■The direction of the medium-term management plan

1. The direction of the medium-term management plan

Unilita (3800) announced its medium-term management plan (fiscal year ending 2025/3 to fiscal year ending 2027/3) in 2024/5. Under the basic policy of “Re.Connect 2026" *, it is a policy to further evolve the three business strategies of 1) expansion of service provision type businesses, 2) establishment of a new value provision model, and 3) business process transformation. Furthermore, the idea is to work on strengthening the sustainability infrastructure, including acceleration of human capital investment, in order to realize sustainable management and value creation centered on the Group Philosophy.

* It contains the meaning of “reconnecting again in a better form” by drastically reviewing points of contact and ways of connecting with various stakeholders.

(1) Key points of the three business strategies

1) Expansion of service-providing businesses

We will continue to expand investment in cloud growth areas, realize optimal modernization for customers, improve the efficiency of some products and services, and examine entry into new areas.

2) Establishing a new value delivery model

After redefining “service management” and “data management,” which were brushed up in the previous medium-term management plan, as core competencies, we will work on crossing groups, enhancing value provided to customers through ecosystems, and continuous investment in social issue businesses and strengthening alliances.

3) Business process transformation

We aim to strengthen quality management to support service shifts, build implementation and operation systems through process standardization, and establish a company-wide customer success promotion system from the customer's point of view.

(2) Financial Targets

As targets for the final year (fiscal year ending 2027/3), we have set sales of 14 billion yen (average growth rate of 5.3% for 3 years), operating profit of 1.45 billion yen (same 12.4%), and ROE 8.8% (+1.7 pp compared to the 2024/3 fiscal year), and investment plans (research and development expenses, capital investment, etc.) are expected to total 2.4 billion yen. Furthermore, they are also ambitious to increase dividends in line with profit growth, and the annual dividend for the fiscal year ending 2027/3 is expected to be 75.0 yen per share (+7.0 yen compared to the fiscal year ending 2024/3). Note, although it is not part of the plan, it is a policy to consider M&A, and it seems that they are considering targets that will lead to the acquisition of data management human resources and the strengthening of service lines as candidates.

Looking at sales plans by business, it is assumed that while “product services” are almost balanced and the expansion of stock sales due to shrinking mainframes and expanding stock sales due to new growth services, each category of “cloud services,” which are positioned as growth engines, will grow significantly. Also, with regard to “professional services,” we will continue to advance the shift to a high-profit model starting from consulting. In terms of profit and loss, the plan emphasizes profitability while continuing to invest in the cloud, and in particular, it is assumed that profit growth in “cloud services” and improved profitability of “professional services” will contribute to improvements in operating margins and ROE.

2. Medium- to long-term focus

The direction set out in the medium-term management plan has not changed significantly from the past, and we also evaluate it as reasonable. In other words, while the DX movement is in full swing in society as a whole, as IT human resource shortages become apparent, strategies that expand the domain not only to IT issues up until now, but also to business issues and social issues, and incorporate expanding demand by optimizing value chains starting from consulting are persuasive in achieving sustainable growth. The past 3 years will be a period of further brushing up on the business model that is taking shape based on efforts so far and issues that have been clarified, leading to concrete harvests. The two most notable points are 1) the path to expanding the cloud service business, and 2) establishing a new value provision model. Regarding 1) in particular, I would like to look forward to a breakthrough in the business promotion cloud, where forms of collaboration with partner companies have come into view. To that end, strategies that include appealing strengths in service and data management infrastructure, attracting leading partners from various fields, and even acquiring sales channels will hold the key. If the number of successful cases increases, a virtuous cycle can also be considered, leading to the acquisition of new partners. Meanwhile, in social clouds, it is a business model where future advantages and entry barriers are established only where data is collected, so although full-scale monetization takes time, concrete movements have begun to appear recently, and there is a possibility that it will be an upward factor in plans if it gets on track. Regarding 2), a one-stop value provision model that makes use of consulting in the service & data management area has taken shape, but it seems that there is still room for value improvement through collaboration between businesses and groups. I would like to follow up on how the strengthening of the organizational structure implemented in 2024/4 (establishment of a service management headquarters and group strategy promotion office, etc.) will function and its effects. Furthermore, I would like to pay attention to M&A movements that make use of abundant operating cash flow (about 1.5 billion yen per year), cash and deposit balances (about 9 billion yen), and a strong financial base (75% equity ratio level). Growth investment in the cloud is planned, but it is expected that there is sufficient investment capacity, and there is a possibility that the speed of growth and the establishment of a value provision model will rapidly accelerate depending on the implementation of M&A. In any case, while the mainframe business, which is a stable source of revenue, plays a role as a cash cow, it is clear that the biggest medium- to long-term theme is to raise the next profit pillar and maintain and improve a strong profit base, and from that point of view, it is necessary to pay attention to future trends.

(Written by FISCO Visiting Analyst Ikuo Shibata)