During the Five-year Rolling Plan period that spanned from FY2019 to FY2023, the unprecedented worldwide spread of COVID-19 caused economic stagnation and disrupted logistics, forcing us to change our values and ways of life. The automotive industry has entered a once-in-a-century period of change, with rapid advances in car-related technological innovations, such as the shift to electric vehicles and automated driving. Under these circumstances, in order to respond to radical changes in the business environment, we continuously revised our direction and strategy under the Five-year Rolling Plan while promoting increased revenue for each business and the establishment of business infrastructures to support this. As a result, consolidated net sales outside the Domestic AUTOBACS Business increased by approximately 27.0 billion yen, allowing us to establish a foundation for growth in areas outside of automotive goods and services sales. In addition, in FY2023, while there was a decrease in sales and profits due to transferring the shares of two consolidated subsidiaries in our Car Dealership Business, net sales operating income ratio increased from 3.4% (FY2019) to 5.0% (FY2022), and I recognize that we also achieved a certain degree of success in improving profitability. On the other hand, the fact that we were unable to achieve sufficient growth in the Domestic AUTOBACS Business and are highly dependent on the sale of winter goods such as studless snow tires, is an ongoing problem.

From a financial standpoint, while we achieved the initial plan of keeping cash flow at the level of required working capital through shareholder returns, etc., ROE is still not satisfactory at 5.8% (FY2022) and 5.0% (FY2023). Going forward, we will aggressively invest in the future while remaining aware of ROE that exceeds capital costs and considering measures such as withdrawing from businesses with low investment returns. In this way, we will continue to strengthen investment return management and review our business portfolio.

Our performance in FY2023 fell short of the plan, with consolidated net sales of 229,856 million yen, a 2.7% year-on-year decline, and consolidated profit of 6,355 million yen, a 12.2% year-on-year decline. This decrease in sales and profits was caused largely by a significant slump in tire sales due to a mild winter, as well as the fact that, with the changes in the franchise chain package, we took measures against the initial inventory held by franchisees at the beginning of FY2024 in order to maintain the same price level after the reduction in wholesale prices, which caused us to record a loss of approximately 3.0 billion yen in sales and profits as a temporary accounting process.

Beginning in April 2024, we made changes to the franchise chain package including lowering wholesale prices from the Company to franchisees and raising the retail royalty rate, in order to achieve a management style in which franchisees and the franchise chain headquarters work together to place a greater emphasis on retail. This allowed us to change from a mechanism in which we acquire profits in advance through wholesale to one in which we earn profit from royalties from retail sales.

Beginning in FY2024, we anticipate that pit service labor sales at franchisees, which previously did not result in profits for the headquarters, will be added to headquarters earnings as royalties. Additionally, we also plan to gradually incorporate the cost of DX promotion at stores into royalties so that all stores can offer the same high-quality services. 

In May 2024, we announced the Medium-term Business Plan, “Accelerating Towards Excellence.” Behind the formulation of this plan is the fact that we have not achieved significant growth since 2000 due to the shrinking of the automotive goods and services market. Based on the recognition that the key to our regrowth lies in becoming indispensable to customers’ mobility usage and establishing a presence in the global market beyond the shrinking domestic market, we established a new direction in which we aim to provide “mobility lifestyle infrastructure” for customers, in order to recover sales of the Domestic AUTOBACS Business and achieve accelerated growth of peripheral businesses from a fully customer- centric perspective.

When formulating the plan, we decided to use consolidated net sales, operating income, and ROIC as indicators, aiming for consolidated net sales of 280.0 billion yen, consolidated operating income of 15.0 billion yen, and an ROIC of 7.0% in FY2026. These targets were firmly embedded with preparatory measures for continued growth even after the plan period ends, and were calculated by backcasting from the 500.0 billion yen net sales target for FY2032 established in the long-term vision. We will work with determination to meet them, recognizing that they are the minimum targets for which we should aim.

During the Medium-term Business Plan period, we plan to invest 35.0 billion yen cumulatively, with a focus on the Car Dealership Business, Internet Business, and M&A-related investments. The investment amount will be gradually increased over the three-year period, with a cumulative total of 17.0 billion yen in M&A investments anticipated in particular, as we explore and investigate investment opportunities aimed at discontinuous growth. With regard to M&A, the Board of Directors conducts deliberations at the initial investigation stage, gives PMI progress reports, and conducts discussions and monitoring aimed at demonstrating synergy at an early stage. Going forward, we will continue to make investment decisions while testing effectiveness with a view to demonstrating a strong return on investment.

