COMPANY RESEARCH AND ANALYSIS REPORT

Trust Tech Inc.
2154
Tokyo Stock Exchange First Section

24-Apr.-2017
FISCO Ltd. Analyst

Ikuo Shibata

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. 1H FY6/17 results beat expectations, upbeat momentum likely to continue in FY6/17 too.........................

01

2. Steadily implementing measures aimed at realization of medium-term growth strategies. ..........................

01

3. MTrec’s earnings proceeding at the anticipated pace. .................................................................................

01

4. Possibility of sales growth staying at 20% YoY in FY8/16 too......................................................................

01■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 02
1. History................................................... ......................................................................................................

02

2. Business overview................................. ......................................................................................................

03

3. Income structure of the engineering field. ....................................................................................................

04

4. Income structure of the manufacturing field segment. .................................................................................

05■Business Performance------------------------------------------------------------------------------------------------------------------------------------------ 01
1. Overview of 1H FY6/17 results. . ............. ......................................................................................................

07

2. Trends in the engineering field.....................................................................................................................

08

3. Trends in the manufacturing field.................................................................................................................

10

4. Overseas field trends...................................................................................................................................

11■Business Outlook------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. FY6/17 outlook...................................... ......................................................................................................

12

2. Outlook for FY6/18.. .....................................................................................................................................

14■Longer-term growth strategy------------------------------------------------------------------------------------------------------------------------- 16
1. Medium-term business plan background and overview. ..............................................................................

16

2. Details of the medium-term growth strategy. ...............................................................................................

17■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 20

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/██Summary
Making healthy progress in the medium-term growth strategy withprofits expanding as planned in domestic and overseas businesses
Trust Tech Inc. <2154> (hereafter, also “the Company”) is a staffing company that mainly dispatches engineers
and manufacturing staff and handles consignments for development, design, and production. Its core strength isdispatching/subcontracting engineers, and Trust Tech stands out among listed companies in the technology staffing
industry with its aggressive pursuit of overseas opportunities too.
1. 1H FY6/17 results beat expectations, upbeat momentum likely to continue in FY6/17 too
Sales and profits exceeded period-start forecast in 1H FY6/17. Key drivers of upside in overall results were that
UK-based MTrec Limited (below, MTrec), which Trust Tech acquired as a subsidiary in August 2016, posted incomeon track with expectations and domestic technology and manufacturing segments both beat initial targets on robust
demand and smooth recruitment of human resources. Healthy business conditions are continuing in 2H too, andwe think Trust Tech is likely to overshoot full-year forecast.
2. Steadily implementing measures aimed at realization of medium-term growth strategies
Trust Tech is making steady progress with medium-term growth strategies. Upbeat 1H FY6/17 results offer evidenceof this progress. Additionally, Trust Tech is implementing measures that are “laying seeds” for business from FY6/18,
including reorganization to optimize human resource assignments and sales activities in the engineering field,
strengthening business capabilities in local areas for the manufacturing field, and investing in Asia for the overseas
field.
3. MTrec’s earnings proceeding at the anticipated pace
MTrec, which has a central role in the medium-term growth strategy, continues to perform well. Customer firms innortheastern England, where MTrec is headquartered, have been bolstering production facilities, and this activity islikely to tighten supply-demand conditions for staffing services. MTrec is broadening core coverage from automotive
to electric equipment and machinery and steadily growing results in line with the anticipated view at the time of theacquisition. Trust Tech’s curtailment of acquisition risk by utilizing an earn-out format for the acquisition is anotherpositive aspect.
4. Possibility of sales growth staying at 20% YoY in FY8/16 too
We think healthy momentum should continue in FY6/18 as well, driven by double-digit growth in engineering andoverseas fields and further improvements in manufacturing profitability. While Trust Tech targets sales gains of over
20% from organic growth and M&A in the medium-term growth strategy, we believe it is capable of coming close
to the target just with organic growth.
Key Points
Possibility of beating FY6/17 period-start forecast as well
Targeting continuation of strong advances led by organic growth and M&A• Seeking realization of growth targets through regional and business field scope••

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻠㻡㻘㻜㻜㻜

㻟㻘㻝㻞㻜

㻞㻘㻡㻠㻥

㻟㻢㻘㻜㻜㻜

㻟㻘㻡㻜㻜
㻞㻘㻤㻜㻜

㻠㻞㻘㻜㻜㻜
㻞㻣㻘㻜㻜㻜

㻞㻘㻝㻜㻜

㻝㻘㻡㻥㻣
㻝㻘㻞㻥㻝

㻝㻤㻘㻜㻜㻜

㻝㻘㻠㻜㻜㻟㻜㻘㻝㻠㻟

㻣㻝㻤㻥㻘㻜㻜㻜㻞㻜㻘㻤㻝㻥

㻝㻣㻘㻢㻠㻡

㻣㻜㻜㻝㻠㻘㻥㻝㻡
㻜㻜㻲㼅㻢㻛㻝㻟

㻲㼅㻢㻛㻝㻠

㻲㼅㻢㻛㻝㻡

㻲㼅㻢㻛㻝㻢

㻲㼅㻢㻛㻝㻣㻌㻱

Source: Prepared by FISCO from the Company’s financial results██Company profile
Make active use of M&A to achieve high growth. Aggressive
overseas development
1. History
Sanei Shoji Inc. established Kyousei Sangyou Inc. (Trust Tech’s predecessor) in 1997 as a special subsidiary basedon the Act on Employment Promotion etc. of Persons with Disabilities. Amuse Capital acquired all of the company’s
shares and changed its name to Trust Works Sanei Inc. in 2004 and also expanded business scope to dispatching
services (specified worker dispatching business) and other areas. Trust Works Sanei acquired all shares in former
Trust Tech Inc., which was a company under Amuse Capital, in 2005 and entered the engineer dispatching business.
It merged with former Trust Tech in 2008 and changed its name to Trust Tech Inc., completing the foundation ofcurrent operations.
Trust Tech subsequently pursued a strategy of M&A deals to accelerate growth and broaden scope, including rapid
acquisitions as subsidiaries of PLM (now, consolidated subsidiary TTM Inc.) in 2009, International Dispatching Human
Resources Limited (now, consolidated subsidiary HKTT Limited) in 2010, and Freedom (consolidated subsidiary)and Kanamoto Engineering (changed its name to Trial but was absorbed into Trust Tech in October 2016) in 2015.
It acquired UK-based dispatching firm MTrec as a subsidiary in August 2016 and is moving more quickly withoverseas initiatives.
Trust Tech listed shares on the JASDAQ Securities Exchange in June 2007 (it was named Trust Works Inc. at thetime of the listing) and switched to the First Section of the Tokyo Stock Exchange in December 2013.

