8%

5,084
-0.6%
12.1%

4,661
-8.3%
11.1%

4,725
1.4%
10.9%

1,151
4.2%
10.8%

1,266
3.8%
11.7%

1,188
10.0%
10.6%

1,120
-10.8%
10.4%

Source: Company materials, SR researchThis 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

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clients. This is a staple business for Aeon Delight, and licensed technicians (such as electricians) are on
standby at all times in large-scale shopping centers. Specifically, the company manages utilities such as
electricity, water, and gas, HVAC (operations, repairs, construction, and required inspections), exit 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 the company are personnel costs and facilities management costs (waterand utilities costs and depreciation). The company puts personnel on-site at large retail facilities, whilesmaller facilities are visited periodically and monitored remotely.

Security services(JPYmn)
Sales
YoY
OP
YoY
OPM

FY2/11

FY2/12

FY2/13

FY2/1434,242
7.7%

FY2/14
1Q
8,438
6.8%

32,088-6.3%

32,2350.5%

31,805
-1.3%

2Q
8,367
5.8%

3Q
8,481
6.5%

4Q
8,956
11.5%

2,764
8.6%

2,823
2.1%
8.8%

2,692
-4.6%
8.5%

2,865
6.4%
8.4%

642
6.8%
7.6%

700
4.6%
8.4%

761
16.0%
9.0%

762
-0.5%
8.5%

Source: Company materials, SR researchThis segment provides comprehensive security services (i.e., security for facilities, security to handle
crowds and traffic, and protection of valuable goods). By combining manual labor and the latest advancesin 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. Gross profit 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 are female security guards that also provide information services to patrons. This
service was started in an effort to shed the old “security guard” image and provide a more hospitableenvironment. As of FY02/14, approximately 30 guards are stationed at 17 stores. Due to demand fromclients, a new project team was established in March 2014, and plans call for 100 staff members at 53
stores by FY02/15. Although costs will arise from staff training, this business provides high added value,
and is one to watch.
Also beginning in 2H FY02/12, “cockpit” security robots have been stationed to aid in security activities.
As of FY02/14, this program is still in the testing phase, but owing to these robots, facilities that
previously required five person teams now only require three guards.

Cleaning services(JPYmn)
Sales
YoY
OP
YoY
OPM

FY2/11

FY2/12

FY2/13

FY2/1442,3204.4%

FY2/14
1Q
10,5394.1%

41,142-6.4%

39,852-3.1%

40,5191.7%

2Q
10,485
4.0%

3Q
10,642
4.3%

4Q
10,654
5.4%

5,937
14.4%

5,882
-0.9%
14.8%

5,918
0.6%
14.6%

5,716
-3.4%
13.5%

1,397
-3.1%
13.3%

1,404
-6.9%
13.4%

1,425
-1.5%
13.4%

1,490
-2.2%
14.0%

Source: Company materials, SR research

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With an eye to extending the longevity of buildings and facilities, Aeon Delight also places heavy influenceon training staff to provide service in a friendly and courteous manner.
From its experience in managing many large-scale shopping centers for the Aeon Group, the company
has implemented measures to increase efficiency of large machinery such as floor cleaners. These andother initiatives serve to standardize and increase the efficiency of work performed. This is a staple
business that is, on a orders received basis, composed of about 10-20% work performed directly by thecompany, 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.

Construction work

(JPYmn)
Sales
YoY
OP
YoY
OPM

FY2/11

FY2/12

FY2/13

FY2/1445,630-14.0%

FY2/14
1Q
15,88843.4%

16,42018.2%

28,513
73.6%

53,07186.1%

2Q
13,929-26.2%

3Q
8,254-47.7%

4Q
7,559
3.0%

1,214
7.4%

1,936
59.5%
6.8%

2,209
14.1%
4.2%

2,580
16.8%
5.7%

851
84.6%
5.4%

764
-4.0%
5.5%

474
5.3%
5.7%

491
-2.2%
6.5%

Source: Company materials, SR researchThis 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 remodeling (not designing) ofAeon retail locations, such as replacing signage, or modifying retail floor space. Sales for Aeon Mall are
not significant, since individual tenant stores perform their own renovation work.
LED installation is the primary source of orders in the environmental business. Revenues from LED
installation work were JPY26.0bn in FY02/13 (JPY7.4bn in FY02/12). LED lighting is sourced fromsuppliers, and sales are recorded once installations are complete at client locations. Personnel costs
account for about 30% of overall costs, and the materials ratio is around 70%.
LED-related sales (JPYbn)
60

53.1
45.6

50
40
28.5

30
20
10

16.4
2.0
14.4

27.0

15.6

26.1

30.0

FY2/13

FY2/147.4
21.1

FY2/11

FY2/12
Non-LED

LED

Source: Company materials, SR research

In April 2012, the company’s initiatives in the field of solar energy were recognized by the Ministry of
Economy, Trade and Industry (METI) and certified as a “BEMS Aggregator” for installation of BEMS insmall- and medium-sized buildings to save energy. BEMS aggregators are companies that conduct energy

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support services (recognizing energy use and supporting energy saving) for clients through cloud systems.
The cloud systems are linked to a central management system, and implementing these systems in smalland medium-sized buildings leads to conservation of energy. Quantifying energy use through BEMS willlead to reduced CO2 emissions and environmental burdens, ultimately yielding longer building life.
The company’s solar power systems utilize unused land in Kikukawa City, Shizuoka Prefecture. Aeon
Delight invested in a special-purpose company to operate this solar-power generation system, andintends to collect dividends from this investment. As a business, the construction of solar panels isclassified as a construction business, and the company receives panels from suppliers and customizes
them to fit its needs. It appears that dividends will not be received until after FY02/15.

AEON GroupElectric Utility Companies

Profit Sharing

Profits
GMS

Energy Sales

・ Capital investments
・ Construction
・ Operations
・ Electricity trading

Installation
Operations

Regional ElectricPower Companies

SM/DS

Source: Company data, SR Inc. ResearchMaterials and supplies sourcing services(JPYmn)
Sales
YoY
OP
YoY
OPM

FY2/11

FY2/12

FY2/13

FY2/1444,543
13.4%

FY2/14
1Q
10,721
12.6%

18,718-4.3%

36,73096.2%

39,284
7.0%

2Q
11,02312.8%

3Q
11,542
14.8%

4Q
11,257
13.4%

627
3.3%

1,234
96.8%
3.4%

1,462
18.5%
3.7%

2,333
59.6%
5.2%

573
109.9%
5.3%

636
98.8%
5.8%

533
39.9%
4.6%

591
21.1%
5.3%

Source: Company materials, SR research

Through efficient logistics, this business reduces costs for intermediate materials used in offices and retailstores. 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 as well. Aeon Delight aims touse efficient logistics to reduce costs for intermediate materials and increase process efficiency. Gross

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profit margin is about 7% to 8%.

Vending machine services(JPYmn)
Sales
YoY
OP
YoY
OPM

FY2/11

FY2/12

FY2/13

FY2/1433,3296.8%

FY2/14
1Q
7,498
-0.1%

17,1882.4%

32,28087.8%

31,200
-3.3%

2Q
8,716
1.7%

3Q
7,479
0.8%

4Q
9,636
25.1%

1,480
8.6%

2,330
57.4%
7.2%

2,396
2.8%
7.7%

3,068
28.0%
9.2%

535
17.8%
7.1%

812
11.5%
9.3%

433
0.2%
5.8%

1,288
64.7%
13.4%

Source: Company materials, SR researchThis segment operates soft drink vending machines. It also creates relaxation areas with foliage plants
and air purification equipment.
The company’s vending machines stock a variety of products from different manufacturers. Aeon Delight
operates approximately 40,000 vending machines, and its gross profit margin is around 11% (as of
FY02/14). About 70% of segment sales come from supermarkets belonging to the Aeon group. The
remainder of sales came from shopping malls operated by Aeon group and non-Aeon companies. Aeon
Delight acquired Certo Corp. (delisted from JASDAQ after being acquired) in September 2010, a vending
machine operator 66.4% owned by Aeon.

