We would like to express our sincere gratitude to our shareholders and investors for your continued and exceptional support. The CRESCO Group has finalized the financial results for the second quarter of FY2023 (from April 1, 2023 to September 30, 2023).
The change in classification of COVID-19 under the Infectious Diseases Control Law has led to a recovery in crowds and accelerated the search for the new normal. At the same time, the yen has once again weakened, making businesses and households even more wary of rising costs.
In the IT industry, to which the CRESCO Group belongs, there is increasing attention on the impact of generative AI on company measures to address labor shortages and improve productivity. The threat of cyber attacks is also coming under increasing scrutiny, and we believe that companies will be even more eager to invest in IT.
At CRESCO, the Quality Management-Unit was reorganized as the Quality & Process Management-Unit in April 2023 with the aim of promoting further improvements in quality and operational efficiency. In addition, the Sales Division as an organization began reporting directly to the Business Enablement Service-Unit in order to drive expansion of our corporate group, primarily in the Digital solutions business.
Furthermore, we launched the “Integrated Report 2023” which organizes and explains in detail the CRESCO Group’s financial information and non-financial information (management principle, business details, value creation process, sustainability/ESG initiatives, etc.), and posted it on our website.
Based on a resolution of the Board of Directors meeting held on May 10, 2023, CRESCO acquired 500,000 shares of treasury shares (aggregate purchase amount of 995,644,700 yen) through open-market purchase during the second quarter of FY2023 and cancelled 1,000,000 shares of treasury shares on September 8, 2023. As a result, the total number of issued shares at the end of the second quarter of FY2023 was 22,000,000 shares.
With regard to our Digital solutions business, we were awarded “Revenue Growth Partner of the Year” at the UiPath Japan Partner Awards 2022 by UiPath, a leading RPA vendor, in April 2023. We concluded a distributorship agreement with WingArc1st Inc. in July and began offering a solution that realizes paperless and automation for accounting operations by linking UiPath with their “invoiceAgent” electronic form platform.
In addition, in the area of AI, we built the “CrePT” generative AI chat service using Microsoft’s Azure OpenAI Service to improve internal operational efficiency and refine our proposals to customers, and began operating it for employees in May 2023. Furthermore, we began offering the “AI Escort” service provided by our own AI experts in June.
In the area of cloud computing, we began offering the “GPUSOROBAN Remote Workstation,” a service that allows users to comfortably operate CAD and other systems in a telework environment, in September 2023.
In the area of security, we offered a penetration testing service as part of the “Security Vulnerability Diagnostics” lineup in May 2023, and began offering a service to identify issues through simulated cyber attacks.
Cognavi India Private Limited, an Indian corporation in which we have made a capital investment, opened the “Cognavi” job portal site for newly graduated Indian students in June 2023.
In addition, we invested in Vietnamese startup CAPICHI PTE. LTD. (head office: Singapore; hereinafter “CAPICHI”), which is focused on restaurant and retail tech, and concluded a business alliance agreement with it in September 2023. We became the Japanese distributor of “Capichi OI,” CAPICHI’s QR-based mobile ordering system through this business alliance. We will contribute to the digital transformation of restaurants, retail stores, and accommodations through inbound tourism measures and improvement of foreign customer satisfaction.
CRESCO Digital Technologies Ltd. announced a “CROSS for Mist” subscription WiFi service and an integrated BOM management solution for the manufacturing industry.
On the other hand, personnel and education expenses increased compared to the same period of the previous year. This was due to the aggressive hiring of new graduates by CRESCO and some consolidated subsidiaries, salary level increases as a measure to recruit and retain employees, and increased investment in training. In addition, with respect to the IT services business, unprofitable projects occurred due to system specifications, functional requirements, and development systems for multiple large-scale outsourced projects.
We recorded a gain on valuation of derivatives (non-operating income) of 266 million yen and a gain on redemption of investment securities (extraordinary income) of 108 million yen in connection with the management of surplus funds.
In terms of the outlook for the second half of FY2023, we are facing a new risk factor in the form of the Israel-Gaza conflict, in addition to impact from a weakening yen and soaring prices. However, we expect that IT investment will grow, particularly in areas such as AI, RPA, and security, and that opportunities for our corporate group to receive orders will continue to expand as a result of the increasing participation by new graduates in the development field.
A provision for loss on order received was recorded in the second quarter of FY2023 in connection with several unprofitable projects that occurred at CRESCO, based on all information and reasonable assumptions that are available at this time. Since the relevant projects still contain uncertain elements, we are focusing on minimizing the impact on the second half of the fiscal year by strengthening support and monitoring by upper management toward the conclusion of these projects.
Based on the above, no changes have been made to the full year consolidated earnings forecasts for the fiscal year ending March 31, 2024 from the figures announced on May 10, 2023. If it becomes necessary to revise the forecasts due to future conditions, trends in financial results, etc., the revision will be disclosed promptly.
Nov, 2023
Hiroyuki Nemoto, Chairman & CEO
Hiroshi Tominaga, President
