BRIDGE REPORT (1433) April 3, 2020

https://www.bridge-salon.jp/

BESTERRA CO., LTD (1433)

President Yoshihide YoshinoCompany Information
MarketIndustry
President
HQ Address
Year-end
Homepage

TSE 1st Section
Construction businessYoshihide Yoshino
Kiba Park Bldg, 3-2-6 Hirano, Koto-ku, Tokyo, JapanEnd of January
http://www.besterra.co.jp/index.html

Stock Information
Share Price
Share Outstanding (exc. Treasury Stock)¥932
8,226,770 shares
DPS (Est.)
Dividend Yield (Est.)
EPS (Est.)¥16.001.7%¥47.41Market Cap.
¥7,667million
PER (Est.)
19.7x

ROE (Act.)
2.3%
BPS (Act.)¥308.57

Trading Unit
100 shares
PBR (Act.)
3.0x*The share price is the closing price on April 2. The number of shares issued was taken from the latest brief financial report excluding treasury stock. ROE andBPS are the values of the pervious term.

Consolidated Earnings
Fiscal Year
Jan. 2017 (Actual)Jan. 2018 (Actual)Jan. 2019 (Actual)Jan. 2020 (Actual)Jan. 2021 (Forecast)

Net Sales
Operating Income Ordinary Income
4,182
397
404
4,496
386
373
4,927
497
495
3,436
93
97
6,400
570
566

Net Income
271
263
621
59
390

EPS
32.85
31.69
75.25
7.29
47.41

DPS
40.00
15.00
15.00
16.00
16.00

*Forecast is from the Company’s financial report. unit: million yen, yen

This Bridge Report reviews on the outlook of BESTERRA’s earnings results for the fiscal year ended January 2020 and its forecast of
the fiscal year January ending 2021.

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Table Contents
Key Points
1. Company Overview
2. Fiscal Year ended January 2020 Earnings Results
3. Fiscal Year ending January 2021 Earnings Forecasts
4. Medium-term Management Plan 2022 (FY 1/21 to FY 1/23)
5. Conclusions<Reference: Activities for actualizing an advanced recycling society and measures for attaining SDGs><Reference: Regarding Corporate Governance>

Key Points● For the term ended January 2020, sales and operating income dropped 30.3% and 81.3%, respectively, year on year. Sales
decreased, because the orders for the projects which were expected to generate profit in the second half were delayed.
Operating margin declined due to a decrease in sales and an increase in personnel cost as the number of employees grew,etc. REVER Holdings Corporation, with which the company has a capital and business alliance, got listed on the Second
Section of the Tokyo Stock Exchange. The company also established 3D Visual KK, which offers 3D scan modeling anddesign services targeting plants. The annual dividend was 16 yen/share, up 1 yen/share from the previous term.
● For the FY ending January 2021, it is estimated that sales will increase 86.3% year on year, and operating income will grow
6.1 times year on year. With the V-shaped recovery, the company will get back on the track on the medium-term
management plan. Sales are expected to increase due to the recovery in orders, and operating income is estimated to growas the sales will absorb the augmentation of recruitment and personnel costs, etc. accompanying the increase in the numberof employees by 27 (including 15 supervisors). The dividend will be 16 yen/share, including 6 yen/share at the end of thefirst half and 10 yen/share at the end of the year (expected payout ratio: 33.8%).
● Considering the business characteristic, the main business of the company is plant demolition, the business does not meetthe condition such as being crowded with people, which is said could result in the coronavirus outbreak. Therefore, thecoronavirus outbreak is less likely to affect the company. However, if there is an infected person within the company or onsite and the demolition schedule is delayed, the business performance will be negatively affected. For this reason, from theviewpoint of controlling the damage of the coronavirus outbreak inside and outside the company and ensuring the safety of
employees and those involved in the business of the company, the company is implementing staggered working hours andtelecommuting.

1. Company Overview
As a specialist in plant dismantlement, BESTERRA manages the dismantlement of plants (metal structures) for iron-making, power
generation, gas, petroleum, etc. Its core competence is “the method and technology for dismantling plants,” and it has many patented
methods including international patents. The company concentrates its managerial resources on engineering (proposal, design, and work
planning) and management (supervision and work management), and outsources actual dismantlement work to its affiliates, and so it
does not own heavy machinery or construction teams (the risk of owning assets can be avoided), and it is unnecessary to procure materials,
etc. and make transactions for material production (the inventory risk can be avoided).
The Group also has two consolidated subsidiaries, Hiro Engineering, which provides human resource services for design work, etc. and
3D Visual KK, which handles 3D scan modeling and design work.
The corporate name “BESTERRA” was coined by combining the English word “Best (the superlative of ‘good’)” and the Latin word
“Terra (the earth),” and、infused with the ambition to “create the best earth.” By developing an integrated system for dismantling andrecycling, the company aims to actualize an advanced recycling society and contribute to the earth environment.
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Corporate ethos and the code of conduct
Under the corporate ethos “We will contribute to the earth environment with our flexible way of thinking, creativity, and technologies
using these concepts,” the company enacted the following code of conduct.
Long-term vision (Ideal state of the company)
・ Plant Demolition Leader in Japan・ Proposing Plant Disassembly Technologies to the World
1-1 Characteristics of the business
The company has a single segment consisting of the plant demolition business. For others, it engages in the human resource service
business and the 3D scan, modeling and design business.

