Risk of Delays in Business Negotiations, Orders and Acceptance Inspections Due to COVID-19

「During the nine months ended 30 April 2024 (1 August 2023 to 30 April 2024), Japan's economy was on a gradual recovery trend as restrictions on socioeconomic activity aimed at preventing the spread of COVID-19 were almost completely lifted.」

「During the six months ended 31 January 2024 (1 August 2023 to 31 January 2024), Japan's economy was on a gradual recovery trend as restrictions on socioeconomic activity aimed at preventing the spread of COVID-19 were almost completely lifted.」

「During the first quarter of the fiscal year ending 31 July 2024 (1 August 2023 to 31 October 2023), Japan's economy was on a gradual recovery trend as restrictions on socioeconomic activity aimed at preventing the spread of COVID-19 were almost completely lifted.」

「During the fiscal year ended 31 July 2023 (1 August 2022 to 31 July 2023), Japan's economy showed signs of recovery in personal consumption and other areas, as restrictions on activities related to COVID-19 were eased and COVID-19 was reclassified as a Class 5 disease in May 2023.」

「The global spread of COVID-19 raises concerns that it may affect the business activities of the Group. Order-related risks include the possibility that contracts with the Group may not be renewed if customers' business conditions change or their information systems investment plans are fundamentally revised, as well as the possibility that customers' willingness to invest may decline and the acquisition of new customers may not progress as expected. Production-related risks include the Group's current work arrangements, which encourage employees to work from home, in an effort to ensure both employee health and safety and business continuity.」

「With the outlook still uncertain due to the rapid spread of the Omicron variant and other factors, the Company has changed its assumption to one that the impact will continue through the end of the fiscal year, and has prepared its financial statements on the basis that, at present, there will be no material impact on accounting estimates such as the valuation of provisions for loss on orders and the amortisation of software held for sale in the market.」

「With the outlook still uncertain due to the rapid spread of the Omicron variant and other factors, the Company has changed its assumption to one that the impact will continue through the end of the fiscal year, and has prepared its financial statements on the basis that, at present, there will be no material impact on accounting estimates such as the valuation of provisions for loss on orders and the amortisation of software held for sale in the market.」

「However, in terms of earnings, net sales in the same quarter of the previous year increased due to a change in the timing of acceptance inspections caused by the impact of COVID-19. As a result of the reversal of that effect, net sales and profit both declined in the cumulative first quarter of the current consolidated fiscal year compared with the same quarter of the previous year.」

「In the “Additional Information” section of the securities report for the previous consolidated fiscal year, under “Accounting estimates related to the impact of the spread of COVID-19,” the Group stated that it had made accounting estimates on the assumption that the impact of the spread of COVID-19 would largely subside during the fiscal year ending July 2021. However, because it is difficult to accurately predict when the future spread of COVID-19 will subside, the Group is currently accounting on the assumption that a certain level of impact will continue through the first half of the following consolidated fiscal year. Based on this assumption, it has determined that there is currently no material impact on accounting estimates, including the valuation of inventories.」

「In the “Additional Information” section of the securities report for the previous consolidated fiscal year, under “Accounting estimates related to the impact of the spread of COVID-19,” the Group stated that it had made accounting estimates on the assumption that the impact of the spread of COVID-19 would largely subside during the fiscal year ending July 2021. However, because it is difficult to accurately predict when the future spread of COVID-19 will subside, the Group is currently accounting on the assumption that a certain level of impact will continue through the first half of the following consolidated fiscal year. Based on this assumption, it has determined that there is currently no material impact on accounting estimates, including the valuation of inventories.」

「The global spread of COVID-19 may affect the Group’s business activities. Risks relating to orders include the possibility that contracts with customers may not be renewed if their business conditions change or they fundamentally review their information systems investment plans, as well as the possibility that weaker customer investment appetite may delay the acquisition of new customers. Production-related risks include the possibility that the Group may be unable to provide the high-quality services expected by customers because its employees currently work under a system that recommends working from home, and the possibility of delays in consulting and system development operations.」

「The spread of COVID-19 may affect the Group’s results. Specifically, the declaration of a state of emergency and other measures accompanying the spread of COVID-19 have led to the postponement of business negotiations and fewer opportunities for face-to-face negotiations. As a result, delays are expected in receiving orders for individual projects and finalising acceptance inspections, while sales activities for new orders may be constrained.」