The consolidated performance plan for FY2024 forecasts net sales of 240.3 billion yen, a 4.5% year-on-year increase, and profit of 7.7 billion yen, a 21.2% year-on-year increase. In addition to the market conditions of increased demand for statutory safety inspections, servicing, and maintenance due to lengthened vehicle life and the expansion of the used car purchasing and sales market, this forecast anticipates a slight increase in tire sales in reaction to last year’s mild winter. Since vehicles subject to statutory safety inspections will increase in the second half of the fiscal year, statutory safety inspections, maintenance, oil, batteries, etc. are expected to remain steady. On the other hand, we expect the downward trend in car electronics to continue.

We reviewed our business portfolio with a view to improving capital efficiency, and have concentrated our management resources on competitive areas. In FY2023, in our Overseas Business, we improved profitability by closing unprofitable stores of AUTOBACS FRANCE S.A.S. and dissolving our joint venture, PT AUTOBACS INDOMOBIL INDONESIA. As a result, operating income of the Overseas Business as a whole returned to the black.

In order for the Group to keep growing continuously as the automotive goods and services market shrinks, I think that, in addition to improving the efficiency of existing businesses and promoting regeneration, investment in growth areas and the development of new businesses will become even more important themes, and therefore, we are promoting business management that focuses on capital costs with ROIC as an indicator. In FY2023, we established an ROIC-based management infrastructure by visualizing ROIC by segment. Beginning in FY2024, since target ROICs have been established for each segment, we will use ROIC by segment as a means of decision-making in business portfolio review going forward, leading to the improvement of company-wide ROIC.

As part of efforts to spread ROIC internally, we are also promoting the incorporation of ROIC as a personnel evaluation indicator, such as making ROIC by segment an indicator for the performance evaluation of General Managers. Going forward, I hope to encourage each employee to change their behavior with a view to spreading the use of ROIC internally through ROIC trees, etc.

The company-wide ROIC target was set as 7.0% for FY2026. In addition, to achieve the goal of maintaining or increasing ROIC so that it exceeds capital costs (WACC), we will improve the ROIC of each business and control WACC by using borrowed capital when making growth investments.

The Company’s PBR remains steady at around 1.0 times, most likely due to the Group’s inability to demonstrate future growth. In this regard, it is critical that we steadily amass revenue in each business and achieve the income targets and investments in growth established in our Medium-term Business Plan. I think that it will be even more important at the next stage to properly ascertain whether each business area can secure investment return and withdraw from those that cannot.

With regard to shareholder returns, we position returning profits to our shareholders as an important management priority. During the Five-year Rolling Plan period, we established a basic policy of a five-year cumulative total shareholder return ratio of 100%, but the cumulative total shareholder return ratio for said period was 93.9%. When excluding the temporary profits from the sale of the official BMW/MINI dealership business in FY2024, the five-year cumulative total shareholder return ratio was 102.9%.

Concerning three-year shareholder returns for the Medium-term Business Plan period beginning in FY2024, we have established a basic policy of prioritizing investment in growth opportunities aimed at achieving our long-term vision, and providing stable annual dividends of 60 yen per share as a general rule. Additionally, we plan to allocate the increase in operating cash flow to investment.

We are also aware of expectations that we will strengthen shareholder returns by establishing a target payout ratio and increasing dividends, but in the current plan period, we ask that our shareholders and investors trust in our ability to achieve medium- to long-term growth by prioritizing investments in regrowth and ensuring that we reach our medium-term targets.

As the General Manager in charge of Corporate Management, in addition to cash flow management that increases capital efficiency and maintenance of a sound financial structure, I think that it is also important to make future-oriented management decisions that sufficiently consider non-financial capital as well. The newly announced Medium-term Business Plan establishes a policy of creating further economic value through the resolution of social and environmental issues by AUTOBACS Group as a whole and the focusing of investments in human capital.

Beginning in FY2024, I have had increased opportunities to communicate directly with investors as part of IR activities. Although I sometimes receive harsh words, I feel that learning what the stock market wants now and deepening our mutual understanding is essential to improving corporate value. Going forward, I will continue to engage in even more sincere and credible dialogue with stakeholders through financial and non-financial disclosures, briefings, and other opportunities, in order to ensure that they have a deep understanding of the Group’s vision and strategy.