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IR Top Page > Financial Information > Financial Review

Financial Review (Japan GAAP)

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(as of October 29, 2019)

Here we breakdown our consolidated business results for the six months ended September 30, 2019 with graphs and diagrams.

1. Operating results overview

Net sales Operating income Ordinary income Net income attributable to owners of the parent Earnings per share
37,272
million yen
( 14.0%
decrease YoY)
13,992
million yen
( 33.2%
increase YoY )
14,002
million yen
( 36.0%
increase YoY )
9,846
million yen
( 43.7%
increase YoY )
92.23 yen

Net sales (cumulative)

Operating income (cumulative)

Ordinary income (cumulative)

Net income attributable
to owners of the parent (cumulative)

During the six months ended September 30, 2019, with the tangible roll-out of the 5G era on the horizon, the industry saw a wave of significant changes coming in anticipation of new business opportunities.

In such an environment, the Company focused on bolstering our development structure, which is the source of our competitiveness. For example, in order to curb costs and shorten development cycles, the Company improved the development process and revenue management while increasing the ratio of internal development by growing our developer workforce. The Company also focused resources on medium- to long-term enhancement of enterprise value, including the allocation of more funds and human resources in esports, which is an area with high future growth potential. In such a situation, Monster Hunter World: Iceborne (for PlayStation 4 and Xbox One), our flagship title for the current fiscal year that launched in September, shipped over 2.8 million units worldwide, supported by consistent popularity. In addition, profit improved due to the continued popularity of major catalog titles, particularly in overseas markets, and the growth of highly profitable digital download sales.

The resulting net sales for the six months ended September 30, 2019 were 37,272 million yen (down 14.0% from the same term in the previous fiscal year), the decrease due in part to promoting the shift from physical package sales to digital sales. In terms of profitability, profit improved at all levels due to the contribution of the hit title Monster Hunter World: Iceborne, primarily sold digitally, as well as to an increase in the percentage of highly profitable digital sales within catalog title sales. Specifically, operating income was 13,992 million yen (up 33.2% from the same term in the previous fiscal year), ordinary income was 14,002 million yen (up 36.0% from the same term in the previous fiscal year), and net income attributable to the owners of the parent was 9,846 million yen (up 43.7% from the same term in the previous fiscal year).

Status of business by operating segment

1. Digital Contents business

Net sales (cumulative)

Operating income (cumulative)

Operating margins (cumulative)

In this business, Monster Hunter World: Iceborne (for PlayStation 4 and Xbox One) experienced solid sales and led profit growth. In addition, healthy sales of high-margin catalog titles also boosted profit. Specifically, sales of Resident Evil 2 (for PlayStation 4, Xbox One and PC) and Devil May Cry 5 (for Xbox One, PlayStation 4, and PC), both hits in the previous fiscal year, continued to grow due to an expanded user base. Monster Hunter: World (for PlayStation 4, Xbox One and PC), which was launched in January 2018, also continued to display its long sales life.

The resulting net sales were 29,163 million yen (down 14.7% from the same term in the previous fiscal year) due to an increase in the percentage of digital sales. Operating income was 14,503 million yen (up 23.4% from the same term in the previous fiscal year) mainly due to contributions from Monster Hunter World: Iceborne and catalog titles.

2. Arcade Operations business

Net sales (cumulative)

Operating income (cumulative)

Operating margins (cumulative)

In this business, the Company worked to secure a wide range of customers, including core users, repeat customers, and families through elaborately planned, community-based promotion activities, such as holding various events and conducting service day campaigns, under the banner of "the No. 1 arcade in the community."

During the period under review, the total number of arcades increased to 39 with the opening of two new arcades: Plaza Capcom Ikebukuro (Tokyo) and Plaza Capcom Fujiidera (Osaka).

The resulting net sales were 6,233 million yen (up 13.3% from the same term in the previous fiscal year) and operating income was 915 million yen (up 24.6% from the same term in the previous fiscal year).

3. Amusement Equipments business

Net sales (cumulative)

Operating income (cumulative)

Operating margins (cumulative)

In an environment in which the shrinkage of the game machine market shows no signs of stopping, mainly due to the revision in pachislo model certification methods, the Company did not launch any new models and focused on business from licensing during the quarter.

