Creek & River was founded in March 1990 by President Ikawa who used to be a freelance creator. After launching an agency business in the video field, he moved into other creative services, expanding the scope of these services to include professionals such as doctors, IT engineers, lawyers, accountants, architects, fashion designers, researchers, chefs, performing artists, researchers (research support staff), corporate executives (CXOs), agricultural workers, and athletes with the view that Creek & River’s business model is applicable to many such specialists. The company’s growth strategy lies in simultaneously expanding professional services and deepening business content.

Creek & River consists of the Agency business (temporary staffing and employment of specialists), the Production business, and the Rights business. As of FY02/20, the majority of operating profit was generated by Agency and Production. Since FY02/17, though, the Rights business’s earnings contribution has risen also. The company operates these businesses across its Creative, Medical Staffing, and Accounting and Legal segments. It has also launched new businesses in architecture, fashion, culinary chef, computer science, virtual reality (VR), artificial intelligence (AI), drone, performing arts, life sciences, corporate executives (CXOs), agricultural workers, and athletes. The company is also involved in peripheral services businesses such as VR hardware for professionals, AI, drones, recruitment media, data analysis, social media, and language learning.

Mainstay segment Creative (Japan) (FY02/21: 69.6% of sales; 72.6% of operating profit) covers agency services (employment and temporary staffing), production (outsourced production), and rights management (distribution of intellectual property) associated with creators in television and video, games, web, and advertising and publishing. As of the end of February 2021, about 85,000 creators were registered with the company.

Medical Staffing (FY02/21: 10.5% of sales; 29.6% of operating profit) provides medical specialist employment services to physicians, resident physicians, and medical students, in addition to hosting teaching-hospital joint presentation meetings for medical students and residents. Approximately 134,000 members (physicians and medical students) are registered with the company and the majority of medical institutions in Japan (about 13,000) are registered as clients.

Trends and outlook

In FY02/21, the company reported full-year consolidated sales of JPY37.3bn (+13.3% YoY), operating profit of JPY2.4bn (+17.4% YoY), recurring profit of JPY2.5bn (+18.1% YoY) and net income attributable to owners of the parent of JPY1.6bn (+21.2% YoY).

The company revised its FY02/22 forecast in September 2021. The revised forecast calls for full-year consolidated sales of JPY41.3bn (+10.7% YoY), operating profit of JPY3.2bn (+30.7% YoY), recurring profit of JPY3.2bn (+28.7% YoY), and net income attributable to owners of the parent of JPY2.0bn (+18.4% YoY).
Compared to the previous forecast, the revised company forecast represents an increase of JPY1.3bn in sales, JPY350mn in operating profit, JPY350mn in recurring profit, and JPY200mn in net income attributable to owners of the parent. In terms of sales, as of September 2021, the Agency and Production businesses in the professional domain, mainly in the Creative (Japan) and Medical Staffing, performed well, and the Rights business also grew. Profits are expected to exceed the previous forecast due to higher sales in the relatively high-margin Production and Rights businesses and lower expenses as a result of successful cost savings initiatives. However, from Q3 onward, the company plans to reinvest some of its outperformance in 1H profit in advertising and promotional expenses for its existing businesses.

The company announced its medium-term management plan in April 2021. The plan calls for FY02/24 sales of JPY46.0bn (CAGR of 7.2% from FY02/21) and operating profit of JPY3.5bn (CAGR of 12.7% from FY02/21). Over the period covered by the plan, the company aims to expand the professional field through the advancement of the 50 professional fields concept currently under development, while also working to create new services that effectively utilize professional skill sets.

Strengths and weaknesses

Shared Research believes that Creek & River’s strengths lie in its brand recognition and track record in selective fields, President Ikawa’s original insights and ideas, and its business model as a one-stop company recruiting both skilled short-term and permanent staff. Its weaknesses are ongoing losses in new businesses, issues with execution, and the Rights (intellectual property) business, which is still a work-in-progress. (See the Strengths and weaknesses section for details.)

Key financial data

Income statement		FY02/12	FY02/13	FY02/14	FY02/15	FY02/16	FY02/17	FY02/18	FY02/19	FY02/20	FY02/21	FY02/22
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est.
Sales		15,458	17,533	20,612	22,926	24,909	26,581	26,709	29,569	32,946	37,314	41,300
	YoY	9.3%	13.4%	17.6%	11.2%	8.7%	6.7%	0.5%	10.7%	11.4%	13.3%	10.7%
Gross profit		5,124	5,994	6,392	7,240	7,996	9,234	10,168	11,366	12,556	13,338
	YoY	11.5%	17.0%	6.6%	13.3%	10.4%	15.5%	10.1%	11.8%	10.5%	6.2%
	Gross profit margin	33.1%	34.2%	31.0%	31.6%	32.1%	34.7%	38.1%	38.4%	38.1%	35.7%
Operating profit		637	992	1,093	1,296	1,178	1,610	1,806	1,579	2,084	2,448	3,200
	YoY	122.2%	55.7%	10.1%	18.6%	-9.1%	36.7%	12.2%	-12.6%	32.0%	17.4%	30.7%
	Operating profit margin	4.1%	5.7%	5.3%	5.7%	4.7%	6.1%	6.8%	5.3%	6.3%	6.6%	7.7%
Recurring profit		691	1,036	1,092	1,320	1,116	1,478	1,825	1,585	2,104	2,485	3,200
	YoY	130.3%	49.9%	5.5%	20.9%	-15.5%	32.4%	23.5%	-13.1%	32.7%	18.1%	28.7%
	Recurring profit margin	4.5%	5.9%	5.3%	5.8%	4.5%	5.6%	6.8%	5.4%	6.4%	6.7%	7.7%
Net income		156	335	491	744	627	893	1,104	970	1,360	1,648	1,950
	YoY	75.6%	114.1%	46.8%	51.5%	-15.8%	42.4%	23.7%	-12.1%	40.2%	21.2%	18.4%
	Net margin	1.0%	1.9%	2.4%	3.2%	2.5%	3.4%	4.1%	3.3%	4.1%	4.4%	4.7%
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000)		22,609	22,609	22,609	22,609	22,609	22,609	22,609	22,609	22,609	23,009
EPS		7.3	15.5	22.8	35.1	30.2	42.9	52.3	45.7	63.6	74.3	87.5
Dividend per share		2.0	4.0	5.0	7.0	8.0	9.0	11.0	12.0	15.0	16.0	17.0
Book value per share		146.7	162.6	185.7	229.0	227.6	265.5	305.4	334.9	386.1	455.9
Balance sheet (JPYmn)
	Cash and deposits	2,465	2,481	2,788	3,293	3,143	3,978	4,966	5,172	6,729	8,315
Total current assets		4,510	5,598	7,046	6,515	6,684	8,107	9,079	9,747	12,352	14,125
Tangible fixed assets		182	194	214	217	250	233	167	883	809	692
Intangible assets		334	257	313	307	537	518	498	581	543	631
Investments and other assets		727	824	978	2,013	1,476	2,154	2,109	2,103	2,527	2,640
Total assets		5,753	6,873	8,551	9,053	8,947	11,012	11,852	13,314	16,231	18,087
	Operating accounts payable	715	992	2,468	1,218	1,407	1,606	1,427	1,532	2,138	2,230
	Short-term debt	399	400	450	500	750	1,106	1,325	1,212	1,213	1,203
Total current liabilities		2,199	3,006	4,063	3,426	3,583	4,266	4,231	4,711	6,627	6,636
	Long-term debt	-	-	63	52	-	517	384	1,103	845	712
Total fixed liabilities		107	92	170	485	175	698	579	1,402	1,203	1,132
Total liabilities		2,306	3,098	4,233	3,912	3,758	4,964	4,809	6,113	7,830	7,768
Total net assets		3,447	3,775	4,319	5,141	5,189	6,048	7,043	7,201	8,401	10,319
Total interest-bearing debt		399	400	513	552	750	1,623	1,709	2,315	2,058	1,915
Cash flow statement (JPYmn)
Cash flows from operating activities		589	317	634	1,350	622	1,185	1,104	1,625	2,407	1,956
Cash flows from investing activities		-129	-588	-326	-14	-1,375	-1,041	-272	-1,044	-816	-431
Cash flows from financing activities		-114	-44	-38	-557	42	710	124	-156	-442	63
Financial ratios
ROA (RP-based)		12.3%	16.4%	14.2%	15.0%	12.4%	14.8%	16.0%	12.6%	14.2%	14.5%
ROE		5.1%	10.1%	13.1%	17.0%	13.2%	17.3%	18.3%	14.3%	17.7%	17.9%
Equity ratio		54.9%	50.9%	46.8%	52.6%	52.8%	50.7%	54.6%	53.6%	50.9%	56.2%

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

Recent updates

Revision to dividend forecast

2022-01-11

On January 6, 2022, Creek & River Co., Ltd. has announced a revision to its year-end dividend forecast for FY02/22.

Per-share dividend forecast for FY02/22

• JPY18 per share (versus previous forecast of JPY17 per share)

In September 2021, the company raised its full-year earnings forecast for FY02/22. Accordingly, it has also increased its year-end dividend forecast for FY02/22 to JPY18 per share, up JPY1 per share compared to its previous year-end dividend forecast.

Quarterly performance

Earnings

Cumulative		FY02/21				FY02/22				FY02/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales		9,486	18,454	27,558	37,314	10,599	21,035	31,277		75.7%	41,300
	YoY	15.2%	11.8%	12.3%	13.3%	11.7%	14.0%	13.5%			10.7%
Gross profit		3,760	6,889	10,002	13,338	4,183	8,114	11,821
	YoY	10.0%	5.9%	5.3%	6.2%	11.3%	17.8%	18.2%
Gross profit margin		39.6%	37.3%	36.3%	35.7%	39.5%	38.6%	37.8%
SG&A expenses		2,711	5,433	8,092	10,891	2,953	5,957	8,810
	YoY	3.0%	3.7%	3.2%	4.0%	8.9%	9.6%	8.9%
	SG&A ratio	28.6%	29.4%	29.4%	29.2%	27.9%	28.3%	28.2%
Operating profit		1,049	1,456	1,910	2,448	1,231	2,158	3,012		94.1%	3,200
	YoY	33.2%	15.0%	15.3%	17.4%	17.3%	48.2%	57.7%			30.7%
	Operating profit margin	11.1%	7.9%	6.9%	6.6%	11.6%	10.3%	9.6%			7.7%
Recurring profit		1,063	1,476	1,938	2,485	1,247	2,174	3,018		94.3%	3,200
	YoY	34.5%	16.3%	16.7%	18.1%	17.3%	47.3%	55.7%			28.7%
	Recurring profit margin	11.2%	8.0%	7.0%	6.7%	11.8%	10.3%	9.6%			7.7%
Net income		710	967	1,264	1,648	881	1,406	1,979		101.5%	1,950
	YoY	40.1%	22.1%	22.9%	21.2%	24.1%	45.4%	56.6%			18.4%
	Net margin	7.5%	5.2%	4.6%	4.4%	8.3%	6.7%	6.3%			4.7%
Quarterly		FY02/21				FY02/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales		9,486	8,968	9,104	9,756	10,599	10,436	10,241
	YoY	15.2%	8.3%	13.4%	16.1%	11.7%	16.4%	12.5%
Gross profit		3,760	3,128	3,114	3,336	4,183	3,931	3,707
	YoY	10.0%	1.3%	4.1%	9.1%	11.3%	25.7%	19.1%
	Gross profit margin	39.6%	34.9%	34.2%	34.2%	39.5%	37.7%	36.2%
SG&A expenses		2,711	2,722	2,659	2,798	2,953	3,004	2,853
	YoY	3.0%	4.3%	2.3%	6.4%	8.9%	10.3%	7.3%
	SG&A ratio	28.6%	30.4%	29.2%	28.7%	27.9%	28.8%	27.9%
Operating profit		1,049	406	454	538	1,231	927	854
	YoY	33.2%	-15.0%	16.5%	25.6%	17.3%	128.3%	88.0%
	Operating profit margin	11.1%	4.5%	5.0%	5.5%	11.6%	8.9%	8.3%
Recurring profit		1,063	413	462	547	1,247	927	844
	YoY	34.5%	-13.6%	17.9%	23.5%	17.3%	124.3%	82.7%
	Recurring profit margin	11.2%	4.6%	5.1%	5.6%	11.8%	8.9%	8.2%
Net income		710	257	297	384	881	525	572
	YoY	40.1%	-9.8%	25.4%	15.8%	24.1%	104.4%	92.7%
	Net margin	7.5%	2.9%	3.3%	3.9%	8.3%	5.0%	5.6%

