Mess age f ro m t h e P re s i d e nt

Developing CSV management
for a next-generation circular economy

The NEC Capital Solutions Group will further deepen the CSV management it has been promoting for the past 10 years

and develop it towards a new era. Here, I would like to explain our efforts to take on the challenge of creating new value

based on the keyword “next-generation circular economy,” as well as our efforts to create future capital solutions.

President

Masaaki Suganuma

9Introduction

Strategies for Value Creation

Foundation for Value Creation

Financial/Corporate Data

Please explain the next-generation circular
economy set forth in “Group Vision 2030.”

What strengths are you going to leverage inyour efforts to realize the Group Vision?

We envision contributing to an advanced
society that adapts to change, and haveadopted the keyword“next-generation circular economy.”

Our strengths include expertise in ICT
equipment, business relationships with
the national and local governments, andthe sales capabilities of RISA Partners.

To date, we have advocated for “CSV management,” inwhich we resolve social issues through our business andcontribute to society, which leads to profit. This approachand value are the basis of our business activities, andthey will remain unchanged in our new Group Vision.
However, in recent years, the world has been affectedby unprecedented changes such as worsening climatechange, pandemics of infectious diseases, risinggeopolitical risks, and the spread of financial instability,
making the future uncertain. In addition, major changes
in the industry and social life are expected, including
the development of cutting-edge technologies such as
digital technology (IoT*1, AI*2, robots), new value creation

One of our strengths is that we have specialized knowledge
regarding the handling of ICT equipment and can provide
financial solutions that utilize this knowledge. Up until
now, we have mainly handled hardware leasing basedon close relationships with vendors and developed abusiness with additional services. As many ICT equipment
has begun transitioning to provision via subscription
or SaaS*3 in recent years, vendors that make upfront
investments in pay-as-you-go mechanisms and systembuilding are required to manage their businesses withgreater awareness of ROIC and cash conversion cycles, andsupporting these financial aspects has become a new role
for the Company. Within the NEC Group, we are involved
in intellectual property and ownership issues faced byoperating companies and we are involved in the resolutionof these issues as well. We also receive inquiries regarding
the transition to subscription models from other ICT
vendors.
Another one of our strengths is that we do a lot ofbusiness with the national and local governments. Throughcustomer sharing with the NEC Group, we have received
business from over 1,800 national and local governments
in Japan, and this has become a strong foundation for oursales activities. Thanks to our extensive track record, we
can accurately handle bidding and contract proceduresthat differ by the national and local government. We arealso able to quickly move forward with major projects,
such as the simultaneous switching of installed equipment
and the mass delivery of devices used in the GIGA School
Program.*4 Based on these strengths, we are also focusing

through DX, and business model reforms. Under suchcircumstances, how should we go about developing
our business, and what should we aim for in order tocontribute to society? We need to respond to changes
autonomously while deepening our thinking.
By its nature, the leasing business is a business that
contributes to the reduction of environmental burden
through the reuse of resources and improved efficiency,
therefore it can be said that it directly contributes to thecreation of a recycling-based society. Looking ahead, werecognize that we will need to implement initiatives thatcreate new value while further developing “circulation,”with an eye towards the post-2030 society aimed for by
the SDGs. Based on this idea, we set the goals of our Group
Vision for 2030, the same year as the SDGs. Moreover, weenvision contributing to an advanced society that adapts
to the changing times, and have adopted the keyword“next-generation circular economy.”
We create services that lead to the cyclical use ofproducts, a virtuous circle for local economies andsocieties, and a virtuous circle for corporate growth.
Through the provision of these services, we will lead thenext-generation circular economy.
Another keyword in our new Group Vision is “SolutionCompany.” To resolve our customers’ management issues,
we will innovate solutions for vendor finance, ICT services,and financial products in order to expand our businessdomains and create “circular economy-oriented” services.
We use the word “Company” to mean partners and agroup of colleagues who work together to achieve theirgoals, aim in the same direction amid social change, andmove forward together.

on the PFI business. For example, we have been involvedin over 20 projects in the school meal center development
business.
Our other strength is the network of approximately
180 regional financial institutions nationwide held by
our subsidiary, RISA Partners that conducts Investment
Business, as well as their knowledge in the real estate field.
We provide financial solutions in collaboration with RISA
Partners, where we implement initiatives by leveraging
these strengths and the company’s quick decision-making
capabilities.
We aim to develop businesses that leverage thestrengths listed above and advance the innovation ofcapital solutions in order to realize a next-generation
circular economy.

NEC Capital Solutions Limited Integrated Report 2023 10

Message from the President

Introduction

Please tell us what you are aiming for with thenewly formulated “Medium-term Plan 2025.”

The recently concluded “Mid-Term Plan 2020” (planperiod: FY2021/3-FY2023/3) had “expand core areas” and“harvest new businesses” as the pillars of its businessstrategy, and by promoting it alongside our strategy tostrengthen the management foundation that supports thisstrategy, we concluded a decade of initiatives to realize
CSV management.
As a result, the consolidated business results for
FY2023/3 achieved both the planned targets for operating
income of 11.0 billion yen and ordinary income of 12.0
billion yen, and profit attributable to owners of parent
exceeded the three-year cumulative target. I believe thatthe efforts we have made over the past few years to create
new solutions are bearing fruit, and that our profitability
has steadily increased. However, our profitability is still
low compared to industry standards, and we will strive forfurther improvement in this remaining issue.
Regarding new businesses, we focused on the fourdomains of healthcare, energy, tourism, and agriculture.
In addition to aiming to generate revenue from financial
and peripheral services, we also aimed to provide services
unique to us that lead to local revitalization. In thehealthcare domain, initiatives combined with real estate
finance yielded results, while in the energy domain, weincreased assets with the expansion of renewable energy
such as solar power generation. As a result, both areas
generated revenue. On the other hand, the tourism domain
was negatively impacted significantly by the pandemic,
and the agriculture domain was also unable to generate
revenue.
Going forward, we will develop initiatives over the next
three years by identifying areas in which we can further● Road map to realizing our Group Vision 2030

Create services unique tothe Company

11

Financial/Corporate Datamaking use of what we have learned.

