fy2014 consolidated business results and forecasts...media(dms) 35 kita-kanto 209 media(dms)...
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FY2014 (from April 1, 2013 to March 31, 2014)
Consolidated Business Results Consolidated Business Results and Forecasts
GEO HORLDINGS CORPORATION May 2014May 2014
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Changes to our business segments and disclosure methodg g
We have omitted the disclosure of our amusement segment in our Japanese financial filings and financial announcements from FY2014 as GEO DINOS which was previously one of our Group FY2014 as GEO DINOS, which was previously one of our Group companies operating in the amusement segment, has been removed from our Group as of January 16, 2014. Consequently, the volume of our retail business segment now accounts for the volume of our retail business segment now accounts for greater than 90% of the total assets of our Group.
Furthermore we recognize the current term as the start of Furthermore, we recognize the current term as the start of medium to long term business restructuring, and have decided to make changes to our earnings announcement presentation materials in order to allow our stakeholders to better understand materials in order to allow our stakeholders to better understand the entire picture of our business restructuring process.
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Executive Summary
Financial summary
FY2014 Business Results From FY2015 onward
Forecasts for FY2015
Achieved record high sales
F ll h f fi
y
Revenue of ¥270 bil.
O ti fit f ¥7 bilFell short of profit targets
Expand the reuse businessMidterm restructuring & our strategies
Operating profit of ¥7 bil.
Overview of various strategies Viewpoint of medium term restructuring
• New concept store deploymentStore opening targets nearly achieved
New business launched and
New concept store deployment
• Organizational restructuring and
investments in human resourcesmedia shops evolved
Omni-channel launched: O2O developed
investments in human resources
• Accelerate store openings in attractive
locations and scraping stores
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locations and scraping stores
• Promote a network strategy
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FY2014 fi i lFY2014 financial summary
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Consolidated Financial Summary for FY 2014
(millions of yen)
03/2013 03/2014
i t
Profits fall short of targets despite record high sales
results sales ratio results sales ratio YOY variance YOY (%)
variance to FY2014
forecasts
achievement (%)
FY2014 forecasts
sales ratio
Sales 259,288 262,324 3,036 101.2% -676 99.7% 263,000
Gross profit 110,690 42.7% 110,022 41.9% -668 99.4% -1,378 98.8% 111,400 42.4%
SG&A 94,725 36.5% 100,819 38.4% 6,093 106.4% 118 100.1% 100,700 38.3%
Operating income 15 965 6 2% 9 203 4 1% -6 761 57.6% -1 497 86.0% 10 700 4.1%Operating income 15,965 6.2% 9,203 4.1% 6,761 57.6% 1,497 86.0% 10,700 4.1%
Ordinary income 15,643 6.0% 9,347 4.2% -6,296 59.8% -1,652 85.0% 11,000 4.2%
Income before income taxes and minority interests
14,665 5.7% 7,729 3.7% -6,935 52.7% -1,976 79.6% 9,705 3.7%minority interests
Net income 8,380 3.2% 3,839 2.1% -4,540 45.8% -1,661 69.8% 5,500 2.1%
・Record high sales achieved on the back of increases in new store openings
・Reasons for the shortfall in profits1) Lackluster sales growth of media goods2) Weaker sales and increased cost in Q4 3) devaluation of some inventories (to be explained later)
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・Main factors influencing net income1) ¥0.5 bil. loss on sales of stocks in subsidiary2) ¥0.2 bil. loss arising from the repeal of the special corporate tax for reconstruction
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Weakness in Q4
Q1 Q2 Q3 Q4 variance to FY2013 Q4
Sales 57,919 64,336 72,170 67,897 1,761Cost of products sold 30 934 36 531 43 605 41 230 3 116
Quarterly Consolidated SG&A
Cost of products sold 30,934 36,531 43,605 41,230 3,116Gross Profit 26,985 27,805 28,564 26,666 -1,354
Transportation expenses 248 267 276 309 74
Advertising expenses 703 939 901 885 66
Promotion expenses 252 298 321 299 120
P i i t 219 235 245 294 208Processing consignment expenses 219 235 245 294 208
Total of Cost of Sales 2,090 2,500 2,540 2,514 543Total of personnel expenses 10,776 11,051 11,436 11,485 253
Business consignment expenses 623 606 601 611 -155
Travel expenses 144 141 150 171 43
Land and rent expenses 4,818 4,918 4,952 4,955 191
Supplies expenses 769 762 888 1,124 379
Recruiting expenses 42 39 52 77 60
Other expenses 10,853 11,572 11,235 11,657 717SG&A 24,019 25,429 25,474 25,896 2,028Operating income 2,966 2,376 3,090 770 -3,383
Rental 94.9% 100.0% 95.0% 92.2%
Used products 90.3% 89.8% 90.0% 95.7%
Year-on-year average mainstay product sales at existing media shops(mil. ¥)
・ Strong sales of media products during the 1st half and slowed during 2nd half
・ Two heavy snow storms on the weekends compounded by slow recovery in
New products 87.8% 118.3% 97.7% 109.1%
