Company Overview

1. Company Overview

Land Computer (3924), as an independent system integrator with a long history, celebrated its 50th anniversary in January 2021. It is rare in the information service industry to have originated from an educational corporation. The company's mission statement is to "1) create customer value and pursue customer satisfaction, thereby enhancing corporate value. 2) Become a leading information technology company as a professional group that opens up the next generation. 3) Always maintain and continue an innovative corporate culture and tradition. "

One of Land Computer's characteristic is its enthusiastic approach to employee education, as the company originated from an educational corporation. Employees are encouraged to obtain not only IT qualifications but also business qualifications and hold an average of three or more qualifications per person. With IT and customer service skills and knowledge, the company can accomplish system development with high customer satisfaction.

2. History

Since its establishment in 1971, the company has been doing business with Fujitsu (6702) and banks for system development. Its business scale has expanded to include commissioned development of financial systems such as bank and insurance systems. In 2006, the company started infrastructure-related services as infrastructure solution services in system integration and services. From April 2010, in collaboration with Salesforce.com, Inc. (currently Salesforce.com Japan), it began providing cloud computing services and started introducing and developing add-ons for package systems in system integration and services as package-based SI services.

In response to the acceleration of DX in April 2020, the company made organizational changes. It established the "DX Promotion Headquarters," positioned the "Salesforce Promotion Room" (currently the Salesforce Business Promotion Room) and the newly established "Cloud Strategy Room" (currently the DX Technology Center) directly under it. Currently, it promotes the enhancement of new digital technology personnel such as low-code development and agile development, as well as efforts to shift to the cloud.

In December 2015, the company was listed on the Tokyo Stock Exchange's second section and designated as the first section of the same market in May 2018. It moved to the prime market due to the market reorganization of the same market in April 2022.

As its first M&A, in April 2021, the company acquired and made a subsidiary of Infrie Inc., which handles the core system package (ERP) of German SAP. In April 2022, it acquired and made a subsidiary of NESCO SUPER SOLUTION Co. Ltd. (currently Technigate Inc.), which specializes in accounting packages "SuperStream." These subsidiaries are subject to consolidated financial statements, which have been disclosed since the fiscal year ended March 2022.

3. Business Composition

The company's business consists of three service lines: system integration and services, infrastructure solution services, and package-based SI services. It has established a system to provide total solutions for business challenges. The service line breakdown of consolidated sales for the fiscal year ending March 2024 was 55.1% for system integration and services, 10.8% for infrastructure solution services, and 34.0% for package-based SI services.

The average annual growth rate of each service line's sales for the three fiscal years ending in March 2024 was as follows: 15.7% for all services, 11.1% for system integration and services, 2.7% for infrastructure solution services, and 33.2% for package-based SI services.

In the fiscal year ended March 2021, sales declined by 2.4% year-on-year, and operating profit declined by 12.6% year-on-year, due to the impact of the spread of COVID-19. The growth/decline of sales for each service line was 7.0% year-on-year for system integration and services, 9.3% year-on-year for infrastructure solution services, and 20.7% increase year-on-year for package-based SI services. Infrastructure solution services were most affected by the backlash from the Windows 10 update-related business in the fiscal year ended March 2020 and the impact of COVID-19. In the fiscal year ending March 2022, sales and operating profit exceeded pre-COVID-19 levels, overcoming changes in the business environment in one term.

The company's performance sees revenue recognition concentrated in Q2 (July-September) and Q4 (January-March) due to the timing of customer companies' budget execution and development system deadlines, with a tendency for operating profit to be biased towards the fourth quarter of the fiscal year. The revenue and operating profit margin in Q1 was extremely low, at 1-2%, but profitability has improved significantly since the package-based SI and service revenue increased after the fiscal year ending March 2022, and a trend of easing the seasonality of the company's profitability is observed.

The company positions system integration services and infrastructure solution services as stable growth businesses, and positions package-based SI and services as high-growth businesses. In April 2020, a "Salesforce Business Promotion Office" was established to deploy Salesforce throughout the entire company. The effect was already evident in the fiscal year ending March 2021. INFREE, which was acquired as a subsidiary in April 2021, has an excellent internal education system and employees involved in the company's SAP-related business have utilized it. As a result, SAP-related business revenue is achieving sustained growth. In addition, the fact that the subsidiary was engaged in highly advanced and well-compensated work has had a positive impact on the company's corporate culture, with employees aspiring to higher value-added work. Due to differences in revenue composition from the expansion of package-based SI and services, the revenue operating profit margin has risen from 7.8% in the fiscal year ending March 2020 before the pandemic to 10.6% in the fiscal year ending March 2023, and is expected to further increase to 12.6% in the fiscal year ending March 2024, and to 12.9% in the fiscal year ending March 2025.

(Author: Hiroki Nagao, FISCO guest analyst)