Upfront Investment and Impairment Risks Associated with Acquisitions and Capital Alliances

「Acquisition-related expenses for the business combination totaled ¥18 million, all of which was recorded under selling, general and administrative expenses in the consolidated income statement. As a result, ¥1,208 million of goodwill was recognized in the machinery, electrical equipment and IT segment.」

「The acquisition consideration consists of approximately A$19 million in cash and additional contingent consideration, with the total amount measured at fair value. The contingent consideration may be payable in the future under certain conditions, including when specified performance targets are achieved.」

「Acquisition-related expenses for the business combination totaled ¥18 million, all of which was recorded under selling, general and administrative expenses in the condensed interim consolidated income statement. As a result, ¥1,208 million of goodwill was recognized in the machinery, electrical equipment and IT segment.」

「Acquisition-related expenses for the business combination totaled ¥124 million, all of which was recorded under selling, general and administrative expenses in the condensed interim consolidated income statement. As a result, ¥7,214 million of goodwill was recognized in the construction segment.」

「The main changes were attributable to a ¥5,821 million increase in goodwill from the acquisitions of Open Up Construction and Open Up Technology, a ¥5,428 million increase in cash and cash equivalents, a ¥2,350 million increase in trade and other receivables, a ¥604 million increase in investments accounted for using the equity method arising from the acquisition of shares in associates and other transactions, and a ¥593 million increase in other financial assets among non-current assets, among other factors.」

「No individually material impairment losses were recorded during the fiscal year. The main component of individually immaterial impairment losses related to goodwill. Impairment losses were recorded because lower profitability caused recoverable amounts to fall below carrying amounts. The total impairment loss of ¥623 million was recorded under other expenses.」

「Although the provisions of IFRS 3, Business Combinations, are being applied, the accounting for the business combination had not been completed as of the reporting date and is therefore not presented. Details and amounts of major acquisition-related expenses Fees and commissions paid to advisors, etc.　¥22 million (estimated)」

「At a meeting of the Board of Directors held on 17 November 2023, the Company resolved that, effective 1 April 2024, all shares of its consolidated subsidiary 株式会社ビーネックスパートナーズ would be transferred to UT Group Co.,Ltd., and that all shares of ＵＴコンストラクション株式会社 and ＵＴテクノロジー株式会社 would be acquired from UT Group Co.,Ltd. and made subsidiaries. The Company entered into the respective share transfer agreements on 27 November 2023. The purchase consideration was ¥5,000 million for ＵＴコンストラクション株式会社 and ¥2,371 million for ＵＴテクノロジー株式会社, and advisory fees, commissions and other expenses were approximately ¥27 million.」

「No individually material impairment losses were recorded during the fiscal year. The main components of individually immaterial impairment losses related to goodwill and customer-related intangible assets. Impairment losses were recorded because lower profitability caused recoverable amounts to fall below carrying amounts. The total impairment loss of ¥246 million was recorded under other expenses.」

「During the nine-month period, an impairment-indicator assessment was conducted for material goodwill, consisting of goodwill allocated to the cash-generating unit of 株式会社夢真 in the construction segment, with a carrying amount of ¥39,045 million, based on the progress of the business plan and other factors. No indications of impairment were identified, together with respect to the other goodwill balances. There were also no material acquisitions or disposals of goodwill during the nine-month period.」

「During the six-month period, an impairment-indicator assessment was conducted based on the progress of the business plan and other factors, and no indications of impairment were identified. There were also no material acquisitions or disposals of goodwill during the six-month period.」

「During the three-month period, an impairment-indicator assessment was conducted based on the progress of the business plan and other factors, and no indications of impairment were identified. There were also no material acquisitions or disposals of goodwill during the three-month period.」

「A loss of ¥1,039 million was recorded in the overseas segment. Although economic activity in the UK normalized during the fiscal year following the lifting of COVID-19 restrictions, the decline in the working population led to sluggish hiring and higher recruitment costs, making the originally anticipated earnings growth unattainable. Accordingly, impairment losses were recorded because of the lower profitability of Gap Personnel Holdings Limited and Quattro Group Holdings Limited, comprising a ¥990 million impairment loss on goodwill and a ¥49 million impairment loss on other intangible assets.」

「Approximately ¥3.0 billion of the amortization expense was recorded in the construction segment. Details and amounts of major acquisition-related expenses Fees and commissions paid to advisors, etc.　¥66 million」

「Meanwhile, goodwill arising from the management integration and intangible assets recognized through purchase price allocation were allocated to each segment based on its future earnings outlook, and approximately ¥2.1 billion of amortization expense was recorded.」