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

History
August 1997

Sanei Shoji Inc. established Kyousei Sangyou Inc. (Trust Tech’s predecessor) in Sagamihara city
(Kanagawa Prefecture) as a special subsidiary based on the Act on Employment Promotion etc. of Persons
with Disabilities

November 2004

Amuse Capital acquired all of the company’s shares and renamed it Trust Works Sanei

December 2004

Trust Works Sanei submitted a notification as a specified worker dispatching business and acquired
operations and some assets for human resource services and other businesses (restaurant and movie
theater business) from Sanei Shoji; started these businesses

March 2005

Acquired Techno Assist Sagami as a wholly owned subsidiary

June 2005

Acquired all shares in Trust Tech from Amuse Capital and started engineer dispatching business

July 2005

Established Kyousei Sangyou Inc. (now, Trust Tech With Inc.) as a special subsidiary based on the Act on
Employment Promotion etc. of Persons with Disabilities

November 2006
June 2007
October 2008
March 2009

Changed the company name to Trust Works
Listed shares on the JASDAQ Stock Exchange
Absorbed Trust Tech and changed the company name to Trust Tech Inc.
Acquired all shares of PLM from Radia Holdings Premier and changed the company name to TTM Inc.

April 2010

Following the merger of the JASDAQ Securities Exchange and the Osaka Securities Exchange, listed on the
Osaka Securities Exchange JASDAQ market

June 2010

Acquired all shares in International Dispatching Human Resources Limited and changed the company name to HKTT Limited

August 2012

TTM Inc. and Techno Assist Inc. merged under the company name TTM Inc. (TTM Inc. became thesurviving company.)

August 2013

Changed from TSE JASDAQ standard to the Second Section of the Tokyo Stock Exchange

December 2013

Switched shares to the First Section of the Tokyo Stock Exchange

July 2015

Acquired all shares in Freedom, making it a wholly owned subsidiary

July 2015

Acquired an IT-related technical solutions business from Techno Power

October 2015

Acquired Kanamoto Engineering, the engineer dispatching subsidiary of Kanamoto, as a subsidiary (byacquiring its shares) and changed the name to Trust Ideal Inc.

August 2016

Acquired an 85% stake in MTrec Limited, a UK-based dispatching company, and converted it to a
consolidated subsidiary

September 2016
October 2016

Established a local entity in Indonesia and a joint-venture company in China
Absorbed consolidated subsidiary Trust Ideal

Source: Prepared by FISCO from securities reports and Company releases

Utilizes three business segments – engineering, manufacturing, andoverseas
2. Business overview
Trust Tech has two main business domains – the engineering field that covers engineer dispatches and the development, design, subcontracting and manufacturing field that handles manufacturing subcontracting and dispatching of
manufacturing workers to production lines. It switched to three business segments from FY6/17 with the addition ofan overseas field to cover overseas business. Trust Tech’s overall income consists of these three reporting segments
plus other income from special subsidiary Trust Tech With Inc. that handles employment for disabled persons andthe real estate leasing business.
Trust Tech has expanded business scope through multiple M&A deals, as seen in the history section. In Japan, it
currently operates as a corporate group with the parent business and consolidated subsidiaries TTM and Freedom(and its subsidiary). TTM manages the manufacturing-related field, and other group firms, including parent business,handle the engineering field. Trust Tech absorbed Trust Ideal in the parent business as of October 1, 2016 aimed at
improving business efficiency due to overlap of business content with the parent.

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

Overseas initiatives are an important element of Trust Tech’s growth strategy. Trust Tech took its first overseas
action with the acquisition of a Hong Kong-based company handling engineer introductions and other services
in June 2010. It renamed this subsidiary as HKTT and is still operating the business. Trust Tech acquired an 85%
stake in MTrec, a UK-based dispatching company for technology and manufacturing staff in August 2016. This is
an important first step toward full-fledged delivery of staffing services in overseas markets.
In September 2016, Trust Tech established a local entity in Indonesia and a joint venture in Shandong (China) withaims of expanding business in Asia. It is also working on establishment of a joint-venture company in Shanghai(China) (as of March 2017).
Overview of Trust Tech’s group companies
Company nameBusiness domain

Business content

Equitystake

Trust Tech Inc.

Engineering field

Dispatch of Engineers, subcontracting, andoutsourcing business

TTM Inc.

Manufacturing field

Manufacturing subcontracting, outsourcing, anddispatch business

100%

FreedomEngineering field

Control-related software development and design
assistance

100%

-

Including subsidiary

Job placement for disabled persons

100%

Engineering field

Engineer recruitment

100%

MTrec Limited

Manufacturing field

Worker dispatch business and worker recruitment
business for manufacturing workers and engineers85%

As of August 30, 2016;
including subsidiary

PT. TRUST TECH ENGINEERINGSERVICE INDONESIA

Manufacturing field

Dispatch of manufacturing staff and engineers,
personnel introductions, etc.

100%

Established in
September 2016

Shandong Trust-Bridge Human
Resources Inc.

Manufacturing field

Dispatch of Manufacturing staff and engineers,
personnel introductions, etc.

49%

Established in
September 2016

Kyousei Sangyou Inc.
HKTT Limited

OthersComment

Source: Prepared by FISCO from securities reports and Company releases

Recruiting engineers is vital to growth in the engineering field
3. Income structure of the engineering field
In the engineering field, Trust Tech handles the dispatch, subcontracting, and outsourcing of its engineers for R&D,
design, production technology, and other technology areas at customer companies. Actual business content can belargely divided into dispatching engineers and development, design, and other consignments. Segment sales totaled¥21,903mn in FY6/16 with about ¥16,000mn from dispatch of engineers and around ¥6,000mn from outsourcing.
The outsourcing business mainly involves work conducted by the Company’s engineers at customer facilities, andoutsourcing development at its own facilities is very rare.
The engineer dispatch and outsourcing business charges higher than average prices, because of the added valueof “engineers,” versus dispatch of manufacturing staff and manufacturing outsourcing described below. Pricedifference results in the profitability gap between the two segments. While it might appear that outsourcing should
be more profitable than dispatching service, dispatching delivers higher profitability in many cases because process
step estimates, deadlines, and other aspects of outsourcing business often differ from the initial budget in actual
implementation.

