earnings presentation for fy19/3 q2 - rizap group ir site ... · sky dinos co., ltd. (newly...

Second Quarter of the Fiscal Year Ending March 2019

November 14, 2018

RIZAP GROUP, Inc.(Sapporo Securities Exchange’s Ambitious 2928)

Copyright © 2018 RIZAP GROUP, Inc. All rights reserved.

Earnings Presentation

Disclaimer

RIZAP GROUP, Inc. (hereinafter referred to as the “Company”) has produced this document for the provision of corporate information on the Company and the Company’s group companies (hereinafter referred to collectively as the “Company Group”) and it does not constitute an inducement towards the shares issued by the Company or any other securities whether in Japan or overseas.

This document contains descriptions concerning the future, including forecasts, plans and targets, etc., related to the Company and the Company Group, but these descriptions are based on the information available to the Company at the time of preparation of this document under certain assumptions (hypotheses) and are founded on predictions, etc., made at that time. These descriptions and assumptions (hypotheses) may be objectively inaccurate or may not be realized in the future and consequently, future forecasts and actual results may differ greatly.

2

President’s Message

3

RIZAP Group is revising downwards the results forecast for

the fiscal year ending March 31, 2019

Future policies

2. Early completion of the management reorganization of Group companies

3. Concentrate management resources on growth area

1. Freeze new M&A in principle

We apologize deeply for causing great concern and trouble to many of our stakeholders, including shareholders.

4

Index

President’s Message P3

Highlights P5

Consolidated Results for FY 2019/3 Q2 P6

About the Downward Revision of the Results Forecast

for FY 2019/3

P12

Future Policies P20

1. Freeze new M&A in principle P21

2. Early completion of the management reorganizations

of Group companiesP29

3. Concentrate management resources on growth area P45

Appendix P101

Highlights

1. FY2019/3 Q2 revenue was record high for 7 consecutive periods (174.3% YoY)

3. Revised downwards the results forecast for the fiscal year ending March 31, 2019

to -3.3 billion yen.

5

4. Accelerating concentration mainly on the growing RIZAP Businesses

- Recorded non-recurring expenses as a result of intensive restructuring

(Freeze new M&As in principle to accelerate “selection and concentration” of businesses)

2. Began implementing a drastic restructuring aimed at sustainable growth

- Recorded restructuring related expenses of 8.35 billion yen (H1: 6.83 bn yen, H2: 1.52bn yen)

- Cleared all the potential risks to aim for reconstruction into a robust management structure

FY 18/3 Q2

(Apr. to Sep.)

FY 19/3 Q2

(Apr. to Sep.)Change Change %

Revenue 62.5 109.1 +46.5 174.3%

Cost of sales 31.7 61.3 +29.6 193.2%

SG&A 28.4 53.1 +24.6 186.5%

Other income and expenses 2.6 -3.4 -6.0 -

Operating income

or loss4.9 -8.8 -13.8 -

Income before income tax 4.3 -9.7 -14.0 -

Quarterly income 3.4 -9.9 -13.3 -

Net income*1 2.9 -8.5 -11.4 -

(¥ bn)

6

*1: Net income attributable to owners of the parent

Note: Change percentage columns are left blank for the items posted negative figures in either previous or current fiscal year.

Consolidated Results Summary (IFRS)

2011/3

H1

2012/3

H1

2013/3

H1

2014/3

H1

2015/3

H1

2016/3

H1

2017/3

H1

2018/3

H1

2019/3

H1

Record high for

7 consecutive periods

4.2x in the past 3 years

109.1

J-GAAP

62.5

Revenue (cumulative)

IFRS7

Increase in need for

restructuring caused

by the rapid growth25.6

41.5

(¥bn)

(¥bn)

Operating Income and Loss

(cumulative)

8

-13.8bn yen YoY(negative goodwill will not be recorded after FY19/3 Q2)

2019/3H1

2018/3H1

2017/3H1

Restructuring related expenses

2019/3 H1 -6.83bn yen

H2 -1.52bn yen

Total -8.35bn yen

*

*July to September, 2018

-8.8

4.96.3

FY2018/3H1

FY2019/3H1

-2.01

-4.05

(¥bn)

-1.8bn yen YoY

Main deficits of the unlisted subsidiariesJapan Gate Way -2.03bn yen*

Tatsumi Planning -0.50bn yen

SANKEI LIVING -0.52bn yen*

Total -3.05bn yen

0.62 0.84

-1.39

-3.21

Surpluses of the unlisted subsidiaries

Deficits of the unlisted subsidiaries

9

(excluding the RIZAP businesses)

*Joined RIZAP Group during H2 of FY18/3

Reason for the Operating Income Decline (1)

The Unlisted Subsidiaries

Increase in deficits mainly at

the subsidiaries joined the Group

within a year

(IFRS)

-4.74

Main deficits of the listed subsidiariesWonderCorporation -3.23bn yen*

PADO -0.59bn yen

MRK HOLDINGS -0.58bn yen

Total -4.40bn yen

3.91

0.423.54

-4.32

-0.37

10

-7.9bn yen YoY

*Joined RIZAP Group during H2 of FY18/3


The Listed Subsidiaries

(¥bn)

FY2018/3H1

FY2019/3H1

Surpluses of the listed subsidiaries

Deficits of the listed subsidiaries

(IFRS)

Increase in deficits mainly at

the subsidiaries joined the Group

within a year

FY19/3

ToalQ1（Apr. – Jun.)

