Company Research and Analysis Report
FISCO Ltd.
http://www.fisco.co.jp

UT Group Co., Ltd.
2146 TSE JASDAQ

31-Jul.-15

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Nobumasa Morimoto伪伪Differentiating itself from its peers by an industryleading employee retention rate and a “start-tofinish outsourced production service”
UT Group<2146> primarily operates a manufacturing dispatch and outsourcing service business.
The group consists of a holding company and beneath it the subsidiaries that carry out the actual
businesses, including an engineer business that dispatches design, development, and constructionengineers. In the semiconductor field, which is where its major clients are found, it is the industry
leader in terms of the number of manufacturing outsourced and dispatched employees. The group
has achieved the No.1 employee retention rate in the industry by measures including its early
introduction of permanent employment and a skill-based wage system, and is achieving growth bydifferentiating itself from its industry peers through its independent business model of a “start-to-finish
outsourced production service.” In December 2003, its predecessor Nihon Aim was the first company
in the manufacturing dispatch and outsourcing services industry to be listed on the JASDAQ market
and one of its objectives was “to create a company that has its employees as a major shareholder.”In its financial results for FY3/15, the group achieved double-digit increases in sales and operating
profit, with sales up 18.5% YoY to ¥36,478mn, and operating profit up 22.4% to ¥2,232mn. It
achieved a record high in outsourcing sales and, in addition, secured an increase in both sales
and operating profit for the fifth consecutive fiscal year since FY3/11. This was because it was able
to expand its share of existing clients thanks to the growth in demand following the recovery of
manufacturing industry and its system of hiring 500 people per month, and also because new orders
trended strongly, particularly in the automobile field.
The group’s targets for FY3/16 are to once again record an increase in sales and operating profit,with sales to rise 9.7% YoY to ¥40,000mn and operating profit 7.5% to ¥2,400mn. As in FY3/15, thegrowth in share for existing clients and in new orders is expected to be the driving force behind thisimproved performance. When considering factors such as the fact that a) sales in both FY3/15 Q3(October to December) and Q4 (February to March), which will be the base for FY3/16, exceeded¥9,500mn, b) that the positive contribution of System Revolution Co., Ltd., which has been madeinto a subsidiary, was not included in the targets, and c) if the revisions to the worker dispatch lawthat were recently discussed in the Diet comes into effect, it could have a positive contribution on thegroup’s results, at FISCO we think the group’s targets look conservative and there remains room for
improvement above them, and it should have it sights set on a new record for outsourcing operating
profit (¥2,823mn in FY3/08).
The group is developing its strategy based upon its medium-term management plan (FY3/12 to
FY3/16), in which it sets out its vision of “Becoming Japan’s No.1 outsourcing provider in quality andvolume.” In addition, in July 2015 the group announced its new medium-term management plan, with
FY3/17 as its first fiscal year. Its main content includes setting out its new vision of “Creating work
for all of Japan,” and in order to drive growth the strategy it has evolved of accelerating M&As ofindustry peers and training facilities, and using M&As to participate in industries where it can utilize
its strengths, and it presents a path toward achieving operating profit of ¥10,000mn and building a
structure of 20,000 active employees. FISCO will pay attention to how these aspects develop in the
future.

伪伪Check Point• Is realizing the lowest employee turnover rate in the industry through enhancing its systemfor developing and training its human resources• Achieved a record high in outsourcing sales and a fifth consecutive fiscal year of higher
sales and profits• Is forecasting increases in sales and profits for FY3/16, but its forecasts are conservative
and there is room to go even higher

We encourage readers to review our complete legal statement on “Disclaimer” page.
1

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2146 TSE JASDAQ㻞㻘㻞㻟㻞㻟㻡㻘㻜㻜㻜

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Important disclosuresand disclaimers appear
at the end of this document.

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31-Jul.-15

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㻯㼛㼙㼜㼍㼚㼥㻌㼠㼍㼞㼓㼑㼠㼟FISCO Ltd. Analyst
Nobumasa Morimoto

