SMS 2175

エス・エム・エス

Recent Updates

2021-11-19

1H FY03/22 report update

2021-10-29

1H FY03/22 flash update

2021-08-27

Q1 FY03/22 report update

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Sumitomo Fudosan Shibakoen Tower2–11–1, Shiba KoenMinato-ku, Tokyo 105－0011 Japan

https://www.bm-sms.co.jp/

03-6721-2400

Summary

SMS is involved in recruitment, job advertisements, management support services, community sites, and information services in the fields of nursing care, medical care, healthcare, senior life, and overseas business.

Commercial Services & SuppliesProfessional Services

Key dates

2014-02-06

Coverage initiation

Full Report

2021-11-19

1H FY03/22 flash update

2021-10-29

Q1 FY03/22 flash update

2021-07-30

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Executive summary

Business

SMS is involved in staffing, job advertisements, management support platform, community sites, and pharmaceutical information services for businesses, employees, and users in the fields of elderly care, medical care, healthcare, and senior life. In FY03/21, the company’s Career segment accounted for 65.8% of consolidated sales, Elderly Care Operators 16.5%, Overseas 14.3%, and Business Development 3.4%. The elderly care career and medical care career businesses, which together make up the Career segment, respectively generated 30.4% and 34.8% of sales.

In the Elderly Care Career business (30.5% of FY03/21 sales), SMS mainly provides staffing services, job information media services, and training schools for elderly care workers. The company has captured an extremely high market share in this business, with nearly 70% of the annual number of elderly care workers who change jobs being registered for its job-change services, according to the company. Elderly care career sales reached JPY11.0bn in FY03/21 (+3.1% YoY), supported by higher sales in staffing services for elderly care workers.

In the Medical Care Career business (35.4% of FY03/21 sales), SMS mainly provides staffing services for nurses and paramedics. The company is the largest staffing service for licensed nurses with a market share of roughly 25–30% (SMS estimate) and deals with 70% of the approximately 8,400 hospitals in Japan. With the number of registered nurses employed on the rise and nurses in short supply, the company sees the market for staffing services for nurses continuing to grow over the medium to long term. Medical care career sales reached JPY12.7bn in FY03/21 (-3.8% YoY). Nurse recruitment demand fell at clinics and other small to medium-sized medical institutions in the wake of the COVID-19 pandemic.

In the Elderly Care Operators segment (16.5% of FY03/21 sales), SMS operates the Kaipoke business support platform for elderly care operators. As of April 2021, Kaipoke was serving 21,250 member locations (31,100 elderly care facilities), accounting for roughly 16% of all elderly care facilities (Shared Research estimate), the primary customers for Kaipoke. Kaipoke was launched in 2006 as a low-cost software service to handle elderly care insurance billing. As SMS expanded into other management support services in 2014, it moved to a new pricing structure in October 2014. According to the company, if management support services other than its elderly care insurance billing software are taken into consideration, the new pricing structure makes its services less expensive than those offered by competitors. Segment sales reached JPY5.9bn in FY03/21 (+20.9% YoY).

In the MIMS Group, which generates the bulk of the sales in the Overseas segment (14.3% of FY03/21 sales), SMS provides marketing support for medical and healthcare companies, a database of drug information for medical institutions, and career services in 17 countries and regions in Asia–Oceania, with a registered user base of 2.8mn healthcare professionals. In Singapore and Hong Kong, over 90% of doctors are registered users. Segment sales reached JPY5.1bn in FY03/21 (-2.4% YoY). Although the MIMS Group is highly profitable, SMS booked goodwill amortization, positioned FY03/20 as another investment period for medium-term growth in the Overseas segment, and appears to have recorded losses in the segment. In FY03/21, the company was profitable when adjusting out goodwill amortization but posted a loss net of goodwill amortization due to restrictions on in-venue events in the marketing support business and overseas travel restrictions in career services business caused by the COVID-19 pandemic.

Trends and outlook

In FY03/21, the company reported sales of JPY36.0bn (+2.3% YoY), operating profit of JPY5.5bn (+10.8% YoY), recurring profit of JPY6.7bn (+4.7% YoY), and net income attributable to owners of the parent of JPY4.8bn (+0.8% YoY). Sales and profits increased due to an increase in the number of Kaipoke member locations and curbs on new staff recruiting.

For FY03/22, SMS forecasts sales of JPY40.0bn (+11.4% YoY), operating profit of JPY6.2bn (+13.4% YoY), recurring profit of JPY7.4bn (+10.5% YoY), and net income attributable to owners of the parent of JPY5.3bn (+10% YoY). The company expects the impact from the COVID-19 pandemic will continue to affect operations through end-March 2022, mostly in the Career segment, but it forecasts double-digit sales and profit increases on growth in the Elderly Care Operators segment and the Overseas segment.

Shared Research sees earnings growing at a CAGR of about 15–20% over the medium term, driven by the Career segment as well as the continued expansion of Kaipoke business support platform for nursing business operators. With the company’s acquisition of a 60% stake in Medica Asia in October 2015 (making Medica Asia a consolidated subsidiary) and its network of businesses in Asia–Oceania targeting medical institutions, healthcare professionals, and pharmaceutical companies, Shared Research believes SMS has added another growth driver. In September 2018, SMS completed the acquisition of Medica Asia (Holdco) Limited, making it a wholly owned subsidiary. With the addition of Medica Asia to the SMS group, the company aims to speed up decision-making and accelerate growth overseas.

Strengths and weaknesses

Shared Research believes the three main strengths of SMS are its high market share in the staffing market for nurses and other healthcare professionals, its focus on growth markets, and its strong management team. The company’s main weaknesses are its cost/benefit analysis for new businesses and limited contribution to earnings relative to investments made in the Overseas segment. (For further details, see Strengths and weaknesses section.)

Key financial data

Income statement		FY03/12	FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21	FY03/22
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est.
Sales		8,692	10,181	12,046	15,056	19,069	23,055	26,611	30,836	35,140	35,960	40,043
	YoY	14.1%	17.1%	18.3%	25.0%	26.7%	20.9%	15.4%	15.9%	14.0%	2.3%	11.4%
Gross profit		8,261	9,481	11,094	13,724	16,865	19,328	23,322	27,301	31,091	32,003
	YoY	13.2%	14.8%	17.0%	23.7%	22.9%	14.6%	20.7%	17.1%	13.9%	2.9%
	Gross profit margin	95.0%	93.1%	92.1%	91.1%	88.4%	83.8%	87.6%	88.5%	88.5%	89.0%
Operating profit		1,520	1,571	1,730	2,079	2,757	3,646	4,021	4,743	4,935	5,470	6,205
	YoY	2.6%	3.3%	10.2%	20.2%	32.6%	32.3%	10.3%	18.0%	4.0%	10.8%	13.4%
	Operating profit margin	17.5%	15.4%	14.4%	13.8%	14.5%	15.8%	15.1%	15.4%	14.0%	15.2%	15.5%
Recurring profit		1,735	1,990	2,340	2,693	3,510	4,431	5,007	5,979	6,355	6,653	7,352
	YoY	13.4%	14.7%	17.6%	15.1%	30.3%	26.2%	13.0%	19.4%	6.3%	4.7%	10.5%
	Recurring profit margin	20.0%	19.5%	19.4%	17.9%	18.4%	19.2%	18.8%	19.4%	18.1%	18.5%	18.4%
Net income		1,005	1,227	1,380	1,824	2,266	2,801	3,361	4,216	4,760	4,800	5,281
	YoY	14.7%	22.1%	12.5%	32.2%	24.2%	23.6%	20.0%	25.4%	12.9%	0.8%	10.0%
	Net margin	11.6%	12.1%	11.5%	12.1%	11.9%	12.1%	12.6%	13.7%	13.5%	13.3%	13.2%
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000)		82,853	83,741	83,741	83,774	83,774	86,765	86,842	86,999	87,058	87,110
EPS		12.2	14.9	16.8	22.4	27.9	33.7	38.7	48.5	54.7	55.1	60.7
EPS (fully diluted)		12.0	14.7	16.8	22.3	27.8	33.6	38.6	48.2	54.5	54.9
Dividend per share		1.5	2.0	2.5	3.5	3.5	5.5	6.5	7.5	8.5	9.5	-
Book value per share		49.9	61.9	73.4	84.0	105.5	197.4	221.7	176.6	220.9	257.1
Balance sheet (JPYmn)
	Cash and cash equivalents	1,768	2,219	1,899	2,709	5,292	7,830	9,515	10,703	11,091	10,538
Total current assets		3,736	4,849	5,430	7,363	12,176	15,235	18,113	20,123	23,102	23,218
Tangible fixed assets		82	67	192	256	428	368	405	447	1,006	939
Investments and other assets		542	1,076	1,750	1,753	1,782	2,521	2,865	3,814	4,149	3,972
Intangible assets		1,357	955	1,034	2,049	27,304	25,107	24,703	23,083	22,738	21,313
Total assets		5,717	6,948	8,407	11,421	41,690	43,232	46,087	47,467	50,996	49,444
	Accounts payable	48	44	99	132	451	312	292	353	314	258
	Short-term debt	-	-	-	0	19,003	1,201	1,403	2,487	2,487	2,479
Total current liabilities		1,485	1,676	2,188	4,394	25,914	8,911	10,400	11,891	13,831	13,875
	Long-term debt	-	-	-	-	45	10,210	9,690	17,632	15,144	10,644
Total fixed liabilities		94	119	144	104	2,618	12,738	12,046	20,037	17,766	12,909
Total liabilities		1,580	1,795	2,332	4,498	28,532	21,648	22,446	31,928	31,597	26,785
Total net assets		4,137	5,154	6,075	6,923	13,158	21,583	23,641	15,539	19,398	22,658
Total interest-bearing debt		-	-	-	-	19,047	11,411	11,093	20,119	17,631	13,123
Cash flow statement (JPYmn)
Cash flows from operating activities		956	1,009	1,595	3,103	2,244	3,920	4,811	5,156	5,591	6,769
Cash flows from investing activities		-1,358	428	-1,324	-1,050	-18,402	-1,034	-2,095	-1,066	-2,127	-1,783
Cash flows from financing activities		-84	-191	-571	-1,272	18,656	-875	-1,107	-2,943	-3,132	-5,224
Financial ratios
ROA (RP-based)		33.4%	31.4%	30.5%	27.2%	13.2%	10.4%	11.2%	12.8%	12.9%	13.2%
ROE		27.3%	26.4%	24.7%	28.4%	29.5%	21.8%	18.5%	24.4%	27.5%	23.1%
Equity ratio		72.4%	74.2%	72.3%	60.6%	31.6%	49.9%	51.3%	32.7%	38.0%	45.8%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Net income reflects net income attributable to owners of the parent from FY03/16.
Note: The company enacted a 2-for-1 stock split on July 1, 2018.
Note: The company has not yet decided on a FY03/22 dividend forecast as of April 2021.

Trends and outlook

Quarterly performance

Cumulative		FY03/21				FY03/22				FY03/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales		10,539	18,638	26,366	35,960	10,838	19,927			49.8%	40,043
	YoY	12.4%	5.7%	4.2%	2.3%	2.8%	6.9%				11.4%
Gross profit		9,607	16,806	23,564	32,003	9,889	17,881
	YoY	12.4%	6.2%	5.1%	2.9%	2.9%	6.4%
	Gross profit margin	91.2%	90.2%	89.4%	89.0%	91.2%	89.7%
SG&A expenses		7,376	13,857	20,344	26,533	7,341	14,198
	YoY	3.7%	0.8%	0.0%	1.4%	-0.5%	2.5%
	SG&A ratio	70.0%	74.3%	77.2%	73.8%	67.7%	71.3%
Operating profit		2,230	2,949	3,220	5,470	2,547	3,682			59.3%	6,205
	YoY	55.6%	42.2%	54.2%	10.8%	14.2%	24.9%				13.4%
	Operating profit margin	21.2%	15.8%	12.2%	15.2%	23.5%	18.5%				15.5%
Recurring profit		3,018	3,852	4,245	6,653	3,319	4,700			63.9%	7,352
	YoY	30.0%	23.5%	24.5%	4.7%	10.0%	22.0%				10.5%
	Recurring profit margin	28.6%	20.7%	16.1%	18.5%	30.6%	23.6%				18.4%
Net income		2,201	2,775	2,868	4,800	2,476	3,404			64.5%	5,281
	YoY	22.3%	19.7%	14.0%	0.8%	12.5%	22.7%				10.0%
	Net margin	20.9%	14.9%	10.9%	13.3%	22.8%	17.1%				13.2%
Quarterly		FY03/21				FY03/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales		10,539	8,099	7,728	9,594	10,838	9,089
	YoY	12.4%	-1.8%	0.7%	-2.5%	2.8%	12.2%
Gross profit		9,607	7,199	6,758	8,439	9,889	7,992
	YoY	12.4%	-1.1%	2.4%	-2.6%	2.9%	11.0%
	Gross profit margin	91.2%	88.9%	87.4%	88.0%	91.2%	87.9%
SG&A expenses		7,376	6,481	6,487	6,189	7,341	6,857
	YoY	3.7%	-2.4%	-1.5%	6.4%	-0.5%	5.8%
	SG&A ratio	70.0%	80.0%	83.9%	64.5%	67.7%	75.4%
Operating profit		2,230	719	271	2,250	2,547	1,135
	YoY	55.6%	12.2%	-	-21.0%	14.2%	57.9%
	Operating profit margin	21.2%	8.9%	3.5%	23.5%	23.5%	12.5%
Recurring profit		3,018	834	393	2,408	3,319	1,381
	YoY	30.0%	4.5%	35.1%	-18.2%	10.0%	65.6%
	Recurring profit margin	28.6%	10.3%	5.1%	25.1%	30.6%	15.2%
Net income		2,201	574	93	1,932	2,476	928
	YoY	22.3%	10.4%	-52.8%	-13.9%	12.5%	61.7%
	Net margin	20.9%	7.1%	1.2%	20.1%	22.8%	10.2%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Net income is net income attributable to owners of the parent.

Sales by segment and business

Cumulative				FY03/21				FY03/22				FY03/21
(JPYmn)				Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Total sales				10,539	18,638	26,366	35,960	10,838	19,927			49.8%	40,043
	YoY			12.4%	5.7%	4.2%	2.3%	2.8%	6.9%				11.4%
	Career			8,086	13,369			7,699	13,071			53.6%	24,375
		YoY		-	-			-4.8%	-2.2%				3.9%
		Elderly care career		3,400	5,992	8,252	10,950	3,099	5,597			48.3%	11,593
			YoY	18.8%	10.4%	7.2%	3.1%	-8.9%	-6.6%				5.9%
		Medical care career		4,686	7,377			4,599	7,473			58.5%	12,781
			YoY	-	-			-1.9%	1.3%				2.1%
	Elderly Care Operators			1,358	2,775	4,302	5,918	1,718	3,464			48.7%	7,113
		YoY		22.5%	21.6%	21.8%	20.9%	26.5%	24.8%				20.2%
	Overseas			826	1,885	3,196	5,147	1,031	2,567			38.9%	6,596
		YoY		2.4%	-7.9%	-5.4%	-2.4%	24.8%	36.2%				28.2%
	Business Development			267	608			388	824			42.1%	1,959
		YoY		-	-			45.3%	35.5%				37.4%
Quarterly				FY03/21				FY03/22
(JPYmn)				Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Total sales				10,539	8,099	7,728	9,594	10,838	9,089
	YoY			12.4%	-1.8%	0.7%	-2.5%	2.8%	12.2%
	Career			8,086	5,283			7,699	5,372
		YoY		-	-			-4.8%	1.7%
		Elderly care career		3,400	2,592	2,260	2,698	3,099	2,498
			YoY	18.8%	1.1%	-0.7%	-7.5%	-8.9%	-3.6%
		Medical care career		4,686	2,691			4,599	2,874
			YoY	-	-			-1.9%	6.8%
	Elderly Care Operators			1,358	1,417	1,527	1,616	1,718	1,746
		YoY		22.5%	20.8%	22.1%	18.7%	26.5%	23.2%
	Overseas			826	1,059	1,311	1,951	1,031	1,536
		YoY		2.4%	-14.5%	-1.5%	2.7%	24.8%	45.0%
	Business Development			267	341			388	436
		YoY		-	-			45.3%	27.9%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: The business of stress checks for elderly care institutions and medical institutions had previously been recorded under the Career segment, but are recorded under the Business Development segment as of FY03/22. FY03/21 results figures are reference figures based on the new segmentation.

