SMS CO., LTD.

2175
End-of-day quote. End-of-day quote  - 01/22
4095JPY +1.11%

SMS : Posted FY03-18 Q1 SMS Presentation Material for IR

07/28/2017 | 06:39am

SMS CO., LTD.

(Securities Code: 2175 / TSE1 )

Presentation Material for Investors

Financial Results Summary for the First Quarter of

the Fiscal Year Ending March 31, 2018 (the 15th Fiscal Year)

July 28, 2017

Table of Contents

1 Q1 FY03/18 Consolidated Financial Results 2 Appendix P3-P10 P12-P49 1 Q1 FY03/18 Consolidated Financial Results 2

Appendix

P3-P10

P12-P49

  • Expects to achieve growth in both net sales and ordinary income for the 14th consecutive year since our establishment.

    Trends in net sales and ordinary income

    (Net Sales, JPY millions) (Ordinary Income, JPY millions)

    30,000

    27,000

    24,000

    23,054

    27,804

    8,000

    7,200

    6,400

    21,000

    18,000

    15,000

    12,046

    15,056

    19,069

    3,509

    4,430

    5,137

    5,600

    4,800

    4,000

    12,000

    9,000

    5,177 7,1727,618

    8,692

    10,181

    1,990

    2,340

    2,693

    3,200

    2,400

    6,000

    3,000

    0

    58 383 835

    49108

    (5)

    1,5452,715

    269415

    1,238 1,266

    1,5301,734

    1,600

    800

    0

    FY03/04 FY03/05 FY03/06 FY03/07 FY03/08 FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18

    (3,000)

    (800)

    :Net Sales (in black font) :Ordinary Income (in blue font)

    3

  • Expects operating income flat in 1H and increasing in 2H YoY .

  • Plans to increase the number of new hires for Career Segment in 1H (especially during Q1).

    Operating Income Comparison of FY 03/17 Actual and FY03/18 Forecasts

    5,000

    4,000

    3,000

    3,646

    1,335

    4,378

    2,066

    2,000

    1,000

    2,311 2,311

    0

    FY03/17 Actual FY03/18 Forecasts

    1H 2H

  • Net sales increased, and incomes decreased YoY due to the increase in the number of new hires as mentioned.

  • Net sales and incomes have been in line with the forecasts as planned.

    P/L Statement [¥ million]

    Q1 FY03/17

    Actual

    Q1 FY03/18

    Actual

    YoY Change

    Net Sales

    6,618

    7,073

    +7

    Operating Income

    1,668

    1,584

    ▲5

    Ordinary Income

    2,165

    2,015

    ▲7

    Net Income

    1,570

    1,444

    ▲8

  • Net sales increased 12% YoY.

  • Grew steadily as planned.

    Year-on-Year Comparison of Net Sales [¥ million]

    Q1 FY03/17

    Q1 FY03/18

    YoY Change

    Elderly Care Career

    1,169

    1,425

    +22%

    Medical Care Career

    3,404

    3,702

    +9%

    Total

    4,574

    5,127

    +12%

    Highlights

    • Elderly Care Career has been growing significantly.

      • Recruiting Agent for care workers has been growing significantly by increasing the number of consultants.

      • Recruiting Agent for rehabilitations has been growing significantly.

    • Medical Care Career has been growing steadily.

      • Recruiting Agent for nurses has been growing steadily.

        中堅事業者の総数、定義等

  • Net sales increased 17% YoY.

  • Grew steadily as planned.

    Year-on-Year Comparison of Net Sales [¥ million]

    Q1 FY03/17

    Q1 FY03/18

    YoY Change

    Elderly Care Operators

    664

    780

    +17%

    Highlights

    • The number of Kaipoke membership locations has been increasing steadily.

      • The number of the membership has increased by 450 locations. (As of April, 2017: 13,500 → As of July, 2017: 13,950)

  • Net sales decreased YoY, but progressed in line with the forecasts, due to the sell-offs of overseas businesses in the previous fiscal year and the difference of the sales recording timing in MIMS from the previous fiscal year.

