Financial Summary

Recent Updates

Highlights

On November 10, 2011, JBR announced full-year FY09/11 results: click here to go direct to the FY09/11 results section.

(For original PDF announcement in Japanese-language only please click here.)

On November 8, 2011, the company announced a revision to its FY09/11 results, which was as follows:

• Sales: 7.2 billion yen (vs. previous estimate of 7.4 billion yen)
• Operating profit: 634 million yen (vs. previous estimate of 590 million yen)
• Recurring profit: 582 million yen (vs. previous estimate of 530 million yen)
• Net loss: 430 million yen (vs. previous estimate of 513 million yen net profit)

The company did not provide a detailed explanation for its revision.

(For original PDF announcement in Japanese-language only please click here.)

For corporate releases and developments more than three months old please refer to the News & Topics section.

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Trends & Outlook

Quarterly Trends

FY09/11 Results (Announced on November 10, 2011; please refer to tables above)

FY09/11 sales were up 5.6% YoY at 7.2 billion yen. Operating profit rose 17.3% YoY to 635 million yen and recurring profit increased 10.8% YoY to 582 million yen - both record highs. Additionally, the company recorded an extraordinary gain of 364 million yen from the sale of its Motorcycle Membership subsidiary (total extraordinary profit for the period was 388 million yen vs. 13 million yen a year earlier). Net income for the period was up 42.1% at 430 million yen – an all-time high.

Sales and gross profit came in below expectations versus the company's full year forecast, which was revised in March 2011. Nonetheless, SG&A expenses came in below forecast and thus operating profit came in above forecast.

Sales in the Call Center, Corporate Tie-Ups, and Small Amount Short Term Insurance segments all came in below forecast versus the revised March 2011 forecast, whereas the Membership and Car Chintai & Others segments beat forecasts. The company believes sales were below forecast in the Call Center and Corporate Tie-Ups segments primarily due to the impact from it changing advertising mediums. Specifically, it was cutting back on telephone directory and other print medium ads while increasing the share of Internet ads it uses. In response to this, the company is also attempting to raise brand recognition from FY09/12 onwards. FY09/11 results by segment were as follows:

Call Center Segment: Sales were down 1.6% YoY at 697 million yen and operating profit declined 26.0% YoY to 251 million yen The segment’s sales breakdown was as follows:

• Lock replacement service: 463 million yen (-1.8% YoY)
• Computer-related sales: 96 million yen (-1.6% YoY)

The decline in operating profit was due to increased advertising expenses from use of internet ads.

Membership Segment: Sales rose 2.1% YoY to 2.4 billion yen while operating profit rose 6.7% YoY to 422 million yen. The segment’s sales breakdown was as follows:

• No Worries Residence Support: 1.1 billion yen (+16.2% YoY)
• Student Dial 110: 113 million yen (+8.0% YoY)
• Life Depot: 589 million yen (newly consolidated since September 2011)

The segment had acquired 230,000 members as of end FY09/11 (28,000 renewals; 202,000 new members, excluding Life Depot members). On April 1, 2011, the company sold its Motorcycle Membership subsidiary. 1H FY09/11 sales for the Motorcycle Membership business was 509 million yen.

Corporate Tie-Ups Segment: Sales were 3.5 billion yen, up 0.4% YoY, while operating profit fell 10.5% YoY to 346 million yen. The sales breakdown for the segment was:

• Aquambulance: 1.7 billion yen (-1.1% YoY)
• Asahi Glass Ambulance: 813 million yen (+2.1% YoY)
• Consigned Call Center Operations: 854 million yen (+1.0% YoY)
• Secom Win: 96 million yen (-16.9% YoY)

The company noted it had 170 corporate clients using the service.

Member Shop Segment: The business posted a 13.4% YoY rise in sales to 211 million yen but recorded an operating loss of 386 million yen (vs. an operating loss of 514 million yen a year earlier).

The lower operating loss was due to a decrease in advertising costs with the proportion of Internet advertising increasing (advertising costs at the Call Center segment increased though). At end FY09/11 the total shop network was 1,425 stores – 449 of these were franchisees and 976 sites were Cooperating Shops.

Small Amount Short Term Insurance Segment: sales increased 28.9% YoY to 738 million yen with operating profit rising 86.7% YoY to 267 million yen.

Car Chintai & Others: sales were up more than nine-fold at 251 million yen and operating profit increased just over seven-fold to 19 million yen.

Q3 FY09/11 Results

On August 10, 2011, JBR released Q3 FY09/11 results (see table above).

Cumulative Q3 FY09/11 sales were up 9.9% YoY at 5.6 billion yen. Operating profit rose 21.0% YoY to 503 million yen and recurring profit increased 12.7% YoY to 460 million yen - both record highs. Additionally, the company recorded an extraordinary gain of 367 million yen from the sale of its Motorcycle Membership subsidiary (total extraordinary profit for the period was 389 million yen vs. 13 million yen a year earlier). Net income for the period came in at 339 million yen – an all-time high.

When benchmarked against the company forecast sales and gross profit both came in below expectations: the company forecast was for 5.7 billion yen in sales and 2.6 billion yen in gross profit. Nonetheless, SG&A expenses came in below forecast and thus operating profit was above expectations (of 429 million yen).

With regards to the company plan for sales, the Call Center, Corporate Tie-Ups and Small Amount Short Term Insurance segments all came in below forecast whereas the Membership and Car Chintai & Others segments beat forecasts.

Cumulative Q3 FY09/11 results by segment were as follows:

Call Center Segment: Sales were up 3.0% YoY at 530 million yen but operating profit declined 20.0% YoY to 201 million yen with the operating profit margin coming in at 37.9%. Operating profit fell due to increased Internet advertising.

The segment’s sales breakdown was as follows:

• Lock replacement service: 357 million yen (+3.7% YoY)

• Computer-related sales: 50 million yen (+3.2% YoY)

Sales were lower than forecast, the company noted that a factor behind this was that while inquiries increased nationwide, due to the use of Internet advertising for the service, the number of incidents that Member and Cooperating Shops were unable to dispatch rapidly to increased as the physical distances between incidents and Member & Cooperating Shops also rose. It was a similar case for the Corporate Tie-Ups segment’s Aquambulance business. The company is planning on increasing the number of Cooperating Shops in order to cut down on these lost opportunities.

Membership Segment: Sales rose 12.7% YoY to 2.0 billion yen while operating profit rose 13.6% YoY to was 327 million yen resulting in an operating profit margin of 16.5%.

The segment’s sales breakdown was as follows:

• No Worries Residence Support: 855 million yen (+14.8% YoY)

• Student Dial 110: 82 million yen (+4.4% YoY)

• Life Depot: 440 million yen (consolidated since September 2011)

The segment had acquired 187,000 members at end Q3 FY09/11 (22,000 renewals; 165,000 new members, excluding Life Depot members).

On April 1, 2011, the company sold its Motorcycle Membership subsidiary. 1H FY09/11 sales for the Motorcycle Membership business was 509 million yen.

Corporate Tie-Ups Segment: Sales were 2.7 billion yen, up 4.0% YoY, and operating profit increased 3.8% YoY to 310 million yen. Operating profit margin for the segment was 11.5%.

The sales breakdown for the segment was:

• Aquambulance: 1.3 billion yen (+3.3% YoY)

• Asahi Glass Ambulance: 616 million yen (+1.6% YoY)

• Consigned Call Center Operations: 677 million yen (+10.7% YoY)

• Secom Win: 75 million yen (-16.2% YoY)

The company noted it had 168 corporate clients using the service.

