Recovery in company-wide results driven by higher revenue and profit from the launch of a new magazine

「Our group achieved higher revenue and earnings for 5 consecutive periods, including gross profit of ¥5,768,164 thousand, up 14.5% year on year, operating profit of ¥386,856 thousand, up 24.9%, and ordinary profit of ¥401,186 thousand, up 24.4%.」

「As a result of promoting sales of hybrid advertising that contributes to the revitalization of regional economies, revenue for the current interim consolidated accounting period amounted to ¥5,479.486 million, up 19.5% year on year, reflecting an increase in standalone revenue of 1.2% and the consolidation of Kansai Pado Co., Ltd. and others. Gross profit increased 20.3% year on year to ¥2,430.712 million, reflecting a 3.5% increase in standalone gross profit and the effects of consolidation, while operating profit rose 4.7% year on year to ¥97.352 million.」

「As a result of efforts to promote hybrid advertising sales and analyse and utilise advertising effectiveness, consolidated revenue for the cumulative second quarter increased 20.9% year on year to ¥4,587,075 thousand. This reflected higher standalone revenue, up 14.1%, and contributions from the beginning of the period by 株式会社中広メディアソリューションズ, 株式会社ケイ・クリエイト and others, which had been included in the scope of consolidation from the second quarter of the previous fiscal year. In terms of profit, higher revenue, synergies from group integration and more efficient group management following the integration of subsidiaries resulted in operating profit of ¥93,017 thousand, compared with an operating loss of ¥8,410 thousand in the same period of the previous year, an increase of approximately ¥101 million.」

「As a result, consolidated revenue for the cumulative first quarter was ¥2,257,740 thousand, up 34.7% year on year, owing to higher standalone revenue, which increased 13.5%, and the inclusion in the scope of consolidation from the second quarter of the previous fiscal year of 株式会社中広メディアソリューションズ, 株式会社ケイ・クリエイト and others. In terms of profit, higher revenue, synergies from group integration and lower indirect costs following the absorption-type merger at the beginning of the period resulted in operating profit of ¥20,076 thousand, compared with an operating loss of ¥23,753 thousand in the same period of the previous year.」

「Strong continued growth in standalone results owing to digital transformation, including operating profit of ¥185 million, 2.6 times the previous-year level, and ordinary profit of ¥193 million, 2.3 times the previous-year level, resulted in consolidated operating profit of ¥189,405 thousand, up 131.1% year on year, and ordinary profit of ¥172,115 thousand, up 42.6%.」

「Gross profit increased 22.5% year on year to ¥2,739,212 thousand as the cost ratio declined, exceeding the rate of increase in selling, general and administrative expenses. As a result, operating profit was ¥51,370 thousand, compared with a loss of ¥22,209 thousand in the same period of the previous year, and ordinary profit was ¥43,691 thousand, compared with ¥2,999 thousand.」

「Although the Company on a standalone basis recorded operating profit of approximately ¥15 million in the first half, the first such profit in 4 periods, consolidated operating loss was ¥8,410 thousand, compared with an operating loss of ¥60,974 thousand in the same period of the previous year, representing an improvement of approximately ¥52 million year on year.」

「In terms of profit, gross profit increased ¥40,820 thousand, or 5.7%, year on year to ¥755,228 thousand, owing to an improved cost ratio resulting mainly from the increased proportion of media advertising revenue. However, higher selling, general and administrative expenses, primarily personnel costs related to sales initiatives, limited the improvement in the operating loss to approximately ¥11 million year on year, resulting in an operating loss of ¥23,753 thousand.」

「For the second half, the recovery in full-year revenue, improvement in gross margin through cost control and restraint on selling, general and administrative expenses resulted in operating profit of ¥142,930 thousand, exceeding the first-half operating loss of ¥60,974 thousand. Consequently, full-year operating profit was ¥81,956 thousand, compared with an operating loss of ¥292,349 thousand in the previous fiscal year,」

「As a result, consolidated revenue for the cumulative third quarter was ¥5,215,316 thousand, up 9.4% year on year, reflecting recovery in monthly revenue to 100.1% of the previous-year level in October, 109.8% in November and 104.4% in December. In terms of profit, we recorded standalone third-quarter operating profit of ¥38,764 thousand, driven by the recovery in revenue, an improved gross margin through cost control and lower selling, general and administrative expenses. However, this was insufficient to offset the weak first half, and the consolidated cumulative third-quarter operating loss was ¥22,209 thousand, compared with an operating loss of ¥304,953 thousand in the same period of the previous year.」