I believe that the new solutions wesowed have borne fruit and that ourprofitability has steadily increased.

Medium-term Plan 2025

Foundation for Value Creation

advance as a business as well as areas to focus on while

Looking back on the completed previous
Medium-term Plan, can you tell us about
your achievements and challenges?

FY2024/3-FY2026/3

Strategies for Value Creation

We have set financial and non-financial
indicators. We have clarified our attitude
toward resolving environmental andsocial issues through our business.
As a first step towards realizing our new group vision for2030, we have formulated and launched the “Medium-termPlan 2025” (plan period: FY2024/3-FY2026/3). This plan
promotes the business strategies of “expand service
business and create new cyclical services,” “accelerate
growth through strategic investment in core businesses,”and “strengthen vendor finance and expand customerbase,” creating pillars for revenue to realize a nextgeneration circular economy.
In creating cyclical services, we are considering adding
new things to existing initiatives, such as increasing thevalue of real estate and accelerating the response to aging
infrastructure through PFI and PPP businesses, in order tosignificantly increase “circulation.” In our core businesses
such as ICT-related services, we are expecting further
improvements in revenue, and to that end, we intend to
take proactive steps to accelerate future growth, such as
considering the expansion of HR and strategic investments
in M&A, etc. on merit.
In terms of the planned indicators, financial indicators
are set along with non-financial indicators, and we haveset forth to resolve environmental and social issues
through business activities and promote the enhancementof human capital. Our financial indicators aim to achieve“profit attributable to owners of parent of 10.0 billion
yen,” “ROA of 0.9%,” and “ROE of 8%” in the consolidated
business results for FY2026/3, the third year of the plan.
Our non-financial indicators include five items related
to environmental and social issues including “a 20%

FY2027/3-FY2031/3

Next Medium-term Plan

Develop services unique tothe Company

Establish revenue fromservices unique to theCompany

reduction in CO2 emissions (Scope 1 + 2) compared to

FY2023/3 ” and “a renewable energy power generation
capacity of 100MW.” They also include two items related tohuman capital: “employee engagement score of 34%” anda “ratio of female managers of 10%.”
The financial indicators are a huge challenge for theCompany, which is in the process of strengthening its
profitability, but we hope to achieve them with thestrength of the entire Group, and use the strength we havedeveloped to take our next leap forward.
Over the next three years, the trend toward
decarbonization and response to SDGs is expected toaccelerate, and the funds needed by the national and local
governments to address aging infrastructure are expected
to increase. As I mentioned earlier, we aim to achieve ourgoals by creating services that add new things to existing
initiatives and taking hold of the above opportunities.

Please tell us your message to stakeholders.

We will grasp the needs of society in atimely manner and promote management
worthy of a company listed on the Prime
Market of the Tokyo Stock Exchange.
In 2015, we identified material issues concerning ourbusiness activities and management foundation, and now,in line with the formulation of our Group Vision 2030,
we have re-identified them and reworded them todemonstrate their direct link to contributing to theenvironment and society. Of the five material issues,“investment in human capital” is an issue that I personallyplace particular emphasis on, as one of my missions
is to “create a company in which employees can takepride.” The source of value creation in CSV management
is nothing other than HR. We will work to improve

employee engagement, ensure diversity, and realize healthmanagement, while actively investing in human capital for
HR development and workstyle reforms, including the useof DX.
Next, I would like to share my thoughts on profit
distribution. Regarding the three areas of investment in
human capital, investment in growth strategies, and returnof profits to shareholders and investors, we will always
be conscious of and implement the optimal balanceaccording to the situation.
In terms of return of profits, we set the annual dividendfor FY2023/3 at 110 yen per share (interim: 37 yen, yearend: 73 yen, dividend payout ratio: 36.9%), an increaseof 36 yen year on year. As we expect to achieve growth inboth revenue and income in our consolidated businessresults in FY2024/3, we plan to further increase the annual
dividend to 130 yen (interim: 65 yen, year-end: 65 yen,
dividend payout ratio: 37.3%).
As a company listed on the Prime Market, we aim toachieve a PBR of 1x or above by incorporating humancapital investment and business investment into ourgrowth strategies in the long term, and we plan to expand
the return of profits as a commitment to improving
business results in the short term.
Through communication with our stakeholders, wewill gain an understanding of the changing times, socialdemands, and what society needs in a timely manner, andby using the above knowledge in our management, we willcontribute to “Helping Societies Advance,” as stated inour corporate philosophy. We appreciate your continued
support of the NEC Capital Solutions Group over the longterm.
*1 IoT: Internet of Things, meaning that all things have communication
functions and are connected to a network.

*2 AI: Artificial Intelligence. In general, it refers to technology that allows
computers to perform intelligent actions such as understanding
and recognizing human language and making inferences.

*3 SaaS: Software as a Service, a form of using software via the Internet.

*4 GIGA School Program: A program to equip elementary and juniorhigh schools with ICT devices promoted by theMinistry of Education, Culture, Sports, Scienceand Technology.

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