Member Shop Segment: The business posted a 23.4% YoY rise in sales to 163 million yen but recorded an operating loss of 293 million yen (vs. an operating loss of 409 million yen a year earlier). The lower operating loss was due to a decrease in advertising costs with the proportion of Internet advertising increasing (advertising costs at the Call Center segment).

At the end of Q3 FY09/11 the total shop network was 1,415 stores – 459 of these were franchisees and 856 sites were Cooperating Shops.

Small Amount Short Term Insurance Segment: sales increased 33.1% YoY to 552 million yen with operating profit rising 18.8% YoY to 169 million yen. Operating profit margin came in at 30.6%.

Car Chintai & Others Segment: 143 million yen in sales and operating profit of 7 million yen.

Q2 (1H) FY09/11 Results

JBR released Q2（1H） FY09/11 results on May 12, 2011.

Sales for 1H FY09/11 were up 16.5% YoY at 3.9 billion yen. Operating profit rose 39.4% to 387 million yen and recurring profit 25.9% to 352 million yen – both were record highs. Nonetheles, net income for the period at 101 million yen was down 52.1% YoY due to higher corporate taxes.

Sales exceeded the company forecast of 4 billion yen. Breaking the performance down, the Membership business and the Consigned Call Center Operations within the Corporate Tie-Ups Segment exceeded projections. On the other hand, the Call Center Segment, Comprehensive Corporate Tie-ups operations within the Corporate Tie-Ups Segment, and Small Amount Short Term Insurance Segment failed to meet forecasts. Finally, performance at the Car Chintai unit (long-term automobile rental) was in line with expectations.

The company’s business segments performed as follows over 1H FY09/11:

Call Center Segment: Sales were up 4.8% YoY at 352 million yen, however, operating profit fell of 15.6% to 141 million yen due to a low operating profit margin of 40.2% for the segment. Within the segment the main business lines posted the following sales:

• Lock replacement service: 243 million yen (+7.8% YoY)
• Computer-related sales: 50 million yen (+4.9% YoY)

Membership Segment: At 1.5 billion yen sales were up 31.3% YoY, while operating profit came in at 242 million yen, a 7.9% YoY rise, and the segment recorded an operating profit margin of 16.2 %. The breakdown of sales for the segment was as follows:

• Motorcycle membership: 509 million yen (+3.1% YoY). Honda OEM membership was 138 million yen (-4.8% YoY), while Motorcycle Anshin membership was 271 million yen (+15.7% YoY). The business signed up 68,000 new members in 1H FY09/11 of the people (17,000 renewals and 50,000 new members), the company said.
• Daily Necessities membership: 981 million yen (+53.0% YoY). No Worries Residence support sales came to 572 million yen (+11.8% YoY); Life Depot's sales (newly consolidated for FY09/11) were 292 million yen for the period. The business signed up 117,000 new members in 1H FY09/11 (16,000 renewals and 101,000 new members – this excludes Life Depot), the company said.

Corporate Tie-Ups Segment: Sales came to 1.9 billion yen up 8.2% YoY. Operating income was 224 million yen, a 6.9% YoY rise, underpinned by a segment operating profit margin of 11.6%. The sales breakdown for this segment was:

• Aquambulance: 958 million yen (+5.8% YoY)
• Asahi Glass Ambulance: 425 million yen (+1.4% YoY)
• Consigned Call Center Operations: 497 million yen (+23.5% YoY). The company noted it had 164 corporate clients using the service.

Member Shop Segment: The business recorded a 29.9% YoY gain in sales to 109 million yen but posted an operating loss of 207 million yen (vs. an operating loss of 302 million yen a year earlier). At the end of 1H FY09/11 the total shop network was 1,399 stores - 452 of these were franchisees and 947 sites were Cooperating Shops.

Small Amount Short Term Insurance Segment: Sales rose 44.4% YoY to 355 million yen and operating income increased 31.0% to 106 million yen with the segment recording an operating profit margin of 29.9%.

Q1 FY09/11 Results

JBR released Q1 FY09/11 results on February 14, 2011.

Q1 consolidated sales grew by 15.3% YoY, and operating profit grew by 17.4% YoY. Recurring profit decreased by 4.1% YoY. The YoY decline in RP was due to an 8 million yen loss from an equity-method affiliate (vs. a gain of 15 million yen during the same period last year).

Sales in the Call Center Business segment were 184 million yen (+6.3% YoY). Operating profit for the segment was 79 million yen (-12.5% YoY). The operating profit margin was 42.8%. The main components of sales were as follows:

• Lock replacement service: 126 million yen (+11.0% YoY)
• Computer-related sales: 26 million yen (+3.8% YoY)

Sales in the Membership Business segment were 664 million yen (+33.8% YoY). Operating profit was 54 million yen (-14.3% YoY). The operating profit margin was 8.2%. The breakdown of sales was as follows:

• Motorcycle membership: 265 million yen (+3.3% YoY). Honda OEM memberships were 73 million yen (-2.6% YoY), Motorcycle Anshin memberships were 141 million yen (+19.2% YoY). The company reported 34,000 new memberships (8,000 renewals, 26,000 new members) during the quarter.
• Daily Necessities membership: 397 million yen (+66.7% YoY). No Worries Residence Support sales were 199 million yen (+8.4% YoY), Life Depot sales were 142 million yen (newly consolidated). The company reported 39,000 new memberships (5,000 renewals, 33,000 new members, excluding Life Depot) during the quarter.

Sales in the Corporate Tie-Ups segment were 949 million yen (+4.8% YoY). Operating profit was 103 million yen (+2.5% YoY). The operating profit margin was 10.9%. The breakdown of the sales in the segment was as follows:

Aquambulance – 458 million yen (+0.4% YoY)

Asahi Glass’ Glass Ambulance – 222 million yen (+3.2% YoY)

Consigned Call Center Operations — 241 million yen (+17.8% YoY). The company indicated that the number of corporate clients using the service was 159.

Sales in the Member Shop segment were 55 million yen (+28.9% YoY). Operating loss was 104 million yen (compared to a loss of 157 million yen in Q1 FY09/10).

The total shop network was 1,381 at Q1 end: 448 Member Shops, 933 Cooperating Shops.

Sales in the Small Amount Short Term Insurance segment were 164 million yen (+67.9% YoY). Operating profit was 42 million yen (-5.9% YoY). The operating profit margin was 26.0%. The company indicated that operating profit decreased due to a provision for a responsibility reserve fund (for possible future insurance payments).

Full Year (FY09/12) Outlook

The FY09/12 company forecast calls for sales to increase 9.1% YoY to 7.9 billion yen. However, operating profit is expected to decline 17.3% YoY to 525 million yen, and net income is also predicted to fall 44.9% YoY to 237 million yen.

Top-line growth is expected due to:

• In the Membership segment, strong new member sign-ups for its No Worries Residence Support package.
• In the Small Amount Short Term Insurance segment, sales growth for both New Residence Room Insurance, which covers damaged/stolen apartment items, and mobile phone insurance offered by subsidiary Japan Small Amount and Short Term Insurance Co.
• Expansion of the Car Chintai Business (aiming to increase the number of cars in the program to 800 in FY09/12 from 400 in FY09/11 as unit prices level off).

Despite higher sales, the company expects a decline in operating profit, primarily due to increased adverting (+92 million yen YoY) and labor costs (+98 million yen YoY).

The increased advertising costs are due to the company’s efforts to raise the profile of its services and expand its advertising channels. For example, it is looking at introducing ads printed on magnets in addition to its traditional focus on telephone directory ads and the Internet. FY09/11 advertising costs came in at 583 million yen of which 259 million yen was in Internet ads, 277 million yen was in non-Internet print-media (such as newspaper ads), and 46 million yen in general advertising expenses.