SG&A expenses

Cumulative			FY03/21				FY03/22
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
SG&A expenses			7,376	13,857	20,344	26,533	7,341
	YoY		3.7%	0.8%	0.0%	1.4%	-0.5%
	Personnel		3,537	6,632	9,694	12,742	3,550
		YoY	11.9%	8.6%	6.9%	6.6%	0.4%
	Advertising		1,351	2,610	3,958	4,979	1,372
		YoY	10.1%	0.9%	2.1%	5.6%	1.6%
	Outsourcing		659	1,285	1,903	2,452	558
		YoY	1.7%	-1.9%	-1.7%	-3.6%	-15.3%
	Goodwill amortization		205	407	611	814	205
		YoY	6.8%	3.6%	2.9%	0.6%	0.0%
Quarterly			FY03/21				FY03/22
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
SG&A expenses			7,376	6,481	6,487	6,189	7,341
	YoY		3.7%	-2.4%	-1.5%	6.4%	-0.5%
	Personnel		3,537	3,095	3,062	3,048	3,550
		YoY	11.9%	5.0%	3.4%	5.5%	0.4%
	Advertising		1,351	1,259	1,348	1,021	1,372
		YoY	10.1%	-7.4%	4.3%	22.1%	1.6%
	Outsourcing		659	626	618	549	558
		YoY	1.7%	-5.4%	-1.3%	-9.6%	-15.3%
	Goodwill amortization		205	202	204	203	205
		YoY	6.8%	0.5%	1.5%	-5.6%	0.0%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods
Note: Personnel expenses consist of payroll and allowances and legal welfare expenses.

Trends in Kaipoke member locations

		FY03/21				FY03/22
(Base)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
No. of member locations		19,300	19,950	20,550	21,250	22,000	22,650
	YoY change	2,050	2,100	2,250	2,400	2,700	2,700
	YoY	11.9%	11.8%	12.3%	12.7%	14.0%	13.5%
	QoQ change	450	650	600	700	750	650
	QoQ	2.4%	3.4%	3.0%	3.4%	3.5%	3.0%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.

1H FY03/22 results

Sales: JPY19.9bn (+6.9% YoY)
Operating profit: JPY3.7bn (+24.9% YoY)
Recurring profit: JPY4.7bn (+22.0% YoY)
Net income attributable to owners of the parent: JPY3.4bn (+22.7% YoY)

Sales increased YoY primarily thanks to a rise in the number of Kaipoke member locations and expansion of the Overseas business. Gross profit increased 6.4% YoY to JPY17.9bn, and SG&A expenses were up just 2.5% YoY to JPY14.2bn, resulting in double-digit operating profit growth. SG&A expenses primarily consisted of JPY6.8bn in personnel expenses (+1.8% YoY), JPY2.8bn in advertising expenses (+6.5% YoY), JPY1.1bn in outsourcing expenses (-13.5% YoY), and JPY415mn in amortization of goodwill (+2.0% YoY).

At end-1H FY03/22, sales had reached 49.8% of their corresponding projection in the company’s full-year forecast, while operating profit had reached 59.3%, recurring profit 63.9%, and net income attributable to owners of the parent 64.5%. In comparison, at the conclusion of 1H FY03/21, sales had reached 51.8% of the full-year results, while operating profit had reached 53.9%, recurring profit 57.9%, and net income 57.8%. In 1H FY03/22, sales were below expectations, but all profit categories from the operating line down were in line with plan. In Q2 (July–September 2021), orders in the Career segment fell below the company's expectations due to a resurgence in COVID-19 cases. However, the company said orders in October 2021 were on a recovery track to meet its expectations.

Career

Sales: JPY13.1bn (-2.2% YoY)

Sales of JPY5.6bn (-6.6% YoY) in the elderly care career business

Sales of JPY7.5bn (+1.3% YoY) in the medical care career business

Starting FY03/22, the company has decided to book sales from stress checks for medical institutions, previously booked under the Career segment, under the Business Development segment. YoY comparisons were made with retroactively adjusted FY03/21 figures (for reference purposes) to reflect this change.

The COVID-19 pandemic impacted staffing services in both the elderly care career business and the medical care career business.

Further, the career segment was negatively impacted by the suspension of new contracts for its elderly care staffing service since August 2020 in the elderly care career business (depressing 1H sales by JPY270mn YoY), and by the adoption of the Accounting Standard for Revenue Recognition at the start of Q1 FY03/22 in the medical care career business (by JPY140mn). However, eliminating the impact of these two factors, sales increased YoY in Q2 (July–September 2021) in both the elderly care career and medical care career businesses.

By quarter, Q1 (April–June 2021) sales were JPY7.7bn (-4.8% YoY), and Q2 (July–September 2021) sales were JPY5.4bn (+1.7% YoY).

In Q1 (April–June 2021), sales fell 4.8% YoY. In staffing services, it usually takes several months to half a year for an order received (staffing request from a client company) to be booked as sales upon successful placement of a jobseeker. In Q1 FY03/21, sales benefited from a higher share of orders received before the COVID-19 pandemic, but in Q1 FY03/22, all orders were affected by the pandemic. As such, Q1 FY03/22 sales were hit harder by the pandemic than those a year ago. Further, the abovementioned suspension of new contracts for the elderly care staffing service had a negative impact on Q1 sales of JPY150mn, and the adoption of the new accounting standard a negative impact of JPY100mn.

In Q2 (July–September 2021), sales rose 2.2% YoY. In Q2 FY03/21, orders were sluggish due to the spread of COVID-19, and in Q2 FY03/22 as well, orders lagged as the number of COVID-19 cases per day topped 10,000 (previous peak was in February 2021, with 2,634 cases in a single day). Further, as in Q1, the suspension of new contracts for the elderly care staffing service had a negative impact on sales of JPY120mn, and the adoption of the new accounting standard a negative impact of JPY40mn.

At end-September 2021, the number of career partners on staff was up versus end-FY03/21 thanks to steady progress in recruitment activities. The company said that in 2H, it plans to hire more career partners than initially planned aiming for business growth in FY03/23.

Elderly care career business

As mentioned above, the COVID-19 pandemic temporarily had a negative impact on sales activities to win orders for staffing services. However, the company has been focusing on sales activities targeting home-visit elderly care operators and other operators who have retained relatively high levels of interest in recruiting, and orders from home-visit elderly care operators have consequently accounted for a higher percentage of recruitment orders received by the company.

Medical care career business

As indicated above, Nurse Personnel Bank, the company’s staffing service for nurses, incurred impact from the COVID-19 pandemic. Demand for radiologists and clinical engineers was strong, but the company observed a decline in demand for nurses and some other types of personnel. According to the company, recovery in the recruitment of nurses has been delayed due primarily to two factors stemming from the COVID-19 pandemic: outpatient declines at medical institutions and deterioration in the financial conditions of clinics and other small- and medium-sized healthcare facilities. The company has stepped up efforts aimed at acquiring recruitment-related projects from home-visit nursing stations and other facilities that have demonstrated relatively high interest in hiring despite these circumstances.

Change in the company's revenue recognition method: The company provides HR solution services for hospitals (a diverse array of services focused mainly on resolving management issues related primarily to recruitment) as part of the service lineup of its medical care career business. Through these services, the company occasionally provides support related to the collective recruitment of 10 or more nurses at once. In cases such as these, the company has outsourced some operations related to securing job-seeking applicants to external staffing agencies. Before changing its revenue recognition standards, the company had recorded all revenue generated through collective recruitment as sales and booked costs associated with outsourcing operations to external agencies as costs of sales. Since changing its revenue recognition standards, the company records the difference between revenue from collective recruitment and costs associated with outsourcing operations to external agencies as sales and does not book the latter under cost of sales.

Elderly Care Operators

Sales: JPY3.5bn (+24.8% YoY)

The Kaipoke management support service for nursing care providers posted solid results due to an increase in Kaipoke member locations as well as more usage of optional services for smartphones and tablets. As in FY03/21, the COVID-19 pandemic had limited impact on financial results in the elderly care operators segment.

As of October 1, 2021, Kaipoke had 22,650 member locations (+2,700 versus end-1H FY03/21) and 33,100 elderly care facilities (+3,950).

Overseas

Sales: JPY2.6bn (+36.2% YoY)

The Overseas segment consists of the Medical Platform business (the Medical Marketing and Clinical Decision Support businesses) and the Global Career business. In Q1 FY03/22, the Medical Platform business accounted for about 90% of segment sales while the Global Career business accounted for roughly 10%. Impact stemming from the MIMS group’s statement of income is reflected in the company’s consolidated financial results following a three-month delay.

The Medical Marketing business accounts for the majority of sales generated by the Medical Platform business. The Medical Marketing business benefited from a shift toward digital technology amid the COVID-19 pandemic, with online events and digital products performing well. In some regions, sales from offline (actual) events began to recover.

The company reported growth in the Global Career business despite a measurable amount of impact stemming from travel restrictions implemented in response to the COVID-19 pandemic. As in FY03/21, SMS successfully matched hospitals with job-seekers, and booked sales as these job-seekers traveled to their work sites and assumed their new positions, except in some regions. The company incurred no impact from travel restrictions associated with the pandemic in January or February 2020, but impact of this nature began to emerge in March and beyond.

Business Development

Sales: JPY824mn (+35.5% YoY)

The company proceeded with the development and promotion of new businesses, focusing on the provision of remote specific health guidance and occupational healthcare utilizing ICT in the healthcare area, and on home renovation information and funeral director referral services in the senior life space.

FY03/22 full-year company forecast

		FY03/21			FY03/22			YoY
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.	1H Act.	2H Est.	FY Est.
Sales		18,638	17,322	35,960	19,927	20,116	40,043	6.9%	16.1%	11.4%
Cost of sales		1,831	2,126	3,957	2,046
Gross profit		16,806	15,197	32,003	17,881			6.4%
	Gross profit margin	90.2%	87.7%	89.0%	89.7%
SG&A expenses		13,857	12,676	26,533	14,198			2.5%
	SG&A ratio	74.3%	73.2%	73.8%	71.3%
Operating profit		2,949	2,521	5,470	3,682	2,523	6,205	24.9%	0.1%	13.4%
	Operating profit margin	15.8%	14.6%	15.2%	18.5%	12.5%	15.5%
Recurring profit		3,852	2,801	6,653	4,700	2,652	7,352	22.0%	-5.3%	10.5%
	Recurring profit margin	20.7%	16.2%	18.5%	23.6%	13.2%	18.4%
Net income		2,775	2,025	4,800	3,404	1,877	5,281	22.7%	-7.3%	10.0%
	Net margin	14.9%	11.7%	13.3%	17.1%	9.3%	13.2%

Forecasts by segment and business

FY03/22 forecasts by segment			FY03/21	FY03/22
(JPYmn)			Full-year	FY Est.	YoY
Sales			35,960	40,043	11.4%
	Career		23,469	24,375	3.9%
		Elderly care career	10,948	11,593	5.9%
		Medical care career	12,521	12,781	2.1%
	Elderly Care Operators		5,918	7,113	20.2%
	Overseas		5,147	6,596	28.2%
	Business Development		1,426	1,959	37.4%
Operating profit			5,470	6,205	13.4%

For FY03/22, SMS forecasts sales of JPY40.0bn (+11.4% YoY), operating profit of JPY6.2bn (+15.5% YoY), recurring profit of JPY7.4bn (+10.5% YoY), and net income attributable to owners of the parent of JPY5.3bn (+10% YoY). The company expects the impact from the COVID-19 pandemic will continue to affect operations through end-March 2022, mostly in the Career segment, but it forecasts double-digit sales and profit increases on growth in the Elderly Care Operators segment and the Overseas segment.

Career: Sales JPY24.4bn (+3.9% YoY)

The long-term market environment remains strong in terms of the demand for recruitment of elderly care and healthcare professionals, and the company expects growth in both the elderly care career and medical care career businesses.

However, in addition to the single digit YoY growth in the number of career partners as of the beginning of FY03/22 resulting from curbed hiring in FY03/21, the company anticipates the impact of COVID-19 to persist through end-March 2022 and expects slower growth in FY03/22.

In FY03/22, it intends to reinforce its business structure in anticipation of growth from FY03/23 onward, thereby recruiting career partners.

Elderly care career

In the elderly care career business, the company forecasts sales of JPY11.6bn (+5.9% YoY; +JPY645mn).

The company expects a drop in productivity of career partners resulting from COVID-19 to lower sales by JPY800mn and the suspension of new contracts in the elderly care staffing service in August 2020 to lower sales by JPY400mn.

Medical Career

In the medical career business, the company forecasts sales of JPY12.8bn (+2.1% YoY; +JPY260mn).

The company expects a drop in productivity of career partners resulting from COVID-19 to lower sales by JPY700mn and a change in revenue recognition standards to lower sales by JPY300mn.

Change in revenue recognition method: As part of its medical career service portfolio, the company provides HR solutions for hospitals (a service for solving management issues centered on recruiting, with a wide range of other offerings). The HR solutions for hospitals sometimes support a bulk recruitment of over 10 nurses at once, and the company previously outsourced part of the bulk recruitment to an external recruiting firm. Prior to the change in revenue recognition method, the company recorded the entire revenue from the bulk recruiting as sales and the fees paid to recruiting agencies as cost of sales. After the change in the revenue recognition method, the revenue from bulk recruiting minus the fees paid to recruiting agencies is recorded as sales, and the fees paid to recruiting agencies are not recorded as cost of sales.

Elderly Care Operators: Sales JPY7.1bn (+20.2% YoY)

The company maintains that the long-term market environment remains robust, against a background of increased elderly care facility numbers.

SMS anticipates continued growth through increases in the number of member locations for Kaipoke, which provides business support services for elderly care business operators, as well as in the use of add-on paid optional services including factoring services. The company expects the impact from COVID-19 to remain limited.

Overseas: Sales JPY6.6bn (+28.2% YoY)

The company holds that there is room for significant long-term growth, against the background of expansion of the healthcare market in Asia, and global demand for medical staffing.

The company expects the marketing support business for medical and healthcare professionals to continue to be affected by the impacts of COVID-19, such as the cancellation of real (in-person) events. However, it anticipates a much more substantial expansion in digital needs, and therefore forecasts sales growth of about 20% YoY.

In the Global Career business, the company’s forecast is premised on the COVID restrictions on travel by medical professionals recruited on a cross-border basis persisting through end-March 2022 and expects a negative sales impact of about JPY100mn. However, it forecasts sales growth of about 70% YoY thanks to such restrictions being milder than in FY03/21. According to the company, in FY03/21, it was able to match hospitals and job seekers in several cases, but due to travel restrictions, the job seekers were not able to start employment. However, with the easing of travel restrictions, job seekers are now starting employment.

Outlook

Strategy

Shared Research understands that fundamentally, the core of SMS’ strategy is to estimate as precisely as possible future trends in social infrastructure and demographics related to elderly and medical care, and focus on future sources of value early on, when the trend has not been fully recognized by the mainstream players, and capturing such sources is inexpensive, and then erect barriers to entry and develop various services.

The company operates in four areas: elderly care, medical care, healthcare, and senior life. It plans on developing various businesses to target practitioners (nurses, doctors, and pharmacists). For practitioners, it specifically targets nurses and elderly care workers, for business operators, hospitals and elderly care facilities, and for users, hospital inpatients/outpatients and senior citizens receiving elderly care.

The company’s key management priority is to achieve sustainable growth and build long-term corporate value.

