Note: This document is an English translation of the "Kessan Tanshin" for the second quarter of the fiscal year ending March 31, 2024 and is provided solely for reference purposes. In the event of any inconsistency between the Japanese and English versions, the Japanese version will govern.
Consolidated Financial Results for the First Six Months of the Fiscal Year
Ending March 31, 2024 (J-GAAP)
October 31, 2023 | ||||||||||||||||||||||
Company name: | ID Holdings Corporation | |||||||||||||||||||||
Listing: | Tokyo Stock Exchange, Prime Market | |||||||||||||||||||||
Securities code: | 4709 | |||||||||||||||||||||
URL: | https://www.idnet-hd.co.jp | |||||||||||||||||||||
Company representative: | Masaki Funakoshi, President, Representative Director and Group CEO | |||||||||||||||||||||
Direct inquiries to: | Yasuhiro Araki, Corporate Officer | |||||||||||||||||||||
Manager, Corporate Strategy Department | ||||||||||||||||||||||
Tel: +81 3-3262-5177 | ||||||||||||||||||||||
Scheduled date of filing of Quarterly Securities Report: | November 7, 2023 | |||||||||||||||||||||
Scheduled date of dividend payment: | December 4, 2023 | |||||||||||||||||||||
Preparation of supplementary materials on financial results: Yes | ||||||||||||||||||||||
Presentation on quarterly results: | Yes (for institutional investors and financial analysts) | |||||||||||||||||||||
(Amounts of less than ¥1 million are truncated) | ||||||||||||||||||||||
1. Consolidated Financial Results for H1 of FY2023 (April 1-September 30, 2023) | ||||||||||||||||||||||
(1) Consolidated Business Results | (% indicates YoY changes) | |||||||||||||||||||||
Net sales | Operating income | Ordinary income | Net income attributable to | |||||||||||||||||||
owners of parent | ||||||||||||||||||||||
¥ million | % | ¥ million | % | ¥ million | % | ¥ million | % | |||||||||||||||
H1 FY2023 | 15,938 | 7.2 | 1,421 | 23.0 | 1,504 | 24.5 | 844 | 24.0 | ||||||||||||||
H1 FY2022 | 14,861 | 11.4 | 1,155 | 63.9 | 1,209 | 63.1 | 680 | 81.5 | ||||||||||||||
Note: Comprehensive income | H1 FY2023 | ¥1,131 million | (27.4%) | H1 FY2022 | ¥887 million | (59.1%) | ||||||||||||||||
Net income | Diluted net income | EBITDA | EPS before amortization | |||||||||||||||||||
per share | per share | of goodwill | ||||||||||||||||||||
¥ | ¥ | ¥ million | % | ¥ | % | |||||||||||||||||
H1 FY2023 | 50.76 | - | 1,722 | 18.4 | 64.12 | 17.8 | ||||||||||||||||
H1 FY2022 | 41.04 | - | 1,454 | 44.1 | 54.43 | 56.5 | ||||||||||||||||
Note: Diluted net income per share is not listed, as the Group has no potential shares. | ||||||||||||||||||||||
(2) Consolidated Financial Position | ||||||||||||||||||||||
Total assets | Net assets | Equity ratio | ||||||||||||||||||||
¥ million | ¥ million | % | ||||||||||||||||||||
Q2 FY2023 | 17,384 | 11,199 | 64.1 | |||||||||||||||||||
FY2022 | 17,519 | 10,432 | 59.3 | |||||||||||||||||||
Reference: Equity | Q2 FY2023 | ¥11,144 million | FY2022 | ¥10,382 million | ||||||||||||||||||
2. Dividends | ||||||||||||||||||||||
Annual dividends | ||||||||||||||||||||||
End of first quarter | End of second quarter | End of third quarter | End of fiscal period | Total | ||||||||||||||||||
¥ | ¥ | ¥ | ¥ | ¥ | ||||||||||||||||||
FY2022 | - | 20.00 | - | 25.00 | 45.00 | |||||||||||||||||
FY2023 | - | 25.00 | ||||||||||||||||||||
FY2023 (forecast) | - | 25.00 | 50.00 | |||||||||||||||||||
Note: Revision of most recently published dividend forecast: No
3. Forecasts of Consolidated Results for FY2023 (April 1, 2023-March 31, 2024)
(% indicates YoY changes) | ||||||||||
Net income | Net income | |||||||||
Net sales | Operating income | Ordinary income | attributable to | |||||||
per share | ||||||||||
owners of parent | ||||||||||
¥ million | % | ¥ million | % | ¥ million | % | ¥ million | % | ¥ | ||
FY2023 | 32,800 | 5.5 | 2,630 | 8.5 | 2,650 | 5.8 | 1,520 | 8.4 | 91.07 | |
(full fiscal year) | ||||||||||
EPS before | ||||||
EBITDA | amortization of | |||||
goodwill | ||||||
¥ million | % | ¥ | % | |||
FY2023 | 3,269 | 7.8 | 117.70 | 5.7 | ||
(full fiscal year) | ||||||
Note: Revision of most recently published results forecast: No |
*Notes
(1) Changes in important subsidiaries during the period
Changes in specified subsidiaries resulting in change in consolidation scope
- Adoption of special accounting treatments for quarterly consolidated financial statements:
