Risk of Recouping Upfront Investment in New Services and Businesses
First written in FY2016. 5 of 10 entries say "Worsened", first in FY2018-Q3. Latest entry: FY2020-Q2.
FreakOut Holdings moved to the "Worse" side of this theme in 2018, 7 years before the typical company in this theme (2025).
The whole theme swung hardest in 2019: 6 of 25 companies on the "Worse" side.
9 other companies' latest entry also says "Mitigated".
- FY2020-Q2MitigatedAnnual report
「Since March 2020, in domestic and overseas businesses, the impact of COVID-19 has resulted in cancellations of orders and customers’ use of products, as well as lost opportunities to acquire new customers. In addition, the Group proceeded with further liquidations of companies that were difficult to monetise in the short term.」
Regarding the recovery of investments in new and overseas businesses, the Group proceeded with additional liquidations of companies that were difficult to monetise in the short term and continued to address investments that were difficult to recover. - FY2020-Q1MitigatedAnnual report
「At the same time, the Group proceeded with the sale or liquidation of domestic subsidiaries in new businesses and overseas subsidiaries that it determined would be difficult to monetise in the short term.」
The Group proceeded with the sale or liquidation of new businesses and overseas subsidiaries that were difficult to monetise in the short term. - FY2019MaterialisedAnnual report
「At its consolidated subsidiaries Talention Co., Ltd., PT. AMARTA ZWARA GUNA, adGeek Marketing Consulting Co., Ltd. and The Studio by CtrlShift Pte. Ltd., goodwill and customer-related assets based on expected excess earning power were recognised when the shares were acquired. Following a review of their earning power and future business plans, the originally anticipated earnings were no longer expected to materialise, so the carrying amounts were reduced to their recoverable amounts, with the reductions recognised as impairment losses.」
The risk of failing to recover upfront investments associated with new businesses and M&A materialised, with an impairment loss of ¥1,168.213 million recognised on goodwill and customer-related assets because the acquired businesses failed to achieve their expected earnings. - FY2019-Q3WorsenedAnnual report
「At the same time, in addition to upfront investment for growth, the consolidation of The Studio by CtrlShift Pte. Ltd. and losses arising from the loss of major customers at certain M&A targets, the Group has been undertaking initiatives such as withdrawing from or downsizing certain locations to move toward monetisation, incurring costs for these purposes.」
In addition to growth investments and new consolidations, losses from the loss of major customers at certain M&A targets and costs associated with withdrawing from or downsizing locations were incurred, broadening the factors contributing to the burden of upfront investment. - FY2019-Q2WorsenedAnnual report
「In the new businesses, Gardia株式会社’s FinTech and other businesses have begun contributing to revenue, but costs for business expansion have been incurred ahead of revenue since the previous fiscal year.」
While Gardia’s FinTech and other businesses have begun contributing to revenue, upfront costs for business expansion have continued. Other Businesses reported a segment loss of ¥604 million, compared with ¥311 million in the same period of the previous year, resulting in a wider loss. - FY2019-Q1WorsenedAnnual report
「Meanwhile, although sales contributions from Gardia's FinTech and other new businesses have begun, costs for business expansion have continued to be incurred ahead of revenue since the previous fiscal year. As a result, revenue from Other businesses was ¥187 million, up 55.3% year on year, EBITDA was a loss of ¥276 million, compared with a loss of ¥144 million in the same quarter of the previous year, and the segment loss was ¥307 million, compared with a segment loss of ¥165 million in the same quarter of the previous year.」
While Gardia’s FinTech and other businesses have begun contributing to revenue, upfront costs for new businesses and overseas expansion have continued, widening the loss in Other Businesses from the same period of the previous year. - FY2018WorsenedAnnual report
「Meanwhile, costs for expanding the new and overseas businesses continue to be incurred ahead of revenue.」
In addition to new businesses, costs for expanding the overseas business continue to be incurred ahead of revenue. For the full fiscal year, the upfront investment burden was reflected in results, including a segment loss of ¥604 million in Other businesses. - FY2018-Q3WorsenedAnnual report
「Meanwhile, costs for expanding the new and overseas businesses are being incurred ahead of revenue.」
The scope of upfront costs has expanded from new businesses to overseas businesses, and the cost burden associated with business expansion is continuing. - FY2018-Q1MaterialisedAnnual report
「Meanwhile, costs related to upfront investments in new businesses and amortization of goodwill from M&A have increased substantially.」
Regarding the upfront investments in new businesses previously identified as a risk, increased costs are now cited as an actual factor affecting performance. A substantial increase in amortization of goodwill from M&A is also noted. - FY2016First statedAnnual report
「In addition, if circumstances arise that differ from the initial forecasts and the rollout of new services and businesses does not proceed as planned, we may be unable to recover our investments, which could affect our group's business and performance.」
The risks identified are additional spending on systems investments and personnel for new businesses and the inability to recover investments if plans fall short.