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Tanabe Management Consulting Co., Ltd. (JP-9644) Tokyo Stock Exchange First Section ( I )

2018-08-06  提供機構:FISCO  作者:FISCO  點閱次數:2

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◆Summary

Outlook is to continue to achieve steady profit growth on the twin axes of management consulting and SP consulting

Tanabe Management Consulting Co., Ltd. <9644> (hereafter, also “the Company” or “Tanabe”), which is approaching the 61st anniversary of its foundation, is a pioneer and a major presence in private sector management consulting in Japan. Its corporate mission is to “assist in the creation of ‘first call companies’ that will be selected even 100 years from now.” It is aiming to realize sustainable, stable growth by expanding its “domain (business strategy) x function (organization strategy) x region (regional strategy) team consulting.” As its medium-term business strategy, the Company is promoting a “Consulting & Conglomerate (C&C) strategy,” and from the stage up to the present time, of “a strategy to diversify consulting domains,” it is evolving to a stage of accelerating “a consulting platform strategy” that utilizes its strength of developing bases in a business firm format in 10 major cities nationwide. It practices strong, debt-free management, and its strengths also include its solid financial structure with an equity ratio of more than 80%.

1. FY3/18 results

Both sales and profits increased in the FY3/18 results, with net sales rising 4.9% year-on-year (YoY) to ¥8,797mn and ordinary profit growing 5.5% to ¥965mn, while both results were also above the Company forecasts (net sales of ¥8,550mn and ordinary profit of ¥945mn). In the management consulting business, the number of contracts for management consulting, which includes business strategy, business succession, and branding strategy, and for human resources development consulting, steadily increased. Also, in the SP consulting business, high-value-added SP consulting performed well, and the Company achieved higher sales and profits in both businesses. The main KPI also steadily increased, with the number of team consulting* contracting companies rising by 80 YoY to 946 companies and net sales growing 8.1% to ¥3,816mn.

* Team consulting = management consulting + human resources training consulting + SP consulting

2. FY3/19 outlook

The forecasts for the FY3/19 results are for net sales to increase 2.3% YoY to ¥9,000mn and ordinary profit to grow 2.6% to ¥990mn. In the management consulting business, the Company is aiming for higher sales and profits through improving the management consulting added value and increasing the number of contracts. In this fiscal period, it will newly add two services, “M&A consulting” and “stage-up consulting” to its service menu for small- and medium-sized enterprises (SMEs), and strengthen measures for these services. For “M&A consulting,” it provides consulting for companies on the buyer side that are aiming for growth, and the outlook is for a few contracts per year. Also, in the SP consulting business, it is aiming to increase sales and profits by strengthening proposals for “sales promotions and Web promotions consulting” and “SP design,” and by improving added value and increasing the number of contracts.

3. Medium-term business plan

The Company newly formulated “Tanabe Vision 2020 (2018 to 2020)” with the slogan of “from change to growth” in order to realize sustainable growth from 2020 onwards. As the growth strategy for the future, it is advancing the “creation of a consulting platform” on a nationwide scale and aiming to grow team consulting sales while expanding the customer base. The FY3/21 results targets are net sales of ¥9,600mn and ordinary profit of ¥1,060mn. For the average annual growth rates, the policy is to continuously achieve steady growth of around 3% for both net sales and ordinary profit. Also, it plans to increase the number of consultants, who will be the driving force behind growth, from 218 people at the end of FY3/18 to 291 people at the end of FY3/21. It will not only employ new graduates, but also strengthen its recruitment of mid-career hires with practical work experience in various industries and develop each as consultant candidates at an early stage, thereby further strengthening its business foundation.

4. Shareholder return policy

As its policy to return profits to shareholders, the Company pays dividends and also provides gifts to shareholders. Its benchmark for dividends is a payout ratio of 60% and it determines the dividend while considering results and other factors. In FY3/19, it plans to increase the dividend by ¥1.0 to ¥42.0 (for a payout ratio of 53.5%), for the seventh consecutive fiscal year of higher dividends. It also intends to continue to increase sales, profits and dividends in the future. In addition, the Company provides a gift to shareholders on record as of the end of September of its original Blue Diary scheduler (worth about ¥3,000). The dividend yield was about 2.0% and the investment return was around 3.4% including the shareholder gift, based on the share price of July 10, 2018 (¥2,154).