- Changes in accounting policies, changes in accounting estimates and restatements:
- Changes in accounting policies due to revisions of accounting standards, etc.:
- Changes in accounting policies other than (i):
- Changes in accounting estimates:
- Restatements:
No
No
No
No
No
No
- Number of shares outstanding (common stock)
- Number of shares outstanding (inclusive of treasury stock):
- Amount of treasury stock:
- Interim average number of shares (Consolidated total for the quarter)
Q2 FY2023 | 18,066,453 | shares | FY2022 | 18,066,453 | shares |
Q2 FY2023 | 1,318,995 | shares | FY2022 | 1,471,167 | shares |
Q2 FY2023 | 16,633,598 | shares | Q2 FY2022 | 16,590,015 | shares |
- Calculation of certain management indices
- EBITDA = Operating income + depreciation + amortization of goodwill
- EPS before amortization of goodwill = Net income after adjustments* ÷ interim average number of shares
*Net income after adjustments = Net income attributable to owners of parent + amortization of goodwill
- These quarterly consolidated financial results are not subject to quarterly review by a certified public accountant or audit corporation.
-
Qualitative information relating to the appropriate use of results forecasts, and other noteworthy items
Results forecasts are estimates based on information available as of the day the results were announced. Forecasts are inherently uncertain. The actual results, etc. may be different from the forecasts because of changes in business conditions, etc. See (3) Qualitative Information on the Consolidated Results Forecast under Section 1. Qualitative Information on the Second Quarter of the Fiscal Year Ending March 31, 2024, on page 6 of the Attachment for the assumptions that form the basis of results forecasts and other things to remember when relying on results forecasts.
The ID Group has also introduced a board benefit trust (BBT) and Japanese employee stock ownership plan (J-ESOP). Company shares held by Custody Bank of Japan, Ltd. (Trust Account E) as trust property for the BBT and J-ESOP plans are included in treasury stock.
(Method of obtaining supplementary explanatory materials regarding quarterly results and details of the quarterly results briefing) The ID Group will hold a quarterly results briefing for institutional investors and analysts on November 21, 2023. The materials that will be distributed at the briefing will be posted on the Group website promptly after the briefing.
Contents
1. Qualitative Information on the Second Quarter of the Fiscal Year Ending March 31, 2024 | ||
Qualitative Information on the Consolidated Business Results | ||
Qualitative Information on the Consolidated Financial Position | ||
Qualitative Information on the Consolidated Results Forecast | ||
(2) | Consolidated Statement of Income and Comprehensive Income | - 9 - |
(Consolidated Statement of Income) | - 9 - | |
(Consolidated Cumulative Second Quarter) | - 9 - | |
(Consolidated Statement of Comprehensive Income) | - 10 - | |
(Consolidated Cumulative Second Quarter) | - 10 - | |
(3) | Consolidated Cash Flow Statement | - 11 - |
(4) | Notes on Consolidated Financial Statements | - 13 - |
(Notes on Assumptions Regarding Going Concern) | - 13 - | |
(Notes on Significant Changes (If Any) in Shareholders' Equity) | - 13 - | |
(Additional Information) | - 13 - | |
(Material Subsequent Events) | - 13 - |
- 1 -
1. Qualitative Information on the Second Quarter of the Fiscal Year Ending March 31, 2024
- Qualitative Information on the Consolidated Business Results
During the consolidated fiscal first half under review (H1 FY2023: April 1 to September 30, 2023), a gradual recovery took shape as restrictions on activity imposed in view of the COVID-19 pandemic were eased. However, resource prices rose steeply, the Japanese yen continued to depreciate and monetary tightening proceeded worldwide. These trends continued to stoke concerns about impacts from an economic downturn and other risks, feeding lingering uncertainty.
Fortunately for the ID Group, a firmer footing prevailed in the information services industry, to which the Group belongs. Demand for IT investment related to digital transformation (DX), an approach aimed at establishing new business models and transforming existing ones, was solid and is expected to continue to enjoy steady support.
