Bridge Report:（7590）Takasho fiscal year January 2023

President Nobuo Takaoka	Takasho Co., Ltd. (7590)

Company Information

Stock Information

*Stock price as of closing on March 24,2023. Number of shares issued at the end of the most recent quarter excluding treasury shares.
*ROE and BPS are based on FY January 2023’s results. EPS is the forecast for FY January 2024. The data is rounded off. 

Consolidated Earnings Trends

*Estimates are those of the Company.
*Unit: million yen

We present this Bridge Report along with the earnings results for fiscal year January 2023. 

Table of Contents

Key Points
1.Company Overview
2.Buisiness Development
3.Fiscal Year January 2023 Earnings Results
4.Fiscal Year January 2024 Earnings Forecasts
5.Mid/long-term Plan
6.Conclusion
<Reference: Concerning Corporate Governance>

Key Points

• In the fiscal year January 2023, sales and current profit decreased 2.1% and 35.8%, respectively, year on year. In order to improve brand value and promote future growth, the company has conducted sales promotion activities, for example, “GLD-LAB Design Network Service,” which supports exterior design proposals, by conducting new DX-based sales promotion that links TV commercials and online platforms and utilizing cutting-edge technology. Regarding the overseas business, the slump in attracting customers due to the easing of voluntary restrictions on going-out in the United States and consumers refraining from purchasing due to the soaring prices of energy and daily necessities in Europe significantly impacted sales. In terms of profit, gross profit margin improved, but the ratio of SG&A expenses augmented because of an increase in personnel expenses due to hiring personnel for business expansion and a rise in exhibition expenses due to increased sales activities after the easing of the COVID-19 restrictions. The company will pay a term-end dividend of 23.0 yen/share, unchanged from the previous term.

   

• In the fiscal year January 2024, sales and current profit will grow 11.5% and 6.7%, respectively, year on year. The company will promote product development under the LINKED CITY concept and make efforts to revitalize local economies and achieve sustainability. ESG has been incorporated into the company's business, and the distribution of the company's products directly leads to the settlement and mitigation of environmental and social issues. The company will continue the DX-based sales promotion in the professional use business, and in the home use business, it will further strengthen sales in the e-commerce field. Regarding the overseas business, the company will expand sales channels and sales through e-commerce. In terms of SG&A expenses, to strengthen productivity, the company will work to reduce costs by promoting the usage of AI and RPA, as well as the systemization of operations, mainly in the online order receipt system, to establish a competitive advantage. The company plans to pay a term-end dividend of 16.0 yen/share.

   

• The domestic professional use business is on track. Nonetheless, the shares of fence-related and lamp-related products, which are performing well, are single-digit percentages. Thus, there is considerable room for future expansion. We would like to pay attention to the further developments of the DX strategy. On the other hand, the overseas business struggled in the fiscal year January 2023. Inventory assets have increased significantly, and the company hopes to decrease them. In the fiscal year January 2024, the company hopes to secure a stepping stone for the re-growth of the overseas business while maintaining steady and stable growth in the domestic professional use business. It is also noteworthy that the company has become more proactive in returning profits to shareholders. In addition to raising dividend payout ratio from 30% to 40%, the company announced the acquisition of treasury shares accounting for 4% of the total number of outstanding shares. If the target in the fiscal year January 2027 is achieved, EPS will be around 87 yen. Thus, the current share price, whose PBR is below 1, seems to have room for improvement.

1. Company Overview

Takasho Corporation maintains a basic business concept of contributing to the “Creation of comfortable spaces” and handles garden exterior products. In the aftermath of the Second World War, Takasho changed its business style from sales of gardening materials to a gardening business, and then to a comprehensive lifestyle business, growing as a lifestyle maker that proposes better lifestyles with gardens. Its vision is to create mental and physical health and happy family lifestyles that bring smiles to the people. Takasho always forecasts future changes to accurately create new value that matches the market’s needs, and pursues its goal of becoming the “only global company” contributing broadly to gardening culture in urban environments. Its mission is “to be a company that provides better lifestyles globally through gardens.” The Takasho Group manufactures products in Japan and China for sale in Japan, Europe, Asia, Oceania and　the United States. The Group’s integrated structure with the ability to plan, manufacture and sell products has allowed it to become the leading company within the “gardening market,” which is growing to become a firmly established market in Japan. The Company listed its shares on the JASDAQ market in September 1998, and after a capital increase in 2012 and 2013, moved its shares to the Second Section of the Tokyo Stock Exchange on October 19, 2017, and to the First Section of the Tokyo Stock Exchange on July 9, 2018. The company chose the Prime Market, in the new market classification of TSE, which became effective on April 4, 2022.