Support services(JPYmn)
Sales
YoY
OP
YoY
OPM

FY2/11

FY2/12

FY2/13

FY2/14
13,551
25.2%

FY2/14
1Q
2,964
43.1%

5,271
-

7,980
51.4%

10,823
35.6%

2Q
3,433
54.8%

3Q
3,604
2.7%

4Q
3,550
17.4%

375
7.1%

156
-58.4%
2.0%

504
223.1%
4.7%

829
64.5%
6.1%

77
92.5%
2.6%

323
69.1%
9.4%

312
6.5%
8.7%

117
-685.0%
3.3%

Source: Company materials, SR researchThis segment provides business process outsourcing (BPO), housework support services, business travel
services, training services, and staffing services. Much of these support services are conducted bycompanies acquired through M&A. BPO services are conducted by General Services, Inc., which was
acquired via M&A as well. Services that BPO undertake include cost management, salary calculations,administrative functions, social security and welfare, receipt of telephone calls, and system management.
Kajitaku Co., Ltd., a housework services provider, implemented a comprehensive FMS model for BtoBtoC,
and its sales for FY02/14 were JPY4.7bn, demonstrating almost 20% YoY growth. Sales for “Kaji Cloud,” ahousework services package, are contributing to strong growth. A to Z Service Co., Ltd., a maintenanceservice provider for small commercial facilities, was acquired in 2011. A to Z Service operates a 24 hour,
365 days a year call center to provide comprehensive support services for retail chains in small-scale
shopping centers.
Business travel services are provided by Aeon Compass, Co., Ltd. Specific duties include logistics forcorporate business trips, planning for group holidays, and logistics services for meetings and events.
Although orders received are JPY20.0bn, fees collected are recorded as sales on the company’s books.
Aeon Delight Academy, Co., Ltd. operates the “Aeon Delight Academy Nagahama” in Shiga Prefecture to

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provide real-world training. It also operates a staffing service for technical professions.
Overseas business
As of FY02/14, overseas business accounted for about 2% of sales, but Aeon Delight is looking to expand
into China and Asia in the medium term. In China, expansion is looked at on a per-province basis, and thecompany is able to expand rapidly through cooperation with the largest regional firms. As of FY02/14, thecompany has expanded into Beijing, Tianjin, Jiangsu, Hubei, and Guangdong, and preparations areunderway to expand into Shandong. Aeon Delight aims to have overseas sales account for 10% of its
overall sales by FY02/17. In China, the company plans to further its relationships with local firms anddifferentiate itself via its ESCO and elevator businesses. For the ASEAN region, the company will establish
a comprehensive list of FMS services.
Overseas companies
Aeon Delight (China) Co., Ltd. (facilities management services, 100% owned by Aeon Delight)
Utilizes accumulated expertise from Japan to provide Japanese-quality service that is made in China,
yielding unique Chinese comprehensive FMS.
Aeon Delight (Hangzhou) Service Outsourcing Co., Ltd. (outsourcing services, 70.0% owned)
Utilizes IT to provide outsourced BPO solutions for personnel management, administrative tasks, andaccounting.
Aeon Delight Sufang (Suzhou) Comprehensive Facility Management Service Co., Ltd. (maintenanceservices, 51.0% owned)
After acquisition of a First Class Manufacturing Management License in Suzhou, provides cleaning, roadmaintenance, parking maintenance, and warehousing services. Acquired an elevator business via M&A in
September 2013.
Wuhan Xiaozhu Comprehensive Facility Management Service Co.,Ltd. (management services, 51.0%
owned)
Largest provider of manufacturing management in Wuhan. After acquiring a First Class Manufacturing
Management License in Wuhan, also provides meeting room, cafeteria, and building maintenanceservices, in addition to comprehensive building management services.
Aeon Delight (Vietnam) Co., Ltd. (facilities management, 100% owned)
Provides Japanese services after becoming the first Japanese firm to acquire multiple licenses. Provides
comprehensive FMS in Vietnam.
Aeon Delight (Malaysia) Sdn. Bhd. (facilities management, 100% owned)
Provides comprehensive FMS primarily in Malayasia, but also in the greater ASEAN region. Also provider offacilities and back office service functions.

Business model
Aeon Delight became a leading facilities management operator through its relationship with the Aeon
group. It has also grown through acquisitions. The company derives its earnings by providing acomprehensive, all-in-one package of facilities management services to large-scale retail and commercial
properties. It was able to differentiate itself from competitors by its expertise and costs competitiveness.
Competitors included Tokyu Community Corp. (TSE1: 4711), Biru Daiko Co., Ltd., Nihon Housing Co., Ltd.
(TSE1: 4781), and Nippon Kanzai Co., Ltd. (TSE1: 9728).

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There are three type of property management, residential, commercial, and office buildings. Most ofthese competitors were mainly involved in residential management of condominiums. Few other large
companies were focused on commercial facilities and building management due the high costs involved.
The company was able to gain expertise in commercial property management through servicing
large-scale retail facilities such as shopping malls and supermarkets. The property maintenance industry
includes over 5,000 companies, most of which are small- and medium-sized businesses.
The structure of the building maintenance industry resembles that of the construction industry, withsecond- and third-tier subcontractors working under prime contractors. Aeon Delight, a prime contractor,
uses a number of subcontractors. Most of its contracts are signed on an annual basis, which are almost
always renewed. In other words, it has a recurring-revenue structure.
The company renegotiates contracts once a year, a process that regularly challenges its pricing, quality,
and ability to offer clients attractive packages. For example, the parent company Aeon conducts acompetitive bidding to keep the process fair and open. However, Aeon Delight is able to provide
competitive bids given its knowledge of the client’s needs, and know-how. Its superior position as alarge company with comprehensive reliable services will be further enhanced as the size of buildings
expands. The company is able to handle large-scale facilities maintenance given its size and economy ofscale, which further reinforces its strength and position. Thus, SR Inc. believes that Aeon Delight’s
position within the commercial facilities industry is likely to improve, as the company has know-how andexpertise.
In response to these changing requirements of its customers, Aeon Delight intends to leverage its
accumulated expertise in areas such as building and equipment diagnostics to expand its operations frombuilding maintenance into building and project management. The company has an in-house developed
system for building and equipment. It uses the system for tasks including the diagnosis of deterioration ina building’s fabric and analysis of its energy consumption performance. Based on the results, Aeon Delight
can carry out any necessary repairs and improvements. It already has developed expertise in using thelatest equipment and technology, such as infrared imaging, fiber optics, X-rays, and ultrasound.
Management now intends to further develop the company’s analysis capabilities in this area.

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Profitability snapshot, financial ratios
Aeon Delight’s overall operating profit margin has been generally stable at 6% to 7%.
of SG&A expenses is labor, which accounted for 40% as of FY02/13.
Profit Margins (JPYmn)
Gross Profit
Gross Profit Margin
Operating Profit
OP Margin
EBITDAEBITDA Margin
Net Profit Margin
Financial Ratios
ROA
ROE
Total Asset Turnover
Working Capital
Current Ratio
Quick Ratio
OCF / Current Liabilities
Net Debt / Equity
OCF / Total Liabilities
Cash Cycle (days)
Changes in Working Capital

The main driver

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

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

FY02/1123,98914.0%
12,031
7.0%
13,8188.1%
3.8%

FY02/1228,631
13.0%
13,762
6.3%
16,1077.3%
3.1%

FY02/1330,22712.1%
13,901
5.6%
16,1386.5%
3.0%

FY02/1433,71413.1%
15,115
5.9%
17,547
6.8%
3.2%

10.1%
19.9%
3.0
7,502
149.8%
135.8%
31.3%
27.6%
31.8%
14.3
108

11.2%
18.9%
2.9
7,330
184.4%
166.6%
38.6%
34.6%
40.6%
14.8
-172

9.7%
15.5%
2.6
7,298
210.0%
195.4%
29.0%
60.4%
21.5%
10.4
-32

7.8%
12.5%
2.5
9,047
215.5%
201.0%
30.0%
63.5%
27.8%
8.2
1,749

7.8%
12.5%
2.6
22,366226.9%
207.6%-12.7%
43.4%-12.1%
18.5
13,319

7.7%
12.3%
2.4
13,223229.9%
208.9%
57.5%
63.1%
52.3%
20.3
-9,143

FY02/11
Cons.
77
4,175

FY02/12
Cons.
31
5,300

FY02/13
Cons.
80
5,897

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

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

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

92
121
216
19
7,257
11,957

251
120
268
15
8,883
14,868

323
90
295
18
9,623
16,326

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

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

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Parent(Million Yen)
Cost of Sales

