BOOKOFF GROUP HOLDINGS LIMITED (TSE First Section: 9278) Financial Results Presentation Materials for the First Half of the Fiscal Year Ending March 2020 (1H FY3/2020) November 15, 2019
Contents ・・・ Topics 2 1H FY3/2020 Overview of ・・・ 7 Consolidated Financial Results ・・・ Highlights of 1H FY3/2020 13 FY3/2020 Second Half Initiatives and ・・・ 28 Sales and Earnings Forecast ・・・ Medium-term Management Policies 31 ・・・ Appendix 49 *Financial data up to and including 1H FY3/2019 in these materials are consolidated figures for BOOKOFF CORPORATION. 1
Topics
Topics Consolidated Consolidated Sales Ordinary Profit YoY change (Ratio) YoY change (Ratio) 106 % 127 % Sales and earnings up due mainly to higher sales at existing stores in Japan and a profit in the HUGALL Business 3
Topics One-stop purchasing consultation desk 2 stores 2 stores opened opened 36 directly operated existing stores in Japan Opened the renovated 4 th store in Malaysia Restarted growth of the store network in FY3/2020 and renovations of existing stores are continuing 4
Topics Started a link between As of Sep.30, 2019 store/e-commerce app members inventories 1.05 million Started a free store pick-up service for internet purchases Are you using all of your points? Use your smartphone to keep track of points! More than one million smartphone app members Progress continues with creating a store/EC omni-channel structure 5
Topics Acquired Jewelry Asset Managers Inc., making the company a wholly owned subsidiary 6
1H FY3/2020 Overview of Consolidated Financial Results
Statement of Income YoY change YoY change (Million yen) 1H FY3/2020 1H FY3/2019 (Amount) (Ratio) 41,289 38,953 +2,335 106.0% Net sales 25,322 23,182 +2,140 109.2% Gross profit 24,441 22,633 +1,808 108.0% SG&A expenses 881 549 +331 160.4% Operating profit 1,144 897 +247 127.6% Ordinary profit Profit attributable to 557 441 +116 126.5% owners of parent ✓ Sales increased at directly operated existing stores in Japan and the conversion of franchised stores in Kyushu to direct operation and new store openings also contributed to sales growth. ✓ A strong performance by the HUGALL Business, which operates purchasing desks at department stores, sales growth at directly operated existing stores in Japan and other favorable trends contributed to earnings growth. 8
YoY Change in Net Sales Opening and Conversion of closing of FC stores to directly 1H FY3/2020 directly operated Others ¥41.2 billion operated stores Up 4.2% YoY, stores +0.12 +0.01 including ¥420 million HUGALL +0.29 increase in EC sales +0.56 Net effect of +1.33 new/closed stores in FY3/2019 and FY3/2020 9 Kyushu stores converted from Resumed activities franchised to direct 1H FY3/2019 in FY3/2020 for operation ¥38.9 billion growth of this business Directly ～ ～ operated existing stores in Japan 9
YoY Change in Ordinary Profit Cost reductions and No loss as in FY3/2019 other benefits of Directly + group reorganization Opening and operated Start of profitability measures closing of existing stores directly in Japan operated +0.07 1H FY3/2020 Strategic stores +0.38 investments ¥1.14 billion +0.18 (0.07) 1H FY3/2019 ¥0.89 billion Others (0.32) HUGALL Store start-up IT investments, TV expenses due to commercials/PR activities, resumption of new M&A and other expenses store openings involving the “One BOOKOFF” concept 10 10
Balance Sheet (Million yen) Current assets Liabilities 31,430 23,139 23,765 34,580 27,936 27,640 Non-current assets Net assets 16,458 17,899 13,102 16,882 13,006 13,307 As of Mar. 31, 2018 As of Mar. 31, 2019 As of Sep. 30, 2019 47,888 40,647 41,039 Total assets Interest-bearing 24,480 17,535 18,487 debt Treasury shares 1,255 2,343 2,343 27.5% 31.6% 31.8% Equity ratio ✓ Interest-bearing debt increased mainly for new stores, IT systems and other capital expenditures and expenses for business acquisitions 11 11
