Summary of Consolidated Financial Results for the Fiscal Year Ended January 31, 2024 [Japanese GAAP]
March 8, 2024
Name of listed company: Code: 9692 Representative: (Title) Contact: (Title)Computer Engineering & Consulting Ltd. URL:https://www.cec-ltd.co.jp/en/ Representative Director & President
General Manager, Accounting & Finance Division
Scheduled date of Ordinary General Meeting of Shareholders: | April 23, 2024 |
Scheduled date of dividend payments: | April 24, 2024 |
Scheduled submission date of Securities Report: | April 23, 2024 |
Supplementary materials prepared for financial results: Yes |
Briefing held on financial results:
Listed exchange: Tokyo
(Name) Takashi Himeno (Name) Yoshiyuki Nakamura Tel. +81-(0)46-252-4111
Yes (for institutional investors and analysts)
(Rounded down to the nearest million yen)
1.
Consolidated financial results for the fiscal year ended January 31, 2024 (February 1, 2023 through January 31, 2024)
(1) Consolidated operating resultsFY ended Jan.
2024
FY ended Jan.
2023
Net sales Million yen
(Note) Comprehensive income:Operating income
53,124 48,206
% 10.2
6.6
Million yen 6,361 4,374
FY ended Jan. 2024
FY ended Jan. 2023
(Percentages indicate year-on-year changes.)Ordinary income
% 45.4
4.0
Million yen 6,409 4,413
4,916 million yen (4.1)% 5,128 million yen 88.1%
Net income attributable to owners of parent
% 45.2
Million yen
%
4,541 (12.3)
3.1
5,179
70.4
Net income per share | Diluted net income per share | Return on equity | Ordinary income to total assets | Ordinary income to net sales | |
FY ended Jan. 2024 FY ended Jan. 2023 | Yen 135.15 151.97 | Yen 135.00 151.45 | % 11.6 14.2 | % 13.1 9.6 | % 12.0 9.1 |
(2) Consolidated financial position
Total assets | Net assets | Equity ratio | Net assets per share | |
FY ended Jan. 2024 FY ended Jan. 2023 | Million yen 51,391 46,333 | Million yen 40,787 37,379 | % 79.3 80.5 | Yen 1,212.54 1,111.48 |
(Reference) Total shareholders' equity: FY ended Jan. 2024 40,760 million yen
FY ended Jan. 2023 37,309 million yen
(3) Consolidated cash flow
Cash flow from operating activities | Cash flow from investing activities | Cash flow from financing activities | Cash and cash equivalents at end of period | |
FY ended Jan. 2024 FY ended Jan. 2023 | Million yen 5,682 2,494 | Million yen (747) 1,930 | Million yen (1,526) (3,559) | Million yen 26,714 23,302 |
Cash and cash equivalents
2.
Dividends
Annual dividends | Dividends (total) | Payout ratio (consolidated) | Dividends/ net assets (consolidated) | |||||
Q1 end | Q2 end | Q3 end | Year end | Total | ||||
FY ended Jan. 2023 FY ended Jan. 2024 | Yen - - | Yen 25.00 25.00 | Yen - - | Yen 20.00 30.00 | Yen 45.00 55.00 | Million yen 1,518 1,848 | % 29.6 40.7 | % 4.2 4.7 |
FY ending Jan. 2025 (Forecast) | - | 25.00 | - | 30.00 | 55.00 | 43.0 |
(Note) Breakdown of dividends at end of second quarter of fiscal year ended January 31, 2023: Ordinary dividend 20.00 yen, special dividend 5.00 yen
3.