FY09/12 advertising costs are forecast at 675 million yen, split between 296 million yen in Internet ads, 229 million yen in non-internet print-media, and 149 million yen in general advertising expenses. (The new magnet ads are part of general advertising expenses.)

Full details of the magnet ad campaign are still under review, but the company’s Key Doctor, Aquambulance, Glass Ambulance, and PC Doctor brands are expected to be printed onto a single magnet together and then distributed to households in select areas. In doing so, the company is aiming to unify its services under the 24/7 Handyman Van brand and raise brand recognition as part of the company’s investment to drive future growth. The increase in labor costs is expected to be temporary as the company transfers control of its call center operations (to Ogaki, Gifu prefecture from Urayasu, Chiba prefecture).

The forecast drop in net income is due to a decline in operating profit and base effects from the company posting 388 million yen in extraordinary profit in FY09/11.

As for the FY09/12 forecast, JBR remarked that although the macroeconomic picture was uncertain it felt there was limited downside to its forecast figures and that FY09/12 should be viewed as a waypoint in its mid to long-term goal of growing profits. Given Japan’s aging society will probably lead to more elderly living alone, higher crime rates, and other social phenomena there should be plenty of scope for the company's business to expand. Against this backdrop, SR Inc. views FY09/12 is a key period in the company’s mid-term expansion efforts.

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Business

Business Description

JBR provides nationwide service to help solve daily “life emergencies”. Customers call the company with problems: a broken window glass, a leaky faucet, or other small odd-jobs, and JBR dispatches a repairman from Member or Cooperating Shops.

Services can be classified into two categories: daily life needs (plumbing problems, broken window glass, lock replacement, etc.) and automobile and motorcycle services (dead battery, flat tires, empty fuel tank, towing a motorcycle, etc.).

JBR Handyman Van Source: Company Data

The company reports performance across 6 main segments, but the different businesses share a common theme: handling customer service requests and finding a capable response. JBR offers many different services including: motorcycle and automobile road service, lock replacement, glass repair, apartment and small item insurance, light plumbing services, pest control, roofing repair, small appliance repair, and garden maintenance.

Main Business Segments

Note: Although the company uses 6 segment classifications, the Call Center and Corporate Tie-Ups segments are essentially the same business but use different accounting treatment for sales, and the Member Shop segment essentially represents group advertising expenses offset by Member Shop contributions (company functions like an advertising agency). See segment descriptions below for more detail.

Call Center (9.7% of FY09/11 sales; Gross profit of 696 million yen)

The core business of JBR is Call Center Business – handling incoming service requests from individual customers and dispatching a response. The relatively minor contribution to sales obscures the segment’s importance to the company; JBR’s businesses are all supported by call center operations.

The operational flow for the Call Center Business is simple. A customer calls reporting a problem. The call center operator determines the nature of the problems, and then dispatches the work order to a Member Shop or a Cooperating Shop for service, following-up with the customer if necessary.

Member Shops are dedicated local repairmen that perform service work only for JBR, wearing JBR uniforms and driving company-branded vans. The relationship between the company and Member Shops is similar to a franchisee relationship but currently does not involve any fixed royalty payments. The company would provide Member Shops with workflow and advertising support in exchange for per-revenue commissions. The amount of commission varies by service type; the range is 20-30% of the amount paid by the customer (JBR sets the prices). Member Shops are mainly selected from Cooperating Shops, and membership agreements are renewed annually. Cooperating Shops are used by JBR to perform service calls when Member Shops are unavailable. Both Member and Cooperating Shops are screened for skill before selection. At the end of FY09/11, there were 449 Member Shops (31.0% of the 1,425 total), mostly concentrated in areas near Tokyo and Osaka.

JBR’s call center operations are staffed 24/7, handling approximately 20,000 calls per day, with approximately 600 (17.0%) requiring service dispatches (as of end-FY09/11).The company suggested that the current call center capacity (call volume) can be scaled easily to handle up to 35,000 calls per day. The limiting factor for expanding the current operations would be labor, a problem easily solved. A defining characteristic of call center businesses are the relatively low skills required and minimal infrastructure needs.

Corporate Tie-Ups Business (48.2% of FY09/11 sales; Gross profit of 509 million yen)

The Corporate Tie-Ups Business segment consists of two business types: tie-ups with corporate partners (75.4% of FY09/11 segment sales) and call center outsourcing for other companies (24.6% of FY09/11 segment sales). JBR runs the daily operations and the partner companies provide branding (the tie-ups are all JBR, except in name). JBR benefits from the tie-ups through increased sales leveraging well-recognized brands, partner companies benefit from additional sales of their products. Operations in the comprehensive tie-ups are identical to the company’s core Call Center Business. The two businesses differ in the accounting treatment of revenues. Sales in the Call Center Business are commissions from the work order, whereas revenues in the joint venture companies are the gross amount of the work order.

Joint Ventures and Business Tie-ups:

• "Mizu No Kyukyusha" (Aquambulance). A joint venture with INAX, a leading manufacturer of plumbing fixtures and porcelain bathroom equipment, that handles light plumbing service calls (blockages, leaky faucets, etc.). FY09/11 sales were 1.7 billion yen.

• "Asahi Glass Glass no Kyukyusha" (Asahi Glass’ Glass Ambulance). A business tie-up with Asahi Glass, manufacturer of glass and related products, that provides glass replacement. FY09/11 sales were 813 million yen.

• Secom Win Co., Ltd. A joint venture with Secom, a leading security company in Japan. Secom sells security glass to consumers, JBR Member and Cooperating Shops install it, and Secom Win manages the process. FY09/11 sales were 96 million yen.

Consigned Call Center Operations offer two services to other companies: either pure call center outsourcing (handling incoming calls from customers), or call center outsourcing that includes dispatching JBR’s Member Shops or Cooperating Shops – a good example of product cross selling which appears to permeate the company’s business. Typical examples of the call center with van service include maintenance calls for real estate firms, and maintenance requests for appliance manufacturers. Although call center outsourcing has typically been the smaller part of Corporate Tie-Ups Business segment sales, the business has growth potential. Call center outsourcing business exhibits economies of scale: increasing utilization lowers call center costs, which benefits both the call center operator (increased sales) and users of the service (lower costs). At the end of FY09/11 there were 170 client companies using JBR’s call center outsourcing.

Membership (33.8% of FY09/11 sales; Gross profit of 1.3 billion yen)

The Membership segment provides the company’s services at discounted prices to members for the duration of the membership.

From the perspective of the purchaser, becoming a member means receiving services for free or paying only for materials and in many cases insurance is also a part of the package. Members get support 24/7 with JBR dispatching a handyman in 30-60 minutes.

There three main services under the Daily Necessities umbrella, “Students Dial 110” and “No Worries Residence Support”. The membership packages provide members with a package of services for a fixed periodic fee (typically plumbing, lock and key service, glass repair, short distance towing for cars and motorcycles).

There three main services under the Daily Necessities umbrella, “Students Dial 110”, “No Worries Residence Support” and “Life Support Pack”. The membership packages provide members with a package of services for a fixed periodic fee (typically plumbing, lock and key service, and glass repair).

• “Gakusei Seikatsu 110 Ban” (Students Dial 110) membership packages are sold to university students through University Cooperatives. The membership packages typically last for 4 years, and cost approximately 8,000 yen (covering the entire 4 year term). Sales of Students Dial 110 were 113 million yen in FY09/11.

