Executive summary

Business overview

JBR provides a nationwide service to handle emergencies. Customers call the company with problems such as a broken window, a leaky faucet, or other odd jobs. JBR dispatches a repairman from its partner stores. JBR offers various services, including lock replacement, glass repair, household insurance for apartments, light plumbing services, pest control, roofing repair, small appliance repair, and garden maintenance.

As of September 2021, the company’s five reporting segments are Urgent Response, Membership, Insurance, Repair, and LifeTech (providing power producer and supplier services through existing partner companies involved primarily in the real estate rental business). These segments produced 9.8%, 51.8%, 34.7%, 2.0%, and 1.7% of sales respectively, and -1.5%, 97.6%, 21.5%, -4.3%, and -13.2% of operating profit in FY09/21. Group companies include the parent company JBR, five subsidiaries (Japan Warranty Support Co., Ltd., Rescue Insurance Co., Ltd., ACTCALL Inc., TSUNAGU Co., Ltd., and Japan Small Amount and Short-Term Insurance Co., Ltd.), and one equity-method affiliate (Japan PC Service Co., Ltd.). In FY09/15, the company had eight reporting segments: Call Center, Membership, Corporate Tie-Ups, Member Shop, Small Amount Short-Term Insurance, Environmental Maintenance (decontamination), Car Leasing, and Others. However, in August 2015, it sold all of its shares in Binos Corp. and effectively exited the Environmental Maintenance business. According to company estimates, its current market share in resolving everyday customer troubles is only about 1%, but JBR has set a target of 10%, and will work to expand and deepen its operations in its main business.

Earnings

FY09/21 results: The company reported full-year consolidated sales of JPY13.5bn (+11.6% YoY) and operating profit of JPY1.4bn (+3.0% YoY), recurring profit of JPY1.7bn (-3.2% YoY), and net income attributable to owners of the parent of JPY57mn (-94.3% YoY). 4Q and full-year sales both marked record highs. The company's gross profit margin declined 3.9pp YoY, to 42.8%, hurt by rising costs including a sharp jump in electricity procurement prices at its PPS business and higher dispatch costs versus low levels last year, when dispatches were curbed amid the pandemic. The SG&A expense margin declined 3.0pp, to 32.3%, leaving the operating profit margin down 0.9pp, at 10.5%.

FY09/22 forecast: For FY09/22, the company is projecting full-year consolidated sales of JPY18.0bn (+33.7% YoY), operating profit of JPY1.7bn (+22.8% YoY), recurring profit of JPY1.9bn (+9.2% YoY), net income of JPY1.2bn (20.1x YoY) and EPS of JPY35.36. Factors contributing to the forecast JPY4.5bn YoY sales increase are the ACTCALL acquisition effect (+JPY3.6bn), existing businesses (+JPY1.2bn), and effect of withdrawal from the PPS business (-JPY300mn). Factors contributing to the forecast JPY322mn YoY operating profit increase are existing businesses (+JPY227mn), effect of withdrawal from the PPS business (+JPY145mn), ACTCALL acquisition effect (+JPY70mn), and ERP expenses (-JPY120mn).

Medium-term business plan: The new medium-term business plan announced by the company runs through FY09/24. Targeting FY09/24 consolidated sales of JPY22.0bn (+63.4% versus JPY13.5bn in FY09/21), the company is looking to establish an earnings structure capable of delivering earnings growth of at least 20% per annum and, in keeping with this goal, is targeting operating profit of JPY2.5bn in FY09/24 (+77.5% versus JPY1.4bn in FY09/21), recurring profit of JPY2.7bn in FY09/24 (+52.2% versus JPY1.7bn in FY09/21), net income of JPY1.8bn in FY09/24 (32.1-fold increase over JPY56mn in FY09/21), and EBITDA of JPY3.2bn in FY09/24 (+92.6% versus JPY1.7bn in FY09/21).

FY09/24 targets for key performance indicators include a member count of 4,604,000 (+37.6% versus 3,347,000bn in FY09/21) and number of insured individuals of 867,000 (+46.2% versus 593,000 in FY09/21).

Strengths and weaknesses

Shared Research views the company’s strengths as its strong financial position and ability to leverage the single fixed cost base (call centers). Weaknesses include an inability to leverage a single brand identity and JBR’s reliance on partner and network stores for its store network. (See the Strengths and weaknesses section.)

Key financial data

Recent updates

JBR to acquire additional shares in Aqualine under capital alliance agreement

On February 10, 2022, Japan Best Rescue System Co., Ltd. announced that it had agreed to form a capital alliance with Aqualine Ltd., (TSE Mothers: 6173). Under the agreement, JBR will acquire enough shares in Aqualine to make it an equity-method affiliate, buying newly issued shares in a private placement.   

Capital alliance background and goals

JBR and Aqualine have built up a close relationship over the years with Aqualine becoming one of JBR's regular partners in its service lineup for general customers — Aqualine's specialty being emergency plumbing services, including fixing plumbing problems in kitchens, toilets, bathrooms, washrooms, and even water intake and drainage pipes. 

For its part, JBR notes that while it has done a good job of expanding its service menu over the years and now provides a wide range of trouble-shooting services, and has also made steady progress towards improving both its service quality and operational efficiency, that it has not enjoyed the same success on the marketing front. More specifically, JBR acknowledged that the increasing diverse lifestyles of consumers has left it struggling to attract new customers whether it be through the internet or traditional media channels such as Townpages (Japan's version of the Yellow Pages). 