Company Overview

Corporate Mission  

(Taken from the material of the company)

Business Segment

(Taken from the material of the company)

Market 

The scales of the domestic professional use market and DIY market, which are major targets of the company, are both 700 billion yen. The scales of the domestic contract segment and the overseas market, which is growing rapidly, are both as large as 14 trillion yen, so there is significant potential.

(Taken from the material of the company)

Future growth

(Taken from the material of the company)

2. Business Development

Professional use business Products that constitute a garden space

(Taken from the material of the company)

Lighting Takasho Digitech growth due to lighting

(Taken from the material of the company)

Released new products in all categories, such as the gatepost with a delivery locker equipped with V2H equipment (upper right in the figure below)

(Taken from the material of the company)

Business model

(Taken from the material of the company)

Business developments

The company has expanded the lifestyle and hybrid management to achieve sales of 50 billion yen in 2030.
On July 27 last year, the company established a subsidiary, GLD-LAB Corporation, which is responsible for 4D space design and XR simulation business.

(Taken from the material of the company)

4K Video Image

(Taken from the material of the company)

DX (Digital Transformation) 

(Taken from the material of the company)

Future market

(Taken from the material of the company)

1% of the total number of housing units (approximately 600,000) × 300,000 yen (the estimated minimum amount required in the "Garden Package" plan provided by the company) → The company envisions a market of approximately 180 billion yen.

Release of GX Home, the first collaborative product under the LINKED CITY* concept

(Taken from the material of the company)

(*) LINKED CITY: A smart touristic city that enhances urban creativity centered on tourism.

Home use initiatives

The company classifies and delivers common products and local products.

(Taken from the material of the company)

Proposing a lifestyle that matches your tastes

(Taken from the material of the company)

Characteristics of home use business

(Taken from the material of the company)

Expansion of sales to the entire Europe

(Taken from the material of the company)

Future developments: Developing products that can be enjoyed in the entire garden.

(Taken from the material of the company)

Promotion of professional use products in the U.S. market

(Taken from the material of the company)

Value provided by Takasho

(Taken from the material of the company)

SDGs Initiatives 

We contributes to society through the sustainable development goals based on the principle of always anticipating change, creating new value, and contributing widely to the creation of urban environment garden culture. 
In addition, among the 3Rs, the company focuses on "reduce."

(Taken from the material of the company)

3. Fiscal Year January 2023 Earnings Results

3-1 Consolidated Earnings 

*Unit: million yen
*The figures include figures calculated by Investment Bridge Co., Ltd. as reference values, so they may differ from actual figures (the same shall apply hereinafter).

Sales dropped 2.1%, and current profit decreased 35.8% year on year.
Sales decreased 2.1% year on year to 20,351 million yen.
In order to improve brand value and promote future growth, the company has conducted sales promotion activities, for example, “GLD-LAB Design Network Service,” which supports exterior design proposals for housing developers and renovating companies, by conducting new DX-based sales promotion that links TV commercials and online platforms and utilizing cutting-edge technologies such as XR and Metaverse based on AR, VR, MR, etc. Furthermore, the company entered into strategic partnerships with Nichicon (a manufacturer of capacitors, energy, and ecology equipment; code: 6996) and Yuasa Trading (a trading company specializing in the fields of manufacturing and home building; code: 8074) and has focused on developing sustainable products for gardens (Gatepost with delivery box equipped with V2H equipment). In the overseas business, inventory adjustments due to excess inventory at client stores, sluggish customer numbers at home centers and garden centers due to the relaxation of voluntary restrictions on going-out in the United States and consumers refraining from purchasing due to soaring prices of energy and daily necessities in Europe greatly impacted sales.
Current profit decreased 35.8% year on year to 982 million yen.
In terms of profit, marine transportation costs increased significantly, but the company managed to curb rising costs through diversification of transportation methods and improving gross profit margin by changing sales composition ratio. Thus, gross profit margin improved 0.7 points to 44.3% year on year. However, SG&A expense ratio increased 3.4 points to 39.9% year on year due to an increase in personnel expenses due to hiring personnel for business expansion (mainly lighting) and a rise in exhibition expenses due to increased sales activities because of the easing of COVID-19 restriction, and operating income fell 40.2% year on year to 880 million yen. Profit attributable to owners of parent decreased 48.2% year on year to 518 million yen, partly due to an increase in tax burdens, despite sales discounts being reduced.
The year-end dividend is 23.0 yen/share, unchanged from the previous term.

Sales status by business

*Unit: million yen
*Due to the small amount of sales other than the above three businesses, the total amount of each business does not match the sales.

