CHAPTER

CFO MESSAGE
We will proactively makegrowth investments and boldly
promote transformation.

Shinsuke Tsuboi
Managing Executive Officer, CFO,Executive General Manager of Finance and Accounting

Summary of results for fiscal 2022
and outlook for fiscal 2023
Fiscal 2022 was the final year for phase 1 of the current
medium-term management plan. For the fiscal year, weposted net sales of 411.8 billion yen, down 20 billion yen(4.6%) year on year, operating income of 20.6 billion yen, up
400 million yen (2.2%) year on year, and net income of 11.3
billion yen, up 10.2 billion yen (966.8%), year on year. The
decrease in net sales is attributable to the sale of the Berlitz
business. In operating income, we were able to achieve
an increase of 400 million yen. Although the lingering
pandemic caused a delay in the improvement of theoccupancy rates in the nursing care and childcare business,and the enrollment rate in the Kodomo Challenge businessin China decreased due to the country’s zero COVID-19
policy, we were able to increase profit by selling theunprofitable Berlitz business and expanding the Universityand Working Adult Business, in particular the Udemy
business. The environment surrounding our businesses,
including the education business in Japan, is becoming
harsher, and in response we are further enhancing ourbusiness performance management function. We havebeen dispatching employees in charge of managing
business performance under the CFO to each of thein-house companies and have been appointing somestaff members to more than one job while implementinga job rotation system among them. In fiscal 2022, we also
started to implement measures to increase the frequencyof reporting from onsite staff to the management teamand enhance communication between the two sides.
As a result, the management and onsite staff began toshare a commitment to numerical targets and a sense

27 Benesse Report 2023

of crisis that were stronger than before. They have been
more stringently reviewing measures for each in-housecompany, working to reduce costs, and striving for
more drastic full-year profit and loss management inaddition to ensuring the conventional monthly profit
and loss management. I think these improvements havecontributed to increasing our operating income.
As for our performance in fiscal 2023, the first yearof the Transformation Business Plan announced in May2023, we expect that net sales will reach 423 billion yen,up 11.1 billion yen (2.7%) year on year, and operating
income will also increase by 800 million yen (4.3%) to
21.5 billion yen, mainly driven by the recovery from theimpact of COVID-19 in the Nursing Care and Childcare
Business. In the Shinkenzemi business, we will face adecrease in the number of enrollments. To counter this,we will work to increase profit through our own pricerevisions and cost reductions.
For fiscal 2023, we will also make investments infuture growth. Specifically, we will allocate funds mainly toenhance our products and operational foundation in thebusiness targeting elementary and junior high schools,
where replacement of devices will be promoted based on
the “one terminal per student” principle under the Next
GIGA Program starting in fiscal 2025; promote sales anddevelop human resources for the speedier growth of theUdemy business; enhance the area business promotion
system; develop business in India; and develop humanresources for DX. For the fiscal year, we thus plan to increase
the investment amount by a total of about three billion yen
year on year.
While proactively making investments in future growth,
we will also strive to keep increasing our profit.

Important points of the Transformation
Business Plan from the CFO’s viewpoint
Fiscal 2025 and fiscal 2028 are milestone years for theTransformation Business Plan. In consideration of thepresent situation for our existing businesses and theinvestments to be made in new businesses for future
growth starting in fiscal 2025, we set the operating incometarget for fiscal 2025 at 32 billion yen. For the ROE targetfor fiscal 2025, we strive to increase the return to 10% ormore. Also, through the transformation of our businessportfolio, we aim for well-balanced profit generation fromthree pillars: Core Education, Core Nursing Care and New
Fields, by setting the targeted status of the three to bestable profits, stable growth and growth driver, respectively.
Specifically, for Core Education, we will boldly transformthe business model up to fiscal 2025 and onwards, while
drastically making structural reforms, enhancing thecustomer base, and responding to the diversificationof market needs, thereby stabilizing our foundation togenerate profits. In order to achieve the targeted status(stable profits), we must maintain the current profit level,
for which we will implement measures as required.
Although the education business remains a core businessfor the Group, the market growth rate will inevitably drop
due to the decreasing birthrate. For the time being, we willcontinue to make prior investments to grasp opportunities
given by the Next GIGA Program to be implemented
starting in 2025, while also steadily evaluating ROI for
well-balanced investments.
In Core Nursing Care, the market will continue to expandin line with the aging of society. Also, we can see signs ofbottoming out regarding the occupancy rates at our nursing
care facilities, which had been falling due to COVID-19. We
are offsetting the increase of costs caused by the recent
inflation by raising our own service prices and saving costs
and are nearly on the path to boost our profit substantially.
First, we will achieve recovery to the pre-COVID-19 level forthe occupancy rates and profits toward building a robust
business foundation for stable growth.
For New Fields, we regard these fields as those that will
drive the Benesse Group’s profit growth starting in fiscal
2026. Accordingly, we will make proactive investments inthe fields, including those for M&A.
We held some meetings with investors after theannouncement of the Transformation Business Plan, andI think the investors largely agree with the direction of
the strategies that we are upholding. However, to further
increase their expectations for our growth potential, weneed to demonstrate that we do have such potential bymaking achievements.

