To Our Shareholders and Investors
I am Katsutoshi Oshima, and I am pleased to announce my appointment as President and CEO. I would like to take this opportunity to extend my best wishes to all shareholders. As an advertising company that tailors its business to the characteristics of individual industries, the Group has been supporting the development of client companies' business performance. We will continue to build a solid, steady, and strong organization based on our corporate philosophy to achieve sustainable growth of the Group. In addition, to adapt to rapid changes in the business environment, we will continue to take on challenges for business transformation and address various strategic issues more than ever. We would like to thank our shareholders for their continued support and encouragement.
Report for the consolidated fiscal year ended March 31, 2024
During the consolidated fiscal year under review, the Japanese economy showed signs of a gradual recovery thanks to improvements in the employment and income environment and the effects of various policies, but the outlook remains uncertain due to a rise in consumer prices caused by soaring energy and raw material prices.
In the pachinko parlor industry, the Group's main customer base, expectations for a revitalization of the industry tended to increase due to the introduction of high-profile models in April 2023 in the next-generation pachislo machines launched in November 2022.
In the pachinko parlor advertising market, a recovery in advertising demand was expected due to demand raised by the introduction of next-generation machines and moves in each prefecture to review advertising regulations for pachinko parlors to respond to the "Handling of Advertisements and Promotions in Pachinko Businesses" notice issued by the National Police Agency in January 2023. However, advertising expenditures continued to be restrained in order to secure the investment funds necessary for the introduction of next-generation machines. Furthermore, due to stealth marketing regulations that came into effect in October 2023 and other factors, many pachinko parlors suspended Internet advertising using influencers and other media, resulting in a sharp decline in demand for Internet advertising.
On the other hand, in advertising fields other than pachinko parlors, demand for advertising is on the rise, including fitness facility and housing-related advertising fields.
In such environment, the Group worked to maximize the pachinko parlor advertising field in its mainstay advertising business. Furthermore, the Group has pursued initiatives with a view to acquiring new customers and deepening business relationships with customers other than pachinko parlors in order to increase its bottom line.
As a result of these initiatives, net sales for the consolidated fiscal year under review were 7,419 million yen (down 1.7% YoY), a slight decrease from the same period of the previous fiscal year, but gross profit declined to 2,192 million yen (down 3.7% YoY) due to a sharp drop in orders for high margin influencer advertising. In addition, investment in human capital, including an increase in personnel and wage increases to cope with recent inflation, resulted in a 67 million yen increase in selling, general, and administrative expenses. With this increase in expenses, operating income was 249 million yen (down 38.0% YoY), ordinary income was 262 million yen (down 37.6% YoY), and net income attributable to owners of the parent was 125 million yen (down 66.0% YoY), due in part to the impact of the reversal of deferred tax assets.
Based on the above operating results, we have decided to pay a year-end dividend of 9 yen per share, which together with the interim dividend (9 yen) will bring the total annual dividend to 18 yen per share.
Breakdown by Business Segment
Advertising Business
The pachinko parlor advertising market in the consolidated fiscal year under review showed a temporary boost due in part to the introduction of a noteworthy next-generation pachislo machine in April 2023, but the demand for new machine replacement has settled down since May. The market's evaluation of next-generation pachinko machines is still uncertain, and the impact on advertising demand was limited. In addition, there were moves in some customers to curb advertising expenses in order to secure funds for continued capital investment in next-generation equipment. Furthermore, in Internet advertising, where we had expected growth, there was a large impact from the sharp decline from October 2023 in orders for high margin influencer advertising, resulting in a significant setback from the scenario we had expected at the start of the period, which was to return the performance to a growth path in the pachinko hall advertising field.
Meanwhile, in the advertising market for sectors other than pachinko parlor advertisements, demand for advertising in the mainstay fitness facilities and housing-related sectors remained strong.
In this environment, the Group actively pursued new customer acquisition in the mainstay pachinko parlor advertising field as well as in sectors where advertising demand is expected to grow.
As a result, net sales were 7,342 million yen (down 1.9% YoY) and segment income was 504 million yen (down 20.3% YoY) due to the impact of slower growth in high margin Internet advertising and the increase in selling, general and administrative expenses.
Real Estate Business
In the consolidated fiscal year under review, there was leasing income from land in Kashiwa City, Chiba Prefecture owned by consolidated subsidiary Land Support Inc. and 17 million yen in commission income for the brokerage of a pachinko parlor site.
As a result, net sales were 69 million yen (up 30.6% YoY) and segment income was 30 million yen (up 36.0% YoY).
Others
In the consolidated fiscal year under review, the camper rental business and other activities resulted in net sales of 7 million yen (down 23.4% YoY) and segment loss of 5 million yen (1 million yen loss in the same period of the previous fiscal year).
Medium to Long-term Management Strategies
The Group will ceaselessly pursue enhancement of the added value and productivity of its advertising services in the mainstay pachinko parlor advertising field and work to maximize profitability despite the adverse business environment. At the same time, the Group will continuously seek out new business opportunities and proactively work on business development to avoid excessive dependence on any particular industry and diversify its revenue sources in order to achieve sustained growth for the entire Group.
The main strategic issues to be addressed in order to achieve sustained growth are as follows.
- Develop markets in fields other than pachinko parlor advertising
- Work to firmly establish digital media market for customer-drawing commercial facilities
- 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.