Honyaku Keeps Losing Ground in Core Translation Business

Japan Biggest Translation and Localization Company Honyaku Full Year 2020 Results

On May 18, 2020, Tokyo-listed Honyaku Center (2483.T), released consolidated financial results for the fiscal year ended March 31, 2020.

Japan’s largest language service provider (LSP) reported that, due to the decline in revenues from its core Translation Business, overall sales for the 12 months to March 31 fell 3.8% year on year to JPY 11.55bn (USD 107m).

This continues the downward trend from the first nine months of the same fiscal year, where revenues slid marginally by 0.9% year on year to JPY 8.6bn (USD 80m) as covered by Slator back in February before widespread Covid-19 lockdowns were imposed across the globe. Japan stopped short of imposing a national lockdown backed by penalties and, instead, declared a state of emergency where social distancing was voluntary.

As before, the company stated that it was reporting results against the backdrop of a Japanese economy that had been affected by trade friction with the US and the slowdown of the Chinese economy. The company stated that business had also declined due to the coronavirus-related economic slowdown in the fourth quarter and “the outlook has remained extremely uncertain.”

Operating income dropped 9.6% year on year to JPY 813m (USD 7.5m); while ordinary income also declined by 9.1% to JPY 822m (USD 7.6m) against the comparable period the year prior.

Back in the summer of 2018, Honyaku reorganized into five business units: Translation, Temporary Staffing, Interpretation, Convention, and Others.

Revenues from Honyaku’s core Translation Business fell 4.6% year on year to JPY 8.11bn (USD 75m). The company further broke out this figure into Patents, Pharmaceutical, Industrial, and Financial & Legal.

Patent orders remained strong and sales were up 5.5% year on year to JPY 2.26bn (USD 21m). This, however, could not compensate for the slump across all other sectors.

Net sales from the Pharmaceutical sector decreased 5.1% year on year to JPY 2.75bn (USD 26m). Orders in the Industrial segment were sluggish as well, leading to a 9.2% decline in net sales YoY to JPY 2.47bn (USD 23m).

In the Financial & Legal fields, sales were down 15.0% to JPY 632m (USD 5.9m) against the comparable period the previous year because of weak orders from corporate management departments, the company stated.

Honyaku’s Interpreter business was going strong heading into the pandemic, generating business mainly from financial and IR firms, according to the company. However, due to Covid-19 and the subsequent “sharp increase in cancellations accompanying the spread of viral infections,” sales increased only slightly by 1.6% year on year to JPY 1.02bn (USD 9.5m).

The Convention unit likewise posted growth in the pre-Covid era, under which most of the reporting period fell. Honyaku attributed the increase to events such as the 12th World Railway Research Conference “ which ended November 1, 2019, as well as from “medical associations, corporate events, etc.”

Thus, sales for the Convention business grew 15.5% year on year to JPY 782m (USD 7.3m). Of course, it is likely that most of that revenue will evaporate in the current financial year — and will be unlikely to return to pre-Covid levels for some time.

Temporary Staffing, where the company provides personnel “with high language skills” to the financial, IT, and pharmaceutical sectors, reported a marginal increase of 0.6% year on year to JPY 1.2bn (USD 11m).Sales under Others, meanwhile, dropped by 26.9% year on year to JPY 433m (USD 4m), which, as in previous quarters, the company attributed to the impact of Honyaku’s 2017 acquisition of Media Research Inc.

Shares in Japan’s largest LSP have been down 37% since the beginning of 2020. Market capitalization stood at a meagre USD 39m — less than half the revenue or 6x earnings at the time of writing.