Takeshi Ueno
President and Representative Director
Despite a fall in sales, cost-cutting activities progressed ahead of schedule, helping us achieve growth in operating income.
Consolidated net sales for the first six months of the fiscal year ending March 31, 2012 (hereinafter the "first half") totaled 10,743 million yen, down 831 million yen, or 7.2%, compared to the previous first half. This decline reflected a drop in the number of listed companies in Japan, our clients' low-cost mentality, and the simplification of investment trust prospectuses brought about by legal system revisions. However, operating income rose 241 million yen (or 13.2% year on year), to 2,062 million yen, and ordinary income increased 220 million yen (or 12.1% year on year), to 2,041 million yen, because company-wide cost-cutting activities—implemented as part of our medium-term management plan to overcome the challenging operating environment—progressed ahead of schedule. In terms of our bottom line, we posted net income of 1,179 million yen for the first half under review, which contrasted with the net loss of 1,231 million yen realized during the previous first half reflecting an extraordinary loss booked on our withdrawal from the employees' pension fund and other factors.
Making company-wide efforts under Medium-term Management Plan 2011
The Great East Japan Earthquake caused unprecedented damage and destruction, which has had a significant impact on Japan's economy. While much progress has been made since the earthquake toward restoring production and logistics activities to normal, ongoing efforts are still required to realize a full recovery from the disaster. Amid the challenging environment, in April 2011 we launched Medium-term Management Plan 2011. To overcome the challenging management environment and establish an earnings base for medium- to long-term growth, during the first half under review we embarked on company-wide measures in line with our three basic strategies and aimed at achieving the targets outlined in the plan.
Unfortunately, as noted above, net sales declined in the first half because we were unable to overcome the effects of external factors. Nevertheless, our steadfast efforts to promote thorough manufacturing cost cutting progressed well ahead of schedule. As a result, our cost of sales ratio fell 4.7 percentage points, from 59.9% to 55.2% year on year, which exceeded our initial target by about 2 percentage points. Together with a reduction in selling, general and administrative (SG&A) expenses, this helped us achieve an increase in operating income.
In addition, we worked to strengthen our "Systems," "Online" and Database" services, each of which has been positioned as a key growth driver for the future. For example, in terms of our "Systems" services, the operation support system for investment trust management firms FDS, which was launched in June 2011, saw a steady rise in the number of client users. This reflected strong feedback from clients helped by the service to streamline operational work flow as well as speed up operations and ensure greater accuracy. At the same time, we succeeded in greatly expanding the number of clients using our disclosure and accounting information generating system WORKS-i, as it has proven to be a strong tool for promoting operational efficiencies. In terms of our "Database" services, we pushed forward with marketing activities in Taiwan. As for our "Online" services, we posted steady progress toward our targets, as we expanded sales of our IR website services that automatically update and help make required IR content more concise and compact.
Working to achieve the targets set out in Medium-term Management Plan 2011
Amid the unprecedentedly challenging operating environment, PRONEXUS has been working to promote Medium-term Management Plan 2011 and achieve the targets set out in it as one of management's top priorities going forward. Although economic uncertainty persists, stemming from the slowdown in the global economy and rapid appreciation of the yen, and Japan's stock markets continue to stagnate, we are beginning to see signs of hope for the future, such as the turn to an increase in the number of initial public offerings (IPOs). PRONEXUS stands firmly committed to leveraging and maximizing its many, long-standing strengths to unlock growth opportunities over the medium to long term. In this regard, I ask for the continuing support and encouragement from our shareholders as we move forward.
December 2011
Takeshi Ueno
President and Representative Director
