2015 was a very successful year. Strong business consultancy demand from both Japanese and international clients helped us grow our sales by 140% (base year adjusted to include personal consultancy contract between our founder and the seeding client) while business engagements yielded a promising expansion to our pipeline. Our royalty business started to signs of generating sales on the back of solid demand from Philippines. Our research content partnership with the Japanese house, on the other hand, did not produce sustainable business results.
Politics and economy in key markets
Although the political environment at Turkey, our key market, was potentially turbulent from allegations of corruption and wrongdoings, in line with our forecast the government of then prime minister Recep Tayyip Erdogan held its position strong. On August 2014 Mr. Erdogan became the 12th president of the Republic of Turkey after winning 52% of the popular vote earning the title of first president ever elected directly by the people. There was a smooth transition of power as Mr. Ahmet Davutoglu assumed the prime ministership. Despite unfavorable circumstances Turkish economy grew 2.9% on back of strong exports and domestic demand while the currency depreciated by almost 25%.
In Japan, the government of prime minister Abe continued its efforts to revitalize the economy through Abenomics-a series of fiscal and monetary policies combined with and supported by structural reforms. The Government hiked consumption tax to 8% on April 2014 in line with its fiscal reform plan which boosted inflation and wages accordingly. However, there was yet any sign of a structural inflation creeping to the economy. Growth picked up a little bit due to front loading ahead of the consumption tax hike while the Japanese currency lost ground to US$120 from JPY105 impacting corporate profits favorably.
Global geopolitical risks have spiked particularly around Turkey. Russian intervention to Ukraine and deteriorating of Syrian conflict are causes of worry. Violations became rampant on the Turkish-Syrian border. Towards the end of the fiscal year developments in the Middle East, killing of two Japanese citizens by ISIS signaled trouble.
We took several consultancy clients one of which was inbound (overseas to Japan), and an additional potential royalty business. Towards the end of the fiscal year we were very close to signing an OEM/M&A consultancy contract. To manage our expansion, we invested in new business development, relationship building and personnel engagement.
Salaries were approximately 40% of our sales, a big chunk of expenses were for travel and business promotion. Nevertheless, we achieved a 2.2% net profit margin. Consequently, our Owners’ Equity account went up to JPY3.4 million. Our equity ratio is at 45%. At the current rate we expect to maintain our finances without a need for additional financing if business conditions do not turn for the worse.