BRIDGE REPORT
(4319)

東証1部

TAC Co., Ltd. (4319)
Toshio Tada, President
Toshio Tada, President
Corporate Profile
Company
TAC Co., Ltd.
Code No.
4319
Exchange
1st Section Tokyo Stock Exchange
Industry
Service
President
Toshio Tada
HQ Address
Kanda-Misaki-cho 3-2-18, Chiyoda-ku, Tokyo
Year-end
March
Homepage
Stock Information
Share Price Shares Outstanding Market Cap. ROE (Act.) Trading Unit
¥250 18,503,932 shares ¥4,625 million 8.6% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (Act.) PBR (Act.)
¥8.00 3.2% ¥29.72 8.4x ¥285.70 0.9x
*Stock price as of close on November 19, 2018. Number of shares outstanding as of most recent quarter end does not include treasury shares.
 
Consolidated Earnings Trends
Fiscal Year Sales Operating
Income
Ordinary
Income
Net
Income
EPS (¥) Dividends (¥)
March 2010 23,991 623 442 40 2.20 17.00
March 2011 24,575 465 283 -244 - 20.00
March 2012 22,578 -606 -530 -799 - 0.00
March 2013 20,999 136 377 977 53.63 0.00
March 2014 20,526 1,034 1,299 816 44.68 1.00
March 2015 19,537 140 404 208 11.24 1.00
March 2016 20,007 605 635 213 11.54 2.00
March 2017 20,440 713 692 490 26.49 4.00
March 2018 20,951 833 735 442 23.93 5.00
March 2019 Est. 21,200 910 880 550 29.72 8.00
*Estimates are those of the Company. The definition for net profit has been changed to net profit attributable to parent company shareholders. (Abbreviated as Parent Company Net profit)
 
We present this Bridge Report reviewing the first half of fiscal year March 2019 earnings results and other information about TAC.
 
Key Points
 
 
 
Company Overview
TAC Co., Ltd. is known as the "TAC, The Certification School" where university students and working people come to study to increase their chances of passing tests for various certifications and qualifications. The Company operates schools throughout Japan that educate students and adults in academic fields necessary to pass certification and Public Officer tests to become Certified Public Accountants, Licensed Tax Accountants, Real Estate Appraisers, Certified Social Insurance and Labor Consultant, Bar Examination, Judicial Scriveners and other professional occupations. In addition, TAC also provides various training programs for corporate clients and conducts publishing business as well. <Corporate History> TAC was established in December 1980 as a school providing instruction to people seeking to obtain certifications and qualifications through examinations, including courses for the Certified Public Accountant, Bookkeeper, and Licensed Tax Accountant examinations. In October 2001, TAC listed its shares on the Over-The-Counter Market, and later moved its shares to the Second Section of the Tokyo Stock Exchange in January 2003 and then to the First Section in March 2004. TAC acquired KSS Co., Ltd. (formerly known as Waseda Management Publishing), which conducts certification and qualification acquisition support services including the provision of preparatory courses for Bar Examination, Judicial Scrivener, Patent Attorney, Level-1 Civil Service, Special Personnel of the MOFA, in September 2009. Through the addition of this company, TAC has been able to fortify its strengths in the accounting area by adding certification preparatory courses in the legal area, and to round out its service lineup with courses in the Public Officer area. In December 2013, the Company formed a collaborative agreement that included the sharing of capital with Zoshinkai Publishers Co., Ltd. for work in the development of a correspondence course education service for elementary, junior and senior high school students. Furthermore, other M&A activities were conducted in June 2014 to enter into the medical office area. <Strengths> (1) Detailed Response to Changes, Revisions in Examination System, Laws Since the founding of the Company, TAC instructors have made revisions to the text materials used in its courses every year, and this ability to respond to changes and revisions in the examination and legal systems is a distinguishing feature and strength of TAC. For a company like TAC with sales approaching ¥20.0 billion, absorbing the costs of updating text materials on an annual basis is possible. However, new entrants and smaller players in the market have a much more difficult time absorbing the costs of updating teaching materials. Other strengths of TAC include its knowhow and efficiency accumulated over the history of its operations in providing the most updated information to the students of its courses. (2) Full-Scale Lineup and Active Course Development TAC has risen to become the top player in the industry through its active efforts to develop courses in new areas, including those targeting university students, and it has become the first company within its industry to list its shares. Along with the acquisition of W Seminar's certification and qualification acquisition support business in 2009, TAC has been able to fortify its weakness in the areas of legal and Public Officer related courses. Consequently, the Company now boasts of a strong business model comprised of the three main cornerstones of accounting (Certified Public Accountant, Licensed Tax Accountant and Bookkeeper), legal, and Public Officer related certification and qualification acquisition support courses. (3) Providing Innovative Services with a Focus upon Students Innovative services are yet another strength of TAC. TAC was the first school in the certification and qualification acquisition support services market to introduce educational media and enable students to choose which instructor they would like to study under. This corporate focus upon satisfying the needs of students is reflected in the quality of the text materials offered and has contributed to the establishment of a strong brand reputation as "TAC, The Certification School."
 
