Earnings and Medium-Term Management Plan Presentation for the Year Ended March 31, 2017: Question & Answer Session (Summary)

FIELDS CORPORATION held a financial presentation and Medium-term Management Plan presentation for the year ended March 31, 2017 in OTEMACHI 1st SQUARE CONFERENCE (Chiyoda-ku, Tokyo) on May 10, 2017 (Wednesday) at 11:30 am.
This page provides an overview of the question & answer session at the presentation.

Question & Answer Session (Summary)

Q1. The Medium-term Management Plan indicates that the company will be in profit from this fiscal period onward, based upon the medium- to long-term IP line-up, however is this certain?

A1. On both an operating cash-flow basis, and an operating income basis, we expect the company to be in profit if we achieve the targets which we have proposed.
The company operates on a three-year term, and in respect of the adjustments made according to investment undertaken over the past three years, there remains the possibility that non-operating expenses or extraordinary losses may arise.

Q2. The company has explained that, until now, priority was placed upon IP rather than planning, resulting in distortion and dysfunction. What specifically does this refer to?

A2. In order to raise the value of IP, it is important, in the case of pachinko and social games, for example, to have plans that match game function and interest. However, over the past three or four years, our goal has been to secure IP.
Moving forward, we believe that business will be unable to succeed only through IP. Instead, products and services will emerge from a combination of planning and IP. From FY2019, we believe that we can develop pachinko/pachislot machines that incorporate such planning.

Q3. The pachinko/pachislot business is increasingly focused on machine sales, the intrinsic added-value of Fields is weakening, and furthermore, visitation numbers are decreasing. What are the causes of this?

A3. In the past, we actively offered various proposals and support to pachinko halls, building relationships of trust, however we believe that to some degree, we have developed a reliance on product appeal, or even arrogance.
At present, the market presents a tough business environment, and in such times, it is particularly important to consider the needs and wishes of pachinko halls, providing proposals and support beyond machines, in order to contribute to the activation of the entire industry.

Q4. What is your opinion of the current progress with regards to the pachinko/pachislot machines of MIZUHO CORP.?

A4. We are holding discussions aimed at sales of pachinko/pachislot machines that have already been developed. However, MIZUHO CORP. is not currently engaged in newly machines development.

Q5. Consolidated net sales for the year ended March 31, 2017 totaled ¥76.6 billion, but what were the total sales for pure IP, excluding pachinko/pachislot machines, Total Workout, and food service? Also, what is the expected value of IP-related sales for the year ending March 31, 2020?

A5. IP-related sales were ¥12.0 billion for FY2016, and are forecast to reach approximately ¥24.0 billion for FY2019.

Q6. What is the expected profit for IP for the year ending March 31, 2020?

A6. Operating income for FY2019 is forecast at approximately ¥2.0 billion, representing around 30% of the overall total.

Q7. You have indicated that ROI will be made a pillar of managerial accounting. What is the present ROI?

A7. We have not precisely calculated overall ROI for managerial accounting purposes, so we wish to refrain from responding at this time.
However, to date, certain individual titles have had ROI of 200% or more, while the lowest level has been around 70%, so we believe that we need to achieve ROI of approximately 130% on average for each investment in order to build profits.

Q8. In regards to remaining issues: can you explain issues that may affect the cost, SG&A expenses, and non-operating expenses projected under the Medium-term Management Plan?

A8. There are no remaining issues that will impact upon cost and SG&A expenses, thereby affecting operating income. We believe the only possible issues are devaluation of current investments or losses.

Q9. You have indicated that, in the future, the term of office for directors will be one year in order to clarify their management responsibilities. Is it possible that you will also revise the Medium-term Management Plan to one-year units?

A9. The directors are not solely responsible for leading the achievement of the Medium-term Management Plan, and our current intention is to create mechanisms whereby the company can sustain the plan.
These mechanisms represent a reconstruction of the value chain, and it is important that all employees understand their role in that value chain. We hope to create mechanisms that can function regardless of who the leader is.
Consequently, the one-year term of office for directors does not need to align with the achievement of the Medium-term Management Plan.