Q2（Jul. – Sep.）

(1) Increased marketing expensesTotal amount of advertising expenses and sales

promotion expenses

+1.9 +1.6 +3.5

(2) Increased expenses associated

with new store openings and

business expansionTotal amount of store opening expanses, hiring expenses,

and personnel expenses

+1.0 +0.8 +1.8

(3) Others +1.1 +1.5 +2.6

Total +4.0 +3.9 +7.9

(¥bn)


Acceleration of Advance Investments

11

Revise downwards the results forecast

for the fiscal year ending March 31, 2019

Review areas where management is overdue

thoroughly and aim for reconstruction into

a robust management structure

12

(¥bn)

FY2018/3 FY2019/3 FY2019/3

Downward revision of

-26.3bn yen

23.0

13

About the Downward Revision of Operating Income

13.5

-3.3

(Initial forecast) (Revised forecast)

Initial forecast for FY2019/3 ¥23.0bn

(1) Delay in the management reorganizations mainly at

the subsidiaries that have been part of

the Group within a year

¥-7.16bn

(2) Non-recurring expenses including

restructuring expenses¥-8.35bn

(3) Freeze new M&A in principle ¥-10.36bn

(4) Others including consolidated adjustments ¥-0.43bn

Revised forecast for FY2019/3 ¥-3.3bn

14

Breakdown of the Revised Forecast(consolidated operating income)

FY13/3 FY14/3 FY15/3 FY16/3 FY17/3 FY18/3 FY18/9

85

51

15

1923

1410

Increased

52 subsidiaries

in the past 2 years

Total amount

of downward revision of

operating income forecasts

mainly at subsidiaries

joined the Group within a year

7.16bn yen

Trend in No. of Subsidiaries

75(No. of subsidiaries)

(1) Delay in the Management Reorganizations

Company Amount Detail

H1

PADO -0.23 Partial impairment of unprofitable business (extraordinary expenses)

WonderCorporation -3.36 Restructuring related expenses (extraordinary expenses)

Unlisted companies -2.75Restructuring related expenses of Japan Gate Way and Tatsumi

Planning’s solar power business

Others -0.49Extraordinary expenses of SD Entertainment related to the 2018 Hokkaido

Eastern Iburi Earthquake, and change in accounting the initial fee of

RIZAP Body Making studios due to adoption of IFRS 15.

Subtotal -6.83

H2

WonderCorporation and

Japan Gate Way, etc.-1.52

Restructuring related expenses of WonderCorporation, Japan Gate Way,

and Tatsumi Planning’s solar power business

Subtotal -1.52

Total -8.35

Record the restructuring expenses intensively during this fiscal year

for accelerating restructuring (¥bn)

16

(2) Non-recurring expenses including restructuring expenses

< J-GAAP > < IFRS >

IFRS dose not hold special distinctions for different types of incomes

Revenue

Cost of sales

Gross profit

SG&A

Operating income

Non-operating income/expenses

Ordinary income

Income taxes, etc.

Net income

Income before income taxes

Revenue

Cost of sales

Gross profit

Other income/expenses

Operating income

Financial revenue/expenses

Net income

Income from all

the businesses(excl. financial

revenue/expenses)

Income and

expenses from

the core business

Temporary income and

loss are not included in

operating income

(reference)

17

Extraordinary income/expenses

SG&A

Income before income taxes

Income taxes, etc.

Income and

expenses from other

than the core business

(¥bn)

FY2018/3

-8.8

H1 (forecast)H2

FY2019/3

H1 H2

8.6

Aim to be

profitable again by conducting

restructuring

5.5

18

4.9

Operating Income Forecast for FY19/H2

FY 2019/3

[Initial forecast]

(1)

FY 2019/3

[Revised forecast]

(2)

Change

(2) – (1)

FY 2018/3

[Result]

(3)

Change

(2) – (3)

Revenue 250.0 230.9 -19.1 136.2 +94.7

Operating income

or loss 23.0 -3.3 -26.3 13.5 -17.0

Net income* 15.9 -7.0 -22.9 8.0 -15.0

(¥ bn)

19

Donward Revision of the Forecast - Summary

*Net income attributable to owners of the parent

20

Future Policy

Change some of the Group’s strategies,

formulate new policies and concentrate on

early management reorganization

Restructuring policies

2. Early completion of the management reorganizationsof Group companies

3. Concentrate management resources on growth area


21


Restructuring Policies

・ Business where short-term earnings improvement is difficult

・ Business where initially-assumed Group synergies cannot be expected

Selection and Concentration

The contraction, withdrawal from or sale of

business that falls under either of

the above will be considered positively22

Transfer the entertainment business which is only loosely involved with

the self-investment industry

・ Corporate divestiture of the majority of the entertainment

business

・ Transfer to Hokkaido SO Capital, Co., Ltd.

(scheduled date for share transfer: December 28, 2018)

Entertainment business

Wellness business

Revenue 4.07 billion yen

*The revenue stated for each business are the results for

the fiscal year ending March 31, 2018

Games Bowling Cinemas

Fitness Nursing care Day care

Sky Dinos Co., Ltd.(newly established company)

・ Concentrate management resources

on the wellness business and strengthen

synergies with the RIZAP Group

SD Entertainment Inc.Revenue 3.86 billion yen

23

(excluding some stores / businesses)

Announced a basic agreement with regard to a transfer to Hokkaido SO Capital, Co., Ltd. On November 13

SD Entertainment Inc.

Partial Transfer of SD Entertainment Inc.

