System Support Research Memorandum (1): “ServiceNow” promotes double-digit profit growth | Special Report

■Offer

System Support<4396>It is an independent IT company that continues to grow, with cloud systems, ERP, database use support and other solution businesses as its core, and has industry-leading technical capabilities. The head office is in Ishikawa Prefecture, but with Higashimeisaka as the center, it has a subsidiary in Silicon Valley, USA. In addition to the solution business, it is also developing stock-based businesses such as outsourcing business centered on data center operations and product business centered on cloud (SaaS) services. The company has applied to select the “main market” of the Tokyo Stock Exchange’s new market division, which will be launched in April 2022.

1. Overview of operating performance for the fiscal year ending in June 2021
In the 2006/2021 fiscal year, consolidated sales reached a record high of 14.431 billion yen, an increase of 7.9% year-on-year, and operating income increased by 23.3% to 931 million yen. The impact of the spread of the new coronavirus infection (hereinafter referred to as “coronavirus disease”) is negligible within the expected range. Due to the steady expansion of the solution business and outsourcing business, and the completion of large-scale projects contributing to FY06/2020, sales remained flat. In terms of profit, in addition to the impact of increased sales, the growth of high-margin “ServiceNow”*, the increase in cost ratios brought about by remote office penetration, and the control of operating expenses and other expenses have all increased. Factors behind profit growth.

* The cloud platform that standardizes and automates business processes and supports the improvement of employee and organizational productivity, as a DX solution, has begun to spread rapidly not only in Europe and the United States, but also in Japan in recent years.

2. Forecast for the fiscal year ending June 2022
In fiscal year 06/2222, sales are expected to increase by 10.6% year-on-year to 15.962 billion yen, operating income is expected to increase by 16.0% to 1.080 billion yen, and sales and profits are expected to achieve double-digit growth. Although the corona is still continuing, the company’s DX investment is strong and has almost no impact on orders. The high growth is expected to be especially related to “ServiceNow”. It continues to spread and expand as a tool to improve corporate productivity… In addition, with SAP The cloud migration project is the center, and the sales of ERP-related products will continue to increase. The product business that was sluggish due to temporary factors in the previous fiscal year was due to accumulated contracts. In terms of profit, the budget is formulated on the premise that operating expenses and other expenses will return to the level before the corona disaster, but as the corona disaster continues, these expenses seem to be falling below the budget. There will be no major changes in the future market environment. We believe that the fiscal year ending in June 2022 may exceed the company’s plan.

3. Growth strategy
As a medium- and long-term growth strategy, while maintaining the steady growth of our main solution business, we will further accelerate the growth of outsourcing business and product business to expand operating performance and improve profitability. In terms of solution business, we will expand sales related to cloud, ERP and database, which are in high demand, through recruitment and training of human resources with high technical capabilities. Especially in the “ServiceNow” that realizes the digital transformation of enterprises, the company has been certified as the highest “elite partner” of partners, and the number of certified construction qualifications ranks second in Japan, and will continue to maintain human resources development, and the policy is strengthening At the same time actively increase sales. The high profit margin is expected to contribute to the improvement of overall profitability. On the other hand, in the outsourcing business, we will capture the demand for backup applications as a BCP measure for private cloud construction companies. In terms of product business, we develop and provide various cloud services that help improve operational efficiency, and achieve sales growth by expanding sales agents and strengthening network marketing. In terms of product business, mergers and acquisitions have also been positioned as one of the growth strategies.

■Key points
・ An independent IT company that continues to grow by handling many projects related to Microsoft Azure, AWS, ServiceNow, SAP and Oracle
・For the fiscal year ending in June 2021, by increasing orders for cloud systems and ERP and increasing cost rates, sales and profits exceeded the company’s plans.
・ In the fiscal year ending in June 2022, driven by the expansion of DX investment, profits will maintain double-digit growth, and the impression of conservative profits is strong.
・ All business units are expected to grow, especially ServiceNow related products are expected to continue to grow rapidly.

(Written by Yuzuru Sato, Visiting Analyst at FISCO)

“As”

Provider: FISCO