Japan-based staffing firm Outsourcing Inc. (2427: JP), the tenth-largest global staffing firm, reported revenue today for the full year ending 31 December 2023 of JPY 749.60 billion (USD 4.99 billion), an increase of 8.6% when compared to the previous year.

In December 2023, Outsourcing announced it will go private in a transaction styled as a management buyout with the backing of US-based based Bain Capital Private Equity.

The company’s shares will be delisted once the tender offer is conducted by the tender offeror and certain subsequent procedures are successfully completed. Therefore, the company has not disclosed an outlook for the fiscal year ending 31 December 2024.

Despite achieving record-high revenue, the actual results fell below the performance forecast announced on 14 February 2023. The impact of factors such as impairment losses on goodwill significantly contributed to the shortfall in performance compared to the forecast, particularly in the operating profit and other profits below operating profit.

Revenue recorded a new high, driven by strong demand in engineering and the recovery of production in the transportation equipment sector. However, challenges such as intensifying competition for talent acquisition, continued slowdown in the production of electrical equipment, including semiconductors, and delays in material procurement for projects related to the domestic US military facilities led to a performance below the forecast.

In addition, operating profit, profit before tax, profit for the year, and profit attributable to owners of parent all fell below the forecast affected by the impairment losses on goodwill, amounting to JPY 9,051 million recorded, as well as investigation costs related to the employment adjustment subsidies. Furthermore, as impairment losses, including goodwill, are not considered in tax calculations, they had a downward impact on profits below profit before tax.

Outsourcing Inc. provides outsourcing services in electronics, cars and other areas. It also provides temporary staffing services, known in Japan as worker dispatch.

Over recent years, the company has grown internationally through an ambitious acquisition strategy. However, the company also amended results for several past years because of fraudulent reporting. A series of investigations wrapped up on 14 November 2023.

The group has five reportable segments, namely “Domestic Engineering Outsourcing Business,” “Domestic Manufacturing Outsourcing Business,” “Domestic Service Operations Outsourcing Business,” “Overseas Engineering Outsourcing Business,” and “Overseas Manufacturing and Service

Operations Outsourcing Business.” Revenue for all five reportable segments successfully rose to a record high in the current fiscal year.

In the Domestic Engineering Outsourcing Business, despite an increase in recruitment costs due to intensified competition for personnel and goodwill impairment loss of JPY 354 million (USD 2.4 million) , the revenue and profit increased, against the backdrop of strong demand for engineers. Revenue was up 8.6% year-on-year.

In the Domestic Manufacturing Outsourcing Business, while there was a recovery in auto industry production, the production activities among electric equipment manufacturers including semiconductor manufacturing equipment manufacturers were sluggish. Revenue was up 0.8% year-on-year.

The Domestic Service Operations Outsourcing Business mainly provides services to US military facilities, which are less susceptible to macroeconomic dynamics, unlike businesses in the manufacturing field. Revenue was up 9.8% over the year.

The Overseas Engineering Outsourcing Business recorded an increase in revenue and decrease in profit year-on-year. In the UK, the profitable public debt collection business continued to show a recovery and improved its collection efficiency. Whereas in Ireland, an economic uncertainty, including the layoff at a major global IT company, partly affected the recruiting and placing business. Despite increased costs due to inflation-related factors such as labour expenses, the dispatching business steadily progressed in a stable manner. Revenue was up 5.7%.

Meanwhile, the Overseas Manufacturing and Service Operations Outsourcing Business marked a double-digit growth in revenue year-on-year which was attributed to the reinforcement of the strong e-commerce related business centred around major supermarkets in Netherlands as well as the logistics-related business, an increase in dispatch unit prices, and a strong demand in the aviation industry in Germany. Revenue increased 14.9% year-on-year.

Included in Other Business are shared services of administrative work and sign language classes provided by disabled employees who work for the company’s special subsidiary company, which performed as planned during the current fiscal year. Revenue ticked up 1.3% over the year.

On Monday, Outsourcing Inc shares closed at JPY 1,737.00 (USD 11.58), up 0.52% on the day and 1.56% below its 52-week high of JPY 1,764.50 (USD 11.77), set on 13 December 2023. The company has a market cap of JPY 213.30 billion (USD 1.42 billion).