In contrast, Aqualine has enjoyed much more success on the marketing front, thanks in large part to its acquisition of EPARK Kurashi no Rescue, Inc. and the online customer drawing power of its  EPARK Kurashi no Rescue and Local Place websites. Aquiline is struggling in other areas, though, particularly when it comes to building out its operational infrastructure, improving service quality, and improving operational efficiency, and it understands that its weaknesses in these areas have been holding back growth, this despite its position as one of the leading companies in the emergency plumbing services industry and expectations of rapid growth in the future. Further compounding its situation, in August last year Aqualine was hit with an administrative improvement order by the Japanese government and is now required to make substantial improvements to its management structure, particularly in the areas of regulatory compliance oversight and corporate governance.    

Given their respective strengths and weakness, JBR and Aqualine agreed that they seemed like a good match for working together under a capital and business alliance that, with Aqualine assuming the status of an equity-method affiliate of JBR, should ultimately lead to further increases in the enterprise value of both companies over the medium to long term. JBR, for its part, has long been working to strengthen its corporate governance, improve service quality, and boost operational efficiency, putting it in a good position to monitor the progress of Aqualine as its works to rebuild its management and oversight structure as required under the administrative order. At the same time, JBR expects to benefit from Aqualine's strength on the marketing front and, by combining that with its own high levels of service quality and operational efficiency, plans to work together with Aqualine to overcome obstacles to growth at both companies. 

Overview of capital alliance

Under the terms of the capital alliance between the two companies, JBR will increase its ownership stake in Aqualine from 9.09% (181,400 shares) to 23.62% (504,400 shares). The additional shares are to be acquired by JBR via a combination of (1) a direct purchase of some of the shares held by Takeshi Okochi, Aqualine's president and largest shareholder; and (2) the purchase of newly issued Aqualine shares via a private placement, all of which will go to JBR. The specifics of the private placement of new shares are shown below. The direct purchase of shares from Okochi will be made on the same date as the private placement, February 28, 2022.

Outline of private placement of newly issued Aqualine shares with JBR

• No. of shares to be underwritten by JBR: 140,000 shares of Aqualine common stock
• Price per share:                                  JPY507 per share
• Total amount paid by JBR:                     JPY70,980,000
• Payment date (scheduled):                   February 28, 2022

Funding, impact on consolidated results

JBR intends to draw upon internal resources to fund the roughly JPY164mn needed to purchase both the newly issued shares and the shares it has agreed to purchase from Aqualine's president. At this time, the capital alliance with Aqualine is expected to have only a modest impact on JBR's consolidated results for FY09/22, but the company has promised to follow up with timely updates should this or any other matter require disclosure.

Trends and outlook

Quarterly trends and results

1H FY09/22 results (out May 6, 2022)

Results summary

1H FY09/22 results

The company booked consolidated sales of JPY8.8bn (+32.7% YoY), operating profit of JPY738mn (+9.8% YoY), recurring profit of JPY696mn (-14.6% YoY), and net income attributable to owners of the parent of JPY519mn (-4.2% YoY). Note: The company adopted the Accounting Standard for Revenue Recognition from Q1 FY09/22. This either pushed up or down sales, cost of sales, SG&A expenses, operating profit, recurring profit, and pretax profit. In addition, the company adjusted its reporting segments, merging the Repair business into the Membership Segment and turning business related to warranty extensions for home appliances, previously part of the Membership segment, into the Warranty segment.

Progress versus forecast

Progress versus the full-year FY09/22 forecast was 48.9% for sales, 42.7% for operating profit, 36.6% for recurring profit, and 43.2% for net income attributable to owners of the parent.

Sales 

Sales were JPY8.8bn (+32.7% YoY). In addition to steady growth at existing businesses, the Membership business benefited from the acquisition of ACTCALL group, posting sales of JPY4.9bn (+73.0% YoY). The Insurance business benefited from the acquisition of insured individuals, for sales of JPY2.6bn (+7.3% YoY). The sales weighting of these two mainstay businesses, together with the Warranty business, rose by 6.6pp YoY to 94.5%. With an increased weighting of recurring revenue businesses, the business portfolio is more stable.

At end-Q2, member count was 3,569,000 (+37.2% YoY). This broke down to 1,100,000 apartment dwellers (included under services for resolving everyday problems; +14.1% YoY), 640,000 from the old ACTCALL group (not yet acquired in Q2 FY09/21), 316,000 university students (-0.6% YoY), and 272,000 others (-3.5% YoY). Warranty extension member count stood at 1,239,000 (+19.6% YoY).

At end-Q2, the number of insured persons was 606,000 (+5.6% YoY). This broke down to household insurance, 272,000 (+13.3% YoY); sports injury insurance 222,000 (-8.3% YoY); smartphone repair insurance, 63,000 (+37.0% YoY); and other, 48,000 (+9.1% YoY).

Operating profit 

1H operating profit was JPY738mn (+9.8% YoY). The gross profit margin rose 0.7pp YoY to 42.8%, the SG&A expense ratio was up 2.5pp YoY to 34.5%, and OPM fell 1.7pp YoY to 8.4%. Sales growth outweighed the negative factors and operating profit increased YoY. Noteworthy contributors to operating profit growth were the acquisition of the ACTCALL group under business development and withdrawal from the LifeTech business. At the segment level, the Membership business posted operating profit of JPY466mn (-7.0% YoY), the Insurance business posted operating profit of JPY188mn (-7.5% YoY), and the Warranty business posted operating profit of JPY269mn (+8.2% YoY).

