Growth strategy for Trilogy Holdings＜5133＞

2. Shareholder return plan

Regarding shareholder returns, we recognize shareholder respect as an important management strategy issue, and our basic policy is to work on returning benefits to shareholders by implementing dividends based on performance. Based on this policy, the dividend for the March 2024 period is an annual 7.0 yen (end of term lump sum, ordinary dividend 5.0 yen + 35th anniversary commemorative dividend 2.0 yen), an increase of 2.0 yen compared to the previous period. The dividend payout ratio is 60.7%. For the dividend of the March 2025 period, the plan is an annual 5.0 yen (end of term lump sum), a decrease of 2.0 yen compared to the previous period. This is because the commemorative dividend that was implemented for the March 2024 period has been dropped, and it is the same amount based on the ordinary dividend. The expected dividend payout ratio is 31.3%.

Expectations for sustainable profit growth and profit margin improvement initiatives

3. Our perspective

The Trilogy Group views "expertise and market responsiveness" as core competencies and has a wealth of experience in introducing and popularizing overseas cutting-edge technology in the Japanese market. Even in the headwinds of rapid yen depreciation, the technical and sales strength enhancement measures that responded to expanding demand achieved significant revenue and profit growth for the March 2024 period. Our company evaluates this. However, the current profit level is insufficient, and it is considered that the realization of sustainable profit growth and profit margin improvement is a challenge for the future of the Trilogy Group. In response to these challenges, the Trilogy Group has announced a direction for expanding its business portfolio through M&A and alliances and transitioning to a stock-based business model in its new three-year medium-term management plan. The plan also announced a goal of increasing the operating profit margin to 7.3% by March 2027 (the actual result for the March 2024 period was 5.8%). This can be evaluated to some extent. As the security needs increase with the progress of DX and with the business environment surrounding the Trilogy Group being favorable, our company believes that the level of investor interest and understanding regarding the Trilogy Group's growth scenario will increase further if specific profit growth and profit margin improvement initiatives (such as hedging against exchange rate fluctuations, expanding stock income, and improving sales mix) and new growth drivers such as products and services are presented more concretely.

In light of these challenges, the Trilogy Group has announced a direction for expanding its business portfolio through M&A and alliances and transitioning to a stock-based business model in its new three-year medium-term management plan. The plan also announced a goal of increasing the operating profit margin to 7.3% by March 2027 (the actual result for the March 2024 period was 5.8%). This can be evaluated to some extent. As the security needs increase with the progress of DX and with the business environment surrounding the Trilogy Group being favorable, our company believes that the level of investor interest and understanding regarding the Trilogy Group's growth scenario will increase further if specific profit growth and profit margin improvement initiatives (such as hedging against exchange rate fluctuations, expanding stock income, and improving sales mix) and new growth drivers such as products and services are presented more concretely.

(Authored by FISCO guest analyst Masanobu Mizuta)