Consolidated Operating Results for the year Ended March 31, 2019
RESULTS OF CONSOLIDATED OPERATIONS
Net sales |
Operating income |
Ordinary income |
Net income attributable to equities of parent |
|||||
---|---|---|---|---|---|---|---|---|
Million yen | % | Million yen | % | Million yen | % | Million yen | % | |
Year ended March 31, 2019 |
31,166 | -8.6 | 1,527 | 28.1 | 1,748 | 25.8 | 1,263 | 60.9 |
Year ended March 31, 2018 |
34,093 | -16.3 | 1,192 | 13.8 | 1,390 | 1.2 | 785 | 56.2 |
(Note) Comprehensive income
Year ended March 31, 2019: ¥1,237 million (47.5%)
Year ended March 31, 2018: ¥839 million (39.9%)
Net income per share |
Diluted net income per share |
Net income to shareholders’ equity ratio |
Ordinary income to total assets ratio |
Operating income to net sales ratio |
|
---|---|---|---|---|---|
Yen | Yen | % | % | % | |
Year ended March 31, 2019 |
85.46 | - | 4.3 | 4.0 | 4.9 |
Year ended March 31, 2018 |
53.11 | - | 2.7 | 3.1 | 3.5 |
(Reference) Equity in earnings of affiliates:
Year ended March 31, 2019: ¥- million
Year ended March 31, 2018: ¥- million
CONSOLIDATED FINANCIAL POSITION
Total assets | Net assets | Shareholders’ equity ratio |
Net assets per share |
|
---|---|---|---|---|
Million yen | Million yen | % | Yen | |
Year ended March 31, 2019 |
43,729 | 29,898 | 68.4 | 2,022.46 |
Year ended March 31, 2018 |
43,564 | 29,251 | 67.1 | 1,978.72 |
(Reference) Shareholders’ equity
Year ended March 31, 2019: ¥29,898 million
Year ended March 31, 2018: ¥29,251 million
CONSOLIDATED CASH FLOWS
Cash flows from operating activities |
Cash flows from investing activities |
Cash flows from financing activities |
Cash and equivalents, end of period |
|
---|---|---|---|---|
Million yen | Million yen | Million yen | Million yen | |
Year ended March 31, 2019 |
1,875 | -2,364 | -592 | 12,751 |
Year ended March 31, 2018 |
2,921 | -2,411 | -739 | 13,832 |
Dividends
Annual dividends | |||||
---|---|---|---|---|---|
First quarter-end |
Second quarter-end |
Third quarter-end |
Year-end | Annual | |
Yen | Yen | Yen | Yen | Yen | |
Year ended March 31, 2018 |
- | 10 | - | 30 | 40 |
Year ended March 31, 2019 |
- | 10 | - | 30 | 40 |
Year ended March 31, 2020 (Forecast) |
- | 10 | - | 30 | 40 |
Total dividends paid (annual) |
Payout ratio (Consolidated) |
Dividends paid to net assets (Consolidated) |
|
---|---|---|---|
Million yen | % | % | |
Year ended March 31, 2018 |
591 | 75.3 | 2.0 |
Year ended March 31, 2019 |
591 | 46.8 | 2.0 |
Year ended March 31, 2020 (Forecast) |
73.9 |
Forecast earnings for the year ending March 31, 2020
Net sales | Operating income |
Ordinary income |
Net income attributable to owners of parent |
Net income per share |
|||||
---|---|---|---|---|---|---|---|---|---|
Million yen | % | Million yen | % | Million yen | % | Million yen | % | Yen | |
First half ending September, 2019 |
16,500 | 16.0 | 600 | -31.2 | 625 | -37.8 | 400 | -37.3 | 27.06 |
Entire – year | 34,000 | 9.1 | 1,200 | -21.5 | 1,250 | -28.5 | 800 | -36.7 | 54.12 |
Analysis of Operating Results
Operating results for this period
The Japanese economy remained on the track of moderate recovery during this consolidated fiscal year against a backdrop of improvement in corporate earnings, and employment and income environments. On the other hand, the economic outlook still continued to be uncertain due to the impact of the US-China trade friction on the global economy, and concerns about the effect of volatility in financial and capital markets, etc. Although it has been more than a year since “the Regulations on the Partial Revision of Regulations Regarding the Enforcement of the Act on Control and Improvement of Amusement Business, etc. and Regulations Regarding the Certification of Game Machines and Examination of Model” (hereinafter referred to as “new regulations”) came into force, the market still has a mix of game machines under the old and new regulations, and the pachinko industry, in which the Daikoku Denki Group (“the Group”) is engaged, is required to accelerate the transition to game machines under the new regulations by creating attractive gaming features suitable for the new regulations. In addition, “the basic plan for the promotion of countermeasures against gambling addiction, etc. (draft)” was officially announced on March 6, 2019, and indicated specific policies and challenges that the pachinko industry should work on. According to the “2018 White Paper on Adult Entertainment Business and Moral Offense Control” issued by the Community Safety Bureau of the National Police Agency, the total number of installed game machines was 4,302,731 units, as a result of a decrease of 112,223 units in pachinko game machines and a decrease of 21,841 units in pachislot game machines. However, the average number of installed game machines per parlor increased by 9.0 units to 427.7 units. In this market environment, the Information System Segment released a trading area analysis service, “Market-SIS,” that shows the status of attracting customers in the surrounding area as a new MIRAIGATE service, and strived to disseminate it. The Information System Segment also continued to seek to expand sales of information publication products including “BiGMO PREMIUM