Plant dismantlement business
OthersConsolidated sales
Plant dismantlement business
OthersAdjustment amount
Consolidated operating income

FY 1/19
4,761
165
4,927
1,021
32
-556
497

Ratio
96.6%
3.4%
100.0%
21.5%
19.5%
10.1%

FY 1/20
3,224
211
3,436
665
43
-615
93

Ratio
93.8%
6.2%
100.0%
20.6%
20.5%
2.7%

YoY
-32.3%+27.6%-30.3%-34.9%+33.7%-81.3%*unit: million yen

Plant dismantlement businessIn the plant dismantlement business, the company works on all types of plants in the fields of ironmaking, electric power, gas, petroleum
and petrochemicals, etc. The company offers services on overall engineering processes including proposals, designing, work planning,
outsourcing/arrangement of equipment and materials, supervision, safety management, cost management, financial management, andhandling of governmental procedures. It focuses on designing its unique demolition technologies and supervising demolition works
based on demolition plans, and uses specialized subcontractors for demolition works.
The clients for plant dismantlement are leading companies that own plants for ironmaking, electric power, gas, petroleum, etc. In mostcases, the equipment installation companies of the corporate groups of clients or leading general contractors are entrusted withdismantlement, and then BESTERRA serves as the primary or second-tier subcontractor.
Also, in the plant dismantlement business, BESTERRA receives valuable materials generated through dismantlement, such as scrap,
and sells them to scrap handlers. Accordingly, the company estimates the value of valuable materials while comprehensively considering
material, quantity, price (market price of each material, such as iron, stainless steel, and copper), etc. and negotiates with clients about
the fee for dismantlement work. In accounting, the gain from sale of valuable materials is included in revenue from dismantlement work,and posted as part of sales from completed dismantlement work. In some cases, contractors (clients) dispose of (sell) scrap, etc. bythemselves.
The number of completed works (rough estimates)
FY 1/19
Ratio to Sales
Electric power
1,666
35%
Steelmaking
1,952
41%
Petroleum/petrochemical
428
9%
Gas
666
14%
Other
47
1%
Total
4,761
100%

FY 1/20
419
1,837
548
290
128
3,224

Ratio to sales
13%
57%
17%
9%
4%
100%

YoY
-75%
-6%
+28%
-56%
+172%
-32%

*unit: million yen

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https://www.bridge-salon.jp/*Two standards for posting revenue and seasonality of revenue posting of the company
The standards for posting revenue from contracts can be classified into the completed contract method, in which revenue is posted whenworks are completed, and the percentage-of-completion method, in which revenue is posted according to the progress of works. In thecase of plant dismantlement, where valuables, such as scrap, are collected, revenue cannot be confirmed until the sale of scrap. Therefore,
the company basically applies the percentage-of-completion method to large-scale projects whose contract amount exceeds 50 million
yen and whose period exceeds 3 months, from the term ended January 2018 (the completed contract method is applied to the projects
that are not applicable to the above criteria). The timing of posting revenue (the completion of demolition work) from works for which
the completed contract method is used is often affected by the capital investment plans of clients. In the case of BESTERRA, revenue
tends to be posted in the first quarter (February to April) and the fourth quarter (November to January) (the seasonality of revenue
posting). However, the variation in quarterly performance may mislead investors, so the company is expanding the scope of applicationof the percentage-of-completion method step by step, to equalize the timings of revenue posting.
OthersIn response to the chronic shortage of skilled construction workers, the company began providing human resource services in January
2013, and in March 2018, it made Hiro Engineering, which handles human resource services such as design work, a subsidiary. In
January 2015, the company began offering a 3D measurement service as well. It established 3D Visual KK in December 2019, and 3D
scan modeling and design business was transferred from INTER ACTION Corporation (securities code: 7725) in February 2020.
1-2 Strengths: an excellent client base, efficient dismantlement management based on plenty of experience, and intellectual
property, such as patented methods
The strengths of the company are excellent client assets, efficient dismantlement management based on plenty of experience, andintellectual property, such as patented methods. Because the clients are basically engineering subsidiary companies of leading companies
in ironmaking, electric, gas, coal oil fields, and major general contractors, which are easily trustable excellent clients, and it is predictedthat they will receive orders continuously. The clients of the leading companies highly evaluate its company’s total management (lowcost and high efficiency) of plant dismantlement that it cultivated experiences for over 40 years, and it elect a barrier to entry.
Furthermore, the company possesses a variety of technologies and know-how, which have been accumulated through environmental
work, etc.
Patented methods, etc.
“Apple peeling demolition method” and fusing robot “Ringo☆Star”
The “apple peeling demolition method” is a method of dismantling a large spherical tank, such as gas holders and oil tanks, by cutting itin spirals from the center of the ceiling of the enclosure part. The cut part spirals down to the ground gradually under the force of theearth’s gravity (natural energy). The method enjoys superiority in a work period, cost, and safety, and has considerable competitive
advantages, realizing “greater promptness, higher cost efficiency, and added safety.” Furthermore, the company offers a robot for thefusing process, “Ring☆Star,” which automates the “apple peeling demolition method.” (The company is also working to expand therange of applications for “Ringo☆Star” by developing a new attachment).
Environment-related methods
The company has cultivated experiences and business results of a multitude of environment-related demolition works, using the “firelessmethods” which do not require the use of fire. For example, although polychlorinated biphenyls (PCBs) are considered as a toxic
substance and therefore totally abolished today, it had been used for many years in transformers and condensers because of its excellent
thermal stability and chemical stability (electric insulation characteristics). In many cases, transformers and condensers are disposed ofin conjunction with plant demolition works; however, because PCBs gasify when they are treated at the high temperature, posing a riskof inhaling the gas so generated, any firearms (such as gas cutting machines) cannot be used in demolition and withdrawal involving
PCBs. The company is skillful at fireless and quasi-fireless methods using saber saws (which cut off objects with their saw blades moving
in a reciprocating manner) that can cut off objects thicker than the thickness, which, in the industry, had been considered impossible tocut, through numerous devices, including measures against seizure of motors and recycling of blades. BESTERRA has applied for joint
patents with Hitachi Plant Construction, Ltd. for a transformer dismantling method, a transformer dismantling jig, and a cutting devicefor dismantling a transformer.
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Windmill demolition works
The number of power-generating wind turbines continues to increase by about 20% annually worldwide, but the demand for dismantlingis expected to increase in the future due to wear and tear and economic obsolescence. According to the material presented by the company,
the wind power generation volume worldwide is 486,790 MW (by about 340,000 onshore power generation plants and about 4,000
offshore ones) with an annual growth rate of about 20%. In Japan, the number of wind power generation plants stood at 2,225 as of theend of 2017, expanding by about 90 every year. Meanwhile, as the useful life is approximately 15 to 20 years, and the windmills for
power generation established in the early stage are reaching the application limit. Moreover, not a few plants need to be dismantled due
to damage or fatal failure caused by thunderbolts or typhoons.
How to knock down a power-generating wind turbine (international patent application)
As some windmills have been built in mountain districts and on the sea, demolition of them is highly difficult. The company has deviseda method for dismantling wind turbines that does not require scaffolds, and has already acquired a domestic patent for “Method ofknocking down a power-generating wind turbine.” International patents are pending for “Method of knocking down towering structuresusing their bases” and “Method for dismantling tower-shaped equipment for wind power generation.” Safety of workers can be improved
dramatically and the work period can be shortened by using these patent-based methods.
Pursuit of the value of the 3D business
Using services such as layout simulation, strain/bending/torsion measurement, comparison of structures before and after improvement,
and video walkthroughs, the company converts physical data taken when plants were established (more than 30 years ago) into the latest
3D data, and uses that to provide detailed information about the dismantling process. They also provide unique 3D measurement services
for dismantling work using the latest measuring technology and simulation systems that are capable of drawing data as 2D diagrams,
handling BIM/CIM modeling, Perfect 3D, and 3D printing, etc.
“Visualize” the dismantling process
Layout simulation
The equipment models produced with 3D CAD are placed in 3D data, and the replacement ofequipment can be simulated. By moving the equipment models, it is possible to check how theyinterfere and collide with one another.
Strain, bending, and torsion It is possible to measure changes in shapes. This is useful for diagnosing frameworks tentatively, tomeasurements
check whether a building got distorted due to an earthquake, deterioration, etc.
Comparison of structures
The shapes of equipment that changes due to heat and vibration, such as pipes, conveyors, andbefore and after installation furnaces, at the time of installation and after operation are compared. With 3D data, it is possible tograsp overall changes intuitively.
Video walkthroughs
Walk-through videos are produced by using synthesized point cloud data. These videos can be utilized
for presentations and publicity videos regarding dismantlement plans and real estate information.
Unique 3D measurement service
Draws a two-dimensional
The 3D CAD models based on point cloud data are converted into drawings. It is also possible todiagramproduce drawings directly from point cloud data in a simple manner.
Handles BIM/CIM
Modeling is conducted with 3D CAD based on point cloud data. It is possible to produce models ofmodeling
the parts that require construction or renovation as BIM (building information modeling) data.
Perfect 3D
This is a large-scale 3D data measurement service combining automobile-based MMS (mobile
mapping system), airborne laser measurement, water area measurement, etc.
3D printing
After modeling with point cloud data, data are processed and deformed so that they can be shaped witha 3D printer. It can produce fine structures with a lamination pitch of 15 μm.

