Note: This document is an English translation of the "Kessan Tanshin" for the second quarter of the fiscal year ending March 31, 2025 and is provided solely for reference purposes. In the event of any inconsistency between the Japanese and English versions, the Japanese version will govern.
Consolidated Financial Results for the First Six Months of the Fiscal Year
Ending March 31, 2025 (J-GAAP)
October 31, 2024 | |||||||||||||||||
Company name: | ID Holdings Corporation | ||||||||||||||||
Listing: | Tokyo Stock Exchange, Prime Market | ||||||||||||||||
Securities code: | 4709 | ||||||||||||||||
URL: | https://www.idnet-hd.co.jp | ||||||||||||||||
Company representative: | Masaki Funakoshi, President, Representative Director and Group CEO | ||||||||||||||||
Direct inquiries to: | Naoko Hara, Corporate Officer | ||||||||||||||||
Manager, Corporate Strategy Department | |||||||||||||||||
Tel: +81 3-3262-5177 | |||||||||||||||||
Scheduled date of filing of Semi-annual Securities Report: | November 8, 2024 | ||||||||||||||||
Scheduled date of dividend payment: | December 6, 2024 | ||||||||||||||||
Preparation of supplementary materials on financial results: | Yes | ||||||||||||||||
Presentation on results: | Yes (for institutional investors and financial analysts) | ||||||||||||||||
(Amounts of less than ¥1 million are truncated) | |||||||||||||||||
1. Consolidated Financial Results for H1 of FY2024 (April 1-September 30, 2024) | |||||||||||||||||
(1) Consolidated Business Results | (% indicates YoY changes) | ||||||||||||||||
Net sales | Operating income | Ordinary income | Net income attributable to | ||||||||||||||
owners of parent | |||||||||||||||||
¥ million | % | ¥ million | % | ¥ million | % | ¥ million | % | ||||||||||
H1 FY2024 | 17,347 | 8.8 | 1,737 | 22.2 | 1,801 | 19.7 | 1,055 | 25.1 | |||||||||
H1 FY2023 | 15,938 | 7.2 | 1,421 | 23.0 | 1,504 | 24.5 | 844 | 24.0 | |||||||||
Note: Comprehensive income | H1 FY2024 | ¥1,097 million | (-3.0%) | H1 FY2023 ¥1,131 million | (27.4%) | ||||||||||||
Net income | Diluted net income | EBITDA | EPS before amortization | ||||||||||||||
per share | per share | of goodwill | |||||||||||||||
¥ | ¥ | ¥ million | % | ¥ | % | ||||||||||||
H1 FY2024 | 63.03 | － | 2,065 | 19.9 | 76.29 | 19.0 | |||||||||||
H1 FY2023 | 50.76 | － | 1,722 | 18.4 | 64.12 | 17.8 |
Note: Diluted net income per share is not listed, as the Group has no potential shares.
(2) Consolidated Financial Position
Total assets | Net assets | Equity ratio | |
¥ million | ¥ million | % | |
As of September 30, 2024 | 19,141 | 12,606 | 65.5 |
As of March 31, 2024 | 20,061 | 12,010 | 59.6 |
Reference: EquityAs of September 30, 2024 ¥12,546 million As of March 31, 2024 ¥11,954 million
2. Dividends
Annual dividends | |||||
End of first quarter | End of second quarter | End of third quarter | End of fiscal period | Total | |
¥ | ¥ | ¥ | ¥ | ¥ | |
FY2023 | － | 25.00 | － | 25.00 | 50.00 |
FY2024 | － | 25.00 | |||
FY2024 (forecast) | － | 30.00 | 55.00 | ||
Note: Revision of most recently published dividend forecast: No Breakdown of year-end dividend for FY2024 (forecast)
Ordinary dividend ¥25.00 | Commemorative dividend ¥5.00 |
3. Forecasts of Consolidated Results for FY2024 (April 1, 2024-March 31, 2025)
(% indicates YoY changes) | |||||||||||
Net income | Net income | ||||||||||
Net sales | Operating income | Ordinary income | attributable to | ||||||||
per share | |||||||||||
owners of parent | |||||||||||
¥ million | % | ¥ million | % | ¥ million | % | ¥ million | % | ¥ | |||
FY2024 | 35,000 | 7.1 | 3,400 | 22.8 | 3,400 | 18.8 | 2,000 | 12.5 | 119.30 | ||
(full fiscal year) | |||||||||||
EPS before | |||||||||||
EBITDA | amortization of | ||||||||||
goodwill | |||||||||||
¥ million | % | ¥ | % | ||||||||
FY2024 | 3,950 | 15.4 | 142.20 | 6.9 | |||||||
(full fiscal year) | |||||||||||
Note: Revision of most recently published results forecast: Yes
For the revisions to the forecast of consolidated business results, please refer to "Notice Regarding Revision of Forecast of the Full-year Consolidated Business Results," published on October 31, 2024.
