Nippon Ichi Software: 22nd Term Securities Report

Key insights

6 takeaways

01
Nippon Ichi Software’s operating profit fell by 75.9 percent to 139.7 million yen for the fiscal year ending March 31, 2015, despite net sales remaining flat at approximately 3.67 billion yen.See it on page 7
02
Profitability was primarily eroded by rising development costs, increased advertising expenditures, and higher general management expenses.See it on page 79
03
The company faces significant market concentration risk, with a single major client accounting for 68.3 percent of total trade receivables.See it on page 14
04
To reduce reliance on the volatile home console market, the company is shifting its strategy toward mobile and Steam platforms, alongside the development of new intellectual properties.See it on page 19
05
Despite earnings pressures, the company maintained a stable financial position with total assets growing to 3.13 billion yen and cash reserves increasing to 1.24 billion yen.See it on page 78
06
The company maintains a consistent dividend policy of 2 yen per share and operates under a governance framework that includes independent outside board members.See it on page 31

Summary

Nippon Ichi Software concluded its 22nd fiscal year ending March 31, 2015, facing a period of significant financial contraction despite maintaining stable top-line revenue. Consolidated net sales remained flat at approximately 3.67 billion yen, yet operating profit plummeted by 75.9 percent, falling from 580.1 million yen in the previous year to 139.7 million yen. This sharp decline in profitability was primarily driven by rising development costs, increased advertising expenditures, and higher general management expenses. Despite these earnings pressures, the company maintained a solid financial foundation, with total assets growing to 3.13 billion yen and cash and deposits increasing to 1.24 billion yen.

The company’s strategic outlook focuses on mitigating risks associated with the volatile home console market and a heavy reliance on a single major client, which accounts for 68.3 percent of trade receivables. To diversify revenue streams and reduce dependency on traditional console software, Nippon Ichi Software is prioritizing the creation of new intellectual properties, the enhancement of 3D technical capabilities, and expansion into mobile and Steam platforms. These initiatives are intended to maximize long-term profitability and strengthen brand equity across four primary business segments: Package, Online, License, and Other.

Corporate governance remains stable, supported by a board of directors and auditors that include independent outside members. The company continues to adhere to a consistent dividend policy of 2 yen per share, and its financial statements received an unqualified audit opinion from the Azusa Audit Corporation. While the firm faces structural challenges regarding cost management and market concentration, the current governance framework and liquidity position provide a stable base for executing its mid-term growth strategy.