*Created by Investment Bridge Co., Ltd. based on disclosed material

Professional use business
Sales increased 6.9% year on year to 13,193 million yen. The company promoted a business model of offering comprehensive proposals for a garden lifestyle that meets various tastes and preferences through the “Facade Exterior & Living Garden” products, based on the company's factory production in Japan that enables custom orders and a wide variety of colors, proposals relying on DX such as online showrooms and VR parks, and the company's garden & exterior showrooms located all over the country where you can try products. Furthermore, the company has sold living garden-related products, such as the “Home Yard Roof,” which is a main product based on the concept of the “5th ROOM,” to customers through new DX-based sales promotion activities that link TV commercials and online platforms, which increased orders for products of brands selected by clients. In addition, sales of products related to Low Voltage Lights, which are outdoor lighting for gardens at night, also increased.
By product category, sales of products that help create garden spaces increased due to the growing demand for a garden lifestyle. Fence-related sales, such as privacy fences, increased from 2,929 million yen in the previous fiscal year to 3,203 million yen. Lighting-related sales increased from 1,484 million yen to 1,774 million yen. Floor materials-related sales rose from 1,328 million yen to 1,514 million yen, and garden room-related sales were up from 781 million yen to 875 million yen.
In addition, Takasho Digitech has continued to grow due to progress in the initiatives in the non-housing field through collaboration with the landscape construction materials group, and sales grew 30.6% year on year.

Home use business
Sales decreased 4.8% year on year to 5,586 million yen. In the e-commerce field, sales increased 12.8%, despite a reactionary decline to the impact of the novel coronavirus. However, sales of gardening-related products declined due to unseasonable weather, such as more typhoons than usual during the fall, in which the demand is high, and restrained purchases because of the price hike caused by soaring raw material prices and rising import costs due to the depreciation of the yen.

Overseas business
Sales declined 39.5% year on year to 1,545 million yen. Sea freight has become stable. However, in the United States, people’s interest in overseas travel and outdoor activities increased due to the easing of voluntary restrictions on going-out, resulting in a temporary slump in the number of customers of home and garden centers. In Europe, consumers refrained from purchasing due to soaring energy prices and daily necessities. This resulted in inventory adjustments due to excess store inventories, leading to delivery adjustments with business partners and a sharp drop in consumption.

*Unit: million yen 
* Composition of operating income is on a consolidated basis before consolidation adjustments

3-2 Financial Conditions and Cash Flow

Financial Conditions

*Unit: million yen 
*Interest Bearing Liabilities = Debt + Leases 

*Created by Investment Bridge Co., Ltd. based on disclosed material

The total assets as of the end of the fiscal year January 2023 stood at 23,640 million yen, down 25 million yen from the end of the previous term.
Current assets decreased 536 million yen to 15,383 million yen, mainly because cash & deposits declined 1,393 million yen to 4,206 million yen and merchandise and finished goods (part of inventory assets) increased 965 million yen to 4,964 million yen. Fixed assets rose 510 million yen to 8,256 million yen, mainly because buildings and structures increased 181 million yen to 3,825 million yen and leased assets grew 300 million yen to 663 million yen.
Current liabilities dropped 587 million yen to 9,386 million yen, mainly because trade payables decreased 816 million yen to 3,767 million yen and short-term debt augmented 180 million yen to 3,915 million yen. Fixed liabilities increased 236 million yen to 864 million yen, mainly because lease obligations rose 226 million yen to 508 million yen.
Net assets increased 324 million yen to 13,389 million yen, mainly because retained earnings rose 115 million yen to 6,252 million yen and accumulated other comprehensive income grew 193 million yen to 891 million yen.
Capital-to-asset ratio was 56.2% (54.8% at the end of the previous term).

*Created by Investment Bridge Co., Ltd. based on disclosed material

The cash and cash equivalents as of the end of the fiscal year January 2023 stood at 4,206 million yen, down 1,393 million yen from the end of the previous term.
From operating activities, the company posted a cash outflow of 465 million yen (a cash inflow of 1,484 million yen in the previous term), as net income before taxes and other adjustments stood at 967 million yen (1,525 million yen in the previous term), depreciation was 711 million yen (647 million yen in the previous term), inventory assets increased 1,008 million yen (increased 1,348 million yen in the previous term), and accounts payable decreased 1,087 million yen (increased 1,448 million yen in the previous term).
From investing activities, the company posted a cash outflow of 615 million yen (a cash outflow of 708 million yen in the previous term), mainly because the company paid 498 million yen for acquiring tangible fixed assets (a cash outflow of 511 million yen in the previous term) and 122 million yen for acquiring intangible fixed assets (a cash outflow of 145 million yen in the previous term).
From financing activities, the company posted a cash outflow of 470 million yen (a cash inflow of 741 million yen in the previous term), mainly because the company paid dividends amounting to 403 million yen (291 million yen in the previous term).

