CFO Message

The key features of JAC Group financial strategies are high profit margins and high capital efficiency.

The Group vision is to become the world’s No. 1 professional recruitment firm in service quality and profitability. To achieve this goal, we know it is important to maintain and strengthen these two financial aspects of our businesses.

In FY2023, the Group achieved a 23.8% operating income margin, which maintains a high simple standard average of 27.1% over the last ten years. To maintain these high profit margins, we must focus on expanding the businesses that have high profit margins. That is why JAC Group will realise high growth toward becoming the world’s No. 1 by 2030 by emphasising the organic growth of the Recruitment Business in Japan.

We will also work to reduce the cost of sales as well as sales and administrative expenses in the Japan Recruitment Business to further enhance the profit margins. More specifically, a more powerful in-house database, referrals, and scouting will attract the candidates necessary to reduce the use of external advertising and recruitment sites, which lowers the cost of sales ratio. These efforts have already reduced the cost of sales ratio in 2023 to 7.7%, down 2.1 points, from 9.8% in 2018. Operational innovations through a digital transformation will also drive efficiency in middle/back-office operations and improve consultant productivity to reduce sales and administrative costs. Furthermore, in addition to having moved back office functions from overseas to the head office in Japan, our overseas businesses with low profit margins are currently shifting resources to more highly profitable regions in order to enhance the profit margins.

In FY2023, the Group achieved a tremendous ROE of 36.4% with a cost of equity at 8% to 8.5%. Over the last ten years, we have continually maintained a high simple ROE average of about 33%, excluding 2020 during the COVID-19 pandemic. Our price to book ratio (PBR) at the end of FY2023 was 6.02. We have also maintained a high PBR between 5 and 7 over the last ten years.

The company has secured a steady cash position. These funds act as both capital to flexibly invest in businesses as well as a reserve to retain employees—the Company’s strongest asset—during significant drops in earnings due to crises like the collapse of the Lehman Brothers.

We will secure the capital necessary to respond to these kinds of risks, enhance profit margins, and realise a high growth rate, which I hope will not only sustain high capital efficiency but also improve corporate value.

The Group also needs to explore opportunities for inorganic growth in addition to organic growth to become the world’s No. 1. As a means to this end, our policy is to pay out 60%–65% of net income as dividends, with the remainder allocated to growth investments.

The criteria to decide to invest in a business in order to maintain high profit margins and capital efficiency are: (1) whether the business is highly reliable and profitable, (2) whether we can expect investment efficiency to exceed capital costs and maintain high capital efficiency, and (3) whether the business has synergy with a high-class recruitment business, which is our current core business. Our policy also minimises risk-taking when investing in businesses. As a general rule, we do not invest in businesses that require large assets or a long payback period.

Recruitment businesses only require a small up-front investment to start and allows companies to flexibly exit and re-enter the market according to market conditions. Therefore, as policy, offices overseas and branches in Japan start reforming businesses if in debt for one or two years and will then exit the market if recovery cannot be expected over the medium to long term.

*Dividend payout ratio targeted at 60%–65%
*Maintain a steady trend of increasing dividends in line with profit growth
Our basic policy regards the return of profits to be an important management issue and is the blueprint for decisions to properly balance investments and shareholder returns primarily provided through dividends. The dividends per share in FY2023 were ¥22.5 after the stock split, which is the third consecutive year of increasing the dividend. Our dividend on equity (DOE) has also realised an extremely high standard of 21.1%. Going forward, we have secured the internal reserves necessary to maintain a high dividend payout and invest in businesses to foster subsequent growth while aiming to enhance shareholder value that exceeds increases in owned capital.