Slide 1: Consolidated Results of Operations, Fiscal Year Ended March 31, 2019
Consolidated Results of Operations Fiscal Year Ended March 31, 2019 USS Co., Ltd. May 2019 1
Slide 2: Notes and forward-looking statements
• USS acquired 66.0% of the voting rights of Japan Automobile Auction Inc. (JAA) on August 24, 2017. As a result, auction sites operated by JAA and the HAA Kobe Auction Site HAA Kobe (JAA’s wholly owned subsidiary) became USS Group auction sites. On March 1, 2018 the USS acquired additional stock of
Slide 3: Results of Operations Fiscal Year Ended March 2019
Results of Operations Fiscal Year Ended March 2019 3
Slide 4: FY3/2019 – Summary of Consolidated Results of Operations
FY3/2019 – Summary of Consolidated Results of Operations ◼ Sales increased 6.3% YoY to ¥79.90 billion, operating profit was up 2.9% to ¥37.12 billion, and profit attributable to owners of parent increased 5.2% to ¥25.54 billion. ◼ The number of vehicles handled increased because of the acquisition o
Slide 5: FY3/2019 – Reasons for Change in Operating Profit (Actual)
FY3/2019 – Reasons for Change in Operating Profit (Actual) Net sales Cost of sales SG&A expenses Increase in fee rates 0.87bn Decrease in depreciation 0.41bn Decline in sales commission 0.07bn Increase in vehicles consigned 0.25bn Increase in outsourcing expense ▲0.18bn Decrease in taxes and dues 0.
Slide 6: Net Sales and Operating Profit by Business Segment
Net Sales and Operating Profit by Business Segment (Million yen) Net sales FY3/2017 FY3/2018 FY3/2019 Year on year Auto auction 52,811 59,521 64,684 108.7% Used vehicle purchasing and selling 9,373 9,827 9,701 98.7% Other 4,995 5,805 5,522 95.1% Total 67,179 75,153 79,908 106.3% Operating profit (op
Slide 7: Consolidated Balance Sheets and Statements of Cash Flows
Consolidated Balance Sheets and Statements of Cash Flows ◼ Cash and deposits increased due mainly to the significant increase of auction fees ◼ Free cash flows increased because there were no major capital expenditures. ◼ Equity ratio: 78.1% Consolidated Balance Sheets (Summary) (Million yen) FY3/18
Slide 8: Automobile Market
Automobile Market New Car Registrations and YoY Changes Used Car Registrations and YoY Changes (Thousand vehicles) (Thousand vehicles) 3,000 30% 3,000 30% 20% 20% 7.3% 1,984 2,008 1,963 1,967 4.0% 10% 10% -0.2% 1.0% 1,611 1,569 1,590 1,670 1,609 1,648 1,673 1,609 1,704 1,470 1,577 1,540 1,528 1,500
Slide 9: Auto Auction Segment (1)
Auto Auction Segment (1) ◼ Vehicles consigned increased 8.5% YoY to 2,930 thousand; contract completions increased 6.8% YoY to 1,825 thousand (contract completion rate: 62.3% against 63.3% in the previous fiscal year) (2,512 thousand vehicles consigned (an increase of 4.1% YoY) at USS’s 17 auction s
Slide 10: Auto Auction Segment (2)
Auto Auction Segment (2) No. of Vehicles Consigned and Contract Completion Rate Vehicles Contracted Vehicles consigned Vehicles contracted USS Industry's average (excl. USS) (Thousand vehicles) 1,000 80% 784 752 814 703 663 671 636 664 699 68.4% 593 70% 66.0% 66.3%65.9%66.4% 575 65.9%65.2% 529 559 4
Slide 11: Auto Auction Segment (3)
Auto Auction Segment (3) Total Consignment Fees and Total Contract Completion Fees and Consignment Fee per Vehicle Contract Completion Fee per Vehicle Total consignment fees Fee per vehicle Total contract completion fees Fee per vehicle (Million yen) (yen) (Million yen) （円） 5,000 5,375 5,317 5,357 6
Slide 12: Auto Auction Segment (4)
Auto Auction Segment (4) From April 1, 2018 to March 31, 2019 (Number of auctions held, Vehicles) Number of auctions Number of consigned vehicles Number of contract completions Contract completion rate FY3/19 FY3/18 FY3/19 FY3/18 YoY change FY3/19 FY3/18 YoY change FY3/19 FY3/18 Tokyo 49 49 658,344
Slide 13: Auto Auction Segment (5)