「Meanwhile, goodwill arising from the management integration and intangible assets recognized through purchase price allocation were allocated to each segment based on its future earnings outlook, and approximately ¥1.3 billion of amortization expense was recorded.」

「Goodwill recognized on the consolidated balance sheet ¥70,032 million Of which: Machinery, Electrical Equipment and IT segment ¥2,968 million Construction segment ¥67,064 million」

「Details and amounts of major acquisition-related expenses Fees and commissions paid to advisors, etc.　¥40 million」

「In the UK overseas segment, future earnings were reassessed because of the impact on the business of the spread of COVID-19 infections in addition to Brexit, and an impairment loss on goodwill of ¥1,165 million was recorded as a special loss.」

「For the goodwill related to our consolidated subsidiaries Gap Personnel Group Ltd and MTrec Limited, the carrying amount was reduced to the recoverable amount because the earnings anticipated at the time of the share acquisitions could no longer be expected.」

「Because ¥75 million of acquisition expenses related to making 株式会社アクシス・クリエイト and 2 other companies subsidiaries in November 2019 was recorded in selling, general and administrative expenses, operating profit was ¥2,741 million, down 11.2% year on year.」

「Although goodwill amortization and acquisition-related expenses associated with M&A continued to arise during the fiscal year, they were smaller than in the previous fiscal year, and improvements in cost of sales progressed. As a result, selling, general and administrative expenses as a percentage of revenue decreased by 0.1 percentage points year on year to 13.7%.」

「During the six-month period, the impact of making Quattro Group Holdings Limited, whose shares were acquired in August 2018, a subsidiary, together with the absence of one-time expenses and efforts to improve costs, resulted in revenue of ¥15,317 million, up 75.8% year on year, and segment profit of ¥104 million, compared with a segment loss of ¥69 million in the same period of the previous year.」

「The segment loss was ¥67 million, compared with segment profit of ¥48 million in the same period of the previous year, partly because one-time expenses such as M&A-related advisory fees were recorded during the three-month period. As a result, goodwill in the overseas segment increased by ¥907 million.」

「In addition, because a special loss of ¥170 million was recorded as a settlement payment in connection with a change to the share transfer agreement for MTrec during the nine-month period, profit for the period attributable to owners of the parent was ¥1,690 million, up 32.3% year on year.」

「During the second quarter, the Company acquired shares in 1998 Holdings Limited and newly included the company in the scope of consolidation. As a result, goodwill in the overseas segment increased by ¥2,396.510 million.」

「During the fiscal year, MTrec Limited, a UK staffing company acquired as a subsidiary in August 2016, performed steadily, while one-time expenses such as M&A-related advisory fees and goodwill amortization expenses were recorded. As a result, the segment's revenue for the fiscal year was ¥7,399 million, compared with revenue of ¥105 million in the previous fiscal year, and its segment loss was ¥45 million, compared with a segment loss of ¥13 million in the previous fiscal year. Excluding the one-time M&A expenses, segment profit would have been ¥156 million.」

「During the 9-month period ended [the current quarter], the performance of UK staffing company MTrec Limited, made a subsidiary in August 2016, progressed steadily. However, we recorded one-time expenses such as advisory fees associated with M&A and goodwill amortization. As a result, segment revenue for the 9-month period was ¥5,455 million (¥95 million in the same period of the previous year), and segment loss was ¥83 million (segment loss of ¥7 million in the same period of the previous year). Excluding the one-time M&A expenses, segment profit would have been ¥118 million.」

「During the six-month period ended [the second quarter], MTrec Limited, a UK staffing company acquired as a subsidiary in August 2016, performed steadily, while one-time expenses such as M&A-related advisory fees and goodwill amortization expenses were recorded. As a result, the segment's revenue for the six-month period was ¥3,756 million, compared with revenue of ¥78 million in the same period of the previous year, and its segment loss was ¥141 million, compared with a segment loss of ¥0.3 million in the same period of the previous year. Excluding the one-time M&A expenses, segment profit would have been ¥60 million.」

「In connection with the acquisition of the subsidiary, MTrec Limited's results have been included using July 2016 as the deemed acquisition date, while one-time expenses such as advisory fees related to the M&A and goodwill amortization expenses have been recorded.」

「Our Group actively considers and implements acquisitions and capital alliances as effective management strategies for expanding its business. In connection with these activities, performance may be affected by the use of financing methods such as borrowings, as well as by one-time expenses, amortization of goodwill and other factors.」