Persol Holdings Co Ltd

TSE:2181

Earnings Call Transcript 2022-Q2

[和田 孝雄, executive]

I am Mr. Wada, CEO of Persol Holdings. Thank you very much for taking time out of your busy schedules to join us today. We will now start the live streaming of the financial results briefing for the second quarter of the fiscal year ending March 31, 2022.

First of all, let me tell you a little about what we at Persol are aiming for. Our vision is work and smile. We want as many people as possible to live a better life through work, and that is our passion and the basis of what we do. In our value creation story, we place great importance on the social values in addition to the economic values. As part of our commitment to realize a society of work and smile, we have conducted a global survey on work and smile. We have already released the results and received a very positive response. There are so many companies that support this initiative. This survey conducted as part of Gallup World Poll confirms that work and smile vision can be an indicator of working well-being. In this survey, Japan's statistical results are very low, especially on the first question, do you enjoy the work you do in your job every day or not? the result is very low. Through our efforts, we would like to help bring these results to a higher level. We would like to contribute in such a way. In particular, the improvement in the working well-being shown by the Work and Smile Index leads to an improvement of the work engagement of the people and contributes to an increase in the productivity of each individual and the reduction of the turnover rate of workers. Then increased productivity of the team will lead to increased value for the company. The statistics clearly show that such a positive chain of events can be established. We will make sure that the world understands and agrees with what we are doing, and we will expand this initiative not only in Japan but in the world. In addition, we would like to support working people so that they can lead a happier and better life through their work.

As we move forward with these initiatives, our financial highlights for the first half are as shown. These are the 4 points I would like to tell you this time. Firstly, the business results in the first half of this fiscal year landed above the pre-COVID-19 level. We established a midterm management plan towards 2023. And the current forecast indicates that we will achieve the numerical targets for 2023 1 year ahead of schedule. In the second half and beyond, in terms of the supply of human resources, it is expected that there will be an extreme shortage, and we will work proactively to tackle this challenge by aggressive investment. Fourthly, I would like to inform you that we are planning to pay a record dividend. Now our CFO, Mr. Seki will explain the financial results for the first half, and then I will explain the full year forecast and dividends after that.

[Kiyoshi Seki, executive]

I am Seki, CFO at Persol Holdings. I will now provide an overview of our financial results for the first half. First, the consolidated financial results. In the first half, net sales and profit exceeded those of the same period of previous year and the forecast. For your reference, on the slide, the right-hand side column shows the FY 2019 first half results, which was the pre-COVID-19 level. Both sales and profit exceeded the pre-COVID-19 level. I believe from this, you can see our steady and strong recovery. We will also pay an interim dividend of JPY 20 per share, an increase of JPY 7 per share year-on-year and an increase of JPY 1 per share from our forecast of JPY 19 per share.

Next, I would like to go over the net sales for each SBU in the consolidated financial summary on this slide. As you can see on this slide, we achieved an increase in net sales in all SBUs compared with the same period last year. Net sales increased not only in the mainstay Staffing SBU, but also in the Asia Pacific SBU. As a result, consolidated net sales increasing 10.1% year-on-year.

Next, I would like to explain the operating profit of each SBU. In all of the SBUs, the results were higher than the same period of the previous year and compared to the forecast. I would like to provide a more detailed explanation of the financial results of each SBU in the following slides. First, let's review the Staffing SBU. In the temporary staffing business, the core business of the Staffing SBU, the number of active staff continue to increase steadily due to efforts to curb the number of contract terminations. The number of active staff turned to growth year-on-year from the second quarter. And as a result, overall sales in the temporary staffing business increasing 6.0%. In the BPO business, which is highly profitable, the orders for the public sector, in particular, continue to be strong, resulting in an increase in net sales of over 30%. The combination of these 2 core businesses resulted in a 7.3% increase in net sales and a 34% increase in operating profit for the SBU as a whole.

Next, I would like to explain Career SBU. In the first half of the fiscal year, both the core businesses, placement and job recruiting media businesses performed well, resulting in increased net sales and operating profits. In the placement business, in addition to the market recovery, we have been working vigorously to concentrate and strengthen its sales force. As a result, the number of informal appointments of workers has increased to about 1.3x the level of the same period last year. In the first half of this fiscal year, we recognize the market has entered a major recovery phase. In response, we have made vigorous efforts in marketing investments and strengthening of recruitment. We are making these additional strategic investments to support future growth.

Next, I would like to talk about Professional Outsourcing SBU. In the IT area, the demand continues to be very strong. The operating rate remained high at about 95%. The business environment and management conditions are very good. In the engineering area, in addition to the market recovery, we operated soundly our management activities and the net sales increased in all areas, including the IT and engineering temporary staffing. In terms of operating profit, the overall Professional Outsourcing SBU landed in increased profits. If you look at the number of engineers, we have seen year-on-year increases in all areas. Going forward, we intend to focus our efforts on hiring engineers as a growth driver of the Professional Outsourcing SBU.

