■Future Outlook LeTech <3497> expects an increase in sales and ordinary income of more than 20%, with sales of 2.14 billion yen (+33.8% YoY), operating income of 150 million yen (+7.7% YoY), ordinary income of 100 million yen (+21.7% YoY), and net income of 1.03 billion yen (-11.4% YoY) for the July 2024 term, and has maintained its initial forecast (announced in September 2023).

1. Performance Forecast for November 2024.

Espoir's consolidated performance for the fiscal year ending November 2024 is expected to reach 27,060 million yen, a 4.9% increase compared to the previous year's sales revenue. Operating profit is expected to decrease by 1.0% to 2,750 million yen, pretax profit is expected to increase by 2.9% to 2,726 million yen, and net profit attributable to owners of the parent company is expected to remain flat, increasing by 5.7% to 1,829 million yen. Progress rate until the second quarter reached 44.7% in sales revenue and 26.9% in operating profit. While sales revenue may be lower than expected due to the stagnation of the human resources solutions business, it is possible for the company to achieve its plan as profits are expected to continue to be favorable in the second half due to the expansion of revenue from wide-area administrative BPO services and environmental management support services, among other factors.

(1) Business Solutions Business. Sales revenue for the business solutions business is expected to reach 15,023 million yen, a year-on-year increase of 19.7%, and operating profit is expected to be 3,497 million yen, a 15.0% increase over the previous year. The main services and major policies are as follows:

The sales revenue of the business solution business is planned to increase by 19.7% to 150.23 billion yen compared to the previous period, and the operating profit is planned to increase by the same 15.0% to 34.97 billion yen. The planned major services and main initiatives are as follows.

a) Employment support services for people with disabilities. Sales revenue for employment support services for people with disabilities is expected to reach 800 million yen, a 15.9% increase compared to the previous year. Profits are expected to increase by a single digit. Operating profit margin is expected to decrease from approximately 36% in the previous year to approximately 33%. In the second half of the year, the company plans to establish four new farms, but three of them are indoor types, which will continue to pose a burden on start-up costs, and changes in revenue composition will also contribute to a decrease in profit margin. By category of sales revenue breakdown, equipment sales are expected to increase by 5.2% to 2,460 million yen, facility management income is expected to increase by 27.8% to 4,992 million yen, and personnel introduction fees and others are expected to decrease by 16.5% to 547 million yen.

Facility sales in the second half of the year are expected to be 736 units (Q3: 275-325 units, Q4: 433-483 units), but the order backlog at the end of the second quarter was high at 500 units, and demand continues to be strong, so there is ample room for a higher performance depending on the hiring and training of people with disabilities. The company is strengthening its recruitment team and pursuing web marketing to enhance its education system and respond to customer needs.

With regard to the employment rate of people with disabilities, the rate is expected to increase from the current 2.5% to 2.7% in July 2026, which means that strong demand will continue for the time being. In addition, the company will launch a new matching service connecting companies and people with disabilities who have various employment needs in the middle of the fiscal year ending November 2024. While most of the current employees in the farm service are intellectually disabled, the company will also address the job changing needs of people with mental and physical disabilities, as well as cultivate the needs of small businesses with less than 100 employees outside the target group.

The employment rate of people with disabilities is expected to continue to grow due to the increase from the current 2.5% to 2.7% in July 2026. In order to meet various employment needs of people with disabilities, the company will launch a new matching service connecting companies and people with disabilities by mid-November 2024. Currently, the majority of workers in the farm service are individuals with intellectual disabilities, but the company will also cater to the job transition needs of individuals with mental and physical disabilities. The company aims to expand its customer base by targeting small-scale businesses with less than 100 employees, which were previously not part of the farm service's target market.

b) Wide-Area Administrative BPO Services. Sales revenue for wide-area administrative BPO services is planned to be approximately 1,495 million yen, up 7.6% from the previous year, and operating profit is planned to be around 100 million yen. Winning of cases for local government budgets for fiscal year 2024 has progressed, and sales of approximately 400 million yen in the third quarter and approximately 650 million yen in the fourth quarter are expected. Already, 80% of the orders have been received, and the remainder will be received through future sales activities. In addition, in the second half of the year, the company plans to open 1-3 new centers, bringing the total number of shared BPO centers to 23 at the end of the period. Going forward, the company plans to expand the number of centers primarily in small and medium-sized local governments where outsourcing needs are strong.

