Operating income declined, but exceeded the initial estimate.
Sales grew 33.6% year on year to 48,807 million yen. The sales of the three core businesses fell below the initial estimate, due to the sluggishness of the communications business, in which the shipment volume of smartphones decreased, and the delay in securing personnel due to the stringency in the labor market, but the three strategic growth businesses (care support, overseas HR, and startup personnel support), mainly overseas HR business, saw steady sales growth. As C4 Inc., which dispatches and introduces construction engineers mainly in the Tohoku region, was reorganized into a subsidiary of Will Group through the acquisition of all of its shares, sales exceeded the initial estimate.
Operating income decreased 15.9% year on year to 1,092 million yen. For the three core businesses, since the company raised wages for staff before raising unit prices the company charge clients, gross profit rate dropped. The company incurred the cost for upfront investment for achieving an operating income of 4 billion yen as a goal of the medium-term management plan (200 million yen for IT investment, preparation for adapting to the IFRS, strategic recruitment, etc.). However, the drop in profit has been estimated from the beginning of the term, and operating income exceeded the initial estimate significantly thanks to the performance of the three strategic growth businesses. EBITDA (operating income + depreciation + goodwill amortization), which is a management index on which the company puts importance, was 1,566 million yen, up 0.6% year on year from 1,557 million yen.
Sales Outsourcing Business
Sales were 10,809 million yen, up 3.7% year on year, and profit was 638 million yen, down 29.7% year on year. The sales in the communications field declined, but the company saw sales growth in the non-communications field, including the dispatch of workers in the apparel industry, the dispatch of sales promotion staff, the undertaking of sales promotion, and sales promotion services offered by CreativeBank INC. As for profit, gross profit rate decreased due to the rise in wages, the decline in income from incentives in the communications field, etc. and personnel expenses augmented as marketing bases (9 branches) were established for expanding the non-communications domain.
Call Center Outsourcing Business
Sales were 7,762 million yen, down 7.5% year on year, and profit was 284 million yen, down 33.2% year on year. The dispatch and introduction of office workers, which had been included in the segment "Others" till the term ended March 2018, are included in this segment from this term. The sales increased in the financial field, where the company strived to increase clients further, but could not offset the decline in sales in the call center and office fields, and the number of dispatched staff members dropped. While sales decreased, gross profit rate, too, dropped due to the augmentation of legal welfare expenses.
Factory Outsourcing Business
Sales were 9,813 million yen, up 28.1% year on year, and profit was 424 million yen, up 1.1% year on year. While the food product domain, including prepared food, sweets to be sold at convenience stores and boxed meals, expanded due to the active expansion of footholds, Little Seeds Service Corporation, which was reorganized into a consolidated subsidiary in September 2017, made a contribution (increasing sales 800 million yen), and the domains other than the food product one, such as the cosmetic one, expanded. While gross profit rate declined due to the rise in wages for staff, the target area for marketing expanded, boosting personnel expenses, but it was offset by sales growth. The recruitment of non-Japanese workers progressed.
For expanding the target area of marketing, four branches were established (3 branches in the 1st quarter, 1 branch in the 2nd quarter). In addition, the company formed an alliance with two colleges in Vietnam for accepting more non-Japanese technical interns and proceeded with the development of an educational program for developing personnel with necessary skills for joining Japanese enterprises and Japanese affiliated firms in Vietnam.
Care Support Business
Sales were 4,353 million yen, up 29.9% year on year, and profit was 28 million yen (a loss of 40 million yen posted in the same period of the previous year). In addition to active development of business bases, including establishment of three branches in the first quarter and three branches in the second quarter (the number of branches: 47 as of the end of the first half), the company enhanced employment follow-up activities and proposal for a variety of ways of working toward client enterprises. This led to more use of staff who have no experience or less experience and staff who want to work flextime, and the number of contract staff increased. The upfront investment for opening branches, etc. and expenses for increasing staff augmented, but this was offset by sales growth and improvement in gross profit rate through the revision to contracts with existing clients. Consequently, the company secured an operating income of 28 million yen.
For "Will Care Academy," which was established for training staff from the inside and outside of Will Group, the number of the schools increased to three in the Tokyo Metropolitan Area, and the system for developing staff was developed.
Overseas HR Business
Sales were 12.1 billion yen, up 132.2% year on year, and profit was 465 million yen, up 138.0% year on year. The businesses of consolidated subsidiaries in Singapore and Australia expanded steadily, and DFP Recruitment Holdings Pty Ltd., which offers personnel services related to office work and call centers in Australia and became a consolidated subsidiary in January 2018, contributed significantly to sales and profit.
