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Financial Results Briefing for the December 2005 Term March 3, 2006 SBS Co., Ltd. Securities code: 2384 Table of Contents І. Financial Results for the December 2005 Term & Earnings Forecast for the December 2006 Term ІІ. Post-M&A Activities and Business Strategies

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financial results briefing for the december 2005 term

Financial Results Briefing for the December 2005 Term

March 3, 2006

SBS Co., Ltd.

Securities code: 2384

slide2

Table of Contents

І.Financial Results for the December 2005 Term & Earnings Forecast for the December 2006 Term

ІІ.Post-M&A Activities and Business Strategies

III. Briefing on Balance Sheet

IV. Future Efforts

consolidated statement of income for december 2005 term
Consolidated Statement of Income for December 2005 Term

(Unit: Million Yen)

Foods Lec contributed to the consolidated results for the full year.

TL Logicom (former Tokyu Logistics) and two other companies contributed for the half-year.

Same-day delivery business and human resources business continued steady growth

consolidated segment information for december 2005 term
Consolidated Segment Information for December 2005 Term

(Unit: Million Yen)

(Unit: Million Yen)

consolidated segment information for december 2005 term6
Logistics business

 General distribution and food distribution:

Foods Lec’s performance has been strong

TL Logicom started to contribute to earnings from the second half.

Post M&A activities of Foods Lec (former Yukijirushi Butsuryu) & TL Logicom (former Tokyu Logistics)

 (Refer to case study in later slides)

Same-day delivery service:

Income & profit increased thanks to competitor withdrawal

Expanded base for network logistics

Moving service business:

Explored marketing methods/incurred costs in organizational realignment

Retreated from unprofitable free paper business

 (Refer to case study in later slides)

Consolidated Segment Information for December 2005 Term
consolidated segment information for december 2005 term7
Consolidated Segment Information for December 2005 Term
  • Marketing business
    • Income increased, yet competition remains stiff in preparation for postal privatization. Earnings are sluggish.
    • Move of industry reorganization. This fiscal year would be the bottom in terms of financial performance.
    • PAM Co.,Ltd. joinedSBS Group. Financial contribution from FY2006.
  • Human resources business
    • New operational bases aggressively launched during the first half made positive contribution to sales
    • Significant rise in recruitment cost suppressed earnings
  • Other businesses

Environmental services business

    • Cost forYokohamaFacility launchwas a burden, resulting in red for the full year,

Financial services business

    • Re-acquisition of Omiya Center Building. Built qualificationsin real estate liquidation techniques.
consolidated cashflow statement for december 2005 term
Consolidated Cashflow Statement for December 2005 Term

(Unit: Million Yen)

CF from operating activities: Increase in profits due to group expansion. Increase in depreciation expense

CF from Investing/financing activities: Acquisition of TL Logicom. Funds procured by arranging a loan for the acquisition.

consolidated performance forecast for december 2006 term
Consolidated Performance Forecast for December 2006 Term

(Unit: Million Yen)

Full-year contributions will bemade by TL Logicom, Zentsu, etc.

Focus on 3PL/Joint-distribution business (rollout of LAOX project)

Integration of headquarters function (April). Pursuit of existing M&A synergy

Seek further business expansion

consolidated earnings forecast by segment for december 2006 term
Consolidated Earnings Forecast by Segment for December 2006 Term

(Unit: Million Yen)

(Unit: Million Yen)

Logistics business: Focus on growth of 3PL business

Marketing business: Industry trend will be set this year ahead of postal service privatization Expectation of business opportunities for SBS is high.

