PRONEXUS provides disclosure and investor relations support services to companies, and thus its business operations are influenced by external factors such as revisions to the legal system and changes in the securities market. The impact of legal system revisions on our performance is sometimes positive but at other times negative. When securities market conditions are strong, a rise may occur in the number of orders for prospectuses, securities registration statements and sales materials due to brisk activity in corporate financings and IPOs, as well as the creation of investment trusts.
As the chart below illustrates, up until 2008 a series of positive factors boosted our business performance, including the requirement for securities reports to be submitted using the EDINET system and the disclosure of consolidated financial statements to the convocation notices for shareholders' meetings, a new requirement on the execution of the Companies Act and the Financial Instrument and Exchange Act as well as the introduction of XBRL. This supported our sales and steady profit growth. Following theLehman shock in autumn 2008, however, our sales and profits declined due to a drop in the number of listed companies reflecting a drastic decrease in IPOs, the digitization of stock certificates and clients' efforts to cut costs. From 2013 our performance recovered, with both sales and profits on the rise thanks to a recovery in the securities market and the introduction of the next-generation EDINET system.
PRONEXUS's main growth driver is support services related to changes in disclosure operations due to legal system revisions. In other words, our business is highly dependent upon developments in the legal system. To avoid the risk of dependence on this system and to create a business structure that is less affected by changes in the external environment, we will pioneer new markets and develop new business fields by leveraging our systems expertise and infrastructure.
- Performance and Business Environment: System Changes and Effects of Market Conditions