| WILL GROUP, INC. (6089) |
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Company |
WILL GROUP, INC. |
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Code No. |
6089 |
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Exchange |
First Section, TSE |
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Industry |
Services |
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Chairman, CEO |
Ryosuke Ikeda |
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HQ |
1-32-2 Honcho, Nakano-ku, Tokyo, Japan |
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Year-end |
End of March |
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URL |
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*Stock prices as of the close on December 9, 2016. Number of shares issued at the end of the most recent quarter excluding treasury shares. ROE and BPS based on previous term's results.
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* Estimates are those of the Company. Net Income means Net Income attributable to owners of the parent since FY 3/16.
* A 200 for 1 stock split was conducted in October 2013, and 2 for 1 stock splits were conducted in September 2014, September 2015 and December 2015. * Dividend and earnings per share data (DPS, EPS) for FY3/16 was taken from the FY3/16 securities report. FY3/17 DPS and EPS data have been adjusted to reflect the stock split to be conducted in December 2016. |
| Key Points |
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| Company Overview |
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Will Group companies includes the call center outsourcing services company Saint Media, Inc., the company specializing in manufacturing industry temporary staffing services FAJ, Inc., the assistant language teacher dispatch and elementary school foreign language class outsourcing company Border Link, Inc., the sales promotion company Creative Bank, Inc. and others for a total of 23 consolidated subsidiaries (As of end of September 2016). Main Subsidiaries Business Description
Saint Media, Inc.
FAJ, Inc. Retail store sales staff dispatch, call center operator dispatch, nursing care staff dispatch
Will Group Asia Pacific Pte. Ltd. (Singapore) Intermediary holding company overseeing overseas business
Manufacturing industry staff dispatch, consignment <Will Vision>
Creating a strong brand with high expected value and becoming No. 1 in the business fields of "working," "interesting," "learning" and "living."
Working:
Interesting: Learning: Life:
Support "Working"
Support "Interesting" Support "Learning" Support "Living" <Corporate History>
The predecessor of this corporate group was Saint Media, Inc., a company established in Kita-ku, Osaka-shi in January 1997, which operated telemarketing business. Saint Media, Inc., is now a consolidated subsidiary. In the meantime, in August 1997, Big Aid Co., Ltd. which undertook short-term businesses, was established in Naniwa-ku, Osaka-shi, and Mr. Ryosuke Ikeda, the current Representative Director and President, joined Big Aid Co., Ltd. as one of its co-founders in October 1997. In February 2000, the two companies merged, with Saint Media, Inc. being the surviving company, hoping to produce synergetic effects between telemarketing and task undertaking business, and Mr. Ikeda was appointed as the president of this new company. Since then, this business group has operated personnel services with Saint Media, Inc. as its core company, creating new businesses and restructuring existing businesses to keep pace with market changes. In April 2006, Will Holdings, Inc. (renamed to Will Group, Inc. in June 2012) was founded as a pure holding company, shifting to group business administration in order to improve the expertise of operational companies and optimize managerial resources. The Company was listed in the second section of the Tokyo Stock Exchange in December 2013, then in December 2014, designated to the first section of the Tokyo Stock Exchange.
<Business Description>
Will Group is cultivating various businesses within and outside of the human resources realm (Booked as earnings in the "others" business segment) that can become the next driver of growth and based upon its existing three core earnings drivers of "sales outsourcing", "call center outsourcing" and "factory outsourcing". During fiscal year March 2016, by business segments sales outsourcing, call center outsourcing, factory outsourcing and others accounted for 39%, 22%, 23% and 16% of sales respectively, and by service categories temporary staffing (hybrid temporary staff and general dispatching accounting for 30% and 34%), outsourcing, permanent placement services and others accounted for 64%, 25%, 3% and 8% respectively. The hybrid temporary staff and field supporter service is a unique service where full time employees of Will Group are dispatched to work alongside dispatched staff in the workplace and to provide supervision, guidance, and education.
Sales Outsourcing Business
Dispatching of temporary staff to provide storefront sales services at apparel, home electronic mass retail and cellular telephone shops and outsourcing of related business processes are conducted in this business segment. Creative Bank, Inc. was turned into a consolidated subsidiary in September 2015 and earnings derived from its sales promotion planning and operations are booked in this segment (A comprehensive support structure has been facilitated to provide sales promotion operations and sales support).