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.

24-Apr.-20172154 Tokyo Stock Exchange First Section

https://www.trust-tech.jp/ir/

Growth in this business obviously depends on the Company’s ability to secure a large number of talented engineers.
It is more important to find engineers than destinations in the current tight labor environment. Trust Tech had focusedon acquiring human resources by hiring people with an existing career who can be immediately used on projects.
However, it has been hiring new graduates more aggressively since about two years ago and has been hiring fromthis group at a pace of 200-300 people per year over the past few years, including about 200 graduates in April
2015 and roughly 260 graduates in April 2016 (these values are just for Trust Tech’s parent business).

㻱㼚㼓㼕㼚㼑㼑㼞㼕㼚㼓㻌㼒㼕㼑㼘㼐㻌㼟㼑㼓㼙㼑㼚㼠㻌– 㼑㼙㼜㼘㼛㼥㼑㼑㼟㻌㼍㼚㼐㻌㼡㼠㼕㼘㼕㼦㼍㼠㼕㼛㼚㻌㼞㼍㼠㼑㻌㼠㼞㼑㼚㼐㼟㻌㻔㻼㼑㼛㼜㼘㼑㻕㻌㻼㼑㼛㼜㼘㼑㻌㻔㼘㼑㼒㼠㻕㼁㼠㼕㼘㼕㼦㼍㼠㼕㼛㼚㻌㼞㼍㼠㼑㻌㻔㼞㼕㼓㼔㼠㻕㻠㻘㻜㻜㻜㻝㻞㻜㻚㻜㻑
㻥㻣㻚㻝㻑 㻥㻣㻚㻝㻑 㻥㻣㻚㻜㻑 㻥㻡㻚㻡㻑 㻥㻢㻚㻜㻑 㻥㻡㻚㻢㻑 㻥㻠㻚㻥㻑 㻥㻢㻚㻤㻑 㻥㻢㻚㻡㻑 㻥㻢㻚㻡㻑 㻥㻡㻚㻤㻑 㻥㻣㻚㻟㻑 㻥㻣㻚㻠㻑

㻟㻘㻜㻜㻜

㻥㻜㻚㻜㻑

㻞㻘㻜㻜㻜
㻞㻘㻣㻡㻝 㻞㻘㻥㻞㻟㻝㻘㻜㻜㻜㻝㻘㻟㻣㻝 㻝㻘㻠㻟㻥 㻝㻘㻡㻣㻥㻝㻘㻢㻤㻞 㻝㻘㻣㻥㻞 㻝㻘㻥㻝㻢㻟㻘㻜㻟㻢㻟㻘㻟㻢㻞 㻟㻘㻟㻤㻢 㻟㻘㻡㻠㻥

㻞㻘㻞㻜㻜

㻢㻜㻚㻜㻑

㻟㻜㻚㻜㻑

㻜

㻜㻚㻜㻑
㻞㻽

㻟㻽

㻠㻽

㻲㼅㻢㻛㻝㻠

㻝㻽

㻞㻽

㻟㻽

㻠㻽

㻝㻽

㻲㼅㻢㻛㻝㻡

㻞㻽㻟㻽㻲㼅㻢㻛㻝㻢㻠㻽㻝㻽㻞㻽㻲㼅㻢㻛㻝㻣

Source: Prepared by FISCO from the Company’s financial results

Trust Tech continues to hire mid-career employees at a pace of about 80-90 people per month from the roughly
1,000 who contact it. The staffing industry, including Trust Tech, is managing to acquire mid-career human resources
because of the high job mobility of dispatched engineers. Although dispatched engineers are officially employees ofthe staffing company, they actually work at customer companies. Dispatched engineers have a variety of motivations
for changing jobs, such as customer companies and working environments and treatment, and these aspects arecontributing to vibrant mid-career hiring throughout the industry.

Pursuing stable growth and higher earnings with business initiatives
in local areas for manufacturing field
4. Income structure of the manufacturing field segment
In the manufacturing field, Trust Tech handles subcontracting of production line operations (on-site subcontracting) at
customer companies and dispatch of manufacture workers utilizing its production line staff. Actual business content
can be largely divided into on-site subcontracting and dispatch of manufacturing staff with respective shares thatfluctuate in a range of 40-60%. The FY6/16 breakdown was roughly 40% in on-site subcontracting and 60% in
dispatch of manufacturing workers.

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

Trends in the number of employees for the manufacturing field slightly differ from the engineering field describedabove. Employee volume varies in a range of 2,000 to 2,500 people in response to fluctuations in manufacturingsubcontracting and dispatching demand. Additionally, demand for manufacturing subcontracting and dispatching
services is rooted in labor cost reduction at customer companies. Given this background, the company uses a
combination of full-time employees and part-time employees in the manufacturing field. These aspects manifest in
the fluctuation of headcount in the manufacturing field segment.