The M&A policy of this fiscal year

Freeze new M&A in principle

and concentrate on the

management reorganizations of

Group companies

24

Management Reorganization Steps

of RIZAP Group

M&AIncrease in

net asset

25

Management

reorganization

6.9

11.1

21.4

1.9

0.6

1.8

-0.8 -0.5 -1.4

0.4

2.1

1.9

8.5

12.1

3.1

0.3

8.8

-0.3

-1.0 -1.6

0.0

0.3

-0.1

Fund procurement

21.4

11.1

(¥bn)

Mar. 31, 2018

Negative goodwill from M&A, etc.

M&A business (profit-making part)

Existing business

Total assets at end of previous fiscal year

M&A business (loss-making part)

Dividend

42.8

Mar. 31, 2017Mar. 31, 2016

Trend in Net Asset (classified by different items)

Accumulate net

assets efficiently

by use of M&A

26

Management

reorganization

Before

27

After

Conduct new M&A before

the reorganization is completed

Concentrate the management reorganization

until the improvement of existing businesses become apparent

Increase in

net assetM&A

(¥mil)Year of

M&A

3 years

before

M&A

2 years

before

M&A

1 year

before

M&A

1st year 2nd year ３rd year ４th year ５th year ６th year

Idea International Sep. 2013 23 84 -526 45 249 182 401 415 620*

SD Entertainment Jan. 2014 186 226 268 322 132 188 68 260*

Dream Vision Mar. 2015 167 -751 -536 -324 -140 583 600*

HAPiNS May 2016 -129 -335 91 -552 151 210*

MRK HOLDINGS Jul. 2016 670 -470 -600 135 900 145*

JEANS Mate Feb. 2017 31 -663 -829 -609 70*

PADO Mar. 2017 -164 -175 -311 234 -160*

Marsuho Hotta Jun. 2017 -192 81 86 68 100*

WonderCorporation Mar. 2018 -557 -478 296 790*

Trends in Operating Income After M&A

＊Forecasts of this fiscal year

28

＊Operating income announced by each subsidiary

Currently

achieving

restructuring in

roughly 2 to 3

years

29

2. Early completion of the

management reorganizations of

Group companies


No. of

yrs since

M&A

FY2019/3 forecasts FY2018/3 Results

Evalua-

tionInitial

forecasts

(1)

Revised

forecasts

(2)

Change

(2) – (1)

Results

(3)

Change

(1)or(2) – (3)

JEANS Mate 2nd YR 70 - - -609*13-months period

+679 ○

Wonder

Corporation1st YR 790

*13-months period- - 296 +494 ○

Idea

International*Fiscal year ends in June

6th YR 620 - - 415 +205 ○

SD Entertainment 5th YR 260 - - 68 +192 ○

Marusho Hotta 2nd YR 100 - - 68 +32 ○

Dream Vision 4th YR 600 - - 583 +17 ○

HAPiNS 3rd YR 600 210 -390 151 +59 △

Pado 2nd YR 300 -160 -460 234 -394 ☓

MRK Holdings 3rd YR 1,400 145 -1,255 900 -755 ☓30

○: No revision,

income increase forecast△: Downward revision,

income increase forecast▲: No revision,

income decrease forecast☓: Downward revision,

income decrease forecast

(¥mil)

Summary of Forecasts of Operating Income of Listed Subsidiaries

Hig

hest

prio

rity

(¥mil)

FY2016/3 FY2018/3 FY2019/3(forecast）

1,400

-600

FY2017/3

31

-470

135

900

145

The full year forecast is being revised downwards due to temporarily decreased profits arising

from delays in the production of new products, etc.

FY2015/3

Temporary deterioration of gross profit margin Impact on discount sales of existing products due to the delay in

production of the new core product, “Curvaceous” (eliminated in

October).

Temporary increase in expenses due to concentration of

advance investments Advertising expenses such as new commercials for brand image

reform +0.4bn yen YoY

Positive investment in the store network(5 new stores, 18 refurbished stores)

The new marketing measures are trending well and the

customer base is growing steadily New store visitors are 132％ YoY, and the number of reservations

through media is 170％ YoY

Number of active customers is 49,464 (113% YoY)

Operating Income

(full year)

MRK HOLDINGS < Entered the Group in July 2016 >

Revised

forecast

・ Entered the RIZAP Group

(July 2016 -)

* Changed trading name from Maruko Corporation as of October 1, 2018

23

435

378 385

664

FY2015/3H2

FY2016/3H2

FY2017/3H2

FY2018/3H2

FY2019/3H2 (forecast)

32

（¥mil)

*The H2 operating income comparison after change of fiscal year end (FY2013/3)

Operating Income

(H2)

MRK HOLDINGS < Entered the Group in July 2016 >

* Changed trading name from Maruko Corporation as of October 1, 2018

TV commercials:

Appointment of Shohei Miura

(nationwide broadcasts from August 2018)

“Curvaceous,”

new core product

Creation of secure, comfortable spaces:

Omiya Store (June)

Management reorganization has progressed greatly and achievement of record high profit is

forecast for the second half

33

(Million yen)

PADO < Entered the Group in March 2017 >

Operating Income

(full year)

FY2016/3 FY2018/3 FY2019/3

(forecast)

300

-311

FY2017/3

-175

234

-160

(¥mil)


(July 2016 -)

Revised

forecast

Extraordinary expenses

of 0.29bn yen* due to impairment of unprofitable

businesses Impairment loss related to the website for beauty and the

extraordinary loss related to withdrawal of business

Decreased revenue due to a decrease in the circulation

of the home-edition publication Decreased revenue of 0.32bn yen (Q2 cumulative) due to review of

unprofitable areas

New media is growing steadily “Affluent” for wealthy sector grew 185% (Q2 cumulative) YoY

Integration of its functions with SANKEI LIVING Consolidated and enhanced distribution and delivery by acquiring

LIVING PROSEED, Inc.

