We will establish a stable financial base and increase our enterprise value continuously.
In the fiscal year ended January 31, 2024, growing demand in the aftermath of COVID-19 contributed to record-high financial results, posting record-high net sales of ¥10,110 million (up 9.4% year-on-year). Profit in FY2024 also set a new record at ¥1,051 million (up 17.5% year-on-year). As a result, operating cash flows and free cash flows increased steadily to ¥1,126 million and ¥1,121 million, respectively. Additionally, earnings per share (EPS) reached ¥98.99, with a compound annual growth rate (CAGR) of 18.7% over the three-year period starting from the fiscal year ended January 31, 2021.
In our Medium-Term Business Plan, we have set the following business targets: net sales of ¥11.6 billion; an operating margin of 14.0%; over 1,600 engineers; and a return on equity (ROE) of over 20%.
In the engineer dispatching business, our main business, the following indicators are used. Net sales: the amount calculated by the number of operative personnel (number of engineers × utilization rate) × unit price of engineers × total work person-hours; cost of sales: labor costs for engineers assigned to our clients; and selling, general and administrative (SG&A) expenses: labor costs for engineers undergoing in-house training (standby status) and labor costs for other staffers. Thus, “number of engineers,” “utilization rate,” and “unit price of engineers” constitute our key management indicators.
To improve the future gross margin, it is essential to increase the unit price per engineer. We will aim to increase the unit price of engineers by enhancing their added value, such as through strengthening our training programs and offering extensive career support. We will also improve the operating margin by improving administrative efficiency, thereby minimizing the addition of administrative staff associated with the increase in engineers and suppressing the increase in the SG&A expense ratio.
We will continue to work toward realizing our Medium-Term Business Plan targets of increasing the number of engineers to 1,600 and maintaining a high utilization rate, unit price of engineers, and total work person-hours. By doing so, we will endeavor to grow net sales to ¥11.6 billion, and through appropriate management of the recruitment cost ratio relative to net sales, achieve an operating margin of 14.0%.
Given that the Company has no borrowings and has a high equity ratio, we attach importance to the cost of shareholders’ equity. We are mindful to keep the cost of shareholders’ equity at approximately 8% in managing our business. Whereas our Medium-Term Business Plan ROE target is of over 20%, we achieved an ROE of 25.3% in the fiscal year ended January 31, 2024, surpassing the cost of shareholders’ equity and realizing high capital efficiency. Going forward, we will continue to increase profit, the numerator of ROE. As for equity, the denominator, we intend to return profits as dividends while considering the balance with retained earnings.
For sustainable growth, we strive to ensure stable cash flows and efficient capital allocation. We aim to hold approximately three months’ worth of monthly net sales as cash on hand and reserve any surplus funds for future growth opportunities.
While our business model requires some initial investment, including personnel expenses until newly graduated engineers are operational, it does not necessitate significant capital investments. We believe that using surplus funds to finance some of the M&As will help us to adapt swiftly to various industry restructurings and strengthen our competitiveness.
In terms of profit distribution, we comprehensively consider future business developments, earnings, the management environment, as well as the strengthening of our management foundations, and positions the supply of stable dividends to our shareholders as top-priority management tasks. Accordingly, we have agreed to consider a payout ratio based on 50%. In addition, our basic approach is to continue to grow our profit this year, ensuring that the dividend remains at least at the same amount as the previous year and continues to increase.
The Total Shareholder Return (TSR) has been as follows.
FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | |
---|---|---|---|---|---|
TSR(Total Shareholder Return)(%) |
91.8 | 98.3 | 102.7 | 123.1 | 262.9 |
Comparison index: TOPIX total return index(%) |
110.2 | 121.2 | 129.7 | 138.8 | 183.9 |
As a company listed on the Prime Market of the Tokyo Stock Exchange, Artner is committed to managing and disclosing our management indicators appropriately, striving for transparent and trustworthy financial management to earn and maintain trust from our stakeholders. To this end, we consider it critical to focus on upgrading our management systems and improving business processes, as well as executing proper management of our financial figures and contributing to the Board of Directors’ decision-making.
We will continue to make efforts to improve our margins and capital efficiency, always conscious of generating cash, allocating cash, and returning value to our shareholders. Moreover, by differentiating ourselves from our competitors in financial management, we will aspire to achieve sustainable growth and increase our enterprise value.
May 29, 2024
HARIGAE Tomonori
Chief Financial Officer (CFO)