President & Representative Director
Revenues increased in all areas, and income also rose in each profit item.
In recent years, Japanese companies have been stepping up their investment in IT, regardless of industry sector. In addition, in the information service industry where the INES Group operates, not only has the market been expanding, but the area of leading-edge technologies such as artificial intelligence (AI), Internet of things (IoT) and robotics process automation (RPA) has also been developing rapidly.
In this business environment, the Group has been focusing on investing in the development of the next-generation version of “WebRings,” a web-type comprehensive government information system for local governments, which is the core product, in addition to focusing on sales activities to expand orders and sales of the Group. The Group has also been actively working on far-sighted research and development activities in leading-edge areas such as AI, RPA, big data and IoT, as well as areas related to digital transformation, with INES Research Institute, Inc., a Group company that specializes in research and development, playing the central role.
As a result of a series of initiatives, including the efforts above, revenues increased in all industry sectors of the public, financial and general industry, and consolidated net sales for the fiscal year under review increased 5.6% year on year, to \38,143 million.
Looking at earnings, consolidated operating income rose 34.9% year on year, to \2,169 million, and consolidated ordinary income increased 34.8% year on year, to \2,233 million, reflecting company-wide cost reduction efforts and the elimination of relocation costs for the business office in Kawasaki, which were posted in the previous fiscal year, in addition to the effect of higher revenues, despite an increase in costs for some projects. Consolidated net income attributable to owners of parent rose 41.1% year on year, to \1,492 million.
Initiatives to strengthen competitiveness and improve the efficiency of management resources.
The INES Group has been restructuring business facilities in the Tokyo metropolitan area with the aim of strengthening the competitiveness of businesses and improving the efficiency of management resources. As part of this endeavor, the Group has decided to sell the land and building of the head office it owns in Chiyoda-ku, Tokyo, as announced on November 27, 2018. As a result, the Group will post a gain on sales of non-current assets of \4.3 billion as extraordinary income in the current fiscal year.
However, temporary costs (including investments) for the relocation of the head office and business offices and the enhancement of the IT environment for work style reforms are expected to be generated. In addition, the Group is also considering the disposition of other non-current assets to further improve the efficiency of assets (the amount of changes in extraordinary income and losses due to these measures is not yet determined at present). The Group will continue to make efforts to streamline the balance sheet and reduce costs for holding assets through the restructuring of business facilities, among other initiatives.
Start-up of the 2021 Medium-Term Management Plan.
The report of the Study Group for Digital Transformation (DX) of the Ministry of Economy, Trade and Industry notes concerns that a large economic loss (the so-called “2025 Digital Cliff” (Note)) could be generated due to a delay in the response by Japanese companies to digital competition if they neglect to renew existing systems, given that many companies still have legacy systems (old models of mission-critical systems), as a trend around the information service industry. To avoid this, they are expected to be forced to change their business models utilizing digital transformation.
Note) “2025 Digital Cliff”: This means that Japanese companies will be the losers in the digital competition because they will be unable to change their business models quickly and flexibly enough, as the maintenance costs of systems soar as a result of their failure to renew legacy systems. The report forecasts that an economic loss of up to \12 trillion a year will be generated in Japan as a whole in or after 2025.
With this understanding of the business environment, we have reviewed our management plan, which we have been executing since 2014, and launched the “2021 Medium-Term Management Plan” with the vision of “Change toward Growth” from the current fiscal year (ending March 31, 2020)
In this three-year plan, we will vigorously push forward with initiatives based on the following two major policies: The “renewal of business models for customers’ base business”. in which we will support the change of business models of customers by enhancing new solutions and functions without being bound by existing businesses, and the “creation and expansion of new growth businesses” through alliances and M&A. The Plan aims to achieve consolidated net sales of \40 billion or more and the operating income margin of 7% or more in its final fiscal year (ending March 31, 2022).
Increased our year-end dividends by ￥5 from the initial plan, to ￥15 per share.
To further enhance returns to shareholders, we have increased our year-end dividends by ¥5 from the initial plan, to ¥15 per share in the fiscal year under review. As a result, the annual dividends combined with the interim dividends of ¥10 will be ¥25 per share. In the current fiscal year (ending March 31, 2020), we plan to pay annual dividends of ¥30 per share, consisting of the interim dividends of ¥15 and the year-end dividends of ¥15.
We will aim to further improve our earnings strength, and in doing so respectfully ask for the continued support and encouragement of all of our shareholders.