Integrating business with SANKEI LIVING SHIMBUN, Inc.,

applying impairment positively to unprofitable media / businesses, and accelerating structural reform

H1 Segment IncomeOperating income decreased YoY due to the

restructuring Only apparel business is making a loss, so concentrating

on restructuring during H2. Fundamental review of Marie

Business cost structure.

Achievement of return to profitability of Kimono

Business Restructuring from previous fiscal year has progressed

steadily (the contraction of unprofitable events,

consolidation of places of business, introduction of gross

profit management index, development of supporters for

kimono by D&M cooperation, etc.)

Success in development of new fancy yarn,

“COMST” by Fancy twisted yarn Business Business negotiations this autumn are booming and

COMST will become a material next fiscal year

FY2018/3 FY2019/3 Change

Fancy

twisted yarn

Business67 52 -15

Kimono

Business-16 8 +24

Apparel

Business77 -53 -130

Bedding

business12 13 +1

Consolidated 27 -84 -111

(¥mil)

34

Marusho Hotta < Entered the Group in June 2017 >

*Because the Head Office adjusted amount is not included, the total for the businesses does not correspond with the consolidated figure

Structural reform staged from June last term is making steady progress

The New fancy twisted yarn,

“COMST”

Shape stability

Washable

Price competitiveness(about half price of existing products)

35

WonderCorporation

Although WonderREX Business and Shinseido Business were trending well,

H1 revenue and operating income decreased due to the weak sales of gaming

products and music CDs

(¥mil)Revenue Operating income

DetailsH1 Change YoY H1 Change YoY

14,661 -13.6% 557 -27.0％

・Weak sales volume in gaming softwares, music CDs,

and books・Enhancing profitability by opening RIZAP and RIZAP

GOLF studios in GOO

3,854 ＋0.6% 228 ＋21.9%・Increased in revenue and operating income due to

the growth of second hand market

5,104 -2.3% 244 ＋100.3%・Achieved increased operating income by enhancing

events and closing unprofitable stores

7,102 -4.5% 64 -34.0% ・Maintained operating income due to the save of SG&A

Consolidated 32,911 -8.2% 59 -72.1%

36

< Entered the Group in March 2018 >

*Because the Head Office adjusted amount is not included, the total for the businesses does not correspond with the consolidated figure

Accelerate the transition to

profitable hybrid-type stores by

making alliance with various

companies

Accelerate the restructuring for shifting to profitable hybrid-type stores

(product write-downs, extraordinary loss related to withdrawal of

unprofitable business or stores, etc.)

*WonderCorporation recorded this loss as extraordinary loss under

J-GAAP, while RIZAP Group, adopted IFRS, recorded this loss as other expenses.

Restructuring related cost

3.9bn yen

Extraordinary loss is scheduled to be

recorded during this fiscal year

37

WonderCorporation < Entered the Group in March 2018 >

HAPiNS

Achievement of increased revenue and operating income is forecast for the fiscal

year, while the full year forecast revised downwards due to the weak sales of

existing stores

FY15/2 FY17/2 FY19/3

(forecast)

600

-335

FY16/2

-129

91151

210

FY14/2 FY18/3

-552

The aggressive openings of new stores

trending well Opened 27 shops during FY19/H1, and will add 200

shops by end of this fiscal year

Weak sales at existing and pre-renewal shops,

and close the unprofitable stores The sales of core products was trending lower than

the plan. Closed 7 stores.

Apple the good practice of new concept shop

specializing in gifts to other existing shops The sales per customer at the gift shop is 110% of the

existing shops 38

< Entered the Group in May 2016 >* Changed trading name from Passport Co., Ltd. as of August 1, 2018

(¥mil)

Operating Income

(full year)

Revised

forecast


(May 2016 -)

Popular series for gifts

The new concept shop specializing in gifts is strong

Before After

HAPiNS

39

New opening of new concept shop specializing in gifts:

Mito Excel Store (September)

< Entered the Group in May 2016 >* Changed trading name from Passport Co., Ltd. as of August 1, 2018

40

Idea InternationalMaintained strong sales of the BRUNO brand products

operating income are at historic high for 5 consecutive years

Maintained strong sales of the

BRUNO brand products Cumulative sales of BRUNO hot plate broke through

1.26 million (end of September)

Expanding the BRUNO brand product line up due to high

popularity

On Singles Day (Novem11), sold 16,000 Bruno products in

China

▲526

45

249

182

401 415

620

FY17/6 FY18/6FY15/6 FY16/6FY14/6

Strengthening EC

(2017 - )

FY13/6 FY19/6

(forecast)

Acquired Shicata Co.,

the OEM producer of

bags, (April 2018)

BRUNO multi futon dryer

(a new product of home

electronic appliance)

BRUNO hot sandwich maker

(raising production due to

high popularity)

BRUNO My Little series

(for young single ladies)

< Entered the Group in September 2013 >

(¥mil)

Operating Income

(full year)


(September 2013 - )

・ Launched the BRUNO hot plat

(March 2014 - )

FY16/3 FY18/3 FY19/3

(forecast)

600

-324

FY17/3

-536

-140

583

FY15/3

Achieved increase in revenue and operating

income for 8 consecutive quarters

(non-consolidated, YoY)

The core 3 product categories were trending well due to

the enhancement of product planning(tops, sandals, blouses, shirts)

