Results for FY2014 ended Mar. 31, 2015

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1 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 8 th, 2015 NAC Co., Ltd. Code; 9788 TSE 1st section

2 Topics 1. Results for the Fiscal Year(FY2014) 2. Results by Segments 3. FY2015 Forecasts of Financial Results 4. Plan of Dividends 5. Appendix P. 2 P. 8 P. 21 P. 24 P. 26 This document contains certain forward-looking statements including the NAC Group s sales and contract targets based on information available to the Group as of the date of release. These statements are subject to a number of risks and uncertainties such as economic and business conditions as well as the outcomes of new services. Therefore, please understand that actual future results may differ materially from these projections set forth in the Group s forward-looking statements. 1

3 1. Results for the Fiscal year(fy2014) 2

4 1 FY2014 Consolidated Income Statement FY2014 Result FY2013 Result YoY Comparison Sales 85,443 91, % Gross profit 34,048 35, % (Gross margin) 39.8% 38.2% pt SG&A 32,531 30, % Operating Income 1,517 4, % (Operating margin) 1.8% 5.1% 3.3 pt Non-operating income and loss Ordinary Income 1,481 4, % Extra-ordinary income and loss Net Income 519 2, % Consolidated sales and operating income decreased year-on-year due to the reflexive decline in demand following the surge ahead of the consumption tax hike. 3

5 1 Sales by Segment Sales FY2014 Result FY2013 Result YoY Comparison CreCla 13,033 13, % Rental 12,485 12, % Construction Consulting 6,014 5, % Housing Sales 44,134 53, % Mail-order 9,825 7, % Elimination Total 85,443 91, % Crecla Rental The result of Mail-order in FY2013 was during 9 months ended Mar.31,2014. Sales decline year-on-year because sales of water coolers to affiliated stores decreased and it was adverse whether condition. Sales increased owing to new Sales strategy, which is mainly focused on the household-use market, and owing to actively opening new stores, in addition, online ordering bore fruit. C.Consulting Sales increased year-on-year because there was strong demand from the market for solar systems for industry, and we were rewarded for our efforts to present customers with solutions meeting their needs. Housing Sales Sales decline year-on-year because the impact of the reflexive declined related to tax hike was more serious than expected. Mail-order Sales increased year-on-year owing to difference in the accounting term related to JIMOS. 4

6 1 Operating Income by Segment Note) The figures inside()marks indicated Operating margin. Operating income FY2014 Result FY2013 Result YoY Comparison CreCla 143 ( 1.1% ) 375 (2.8%) 61.9% ( 1.7pt ) Rental 1,505 ( 12.1% ) 1,738 (14.3%) 13.4% ( 2.2pt ) Construction Consulting 900 ( 15.0% ) 976 (17.4%) 7.8% ( 2.4pt ) Housing Sales 388 ( 0.9% ) 3,003 (5.7%) 87.1% ( 4.8pt ) Mail-order Elimination, HQ Cost 222 ( 2.3% ) 199 ( 2.7%) - ( + 0.4pt ) 1,199 1,222 - Total 1,517 ( 1.8% ) 4,672 (5.1%) 67.5% ( 3.3pt ) Crecla Operating income declined year-on-year due to a decrease in sales of water coolers. Rental Operating income declined year-on-year due to increases in costs related to new stores opening and personnel. C.Consulting Operating income declined year-on-year due to a decrease sales of know-how systems. Housing Sales Operating income declined year-on-year due to the sales decreased. Mail-order The result of Mail-order in FY2013 was during 9 months ended Mar.31,2014. Operating income declined year-on-year because the sales of seasonal goods, which have high earning rate, decreased. 5

7 1 FY2014 Consolidated Balance Sheet As of Mar Breakdown As of March Breakdown Comparison Current assets 16, % 18, % 2,622 Total PP&E 15, % 12, % + 2,352 Intangible assets 4, % 5, % 741 Investments and other assets 4, % 4, % Non-current assets 23, % 21, % + 2,029 Total assets 39, % 40, % 593 Current liabilities 16, % 19, % 3,259 Non-current liabilities 7, % 5, % + 2,539 Total liabilities 23, % 24, % 720 Shareholder s equity 16, % 16, % + 39 Accumulated other comprehensive income % % + 87 Total net assets 16, % 16, % Total liabilities and net assets 39, % 40, % 593 Current assets : Cash and deposits 1,907, Costs on uncompleted construction contracts 781 Non-current assets : Construction in progress +2,655 Depreciation and Amortization of Non-current assets 741 Current liabilities :Loans +1,609, Accounts Payable 1,576, Income taxes payable 1,246, Advances received on uncompleted construction contracts 1,813 Non-current liabilities:long-term loans Equity Ratio:40.5% 6