Call Center Outsourcing Business
Call center operators are dispatched to companies operating telemarketing services and call centers including communications companies and a growing number of finance industry companies. Will Group is also able to provide business process outsourcing of telemarketing functions because of its in-house call center.
Factory Outsourcing Business
The consolidated subsidiary FAJ, Inc. provides business process outsourcing and temporary worker dispatching services to the food manufacturing industry (Convenience store lunch boxes and other food side dishes), which is relatively stable and is not largely impacted by fluctuations in the economy, and the light work job applications (Inspecting, quality assurance, sorting, packing, others).
Others
Nine main services are conducted in this business segment including caregiver dispatch, Internet and IoT application human resources permanent placement (Headhunting), overseas business (human resources services in the ASEAN region), temporary office worker dispatch, overseas business office worker dispatch, sports industry permanent placement, assistant language teacher dispatch, information technology technician dispatch, childcare giver dispatch, and shared housing. And while the caregiver dispatch and temporary office worker dispatch services have already grown to become established businesses, Will Group is still in the investing stage in its other newer businesses.
 <Strengths: Hybrid Temporary Dispatch>
Registered worker dispatch in the general worker dispatch market requires employment contracts with the companies to which workers are dispatched for limited time periods and shrank by 37% over the period from the outbreak of the "Lehman Brothers Shock" in 2008 to 2010. However, the market has bottomed and is now trending sideways. Will Group also suffered declines in both sales and profits in the aftermath of the Lehman Shock, but its hybrid temporary staffing system has acted as a driver of growth and allowed both sales and profits to grow from fiscal year March 2011 onwards for six consecutive terms until fiscal year March 2016.
 Hybrid Temporary Staff System, A Weapon to Monopolize Orders, Expands In-Store Share
As explained earlier, the hybrid temporary staffing system is a unique service where full time employees of Will Group (Field supporters: FS) are dispatched to work alongside dispatched staff in teams in the workplace. Customer needs can be gathered and responses can be quickly implemented through the provision of this high quality service that uses highly loyal field supporters to manage the workplace. In addition, the client base can be fortified through acquisition of monopolistic orders (Orders where Will Group maintains a monopolistic share) and expansion of in-store share (The share of staff used at customers' operations dispatched by Will Group).
  In contrast, Will Group's hybrid temporary staffing system uses field supporters (FS) who are full time employees and dispatched to work alongside the dispatched workers at the same workplace. These field supporters can therefore provide supervision, guidance, and education to dispatched workers in the workplace. At the same time, this capability allows for reductions in client representatives' burden of work to supervise dispatched workers because Will Group is responsible for providing highly skilled full time employees who can respond to sudden changes in temporary worker assignments. Hybrid Temporary Staffing System: Strong Knowhow and "Do-How" Supported by Highly Skilled People
Superior field supporters are critical for the hybrid temporary staffing system because they need to lead the dispatched workers in the workplace to insure that they function as a team. Furthermore, 36 of 59 Will Group managers, including CEO Ryosuke Ikeda, have worked as field supporters. Also, supervisors without experience in the workplace commonly encounter difficulty getting dispatched workers to act as a team in resolving various issues in the workplace, which in turn may contribute to temporary workers quitting due to a lack of leadership. Therefore, it will take several years for competing companies to replicate Will Group's teamwork capability because of the time required to cultivate highly field supporters. |
| Medium Term Business Plan "Will Vision 2020" |
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<Important Strategies to Achieve Management Goals>
(1) Grow to achieve the top position in each of its current three main business realms.(2) Establish three new businesses (3) Create businesses of a certain scale outside of the realm of human resources services (1) Grow to Achieve the Top Position in Each of Its Current Three Main Business Realms.
Will Group identifies 1) expansion of its in-store share of dispatched temporary staff, 2) expansion of its operating area, and 3) diversification of its business realms as three key points in its business strategy. Concretely, the Company seeks to expand its in-store share of dispatched workers by leveraging its hybrid temporary staffing system. Furthermore, it will also leverage its credibility with clients to increase its profitability and strengthen its relations with clients by expanding its business service realm from hybrid temporary staffing to business process outsourcing (Increase the opportunity cost of switching to competitors). Will Group will also conduct efforts to expand its service area, as reflected by its target to grow facilities (Staff hiring and training facilities) from 63 at the end of the previous term to 105 at the end of fiscal year March 2020 (73 expected at the end of fiscal year March 2017) along with its in-store share.
