System Support Research Memorandum (4): Achieved sales and profits higher than the company’s plan for the fiscal year ending in June 2021 |

* 15: 04 JST System Support Research Memorandum (4): Achieved sales and profits higher than the company’s plan for the fiscal year ending in June 2021
■Performance Trends

1. Overview of operating performance for the fiscal year ending in June 2021
System Support <4396>The consolidated financial results for the fiscal year ending in June 2021 are as follows: sales increased by 7.9% to 14.431 billion yen, operating income increased by 23.3% to 931 million yen, and ordinary income increased by 34.1%. 954 million yen, the net profit attributable to the owners of the parent company increased by 49.9% year-on-year to 674 million yen, a continuous record high. It also exceeds the company’s upward revision plan in May 2021.

The negative impact of the corona disaster on sales remained at the level expected in the original plan. On the whole, companies are enthusiastic about digital transformation investment, and the solution business has grown due to the introduction of cloud systems designed to improve operational efficiency and the expansion of ERP introduction project orders, which has led to a drag on overall profits. In addition, due to the accumulation of monthly billing income, the sales of outsourcing business continued to grow. On the other hand, the product business was flat due to the disappearance of large-scale customized projects that contributed to sales in FY06/2020.

The cost of sales ratio fell from 74.6% in the previous fiscal year to 74.1%, a decrease of 0.5%. In addition to improving the product mix, the shift to telecommuting systems also helps reduce fixed costs. SG&A expenses increased by 6.6% year-on-year due to the increase in personnel expenses. However, due to the cancellation of exhibitions and the introduction of online sales to curb operating expenses, the SG&A ratio was higher than the previous quarter and decreased by 0.2%. Therefore, the operating profit margin increased from the previous fiscal year’s 5.6% rose to 6.5%, the highest level in recent years. Non-operating income and expenses increased by 66 million yen from the previous quarter. The main reason is that the subsidy income increased by 34 million yen, and the listing-related expenses of 17 million yen recorded in the last fiscal year disappeared.

The solution business related to ServiceNow continues to grow rapidly, supporting the improvement of business productivity.
2. Business sector trends
(1) Solution business
Solution business sales increased 8.5% year-on-year to 12.06 billion yen, and segment profit increased 11.2% to 2.905 billion yen. The ERP import project, the cloud system “ServiceNow” import project and other cloud service use support orders aimed at improving system maintenance and operation efficiency are firm. In addition, the segment profit margin increased from 23.5% in the previous fiscal year to 24.1%, mainly due to the increase in the sales composition of the high-margin “ServiceNow”.

Looking at sales by field, sales related to database and cloud infrastructure continued to grow, with a year-on-year increase of 13.2% to 3.116 billion yen. In addition to the increase in the import projects of cloud systems such as AWS and Microsoft Azure, the cloud migration project of the Oracle database is also progressing steadily. In addition, although the scale is still small, the resale of each cloud account (the monthly usage fee generated by the customer using the cloud) is steadily increasing as a stock-based income.

ServiceNow-related sales increased by 64.4% year-on-year to 1.169 billion yen. FY06/19’s sales were 377 million yen, which means it has tripled rapidly in two years. As companies are committed to the digital transformation of management, as a cloud platform that can efficiently realize the standardization and automation of business processes, the demand has expanded rapidly in the past 1-2 years. The company is one of the first domestic companies to sign a partnership contract in 2015. While cultivating certified talents, it has accumulated a large number of introduction records and achieved rapid growth. Recently, the number of competitors has increased, but the number of engineers in the Kansai region is still relatively small, and the fact that companies often receive large-scale project orders from large companies has an impact.

ERP-related sales increased by 8.3% year-on-year to 2.6 billion yen. As the maintenance support for existing SAP ERP products will expire in 2027, the companies that introduced them are continuing to switch from existing products to “SAP S/4 HANA.” In this case, the company is actively training engineers while responding to strong demand. In addition, the company has established a system that can handle nearshore ERP maintenance in the Hokuriku region. Its advantage is that it can provide one-stop support from ERP consulting to development, infrastructure construction and maintenance services, and contribute to sales. growing up.

Sales of other system contract development were 5.177 billion yen, a decrease of 1.5% from the previous fiscal year. This is due to the completion of large-scale contract development projects that contributed to sales in the 2006/2020 fiscal year, which is an increase from the level two years ago (4,489 million yen).

(2) Outsourcing business
Outsourcing business sales increased by 6.5% year-on-year to 1.780 billion yen, and segment profit increased by 11.3% to 558 million yen. Sales of data center services, including artificial intelligence-related services, have grown steadily. The monthly usage fee of the data center is also increasing. Due to the increase in sales, the segment profit margin has also increased from 30.0% in the previous fiscal year to 31.4%.

(3) Product business
Product business sales increased by 0.1% year-on-year to 555 million yen, and segment profit fell 3.1% year-on-year to 295 million yen. Sales of “MOS”, “Working Actors” and “SHIFTEE” increased due to the accumulation of contracts, but due to the disappearance of large-scale customized projects of “Architects Actors,” sales were sluggish, contributing to profit growth. The fiscal year ending in June 2020. This is a factor, and if this factor is excluded, profits are steadily expanding. Due to the disappearance of large-scale customized projects, the segment profit margin has also fallen from 55.0% in the previous fiscal year to 53.2%.

As of the end of June 2021, the number of contracts classified by major products were 636 “builders” (41 more than the end of the previous fiscal year), 457 “MOS” (an increase of 109), and 81 “SHIFTEE” contracts were 75. Companies (increased by 17 companies) and 75 “employees” (increased by 49 companies). “Builders” and “MOS” are the pillars of profitability, and “SHIFTEE”, which went public in 2016, also achieved its first profit in the whole year. Regarding the “work actors” that started selling in 2018, it seems that it will take some time to monetize, because they are continuing to develop, such as functional improvements, but through the introduction of partner regional banks for sales, in addition to the increase in the number of employees, major companies hire The number of employees has begun to increase, and growth is expected. In addition to daily attendance management, it can also manage and analyze the working hours of various businesses and projects. Its introduction is becoming popular as a tool to support the improvement of enterprise productivity and “work style reform”.

(FISCO guest analyst Yuzuru Sato writes)>