コネクシオ（9422） – Integrated Report 2021

“Co nexio is to connect people and values”CONEXIOINTEGRATED REPORT2O21CONEXIO Corporat ion Integrated Report 2021010_0014687912201.indd 2010_0014687912201.indd 22022/01/24 19:25:232022/01/24 19:25:23SECTION 1 About CONEXI OIntroductionC o r p o r a t e P h i l o s o p h yO r i g i n o f t h e C o m p a n y n a m e“Conexio is to connect people and values”O ur o b je ct i ves(reas o n fo r ex is te nc e)We aim to cherish one’s feelings, touch customer’s heart, and contribute to the realization of a secure and comfortable life and society.Our value(manageme nt p ri n cip les )Our be ha viora l guideline s(c ode of conduct)Everybody is the main player:We are for our customersWe will develop an environment in which autonomous individuals respect each other.Pleasure to connect:We will broaden the circle of pleasure among all people connected to each other and deepen the bond of trust starting from our own personal growth.Social responsibility and pride:We are deeply aware and proud of the responsibility for supporting the vital infrastructure for life and business.We will think proactively, act autonomously, and take Proactivelyon new challenges.FairlySincerelyWith teamworkof diversity.accordingly.Think and ActWe will act in a fair manner with high moral standards.We will act frankly with gratitude in mind.We will deliver excellent results by taking advantage Starting from the perspective of customersWe recognize the importance of job sites where we interact with customers and will think and act Conexio is to connect people and valuesCompany nameCONEXIO CorporationOrigin of the Company nameMeaning of our corporate logoMeaning of our corporate colorCONEXIO comes from a Latin for The large arch that shapes the overall Bright blue is a symbol of innovation “bond.”logo illustrates a bridge between and freshness. The color represents The name CONEXIO represents our people, companies, and values.the future-oriented perspective and aspiration and firm determination to The logo represents our company’s sincerity of the company working on help each and every customer con-stance of extending excitement and the creation of services in anticipation nect, as well as to broaden the circle of pleasure and creating new value by of the needs of each and every pleasure among all people connected connecting people and information.customer.to each other and deepen the bond of trust.1 0 – y e a r V i s i o nCreate services in anticipation of the needs of each and every customer and become the most trusted partner in the world of communication networksCONTENTS01030507IntroductionCONEXIO’s GoalCONEXIO’s BusinessCONEXIO’s History0 1SE CT ION 1 A bo ut CO NEXIOSECTION 2 CONEXIO’s VisionSE CTION 3 CONEXIO’s StrategySECTION 4 CONEX IO’s Mater iality09111315Our Value Creation ModelMessage from the PresidentCONEXIO’s SustainabilityResponse to the External Environment (Risks and Opportunities)Message from the General Manager, Consumer Business Group (Business Strategy)Materiality 1 Eliminating the Information Gap And Realizing a Prosperous Information SocietySummary of Medium-term Management Plan 2020Message from the General Manager, Corporate Business Group (Business Strategy)Materiality 2 Promoting Digital Transformation in Business SocietyOverview of Medium-term Management Plan 2023Message from the General Manager, Administration GroupMateriality 3 Contributing to the Prevention of Incidents and Accidents and the Creation of a Society Resistant to Natural Disasters172125293335373941434749Materiality 4 Initiatives for Environmental issuesMateriality 5 Promotion of Diversity and InclusionCorporate GovernanceBoard Directors and Corporate AuditorsSECTION 5 D ata51535455565758Financial HighlightsNon-financial HighlightsBalance SheetsStatements of IncomeStatements of Cash FlowsCorporate DataExternal EvaluationAbout this reportEditorial policyWe consider it important that our integrated report informs our stakeholders about the process of achieving a medium- to long-term and sustainable increase in enterprise value. The report is issued as a tool for stakeholder communication, with the aim of publishing information that shows the relationship between our management strategy and financial and non-financial capital, etc. and thereby deepening mutual understanding through dialogue to upgrade our corporate management.This Integrated Report integrates financial and non-financial information and is edited based on the Guidance for Collaborative Value Creation, published by the Ministry of Economy, Trade and Industry, and other reference materials. We plan to issue an inte-grated report every year, while making necessary improvements, as a tool for dialogue with all stakeholders. When there is a disagreement in the Japanese text and the transla-tion published at the English site, they give priority to the contents of the Japanese text. Period covered FY2020 (April 1, 2020 – March 31, 2021) Past and most recent activities and initiatives may also be included. Contact Sustainability Promotion Section, General Affairs Department Phone: 03-5331-3608E-mail: sasutena@conexio.co.jp Organizations covered CONEXIO Corporation and CONEXIO with Corporation Issuance time November 2021*Office relocation is planned on January 11, 2022. The phone number for inquiries after the relocation is as follows.Phone: 03-5408-3100 (switchboard)0 2CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 1 About CONEXI OCONEXIO’s GoalUnder the philosophy statement of “Conexio is to connect people and values,” we aim to deepen the bond of trust with all stakeholders and continue to increase enterprise value, by contributing to the realization of a secure and comfortable society.Strategy for achievementV i s i o nCreate new serv ice s and sol uti ons by graspi ng t he needs of dig ita l so ciety, and co ntribute to the enrichment of livin g and busin esse sQ u a n t i t a t i v e t a r g e t s f o r F Y 2 0 2 3O per ating prof itProfitROE12.0 billion yen8.0 billion yen12% or moreResponse to environmental changes See page 11 for details.New medium-term management planSee page 15 for details.Expand real contact opportunities with customers by shifting the focus from in-store sales activities to travelling to sell in shopping centers and areas away from the shopsBusiness strategy (Consumer Business)See page 21 for details.External environment surrounding CONEXIOSee page 11 for details.Decrease in the number of customers visiting shops and in-store sales, due to the popularity of online only plansExpand our support service lineup to offer services not only at the stores but over the phone and online, rolling out a range of device settings support and remote support servicesBusiness strategy (Corporate Business)See page 25 for details.C o r p o r a t e P h i l o s o p h y“C onexi o is to con nec t people and values”Diversification of customer contact in response to behavioral changes of customersExpansion of telework and digital transformation utilizing cloud and mobile services, with an eye to the new normal eraSpread of SDGs managementSpread “Mobile WorkPlace”, which creates a home and outside working environment equivalent to the environment in the office and realizes a new work styleStrengthening of business foundationSee page 29 for details.To contribute to a sustainable growth of society, set medium-term targets, and address five important issues under the leadership of the SDGs Promotion CommitteePromotion of SDGs managementSee page 33 for details.0 30 4CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 1 About CONEXI OCONEXIO’s BusinessCONEXIO offers a variety of products and services in the Consumer Business (business for individ-ual customers), centered around telecom carrier-certified shops, and the Corporate Business (busi-ness for corporate customers), centered around mobile solutions.Corporate Business2,758 million yen18%Mobile solutionWe propose solution services using smart devices to our corporate customers. We also support our customers’ business activities through mobile helpdesk and handset set-up (kitting) that match the needs of each customer.PICK UP“Mobile WorkPlace”“Mobile WorkPlace” is a mobile work related solution for corporate customers. We offer one-stop services from the provision of devices, lines, and applica-tions to the “Managed Mobile Service” , which operates and manages them on behalf of the customers.IoT solutionsEngineers with more than 20 years of M2M/IoT experience, mid-career employees with a wealth of knowledge in various industries, and young employees with new ideas and dynamism are work-ing hard every day to support the introduction and use of IoT at over 300,000 locations.PICK UP“Smart Ready IoT Solution Set”Based on the know-how we have accumulated, the all-in-one package offers solutions specific to each indus-try and sector, from sensors to gateways, communica-tion, and applications. The product realizes speedy IoT introduction.Providi ng MV NO l inesWe provide telecommunication infrastructure services that meet the needs of our customers including Internet lines and secure, high-quality VPN (Virtual Private Network), etc. for our corpo-rate clients.Paym en t s erviceOur payment services include selling prepaid cards to convenience stores.Consumer BusinessTelecom carrier-certified shopsWe operate the telecom carrier-certified shops of NTT DOCOMO, KDDI Corp. (a.k.a “au” and “UQ mobile”), and Rakuten Mobile, Inc. around the country. We are engaged in creat-ing high value- added shops that are “preferred by the customers.”PICK UP“KURASHI NO SUMAHO KYOSHITSU” To meet the requests from many customers who wish to make better use of their smartphones and learn how to use them more effectively, we launched “KURASHI NO SUMAHO KYOSHITSU” smartphone classes for those who want one-on-one individ-ual curriculums and those who have finished learning the basics and want to further improve their skills.Unique smartphone servicesWe provide various services and content for our customers to enjoy their smartphones more.PICK UP“nexi smartphone support”The service offers learning content linked to the curriculum of smartphone classes at docomo Shops operated by us. Custom-ers who are not confident with using smart-phones or looking to use them more effectively can easily learn about smart-phone use whenever and wherever they wish.Wholesale to retailers, etc.Insurance shopsWe have concluded a partnership agreement with HOKEN NO MADOGUCHI GROUP INC., and operate the “HOKEN NO MADOGUCHI.”In addition to engaging in the wholesale of smart-phones, etc., to retailers, etc., we also provide in-store sales facilitation. At Distribution Center and Call Center, we provide powerful backup to in-store sales through the speedy distribution of inventory and high-precision activation services.Fiscal year ended March 31, 2021Operating profit*12,462 million yen82%0 50 6*Operating profit by segment and percentage breakdown are figures before the allocation of companywide costs.The consumer business consists of operating telecom carrier-certified shops, wholesale of smartphones, etc., to retailers, etc., as well as facilitating their sales, and operat-ing the insurance shops, “HOKEN NO MADOGUCHI.”In the Corporate Business, we sell smartphones, etc., as well as offer the “Managed Mobile Service” (helpdesk, etc.), solution products, IoT solutions, and payment services (sale of prepaid cards to convenience stores, among other services).CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 1 About CONEXI OCONEXIO’s HistoryCONEXIO was established at Kitaaoyama, Minato-ku, Tokyo in 1997 as a wholly-owned subsidiary of ITOCHU Corporation, starting as a contractor for the mobile-related 2012a mergerbusiness of ITOCHU’s Communication Network Division.A spin-off absorption-type split in 2002 allowed us to succeed to the status of a primary distributor from ITOCHU Corporation, which shaped our core business.We have adapted to changes in the business environment, offered services expected from society, and seen a steady growth ever since.Listed om the Second Section of the Tokyo Stock Exchange200 6Merged with Idomco Communications Co.200 7Established ITCN Assist Co., Ltd. as a wholly-owned subsidiaryListed on the First Section of the Tokyo Stock ExchangeCO NE XI O Plan 2020“CO NE XI O Plan 2023”12 billion yenAbsorbed Panasonic Telecom Co., Ltd. through Changed the trade name to CONEXIO Corporation201310.6 billion yenSucceeded to the Mobile Communication Business of Hitachi Mobile Co., Ltd. 2008through a company splitF o u r t y p e s o f a s s e t sNumber of telecom carrier-certified shopsApprox. 440 locations(As of the end of September 2021)Number of staff members with expertise*Number of corporate customers“Managed Mobile Service”(number of helpdesk lines)Approx. 4,100Approx. 7,000 companiesApprox. 480 thousand lines(As of the end of August 2021)* Number of persons with telecom number of persons with Financial Planner qualifications at insurance shops(As of the end of September 2021)carrier-certified qualifications at telecom carrier-certified shops, at retailers, and in the Corporate Business and (As of the end of September 2021)Operating profit199720052 00 62 00 720 0820 12201320202023B u s i n e s s E n v i r o n m e n tTransition of the number of contracts by contract types (all telecom carriers)(Ten thousand)Size of the market for the ICT transformation solution(Billion yen) （第2四半期）In the mobile phone market in which the Company mainly conducts its business activities, the market is foreseen to experience the revitalization and liquidation due to the reduction of prices by telecom carriers, and the popularity of online only plans over the next three years. On the other hand, the value of real contact opportunities with customers is expected to increase with greater information gaps due to the progress of digitalization, the wide spread availability of mobile handsets compatible with “5G” (the 5th generation mobile telecommunication system) and the advancement of related services. In addition, the shift into the new normal (new lifestyle) era is likely to accelerate continuously. In the corporate market, IT investment by companies to realize DX and “workstyle reform” will accelerate, raising expectation for the expansion of the scope of usage of mobile solutions for corporations and promotion of the use of loT and 5G technologies.16,00012,0008,0004,0001,271.31,157.01,369.41,459.31,022.2878.6678.61,6001,20080040000Mar. 2016Mar. 2017 Mar. 2018 Mar. 2019 Mar. 2020 Jun. 2020 Sep. 2020 Dec. 2020 Mar. 2021 Jun. 2021(2Q)(3Q)(1Q)(4Q)(1Q)(2Q)2019Results2020Prospect2021Forecast2022Forecast2023Forecast2024Forecast2025Forecast 3G LTE 5G PHS BWASource: Ministry of Internal Affairs and CommunicationsSource: Fuji Camera Research Institute, Inc.: “ICT Transformation Market in the New Normal Era, Accelerating with an Eye to the World after and with COVID-19”0 70 8CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 2 CONEXIO ’ s V is io nOur Value Creation ModelTo achieve the medium-term management plan, CONEXIO flexibly responds to changes in the exter-nal environment surrounding us. In addition, the corporate philosophy is reflected in our manage-ment policies. The CONEXIO Plan 2023 aims to create economic and social value by grasping the needs of digital society, creating new services and solutions, and contributing to enrichment of living and businesses.Corporate Philosophy“Conexio is to connect people and values”Conexio’s BusinessConsumer BusinessCorporate BusinessRealize a sustainable growthInputMaterialityMedium-term management planOutcome1 Financial capital (End of March 2021)Total assets Net assets 105,315 million yen51,140 million yen2 Manufactured capital (End of March 2021)Capital investment 1,459 million yen3 Intellectual capital (End of August 2021)Number of staff members with expertise* Approx. 