伪伪Corporate Overview
After the financial crisis, it decided to return to dispatchingengineers in the manufacturing industry(1) Corporate history
The group, which reached its 20th anniversary this year, was founded in April 1995 based on thephilosophy of President, Representative Director & CEO Yoichi Wakayama of contributing to bothpeople looking for a job and companies wanting people. The group’s corporate history can be
categorized into three periods: a) its founding period up to 2001, b) its first growth period up to 2009,
in which it adopted a niche strategy of specializing in the semiconductor field, and c) its second
growth period from 2010, in which it returned to the manufacturing outsourcing industry in order toescape from its reliance on semiconductors by converting to a market leader strategy.
a) The founding period (1995 to 2001)
The origins of the group were the founding in April 1995 in Yokohama of Aim CIC Company for thebusiness of dispatching personnel for in-plant work. In July 1996, Aim CIC was renamed Nihon
Aim Co., Ltd. Since its founding, it has focused on the manufacturing field, and one after another it
adopted employment systems that ran contrary to the prevailing wisdom in the industry at that time,such as permanent employment, 100% employee participation in social insurance and a skill-based
wage system. In such ways, it was successfully able to increase its employee retention rate andproduction efficiency. Furthermore, it created an independent business model in which instead ofdispatching individuals, it dispatches entire teams to provide its start-to-finish outsourced production
service in which the team is responsible for an entire process, and implemented various reforms of
employees’ ways of working. These initiatives helped to improve the management efficiency at its
corporate clients, which further increased client numbers, and established the business foundations
for its first growth stage.

We encourage readers to review our complete legal statement on “Disclaimer” page.
2

■■Corporate Overview

UT Group Co., Ltd.
2146 TSE JASDAQ

31-Jul.-15

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Nobumasa Morimotob) First growth stage (2001 to 2009)
Due to the collapse of the IT bubble, the performance of companies in the manufacturing industry,
which are the group’s clients, deteriorated, and so inevitably the group’s results also worsened. In thissituation, it decided to convert to a niche, growth strategy of specializing in the semiconductor field
which requires high-level expertise and is appropriate for outsourcing work on the unit of an entire
process. In October 2002, it established the Semiconductor Market Development Team (currently
the Tsukuba Training Center), which promotes the start-to-finish outsourced production service forsemiconductor device manufacturers and carries out planning to improve the abilities of functional
employees specializing in the semiconductor business. These efforts bore fruit and up to 2007prior to the Lehman Brothers’ collapse, it had established its position as No.1 in the manufacturingoutsourcing industry in terms of number of manufacturing outsourced and dispatched employees tothe semiconductor-related industry. In April 2006, in order to advance into the semiconductor device
design business, it made a subsidiary of ARTISTA Co., Ltd. (merged with Comm Leading Co., Ltd.
in December 2011), thereby entering into the design and development engineers dispatch business.
Further, in April 2007 it established a joint holding company called United Technology Holdings Co.,
Ltd. (name changed to UT Holdings Co., Ltd. in January 2009; changed to UT Group in July 2015) with
Apex Inc., which sells used semiconductor manufacturing equipment and provides technical services.
Next, in June 2007, Nihon Aim Co., Ltd. (name changed to UT Aim Co., Ltd in July 2012) made asubsidiary of Micro Engineering Inc., which manufactures and sells semiconductor manufacturing
equipment, thereby entering into the business of manufacturing and selling semiconductor equipment
and accelerating its strategy of expanding the scope of its semiconductor business.
However, it had to abandon its expansion of its semiconductor business due to the deteriorationof the performance of companies in the semiconductor industry following the worldwide recession
triggered by the Lehman Brothers’ collapse. In June 2009, it sold Micro Engineering and then in
November it sold Apex, and decided to return to the engineer dispatch business in the manufacturing
field, which had been its business domain since its founding.
In December 2003, the group’s predecessor Nihon Aim listed on the JASDAQ market, with one of its
objectives being “to create a company that has its employees as a major shareholder.” Incidentally,
this was the first IPO of an outsourcing company, and its formation of an employee shareholder plan
was also a first for its industry.

*1	The 2012 problem that affected thegroup was that in conjunction withthe rapid expansion in production
following the Lehman Brothers’
collapse, from 2009 the re-utilizationof dispatch workers started once
again in the manufacturing industry.
But then the temporary employment
periods of the dispatched workers
that started at that time all came toan end at the same time in 2012.
Manufacturing companies, which
are the group’s main clients,
were required to decide whether
to directly employ their dispatch
workers and workers on a fixedterm employment contract, or toswitch to outsourcing. Since then,the shift toward outsourcing has
accelerated even outside of thesemiconductor industry.
*2	In July 2012, its name was changed
to UT Leading Co., Ltd.
*3	In April 2012, its name waschanged to UT icom Co., Ltd.,and at the same time it launcheda manufacturing dispatch andoutsourcing business. But thenin June 2012, it spun-off the
distribution and retail dispatch
business and established UTAgent Co., Ltd. In April 2013, UT
Agent transferred its business to UT
icom (UT icom was merged with UT
Aim in April 2014).

