TKC 9746

TKC

Recent Updates

2021-11-10

FY09/21 flash update

2021-10-11

Q3 FY09/21 report update

2021-08-11

Q3 FY09/21 flash update / Upward revision to its dividend forecast

Get in touch

1758 Tsurutamachi Utsunomiya, Tochigi Prefecture, Japan

http://www.tkc.jp/company/

028-648-2111

Summary

TKC provides computer-based accounting services to accounting firms employing tax accountants and certified public accountants (Accounting Firm segment: 70.9% of total sales in FY09/17). TKC uses a mainframe computer to handle accounting tasks for its accounting firm clients. TKC’s clients pay fees to TKC for preparing accounting documents for their customers, as well as fees to rent TKC’s accounting software.

IT Services

Key dates

2016-11-01

Coverage initiation

Q3 FY09/21 flash update / Upward revision to its dividend forecast

2021-08-11

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Executive Summary

Core businesses

TKC provides computer-based accounting services to accounting firms employing tax accountants and certified public accountants (Accounting Firm segment: 69.5% of total sales in FY09/20). TKC uses a mainframe computer to handle accounting tasks for its accounting firm clients. TKC’s clients pay fees to TKC for preparing accounting documents for their customers, as well as fees to rent TKC’s accounting software. Based on the number of accounting firms, TKC’s market share was 36.5% (of the 26,608 total accounting firms in Japan [according to a 2018 announcement regarding a 2016 economic census by the Ministry of Internal Affairs and Communications and the Ministry of Economy, Trade and Industry], TKC’s clients numbered 9,700 accounting firms as of September 30, 2020).

Accounting Firm segment: The company’s Accounting Firm segment has a distinctive business model in that its clients are not the small and medium-sized enterprises (SMEs) who contract for accounting services, but rather the accounting professionals (tax accountants and certified public accountants) that offer corporate tax, finance, and management advice and provide bookkeeping services to support those SMEs. TKC has also established the TKC Nationwide Society*¹, a professional organization that it works with to build relationships with financial institutions and help SMEs gain better access to financing.

According to the 2020 White Paper on Small and Medium Enterprises, SMEs*² and small enterprises*³ account for 99.3% of the 1.61mn companies in Japan outside of primary industries, 64.6% of the 41.1mn people employed by these companies, and 44.1% of total sales generated by these companies. This presents a large potential client base for TKC, as a Ministry of Finance survey in 2018 shows nearly 90% of these SMEs using certified tax accountants to prepare their financial statements (89.1% file corporate tax returns through tax accountants). A total of 580,000 SMEs use TKC’s accounting system. In addition, the number of listed companies and other groups is 4,100, and the total number of associated companies, including large corporations, is about 850,000 (as of end-FY09/20).

*1: The TKC Nationwide Society is Japan’s largest organization for accounting professionals. About 14.4% of the nation’s roughly 79,200 tax accountants and some 36% of the 26,600 accounting firms were members as of 2020.
*2: How the Japanese government defines SMEs differs depending on the industry in which they operate. The largest number of employees (some 5.8mn people) is at companies deemed SMEs in the manufacturing industry. SMEs in manufacturing are defined as those capitalized at less than JPY300mn or those that have fewer than 300 full-time employees. By comparison, in the retail industry, there are about 3.3mn employees at companies that are classified as SMEs, defined as those capitalized at less than JPY500,000 or having fewer than 50 full-time employees.
*3: Under Japanese law (the Small and Medium-size Enterprise Basic Act), in the case of manufacturing and other category, small enterprises are defined as companies employing fewer than 20 people; in the case of retail and service industries, small enterprises are defined as companies with fewer than five employees.

TKC’s accounting system uses a proprietary computation center to create reliable financial statements for SMEs (the clients of accounting firms). This allows the SMEs to more easily obtain loans from financial institutions. Unlike competitors, TKC’s services involve a third party (TKC) preparing monthly and annual financial statements, so retroactive processing of historical financial data (revisions, additions, and deletions) is not possible. SMEs that use accounting firms belonging to the TKC Nationwide Society can obtain loans from the financial institutions that partner with the society, using “Certificates of Bookkeeping Timeliness” issued by TKC (a certificate offering third-party verification of the timeliness and accuracy of prepared financial documents).

At the Local Government segment (25.6% of FY09/20 sales), TKC provides basic resident registration systems to local governments based on the technology and expertise it holds in the Accounting Firm segment.

According to TKC, it had a domestic market share of about 9% in March 2020 (by number of organizations using its basic resident registration systems). As of end-September 2020, TASK Cloud Service (core systems: cloud-based basic resident registration and tax systems), a packaged system operated by the company’s data centers that can be jointly used over the cloud by customers across the nation, had been adopted by over 160 organizations across Japan. In addition, TKC was the first to offer an electronic regional tax filing system that receives tax data, screens it, and ensures its originality. The company has a top market share of about 43% for this service (770 users as of end-March 2020). Furthermore, the number of municipalities using TKC’s system (including general affairs associations) reached 1,000 as of end-FY09/20.

Trends and outlook

For FY09/21, the company reported full-year consolidated sales of JPY66.2bn (-2.3% YoY), operating profit of JPY12.3bn (+8.2% YoY), recurring profit of JPY12.7bn (+8.5% YoY), and net income attributable to owners of the parent of JPY8.7bn (+11.1% YoY). Accounting Firm segment sales declined 3.7% YoY, Local Government segment sales rose 1.9% YoY, and Printing segment sales fell 5.5% YoY, with YoY declines in sales largely attributable to the company’s early adoption of the Accounting Standard for Revenue Recognition that listed companies are required to transition to from April 1, 2021. After applying the new standard, sales were JPY2.5bn lower compared to not applying the standard. The rationale for adopting the new accounting standard early was to acquire expertise in its implementation so that TCK can provide
consulting services to listed companies.

For FY09/22, the company projects full-year consolidated sales of JPY67.6bn (+2.0% YoY), operating profit of JPY12.6bn (+2.0% YoY), recurring profit of JPY12.9bn (+2.0% YoY), and net income attributable to owners of the parent of JPY8.9bn (+2.0% YoY), and plans to pay an annual dividend of JPY72.0 per share (flat YoY).

TKC does not release a medium-term business plan. However, TKC Nationwide Society, an organization that counts TKC’s client firms among its members and has a strong influence on TKC’s management strategy, releases strategic targets. By 2021, the 50th anniversary of the establishment of the society, TKC Nationwide Society targets 15,000-member tax accountants and certified public accountants (+32% versus end-FY09/20) and 500,000 installations of its accounting software FX Series (+90%). TKC prioritizes three long-term targets: sales growth of 3% YoY or more, shareholders’ equity ratio of 70% or more, and ROE of 8% or more.