• “Anshin Nyukyo Support” (No Worries Residence Support) membership packages are offered to rental condo tenants through property agents. The membership packages typically last for 2 years (the standard apartment lease term in Japan), and sell for approximately 15,750 yen (for both years of membership). Sales of No Worries Residence Support were approximately 1.1 billion yen in FY09/11.

Excluding Life Support Pack members, the number of Daily Necessities members was approximately 230,000 as of end-FY09/11.

Member Shop (2.9% of FY09/11 sales; Gross profit of 181 million yen)

Sales in the Member Shop segment reflect contributions of member shops to SG&A expenses associated with advertising and promotions. The company used to charge a fixed fee to its member shops for advertising. From FY09/10 it pretty much stopped the practice, increasing the revenue-linked commission rates instead.

Small Amount Short Term Insurance (10.2% of FY09/10 sales; Gross profit of 181 million yen)

In the Small Amount Short Term Insurance segment, the company provides insurance covering repair expenses for mobile phones, as well as movable insurance under the “Residence Room Insurance α” service brand. Items insured in the movable insurance include apartment contents, items damaged due to fire or water, and theft (to a maximum of 10 million yen). Policies are priced between 15,000 and 27,000 yen and typically last for two years (matching the typical apartment lease).

Car Chintai Business and others (1 million yen operating profit in FY09/10, 0.4% of FY09/10 sales)

The company started a new business during FY09/10, Car Chintai (long-term car rental).

Car Chintai & Others(3.5% of FY09/10 sales; Gross profit of 157 million yen)

The company started this new business in FY09/10. This service enables customers to rent cars for long periods, much as if they owned the vehicle, by simply paying a fixed monthly usage fee and covering the costs of voluntary insurance and gasoline.

Basic Flow

• Customers select a specific car model.
• JBR buys the vehicle through the dealer auction system.
• JBR reconditions the car using an affiliate company, Dr. Paint.
• The customer rents the car for 6 months to 2 years; the car is owned by JBR subsidiary.
• The customer returns the car to the company
• At the end of the reconditioned car’s useful life, JBR sells the car through the dealer auction network

Business Model

Japan Best Rescue’s core business is operating a call center for service calls. The company earns recurring fees from memberships, and commissions from non-member service calls. The biggest driver of revenues and earnings is volume: The company earns revenues from non-membership services and customer membership services. For non-membership services the revenues and costs are in linear relationship (provide the service – get paid); for membership service costs, the variable costs fluctuates depending on the number of dispatches (receives membership fees – and then provide services if called upon). The fixed cost of the business is overhead and call center costs. The advertising expenses are currently primarily a variable cost associated with non-membership businesses.

Source:Company Data Processed by SR Inc.

Revenues in the Call Center Business are commissions on service. Customers pay the person who performs the work (either a Cooperating or Member Shop),who in turn pays a commission to JBR (25%-30% depending on the service and contract relationship; as of FY09/11).

In the Membership segment, members make up-front payments to the company and receive service when needed either for free or discounted prices. The company recognizes the upfront payment as revenue (minus a commission if necessary), and costs are incurred when service is used (payment to Member or Cooperating Shops).

Operations in the Corporate Tie-ups Business are the same as the Call Center Business – customers call for service, and the company dispatches either a Member shop or a cooperating shop specialist. Standard prices are set for the most typical services: 19,400 yen for the replacement of a standard glass pane, and 11,550 yen for the removal of bathroom blockages (FY09/11). Prices for Secom Win services vary, a result of the non-standard nature of the work (prices differ for materials, and labor costs are dependent on the size and complexity of the work).

Cost Structure

The largest costs in the company’s business model are SG&A, dominated by labor and advertising expenses (averaged 35.8% of SG&A from FY09/04 through FY09/11). Advertising costs are variable, and labor costs are fixed.

JBR has historically advertised mostly in Townpages (the Japanese telephone directory), but since FY09/09 has begun advertising through both web and mobile platforms. Approximately 1.4 billion yen of FY09/11 sales were from web and mobile sources.

Full time employees mostly perform sales, operations management, and also manage call center operators. Outsourced labor costs (either Cooperating or Member Shops) represent costs of sales and are variable.

Profitability Snapshot, Financial Ratios

The company’s business has been characterized by relatively volatile operating profit margins, reflecting the company’s growth into new businesses. Operating profit margin for the company has averaged 6.9% from FY09/03 through FY09/11, within a wide range between 1.7% (FY09/03) and 9.7% (FY09/07).

Ratio analysis is most useful when comparing firms that have similar business models and accounting treatments. JBR’s business is relatively unique, and the fact that different accounting treatments are used for similar businesses (Call Center and Corporate Tie-Ups, see Income Statement discussion of sales) complicates finding suitable peers for ratio comparison.

Strengths, Weaknesses

Strengths:

• Strong financial position. TSE1 Listing. JBR has a substantial cash position (5.6 billion yen as of end FY09/11), and is listed on the 1st Section of TSE. This is a powerful weapon in competition against unlisted rivals and the myriad of small businesses offering similar services. In a nutshell, it comes down to branding capabilities as well as corporate strength to provide consistent quality services 24/7.
• Ability to leverage the single fixed cost base (call centers) to provide a variety of services to customers.

Weaknesses:

• Current inability to leverage a single brand identity. This weakness is highlighted by the low repeat customer ratio (under 10% as of end FY09/11). The lack of a clear identity creates a competitive weakness because competitors only have to compete with the individual service name in the market, instead of a larger JBR brand image. The company also faces relatively higher advertising spending to support the multiple service names.
• Reliance on Cooperating Shops for store network. Cooperating Shops are a large portion of the company’s service network (69.0% FY09/11). Unlike Member Shops, Cooperating Shops only have a relative loose contractual relationship with the company. JBR’s is a customer service business and reliance on Cooperating Shops introduces quality control, branding, and potentially reputational problems that competitors with directly managed store networks and/or employees would not share.

Group Companies

There were three fully-owned consolidated subsidiaries and five equity method holdings in the group as of end October 2011.

Consolidated subsidiaries (ownership amounts at the end of October 2011) include:

• JBR Leasing (100.0%) – subsidiary responsible for leasing of the vehicles in the Car Chintai segment.
• Japan Small Amount and Short Term Insurance Co.,Ltd. (100.0%) – insurance company that is mainly engaged in selling mobile phone insurance (sold through the Life Depot subsidiary) and movable insurance.
• Life Depot (51.0%) – a joint venture with Hikari Tsushin, established to sell mobile phone insurance (provided by Japan Insurance Co .,Ltd subsidiary).

Equity method holdings include (ownership amounts at the end of October 2011):

• Japan Lock Rescue Service (36.6%) – provides locksmith services.
• House Doctor (40.0%) – small home renovations and roof repair.
• Aquambulance (40.0%) –joint venture with INAX, provides light plumbing services.
• BAC (32.7%) – company that forms the core of the glass repair business in cooperation with Asahi Glass, performs window and glass replacement services. Operates under the service name “Asahi Glass’ Glass Ambulance”.
• Secom Win (33.3%) – a joint venture with security company Secom, installs Secom security glass.

Group Strategy

JBR’s business fits well within a group structure. The core operations of the business are essentially call center operations, and the group companies are used as vehicles to provide sell different service packages to consumers.

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Market & Value Chain

Market Overview

JBR suggests that the market size for all of the services it provides is at least 15 billion yen, however given the fact that the company’s main competitor, Qracian, generates revenues of approximately 8 billion yen per year, the total market size could exceed the company’s estimates.