 
First Half of Fiscal Year March 2019 Earnings Overview
Regarding Sales Students applying for courses are required to pay tuitions at the time of their initial application (TAC calls these fees tuition advance pre-adjustment sales or sales on a cash basis), which are then booked on the balance sheet as a liability under the title "tuition advance." These tuition advances are then written down and booked as sales in the month that educational services were provided to the student (TAC calls these fees tuition advance pre-adjustment sales or sales on an accrual basis). While sales booked on the income statement are "sales on an accrual basis (tuition advance pre-adjustment sales)", the actual indicator of the sales conditions of the Company in the term are considered to be the "sales on a cash basis (tuition advance pre-adjustment sales)" (The fact that cash and equivalents are influenced strongly by the sales on a cash income is a characteristic that is shared with companies that take orders) and they are deemed to be a leading indicator for actual sales. Therefore, TAC management identifies this "sales on a cash basis (tuition advance pre-adjustment sales)" as a key management indicator. Regarding Seasonal Characteristics Examinations for the majority of certification courses are held from the second (July to September) to third quarters (October to December), and core courses, especially those for Certified Public Accountants and Licensed Tax Accountants, fall into the time frame for examinations in the following year. At the same time, all courses fall into the fourth (January to March) and first quarters (April to June). Despite an increase in sales on a cash basis and Account receivable-trade sales during the second and third quarters, tuition advances are written down and booked depending upon enrollment period and gross margin is profoundly influenced because of the booking of a fixed level of expenses every month. In the fourth and first quarters, these tuition advances are then written down and booked as sales in each month, causing gross margin to increase. Sales and profit declined Sales on a cash basis were 10,728 million yen, down 3.7% year on year. Sales on an accrual basis were 10,854 million yen, down 2.3% year on year. While the sales of the Personnel Education and Corporate Training Businesses declined, the sales of the Publishing and Manpower Businesses increased. Operating profit on a cash basis decreased 31.2% year on year to 735 million yen. Operating profit on an accrual basis was 861 million yen, down 17.2% year on year. Cost of sales, composed of mainly personnel expenses, decreased 0.6% year on year, and sales, general and administrative expenses, composed of mainly advertisement cost, dropped 2.1% year on year, but they could not offset the decline in sales. <Personnel Education> Sales grew, but profit declined The sales from courses for Certified Public Accountant declined in the first quarter (April to June), but increased in the second quarter (July to September). Instruction fees, outsourcing fees for course material creation, rent and other operating expenses decreased 0.4% year on year to 6,268 million yen. <Corporate Training Business> Sales and profit declined. Operating expenses, including instruction fees and personnel expenses for marketing, augmented 0.2% year on year to 1,649 million yen. <Publishing Business> Higher Sales, Higher Profits Higher Sales Real Estate Notary Certified Social Insurance and Labor Consultant, Financial Planner, Condominium Management Consultant, and medical care-related area saw higher sales. The guidebooks for watching FIFA World Cup Russia 2018, travel books, and picture books for children contributed. Lower Sales Bookkeeping and Judicial Scrivener saw lower sales. Operating expenses decreased 3.0% year on year. While personnel expenses and net provision for returns, etc. augmented, sales promotion costs decreased as the costs of publication of translated books subsided and measures for expanding sales channels are nearly completed. <Manpower Business> Higher Sales, Higher Profits In manpower Business, personnel introduction saw solid performance due to the overall shortage of human resources in the accounting industry, but temporary staffing shrunk due to the affection of the amendment of the Worker Dispatch Law. The sales from advertisement