Strengths and weaknesses

Shared Research sees TKC’s strengths as a stable earnings base supported by the TKC Nationwide Society (which counts TKC’s client firms among its members), an accounting system that creates reliable earnings statements, which helps SMEs obtain loans, and a track record of accounting software that supports accounting firms’ management. Weaknesses: slow growth as a result of clinging too tightly to its past success, a weak appeal to SMEs seeking simpler services, and low capital efficiency due to low asset turnover.

Key financial data

Income statement		FY09/11	FY09/12	FY09/13	FY09/14	FY09/15	FY09/16	FY09/17	FY09/18	FY09/19	FY09/20	FY09/21	FY09/22
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est.
Sales		53,635	53,387	53,115	54,502	54,928	57,750	59,705	61,621	66,120	67,814	66,221	67,550
	YoY	0.4%	-0.5%	-0.5%	2.6%	0.8%	5.1%	3.4%	3.2%	7.3%	2.6%	-2.3%	2.0%
Gross profit		32,121	33,485	33,142	34,112	35,747	37,406	39,285	40,619	43,298	45,147	46,902
	Gross profit margin	59.9%	62.7%	62.4%	62.6%	65.1%	64.8%	65.8%	65.9%	65.5%	66.6%	70.8%
SG&A expenses		26,905	27,262	27,178	27,920	29,006	29,764	30,718	31,939	33,951	33,766	34,587
	YoY	0.6%	1.3%	-0.3%	2.7%	3.9%	2.6%	3.2%	4.0%	6.3%	-0.5%	2.4%
	SG&A ratio	50.2%	51.1%	51.2%	51.2%	52.8%	51.5%	51.4%	51.8%	51.3%	49.8%	52.2%
Operating profit		5,215	6,222	5,964	6,192	6,741	7,642	8,567	8,679	9,347	11,381	12,314	12,560
	YoY	-13.4%	19.3%	-4.1%	3.8%	8.9%	13.4%	12.1%	1.3%	7.7%	21.8%	8.2%	2.0%
	Operating profit margin	9.7%	11.7%	11.2%	11.4%	12.3%	13.2%	14.3%	14.1%	14.1%	16.8%	18.6%	18.6%
Recurring profit		5,421	6,431	6,186	6,401	7,042	7,604	8,792	8,961	9,669	11,685	12,673	12,930
	YoY	-12.3%	18.6%	-3.8%	3.5%	10.0%	8.0%	15.6%	1.9%	7.9%	20.9%	8.5%	2.0%
	Recurring profit margin	10.1%	12.0%	11.6%	11.7%	12.8%	13.2%	14.7%	14.5%	14.6%	17.2%	19.1%	19.1%
Net income attributable to owners of the parent		3,000	3,112	3,685	3,604	4,011	4,770	6,071	6,158	6,721	7,821	8,686	8,860
	YoY	-13.9%	3.7%	18.4%	-2.2%	11.3%	18.9%	27.3%	1.4%	9.1%	16.4%	11.1%	2.0%
	Net margin	5.6%	5.8%	6.9%	6.6%	7.3%	8.3%	10.2%	10.0%	10.2%	11.5%	13.1%	13.1%
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000)		53,462	53,462	53,462	53,462	53,462	53,462	53,462	53,462	53,462	53,462	53,462
EPS (JPY)		56.17	58.33	69.22	67.78	75.59	89.83	114.57	111.73	127.76	148.82	164.93	168.21
EPS (fully diluted; JPY)		-	58.30	69.10	67.58	75.32	89.44	114.08	116.21	127.51	-	-
Dividend per share (JPY)		22.0	22.0	22.0	22.0	35.5	40.0	50.0	52.5	55.0	60.0	72.0	72.0
Book value per share (JPY)		949.17	987.67	1,053.12	1,102.70	1,152.19	1,187.04	1,275.85	1,343.16	1,362.39	1,466.56	1,582.45
Balance sheet (JPYmn)
Current assets		28,291	31,645	33,352	34,944	31,666	29,554	30,545	31,747	41,073	35,844	36,107
	Cash and cash equivalents	19,083	22,614	22,922	23,625	21,919	19,552	20,039	22,268	29,810	26,769	26,426
	Trade receivables	5,805	5,865	7,300	7,648	6,377	6,299	6,555	7,690	8,755	7,014	6,973
	Inventories	609	506	561	869	636	630	754	618	1,089	722	411
	Other	2,794	2,660	2,569	2,802	2,734	3,073	3,197	1,171	1,419	1,339	2,297
Fixed assets		38,746	37,943	39,371	40,322	45,170	51,562	54,883	58,454	55,915	61,826	67,298
	Tangible fixed assets	15,312	14,426	13,740	13,668	14,495	14,906	16,212	17,464	17,963	17,794	17,540
	Intangible assets	1,258	1,188	1,646	2,744	3,365	3,712	3,812	3,707	3,290	3,120	3,605
	Investments and other assets	22,176	22,329	23,985	23,910	27,310	32,944	34,858	37,282	34,661	40,911	46,152
Total assets		67,037	69,588	72,723	75,266	76,836	81,116	85,428	90,202	96,989	97,671	103,406
Current liabilities		10,791	11,171	10,689	13,281	11,749	13,419	13,345	13,955	16,278	14,701	14,721
	Trade payables	3,125	2,782	3,460	3,296	2,540	2,602	3,289	3,904	4,518	2,983	3,236
	Short-term debt	80	80	64	384	356	401	424	505	683	664	548
	Other current liabilities	7,586	8,309	7,165	9,601	8,853	10,416	9,632	9,546	11,077	11,054	10,937
Fixed liabilities		4,300	4,459	4,613	2,079	2,457	3,140	3,191	3,696	7,590	5,893	5,268
	Long-term debt	27	75	76	164	1,039	984	969	1,156	1,771	1,408	908
	Other	4,273	4,384	4,537	1,915	1,418	2,156	2,222	2,540	5,819	4,485	4,360
Net assets		51,946	53,958	57,421	59,906	62,630	64,557	68,892	72,550	73,121	77,075	83,416
	Capital stock	5,700	5,700	5,700	5,700	5,700	5,700	5,700	5,700	5,700	5,700	5,700
	Capital surplus	5,409	5,409	5,409	5,409	5,419	5,419	5,409	5,409	5,711	6,588	6,589
	Retained earnings	40,522	42,460	44,966	47,399	49,906	52,606	56,549	59,806	63,623	68,533	73,411
	Treasury stock	-38	-143	-194	-406	-349	-350	-968	-971	-1,630	-1,660	-1,352
	Accumulated other comprehensive income	-887	-783	172	388	508	-339	621	917	-1,787	-2,085	-932
	Share subscription rights	-	30	55	100	127	176	178	235	-	-	-
	Non-controlling interests	1,240	1,284	1,312	1,315	1,317	1,345	1,401	1,453	1,504	-	-
Total liabilities and equity		67,037	69,588	72,723	75,266	76,836	81,116	85,428	90,202	96,989	97,671	103,406
Statement of cash flows (JPYmn)
Cash flows from operating activities		5,236	6,889	3,926	4,402	6,485	9,181	8,123	8,810	10,550	10,569	10,550
Cash flows from investing activities		-3,293	-2,634	-2,026	-2,873	-4,558	-7,022	-4,617	-4,013	411	-10,124	-7,201
Cash flows from financing activities		-1,211	-1,324	-1,291	-1,125	-1,333	-2,225	-3,019	-2,567	-3,792	-3,786	-3,691
Financial ratios
Interest-bearing debt		107	155	140	548	1,395	1,385	1,393	1,661	2,454	2,072	1,456
Net cash		18,976	22,459	22,782	23,077	20,524	18,167	18,646	20,607	27,356	24,697	24,970
ROA (RP-based)		8.1%	9.4%	8.7%	8.7%	9.3%	9.6%	10.6%	10.2%	10.3%	12.0%	12.6%
ROE		6.0%	6.0%	6.8%	6.3%	6.7%	7.7%	9.3%	8.9%	9.4%	10.5%	10.8%
Current ratio		262%	283%	312%	263%	270%	220%	229%	227%	252%	244%	245%
Fixed ratio		74.6%	70.3%	68.6%	67.3%	72.1%	79.9%	79.7%	80.6%	76.5%	80.2%	80.7%
Equity ratio		75.6%	75.6%	77.1%	77.7%	79.6%	77.7%	78.8%	78.6%	73.8%	78.9%	80.7%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Note: Accounts receivable amounts shown are after deductions for allowance for doubtful accounts.
Note: On April 1, 2021, the company conducted a two-for-one stock split of its common shares. The figures prior to FY09/20 have been adjusted retroactively to reflect this change.

