Persol Holdings Co Ltd

TSE:2181

Earnings Call Transcript 2022-Q1

[Kiyoshi Seki, executive]

I am Seki, CFO at PERSOL HOLDINGS. Thank you very much for your attendance today despite your busy schedule. Now I would like to commence the livestreaming of the consolidated financial results for the first quarter of the fiscal year ending March 31, 2022. Today, I will explain the financial results for the first quarter ended June 30, 2021, and update you on the revisions of the financial and dividend forecast for fiscal year 2021.

First, I would like to start with the financial results for the first quarter ended June 30, 2021. Our core business of Staffing SBU performed strongly in temporary staffing business. And we saw an increase in orders in BPO sector, including from public sector. And other SBUs recovered from the impact of COVID-19. As a result, net sales increased by 5.1%. Staffing SBU's operating profit increased, driven by growth of high-margin BPO sector. Other SBUs also increased profit, enabling us to achieve remarkable growth exceeding 40% year-on-year.

This slide shows net sales and operating profit by SBU. As you can see, thanks to the recovery from the impact of COVID-19, we saw an increase in sales and operating profit or a lower loss in all the SBUs. I will be explaining the details of the results of each SBU in the following slides.

First, the Staffing SBU. The core sectors in this SBU are temporary staffing and BPO. In BPO sector, public-related projects were very strong, with almost 20% increase in sales, contributing to 5.5% increase in sales for the SBU as a whole. The growth of high-margin BPO sector pushed up operating profit by 16.9%. Number of active staffs in core clerical and administrative staffing sector at the beginning of the month decreased year-on-year, but working hours increased significantly, pushing up net sales by 3.8%. As for working hours, we believe it increased year-on-year because of the very big decline triggered by the impact of suspension of businesses after the first emergency declaration last year. Number of active staffs is recovering steadily now, and we expect to see this trend will continue in this fiscal year.

I will now explain about BPO sector, which has continued to grow since last fiscal year and which we position as the growth driver for this SBU. The line graph at the top shows the BPO sector sales trend, with the first quarter of last fiscal year indexed as 100. Thanks to the contributions of public-related projects last fiscal year, we grew over 10%. We are continuing to see strong orders from the public-related projects this year. And as a result, we saw approximately 20% increase in net sales year-on-year in the first quarter. We are aiming to grow continuously next fiscal year and beyond and are enhancing our sales activities and business management structure to expand private sector projects.

The pie chart at the bottom shows the sales composition of BPO sector in Staffing SBU. While Staffing SBU sales are growing strongly, BPO sector, which accounted for around 12% in last year's first quarter, now accounts for 14% of the business. Such results demonstrate that our BPO sector is growing steadily. We expect this growth to continue in the future as well.

This is the financial results of Career SBU. The core businesses in this SBU are placement business and job recruitment media business. In the first quarter, job recruitment media business was strong. For the SBU overall, net sales increased 4.6% and operating profit increased 37.1% year-on-year. Placement business has about 3-month lead time till recording to sales, which means sales was compared to before the impact of COVID-19 became serious. As such, sales declined year-on-year. However, demand for workers with less experience and marketing and sales staffs was on a recovery trend, and number of informal appointments of workers increased by approximately 1.3x year-on-year. We are seeing a strong trend down.

In the next slide, I will explain the current recovery status. On the left graph, we have a number of jobs available, number of candidates who want to change jobs and job-openings-to-applicants ratio calculated based on number of jobs and candidates registered at our group's doda agent service. Number of jobs available started to decrease from last April due to the impact of COVID-19, but started to recover with last August being the bottom. Number of jobs available as of June 2021 recovered to 90% level compared to June 2019. This is a rapid recovery, considering that it took around 3 years to recover from the financial crisis in 2008.

The graph on the right shows the increase in number of orders, indexing February 2020 before the pandemic as 100 to show the corporate demand trends. Just like the trend of jobs available, there was a big drop around April last year, but number of orders recovered, exceeding the level of February 2020 in June 2021. Reflecting such recovery trend in number of jobs available and number of orders, we believe number of informal appointments of workers will recover back to pre-COVID-19 level in the second half of this year.

