Message from the CEO

Steadfastly implementing our philosophy amid a changing environment

The Benesse Group’s corporate philosophy is the word "Benesse" which means well-being. It expresses how we will accompany each individual customer as they move forward, step by step, toward the realization of their dreams and aspirations, empowering them to grow and to solve issues at every stage of their lives. This has been of utmost importance to the Group throughout our history. You could say it is an unchanging management principle that we have always pursued.
However, the education, lifestyle-related, and nursing care markets in which we do business are constantly changing. They have been transformed, even compared to just 10 years ago, and the pace of this transformation is expected to accelerate further. Other business areas are also experiencing great change as the social and economic environments of our customers and the nature of the issues troubling them are altered by factors such as the continuing impact of the COVID-19 pandemic. In order to steadfastly implement our unchanging philosophy amid this rapidly changing world, we must be flexible in meeting the needs of customers. This includes carefully observing and understanding the current situation to predict changes and customer demands over the next five to 10 years, which will enable us to develop and deliver products and services in a timely manner.
If we are to confront our current situation and take the correct path for continuously providing customers with value that meets their expectations, then we need to clarify our reason for existence and the basis of our decision making. Obviously, "Benesse" is at the root of these, but as our philosophy is a broad reaching concept, we need to add to it to create specific growth strategies and principles of action for our everyday work. Therefore, starting two years ago, every organization within the Group has been setting and implementing a clearly stated purpose.

Contributing to the realization of a sustainable society by putting a three-value cycle at the heart of our purpose

Recently, sustainability has become a buzz word within the business community. However, it is not a new concept for the Benesse Group. I believe it has always been present in our values and actions.
Since our founding in 1955, we have constantly worked to provide solutions to social issues in the fields of education and nursing care, and the well-being that is the goal of the SDGs is the same as our "Benesse" corporate philosophy. I think this shows that sustainability is a core principle of the Group’s management. We aim to continue enhancing long-term corporate value by realizing a three-value cycle comprising social value, customer value, and economic value. We will work to generate social value by contributing to solutions for various social issues while also generating customer value by providing products and services that meet customers’ expectations. This will lead to the creation of profit, thereby generating economic value for the company. Achieving this cycle through our corporate activities is at the heart of our purpose and I recognize that it is also my important duty as a member of the company’s management.
In April 2022, we launched ESG and Sustainability Division within Benesse Holdings in order to implement specific measures based on the management direction outlined above at each business. It has been established as an independent division to clearly demonstrate our intent to address sustainability to stakeholders both inside and outside the Group. It will play a central role in examining the Group’s various actions and initiatives from a sustainability perspective to further strengthen our ability to contribute to addressing social issues.

Three values

A rapid recovery from the downturn in business performance caused by the pandemic

Fiscal 2021 was the first year of our medium-term management plan. The plan covers five years and is divided into two phases. The first is to realize a swift V-shaped recovery in business results, which declined in fiscal 2020 due to the COVID-19 pandemic, while the second will aim to further improve performance to new heights.
In fiscal 2021, although net sales only increased slightly to ¥431.9 billion, operating income grew 54.1% year on year to ¥20.1 billion, resulting in a significantly faster recovery than forecasted. Within this, we should highlight that the education business in Japan achieved a V-shaped recovery in a single year and even exceeded fiscal 2019 results. Another big result was the sale of the Berlitz business, which has been a management issue for a number of years. The sale has given a huge boost to our business selection and concentration efforts. We see these two results as a smooth start to Phase 1 of the plan.
The nursing care business saw a decline in occupancy rates at our nursing homes, but the main factor behind this was that prospective residents were wary about moving into homes as the Omicron variant prolonged the effects of the COVID-19 pandemic. In order to continue our business, we also made it a top priority to prevent infection among residents and staff. In the nursing care market, demand continues to outweigh supply, and as our facilities and services have an excellent reputation, I am confident that business performance will recover once the pandemic subsides. In our forecasts for fiscal 2022, we expect that net sales will decrease by 1.4% to ¥426.0 billion due to the absence of sales from the Berlitz business, but operating income will increase 24.0% to ¥25.0 billion due to profit growth in the education business in Japan and the absence of losses incurred by Berlitz.