Conversion of NARA

CAMICIE into a subsidiary

from Oct. 2018

Aiming to expand the business

Foundation

41

Dream Vision < Entered the Group in March 2015 >

(¥mil)

Operating Income

(full year)


(March 2015 -)

Due to the expansion in the growth of apparel EC websites, and the conversion of NARACAMICIE

into a subsidiarythe company is revising upwards the forecast for term-end sales revenue

(6.0 billion yen -> 6.7 billion yen)

JEANS Mate

Existing shop sales increased

for 15 consecutive months

Strong sales in Woman’s and Fashion Goods categories 112% YoY

Growing in inbound sales by overseas tourists Duty free sales 193% YoY

319

-102

-325

-754

-40 -81

-345

-11

-245 -287 -273

179

Achieved a return to H1 operating income for the first time in 11 terms

due to the progress of structural reform

FY2008/2 FY2019/3FY2011/2

42

< Entered the Group in February 2017 >

（¥mil)

Operating Income (H1)

・ Entered

the RIZAP Group

(February 2017 -)

Significant renewal of JEANS Mate Shibuya shop (October 20)

The new concept shop, “JEM”

Before After

43

JEANS Mate < Entered the Group in February 2017 >

JEM Shibuya Store, 2nd floor: focus on inbound demand

Management Status of 3 Unlisted SubsidiariesConcentration of management resources towards the early completion of management reorganization

・ The company conducted significant promotion activities, but sales were below those

planned and there is no prospect of an early recovery so it will implement structural

reform and make significant provisions for loss

First half loss: -2.0 billion yen

・ In the second half, the company will concentrate on rebuilding by withdrawing

unprofitable products and conducting a fundamental review of advertising activities

・ The company was unable to make up for the decrease in free paper advertising revenues

with cost-cutting measures and made an operating loss in the first half of 500 million yen

・ In the second half, the company will concentrate on management rebuilding with the

promotion of functional integration with PADO Corporation and synergies with various

companies of the RIZAP Group

・ The company implemented structural reform because of delays in the receipt of large

orders for mega-solar business (2013 -) and made a loss of 500 million yen in the first half

due to a review of assets

・ The company’s policy from the second half on will be to optimize the distribution of

management resources with its main construction business and promote the

optimization of business risk

Japan Gateway

Tatsumi Planning

(Entered the Group in

December 2017)

(Entered the Group in March 2018)

(Entered the Group in February 2016)

44

SANKEI LIVING

45

3. Concentrate Management

Resources on Growth Area


The RIZAP Businesses

46

RIZAP

Body Making

47

13.7

FY17/3Q2

FY18/3Q2

FY19/3Q2

FY16/3Q2

FY15/3Q2

171％ YoY

The RIZAP Businesses

maintained a strong growth

The RIZAP Businesses – Trend in Revenue

(¥bn)

(the full-year forecast for operating income for RIZAP Body Making is 143% YoY）

48

Q2 (3-months)

8.0

5.55.1

2.8

*The RIZAP businesses:

In addition to the RIZAP body making business,

this also includes the RIZAP-related products and services

(cumulative of Japan and overseas)

RIZAP Body Making – Cumulative Number of Members

Broke through

120,000in September 2018

Jan.

2013

121,796

Sep.

2018 49

(people)

The RIZAP Businesses – Number of Studios(cumulative of Japan and overseas)

10

25

42

83

130

149

182

FY13/3 FY14/3 FY15/3 FY16/3 FY17/3 FY18/3 FY18/10

33 studios

Opened

33 studiosafter April 2018

(of which 2 studios are in overseas:

Shanghai and Singapore)

50

*The RIZAP businesses:

In addition to the RIZAP body making business,

this also includes the RIZAP-related products and services

RIZAP Body Making Received the Porter Prize

About the Porter Prize

Evaluation Point

The prize will be awarded to companies and business units that

have competed successfully using as distinctive strategy

51

The distinctive business model was evaluated highly

Investing in R&D and developing the RIZAP Body

Making method based on evidence

Systems that do not rely on the individual skills

of trainers, such as weight loss predictions based

on users’ data

Give up

Other

gyms

52

Self training →

Achievegoal

Attentivesupport →

Difference Between RIZAP Body Making and Other Gyms

The Strength of RIZAP Body Making

53

Make guests to finish

what they have started

by providing highly attentive

support

Achievegoal

Attentivesupport →

Body

Making

English

Cooking

KidsSports

Dance

Health

-care

Golf

The method to make guests

to finish what they have started

Expansion of Service

54

RIZAP

GOLF

55

FY2017/3 FY2018/3

Q1 Q2 Q3 Q4 Q1 Q2 Q3Q3 Q4

FY2016/3

Q1 Oct.Q4

FY2019/3

RIZAP GOLF – Number of Studio

(opened 2 studios per month)

27

14

6

56

Number of Studios

is doubled

since April 2018

Approx. 2x

新宿南店 2018年6月Opened before March 2018

Opened after April 2018

Opened 13 New RIZAP GOLF Studios (since April 2018)

Operates in 27 locations

nationwide

57

Minamikoshigaya studio

(opened August 2018)

FY2019/3Q1

FY2019/3Q2

Approx. 2x

RIZAP GOLF – Number of Inquiries

Inquiries increased due to increase in

number of studios

58

RIZAP GOLF – Cumulative Number of Members

59FY2017/3 FY2018/3

Q1 Q2 Q3 Q4 Q1 Q2 Q3Q3 Q4

FY2016/3

Q1 Q2Q4

FY2019/3

Broke through 10,000along with increased

number of studios

Conducted advanced

investment along with

increased number of

studios

FY2017/3 FY2018/3

Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2Q4

FY2019/3

Q1

(opening expenses, hiring expenses,

and adverting expenses)

60

RIZAP GOLF – Revenue and Operating Income

■Revenue

■Operating income

Apr.

