|J-COM Holdings Co., Ltd. (2462)
J-COM Holdings Co., Ltd.
Tokyo Stock Exchange, First Section
Umeda Hankyu Building Office Tower 19F, Kakutacho 8-1, Kita-ku, Osaka-shi
* Stock price as of the close on July 22, 2016. Number of shares at the end of the most recent term excluding treasury shares.
* Estimates are those of the Company. From FY5/16, the definition for net profit has been changed to net profit attributable to parent company shareholders (Abbreviated as parent net profit).
This Bridge Report presents details of the fiscal year May 2016 earnings results for J-COM Holdings Co., Ltd.
<Business Segments and J-COM Group Companies>J-COM's business segments include the comprehensive human resources services business, which includes human resources dispatch, business process consignment, dispatched worker for employment and job placement services, the nursing care business, which includes nursing facility operations, the multimedia services business, which includes cellular telephone carrier shop operations, and the child care services business, which includes consigned operation of public child care facilities and consigned operations of child care related facilities and became a new segment from fiscal year May 2016 (Success Holdings Co., Ltd. became consolidated subsidiary as of July 2015).
* ROE is an indicator reflective of the three indicators of net income margin (Net income / Sales), asset turnover ratio (Sales/Total assets), and leverage (Total assets/Equity, or the invers of equity ratio). ROE: Net income margin X Asset turnover ratio X Leverage
* Data in the above table are derived from the earnings announcement statement and financial filing reports, and ROE, asset turnover ratio and leverage are calculated using the average of total assets and equity during the term (Adding the values at the end of the previous and current terms and dividing by two. The value for leveage may not necessary be a direct calculation as the inverse of the equity ratio as the equity ratio shown in both the earnings announcement and financial filing reports are calculated using the current term end value.)
* Created by Investment Bride using the Company's earnings announcement.
|Fiscal Year May 2016 Earnings Results
<J-COM Holdings' and Subsidiaries' Fiscal Years>Success Holdings, which had previously been held as an equity accounting method affiliate, was turned into a consolidated subsidiary in the first quarter of fiscal year May 2016 (July 2015), and its earnings have been included into consolidated accounts as of the second quarter (The fiscal year end for Success Holdings has been changed from end December to end April along with its inclusion as a consolidated subsidiary). Therefore, J-COM Holdings' fiscal year May 2016 earnings reflect 10 months of Success Holdings earnings, including the third and fourth quarters of fiscal year December 2015 and the January to April period of its fiscal year April 2016.
Sales, Current Profit Rise 76.3%, 232.6% Year-On-YearSales rose by 76.3% year-on-year to ¥31.844 billion on the back of a 24.6% year-on-year increase in comprehensive human resources services business sales arising from favorable trends in consigned sales of cellular telephones combined with optical fiber communications, tablets and other products and services, and the inclusion of a 58% year-on-year increase in sales to ¥10.542 billion derived from the conversion of Success Holdings from an equity accounting held affiliate to a consolidated subsidiary. Regarding sales of the nursing care services business, a rise in occupancy rates at nursing care facilities absorbed the loss of sales resulting from the sale of a commissary company and allowed sales to rise by 9.1% year-on-year (Excluding the sales of the commissary company in the previous term, the actual sales growth would have been 18.6% year-on-year).
With regards to profits, improved profitability of the comprehensive human resources services business from contributions of highly profitable projects and declines in cost of sales (94.8% to 91.0%) of the nursing care services business resulting from increases in occupancy rates allowed gross profit margin to improve by 0.8% point year-on-year. The improvement in gross margin allowed J-COM to absorb the higher sales, general and administrative expenses arising from the conversion of Success Holdings into a consolidated subsidiary and allowed operating profit to rise by 144.1% year-on-year to ¥1.147 billion. The booking of ¥474 million in facility operations subsidies in the child care services business at the non-operating income level allowed current profit to rise by 232.6% year-on-year to ¥1.672 billion. Valuation gains of ¥1.230 billion on the graduated acquisition of shares contributed to booking of an extraordinary profit of ¥1.263 billion (At the same time, an extraordinary loss of ¥264 million was incurred due in part to the director retirement benefit payment of ¥209 million), and allowed net profit to rise by 464.9% year-on-year to ¥1.871 billion. After a ¥5 increase in yearend dividend and the ¥5 commemorative dividend to celebrate the Company's 10th year of its listing are considered, a dividend payment of ¥25 is anticipated. Including the first half dividend, the full year dividend payment is expected to be ¥40 per share.
