President's Message
To Our Investors and Shareholders
I would like to take this opportunity to express my gratitude to our shareholders for their support.
I'm pleased to report our financial results for the first half of the fiscal year ending March 2012.
Financial Results for the First Half of the Fiscal Year ending March 2012
The AIFUL Group's consolidated operating revenue for the first half of fiscal 2011 fell 27% compared with the corresponding period of the previous fiscal year, to 59.1 billion yen. This fall mainly reflected a decrease of 204.8 billion yen, down 29% year on year, in the total amount of loans outstanding, mainly due to the effects of restrictions on total lending limits and the high level of waiver of principal due to interest repayments.
Looking at operating expenses, the provision for doubtful accounts fell 9.1 billion yen, or 35% from the same period of the previous fiscal year, to 17.1 billion yen. This was attributable to the absence of expenses posted in relation to interest repayments and the recording of a provision for doubtful accounts related to interest repayments. This is because the Company recorded a provision for doubtful accounts related to interest repayments at the end of the previous fiscal year, in anticipation of an increase in claims for interest repayments, due to corporate reorganization proceedings by a major consumer finance company. Variable costs also fell in line with a decline in the outstanding balance, while personnel expenses, equipment costs, and other costs also declined, reflecting the streamlining of operations, following the reorganization of the Group on July 1, 2011. As a result, operating expenses fell 35% year on year, to 49.6 billion yen. Consequently, operating income rose 81% from the same period of the previous fiscal year, to 9.4 billion yen, and ordinary income jumped 107%, to 8.5 billion yen.
Meanwhile, the Company recorded extraordinary income of 4.8 billion yen, chiefly reflecting a gain on ADR loan extinguishment and a gain on retirement with the purchase of bonds. As a result, net income rose 228% year on year, to 11.1 billion yen.
Current Management Situation
The management environment surrounding the AIFUL Group is likely to remain severe, principally reflecting the high level of claims for interest repayments directly impacting on the management of the Group, as well as a contraction in the scale of the market and a decline in profitability following the enforcement of the Money Lending Business Act.
Under these circumstances, the AIFUL Group is working diligently to build a quality loan portfolio and improve its financial standing and profitability. Aiming to steadily execute its Business Revitalization Plan utilizing consensual business revitalization alternative dispute resolution, the Group is endeavoring to slash operating overheads and improve operating efficiency through cost structural reforms, including the closure and amalgamation of sales and administrative offices. In addition, the television commercial campaign, which had been temporarily suspended, was recommenced in June 2011.
As announced recently, effective July 1, 2011, to concentrate management resources on its core businesses and improve business efficiencies of the entire Group, the AIFUL Group spun off the credit sales and card businesses of LIFE Co., Ltd., and transferred these businesses to Life Card Co., Ltd. With this reorganization, the Group also consolidated the consumer finance business under AIFUL Corporation through the absorption-type merger of other subsidiaries.
The AIFUL Group will continue to improve its financial standing and profitability through cost structural reforms. It will also endeavor diligently to further increase the number of high-quality loans, build a quality loan portfolio, and strive to further improve business efficiencies across the entire Group. The Group will make its best effort to respond to the support and expectations of all stakeholders by steadily executing the Business Revitalization Plan.
AIFUL would like to ask all shareholders for assistance and support in these efforts.
December 2011
Yoshitaka Fukuda
President and CEO
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