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Message from the president and CEO

AKIRA SHIDA

Driving Ahead: Developing Original Products and Expanding Multi-Lingual Services

Firstly, allow me to express my appreciation for your generous support and patronage. AUN Consulting, Inc. announced its quarterly results for the first accounting quarter (May 2010 account closing) on Friday October 1, 2009. I would like to give a brief update in regard to these.

In reference to the Japanese national economy during this first accounting quarter, despite signs of a partial halt in the production downturn, the employment situation was still arduous and levels of individual consumption are still low. Consequently, the tendency for many companies to limit their advertising expenses has continued.

Although the Internet advertising market in which the AUN Group is engaged did demonstrate continued growth, the speed of that growth was more moderate than usual.

Given this environment, the AUN Group is aware that further development of its business structure represents its most significant management issue. AUN is actively undertaking various measures toward this end. Firstly, in its traditional field of consulting services with search engine marketing (SEM), AUN is not only providing sales promotion applications, but is also making efforts to develop services in other fields and expand its line-up. On June 8, 2009, AUN undertook an operations/capital tie-up with HR Solutions CORP, acquiring 3.0% of that company’s stock. By concluding this tie-up with a company that offers one-stop solutions to human resources from planning/design through to progress support after appointment, AUN has successfully established a platform for ongoing provision of SEM consulting services in the field of human resources.

Also, on July 13, 2009, the subsidiary company Art Studio Sunlife Co., Ltd. changed its company name to AUN Global Marketing, Inc. With the establishment of a framework via this company for the provision of SEM services focusing on languages such as English and Chinese, AUN has successfully expanded its scope of business to include not only creative work but also marketing support in various languages.

In the pursuit of greater added value and business efficiency for AUN Group services, the functions of AUN Okinawa Laboratories, Inc. and AUN Thai Laboratories Co., Ltd. have also been expanded. Personnel exchange has been further promoted, and increases in the productivity and product quality of both companies have been successful in achieving strengthening of revenue systems, resulting in a stronger framework for price competitiveness.

Despite the efforts outlined above, demand from principal clients dropped, which exerted a major influence on the ongoing profit and loss situation.

Each business segment performed as follows:

  • Within SEM business services, AUN has driven ahead with development of SEM applications, and is making efforts to provide high added-value services in fields other than sales promotion. Through the tie-up with HR Solutions CORP, AUN is developing related services for human resources applications, which opens up a new market. Within search engine optimization (SEO), which represents a principal product, AUN is working toward development of new products for PC and mobile platforms. In order to provide greater added-value and business efficiency, AUN has been working consistently to ensure the stable operations of AUN Okinawa Laboratories., Inc. and AUN Thai Laboratories Co., Ltd. in order to transform cost structure and improve quality of work not only in Japanese, but also in other languages. Although SEO and search-linked and content-linked advertising (Pay-for-Performance: P4P) demonstrated steady performance, AUN was unable to cover the drop in demand from its principal clients. As a result, the turnover for these services came to 565 million yen (51.7% less than the same quarter in the previous year), with operating loss of 32 million yen (with the same quarter in the previous year having an operating profit of 79 million yen).
  • Within creative business services, AUN has steadily been acquiring orders for creative work, playing to its strengths in multi-lingual services in English, Chinese, Japanese and other languages in the creation of websites, catalogs, and more. Just as with SEM business services, creative business services have moved toward increased liaison with AUN Okinawa Laboratories., Inc. and AUN Thai Laboratories Co., Ltd., thus establishing systems for efficient creation of high-quality output. Copywriting work by native-speaking writers and translation business brought about a synergistic effect, and more efficient operational systems were developed. However, many major corporate clients downsized their advertising campaigns in order to rein in advertising expenses. As a result, the turnover for these services came to 74 million yen (20.1% less than the same quarter in the previous year), with operating loss of 36 million yen (with the same quarter in the previous year having an operating profit of 14 million yen).

As a result of the above factors, performance in this first accounting quarter saw a total turnover of 634 million yen (49.7% less than the same quarter in the previous year), with operating loss of 69 million yen (the same quarter in the previous year having an operating profit of 94 million yen), and ordinary loss of 70 million yen (the same quarter in the previous year having an ordinary profit of 99 million yen). Additionally, compensation for transfer of property accompanying the change of head office location was entered as an extraordinary gain of 82 million yen, while expenses for moving location were entered as an extraordinary loss of 18 million yen. As a result, quarterly net loss was 18 million yen (the same quarter in the previous year saw a quarterly net profit of 62 million yen).

Moving ahead, AUN will continue to develop independent and creative marketing methods utilizing our original SEM business services, as well as expanding our multi-lingual services and broadening the scope of our marketing strategy as a global marketing company. We will continue to strengthen our position as a leading company in the field of multi-lingual services and to drive the transformation of our business services portfolio across the entire AUN Group. AUN is moving ahead by actively developing new and highly profitable business services in fields other than search engine marketing (SEM), aimed firmly at improving our top line and expanding our business services.

We look forward to your continued generous support and guidance, and we wish you well for the coming year.

Akira Shida
President and CEO
AUN Consulting, Inc.