    Highlights

    FY03/17

    FY03/18

    YoY Change

    Overseas

    968

    789

    ▲18

    Year-on-Year Comparison of Net Sales [¥ million]

    • Net sales of the Overseas Segment decreased YoY, but progressed in line with the forecasts.

    • The sell-offs of businesses such as eChannelling (Sri Lanka) as part of the overseas portfolio restructuring conducted in the previous fiscal year, resulted in the YoY net sales decrease.

    • As MIMS Book publications are scheduled more in Q2 and beyond compared to the previous fiscal year, net sales of Q1decreased YoY.

    • Global career business has started on a full scale and acquired Melorita in June 2017.

    • Full-scale expansion starts in FY03/18, leveraging the strong healthcare professional (HCP) platform of MIMS.

    • Establish a dominant position as HCP supply platform.

    9

    © Copyright SMS CO.,LTD.

  • Acquired Melorita, a company introducing Malaysian nurses to hospitals in Saudi Arabia.

  • MIMS HCP platform enables Melorita to accomplish further growth by making full use of its plentiful hospital recruitment orders in Saudi Arabia.

    Platform

    Significant Increase in the Number

    of Job Seekers

    Significant Increase in the Number of Matchings

    Job Seekers (Nurses)

    Attracting nurses at its own Website

    Matching/Operation

    Possessing know-hows for matching/operation between the two countries

    Hospital Recruitment Orders

    Possessing plentiful hospital orders in Saudi Arabia

    1

    Q1 FY03/18 Consolidated Financial Results

    2 Appendix

    P3-P10

    P12-P49 We create value and contribute to society by providing an "information infrastructurefor an aging society."
    • Provide an information infrastructure which fills in information gaps among stakeholders in an aging society.

      Market segments in an aging society

      Stakeholders covered by an information infrastructure

      Senior Life*2

      Busi

      ness Operators

      Healthcare

      Related Companies

      Healthcare

      Healthcare*1

      Facility Care

      Professionals

      Healthcare

      Related Workers

      End Users

      EU

      People

      Pharmaceutical

      Elderly Care Medical Care

      Home Care Support

      Care Workers

      健康にwith心が

      InterestinHealth

      家族 家族

      Doctors

      Other

      Companies

      Operators Developing

      Care Managers

      The elderly

      要介護者

      Patients

      患者

      Co-medicals

      Pharmacies

      Care Plans

      Home-visit Elderly Care

      Rehabilitation Staffs

      Nurses

      Pharmacists

      Clinics

      Daycare

      Elderly Care

      Home-visit Nursing

      Hospitals

      Medical Care

      © Copyright SMS CO.,LTD.

      *1. Covers health-related services that are not subject to public elderly care insurance or medical care insurance 13

      *2. Covers services related to daily life in an aging society

      • Started our businesses and have already established strong positions with high growth potential in Japan.

      • Expanding our businesses into the growing Asian*1 markets.

        • Asia

          Japan Korea China Hong Kong

          Thailand Malaysia Indonesia Vietnam

          Singapore Myanmar

          Philippines

          India

          ■Oceania

          Australia New Zealand

          © Copyright SMS CO.,LTD.

          14

          *1. Includes Oceania

    • Healthcare related expenditures continue to rise both in Japan and Asia.

    • In 2025, the size of our target market will be at least over $29.4 billion in Japan and Asia.

Market size of healthcare related information services in Japan and Asia (USD billions)

671

bn USD

Japan

Elderly and medical care Expenditures*1

454

491

Medical care Elderly care

258

315

359

180

1%*

6.7 bn USD

Asia

57 95

2005 2015 2025

2,269bn

Total market size in 2025

Healthcare expenditure*2

295

1,152

USD

1%*

  1. bn USD

    29.4 bn

    USD

    * Information services would account for at least 1% of the total expenditure

    2005 2015 2025 15

    © Copyright SMS CO.,LTD.

    *1. Sources: 2005 - MHLW; 2015,2025 - MHLW estimates. *2. Sources 2005 - WHO; 2015,2025 - SMS estimates.

    • Our growth so far has been driven by Career Businesses.

    • Kaipoke and Overseas Businesses have been growing as the second and the third pillars of our business portfolio.