  The growing demand for caregivers dispatching services arising from a shortage of caregivers has allowed Will Group to expand the number of its facilities from 2 and 9 at the end of fiscal years March 2014 and 2015 respectively, and by another 17 to 26 as of end fiscal year March 2016, and sales to grow from ¥0.5 to ¥2.6 billion from fiscal year March 2015 to 2016 respectively. According to the Ministry of Health, Labor and Welfare "Supply and Demand Data (Provisional) for Caregivers to 2025", there will be a shortage of slightly less than 380,000 caregivers by 2025. Will Group seeks to resolve this shortage of caregivers and to provide a diverse range of human resources solutions including caregivers who can work on a part or full time basis. Will Group expects to be able to open up to 50 facilities nationwide and is promoting aggressive openings in fiscal year March 2017. And while frontloading of anticipatory investments is expected to prevent profits from being realized in the near term, profits are expected to grow in line with sales once the opening of facilities has been completed. Permanent placement of staff specializing in Internet and IoT industry applications is expanding steadily. And while this service's impact upon sales is small, its contribution to profits is large. Permanent placement of C-suite executives is being provided in the "NET Jinzai (human resources) Bank" brand service and this division's manager has been selected to receive the "Headhunter of the Year" award for the second consecutive year in a competition held by BizReach, Inc. However, anticipatory investments are expected to continue in the near term.   (3) Creating Businesses of a Certain Scale Outside of the Human Resources Services
The following points are part of the strategy going beyond the end of the Medium Term Business Plan to 2030.
① Conduct venture capital investments through corporate venture capital (Six companies in FY3/16)
② M&A and minor investments (Two companies in FY3/16)
③ Alliances (One company in FY3/17)
④ New business developed internally (Share housing realm, etc.)
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| First Half of Fiscal Year March 2017 Earnings Results |
 Sales Rise 40.3%, Operating Income Declines 3.8% Year-On-Year
Sales rose by 40.3% year-on-year to ¥27.872 billion on the back of strong increases of 62.8% and 25.3% year-on-year in general worker dispatching and hybrid temporary staffing system sales respectively. In addition, a smooth shift from hybrid temporary staffing system to business process outsourcing with even higher profitability has allowed negative influence of the completion of large sales outsourcing projects to be absorbed and to allow outsourcing sales to rise by 5.4% year-on-year. At the same time, permanent placement sales rose by 21.7% year-on-year and caregiver dispatching sales rose by 5.1 times year-on-year.Operating income declined by 3.8% year-on-year due to the completion of highly profitable large sales outsourcing projects and the influence of higher labor and hiring expenses arising from aggressive hiring conducted during the term. However, both sales and profits during the July to September three month period rose from the same period in the previous term. A decline in extraordinary loss due to the disappearance of valuation losses associated with investment securities booked in the previous term allowed net profits to rise by 9.3% year-on-year to ¥286 million. In addition, EBITDA, which is a key management benchmark of Will Group, rose by 8.0% year-on-year from ¥722milion in the previous term to ¥780 million in the current term (Equivalent to EBITDA margins of 3.6%. and 2.8% respectively). During the first half, the total number of employees rose by 212 (Including 113 new graduates, 45 employees acquired through M&A, and 54 mid-career hires) from the end of the previous term to 1,141, and the number of field supporters rose by 39 to 326.  Sales outsourcing
While sales rose by 25.9% year-on-year to ¥9.414 billion, operating income declined by 4.0% year-on-year to ¥560 million. The contribution of the sales promotion planning and operation company Creative Bank, Inc., which was converted to a consolidated subsidiary in August 2015, and the higher dispatching sales offset a decline in outsourcing sales of Saint Media, Inc. and allowed both sales and profits to increase. With regards to profits, amortization of goodwill from Creative Bank was absorbed, but reductions in gross profit margin due to termination of highly profitable projects performed by Saint Media and increases in labor and hiring expenses caused operating income to decline.
 Call center outsourcing
Sales and operating income rose by 29.8% and 5.5% year-on-year to ¥6.012 billion and ¥297 million respectively. Increases in dispatching of call center operators caused by growing demand for after sales services for smartphones allowed Will Group's in-store share to expand. The share of sales of financial industry clients rose as efforts to cultivate business from clients in this and the telecommunications industries were implemented. With regards to profits, higher sales and gross profits allowed increases in labor expenses to be absorbed.