For the sustainable improvement of ourcapital efficiency and earning power
In fiscal 2022, we recorded 7.5% for ROE, up as much as 6.8
percentage points year on year. For fiscal 2023, we will post
ROE of 7.3%. The attainment of 10%, which is our ROE target
for fiscal 2025, is within reach if we can steadily increase ourprofit in line with the Transformation Business Plan in addition
to gaining a tax effect from the sale of the Berlitz business.
As for cash allocation for three years from fiscal 2023 tofiscal 2025, we will allocate a total of about 124 billion yen

01 Our Vision and Business Strategies

to transform the core businesses, make growth investments
in New Fields, and to return profits to shareholders. For
the breakdown, we will allocate a total of 103 billion yen
to making investments at the rates of 30%, 20% and 50%
in Core Education, Core Nursing Care and New Fields.
Specifically, we will invest 50 billion yen in the transformationof the core businesses, and the remaining 53 billion yen in
the growth of New Fields. Then we will use the remaining
21 billion yen to return profits to shareholders and to solidify
our financial foundation. We used to categorize the use offund into the following: 1) CAPEX and other investments
in existing businesses, 2) growth investments in new
business fields and M&A, 3) return of profit to shareholders,and 4) internal reserves. Going forward, we will prioritize
investments in the Core Nursing Care business in which
we are aiming for stable growth, and in New Fields whichhave market growth potential, while making more selective
investments in the Core Education business than in the past.
We will not cut the number of necessary investments, butwill strictly check the returns on each to make well-balanced
investments, which I will lead as a responsibility to be fulfilledby the CFO.
As for the balance sheet, we secure about 150 billion
yen as cash on hand and bank deposits. Relative to theamount of our interest-bearing debt, we have adequate
cash and bank deposits. However, advance payments
received from our customers amount to 100 billion yen
or more, and funds that we can immediately spend total
40 billion yen to 50 billion yen. It might be possible toinvest the funds from advance payments also in ourbusinesses, but as a corporate group engaging in the social
infrastructure business, we have consistently adhered tothe policy of retaining all the cash gained from advancepayments. The Benesse Group thus has enough surplus
fundraising capacity, while the interest rates remain at avery low level. Against this backdrop, when making a large
investment such as for an M&A, we will consider raising ourfinancial leverage on a temporary basis, while giving due
consideration to the availability of working capital.

For the maximization of shareholders’value
In returning profit to shareholders, we aim to continuously
increase the dividend payout ratio by increasing our profit,
setting the lower limit of the ratio at 35%, and enhancing ourfinancial foundation mainly by recovering the equity ratio
to 30%. Recently, our dividend payout ratio has remained
at 45% to 50%, and we will allocate the balance between
the total amount of profit gained and the amount paid
to shareholders as dividends to internal reserves and as afund for future investments. For the repurchase of our ownshares, which we have been conducting, we will consider
shifting our focus to the payment of dividends in view of
the increased number of personal shareholders and witha focus on encouraging our customers to become ourshareholders and our shareholders to become our customers.
Our equity ratio is currently slightly below 30% due tochanges made to the lease accounting method and becauseof the introduction of the revenue recognition standard. To
maintain our corporate rating, we need to recover the ratio
to at least 30%, for which we will focus on dividends as ameans of returning profits to shareholders.
Benesse Report 202328

