■ Medium-term Management Plan 1. The goal of the medium-term management plan The outline of the "Medium-term Management Plan 2025" (fiscal year from February 2024 to February 2026) that Veru, Inc. is currently working on is as follows. The company believes that the market environment will change after the end of the corona pandemic. Regarding the changing societal situation, the company assumes various management challenges arising from the normalization of economic activities and the consequent labor market shortages, uncertain future risks, the rise of marketing needs due to the evolution of technology and the increasing complexity of customer touchpoints. As for the company's market, it predicts the importance of securing highly skilled personnel through marketing technology utilization and the increase in effective BPO demands in both the defensive and offensive areas amid various management challenges, as well as rising labor costs due to a shortage of human resources and the automation of customer correspondence. In April 2023, the company established a new corporate brand slogan, "How will you respond to that voice?". Although it has been listening to the needs of society, companies, and consumers by listening to the people's voices and solving problems with meticulous communication, the problems that can be solved by interpreting the "voice" are becoming more multifaceted and complex due to technological innovations. Meanwhile, the new epoch of "NEW BPO," which the company group aims to achieve as a slogan, is to model the process of turning many of the voices gathering at the CX site (customer response department) into values related to management decisions and to lead to the optimal action by utilizing data. NEW stands for Next, Engage, and Widen, aiming to delve into all the voices (maximizing the performance of 40,000 people, enhancing the utilization of data), connect stakeholders (collaboration with partners), and broaden the sphere of influence (growth strategy for expanding into new business domains). In other words, it is considered that the company aims to utilize a wide range of collaborations with companies more than in the past, not only in contact centers but also in marketing and other areas. In the "Medium-term Management Plan 2025," the company has set three key policies and plans to make additional investments of a total of over 15 billion yen for three years from fiscal year 2024 to achieve them. As a result, it has set quantitative targets to achieve sales revenue of 180 billion yen (an average year-on-year increase of 7.1%), operating profit of 16.5 billion yen (an operating margin of 9.2%), net income after tax of 11 billion yen (an average year-on-year increase of 11.8%), ROE of 14.4%, and a dividend payout ratio of 50% for the final fiscal year ending in February 2026. It is a goal-setting that exceeds the sales revenue average annual increase of 5.3% and the tax-exempted income average annual increase of 8.7% in the previous medium-term management plan, based on the assumption regarding the changing social and economic environment. Although the first year of the plan, the fiscal year ending in February 2024, started off tough due to the unexpected decrease in high-profit corona-related businesses, the company aims to achieve its target for the final year by investing in organic growth (growth by internal resources) and reform through generated AI after the fiscal year ending in February 2025.

4. Management conscious of capital cost and stock price

Shibusawa Warehouse <9304> is promoting management conscious of capital cost and stock price in order to build a management foundation that supports growth strategy. Specifically, we are making efforts to improve PBR, which is currently below 1, and to improve ROE and P/E ratio. In order to improve ROE, we plan to achieve an ROE of 7% or more during the Medium-term Management Plan 2026 period through top-line growth, improvement of profit margin, and promotion of appropriate capital policy, and aim for long-term stable achievement of ROE 10% above capital cost in Shibusawa 2030 Vision. In order to improve the P/E ratio, we aim to increase the expected profit growth rate by steadily executing the growth strategy while reducing the shareholders' capital cost by lowering the risk premium. We will also communicate these initiatives through IR activities.

In addition, there are plans to execute growth investments steadily towards improving corporate value. During the Medium-term Management Plan 2026 period, we expect to have cash inflows of up to 60 billion yen through the use of external liabilities assuming financial soundness and disposal of assets, in addition to operating cash flows of 25 billion yen. In addition to the essential update investment of 10 billion yen, we are considering growth investment of 40 billion yen and shareholder returns of 10 billion yen. The growth investment is intended to strengthen the foundation of domestic businesses, strengthen and expand overseas businesses, expand the real estate portfolio, expand business areas, develop new businesses, and strengthen DX/IT and ESG management, including M&A and capital alliances.

(Author: FISCO guest analyst Nobumitsu Miyata)