Quarterly performance by segment

Cumulative			FY02/21				FY02/22				FY02/22
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales			9,486	18,454	27,558	37,314	10,599	21,035	31,277		75.7%	41,300
	YoY		15.2%	11.8%	12.3%	13.3%	11.7%	14.0%	13.5%			10.7%
	Creative (Japan)		6,284	12,471	18,988	26,067	7,181	14,509	21,844
		YoY	6.0%	4.7%	5.4%	6.0%	14.3%	16.3%	15.0%
	Creative (South Korea)		860	1,674	2,456	3,269	895	1,744	2,609
		YoY	-	-	-	-	4.0%	4.2%	6.3%
	Medical Staffing		1,312	2,302	3,125	3,923	1,474	2,619	3,611
		YoY	-0.7%	-10.0%	-7.3%	-3.6%	12.3%	13.7%	15.5%
	Accounting and Legal		544	1,010	1,483	1,994	519	1,038	1,544
		YoY	5.9%	-3.3%	-7.4%	-6.0%	-4.5%	2.7%	4.1%
	Other		515	1,050	1,605	2,200	580	1,224	1,820
		YoY	2.4%	-2.2%	-0.7%	-2.1%	12.7%	16.7%	13.4%
	Eliminations, company-wide		-28	-53	-99	-139	-49	-99	-151
Operating profit			1,049	1,456	1,910	2,448	1,231	2,158	3,012		94.1%	3,200
	YoY		33.2%	15.0%	15.3%	17.4%	17.3%	48.2%	57.7%			30.7%
	Creative (Japan)		546	818	1,222	1,775	659	1,302	2,073
		YoY	58.7%	53.1%	49.8%	35.0%	20.6%	59.2%	69.6%
	Creative (South Korea)		-2	-16	-46	-50	2	3	10
		YoY	-	-	-	-	-	-	-
	Medical Staffing		475	667	737	724	556	826	938
		YoY	0.5%	-11.1%	-9.1%	-2.2%	17.2%	24.0%	27.3%
	Accounting and Legal		66	67	76	100	18	39	55
		YoY	18.5%	-37.9%	-61.0%	-56.8%	-72.2%	-41.4%	-27.3%
	Other		-38	-82	-80	-104	-8	-14	-60
		YoY	-	-	-	-	-	-	-
	Eliminations, company-wide		1	2	2	2	3	2	-4
Recurring profit			1,063	1,476	1,938	2,485	1,247	2,174	3,018		94.3%	3,200
	YoY		34.5%	16.3%	16.7%	18.1%	17.3%	47.3%	55.7%			28.7%
Net income attributable to owners of the parent			710	967	1,264	1,648	881	1,406	1,979		101.5%	1,950
	YoY		40.1%	22.1%	22.9%	21.2%	24.1%	45.4%	56.6%			18.4%
Quarterly performance			FY02/21				FY02/22
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales			9,486	8,968	9,104	9,756	10,599	10,436	10,241
	YoY		15.2%	8.3%	13.4%	16.1%	11.7%	16.4%	12.5%
	Creative (Japan)		6,284	6,187	6,517	7,079	7,181	7,329	7,335
		YoY	6.0%	3.5%	6.6%	7.6%	14.3%	18.5%	12.5%
	Creative (South Korea)		860	814	781	814	895	849	865
		YoY	-	-	-	-	4.0%	4.3%	10.7%
	Medical Staffing		1,312	990	823	798	1,474	1,145	992
		YoY	-0.7%	-20.0%	1.1%	14.4%	12.3%	15.6%	20.6%
	Accounting and Legal		544	466	473	511	519	518	507
		YoY	5.9%	-12.1%	-15.3%	-1.7%	-4.5%	11.1%	7.2%
	Other		515	535	555	595	580	645	595
		YoY	2.4%	-6.3%	2.1%	-5.6%	12.7%	20.5%	7.2%
	Eliminations, company-wide		-28	-25	-46	-41	-49	-49	-52
Operating profit			1,049	406	454	538	1,231	927	854
	YoY		33.2%	-15.0%	16.5%	25.6%	17.3%	128.3%	88.0%
	Creative (Japan)		546	271	404	553	659	643	771
		YoY	58.7%	42.9%	43.5%	10.9%	20.6%	136.9%	90.8%
	Creative (South Korea)		-2	-14	-30	-4	2	1	7
		YoY	-	-	-	-	-	-	-
	Medical Staffing		475	192	70	-13	556	270	111
		YoY	0.5%	-30.9%	15.6%	-	17.2%	40.6%	59.1%
	Accounting and Legal		66	0	9	25	18	21	16
		YoY	18.5%	-99.1%	-89.7%	-34.9%	-72.2%	-	77.1%
	Other		-38	-45	2	-24	-8	-7	-46
		YoY	-	-	-	-	-	-	-
	Eliminations, company-wide		1	1	-1	1	3	-1	-7
Recurring profit			1,063	413	462	547	1,247	927	844
	YoY		34.5%	-13.6%	17.9%	23.5%	17.3%	124.3%	82.7%
Net income attributable to owners of the parent			710	257	297	384	881	525	572
	YoY		40.1%	-9.8%	25.4%	15.8%	24.1%	104.4%	92.7%

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: In Q1 FY02/21, the Creative (South Korea) business which had been included in the Other segment became an independent reporting segment.

Results by business

			FY02/21				FY02/22
Cumulative (JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Sales			9,486	18,454	27,558	37,314	10,599	21,035
	YoY		15.2%	11.8%	12.3%	26.2%	11.7%	14.0%
	TV and video		1,518	3,045	4,740	6,455	1,887	3,660
		YoY	-4.0%	-2.9%	2.7%	4.8%	24.3%	20.2%
	Games		2,134	4,337	6,421	8,843	2,385	4,943
		YoY	6.7%	6.8%	5.9%	6.1%	11.7%	14.0%
	Web		1,746	3,396	5,098	6,866	1,971	3,934
		YoY	1.9%	0.3%	-0.6%	-1.7%	12.9%	15.8%
	Medical		1,309	2,288	3,114	3,918	1,473	2,629
		YoY	0.6%	-9.4%	-6.7%	-2.5%	12.5%	14.9%
	Accounting		446	867	1,295	1,716	445	883
		YoY	-1.5%	-6.2%	-7.4%	-7.0%	-0.2%	1.9%
	E-books		588	1,200	1,901	2,649	604	1,367
		YoY	37.4%	29.7%	31.3%	27.6%	2.7%	14.0%
Operating profit			1,049	1,456	1,910	2,448	1,231	2,158
	YoY		33.2%	15.0%	15.3%	55.0%	17.3%	48.2%
	Operating profit margin		11.1%	7.9%	6.9%	6.6%	11.6%	10.3%
	TV and video		114	180	262	419	133	192
		YoY	-3.9%	10.5%	18.8%	33.9%	16.2%	6.4%
		Operating profit margin	7.5%	5.9%	5.5%	6.5%	7.0%	5.2%
	Games		327	565	800	1,082	373	764
		YoY	105.7%	101.9%	108.3%	71.3%	13.9%	35.3%
		Operating profit margin	15.3%	13.0%	12.5%	12.2%	15.6%	15.5%
	Web		161	262	344	475	166	302
		YoY	16.4%	13.1%	-2.5%	-4.3%	3.5%	15.3%
		Operating profit margin	9.2%	7.7%	6.7%	6.9%	8.4%	7.7%
	Medical		475	667	737	724	561	837
		YoY	2.4%	-10.0%	-7.8%	-0.7%	18.0%	25.6%
		Operating profit margin	36.3%	29.1%	23.7%	18.5%	38.1%	31.8%
	Accounting		38	42	69	88	15	17
		YoY	-26.2%	-53.0%	-58.1%	-49.1%	-60.9%	-59.1%
		Operating profit margin	8.5%	4.9%	5.3%	5.1%	3.3%	2.0%
	Legal		29	25	6	12	5	24
		YoY	645.7%	39.6%	-80.8%	-78.3%	-83.2%	-4.1%
	E-books		71	130	202	289	74	235
		YoY	183.0%	108.8%	77.2%	57.5%	3.5%	81.6%
		Operating profit margin	12.1%	10.8%	10.6%	10.9%	12.2%	17.2%
	Other		-167	-415	-510	-641	-97	-216
			FY02/21				FY02/22
Quarterly (JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales			9,486	8,968	9,104	9,756	10,599	10,436
	YoY		15.2%	8.3%	13.4%	30.3%	11.7%	16.4%
	TV and video		1,518	1,527	1,695	1,715	1,887	1,773
		YoY	-4.0%	-1.9%	14.8%	10.9%	24.3%	16.1%
	Games		2,134	2,202	2,084	2,422	2,385	2,558
		YoY	6.7%	6.8%	4.2%	6.6%	11.7%	16.2%
	Web		1,746	1,650	1,703	1,768	1,971	1,962
		YoY	1.9%	-1.3%	-2.4%	-4.7%	12.9%	18.9%
	Medical		1,309	979	826	804	1,473	1,156
		YoY	0.6%	-20.1%	1.8%	17.9%	12.5%	18.1%
	Accounting		446	421	428	421	445	438
		YoY	-1.5%	-10.7%	-9.8%	-5.6%	-0.2%	4.0%
	E-books		588	611	702	748	604	763
		YoY	37.4%	23.1%	34.1%	19.2%	2.7%	24.8%
Operating profit			1,049	406	454	538	1,231	927
	YoY		33.2%	-15.0%	16.5%	189.0%	17.3%	128.3%
	Operating profit margin		11.1%	4.5%	5.0%	5.5%	11.6%	8.9%
	TV and video		114	66	81	157	133	59
		YoY	-3.9%	49.2%	42.6%	69.9%	16.2%	-10.5%
		Operating profit margin	7.5%	4.3%	4.8%	9.1%	7.0%	3.3%
	Games		327	237	235	282	373	391
		YoY	105.7%	96.8%	125.6%	13.9%	13.9%	64.7%
		Operating profit margin	15.3%	10.8%	11.3%	11.6%	15.6%	15.3%
	Web		161	101	82	131	166	136
		YoY	16.4%	8.2%	-32.4%	-8.5%	3.5%	34.0%
		Operating profit margin	9.2%	6.1%	4.8%	7.4%	8.4%	6.9%
	Medical		475	191	71	-13	561	276
		YoY	2.4%	-30.8%	19.2%	-	18.0%	44.3%
		Operating profit margin	36.3%	19.5%	8.5%	-	38.1%	23.9%
	Accounting		38	4	27	19	15	2
		YoY	-26.2%	-88.5%	-64.2%	114.3%	-60.9%	-43.7%
		Operating profit margin	8.5%	1.1%	6.2%	4.6%	3.3%	0.6%
	Legal		29	-5	-19	7	5	19
		YoY	645.7%	-	-	-75.4%	-83.2%	-
	E-books		71	58	73	86	74	161
		YoY	183.0%	58.0%	39.6%	25.0%	3.5%	177.3%
		Operating profit margin	12.1%	9.5%	10.4%	11.6%	12.2%	21.1%
	Other		-167	-248	-95	-131	-97	-119

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: Sales and operating profit by business area are calculated by Shared Research based on percentage breakdown disclosed by the company.

Seasonality: Physician referral revenue at Medical Principle Co. (fiscal year ends on October 31) is normally concentrated in April, as well as in July and October (when physicians tend to transfer). As a result, quarterly sales at Medical Principle are usually highest in February–April, followed by May–July, August–October, and November–January. Meanwhile, fluctuations in quarterly expenses are smaller than those in sales, so operating profit tends to be higher in February–April, while August-October and November–January see losses. Medical Principle’s financial year ends in a different month from that of Creek & River, meaning Q1 sales in the Medical Staffing segment cover February–April, and so on for Q2, Q3, and Q4. This means consolidated operating profit tends to be higher in Q2 and lower in Q3 and Q4.

Cumulative Q3 FY02/22results

Sales and profits were up YoY. Despite the impact from the spread of COVID-19 in some areas, there remained firm demand for professionals with advanced expertise, including the creators, doctors, IT engineers, lawyers, accountants, architects, fashion designers, chefs, and researchers in the company’s network. Sales rose in all segments.

On the profit front, all lines from operating profit down recorded double-digit gains thanks to the increase in sales. By segment, sales fell in Accounting and Legal, but profit growth in Creative (Japan) and Medical Staffing extended into the double digits.

As in FY02/21, the COVID-19 pandemic resulted in the cancellation of events across Japan in Medical Staffing and delays to recovery in demand associated with staffing operations, particularly in Accounting and Legal. On the other hand, performance was robust in the agency business in the core Creative (Japan) and Medical Staffing segments, as well as in the rights management business for YouTube content and e-books in the Creative (Japan) segment, which posted record earnings.

Creative (Japan)

Both sales and operating profit increased YoY.