◆Business overview

A major management consulting company that is continuing to grow based on “business strategy x organization strategy x regional strategy team consulting”

1. Company overview

The Company, which was founded in Kyoto in 1957, is a pioneer and a major presence in Japan for private-sector management consulting. It aims to achieve sustainable growth together with its customers by providing them with new consulting value through promoting its Consulting and Conglomerate (C&C) strategy (creation of a consulting platform). Its corporate mission is to “assist in the creation of first call companies” that will be selected first even 100 years from now through creating more value.

As a strategic partner, the Company provides consulting services for customers nationwide for the full scope of their management needs, from formulating business strategies to organizational design, building management systems, and developing next-generation management operations, as well as human resource training consulting, from executives and business successors through to new recruits, and also SP (sales promotion) consulting. It is characterized by its provision of “team consulting” in which it selects the optimum number of specialist consultants and forms them into a team in accordance with the issues facing the customer, from the viewpoint of “business x organization x region.”

It conducts its business from its bases in 10 major cities nationwide, from Hokkaido to Okinawa. The features and strengths of the Company include that, within its industry, only it conducts a nationwide business in a business firm format and only it can provide consulting services tailored to each specific region. Also, in April 2017 it raised the sta­tus of the Tokyo Headquarters to the Tokyo Head Office. By establishing a dual head office structure with the Tokyo Head Office responsible for IR and PR, recruitment, and M&A functions, as well as the Strategic Comprehensive Institute, which plans and produces various consulting services, analyzes information from consulting sites and elsewhere, and disseminates information to member companies and society, along with the Osaka Head Office, the Company is aiming to supplement its customer service nationwide and achieve further growth.

2. Business details

The Company has two business segments, the management consulting business and the SP (sales promotion) consulting business. In terms of the percentages of total net sales (in FY3/18), the management consulting business provided 57.1% and the SP consulting business 42.9%, but the majority of operating profit is provided by the management consulting business, at 86.8%. This is because the SP (sales promotion) consulting business includes the purchases and sales of promotions products and other products, and therefore its profit margin is comparatively low. However, in this business, the Company is focusing on the high-value-added consulting domain, and in the last few years its operating margin has also been trending upward.

The Company’s customer creation model is to have various points-of-contact with new customers, including via referrals from existing customers, the Web, referrals from financial institutions, and new sales, to hold strategy domain & management workshops and seminars for them, and to attract as customers those companies with a variety of management issues, which leads to contracts for team consulting (management consulting, human resources development consulting, and SP consulting), which in turn leads to the creation of loyal customers. The mechanism is that finally, the customer companies use the Company’s various services and aim to become first call companies. Over the last few years, it has increased the topics for its strategy domain & management workshops, and among the new customers, it seems that around 70% are companies that attended these workshops and various types of seminars. Also, some customers are members of services, including for the email magazine, FCC Academy Cloud (digital education), and FCC REVIEW (management information magazine).

(1) Management consulting business

Under its management consulting business, the Company breaks down sales into the following categories: management consulting, human resource development consulting (including customized education programs and human resource development programs for alliance partners such as partner financial institutions and accounting firms), seminars (targeting audiences from executives and business successors through to new recruits,), FCC workshops (workshops covering various strategic domains and management topics, “first call company” executive groups), and alliances. Of these, management consulting services account for more than 50% of segment sales.

For management consulting, the Company mainly targets medium-sized companies, to which it provides various consulting services, including formulating and implementing medium-term management plans; recruiting, training, and utilizing human resources; business succession (building next-generation management structures); establish­ing FCC academies (corporate universities); and branding strategies. Recently, there has been an increase in the need to conduct M&A among customer companies that are aiming to diversify their businesses, so the Company also plans to incorporate a full range of M&A consulting services into its service menu and expand this business while utilizing its network, such as with its partner financial institutions.

(2) SP (sales promotion) consulting business

The Company’s sales promotion consulting business includes sales promotion consulting (covering everything from helping clients establish promotion strategies to support for the execution of those strategies, as well as SP designs by consultants specializing in premium novelty goods), the planning and sales of SP tools (novelty goods created by adding the client company’s name to a standard item), the planning and sales of “diaries” (business planners, calendars). Tanabe is currently working with over 3,000 companies (providing services as well as promotional goods) that are looking to boost their brand image, including not only medium-sized companies but also large companies as well.