Total 92.0% 102.8% 95.1% 99.1%
Operating incomefell to FY2006 levels
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・ Two heavy snow storms on the weekends compounded by slow recovery in
demand after the Winter Olympics
・ Increase in SG&A due primarily to renovation of “FAMILY BOOK” stores into GEO brand
fell to FY2006 levels
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Valuation decline due to use of conservative inventory valuation method
Year-on-year Gross profit by mainstay products
120.0%
140.0%
60 0%
80.0%
100.0%
1Q 2Q 3Q 4Q
レンタル 107 6% 111 6% 99 9% 62 8%
40.0%
60.0%
レンタル 107.6% 111.6% 99.9% 62.8%
中古 92.2% 76.2% 92.2% 66.6%
新品 106.2% 127.1% 103.5% 74.9%
リユース 108.5% 110.7% 111.2% 111.0%リ % % % %
A devaluation method (half to full amount of value) applied during the second quarter to inventories of some current game consoles and software along with the introduction of a new home use game platforms
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introduction of a new home-use game platforms
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Expansion of reuse business
100%
Gross profit of mainstay products60030,000
Upward trend of reuse business
40%
60%
80%
100%
300
400
500
600
15,000
20,000
25,000
30,000
1Q 2Q 3Q 4Q
タ 12 278 13 412 11 760 11 835
0%
20%
40%
0
100
200
-
5,000
10,000
2011/3 2012/3 2013/3 2014/3
(mil. ¥)
レンタル 12,278 13,412 11,760 11,835
中古 4,408 3,708 4,392 4,737
新品 1,744 2,242 2,837 2,725
リユース 4,483 4,179 5,746 4,554
2011/3 2012/3 2013/3 2014/3
売上 21,415 23,812 25,314 28,434
粗利 14,061 15,600 17,178 18,963
店舗数 340 323 346 368
(mil. ¥)
Growth rate of reuse business(year-on-year)
Net Sales 111.2% 106.3% 112.3%
Gross profit 110.9% 110.1% 110.4%
Reuse business sustained growth over 10% both in sales and gross profit, and its gross profit contribution to the mainstay products marked roughly 20% throughout FY2014.
p
# of shops 95.0% 107.1% 106.4%
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Overview of Strategies gimplemented in FY2014
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store opening targets nearly achieved
Hokkaido 135number of stores
※conjoined facilities are double-counted ※Franchises and agencies are included in
block totals
80010001200140016001800 Media (DMS) 84
Reuse (DMS) 30
Tohoku 173Media(DMS) 117Reuse(DMS) 31
2012/3 2013/3 2014/3
media 887 958 1001
0200400600800
Koshinetsu 76Media(DMS) 44Reuse(DMS) 18
Hokuriku 60Media(DMS) 35
Kita-Kanto 209Media(DMS) 111Reuse(DMS) 36WAREHOUSE 5
Minami-Kanto 249Media(DMS) 158media 887 958 1001
FB 43
reuse 187 211 239
conjoined 94 95 88
WAREHOUSE 55 53 11
Media(DMS) 35Reuse(DMS) 14
Chugoku 94Media(DMS) 54Reuse(DMS) 14
Media(DMS) 158Reuse(DMS) 37WAREHOUSE 6
Tokai 225 Media(DMS) 171Reuse(DMS) 37
others 6 4 2
FCs 133 130 123
AGCYs 106 102 99
TDMS 1229 1321 1384 Shikoku 74Media(DMS) 45
Kyusyu 233M di (DMS) 161
Kinki 170 Media(DMS) 109Reuse(DMS) 50
Total 1468 1553 1606
L d th i iti f “FAMILY BOOK” t d di d b i i th K t i
Media(DMS) 45Reuse(DMS) 14
Media(DMS) 161Reuse(DMS) 46
※ con: Each media and reuse shop independently located on a single premise※ TDMS: Total number of Direct Management Shops ( franchises and agencies excluded from the total)※ FB:Familybook converted to media or reuse shops in FY2015 (conversion of 24 stores finished by the end of FY2014)
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Leveraged the acquisition of “FAMILY BOOK” to expand our media and reuse businesses in the Kanto region (especially northern Kanto), a strategic area for expansion, in combination with steady expansion of directly operated stores in western Japan
※ removal of 40 amusement arcades (as of Jan. 16 2014) operated by GEO DINOS
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New business launched and sophistication of media shops
Floor space: a little less than 1,000 square meters
Develop interior and exterior designs that look good at night and give the impression of being clean and not low cost in construction
Keep product display neat and clean and create a display method that
Floor space: over 2,000 square meters
Feature an overwhelming selection of more than 100,000 items, based on the current “2nd STREET” store concept
p p p y p yenhances the relationship between itemsIntroduce game products available at media shops
GEO, matsuzaka otsuka, Mie
Super 2nd Street, kashiwa shonan, Chiba
Launch two “Super 2nd STREET” (SSS) large comprehensive shops in Chiba prefecture
C d & b ld f d h l d d h h l
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Conduct scrap & build strategies for media shops tailored in accordance with each areal characteristic and trade zone
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The first year of omni-channel strategy: O2O formation
Coupon
Diagram of O2O Cycle with GEO Appli
Store StampApplication currency
Mini Games
Review
Product inventory search
Collection Board
Guiding our customers from the application to our shop
Released “GEO Appli” for smart phones in November 2013 as the first step of our omni-channel retailing strategy (To be explained later)