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2. Fiscal Year ended January 2020 Earnings Results
2-1 Consolidated results

Sales
Gross profit
SG&A expenses
Operating income
Ordinary income

4,927
1,054
556
497
495

Ratio tosales
100.0%
21.4%
11.3%
10.1%
10.1%

Profit attributable toowners of the parent

621

12.6%

FY 1/19

3,436
708
615
93
97

Ratio tosales
100.0%
20.6%
17.9%
2.7%
2.8%

59

1.7%

FY 1/20-30.3%-32.8%+10.7%-81.3%-80.4%

Forecast revisedat the 3Q
3,540
120
120

Compared toforecast-2.9%-22.3%-19.0%-90.4%

74-23.4%

YoY*unit: million yen
Sales and operating income decreased 30.3% and 81.3% year on year, respectively
Sales declined 30.3% year on year to 3,436 million yen. As the orders for the projects which were scheduled to generate profit in thesecond half were delayed, sales decreased. Operating income decreased 81.3% year on year to 93 million yen. Gross profit margin
declined 0.8 points to 20.6% (22.8% in the first half) due to a fall in the operation rate in the second half, while SG&A expenses increased,
mainly in recruitment, personnel and R&D expenses.
Orders received decreased 8.8% year on year to 3,249 million yen. The backlog of orders at the end of the term was 1,046 million yen,up 2.5% from the end of the previous year.
Since the decreases in sales and profit are temporary, the company plans to pay a year-end dividend of 16 yen/share, up 1 yen/share, as
announced at the beginning of the fiscal year (payout ratio: 219.5%).
The number of completed works by sector (rough estimates)
FY 1/19
Ratio to sales
Electric power
1,666
35%
Steelmaking
1,952
41%
Petroleum/petrochemical
428
9%
Gas
666
14%
Other
47
1%
Total
4,761
100%

FY 1/20
419
1,837
548
290
128
3,224

Ratio to sales
13%
57%
17%
9%
4%
100%

Increase/Decrease
-75%
-6%
+28%
-56%
+172%
-32%

*unit: million yen

The amount of completion work was recorded mainly in the ironmaking industry, where demand for demolition in western Japan isstrong.

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Breakdown of SG&A and major change factors
FY
Ratio to1/19
sales
Salaries and allowances
280
5.7%
R&D cost
9
0.2%
Commissions and52
1.1%
remunerations paid
Recruitment cost
120.2%
Advertisement
17
0.3%

FY
1/20
327
16

Ratio toIncrease/Decre
Major change factors
sales
ase
9.5%
+16.7% Increase in head office staff
0.5%+71.3% Development of Robots

53

1.5%

+1.0% The upgrade of basic system

16
10

0.5%
0.3%

+37.0% Advertising media, referral fee-42.9% Decrease of exhibition
Leasing expense of head office+4.3%
building+10.7%

Other

182

3.7%

190

5.5%

Total SG&A expenses*unit: million yen

556

11.3%

615

17.9%

Salaries and allowances increased due to base upgrades and an increase in the number of employees, mainly supervisors, etc. R&D cost
increased because of the development of a robot for inspecting crane rails. The number of supervisors at the end of the fiscal year was
37, up 5 from the same period last year.