4,1004 Human capital (End of March 2021)Number of employees 5,5655 Social capital (End of September 2021)Number of corporate customers Approx. 7,000 companies6 Natural capital (End of March 2021)Energy consumption 4,386 kl * Number of persons with telecom carrier-certified qualifications at telecom carrier-certified shops, at retailers, and in the Corporate Business and number of persons with Financial Planner qualifications at insurance shopsEliminating the information gap and realizing a prosperous information societyPromoting digital transformation in business society Contributing to the prevention of incidents and accidents and the creation of a society resistant to natural disastersInitiatives for environmental issuesPromotion of diversity and inclusion“CONEXIO Plan 2023”Create new services and solutions by grasping the needs of digital society, and contribute to the enrichment of living and businessesBasic strategy 1Basic strategy 2Basic strategy 3Evolve the shop business in response to the changes of customer needsExpand the Company’s unique services and solutionsInnovate productivity mainly through the pursuit of digitalizationReinforce the management baseCapital and governance strategyInvestment strategyHuman capital strategyCompliance strategySDGs managementIn order to contribute to the sustainable growth of society, we will implement SDGs management through our main business and specialized fields with the following five important issues:Contribute to the development of communication society through ICT utilizationSolve business issues by providing the latest technologies such as 5G, AI, and IoTImprove the ability of local communities to deal with cybercrime and contribute to disaster prevention and mitigation by utilizing loT technologyReduce CO2 emissions and promote resource recyclingDevelop a comfortable work environment in which diverse human capital can play an active roleShift to the new normal eraSocial IssuesPromotion of the use of IoT and 5G technologiesDecrease in the labor population, etc.Resolve social issues0 91 0CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 2 CONEXIO ’s Visio nResponse to the External Environment (Risks and Opportunities)The market surrounding CONEXIO is at a turning point, and our business is faced with significant changes.We will identify risks and opportunities and implement measures for medium- to long-term growth.A n a l y s i s o f t h e b u s i n e s s e n v i r o n m e n tO u r p o l i c yC h a n g e i n t h e b u s i n e s s e n v i r o n m e n t[ R i s k s ]Shift to the new normal era (a remote type society) Decrease in agency commission Decrease in the number of customers visiting shops and in-store sales, due to the popularity of online only plans We will strive to expand real contact opportunities with customers by shifting the focus from in-store sales activities to pop-up shops in shopping centers and areas away from the shops. We will expand our services with higher added value by grasping major environmental changes as opportunities. In addition, we will work on productivity improvement by promoting the optimization of store operations and the use of IT through digital transformation.Promotion of the use of IoT and 5G technologiesRevitalization and liquidation of the market due to the reduction of prices by telecom carriersDecrease in the labor population[ O p p o r t u n i t i e s ] Diversification of customer contact in response to behavioral changes of customers We will expand our support service lineup to offer services not only at the stores but over the phone and online, rolling out a range of device settings support and remote support services. Increase in the needs for support and the value of real contact opportunities with customers, due to the widening of information gap against the backdrop of the progress of digitalization We will roll out pop-up smartphone classes for beginners and the elderly, smartphone seminars in collaboration with local governments, etc., and other services that facilitate the shift from goods to services and experiences and lead to new discoveries. Expansion of operations at telecom carrier-certified shops Services that add high value and meet customer needs, including unique content, will be expanded. Expansion of telework and digital transformation utilizing cloud and mobile services, with an eye to the new normal era We will spread “Mobile WorkPlace”, which creates a home and outside working environment equivalent to the environment in the office and realizes a new work style.Environmental risks Spread of new solutions that use IoT and 5G technologiesTCFD(Task Force on Climate-related Financial Disclosures) Spread of SDGs management We will promote collaboration with key partners; facilitate the use of field data in the manufacturing, construction, and public sectors; and offer solution packages and recurring businesses to customers struggling to overcome labor shortages. To contribute to a sustainable growth of society, we will set medium-term targets, and address five important issues under the leadership of the SDGs Promotion Committee.Express ing supp ort fo r the T CFD a nd participating in t he TCFD Co nsort iumWe work to reduce CO2 emissions by shifting the energy we use in business activities, such as the operation of telecom carrier-certified shops and insurance shops, to renewable energy. Promotion of diversity to empower diverse human capital To enhance employee engagement, we will adopt working styles that are in line with the change in the environment and offer opportunities to take on new challenges, under the leadership of the Diversity Promotion Committee. Increase in the needs for provision against natural disasters, unknown diseases, and longer life expectancy “HOKEN NO MADOGUCHI” insurance shops will focus on locations that can attract a large number of customers, such as the Tokyo metropolitan area and large-scale commercial facilities, and we will aim to establish a new service model that can create synergy with the mobile phone distributors.1 11 2CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 2 CONEXIO ’s Visio nSummary of Medium-term Management Plan 2020CONEXIO Plan 2020Strengthening Contact with Customers and Enhancing Productivity Towards Achieving a Smart Society Pioneered by 5G1Build a long-term relationship with customers2Achieve highly productive shop operations3Evolve into a mobile solutions provider4Enhance IoT/5G solutionsReinforce the management base5Capital strategyAim for a dividend payout ratio of 40% and ROE of 15%6Investment strategySteadily carry out strategic investments that will lead to future growth7Human capital strategyReinforce human capital investments that sustain CONEXIO8ESG/CSR managementFurther promote ESG/CSR managementQ u a n t i t a t i v e t a r g e t sNet salesOperating profitProfit280,000 million yen11,000 million yen7,200 million yenResults and evaluation for the fiscal year ended March 31, 2021 (achievements and challenges)Net salesOperating profitProfit188,795 million yen10,676 million yen(down 32.6% from the plan)(down 2.9% from the plan)7,536 million yen(up 4.7% from the plan)In