We would like to express our sincere gratitude to our shareholders and investors for your continued and exceptional support.
The CRESCO Group embarked on its five-year vision “CRESCO Ambition 2020” in April 2016, in a bid to ensure capturing business opportunities and achieve a further leap, and is striving to achieve the target of business performance, implement focus measures, and enhance the corporate value.
Under the corporate philosophy of “management in accordance with ‘CRESCO Ambition 2020,’” “qualitative growth through reinforcement of service quality,” “quantitative growth through reinforcement of resources and technological strategies,” and “increase in growth speed through M&As,” we have tackled 11 items of issues to be addressed and pushed forward with the business operations in the fiscal year under review.
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Ongoing issues in accordance with the five-year vision |
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The fiscal year under review, backed by “digital transformation,” provided opportunities for the CRESCO Group to demonstrate its superiority, as it operates in wide areas of business fields encompassing advanced technologies (AI, cloud computing, etc.) in addition to the three core technologies which the Group has developed since its foundation (application development technology, IT infrastructure construction technology, and embedding technology). In the 4th quarter, however, an uncertainty grew pronounced due to impacts of the scourge of the novel coronavirus disease (COVID-19).
As infrastructure improvement and an expansion in inbound demand related to Tokyo Olympic Games supported IT investment to a certain extent, orders received by the CRESCO Group has begun to be partially impacted. At the same time, a global decline in stock prices caused by the scourge of COVID-19 has forced a cautious review and revision of the Group’s investment portfolio.
At this period, the Group reinforced the quality management system and project audits, tried to review its customer portfolio and business structure in response to changes in markets, and, at the same time, devoted its efforts to cultivating new customers and developing new business and service incorporating advanced technology. The Group also strove to ensure the appropriate amount of orders commensurate with resources and to further improve customer satisfaction by expanding development systems (near-shoring and offshoring), selectively taking orders, and reviewing its operating policies. On the other hand, regardless of the supply demand environment, it is undeniable that there is a shortage of human resources as the “digital transformation” progresses. The Group thus devoted its efforts to hiring activities (of new graduates and experienced workers) and productivity improvement activities (internal innovation activities).
As a capital policy, the Group implemented the “issuance through third party allotment of 7th series share acquisition rights using treasury shares” designed to raise fund for positive business investment such as M&A and capital and business alliance, and the “2-for-1 share split (effective February 1, 2020)” designed to expand the range of investors and improve market liquidity.
Besides, as a part of evangelist activities, the Group is implementing promotional activities for various services and solutions through publishing the result of technological research.
The CRESCO Group’s business focuses on system integration, including the design, development, maintenance and operation service, etc. of systems and products upon customers’ request, and contracted software development. According to the “Kigyo-IT-doko Chosa 2020 [Corporate IT Trend Survey 2020]” (survey period: Sep. to Oct. 2019) conducted annually by the Japan Users Association of Information Systems (JUAS), 40.7% of the responding companies indicated that they would “increase” the IT budget for FY2020 as they had done for the previous year, backed by the trend of “digital transformation.” There has been a huge change in business confidence, however, due to the scourge of COVID-19 involving the whole world, pouring cold water on IT investment appetite. Although there is a high potential appetite for IT investment, a downturn in Japanese and global economies is considered to be inevitable at least in the first half of FY2020. In addition, there are inexhaustible concerns including the stagnation in the global economy and supply chains, a slump in consumption, employment issues, etc., resulting in the unforeseeable future. From a short-term perspective, the scourge of COVID-19 is considered to be a factor having a material impact on operating results given a decrease in orders due to customers’ revisions and changes in their IT investment plans, the cancellation, suspension or postponement of projects, delayed opportunities for business meetings, etc.
In the finance sector of the software development business, financial uncertainty on the global scale brought about by a plunge in stock prices and significant changes in exchange rates are expected to impact IT investment. In the public service sector and the distribution and other sector, a drastic deterioration in recent financial results and future uncertainty are expected to impact IT investment. In the telecom system, car electronics and information appliances and other sectors of the embedded software development business, a drastic decrease in demand, a review and revision of the product development cycle, significant changes in exchange rates, etc. are expected to impact IT investment although the magnitude of an impact differs by sectors.
The trend of “digital transformation,” however, has not greatly changed structurally, and, from medium- and long-term perspectives, the basic expansionary trend is considered to continue. In addition, occasioned by the scourge of COVID-19, customer demand is trending upward for the development of a cloud environment, which is gaining a renewed interest, sometimes as a part of a business continuity plan (BCP), the introduction of a system of teleworking and working from home, manpower saving and automation through artificial intelligence (AI) and robotic process automation (RPA), etc. This is considered to provide new business opportunities for the CRESCO Group, which has broad areas of business that also cover advanced technology.
In the next fiscal year, which is the final year of the “CRESCO Ambition 2020,” the Group will continue to address issues specified below under the management policy it upholds: “management in accordance with ‘CRESCO Ambition 2020,’” “ensuring that orders are received by acquiring new customers and optimizing the Group’s business portfolio,” “expanding profit by creating a high value-added business through advanced technology,” “improving productivity and employee satisfaction through continuous efforts toward work style reform,” and “accelerating growth potential by promoting alliance.”
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Issues to Be Addressed |
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The CRESCO Group is a group of IT companies that leads digital transformation (DX) focusing on a variety of technological areas: the three core technologies of application development technology, IT infrastructure construction technology and embedded technology with the addition of advanced technology (AI, cloud computing, etc.). While FY2020 started with numerous matters of concern including the stagnation of the Japanese and global economies, the deterioration of business confidence and increasing future uncertainty, against the backdrop of the postponement of Tokyo Olympic Games due to the scourge of COVID-19 and the heightened sentiment for voluntary restraints from going out, the Group aims for its sustained growth and greater corporate value by implementing the management policy in a steady manner in order to mark the final year of the “CRESCO Ambition 2020.”
May, 2020
Toshio Iwasaki, Chairman & CEO
Hiroyuki Nemoto, President