Forecasts of consolidated financial results for the fiscal year ending January 31, 2025 (February 1, 2024 through January 31, 2025)
(Percentages indicate year-on-year changes.)Net salesOperating income Ordinary incomeNet income attributable to owners of parentNet income per shareH1 Full yearMillion yen 27,700 56,500
% 4.7 6.4
Million yen
%Million yen
%Million yen
%
3,160 (10.4)
3,175 (10.5)
2,170 (11.5)
6,280
(1.3)
6,300
(1.7)
4,300
(5.3)Yen 64.55 127.91
*Notes
(1) Significant changes in subsidiaries during the period (transfer of specific subsidiaries accompanying changes in scope of consolidation): None
Additions: 0 (company names) Removals: 0 (company names)
(2) Changes in accounting policies or estimates, restatements:
(i) Changes in accounting policies accompanying revisions of accounting standards, etc.: Yes
(ii) Changes other than those under (i) above: None
(iii) Changes in accounting estimates:
(iv) Restatements:
None None
(Note) For more information, see "(5) Notes on the Consolidated Financial Statements (Changes in Accounting Policies)" under "3. Consolidated Financial Statements and Major Notes" on page 16 of the accompanying materials to this Summary.
(3) Number of shares issued and outstanding (common stock)
(i) Number of shares issued and outstanding
(including treasury stock)
(ii) Ended number of shares of treasury stock
(iii) Average number of shares during period
FY ended Jan. 2024 | 37,600,000 shares | FY ended Jan. 2023 | 37,600,000 shares |
FY ended Jan. 2024 | 3,983,862 shares | FY ended Jan. 2023 | 4,032,960 shares |
FY ended Jan. 2024 | 33,604,840 shares | FY ended Jan. 2023 | 34,080,884 shares |
(Reference) Nonconsolidated Financial Results
1.
Nonconsolidated financial results for the fiscal year ended January 31, 2024 (February 1, 2023 through January 31, 2024)
(1) Nonconsolidated operating results
(Percentages indicate year-on-year changes.)FY ended Jan. 2024
FY ended Jan. 2023
Net sales Million yen 40,715 36,659
% 11.1 6.5
Operating income | Ordinary income | Net income |
Million yen | Million yen | Million yen |
% 59.1 5.6
4,988 3,136
5,570 3,518
% 58.3 3.2
4,161 4,678
% (11.1)
81.1
Net income per share | Diluted net income per share | |
FY ended Jan. 2024 FY ended Jan. 2023 | Yen 123.83 137.28 | Yen 123.70 136.80 |
(2) Nonconsolidated financial position
Total assets | Net assets | Equity ratio | Net assets per share | |
FY ended Jan. 2024 FY ended Jan. 2023 | Million yen 42,699 38,209 | Million yen 33,785 31,048 | % 79.1 81.1 | Yen 1,004.25 922.87 |
FY ended Jan. 2024 33,758 million yen FY ended Jan. 2023 30,978 million yen
(Reference) Total shareholder equity
* The Summary of Financial Results is not subject to audits by a certified public accountant or audit firm.
*Note on forward-looking statements and other notes (Forward-looking statements)
The forecasts of financial results above are based on information available as of the date this document is released. Actual results may differ from forecasts for various reasons. Please see page 7 of the accompanying materials for the assumptions underlying forecasts and other related information.
(Financial results briefing, how to obtain supplementary briefing materials)
The Company will hold an online financial results briefing for institutional investors and analysts on Wednesday, March 13, 2024. It plans to publish the materials to be used in the financial results briefing on the Company website (https://www.cec-ltd.co.jp) on Friday, March 8, 2024. The Company plans to release a video of the financial results briefing on Friday, March 15, 2024.
Contents of accompanying materials
(Consolidated Statement of Comprehensive Income) ........................................................................................................... 11
(3) Consolidated Statement of Changes in Equity ...................................................................................................................... 12
(4) Consolidated Statement of Cash Flows ................................................................................................................................ 14
(5) Notes on The Consolidated Financial Statements ................................................................................................................. 16
(Notes on The Going Concern Assumption) ........................................................................................................................ 16
(Changes in Accounting Policies) ....................................................................................................................................... 16
(Segment Information, etc.) ................................................................................................................................................ 16
(Per-Share Information) ...................................................................................................................................................... 19
(Significant Subsequent Events) .......................................................................................................................................... 19
4. Other .................................................................................................................................................................................... 20
1. Overview of Business Results, etc.
(1)Overview of Business Results for The Period under Review
Japan's economy experienced gentle recovery during the consolidated fiscal year under review (February 1, 2023 through January 31, 2024) due to various policies, with improving employment and income conditions. Nevertheless, the future outlook includes the risk that an economic downturn overseas will exert downward pressure on the domestic economy. Examples include concerns about a slowdown in the Chinese economy. Other notable factors include inflation, geopolitical risks, and fluctuations in financial and capital markets.