Auto Auction Segment (5) (Vehicles, %) Apr. May Jun. Jul. Aug. Sep. First Half Oct. Nov. Dec. Jan. Feb. Mar. Second Half Fiscal Year FY3/17 233,303 165,327 195,240 186,899 141,275 201,229 1,123,273 186,409 197,643 174,983 172,609 209,027 289,592 1,230,263 2,353,536 YoY ▲2.8 ▲8.4 3.8 ▲6.0 ▲1.6 2.4 ▲2
Slide 14: Used Vehicle Purchasing and Selling Segment
Used Vehicle Purchasing and Selling Segment ◼ At the used vehicle purchasing subsidiary (Rabbit) posted lower sales and earnings due to higher advertising and sales promotion expenses, and lower number of vehicles sold due to a reorganization of unprofitable stores. (Net sales decreased 2.8% YoY to
Slide 15: Other Segment
Other Segment ◼ Recycle business posted lower sales and earnings due to the discontinuing some of the auto part sales business and a lower metal scrap market. (Net sales decreased 6.3% YoY to ¥4,910 million, Operating profit decreased 20.4% to ¥481 million) ◼ In the used vehicle export clearing serv
Slide 16: Consolidated Forecast for FY3/2020
Consolidated Forecast for FY3/2020 16
Slide 17: FY3/2020 – Consolidated Forecast
FY3/2020 – Consolidated Forecast ◼ New car registrations are expected to remain flat from FY3/2019. ◼ Replacement of auction systems, including renewal of auction sites, planned. (Million yen) FY3/18 (Actual) FY3/19 (Actual) FY3/20 (Forecast) VS. previous year Net sales 75,153 79,908 80,800 101.1% G
Slide 18: FY3/2020 – Reasons for Change in Operating Profit (Forecast)
FY3/2020 – Reasons for Change in Operating Profit (Forecast) Net sales Cost of sales SG&A expenses Increase in vehicles consigned 1.25bn Decrease in depreciation 0.21bn Decline in sales commission 0.11bn Used vehicle sales/purchases ▲0.41bn Decrease in the cost of demolition 0.18bn Decrease in adver
Slide 19: FY3/2020 – Forecast by Business Segment
FY3/2020 – Forecast by Business Segment (Million yen) FY3/18 FY3/19 FY3/20 VS. previous (Actual) (Actual) (Forecast) year Net sales Auto auction 59,521 64,684 65,892 101.9% Used vehicle purchasing and selling 9,827 9,701 9,472 97.6% Other 5,805 5,522 5,435 98.4% Total 75,153 79,908 80,800 101.1% Ope
Slide 20: Market Overview, Strategy for Creating Value Over the Medium Term
Market Overview Strategy for Creating Value Over the Medium Term 20
Slide 21: Medium-term Market Outlook and USS's Strategy
Medium-term Market Outlook and USS’s Strategy ◼ New car sales in Japan: Unlikely to see significant growth over the medium term ⁃ USS’s Strategy 1) The JAA acquisition significantly raised the Osaka area market share. The goal is to increase the Tokyo area market share in order to have a market shar
Slide 22: Used Car Auction Market and USS Market Share
Used Car Auction Market and USS Market Share ◼ Maintained higher market shares and profit in the period of sluggish markets following the financial crisis of 2008-2009. ◼ The JAA acquisition significantly raised the USS Group’s market share 1990(CY) market share 2000(CY) market share 2018(CY) market
Slide 23: Goals of the JAA Acquisition
Goals of the JAA Acquisition Faster growth by becoming more competitive Sales growth Higher sales due to sharing of internet platforms Medium-term growth of corporate value Improve efficiency by sharing best Higher profitability Medium-term growth of EPS and ROE practices More productive use of capi
Slide 24: JAA Acquisition Raised Market Share, Making USS More Competitive
JAA Acquisition Raised Market Share, Making USS More Competitive JAA raised the USS Group market share to 39% As auto auction is a platform business, scaling up contributes to strengthening competitiveness ◼ Market share in Japan: 33.1%→39.4% ◼ Market share in Osaka area, which had been low:19.0%→45
Slide 25: Largest Auction Site in Kinki Region Joined the USS Group
With the Acquisition of JAA, the Largest Auction Site in Kinki Region Joined the USS Group ◼ Larger auction sites tend to attract more <Kinki region> 19.0% → 45.5% number of vehicles. Vehicles ◼ The HAA Kobe auction site has a Site Name Share consigned HAA Kobe 341,374 26.6% dominant market share in
