FISCO’s Business Strategy
Embarking on a Major Group Reorganization
In the fiscal year ending December 31, 2019, FISCO Ltd. carried out a major group reorganization. Consolidated subsidiaries FISCO DIAMOND AGENCY, Inc. and FISCO IR Ltd. were absorbed and merged into FISCO Ltd. In addition, FISCO conducted a debt-equity swap covering the monetary liabilities of \1,400 million held by NCXX Group Inc. against the Company. Moreover, FISCO sold part of its shares of NCXX Group (realizing a gain of \397 million), thereby converting NCXX Group from a consolidated subsidiary into an equity-method affiliate.
The goal of this reorganization is to resume dividend payments as early as possible. To do so, we will restore a sound balance sheet by reducing liabilities and rein- forcing equity, along with increasing short-term liquidity. Our financial health had deteriorated in the course of executing large investments. Through restructuring initia- tives, we will restore our financial health, and as we earn back the trust of our shareholders, we will transition to a new growth track for the future.
The debt-equity swap and the sale of NCXX Group shares will reduce the size of FISCO’s business in the near future. However, interest-bearing debt has been reduced from \3,821 million as of December 31, 2018 to \274 million, and the equity ratio has dramatically improved from around 2% to around 40%. Additionally, as a result of the absorption and merger of subsidiaries, savings in selling, general and administrative expenses have started to materialize through such means as streamlining expenses. With the deconsolidation of NCXX Group, the brand retail platform business, which has remained in the red, will no longer be reflected in FISCO’s financial results. Consequently, this will have the effect of reducing FISCO’s risks associated with business performance.
Incidentally, NCXX Group will become an equity- method affiliate. FISCO expects to continue its cordial relationship with NCXX Group, including collaborations, as before. Collaborations will be considered in fields such as cryptocurrency, which is an area of focus for FISCO, and 5th generation wireless communication systems (5G), which is a promising growth area for NCXX Group, as well as the mining business, which is an area of strong interest.
Business Forecasts for the Fiscal Year Ending December 31, 2020
The FISCO Group has set the following numerical targets in its business plan. The Group is targeting net sales of \1,661 million and operating income of \239 million for the fiscal year ending December 31, 2020; net sales of \1,826 million and operating income of \273 million for the fiscal year ending December 31, 2021; and net sales of \2,084 million and operating income of \332 million for the fiscal year ending December 31, 2022. In the cryptocurrency and blockchain business, Vulcan Crypto- currency Financial Products K.K., a subsidiary of the Com- pany, conducts properietary investment in cryptocurrency, and records the net gains (losses) from these investment activities as net sales. That said, Vulcan Cryptocurrency Financial Products K.K. plans to conduct trading activities according to market conditions for cryptocurrency, and has not been included in the FISCO Group’s business plan at this time. Its results will serve as an additive positive factor to the plan’s numerical targets.
As measures to achieve these targets, the Group will resume services for individual investors, which have been revised, and strengthen financial content services. It will also expand services for institutional investors and step up sales of corporate analysis reports. The Group will also reduce shared costs of Headquarters divisions by merging them and further strengthen the management structure through such means as strengthening cross organizational systems.
Hitoshi Kano, President and CEO