Sales revenue of wide-area administrative BPO services is planned to increase by 7.6% to ¥1,495 million compared to the previous year, and operating profit of about ¥100 million is planned. The acquisition of cases for local government budgets for the fiscal year 2024 is progressing, and sales of about ¥400 million in the third quarter and about ¥650 million in the fourth quarter are expected. About 80% of the orders have already been received, and the rest will be ordered in future sales activities. In addition, the company plans to open new centers from 1 to 3 in the second half, and the shared BPO center at the end of the period will be 23 bases. The policy is to expand the number of bases, mainly for small and medium-sized local governments with strong outsourcing needs.

c) Environmental Management Support Services. Sales revenue for environmental management support services is planned to be approximately 1,430 million yen, up 50.6% from the previous year, and operating profit is planned to be around 600 million yen, up 20%. Sales revenue is expected to be around 100 million yen for CDP response support in the third quarter and around 900 million yen for Taiwan's fourth quarter, due to an concentration of CDP response deliveries in the fourth quarter. In addition, as more companies are working on environmental management, demand is expected to increase for various support services such as support for calculating greenhouse gas emissions, disclosure support for the TNFD (Natural Capital Financial Information Disclosure Task Force), and LCA calculation support. Furthermore, the company is steadily collecting orders for consulting services for local governments and is expecting sales revenue of 180 million yen (targeting 30 local governments) for the fiscal year ending November 2024.

Sales revenue of environmental management support services is planned to increase by 50.6% to ¥1,430 million compared to the previous year, and operating profit of about 20% is planned to be ¥600 million. Since the delivery time for CDP response support is concentrated in the fourth quarter, sales revenue is expected to be about ¥100 million in the third quarter and about ¥900 million in the fourth quarter. In addition, as more companies work on environmental management, various support services such as greenhouse gas emission calculation support, TNFD (Task Force on Nature-Related Financial Disclosure) disclosure support, and LCA calculation support※ are expected to expand. Furthermore, the company has also steadily received orders for consulting services for local governments, and expects to generate sales revenue of ¥180 million (aiming for 30 local governments) in the November 2024 period.

*LCA (Life Cycle Assessment) is a method of environmental impact assessment for products and services, quantifying the environmental burden at each stage of resource extraction, manufacturing, transportation, sales, use, disposal, and reuse.

d) Other

The logistics outsourcing service's sales revenue is expected to increase by about 10.6% to 1.626 billion yen compared to the previous year, and operating profit is expected to increase by about 100 million yen. The sales progress rate up to the second quarter is 39.3%, and the full-year plan is likely to be lower, but profitability is expected to improve in the latter half of the year due to the productivity improvement of the Nagareyama Center. The sales revenue of the employment support service is expected to increase by 11.7% compared to the previous year to 800 million yen, and the operating profit is expected to increase by about 12% to 120 million yen. Although there is a possibility of lower-than-expected sales revenue due to the decline in price, it is expected that the plan can be achieved because it has already exceeded 50% of the profit by the second quarter. The company will focus on expanding the primary interview agency service (cumulative sales of 50 million yen in the second quarter of the fiscal year ending November 2024), which is difficult to automate but has a high outsourcing demand, as well as starting a new recruitment support service for regular employees as part of its business expansion.

Sales revenue for recruitment support services is expected to increase by 11.7% compared to the previous year to 800 million yen, and operating profit is expected to increase by about 12% to 120 million yen. Although there is a possibility of lower-than-expected sales revenue due to the decline in price, it is expected that the plan can be achieved because it has already exceeded 50% of the profit by the second quarter. To expand its business, the company has started to focus on expanding its primary interview agency service (cumulative sales of 50 million yen in the second quarter of the fiscal year ending November 2024), which is difficult to automate but has a high outsourcing demand, as well as starting a new recruitment support service for regular employees.

Sales revenue for sales support services is expected to increase by 30.4% compared to the previous year to 1.05 billion yen. We plan to focus on acquiring large-scale campaign orders nationwide due to the effect of opening bases. In addition, the expansion of "Real Promotion CRM" which was jointly launched with Veru Inc. <6183> is also expected. The service plans and designs real promotions for Bell System 24 Holdings' customers (catalog sales companies, etc.), and operates the service. It has great potential demand.

(2) Human resources solution business

The sales revenue of the human resources solution business is planned to be 12,325 million yen, a 7.4% decrease from the previous year, and operating profit is expected to be about 1,120 million yen, a 11.5% decrease from the previous year. However, as mentioned earlier, the decline in call center operations continues, and there is a high probability of falling below the plan. The sales level for the third quarter is expected to be in the 800 million yen range, and it is expected that the third quarter will be the bottom of sales on a quarterly basis. The company started sales activities to capture outsourcing demand for call center operations by starting sales to small businesses and promoting expansion into new areas. As the first move, it headhunted people with expertise in human resources dispatch for construction management engineers and started the service.

As part of its recovery measures, the company has started sales activities to capture outsourcing demand for call center operations by starting sales to small businesses and promoting expansion into new areas. As the first move, it headhunted people with expertise in human resources dispatch for construction management engineers and started the service.

(Written by FISCO guest analyst, Jo Sato)