BOOKOFF GROUP HOLDINGS LIMITED (TSE First Section: 9278) Financial Results Presentation Materials for the Fiscal Year Ended March 2019 (FY3/2019) May 15, 2019
Contents ・・・ FY3/2019 Overview of Consolidated Financial Results 2 ・・・ Our Business Model and Business Climate 12 ・・・ Strategies for Growth 26 ・・・ FY3/2020 Plan 40 ・・・ Appendix 48 *Financial data up to and including 1H FY3/19 in these materials are consolidated figures for BOOKOFF CORPORATION. 1
FY3/2019 Overview of Consolidated Financial Results
Topics FY3/2017 FY3/2018 FY3/2019 FY3/2021 Targets ¥2. 12 billion ¥0.58 billion Ordinary profit ¥1.09 billion ¥2.0 billion ROA 4 .8% 1.2% 2.2% At least 5.0 % (Ratio of ordinary profit to total assets) Interest-bearing Maximum of 5.0 6 .3 13.7 9.1 debt-to-operating cash flow multiple Medium-term Management Policies Financial targets announced on May 2018 Steady progress for achieving the FY3/2021 targets Achieved the ordinary profit target two years early ROA = Ordinary profit/{(Total assets at beginning of period + Total assets at end of period)/2} 3 Interest-bearing debt-to-operating cash flow multiple = Interest-bearing debt at end of period / Operating cash flows
Statement of Income YoY change YoY change (Million yen) FY3/2019 FY3/2018 (Amount) (Ratio) 80,796 80,049 +746 100.9% Net sales 48,235 46,994 +1,240 102.6% Gross profit 59.7% 58.7% +1.0pt - Gross profit margin 46,684 46,381 +303 100.7% SG&A expenses 1,550 Operating profit 613 +936 252.6% 2,120 1,092 +1,027 194.0% Ordinary profit Profit (loss) attributable to 2,172 (889) +3,062 Profitable owners of parent ✓ Big improvement in earnings in FY3/2019 was the result of terminating the special event sales business of HUGALL and other low-margin operations in FY3/2018 and of the strong existing store performance of the Reuse Store Business. ✓ Record high profit attributable to owners of parent, due largely to a one-time reduction in income taxes associated with group reorganization activities. 4
YoY Change in Net Sales / Operating Profit ■ Net sales ■ Operating Profit FY3/2019 (3) (1) ¥1.55 billion +0.31 (2) +1.8 (2) (3) FY3/2019 +0.37 ¥80.7 billion Others/ (0.7) FY3/2018 (1) Corporate (0.4) ¥80.0 billion expenses +0.24 and Others FY3/2018 adjustments BOOKOFF Online Reuse Store ¥0.61 billion Business Business + BOOKOFF Online (FY3/2018) Business Reuse Store HUGALL Business + Business ～ ～ (FY3/2018) HUGALL Business (1) Existing store sales increased (1) Strong existing store sales and contributions from large stores opened in FY3/2018 and a new (2) Strong performance by the e-commerce business consolidated subsidiary and switch of HUGALL from a loss to a profit (2) E-commerce sales were higher but HUGALL sales resulting from ending an unprofitable sales decreased due to the termination of special channel event sales in FY3/2018 (3) Mainly because of lower income taxes associated (3) Decreased mainly because stores selling new with group reorganization activities books were closed 5
Reuse Store Business – Directly Operated Existing Store Sales YoY change in monthly sales Sales by product category FY3/2019 YoY change % to sales 103.5% (Ratio) 108% 102.3% 33.3% Books 105% Software media 102.0% 29.5% (CDs, DVDs, games, etc.) 103% FY3/2019 97.6% 13.0% Apparel 100% Precious metals/watches/ 118.1% 7.2% high-end brand items FY3/2018 98% 118.6% 6.2% Trading cards/hobby goods 95% Home appliances/mobile 100.2% 5.2% phones 93% 105.2% 5.6% Others Apr. Jun. Aug. Oct. Dec. Feb. Total 103.5% 100.0% ✓ Existing store sales were higher than one year earlier in every month of FY3/2019 and were 3.5% higher for the entire fiscal year. ✓ Measures to reflect local market characteristics of stores produced much higher sales of precious metals/watches/high-end brand items and of trading cards/hobby goods. Also, sales of books and software media, which account for a large share of total sales, increased. 6
Reasons for the Big Increase in Profit* ✓ FY3/2019 FY3/2018 extraordinary losses of Decrease in Profit more than ¥400 million for income taxes HUGALL Business asset + ¥ 1.2 billion ¥2. 17 billion impairment and also for asset impairment at large stores in the Others Reuse Store Business Decrease in extraordinary losses ✓ Smaller extraordinary losses in + ¥ 0.7 billion FY3/2019 because improving store profitability reduced asset impairment charges Increase in ordinary profit ✓ Big decline in income taxes + ¥ 1.0 billion associated with group reorganization activities ✓ About ¥1 billion of the reduction in FY3/2019 income taxes was a one-time decline caused by tax- One-time reduction about effect accounting and will not ¥ 1 billion in income taxes happen again. associated with group reorganization activities FY3/2018 Profit ¥(0.88) billion 7 *Profit = Profit attributable to owners of parent
