- To increase corporate value, going beyond simply conducting business with value and further improving pitch ability
Ricoh Leasing is often praised for its serious and honest business development. The reality is that, though the Company has distinctive businesses born from this seriousness, society is largely unaware of them. What is needed to further enhance the corporate value of Ricoh Leasing,which has been supporting small and medium-sized enterprises since its founding and is engaged in businesses that contribute to solving social issues? This is the question posed in this dialogue with Shoichi Tsumuraya,Professor at the Graduate School of Business Administration at Hitotsubashi University.
- Seriousness is clearly communicated
Learn to show off businesses with social value
Tsumuraya
President Nakamura, prior to this dialogue, I read an interview article with you and Ricoh Leasing's Integrated Report, among other items. They gave me the sense of a serious company. I think this is great, considering that such a corporate culture cannot be created overnight. You, President Nakamura, are said to have originated the idea of lowering the hurdles to capital investment for all types of companies. With the macroeconomic challenge in Japan of companies' cash reserves not being directed toward investment, your business could help solve this issue. Is this not an innate strength you should be showing off even more?
Nakamura
At the time of our founding, a number of major leasing companies, including those affiliated with banks, were being established to invest in ships, airplanes, and large-scale factory equipment. However, they targeted large companies, and small and medium-sized enterprises were being left behind. In the process of Ricoh's popularization of copiers, we were established to support the capital investment of small and medium-sized enterprises. Since then, we have continued to grow while expanding the scope of our leasing to include computers, cars, and medical equipment. Currently, we have about 400,000 customers, but the average unit price of lease and installment sales contracts is less than 2 million yen, and we have not changed our stance of supporting small and medium-sized corporate customers.
Tsumuraya
And this becomes an asset in the form of a large amount of transaction data. Using this data, which you can say is proof of trust in Ricoh Leasing, and repeating what you call continuous evolution, you are seeking to be a bridge to an abundant future with independent finance and services.
Nakamura
Yes, that’s right. We have generated and systematized scoring based on information such as corporate attributes and other company information, as well as transaction history, to ensure prompt and efficient screening. The data is also used to improve screening accuracy through AI-based analysis and evaluation. As for evolution, there are two kinds. The first is intentional evolution on the part of management, and the other is evolution that occurs as a result of new daily awarenesses by employees, such as when they are stimulated by customers. In both cases, the initial evolution is small, but as it repeats over and over again, it grows to become big business. Though evolution, or specifically the initial mutation part of evolution, does result in errors, the kind of mutation we are referring to builds up and helps us grow internally.
Tsumuraya
Your company's goal of moving from a "financial company that engages in business" to a "business company that also engages in finance" is also in line with this continuous evolution.
Nakamura
Currently, we operate nursing care facilities and provide factoring services to nursing care providers, while in the environmental field, we contribute to the expansion of renewable energy by operating our own solar power plants and providing financing for power generation facilities. Finance is sometimes likened to the lifeblood of an industry, or a silent stagehand dressed in black. The greatest strength of our Group is that we have the perspective of a business operator and a player in the financial industry, which is the lifeblood of business. In other cases, we have helped stabilize businesses by meeting demand for funds through ABL, or asset-based lending, that focuses on the asset value of beef cattle, in response to the social issues faced by the agricultural and livestock industries, which continue to see a decline in the number of producers.
Tsumuraya
That is the kind of unique business that I would like to see in an Integrated Report. If it catches the eye of investors, it may generate analyst coverage and change the structure of how traders value your stock price. I imagine a paid analyst report would be something people would be interested in.
- Relationships with customers who understand price increases
Desire for growth with positivity among employees
Tsumuraya
If the majority of your customers are small and medium-sized enterprises, would there not be a backlash against rate hikes and price increases?
Nakamura
With the Bank of Japan lifting its yield curve control and negative interest rate policies, Japan has re-entered a world with interest rates. Our clients understand that that some price increases are compensation for our services, and yields have been increasing since around 2018. We enjoy a sound financial position, with a low default rate and good risk diversification.
