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Financial Report for Fiscal 2016 (Japanese GAAP) (Consolidated) (May 1, 2017)
Company Name SG HOLDINGS CO., LTD. URL http://www.sg-hldgs.co.jp/english
Representative President and COO Tadashi Machida
Contact Director in charge of Finance and Accounting, and
Management and Control
Shunichi Nakajima (TEL) 075(671)8600
General Meeting of the
Shareholders Scheduled for June 9, 2017 Payment of Dividends Scheduled for June 12, 2017
(Note: Amounts less than 1 million yen are rounded down to nearest million yen)
1. Consolidated Financial Results for Fiscal Year Ended March 20, 2017 (March 21, 2016 - March 20, 2017) (1) Consolidated Operating Results
(Note: Percentage figures in the table below represent changes from the previous fiscal year)
Operating Revenue Operating profit Ordinary profit Profit Attributable to Owners
of Parent
Million yen % Million yen % Million yen % Million yen %
Fiscal 2016 930,305 (1.4) 49,474 (8.4) 51,208 (2.6) 28,452 (16.3)
Fiscal 2015 943,303 10.0 54,004 18.4 52,572 19.8 33,975 36.9 (Note) Comprehensive income: Fiscal 2016: 30,962 million yen ((7.4)%) Fiscal 2015: 33,449 million yen (17.7%)
Basic Earnings Per Share Diluted Earnings Per Share Return on Equity
(ROE)
Return on Assets
(ROA) Operating Margin
Yen Yen % % %
Fiscal 2016 274.98 11.0 8.3 5.3
Fiscal 2015 320.41 15.7 9.0 5.7
-
- (Reference) Equity in earnings of associates: Fiscal 2016: 2,954 million yen Fiscal 2015: 33 million yen
(2) Consolidated Financial Position
Total Assets Net Assets Equity Ratio Net Assets Per Share
Million yen Million yen % Yen
Fiscal 2016 650,843 309,771 43.9 2,758.57
Fiscal 2015 583,761 237,192 39.5 2,205.96
(Reference) Shareholders’ equity: Fiscal 2016: 285,429 million yen Fiscal 2015: 230,624 million yen
(3) Consolidated Cash Flows
Cash Flows from Operating
Activities
Cash Flows from Investing
Activities
Cash Flows from Financing
Activities
Cash and Cash Equivalents
at End of Year
Million yen Million yen Million yen Million yen
Fiscal 2016 43,907 (111,826) 51,009 70,990
Fiscal 2015 85,770 (16,870) (42,938) 88,428
2. Dividends
Dividend Per Share
Total
Dividends
(Annual)
Payout Ratio
(Consolidated)
Dividends on Net
Assets
(Consolidated) 1Q-end 2Q-end 3Q-end 4Q-end Total
Yen Yen Yen Yen Yen Million yen % %
Fiscal 2015 0.00 30.00 30.00 3,104 9.4 1.5
Fiscal 2016 0.00 36.00 36.00 3,724 13.1 1.5
Fiscal 2017 (Forecast)
- -
- -
- - - - - - (Note) “Dividends” above represents the dividend paid for the Company’s common shares. As to dividend payment for class shares
that differ from the Company’s common shares in respect to shareholders’ rights, see “Dividends of Class Shares” as
described below. Distribution of dividends from surplus is scheduled to be resolved at the 11th ordinary general shareholders’
meeting to be held on June 9, 2017. The Company’s articles of incorporation designate September 20 and March 20 as the
dividend record dates. However, a dividend forecast based on the said record dates is currently undecided.
Translation
3. Projection of Consolidated Performance for Fiscal 2017 (March 21, 2017 - March 31, 2018)
(Note: Percentage figures in the table below represent changes from the previous fiscal year)
Operating Revenue Operating profit Ordinary profit Profit Attributable to
Owners of Parent
Basic Earnings Per
Share
Million yen % Million yen % Million yen % Million yen % Yen
Full year 1,000,000 - 58,000 - 60,000 - 33,000 - 318.93
(Note) Subject to the approval of “Partial Amendment of the Articles of Incorporation” at the 11th ordinary general shareholders’
meeting to be held on June 9, 2017, from the fiscal year 2017, the Company will change its closing date from March 20 to March 31. Accordingly, for all the consolidated subsidiaries, their closing date or provisional closing date will be unified to the revised consolidated closing date. In addition, from the fiscal year 2017, the Company and its domestic consolidated subsidiaries changed their depreciation method for property, plant and equipment to the straight-line method while changing some of the useful lives. Therefore, as a projection of consolidated performance for the fiscal year 2017, the forecast figures include such impact, and changes from previous fiscal year are not shown. Please refer to the section “(ii) Projections for the Next Fiscal Year” in “(1) Analysis of Operating Results” in “1. Analysis of Operating Results and Financial Position” on page 3 of the Appendix for further information.
* Disclaimer regarding forward-looking statements
The descriptions concerning the business forecasts included in this document are based on certain information obtained by the
Company and the assumptions that the Company has deemed reasonable as of the date of publication. Actual results may differ
substantially from these forecasts due to a variety of important factors.
* Notes
(1) Changes in significant subsidiaries during the period (Changes in specified subsidiaries resulting in changes in
None scope of consolidation):
Newly added: - (Company Name)
Excluded: - (Company Name)
(2) Changes in accounting policies and accounting estimates, and restatements
(i) Changes associated with revision to accounting standards: Yes
(ii) Changes in accounting policies other than (i) above: None
(iii) Changes in accounting estimates: None
(iv) Restatement: None (Note) Please refer to the section “(5) Notes on Consolidated Financial Statements (Changes in Accounting Policies)” in “4.
Consolidated Financial Statements” on page 22 of the Appendix for further information.
(3) Number of shares issued and outstanding (common shares)
(i) Number of shares outstanding at end of
period (including treasury shares)
(ii) Number of shares of treasury shares at end
of period
(iii) Average number of shares during the term
Fiscal 2016 106,732,400 shares Fiscal 2015 106,732,400 shares
Fiscal 2016 3,262,483 shares Fiscal 2015 3,262,483 shares
Fiscal 2016 103,469,917 shares Fiscal 2015 103,469,917 shares
(Reference) Summary of Non-Consolidated Operating Results
1. Non-Consolidated Operating Results for the Year Ended March 20, 2017 (March 21, 2016 – March 20, 2017)
(1) Non-Consolidated Operating Results
(Note: Percentage figures in the table below represent changes from the previous fiscal year)
Operating Revenue Operating Profit Ordinary Profit Profit
Million yen % Million yen % Million yen % Million yen %
Fiscal 2016 19,128 9.7 11,196 11.3 12,079 24.9 100,894 687.7
Fiscal 2015 17,443 (0.4) 10,061 7.6 9,668 1.8 12,808 35.3
Basic Earnings Per Share Diluted Earnings Per Share
Yen Yen
Fiscal 2016 975.11 -
Fiscal 2015 115.84 -
(2) Non-Consolidated Financial Position
Total Assets Net Assets Equity Ratio Net Assets Per Share
Million yen Million yen % Yen
Fiscal 2016 466,892 273,822 58.6 2,646.39
Fiscal 2015 423,537 177,977 42.0 1,697.15
(Reference) Shareholders’ equity: Fiscal 2016: 273,822 million yen Fiscal 2015: 177,977 million yen
Dividends of Class Shares
Details of dividends per share on class shares that differ from the Company’s common shares in respect to shareholder’s rights are as
follows:
Dividend Per Share
1Q-end 2Q-end 3Q-end 4Q-end Total
Yen Yen Yen Yen Yen
Class A preferred shares
Fiscal 2015 0.00 30.50 30.50
Fiscal 2016
Class B preferred shares
Fiscal 2015 0.00 32.00 32.00
Fiscal 2016
- -
- - - - -
- -
- - - - -
(Note) Based on the resolution by the Board of Directors on June 17, 2016, the Company acquired all the Class A preferred shares and Class B preferred shares as of August 1, 2016, and cancelled all the acquired shares on the same date. Therefore, there is no dividend after 2Q-end of fiscal 2016.
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Table of Contents of Appendix
1. Analysis of Operating Results and Financial Position .............................................................................................................. 2
(1) Analysis of Operating Results ............................................................................................................................................ 2
(2) Analysis of Financial Position ............................................................................................................................................ 4
(3) Dividend Policy and Dividends for the Current and Next Fiscal Years ................................................................................ 5
2. Overview of SG HOLDINGS Group ........................................................................................................................................ 6
3. Management Policy ................................................................................................................................................................ 8
(1) Principle Policy of Corporate Management ........................................................................................................................ 8
(2) Medium- to Long-Term Management Strategies and Target Management Indicators ......................................................... 8
(3) Challenges to Be Addressed ............................................................................................................................................. 9
4. Consolidated Financial Statement .......................................................................................................................................... 11
(1) Consolidated Balance Sheets ........................................................................................................................................... 11
(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income ......................................... 13
(3) Consolidated Statements of Changes in Equity ................................................................................................................. 15
(4) Consolidated Statements of Cash Flows ........................................................................................................................... 17
(5) Notes to Consolidated Financial Statements ..................................................................................................................... 19
(Significant Items Relating to the Preparation of Consolidated Financial Statements) ..................................................... 19
(Changes in Accounting Policies) ................................................................................................................................... 22
(Changes in Presentation) .............................................................................................................................................. 22
(Additional Information) .................................................................................................................................................. 22
(Segment Information, etc.) ............................................................................................................................................ 22
(Significant Subsequent Events) ..................................................................................................................................... 24
5. Non-Consolidated Financial Statements ................................................................................................................................. 25
(1) Balance Sheets ................................................................................................................................................................. 25
(2) Statements of Income........................................................................................................................................................ 27
(3) Statements of Changes in Equity....................................................................................................................................... 28
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1. Analysis of Operating Results and Financial Position
(1) Analysis of Operating Results
(i) Operating results for the fiscal year under review
During the fiscal year under review, the Japanese economy continued to see a moderate recovery supported by the highly
eased financial environment and the effect of the government’s large economic stimulus package as well as the moderate rise
in the growth rate of overseas economies.