Human resources business: Strong demands for general assistance work/work in warehouses, but impact of staff shortage is a concern. Earnings improved at new operational bases from FY2005.

slide13

Recognizing business environment

Changes in

business environment

Challenges

Measures (strategies)

  • Expansion in size and business offerings
    • Integrated business expansion strategy of M&A+ internal growth
    • Enhancing business portfolio
  • Enhance corporate strength(Examplesin Case Studies)

1) Strengthen sales capability

2) Pursuesynergy of SBS group

3) Strengthen capability to respond to clients’ needs

  • Privatization of postal services
  • Sophisticated demands from Clients
  • Industry trend toward oligopoly
  • Escalating fuel cost
  • Rise in labor cost
  • Establish competitive advantage by strengthening comprehensive capability of SBS group
  • Much closer relationship-building with customers
  • Secure earnings by building more effective business model
integrated business expansion strategy of m a internal growth
Integrated Business Expansion Strategy of M&A + Internal Growth
  • Selecting M&A targets in alignment of our aim of being a business infrastructure provider
  • Build track records in turn-around businesses

1) Execution of strategic

and sound M&A

  • Enhance Corporate Strength
    • Strengthen sales capability
    • Reviseincentives
    • Reform corporate culture
  • Sharesuccess experiences via post-M&A support to groupcompanies
  • Pursuit of synergy effects

2) Swiftintegration of newly acquired companies (Business co-ordination

/Group-wide network)

M&A

+

Internal Growth

  • Build advancedlogistics facilities by providing know-how in logistics system design/development
  • Review/Assess effective use of real estate
    • Liquidation
    • Logistics REIT
    • Know-how for efficient use of assets

(One of our core competency)

3) Efficient and effective

use of assets(Group-wide)

strengthening business portfolio
Strengthening Business Portfolio

Provide comprehensive service catering to outsourcing needs of businesses – as a business infrastructure provider

Realize cost competitiveness and capability to respond to sophisticated needs

Recent efforts

  • Logistics business:Acquired Zentsu (Sales: 10 billion yen), which is highly regarded for its fresh foodsstoring/processing skills and home-delivery service (deal closing on January 5)
  • Financial services business:In 2005, acquired Carlyle-held interest in real estate which had been acquired jointly by our A-MAX financial subsidiary and Carlyle in 2004.
  • Marketing business:Took 20% stake in PAM, which engages in advertisement planning and production (mainly brochures for financial products) and later made it a wholly-owned subsidiary through a stock swap.

Current three pillars

Human resources business

Marketing business

  • Temporary staffing service
  • Staff subcontracting service
  • Market research
  • Sales promotion
  • Online mail order business, etc.

Logistics business

  • Same-day delivery/nationwide delivery
  • Food distribution/Vehicle transportation
  • Overseas distribution/moving service business

Expand current business segments from 3 pillars to 6

Environmental services

business

Financial services business

Business areas to drive growth in the future

  • Collaboration with logistics business
  • Collection of large refuse from households
  • Strengthening industrial waste disposal business
  • Establish leasing business
  • Securitization/liquidation of real estate
  • Others

Information service business

  • Warehouse management system (WMS)
  • Medical analysis system solution
  • Logistics system
case study 1 efforts in foods lec
Case Study 1: Efforts in Foods Lec ①

At the time of acquisition by SBS

  • Foods Lec sales were mainly generated through transportation service, work in warehouses, and auto-leasing business contracted fromSnow Brand Group and its affiliates. (including formerSnow Brand Group companies and its affiliates) (Approx. 70% of the total sales)
  • Sales environment has been tough.
  • Vehicle finance lease to partner transportation companies is a unique business area.

Challenges

  • Maintain quality level, expand into broader range of refrigerated/general food area and secure earning base
  • Drive deployment of consolidated distribution business (3PL) leveraging the synergy of SBS group
  • Expand auto-leasing business to the entire group
case study 1 efforts in foods lec17
Case Study 1: Efforts in Foods Lec ②

Efforts and specific results

  • New customer cultivation
    • Contracted the entire logistics business from Sweet Garden and created a business division.
  • Strengthen Consolidated distribution business
    • Strengthen consolidated inland distribution business leveraged on the Sweet Garden case
    • Cooperate/coordinate with Zentsu in business deployments within the Kanto region
  • Leasing business division rollout
    • Expand service provision by the entire group from the current scope of service provision to partner companies.
    • Study growth strategy towards specializing in finance lease business for trucks
    • Staff and system enhancement
    • Planned investment amount for 2006: 2.4 billion yen
  • Improvement ofvehicle dispatching/hiring control and efficiency in wide-area transportation
    • Concentrated vehicle dispatch control centers for wide-area transportation in the Chubu Branch Office, and improved loading and capacity operating rates.
case study 1 efforts in foods lec18
Case Study 1: Efforts in Foods Lec ③

