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Japan's tight labor market spurs Recruit to record profit

Dutch acquisition and US tax cut buoy bottom line

Administrative staff has been in demand, particularly in the Tokyo area. (Photo by Tsunoru Nakashima)

TOKYO -- Recruit Holdings' net profit grew 11% last fiscal year to a second straight annual record as its core staffing and job information services fared well in the tightest Japanese labor market in decades.

The company, which recently announced plans to buy U.S. job search website Glassdoor, generated a net profit of 151.6 billion yen ($1.37 billion) for the year ended March, with revenues rising 12% to 2.17 trillion yen. Recruit switched to international accounting standards last fiscal year.

Revenue grew for all three of Recruit's business segments: temporary staffing; human-resources technology operations, focused on U.S.-based Indeed; and marketing media, such as a salon-booking website.

Operating profit, however, slipped 1% to 191.7 billion yen following the sale of subsidiary shares the previous year. International accounting standards factor such gains into operating profit. But earnings before interest, taxes, depreciation and amortization, which Recruit uses as a key earnings benchmark, climbed 11% to 258.4 billion yen.

The staffing segment's revenue increased 11% to 1.29 trillion yen, and that segment's EBITDA also grew 11% to 72.7 billion yen. The seasonally adjusted job-offers-to-applicants ratio rose to a 44-year high of 1.54 last fiscal year. Demand for administrative workers was particularly strong, mainly in greater Tokyo.

The bottom line also was helped by the U.S. corporate tax cut and a full-year earnings contribution from USG People, a Dutch staffing company acquired in 2016 and renamed Recruit Global Staffing this year.

For the current fiscal year that began April 1, Recruit projects net profit climbing 1% to 153 billion yen on sales of 2.3 trillion yen, up 6%. The profit estimate came in under the QUICK Consensus analysts' forecast, chilling investor sentiment.

The earnings briefing came out during the afternoon market session, and Recruit shares slid as much as 6% before closing 2% lower.

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