Video, TV, and video technology-related businesses

The company expanded earnings in this business, accurately capturing production demand associated with standard and special programs at TV broadcasters. The Kajiyarou TV program (aired by TV Asahi affiliates) planned and produced by the company was initially broadcast late at night, but was moved to a primetime slot in spring 2021 thanks to its strong ratings. The number of followers on the program’s official Instagram account exceeded 2.25mn as of end-November 2021, making it the top TV program’s official account in Japan.

WING Inc. (acquired in July 2020, and made a consolidated subsidiary), founded by an NHK veteran, is a temporary staffing agency that provides production and editing personnel for NHK and its affiliated broadcasting companies, and also provides a temporary staffing service for weather forecasters. The company looks to generate synergies through integrating the subsidiary’s services into the company’s network.

YouTube Online Creators (OC), a multichannel network for content creators

The company has launched a new project called "Online Creator GAMES" and concluded a comprehensive licensing agreement with a major game company concerning the use of its game software and copyrights. In the meantime, contractual agreements associated with the operation of YouTube channels for companies and television programs rose.

Games business

The company undertook new production projects at production studios on behalf of clients, and progressed with its own development work using licensed IP.

Through the operation of Creative Academy, a tuition-free training facility for people with no experience in the game industry, and the active hiring of overseas nationals, the company worked to address the shortage of qualified personnel in the industry.

XR (a generic term for VR, AR, MR, etc.)

Creek & River achieved progress with sales of "Fast VR," which allows companies to quickly create their own original live-action VR teaching materials. In collaboration with VR Japan Inc., a consolidated subsidiary, the company worked on developing a VR-based, low-latency, real-time streaming system and a VR-based, low-latency, remote lecture system. It also began rolling out a comprehensive business solutions service including everything from the hardware to the content and conducted a variety of initiatives, including joint development of simulation-based disaster education tools with corporate partners. The target markets include corporate education and training facilities, amusement facilities, events, and exhibitions.

Web business

The company worked to expand its network of website creators and professionals in the fields of digital transformation and digital marketing. Meanwhile, it also strove to expand its business operations primarily through sales pitches based on corporate demand for digital marketing and operational reforms implemented using digital technologies. The company also targeted a broader range of business operations through area-based strategies that leverage its nationwide network of business locations.

Publishing business

In publishing, the company distributed (as an agent) e-books through electronic bookstores, including Amazon Kindle. In this e-book distribution agent business, the company reported a steady increase in downloads and distribution of e-books, partially due to the trend of consumers remaining at home in response to the COVID-19 pandemic. At Manga Labo, which turns into profit the work of newly discovered talent (manga artists and authors), gained top ranking in online bookstores, producing bestsellers like Machigai de Kyukonsareta Onna wa Ichinengo ni Riensareru ("Women who received a marriage proposal by mistake will separate a year later") by authors Whipped Cream, Yamato Mirai, and Amary.

Architecture business

The company observed steady growth in the agency business (which provides a referral service of certified class 1 architects and a temporary staffing service for BIM engineers) and contract-based design and construction projects. The company rolled out a new series of the Creative ResidenceⓇ, which proposes rental housing with distinctive designs, and Chokenchiku VR, a service that allows homebuilders and building contractors to present and sell homes to customers in a VR space.

BIM, or Building Information Modelling, refers to the production of three-dimensional models of buildings on a computer, identical to reality, and the use of such models in the construction process.

Initiatives in new businesses

The company developed its agency business for engineers and doctorate holders in the field of AI and other computer science-related technology, R&D staff active in the realm of life sciences, chefs, and chief executive officers (CXOs, or corporate executives with chief executive duties and functions).

Creative (South Korea)

Sales were higher YoY. In part through the development of digital comics (webtoons) through its content-related operations, the company has established a framework that it believes will facilitate higher earnings in the future.

These subsidiaries have built an extensive track record providing temporary staffing services to TV and video producers in South Korea. In the future, they plan to diversify earnings by strengthening cooperation with the parent company, moving into non-video fields, and strengthening the rights management business.

Medical Staffing

Sales and operating profit grew YoY.

To meet the various needs of medical institutions, municipal governments, doctors, and nurses, the company rolled out services in its Medical Staffing business such as Resinavi Fair events for medical students and residents held all over the country; Resinavi Fair Online (events held via the Internet); Resinavi, a clinical trial training information website; and Minkan Ikyoku Connect, an informative website for young physicians.

In the doctor agency business, demand remained high amid the chronic shortage and uneven regional distribution of doctors across the country. Meanwhile, the company referred doctors to more than 15,000 COVID-19 vaccination-related positions at medical institutions, local government, and companies nationwide through 17 referral centers. Although opportunities to hold live Resinavi Fair events remained restricted because of COVID-19, the company has established a system for running online events designed to help residents, medical students, and medical institutions and has begun efforts monetize this system.

Through an agreement with Nagasaki University, Creek & River has launched a new initiative aimed at supporting the development of medical personnel specializing in infectious diseases and the dissemination of relevant information. In June 2009, the company established Community Medical Innovation (CMI) and has begun contributing to community healthcare and providing peripheral services, facilitating the launch of medical facilities, and providing operational support.

Accounting and Legal

Sales grew YoY. Profit was down YoY, in part because the company took steps to encourage registrations with an eye on future growth.

In its staffing business, the company began to observe positive effects from measures targeting growth in registered users of its website despite, as in the previous year, also reporting unfavorable impact from the COVID-19 pandemic, including employment screening delays among clients and adjustments to recruitment plans implemented by the administrative departments of client organizations.

The company worked to expand the agency business and increase its name recognition in the industry by enhancing relationships with associated organizations and holding joint seminars with client companies and firms.

Making use of the network it has already established, Creek & River worked to further develop its service offerings with the full-scale launch of business succession and M&A support services to better meet the business succession planning needs of accounting firms, legal firms, and their respective clients. The company also expanded its service offerings by providing a referral service for accounting and legal staff who wish to telecommute in an effort to address work style diversification in those fields.

As a new initiative within the legal field, the company has launched its "Business Lawyer's Marketing Service" to support the branding and sales activities of business lawyers.

Other

Sales increased YoY. Operating loss contracted due to the growth in sales and improvement in profit generated by operations conducted during the investment stage.

Consolidated subsidiary Leading Edge, which operates the IT staffing agency business, continued to work on hiring, training, and referral of IT engineers in response to market demand for robotics and AI, creating a network of more than 5,000 engineers adept at the Python programming language. Demand for engineers remained strong, and Leading Edge moved forward with efforts to secure necessary human resources.

Consolidated subsidiary Inter Belle dispatches temporary sales staff and operates a store management agency business in the fashion industry. Creek & River's sales representative operations, which leverage its unique expertise, have begun to yield results. Through actions such as the introduction of online customer service and livestream shopping, the company has begun to capitalize on new profit opportunities associated with post-COVID-19 society.

Professional Media, a consolidated subsidiary that operates an HR-related media business, expanded its business operations, which were previously focused primarily on its recruitment website for professionals in the advertising industry, to more extensively include Web, IT, and AI professionals. The subsidiary renewed its website DX Career in FY02/21 in response to market needs.

Consolidated subsidiary VR Japan sells in Japan the VR goggles from China-based Idealens and SKYWORTH. The subsidiary made progress in developing its VR remote simultaneous lecture system and low-latency, livestreaming system. It is developing its own business platform, with a particular focus on training and education for the healthcare sector.

Consolidated subsidiary Idrasys provides system planning, development, sales, operation, and maintenance services using AI. Idrasys worked to position itself as a provider of support for the leveraging of data among corporations through Forecasting Experience, a proprietary AI-enhanced cloud platform that enables demand forecast and provides tools for contract scoring.

Creek & River Global, Inc. develops and operates JURISTERRA, a social media platform for legal professionals in the US. It was carrying out development with a view to full-scale operations on the platform. It also used some of the platform’s functions to expand legal consulting services linking Japan and the US.

Grune, which became a subsidiary in July 2020, engages in IT consulting, Web application, and AI system construction and is leveraging Creek & River's customer base to expand its business. It became a consolidated subsidiary in FY02/22 because of its increased importance.

Economic Index Co., Ltd., on the other hand, was removed from the scope of consolidation from FY02/22, because the company transferred all shares in the business.

Kiduki Architect, which became a consolidated subsidiary in October 2020, is helping to accelerate new businesses in collaboration with the company by supporting startups, etc., under the Tokyo 5G Boosters Project.

For details on previous quarterly and annual results, please refer to the Historical performance section.

Full-year company forecast

		FY02/21			FY02/22
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Act.	2H Est.	FY Est.
Sales		18,454	18,860	37,314	21,035	20,265	41,300
	YoY	11.8%	14.8%	13.3%	14.0%	7.4%	10.7%
Cost of sales		11,565	12,410	23,976	12,921
Gross profit		6,889	6,450	13,338	8,114
	YoY	5.9%	6.6%	6.2%	17.8%
	Gross profit margin	37.3%	34.2%	35.7%	38.6%
Operating profit		5,433	5,457	10,891	5,957
	SG&A ratio	29.4%	28.9%	29.2%	28.3%
Operating profit		1,456	992	2,448	2,158	1,042	3,200
	YoY	15.0%	21.3%	17.4%	48.2%	5.1%	30.7%
	Operating profit margin	7.9%	5.3%	6.6%	10.3%	5.1%	7.7%
Recurring profit		1,476	1,009	2,485	2,174	1,026	3,200
	YoY	16.3%	20.9%	18.1%	47.3%	1.7%	28.7%
	Recurring profit margin	8.0%	5.4%	6.7%	10.3%	5.1%	7.7%
Net income		967	681	1,648	1,406	544	1,950
	YoY	22.1%	19.8%	21.2%	45.4%	-20.1%	18.4%

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

The company revised its 1H and FY02/22 forecasts in September 2021. The revised forecasts call for full-year consolidated sales of JPY41.3bn (+10.7% YoY), operating profit of JPY3.2bn (+30.7% YoY), recurring profit of JPY3.2bn (+28.7% YoY), and net income attributable to owners of the parent of JPY2.0bn (+18.4% YoY).

The upgrade to the previous forecasts reflects the following:

In terms of sales, the Agency and Production businesses in the professional domain, mainly in the Creative (Japan) and Medical Staffing, have performed well, and the Rights business has also grown.

Profits from the operating level downward are expected to exceed the previous forecast due to higher sales in the relatively high-margin Production and Rights businesses and lower expenses as a result of successful cost savings initiatives and the implementation of workstyle reforms in the entire group.

Versus the initial forecasts, the revised company forecasts represent an increase of JPY1.3bn in sales, JPY350mn in operating profit, JPY350mn in recurring profit, and JPY200mn in net income attributable to owners of the parent. The full-year sales forecast has been revised upward to reflect better than expected outcome in 1H. In terms of profit, the company plans to reinvest some of its outperformance in 1H profit in advertising and promotional expenses mainly for the existing businesses. It expects recruiting and human resource development costs to increase to meet demand, especially in the existing businesses, but plans to link spending in 2H to growth in FY02/23 and beyond.

Operating profit for FY02/22 will be the amount originally budgeted for FY02/23 in the medium-term management plan announced in April 2021. The company expects to achieve this target one year ahead of schedule. It intends to announce plans for FY02/23 and FY02/24 when it releases its full-year FY02/22 results.

Segment forecasts

Forecasts by segment			FY02/20			FY02/21			FY02/22
(JPYmn)			Act.	1H Act.	2H Act.	Act.	1H Act.	2H Est.	Est.
Sales			32,964	18,454	18,860	37,314	21,035	20,265	41,300
	YoY		11.5%	11.8%	14.6%	13.2%	14.0%	7.4%	10.7%
	Creative (Japan)		24,559	12,471	13,597	26,067	14,509	14,491	29,000
		YoY	10.6%	4.7%	7.5%	6.1%	16.3%	6.6%	11.3%
	Creative (South Korea)		68	1,674	1,595	3,269	1,744	1,756	3,500
		YoY	-	-	-	-	4.2%	10.1%	7.1%
	Medical Staffing		4,070	2,302	1,621	3,923	2,619	1,781	4,400
		YoY	9.7%	-10.0%	7.2%	-3.6%	13.7%	9.9%	12.1%
	Accounting and Legal		2,122	1,010	983	1,994	1,038	1,062	2,100
		YoY	8.7%	-3.3%	-8.7%	-6.0%	2.7%	8.0%	5.3%
	Other		2,248	1,050	1,150	2,200	1,224	1,276	2,500
		YoY	-	-2.2%	-2.0%	-2.1%	16.7%	10.9%	13.6%
Operating profit			2,084	1,456	992	2,448	2,158	1,042	3,200
	YoY		32.1%	15.0%	21.3%	17.4%	48.2%	5.1%	30.7%
	Operating profit margin		6.3%	7.9%	5.3%	6.6%	10.3%	5.1%	7.7%
	Creative (Japan)		1,315	818	957	1,775	1,302	948	2,250
		YoY	22.6%	53.1%	22.7%	35.0%	59.2%	-0.9%	26.7%
		Operating profit margin	5.4%	6.6%	7.0%	6.8%	9.0%	6.5%	7.8%
	Creative (South Korea)		-67	-16	-34	-50	3	17	20
		YoY	-	-	-	-	-	-	-
		Operating profit margin	-	-	-	-	0.6%	0.6%	0.6%
	Medical Staffing		740	667	57	724	826	74	900
		YoY	38.9%	-11.1%	-	-2.2%	24.0%	28.8%	24.3%
		Operating profit margin	18.2%	29.0%	3.5%	18.4%	31.6%	4.1%	20.5%
	Accounting and Legal		233	67	34	100	39	71	110
		YoY	59.3%	-37.9%	-73.1%	-56.8%	-41.4%	111.0%	9.5%
		Operating profit margin	11.0%	6.6%	3.4%	5.0%	3.8%	6.7%	5.2%
	Other		-131	-82	-22	-104	-14	-36	-50
		YoY	-	-	-	-	-	-	-
		Operating profit margin	-	-	-	-	-	-	-

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

Creative (Japan)

After an upward revision of its full-year forecast in September 2021, the company forecasts sales of JPY29.0bn (+11.3% YoY; +JPY1.0bn versus previous forecast) and operating profit of JPY2.3bn (+26.7% YoY; +JPY250mn).