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Orders received and the backlog of orders
FY 1/19
The backlog of orders at the beginning of the term
The amount of works received
The amount of completed works
The backlog of orders at the end of the term

FY 1/20
2,218
3,565
4,761
1,021

YoY
1,021
3,249
3,224
1,046

-53.9%-8.8%-32.3%+2.5%*unit: million yen

The backlog of orders by sector (Amounts are approximate.)
FY 1/19
Ratio
Electric power
275
27%
Steelmaking
429
42%Petroleum/petrochemical
224
22%
Gas
51
5%
Other
40
4%
Total
1,021
100%
*unit: million yen

FY 1/20
73
565
397
10
1,046

Ratio
7%
54%
38%
1%
100%

Increase/Decrease
-73%
+32%
+77%
-75%
+2%

The backlog of orders grew in the ironmaking industry, which is undergoing a large-scale renewal in western Japan, and the petroleum
and petrochemical industries (successful in identifying major chemical manufacturers), which are strengthening sales operations. The
orders from the electric power industry declined due to a lull in large-scale projects and the issues of human resources, etc.
2-2 Financial condition and cash flow（CF）
Financial condition
Cash
Notes receivable, accounts receivablefrom completed construction contracts and other

Current Assets
Tangible Assets
Investments, Others
Noncurrent Assets*unit: million yen

Jan. 19
2,032

Jan. 20938 Payables

1,785

708 Taxes Payable

4,059
265
212
504

1,965
267
2,680
2,975

Borrowings and Bonds
Liabilities
Net Assets
Total Liabilities, Net Assets

Jan. 191,357
250

Jan.20
347
0

10
1,949
2,614
4,564

1,756
2,400
2,540
4,941

The total assets as of the end of the fiscal year stood at 4,941 million yen, up 376 million yen from the end of the previous term. As fordebits, cash and deposits decreased due to share acquisition (14.59% of issued shares) based on a capital and business alliance with
REVER Holdings Corporation, while investment securities increased. On the credit side, long-term borrowings increased in line withthe above acquisition of shares and an increase in operating capital. Equity ratio was 51.4% (57.2% at the end of the previous fiscal year).
REVER Holdings Corporation got listed on the Second Section of the Tokyo Stock Exchange on March 24, 2020 (securities code: 5690).
Outline of REVER Holdings Corporation
REVER Holdings Corporation is a holding company that operates the businesses of recycling metal, home appliances, and automobiles,
disposing of industrial waste, etc. via 10 subsidiaries. Its corporate group has 20 odd footholds mainly in the Kanto region, and in
Shizuoka and Osaka. It has a history of over 110 years. REVER Holdings is a leading material recycler in Japan, and has been pursuingthe economies of scale through active M&A in the field filled with small and medium-sized enterprises, with the aim of becoming a
Japanese giant material recycling company.
The Japanese venous industry(material recycle) has been fragmented and filled with small and medium-sized enterprises, and theirthought of “the shift to the scale business would improve the advantage of the industry itself and contribute to the actualization of anadvanced recycling society” led to a capital and business alliance with BESTERRA. Through the capital and business tie-ups, the8

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company will create an environmental supply chain (a platform in the venous industry), and call on small-sized enterprises to join theplatform, with the aim of becoming a major company in the Japanese venous industry.
Cash Flow（CF）
FY 1/19
Operating Cash Flow
Investing Cash Flow
Financing Cash Flow
Cash and Equivalents at Term End*unit: million yen

FY 1/20
1,753
298
-777
2,031

YoY
-153
-2,543
1,604
938-1,907-2,841+2,381-1,092-53.8%

FY 1/1923.81%
13.6%
12.62%
1.08
1.75

FY 1/20
2.33%
1.26%
1.75%
0.72
1.84

Reference: Trend of ROE and ROA
ROE
ROA
Net income margin
Total asset turnover [times]
Leverage [times]

FY 1/1618.43%
10.26%
7.60%
1.35
1.80

FY 1/1712.81%
7.28%
6.48%
1.12
1.76

FY 1/18
11.69%
6.49%
5.87%
1.11
1.80

*ROE = Net income margin x Total asset turnover x Leverage*Total asset and Equity are the average balance in the term

3. Fiscal Year ending January 2021 Earnings Forecasts
3-1 Consolidated Earnings
Sales
Operating income
Ordinary income
Profit attributable to owners of the parent

FY 1/20
Ratio to sales
3,436
100.0%
93
2.7%
97
2.8%
59
1.7%

FY 1/21(forecast) Ratio to sales
6,400
100.0%
570
8.9%
566
8.8%
390
6.1%

YoY
+86.3%+511.6%+482.2%+550.4%*unit: million yen

It is estimated that sales and operating income will grow 86.3% and 6.1 times, respectively, year on year
With the V-shaped recovery, the company will get back on the track on the medium-term management plan. It will make efforts inacquiring projects by strengthening sales of proposals based on the strategy to patent technologies. It will also implement a personnel
strategy centered on strengthening recruitment and development and improving the workplace environment. In addition, it will flexibly
work on M&A to secure excellent human resources and develop innovative new services, while pursuing group synergies bystrengthening cooperation with the consolidated subsidiaries.
It is estimated that sales will increase 86.3% year on year to 6.4 billion yen due to a recovery in orders. Sales will absorb increases ofrecruitment and personnel costs accompanying the increase in the number of employees by 27 (including 15 supervisors). Consequently,
operating income is estimated to increase 6.1 times year on year to 570 million yen.
The annual dividend will be 16 yen/share, including 6 yen/share at the end of the first half and 10 yen/share at the end of the year
(expected payout ratio: 33.8%).

