Top Management Interview

August 2019,
Taro Hashimoto, CEO

Summary of financial results and operations for FY2018

For the consolidated results in the fiscal year ended March 31, 2019, we recorded revenue of 11,123 million yen, operating income of 167 million yen, ordinary income of 203 million yen, and net income of 167 million yen. Revenue rose compared to the previous fiscal year, and in addition to that increase, there was also a contribution from company-wide efforts to control costs, which resulted in higher operating income. In addition, ordinary income and net income also rose owing to the posting of reversal of allowance for doubtful accounts as well as the posting of refunds for consumption and corporate taxes at our subsidiaries.

In the first half, we experienced negative operating income due to one-time expenses related to the damage associated with fictitious transactions. However, as our business structure inherently tends to post higher operating income in the second half, and owing to our diligent efforts to improve business results until the end of the fiscal year, the operating income was positive in the end.

Currently, the “Content” and “Technology” segments are the main driving forces of the Company’s business results. The “Content” segment as a whole recorded increased revenue and income, while its education service business, in particular, has been steady thanks to an increase in the number of students enrolled in the Renaissance High School Group. The eSports course introduced at the Osaka School in April 2018 was received well, and in April 2019, we opened “Umeda eSports Campus” as the largest eSports facility in western Japan. In the “Technology” segment, CDN service and Digital cinema service showed favorable results, and both revenue and operating income increased. Each segment has positive and negative aspects, but overall it was a year that we achieved steady results.

Financial results forecast for FY2019

Our full-year forecast for the fiscal year ending March 31, 2020 expects firm results in the “Broadcast” and “Technology” segments, and we anticipate growth for the “Content” segment. As a result, we believe revenue will rise roughly 8%. In addition, operating income, ordinary income and net income are also projected to accumulate, leading to increases in both revenue and income. We expect that FY2019 will maintain a recovery trend.

Financial results forecast for FY2019

Two objectives of management integration

We spent time to consider our vision of the Group’s organization, and came to the conclusion that, given the backdrop of this recovery in business results, this would be the time to integrate wholly-owned subsidiaries into the Company, strengthening both our compliance system and business foundation. Up to the present, each business had its own history and subsidiaries, whereby our group structure placed emphasis on each company’s swift decision-making and mobility. However, this structure tended to make each of the businesses small entities. For that reason, we are considering an absorption-type merger of our six wholly-owned subsidiaries by the end of FY2019, so as to remove the barriers between the Company and its subsidiaries, and to advance a stronger collaborative system for all the businesses.

Two objectives of management integration_1

From a business perspective, the objective of management integration is to bring all businesses under the same umbrella as mentioned above, so as to make it easier to develop businesses jointly by overcoming barriers between conventional subsidiaries and segments. For example, we anticipate joint structures such as Education & Technology, Education & Game, and Technology & Studio. We will see great merits emerging by having the know-how cultivated in each business shared with other businesses.

Two objectives of management integration_2

From the perspective of management efficiency, we are looking to achieve such benefits as eliminating the duplication of administrative tasks, reducing tax burdens incurred by each company, removing internal workloads associated with transactions among the Group companies, and creating economies of scale in outsourcing. In addition, as seamless transfer of human resources becomes possible, we will push forward with the optimization of staff allocation. Through management integration, we aim to strengthen collaboration among each business, raise management efficiency and improve corporate value. Simplifying the organization will enable us to do what is required without delay. Based on this policy we will work to accelerate growth.

To our shareholders

Results are steadily recovering, and we believe that from FY2018 to FY2019 we will be on a trajectory for growth. Going forward, FY2019 will be an important year with respect to whether or not we can achieve greater growth after FY2020. We will take a firm stance to address this issue.

With regard to dividends, as retained earnings are negative, we sincerely regret that we will not pay year-end dividends for FY2018, and at the same time, also do not plan to pay dividends in FY2019.

We strive to accelerate the recovery of our financial results, improve corporate value, and provide returns to shareholders as soon as possible. I would be most grateful to our shareholders for their continuing support.