IR Seminar in December 2017

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IR Seminar in December 2017 - Results for the 2nd Quarter ended September 30, 2017 and Future Measures - Translation In the case of inconsistences between

1 IR Seminar in December Results for the 2nd Quarter ended September 30, 2017 and Future Measures - Translation In the case of inconsistences between the Japanese and English version, the Japanese version will control and supersede any ambiguities. Dec 6 th, 2017 NAC Co., Ltd. Code; 9788 TSE 1st section

2 1. Results for the 2nd Quarter ended September 30,

3 1 Q2 FY2017 : Consolidated Income Statement 6 months ended FY2017 Plan Comparison Plan Actual/Plan Comparison 6 months ended FY2016 YoY Comparison YoY Comparison Sales 38,148 36, % 34, % Gross profit 15, , % (Gross margin) 41.4% % 3.4pt SG&A 17, , % Operating Income 1,561 1,500-2,272 - (Operating margin) 4.1% 4.1% % + 2.5pt Non-operating income and loss Ordinary Income 1,576 1,490-2,266 - Extra-ordinary income and loss Net income attributable to owners of parent ,429 1,050-1,810-2

4 1 Q2 FY2017 : Sales by Segment Plan Comparison YoY Comparison 6 months ended FY2017 Plan Actual/Plan Comparison 6 months ended FY2016 YoY Comparison CreCla 6,678 6, , Rental 6,783 6, , Construction Consulting 2,558 2, , Housing Sales 17,216 19,000 1,783 13, ,827 Mail-order 4,943 5, , Others 31 3, , Total 38,148 36, ,948 34, ,787 3

5 1 Q2 FY2017 : Operating income by Segments 6 months ended FY2017 Plan Comparison Plan Actual/Plan Comparison YoY Comparison 6 months ended FY2016 YoY Comparison CreCla 131 (2.0%) 40 ( 0.6%) (+ 2.6pt) 14 (0.2 %) (+ 1.8pt) Rental 928 (13.7%) 880 (13.5%) + 48 (+ 0.2pt) 824 (12.8 %) (+ 0.9pt) Construction Consulting 239 (9.4%) 310 (11.9%) 70 ( 2.6pt) 234 (8.9 %) + 4 (+ 0.5pt) Housing Sales 1,974 ( 11.5%) 1,740 ( 9.2%) 234 ( 2.3pt) 2,214 ( 16.5 %) (+ 5.1pt) Mail-order 291 ( 5.9%) 300 ( 5.9%) + 8 ( - ) 481 ( 9.6 %) (+ 3.7pt) Elimination, HQ Cost Total 1,561 ( 4.0%) 1,500 ( 4.1%) 61 ( 0.3pt) 2,272 ( 6.6 %) (+ 2.5pt) Note) The figures inside ( ) marks indicate operating margin. 4

6 1 Q2 FY2017 : Results by Housing sales 1 and 2 include internal transactions about 6 and 110 millions yen, respectively. Suburban areas Others Urban areas Sales 20,000 10,000 KUNIMOKUHOUSE KDI J-wood Leohouse(suburban areas) Leohouse(urban areas) 15,874 1, , , , ,092 2,023 Tokyo Kanagawa Chiba Saitama 13,085 9,956 11, ,525 1,270 1,474 FY2015 Q1-2 FY2016 Q1-2 FY2017 Q1-2 FY2015 Q1-2 FY2016 Q1-2 FY2017 Q Operating Income Operating Income 1,297 This segment includes the Amortization of goodwill at 49 million yen related to to J-wood, KDI and KUNIMOKUHOUSE. 1,500 2,214 1,974 2,500 5