Recurring profit 

1H recurring profit was JPY696mn (-14.6% YoY). While operating profit grew as mentioned, non-operating income (including gains on the sale of investment securities) declined YoY and non-operating expenses (including valuation loss on derivatives) increased YoY.

Quarterly net income attributable to owners of the parent

Net income attributable to owners of the parent was JPY519mn (-4.2% YoY). There was no extraordinary gain or loss that had a significant impact on 1H results.

Results by segment

Membership segment

Sales: JPY4.9bn (+73.0% YoY)
Operating profit: JPY466mn (-7.0% YoY)

Sales increased YoY on steady growth in member count for the mainstay QR Service for New Tenant, and the acquisition of the ACTCALL group also contributed. However, operating profit declined YoY due to the burden of amortization and other factors.

At end-Q2, member count was 3,569,000 (+37.2% YoY), including 640,000 that the ACTCALL group, which the company acquired in FY09/21, brought with it. The number of mainstay QR Service for New Tenant members reached 1,100,000 (+14.1% YoY).

Warranty segment

Sales: JPY700mn (+14.9% YoY)
Operating profit: JPY269mn (+8.2% YoY)

Sales and operating profit both rose YoY due to the successful expansion of sales channels for warranty extensions for home appliances (member count increased 19.6% YoY to 1,239,000).

Insurance segment

Sales: JPY2.6bn (+7.3% YoY)
Operating profit: JPY188mn (-7.5% YoY)

Sales grew YoY on strong growth in the number of contracts for mainstay household insurance for apartments and contributions from Smartphone Insurance and Sports Club Accident Insurance.

The number of insured individuals at end-Q2 was 606,000 (+5.6% YoY), of which the number of individuals with mainstay household insurance for apartments contracts rose 13.3% YoY to 272,000, while 222,000 individuals had Sports Club Accident Insurance contracts (-8.3% YoY), 63,000 had Smartphone Insurance contracts (+37.0% YoY), and 48,000 had other contracts (+9.1% YoY).

Urgent Response segment 

Sales: JPY490mn (-29.4% YoY)
Operating loss: JPY54mn (vs. profit of JPY500,000 in 1H FY09/21)

A decrease in online customer traffic, especially via other companies’ websites, led to a YoY sales decline and operating loss.

Future new initiatives (excerpt of negotiation with partners; as of May 6, 2022)

Negotiations are underway for alliances (collaboration) with various companies.

Alliances likely in the near future

Companies that are the target of negotiations and their services areas: Food delivery company and gas company (both in the area of daily life-related services)

Still under negotiation

Companies that are the target of negotiations and their services areas: Security company (daily life-related services), regional bank (student loans and daily life-related services), credit card company (daily life-related services; projected member count of 1.5mn), and medical institution (last one mile services and support for people discharged from hospital; 1.2mn people annually)

Making ACTCALL and TSUNAGU wholly owned subsidiaries through a share exchange and concluding a capital and business alliance with CHIC

On July 27, 2021, Japan Best Rescue System (JBR) resolved to carry out a share exchange under which it would acquire 100% ownership of ACTCALL Inc. and TSUNAGU Inc., with each of these companies as a result becoming wholly owned JBR subsidiaries. ACTCALL (established on January 27, 2005; capital of JPY101mn) operates a comprehensive outsourcing business relating to housing life while TSUNAGU (established on October 1, 2020; capital of JPY10mn) is engaged in the call center operations business.

At the same time it concluded the share exchange agreement, JBR concluded a capital and business alliance agreement with CHIC Holdings Inc. (TSE Mothers: 7365), the parent company for ACTCALL and TSUNAGU, with the aim of promoting mutual business development and collaborative efforts in the operating areas of both companies. 

The share exchange agreement is subject to approval at the extraordinary general meeting of shareholders scheduled at each of the companies targeted for acquisition on September 29, 2021. JBR expects to implement the share exchange on September 30, 2021 without having secured approval at shareholders meetings in accordance with the simple share exchange provisions stipulated under Article 796 Clause 2 of the Companies Act of Japan.

Reasons for making the targeted companies wholly owned subsidiaries through a share exchange and concluding a capital and business alliance with CHIC

JBR’s Membership business for tenants of rental real estate properties has to date focused on improving its performance as a competitor to the housing life related comprehensive outsourcing business provided by CHIC. However, since CHIC started to consider focusing its management resources on the settlement solutions business, JBR saw an opportunity to discuss future business strategies with CHIC alongside it being entrusted with a portion of call center operations within the housing life related comprehensive outsourcing business operated by CHIC. After discussions focused on the further development of both companies, it was agreed that the JBR would make the targeted companies wholly owned subsidiaries through a share exchange.

Making the targeted companies wholly owned subsidiaries will increase the number of total group members to more than three million, which would allow the company to make great strides toward achieving its mid-term goals. In addition, since the profit margin in its Membership business exceeds that at the targeted companies, JBR expects profitability at those companies to improve through the streamlining of their marketing resources and call center operations.