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3-2 The company reorganized 3D Visual KK into a subsidiary
On February 1, 2020, a wholly owned subsidiary, 3D Visual KK, acquired a business of 3D scanning, modeling, and design services forplants from INTER ACTION Corporation (securities code: 7725). INTER ACTION Corporation decided to transfer the business,despite strong performance of the business, mainly in the design service, because it was difficult to expect synergy with its main business.
The company will pursue synergies, including mutual referral of customers, by developing businesses from different perspectives with
BESTERRA as a demolition company and 3D Visual KK as a design company. In the medium term, they are intending to use thetechnology to enhance dismantling work.
3D Visual KK was established in December 2019 for 3D scanning and modeling, design and analysis, equipment inspection, dispatchof designers, and software training.
3-3 Impact of the coronavirus outbreakConsidering the business characteristic, the main business of the company is plant demolition, the business does not meet the condition
such as being crowded with people, which is said could result in the coronavirus outbreak. Therefore, the coronavirus outbreak is lesslikely to affect the company. It was not affected by the outbreak in the term ended January 2020, because its financial settlement was
January.
The company expects that the situation will remain unchanged in the term ending January 2021. However, if there is an infected personin the company or on-site and the demolition schedule is delayed, the impact of the outbreak on business performance is inevitable. For
this reason, from the viewpoint of controlling the damage of the coronavirus outbreak inside and outside the company and ensuring thesafety of employees and those involved in the business of the company, the company is implementing staggered working hours andtelecommuting. Furthermore, alcohol for disinfection is placed on each floor of the company, and cleaning solutions for gargling are
distributed to employees. The employees are also recommended to take individual infection prevention measures.

4. Medium-Term Management Plan 2022 (FY 1/21 to FY 1/23)
4-1 SDGs/ESG and the company
It will carry out ESG management mainly by working on safety (creating a safe culture with its original technologies), R&D (developing
innovative construction methods friendly to the earth), recycling (building an advanced environmental cycle by strengthening the venous
industry), governance (thorough transparency and risk control), and human resources (pursuit of worthwhile jobs and growth ofindividuals). Furthermore, as a leader of the plant dismantlement industry, it will be making efforts to realize a highly recycling-oriented
society, taking nuclear power plant decommissioning measures, and working on responses to aging social capital. It will also facilitate
the reorganization and integration of the venous industry by sharing and promoting the management policy with REVER Holdings
Corporation that aims to be a major company in the venous industry. Through ESG management and these activities, it intends tocontribute to the achievement of the Sustainable Development Goals (SDGs) while aiming for the best earth (BEST TERRA), as thecompany’s name represents.

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https://www.bridge-salon.jp/(Source: Company’s material)

4-2 Three Strategies
Under the belief that “nothing is unbreakable by BESTERRA, a pioneer in dismantling plants,” the company will continue to develop
businesses that mainly target plants that require the most technical skills in demolition work. Specifically, it will promote three strategies:
the technology patent strategy, human resources strategy, and M&A strategy.
Strategy 1: Technology patent strategy
It will identify potential demand by providing innovative dismantling technologies such as 3D dismantling, patented methods (apple
peeling demolition method, robot method, environment-related methods, windmill dismantling method), 3D business, and a robot for
inspecting crane rails. At the same time, it will contribute to the global environment by improving safety, recycling, and productivity.
3D dismantling
Combining the latest measurement technology with the know-how of dismantling work, the company offers a unique “3D dismantling”
service. The “3D dismantling” is implemented based on modeling data (drawing data) created from point cloud data in a short period oftime using “3D measurement (point cloud data conversion)” to convert the current situation of a complex plant without blueprints. Thisis an advanced dismantling method that is different from the conventional ones that are based on experiences and intuition. The company
continuously accumulates and shares new dismantling methods and know-how obtained from the workplace, leading to new technology
development and patent acquisition.
Patented methods
The company owns many competitive patented methods. It intends to increase orders by proposing dismantling methods using thesepatented methods.

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Major patented methods
Apple peeling
It is a method with excellent demolition period, cost, safety and is highly competitive. When dismantling ademolition method
spherical storage tank such as a gas holder or oil tank, a spiral cut is made from the center of the outer ceilinglike peeling an apple.
Robot method
The company is evolving the “Ringo☆Star” used in the apple peeling demolition method. It is also working
on a new robot development. “Ringo☆Star” can be used in a wider range by developing new attachments.
Environment-related
The company has abundant demolition experience with the “fireless methods” that does not use fire. The
methods“fireless methods” is suitable for disassembling and disposing of transformers containing harmful
substances (i.e. PCB) that cannot be used firearms on (gas fusing, etc.) in demolition and withdrawal. It isbased on the technology that cuts large equipment with a thickness that exceeds common sense in theindustry by using saber saws (which cut off objects with their saw blades moving in a reciprocating manner)
etc. and other unique know-how. The “fireless methods” also works well for the places where there areasbestos and dioxin.
Windmill dismantling The number of wind turbines for power generation is growing at a rate of about 20% annually worldwide.
methodDemand for dismantlement is estimated to increase due to their expiration and economic obsolescence inthe future.