 Factory outsourcing
Sales and operating income rose by 42.7% and 23.7% year-on-year to ¥6.520 billion and ¥294 million respectively. Along with the expansion in facilities, expansion in the share of business derived from existing customers primarily in the food industry and cultivation of new clients are progressing smoothly. With regards to profits, higher labor and hiring expenses were absorbed by increases in gross profit derived from the strong growth in sales.
 Others
Sales and operating income rose by 86.2% and 86.5% year-on-year to ¥5.925 billion and ¥82 million respectively. The increase in the number of facilities of 9 from 17 at the end of fiscal year March 2015 and 2016 respectively to 26 at the end of the first half of fiscal year March 2017 contributed a steady expansion in caregivers dispatching (Number of facilities is expected to rise to 30 by the end of fiscal year March 2017), and cultivation of new clients in administrative office worker dispatch also expanded steadily. The consolidation of Oriental Aviation International (Singapore) and Asia Recruit Holdings in February and June 2016 respectively also contributed to earnings. With regards to profits, ongoing anticipatory investments for the caregivers dispatching business contributed to an expansion in losses of this service, which were offset by higher profits of the assistant language teacher dispatch and contributions from Oriental Aviation.Oriental Aviation International dispatches aviation maintenance technicians to airline companies operating out of Singapore Changi Airport (All technicians are licensed by the Singaporean Government). In addition, Asia Recruit Holdings provides permanent placement of personnel in major cities in Malaysia including Kuala Lumpur, Johor Bahru and Melaka.    (4) First Half Topics
Asia Recruit Holdings, Providing Human Resources Services in Major Cities of Malaysia, Turned Into Subsidiary in June 2016
Asia Recruit Holdings provides human resources permanent placement (headhunting) and worker dispatching services in major cities throughout Malaysia through a subsidiary. Will Group converted this company into a subsidiary to enter and provide services in major cities in Malaysia (Will Group Asia Pacific Pte. Ltd. and 60% of the shares of a Malaysian subsidiary were acquired at a cost of ¥133 million including ¥6 million for due-diligence costs). Will Group Asia Pacific Pte. Ltd. has already transferred its Japanese staff to this local subsidiary to cultivate Japanese companies operating locally as clients.
Internet, IoT Human Resources Permanent Placement Service Spun Off to Establish NET Jinzai Bank, Inc. in September 2016
The human resources permanent placement service specializing in the Internet and IoT industry applications conducted by the subsidiary Saint Media was spun off to establish NET Jinzai Bank, Inc. as a 100% owned subsidiary of the Will Group. This move was taken to be able to respond with speed and flexibility to the fast paced changes in the Internet and IoT industry, and as a means of matching achieving fast growth by matching the fast paced growth of its customers.
Corporate Capital Investment Track Record in the First Half of Fiscal Year March 2017
Will Group established a fund with a maximum limit of ¥300 million to conduct venture capital investments. And as part of its track record during the current first half, it has invested in DVERSE Inc., which develops and sells VR/AR software to the civil engineering and construction industry, and MiRteL Co., Ltd., which conducts genetic testing for prevention of cancer, heart disease, lifestyle diseases and other intractable diseases.
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| Fiscal Year March 2017 Earnings Estimates |
 Full Year Estimates Remain Unchanged, Call for Growth in Sales and Current Profits of 26.6% and 9.6% Year-On-Year
Will Group's earnings estimates call for sales to rise by 26.6% year-on-year to ¥57.0 billion. Sales of factory outsourcing service, which are provided to clients with manufacturing facilities nationwide and the logistics industry, are expected to rise by 20.4% year-on-year, outsourcing sales of Creative Bank are trending favorably and expected to rise by 13.5% year-on-year, and sales of call center outsourcing services are benefitting from strong demand for operators to conduct smartphone after sales services are anticipated to rise by 15.4% year-on-year. In addition, other business segment sales are expected to rise by a strong 81.0% on the back of expansion in caregiver dispatching accompanying the expansion in facilities.Operating income is expected to rise by 11.9% year-on-year to ¥1.6 billion. Increases in anticipatory investments arising from fortification of information technology investments and hiring structure, and in goodwill amortization are expected to be absorbed by the higher sales. While a lack of subsidies to be booked during the current term (¥65 million booked in the previous term) is expected to lead to a decline in non-operating income, improvement in extraordinary income (Disappearance of valuation losses on investment securities of ¥110 million in the previous term) is expected to allow net profits to rise by 22.8% year-on-year to ¥850 million. At the same time, EBITDA, which is an important benchmark of the Company, is expected to rise by 20.8% year-on-year to ¥2.040 billion.  (2) Shareholder Returns