      Strategic Units

      Career Businesses

      • No.1 player in the market of elderly and medical care recruiting services

        Breakdown of Net Sales

        (JPY millions)

        23,054

        1,514

        4,786

        7%

        21%

        Kaipoke

      • The only player providing cloud-based business support service for elderly care operators

        Overseas Businesses (MIMS)

      • Led by the MIMS group that SMS acquired in October 2015

      • MIMS is No.1 drug information service provider in

        1%

        (Overseas Businesses)

        10,181

        7%

        (New Businesses)

        4%

        (Kaipoke)

        88%

        15,056

        7%

        5%

        10%

        78%

        2,782

        13,972

        12%

        61%

        Asia

        FY03/13 FY03/15 FY03/17

        New Businesses

      • Developing a series of new businesses

        Career Businesses

        Overseas Businesses

        Kaipoke

        New Businesses

        16

    • On top of the Career Businesses' stable growth, accelerate Kaipoke's growth and put MIMS on the growth track.

    • Develop a series of new businesses to create the next pillars of our businesses, which will further drive our growth in the future.

      Profit

      4. Growth of New businesses

      3. Growth of Overseas Businesses driven by MIMS

      2. Growth of Kaipoke

      1. Growth of Career Businesses

      NowFuture

    • Change the disclosed segments based on the strategy.

      Former disclosed segments New disclosed segments

      Career

      Career

      Elderly Care Recruiting Agent

      Elderly Care Media

      Medical Care Recruiting Agent

      Medical Care Media

      Elderly Care Career

      Medical Care Career

      Elderly Care

      Management Support for Service Operators

      Elderly Care Operators

      New Businesses

      Medical Care

      Business Development

      Healthcare

      Overseas

      Overseas

      Career Businesses

      • The size of our Recruiting Agent for nurses is already considerable, and it continues to grow.

      • Care workers contribute to our growth via not only Recruiting Ads but also Recruiting Agent.

        Our current and future sales by segment*1*2

        Current sales: 4,025 Current sales: 9,946

        Rehabilitation

        (JPY millions)

        :Current sales

        : Sales estimates in the future

        Recruiting Agent

        Care Manager

        Care Worker

        Full-scale expansion commences in FY03/17.

        Nurse

        No.1 share(30%)

        Other

        Co-medicals

        Recruiting Ads

        Care Worker

        No.1 share

        (with no major competitors)

        Elderly Care

        *1. The figures of "Current sales" are actual figures of FY03/2017.

        Nurse Newly-graduated

        Nurse

        Medical Care

        20

        © Copyright SMS CO.,LTD. *2. Career businesses for doctors and pharmacists are operated by M3 Career, Inc. which is a joint venture between M3, Inc. (51%) and SMS(49%).

        Business model of Recruiting Agent

        Receive a certain percentage of an annual salary from a hiring business operator as a fee when an applicant joins it.

        Website

        Attract new customers Sales activity

        Registration

        Request recruiting

        Care Workers

        Nurses

        Matching Matching

        Consultants

        Hospitals

        Elderly care operators

        Fee

        Business model of Recruiting Ads

        Receive a fee for each application for a job via our Recruiting Ads

        Attract new customers Registration

        Website

        Sales Activity Post recruiting ads

        Care workers

        Application

        Fee

        Elderly care operators

        21

        © Copyright SMS CO.,LTD.

      • Labor shortages continue to be a serious issue despite an increase in both care workers and nurses.

      Number of care workers and their turnover rate*1

      (thousands)

      Number of nurses and their turnover rate*3

      (thousands)

      # of care workers CAGR: 5%

      1,696

      1,555

      1,773

      1,866

      1,925

      # of nurses CAGR: 2%

      1,537 1,5711,603

      1,495

      1,634

      16.1% 17.0% 16.6% 16.5% 16.5%

      2011 2012 2013 2014 2015

      Jobs-to-applicants ratio of care workers*2

      4.00

      10.9% 11.0% 11.0% 10.8% 10.8%

      2011 2012 2013 2014 2015

      Jobs-to-applicants ratio of nurses*2

      4.00

      3.00

      2.00

      1.00

      Care workers All Industries

      3.00

      2.00

      1.00

      Nurses

      All Industries

      0.000.00

      FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17

      22

      © Copyright SMS CO.,LTD.