Comprehensive Human Resources Services BusinessSales and operating profit rose by 24.6% and 74.5% year-on-year to ¥15.621 and ¥1.630 billion respectively. Strong demand for consigned sales of cellular telephones packaged with optical fiber communications, tablets and other products and services allowed consigned services to rise by 108.4% year-on-year. At the same time, sales declined due to a rebound from strong commission sales recorded in the previous term due to the arrival of the May 2015, when direct hiring of dispatched staff along was called for by the implementation of revisions in the dispatched work law.
By industry, growth in sales to mobile communication (integrated with "information and communications," because it is now common to sell combined products/services with optical lines or the like) and apparel industries combined with increases to the child and nursing care industries derived from collaboration with Success Holdings and Sunrise Villa (Net cancelling effect for consolidate accounts: ¥74 and ¥108 million for child care and nursing care respectively). In addition, Internet sales activities acted as a tailwind and boosted sales to the logistics and call center industries. With regards to profits, selection of orders emphasizing profitability and the contribution from highly profitable consigned operations allowed operating profit margins to improve.
Child Care Services BusinessSales and operating profit of ¥10.542 and ¥0.153 billion were recorded. Collaboration with the comprehensive human resources services business and increases in hiring and retention rates of childcare providers resulting from improvements in working conditions allowed sales of new childcare facilities to exceed expectations. Higher goodwill amortization burden was overcome and allowed operating profit to rise above expectations. As of end April 2016, the number of facilities operated stood at 182 on a consigned basis and 120 publicly owned facilities.
Nursing Care Services BusinessSales rose by 9.1% year-on-year to ¥4.956 billion and the operating loss declined to ¥64 million from ¥313 million in the previous term. The ability to turn vacancies into occupancies due to the fortification of nursing care providers allowed the occupancy rates to improve by a large margin and exceed 90% (Some closures of facilities were caused by a lack of nursing care providers). During the third quarter, this business turned profitable on a monthly basis. As of end May 2016, a total of 21 facilities (Including 2 day care service facilities) with 1,123 rooms were operated.
|New Medium term Business Plan (From FY5/17 to FY5/19)
<Company Name to Be Changed from December 1, 2016, J-COM Holdings becomes LIKE Co., Ltd.>The conversion of Success Holdings from an equity accounting method held affiliate to a consolidated subsidiary during fiscal year May 2016 reflects the full scale effort to participate in the child care support services (Business segment name will be changed from child care services business to reflect the broader responsibilities of this segment). Also, profitability of the nursing care facility operations conducted by Sunrise Villa appears to now be within reach due to the efforts to strengthen the 24 hour nursing care structure. J-COM strengths in the comprehensive human resources services business and its ability to match and train inexperienced workers will be bolstered through the addition of child care support services and nursing care services businesses to serve as the cornerstones of a three pronged business strategy and in the second founding period of the Company.
Becoming a Group Sought After At All Stages of Customers' LivesWith the conclusion of the second founding period, fiscal year May 2017 represents the next growth stage for J-COM Holdings Co., Ltd., and the impending change to a new company name is a reflection of this new start. The new company name Like will be adopted to reflect J-COM's goal of "becoming a company that is sought after and liked by job seeking workers, child and nursing care services users, employees and all of the other stakeholders." The new name will begin being used from December 1, 2016. At the same time the consolidated subsidiary J-COM Co., Ltd. will change its name to LIKE Staffing Co., Ltd. but it will continue to pursue synergies with the other group companies Success Holdings Co., Ltd., Sunrise Villa Co., Ltd. and others. J-COM will endeavor to be a corporate group that is capable of providing vital services necessary at all stages of customers' lives. LIKE Co., Ltd. will pursue a three pronged business strategy including the comprehensive human resources services business, child care support services business and nursing care services to be a corporate group that is capable of providing vital services necessary at all stages of customers' lives.