It is looking for further growth in its existing core Career, Kaipoke, and Overseas businesses and is proactively pursuing new undertakings to create the next core business. The company thus plans to expand the current businesses and continue investments for actively developing and nurturing new businesses. Regarding the allocation of funds to new businesses, the company plans to conduct active investments for sustainable growth and long-term improvement in corporate value after securing certain profit levels, such as double-digit growth of net income.

Medium-term business development

In terms of the outlook for Japan’s aging society, according to the National Institute of Population and Social Security Research’s Projected Population of Japan (2017 estimate), the aging rate (the ratio of the population aged 65 and over to the population) was 28.8% in 2020, but will rise to 35.3% in 2040. On the other hand, the ratio of the working-age population (the percentage of the population aged 15-64) will decline from 59.3% in 2020 to 53.9% in 2040.

As the Japanese population ages, the company believes that social issues will become more apparent. This includes the increasing shortage of medical and elderly care professionals making it difficult to provide high-quality medical and elderly care services, the growing burden on the working-age population, and the difficulty of meeting the diverse needs of the elderly due to social changes and a shrinking workforce. The company aims to address these issues by providing information infrastructure services as described below.

Issues related to providing medical and elderly care services: By expanding businesses in the Career segment and the Elderly Care Operators segment, the company aims to eliminate labor shortages, resolve uneven regional and sctroal distributions of workers, and improve management of elderly care operators.

Growing burden on the working-age population: The company aims to expand the number of healthy worker population by promoting business development in the healthcare field as part of the Business Development segment.

Issues related to the diverse needs of the elderly: The company intends to provide a variety of options and high-quality information for decision-making by promoting business development in the senior life business field as part of the Business Development segment.

SMS does not release a medium-term business plan, but it plans to grow the Career business, the Kaipoke business (support platform for elderly care providers), and the Overseas businesses led by MIMS, while solving social issues. As of May 2021, earnings for FY03/22 had been adversely affected by the spread of COVID-19. However, the company has made no changes to its medium-term strategy as it continues to operate in growth markets.

Shared Research estimates that profit growth for the company could average around 20% in the medium term, driven mainly by the Career business and Kaipoke. With the company’s acquisition of a 60% stake in Medica Asia in October 2015 (making Medica Asia a consolidated subsidiary, and wholly owned subsidiary in September 2018) to acquire the MIMS Group and its network of businesses in Asia–Oceania targeting medical institutions, healthcare professionals, and pharmaceutical companies, Shared Research believes SMS has added another growth driver in the Overseas segment. Shared Research understands that SMS is developing many new businesses, but that some of them are unlikely to generate significant revenues. We think reinvesting profits gained from existing businesses to expand new businesses could restrain profit growth in the near term

Career segment growth

Elderly care and medical care operators continue to face labor shortages due to growth in the elderly population. In FY2020, the standard job opening-to-application ratios (ratio of job openings to one job seeker; excludes part-time jobs; the higher the ratio, the greater the shortage) for elderly care workers and nurses were about 3.3 and 2.2 (average ratio for all occupations combined was 1.0). As the elderly population is expected to further increase, the labor shortage may continue or become more serious. For example, according to the Ministry of Economy, Trade, and Industry, there will be a shortage of between 320,000 to 430,000 care workers in 2025, and this number will expand to between 690,000 to 790,000 by 2035. According to the company, it has already established an overwhelming position in the market for elderly care/medical care personnel, and this will allow the Career business to expand in tandem with market growth for the medium- to long-term.

In FY03/21, sales in the company’s Career business were JPY23.7bn, down 0.7% YoY. The company managed to secure FY03/20-level sales despite the negative impact from the COVID-19 pandemic.

In the Career segment, the company will expand earnings by solving the emerging social issue of difficulty in providing high-quality medical and elderly care services by matching care workers and business operators to eliminate the labor shortage and resolve uneven regional and sectoral distributions of workers. Although the company will strive to expand its market share in nursing staffing services, where it already commands a leading share of the market, it expects growth to be driven by services for elderly care professionals, where the job opening-to-application ratio is high and labor shortage is severe, as well as services for new job categories such as childcare professionals.

Elderly care career: Aiming for sales growth by attracting and retaining workers from other industries and continuing to provide recruitment support services

The elderly care career business mainly provides nursing staff and help-wanted information. In FY03/21, it accounted for 30.4% of consolidated sales and 46.6% of sales in the Career business.

According to the Japanese Ministry of Health, Labour and Welfare, there will be a shortage of 220,000 care workers in 2025, and this number will expand to between 650,000 by 2035. To address this, the company will not only provide its existing recruitment support services, but will also help new candidates with no experience acquire certifications through its certification schools to attract workers from other industries. In addition, it will boost retention by helping elderly care providers solve human resource-related issues, such as improving the working environment.

Medical care career: Aiming for sales growth by resolving uneven regional distributions of workers across medical functions and regions through existing services such as nursing staffing services and developing new services such for childcare professionals.

The medical care career business, one of the key businesses of the Career segment, mainly focuses on staffing services for nurses. In FY03/21, the business accounted for 34.8% of consolidated sales and 53.4% of sales for the Career segment.

According to the Ministry of Health, Labor and Welfare, there will be a shortage of 60,000 to 270,000 nurses in 2025. In addition to this, the required medical functions will shift from acute to chronic and from hospital to home care, and uneven regional distribution of workers will also become an issue. To address these issues, the company will help match workers with medical functions and regional providers where they are needed. Moreover, it will help workers find jobs, change jobs, or return to work, and provide information on skills and career development to help them improve their careers, while helping businesses solve human resource-related issues such as recruiting and improving the working environment.

In addition, the company aims to grow sales for its recruitment services for childcare workers started in FY03/19 as well as its recruitment services for judo-orthopedists, masseuses, acupuncturists, and moxibustion therapists started in FY03/18 when Will One Co., Ltd. was converted into a subsidiary.

Growth of Kaipoke, business support platform for elderly care operators

As an external environment, the number of elderly care facilities is increasing continuously along with increasing elderly population (CAGR of 2% in the past five years), and this is increasing the potential demand for Kaipoke (management support platform for elderly care operators). In the Kaipoke business, the company provides over 40 services while most rival companies provide insurance claim services only. It is also the only company in the industry providing a management support platform. As Kaipoke services are often more reasonably priced than rivals’ services, member locations are increasing.

Started as insurance claim software in 2006

Kaipoke was launched in July 2006 as a software for processing insurance claims. By September 2014, the company had provided the services at low prices (average monthly fee: JPY3,000) which were about 1/10 of rival companies’ services in order to maintain customer loyalty. There has been a steady increase in the number of member locations to 13,600 (across 17,500 locations [care facilities]) as of FY03/14.

Added functions, increased price in 2014

In February 2014, the company added new services to the Kaipoke lineup including job ads for nursing professionals, equipment purchasing feature, sales support, bank transfers for nursing fees, and document transfer support between offices. According to the company, most rival companies only provide insurance claim software, and SMS is the only company providing a comprehensive management support platform.

In October 2014, the company changed the Kaipoke pricing structure to reflect the expanded lineup of services. As a result, the average monthly spend per user increased from JPY3,000, to almost JPY20,000 as of October 2014. The company assumed that the increase in service fees could be sufficiently recouped through the effects of improved management enjoyed by small and medium-size elderly care service providers.

However, after the price hike the number of member locations declined to 10,500 (as of January 2015) and 10,400 (as of April 2015), as it lost members for which low-price was a priority. That said, fallout from the price revisions subsided from the second half of Q4 FY03/15 (January–March), and the number of new members obtained by sales visits and other measures started to outpace the number of members dropping out. The number of member locations rose to 21,250 in April 2021.

Growth strategy for Kaipoke

In the Elderly Care Operators segment, the company aims to solve the emerging social issue of difficulty in providing high quality medical and elderly care services by contributing to the improvement of the management of elderly care operators through offering its subscription-based management support platform, Kaipoke.

There are 251,000 elderly care facilities in Japan, and 80% of them have less than 50 employees. Because these companies are small, a lot of time is spent on administrative tasks such as documentation, and the companies often suffer from labor shortages due to difficulties in hiring personnel, the lack of procurement capacity, and cash flow problems. Offering over 40 different services, Kaipoke is a one-stop solution for these problems.

The company expects Kaipoke to grow through market share gains and increases in member locations. It projects membership and user count to grow as it was the only provider of a business support platform for elderly care operators as of May 2021, with competitors providing only the insurance claim service. The company also believes that it will be able to accelerate market share growth by expanding coverage to different types of operators and boosting its services lineup.

Expanding coverage to different types of operators

As measures to expand the range of elderly care services it covers, the company began offering its management support platform to operators of home-visit nursing services in June 2015, to outpatient rehab center operators and operators of assisted living facilities for the elderly in November 2015, and to operators of afterschool day care services in September 2016. The target market for these new Kaipoke services are the existing 31,000 home care support operators, the 34,000 day care operators, and 26,000 operators of home-visit care services. In addition to these 91,000 existing businesses, Kaipoke is able to target the 6,000 new home-visit nursing service operators, 7,000 new outpatient rehab center operators, and 7,000 new afterschool day care service operators. SMS plans to increase the bases of possible users by expanding elderly care services covered by Kaipoke.

Home-visit nursing: Elderly care rendered at the patient’s home at the direction of the attending physician.

Outpatient rehab centers (day care centers): To help the elderly live as independently as possible at their own home, outpatient rehab centers (including rehabilitation facilities for the elderly, hospitals, and clinics) provide support services for daily tasks such as cooking and bathing, as well as therapeutic services to help patients live their life more fully. These services are provided on an outpatient basis, with the patients commuting from their homes on a regular basis.

In FY03/16 SMS made functional enhancements to the software that allowed Kaipoke to meet the demands of nursing service businesses that operate in three or more locations.

Boosting services lineup

Kaipoke started as software for processing health insurance claims. In August 2013, SMS started a factoring service for elderly care compensation, as a first major addition to the package, and in February 2014, it launched a management support platform for small and medium-size elderly care providers on top of the software for elderly care insurance billing. The new service offers additional functions, such as sales support, recruitment support (e.g., job advertisements for elderly care facilities), and improvement of operational efficiency including purchasing functions for workplace equipment, bank transfers to handle fees paid by users of elderly care services, and support for coordinating documentation between different workplaces (see the “Main businesses” section).

Among the added services, the company aims to develop those that generate sales other than basic fees to raise the unit price. In April 2014, it started Kaipoke Tablet, a service that allows customers to use one tablet for free, but requires payment under optional services from the second tablet onward. In February 2018, it launched Kaipoke Mobile, a mobile phone rental service.

Growth in Business Development segment

To address social issues such as the growing burden on the working-age population and the difficulty of meeting the diverse needs of the elderly, the company aims to promote business development in the healthcare and senior life business fields as part of the Business Development segment. The company already operates several businesses in the Business Development segment, all of which are businesses that match workers or consumers with businesses by applying the company’s expertise developed in the Career segment.

Healthcare field: Providing a health management support platform

In the healthcare field, SMS provides companies with a health management support platform. Specifically, it provides services such as remote health guidance and remote occupational health to companies and health insurance associations. The company is able to provide inexpensive and effective solutions by leveraging its network of healthcare professionals, ICT expertise, and experience in verification projects with government agencies.

Remote specific health guidance: A chat-based specific health guidance service provided by the company’s registered dietitians. Specifically, the company’s dietitians share dietary information and chat with insured persons who are eligible for the specified health guidance service during the specified health checkups (health checkups aimed at reducing the number of persons with or at risk of developing metabolic syndrome) via a smartphone, and provide advice on how to improve their lifestyle. The company earns a commission from the health insurance association based on the number of insured persons advised. According to the company, the company’s communication is more frequent and more effective in improving lifestyle habits than when conducted through regular consultations.

Remote occupational health: A total package service that combines home visit and remote services to support occupational health operations of human resource departments. The basic fee starts at JPY30,000 per month, and offers support for occupational health operations in collaboration with occupational physicians and nurses, as well as support for employee consultations. The support service leverages the company’s experience in providing specific health guidance through remote chats, and is provided both through home visits and remotely using ICT.

Going forward, the company plans to expand the corporate client and user base of its services, develop services that are essential for health management, improve the quality of services by securing and training healthcare professionals, and analyze and utilize accumulated data to boost the value it provides as a health management support platform and accelerate sales growth. The company believes it can leverage its existing pool of healthcare personnel in other businesses to expand its business scale.

Senior Life field: Providing services centered on elderly care through communities for the elderly and their families

By building a platform that connects the elderly and their families to consultation resources and services that help with elderly care related needs, the company provides a variety of options and high-quality information for decision-making. As part of its community service, it helps solve problems by enabling users to interact with other caretakers and receive advice from experts, as well as connecting users to businesses that provide solutions for specific topics such as housing, food, and end-of-life care. The company receives commissions from service providers based on the number of matches it arranges.

Going forward, the company will work to boost its value as a platform and accelerate sales growth by improving its value as a community-oriented comprehensive consultation service for all things related to elderly care, expanding on themes specific to an aging society and enhancing services within those themes, increasing the number of partner businesses that provide solutions, and providing management support for partner businesses.

Acquisition of MIMS Group

In October 2015, SMS acquired a 60% stake in Medica Asia (Holdco) Limited, the holding company of the MIMS Group, making it a consolidated subsidiary. In September 2018, SMS completed the acquisition of Medica Asia (Holdco) Limited, making it a wholly owned subsidiary.

With Medica Asia as the holding company, the MIMS Group provides marketing support to medical and healthcare professionals, medical databases to medical institutions, and career services in South Korea, China, Hong Kong, Taiwan, Singapore, Malaysia, Indonesia, Thailand, Vietnam, the Philippines, Myanmar, India, Australia, New Zealand, the UAE, and Ireland. Registered healthcare professional users in these regions have reached 2.8mn. In Singapore and Hong Kong, over 90% of doctors are registered users of the MIMS Group.

Overview of MIMS Group businesses

The MIMS Group operates the Medical Platform business (chiefly Medical Marketing and Clinical Decision Support) and the Global Career business. In FY03/21, the existing MIMS businesses accounted for roughly 90% of overseas sales, and Global Career for about 10% of overseas sales.

Medical Marketing business (formerly Pharma Marketing)

Medical Marketing accounts for roughly 70% of the sales of the Medical Platform business of the MIMS Group. MIMS provides healthcare professionals (doctors, nurses, pharmacists) with a uniform drug database that sorts and summarizes drug information provided by pharmaceutical companies and can be accessed through various print media and online. In return for including such information in its drug database, the group collects posting fees from pharmaceutical companies. The Medical Marketing business also provides marketing support to healthcare professionals at pharmaceutical companies and healthcare operators by delivering medical news and educational content, and managing industry events.

According to management, the MIMS drug database is the de facto industry standard in those countries where the company operates. The MIMS Group has business relations with almost all makers of new drugs, from major companies to small and medium-size ones and its database posts information on almost all new drugs.

Clinical Decision Support business (formerly Healthcare Data)

The Clinical Decision Support business provides a drug database to medical institutions (hospitals, clinics, and pharmacies), charging a fee for database use. In addition to being offered as a stand-alone system, the database can also be integrated into core systems such as hospital information systems, clinic prescription systems, and pharmacy dispensing systems.

According to the company, the database has become the standard means of checking to ensure no unfavorable drug interactions occur when patients are prescribed multiple medications and to prevent drug misuse, and is currently used at over 50% of all hospitals, clinics, and pharmacies in Australia and New Zealand.

Global Career business

In June 2017, the MIMS Group converted Melorita, a Malaysian recruitment agency for nursing professionals with orders from hospitals in Saudi Arabia and Asia, into a subsidiary, thus strengthening the Global Career business.

Saudi Arabia is a host to many foreign healthcare professionals, with 60% of its nurses being foreign nationals. Like their European and American counterparts, Malaysian nurses enjoy a strong reputation in Saudi Arabia by virtue of Malaysia’s advanced medical education and technology. Their shared Islam background as well as their high level of English proficiency has led them to be accepted in large numbers by Saudi Arabia and other countries in the Middle East.