      *1. Sources: Number - MHLW; Turnover rate - Care Work Foundation *2. Sources: MHLW *1. Sources: The Japanese Nursing Association

      • As a pioneer, created these attractive markets and continue to lead them going forward as No.1 player.

      • With strong competitive advantages in attracting customers and receiving orders, create a virtuous cycle that draws more job seekers and business operators.

        Job seekers

        Our customers are:

        (percentage of registered members for our services among the number of people who change their jobs annually)

        Nurses Over 100%

        (Recruiting Agent)

        Care workers 40%

        (Recruiting Ads)

        Created the market as a pioneer and lead the market as No.1 player

        Nurse

        No.1 share with 30% (Recruiting Agent)

        Care worker

        No.1 share with no major competitors (Recruiting Ads)

        Operators

        We receive orders from:

        Hospitals 70%

        (Recruiting Agent)

        Major elderly care operators 50%

        (Recruiting Ads)

        Accumulated online marketing know-how by conducting it in house*1.

        Developed strong relationship with operators and their

        heavy dependence on us

        23

        © Copyright SMS CO.,LTD.

        *1. Our competitors traditionally outsourced their web marketing.

        • Market size of Recruiting Agent for care workers is expected to become as large as that of nurses.

      Potential number of users of care worker recruiting services*1

      # of Workers 1,630,000

      # of job seekers 390,000

      20%

      # of Workers 1,920,000

      10%

      # of job seekers 160,000

      Nurses

      25%

      # of workers using a recruiting agent service

      40,000

      # of workers using a recruiting agent service

      40,000

      (assumption)

      10%

      Care Workers

      © Copyright SMS CO.,LTD.

      24

      *1. Sources: # of workers: care workers - MHLW; nurses - Japanese Nursing Association. Others: SMS estimates.

    • Develop Recruiting Agent for care workers on a full scale. Create markets and achieve significant growth by leveraging our database of 700,000 registered care works.

    • A high unit price of Recruiting Agent will bring high profitability.

Database

Registered care workers Approx. 700 thousand (40% market share ) Recruiting Ads Recruiting Agent Elderly care operators

Kaipoke

  • In-home care services are the mainstream of elderly care in Japan.

  • Kaipoke's main target is the in-home care operators.

  • 90% of elderly care costs is covered by the public elderly care insurance.

    Proportion of in-home care operators and facility care operators (%) *1

    Facility care 6%

    In-home care 94%

    Types of in-home elderly care services

    ・Home care support services

    Care managers develop care plans

    ・Day care

    Bathing, excretion, and meal support at a day care center

    ・Home-visit elderly care

    Bathing, excretion, and meal support at home

    ・Home-visit nursing

    Medical check and treatment at home

    ・Main contents out of approx. 40 contents

    ・Provides these contents as a package

    Insurance

    Provide cloud-based business

    support service

    Pay monthly subscription

    Elderly care operators

    fee

    claim

    system

    Recruit- ment

    Operation improve- ment

    Generates claims for the elderly care insurance.

    Allows customers to use SMS's industry leading Recruiting Ads

    Lends an iPad for free. Care workers can complete documentation at their customer sites

    (fixed price*1)

    Marketing Makes flyers and a list of care managers who are the sales target of elderly care operators.

    Finance Improve- ment

    Provides factoring service that helps business operators improve their cash flows

    • The number of elderly care operators continues to increase as the population of the seniors increases.

Number of elderly care operators locations and population of the seniors*1

# of elderly care operators locations CAGR:5%

153

143

136

130

29 3031

Number of care operators: thousands

Population of the senior: millions

179

172

162

32 3334

35 Services offered by Kaipoke*2

  • Home care support services

  • Home-visit elderly care

  • Day care

  • Home-visit nursing

    86 90 96 102 108 113 116

    43 45 48 51 54 5963

    2010 2011 2012 2013 2014 2015 2016

  • Outpatient rehabilitation etc.

    Services not offered by Kaipoke*2

  • Commuting care for elderly with dementia

  • Short stay

  • Daily life care for elderly in specific facilities

  • Small-sized multifunctional in-home care

  • Facilities, etc.

