SYS Holdings Co., Ltd.

The information services industry is labor-intensive, and continuous securing of personnel is essential for maintaining and expanding business scale. Amid a continuing shortage of domestic IT engineers, if recruitment cannot be achieved as planned, this may affect business expansion, financial condition, and business performance. As countermeasures, the company implements diverse recruitment methods including hiring inexperienced personnel, internships, overseas recruitment, and active hiring of women and older workers, and analyzes and addresses discrepancies between recruitment plans and actual results at management strategy meetings as needed.

In system development operations, if unforeseen specification changes or additional work arise, actual costs may exceed estimated amounts, resulting in low profitability or losses. Furthermore, if delivery delays occur, there is a risk of claims for delay damages or contract termination and transaction restrictions, which could lead to a decline in the credibility of the entire group. As countermeasures, the company conducts order acceptance review meetings by the officer responsible for technology promotion and manages progress based on the "Project Management Guidelines," with monitoring conducted at management strategy meetings.

Although various inspections are conducted before delivery, if defects occur after delivery, in addition to increased correction costs, there is a possibility of receiving damages claims from customers. The occurrence of defects could also spread to a decline in the credibility of the entire group, contract termination, and transaction restrictions. The company strives for early detection of risks through inspections at each process based on the "Quality Management Guidelines."

Engineer personnel expenses, which account for the majority of cost of sales, are fixed costs, and if idle man-hours arise due to a sharp decline in orders received, mismatches between projects and engineer skills, training periods, etc., the fixed cost burden will pressure profitability. In the consolidated fiscal year under review (August 2024 to July 2025), net sales were ¥14,051 million and operating profit was ¥705 million, and the impact of the fixed cost structure directly affects business performance. The company seeks to minimize idle man-hours by building long-term, stable business relationships with customers and confirming customers' software investment plans in advance.

Due to the concentration of inspections and acceptance by companies with a March fiscal year-end, sales and profit tend to be concentrated in the third quarter (February to April), while profit tends to decline in the first and second quarters, when the number of working days is reduced due to holidays. In the consolidated fiscal year under review, the proportion of operating profit in the first half improved to 50.9% from 44.9% in the previous consolidated fiscal year, but fluctuations between quarters remain significant. If short-term development projects become concentrated or acceptance is delayed, the impact on business performance may expand, and the company responds through thorough project management and monitoring of engineer working hours.

The Group promotes an active M&A strategy, and since it positions the acquisition of companies with negative net worth as one of its strategies, it recognizes internally that there is a higher risk than usual corporate acquisitions of being unable to recover the amount of investment and loans. If latent risks such as employee attrition, unrecognized liabilities, or litigation materialize after an acquisition, or if the business plan is not achieved, this may have a material impact on financial condition and business performance through impairment of goodwill and fixed assets or recording of allowance for doubtful accounts. The company addresses this through monitoring of discrepancies between investment plans and actual results at Board of Directors meetings and prior due diligence.

15 or more Group companies conduct business having obtained worker dispatch business licenses, and if they fall under disqualification grounds or grounds for license revocation, they may receive an order to suspend all or part of their business operations. Additionally, if the company fails to appropriately respond to changes in legal regulations, this may also affect business activities, financial condition, and business performance. The company ensures thorough legal compliance through regular compliance training for Group officers and employees.

Since confidential customer information and personal information are handled in the process of providing Comprehensive Information Services, if an information leak occurs, this may affect business activities, financial condition, and business performance through loss of social credibility and damages claims. Major subsidiaries have obtained and maintain Privacy Mark and ISO27001 certification, other subsidiaries have established equivalent management systems, and the company has taken out information leak insurance. The Information Security Committee continuously monitors the management status.

Overseas businesses are exposed to a variety of risk factors, including political and social changes, economic trends such as exchange rates, unexpected changes in laws and regulations, legal customs and business practices that differ from those in Japan, and labor issues arising from differences in culture and customs. If these risks materialize, this may affect business activities, financial condition, and business performance. The company addresses this through monitoring by the Board of Directors.

Although the company has a business structure resistant to economic conditions, with major customers in Global Manufacturing Solutions and social information infrastructure-related companies, if software investment is restrained due to changes in economic conditions or economic downturn, this may affect business performance through sluggish development of new customers or a decrease in orders from existing customers. The spread of infectious diseases such as COVID-19 also carries a risk of leading to a decrease in order volume through the restraint of customers' software investment. The company addresses this through information sharing and monitoring of economic trends and changes in demand at management strategy meetings and weekly Group executive meetings.