GEO HOLDINGS CORPORATION

Financial Data

1. Overview of Results of Operations, etc.

(1) Overview of Operating Results


(i) Results for the current fiscal year

According to the market report concerning electronic commerce published by Ministry of Economy, Trade and Industry, the reuse market (excluding automobiles and motorcycles, and B to B, etc.) has been steadily expanding, with the approximate market scale of 1,880 billion yen in 2016, and 2,100 billion yen in 2017. On the other hand, the downward trend still continues for the video rental market using store outlets, the Group’s founding business, and in regard to the home game market, demand for the previous year’s hit new model game device has settled down.

In such an environment, our group focused on expanding our sales network and market share through brick-and-mortar stores, and developing infrastructure for providing seamless services such as concurrent selling with EC, through attempts to adapting to the changing environment with our policy to “offer joy to everyday life.”

As a result, sales for the current fiscal year resulted in 292,560 million yen (2.2% decrease from the previous fiscal year) although we focused on covering the decline in sales for media stores with contribution from reuse stores whose annual average of monthly sales for existing stores were 108.7% compared to the previous year. In profits, operating profit resulted in 15,668 million yen (6.8% increase from the previous fiscal year), from the effect of reviewing SG&A in parallel with investing in the installment of additional self-checkout terminals in media stores, ordinary profit resulted in 17,632 million yen (15.6% increase from the previous fiscal year) due to the receipt of compensation for urban redevelopment project within Sapporo-shi and insurance related to natural disasters and such, and profit attributable to owners of parent resulted in 10,301 million yen (55.7% increase from the previous fiscal year).

The results for major merchandise are as follows.

Fiscal Year ended
March 31, 2019
(Millions of yen)
Increase from the
previous fiscal year (%)
Rental 62,288 93.5%
Reuse goods Media 54,173 99.7%
Non-media 52,493 116.5%
New (media) 89,218 88.2%

The group’s stores and facilities as at the end of the current fiscal year are as follows.

Directly managed stores Distributors Franchise stores Total
Increase
(decrease)
Increase
(decrease)
Increase
(decrease)
Increase
(decrease)
Total number of GEO group stores and facilities 1,649 38 105 (3) 124 0 1,878 35
Media 1,043 (11) 105 (3) 72 (3) 1,220 (17)
GEO mobile
(mobile dedicated stores)
17 0 17 0
Reuse 578 43 52 3 630 46
WAREHOUSE 12 2 12 2
Others 16 4 16 4
Notes:
  1. The numbers of stores are counted based on each store name.
  2. The stores that rent DVDs and sell and purchase home game related items are counted as media stores (store names: GEO, GEO mobile).
  3. GEO mobile means mobile store that does not operate within a media store.
  4. The stores that sell and purchase clothing and accessories, etc. are counted as reuse stores (store names: Second Street, Super Second Street, 2nd Outdoor, Jumble Store, etc.).

(ii) Future forecast

In the operating environment of the group, the shrinking trends for rental merchandise are expected to continue, and it is necessary to take action. As forecast for the next fiscal year, we anticipate reduced profit due to continuous investment in reuse and new retail format and exploring new products in the aim of achieving growth over the long term, while continuing to open new stores for GEO mobile in media business, and Second Street in reuse business, in order to secure sales. Specifically, in addition to continuing to open new reuse stores that sell clothing and accessories as the core merchandise and demonstrate growing sales, we will proactively focus on stores that specialize in luxury brands and stores that only purchase merchandise which we have not been able to gain a sufficient foothold. Moreover, we will invest in e-commerce including strengthening logistics and we will create a seamless environment for sale and purchase and rental in order to enhance convenience for customers.

From the above, as forecast for consolidated results for fiscal year ending March 31, 2020, we project sales of 310,000 million yen (6.0% increase from the previous fiscal year), operating profit of 10,000 million yen (36.2% decrease from the previous fiscal year), ordinary profit of 10,500 million yen (40.5% decrease from the previous fiscal year), and profit attributable to owners of parent of 5,250 million yen (49.0% decrease from the previous fiscal year)

(2) Overview of consolidated financial position

[Cash Flows]

Cash and cash equivalents (“cash”) at the end of the current fiscal year decreased by 6,401 million yen from the end of the previous fiscal year and resulted in 38,774 million yen.

The situations of each cash flow and their major factors for the current fiscal year are as follows.

(Cash flows from operating activities)

As a result of operating activities, cash increased 7,903 million yen (where this increased 16,345 million yen in the previous fiscal year).

The major factors for this increase were an increase of inventory of 4,916 million yen, purchase of rental assets of 5,881 million yen, and income taxes paid of 7,555 million yen while there were profit before income taxes of 16,680 million yen and rental assets depreciation of 6,152 million yen.

(Cash flows from investing activities)

As a result of investing activities, cash decreased 6,318 million yen (where this decreased 2,969 million yen in the previous fiscal year).

The major factor for this decrease was expenditures of 4,184 million yen from purchasing property, plant and equipment.

(Cash flows from financing activities)

As a result of financing activities, cash decreased 8,052 million yen (where this decreased 5,253 million yen in the previous fiscal year).

The major factors for this decrease were payments of cash dividend of 1,565 million yen, and expenditures of 6,308 million yen from purchasing treasury stocks.

(3) Basic policy in distributing profits and dividends for the current and next fiscal year

One of the Company’s top management priorities is to return profit to shareholders. For this purpose, the Company will continue to endeavor to establish a sound managerial base and improve profitability. The Company’s policy is to pay dividends that reflect the performance and the Company currently pays dividends twice a year at interim and year-end as dividend of surplus.

The dividend of surplus is decided by the shareholders meeting for the year-end dividend and by the board of directors for the interim dividend.

Pursuant to the above basic policy, an interim dividend of 17 yen per share was paid and an year-end dividend of 17 yen is scheduled to be paid.

The Company paid dividends as follows over the recent five (5) years.

(per share in yen)

Fiscal Year ended
March 31, 2015 March 31, 2016 March 31, 2017 March 31, 2018 March 31, 2019
Interim 16 16 17 17 17
Year-end 16 17 17 17 17
Total 32 33 34 34 34

In accordance with the above policy, the Company is scheduled to pay an interim dividend of 17 yen per share and a year-end dividend of 17 yen per share which results in an annual dividend of 34 yen per share for the fiscal year ending March 31, 2020.