the mobile phone market, commercial services of the new telecommunication standard 5G (the 5th generation telecom-munication system) were launched and telecom carriers announced revamped pricing plans, revitalizing the market. However, due to the revised Telecommunications Business Act and the voluntary restraint on business activities amid the COVID-19 pandemic during the three months ended June 30, 2020, handset unit sales were limited to 1.81 million units and net sales to 188,795 million yen. Meanwhile, operating profit increased to 10,676 million yen, marking the 10th con-secutive year of growth, and profit increased to 7,536 million yen, marking the 9th consecutive year of growth, due to the revenue growth achieved through our own initiatives (such as mobile help desk services for corporate clients) and increased sales of prepaid cards.1 3K e y i n i t i a t i v e s a n d r e s u l t sC o n s u m e r B u s i n e s s1 Build a long-term relationship with customers Enhancing services for which there is high customer demand, such as the expansion of smartphone classes Enhancing new customer contact by strengthening the pop-up shop system Store operations that offer safety and security by avoiding “3Cs” (closed spaces, crowded places, close-contact settings)2 Achieve highly productive shop operations Establishing an operations system based on the premise of appointments for store visits, and shortening customer service time Investments to save labor in back office operations (shift creation tools and store visit appointment tools, etc.)Strategic investment Launched Rakuten Mobile Shop Business, opening 23 directly managed stores Launched “HOKEN NO MADOGUCHI” insurance agency business, opening four directly-operated storesSmartphone classHuman capital investments Revised the personnel system, including improved conditions for shop staffPop-up shop (scenes from a pop-up shop run on a remote island)C o r p o r a t e B u s i n e s s3 Evolve into a mobile solutions provider Established an operations base for “Managed Mobile Service” Provided mobile solution services that promote “workstyle reforms” Established a sales system for solution products using digital marketing4 Enhance IoT/5G solutions Developed edge computing gateway “CONEXIOBlackBear”Nokia Local 5G Technology PartnershipParticipating companiesNokia Solutions and Networks Japan G.K.OMRON CorporationCONEXIO CorporationSharp CorporationNS Solutions CorporationHitachi Kokusai Electric Inc. Strengthened relationships with local 5G partners such as Nokia and NS Solutions*1: Nokia global alliance Expanded package sales of IoT solutions and built a stock-type business modelR e i n f o r c e t h e m a n a g e m e n t b a s e5 Capital strategy Aim for a dividend payout ratio of 40% and ROE of 15%We paid stable dividends of at least 60 yen of annual dividends during medium-term management plan 2020, with the aim of sustainably enhancing financial soundness and shareholder value. In addition, we increased annual dividends to 65 yen for fiscal year ended March 31,2021.6 Investment strategy Steadily carry out strategic investments that will lead to future growthWe will actively invest in fields supporting business over the long term and new businesses, and launched the Rakuten Mobile shop business and the “HOKEN NO MADOGUCHI” agency business.7 Human capital strategy Reinforce human capital investments that sustain CONEXIOIn the aim of becoming a company in which diverse human capital can perform their highest capabilities, we launched a Diversity Pro-motion Committee and accelerated initiatives while also revising the personnel system, including improved conditions for shop staff.8 ESG/CSR management Further promote ESG/CSR managementWe worked to further promote ESG/CSR management, identifying challenges to address over the medium- to long-term, including: reducing the environmental burden of our business processes; promotion of the empowerment of female employees, diversity, and health management; and thorough governance, compliance, and information security.*11 4Consumer BusinessCorporate BusinessCONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 2 CONEXIO ’s Visio nOverview of Medium-term Management Plan 2023“CONEXIO Plan 2023”Create New Services and Solutions by Grasping the Needs of Digital Society, and Contribute to the Enrichment of Living and BusinessBasic strategy 1Basic strategy 2Basic strategy 3Evolve the shop business in response to changes in customer needsExpand the Company’s unique services and solutionsInnovate productivity mainly through the pursuit of digitalizationReinforce the management baseCapital/governance strategyHuman capital strategyInvestment strategyCompliance strategySDGs managementIn order to contribute to the sustainable growth of society, we will implement SDGs management through our main business and specialized fields, with the following five important issues:Q u a n t i t a t i v e t a r g e t s f o r F Y 2 0 2 3Profit8 billion yenROE12% or moreOperating profit12 billion yen(million yen)Corporate Business10,6762,7589,7002,850Consumer Business12,46211,800Company-wide(4,544)21/3 Results(4,950)22/3 Forecast12,0003,39013,300(4,690)24/3 PlanK e y i n i t i a t i v e sBasic strategy 1Evolve the shop business in response to changes of customer needsPursuing a new shop style that supports customers in improving their quality of lifeIn addition to in-store sales, we will strengthen the out-of-store sales activities of pop-up shops, door-to-door sales, and pop-up smart-phone classes. Carrier shops will fulfil the role of offering what only physical stores can provide, such as experiences of 5G and other new technologies and providing services that lead to new discoveries. At the same time, we will leverage all contact with customers to expand sales activities.Basic strategy 2Expand the Company’s unique services and solutionsExpanding gross profit margin to 1.3 times from the FY2020 level by FY2023 through CONEXIO’s unique services and solutionsWe see major changes in the environment as an opportunity, in addition to the greater flexibility of unique services and solutions for our telecom carrier-related businesses. In the Consumer Business, we will provide services for smartphone beginners and security func-tions, in addition to expanding HOKEN NO MADOGUCHI stores. In the Corporate Business, we will expand “Mobile WorkPlace”, a service that combines mobile and cloud technologies to realize new working styles by creating an environment where people can work to the same standard as in the office while at home or on the road. We will also promote collaboration with major partners.Basic strategy 3Innovate productivity mainly through the pursuit of digitalizationImproving productivity by restructuring business processesIn the Consumer Business, we will renew our POS system, improve operation of shop tasks, and introduce online customer service. In the Corporate Business, we will shift from the current phone-centric system to an online system for our mobile solution sales and help desk order reception, as well as digitizing internal processes. On a Company-wide basis, we will promote the digital transformation of core business operations such as network environment development, accounting operations, and contract operations.Further strengthening the management base on the four strategiesCapital/governance strategy : we will strive to pay a stable dividend of 70 yen or more per year during medium-term management plan 2023, with the aim of sustainably enhancing financial soundness and shareholder value. We will continually strengthen the corporate governance system.: we will actively invest in fields