決算説明会資料

Masakazu Haneda: I am Masakazu Haneda, Representative Director, President and CEO of Business Engineering Corporation. I will now explain our financial results for the second quarter of the fiscal year ending March 31, 2026.

Here is the agenda for today's presentation.

This is an overview of our financial results for the second quarter of the fiscal year ending March 31, 2026. Corporate earnings overall are maintaining high levels, and business sentiment in the manufacturing industry remains favorable. The economy continues its gradual recovery. DX demand in manufacturing industries continues to be strong, with strategic digital investments maintaining robust momentum.

Against this backdrop, our second quarter consolidated results achieved our first-half targets for net sales, profit at all levels, and order intake. All of these represent record highs.

Net sales achieved a third consecutive period of record highs, while operating profit and net profit achieved an eighth consecutive period of record highs.

Our interim dividend is ¥78 per share, an increase of ¥36 year-on-year. Due to the substantial growth in first-half performance, we have revised upward our full-year earnings forecast across all items.

I will now explain our financial results for the second quarter of the fiscal year ending March 31, 2026. In the highlights of our consolidated income statement, both net sales and profits grew significantly in the second quarter alone and in the first half overall.

In the first quarter, we recorded gains from the sale of strategic shareholdings, and all metrics reached record highs for the first half. In August, we revised upward our first-half earnings forecast, and we have achieved all targets in this plan.

Compared to the previous fiscal year, net sales increased by 21.7%, operating profit by 39.4%, net profit by 50.2%, and order intake by 18.4%.

This shows our progress against the full-year sales forecast. As a result of substantial sales growth in the second quarter, our first-half progress has been very strong.

Accordingly, we have revised upward our full-year sales plan by ¥2.0 billion to ¥24.0 billion. The first-half progress rate against this revised plan is 51.2%.

Regarding operating profit, we achieved significant growth due to increased license sales in the Products Business and higher sales and profitability in the Solutions Business.

We have revised upward our full-year operating profit plan by ¥0.8 billion to ¥6.0 billion. Our progress rate stands at 56.2%.

Let me explain the analysis of changes in operating profit. The left side of the slide shows the second quarter alone, and the right side shows the first-half analysis. The key driver of substantial profit growth in both cases is sales growth.

In the second quarter, we implemented provisions for performance-linked bonuses for employees, but we absorbed these and still achieved substantial profit growth in both periods.

I will now explain net sales and operating profit by segment. As a notable point, license sales in the Products Business grew substantially in the second quarter.

The Solutions Business also maintained strong performance in the second quarter, following the first quarter, and achieved the upwardly revised plan.

Let me explain the Solutions Business. As a result of making proposals aligned with customer needs, orders have been progressing favorably. Continuing from the first quarter, we had strong project inquiries, and with some one-time factors added, net sales significantly exceeded the previous year.

Profits declined from the first quarter, but this was due to provisions for performance-linked bonuses. Project profitability and other factors continue to be maintained at high levels.

Regarding the Products Business, license sales performed well under our strategic partnerships. In the second quarter, some projects were brought forward, resulting in substantial sales growth. License sales by both existing and new partners contributed to the expansion of Products Business sales.

Regarding profits, although we made provisions for performance-linked bonuses, license sales absorbed this impact, achieving higher profit levels than in the first quarter.

Let me explain the trend in mcframe license sales. Leveraging mcframe's competitive advantage in the supply chain management field, second quarter sales grew substantially. Overall for the first half, we recorded high growth exceeding 20% year-on-year.

Let me explain the highlights of our consolidated balance sheet. We optimized capital efficiency through growth investments in products and the sale of strategic shareholdings.

This slide shows the highlights of our consolidated cash flows. I will skip the detailed explanation of this.

I will now explain our full-year earnings forecast for the fiscal year ending March 31, 2026. First, regarding the business environment, while some economic slowdown is expected, DX needs in the manufacturing industry remain high, and we expect digital investments to continue. Against this backdrop, we have revised upward our full-year consolidated earnings forecast across all items.

For both net sales and profits, in addition to the substantial growth in the first half, we expect increased revenue and profit in the second half as well. Additionally, we are expecting a one-time reduction in tax burden for this fiscal year.

We expect net sales to reach record highs for the fourth consecutive period, and operating profit and net profit for the tenth consecutive period. Furthermore, regarding our shares, we plan to implement a 5-for-1 stock split.

We plan to abolish our shareholder benefit program. Regarding the dividend payout ratio, we have increased the annual dividend amount based on our policy of maintaining a payout ratio exceeding 50%. On a pre-split basis, this comes to ¥188 per share, which represents an increase of ¥32 from the previous forecast and an increase of ¥88 from the previous fiscal year.

Let me explain our full-year earnings forecast. As I mentioned earlier, we expect substantial revenue growth for the full year and have revised upward all items.

Compared to our previous forecast, we expect net sales to increase by ¥2.0 billion to ¥24.0 billion, operating profit to increase by ¥0.8 billion to ¥6.0 billion, and net profit to increase by ¥0.7 billion to ¥4.4 billion. For order intake, we expect an increase of ¥1.8 billion to ¥24.3 billion.

The dividend is planned at ¥188 per share on a pre-split basis, and we forecast an ROE of 29.8%.

Next, I will explain the sales outlook by segment. We have revised upward all segments and license sales.

Regarding the outlook for the Solutions Business, we believe that customer inquiries continue to be favorable.

By making proposals aligned with customer needs, we will continue to secure a foundation for both sales and profitability in the second half as well. We are also working on new businesses such as data-centric business.