8 1 FY2014 Consolidated Cash flows FY2014 FY2013 Comparison 1. Cash flows from Operating activities 1,537 5,827 7, Cash flows from Investing activities 3. Cash flows from Financing activities Net increase(decrease)in cash and cash equivalents Cash and cash equivalents at beginning of year 4,086 10,645 +6,558 3,727 2, ,897 2, ,371 8,407 2,035 Cash and cash equivalents at end of year 4,474 6,371 1,897 Summary Operating activities : Net income before income taxes :+1,310 Depreciation :+1,859 Advances received on uncompleted construction contracts : 1,813 Income taxes payments :+2,461 Investing activities : Purchase of tangible assets : 3,603 Financing activities : Increase long-term and short-term loans :+4,150 Dividends : 650 7

9 2. Results by Segments 8

2 Results by Segment (1) CreCla Sales 13,235 5,151 13,376 5,212 13,033 4,795 8,084 8,164 8,238 In direct managed stores, although there is a bad impact by adverse weather conditions, the sales

10 2 Results by Segment (1) CreCla Sales 13,235 5,151 13,376 5,212 13,033 4,795 8,084 8,164 8,238 In direct managed stores, although there is a bad impact by adverse weather conditions, the sales increased year-on-year owing to contribution of the new delivery system that was useful to met customer needs, which are becoming increasingly diversified, and to fewer opportunity losses. In sales to affiliated stores, its sales declined owing to decreased in sales of water coolers due to sluggish growth in customer numbers. Operating Income Operating income decreased due to lower sales in the affiliated division, and the costs increase by new stores openings and higher personnel expenses in the directly managed stores division. 9

11 2 Results by Segment (1) CreCla FY2012 FY2013 FY2014 CreCla invests more in advertising during Q1 Q3 than Q2 Q4 10

12 2 Results by Segment (2) Rental Sales 11, ,979 12, ,092 12,486 1,211 2,148 9,112 8,567 8,478 9,071 6,880 9,126 In Duskin division, the sales increased owing to new sales strategy that is mainly focused on the house-hold use market in order to acquire new customers and to cultivate existing customers. In With division, the pest-control devices, sales increased year on year because new directly managed stores contributed. In Earnest(Regular-cleaning for business), its sales increased because online ordering and customer introduction had been established. Operating Income 1,582 1,738 1,505 Operating income declined owing to increased spending on sales promotions and higher personnel expenses. 11

13 2 Results by Segment (2) Rental FY2012 FY2013 FY2014 Sales and Operating income hold steady all the year over. 12

2 Results by Segment (3) Construction Consulting Sales 4,455 2,266 5,628 3,258 6,014 3,794 2,189 2,369 2,219 In sale of know-how systems, sales declined year on year.

followed the demand surge prior to the consumption tax hike. In the construction materials business, sales increased year on year.

14 2 Results by Segment (3) Construction Consulting Sales 4,455 2,266 5,628 3,258 6,014 3,794 2,189 2,369 2,219 In sale of know-how systems, sales declined year on year. Our main customers, local building firms, were not eager to invest in know-how systems because they saw little prospect for improvement in orders in hand amid the reflexive decline in demand that followed the demand surge prior to the consumption tax hike. In the construction materials business, sales increased year on year. There was strong demand from the market for systems for industry, and we were rewarded for efforts to present customers with solutions meeting their needs. Operating Income The Operating income fall year on year, as a decline in know-how system sales and profits offset higher profits at the construction materials business, which arose from stronger sales and initiatives to improve operating efficiency. 13

15 2 Results by Segment (3) Construction Consulting FY2012 FY2013 FY2014 Sales and Operating income tend to increase around Q4 14

increased sales year on year, and new orders are increasing. This segment includes 2,686 3,003 the Amortization of goodwill related to J-wood.