Performance Trend

  • Refrigerated logistics business grew steadily, focused on consolidated distribution business
  • Improving logistics profit rate is a challenge.
  • Impact of accounting standard change in leasing business
case study 2 efforts in tl logicom
Case Study 2: Efforts in TL Logicom ①

At the time of acquisition by SBS

  • Performance of logistics business was stable.
  • Larger profit contribution provided from real estate leasing business.
  • Existing customer base has been stable. New customer base remained small.
  • Close to 20 percent of sales from Tokyu Group companies
  • Sotetsu Transportation, Tokyu Unyu, and Tokyo Tsuun have merged over the course of the past two years. (Integration process, both in terms of HR and business operations, of the three former companies is ongoing)

Challenges

  • Cultivation of new customers
  • Increase profitability of logistics business
  • Effective use of real estate
  • Faster information sharing among sales offices and further strengthening of operational coordination.
  • Organizational Reformation
case study 2 efforts in tl logicom20
Case Study 2: Efforts in TL Logicom ②

Efforts and specific results

  • Strengthening sales capability in logistics business
    • Promotion of new customer cultivation by efforts such as establishment of Sales Development Division.

Example: SBS group won a contract to handle the entire logistics operation for LAOX. (Refer to the next slide for details)

    • Group-wide sales efforts based on coordination among SBS group companies, led by TL Logicom.

(A-Max:real estate asset management, AT&C:warehouse management system)

    • Drive further business deployments of 3PL service, taking the LAOX deal as a model case
  • Established a real estate division in order to promote effective use of real estate
    • Concentrated real estate-related businesses. Promotion of more effective use of assets and efficient business operations.
  • Refinementof operation management
    • Execute efficient vehicle dispatch controlby enhancing information sharing and operational coordination among branch offices.
    • Staff enhancement
  • Reformationof management/human resources
    • Concentrate into a 3-business-division system from 8 divisions. Quicker management decisions
    • Reform in business management and promotion of junior staff
case study 2 efforts in tl logicom21
Case Study 2: Efforts in TL Logicom ③

Business tie-up with LAOX

  • SBS group coordination led by TLLogicom. Provision of a total solution.
  • Better correspondencetomore detailed clientneeds throughenhancedsales capability.

Group effort topursue synergy, utilizing group resources.

Laox’s business management strategy

SBS’s sales approach

  • Formed a project team as SBS group (Studied solutions to respond to various customer needs in addition to efforts to cut costs and improve efficiency)
  • Proposed a one-stop solution responding to customer needs
  • Switch over to “Lifestyle providing business” capable of responding to changes in the needs of consumers and society.
  • Capture unyielding support from customers by building “a business model for small trade area” in close relationship with local communities.

Details of solution (Contract signed on December 20)

Needs of logistics/supply chain management

  • Won a contract to handle entire logistics center operation and distribution to stores
    • TL Logicom: Center operation. Distribution to stores
    • AT&C: Logistics system design
  • Set up a joint venture: home appliance installation service in conjunction with moving service
    • Converge LAOX home-appliance sales channel and SBS group moving service channels such as Duck
    • Packaged sales of moving service and home appliance installation service
  • Recycling business of home appliance disposal
    • LAOX and SBS’s environmental service division (Sogo Butsuryu System) are jointly working on the recycling business for home appliances disposed of by LAOX customers
  • Realize improved operational efficiency and cost reductions
    • Service enhancement including same-day delivery
    • Improvement in logistics by bringing down logistics costs
  • Needs for supply chain management
    • Remove unprofitable products by thorough item-by-item control
    • Enhance fresh atmosphere of sales floors by placing more popular products.
  • Higher added value
    • Renewal of E-commerce system and strengthening home-delivery function
    • Strengthen home appliance handling service at the time of moving
    • Handling of home appliance disposal
case study 2 efforts in tl logicom22
Case Study 2: Efforts in TL Logicom ④