㻹㼍㼚㼡㼒㼍㼏㼠㼡㼞㼕㼚㼓㻌㼒㼕㼑㼘㼐㻌㼟㼑㼓㼙㼑㼚㼠㻌– 㼑㼙㼜㼘㼛㼥㼑㼑㻌㼢㼛㼘㼡㼙㼑㻌㼠㼞㼑㼚㼐㻌㻔㻼㼑㼛㼜㼘㼑㻕㻌
㻞㻘㻠㻜㻜

㻞㻘㻟㻢㻤
㻞㻘㻟㻝㻥

㻞㻘㻟㻡㻜
㻞㻘㻟㻜㻜

㻞㻘㻞㻢㻟

㻞㻘㻞㻡㻥
㻞㻘㻞㻞㻞

㻞㻘㻞㻞㻝

㻞㻘㻞㻡㻜

㻞㻘㻝㻥㻞 㻞㻘㻝㻤㻢

㻞㻘㻝㻢㻥

㻞㻘㻞㻜㻜

㻞㻘㻝㻡㻜

㻞㻘㻝㻞㻡

㻞㻘㻝㻡㻜

㻞㻘㻝㻝㻟

㻞㻘㻜㻥㻠

㻞㻘㻝㻜㻜

㻞㻘㻜㻡㻜
㻞㻘㻜㻜㻜
㻝㻘㻥㻡㻜
㻞㻽

㻟㻽
㻲㼅㻢㻛㻝㻠

㻠㻽

㻝㻽

㻞㻽

㻟㻽

㻠㻽

㻝㻽

㻲㼅㻢㻛㻝㻡

㻞㻽㻟㻽㻲㼅㻢㻛㻝㻢㻠㻽㻝㻽㻞㻽㻲㼅㻢㻛㻝㻣

Source: Prepared by FISCO from the Company’s financial briefing materials

Dispatch of manufacturing workers and subcontracting services charge an average price that is typically less thanthe price for engineers. The average price also fluctuates sharply and contract terms tend to be shorter becauseof impacts from strong and weak demand periods. Manufacturing worker dispatch and subcontracting service has
lower profitability due to these factors. Manufacturing subcontracting and manufacturing worker dispatch services
currently generate similar profitability. It is theoretically possible to obtain higher profitability in subcontracting thandispatch because of room in this business to raise profitability through effort-driven improvements in productivity.
In reality, however, it is difficult to generate surplus spread in subcontracting owing to tough pricing and terms
presented by customers. We think emphasis on boosting business profitability through measures related to humanresource acquisition described below are a higher priority in assessing profitability for manufacturing subcontracting
and dispatch business.
Human resource recruitment and efficient management are key points for expansion of manufacturing subcontracting
and dispatch business profits too. However, the business strategy differs because of significant discrepancies inaverage pricing, contract term, and other conditions compared to engineer dispatching. Regionality affects efficienthuman resource management in the manufacturing subcontracting and dispatch business. A good example of thisissue would be an order for manufacturing subcontracting from a plant in Hokkaido and utilization of production
staff living in the Kanto area. Accommodation for production staff and other costs clearly squeeze profit margin.
Conversely, recruitment of production staff living near the plant leads to significant cost savings.

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

Trust Tech pursues customer deals nationwide but also promotes human resource acquisition activities with atheme of “local hiring and local work,” in light of the above-mentioned features of manufacturing subcontracting
and dispatch business. This is an effort to improve the efficiency of hire matching. These ground-level efforts arepaying off in steady improvement of manufacturing field profitability.

██Business Performance
1H FY6/17 results exceeded period-start forecast
1. Overview of 1H FY6/17 results
Trust Tech reported double-digit sales and profit growth to all-time highs in 1H FY6/17 with sales at ¥20,471mn (up40.7% YoY), ¥1,306mn in operating income (up 18.0%), ¥1,283mn in ordinary income (up 16.3%), and ¥726mn in
profit attributable to owners of parent (up 12.9%).
Compared to period-start forecast, sales overshot by 3.4% and operating income and other profit items exceeded
targets by 14.4%, 14.7%, and 10.1% respectively. Progress rates toward full-year initial forecast were 48.7% forsales (coming close to 50%) and about 40% for the profit items.
Overview of 1H FY6/17 Results(¥mn)
FY6/17
1H

Full year
vs.
period-start
forecast

Progress
rate toward
FY6/17
forecast

Period-start
forecast

YoY

Period-start
forecast

ActualYoY

Net sales

19,80020,471

40.7%

3.4%

48.7%

42,00039.3%

Operating income

1,142

1,306

18.0%

14.4%

41.9%

3,120

22.4%

Ordinary income

1,119

1,283

16.3%

14.7%

41.4%

3,100

22.6%

660

726

12.9%

10.1%

38.8%

1,870

22.7%

Profit attributable to owners of parent

Source: Prepared by FISCO from the Company’s financial results

Strong demand continued in the staffing services industry, including Trust Tech, in 1H FY6/17 amid positive conditions in domestic employment, as seen in the high effective job openings ratio. Important drivers are upbeat
production of industrial machinery and electronic parts and devices and healthy personal consumption.
Trust Tech expanded results in domestic engineering and manufacturing fields in this environment. For engineering,
it posted sharply higher sales and profits at ¥12,418mn in sales (up 20.3% YoY) and ¥1,292mn in operating income(up 30.3%). The number of engineering employees grew more than expected amid robust demand for engineer
dispatching and subcontracting. While the operating loss in the overseas field expanded more than the outlook
as explained below, we think strong earnings in the engineering field played a major role in enabling Trust Tech toabsorb this impact and beat initial forecast in overall earnings.
For the manufacturing field, it reported ¥4,308mn in sales (up 4.3% YoY) and ¥171mn in operating income (up61.4%). Sales growth was slower than in the engineering field, though the manufacturing field reached 49.0%
fulfillment of the full-year target and achieved healthy progress similar to engineering.

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

The overseas field expanded 47.6-fold YoY to ¥3,756mn in sales due to the income contribution from MTrec,
which was acquired as a subsidiary in August 2016. The ¥141mn operating loss largely stems from amortizationof MTrec goodwill and a one-off charge for all of the acquisition-related expenses in 2Q. While the operating loss
was bigger than anticipated because of temporary sales shortfall during the summer in August and September
2016, this negative portion appears to have been offset in 2H. EBITDA (operating income + goodwill amortization +depreciation costs + one-off acquisition costs), which removes acquisition-related extraordinary and one-off costs,
shows a significant improvement to ¥135mn in 1H, from a slight loss a year earlier, and a 3.6% sales ratio.
Breakdown by business segments(¥mn)
FY6/16

FY6/17

1H

1H

YoY

Progress rate

Full year (E)Engineering field

10,32012,418

20.3%

48.2%

25,770

Manufacturing field

4,131

4,308

4.3%

49.0%

8,800

Overseas field

78

3,756

47.6倍

49.9%

7,520

Others

23

30

31.5%

-

-

14,554

20,513

40.9%

-

-

-9

-42

-

-

-

14,54520,471

40.7%

48.7%

42,000Engineering field

991

1,292

30.3%

44.4%

2,910

Manufacturing field

106

171

61.4%

45.2%

380

Overseas field

-0

-141

-

-

420

Others

-32

-35

-

-

-

1,065

1,287

20.8%

-

-

42

19

-

-

-

1,107

1,306

18.0%

41.9%

3,120

Net sales

Sales prior to adjustments (total)
Adjustment value
Sales (total)
Operating income

Operating income prior to adjustments (total)
Adjustment value
Operating income (total)

Source: Prepared by FISCO from the Company’s results briefing materials

Segment earnings ahead of forecast on healthy progress inrecruiting engineering
2. Trends in the engineering field(1) Results trends and business environment
The engineering field, the primary business, reported sharply higher sales and profits in 1H FY6/17 at ¥12,418mn
in sales (up 20.3% YoY) and ¥1,292mn in operating income (up 30.3%). While EBITDA margin dropped by 0.8pp
YoY to 11.8%, operating margin rose 0.8pp from 9.6% a year ago to 10.4%, confirming healthy conditions.
Demand was strong in a wide range of industries, including transportation equipment and electric equipment.
Trust Tech accommodated this demand with steady progress recruiting engineers, adding 626 engineers over theprevious year to put the total number of engineers at 3,549 people at the end of December 2016. These trends
fueled sales and profit increases mentioned above. EBITDA margin, meanwhile, modestly declined because of
the impact on production costs of improving engineer benefits.

