New Mid-Term Business Strategy
FY2019 – FY2021

May 31, 2019

AgendaⅠ Financials
１．FY2018 Results
２．FY2019 Forecast

Ⅱ New Mid-Term Business Strategy
１．Progress and Challenges
２. Opportunities
３．Key Measures
４．Target2

［Ⅰ Financials］

１．FY2018 Results

１． FY2018 Results(1) Highlight of Financial Results

Operating income decreased
Net Sales

Operating Income

Net Profit Attributable
To Owners of the Parent¥90,212¥926-¥2,010-¥1,498 (38%）-¥4,947（Million yen）

YoY-¥1,139(99%）

91,351

YoY

YoY

90,212

2,937

2,424-1,139-1,498-4,947
926

FY2017FY2018FY2017FY2018We recorded
2,290 million yen
as OLM goodwill
amortization in
extraordinarylosses.

FY2017-2,010FY20184

１．FY2018 Results(2) Operating Income

Imaging Systems & Solutions increased, while the other threesegments decreased.
（Million yen）

2,424-756-1,498-532
926-583447-73

FY2017

Content Production
Media
Creation Services Localization

OthersImaging
Systems &Solutions

FY20185

１．FY2018 Results(3) Financial Results by Segment
FY2017(Million yen)ContentCreation

ActualActual

YoY

Net sales

25,28923,429-1,860

Operatingincome799

43-755(3.2%)(0.2%)Net sales

27,72527,529-195

Operatingincome1,209

677-532(4.4%)(2.5%)Net sales

24,81424,916101

Operatingincome-674-1,257-583(---％)(---%)Net sales

14,997

15,946948

Operatingincome

1,449

1,896

447

(9.7%)(11.9%)

Operatingincome-360-433-73

Net sales

91,351

90,212-1,139

Operatingincome2,424

926-1,498(2.7%)(1.0%)（Op ratio）

Production
Services（Op ratio）

Media
Localization（Op ratio）

Imaging
Systems &Solutions

OthersConsolidated

FY2018（Op ratio）（Op ratio）YoY ratio-7.4%

Overview
 New businesses（live-entertainment / publisher）
 Less live-action feature films than privious year Increased in animation production cost-0.7%

 TV animation post production, IT humanresources, and weather forecast resulted well
 TV episodic post-production dropped sales/profit Edit team work-style reform on going

0.4%

 Invested in Pixelogic for global E2E business Special localization needs ceased, sales dropped
 Delay of fixed cost cut measures lowered profit

6.3%

 Imaging systems business in Japan was strong Video system solution for broadcasters did well
 Video and imaging LSI to China went well

-1.2%

6［Ⅰ Financials］

2．FY2019 Forecast

２．FY2019 Forecast(1) Policy and Consolidation Indicators

Position：A year to regain profitability
Policy：Motivate “Integration to 2021” on imaging（Million yen）

Net Sales

Operating Income

Net Profit Attributableto Owners of the Parent

95,000

1,680

1,800

YoY＋4,788 (105%）

YoY＋¥754（181%）

YoY＋3,810

90,21295,0001,800

1,680+4,788+754926+3,810-2,010

FY2018FY2019FY2018FY2019FY2018FY20198２．FY2019 Forecast(2) Priority Measure by Segment

Segments

Focus Area - Action

ContentCreation• Animation – restructure production processes• Transform into a solutions business – transition from labor
intensive to knowledge intensive (creative)

ProductionServices••••

E2E service – expand
TV business – rebuild by optimizing workflows
Cloud platform – develop the basis for this business
Human resource consulting and Media – strengthen• E2E service – globally expand
Media• Feature films (higher margin) – increase share
Localization • IT – utilize more for improved operational efficiency

Imaging
Systems &Solutions• New high-speed cameras - boost sales• Newly entered markets (optical measurement, FA, andmotor vehicle crash test) - strengthen position• Next generation camera, systems and sensors - accelerate
development• Broadcast system integration – expand the business9

［Ⅱ New Mid-Term Business Strategy］

１．Progress and Challenges

１．Progress and Challenges(1) Management KPIs in the Original Mid-Term Plan

Achieving target in FY2020 is challenging

Net sales ¥100 billion and Op rate 5%Net sales
Operating income(Billion yen)100100Op income rate

95.05%

91.4
90
2.0%

1.8
090.2
2.7%

87.6
5(%)

FY2016
Actual

1.8%

2.5

1.0%

0.9
FY2017
Actual

FY2018Actual5.0

1.7
FY2019Plan

FY2020Plan
11

１．Progress and Challenges(2) Operation Income by Segment

Imaging Systems & Solutions: in line with the plan

Other Segments:(Billion yen)

