FY 2008 1St Quarter Results
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FY 2008 1st Quarter Results July 27th, 2007 SEGA SAMMY HOLDINGS INC [Disclaimer] The contents of this material and comments made during the questions and answers etc of this briefing session are the judgment and projections of the Company’s management based on currently available information. These contents involve risk and uncertainty and the actual results may differ materially from these contents/comments. Copyright © SEGA SAMMY HOLDINGS INC. All Rights Reserved. 1 1 Contents FY 2008 1st Quarter Results Highlights ……3 Consolidated Income Statement ……4 Consolidated Balance Sheet ……5 Segment Information ……6 Segment Results ……7 – Pachinko Pachislot ……7 – Pachislot ……8 – Pachinko ……9 – Amusement Machines ……10 – Amusement Facilities ……12 – Consumer ……14 Results of Listed Subsidiaries ……16 Appendix ……19 Copyright © SEGA SAMMY HOLDINGS INC. All Rights Reserved. 2 Good morning. I am Nakayama, Executive Vice President and Representative Director at Sega Sammy Holdings. We thank you for joining us today as we discuss our Q1 results. 2 Highlights ■Sales/Profits Sales of ¥95.4 Billion, Operating Loss of ¥2.4 Billion, Quarterly Net Loss of ¥5.0 Billion ⇒Sales of Pachislot machines well above prior year’s levels leading to 11.4% more revenue. As expected operating losses were incurred in the Amusement Machines, Amusement Facilities and Consumer Segments, all of which are second half weighted ■Segment Overview Pachinko Pachislot: Pachislot replacement cycle delayed, but sales far exceed last year’s levels Amusement Machines: With the lack of new large scale equipment such as was introduced in the comparable period, revenues and profits fell, but sales were steady and focused on the continuing orders for product introduced in the prior fiscal year Amusement Facilities: Same store sales below last year’s levels, but with cost controls losses are reduced Consumer: Domestic sales in line with plans, overseas operations gearing up for major 2nd half titles, R&D spend up due to strengthening our global network ■Corporate Actions ・Formal conclusion of comprehensive business tie-up with Sanrio ・Hajime Satomi named President and Representative Director CEO and COO of SEGA Corporation Copyright © SEGA SAMMY HOLDINGS INC. All Rights Reserved. 3 Firstly, some highlights from the period. Net sales rose 11.4% over the comparable period to 95.4 billion yen, however the company posted a net operating loss of 2.4 billion yen. This came as a result of the fact that major products and services being planned for launch in the second half while costs were recognized in advance, all of which was in line with our expectations. Looking segment by segment, with the new regulation replacement cycle underway we saw sales of pachislot machines well above last year’s levels. Lacking the launch of major products such as influenced the comparable period’s results, profitability fell in the Amusement Machines segment, but results were in line with our plans. Same store sales fell below last years levels in the Amusement Facilities segment, but through reduction in costs profitability is being enhanced. The Consumer segment trended about in line with plans. Corporate actions in the period included a broad business tie up with Sanrio, the formal contract with which was concluded on April 27th. Additionally, in order to take decisive measures to strengthen operations at SEGA, Mr. Satomi was named President, CEO and COO of SEGA and will work to strengthen the business structure and drastically strengthen SEGA’s profitability. 3 Condensed Consolidated Income Statement FY 2007 FY 2008 (JPY Billions) 1Q 1H FY 1Q 1H Plan FY Plan Net Revenue 85.6 283.5 528.2 95.4 310.0 670.0 Operating Profit 2.7 62.9 76.5 -2.4 14.0 70.0 Ordinary Profit 2.4 66.0 81.2 -1.4 13.0 67.0 Net Income 0.7 37.9 43.4 -5.0 -5.0 35.0 Copyright © SEGA SAMMY HOLDINGS INC. All Rights Reserved. 4 Results for the 1st Quarter of the March 2008 Fiscal year were as follows: Net sales 95.4 billion yen Operating loss of 2.4 billion yen Ordinary loss of 1.4 billion yen Net loss of 5.1 billion yen As I mentioned earlier in the call, with the recognition that many of the main products and services for this fiscal year will be launched in the second half while costs are recognized up front, results were within our expectations. Also, as was announced on July 25th, Sammy Networks is took a 1.1 billion yen extraordinary loss on its investment in a subsidiary in China. 