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Ladies and gentlemen, good evening. Thank you very much for gathering to hear from TechnoPro Holdings, to hear about our financial results for the first quarter of fiscal year June 2019. Thank you for your participation for this call. We have the board members, CFO, Hiroshi Sato, as the presenter; and also the MC will be delivered by [ Ogawa, ] PR, IR division.
Now CFO, Sato, will give a presentation for about 15 minutes on the financial results for the first quarter of June 2019, and then we will take questions up until 5:30. The questions will only be taken from the Japanese language line. We ask you for your understanding. The deck, TechnoPro Group financial results for the first quarter of FYE June 2019 will be uploaded on to our homepage. It is uploaded on our homepage. So please confirm it.
We'd like to make sure we enrich our information disclosure. That's why we have the English translation, the English delivery of the earnings result explanation, and we will have the presentation on the homepage as well.
Now this presentation will be typed up in Japanese and English. And the contents of the presentation will be introduced on the website as well. In that part, the Q&A session will also be uploaded on to the website. We ask you for your understanding. Without further ado, Mr. Sato, please.
Ladies and gentlemen, good evening. I am Sato, the CFO. Without further ado, allow me to explain the set of documents here. First of all, let's look at the FY 2019 Q1 overview. For the revenue, compared to last year, we are up by 24.7%, which is JPY 33,334,000,000. Operating profit up by 26.7% to JPY 3.183 billion. And also, for the net profit attributable to owners of the parent company, it is up by 10.8% at JPY 2.082 billion. Regarding the net profit, the tax will be normalized and, therefore, the tax rate is up by around 9%. It is 32.9%, but we have been able to absorb this burden and yet deliver a net profit of 10% plus. Moving on to the business line results. The managerial numbers for each business line, for the 2 engineer companies and the other domestic companies and global companies. These are how we have split the numbers. Now when you look at the 2 engineer staffing, the headquarter function lies in TechnoPro Holdings. So when you allocate that headquarter support accurately, you can see the actual contribution margin. If you can look at that in the left side, it is 10.2%, which is an improvement from 99%. Looking at the domestic, other companies. Each of these companies are all independent. And so they each have their headquarter function. That is why the OP margin is not as high. It is around 8%. But regarding the acquisition hiring company, we will take that and merge that into the engineer staffing category. And with this, we will be able to increase the profit gradually.
Actually tomorrow, on November 1, regarding Techno Live, which we acquired last year, we will be incorporating this into the headquarter as well. As for the acquired companies, Boyd & Moore Executive Search, they have a very global operation. So that's why we have included them into the global bucket now from this time.
So if you look at the global operating margin, it is as high as 10.5%, 1% was the number last year. So -- and this is due to the black ink from TechnoPro China and also Boyd & Moore, which is delivering 10% on their OP margin as well. This is the reason why we have a great improvement for the global operating margin. If you look at the next page, we have organized all of the business units on a chart here. Last year, as of the end of September, the company, TechnoPro Embedded, used to be in Others (Japan) on the bottom left. But as I mentioned earlier, it will be merged gradually into the engineer staffing business. As you can see, on the chart on the right side, you can see that TechnoPro Embedded has already moved into this bucket here. As I mentioned earlier, regarding Techno Live, that will be absorbed tomorrow, November 1.
Next page, we're looking at the quarterly performance and our progress here regarding the quarter 1 this year. We are moving very steadily with our business, in a nutshell. Next page is regarding the P&L summary. Please look at the structure here. In terms of revenue, it is up by JPY 6.6 billion versus last year, but the breakdown is: JPY 3.7 billion due to impact of engineer increase; and JPY 33 million due to impact of unit sales price increase, and I'll explain this later a little bit more; and also JPY 2.8 billion for the M&A contributions for the companies that came onboard last year. So the companies that were not in these numbers last year are now incorporated into our report this time. And that's why we see a big lift in the revenue here. As for the gross profit, compared to last year, we are up by 0.5 percentage points. And you can see the breakdown here as well, and I'll talk more in detail later on, but it's 0.2% up due to impact of utilization rate and also 0.3% up due to other reasons, other than engineer staffing. So what is other than engineer staffing, that is Boyd & Moore and also Pc Assist, these businesses that have totally different business models. Their gross profit tends to be very high. That's why you can see these results.
