■ The performance trends of Neo Marketing <4196>

1. Overview of performance for the fiscal year ending September 2024

In the fiscal year ending September 2024, the Japanese economy showed signs of recovery with improvements in corporate earnings and personal consumption, alongside a robust inbound demand from overseas visitors driven by a weak yen, leading to a gradual economic recovery trend. However, resource price surges and rising prices for essential goods, including food and daily necessities, continued due to unstable global conditions and financial circumstances, leaving the economic outlook still uncertain. Japanese companies are facing themes such as promoting DX, fostering innovation, improving productivity, and creating customers amidst a declining population, forcing a reevaluation of marketing strategies in a rapidly changing market environment. Against this backdrop of challenges, it is expected that there will be a surge in demand for the marketing support services provided by the company group in the medium to long term.

In this context, the company's consolidated results for the fiscal year ending September 2024 were sales revenue of 2,098 million yen (down 7.8% from the previous period), operating profit of 15 million yen (down 95.0% year-on-year), ordinary profit of 14 million yen (down 95.5% year-on-year), and net income attributable to the parent company's shareholders of 147 million yen (down 25.7% year-on-year). Compared to the revised forecasts announced during the third quarter earnings reports for the fiscal year ending September 2024, revenue largely met expectations; however, due to an increase in selling, general and administrative expenses by 0.7%, operating profit fell short by 22.5%.

The decline in revenue was due to 1) while the recruitment of marketing consultants proceeded smoothly according to the mid-term management plan, delays in client acquisition due to the time required for training new hires, 2) decreases from the transfer of shares in the subsidiary Sales Support, and 3) reductions due to the completion of some large L projects. In addition to the revenue decrease, an increase in personnel costs and agent payments associated with the recruitment growth significantly raised selling, general and administrative expenses, resulting in a substantial drop in operating profit and ordinary profit. Meanwhile, the small decline rate in net income is attributed to recognizing special profits from the sale of shares in Sales Support.

Based on the financial results for the fiscal year ending September 2024, the target values for the ongoing mid-term management plan were revised downward; however, this was a result of prioritizing the recruitment and training of marketing consultants, which will be key to future growth and is expected to significantly contribute to performance in the coming years. During the first half of the year, resources were allocated to training, resulting in stagnation in the number of business negotiations, which is a leading indicator of sales revenue, but as newly hired employees gradually become operational in handling phone and email inquiries, the number of business negotiations in the second half of the fiscal year ending September 2024 is projected to increase by about 50% compared to the first half, contributing to performance in the coming years.

In terms of sales by service type, Incyte-driven segments experienced high proposal, order, and repeat rates in response to the demand for marketing strategy planning based on insights, and sales reached 495 million yen (up 0.7% year-on-year), showing steady growth. Customer-driven segments faced delays in client outreach activities due to a focus on training new hires, resulting in sales of 846 million yen (down 1.6% year-on-year). Going forward, adjustments will be made to the営業体制 and educational framework, with a focus on business outreach to client companies. In Digital Marketing and PR, digital marketing performed well, but PR saw a decline, with sales at 403 million yen (down 4.0% year-on-year). Revisions to the営業体制 and strengthening of sales activities are necessary. Customer Success and QITABANKUAI services ended up with a significant reduction in sales to 352 million yen (down 29.9% year-on-year) due to the termination of a large-scale project worth about 0.1 billion yen annually and the impact of the transfer of shares in the subsidiary (Sales Support). However, active discussions on overall business negotiations and digital marketing, PR, and other communication measure projects are increasing, and plans to further enhance sales activities toward future growth are in place.

As an example of initiatives for the second half of the fiscal year ending September 2024, the company established a framework to conduct high-quality qualitative research quickly and at lower costs through the acquisition of the self-interview tool "Research DEMO!" as a new business. This service is aimed at companies looking to internalize marketing, anticipating the expansion of the self-service market. Together with ViaGate Co., Ltd., a new interview service utilizing the latest AI technology called "Chat AI Research DEMO!" has already been released. Additionally, work has begun on consumer-driven influencer marketing services, selecting optimal influencers for the target based on the unique marketing research function "iResearch" to realize effective marketing strategies. The company considers this a market expected to grow going forward. Furthermore, the company has also strengthened its Overseas research services. Specifically, through collaboration with Marketing Center Co., Ltd., they are providing smooth operations for overseas offline research to meet customer needs seeking deeper insights into local conditions. A partnership with RareJob, the leading online English conversation company, has also been initiated to provide services meeting customer needs for deeper local knowledge. Additionally, a system has been prepared for delivering research services for foreign residents in Japan through collaboration with Borderlink Inc. The company plans to continue expanding its overseas research services, considering the needs of Japanese companies for overseas expansion and inbound attraction from abroad.

(Written by FISCO guest analyst Nozomi Kokushige).