Delays, Damages and Reputational Damage in Large-Scale Systems Development Projects

「The main factors behind the decrease in profit were the decline in revenue and the recognition in cost of sales of ¥439 million in provision for contract loss, including future development costs required to restore some projects in which high workloads had arisen, among other factors.」

「Provision for contract loss 9,463 —」

「The main factor behind the increase in profit was that, although a provision for contract loss had been recognized in the previous consolidated fiscal year, the impact of extraordinary factors such as contract losses was limited in the current consolidated fiscal year, among other factors.」

「The main factor behind the increase in profit was that a provision for contract loss had been recognized in the previous interim consolidated period, whereas no extraordinary factors such as contract losses occurred in the current interim consolidated period, among other factors.」

「Due to the high workload arising in some projects under development, the Company recognized ¥1,805 million in provision for contract loss in cost of sales as development costs required to restore those projects.」

「As stated in the extraordinary report submitted to the Kanto Local Finance Bureau on 31 October 2023, some projects under development have experienced high workloads. The Company is considering strengthening the measures described under “(4) Risks Related to Contract Development” within the “Business and Other Risks” section of the annual securities report for the previous fiscal year.」

「Due to the high workload arising in some projects under development, the Company recognized ¥1,272 million in provision for contract loss in cost of sales as future development costs required to restore those projects.」

「Although the Company has continued to invest in research and development, it has worked to improve productivity since the end of the fiscal year ended March 2016, when it recorded a loss related to delays in a long-term large-scale project. As a result, revenue per employee grew to ¥31.4 million in the fiscal year ended March 2021, up 29.1% from the fiscal year ended March 2016, while gross profit per employee grew to ¥13.3 million, up 96.3%.」

「In addition, in the Financial IT Services business, the Company expects customer investment in systems development to remain on a declining trend following the large-scale development project completed two years ago, making it difficult to foresee positive growth going forward.」

「Following the completion in the previous consolidated fiscal year of the large-scale systems development project that had continued for more than a decade, the Company formulated and is implementing a three-year medium-term management plan beginning in the current consolidated fiscal year to promote the transformation to a new business structure.」

「Following the completion in the previous consolidated fiscal year of the large-scale systems development project that had continued for several years, the Company formulated a new three-year medium-term management plan beginning in the current consolidated fiscal year to promote the transformation to a new business structure.」

「Following the completion in the previous consolidated fiscal year of the large-scale systems development project that had continued for several years, the Company formulated a new three-year medium-term management plan beginning in the current consolidated fiscal year to promote the transformation to a new business structure.」

「In terms of revenue, the large-scale systems development project that had been a longstanding concern was successfully completed, has already entered operation and is making a significant contribution to performance.」

「The main factors behind the decrease were the ¥850 million reduction in the provision for contract termination losses due to payment of the termination fee related to the agreed termination of the large-scale systems development contract, and the ¥700 million decrease in long-term borrowings, among other factors.」

「In the previous consolidated fiscal year, the Company recognized ¥6,646 million in damages related to the conditional settlement concerning the development delay issue involving the large-scale systems development project as a provision for damages and recorded it as a loss. However, receipt of a neutral evaluation from the Software Dispute Resolution Center, a third-party organization, on 29 July 2016 satisfied the condition precedent for the settlement, causing the settlement to take effect immediately. As the loss amount was thereby finalized at the amount already recognized in the previous consolidated fiscal year, the payment of the settlement amount had no impact on profit or loss for the cumulative third quarter of the current consolidated fiscal year.」

「The main factor behind the decrease was the payment of ¥6,646 million in damages related to the development delay issue involving the large-scale systems development project, among other factors.」

「Receipt of the neutral evaluation in this matter satisfied the condition precedent for the settlement, and the settlement therefore took effect immediately. Of the total payment of ¥14,975.216 million stated above, part will be offset against advance payments and other amounts already paid, resulting in an actual payment of ¥7,764.651 million.」

「Net loss attributable to owners of the parent was ¥6,094 million, mainly due to the recognition of ¥6,646 million in provision for damages arising from a conditional settlement with the customer concerning delays in the development of a large-scale systems development project, and an impairment loss of ¥1,254 million on business-use assets.」