Amid the environment just described, business results for the ID Group trended favorably in system management*; cybersecurity, consulting and training; and IT infrastructure. Net sales rose 7.2% from the same period of the previous fiscal year (YoY) to ¥15.938 billion.
Earnings continued on a strong trend. While salaries and other payments to employees advanced, sales grew and the Group's high margin DX related business expanded. Operating income rose 23.0% YoY to ¥1.421 billion, ordinary income improved 24.5% YoY to ¥1.504 billion, and net income attributable to owners of parent rose 24.0% YoY to ¥844 million. EBITDA increased 18.4% YoY to ¥1.722 billion.
*Beginning with the consolidated first quarter of the current fiscal year, the service name "system operation management" is changed to "system management." The content of the service is unchanged.
- 2 -
The Group's business consists of a single segment. Business results for each service are as follows.
(Millions of ¥) | |||||
Previous consolidated | Consolidated cumulative | Compared with same period of | |||
second quarter under | previous fiscal year (YoY) | ||||
cumulative second quarter | |||||
review | |||||
(April 1, 2022 to | Increase/ | Rate of | |||
(April 1, 2023 to | |||||
September 30, 2022) | increase/ | ||||
decrease | |||||
September 30, 2023) | |||||
decrease (%) | |||||
System | Net sales | 6,641 | 7,213 | 571 | 8.6 |
management | |||||
Gross profit | 1,476 | 1,591 | 114 | 7.8 | |
Gross profit margin | 22.2% | 22.1% | -0.1P | ― | |
Software | Net sales | 5,647 | 5,659 | 11 | 0.2 |
development | |||||
Gross profit | 1,210 | 1,028 | -181 | -15.0 | |
Gross profit margin | 21.4% | 18.2% | -3.2P | ― | |
IT infrastructure | Net sales | 1,228 | 1,396 | 167 | 13.6 |
Gross profit | 310 | 420 | 110 | 35.5 | |
Gross profit margin | 25.3% | 30.1% | 4.8P | ― | |
Cybersecurity, | Net sales | 1,130 | 1,502 | 371 | 32.9 |
consulting and | |||||
Gross profit | 315 | 488 | 172 | 54.6 | |
training | |||||
Gross profit margin | 27.9% | 32.5% | 4.6P | ― | |
Others | Net sales | 212 | 166 | -45 | -21.5 |
Gross profit | 10 | 54 | 43 | 398.7 | |
Gross profit margin | 5.1% | 32.6% | 27.5P | ― | |
Total | Net sales | 14,861 | 15,938 | 1,076 | 7.2 |
Gross profit | 3,324 | 3,583 | 258 | 7.8 | |
Gross profit margin | 22.4% | 22.5% | 0.1P | ― | |
(i) System management
New orders were received due to redoubling of sales efforts aimed at major IT vendors, while orders accepted from existing clients swelled. Net sales rose 8.6% YoY to ¥7.213 billion.
(ii) Software development
Although some projects with public-sector-related clients drew to a close, reinforced sales efforts aimed at major IT vendors led to expansion in transactions, while orders accepted from existing clients related to the financial fields swelled. Net sales grew 0.2% YoY to ¥5.659 billion.
(iii) IT infrastructure
The Group enjoyed increases in orders accepted for major projects with finance-related clients and in transactions with major IT vendors and manufacturing related clients. Net sales increased 13.6% YoY to ¥1.396 billion.
(iv) Cybersecurity, consulting and training
Orders accepted in consulting and cybersecurity swelled, boosting net sales 32.9% YoY to ¥1.502 billion.
(v) Others
Despite expansion in orders accepted for product sales, changes in service category for some projects engendered a decline in net sales of 21.5% YoY to ¥166 million.
- 3 -
Management Policy Initiatives
In the previous Mid-term Management Plan, the ID Group strove to upgrade its services in various fields by cultivating engineers with a thorough grounding in digital technology, thereby building a foundation for future growth. Beginning in the fiscal year ended March 31, 2023 (FY2022), the Group prepared "Next 50 Episode II: Ride on Time," the Mid-term Management Plan covering the period FY2022 through FY2024, to bolster profitability based on the following three basic themes:
- Develop business models in line with our DX portfolio, which is focused on strengthening support for advancement of customers' DX and development of original solutions
- Strengthen partnerships to create greater value-added
- Upgrade management divisions and reallocate resources to the business divisions
Under this Mid-term Management Plan, the Group is pursuing four basic strategies to achieve the above three basic themes: an IT service strategy, a human resource strategy, a "new normal" strategy and a Sustainable Development Goals (SDGs) strategy.