II” equipped with data display, and various content corresponding to “pachinko machines with fixed settings,” and also undertook efforts to offer customer analysis and a new feature with a strengthened security function through the fan trend data publication service “Fan-SIS” for the CR unit “VEGASIA III.” The Control System Segment forecast the market environment after the new regulations came in force, and undertook efforts to create attractive gaming features suitable for the new regulations by evaluating and analyzing “pachinko machines with fixed settings” that were launched onto the market by game machine manufacturers. The Control System Segment also promoted activities for planning and proposals that utilize content and new technology in order to acquire new clients. As a result, for this consolidated fiscal year, net sales amounted to 31,166 million yen (down 8.6% year-on-year), operating income was 1,527 million yen (up 28.1% year-on-year), and ordinary income was 1,748 million yen (up 25.8% year-on-year), and net income for the year attributable to parent company shareholders amounted to 1,263 million yen (up 60.9% year-on-year).
Business results by segment are as follows.
Information System Segment
This consolidated fiscal year’s sales of hall computers exceeded the levels of the previous consolidated fiscal year because their introduction to leading companies proceeded. However, sales of information terminals for fans such as “BiGMO PREMIUM II” and “REVOLA,” and of CR units such as “VEGASIA III,” whose security offering, unique to our company, was highly regarded, were at the levels of the previous consolidated fiscal year. In the severe market environment with significantly decreased new parlor openings and large-scale renovations, sales of other main products, such as the system for customers receiving prizes, also fell below the levels of the previous consolidated fiscal year. With respect to selling and general administrative expenses, mainly the R&D cost decreased from the previous consolidated fiscal year. As a result, net sales in this segment were 24,474 million yen (down 1.4% year-on-year), and segment income was 2,725 million yen (up 11.9% year-on-year).
Control System Segment
While the number of new machines sold remained small for the overall game machine market, display units for pachinko game machines sold well during this consolidated fiscal year and exceeded the level of the previous consolidated fiscal year. However, sales of control units and their components fell below the levels of the previous consolidated fiscal year because of game machine manufacturers’ review of sales plans due to the effect of new regulations, and the reuse rate increase, etc. As for pachislot game machines, approximately 5,500 units were brought to the market in the previous consolidated fiscal year, but there were no sales during this consolidated fiscal year. As a result, net sales in this segment were 6,740 million yen (down 27.7% year-on-year), and segment income was 488 million yen (up 12.7% year-on-year).
(Note) Business segment results include intersegment transactions.
Overview of Financial Position
Current assets at the end of the consolidated fiscal year were 26,397 million yen, a decrease of 159 million yen from the end of the previous consolidated fiscal year. The main factor was a decrease in cash and deposits and inventories, despite an increase in accounts due and trade receivables through development recovery compared to the previous consolidated fiscal year. Non-current assets at the end of this consolidated fiscal year were 17,331 million yen, an increase of 324 million yen from the end of the previous consolidated fiscal year due to an increase in tools, furniture and fixtures by additional acquisitions during this consolidated fiscal year and transfer from construction in progress through in-house system construction in the Information System Segment, and also due to in-house system construction in software and an increase in software for products. As a result, total assets at the end of the consolidated fiscal year were 43,729 million yen, an increase of 165 million yen from the end of the previous consolidated fiscal year. Total liabilities at the end of the consolidated fiscal year amounted to 13,831 million yen, a decrease of 481 million yen from the end of the previous consolidated fiscal year. The main factors for this include a significant decrease in advances received due to good progress in contracted cases, such as software production, although other accounts payable and trade payables increased due to many R&D costs being recorded at the end of this consolidated fiscal year compared with the previous consolidated fiscal year. Net assets at the end of the consolidated fiscal year were 29,898 million yen, an increase of 646 million yen from the end of the previous consolidated fiscal year. The main factors for this include increased retained earnings because the recorded net income for the year attributable to parent company shareholders was large. From the above, the Group’s equity ratio was 68.4% (an increase of 1.3 points when compared to that at the end of the previous consolidated fiscal year).