A ¥10 per share dividend is expected to be paid at the end of the term. After the 2 for 1 stock split conducted on December 1, 2016 is considered, the actual dividend is ¥20 per share. Consequently, the total dividend payment remains in line with the previous term of ¥20 per share, including normal and commemorative dividend payments of ¥10 each. Consequently, this year's dividend payment reflects the replacement of the ¥10 commemorative dividend payment with an increase in the normal dividend payment of ¥10 per share. In addition, the shareholder benefit program will be fortified, with shareholders holding between 100 to 200 shares and over 200 shares for over three years being given Quo Cards (Prepaid cards) worth ¥2,000 and ¥4,000 respectively. Previously, shareholders holding over 100 shares were given Quo Cards amounting to ¥1,000.As explained previously, a comprehensive payout ratio of 48% is anticipated in the current term as Will Group implemented a share buyback at the end of the first half totaling ¥317 million. The Company will endeavor to return profits to shareholders and maintains a comprehensive payout ratio target of 30% by fiscal year March 2020. Moreover, comprehensive payout ratio reflects the combined total of dividends and share buybacks relative to net profits.  (Note 1) Holding period is based on the shareholder registry date of March 31 every year, and applies to shareholders who have held share for over 1 and under 2 years and appear on the registry two times, shareholders who have held share for over 2 and under 3 years and appear on the registry three times, and shareholders who have held share for over 3 years and appear on the registry four times.
(Note 2) Shareholders holding over 200 shares for under one year are treated the same as the pre-fortified program. |
| Conclusions |
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In addition to the above-mentioned three business segments, the caregivers dispatching business is steadily expanding and may grow to become the fourth business segment. Furthermore, the caregiver dispatching business is a critical part of the Medium Term Business Plan strategy to achieve ¥100.0 billion in sales by fiscal year March 2020. In the caregivers dispatching business, inexperienced workers are hired, trained and dispatched to provide support to care workers. Flexibility in working conditions including part time and full time positions is provided to facilitate a worker friendly work environment. A key point in realizing the goals of its Medium Term Business Plan is the ability of Will Group to cultivate caregivers and achieving success in its efforts in each business segment. A close watch should be paid to Will Group's various efforts to expand its businesses in the human resources realm against the backdrop of growth in overseas business accelerated through M&A activities and growing demand for management staff in Internet and IoT venture companies. |
| <Reference: Regarding Corporate Governance> |
 ◎ Corporate Governance Report Updated on Jun. 21, 2016
<Disclosure Based on the Principles of the Corporate Governance Code (Excerpts)>  Principle 1-4 (A) Policy on strategically held shares
Comprehensively considering creation of business opportunities, and establishment, maintenance and enhancement of transaction and cooperative relationships, and the like, our company will hold shares when strategically necessary. (B) Criteria for the execution of voting rights relating to strategically held shares
Our company will determine whether or not to exercise our voting rights based on various perspectives such as medium- to long-term improvement of corporate value and enhancement of shareholder return, with sufficient respect for the management policy, strategy, and the like of companies that we invest in, not based on pros and cons in a uniform manner. Principle 5-1 (1) In our company, the president and the director in charge of the Administration department proactively have dialogue and conduct IR activities to facilitate good bilateral communication with shareholders, with weight attached to fairness, accuracy, and continuity of the management strategy, business strategy, financial information, and the like.
(2) Various departments, including not only the Administration department, but also the Management planning department, General Affairs department, Financial department, Accounting department, Legal department, and personnel in charge of each business, organically cooperate with each other to disclose information in a timely, fair and proper fashion.
(3) Our company endeavors to enrich company information sessions for shareholders and the like, as means of dialogue.
(4) Our company appropriately and effectively feeds back opinions or concerns of shareholders, and the like, obtained through dialogue with them to each meeting structure of our company by the president or the director in charge of the Administration department.
(5) In addition to the silent period in accordance with the disclosure policy, our company thoroughly enforces the regulations for management of insider information.
Disclaimer
This report is intended solely for information purposes, and is not intended as a solicitation for investment. The information and opinions contained within this report are made by our company based on data made publicly available, and the information within this report comes from sources that we judge to be reliable. However we cannot wholly guarantee the accuracy or completeness of the data. This report is not a guarantee of the accuracy, completeness or validity of said information and 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) 2017 Investment Bridge Co., Ltd. All Rights Reserved. |
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