*Notes | |||
(1) | Significant changes in the scope of consolidation during the period | No | |
(2) Adoption of special accounting treatments for semi-annual consolidated financial statements: | No | ||
(3) | Changes in accounting policies, changes in accounting estimates and restatements: | ||
(i) | Changes in accounting policies due to revisions of accounting standards, etc.: | No | |
(ii) | Changes in accounting policies other than (i): | No | |
(iii) | Changes in accounting estimates: | No | |
(iv) | Restatements: | No |
(4) Number of shares outstanding (common stock)
(i) | Number of shares outstanding | As of September 30, 2024 | 18,066,453 shares | As of March 31, | 2024 18,066,453 shares |
(inclusive of treasury stock): | |||||
(ii) | Amount of treasury stock: | As of September 30, 2024 | 1,292,638 shares | As of March 31, | 2024 1,297,430shares |
- Interim average number of shares
(Six months from the beginning of H1 FY2024 | 16,754,139 shares H1 FY2023 | 16,633,598 shares |
the fiscal year) |
- Calculation of certain management indices
- EBITDA = Operating income + depreciation + amortization of goodwill
- EPS before amortization of goodwill = Net income after adjustments* ÷ interim average number of shares
*Net income after adjustments = Net income attributable to owners of parent + amortization of goodwill
- These consolidated financial results for the first six months of the fiscal year are not subject to review by a certified public accountant or audit corporation.
-
Qualitative information relating to the appropriate use of results forecasts, and other noteworthy items
Results forecasts are estimates based on information available as of the day the results were announced. Forecasts are inherently uncertain. The actual results, etc. may be different from the forecasts because of changes in business conditions, etc. See (3) Qualitative Information on the Consolidated Results Forecast under Section 1. Summary of Business Results, etc., on page 6 of the Attachment for the assumptions that form the basis of results forecasts and other things to remember when relying on results forecasts.
The ID Group has also introduced a board benefit trust (BBT) plan and Japanese employee stock ownership plan - restricted stock (J-ESOP-RS). Company shares held by Custody Bank of Japan, Ltd. (Trust Account E) as trust property for the BBT and J- ESOP-RS plans are included in treasury stock.
(Method of obtaining supplementary explanatory materials regarding results and details of the results briefing)
The ID Group will hold a results briefing for institutional investors and analysts on November 20, 2024. The materials that will be distributed at the briefing will be posted on the Group website promptly after the briefing.
