BRIDGE REPORT
(2462)

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LIKE Co., Ltd. (2462)
Yasuhiko Okamoto President
Yasuhiko Okamoto
President
Corporate Profile
Company
LIKE Co., Ltd.
Code No.
2462
Exchange
Tokyo Stock Exchange, First Section
Industry
Service
President
Yasuhiko Okamoto
HQ Address
Umeda Hankyu Building Office Tower 19F, Kakudamachi 8-1, Kita-ku, Osaka-shi
Year-end
May
Home Page
Stock Information
Share Price Shares Outstanding Market Cap. ROE (Act.) Trading Unit
¥2,479 9,375,897 shares ¥23.243 billion 32.1% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (Act.) PBR (Act.)
¥36.00 1.5% ¥96.32 25.7x ¥718.70 3.4x
* Stock price as of the close on January 19, 2017. Number of shares at the end of the most recent term excluding treasury shares.
 
Consolidated Earnings Trends
Fiscal Year Sales Operating Profit Current Profit Net Profit EPS(¥) DPS(¥)
May 2013 15,196 798 906 599 65.34 30.00
May 2014 14,951 303 374 259 28.29 30.00
May 2015 18,067 470 502 331 36.13 30.00
May 2016 31,844 1,147 1,672 1,871 203.56 40.00
May 2017 Est. 38,300 1,600 2,200 900 96.32 36.00
* 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 first half of fiscal year May 2017 earnings results for LIKE Co., Ltd.
 
Key Points
 
 
 
Company Overview
 
Based upon its corporate motto of "Leveraging Human Resources to Create the Future", LIKE endeavors to create a corporate group structure that is capable of providing vital services necessary at all stages of life in the operating realms of child and nursing care, human resources and other services.
 
<Business Segments and LIKE Group Companies>
LIKE's business segments are divided into the comprehensive human resources services business, which includes human resources dispatch, business process consignment, dispatched worker for employment and job placement, hiring and training support services, the childcare support services business (Name changed from childcare services business), which includes consigned operation of public and private childcare facilities, the nursing care services business, which includes nursing facility operations, and the multimedia services business, which includes cellular telephone carrier shop operations.
 
 
The LIKE Group is comprised of the holding company LIKE Co., Ltd., six consolidated subsidiaries and one non-equity accounting method affiliate. The consolidated subsidiaries include LIKE Staffing Co., Ltd., which provides worker dispatch and business process consignment services to cellular telephone shops within its comprehensive human resources services business, Astaff Inc., which provides dispatch of administrative staff, headhunting services and business school operations, Success Holdings Co., Ltd., which was consolidated from July 2015, and its subsidiary Success Academy, which conducts consigned operations of public childcare facilities, and Sunrise Villa Co., Ltd., which provides nursing care facility operation services

In addition, the joint venture company Career Design Academy Co., Ltd. formed between LIKE Staffing Co., Ltd. and the largest cellular telephone sales company T-Gaia Corp. (First Section, Tokyo Stock Exchange, Code Number: 3738) provides training services to corporate clients, with each company providing 20% and 80% of the capital respectively.
 
 
New Medium Term Business Plan (FY5/17-FY5/19)
 
 
LIKE was able to exceed earnings estimates, which were revised upwards during the term by a large margin due to the inclusion of Success Holdings as a consolidated subsidiary. The targets included in the New Medium Term Business Plan announced on July 13, 2016 represent upward revisions to outstanding estimates for fiscal year May 2017 (Sales and current profits of ¥36.0 and ¥1.65 billion respectively), and include targets for both fiscal years May 2018 and 2019. Based upon its corporate motto of "Leveraging Human Resources to Create the Future", LIKE endeavors to create a corporate group structure that is capable of providing vital services necessary at all stages of life in the three operating realms of child care, nursing care, and human resources.
 
(2) Strategy by Business Segment
Comprehensive Human Resources Services Business
The securing of human resources is an important management issue for companies in all industries. LIKE has highly flexible solutions responding to the needs of job seeking workers including the ability to propose job matching services which cover a wide range of diversified clients and provide flexible working conditions including three day work weeks and shorter working hours. At the same time, the Company endeavors to increase the working population by leveraging the unique knowhow of its Group to turn inexperienced workers into fully contributing workers, raising the job retention rates by close follow up after employment, and by providing classroom and on the job training led by experienced staff. This strategic strength of providing skill evaluation and training will be applied to workers from overseas, whose numbers are expected to grow in the future.
 
 
Efforts to Realize Diversified Work Styles
With regard to job search, LIKE operates "Job-Toru" (Literal translation: "job taking") as a website for people seeking a job. This same site offers workers the ability to search by specific criteria such as "working 2 days a week", "fixed amount of working hours and others. Data about working conditions aggregated from users of this website will be leveraged in proposal based marketing to create job situations with new working conditions. In addition, people can take LIKE's unique training courses regardless of their lifestyles or skills. Workers can also choose to take training courses at their own pace and learn necessary skills specific to their jobs from experienced lecturers.
 