Note: Business partners refers to IT partners collaborating with the Group on projects.
- 4 -
(i) IT Service Strategy
The Group identifies fields of technology where needs are strong and works with corporate partners to support customers in advancing DX and develop original solutions targeting growth fields. For example, the Group is moving forward with research in AI systems for X-ray image diagnostics in the orthopedic-surgery field, based on a joint-research agreement concluded in March 2023 with Tottori University. We are also developing a proprietary, dialogue-based AI chatbot service that uses the ChatGPT API, exclusively for in-house use. In August, the Group launched sales of ID AI Concierge, which enables selection of plans according to customers' applications. In addition, the Group released a pilot version of a virtual operations center (VROP) long in the works. Development of this project is now accelerating, with a view to start of service planned for January 2024.
(ii) Human Resource Strategy
To expand its DX services and boost value-added, the Group is further enhancing its training programs, accelerating the development of mid- to senior-level engineers and planning-and-proposal staff. For example, the Group is preparing and deploying in-house training roadmaps for each role of personnel involved in advancing DX, based on the Digital Skill Standards created by the Ministry of Economy, Trade and Industry (METI) and the Information-technology Promotion Agency, Japan. The Group is also taking steps to develop AI engineers. To bolster the AI literacy of all Group employees, the Group launched in- house training by fellow and provided online study plans to some 300 employees.
(iii) New Normal Strategy
The ID Group is working to streamline and add value to operations through measures such as overhauling its core in-house systems and is constructing a smart management division. The ID Group is moving to digitize the duties of management divisions, automate contacts among departments and functions, and centralize the management of information. To make its in-house network secure yet flexible, the Group constructed a Zero Trust Network Access connection. Moreover, the Group overhauled its in-house systems to streamline operations and ensure seamless communications, thereby boosting Group-wide productivity. Through these various initiatives, the Group is working to optimize workflows and radically transform management divisions and other aspects of its in-house environment.
(iv) SDGs Strategy
The Group takes concerted steps to advance sustainability through its business activities, aiming for a virtuous circle of solving social problems and enhancing corporate value. To enhance transparency in its management of human capital, the ID Group published a page on its corporate website related to sustainability, entitled "Toward Human Capital Management." The page discusses human capital and related initiatives throughout the Group. The Group is working to support employees' health and provide them with a supportive work environment. Barrier-free washrooms, usable by a wide variety of people, were installed in the head office building; health management seminars were presented, with focus on sleep; and support was provided to employees who wished to quit smoking. Repeating an initiative in the previous fiscal year, to support activities contributing to society and to culture and the arts, the Group sponsored ID Group Blood Donation Day and classical concerts.
- 5 -
- Qualitative Information on the Consolidated Financial Position
- Changes in the ID Group's financial position
(Assets)
Assets at the end of consolidated Q2 decreased by ¥134 million from the end of the previous consolidated accounting period to ¥17.384 billion. Although contract assets increased by ¥567 million, investment securities rose by ¥210 million and accounts receivable-other increased by ¥108 million, accounts receivable-trade declined by ¥911 million and cash and deposits decreased by ¥156 million.
(Liabilities)
Liabilities at the end of consolidated Q2 decreased by ¥901 million from the end of the previous consolidated accounting period to ¥6.185 billion. Interest-bearing debt declined by ¥1.117 billion.
(Net Assets)
Net assets at the end of consolidated Q2 increased by ¥767 million from the end of the previous consolidated accounting period to ¥11.199 billion. Although payment of year-end dividends reduced net assets by ¥426 million, net income attributable to owners of parent increased to ¥844 million and foreign currency translation adjustment rose by ¥118 million.
(ii) Cash flows
Cash and cash equivalents on a consolidated basis (hereinafter "net cash") at the end of consolidated Q2 under review increased by ¥732 million in comparison with the end of consolidated Q2 in the previous fiscal year, to ¥4.554 billion (+19.2% YoY).
The cash flow and factors affecting cash flow for H1 of the fiscal year under review are as follows.
(Cash flows from operating activities)
Net cash provided by operating activities was ¥1.447 billion (compared to a net cash increase of ¥364 million in the same period of the previous fiscal year). This result was mainly due to ¥1.505 billion in net income before income taxes, ¥912 million decrease in notes and accounts receivable-trade, and ¥864 million increase in other current assets.
