Generating record revenue for six consecutive fiscal years due to the advancing shift to smartphones and growth in video advertising
In the Internet-related market, the main business area of the Septeni Group, the ways in which smart devices are used have become more diverse and in-depth. At the same time, globalization is proceeding at a rapid pace, typified by market expansion primarily in developing countries. In 2017 marked two decades since the Internet gained widespread adoption and a decade from the introduction of the first iPhone. It was also a year that provided hints about the next decade for the Internet-related market with the release of a stream of smart speaker products from the IT companies that drive the industry.
In this environment, in our mainstay Internet Marketing Business we focused on smartphone advertisements, and paid particular attention to enhancing our production and sales systems for the fast-growing area of video advertisements. In conjunction with this approach, we made strides in promoting an expansion of our overseas operations primarily through Lion Digital Global Ltd., an internet advertising business in the Southeast Asia region that we made a consolidated subsidiary from the fiscal year in review.
In the Media Content Business, we made proactive marketing investments in “GANMA!” Comic app in an effort to expand the size of the user base and media.
In the Internet Marketing Business, we expanded overseas revenue mainly in Asia, while achieving steadily improving profitability in Japan
In the Internet Marketing Business, we have actively rolled out sales activities and expanded operations against a backdrop of a larger internet advertising market, primarily composed of performance-based advertising for smartphones. The percentage of earnings from the transactions of smartphone advertising in this business rose 5.7 points over the previous year, and this type now accounts for a high 80% of advertising. Even within this type, earnings from transactions of video advertising experienced considerable year-on-year growth of around 2.4 times. Meanwhile, while we were affected by a decrease in advertising in some existing large-scale projects, overseas earnings particularly from the Asia region were strong, and as a result we achieved a 3.2% increase in revenue over the previous period to 13.8 billion yen, while Non-GAAP operating profit settled at 4.26 billion yen, a 20.2% drop from the previous period. Although we ended the period with increased revenue and lower income, we saw improvements in transactions for our mainstay areas of smartphone advertising and social media advertising, as well as a better product mix thanks to a decrease in low-profitability projects. In terms of the ratio of expenses to revenues for advertising transactions, we recorded a 0.8-point rise over the preceding period. In these ways, we are continuing to make progress in our switch to a high-revenue business model.
On the organizational front, we made organizational changes to better fit the immediate business environment and sought to strengthen our mobility.
In the Media Content Business, we have steadily expanded our media scale through large-scale marketing investment in the manga content business
In the Media Content Business, we made aggressive marketing investments in GANMA! and ran the first television commercials in March 2017. The investment yielded significant results, with the user base steadily growing primarily among younger demographics. As of October 2017, cumulative downloads of the app stood at 8.95 million, 2.3 times greater than the preceding period, and monthly page views continued to grow to 3.9 billion views. Moreover, in connection with the expanded media scale, app revenue enjoyed considerable growth of approximately 4.5 times over the previous term mainly thanks to expanded sales of GANMA! AD in-app advertising.
The effects of television commercials not only enhanced our media scale but also had the effect of raising our recognition among advertisers. In the second half of the year, development of the brand advertising market made consistent progress and the number of advertisers rose steadily. Consequently, this form of advertising is gaining increased recognition as an alternative medium to television by which to reach younger demographic who are defecting from TV viewership at an increasing rate.
As a result, on a consolidated basis we generated 14.7 billion yen in revenue, a 6.1% jump over the previous year, while Non-GAAP operating profit fell 43.9% to 2.33 billion yen from the previous fiscal year.
Investing in people, the Group’s greatest asset, raises our competitiveness as a company in the medium-to-long term
To date, Septeni has achieved sustained growth by actively investing in entrepreneurial human resources with a sense of ownership. As a part of our investment in these kinds of human resources, since 2012 we have been promoting an AI-type personnel system based on machine learning in the areas of personnel hiring and development. In recent years, this initiative has progressed to the stage where the prospect of hiring even more talented personnel and bringing junior personnel to full strength at an earlier stage has been backed up by our internal data. We have also built up a track record of having these independent efforts recognized by multiple outside organizations.
Against this backdrop, we decided to make bold revisions to our personnel systems starting from the next fiscal year. Through the revisions, we will confirm to the “workstyle reform” trend advocated by the national government since September 2016, and also aim to contribute to medium-to-long term business performance and boost competitiveness by the hiring of more talented personnel and developing them to full strength early on.
We distributed essentially the same dividends as the preceding fiscal year
With respect to returning profits to shareholders, we have set roughly 15% of profit attributable to owners of parent as a benchmark, in the interest of maintaining continuity and stability of dividends, as previously. We decided to distribute a dividend per share of 3.2 yen, which is essentially the same amount as the preceding period. Moving forward we will continue to engage in appropriate profit distribution based on business performance.
From the next fiscal year, we will aim to achieve sustainable growth under the Midterm Business Policies that have set non-GAPP operating profit of 10.0 billion yen as a target. I humbly ask for your continued understanding and cooperation.