Childcare Support Services Business (Consigned Childcare Facilities: 182, Public Childcare Facilities: 125)
The intensifying problem of children unable to gain access to childcare (Due to a shortage of childcare providers and facilities) has become an urgent issue for resolution by the current Abe administration. In addition to efforts implemented to secure childcare providers and increase childcare facility numbers, LIKE endeavors to grow both sales and profits and become Japan's number one childcare support services business operator by providing high quality childcare support services.
 
Increase in Childcare Facilities
With regards to the consigned operation of childcare facilities, the LIKE Group will review various projects from its long list of customers a The Group will make efforts to increase the number of consigned projects that can secure an appropriate level of profit. At the same time, LIKE 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 facilities (hardware) as well as childcare service contents (software).
 
Securing Childcare Providers
Knowhow regarding hiring and post hiring training of childcare providers accumulated by LIKE Staffing will be leveraged to improve the hiring capability and retention rates of childcare providers. Specifically, knowhow will be shared through personnel exchange, matching will be strengthened, and training contents will be shared within the Group. Moreover, LIKE has joined the non-profit organization "Iku-Boss Kigyo Domei" (Literally "Childcare Conscious Boss Corporate Alliance) in February 2016 as part of its efforts to facilitate an environment that makes working easier for childcare providers. "Iku-Boss" is a boss (manager or supervisor) who calls for companies to create a work environment with a favorable work-life balance, allowing for support of his or her subordinate's (employee's or staff member's) career and private lifestyles while at the same time allowing the subordinate to deliver results in the workplace, and at the same time the boss himself/herself enjoying their own private life (Fathering Japan, an NPO).
 
 
Nursing Care Services Business (21 Facilities, 1,123 Rooms)
Sunrise Villa Co., Ltd. has been successful in collaboration with LIKE Staffing Co., Ltd. through personnel exchanges, hiring capacity outsourcing efforts, etc., and satisfied the demand for nursing care providers in fiscal year October 2015. The improvement in service quality achieved by the satisfaction of demand for nursing care providers has contributed to increases in occupancy rates (Rose from 68.0% in October 2013 to 95.6% in October 2016) and allowed this business to turn profitable on a full year basis during fiscal year October 2016.

Efforts will be made to further reduce hiring expenses, etc. by improvements in retention rates during fiscal year October 2017 as part of overall measures to strengthen profitability. Furthermore, sustained efforts will be made to differentiate services, including 24 hour nursing care staffing, provision of high quality services, and securing 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 through collaboration with LIKE Staffing Co., Ltd. Efforts will also be made to expand and improve training programs to prepare for accepting human resources from overseas.
 
 
Meanwhile, the January 20, 2017 issue (Released on January 5, 2017) of the weekly "Shukan Posuto" (The Weekly Post) selected six of Sunrise Villa nursing care facilities among its "Top 150 Nursing Homes where Nursing Care Experts Want to Put Their Parents" (No. 1: Férié de Yokohama-Kamoi, No. 4: Sunrise Villa Fujisawa-Shonandai, No. 15: Férié de Inada Tsutsumi, No. 31: Sunrise Villa Ayase, No. 70: Férié de Mitaka, and No. 73: Sunrise Villa Isehara).
 
 
First Half of Fiscal Year May 2017 Earnings Results
 
<Fiscal Years of LIKE Co., Ltd. and Its Consolidated Subsidiaries>
Success Holdings Co., Ltd. was turned into a subsidiary during fiscal year May 2016, and its earnings were consolidated from the second quarter of the fiscal year to include the 10 month period covering from the third (July to September) and fourth (October to December) quarters of fiscal year December 2015 and the four months to fiscal year April 2016 (An irregular accounting period of four months). The 12-month accounting period of fiscal year April 2017 for Success Holdings Co., Ltd. will be consolidated in LIKE Co., Ltd.'s earnings for fiscal year May 2017.
 
 
 
Sales, Current Profits Rose 42.7%, 73.2% Year-On-Year
Sales rose by 42.7% year-on-year to ¥19.027 billion. The full contribution from the start of the year of Success Holdings Co., Ltd., which conducts the childcare support services business (Consolidated from the second quarter of the previous fiscal year), strong demand for the comprehensive human resources services business (Up 19.3% year-on-year), and high occupancy rates of nursing care facilities in the nursing care services business (Up 8.4% year-on-year) contributed to the higher sales.