The business environment in the logistics industry has remained challenging. Despite the improvement in business
performance due to low fuel prices, the labor supply and demand situation remained tight following the improvement in
Japan’s employment and ongoing concerns about the rise in the cost of labor.
This fiscal year, the first year of the medium-term management plan “First Stage 2018” (FY2016–FY2018), we have focused on
enhancing the ability to produce solutions and expanding the global logistics network driven by “GOAL (GO Advanced
Logistics),” our Group-wide strategic sales team (hereinafter referred to as “GOAL”). In addition, the Group has focused on
enhancing the offering of customer solution and expanding business by the capital and business alliance contract with Hitachi
Transport System, Ltd. (hereinafter referred to as “Hitachi Transport System”).
Under these circumstances, in its core delivery business, the Group has worked on sales expansion of Smart Delivery services
and featured delivery products as well as generating synergies with Hitachi Transport System through development of new
services and shared usage of vehicles and facilities. In the logistics business, the Group further accelerated the activities of
GOAL which provides integrated logistics solutions. In the real estate business, the Group continued to sell trust beneficiary
interests of its real estate but reduced the level of sales activities compared with the previous fiscal year. In other businesses,
we broadened the scope of business by leveraging the Group’s logistics networks and management resources.
Operating revenue for the consolidated fiscal year under review decreased by 1.4% from a year earlier to 930,305 million yen,
operating profit decreased by 8.4% to 49,474 million yen, and ordinary profit decreased by 2.6% to 51,208 million yen.
Meanwhile, profit attributable to owners of parent amounted to 28,452 million yen, a decrease of 16.3% from the previous year.
Below is an overview of business segments and their respective performances.
• Delivery Business
The number of packages handled and delivered by the Group in its main services was as follows:
Fiscal 2015 Fiscal 2016 Year-on-year Year-on-year
Service name (March 21, 2015 to (March 21, 2016 to change change (%)
March 20, 2016) March 20, 2017)
Hikyaku Express (in millions) 1,198 1,218 19 1.7
Hikyaku Air Express (in millions) 7 7 0 0.2
Hikyaku Cool Express (in millions) 32 36 3 11.1
Mail Express (in millions) 247 204 (42) (17.3)
Hikyaku Mail (in millions) 46 40 (5) (12.4)
Express
Hikyaku You-Mail (in millions) 200 163 (37) (18.5)
Express
(Reference) e-Collect (in millions) 105 104 (1) (1.2)
Service
(Notes) 1. Hikyaku Express is shown including Hikyaku Air Express and Hikyaku Cool Express.
2. Although e-Collect Service belongs to the “Other Businesses” segment, the information is provided for
reference purposes.
In the delivery business, the introduction of same-day delivery services in Tokyo’s 23 wards, the sales expansion of featured
delivery products and the roll-out of Smart Delivery services contributed to increase the number of packages handled and the
revenue. In addition, the Group, with Hitachi Transport System, launched the new delivery route to transport directly from
Hitachi Transport System’s distribution centers to Sagawa Express Co., Ltd.’s (hereinafter referred to as “Sagawa Express”)
transit center and pursued the efficiency from the shared usage of vehicles.
As a result, operating revenue from this business segment increased by 2.3% from the previous fiscal year to 738,186 million
yen while operating profit increased by 3.2% to 39,647 million yen.
- 3 -
• Logistics Business
In the logistics business, operating revenue in Japan remained strong due to the increase in new customers from the second
half of the previous fiscal year and the transaction volume of existing customers. However, costs were incurred in launching
new logistics sites.
In overseas markets, the Group was adversely affected by fluctuation in currency exchange despite the increase in transaction
volume. In addition, the Group executed business alliances with PT.Repex Wahana in Indonesia and LBC Express, Inc. in the
Philippines. Furthermore, the Group developed and commenced the operation of a large multi-tenant logistics facility called the
SG Sagawa Vietnam Distribution Center in Vietnam, converted SG SAGAWA EXPRESS VIETNAM, LLC into a subsidiary and
extended the logistics services for large distribution customers.
As a result, operating revenue from this business segment decreased by 3.2% from the previous fiscal to 110,471 million yen
while operating profit decreased by 27.9% to 786 million yen.
• Real Estate Business
In the real estate business, the Group continued to sell trust beneficiary interests of real estate for sale but reduced the level of
sales compared with the previous fiscal year.
As a result, operating revenue from this business segment decreased by 63.2% from the previous fiscal year to 17,513 million
yen while operating profit decreased by 49.8% to 5,146 million yen.
• Other Businesses
In other businesses, in addition to the increased sale of new cars, automobile services business, fuel sales and human
resources services were strong.
As a result, operating revenue from this business segment increased by 6.8% from the previous fiscal year to 64,134 million
yen. Operating profit totaled 5,704 million yen, an increase of 14.4% from a year earlier.
(ii) Projection for the Next Fiscal Year
The domestic economy for the new fiscal year will continue to see a moderate expansion supported by the eased financial
environment and the fiscal expenditures in the government’s large economic stimulus package. With respect to economies
overseas, growth rates are expected to rise moderately that is supported by solid growth in developed countries and recovery
in emerging economies. In the logistics industry, we anticipate the difficult business environment to remain unchanged
considering factors such as increasingly fierce competition and rising labor costs as a result of the tight labor supply and strong
labor demand.
Under such circumstances, we focus on creation of logistics solutions for clients leveraging the full-extent of the Group’s
expertise, establishment of the consistent logistics network locally and globally, and business expansion through the alliance
with Hitachi Transport System, as we move on to the second year of the medium-term management plan “First Stage 2018.”
In the delivery business and the logistics business, we continue to seek ways to address clients’ potential issues for optimized
logistics through GOAL and the Group-wide collaborative sales activities. In addition, through the capital and business alliance
with Hitachi Transport System, we enhance our solution capability and achieve synergies. With respect to global initiatives, we
strengthen logistics network that is consistent locally and globally through M&A and business alliances.
In the real estate business, we focus on continuous development and operational management towards building an optimal
Group infrastructure and also to promote the growth of the private open-end real estate investment trust (private REIT).
(Projection for consolidated business performance)
Operating revenue 1,000.0 billion yen
Operating profit 58.0 billion yen
Ordinary profit 60.0 billion yen
Profit attributable to owners of parent 33.0 billion yen
Subject to the approval of “Partial Amendment of the Articles of Incorporation” at the 11th ordinary general shareholders’
meeting to be held on June 9, 2017, from the fiscal year 2017, the Company will change its closing date from March 20 to
March 31. Accordingly, for all consolidated subsidiaries, their closing date or provisional closing date will be unified to the
revised consolidated closing date.
As a result, the projection of consolidated performance for the fiscal year 2017, which is a transition period for unifying the
closing date, reflects the following factors.
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Company
Financial statements used
when preparing for the
consolidated financial
statements to date
Closing
date after
the change
Period considered
the projection of
consolidated
performance
in
The Company and its domestic consolidated
subsidiaries
Financial statements based
on March 20 closing date March 31
March 21, 2017 to March
31, 2018
Overseas consolidated subsidiaries
(Companies whose former closing date was
December 31 and those that are able to change
the closing date under local laws and regulations)
Financial statements based
on December 31 closing
date
March 31 January 1, 2017 to
March 31, 2018
Overseas consolidated subsidiaries
(Companies whose former closing date was
December 31 and those that are unable to change
the closing date under local laws and regulations)
Financial statements based
on December 31 closing
date
December
31
January 1, 2017 to
March 31, 2018
(planned for provisional
closing)
Overseas consolidated subsidiaries
(Companies whose former closing date was March
31)
Financial statements based
on December 31
provisional closing date
March 31 January 1, 2017 to
March 31, 2018
The effects of these changes are estimated as operating revenue of 43,000 million yen, operating profit of 1,200 million yen,
ordinary profit of 1,100 million yen and profit attributable to owners of parent of 300 million yen, in increase respectively.
In addition, from the fiscal year 2017, the Company and its domestic consolidated subsidiaries changed their depreciation
method of property, plant and equipment from the declining balance method to the straight-line method. Furthermore, the
delivery business changed the useful lives used in taxation to those on the actual condition. As a result, the amount of
depreciation is expected to decrease approximately by 7,000 million yen, and such effect has been reflected in the projections.