2018

RIZAP GOLF – Revenue and Operating Income

May

2018

Jun.

2018

Jul.

2018

Aug.

2018

Sep.

2018

■Revenue

■Operating income

Oct.

2018(preliminary figure)

Profitable for

2 months in a rowSeptember and October

61

RIZAP

ENGLISH

62

2

4

8

Mar.

2017

Mar.

2018

Oct.

2018

Number of locations

is doubledduring Apr. and Oct., 2018

RIZAP ENGLISH – Number of Locations

63

2x

Existed locations: Shinjyuku, Ikebukuro, Giza, Sinjyukugyoen

New locations: Shibuya, Nihonbashi, Akasakamitsuke, Akihabara（）

Aug.

2016

Sep.

2018

RIZAP ENGLISH – Cumulative Number of Members

Number of members

are increasing

steadily

RIZAP ENGLISH

64

FY2017/3 FY2018/3

Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2Q4

FY2019/3

Revenue is

improving(operating income in

FY19/3 Q2)

RIZAP ENGLISH – Revenue and Operating Income

■Revenue

■Operating income

65

RIZAP ENGLISH

RIZAP

WOMAN(since May 2018)

66

The collagen machineOnly women members andwomen trainers

67

RIZAP WOMAN – Cumulative Number of Members

Already operates

in 3 studios due to

the great popularity

May

2018

Jun.

2018

Jul.

2018

Aug.

2018

Sep.

2018

Oct.

2018

(Ginza, Shinjyuku, and Ueno)

68

Launch of

1st studio

EXPA

Muscle training studio for women

69

Launch

of EXPA

2017Nov. Dec.

EXPA – Cumulative Number of Members

2018Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep.

4.7x Opened 6 studios

within a year

from its launch

70

(Ikebukuro, Takadanobaba, Ginza,

Omori, Hachioji, Omiya)

RIZAP

Corporate

Program

71

FY2018/3

Q4 Q1 Q2Q3Q2Q1

50,000

2x

RIZAP Wellness Seminar – Number of Attendees

Broke through

560 companies and

50,000 people

FY2019/372

The leading companies making

efforts in promoting

employees’ health

Participants achieved average bodyweight loss of 8kg

by conducting lifestyle modification for 3 months

Example: Funai Soken

3 months

later

-12kg

165cm

34 year-old

80kg→68kg

-9kg

N＝14

73

3 months

later

172cm

39 year-old

79kg→70kg

74

zap DELI

Office delivery of

low-carbohydrate lunchboxes

Make cashless payment for low-

carbohydrate and high protein lunch

Support corporates’

health and productivity

management

(LINE Pay)

Please watch the video

75

SPORTSAthlete support and

health promotion

77

Establishment and evolution of

“Are you able to enjoy?”

By 2020

(1) Title acquisition (J1 or Emperor’s Cup or Levain)

(2) Full stadium (No.1 seating rate)

The Commitment of Shonan Bellmare and the Group

78

50 years since the founding of Shonan Bellmare

First victory in the Levain Cup

79

(Achieved the commitment)

RIZAP trainers provide residential support for

improvements in player performance

・Individual interviews with all players

Ask about “physical ability they want,” “problems,” and “dreams”

・Provision of guidance, training menus

matched to what each player wants to strengthen

Example of what players want to strengthen

80

Support by RIZAP – (1) Physical Support

Takayama: Powerful sprinting form that does not burden my knees

Umesaki: Improvement in initial speed when I start running and acquisition of sharpness

when I make a turn

Saito: Ways of moving my body so I produce power and the next play starts quickly

Yamasaki: Acquisition of a body that does not get brushed aside due to body core training

Akino: Reduction in burdens on the body due to posture improvement,

increase in initial speed, etc.

Support by RIZAP – (2) Diet Management Support

MF＃7 Umezaki

MF＃16 Saito

Actual meal photo

Actual meal photo

24 players send photos of 3 meals a day

Dieticians of RIZAP provide advice

81

<Comments>

There is enough of the

energy you need for 1 day.

There is not much protein in

your lunch so adjust the

amount in your evening

meal.

<Effects>

My stomach is in

good condition.

I do not have so

many ups and

downs in my

physical condition.

<Comments>

Your dinner is well-

balanced. When you are

tired, eat food with low fat

that can give you nutrition.

<Effects>

I feel that my legs

do not cramp so

easily during

matches.

82

Please watch the video

Providing the through Support of RIZAP to all athletes

RIZAP LabStart of

84

Training and research

facilityDiet, exercise, mental,

etc.

Development of wear for athletes

(research, testing, and product

planning and development)

RIZAP Lab ‐ FACILITY

* The photo is for illustrative purposes

Developing athletes committed to results

Scheduled to open

in January 2019

・ Close to Shonan Bellmare’s training

ground

・ The facility will accumulate athletes’

data. Aiming to become a base that

creates methods

Cutting-edge training

and research facility

85

RIZAP Lab ‐ VISION To the World

Establishment of

methods for athletes

EnjoyChampionTop teams

and athletesExtracurricular

activities, teams

athletes

Top teams and

athletes from

around the world

People who enjoy

sports from around

the world

Training,

recovery wear,

ports shoes,

wearables, etc.