By segment		FY09/11	FY09/12	FY09/13	FY09/14	FY09/15	FY09/16	FY09/17	FY09/18	FY09/19	FY09/20	FY09/21	FY09/22
(JPYmn)		Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Est.
Sales		53,635	53,387	53,115	54,502	54,928	57,750	59,705	61,621	66,121	67,814	66,221	67,550
	Accounting Firm	38,360	38,122	39,027	39,772	39,067	40,636	42,325	43,781	45,899	47,150	45,412
	Local Government	11,932	12,087	10,881	11,453	12,472	13,455	13,717	14,113	16,413	17,377	17,704
	Printing	3,341	3,177	3,205	3,277	3,388	3,658	3,662	3,726	3,808	3,286	3,105
YoY		0.4%	-0.5%	-0.5%	2.6%	0.8%	5.1%	3.4%	3.2%	7.3%	2.6%	-2.3%	2.0%
	Accounting Firm	-2.1%	-0.6%	2.4%	1.9%	-1.8%	4.0%	4.2%	3.4%	4.8%	2.7%	-3.7%
	Local Government	9.9%	1.3%	-10.0%	5.3%	8.9%	7.9%	1.9%	2.9%	16.3%	5.9%	1.9%
	Printing	-1.5%	-4.9%	0.9%	2.2%	3.4%	8.0%	0.1%	1.7%	2.2%	-13.7%	-5.5%
% of total		100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
	Accounting Firm	71.5%	71.4%	73.5%	73.0%	71.1%	70.4%	70.9%	71.0%	69.4%	69.5%	68.6%
	Local Government	22.2%	22.6%	20.5%	21.0%	22.7%	23.3%	23.0%	22.9%	24.8%	25.6%	26.7%
	Printing	6.2%	6.0%	6.0%	6.0%	6.2%	6.3%	6.1%	6.0%	5.8%	4.8%	4.7%
Operating profit		5,215	6,222	5,964	6,192	6,741	7,642	8,567	8,699	9,347	11,381	12,314	12,560
	Accounting Firm	3,776	4,545	5,372	5,446	5,579	6,479	7,818	8,501	8,725	10,237	10,563
	Local Government	1,407	1,579	492	726	1,100	1,016	576	3	425	1,037	1,705
	Printing	24	90	91	6	54	143	166	168	189	106	39
	Adjustments	7	7	7	12	6	3	5	6	7	-	-
YoY		-13.4%	19.3%	-4.1%	3.8%	8.9%	13.4%	12.1%	1.5%	7.4%	21.8%	8.2%	2.0%
	Accounting Firm	-18.5%	20.4%	18.2%	1.4%	2.4%	16.1%	20.7%	8.7%	2.6%	17.3%	3.2%
	Local Government	3.2%	12.2%	-68.8%	47.6%	51.5%	-7.6%	-43.3%	-99.5%	14,066.7%	144.0%	64.4%
	Printing	50.0%	275.0%	1.1%	-93.4%	800.0%	164.8%	16.1%	1.2%	12.5%	-43.9%	-63.2%
OPM (ex. adjustments)		9.7%	11.7%	11.2%	11.4%	12.3%	13.2%	14.3%	14.1%	14.1%	16.8%	18.6%	18.6%
	Accounting Firm	9.8%	11.9%	13.8%	13.7%	14.3%	15.9%	18.5%	19.4%	19.0%	21.7%	23.3%
	Local Government	11.8%	13.1%	4.5%	6.3%	8.8%	7.6%	4.2%	0.0%	2.6%	6.0%	9.6%
	Printing	0.7%	2.8%	2.8%	0.2%	1.6%	3.9%	4.5%	4.5%	5.0%	3.2%	1.3%
% of total (incl. adjustments)		100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	99.8%	100.0%	100.0%	99.9%
	Accounting Firm	72.5%	73.1%	90.2%	88.1%	82.8%	84.8%	91.3%	97.8%	93.4%	89.9%	85.8%
	Local Government	27.0%	25.4%	8.3%	11.7%	16.3%	13.3%	6.7%	0.0%	4.6%	9.1%	13.8%
	Printing	0.5%	1.4%	1.5%	0.1%	0.8%	1.9%	1.9%	1.9%	2.0%	0.9%	0.3%

Recent updates

FY09/21 flash update

2021-11-10

On November 9, 2021,TKC Corporation announced earnings results for FY09/21; see the results section for details.

