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Latest Performance

Consolidated business results for the first half of the year ending March 31, 2019 (April 1, 2018 to September 30, 2018)

Operating results (Percentage figures denote YoY changes)

(Unit: Millions of yen) First Half of the year
ended March 31, 2018
First Half of the year
ending March 31, 2019
YoY Change %
Net sales 35,213 18,041 (48.8)
Operating profit (2,780) (3,906) -
Ordinary profit (3,288) (4,062) -
Profit attributable to owners of parent (3,289)

(3,251)

-

Consolidated Balance Sheets (summary)

(Unit: Millions of yen) Year ended March 31, 2018
(March 31, 2018)
First Half of the year
ending March 31, 2019
(September 30, 2018)
Increase /
Decrease
Assets
Total current assets 42,175 33,148 (9,027)
Total non-current assets 30,160 28,197 (1,962)
Total assets 72,336 61,346 (10,990)
Liabilities
Total current liabilities 22,480 15,916 (6,564)
Total non-current liabilities 14,346 12,936 (1,410)
Total liabilities 36,827 28,852 (7,975)
Net assets
Total net assets 35,509 32,493 (3,015)
Total liabilities and net assets 72,336 61,346 (10,990)

Consolidated Statement of Cash Flows (summary)

(Unit: Millions of yen) First Half of the year
ended March 31, 2018
First Half of the year
ending March 31, 2019
Increase /
Decrease
Cash flows from operating activities (912) (4,177) (3,264)
Cash flows from investing activities 4,905 1,652 (3,253)
Cash flows from financing activities (419) (531) (111)
Effect of exchange rate change on cash and cash equivalents (0) 0 1
Net increase (decrease) in cash and cash equivalents 3,573 (3,055) (6,628)
Cash and cash equivalents at beginning of period 23,090 24,373 1,282
Cash and cash equivalents at end of period 26,663 21,318 (5,345)


1.Qualitative information on the quarterly financial results

(1) Analysis of operating results and consolidated earnings forecasts

i.) Overview of operations for the six months ended September 30, 2018 (April 1, 2018 to September 30, 2018)

In the first half of the fiscal year under review, the Japanese economy was on a gradual recovery path, supported by sustained improvement in the employment and income environments as well as in consumer spending.

The pachinko and pachislot (hereinafter, PS) industry regained its original stability with the enforcement of Amendment of the Regulation for Enforcement of the Amusement Businesses Law* (hereinafter, Amusement Business Law), which was revised for the first time in 14 years on February 1, 2018. Although the number of pachinko halls in operation fell due to consolidated of halls into larger halls and aggressive M&A activities, the number of PS machines installed per hall has continued to increase, and against such a backdrop, the halls have steadily worked to strengthen its business capabilities. PS machine manufacturers are proceeding to launch new regulation machines with novel gaming functions into the market. With the introduction of new regulation machines, consumers are expecting the birth of a new form of popular entertainment—pachinko games a variety of people can enjoy while limiting spending to an appropriate amount.

In the first half of the fiscal year under review, seven models of pachinko machines compliant with the new regulations were launched in the PS industry. Although the newly launched machines mainly comprised recycled models such as Amadigi-type (pachinko machines offering relatively higher jackpot probabilities), they got off to a strong start as more than 6,000 halls installed these machines in a single month (the Company estimate). Further, pachislot machines compliant with the new regulations (hereinafter, regulation 6.0 machines) released early in the second half of the fiscal year under review are performing well in terms of the units sales and operation, and they are scheduled to be steadily delivered to the market. As can be understood from such circumstances, purchase intention of halls has increased, presenting ample opportunities for market revitalization.

Under such market environment, the Company shifted to a new management structure in May 2018, under which four companies jointly manage business operations. Each of the four companies is currently formulating a new growth plan. Further, the four companies will together implement various cost reduction measures to achieve management with optimal cost effectiveness.

The PS distribution unit led by the Company has returned to its original position of a PS machine distributor, and in addition to selling new machines, the unit is working on developing new business that responds to customer needs.

The PS development unit centered on BOOOM Corporation, is engaged in contracted development for a variety of manufacturers as well as new product development in collaboration with the PS distribution unit.

Tsuburaya Productions Co., Ltd., which heads the IP&MD unit, has implemented a medium- to long-term growth plan with the goal of becoming a major player in the global market in addition to expanding its business in Japan.

Further, Digital Frontier Inc., which is at the core of the visual production unit, aims to collaborate with the PS development unit in developing quality videos for PS machines and expand its business as a crucial growth partner of Tsuburaya Productions Co., Ltd.


[Results for the first half of the fiscal year ending March 31, 2019]
For its mainstay PS business (PS distribution and development units), the Company mainly worked on revising PS machines so that they would be compliant with the new regulations in the first half of the fiscal year under review as the Amusement Business Law came into effect in February 2018. As a result, it has planned sales activities mainly in the second half of the fiscal year.

In the first half of the fiscal year ending March 31, 2019, the Company focused on the sale of new machines centered on those old regulation machines and those later remodeled machines, and sold a total of 43,000 units (down 56,000 units YoY), comprising 33,000 pachinko machines and 10,000 pachislot machines. As a result, the Company posted an operating loss of about ¥3.9 billion for the PS business, but the loss only had a minor impact on overall performance.


