To Our Shareholders and Investors
I would like to sincerely thank all of our shareholders for their support and patronage.
I am pleased to report the financial results for the fiscal year ended March 31, 2016.
During the fiscal year ended March 31, 2017, the Japanese economy gradually recovered as consumer spending improved despite slowness in exports and capital investment.
The pachinko parlor industry, which is the Group’s main customer, continues to face a difficult business environment in terms of revenue, as the frequency at which users play games and the amount of money they spend on gaming declined. While there is a declining trend in the number of new parlor openings, recently some of the major parlor operators have been engaged in acquisition of peers as well as expansion of groups by purchasing existing parlors and changing their names, which points to advancing industry reorganization. Moreover, machines whose performance may differ from the machines that have been inspected at pachinko parlors were removed from parlors around Japan with the deadline of Dec. 31, 2016, and uncertainties regarding future revenue trend have been increasing.
In such a difficult business environment, the Group aimed to raise the level of revenue by actively pursuing sales expansion of Internet media and focusing on the printing business, which serves industries other than the pachinko parlor industry, in an effort to transform its earnings structure in the mainstay advertising business. Furthermore, the Group at the same time worked to control fixed costs to improve its profitability.
As a result, while net sales for the fiscal year ended March 31, 2017 came to 15,851 million yen (down 6.3% year on year), profits increased at all levels, with operating income totaling 1,269 million yen (up 11.2% year on year), ordinary income totaling 1,268 million yen (up 12.3% year on year) and net income attributable to parent company shareholders reaching 831 million yen (up 69.7% year on year).
Taking into consideration these business results, the Group will pay an annual dividend of 25 yen per share, including a year-end dividend of 13 yen per share.
We appreciate your continued support and patronage.
Breakdown by Business Segment
In the fiscal year under review, demand for advertisement in the pachinko parlor industry remained weak, as the pachinko parlor operators intermittently reduced advertising expenses due to worsening profitability and pachinko parlors throughout the country voluntarily refrained from replacing game machines for about one month in connection with the G7 summit held in Ise-Shima in May 2016. Given the uncertainties in the industry environment, the number of new parlor openings by parlor operators declined and the pace of new machine replacements remained slow after the removal of machines whose performance may differ from the machines that have been inspected due the end of December 2016, and the demand for advertisements for machine replacements stagnated.
Under such circumstances, the Group drove forward major new customer acquisition, sales expansion of the Internet media led by its own “Pachi 7” media and sales enhancement of the printing business targeting other industries to limit the impact of declining demand to the minimum. From the aspect of cost, the Group focused on controlling fixed costs by consolidating sales offices, streamlining through drastic review of the ordering process and labor saving.
These initiatives succeeded and limited the decline in net sales compared with the previous fiscal year to the minimum. Net sales of the segment totaled 15,643 million yen (down 6.2% year on year) and segment income came to 1,581 million yen (up 7.2% year on year) as the impact of fixed cost reduction contributed.
Real Estate Business
During the fiscal year under review, one of the two existing, ongoing leasing agreements of consolidated subsidiary Land Support Inc. expired in the third quarter. It sold the other land for leasing in Hyogo Prefecture at the end of January 2017. At the same time, the company newly purchased land for leasing in Chiba Prefecture and has started leasing it to a pachinko parlor operator.
As a result, while net sales of the Real Estate Business totaled 120 million yen (down19.7% year on year), segment income came to 59 million yen (down 7.2% year on year) as the reduction in fixed costs contributed.
The operation of the Hong Kong restaurant business by Gendai R1 Ltd., the main business of the segment in the consolidated fiscal year under review, has become stabilized. Also, as a new business project during the fiscal year, we started testing storage business for research on contents regarding utilization of idle properties of former pachinko parlors.
As a result, net sales of the segment increased 3.3% year on year to 87 million yen, and segment loss stayed the same at 19 million yen.
Gendai Agency established a consolidated subsidiary GDLH Pte. Ltd. in Singapore in February 2017, primarily with the aim of entering the electronic casino operation business in Southeast Asia, and is preparing for the start of business.
Medium to Long-term Management Strategies
As the leader in the pachinko parlor advertising market, the Group will strive to add more value to its services and improve productivity, which are its strengths, so as to ensure stable profitability even in an adverse environment. At the same time, the Group will consistently seek new business opportunities and actively develop its business to ensure sustained growth for the Group.
The main strategic issues to be addressed in order to achieve sustained growth are as follows.
- Acquire new customers, deepen business relationships and pursue low-cost operations in the Advertising Business
- Penetrate the Internet media market in the Advertising Business
- Expand business domain
As we work to maximize our corporate value, we will disclose information to all of our shareholders and investors in a proactive and timely manner and follow a policy of providing returns to shareholders that reflect our business performance.
We look forward to your continued understanding and support.