This is Professional Outsourcing SBU. In this SBU, we operate manufacturing and development outsourcing business in IT and engineering areas and temporary staffing business specialized in engineers dispatching. Following last fiscal year, demand for IT area continue to be extremely robust. Demand for engineering area was a challenge last fiscal year, but demand recovered. As a result, net sales increased by 6.8% and operating profit increased by 3.8x year-on-year. Number of engineers in IT area, which is a source of growth, increased by around 10% year-on-year, and their operating rate was maintained at a high level of close to 95%, contributing to approximately 10% increase in sales and a remarkable growth of profit. Engineering area was severely impacted by COVID-19 last fiscal year, but demand is recovering strongly, and sales increased by around 10% year-on-year. Operating rate recovered to 90%-plus, and we were able to become profitable in the first quarter this year. IT area, again, is robust in IT, engineering temporary staffing. We are enjoying increase in sales and profits due to increase in operating hours.

This is Solution SBU. We are currently in the investment phase as we are creating new businesses for the future growth of PERSOL Group. In this first quarter, thanks mainly to remarkable growth of Miidas, a job search app business, sales increased 129% year-on-year and operating loss shrank. On top of the growth driven by Miidas, reflecting the recovery trend of demand for hiring at companies, Cloud POS business, POS+, is also on a recovery trend. Number of companies introducing both of our 2 businesses of Miidas and POS+ are continuously expanding.

This is the Asia Pacific SBU. In Asia, our main businesses are temporary staffing business and job placement business under PERSOLKELLY brand. We also operate staffing business and maintenance business in Australia, mainly under Programmed brand. In this first quarter, sales decreased on a local currency basis. But because of the foreign exchange rate, our sales increased by 2% in Japanese yen. For profit, establishing an efficient business operation structure contributed, making both PERSOLKELLY and Programmed turn profitable as business units. However, after netting the corporate function costs of APAC, there is a small operating loss.

PERSOLKELLY sales recovered almost to the level before the pandemic in main regions, except India and some others. In Programmed, COVID-19 is still impacting the maintenance business because of the lockdown in some areas. But on the other hand, white-collar staffing service is growing, contributing to increase in sales of staffing business. As a result, both PERSOLKELLY and Programmed became profitable in the first quarter, and we believe it is possible to achieve full year profit for APAC overall. We are disclosing the breakdown of financial results of PERSOLKELLY and Programmed from this time. Please refer to the numbers by yourselves later.

Last of all, I would like to explain about Others, meaning companies directly managed by PERSOL HOLDINGS; and adjustment, meaning corporate and reconciliation adjustments. Under Others segment, net sales increased with strong performance of disabled persons hiring business and training business recovering from the COVID-19 impact. There is less operating loss as a result of increased sales and improved operational efficiency. Operating profit for Adjustment segment was recorded, as was the case in the first quarter of fiscal 2020, due to review and delay of investments related to the midterm management plan.

Now I would like to explain about the financial and dividend forecast for fiscal year ending in March 2022. As I explained, first quarter results far exceeded our initial plan. Reflecting that, we revised our first half sales forecast to JPY 505.2 billion from the original JPY 481.5 billion. Operating profit was revised up to JPY 22.5 billion from JPY 15.1 billion. Net profit was revised up to JPY 14 billion from JPY 7.9 billion. After reviewing the outlook including the status of COVID-19 and investment plans for next year's growth carefully, full year financial forecast will be disclosed at the first half financial results announcement. Therefore, the forecasts were changed to undecided.

This slide shows the gap of the upward revision of the current first half forecast and the initial forecast by SBU. As you can see, upward revision of Staffing SBU, which is extremely strong now, is the biggest. Having said that, upward revision was made in all SBUs as all SBUs performed strongly in the first quarter. We revised the figures for sales, operating profit and EBITDA forecast in the following slides, so please take some time to look at them later on your own.

I would like to skip to Slide 21 now. On Slide 21, in line with the revision of the forecast, we also revised our dividend forecast. Our basic policy for dividends is payout ratio of 25% against adjusted EPS. With the upward revision of the first half forecast, we also hiked interim dividends by JPY 5 to JPY 19 from the original JPY 14. And as we make the full year forecast undecided, year-end dividend is also undecided. We plan to disclose our full year financial and year-end dividend forecast when we announce our first half financial results.

This is all for today. There is an extension of the emergency declaration, and the pandemic is yet to be contained. There are uncertainties for the future. But we, as a group, will continue to do our best to achieve the first half forecast for fiscal 2021 and our midterm management plan. I ask for your understanding and encouragement. Thank you very much for today.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]