BoardApplication functions
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(To be explained later)
Acquired 1 million users within 4 months and firmly established O2O
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Forecasts for FY2015
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Forecasts
30,000
35,000
300,000
350,000
売上
営業利益
純利益
(millions of yen)
(left scale)
20,000
25,000
200,000
250,000純利益
(right scale)
5,000
10,000
15,000
50,000
100,000
150,000
2013 2014 2015
results sales ratio results sales ratio forecasts (1st half)
l 270 000
00
Sales 259,288 262,324 270,000 125,200
Operatingincome
15,965 6.2% 9,203 3.5% 7,000 2,200
Ordinaryincome
15,643 6.0% 9,347 3.6% 7,500 2,450
Net income 8,380 3.2% 3,839 1.5% 6,000 2,300
・Maintain growth at existing stores and grow sales through ongoing new store openings
・Conduct upfront investments in consolidation process in order to accelerate revisions in the business portfolio
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・Conduct upfront investments in consolidation process in order to accelerate revisions in the business portfolio
・New store openings targets: media 30 reuse & integration 50 (including consolidation)
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Medium term restructuring and strategiesand strategies
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Overview of medium term restructuring
Operating profit margin of 6.5% and ROE of 15% targeted for FY2018
Investment in our organization & human resourcesMedia
Facilitate our organizational environment conductive to innovationSecure such human resources as restructuring, and covering the breadth of, our store packages
Store opening strategyAccelerate store openings in attractive locations and scraping Restructuring of our Group
t d t
Review of our supply chain
stores
Network strategyFortify the network strategy for our omni-channel retailing
Acquire new products & businessesTests and horizontal deployment of new products leveraged by our
Proposing new store solutions to customers exceeding the boundaries of
our store formats
management resources and system
Tests and horizontal deployment of new products leveraged by our direct-management operationUtilizing M&A for faster new business acquisitionReuse Amusement
Image of our business portfolio shift (excluding new businesses acquired through M&A)
Media businessReuse businessCombined
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Combined
2014 FY2015 FY2018
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New Concept Shop Deployment
(You can find what you want)
Flagship Shop
A brand new store solution to customers exceeding the boundaries of our store packages
Floor space 2500 square meters
Super 2nd STREER Omiya nisshin store, Saitama
prefecture
Floor space 2500 square meters
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Investments in our organization and human resouces
Investments in organizational environment and human resources
so as to bring improvements and innovation free of the mold of our past
Compensation structure designed to incentivize contributions to the business performance
Selection for promotion at our subsidiary GEOSelection for promotion at our subsidiary GEO
Flattering the overall structure including the chain of command at our subsidiary GEO
Securing such human resources as restructuring, and covering the breadth of, our store packages
200 personnel to be trained by FY2018 end who can operate both media 200 personnel to be trained by FY2018 end who can operate both media and reuse shops
→ accelerate deployment of customer-value-proposition (CVP) sensitive stores
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Accelerate store openings in attractive locationsand scraping storesp g
メディア系Media shopPR: Prefectural RouteNR: National Route
Challenge large space stores on main streets within key trade area
Accelerate shop consolidation including resolving
Floor space1,750 square meters
cannibalization of our own stores through“large space stores on main street” strategy
PR270
Sanotakahagi shop Tochigi prefectureSanotakahagi shop, Tochigi prefecture
Super 2nd STREET Kashiwanuma minami store, Chiba Prefecture
リユース・融合系
fill voids
O i t t f i l
Reuse・Integrated shopFloor space1,980 square meters
NR16
Ongoing strategy of opening large stores (more than 1,600 square meters, 500tsubo)
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Fortifying network for omni-channel retiling strategy
Newly established GEO NETWORKS provides integrated online services for GEO Group
Make GEO Appli more influential in the market with its million user base media value enhanced effectively by movie review and other application functions
Release a reuse smart phone application based on the knowledge and experiences of GEO Appli
Omni Channel BASIC Platform
GEO Appli member’s card
Reuse member’s card
Rental shop A
used items for saleRental DVD
Reuse shop B
GEO Group membership
data
card
GEO Group to centrally manage information of
members
Pre-input of product information
Store A does not have the DVD I want!
