Performance trend of Project Holdings Co., Ltd. <9246>.
1. Performance overview for the first quarter of the fiscal year 2024.
In the first quarter of fiscal year ending December 2024, the future of the environment surrounding companies remains uncertain due to the situation in Ukraine and Russia, rising raw material prices, the progress of the weak yen, etc. However, it is expected to gradually recover due to various policy effects and the recovery of individual consumption. In such a situation, Japanese companies are actively promoting the improvement of further added value, the creation of business opportunities, the improvement of productivity, and the utilization of technology to achieve them, and the need for DX such as formulating, executing, and improving business strategies utilizing digital technology is expected to increase further in the future. In the first quarter of fiscal year ending December 2024, the consolidated financial results were sales of ¥ 1,439 million (down 3.7% year-on-year), an operating loss of ¥ 22 million (a profit of ¥ 228 million in the same period last year), an ordinary loss of ¥ 27 million (a profit of ¥ 224 million in the same period last year), a net loss attributable to the parent company's shareholders for the quarter of ¥ 24 million (a profit of ¥ 136 million in the same period last year), and EBITDA of ¥ 33 million (down 87.8% year-on-year), and revenue and profit decreased. In terms of quarterly trends, sales continued to decline from the peak of ¥ 1,634 million in the second quarter of fiscal year ending December 2023, and in the first quarter of fiscal year ending December 2024, it decreased by 7.8% compared to the previous quarter. The operating profit has been decreasing mainly from ¥ 282 million in the third quarter of the fiscal year ending December 2022, and it decreased from a profit of ¥ 189 million in the previous quarter for the first quarter of fiscal year ending December 2024. As a result, the operating profit margin has also decreased sharply from 15.3% in the same period last year and 12.1% in the previous quarter to -1.6%.
Amid such circumstances, the consolidated business performance in the first quarter of fiscal year ending December 2024 was greatly affected by the resignation of the former representative director and vice president due to a scandal and the departure of a certain number of employees due to distrust of the organization. In particular, the significant decrease in revenue in the main business of digital transformation business led to a decrease in sales revenue. In addition, in the digital transformation business, the gross profit margin decreased due to an increase in cost of goods sold such as personnel expenses and outsourcing fees, and in the DX x technology business, sales decreased due to the departure of sales employees, which was linked to a decrease in sales revenue. In addition, due to the use of external personnel for the purpose of revitalizing the personnel system and strengthening education, personnel expenses (such as back-office employee salaries) and outsourcing expenses (such as external personnel use and training expenses for strengthening education) increased, and due to the prepayment of rent for office relocation, the selling, general and administrative expenses increased significantly.
Regarding the recording of rent, the budget was created on the premise of recording the actual amount of rent paid as an expense. Later, it was decided to allocate the expenses for all contract periods by dividing them from January 2024 when entering into the contract, through consultation with experts and others, which resulted in an increase in expenses for fiscal year ending December 2024. Therefore, it can be said that it is a special factor different from the performance trend. In our company's opinion, the increase in personnel expenses, outsourcing expenses, and rent for head office relocation, which were the factors that caused the decrease in profit, are necessary expenditures for the company to return to the growth track again in line with the medium-term management plan.
The above-mentioned increase in personnel expenses and outsourcing expenses that led to the decrease in profit, as well as the increase in rent for head office relocation, which was the reason for the increase in selling, general and administrative expenses, are considered necessary expenses for the company to return to the growth track again in line with the medium-term management plan.
(Written by FISCO guest analyst Nozomi Kokushige).