In the information services industry, as domestic economic recovery continues, investments are growing in digital transformation (DX) to improve corporate productivity and competitive strengths. Demand for digitalization, including system upgrades and migration to the cloud as part of business structural reforms, is expected to grow. In particular, use of ChatGPT and other generative AI solutions is spreading rapidly. Attention is increasingly turning to business efficiency improvements and workstyle reforms using AI. In addition, demand for cybersecurity solutions continues to show rapid growth in response to increasingly sophisticated cyber attacks.
Under these circumstances, the CEC Group carried out its business in accordance with three basic policies: (i) strengthening business capabilities; (ii) strengthening human resources and technical capabilities; and (iii) strengthening the management foundations based on its medium-term management plan for the three-year period from the fiscal year ended January 2023 through the fiscal year ending January 2025. This plan seeks to realize a sustainable society and achieve sustained growth. In the area of (i) strengthening business capabilities, we sought to propose solutions suited to priority investment areas for customers and to enhance sales of our own products and services. These efforts led to growth in both our focus businesses and core businesses, with profits reaching a new record high. In the area of (ii) strengthening human resources and technical capabilities, we reformed the HR system, enhanced hiring and improved employee compensation and treatment, and enhanced training programs in various areas, including programs related to earning official qualifications. In the area of (iii) strengthening the management foundations, we strengthened governance by adopting a system of performance-linked remuneration and promoted ESG initiatives by expanding ISO 14001 certification, among other efforts to boost corporate value.
The business results for the period under review demonstrated positive results due to proposals of ICT solutions in line with the priority investment areas of major customers in both core businesses *1 and focus business areas *2, driving net sales up 4,917 million yen (10.2%) from the previous year to 53,124 million yen. In terms of profit, higher sales combined with sustained efforts to expand sales of Company products and services, coupled with productivity improvements, led to growth of 1,987 million yen (45.4%) in operating income to 6,361 million yen and growth of 1,996 million yen (45.2%) in ordinary income to 6,409 million yen. Net income attributable to owners of the parent was down 637 million yen (12.3%) to 4,541 million yen due to the elimination of the gain on the sale of investment securities recorded last year.
*1 Core businesses:The Company defines its core business as those that function as stable foundations supporting the Company's operations, including contracted development, which serves as the basis of Company sales; provision and operation of ICT infrastructure, development of onboard devices, embedded development, and the testing business.
*2 Focus business areas:
The Company's six focus business areas are (1) production and logistics solutions, (2) mobility services, (3) services provided in cooperation with Microsoft Japan, (4) migration services, (5) security services, and (6) DX cloud platforms.
Business results in the individual segments are reviewed below. (Digital Industry Business)
In the core businesses, services in both central and Western Japan demonstrated positive trends, backed by active ICT investment among manufacturing customers. The focus business area of mobility services demonstrated positive trends in areas such as Big Data analysis and smartphone app development in the MaaS domain. In production and logistics solutions, while results related to smart factory solutions were down from the previous year due to restrained investment, logistics solutions recorded strong performance. As a result, net sales increased by 1,479 million yen (8.8%) from the previous year to 18,313 million yen. Operating income was up 242 million yen (6.3%) over the same period to 4,100 million yen due to higher net sales.
(Service Integration Business)
The core businesses of ICT infrastructure development, including operations and systems development, trended positively. Services provided in cooperation with Microsoft Japan, one of the Company's focus businesses, also maintained favorable performance thanks to growth in Dynamics 365 and Power Platform inquiries. Demand also grew for migration services aimed at cloud migration and security enhancements against a backdrop of DX promotion. Despite the effects of lower stock sales, security services continued to show strong income performance, driven by the effects of recording results for Company products during the second quarter. As a result, net sales increased by 3,438 million yen (11.0%) from the previous fiscal yearto 34,810 million yen. Operating income was up 2,032 million yen (44.4%) over the same period to 6,606 million yen, thanks to sales promotion of Company products and services and the effects of higher net sales.