(2) Analysis of Financial Position
(i) Status of Assets, Liabilities and Net Assets
Total assets amounted to 650,843 million yen and it is up by 67,081 million yen from the end of the previous fiscal year. This
was mainly due to the increase of 91,809 million yen in investment securities through the acquisition of shares of Hitachi
Transport System, the decrease of 17,502 million yen in cash and deposits and 11,195 million yen in real estate for sale.
Liabilities totaled 341,071 million yen, and it is down by 5,497 million yen from the end of the previous fiscal year. This was due
primarily to the decrease of 3,795 million yen in loans payable.
Net assets amounted to 309,771 million yen and it is up by 72,579 million yen from the end of the previous fiscal year. This was
due mainly to the increase of 32,975 million yen in capital surplus following the sales of shares of Sagawa Express and 28,452
million yen in profit attributable to owners of parent while making dividend payments of 3,927 million yen from surplus.
All these factors combined brought our equity ratio up by 4.4 points above the end of the previous fiscal year, to 43.9%.
(ii) Status of Cash Flows
The balance of cash and cash equivalents (hereinafter referred to as “funds”) as of the end of the consolidated fiscal year
under review decreased by 17,438 million yen to 70,990 million yen.
The status of cash flows for the current fiscal year under review and factors behind them are provided below.
(Cash flows from operating activities)
Funds from operating activities totaled 43,907 million yen and it is decreased by 48.8% from the previous fiscal year.
This was primarily because of the recognition of 49,388 million yen in profit before income taxes, 24,209 million yen in
depreciation, the decrease of 9,533 million yen in inventories, and the payment of 34,201 million yen in income taxes.
(Cash flows from investment activities)
Funds used for investment activities increased by 562.8% from the previous year to 111,826 million yen.
This was primarily because of the purchase of shares of subsidiaries and associates of 87,784 million yen, purchase of
property, plant and equipment of 22,648 million yen and intangible assets of 6,327 million yen, the sale of property, plant and
equipment of 8,019 million yen.
(Cash flows from financing activities)
Funds from financing activities were 51,009 million yen (as compared to the payment of 42,938 million yen in the previous fiscal
year).
This was primarily because of 66,318 million yen in proceeds from subsidiaries not resulting in change in scope of
consolidation, 17,550 million yen in proceeds from long-term loans payable, and 21,390 million yen for the repayment of long-
term loans payable.
- 5 -
(3) Dividend Policy and Plans for the Current and Next Fiscal Years
The Company has set a principle profit distribution policy to maintain a stable dividend payment while securing sufficient retained
earnings necessary to continue business operations in the future and enhance business management.
The Company distributes dividends of surplus annually as per the above policy by the resolution of the ordinary general
shareholders’ meeting. Meanwhile, the Company’s Articles of Incorporation stipulates that the Company is able to pay an interim
dividend by the resolution of the Board of Directors.
Based on this policy, the Company is planning to propose at the 11th ordinary general shareholders’ meeting scheduled for June
9, 2017 the payment of a dividend of 36.0 yen per common share for the fiscal year under review.
Based on the resolution by the Board of Directors on June 17, 2016, the Company acquired all the Class A preferred shares and
Class B preferred shares as of August 1, 2016, and revoked all the acquired shares on the same date. Therefore, there is no
dividend after 2Q-end of fiscal 2016 for these shares.
While dividends for the next fiscal year are not decided at this moment, the Company will consider payout based on the policy
described above..
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2. Overview of SG HOLDINGS Group
SG HOLDINGS Group (the Company and related companies) consists of the Company (SG HOLDINGS CO., LTD.) which is a pure
holding entity, 110 consolidated subsidiaries and 10 associates subject to the equity method and is engaged in the delivery business,
logistics business, real estate business, and other ancillary businesses.
Businesses performed by the Group and the segments of the individual subsidiaries and associates are shown below:
Segment Name Major products and services Major companies
Delivery Business Hikyaku Express, Hikyaku Cool Express
Hikyaku Mail Express, Mail Air
Express, etc.
Moving transportation, Route delivery
service, Charter transportation
Installation transportation, Art
transportation, Delivery agency service,
Food delivery service
SAGAWA EXPRESS CO., LTD.
SG MOVING CO., LTD.
WORLD SUPPLY CO., LTD.
2 other companies
(Total: 5 companies)
Logistics Business Comprehensive logistics services
Development of logistics systems
Control and management of inventory
and orders
Management of distribution centers
Warehousing
Transportation using public transport
Sgx (international delivery service)
International air and sea transportation
services
SAGAWA GLOBAL LOGISTICS CO., LTD.
SAGAWA LOGISTICS PARTNERS CO., LTD.
SGH GLOBAL JAPAN CO., LTD.
SHANGHAI POLY-SAGAWA LOGISTICS CO., LTD.
POLY-SAGAWA LOGISTICS CO., LTD.
SAGAWA EXPRESS (H.K.) CO., LTD.
SAGAWA EXPRESS PHILIPPINES INC.
SAGAWA EXPRESS VIETNAM CO., LTD.
SG SAGAWA VIETNAM CO., LTD.
SAGAWA EXPRESS SINGAPORE PTE. LTD.
SG SAGAWA AMEROID PTE. LTD.
PT. SAGAWA EXPRESS INDONESIA
EXPOLANKA HOLDINGS PLC
90 other companies
(Total: 103 companies)
Real Estate Business Real estate leasing and management,
Real estate development
Real estate fund
Renewable energy supply
SG REALTY CO., LTD.
1 other company
(Total: 2 companies)
Other Product sales, insurance agent, fuel
sales
Automobile services, sales of
automobiles
Manufacture of auto bodies,
System sales and maintenance
e-Collect Service
Temporary staffing services and
outsourcing
SAGAWA ADVANCE CO., LTD.
SG MOTORS CO., LTD.
SG SYSTEMS CO., LTD.
SAGAWA FINANCIAL CO., LTD.
SG FIELDER CO., LTD.
3 other companies
(Total: 8 companies)
(Notes) 1. The Group’s consolidated subsidiary, SG EXPERT CO., LTD. (shared service business) and SG HOLDINGS
GLOBAL PTE. LTD. (overseas operation headquarters) have not been listed as they cover all segments.
2. SHANGHAI DAZHONG SAGAWA LOGISTICS CO., LTD. is excluded from the subject of consolidation and is
included in the equity-method applicable companies because its shares have been partially sold.
3. SG SAGAWA AMEROID PTE. LTD. changed its name from AMEROID LOGISTICS (S) PTE. LTD. as of September
30, 2016. SG SAGAWA AMEROID PTE. LTD., as the surviving company, integrated business with SAGAWA
EXPRESS SINGAPORE PTE. LTD. as of January 1, 2017.
- 7 -
The following diagram illustrates the roles, and the relations with segments, of SG HOLDINGS Group.
Customer
Delivery Business
SAGAWA EXPRESS CO.,
SG MOVING CO., LTD.
WORLD SUPPLY CO., LTD.
Plus 1 other consolidated subsidiary 1 associate subject to the equity method
Real Estate Business
SG REALTY CO., LTD.
Plus 1 other consolidated subsidiary
Other Businesses
SAGAWA ADVANCE CO., LTD.
SG MOTORS CO., LTD.
SG SYSTEMS CO., LTD.
SAGAWA FINANCIAL CO.,
SG FIELDER CO., LTD.
Plus 3 other consolidated subsidiaries
Logistics Business
Japan
SAGAWA GLOBAL LOGISTICS CO.,
SAGAWA LOGISTICS PARTNERS CO., LTD.
SGH GLOBAL JAPAN CO., LTD.
1 associate subject to the equity method
Overseas
SHANGHAI POLY-SAGAWA LOGISTICS CO., LTD.
POLY-SAGAWA LOGISTICS CO., LTD.
SAGAWA EXPRESS (H.K.) CO., LTD.
Plus 81 other consolidated subsidiaries 8 associates subject to the equity
SG HOLDINGS CO., LTD. (holding company)
(Notes) 1. SG EXPERT CO., LTD. (shared service business) and SG HOLDINGS GLOBAL PTE. LTD. (overseas operation
headquarters) have not been listed as they cover all segments.
2. The names of the subsidiaries operating in multiple business segments are provided in their principle business segment.
LTD.
LTD.
LTD.
method
- 8 -
3. Management Policy
(1) Principle Policy of Corporate Management
Remaining committed to the founding spirit of “Hikyaku no Kokoro” (the spirit of express messenger), as the guiding principle, the
SG Holdings Group will:
• Earn the trust of customers and society and grow together.
• Create new value and contribute to social development.
• Always take on the challenges presented to us and pursue all possibilities.
The Group has always been committed to improving its services and quality by which the clients and customers can enjoy
security, satisfaction and trust. Looking toward the future, the Group makes its utmost efforts to become the business entity of
more value to society by promptly responding to the changing society and customer needs and providing total solutions.
