Presentation Material of Financial Results for the Third Quarter of FY2024
(from January 1, 2024 to September 30, 2024)
Note: This English translation is solely for reference purposes and not a legally definitive translation of the original Japanese text. In the event a difference arises regarding the meaning herein, the original Japanese version will prevail as the official authoritative version.
DENTSU SOKEN INC.
October 31, 2024
INDEX
01 | Outline of financial results for the 3Q of FY2024 |
02 | Forecasts for FY2024 |
03 | Next Medium-Term Management Plan |
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INDEX
01 | Outline of financial results for the 3Q of FY2024 |
02 | Forecasts for FY2024 |
03 | Next Medium-Term Management Plan |
3
Summary of the Third Quarter of FY2024
Net sales
Despite +6.6% YoY due to the expansion of Financial and Manufacturing Solutions, the progress rate against the full-year plan is 72.4%, -1.4pYoY.
-7.0%YoY due to the significant increase in SG&A expenses mainly due to | ||
Operating | ||
personnel expenses. The progress rate against the full-year plan also | ||
profit | ||
worsened significantly to 64.3%, -9.7pYoY. | ||
Orders received during the 3Q (July-September) increased by 7.8% YoY, | ||
Orders | mainly in Business Solutions. However, it did not meet the net sales growth | |
expectations for the second half of the fiscal year of +11.0%. | ||
Based on these trends, we have revised our full-year forecast downward but | ||
Full-year | ||
have maintained our dividend forecast. Net sales: ¥155 billion > ¥152 billion | ||
forecast | ||
(-1.9%), Operating profit: ¥22.5 billion > ¥20.0 billion (-11.1%) | ||
© DENTSU SOKEN INC.
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Consolidated Results for the Third Quarter of FY2024
(Unit: millions of yen)
3Q of FY2024 | YoY | percentage of progress%** | |||||
(cumulative) | 3Q of FY2023 | Variance | % change | 3Q of FY2024 | 3Q of FY2023 | ||
(cumulative) | (cumulative) | (cumulative) | |||||
Net sales | 112,231 | 105,267 | +6,964 | +6.6 | 72.4 | 73.8 | |
Gross profit | 40,424 | 37,859 | +2,565 | +6.8 | - | － | |
- | － | ||||||
Gross profit margin (%) | 36.0 | 36.0 | +0.0p | - | |||
Selling, general and administrative | 25,961 | 22,307 | +3,654 | +16.4 | - | － | |
expenses | |||||||
Operating profit | 14,463 | 15,551 | -1,088 | -7.0 | 64.3 | 74.0 | |
- | - | ||||||
Operating margin (%) | 12.9 | 14.8 | -1.9p | - | |||
Ordinary profit | 14,413 | 15,695 | -1,282 | -8.2 | 64.1 | 73.9 | |
Profit attributable to owners of parent | 10,074 | 10,838 | -764 | -7.0 | 64.2 | 73.9 | |
Number of employees (people)* | 4,400 | 3,621 | +779 | +21.5 | * At the end of the third quarter | ||
**FY2024:Against the forecast announced on July 24, 2024. FY2023: Against the results of FY2023. |
© DENTSU SOKEN INC.
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Factors for Increase/Decrease in Operating Profit (YoY)
- Despite the effect of increased net sales and improved gross profit margin, operating profit declined as the expansion of SG&A expenses exceeded these effects.
- The gross profit margin remained almost the same as FY2023 due to the conclusion of unprofitable projects in FY2023, as well as the occurrence of new unprofitable projects in FY2024.
- The increase in SG&A expenses was due to an increase in personnel, raised base salaries, and an increase in the
man-hours spent on sales support by engineers.
Effect of increase in | Effect of increase in | Increase in SG&A | YoY | ||
gross profit margin | +0.6 | -10.9 | |||
sales | +25.0 | expenses | |||
-36.5 |
Operating | • | Conclusion of unprofitable | |||||||
profit | projects in FY2023 (+11) | Operating | |||||||
155.5 | • | Impact of three new unprofitable | |||||||
profit | |||||||||
• | Personnel expenses (+15.5) | ||||||||
projects in FY2024 (-5) | |||||||||
• | Decline in profitability of | • | Business development expenses (+6.6)* | 144.6 | |||||
outsourcing, operation and | • Sales promotion expenses (+6.5)* | ||||||||
maintenance services (-4) | • | Outsourcing expenses (+2.2) | |||||||
• Amortization of goodwill (+1.9) | |||||||||
3Q of FY2023 (cumulative) result
*Business development expenses are mainly labor costs for engineers' non-paid work hours. Sales promotion expenses are mainly labor costs for engineers' proposal activities to win new projects.
© DENTSU SOKEN INC.
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Non-operating Income/Expenses and Extraordinary Income/Losses
- In addition to the recording of equity method investment losses, non-operating income/expenses deteriorated due to the posting of foreign exchange losses, etc.
- In addition to the recording of gains on the sale of investment securities, extraordinary income/losses improved due to a decrease in losses on the valuation of investment securities.
