Decline in Future Earnings from the Distribution and IT Solutions Business

「Revenue was ¥3,730 million, up 32.6% from the previous consolidated fiscal year, due mainly to a temporary increase in revenue from system development projects. Although provision for losses on orders was recorded in the previous consolidated fiscal year, the impact of temporary factors such as losses on orders was limited in the current consolidated fiscal year. However, the Company posted an operating loss of ¥75 million due mainly to lower profitability, compared with an operating loss of ¥1,852 million in the previous consolidated fiscal year.」

「Revenue was ¥1,625 million, up 11.1% year on year, due mainly to an increase in system development projects. Although provision for losses on orders was recorded in the previous interim consolidated accounting period and no temporary factors such as losses on orders occurred in the current interim consolidated accounting period, the Company posted an operating loss of ¥62 million, compared with an operating loss of ¥1,297 million in the same period of the previous year, due mainly to lower profitability.」

「Revenue was ¥2,812 million, down 8.9% from the previous consolidated fiscal year. In addition, certain projects under development came under significant pressure, resulting in the recognition of ¥1,805 million in provision for losses on orders in cost of sales as the development costs required to restore those projects. As a result, the Company posted an operating loss of ¥1,852 million, compared with operating profit of ¥29 million in the previous consolidated fiscal year.」

「Revenue was ¥2,177 million, down 0.2% year on year, due mainly to a decline in information processing services in existing areas, despite the recovery in customers’ IT investment. In the second quarter of the current consolidated fiscal year, certain projects under development came under significant pressure, resulting in the recognition of ¥1,272 million in provision for losses on orders in cost of sales as the development costs required to restore those projects. As a result, the Company posted an operating loss of ¥1,293 million, compared with an operating loss of ¥9 million in the same period of the previous year. The Company continues to work to restore the projects and improve productivity.」

「Revenue was ¥1,463 million, up 11.2% year on year. However, certain projects under development came under significant pressure, resulting in the recognition of ¥1,272 million in provision for losses on orders in cost of sales as the future development costs required to restore those projects. As a result, the Company posted an operating loss of ¥1,297 million, compared with an operating loss of ¥65 million in the same period of the previous year.」

「Revenue was ¥790 million, up 33.9% year on year, due mainly to the recovery in customers’ IT investment, particularly in the distribution and retail and aviation industries. Operating profit was ¥14 million, compared with an operating loss of ¥74 million in the same period of the previous year, due mainly to the increase in revenue.」

「Revenue was ¥3,086 million, up 0.9% from the previous consolidated fiscal year, due mainly to the expansion of the digital transformation areas in which the Group’s strengths can be leveraged. Operating profit was ¥29 million, down 80.1% year on year, due mainly to a decline in information processing services related to existing areas.」

「Revenue was ¥2,182 million, down 6.5% year on year, due mainly to the Company’s efforts to focus selectively on the digital transformation areas in which its strengths can be leveraged. Operating profit was an operating loss of ¥9 million, compared with operating profit of ¥134 million in the same period of the previous year, due mainly to the decline in revenue.」

「Revenue was ¥1,315 million, down 15.0% year on year, due mainly to the Company’s efforts to focus selectively on the digital transformation areas in which its strengths can be leveraged. Operating profit was an operating loss of ¥65 million, compared with operating profit of ¥92 million in the same period of the previous year, due mainly to the decline in revenue.」

「Revenue was ¥590 million, down 20.6% year on year, due mainly to the Company’s efforts to focus selectively on the digital transformation areas in which its strengths can be leveraged. Operating profit was an operating loss of ¥74 million, compared with operating profit of ¥28 million in the same period of the previous year, due mainly to the decline in revenue.」

「Revenue was ¥3,059 million, down 4.8% from the previous consolidated fiscal year, due mainly to the Company’s efforts to focus selectively on the digital transformation areas in which its strengths can be leveraged. Operating profit was ¥147 million, down 10.9% year on year, due mainly to the decline in revenue.」

「Revenue was ¥2,332 million, down 0.9% year on year, due mainly to a decline in system development related to existing areas. Operating profit was ¥134 million, down 0.4% year on year, in line with the decline in revenue.」

「Revenue was ¥1,547 million, up 2.6% year on year. Some customers restrained IT investment due to the spread of COVID-19, while others actively advanced digital transformation in response to the situation. Operating profit was ¥92 million, up 8.6% year on year, in line with the increase in revenue.」

「Revenue was ¥2,354 million, down 14.5% year on year, due mainly to a decline in system development projects, despite progress in supporting customers’ digitalization to improve their operations. Operating profit was ¥135 million, up 115.3% year on year, partly because no losses on orders were recognized, unlike in the first nine months of the previous consolidated fiscal year.」

「As a decline in the profitability of the general-purpose server infrastructure provision service in the Distribution IT Services segment was expected, the Company decided to discontinue the service and reorganize the business. Accordingly, it recorded ¥2,070 million in restructuring costs as an extraordinary loss, causing net income attributable to owners of the parent for the fiscal year to fall below the initial forecast.」

「In terms of profit, although linkage services continued to grow steadily, operating profit for the first nine months of the current consolidated fiscal year was ¥22 million, down 35.1% year on year, due mainly to the recognition of losses on orders resulting from lower profitability in the general-purpose server infrastructure provision service in the existing business area. In addition, the Company recorded an impairment loss of ¥176 million for the general-purpose server infrastructure provision service during the first nine months of the current consolidated fiscal year due to its lower profitability.」