    Not included in Kaipoke service Included in Kaipoke service Population of the seniors (over 65)

    *1. Source: Number of elderly care operators locations - SMS estimates based on statistics of MHLW; Population of the seniors - IPSS. 29

    © Copyright SMS CO.,LTD. *2. As of March,2017

    • Penetrated the market as a discounter of the insurance claim system.

    • Turned the insurance claim system into the business support and became the only player to provide the service of this kind to elderly care operators.

Prior to February 2014 Starting in February 2014

Insurance claim

system

Recruiting Ads

Marketing

Insurance claim

Business support service

system

Finance Improvement

Operation improvement

Other Contents

(Approx. 40 contents)

(ARPU) JPY3,000 / month

  • Many other competitors provide on-premises insurance claim system

  • Fierce competition

  • Entered the market with cloud-based insurance claim system as a discounter

© Copyright SMS CO.,LTD.

(ARPU) JPY 20,000 / month

  • The only player providing cloud-based business support service with approx. 40 contents including the No.1 recruiting ads service (Kaigojob)

    30

    • The number of members is increasing in accordance with our strategy, despite some members leaving our service when we changed the concept and raised the price

by 7 times.

Number of memberships of Kaipoke

Only insurance claim system Business support

13,600

13,500

10,400

Many companies entered the market

Public elderly care insurance started

1,500

Changed

the service concept

2000

© Copyright SMS CO.,LTD.

Apr. 2010

Feb. 2014

Apr. 2015

Apr. 2017

Future

31

  • Expand the business further by increasing elderly care operators types and developing new contents.

    Services provided

    Develop new contents Maximize the value provided to elderly care operators

    Business support service

    Increase elderly care operators types

    Number of memberships

    Overseas Businesses

    (MIMS)

    MIMS Group global coverage MIMS group profile

    Founded

    1963

    Business models

    ・Pharma Marketing

    ・Healthcare Data

    Global coverage

    13 countries and regions in Asia and Oceania

    Number of memberships

    Approx. 2.0 million memberships including 0.45 million doctors

    Acquisition date

    Oct. 7, 2015

    Shareholding ratio

    SMS 60%, Mitsui 40%

    Pharma Marketing

    Pharmaceutical Companies

    Healthcare Data

    Posting Fee

    Drug information

    Drug information via various media (mainly paper based)

    Usage fee

    • Drug database

    • Database can be integrated into core systems of healthcare institutions

      Healthcare Professionals (e.g. doctors, nurses, pharmacists)

      Healthcare Institutions (e.g. hospitals, clinics, pharmacies)

  • Strengths of MIMS Group include its overwhelming brand value in the region, its strong membership base of healthcare professionals, and its business relationships with pharmaceutical companies.

  • Overwhelming Brand Value

    • 50 years of history

    • Utilized by healthcare institutions/ professionals to get drug information on a daily basis

      Healthcare Professionals

      Pharmaceutical Companies

  • Strong Membership Base of HCPs

  • Business Relationships with Pharma Companies

    • Approx. 2.0 million healthcare professional memberships

      - Including approx. 0.45 million doctors

    • Most manufacturers of new drugs in the region post information of their drugs on MIMS's database

    36

  • Strengthen the MIMS platform by providing healthcare professionals with a wide range of information and services.

  • Develop new services for healthcare business operators, utilizing the strong MIMS platform.

Healthcare professionals

Healthcare business operators

Drug information

News

E-learning

Academic

Marketing support services

SMS's career

Pharmaceutical companies

Online

conferences/events

Research

Platform

businesses know-how

Career services

community

Career information

SMS's management support businesses know-how

Hospitals

Registration

SMS's platform operation know- how

Business support services

Mitsui's Medical/ Healthcare network

Clinics

37

  • Full-scale expansion starts in FY03/18, leveraging the strong healthcare professional (HCP) platform of MIMS.

  • Establish a dominant position as HCP supply platform.

    38

    © Copyright SMS CO.,LTD.

    New Businesses

    39

    © Copyright SMS CO.,LTD.

    • Provide more than 40 services.

    • Constantly develop new businesses to create the next pillars of our businesses.