Startup Personnel Support Business
Sales were 536 million yen, up 59.1% year on year, and profit was 134 million yen, up 17.1% year on year. Sales and profit grew, mainly thanks to the recruitment of personnel in the AI and IoT fields. The number of workers the company introduced increased 37.8% year on year from 147 to 203. The decrease in profit rate from 34.1% to 25.1% is due to the increase of staff for expanding businesses (augmentation of personnel expenses, etc.). The company released "STARTUP DB," an information platform specializing in growing industries.
Other Domestic Businesses (in new fields)
Sales were 3,431 million yen, up 194.6% year on year, and profit was 20 million yen (a loss of 79 million yen posted in the same period of the previous year). While the sales of existing businesses, including the dispatch of assistant language teachers (ALTs), the dispatch and recruitment of nursery staff, increased, C4 Inc., which dispatches and introduces construction engineers and was reorganized into a consolidated subsidiary in June 2018, and TECH RESIDENCE, which is a rental apartment building for IT engineers and creators, contributed to sales growth.
Total assets as of the end of the first half were 30,109 million yen, up 2,612 million yen from the end of the previous term. Non-current assets increased, mainly due to the increase of intangible assets (goodwill: from 2,234 million yen to 4,589 million yen), as the company acquired all shares of C4 Inc., which dispatches and introduces construction engineers mainly in the Tohoku region, in June and acquired 51% of shares of Quay Appointments Pty Ltd., which dispatches workers in Australia and excels at offering services to governmental organizations, etc., in September.
On the other hand, net assets (capital surplus: -1,958 million yen; non-controlling interests: -451 million yen) decreased, as cash and deposits declined through active M&A and equity changed due to the acquisition of more shares of consolidated subsidiaries. As a result, capital-to-asset ratio dropped to 21.6% (30.0% as of the end of the previous term), but net DE ratio ([balance of interest-bearing liabilities - cash and deposits] ÷ equity capital) was 0.5 (down 0.3 from the end of the previous term), and EBITDA-adjusted interest-bearing liabilities ratio (balance of interest-bearing liabilities excluding short-term loans payable ÷ estimated EBITDA) is 2.2 (actual EBITDA-based one at the end of the previous term: 1.1). This indicates that the influence on the corporate finance is minor as a whole.
Regarding the changes in equity, the decrease in capital surplus, etc. due to the acquisition of more shares of affiliated companies
Will Group carries out M&A actively in the field of personnel services. For M&A inside Japan, the company can conduct post-merger integration appropriately, because it has been offering personnel services for about 20 years. Accordingly, it usually reorganize acquired companies into 100% subsidiaries, but in foreign countries, where it is difficult to grasp commercial customs, etc., the company makes earn-out deals in a careful manner. In the earn-out scheme, the company first acquires slightly over 50% of shares, and then acquires more shares after confirming the progress of management plans in 1 to 3 years. This will lead to the changes in equity, so capital surplus, etc. may be affected like this time. In this case, too, the influence on the corporate finance was minor, and the company plans to deal with M&A with its own funds and borrowings.
||Dispatch and recruitment of construction engineers
|Results for FY 3/18
||Sales: 3,494 million yen; operating income: 306 million yen; net income: 201 million yen
||3,409 million yen
||2,416 million yen (amortization period: 7 years)
C4 Inc. was established in 2011 for the purpose of supporting restoration after the Great East Japan Earthquake, and all engineers are experienced full-time employees. At present, its market share is about 20% in the field of dispatch of construction management engineers in the Tohoku region, and there are about 100 competitors in Japan, and C4 ranks around 10th. Domestic nominal construction investment is growing by double digits, but the number of workers in the construction field is decreasing. Accordingly, there is significant room for the growth of personnel services. The company estimates that the scale of the market of dispatch and recruitment of construction engineers is 230 billion yen and market growth rate is 9% per year. By utilizing the footholds of Will Group, it plans to expand its business area from the Tohoku region and the Tokyo Metropolitan Area to Osaka, Nagoya, and Fukuoka.
Quay Appointments Pty Ltd.
|Results for FY 6/18
||Sales: 4,783 million yen; net income before taxes: 223 million yen; net income: 156 million yen
||503 million yen
||249 million yen
* It is assumed that 1 Australian dollar = 80.5 yen.