Account Closing Review

Consolidated Financial Results for the Six Months Ended September 30, 2021

(Adoption of the Accounting Standard for Revenue Recognition)

  • ・transcosmos (the Company) has adopted the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) and the related guidance since the beginning of the current first quarterly consolidated accounting period.
  • ・Accordingly, all sales generated from the transactions in which the Company has acted as an agent (i.e. agency transactions), such as in the Company’s internet advertising business, are presented on a net basis whereas, previously these were presented on a gross basis (total sales minus cost of sales).
  • ・In this report, the Company has restated the consolidated sales generated from the agency transactions in each quarter of the previous fiscal year on a net basis from the gross basis (total sales minus cost of sales). For this reason, the consolidated sales amount for the first half of the previous fiscal year has decreased by 10,337 million yen.
    Please note that there is no change in operating income line and below as a result of the above restatement.

(Units: millions of yen)

  Prior period
results
Current period
results
Year-on-year
comparison (%)
Net sales 153,396 168,088 9.6
Gross profit 32,061 36,294 13.2
Selling, General & Administrative Expenses 23,575 25,527 8.3
Operating income 8,485 10,767 26.9
Ordinary income 8,677 10,766 24.1
Net income attributable to owners of transcosmos inc. 5,569 8,772 57.5

Qualitative Information Regarding Consolidated Business Results

The Covid-19 pandemic continued to impact the Japanese economy during the current second quarterly consolidated accounting period. Despite signs of recovery in certain industries following a gradual restarting of economic activities, the economic outlook remains uncertain.
In the business environment where our Group operates, demands for outsourcing services that lead to higher productivity, stronger cost competitiveness, and higher sales remain solid. At the same time, under the COVID-19 crisis, there is a growing need for services that enable companies to promote digitalization, build up e-commerce and other contactless sales channels, apply teleworking models, and implement BCP measures.
Against this backdrop, and as the digital transformation partner of our clients, our Group has continued to take an energetic approach, delivering both Digital Marketing • E-Commerce • Contact Center (DEC) services and Business Process Outsourcing (BPO) services that assist our clients in managing and transforming their businesses. At the same time, building on our Group’s immense execution capability, we have also played a role as a social infrastructure, proactively providing the national and local governments with services that assist them in carrying out various policies.
In addition, we have created and released services as well as enhanced our organizational structure in order to meet the accelerated demand for digital transformation (DX) in both the public and private sectors.
Specifically, we deployed Google Cloud Contact Center AI to Avaya Japan’s platform for the first time in Japan, thereby enhancing our conversational AI services. With a feature that hands over AI-User conversational data to agents, there is no need for users to repeat their inquiries which significantly takes the burden off users. At the same time, it makes agents solve user problems quicker than ever as they know user inquiries before interacting with users. We also released LINE Official Account 100% Utilization Diagnostics service. By leveraging our abundant service record in implementing and operating 250 LINE Official Accounts for about 200 clients, we assess LINE Official Account utilization rate with our six proprietary performance indicators, and help businesses solve their challenges and operate their accounts more effectively than ever. In addition, we began offering Business Support AI Service - AI chatbot operations services designed for B2B businesses. The service comes with an AI chatbot and a dedicated annotation trainer who performs real-time tuning. Chatbot saves man-hours for inquiry handling, and helps our clients keep up with employee inquiries about internal procedures and systems that have increased due to the adoption of remote working models. By making chatbots handle inquiries related to BPO services, we will further streamline our back-office services.
With regard to our initiatives for enhancing our organizational structure, we setup the DX Promotion Division under the Digital Marketing・E-Commerce・Contact Center (DEC) Headquarters to strengthen the link among various DEC services, and to push our multichannel integrated services. We will enhance our services that comprehensively help our clients achieve DX. Also, given that teleworking has taken root in the Company, we have discussed how we should best own and utilize our business premises in order to adapt to this new workstyle in terms of both employee engagement and cost optimization over the medium term. As a first step, we canceled the lease agreement of the current Tokyo Main Office located in Shibuya, and moved and centralized the Headquarter functions to Tokyo Main Office 2 in Ikebukuro, and moved all Sales functions to Shibuya First Tower.
We have also promoted our initiatives for accelerating global expansion. For example, we opened a new warehouse in the center of Jakarta, and beefed up our e-commerce business targeting the market. In South Korea, we released Global E-Commerce Service that helps South Korean companies open and operate their shops on Rakuten Ichiba. Our Global E-Commerce Service not only covers the entire processes required for Korean brands to open their shops on Rakuten Ichiba, i.e. completing the registration process, building online shops, planning content for brand storefronts, designing, and translating their websites into Japanese, but also offers post-opening operational services including ad planning, marketing, analysis, and customer care at one-stop.

Business Results by Segment

1. Parent Company

Parent Company achieved sales of 114,305 million yen, up 5.3% from the same period last year, primarily due to expanded demand for the Company’s outsourcing services. The segment income resulted in 7,123 million yen, up 25.0% from the same period last year, due primarily to an order increase from the public sector and higher profitability generated from existing projects.

2. Domestic Affiliates

Domestic affiliates’ sales resulted in 19,239 million yen, up 11.4% from the same period last year, due primarily to a steady increase in orders in listed subsidiaries. The segment income grew by 5.3% from the same period last year to 1,791 million yen due primarily to healthier profitability in listed subsidiaries.

3. Overseas Affiliates

Overseas affiliates achieved sales of 39,632 million yen, a 22.9% increase from the same period last year, primarily due to an order increase in subsidiaries in South Korea, South East Asia and China. The segment income was 1,832 million yen, a 69.9% increase from the same period last year, primarily driven by higher profitability generated by subsidiaries in South Korea and South East Asia.

Note that all segment income figures are calculated based on the operating income shown on the quarterly consolidated statement of income.

■ Consolidated net sales per segment for the six months ended September 30, 2021

Business Results by Segment

*Note: Elimination of inter-segment transactions of ¥-5,087 million is not included.

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