Thanks to its successful 40-year track record of placing Malaysian nurses in Saudi Arabia and Asia, Melorita receives many orders for staff from hospitals in Saudi Arabia. In addition, it has accumulated expertise in how to apply for a work permit and to find suitable accommodations in Saudi Arabia.

Medium-term strategy for MIMS Group

The MIMS Group is in charge of driving business across the Asia–Oceania region. As contributions to consolidated sales and earnings at SMS, the company expects there will be improvements in the profitability of the existing business of the MIMS Group and plans to take steps to generate additional growth by developing new businesses to take advantage of synergies with the MIMS Group. SMS positions the time-frame through FY03/21 as an investment period for medium-term growth of the MIMS Group and forecasts losses due to rising costs. From FY03/22, the company plans to realize growth at the acquired company by promoting cross-selling in the existing Medical Marketing business, and by getting the Global Career business up and running.

Promoting cross-selling in MIMS Group’s Medical Marketing business

In FY03/20, SMS restructured its sales organization for existing MIMS Group businesses to promote cross-selling. Sales staff in the Medical Marketing business previously specialized in sales of distinct products and services such as medical databases, medical news, distribution of educational content, or management of industry events. Under the new organization, sales staff can cross-sell products and services in various combinations (e.g., incorporating medical news in managed industry events to attract visitors). From FY03/21 onward, it has continued to push cross-selling, and aims to improve productivity per salesperson.

In FY03/21, amid the COVID-19 pandemic, adjustments made to the company’s sales structure bore fruit, resulting in strong cross-selling of online events and digital products.

Adding to earnings with Global Career business

The company has been aggressively expanding the Career business, which is its specialty in Japan, to Asian countries since FY03/18. In June 2017, it converted Melorita, a Malaysian recruitment agency for nursing professionals with orders from hospitals in Saudi Arabia and Asia, into a subsidiary, thus launching the cross-border staffing business in earnest. The company has since increased the number of countries it operates in, aiming to not only support career changes in individual countries but also globally by establishing a position as a platform that supplies healthcare professionals. It made MSR (a nurse referral company in the Philippines) and CCM (a company that refers healthcare professionals from Europe and Oceania to medical institutions in the Middle East) subsidiaries in May 2018 and August 2019, respectively.

As of March 2021, the MIMS Group had a membership base of healthcare professionals in Ireland, England, Australia, New Zealand, Malaysia, the Philippines, and South Korea. It receives staffing orders for such practitioners from medical institutions in countries and regions such as Saudi Arabia, the UAE, Qatar, North America, England, Australia, Ireland, and South Korea.

Business

In its core businesses, the company provides staffing services, job advertisements, a management support platform, community sites, and information services in the fields of elderly care, medical care, health-care, and senior life.

Business model

Staffing services

SMS introduces prospective employees (nurses, care workers) who have registered on its web site to employers (hospitals, elderly care and service providers). The company screens the applicants by experience, certifications, technology skills, knowledge, reason for changing jobs, and other factors. If an applicant is successfully placed, SMS receives a commission equivalent to 20% to 30% of the estimated annual salary for the position from the hiring company. For the most part, applicants find their way to the SMS web site through search ads.

Business model of staffing services

Source: Shared Research based on company data

Revenues from staffing services are calculated by multiplying the number of job seekers signing contracts to change jobs by the average commission (calculated by multiplying the annual income of the job seeker by the commission for staffing services). In addition, the number of job seekers signing contracts to change jobs can be analyzed in terms of the number of career partners and productivity (number of job seekers signing contracts per career partner).

Revenues for the company’s staffing services
Sales = Number of Consultants x Productivity x Commission - pre-cancellations – refunds

Sales: recorded on the day the applicant starts the job
Commission: average referral commission
Pre-cancellations: agreements that fail before the applicant starts the job; these commissions are

SMS acts as a staffing agency for medical nurses, care workers, care managers, and medical/elderly care professionals such as clinical technologists, radiologists, and clinical engineers as well as massage, acupuncture, and combustion therapists. According to data from the Ministry of Health, Labour and Welfare’s 2020 Basic Survey of Wage Structure, the average annual salaries for the jobs that make large contributions to SMS sales in the staffing service business are: for nurses JPY4.92mn (JPY4.83mn in 2019), for care takers (medical and care facilities) JPY3.60mn, for care managers JPY3.99mn (JPY3.93mn), and for physical and occupational therapists JPY4.19mn (JPY4.10mn). SMS receives a commission equivalent to 20% to 30% of the estimated annual salary for the position.

Shared Research understands that in general, by placing a high-income specialist with an average annual salary of over JPY6mn, a recruiting agency receives a 30% commission or over JPY1.8mn for an arrangement, while the average commission is around JPY700,000 to JPY800,000mn for nurses and care managers going through the company’s staffing services. According to the company, the barriers to entry are not high in the staffing services business in this field, but average commission is low. Therefore, highly productive career partners and reducing advertisement costs used to attract customers are key to make a profit.

When hiring a nurse, hospitals usually use a staffing agency, and rarely use a job board. This is because hospitals, many of them not having HR departments, prefer agencies that can take over most of the hiring processes.

Staffing services for medical and elderly care practitioners generate lower revenue per contract than those for high-income specialists, but time and effort that career partners must expend for each successful contract is also lower. In most cases, it can be determined whether medical and elderly care practitioners fulfill the basic requirements that employers are seeking in terms of certifications and experience. In addition, the time given to job decision-making is short, given that there is a standard ratio of seven patients per nurse*, and there is a need for a certain minimum number of care managers per site. Also, in staffing services for high-income professionals, career partners must usually interview applicants in person. However, for the medical and elderly care practitioners targeted by SMS, telephone interviews suffice.

*Seven per nurse: the more nurses, the greater the benefits paid by health insurance to hospitals. Hospitals are grouped into four categories based on the ratio of patients to nurses: 15-to-one, 13-to-one, 10-to-one and seven-to-one. In 2006, seven-to-one was established as part of diagnostic compensation reform. The more nurses a patient requires the higher the compensation.

The main costs in the staffing services business are personnel costs for career partners and advertising costs to attract customers. As described, in staffing services for medical and elderly care practitioners, revenues per contract signed may be low, but by increasing productivity it is possible to keep down the ratio of personnel costs per unit of sales. In SMS’ case, personnel costs as a percentage of sales are about 30%.

Advertising costs associated with the registration of a single vendor are little different in staffing services for nurses and care managers than they are for high-income professionals, so keeping these costs down is important. The company was engaging in its own SEM (search engine marketing) since its foundation, and by building up expertise in this area, it has succeeded in securing registrants while keeping advertising costs down to about 15–20% of sales, establishing a model for profitability in this business.

SEM: A marketing technique used with the objective of increasing the number of visitors to a company’s web site via search engines. It includes SEO (Search Engine Optimization), which involves optimizing the web site’s content to increase the ranking the site receives in keyword search results, as well as the use of pay-per-click keyword advertising and paid listings.

Job information services

Business model of Job information services

Source: Shared Research based on company data

In job information services, clients place ads on SMS-operated web sites to seek out prospective job applicants. The company earns job-ad revenues, equal to the number of applicants who respond to an ad, times a set amount per applicant. For some services, the company receives a commission from clients the business when a job applicant is placed.

While the company earns a 20–30% commission per placement (based on the projected annual salary of the candidate) in staffing services, it only earns tens of thousands of yen per one application in the job information services. The significant difference in the fee structure stems from the fact that staffing services are completely success fee based, whereas the role of job information is the collection of potential candidates and the service only covers a portion of the overall recruiting process.

Unlike staffing services, job information services do not require career partners and tend to be used for the hiring of regular workers (as opposed to high-earners) who fit certain conditions.

The use of recruiting ads has traditionally been the standard practice for finding and hiring elderly care workers. Elderly care operators need to minimize per head hiring costs as it is important to secure ample resources due to this job’s labor-intensive nature. As a result, the company has developed the business for elderly care operators mainly through job information services. (As stated above, however, a shortage of elderly care workers is becoming a serious issue and demand for success fee-based staffing services is increasing despite the high cost. As such, the company launched a staffing service for elderly care workers in earnest in FY03/17. The service is rapidly expanding in scale, and the company’s sales of staffing and other elderly care related services have expanded at a CAGR of 38.2% from FY03/17 through FY03/20.

Community websites

The community websites that SMS operates are intended to provide a platform for professionals (nurses, care managers) and end users (users of medical and elderly care services) to exchange information about the industry and related news. The websites also provide tools for business improvement, such as electronic forms, to professionals.

The company’s main aim in operating these community sites is not only earning advertising revenues but by keeping in touch with workers on an everyday basis, utilizing their influence in developing new businesses and speeding up inception of new businesses by conducting sales promotion to community site workers (For example, care managers have an influence on elderly care providers because of their position to choose providers and on end users because they are consulted by patients and their family members. With their influence on end users, care managers also have an influence on elderly care-related companies such as diaper makers, whose customers are end users). Other key aims in operating the community sites include building a network of quality medical practitioners essential in new healthcare related services and other businesses and lowering advertising costs in its staffing services business over the long run.

In staffing services for medical and elderly care practitioners, the amount of revenue per contract signed is limited to a certain ratio of annual revenues of successful applicants, and it costs to advertise to attract job applicants. The company realizes that it is important to keep those costs down, in order to maintain or increase profitability. It hopes that job applicants and prospective job applicants will develop a habit of using its community sites regularly, to create an avenue so that when it comes time for them to switch jobs, they will move naturally from the community site to registration with the staffing services that the company operates. This helps to keep down advertising costs it incurs in registering job applicants. SMS aims to continue boosting the value of these assets.

SMS aims to continue boosting the value of these assets.

Business support platform for elderly care operators: Kaipoke

Kaipoke is a business support platform for elderly care operators. It provides software for elderly care insurance billing via ASP for elderly care providers. The software assists elderly care providers to create care plans and transmit requests for compensation to the National Health Insurance Organization, and provides services for total management support including sales support, staffing support, and improvement of operational efficiency, financing, and purchasing assistance.

Sales for this business are calculated as the number of elderly care provider member locations using Kaipoke x average user fees per month x number of months used. Sales for the service itself and optional services came to JPY5.9bn in FY03/21 (+20.9% YoY) with 21,250 member locations (as of April 1, 2021), average user fees per month (calculated by Shared Research based on average number of member locations during the fiscal year and sales) were roughly JPY24,500 (+ approximately 8% YoY). According to the company, the average user fees per month were JPY3,000 through September 2014, and has tracked at JPY20,000 since October 2014.

The providers are to pay monthly usage fees when they continue to use the software beyond the period for free trial. Prior to changes to the pricing structure in October 2014, monthly usage fees depended on the services and the number of service units, such as JPY1,980 for at-home elderly care support service providers, JPY3,980 for home-visit care service providers or service providers of elderly care services at day care service centers, and when there are multiple services, JPY3,000 per service unit. In October 2014, the company began providing various new Kaipoke services in addition to its elderly care insurance billing service. These included sales support, recruitment support (such as job advertisements for elderly care providers), improvement of operational efficiency including purchasing functions for workplace equipment, bank transfers to handle fees paid by users of elderly care services, and support for coordinating documentation between workplaces. Following changes to the pricing structure in October 2014, at-home elderly care support service providers paid JPY5,000 per month and providers of home-visit care services or nursing day care services paid JPY25,000 per month, plus fees for any additional services.

According to the company, the monthly fees for Kaipoke are low compared with competitors’ fees when considering the management support services provided in addition to the elderly care insurance billing software.

Expenses are mainly fixed expenses such as personnel, system development, software depreciation and advertising. This results in an earnings structure whereby profits expand when sales top the break-even point. However, the company has indicated that it maintained a profit margin of roughly 25% for Kaipoke (before allocation of corporate overhead) in FY03/21 to facilitate ongoing investment in the development of systems and services to support continued growth in the future.

Main businesses

SMS operates in nursing, medical, healthcare, and senior life sectors. The company offers staffing services, job postings, information on certification courses, management support platform for nursing business operators, and community websites.

In FY03/21, approximately 65.8% of total sales came from the Career segment, which provides staffing services and job posting/search services for nursing and medical care personnel. The company’s Kaipoke management support platform for elderly care operators accounted for 16.5% of revenues.

Sales breakdown

In FY03/21, the Career segment accounted for 65.8% of total sales, Elderly Care Operators 16.5%, Overseas 14.3%, and Business Development segment 3.4%.

The company does not disclose detailed earnings data by segment, but it does release sales figures for each business segment. Until FY03/10, the company disclosed its breakdown of sales for staffing services, media and new businesses in three areas: elderly care, medical care, and active seniors. From FY03/11 to FY03/15, it divided its elderly care, medical care and overseas businesses into daily use and non-daily use business, and disclosed its sales data on that basis. From FY03/16 to FY03/17, it disclosed sales data for the redefined business segments of Career, Elderly care, Medical Care, Healthcare, and Overseas. From FY03/18, it changed its segment structure as follows: Career, Elderly Care Operators (previously Management Support for Service Operators), Overseas, and Business Development (previously Elderly care, New Businesses, Medical Care, and Health Care).

FY03/21 sales breakdown by segment and business

Segment	Details	Sales (JPYmn [YoY])	% of total	Main service
Career	Elderly care career	10,950 (+3.1%)	30.5%	Personnel referral for nursing care workers
	Medical care career	12,716 (-3.8%)	30.5%	Personnel referral for nurses
Elderly Care Operators	Kaipoke	5,918 (+20.9%)	16.5%	Kaipoke sales
Overseas	MIMS (Medical Marketing, Cliincal Decision Support) Global career	5,147 (-2.4%)	16.5%	Majority of sales from MIMS sales
Business development	former "Elderly care: new businesses" Medical care Healthcare	1,426 (+25.9%)	3.4%

Source: Shared Research based on company data

Sales by segment and business (new segmentation)

(JPYmn)				FY03/17	FY03/18	FY03/19	FY03/20	FY03/21
Sales				23,055	26,611	30,836	35,140	35,960
	YoY			20.9%	15.4%	15.9%	14.0%	2.3%
	Career			13,972	16,863	20,398	23,836	23,666
		YoY		-	20.7%	21.0%	16.9%	-0.7%
		% of total sales		60.6%	63.4%	66.1%	67.8%	65.8%
		Elderly care career		4,025	5,836	7,974	10,618	10,950
			YoY	-	45.0%	36.6%	33.2%	3.1%
			% of total sales	17.5%	21.9%	25.9%	30.2%	30.5%
		Medical care career		9,946	11,027	12,423	13,218	12,716
			YoY	-	10.9%	12.7%	6.4%	-3.8%
			% of total sales	43.1%	41.4%	40.3%	37.6%	35.4%
	Elderly Care Operators			2,782	3,328	3,930	4,894	5,918
		YoY		-	19.6%	18.1%	24.5%	20.9%
		% of total sales		12.1%	12.5%	12.7%	13.9%	16.5%
	Overseas			4,786	5,109	5,464	5,276	5,147
		YoY		-	6.7%	6.9%	-3.4%	-2.4%
		% of total sales		20.8%	19.2%	17.7%	15.0%	14.3%
	Business Development			1,512	1,309	1,041	1,133	1,227
		YoY		-	-13.4%	-20.5%	8.8%	8.3%
		% of total sales		6.6%	4.9%	3.4%	3.2%	3.4%

Source: Shared Research based on company data

Career segment (65.8% of FY03/21 consolidated sales)

The Career segment comprises the elderly care career and medical care career businesses. In FY03/21, the elderly care career business accounted for 30.5% of consolidated sales, and the medical care career business for 35.4%.