c) Second growth stage (2010 to the present)
From the group’s decision to return to its original business of manufacturing outsourcing, in addition tocultivating further transactions in its main manufacturing dispatch and outsourcing services businessand expanding into client growth fields, such as the environment and energy field, the automobilerelated field, and the housing field, it aimed to develop its business foundations by expanding its
engineer business (dispatch of design and construction engineers). In this way, it implemented
a market leader strategy of escaping from a reliance on semiconductors and becoming the No.1
outsourcing company, at the same time as implementing financial restructuring. Even though
its business environment was working against it, such as the shift of the manufacturing industry
overseas due to the Great East Japan Earthquake and the strong yen, the 2012 problem*1 worked
to the advantage of the group thanks to its policy of permanent employment, and its number of client
plants increased, its results recovered, and its expansion trend accelerated.
In order to expand its business foundations, in January 2010 the group established Comm Leading
Co., Ltd. (design and development engineers dispatch business)*2, and then in March it establishedComm Agent Co., Ltd. (distribution and retail dispatch business)*3. In addition, in July 2013, it
acquired 81% of the shares of Panasonic Battery Engineering Co., Ltd. and made it into a subsidiary(at the same time, its name was changed to UT Pabec Co., Ltd.). Further, in March 2015, with theobjective of expanding its engineer business even further, it made a subsidiary of System Revolution,
which operates a software development business*4.
In March 2011, the group announced its medium-term management plan (FY3/12 to FY3/16), in
which it set out its vision of moving from being “‘the No.1 semiconductor outsourcing service provider’
to being ‘Japan’s No.1 outsourcing company’ in terms of both quality and volume.” It presented
the path it would take toward achieving operating profit of ¥10,000mn and a structure of 20,000
engineers from March 2017 onwards. At the same time, it committed to achieving an EPS growth rateof 30% or more (5 year average) and a total return ratio of 50% or more (changed from a dividend
payout ratio of 30% or more in FY3/13). Then, in July 2015, it announced its new medium-term
management plan (FY3/17 to FY3/21).

*4	The acquisition cost was ¥1,000mn.

We encourage readers to review our complete legal statement on “Disclaimer” page.
3

■■Corporate Overview

Company History
April 1995
July 1996

UT Group Co., Ltd.
2146 TSE JASDAQ

31-Jul.-15

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Nobumasa Morimoto

Aim CIC Company was founded for the business of dispatching personnel for in-plant work.
Aim CIC was renamed Nihon Aim Co., Ltd.
The Semiconductor Market Development Team was established (currently, the Tsukuba
October 2002
Training Center).
December 2003 Nihon Aim was listed on the JASDAQ market.
ARTISTA Co., Ltd. was made a subsidiary in order to enter into the design and development
April 2006
engineer dispatch business.
Nihon Aim and Apex Inc. jointly transferred shares to establish United Technology Holdings
April 2007
Co., Ltd. (currently UT Group Co., Ltd.) as a pure shareholding company. It was listed in the
JASDAQ market (Nihon Aim became unlisted).
January 2009 United Technology Holdings was renamed UT Holdings Co., Ltd.
November 2009 All shares of Apex were acquired by HACHITOKU Co., Ltd.
Comm Leading Co., Ltd. was established in order to strengthen the group’s design andJanuary 2010
development engineers dispatch business.
Comm Agent Co., Ltd. was established in order to enter into the distribution and retail dispatch
March 2010
business.
February 2011 ARTISTA and Comm Leading were combined to form Comm Leading.
The name of Comm Agent Co., Ltd., was changed to UT icom Co., Ltd. and a manufacturing
dispatch and outsourcing business was launched.
April 2012
UT Career Co., Ltd. was established (entered into the outplacement business).
UT Construction Network Co., Ltd. was established in order to enter into the constructionengineer dispatch business.
The distribution and retail dispatch business of UT icom Co., Ltd. was spun-off and UT Agent
June 2012
Co., Ltd. was established.
To enhance the UT Group’s brand power, some subsidiaries were renamed to make corporate
July 2012
names of all subsidiaries start with UT.
October 2012 UT Life Support was established in order to expand welfare services to employees.
81% of shares of Panasonic Battery Engineering Co., Ltd. were acquired to make it a
July 2013
subsidiary that was renamed UT Pabec Co., Ltd.
March 2015
System Revolution Co., Ltd. was made into a subsidiary.
July 2015
UT Holdings Co., Ltd. was renamed UT Group Co., Ltd.