Trends and outlook

Quarterly trends and results

Cumulative		FY09/19				FY09/20				FY09/21				FY09/21
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales		14,141	31,936	47,721	66,120	16,320	35,137	51,310	67,814	14,837	33,372	49,587	66,221	100.3%	66,000
	YoY	-3.6%	5.3%	5.4%	7.3%	15.4%	10.0%	7.5%	2.6%	-9.1%	-5.0%	-3.4%	-2.3%		-2.7%
Gross profit		9,421	20,776	31,534	43,298	10,392	22,938	34,088	45,147	10,542	23,731	35,298	46,902
	Gross profit margin	66.6%	65.1%	66.1%	65.5%	63.7%	65.3%	66.4%	66.6%	71.1%	71.1%	71.2%	70.8%
SG&A expenses		7,802	16,098	24,254	33,951	7,928	15,946	24,110	33,766	7,871	15,825	23,796	34,587
	YoY	5.8%	6.0%	5.7%	6.3%	1.6%	-0.9%	-0.6%	-0.5%	-0.7%	-0.8%	-1.3%	2.4%
	SG&A ratio	55.2%	50.4%	50.8%	51.3%	48.6%	45.4%	47.0%	49.8%	53.0%	47.4%	48.0%	52.2%
Operating profit		1,618	4,678	7,280	9,347	2,464	6,991	9,977	11,381	2,670	7,906	11,502	12,314	108.0%	11,400
	YoY	-33.4%	-4.0%	-2.6%	7.7%	52.3%	49.4%	37.0%	21.8%	8.4%	13.1%	15.3%	8.2%		0.2%
	Operating profit margin	11.4%	14.6%	15.3%	14.1%	15.1%	19.9%	19.4%	16.8%	18.0%	23.7%	23.2%	18.6%		17.3%
Recurring profit		1,729	4,850	7,564	9,669	2,581	7,149	10,245	11,685	2,816	8,086	11,808	12,673	108.3%	11,700
	YoY	-31.5%	-2.8%	-2.1%	7.9%	49.3%	47.4%	35.4%	20.9%	9.1%	13.1%	15.3%	8.5%		0.1%
	Recurring profit margin	12.2%	15.2%	15.9%	14.6%	15.8%	20.3%	20.0%	17.2%	19.0%	24.2%	23.8%	19.1%		17.7%
Net income attributable to owners of the parent		1,170	3,466	5,171	6,721	1,594	4,712	6,792	7,821	1,873	5,495	7,961	8,686	110.6%	7,850
	YoY	-31.1%	5.1%	2.0%	9.1%	36.2%	35.9%	31.3%	16.4%	17.5%	16.6%	17.2%	11.1%		0.4%
	Net margin	8.3%	10.9%	10.8%	10.2%	9.8%	13.4%	13.2%	11.5%	12.6%	16.5%	16.1%	13.1%		11.9%
Quarterly performance		FY09/19				FY09/20				FY09/21
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales		14,141	17,795	15,785	18,399	16,320	18,817	16,173	16,504	14,837	18,535	16,215	16,634
	YoY	-3.6%	13.7%	5.4%	12.7%	15.4%	5.7%	2.5%	-10.3%	-9.1%	-1.5%	0.3%	0.8%
Gross profit		9,421	11,355	10,758	11,764	10,392	12,546	11,150	11,059	10,542	13,189	11,567	11,604
	Gross profit margin	66.6%	63.8%	68.2%	63.9%	63.7%	66.7%	68.9%	67.0%	71.1%	71.2%	71.3%	69.8%
SG&A expenses		7,802	8,296	8,156	9,697	7,928	8,018	8,164	9,656	7,871	7,954	7,971	10,791
	YoY	5.8%	6.2%	5.2%	7.8%	1.6%	-3.4%	0.1%	-0.4%	-0.7%	-0.8%	-2.4%	11.8%
	SG&A ratio	55.2%	46.6%	51.7%	52.7%	48.6%	42.6%	50.5%	58.5%	53.0%	42.9%	49.2%	64.9%
Operating profit		1,618	3,060	2,602	2,067	2,464	4,527	2,986	1,404	2,670	5,236	3,596	812
	YoY	-33.4%	25.3%	0.0%	71.3%	52.3%	47.9%	14.8%	-32.1%	8.4%	15.7%	20.4%	-42.2%
	Operating profit margin	11.4%	17.2%	16.5%	11.2%	15.1%	24.1%	18.5%	8.5%	18.0%	28.2%	22.2%	4.9%
Recurring profit		1,729	3,121	2,714	2,105	2,581	4,568	3,096	1,440	2,816	5,270	3,722	865
	YoY	-31.5%	26.6%	-0.8%	70.3%	49.3%	46.4%	14.1%	-31.6%	9.1%	15.4%	20.2%	-39.9%
	Recurring profit margin	12.2%	17.5%	17.2%	11.4%	15.8%	24.3%	19.1%	8.7%	19.0%	28.4%	23.0%	5.2%
Net income attributable to owners of the parent		1,170	2,296	1,705	1,550	1,594	3,118	2,080	1,029	1,873	3,622	2,466	725
	YoY	-31.1%	43.5%	-3.7%	42.3%	36.2%	35.8%	22.0%	-33.6%	17.5%	16.2%	18.6%	-29.5%
	Net margin	8.3%	12.9%	10.8%	8.4%	9.8%	16.6%	12.9%	6.2%	12.6%	19.5%	15.2%	4.4%
Segments (cumulative)		FY09/19				FY09/20				FY09/21				FY09/21
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Sales		14,141	31,936	47,721	66,120	16,320	35,137	51,310	67,814	14,837	33,372	49,587	66,221	100.3%	66,000
	Accounting Firm	10,408	22,107	33,430	45,899	11,288	23,510	34,917	47,150	10,631	22,466	33,341	45,412
	Local Government	2,835	7,948	11,322	16,413	4,203	9,830	13,763	17,377	3,523	9,358	13,838	17,704
	Printing	897	1,880	2,969	3,808	828	1,796	2,629	3,286	683	1,547	2,408	3,105
YoY		-3.6%	5.3%	5.4%	7.3%	15.4%	10.0%	7.5%	2.6%	-9.1%	-5.0%	-3.4%	-2.3%		-2.7%
	Accounting Firm	2.6%	3.5%	3.8%	4.8%	8.5%	6.3%	4.4%	2.7%	-5.8%	-4.4%	-4.5%	-3.7%
	Local Government	-20.1%	12.1%	11.3%	16.3%	48.3%	23.7%	21.6%	5.9%	-16.2%	-4.8%	0.5%	1.9%
	Printing	-7.3%	1.2%	2.2%	2.2%	-7.7%	-4.5%	-11.5%	-13.7%	-17.5%	-13.9%	-8.4%	-5.5%
Operating profit		1,619	4,678	7,280	9,347	2,464	6,991	9,977	11,381	2,670	7,906	11,501	12,314	108.0%	11,400
	Accounting Firm	2,001	4,519	7,088	8,725	2,347	5,364	8,649	10,237	2,632	5,990	9,050	10,563
	Local Government	-344	119	-130	425	227	1,653	1,104	1,037	212	2,028	2,298	1,705
	Printing	-38	34	315	189	-95	-17	229	106	-170	-117	147	39
Operating profit margin		11.4%	14.6%	15.3%	14.1%	15.1%	19.9%	19.4%	16.8%	18.0%	23.7%	23.2%	18.6%		17.3%
	Accounting Firm	19.2%	20.4%	21.2%	19.0%	20.8%	22.8%	24.8%	21.7%	24.8%	26.7%	27.1%	23.3%
	Local Government	-12.1%	1.5%	-1.1%	2.6%	5.4%	16.8%	8.0%	6.0%	6.0%	21.7%	16.6%	9.6%
	Printing	-4.2%	1.8%	10.6%	5.0%	-11.5%	-0.9%	8.7%	3.2%	-24.9%	-7.6%	6.1%	1.3%
Segments (quarterly)		FY09/19				FY09/20				FY09/21
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Sales		14,141	17,795	15,785	18,399	16,320	18,817	16,173	16,504	14,837	18,535	16,215	16,634
	Accounting Firm	10,408	11,699	11,323	12,469	11,288	12,222	11,407	12,233	10,631	11,835	10,875	12,071
	Local Government	2,835	5,113	3,374	5,091	4,203	5,627	3,933	3,614	3,523	5,835	4,480	3,866
	Printing	897	983	1,089	839	828	968	833	657	683	864	861	697
YoY		-3.6%	13.7%	5.4%	12.7%	15.4%	5.7%	2.5%	-10.3%	-9.1%	-1.5%	0.3%	0.8%
	Accounting Firm	2.6%	4.2%	4.4%	7.8%	8.5%	4.5%	0.7%	-1.9%	-5.8%	-3.2%	-4.7%	-1.3%
	Local Government	-20.1%	44.3%	9.7%	29.0%	48.3%	10.1%	16.6%	-29.0%	-16.2%	3.7%	13.9%	7.0%
	Printing	-7.3%	10.4%	4.0%	2.2%	-7.7%	-1.5%	-23.5%	-21.7%	-17.5%	-10.7%	3.4%	6.1%
Operating profit		1,619	3,059	2,602	2,067	2,464	4,527	2,986	1,404	2,670	5,236	3,595	813
	Accounting Firm	2,001	2,518	2,569	1,637	2,347	3,017	3,285	1,588	2,632	3,358	3,060	1,513
	Local Government	-344	463	-249	555	227	1,426	-549	-67	212	1,816	270	-593
	Printing	-38	72	281	-126	-95	78	246	-123	-170	53	264	-108
Operating profit margin		11.4%	17.2%	16.5%	11.2%	15.1%	24.1%	18.5%	8.5%	18.0%	28.2%	22.2%	4.9%
	Accounting Firm	19.2%	21.5%	22.7%	13.1%	20.8%	24.7%	28.8%	13.0%	24.8%	28.4%	28.1%	12.5%
	Local Government	-12.1%	9.1%	-7.4%	10.9%	5.4%	25.3%	-14.0%	-1.9%	6.0%	31.1%	6.0%	-15.3%
	Printing	-4.2%	7.3%	25.8%	-15.0%	-11.5%	8.1%	29.5%	-18.7%	-24.9%	6.1%	30.7%	-15.5%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods.
Note: Operating profit tends to be lower in Q4 than in other quarters because the company books expenses in Q4 to use up its full-year budgets.