      Segment

      Sub- segment

      Services

      Career

      Elderly Care Career

      RAG for care managers RAG for PT/OT/ST RAG for care workers Certification course information Com for PT/OT/ST

      RAD for newly-graduated Temporary staffing

      RAD for care workers elderly care professional for care workers Elderly care certification course

      Medical Care Career

      RAG for nurses RAG for medical RAG for radiological RAG for medical engineers RAG for nutritionists Solution service technologists technologists for hospitals

      RAD for nurses RAD for newly-graduated Scholarship information portal Com for nurses and

      nurses student nurses

      Elderly Care Operators

      Business support service for

      elderly care operators

      Overseas

      Drug information service for Com and RAG/RAD Doctor consultation

      healthcare professionals and RAG for nurses for nurses (South Korea) (Indonesia) Medical ad services Medical adservices

      institutions (Malaysia and Saudi Arabia, (Philippines) (Indonesia)

      etc.)

      Business Develop- ment

      Information portal of Home-delivered Com for care managers Com for care workers Com for families with Magazinesfor

      housing for the elderly meal search site those requiring elderly care hospitalmanagement

      Housing renovation Mail order/online Publishing for nurses Online academic media Information portal for Livelihood support operators search site sales of nursing goods for nurses hospital Admin. managers search site

      Information portal of Information portal of diabetes Q&A site on health News column regarding Com for nutritionists Com for pharmacists dementia pregnancy, childbirth and

      child-raising Com for managers of User review site regarding

      elderly care operators elderly care operators

      © Copyright SMS CO.,LTD.

      *1. As of June, 2017 *2. RAG stands for Recruiting Agent; RAD stands for Recruiting Ads; Com stands for online community 40

      *3. Career businesses for doctors and pharmacists are operated by M3 Career, Inc. which is a joint venture between M3, Inc. (51%) and SMS(49%).

      • Develop new businesses making use of the established bases of service operators and healthcare professionals in the elderly and medical care markets.

      Shares of each customer

      Large-sized elderly care operators

      50%

      of them are our Recruiting Ads clients

      Small and mid-sized elderly care operators

      10%

      of them are our Kaipoke members

      Hospitals

      70%

      of them are our Recruiting Agent clients

      Clinics

      10%

      of them are our Recruiting Agent clients

      Care managers

      45%

      of them are our

      online community members

      Care workers

      40%

      of them are our Recruiting Ads members

      Nurses

      35%

      of them are our

      online community members

      Student Nurses

      65%

      of them are our

      online community members

      PT/OT/ST*1 Nutritionists

      Hospital Admin. managers

      70%

      of annual job seekers register in our Recruiting Agent

      70%

      of them are our

      online community members

      20%

      of them are our

      online community members

      41

      © Copyright SMS CO.,LTD. *1. PT stands for Physical Therapist, OT stands for Occupational Therapist and ST stands for Speech Therapist

      Other Information

      42

      © Copyright SMS CO.,LTD.

      Trends of the amount and the payout ratio of dividends*1

      14.8%

      13.6%

      15.6%

      12.5%

      16.3%

      ¥11

      11.6%12.3%

      ¥7 ¥7

      6.8%

      ¥1.25

      ¥5

      ¥4

      ¥2.50 ¥3

      FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17

      © Copyright SMS CO.,LTD.

      43

      *1.The stock splits we had in the past are taken into account for the dividend amount calculation.

  • Net sales and operating income tend to increase in Q1 and Q4.

Seasonal Volatility of Net Sales and Operating Income Businesses with Seasonal Volatility and Reasons

Quarterly Net Sales and Operating Income (FY03/17) [¥ million] NetSales

7,000

Operating Income

6,000

Businesses whose net sales and operating income increase in Q1

  • Recruiting Agent Service

    • Net sales are booked when a job seeker joins a company; therefore, net sales and operating income increase in April (Q1) when personnel changes often happen

      5,000

      4,000

      3,000

      2,000

      1,000

      1Q 2Q 3Q 4Q

      0

      Q1 Q2 Q3 Q4

      Businesses whose net sales and operating income increase in Q4

  • Recruiting Ads Service

    • Net sales are booked when a job seeker applies for a recruiting ad; therefore, net sales and operating income increase in Q4 when companies publish recruiting ads targeting the beginning of a fiscal year when job seekers are likely to be motivated to change jobs

  • MIMS group

  • The client (pharmaceutical companies) tend to increase their expenditure for advertising expenses toward December; therefore, net sales and operating income increase in Q4.