3D Business
The lineup of measurement services will be expanded by adding modeling (drawing), 3D layout simulation, distortion/bending/twist
measurement, Before/After shape comparison, walk-through video, 2D drawing, BIM/CIM modeling, perfect 3D, and 3D printing on
3D measurement.
A robot for inspecting crane rails
The company and iXs Co., Ltd. jointly developed an autonomous robot that runs on crane rails and performs efficient periodic inspectionof overhead cranes that are installed in plants and factories for transporting heavy objects and parts, etc. Overhead cranes can be distorted
due to aging, etc., and if left as it is, a serious accident may occur. For this reason, the Industrial Safety and Health Act’s safety regulations
for cranes, etc. stipulates that companies that use overhead cranes must perform voluntary inspections once a year and once a month.
The domestic market size of overhead crane inspection is estimated to be more than 30 billion yen per year (estimated by the company).
There are wide demand bases, such as general contractors, logistics, and maintenance companies, and the company is eager to develop
new customers.
Strategy 2: Human Resource Strategy
The company specializes in demolition management for demolition work, and it needs to place supervisors at every site. Therefore,
increasing the number of supervisors is essential for sustainable growth. In order to increase the number of supervisors and improve theirability in a short period of time, the company will implement an efficient recruiting strategy and work on establishing a training program.
It will also focus on creating mechanisms that allow the employees to work with peace of mind.

(Source: Company’s material)

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An efficient recruitment strategy aims to achieve a personnel plan by clarifying recruitment methods and targets and establishing apersonnel system that has a direct effect on recruitment. At the time of recruiting, the targets are divided into inexperienced people,
experienced people, and seniors, and effective recruiting methods such as advertising media, putting on the web-sites, referrals,
headhunting, etc. are used.

(Source: Company’s material)

For establishing a training program, the company will implement a “training program” to transfer technology from experienced engineers
to inexperienced ones. Furthermore, the “Demolition Professional Course” and “Management Course” will be established as anevaluation system in line with the actual situation of supervisors. The “Qualification Promotion System” will also be expanded to support
skill improvement. Furthermore, a personnel system that places emphasis on individual work styles will be formulated.
As for the development of a worker-friendly mechanism, in the construction industry, where working on Saturdays is common, thecompany introduced a five-day workweek system for all employees ahead of its rivals. In the future, it will introduce “shift (time)
management by executives,” “workplace (labor) rotation” and “health management” and other various systems as measures to create aworker-friendly environment, where employees can work with a peace of mind for a long time.
Income insurance that has the highest
level in Japan(Income compensation insurance)
Retirement plan
A generous grant to the employee
shareholding association
Special paid leave (preserved annual paid
leave)

Insurance for which the premium is fully covered by the company to compensate forthe loss of income when an employee cannot work for a long time due to injury orillness. 50% of monthly remuneration will be reimbursed until retirement (age 60).
A retirement allowance system is in place so that employees can work for a long time
until retirement and enjoy a fulfilling life after retirement.
An employee shareholding association is established where employees hold their own
shares by a funding method. Incentives earned by members are subsidized by a 15%
rebate purchase of treasury stock to encourage employees to build their assets.
The typical maximum number of days of paid leave is 40 days under the Labor
Standards Act, but the company allows the employees to hold up to 80 days of paid
leave in case of medical treatment due to injury or illness.

Strategy 3: M&A Strategies
The company will implement M&A flexibly to secure excellent human resources and develop innovative new services. In addition, it
will pursue group synergy by strengthening cooperation with Hiro Engineering, through which the M&A effects are not fully
demonstrated yet, and 3D Visual KK which acquired the 3D scan modeling business from INTER ACTION Corporation (securities
code: 7725).

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Response to decommissioning of nuclear power facilities
There are 60 reactors at 19 locations in Japan, and the decommissioning of 24 units has already been decided. It is estimated that thedecommissioning business will accelerate and expand from now on as the examination of conformity with the new regulatory standards
progresses. The company is contributing to the efforts to decommission nuclear power generation plants, which is a national issue, by
providing technologies and know-how cultivated in plant demolition work. As part of this effort, in July 2018, the company establisheda business alliance with Hitachi Plant Construction, Ltd., which has the know-how and technology of sales, on-site management, anddemolition of nuclear power generation plants (decommissioning, renovation, etc.) and handles dismantling work and radiation
management using demolition techniques using large band saws, etc.
In addition, the company itself is working as a platform to expand tie-ups with specialized contractors, etc., and is working on building
a “decommission-related business platform” that leverages the strengths of each company in the work related to decommissioning
nuclear power plants. For this purpose, it is facilitating collaboration and M&A. In September 2018, the company concluded a businessalliance agreement with Daiichi Cutter Kogyo K.K., Japan’s leading company for the diamond method and water jet method that are
required for the maintenance and repair of structures. In September 2019, the Group concluded a capital and business alliance agreementwith REVER Holdings Corporation, which operates a recycling business and an industrial waste treatment business, etc.

(Source: Company’s material)

Creation of an environmental supply chain
The company will also work with REVER Holdings Corporation to create an environmental supply chain. While BESTERRA Co., Ltd.
mainly operates the dismantlement business, which is positioned between the arterial industry (including electric power, steelmaking,and petrochemistry) and the venous industry (including scrap and industrial waste), REVER Holdings Corporation mainly conducts theintermediate processing of scrap, industrial waste, etc. in the venous industry. While the market is expected to expand in response to thedeterioration of social infrastructure, etc. the two companies are intending to play a role in coordinating the “arterial industry” and the“venous industry” establish an indispensable position in the advanced recycling society by joining hands in the medium to long term.

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Other strategies
The company will work on improving profitability and increasing sales bases by expanding direct orders.
To increase the number of direct orders, it will enhance its name recognition by increasing advertising media such as exhibitions, websites, promotional materials, etc. Furthermore, since the company can propose a plan based on the demolition plan of the client, it has
knowledge about the demolition system of the primary contractor. It will also strengthen the structure by establishing a qualificationacquisition system, increasing the number of sales assistants, and carrying out the personnel structure reform.
In order to expand sales bases, the company is planning to establish new bases in industrial areas in Kyushu or Sendai, etc. so that they
can accept more recurring-revenue orders (projects that receive continuous orders from customer groups, being stationed at factories,
the apple peeling demolition method, PCB processing work, etc.).
4-3 Numerical targets
Sales
Operating income
Ordinary income
Net income attributable to owners of the parent
Operating margin
EPS

FY ending January 2021
6,400
570
566
390
8.9%
47 yenFY ending January 2022
7,200
650
645
455
9.0%
55 yenFY ending January 2023
8,100
740
735
523
9.1%
63 yen*Unit: Million yen

Although the business performance was down in the term ended January 2020 due to a temporary factor, a V-shaped recovery is expectedin the term ending January 2021 as the orders are recovering. Despite the large fluctuations in business performance in the term ended
January 2020 and the term ending January 2021, basically, both sales and profits are targeted for continuous growth of more than 10%
from the previous year. It is targeting sales of 8,100 million yen and an operating income of 740 million yen in the final year (the term
ending January 2023).

