Consolidated Operating Results for the Year Ended March 31, 2011
RESULTS OF CONSOLIDATED OPERATIONS
|Net sales||Operating income||Ordinary income||Net income|
|Million yen||%||Million yen||%||Million yen||%||Million yen||%|
|Year ended March 31, 2011||34,483||-33.5||226||-95.1||356||-92.7||-342||−|
|Year ended March 31, 2010||51,857||-0.8||4,626||-3.6||4,903||-1.8||2,347||-33.4|
(Note) Comprehensive income
Year ended March 31, 2011: ¥-325 million (−%)
Year ended March 31, 2010: ¥2,355 million (−%)
|Net income to
income to total
income to net
|Year ended March 31, 2011||-23.14||−||-1.3||0.7||0.7|
|Year ended March 31, 2010||158.76||−||8.8||9.3||8.9|
(Reference) Equity in earnings of affiliates:
Year ended March 31, 2011: ¥-14 million
Year ended March 31, 2010: ¥11 million
CONSOLIDATED FINANCIAL POSITION
|Total assets||Net assets||Shareholders’
|Million yen||Million yen||%||Yen|
|Year ended March 31, 2011||49,015||26,020||52.9||1,755.57|
|Year ended March 31, 2010||49,641||27,380||55.1||1,848.74|
(Reference) Shareholders’ equity
Year ended March 31, 2011: ¥25,953 million
Year ended March 31, 2010: ¥27,331 million
CONSOLIDATED CASH FLOWS
|Million yen||Million yen||Million yen||Million yen|
|Year ended March 31, 2011||-2,791||-1,016||465||13,080|
|Year ended March 31, 2010||6,079||-3,416||-1,895||16,426|
|Year ended March 31, 2010||−||10.00||−||60.00||70.00|
|Year ended March 31, 2011||−||10.00||−||30.00||40.00|
|Year ended March 31, 2012
to net assets
|Year ended March 31, 2010||1,034||44.1||3.9|
|Year ended March 31, 2011||591||−||2.2|
|Year ended March 31, 2012
Forecast earnings for the year ending March 31, 2012
|Net income||Net income
|Million yen||%||Million yen||%||Million yen||%||Million yen||%||Yen|
|First half ending
|Entire – year||38,000||10.2||-1,500||−||-1,500||−||-1,500||−||-101.46|
Material changes in subsidiaries during this period (Changes in scope of consolidations resulting from change is subsidiaries)
No(Number of subsidiaries excluded from consolidation: 0, Name of subsidiaries excluded from consolidation: −)
Changes in accounting policies and accounting estimates, retrospective restatement
Changes in accounting policies based on revisions of accounting standard: Yes
Changes in accounting policies other than ones based on revisions of accounting standard: Yes
Number of shares outstanding (common stock)
1. Number of issued and outstanding shares at the end of fiscal year (including treasury stock)
March 31, 2011: 14,783,900
March 31, 2010: 14,783,900
2. Number of treasury stock at the end of fiscal year
March 31, 2011: 315
March 31, 2010: 196
3.Average number of shares
March 31, 2011: 14,783,626
March 31, 2010: 14,783,704
Analysis of Operating Results
Operating results for this period
During the consolidated fiscal year, the Japanese economy was severely hit by the Great East Japan Earthquake on March 11, 2011 while corporate earnings had been back on the recovery track. The pachinko business, a part of the amusement industry in which the Daikoku Denki Group (“the Group”) is engaged, has been suffering from sluggish personal consumption in this period. In particular, revenues of pachinko hall operators, our customers, remained in tough conditions. Under these environments, low-priced rental balls services, such as1-yen pachinko, have now been spread all over Japan, and there was efforts to differentiate services. In addition, the unit sales of pachinko game machines remained slow due mainly to a change in distribution system of used game machines and self-restraint of replacing pachinko machines along with APEC Summit held in November. On the other hand, the performance of pachislot game machines was strong and a shift from pachinko to pachislot started to come up.
According to the” Present Status of Businesses Affecting Public Morals in 2010″ surveyed by the Community Safety Bureau, the National Police Agency, the number of pachinko halls was 12,479, a decrease of 173 from the preceding year, and the total number of installed game machines was 4,554,430, as a result of an increase of 4,851 units in pachinko game machines and an increase of 43,316 units in pachislot ones. Consequently, the number of installed game machines per hall was increased by 8.8 units to 365 units.
