Square Enix 2007 Annual Report Download - page 22

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Europe
Years ended March 31 Millions of yen
2006 2007 Change
¥1,378 ¥12,271 ¥10,893
The Company primarily conducts Games (Offline), Games (Online)
and Mobile Phone Content businesses in Europe. In this region,
sales of the Company’s game content were generally licensed to
leading European publishers. However, during the period under
review, SQUARE ENIX LTD., a wholly owned subsidiary of the
Company in this region, began preparations for game sales under
the Company’s own brand. Sales during the year included such
titles as “FINAL FANTASY XII,” “KINGDOM HEARTS II” and
“Dragon Quest: The Journey of the Cursed King” for PS2. As a
result, sales in Europe increased ¥10,893 million, to ¥12,271 mil-
lion.
Asia
Years ended March 31 Millions of yen
2006 2007 Change
¥3,025 ¥1,551 ¥(1,474)
In Asia, the Company provides primarily Games (Online) and
Amusement services. In the Games (Online) business, the Company
primarily operates “CROSS GATE” online game service for the
PC platform in China. In the Amusement business, the Company
operates game arcade facilities in South Korea and China. Sales in
Asia decreased ¥1,474 million, to ¥1,551 million.
4. Strategic Outlook, Issues Facing
Management and Future Direction
It is management’s main task to grow the Company in the medium
and long term, maintaining profitability with the creation of
advanced, high-quality content.
As the development and popularization of information technol-
ogy (IT) and network environments are rapidly advancing, new digi-
tal entertainment will transform the industry structure in the near
future; customer needs for network-compliant entertainment will
increase; and multifunctional terminals will allow users easy access
to various types of content.
It is the Company’s medium- and long-term strategy to respond
to such changes and open a new era of digital entertainment.
In the fiscal year ending March 31, 2008, as part of our imple-
mentation of a medium-term business strategy, we will focus on
expanding our existing offline game franchises and strengthening
our network-related businesses. We will also work to restore prof-
itability to the Amusement business.
The Group’s targets for the fiscal year ending March 31, 2008
are as follows (as of May 23, 2007):
Years ended March 31 Millions of yen
2004 2005 2006 2007 2008
Results Results Results Results Targets
Net sales ¥63,202 ¥73,864 ¥124,473 ¥163,472 ¥162,500
Operating income 19,398 26,438 15,470 25,916 21,000
Recurring income 18,248 25,901 15,547 26,241 20,000
Net income 10,993 14,932 17,076 11,619 12,000
Owing to the consolidation of Taito at the end of September
2005, Taito’s operating results are reflected in the Company’s con-
solidated statements of income from October 2005. Following this
merger, we have set an operating income ratio of 20% or more
and average annual growth in net income per share (EPS) of 10%
as our main numerical targets.
5. Dividend Policy
It is one of the Company’s most important management policies to
return profit to shareholders. We will reserve retained earnings as
we take priority over investments for effective purposes for future
growth of corporate value, such as the enhancement and expan-
sion of existing business operations, capital investments for new
business development and merger and acquisition (M&A) activities.
After ensuring that sufficient funds are retained for these purposes,
we return profit to shareholders in a manner that strikes an optimal
balance between linkage to operating performance and a consis-
tent payout, resulting in continuous and stable dividend payouts.
For dividends linked with consolidated operating results, our target
is a consolidated payout ratio of 30%.
The Company’s basic policy is to pay dividends out of retained
earnings twice each fiscal year, awarding an interim dividend and a
year-end dividend. Decisions on awarding dividends from retained
earnings are made by the annual general meeting of shareholders
for the year-end dividend and by the Board of Directors for the
interim dividend.
As to the dividends for fiscal 2006, in line with our highest level
of consolidated recurring income on record, the Company awarded
dividends for the term of ¥35 per share (¥10 per share in interim
dividends and ¥25 per share as the year-end dividend), an increase
of ¥5 from fiscal 2005, which was ¥30 per share (¥10 per share in
interim dividends and ¥20 as the year-end dividend). This dividend
increase resulted in a consolidated payout ratio of 33.3%.
Dividends from retained earnings during the fiscal year were as
follows:
Date of resolution
Total dividends Dividends per share
Board of Directors’ resolution (Millions of yen) (Yen)
November 17, 2006
Board of Directors’ resolution ¥1,105 ¥10
June 23, 2007
Resolution of the annual general
meeting of shareholders 2,768 25
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