Tsumuraya
You have the makings of an opportunity to increase asset efficiency and profitability for the future. If the capital market is informed that your company enjoys such an advantage, I believe that valuations will rise even higher.
Nakamura
First of all, we are aiming for ROE of 7% or more in fiscal 2025, and we are striving for growth by rearranging our business portfolio mindful of management aware of cost of capital.
Tsumuraya
Currently, the mainstream approach to dealing with a P/B ratio below 1x is to use the proceeds from the sale of cross-shareholdings to conduct large-scale share buybacks, and then take short-term corporate actions to turn the situation around. However, your company is not a company that drastically changes its capital structure. The structure is designed to grow the business, return it with dividends, and reduce the volatility of profits. If we can explain that these are favorable conditions for shareholders and that it will take time to generate evolution, investors and the capital market will appreciate it differently. You also possess distinctive internal systems, such as Happiness Training, a one-month virtual experience for organization managers to experience time-constrained work styles due to childcare, nursing care, illness of a partner, or other circumstances. Your paternal leave also enjoys a 100% usage rate. How that has changed the company should also be a factor for pitching your superiority.
Nakamura
Recently, we improved our Mirai Creation internal proposal submission system for creating new businesses; if a proposal proceeds to commercialization, the proposing employee will receive a reward of 2 million yen, and even a proposing employee who is not in a management position can also become the head of the organization that is in charge of that business. This also serves as training in entrepreneurship. Other efforts to revitalize communication between the field and management include the start of Mirakuru-Za, in which officers are dispatched to business sites for discussions at the request of those sites.
Tsumuraya
And what are your thoughts, President Nakamura, in the context of these initiatives?
Nakamura
In the end, the only person who can change you is yourself. My term as president will be limited, and then the natural cycle of replacement and renewal will continue. In a rapidly changing social environment, just doing the daily tasks in front of you will not help you grow, since this keeps you from seeing the rest of the world around you. We see our greatest asset at Ricoh Leasing as being our human resources, and we believe that in order for them to achieve growth, we need to invest in their education. We believe that this growth will lead to qualitative changes in our human resources, and that these changes will lead to the birth of new businesses.
Tsumuraya
You seem to have a strong will to change both the organization and its human resources, rather than maintaining the status quo. With that as a foundation, what is your next goal?
Nakamura
My personal ideal would be to create an environment where people can grow if they work at Ricoh Leasing. In this ideal, many people would join us, gain experience, and become independent. It would be interesting to see if human resources who have grown up outside the Company come back to reconnect with us with a new sense of values.
- Diverse and sound governance structure
Making Board of Directors meetings a forum where everyone feels a sense of ownership
Tsumuraya
As an independent listed company, your company has a separate governance structure from its major shareholders, Ricoh and Mizuho Leasing. Tell us about the composition of your Board of Directors.
Nakamura
The Board of Directors consists of 13 directors, including three internal directors, two outside directors dispatched from our major shareholders, and eight independent outside directors. Our officer structure enjoys strong governance, with 30% of our directors being women, creating diversity and a sense of ownership by all. By providing information on agenda items from the Company prior to Board meetings, we try to create a forum for lively discussions that are rich in substance on the day of the meeting. In addition, during the formulation of our Mid-term Management Plan, members of the Board held half-day meetings and retreats to ensure close mutual communication during this process, which allowed for quite in-depth discussions.
Tsumuraya
Are there any opportunities for communication between internal and outside directors outside of Board meetings?
Nakamura
We have informal gatherings where only outside directors participate and no minutes are taken, and I also share my awareness of issues as appropriate. We have sessions with advisors based on changes in the external environment, which we also share. In such interactions, outside directors have told me to do more to pitch the appeal of Ricoh Leasing.
Tsumuraya
That is indeed a key topic of today's discussion, and I think you should explore what investors are focusing on and proactively disclose information related to these areas. Since your company is engaged in a business with social value, how you disclose this should have a positive impact on the share price.
Nakamura
In addition to proactively disclosing what investors are looking for, we would like to devise and enhance methods for two-way communication, including disclosure and engagement for multiple kinds of stakeholders. Thank you very much for your time today.