Contents
1. Summary of Business Results, etc | - 2 - | |
(1) | Summary of Business Results for the Period | - 2 - |
(2) | Summary of Financial Condition for the Period | - 6 - |
(3) | Qualitative Information on the Consolidated Results Forecast | - 6 - |
2. Consolidated Financial Statements and Important Notes | - 7 - | |
(1) | Consolidated Balance Sheet | - 7 - |
(2) | Consolidated Statement of Income and Comprehensive Income | - 9 - |
(Consolidated Statement of Income) | - 9 - | |
(Consolidated Statement of Comprehensive Income) | - 10 - | |
(3) | Consolidated Cash Flow Statement | - 11 - |
(4) | Notes on Consolidated Financial Statements | - 13 - |
(Notes on Assumptions Regarding Going Concern) | - 13 - | |
(Notes on Significant Changes (If Any) in Shareholders' Equity) | - 13 - | |
(Additional Information) | - 13 - | |
(Material Subsequent Events) | - 13 - |
- 1 -
1. Summary of Business Results, etc.
- Summary of Business Results for the Period
During the consolidated fiscal first half under review (H1 FY2024: April 1 to September 30, 2024), moderate recovery proceeded but uncertainty persisted due to a number of ongoing risks. The Japanese economy continued a gradual recovery keynote, with improvements seen in the employment and income environments. However, the path forward remained unclear amid concerns regarding the impact of downside events in the global economy, such as continuing high interest rates in Western countries and worries about prospects for the Chinese economy, as well as downside risks in Japan such as rising resource prices, geopolitical tensions, and fluctuations in financial and capital markets, among other issues.
The information services industry, in which the ID Group is a participant, continued on a firm footing. Demand for IT investment related to digital transformation (DX) was firmly based. DX is the application of digital technology to create new business models or transform existing ones, and to streamline operations to respond to labor shortages, a serious social issue in Japan. Ongoing growth in the fields of cloud services and generative AI drove heightened investment in construction of data centers in Japan. Resulting demand for IT infrastructure construction and system operation appears set to expand.
Against this background, the ID Group strategically invested management resources in the high-margin advanced operation and IT infrastructure domains and revised unit prices for orders received. Trends were favorable across all services, notably including IT infrastructure. Net sales rose to ¥17.347 billion (+8.8% YoY).
Earnings leaped YoY across the board. The Group returned value to employees and increased strategic investment in training and securing personnel. The increase in net sales and expansion in high-margin DX-related business boosted income. Operating income rose to ¥1.737 billion (+22.2% YoY) and ordinary income increased to ¥1.801 billion (+19.7% YoY). Net income attributable to owners of parent grew to ¥1.055 billion (+25.1% YoY) and EBITDA improved to ¥2.065 billion (+19.9% YoY).
- 2 -
The Group's business consists of a single segment. Business results for each service are as follows.
(Millions of ¥) | |||||
Previous consolidated | Consolidated first half | Compared with same period of | |||
previous fiscal year (YoY) | |||||
first half | under review | ||||
(April 1, 2023 to | (April 1, 2024 to | Increase/ | Rate of | ||
September 30, 2023) | September 30, 2024) | increase/ | |||
decrease | |||||
decrease (%) | |||||
System | Net sales | 7,213 | 7,528 | 315 | 4.4 |
management | |||||
Gross profit | 1,591 | 1,819 | 228 | 14.3 | |
Gross profit margin | 22.1% | 24.2% | 2.1P | ― | |
Software | Net sales | 5,659 | 5,978 | 319 | 5.6 |
development | |||||
Gross profit | 1,028 | 1,213 | 185 | 18.0 | |
Gross profit margin | 18.2% | 20.3% | 2.1P | ― | |
IT infrastructure | Net sales | 1,396 | 1,829 | 433 | 31.0 |
Gross profit | 420 | 554 | 134 | 31.9 | |
Gross profit margin | 30.1% | 30.3% | 0.2P | ― | |
Cybersecurity, | Net sales | 1,502 | 1,819 | 317 | 21.1 |
consulting and | |||||
Gross profit | 488 | 546 | 58 | 11.9 | |
training | |||||
Gross profit margin | 32.5% | 30.0% | -2.5P | ― | |
Others | Net sales | 166 | 190 | 23 | 14.3 |
Gross profit | 54 | 25 | -28 | -52.3 | |
Gross profit margin | 32.6% | 13.6% | -19.0P | ― | |
Total | Net sales | 15,938 | 17,347 | 1,408 | 8.8 |
Gross profit | 3,583 | 4,160 | 577 | 16.1 | |
Gross profit margin | 22.5% | 24.0% | 1.5P | ― | |
(i) System management
Order acceptance expanded and new projects were won, including projects for the relocation of data centers for major IT vendors and clients in the financial sector. Unit prices were revised in view of increasing labor and outsourcing expenses. Net sales rose to ¥7.528 billion (+4.4% YoY).
