Honyaku Shares Fall Despite Record Full-Year Revenues

Honyaku Center, Japan’s largest language service provider, released its full-year 2019 financial results on May 5, 2019 (Japan’s fiscal year started April 1, 2018). The publicly listed company’s revenues jumped 13% to JPY 12bn (USD 109.5m) from last fiscal year’s JPY 10.6bn (USD 96.2m), with profits increasing 12.2% year-on-year to JPY 900m (USD 8.2m).

The LSP has bested its previous year’s financial results for three straight years — full fiscal year results from 2017 came in at JPY 10.2bn (USD 93.1m).

In the company’s financial results overview, Honyaku pointed out that it is still executing against a Medium-Term Management Plan intended to last from the fiscal year ending March 2019 to the one ending March 2021. The company reported that sustainable growth from the company’s core translation unit, consolidation from M&A activities, and proactive use of language technologies such as translation productivity tools and machine translation, helped bolster figures.

All Units Growing

Honyaku Center is divided into five business units: Translation, Temporary Staffing, Interpretation, Convention, and Others. In August 2018, a sixth unit, Language Education, was folded into “Others.”

The Translation unit recorded a 12% YoY upswing in revenues to JPY 8.5bn (USD 77.5m). In terms of verticals within the Translation business, “industrial and localization” revenues were up 21.6% to JPY 2.725bn with help from the consolidation of the recently acquired Media Research Institute; patents were up 13.7% to JPY 2.1bn, pharmaceuticals, up 5.5% to JPY 2.9bn, and finance and legal revenues increased by 1.9% to JPY 744m.

Temporary Staffing, the business unit that dispatches linguists to Honyaku clients in various industries, saw a revenue increase of 5.7% to JPY 1.2bn (USD 10.8m). Honyaku’s Interpretation unit produced a solid 11.3% more revenues YoY to JPY 1bn (USD 9.5m).

The company’s Convention unit enjoyed an updraft from events like the 8th Pacific-Island Leaders Meeting and the 5th World Assembly for Women. This unit’s revenues surged 36.3% beyond last year’s to reach JPY 677m (USD 6.2m). Revenues from the “Others” unit also performed well and generated JPY 593m (USD 5.4m) in revenues, 27% better than last year.

Honyaku noted a couple of key factors that contributed to record financial results, namely: language technology adoption and their continued leading market share in the fields of medicine, patents, “industry and localization,” and finance and legal.

The company’s overview of future plans also mentioned targeting more Big Pharma clients, leveraging productivity tools and software for sectors such as automobiles, electronics, machinery, and ICT, and improving the sales presence of their Interpretation unit in Japan’s Kansai and Chubu regions.

Honyaku expects growth to continue, with the financial results forecast for this coming fiscal year at JPY 12.6bn (USD 114.8m) in revenues, reflecting a 4.9% YoY increase, and JPY 1bn in operating income, up 13.8% YoY.

Investors’ reaction was muted with the stock down in the wake of the results announcement. The company currently trades at less than 1x revenue and a PE ratio in the low teens.