4-4 Profit distribution/shareholder return policy
While considering “investment for future growth” and “internal reserves for strengthening the business base,” the company is intending
to pay dividends with a payout ratio of 40%. In addition to dividends, a QUO card of 1,000 yen is offered to shareholders holding one
unit (100 shares) or more and 2,000 yen to shareholders holding three units (300 shares) or more as shareholder benefits.
“Investment for future growth” means human resource investment (recruitment/training costs), technology development investment(demolition method/robot development), system investment (3D system, BIM/CIM), and strategic business investment (M&A cost). It
will allocate the funds reasonably.
4-5 New executive structure
At the Ordinary General Meeting of Shareholders scheduled to be held on April 23, 2020, and at the Board of Directors meeting thatwill be held after that, Mr. Yoshihide Yoshino, current President and CEO will be the Representative Director and Chairman, and Mr.
Akitatsu Yoshino, current Senior Managing Director and Executive Director of Operations will be the President and CEO. To respondto the changes in the business environment, the company will transform the structure from one representative director to two, andstrengthen top management to further strengthen corporate governance and management. This way, it aims at enhancing the corporate
value and generating further growth.
Senior Managing Director Yoshino has been active as the right arm of President Yoshino, mainly in the sales field, since the company
was still small. On the other hand, President Yoshino is an engineer rather than a merchant, and is good at patents, etc. Therefore, fromnow on, the new president will oversee BESTERRA’s business strategy, and the former president Yoshino will, as chairperson, be incharge of technologies and efforts with REVER Holdings Corporation for becoming a major company in the venous industry.

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Message to shareholders and investors from Mr. Yoshino, the next president
The other day, we announced the three-year plan together with the financial results. We
always set high goals, but we are aiming to achieve this three-year plan, first. I am just an
ordinary person compared to the current president. Therefore, I cannot talk about largescale dreams like the current president, but as one of the employees who has been managing
the work of BESTERRA from the very beginning, I would like to take some weight off
from the current president’s shoulders and be in charge of the growing fields of thecompany.
I also would like to achieve our long-term vision, “To be the leader of the plant dismantlingindustry in Japan” as early as possible. The next goal is to become a “proposer of plantdismantling technology to the world.” I would like to ask for your continued support.

5. Conclusions
In 2019, partially due to preparation for the Olympics, shortage of manpower and high construction materials became prominent, andthe general contractors temporarily refrained from receiving and ordering. Consequently, orders in the dismantlement industry mostly
from general contractors also fell. Due to this issue, orders of two large-scale projects, which were scheduled to take place in the term
ending January 2021, were delayed. Also, the company refrained from taking unreasonable orders to cover the delay, because personnel
costs rose sharply.
On the other hand, the company focused on obtaining direct (primary contract) orders. Considering the current situation where orders
are received mainly through general contractors, general contractors should not be ignored. Nonetheless, business opportunities throughdirect orders are increasing as the clients become more cost-conscious. Subsequently, the company has been successfully establishingbusiness relationships with several major chemical manufacturers. The key industries for the company’s business are electric power,
ironmaking, petroleum and petrochemicals. However, the electric power industry has a strong connection with traditional trading
companies, and the ironmaking industry basically requires an engineering subsidiary to operate business. Meanwhile, the petroleum andpetrochemical industries do not have such “constrains.” The company carried out sales activities in these industries while gaining theconsensus of general contractors. Consequently, the ratio of direct orders received, which was about 10% in the term ended January
2020, is likely to exceed 20% in the term ending January 2021.
In the term ending January 2021, when V-shaped recovery is expected, despite uncertainties caused by the coronavirus outbreak, thedirect order projects in the petroleum and petrochemical industries are expected to increase. Furthermore, in the ironmaking industry, alarge scale of dismantlement projects in association with renewal of facilities for a major manufacturer will be available. The company
also secured employment of 5 new supervisors by the end of the first quarter and is planning to hire 10 more later (a total of 5 people in
the term ended January 2020). The total number of supervisors, including the newly joined 5, is 42, which is enough to achieve thesales of 6,400 million yen in the term ending January 2021. For this reason, future hiring activities will be in anticipation of the nextterm onward.
In the medium term, prospects for demolition work are bright, because the facilities constructed during the period of high economic
growth are expected to reach the time of dismantlement/renewal due to physical obsolescence and economic obsolescence, etc. We
would like to pay attention to the actualization of group synergies, responses to nuclear power generation facilities, and major venous
measures.

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https://www.bridge-salon.jp/<Reference: Activities for actualizing an advanced recycling society and measures for
attaining SDGs>
Roles and activities of the company for actualizing an advanced recycling society
At a global level, the company aims to actualize BEST (the best) TERRA (the earth), which is the corporate name, by contributing to
the earth environment by making efforts to attain Sustainable Development Goals (SDGs). In Japan, the company will work on the
response to the measures for abandoning nuclear power plants and measures for coping with the deterioration of infrastructure, in
addition to the actualization of an advanced recycling society. Then, as a leader in the plant dismantlement field, the company will leadthe restructuring and integration of the venous industry by shifting to the scale business (connecting the arterial and venous sectors), andoffer innovative demolition technologies. For the cooperation with the venous sector, the company will actualize and strengthen an
integrated environment-related business by combining the demolition/wrecking business, the recycling business, and the industrial waste
disposal business.
BESTERRA’s response to SDGs
The company will develop a workplace environment where worthwhile jobs are offered(Source: Company’s material)

The company has been pursuing a workplace environment where worthwhile jobs are offered, and it is developing a personnel
evaluation system, taking measures for the employee shareholding association, and establishing systems for incentives, income
insurance, etc. so that employees can work with peace of mind. In the cumulative second quarter of the term ended January 2020, thecompany raised basic pay and enriched a qualification allowance, etc.
The company will provide innovative demolition technologies and contribute to the global environment(Source: Company’s material)

The provision of innovative technologies is the company’s core business and strength. In addition to various patented methods, thecompany has adopted 3D technologies for dealing with large-scale projects.