7 1 Q2 FY2017 : Results by Housing sales 130 stores( Leohouse :105 stores, J-wood :10 stores, KDI :3 stores, suzukuri : 10 stores, KUNIMOKU HOUSE : 2 stores) Leohouse ( As of Sep.30, 2017 ) J-wood ( As of Sep.30, 2017 ) KUNIMOKU HOUSE opened new stores during the 2 nd quarter KDI KDI opened new stores Hokkaido ( As of Jun.30, 2017 ) during the 2 nd quarter suzukuri suzukuri opened new stores ( As of Jun.30, 2017 ) during the 2 nd quarter Leohouse : 105 stores ( Branch : 46 / Model display site : 56 / Others : 3 ) Aomori J-wood : 10 stores ( Housing café : 3 / Model display site : 7 ) KDI : 3 stores ( Branch : 3 ) Akita Iwate suzukuri : 10 stores ( Branch : 9 / Other : 1 ) KUNIMOKU HOUSE : 2 stores ( Branch : 1 ) Ishikawa Toyama Yamagata Niigata Miyagi Fukushima Nagasaki Okinawa Saga Kuma -moto Fuku -oka Oita Miyazaki Kagoshima Yamaguchi Ehime Kochi Shima -ne Tottori Shizuoka Hiroshima Okayama Kagawa Tokushima Kyoto Hyogo Fukui Shiga Mie Nara Osaka Wakayama Gifu Aichi Nagano Gumma Yama -nashi Tochigi Saitama Tokyo Kanagawa Ibaraki Chiba 6

8 1 Q2 FY2017 : Results by Housing sales Quarterly store openings, number of orders, completions and average sales price(leohouse) (Number of houses ordered) FY2015 FY2016 FY2017 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Number of Orders Complet ions Orders in hand 1,035 1,057 1, ,114 1,385 1,361 1,016 1,245 1,294 Change Unit price million yen Target : million yen Target : million yen Store openings Total Unit price excludes additional costs and exterior construction costs stores Closing of model display sites : Closing of model display sites : Brand change to suzukuri 5 7

9 1 Q2 FY2017 : Consolidated Balance Sheet As of Sep Break down As of Mar Break down Comparison Current assets 24, % 22, % + 1,998 Total property, plant and equipment 13, % 13, % 486 Intangible assets 3, % 3, % 311 Investments and other assets 3, % 4, % 162 Non-current assets 20, % 21, % 961 Total assets 44, % 43, % + 1,037 Current liabilities 23, % 20, % + 2,551 Non-current liabilities 7, % 7, % + 52 Total liabilities 30, % 27, % + 2,603 Shareholder s equity 14, % 16, % 1,569 Accumulated other comprehensive income % % + 3 Total net assets 13, % 15, % 1,566 Total liabilities and net assets 44, % 43, % + 1,037 Current assets : Cash and deposits 2,526 Costs on uncompleted construction contracts + 1,649 Non-current assets : Building and structures 217 Current liabilities :Advances received on uncompleted construction contracts + 3,076 Accounts payable 2,029 Non-current liabilities : Long-term loans Equity Ratio : 31.3 % 8

10 1 Q2 FY2017 : Consolidated Cash Flow 6 months ended FY months ended FY2016 FY Net cash provided by operating activities 3, ,237 2.Net cash used in investing activities 688 1,837 1,148 3.Net cash used in financing activities 1, ,524 Net increases cash and cash equivalents 2,584 3, Cash and cash equivalents at beginning of period 7,430 8, Cash with the new connection and cash equal accrual 56 ーー Cash and cash equivalents at end of period 4,903 5, Depreciation and amortization The main reasons of the fluctuation Operating activities:an increase in Advances received on uncompleted construction contracts at 3,004 / An increase in depreciation at 889 An increase in inventory at 2,517 A decrease in accounts payable at 2,029 / Net loss at 1,757 Investing activities: Acquisition of property, plant and equipment at 485 Purchase of investments in subsidiaries resulting in change in scope of consolidation at 274 Financing activities:an increase in Short-term loans at 1,000 9

11 2. FY2017 Forecasts of Financial Results 10

12 2 FY2017 Forecasts of Financial Results Result FY2017 Plan FY2018 YoY comparison Sales 85,901 94, % Operating income 756 2, % Ordinary income 793 2, % Net income % Dividends per share 27 yen 37 yen + 10 yen EPS yen yen yen 11

13 2 FY2017 The progress of the initial plan : Sales by Segments Sales 6 months ended FY2017 Achievement rate to the initial plan Plan FY 2017 Achievement rate (%) CreCla 6,678 13, % Rental 6,783 13, % Construction Consulting 2,558 6, % Housing Sales 17,216 50, % Mail-order 4,943 10, % Elimination, HQ Cost Total 38,148 94, % The CreCla and Rental are on track. We increase sales significantly in the Construction Consulting, Housing sales and Mail-order in the second half of the year. 12

