Cost Structure and Business Portfolio Restructuring

「Following delays in the release of new F2P titles and poor performance after launch in the fiscal year ending March 2026, the Company lowered the priority of GaaS and transferred more than 100 F2P development personnel to full-game development centered on its core IP. In connection with this, the Company also decided to discontinue Super Game, for which being online is one of the defining characteristics.」

「A business revitalization program will be implemented in FY2027/3.」

「The Company is also reviewing its business portfolio to optimize it. During the current consolidated fiscal year, it recorded business reorganization losses as extraordinary losses in connection with the transfer of the overseas development studio Amplitude Studios SAS through an MBO. However, profit attributable to owners of the parent increased year on year due to the recording of an extraordinary gain from the transfer of shares in Phoenix Resort Co., Ltd. and the absence of the business reorganization losses at European sites recorded in the previous fiscal year.」

「In connection with the transfer of the overseas development studio Amplitude Studios SAS through an MBO, the Company recorded ¥5.9 billion in extraordinary losses during the current interim consolidated accounting period. However, profit attributable to owners of the parent for the interim period increased year on year, due to the absence of the business reorganization losses at European sites recorded in the previous interim consolidated accounting period and the recording of an extraordinary gain from the transfer of shares in Phoenix Resort Co., Ltd. during the current interim consolidated accounting period.」

「In the European consumer business, the Company narrowed its lineup, optimized fixed costs, including through headcount reductions, and sold certain development studios.」

「As a result of recording ¥9,780 million in extraordinary losses, including business reorganization losses associated with reviewing the title portfolios at the European development sites, profit attributable to owners of the parent for the quarter was ¥23,117 million, up 140.3% year on year.」

「These relate mainly to games whose development was discontinued in connection with the reorganization of the European business.」

「As a result of the structural reforms implemented in the previous fiscal year and other factors, fixed costs have remained at a low level.」

「In light of these circumstances, the Company established a Structural Reform Committee to transform the Group into a structure adapted to the external environment and undertook measures including ① a review of the balance sheet targeting non-business assets, ② development of an organizational structure capable of adapting to changes in market conditions, and ③ cost reductions focused on fixed costs across the Group.」

「To adapt to these changes in the business environment and improve the profitability and achieve an early recovery in sales of the amusement facility business, the Company considered various options. In this process, it proceeded with discussions to transfer the shares of Sega Entertainment Co., Ltd. (currently GENDA SEGA Entertainment Co., Ltd.) to GENDA, which had a strong interest in expanding the amusement facility business, and at a meeting of the Board of Directors held on 4 November 2020 decided to enter into a share transfer agreement.」

「In light of the significant impact of the COVID-19 pandemic on many of the Group's businesses, the Company established a Structural Reform Committee to transform the Group into a structure adapted to the external environment. The Company is undertaking measures including a review of the balance sheet targeting non-business assets, the development of an organizational structure capable of adapting to changes in market conditions, and cost reductions focused on fixed costs across the Group, with a reduction target of ¥15 billion.」

「In the entertainment content business, we will review our priority areas, optimize the scale of development and operations in digital games, reallocate resources to packaged games, and pursue improved profitability.」

「Under Road to 2020, the Group set a medium-term management target of an operating margin of at least 15% and ROA of at least 5% for the fiscal year ending March 2020. Improving profit margins and capital efficiency and optimizing the allocation of management resources are priority issues, and the Group will actively invest earnings secured by its core businesses, centered on gaming machines, in growth businesses such as digital games and integrated resorts (IR).」

「The Company entered into a share transfer agreement with China Theme Park Ltd. on 31 October 2016 for part of its holdings in Sega Live Creation Co., Ltd. (currently CA Sega Joypolis Co., Ltd.), and completed the share transfer on 1 January 2017.」

「Following its consideration of these group structural reforms, the Company decided to transfer part of the shares concerned to further improve its financial position and increase its capital turnover ratio.」

「The Group has set improving profit margins and capital efficiency as its medium-term management objectives, and aims to achieve a consolidated operating margin of 15% and consolidated ROA of 5% in the fiscal year ending March 2020. To achieve these objectives, the Company decided to transfer the fixed assets concerned in order to further improve its financial position and increase its capital turnover ratio.」

「Over the two fiscal years from the previous fiscal year, we pursued these initiatives in stages: cost structure reform aimed at improving profitability, and business structure reform aimed at reviewing the business portfolio itself.」