Earnings Presentation for the H1 FY2020: Company Briefing (Summary)

From 12:00 on November 16 (Monday), 2020, FIELDS CORPORATION held a financial results briefing (conference call) for the H1 of the fiscal year ending March 2021.
This page provides information on our explanation (summaries) at the briefing.

Kenichi Ozawa, Director

Financial Results for the H1 of the FY2020

Changes in market environments (effects of coronavirus disease COVID-19 )

⇒Page 2 of financial briefing material

I would like to explain the current market environment.
The figure shows the results up to the H1 against our forecasted total market unit sales.
Prior to coronavirus disease crisis, we had planned to sell about 2.5 million units in pachinko/pachislot (hereinafter, “PS”) market for the fiscal year under review (FY2020). This was due to the reaction to the decline in the previous fiscal year (FY2019) to buy new machines and to the removal of 2.3 million units of old regulation machines, which was planned for the current fiscal year.
However, due to the impact of the spread of coronavirus disease, the self-restraint of pachinko halls, delays in procuring manufacturing materials, and the combination of the extension of the removal deadlines for some old regulation machines, sales up to the H1 of the fiscal year were only about 400,000 units.

PS sales in H1 of the FY2020

⇒Page 3 of financial briefing material

The table shows PS sales in the H1 of the fiscal year.
In response to the aforementioned changes in the market environment, we decided to significantly revise our sales schedule.
Consequently, the Company did not sell new machines in Q1, and as it sold three pachislot titles in Q2, it recorded 16,000 units in H1.

Consolidated P/L (Summary)

⇒Page 4 of financial briefing material

Consolidated P/L is shown in the table.
Net sales was ¥10.59 billion (down ¥17.18 billion YoY), operating loss was ¥3.32 billion (up ¥570 million YoY), ordinary loss was ¥3.24 billion (up ¥710 million YoY), and net loss was ¥3.92 billion (up ¥1.16 billion YoY).

Consolidated B/S (Summary)

⇒Page 5 of financial briefing material

Consolidated B/S is shown in the table.
Both assets and total liabilities and net assets declined YoY to ¥50.61 billion. This was due to the collection of payments for accounts receivable-trade and accounts payable-trade of machinery sold at the end of the previous fiscal year, as well as significant progress in payments.

Forecast of PS market in H2

⇒Page 7 of financial briefing material

Our forecast for the H2 of the PS market is as shown in the figure.
Considering that pachinko hall operations are recovering, PS machine equipped with new game function such as “Yu time” have been well received in the market, and expectations for market revitalization are rising, and that about 900,000 units of old regulation machines are scheduled to be removed during the H2, we forecast demand for more than 1,000,000 units in the H2.

PS sales titles for the FY2020 (scheduled)

⇒Page 8 of financial briefing material

The planned sales of PS in the current fiscal year are shown in the table.
Based on the market forecast for the H2 described above, we are committed to promoting sales.
In Q3, the company plans to deliver five titles, and sales are progressively underway. It has already received orders for more than 50,000 units.
In Q4, the company is currently selling two titles and is planning to sell and deliver several titles.
These planned sales of titles will be launched in the marketplace at an appropriate timing, taking into account the removal status of old regulation machines and other factors.

Tsuburaya Productions

⇒Page 10 of financial briefing material

The status of Tsuburaya Productions is shown in the chart below.
In Q1, due to the impact of the spread of coronavirus disease, Tsuburaya Productions was forced to cancel or downsize visiting events and live shows, particularly in this spring. In addition, some movies postponed their release due to production delays.
Meanwhile, domestic and overseas merchandising performed well in Q2. Domestically, toy sales related to “Ultraman Z”, which is currently being broadcast on TV, are robust, and overseas, merchandising in particular in China is recovering and growing.
In H2, Tsuburaya Productions is implementing various measures based on its medium-term business strategy.
In order to expand the fan base of “Ultraman” series, Tsuburaya Productions produces video products suitable for the fan base by segment using a variety of expressive methods, such as live-action and anime, and provides them domestically and internationally as films, televisions, and distribution. In terms of monetization, Tsuburaya Productions is promoting monetization in both video and merchandising, and it has achieved some results, such as the expansion of domestic licensee partners and the growth of merchandising in China and other Asian countries.
Tsuburaya Productions announced the film “SHIN ULTRAMAN” to be released in the early summer of 2021. The entire company is making preparations for the film release.

Digital Frontier

⇒Page 11 of financial briefing material

The status of Digital Frontier is shown in the table.
In response to the impact of the spread of coronavirus disease, Digital Frontier has succeeded in maintaining the production quality as it has been in the past, while switching over half of its employees to telecommuting.
As a result, Digital Frontier has been able to continue its business while responding to the growing demand for CG video production from game companies that have received consumption from staying at home. Digital Frontier also expects cost reductions due to office shrinkage accompanying the implementation of telecommuting.
In terms of new technological developments, Digital Frontier has recently established a joint venture with NIKKATSU CORPORATION and AOI TYO Holdings Co., Ltd. and commenced operations of “VIRTUAL LINE STUDIOS.” This is a technique that enables the photography of people, CG backgrounds, and art to be combined in real time. Even though overseas travel is restricted, all locations can be reproduced without being affected by weather or time zones, so we predict the strong need for it in the wake of coronavirus disease.
In addition, demand for video production of VFX is extremely rising, and orders for VFX video production from major global distribution companies and other partner companies are increasing. Digital Frontier will continue to respond to these needs with a high level of technology.

Consolidated business results and dividend forecasts

⇒Page 13 of financial briefing material

Consolidated business results and dividend forecasts are shown in the table.
The forecasts are as follows: operating profit ¥1.2 billion (up 68.1% YoY), ordinary profit ¥1.2 billion (up 27.7% YoY), and profit attributable to owners of parent ¥350 million (down 28.7% YoY). Based on these, the Company has announced a dividend forecast of ¥10 at the end of the fiscal year.