In FY02/21, the negative impact of the COVID-19 pandemic on the Creative (Japan) business, Creative (Korea) business, and Accounting and Legal segments amounted to JPY1.2bn in sales and JPY250mn in operating profit. However, sales and profits were up versus FY02/20 thanks in large part to contributions from the games, YouTube, and e-books and copyrights businesses.

In FY02/21, the impact of the COVID-19 pandemic was mainly felt in Q2 and Q3. The effect on Q4 results was minimal despite the state-of-emergency declaration that was issued during the quarter. The company and its clients have established systems for working remotely and carrying out meetings online, and have become accustomed to them. The company believes this fact will help to lessen the impact of the pandemic in FY02/22 versus FY02/21.

In the Creative (Japan) segment, the company expects sales to grow as it responds to an increase in projects in the areas of visual, games, web, advertising, and publishing. In these businesses, there is a trend of clients outsourcing more work to shift toward greater variable costs, and the company has been able to achieve earnings growth by tapping into this outsourcing demand. Among the new businesses, the e-book business has been growing in terms of distribution and downloads, and the YouTube MCN Online Creators (OC) business has been growing in terms of video views.

2H FY02/22 forecast for Creative (Japan)

1H FY02/22 results were sales of JPY14.5bn (+16.3% YoY) and operating profit of JPY1.3bn (+59.2% YoY). Subtracting 1H results from the full-year FY02/22 forecast indicates the company is expecting 2H sales of JPY14.5bn (+6.6% YoY) and operating profit of JPY948mn (-0.9% YoY). Although it expects sales to increase, it expects operating profit to be essentially flat YoY due to increases in recruiting and human resource development costs to meet demand, especially in the existing businesses, but plans to link spending in 2H to growth in FY02/23 and beyond.

Creative (Korea)

The company forecasts sales of JPY3.5bn (+7.1% YoY) and operating profit of JPY20mn (versus loss of JPY50mn in FY02/21). In its September 2021 revision to the full-year FY02/22 forecast, the company raised the sales target by JPY100mn.

In FY02/21, Creek & River Entertainment Co., Ltd., which operates an agency business in TV and video in South Korea, was in the black. However, Creek & River Korea Co., Ltd., which distributes popular Korean smartphone games worldwide, posted loss. Creek & River Korea Co., Ltd. will withdraw from its game distribution business in FY02/22, which the company believes will keep it from dragging on performance as it did in FY02/21, and lead to increased profit.

Medical Staffing

The company forecasts sales of JPY4.4bn (+12.1% YoY) and operating profit of JPY900mn (+24.3% YoY). In its September 2021 revision to the full-year FY02/22 forecast, the company raised the sales target by JPY200mn and the operating profit target by JPY100mn.

In the Medical Staffing segment, the company conducts the physician staffing business and the Resinavi Fair business, in which it hosts joint presentation meetings for medical students and residents. In recruitment services in FY02/21, sales and operating profit rose due to a chronic shortage of physicians nationwide and their uneven regional distribution. On the other hand, Resinavi Fair events for medical students and residents were cancelled nationwide due to the COVID-19 pandemic, resulting in the Resinavi Fair business having negative impact of JPY600mn on sales and of JPY300mn on operating profit.

For FY02/22, the company expects to increase sales and profit in the physician staffing business due to the continued high demand for physicians. With regard to Resinavi Fair, the company established a system for holding the events online in FY02/21, which enabled hospitals in all regions of Japan, including hospitals in outlying areas, to participate in the events. As a result, medical students from all over Japan tuned in to the events, as did Japanese medical students enrolled in overseas medical schools. In FY02/22, the company anticipates the Resinavi Fair Online business to contribute to earnings by holding events online.

2H FY02/22 forecast for Medical Staffing

1H FY02/22 results were sales of JPY2.6bn (+13.7% YoY) and operating profit of JPY826mn (+24.0% YoY). Subtracting 1H results from the full-year FY02/22 forecast indicates the company is expecting 2H sales of JPY1.8bn (+9.9% YoY) and operating profit of JPY74mn (+28.8% YoY). Sales and operating profit for this business tend to be weighted toward 1H, since April is the main month for physician transfers. In 2H, the company expects medical staffing operations to be robust, but still does not plan to hold Resinavi Fair events at physical venues.

Accounting and Legal

The company forecasts sales of JPY2.1bn (+5.3% YoY) and operating profit of JPY110mn (+9.5% YoY).

In FY02/21, the COVID-19 pandemic caused delays in clients’ recruitment processes, and sales and operating profit fell below the levels of FY02/20. In FY02/22, the company expects the impact of COVID-19 pandemic to ease and results to recover compared to FY02/21.

Other

The company forecasts sales of JPY2.5bn (+13.6% YoY) and operating loss of JPY50mn (versus loss of JPY104mn in FY02/21).

In FY02/21, while sales in the IT staffing agency business grew, the impact of the COVID-19 pandemic on fashion and the VR business led to lower sales versus FY02/20. On the profit front, the operating loss narrowed YoY as the company made progress in building the business infrastructure in new areas such as AI. The COVID-19 reduced sales by JPY200mn and operating profit by JPY50mn.

In FY02/22, the company expects its IT staffing agency business to continue to grow, and plans for consolidated subsidiary Idrasys’ Forecasting Experience, an AI-enhanced cloud platform that helps forecast demand, to contribute to earnings. In March 2021, the company sold its shares in Economic Index Co., Ltd., which had been a consolidated subsidiary through FY02/21. Economic Index had posted operating loss in the FY02/21, which will be eliminated from results moving forward.

Outlook

Medium-term management plan

The company announced its medium-term management plan in April 2021. The plan calls for FY02/24 sales of JPY46.0bn (up an average of 7.2% each year from FY02/21) and operating profit of JPY3.5bn (up an average of 12.7% each year from FY02/21).

Numerical targets

		FY02/17	FY02/18	FY02/19	FY02/20	FY02/21	FY02/22	FY02/23	FY02/24
(JPYmn)		Act.	Act.	Act.	Act.	Act.	Est.	Targets	Targets
Sales		26,581	26,709	29,569	32,946	37,314	41,300	43,000	46,000
	YoY	13.3%	13.3%	13.3%	13.3%	13.3%	10.7%	4.1%	7.0%
Operating profit		1,610	1,806	1,579	2,084	2,448	3,200	3,200	3,500
	YoY	17.4%	17.4%	17.4%	17.4%	17.4%	30.7%	0.0%	9.4%
	Operating profit margin	6.1%	6.8%	5.3%	6.3%	6.6%	7.7%	7.4%	7.6%

Source: Shared Research based on company data

During the period of the medium-term management plan, the company plans to expand in terms of professional fields by advancing the “50 professional fields” concept that it has been working to realize. It also plans to work on creating new services that leverage the capabilities of professionals.

The basic strategies of the three-year plan include: Further expansion of professional fields, creation of new services, development of management personnel, and strengthening of corporate governance.

Further expansion of professional fields: The company will continue to develop the “50 professional fields” concept.
Creation of new services: The company will continue to actively develop new services aimed at creating new value by leveraging the capabilities of professionals.
Development of management personnel: The creation of new businesses in a variety of fields is only possible with management talent. Therefore, the company will acquire skilled management personnel by developing them internally and outside of the company so that the group can benefit from their expertise.
Strengthening of corporate governance

Further expansion of professional fields: As of April 2021, the company is engaged in nine peripheral services and developing businesses in 18 professional fields. So far, it has expanded to cover professionals in video, games, web, advertising, and publishing (what the company categorizes under Creative), in addition to medical, IT, legal, and accounting personnel, as well as architects, fashion creators, chefs, computer science personnel, life science workers, researchers, performing artists, research support staff, corporate executives (CXOs), agricultural workers, and athletes. The company believes that there are about 50 fields in which Japan can be competitive globally, and it aims to further expand the number of fields it handles in the future (see Strategy for details).

Sources of medium-to long-term growth

The medium- and long-term outlook for the company can be split into two themes—continued revenue growth and profitability improvement in existing businesses, and attaining profitability while expanding revenues in new business areas.

Outlook by segment

Segment	Existing businesses	New businesses
Creative & Technical (Japan)	Sustained demand for TV program, game, and web creators	E-book and online creator businesses turn a profit, continuing their growth momentum
		Architecture agency expected to break even in FY02/18
		Fashion, chef, and computer science agencies still in the beginning stages, but losses are contracting
		Launched drone and performing arts operations in FY02/19, life science agency and language learning operations in FY02/20, and CXO and athlete agency operations in FY02/21. Launched agriculture business in FY02/22.
Medical Staffing	Shortage of doctors and varied availability of diagnostic departments nationwide resulted in robust demand from medical institutions; opened more offices	Provides physicians and medical institutions with support services for M&A, clinic openings, business successions, and new business startups. Also provides a diagnostic imaging knowledge service (Dokuei Shinan). Plans to operate nationwide doctor visit services after establishing new operation centers
Accounting and Legal	Strong demand for accounting and legal professionals	Operates business succession and M&A support services in Accounting, and JURISTERRA (a global social media platform for lawyers) in Legal business
Other	Aiming for business growth in Other business through increasing registered members and company personnel	VR Japan undertakes exclusive sales of Idealens Technology’s products, marketing, and platform operation in Japan In November 2019, VR Japan was named the authorized distributor in Japan for SKYWORTH S1 (VR headset) and expanded its lineup of products. It is also developing a low-latency, real-time VR transmission system.
		Professional Media, which runs recruitment site for professionals, plans to strengthen profitability of DX Career, a recruitment site for DX professionals. Plans to apply same business model to recruitment of other professionals.
		Idrasys develops and sells Forecasting Experience, an AI-enhanced cloud platform that helps forecast demand and provides tools for contract scoring.

Source: Shared Research based on company data

Existing businesses

The main contributors to the company’s operating profit are Creative (Japan), which accounted for 69.6% of sales and 72.6% of operating profit in FY02/21, and Medical Staffing, which accounted for 10.5% of sales and 29.6% of operating profit in FY02/21. Shared Research understands there is growth potential for the Creative (Japan) and Medical Staffing segments over several years to

Earnings growth of Creative (Japan)

In Creative (Japan), client companies in the existing businesses of visual, games, web, advertising, and publishing businesses are increasingly outsourcing to shift fixed expenses to variable expenses, and Shared Research understands that Creek & River has been achieving earnings growth by capturing such outsourcing demand.

In the five years from FY02/16 to FY02/21, Creative (Japan) business recorded CAGRs of 11.3% in sales and 19.8% in operating profit. Shared Research understands that this growth was due to an increase in the number of professionals and clients as client companies outsourced a greater part of their operations. As of end-FY02/15, the company had 60,000 professionals and 3,000 clients. As of end-FY02/21, the company had 85,000 professionals and 5,000 clients. The company should be able to grow its business in the medium term by increasing the number of professionals and clients.

The company is considering the following growth strategies for the mainstay video, TV, and image technology-related businesses, web business, and games business.

The number of clients in the video, TV, and imaging technology-related business is limited, and the company is aiming to increase sales per client rather than increase the number of clients. The company sees room to increase its share in TV production in particular.

There is a large market for outsourcing in the web business, and the company believes there is significant room to grow by increasing the number of clients.

In the games business, the company sees it as important to pursue sales from existing clients. It plans to grow by periodically focusing on clients with large personnel needs when the timing is suitable.

