Management Plan
New Medium-Term Management Plan: VISION 2023
JVCKENWOOD Corporation announced on May 14, 2021 that it has formulated a medium-term management plan, VISION 2023, starting from fiscal year 2021.
Under VISION 2023, in order to increase corporate value over the medium to long term in a rapidly changing business environment, the Company will transform into an organization that can earn stable business profits by securing a revenue base and structural reforms, strengthen the revenue base of existing business, establish new growth areas by redefining the business portfolio as we strive to become an excellent company.
Positioning of the Medium-Term Management Plan VISION 2023
In recent years, the market environment has been changing at a faster pace than expected. The global spread of COVID-19 has accelerated technological innovation through Digital Transformation (DX), and the business environment surrounding our company is undergoing a major shift.
In this environment, we have formulated a new Medium-Term Management Plan VISION 2023, which aims to make a leap forward to become an excellent company with both strength and toughness in order to increase corporate value over the medium to long term even in a drastically changing business environment. To achieve this goal, we have positioned the period from FY 2021 to FY 2023 as a three-year period under the theme of “Change for Growth,” with a focus on strengthening the revenue base of existing business and establishing new growth areas by redefining our business portfolio.
Recognition of external environment and key themes for VISION 2023
As a result of analyzing the market environment surrounding our company, JVCKENWOOD believes that there are opportunities in the creation and innovation of business models through new technologies and DX such as AI and IoT, the substitution of existing business and the stimulation of new demand, the acceleration of digitalization and the fusion of real and digital. We also see opportunities in management focusing on ESG and seeking solutions to social issues. We also recognize that there are risks such as the business impact of the prolonged spread of COVID-19, the worsening risk of global supply networks for semiconductors, the expansion of global geopolitical risks and supply chain disruptions caused by climate change.
In formulating VISION 2023, we considered the four key themes based on our awareness of the external environment regarding these opportunities and risks.
Basic strategies of the Medium-Term Management Plan VISION 2023
As a result of examining key themes based on our recognition of the external environment, we have set the basic strategy for VISION 2023 as “Change for Growth.”
In the area of “change,” we aim to (1) rebuild our revenue base by redefining our business portfolio, (2) further accelerate manufacturing reforms by promoting automation and returning to domestic production, and (3) enhance manufacturing cost competitiveness by reorganizing and consolidating production bases.
In the area of “growth,” we will take on the following challenges: (1) Evolution of the DX business by expanding into the IoT platform service business, (2) Expansion of new products and new sales channels for the post COVID-19 era, and (3) Improvement of capital efficiency and ROE with an awareness of capital costs.
We will further evolve sustainability management and ESG based on “change” to strengthen the earnings base of existing business and “growth” to expand growth business by creating new products and new business.
Outline of Medium-Term Strategy
Under VISION 2023, we will strengthen our revenue base through structural reforms (“Change”), expand growth business by expanding new products and sales channels and creating new business (“Growth”), and pursue initiatives that combine “profitable growth” with “solving social issues on a global scale” (sustainability management and ESG evolution).
Financial targets
Under the Medium-Term Management Plan VISION 2023, we aim to achieve revenue of 320 billion yen or more, core operating income*1 of 12 billion yen or more, and ROE*2 of 10% or more by FY 2023, the final year of the plan, by steadily implementing the business strategies set forth in “Change for Growth.” In addition, we aim to both maintain growth and secure stability by achieving a ratio of equity attributable to owners of the parent company to total assets, which is a measure of financial stability, of 30% or more at the end of FY 2023 while paying stable dividends with a target dividend payout ratio of 30%.
Meanwhile, by earning 70 billion yen or more in operating cash flow over the cumulative three years of the VISION 2023 period, we plan to reduce the ratio of interestbearing debts to equity (D/E ratio) to 1.0 or less at the end of FY 2023.
*1: Operating profit, net of other income, other expenses, foreign exchange losses (gains), and other primarily temporary factors
*2: Ratio of profit attributable to owners of the parent company
Cash flow allocation
Under VISION 2023 we will focus on generating cash flow and ensure an effective outflow of cash after making the use of funds clear.
As for inflows of cash, 80 billion yen is expected with cash of 10 billion yen resulting from the business and sale of assets selected from the perspective of capital efficiency, in addition to operating cash flow.
On the other hand, with regard to outflows of cash, we will make strategic investments, pay dividends, and repay interest-bearing debts within the limit of 20 billion yen, after excluding ordinary investments of 60 billion yen that are necessary to maintain the business. In particular, strategic investments are expected to include investments in growth business, development of technological platforms, structural reforms, business base reforms, and IT investments. In addition, by using cash flow and ROA*3 by business sector as key KPIs*4, we aim to improve the accuracy of investment judgment and post-investment budget and performance management.
*3: Ratio of return on total assets
*4: Abbreviation of Key Performance Indicators
Toward permanent strengthening of business structure
As a measure to strengthen our business structure, we had been implementing the “management reform through manufacturing reforms” across the Company since 2018, and have further expanded the scope of our management base reform activities since 2020. In addition, in FY2020, we promoted the COVID-19 Emergency Measure (CEM) project as an urgent countermeasure based on the assumption of lower limit of sales risk due to the spread of COVID-19. In this project, all fixed costs, including inventories, capital investment, and development expenses, were reduced in order to thoroughly control outflows of cash. These measures produced results greater than expected at the beginning of the fiscal year. Some of these initiatives are related to the suspension or postponement of non-essential and non-urgent measures, however, others have led to the improvement of our management structure. We intend to continue those activities to get these structural reforms embraced deeply and promote the permanent transformation of our business structure.
Return to shareholders
One of the main pillars of our financial strategy is the stable distribution of profits to shareholders. At the same time, securing management resources for future growth is a top management priority. Accordingly, we will decide on dividend of surplus, etc. by considering our profitability and financial position comprehensively. Based on such policy, VISION 2023 plans to pay dividends with a target dividend payout ratio of 30%.
Meanwhile, in order to respond to future changes in the business environment, we will effectively utilize retained earnings to strengthen our financial structure, realize stable dividends on an ongoing basis, strengthen our management structure for future business development, and invest in growth areas.
*For details, please refer to the following documents.