As for the SG&A, the companies that we acquired are now included. All in all, it is up by JPY 986 million. But if you can see the ratio themselves, it is the same level as last year. Moving on to the next page, balance sheet. First of all, the total asset is up by -- excuse me, so you can see that the first quarter -- at the end of first quarter, the net profit is JPY 2.08 billion, but the dividend is JPY 2.5 billion. And this is because we paid out the dividend. So that's why you see a very unique number for the first quarter right here. This explains why the total equity is down here. Number of engineers and utilization rates compared to last year were up by 415 engineers to 17,212, and this includes 809 non-Japanese engineers. Other than this, we have 994 engineers at overseas subsidiaries. So looking at the average utilization rate is 92.6%, which is 0.2% up compared to last year, but it's very much high already. So 1% is allocated to education and the remaining 3% are waiting to get the order from next month. So this is a very appropriate or actually very high -- quite high unit utilization rate, if I should give a color to how high it is. Next, moving on to assigned engineers by technology. And so, first of all, in terms of recruitment and turnover, we hired 870 engineers. And 35 engineers within this have come through TOQO acquisition, and we have 340 members who left. That is the turnover rate. Basically, the turnover rate is 8%. So it is 1 percentage point down compared to last year. We see an improvement here. Moving on to assigned engineers by technology. So we can see that the number of assigned engineers have increased in all technologies. Engineers increased in software development especially due to the acquisition of EDELTA and PROBIZMO. And for the assigned engineers by industrial sectors, you can see that we're doing very well in all industrial sectors. Next, Page 12, regarding the unit sales price. So when we look at the unit sales price for this first quarter, it is JPY 621,000. It has increased by 0.1%, up JPY 7,000 month year-on-year. Now we have 0.2 days a month down for fewer working days and shorter overtime hours, down by 0.7 hours, month -- per month. So that's why we have decreased JPY 7,000 month on a year-to-year basis.
Also, we've increased JPY 15,000 per month, driven by increased contract price. And also, we decreased JPY 11,000 month per due -- per month due to the first assignment of the newly hired new grads and mid-career engineers. So when you look at this chart, the key KPI, which is the price increase of engineers on assignment, the existing engineers, we've been able to achieve 3% up. So when you look at the ratio of the new graduates, it is 10.6% of the total engineers. This is 1% or actually almost 2% up compared to last year's. So you can see that the productivity or the utilization rate tends to go up a little bit slowly. Now we're looking at the 3% price increase for the existing engineers. 3% is healthy. Next, Page 13. This month, we acquired this company, Orion Managed Services, and we have an explanation about the company. So Orion Managed Services has 2 locations outside of London in the United Kingdom. It delivers engineering-related staffing and permanent recruitment services. The revenue is JPY 3.9 billion and EBITDA of JPY 300 million. This is the scale of the company.
So we have acquired 60% of Orion's outstanding shares, and the current management on board at Orion will continue to collaborate with us to run the business. So the aim of this acquisition is, of course, to expand our business in Europe, but also we have our hubs in Singapore and engineer -- especially the engineers in India, which we will like to utilize even further with this acquisition. These are some of the plans that we have ahead of us. We have 3 locations overseas: Orion, Helius, Boyd & Moore. All 3 locations are actually Commonwealth -- in Commonwealth locations. So it would be very easy for us to facilitate the engineers between these locations, getting the engineers from India and shifting them to these locations when necessary. This will be one of the major benefits of having this location. On the next page, we're talking about goodwill and PPA amortization, which is very often talked about on the press, the newspapers recently. And we have a history of being acquired by a private fund in the past. That's why we have JPY 29.2 billion on book first of all for the goodwill, but we worked on M&A, and currently, the goodwill is at JPY 35.3 billion. Now the goodwill -- always, we have the impairment test where we compare the market value of goodwill to the book value. But currently, the current market value of our goodwill is 5x higher than the book value, which means we are extremely healthy. Now for the companies that we have acquired before, the goodwill from these companies, actually if the cash generating unit or the cash model is the same as some of the businesses that we already have then we can build in the numbers. So that's why there is no sacrificing of the health at all. So we're talking about companies like Helius, Boyd & Moore, Pc Assist. These companies that have different business models. If they have different business models, we're looking not only at the goodwill, but also the PPA, the purchase price allocation, and we would amortize the PPA as well.