supporting business over the long term and new business.: we will enhance employee engagement and promote diversity initiatives.: As the highest priority issue, we will continue to maintain a system that performs the checks and control functions of business activitiesInvestment strategy Human capital strategy Compliance strategy SDGs managementIn order to contribute to the sustainable growth of society, we will implement SDGs management through our main business and specialized fields. Based on this policy, we will work to solve five important issues that directly link to the social significance of the Consumer Business and the Corporate Business, led by the SDGs Promotion Committee.CONEXIO Plan 2023Reinforce the management base1 51 6CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 3 CONEXIO ’ s St ra te gyMessage from the PresidentWe will enhance our enterprise value as we work to achieve CONEXIO Plan 2023, which integrates growth strategy with SDGs management.Hiroshi SugutaPresident1 Adapting to major changes to the business environment to achieve an increase in profit for the 9th consecutive year and a record profitOne important factor in being able to overcome this difficult environment and achieve profit growth and a new record was greatly demonstrating our CSR spirit—a sense of responsibility for providing the important social infrastructure of telecommuni-I am Hiroshi Suguta, appointed President in April 2021. With 30 cations and always placing importance on contributing to years of experience in the field of information communication in customers. Another key factor was the sense of unity in the a general trading company, I have been a Board Director of company created by our corporate philosophy of “Conexio is to CONEXIO for seven years, during which time I have been in connect people and values.”charge of management as a whole, including corporate sales Specifically, in the Consumer Business, while receiving sup-and corporate planning. Leveraging the experience I have built port and guidance from each telecom carrier, we shifted to an up, I will work with enthusiasm to steer the future course for appointment-only system for customer store visits, introduced a CONEXIO.two-shift system for shop staff to prevent crowding, equipped In the rapidly changing environment of the mobile phone stores with infection prevention tools at an early stage, and took industry, the Company has overcome many difficulties by other measures to achieve the continuation of safe and secure responding to change with a field-oriented approach. In the store operations. Concerning the drop in handset unit sales, we previous medium-term management plan, CONEXIO Plan improved gross profit per unit, made up for the fall in income by 2020, there was a drop in handset unit sales due to the intro-growing unique services and product sales, worked to curb revised Telecommunications Business Act in October 2019. improving our operating profit margin. Meanwhile, in the Corpo-This was later followed by declarations of a state of emergency rate Business, we further accelerated the telework style of work-in response to the COVID-19 pandemic, and we were in a very ing that we had already introduced to respond to customer difficult situation in which we faced threats to continuing store demand related to telework, which had grown rapidly, without operation. However, we have taken appropriate measures to sacrificing our sales capabilities. In this way, we were able to cope with this situation and have come together as one to adapt significantly grow our smartphone sales and unique mobile solu-to it. As a result, in the fiscal year ended March 31, 2021 (the tions business. Through these efforts, operating profit from the previous fiscal year), which was the final fiscal year of CONEXIO Corporate Business expanded 73% under CONEXIO Plan Plan 2020, we achieved the profit target of our medium-term 2020, contributing to the achievement of the medium-term management plan. This marked an increase in profit for the 9th management plan for the whole company. In addition, we were consecutive year and a record profit.also able to reward employees for their hard work during the COVID-19 pandemic, paying special service bonuses to environment. Given these background factors, we put together employees for two years in a row.the following three basic strategies for growth in our medi-2 CONEXIO Plan 2023: integrating growth strategy with SDGs managementSo, what kind of changes are predicted for the business envi-ronment surrounding the Company in future? I think that we will be seeing the competition in price plans among telecom carri-ers, which started at the end of last fiscal year, further intensify. I also think another big change will be growth in online smart-phone sales and procedures. We must assume that these um-term management plan CONEXIO Plan 2023.Basic strategy 1is “evolve the shop business in response to changes of customer needs.”We will more accurately gauge the needs of customers —in other words, customer concerns and requests—and take advantage of the strengths of physical stores to evolve our sales activities. In an effort to expand contact with customers other than those who visit stores, we are venturing outside of stores to run initiatives such as counseling sessions to strengthen our sales activities to propose the optimal price plans and smart-phone usage support. In addition, by shifting from a mindset of changes will lead to certain amount of negative impact, such as striving to sell a large number of telecom carrier products to a fall in communications-related income for each telecom carrier, lower agency commission, and a further drop in handset unit sales at carrier shops. However, on the other hand, it is predicted that we will be seeing further growth in demand for proposal-based service sales that respond to the needs of cus-tomers, we would like to enhance our function into a base that supports our customers’ mobile life.Basic strategy 2is “expand the Company’s unique services and support from users who are unable to keep up with these trends solutions.”due to the rapid spread of smartphones and digitization. The Ministry of Internal Affairs and Communications has also made major efforts to widespread the use of smartphones with My Number Cards, with the goal of “people-friendly digitization that will leave no one behind,” and carrier shops are anticipated to play the role of local ICT hubs. Similarly in the Corporate field, demand for support for mobile utilization to be introduced by SMEs will likely continue to grow. Furthermore, new services created by the popularization of 5G will lead to more new business opportunities beyond our existing agency business. I consider this to be a positive aspect of the business In the Consumer Business, we will focus even more than before on the expansion of unique products and services. We will expand the variety of smartphone classes for smart-phone beginners to include formats such as one-on-one classes in accordance with the customer’s level. We will also link this service to “nexi smartphone support,” our app that provides content specialized in operational guidance and information for smartphone beginners, and provide services that contribute to eliminating the digital divide for many middle-aged and elderly users.Medium-term management planCONEXIO Plan 2020CONEXIO Plan 2023IndicatorFiscal year ended March 2018Fiscal year ended March 2021Fiscal year ending March 2024Operating profit10.2 billion yen10.6 billion yen12 billion yenProfitROEDividendsDividend payout ratio6.7 billion yen7.5 billion yen8 billion yen18.7%65 yen43.2%15.5%65 yen38.6%12% or