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The company will achieve an advanced recycling society and contribute to building a sustainable society(Source: Company’s material)

The company has been performing environmentally friendly works, but will improve them further and offer one-stop services. Manyof the company’s client companies operate business in the key industries, and the clients themselves are required to take environmental
measures. The company plans to meet the clients’ requests.
Partnership for building a sustainable (an advanced recycling) society(Source: Company’s material)

Overcoming barriers, the company will focus on the fostering of partnership for achieving higher goals. In order to realize an advanced
recycling society, the company will offer new technologies, knowledge, and insights with the aim of achieving goals. To do so, thecompany will cooperate with various companies.
Contribution to social sustainability and growth of profit through ESG management
The company will conduct ESG management by working on safety (creating a safe culture with its original technologies), R&D(developing innovative methods friendly to the earth), recycling (actualizing advanced environmental cycling by strengthening thevenous industry), governance (thoroughgoing transparency and risk control), and human resources (pursuit of worthwhile jobs andgrowth of individuals), and contribute to social sustainability while growing profit. As the understanding of these activities is deepened,
ESG investment will be made in the plant dismantlement and recycling industries.

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https://www.bridge-salon.jp/<Reference: Regarding Corporate Governance>◎ Organization type and the composition of directors and auditors
Organization typeCompany with auditors
Directors
9 directors, including 2 outside ones
Auditors
3 auditors, including 3 outside ones
◎ Corporate Governance Report
Update date: April 26, 2019
Basic policy
In order to promote sound business administration and win social trust sufficiently, our company recognizes corporate governance as themost important issue, puts importance on the improvement of the soundness, transparency, and fairness of business administration, andcomplies with laws and regulations thoroughly, and all executives operate business while keeping in mind that “the violation of laws or
regulations would lead to management responsibility.” In detail, our company disseminates and executes business pursuant to laws,
regulations, and in-company rules thoroughly, by developing appropriate systems for making decisions about business administration,
fulfilling duties, supervising work, conducting internal control, etc.
It is also important to reform management systems for “achieving appropriate share price” and “increasing share price sustainably” toemphasize shareholders and strengthen the function to check business administration, to establish global-level corporate governance.
The results of such efforts would win the trust of society, increase corporate value, and satisfy shareholders.
<Reasons for Non-compliance with the Principles of the Corporate Governance Code (Excerpts)>【Supplementary principle 4-1-3】
There is no concrete plan regarding the succession of the CEO (chief executive officer). As a policy for the selection of a successor in
the Board of Directors meeting, we will select a suitable candidate by taking his/her character, insight and achievements into account.
The Board of Directors will actively take part in activities of making and carrying out a succession plan.
【Supplementary principle 4-3-3】
Our company has not established a clear procedure ensuring objectivity, timeliness and transparency for dismissal of the president orCEO, but we strive to realize a mutual assessment by involving outside directors in the process of evaluation of nomination andremuneration of the Board of Directors, in order to carry out the assessment of effectiveness of the Board of Directors appropriately.
<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>【Principle 1-4 Strategically held shares】
From the viewpoint of business expansion based on business alliance, etc. with business partners, we will acquire and hold the shares ofthe business partners, etc. if we judge that this will contribute to the improvement in our mid/long-term corporate value. The board of
directors constantly check whether the holding of the above-mentioned shares (strategically held shares) will contribute to theimprovement in our corporate value, and confirm the purpose and rationality of said holding based on that check. Our company will
exercise the voting rights of the strategically held shares appropriately, based on comprehensive judgment from the viewpoint of
improving our corporate value.
【Principle 1-7 Transactions among related parties】
Our company conducts a survey on transactions among executives and major shareholders every year, to check whether there are anytransactions among related parties. In addition, our company produces a manual for producing financial statements, and if our company
makes any transactions with executives, the employee shareholding association, major shareholders, or the like, the internal audit division,
the administrative division, the board of directors, and the board of auditors will deliberate about the necessity of said transactions to a
sufficient degree, so that said transactions will not harm the common interests of our company and shareholders.

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https://www.bridge-salon.jp/【Principle 5-1 Policy on constructive dialogue with shareholders】
Regarding requests from shareholders for dialogue (interviews), our company believes that we should express a positive attitude withina reasonable scope in order to contribute to sustainable growth and medium- and long-term improvement of the corporate value of ourcompany. Aiming to promote constructive dialogue with shareholders, with the planning department designated as a department incharge of IR activities, our company holds financial results briefings targeted at financial institutions and investors semiannually anddiscloses corporate information as needed on our website and through the system of optional disclosure offered by Tokyo Stock
Exchange.

This report is intended solely for information purposes, and is not intended as a solicitation for investment. The information and opinions
contained within this report are made by our company based on data made publicly available, and the information within this report comesfrom sources that we judge to be reliable. However, we cannot wholly guarantee the accuracy or completeness of the data. This report is nota guarantee of the accuracy, completeness or validity of said information and opinions, nor do we bear any responsibility for the same. All
rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice.
All investment decisions are the responsibility of the individual and should be made only after proper consideration.
Copyright(C) 2020 Investment Bridge Co., Ltd. All Rights Reserved.

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