(ii) Software development
Orders accepted from clients in the public and financial sectors swelled, while reinforced sales efforts aimed at major IT vendors led to expansion in transactions. Net sales grew to ¥5.978 billion (+5.6% YoY).
(iii) IT infrastructure
The Group enjoyed increases in transactions with major IT vendors and in orders accepted from clients related to the public sector, finance and shipping. Net sales leaped to ¥1.829 billion (+31.0% YoY).
(iv) Cybersecurity, consulting and training
Orders accepted in cybersecurity and consulting expanded. Net sales lifted to ¥1.819 billion (+21.1% YoY).
(v) Others
Orders accepted for product sales expanded. Net sales rose to ¥190 million (+14.3% YoY).
- 3 -
Management Policy Initiatives
In the previous Mid-term Management Plan, the ID Group strove to upgrade its services in various fields by cultivating engineers with a thorough grounding in digital technology, thereby building a foundation for future growth. Beginning in the fiscal year ended March 31, 2023 (FY2022), the Group prepared "Next 50 Episode II: Ride on Time," the Mid-term Management Plan covering the period FY2022 through FY2024, to bolster profitability based on the following three basic themes:
- Develop business models in line with our DX portfolio, which is focused on strengthening support for advancement of customers' DX and development of original solutions
- Strengthen partnerships to create greater value-added
- Upgrade management divisions and reallocate resources to the business divisions
Under this Mid-term Management Plan, the Group is pursuing four basic strategies to achieve the above three basic themes: an IT service strategy, a human resource strategy, a "new normal" strategy and a Sustainable Development Goals (SDGs) strategy.
Note: Business partners refers to IT partners collaborating with the Group on projects.
- 4 -
(i) IT Service Strategy
The Group identifies fields of technology where needs are strong and works with corporate partners to support customers in advancing DX and develop original solutions targeting growth fields. Aiming for further expansion in revenues in the high- margin fields of advanced operations and IT infrastructure, the Group is focusing on strategic placement of engineers and strengthening cooperation with business partners. In April 2024 the Group established a company focused on AI, ID AI Factory Co., Ltd. The purpose of this move is to apply the Group's amassed wealth of AI-related technologies to enhancing the sophistication of system management, cybersecurity and software development. In June 2024, the Group launched an AI literacy training service. The service offers a curriculum ranging from basic knowledge of AI to methods of practical application, supporting customers in creating business opportunities and boosting productivity. In addition, in August 2024 the Group significantly expanded the feature set of ID-VROP, a product that enables system operation through a virtual environment. The ID Group is moving forward with further enhancements, to deliver new work styles and appealing new approaches in system operation.
(ii) Human Resource Strategy
To expand its DX services and boost value-added, the Group is further enhancing its training programs, accelerating the development of mid- to senior-level engineers and planning-and-proposal staff. For example, the Group is deploying in-house training roadmaps for each role of personnel involved in advancing DX, promoting personnel development. To bolster employees' ability to develop technologies and propose solutions in the advanced-ops and IT infrastructure spaces, the Group implemented "container-type" advanced technical training, as well as training in project management and proposal management. To boost service quality and create innovative services, we provided technical training related to AI to support employees in obtaining qualifications. As a result, some 180 employees have taken the Generalist Test ("G-test"), which evaluates technical skill and basic knowledge of AI.
(iii) New Normal Strategy
The ID Group is working to streamline and add value to operations through measures such as overhauling its core in-house systems and is constructing a smart management division. Among measures to further streamline the duties of the management division, the ID Group is actively deploying systems such as ID AI Concierge, an AI chatbot service. In tandem with the transfer of back-office functions to the Sanin Business Process Outsourcing Center, the Group worked to improve productivity and establish a business continuity plan.