Career segment business portfolio

Career
Elderly care career	Kaigo Job	Job information services and career fairs for nurses and social workers
		Kaigo Job Agent
		Kaigo Job Partners
		Kaigo Job Academy
		Shikatoru
		PT/OT Personnel Bank
	Care Personnel Bank	Personnel referral services for care managers
	Medical care career	Nurse Personnel Bank
		Dietitian Personnel Bank
		Radiologist Personnel Bank
		Laboratory Technician Bank
		Clinical Engineer Personnel Bank
		Childcare Worker Personnel Bank
		WILL ONE
		Nurse Senka [Kyujin Navi]
		Nurse Senka [Shushoku Navi]
		Kango Shogakukin NAVI
		Nurse Senka Community
		JOB NOTE
		Kokushi Kurohon

Source: Shared Research based on company data

Elderly care career (30.5% of FY03/21 Career segment sales)

As of end-FY03/21, the elderly care career business offered seven services. Shared Research believes services that make large earnings contributions are Kaigo Job, Kaigo Job Agent, Care Personnel Bank, and PT/OT Personnel Bank. Other services include Kaigo Job Academy (elderly care qualification courses) and Shikatoru (information service for certification courses).

Kaigo Job

Kaigo Job is a job information service (job posting and search) specializing in the fields of elderly care and social work; it targets home helpers, care takers, care managers, managers at service providers, and counselors. The company earns a commission each time a job applicant responds to an advertisement.

Most of the firms offering jobs through this service are large elderly care operators. In FY03/20, the company did business with approximately 60% of all large operators. The company focuses mainly on large clients for efficiency as customers for this segment require direct contact with the salesperson in charge.

In February 2014, SMS introduced new functionality to the Kaipoke business support platform for providers of elderly care called Kaipoke Saiyo (hiring) that allowing these providers to post job ads using Kaigo Job. The new service is offered in a package with the other features of the Kaipoke service.

Kaigo Job Agent

The company has been in full-scale operation of Kaigo Job Agent (staffing service for elderly care workers) since FY03/17. In nurse staffing and help-wanted information, SMS has roughly 1.2mn members and plans to increase its staffing market share by leveraging its member platform.

Care Personnel Bank and PT/OT Personnel Bank

The Care Personnel Bank is a staffing service specialized in care managers. The company has offered this service since its inception in 2003. The company has also operated PT/OT Personnel Bank for physical therapists, occupational therapists and speech therapists in the elderly care segment since 2008.

As in the staffing service business for nurses, sales in this business are the number of contracts signed, multiplied by the commission per contract. When a referral leads to an employment contract, the company receives a commission of about 20–30% of the estimated annual salary for the position from the hired company. According to the Ministry of Health, Labor and Welfare’s 2020 Basic Survey of Wage Structure, average annual income was JPY3.60mn for care takers (medical and care facilities) and JPY3.99mn for care managers (JPY3.93mn in 2019), and about JPY4.19mn for physical and occupational therapists (JPY4.10mn in 2019).

Kaigo Job Academy

Kaigo Job Academy runs preparatory courses for those seeking elderly/medical care qualifications. In this service, the company offers self-operated free qualification courses to participants and introduces those who pass the qualification exams to care operators. The company has indicated that by having in place this support system, it is helping to increase the number of elderly care workers who are in high societal demand, while meeting the needs of care operators willing to hire beginners.

Shikatoru

Shikatoru is an information service regarding certification courses in the elderly care and medical fields. There is an abundance of information about specific certifications, and preparation courses, and users can compare the various offerings.

The company earns advertising revenues based on the number of brochure requests at a specified rate per request.

Medical care career (35.4% of FY03/21 Career segment sales)

The medical care career business primarily offers the nurse staffing service Nurse Personnel Bank (launched in September 2005). However, the company has been expanding the range of medical care professions covered by its staffing services to include dieticians (May 2012), clinical technologists (September 2013), radiologists (June 2014), clinical engineers (July 2014), judo-orthopedists, massage, acupuncture, and combustion therapists (November 2017), and childcare workers (October 2018). Other services include the job information service Nurse Senka Kyujin Navi, and the community website for nurses/nursing students Nurse Senka Community.

Nurse Personnel Bank

The company’s Nurse Personnel Bank is a staffing service specializing in nurses, and started in 2005. This service supports the matching of job applicants with job opportunities, using the consulting services of specialized career partners.

The company’s main customers in this field are hospitals. As of May 2021, the company did business with about 6,000 hospitals, 70% of the approximately 8,400 hospitals in Japan.

Sales earned in this segment correspond to the number of contracts signed multiplied by the commission per contract. When an applicant is placed, the company receives a commission of about 20% of the estimated annual salary for the position from the hospital. According to the Ministry of Health, Labour and Welfare’s 2020 Basic Survey of Wage Structure, the average gross annual income for nurses was JPY4.92mn (JPY4.83mn in 2019).

Cost of sales is mainly personnel expenses for career partners and advertising costs. Advertising costs are the costs the company incurs to place search-linked ads on the internet aimed at prompting prospective job applicants to register. Its advertising costs tend to rise in parallel with the growth of the personnel staffing services market. The company strives to keep down such advertising costs by optimizing search engine keywords and using the community sites it operates to attract applicants. Shared Research estimates that the company’s operating margin in this segment is around 30%.

According to the company, each year about 10% of the 1.7mn nurses in Japan (168,000) change jobs. Of this number, presumably about 25%, or 40,000 people use recruiters. As just above 10,000 nurses use SMS’ services, it is the leading player with a market share of about 30% (SMS estimate). However, the company’s share of employment contracts for all nurses who change jobs is only about 7%, and therefore, it thinks it has potential to increase market share. Japan has a shortage of nurses. CAGR in the number of nurses between 2012 and 2017 was 2%. Demand for nurses is likely to grow for the medium term as the average age of Japan’s population rises. Therefore, demand for the staffing services for nurses is expected to rise.

HR solutions for hospitals

The company offers hospitals management-related solutions such as assistance in hiring activities. The services provided depend on the needs of individual hospitals; the wide range of service offerings in this area include collective hiring of nurses (over 10 nurses at a time), and consulting services to improve overall hiring process (from job posting to interviews), or to strengthen efficiency of various hospital operations.

In the Medical care staffing business, SMS has dealing with 70% or about 6,000 of the existing 8,400 hospitals in Japan. For the medium term, the company intends to leverage this customer base and develop solutions that could help it establish closer and more sustainable relationships with client hospitals.

Job information services and community website for nurses/nursing students

Nurse Senka Kyujin Navi is a job information service for nurses, operating online and through job fairs and handling about 130,000 job ads for nurses as of May 2021.

Nurse Senka Shushoku Navi is a job information service for nursing students, operating via the internet, job fairs, and promotional publications.

Nurse Senka Community for nurses/nursing students is a membership community site for nurses, providing a bulletin board, news, and various articles. It also provides apps for qualifying examinations. As of March 31, 2019, the site, which opened in 2006, had 770,000 registered users or over 40% of all nurses in Japan. To support continuous use of the site, it provides nursing-related news on top of the bulletin board, a standard for a community site. SMS operates its community sites as well as information and search sites to encourage nurses to access to and use them on a daily basis, so that they register with its career services and finally the company can reduce advertisement costs associated with the staffing services for nurses and personnel media. Another aim is to guide nurses to the company’s other related services, such as online shopping.

Elderly Care Operators segment (16.5% of FY03/21 consolidated sales)

This segment consists of the Kaipoke business support platform for elderly care operators.

Kaipoke, business support platform for elderly care operators

Kaipoke provides software for elderly care insurance billing via ASP for elderly care operators, mainly in the form of assistance in creating care plans, and transmitting requests for compensation to the National Health Insurance Organization. It receives usage fees from the elderly care services providers that use these services. This service was launched in July 2006.

Under the elderly care insurance system in Japan, the patients bear a co-pay of 10% of the costs of the care service received and the national government pays the remaining 90% in form of insurance benefits. Elderly care service providers calculate the 90% amount to be invoiced to the national government based on the Elderly Care Benefit Cost Unit Table and then submit their compensation requests using the standard Detailed Receipt of Elderly Care Benefits. The Elderly Care Benefit Cost Unit Table differs by region. In addition, the amount of benefit money differs depending on the level of care required. Claiming compensation benefits therefore requires cumbersome calculations and paperwork by care providers who tend to be small and understaffed.

Providers normally use specialized software to calculate claims. According to SMS, most vendors charge about JPY30,000 per month in usage fees for such software. However, prior to September 2014, SMS’ price for its Kaipoke service was JPY3,000 per month and the company insists its software had similar functionality.

Expanding the Kaipoke service

Kaipoke started as software for processing health insurance claims. In August 2013, SMS started a factoring service for elderly care compensation (Kaipoke Biz Factoring Service), a first major addition to the package, and in February 2014, it launched a management Support Service for small and medium-sized elderly care providers, on top of the software for elderly care insurance billing. The new platform offers additional functions, such as sales support, staffing support (e.g., job advertisements for recruiters for elderly care facilities), and improvement of operational efficiency including purchasing functions for workplace equipment, bank transfers to handle fees paid by users of elderly care services, and support for coordinating documentation between different workplaces. As of May 2019, the company provided over 40 services. It plans to gradually expand these going forward. Its core services are shown in the table below.

Name of service	Content
Insurance claims	Manages past and future usage of insurance claims, and utilizes related information to create elderly care insurance billing documents.
Job information services	Operates the job information service Kaigo Job (usage is free). Also provides contracted job ad creation services.
Sales support	Supports the creation of sales flyers and elderly care manager lists at customers. Allows users to create a website for no charge that automatically incorporates their registered business information.
Business improvement	Rents out one iPad device at no cost to facilitate on-site document creation.
Facility opening support	Supports the necessary procedures and preparations for facility openings, including the application specified by the Long-Term Care Insurance Act, capital procurement, property search, and research on commercial areas.
Financial improvement	Provides factoring services and helps improve cash flow.
Purchasing support	Facilitates procurement of necessary equipment for operation of elderly care facilities at affordable prices. Also provides affordable smartphone rental and other services.
M&A support	Supports the succession of elderly care facilities

Source: Shared Research based on company data

New pricing structure

In October 2014, the company moved to a new pricing structure for Kaipoke, to reflect the expanded service lineup. Prices were changed as follows:

At-home elderly care support service providers: prices raised from JPY1,980 to JPY5,000 per month;
Home-visit care and elderly day care service providers: prices raised from JPY3,980 to JPY25,000 per month;
Multiple accounts in one location: prices raised from JPY4,980 to JPY30,000 per month, for providers of at-home elderly care support, home-visit care services, and elderly day care services.

The company also set prices for each additional service, although most of these are offered free of charge. Shares Research estimates average user fees per month totaled about JPY24,500 in FY03/21 (+8% YoY), calculated based on the average number of member locations during the fiscal year and sales.

Number of member locations

Kaipoke used to attract users mainly by search ads on the internet. The number of member locations continued growing through Q1 FY03/15 on its popularity as an affordable, high-quality service.

The number of member locations declined in Q3–Q4 FY03/15, as some members cancelled their contracts after the October 2014 price hikes. However, this trend reversed and net membership increases were seen on a monthly basis from the latter half of Q4 FY03/15. As of April 2021, there were 21,250 member locations (31,100 care facilities), equivalent to roughly 16% of the facilities that provide elderly care services where Kaipoke services are available (Shared Research estimate).

Number of Kaipoke member companies and sales

		FY03/12	FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21
		Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Elderly care operator locations ('000)		135	143	153	162	172	179	186	189	192	194
	YoY	4.7%	5.9%	7.0%	5.9%	6.2%	4.1%	3.9%	1.6%	1.6%	1.0%
Number of member locations		-	-	13,600	10,400	12,000	13,500	15,050	16,800	18,850	21,250
	YoY	-	-	-	-23.5%	15.4%	12.5%	11.5%	11.6%	12.2%	12.7%
Number of member offices		7,600	13,000	17,500	13,600	15,400	-	21,400	24,250	27,400	31,100
	YoY	81.0%	71.1%	34.6%	-22.3%	13.2%	-	-	13.3%	13.0%	13.5%
	Share	5.6%	9.1%	11.4%	8.4%	9.0%	-	11.5%	12.8%	14.3%	16.0%
Sales (JPYmn)		211	406	757	1,537	2,551	3,040	3,328	3,930	4,894	5,918
	YoY	92.2%	92.2%	86.2%	103.1%	66.0%	19.2%	-	18.1%	24.5%	20.9%

Source: Shared Research based on company data
Note: Number of Kaipoke elderly care operator locations: company estimate based on Health, Labour and Welfare Ministry statistics
Note: Sales through FY03/17 reflect sales in the former Management Support for Service Operators segment. Due to modification to disclosure classification, in FY03/18, the elderly care business in the former Management Support for Service Operators was moved to Business Development. In the purchasing service of Kaipoke, the company only books commission fees as sales.

Overseas business (14.3% of FY03/21 consolidated sales)

In April 2009, SMS established a system development base in Vietnam. Since then, SMS has expanded its presence in the Asia–Oceania region by establishing subsidiaries and completing capital alliances. In October 2015, SMS acquired 60% of shares in Medica Asia (Holdco) Limited, which holds the MIMS Group, a provider of a medicine information database in Asia–Oceania, and made Medica Asia a consolidated subsidiary. (In September 2018, SMS acquired the remaining shares of Medica Asia, making it a wholly owned subsidiary.) Since FY03/16, the MIMS Group has been the key driver in the Overseas segment. In FY03/18, the group converted Melorita, a Malaysian recruitment agency for nursing professionals with orders from hospitals in Saudi Arabia and Asia, into a subsidiary, and thus started operations in the Global Career business in earnest.

SMS estimates that other Asian countries will follow the aging society patterns of Japan in roughly 30 years. The Asian countries will need to develop their own comprehensive systems of caring for the elderly. SMS wants to be prepared once that starts happening and have a service solution suitable for each particular country. It has set a medium and long-term goal of building a powerful pan-Asian—albeit localized—platform for medical and elderly care information services infrastructure in the region.

MIMS Group

In October 2015, SMS acquired 60% of shares in Medica Asia (Holdco) Limited, the holding company of the MIMS Group, making it a consolidated subsidiary (Mitsui & Co. previously held the remaining 40%, made wholly owned subsidiary in September 2018).

With Medica Asia as its holding company, the MIMS Group provides marketing support to medical and healthcare professionals, drug information databases to medical institutions, and career services in South Korea, China, Hong Kong, Taiwan, Singapore, Malaysia, Indonesia, Thailand, Vietnam, the Philippines, Myanmar, India, Australia, New Zealand, the UAE, and Ireland. Registered healthcare professional users in these regions have reached 2.8mn. In Singapore and Hong Kong, over 90% of doctors are registered users of the MIMS Group. Registered healthcare professional users in these regions have reached 2.7mn (including 500,000 doctors). In Singapore and Hong Kong, over 90% of doctors are registered users of the MIMS Group.

The MIMS Group operates the Medical Platform business (chiefly Medical Marketing and Clinical Decision Support) and the Global Career business.

Medical Marketing business

Medical Marketing accounts for roughly 60% of overseas sales. The Medical Marketing business provides healthcare professionals (doctors, nurses, pharmacists) with a uniform drug database which sorts and summarizes drug information provided by pharmaceutical companies, and can be accessed through various media, both print and digital (including mobile apps). In return for being included in this drug database, pharmaceutical companies pay a posting fee. The Medical Marketing business also provides marketing support to healthcare professionals at pharmaceutical companies by delivering medical news and educational contents, and offering industry events. In the Pharma Marketing business, the MIMS Group has business relations with almost all pharmaceutical companies, from major to small and medium-size companies, and posts almost all information on drugs on the database.

According to SMS, the MIMS drug database is the de facto industry standard for healthcare professionals in those countries where the company operates.

Clinical Decision Support business

According to management, the database has become the standard means of checking to confirm that there is no unfavorable drug interaction when patients are prescribed multiple medications, and is currently used at over 50% of all hospitals, clinics, and pharmacies in Australia and New Zealand.

Global Career business

The MIMS Group converted Melorita into a subsidiary and thus acquired that company’s cross-border operational capabilities. By combining the MIMS Group’s membership base of medical care professionals and SMS’ expertise in managing the Career segment, SMS intends to expand the number of companies and regions from where it can recruit medical practitioners through partner medical institutions, and accelerate growth in the Global Career business. As part of these initiatives, the company made MSR (a nurse referral company in the Philippines) and CCM (a company that refers healthcare professionals from Europe and Oceania to medical institutions in the Middle East) subsidiaries in May 2018 and August 2019, respectively.