(2) Overview of Financial Position in The Period under Review
(Total assets)
Total assets as of the end of the period were 51,391 million yen, up 5,057 million yen from the end of the previous consolidated fiscal year. This was due mainly to an increase of 3,412 million yen in cash and deposits.
(Liabilities)
Total liabilities amounted to 10,603 million yen, up 1,649 million yen from the end of the previous consolidated fiscal year. This was due mainly to an increase of 914 million yen in asset retirement obligations under non-current liabilities and an increase of 617 million yen in contract liabilities included under other non-current liabilities.
(Net assets)
Net assets increased by 3,407 million yen from the end of the previous fiscal year to 40,787 million yen. This was mainly due to an increase of 3,029 million yen in retained earnings.
(3) Overview of Cash Flows in The Period under Review
Cash and cash equivalents ("funds" hereinafter) as of the end of the fiscal year ended January 31, 2024 stood at 26,714 milli on yen, up 3,412 million yen from the end of the previous fiscal year.
(Cash flow from operating activities)
Funds increased by 5,682 million yen as a result of operating activities (for an increase of 3,187 million yen in proceeds from the previous period). This was due mainly to income before income taxes of 6,393 million yen.
(Cash flow from investing activities)
Funds decreased by 747 million yen as a result of investing activities (for a decrease of 2,678 million yen in proceeds from the previous period). This was due mainly to expenditures of 430 million yen on purchase of non-current assets.
(Cash flow from financial activities)
Funds decreased by 1,526 million yen as a result of financial activities (for a decrease of 2,033 million yen in spending from the previous period). This was due mainly to payment of 1,512 million yen in dividends.
(Reference) Trends in indicators related to cash flow
FY ended Jan. 2022 | FY ended Jan. 2023 | FY ended Jan. 2024 | |
Equity ratio (%) | 78.7 | 80.5 | 79.3 |
Equity ratio based on market value (%) | 82.5 | 109.3 | 107.7 |
Cash flow-to-interest-bearing liabilities ratio (years) | 0.1 | 0.2 | 0.1 |
Interest coverage ratio (times) | 1,070.3 | 894.8 | 2,351.5 |
(Notes) 1. | The indicators above were calculated as follows: |
Equity ratio: total shareholder equity/total assets | |
Equity ratio based on market value: market capitalization / total assets | |
Cash flow-to-interest-bearing liabilities ratio: interest-bearing liabilities/cash flow from operating activities | |
Interest coverage ratio: cash flow from operating activities/interest payments | |
2. | Each indicator was calculated using consolidated financial figures. |
3. | Market capitalization was calculated using the following formula: stock price at end of fiscal year × (number of shares issued and |
outstanding at end of fiscal year - number of shares of treasury stock at end of fiscal year). | |
4. | Operating cash flow refers to cash flow from operating activities as reported in the Consolidated Statement of Cash Flows. |
5. | Interest-bearing liabilities refer to all liabilities reported on the Consolidated Balance Sheet for which interest is currently being |
paid. Interest expenses reported on the Consolidated Statement of Income are used as interest payments. |
(4) Outlook
The CEC Group is currently making progress on its medium-term management plan for the three-year period from the fiscal year ended January 31, 2023 through the fiscal year ending January 31, 2025. The coming fiscal year ending January 31, 2025 (February 1, 2024 through January 31, 2025) will be the final fiscal year of this plan. Based on the three basic policies-(1) strengthening business capabilities, (2) strengthening human resources and technical capabilities, and (3) strengthening the management foundations-we will strive to achieve continual growth in our corporate value while aiming to deliver solutions to social and industrial challenges through our business activities. Having identified this as a turning point toward business structural reforms intended to achieve our VISION 2030 for the fiscal year ending January 31, 2031, we plan to implement growth investments to expand the scale of our businesses ahead of schedule, starting in the next fiscal year. We have revised our forecasts for the next consolidated fiscal year to net sales of 56,500 million yen and operating income of 6,300 million yen.
