Risk of Reduced IT Investment and Orders Due to Economic Fluctuations

「Meanwhile, revenue was roughly unchanged from the previous fiscal year, while gross profit fell below the previous fiscal year because customers reduced project sizes, the lengthening of some projects lowered profitability, and costs for training personnel ahead of the ERP business launch came first.」

「The systems infrastructure business was affected by the extension of large-scale system renewal projects and project freezes at major customers. However, inquiries for the company’s original U-Way service increased, multiple new end users were acquired, and orders were won for government cloud projects from local governments. As a result, revenue from the business for the current consolidated fiscal year was ¥1,812.747 billion, up 1.9% from the previous fiscal year.」

「Meanwhile, projects with existing customers ended, and projects were frozen or their starts postponed at customers' request. As a result, revenue from this business for the six months ended 30 September was ¥861.583 million, down 2.7% year on year.」

「The big data analytics business began the current fiscal year with reduced staffing following an organizational restructuring. In this environment, it was affected by reductions in orders for projects from major customers due to changes in their business conditions and the cancellation of projects planned for new customers.」

「Although new projects were won in the big data analytics business, the cancellation of planned projects by new customers and reductions in project scale at the request of existing customers resulted in revenue for the cumulative second quarter of the current consolidated fiscal year falling 1.9% year on year to ¥557.824 million.」

「In the Big Data Analytics business, although new projects were won, revenue from the business for the first quarter of the current consolidated cumulative period was ¥264.842 million, down 5.9% year on year, because planned project launches at new customers were delayed and project sizes were reduced at the request of existing customers.」

「Because the Group's principal business consists of providing outsourced computer systems and programming development services to domestic companies, it tends to be significantly affected by trends in domestic companies' capital expenditure, including IT investment.」

「In the business systems integration business, demand for regulatory compliance in the financial sector continued to support the acquisition of new projects. Several projects had high profit margins, and the gross profit margin for this business in the nine months ended 31 December increased 2.1% year on year. Revenue, however, was affected by the completion of projects at the customers' request and fell 5.9% year on year to ¥1,016.552 million. Although the decline in revenue resulted from the suspension of some projects in this business, the Group secured revenue in line with its plan by seamlessly reallocating the resources released after the project suspensions to the digital innovation promotion business.」

「In the systems infrastructure business, the U-Way Oracle Cloud Infrastructure Implementation and Operations Support Service was launched in October 2022, and multiple new customers were acquired. The service is expected to make a significant contribution to profits going forward.」

「Although the company secured new projects in the business systems integration business, the impact of customers bringing projects in-house was substantial. Revenue from this business for the first quarter of the current fiscal year was ¥318.438 million, down 4.6% year on year.」

「In Japan's information services market, restraints on IT investment have been observed in industries heavily affected by COVID-19, and market growth appears to be leveling off.」

「If demand for IT investment among domestic companies as a whole declines, the Group's business and performance may be affected by a decrease in new orders and cancellations of existing contracts.」