Honyaku Center Posts Decline in Translation Revenues for H1 FY 2020

Tokyo-listed Honyaku Center (2483.T), Japan’s largest language service provider, published consolidated financial results for the first half of its fiscal year ending March 31, 2020.

In the six months to September 30, 2019, sales slid to JPY 5.65bn (USD 51.73m), down 1.1% year on year. Operating profit, however, increased 4.4% YoY to JPY 344m (USD 3.16m) thanks to better margins in the company’s Translation Business and the improved performance of its Conventions Business.

The company said the sales dip was due to the decline in revenues from its core Translation Business, despite an increase in sales from both its Interpretation and Convention business units. Honyaku’s two other business lines are Temporary Staffing and “Others.”

Temporary Staffing, “which dispatches human resources with high language skills,” posted a very slight 0.2% dip in revenues YoY to JPY 604m (USD 5.53m) as sales from IT-service, financial, and pharma related companies proved steady.

Interpretation revenues were up 16.2% year on year to JPY 556m (USD 5.09m) due to an increase in orders from pharmaceutical companies; while the Convention Business posted a 43.0% sales increase YoY to JPY 327m (USD 2.99m).

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Revenues reported under “Others” decreased 39.2% year on year to JPY 203m (USD 1.86m), due largely to a change in Honyaku’s Media Research Inc. unit, which it acquired in 2017.

For its core Translation Business, Honyaku further breaks out revenues into Patents, Pharmaceutical, Industrial, and Financial & Legal. Save for Patents — which posted a revenue increase of 12.5% ​​YoY to JPY 1.16bn (USD 10.64m) — sales were down across all sectors.

Patents were reportedly bolstered by an increase in orders from firms related to intellectual property, as well as a steady stream of business from patent offices that saw a rise in the number of international patent applications.

Meanwhile, orders from major Pharmaceutical customers were steady. However, according to Honyaku, this could not compensate for “the decline in large-scale projects recorded in the same period of the previous year.” Thus, Pharma sales were down 4.4% year on year to JPY 1.31bn (USD 12m).

Sales in the Industrial sector, on the other hand, dropped 10.3% to JPY 1.14bn (USD 10.41m) versus the comparable period of the prior year as “orders from automobile-related companies, our main customers, remained sluggish,” the company said.

Within Financial & Legal, sales declined 11.2% year on year to JPY 344m (USD 3.15m) “due to sluggish orders from corporate management departments,” Honyaku said.

As a result, overall sales in the Translation Business fell 2.6% to JPY 3.96bn (USD 36.25m) year over year.

In explaining its latest results, Honyaku pointed to the uncertainty in the future of the Japanese economy brought about by friction from US trade policy, a slowing Chinese economy, and fluctuations in financial capital markets. As such, the company “is aiming for sustainable growth of its core translation business based on […] a three-year plan from the fiscal year ending March 2019.”

In line with this, Honyaku Center said it has promoted “the active use of cutting-edge technologies such as machine translation, and worked to capture the demand for translation / interpretation associated with the global expansion of companies.”

The markets registered no reaction to the LSP’s latest financial report as growth remained flat. Market cap for Honyaku was around JPY 6.7bn (USD 61.5m) at the time of writing.