* For more information, refer to the materials to be used in the financial results briefing, released today.
* Forecasts of business results reflect judgments based on information currently available. They do not guarantee that the
Company will achieve forecast results. Actual results may vary from forecast figure due to changing business conditions and other factors.
(5) Basic Policy Regarding The Distribution of Earnings and Dividends for This and The Next Fiscal Year
The Company recognizes returns of earnings to shareholders as a key issue. Our basic policy regarding the distribution of earnings is to continually pay stable dividends in a manner that reflects consideration of various factors, including trends in business results, financial position, and future business prospects. The medium-term management plan announced March 17, 2022 sets as its quantitative target the maintenance of a dividend payout ratio of at least 40%.
The Company paid an interim dividend of 25 yen per share in this period. It plans to submit to the 56th Ordinary General Meeting of Shareholders, planned for April 23, 2024, a proposal to pay a year-end dividend of 30 yen per share with a basis date of January 31, 2024. This would result in annual dividends of 55 yen per share, including the interim dividend.
We plan to pay annual dividends of 55 yen per share in the next fiscal year, consisting of an interim dividend of 25 yen per share and a year-end dividend of 30 yen per share.
* A breakdown of annual dividends of surplus is provided below.
Annual dividends | |||
End of Q2 | Year end | Total | |
Paid this fiscal year | 25 yen | 30 yen | 55 yen |
Paid last fiscal year (year ended January 2023) | 25 yen (Ordinary dividend of 20 yen) (Special dividend of 5 yen) | 20 yen | 45 yen (Ordinary dividend of 40 yen) (Special dividend of 5 yen) |
2. Basic Philosophy on Selection of Accounting Standards
The CEC Group will continue to prepare consolidated financial statements in accordance with Japanese GAAP for the time being, in consideration of comparability of consolidated financial statements among different financial periods and entities.
The Group will respond appropriately to application of the International Financial Reporting Standards (IFRS) in consideration of related domestic and international developments.
3. Consolidated Financial Statements and Major Notes
(1)Consolidated Balance Sheet
Previous Consolidated Fiscal Year (January 31, 2023) | Current Consolidated Fiscal Year (January 31, 2024) | |
Assets | ||
Current assets | ||
Cash and deposits | 23,302,042 | 26,714,532 |
Notes and accounts receivable - trade, and contract assets | 10,103,576 | 10,343,099 |
Product | 254,597 | 319,019 |
Work in progress | 504,914 | 531,948 |
Other accounts receivable | 32,350 | 30,346 |
Others | 1,013,313 | 1,075,983 |
Allowance for doubtful accounts | (2,067) | (9,394) |
Total current assets | 35,208,727 | 39,005,535 |
Non-current assets | ||
Property, plant, and equipment | ||
Buildings and structures | 10,224,665 | 11,220,735 |
Accumulated depreciation | (6,451,643) | (6,658,852) |
Buildings and structures, net | 3,773,022 | 4,561,882 |
Land | 2,004,644 | 2,004,644 |
Others | 3,891,832 | 3,818,483 |
Accumulated depreciation | (3,054,165) | (2,946,523) |
Other, net | 837,667 | 871,959 |
Total property, plant, and equipment | 6,615,333 | 7,438,487 |
Intangible assets | ||
Software | 213,404 | 156,897 |
Software in progress | 5,385 | 43,149 |
Others | 39,278 | 39,259 |
Total intangible assets | 258,067 | 239,307 |
Investments and other assets | ||
Investment securities | 1,328,682 | 1,600,258 |
Deferred tax assets | 799,472 | 178,076 |
Net defined benefit asset | 830,806 | 1,566,339 |
Others | 1,304,502 | 1,374,986 |
Allowance for doubtful accounts | (11,909) | (11,909) |