16 2 Results by Segment (4) Housing sales 53,059 Sales 43,049 1,639 44,134 2,106 42,687 29,631 38,933 12,396 3,890 8,733 Leohouse, Ltd., saw sales decline year on year owing to an impact from the reflexive decline in demand following the surge ahead of the consumption tax hike. J-wood Co., Ltd. increased sales year on year, and new orders are increasing. This segment includes 2,686 3,003 the Amortization of goodwill related to J-wood. Operating Income 388 Leohouse, Ltd., decreased operating income year on year due to a decrease in sales. J-wood Co., Ltd. decreased operating income year on year due to costs relating to open a new store. 15

17 2 Results by Segment (4) Housing sales FY2012 FY2013 FY2014 Sales and Operating income tend to increase around Q4 16

18 2 Results by Segment (4) Housing sales Policy :Expand markets to Kansai areas. During FY2014, Leohouse opened 14 new bases.(total 107 bases) J-wood opened 1 new bases.(total 5 bases) Hokkaido Leohouse (As of Dec.31,2014) Leohouse new stores (During the 4 th quarter) J-wood (As of Mar.31) Akita Aomori Iwate Leohouse : 107 stores J-wood : 5 stores Ishikawa Toyama Yamagata Niigata Miyagi Fukushima Nagasaki Okinawa Saga Fukuoka Kumamoto Okayama Oita Miyazaki Kagoshima Yamaguchi Ehime Kochi Hiroshima Tottori Shizuoka Shimane Kagawa Tokushima Kyoto Hyogo Fukui Shiga Mie Nara Osaka Wakayama Gifu Aichi Nagano Yamanashi Gumma Saitama Tochigi Tokyo Kanagawa Ibaraki Chiba 17

19 2 Results by Segment (4) Housing sales Quarterly store openings, number of orders, completions and average sales price (Leohouse) (Number of houses ordered) FY2012 FY2013 FY2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Number of Orders Comple tions Orders in hand ,401 1,434 1,393 1,306 1,606 1,860 1,636 1,233 1,267 1,220 1, Change Unit price million yen million yen million yen Store openings Total stores * * closing of model display sites : 2 18

2 Results by Segment(5)Mail-order Mail-order Business segment established from July 2013.

20 2 Results by Segment(5)Mail-order Mail-order Business segment established from July Sales 9,825 7,421 Sales increased year on year, as JIMOS spent aggressively on advertising its cosmetics products to individuals. Sales in the cosmetics product wholesaling business for corporate customers and mail-order consulting business declined year on year. Operating Income This segment includes Amortization of goodwill related to JIMOS. Operating income decreased year-on-year because the sales of seasonal goods, which have high profit margin, decreased and expenses related to raising the retention rate among existing customers increased. 19

21 2 Results by Segment(5)Mail-order Mail-order Business segment established from July FY2012 FY2013 FY2014 Spending on advertising since we consolidated JIMOS in July

22 3. FY2015 Forecasts of Financial Results 21

23 3 FY2015 Forecasts of Financial Results (million yen) FY2014 FY2015 YoY comparison Sales 85,443 89, % Operating income 1,517 1, % Ordinary income 1,481 1, % Net income % Dividends per share 38 yen 39 yen + 1 yen EPS yen yen yen 22

24 3 FY2015 Forecasts of Financial Results Sales 89.5 billion yen (YoY Comparison +4.7%) Operating income 1.6 billion yen (YoY comparison +5.5%) Crecla Strengthen our ability to respond to customer needs Expand the coverage area of the new delivery system Launch new service, the one-way service, branded CreCla Mio Housing Sales Expand the range of our target customers Planning to offer customers new, high value-added products, and differentiate ourselves from other companies through customer service. Expand the business territory Developing urban products and opening new stores in Kansai area. Rental Increase customer count M&A in Duskin division Focus on winning new customers Focus sales efforts on new stores in pestcontrol device division. Construction Consulting Expand the number of new clients Developing new know-how systems that will lead to home orders for our clients Expand our sales channels Distributing management resources based on Analysis of the market in each region Mail-order Increase customer counts Investing actively in advertising for brands that are performing well. Increase profitability Improving the wholesaling and the mail-order consulting businesses. 23