At the same time, JBR notes that CHIC aims to expand its settlement solutions business, and in line with capital and business alliance concluded alongside the share exchange agreement, the company will support the sales and marketing efforts of CHIC in the settlement solutions business while working with CHIC toward the establishment of joint venture companies and the development of new services.

With the share exchange and alliance agreements as a starting point, JBR aims to expand the Membership business and improve its profitability while also contributing to the further expansion of CHIC’s settlement solutions business. The company expects that the two companies will thereafter work to further advance business synergies.

Procedure for the share exchange

Under the share exchange agreement, 0.266 JBR common shares will be allocated for each ACTCALL share, while 96.415 JBR common shares will be allocated for each TSUNAGU share. JBR will allocate 3,007,519 treasury shares in the share exchange and does not plan to issue any new shares.

Creating synergies through the grouping of the targeted companies

The acquisition and conversion of ACTCALL and TSUNAGU to subsidiaries reflects competitive conditions. In line with market trends, the company is working to expand its share in membership services for real estate rental property tenants and ensure for itself a slice of that expanding market. As noted earlier, the targeted companies are not as profitable as JBR, though by helping them adopt its methods, the company aims to improve their profitability. In the near term, JBR aims to boost the Membership business by improving its market share and sharing mutual strengths acquired in the same industry. On the other hand, the company over the long term intends to assess the possibility and potential merits of integrating the targeted companies. In light of share price fluctuations, goodwill has not yet been determined. The company indicated that it would announce accounting effects tied to the treasury stock and the number of years for goodwill amortization as soon as it has determined the associated impact on earnings.

Near-term initiatives (Improving market share and performance): In the Membership business, the number of members for real estate leasing exceeds 1.5 million, and the total number of members in the Membership business exceeds 3 million

Medium-term initiatives (① Improving profit margins through improved operational efficiency): In addition to sharing strengths with the targeted companies, JBR will promote the joint use of sales and operational expertise accumulated within the same industry, including how the company improved profit margins in the past.

Medium-term initiatives (② Strategy for expanding sales through an increased market share): Amid a declining birthrate and aging population, the real estate market is expected to see an increase in the outsourcing of call and after-sales services, and JBR intends to follow a strategy for expansion based on securing a leading share in this market.

Medium-term initiatives (③ Collaboration with other businesses) In addition to the Insurance business, which is mainly focused on the real estate rental market, the company will collaborate with the Repair business and extended warranty services, which are focused on the owner-occupied home market.

Medium- to long-term initiatives (Collaboration in the settlement business): By forming a capital alliance with CHIC, the company will strengthen its collaborative efforts in the settlement business, where it currently does not operate, and promote the creation of new value centered on the Membership and Insurance businesses.

Exit from PPS business

As was the case with a large number of other power suppliers in Japan, the company’s PPS business incurred impact from electricity prices that soared to unexpectedly high levels from December 2020 through January 2021. In response, the company began considering a variety of possibilities for the future operation of this business, as previously announced in the Q2 FY09/21 financial results briefing materials it released on May 7, 2021. According to the company, electricity prices have currently stabilized at levels that prevailed prior to their rise. Despite these circumstances, the company made the decision to withdraw from its PPS business due to concerns regarding the risk of additional price leaps.

The company withdrew from the PPS business at the end of September 2021. JBR
believes that avoiding characteristic procurement risks associated with the PPS business will contribute to improved stability for all of its businesses.

Company forecast for FY09/22

Overview

For FY09/22, JBR is projecting full-year consolidated sales of JPY18.0bn (+33.7% YoY), operating profit of JPY1.7bn (+22.8% YoY), recurring profit of JPY1.9bn (+9.2% YoY), and net income attributable to owners of the parent of JPY1.2bn (21.1x YoY).

The company projects record sales and record operating profit.

In FY09/22, the company sees consolidated sales rising 33.7% or JPY4.5bn YoY, with the recently acquired ACTCALL group seen adding JPY3.6bn to sales while alliances and collaboration between existing businesses and departments expected to add another JPY1.2bn; offsetting this in part will be the dropouts of its PPS (LifeTech) business and COVID-19 infection prevention business, which together will effectively reduce sales by JPY300mn.

The company is targeting a JPY322mn YoY operating profit increase in FY09/22, of which the positive impact of stable growth of existing businesses seen accounting for JPY227mn, effect of withdrawal from the PPS (LifeTech) business JPY145mn, and the ACTCALL acquisition effect JPY70mn, offset against the JPY120mn effect of expenses associated with the introduction of ERP to streamline business processes and strengthen management structure.

Dividend: JBR plans a FY09/22 dividend of JPY17 (flat YoY). The FY09/21 dividend is JPY17.0 versus EPS of JPY1.83. Based on the company’s assumptions of EPS of JPY35.62 and a full-year dividend of JPY17, the payout ratio will be 47.7% in FY09/22. JBR's management policy targets a dividend payout ratio of 30% or more. 

By segment

Membership and Warranty: The company aims to achieve growth beyond the existing plan through continued membership growth in its mainstay QR Service for New Tenant and warranty extension services for home appliances, as well as via an increase in new alliances and further diversification in the types of services and products offered.

