Uss Co., Ltd. · TSE:4732
Uss — Q3 FY3/2019 Earnings Presentation
38 slides from Uss's earnings presentation, February 2019
Slide 1: Consolidated Results of Operations, Third Quarter FY ending March 2019
Consolidated Results of Operations The Third Quarter, Fiscal Year Ending March 31, 2019 USS Co., Ltd. February 2019 1
Slide 2: Notes on JAA acquisition 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, Third Quarter
Results of Operations Third Quarter Fiscal Year Ending March 2019 3
Slide 4: 3Q FY3/2019 – Summary of Consolidated Results of Operations
3Q FY3/2019 – Summary of Consolidated Results of Operations Results of operations: Sales increased 8.0% YoY to ¥58.33 billion, operating profit was up 4.4% to ¥27.11 billion, and profit attributable to owners of parent increased 4.6% to ¥18.47 billion. The number of vehicles handled increased si
Slide 5: 3Q FY3/2019 – Reasons for Change in Operating Profit (Actual)
3Q FY3/2019 – Reasons for Change in Operating Profit (Actual) Net sales Cost of sales SG&A expenses Increase in fee rates 0.82bn Decrease in depreciation 0.36bn Impact of JAA(1H) ▲1.71bn Increase in contract completion rate 0.19bn Impact of JAA(1H) ▲1.87bn (of which goodwill amortization ▲0.95bn) De
Slide 6: Net Sales and Operating Profit by Business Segment
Net Sales and Operating Profit by Business Segment (Million yen) Net sales 1-3Q FY3/17 1-3Q FY3/18 1-3Q FY3/19 Year on year Auto auction 38,176 42,509 47,277 111.2% Used vehicle purchasing and selling 6,816 7,049 6,951 98.6% Other 3,629 4,444 4,109 92.5% Total 48,622 54,003 58,339 108.0% Operating p
Slide 7: Consolidated Balance Sheets and Statements of Cash Flows
Consolidated Balance Sheets and Statements of Cash Flows A big increase in auction fees was the main reason for the increase in cash and deposits. Other current liabilities were down mainly because income taxes payable and deposits received decreased. Free cash flows increased because there we
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% 11.8% 1,984 2,008 1,963 4.9% 6.4% 10% 10% 1,577 1,605 1,611 1,569 1,590 1,670 1,609 1,648 1,673 1,609 1,704 1,470-1.9% -1.7%1,540-1.1% 1,
Slide 9: Auto Auction Segment (1)
Auto Auction Segment (1) Vehicles consigned increased 10.5% YoY to 2,115 thousand; contract completions increased 9.7% YoY to 1,330 thousand (contract completion rate: 62.9% against 63.3% in the previous fiscal year) (1,803 thousand vehicles consigned (an increase of 1.5% YoY) at USS’s 17 existing
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% 784 752 703 663 671 636 664 699 68.4% 583 593 70% 66.0% 66.3%65.9% 575 65.9%65.2% 529 559 497 46
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) (Yen) 5,000 5,561 5,500 5,362
Slide 12: Auto Auction Segment (4)
Auto Auction Segment (4) From April 1, 2018 to December 31, 2018 (Number of auctions held, Vehicles) Number of auctions Number of consigned vehicles Number of contract completions Contract completion rate 1-3Q FY3/18 1-3Q FY3/19 1-3Q FY3/18 1-3Q FY3/19 YoY change 1-3Q FY3/18 1-3Q FY3/19 YoY change 1
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), a reexamination of unprofitable stores caused the number of vehicles sold to decline. Although sales decreased as a result, earnings were higher due to a higher profit margin. (Net sales decreased 5.2%
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 decline in the metal scrap market. (Net sales decreased 9.7% YoY to ¥3,630 million, Operating profit decreased 19.5% to ¥390 million) In the used vehicle export clea
Slide 16: Consolidated Forecast for FY3/2019
Consolidated Forecast for FY3/2019 16
Slide 17: FY3/2019 – Consolidated Forecast
FY3/2019 – Consolidated Forecast No revisions to the FY3/19 forecast announced on November 12, 2018. (Million yen) FY3/19 Initial plan FY3/19 Revised plan Revised plan vs FY3/18 (Actual) Change (May 8, 2017) (Nov. 12, 2018) FY3/18 Net sales 75,153 80,000 ▲800 79,200 105.4% Gross profit 45,979 49,1
Slide 18: 2H FY3/2019 – Reasons for Change in Operating Profit (Forecast)
2H FY3/2019 – Reasons for Change in Operating Profit (Forecast) Net sales Cost of sales SG&A expenses Increase in fee rates 0.94bn Decrease in cost of goods sold 0.50bn Increase in enterprise tax ▲0.03bn Used vehicle sales/purchases ▲0.29bn Increase in employee salaries and bonuses ▲0.23bn Decrease
Slide 19: FY3/2019 – Reasons for Change in Operating Profit (Forecast)
FY3/2019 – Reasons for Change in Operating Profit (Forecast) Net sales Cost of sales SG&A expenses Increase in fee rates 1.40bn Decrease in cost of goods sold 0.86bn Impact of JAA(1H) ▲1.71bn Used vehicle sales/purchases ▲0.47bn Decrease in depreciation 0.33bn (of which goodwill amortization ▲0.95bn
Slide 20: FY3/2019 – Forecast by Business Segment
FY3/2019 – Forecast by Business Segment (Million yen) FY3/19 Initial plan FY3/19 Revised plan Revised plan vs FY3/18 (Actual) Change (May 8, 2017) (Nov. 12, 2018) FY3/18 Net sales Auto auction 59,521 65,048 ▲826 64,221 107.9% Used vehicle purchasing and selling 9,827 9,393 ▲53 9,339 95.0% Other 5,80
Slide 21: Market Overview, Strategy for Creating Value Over the Medium Term
Market Overview Strategy for Creating Value Over the Medium Term 21
Slide 22: 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 23: Used Car Auction Market and USS Market Share
Used Car Auction Market and USS Market Share Maintained high market shares and increased 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
Slide 24: 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 25: 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 26: Kinki Region’s Largest Auction Site Joined the USS Group
With the Acquisition of JAA Stock, Kinki Region’s Largest Auction Site Joined the USS Group Larger auction sites tend to attract more <Kinki region> 19.0% → 45.5% number of vehicles. Vehicles Site Name consigned Share The HAA Kobe auction site has a HAA Kobe 341,374 26.6% dominant market share i
Slide 27: 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 28: Earnings Distributions – Dividend Policy
Earnings Distributions – Dividend Policy Plan to pay 49.2 yen dividend per share for FY3/19 (up 1.4 yen) 19 consecutive years of dividend growth since listing DPS Consolidated payout ratio 50.1% (Yen) 51.5% 50.1% 49.2 50 47.8 47.0% 46.4 44.3% 45.1% 45.1% 43.1% 45% 40.8 40 37.7 34.7 30.5% 30.75 30
Slide 29: 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. ) Draw up capital investment plans for JAA. (Million yen) Div
Slide 30: 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% 15% 16.0% 14.1% 14.1% 13.7% 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 FY3/08
Slide 31: Cycle of Rising Corporate Value Driven by Business Growth and Shareholder 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 32: 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 33: Reference
Reference 33
Slide 34: 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 35: 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 36: 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 37: 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 38: 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