Miki Igarashi: Hello, My name is Miki Igarashi, and I am Cross Marketing Group’s representative director and CEO. I will now explain Cross Marketing Group’s consolidated financial results for the fiscal year ended in December 2020.
FY2020 Executive Summary
First, I will summarize the consolidated financial results for the fiscal year ended in December 2020.
The executive summary for the fiscal year ended in December 2020 is shown here.
First, despite the coronavirus pandemic, we decided to acquire shares in DO HOUSE Inc. in December 2020 to strengthen our work in the digital marketing field for ongoing growth.
This was a step forward in setting up a structure that will enable us to generate 30 billion yen in consolidated sales.
Second, although we were affected by the COVID-19 pandemic both in Japan and overseas in this fiscal year, sales were solid in our businesses in Japan in the fourth quarter, and compared to the same period in the previous year, sales were down 5.6% in the Domestic Research business, up 7.6% in the IT Solution business, and up 22.2% in the Web Promotion business.
Third, in the full year, ordinary profit totaled 1.0 billion yen. Specifically, domestic businesses were particularly firm in the second half of the fiscal year, allowing us to post 890 million yen in ordinary profit, up 10% over the same period in the previous fiscal year.
FY2020 Consolidated Financial Results
This is an overview of consolidated financial results in fiscal 2020.
Revenue was down 14% year on year to 15,985 million yen in 2020, operating profit fell 22.2% to 986 million yen, and ordinary profit was down 6.2% to 1,078 million yen. Net income amounted to 467 million yen.
Conditions were harsh in this fiscal year, particularly overseas, but domestic businesses were stable from the third quarter and we constrained SG&A expenses in an emergency response during the COVID-19 outbreak. This allowed us to secure ordinary profit in line with the previous fiscal year’s levels.
Financial Results by Segment: Research Business (Domestic/Overseas)
Continuing on, we will look at conditions by business segment.
First, I will explain the domestic and overseas research business.
In the full year, revenue in domestic research fell 7% year on year and 46% in overseas research, and segment profit was down 9% over the fiscal previous year.
Particularly in the case of the overseas research business, the impact of city lockdowns and other factors, as well as the reactionary decline following the posting of large-scale projects in the fourth quarter of the previous fiscal year, led to revenues that were far below levels in the previous fiscal year. However, keeping SG&A expenses down resulted in a profit for the fourth quarter.
In Japan, the impact of the COVID-19 outbreak was greatest in the second quarter, when revenue was down 20% compared to the same period in the previous fiscal year. However, revenue has continued to recover since then and is down 7% year on year for the full year.
By individual company, Medilead, our subsidiary that primarily runs a medical research business, and Shopper’s Eye, Inc., which mainly provides mystery shopping services, generated revenue above the previous year’s levels in the fiscal year as a whole, and revenue was solid.
Financial Results by Segment: IT Solution Business
This shows conditions in the IT Solution Business.
Revenue was down 1% over the previous year in the full fiscal year, about on par with the previous fiscal year, and segment profit was down 29% year on year.
The sales activities of our mainstay Cross Communication Inc. were affected by the COVID-19 outbreak in the first half of the fiscal year, but orders were solid in the second half, and sales were up a strong 8% year on year in the fourth quarter.
Full-year sales for Fittio, a staffing firm, were robust and exceeded the previous fiscal year’s levels, with an increasing number of people registered thanks to several measures taken and other factors.
Financial Results by Segment: The Other Businesses (Web Promotion)
This slide shows conditions for the other business, which runs the Web Promotion Business.
In the full fiscal year, revenue was up 4% year on year and segment profit was down 2%.
Even in these businesses, there were cases in which projects were extended or cancelled in the first half of the fiscal year due to the impact of COVID-19, but in the second half, customers increasingly moved onto the Internet and the number of projects increased.
Moreover, we reinforced business tie-ups with external partners and in marketing activities, strengthened relationships with customers and inbound marketing, leading to higher revenue in the second half. As a result, revenue in the fourth quarter reached a record high.
FY2020 Business Topics: Look-back on Key Points in FY2020 and Direction of Growth
Next, I will explain topics for 2020 and initiatives taken by the businesses.
The key words for 2020 were “digital transformation,” and our businesses expanded the services offered in fields such as digital marketing, AI and big data. I would now like to introduce some representative examples and initiatives
FY2020 Business Topics: Business Actions 【Domestic Research】①
I’ll start with initiatives in the Domestic Research business.
The Group focused on reorganizing Group companies and strengthening synergies to improve Group profitability and competitiveness overall.
As part of this effort, in the Domestic Research business, we merged Cross Marketing, the Group’s mainstay subsidiary that engages primarily in Internet research, and Research and Development Inc., which primarily conducts insight consulting and offline research.
Our objective is for this merger to enable the Group to respond promptly to market changes and provide highly effective, interlinked one-stop service. We also established withwork Inc. as a hub for outsourcing of research operations.