(2) Medium- to Long-Term Management Strategies and Target Management Indicators
The Group established its corporate vision dubbed “Towards an integrated logistics corporate group representing Asia” in its long-
term management plan for 9 years from fiscal 2016 to fiscal 2024. As the first step, the Group is promoting a medium-term
management plan called “First Stage 2018” (for fiscal 2016 to fiscal 2018).
The current Japanese economy faces the environment where the labor supply and demand is further tightening, due in part to the
aging society and the low birthrate. Therefore, in order to realize a society with dynamic engagement of all citizens which is a
pillar for an economic growth strategy, work innovation to improve long working hours and pay equal for equal work has been
promoted by the government, employers and workers in cooperation since last year. In addition, following the growing e-
commerce market, social needs for the logistics industry, especially express service, are increasing.
Under such environment, the Group decided to revise the medium-term management plan “First Stage 2018” one year after its
establishment. As a matter of priority, the Group has engaged in improvement of working environment, enhancement of
resourcing as well as measures for parking in an accelerated manner, and by pursuing further efficiency, redevelops a system that
continuously provides stable logistics solutions.” The Group revised its consolidated management target in order to achieve stable
profit growth after an expected increase in outsourcing costs and labor costs that is necessary for promoting initiatives.
Furthermore, considering the impact of the real estate market and sharp increase in construction material costs, the Group
revised its real estate and capital investments and downscaled its investment plan. The investment plan shows the total amount of
investments for vehicles and facilities, information technology, real estate and capital. The real estate and capital investments only
reflect on-going or highly probable transactions, and may vary due to future investment activities.
Although the Group revised its consolidated management target, the basic policy in the medium-term management plan remains
unchanged. We will push forward with our business to achieve the management vision of “Towards an integrated logistics
corporate group representing Asia.”
(Management strategy in the medium-term management plan)
1. Enhancement of sustainable growth platform through evolution of its integrated logistics solutions and productivity
2. Enhancement of overseas business platform and establishment of the global logistics network through integration and
development with Japan businesses
3. Increase in the value and optimize the ancillary businesses around the logistics business
4. Establishment of the human resources management system and diversification in use of human resources
5. Differentiation of services through active and effective use of latest technologies and streamlined operations
Revision of management target
We have revised SG Holdings Group medium-term management plan announced on May 6, 2016, as follows:
Fiscal 2018 consolidated management target
Consolidated operating revenue 980.0 billion yen
Consolidated operating profit 56.5 billion yen
Investment plan *1
95.0 billion yen Total amount of depreciation &
amortization for 3-year period 62.5 billion yen
*1. The investment plan for 3-year period does not include 87,600 million yen of share acquisition of Hitachi Transport
System.
The investment plan has been changed from internal management figures to total of investment cash flow paid in
a 3-year period in a generally accepted market practice.
From the fiscal year 2017, the Company and its domestic consolidated subsidiaries changed their depreciation method of property,
plant and equipment from the declining balance method to the straight-line method. Furthermore, with respect to the useful lives
of vehicles in the delivery business, we revised the useful lives from periods allowed under tax laws to those based on the actual
condition. As a result, depreciation is expected to decrease approximately by 5,000 million yen in fiscal year 2018, and such effect
has been included in the target figure.
- 9 -
(3) Challenges to Be Addressed
The Group established its long-term management vision as “Towards an integrated logistics corporate group representing Asia,”
and in order to achieve this vision, the Group has set the tasks of enhancing solutions offering and establishing global logistics
network through Group-wide collaboration driven by GOAL.
To achieve this long-term management vision, the Group established and announced the medium-term management plan “First
Stage 2018” (fiscal 2016 to fiscal 2018) on May 6, 2016. In the plan, the Group discussed the strategic management objective and
the key initiatives for achieving such objective. In addition, considering the current tight labor environment in the logistics industry,
the revised plan was established and announced on May 1, 2017. To supplement the strategic management objective as set out
in the medium-term management plan and the key initiatives on achieving such objective, the revised plan sets out “our
commitment in improving working environment, enhancing resourcing as well as addressing issues around parking without delay,
and, by pursuing further efficiency, redeveloping an organizational structure that continuously encourages the provision of stable
logistics solutions” as its additional management challenges.
The Group acknowledges the achievement of its strategic management objective as set out in the medium-term management
plan and additional management challenges in consideration of the current environment as challenges to be addressed, and will
respond to them as follows:
1. Enhancement of sustainable growth platform through evolution of integrated logistics solutions and productivity
• Evolution of GOAL
The Group sees its strength in logistics mandates from corporate clients (from B). The Group expands business through
GOAL with the tailor-made solutions created by packaging the Group’s various services to address the potential issues of
the corporate client. It is our policy to advance and evolve this strategy.
• Evolution of Smart Delivery services
The Group launched Smart Delivery services, in which items to a certain customer accepted at multiple service offices are
delivered in one batch. This contributed to improved efficiency in the logistics for the clients. We will continue to commit in
the service, and by expanding the service offering and building the direct delivery routes from transit centers, we will offer
further efficiencies in service.
• Capital and business alliance with Hitachi Transport System
The Group entered into a capital and business alliance contract with Hitachi Transport System on March 30, 2016.
Under the theme of “integration of the delivery business and the logistics business,” the Group is generating various
business synergies by providing new logistics solutions through utilizing management resources of both companies, and
enhancing efficiency via the joint utilization of vehicles and centers.
2. Reinforcement of overseas business platform, and establishment of the global logistics network through integration and
development with Japan businesses
• Enhancement of forwarding business and expansion of global logistics network
By connecting EXPOLANKA group with offices in South Asia, Southeast Asia and Africa and our overseas locations we will
enhance the global logistics network in emerging markets which we expect to grow going forward.
• Enhancement of local logistics in the overseas locations
By developing our own operations, entering into alliances or securing subcontractors, we will secure “last one mile network”
(i.e. a distribution system to the final destination of packages) within the countries of our overseas locations, and establish
the system that enables a comprehensive logistics package in alliance with local warehouses and forwarding businesses.
3. Increase in the value and optimize the ancillary businesses around the logistics business
• Expansion of ancillary businesses of the logistics business
The Group recognizes that each of the businesses other than the logistics business (delivery and logistics business) have
function as infrastructure that supports the logistics business, and places these as ancillary businesses of the logistics
business. By maximizing the created value in ancillary businesses of the logistics business, the Group raises the quality of
the offered services in the logistics business while improving the quality of services to outside clients. In addition, with
enhanced work efficiency derived from utilizing such ancillary businesses of the logistics business, we will enhance the
Group profitability. Furthermore, we will commence discussions as soon as possible on the development of new business
fields in addition to the logistics and real estate areas as it is our plan to enter such fields.
- 10 -
4. Establishment of the human resources management system and diversification in use of human resources
• Securing excellent workforce
Through appropriate recruitment, training and talent management systems, we continue to secure excellent human
resources and labor that helps the Group to evolve into a global company.
• Diversity management
In order to foster the environment where the diversified human resources flourish, the Group will enhance its organizational
system by implementing a short working hour program and nurturing the corporate culture to actively utilize such benefits. By
pushing forward with these work style innovations, we achieve a good work life balance for all employees. In addition, to
respond to social issues including a large number of children waiting for admission to nursery schools, help needed for
women to take active roles in business, a good work-family balance supported by flexible working styles, we opened a
nursery school called SGH Kids Garden within our Tokyo office. We will implement various initiatives to help female
employees play active roles now and in the future.
• Improvement of long working hours
Work style innovation is under discussion amid government initiatives, and in the fiscal year 2019 an amended law is
expected to be applied to resolve the issue of long working hours. In the transport industry to which the Group belongs, the
application of regulations has been waived for 5 years due to labor shortage, with an announcement being made that the
maximum overtime work will be limited to 960 hours (monthly average of 80 hours) per year. In addition, with shrinking
domestic population, shortage of drivers is becoming a serious concern.
The Group, being one of the largest transport companies in Japan, is striving to have thorough management of working
hours to prevent long working hours. In addition, to respond to the shortage of drivers, we will enhance recruitment of drivers,
and secure workforce by promoting the acquisition of driving license for large-sized vehicles among Group employees and
utilize part-time employees to reduce the burden on drivers. We address the situation by taking various possible measures
including defining the work scope of drivers to manage the workload and implementing the solutions to pursue efficiency in
operation such as automating the sorting.
5. Differentiation of services through active and effective use of latest technologies and streamlined operations
• Promoting Information Technology (IT) usage
To respond to the labor shortage due to the continued population decline into the future, it is the Group’s policy to promote
active use of IT. Specifically, we will make upfront investments in actively using the latest technologies including automation
technology, big data, AI (artificial intelligence) and smart devices, and explore ways to put them to practical use.
6. Thorough enhancement of compliance system
The Group has steadily enhanced its management control structure including compliance through relevant committees and
projects as necessary.
Under these circumstances, we took the issue of illegal parking very seriously. The Group’s policy is to take firm actions for
the people in charge and make every effort for investigation while heeding the advice from external experts. The Group has
implemented measures to handle illegal parking. Specifically, in addition to additional physical facilities secured including
external parking lots and expansion of service centers, it is the Group’s policy to adopt a two-person structure in areas where
it is difficult to secure such parking after a detailed study on delivery routes in the area. Furthermore, not limited to these
specific measures, we utilize an internal online learning system to raise employees’ awareness of the need for compliance,
and improve the corporate culture by continuous communication on the subject.