Effects of consolidating MIMS Group

Below were the MIMS Group’s business results before the consolidation into SMS.

MIMS Group’s business performance for FY12/12 to FY12/14

	FY12/12	FY12/13	FY12/14
Consolidated sales (USD'000)	46,951	47,605	47,354
Consolidated operating profit (USD'000)	9,479	12,193	13,377

SMS posted the MIMS Group’s earnings for January–December 2016 in its consolidated results for FY03/17; sales amounted to JPY4.8bn. In FY03/21, the MIMS Group delivered the bulk of the earnings in the Overseas segment. Shared Research estimates the Overseas segment contributed sales of JPY5.1bn (-2.4% YoY) and booked a loss. Sales fell due to restrictions on off-line (actual) events in the Medical Platform business and overseas travel restrictions in the Career business amid the COVID-19 pandemic. In addition to the drop in sales, profits were affected by the recording of goodwill amortization.

Group companies

As of May 2021, 41 companies were included in consolidated earnings: the parent company, 38 consolidated subsidiaries, and three equity-method affiliates. The subsidiaries making the largest contribution to earnings are SMS Career Co., Ltd., MIMS Group (see the Main businesses section), and an equity-method affiliate M3 Career Inc.

M3 Career Inc.

SMS holds a 49% stake of this equity-method affiliate. M3 Career Inc. (TSE1: 2413) owns the remaining 51%. M3 Career was established in December 2009, combining M3’s physician and pharmacist job ads business with SMS’ physician and pharmacist staffing agency business.

M3 Career performance

		FY03/12	FY03/13	FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21
(JPYmn)		Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.	Act.
Sales		2,191	3,235	4,594	5,712	6,925	8,630	10,880	13,710	15,388	13,540
	YoY	52.9%	47.6%	42.0%	24.3%	21.2%	24.6%	26.1%	26.0%	12.2%	-12.0%
Recurring profit		437	749	1,070	1,714	2,292	2,554	2,871	3,847	4,125
	YoY	146.9%	71.4%	42.9%	60.2%	33.7%	11.4%	12.4%	34.0%	7.2%

Source: Figures for FY03/20 and earlier accounting periods are as listed in annual securities reports from M3 Career Inc. while figures for FY03/21 and later accounting periods were produced by Shared Research based on information disclosed by M3 Career Inc.

Strengths and weaknesses

Strengths

Strong market share in medical and elderly care staffing services: In staffing services and job information services, brand name recognition is an important factor for an agency’s efficiency in attracting applicants. Particularly in online job ads, the staffing agencies with the highest market share are the best in attracting job applicant registrations and job information. This makes their sites easier to use, which leads to further gains in market share. The company was one of the pioneers in the market for staffing services and job information in the nursing and elderly care segment. It was successful in keeping costs down and achieving profits, allowing it to surpass its competitors and increase share in this growth market. This in turn helped further boosted its brand name recognition. Top providers of online based staffing service able to attract a large number of registered job seekers and offer abundant job information are able to increase their market share by enhancing the convenience of web-based staffing services.

Specializing in growth fields: SMS does business in the medical and elderly care markets, which are expected to grow as Japan’s demographics continue to age. As of May 2021, the company does business mainly in staffing services, job information, and business support platform, but its medium to long-term strategy is to increase sales in other peripheral businesses by attracting more customers (employees, agencies, users) in the medical and elderly care services segment. Shared Research thinks that the company has significant opportunity to increase profits in the medium to long term from the enormous markets for medical and elderly care services in Japan and abroad.

Outstanding management: Shared Research thinks that President Shuhei Morofuji and the rest of SMS management have a good grasp of logical decision-making in business, taking in the current environment and planning ahead for the medium to long term, seeing what they need to do now to be where they want to be further down the road. For example, concerning the Kaipoke Biz business platform for small and medium-size elderly care providers, management predicted that regional elderly care providers would be the mainstream in the medium term. They determined what tools was necessary to reach such vendors, and developed appropriate services such as elderly care invoicing application service provider (ASP), within a short span of time after the company’s founding. It is no coincidence that the company found its way into these growth markets. Shared Research thinks that this was a result of management’s vision and capabilities.

Weaknesses

Costs vs. benefits in new businesses: In its new businesses, the company appears to lack clear standards for profitability, or costs vs. benefits. This may be what makes it possible for the company to speedily implement new businesses, and invest for the long term, but still its analysis of costs vs. effects seems unclear.

Limited contribution to earnings by overseas investment: In October 2015, the company spent JPY18.4bn (goodwill: JPY11.9bn) to acquire a 60% stake in Medica Asia, the holding company of the MIMS Group which provides a medicine information service in Asia–Oceania, making Medica Asia its consolidated subsidiary. This acquisition amount exceeded the company’s total assets in FY03/15: JPY11.4bn. Subsequently, in September 2018, the company acquired the remaining 40% stake in Medica Asia held by Mitsui & Co. for approximately JPY11.5bn, making it a wholly owned subsidiary. The MIMS Group has been a key driver in the Overseas segment. However, the Overseas segment only contributed sales of JPY5.1bn (-2.4% YoY) in FY03/21, with annual sales growth averaging only 1.8% since FY03/17, and appears to have posted a loss.

Market and value chain

Market overview

The company thinks that its core market—catering to the needs of an aging society—will post multi-year growth.

Elderly care

Estimates of population age 65 and older

According to the population projection released by the Ministry of Internal Affairs and Communications, the estimated elderly population in Japan (65 years or above) reached approximately 36.2mn as of October 2020 (+0.8% YoY). At 28.7% of the total population (28.4% a year before), this was among the highest in the world. According to estimates by the National Social Security Population Studies Association, the elderly population in Japan (65 years or above) will continue to rise due to longer average life expectancy and shrinking birthrate and is forecast to account for over 30% of the total population in 2025.

Japan population statistics and outlook (mn people)

(mn)			2005	2010	2015	2020	2025	2030	2035	2040
Total population			127.8	128.1	127.1	125.9	122.5	119.1	115.2	110.9
	5-year CAGR		0.1%	0.0%	-0.2%	-0.2%	-0.5%	-0.6%	-0.7%	-0.8%
Population age 65 or older			25.7	29.5	33.9	36.2	36.8	37.2	37.8	39.2
	5-year CAGR		3.1%	2.8%	2.8%	1.3%	0.3%	0.2%	0.4%	0.7%
	% of total		20.1%	23.0%	26.6%	28.7%	30.0%	31.2%	32.8%	35.3%
	Aged 65-74		14.1	15.3	17.5	17.5	15.0	14.3	15.2	16.8
		5-year CAGR	1.6%	1.7%	2.8%	-0.1%	-3.0%	-0.9%	1.3%	2.0%
	75 or older		11.6	14.2	16.3	18.7	21.8	22.9	22.6	22.4
		5-year CAGR	5.2%	4.1%	2.8%	2.8%	3.1%	1.0%	-0.3%	-0.2%

Source: Population Census, Ministry of Internal Affairs and Communications
Note: April 2019 Population Projections for Japan, National Institute of Population and Social Security Research

As of March 31, 2019, people recognized as needing long-term elderly care reached 6.58mn. Of them, 5.56mn people or more than 80% of the total, used services provided by elderly care insurance.

In the past 10 years, population aged 65 and above increased at a CAGR of 2.2%. In this period, people needing long-term elderly care increased at a CAGR of 3.5% and people using insured long-term care service increased at a CAGR of 3.8%, which exceeded the growth rate of elderly population. This is because over 80% of people needing long-term elderly care were aged 75 and above and the population growth rate of a population group aged 75 and above was higher than that of a population group aged 65 to 74. According to the population projections shown in the table above, population aged 75 and above is predicted to keep growing until 2030.

Population needing long-term elderly care and population covered by elderly care insurance (at end of March)

000			2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Population aged 65 or older			29,752	30,793	31,898	33,000	33,868	34,591	35,152	35,578	35,885	36,190
	YoY		0.9%	3.5%	3.6%	3.5%	2.6%	2.1%	1.6%	1.2%	0.9%	0.8%
No. of people needing long-term elderly care			5,059	5,303	5,611	5,838	6,058	6,204	6,319	6,413	6,582	6,686
	YoY		4.4%	4.8%	5.8%	4.0%	3.8%	2.4%	1.9%	1.5%	2.6%	1.6%
	Population needing long-term elderly care / 65 or older		17.0%	17.2%	17.6%	17.7%	17.9%	17.9%	18.0%	18.0%	18.3%	18.5%
	Of which, 75 or older		4,264	4,494	4,771	4,969	5,165	5,312	5,441	5,545	5,722	5,831
		YoY	5.2%	5.4%	6.2%	4.1%	4.0%	2.9%	2.4%	1.9%	3.2%	1.9%
		75 or older needing long-term elderly care / total population needing long-term elderly care	84.3%	84.7%	85.0%	85.1%	85.3%	85.6%	86.1%	86.5%	86.9%	87.2%
Population covered by elderly care insurance			4,133	4,349	4,589	4,827	5,032	5,222	5,602	5,529	5,544	5,673
	YoY		4.1%	5.2%	5.5%	5.2%	4.2%	3.8%	7.3%	-1.3%	0.3%	2.3%
	Ratio of those covered by elderly care insurance (No. of people covered by elderly care insurance/No. of people needing long-term elderly care)		81.7%	82.0%	81.8%	82.7%	83.1%	84.2%	88.7%	86.2%	84.2%	84.8%
	No. of people covered by home service		3,019	3,191	3,379	3,575	3,743	3,894	3,909	3,765	3,741	3,841
		YoY	4.5%	5.7%	5.9%	5.8%	4.7%	4.0%	0.4%	-3.7%	-0.6%	2.7%
	No. of people covered by community-based service		272	303	336	359	391	416	770	834	862	882
		YoY	10.3%	11.3%	11.0%	7.0%	8.9%	6.3%	85.2%	8.3%	3.4%	2.3%
	No. of people covered by facility service		842	855	874	893	898	912	923	930	941	950
		YoY	0.6%	1.5%	2.2%	2.2%	0.6%	1.6%	1.2%	0.8%	1.2%	1.0%

Source: Shared Research based on population projections (Ministry of Internal Affairs and Communications) and reports on insured long-term care service (Ministry of Health, Labour and Welfare)
Note: Data on population aged 65 is compiled every October; data on population needing long-term elderly care and population using insured long-term care service are compiled every March.

Monetary value of elderly care insurance costs

With the ageing of Japan’s population, the number of people making use of elderly care insurance services rose to about 5.6mn in March 2019 from about 1.5mn in April 2000, according to the Ministry of Health, Labour and Welfare. This increased elderly care benefit expenses every year from JPY3.6tn in 2000, JPY9.2tn in 2013, and JPY11.7tn in 2019. According to an MHLW estimate (“Outlook and future prospects of the Japanese social security system 2040”), elderly care insurance costs will rise to about JPY24.6tn in 2040, based on mechanical projections from current conditions.

Trends among elderly care professionals

In FY2000, when the elderly care insurance system was introduced, there were 550,000 elderly care workers in Japan. As more people became aware of the elderly care insurance system, and the population of senior citizens continued to grow, the number of professionals working in this field (nurses and others) rose to 1.71mn in FY2103. As 2025 approaches, there will be calls to strengthen Japan’s insurance system for medical and elderly care services, with the nation being called upon to build a comprehensive regional care system. According to the Ministry of Economy, Trade, and Industry, between FY2017 and 2035 Japan will need to increase the number of professionals working in the elderly care field by 50%.

Elderly care workers statistics and outlook

('000)	FY2013	FY2017	FY2020	FY2025	FY2035
	Act.	Est.	Est.	Est.	(est.)
Care worker supply	1,708	1,954	2,057	2,152	2,280
Care worker demand	-	2,078	2,257	2,470	2,970
Supply shortage	-	125	200	318	690

Source: Shared Research, based on the Ministry of Health, Labour and Welfare’s "Estimated Supply and Demand for Human Resources for Nursing Care in 2025 (Finalized)" and the Ministry of Economy, Trade and Industry’s "Research Report on Elderly Care System for Future Nursing Care Supply and Demand".

With respect to the number of elderly care workers and turnover ratio that largely affect the number of elderly care workers who change jobs, according to the company, the number of care workers increased at a CAGR of 3.6% in the past seven years and turnover ratio fluctuated between 15.0% and 17.0%.

Number of elderly care workers and turnover ratio

	2011	2012	2013	2014	2015	2016	2017	2018	2019
No. of elderly care workers	1,509	1,630	1,708	1,765	1,839	1,899	1,951	1,978	2,009
Turnover rate	16.1%	17.0%	16.6%	16.5%	16.5%	16.7%	16.2%	15.4%	15.3%

Source: Shared Research based on company data

Medical care

Ratio of nursing job offers to number of nurses

When standardized compensation for diagnostic procedures was reformed in 2006, the new system built in incentives by increasing basic hospitalization fees based on the number of nurses per patient (see Business model section regarding the seven-to-one rule for base hospitalization fees). This sparked competition to hire more nurses, leading to a nationwide shortage of nurses. As a result, nurses remain in chronic short supply. The job opening-to-application ratio for nurses has been exceeding the same ratio for all professions.

In 2014, the government revised the medical payment system with changes to standards for the number of days in hospital and nurses required. The new system—implemented from October 2014—maintains a focus on the seven-to-one rule (patient-to-nurse ratio), and on defining hospital features appropriate to the care of acute conditions. However, according to the company, the new regulations have not caused hospitals’ recruitment of nurses to fall. The company expects their effect will be limited over the medium term, as hospitals continue recruiting nurses to fill existing requirements.

Number of nurses in service and jobs-to-applicants ratio

		2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Nurses in service ('000)		1,496	1,538	1,572	1,603	1,634	1,660	1,658	1,683	1,683	-
	YoY	1.7%	2.8%	2.2%	2.0%	1.9%	1.6%	-0.1%	1.5%	0.0%	-
Jobs-to-applicants ratio (public health nurses, midwives, nurses）		3.0	3.1	3.0	2.9	2.8	2.7	2.6	2.5	2.5	2.2
Jobs-to-applicants ratio (all occupations)		0.5	0.6	0.7	0.9	1.0	1.1	1.3	1.4	1.4	1.1

Source: Shared Research based on Japanese Nursing Association (number of nurses in service) and Ministry of Health, Labour and Welfare (jobs-to-applicants ratio)

Looking ahead, Shared Research thinks that Japan’s demographics will continue to age rapidly, and the number of nurses in Japan is likely to continue to grow. According to a report by the Medical Personnel Supply and Demand Study Committee’s Subcommittee on Nursing Supply and Demand under the Ministry of Health, Labour and Welfare, demand for nurses in 2025 will be in the range of 1.8mn to 2.0mn nurses. This implies that annual supply growth rate of about 2% per year will be needed.

With respect to the number of nurses and turnover rate that largely affect the number of nurses who change jobs, the number of nurses increased at a CAGR of 1.5% in the past nine years and turnover rate fluctuated between 10.0% and 12.0%.

Number of nurses and turnover ratio

	2011	2012	2013	2014	2015	2016	2017	2018	2019
No. of nurses ('000)	1,496	1,538	1,572	1,603	1,634	1,660	1,658	1,683	1,683
Turnover rate	10.9%	11.0%	11.0%	10.8%	10.8%	10.9%	10.9%	10.7%	11.5%

Source: Shared Research based on company data

Medical costs

According to the Ministry of Health, Labour and Welfare, medical costs in 2019 were JPY43.6tn (+2.4% YoY). Medical costs are likely to increase an average of JPY1.4tn annually, reaching JPY76.3tn in 2040, attributable a growing number of elderly falling ill, or getting injured and requiring medication (particularly increasing for those aged 75 years and older), as well as rising medical costs due to the increasing sophistication of medical care.

