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Account Closing Review

Consolidated Performance for the Fiscal year Ending March 2018

(Units: millions of yen)

  Current period
results
Prior period
results
Year-on-year
comparison (%)
Net sales 266,645 242,314 10.0
Gross profit 47,267 42,902 10.2
Selling, General & Administrative Expenses 41,175 34,822 18.2
Operating income 6,092 8,080 -24.6
Ordinary income 1,802 6,742 -73.3
Net income attributable to shareholders of transcosmos inc. ▲2,176 7,156 -

Qualitative Information Regarding Consolidated Operating Results

In the environment surrounding the services offered by our group, there is expanding demand for outsourcing services that lead to advances such as improved operational efficiency, enhanced cost competitiveness and sales expansion. This is against a backdrop that includes a declining labor force, the globalization of businesses, expansion of digital communication centered on chat, and the progress of digital technologies such as IoT and AI. Under these circumstances, our group has actively expanded BPO services focused on operations such as DEC services that integrate digital marketing, EC and contact centers, along with back office and design development, and this has led to an increase in orders. In terms of revenue, although profitability remained on an improving trend, which included a reduced impact of investment costs that had preceded the second half of the year and an improved utilization rate at operation centers, there was an increase in selling, general and administrative expenses associated with upfront investment for future growth focused on personnel expenses.

Our main initiatives in this consolidated fiscal year were to create new services and to enhance our service structure, and we have also made upfront investments for future growth.

In an effort to create new services, within the DEC services area we have continued to expand the functions and service lineup for the “DEC (R)” Series, which we are focusing on as one of our main services. Specifically, we began offering “DECAds for Emergency,” which handles chat window support when emergency situations such as recalls, or information leaks occur. In addition, through collaboration between the cloud-type contact center platform “Contact-Link” and the DMP service “DECode,” we can achieve unified management of customer conversation logs and marketing data and have strengthened ad delivery services utilizing contact center conversation logs. Furthermore, we have expanded services that link with the messenger application LINE. Specifically, we began offering services such as hybrid phone and chat customer support via “LINE,” which utilizes the LINE Customer Connect functions “LINE to Call” and “Call to LINE,” customer communication services that link LINE and Salesforce Service Cloud, and marketing support services for LINE, which are jointly operated with Dentsu Digital Inc. and Dentsu Digital Drive Inc. In collaboration with Line Corporation, we established the “National SNS Counseling Association” and started a business to implement preventive measures for problems such as suicide and bullying through efforts that include opening a consultation service desk and disseminating information through SNS. In addition, we established a subsidiary called “playground” that specializes in the entertainment industry, providing electronic ticket issuance and marketing support services, and which has also begun offering new communication services originating from the “QuickTicket” electronic ticketing system. Also in “Gotcha!mall,” which is a platform that connects consumers to stores and brands, it was decided to introduce Jeans Mate Corporation, Kasumi Co., Ltd. and Seven & i Holdings Co., Ltd., and we have started offering products from each of them. Meanwhile, in the BPO services domain, we have continued to focus on developing and providing “Digital BPO (R) Services” that integrate into a hybrid the latest digital technology and the operational excellence that we have cultivated since our founding. We will also continue contributing to improved productivity for our client companies by simultaneously speeding up operations and reducing man-hours.

In an effort to strengthen our service systems, we have focused mainly on areas such as expanding our service bases and strengthening our organizational structure with a view to increasing demand. Specifically, we have established the “Changsha Center” contact facility, which is our eighth base in China. In addition, we have established an “ad management team for Amazon” in Sendai, which is an organization consisting of expert operations staff from the advertisement publishing service “Amazon Marketing Services,” which is provided by Amazon Japan LLC and its affiliated companies, and the “Amazon Advertising Platform.” Furthermore, as an information security initiative, a Thai subsidiary has acquired ISO / IEC 27001: 2013 certification, which is an international standard for information security management systems (ISMS).

Business Conditions by Segment Category

The reporting segment classifications have been changed starting from the current first quarter consolidated accounting period, and the following year-on-year comparisons were made using the readjusted values for segment classifications after changing the values for the same period last year.

1. Parent company

As a result of factors such as increased demand for outsourcing services at our company, sales volume reached 203.097 billion, resulting in a revenue increase of 4.9% compared with the same period last year. However, segment profit declined by 30.5% to ¥5.834 billion due to the impact of factors such as increased selling, general and administrative expenses associated with upfront investment for future growth.

2. Domestic subsidiaries

With respect to affiliated companies in Japan, due to an increase in orders at some subsidiaries sales volume reached ¥18.797 billion, resulting in a revenue increase of 0.2% compared with the same period last year. However, due to factors such as increased start-up costs for new businesses, segment profits were ¥256 million, resulting in an earnings decline of 43.9% 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 ¥52.72 billion, resulting in earnings growth of 44.8% compared with the same period last year. Regarding segment losses, profits declined by 96.7% to ¥24 million compared with the same period last year, due to the impact of factors such as business restructuring at some European subsidiaries, but the prospect of restoring profitability has been achieved.

* 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 Ending March 2018

Business Conditions by Segment Category

* Note: Elimination of inter-segment transactions of ▲¥7,969 million is not included.

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