Cumulative FY09/21 results (out November 9, 2021)

Summary

For full-year FY09/21, the company cumulatively reported sales of JPY66.2bn (-2.3% YoY), operating profit of JPY12.3bn (+8.2% YoY), recurring profit of JPY12.7bn (+8.5% YoY), and net income attributable to owners of the parent of JPY8.7bn (+11.1% YoY).

As for progress versus the forecast for full-year FY09/21, sales reached 100.3%, while operating profit came in at 108.0%, recurring profit 108.3%, and net income attributable to owners of the parent 110.6%.

Sales declined 2.3% YoY: Accounting Firm segment sales declined 3.7% YoY, Local Government segment sales rose 1.9% YoY, and Printing segment sales fell 5.5% YoY. The YoY decline in sales is largely attributable to the company's early adoption of the Accounting Standard for Revenue Recognition that listed companies are required to transition to from April 1, 2021. After applying the new standard, sales were JPY2.5bn lower compared to not applying the standard. The rationale for adopting the new accounting standard early was to acquire expertise in its implementation so that TCK can provide consulting services to listed companies.

Operating profit increased 8.2% YoY: Accounting Firm segment operating profit increased 3.2% YoY, while operating profit in the Local Government segment rose 66.4% YoY, and Printing segment operating profit fell 63.5% YoY. The operating profit margin of 18.6% represented a 1.8pp improvement YoY, with the company’s gross profit margin of 70.8%, up 4.2pp YoY and its SG&A expense ratio of 52.2%, up 2.4pp YoY.

Quarterly trends

Performance by segment

Accounting Firm segment

Segment sales were JPY45.4bn (-3.7% YoY), and operating profit was JPY10.6bn (+3.2% YoY). Application of the Accounting Standard for Revenue Recognition subtracted JPY2.3bn from the amount of sales that would have been recorded had this standard not been applied. Application of the standard also lowered operating profit by JPY17mn. The 3.2% YoY increase in operating profit was driven by reduced expenses, including reductions in travel expenses stemming from its move to remote customer support via online teleconferencing, and reductions in marketing-related expenses stemming from its move away from in-person seminars to online seminars.

Sales from computer services were up 1.6% YoY. Introduction of the cloud-based financial accounting information system targeting SMEs that links accounting data to sales management and payroll systems (FX4 Cloud) has picked up amid accelerated efforts by SMEs to adopt Digital Transformation (DX). Use of the tax accounting office management system, OMS Cloud, and secure remote OMS access system, OMS Mobile, also increased among accounting firms.

Software sales were up 3.7% YoY, the gains on this front underpinned by the growing number of users for the financial accounting systems, including the cloud-based financial accounting information system targeting SMEs (FX4 Cloud), completely conforming to the requirements of Japan’s Electronic Books Maintenance Act, as well as solid growth in the number of users of the company’s corporate electronic tax filing system for large companies (ASP1000R) following the mandatory move to electronic filing of corporate taxes for all companies capitalized at JPY100mn or more as of April 1, 2020.

Consulting sales rose slightly YoY. Sales generated by installation support services increased as the company’s cloud-based financial accounting information system targeting SMEs (FX4 Cloud) turned in a strong performance.

Hardware sales declined 11.8% YoY. As the surge in replacement demand for PCs following the end of manufacturer’s support for the Window 7 operating systems in January 2020 ran its course, PC sales volumes returned to normal levels.

Sales from supplies decreased 68.1% YoY. The company reported strong performance from office equipment for remote work and infection prevention supplies. However, the company’s implementation of the Accounting Standard for Revenue Recognition requires it to record as sales of accounting slips and office equipment for accounting firms the value produced by subtracting purchasing costs from the unadjusted total sales revenue generated by these products. This requirement stems from the classification of many transactions involving these products as “agent transactions.” Applying this standard caused the YoY decline in sales from supplies. If not for the application of this standard, recorded sales would have been JPY2.1bn higher.

Operating profit grew mainly because of a decline in travel expenses as the company switched its customer support (including service proposals) to remote support via an online conference system and transitioned planned large events to a hybrid style combining face-to-face and online interaction, and a decrease in costs related to hosting seminars through a change in new customer acquisition activities from face-to-face seminars to webinars.

