Past Message from Our President and CEO
Market Environment for Reporting Period 60 (Fiscal Year Ended January 31, 2022)
While the pandemic continues, there is an increasing demand for engineers in the fields of electric vehicles (EVs), fuel cell vehicles (FCVs), autonomous driving, and semiconductors.
Our client companies have widely completed establishing their responses to adapt to the post-COVID era, and as a result, demand for engineers has heightened, despite the prolonged pandemic. In particular, there was a strong demand for engineers for electric vehicles (EVs) and fuel cell vehicles (FCVs) related to the transition to carbon neutrality, as well as autonomous driving and semiconductors, and these were the year’s driving forces. These areas were characterized in particular by a greater need for software than for hardware.
Summary of Business Results for Reporting Period 60 (Fiscal Year Ended January 31, 2022)
The number of operative personnel exceeded that of the previous reporting period, resulting in double-digit growth in both sales and profit in the period. This marked the eighth consecutive period of growth in both sales and profit.
As in Reporting Period 59, we implemented a sales policy of prioritizing placement to maintain the utilization ratio in Reporting Period 60, resulting in a slightly lower unit price per engineer than in the previous period. But a year-on-year increase in the number of operative engineers compared to the previous period. Demand for inexperienced engineers stagnated in Reporting Period 59, but gradually recovered in Reporting Period 60, and newly graduated engineers were placed with client companies at close to normal levels. There was an increase in the percentage of contracting business in total company sales.
Based on the above, Reporting Period 60 saw an eighth consecutive year of growth in both sales and profit, with sales of ¥8,102 million (up 12.9% year-on-year), operating profit of ¥1,010 million (up 13.9% year-on-year), ordinary profit of ¥1,032 million (up 13.4% year-on-year), and profit of ¥728 million (up 15.9% year-on-year). We believe that concerted company-wide efforts in the midst of a challenging business environment generated this momentum.
Forecast for Reporting Period 61 (Fiscal Year Ending January 31, 2023)
Assumed a completion date for the placement of new graduate engineers at roughly the same time as in the normal pre-pandemic environment.
We have based the forecast on the assumption that the environment will continue to be influenced by the pandemic in Reporting Period 61. Beginning with Reporting Period 61, the timing of the completion of the placement of new graduate engineers who joined the Company in April 2022 is set at roughly the same time as in the normal pre-pandemic environment.
In the recruitment of new graduates, we used to recruit a balanced number of students in the fields of Software, Electronics, and Machinery, but are now placing more weight on Software and Electronics in line with current market demand. The number of new graduate engineers hired in April 2022 was 166, down from the previous year, as we were unable to hire enough Software and Electronics to fill the reduction in Machinery hires. We will aim to supplement the unfilled number of new graduates with career hires.
Based on the above, the Company expects to post higher sales and profits for Reporting Period 61, with sales of ¥8,798 million, operating profit of ¥1,147 million, ordinary profit of ¥1,150 million, and profit of ¥797 million.
New Medium-Term Business Plan (Fiscal year ending January 31, 2023 to Fiscal year ending January 31, 2025)
• Increase career hires, aiming at carbon neutral projects.
• Aim for return to higher unit prices and revenue.
In the new medium-term business plan for the fiscal year January 2023 to January 2025, we incorporated a number of initiatives based on the assumption that the with-COVID-19 era will continue. Continuing from Reporting Period 60, we will position electric vehicles (EVs) and fuel cell vehicles (FCVs) related to the transition to carbon neutrality, autonomous driving, and semiconductor-related markets as strategic priority markets, and will concentrate on recruitment, training, and sales activities focusing on such markets.
These projects will require engineers with high potential, and competition for employment of such engineers is expected to become increasingly intense. Therefore, in order to secure talent that meet our employment criteria, we will adjust our recruitment policy—which had been heavily weighted toward new graduates—to balance the ratio of new graduates to career hires at 1:1 during the new medium-term three-year period. By assigning our engineers to strategic priority markets, we will be able to obtain higher unit prices, which will lead to higher revenue. Reporting Period 61 is the first year of the new recruitment policy, under which we will be increasing recruiting staff and expenses to achieve 160 new graduate hires in April 2023 and 110 career hires during Reporting Period 61.
Transition to Prime Market and Initiatives to Achieve Listing Maintenance Criteria
The Company chose to move to the Prime Market in order to address the competitive recruitment environment, and is aiming to satisfy the listing maintenance criteria within the new medium-term three-year period.
The main reason for our initial listing in 2007 and subsequent listing in the First Section of the Tokyo Stock Exchange was that major companies in our industry were listed in the same section on the exchange, and we considered it to be a necessary condition to compete in the recruitment of engineers. Upon the Tokyo Stock Exchange revising its market classification in April 2022, we opted for the Prime Market for the same reason that we chose the First Section of the Tokyo Stock Exchange. We saw it as imperative for us to take on the challenge to satisfy the listing maintenance criteria for our listing on the Prime Market as major competitors had chosen the Prime Market, as well as it creating an opportunity for us to further enhance our overall corporate strength.
The item that remains unsatisfied as of the transition standard date for the Company’s Prime Market listing maintenance criteria is the tradable share market capitalization. To achieve these criteria during the new medium-term three-year period, we will a. increase the ratio of tradable shares, b. increase earnings per share (EPS), and c. increase shareholder returns. As for the increase of the ratio of tradable shares, the Company will aim to raise it to 70% through liquidation of shares held by existing shareholders. With respect to the increase of earnings per share (EPS), we will grow the scale of our business, conduct M&A activities to acquire new areas of expertise, and reinforce the development of subcontractors and business partners. And, concerning the increase of shareholder returns, we will increase the dividend payout target ratio to 50% from the current 30%. Moreover, we will also consider raising total return ratio, including by way of share buybacks, if we cannot expect large investments such as M&A. We will raise our share price through an increased price-to-earnings ratio by enhancing your evaluation of expectations for Artner.
To Our Shareholders and Investors
Upon the 60th anniversary of the Company’s founding and the transition to the Prime Market, we will transform into a Reborn Artner by taking on new challenges.
We would like to thank our shareholders and investors for their continued support.
Reporting Period 61 marks the 60th anniversary of the Company’s founding, and this milestone year is also the beginning of the new medium-term business plan. Moreover, it is imperative that we satisfy all remaining unachieved items on the listing maintenance criteria, following our transition to the Prime Market. We will create a Reborn Artner through our endeavors to resolve these corporate challenges.
Since share price reflects overall corporate strength, we will aim to achieve our target share price by further enhancing our overall corporate strength. We humbly ask for the continued understanding and cooperation of our shareholders.
With the aim of edging closer to the dividend payout ratios of our peer companies, we have raised the 30% target standard to 50%. The dividend for Reporting Period 60 will be ¥34.5 per share, consisting of an interim dividend of ¥14.0 and a year-end dividend of ¥20.5 yen (up ¥6.5 from the previous forecast of ¥14.0). For Reporting Period 61, the Company plans to pay an interim dividend of ¥19.0 and a year-end dividend of ¥19.0, for a total of ¥38.0 (up ¥3.5 over the previous year). We at Artner are grateful for your continued understanding, support and cooperation.
April 22, 2022
President and CEO SEKIGUCHI Sozo