Leaping forward in Phase 2 of the plan and beyond by growing existing businesses and expanding into new fields

Our targets for fiscal 2025, the final year of our medium-term management plan, are an operating margin of at least 8% and ROE of at least 10%. ROE was low in fiscal 2021, at 0.7%, due to special losses accompanying the sale of Berlitz. However, we are aiming to achieve our target of at least 10% two years early in fiscal 2023 through business growth and the effects of reduced taxes following the Berlitz sale.
Our main medium- to long-term growth strategy is to realize organic growth in existing business, but we will also advance inorganic growth strategies, including M&A. At the same time, we will aim to make further leaps forward by creating and expanding into new fields. We are targeting net sales of ¥500.0 billion and operating income of ¥40.0 billion in fiscal 2025 and we anticipate that over 20% of contributions toward achieving these targets will come from inorganic growth and growth in new fields from fiscal 2023 to 2025.
We also recognize that digital transformation (DX) will play an extremely important role in both organic and inorganic growth in every business field. Therefore, we are providing robust support for the advancement of DX in every business, primarily through the establishment of the Group-wide organization Digital Innovation Partners (DIP) in April 2021.

Targets of the Medium-Term Management Plan (Announced in November 2020)

Update on financial KPI for FY2025 (Announced in May 2022)

Targeting university students and working adults as a new business field

In our efforts to cultivate new business fields, we are putting a particular emphasis on the education market for university students and working adults. While many companies are aiming for sustainable growth by focusing on reskilling employees, from an individual’s perspective, we have entered an age in which even adults who are already employed need to gain new abilities and expand their potential. We believe that developing and delivering services that meet these individuals’ needs is not only a business opportunity, but also contributes to solving a social issue.
We are already active in this field as the long-time partner of Udemy, a world-class online learning platform, in Japan. We also plan to provide various learning and self-improvement support services for university and for working adults. We plan to invest proactively to expand our business in this area, including exploring potential M&As.
We have been carrying out organizational restructuring to facilitate more robust expansion into new fields. This includes making the divisions in Benesse Corporation’s School and Teacher Support Business Company that were previously responsible for the development of services for university students and working adults into the independent University and Working Adult Business Company. While the company is still small, we think it has the highest growth potential out of all of the companies in the Group. Our targets for the university and working adult business are to achieve sales of ¥40 billion by fiscal 2025 and ¥100 billion further into the future.
We will also continue working to expand our overseas business as an initiative in a new field. Our assessment business occupies a clear leading position in Japan and under our current medium-term management plan, we are adapting it for overseas markets. In fiscal 2022, our paid assessment business in India started holding tests. We are also considering a potential nursing care business in China.

Key measures for FY2025

Leveraging our learning culture to encourage the reskilling of individual employees

Human resources continues to be the main theme of the non-financial initiatives in our medium-term management plan. Within these, we recognize that strengthening the pool of DX employees is an increasingly important issue across the Group. There is strong demand for DX human resources from every industry, so it is becoming extremely difficult to recruit exceptional talent. However, I think that merely gathering together engineers with a talent for digital technology will not necessarily lead to the development of good services.
We cannot create great value based on our "Benesse" philosophy through advanced digital technology alone. It needs to be combined with essential factors such as conviction regarding education, affection toward children, or sympathy for the elderly, which our current employees have been cultivating through their work. Therefore, I think the company should focus on training these employees to learn new skills so they can create new services that meet customers’ needs.
The digitalization of Japan’s education industry is progressing rapidly, driven by the government’s GIGA School Program. We have been advancing the digital shift of services across the Group for some time now, but if we are to continue producing highly competitive materials in our education business, then we will need knowledge at a workplace level that is completely different from the methods we have developed that use paper-based materials.
The same applies to the nursing care business. Although people are the core of our nursing care services, digital technology will be the key to further improving quality. In March 2022, we opened Granda Yotsuya, a sensing-based nursing home located in Yotsuya, Tokyo. This facility gathers data about residents’ activities in real time through various sensors and the data is then analyzed by our Majikami (nursing care experts certified by Benesse) to revise how care is delivered. We are also developing Majikami AI, an AI solution that incorporates this data and the knowledge of the Majikami. We will use Majikami AI to improve the skills of nursing care staff, further raising quality of life for residents.
I am confident that our employees also recognize the need to reskill with regard to DX and as a company, we will provide them with the means and opportunities to do this wherever possible. Happily, the Benesse Group has a deep-rooted culture of self-directed learning. We will leverage this culture as much as possible to support individual employees in developing new abilities.