more70 yen or more40.0% or moreduction of discount sale restriction rules on smartphones by the selling, general and administrative expenses, and focused on C h a n g e s i n k e y m a n a g e m e n t i n d i c a t o r s1 71 8CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 3 CONEXIO ’ s St ra te gy We will also proactively participate in the Project on Digital Basic strategy 3is “innovate productivity mainly through the pur-Utilization Support for Users led by the Ministry of Internal suit of digitalization.”Affairs and Communications, and promote regional expansion In addition to renewing POS systems and optimizing shop through initiatives such as running smartphone classes in operations, we will further promote the introduction of IT, such public halls in collaboration with local governments and other as by providing remote support for initial setup and other venues outside of carrier shops.common tasks even in the field of in-store customer service. By We will continue to plan and develop unique products and doing so, we will boost the productivity of store operations. In services that are niche but beneficial to users, such as smart-the Corporate Business, we will introduce digital technologies to phone earphones and other accessories, smartphone coating customer contact and expand our “Managed Mobile Service” services, and “nexi” service packages that provide security that can swiftly respond to customer requests without missing functions.any opportunities, and facilitate the optimization of operations. We are accelerating the expansion of our HOKEN NO MADO-GUCHI business, which is an initiative to branch out into other industries by using our expertise in shop operation, and are considering opening stores in a new format that also offers smartphone consultations. Our plans for the Corporate Business are as follows. Promoting “Mobile WorkPlace”, our environment for a new 3 Evolving from CSR to SDGs management through our main business and specialized fieldsIn addition to practicing the corporate philosophy of “Conexio is working style that enables users to complete tasks in any to connect people and values,” the Company has carried out location at any time by linking mobile and cloud technologies, management based on the CSR Policy established in 2015. we are proactively pushing forward with the expansion of When CONEXIO Plan 2023 was being formulated, the Board of solution services for small and medium enterprise users.Directors resolved to evolve this CSR management to SDGs In the field of IoT, we will utilize the expertise we have built up management that is more conscious of global standards, and in systems development and joint proof-of-concept experi-specific important issues “Materiality” to address through our ment to expand our activities with a focus on our IoT Solution main business and specialized fields were established.Set, an all-in-one package covering everything from sensors “Eliminating the information gap and realizing a prosperous to gateways, communications, and applications, and local 5G information society,” “promoting digital transformation in busi-initiatives. By doing so, we will provide additional functions ness society,” and “contributing to the prevention of incidents that are useful for the digital transformation of society and and accidents and the creation of a society resistant to natural We established specific important issues “Materiality” to address through our main business and specialized fields.Incorporating SDGs management into the growth strategy of CONEXIO PLAN 2023 with the aim of enhancing enterprise value.Optimizing the business base, financial base, and human capital that we have cultivated over the past 20 years, we will take on challenges as we move toward our next growth stage.Firmly believing that our initiatives to address these important 8 billion yen in the final year of the plan, the dividend payout issues will facilitate the sustainable growth of the Company, we ratio of 40% would be equivalent to dividends of 70 yen or have incorporated SDGs management into the growth strategy more per year, and we hope to achieve this ahead of schedule of CONEXIO PLAN 2023 and aim to enhance our enterprise (yearly dividends were 65 yen in the previous fiscal year ended value.March 31, 2021).4 Enhance our management base to meet the demands of the new market segments and strengthen shareholder returnsIn July this year, it was confirmed that we meet the standards to be listed on the Prime Market, the new market segments sched-uled to launch in April 2022. In September, the Board of Direc-tors resolved to select the Prime Market. We will work to further For fiscal year ending March 31, 2022, I regret to say that we predict a drop in profit to 9.7 billion yen of operating profit and 6.6 billion yen of profit due to a reduction in commission income as a result of telecom carriers’ revised agency commission. However, moving forward, as I previously mentioned, we will aim to achieve a record profit of 12 billion yen of operating profit and 8 billion yen of profit for fiscal year ending March 31, 2024 by growing the revenue of our unique businesses while maintaining the revenue of our telecom carrier agency business.The Company has grown with the strength of being able to accurately capture the needs of customers by directly dealing with user customers. Optimizing the business base, financial base, and human capital that we have cultivated over the past ees and create a system with working check functions. Concerning our investment strategy, we will invest in develop-ment and expansion of carrier shops and HOKEN NO MADO-GUCHI stores (including M&A), as well as technologies and companies that tie into the development of our unique prod-ucts and services. We will also conduct investments to acquire solution functions, technologies, and human capital in line with the growth strategy of the Corporate Business. For our shareholders and investors, during CONEXIO Plan 2023 we will aim to maintain a ROE of 12% or more and a dividend payout ratio of 40%. If we achieve our profit target of disaster prediction.disasters” summarize the social reason for existence of the strengthen our management base in the future, taking into In this way, the pillar of the growth strategy of CONEXIO PLAN Company. We then also added “initiatives for environmental account the revised Corporate Governance Code and the eval-2023 is expanding our unique businesses (with a medium-term issues” and “promotion of diversity and inclusion” to form the uation standards of investors in the new market.management plan target of boosting its proportion of compa-five materiality issues. We decided on KPI targets as the five ny-wide gross profit from the current 25% to 31%), while also materiality issues and tied them to the goals of achieving the maintaining the revenue of our telecom carrier agency business.SDGs. With our business domain in the regulated field of telecommu-20 years, we are determined to take on challenges as we move nications, we continue to consider compliance, the most toward our next growth stage. To all of our stakeholders, I ask important factor in sustainable growth, to be a key manage-for your warm support as we, CONEXIO, take on challenges ment issue. We will work to boost awareness among employ-moving forward.1 92 0CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 3 CONEXIO ’ s St ra te gyMessage from the General Manager, Consumer Business Group (Business Strategy)Leveraging our industry-leading base and wealth of human capital that have overcome countless crises, we will aim for sustainable growth.R iic hiro M eto kiBoard Director and Senior