Statement of Cash Flows (Million yen) 953 1,024 955 (161) (551) (1,928) (1,725) (67) (6,752) Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities 1H FY3/2018 1H FY3/2019 1H FY3/2020 Net increase (decrease) (1,315) (5,899) (1,059) in cash and cash equivalents Depreciation* 953 811 820 Decrease (increase) in 422 157 (584) inventories ✓ Big increase in cash used in investing activities because of expenditures for new stores and IT systems as well as for purchasing stores and M&A activity ✓ Big improvement in financing cash flows because of cash used one year earlier for the redemption of bonds with share acquisition rights 12 12 *Including amortization of goodwill
Highlights of 1H FY3/2020
FY3/2020 Policy End the group’s recovery phase and advance to consistent earnings growth. Make substantial investments to build a base for growth in the future. Business operations ➢ Continue to operate stores focused on their local markets (upgrade individual stores) ➢ Continue progress with “One BOOKOFF” to advance and grow ➢ Make HUGALL profitable in FY3/2020 and take on new challenges Organization and people ➢ Use the regional headquarters structure for unified operations of directly operated and franchised stores ➢ Increase training budgets and programs to enable employees to realize their full potential 14 14
Assumptions and Progress for FY3/2020 Outlook Full-year plan 1H progress Existing stores/Businesses Sales of directly operated existing stores in Japan 100.5% 104.2% vs. FY3/2019 36 stores renovated Same level of existing store renovations as in FY3/2019 (23 in 1H FY3/2019) Profitable in 1H and Contribution to earnings as HUGALL becomes profitable expect profit for FY3/2020 New stores/Others BOOKOFF SUPER BAZAAR 4 stores 2 stores 7 to 8 BOOKOFF one-stop purchasing consultation desks 2 stores locations Franchised stores converted to directly operated 9 stores 9 stores (decrease in franchised stores) Other investment activities Strategic IT investments for making “One BOOKOFF” a reality Many IT infrastructure maintenance expenditures, including Progressing as planned responses to the end of Windows 7 support, the planned 2019 consumption tax increase and associated exemptions, and other items 15 15
More Authority Shifted to the Regional Level with Reorganization Directly-Managed Business Franchise Business Regional business units Branch offices Franchisee Franchisee Before operated operated operated Directly Directly Directly store store store Franchised Franchised Franchised Franchised store store store store Sendai office Omiya office Osaka office Fukuoka office Tokyo sales Regional Headquarters Nagoya department office Franchisee Franchisee Now operated Franchised Franchised operated operated Franchised Franchised Directly Directly Directly store store store store store store store In the new organization, directly operated and franchised stores are no longer separate. Furthermore, regions have more authority in order to allow making decisions at a level that is closest to customers. With this organization, stores can take actions faster and directly operated and franchised stores can more easily share their know-how and people. 16 16
Expanded and Upgraded Training Program Business operations Specialized skills Customer Merchandise Strategies Business skills service ◼ Books/software training ◼ Basic training • Business climate analysis • Management philosophy • Recent advances in operations • Basic operations ◼ Merchandise category training • Store management training • Interacting with customers • New employee training • Brands • Compliance • Sports ◼ Management courses • Pricing • Marketing • Authentication training • Logical thinking • Merchandise leader training • Financial statement analysis ◼ Professional qualifications • Management • Support for national certifications ◼ Senior management courses • Internal certification programs • Understanding strategies • Beginning gemstone evaluation • Industry analysis course and others and others Employee training is one of BOOKOFF’s greatest strengths. Programs have been expanded and upgraded to cover not only basic business activities, customer service and merchandise but also understanding strategies, senior management training and other subjects, more than 50 courses in all. 17 17
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