Financial Strategy

Two Consecutive Years of Record-High Profits: Continued efforts to enhance corporate value through further growth investments.

Upon Assuming the Role of CFO

My name is Nobuyuki Tako, and I assumed the positions of Representative Director, Executive Vice President, and CFO in May this year. As TOHO's first CFO, I fully recognize the significance of this responsibility and am deeply committed to developing financial and capital strategies that support the sustainable enhancement of corporate value.
Having spent much of my career in corporate planning, I have been deeply involved in formulating the TOHO Mid-Term Plan, strengthening our governance framework, and executing capital policies while maintaining a Group-wide management perspective. Through my recent experience overseeing investor relations, I have gained firsthand insight from discussions with shareholders and investors into their expectations for our medium- to long-term growth story and their strong focus on capital efficiency. Drawing on these insights, I will carefully assess our strategic direction even in an uncertain business environment while supporting the CEO in making timely and well-informed decisions. By balancing disciplined growth investment with the optimization of our capital structure, I am committed to leading the TOHO Group into its next phase of growth.

TOHO Mid-Term Plan 2028: A Review of the First Year

Record-High Profits and Improved Capital Efficiency

FY2/26, the first year of TOHO Mid-Term Plan 2028, got off to an exceptionally strong start. In addition to the Film Business, which delivered blockbuster hits including Demon Slayer: Kimetsu no Yaiba Infinity Castle and KOKUHO, our IP & Anime Business established itself as our second major earnings pillar. The Theatrical and Real Estate businesses also delivered solid performance, enabling us to achieve record-high results at every level of profit. Particularly noteworthy was the strong progress we made toward our financial KPIs. Operating profit reached ¥67.8 billion, approaching our ¥70 billion target, while ROE rose to 10.4%, surpassing our target of 9% or higher. I believe these results demonstrate that our diversified business portfolio possesses both the resilience to adapt to changing market conditions and the ability to generate sustainable earnings.

Deepening Our Business Foundation: Renewed Recognition of the "Experiential Value" of the Film Market

The performance of our Film Business was particularly outstanding. Annual box-office revenue from films distributed by the TOHO Group exceeded ¥160 billion, while our domestic market share surpassed 50%, reinforcing our overwhelming presence in the Japanese film market.
Although consumer behavior has evolved since the COVID-19 pandemic, audiences are once again recognizing the unique value that only cinemas can provide—an immersive environment and a truly extraordinary shared experience. We have also seen the establishment of a virtuous cycle in which word-of-mouth on social media—beginning with KOKUHO—has generated widespread momentum extending well beyond its initial target audience. Even as Japan faces a declining population, I am confident that we can unlock further growth potential in the domestic market by continuing to enhance the experiential value of the moviegoing experience.

Accelerating Our Growth Strategy: Entering the Investment Phase for the IP & Anime Business

Our IP & Anime Business, a key medium- to long-term growth driver, became an independent reporting segment in the previous fiscal year, enhancing the transparency of its financial performance. Although profit declined due to one-off expenses—including higher goodwill amortization associated with the acquisitions of GKIDS and Science SARU, as well as increased amortization related to games launched in the previous fiscal year—license revenue from streaming and character licensing, the foundation of our business, remained at a high level.
Having completed the expansion of our operational bases in North America, Europe, and Asia, we are now in the investment phase of building a direct global distribution network. As a result, there may be periods over the next few years when investment expenses temporarily outpace earnings. However, we remain committed to achieving operating profit of ¥40 billion or more in this business by 2032 and will continue to accelerate its growth. Beginning with the worldwide release of GODZILLA MINUS ZERO this November, we will further maximize the value of Godzilla, one of our flagship proprietary IPs.

Capital Allocation Strategy

Capital Allocation and Financial Discipline

Under TOHO Mid-Term Plan 2028, we expect total cash inflows of ¥200–210 billion over the three-year period and plan to allocate the majority to growth investments (¥160 billion) and shareholder returns (¥40–50 billion). In the first year, supported in part by the sale of strategic-shareholdings, operating cash flow reached ¥66.6 billion, exceeding our original expectations.
In response, we executed a ¥14.9 billion share buyback as part of our flexible capital management policy. In addition to maintaining a dividend payout ratio of at least 35%, we achieved a total payout ratio of approximately 65%, significantly enhancing shareholder returns. Going forward, our priority will be executing investments—including M&A—that support growth in the content and IP businesses. Although we have established a ¥100 billion investment allocation, our objective is not simply to utilize the entire amount. Every investment opportunity will be evaluated carefully based on its strategic significance, with economic rationality and investment discipline taking precedence. If suitable opportunities are not available, we will flexibly allocate surplus cash to share repurchases and other shareholder return measures, while maintaining a strong focus on capital efficiency.

Utilizing Financial Leverage in the Real Estate Business

For the large-scale, long-term redevelopment of the Imperial Theatre Building (Teigeki Building), we will adopt the financing structure best suited to the project's characteristics.
Given the long investment recovery period inherent in this project, we will carefully assess the relationship between expected investment returns and our weighted average cost of capital (WACC), while making effective use of interest-bearing debt to help improve ROE.

Improving Asset Efficiency: Reduction Targets for Strategic-Shareholdings

To further optimize our balance sheet and improve capital efficiency, we will accelerate the reduction of our strategic-shareholdings.
Although we have steadily reduced the number of strategic-shareholdings, we recognize that rising market values for certain holdings have resulted in their carrying amount exceeding 20% of net assets as of the end of FY2/26. Accordingly, in July of this year, we established a clear quantitative target to reduce the balance sheet carrying amount of strategic-shareholdings by more than ¥50 billion and lower the ratio to net assets to below 10% by the end of FY2/30. Cash generated through the phased sale of these holdings will be allocated to growth investments and enhanced shareholder returns, thereby improving capital efficiency.

Management Centered on ROE

As CFO, I view ROE not merely as an outcome metric, but as a compass for assessing the effectiveness of every management initiative. To achieve a sustainable increase in corporate value, it is essential that we maintain ROE consistently above the cost of capital and continue generating a positive equity spread. Our foremost priority is, of course, to strengthen our earnings power by enhancing profitability and improving margins in our core Film and IP & Anime businesses. Equally important, however, is improving asset efficiency through balance sheet optimization.
In addition to systematically reducing strategic-shareholdings, we will review the property portfolio of our Real Estate Business, dispose of non-core assets that no longer serve a compelling strategic purpose, and reinvest the proceeds in growth areas. At the same time, we will maintain an appropriate level of equity by flexibly combining dividends and share buybacks, taking into account the progress of growth investments and our cash position. By exercising disciplined control over both the denominator (equity) and the numerator (profit), we will establish a robust management framework that delivers high capital efficiency and meets the expectations of global capital markets.

Conclusion: Expanding Our Community of Fan Shareholders

The 1-for-5 stock split implemented in March this year was intended to reduce the investment required per trading unit, making it easier for a broader range of investors to participate in TOHO's growth. We believe that broadening our shareholder base not only enhances market liquidity, but also helps build a stable base of shareholders who have a deep understanding of our corporate philosophy and our content. Our shareholders are also valued fans of our works. We will also strengthen our IR activities to deepen engagement with these "fan shareholders" and support the long-term development of our share price.
We sincerely ask for your continued support as we pursue sustainable growth and further enhance corporate value.

May 2026