Balance Sheet (Million yen) Current assets 32,567 Liabilities 31,430 36,804 23,765 34,580 27,640 Non-current assets Net 18,479 assets 16,882 13,006 16,458 13,307 14,242 FY3/2017 FY3/2018 FY3/2019 588 1,092 2,120 Ordinary profit Treasury shares 1,260 1,255 2,343 27.9% 27.5% 31.6% Equity ratio ROA 1.2% 2.2% 4.8% (based on ordinary profit) ✓ The equity ratio increased significantly because BOOKOFF GROUP HOLDINGS redeemed bonds with share acquisition rights held by Yahoo Japan Corporation and repurchased stock due to the termination of the capital and business alliance with Yahoo Japan. 8
Statement of Cash Flows Financing 224 Operating 2,751 2,668 1,965 (559) (940) Investing (2,054) (3,394) (Million yen) (9,895) Redemption of bonds with share acquisition rights held by Yahoo Japan (7,700) Repurchase of stock associated with Yahoo Japan (2,343) FY3/2017 FY3/2018 FY3/2019 2,139 1,895 1,645 Depreciation* Cash and deposits at end 15,268 13,860 6,142 of period 26,937 24,480 17,535 Interest-bearing debt Interest-bearing debt-to- 13.7 9.1 6.3 operating cash flow multiple ✓ Operating cash flows increased and financial leverage was mostly at a proper level despite a big decrease in cash and deposits caused by the redemption of bonds with share acquisition rights held by Yahoo Japan and other reasons. 9 *Including amortization of goodwill
Other Topics (1) Reuse Store Business New stores Opened a large BOOKOFF store in Japan and the third store in Malaysia Grand opening of the BOOKOFF SUPER BAZAAR Hiroshima Danbara Store Opened six one-stop purchasing consultation desks as planned Reuse Store Business Large number of store renovations Based on the medium-term management policies, added merchandise to reflect the distinctive characteristics of each store’s market and completed interior and exterior renovations at 69 directly operated stores in Japan. Release of member app Started distributing the BOOKOFF App to enable customers to use stores with greater simplicity and convenience. The app had about 500,000 members as of the end of March 2019. 10
Other Topics (2) Established BOOKOFF GROUP HOLDINGS as a pure holding company The new holding company is responsible for determining strategies, procuring funds for investments, developing business models, developing the next generation of managers, properly allocating personnel and other activities. Switching to this holding company structure is expected to facilitate the proper allocation of group resources and make business operations more efficient. This structure is also well suited for business integrations, mergers and other group realignment activities among subsidiaries for the convergence of internet and store operations. Reexamined the business alliance with Yahoo! The 2014 capital and business alliance with Yahoo Japan Corporation produced a certain level of benefits through activities for building in infrastructure for the reuse of household goods. This alliance was terminated to give each company the flexibility to pursue its own growth strategy that reflects changes in market conditions. Cooperation in the reuse business will continue in accordance with the business alliance contract. 11
Our Business Model and Business Climate
BOOKOFF’s Corporate Philosophy and Mission Philosophy Corporate Contributions to society Pursuit of employees’ material through our business activities and spiritual wellbeing Be a source of enjoyable and enriching lives for as many people as possible Mission Mutually increase Growth of the pace of growth Individual growth the Group Remain a company performing a vital social role 5 and 10 years from now Vision Be a company employees can trust and Japan’s leading reuse company where everyone can grow while doing their (the reuse store network with the largest number of customers) jobs with self-confidence and passion 13
Store Packaging Evolution Focus on suburban One-stop purchasing locations consultation desk ・ More BSB and BOP store openings and store remodeling BOOKOFF Chuko-Gekijo ・ Large-scale urban BOOKOFF store openings ・ Faster BOOKOFF store openings ・ New reuse business B KIDS, B SPORTS ・ BOOKOFF Chuko-Gekijo (a comprehensive large-format store) ・ Overseas expansion Dept. store purchasing desks The 1st BOOKOFF ・ Online business starts store ・ Founding ・ “Sell us your books” ・ Franchised store growth Start of operations in Overseas Store Large-scale urban BOOKOFF store Malaysia 1990 2000 2009 2015 14
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