[As of March 31, 2024]
The business environment in FY2023 saw procurement costs for personnel, supplies, and funds pushed higher due to emerging shortages of materials and labor, despite a recovery in domestic demand and exports as the COVID-19 pandemic ended.
While these conditions had a negative impact on the cost structure of the CRESCO Group, they also prompted the Group’s corporate customers to accelerate investment for increasing productivity using IT, with a continuing positive impact for the overall information service industry to which the CRESCO Group belongs.
In order to achieve the targets of Medium-Term Management Plan 2026 and meet stakeholders’ expectations by accurately seizing these business opportunities, the CRESCO Group is committed to promptly implementing various measures based on the recognition of the following issues to achieve sustainable growth and increase corporate value.
During the fiscal year under review, the Company was impacted by a number of large projects becoming unprofitable. As a result, while the Company achieved the consolidated operating profit target of 5.0 billion yen under Medium-Term Management Plan 2023, it did not achieve the planned operating profit ratio of 10.0%. When unprofitable projects occur, they not only require the investment of large amounts of human resource and outsourcing expenses to complete, but also bring about opportunity losses by preventing the allocation of resources into new projects. As such, they have a severe impact on the CRESCO Group’s operating results. Unprofitable projects are caused not only by technology or quality issues, but can arise from various factors including estimation errors and lack of coordination with customers. We will build systems and structures for thoroughly pursuing causal factors and ensuring that the same issue does not arise again.
In order to achieve the Medium-Term Management Plan 2026 target for consolidated net sales of 70.0 billion yen, it is necessary to secure IT engineers with expert knowledge of wide-ranging technology fields and customers’ businesses. To address this management issue, the CRESCO Group will increase its population of engineers by further strengthening its branding and recruitment activities, identifying potential M&A deals and business partners, and strengthening its near-shore (distributed development inside Japan through collaboration with subsidiaries and business partners) and off-shore (overseas distributed development through collaboration with local companies in Vietnam) operations. In addition, by renewing our human resource development and education programs, we will improve the capabilities of all Group employees, including engineers. Moreover, by reviewing pay levels and continuing to provide telework, office environment and safe and healthy working environment, we will implement various measures to increase employee engagement.
To secure net sales, we judge that it is important not only that all CRESCO Group companies aim to expand their own commercial areas to enable efficient acceptance of orders covering all scales from small to large, but also that sales proposals are arranged flexibly within the Group, with proposal activities based on links between personnel, technologies, and solutions.
The CRESCO Group will address these management issues by increasing opportunities for interaction between Group officers, sales representatives, and development personnel centered on the Group Supervisory-Unit and building a structure that will maximize Group synergies by enabling flexible responses to requests from corporate customers.
Recently, our corporate customers are facing changes in their cost structures and an increasing pace of competition between companies due to worker shortages and rising costs driven by falling birthrates and population aging. It is becoming difficult to conduct research and development in the conventional way, using in-house personnel and equipment and working over a long time scale. One solution that offers a breakthrough in this situation and is drawing a great deal of attention is digital solutions using technologies such as AI, cloud computing, and RPA. Since demand is expected to grow going forward, the CRESCO Group judges that it is important to concentrate its management resources in the digital solutions business to secure net sales of the business and increase profitability.
To address this management issue, the CRESCO Group will hold a variety of events and study sessions and promote technology community activities, aiming to increase market pricing for IT engineers by capturing joint projects. At the same time, we aim to increase the profit margin for the business overall by further developing in-house brand solutions and promoting the discovery of alliance partners with solutions.
In promoting Medium-Term Management Plan 2026, the Group expects to see an increase in activities to deal with operations such as sales, recruitment, procurement, and M&A/PMI, and with matters such as laws and regulations. In the CRESCO Group’s mainstay business of contract software development, the level of customers’ demands (specifications, conditions, etc.) is also expected to increase. To response accurately to such changes, we judge that increasing productivity is essential, and will be the key to higher operating profit ratio.
As specific measures, we will promote IT literacy education and work to improve the efficiency of operations and centralize them through the use of digital solutions, thereby curbing back-office costs. In addition, we will create an environment where the Group’s officers and employees can focus on the Group’s core operations. Furthermore, by promoting agile development and introduction of RPA and generative AI, we will increase development efficiency and control manufacturing costs.
The CRESCO Group has established management targets and indicators, and is responsible for achieving them; however, the Group is required to promote sustainability management, which not only enhances the corporate value but also finds solutions to social issues, and human capital management, which maximizes the value of human resources to enhance corporate value over the medium to long term.
To address these management issues, the Group established the “Basic Policy on Sustainability” in FY2022, and clarified its commitment to promote actions toward the realization of a sustainable society. The Group has also announced its “Declaration on Health and Productivity Management” and “Multi-Stakeholder Policy,” making it clear that it will promote value co-creation with its diverse stakeholders, including its employees. In Medium-Term Management Plan 2026, we have set out the CRESCO Group’s material issues. We will continue to conduct our business activities in accordance with these policies and strive to disclose information in a timely and appropriate manner.
For information on the Company’s objectives, systems, and main initiatives for promoting health management, please see the Integrated Report posted on the Company website.