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

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

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

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

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

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

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

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

Sales
Operating Profit
OPM

Facilities
Management

Security
Services

Cleaning
Services

Construction
Work

42,050
4,661
11.1%

31,8052,692
8.5%

40,5195,918
14.6%

53,071
2,209
4.2%

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

Vending
MachineServices
31,2002,396
7.7%

SupportServices
10,823504
4.7%

Source: Company data, SR Inc. Research

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Strengths & weaknesses
Strengths
 Strong ties with the Aeon Group: Aeon Delight is a subsidiary of Aeon Co., Ltd., and almost 70% ofsales are generated form 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 isable to leverage economies of scale from the Aeon group, and has accumulated expertise incomprehensive FMS from its transactions with Aeon. This provides for a stable recurring-revenue
model.
 Industry leader in comprehensive commercial maintenance services: Aeon Delight is theindustry leader capable of providing comprehensive all-in-one building maintenance services such as
facilities management, security, cleaning, and renovations. Its competitors can only provide one to twoof these services (i.e., security or cleaning). Owners of large-scale commercial facilities and buildings
are would prefer to contract such services to one service provider rather than negotiate with eachindividual service provider based on their specialty. The company’s ability to provide suchcomprehensive service is a competitive advantage over its competitors.
 Financial strength to buy growth: Aeon Delight has a very strong balance sheet. SR Inc. believes
that this balance sheet could be used aggressively to buy growth. According to the Japan Building
Maintenance Association, there are currently over 5,000 property maintenance service providers
throughout Japan. This market is relatively mature, and a realignment of the industry is possible. Aeon
Delight, with its financial strength and industry prowess, would be able to acquire smaller firms withspecialized services in local areas. This could lead to further growth and expansion. The company isable to benefit from economies of scale. It can leverage its balance to buy growth since it has arecurring stable source of revenue from the Aeon group. The company could take on debt to expand
its business since it has an under leveraged balance sheet.

Weaknesses
 Organic growth challenging: Aeon Delight has grown through acquisitions. Therefore, organic
growth may be a challenge because the market is relatively mature. There is limited domestic growthand overseas offers one avenue of expansion. M&A activities could dry up, and this could have an
impact on earnings. The company has been able to buy growth using its strong financial position.
 Overly dependent on the Aeon group: Aeon Delight is a consolidated subsidiary of Aeon, andderives almost 70% of its sales from the Aeon group. A drawback from such a strong relationship isthat the parent company may ask for support in pursuing its agenda. Recently, Aeon acquired 50% of
Tesco Japan, the U.K. supermarket chain operator’s Japan retail business. A joint venture company,
Aeon Every Co., Ltd. is in charge of supermarket operations. The parent Aeon could ask the company
for support in future acquisitions.
 Mature property management market: The property management market is relatively mature.
However, small-scale retail stores in urban areas offer growth opportunities given the greater numberof customer volume. Many small-scale retailers are renovating their stores and upgrading facilities.
Aeon Delight’s expertise has been in large-scale facilities, mainly supporting the Aeon group retailstores such as shopping centers and supermarkets. As smaller commercial facilities emerge in large
urban areas, the question remains whether the company can successfully adapt its facilities
maintenance know-how to this segment of the market. The company may need to look at this segment
for growth.

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Market and value chain
Market overview
Building maintenance market valued at JPY3.3tn
Japan’s building maintenance market was worth 3.7 trillion yen in FY03/12 (April 1, 2011 to March 31,2011), up 3.1 YoY, according to Yano Research Institute Ltd. This included facilities maintenance,
cleaning, and security services, as well as repairs and renovation work. The market grew steadily until
the second half of the 1990s, supported by the expansion in office buildings. However, the financial crisis
caused the real estate market and, consequently, property management services to contract in 2009 and2010. The market fell to 3.4 trillion in FY03/10. The market slightly expanded for the next two years,
and has stabilized at 3.6 billion yen to 3.7 billion yen.
According to Aeon Delight, it had 4% of the domestic market for cleaning services at retail stores,
hospitals, schools, hotels, and other facilities that totaled 960 billion yen in FY02/12. Retail storesaccounted for 17% of its cleaning business sales, while hotels made up a mere 2%.

Instead of agreeing to individual contracts for facilities management, security services, and cleaning
activities, customers now prefer comprehensive agreements covering all their requirements. In order todrive up the profitability of their facilities, customers have been seeking further progress in minimizationof the maintenance and equipment replacement costs over the entire lifespan of such facilities. Property
maintenance providers are given more freedom to offer an effective program for facility management,
security, and sanitation, based on its accumulated expertise.

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LED
The domestic market for LED lamps was 202.0 billion yen in FY03/12, and 370.0 billion yen in FY03/13,
according to Yano Research Institute. By 2020, the market has the potential to expand to 450 billion yen.
Aeon Delight had sales of about 26 billion yen, for a market share of slightly less than 7% in FY02/13.

Recirculating, water-saving, plastic urinal
According to Aeon Delight, there are 4 million urinals in Japan, most of which are ceramic (as of April2013). The potential market for its water-saving urinals is 500 billion yen (4 million units x 120,000 yen).

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

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AEON Group Stores by Format (Domestic & Overseas)Feb. 2009 Feb. 2010 Feb. 2011
GMS
603
601
590
Supermarket
1,231
1,267
1,307
Discount Store
41
52
72
DIY Store
127
125
127
Supercenter
31
33
32
Department Store
1
1
1
Convenience Store
3,270
3,514
3,811
Specialty Store
4,746
4,475
3,305
Other Retail Format
87
180
268
Financial Service
395
386
401
Services
1,621
1,549
1,410
Total
12,153
12,183
11,324
56
45

59
107

Feb. 2013
604
1,797
332
123
26
1
4,462
3,663
562
528
1,401
13,499062115Stores by Format in China, South Korea, and ASEAN
Feb. 2009 Feb. 2010 Feb. 2011
GMS
42
46
52
Supermarket
18
19
25
Discount Store
Convenience StoreSpecialty Store
Other Retail Format
18
21
24
Financial Service
Services
Total
78
86
101

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

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

AEON MALL
AEON TOWN

51
42

53
44

Feb. 2012
590
1,537
105
122
29
1
4,121
3,424
418
460
1,383
12,190Feb. 2014
617
1,977
353
122
26
1
4,581
3,853
756
641
1,519
14,4400137
122Feb. 2014
69
95
23
2,370
61
29
302
95
3,044

Source: AEON Co. data, SR Inc. Research

Source: AEON Co. data, SR Inc. Research

Customers
Aeon Delight generates almost 70% of its sales from the Aeon group companies. The remainder comesfrom non-Aeon group customers that include commercial facilities, offices, hotels, medical facilities,
schools, factories, warehouses, public facilities, and event operators. The company’s largest customer is
Aeon Retail, which accounted for 33.7% of its facilities management services segment sales in FY02/14.
Its share of Aeon Mall’s business is about 60%, and its share of MaxValu’s business is 60% to 70% as of
FY02/13. Outside Japan, Aeon Delight seeks to reduce its reliance on the Aeon group to about 40%.
Construction work accounted for the largest portion of segment sales at 49.9% (as of FY02/13).
Facilities Management Services
AEON RETAIL
Facilities Management
12,642
Security Services
15,129Cleaning Services
13,727
Construction Work
26,484
Materials/Supplies Sourcing
11,956
Vending Machine Services
5,609
Support Services
3,720
Total
89,270Source: Company data, SR Inc. Research

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Segment Sales
42,05031,80540,51953,071
39,284
31,20010,823248,756% of Segment Sales
30%
48%
34%
50%
30%
18%
34%
36%

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Competition
Aeon Delight’s competitors include Secom Co., Ltd. (TSE1: 9735) and Alsok (TSE1: 2331) in security
services. It competes with Azbil Corp. (TSE1: 6845), Nippon Kanzai Co. Ltd. (TSE1: 9728), and Tokyu
Community Corp. (TSE1: 4711) and over 5,000 small local operators in property management services.
There are no major competitors that offer cleaning services; Aeon Delight competes with smaller, regional
cleaning operators. In construction-related work, Aeon Delight competes with Azbil in the environmental
solutions business. In the energy-saving business, major rivals are NTT Facilities, Inc. (consolidated
subsidiary of NTT (TSE1: 9432)) and Hitachi Ltd. (TSE1: 6501).