CFO MESSAGE

CHAPTERConclusion
The Benesse Group is strongly committed to serving society
and our customers. On the other hand, the Group tends
to be not very sensitive to numerical figures that reflect its
business performance. In order to implement the Group’s
corporate philosophy through its business operations asa going concern, I strongly feel it necessary for the Groupto develop human resources who can help the Group
increase its corporate value financially. To this end, for theeducation business in Japan, employees working under theCFO are given multiple jobs and are transferred to makethe business more financially robust. I would like to expand
this practice to across the Group to develop personnel who

can make business and investment plans and formulate
financial strategies based on the understanding of worksite
atmospheres and situations.
The Benesse Group’s price-earnings ratio (PER) andprice-to-book ratio (PBR) are about 15 and 1.1, respectively,
and are thus on an average level in the market. However, ourPER used to be 20, and compared with that time, the Group’s
rating in the capital market is not very high. Also, I am notat all satisfied with our current stock price. We have beenpresenting detailed explanations to investors about thegrowth strategies described in the Transformation Business
Plan, while providing them with relevant quantitative
information to help them further their understanding ofthe Group. However, it is not enough, and we need toimplement strategies to make achievements. If we cansuccessfully transform our business portfolio under thePlan, investors will have more expectations for the BenesseGroup’s future growth. Accordingly, it is becoming evenmore important for us to report the progress with the Plan
to them continuously through proactive IR activities.
I would ask all our stakeholders, including shareholders
and investors, to give your frank opinions to the Group, andask for your continued support for us.

Financial Highlights

Net sales

500.0

Operating income/Operating income ratio

Net income attributable to ownersof the parent/Net income per share

Operating income (left)
Operating income ratio (right)

Net income attributable to owners of the parent (left)
Net income per share (right)(billionsof yen)(billionsof yen)

439.4

448.5

(%)

25.0
427.5

431.9

400.0

411.8

21.2

20.1

20.0

300.0

15.0

13.0

10.0

200.0

3.7

4.70

18

1920

21

22 (FY)

ROE/ROA

018

4.7

5.0

3.1

5.0

100.0

15

15.0

12

12.0

9

9.0

19

20

6321

0
22 (FY)

CAPEX

(yen)

250

11.3 200

117

6.2

6.0

100

4.9

3.0

50

0

18

65

3.1
32

19

150

20

1.050
110
22 (FY)

21

Depreciation & amortization

ROE
ROA

(billionsof yen)

87.5

6(billionsof yen)

25.0

40.030.031.54

The investment plan allocates approx. 50% of them to New Fields.
We also make investments in core business transformation while verifying ROI.

2▶Cash allocation (FY2023-2025)

0

3.7

23.5

1.2

1819

24.4

19.8

19.8

1819

18.8

18.8

19.2

202122 (FY)

15.0

20.0

2.9
1.0

20.0

29.2
22.6

Cash and investment allocationapprox. 124 billion yen

20.6(billionsof yen)

16.2

(%)

Three-year cumulative cash position
in FY2023-2025:

01 Our Vision and Business Strategies

2.1

1.8
0.6

0.7

20210.2

22 (FY)Investment plan(FY2023-2025)

10.0
10.00

5.0

1819202122 (FY)0

Note: CAPEX shows the “increase in tangible fixed assets andintangible fixed assets” as listed in summaries of financialresults.

Note: Depreciation & amortization shows the total amountof “depreciation and amortization” and “amortization ofgoodwill” as listed in summaries of financial results.

Interest-bearing debt/
Debt-to-equity ratio

Cash dividends/Dividend payout ratio

Percentage of total

Use

1 Core business transformation

Use

2New fields growthBusiness investment

Business investment(CAPEX etc.)(M&A, CAPEX, etc.)*Excluding lease assets, long-term
prepaid expenses, etc.

(Approx.) 50 billion yen

CoreEducation(Approx.) 53 billion yen
Core Nursing
CareUse3

Shareholder returns and strengthening of financial base

Shareholder returns

Strengthening of financial baseWith lower limit of dividend
payout ratio at 35%, dividends toincrease continuously thanks toincrease in net income after taxes

Some retained earnings forrecovery of 30% equity ratio inFY2025 and for future
investments

New Fields

30 %20 %50 %100 %Equity ratio

Interest-bearing debt (left)
Debt-to-equity ratio (right)

Cash dividends (left)
Dividend payout ratio (right)(billionsof yen)

(%)

(%)

160.0

40

33.6

32.7

31.3

30

27.6

28.5

120.0

20

80.0

10

40.0

120.6

68.1

123.6

72.2

137.2

77.0

139.9

86.9

143.9
93.5

12090

(%)

(yen)

100

500

452.9

400

80
60

60

60
50

50

50

76.6

154.3

50

40
30

20

300
200

98.2

100
51.0

0

18

1920

2122 (FY)

018

1920

21022 (FY)

018

192021022 (FY)

Note: Interest-bearing debt includes lease obligations.

29 Benesse Report 2023

Benesse Report 202330