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. Business Revitalization Procedures
As a result of the increased expenses arising from demands for interest repayments and the difficulties in raising funds due to the so-called Lehman Shock, AIFUL Corporation and its subsidiaries LIFE Co., Ltd., Marutoh KK, and City's Corporation applied for Business Revitalization Procedures using an alternative dispute resolution (ADR) on September 24, 2009, requesting financial assistance from Participating Creditors primarily consisting of the maintenance of the balance of the principal of loan obligations over a certain period followed by modification to repayment schedules. Subsequently, a Business Revitalization Plan, which includes financial assistance, was approved at a creditors' meeting held on December 24, 2009, following discussions with the Participating Creditors.
The fundamental policy for business restructuring under the Business Revitalization Plan consists of three points: a reduction in asset size, including operating loans, to a level commensurate with the current ability to procure funds; cost reductions adapted to a reduction in business size and decline in revenue; and Group reorganization that includes withdrawal from unprofitable businesses.
Based on this fundamental policy, the AIFUL Group has already implemented a reduction in asset size through curbs on lending, consolidation and closures in its branch network, and personnel reductions through voluntary retirement. Looking ahead, the AIFUL Group is planning to move forward with business restructuring through Group reorganization while paying close attention to trends in the consumer finance market following the full enforcement of Japan's amended Money Lending Business Law.
2. Financial Results for the Fiscal Year Ended March 2010
The AIFUL Group recorded 218.1 billion yen in consolidated operating revenue for the fiscal year ended March 2010, which was down 30% year-on-year. In addition to a decline of 477.4 billion yen in the balance of loans outstanding, down 36% year-on-year, due to tighter credit criteria ahead of the full enforcement of the amended Money Lending Business Law and continued curbs on lending, the decline in income from interest on loans also continued, partly due to the impact from reductions in interest rates.
Although the Group implemented 30.6 billion yen of cost reductions in general administrative expenses, it transferred 257.3 billion yen to reserves related to interest repayments (includes waiver of claims) taking into account the current high level of demands for interest repayments as well as transferring 115.7 billion yen to reserves for bad debts other than those related to interest repayments. As a result, operating expenses stood at 483.3 billion yen, up 59% year-on-year, and the Group recorded an ordinary loss of 264.1 billion yen, compared to 8.6 billion yen in income the previous year.
Moreover, the AIFUL Group posted a net loss of 295.1 billion yen as it recorded a total of 27.3 billion yen in extraordinary losses associated with business restructuring, which included such expenses as early retirement expenses, branch consolidation and closure expenses, and consumer finance subsidiary sale expenses.
3. Projections for the Fiscal Year Ending March 2011
Consolidated financial results for the fiscal year ending March 2011 involve uncertainties such as the impact of the full enforcement of the amended Money Lending Business Law. However, tighter credit criteria and curbs on lending will be maintained. On the other hand, the break down of the reserve for losses on interest repayments to which the AIFUL Group made large-scale transfers in the fiscal year ended March 2010 will alleviate the burden on expenses in the area of interest repayments and bad debts. As a result, the Group forecasts that its financial results will be in the black with operating income of 11.9 billion yen, ordinary income of 12.3 billion yen, and net income of 2.8 billion yen on operating revenue of 140.8 billion yen, down 35% year-on-year.
The employees of the AIFUL Group are united in exerting maximum effort to ensure the steady accomplishment of the Business Revitalization Plan.
AIFUL would like to ask all shareholders for assistance and support in these efforts.
June 2010
Yoshitaka Fukuda
President and CEO
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