Barriers to entry
Property management for residential and small office buildings has relatively low barriers to entry.
However, the barriers are high for large-scale facilities given the comprehensive services required. Smaller
residential or office building owners are less concerned about having total package of services and usuallyfocus on cleaning or security. However, large-scale facilities require comprehensive services such as
maintenance, cleaning, and security, all-in-one. Instead of hiring a contractor for each service, large-scalebuilding owners prefer to contract out these services to one company that is able to provide all of these
services in package. Consequently, this enables Aeon Delight to enjoy a relatively high barrier of entry in
its market niche, namely servicing large-scale retail stores and office buildings, due to its expertise inproviding an all-in-one package of services. The company knows the market, and has a foothold with the
Aeon group. It is able to enjoy economies of scale, and offers comprehensive services (maintenance,
cleaning, security, and repairs and renovations), while its competitors are specialized in one or two areas(i.e., security or cleaning). The company enjoys a high rate of retention (i.e., customers are reluctant toswitch companies), with most of its contracts renewed.

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Strategy
The company is looking to invest in sources outside of the Aeon Group, using its stable revenue sourcesfrom within the Aeon Group (such as new store openings and overseas expansion) as a springboard.
Aeon Delight’s strategy is to grow existing business through expansion of comprehensive services tocustomers inside and outside of the Aeon Group. Over the medium term, the company aims to expand
sales to non-Aeon group companies and lower this weighting to around 40%. It plans to do this byleveraging its main strength - the ability to take on comprehensive management contracts for large
facilities - and by expanding into airports, factories, hospitals, and other retail facilities. Some of thespecialty store operators also have outlets in non-Aeon shopping centers. SR Inc. expects the specialty
store and services business to expand more quickly than the Aeon group’s shopping centers.
The company adopted a new medium term plan, ending in FY02/17. Please see the Outlook section for
details. In the medium term plan ended FY02/14, Aeon Delight concentrated on growth in three mainareas, as described below.
Aeon Delight adopted a growth-through-acquisition strategy as mentioned above. (Please refer to M&A
Activities section). The company acquired businesses that strengthened its integrative capabilities, andintends to do the same going forward. In addition, the company is aiming to strengthen its
comprehensive facilities maintenance services. Aeon Delight has targeted three markets: major urban
area market, ecology and environmentally friendly market, and the Asian market.

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

Ecology and environmentally friendly market
Aeon Delight has provided environmental solutions, such as LEDs and other environmental products. The
company’s initiatives in this field was recognized by the Ministry of Economy, Trade and Industry (METI)
and certified as a “BEMS Aggregator.” METI is expected to introduce BEMS (building energy
management system) to more than 60,000 buildings across Japan. The company would be in a good
position to benefit from any regulatory or designation changes (i.e., facilities maintenance contracts
awarded only to certified service operators). This is still in the works and no regulatory changes havebeen made yet.

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Aeon Delight also plans to extend sales of its energy management services, water-based coating agent,
and water-saving urinals to hotels, hospitals, and nursing-care facilities, which are generally
environmentally conscious. It is also offering cleaning and security services in these facilities and isdeveloping a cleaning method to control bacteria more effectively. Aeon Delight plans to capture 10% of
the hospital and nursing-care market.
As part of Aeon group’s energy-saving initiative announced in August 2012, Aeon Delight is developing anelectric vehicle battery charger that uses Aeon Retail’s electronic money, WAON.

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Historical financial statements
Summary
FY02/14 Results (announced on April 8, 2014; please refer to the preceding table)
In FY02/14, Aeon Delight recorded its fourth consecutive year of increased sales and its tenth consecutive
year of increased profits.
Sales: JPY257.2bn (+3.4% YoY)
Operating profit: JPY15.1bn (+8.7%)
Recurring profit: JPY15.1bn (+8.6%)
Net income: JPY8.2bn (+8.7%)
Overall
The company worked to expand its services lineup and start new businesses with a focus on urban areas,
ecology and environmental market, and Asia outside Japan as its main market and business focal points.
As a result, Aeon Delight was able to expand its businesses via measures such as housekeeping agency
services to meet the complex needs of urban living, and facilities management geared toward small retailfacilities. The company also conducted administrative management support for businesses throughbusiness process outsourcing (BPO).
An overview of each segment is as follows:
Facilities Management
Sales: JPY43.5bn (+3.3 YoY)
The company fulfilled over 400 orders for its Building Energy Management System (BEMS) to meetcustomer needs for air conditioning control functions and features to control fridge-freezer facilities.
Additionally, by tracking data for energy usage by business type and by region enabled Aeon Delight toadvance its unique energy management support service.
Securities Service
Sales: JPY34.2bn (+7.4% YoY)
In addition to new contracts, the company added 17 stores with “attender” services (i.e., attendant staff
functioning as an information and security provider). The attender service has also been introduced to
Beijing and Qingdao in China, and is receiving high praise from customers. The company is also moving toutilize security systems which integrate human elements of security with the latest technology(“cockpit”-style), and upon finalization of specifications using existing contracts as a baseline, will
accelerate proposal of this new system to customers.
Cleaning Services
Sales: JPY42.3bn (+4.4% YoY)
The company’s original coating agent, which replaces floor wax, was implemented in 121 properties.
Other initiatives included progress in standardization and productivity improvement in product quality by
uniformly sharing the company’s cleaning expertise with a consolidated pool of consigned firms.
Construction Work
Sales: JPY45.6bn (-14.0% YoY)
LED construction work was down YoY due to a lack of orders from the Aeon group, which had been
concentrated in the previous year. Sales for LED construction work to the Aeon group were JPY15.6bn(JPY26.6bn in the previous year). However, orders received for maintenance for existing stores andhttp://www.sharedresearch.jp/

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scheduled upkeep construction work were healthy, centered on the Aeon group.
Materials and Supplies Sourcing
Sales: JPY44.5bn (+13.4% YoY)
The company began taking orders for customers in the Kanto region which manage chain stores at
small-scale retail shopping centers, and focused on providing hygiene and packaging materials.
Concerning trays and packaging materials for fresh foods and delicatessen items, Aeon Delight was able
to secure a 37.1% YoY increase in sales (JPY8.9bn) by concentrating demand.
Vending Machine Services
Sales: JPY33.3bn (+6.8% YoY)
The company continued to develop low-cost vending machines, and machines capable of accepting
electronic money. Furthermore, the company’s management of soft-drink vending managements saw a
net increase of 4,800 units, due to the installation of new units in Sanyo Marunaka shops and new Aeon
Malls.
Support Services
Sales: JPY13.6bn (+25.2% YoY)
Demographic changes (i.e., growing elderly population) and diversified lifestyle in urban areas
contributed to a significant increase in housekeeping services, which recorded a sales increase of 50.9%
YoY, and contributed to the improvement of segment sales and profitability. Kajitaku, a group company,
expanded sales channels for its “Kaji Cloud” housekeeping services package, and succeeded in sales ofapproximately 120,000 packages, up significantly from the 50,000 packages sold in the previous year.
From Q2 FY02/13 onward, the business grew at a rapid pace thanks to contributions from groupcompanies that are now included in the scope of consolidation.
On the same day as the earnings announcement, the company announced its new medium-term plan (forFY02/15 through FY 02/17). The framework for the plan will be centered on:
1. Establish a dominant position in comprehensive FMS and competitiveness (strengthen the cleaning
services segment and the energy solutions segment)
2. Develop the Asian market
3. Build an organizational base (organizational restructuring, human resource development, IT
investment)

Year
Sales
Operating income
Net income
FY02/14
JPY257.2bn
JPY15.1bn
JPY8.2bn
FY02/15
JPY270.0bn
JPY16.0bn
JPY8.6bn
FY02/17
At least JPY330.0bn
At least JPY21.0bn
At least JPY11.0bn
Sales for FY02/17 will consist of 35% outside of the Aeon group, and 10% to overseas.