-62%

4,0
1.8

3,0
2,0
1,00.9
1.0-2,0

2.4

0.8
1.2

0.7

1.9

Imaging Systems & Solutions➡️ remaining strong-1.3

Media Localization-1.2-0.7-0.4-0.4-0.8-0.4
FY2017
Actual

Production Services⬇️decreasing

0.7

1.6

FY2016
Actual0.9

1.3

1.4-0.2

Content Creation⬇️decreasing

2.5

1.2

0,0-1,0falling far behind the plan

FY2018Plan⬇️significantly decreasing

FY2018Actual12

１．Progress and Challenges(3) Reasons for Falling Behind the Original Plan

１．Underperformance by Media Localization Segment• High cost structure and dependency on sales increase• Delay in executing productivity optimizing initiatives like IT investment

２．Delay in shifting to new business model• Unsuccessful attempt to reform the existing profit structure• Unaccomplished attempt to shift from labor-intensive business13

１．Progress and Challenges(4) Existing Challenges

Three major business challenges are recognized.
Business Challenges
１．Underperformance by Media Localization Segment
２．Delay in shifting to new business model
３．Reliance on Imaging Systems & Solutions for profit

Need for a New Mid-Term Business Strategy
14

［Ⅱ New Mid-Term Business Strategy］

2．Opportunities

２．Opportunities(1) Environment and Opportunities

New video markets arise as video technology and business environment advance■ Expanding – video usage and video viewing range
Innovation in imaging technology
Filming & editing devices, CG/VFX, and AR/VR

Diversified

Sophistication of visual resolution

Usage of imageries

4K/8K, 3D/4D, and HDR

Smartphone/SNS/OTT

Seize the chance

Advances in networking technology
５G■ Growing markets of video streaming and video technology
Video production market

Shrinking

TV, CM, feature film, and packaging

Video streaming andvideo technology markets

Growing strong

Go overseas
Win market share

Lead the growth

OTT, digital cinema, projection mapping16

２．Opportunities(2) Group’s Mission and Vision

Group’s Mission
We are dedicated to being a visual communications group that brings

amazing and inspiring experiences to the people around the world bycreating new values with honesty.

Group’s Value of 4we’s
We lead; We collaborate; We serve; and We discoverGroup’s Vision
Our vision is to use the Group’s integration to become the world’s only
one creative technological organization to realize visual communication
across the globe.
17

２．Opportunities(3) Core Competence

Creativity

Technology

Engaged in a wide range of media and entertainment
related businesses
Pre-production(Plan)

SystemSolution

Production(Shoot/CG)

Post-production(Edit/Localize)

Distribution(Deliver)Globalization

A unique corporate group offering one-stop video services
18２．Opportunities(4) Group’s Key Strategy
We have developed a new mid-term business strategy“Integration to 2021”,
based on our business challenges and opportunities
We will accelerate the Group’s structural reform and build a well-balanced business portfolio withthose 5 key strategies below.

5 Key Strategies
１．Develop a new global strategy
２．Improve profitability of the existing businesses
３．Transition to a new business model
４．Create and develop new businesses
５．Develop human resources and promote the work-style reform

Business portfolio with growth potential and profitability19

［Ⅱ New Mid-Term Business Strategy］

３．Key Strategy and Measures to Implement

３．Key Strategy and Measures to Implement(1) New Global Strategy

Media Localization

Production Services

Strategic investment in Pixelogic for a business allianceto provide global end-to-end(E2E) services
１．Global one-stop service=

Sales expansion

２．Expanded business fields=

Profitability improvement

３．Improved operational efficiency=

Productivity increase

Offer one stop-E2E
serviceExpand feature film
service (high profit)

ClientLocalization

Majorstudio①Video onDemandRelease and Delivery

Distribution

TheaterTVFeaturefilm

Utilize internal ITsystems to improve
efficiency➁③ITSystemBroadcastersTVBlu-ray
DiscOTTE2E service ➁OTT (Over-the-top) refers to companies excluding telecommunications that distribute streaming media content.

21

３．Key Strategy and Measures to Implement(1) New Global Strategy (Cont’d)Video streaming industry is growing globally (OTT-led, increased content volume)
We will execute those 5 key strategies in “Integration to 2021” to expand theglobal E2E service
Media Localization

Expand share in the film market
Mainly Localizes TV episodes

Pixelogic’s network

Provide E2E service
Mainly distribution service

Production Services

E2E service in Japan

SDI’s dubbing studio capacity

Expand into the Asian markets
Expand localization service
SDI and Pixelogic network

An end-to-end (E2E) service covers an entire process from localization (subtitiling/dubbing) to distribution offeature films and other source videos (creation, inspection, and distribution of data tailored to therequirements of release/delivery format).