(Cash flows from investing activities)
Net cash used in investing activities was ¥254 million (compared to a net cash decrease of ¥265 million in the same period of the previous fiscal year). This result was mainly due to a net payment of ¥72 million into time deposits, purchase of property, plant and equipment of ¥53 million and other expenditures of ¥107 million (payments for capital investments, etc.).
(Cash flows from financing activities)
Net cash used in financing activities was ¥1.548 billion (compared to a net cash decrease of ¥1.119 billion in the same period of the previous fiscal year). This result was mainly due to a net decrease of ¥900 million in short-term loans payable, repayment of long-term loans payable of ¥216 million, and cash dividends paid of ¥429 million (including cash dividends paid to non-controlling interests).
- Qualitative Information on the Consolidated Results Forecast
There have been no changes to the full-year results projections as released by the ID Group on April 28, 2023.
- 6 -
2. Consolidated Financial Statements and Important Notes
- Consolidated Balance Sheet
(Thousands of ¥) | ||
Previous consolidated accounting | Consolidated second quarter | |
period | under review | |
As of March 31, 2023 | As of September 30, 2023 | |
Assets | ||
Current assets | ||
Cash and deposits | 5,069,433 | 4,913,173 |
Notes receivable-trade | 2,200 | 2,200 |
Accounts receivable-trade | 5,903,800 | 4,992,610 |
Contract assets | 293,657 | 861,415 |
Work in process | 858 | 3,215 |
Accounts receivable-other | 153,382 | 261,951 |
Other | 265,957 | 439,794 |
Allowance for doubtful accounts | -40,068 | -40,068 |
Total current assets | 11,649,222 | 11,434,293 |
Non-current assets | ||
Property, plant and equipment | 1,327,189 | 1,351,369 |
Intangible assets | ||
Goodwill | 1,304,134 | 1,081,899 |
Software | 152,791 | 137,343 |
Other | 764 | 754 |
Total intangible assets | 1,457,690 | 1,219,997 |
Investments and other assets | ||
Investment securities | 1,865,067 | 2,075,167 |
Deferred tax assets | 553,277 | 536,064 |
Guarantee deposits | 285,952 | 304,823 |
Other | 388,449 | 470,500 |
Allowance for doubtful accounts | -7,500 | -7,500 |
Total investments and other assets | 3,085,248 | 3,379,055 |
Total non-current assets | 5,870,127 | 5,950,422 |
Total assets | 17,519,349 | 17,384,716 |
- 7 -
(Thousands of ¥) | ||
Previous consolidated accounting | Consolidated second quarter | |
period | under review | |
As of March 31, 2023 | As of September 30, 2023 | |
Liabilities | ||
Current liabilities | ||
Accounts payable-trade | 1,147,457 | 1,160,131 |
Contract liabilities | 62,077 | 53,313 |
Short-term loans payable | 1,400,000 | 500,000 |
Current portion of long-term loans payable | 375,100 | 258,633 |
Income taxes payable | 580,112 | 604,664 |
Provision for bonuses | 1,134,387 | 1,131,612 |
Provision for directors' bonuses | 31,600 | 11,749 |
Provision for product warranties | 10,095 | 6,344 |
Other | 1,216,611 | 1,363,646 |
Total current liabilities | 5,957,442 | 5,090,095 |
Non-current liabilities | ||
Long-term loans payable | 350,000 | 250,000 |
Deferred tax liabilities | 286,834 | 354,427 |
Provision for directors' retirement benefits | 29,331 | 32,886 |
Net retirement benefit liability | 174,944 | 28,473 |
Other | 288,600 | 429,282 |
Total non-current liabilities | 1,129,710 | 1,095,070 |
Total liabilities | 7,087,153 | 6,185,166 |
Net assets | ||
Shareholders' equity | ||
Capital stock | 592,344 | 592,344 |
Capital surplus | 754,132 | 754,132 |
Retained earnings | 8,819,108 | 9,237,244 |
Treasury stock | -836,345 | -772,099 |
Total shareholders' equity | 9,329,240 | 9,811,621 |
Accumulated other comprehensive income | ||
Valuation difference on available-for-sale securities | 755,600 | 895,422 |
Deferred gains or losses on hedges | - | 18,934 |
Foreign currency translation adjustment | 297,086 | 415,934 |
Remeasurements of retirement benefit plans | 711 | 2,520 |
Total accumulated other comprehensive income | 1,053,398 | 1,332,812 |
Non-controlling interests | 49,557 | 55,116 |
Total net assets | 10,432,196 | 11,199,550 |
Total liabilities and net assets | 17,519,349 | 17,384,716 |
- 8 -
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ID - Information Development Co. Ltd. published this content on 31 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 November 2023 07:40:52 UTC.