To enhance the overall compliance system, in accordance with “SG Holdings Group Corporate Code of Ethics and Conduct,”
the Company and each of the group companies appoint a compliance manager, who ensures the compliance with laws and
regulations, and reports and handles any emergency matters. In addition, at the Risk Management Meeting, important
matters are reported regularly. These are part of actions taken across the Group. Furthermore, the Group launched and
expanded the SG Holdings Group Compliance Hotline in order to investigate causes promptly when any illegal incidents
occur, and establish measures to prevent further cases and a mechanism to monitor the situation. We will enhance these
systems going forward, and work towards better and effective systems.
- 11 -
4. Consolidated Financial Statements
(1) Consolidated Balance Sheets
(Million yen)
Fiscal 2015
(March 20, 2016)
Fiscal 2016
(March 20, 2017)
Assets
Current assets
Cash and deposits 88,509 71,007
Notes and operating accounts receivable 134,793 138,857
Real estate for sale 48,324 37,128
Merchandise and finished goods 327 337
Work in process 215 152
Raw materials and supplies 1,283 1,338
Deferred tax assets 5,439 4,447
Other 11,053 18,286
Allowance for doubtful accounts (884) (926)
Total current assets 289,061 270,629
Non-current assets
Property, plant and equipment
Buildings and structures, net 48,229 47,438
Vehicles, net 8,418 8,818
Land 124,689 123,618
Leased assets, net 14,274 14,609
Construction in progress 1,661 4,429
Other, net 16,742 15,379
Total property, plant and equipment 214,015 214,294
Intangible assets
Goodwill 5,682 5,815
Software 10,911 11,721
Leased assets 52 28
Other 6,706 6,403
Total intangible assets 23,353 23,969
Investments and other assets
Investment securities 9,415 101,225
Deferred tax assets 19,703 12,925
Other 30,164 29,609
Allowance for doubtful accounts (2,072 (1,887)
Total investments and other assets 57,211 141,873
Total non-current assets 294,579 380,136
Deferred assets
Bond issuance cost 119 76
Total deferred assets
Total assets
119 76
583,761 650,843
)
- 12 -
(Million yen)
Fiscal 2015
(March 20, 2016)
Fiscal 2016
(March 20, 2017)
Liabilities
Current liabilities
Notes and operating accounts payable-trade 46,567 46,557
Short-term loans payable 1,358 1,338
Current portion of long-term loans payable 20,970 38,236
Lease obligations 3,813 4,330
Income taxes payable 11,328 9,160
Deposits received 30,094 31,090
Provision for bonuses 5,202 5,954
Provision for directors bonuses ’ 37 19
Other 38,235 35,421
Total current liabilities 157,608 172,109
Non-current liabilities
Bonds payable 9,000 9,000
Long-term loans payable 119,841 98,799
Lease obligations 11,866 11,947
Provision for directors retirement benefits ’ 29 29
Net defined benefit liability 37,603 37,777
Asset retirement obligations 4,531 4,692
Other 6,089 6,715
Total non-current liabilities 188,960 168,961
Total liabilities 346,569 341,071
Net assets
Shareholders equity ’
Capital stock 11,882 11,882
Capital surplus 847 33,822
Retained earnings 219,534 242,509
Treasury shares (4,421) (4,421)
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
227,842
1,328
(265)
1,975
(257)
283,793
1,639
(155)
35
116
Total accumulated other comprehensive income 2,781 1,635
Non-controlling interests 6,568 24,342
Total net assets
Total liabilities and net assets
237,192 309,771
583,761 650,843
- 13 -
(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
(Consolidated Statements of Income)
(Million yen)
Fiscal 2015
(March 21, 2015 to March 20, 2016)
Fiscal 2016 (March 21, 2016 to March 20, 2017)
Operating revenue 943,303 930,305
Operating cost 853,639 843,734
86,571
37,096
49,474
Operating gross profit 89,663
Selling, general and administrative expenses 35,659
Operating profit 54,004
Non-operating income
Interest income 116 94
Dividend income 146 161
Share of profit of entities accounted for using equity 33 2,954
method
Other 2,503 1,660
4,871 Total non-operating income 2,800
Non-operating expenses
Interest expenses 2,988 2,740
Other 1,243 397
3,137
51,208
Total non-operating expenses 4,232
Ordinary profit 52,572
Extraordinary income
Gain on sales of non-current assets 481 359
Other 200 221
581 Total extraordinary income 682
Extraordinary loss
Loss on sales of non-current assets 54 635
Loss on retirement of non-current assets 539 195
Impairment loss 5,907 1,194
Other 443 376
2,401
49,388
8,451
Total extraordinary loss 6,944
Profit before income taxes 46,310
Income taxes-current 17,712
Income taxes-deferred (6,309) 8,479
16,931
32,457
4,004
28,452
Total income taxes 11,403
Profit 34,907
Profit attributable to non-controlling interests
Profit attributable to owners of parent
931
33,975
- 14 -
(Statements of comprehensive income)
(Million yen)
Fiscal 2015
(March 21, 2015 to March 20, 2016)
Fiscal 2016 (March 21, 2016
to March 20, 2017)
Profit 34,907 32,457
Other comprehensive income
Valuation difference on available-for-sale securities (114) 358
Deferred gains or losses on hedges 20 100
Foreign currency translation adjustment (1,230) (1,710)
Remeasurements of defined benefit plans, net of tax 26 163
Share of other comprehensive income of entities (160) (406)
accounted for using equity method
Total other comprehensive income (1,458) (1,494)
Comprehensive income 33,449 30,962
Total comprehensive income attributable to:
Owners of parent 32,652 27,306
Nnon-controlling interests 796 3,655
- 15 -
(3) Consolidated Statements of Changes in Equity
Fiscal 2015 (March 21, 2015 to March 20, 2016)
(Million yen)
’
Shareholders equity
Total Retained
Capital stock Capital surplus Treasury shares shareholders earnings
equity
Balance at beginning of current 11,882 882 188,964 (4,421) 197,309
period
Changes of items during period
’
Dividends of surplus (3,406) (3,406)
Profit attributable to owners 33,975 33,975
of parent
Change in ownership interest
of parent due to transactions (35) (35)
with non-controlling interests
Net changes of items other
than shareholders equity
Total changes of items during (35) 30,569 30,533
period
Balance at end of current 11,882 847 219,534 (4,421) 227,842
period
’
- -
Accumulated other comprehensive income
Valuation Total Non-Deferred Foreign Remeasure Total net
difference on accumulated controlling gains or currency ments of assets
available-for- other comp- interests losses on translation defined
sale rehensive hedges adjustment benefit plans
securities income
Balance at beginning of current 1,446 (286) 3,205 (260) 4,104 6,133 207,547
period
Changes of items during period
Dividends of surplus (3,406)
Profit attributable to owners 33,975
of parent
Change in ownership interest
of parent due to transactions (35)
with non-controlling interests
Net changes of items other (117) 20 (1,230) 3 (1,323) 434 (888)
than shareholders’ equity
Total changes of items during (117) 20 (1,230) 3 (1,323) 434 29,644
period
Balance at end of current 1,328 (265) 1,975 (257) 2,781 6,568 237,192
period
- 16 -
Fiscal 2016 (March 21, 2016 to March 20, 2017)
(Million yen)
’
Shareholders equity
Total Retained
Capital stock Capital surplus Treasury shares Shareholders earnings
equity
Balance at beginning of current 11,882 847 219,534 (4,421) 227,842
period
Changes of items during period
Dividends of surplus (3,927) (3,927)
Profit attributable to owners 28,452 28,452
’
of parent
Purchase of treasury shares (1,549) (1,549)
Retirement of treasury (1,549) 1,549 -
shares
Transfer to capital surplus 1,549 (1,549) -
from retained earnings
Change in ownership interest
of parent due to transactions 32,975 32,975
with non-controlling interests
Net changes of items other
than shareholders equity
Total changes of items during - 32,975 22,975 - 55,950
period
Balance at end of current 11,882 33,822 242,509 (4,421) 283,793
period
’
Accumulated other comprehensive income
Valuation Total Non-Deferred Foreign Remeasure Total net
difference on accumulated controlling gains or currency ments of assets
available-for- other comp- interests losses on translation defined
sale rehensive hedges adjustment benefit plans
securities income
Balance at beginning of current 1,328 (265) 1,975 (257) 2,781 6,568 237,192
period
Changes of items during period
Dividends of surplus (3,927)
Profit attributable to owners 28,452
of parent
Purchase of treasury shares (1,549)
Retirement of treasury -
shares
Transfer to capital surplus -
from retained earnings
Change in ownership interest
of parent due to transactions 32,975
with non-controlling interests
Net changes of items other 310 110 (1,939) 373 (1,145) 17,774 16,629
than shareholders’ equity
Total changes of items during 310 110 (1,939) 373 (1,145) 17,774 72,579
period
Balance at end of current 1,639 (155) 35 116 1,635 24,342 309,771
period
- 17 -
(4) Consolidated Statements of Cash Flows
(Million yen)
Fiscal 2015
(March 21, 2015 to March 20, 2016)
Fiscal 2016 (March 21, 2016
to March 20, 2017)
Cash flows from operating activities
Profit before income taxes 46,310 49,388