Total investments and other assets | 4,251,553 | 4,707,750 |
Total non-current assets | 11,124,954 | 12,385,544 |
Total assets | 46,333,682 | 51,391,080 |
(Unit: thousands of yen)
Previous Consolidated Fiscal Year (January 31, 2023) | Current Consolidated Fiscal Year (January 31, 2024) | |
Liabilities | ||
Current liabilities | ||
Accounts payable - trade | 2,251,585 | 2,211,551 |
Short-term loans payable | 350,000 | 350,000 |
Current portion of long-term loans payable | 13,600 | 13,800 |
Income taxes payable | 965,599 | 795,357 |
Allowance for bonuses | 585,623 | 716,224 |
Provision for loss on orders received | 488,092 | 2,835 |
Asset retirement obligations | 1,705 | 1,900 |
Others | 3,654,890 | 4,914,647 |
Total current liabilities | 8,311,096 | 9,006,316 |
Non-current liabilities | ||
Long-term loans payable | 13,800 | - |
Long-term accounts payable - other | 22,120 | 22,120 |
Deferred tax liabilities | 123 | 53,118 |
Provision for directors' retirement benefits | 19,064 | 15,050 |
Net defined benefit liability | 106,227 | 111,131 |
Asset retirement obligations | 481,579 | 1,396,138 |
Total non-current liabilities | 642,914 | 1,597,558 |
Total liabilities | 8,954,010 | 10,603,874 |
Net assets | ||
Shareholder equity | ||
Capital stock | 6,586,000 | 6,586,000 |
Capital surplus | 6,733,706 | 6,737,978 |
Retained earnings | 27,105,988 | 30,135,872 |
Treasury shares | (3,505,438) | (3,462,774) |
Total shareholder equity | 36,920,256 | 39,997,076 |
Accumulated other comprehensive income | ||
Valuation difference on available-for-sale securities | 371,132 | 455,482 |
Foreign currency translation adjustment | 7,138 | 12,611 |
Remeasurements of defined benefit plans | 10,713 | 295,633 |
Total accumulated other comprehensive income | 388,983 | 763,727 |
Subscription rights to shares | 70,431 | 26,401 |
Total net assets | 37,379,671 | 40,787,205 |
Total liabilities and net assets | 46,333,682 | 51,391,080 |
(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income (Consolidated Statement of Income)
Previous Consolidated Fiscal Year (February 1, 2022 - January 31, 2023) | Current Consolidated Fiscal Year (February 1, 2023 - January 31, 2024) | |
Net sales | 48,206,206 | 53,124,026 |
Cost of sales | 36,895,514 | 39,027,874 |
Gross profit | 11,310,691 | 14,096,152 |
Selling, general, and administrative expenses | 6,936,467 | 7,734,324 |
Operating income | 4,374,224 | 6,361,827 |
Non-operating income | ||
Interest income | 1,299 | 975 |
Dividends received | 24,675 | 24,076 |
Reversal of allowance for doubtful accounts | 2,875 | - |
Dividends from insurance | 12,849 | 7,953 |
Miscellaneous income | 20,835 | 21,581 |
Total non-operating income | 62,534 | 54,587 |
Non-operating expenses | ||
Interest expenses | 2,788 | 2,416 |
Foreign exchange loss | 15,627 | 3,761 |
Commission for purchase of treasury shares | 3,599 | - |
Miscellaneous loss | 1,328 | 712 |
Total non-operating expenses | 23,343 | 6,890 |
Ordinary income | 4,413,415 | 6,409,524 |
Extraordinary income | ||
Gain on sale of investment securities | 2,265,000 | - |
Total extraordinary income | 2,265,000 | - |
Extraordinary loss | ||
Loss on retirement of non-current assets | 2,015 | 15,957 |
Impairment loss | 704 | - |
Total extraordinary loss | 2,720 | 15,957 |
Profit before income taxes | 6,675,695 | 6,393,567 |
Income taxes - current | 1,707,649 | 1,340,136 |
Income taxes - deferred | (211,365) | 511,802 |
Total income taxes | 1,496,284 | 1,851,938 |
Net income | 5,179,411 | 4,541,628 |
Net income attributable to owners of parent | 5,179,411 | 4,541,628 |
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Computer Engineering & Consulting Ltd. published this content on 26 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 March 2024 05:16:05 UTC.