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08 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

Review of sales by transaction industry

Source: From the Company’s results briefing materials(2) Main measures from 1H FY6/17
Human resource recruitment is the most important point for Trust Tech’s engineering field, as noted earlier. As
part of tackling this issue, Trust Tech reorganized in order to optimize business operations by engineering fields
and regions. It created business units with field specialties (engineering, field engineering, and technical solutions)and sales units focused on areas (sales units for specific areas within the three business units).
The adoption of business units with field specialization seeks to provide opportunities suited to the highly diverse
attributes and interests of engineers. Additionally, formation of sales units with area focus is an effort to achieve
more dynamic promotion of local hiring and assignment measures. We think these initiatives are fundamentally
aimed at recruitment of human resources and enhanced retention. The number of engineers employed by Trust
Tech has been steadily rising and appears to have exceeded the plan target in 1H FY6/17.
Reorganization in the engineering field

Source: From the Company’s results briefing materials

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09 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

Significant improvement in operating margin thanks to success withbusiness initiatives with local focus
3. Trends in the manufacturing field(1) Results trends and business environment
The manufacturing field reported ¥4,308mn in sales (up 4.3% YoY) and ¥171mn in operating income (up 61.4%)
in 1H FY6/17. Orders expanded from transportation equipment and electric equipment industries, lifting income.
Trust Tech has been focusing on “improvement of personnel efficiency through local-oriented sales activities”
in order to raise business profitability, and the 1H results confirm contributions from this activity. Manufacturing
EBITDA climbed from ¥111mn in the previous year to ¥175mn in 1H and EBITDA margin improved from 2.7% to
4.1%. Operating margin followed a similar trend with a 1.4pp YoY rise from 2.6% in the previous year to 4.0%.

㻹㼍㼚㼡㼒㼍㼏㼠㼡㼞㼕㼚㼓㻌㼒㼕㼑㼘㼐㻌㼟㼑㼓㼙㼑㼚㼠㻌㼙㼍㼞㼓㼕㼚㻌㼠㼞㼑㼚㼐
㻠㻚㻡㻑

㻠㻚㻜㻑

㻠㻚㻜㻑

㻟㻚㻡㻑

㻟㻚㻠㻑

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㻟㻚㻜㻑
㻞㻚㻡㻑

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㻞㻚㻝㻑

㻞㻚㻜㻑

㻞㻚㻞㻑

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㻝㻚㻡㻑
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㻜㻚㻜㻑
㻲㼅㻢㻛㻝㻝

㻲㼅㻢㻛㻝㻞

㻲㼅㻢㻛㻝㻟

㻲㼅㻢㻛㻝㻠

㻲㼅㻢㻛㻝㻡 㻲㼅㻢㻛㻝㻢㻌㻝㻴 㻲㼅㻢㻛㻝㻢 㻲㼅㻢㻛㻝㻣㻌㻝㻴Note: Segment profit uses operating income from FY6/17; ordinary income in previous years
Source: Prepared by FISCO from the Company’s financial results(2) Main measures in 1H FY6/17
Trust Tech emphasized improvements in hiring efficiency and sales efficiency by deepening area coverage in the
manufacturing field. Subsidiary TTM, which handles the manufacturing business, continues to steadily establish
local sites for hiring and sales activities. It aims to open six sites during FY6/17, expanding operations from 19
sites at period-start to 25 sites at period-end. TTM opened the Yokosuka satellite office in October 2016 andplans to launch the remaining five sites in 2H.
Additionally, TTM created the Job Park job openings website in order to enhance its hiring capabilities. It intends
to implement measures that increase access volume, thereby boosting responses and hiring volume.

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10 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

Example of manufacturing field measures

Source: From the Company’s results briefing materials

MTrec generating income roughly in line with expectations, pursuinginvestments in Asia
4. Overseas field trends(1) Results trends and business environment
The overseas field grew considerably in 1H FY6/17 because of the MTrec acquisition effect. Sales rose sharply
with a 47.6-fold YoY increase to ¥3,756mn, as noted above. While this segment posted an operating loss for
1H due to goodwill amortization and one-off expenses booked in 2Q, EBITDA, a real indicator of earnings that
excludes these impacts, was ¥135mn, putting EBITDA margin at 3.6%.
The UK business environment remains healthy without major changes in actual conditions, despite the nationalreferendum voting to leave the EU (Brexit). MTrec results are roughly contributing as expected, even with thetemporary sales decline, and sales in Apr-Sep 2016 were up 20.2% to ¥3,733mn on a real basis excluding theforex rate impact.
(2) Main measures in 1H FY6/17
Trust Tech strengthened the MTrec business foundation in the UK as a major initiative in overseas business during
1H. While there is concern in the UK about the future Brexit impact, as mentioned above, Trust Tech focusedon securing human resources demand from the automotive industry and other sectors, mainly from Japanesecompanies, in order to support MTrec’s ability to grow on its own after Brexit.
Trust Tech made investments aimed at future growth in Asia. Specifically, it established PT.TRUST TECHENGINEERING SERVICE INDONESIA in Indonesia to handle personnel placements in September 2016 andalso created a joint venture in Shandong, China (September 2016; equity-method affiliate). We think Shandong
Trust-Bridge Human Resources (Trust-Bridge; Trust Tech owns 49%) deserves notice. While the Indonesia initiative
has a research emphasis, mainly involving personnel placements and information gathering, Trust-Bridge aims
to expand actual personnel dispatching business. The nationwide scope of the Trust-Bridge license also fosters
expectations for future developments. We anticipate income contributions from this business as soon as FY6/18.