This is intended to improve our ability to hire and train optimal staff as well as the administrative capacity and quality, while also ensuring business continuity and other factors in the event of a disaster.
FY2020 Business Topics: Business Actions 【Domestic Research】②
Next, I would like to introduce new services in the Research business.
First is the customer journey-type data analysis service, which supports our client companies in their use of big data.
Currently, COVID-19 is having an impact in various industries, and companies are really struggling.
Given this, we began to provide this service in which our research subsidiary will collect data on consumer awareness, consolidate this with the vast amounts of data on consumer behavior and other held by our client companies, and then analyze this data to identify the optimal marketing measures for a more difficult environment.
Next, I would like to introduce open data-related services. This is a new service developed by Medilead, which provides medical research.
This service combines the optimal AI for text analysis with a web crawler to compile the needed information from over 1.7 billion websites around the world, and through analysis makes the entire process more efficient and advanced.
Finally, I’d like to introduce CROSS-UX, a service that supports improvement of the consumers’ digital experience on a client company’s website. We began offering this service jointly with PopInsight Inc.
By supporting the development of an easy-to-use website for consumers, this service enhances the customer experience and helps to improve both the revisit rate and the contract rate.
FY2020 Business Topics: Business Actions 【IT Solution】
Here we show initiatives in the IT Solution Business.
In this business, this fiscal year we began offering services for D2C brands, which is a new field for the Group.
D2C brands is a business model in which a single company handles every step from product planning and development to sales, and requires expert knowledge in a range of areas, from product development to customer attraction and sales.
We developed and offered this service jointly with Newrope, a company skilled in AI technology that can analyze image data on social media sites, and Third Office, a company with strengths in product development, manufacturing and branding in the apparel sector.
This service provides the total support essential for the growth of D2C brands, including marketing e-commerce site construction and customer attraction.
Moreover, in the commissioned development of smartphone apps, we utilized our achievements and expertise acquired thus far in app development for financial institutions to develop all of the processes from design to infrastructure for an app for CONNECT Co. Ltd., a company that provides securities products and services for the Daiwa Securities Group.
FY2020 Business Topics: Business Actions 【Web Promotion】
Next, we have new services in the Web Promotion business.
D&M Inc., which runs a web promotion business, has worked on building affiliations with outside companies and developing and strengthening digital marketing services.
The first example is the conclusion of a partnership with Temona, which offers subscription systems.
This makes it possible to support marketing using consumer network panels, at which D&M is particularly skilled, for businesses that use this company’s subscription system.
Second, we formed a business tie-up with Cross Locations, which offers big data analysis services for location information, and jointly developed a new service.
We released a service that helps clients identify measures that lead to “new business development,” “promotion of repeat visits by existing customers” and “improved efficiency in attracting customers.” This is accomplished by using this company’s big data analysis service for location information to identify marketing targets and analyze the results of a questionnaire given to these targets together with data on their location and behavior, among other information.
Direction of Business Growth for the Future: Key Points for Growth
Next, I would like to explain our vision for business growth going forward.
As a comprehensive marketing company, the Group overall is strengthening its position in the digital marketing field to utilize digital technology and IT to help our clients achieve success in their businesses.
Through these efforts, we aim to further advance marketing solutions and achieve consolidated sales of 30 billion yen.
Direction of Business Growth for the Future: Sizes and Trends of the Target Markets
Now I would like to explain the market environment and trends that we target.
I will start by discussing the digital marketing-related market for our growth fields, which include the IT Solution business and the Web Promotion business.
In this market, Japan’s Internet advertising market expanded to 2.1 trillion yen in 2019, and records double-digit growth every year.
And Japan’s D2C market, a field in which we began offering services as a new field in 2020, attained a scale of about 2 trillion yen in 2019, and is expected to reach over 3 trillion yen in 2025.
Next, in the Research business, one of the Group’s longstanding businesses, the marketing activities of our client companies have grown more complex due to the rapid changes in the marketing environment and the diversification of consumer needs, resulting in an expanding research market.
As a result, in addition to the traditional definition of the research market, which focuses on data compilation using market surveys, we now have the insight industry, which provides comprehensive solutions not restricted to data compilation, such as data analysis and report creation.
In 2019, the traditional global research market totaled about 5.1 trillion yen, with the insight industry’s market scale totaling about 4.8 trillion yen.
Taken together, the digital marketing-related market, research market and insight market account for a scale of more than 10 trillion yen. We intend to promote business in this high-growth field in anticipation of this massive market scale.
Direction of Business Growth for the Future
Going forward, as noted above, we aim to expand corporate value with ongoing investment and measures and building our presence in this growth market, which exceeds 10 trillion yen.
Rearrangement of Business Segments: Rearrangement of Business Segments Planned from FY2021
We decided to change our business segments as we target higher medium- and long-term corporate value in the future.
By changing the business segments, we will clarify our response to the market environment and the growth businesses, and also pursue management aimed at high growth.