Q3 FY02/14 Results (announced on January 8, 2014; please refer to the precedingtable)
Cumulative Q3 FY02/14 sales were 194.8 billion yen (+1.3% YoY), operating profit 11 billion yen (+5.5%
YoY), recurring profit 11 billion yen (+5.5% YoY) and net income 5.8 billion yen (+5.4% YoY). Gross profit

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margin improved 1 percentage point over the previous year to 12.8%. The company is gradually seeing
the impact of its cost-cutting efforts, such as lowering costs in directly managed properties and reworking
ties with partner companies.
An overview of each segment is as follows:
Sales in the Facilities Management segment were 32.7 billion yen (+2.8% YoY). The gross profit margin
was 15% (14.4% in Q3 FY02/13). The company secured new contracts with the Aeon group and hotels
during Q3 (September to November). The company also added impetus to uptake of its Building Energy
Management System (BEMS) by developing functions for controlling existing air-conditioning machines
and fridge-freezer facilities. The company also continued constructing a proprietary service for supporting
energy management, which records data on how much energy clients are using in different industries andseasons.
Sales in the Securities Services segment were 25.3 billion yen (+6.4% YoY). The gross profit margin was
13.1% (13.2% in Q3 FY02/13). In addition to new securities services contracts, the company added“attender” services (i.e., attendant staff functioning as an information and security provider) to 12 stores.
The company says future uptake of these “attender” services appears promising, in light of the favorable
feedback they received. The company also undertook a number of security contracts for major events,
such as J-League soccer matches (J-League is Japan’s national soccer league).
Sales in the Cleaning Services segment were 31.7 billion yen (+4.1% YoY). The gross profit margin was
18.5% (18.8% in Q3 FY02/13). We note that 206 stores began using the company’s original coating
agent, which replaces floor wax, after the company promoted its uptake. Also, in September 2013, thecompany installed 14 of its “recirculating, water-saving urinals” in Aeon Shinagawa Seaside Shopping
Center (Tokyo). The company is making steady advances in its preparations for mass production of thisproduct, paving the way for full-scale sales drives, but it is a little behind its plan. The company hadplanned for 1,500 installations this year, but that now looks likely to run into next year. On the other hand,results for this year will receive a small boost as the front-loaded expenses associated with installations
will also be delayed.
Sales in the Construction Work segment were 38.1 billion yen (-16.8% YoY). The gross profit margin was
8.6% (7.4% in Q3 FY02/13). This sector saw a fall in earnings on the previous year as LED construction
work, which had been concentrated in the previous year, lost momentum. However, the company received
a healthy supply of orders for maintenance and upkeep construction work, mainly from within the Aeon
group. The improvement in the gross profit margin is because LED-related work comprised a smaller
share of total sales. The company will begin selling solar power from FY02/15, but states that its aim is toimprove performance in upkeep and maintenance work.
Sales in the Materials and Supplies Sourcing segment were 33.3 billion yen (+13.4% YoY). The grossprofit margin was 7.8% (7.1% in Q3 FY02/13). The company started providing hygiene and packaging
materials to newly added customers, including Aeon Market Co., Ltd., whose stores became part of the
Aeon group last year. Furthermore, as a result of concentrated demand for trays and packaging materials
for fresh foods and delicatessen items, sales jumped 45.2% YoY to 6.4 billion yen.
Sales in the Vending Machine Services segment were 23.7 billion yen (+0.8% YoY). The gross profit
margin was 9.5% (unchanged from Q3 FY02/13). The company continued to develop low-cost vending
machines, and machines capable of accepting electronic money. Furthermore, the company’s
management of soft-drink vending managements saw a net increase of 2,000 units, due to theinstallation of new units in Sanyo Marunaka shops and new Aeon Malls.
Sales in the Support Services segment were 10 billion yen (+28.2% YoY), a significant increase over the

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previous year. The gross profit margin was 26.3% (20.5% in Q3 FY02/13). Demographic changes (i.e.,
growing elderly population) and diversified lifestyle in urban areas contributed to a significant increase inhousekeeping services, which recorded a sales increase of 76.6% YoY, and contributed to theimprovement of segment sales and profitability. The significant increase in the gross profit margin was
due to the fact that commission fees at Aeon Compass Co., Ltd. were included in the calculation of thismargin (these fees are not included in the sales figure for this segment; Aeon Compass Co., Ltd. offers
third-party services for business trips and conferences).
The company’s business in China and the ASEAN region expanded at a healthy rate, to 134 projects in
China, 39 projects in Malaysia, and 21 projects in Vietnam. Profits in China seem assured.
The company has maintained its full-year forecasts. The company will need a 15% increase in sales in Q4,
and a 30% increase in operating profit to meet those targets. However, the company believes it canachieve them, given that there will be new stores opening in the Aeon group in Q4 (no new stores openedin Q4 FY02/13), and that it will be providing comprehensive facilities management services (FMS) to aflagship Aeon store (AEON Mall Makuhari Shintoshin, which opened in December 2013 in Chiba City).
The company plans to release its new medium-term plan (for FY02/15 through FY02/17) in April 2014. It
appears that this plan will focus on the growth of the cleaning services segment and the energy
management business. SR believes it will be a reasonable plan, calling for average annual growth ofaround 5% in sales and 10% in operating profit, in the manner of previous plans.

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

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agent, which replaces floor wax, and added 174 new stores using this new product. In addition, thecompany continued to prepare for mass producing its “recirculating, water-saving urinals” that it
developed last year, although the preparations were slightly behind schedule.
Sales in the Construction Work segment were 29.8 billion yen, 0.5% lower YoY largely due to
exceptionally strong LED-related sales (16.0 billion yen) a year earlier. The company said that the sales
were better than its estimate. The segment gross profit margin was 8.2% (7.9% in 1H FY02/13).
LED-related sales and installation work reached 12.0 billion yen, due to stronger than initially expectedenergy-savings related investments and measures to reduce electricity costs by each of its customers.
According to Aeon Delight, the bulk of LED-related sales were made to the Aeon group. Although thecompany’s initial plan for full-year LED-related sales to the Aeon group was 10.0 billion yen, the company
appeared to be experiencing LED-related sales per store climbing higher than initially expected.
Sales in the Materials and Supplies Sourcing segment were 21.7 billion yen (+12.7% YoY), and thesegment gross profit margin was 8.0% (6.8% in 1H FY02/13). The company started providing hygieneand packaging materials to newly added customers, including Aeon Market Co., Ltd., whose stores
became part of the Aeon group last year. Furthermore, as a result of concentrated demand for trays andpackaging materials for fresh foods and delicatessen items, sales jumped 61.2% YoY to 4.2 billion yen.
Sales in the Vending Machine Services segment were 16.2 billion yen (+0.8% YoY), and the segment
gross profit margin was 10.2% (9.9% in 1H FY02/13). The number of soft drink vending machines under
the company’s management increased 1,400 units. This significant increase was due to installations of
new machines (e.g., electric money-capable, lower-price) and to new installations at stores run by newgroup companies since last year (e.g., Marunaka Co., Ltd., Daiei, Inc.). In 1H, Aeon Delight installed about
200 units at Daiei stores, adding that it would install roughly 2,000 units in 2H.
Sales in the Support Services segment were 6.4 billion yen (+49.1% YoY), and the segment gross profit
margin was 26.3% (16.3% in 1H FY02/13). Demographic changes (i.e., growing elderly population) anddiversified lifestyle in urban areas contributed to a significant increase in housekeeping services, which
recorded a sales increase of 68.2% YoY, and contributed to the improvement of segment sales andprofitability.

October 3, 2013 1H Results Meeting Summary
Initiatives in 1H FY02/14
Restructuring Efforts
1. Cost Reductions
 Cleaning Services: Profitability improved on lower costs at directly managed properties and lower
commissions paid to partner companies
Directly managed properties: Optimized work scheduling and process standardizationPartner companies: Lowered commissions
 Materials and Supplies: Profitability improved on standardized materials and supplies used at groupcompanies, streamlined logistics network, and better ordering processes
2. New Product/Service Development
 Aeon Delight Coat
Plans to use this new floor coating agent at 500 properties (mainly of the Aeon group) andhave related sales of 250 million yen
 Aeon Delight Hard Coat (Upgraded Coating Agent)This coating agent eliminates “puffing” work on floors. Due to this feature, the company has

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

Initiatives Planned for 2H FY02/14
Additional Restructuring Efforts BEMS Upgrades
In 1H, Aeon Delight jointly developed a new, fridge-freezer control-enabled Building Energy Management
System (BEMS) with a large equipment manufacturer. The new BEMS helps reduce power consumption
during thawing processes. The company plans to begin selling and installing the new BEMS at Aeon groupstores from this 2H, with an eye to selling to non-group clients (e.g., drugstores).