New function
New function
Value added service for our customers
Online+Rental Shop A
Online+Reuse shop BEither at our shop or your house
Avility to select products online
Purchase can be made either at stores or
booking and pickup at Shop A available through online
either at stores or online
GEOHome GEO
GEO Group online service
Example of GEO
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Home delivery
DVDrental
GEOSNS service
GEOEC
digital contents mart
Example of GEO omni-channel retailing
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A diAppendix
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Summary of Consolidated SG&A
(millions of yen)
03/2013 04/2014
results sales ratio results sales ratio YOY variance YOY (%)
Total of Sales expenses 8,263 3.2% 9,617 3.7% 1,353 116.4%
Advertising expenses 3,615 1.4% 4,078 1.6% 462 112.8%
Sales promotion expenses 845 0.3% 999 0.4% 153 118.2%
Total of Personnelexpenses
42,114 16.2% 44,692 17.0% 2,578 106.1%
Other expenses 43,125 16.6% 45,484 17.3% 2,359 105.5%
Utilities expenses 5,858 2.3% 6,437 2.4% 579 109.9%
Land and rent expenses 18,660 7.2% 19,990 7.6% 1,330 107.1%
Depreciation 4,039 1.6% 4,581 1.7% 541 113.4%
Supplies expenses 3,090 1.2% 3,172 1.2% 81 102.6%pp p 3,090 % 3,172 % 81 0 6%
Repair expenses 820 0.3% 930 0.4% 109 113.4%
Amortization of goodwill
1,222 0.5% 906 0.3% -316 74.1%
Total of SG&A 94,725 36.5% 100,700 38.3% 5,975 106.3%, , ,
※The above statement shows major expenses in SG&A only.
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Summary of Consolidated Profit and Loss(5 years)
25,000350,000売上 粗利 営利 純利
(left scale) (right scale)
(millions of yen)
15,000
20,000
200,000
250,000
300,000
5 000
10,000
100,000
150,000
03/2010 03/2011 03/2012 03/2013 03/20140
5,000
0
50,000
Net sales 241,491 253,082 258,244 259,288 262,324
Cost of goods sold (148,257) (148,720) (148,011) (148,597) (152,301)
Gross profit 93 233 104 362 110 232 110 690 110 022Gross profit 93,233 104,362 110,232 110,690 110,022
Operating income 13,287 14,094 18,306 15,965 9,203
Ordinary income 13,845 14,447 16,464 15,643 9,347
Net income 6,665 7,512 6,842 8,380 3,839
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Summary of Consolidated Balance Sheet(last 5 years)
(millions of yen)
3/31/2010 3/31/2011 3/31/2012 3/31/2013 3/31/2014Balance % Balance % Balance % Balance % Balance %
Current assets 54,353 46.0% 55,397 44.2% 56,240 43.9% 55,166 45.5% 0assets , , , ,
Noncurrent assets 63,824 54.0% 70,045 55.8% 71,834 56.1% 66,186 54.5% 0
Assets 118,177 125,442 128,075 121,353 0
営利
経常
純利
Current liabilities 45,909 38.8% 36,458 29.1% 43,889 34.3% 39,405 32.5% 0
Noncurrent liabilities 32,918 27.9% 40,945 32.6% 30,759 24.0% 23,970 19.8% 0
Liabilities 78,828 66.7% 77,404 61.7% 74,649 58.3% 63,375 52.2% 0
Shareholders’ equity 38,047 32.2% 44,964 35.8% 50,229 39.2% 56,648 46.7% 0
Net assets 39,349 33.3% 48,037 38.3% 53,425 41.7% 57,978 47.8% 0
Liabilities and 118 177 125 442 128 075 121 353 0Liabilities and net assets 118,177 125,442 128,075 121,353 0
Interest-bearing liabilities 47,553 44,129 33,381 28,101 0
Net interest bearing liabilities 28 165 20 830 5 309 3 999 0Net interest-bearing liabilities 28,165 20,830 5,309 3,999 0
BPS 71,212.07 82,856.62 92,690.69 105,331.25 #DIV/0!