(Unit: millions of yen) | ||||
3Q of FY2024 | YoY | |||
3Q of FY2023 | ||||
(cumulative) | Variance | % change | ||
(cumulative) | ||||
Operating profit | 14,463 | 15,551 | -1,088 | -7.0 |
Non-operating income | 199 | 180 | +19 | +10.5 |
Non-operating expenses | 248 | 35 | +213 | +596.4 |
Ordinary profit | 14,413 | 15,695 | -1,282 | -8.2 |
Extraordinary income | 320 | 135 | +185 | +136.4 |
Extraordinary losses | 25 | 377 | -352 | -93.2 |
Profit before income taxes | 14,709 | 15,453 | -744 | -4.8 |
Total income taxes | 4,634 | 4,614 | +20 | +0.4 |
Profit attributable to non-controlling interests | - | 1 | -1 | - |
Profit attributable to owners of parent | 10,074 | 10,838 | -764 | -7.0 |
© DENTSU SOKEN INC.
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Net Sales and Operating Profit by Reportable Segment
(Unit: millions of yen)
Reportable Segment | 3Q of FY2024 | YoY | ||||
(cumulative) | Variance | % change | Overview | |||
Net sales | 24,021 | +1,439 | +6.4 | Net sales and operating profit increased due to expanded | ||
Financial Solutions | Operating | 2,707 | +130 | +5.0 | sales and implementation of third-party software in the | |
accounting area to the banking industry, as well as | ||||||
profit | ||||||
11.3 | -0.1p | - | increased sales and installations of "Lamp" to the leasing | |||
% | industry. | |||||
Net sales | 17,137 | -329 | -1.9 | Net sales decreased due to the peak out of several projects | ||
Business Solutions | Operating | 3,793 | -778 | -17.0 | in the human resources and accounting areas. Profit also | |
decreased due to a significant increase in personnel | ||||||
profit | ||||||
expenses in line with strategic personnel allocation, in | ||||||
% | 22.1 | -4.1p | - | addition to the impact of reduced sales. | ||
Net sales | 34,536 | +4,717 | +15.8 | Net sales and operating profit increased due to the | ||
Manufacturing Solutions | profitOperating | 3,616 | +157 | +4.5 | expansion of consulting to support system grand design | |
and engineering, as well as sales and implementation of | ||||||
10.5 | -1.1p | - | "Teamcenter" mainly to the transportation equipment and | |||
% | electric and precision instruments industries. | |||||
Net sales | 36,535 | +1,137 | +3.2 | Net sales increased due to the expanded implementation | ||
of SAP solutions mainly to the machinery industry. Profit | ||||||
Communication IT | Operating | 4,345 | -597 | -12.1 | decreased due to an increase in personnel expenses, the | |
profit | burden of goodwill amortization, and the impact of a | |||||
project that was unprofitable in FY2023 continuing at a low | ||||||
% | 11.9 | -2.1p | - | |||
profit level. | ||||||
* Lamp: Management System for Leasing and Finance Operations, Teamcenter: product lifecycle management solution |
© DENTSU SOKEN INC.
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Ref. Consolidated Financial Results for the 3Q of 2024(July-September)
Consolidated Financial Results | (Unit: millions of yen) | |||
YoY | ||||
3Q of FY2024 | ||||
3Q of FY2023 | ||||
(Jul.-Sep.) | Variance | % change | ||
(Jul.-Sep.) | ||||
Net sales | 37,995 | 35,417 | +2,578 | +7.3 |
Gross profit | 13,348 | 12,296 | +1,052 | +8.6 |
% | 35.1 | 34.7 | +0.4p | - |
SG & A expenses | 9,245 | 7,397 | +1,848 | +25.0 |
Operating profit | 4,103 | 4,898 | -795 | -16.2 |
% | 10.8 | 13.8 | -3.0p | - |
by Reportable Segment | (Unit: millions of yen) | |||
YoY | ||||
3Q of FY2024 | ||||
Reportable Segment | ||||
(Jul.-Sep.) | Variance | % change | ||
Finance | Net sales | 7,912 | +51 | +0.6 |
Operating | ||||
866 | -294 | -25.3 | ||
Solutions | profit | |||
10.9 | -3.9p | - | ||
% | ||||
Business | Net sales | 5,419 | -393 | -6.8 |
Operating | ||||
1,012 | -406 | -28.6 | ||
Solutions | profit | |||
18.7 | -5.7p | - | ||
% | ||||
Manufacturing | Net sales | 11,842 | +1,819 | +18.1 |
Operating | ||||
889 | -398 | -30.9 | ||
Solutions | profit | |||
7.5 | -5.3p | - | ||
% | ||||
Communication | Net sales | 12,821 | +1,102 | +9.4 |
Operating | ||||
1,334 | +303 | +29.4 | ||
IT | profit | |||
10.4 | +1.6p | - | ||
% | ||||
© DENTSU SOKEN INC.
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Net Sales by Service Category and Dentsu Group companies
(Unit: millions of yen) | ||||
Service category | 3Q of FY2024 | YoY | ||
(cumulative) | Variance | % change | ||
Consulting Services | 7,472 | +1,448 | +24.0 | |
Custom System Development | 22,616 | -643 | -2.8 | |
In-house Software | 22,094 | -499 | -2.2 | |
Third-party Software | 40,566 | +5,215 | +14.8 | |
Outsourcing, Operation and Maintenance Services | 13,402 | +962 | +7.7 | |
IT Equipment Sales and Others | 6,079 | +482 | +8.6 | |
Counterparty | 3Q of FY2024 | YoY | ||
(cumulative) | Variance | % change | ||
Dentsu Group Inc. and its subsidiaries | 15,754 | -762 | -4.6 | |
© DENTSU SOKEN INC.
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