「The business model is steadily shifting from a focus on system development to a focus on service provision. Despite a decline in projects in existing areas, revenue in the Distribution IT Services segment for the first six months of the current consolidated fiscal year was ¥2,265 million, up 8.0% year on year, due mainly to the steady increase in projects for linkage services. In terms of profit, profit margins improved as linkage services grew steadily, and the segment posted operating profit of ¥118 million for the first six months of the current consolidated fiscal year, compared with an operating loss of ¥32 million in the same period of the previous year.」

「The business model is steadily shifting from a focus on system development to a focus on service provision. Revenue in the Distribution IT Services segment for the first quarter of the current consolidated fiscal year was ¥988 million, up 1.1% year on year, due mainly to the steady increase in projects for data integration services, despite a decline in projects in existing areas. In terms of profit, profit margins improved as data integration services grew steadily, and the operating loss for the first quarter of the current consolidated fiscal year narrowed to ¥26 million, compared with an operating loss of ¥48 million in the same period of the previous year.」

「Revenue in the Distribution IT Services segment for the first nine months of the current consolidated fiscal year was ¥3,303 million, up 1.0% year on year, due mainly to limiting system development projects to those that leverage the Company’s strengths and the steady increase in projects for its data integration services following their active expansion. In terms of profit, profit margins have improved as system development projects have been limited and data integration services have grown steadily, but operating profit for the first nine months of the current consolidated fiscal year was ¥34 million, down 25.5% year on year, due mainly to an increase in selling, general and administrative expenses from the ongoing efforts to transition to a new business model.」

「In terms of profit, profit margins have improved as the Company has limited its system development projects, but selling, general and administrative expenses increased due mainly to its active efforts to transition to a new business model. As a result, the operating loss for the first six months of the current consolidated fiscal year was ¥32 million, compared with an operating loss of ¥4 million in the same period of the previous year.」

「In terms of profit, the Company incurred an operating loss of ¥48 million in the first quarter of the current consolidated cumulative period, compared with an operating loss of ¥24 million in the same period of the previous year, due mainly to its active efforts, including demonstration tests of delivery lockers using blockchain, and an increase in selling, general and administrative expenses associated with its aim of transforming the above business model.」

「In terms of profit, research and development expenses increased as the Company actively pursued demonstration tests for delivery lockers using IoT and blockchain, commercialization of data analytics services, and other initiatives. However, profitability improved as losses related to the cancellation of development of certain projects in the previous year subsided and improved productivity contributed to earnings. As a result, operating income for the consolidated fiscal year was ¥138 million, compared with an operating loss of ¥720 million in the previous consolidated fiscal year.」

「On the earnings side, research and development expenses increased as the company actively pursued proof-of-concept testing for delivery boxes using IoT and blockchain and the commercialisation of data analysis services. However, profitability improved as loss recognition related to the cancellation of development projects that occurred in the same period of the previous year subsided and higher development productivity also contributed, resulting in operating profit of ¥46 million for the first nine months of the current consolidated fiscal year, compared with an operating loss of ¥240 million in the same period of the previous year.」

「In terms of earnings, profitability improved as the loss processing related to the cancellation of certain projects incurred in the same period of the previous year wound down. However, research and development expenses increased as we actively pursued proof-of-concept testing of a delivery locker using IoT and blockchain and the commercialization of data analytics services. As a result, the first six months of the fiscal year recorded an operating loss of ¥4 million, compared with an operating loss of ¥251 million in the same period of the previous year.」

「In terms of profit, the consolidated cumulative first quarter resulted in an operating loss of ¥24 million, compared with an operating loss of ¥237 million in the same period of the previous year, when losses related to the cancellation of development of certain projects and other factors were recognized. This was mainly because research and development expenses increased as the Company actively pursued demonstration tests for delivery lockers using the latest technologies, including IoT and blockchain.」

「In terms of profit, the consolidated cumulative third quarter recovered from the second quarter due to improved productivity and other factors, but recorded an operating loss of ¥240 million, compared with an operating loss of ¥245 million in the same period of the previous year, due to lower net sales and the recognition in the first quarter of losses related to the cancellation of development of certain projects. In addition, an impairment loss of ¥164 million was recorded in the first quarter because future business earnings were expected to decline due to losses recognized in connection with the cancellation of development of the aforementioned projects and a decrease in transaction volume with existing customers.」

「In terms of profit, the consolidated cumulative second quarter resulted in an operating loss of ¥251 million, compared with operating income of ¥46 million in the same period of the previous year, due to lower net sales and losses recognized in connection with the cancellation of development of certain projects. In addition, an impairment loss of ¥164 million was recorded in the first quarter because future business earnings were expected to decline due to losses recognized in connection with the cancellation of development of the aforementioned projects and a decrease in transaction volume with existing customers.」

「Because future business earnings were expected to decline due to losses recognized in connection with the cancellation of development of certain projects and a decrease in transaction volume with existing customers, the carrying amount of the assets was reduced to their recoverable amount. The reduction of ¥164.225 million was recorded as an impairment loss under extraordinary losses.」