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Account Closing Review

Consolidated Performance for the 3Q Fiscal year March 2019

(Units: millions of yen)

  Current period
results
Prior period
results
Year-on-year
comparison (%)
Net sales 208,646 194,848 7.1
Gross profit 34,169 34,282 -0.3
Selling, General & Administrative Expenses 31,277 30,025 4.2
Operating income 2,892 4,256 -32.1
Ordinary income 3,176 3,694 -14.0
Net income attributable to shareholders of transcosmos inc. 5,994 1,422 321.3

Qualitative Information Regarding Consolidated Operating Results

The Japanese economy in the third quarter consolidated year-to-date period has remained in a moderate recovery trend due to the impact of factors including improvements in employment conditions, corporate earnings and increased capital investment, as well as economic recovery and improvements in overseas economies. On the other hand, the outlook remains uncertain due to issues including concerns about the impact on the global economy of intensified trade friction between the US and China, and fluctuations in the financial and capital markets.
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 advances in digital technology such as IoT and AI. Against this setting, in addition to existing services, our group has actively expanded new services that we have been developing for future growth in Asian markets focusing on Japan, China and Korea, and this has led to an increase in orders. In addition, we have continued to strengthen efforts such as those for developing and providing services that utilize digital technology, and to accelerate overseas expansion.
In our efforts to utilize digital technology, we have newly established the “Marketing Chain Management Center Hakata,” where we have actively introduced digital technology, as an operation base to provide call center, chat support and digital marketing services. In order to provide next-generation contact center services and establish an environment where employees can work comfortably, we are utilizing digital technologies at this center that include phoneless, wireless headphones and touch panel PCs facilitated by the introduction of softphone software, as well as our own voice recognition solution “transpeech” and biometric authentication equipment. In addition, for new services we are utilizing “AmazonConnect,” the cloud contact center of Amazon Web Services Japan (hereafter, AWS), and we have developed and started providing services that integrate the AI functions of AWS, such as voice recognition IVR and conversation bot. Furthermore, we have concluded a strategic business alliance with IDH Media Limited, a company from Poland that provides “indaHash,” the world’s No. 1 platform for influencer marketing. Through “indaHash” we will support SNS promotions focusing on the Instagram agendas of client companies.
Overseas, we opened our first contact center base in Taiwan, where we will utilize Japan’s quality control and security measure know-how to provide contact center services for the Taiwan market. In addition, we have formed a capital alliance with Heroleads (Thailand) Co., Ltd., which develops Internet advertising business in Thailand. This will strengthen our digital marketing business for the ASEAN market. Moreover, we have established PT. Transcosmos Commerce to support EC related business in Indonesia. The Indonesian government promotes the EC industry as a national policy, and we will continue to develop business in Indonesia’s rapidly expanding EC market.
In other initiatives, we established the “BPO Center Sasebo” operation base in Nagasaki Prefecture with a focus on back-office services, and we will start operations in January 2019. In addition, we concluded the “Agreement on cooperation between Ichikawa City and transcosmos inc.” with Ichikawa City in Chiba Prefecture. We will cooperate with Ichikawa City on matters such as the utilization and application of information and communications technology, which is our forte, with the aim of improving the efficiency and convenience of the citizens’ lives and facilitating communication. We also introduced “3 years Return Pass” as a new system for recruiting recent graduates. This system gives personnel who have cleared a certain level in the recruiting process of new graduates the right to join the company within three years, and this will provide opportunities to allow a wide range of employment for many people.

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 ¥155.652 billion, resulting in a revenue increase of 2.8% compared with the same period last year. Segment profit decreased by 40.0% compared with the same period last year to ¥2.489 billion due to the impact of factors including a decline in large-scale short-term projects and upfront investment implemented in the previous period.

2. Domestic subsidiaries

With respect to affiliated companies in Japan, sales volume increased 9.3% compared with the same period last year to ¥15.047 billion due to strong orders, including those at listed subsidiaries, and the impact of new consolidated subsidiaries. Segment profit increased 142.3% compared with the same period last year to ¥388 million due to improved profitability resulting from business restructuring at some subsidiaries.

3. Overseas subsidiaries

With respect to affiliated companies overseas, orders for services in China and Korea were favorable and sales volume reached ¥43.928 billion, resulting in earnings growth of 22.9% compared with the same period last year. Segment profit amounted to ¥13 million (there was a segment loss of ¥61 million in the same period last year) due to the impact of factors including improved profitability at Korean subsidiaries and business restructuring at European subsidiaries.

Net sales per segment for Consolidated Performance for the 3Q Fiscal year March 2019

Business Conditions by Segment Category

*Note: Elimination of inter-segment transactions of ¥-5,982 million is not included.

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