Membership Business – No Worries Residence Support

No Worries Residence Support packages are marketed predominantly to apartment renters and corporations that manage rental properties. The company estimates that the total market size for the No Worries Residence Support package is approximately 3 million households per year.

Market Growth

The Japanese traditionally relied on a neighborhood handyman, called “benriya” to help in small emergencies. The changing shape of the Japanese demographic and residential landscape in the recent years probably means that the market needs for organized services like those provided by JBR can only grow. Traditionally, the benriya would open their business on local shopping streets. In recent years the “shutter street” problem became acute. Businesses in shopping streets are forced to close (owner’s old age, inability to compete with chain retailers), driving customers away to large scale suburban shopping malls and undermining few remaining retailers and service providers, including the benriya handymen. At the same time, the increasing number of people living alone (the number of households continues to grow well after the population starts to decline) means higher demand.

Customers

The company’s customers are generally constrained by the urgency and availability factors. They want the service ‘now’ be it day or night. That makes them price-takers, unlikely to shop around for the lowest bid. JBR admits to charging 20-30% more for its services that what is available from local independent handymen. However, it also solves problems quickly and anytime, using a trustworthy professional.

The customers who are members of a package services provided through 3rd parties (e.g. rental condo management companies) pay a fixed fee to JBR and are unlikely to comparison-shop. In the case of No Worries Residence Support for instance, the realty brokers who have the contract with JBR would recommend to new tenants to apply for the service when signing a new lease.

Suppliers

The main suppliers to the company’s business are the Member and Cooperating Shops – the company uses labor from both Member and Cooperating Shops to fill service requests. The relationship between the company and the Member and Cooperating Shops is mutually beneficial: JBR provides the shops with work, and the shops pay a commission to the company. The relationship is straightforward and interdependent. In the future, as the JBR brand gets stronger, the company should have more leverage over its labor suppliers.

Barriers to Entry

In terms of individual local markets, the barriers to entry are limited, the smallest competitive unit being a handyman himself putting an ad in Townpages. To start a wide territorial or nationwide network however, would arguably require the capital and time similar to what JBR already spent on the business, giving the company a first-mover advantage.

Competition

JBR’s largest competitor is Qracian (unlisted), the largest plumbing related emergency maintenance services company in Japan. JBR estimates that Qracian’s sales during FY09/10 were approximately 8 billion yen. Other competitors include local maintenance and repair shops located throughout the country.

Substitutes

Substitutes for the services that the company provides are limited. For lock replacements for instance, there are no alternatives to calling a locksmith. The same is true for glass replacement and plumbing – both services require technical expertise and specialized tools.

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Strategy

From discussions with the company, it seems that the competitive strategy followed by the company has been to go after opportunities as they have been discovered and the management resources were available. The company has added services using the simple criteria of “if it satisfies customers and makes money, it is worth starting”. Such an approach has served the company well: sales have grown approximately 38x from FY09/00 through FY09/11.

One issue which has faced the company throughout its growth has been branding. The growth hasn’t yet addressed the issue of creating a brand image that can be used to market to all of the company’s customers. This becomes obvious when considering the multiple service names that the company uses: Key Doctor, Aquambulance, etc. The service names are effective in communicating the product to potential consumers, but the lack of a single brand identity across all of the services seems to be an ignored opportunity in the company’s marketing efforts.

A distinction needs to be drawn between the company’s advertising efforts and its marketing message. The company has been successful drawing in customers using various internet-based and traditional media campaigns. The company suggests that the repeat customer ratio is relatively low, which supports the view that customer awareness of the company and its services is either forgotten quickly or not properly established.

It could be argued that although the company has been successful in various advertising efforts, a unifying brand image that can increase the repeat customer ratio through raising consumer awareness has been missing from the company’s strategy.

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Historical Financial Statements

Summary

Earnings Results Discussion for the Year Preceding Current Fiscal Year (For Reference Purposes)

FY09/10 Results

JBR released FY09/10 results on November 10, 2010. FY09/10 results were in line with the company’s revised estimate announced on November 8. Sales increased YoY in all of the main segments except the Member Shop business. Sales, operating profit, recurring profit, and net income were all record highs.

Sales were up 22.4% YoY. In the Call Center Business, sales continued to increase steadily on growth in lock replacement services. Sales in the Membership Business segment were helped by a new partnership with a nationwide real estate agency which increased Daily Necessities memberships. Motorcycle Membership revenues managed to increase YoY despite stagnant growth in the industry. The Corporate Tie-Ups Business segment performed well, driven by sales growth of Aquambulance (thanks to improved effectiveness of online advertising). Sales of Asahi Glass’ Glass Ambulance grew 3.9% YoY; the company identified a tough economy and intensified competition as the reasons behind relatively slower recovery compared to other services.

Operating profit increased 236 million yen YoY to 541 million yen. Factors affecting profit included increased costs for advertising (188 million yen), labor (71 million yen), and other SG&A expenses (170 million yen). However, the 664 million yen increase in gross profit compensated for higher costs. Part of the increase in advertising expenses included more spending on Internet ads (91 million yen); sales from the channel grew by 522 million yen in FY09/10.

The FY09/10 business overview is shown below.

Sales in the Call Center Business segment were 708 million yen (+21.1% YoY). Operating profit for the segment was 340 million yen (+38.2% YoY). Operating profit margin was 47.9%. The main components of sales were as follows:

• Lock replacement service: 385 million yen (+37.6% YoY)
• Computer-related sales: 98 million yen (+22.4% YoY)

Sales in the Membership Business segment were 2.4 billion yen (+16.6% YoY). Operating profit was 395 million yen (+2.4% YoY). Operating profit margin was 16.6%. The breakdown of sales was as follows:

• Motorcycle membership: 1.2 billion yen (+7.5% YoY). Honda OEM memberships were 357 million yen (-1.2% YoY), Motorcycle Anshin memberships were 544 million yen (+22.6% YoY). The company reported 128,000 new memberships during FY09/10.
• Daily Necessities membership: 1.2 billion yen (+26.9% YoY). No Worries Residence Support sales were 941 million yen (+23.2% YoY), Student Dial 110 sales were 104 million yen (+3.0% YoY). The company reported 167,000 new memberships during FY09/10.

Sales in the Corporate Tie-Ups segment were 3.5 billion yen (+37.5% YoY). Operating profit was 386 million yen (+141.7% YoY). Operating profit margin was 11.1%. The breakdown of the sales in the segment:

• Aquambulance: 1.7 billion yen (+37.5% YoY)
• Asahi Glass’ Glass Ambulance: 796 million yen (+3.9% YoY)
• Consigned Call Center Operations: 846 million yen (+10.1% YoY). The company said that the number of corporate clients using the service was 158.

Sales in the Member Shop segment were 186 million yen (-4.0% YoY). Operating profit was a negative (loss) 514 million yen (compared to a loss of 365 million yen in FY09/09). The loss for this segment increased following aggressive advertising spending that the company started in FY09/10. (See Business Description discussion for detail)

The total shop network was 1,338 at Q4 end: 449 Member Shops, 889 Cooperating Shops.

Sales in the Small Amount Short Term Insurance segment were 572 million yen (+248.8% YoY). Operating profit was 143 million yen (+128.7% YoY). Operating profit margin was 25.0%.

Sales in the Car Chintai Business and Others were 28 million yen (+498.9% YoY). Operating profit was 1 million yen, and operating profit margin was 6.8%.

