SEPTENI HOLDINGS CO.,LTD.SEPTENI
HOLDINGS
CO.,LTD.

President’s Message

We have doubled profits thanks to strong growth in our areas of focus and the aim to achieve further dramatic growth under a new plan.

Create foundation for new growth in the Global business by demonstrating presence in the Mobile and Social Media Business.

In the Internet-related market, our main business area, the market size is expanding steadily, associated with an increase in the population of so-called digital natives, and globalization is proceeding rapidly.

In the area of smartphones, the use is expanding, especially in emerging countries, and the quality of use is deepening. The utilization of smartphones is also progressing in new areas such as the sharing economy, AR (augmented reality) and VR (virtual reality). In this environment, the Septeni Group has promoted businesses with a focus on the Mobile, Social and Global domains in its mainstay Internet Marketing Business. As a result, the volume of smartphone advertising, a growth area, expanded steadily, and marketing support services using social media, which we have been working on as an industry pioneer, also grew strongly. In terms of overseas development, we continued to expand operations by making Lion & Lion, a leading digital agency in Southeast Asia, a subsidiary in October 2016.

The Internet Marketing Business was a driving force for the significant increase in profits and it offset the losses of prior investments.

Profit growth in our mainstay Internet Marketing Business offset the losses due to prior investments made by the Media Content Business and Non-core business. As a result, revenue stood at 17.1 billion yen, and non-GAAP operating income amounted to 3.84 billion yen. Both substantively marked a record high for the fifth consecutive year. We regard these business results as successful in realizing the Group’s management stance of steadily continuing to increase revenue and profits by making investments that will lead to future growth. Profit attributable to owners of parent also increased, overcoming a reactionary fall in profits associated with the sale of the DM business which was recorded in the previous fiscal year.

By business segment, the Mobile and Social domains achieved high growth in the Internet Marketing Business. In this segment, net sales increased 18.8% year on year, to 73.2 billion yen, and non-GAAP operating income rose 39.7%, to 5.33 billion yen. The ratio of operating income to sales was 7.3%, improving for the fifth consecutive year, suggesting that the shift to a more profitable business model is occurring.

In the Mobile and Social domains, which we positioned as areas of focus, the volume of smartphone advertising increased approximately 40% year on year, to 54 billion yen, and its composition ratio was approximately 74%. There was an especially significant increase in the volume of in-feed advertising through expansion of the line-up in media such as Instagram and LINE, and it made a contribution.

Meanwhile, the volume declined approximately 5% year on year, to 9.0 billion yen, in the Global domain due to the impact of declining advertising for largescale projects. However, in terms of an organizational foundation to support global promotion by establishing a base in New York and Beijing, the groundwork is making steady progress.

In the Media Content Business, revenue increased significantly, particularly in the Manga Content Business

In the Media Content Business, revenue increased significantly, particularly in the Manga Content Business, as a result of making aggressive prior investments to expand the size of “GANMA!”, a Manga content app, although operating loss expanded. The cumulative number of downloads in GANMA! as of the end of October 2016, was 3.97 million, approximately twice as many as in the same period of the previous fiscal year, and the number of monthly page views grew to 1.35 billion in October. Monetization is also making progress, and we have commenced the sale of native advertising in the application “GANMAAD.” We are getting a positive response by creating a business model with high growth potential and repeatability. We also promote the commercialization of our intellectual property and have published 27 new works as books and released a total of 43 independent volumes, including sequels.

As for our other new businesses, we have newly consolidated the medical platform business in the fiscal year under review, in addition to platform businesses for recruitment and social contribution. All of the businesses are growing steadily, and we will continue to invest aggressively in new businesses.

We aim to achieve non-GAAP operating income of 10.0 billion yen under the new policies after three years, in which we will have doubled our profits.

The concept of the Midterm Business Policies starting from the fiscal year ended September 30, 2014 was to “Double Profits.” We have been aiming to increase the composition ratio of highly-profitable businesses byconcentrating our management resources in Mobile, Social and Global as the focused domains, and build a new core business second to advertising. As a result, operating income, which was 1.59 billion yen in the fiscal year ended September 30, 2013, increased approximately 2.4 times in three years, to 3.84 billion yen in the fiscal year ended September 30, 2016, and the operating margin also improved.

Looking at the domains in focus, we succeeded in increasing the volume of smartphone advertising by approximately 5.1 times in the Mobile business during the same period, increasing the total volume of major media, such as Facebook and Twitter, by approximately 8.3 times. In the Global business, the total of the volume for overseas customers and the volume of distribution of domestic customers for overseas grew approximately 16.5 times. We are very glad that we were able to comfortably achieve our goal of doubling profits overall over three years as a result of steady growth in the focused domains.

In the Midterm Business Policies, starting from the next (27th) fiscal year, we have set non-GAAP operating income of 10.0 billion yen as the performance target. As the basic policy toward that goal, as our first initiative, we will expand the advertising business globally. We will seek to expand shares and profitability by strengthening our established position in the field of smartphones and social media, and promote organic business growth and M&A as future engines for growth in the global market, where smartphone users continue to increase. We aim to achieve further growth in the Internet Marketing Business by implementing strategies that suit the market environments in Japan and overseas.

In the Media Content Business, we will focus on enhancing our own media. We will seek to create synergies between the segments with the Internet Marketing Business by developing GANMA! as our own media that constitutes a primary revenue source of the Group.

Dividends increased for the fourth consecutive year in the year ended September 2016. We aim for dramatic and sustainable growth under our new policies.

With respect to profit distribution to shareholders, we have set roughly 15% of the consolidated net income as a benchmark.Given a significant increase in net income, we have decided to distribute a dividend per share of 14 yen, up 5 yen from FY9/14, for FY9/15.We have raised dividends for the third consecutive year. Our basic policy continues to be appropriate profit distribution based on business performance, while paying attention to maintaining stable dividends.

From the next fiscal year, we will aim to achieve sustainable and dramatic growth under the new Midterm Business Policies that have set non-GAPP operating income of 10.0 billion yen as a target.

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