Regarding the Products Business, leveraging mcframe's market leadership in the supply chain management area, we expect substantial sales growth in license sales in the second half as well.

In addition to strengthening partnerships, we will also focus on overseas offices and SaaS-type business.

Let me explain the trend in net sales. In May of this year, we announced our growth strategy 'BE 2030' with targets for fiscal year 2030.

In the current fiscal year, which is the first year of this plan, we expect sales growth equivalent to the first two years toward our fiscal 2030 target, projecting significant progress.

Regarding operating profit as well, we expect a substantial increase to ¥6.0 billion, equivalent to approximately two years' worth toward our final target of ¥10.0 billion for fiscal 2030 under 'BE 2030'.

Regarding mcframe license sales, in fiscal 2024, which was last year, we recorded substantial growth exceeding 17% year-on-year. In fiscal 2025 as well, we continue to expect substantial growth exceeding 17% year-on-year.

This graph shows the sales trend by segment. You can see that sales are growing substantially overall.

Let me explain dividends and the stock split. Since fiscal 2023, we have been implementing a progressive dividend policy with a dividend payout ratio exceeding 35% as our basic policy.

Starting from this fiscal year, we have further increased the dividend payout ratio to exceed 50%. As I explained, with substantial growth in net profit, we plan a substantial dividend increase this fiscal year, resulting in an expected 11th consecutive year of dividend increases.

As noted here, we plan to implement a 5-for-1 stock split for our shares, with an effective date scheduled for January 1, 2026.

Regarding the shareholder benefit program, after careful consideration of fair profit distribution to shareholders, we plan to abolish it. We plan to discontinue the program after the distribution with a record date of December 31, 2025.

For fiscal 2025 dividends, the interim dividend is ¥78 per share on a pre-split basis, and the year-end dividend is ¥110 per share on a pre-split basis, representing an increase of ¥32 from the previous forecast. The total annual dividend is ¥188 per share on a pre-split basis, an increase of ¥88 from the previous fiscal year.

Chapter 3 contains the data book, which includes the materials shown in the slides. Please refer to it later.

Finally, I would like to introduce our IR-related materials. We published our first integrated report in fiscal 2024. This fiscal year, we have also updated our integrated report in September.

Similarly, we are updating information in our Investors Guide as appropriate. Please take a look.

This concludes the presentation of Business Engineering's financial results for the second quarter of the fiscal year ending March 31, 2026. Thank you very much.

Q: What is the background behind the rapid increase in mcframe license sales? Particularly, could you explain the trend toward larger customers and its impact on profitability?

A: Background of the increase in mcframe license sales: Recently we have been seeing increased adoption not only by mid-sized customers but also by quite large customers. Accordingly, the license amount per case has been increasing. This fiscal year, several such large-scale projects have been recorded.

Trend toward larger customers and future outlook: When we say 'large' customers, we are referring to customers with sales of around ¥300 billion to ¥500 billion. Many are SAP users, but we are increasingly being selected for mcframe for certain portions of the supply chain area.

Impact of larger customers on profitability: The increase in large customers does not lead to increased discounting or deterioration in profitability.

Q: Could you explain the profit margins in each business segment (Products Business and Solutions Business)?

A: Products Business: The reason the profit margin appears slightly lower than usual is due to performance-linked bonuses. There is no fact that we offered special discounts.

Solutions Business: Excluding the impact of performance-linked bonuses, the profit margin in the second quarter was slightly higher than in the first quarter, maintaining high levels. What we previously considered 'special demand' in the first quarter has become somewhat normalized, driving both sales and profit margins higher.

Q: Could you explain the background of the strong orders and the outlook for the business environment?

A: Background of strong orders: Fundamentally, the need for digitalization in the supply chain management area of the manufacturing industry has been very strong recently, which is supporting strong orders. It's not that we have received any specific massive new orders. Many of our customers have relationships with us for 10 or 20 years and have numerous digitalization challenges, and we are supporting them in addressing these. It seems unlikely that digitalization needs will suddenly diminish.

Impact of SAP end-of-support issue and sustainability of demand: Some customers are considering upgrading to SAP S/4 HANA, while others are switching to mcframe for certain functions, and in any case, this is having a positive effect on our business. We expect this demand to continue for some time to come.

IT implementation potential in Japan's manufacturing industry: In Japan's manufacturing industry, the implementation rate of packaged software in the supply chain management area such as production management is about half, which is lower than in accounting and human resources areas. Conversely, we believe there is significant latent demand. It is unlikely that this demand will peak out in the short term.

Q: What are the intentions behind measures related to shareholder composition, such as stock split and abolition of shareholder benefits?

A: We lowered the minimum investment amount through the stock split. We aim to further increase the number of individual shareholders and improve liquidity through more active trading, thereby increasing shares in circulation. As a result, we also expect it to become easier for institutional investors to trade, and we hope to achieve a balanced shareholder composition between individual shareholders and institutional investors.

Q: Could you explain your dividend policy (progressive dividend, dividend payout ratio) and the impact of the reduced tax burden?

A: Dividend policy and outlook for next fiscal year: Our dividend policy states "progressive dividend," so there will be no dividend reduction next fiscal year. The reduced tax burden is a one-time effect resulting from the application of the "wage increase promotion tax credit."

Q: Could you explain the current status and future direction of your partner strategy?

A: Room for developing new partners: Many major SIers with strengths in the manufacturing industry have already become mcframe partners. We are focusing on expanding the number of engineers who can handle mcframe, both among new and existing partners. We are also working to strengthen our support structure to make it easier for partners to sell our products through joint sales activities and promotional efforts.