On the profit front, there is room for the company to improve profit margins by reducing the fixed-cost burden. In the past, the company had to secure more office space as the number of projects in the outsourced contracting business increased. However, by promoting remote work during the COVID-19 pandemic, the company has established a system that helps to suppress the increase in rent and raise the profit margin. Shared Research understands that although remote work entails spending on internet connections and security, the company will not need to increase fixed costs (mainly rent) in the medium term in proportion to the growth in sales, and thus can count on higher profit margins.

Earnings growth of Medical Staffing

Based on MHLW’s “Employment Referrals for General Workers,” the active job openings-to-applicants ratio for physicians in FY2019 was 3.50x, consistently exceeding 1.41x for all job categories.

Over the five-year period from FY02/16 to FY02/21, the business grew at an average annual rate of 6.2% in terms of sales and 12.1% in terms of operating profit. As of end-FY02/15, there were 70,000 registered users (physicians and medical students) and 8,800 contracted medical institutions, but by end-FY02/21, these figures had grown to 134,000 and 13,000, respectively. In the medium term, there are chronic doctor shortages all over Japan due to uneven regional distribution. Thus, the demand for doctors remains high, which we believe indicates significant growth potential for the Medical Staffing business.

In the medical field, the company, which has 17 nationwide offices as of April 2021, plans to increase the number of offices as one of its medium-term growth strategies. The company plans to operate nationwide doctor visit services after establishing new operation centers around the country. As regards physician staffing, the company has focused on major hospitals in the past, but plans to increase the number of job openings by expanding its target to include medium-sized hospitals in the medium term.

New business areas

If the company is successful in establishing several new businesses starting in the Agency business as outlined in the table above, the growth in such new businesses should combine with expansion in existing businesses to produce strong earnings growth. These new businesses have continued to be in the red due to upfront costs. According to the medium-term management plan, the company expects to incur operating loss of about JPY200mn from new businesses.

The following is overview of the main new businesses as of April 2021.

New business 1: Agency operations in new fields

In the area of agency operations in new fields, the company operates agency businesses for architects, fashion creators, chefs, professors (now computer science), researchers (now life science), corporate executives (CXO), agricultural workers, and athletes.

Architecture business

With regard to the architecture business, which is mainly an architect referral service, the company launched a specialist website called “Architect Agency” in April 2013. The number of registered architects was about 4,500 in FY02/21.

Creek & River has started a business of packaging design proposals for made-to-order houses submitted by registered architects and providing them to small- and medium-sized homebuilders. Its Creative Residence® Series brand has proposed and provided unique architect design services (including rental properties with golf, garage, and vegetable garden themes) to rental property owners since FY02/16.

In April 2020, the company conducted a full-fledged launch of Chokenchiku VR, a service that allows homebuilders and building contractors to present and sell homes to customers in a VR space.

Fashion designer agency business

For the fashion designer agency business, in May 2013 the company launched a specialist website called “Fashion Creator Agency,” and began accepting registrations from designers and apparel companies. In December 2013, the company made Inter Belle Inc. a consolidated subsidiary (included in the Other segment) after acquiring shares through a private placement.

Chef agency and professor agency businesses

Creek & River started up the chef agency and professor agency (now computer science) businesses in FY02/16, which posted operating losses in FY02/19.

Researcher (now life sciences) agency business

In February 2019, Creek & River launched an agency business for R&D support staff (researchers) to assist with R&D in the life sciences, including biology and chemistry. Clients include pure research departments at universities and major food and pharmaceutical manufacturers.

Other new agency businesses (CXO, agricultural workers, athlete)

Creek & River launched CXO and athlete agency businesses in FY02/21 and the agricultural agency business in FY02/22.

Athlete agency: This business supports professional sports athletes, retired athletes, and others.

New business 2: New businesses in Medical Staffing (support for M&A, business succession, image diagnostics, and advertising)

The company will operate a consulting business that will harness its relationships with 134,000 doctors and medical students and 13,000 medical institutions, to act as an intermediary for buying and selling businesses that fulfill hospitals’ succession planning needs. The consulting business will provide business support for the medical industry in areas such as the launch of medical institutions, business succession, establishment of new businesses, and hospital management.

New business 3: VR business

In August 2016, the company established VR Japan (84.2% stake) with Wang Han (partner of investment fund New Margin Ventures, which is the top shareholder of Idealens Technology Co., Ltd.) to move into Japan’s virtual reality (VR) and augmented reality (AR) markets. VR Japan is the sole distributor of Idealens Technology’s VR head-mount displays (HMDs) in Japan and is also responsible for such things as marketing and platform operation. In addition, Creek & River is engaged in the planning and development of VR content.

In September 2019, VR Japan launched the IDEALENS K4 model of 4K HMD VR goggles with new functionality. In addition, in November 2019, the company was named the authorized distributor in Japan for SKYWORTH S1, a VR headset with a 4K resolution display which supports direct 8K VR reproduction, broadening its lineup. The company is also expanding its proprietary technologies by developing a VR remote simultaneous lecture system and low-latency, real-time transmission system.

New business 4: Idrasys Co., Ltd.

In January 2018, the company established Idrasys Co., Ltd. (a company that provides system planning, development, sales, operation, and maintenance services using AI) with Taiwanese company Intumit Inc., whose main businesses are development and sales of AI platforms and robotic process automation (RPA). The company has an 80.11% stake in Idrasys.

As of April 2021, Idrasys helps companies leverage AI with Forecasting Experience, its proprietary AI-enhanced cloud platform that helps forecast demand and provides tools for contract scoring.

New business 5: Other new services (drone business)

Drone business

Creek & River launched a drone business in March 2018. In this business, it provides support for the adoption and operation of drones, and training and referrals of personnel involved with drones. In November 2019, the company teamed up with drone developer Saitotec Co., Ltd., to conduct a drone drill with the Self-Defense Forces, using drones to transport and drop materials out of the direct line of sight of the operator.

The upward revisions to the 1H FY02/22 forecasts reflect the following:

In terms of sales, the Agency and Production businesses in the professional domain, mainly in the Creative (Japan) and Medical Staffing, have performed well, and the Rights business has also grown.

In terms of profit, profits from the operating level downward are expected to exceed the previous forecasts due to higher sales in the relatively high-margin Production and Rights businesses and lower expenses as a result of successful cost savings initiatives and the implementation of workstyle reforms in the entire group.

Business

Business description

Given the main sources of earnings are its recruitment services such as temporary staffing and employment agency businesses, one could view Creek & River as simply an employment agency. However, President Yukihiro Ikawa’s ambition is broader—providing higher value-added services, including contracting/outsourcing and rights management (distribution of intellectual property).

By business

The company’s business officially consists of the Agency, Production, and Rights management businesses. In FY02/21, the Agency business (temporary staffing and employment) accounted for the bulk of both sales and gross profits, at 58% (53% in FY02/20) and 65% (flat YoY), respectively. The Production business made up 34% of sales (39% in FY02/20) and 27% of gross profits (27% in FY02/20), and the Rights management business accounted for the remaining 8% (flat YoY) and 8% (flat YoY), respectively.

The contribution of the Agency business (temporary staffing) has been declining, while those of the Agency (employment) and Rights management business have been increasing.

Sales by business

Sales by business (JPYmn)			FY02/15	FY02/16	FY02/17	FY02/18	FY02/19	FY02/20	FY02/21
Total sales			22,926	24,909	26,581	26,709	29,569	32,946	37,314
	YoY		11.2%	8.7%	6.7%	0.5%	10.7%	11.4%	13.3%
	Agency: Temporary staffing		11,000	12,200	11,700	10,400	10,900	12,500	16,800
		YoY	6.8%	10.9%	-4.1%	-11.1%	4.8%	14.7%	34.4%
		% of total	48.0%	49.0%	44.0%	39.0%	37.0%	38.0%	45.0%
	Agency: Employment		2,500	3,000	3,500	4,000	4,400	4,900	4,900
		YoY	8.7%	20.0%	16.7%	14.3%	10.0%	11.4%	0.0%
		% of total	11.0%	12.0%	13.0%	15.0%	15.0%	15.0%	13.0%
	Production		8,700	9,000	10,100	10,400	12,100	12,800	12,700
		YoY	17.6%	3.4%	12.2%	3.0%	16.3%	5.8%	-0.8%
		% of total	38.0%	36.0%	38.0%	39.0%	41.0%	39.0%	34.0%
	Rights management		700	700	2,100	1,900	2,100	2,600	3,000
		YoY	75.0%	0.0%	200.0%	-9.5%	10.5%	23.8%	15.4%
		% of total	3.0%	3.0%	8.0%	7.0%	7.0%	8.0%	8.0%
Gross profit			7,240	7,996	9,234	10,168	11,366	12,556	13,338
	YoY		13.3%	10.4%	15.5%	10.1%	11.8%	10.5%	6.2%
	Gross profit margin		31.6%	32.1%	34.7%	38.1%	38.4%	38.1%	35.7%
	Agency: Temporary staffing		2,200	2,000	2,300	2,400	2,800	3,300	3,900
		YoY	15.8%	-9.1%	15.0%	4.3%	16.7%	17.9%	18.2%
		Gross profit margin	20.0%	16.4%	19.7%	23.1%	25.7%	26.4%	23.2%
		% of total	30.0%	25.0%	25.0%	24.0%	25.0%	26.0%	29.0%
	Agency: Employment		2,500	2,800	3,500	4,000	4,300	4,900	4,800
		YoY	8.7%	12.0%	25.0%	14.3%	7.5%	14.0%	-2.0%
		Gross profit margin	100.0%	93.3%	100.0%	100.0%	97.7%	100.0%	98.0%
		% of total	35.0%	35.0%	38.0%	39.0%	38.0%	39.0%	36.0%
	Production		2,200	3,000	2,800	2,900	3,300	3,400	3,600
		YoY	10.0%	36.4%	-6.7%	3.6%	13.8%	3.0%	5.9%
		Gross profit margin	25.3%	33.3%	27.7%	27.9%	27.3%	26.6%	28.3%
		% of total	31.0%	38.0%	30.0%	29.0%	29.0%	27.0%	27.0%
	Rights management		300	200	900	800	900	1,000	1,100
		YoY	200.0%	-33.3%	350.0%	-11.1%	12.5%	11.1%	10.0%
		Gross profit margin	42.9%	28.6%	42.9%	42.1%	42.9%	38.5%	36.7%
		% of total	4.0%	2.0%	10.0%	8.0%	8.0%	8.0%	8.0%

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

Agency business

The company acts as an agent between client companies and various specialists. The two contractual forms of the relationship are: temporary staffing (for short-term temporary positions such as for the duration of a project) and employment agency (or recruiter; for long-term positions).

Temporary staffing: after an employment contract is signed between the client company and a specialist, Creek & River dispatches the specialist to client sites to perform work. The company invoices the wage amount plus its own management fee. In FY02/21, the Agency business (temporary staffing) accounted for 45% of sales (38% in FY02/20) and 29% of gross profit (26%), and had a GPM of 23.2% (26.4%).

Employment agency: the company refers professionals who are registered to client companies. The business model is such that if the referred professional is hired directly by the employer as an employee of the client, then the client pays the company a fixed finder’s fee. In FY02/21, the Agency business (employment agency) accounted for 13% of sales (15% in FY02/20) and 36% of gross profit (39%), and had a GPM of 98.0% (100.0%).

Production business

The company assists clients in content production and other businesses, using its specialists to produce and manage visual, game and web content. In FY02/21, the Production business accounted for 34% of sales (39% in FY02/20) and 27% of gross profit (flat), and had a GPM of 28.3% (26.6%).

Rights management business

The company distributes and manages copyrighted material produced mainly by the creative staff registered with it. In FY02/21, the Rights management business accounted for 8% of sales (flat YoY) and 8% of gross profit (flat), and had a GPM of 36.7% (38.5%).

Segments

Creek & River provides above three services in business segments of Creative (Japan), Medical, Accounting and Legal, and Other (including IT, fashion). The company’s roots are in the creative sector, which includes such areas as TV and cinematic production, web design, and computer game development. Subsequently, the company added new businesses in e-book distribution, architecture, fashion, online creator, and other fields. As of April 2021, the company had new businesses in fields such as computer science, life science, chef, professor, drone, VR, and other new agency operations (CXO, athlete).

CXO agency: This business handles searches for CEOs, CFOs, and other corporate executives, with a focus on those with experience at strategic consulting firms and director-level experience at listed companies.
Athlete agency: This business supports retired athletes, including Olympic-level athletes and athletes retiring from professional sports.