Local Government segment

Segment sales were JPY17.7bn (+1.9% YoY) and operating profit was JPY1.7bn (+64.4% YoY). The company’s application of the Accounting Standard for Revenue Recognition subtracted JPY72mn from the total sales that would have been recorded had the standard not been applied. The application of this standard also lowered operating profit by JPY18mn.

Sales from computer services were up 10.1% YoY on an increase in outsourcing service sales and data center usage fees from new customers that deployed the systems in FY09/21. In addition, the company received orders for the production of COVID-19 vaccination coupon notices.

Software sales declined 10.9% YoY owing to a drop in temporary sales caused by circumstances resulting from partial revisions to the Act on Child and Childcare Support, such as system upgrade costs associated with the shift to free early childhood education and childcare. After applying the Accounting Standard for Revenue Recognition, sales were JPY176mn lower compared to not applying the standard.

Consulting service sales were up 22.3% YoY. Sales generated by systems installation support rose thanks to orders related to systems for new services, including reservation and reception systems for vaccinations as well as issuing and appointment management systems associated with Japan’s individual number (My Number) card system. The company’s application of the Accounting Standard for Revenue Recognition added JPY116mn to the amount of sales that would have been recorded had the standard not been applied.

Hardware sales rose 5.7% YoY as sales generated by customer replacement of server equipment increased YoY.

Operating profit grew mainly because of the aforementioned orders for the production of COVID-19 vaccination coupon notices and provision of vaccination registration and reservation systems, as well as a decline in travel expenses as the company switched its customer support (including service proposals) to remote support via an online conference system.

Printing segment

Segment sales were JPY3.1bn (-5.5% YoY) and operating profit was JPY39mn (-63.5% YoY). Applying the Accounting Standard for Revenue Recognition subtracted JPY43mn from the amount of sales that would have been recorded had the standard not been applied.

Sales of data printing service-related products were up 1.7% YoY, as although there was a continued decline in orders from private-sector client companies for direct mailings in the wake of the pandemic, earnings improved thanks to orders for vaccination coupon production from municipalities.

Sales of business forms were down 4.3% YoY, owing to a decline in demand for business forms stemming from digitalization at client companies.

Commercial printing-related sales (catalogues, flyers, books, etc.) were down 13.1% YoY due to the cancellation/postponement of events as a result of COVID-19 and switch to web-based seminars, resulting in a decrease in orders for the reference materials and flyers that normally would be used for such events.

For details on previous quarterly results, see the Historical financial statements section.

Company forecast for FY09/22

Earnings		FY09/18	FY09/19	FY09/20			FY09/21			FY09/22
(JPYmn)		FY Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.
Sales		61,621	66,120	35,137	32,677	67,814	33,372	32,849	66,221	33,140	34,410	67,550
	YoY	3.2%	7.3%	10.0%	-4.4%	2.6%	-5.0%	0.5%	-2.3%	-0.7%	4.8%	2.0%
Operating profit		8,679	9,347	6,991	4,390	11,381	7,906	4,408	12,314	6,730	5,830	12,560
	YoY	1.3%	7.7%	49.4%	-6.0%	21.8%	13.1%	0.4%	8.2%	-14.9%	32.3%	2.0%
	Operating profit margin	14.1%	14.1%	19.9%	13.4%	16.8%	23.7%	13.4%	18.6%	20.3%	16.9%	18.6%
Recurring profit		8,961	9,669	7,149	4,536	11,685	8,086	4,587	12,673	6,920	6,010	12,930
	YoY	1.9%	7.9%	47.4%	-5.9%	20.9%	13.1%	1.1%	8.5%	-14.4%	31.0%	2.0%
	Recurring profit margin	14.5%	14.6%	20.3%	13.9%	17.2%	24.2%	14.0%	19.1%	20.9%	17.5%	19.1%
Net income attributable to owners of the parent		6,158	6,721	4,712	3,109	7,821	5,495	3,191	8,686	4,740	4,120	8,860
	YoY	1.4%	9.1%	35.9%	-4.5%	16.4%	16.6%	2.6%	11.1%	-13.7%	29.1%	2.0%
	Net margin	10.0%	10.2%	13.4%	9.5%	11.5%	16.5%	9.7%	13.1%	14.3%	12.0%	13.1%
Segments (quarterly)		FY09/18	FY09/19	FY09/20			FY09/21			FY09/22
(JPYmn)		FY Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.
Sales		61,621	66,120	35,137	32,677	67,814	33,372	32,849	66,221	33,140	34,410	67,550
	Accounting Firm	43,781	45,899	23,510	23,640	47,150	22,466	22,946	45,412
	Local Government	14,113	16,413	9,830	7,547	17,377	9,358	8,346	17,704
	Printing	3,726	3,808	1,796	1,490	3,286	1,547	1,558	3,105
YoY		3.2%	7.3%	10.0%	-4.4%	2.6%	-5.0%	0.5%	-2.3%	-0.7%	4.8%	2.0%
	Accounting Firm	3.4%	4.8%	6.3%	-0.6%	2.7%	-4.4%	-2.9%	-3.7%
	Local Government	2.9%	16.3%	23.7%	-10.8%	5.9%	-4.8%	10.6%	1.9%
	Printing	1.7%	2.2%	-4.5%	-22.7%	-13.7%	-13.9%	4.6%	-5.5%
Operating profit		8,679	9,347	6,991	4,390	11,381	7,906	4,408	12,314	6,730	5,830	12,560
	Accounting Firm	8,501	8,725	5,364	4,873	10,237	5,990	4,573	10,563
	Local Government	3	425	1,653	-616	1,037	2,028	-323	1,705
	Printing	168	189	-17	123	106	-117	156	39
Operating profit margin		14.1%	14.1%	19.9%	13.4%	16.8%	23.7%	13.4%	18.6%	20.3%	16.9%	18.6%
	Accounting Firm	19.4%	19.0%	22.8%	20.6%	21.7%	26.7%	19.9%	23.3%
	Local Government	0.0%	2.6%	16.8%	-8.2%	6.0%	21.7%	-3.9%	9.6%
	Printing	4.5%	5.0%	-0.9%	8.3%	3.2%	-7.6%	10.0%	1.3%

Source: Shared Research based on company data
Note: Figures may differ from company data due to differences in rounding methods

Summary

Company forecast by segment

Accounting Firm segment

At the Accounting Firm segment, the company projects full-year sales of JPY46.7bn (+2.8% YoY).

The business climate surrounding TKC member companies and SMEs is evolving year by year, affected not only by economic weakness caused by the COVID-19 pandemic, but also by reforms to the Electronic Books Maintenance Act and Consumption Tax Act, the introduction of electronic invoicing, work style reforms, and DX promotion. In addition to providing TKC member firms and partner companies with fully compliant systems in a timely manner, the company also will utilize the latest cloud technology to help clients improve productivity and aid them in achieving a positive balance and proper filing.