In daily life-related services, the company seeks to strengthen offerings for homeowners. JBR still sees room for business expansion through collaboration with major real estate companies with whom it has not yet collaborated, and initiatives to offer housing and student loans in cooperation with financial institutions, as an extension of existing businesses. Regionally speaking, the company also believes there remains scope for growth in some markets. In services for university students, JBR aims to access a larger proportion of students through collaboration with university co-ops, while also broadening its sales channels to include universities that do not have student co-ops. In warranty extension services for home appliances, the company seeks to increase opportunities for business growth by ramping up collaboration with housing and fixture manufacturers with a view to providing services for new-build properties also. 

Insurance: The company expects contributions to sales and earnings growth mainly from increased contracts in household insurance for apartments provided by Japan Small Amount and Short-term Insurance Co., Ltd., but also from smartphone insurance and sports gym accident insurance sold by Rescue Insurance Co., Ltd.. Plans also call for creating new products in the small-amount short-term insurance area, including property insurance products for real estate companies, and developing more group insurance policies so as to increase the efficiency of new policyholder acquisitions.
JBR furthermore seeks to broaden its sales channels by leveraging the recently acquired ACTCALL. The company is also looking to develop new products through its alliances with other companies, and to pursue opportunities for cultivating large-scale sales channels, as it partnered with Itochu and Minimini Group earlier. 

In last one mile services, which essentially represent a new business for JBR, the company envisions providing services such as food delivery back-up, restaurant patrols, and monitoring for the elderly.

Urgent response business: The company will strive to acquire customers more efficiently, chiefly through its own websites, while also exploring sales promotion opportunities by such means as displaying advertising posters in regional financial institutions. 

Medium-term outlook

Medium-term business strategy

On November 5, 2021, the company unveiled its new medium-term business plan that will run through FY09/24. Targeting FY09/24 consolidated sales of JPY22.0bn (+63.4% versus JPY13.5bn in FY09/21), the company is looking to establish an earnings structure capable of delivering earnings growth of at least 20% per annum and, in keeping with this goal, is targeting operating profit of JPY2.5bn in FY09/24 (+77.5% versus JPY1.4bn in FY09/21), recurring profit of JPY2.7bn in FY09/24 (+52.2% versus JPY1.7bn in FY09/21), net income of JPY1.8bn in FY09/24 (32.1-fold increase over JPY56mn in FY09/21), and EBITDA of JPY3.2bn in FY09/24 (+92.6% versus JPY1.7bn in FY09/21).

FY09/24 targets for key performance indicators include a member count of 4,604,000 (+37.6% versus 3,347,000bn in FY09/21) and number of insured individuals of 867,000 (+46.2% versus 593,000 in FY09/21). 

Urgent Response

In the Urgent Response business, which helps general consumers with issues they face, JBR will promote more efficient advertising by mixing various advertising methods. It will strengthen its ability to attract customers via the Internet in particular, aiming to provide faster and more professional response to various emergency requests regarding such things as locks, plumbing, and windows.

Membership

In the Membership business, the company aims to attract new members for its QR Service for New Tenant, which targets tenants and new home owners in cooperation with companies involved in real estate, and QR Service for Student Life, via the National Federation of University Co-operative Associations. In addition, consolidated subsidiary Japan Warranty Support Co., Ltd., aims to attract new members for its warranty extension for home appliances (which provides support after the manufacturer warranty expires for various housing facilities and equipment) and create new alliances and services.

Whereas the Urgent Response business targets the market for solving issues that have actually arisen (manifest market), the Membership business targets the market for preparation for such issues or equipment warranty shortcomings (potential market) by having members subscribe to services before trouble occurs. The scale of the manifest market is relatively small, but JBR believes the scale of the potential market is much more expansive, as it is possible to develop a range of services based on a large number and wide variety of customer contact points. The company therefore aims to promote business growth and customer acquisition in this potential market. It expects further business growth through market penetration in recurring revenue-type memberships, along with business growth through expansion of subscription-type memberships for both existing and new alliances.

Recurring revenue-type membership services: The business model is similar to that of the Insurance business, in which users pay for membership in advance and the company provides services free of charge as the need arises. Partner companies sell JBR’s services and, as the number of recurring revenue-type memberships grows, the balance of unearned revenue increases. This is a market the company is currently developing, and its partners include real estate firms, university co-ops, home electronics mass retailers, and housing manufacturers.

Subscription-type membership services: This is a new market on which JBR is focusing. Potential partners include regional banks, credit card companies, electricity and gas companies, newspapers, media, telecommunications, medicine, nursing care, and leisure service companies. Subscription-type membership services are available to anyone, with monthly fees set so as to make subscribing easy. It is also possible to attach the services to the existing services or products of partner companies, providing them the benefits of standing out from the competition and increasing added value. JBR can collaborate with companies in a wide range of industries. While some costs will be incurred upfront, new partnerships will help to expand the target market and accelerate growth. The following are some specific examples:

Partnership with nursing care service provider: In August 2021, JBR entered into a business alliance agreement with nursing care service provider INFIC Inc., which among other things operates nursing care facilities for seniors that make use of its IoT-based senior life support system known as LASHIC. The partnership agreement gives JBR the option of becoming an authorized provider of in-home services for the elderly under the brand name LASHIC-home.

Partnership with leisure service provider: In March 2020, JBR entered a business alliance with Yuko Holdings Inc., which operates a specialized onsen (hot spring) accommodation booking service through the website yukoyuko.net. Under the partnership agreement, JBR will offer life support services under the name Yuko Life Support Club to the users of yukoyuko.net.