4. Fiscal Year January 2024 Earnings Forecasts

Consolidated Earnings  

*Unit: million yen

According to the forecast for the fiscal year January 2024, sales will increase 11.5%, and current profit will grow 6.7% year on year.
The forecast for the fiscal year January 2024 calls for sales increasing 11.5% year on year to 22.7 billion yen, operating profit growing 15.3% to 1,016 million yen, and current profit rising 6.7% to 1,048 million yen. Regarding profit attributable to owners of parent, it is expected to increase 25.4% year on year to 651 million yen.
There are risks difficult to predict, such as the turmoil in the world and consumers refraining from going out due to the impact of the novel coronavirus. Thus, there are concerns that the uncertain business environment will continue. On the other hand, due to the increase in housing starts and the spread of new lifestyles, people are spending more time at home. Therefore, the demand for garden exteriors is expected to continue increasing. In the future, the company will proceed with product development under the LINKED CITY concept and make efforts to revitalize local economies and sustainability. As society shifts toward low-carbon and eco-friendly products, the company will accelerate efforts to fulfill its commitments set in the corporate philosophy and actively make efforts toward achieving excellence in ESG and SDGs. Since ESG has been incorporated into the business, the spread of the company's products directly leads to the settlement and mitigation of environmental and social issues.
In the professional use business, the company will further promote the fusion of the offline and the online, conduct DX-based sales promotion such as AR and MR, improve brand power and sales activities, strengthen sales and proposal capabilities for landscapes, and expand sales channels. In the home use business, the company will further enhance sales in the growing e-commerce field, promote the development of new products produced in its factories, and promote joint sales of global products. In the overseas business, the company will proceed with new transactions with major home centers in the United States and improve sales in Europe, where it has been unable to develop sales until now (France, Italy, etc.). The company will also introduce new sales items and develop new products focusing on marketplaces with business partners, including its website, “VEGTRUG.COM,” to expand sales through e-commerce and improve sales by making proposals for products that can be enjoyed within the entire garden. In addition, the company will promote sales of living garden products by applying its Australian market's successful practices in the U.S. market. Also, the company will appoint an executive officer in charge of promoting market creation and will not only approach existing industries to expand sales, but also develop sales channels in uncultivated industries and fields. In terms of SG&A expenses, the company will strive to reduce costs by promoting the utilization of AI and RPA and the systemization of operations, starting with the online order receipt system to improve operational efficiency and strengthen productivity in order to gain a competitive edge.
The company's basic policy is to actively pay dividends linked to business performance with a minimum of 5.0 yen per share. Dividend payout ratio has been raised from 30% to 40%. The term-end dividend for the fiscal year January 2024 is expected to be 16.0 yen/share.

5. Mid/long-term Plan

The ongoing medium/long-term plan is aimed at sales of 31,410 million yen and current profit of 2,410 million yen in the fiscal year January 2027. In addition, the company aims to achieve sales of 50 billion yen in the fiscal year January 2031 and 100 billion yen in the fiscal year January 2050. Operating and current profit ratios are expected to be 10%.

(Taken from the material of the company)

Segment Sales Plan

(Taken from the material of the company)

6. Conclusion

The domestic professional use business is on track. Nonetheless, the shares of fence-related and light-related products, which are performing well, are single-digit percentages, and there is considerable room for future expansion. We would like to pay attention to the further developments of the DX strategy. On the other hand, the overseas business struggled in the fiscal year January 2023. Inventory assets have increased significantly from 5,849 million yen to 7,044 million yen, and the company hopes to decrease them, including over-the-counter inventories. The worst phase due to soaring energy prices and stagnation of logistics has passed, and we would like to see the company further advance its strategy to expand sales channels in the future. At the time of announcing the financial results for the first half of the fiscal year January 2023, the company announced that “it would shift from startup value management to growth management.” In the fiscal year January 2024, the company aims to gain a foothold for the re-growth of the overseas business while maintaining steady and stable growth in the domestic professional use business. It is also noteworthy that the company has become more proactive in returning profits to shareholders. In addition to raising dividend payout ratio from 30% to 40%, the company announced the acquisition of treasury shares accounting for 4% of the total number of outstanding shares (up to 700,000 shares or 500 million yen). If the target in the fiscal year January 2023 is achieved, EPS will be around 87 yen. Thus, the current share price, whose PBR is 1, seems to have room for improvement.

<Reference: Concerning Corporate Governance>

◎ Organizational structure and composition of directors and corporate auditors 

< Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts) > 

< Disclosure Based on the Principles of the Corporate Governance Code (Excerpts) >