Operations are mainly carried out by teams of experienced
employees organized on the unit of an entire process(2) Businesses
The group consists of the UT Group Co., Ltd. which functions as the pure holding company for theother group companies of six consolidated subsidiaries, which conduct the actual businesses.
Outline of the Six Consolidated Subsidiaries
Company name

FoundedAddress
Description of business
April
Shinagawa Ward,
Manufacturing dispatch and outsourcing
1995
Tokyo
September Shinagawa Ward,
UT Leading Co., Ltd.
Design and development engineer dispatch
2005
Tokyo
April
Shinagawa Ward,
UT Career Co., Ltd
Outplacement business
2012
Tokyo
April
Shinagawa Ward,UT Construction Network Co., Ltd.
Construction engineer dispatch
2012
Tokyo
July
Shinagawa Ward,
UT Pabec Co., Ltd.
Manufacturing dispatch and outsourcing
2013
Tokyo
Software development and operational
August Shibuya Ward,
System Revolution Co., Ltd.
management
1986
Tokyo
Specified worker dispatch business
UT Aim Co., Ltd.

The two main businesses it is engaged in are the manufacturing dispatch and outsourcing services
business and the engineer business, but in terms of financial accounting, it discloses information
on one business, the outsourcing business. In FY3/15, percentages of total sales by businesswere 91.3% from the manufacturing dispatch and outsourcing services business and 8.7% fromthe engineer business (breaking this down, 5.6% from the dispatch of design engineers and3.1% from the dispatch of construction engineers). Also, percentages of sales according to clientbusiness category were 44.8% from the semiconductor and the electronic parts field, 25.3% from theenvironment and energy field, 16.0% from the automobile-related field, 6.7% from the housing field,
and 7.2% from other fields.

We encourage readers to review our complete legal statement on “Disclaimer” page.
4

■■Corporate Overview

UT Group Co., Ltd.
2146 TSE JASDAQ

31-Jul.-15

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Nobumasa Morimoto●Manufacturing dispatch and outsourcing services business
It dispatches permanent employees and carries out outsourcing of the in-plant work of Japanesemanufacturers. Rather than dispatching individuals for the work outsourced to it, it mainly organizes
experienced employees into teams, establishes a chain of command, and carries out the work on
the unit of an entire process (start-to-finish outsourcing). The group’s employees that carry out theoutsourcing work are called engineers and their employment forms are divided into permanent
employees following a transfer to locations nationwide (approximately 70% of all employees) andcontract employees.
Its main users are manufacturing companies in industries including semiconductor, electronics,
environment and energy, automobile, and construction and building materials. Specifically, its mainclients include the Sony Group<6758>, the Panasonic Group <6752>, and the Toshiba Group<6502>. The consolidated subsidiaries UT Aim and UT Pabec carry out this business. As of the endof March 2015, it dispatched engineers to 438 plants and employed 8,597 engineers.
●Engineer business
The business involves software outsourced development; machinery, electrical, and electronic design
development (including design work using 3D CAD); and the dispatch of construction engineers.
Software development is carried out by UT Leading and System Revolution, but the dispatch ofengineers for machinery, electrical, and electronic design development is carried out by UT Leadingalone. The construction engineer dispatch business is carried out by UT Construction Network
Co., Ltd. The main clients for software development and the dispatch of engineers for machinery,electrical, and electronic design development are major electronics manufacturers. Clients in theconstruction engineer dispatch business include major construction companies, primarily super
general contractors. As of the end of March 2015, the group employed 702 engineers in this business.

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We encourage readers to review our complete legal statement on “Disclaimer” page.
5

■■Corporate Overview

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UT Group Co., Ltd.
2146 TSE JASDAQ㻱㼚㼢㼕㼞㼛㼚㼙㼑㼚㼠㻌㼍㼚㼐㻌㼑㼚㼑㼞㼓㼥㻌㼒㼕㼑㼘㼐

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31-Jul.-15

㻻㼠㼔㼑㼞

Important disclosuresand disclaimers appear
at the end of this document.