Future outlook for medical costs(current projection)

(JPYtn)	FY2018	FY2025	FY2030	FY2035	FY2040
Total	45.3	54.9	62.0	69.1	76.3
Insurance premiums	22.1	26.0	29.0	32.1	35.3
Public expenditures	16.8	21.5	24.8	27.9	31.0
Co-payments	6.4	7.5	8.3	9.2	10.0

Source: Shared Research, based on the "Future Outlook for Social Security in 2040” report published by the Cabinet Secretariat, Cabinet Office, Ministry of Finance, and Ministry of Health, Labour, and Welfare

Competition

SMS operates its businesses based on a corporate philosophy of “creating values and continuing contribution to society by establishing information infrastructure fitted for an aging society.” According to the company, there is no other company that operates businesses on the same idea of building information infrastructure in an aging society and there is essentially no company that SMS finds to be a competitor. However, its businesses cover broad areas and there is competition in each business area.

Nursing staffing services

In the nursing staffing services business, the company’s main competitors are major players in the human resources services industry, such as Nurse de Hatarako (Dip Corp., Mothers: 2379), Kango-roo (Quick Co., ltd., JASDAQ: 4318), and Iryou-Worker (TrytCo., Ltd.). According to the company, sales for its competitors offering nursing recruiting services are estimated to be only around a third of SMS’ sales, and their profit margins are not as high.

When the company entered the nursing staffing services business in 2006, most companies active in this sector were small and medium-sized companies, closely tied to certain regions, which they dominated. SMS became successful and profitable by utilizing its own expertise in nursing staffing services, and expanded its market share.

In FY03/21, the company commanded a roughly 30% market share (SMS estimate) as more than 10,000 nurses changed their positions through its services out of a total of 40,000 who used any recruiting services in finding or changing jobs. As the market for nursing staffing services grows, even this top market share will only be around 7% of the total market for staffing services (170,000 nurses who change jobs a year), and consequently, Shared Research thinks that the company has plenty of potential to increase its market share further. Major companies that operate personnel services have been entering the nursing-related subsector since 2010, but the overall market is growing, Shared Research thinks that the market is not too competitive.

As the competitive environment grows more intense, however, players may increase their advertising spending aimed at attracting job applicants to register. Larger companies could use their financial clout to increase market share. The company’s strategy is to set itself apart from the competition by using advertising skills to attract customers and maintaining contact with nurses on a daily basis.

Kaipoke, business support platform for elderly care providers

Kaipoke—business support platform for elderly care providers—provides the service for elderly care insurance billing and other services, such as support for enhancing operational efficiency and for sales and recruitment. Main competitors in the elderly care insurance billing service are ND Software Co., Ltd. (TSE2: 3794, delisted in June 2019 following MBO), WISEMAN Co., Ltd. (JASDAQ: 3752. The stock was delisted in January 2014 as a result of a management buyout in 2013), and Kanamic Network Co. Ltd. (TSE1: 3939).

Historical financial statements

Q1 FY03/22 results

Sales: JPY10.8bn (+2.8% YoY)
Operating profit: JPY2.5bn (+14.2% YoY)
Recurring profit: JPY3.3bn (+10.0% YoY)
Net income*: JPY2.5bn (+12.5% YoY)
*Net income attributable to owners of the parent

Sales increased YoY primarily thanks to a rise in the number of Kaipoke member locations. Gross profit increased 2.9% YoY to JPY9.9bn, while SG&A expenses were just JPY7.3bn (-0.5% YoY), resulting in double-digit operating profit growth.
SG&A expenses primarily consisted of JPY3.6bn in personnel expenses (+0.4% YoY), JPY1.4bn in advertising expenses (+1.6% YoY), JPY558mn in outsourcing expenses (-15.3% YoY), and JPY205mn in amortization of goodwill (level YoY).

At the end of Q1 FY03/22, sales had achieved 27.1% of their corresponding projection in the company’s full-year forecast, while operating profit had reached 41.0%, recurring profit 45.1%, and net income 46.9%. In contrast, at the conclusion of Q1 FY03/21, sales had reached 29.3% of their eventual full-year result, while operating profit had achieved 40.8%, recurring profit 45.4%, and net income 45.9%. Both sales and profit in Q1 FY03/22 appear to be commensurate with the company’s expectations.

Career

Sales: JPY7.7bn (-4.8% YoY)

Sales of JPY3.1bn (-8.9% YoY) in the elderly care career business

Sales of JPY4.6bn (-1.9% YoY) in the medical care career business

Sales in the Career segment declined YoY. The COVID-19 pandemic impacted staffing services in both the elderly care career business and the medical care career business. Sales generated by staffing services are recorded once applicants join their new companies, which typically occurs several months to about one half of a year after the company receives the corresponding order for its staffing services (corporate requests for the referral of human resources). A large percentage of sales in Q1 FY03/21 were generated by projects for which the company accepted orders before the onset of impact from the COVID-19 pandemic. In contrast, sales in Q1 FY03/22 were all generated by projects that incurred impact from the pandemic. Consequently, sales in Q1 FY03/22 incurred downward impact that did not affect sales in Q1 FY03/21. Sales in Q1 also incurred downward impact from the suspension of new contracts associated with temporary staffing services for care workers and the application of the Accounting Standard for Revenue Recognition (more details below).

The company expects sales to begin rising YoY in Q2, projecting that enhancement of sales activities targeting operators who retained a relatively robust interest in hiring despite impact from the COVID-19 pandemic (home-visit elderly care operators and home-visit nursing stations) in FY03/21 would be a major factor driving sales growth. As mentioned earlier in this report, performance from staffing services incurred only limited impact from the COVID-19 pandemic in Q1 FY03/21 but performance from these same services began to incur impact from factors such as intermittent state of emergency declarations in Q2 of the same year.

As of June 30, 2021, the company had fewer career partners on staff than at the end of the same month in 2020. The company conducted recruiting activities as planned, but its staff of career partners decreased in size because it cut back on actual recruitment in response to uncertainty surrounding business impact stemming from the COVID-19 pandemic in FY03/21. SMS plans to expand its staff of career partners beyond its size at the close of FY03/21 by conducting recruiting activities moving forward.

Elderly care career business

Medical care career business

As indicated above, Nurse Personnel Bank, the company’s staffing service for nurses, incurred impact from the COVID-19 pandemic. Demand for radiologists and clinical engineers was strong, but the company observed a decline in demand for nurses and some other types of personnel. According to the company, recovery in the recruitment of nurses has been delayed due primarily to two factors stemming from the COVID-19 pandemic: outpatient declines at medical institutions and deterioration in the financial results of clinics and other small- and medium-sized healthcare facilities. The company has stepped up efforts aimed at acquiring recruitment-related projects from home-visit nursing stations and other facilities that have demonstrated relatively high interest in hiring despite these circumstances.

Sales generated through the medical care career business incurred downward impact of about JPY100mn stemming from the application of the Accounting Standard for Revenue Recognition at the beginning of Q1 FY03/22.

Change in the company's revenue recognition method: The company provides HR solution services for hospitals (diverse services focused mainly on resolving management issues related primarily to recruitment) as part of the service lineup of its medical care career business. Through these services, the company occasionally provides support related to the collective recruitment of 10 or more nurses at once. In cases such as these, the company has outsourced some activities related to the acquisition of job-seeking applicants to external employment agencies. Before changing its revenue recognition standards, the company had recorded all revenue generated through collective recruitment as sales and booked costs associated with the outsourcing of activities to external employment agencies as costs of sale. Since changing its revenue recognition standards, the company records the difference between revenue from collective recruitment and costs associated with the outsourcing of activities to external employment agencies as sales and does not book the latter under cost of sales.

Elderly Care Operators

Sales: JPY1.7bn (+26.5% YoY)

As of July 1, 2021, Kaipoke had 22,000 member locations (+2,700 versus end-Q1 FY03/21) and 32,200 elderly care facilities (+4,000).

Overseas

Sales: JPY1.0bn (+24.8% YoY)

The Overseas segment consists of existing businesses operated by the MIMS group (the medical marketing and clinical decision support businesses) and the Global Career business. In Q1 FY03/22, existing MIMS businesses accounted for about 90% of segment sales while the Global Career business accounted for roughly 10%. Impact stemming from the MIMS group’s statement of income is reflected in the company’s consolidated financial results following a three-month delay.

The medical marketing business accounts for the majority of sales generated by existing MIMS businesses. The medical marketing business benefited from a shift toward digital technology amid the COVID-19 pandemic, with online events and digital products performing well. In Q1 FY03/21, the company observed impact stemming from factors such as the cancellation of events planned by pharmaceutical companies in response to the COVID-19 pandemic. In China, this impact emerged in January 2020 while in Singapore and Hong Kong, it appeared in February of the same year.

The company reported steady growth in the Global Career business despite a measurable amount impact stemming from travel restrictions implemented in response to the COVID-19 pandemic. As in FY03/21, SMS successfully and steadily matched hospitals with job-seeking applicants, and the company projects that it will record sales associated with this matching once these applicants become able to travel and assume their new positions. The company incurred no impact from travel restrictions associated with the pandemic in January or February 2020, but impact of this nature began to emerge in March of the same year.

Business Development

Sales: JPY388mn (+45.3% YoY)

Full-year FY03/21 results

Sales: JPY36.0bn (+2.3% YoY)
Operating profit: JPY5.5bn (+10.8% YoY)
Recurring profit: JPY6.7bn (+4.7% YoY)
Net income attributable to owners of the parent: JPY4.8bn (+0.8% YoY)

Sales growth in cumulative Q3 (April–December 2020) was driven primarily by growth at the Career segment and the rising number of Kaipoke members under the Elderly Care Operators segment. In Q1 (April–June 2020), consolidated sales of JPY10.5bn were up 12.4% YoY; in Q2 (July–September 2020), sales of JPY8.1bn were down 1.8% YoY; in Q3 (October–December 2020), sales of JPY7.8bn were up 0.7% YoY; and in Q4 (January—March 2021), sales of JPY9.6bn were down 2.5% YoY.

In Q1, the company recorded sales from successful recruitment matches made during Q4 FY03/20 in the Career segment. Meanwhile, sales were strong in the Elderly Care Operators segment, which was nearly unaffected by the spread of the COVID-19.

Sales fell YoY in Q2 as the Career segment and Overseas segment incurred impact from the COVID-19 pandemic.

The modest rise in Q3 sales reflected a combination of rising revenues at the Elderly Care Operators segment and falling revenues at the Career segment, which was hurt by the ongoing drag on business from the pandemic.

In Q4, sales in the Elderly Care Operators segment remained robust and rose YoY, but a drop in sales in the Career segment resulted in lower sales YoY. The drop in sales in the Career segment was attributable to the second state of emergency declaration in January 2021 caused by the spread of COVID-19, as well as curtailed recruitment of career partners in 1H. Normally, the company hires most of its career partners for the year in 1H, and the new career partners contribute to results from Q3 onward. However, in 1H FY03/21, the company temporarily curtailed recruitment in response to uncertainties in the Career segment brought on by the COVID-19 pandemic. In addition, the suspension of new contracts for elderly care staffing services in August 2020 and the expiration of existing contracts led to a drop in sales in Q4.

On the earnings front, the company reported a gross profit of JPY32.0bn (+2.9% YoY) in FY03/21. The double-digit growth in earnings at the operating profit level and below was driven by cutbacks in new hiring that allowed the company to keep SG&A expenses under control at JPY26.5bn (+1.4% YoY).

Compared with the company’s full-year forecast, results for FY03/21 give it 96.1% of its full-year target for consolidated sales, 108.8% of its full-year target for operating profit, 103.0% of its full-year target for recurring profit, and 100.3% of its full-year target for net income.

In short, consolidated sales for FY03/21 fell short of plan while earnings at the operating profit and below finished above plan.

The company had initially assumed the drag from the COVID-19 pandemic would be gone by September 2020 and lowering sales by JPY3.1bn; however, the COVID-19 impact lingered past October in the Career segment, lowering sales by JPY4.4bn. as of October 2021, the pandemic still appears to being weighing on some of the group’s businesses, especially those under the Career segment. In addition, in the Career segment, the suspension of new contracts in the elderly care staffing service in August 2020 lowered sales by JPY600mn. On the other hand, sales in the Elderly Care Operators segment and Overseas segment were above plan.

On the profit front, despite the drop in sales, earnings at the operating profit level and below exceeded plans due to cost controls.

Impact of COVID-19 pandemic by segment

Segment	Impact on results	Impact on sales (company forecast)
Elderly Care Career	The impact on recruitment activities peaked in May and June 2020 and has been improving. However, as mentioned above, the company had assumed that the COVID-19 impact would end in September, but has continued to be impacted by the pandemic in October and beyond.	-JPY1.3bn (-JPY600mn)
Medical Career		-JPY1.4bn (JPY-800mn)
Kaipoke	Limited impact.	None (-JPY100mn)
Overseas	The impact of the cancellation or postponement of pharmaceutical company events in the marketing support business for medical and healthcare professionals was in line with the company’s expectations. Meanwhile, the company was able to mitigate the impact by shifting to digital channels such as online events. The impact of delays in the travel of healthcare professionals in the Global Career business continued in Q4, and the full-year negative impact exceeded the company’s expectations.	-JPY1.5bn (-JPY1.4bn)
Business Development	The impact on results was in line with the company’s expectations.	-JPY200mn (-JPY200mn)

Career

Sales: JPY23.7bn (-0.7% YoY)

Elderly care career business: JPY11.0bn (+3.1% YoY)
Medical care career business: JPY12.7bn (-3.8% YoY)

Elderly care career

In cumulative Q3 (April–December 2020), the elderly care career business drove sales growth at the Career segment as a whole. The pandemic was a drag on business to some extent, temporarily restricting the company’s ability to solicit new orders and precipitating a drop in users of day care and other nursing services offered by elderly care providers, which in turn meant fewer requests for personnel. Starting in Q2 (July–September), the company directed more of its marketing efforts towards providers of home-visit care and other services where there were more new job openings and, as a result, has since seen an increase in the proportion of total personnel orders derived from home-visit care workers.

On a quarter-by-quarter basis, the elderly care career business reported Q1 sales of JPY3.4bn (+22.5% YoY), Q2 sales of JPY2.6bn (+1.1% YoY), Q3 sales of JPY2.3 (-0.7% YoY), and Q4 sales of JPY2.7bn (-7.5% YoY), as detailed below.

The company recorded a double-digit YoY increase in Q1 segment sales thanks to its recording of sales generated from successful matches produced by staffing services during Q4 FY03/20 (prior to the state of emergency declaration) and contribution from career partners added in FY03/20.

In Q2, the company recorded sales from successful matches achieved during Q1, and the company achieved a YoY increase in sales despite a negative impact of the COVID-19 pandemic. The company launched successful efforts aimed at adjusting its sales structure in Q3 FY03/20 and was able to reduce the pandemic’s impact on business performance. In 1H FY03/20, the company encountered a temporary decline in the productivity of its career partners. As a countermeasure, it strengthened its management of job applicant attributes (years of experience, qualifications, willingness to change occupation, etc.) and job offer requirements while defining smaller areas of responsibility for region-specific management of job offer acceptance. As a result, the company was able to strengthen sales in areas with relatively abundant opportunity for market share improvement and successfully curbed decreases in the number of job offers accepted in 1H FY03/21. During the same period, the company also continued to adjust PR methods for applicants responding to job offers that have not been filled for a certain period of time.

In Q3, the drag from the pandemic left segment sales roughly flat YoY. As mentioned above, the company directed more of its marketing efforts towards areas where personnel demand was not falling, such as home-visit care workers, and as a result saw an increase in the proportion of personnel orders derived from these workers. According to the company, job application were relatively low for home-visit care services, which require care operators to visit the homes of elderly people alone, and the rising proportion of personnel placement orders for such workers has pushed down productivity at its career partners. On the other hand, in Q3 FY03/20, the effects of changes in the sales structure were not yet apparent, and the aforementioned changes in the sales structure and a review of PR methods for job openings contributed to an increase in productivity at career partners. As a result of these factors, the productivity of career partners in Q3 FY03/21 was basically flat YoY.

In Q4, the impact of the COVID-19 pandemic lingered, and as mentioned above, curtailed recruitment of career partners in 1H led to lower sales. In addition, the suspension of new contracts in the elderly care staffing service in August 2020 and the expiration of existing contracts resulted in a drop in sales in Q4.

