■Performance Trends of Macromill <3978>

1. Overview of Performance for the Year Ending June 2024

For the fiscal year ending June 2024, sales revenue was ¥ 43,861 million (up 8.0% from the previous year), operating profit was ¥ 5,624 million (up 13.4% from the previous year), operating profit was ¥ 4,470 million (down 0.6% from the previous year), pre-tax profit was ¥ 4,746 million (up 27.3% from the previous year), and net income attributable to owners of the parent company for continuing operations was ¥ 2,293 million (up 29.0% from the previous year). The Japan business performed well, with a double-digit increase in operating profit due to improved productivity. On the other hand, due to the impact of equity method losses at Toluna, operating profit remained flat compared to the previous year. Regarding Toluna, unexpected losses occurred in the fiscal year ending June 2024 due to the expenses related to post-merger integration (PMI) and the subdued sales in regions such as Europe affecting business, but cost reduction initiatives have been promoted over the course of a year. Plans are underway to sell shares after the fiscal year ending June 2026.

2. Business trends by segment

(1) Japan Business

The Japan business achieved sales revenue of ¥ 37,719 million (up 8.0% from the previous year) and segment operating profit of ¥ 5,422 million (up 22.5% from the previous year). Sales revenue expanded smoothly in focus areas, strategic investment areas, and infrastructure strengthening areas.

In the focus area of online and digital research services, proactive sales activities since the prior second half have been effective in strengthening relationships with client companies. As a result, sales revenue reached ¥ 14,888 million, a 5.5% increase from the previous year. The focus area has the highest profit contribution with a sales gross profit margin of over 60%, but it had been lackluster until the fiscal year ending June 2023. Due to internal resource shortages in response to recovering demand from the COVID-19 pandemic, this was a factor, but it was resolved during the fiscal year ending June 2023. In the fiscal year ending June 2024, efforts were made to attract returning customers and win competitive projects. Staff recruitment has moved past significant expansion phases, and the focus is on enhancing the abilities and proficiency of existing employees to increase the number of cases handled per employee and reduce outsourcing costs. By steadily securing sales in the focus area with a high sales gross profit margin, overall productivity is being improved.

For services in the strategic investment area such as global research, consulting, and new businesses, global research and consulting were strong in the first half, while new business growth accelerated in the second half, leading to sales revenue reaching ¥ 6,787 million, a 12.9% increase from the previous year. The strategic investment area fell behind initial plans, attributed to the larger project size per case compared to other areas, resulting in higher sales volatility. Despite the likelihood of fluctuations due to the timing of order placement and completion of projects, double-digit growth was achieved. This area is expanding in the market, with continued expectations for high growth.

Regarding the subsidiary group that expands into the offline and data provision areas, as well as joint ventures with other advertising agencies, with the subsidiary Monitas being made a subsidiary in July 2023, the net sales increased by 8.5% to 160.43 billion yen compared to the previous period. The foundational strengthening domain, including joint ventures, is expected to have stable growth through the pursuit of expertise, but the subsidiary group, including Monitas, exceeded the initial plan and performed well in the June 2024 period.

In terms of expenses, the increase in personnel expenses due to additional hiring from the second half of the June 2023 period, as well as the strengthening of hiring for new businesses such as talent and IT personnel, resulted in personnel expenses exceeding the sales growth rate. On the other hand, productivity improvement of internal resources and internalization of operations progressed, restraining outsourcing costs and reducing them from the previous period. Regarding system-related expenses, investments were made in sustainable sales growth and profit improvement for the future, such as the renewal of research core systems, leading to an increase.

(2) South Korea Business

The sales revenue of the South Korea business increased by 7.3% to 61.42 billion yen compared to the previous period, while the segment business profit decreased by 61.9% to 2.02 billion yen. In South Korea, the market environment is challenging due to the impact of a sluggish economy, leading to a decrease in public surveys carried out by the government, a reduction in research budgets of major client companies, and other factors. However, the company capitalized on the advantage of being the only major research company in South Korea to own a panel foundation, and promoted new businesses such as providing purchase data already implemented in Japan, leveraging its structural strengths for service expansion and striving to secure new revenue sources. By the end of the second quarter, the company started marketing support operations in South Korea, acquired an advertising and promotion company through M&A to launch advertisement and publicity operations, and proceeded with collaboration. The impact of deteriorating business sentiment subsided in the following third quarter, and sales recovered in the fourth quarter with synergy effects from M&A becoming evident. Despite continued losses in the second half due to increased personnel costs and one-off expenses, the company made efforts in cost control resulting in a recovery to the breakeven point in the fourth quarter. While advancing business investments in new core services, the company believes that management focusing on profitability is being pursued.

3. Financial position

The total assets at the end of the June 2024 period decreased by 49.48 billion yen to 892.05 billion yen compared to the previous period. Total current assets decreased by 83.00 billion yen to 209.86 billion yen, with cash and cash equivalents at 78.56 billion yen, and operating receivables and other receivables at 6.75 billion yen primarily contributing to the decrease. Total non-current assets increased by 33.51 billion yen to 682.18 billion yen, with the main factors being the increase in other financial assets at 14.94 billion yen, tangible asset assets at 12.21 billion yen, and long-term loans and receivables at 11.84 billion yen. Total liabilities decreased by 84.16 billion yen to 434.06 billion yen, mainly due to an increase in lease liabilities at 11.97 billion yen and a decrease in corporate bonds and borrowings by 104.21 million yen. Total capital increased by 34.68 billion yen to 457.99 billion yen, with a decrease in dividend payouts of 12.79 billion yen and fluctuations in ownership interest in subsidiaries by 6.44 billion yen, while attributed net income to parent company owners at 29.98 billion yen and other comprehensive income at 22.26 billion yen were the main factors. The self-capital ratio in the individual financial position increased by 3.5 percentage points to 23.8%, and the Net Debt/EBITDA ratio is showing a recovering trend from the end of the previous period and the previous quarter. Repayment of interest-bearing debts has a clear schedule, and it is expected that the Net Debt/EBITDA ratio will fall within the target range by the June 2025 period. Financial soundness is solid, with no short-term concerns whatsoever.

(Author: FISCO Guest Analyst Ryoji Mogi)