The resulting net sales were 241 million yen (down 89.1% from the same term in the previous fiscal year), although the Company secured an operating income, albeit small, of 67 million yen (an operating loss of 625 million yen for the same term in the previous fiscal year).

4. Other Businesses

Net sales (cumulative)

Operating income (cumulative)

Operating margins (cumulative)

The net sales from Other Businesses, mainly consisting of royalty income from the licensing and sale of character merchandise, were 1,633 million yen (up 16.4% from the same term in the previous fiscal year) and operating income was 733 million yen (up 7.0% from the same term in the previous fiscal year).

2. Explanation of the consolidated financial position

Assets

Total assets as of the end of the second quarter increased by 7,969 million yen from the end of the previous fiscal year to 131,377 million yen. The primary increases were 4,746 million yen in cash on hand and in banks and 5,261 million yen in work in progress for game software. The primary decrease was 1,015 million yen in notes and accounts receivable - trade.

Liabilities

Total liabilities as of the end of the second quarter increased by 988 million yen from the end of the previous fiscal year to 35,646 million yen. The primary increase 509 million yen in accrued income taxes.

Net assets

Net assets as of the end of the second quarter increased by 6,980 million yen from the end of the previous fiscal year to 95,730 million yen. The primary increase was 9,846 million yen in net income attributable to owners of the parent. The primary decrease was 2,135 million yen in dividends from retained earnings.

3. Forecast and Outlook

The forecast for the consolidated business results for the current fiscal year ending March 31, 2020 remains the same as what was projected at the financial results announcement on May 7, 2019.

Earnings forecast for the fiscal year ending March 31, 2020
(From April 1, 2019 to March 31, 2020)

  Net sales Operating income Ordinary income Net income attributable to owners of the parent Earnings per share
Year ending March 31, 2020 85,000 million yen
(15.0% decrease YoY)
20,000 million yen
( 10.2% increase YoY )
19,500 million yen
( 7.2% increase YoY )
14,000 million yen
( 11.5% increase YoY )
131.15

In our consolidated outlook for the fiscal year ending March 31, 2020, in addition to improvements in the Amusement Equipments business, we expect stable results primarily due to concentrating on digital sales of titles from the Consumer sub-segment of our Digital Contents business. Continuing to operate under our strategy for growth, we expect a decrease in net sales but an increase in profit because, while we expect cumulative unit sales of titles from our Consumer business to increase, per unit retail prices will be lower.

Our forecast calls for net sales of ¥85 billion (down 15% year-over-year); operating income of ¥20 billion (up 10.2% year-over-year); an operating margin of 23.5%; ordinary income of ¥19.5 billion (up 7.2% year-over-year), and net income attributable to owners of the parent of ¥14 billion (up 11.5% year-over-year).

In Consumer, we plan to further cement the global status of the Monster Hunter brand with the September 6 release of Monster Hunter World: Iceborne, a massive expansion. We will also work to further world-wide growth by focusing on catalog sales of Monster Hunter: World, Resident Evil 2 and Devil May Cry 5.

Outlook

The company expects an increasingly high-tech landscape, where high-resolution graphics and the adoption of AI (Artificial Intelligence) and VR (Virtual Reality) will enable greater realism and natural movement by characters in home video games.

As such, to generate synergy with its popular games via greater global brand awareness and value, the Company has been producing world-leading content, with brands such as Street Fighter and Resident Evil being made into Hollywood movies, now followed by Monster Hunter and Mega Man, which are also scheduled for live-action film adaptation. In recent years, as the domestic market matures, further efforts to increase sales in the larger overseas market have become essential to maintain sustained growth. The Company will, therefore, develop and sell titles that appeal to diverse customer needs, including games that are popular overseas, thereby enhancing customer satisfaction and ensuring its competitive advantage.

Moreover, in the fast-growing esports business, the Company, in addition to leveraging its abundant experience and operational knowhow accumulated over the years in the US, intends to make a full-scale entry into the market and gain a firm footing through the allocation of the necessary funds and human resources. Furthermore, by focusing its management resources in growth areas and priority divisions, as well as reinforcing existing divisions and downsizing and withdrawing from unprofitable divisions, the Company will rebuild its businesses in line with environmental changes. It will also aim for more cohesive business development and higher management efficiency while at the same time enhancing the corporate value of the entire Group by carrying out the business strategies and priority measures that utilize the Company's strengths.

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