㻞㻡㻚㻟㻑

FISCO Ltd. Analyst
Nobumasa Morimoto

伪伪The Group’s Strengths and Business Risks
Has achieved the lowest employee turnover rate in theindustry through enhancing its system to develop and train
human resources(1) Strengths and competition
The group’s strengths are its systems of permanent employment and 100% employee participation insocial insurance. In addition, by introducing Job Grade, which is a skill evaluation system on 25 levels;
Entry System, in which employees can fairly become candidates for management; and an Employee
Stock Ownership Plan (ESOP), it has achieved the lowest employee turnover rate in its industry(specifically, its current turnover rate is around 3 to 4%, which is significantly below the industry
average of 8%). In addition, it has enhanced its system for developing and training human resources,
including through the One UT Project (a career progression program for design engineers), theSuper Manager School (an executive training school), and MTM Training (a management leadershipdevelopment program). This is considered to be a factor behind its ability to maintain the quality of its
employees, which has been highly evaluated by its corporate clients.
Further, another one of its strengths seems to be that it can contribute to the improved management
efficiency of its clients through the format of its outsourcing contracts, in which a team provides astart-to-finish outsourced production service.
The group is leveraging its strengths to differentiate itself from competitors in the semiconductor
field, which is where its main clients are located, and has established an unshakeable position as theNo.1 company in the manufacturing outsourcing industry in terms of the number of manufacturingoutsourced and dispatched employees. On the other hand, competition is fierce for manufacturingoutsourcing in growth fields like automobiles, where the group has been aiming to expand its
business to escape from its reliance on the semiconductor field through developing a market leader
strategy. But despite this competition, the group is steadily increasing client numbers by leveraging
its strengths. The specific competitors in this field can be said to include Nikken Sogyo, NISSO,
Outsourcing <2427>, and World Holdings<2429>.
(2) Business risks
The group’s business risks can be summarized into two points; a) its high reliance on the
manufacturing and semiconductor-related industries and b) securing human resources.

We encourage readers to review our complete legal statement on “Disclaimer” page.
6

■■The Group’s Strengths and Business Risks

As the group’s clients are in the manufacturing industry, they are likely to be affected by fluctuationsin the macro economy, like a strong yen and the domestic economic climate. Further, while thepercentage of sales from the semiconductor field is declining due to the progress the group is making
in its strategy of escaping from its reliance on the semiconductor-related field, it still provides around
40% of sales, so the group could be affected by changes in the performance of its semiconductorrelated corporate clients.

UT Group Co., Ltd.
2146 TSE JASDAQ

31-Jul.-15

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Nobumasa Morimoto

The group's source of revenues is its human resources and securing them is its biggest challenge.
It may not be able to secure the engineers it requires due to conditions in the labor market. Or if its
employee retention rate declines, this may have a negative impact on earnings due to an increasein hiring expenses. In addition, its hiring system in its main manufacturing dispatch and outsourcing
services business is founded upon hiring locally in each region, so if it has difficulties hiring in one
region, it will have to hire from other regions and will incur relocation expenses, which may cause
profitability to decline.
In order to expand its engineer business, the group began hiring new graduates from among thegraduates of March 2014. It hired 240 graduates in April 2014 and 364 graduates in April 2015. It
plans to hire 500 graduates in April 2016 (300 engineers and 200 manufacturing dispatch and other
employees).

伪伪Financial Results Trends
Achieved a record high in outsourcing sales and the fifth
consecutive fiscal year of increased sales and profits(1) FY3/15 financial results
In its financial results for FY3/15, the group achieved double-digit increases in both sales andoperating profit, with sales up 18.5% YoY to ¥36,478mn and operating profit up 22.4% to ¥2,232mn.
In addition to achieving a record high in outsourcing sales, it recorded increases in sales and profits
for the fifth consecutive fiscal year since FY3/11.
FY3/15 Results Overview(unit: ¥mn, people)
FY3/14
FY3/15Results Ratio Target*1 Target*2 Results Ratio
YoY
Sales
30,779- 32,000 36,000 36,478- 18.5%
Cost of sales
25,349 82.4% 25,900 29,370 29,718 81.5% 17.2%
Selling, general and administrative expenses
3,605 11.7%
3,600
4,630
4,528 12.4% 25.6%
Operating profit
1,824
5.9%
2,500
2,000
2,232
6.1% 22.4%
Ordinary profit
1,754
5.7%
2,360
1,920
2,157
5.9% 23.0%
Net profit
934
3.0%
1,400
1,100
1,168
3.2% 25.0%
Number of engineers
7,768
9,299
- 19.7%*1: announced on May 14, 2014
*2: announced on February 12, 2015