SMS began providing its staffing services for care workers in earnest in FY03/17 and had traditionally focused on raising its number of career partners. At the start of FY03/21, the business impact of the pandemic was uncertain, so the company cut back on hiring. However, the company gradually resumed hiring from Q3 onward, and the number of career partners as of end-FY03/21 rose YoY.

Medical care career

The Nurse Personnel Bank, a staffing service for nurses was affected by the COVID-19 pandemic. Demand for radiological technicians and clinical engineers was favorable while demand for nurses and other human resources decreased. According to the company, nurse recruitment is rebounding more slowly than expected due to a decline in outpatient visits to medical institutions caused by the COVID-19 pandemic and deterioration in the financial performance of clinics and other small- to medium-sized medical facilities. The company strengthened its acquisition of job offers from home-visit nursing stations and other medical facilities with relatively robust hiring interest.

In Q1, sales were JPY4.7bn (+7.5% YoY), sales in Q2 amounted to JPY2.7bn (-9.0% YoY), Q3 sales reached JPY2.3bn (-8.4% YoY), and Q4 sales came to JPY3.0bn (-10.4% YoY).

Sales in Q1 increased YoY because the company recorded sales from successful matches achieved during the previous quarter and received contribution from career partners added during FY03/20.

In Q2 and Q3, sales declined YoY due the impact of the pandemic.

In Q4, the continued impact of the pandemic and the curbed hiring of career partners mentioned above resulted in a YoY decline in sales.

As was the case in the elderly care career business, the company cut back on hiring at the beginning of FY03/21 due to uncertainty surrounding the potential impact of the COVID-19 pandemic. However, the company resumed hiring from Q3 onward, and the number of career partners as of end-FY03/21 rose YoY.

Elderly Care Operators

Sales: JPY5.9bn (+20.9% YoY)

The Kaipoke management support service for elderly care providers posted solid results due to an increase in Kaipoke member locations, smartphone and tablet additions, and more usage of Kaipoke factoring service and other paid optional services. COVID-19 had only a limited impact on earnings in the Elderly Care Operators segment.

As of April 1, 2021, Kaipoke had 21,250 member locations (+2,400 versus end-FY03/20) and 31,100 elderly care facilities (+3,700).

Member locations are counted by physical location, while offices are counted by the type of elderly care service provided. For example, if home-visit care and care management are conducted from the same location (= single address), this is counted as one member location, but two offices. Kaipoke charges fees per location rather than per office.

Overseas

Sales: JPY5.1bn (-2.4% YoY)

The Overseas segment consists of the existing MIMS Group (Medical Marketing and Clinical Decision Support) and Global Career businesses. In FY03/21, the existing MIMS Group accounted for about 90% of sales, and the Global Career business accounted for about 10% of sales. The MIMS Group’s income statement is reflected in consolidated results with a three-month lag. Within existing MIMS Group businesses, cancellations of pharmaceutical company events and other disadvantageous circumstances impacted results in China starting in January, and results in Singapore and Hong Kong starting in February. The Global Career business was not affected by travel restrictions during January–February 2020 but began to incur impact in March.

Sales fell due to impact from the COVID-19 pandemic but exceeded the company’s projections due to favorable sales generated by cross-selling focused on online events and other services that was conducted through existing MIMS Group businesses. In Q1, sales were JPY826mn (+2.4% YoY), sales in Q2 amounted to JPY1.1bn (-14.5% YoY), Q3 sales reached JPY1.3bn (-1.5% YoY), and Q4 sales came in at JPY2.0bn (+2.7% YoY).

Sales in Q1 rose YoY. Two primary factors contributed to the increase in sales: The first was the dissolution of temporary impact from the March 2019 reorganization of Medilabs (a company providing career-related services for nurses in South Korea), which placed Medilabs underneath the umbrella of the MIMS Group and altered the period during which its business results are consolidated. The second was contribution from CCM, which became a subsidiary in August 2019 and introduces medical professionals from Europe and Oceania to medical institutions in the Middle East. If not for these two factors, sales would have declined YoY.

Sales in Q2 declined YoY. As projected, cross-border introductions within the Global Career business generated nearly no sales due to travel restrictions and other factors. Obstacles such as event cancellations and postponements in the Medical Marketing business brought down sales, but sales did turn out higher than the company had projected as it ramped up its online event services and performed cross-selling involving essay preparation, the publication of medical articles in journals, and the distribution of these articles through digital media. In addition to rising demand for digital products amid the COVID-19 pandemic, adjustments the company made to its sales structure in FY03/20 with the goal of strengthening its cross-selling proved successful.

The modest decline in Q3 sales was an improvement over the double-digit decline in Q2, the improvement coming largely from the company’s ongoing push to expand cross-selling, mainly through the use of online events.

Q4 sales rose YoY. Although the Global Career business continued to suffer from travel restrictions, adjustments to the sales structure made in FY03/20 aimed at strengthening cross-selling functions proved successful in the Medical Marketing business, helping capture online event and digital product demand amid the pandemic.

Business Development

Sales: JPY1.2bn (+8.3% YoY)

The company proceeded with the development and promotion of new businesses, focusing on the provision of remote specific health guidance and occupational healthcare utilizing ICT in the healthcare business area, and on home renovation information services and funeral director referral services in the senior life business space.

Cumulative Q3 FY03/21 results

Sales: JPY26.4bn (+4.2% YoY)
Operating profit: JPY3.2bn (+54.2% YoY)
Recurring profit: JPY4.2bn (+24.5% YoY)
Net income attributable to owners of the parent: JPY2.9bn (+14.0% YoY)

Sales growth in cumulative Q3 (April–December 2020) was driven primarily by growth at the Career segment and the rising number of Kaipoke members under the Elderly Care Operators segment. In Q1 (April–June 2020), consolidated sales of JPY10.5bn were up 12.4% YoY; in Q2 (July–September 2020), sales of JPY8.1bn were down 1.8% YoY; and in Q3 (October–December 2020), sales of JPY7.8bn were up 0.7% YoY.

Sales fell YoY in Q2 as the Career segment and Overseas segment incurred impact from the COVID-19 pandemic.

On the earnings front, the company reported a gross profit of JPY23.6bn (+5.1% YoY) in cumulative Q3. The double-digit growth in earnings at the operating profit level and below was driven by cutbacks in new hiring that allowed the company to keep SG&A expenses basically flat YoY, at JPY20.3bn.

The smaller rise in earnings at the recurring profit and net income levels reflected a number of different factors. First, at the recurring profit level, the company reported smaller contributions to consolidated earnings from equity-method subsidiaries. At JPY1.1bn, equity in earnings at equity-method subsidiaries was down 17.4% YoY, the decline due in large part to lower earnings at M3 Career Inc. in the wake of the pandemic. At the net income level, earnings growth was further muted by extraordinary losses totaling JPY207mn (versus JPY11mn in cumulative Q3 FY03/20). The jump in extraordinary losses was due largely to a JPY121mn loss booked in cumulative Q3 in connection with the termination of retirement benefit plans at subsidiaries, the loss being taken in advance of the company’s absorption-type merger with M3 Career and other subsidiaries (effective on January 1, 2021), as the subsidiaries SMS absorbed had pension plans while SMS (at the parent company level) does not.

Compared with the company’s full-year forecast, results for cumulative Q3 give it 70.4% of its full-year target for consolidated sales (versus 72.0% at this time in FY03/20), 64.0% of its full-year target for operating profit (versus 42.3%), 65.7% of its full-year target for recurring profit (versus 53.7%), and 59.9% of its full-year target for net income (versus 52.9%).

In short, consolidated sales for cumulative Q3 are basically running in line with plan while earnings at the operating profit and below are ahead of plan. The company had initially assumed the drag from the COVID-19 pandemic would be gone by September 2020; however, as of February 2021, the pandemic still appears to being weighing on some of the group’s businesses, especially those under the Career segment.

Impact of COVID-19 pandemic by segment

Segment	Conditions in cumulative Q3	Q4 expectations and planned response
Elderly Care Career	Recruiting Agent service (RAG) matching activities have been recovering more slowly than expected since impact from the COVID-19 pandemic peaked during May–June 2020.	- COVID-19 expected to continue to have an impact - Near-term uncertainty increases in wake of another state of emergency declaration issued in January 2021 - Cultivate new job orders from elderly care operators who are less affected by the pandemic
Medical Care Career	Recruiting Agent service (RAG) matching activities have been recovering more slowly than expected since impact from the COVID-19 pandemic peaked during May–June 2020.	- COVID-19 expected to continue to have an impact - Near-term uncertainty increases in wake of another state of emergency declaration issued in January 2021 - Cultivate new job orders from hospitals and clinics that are less affected by the pandemic and promote transition from on-site job fairs to online job fairs
Kaipoke	As projected	- Impact from COVID-19 will be limited. - Promote new member acquisition through web marketing and online seminars
Overseas	As projected	- COVID-19’s impact on the pharma marketing business will continue to be consistent with initial projections - Promote digital services such as online events and eDMs, taking advantage of opportunities created by the shift toward digital technology amid the COVID-19 pandemic - The global career business will continue to incur impact from October onward due to travel restrictions

Career

Sales: JPY18.0bn (+2.2% YoY)

Elderly care career business: JPY8.3bn (+7.2% YoY)
Medical care career business: JPY9.7bn (-1.6% YoY)

Elderly care career

On a quarter-by-quarter basis, the elderly care career business reported Q1 sales of JPY3.4bn (+22.5% YoY), Q2 sales of JPY2.6bn (+1.1% YoY), and Q3 sales of JPY2.3 (-0.7% YoY), as detailed below.

SMS began providing its staffing services for care workers in earnest in FY03/17 and had traditionally focused on raising its number of career partners. At the start of FY03/21, the business impact of the pandemic was uncertain, so the company cut back on hiring. However, the company is currently targeting double-digit growth from FY03/22 onwards as it hires at a faster pace than it had initially projected.

Medical care career

In Q1, sales were JPY4.7bn (+7.5% YoY), sales in Q2 amounted to JPY2.7bn (-9.0% YoY), and in Q3 sales reached JPY2.3bn (-8.4% YoY).

Sales in Q1 increased YoY because the company recorded sales from successful matches achieved during the previous quarter and received contribution from career partners added during FY03/20.

In Q2, sales declined YoY due the impact of the pandemic.

In Q3, the impact of the pandemic continued, resulting in a YoY decline in sales.

As was the case in the elderly care career business, the company cut back on hiring at the beginning of FY03/21 due to uncertainty surrounding the potential impact of the COVID-19 pandemic. Currently, the company is aiming for growth in FY03/22 and onward as it hires at a faster pace than it initially projected.

Elderly Care Operators

Sales: JPY4.3bn (+21.8% YoY)

As of January 1, 2021, Kaipoke had 20,550 member locations (+2,250 versus end-Q3 FY03/20) and 30,100 elderly care facilities (+3,500 YoY).

Overseas

Sales: JPY3.2bn (-5.4% YoY)

The Overseas segment consists of the existing MIMS Group (Pharma Marketing and Healthcare Data) and Global Career businesses. The MIMS Group’s income statement is reflected in consolidated results with a three-month lag. Within existing MIMS Group businesses, cancellations of pharmaceutical company events and other disadvantageous circumstances impacted results in China starting in January, and results in Singapore and Hong Kong starting in February. The Global Career business was not affected by travel restrictions during January–February 2020 but began to incur impact in March.

Sales in Q2 declined YoY. As projected, cross-border introductions within the Global Career business generated nearly no sales due to travel restrictions and other factors. Obstacles such as event cancellations and postponements in the Pharma Marketing business brought down sales, but sales did turn out higher than the company had projected as it ramped up its online event services and performed cross-selling involving essay preparation, the publication of medical articles in journals, and the distribution of these articles through digital media. As can be seen from these results, adjustments the company made to its sales structure in FY03/20 with the goal of strengthening its cross-selling proved successful.

Business Development

Sales: JPY874mn (+10.6% YoY)

The company proceeded with the development and promotion of new businesses, focusing on the provision of remote specific health guidance and occupational healthcare utilizing ICT in the healthcare area, and on information services centered on meal catering for the elderly and on home renovation in the senior life space.

1H FY03/21 results

Sales: JPY18.6bn (+5.7% YoY)
Operating profit: JPY2.9bn (+42.2% YoY)
Recurring profit: JPY3.9bn (+23.5% YoY)
Net income attributable to owners of the parent: JPY2.8bn (+19.7% YoY)

Sales increased YoY primarily thanks to business expansion in the Career segment and a rise in the number of Kaipoke members in the Elderly Care Operators segment. In Q1 (April–June 2020), sales were JPY10.5bn (+12.4% YoY), and sales in Q2 (July–September 2020) came to JPY8.1bn (-1.8% YoY).

Sales fell YoY in Q2 as the Career segment and Overseas segment incurred impact from the COVID-19 pandemic.

During 1H, the COVID-19 pandemic held back sales by about JPY2.0bn. The pandemic had negative impacts on sales of about JPY1.2bn in the Career segment (downward impact of about JPY500mn on elderly care career sales and approximately JPY700mn on medical care career sales), roughly JPY700mn in the Overseas segment, and around JPY100mn in the Elderly Care Operators segment and the New Business segment. The 1H impact of the pandemic was consistent with the company’s projections. The company’s full-year forecast for FY03/21 assumed that impact from the pandemic’s spread would abate by September 2020. However, as of November 2020, the pandemic was still affecting earnings, delaying recovery in recruitment of nurses and other professionals in the Career segment and giving rise to travel restrictions and other obstacles in the Overseas segment.

Gross profit was JPY16.8bn (+6.2% YoY). SG&A expenses were only JPY13.9bn (+0.8% YoY) because of a decline in recruitment expenses as the cut back on hiring. As a result, the company recorded double-digit growth on all profit lines.

1H sales achieved 49.8% of the full-year forecast (in 1H FY03/20, progress was 50.2% of eventual full-year results), while operating profit reached 58.7% (42.0%), recurring profit 59.6% (49.1%), and net income 58.0% (48.7%). Sales and results on all profit lines exceeded the company’s projections in 1H. However, the conclusion of the COVID-19 pandemic has not occurred as early as the company assumed, so results have apparently been consistent with the company’s full-year projections overall.

Impact of COVID-19 by segment

Segment	1H conditions	2H forecast and planned response
Elderly Care Career	- Recruiting Agent service (RAG) matching activities have been recovering more slowly than expected since impact from the COVID-19 pandemic peaked during May–June 2020.	- COVID-19 will continue to have an impact for the time being. - Cultivate new job orders from elderly care operators who are less affected by the pandemic
Medical Care Career	- Recruiting Agent service (RAG) matching activities have been recovering more slowly than expected since impact from the COVID-19 pandemic peaked during May–June 2020.	- COVID-19 will continue to have an impact for the time being. - Cultivate new job orders from hospitals and clinics that are less affected by the pandemic and promote transition from on-site job fairs to online job fairs
Kaipoke	- As projected	- Impact from COVID-19 will be limited. - Promote new member acquisition through web marketing and online seminars
Overseas	- As projected	- COVID-19’s impact on the pharma marketing business will continue to be consistent with initial projections - Promote digital services such as online events and eDMs, taking advantage of opportunities created by the shift toward digital technology amid the COVID-19 pandemic - The global career business will continue to incur impact from October onward due to travel restrictions

Career

Sales: JPY13.4bn (+4.9% YoY)

Elderly care career: JPY6.0bn (+10.4% YoY)
Medical care career: JPY7.4bn (+0.8% YoY)

Elderly care career

In the elderly care career business, staffing services sales expanded, driving growth in the Career segment. The COVID-19 pandemic had a negative impact of about JPY500mn on sales, causing obstacles such as matching delays within staffing services. According to the company, long-term demand for care workers has not changed and any effect on business performance will be limited to impact associated decrease in job orders from elderly care operators who incurred temporary operational impact from the pandemic. In Q1, sales were JPY3.4bn (+22.5% YoY) and sales in Q2 w