Managing Executive OfficerGeneral Manager, Consumer Business GroupWith the support and guidance of telecom carriers, we have places where we can expect to attract a large number of cus-implemented thorough hygiene control measures such as tomers, such as shopping malls, supermarkets, and other com-ensuring social distance and setting up plastic barriers for face-mercial facilities, drug stores and convenience stores, as well as to-face customer service in order to prevent virus transmission remote islands. There, we increase our contact with customers, among shop employees and store visitors. Furthermore, we with a focus on users of other telecom carriers, and uncover worked to ensure safe and secure store operations by strictly new customers.enforcing appointment-only store visits and introducing a two-When running these pop-up shops, staff are required to have shift system for shop staff. We also focused on boosting staff customer service skills that previously were not needed much, skills on days where it was not possible to carry out in-store such as using a variety of approaches to strike up conversation duties, such as by running training and study sessions to hone with the people passing by, get them interested in the products their customer service skills. At the same time as implementing and services that we handle, and get them to listen to what we these measures, we also worked to curtail selling, general and have to say. At the moment, we are utilizing external specialized administrative expenses, thus improving profit margins. As a staff to achieve results in various regions. Moving forward, I result, operating profit was almost on target.would like many of our shop staff to acquire these skills so that Solving social issues through new customer experiences with an eye to sustainable growthwe are able to achieve results on our own accord. This will be a big challenge for shop staff, but staff of retailers actually demon-strate these skills on a daily basis. Leveraging the strengths of our Consumer Business, we will transcend departmental boundaries to promote training sessions taught by retailer staff An industry-leading business basecustomer-first philosophy that we have cultivated since our founding, we provide a wide range of services from proposing Under CONEXIO Plan 2023, which was launched in April 2021, and personnel exchange, and ensure that the pop-up shop The Consumer Business operates telecom carrier-certified insurance products that align with the customers’ wishes to we will respond to the significant changes in the environment initiatives of our shops achieve results more efficiently.shops of NTT DOCOMO, KDDI Corp. (a.k.a “au” and “UQ helping customers claim for benefits and insurance payments. that have been continuing since the previous fiscal year and Regarding “expanding unique services,” we will develop the mobile”), and Rakuten Mobile throughout Japan. We have an Going forward, we plan to leverage our high customer service promote changes. We will move forward with the two key smartphone classes that have been well received so far, industry-leading business base, with annual handset unit sales skills in mobile phone sales and our experience in the rapidly themes of “evolving the shop business” and “expanding unique enhance their added value, and expand them. Smartphone of approximately 1.7 million units, approximately 440 telecom changing mobile phone industry to rapidly achieve proficiency in services.”classes are currently provided in shops around Japan, but they carrier-certified shops, and over 9 million shop members. In this field and proactively open stores. In addition, we are consid-Background factors to the theme of “evolving the shop originally started out at a service independently launched by one addition to engaging in the wholesale of smartphones, etc., to ering opening stores in a new format that also offers smartphone business” include the environmental changes of intensifying of our stores. Catching the attention of telecom carriers, smart-retailers, we also provide in-store sales facilitation. At Distribu-consultations run by sales staff who draw on their experience in competition among telecom carriers to acquire customers phone classes were subsequently expanded and rolled out to app ADGUARD. We also started sales of content that can be In the fiscal year ended March 31, 2021 (the previous fiscal to conduct sales—in other words, pop-up shops. We head to who have reacted favorably to the classes. In future, we will through price competition, and the resultant shift to perfor-shops around Japan as free classes. We have currently added mance-based agency commission. Furthermore, the COVID-19 the new “KURASHI NO SUMAHO KYOSHITSU” to service pandemic has meant that store visits are mainly via appoint-lineup as a premium class. One-on-one classes have been ment, and customer service time has also been restricted. started as the first phase. Taking place in the free time between Against this backdrop, it has become more important not to just existing free classes, these classes offer counselling in accor-wait in shops for customers to come, but to go outside of stores dance with the various requests and levels of the participants, tion Center and Call Center, we provide powerful backup to mobile phone sales.in-store sales through the speedy distribution of inventory and high-precision activation services.Furthermore, the Company also expends efforts on unique services such as “nexi smartphone support” for smartphone A year of overcoming double difficulties: falling handset unit sales and store visitorsusers, “nexi” service package security software, and adblocker viewed via smartphone as well as ENEOS Electricity as an infra-year), which was the final fiscal year of the previous medi-structure product that is highly compatible with phone bills, and um-term management plan CONEXIO Plan 2020, an increase in are working to create high value-added shops that are “pre-the price of smartphone devices due to revisions to the Tele-ferred by the customers.”communications Business Act in 2019 spurred on a drop in Furthermore, we have signed a partnership agreement with handset unit sales. Furthermore, there was also the impact of HOKEN NO MADOGUCHI GROUP INC., launching our HOKEN the state of emergency declarations due to the COVID-19 pan-NO MADOGUCHI business from March 2020. We are currently demic that urged the public at large to stay at home and for operating five stores with the primary business of proposing and stores to close. As a result, we faced double difficulties: falling offering the insurance coverage (compensation) necessary for handset unit sales and store visitors.the everyday lives of the customers. Based on the thorough We will create shops that are pleasant for more customers to visit and for employees to work in.2 12 2CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 3 CONEXIO ’ s St ra te gyexpand the classes with an eye to online classes, classes run in to use smartphones well enough, they may be left behind in the partnership with companies, and more. We will renew and digitization process, creating a digital divide. We can play an expand the lineup of existing unique services as appropriate, important role in ensuring as many people as possible to reap such as “nexi smartphone support” for smartphone beginners, the benefits of an abundant information society by making use “nexi” service package security software, and adblocker app of our expertise as a company that sells smartphones. As our ADGUARD.carrier shops become local ICT hubs that help improve custom-We will also leverage the human capital and