We reorganized our business segments by splitting the Research business into the Data Marketing business and the Insight business, and consolidating the IT Solution business and Other business as the Digital Marketing business.
Rearrangement of Business Segments: Rearrangement of Business Segments Planned from FY2021
Regarding our 2021 revenue forecasts for the new business segments, we have positioned the Digital Marketing business, which is our growth area and has the highest revenue at 9.0 billion yen, as the core business, and expect the Data Marketing business, which primarily offers services focused on data compilation in an online environment, to generate revenue of 6.4 billion yen.
We anticipate sales of 6.1 billion yen in the Insight business, which uses consultation to help customers decide on policies and provides insights on consumers, among other services.
Rearrangement of Business Segments: Trend of Digital Marketing Business’s Revenue
This shows trends in revenue in the Digital Marketing business, which will be our core business going forward, as well as 2021 revenue forecasts.
Revenue in this segment grew an average of 20% from 2016 to 2020, and we expect it to increase 94% over the previous fiscal year to 9.0 billion yen in 2021.
Rearrangement of Business Segments: Outline of Digital Marketing Business
Next, I will give an overview of services in the Digital Marketing business.
In this business, we offer comprehensive services in the IT business such as support for promotions, e-commerce, and marketing, focused on digital and IT, as well as system development, maintenance and operations.
We can claim a wealth of achievements in system and app development, particularly in securities and Internet banking, and also provide IT staff.
In the Web Promotion business, we can tailor an approach to the optimal target through a consumer network of 8 million people.
In addition, we provide product development and cultivation utilizing actual consumer experiences through sample promotions and services using word-of-mouth recommendations.
Policies & Financial Results Forecast of FY2021: Policies of FY2021①
Next, I will explain our policies and measures for 2021, as well as our financial results forecasts, based on our vision for growth that we have discussed so far.
In terms of policies for 2021, we will pursue a digital shift both within and outside the Group as “DX ACTION,” and advance our business model and expand business fields.
Within the Group, we will strengthen SDLES DX, which derives more efficient marketing measures by analyzing inbound marketing data, project order status and other data in real time. Outside of the Group, we will reinforce the Data Marketing Solution service, which utilizes and analyzes the consumer data held by client companies, and the D2C growth Partner service, a new service for D2C brands, while also expanding digital services in tie-ups with external companies.
Next, I will introduce measures that we are already working on.
Policies & Financial Results Forecast of FY2021: Policies of FY2021②
We acquired shares in Do House and made the company a subsidiary.
Do House’s revenue continue to grow, reaching 3.3 billion yen in the fiscal year ended in September 2020.
By linking the consumer networks and business networks that Do House has with the Group’s network, we can utilize our mutual strengths to expand promotion services and reinforce business in the digital marketing field.
Policies & Financial Results Forecast of FY2021: Financial Results Forecast of FY2021
Next, I will outline 2021 earnings forecasts, based on the above policies and measures.
We aim to achieve a record high in consolidated sales of 21.5 billion yen by aggressively investing in the digital marketing field and prioritizing sales gains and growth.
By segment, we expect revenue in the Digital Marketing business to increase 93.5% year on year to 9,014 million yen, a 13.4% increase in the Data Marketing business to 6,378 million yen, a 7.1% increase in the Insight business to 6,107 million yen, and a 26.8% increase in operating profit to 1,250 million yen. We aim to achieve record-high revenue for the Group, thereby boosting both revenue and profit.
Shareholder Returns and Dividend Amount: Dividends of FY2020 & FY2021
I will turn now to dividends for 2020 and 2021.
Dividends at the end of fiscal 2020 will be 3.1 yen per share, as initially planned.
Including interim dividends, this brings dividends to 6.2 yen per share for the fiscal year ended in December 2020.
Based on our earnings forecasts for the fiscal year ending in December 2021, we plan to increase dividends to 6.4 yen per share for the full year.
Corporate Actions of FY2021 : FY2021 Corporate Actions
Finally, I will explain corporate actions for the fiscal year ending in December 2021.
We aim to enhance our corporate governance to achieve medium- and long-term growth for the Group and make transparent, fair, prompt and bold decisions for our shareholders and other stakeholders.
First, we plan to change the financial period in the fiscal year ending in December 2021.
Since December is a busy period for business and also the end of the fiscal period, we have decided to change the end of the fiscal year from December 31 to June 30 with the aim of improving the efficiency of Group operations and pursuing timely and appropriate business by avoiding this overlap.
We have also established a voluntary Nomination and Compensation Committee. This is intended to further improve the transparency and fairness of director compensation and officer appointments, and ensure reasonable standards, while also remaining accountable to shareholders.
The Group will continue to improve corporate value in the medium and long term and is working to expand total shareholder returns.
This concludes our briefing on financial results for the fiscal year ended in December 2020.
We expect the environment to remain difficult going forward, but we are working to raise corporate value in the medium to long term by aggressively implementing and pursuing a variety of measures. We ask for your continued support of the Cross Marketing Group.