■ 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.

2. Business Model

One solution to the challenges faced by Japanese small and medium-sized enterprises is the business succession total solution provided by Cerendip Holdings <7318>. And the foundation of this business succession total solution is the Monozukuri Business Succession Platform, which is built on three foundations: M&A Execution Infrastructure, Management System Infrastructure, and Manufacturing Infrastructure, based on the company's three main businesses. The M&A Execution Infrastructure consists of three investment models that cater to growth strategies and the needs of owner-managers: roll-up type M&A and long-term investments such as investments in new businesses, flow-type investments that aim for value enhancement and exit, and investments through funds, as well as alliances with mega banks, regional financial institutions, and funds that cover multiple areas. The Management System Infrastructure includes due diligence with a focus on not only financial and legal aspects, but also overall management transformation, as well as management support provided by professional management teams and back-office support provided by the company. The Manufacturing Infrastructure consists of visualization, standardization, and personnel reduction to improve quality and productivity, as well as research and development investments.

By combining both management and investment, this unique platform provides owner-managers of small and medium-sized manufacturing companies with solutions for their aging population through business succession via M&A, overseas expansion to cope with the shrinking Japanese market, entry into high value-added and new areas to adapt to changing times such as environmental considerations, implementation of smart and digital transformation to address aging and labor shortages in the workplace and low productivity, and group management support provided by the company to address weaknesses in management and planning functions. Furthermore, this platform serves as a business model for Cerendip Holdings by achieving both discontinuous growth through the M&A Execution Infrastructure and organic growth through the Management System Infrastructure and Manufacturing Infrastructure at the same time.

(Author: FISCO guest analyst Nobumitsu Miyata)