22

３．Key Strategy and Measures to Implement(2) Improve Existing Business’ Profitability
Content Creation

１. Animation
High labor and outsourcing costs•Cost control•

Level out schedule; avoid losing work time•

Manage person-hour by project; control the budget•

Maximize offshore production teams in Malaysia

Content Creation

From labor-intensive to creative

２. CM and Feature film
CM: profit drop due to shift to digital•(less physical media•

duplication/delivery)
Feature film: lower rate of recouping•

Promote solution business by combining branding
and ICT•Enter into experience-based media business

investments
Production Services

Maximize creators’ operation efficiency

３. Post-production•

Decreased TV program volume•

Revisit unprofitable deals

due to The Work-Style Reform Bill•

Improve productivity by revising workflows
23

3. Key Strategy and Measures to Implement(3) New Business Model
Content Creation

１. Expand business by IP
Break away from made-to-orderstyle of filmmaking•

Create original contents in-house•

Gain profit throughout the value chain—IP, production, and box office

Production Services•

２. Develop a cloud system for the•entire production process
Production(shooting・CG)
Pre-production(planning)•

Visualize complicated production process
Make a flexible production system;

standardize quality management
Optimize production process

Production
Cloud platform

Post-production(Editing・Localization)

DeliveryRelease・Broadcast(Delivery support)

Stock・Secondary distribution
Distribution(Data stock)(Delivery・Approval)

24

3. Key strategy and Measures to Implement(4) Create and Develop New Businesses
Content Creation

・Strengthen experiential communication
・Co-create with a partner keen on
market expansion

１. Expand live entertainment
business with a partner
Imaging System & Solutions

２. Expand the business fields,
starting with image sensing
technology
Existing
High-speed camera
Polarization camera etc

・Increase product categories
・Develop more fields (measuring, integrating,analyzing, and controlling by visual data)

NewMeasure

IntergradeAnalyze

Control

IoT & AI

Expand product(Multiple head high-speedcamera)

3. Create new businesses by M&A(Birefringence mapping investigatedevice)(Anomaly detection system)• Engage in significant active
investment25

3. Key strategy and Measures to Implement(5) Human Resources Development and Work-Style Reform

１．Human resources development
・ Executive talent
Lead the Group・ Global talent
Promote global businesses

・ Professional talent・Perform with high creativity
・Play key role in developing newtechnologies

２．Work-style reform
・Work-life-balance of each personnel

・High creativity

Succession planning・Continuous, systematic successor development
in line with the succession plan・Select young executive candidates andsystematical training program

Talent management
・Define the type of talents and skill sets needed
・Systematically conduct recruitment, training androtation

Mindset reform and productivity
improvement
・Carry out diverse and flexible ways of working
・Develop career and improve skill sets ofpersonnel
・Utilize IT26

［Ⅱ New Mid-Term Business Strategy］

４．Key Strategy and Target4. key Strategy and Target(1) Target Operating Income Before Goodwill Amortization

New global strategy, existing businesses’ improved profitability, andnew businesses through M&A

a well-balanced business portfolio
10%Imaging & System Solution
is more than 70%

20%

30%
25%
15%
FY2021FY20186.0billion

2.5billion
Content Creation

Production services

Media Localization

Imaging & System Solution

New business (M&A)
28

4. Key Strategy and Target(2) Target Operating Income Before Goodwill Amortization by Segment

Content Creation

Production Services

Media Localization

Imaging Systems &Solutions（billion yen）

2.2
1.9

1.6

0.9

1.3
0.7
0.4

-0.1
FY2018FY2021FY2018

FY2021FY2018FY2021FY2018FY202129

4. Key Strategy and Target(3) Raise Group’s Corporate Value
New Mid-Term Business Strategy

Integration to 2021
to achieve market capitalization of 50 billion yen in 2021

2021’s Market Cap

50 billion
Market Cap

30 billion

Operating Income

2.8 billion

×2
Challenge> 6 billion(after goodwill amortization)

FY2019 Plan

FY2021
New Mid-TermBusiness Strategy

FY202530

31

For more information, please contact/visit us atPlanning Dept., IMAGICA GROUP INC.
11th Floor, Uchisaiwaicho Tokyu Bldg.,
Uchisaiwaicho, Chiyoda-ku, Tokyo 100-0011
ＴＥＬ：+81-3-6741-5742

ＦＡＸ：+81-3-6741-5752

Email：ir@imagicagroup.co.jp
URL：https://www.imagicagroup.co.jp/

Disclaimer:This document includes the Group’s business plan and future outlook in line with its forecasts.
The future outlook is formulated from information currently available to the Group and theoutlook is susceptible to future economical environment, competitive landscape, success or
failure of new services and other uncertain factors. Thus, the Group asks you for yourunderstanding that the actual performance may differ from the future outlook stated in thisdocument. Additionally, our Group shall not bear any responsibility to update the outlook after
the disclosure of this document.