Under these market environments, the Information System Segment promoted proposals for hall utilization of , “BiGMO” for boosting the performance of pachislot games, and “Raku-pass” for differentiating amid the trend of a low-priced rental ball service.
The Control System Segment sought to improve the quality and efficiency of development operations aiming at reforms in manufacturing and strove to promote projects of hardware and software of game machines. However, the release of new models of the segment was delayed due to the Great East Japan Earthquake, which adversely affected the business results.
As a result, the Company’s cumulative consolidated results for the year were ¥34,483 million in net sales(down 33.5% year-on-year), ¥226 million in operating income (down 95.1% year-on-year), and ¥356 million in ordinary income (down 92.7% year-on-year).Consolidated net loss for the quarter amounted to ¥342 million (compared with net income of ¥2,347 million for the previous year).Business results by segment are as follows:
Information System Segment
During the consolidated fiscal year, the Information System Segment enhanced values of the “C II Desk,” a service desk for supporting hall management utilizing the MIRAIGATE Network and the “Maintenance Desk” for quick and appropriate maintenance, and also presented proposals on an installation of the “C II”, hall computing system. In addition, the segment also promoted proposal for hall utilization of “BiGMO,” a data display tool with added functions for displaying contents and sound effects to enjoy game machines more for boosting the performance of pachislot games, and “Raku-pass”, a counting system per machine that sought to enhance fans conveniences for differentiating amid the trend of low-priced rental ball services ,and facilitated the spread of the MIRAIGATE Network. However, large-scale capital investment, such as the opening of new halls, remained low.
As a result, sales in the segment were ¥23,492 million (down 8.2% year-on-year), and operating income was ¥3,047 million (down 20.5%year-on-year).
Control System Segment
During the consolidated fiscal year, the Control System Segment strove to project proposals of hardware and software of game machines. However, the number of models and the unit sales decreased significantly, due to self-restraint of replacing pachinko machines during APEC Summit, the extension of the development period to address the revision of internal rules on pachinko game machines, a postponed schedule for sales affected by the Great East Japan Earthquake, etc.
As a result, sales in the segment were ¥9,497 million (down 62.1%year-on-year), and operating loss amounted to ¥1,028 million (compared with operating income of ¥1,028 million for the previous year).
Amusement Content Segment
During the consolidated fiscal year, orders for development increased due to the Group’s highly rated development capability. The segment also released “SPI Test Perfect Exercise Book Containing Most-Frequently Questioned Issues (DS software for 2012 version) under the supervision of Takahashi Shoten Co., Ltd.” as a Genki original game, and its sales showed favorable results. The segment also started to provide mobile contents to GREE, following the provision for mixi and Yahoo! Mobage.
As a result, sales in the segment were ¥1,561 million (up 25.2% year-on-year), and operating loss amounted to ¥59 million (compared with operating loss of ¥222 million for the previous year).
(Note) Figures of segment results include intersegment transactions.
Outlook for the next year
The Japanese economy is expected to be in a tough situation due to the effect of the Great East Japan Earthquake. Our DK-SIS data indicates that the number of customers of game plays recovered at the end of April 2011 following a temporary drop after the Great East Japan Earthquake. However, the Group expects that pachinko hall operators, our customers, would refrain from an opening of new halls and large-scale investments in facilities partly due to a lack of building materials, and game machine manufacturers would delay the launch of new models due to uncertainty in the distribution of semiconductors.
Given such market environments, the Group forecasts the Information System Segment to achieve sales of ¥21 billion, down 10.6% from the year. The segment will try to enhance the value of MIRAIGATE Network further so as to exceed the results for the preceding fiscal year. The Group forecasts the Control System Segment to achieve sales of ¥15 billion, up 57.9% from the year. The Control System Segment will try to enhance the performance through improvement of project proposal capability and pursuit for development efficiency. The Group forecasts the Amusement Content Segment to achieve sales of ¥2 billion, up 28.1% from the year. The Amusement Content Segment will aim to increase orders for entrusted development through improvement of development capacities.
Consequently, as consolidated results for the next year, , the Group forecasts net sales of ¥38 billion (up 10.2% year-on-year), operating loss of ¥1.5 billion (compared with the operating income of ¥226 million for previous fiscal year), ordinary loss of ¥1.5 billion (compared with ordinary income of ¥356 million for the previous fiscal year ), and net loss of ¥1.5 billion (compared with net loss of ¥342 million for the previous year).