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 Urinal Revolution
The company improved its “recirculating, water-saving urinals” further in 1H, claiming that they cut water
usage by 90%. The company plans to begin the shipment of the urinals in 2H. In fact, Aeon Delightdelivered 14 units to the AEON Shinagawa Seaside Shopping Center (currently being installed).
Expanding Client Base
Aeon Delight plans to begin providing comprehensive facilities management services (FMS) to flagship
AEOM stores (AEON Mall Makuhari Shin-toshin in December 2013).
Creating New Markets in Asia
China
 China has yet to see oligopoly in the comprehensive FMS market, thus likely offering business
opportunities. Aeon Delight was ranked 10th in the market as of the end of 1H FY02/14.
 Aeon Delight believes that its services are much needed in China, considering Beijing’s PM2.5 andother problems.
 Aeon Delight was cooperating with local partners in preparation for new businesses, such as Energy
Service Company (ESCO) services. In fact, the company was receiving many enquiries from potential
clients in South China and Hong Kong.
 China’s Ministry of Commerce is planning to develop about 300 shopping malls with estimated total
investment of two trillion yen.
Malaysia
Due to instable electricity supply, ESCO services may provide ample opportunities.
Next Medium-Term Plan
Aeon Delight intends to announce its new medium-term plan (FY02/15-FY02/17) next spring.

Q1 FY02/14 Results (announced on July 3, 2013; please refer to the preceding table)
Consolidated sales were 66.7 billion yen (+13.9% YoY), gross profit was 8.2 billion yen (+17.0% YoY),
and gross profit margin was 12.2% (11.9% a year earlier). Sales rose after the company added Aeon
Market Co., Ltd. (Peacock Stores) to the Aeon group while winning new clients such as a large stadium,
headquarters buildings of major corporations, and commercial facilities. Gross profit margin improved
attributable to greater cooperation with partner companies in an effort to lower costs and streamline
operations. Gross profit appeared to have exceeded the company’s forecast (Q1 guidance not disclosed),mainly due to stronger-than-expected results in the Facilities Management segment.
An overview of each segment is as follows:
Sales in the Facilities Management segment were 10.6 billion yen (+2.4% YoY), with gross profit of 1.6
billion yen (+9.0% YoY, gross profit margin of 15.5%). This segment was supported by new contracts
from the Aeon group to manage large-scale facilities from March 2013, as well as favorable demand fromoutside the Aeon group such as servicing a large stadium, and new contracts for government and public
office facilities. In addition, segment sales were also supported by favorable contributions frommanagement services of a resort hotel, which started in the previous term, and a prefectural public
hospital.
Sales in the Security Services segment were 8.4 billion yen (+6.8% YoY), gross profit was 1.1 billion yen(+2.1% YoY, gross profit margin of 12.5%). In addition to new security services contracts, the company
added “attender” services to four new stores. The company stated that the attender services received
positive customer feedback and that such services may expand going forward.

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Sales in the Cleaning Services segment were 10.5 billion yen (+4.1% YoY), with gross profit of 1.9 billion
yen (+2.0% YoY, gross profit margin of 18.3 %). The company promoted its original coating agent, which
replaces floor wax, and introduced the product at six additional stores. Furthermore, the company ispreparing to market its “recirculating, water-saving urinal,” which was developed last year; during thelatter half of this fiscal year (the company has not changed its plan to sell 1,500 urinals during FY02/14).
Sales in the Construction Work segment were 15.9 billion yen (+43.4% YoY), with gross profit of 1.3
billion yen (+31.3% YoY, gross profit margin of 7.9%), a significant increase over the previous year. In theenvironmental operations, the company posted a 70% sales increase YoY after winning a 6.6 billion yenorder for LED-related work mainly for the Aeon group. In the renovation operations, demand for store
renewal and earthquake-resistant construction work led to a 27% sales increase. It should be mentionedthat LED-related work at the Aeon group is nearing its final stages. Thus, sales contributions from thisbusiness may begin to decline in Q2 and thereafter.
Sales in the Materials and Supplies Sourcing segment were 10.7 billion yen (+12.6% YoY), with grossprofit of 800 million yen (+32.7% YoY, gross profit margin of 7.8%). The company started providing
hygiene and packaging materials to newly added customers, including Aeon Market Co., Ltd., whose
stores became part of the Aeon group last year.
Sales in the Vending Machine Services segment were 7.5 billion yen (-0.1% YoY), basically flat over theprevious year, with gross profit of 700 million yen (+2.7% YoY, gross profit margin of 9.1%). Sales pervending machine were stagnant as consumers remained cautious about spending, despite installing new
vending machines in its customer stores, including Marunaka Co., Ltd., that were added to the Aeon groupduring the previous year. Meanwhile, the company is seeking to install vending machines at Daiei Inc.
stores. Although there had been no negotiations between the two companies as of Q1, progress is
expected now that Daiei is an Aeon Co., Ltd. subsidiary.
Sales in the Support Services segment were 3.0 billion yen (+43.1% YoY), with gross profit of 700 million
yen (+146.1% YoY, gross profit margin of 24.7%), a large increase over the previous year. Kajitaku Co.,
Ltd. favorably expanded its mainstay housework services and recorded an 18.9% YoY growth in sales. In
addition, Aeon Compass Co., Ltd. and General Services Inc., two companies that become consolidated
subsidiaries from the Q2 of last year, also contributed to the strong growth in segment sales. Gross profit
recorded strong growth, as a result of Aeon Compass (business travel, conference support services)
started booking sales commissions as gross profit (previously booked as sales) during the term.
As a result of adding new consolidated subsidiaries and implementing an aggressive investment strategy,
SG&A expenses totaled 4.8 billion yen (+22.9% YoY). Consequently, operating profit was 3.4 billion yen(+9.6% YoY), recurring profit was 3.4 billion yen (+9.7% YoY), and quarterly net profit was 1.9 billion yen(+4.0% YoY).
The company maintained its 1H and full-year earnings forecasts, and conditions remain favorable in Q2(as of July).

FY02/13 Results
Aeon Delight had sales of 248.9 billion yen (+13.2 YoY) in FY02/13. By segment, Facilities Management
sales were 42.1 billion yen (-0.2 YoY), Security Services sales were 31.8 billion yen (-1.3% YoY), Cleaning
Services sales were 40.5 billion yen (+1.7% YoY). Construction Work sales rose 86.1% YoY to 53.1 billion
yen due to increased orders for energy-saving projects and repair work. During FY02/13, Aeon Delightwon 26 billion yen worth of orders for LED construction, mostly from the Aeon group companies,

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compared with 7.4 billion yen a year earlier. Materials/Supplies Sourcing Services sales were 39.3 billion
yen (+7.0% YoY), reflecting increased orders from within the Aeon group. Vending Machine Services
sales were 31.2 billion yen (-3.2% YoY). Support Services sales were 10.8 billion yen (+35.6% YoY),
supported by its consolidated subsidiary, Kajitaku Co., Ltd., which strengthened its housework andcleaning services to individuals.
Gross profit rose 5.6% YoY to 30.2 billion yen due to increased LED construction work from the Aeon
Group. However, gross profit margin fell to 12.1% from 13.0% a year earlier due to higher cost related to
LED work. SG&A expenses rose 9.8% YoY to 16.3 billion yen due to start-up costs mainly related toincreased headcount in environmental and facilities management operations. Consolidated operating
profit rose 1.1% YoY to 13.9 billion yen.
Extraordinary expenses declined to 50 million yen in FY02/13 from the 900 million yen charges recorded
in FY02/12 (related to the aftermath of the March 2011 Tohoku earthquake). Consolidated net income
was 7.5 billion yen (+8.6% YoY).
In FY02/13, the company expanded through acquisitions, acquiring General Services Inc. and Aeon
Compass in October 2012. In the same month, Aeon Delight also set up a company to in Hangzhou, China
to expand business in that region.