(iv) SDGs Strategy
The Group takes concerted steps to advance sustainability through its business activities, aiming for a virtuous circle of solving social problems and enhancing corporate value. In July 2024 AI Factory Co., Ltd., a special subsidiary, was recognized as A Company in Tottori Prefecture That Promotes Women in the Workplace and A Company That Supports the Iku Boss/Family Boss Declaration. AI Factory was also recognized as a Tottori SDGs Company, praised for original efforts such as its "pear-tree owner program" and product development in collaboration with local companies. In September 2024, to provide a forum of exchange between venture companies and investors in Boston, MA, USA , the Group began operating of Miraku Boston Partners with ID Group, a ramen restaurant. To further strengthen healthy Group management, we launched a health advancement project this fiscal year, beginning health support by public health nurses and a subsidy for treatments to stop smoking. To support activities contributing to society and to culture and the arts, the Group continued to sponsor ID Group Blood Donation Day and classical concerts.
Research and Development Activities
During H1 FY2024, Group expenditures on research and development activities totaled ¥112 million.
The ID Group is focusing intensively on research and development, determined to create innovative businesses that put state-of- the-art technologies to work.
The Group undertook a number of major initiatives. In AI technology, the Group is committing resources to R&D on voice- and image-recognition technologies, focusing on large language models, a field that is advancing at an eye-watering pace. At ID AI Factory Co., Ltd., a subsidiary established in April 2024, the Group moved forward with a proof-of-concept system in AI services to contribute to the enhancement of its business domains. We also developed the Funakoshi President AI Chatbot, to study and faithfully reproduce the thoughts and philosophy of Masaki Funakoshi, President of ID Holdings.
In ID-VROP, a virtual operation center that enables system operation in a virtual space, the Group developed major functional additions, including an impairment detection function and a whiteboard function. These features enable swift and accurate response to system impairments by means of a virtual operation room, contributing to the Group's aim of achieving new styles of system operation.
Additionally, the Group began joint development with NTT Data Intellilink Corporation and SBI R3 Japan Co., Ltd. of a logging system that uses a patented blockchain technology developed by ID.
- 5 -
- Summary of Financial Condition for the Period
- Changes in the ID Group's financial position
(Assets)
Assets at the end of consolidated Q2 decreased by ¥919 million from the end of the previous consolidated accounting period to ¥19.141 billion. Although contract assets increased by ¥507 million and investment securities by ¥165 million, cash and deposits decreased by ¥735 million, accounts receivable-trade by ¥424 million, accounts receivable-other by ¥240 million, and goodwill by ¥222 million.
(Liabilities)
Liabilities at the end of consolidated Q2 decreased by ¥1.515 billion from the end of the previous consolidated accounting period to ¥6.534 billion. Interest-bearing debt declined by ¥1.3 billion.
(Net Assets)
Net assets at the end of consolidated Q2 increased by ¥596 million from the end of the previous consolidated accounting period to ¥12.606 billion. Although payment of year-end dividends reduced net assets by ¥426 million, net income attributable to owners of parent increased to ¥1.055 billion.
(ii) Cash flows
Cash and cash equivalents on a consolidated basis (hereinafter "net cash") at the end of consolidated Q2 under review increased by ¥387 million in comparison with the end of consolidated Q2 in the previous fiscal year, to ¥4.941 billion (+8.5% YoY).
The cash flow and factors affecting cash flow for H1 of the fiscal year under review are as follows.
(Cash flows from operating activities)
Net cash provided by operating activities was ¥1.212 billion (compared to a net cash increase of ¥1.447 billion in the same period of the previous fiscal year). This result was mainly due to ¥1.802 billion in net income before income taxes, ¥424 million decrease in notes and accounts receivable-trade, and ¥407 million increase in other current assets.
(Cash flows from investing activities)
Net cash used in investing activities was ¥131 million (compared to a net cash decrease of ¥254 million in the same period of the previous fiscal year). This result was mainly due to purchase of property, plant and equipment of ¥39 million, purchase of investment securities of ¥25 million, and other expenditures of ¥57 million (payments for guarantee deposits, etc.).
(Cash flows from financing activities)
Net cash used in financing activities was ¥1.782 billion (compared to a net cash decrease of ¥1.548 billion in the same period of the previous fiscal year). This result was mainly due to a net decrease of ¥1.2 billion in short-term loans payable, repayment of long-term loans payable of ¥100 million, and cash dividends paid of ¥431 million (including cash dividends paid to non- controlling interests).
