Square Enix 2008 Annual Report Download - page 22

Group provides online game services and sells software discs for
online games.
In the fiscal year under review, sales in Europe amounted to
¥7,896 million, a decrease of ¥4,375 million, which was mainly
attributable to the absence of any major game title releases during
the period.
Asia
Millions of yen
Years ended March 31 2007 2008 Change
¥1,551 ¥1,118 ¥(433)
In Asia, the Group primarily is engaged in the Games (Online) and
Amusement businesses. In the Games (Online) business, the Group
primarily operates online game services for the PC platform in
China. In this business in fiscal 2007, the Group commenced a
restructuring of operations in response to changes in the market
environment. The Group will continue to pursue business opportuni-
ties in China based on a flexible approach, including tie-ups with
local companies.
In the Amusement business, the Group operates game arcade
facilities in South Korea and China.
Sales in Asia in fiscal 2007 decreased ¥433 million to
¥1,118 million.
4. Strategic Outlook, Issues Facing Management and
Future Direction
Management’s key task is to ensure growth in the Group in the
medium- and long-term, maintaining profitability through the cre-
ation of advanced, high-quality content and services. As the devel-
opment and popularization of information technology (IT) and
network environments rapidly advance, we anticipate a major trans-
formation in the structure of the digital entertainment industry. We
believe that this will be driven by such factors as increased con-
sumer needs in the area of network-compliant entertainment and
growing access to a diverse range of content by users of devices
that provide multiple functions.
The Group will strive to respond to these changes, and has
adopted a medium- to long-term management strategy that focuses
on pioneering a new era in digital entertainment.
The Group’s operating targets for the fiscal year ending March
31, 2009 are as follows (as of May 23, 2008).
Millions of yen
Years ended/ 2004 2005 2006 2007 2008 2009
ending March 31 results results results results results targets
Net sales ¥63,202 ¥73,864 ¥124,473 ¥163,472 ¥147,516 ¥160,000
Operating
income 19,398 26,438 15,470 25,916 21,520 21,000
Recurring
income 18,248 25,901 15,547 26,241 18,864 20,000
Net income 10,993 14,932 17,076 11,619 9,196 12,000
Owing to the consolidation of TAITO at the end of September 2005,
TAITO’s operating results are reflected in the Company’s consoli-
dated statements of income effective October 2005. Following this
merger, we have set an operating income ratio target of at least 20%
and a target for annual average growth in net income per share (EPS)
of at least 10%. These are our two main numerical targets.
5. Dividend Policy
The Group recognizes the return of profits to shareholders as one of
its most important management tasks. The Company maintains
internal reserves to enable priority to be given to investments that
will enhance the value of the Group. Such investments may include
capital investments and M&A for the purpose of expanding existing
businesses and developing new businesses. The retention of internal
reserves is done while also taking into account return to sharehold-
ers, operating performance and the optimal balance for stable divi-
dends. Accordingly, the Company strives to maintain stable and
continuous dividends. The portion of dividends linked to operating
results is determined by setting a consolidated payout ratio target of
approximately 30%.
The Company’s basic policy is to pay dividends from retained
earnings twice a year, through an interim dividend and a year end
dividend. The year end dividend is determined at the Annual General
Meeting of Shareholders, and the interim dividend is determined by
the Board of Directors.
For fiscal 2007, total dividends applicable to the year were ¥30
per share, comprising an interim dividend of ¥10 per share and a
year end dividend of ¥20 per share. The consolidated payout ratio
for fiscal 2007 was 36.7%.
Millions of yen Yen
Date of resolution Total dividends Dividends per share
November 19, 2007
Resolution of the Board of Directors ¥1,115 ¥10
June 21, 2008
Resolution of the Annual General
Meeting of Shareholders 2,296 20
6. Risk Factors
The risks described below are those that could affect the Company’s
business performance. Forward-looking statements in this manage-
ment discussion and analysis are in accordance with management’s
judgments as of June 30, 2008.
(1) Changes in the Economic Environment
In the event of an exceptionally harsh downturn in the economy
causing consumer expenditure to fall, demand for the Group’s
products and services in the entertainment field may decline. Such
circumstances may lead to an adverse impact on the Group’s
business performance.
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