Recently, it has been focusing on consulting targeting “the children and child-rearing families markets,” and the needs of customer companies are great from the viewpoints of the possibilities for this market, in which customers can be expected to be customers in other domains in the future, and also for CSR. It also started to focus on web promotion consulting for BtoB companies in regions with branding problems. Furthermore, it is progressing alliances with the management consulting business, in which management consultants support customer companies’ business and organization strategies while SP consultants support the development of product sales channels, branding and a corporate identity. While management consulting remains the mainstay business, a strength of the Company is that, unlike other consulting companies, it is equipped with design and sales functions, enabling it to provide SP consulting.

In the SP consulting business, diary sales, which constitute approximately 30% of total sales, are concentrated in Q3, so the quarterly revenue trend in a typical year peaks in Q3.

◆Result trends

Against the backdrop of the growth in consulting demand, in FY3/18 achieved higher net sales and ordinary profit for the 8th consecutive fiscal period

1. FY3/18 results overview

In FY3/18, net sales increased 4.9% YoY to ¥8,797mn, operating profit rose 6.6% to ¥936mn, ordinary profit grew 5.5% to ¥965mn, and net profit increased 5.8% to ¥675mn. Each result exceeded the initial Company forecast, and this was the eighth consecutive year of higher sales, operating profit and ordinary profit.

Aided by the slow but steady recovery in the domestic economy, net sales finished up 6.6% YoY at the management consulting business and were up 2.7% at the sales promotion consulting business. Driving growth at the manage­ment consulting business was growing demand for consulting in the areas of business strategy, business succession planning, and human resource development. Sales promotion consulting benefited from an ongoing increase in companies looking for expert advice and assistance to grow sales and improve their branding. Operating profit rose 6.6% as benefits stemming from strong top-line growth absorbed expenditures for recruiting new consultants, investments in IT and promotion, and other strategic investments. As of the end of March 2018, the Company had a total of 218 consultants, an increase of 3 over March 2017.

Higher sales and profits that exceeded the Company forecasts in both the management consulting business and the SP consulting business

2. Segment trends

(1) Management consulting business

In the management consulting business, net sales increased 6.6% YoY to ¥5,021mn and segment profit rose 5.7% to ¥1,336mn. At the end of FY3/18, the number of management consultants (including human resources development consultants) had increased by 6 on the end of the previous fiscal year to 160 people. Due to the increases in recruitment expenses and personnel expenses, the segment profit margin declined 0.2 of a percentage point, but compared to the Company forecasts, net sales were 4.2% and segment profit 5.2% above their respective forecasts.

Looking at how sales trended by product and service, sales in the mainstay management consulting were strong, up 7.3% YoY. With an eye to post 2020, there continues to be significant needs for consulting on topics such as “the formulation and implementation of a medium-term management plan (vision), “the recruitment, development, and utilization of human resources,” and “business succession and the development of next-generation manage­ment teams (junior boards).” In terms of regions also, overall sales are increasing not only from the three major metropolitan areas, but also from the regional bases. In addition, as a new measure it is progressing, the Company has introduced “the establishment of FCC academies (corporate universities)” into a cumulative total of around 50 companies, which contributed to the increase in sales. As a result, the number of management consulting contracts, as the average during the period, rose by 21 YoY to 457 contacts, which is a new record high.

Sales from human resource development consulting rose 4.7% YoY, driven by growing demand among client companies for the training of future executives and customized workshops for current executives. The Company’s alliance partners among financial institutions and accounting firms also contracted for additional employee training to give their people the consulting skills necessary to help the companies they finance and advise grow and prosper.

Seminar sales rose 9.6% YoY. The main reason for this were the increases in the number of people attending the start-up seminars for new company employees, which were held in April 2017 and March 2018, and the Team Leader School, which was held from July to September 2017. A record number of people also attended the management strategy seminars, which were held from November to December. The number of companies attending the seminars rose by 354 to 4,340 companies.

Sales of FCC workshops continued to grow by double digits, up 10.8% YoY, even though they are of small scale. The main factors behind this growth were the addition of topics to the strategy domain & management workshops from September 2017, of “leading-edge technologies,” “new business development,” and “education and tutorial business”, and also “Aiming to be the financial institution selected first” from October. So together with the existing topics, the number of seminars held increased. The number of attending companies also increased, by 120 YoY to 997 companies, and together with the higher sales, this contributed greatly as a path toward the conclusion of consulting contacts.