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Income statement
Income Statement(JPYmn)Total Sales
Facilities Management
Security Services
Cleaning Services
Construction Work
Materials/Supplies Sourcing Services
Vending Machine Services
Support Services
Other

FY02/09Cons.
145,690
42,25336,67042,403
18,5155,846

FY02/10Cons.
140,299
41,66634,28145,05013,8895,412

FY02/11
Cons.
170,905
40,01932,08841,142
16,42018,71817,1885,271
56

FY02/12Cons.
219,797
42,14732,23539,85228,51336,73032,2807,980
57FY02/13Cons.
248,876
42,05031,80540,51953,071
39,284
31,20010,823119

FY02/14Cons.
257,243
43,45834,24242,32045,63044,54333,32913,551167

FY02/15
Est.
270,000

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

5.9%
5.1%
2.3%
3.2%
62.8%

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

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

28.6%
5.3%
0.5%
-3.1%
73.6%
96.2%
87.8%
51.4%
1.8%

13.2%
-0.2%
-1.3%
1.7%
86.1%
7.0%
-3.3%
35.6%
108.8%

3.4%
3.3%
7.7%
4.4%
-14.0%
13.4%
6.8%
25.2%
40.3%

5.0%

CoGS

124,735

119,180

146,916

191,166

218,648

223,528

Gross Profit
YoY
GPM

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%

SG&A
SG&A / Sales

11,008
7.6%

11,148
7.9%

11,9577.0%

14,8686.8%

16,326
6.6%

18,599
7.2%

Operating Profit
YoY
OPM

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%

15,115
8.7%
5.9%

108
241

88
147

208
149

281
260

213
221

163
186

Recurring Profit
YoY
RPM

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%

Extraordinary Gains
Extraordinary Losses
Tax Charges
Implied Tax Rate

110
940
4,026
44.8%

457
234
4,618
45.6%

5
985
4,613
41.5%

73
880
5,932
45.7%

80
53
6,306
45.3%

28
529
6,192
42.4%

Net Income
YoY
Net Margin

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%

Non-Operating Income
Non-Operating Expenses

16,0005.9%
5.9%

16,000
6.0%
5.9%

8,600
5.4%
3.2%

Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.
Engineering-training operations, staffing operations, and document-management operations were part of the “Other” section until FY02/10. These businesses
were designated as Support Serv ices from FY02/11 after the company merged with Certo Corp. in September 2010. Materials/Supplies Sourcing Serv ices andVending Machine Serv ices, which had been operated by Certo, were also added as separate categories.

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Historical forecast accuracy
Initial CE vs. Results(JPYmn)Sales (Initial CE)
Sales (Results)
Initial CE vs. Results
Operating Profit (Initial CE)
Operating Profit (Results)
Initial CE vs. Results
Recurring Profit (Initial CE)
Recurring Profit (Results)
Initial CE vs. Results
Net Profit (Initial CE)
Net Profit (Results)
Initial CE vs. Results

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

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

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

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

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

FY02/14Cons.
260,000
257,243-1.1%
15,50015,115-2.5%
15,50015,092
-2.6%
8,300
8,161
-1.7%

Source: Company data, SR Inc. Research
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) sinceapproximately 70% of its sales are generated by a single group company. There is little difference
between estimates and performance.
However, for FY02/13, there were significant shortfalls. Firms acquired under M&A in initial forecasts did
not provide profits as expected in their first year.

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Balance sheet(JPYmn)ASSETSCash and Equivalents
Accounts Receivable
Allowance for Doubtful
Inventories
Deposit of Subsidiaries and Affiliates
Other Current Assets
Total Current Assets

FY02/09

FY02/10

FY02/11

FY02/12

FY02/13

FY02/14

6,991
18,025
-188
28
2,500
2,794
30,1507,964
16,284
-122
20
3,000
2,880
30,026

13,09828,246-226
1,476
18,9203,010
64,524

9,707
31,240-657
1,527
27,3203,349
72,486

10,014
44,673-144
2,237
18,0204,523
79,323

12,56537,420-290
2,504
32,4205,728
90,347

Buildings
Machinery for Area Control, net
Tools, Furniture, and Fixtures, net
LandConstruction in Progress
Other Fixed
Total Tangible Fixed Assets

762
343
475
13
1,009
2,602

1,185
305
284
15
952
2,741

1,234
265
1,791
284
182
3,756

1,217
246
1,918
284
108
3,773

1,089
274
2,079
282
72
3,796

1,046
238
2,487
278
209
4,258

Investment Securities
Deferred Tax Assets
Other
Allowance for Doubtful
Total Other Fixed Assets

1,730
534
1,566
-172
3,658

2,050
289
1,779
-141
3,977

2,983
278
1,701
-196
4,766

2,577
406
1,517
-224
4,276

2,973
288
2,196
-200
5,257

3,897
254
1,877
-199
5,829

Goodwill
Other
Total Intangible Assets
Total Fixed Assets
Total Assets

11,974649
12,623
18,88549,035

11,295629
11,924
18,644
48,670

10,546
1,031
11,577
20,10084,624

11,2491,023
12,272
20,32292,80910,801
1,520
12,321
21,375
100,699

10,078
1,609
11,687
21,775
112,122

LIABILITIES
Accounts Payable
Short-Term Debt
Other Current Liabilities
Total Current Liabilities

10,551
1,688
7,892
20,131

8,974
80
7,227
16,281

22,42449
8,251
30,72423,72041
9,882
33,64324,544
10
10,401
34,95526,701
5
12,60039,306Long-Term Debt
Other Fixed Liabilities
Total Long-Term Liabilities
Total Interest-Bearing Debt
Total Liabilities

56
768
824
1,744
20,956

31
993
1,024
111
17,306

6
1,006
1,012
55
31,737

15
968
983
56
34,626

5
1,190
1,195
5
36,1511,500
1,500
40,806

Shareholder Equity
Issued Capital
Reserves
Retained Earnings
Treasury Stock
Total Accumulated Other Comprehensive Income
Share Warrants
Minority Interests
Total Shareholder Equity (Net Assets)
Working CapitalInterest-Bearing Debt
Net Debt (Net Cash)

28,0793,238
2,963
20,852
-461
-42
72
1,456
28,079
7,502
1,744
7,747

31,364
3,238
2,964
25,366-461
145
110
31,3647,330
111
10,85352,8873,238
18,741
30,575-461
645
149
52,887
7,298
55
31,96358,182
3,238
18,75335,285
-460
647
173
545
58,182
9,047
56
36,97164,5473,238
18,77040,539
-458
992
205
1,260
64,54722,36615
28,01971,316
3,238
18,81846,235
-449
1,711
165
1,597
71,316
13,223
5
44,980Source: Company data, SR Inc. Research
Figures may differ from company materials due to differences in rounding methods.

AssetsCurrent assets account for approximately 80% of the company’s assets (as of FY02/14). A large portion ofreceivables are due from 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 (9% as
of FY02/14) due to the volume of M&A.
Aeon Delight’s assets and liabilities swelled in FY02/11 due to its merger with Certo Corp.
assets of 31.5 billion yen and liabilities of 15.3 billion yen.

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Liabilities
Aeon Delight was basically debt free, with a mere several million of interest-bearing debt at the end of
FY02/14. Cash and deposits exceeded interest-bearing debt. Receivables account for a significant portionof liabilities (68% as of FY02/13). However, receivables are diversified among a large portion ofcounterparties, and the largest is JPY1.0bn from Japan Beverage Holdings.
Equity Capital
Equity capital ratio rose to 64.2% at the end of FY02/10 from 39.9% in FY02/07 due to growth in equity
as a result of acquisitions. The company has maintained a relatively high equity capital ratio for the past
four years. However, SR Inc. believes that the company could use financial leverage (i.e., use of debt toacquire additional assets) to expand business and its equity.
Shareholder Rewards
Aeon Delight aims to provide dividends that correspond to its financial performance in a stable andcontinuous manner. It aims to provide a 20% dividend payout ratio, while keeping a close watch on its net
asset ratio. The dividend ratio in FY02/14 was 30.9%, and the company plans for a ratio of 30.5% in
FY02/15.