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11 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

Initiatives in the overseas field

Source: From results briefing materials██Business Outlook
Possibility of beating FY6/17 period-start forecast as well
1. FY6/17 outlook
Trust Tech forecast for sales at ¥42,000mn (up 39.3% YoY), operating income at ¥3,120mn (up 22.4%), ordinary
income at ¥3,100mn (up 22.6%), and net profit attributable to owners of parent at ¥1,870mn (up 22.7%) in FY6/17.
These values have not changed from period-start levels.
Overview of the FY6/17 outlook(¥mn)
FY6/17
FY6/16

1H

2H (E)

Period-start
forecast

YoY

Net sales

30,143

20,471

21,52842,00039.3%

Operating income

2,549

1,306

1,813

3,120

22.4%

Operating margin

8.5%

6.4%

8.4%

7.4%

-

Ordinary income

2,528

1,283

1,816

3,100

22.6%

Profit attributable to owners of parent

1,523

726

1,143

1,870

22.7%

Source: Prepared by FISCO from the Company’s financial results

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12 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

Comparison of the 1H results and FY6/17 forecast demonstrates that the income structure is weighted toward 2H.
We are not concerned about this distribution because of the following reasons. The first is seasonality of income inthe staffing services business, including Trust Tech, and pattern of June as the peak month. This reflects the entry of
new graduate employees in April and actual start of income contributions from these employees in June. The second
is MTrec. While MTrec sales were weaker than expected in the summer months (August and September), which
affected 1H numbers, MTrec has been catching up in 2H (January and February) and this trend should expand thediscrepancy in 1H and 2H results. The third is income in the domestic engineering field. Employee build-up strongly
affects results in the engineering field, as noted above. Trust Tech continues to steadily increase engineer volume,and this should expand the income base in 2H, versus the 1H level. Employment growth hence is also likely to drive
the larger scale of 2H results. Given these factors, we expect 2H income to exceed 1H results and think Trust Techshould be capable of attaining FY6/17 targets. Individual segment income prospects and business conditions should
be largely unchanged during 2H from trends seen through 1H.
For the engineering field, Trust Tech targets ¥25,770mn in sales (up ¥3,970mn YoY) and ¥2,910mn in operating
income (up ¥260mn). We think the 1H results outpaced forecast and this segment is well on track to exceeding
the full-year outlook as well. We expect continuation of tight conditions for human resources from transportationequipment and semiconductor and SPE industries. Trust Tech has been increasing engineer volume and raising
the retention rate, thanks to success in reorganization to business units with field specialization and local hiring andassignments in the sales division, and these trends are contributing to steady expansion of income results.
For the manufacturing field, Trust Tech envisions ¥8,800mn in sales (up ¥540mn YoY) and ¥380mn in operating
income (up ¥110mn). Profitability is fundamentally weaker in manufacturing worker dispatch and manufacturingsubcontracting business than in the engineering field, and raising profit margin is an important issue for the segment.
Trust Tech is utilizing a strategy that seeks to expand profit margin by reducing logistics costs for manufacture
workers by bolstering operations rooted in local areas. It improved operating margin to 4.0% in 1H FY6/17 (vs.
2.6% a year earlier) thanks to these efforts. Trust Tech aims to expand the network of satellite offices in order tofurther reinforce sales capabilities with local focus. We anticipate even higher profit margins in 2H with help fromthese contributions.
For the overseas field, Trust Tech’s targets are ¥7,520mn in sales (up ¥7,410mn) and ¥420mn in operating income(up ¥420mn). MTrec results effectively account for this segment’s values. While MTrec modestly undershot forecast
in 1H due to a temporary dip in summer sales, its results were roughly within the anticipated range. MTrec appears
to have returned to plan levels in sales and profits in 2H after removal of factors that caused temporary sales
contraction.
FY6/17 Outlook by segment(¥bn)
FY6/17
AmountYoY change

Growth rate

Net sales
Engineering field

25.77

3.97

-

Manufacturing field

8.80

0.54

-

Overseas field

7.52

7.41

-

Total net sales

42.00

11.85

39.3%

Engineering field

2.91

0.26

-

Manufacturing field

0.38

0.11

-

Overseas field

0.42

0.42

-

Operating income before adjustments

3.73

0.79

25.4%

Operating income

Source: Prepared by FISCO from the Company’s results briefing materials

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13 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

Capable of sustaining 20% sales growth again in FY8/16
2. Outlook for FY6/18
Trust Tech targets an annual sales growth rate of at least 20% in the current medium-term growth strategy. In the
FY8/16 plan, this will be the one indicator. However, a 20% growth rate requires a sales increase of ¥8,400mn,
which is not an easy hurdle, based on the ¥42,000mn sales target for FY6/17. Trust Tech aims to achieve the goal
through a combination of organic growth and M&A-led growth.
We think the engineering field is capable of delivering 15-20% in organic growth, just as in FY6/17. This view
takes into account the prospect of demand for staffing services that Trust Tech provides continuing current robust
momentum and the Company’s ability to steadily expand employment, including increases in new graduate hiring,at a corresponding pace. We expect engineering field sales to surpass ¥30,000mn in FY6/18 if the segment reaches
about ¥26,000mn in FY6/17.
Hiring plan

Source: From the Company’s results briefing materials

Improvement in profitability is the main goal in the manufacturing field, and we see sales growth potential in a rangeof 5-10%. These points are the same as trends from FY6/17. We think this segment could target ¥9,400-9,500mn
in FY6/18 sales if it posts ¥8,800mn in FY6/17 sales, as planned.
We expect MTrec to serve as the main source of overseas income again in FY6/18. Contributions from subsidiaries
and joint ventures in Hong Kong, Indonesia, and China should still have relatively minor impacts on overall income
during this fiscal year. MTrec achieved sales growth of over 20% in 1H FY6/17. We think MTrec is capable of attaining
a similar level of growth in FY6/18 too because economic conditions are vibrant in northeastern England and manycustomer firms are expanding plant capacity. Forex fluctuations, however, could lower the sales outcome.
Our analysis suggests that organic growth should be capable of driving sales to about ¥48,000mn. This means that
Trust Tech needs to add another ¥2,000mn in order to surpass ¥50,000mn. While M&A activity is one scenario forcovering this portion, we believe Trust Tech also has the ability to reach ¥50,000mn through just organic growth.