ROA 5.6% 6.2% 5.4% 6.7% 0.0%
ROE 18 8% 18 1% 14 3% 15 6% 0 0%
(yen)
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ROE 18.8% 18.1% 14.3% 15.6% 0.0%
Total amount of dividend payout 1,330 1,498 1,574 1,630
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Summary of Consolidated Cash Flow Statements (last 5 years)
売上
03/2010 03/2011 03/2012 03/2013 03/2014Depreciation and amortization 3,495 5,136 5,399 5,467 5,156Rental asset depreciation 14,244 13,070 15,052 14,244 13,150Asset retirement obligation 0 1 312 0 0 1 218
※Major items in CF statements are selected (millions of yen)
粗利
Asset retirement obligation 0 1,312 0 0 1,218Loss on valuation of goods 0 0 0 0 97Impairment loss 1,317 1,052 1,089 1,529 24
Loss on retirement of property, plant and equipment 211 516 124 453 -13,422
Increase in provision for loss on store closing -50 -182 77 -155 24
営利
経常
純利
Purchase of Rental assets -12,780 -13,936 -16,244 -13,247 -13,422
Increase (decrease) in notes and accounts payable-trade -1,772 -930 1,019 382 -708
Increase (decrease) in other assets 275 737 1,262 -143 295Increase (decrease) in other liabilities 0 0 0 -64 514( ) 0 0 0 6 5
Net cash provided by operating activities 22,226 17,662 25,241 11,457 8,255Purchase of property, plant and equipment -2,235 -7,683 -4,379 -4,454 -4,937Proceeds from acquisition of consolidated subsidiary 0 0 30 0 0Payment for acquisition of consolidated subsidiary 0 -2,148 0 0 -3,391Acquisition of shares of a consolidated subsidiary -3,481 -217 0 -824 -266q y ,Purchase of intangible assets -367 -425 -352 -362 -385Payments for transfer of business -432 -821 -196 -207 -7
Net cash provided by investing activities -9,879 -8,854 -4,364 -5,296 -9,401Increase in short-term loans payable 196 -2,288 3,700 9,050 13,550
Decrease in short term loans payable 0 0 4 113 9 020 -Decrease in short-term loans payable 0 0 -4,113 -9,020 13,630Proceeds from long-term loans payable 13,431 18,790 2,150 6,860 11,200
Repayment of long-term loans payable -15,301 -15,987 -12,191 -11,480 -10,972
Repayment of finance lease obligations -2,437 -2,694 -2,664 -2,350 -1,958Proceeds from disposal of treasury stock 0 125 0 334 0
25
Proceeds from disposal of treasury stock 0 -125 0 -334 0
Net cash provided by financing activities -10,927 -4,111 -15,034 -9,615 -3,790
FCF 12,347 8,808 20,876 6,160 -1,145
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Note on Forward-looking Statements
All representations other than historical facts, including forward-looking statements such as performance forecasts, policies, management strategies, targets, plans, understanding, and evaluation of data, as well as outlook on performance and
fdividends, are merely statements of current expectations, assumptions, plans, understanding, evaluations, etc., based on information currently available to the Group. These statements, representations, or hypotheses(assumptions) may be, by their nature, objectively inaccurate and are open to potential risk owing to general
d h l h d d
Please feel free to contact us for more information
conditions, weather, economic climate, or changes in consumer trends, and no guarantee is made that they will be realized in the future.
Please feel free to contact us for more informationIR Division
GEO HOLDINGS CORPORATION
5F, OMC Bld. 8-8 Fujimi-cho Nagoya-shi, Aichi Pref.
Tel.052-350-5711 Fax.052-350-5701
e-mail info@geonet.co.jp
5F, OMC Bld. 8 8 Fujimi cho Nagoya shi, Aichi Pref.
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