<New Medium Term Business Plan (FY5/17 to FY5/19)>
(2) Strategy by Business SegmentThe securing of human resources is an important management issue for companies participating in all industries. J-COM will leverage its Group's unique knowhow to turn inexperienced workers into productive assets and thereby contribute to growth in the working population. In addition, the revised Dispatched Worker Law implemented in September 2015 (Regulations requiring worker dispatching companies to maintain minimum levels of scale and quality) is expected to act as a tailwind for J-COM because of its superior financial position and career support services. These characteristics, including the ability to provide career formation support services, will enable J-COM to attract workers which in turn will enable them to stably supply workers.
Comprehensive Human Resources Services Business
Child Care Services Business - From Child Care Services to Child-raising Support ServicesResponses are required for the growing problem of children who cannot gain entrance to nursery school or preschools due to shortages in facilities and childcare providers, including resolution of the issues of growing the number of facilities and eliminating the shortage of childcare providers. Therefore, J-COM is endeavoring to provide high quality childcare services to become Japan's top childcare company and to grow sales and profits.
Increase in Childcare FacilitiesWith regards to the consigned operation of childcare facilities, J-COM will review various projects from its long list of customers and select the most promising projects with the strongest potential to yield high levels of profitability. At the same time, J-COM seeks to create new childcare facilities that will continue to be chosen by parents even after the problem of children who cannot gain entrance to publicly owned nursery school or preschools is resolved. In addition, efforts will be conducted to fortify childcare service contents.
Success Holdings expects to open 20 new approved childcare facilities during fiscal year April 2017, and will continue its efforts to establish new childcare facilities and capture orders for entrusted operation. Moreover, reviews of construction costs will be conducted to improve investment efficiency.
Securing Childcare ProvidersKnowhow regarding hiring and post hiring training cultivated in the comprehensive human resources services business will be leveraged to strengthen the hiring capability and retention rates of childcare providers. Furthermore, knowhow will be shared through personnel exchange, matching will be strengthened, and training contents will be shared within the Group.
Nursing Care Services BusinessSuccess has been realized in collaborations with the comprehensive human resources services business, personnel exchanges and hiring capacity outsourcing efforts with fortification of nursing care providers being achieved. Therefore, occupancy rates have improved through the ability to use idle space and service quality has also improved. Consequently, the occupancy rates have risen to 91.6% as of April 2016 from 68.0% in October 2013, and this business has turned profitable on a monthly basis.
Efforts will be made to reduce hiring expenses a step further during fiscal year October 2016 as part of overall measures to strengthen profitability. Furthermore, sustained efforts will be made to differentiate services, including 24 hour nursing care services and provision of high quality services, and secure of nursing care providers. At the same time, collaboration with the comprehensive human resources services business will be conducted to turn inexperienced workers into effective nursing care providers and training contents will be fortified to enable foreigners to work as nursing care providers within Japan.
|Fiscal Year May 2017 Earnings Estimates
Sales Expected to Rise 20.3% Year-on-Year to 38.3 billion yen, and Current Profits Expected to Increase 31.6% Year-on-YearJ-COM's earnings estimates call for sales to rise by 20.3% year-on-year to ¥38.3 billion. Sales of the nursing care business are expected to rise by 0.9% year-on-year on the assumption that there will be no change in the number of facilities under operation, but the full year contribution of Success Holdings is expected to boost sales of the child care business by 30.9% year-on-year. At the same time, the comprehensive human resources services business is expected to rise by 21.0% year-on-year on the back of measures to capture a wide range of customers.. With regards to profits, the higher sales and improvements in profitability of the nursing care services business are expected to absorb increases in amortization of goodwill and allow operating profit to rise by 39.4% year-on-year to ¥1.6 billion.