experience that ers’ quality of life, we will find new revenue opportunities and we have cultivated through smartphone classes to strengthen work toward sustainable growth.initiatives aimed at eliminating the information gap (digital divide) in local communities. The Company was entrusted with the “Project on Digital Utilization Support for Users (regional collab-oration type)” by the Ministry of Internal Affairs and Communica-Leveraging the characteristics of regions to promote work-style reform for shop stafftions, for which we dispatch instructors as digital supporters in partnership with 22 municipalities around Japan. We run funda-Up until now, many of our shop operations involved instruction mental smartphone classes at venues such as public halls, from telecom carriers, and were carried out face-to-face using which cover content including applying for a My Number Card. old-fashioned methods. However, the COVID-19 pandemic has These classes have been well received. From the fiscal year led to progress in the digitization of customer service methods, ending March 31, 2023 onwards, we will expand this initiative to including the introduction of online customer service and vid-municipalities around Japan in line with the direction of the five-eo-based explanations. We have also started promoting our year plan of the Ministry of Internal Affairs and Communications own digital transformation in the aim of shortening customer to help eliminate the digital divide throughout local communities service time and optimizing staff operations. Promoting the use as a whole by dispatching supporters, training supporters, and of originally developed reception aggregation and analysis tools, other activities.we will push forward with reforms to productivity and shop staff These initiatives embody the important issue (Materiality) working styles.“eliminating the information gap and realizing a prosperous Furthermore, we will analyze the needs of customers, store information society” that we established as a social issue we visits, and other factors by region to flexibly revise our operating need to solve. When 3G services are terminated in future, hours to ensure we are able to serve even more customers. people buying smartphones for the first time and senior citizen Enacting reforms on a store-to-store basis, such as making will become new smartphone users. However, if they are unable opening and closing times earlier and increasing regular closing Consumer Business Group Initiatives Unique servicesSmartphone learning support app“nexi smartphone support”One-to-one/individualized instruction“KURASHI NO SUMAHO KYOSHITSU” (opening own stores)One-to-one/individualized instruction“KURASHI NO SUMAHO KYOSHITSU” (in docomo Shops)Project on Digital Utilization Support(Collaboration with municipal governments)I will develop our unique services even more than before and aim for a Consumer Business that can realize high revenue and growth.days, will give rise to a variety of benefits, including being able to On the other hand, we have growing discretion in store man-secure more appointment slots in the morning, simplifying staff agement and increasingly more room to develop our own shifts, and rapidly sharing information by holding morning meet-services. Taking this as a good opportunity, I will strive to put the ings in which all staff participate. In the future, we will continue right people in the right places to promote the growth and evolu-to widely promote these reviews to create shops that are pleas-tion of each business, while encouraging the leaders and staff at ant for more customers to visit and for employees to work in.each level of each department. In addition, I will constantly con-sider the effective allocation of human capital across businesses and implement them across organizational boundaries. Further-more, I will develop our unique services even more than before and aim for a Consumer Business that can realize high revenue and growth.Leveraging our wealth of human capital that have reformed themselves to overcome a variety of crisesOur Consumer Business has faced a variety of difficulties, including the COVID-19 pandemic in the previous fiscal year. It has overcome them by reforming itself, and continued to grow. Now, we are entering another turning point, and we ourselves are required to embark on even larger reforms.The source of sustainable growth for our Consumer Business is a wealth of human capital with strong customer service skills and growth mindset. To ensure success in our new challenge of pop-up shops, which seek to form diverse customer contact, and our smartphone classes, which seek to eliminate the digital divide, our wealth of human capital that have overcome a variety of difficulties need to come together as one to get closer to the customer. At the same time, it is important to reform the way we work, including the digitization of our operations, so that we can improve productivity and achieve results efficiently.2 32 4CONEXIO Corporation Integrated Report 2021CONEXIO Corporation Integrated Report 2021SECTION 3 CONEXIO ’ s St ra te gyMessage from the General Manager, Corporate Business Group (Business Strategy)Adhering to the customer-first philosophy that is our founding spirit, we will grow into a strong organization that pioneers the next generation in the wireless-first trend.Nao k i I no u eManaging Executive OfficerGeneral Manager, Corporate Business Groupin new contracts and introductions of our mobile solution prod-Company’s unique services and solutions.” This basic strategy ucts that promote “workstyle reform”. There was an increase in links in to Materiality 2 “promoting digital transformation in subscriptions for “Managed Mobile Service” as existing custom-business society,” and Materiality 3 “contributing to the pre-ers promoted working from home, and sales per customer also vention of incidents and accidents and the creation of a society increased thanks to factors such as an expansion in service resistant to natural disasters.”scope following the switch to smartphones. Revenue grew as a The services run by the Corporate Business include: “Mobile result. Meanwhile, in the IoT solutions field, we participated in WorkPlace”, our service that promotes work-style reform by the Nokia Local 5G Technology Partnership in local 5G and digitizing work environments using the power of mobile and private LTE with partner companies, and promoted proof-of-cloud technologies and creating an environment where users concept experiment for the development and provision of edge can conduct work and information sharing regardless of time computing gateways that support local 5G/private LTE.and place; and IoT Solution Set, an all-in-one package cover-Reforming from a sales to solutions organization and establishing the base toward our next leap forwardof-concept experiment.ing everything from sensors to gateways, communications, and applications to solve customer issues, developed leverag-ing our experience in IoT system development and joint proof-“Mobile WorkPlace” is a solution service that upgrades the Through the three years of medium-term management plan “Managed Mobile Service” that we have provided so far to CONEXIO Plan 2023, the Corporate Business will work on promote digital transformation and encourage the introduction The Corporate Business has its beginnings in sincerely caring for customersThe 2010s saw the advent of the smartphone, and phones reforming its entire business, moving from a sales-focused of new working styles. Many small to medium companies do shifted from being a tool for calling to a tool for information. Smartphones can be used in a variety