Sega Sammy Holdings: Actual Results for Year Ended March 2011 and Projections for Year Ending March 2012

Key insights

6 takeaways

01
Sega Sammy’s fiscal year 2011 growth was primarily driven by the Pachislot and Pachinko Machine business, which leveraged high-margin sales and component reuse to improve cost efficiencies.See it on page 1
02
The Consumer Business segment struggled in 2011, recording a 3.1 billion yen valuation loss on overseas assets and experiencing delays in software releases due to the Great East Japan Earthquake.See it on page 1
03
The Great East Japan Earthquake caused approximately 1.2 billion yen in losses and forced the temporary closure of nine amusement facilities, though the Amusement Center Operations segment still achieved profitability through portfolio streamlining.See it on page 4
04
The company converted three subsidiaries into wholly owned entities in December 2010, resulting in 10.8 billion yen in goodwill to be amortized over a five-year period.See it on page 1
05
Projections for fiscal year 2012 indicate a divergence where revenue is expected to rise, but operating income will decline due to increased raw material costs, higher R&D spending, and elevated depreciation from new investments.See it on page 2
06
Strategic focus for the 2012 fiscal year is centered on long-term growth through investments in mobile and network business segments.See it on page 2

Summary

Sega Sammy Holdings’ financial review for the fiscal year ended March 2011 and projections for the year ending March 2012 detail a period of operational recovery alongside strategic adjustments in response to market volatility and the Great East Japan Earthquake. The primary driver of growth during the 2011 fiscal year was the Pachislot and Pachinko Machine business, which benefited from high-margin sales volume and improved cost efficiencies through component reuse. Conversely, the Consumer Business faced challenges, including a 3.1 billion yen valuation loss on overseas game assets and the postponement of key software releases due to the earthquake.

Despite the earthquake’s impact, which resulted in approximately 1.2 billion yen in losses and the temporary closure of nine amusement facilities, the company maintained overall stability. A significant structural change occurred in December 2010 with the conversion of three subsidiaries into wholly owned entities, resulting in 10.8 billion yen in goodwill to be amortized over five years. The Amusement Center Operations segment successfully returned to profitability by streamlining its facility portfolio and reducing operating expenses, even as total sales in that division declined.

Looking toward the 2012 fiscal year, the company anticipates a divergence between revenue and operating income. While sales are projected to rise due to increased pachinko machine volume and a robust lineup of home video game titles, operating income is expected to decline. This contraction is attributed to rising raw material costs linked to the earthquake, increased research and development expenditures, and higher depreciation costs associated with new amusement center investments. The company remains focused on long-term corporate value through strategic investments, particularly in mobile and network businesses, while navigating the cyclical nature of its product development and the ongoing recovery from regional environmental disruptions.