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Account Closing Review

Consolidated Performance for the third Quarter of the Period Ending March 2017

(Units: millions of yen)

  Current period
Prior period
comparison (%)
Net sales 177,446 164,954 7.6
Gross profit 31,363 29,366 6.8
Selling, General & Administrative Expenses 25,447 22,660 12.3
Operating income 5,916 6,705 -11.8
Ordinary income 5,768 6,307 -8.5
Profit attributable to owners of parent 6,272 7,294 -14.0

Qualitative Information Regarding Consolidated Operating Results

The Japanese economy in the third quarter consolidated year-to-date period has been in a moderate recovery trend, including continued improvement in the employment and income environment, and signs of personal consumption also moving into a recovery. On the other hand, there are concerns such as the increase of uncertainties in overseas economies, including the British EU withdrawal issue, the influence of the American presidential election, and an economic slowdown in the emerging countries and resource-rich countries of Asia, as well as the impact of foreign exchange fluctuations on corporate earnings, all of which result in an uncertain outlook for conditions going forward.

In the environment surrounding the services offered by our group, there is expanding demand for outsourcing services that lead to developments such as improved efficiency, enhanced cost competitiveness and sales expansion for businesses facing a backdrop that includes a declining labor force, the globalization of businesses, and the popularization of smart devices and SNS. Against this setting, our Group has actively expanded services focused on contact center, back office, design development, digital marketing, EC and other operations, and this has led to an increase in orders.

On the other hand, with the progress of digital technology, the points of contact between companies and consumers have diversified and the influence of consumers is getting stronger. In addition, new players have emerged based on state-of-the-art digital technology, and the boundaries of the industry have become ambiguous. Our group will respond to such changes in the business environment by providing new services that utilize digital technology in order to support innovative changes for client companies.

One of these new services will support improvement of the customer experience by eliminating the boundaries among marketing, sales and support for the diversifying contact points between companies and consumers. We will continue to compete by integrating our expertise in communication with consumers that has been cultivated over many years with digital technology and a global service network in order to be recognized as a unique partner who can promote both improved customer loyalty and expanded sales and earnings. Another new service will support digitalization of the business processes within client companies so as to respond to digitalization of the market and consumers. Through endeavors such as automation with digital technology and the utilization of digital platforms, we will collaborate with client companies to create simple business processes to support their operations.

Our group seamlessly links these two, aiming to be a good digital transformation partner for client companies, as well as a Global Digital Transformation Partner, to support innovative changes for client companies. Based on this idea, we have worked to strengthen our organization and create DEC services that integrate digital marketing, EC (E-commerce) and contact center operations as services to support improvement of the customer experience.

As one initiative to create DEC services, we began offering “E-Commerce Service for Messaging Apps” as a service to accomplish everything from product selection to ordering and payment on the Talk screen of LINE. This service is also provided with functions such as promotion of repeat purchases using a recommendation engine and automatic response by bot (automatic remark system) to support communication with a high level of customer satisfaction.

On the other hand, as an initiative to strengthen our DEC service systems, we aimed to enhance the service structure for future growth. In Japan, we opened “Marketing Chain Management Center Oita” as a contact center base in the city of Oita in Oita Prefecture. In addition to telephone calls, the center also handles digital communication through channels such as chat, LINE and messenger applications, and it will provide a “multi-contact communication center” combining the latest technology and advanced communication capabilities. Overseas, we expanded the local center in Malaysia to about 300 workstations in order to provide a wide range of services, including multilingual contact center services and EC one-stop services for the Japan market, in addition to local services. In Indonesia, as local demand expanded, we opened the “Jakarta Center No. 3” as a contact center base with about 300 workstations. In addition, we formed a capital and business alliance with the Brazilian company “Infracommerce Ltd.” which develops EC one-stop services in Latin America. We will continue to accelerate the development of EC one-stop services globally, including Latin America.

In addition, with regard to services for supporting the digitalization of business processes within client companies, we will continue to focus on the development of new services that integrate BPO functions concentrating on back office operations and cutting-edge technologies, including AI (Artificial Intelligence) and RPA (Robotic Process Automation).

Business Conditions by Segment Category

1. Parent company
As a result of factors such as increased demand for outsourcing services at our company, sales volume reached ¥142.531 billion resulting in a revenue increase of 8.5% compared with the same period last year, and segment profits reached ¥5.996 billion resulting in earnings growth of 0.8% compared with the same period last year.

2. Domestic subsidiaries
With respect to affiliated companies in Japan in the second quarter consolidated accounting period, sales volume was ¥13.682 billion resulting in a revenue decline of 8.5% compared with the same period last year due to the impact of merging some subsidiaries (absorption-type mergers with our company as the surviving entity) and excluding them from the scope of consolidation. Additionally, segment profits were ¥264 million resulting in an earnings decline of 62.6% compared with the same period last year. The main reason for this result was the impact of increased costs for the start-up of new business at newly consolidated subsidiaries.

3. Overseas subsidiaries
With respect to affiliated companies overseas, orders for services in China were favorable and sales volume reached ¥25.868 billion, resulting in earnings growth of 15.6% compared with the same period last year. On the other hand, with regard to profit and loss, there was a segment loss of ¥347 million (there was segment profit of ¥37 million in the same period last year) due to an increase in temporary surplus personnel costs related to the completion of some large-scale projects in South Korea, up-front investments in Europe and other factors.

Net sales per segment for the cumulative 3rd quarter (consolidated) ending at the end of March 2017

Business Conditions by Segment Category

* Note: Elimination of inter-segment transactions of ¥4,635 million is not included.

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