With regard to profits, expenses arising from new certified childcare facilities in the childcare support services business (2 new facilities opened in June 2016), pay raise for childcare service providers, and other factors contributed to a small increase in cost of sales margin from 83.1% to 83.3%. However, increases in sales of the three main business segments and reductions in sales, general and administrative expense margins due in part to effective reviews of the childcare support services headquarter structure allowed operating profit margin to grow by 0.6% points to 4.9%, and operating profit to rise by a large margin of 62.0% year-on-year to ¥925 million.

The booking of ¥156 million in facility related subsidies for the childcare support services business (None booked in the previous term) allowed current profit to rise by 73.2% year-on-year. However, a drop in extraordinary profit caused net profit to declined by 59.2% year-on-year to ¥610 million (Translation gain on the takeover bid of Success Holdings led to the booking of an extraordinary profits of ¥1.230 billion in the previous term).
 
 
 
 
Comprehensive Human Resources Services Business
Sales and operating profit rose by 19.3% and 13.7% year-on-year to ¥8.999 and ¥0.905 billion respectively. LIKE has implemented efforts to resolve the severe shortage of human resources across all industry applications by implementing training, matching and follow-up processes that allow staff with little work and societal experiences to be placed into jobs. Consequently, the number of dispatched worker and business process outsourcing contracts rose by 13.8% and 32.0% year-on-year respectively. At the same time, sales from dispatching and headhunting services provided to the cellular telephone sales industry declined due to the amendment to the Worker Dispatch Act.

By industry, sales to the cellular telephone sales industry rose by 19.4% year-on-year due to the strong demand for human resources and the unique training and operations structure of LIKE. Also, sales to the apparel industry rose by 41.3% year-on-year due to successful acquisition of long-term contracts. Sales to call center and logistics industry rose by 34.2% and 32.5% year-on-year respectively due to an expansion in usage of Internet related services. And while sales to the childcare and nursing care industries expanded steadily, eliminations of transactions within the Group (Sales to Success Holdings and Sunrise Villa of ¥63 and ¥55 million respectively) caused net sales growth to be reduced.
 
 
 
Childcare Support Services Business
The "childcare services business" has been renamed as the "childcare support services business" with a view to the establishment of the Act Concerning Promotion of Women's Career Activities and the need to address the growing problem of children unable to access childcare services. In addition, the consolidation of Success Holdings meant that the first half results only included the three-month period of its third quarter earnings (July to September) during the first half. Sales and operating profit of ¥7.051 and ¥0.190 billion respectively were booked. Collaboration with LIKE Staffing Co., Ltd. and improvements in working conditions contributed to increases in hiring and retention rates of childcare service providers. While additional costs occurred from the creation of new childcare facilities opened in June, overall profitability improved during the period (Irregular 3 month period) compared with the previous term.
 
Nursing Care Services Business
Sales rose by 8.4% year-on-year to ¥2.646 billion, and operating profit improved from a loss of ¥46 million in the previous term to a profit of ¥96 million in the current term. Full capacity operations of nursing care facilities in actual terms allowed sales to exceed the breakeven point (Actual terms refers to the elimination of staff break rooms from the total number of patient rooms). In addition, the outsourcing of hiring processes to LIKE Staffing Co., Ltd. contributed to fortification of the workforce and improvements in service quality.
 
 
Compared with the end of the previous fiscal year, total assets rose by ¥0.8 to ¥22.834 billion at end of the current first half. Improvements in free cash flow contributed to an increase in cash and deposits, and an expansion in the scope of business operations caused both outstanding payments (staff's salaries) and net assets to grow. Both short term and long-term debt due within one year increased. Lease liabilities and long term debt of ¥560 million (¥575 million at the end of the previous term) were booked within long-term interest bearing liabilities. Capital adequacy ratio rose from 30.5% at the end of the previous term to 31.2% at the end of the current first half.
 
 
An increase in cash sales and a decline in working capital allowed the net inflow of operating cash flow to grow by a large margin from ¥24 million in the previous term to ¥1.503 billion in the current term. At the same time, the net outflow of investing cash flow contracted to ¥310 million due in part to the disappearance of the ¥649 million payment to acquire shares of Success Holdings in the previous term and despite payment for new facilities opened by Success Holdings. Declines in newly acquired debt caused the net inflow of financing cash flow to turn to a net outflow of ¥80 million.
 
 
Fiscal Year May 2017 Earnings Estimates
 
 
LIKE's Full Year Earnings Estimates Remain Unchanged, Sales, Current Profits to Rise by 20.3% to ¥38.3 Billion, 31.6%
The first half earnings results exceeded estimates, but LIKE maintained its outstanding earnings estimates due to its "inability to accurately predict subsidies expected to accompany the opening of new certified childcare facilities on a full year basis in the childcare support services business." While sales of the nursing care services business are only expected to grow 0.9% due to the full occupancy rate operations of nursing care facilities, the full year contribution of Success Holdings, a 30.9% year-on-year increase in sales of the childcare support services business, and a 21.0% increase in comprehensive human resources services business are anticipated. With regard to profits, the positive influence of increases in sales and improvements in profitability of the nursing care services business are expected to allow operating profit to rise by 39.4% year-on-year to ¥1.6 billion despite an increase in goodwill amortization.
 