As a result, in the first half of the fiscal year ending March 31, 2019, the Company posted net sales of ¥18,041 million (-48.8% YoY), an operating loss of ¥3,906 million (an improvement of ¥1,126 million from the same period of the previous year), and an ordinary loss of ¥4,062 million (loss widened by ¥773 million from the same period of the previous year). Loss attributable to owners of parent improved ¥37 million from the same period of the previous fiscal year to ¥3,251 million, thanks to a gain on sales of shares of subsidiaries and associates of ¥1,400 million booked as extraordinary income.

ii.) Explanation of consolidated earnings forecasts

The Company made no revisions to the consolidated earnings forecasts for the fiscal year ending March 31, 2019 disclosed on May 11, 2018 when it announced "Summary of Financial Information and Consolidated Business Results for the Year Ened March 31, 2018". Progress in the second half of the fiscal year under review is as follows.


[Progress in the second half of the fiscal year ending March 31, 2019]
In the PS business, the Company plans to proceed with remaking major titles it was not able to launch at the end of the previous fiscal year. It plans to launch the remade titles along with new regulation machines centered on machines in other series. Further, each of the four companies is implementing a new growth plan that includes the development of new businesses.

In the third quarter of the fiscal year under review, the Company expects five PS titles already on the market to produce sales according to plan and significantly contribute to reaching about ¥2.5 billion in quarterly operating profit and narrowing the cumulative operating loss by up to ¥1.4 billion.

In the fourth quarter of the fiscal year under review, the Company looks to sell seven pachinko titles (including three Amadigi-type titles) and three pachislot titles. Of these ten titles, it has already begun selling three PS titles. Regarding main titles it expects to sell in February to March 2019, several have already passed model certification test, and the rest have been submitted for model certification test; preparation for launch is proceeding apace.

Thanks to these initiatives, the Company expects quarterly consolidated operating profit to reach about ¥3.5 billion in the fourth quarter.


[Full-year earnings forecasts for the fiscal year ending March 31, 2019]
As stated above, the PS business is making steady progress to reaching full-year targets in the second half of the fiscal year under review. Hence, the Company expects about ¥1.5 billion in operating profit from the PS business and about ¥500 million in operating profit from Tsuburaya Productions Co., Ltd., for a total of about ¥2.0 billion in operating profit as forecast at the beginning of the fiscal year.


The Company will disclose its next medium-term management plan, including various initiatives to be implemented, at the earnings briefing session scheduled for institutional investors and analysts on November 8, 2018, and will promptly upload the plan to the Company website https://www.fields.biz/ir/ after the briefing.

*: Regulation Partially Amending the Ordinance for Enforcement of the Act on Control and Improvement of Amusement Business and the Regulations for the Verification of Licenses, Formats and Other Aspects of Pachinko and Pachislot Machines, which enforced on February 1, 2018.

(2) Analysis of financial position

  1. Assets
    Current assets amounted to ¥33,148 million, down ¥9,027 million from the end of the previous fiscal year. The principal factor behind this was a decrease in cash and deposits, and notes and accounts receivable-trade.
    Property, plant and equipment amounted to ¥4,817 million, down ¥462 million from the end of the previous fiscal year. The principal factor behind this was a decrease in buildings and structures.
    Intangible assets amounted to ¥910 million, down ¥474 million from the end of the previous fiscal year. The principal factor behind this was a decrease in software.
    Investments and other assets amounted to ¥22,470 million, down ¥1,025 million from the end of the previous fiscal year. This was mainly due to a decrease in investment securities.
    As a result of the above, total assets amounted to ¥61,346 million, down ¥10,990 million from the end of the previous fiscal year.

  2. Liabilities
    Current liabilities amounted to ¥15,916 million, down ¥6,564 million from the end of the previous fiscal year. The principal factor behind this was a decrease in notes and accounts payable-trade.
    Non-current liabilities amounted to ¥12,936 million, down ¥1,410 million from the end of the previous fiscal year. The principal factor behind this was a decrease in long-term loans payable.
    As a result of the above, total liabilities amounted to ¥28,852 million, down ¥7,975 million from the end of the previous fiscal year.

  3. Net assets
    Net assets amounted to ¥32,493 million, down ¥3,015 million from the end of the previous fiscal year. This primarily reflected a decrease in retained earnings.

  4. Analysis of cash flows
    During the first half of the fiscal year under review, cash and cash equivalents (hereinafter referred to as "cash") decreased by ¥3,055 million from the end of the previous fiscal year, amounting to ¥21,318 million.

  5. Cash flows from operating activities
    Net cash used in operating activities amounted to ¥4,177 million (¥912 million of expenditure for the same period of the previous fiscal year). This was mainly due to a loss before income taxes of ¥3,135 million, a decrease in notes and accounts receivable–trade of ¥3,042 million, a decrease in notes and accounts payable-trade of ¥6,610 million, a decrease in inventories of ¥1,286 million, loss on sales of shares of subsidiaries and associates of ¥1,348 million.

  6. Cash flows from investing activities
    Net cash provided in investing activities amounted to ¥1,652 million (¥4,905 million of revenue for the same period of the previous fiscal year). This was mainly due to purchase of non-current assets of ¥212 million and proceeds from sales of shares of subsidiaries and associates of ¥1,800 million, proceeds from sales of investment securities totaling ¥528 million.

  7. Cash flows from financing activities
    Net cash used in financing activities amounted to ¥531 million (¥419 million of expenditure for the same period of the previous fiscal year). This was mainly attributable to increase in short-term loans payable totaling ¥938 million, repayments of long-term loans payable totaling ¥1,290 million, and cash dividends paid totaling ¥168 million.