- Qualitative Information on the Consolidated Results Forecast
In view of recent trends in business results, the Group has revised its forecast of consolidated business results for the fiscal year ending March 31, 2025, published on April 15, 2024. For details, please refer to "Notice Regarding Revision of Forecast of the Full-year Consolidated Business Results," published on October 31, 2024.
- 6 -
2. Consolidated Financial Statements and Important Notes
- Consolidated Balance Sheet
(Thousands of ¥) | ||
Previous consolidated accounting | Consolidated second quarter | |
period | under review | |
As of March 31, 2024 | As of September 30, 2024 | |
Assets | ||
Current assets | ||
Cash and deposits | 5,920,631 | 5,185,594 |
Accounts receivable-trade | 6,029,880 | 5,605,358 |
Contract assets | 793,644 | 1,301,572 |
Work in process | 636 | 7,631 |
Accounts receivable-other | 271,421 | 30,975 |
Other | 886,256 | 899,145 |
Total current assets | 13,902,470 | 13,030,277 |
Non-current assets | ||
Property, plant and equipment | 1,374,298 | 1,417,461 |
Intangible assets | ||
Goodwill | 859,665 | 637,430 |
Software | 135,577 | 114,752 |
Other | 754 | 754 |
Total intangible assets | 995,997 | 752,937 |
Investments and other assets | ||
Investment securities | 2,457,655 | 2,623,486 |
Deferred tax assets | 530,266 | 519,897 |
Guarantee deposits | 328,933 | 377,759 |
Other | 478,918 | 426,865 |
Allowance for doubtful accounts | -7,500 | -7,500 |
Total investments and other assets | 3,788,272 | 3,940,508 |
Total non-current assets | 6,158,567 | 6,110,907 |
Total assets | 20,061,038 | 19,141,185 |
- 7 -
(Thousands of ¥) | ||
Previous consolidated accounting | Consolidated second quarter | |
period | under review | |
As of March 31, 2024 | As of September 30, 2024 | |
Liabilities | ||
Current liabilities | ||
Accounts payable-trade | 1,211,827 | 1,210,436 |
Contract liabilities | 111,302 | 108,190 |
Short-term loans payable | 2,200,000 | 1,000,000 |
Current portion of long-term loans payable | 200,000 | 200,000 |
Income taxes payable | 634,985 | 774,650 |
Provision for bonuses | 1,157,594 | 1,173,879 |
Provision for directors' bonuses | 24,454 | 12,240 |
Other | 1,519,504 | 1,132,121 |
Total current liabilities | 7,059,670 | 5,611,517 |
Non-current liabilities | ||
Long-term loans payable | 150,000 | 50,000 |
Deferred tax liabilities | 455,922 | 478,863 |
Provision for directors' retirement benefits | 36,666 | 40,821 |
Net retirement benefit liability | 22,569 | 27,221 |
Other | 325,794 | 326,344 |
Total non-current liabilities | 990,952 | 923,250 |
Total liabilities | 8,050,623 | 6,534,767 |
Net assets | ||
Shareholders' equity | ||
Capital stock | 592,344 | 592,344 |
Capital surplus | 754,132 | 754,132 |
Retained earnings | 9,743,914 | 10,334,023 |
Treasury stock | -762,970 | -795,926 |
Total shareholders' equity | 10,327,421 | 10,884,573 |
Accumulated other comprehensive income | ||
Valuation difference on available-for-sale securities | 1,176,088 | 1,273,312 |
Deferred gains or losses on hedges | － | -5,627 |
Foreign currency translation adjustment | 441,618 | 383,495 |
Remeasurements of retirement benefit plans | 8,942 | 10,680 |
Total accumulated other comprehensive income | 1,626,649 | 1,661,860 |
Non-controlling interests | 56,344 | 59,983 |
Total net assets | 12,010,415 | 12,606,417 |
Total liabilities and net assets | 20,061,038 | 19,141,185 |
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