Depreciation & amoetization 23,814 24,209
Impairment loss 5,907 1,194
Amortization of goodwill 1,116 962
Increase (decrease) in provision for bonuses (50) 635
Increase (decrease) in allowance for doubtful accounts 40 (96)
Increase (decrease) in other provision (10) (18)
Increase (decrease) in net defined benefit liability 184 505
Foreign exchange losses (gains) (361) 82
Interest and dividend income (263) (256)
Interest expenses 2,988 2,740
Share of (profit) loss of entities accounted for using equity method (33) (2,954)
Loss (gain) on sales of non-current assets (427) 275
Loss on retirement of non-current assets 539 195
Decrease (increase) in notes and accounts receivable-trade (10,369) (4,804)
Decrease (increase) in inventories 33,913 9,533
Increase (decrease) in notes and accounts payable-trade 260 546
Increase (decrease) in deposits received 4,028 1,032
Other, net
Subtotal 104,194 8
(3,102)
0,068
Interest and dividend income received 221 765
Interest expenses paid (3,070) (2,725)
Income taxes (paid) refund (15,575) (34,201)
Net cash provided by (used in) operating activities 85,770 43,907
Cash flows from investing activities
Payments into time deposits (0) -
Proceeds from withdrawal of time deposits 662 62
Purchase of property, plant and equipment (21,789) (22,648)
Proceeds from sales of property, plant and equipment 15,102 8,019
Purchase of intangible assets (7,558) (6,327)
Purchase of investment securities (20) (21)
Purchase of shares of subsidiaries and associates (49) (87,784)
Payments for investments in capital (3,213) (1,617)
Payments for guarantee deposits (1,607) (1,275)
Proceeds from collection of guarantee deposits 1,423 927
Purchase of shares of subsidiaries resulting in change in scope of
consolidation - (1,636)
Proceeds from sales of shares of subsidiaries resulting in change in
scope of consolidation - 262
Other, net 180 212
Net cash provided by (used in) investing activities (16,870) (111,826)
(3,393)
- 18 -
(Million yen)
Fiscal 2015 (March 21, 2015
to March 20, 2016)
Fiscal 2016 (March 21, 2016
to March 20, 2017)
Cash flows from financing activities
Net increase (decrease) in short-term loans payable (17,749) 88
Proceeds from long-term loans payable 23,700 17,550
Repayment of long-term loans payable (43,238) (21,390)
Repayments of lease obligations (1,935) (3,630)
Purchase of treasury shares - (1,549)
Cash dividends paid (3,406) (3,927)
Dividends paid to non-controlling interests (105) (224)
Payments from change in ownership interests in subsidiaries that do
not result in change in scope of consolidation (202) (2,223)
Proceeds from changes in ownership interests in subsidiaries that do
not result in change in scope of consolidation - 66,318
Net cash provided by (used in) financing activities (42,938) 51,009
Effect of exchange rate change on cash and cash equivalents (42) (529)
Net increase (decrease) in cash and cash equivalents 25,919 (17,438)
Cash and cash equivalents at beginning of period 62,509 88,428
Cash and cash equivalents at end of period 88,428 70,990
- 19 -
(5) Notes to Consolidated Financial Statements
(Significant Items Relating to the Preparation of Consolidated Financial Statements)
1. Scope of Consolidation
(1) Number of consolidated subsidiaries: 110
Names of principal consolidated subsidiaries:
SAGAWA EXPRESS CO., LTD.
SG MOVING CO., LTD.
WORLD SUPPLY CO., LTD.
SAGAWA GLOBAL LOGISTICS CO., LTD.
SAGAWA LOGISTICS PARTNERS CO., LTD.
SGH GLOBAL JAPAN CO., LTD.
SG REALTY CO., LTD.
SAGAWA ADVANCE CO., LTD.
SG MOTORS CO., LTD.
SG SYSTEMS CO., LTD.
SAGAWA FINANCIAL CO., LTD.
SG FIELDER CO., LTD.
SG EXPERT CO., LTD.
SG HOLDINGS GLOBAL PTE. LTD.
SAGAWA EXPRESS (H.K.) CO., LTD.
SAGAWA EXPRESS VIETNAM CO., LTD.
SG SAGAWA VIETNAM CO., LTD.
SG SAGAWA AMEROID PTE. LTD.
EXPOLANKA HOLDINGS PLC
SG SAGAWA EXPRESS VIETNAM, LLC has been included in the scope of consolidation since the current fiscal
year because of its share acquisition.
SHANGHAI DAZHONG SAGAWA LOGISTICS CO., LTD. is excluded from the scope of consolidation and is included
in the scope of the equity-method because some of its shares have been sold.
Four (4) subsidiaries that are newly established by EXPOLANKA HOLDINGS PLC have been included in the scope
of consolidation since the current fiscal year, and three (3) subsidiaries whose shares are sold by EXPOLANKA
HOLDINGS PLC have been excluded from the scope of consolidation.
VST CO., LTD., a company that has been newly established by SAGAWA EXPRESS CO., LTD., has been included
in the scope of consolidation since the current fiscal year.
(2) Name etc. of non-consolidated subsidiary
Not applicable.
2. Application of the Equity Method
(1) Number of associates accounted for by the equity method: 10
Name of principal companies
Hitachi Transport System, Ltd.
SG Lawson, Inc.
Hitachi Transport System, Ltd. has been included in the scope of the equity-method since the current fiscal year
because of its share acquisition.
SHANGHAI DAZHONG SAGAWA LOGISTICS CO., LTD. is excluded from the scope of consolidation and is included
in the scope of the equity-method because some of its shares have been sold.
(2) Name etc. of non-consolidated subsidiaries and associates not accounted for by the equity method
Not applicable.
- 20 -
(3) Remarks on the procedure accounted for by the equity method
Closing dates for equity-method are as follows:
Hitachi Transport System, Ltd.: March 31
SG Lawson, Inc.: at the end of February
SHANGHAI DAZHONG SAGAWA LOGISTICS CO., LTD.: December 31
EXPO GLOBAL DISTRIBUTION CENTRE (PVT) LTD. and 6 other companies: March 31
As for Hitachi Transport System, Ltd., SG Lawson, Inc. and SHANGHAI DAZHONG SAGAWA LOGISTICS CO., LTD.,
we used their financial statements based on their fiscal years that ended on such date.
And as for EXPO GLOBAL DISTRIBUTION CENTRE (PVT) LTD. and 6 other companies, we used their financial
statements based on a provisional settlement of accounts as of December 31.
3. Accounting Periods of Consolidated Subsidiaries
Among our consolidated overseas subsidiaries, 22 companies including SAGAWA EXPRESS (H.K.) CO., LTD. close their
books on December 31. In preparing the consolidated financial statements, we used their financial statements that were
prepared based on their fiscal years that ended on such date.
Among our consolidated overseas subsidiaries, 71 companies including EXPOLANKA HOLDINGS PLC close their books
on March 31. In preparing the consolidated financial statements, we used their financial statements that were prepared
based on a provisional settlement of accounts as of December 31.
Necessary adjustment for consolidation is made in regard to significant transactions which occurred between such
closing date and the closing date of the company.
4. Accounting Policies
(1) Appraisal standards and methods for important assets
(a) Investment Securities
Other securities
Marketable
Reported at the fair value on the closing date
(Valuation differences are recorded as net unrealized gain on other securities in net assets, and the cost of
sales is calculated using the moving average method)
Non-marketable
Reported at cost using the moving average method
(b) Derivatives
Reported at the fair value on the closing date
(c) Inventories
Real estate for sale, merchandise, finished goods, work in process:
Mainly stated at cost approach method determined by specific identification method
(Balance sheet value is stated by writing down to net selling value)
Raw materials
Mainly stated at cost approach method determined by moving average method
(Balance sheet value is stated by writing down to net selling value)
Supplies
Mainly stated at cost approach method determined by first-in, first-out method
(Balance sheet value is stated by writing down to net selling value)
(2) Depreciation and amortization methods for important non-current assets
(a) Property, plant and equipment (except leased assets)
The Company and its major consolidated domestic subsidiaries adopt the declining balance method.
However, buildings (excluding fixtures) acquired on and after April 1, 1998 and building fixtures and structures
acquired on or after April 1, 2016 are depreciated using the straight-line method.
Major consolidated overseas subsidiaries adopt the straight-line method.
(b) Intangible assets (except leased assets)
Amortized using the straight-line method.
Software used in-house is amortized over the period it can be used by the Company (5 years).
(c) Leased assets
Leased assets related to finance leases that transfer ownership:
Depreciated by the same method as the depreciation method applied to property, plant and equipment held by the
Company.
Leased assets related to finance leases that do not transfer ownership:
Depreciated by the straight-line method, with the lease periods counted as their useful lives and no residual value.
- 21 -
(3) Treatment of deferred assets
(a) Bond issuance cost
Amortized by the straight-line method over the bond return.