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Statement of cash flows(JPYmn)Operating Cash Flow (1)Investment Cash Flow (2)Free Cash Flow (1+2)
Financial Cash Flow
Depreciation & Amortization (A)Capital Expenditures (B)Working Capital Changes (C)Simple FCF (NI + A + B - C)

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

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

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

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

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

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

Operating cash flow
In FY02/13, net cash used in operations was 4.4 billion yen (net cash provided by operations was 9.6
billion yen in FY02/12), attributed to a 12.6 billion yen increase in accounts receivables related rise in LED
construction work for the Aeon group, and 6.6 billion yen paid in corporate income taxes. Prior to FY02/13,
cash flow from operations ranged from 6.5 billion in FY02/08 to 9.6 billion in FY02/13.
Investment cash flow
A significant portion of cash flow from investments stems from M&A activities. There is also a large
variance due to contributions from affiliated companies, but this more significantly affects operating cash
flow.
Financial cash flow
In FY02/13, net cashed used in financing activities were dividend payments of 2.3 billion yen. Prior to
FY02/09, the company used cash for repayment of funds raised from liquidation of future receivables.
Simple free cash flow
In FY02/13, working capital increased 13.3 billion yen YoY (13.4 billion yen increase in accounts
receivables and 710 million yen increase in inventories minus 820 million yen increase in accounts
payables). Depreciation and amortization of goodwill totaled 2.2 billion yen and capital expenditures were
1.6 billion yen. Net income totaled 7.5 billion yen. Simple free cash flow was negative 5.2 billion yen at theend of FY02/13.
Cash Conversion Cycle
Accounts Receivable TurnoverDays in Accounts Receivable
Inventory TurnoverDays in Inventory
Payables TurnoverDays in Payables
Cash Conversion Cycle (days)

FY02/098.2
44.7
6,565.0
0.1
12.0
30.5
14.3

FY02/108.2
44.6
4,965.8
0.1
12.2
29.9
14.8

FY02/11
7.7
47.6
196.4
1.9
9.4
39.0
10.4

FY02/12
7.4
49.4
127.3
2.9
8.3
44.1
8.2

FY02/13
6.6
55.7
116.2
3.1
9.1
40.3
18.5

FY02/14
6.3
58.2
94.3
3.9
8.7
41.8
20.3

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

Inventory turnover rate deteriorated over the past three years due to increased inventories from acquiredcompanies. Accounts receivable are mainly from Aeon group companies, while accounts payable are withvarious suppliers, such as soft drink beverage suppliers. In FY02/13, its cash-conversion cycle increased
due to increased LED installation work for Aeon group companies.

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Other information
HistoryJapan MaintenanceIn 1972, Nichii Co., Ltd. (renamed Mycal Corp. in 1996) established Nichii Maintenance Co., Ltd., toundertake maintenance at Mycal stores (Aeon Retail acquired Mycal in March 2011). In 1976, Nichii
Maintenance changed its name to Japan Maintenance Co., Ltd. The company listed its shares on theSecond Section of the Osaka Securities Exchange in 1995, and on the Second Section of the Tokyo Stock
Exchange in 1999. In 2000, it listed its shares on the First Section of the Tokyo Stock Exchange.
Aeon Techno Service
In 1987, Jusco Maintenance was established after Jusco Kosan Co., Ltd. (currently Aeon Mall) created a
subsidiary from its building maintenance division. The company handled facilities maintenance, cleaning,and security services for retail stores for the Aeon group companies. In 1997, Jusco Maintenance changed
its name to Aeon Techno Service Co., Ltd.
MergerMycal, falling under hardship and filed for bankruptcy in 2001, became a wholly owned subsidiary of Aeon
in 2003. As a result, Japan Maintenance merged with Aeon Techno Service, and changed its name to Aeon
Delight Co., Ltd. in 2006. In 2006,
Aeon Delight
Prior to the merger, Japan Maintenance generated 40% of its sales from Mycal group companies, while
Aeon Techno Service depended mostly on Aeon group companies for its business. The company derived
65% of total sales from Aeon group companies as of end of FY02/13, and made several acquisitions to
expand its business.

News & topics
In FY02/12, Aeon Delight developed recirculating, water-saving plastic urinals. These urinals reducewater consumption by 90%. According to Aeon Delight, a train station in which 500 people use therestroom daily could save at least 160,000 yen a year with one urinal (500 people x 1.8 liters x 365 x 0.55
yen x 90%). This calculation is based on the assumption that water and sewage cost 550 yen per 1,000
liters, and that conventional urinals require 1.8 liters of water per use. Aeon Delight plans to sell theseurinals for 120,000 yen per unit. However, after testing in stores, there was room for improvement, andalthough experiments continue, it is still not at a stage where it can be implemented en masse.

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Source: Company data, SR Inc. Research

Aeon Delight also developed a water-based coating agent as an alternative to conventional resin wax.
"Aeon Delight Coat" has a high-luster finish without organic solvents or the removal of older wax coatings.
Another product, "AD Hard Coat," which is under development, eliminates the need for buffing.

Conventional
Wax

New
Material

Source: Company data, SR Inc. Research

November 2013
On November 28, 2013, the company announced the launch of a solar power business.
Aeon Delight, Recycle One, Inc., etc. will jointly invest to establish Kikugawa Ishiyama Solar Ltd. andKikugawa Horinouchiya Solar Ltd. The 9.4-megawatt facilities of Kikugawa Ishiyama Solar and the
7.5-megawatt faciliteis of Kikugawa Horinouchiya Solar will have a total annual output of 20.84
megawatt-hours, equivalent to the annual power consumption of about 5,000 typical households.
Construction is scheduled to begin in December 2013, and electricity sale is slated to begin in February2015.

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Major shareholders
Aeon group companies own over 60% of the company.

As of February 28, 2014
Top Shareholders
Aeon Retail Co., Ltd.
Aeon Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust Account)Northern Trust Co. (AVFC) Re 10PCT Treaty AccountJapan Trustee Services Bank, Ltd. (Trust Account 9)
Aeon Delight Business Partners
Aeon Delight Employees
BNP Paribas Sec Services Luxembourg Jasdec Aberdeen Global Client
AssetsJapan Trustee Services Bank, Ltd. (Trust Account)
Trust & Custody Service Bank, Ltd. (Pension Trust Account)

AmountHeld
42.94%
16.81%
2.71%
1.69%
1.69%
1.53%
1.15%
1.10%
0.95%
0.95%

Source: Company data, SR Inc. Research

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

Employees
Aeon Delight had 10,728 employees and an average of 5,671 temporary employees on a consolidated
basis as of FY02/14. At the parent level, there were 3,818 employees and 2,265 temporary employees.
The average age, average length of employment, and average annual salary on a parent basis are as
follows:
 Average age: 46 years and 7 months
 Average length of employment: 10.2 years
 Average annual salary: JPY4.9mn

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

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By the way
Corporate Social Responsibility (CSR) Activities
Aeon Delight is pursuing corporate social responsibility (CSR) activities by strengthening its efforts toprotect the environment with a management principle of creating “environmental value” for clients.
The following are examples of the company’s environmental initiatives:▪
Promotion of energy-saving lighting equipment
The company is promoting energy-saving lighting devices, such as light emitting diode (LED) lamps, thatsignificantly reduce electricity consumption. The company seeks to help clients cut carbon dioxide
emissions and reduce expenses by selecting the most suitable source of lighting depending on thesituation and intended use, such as lighting for room interior or a parking space, and for illuminating abillboard.
▪
Proposal for environmentally friendly packaging
The company proposes a variety of packaging materials, including biomass materials obtained during the
growth process of plants that do not increase carbon dioxide when burned, as well as water based
gravure printing that has low environmental impact.
▪
Introduction of environmentally friendly vending machines
The company introduced environmentally friendly vending machines that can reduce electricity
consumption by as much as 45% a year with the use of heat pumps and LED lighting. The company
unveiled heat-pump vending machines in 2008, and those equipped with LED lighting in 2011.
▪
Participation in Aeon 1% Club
Aeon 1% Club supports projects to protect the environment, boost international cultural and humanexchange, promote regional cultural and social activities, and donate to welfare projects. It is an initiative
under which group companies contribute 1% of their pretax profits so that these activities can be
maintained regardless of the companies’ business performances.
▪
Tree planting through Aeon Environmental Foundation
The company participated in a tree-planting event in Beijing, China in fiscal year 2010, took part in asimilar project in Jakarta, Indonesia in fiscal year 2011 and 2012, respectively. For the tree planting event
in Jakarta held during fiscal year 2012, the company sponsored participation of endorsing companies, inaddition to having its employees from Japan volunteering for the event▪
“Clean Day” on the 11th Day of Each Month
The company designated the 11th day of each month as “Clean Day,” where employees clean streetsaround their workplaces before the start of the working day.
The company also conducts a number of social contributions as part of its CSR activities:▪
Volunteering at social welfare facilities
The company conducts volunteer activities at nationwide welfare facilities once a year, using the systemof the Aeon Social Welfare Foundation.
▪
Shopping basket cleaning outsourced to vocational aid facilities
The company outsources cleaning of its shopping baskets to vocational aid centers. Shopping baskets

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

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Company profile

Company NameAEON DELIGHT CO., LTD.

Phone

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

Tokyo Stock Exchange 1st Section

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

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

IR Mail

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