「Although the Company recorded an operating loss in the second quarter, despite aiming to eliminate the operating loss recorded in the first quarter, the consolidated cumulative second-quarter operating loss was ¥60,974 thousand, compared with an operating loss of ¥341,313 thousand in the same period of the previous year. The ordinary loss was ¥46,568 thousand, compared with an ordinary loss of ¥334,281 thousand, and the quarterly net loss attributable to owners of the parent was ¥55,483 thousand, compared with a net loss of ¥246,164 thousand.」

「In terms of profit, the gross margin improved as the cost ratio declined owing to the recovery in orders for community free magazines in April and June, and we continued to reduce expenses. Although we recorded monthly operating profit in April and June, this was insufficient to offset the operating loss caused by the decline in orders in May, resulting in an operating loss of ¥34,825 thousand in the cumulative first quarter, compared with an operating loss of ¥186,279 thousand in the same period of the previous year,」

「In the 44th fiscal year, we aim for a V-shaped recovery in performance and the resumption of dividend payments by enhancing the value of our group’s posting-based free media, strengthened through the COVID-19 period and evolved through digital transformation.」

「We worked to control and reduce selling, general and administrative expenses while maintaining employment. As a result, performance recovered enough to secure monthly operating profit in November and achieve operating profitability in the standalone third quarter, but the consolidated cumulative third-quarter operating loss was ¥304,953 thousand.」

「As a result, although the second quarter showed an improving trend from the first quarter, the consolidated cumulative second-quarter operating loss was ¥341,313 thousand. The ordinary loss was ¥334,281 thousand, and the quarterly net loss attributable to owners of the parent was ¥246,164 thousand.」

「However, sales in March fell substantially below expectations because of the impact of the global spread of COVID-19, which became apparent in March, and the curtailment of economic activity in Japan. As a result, the goal of returning to profitability for the full year was not achieved.」

「Against this backdrop, while working to expand the lineup of new Happy Media® publications, we continued temporarily suspending unprofitable publications and consolidating sales offices,」

「In this environment, the company worked to restore earnings by expanding the lineup of new Happy Media(R) products and continuing to consolidate or discontinue sales locations based on profitability. In addition to closing 1 location in Fukui Prefecture in the first quarter, it suspended 1 company-operated regional free magazine in Wakayama Prefecture during the second quarter.」

「Against this backdrop, to recover from the prolonged weakness in performance since the previous fiscal year, we continued suspending unprofitable publications and consolidating offices, measures that had begun in the previous fiscal year, and consolidated one office in Fukui Prefecture during the cumulative first quarter. To address the shortage of personnel resources needed to secure earnings, we worked to restore profitability by strengthening and integrating the sales headquarters, including improving work processes and internal systems to increase the efficiency of sales personnel and reduce their workload, and integrating the creative development headquarters into the sales headquarters.」

「In the fiscal year ended March 2019, in light of the poor performance in the previous fiscal year, we restrained the direct launch of new publications and worked to recover performance primarily by monetising publications launched recently.」

「From the beginning of the fiscal year, we restrained the direct launch of new editions of our core product, Happy Media® “Chiiki Micchaku Seikatsu Joho-shi®” (the “community free magazine”). We worked to recover performance, which had declined in the previous fiscal year, by strengthening our operating structure, primarily in the sales division. However, personnel resources fell short of the assumptions underlying our earnings forecast, resulting in weaker-than-expected first-half performance. At the beginning of the second half, we therefore revised down our first-half outlook and full-year earnings forecast.」

「During the cumulative second quarter, we continued working to recover performance, which had declined in the previous fiscal year, by strengthening our operating structure, primarily in the sales division. At the Kansai branch, which was launched in the first quarter, we also worked to expand sales in the Kansai area, focusing on Kyoto, Nara and Wakayama prefectures.」

「During the cumulative first quarter, we worked to recover performance, which had declined in the previous fiscal year, by strengthening our operating structure, primarily in the sales division. As a result, revenue increased to ¥1,775,397 thousand, up 0.3% year on year, due mainly to an increase in advertising orders for community free magazines in the media business and strong performance in the mail-order business. However, gross profit decreased 2.0% year on year to ¥822,577 thousand, owing mainly to higher fixed costs for community free magazines launched since the second quarter of the previous fiscal year. Selling, general and administrative expenses decreased 2.6% year on year to ¥806,516 thousand, reflecting the absence in the current period of the incentives granted in the first quarter of the previous fiscal year and a decrease in costs associated with opening offices. As a result, operating profit increased 46.8% year on year to ¥16,061 thousand, ordinary profit increased 59.4% to ¥18,635 thousand, and quarterly net profit increased 117.0% to ¥9,176 thousand.」

「For the next period, we plan to limit the number of new publications launched by the Company until a sufficient recovery in performance can be expected, and aim to restore overall performance to the previous fiscal year’s level by increasing revenue and earnings from the 20 publications launched at the end of the previous fiscal year and during the current fiscal year.」