The growth in sales was due to the strong performance of the manufacturing dispatch and outsourcing
services business against the backdrop of the expansion in demand for dispatching and outsourcing
services following the improvement in the performance of the manufacturing industry. In addition, thedispatch of design and construction engineers increased and the number of client plants rose by 25compared to the end of the previous fiscal period, to 438 plants. Another factor behind the higher
sales was that the group’s number of engineers reached its highest ever total, of 9,299 engineers.
On the other hand, the factors behind the increase in operating profit (up ¥408mn YoY) were theincrease in profits (¥1,003mn) due to higher sales from an expansion in share and new orders,and also an increase in profits (¥327mn) due to improvements in the gross profit margin (FY3/14
17.6% → 18.5%) following improvements in unit prices, and growth in overtime and a withdrawal
from low-profitability business offices, which meant gross profit increased (¥1,330mn). These factors
outweighed a decline in profits from the increase in selling, general and administrative expenses(¥923mn), partially due to higher hiring-related expenses because of proactive hiring activities inorder to build the foundations of a system for 500 new hires a month (¥461mn).

We encourage readers to review our complete legal statement on “Disclaimer” page.
7

■■Financial Results Trends

UT Group Co., Ltd.
2146 TSE JASDAQ

31-Jul.-15

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Nobumasa Morimoto

Compared to the initial targets announced in May 2014 (sales ¥32,000mn, operating profit ¥2,500mn),
sales exceeded the target but operating profit was slightly below it. The reasons why sales exceeded
the target were the expansion in share following additional orders from existing clients, particularly inthe manufacturing dispatch and outsourcing services business and the engineer dispatch business,
and also the new orders from automobile-related clients. Conversely, the reasons why operating
profit was below the target were negative factors including a) profits in the re-employment support
business were below target (¥200mn below the target), b) an increase in expenses to hire newgraduates (up ¥250mn), and c) an increase in sales-related expenses (up ¥50mn). However,both sales and operating profit exceeded the revised targets announced in February 2015 (sales¥36,000mn, operating profit ¥2,000mn).
(2) Financial conditions
As of the end of March 2015, total assets had increased ¥4,369mn from the end of the previous
fiscal period to ¥16,427mn. Breaking this down, current assets increased ¥3,997mn from the end of
the previous fiscal period due to the rise in cash & deposits (¥3,050mn) that occurred in conjunction
with the increases in profits and long-term debt, while accounts receivable also rose (¥867mn). Fixed
assets increased ¥380mn from the end of the previous fiscal period because of factors including therise in goodwill (¥787mn) following software development company System Revolution becoming a
subsidiary in March.
Liabilities increased ¥3,904mn from the end of the previous fiscal period to ¥12,803mn. Specifically,in conjunction with the improved results, each of accrued expenses, accrued income tax, and accrued
consumption tax increased, and consequentially current liabilities rose ¥2,864mn from the end of theprevious fiscal period. Long-term liabilities grew ¥1,040mn from the end of the previous fiscal period.
This was because, while corporate bonds declined, long-term debt increased (¥1,444mn) as thegroup procured funds at low interest rates in preparation for the deployment of its medium- to longterm strategy, in addition to the M&A of System Revolution.
Net assets rose ¥465mn from the end of the previous fiscal period to ¥3,624mn. This was mainly due
to the increase in retained earnings of ¥416mn from the end of the previous fiscal period following
the improved results.
Balance Sheet
FY3/14
9,197
4,151
4,150
2,833
65
158
2,608
27

FY3/15
13,194
7,201
5,017
3,213
68
945
2,199
20

5,421

8,285

1,601

2,020

3,477

4,517

3,429

4,363

Net assets
Shareholders’ equity
Total assets

3,159
3,103
12,0583,624
3,519
16,427

Balance of interest-bearing debt
Net cashManagement Indicators(indicators of financial strength)
Current ratio (%)
Shareholders’ equity ratio (%)
D/E ratio (%)(indicators of profitability)
Ordinary profit to total assets ratio (%)
Return on equity (ROE) (%)
Operating margin (%)

5,030
-878

6,384
818

169.7
25.7
162.1

159.3
21.4
181.4

16.3
32.2
5.9

15.1
35.3
6.1

Current assets
Cash & deposits
Accounts receivable
Fixed assets
Tangible fixed assets
Intangible fixed assets
Investments and other assets
Deferred assets
Current liabilities
Short-term borrowings + Current
portion of corporate bonds
Long-term liabilities
Long-term debt+ Corporate bonds(unit: ¥mn)
ChangeBreakdown
3,996
3,050
866
379
2
786 Goodwill +773
-409 Deferred tax assets -454
-8
Accrued expenses +473 Accrued income
2,863
tax +399 Accrued consumption tax +1199
Short-term borrowings +85 Current portion419
of long-term debt +335
1,040
Corporate bonds -420 Long-term debt
934
+1444
465
415 Retained earnings +642
4,369
1,353

We encourage readers to review our complete legal statement on “Disclaimer” page.
8

■■Financial Results Trends

UT Group Co., Ltd.

