Square Enix 2007 Annual Report Download - page 5

In fiscal 2006, the video game industry remained in a period of
major transition. Our challenge in this period of time would be
to transform ourselves to be capable in the new business
environment, while maintaining sales and profits.
03
To Our Shareholders
We have acquired Taito in fiscal 2005, but we run its business
separate from Square Enix. Thus, I’d like to review our businesses
separately.
An effective combination of the present and future has dri-
ven our success in the Games (Offline) segment of Square Enix.
As for current-generation software titles, major titles such as
“FINAL FANTASY XII” and “KINGDOM HEARTS II” for the
PlayStation 2 (PS2), both launched in Japan in the previous fiscal
year, were released in Europe and North America and contributed
substantially to earnings and profits.
“SQUARE ENIX Corners,” the dedicated
shelf spaces for Square Enix titles, were
deployed in over 900 retail stores throughout
Japan, which have boosted our sales capitaliz-
ing our strong brand in an extremely competi-
tive sales environment. The system particularly
contributed to increase the sales of catalogue
titles as well as new ones.
We have built a sound business foundation
in Europe and North America. In Europe, we
began publishing our titles ourselves in fiscal
2006. This move boosted not only the sales of
the two new titles mentioned above, but also
I thank our shareholders for the opportunity to present our annual report for fiscal 2006, ended March 31, 2007.
In fiscal 2006, on a consolidated basis, net sales expanded 31.3%, to ¥163,472 million. Operating income surged
67.5%, to ¥25,916 million, and recurring income similarly rose 68.8%, to ¥26,241 million. Net income, on the
other hand, declined 32.0%, to ¥11,619 million. As a result, the recurring income margin was 16.1%, and return
on equity (ROE) came to 9.3%.
The Company’s dividend policy is to maintain an optimal balance between performance-linked payouts and
stable returns to shareholders. In line with this policy, we have set dividends to be ¥35 per share for fiscal 2006,
resulting in a consolidated payout ratio of 33.3%.
We enjoyed strong operating performance during the year. Our targets, however, are higher still, while our
business environment is becoming increasingly challenging. We are tightening our belts and rallying our forces
for another vigorous push forward.
Domestic Share, Based on Net Sales
Sources: Share information from “The Annual Video Game Industry Report.” Breakdown of game consoles and handheld game
devices information compiled by SQUARE ENIX
■ Nintendo
■ BANDAI
■ NAMCO
■ Konami
■ SQUARE ENIX
Game consoles: 87.6%
Handheld game devices: 12.4%
■ SCE
■ Capcom
■ Others
Game consoles: 67.6%
Handheld game devices: 32.4%
■ Nintendo
■ SQUARE ENIX
■ NAMCO BANDAI Games
■ Pokemon
■ Konami
■ Sega
■ Capcom
■ Others
Breakdown: Breakdown:
[Figure 1]
Transition Period Continues in Fiscal 2006 Robust performance of SQUARE ENIX unit
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