President's Message
To Our Investors and Shareholders
Thank you for visiting our Investor Relations website. This website is your one-stop shop for a wide range of materials and useful information. Here you will find AIFUL Group news releases, financial data, and presentations on management strategy. I sincerely hope that these materials will help you to appreciate our current position and management strategy.
1. Financial Results for the Fiscal Year Ended March 31, 2009 and Full Year Forecasts for the Fiscal Year Ending March 31, 2010
For the year ended March 31, 2009, the AIFUL Group recorded declines in both revenue and income on a consolidated basis, with operating revenue of 312.2 billion yen, down 23% year-on-year, ordinary income of 8.6 billion yen, down 73% year-on-year, and net income of 4.2 billion yen, down 85% year-on-year.
The main reasons for the decline in revenue were a fall in the balance of loans outstanding due to such factors as tighter credit criteria ahead of the full enforcement of Japan's amended Money Lending Business Control and Regulation Law and a continued decline in interest on loans resulting from the aggressive marketing of low interest rate products to new and existing prime customers. Some progress was made with bringing down bad debt-related expenses as the incidence of bad debts fell, along with steady efforts to reduce personnel expenses and other general expenses via cost structure reforms at each of the Group companies. Still, with new transfers of 58.3 billion yen made to reserves related to interest repayments, taking into account the current high level of demands for interest repayments, the decline in operating expenses failed to offset the decline in operating revenue, leading to the overall drop in revenue.
For the year ending March 31, 2010, AIFUL forecasts operating revenue of 226.3 billion yen, down 28% year-on-year, ordinary income of 10.6 billion yen, up 24% year-on-year, and net income of 8.1 billion yen, up 91% year-on-year. Despite a decline in the balance of loans outstanding as the company maintains its stance on scaling back operations continuing from last year and the lower expected income from interest, the company expects income growth. Factors in this growth will include a reduction in bad debt-related expenses with improvement in the quality of credit and a contribution from cost-cutting strategies, in addition to the decline that will be seen in the burden of interest repayment-related expenses due to their being recorded the previous year.
2. AIFUL's Future Business Stance
Extremely unusual economic conditions persist, including the paralysis of global financial functions and falling liquidity of funds resulting from the sub-prime loan problem. There are certainly concerns about a slowdown in the real economy with economic recession and an accompanying rise in the number of corporate bankruptcies and deterioration in the employment environment. In addition to this, the Japanese consumer finance industry is facing the full implementation of the Money Lending Business Control and Regulation Law, including the full-scale introduction of restrictions on total lending by June 2010, and falling revenue is forecast as a result of the decline in the balance of loans outstanding from a further tightening up on credit.
In this environment, AIFUL's management theory calls for consolidating defenses. As strategies to achieve this, AIFUL is implementing further reductions in expenses targeting a contraction in the balance of loans outstanding and the size of its business, further tightening up on credit as preparation against changes in the environment and uncertain factors, and reorganizing the Group to achieve concentration and selection.
Firstly, in terms of reducing expenses, the company has been implementing a radical review of its business branch and center structure, carrying out amalgamation and closures and streamlining the organization to match the contraction in the balance of loans outstanding and the size of its business with an eye toward the full enforcement of the Money Lending Business Control and Regulation Law. Moreover, in terms of tightening up on credit, it is maintaining a prudent stance on credit to prevent bad debts in preparation for an economic slowdown and the temporary disruption that will come with the introduction of restrictions on total lending. At the same time, AIFUL is pushing ahead with the selection of customers that it can lend to in the high-risk customer segment as well as developing new products and new scoring products to build up a top quality portfolio with prime customers. Furthermore, the company is promoting a variety of strategies in the reorganization of the Group. It has already ceased lending and specialized in collection at consumer finance subsidiaries, withdrawn from unprofitable businesses, such as per-item credit, at LIFE, and reorganized the small and medium-sized business loan business. AIFUL will continue to push forward with these strategies, cutting back on duplicated business segments in addition to looking into withdrawing from and separating unprofitable businesses. Based on these strategies, the company aims to become a lean, strong operation, carrying out reforms to create an earning structure that can secure ROA of 1.5%.
3. Conclusion
The consumer finance industry is currently undergoing a period of unprecedented upheaval. AIFUL Group employees are united as they face the changing external environment head on, consolidating the company's position by establishing the compliance structure and reforming the cost structure to conduct business to match the changing times.
AIFUL would like to ask all shareholders for assistance and support in these efforts.
May 2009
Yoshitaka Fukuda
President and CEO
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