(2) Dividend and Shareholder Benefit ProgramJ-COM maintains a target for dividend payout ratio of over 35% and implements dividends payment at the end of both the interim and full year periods. During fiscal year May 2017, dividends are expected to be raised by ¥1 per share, and the commemorative ¥5 dividend will be eliminated to yield a full year dividend of ¥36 per share (¥18 dividends to be paid at the end of both the interim and full year periods). In addition, J-COM offers a shareholder benefit program including issuance of QUO Card prepaid cards and discounts on admission to nursing care facilities operated by the Company.
QUO CardShareholders with over 100 shares: Card worth ¥1,000
Shareholders with over 500 shares: Card worth ¥2,000
Nursing Care Facility Admission DiscountShareholders with over 100 shares: ¥300,000 (Effective for care receivers admitted to a single room by end August 2018)
Growth in the number of facilities in the child care services business (To become called the child care support services business) will be accelerated on the back of efforts to increase both hiring and retention rates of childcare providers by improving working conditions and through collaboration with the comprehensive human resources services business. In addition, relaxation of requirements for subsidies of in-facility childcare centers is expected to act as a tailwind for the consigned operations of childcare facilities.
A structure has been established that will enable the nursing care services business to achieve monthly profits of about ¥20 million. And while near full occupancy rates at existing facilities will make growth in sales difficult, efforts are being made to reduce worker advertising and other expenses to improve profitability a step further.
|Reference : Regarding Corporate Governance
*If necessary revisions to the articles of incorporation are approved as mentioned in the original proposal at the 23rd annual meeting of shareholders on Aug. 29, 2016, the company will make the transition to a company with audit and supervisory committee on the same date.
◎Corporate Governance Report Updated on February 15, 2016Basic Policy
Under the motto "Planning the Future - Leveraging Human Resources to Create the Future," the company recognizes that its important managerial mission is to take corporate governance measures for remaining vital for society at every stage of life. To do so, the company concentrates compliance systems in the holding company, so that the executives, employees, and service users of the corporate group can always conduct fair, functional activities, and converges the functions of the holding company in the business administration of the entire group, fortifying the corporate governance of the entire group.
1. Securing of the rights and equality of shareholders
The company takes appropriate measures for substantially securing shareholders' rights, including the voting rights at a general meeting of shareholders.
2. Appropriate cooperation with stakeholders other than shareholders
Under the motto of the corporate group, the company observes the code of conduct and the principles of actions, and faithfully attends to all stakeholders, including service users, clients, shareholders, and employees, to keep improving its corporate value.
3. Appropriate disclosure of information and securing of transparency
The company discloses information properly in accordance with laws and regulations, and proactively offers information not specified in laws or regulations and non-financial information.
4. Obligations of the board of directors, etc.
The board of directors formulates the basic policies and strategies for the management of the corporate group, manages and oversees operating companies. The board of directors is recognized and operated as a body that makes decisions for the business of the entire group and supervises its business operation. Outside directors have the roles of tightening managerial discipline and enhancing transparency.
5. Dialogue with shareholders
The company places importance on the dialogue with shareholders to maximize the value of the corporate group, and accepts a request for dialogue with shareholders. The dialogue with shareholders is dealt with by the IR section, executives in charge of IR, and the management when necessary.
DisclaimerThis report is intended solely for information purposes, and is not intended as a solicitation to invest in the shares of this company. The information and opinions contained within this report are based on data made publicly available by the Company, and comes from sources that we judge to be reliable. However we cannot guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and or opinions, nor do we bear any responsibility for the same. All rights pertaining to this report belong to Investment Bridge Co., Ltd., which may change the contents thereof at any time without prior notice. All investment decisions are the responsibility of the individual and should be made only after proper consideration.
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