Earnings weakened by the concentration of projects in the second half and temporary indirect costs

「During the six-month consolidated accounting period, revenue declined year on year. Although orders showed signs of recovery compared with the first quarter, orders for development projects were expected to be more heavily weighted toward the second half than in typical years, among other factors.」

「On the cost side, profit declined year on year, mainly because the workload required to address problems in certain development projects increased unexpectedly, among other factors.」

「As a result, the segment recorded revenue of ¥292,162 thousand, up 12.8% year on year, and segment profit of ¥28,874 thousand, an increase of ¥26,349 thousand year on year.」

「As a result, performance for 1) the staffing services and systems development divisions and 2) the contract development and industrial graphics divisions within the systems development segment, before elimination of intersegment transactions, was revenue of ¥1,202,645 thousand, up 12.6% year on year, and operating profit of ¥67,479 thousand, up 555.3% year on year.」

「As a result, the systems development segment as a whole recorded revenue of ¥858,067 thousand, up 12.1% year on year, and operating profit of ¥65,377 thousand, compared with an operating loss of ¥30,091 thousand in the same period of the previous year.」

「Contract wins from existing customers remained stable, the company focused on bringing development personnel in-house, and operational efficiency under the work-from-home arrangement improved. As a result, the contract development division showed a significant recovery from the same period of the previous year and remained profitable after returning to the black.」

「As a result, total revenue for the system development segment was ¥259.081 million, up 9.6% year on year, and operating profit was ¥2.524 million, compared with an operating loss of ¥32.511 million in the same period of the previous year.」

「Although the decline in face-to-face sales meetings, customers' restrictions on IT investment, and project postponements caused stagnation in the acquisition of some new projects, contract acquisition from the second half onward was strong as a result of focusing sales activities on additional orders for existing projects. Demand for development projects related to business automation and efficiency improvements also continued to increase, resulting in revenue of ¥1,067 million, up 1.2% year on year.」

「In terms of earnings, although subcontracting costs for urgent projects increased in the first quarter, orders for development projects remained stable from around October 2020, and the segment turned profitable in the third quarter, resulting in a cumulative segment loss of ¥30 million, compared with a loss of ¥34 million in the same period of the previous year.」

「In the system development segment during the first six months of the fiscal year, revenue was ¥474 million, up 2.2% year on year, as demand continued to increase for development projects related to business automation and efficiency improvements, despite stagnation in the acquisition of some new projects due to customers restricting IT investment and postponing projects. In terms of earnings, the segment posted a loss of ¥53 million, compared with a loss of ¥43 million in the same period of the previous year, due to higher subcontracting costs for urgent projects in the first quarter and stagnation in new orders for commissioned development projects with relatively high margins.」

「The segment is expected to remain concentrated in the second half, as in previous years. During the first quarter of the fiscal year, demand increased for development projects related to business automation and efficiency improvements and for projects related to the development of operating environments, as telework and other work-style reforms rapidly spread throughout society due to the impact of the novel coronavirus disease. However, the acquisition of some new projects stagnated due to customers restricting IT investment and postponing projects, resulting in revenue of ¥236 million, up 7.2% year on year. In terms of earnings, the segment posted a loss of ¥32 million, compared with a loss of ¥24 million in the same period of the previous year, due to preparation costs for launching an IT equipment kitting business as a new business and higher subcontracting costs for urgent projects.」

「Due to the transfer of all shares in certain subsidiaries belonging to the Other Businesses segment during the third quarter of the previous fiscal year and a stronger concentration in the second half compared with the previous fiscal year, revenue was ¥1,892 million, down 58.8% year on year; EBITDA was negative ¥54 million, compared with EBITDA of ¥47 million; and the segment loss was ¥93 million, compared with segment profit of ¥0 million.」

「As a result, revenue was ¥1,081 million, up 4.6% year on year; segment profit was ¥20 million, up 62.5%; and EBITDA was ¥33 million, up 5.5%.」

「While external revenue and intra-group revenue remained steady, selling, general and administrative expenses increased slightly to 103.6% of the level in the same period of the previous year due to higher personnel costs from intensified hiring and higher one-time costs associated with the renewal of the medical image display software "FVT-air." As a result, revenue was ¥791 million, up 3.4% year on year; segment profit was ¥1 million, down 77.4%; and EBITDA was ¥13 million, down 36.1%.」

「Although earnings in the system development business are expected to remain concentrated in the second half, as in previous years, selling, general and administrative expenses continued to increase due to higher personnel costs resulting from intensified hiring aimed at securing medium- to long-term earnings and higher one-time costs associated with the renewal of the medical image display software "FVT-air."」

「Although earnings in the system development business are expected to remain concentrated in the second half, as in previous years, the segment loss narrowed due to steady acquisition of external orders, reductions in subcontracting costs related to systems engineering, and efforts to bring work in-house. As a result, revenue was ¥244 million, down 1.0% year on year; the segment loss was ¥5 million, compared with a segment loss of ¥9 million; and EBITDA was negative ¥2 million, compared with negative ¥3 million.」

「Revenue was ¥765 million, up 15.6% year on year; segment profit was ¥4 million, compared with a segment loss of ¥69 million in the same period of the previous year; and EBITDA was ¥20 million, compared with negative EBITDA of ¥17 million.」

「Although earnings in the system development business are expected to remain concentrated in the second half, as in previous years, revenue increased and the loss narrowed due to strong external sales and efforts by group companies to partially bring development capabilities in-house. As a result, revenue was ¥516 million, up 12.7% year on year; the segment loss was ¥0 million, compared with a segment loss of ¥62 million; and EBITDA was ¥10 million, compared with negative EBITDA of ¥17 million.」

「Although earnings in the system development business are expected to remain concentrated in the second half, as in previous years, revenue and the loss narrowed as the company pursued new customers and expanded existing projects, implemented cost-improvement measures, and partially brought development capabilities in-house as the group's technology center.」

「While each business performed steadily, the system development business posted revenue of ¥662.444 million, down 4.1% year on year, during the first nine months of the fiscal year. After recording a business loss of ¥19.731 million, compared with a business loss of ¥8.461 million in the same period of the previous year, and goodwill amortization of ¥49.455 million, the segment posted a loss of ¥69.186 million, compared with a segment loss of ¥77.513 million.」

「While each business performed steadily, the system development business posted revenue of ¥458.157 million, up 0.4% year on year, during the first six months of the fiscal year, due mainly to the tendency for earnings from system development projects to be concentrated in the second half. After recording a business loss of ¥18.367 million and goodwill amortization of ¥43.868 million, the segment posted a loss of ¥62.236 million.」

「Due to the tendency for earnings from system development projects to be concentrated in the second half and a decline in the gross margin caused by a temporary increase in indirect costs, revenue was ¥206.473 million, up 3.4% year on year. After recording a business loss of ¥28.229 million (*) and amortization of goodwill of ¥21.934 million, the segment posted a loss of ¥50.163 million, compared with a segment loss of ¥29.792 million in the same period of the previous year.」