Outlook for Project Holdings (9246) in the future.

1. Performance outlook for fiscal year ending December 2024.

The future economic situation is still uncertain, with concerns about the impact on the business environment due to the prolonged situation in Ukraine and Russia, rising raw material prices, and the progress of yen weakness. However, it is unlikely that the need for digital technology utilization to achieve business model transformation and productivity improvement in Japanese companies will decrease, and it is expected that the DX market will continue to expand, and the inquiries for various services offered by the company group will continue to be strong.

For the consolidated performance for the fiscal year ending December 2024, based on the transfer of shares of consolidated subsidiaries and recent business trends, the company downwardly revised its financial estimates for the first quarter of the same year from its initial performance estimates by reducing revenue, operating profit, ordinary profit, and net income attributable to shareholders of the parent company by 350 million yen, 440 million yen, 520 million yen, and 320 million yen, respectively. It predicts a decrease in revenue of 5,750 million yen (8.5% decrease from the previous year), operating loss of 190 million yen (857 million yen profit in the previous year), ordinary loss of 220 million yen (836 million yen profit in the previous year), and net loss attributable to shareholders of the parent company of 120 million yen (587 million yen profit in the previous year).

The main reason for the downward revision is the change in the method of accounting for ground rent expenses since the previous performance estimate, and the transfer of shares of consolidated subsidiary Project HR Solutions.

Regarding the method of accounting for ground rent expenses due to office relocation, the cost of sales and general and administrative expenses in the fiscal year ending December 2024 is expected to increase by 180 million yen as a result of changing the method after considering the opinions of experts. As a result, it is predicted that operating profit, ordinary profit, and net income attributable to shareholders of the parent company will each decrease by 180 million yen.

Regarding Project HR Solutions, the decision to sell was made based on recent business conditions, synergy utilization, and the concentration of management resources on major businesses, thus becoming a factor that reduces revenue by 250 million yen, operating profit and ordinary profit by 80 million yen, and net income attributable to shareholders of the parent company by 80 million yen. However, a special profit of 50 million yen associated with the transfer of shares will be a factor in raising net income attributable to shareholders of the parent company.

In addition, some accounting items have been revised since the previous estimate, and the proportion of projects that utilize external partners has increased more than expected due to prioritizing the development of employees, mainly new employees, in the digital transformation business, taking into account the increase in costs and other factors.

Thus, the main reason for the downward revision became a special factor of changing the method of accounting for ground rent expenses. Additionally, efforts to organize in accordance with the medium-term management plan and restart growth also had an impact. Based on the above, the revised estimates are conservative performance estimates that are highly feasible based on current business and financial trends, and we consider them to be so.

(Written by FISCO guest analyst Nozomi Kokushige).