Products

Supplements,

protein,

Compression

wear(Gemstones that will

shine if polished)

86

HEALTHCARE

Alliance with medical organizations

and local governments

87

RIZAP’s Efforts Towards Healthcare

1. Collaboration with medical institutions, etc.,towards the further evolution of the RIZAP method

2. Extension of the healthy life expectancy of senior citizens in

collaboration with local authorities

Development of health promotion programs

88

Number of diabetics

exceeds

10 million6.90 7.40

8.90 9.50

10.00

1 2 3 4 5

Trend in Number of Patients of Diabetes in Japan

People in Whom Diabetes is

Strongly Suspected (in millions)

Source: Health, Labour and Welfare Ministry

(National Health and Nutrition Examination Survey 2016)1997 2002 2007 2012 201689

(1) The Japan Diabetes Society (Oct. 2018)

Short-term low-

carbohydrate diets are

safe and effective in the

treatment of obesity

The Institute for Adult Diseases, Asahi Life Foundation,

an authority in diabetes research, announced the results of

joint research with RIZAP

90

Begin to verify the effectiveness of RIZAP Corporate Program

for improving mental health

Previous Joint Research

(RIZAP Body Making)

Period: Nov. 2018 -Mar. 31, 2023

No. of subjects: 40 people

Survey:- Subjective awareness

of health

- Measure of self-efficacy

- Measure of depression

- Score the ability of

stress coping

<Announced in Apr. 2017>

People with no signs of

depressive tendency

People with signs of depressive

tendency (over 40 pts)

34.1pts

36.9pts

Improved

1.8pts

Improved

4.4pts

91

(2) Joint Research with University of Tsukuba

New Joint Research

(RIZAP Corporate Program)

Upon

completionPrior to

joining

Prior to

joining

Upon

completion

Participated in a pre-symptomatic disease consortium run by Shona Innovation Park, established

after Takeda Pharmaceutical Company opened up its Shonan research site

・Evolution of the RIZAP method└ Improvement of pre-symptomatic disease

└ Prevent of dementia

└ Improvement of productivity of companies, etc.

・Providing health improvement

program in the companies

in the Shonan area

Promotion healthcare innovation

92

(3) Participation in Shonan Meeting

RIZAP’s Efforts Towards Healthcare

1. Collaboration with medical institutions, etc.,towards the further evolution of the RIZAP method

2. Extension of the healthy life expectancy of senior citizens in

collaboration with local authorities

Development of health promotion programs

93

11 local authorities have adopted the program

Health Promotion Program for Local Authority

<3 authorities recently added>

- Ono, Fukushima

- Tadami, Fukushima

- Tamura, Fukushima

94

*11 local authorities: Makinohara (Shizuoka), Ina (Nagano), Kawakami (Nagano), Kawakamimura (Nagano), Shimosuwa (Nagano),

Ono (Fukushima), Tadami (Fukushima), Tamura (Fukushima),

Furudono (Fukushima), Minamisoma (Fukushima), Kaminokuni (Hokkaido)

Alliance with SOMPO Holdings, Inc. (1)

Concluded a business alliance

in the healthy life expectancy

extension area

(November 13, 2018)

The SOMPO group addresses and aiming to “build a society that strived

to prevent dementia and enables people to continue living ling and

happy lives with dignity as individuals, even after being diagnosed with

dementia,” and launched the “SOMPO Dementia Support Program”

95

Plan to develop a new program for preventing decline in cognitive functions

<Image of the new program>

・RIZAP health promotion program

・The exercise, diet, and learning

content for preventing decline in

cognitive functions

The program will be launched by both

companies, and the effectiveness

will be verified by joint researches

96

Alliance with SOMPO Holdings, Inc. (2)

To Realize the RIZAP Declaration to

Bring Health and Fitness to 10 Million People

97

Summary

98

1. Began implementing a drastic restructuring aimed at sustainable growth

3. Concentrated the management resources on growing businesses including

the RIZAP Businesses aimed at sustainable growth starting after this fiscal year

Freeze new M&A in principle, and concentrate on early management reorganizations of

Group companies, and accelerate “selection and concentration” of business

2. Recorded restructuring related expenses intensively to clear all the potential future

risks and reconstruct into a robust management structure

President’s Message

99

I apologize deeply for causing great concern and trouble to

many of our stakeholders, including shareholders, recently.

From now on, we will strive for the early recovery of results

and their further expansion, and make efforts towards the

recovery of everybody’s trust.

Representative Director

and President

Takeshi Seto

Want to improve oneself

Want to be beautiful

Want to live longer

Want to live in a good house

Want to make a social contribution

Becoming the Global No.1 in Self-Investment Industry

Maslow's Hierarchy of Needs

self-actualization

Esteem needs

Belongingness and Love needs

Safety needs

Physiological needs

Outsidescope ofbusiness

RIZAP Group business domain

“Self-investment industry”

100

RIZAP GROUP Vision

101

For all people to live a life during which they can feel their own value

Appendix.

102

Company name RIZAP GROUP, Inc.

Stock code 2928(Sapporo Securities Exchange’s Ambitious Market)

Establishment April 2003

Representative Takeshi Seto, Representative Director, President

Capital 19,200,440,000 yen

Number of shares outstanding 556,218,400 shares

Number of consolidated employees

7,063 people(excl. temporary employees) *As of March 2018

1

0

Company Overview (as of the end of September 2018)

(¥bn)

*Equity ratio = total equity / total liabilities and equity

Equity ratio 24.6%

141.1

61.1

85.7

49.6

66.8

104

Strengthening the financial ground by fund procurement.