25 4. Plan of Dividends 24

26 4 Plan of dividends:dividend Policy with DOE 4% (Yen) Payment amount of Dividends Stock split as of Apr. 1,2013 (2-for-1) FY2012 FY2013 FY2014 FY2015(Plan) Dividends per share 61 yen 36 yen 38 yen 39yen Our dividend policy is DOE 4%. In accordance with this dividend policy, annual dividend is 39yen in FY2015 Note) The dividends prior to FY2013 were before a stock split (2-for-1) as of Apr.1,

27 5. Appendix 26

28 5 Key Financial Indicators(Consolidated) FY2013 FY2014 Comparison Average number of shares during the period Net assets per share (BPS) Net income per share (EPS) 16,608,950 shares 16,717,171 shares +108,221shares yen Yen yen yen yen yen Equity ratio 39.6% 40.5% pt Ratio of shareholder s equity to Net income (ROE) 18.8% 3.2% 15.6 Pt Dividends per share 36 yen 38 yen +2 yen Dividend ratio 21.4% 122.2% pt Ratio of dividends to shareholder s equity 4.0% 4.0% 0 pt 27

29 5 会社概要 (2015 年 3 月末現在 ) Company name Head office NAC Co., Ltd. Shinjuku Center Building, Nishi-shinjuku Shinjuku-ku, Tokyo Established May 1971 President Businesses Consolidated companies Toyohiko Teraoka CreCla(Production and sale of bottled water) Rental(Duskin franchise business, pest control machine rental, 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) J-wood Co., Ltd. (Housing sales) Nac life partners Co., Ltd. (Housing sales) Employees Capital stock Number of shares Number of shareholders 2,103 (consolidated) 4,000 millions yen 18,719,250 shares (share unit :100 shares) 8,945 28

5 Company History May. 1971 Aug. 1977 Sep. 1995 Jan. 1997 Sep. 1999 Dec.

, Ltd Listed on the JASDAQ market Listed on the 2nd section of the Tokyo Stock Exchange Listed on the

30 5 Company History May Aug Sep Jan Sep Dec Established Duskin Tsurukawa in Machida city Changed company name to NAC Co., Ltd Listed on the JASDAQ market Listed on the 2nd section of the Tokyo Stock Exchange Listed on the 1st section of the Tokyo Stock Exchange Started bottled water CreCla delivery business Feb Feb Mar Started housing sales business through Leohouse Achieved 50 billion yen of sales when celebrating its 40th year Acquired Earnest Corporation Jul Apr Acquired JIMOS Co., Ltd. & J-wood Co., Ltd. Opened the CreCla Honjo-Plant 29

31 5 Our business portfolio connected by a single goal Resolving customers daily life issues Comfortable house, Cleaning, Safe Water... ー all thanks to NAC 30

32 5 Business Characteristics 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 Providing support for affiliated building firms through order promotion and cost reduction services, including solar power systems and products for Smart House. Housing Sales Contract construction of a custom-built house under the Leohouse brand Leading local builder in contract construction (FY2011, FY2012) Acquired J-wood Co., Ltd. (July 2013) that produces natural houses Mail-order Various cosmetics for skin and hair care suitable for repeat use 260 thousand female customers (mainly in their s) 31

33 5 FY2014 Sales and Operating income Breakdown CreCla Rental CreCla Rental Construction Consulting Mail-Order Construction Consulting Housing Sales Housing Sales CreCla Crecla 15% 6% Housing Sales 52% Sales 91,630million Rental 15% 7% 11% Construction Consulting Housing Sales 51% Operating income 4,672million Rental 29% Construction Consulting Mail-order 8% 17% except HQ-costs Mail-order CreCla Rental Construction Consulting Operating margin on sales Mail-order Housing sales Total 2.8% 14.3% 17.4% 2.7% 5.7% 5.1% 32

5 Operating income trend by Segment Eliminated Mail-order

[Housing sales] Accelerated store openings Sales

1 market share New sources of growth in recent years

34 5 Operating income trend by Segment Eliminated Mail-order Business [CreCla business] Invested for expanding market [Housing sales] Accelerated store openings Sales promoting actively Stabilizing No.1 market share New sources of growth in recent years [Rental Business] [Construction Consulting] High margin, stable business High margin business 33

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