Segments and business description

Segment		Business description
Creative (Japan)		Offers employment and temporary staffing, as well as outsourcing services targeting creators in visual, games, web, and publishing. Also includes publishing (e-book distribution in Japan and the author agency business overseas), architecture, fashion, online creator, and VR businesses.
Creative (South Korea)		Consolidated subsidiary Creek & River Korea mainly engages in the Rights management business, licensing South Korean games for global distribution. In addition, consolidated subsidiary Creek & River Entertainment conducts temporary staffing for television stations.
Medical		Consolidated subsidiary Medical Principle Co., Ltd., provides medical specialist (mostly doctor) employment services. It also provides physicians and medical institutions with support services for M&A, clinic openings, business successions, and new business startups. Furthermore, it provides a diagnostic imaging knowledge service (Dokuei Shinan).
Accounting and Legal		Consolidated subsidiary C&R Legal Agency Co., Ltd., provides employment services for lawyers. Consolidated subsidiary JUSNET Communications Co., Ltd., provides employment and temporary staffing services for chartered accountants and licensed tax accountants
Other	IT	Consolidated subsidiary Leading Edge Co., Ltd., provides employment and temporary staffing services for IT engineers
	Fashion	Consolidated subsidiary Inter Belle Inc. operates the group’s agency business in the fashion industry.
	Recruitment media	Consolidated subsidiary Professional Media operates recruitment sites specializing in the DX industry.
	VR	Consolidated subsidiary VR Japan Co., Ltd., is marketing IDEALENS all-in-one VR headsets in Japan.
	United States	Consolidated subsidiary Creek & River Global develops and operates the legal networking social media platform JURISTERRA and provides consulting services
	China	Consolidated subsidiary Creek & River Shanghai operates a rights management business in China
	AI	Consolidated subsidiary Idrasys Co., Ltd., operates the SmartRobot™ chatbot system business in Japan, and is operating Forecasting Experience, an AI-enhanced cloud platform.
	IT development	Consolidated subsidiary Grune provides IT consulting and web application development services
	Business creation	Consolidated subsidiary Kiduki Architect engages in new product and service planning, development, operations, and sales

Note: From Q1 FY02/19, the accounting and legal businesses which had been included in the Others segment became an independent reporting segment.
Note: Starting in FY02/21, the company made Creative (South Korea), previously included in the Other segment, an independent reporting segment.

Sales and operating profits by segment

Segment sales and OP			FY02/15	FY02/16	FY02/17	FY02/18	FY02/19	FY02/20	FY02/21
(JPYmn)			Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
Sales			22,926	24,909	26,581	26,709	29,569	32,946	37,314
	YoY		11.2%	8.7%	6.7%	0.5%	10.7%	11.4%	13.3%
	Creative (Japan)		14,340	15,237	17,089	19,102	22,212	24,599	26,067
		YoY	8.3%	6.3%	12.2%	11.8%	16.3%	10.7%	6.0%
	Creative (South Korea)		3,276	3,820	3,301	986	32	-	3,269
		YoY	9.8%	16.6%	-13.6%	-70.1%	-96.8%	-	-
	Medical Staffing		2,732	2,909	3,311	3,558	3,709	4,070	3,923
		YoY	7.5%	6.5%	13.8%	7.5%	4.2%	9.8%	-3.6%
	Accounting and legal		-	-	-	1,807	1,952	2,122	1,994
		YoY				-	8.1%	8.7%	-6.0%
	Other		-	-	-	1,458	1,881	2,315	2,200
		YoY				-	29.0%	23.1%	-5.0%
	Accounting, Legal, IT, other		2,619	2,968	2,956	3,260	-	-	-
		YoY	38.3%	13.3%	-0.4%	10.3%	-	-	-
	Eliminations, company-wide		-41	-25	-76	-201	-217	-160	-139
Operating profit			1,296	1,178	1,610	1,806	1,579	2,084	2,448
	YoY		18.6%	-9.1%	36.7%	12.2%	-12.6%	32.0%	17.4%
	Operating profit margin		5.7%	4.7%	6.1%	6.8%	5.3%	6.3%	6.6%
	Creative (Japan)		804	719	1,083	1,155	1,072	1,315	1,775
		YoY	4.1%	-10.6%	50.7%	6.7%	-7.2%	22.6%	35.0%
		Operating profit margin	5.6%	4.7%	6.3%	6.0%	4.8%	5.3%	6.8%
	Creative (South Korea)		41	23	18	3	-32	-	-50
		YoY	87.8%	-43.0%	-20.4%	-85.0%	-	-	-
		Operating profit margin	1.2%	0.6%	0.6%	0.3%	-	-	-
	Medical Staffing		361	409	433	575	533	740	724
		YoY	10.6%	13.3%	5.9%	32.8%	-7.3%	38.8%	-2.2%
		Operating profit margin	13.2%	14.1%	13.1%	16.2%	14.4%	18.2%	18.4%
	Accounting and legal		-	-	-	148	146	233	100
		YoY	-	-	-	-	-1.1%	59.2%	-56.8%
	Other		-	-	-	-83	-150	-199	-104
		YoY	-	-	-	-	-	-	-
	Accounting, Legal, IT, other		85	24	77	65	-	-	-
		YoY	-	-71.6%	216.5%	-15.7%	-	-	-
	Eliminations, company-wide		5	2	-1	8	9	-5	2

Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Note: From Q1 FY02/19, the accounting and legal businesses which had been included in the Others (IT, Legal, Accounting, other) segment became an independent reporting segment.
Note: In Q2 FY02/18, the company changed Creek & River Entertainment Co., Ltd., from a consolidated subsidiary to an equity-method affiliate, so Creative (South Korea) was excluded as an independent segment in FY02/20. Then in January 2020, the company changed the capitalization of Creek & River Entertainment Co., Ltd., and made it a consolidated subsidiary once more. For this reason, starting with FY02/21, it has made Creative (South Korea) an independent reporting segment again.

Group network

Business area	Company		Registered professionals and numbers	Number of clients
Creative	Creek & River	Established in 1990	Creators: 85,000 Productions: 1,000	15,800 companies
	CREEK & RIVER KOREA (South Korea)	Established in 2001
	CREEK & RIVER SHANGHAI (China)	Established in 2010
	Professional Media	Acquired in 2015
	CREEK & RIVER ENTERTAINMENT Co., Ltd. (South Korea)	Established in 2016
	Claytechworks	Acquired in 2018
	WING	Acquired in 2020
Publishing	Creek & River (E-books)	Business started in 2012	e-book titles: 80,000 Titles published overseas: 5,000	850 companies
Publishing	CREEK & RIVER SHANGHAI (China)	Established in 2010	e-book titles: 80,000 Titles published overseas: 5,000	850 companies
Medical Staffing	Medical Principle	Established in 1997	Physicians and medical students: 134,000	13,000 institutions
IT	Leading Edge	Established in 2000	IT engineers: 4,200	450 companies
	Idrasys	Established in 2018
	Grune	Acquired in 2020
Legal	C&R Legal agency	Established in 2007	Lawyers, etc.: 18,500	1,900 offices/companies/
Legal	CREEK & RIVER Global, Inc. ((US))	Established in March 2016	Lawyers, etc.: 18,500	1,900 offices/companies/
Accounting	JUSNET Communications	Established in 2009	Accountants, etc.: 57,000	5,000 offices/companies/
Architectural	Creek & River (Architect agency)	Business started in 2013	Architects, etc.: 4,500	2,500 offices/companies/
Fashion	Creek & River (Fashion creator agency)	Business started in 2013	7,100	560 companies
Fashion	Inter Belle	Acquired in 2013	7,100	560 companies
Food	Creek & River (Chef agency)	Business started in 2015	2,700	310 companies
Computer science	Creek & River (Computer science agency)	Business started in 2015	5,000	500 companies
VR	Creek & River (VR business division)	Business started in 2016	-	-
VR	VR Japan	Established in 2016	-	-
Performing arts	Creek & River (Performing arts agency)	Business started in 2018	500	100 companies
Life sciences	Creek & River (Life science agency)	Business started in 2019	600	100 companies
Athletics	Creek & River (Agency for retired athletes)	Business started in 2020	100	150 companies
CXO	Creek & River (Executive search agency)	Business started in 2013	500	100 companies
	Kiduki Architect	Business started in 2020	-	-
Agriculture	Creek & River	Business started in 2021	-	-

Source: Shared Research based on company data

Creative (Japan)

(In FY02/21: 69.6% of sales; 72.6% of operating profit)

The Creative business is run by parent company Creek & River, WING (consolidated in July 2020) and Claytechworks (established in 2018), and represents the core of the consolidated operations. Existing businesses include video-related work (TV and movies), games, website creation, advertising and publication agency, production, rights management, publishing (e-book distribution and author agency), architecture, fashion, and online creator operations. The company has also launched new chef, professor, drone, VR, and other new agency businesses (CXO, athlete). As of FY02/21, existing businesses comprise the majority of revenue and operating profit of the company.

Creative (Japan): sales and operating profit

(JPYmn)			FY02/15	FY02/16	FY02/17	FY02/18	FY02/19	FY02/20	FY02/21
Sales			14,340	15,237	17,089	19,102	22,212	24,599	26,067
	YoY		-	6.3%	12.2%	11.8%	16.3%	10.7%	6.0%
	Video-related work (TV and movie)		4,732	4,876	4,956	5,539	5,997	6,150	6,517
		YoY	-	3.0%	1.6%	11.8%	8.3%	2.5%	6.0%
		% of total	33.0%	32.0%	29.0%	29.0%	27.0%	25.0%	25.0%
	Games		3,441	4,266	4,956	5,921	6,886	8,364	8,863
		YoY	-	24.0%	16.2%	19.5%	16.3%	21.5%	6.0%
		% of total	24.0%	28.0%	29.0%	31.0%	31.0%	34.0%	34.0%
	Online and paper media		5,449	5,181	5,468	5,730	6,664	6,888	7,038
		YoY	-	-4.9%	5.6%	4.8%	16.3%	3.4%	2.2%
		% of total	38.0%	34.0%	32.0%	30.0%	30.0%	28.0%	27.0%
	E-books and YouTube		574	762	1,367	1,146	1,777	1,968	2,607
		YoY	-	32.8%	79.5%	-16.2%	55.0%	10.7%	32.5%
		% of total	4.0%	5.0%	8.0%	6.0%	8.0%	8.0%	10.0%
	Other		143	152	342	764	888	984	1,043
		YoY	-	6.3%	124.3%	123.6%	16.3%	10.7%	6.0%
		% of total	1.0%	1.0%	2.0%	4.0%	4.0%	4.0%	4.0%
Operating profit			804	719	1,083	1,155	1,072	1,315	1,775
	YoY		-	-10.6%	50.7%	6.7%	-7.2%	22.6%	35.0%
	Operating profit margin		5.6%	4.7%	6.3%	6.0%	4.8%	5.3%	6.8%
	Video-related work (TV and movie)		418	345	390	323	257	316	373
		YoY	-	-17.5%	13.0%	-17.0%	-20.4%	22.6%	18.2%
		Operating profit margin	8.8%	7.1%	7.9%	5.8%	4.3%	5.1%	5.7%
		% of total	52.0%	48.0%	36.0%	28.0%	24.0%	24.0%	21.0%
	Games		257	446	552	693	708	631	1,154
		YoY	-	73.3%	24.0%	25.5%	2.1%	-10.8%	82.9%
		Operating profit margin	7.5%	10.4%	11.1%	11.7%	10.3%	7.5%	13.0%
		% of total	32.0%	62.0%	51.0%	60.0%	66.0%	48.0%	65.0%
	Online and paper media		321	180	390	335	482	486	497
		YoY	-	-44.1%	117.0%	-14.1%	44.0%	0.8%	2.2%
		Operating profit margin	5.9%	3.5%	7.1%	5.8%	7.2%	7.1%	7.1%
		% of total	40.0%	25.0%	36.0%	29.0%	45.0%	37.0%	28.0%
	E-books and YouTube		-80	-50	54	92	204	184	302
		YoY	-	-37.4%	-207.7%	70.7%	120.4%	-9.7%	64.0%
		Operating profit margin	-14.0%	-6.6%	4.0%	8.1%	11.5%	9.4%	11.6%
		% of total	-10.0%	-7.0%	5.0%	8.0%	19.0%	14.0%	17.0%
	Other		-112	-201	-303	-289	-579	-302	-373
		YoY	-	-	-	-	-	-	-
		% of total	-14.0%	-28.0%	-28.0%	-25.0%	-54.0%	-23.0%	-21.0%

Source: Shared Research based on company data
Note: Sales and OP calculated by Shared Research based on percentage breakdown disclosed in company data.
Note: The Other segment includes new agencies.

Existing operations (video-related work, games, web, advertising and publishing)

To recap, Creek & River runs Agency, Production, and Rights management businesses that provide services to creators in the fields of video-related work (TV and movies), games, web, advertising and publishing.