Partnership with utilities companies: In addition to providing energy, gas companies can develop package products that include equipment warranties and resolution of trouble encountered in day-to-day life. JBR already has business alliances with Osaka Gas and Kyushu Electric Power’s wholly owned subsidiary QTNet.

JBR continues to approach potential partners with the aim of growing its business through partnerships and keeping its own organization as small and efficient as possible and, toward that end, plans to transition to a new management structure starting in January 2022.

Insurance

Under the group's insurance business, consolidated subsidiary Japan Small Amount and Short-Term Insurance Co., Ltd. offers a range of insurance products such as household insurance for apartments, bicycle insurance, and attorney fee insurance (includes an emergency telephone help service that assists with false accusations of public groping). The company aims to expand sales of each product and enhance its product lineup by designing and developing new small amount and short-term insurance products to suit market needs. In addition, with the establishment of Rescue Insurance Co., Ltd., the company aims to further expand the Insurance business by developing insurance products that could not be developed under the category of small amount and short-term insurance.

To establish a foundation for growth, the company will continue to expand sales of existing products, especially household insurance. The number of agencies selling household insurance increased due to a business alliance with Casa Inc. (December 2018).

The company has accelerated the development of non-life insurance products. Examples include the portable device (including smartphones) repair insurance launched in July 2020 and the sports injury insurance for groups launched in April 2020.

JBR will promote a multi-product, multi-channel strategy leveraging its planning and development capabilities covering both non-life insurance and small amount and short-term insurance. Specific initiatives are as follows:

Existing products × existing markets: Product categories include household insurance, bicycle insurance, and smartphone insurance. The company will promote market penetration by increasing the number of partner agencies to strengthen its sales network.

Existing products × new markets: Product categories include attorney fee insurance. JBR aims to develop new markets by collaborating within its own group and with new business partners on the horizontal expansion of its existing product lineup (working to provide existing products to different markets). For example, it is working to sell insurance to existing customers of its other services who are not yet insurance customers (in some cases selling insurance and services together) and proposing insurance and service combinations to new customers. With these initiatives, it aims to develop new sales routes for its insurance products.

New products × existing markets: Product categories include fire insurance for property management companies and homeowners and comprehensive household insurance. Focusing on the real estate market as the main sales channel, in addition to household insurance for tenants, JBR plans to start rolling out fire insurance for homeowners in the near future. Preparations have already been completed, but the exact timing of the rollout is unclear because authorization is taking time. The company says it can also develop comprehensive household insurance and other insurance that is easily handled by agencies.

New products × new markets: JBR will plan suitable product categories in consultation with business partners. The company, with its product planning and development capabilities, will work with companies including Nippon Life Insurance Company and Seven Bank, Ltd., which have strong sales channels, with the aim of developing a range of products and channels. JBR is already considering using convenience stores as a sales channel. It expects to produce interesting products through mutual development projects with both companies.

Repair

The company aims to grow the Repair business and improve profitability by using its construction expertise to win new customers and by focusing more on high-value projects.

LifeTech

In the LifeTech business, the company is looking to establish and develop new technology-based services that can take advantage of synergies with its Membership business.

ESG

Environment

Balancing energy conservation and service quality

Continue working to reduce paper use, improve efficiency of personnel dispatched (reducing percent of highway road usage by 0.2pp, to 5.9% in FY09/21) 

Support environmental protection organizations

Installed in-office vending machines with a donation function to support environmental causes.

Society

Take steps to cope with aging Japanese population

Go after growing demand for business process outsourcing created by shrinking workforce, create new services to address changes in lifestyles and industries, maintain and expand network of construction partner companies so as to reduce risk.

Creating a workplace where employees want to work

Provide additional employee training, take steps to facilitate better work-life balance for employees

Governance

Raise corporate governance standards

Set business strategies and goals that establish a better balance between economic interests and societal interests, raise corporate governance standards so as to quality for listing on Tokyo Stock Exchange's Prime Market, improve management accounting and constantly re-evaluate business portfolio so as to obtain better insights into businesses.

Business Continuity and Disaster & Recovery Planning (BCP)

Strengthen systems so as to maintain call answering services in the event of pandemics and/or natural disasters. 

Proactive dialog with stakeholders

Proactive dialog with investors: Held one-on-one meeting with 218 individuals representing institutional investors, held five seminars for individual investors, provided corporate disclosures in Japanese and English. 

(Reference) Previous medium-term business plan

On November 12, 2018, JBR announced a medium-term business plan for the period through FY09/21. Numerical targets for the close of this plan (FY09/21) were sales of JPY16.5bn (+40.2% compared to FY09/18), operating profit of JPY2.5bn (+74.7%), recurring profit of JPY2.7bn (+61.2%), and net income attributable to owners of the parent of JPY1.9bn (+55.1%). Under the previous plan (FY09/17–FY09/19), JBR formed a business base as a foundation for growth and attained its OPM target of 10% a year early in FY09/18. The company therefore formulated its new medium-term plan to respond to changes in the business environment and seek further growth.

This plan called for the promotion of a business strategy and investment aimed at accelerating growth in the company’s main businesses: Urgent Response, Membership, Insurance, and Repair. Initiatives included streamlining the wide range of businesses the company has built up over the years and reorganizing them into three main segments (Urgent Response, Membership, and Insurance). JBR pushed ahead with priority measures and deepening its operations as well as improving the profitability of the Repair business. The company also worked to help create a society that is safer and more convenient by creating new value, including trialing new products and services. It continued working to improve profitability, targeting a consolidated OPM of 15% in FY09/21 and improved management efficiency.