Due to the increase in long-term debt, shareholders’ equity ratio and D/E ratio (interest-bearing debt
divided by shareholders’ equity), which are indicators of financial strength, slightly worsened. But
due to the improved results, net cash (the amount obtained from subtracting interest-bearing debt
from cash & deposits) returned to a surplus, and when also considering that the objective of longterm debt is to procure funds for M&As for business expansion, it is considered there has been nochange to the improvement trend. Conversely, ROE and operating margin, which are indicators of
profitability, continued to improve in conjunction with the group’s better results.

2146 TSE JASDAQ㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼚㼑㼠㻌㼏㼍㼟㼔
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31-Jul.-15
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Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Nobumasa Morimoto

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Higher sales and profits are expected in FY3/16, but theconservative targets mean there is room for even further
improvement(3) FY3/16 group targets
The group targets for FY3/16 are an increase in both sales and operating profit, with sales up 9.7%
YoY to ¥40,000mn and operating profit up 7.5% to ¥2,400mn.
FY3/16 Group Targets

Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Ordinary profit
Net profit

FY3/15Results
Ratio
36,47829,718
81.5%
6,760
18.5%
4,528
12.4%
2,232
6.1%
2,157
5.9%
1,168
3.2%

Target40,00032,440
7,560
5,160
2,400
2,240
1,320

FY3/16
Ratio

81.1%
18.9%
12.9%
6.0%
5.6%
3.3%

(unit: ¥mn)
YoY
9.7%
9.2%
11.8%
14.0%
7.5%
3.8%
13.0%

The main factors behind the increase in sales are forecast to be the expansion in share of existingclients and the increase in new orders, the same as in the previous fiscal period. On the other
hand, for the increase in operating profit, it is expected that the decrease factors, like a ¥632mn
increase in selling, general and administrative expenses, partially due to the rise in expenses tostabilize the system to hire 500 people a month (¥400mn), will be exceeded by the increase ingross profit (¥800mn) from the higher sales from the expansion in share of existing clients and theincrease in new orders (gross profit up ¥640mn), and also the improvement in the sales profit ratio(FY3/15 18.5% → 18.9%) due to higher unit prices and other factors (gross profit up ¥160mn). The
group commented in its results briefing that its forecasts for FY3/16 are conservative based on the
downward revision of its forecasts in the past.

We encourage readers to review our complete legal statement on “Disclaimer” page.
9

■■Financial Results Trends

UT Group Co., Ltd.
2146 TSE JASDAQ

31-Jul.-15

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Nobumasa Morimoto

FISCO considers that the group’s targets are conservative and there is room for it to achieve evenhigher results. This is because of improved performance of the manufacturing industry thanks toeconomic recovery, the return of production to Japan thanks to the weak yen and other factors, andimprovements in the business environment. We also consider them to be conservative becausea) sales in both FY3/15 Q3 (October to December) and Q4 (February to March), which will be thebase for FY3/16, exceeded ¥9,500mn, b) the positive contribution of System Revolution Co., Ltd.,
which has been made into a subsidiary, was not included in the targets, and c) if revisions to theworker dispatch law that were recently discussed in the Diet come into effect, it could have a positive
contribution on the group’s results.