*Notes on the forecasts:
Forecasts regarding future performance in this report are based on judgments made in accordance with information available at the time this report was prepared and may contain potential risks and uncertainties.
It is difficult to rationally estimate the impact of the Great East Japan Earthquake on the operating results of the Group. Amid uncertainty about the future, therefore, the above forecasts for the next consolidated fiscal year may substantially differ.. As for future outlook, the Group will continuously collect and analyze the data. In cases where it is required to revise its earnings forecast, the Group will officially announce the revision immediately.
Analysis of Financial Position
Status of Assets, Liabilities and Net assets
Current assets at the end of the consolidated fiscal year were ¥31,549 million, a decrease of ¥3,033 million from the end of the previous consolidated fiscal year. The main factors for the decrease were a decrease in trade receivables and cash and deposits reflecting a decline in business results compared to the preceding year, which could not be offset by an increase in inventories which are to be sold in the next consolidated fiscal year or later and an increase in account receivables due to the consumption tax refund, etc.
Noncurrent assets at the end of the consolidated fiscal year were ¥17,466 million, an increase of ¥2,407 million from the end of the previous consolidated fiscal year, mainly attributable to an increase in property, plant and equipment resulting from the construction of the new head office building, an increase in deferred tax assets due to an excess amount of amortization of intangible assets, and a the revision of the tax effect because the Group will adopt the consolidated taxation system from the next consolidated fiscal year. Consequently, the total assets at the end of the consolidated fiscal year were ¥49,015 million, a decrease of ¥625 million from the end of the previous consolidated fiscal year.
Liabilities at the end of the consolidated fiscal year were ¥22,995 million, an increase of ¥734 million from the end of the previous consolidated fiscal year. The main factors for the increase were an increase in research and development expenses compared to the previous fourth quarter, an increase in accounts payable for acquisition of noncurrent assets, and an increase in loans even though income taxes payable decreased reflecting the weaker business results compared to the same period of the previous year.
Net assets at the end of the consolidated fiscal year were ¥26,020 million yen, a decrease of ¥1,360 million from the end of the previous consolidated fiscal year, and the Group’s equity ratio was 52.9% (down2.2 percentage points compared to the end of the previous fiscal year).
Status of Cash flow
Cash and cash equivalents (“cash”) at the end of the consolidated fiscal year end March 31, 2011 were ¥13,080 million, a decrease of ¥3,346 million from the end of the previous consolidated fiscal year. The situation of each cash flow is as follows:
In cash flow from operating activities, the main factors for the increase were depreciation expenses (¥1,539 million) and a decrease in trade receivables (¥1,397 million), whereas the main factors for the decrease were an increase in inventories (¥2,243 million), increase in other assets, such as accounts receivable – other (¥1,133 million) and income taxes paid (¥2,370 million). As a result, cash used in operating activities was ¥2,791 million. For cash flow from investing activities, cash used in investing activities was ¥1,016 million, due to payment for installment time deposits (¥2,000 million) and acquisition of noncurrent assets (¥2,698 million), which exceeded proceeds from the refund of time deposits (¥3,800 million).
For cash flow from financing activities, cash obtained from financing activities was ¥465 million, due to an increase in interest-bearing debts (¥1,500 million) which exceeded the payment of dividends (¥1,034 million).
Basic policy for profit allocation and the dividends for the current and next a year
The Group identifies the return of profits to the shareholders as the most important corporate management policies while expanding its business scale. Therefore, the Group sets out stable dividends as the basic policy, taking into consideration of a comprehensive assessment of business environments, earnings conditions and payout ratio, etc. Amount and timing of the dividend will be carefully examined and determined at the Board of Directors’ meeting. The Group has also the policy to utilize retained earnings for new business development and operational efficiency in long-term perspective in order to improve market competitiveness and profitability.
To return profits to the shareholders, the Group determined to pay dividends of ¥40 per share for the year (interim dividend of ¥10, year-end dividend of ¥30).
The Group also plans to pay interim dividends of ¥10 per share for the next year; (interim dividend of ¥10,year-end dividend of ¥30). The amount of year-end dividends is yet to be determined due to uncertain situation following the Great East Japan Earthquake. The Group will disclose the dividend forecasts immediately when it becomes available.