(4) Reporting standards for important allowances
(a) Allowance for doubtful accounts
The allowance for doubtful accounts is stated in amounts considered to be appropriate primarily based on the
Group's past credit loss experience and an evaluation of potential losses in the receivables outstanding. In the
case of specific debts that are considered to be at risk of souring, the amount of the allowance is that is deemed
unlikely to be recovered following an assessment of the individual debt concerned.
(b) Provision for bonuses
Employees' bonuses are accrued at the end of the year to which such bonuses are attributable.
(c) Provision for directors’ bonuses
Bonuses to directors and Audit & Supervisory Board members are accrued at the year end to which such bonuses
are attributable.
(d) Provision for directors’ retirement benefits
Provision for directors are recorded as liabilityat the amount that would be required if all directors retired at end of
the balance sheet date.
The Company abolished the directors’ retirement benefits in June 2006, and no allowance for this benefit has been
recorded thereafter.
(5) Accounting for retirement benefits
(a) Attributing expected retirement benefits to periods
In calculating the projected benefit obligation, the benefit formula basis is used to attribute the expected benefit to
respective service period.
(b) Treatment of actuarial gains and losses and past service costs
Actuarial gains and losses are amortized on a straight-line basis over a specified number of years (8 years),
whithin the average remaining service period. Past service costs are charged to income at they are incurred.
(6) Accounting for important hedging activities
(a) Accounting for hedging activities
Deferred hedge accounting is adopted.
Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are accounted for
exceptional treatments, while foreign currency forward contracts that meet the allocation method are accounted for
according to allocation method.
(b) Hedging instruments and items hedged
Hedging instruments: Interest rate swap, forward exchange contracts
Items hedged: Interest on loans, interest on bonds, accounts payable in foreign currencies
(c) Hedging policy
The Company enters into derivative contracts in order to hedge against the risk of fluctuations in interest rates and
currency exchange rates in an amount not exceeding the accounts payable relating thereto.
(d) Evaluation of the efficacy of hedging activities
The performance of the hedging instruments and the items hedged are compared using their total amount of
fluctuations in the market, based on which the efficacy is evaluated.
However, evaluation of the efficacy of the interest rate swaps subject to exceptional treatment is omitted.
(7) Amortization method and amortization period of goodwill
Goodwill is amortized using the straight-line method over its estimated useful life determined for each business
combination, not exceeding 20 years. However, goodwill which is fairly immaterial is included as an expense in the
consolidated fiscal year of its occurrence.
(8) Definitions of cash used in the consolidated cash flow statements
Cash and cash equivalents include cash at hand, highly liquid deposits at banks and short-term investments with
negligible risk of fluctuation in value and maturities of less than 3 months.
(9) Other accounting policies for the preparation of consolidated financial statements
(a) Treatment of consumption tax
Consumption tax is treated outside of the financial statements.
(b) Application of consolidated taxation system
The consolidated taxation system is being used.
- 22 -
(Changes in Accounting Policies)
(Application of “Practical Solution on a Change in Depreciation Method due to Tax Reform 2016”)
In accordance with the revision to the Corporation Tax Act, the Group applied the “Practical Solution on a Change in Depreciation
Method due to Tax Reform 2016” (Practical Issues Task Force No. 32, June 17, 2016) from the current fiscal year under review
and changed the depreciation method for building fixtures and structures acquired on or after April 1, 2016 from the declining
balance method to the straight-line method.
The effect of this change on the Group’s profit and loss is minor.
(Changes in Presentation)
(Changes in Application of Accounting Standards for Business Combination, etc.)
The Group adopted the provisions described in Article 39 and others of the “Revised Accounting Standard for Consolidated
Financial Statements” (ASBJ Statement No. 22 issued on September 13, 2013) and changed the presentation of net income and
others as well as that of minority interests to non-controlling interests. Consolidated financial statements for the previous fiscal
year have been reclassified to reflect the changes.
(Additional Information)
(Effect of changes in corporate tax rates)
Following the Diet’s enactment on March 29, 2016 of the “Act for Partial Revision of the Income Tax Act, etc.” (Act No. 15 of 2016)
and the “Act for Partial Revision of the Local Taxes, etc.” (Act No. 13 of 2016), corporate tax rates, etc. were lowered for the fiscal
years beginning on or after April 1, 2016.
Accordingly, the effective tax rates used to measure deferred tax assets and liabilities will be changed from 32.3% to 30.9% for
temporary differences expected to be eliminated in the fiscal years beginning on March 21, 2017 and on March 21, 2018, and
from 32.3% to 30.6% for temporary differences expected to be eliminated in the fiscal years beginning on or after March 21, 2019.
As a result of this tax rate change, deferred tax assets (after deducting deferred tax liabilities) decreased by 734 million yen while
income taxes-deferred increased by 754 million yen.
(Segment Information, etc.)
1. Overview of Reporting Segments
The Group’s reportable segments are those which separate financial information is available and regular evaluation by the
Board of Directors is being performed in order to decide how resources are allocated among the Group.
The Group is operating business by categorizing products and services of consolidated subsidiaries under the umbrella of the
Company, which is a pure holding company, into three business segments.
Therefore, the Company uses the three reporting segments of “Delivery Business,” “Logistics Business” and “Real Estate
Business” based on the said segments.
Main products and services of each reporting segment
Reporting segment Major products and services
Delivery Business
Hikyaku Express, Hikyaku Cool Express, Hikyaku Mail Express, Hikyaku Air Express,
Moving transportation, Route delivery service, Charter transportation, Installation
transportation, Art transportation, Collective delivery service, Food delivery service
etc.,
Logistics Business
Lump-sum acceptance of orders for logistics services, Development of logistics systems,
Control and management of inventory and orders placed and received, Management of
distribution centers, Warehousing, Transportation using public transport, Sgx (international
delivery service), International air and marine transportation
Real Estate Business Real estate leasing and management, Real estate development, Real estate fund,
Renewable energy supply
- 23 -
2. Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, Liabilities and Other Items for Each Reportable
Segment
The accounting method applied for reporting segments is the same as that described in “Significant Items Relating to the
Preparation of Consolidated Financial Statements.”
Profit by reporting segment is stated on an operating profit basis. Amounts for intersegment transactions or transfers are
calculated based on market prices.
3. Information on Operating Revenue, Income or Loss, Assets, and Other Items by Reporting Segment
Fiscal 2015 (March 21, 2015 to March 20, 2016)
(Million yen)
Amounts on
consolidate
financial
statements
(Note 3)
Delivery
Business
Logistics
Business
Real Estate
Business
Other
(Note 1) Total
Adjustments
(Note 2)
Operating revenue
Operating revenue to
external customers 721,573 114,099 47,558 60,070 943,303 - 943,303
Intersegment operating
revenue or transfers 37,249 7,759 4,307 69,007 118,323 (118,323) -
Total 758,823 121,858 51,866 129,078 1,061,626 (118,323) 943,303
Segment profit 38,422 1,092 10,248 4,986 54,748 (744) 54,004
Segment Asset 391,068 57,536 113,357 73,069 635,031 (51,269) 583,761
Other items
Depreciation and
amortization 17,395 1,502 2,924 1,182 23,005 766 23,772
Increase in property,
plant and equipment and
intangible assets
23,270 2,697 10,152 1,069 37,189 569 37,758
(Notes) 1. “Other” includes product sales, insurance agents, fuel sales, automobile services, automobile sales, manufacture of
auto bodies, system sales and maintenance, e-collect service, and temporary staffing service and providing staffing
services under contract.
2. The details of adjustments are as follows:
(1) The (744) million yen segment profit adjustment includes 6,807 million yen in eliminations for intersegment
transactions and (7,552) million yen of companywide expenses not allocated to the respective reporting segments.
Companywide expenses are primarily the Company’s operating expenses.
(2) The (51,269) million yen segment asset adjustment includes (111,095) million yen in eliminations for intersegment
transactions and 59,826 million yen of companywide assets not allocated to the respective reporting segments.
Companywide assets are primarily the Company’s surplus funds and funds for long-term investments (cash and
deposits, investment securities).
(3) The 766 million yen depreciation adjustment is primarily depreciation of companywide assets not allocated to the
respective reporting segments.
(4) The 569 million yen adjustment for an increase in property, plant and equipment and intangible assets comes from
(299) million yen in eliminations for intersegment transactions and the companywide capital investments totaling
868 million yen not allocated to the respective reporting segments.
3. Segment profit is adjusted to operating profit of consolidated financial statements.
- 24 -
Fiscal 2016 (March 21, 2016 to March 20, 2017)
(Million yen)
Amounts on
consolidated
financial
statements
(Note 3)
Delivery
Business
Logistics
Business
Real Estate
Business
Other
(Note 1) Total
Adjustments
(Note 2)
Operating revenue
Operating revenue to
external customers 738,186 110,471 17,513 64,134 930,305 - 930,305
Intersegment operating
revenue or transfers 37,965 8,390 4,564 71,515 122,435 (122,435) -
Total 776,152 118,861 22,077 135,650 1,052,741 (122,435) 930,305
Segment profit 39,647 786 5,146 5,704 51,286 (1,811) 49,474
Segment Asset 338,602 145,693 110,049 76,787 671,132 (20,289) 650,843
Other items
Depreciation 17,744 1,565 3,029 1,088 23,427 739 24,166
Investment to entities
accounted for using
equity method
10 90,141 - - 90,152 - 90,152
Increase in property,
plant and equipment and
intangible assets
17,505 3,184 16,164 1,839 38,694 (4,869) 33,824
(Notes) 1. “Other” includes product sales, insurance agents, fuel sales, automobile services, automobile sales, manufacture of auto bodies, system sales and maintenance, e-collect service, and temporary staffing service and providing staffing services under contract.