(MIMS P/L is consolidated to SMS P/L following a three-month time lag.)

Both net sales and operating income increase significantly in Q1 and Q4

44

© Copyright SMS CO.,LTD.

(JPY million)

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

Net Sales

58

383

835

1,545

2,715

5,177

7,172

7,618

8,692

10,181

12,046

15,056

19,069

23,054

Cost of Sales

0

5

20

38

77

149

375

319

431

700

952

1,332

2,204

3,727

SG&A

Expenses

63

326

705

1,237

2,211

3,100%

5,534

5,818

6,740

7,910

9,363

11,644

14,108

15,681

Operating Income

▲5

52

109

269

426

1,230

1,261

1,480

1,519

1,570

1,730

2,079

2,756

3,646

Ordinary Income

▲5

49

108

269

415

1,238

1,266

1,530

1,734

1,990

2,340

2,693

3,509

4,430

Net Income

▲5

31

63

157

244

719

717

876

1,004

1,226

1,380

1,824

2,265

2,801

Total Assets

59

357

566

1,016

1,806

3,118

3,645

4,672

5,716

6,948

8,406

11,421

41,689

43,231

Liabilities

55

166

196

489

822

1,410

1,266

1,430

1,579

1,794

2,331

4,497

28,532

21,648

Net Assets

4

190

369

527

983

1,708

2,379

3,242

4,136

5,153

6,074

6,923

13,157

21,583

Equity Ratio (%)

7.5

53.3

65.3

51.9

54.4

54.8

65.2

69.2

72.3

74.1

71.5

59.7

20.5

39.6

ROE (%)

▲124.9

31.8

22.8

35.1

32.3

53.4

35.1

31.2

27.3

26.4

24.7

28.4

29.5

21.8

DPS (¥) *1

-

-

-

-

-

1.25

1.25

2.5

3

4

5

7

7

11

Dividend Payout Ratio(%)

-

-

-

-

-

6.8

6.8

11.6

12.3

13.6

14.8

15.6

12.5

16.3

© Copyright SMS CO.,LTD.

45

*1:The stock splits we had in the past are taken into account for DPS calculation.

03/04 03/05 03/06 03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16 03/17 03/18

RAG for care managers: Care Jinzai-bank May 2003

RAD for newly graduated elderly care professionals: Kaigo Job Gakusei-ban July 2003

Certification course information: Sikatoru Nov. 2003

RAD for elderly care professionals: Kaigo Job Mar. 2004

RAG for nurses: Nurse Jinzai-bank Sep. 2005

RAD for nurses: Nurse-senka Kyujin-navi July 2006

Com for nurses and student nurses: Nurse-senka Community Aug. 2006

RAG for doctors and pharmacists: M3 Career Agent Aug. 2006 RAG for pharmacists: Yaku Kyari Agent Apr. 2007

Company split and succeeded to M3 career at the end of Dec. 2009

Career

RAG for PT/OT/ST : PT/OT Jinzai-bank Sep. 2008

RAD for newly-graduated nurses: Nurse-senka Shusyoku-navi Aug. 2009

Solution service for hospitals Apr. 2011

RAG for nutritionists: Nutritionist Jinzai-bank May 2012 Scholarship information portal: Kango Shogakukin-navi Oct. 2012 RAG for medical technologists: MT Jinzai-bank Sep. 2013

Com for PT/OT/ST: Ryohoushi.com Dec. 2013

RAG for radiological technologists: RT Jinzai-bank June 2014

RAG for medical engineers: ME Jinzai-bank July 2014

RAG for care workers Kaigo Job Agent Aug.2014

Elderly care certification course Kaigo Job Academy Oct. 2015 Temporary staffing for care workers Kaigo job Partners Dec.201646

03/04 03/05 03/06 03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16 03/17 03/18