As of end-FY09/21, 7,644 companies (3,170 companies as of end-FY09/20) used the ASP1000R (corporate electronic tax filing system).

As of end-FY09/21, roughly 4,720 corporate groups (4,100 groups as of end-FY09/20) used the TKC Consolidated Group Solution. TKC’s tax filing systems are used by 89% of the top 100 (by sales) listed companies in Japan, and 41% of all listed companies in Japan.

Local Government segment

For the Local Government segment, the company projects full-year sales of JPY17.3bn (-2.3% YoY).

Local governments are being urged to harness digital technology in reforming business processes to improve user convenience and administrative efficiency. TKC regards such changes as an opportunity to acquire new customers and to enhance satisfaction levels for existing customers through elevated support and creation of new customer value via use of state-of-the-art technology to deliver innovation.

Printing segment

For the Printing segment, the company projects full-year sales of JPY3.6bn (+14.3% YoY).

The business climate surrounding the Printing segment has undergone rapid change, with the paperless trend and growth in COVID-19 infections causing rapid acceleration in the decline in demand for business forms. The environment is especially challenging for the segment's mainstay data printing service (DPS) business, due to decreased demand for promotional direct mailings.

The company is now looking to expand sales channels by concentrating human and other resources into its DPS and BPO businesses, developing new products and services addressing society and customers' altered values, and working to further improve the quality and value-added of existing products and services.

Outlook

Targeted management indicators

TKC’s management philosophy since its founding has been “Contributing to customers.” Main customers are accounting firms and regional government bodies. The company’s market strategy is to develop products and services in collaboration with accounting firms, its core customers.

TKC prioritizes three long-term targets: sales growth of 3% YoY or more, shareholders’ equity ratio of 70% or more, and ROE of 8% or more. Short-term targets are a marginal profit ratio (1 – variable costs / sales) of 60% or higher (internal target; results not disclosed) and a 50% labor share of income (personnel costs as a percentage of marginal profit). The labor share target represents a 4pp increase from the actual figure of 46% in FY09/16. TKC also aims for a recurring profit margin of 8% or more.

Medium-term targets in the Accounting Firm segment

In the Accounting Firm segment, TKC operates under a distinctive business model. Targets are set by the TKC Nationwide Society. This society is an organization of tax accountants and certified public accountants who are TKC’s customers (see the Business section). In light of the policy tasks it faces as it approaches its 50th anniversary in 2021, the TKC Nationwide Society has announced its operational policy for the three years from 2019 to 2021 and strategic objectives in 2020 as listed below.

Operational policy for changing society with the TKC brand

Promoting the “TKC method of Document Attachment*”: End-2020 objective of 144,000 companies using corporate “Document Attachment”

Promoting the “TKC Monitoring Information Service”: End-2020 objective of 245,000 companies

Promoting the “TKC method of in-house accounting”: End-2020 objective of 285,000 companies

In addition, since numerous financial institutions have started to take notice of the TKC Nationwide Society initiatives, the company has taken this opportunity to compile the following policies to fortify the business foundation of TKC-member accounting firms:

Promote understanding and implementation of the “TKC Accountants’ Code of Conduct”

Help expand the number of field auditors and assistant field auditors

Work to enhance business advisory service as “certified support organizations”

Number of TKC-member accounting firms: More than 10,000 (9,700 as of end-FY09/20)
Number of tax accountants at TKC-member accounting firms: 15,000 (11,400)
Companies using the Continuity MAS System*: 500,000
Companies using the TKC in-house accounting system: 500,000
Companies utilizing attachments, such as the “Document Attachment*” and the “Certificate of Bookkeeping Timeliness*”: 500,000
Number of auditors*: 20,000 people
Companies subscribing to corporate defense*: 300,000

*Detailed descriptions are provided below.

TKC Management Strategy 2021 (Accounting Firm segment)

In January 2014, the company announced the “TKC Management Strategy 2021.” From the five targets raised by the TKC Nationwide Society (listed above), the TKC Management Strategy 2021 concentrates on the first two: increasing the number of TKC-member accounting firms and tax accountants**, and increasing the number of companies using the TKC internal accounting system. Both targets are linked with boosting Accounting Firm segment sales.

**TKC-member accounting firms and tax accountants:
TKC-member tax accountants make up the TKC Nationwide Society. These tax accountants belong to TKC-member accounting firms. On average, one TKC-member accounting firm has 1.2 TKC-member tax accountants.

Increasing the number of TKC-member accounting firms and tax accountants

The company aims to increase the number of TKC-member accounting firms to more than 10,000 and the number of TKC-member tax accountants to 15,000. To achieve these goals, TKC is collaborating with the TKC Nationwide Society.

As part of an effort to achieve this goal, the TKC Nationwide Society worked on “Project 9501” with an aim of increasing the number of TKC-member accounting firms to at least 9,501 by end-September 2017. Working closely with the TKC Nationwide Society to recruit new members, TKC achieved this goal. The TKC Nationwide Society has a New Member Services Committee, where committee members introduce tax accountants and certified public accountants to the society. The committee conducts “New Member Follow-up Seminars” four to six times per year and holds a “New Members Forum” every November.

The number of TKC-member accountants rose from 7,200 in FY09/94 to 11,400 in FY09/20, growing at a CAGR of about 2%. TKC explains that the increase in members is due both to active recruitment by the society, and the appeal of access to accounting firm management expertise.

TKC’s market share (TKC customers as of September 30 divided by the number of registered tax accountants in Japan as of March 31) rose from 12.7% in FY09/00 to 14.5% in FY09/20.

Number of TKC-member tax accountants and TKC’s market share of tax accountants in Japan

Source: Shared Research based on company data

Increasing the number of companies using TKC’s in-house accounting system

TKC is promoting the adoption of its in-house accounting system, the FX Series. An in-house accounting system refers to one in which companies (end users) internally handle performance management processes such as organizing vouchers and making journal entries, contributing to management decision-making.

Bookkeeping and in-house accounting

Source: Shared Research based on company data

Conventionally, SMEs rely on outsourced bookkeeping, as they do not have the leeway to hire personnel with specialized accounting knowledge. (They hand over vouchers and receipts to accounting firms, which take care of everything from making journal entries to preparing financial statements.)

TKC, on the other hand, recommends an in-house accounting system for owners of SMEs, which allows them to better understand management conditions and quickly ascertain progress against management targets. The bookkeeping and in-house accounting approaches offer certain advantages and disadvantages for companies and accounting firms, shown in the following table.

