The Medium-Term Management Plan 2027 - Move on to the Next Stage -
* Figures for “FY2024 Forecast” announced on April 17, 2025 have been replaced with actual figures (as of May 14, 2025).
Medium-Term Vision
Business Model Innovation with an eye to the Next Generation － Phase 2 －
The Company plans to fully incorporate a Group management approach that is conscious of the cost of capital, as befits a company listed on the TSE Prime market, and in order to achieve sustainable growth and medium to-long term enhancement of corporate value as a Group, the Company plans to strengthen the profitability of existing businesses and review its business portfolio, while also making aggressive investment in growth. Through such measures, the Company intends to implement business model innovation that is a step up from the previous medium-term management plan.
This Mid-Term Management Plan 2027 sets forth three Managerial goals and three priority measures to achieve these goals under the Mid-Term Vision “Business Model Innovation with an eye to the Next Generation - Phase 2”.
Our Vision
Our Purpose and Long-Term Vision 2035
We aim to implement stable and profitable management as an indispensable presence in regional and community healthcare.
Three Managerial Goals
This shows the three managerial goals in Medium-Term Management Plan 2027. We are committed to achieving them in the three-year period ending March 31, 2028.
The first is net sales of ¥660,000 million. This represents a 110% increase from FY2024. While this is a fairly challenging goal given the continuation of annual NHI drug price revisions, we aim to work together to achieve this.
The next goal concerns the core operating profit margin. Starting from this fiscal year, we will aggressively invest in growth more than ever before. The expenses associated with this will be recorded as research and development expenses in SG&A expenses for several years to come, and this will have a negative impact on operating profit. We have, therefore, defined operating profit before deduction of research and development expenses for the pharmaceutical business as "core operating profit," with a view to making investments for the enhancement of corporate value in the future while at the same time reliably increasing the profitability of existing businesses, and we are committed to achieving this managerial goal. We will aim for a core operating profit margin of 1.15% or more.
Finally, we have a KPI related to capital profitability. Here, too, we have defined ROE before deduction of the aforementioned research and development expenses for the pharmaceutical business as "adjusted ROE", and we will aim for adjusted ROE of 8.0% or more.
Three Priority Measures
Next, let me explain our three priority measures.
The first is business portfolio management. In line with a business portfolio basic policy, we will evaluate and monitor each business and realize sustainable growth based on an awareness of the cost of capital and medium-to-long-term improvement in corporate value. The second priority measure is financial strategy and capital policy. We will focus on improving our balance sheet, which has often been identified as an issue by institutional investors. We will also establish a cash flow allocation policy and allocate cash in a well-balanced manner to future growth and enhancement of shareholder returns. Our third priority measure is to strengthen group management. We will push further ahead with strengthening the diversity and independence of the Board of Directors.
Business portfolio management
Business portfolio management
Business Portfolio Basic Policy：
・In existing business, perform evaluation and monitoring each fiscal year based on
ROIC (Return On Invested Capital) and CAGR (5 year net sales compound annual growth rate)
・For hurdle rate, use consolidated WACC (Weighted Average Cost of Capital).
(Currently, WACC is estimated at around 6.0% (average for past three fiscal years).)
・For any unprofitable, low growth businesses positioned as "areas in need of rebuilding",
formulate a turnaround plan and judge whether to attempt to rebuild them or withdraw from them
in accordance with the business portfolio basic policy.
By allocating limited management resources effectively, we aim to achieve sustainable improvement in corporate value.
Pharmaceutical Wholesale Business
We aim to further strengthen profitability.
Based on our founding spirit "Deliver medicines to people who need them at any time", we will leverage the values and strengths we have developed to date to grow and advance onto the next stage.
New business
(Logistics services business, Pharmaceutical business (business of supporting introduction of unapproved drugs))
The logistics services business refers to logistics services as a whole including 3PL and transport business.
We will spin off business which previously operated within the Pharmaceutical Wholesale Business to further improve profitability. In addition, we will actively pursue M&A transactions to acquire logistics-related companies.
We have four logistics centers in VITAL-NET, Inc.'s sales area and three in KSK CO., LTD.'s sales area. In FY2026, we will complete a new logistics center as a core facility of the 3PL business in Isehara, Kanagawa Prefecture. Through further development of the advanced and high-quality supply chain we have established to date, we will not simply transport pharmaceuticals but rather turn the logistics function into a new profit pillar.
We have decided to enter this business for the following two reasons. First, to become more proactive about Japan's drug loss and lag issue as a company involved in health care. Second, by getting this business on track, we aim to achieve further improvement in corporate value and fulfil our responsibility as part of the social infrastructure supporting community health care in the medium and long term.
This business is a completely new venture for us. We will also develop this business as a separate business pillar from our core Pharmaceutical Wholesale Business.
Financial strategy and capital policy
Cash flow allocation
I will now move on to our cash flow allocation policy.
Over the three-year period starting this fiscal year, we plan to generate total cash inflows, including operating cash flow and sales of cross-shareholdings, of ¥35.5 billion. We will allocate this cash as follows.
First, we will allocate ¥9.0 billion for investments in existing businesses, including branch streamlining and WMS, ¥11.0 billion for growth investments such as investment in the new logistics business and pharmaceutical business and M&A as explained under business portfolio management, and ¥2.6 billion for the repayment of interest-bearing debt. For shareholders returns, a top management priority, we will allocate ¥9.4 billion for the payment of dividends of around ¥68 annually that maintains DOE of 3.0% or more. As a result, the consolidated payout ratio will be 40-45％. We plan to keep the remaining ¥3.5 billion as internal reserves for maintaining financial soundness and financing investment for further growth. In the event of surplus capital, we will further enhance shareholder returns.
Strengthening of Shareholder Returns
The dividend policy was changed from DOE of 2.0% or more to DOE of 3.0% or more. As a result, the annual dividend will be around 68 yen (planned).
Strengthen group management
Business Portfolio Management Organization
On the finalization of financial results for each fiscal year, the Corporate Planning Department and Accounting & Finance Department will conduct an evaluation of operating companies, in accordance with the Business Portfolio Basic Policy. They will then refer this to the Management Committee and the Board of Directors, in that order, for decisions on appropriate investments and allocations to be made.
Meanwhile, the Investment Committee will consider new business investments and M&A based on rigorous calculation of future profitability, and will refer these to the Management Committee and the Board of Directors, in that order, for decisions to be made.
Additionally, in the areas of sustainability, risk and compliance, we will continue implementing initiatives befitting a company listed on the Prime Market.
We will also continue our ESG activities.
The Medium-Term Management Plan 2027 - Move on to the Next Stage -
* Figures for “FY2024 Forecast” announced on April 17, 2025 have been replaced with actual figures (as of May 14, 2025).