伪伪Medium-term Management Plan
Steadily expanding its businesses through M&As and othermethods, and has also announced its new medium-term plan
In its current medium-term management plan announced in March 2011, the group has set out its
vision of changing from being the “No.1 semiconductor service provider” to being “Japan’s No.1
outsourcing service provider in quality and volume” (where “quality” means to establish a working
environment where its employees can work vigorously, and “volume” means to be the No. 1 in size inthe manufacturing outsourcing industry). Based on the outsourcing track record it had cultivated up
to that time, it also set out its strategy of aiming to expand into the growth fields of the environment
and energy and to create high-quality employment opportunities and more opportunities for people toadvance their careers. During the period of executing the medium-term management plan, the grouppresented a path toward realizing operating profit of ¥10,000mn and a structure of 20,000 employees
from March 2017. At the same time, it committed to two points; that it was aiming for an EPS growthrate of 30% or more (5 year targeted average) and a total return ratio of 50% or more (changed froma dividend payout ratio of 30% or more in FY3/13)
The group’s fundamental strategy at the time it announced its medium-term management plancan be summarized in the following three points: to expand share of existing clients (improve profit
productivity and achieve stable growth), uncover client needs, and horizontally develop permanent
employees (namely, build foundations so that one third of operating profit is from businesses otherthan the manufacturing dispatch and outsourcing business). It has broadly achieved its initial
objectives within its plan, and it has revised its strategy to the following four specific points; growthin the manufacturing dispatch and outsourcing services business, making the engineer dispatch
business into a core business, M&As and new business start-ups, and the enhancement of theinternal management base.
(1) Growth in the manufacturing dispatch and outsourcing services business
It intends to grow its share of business with existing clients (strategy to increase the group’s shareof dispatches per plant), expand market shares of sales and hiring within regions by implementinga regional dominant strategy (conduct sales and hiring upon dividing the country into five blocks
and build a structure to be No.1 in each region in terms of sales and hiring), and construct a hiring
structure in order to stably secure 500 new hires per month (in FY3/15 it put in place a structure for
500 hires, but it is aiming for 600 to 700 hires in the future).
(2) Make the engineer dispatch business into a core business
It is cultivating its engineer dispatch business to be an earnings pillar second only to its main
manufacturing dispatch and outsourcing services business by establishing an infrastructure forhiring, expanding share in markets with high demand, and conducting employee education andtraining. In addition to new hiring, it is aiming to effectively secure and retain engineers through its
One-UT Project.
(3) M&As and new business start-ups
In order to further accelerate its growth engine, it intends to pursue M&As and business start-ups. For
example, making System Revolution a subsidiary in March was one part of this strategy.

We encourage readers to review our complete legal statement on “Disclaimer” page.
10

■■Medium-term Management Plan

(4) Enhancement of the internal management baseIn addition to aiming to improve operational efficiency by changing the system to prevent workloadfrom concentrating too much on specific people by promoting the building of a framework for internal
backbone work, it is also making a concerted effort to promote the training and development of all
employees.

UT Group Co., Ltd.
2146 TSE JASDAQ

31-Jul.-15

Important disclosuresand disclaimers appear
at the end of this document.
FISCO Ltd. Analyst
Nobumasa Morimoto

In addition, in July 2015 the group announced its new medium-term management plan with FY03/17
as its first year. The main content of this plan includes its new vision of “Creating work for all of Japan,”and it presents an evolved strategy and a path toward achieving operating profit of ¥10,000mn andbuilding a structure of 20,000 active employees. Also, in order to drive growth, it will accelerate
M&As of industry peers and training facilities, and participate in industries where it can leverage its
strengths through M&As. FISCO will be keeping a close watch on future developments.

伪伪Returns to Shareholders
The basic policy for returns to shareholders is to target a total
return ratio of 50% or more
The group regards returning profits to shareholders to be an important management issue. Its basic
policy is to target a total return ratio (the sum of dividends paid and share buybacks as a ratio ofconsolidated net income) of 50% or more (changed in its medium-term management plan in FY3/13
from targeting a dividend payout ratio of 30% or more).
Looking at its track record of returning profits to shareholders since FY3/11 from the data it disclosed
in its medium-term management plan, we see that it paid dividends up to FY3/14 and, in accordancewith its target, the dividend payout ratio was 30% or more (since FY3/13, it has targeted a total return
ratio of 50% or more). However in FY3/15 it decided that it would not pay dividends and instead
decided in February that it would spend ¥1,000mn to acquire its own shares (scheduled acquisition
period from February 13, 2015, to February 12, 2016) through a purchase of 3,000,000 shares(upper limit). In actuality, by June 11 it had acquired 1,885,800 of its own shares at an acquisition
cost of ¥1,000mn, for a total return ratio of 85.6%. As of June 30, the group had resolved to retire
1,885,900 of its own shares (4.84% of outstanding shares before the retirement).
Upon calculating the FY3/15 total return ratio based on this, it comes to 85.6%. As of the end of May,in this share buyback it had acquired 1,079,500 of its own shares at an acquisition cost of ¥557.2mn.

（％）

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We encourage readers to review our complete legal statement on “Disclaimer” page.
11

Disclaimer
FISCO Ltd. (the terms "FISCO", "we", mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock
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This report is based on information that we believe to be reliable, but we do not confirm or
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This report was prepared at the request of its subject company using information provided
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of this report are subject to change without prior notice.
All intellectual property rights to this report, including copyrights to its text and data, areheld exclusively by FISCO. Any alteration or processing of the report or duplicationsof the report, without the express written consent of FISCO, is strictly prohibited. Anytransmission, reproduction, distribution or transfer of the report or its duplications is also
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The final selection of investments and determination of appropriate prices for investment
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