Slide 26: Basic Policy on Finance and Shareholder Distributions
Basic Policy on Finance and Shareholder Distributions Increase shareholder distributions while continuing investment for growth ◼ Consolidated dividend payout ratio: Over 50% starting in FY3/2017 The JAA acquisition will have no effect on the USS dividend policy of maintaining a consolidated payout
Slide 27: Earnings Distributions – Dividend Policy
Earnings Distributions – Dividend Policy ◼ Plan to pay 50.4 yen dividend per share for FY3/19 (up 2.6 yen) ◼ Plan to pay 51.2 yen dividend per share for FY3/20 (up 0.8 yen) ◼ 20 consecutive years of dividend growth since listing DPS Consolidated payout ratio (Yen) 50.1% 50.1% 60 51.5% 50.1% 47.0% 51
Slide 28: Earnings Distributions – Total Payout Ratio
Earnings Distributions – Total Payout Ratio ◼Flexible stock repurchases while maintaining stable dividend. (Scheduled to repurchase 5 million shares for 10 billion yen (maximum) in the period from February 13, 2019 to September 20, 2019. ) (Million yen) Dividend Paid Stock Repurchased Total Payout R
Slide 29: Earnings Distributions – Return on Equity (ROE)
Earnings Distributions – Return on Equity (ROE) ◼No change in the medium-term ROE target of above 15%. ROE 25% 19.5% 18.2% 16.5% 15.9% 15.8% 15.5% 15.3% 15.1% 14.5% 14.2% 14.7% 14.8% 14.5% 15% 16.0% 14.1% 13.7% 13.8% 15.0% 10.9% 11.7% 10.4% 5% FY3/00 FY3/01 FY3/02 FY3/03 FY3/04 FY3/05 FY3/06 FY3/07
Slide 30: Cycle of Rising Corporate Value Driven by Growth and Distributions
Cycle of Rising Corporate Value Driven by Business Growth and Shareholder Distributions ◼Aim at increasing shareholder value by a two-pronged strategy of solid investments in growth and active shareholder distributions Leveraged Internet Increase in number and IT of members – users Rise in contract
Slide 31: How USS Creates Social and Economic Value
How USS Creates Social and Economic Value ◼USS creates social and economic value by functioning as a platform for a used vehicle ecosystem. The used vehicle ecosystem The reuse cycle The new vehicle value chain Production Purchase of Used vehicle Steel Vehicle auctions Used vehicle and sale of used
Slide 32: Reference
Reference 32
Slide 33: History of USS Long-term Growth
History of USS Long-term Growth Before 2000 1982: Held the first auction with only 255 vehicles consigned 1988: Expanded the Nagoya Auction Site. The number of POS seats was 570 (the largest in Japan). Early nineties: Opened Kyushu and Tokyo Auction Sites 2017: Late nineties: Opened Okayama, Shizuok
Slide 34: Business Models for USS
Business Models for USS Used Ferrous vehicles Rabbit scrap End (Used vehicle ARBIZ Steel users purchases) makers Payment for Payments vehicles Payment Payments for vehicles Used Used vehicles vehicles Members Members submitting consigning vehicles Auto Auction successful bids (buyer) (seller） • • Us
Slide 35: Automobile Market and USS Revenue
Automobile Market and USS Revenue ◼ The number of vehicles consigned is correlated through trade-ins to (1) New car registrations and (2) Used car registrations ◼ Total demand comprises domestic demand (2) and overseas demand (3). In recent years, total demand has been driven mainly by overseas dema
Slide 36: New/Used Car Registrations and Auto Auction Market
New/Used Car Registrations and Auto Auction Market ◼ The auction market continued to expand till 2000 as the share of used vehicles sold through the auction market increased as a share of the total used vehicle market. Starting in the mid-2000s, older vehicles and vehicles with high mileage which wo
Slide 37: Corporate Governance
Corporate Governance ◼The company’s governance organization has been improved in order to work toward the goal of increasing corporate value through continuing business growth ◼Adopted the outside director system in FY3/2007 ◼Strengthened the executive officer system in FY3/2013 ◼Established volunta