Performance Trend

  • Aim for increased income and profit for FY 2006.
  • Operating profit ratio expected to improve 1 point from FY2004, the most recent financial results for a full 12 months.
case study 3 summary of efforts in moving service business
Case Study 3: Summary of Efforts in Moving Service Business
  • Duck Moving Group joined SBS Group in January 2005 and Sakura Transport Joined it in March 2005
  • Entered moving service (for individual customers) , first B2C business for SBS group.

At the time of acquisition by SBS

Challenges

  • Both Duck and Sakura Transportation have been struggling in its core moving business.
  • Sakura Transport’s free paper/flyer distribution business has been incurring losses.
  • Concentrate on the core business. Increase profitability.
  • Strengthening marketing capability

(Making the company name well known to customers is the important issue. )

Efforts and specific results

  • Establish “new Duck”(Duck Moving Group and Sakura Transportation integrated their businesses in July 2005)
    • Promote efficiency in business management by integration ofB2Cmoving services
  • Withdraw from unprofitable free paper business
    • Focus on the core business of moving service
  • Change in marketing policy
    • Switch to marketing via TV commercials instead of via flyers
    • Promote Duck brand recognition through TV commercials which converged with the Internet.
financial standings balance sheet summary
Financial Standings: Balance Sheet Summary
  • Actual net debt/equity ratio is lower than 1.00
  • Current consolidated balance sheet
    • Appraisal gains in real estate/investment securities(*)
    • Goodwill on consolidation (negative goodwill)
  • Net debt/equity ratio2.01
  • Equity ratio 17%
  • Actual consolidated balance sheet (image)
    • Consideration (1)Depreciation of goodwill on consolidation (negative goodwill)
    • Consideration (2)Conversion of Alpine bond (CB)
  • Net debt/equity ratio (actual) 0.86
  • Equity ratio (actual) 33%

Current liabilities 12.5 billion yen

Cash and cash equivalents 7.7 billion yen

Current liabilities12.5 billion yen

Cash and cash equivalents7.7 billion yen

Current assets

15.5 billion yen

Current assets

15.5 billion yen

Interest-bearing debt

30.3 billion yen

Interest-bearing debt

30.3 billion yen

Fixed assets56.2 billion yen

(Real estate)*

(Investment securities)*

Fixed assets56.2 billion yen

(Real estate)*

(Investment securities)*

CB5 billion yen

Fixed liabilities 10.4 billion yen

Fixed liabilities 10.4 billion yen

Fixed liabilities

10.4 billion yen

CB5 billion yen

Goodwill on consolidation7.5 billion yen

Goodwill on consolidation 7.5 billion yen

Minority interests 1.8 billion yen

Minority interests1.8 billion yen

Shareholders’ equity 11.9 billion yen

Shareholders’ equity 11.9 billion yen

Total assets79.4 billion yen

Net asset13.7 billion yen

Total assets 79.4 billion yen

Actual net asset26.2 billion yen

balance sheet assets owned by sbs group major commercial properties for lease
Balance Sheet: Assets owned by SBS Group(Major commercialproperties for lease)
balance sheet assets held by sbs group investment securities
Balance Sheet: Assets Held by SBS Group(Investment Securities)
  • Investment securities(This summary only relates to listed stocks)

 Listed stocks:46 issues

    • Breakdown : Financial institutions9 issues

Client companies27 issues

Partner companies, etc. 10 issues

 Book value (as of December 31, 2005) : Approx. 3.2 billion yen

 Market value (as of December 31, 2005) : Approx. 6.1 billion yen

efforts in fy 2006
Efforts in FY 2006

■Strategic Priorities

  • Promote 3PL business
  • *Efforts by TL:
      • Execute LAOX project
      • Receive continuous orders for ongoing projects
  • *Efforts by FL:
      • Promote joint distribution business
      • Promote cooperation with Zentsu
  • Drive facility development leveraged on real estate liquidation technique

