■ 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.

SBS Holdings <2384> proclaims to be a mega-venture growing in 'logistics x IT', solidifying its position as a top-tier industry player. The company aims to respond to the logistics needs of all customers, coexist with society, and strive to be a trusted corporation. The 3-year medium-term management plan 'SBS Next Stage 2025', which started in December 2023, sets out three management visions: 1) contributing to customer value creation through service provision, 2) emphasizing ESG as a social infrastructure and contributing to all stakeholders, 3) implementing profit returns continuously and according to performance, aiming for further enhancement of corporate value and sustainable growth.

1. Management Financial Targets

As the final year target for the management financial targets in the fiscal year ending December 2025, SBS Holdings aimed for a revenue of 500 billion yen, operating profit of 27.5 billion yen, and an operating profit margin of 5.5%. However, due to a significant decline in overseas logistics business performance in the fiscal year ending December 2023, the current situation has slightly raised the hurdles from the initial plans. Nevertheless, discussions are progressing to acquire 66.61% of the shares of NSK Logistics, a logistics subsidiary of Nippon Seiko within the year 2024. The grouping of NSK Logistics is estimated to add over 20 billion yen in revenue. Furthermore, considering M&A activities such as acquiring 3PL companies overseas, the company sees that achieving the revenue target is within reach depending on the M&A situation and the pace of recovery in the future logistics business. It is noted that NSK Logistics only represents domestic operations, while external logistics companies are currently utilized for Nippon Seiko's overseas operations. The company, similar to past M&A activities, is also considering incorporating these overseas business segments in the future, which could potentially lead to acquiring sales of up to 50 billion yen solely for the Nippon Seiko Group.

Looking at the business segment performance, while the logistics business is underperforming as mentioned earlier, the real estate business and other businesses are generally progressing as planned. For the logistics business, the key point is how much the sales of focus businesses such as EC logistics and 3PL can be expanded, in addition to the recovery of overseas logistics business. The profit margin is aimed to increase from 2.8% in December 2023 to 4.1% in December 2025. The company expects profitability to improve, especially in SBS Rico Logistics and SBS Toshiba Logistics, where the PMI effect is expected to be evident. By addressing future pricing adjustments, improving loading efficiency, and optimizing workforce allocation for productivity, the company aims to enhance profitability. In terms of loading efficiency, video training is conducted on effective loading methods for goods, aiming to educate drivers.

As part of its differentiation strategy, the company is actively promoting the introduction of 'LT x IT', positioning it as an initial investment phase for accumulating operational know-how through trial and error. The realization of the introduction effect is likely to occur no earlier than the fiscal year ending December 2025. The real estate business plans to ensure stable revenue by systematically advancing the fluidity of logistics facilities.

The 3-year investment plan will total 98 billion yen (including M&A), increasing by 1.8 times from the performance up to December 2022 (55 billion yen). The breakdown includes 16 billion yen for routine investments (compared to 13 billion yen up to December 2022) and 82 billion yen for strategic investments (compared to 42 billion yen). Strategic investments encompass investments in logistics facility development and LT x IT fields. As of the second quarter cumulative for the fiscal year ending December 2024, 13.2 billion yen has been invested in logistics facility development and 6 billion yen in other investments (compared to 12.8 billion yen and 9 billion yen in December 2023, respectively). With the addition of M&A investments, the progress can be considered generally favorable. Despite the current challenging market environment, the company believes that steadily advancing these investments is necessary to achieve medium- to long-term growth, and hence, it plans to continue investing towards the sales target of 700 billion yen by December 2030. The investment funds will be covered by internal funds, borrowings, and early liquidity of logistics facilities.

(Written by FISCO guest analyst, Jo Sato)