declined, as the number of orders for promotional videos for corporations were completed. As for medical human resources services, Medical Office Staffing Kansai Co., Ltd. increased sales, as it received orders for work related to the National Health Insurance in Hyogo Prefecture and so on. The company concentrates on marketing for securing and dispatching medical office staff and improvement of matching. <Market Overview> The number of official test applicants of the various curricula taught by TAC declined by about 28,000 from the previous year 2.609 million to 2.581 million. It's the first time decrease in three years. (Finance, Accounting Area) The courses for Certified Public Accountant were sluggish in the first quarter, but the courses for beginners and second-time examinees performed well in the second quarter. Consequently, the sales in this area were unchanged from the previous year. (Management, Taxation Area) The sales from the courses for Licensed Tax Accountant declined, due to the decrease in the number of Tax Accounting examination takers. (Financial Service, Real Estate Area) Favorable performance continued from the first to second quarters, and the company saw the growth of sales from Real Estate Appraiser, Real Estate Transaction Manager, Condominium Management Consultant, Architects and Building Engineers, Financial Planner, etc. The healthy sales of books for preparing for the exams for Real Estate Transaction Manager and Financial Planner contributed to the sales growth of the courses as a whole. (Public Officer Labor Area) The sales from the Public Officer course (National Public Employees in the Regular Service and Senior Officials of Local Government course) decreased, as the employment conditions in the private sector were good. (Medical, Welfare Area) The sales growth of Medical Office Staffing Kansai Co., Ltd. thanks to new orders and the sales of the books for preparing for exams for Certified Social Workers and Certified Care Workers contributed. Business Trends by Curriculum Category (Combined Total for both Personal and Corporate Instruction) <Increases> Courses for Real Estate Appraiser (up 4.9% year on year), Architects and Building Engineers (up 24.7% year on year), Condominium Management Consultant (up 31.1% year on year), and Financial Planner (up 5.3% year on year), Business Schools (up 23.8% year on year), etc. <Declines> The Certified Public Accountant(down 3.2% year on year)、Licensed Tax Accountant(down 9.1% year on year)、Small and Medium Enterprise Management Consultant(down 4.4% year on year)、National Public Employees in the Regular Service and Senior Officials of Local Government course(down 5.2% year on year), etc. As for the courses for corporate clients, sales were similar in the previous year. As for the in-university seminar, affiliated school and consigned training, those sales declined 17.9 %, 13.3% and 20.9% year on year respectively. Current assets increased 981 million yen from the end of the previous term, due to the growth of cash and deposits, etc. Fixed assets rose 125 million yen from the end of the previous term, due to the increase in investments and other assets, etc. Consequently, total assets were 22,725 million yen, up 1,106 million yen from the end of the previous term. Total liabilities were 16,897 million yen, up 570 million yen from the end of the previous term, due to the augmentation of long and short debt, etc. Net assets increased 536 million yen from the end of the previous term to 5,828 million yen, due to the rise in retained earnings, etc. As a result, capital adequacy ratio rose 1.1% from the end of the previous term to 25.6%. (6) Topics ◎ Change of the representative director and president On October 23, 2018, Mr. Hiroaki Saito, who founded the company and served as representative director and president, resigned because of his health condition, and Mr. Toshio Tada, who had been serving as director and vice-president, was appointed as representative director and president. The new president Tada joined the company in January 1984, became a senior managing director in March 1998, and was appointed as a director and vice-president in June 2007. ◎ Challenge for the sciences field As was mentioned in the previous report, in October 2018, the company started offering "Third-Class Chief Electricity Engineer's License Course" as