We encourage readers to review our complete legal statement on “Disclaimer” page.

14 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.

24-Apr.-20172154 Tokyo Stock Exchange First Section

https://www.trust-tech.jp/ir/

For earnings, we think Trust Tech could come substantially closer to the 10% goal for companywide operating margin
targeted in the medium-term business plan if sales increase in line with expectations thanks to healthy momentum
in the engineering, manufacturing, and overseas fields supported by tight supply-demand conditions.
Simplified income statement and key indicators(¥mn)
FY6/17
FY6/14

FY6/15

FY6/16

Net sales

17,645

20,819

YoY

18.3%

18.0%

Gross profit

4,288

Sales ratio

1H

Full year(forecast)

30,143

20,47142,000

44.8%

40.7%

39.3%

4,868

7,192

4,357

-

24.3%

23.4%

23.9%

21.3%

-

SG&A expenses

2,996

3,271

4,643

3,050

-

Sales ratio

17.0%

15.7%

15.4%

14.9%

-

Operating income

1,291

1,597

2,549

1,306

3,120

YoY

79.9%

23.7%

59.6%

18.0%

22.4%

Operating margin

7.3%

7.7%

8.5%

6.4%

7.4%

1,319

1,623

2,528

1,283

3,100

63.9%

23.0%

55.8%

16.3%

22.6%

797

1,024

1,523

726

1,870

73.2%

28.5%

48.7%

12.9%

22.7%

EPS after the stock split (¥)

41.88

53.39

78.91

37.46

96.63

Dividend after the stock split (¥)

25.00

30.00

40.00

15.00

45.00

BPS after the stock split (¥)

200.47228.22274.80--Ordinary income
YoY
Profit attributable to owners of parent
YoY

Source: Prepared by FISCO from the Company’s financial results

Simplified balance sheet(¥mn)
End-FY6/13

End-FY6/14

End-FY6/15

End-FY6/16

End-FY6/17
1H

4,487

5,283

6,551

8,984

9,725

Cash and deposits

2,175

2,429

3,038

3,930

3,998

Notes and accounts receivable –trade

1,931

2,388

2,954

4,060

4,941

1,056

1,172

1,174

2,929

4,089

Property, plant and equipment

192

193

221

256

430

Intangible assets

130

145

130

2,202

3,132

Current assets

Non-current assets

733

832

821

471

525

Total assets

5,544

6,455

7,725

11,914

13,815Current liabilities

2,019

2,584

3,287

6,531

6,900

1,327

1,447

1,754

2,394

2,325

-

-

-

1,900

2,250

Non-current liabilities

44

38

31

60

1,254

Bonds payable

-

-

-

-

1,204

Shareholders’ equity

3,484

3,837

4,409

5,323

5,590

Capital stock

1,476

1,492

1,529

1,538

1,550

Capital surplus

634

650

687

696

708

1,373

1,694

2,193

3,089

3,332

Investment and other assets

Accrued expenses
Short-term loans payable

Retained earnings

-4

-5

-3

-5

-8

Total net assets

3,479

3,832

4,406

5,322

5,660

Total liabilities and net assets

5,544

6,455

7,725

11,914

13,815

Accumulated other comprehensive income

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

15 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.

24-Apr.-20172154 Tokyo Stock Exchange First Section

https://www.trust-tech.jp/ir/

Cash flow statement(¥mn)
FY6/13

FY6/14

FY6/15

FY6/16

FY6/17 1H

Cash flows from operating activities

777

861

1,209

1,418

973

Cash flows from investing activities

-75

-154

-147

-1,807-1,578Cash flows from financing activities

-275

-451

-459

1,287

677

1

-1

6

-7

-4

427

254

609

891

67

Cash and cash equivalents at beginning of period

1,747

2,175

2,429

3,038

3,930

Cash and cash equivalents at end of period

2,175

2,429

3,038

3,930

3,998

Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents

Source: Prepared by FISCO from the Company’s financial results██Longer-term growth strategy
Targeting continuation of strong advances led by organic growthand M&A
1. Medium-term business plan background and overview
Trust Tech prepared and disclosed a medium-term business plan in August 2015. It set business goals of “sustaining
an annual growth pace of at least 20%” and “achieving 10% consolidated operating margin” based on organic
growth & M&A.
In August 2016, Trust Tech announced a medium-term business plan that retains content from the plan disclosed on
August 2015 and updates growth strategies for realizing the goals. It specifically calls for realization of growth andexpansion, thereby “sustaining an annual growth pace of at least 20%” and “achieving 10% consolidated operating
margin,” through establishment of a “unique position” in regional and business field scope.
Trust Tech does not disclose detailed income values in the medium-term business plan and only provides official
guidance for individual fiscal years (FY6/17 at this point). However, the plan’s business goals imply just over ¥50.0bn
in sales in FY6/18 and just over ¥60.0bn in sales in FY9/16. Trust Tech hopes to attain the goal of 10% operating
margin over the medium term.

We encourage readers to review our complete legal statement on “Disclaimer” page.

16 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/

Medium-term business plan

Source: 1. Yano Research Institute
2. Market share of the global staffing industry 2015 Staffing Industry Analysts World’s Largest Staffing and
Recruitment Firms
Source: From the Company website

Seeking realization of growth targets through regional and businessfield scope
2. Details of the medium-term growth strategy
The medium-term growth strategy fundamentally aims to expand in regional and business field scope and thereby
realize overall growth. Trust Tech outlined unique positions it is targeting in each of these thrusts in order to solidify
attainment of growth.
(1) Growth strategy through regional scope
Regional scope refers to the geographical areas where the company operates its businesses. Trust Tech understands that it will be difficult to maintain the growth pace just in the domestic market, and it also expects
competition to get tougher in the domestic market. The global market, meanwhile, is seven times larger thanJapan’s staffing market (about ¥6trn) at roughly ¥42.4trn. We think it only natural for Trust Tech to seek growthroom with global initiatives in light of the global market size and the current situation in which its customers are
deploying design, development, and production sites overseas. Additionally, we believe Trust Tech is capable ofmaking effective use of business and operational knowhow cultivated in the domestic market in the global market(particularly mature markets in developed countries).

We encourage readers to review our complete legal statement on “Disclaimer” page.

