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Account Closing Review

Consolidated Performance for the Fiscal Year Ended March 31, 2018

(Units: millions of yen)

  Current period
results
Prior period
results
Year-on-year
comparison (%)
Net sales 61,898 56,616 9.3
Gross profit 9,949 9,593 3.7
Selling, General & Administrative Expenses 9,508 8,242 15.4
Operating income 440 1,351 -67.4
Ordinary income 210 983 -78.6
Profit attributable to owners of parent 123 436 -71.7

* As a result of revisions to the accounting standards for business combinations, the former quarterly net income has been changed to quarterly net income “attributable to shareholders of the parent company” since the fiscal year ended March 2016

Qualitative Information Regarding Consolidated Operating Results

The Japanese economy in the first quarter consolidated year-to-date period has been in a moderate recovery trend, including continued improvement in areas such as corporate earnings as well as the employment and income environment, with signs of personal consumption also picking up. On the other hand, overseas, in addition to the strong US economy, China’s economy is showing signs of picking up, but there is concern about an economic downturn accompanying the rise of uncertainties in overseas economies, including the policy trends of the new US administration, growing uncertainty about the British EU withdrawal issue and geopolitical risks in the Middle East situation, 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 related to improvements such as increased business 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, we have endeavored to create new services and to strengthen our service systems, while also making upfront investments for future growth.
In an effort to create new services, we have made use of digital data to expand our unique advertising menu “Decads,” which provides full services ranging from advertising and marketing to support. Specifically, as part of an expanded DECAds series, we have begun offering a variety of communication channels including the chat platform “DECAds Chat Edition,” LINE and Facebook Messenger, which support One to One communication between client companies and customers via chatting. The series also includes “DECAds Connect Edition,” which supports communication between client companies and customers by suitably combining chat solutions such as bot and AI with the databases retained by client companies, including customer information, purchase histories and website logs.

In addition, we have introduced the world's most advanced machine learning automation and AI platform “DataRobot” within our company, and we have initiated efforts to train more than 100 data scientists to master this platform while also beginning to provide services utilizing this platform for client companies.

In an effort to strengthen our service systems, we have actively promoted alliances with leading companies in Japan and overseas. Particularly, in Japan, we have agreed to collaborate with Trade Shift Japan Co., Ltd., which provides the “Tradeshift” global electronic trading platform. We will combine “Tradeshift” with the BPO services offered by our company to promote the digitization of indirect operations at client companies in order to support enhancement of their competitiveness. Overseas, we have agreed to a capital and business alliance with Soft Space Sdn Bhd., a FinTech company in Malaysia. We will collaborate to develop CRM solutions that combine that company’s mobile payment services with our own services in order to provide advanced CRM services that utilize online and offline mobile payment data. Furthermore, we have made an additional investment in Anchanto Pte. Ltd., a capital business partner that is an EC logistics and sales platform provider in Singapore. While strengthening our relationship with the company, we have also acquired exclusive marketing rights in Japan and for sales to Japanese companies (domestic and overseas sales) for the SaaS type EC sales platform “SelluSeller” that is offered by Anchanto. In the future, we will begin providing and selling “SelluSeller” operation services targeting Japanese and multinational companies moving into areas centering on Japan, ASEAN and India.

In other initiatives, we have enhanced the recruitment and training of human resources with a focus on operators. In particular, we have newly established a chat recruitment consultation desk at “Marketing Chain Management Center Oita,” a service base in Oita Prefecture, with the aim of promoting the recruitment of young people and those who are motivated by new ways of working. In addition, at a service base in Hokkaido we have opened the “Work it! Plaza Sapporo” recruitment plaza, which performs functions related to recruitment, including job searches and consultation related to categories of work. Furthermore, we have enhanced the functions of our “Work it!” dedicated employment information website and reopened it. We will boost our service competitiveness by strengthening the recruitment and training of human resources, while also contributing to the revitalization and development of local communities through job creation.

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 ¥48.958 billion resulting in a revenue increase of 8.4% compared with the same period last year. However, due to influences such as rising costs of large-scale projects and upfront investment for future growth, segment profits were ¥638 million resulting in an earnings decline of 51.9% compared with the same period last year.

2. Domestic subsidiaries

With respect to affiliated companies in Japan, sales volume was ¥4.654 billion resulting in a revenue decline of 0.9% compared with the same period last year, due to factors such as the completion of projects and upfront investments for the start-up of new business at some subsidiaries. Moreover, segment profits were ¥42 million, resulting in an earnings decline of 48.0% compared with the same period last year.

3. Overseas subsidiaries

With respect to affiliated companies overseas, orders for services in China and Korea were favorable and sales volume reached ¥10.372 billion resulting in earnings growth of 25.4% compared with the same period last year. On the other hand, with regard to profit and loss, there was a segment loss of ¥235 million (there was a segment loss of ¥69 million in the same period last year) due to factors such as continuing upfront investments in Europe.

* Note that segment profit is based on operating income in the consolidated income statement.

Net sales per segment for Consolidated Performance for the Fiscal Year Ended March 31, 2018

Business Conditions by Segment Category

* Note: Elimination of inter-segment transactions of ¥2,086 million is not included.

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