Advantages and disadvantages of bookkeeping vs. in-house accounting for companies and accounting firms

SME’s perspective	Outsourced bookkeeping	In-house accounting
Advantages	・No need for company to handle journal entries ・No specialized knowledge needed	・Daily journal entry facilitates quick understanding of the management situation (Essential for a profitable operation) ・Daily accounting reduces mistakes ・Frees up accounting firms for additional services, such as field audits
Disadvantages	・Time-consuming to organize and send vouchers and receipts to accounting firm ・Makes understanding a company’s management status slow (The company may not be able to recognize right way that it might fall into the red)	・Company must make journal entries ・Specialized knowledge needed ・Requires capital expenditure for in-house accounting
Accounting firm’s perspective	Outsourced bookkeeping	Automated accounting
Advantages	・Easy to win small companies as new customers	・Increases quality of consulting service
Disadvantages	・Lowers quality of consulting service ・Leads to price competition on consulting fees	・Need to provide clients with guidance until they become used to making journal entries

Source: Shared Research based on company data
Note: For the general examples given above, actual fees and services vary by accounting firm

The number of companies using TKC’s in-house accounting system software rose from about 160,000 in 2012 to about 280,000 in 2020, up approximately 120,000. Driving this growth was strong performance by FX2 for SMEs and e21 My Star (a PC-based financial accounting system that can be operated easily by companies with 10 or fewer employees and sales of JPY100mn or less) and robust expansion of FX4 Cloud for medium-sized companies. TKC offers e21 My Star for free for the first three years, so in June 2016 it began charging companies that had adopted the software in 2013.

TKC employs a number of measures to encourage in-house accounting by SMEs that receive advisory services from accounting firms.

In October 2014, began providing an “institutional accounting tab” that allows companies under advisory agreements to print out their own accounting records

In January 2015, introduced the “OMS output” format, enabling TKC-member accounting firms to use OMS Cloud (an office management system) to print records for client companies

Sets processing fees associated with the “institutional accounting” and “OMS output” formats lower than for documents printed at TKC Consolidated Information Centers*

Encourages SMEs to use the PX Series, compatible with the My Number** system

For medium-sized companies, promotes in-house accounting using FX4 Cloud

Develops fintech services***

*TKC Consolidated Information Centers: Nine locations throughout Japan that offer large-scale output (printing). The centers receive data from the TKC Internet Service Center and provide TKC members with accounting records, financial statements, and other data and documents.

**My Number: A personal identification number assigned to every person in Japan who holds a certificate of residence. TKC manages My Number information at its data center, allowing client companies to reduce the risk and burden associated with holding such data themselves. TKC sees this service as a means of expanding sales of its in-house accounting services to companies that have already adopted PX My Portal, a cloud system that allows viewing of employee payment slips via a web browser.

***Fintech services: A term coined from “finance” and “technology,” refers to financial services that utilize the latest information technology. TKC’s Fintech services include fintech for corporate clients, and fintech for financial institutions:

Fintech for corporate clients:
In June 2016, TKC launched a service in which it collects companies’ transaction data provided by banks or credit companies—such as online-banking transaction data—and records them as journal entries for its FX Series. The company then compares such transaction data with those that have already been in the system, automatically checking for any overlaps. In compliance with the purchase tax credit requirements of Article 30 of the Consumption Tax Act, the system also checks for any omitted items in the entry column. According to TKC, this system offers access to more financial institutions than any other similar service in Japan (compatible with 99% of the corporate accounts held with the nation’s 967 financial institutions).

Fintech for financial institutions:
In October 2016, TKC launched a service that will allow accounting firms to provide financial institutions with a company’s financial statements, monthly trial balances, and other updated operating information.

Core strategy for Local Government segment

The Local Government segment will support the realization of smart municipalities and digitalization of public services, as well as administrative and fiscal reform at local governments. Its key management objective is to provide support to enhance the convenience of residents and improve administrative efficiency by developing and providing groundbreaking products and services that take advantage of the latest trends in ICT. The segment will implement the following five priority initiatives.

Expand new customers for core operational systems among municipalities, push the digitalization of administrative services by further promoting cloud systems for local governments, and support local governments reduce costs to a minimum.

Support the realization of evidence-based policy making (EBPM) based on public accounting information by providing various systems and functions that allow for multidimensional analysis of financial and other data.

Aim to expand adoption of eLTAX-related services, and support improvement in user convenience (for both governments and residents) by digitalizing tax procedures.

Work to develop and provide new user-oriented digitalization support solutions for administrative services.

Establish mutual product supply relationships with local vendors that mainly provide services to local municipalities in order to promote alliance strategies designed to achieve expansion of sales areas and multiplexing of services.

Core strategy for Printing segment

The Printing segment will implement the following measures to increase sales of data printing services (DPS) and business process outsourcing (BPO).

Focus on sales promotion for DPS-related products through the cultivation of new customers.

Establish Kansai plant and sales office to cultivate new customers in Western Japan (specifically, west of the Kansai region), and accordingly drive sales expansion.

Submit proposals combining analog and digital printing technologies to customers to achieve direct communication with such customers.

Assume back-office operations of customers through BPO, and contribute to management efficiency at customers by enhancing operational efficiency, lowering costs, and reducing information security risks while maintaining high quality.

Aim to expand market share by strengthening ties with existing customers.

Continue to respond to customer needs, leverage proposal-based sales to differentiate the company from competitors, and develop new technologies to reduce production costs.

Make proposals related to production accuracy achieved through mechanization of production processes and shorter delivery times achieved through improved production efficiency, and expand market share of governmental and municipal projects.

Strive to improve and maintain consistent quality, and enhance quality inspection systems for all processes of all products to prevent quality defects.

Increase in-house manufacturing further and cut down share of outsourcing to reduce costs.

Further strengthen information security systems based on Privacy Mark and ISMS in order to win the trust of customers and business partners, and to ensure secure management of My Number data.

As an ISO14001-certified, environmentally friendly company, aim to reduce paper waste and lower energy consumption further through enhanced productivity and efficiency.

Business

Business model

Overview

TKC’s main business is supporting tax accountants with computer-based accounting services. It provides information processing, software rental, consulting, and other services to accounting firms (Accounting Firm segment: 69.5% of sales and 89.9% of operating profit in FY09/20) and regional government bodies (Local Government segment: 25.6% of sales and 9.1% of operating profit).

The company also offers data printing services (Printing segment: 4.8% of sales and 0.9% of operating profit), and sells software and office equipment.

It has achieved firm long-term growth (see figure below). From its founding up through FY09/08, TKC recorded 42 consecutive years of sales increases, and 30 consecutive years of recurring profit growth. Profit growth between FY09/09 and FY09/13 was weighed down by the arrival of lower-priced versions of accounting software. However, since FY09/14, sales and recurring profit have rebounded and remained on an upward trend. In FY09/20, sales and recurring profit reached record highs for the sixth consecutive fiscal year, totaling JPY67.8bn (+2.6% YoY) and JPY11.7bn (+20.9% YoY), respectively.

Composition of consolidated sales in FY09/20 (Left)

Composition of consolidated operating profit in FY09/20 (Right)

Source: Shared Research based on company data

Consolidated operating performance

Source: Shared Research based on company data
Note: Non-consolidated results through FY1993, consolidated results from FY1994.

TKC’s business structure