17 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.

24-Apr.-20172154 Tokyo Stock Exchange First Section

https://www.trust-tech.jp/ir/

Trust Tech moved forward substantially with the “regional” initiative in FY6/17 via the acquisition of UK-based
MTrec in August 2016. MTrec, a staffing service company, was established in 2006 and has headquarters in
Newcastle Upon Tyne in northeastern England. Its businesses include manufacturing worker and engineer dispatch
and introduction services at MTrec itself and nurse, helper, and other care human resource services at subsidiary
MTrec Care. The region where MTrec is headquartered has a concentration of automotive and other manufacturing,
including many Japanese-affiliated companies such as the plant of Nissan Motor Manufacturing UK (Sunderland)and Hitachi Rail Europe’s rolling stock plant (Newton Aycliffe). MTrec has been steadily increasing business with
automotive, consumer electronics, machinery, and other manufacturing firms as key customers in this market
environment. MTrec reported GBP44.9mn in sales and GBP2.3mn in profit before income taxes in FY3/16.

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Source: Prepared by FISCO from Company releases㻲㼅㻟㻛㻝㻡

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We believe the MTrec acquisition is an excellent deal in various respects. The first is acquiring a company in acountry with a mature staffing market (United Kingdom). The UK’s staffing market accounts for 12% of the global
market, putting it on par with the Japanese market that has a 13% share. It is actually more mature than Japanconsidering the population difference between the two countries. We think it is significant that Trust Tech secured
a site in a country with a mature staffing market as a first step in its full-fledged overseas initiative. The second
is continued involvement by a founder as a shareholder and executive. While Trust Tech acquired companies
outright (100% of equity) in past M&A deals, Mr. Musgrave, one of the founders, is remaining as a shareholder
at the request of Trust Tech. We believe the retention of a UK person (and founder), who has the same interests
as Trust Tech as a shareholder, is effective in alleviating management risk. The third is use of an earn-out format,
which delays payment of a portion of the purchase price until future earnings growth is achieved. Earn-out
arrangements, though not well known in Japan, are broadly utilized in Europe and the United States as an effective
way of alleviating acquisition risk.
Trust Tech also invested in Asia, setting up a local entity in Indonesia and a joint venture in China. We think theTrust-Bridge joint venture in Shandong (China) deserves attention. Trust-Bridge holds a license to provided staffing
and subcontracting services throughout nationwide in China. It was the first firm to obtain a license. We will beclosely monitoring the extent to which it capitalizes on this timing advantage to solidify its presence.

We encourage readers to review our complete legal statement on “Disclaimer” page.

18 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.
2154 Tokyo Stock Exchange First Section

24-Apr.-2017https://www.trust-tech.jp/ir/(2) Growth strategy through business field scopeBusiness field scope refers to the domains it covers. Trust Tech provides services in engineering and manufacturing
fields. For the manufacturing worker dispatch and subcontracting business, customers are manufacturers anddispatch and subcontracting involves “production” regardless of the manufactured items. Engineer dispatches,
meanwhile, currently mainly consist of services for machinery and electrical customers through the parent business. Subsidiary Freedom covers IT and software areas. Trust Tech hopes to strengthen IT and software areas
and also enter IoT and AI areas with large market potential to establish a unique position in business field scope.
(3) Conclusions
We review Trust Tech’s growth strategy in the medium-term business plan. For business fields, it supplies manufacturing worker dispatch and subcontracting as well as engineer dispatch and subcontracting in machineryand electrical and IT and software development areas in the Japanese market. We think the growth strategy
targeting regional and business field scope has the potential to give clear guidelines for executive decisions at
Trust Tech. These two views are also useful in making an accurate assessment of past M&A deals and various
business actions. Trust Tech is capable of learning from an accumulation of past successes and failures to realize
future success.
Trust Tech has achieved multiple major advances in line with this growth strategy during FY6/17. In the domestic engineering field, it absorbed Trust Ideal and reorganized operations with a focus on specialized areas, as
explained above. In the domestic manufacturing field, TTM expanded satellite offices and is strengthening its
emphasis on local operations. In the overseas field, it acquired MTrec and established local entities and joint
ventures in Indonesia and China. We will be closely monitoring progress in and impacts from these measuresand also further actions.
Conceptual diagram of growth and expansion by broadening regional and business field scope

Source: From the Company website

We encourage readers to review our complete legal statement on “Disclaimer” page.

19 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Trust Tech Inc.

24-Apr.-20172154 Tokyo Stock Exchange First Section

https://www.trust-tech.jp/ir/██Shareholder return policy
Aiming for healthy shareholder returns at a 50% dividend payout
ratio while making growth investments
Trust Tech sees shareholder returns as an important management issue and is mainly focusing on dividends. It
places emphasis on stability in setting the dividend value, but also intends to have the dividend reflect earnings while
securing internal retention in order to fund expansion of business scope and improvements in the income structure.
Trust Tech currently uses a 50% dividend payout ratio as a target for dividends adhering to this basic policy.
For FY6/17, Trust Tech has disclosed a ¥45 full-year dividend based on a ¥15 interim dividend and ¥30 period-end
dividend. This level works out to a 46.6% dividend payout ratio given the forecast ¥96.63 in earnings per share.
Trust Tech has not revised the dividend target following the announcement of 1H FY6/17 results. We think Trust
Tech might expand the dividend in line with earnings upside in light of a basic policy of paying dividends that reflectearnings with a goal of a 50% dividend payout ratio, as noted above.

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㻱㻼㻿㻌㼍㼒㼠㼑㼞㻌㼠㼔㼑㻌㼟㼠㼛㼏㼗㻌㼟㼜㼘㼕㼠㻌㻔㼘㼑㼒㼠㻕㻢㻞㻚㻜㻑㻰㼕㼢㼕㼐㼑㼚㼐㻌㼍㼒㼠㼑㼞㻌㼠㼔㼑㻌㼟㼠㼛㼏㼗㻌㼟㼜㼘㼕㼠㻌㻔㼘㼑㼒㼠㻕
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㻲㼅㻢㻛㻝㻠

㻲㼅㻢㻛㻝㻡

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Source: Prepared by FISCO from the Company’s financial results*Implemented 2 for 1 stock split on April 1, 2016.



We encourage readers to review our complete legal statement on “Disclaimer” page.

20 20

Disclaimer
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