Medium-term business plan targets (JPYmn)

Medium-term plan’s vision and priority measures

JBR announced its vision for the new medium-term plan ending in FY09/21 as “providing a service to 5mn households.” To make this vision a reality, the company implemented the following priority measures.

Priority measures
Sales targeting all levels of client companies with collaboration between business segments and divisions: JBR promoted the cross-selling of new and existing products to new and existing clients (aiming to enhance its sales capacity). It worked to improve average revenue per user (ARPU) through such cross-selling and by targeting all levels of client companies with collaboration between business segments and divisions.

Alliances with top companies in other sectors: The company promoted alliances with top companies in various sectors. Alliance targets included real estate firms, university co-ops, telecom carriers, electric and gas companies, home electronics mass retailers, housing manufacturers, and lodging facilities. It provided services simultaneously to all members at alliance companies. It also worked to promote new alliances in sectors where it had not traditionally had dealings. The company developed plans for providing services to alliance partners so that the partners could provide special service to preferred customers, focusing on creating new alliances for the Membership, Insurance, and Repair segments in particular.

Cost reduction by the use of IoT and IT systems: The company developed an enterprise resource planning (ERP) system*¹, formulated a BCP system, added various functions*² to its member identification app, and utilize AI.

Create new products and services: By providing pinpoint services*³ and utilizing IoT, the company reduced customer inconvenience and insecurity. In the Membership and Insurance segments in particular, it conducted active development, including trials.

Financial measures

Investment strategy

JBR aggressively pursued M&A in businesses related to its core operations that would help improve its corporate value and made capital alliances with or invested in companies with businesses and strengths necessary for growth. The company also allocated additional capital spending on IT to improve business efficiency and establish a BCP system.

Financial strategy

Company policies for dividends, share buybacks, and shareholder benefits to improve shareholder returns were as follows.

Dividend policy: Dividend payout ratio of at least 30% on consolidated earnings. For the distribution of its earned surplus, dividends were to be paid twice a year (interim dividend and year-end dividend).

Shareholders will receive gift cards for KidZania, of which JBR is an official sponsor. JBR supports KidZania’s basic philosophy of children learning from experience the importance of being a member of society.

Business

Business description

Overview

JBR provides nationwide service to handle emergencies. Customers call the company with problems such as a broken window, a leaky faucet, or other odd jobs. JBR dispatches a repairman from its partner stores* (at end-September 2020, the number of partner contracts was 2,198, +64 YoY). JBR offers various services, including lock replacement, glass repair, household insurance for apartments, light plumbing services, pest control, roofing repair, small appliance repair, and garden maintenance. The Repair segment acquired in May 2016 provides a repair service for residential buildings and furniture made from any material (including timber, aluminum, and stone).

The company develops and provides small-amount and short-term insurance products covering problems and concerns encountered in daily life through subsidiary Japan Small Amount and Short-Term Insurance Co., Ltd. In July 2019, JBR established Rescue Insurance Co., Ltd., with Nippon Life Insurance Company and Seven Bank, Ltd. (shareholdings: JBR 85.7%, Nippon Life Insurance 7.1%, and Seven Bank 7.1%) to develop and market insurance products that are outside the scope of small-amount and short-term insurance. Japan Small Amount and Short-Term Insurance became a wholly owned subsidiary of Rescue Insurance as of October 1, 2019.

As of FY09/21, the company’s five segments are Urgent Response (accounting for 9.8% of sales, -1.5% of operating profit), Membership (51.8%, 97.6%), Insurance (34.7%, 21.5%), Repair (2.0%, -4.3%), and LifeTech (1.7%, -13.2%). See figure below. The group is comprised of the parent JBR, five consolidated subsidiaries (Japan Warranty Support Co., Ltd., Rescue Insurance Co., Ltd., ACTCALL Co., Ltd., TSUNAGU Co., Ltd., and Japan Small Amount and Short-Term Insurance Co., Ltd.), and one equity-method affiliate (Japan PC Service Co., Ltd.).

Business model

JBR’s business model is summarized below.

Urgent Response segment (9.8% of sales, -1.5% of operating profit in FY09/21)

In Urgent Response, the company’s call center takes calls 365 days a year requesting lock replacement, plumbing help, and other home-related emergency services.

The Urgent Response business targets general customers (non-membership customers) who have found the company via Townpage (Japan’s telephone directory), the internet, leaflets, or other advertising. Located within the company’s head office in Naka-ku, Nagoya, the call center (contact center) receives service requests from general customers, and an operator determines what sort of problem an individual customer has and submits a request for service to a partner store. Operators also follow up with customers as needed.

Partner stores are businesses with which JBR concludes a service contract to perform service calls in the Urgent Response business. In contrast, network stores are used by JBR to respond to service calls in the Membership business. Partner and network stores are screened for competence before selection. At end-FY09/21, the number of partner contracts was 2,365. Partner stores are mostly located around Tokyo, Osaka, and Aichi, which are areas of highest demand.

The relationship between JBR and partner stores is similar to a franchisee but there are no fixed royalty payments. The company provides partner stores with workflow and advertising support in exchange for per-revenue commission. It receives 40% of the amount paid by the customer as a referral fee. JBR sets prices. Partner store contracts are renewed annually.