14 2 FY2017 The progress of the initial plan : Operating income by Segments Operating income 6 months ended FY2017 Achievement rate to the initial plan Plan FY 2017 Achievement rate (%) CreCla % Rental 928 2, % Construction Consulting % Housing Sales 1, Mail-order New Business and M&A 594 1,300 - Total 1,561 2,000 - Calculation of achievement rate : (result-plan) plan (absolute value) + 100% We increase operating income significantly in all segments in the second half of the financial year. 13

15 3. Market environments and Future measures 14

16 3 - CreCla (Ex) (Ex) FY2013 FY2014 FY2015 FY2016 FY Market environment Recently, securing human resources and price hike in delivery charge are big issues in the market. Furthermore, industry consolidation and major company s capital participation are anticipated. Future measure We continuously try to win new customers and enrich the content of customer services so as to improve customer retention rate and sales per customer. * In October, 2017, we newly started comprehensive support plans that include maintenance of water cooler, safety measures for children and so on. Sales Sales for the first half of the FY Operating income 15

17 3 - Rental (Ex) (Ex) FY2013 FY2014 FY2015 FY2016 FY2017 Sales Sales for the first half of the FY Operating income 10.0 Market environment It is expected that the needs of total care services such as the housekeeping service, exterminator and gardener is rising more and more backed by aging society and increases in single-person households and two-income families. Furthermore, the new entry of different industries and price war are expected. Besides, securing human resources is also a big issue. Future measure The mainstay dust control products business focuses on existing customers to improve customer satisfaction. Moreover, we utilised M&A strategies to expand business areas. The With-branded pest-control devices business reinforces sales promotions by the use of the newest product called With. 16

3 - Construction Consulting - 80.0 66.7 12.0 70.0 60.8 62.0 (Ex) 11.0 60.0 56.2 60.1 11.4 10.0 50.0 40.0 9.7 9.0 9.5 9.0 (Ex) 9.0 8.0 30.0 7.0 20.0 10.0 29.0 25.5 24.1 27.4 26.

18 3 - Construction Consulting (Ex) (Ex) FY2013 FY2014 FY2015 FY2016 FY2017 Sales Sales for the first half of the FY Operating income Market environment The local construction market remains stagnant due to the postponement of consumption tax hike. In addition, the market for solar energy systems faces a fall in the purchase price. Future measure The construction know-how system works on continual support programs for small and midsize building contractors. What is more, the construction materials business tries to increase the number of orders regarding solar powered house, especially new-built house, in the housing market by the use of Net Zero Energy House (ZEH). Additionally, we offer construction materials for subdivided housing unit and renovation in the adjacent market. Eco & Eco have conducted an overhaul of income structure, sales promotions and process management. Hence, we assume that Eco & Eco generates a stable profit from now on. 17

19 Housing Sales (Ex) (Ex) FY2013 FY2014 FY2015 FY2016 FY2017 Sales Sales for the first half of the FY Operating income Market environment The growth of housing starts have settled down. In relation to this, the number of housing starts regarding subdivided housing unit is weak from FY2017 backed by a wait-and-see mood before the tax hike and a decrease in population. In terms of Japanese 5 major housing companies, the number of orders received in the first halt of the year down about 3.0% to 8.2% year on year. This figure would be around -3.0% at the end of FY2017. On the other hand, the last-minute demand is surely anticipated, so the number of housing starts regarding subdivided housing unit would up about 3.4% year on year in the next fiscal year. Future measure We take effective countermeasures against the last-minute demand. 1. Seek the improvement of products and sales promotions 2. Improve profitability through overhauls of unprofitable stores and plans to open up stores. 3. Cooperate with other segments, especially the construction consulting business. Besides, suzukuri aggressively promotes Matrix Concept that produced semi-custom, fashionable and low-priced houses and KDI strengthens sales promotion of ready-built home in the metropolitan area. 18

3 - Mail-order - 120.0 2.0 100.0 98.0 103.7 104.0 108.0 (Ex) 1.0 80.0 74.2 1.0 (Ex) 0.0-1.0-1.0 60.0 50.2-2.0 40.0-1.9-2.2 49.4-3.0 20.