2. The details of adjustments are as follows: (1) The (1,811) million yen segment profit adjustment includes 6,843 million yen in eliminations for intersegment
transactions and (8,655) million yen of companywide expenses not allocated to the respective reporting segments. Companywide expenses are primarily the Company’s operating expenses.
(2) The (20,289) million yen segment asset adjustment includes (67,911) million yen in eliminations for intersegment transactions and 47,622 million yen of companywide assets not allocated to the respective reporting segments. Companywide assets are primarily the Company’s surplus funds and funds for long-term investments (cash and deposits, investment securities).
(3) The 739 million yen depreciation adjustment is primarily depreciation of companywide assets not allocated to the respective reporting segments.
(4) The (4,869) million yen adjustment for an increase in property, plant and equipment and intangible assets comes from (6,301) million yen in eliminations or transfer of balances for intersegment transactions and the companywide capital investments totaling 1,431 million yen not allocated to the respective reporting segments.
3. Segment profit is adjusted to operating profit of consolidated financial statements. (Significant Subsequent Events) VST CO., LTD., the Company’s consolidated subsidiary, entered into an absorption-type company split agreement with HUMONY CO., LTD. in accordance with the resolution of Board of Directors of the Company dated December 16, 2016. On April 3, 2017, VST CO., LTD. succeeded HUMONY CO., LTD.’s business, and VST CO., LTD. changed its trade name to HUMONY CO., LTD.
(i) Purpose
To increase market share of service similar to telegram (ii) The name of the company to take over
HUMONY CO., LTD. (iii) Business to take over
Service similar to telegram
(iv) Amount of assets and liabilities to take over Yet to be determined.
(v) Schedule of business transfer April 3, 2017
- 25 -
5. Non-Consolidated Financial Statements
(1) Balance Sheets
(Million yen)
FY2015 FY2016
(March 20, 2016) (March 20, 2017)
Assets
Current assets
Cash and deposits 42,055 29,341
Operating accounts receivable 327 359
Prepaid expenses 31 69
Deferred tax assets 596 557
Short-term loans receivable 995 821
Current portion of long-term loans receivable 11,790 9,909
Accounts receivable-other 8,885 1,419
Income taxes receivable 17 5,351
Other 347 342
Total current assets 65,047 48,171
Non-current assets
Property, plant and equipment
Buildings, net 0 82
Tools, furniture and fixtures, net 5 2,394
Leased assets, net 8 5
Construction in progress - 8
Total property, plant and equipment 14 2,490
Intangible assets
Trademark right 5 3
Software 13 36
Total intangible assets 19 39
Investments and other assets
Investment securities 3,970 4,419
Shares of subsidiaries and associates 198,895 263,648
Long-term loans receivable 152,744 147,830
Long-term prepaid expenses 18 27
Deferred tax assets 2,527
Other 179 188
Total investments and other assets 358,336 416,113
Total non-current assets 358,370 418,643
Deferred assets
Bond issuance cost 119 76
Total deferred assets
Total assets
119 76
423,537 466,892
-
- 26 -
(Million yen)
FY2015 (March 20, 2016)
FY2016 (March 20, 2017)
Liabilities
Current liabilities
Short-term loans payable 87,302 40,851
Current portion of long-term loans payable 20,970 38,236
Lease obligations 3 2
Accounts payable - other 841 1,258
Accrued expenses 692 761
Income taxes payable 6,379 3,380
Provision for bonuses 30 38
Other 18 2
84,532 Total current liabilities 116,237
Non-current liabilities
Bonds payable 9,000 9,000
Long-term loans payable 119,841 98,799
Lease obligations 6 3
Deferred tax liabilities - 329
Provision for retirement benefits 126 186
Other 348 219
108,538
193,070
Total non-current liabilities 129,322
Total liabilities 245,560
Net assets
Shareholders’ equity
Capital stock 11,882 11,882
Capital surplus
Legal capital surplus 109,089 109,089
109,089 Total capital surplus 109,089
Retained earnings
Other retained earnings
General reserve 30,000 30,000
Retained earnings brought forward 31,031 126,448
156,448
(4,421)
272,999
Total retained earnings 61,031
Treasury shares (4,421)
Total shareholders’ equity 177,582
Valuation and translation adjustments
Valuation difference on available-for-sale securitie 660 988
Deferred gains or losses on hedges (265) (165)
823
273,822
466,892
Total valuation and translation adjustments 394
Total net assets
Total liabilities and net assets
177,977
423,537
s
- 27 -
(2) Statements of Income
(Million yen)
FY2015
(March 21, 2015
to March 20, 2016)
FY2016
(March 21, 2016
to March 20, 2017)
19,128 Operating revenue 17,443
Operating cost 2,973 2,552
16,575
5,379
11,196
Operating gross profit 14,469
General and administrative expenses 4,408
Operating profit 10,061
Non-operating income
Interest income 8 0
Dividend income 122 688
Other 156 200
889 Total non-operating income 287
Non-operating expenses
Interest expenses 0 0
Other 680 6
6
12,079
Total non-operating expenses 680
Ordinary profit 9,668
Extraordinary income
Gain on sales of shares of subsidiaries and associates - 43,077
Extraordinary dividend - 60,255
103,332 Total extraordinary income -
Extraordinary loss
Loss on retirement of non-current assets 11 0
0
115,412
11,771
Total extraordinary loss 11
Profit before income taxes 9,656
Income taxes-current 140
Income taxes-deferred (3,292) 2,746
14,518
100,894
Total income taxes
Profit
(3,152)
12,808
- 28 -
(3) Statements of Changes in Equity
Fiscal 2015 (March 21, 2015 to March 20, 2016)
(Million yen)
Shareholders equity ’
Capital surplus Retained earnings
Capital stock Total
capital
surplus
Legal capital
surplus
Other retained earnings Total
retained
earnings
Retained
earnings
brought
forward
General
reserve
Treasury
shares
Total
shareholde
rs’ equity
Balance at beginning of
current period 11,882 109,089 109,089 30,000 21,628 51,628 (4,421) 168,179
Changes of items during
period
Dividends of surplus (3,406) (3,406) (3,406)
Profit 12,808 12,808 12,808
Net changes of items
other than shareholders
equity
’
Total changes of items
during period 9,402 9,402 9,402
Balance at end of current
period 11,882 109,089 109,089 30,000 31,031 61,031 (4,421) 177,582
- - - - -
Valuation and translation adjustments
Valuation
difference
on
available-
for-sale
securities
Valuation
and
translation
adjustment
Total
Deferred
gains or
losses on
hedges
Total net
assets
Balance at beginning of
current period 949 (286) 662 168,842
Changes of items during
period
Dividends of surplus (3,406)
Profit 12,808
Net changes of items
other than shareholders’
equity (288) 20 (267) (267)
Total changes of items
during period (288) 20 (267) 9,134
Balance at end of current
period 660 (265) 394 177,977
- 29 -
Fiscal 2016 (March 21, 2016 to March 20, 2017)
(Million yen)
Shareholders’ equity
Capital
stock
Capital surplus Retained earnings
Treasury
shares ’
Total
sharehold
ers
equity
Legal
capital
surplus
Other
capital
surplus
Total capital surplus
Other retained
earnings Total
retained
earnings General
reserve
Retained
earnings
brought
forward
Balance at beginning
current period
of 11,882 109,089 - 109,089 30,000 31,031 61,031 (4,421) 177,582
Changes of items during
period
Dividends of surplus (3,927) (3,927) (3,927)
Profit 100,894 100,894 100,894
Purchase of treasury
shares (1,549) (1,549)
Retirement of treasury
shares (1,549) (1,549) 1,549 -
Transfer to capital surplus
from retained earnings
1,549 1,549 (1,549) (1,549) -
Net changes of items
other than shareholders
equity
’
Total changes of items
during period - - - - - 95,416 95,416 - 95,416
Balance at end of current
period 11,882 109,089 - 109,089 30,000 126,448 156,448 (4,421) 272,999
Valuation and translation adjustments
Total net
assets
Valuation
difference on
available-for-
sale securities
Deferred
gains or
losses on
hedges
Total valuation and
translation adjustments
Balance at beginning
current period
of 660 (265) 394 177,977
Changes of items during
period
Dividends of surplus (3,927)
Profit 100,894
Purchase of treasury
shares (1,549)
Retirement of treasury
shares -
Transfer to capital surplus
from retained earnings -
Net changes of items
other than shareholders’
equity 327 100 428 428
Total changes of items
during period 327 100 428 95,845
Balance at end of current
period 988 (165) 823 273,822
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