*Effective use of assets owned by TL

      • Develop logistics facility in Yokohama area
      • Expand warehouse in the scope of our mid-term plan
  • (Approx. 50,000 tsubo nowApprox. 100,000 tsubo)*1
  • *SBS’s efforts
      • Real estate development in view of mid-term strategy

for the entire SBS group

  • (Approximately 30,000 – 50,000 tsubo planned) *1
  • More efficientbusiness management through

integration of headquarters function

  • Improvement in unprofitable businesses
  • Acting on issuesregarding environmental concern

Targets to be achieved in this term

☆Consolidated sales:

125 billion yen

☆ Consolidated ordinary profit:

4.4 billion yen

Note

*1 : 1 Tsubo = Approx. 3.3㎡

slide31
Future Efforts: Image of Strategy ~Efficient Service Model Leveraged on SBS’s Comprehensive Capabilities ~
  • Realize high added-value for our customers via 3PL solution driven by SBS group’s collective strength

SBS Group

Distribution support

service in warehouse/

general assistance work

(Temporary staff dispatching service)

General distribution/

consolidated

distribution

SBS Staff

Acquisition/development of

logistics sites

(Use of real estate

liquidation scheme)

WMS development

(Warehouse management

system)

TL Logicom

Foods Lec

SBS Logitem

Zentsu

AT&C

A-MAX

Build

closer Client

Relationships

based on trust

Comprehensive 3PL solution based on coordination

among SBS group member companies

  • Provide high value-added 3PL service for customers
    • Improve efficiency in logistics operation
    • Lower costs

Optimized logistics facilities/warehouses (Use facilities within/outside SBS group effectively)

summary of sbs group
Summary of SBS Group

 As of March 2006

Mailing service business

SBS Postway Co., Ltd.

Forward, Inc.

Marketing planning/proposal offering

Mailing service

Marketing planning business

Environmental services business

Recycling

Marketing Partner Co., Ltd.PAMCo., Ltd.

Sogo Butsuryu System Co., Ltd.

Transportation

System integration service

Clients

Staff

dispatching

System development business

Human resources outsourcing business

CS-Net Co., Ltd.

AT&C Co., Ltd.

Big Bang Co., Ltd.

General assistance work

SBS Staff Co., Ltd.

Real estate liquidation service

Logistics consulting

Financial services business

Logistics consulting business

A-MAX Co., Ltd.

Fuji Sogo Logistics Research Center Co., Ltd.

Same-day delivery/general logistics service

Refrigerated logistics service

Logistics/same-day delivery/3PL/moving service

SBS Logitem Co., Ltd./ Duck Co., Ltd.

Foods Lec Co., Ltd. / Transworld Co., Ltd.

TL Logicom Co., Ltd. (Former business name: Tokyu Logistics)

Nihon Kamotsu Kyuso Co., Ltd. / Izu Express Trucking, Inc.

Zentsu Corporation(Joined SBS group in January 2006)

slide33

Inquires Regarding Investor Relations

Please visit our web site for IR information and inquires regarding IR issues.

Contact Information

  • Division: Corporate PlanningPhone: 03-5655-6110
  • FAX: 03-5655-6180
  • E-mail: irinfo@sbs-group.co.jp

IR information page

TOP page

Cautionary Statement on this Forecast

The purpose of this document is to provide information to investors. It is not meant to solicit sales. Descriptions related to future prospects in this document are based on our targets and forecasts and do not provide any assurance or guarantee. Please use this document with the full understanding that future earnings of SBS may differ from our present forecasts. While our descriptions on performance are prepared based on various data that are deemed reliable, SBS does not guarantee the accuracy or safeness of such. This document is provided on the basis that investors may use this document for their own purposes, upon their own judgment and responsibility, thus SBS, under any circumstances, does not accept any responsibility for the results of such use.