0 Market environment The Japanese EC market, especially Business-to-Customer, is glowing steadily. In 2017, the market size is about 15.1 trillion yen (up 9.9 year on year).

20 3 - Mail-order (Ex) (Ex) FY2013 FY2014 FY2015 FY2016 FY2017 Sales Sales for the first half of the FY Operating income -5.0 Market environment The Japanese EC market, especially Business-to-Customer, is glowing steadily. In 2017, the market size is about 15.1 trillion yen (up 9.9 year on year). Future measure We maintain stable profits in the Macchia Label and Coyori brand. Moreover, we develop new brands and expand overseas business. BELAIR develops comprehensive services using management resources for an aging society and expands our sales network. 19

21 4. Medium-Term Targets and Shareholder Return 20

22 4 Medium-term Targets 160,000 Sales Operating income 150,000 60, , ,249 50, , , ,000 85,901 94,100 40,000 80,000 30,000 60,000 20,000 40,000 20,000-10,000 6, ,000 3,377 FY2016 FY2017 FY2018 FY2019 FY ,000 0 Announcement in 10 th December 2017 : Sales 94,100 million yen / Operating profits 2,000 million yen Regarding the medium-term target, we would take the latest business performance into consideration and review the plan to ensure profit. 21

23 4 FY2020 Target of Consolidated Results by Segment Sales Operating income Operating margin CreCla 13,500 21, % Rental 13,600 17, % Construction Consulting 6,200 8, % Housing Sales 50,000 80, % Mail-order 10,800 20, % New business + M&A 2,000 Total 94, , % 22

24 4 FY2020 Target of Operating Income Operating Income Result FY 2017 Plan FY 2020 Comparison CreCla 500 (3.7%) 1,100 (5.0%) 120.0% (+ 1.3pt) Rental 2,000 (14.7%) 2,200 (12.9%) 10.0% ( 1.8pt) Construction Consulting 900 (14.5%) 1,100 (12.5%) 22.2% ( 2.0pt) Housing Sales 200 ( 0.4%) 5,100 (6.4%) (+ 5.9pt) Mail-order 100 (0.9%) 2,100 (10.3%) % (9.3pt) New business + M&A 1,300 1,600 Total 2,000 (2.1%) 10,000 (6.7%) 400% (+ 4.5pt) Note) The figures inside () marks indicated Operating margin. 23

25 4 Plan of dividends:dividend Policy with DOE 4% (Yen) Payout ratio : within 100 % Payment amount of Dividends FY2014 FY2015 FY2017 (Plan) FY2016 Dividends per share 38 yen 38 yen 27 yen 37 yen Our dividend policy is DOE 4%. In accordance with this dividend policy, annual dividend is 37 yen in FY

26 5. Appendix 25

27 5 Positioning in a market of each business CreCla Rental Construction Consulting Market leader in bottled water sales (Number of affiliated stores : 600) Market leader in bottled water production First HACCP certified business in the industry First Eco Mark certified business in the industry First in the industry to open an R&D center Highest sales of all Duskin franchisees (out of approximately 2,000 companies) With-branded pest control devices for restaurants first in the industry to be approved by Ministry of Health, Labour and Welfare Acquired AI LIFE Co., Ltd. (September, 2017) that runs Duskin business. Nac members ( Construction company : 6,000 ) Providing support for affiliated building firms through order promotion and cost reduction services, including solar power systems and products for Smart House Acquired Eco & Eco Co., Ltd. (September, 2015) that deals with energy-saving products. Housing Sales Contract construction of a custom-built house under the Leohouse brand Leading local builder in contract construction (FY2011, FY2012 and FY2013) Acquired J-wood Co., Ltd. (July 2013) that produces natural houses In the survey of customer s satisfaction of custom-built house conducted by Oricon, we won female customer s satisfaction No.1 in three categories. We acquired KDI Co., Ltd. that deal with subdivided housing unit and custom-built house in metropolitan area. We acquired suzukuri Co., Ltd. that perform business in a matrix concept. We acquired KUNIMOKU HOUSE Co., Ltd. that expands the housing sales business in Hokkaido. Mail-order In July 2013, the mail-order business entry by a subsidiary of JIMOS Co., Ltd. Various cosmetics for skin and hair care suitable for repeat use 260 thousand female customers (mainly in their s) In the "'14 Yahoo! BEAUTY mail order cosmetics grand prize you choose." It won the products No.1 of JIMOS in base makeup items department 26