Next, I will explain about Solution SBU. As in the first half of this fiscal year, this SBU is still in the strategic investment phase. In the second quarter, net sales of our core businesses, the job search application business MIIDAS and the Cloud POS business POS+ both increased, and the total net sales of the SBU increased significantly. As for the loss, we are continuing to make strategic investments, but thanks to sales increase, deficit decreased. Both MIIDAS and POS+ are showing steady growth and both the number of account companies and the number of stores that introduced these services continue to increase. Next, I would like to explain about the Asia Pacific SBU. In the second quarter of the fiscal year, we made progress in recovering from the situation under COVID-19, and we achieved an increase in net sales. In terms of profit, we turn to profitability, thanks to the continued establishment and operation of an efficient business management system from the previous fiscal year. In addition, the SBU will be consolidated 3 months later in the consolidated financial statements. The bottom left of the slide shows qualitative information regarding the situation in the recent quarter, July to September quarter in each region for your reference. The next page shows the breakdown of results of PERSOLKELLY and Programmed in the Asia Pacific SBU, which we have been disclosing continuously. Please review and confirm the net sales and operating profit level as well as other information. Lastly, I would like to explain the others and adjustment segment. In the Others segment, the training business recovered from the impact of COVID-19 and posted increase in net sales. On the other hand, the loss increased somewhat due to the impact of the settlement of employment management costs of special subsidiaries. In the Adjustment segment, profits were down slightly from the previous fiscal year due to a temporary increase in the cost for the promotion of remote work, which is being promoted as a group policy and for the inoculation of COVID-19 vaccines in the workplace. This concludes my explanation of the outline of the financial results for the first half. Mr. Wada will now explain the full year financial forecast for FY 2021 and dividend forecast.

[和田 孝雄, executive]

As Mr. Seki just explained, the business is performing very well. Therefore, we have set our full year net sales forecast at JPY 1.6 trillion. Operating profit is expected to reach JPY 48 billion, exceeding the 2023 target of the medium-term management plan achievement 1 year ahead of the schedule. We don't have a plan of reviewing the medium-term management plan for 2023 itself, but we are already in the process of formulating the medium-term management plan for 2024 and beyond. So I hope to provide you with such information when time comes.

Next, I would like to explain the background of the full year financial forecast. In the second half of the fiscal year, we expect the staffing business to continue to perform well. We assume that we will be able to continue to increase the number of active staff, and we also assume that the BPO business will continue to be strong. In addition, the recovery in the Career SBU and Professional Outsourcing SBU from COVID-19 is quite clear, and we believe these SBUs will return to their pre-COVID levels. As for the Asia Pacific SBU, first half of the year is usually very difficult to generate profits due to the number of operating days affected by the Chinese New Year and other factors, but we were able to generate profit in the first half, and we expect to continue to do so in the second half.

The slide we are showing is the data that tracks the recovery trend of each SBU. The orange lines in these graphs show the status of the current term. The Staffing SBU and the Professional Outsourcing SBU have already surpassed their 2019 levels. Shown here are their key KPIs, which are numbers that directly reflect their business performances. In the Staffing SBU, it is the number of active staff and Professional Outsourcing SBU's indicator is the operating rate. In the middle, we have Career SBU. We have almost reached the 2019 level for the SBU. We expect that we will continue to progress at this level for the second half of the fiscal year and beyond. Therefore, we believe that the figures I mentioned earlier will be achievable.

From now on, I believe that the market will place a great deal of emphasis on acquiring human resources, including in the area of Career SBU. Based on such view, we would like to aggressively accelerate investments in branding and marketing. In addition to acquiring human resources and increasing registered staff, it is necessary to secure human resources for responding to such needs, so we will strengthen recruitment of internal human resources. In addition, in the area of professional outsourcing, we will also focus on hiring engineers in order to acquire personnel who will actually work hands on for these businesses. At the same time, we will strongly promote investments in technology. Investment into [ DX ] is broad in scope, but we will invest in improving the efficiency of our internal operations as well as enhancing the convenience of our corporate clients and the candidates and staff who use our services. Through these initiatives, we are intending to deepen the relationships with our customers and the people who work. By advancing these measures, we will be able to set a firm foundation for the next fiscal year. Please refer to the following slides for the sales forecast by SBU. Next page shows the operating profit forecasts by SBU. I would like to make one additional point regarding the operating profit of Asia Pacific SBU. As I explained earlier, we returned to profitability in the first half of the fiscal year, but we expect to post a small loss in the second half due to the impact of accounting processing change, as described in the notes. Excluding the impact of this change, the business is on track to be profitable in the second half, and we are well positioned to generate steady profits. As for EBITDA forecast by SBU, please refer to the table below.

Finally, let me explain our dividend forecast. Based on the strong financial performance, we plan to pay an annual dividend of JPY 40 per share. Our dividend policy is dividend payout ratio of 25% of adjusted EPS. We are planning to pay a total annual dividend of JPY 40 per share, consisting of JPY 20 as an interim dividend and JPY 20 as year-end dividend. This translates to 25.7%, which is slightly higher than the policy. This dividend amount will be the highest ever paid. This is all for today's presentation.

Before closing, I would like to inform you that we published an integrated report 2021 in November. You can find the link in the appendix. I think the report provides a good opportunity to see the overall picture of Persol Group, and I hope you will review it. Although the declaration of the state of emergency has been lifted, we would like to continue to engage in our business with a high sense of urgency, and we are determined to strive to achieve the plan for the current fiscal year. I would like to ask for your continued understanding and support. This concludes my explanation. Thank you very much for your time today.