In September 2018, the Group announced new five-year medium-term management plan "BE GLOBAL 2023" which covers five years to the fiscal year ending June 30, 2023, with the goal of becoming a globally competitive software company. We are working to achieve this plan. In particular, the goal of raising the ratio of "recurring revenue," which consistently generate sales, such as software maintenance fees, to total revenue (the ratio of recurring revenue) to 70% from more than 30% currently, is an extremely important challenge for the Group, and all of our employees are making efforts to tackle this challenge positively. In addition, we have adopted the "sales growth rate + operating income margin" as an indicator in order to promote both improvement of profitability and expansion of scale in a balanced manner. Our goal is to raise this figure to 40% or more, which is the highest level on a global basis.
In realizing these medium-term management plan, we must address the following issues.
1. To Increase the Number of Clients
The Group's products have been adopted by many of Japan's leading companies, with sales records exceeding 1,100 companies, and these products are becoming the infrastructure that support consolidated accounting and group management in Japan. However, they have not yet reached a sufficient level to contribute to society and increase corporate value. For the foreseeable future, we will continue to provide high-quality, high-value-added products and services with the aim of attracting more than 2,000 customers.
2. To Increase the Value of Contributions to Existing Customers and Their Group Companies
One of our greatest assets is our clients, who are among Japan's most outstanding corporations. In addition, as we provide products and services related to group management, dozens of affiliated companies of the clients are using our Group's products as users. In order to provide added value to these customers and their group companies, we aim to contribute to more than ten thousand group companies by providing various services of our group companies and cloud-based products developed based on the knowledge accumulated through these services.
In addition, we will strive to create an environment in which each Group company can realize maximum synergy.
3. Transition from Man-hour Sales to Value-added based Sales
In the process of expanding the scale of our corporate group to the present scale, we have increased the ratio of sales based on the man-hours required to bill customers by man-hours multiplied by the unit price. In order to further increase corporate value by increasing profitability and productivity while expanding the scale of sales in the future, we recognize that it is necessary to shift from a business focused on man-hours sales to a business focused on Value-added based sales that does not necessarily require an increase in the number of employees in order to increase sales.
The 70% recurring revenue ratio is a percentage that will be difficult to achieve without this change in business model. By setting this goal as an important indicator, the Group is working together to transform its business model.
4. Improving Employee Satisfaction
Another major asset of our group is outstanding employees with advanced technologies, expertise, and a spirit of challenge. At the Group, we consider "increasing quality employment" to be an important role of management. While increasing the number of employees every fiscal year, we strive to create a rewarding work environment that enriches the lives of employees and allows them to focus on the creation of results in their work. As part of these efforts, we have begun to recruit diverse human resources regardless of gender or nationality, and to promote them to manager positions.
5. Capturing External Growth
Sustainable development of existing businesses is the foundation for realizing the Medium-term Management Plan, but it may not be possible to achieve it on its own. We will also consider acquisitions and capital alliances to be the important elements of modern corporate activities when these are deemed necessary and effective, and will take a proactive approach while carefully preparing for them.
In incorporating external growth, the target company should share the direction we aim to pursue, and we will avoid the possibility of impairing corporate value by adopting an easy approach to external growth. To this end, we always refer to the cost of capital and we decipline ourselves to maintain ROE of 20% or more even after the acquisition.
6. Compliance
Since our founding, compliance has been a fundamental principle of corporate governance. At the same time, society demands for stronger compliance so much that in the event of a violation, the loss of public confidence is even greater than in the past, and the time required to restore confidence is longer. We are promoting business activities even more thoroughly than in the past so that we do not violate not only various related laws and regulations centered on labor laws, but also corporate ethics.
7. Sustainability
The Group's management philosophy, "Creating a 100-Year-Old Company," refers to the sustainable development of a company as an organization that exists for the benefit of society, viewing it as a public institution. The Group's mission is to contribute to society by providing value to customers through the use of management information for the creation of the future, and in the process of realizing this mission, the Group is involved with various stakeholders. Therefore, unless each and every member of the Group acts with due consideration for maintaining a balance between economic activities, environmental conservation, and social fairness, sustainable development will not be achieved. To this end, on July 22, 2020, the Group established the Group Human Rights Policy and Group Environmental Policy, and on August 25, 2020, the Group signed the United Nations Global Compact, declaring that it accepts, supports, and implements essential values in the four areas of human rights, labor, the environment, and anti-corruption. On July 1, 2021, the Group took the first step toward realizing a sustainable society by converting all of its annual electricity use to "green power" and reducing its greenhouse gas emissions to zero. In addition, the Group has been supporting, albeit in a small way, sporting events and cultural activities organized by local governments and industry groups. On the other hand, now that the Group has more than 1,000 members, in order to share the same philosophy system throughout the Group and solve the issues mentioned in 1 to 6 above, we need highly skilled human resources who can understand changes in customer needs and propose solutions. We are aiming to establish an optimal training and compensation system to secure and develop such human resources.