So currently, we have JPY 2.9 billion of PPA amount on the book right now. I mean, the amortization period is different, depending on the company, 10 to 14 years, and we are amortizing it steadily. So we are taking appropriate financial procedures, and we're very healthy.
Finally, we'd like to talk about some topics. Now, next month in November, we're going to publish our integrated report. In this report, we will try to enrich disclosure about nonfinancial information, allocating more pages to talk about these things. And we believe that human resource development is the most important agenda for TechnoPro Group, and that's why we have set the material issues for the TechnoPro Group, as you can see, on the left side. For each team, we have set a KPI, and we will disclose these initiatives that we have. And of course, we will follow up on them. So when we publish the integrated report next month, we very much hope that you will look through them.
We have other activities as well. We are fostering data scientists, leveraged by partnership with ALBERT and also partnership with i's FACTORY too. And also, at the Indian Institutes of Technology, Hyderabad, we're making a presentation to introduce our group to them, so that we can lead this to the promotion of hiring in the future. Now when we include Orion, the non-Japanese members will exceed 10% -- the headcount will exceed 10%.
I would like to stop here with my explanations. Thank you.
Next, we would like to move into the Q&A. We'd like to explain how we will like to receive your questions.
[Operator Instructions] We have Mr. Sekine from Daiwa Securities.
I'm Sekine from Daiwa Securities. Can you hear me?
Yes, we can.
I have 2 questions. I'd like to ask both of them at once. First of all, I want to talk about the profitability. This time, the staffing business is included now. So when you look at the gross profit ratio, it is up by 0.5%, I understand. But I'm wondering, going forward, for the nonstaffing businesses, when you expand that, now the operating profit rate, I think, I was wondering how much the operating profit can go up from the current base. So maybe you can talk about some of the short-term contributions that will push the profit up. That is my first question. And the other one is regarding the M&A strategies. So this time, when we look at Page 13, you mentioned that you have focused on the Commonwealth regions in the United Kingdom, and you've explained this to us on this map. When you expand the business here, I was wondering, would you continue to expand the business according to the current situations? Or are you going to have a totally separate overseas location in the future?
Thank you, Mr. Sekine. So in terms of the improvement of the profit in short term, first of all, the margin, as I mentioned, for Boyd & Moore, Pc Assist, both of them are very healthy. So we would like to maintain the current level right now. The main business is expanding right now. So we think that we would basically keep the current level. But when it comes to operating profit margin, as we explained to you in the global business by unit, the TechnoPro China business changed the management. And also, we're getting some midterm customers recently. Therefore, we're seeing very dramatic improvement as we speak today. So regarding Helius Technologies, we are actually seeing the operating profit over 10% in our forecast right now. So when we think about this, and when we look at the Others Japan companies, who are still in the higher single-digit operating profit margins, if we can continue to absorb this into the engineer staffing business, we believe that we can do a little bit better. It can be a little bit higher than the current levels right now. In the future, in the midterm, we would like to bring it up to 11% to 12%, which we have already communicated earlier, but also, in short term, we are willing to and expect to see improvement in numbers. M&A strategies is your second question. Currently, the China area, we have Asia and also the Commonwealth English regions. These 2 are the locations that we are focusing on right now. Now there are many cases right now, but -- in the United States too, but we're not really thinking about focusing on Americas right now. We're focusing on Europe and also Asia and, if possible, Australia, if we can go there as well. Anyway, we'd like to keep within the Union Jack line, when we expand our business overseas. I would like to conclude my answer here.
So for the second question regarding M&A, for example, what are the fields of business that you're going to pursue it? Are there any limitations because last time, you have bought the Singapore company that is IT software, I think, and also the company that you acquired this time is more about electronics, I guess, and, of course, you cover all the areas comprehensively. So it looks like your M&A strategy is comprehensive across sectors, but what is your thought?
Well, for the engineering services that we provide in a very wide variety, we would like to have the scope and also referral companies and also education companies that train these people. Those would be our scope of business.
[Operator Instructions]