Existing operations

Business	Details
Video-related (TV, movies, videos)	Agency services introducing creators with skills that range from television production to movies, commercials, music videos, and other videos to clients. Specific jobs include producers, television directors, script writers, and camera operators. Young creators receive training via the company’s internship program prior to placement
Games	Agency services for creators. The company also develops its own social games and manages operations. Specific jobs include game producers, game designers, game programmers, and character designers
Web	Supports the needs of web creators, which include agency services to web production companies, along with planning, design, and operation of corporate and product websites. Specific jobs include web designers, planners, and writers
Advertising and publishing	Agency services for graphic designers, editors, copywriters, and editors. Also provide services for catalog and pamphlet production and outsourcing

Creators

A creator refers to mostly freelance specialists working in areas such as audiovisual production, web development, game development, software application development, advertising, and publishing. In terms of specific professions, examples include TV and movie directors and producers, script writers, photographers, web designers, computer graphics (CG) designers, game programmers, copy writers, illustrators, etc. The definition applies to the company’s Creative operations in China as well. The number of creative staff registered with the company was about 85,000 at the end of FY02/20.

Clients

The company’s clients include businesses that create and provide content, like TV stations, game development companies, website design companies, advertising agencies, and publishers, as well as general business firms that do not produce any content but only use it (examples of services here include promotional videos, web content, and printed materials). There were approximately 15,000 client companies as of end-February 2020. Breaking it down at the client level, the Agency business has a comparatively high share of clients who are TV stations, game companies, and advertising agencies, while the Production business generally has a higher share of companies in non-creative sectors as clients.

Existing business models

The Agency, Production, and Rights businesses comprise the existing businesses within the Creative segment. In FY02/21, the Agency and Production businesses generated the majority of earnings.

Agency business

In its Agency business the company mostly provides temporary staffing and employment services to creators.

Temporary staffing: After the company and an employee sign an employment contract, the company assigns the employee (creator) to perform services at the client’s place of business. The company invoices the wage amount (cost of sales [labor cost]) paid to the creator plus its own management fee (gross profit). Charges to clients vary depending on the desired skill sets of the creator, but it is normally in the 350,000–500,000 yen a month range. In this business, sales are the invoiced amounts sent to clients. The direct costs are wages paid to creators (labor cost). The gross profit margin is higher for the company, because it operates in specialized fields, than competitors that provide temporary office staff, such as Pasona Group Inc. (TSE1: 2168) or PERSOL Holdings Co., Ltd. (TSE1: 2181), where gross margins tend to be in the 15–25% range.

Employment agency: The company introduces creators to clients and receives a fee when a permanent employment contract is signed. In some instances, professionals who are at the end of their temporary contracts may receive a permanent employment offer from the client. Employment service fees tend to be about 35% of the base annual salary and only the fees are booked as sales by Creek & River in its income statement. Since employment service fees have no cost of sales, gross profit is the same as sales booked, and GPM is 100%.

Production business

While in its staffing service the company mostly provides specialists to assist in production of creative work, in outsourcing Creek & River is involved in creation itself under contract from the client, starting from the concept and planning, and finishing with production. Actual examples of outsourcing projects include creating help-wanted ads for a recruitment company, TV show production, game development, and events that utilize characters or IP.

In outsourcing, the money paid by the client is booked as revenue, and the cost of revenue is wages paid to the employed individuals (or subcontractors if an external production team is used). According to the company, the gross profit margin is about 30% for this segment.

New businesses

New businesses include architecture, fashion, chef, and professor operations. (See Future outlook). Creek & River also has become involved in VR (virtual reality) and IoT (Internet of Things), AI (Internet of Things and artificial intelligence).

Business models of new businesses

Business
Architecture	Introduces architects to clients and receives a finder’s fee. The company also provides these architects’ designs to rental property owners and receives a fee for design consultation or construction management services
Fashion	Introduces designers to clients and receives a finder’s fee. The company also plans to provide these architects’ works to apparel makers in Japan, China, and South Korea
Chef	Introduces chefs to clients for both permanent and temporary jobs and receives a management fee or finder’s fee. Also assists chefs in starting businesses, and provides production services (subcontracting and introduction) such as developing menus targeting food and beverage companies. Also in the pipeline are rights-management operations for the publishing of cooking-related books
Computer science (research)	Provides job support services to researchers, e.g., professors and associate professors, assisting them with finding sponsors and joint development partners for their research, aiding them in developing their intellectual property into products and services, and helping them with career upgrade in terms of employment, mid-career changes, and starting up businesses
VR	Plans and develops VR content. Also sells and rents out VR head-mount displays (HMDs). Its rental service offers a one-stop solution, renting out HMDs, estimating the number of HMDs required, providing content, and dispatching support staff (technicians).
Performing arts	Provides networking services, produces performing arts events, undertakes corporate promotions, and provides performing arts agency services for all manner of performing artists including theater actors, rakugo comic storytellers, singers, and magicians. In addition to agency services for performance artists, offers a “Dramatic Corporate History” service.
Life sciences	Provides agency services to R&D support staff (researchers) to assist with R&D in the life sciences, including biology and chemistry. Clients include pure research departments at universities and major food and pharmaceutical manufacturers.
CXO	Provides agency services to CEOs, CFOs, and other corporate executives, with a focus on those with experience at strategic consulting firms and director-level experience at listed companies.
Athlete	Provides agency services to retired athletes, including Olympic-level athletes and athletes retiring from professional sports.

SG&A expenses in Creative segment in Japan

The company spends a relatively high percentage of its SG&A expenses for the Creative segment in Japan on attracting the salespeople it refers to as “agents” (personnel expenses). Creek & River agents are responsible for developing new clients, writing proposals, negotiating contracts, managing the projects, and confirming final product delivery. The parent company employed approximately 300 agents as of February 2021. Agents are split into teams based on client industry (TV, games, web, advertising, publishing, etc.) but typically handle both temporary staffing and outsourcing services.

In contrast, the company spends a trivial amount on recruiting creators. The company says creators are mainly recruited via portal sites without the use of television commercials, and prior to establishing portal sites, most were recruited via word-of-mouth.

SG&A costs for the parent (Creative business in Japan)

			FY02/15	FY02/16	FY02/17	FY02/18	FY02/19	FY02/20	FY02/21
(JPYmn)			Par.	Par.	Par.	Par.	Par.	Par.	Par.
SG&A expenses			2,783	3,298	3,738	4,364	5,245	5,599	5,626
	SG&A ratio		19.4%	21.6%	21.9%	22.8%	23.9%	23.5%	22.6%
	Personnel expenses		1,519	1,784	2,001	2,370	2,719	2,996	3,096
		% of sales	10.6%	11.7%	11.7%	12.4%	12.4%	12.6%	12.5%
		% of SG&A expenses	54.6%	54.1%	53.5%	54.3%	51.8%	53.5%	55.0%
	Rents		277	262	261	261	392	538	530
		% of sales	1.9%	1.7%	1.5%	1.4%	1.8%	2.3%	2.1%
		% of SG&A expenses	10.0%	7.9%	7.0%	6.0%	7.5%	9.6%	9.4%
	Other		986	1,252	1,477	1,733	2,134	2,066	2,000

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

Number of employees at Creative business in Japan

				FY02/15	FY02/16	FY02/17	FY02/18	FY02/19	FY02/20	FY02/21
Number of employees				211	237	255	352	825	872	975
Number of temporary employees				80	93	104	110	104	100	223

Source: Shared Research based on company data
Note: Personnel expenses per employee were calculated by diving personnel expenses by the average of the number of employees at the beginning and end of a fiscal year.
Note: In FY02/19, the number of employees increased due to the conversion of professional staff into full-time employees.

Creative (Korea)

(FY02/21: 8.7% of overall sales, operating loss JPY50mn)

Creek and River Korea Co., Ltd. and consolidated subsidiary Creek & River Entertainment Co., Ltd. develop the same business model in South Korea as they do in Creative (Japan).

Creek and River Korea Co., Ltd. mainly focuses on the rights management business. In May 2018, it launched the Japan–Korea joint game publishing business in collaboration with Creative (Japan) to distribute popular Korean smartphone games in Japan. The company suspended operations in its game business in August 2021 and is strengthening its business synergies in areas such as publishing and YouTube content with Creek & River.

Creek & River Entertainment Co., Ltd. operates an agency business (temporary staffing and recruitment) in the areas of TV and video in South Korea.

Medical Staffing

(In FY02/21: 10.5% of sales; 29.6% of operating profit)

Consolidated subsidiary Medical Principle Co., Ltd., established in 1997 (Creek & River holds a 100% stake in the company) provides medical specialist employment services, including physician staffing and teaching-hospital joint presentation meetings for medical students and residents.

Professionals

The personnel targeted by Medical Principle include physicians, resident physicians, and medical students. The company targets doctors who work as hospital or clinic employees, rather than physicians with private practices (doctors who operate their own clinics or hospitals). The company also targets part-time physicians. As of April 2021, approximately 134,000 physicians and medical students were registered with the company (versus 124,000 in April 2020). Japan has approximately 327,000 registered physicians (Ministry of Health, Labour and Welfare, 2018), meaning that nearly 40% of physicians are registered with the company. Annual contracts numbered approximately 50,000.

Clients

Medical Principle’s clients are medical institutions throughout the country, healthcare related firms, and government organizations employing physicians. As of April 2021, roughly 13,000 institutions—which include hospitals and clinics—were registered with the company. According to the Ministry of Health, Labour and Welfare’s Dynamic Survey of Medical Institutions (October 2019), there are 8,300 hospitals and 102,616 clinics in Japan, meaning that the company has a majority of Japan’s hospitals as clients.

Business details

The company’s main businesses is physician staffing (private medical offices) and hosting teaching-hospital joint presentation meetings for medical students and residents.

Physician services (Minkan Ikyoku)

The company mainly provides permanent staffing services (recruiting services) for physicians, resident physicians, and medical students in this segment as temporary staffing services are not allowed under the law. The company provides its services under the Minkan Ikyoku brand, which roughly translates into English as a “Private Medical Office.” In reality, the service it offers is actually a referral service (introductions) for physicians to hospitals they are interested in for permanent (long-term) employment rather than an actual private-sector medical practice.

Ikyoku—literally a medical office—is a practice unique to the Japanese medical community. It refers to a group in charge of physician hiring and placement decisions at university (medical school) hospitals. Such groups exist in each medical department and are hierarchically organized with a university professor, the head of that particular department, at the top, followed by assistant professors, instructors, assistants, physicians, residents and graduate students in that order. Ikyoku groups are not limited to within one university hospital, but often cover affiliated hospitals.

The ability of physicians to change their professional affiliation more flexibly has been growing since 2004, because of new policies introduced by the Ministry of Health, Labor and Welfare (such as the New Resident Physician Policy). Prior to 2004, the ikyoku system held more power. For instance, doctors that graduated from a certain university hospital would normally rotate every 2-3 years from hospital to hospital within their particular ikyoku network. Medical Principle owes its existence to the increased mobility of medical specialists made possible by deregulation that started in 2004.

In Japan, in order to become a doctor, one must graduate from a university medical school (a six-year course) and pass the national medical examination. Under the new residency system (which started in 2004 due to the revision of the Medical Practitioners Law in 2000), doctors who wish to engage in medical practice are required to undergo at least two years of clinical training as a resident after graduating from medical school. During their clinical training, they gain experience as doctors at university hospitals or hospitals designated for clinical training. They receive at least one month of training each in emergency medicine, pediatrics, internal medicine, and surgery.

The service also introduces part-time physicians for spot work, including medical checkups and physical examinations.

Services for medical students and residents (Resinavi)

The company hosts teaching-hospital joint presentation meetings for medical students and residents and provides information online.

Resinavi Fair: Teaching-hospital joint presentation meetings are held at nine venues nationwide (including Tokyo, Osaka, Fukuoka, Nagoya, Sendai, and Kanazawa). Participating hospitals provide explanations of their clinical resident training and senior resident training programs. According to the company, 95% of Japanese medical students and nearly all of Japan’s 600 hospitals with clinical resident training programs participate in its Resinavi Fair events.
Since 2020, the company has been providing the "Resinavi Fair Online" service, which has distributed about 1,000 videos on an annual basis.

Resinavi Web: The company provides information online about clinical resident training programs for medical students and senior resident training programs for residents.

Revenue structure

Medical Staffing earnings

Medical		FY02/15	FY02/16	FY02/17	FY02/18	FY02/19	FY02/20	FY02/21
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
Sales		2,732	2,909	3,311	3,558	3,709	4,070	3,923
	YoY	7.5%	6.5%	13.8%	7.5%	4.2%	9.8%	-3.6%
Operating profit		361	409	433	575	533	740	724
	YoY	10.6%	13.3%	5.9%	32.8%	-7.3%	38.8%	-2.2%
	Operating profit margin	13.2%	14.1%	13.1%	16.2%	14.4%	18.2%	18.4%
Number of employees		205	217	240	247	268	287	316
	YoY	6.2%	5.9%	10.6%	2.9%	8.5%	7.1%	10.1%

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

If a staff doctor who is registered with the company moves from hospital A to hospital B, then the revenue to the company is determined by the expected annual salary of the doctor at hospital B. According to the Basic Survey on Wage Structure compiled by the Ministry of Health, Labour and Welfare, the average annual compensation for physicians during 2020 was JPY14.4mn.