Consolidated Financial Position

As of September 30, 2018As of March 31, 2018

(Total assets 202.2 billion yen)(Total assets 174.2 billion yen)

Total equity

116.6

57.7

80.5

50.9

42.8

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Current assets

Current liabilities

Total equityNon-current assets

Non-current liabilities

Equity ratio 33.1%

105

Mar. 31,2017

Mar. 31,2018

Sep. 30, 2018

(¥bn) 66.8

42.8

21.4

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Mar. 31, 2017

Mar. 31, 2018

Sep. 30, 2018

*Equity ratio = total equity (net assets) / total liabilities and eqioty

*As of Sep. 30, 2018, equity attributable to owners of the parent was 26.5%

Equity RatioTotal Equity

22.4%

24.6%

33.1%

Financial KPI (1)

106

Mar. 31,2017

Mar. 31,2018

Sep. 30,2018

(¥bn) 57.2

Mar. 31,2017

Mar. 31,2018

Sep. 30,2018

Interest-bearing DebtCash and Cash

Equivalent

(¥bn)

Financial KPI (2)

43.6

24.6

32.5

19.615.8

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

107

Mar. 31,2017

Mar. 31,2018

Spe. 30, 2018

Mar. 31, 2017

Mar. 31,2018

Sep. 30, 2018

Net DE RatioGoodwill to Equity Ratio

29.3%

17.3%

11.9%

*Net DE ratio = net debt / equity attributable to owners of the parent

0.7x

0.8x

0.3x

(times)

Financial KPI (3)

108

Continue ROE (return on equity) Management

-30.0

-10.0

10.0

30.0

50.0

70.0

90.0

FY14/3 FY15/3 FY16/3 FY17/3 FY18/3 FY19/3Q2

27.9%

*Up to FY16/3: net income to equity ratio

*FY17/3: net income to equity attributable to

parent company ratio

70.7%

27.1%

56.4%

Average ROE over

the past 5 years

44.6%

-20.8%

40.8%

(¥ mil)FY 2018/3

Q2

FY 2019/3

Q2Difference Overview

MRK HOLDINGS

Sales 7,311 8,619 +1,307Sales per customer decreased due to delays in production of new products and there

was a significant decline in profits in the first half due to the concentrated

implementation of investments in commercials and store renovations. The second half

will see a conversion to a growth path.

The achievement of record high profits is forecast for the second half.Operating

profit 515 -516 -1,031

PADO

Sales 3,418 3,120 -298 The company concentrated on structural reform based on collaboration with Sankei

Living and recorded an extraordinary loss in the first half. The effects of cooperation are

expected from the 4Q of this term to next term.Operating

profit 7 -332 -339

Marusho Hotta

Sales 3,781 3,215 -565Designed twisted yarn business is trending steadily. Structural reform has been successful in

kimono business, where the company was struggling The company will focus on the structural

reform of its couture business in the second half.Operating

profit27 -84 -112

Wonder

Corporation

Sales 35,854 32,911 -2,943Structural reform expenses preceded in association with conversion to high-revenue

hybrid stores.

New stores are forecast to increase profits for the full-term due to strong trends.Operating

profit 214 59 -155

HAPiNS

Sales 4,017 4,470 +453Costs preceded due to positive store openings. Store development and product

measures were successful so a profit increase is forecast for the full-term.Operating

profit 23 61 +38

*1

109

*2

Operating Income of Listed Group Companies (1)

*1. Changed trading name from MARUKO CO.,LTD. as of October 1, 2018

*2. Changed name from Passport Co., Ltd as of August 1, 2018

(¥ mil)FY 2018/3

Q2

FY 2019/3

Q2

Difference Overview

Idea

International

Sales 1,756 3,360 1,604 The company implemented advance investments for the expansion of brand

recognition in the 1st qtr. Full-term revenue and profit increases are forecast due

to expansion of the line-up of strong BRUNO products and growth of the

MILESTO bag brand.Operating

profit 91 38 -53

Dream VisionSales 2,476 2,729 +252 The company made a loss in the first half due to delays in the structural reform

of TRECENTI Co., Ltd., which it purchased last term.

A significant revenue and profit increase is forecast for the second half due to

the effect of purchasing NARACAMICIE. Operating

profit 666 -77 -743

JEANS Mate

Sales 4,300 4,252 -47 The first half saw the achievement of a profit turnaround due to the effects of

structural reform of the previous term.

The forecast is for an increase in full-term profits due to PB products and the

strengthening of new stores, etc., in the second half.Operating

profit -272 179 +451

SD

Entertainment

Sales 3,891 4,025 +134Results were trending strongly until August. There was a significant decrease in

revenue and profit in September due to the impact of the earthquake in Hokkaido

in September, and the company recorded an extraordinary loss.Operating

profit -76 7 +83

*2

110

*1

Operating Income of Listed Group Companies (2)

*1. Because settlement is in June, the figures shown are for the 3-month period from July to September of the accounting periods in question, and the figures for the 2nd qtr of the fiscal year

ending March 31, 2019 are consolidated.

*2. International financial reporting standards (IFRS)

*3. Because the company changed its account settlement period during the fiscal year ending March 31, 2018, the figures shown for the previous term are for the 6 months from February 21

to August 20, 2017

*3

111

www.rizapgroup.com/ir/group/

Concentratedthe IR websites of

listed Group companies

IR information of listed Group companies

RIZAP GROUP, Inc.

IR Information of Listed Group companies

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