Overview of Cash Flows
Cash and cash equivalents (hereinafter referred to as “cash”) at the end of the consolidated fiscal year amounted to 12.751 billion yen, a decrease of 1,080 million yen from the end of the previous consolidated fiscal year.
The situation of each cash flow for the consolidated fiscal year is as follows:
(Cash flows in operating activities)
Cash provided by operating activities amounted to 1.875 billion yen (an income of 2.921 billion yen for the same period last year). The main factors for this were net income before taxes of 1.682 billion yen as income, a depreciation cost of 1.742 billion yen, although there was and a increase in trade receivables, 1.141 billion yen, and a decrease in trade payables, 401 million yen, as expenditure.
(Cash flows in investment activities)
Cash used in investing activities amounted to 2.364 billion yen (an expenditure of 2.411 billion yen for the same period last year), whose breakdown was mainly expenditures for acquisition of fixed assets.
(Cash Flows in financing activities)
Cash spent for financing activities amounted to 592 million yen (an expenditure of 739 million yen for the same period last year), whose breakdown was mainly dividend payments.
Future outlook
The Japanese economy is expected to continue a moderate recovery in the domestic economy even during the full fiscal year ending March 2020, while employment and income environments continue to improve, but the outlook for consumer spending is still expected to be uncertain due to the impact of the consumption tax hike scheduled for October. Attention also needs to be paid to uncertainty about overseas economic trends and policies, such as intensified trade friction and European policy trends, and the impact of financial capital market fluctuations. The number of new pachinko game machines sold has been decreasing, and a severe market environment is expected to continue in the pachinko industry, in which the Group is engaged. Approximately 180,000 pachislot game machines are planned to be replaced with game machines under new regulations due to the expiration of certification by December 2019, so future trends will attract attention. Companies involved in the management of pachinko halls that are considering a price change in pachinko balls (medals) are increasing as a response to the consumption tax hike, and demand to replace the existing CR unit with our company’s CR unit “VEGASIA III,” which has a tax-exclusive pricing function, is anticipated. In such a market, the Information System Segment strives to contribute to the performance of companies involved in the management of pachinko halls by launching on the market products equipped with various content in compliance with the new regulations, and anticipates net sales of 26 billion yen (up 6.2% year-on-year) by promoting widespread use of the new MIRAIGATE service, “Market-SIS,” which is in its second year after release. The Control System Segment aims for quality improvement and development cost reduction through efficiency in the development process, and also anticipates net sales of 8 billion yen (up 18.7% year-on-year) by creating attractive gaming features suitable for the new regulations, and by disseminating planning and product proposals that utilize new technology for all pachinko game machines. As a result, the Group anticipates consolidated net sales of 34 billion yen (up 9.1% year-on-year), consolidated operating income of 1.2 billion yen (down 21.5% year-on-year), consolidated ordinary income of 1.25 billion yen (down 28.5% year-on-year) and consolidated net income for the year attributable to parent company shareholders of 800 million yen (down 36.7% year-on-year). Although an increase in sales and a decrease in profit are forecast compared to the previous consolidated fiscal year, the main factors in a decrease in profit are replacement of the core system, etc., and depreciation caused by the Information System Segment launching the hall computer “X (Kai)” onto the market in June 2019.
* Important notice concerning forecasts Forecasts in this report are determined on the basis of information available at the time the report was prepared, and may thus contain potential risks and uncertainties. As for business performance, the Group will continuously collect and analyze data. If the earnings forecast must be revised, the Group will immediately announce the revision.
Basic Approach to Selection of Accounting Standards
The Group applies Japanese accounting standards, as its operations are limited to Japan with no activity conducted outside of Japan. However, the Group plans to examine the application of the International Financial Reporting Standards (IFRS) based on the trend of IFRS applications from other companies in Japan in the future.