4 Condensed Consolidated Balance Sheet Units: JPY Billions 【 Assets 】 【 Liabilities and Net Assets 】 Account End March 2007 End 1Q Change Account End March 2007 End 1Q Change Cash and Cash Equivilents 146.6 137.4 (9.1) Accounts Payable 71.4 70.9 (0.4) Accounts Receivable 83.4 57.3 (26.1) Short term borrowings 29.2 30.1 0.8 Securities 0.9 0.9 0.0 Other 52.3 40.7 (11.5) Inventories 40.1 51.1 10.9 Current Liability % 27.9% 26.9% -1.1% Other 40.9 41.1 0.2 Total Current Liabilities 153.0 141.8 (11.1) Current Asset % 56.8% 54.8% -2.0% Bonds Payable 15.6 15.6 0.0 Total Current Assets 312.1 288.1 (24.0) Long Term Debt 1.1 3.5 2.4 Tangible Fixed Assets 111.8 115.2 3.3 Other 21.2 22.1 0.8 Intangible Fixed Assets 25.2 23.6 (1.6) Long Term Liabilities % 6.9% 7.9% 1.0% To tal Lo n g- te rm Liabilitie s 38.0 41.4 3.3 Investment Securities 63.4 60.0 (3.4) Total Liabilities 191.0 183.2 (7.7) Other 37.1 38.9 1.8 Shareholders Equity 348.5 335.0 (13.5) Valuation/ Tran slatio n Adjustmen ts (10.4) (12.2) (1.7) Warrants 0.4 0.6 0.1 Minority Interest 20.3 19.2 (1.0) Fixed Asset % 43.2% 45.2% 2.0% Net Assets % 65.2% 65.2% 0.0% Total Fixed Assets 237.7 237.9 0.1 Total Net Assets 358.8 342.7 (16.0) Total Liabilities 549.9 526.0 (23.8) 549.9 526.0 (23.8) Total Assets and Net Assets 自己資本比率 Topicsのれん 増減明細 少数株主持分 残高明細(単位 ■Decreased accounts receivable, etc. yield a decline in total assets of ¥23.8 billion ■Net assets sink by ¥16 billion as a result of the quarterly loss and dividend payment Copyright © SEGA SAMMY HOLDINGS INC. All Rights Reserved. 5 Next we will move to the balance sheet. There have been no major changes since the end of the prior fiscal year, but a lower amount of receivables as well as the payment of 16 billion yen in dividends has lead to a 23.8 billion yen drop in total assets. 5 Segment Information FY 2007 FY 2008 (JPY Billions) 1Q 1H FY 1Q 1H Plan FY Plan Net Sales 85.6 283.5 528.2 95.4 310.0 670.0 Pachinko Pachislot 21.5 145.0 211.5 37.9 168.0 303.0 Amusement Machines 17.7 34.6 75.4 15.2 34.5 82.5 Breakdown Amusement Facilities 25.2 53.5 103.8 22.8 52.0 110.5 Consumer 16.5 40.7 119.5 16.0 46.5 156.0 Other 4.5 9.6 17.8 3.3 9.0 18.0 Operating Profit 2.7 62.9 76.5 -2.4 14.0 70.0 Pachinko Pachislot 2.1 63.7 71.1 6.6 36.9 66.3 Amusement Machines 4.0 6.6 11.6 0.6 0.2 9.2 Amusement Facilities 2.0 2.9 0.1 -0.8 -2.4 -1.0 Breakdown Consumer -4.0 -6.7 1.7 -7.2 -15.6 4.4 Other -0.2 -0.4 -1.3 -0.2 -0.4 -0.4 Eliminations -1.1 -3.2 -6.7 -1.5 -4.7 -8.5 Copyright © SEGA SAMMY HOLDINGS INC. All Rights Reserved. 6 Following we have the breakout by segment. With an increased number of pachislot sales versus the comparable period sales and profits in that segment rose, but in the other segments results were flat to down with certain areas even showing operating losses. These figures are the result of the launch of main products and services expected to be concentrated in the second half. The results of each individual segment will be explained later. 6 Segment Results : Pachinko Pachislot 1Q Results 1st Half Outlook ■Sales at subsidiary brands strong ■Strong Demand for Hokuto no Ken 2 ⇒Ginza ⇒Orders already exceed 100k “Ring ni Kakero” “Urusei Yatsura” ⇒ ■ Pachislot Pachislot Rodeo Will be announcing new titles as “Devil May Cry 3” appropriate upon reflection on market ■As of June end 56% of market is reg 5 movements ⇒Introduction of new reg machines is proceeding well, but halls using popular old reg machines until their deadline ■Drivers of replacement ⇒discounts, rentals ■Repeat orders for CR Aladdin Destiny ■Strong demand for “Sakura Taisen” ■Second half weighted which will be released in September Pachinko Pachinko ⇒ Ginza branded “Love Love Olive” ■Results of the new development “gate” only title released in 1Q process will be reflected in the second half. ■New Pachinko R&D Process ⇒Expect machines designed under this process to hit the market in the 2nd half. Copyright © SEGA SAMMY HOLDINGS INC. All Rights Reserved. 7 Net sales were up 76%, totaling 37.9 billion yen, and operating income was 6.6 billion yen, or 3.1x the comparable period’s level, in the pachinko pachislot segment, reflecting an large increase in both sales and profits versus the comparable period.