Elderly Care Operators

Overseas

Business support service for elderly care operators: Kaipoke July 2006

(Korea) Com for nurses: Nurscape Sep. 2011 (Indonesia) Doctor consultation: MeetDoctor Jul. 2013 (Philippines) : Medical ad services Jan. 2015

(Indonesia) : Medical ad services Feb. 2015 (13 countries and regions in Asia and Oceania)

Drug information service for healthcare professionals and institutions: MIMS Oct. 2015

(Malaysia, Saudi Arabia and Singapore)RAG for nurses: Melorita June 2017

Com for elderly care professionals: Care Tomo Oct. 2005

Information portal of housing for the elderly: Kaigo DB July 2006)

Com for care managers: Care Mane.com Sep. 2006

Business Development

Com for pharmacists: Cocoyaku May 2009

Com for families with those requiring elderly care: Anshin Kaigo June 2009

Publishing for nurses: Nurse-senka Books Aug. 2009

Com for nutritionists: Eichie June 2011

Information portal of dementia: Ninchisho Net Aug. 2011

47

03/04 03/05 03/06 03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16 03/17 03/18

Mail order/online sales of nursing goods: PURE NURSE Sep. 2011

Information portal for hospital management: GALENUS May 2013

Home-delivered meal search site: Lifood Nov. 2013

Q&A site on health: Narukara Dec. 2013

User review site regarding elderly care operators: Tonari no Kaigo Apr. 2014

Business Development

News column regarding pregnancy, childbirth and child-raising Ixil July 2014

Information portal for hospital Admin. managers: Jimcom Sep. 2014

Com for managers of elderly care operators: Kaigo Mast Feb. 2015

Livelihood support search site: Help You Oct. 2015

Online academic media for nurses: Nurse Press Apr.2016

Housing renovation operators search site: Hapisumu Apr.2016

Information portal of diabetes: Tonyobyo Net Jul. 2016

48

Number of employees

Number of employees and its breakdown as of June 30, 2017

Employees (consolidated)

1,836

SMS CO., LTD.

285

SMS Career CO., LTD.

677

Subsidiaries and Sub-subsidiaries

874

Japan

206

Overseas

668

Shareholder composition*1

[as of March 31, 2017]

Number of stock holders 4,984

7%8%

44%

22%

1%

18%

Founders

Director, Employees and Shareholding association Domestic Institutional Investors

Foreign Institutional Investors Individual Investors

Other

Cautionary Statement with Respect to Forward-Looking Statements

These materials contain forward-looking statements, including estimates, projections, and statements related to the business operations of SMS CO., LTD. (hereinafter, "the Company") based on current expectations and assumptions in light of the information available to the Company as of June 30, 2017. These forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. These factors include, but are not limited to:

・changes in economic conditions, market demand, and the competitive environment affecting Japan, Asia and other markets in which the Company operates;

・reliance on digital and information technology, including with respect to the handling of elderly care, medical care and other client information and operation of the Company's online community services;

・inability to effectively execute M&A/business alliance and overseas expansion strategies;

・changes in the laws, regulations and government policies in the markets in which the Company operates, particularly relating to employment placement, elderly care and medical care;

・any damage to the brand image;

・risk of infringing intellectual property rights;

・fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the US dollar, the Singapore dollar, the Hong Kong dollar and the Australian dollar; and

・risk of impairment losses, particularly with respect to goodwill, trademark right and customer-related assets recognized in connection of the acquisition of a 60% interest in Medica Asia (Holdco) Limited in October, 2015.

A discussion of these and other factors which may affect the Company's actual results, performance, achievements or financial position is described in "Business Risks" contained in the Company's corporate website*1.

We do not intend, and disclaim any duty, to update or revise any forward-looking statements contained in these materials to reflect new information, future events or otherwise. We caution you not to place undue reliance on any forward-looking statements contained in these materials.

For any inquiries on the materials, please contact below: Finance & Accounting Department

E-mail: irinfo@bm-sms.co.jp Phone: +81-3-6721-2403

*1. http://www.bm-sms.co.jp/eng/ir/policy/risk/

50

© Copyright SMS CO.,LTD.

SMS Co. Ltd. published this content on 28 July 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 28 July 2017 10:38:08 UTC.

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