a newly established course and also began publication of books for preparing for the examination. (Overview of the Licensed Electrical Engineer-class 3 License) The Licensed Electrical Engineer-class 3 License is a national qualification that allows certified persons to supervise the safety of construction, maintenance, and operation of electric equipment (electric facilities for business use) installed in commercial buildings and factories. The Electricity Business Act requires those who engage in installing electric facilities for business use to appoint one or more persons who hold the Licensed Electrical Engineer License, which means that the qualification plays an extremely vital social role in enabling the public to use electric facilities safely. Electricity is one of the most essential social infrastructures that closely relates to our daily lives, including not only ordinary homes but also commercial buildings, factories, and railways, and the Licensed Electrical Engineer License is a certificate that is significantly promising. In recent years, the number of applicants for the examination for the Licensed Electrical Engineer-class 3 License has been about 65,000, with the passing rate (the ratio of the number of successful examinees to the total number of examination takers) being approximately 8%. The course has more participants than the course for Licensed Tax Accountants, or Certified Social Insurance and Labor Consultants. The company has specialized in preparations for tests for challenging certificates, qualifications, and licenses, such as Certified Public Accountants, Licensed Tax Accountants, and Real Estate Appraisers, and produced myriad successful examinees; however, it has not broken fresh ground in the field of "sciences." The company will strive to produce a multitude of successful applicants also in the area of the Licensed Electrical Engineer-class 3 License by taking advantage of its excellent teachers who have extensive practical work experience, as well as the know-how for passing examinations and effective curricula that it has cultivated. The company published 5 kinds of books: introduction, theory, electric power, machinery, and law. The sales of each book ranked first, leaving the second-ranking book far behind. (Surveyed by the company) The company considers that it made a very good start, and expects that it will grow further. ◎ Proactive utilization of IT for education The company will proactively utilize IT for managing data on the attendance of attendees (timely grasping the progress of learning of each attendee and appropriately supporting attendees lagging behind others) and data on the performance of attendees (grasping the subjects each attendee is good at and not good at, and supporting them in learning the subjects they are not good at). By meticulously managing and checking these data, the company plans to brush up the skills of enrolled attendees and improve pass rates.
 
 
Fiscal Year March 2019 Earnings Estimates
No revision to the earnings forecast. Sales and Profit Estimated to Grow As of now, there is no revision to the earnings forecast. Sales on a cash basis is expected to rise by 1.2% year-on-year to ¥21,250 million. Both gross profit margin and sales, general and administrative expenses are expected to drop by 0.2 and 0.6 points respectively, allowing Operating profit to rise by 9.1% year-on-year to ¥910million. Dividend payment is expected to be raised by ¥3 to ¥8.00 per share, with an anticipated dividend payout ratio of 26.9%.
 
 
Conclusions
The progress rate of the sales on a cash basis for the cumulative second quarter of the term ending March 2019 toward the full-year forecast was 50.5%, which is slightly lower than the average in the past 5 years. In the short term, it is noteworthy how much the company can increase sales from the third quarter. We would like to expect a lot from TAC, which is led by the new president Tada, who said, "I will keep devoting my affection to TAC like the former president Saito, who founded this company, and aim to achieve further growth."
 
 
<Reference: Regarding Corporate Governance>
◎Corporate Governance Report Updated on June 28, 2018
 
 
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) 2018, Investment Bridge Co., Ltd. All Rights Reserved.
 
 
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