 
(2) Dividend and Shareholder Benefit Program
LIKE maintains a dividend payout ratio target of over 35% and implements dividend payments 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 (Dividends of ¥18 to be paid at the end of both the interim and full year periods for a subsequent dividend payout ratio of 37.4%). In addition, LIKE offers a shareholder benefit program including issuance of QUO Card prepaid cards in value of ¥1,000 to holders of between 100 and 500 shares and ¥2,000 to holders of between 500 and 2,000 shares as of the term end in May. Also, discounts on admission to nursing care facilities operated by Sunrise Villa amounting to ¥300,000 (Effective discount for one room until end August 2018) will be given to holders of over 100 shares.
 
 
Conclusions
 
The nursing care services business operated by Sunrise Villa Co., Ltd. is now expected to be able to achieve between ¥20 and ¥30 million in operating profit per month. However, anticipatory investments are expected due to the current full occupancy operations and subsequent need to open new facilities (Between 2 to 3 facilities per year). Ideally, new nursing care facilities are expected to achieve full occupancy utilization within about one year and expected to operate at a loss during the first seven to eight months. In the coming term, two new facilities, one each in Tokyo and Kanagawa Prefecture, are expected to be opened, with the new facility in Kanagawa expected to be opened adjacent to an existing facility due to the waiting list of residents who seek to gain access to the existing facility. Therefore this facility is expected to be able to achieve full occupancy rates at an early stage.

In addition, 16 of 20 new certified childcare facilities (Publicly owned childcare facilities) expected to be opened within the childcare support services business in fiscal year May 2017 have already been determined, with some of the remaining four facilities now expected to be delayed until the next term. Moreover, earnings to be derived from this business are difficult to predict given that subsidies associated with the opening of a new facility in April remains unclear. During fiscal year May 2018, another 15 to 20 facilities are expected to be opened, and 10 to 20 consigned facilities are expected to be taken on every year. An important issue for LIKE is also its ability to negotiate for revised pricing on existing consigned childcare facilities. Currently, a large portion of childcare facilities are operated within hospitals, and difficulties in transfer of higher labor costs to consigning hospitals is being encountered due to their difficult operating conditions and caused about 30% of consigned facilities to operate at a loss. Therefore, LIKE is promoting price revision negotiations with hospitals with an eye to renewal of contracts in March 2018. About 70% of hospitals with which negotiations are being conducted are expected to accept pricing revisions, and the Company will continue to conduct price revision negotiations with the others.

Aside from these developments, the comprehensive human resources services segment plans to increase its employed population by leveraging LIKE's unique knowhow of cultivating the skills of inexperienced workers, which involves classroom lectures given by staff that have extensive hands-on experience, on-the-job training in retail stores, and the improvement of retention rates by follow-up procedures after workers are placed on each site. We anticipate a continued expansion in earnings based upon a good balance between LIKE's three main business segments in addition to the above-mentioned efforts of the Company.
 
 
<Reference: Regarding Corporate Governance>
 
 
◎Corporate Governance Report Updated on Dec. 1, 2016
<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>
Principle 1-4
Our company will consider strategically holding said shares only when we judge that the shareholding would generate synergy to increase our corporate value. Furthermore, while taking account of the improvement of the corporate value of said company and impacts on our company, we will exercise our voting rights of strategically held shares to express our intention of being for or against a bill.

Principle 1-7
In accordance with "Accounting Standard for Related Party Disclosures" and "Implementation Guidance on Accounting Standard for Related Party Disclosures," our company confirms the existence of transactions with related parties and the importance of said transactions, discloses transactions to be disclosed, if any, and is careful not to have discrepancies with the conditions for transactions with a third party. In addition, our company checks, every fiscal year, whether or not any transactions handling a certain amount of money or over have been conducted between our company and any directors or any of his/her relatives within the second degree of kinship.

Principle 5-1
Our company has designated a director and established a department, both of which are in charge of overall IR activities for our corporate group, in order to encourage constructive dialogue with shareholders.
Our company exerts ourselves to disclose information in a fair, timely, and proper manner in accordance with "Disclosure Policy" that we have set forth to organize our basic ideas.
Our company discloses Disclosure Policy on our website (https://www.like-gr.co.jp/ir/policy.html).
The details of our IR activities are as described in the second section of "Implementation Status of Policies regarding Shareholders and Other Stakeholders" in this report.
 
Disclaimer
This 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.
Copyright(C) 2017 Investment Bridge Co., Ltd. All Rights Reserved.
 
 
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