Mar. 17, 2020

Business forecast for FY 2020

We would like to inform you of the Company's business forecasts for 2020

1.Net sales

(1) Market environment for medical systems for the current fiscal year

The biggest reason why net sales in the Medical System business are expected to be lower than in 2019 is due to fewer system updates for existing customers. The system update cycle is about five to seven years for each hospital, but this year happens to fall on a year with a fewer number of updates. Meanwhile, the next fiscal year, 2021, is a year with an expected large number of updates.

As for external factors, the impact of the Olympic Games is one such factor and it has already been factored in our forecasts. In normal years, our sales tend to concentrate in March, May (Golden Week), August (Obon holiday), September (Silver Week) and December (New Year holidays). Usually it takes two to three months to introduce a large-scale system, including field surveys, briefings to doctors and staff on the system outline and operation, and on-site installation work.

This year, some medical institutions have decided not to introduce systems in the current fiscal year, which were originally scheduled for August and September of the above “periods of concentration” to avoid unnecessary confusion, because the preparation period would overlap with the Olympic Games' schedule.

We determined that maintaining an optimistic stance is risky with regard to new deals to be acquired through sales efforts during this fiscal year even outside the host cities of the Olympic Games, given that the impact of the Olympic Games is wide ranging, and thus, we forecast weaker results for this fiscal year than in normal years.

(2) Special factors

With regard to a large-scale project (with an estimated order value of approximately 250 million yen) planned for this fiscal year, one of the companies that was scheduled to participate in the project has difficulties in smoothly carrying out its operations this fiscal year due to various problems. Accordingly, the relevant medical institutions decided to postpone the project to 2021.

(3) Net sales of the HealthTech business

GAP (gaze analyzing perimeter), which was commercialized last year, was expected at the time of initial projection (around the end of 2019) to generate sales of 350 million yen.

For the mass production of GAP, the Company outsourced the production of parts (internal and external plastic parts, lenses, parts of electronic boards, face pads, etc.) to a Chinese company, but due to the spread of the new coronavirus infection (COVID-19), the production was suspended at the outsourced company, and it is uncertain when we can ensure the stable procurement of parts. Under the circumstances, we made a conservative net sales forecast of 100 million yen, assuming a significant delay in launching GAP in the current fiscal year.

2.Expenses associated with relocation of the Head Office

It has been decided that the World Trade Center Building, in which the Company’s head office is located, will be demolished and that its tenants will be required to leave the building by the end of this year. As several months are required for relocation preparation, including interior finish work at the new office and the installation of facilities necessary for the Company's business, we expect that there will be an overlapping rent payment of approximately 60 million yen during this period, which is a special factor putting pressure on profits in this fiscal year.

3.Medium-term future outlook

(1) Market environment

For medical fees affecting the market environment surrounding the Company, a “core part” of fees, which covers medical technology costs and personnel costs, was revised upward in April 2018. Since then, medical institutions have been willing to invest. According to reports from newspapers and other sources, the “core part” of medical fees are likely to be revised upward again in the revision of April 2020, which will work as a “tailwind” in the market environment. As more medical institutions are expected to update their system from 2021 onwards, we will make thorough preparations to ensure that we catch the “tailwinds” in the market.

(2) Status of commercialization of GAP

In addition to the subcontractor for parts production in China, we are considering subcontracting the production of the aforementioned parts to companies in Thailand and Vietnam. There are no delays or other problems in procuring parts in the United States, Taiwan or Japan.

The functionality of GAP has already been highly thought of by academic societies, etc., and if the production of parts whose procurement has been delayed resumes, we may be able to sell the products earlier than expected.

As stated above, due to the circumstances, we have no choice but to conservatively consider each of the factors and forecast weaker results for 2020 compared to the previous year, but the business situation may improve during the fiscal year due to an early convergence of new coronavirus infections (COVID-19) and other factors. If this situation arises, we will inform you immediately. We look forward to your ongoing support.