In FY09/21, the job count was 29,000 lock replacements (versus 32,000 in FY09/20), 22,000 plumbing-related services (versus 25,000), and 3,000 window-related services (versus 4,000). Although the company’s own website, QR Service for Emergency, attracted more customers and the average cost per job improved, the job count for each category declined YoY as the company attracted fewer customers via other companies’ websites and Townpage, and customers were reluctant to request work in light of the COVID-19 pandemic.

Changes to method of booking sales

In FY09/18, JBR changed the method of booking sales for the Urgent Response segment.

In Urgent Response, which provides lifestyle trouble resolution services, after having developed business with joint venture companies in the past, with regard to plumbing and glass-related Urgent Response services, traditionally, fees received from customers using these services were booked as overall gross sales, with sales (income) from partner stores booked as gross cost of sales (note: Urgent Response services other than plumbing and glass were traditionally booked as net sales, as indicated below).

However, when reviewing the terms of contracts with partner stores in the Urgent Response segment, the company changed the method by which it books sales (net) only with respect to introduction fees (see table below).

In all these methods, GPM remains the same.

Membership segment (51.8% of sales, 97.6% of operating profit in FY09/21)

The Membership segment provides the company’s services at discounted prices or free of charge to members for the duration of the membership. After receiving an up-front membership fee, customers can receive on-site service or advice over the telephone in the event of any issue.

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 part of the package. Members get support 24/7 with JBR dispatching a handyman within the hour.

The number of members of mainstay services is steadily rising. As of end-September 2019, the figure stood at 2,222,000 members, a decrease of 25,000 members versus end-September 2018 as a result of reducing the number of unprofitable and problematic memberships. After that, the company worked to increase its membership count by focusing on increasing members for its mainstay services and acquiring other companies in the same industries, and through these means was able to push its total membership count up to 3,347,000 at the end of FY09/21 (up 948,000 versus the end of FY09/20). Major service lines under the daily necessities umbrella include QR Service for New Tenant with roughly 1,020,000 members at the end of FY09/21 versus 913,000 at the end of FY09/20, QR Service for Student Life with roughly 288,000 members versus 290,000 members at the end of FY09/20, and warranty extension for home appliances with roughly 1,132,000 members versus 934,000 members at the end of FY09/20. On May 31, 2019, JBR terminated d Living® (house cleaning and housekeeping agency services, and resolving problems in daily life for NTT Docomo subscribers), which had 241,000 members at end-FY09/18 and 145,000 members at end-1H FY09/19.

These provide members with a package of services for a fixed period fee (typically plumbing, lock and key service, and glass repair). The company partners with a number of different companies and organizations to help sell these services, including real estate agents, university co-ops, and telecom carriers. JBR’s basic business is the same for all sales channels; what changes is the contract’s length and pricing.

Services offered

“QR Service for New Tenant” memberships are offered to rental home tenants through property agents. Memberships typically last two years and sell for JPY16,200 (including tax, both years in total). The company also offers “QR Service for Condominium Life” for condominium residents.

“QR Service for Student Life” memberships are sold to university students through university co-ops. Memberships typically last four years after payment of a one-time fee of JPY9,250.

“Warranty extension for home appliances” memberships are sold to consumers through retailers of home electronics and housing facilities and equipment, and provide maintenance support for a period following the expiration of the manufacturer’s warranty. Memberships last for a maximum of five years for home electronics, and ten years for appliances. The service is provided by Japan Warranty Support Co., Ltd., one of JBR’s consolidated subsidiaries.

“Life Depot” memberships are generally JPY324 (including tax) per month, and services provided include partial payment for repairs and replacement mobile phones, and discounts on urgent everyday services.

“Internet Emergency” memberships are sold through property agents, providing support to tenants who wish to move their Internet services from one residence to another.

Changes to method of booking sales

In FY09/18, JBR changed the method of booking sales for the Membership segment.

Previous methods

Membership fees for most of the services were previously billed as one-time fees, but there were some services that were not included and revenue booking methods varied depending upon the type of contract. In fact, there were three main booking methods: installment booking (for QR Service for Student Life, warranty extension for home appliances, and other services), one-time booking, and monthly booking (for d Living and other services where the company collected monthly fees). There were also other variations in addition to these main booking methods.

For plans such as QR Service for New Tenant—which are under two years—membership fees were recorded in full on the income statement. Expenses were booked based on past results and the expected rate of service provision. For long-term services exceeding two years, such as QR Service for Student Life and warranty extension for home appliances, revenue from memberships was recorded as advances received on the balance sheet, and pro-rated amounts were booked on the income statement. Expenses were recorded based upon actual values recorded during the year.

FY09/18 onward

To rationalize operations and unify booking, the company has been transitioning to contracts that divide membership sales on a monthly basis*.

In this case, when collecting two years’ worth of fees, unearned revenue and long-term unearned revenue are temporarily booked as liabilities on the balance sheet. When revenue is recognized on a monthly basis, an accounting treatment will be applied that changes the unearned revenue into sales. On the other hand, paid fees (introduction fees) for referrals that become expenses are simultaneously booked in a lump sum, an accounting treatment that can be said to be in line with the principles of the conservativism (expenses are booked on an accrual basis, revenue on a realization basis).

The total amount of the company’s unearned revenue and long-term unearned revenue at end-FY09/21 was JPY6.3bn (+21.3% YoY).