If a part-time physician splits time between hospital A and hospital B, the company’s revenue is determined according to the income of the part-time physician at each hospital.

Part-time physician: This refers to a physician who, while working at a university hospital or other facility, takes short-term or part-time work at another medical institution when their schedule permits.

Because the full-time physician job-change referral and part-time physician job referral operations are based on commission, sales amount and gross profit is nearly identical.

The company says, similar to the approach used at its Creative segment, it does not spend heavily on advertising and promotions to encourage physicians to register with it. However, the company does host joint presentation meetings at hospitals nationwide where it invites attending medical students to register.

Accounting and Legal

(In FY02/21: 5.3% of sales; 4.1% of operating profit)

In Accounting and Legal, consolidated subsidiaries JUSNET Communications Co. and C&R Legal Agency Co. run an agency business for accountants and lawyers, respectively. In this business, Accounting area is main (in FY02/21, Accounting accounted for a 4.6% of consolidated sales [5.6% in FY02/20] and 3.6% of operating profit [8.3%]) source of earnings and the ratio of sales and operating profit in the Legal area is limited.

Accounting

Established in 1996, JUSNET Communications Co. is 100.0% owned by Creek & River after becoming part of the company’s group in 2009. The subsidiary provides permanent and temporary staffing, and outsourcing services for chartered accountants and licensed tax accountants. Clients include accounting firms, licensed tax accounting offices, and general businesses. As of February 2021, the company had 57,000 registered accountants and 5,000 client firms.

Legal

Established in 2007, C&R Legal Agency Co. provides permanent and temporary staffing for lawyers and paralegals. Creek & River holds a 90.0% stake in the company, which has about 1,900 client companies and offices, including law firms and general-purpose businesses, and 18,500 lawyers registered with it as of end-February 2021. As of March 2020, there were around 42,000 lawyers in Japan according to the Japan Federation of Bar Associations website. This means around 44% of all lawyers in Japan are registered with the company.

Other (IT, fashion, others)

(In FY02/21: 5.9% of sales, JPY104mn operating loss)

The Other segment includes IT, fashion (Inter Belle), and recruitment media (Professional Media), as well as new businesses such as VR Japan, Idrasys, and Economic Index.

IT

Established in 2000, Leading Edge Co. provides permanent and temporary staffing, and production services for IT engineers. Creek &River holds a 99.9% stake in the company. Client firms include manufacturers, vendors, system integrators, and general businesses. From FY02/16 onward, the company plans to strengthen initiatives to dispatch and train more technicians, particularly to become adept at using the Python programming language. As of February 2021, the company had 4,200 registered IT engineers and 450 client companies.

Fashion

Inter Belle Inc. (established in 2005; owned 90.9% by Creek & River; acquired in 2013) provides human resource, training, and consulting services for the apparel industry.

Recruitment Media

Professional Media Co., Ltd. (established in 2015; 94.1% owned by Creek & River) operates DX Career (a job board for advertising and web professionals), and also runs a recruitment business.

New businesses

In new business areas, the Other segment encompasses VR Japan Co., Ltd., Idrasys Co., Ltd., and Economic Index Co., Ltd., whose operations are as outlined below.

Business models for new businesses

Company name	Business description and business model
VR Japan Co., Ltd. (company’s stake, 81.8%)	Sole distributor in Japan of head-mount displays (HMDs) from China’s Idealens Technology Co., Ltd. Idealens Technology’s HMDs are distinguished from rival products in that they are cordless and easy to use. They are mainly being installed in training facilities. VR Japan began selling the IDEALENS K4 VR headset with a 4K resolution display in September 2019, followed in November 2019 by the SKYWORTH S1 VR headset with a 4K resolution display that supports direct 8K VR reproduction.
Idrasys Co., Ltd. (company’s stake, 80.1%)	Idrasys helps companies leverage AI with Forecasting Experience, its proprietary AI-enhanced cloud platform that helps forecast demand and provides tools for contract scoring.

Cost structure

			FY02/15	FY02/16	FY02/17	FY02/18	FY02/19	FY02/20	FY02/21
(JPYmn)			Par.	Par.	Par.	Par.	Par.	Par.	Par.
Sales			14,340	15,237	17,089	19,102	21,937	23,863	24,839
	YoY		8.3%	6.3%	12.2%	11.8%	14.8%	8.8%	4.1%
Cost of sales			10,753	11,220	12,268	13,582	15,550	16,847	17,507
	YoY		7.8%	4.3%	9.3%	10.7%	14.5%	8.3%	3.9%
	Cost ratio		75.0%	73.6%	71.8%	71.1%	70.9%	70.6%	70.5%
	Outsourcing costs		3,605	3,316	3,355	3,972	4,194	4,326	3,994
		% of total	33.5%	29.6%	27.4%	29.2%	27.0%	25.7%	22.8%
	Labor costs		6,643	7,183	7,604	8,341	9,622	10,768	11,306
		% of total	61.8%	64.0%	62.0%	61.4%	61.9%	63.9%	64.6%
	Other		504	721	1,308	1,270	1,546	1,818	2,097
Gross profit			3,587	4,017	4,821	5,519	6,388	7,016	7,333
	Gross profit margin		25.0%	26.4%	28.2%	28.9%	29.1%	29.4%	29.5%
SG&A expenses			2,783	3,298	3,738	4,364	5,245	5,599	5,626
	SG&A ratio		19.4%	21.6%	21.9%	22.8%	23.9%	23.5%	22.6%
	Personnel expenses		1,519	1,784	2,001	2,370	2,719	2,996	3,096
		% of sales	10.6%	11.7%	11.7%	12.4%	12.4%	12.6%	12.5%
		% of SG&A expenses	54.6%	54.1%	53.5%	54.3%	51.8%	53.5%	55.0%
		Salaries and allowances	988	1,148	1,229	1,412	1,547	1,697	1,741
		Provision for bonuses	67	81	108	97	113	131	113
		Provision for retirement benefits	14	15	16	21	83	32	36
		Other salaries	243	289	367	510	607	729	793
		Statutory welfare expenses	207	251	280	330	369	407	413
	Rents		277	262	261	261	392	538	530
		% of sales	1.9%	1.7%	1.5%	1.4%	1.8%	2.3%	2.1%
		% of SG&A expenses	10.0%	7.9%	7.0%	6.0%	7.5%	9.6%	9.4%
	Other		986	1,252	1,477	1,733	2,134	2,066	2,000
Operating profit			804	719	1,083	1,155	1,142	1,417	1,707
	YoY		4.1%	-10.6%	50.7%	6.7%	-1.1%	24.0%	20.5%
	Operating profit margin		5.6%	4.7%	6.3%	6.0%	5.2%	5.9%	6.9%

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

The cost structure analysis is based on the parent company numbers.

Gross profit margin (GPM)

GPM from FY02/12 to FY02/21 ranged from 23% to 30%. Changes in spread (billing rates for clients minus pay rates for creators) and the respective sales weightings of permanent staffing (employment agency), temporary staffing, and outsourcing are the main factors affecting GPM. GPM has been on an upward trend after the company started up its own TV/game/web production studio to lower the subcontracting ratio.

Operating profit margin (OPM)

Looking at parent OPM, the picture is different. The company booked operating losses in FY02/10. Shared Research believes this is due to the high ratio of fixed SG&A costs, with personnel costs and rent accounting for around 60%. For the company’s OPM to improve it needs to increase sales while maintaining headcount, in other words, increase sales per agent. Shared Research thinks while the overall economic environment obviously impacts sales productivity, it is extremely important for the company to find ways to increase the inherent productivity of its sales force. Looking for sales and project/client management approaches that match the profitability of individual projects (particularly in outsourcing) appears to be an important task for management.

Strengths and weaknesses

Strengths

Brand recognition and track record in Creative and Medical Staffing. Creek & River has a solid reputation in both of its core business areas, to such an extent that it attracts new members with minimal advertising. That word-of-mouth is the main channel for attracting new candidates suggests the company is the de facto choice for workers in those industries who are looking for job placement assistance.

President Yukihiro Ikawa’s unique insights and ideas. In our view, Ikawa’s personal experience as a freelance specialist provided him with firsthand knowledge of the challenges connecting creative staff with the firms that need those skills. His insight that other specialists (like medical doctors) may face similar challenges has been a key contributor to the company’s growth, leading him to start the company’s Medical Staffing business and inspiring the company to create new businesses.

Highly unique business structure. Creek & River’s structure (part-staffing agency, part-talent agency) is part of what makes the company successful. The company is able to provide a “one-stop shop” for client firms that need skilled creative staff for a short term, and also connect companies with permanent staffing needs with qualified specialists. In Shared Research’s understanding, there are no other competitors that offer these types of services in similar areas.

Weaknesses

Ongoing losses in new businesses. Since the 2010s, Creek & River has established a range of new businesses, including agency businesses and e-book and VR businesses, in connection with which it continues to book expenses. The company’s management policy calls for expanding the scope of these businesses, for example by enlarging specialist fields and deepening business content, but entry into new businesses will continue to have a negative impact on operating profit in the short term.

Issues with execution. While Ikawa’s ideas are one of the company’s strengths, only a limited number of projects and businesses actually contribute to earnings. Without proper execution, great ideas may remain just that and could also turn into a source of distraction from core business operations. Shared Research sees this as a weakness because competitors who lack Creek & River’s creative spark could try to become “fast followers” and benefit from Creek & River’s innovative thinking.

Rights management business still a work-in-progress. The company positions the Agency business (temporary staffing and employment agency), the Production business (subcontracting and outsourcing), and the Rights business (intellectual property management) as its core operations. It is probably fair to say that the Production and Right businesses are more difficult to handle than the Agency business. Although the company appears to be approaching the completion of a Production business model, as of April 2021 it seems the Rights management business has yet to have the right model, as its earnings contribution remains below 10%.

Market and value chain

Market overview

Advertising industry sales and IT service industry sales trends

			2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020

GDP YoY			-5.7%	4.1%	0.0%	1.4%	2.0%	0.3%	1.6%	0.8%	1.7%	0.6%	0.3%	-4.8%
Advertising industry sales (JPYbn)			4,708	4,737	5,163	5,424	5,565	5,768	5,924	6,089	5,999	5,952	5,911	5,358
	YoY		-14.7%	0.6%	9.0%	5.0%	2.6%	3.7%	2.7%	2.8%	-1.5%	-0.8%	-0.7%	-9.3%
	TV		1,388	1,418	1,434	1,488	1,493	1,546	1,519	1,544	1,524	1,502	1,461	1,274
		YoY	-11.8%	2.2%	1.1%	3.8%	0.4%	3.5%	-1.8%	1.7%	-1.3%	-1.4%	-2.7%	-12.8%
		% of total advertising industry sales	29.5%	29.9%	27.8%	27.4%	26.8%	26.8%	25.6%	25.4%	25.4%	25.2%	24.7%	23.8%
IT service industry sales (JPYbn)			10,535	10,150	9,881	10,120	10,326	10,633	10,797	10,993	11,322	11,584	12,064	12,910
	YoY		-6.0%	-3.7%	-2.7%	2.4%	2.0%	3.0%	1.5%	1.8%	3.0%	2.3%	4.1%	7.0%

Source: Shared Research based on Ministry of Economy, Trade and Industry data
Note: Advertising Industry includes newspaper, magazine, TV, radio, and internet.
Note: IT service includes software development, programming, information processing, software, and system integrators.

The above table summarizes statistical data relevant for assessing the business environment of Creek & River’s Creative business. There are a couple of conclusions that one can draw from the data above. First, such client businesses as TV stations, web design companies, advertising agencies, and system integrators are substantially and immediately affected by macroeconomic trends. Therefore, Creek & River’s Creative and IT Staffing businesses will also tend to fluctuate with changes in macroeconomic factors.

However, precisely because client companies are sensitive to macroeconomic trends, they have a tendency to rely on outsourcing to shift fixed expenses to variable expenses. Shared Research understands that Creek & River has been achieving earnings growth by capturing such outsourcing demand.

Job-to-applicant ratio trends for physicians and medical nurses

					FY2009	FY2010	FY2011	FY2012	FY2013	FY2014	FY2015	FY2016	FY2017	FY2018	FY2019
(times)
Job-to-applicant ratio: Overall					0.45	0.56	0.68	0.82	0.87	1.00	1.11	1.25	1.38	1.46	1.41