Q3 FY09/10 Results

JBR released Q3 FY09/10 results on August 10, 2010. As a percentage of the full year company forecast, the cumulative Q3 numbers were as follows:

• Sales: 74.1% (vs. full year forecast of 6.8 billion yen )
• Operating profit: 78.7% (vs. full year forecast of 528 million yen)
• Recurring profit: 81.7% (vs. full year forecast of 500 million yen)
• Net income: 95.0% ( vs. full year forecast of 326 million yen)

Sales increased YoY in every segment except the Member Shop business. Performance in the Corporate Tie-ups Business increased due to sales growth of Aquambulance, helped by improving effectiveness of web advertising - more potential customers became customers. In the Membership Business segment, No Worries Residence Support membership grew. The Member Shop segment posted an operating loss due to lower sales (commissions declined YoY) and higher advertising expenses.

There was no change to full year estimates. The company seems confident that it will achieve its full year earnings forecast.

According to the company, well-performing business segments and the reasons for their performance were as follows:

• Lock replacement service in the Call Center Business segment: The company is building up its network by increasing the number of Member and Cooperating Shops. The objective of building up the network is to reduce the number of cases in which an incoming call from a customer is cancelled because rapid service cannot be provided. The company suggests that previously such cases accounted for 15% of reasons for cancellation.
• Daily Necessities Membership in the Membership Business segment: Helped by a new partnership with a nationwide real estate agency. Also, the company increased the number of sales staff to secure Daily Necessities members and boosted sales activities aimed at universities to secure student members (the number of universities offering memberships already exceeds 100).
• Aquambulance in the Corporate Tie-ups Business segment: Web advertising has been effective. Aquambulance provides service more rapidly than the Asahi Glass’ Glass Ambulance, so the company’s network has helped the business.
• Small Amount Short Term Insurance segment: In addition to healthy growth in “New Residence Room Insurance”, the Life Support Pack, first offered in FY09/09, showed remarkable growth in FY09/10 (number of members: 260,000).

Business segments that the company suggests are struggling and the background reasons were as follows:

• Motorcycle Membership in the Membership Business segment: Increase in revenue; however gross profits decreased about 1.4% YoY due to an increase in road service dispatch costs which are included in the COGS for Motorcycle Membership.
• Asahi Glass’ Glass Ambulance in the Corporate Tie-ups Business segment: As well as being affected by the economic downturn due to the high price of security glass, competition has intensified (with building firms, for example).

Additionally, the company predicted that in the Car Chintai Business, started in Q2 FY09/10, there would be 120 units in operation at the end of FY09/10. The average unit cost for FY09/10 will be approximately 72,000 yen, sales will be 50 million yen, and the operating profit margin will be 15%. The company aims to have about 720 units in operation by the end of FY09/11.

The Q3 FY09/10 business overview is shown below.

Sales in the Call Center Business segment were 514 million yen (+30.0% YoY). Operating profit for the segment was 251 million yen (+55.8% YoY). Operating profit margin was 48.8%. The main components of sales were as follows:

• Lock replacement service: 281 million yen (+50.3% YoY)
• Computer-related sales: 72 million yen (+26.4% YoY)

Sales in the Membership Business segment were 1.8 billion yen (+15.8% YoY). Operating profit was 288 million yen (-8.1% YoY). Operating profit margin was 16.4%. The breakdown of sales wase as follows:

• Motorcycle membership: 811 million yen (+3.6% YoY). Honda OEM memberships were 255 million yen (-2.8% YoY), Motorcycle Anshin memberships were 381 million yen (+21.2% YoY). The company reported 121,000 new memberships (31,000 renewals, 89,000 new members) during the quarter.
• Daily Necessities membership: 943 million yen (+30.5% YoY). No Worries Residence Support sales were 745 million yen (+25.1% YoY), Student Dial 110 sales were 79 million yen (+3.9% YoY). The company reported 158,000 new memberships (20,000 renewals, 138,000 new members) during the quarter.

Sales in the Corporate Tie-Ups segment were 2.6 billion yen (+15.4% YoY). Operating profit was 299 million yen (+142.8% YoY). Operating profit margin was 11.5%. Sales growth was due to successful Internet advertising campaigns and increased demand. The breakdown of the sales in the segment:

Aquambulance: 1.3 billion yen (+42.2% YoY)

Asahi Glass’ Glass Ambulance: 606 million yen (+3.9% YoY)

Consigned Call Center Operations: 612 million yen (+6.3% YoY). The company indicated that the number of corporate clients using the service was 151.

Sales in the Member Shop segment were 132 million yen (-18.9% YoY). Operating profit was negative (loss) 409 million yen (compared to a loss of 214 million yen in Q3 FY09/09).

The total shop network was 1,318 at Q3 end: 451 Member Shops, 867 Cooperating Shops.

Sales in the Small Amount Short Term Insurance segment were 414 million yen (+346.8% YoY). Operating profit was 142 million yen (+349.7% YoY). Operating profit margin was 34.3%.

Q2 FY09/10 Results

JBR released Q2 FY09/10 results on May 11, 2010. As a percentage of the full year company forecast, the cumulative Q2 numbers were as follows:

• Sales: 49.1% (vs. full year forecast of 6.8 billion yen )
• Operating profit: 52.5% (vs. full year forecast of 528 million yen)
• Recurring profit: 55.9% (vs. full year forecast of 500 million yen)
• Net income: 64.9% ( vs. full year forecast of 326 million yen)

Sales for each main segment were up YoY, with total 1H progress ahead of budget (see table above). Operating profit for 1H was above budget mainly due to sales in the Corporate Tie-ups segment (OPM for the segment was 11.8% vs. 6.0% in 1H FY09/09) discussed below.

There was no change relative to the forecast revised on April 27, 2010. The company appears to be confident that it will at least clear FY09/10 estimates. It added that Q3 was off to a good start.

Sales in the Call Center Business segment were slightly weaker than expected (335 vs. 377 million yen budget), however the company indicated that sales momentum had been getting better in Q3. Locksmith services were strong contributors to the segment – increased advertising in telephone directories made positive impact; PC service grew as well.

Sales in the Membership Business segment were up YoY and vs. plan. Daily Necessities sales were strong due in part to the contribution of a new partner, a nationwide real estate agency. Total membership for Daily Necessities was approximately 103,000; new members added rose to 88,000 vs. 77,000 in 1H FY09/09. Total Motorcycle Membership was 67,000; new membership additions were stable YoY.

Sales from the Corporate Tie-ups Business segment were above internal budget, mainly due to better than expected sales of Aquambulance (up 45.5% YoY). Here, the internet advertising proved to be increasingly effective. Other sales results: Consigned Call Center Operations +7.7% YoY; Asahi Glass’ Glass Ambulance +4.7% YoY; SECOM Win -46.5% YoY.

Sales in Small Amount Short Term Insurance segment were slightly beneath the internal budget, but up strongly YoY. According to the company, it appears possible that 20,000 contracts could be reached by year end vs. initial estimates of 15,000.

Sales of Life Support Pack, mobile phone insurance service offered through Hikari Tsushin exhibited strong growth, with the number of members reaching 200,000 (JBR is hoping to get in excess of 400,000 by September end – this would be very positive for the overall earnings). In this service, if a customer loses her phone and it gets used by someone, or if the phone is broken, the customer gets paid 5,000 yen. Discounts of 10% to 30% on standard JBR services are also a part of the package. The customer pays 300 yen monthly premium which is split between Hikari Tsushin and JBR group companies. JBR points out that the incidence of insured events is low.

New Business

JBR started a new business during the quarter, Car Chintai (long-term car rental).