Sales from alliance services declined 9.7%, the only business with lower sales. The Company conducted “man­agement workshops” at its alliance partners of financial institutions and accounting firms, and it worked to provide original programs and services to support medium-sized companies and SMEs. But despite these efforts sales declined, with the main factors being the fall in the number of alliance partners by 9 YoY to 139 because of the progress made in the restructuring of regional financial institutions, and also the decline in the number of members in various organizations, including subscribers to the management information magazine.

(2) SP (sales promotion) consulting business

In the SP (sales promotion) consulting business, net sales increased 2.7% YoY to ¥3,776mn and segment profit rose 28.8% to ¥202mn. Sales of high-value-added SP consulting were strong, and the segment profit margin continued to trend upward, up 1.1 percentage points to 5.4%. Compared to the Company forecasts also, net sales were 1.2% and segment profit 22.8% above their respective forecasts, and it can be said that the Company is making steady progress in the measures to improve profitability that it has been advancing in the last few years. At the end of FY3/18, the number of SP consultants had declined by 3 on the end of the previous fiscal year to 58 people. But the main reason for this was the transfer of the “SP Design Lab,” which includes SP design consultants, to the Strategic Comprehensive Institute as the “design lab” (the Strategic Comprehensive Institute personnel increased by 9 on the end of the previous fiscal year to 32 people).

Looking at how sales trended by product and service, sales were strong in the mainstay field of SP consulting, up 17.2% YoY, and its percentage of total sales also increased, from around 40% in the previous fiscal year to approx­imately 50%. Sales greatly increased thanks to the rise in the number of consulting contracts through proposals in collaboration with the management consulting business, and also from orders for major projects for the original and high-value-added promotions products (SP design) designed by the Company’s specialist consultants. In the SP domain also, it is holding strategy domain workshops on topics for which interest is high and implementing measures to attract potential customers, which is contributing to the higher sales. In FY3/18, it newly launched workshops on the topics of “food sales promotion strategies” and “housing market customer-attraction promotions,” so it held a total of three workshops, together with the “child and child-rearing families market growth strategy” workshop that it has held since 2016.

Sales of SP tools (novelty goods created by adding the client company’s name to a standard item) finished down 10.3% YoY. The Company said there were still many repeat orders but that its efforts to convince client companies to switch to higher value-added designs was responsible for the decline in sales of SP tools.

Sales of diaries (business planners and calendars) were basically unchanged YoY. The Company has been con­ducting re-branding activities for the Blue Diary celebrating its 60th anniversary, to be published in 2019. As a part of this, it has changed its logo mark, produced a branding book, and renewed its website, which are leading to stable and continuous orders.

With debt-free management and an abundance of cash on hand, its financial position is excellent

3. Financial position and management indicators

At the end of FY3/18, total assets were up ¥272mn on the end of the previous fiscal year to ¥12,804mn. Looking at the main change factors, in current assets, cash, deposits and marketable securities increased ¥309mn due to the growth in sales, while in non-current assets, investment securities declined ¥40mn following the reassessment of their market valuations. Long-term and short-term adjusted cash, deposits and marketable securities increased ¥269mn to ¥8,691mn, which constituted 67.9% of total assets.

Total liabilities were down ¥39mn on the end of the previous fiscal year to ¥2,369mn. In current liabilities, there were increases in outstanding payments of ¥27mn and advances received of ¥21mn, but decreases in accounts payable of ¥48mn and income taxes payable of ¥79mn. In non-current liabilities, lease obligations increased ¥13mn and the provision for directors’ retirement benefits rose ¥10mn. Net assets were up ¥312mn on the end of the previous fiscal year to ¥10,434mn. Due to the recording of net profit of ¥675mn and dividend payments of ¥346mn, retained earnings increased ¥328mn.

The equity ratio was 81.4% and continues to be maintained at above 80%. As the Company has no interest-bearing debt, it can be judged that its financial position continues to be extremely good. The indicators of profitability are also steadily rising, with the operating margin increasing 0.1 of a percentage point YoY and ROA climbing 0.2 of a percentage point. The ROE level of 6.6% is slightly lower than the average of listed companies, but it is considered that this is due to the Company’s basic policy of conducting solid management as a consulting company.

 

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