28 5 Company's outline Company name NAC Co., Ltd. (As of the end of September 2017) Head office Shinjuku Center Building, Nishi-shinjuku Shinjuku-ku, Tokyo Established May 1971 President Businesses Consolidated companies Employees Capital stock Number of shares Number of shareholders Kan Yoshimura CreCla(Production and sale of bottled water) Rental(Duskin franchise business, pest control machine rental and regular cleaning plan) Construction Consulting(Construction know-how, solar energy systems) Housing Sales(Contract construction of a custom-built house, finance and insurance affairs with housing sales) Mail-order (Cosmetics and health food mail-order sales) Leohouse Co., Ltd.(Housing sales) Earnest Corporation(Building maintenance) JIMOS Co., Ltd. (Mail-order) BELAIR Co., Ltd. (Mail-order) J-wood Co., Ltd. (Housing sales) Eco & Eco Co., Ltd.(Sales of energy-saving products and Construction) KDI Co., Ltd. (Housing sales) Nac life partners Co., Ltd. (Finance and Welfare) KUNIMOKU HOUSE Co., Ltd. (Housing sales) suzukuri Co., Ltd. (Housing sales) AI LIFE Co., Ltd. (Rental businesss) 2,152 (consolidated) 4,000 millions yen 18,719,250 shares (share unit :100 shares) 10,446 (Total number of shareholders; treasury shares are excluded) 27

29 5 Key Financial Indicators(Consolidated) FY2015 FY2016 Comparison Average number of shares during the period 16,867,190 shares 16,854,157 shares 13,033 shares Net assets per share(bps) yen yen 11.54yen Net income per share(eps) 14.99yen 24.65yen yen Equity ratio 38.0% 35.6% 2.4pt Ratio of shareholder s equity to Net income(roe) 1.6% 2.7% + 1.1pt Dividends per share 38yen 27yen 11yen Dividend ratio 253.6% 110.1% 143.5pt Ratio of dividends to shareholder s equity 4.0% 2.9% 1.1pt 28

30 5 Our business portfolio connected by a single goal Resolving customers daily life issues 29

31 5 (( Million 百万円 ) yen ) 120, ,000 80,000 60,000 The history of NAC - Diversification - Mail-order Housing Sales CreCla Construction Consulting Rental Operating Income In 2002 <Housing business> Leo house In 2013 <Housing business> In 2013 <Mail-order> JIMOS In 2012 <Rental> Earnest In 2012 <Construction Consulting> The construction materials In 2016 < Housing business > KDI J-wood In 2015 <Construction Consulting> ECO&ECO 5,000 4,500 4,000 3,500 3,000 2,500 In 2002 CreCla 2,000 40,000 20,000 In 1971 <Rental> Duskin 0 In 1988 <Rental> With In 1992 <Construction Consulting> Know-how business 1,500 1, Sales (Year) Operating Income 30

32 5 Operating income trend by segment (Million of yen) 2,500 2,000 1,500 1, ,000-1, CreCla Invested for expanding market (Million of yen) 1, ,000 2,500 2,000 1,500 1, ,000-1,500 Mail-order (Million of yen) Accelerated store openings Housing sales 1,208 1,858 3,003 2, , /3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3 (Ex) [] 500 Actively advertising investment /3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/317/3 18/3 (Ex) (Million of yen) 2,500 2,000 1,500 1, ,000-1,500 1,580 1,500 1,492 1,445 1,392 1, Rental 1,999 1,802 1,582 1,738 1,654 1,535 1,505 1,853 1,841 2,000 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3 (Ex) (Million of yen) 2,500 2,000 1,500 1, ,000-1, ,767 1,616 1,564 1,501 Consulting Construction , /3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3 (Ex) We focus on aggressive investment toward growth centering on the Rental Business and the Construction Consulting Business, which show stable business performance. 31

Results for FY2014 ended Mar. 31, 2015

Results for FY2014 ended Mar. 31, 2015 Reference Translation In the case of inconsistences between the Japanese and English version, the Japanese version will control and supersede any ambiguities. May