Basic Flow

• Customers select a specific car model.
• JBR buys the vehicle through the dealer auction system.
• JBR reconditions the car using an affiliate company, Dr. Paint.
• The customer rents the car for 6 months to 2 years; the car is owned by JBR subsidiary.
• The customer returns the car to the company
• At the end of the reconditioned car’s useful life, JBR sells the car through the dealer auction network

Rationale

Tougher laws (revisions of the Installment Sales Law) have meant that obtaining leases has become more difficult, and car loans have become more expensive. JBR can use its strong balance sheet to secure funding, and the liquidity of the dealer auction network means that inventory risk should be low.

Company assumptions:

Average rental contract term: 6 months (initial 2 month deposit)

Average monthly contract price: 80,000 yen

Years in JBR ownership per vehicle: 2 years (50% book value after 2 years)

Operating profit margin assumption: 15%

The company targets 200 contracts for the full year, and estimates that it could potentially reach up to 3,000. It appears that the business could add 450-500 million yen of sales for FY09/11 (67-75 million yen of OP). Considering the relatively high operating profit margins as discussed above, this could have a meaningful impact on overall earnings.

Q1 FY09/10 Results

JBR released Q1 FY09/10 results on February 10, 2010. As a percentage of the 1H company forecast, the Q1 numbers were as follows:

• Sales: 51.7% (vs. 1H forecast of 3.1bn yen )
• Operating profit: 50.5% (vs. 1H forecast of 192 million yen)
• Recurring profit: 60.3% (vs. 1H forecast of 166 million yen)
• Net income: 86.9% ( vs. 1H forecast of 86 million yen)

Q1 consolidated operating profit was 97 million yen (-8.0% YoY). The YoY decline was due to increased SG&A expenses of approximately 184 million yen (+37.9% YoY to 670 million yen). Advertising expenses were the largest contributor to the increase in SG&A expenses (100 million yen increase for Townpages, 25 million yen for Internet media). The advertising campaign was started in Q2 FY09/09, so YoY comparisons are affected.

There were no changes to the FY09/10 earnings forecasts.

Sales in the Call Center Business segment were 173 million yen (+62.3% YoY). Operating profit for the segment was 90 million yen (+83.5% YoY). Operating profit margin was 52.0%. The main components of sales were as follows:

• Lock replacement service: 92 million yen (+130.7% YoY)
• Computer-related sales: 25 million yen (+29.8% YoY)

Sales in the Membership Business segment were 496 million yen (+17.2% YoY). Operating profit was 63 million yen (-13.5% YoY). Operating profit margin was 12.8%. The breakdown of sales was as follows:

• Motorcycle membership: 256 million yen (+10.2% YoY). Honda OEM memberships were 75 million yen (-2.6% YoY), Motorcycle Anshin memberships were 118 million yen (+26.7% YoY). The company reported 33,000 new memberships (12,000 renewals, 21,000 new members) during the quarter.
• Daily Necessities membership: 238 million yen (+27.1% YoY). No Worries Residence Support sales were 184 million yen (+21.9% YoY), Student Dial 110 sales were 26 million yen (+4.5% YoY). The company reported 34,000 new memberships (4,000 renewals, 29,000 new members) during the quarter.

Sales in the Corporate Tie-Ups segment were 906 million yen (+18.2% YoY). Operating profit was 101 million yen (+212.6% YoY). Operating profit margin was 11.2%. Sales growth was due to successful Internet advertising campaigns and increased demand. The breakdown of the sales in the segment:

Aquambulance – 456 million yen (+42.5% YoY)

Asahi Glass’ Glass Ambulance – 216 million yen (+2.5% YoY)

Consigned Call Center Operations — 204 million yen (+9.7% YoY). The company indicated that the number of corporate clients using the service was 146 (+12 from Q4 FY09/09).

Sales in the Member Shop segment were 42 million yen (-47.1% YoY). Operating profit was negative (loss) 157 million yen (compared to a loss of 22 million yen in Q1 FY09/09). The loss for this segment expanded due to aggressive advertising that the company commenced in 2009. (See discussion in Business Description)

The total shop network was 1,269 at Q1 end: 447 Member Shops, 822 Cooperating Shops.

Sales in the Small Amount Short Term Insurance segment were 98 million yen (+336.3% YoY). Operating profit was 45 million yen (+278.0% YoY). Operating profit margin was 46.3%. The company indicated that sales growth was significantly impacted by demand for insurance covering repair expenses for mobile phones, as well as “Residence Room Insurance α” movable insurance service (commenting that performance was “remarkable”).

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Income Statement

The company’s sales have been on an increasing YoY trend since FY09/00 through FY09/11. There was only one year of YoY decline (FY09/08, due to slow sales of Secom Win and weakness in the real estate market effecting sales of Daily Necessities memberships).

The largest contributing segment to total sales from FY09/04 through FY09/11 has been Corporate Tie-Ups Business. One reason for this effect is the accounting treatment of revenues earned in the segment. JBR recognizes the total amount of a service call for Corporate Tie-Ups Business on a gross basis. Services provided through the Corporate Tie-Ups Business segment are the same as those in the Call Center segment, however revenues recognized for Call Center business are commissions received from the Cooperating or Member Shops that perform the work.

Historical Performance vs. Initial Estimates

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Balance Sheet

The company’s balance sheet has expanded approximately 17.8x from FY09/03 through FY09/11. While the company raised cash in the IPO and generally enjoyed positive cash flows, the level of relative indebtedness increased from FY09/08. This was due to increase advertising spending and equity investments (“only limited to companies where business synergies can be expected”, comments the company).

The balance sheet has been highly liquid; the balance sheet has been net cash (total interest bearing debt minus cash and equivalents) from FY09/03 through FY09/11. The quick ratio (the ratio of cash and accounts receivable to total current liabilities) has averaged 149.1% from FY09/04 through FY09/10.

Assets

Cash and equivalents represent the largest asset category on the company’s balance sheet. The company is a service business which requires minimal capital expenditures, and the company has a negligible amount of inventory.

Long term assets are mostly investment securities.

Liabilities

The company’s liabilities mix has historically been defined by a greater amount of short term liabilities than long term.

The value of yet unused membership services are reflected on the balance sheet in Member Allowance and Unearned Income liabilities on the balance sheet.

Shareholders’ Equity

Changes in shareholders’ equity have been mostly due to net income (or loss) minus dividends paid. The company conducted some buybacks in FY09/10.

The company’s shares were split 4 times: 5-for-1 in 2004, 3-for-1 in 2005, 2-for-1 in 2006, and again 2-for-1 in 2007.

The company has maintained a dividend payout strategy based on stability of the dividend payment, as opposed to a specific payout rate of yearly earnings.

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Cash Flow Statement

Cash Flow from Operations

CFOs have been positive during the period under review with the exception of FY09/04 (the company used cash to reduce accounts payable). The largest component of CFO has typically been net income, reflecting a relatively small amount of non-cash expenses. The company’s use of cash has become more efficient as measured by the cash conversion cycle – from 40.8 days in FY09/03 to a negative 4.8 days in FY09/11.

Cash Flow from Investment (CFI)

Mostly intangible assets (e.g. software) and securities purchases. Relatively large outflows between FY09/06 and FY09/08 were due to securities purchases averaging 482 million yen per year.

Cash Flow from Financing (CFF)

Notable items are the IPO proceeds (FY09/04) and funds from a subsequent equity financing (FY09/07). The company has also used debt financing, 900 million yen in FY09/08 and 600 million yen in FY09/09.

The simple free cash flows (the sum of net income and capital expenditures, minus working capital changes) have been volatile from FY09/03 through FY09/10, driven predominantly by the rise and fall of net income. The negative simple free cash flow in FY09/09 was due to the net loss for the period as well as a higher level of capital expenditures than previous periods.

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Other Information

History

JBR was born out of personal need. The company’s founder, Nobuhiro Sakakibara had an experience in his college days when he helped a person whose bike broke down. Later, when he started working and was commuting on a scooter, Sakakibara would often work later than motorcycle shops were open, and often could not find help with his scooter when he needed some. Clearly, other motorcycle and scooter riders were facing similar problems but there no services offered to bikers similar to JAF (Japan Automobile Federation, an automobile service membership).

Sakakibara established Japan Motorcycle Road Service Corp., the predecessor of JBR, in 1997 to connect motorcycle riders in distress with motorcycle mechanics. He built the business from the ground up travelling across the country visiting all of the motorcycle shops to get them to use the company’s service. The concept was relatively novel at the time. The motorcycle service market was characterized by a large number of shops, but any degree of organization was generally lacking. Japan Motorcycle Road Service was an attempt to provide consumers with technical emergency help when and where they needed it.

In 1999 the company began adding other services. Sakakibara realized that the motorcycle business was highly cyclical – most riders kept their motorcycles off the road during in winter. Sakakibara started offering a lock replacement services to general consumer and followed with adding new service types that reach approximately 20 in 2010. The company name was changed to Japan Best Rescue Corporation in 1999.

The company began corporate tie-ups to boost growth by capitalizing on well recognized brands, launching the Asahi Glass’ Glass Ambulance, a glass replacement and repair service using Asahi Glass’ products, in 2002. In 2004 this was followed by SECOM Win, a joint venture with security company SECOM, and Aquambulance, a joint venture with INAX. Tie-ups became a considerable part of the total business -60.6% of FY09/04 revenues.

JBR listed on the Tokyo Stock Exchange (Mothers market) in August 2005, and moved to the first section in September 2007.

The company purchased a small amount short term insurance company in 2008. The acquisition provides a logical enhancement to the company’s membership products, and should become a visible earnings contributor.

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News & Topics

August 2011

On August 10, 2011, JBR released Q3 FY09/11 results: click here to go direct to the Q3 FY09/11 results section.

(For original PDF announcement in Japanese-language only please click here.)

May 2011

On May 12, 2011, the company released Q2 (1H) FY09/11 results.

(For original PDF announcement in Japanese-language only please click here)

March 2011

On March 15, 2011, JBR made an announcement regarding the March 11 Tohoku earthquake.

Damage situation report:

• The company was still assessing the impact on Member Shops in the Tohoku region (northeastern Japan) following the earthquake, some of whom it was unable to contact. Consequently, the company was operating beneath normal levels in those areas.
• It expects to resume normal nationwide services as the situation progresses towards a full recovery.

Impact on financial performance:

The company was still assessing the impact from the earthquake and said it would release details if it became clear that earnings could be impacted.

On March 8, 2011, the company announced that the company would sell JBR Motorcycle’s Membership business and JBR Bike Relations on April 1, 2011. The company announced a revision to 1H and full year FY09/11 forecasts in the same announcement, reflecting the sale. The revised figures were follows:

1H FY09/11 Forecasts

• Sales: 4.0 billion yen (previous forecast: 4.0 billion yen)
• Operating profit: 333 million yen (previous forecast: 312 million yen)
• Recurring profit: 301 million yen (previous forecast: 280 million yen)
• Net income: 134 million yen (previous forecast: 156 million yen)

Full Year FY09/11 Forecasts

• Sales: 7.5 billion yen (previous forecast: 8.2 billion yen)
• Operating profit: 590 million yen (previous forecast: 658 million yen)
• Recurring profit: 530 million yen (previous forecast: 600 million yen)
• Net income: 513 million yen (previous forecast: 325 million yen)

February 2011

On February 14, 2011, the company released Q1 FY09/11 results.

November 2010

On November 10, 2010, the company released FY09/10 results.

On November 8, 2010, the company announced a revision to its FY09/10 forecasts. The revised figures were as follows:

• Sales: 6.8 billion yen (previous forecast: 6.8 billion yen)
• Operating profit: 540 million yen (previous forecast: 528 million yen)
• Recurring profit: 525 million yen (previous forecast: 500 million yen)
• Net income: 302 million yen (previous forecast: 326 million yen)

The company mentioned that the upward revision of operating profit was due to the combination of controlled SG&A costs and costs related to Member Allowance that were less than expected. Net income was revised down slightly due an increased provision for an actuarial liability (reserve for future insurance payment) related to the Small Amount Short Term Insurance business.

August

On August 24, 2010 the company announced an upward revision to its dividend for FY09/10. The revised full year dividend was for 1,500 yen per share (vs. an earlier estimate of 1,000 yen per share). The company’s reason for the revision was that it expects the full year performance target to be achieved.

On the same day, the company announced that it decided to make “Life Depot” (an equity method affiliate, see Group Companies) into a fully-owned subsidiary on October 1, 2010. The company commented that there would be no impact on FY09/10 results, and that it would review how the action might impact their business in the future.

JBR released Q3 results on August 10, 2010.

May

JBR released Q2 (1H) results on May 11, 2010. On the same day, the company also announced that 1H dividend would be 500 yen.

April

JBR announced an upward revision of earnings and dividend forecasts for the cumulative Q2 (1H) and FY09/10 on April 27, 2010. Details of the revision:

Cumulative Q2 (1H) Consolidated:

Sales: 3.3 billion yen (8.7% over the previous forecast of 3.1 billion yen)

Operating income: 251 million yen (30.5% over the previous forecast of 192 million yen)

Recurring income: 261 million yen (57.4% over the previous forecast of 166 million yen)

Net income: 195 million yen (124.4% over the previous forecast of 86 million yen)

FY09/10 Consolidated:

Sales: 6.8 billion yen (+6.5% over the previous forecast of 6.4 billion yen)

Operating income: 528 million yen (-3.2% over the previous forecast of 546 million yen)

Recurring income: 500 million yen (maintained previous forecast of 500 million yen)

Net income: 326 million yen (+12.0% over the previous forecast of 291 million yen)

For 1H estimates, sales in Aquambulance were expected to increase by 283 million (45.6% increase vs. previous forecast) yen due to improved effectiveness of web advertising (Search Engine Optimization and Search Engine Marketing), and performance in the Membership business (increases in No Worries Residence Support and 24/7 Handyman Van membership).

For the full year, sales in Aquambulance are expected to increase by 531 million yen (42.2% increase vs. previous forecast), in part due to results from web advertisement. Daily Necessities memberships in Membership segment are expected to increase by 74 million. Operating profit was revised downward in part due to upfront investments related to the new car and motorcycle rental business.

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Top Management

Nobuhiro Sakaibara, President and founder of the company. Sakakibara is the key person in the company, responsible for setting strategy and corporate direction.

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Employees

At the end of FY09/11, the company employed 150 employees (83 full-time, 67 part-time) on a parent level. The average employee age was 33.2 (working for the company on average for 4.2 years) with an average salary of 4.3 million yen.

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Major Shareholders

The company is effectively controlled by company founder and President, Nobuhiro Sakakibara.

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Dividends and Shareholder Benefits

The company’s shareholder benefit program offers benefits such as a 5,000 yen coupon for shareholders at the end of September usable for the company’s services (lock replacement, glass repair, and light plumbing services) etc.

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Investor Relations

Result meetings are held in Tokyo after the announcement of interim and fiscal year end results.

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By the Way

Source: Company Data Processed by SR Inc.

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