October 14, Copyright Aderans Co., Ltd.

Transcription

1 Aderans Pursuing good company ideal and world brand status Consolidated Results for the First Two Quarters of the Fiscal Year ending February 28, 2017 (March 1, 2016 to August 31, 2016) October 14, 2016 This handout contains forward-looking statements that are based on management s estimates, assumptions and projections at the time of presentation and include risks and uncertainties. A number of factors could cause actual results to differ materially from expectations. Amounts less than a full unit are omitted, and percentages are rounded to one decimal place. Totals may not reflect the sum of component amounts. Copyright

2 Consolidated Results for the First Two Quarters of Fiscal 2017 (March 1, 2016 to August 31, 2016) Copyright 2

3 Summary of Results for First Two Quarters of Fiscal 2017 Recovery in performance still a work in progress Net sales reached 37.8 billion, down 5.0% year on year. Operating income tumbled 63.0% to 169 million. EBITDA settled at 2.3 billion, down 15.9% year on year. The Company posted a net loss attributable to owners of the parent, at 1.3 billion, for the first two quarters of fiscal 2017, reversing from profit position of 349 million in the corresponding period a year ago. Full-year performance forecast for fiscal 2017 has been revised Performance Factors All segments saw sales decrease, but successful cost-cutting efforts kept the Company in a profit position overall. Impact of yen appreciation against other currencies led to foreign exchange losses for the Company on a consolidated basis. Full-year performance forecast revised after taking into account such factors as decrease of domestic women s wig business and losses on the conversion of foreign currencies to yen. -3-

4 Summary of Consolidated Results for the First Two Quarters of Fiscal 2017 Net sales initial forecast unachieved, but operating income surplus. Booked Foreign exchange losses of 1,419 million, reflecting yen appreciation, under non-operating expenses. (Millions of yen) First Two Quarters of Fiscal 2016 First Two Quarters of Fiscal 2017 YOY Change (%) Initial Targets Net sales 39,842 37, % 40,000 Operating income % 200 Ordinary income (loss) 821 (1,245) Net income (loss) attributable to owners of the parent company 349 (1,319) - 30 (Exchange rate) (Average exchange rate) Fiscal Q Fiscal Q Fiscal 2017(presumed rate at of year) US$1 = = US$1 = = US$1 = = (End of period) Fiscal Q Fiscal Q US$1 = = US$1 = =

5 Results for Each Reporting Segment, Operating Income (Loss) for the First Two Quarters of Fiscal 2017 Aderans Business favorable. Fontaine Business and Bosley Business faced uphill struggles. (Millions of yen,) First Two Quarters of Fiscal 2016 First Two Quarters of Fiscal 2017 YOY Change (%) Aderans Business Fontaine Business Bosley Business Overseas Wig Business Other Operations Net Sales 14,503 14, % Operating income (Operating income to sales ratio) 3,384 (23.3%) 3,483 (24.5%) 2.9% Net sales 3,958 3, % Operating loss (Operating loss to sales ratio) (45) (-%) (226) (-%) - Net sales 6,143 5, % Operating income (Operating income to sales ratio) 259 (4.2%) 15 (0.3%) % Net sales 14,117 13, % Operating loss (Operating loss to sales ratio) (520) (-%) (357) (-%) - Net sales 1, % Operating loss (Operating loss to sales ratio) (326) (-%) (629) (-%) - -5-

6 Analysis of Consolidated Sales for the First Two Quarters of Fiscal 2017 Aderans Business and Fontaine Business continued to struggle due to heightened competition in domestic women s wig market. Overseas Wig Business on a growth trend, showing favorable sales results on local-currency basis. (Millions of yen) 39, Male Domestic Operations -497 Female Aderans Business (Custom-made wigs) -185 Fontaine Business (Ready-made wigs for women) Overseas (Bosley Business, Wig Business) -205 Bosley Business, excluding foreign exchange difference 348 Overseas Wig Business (United States and Europe), excluding foreign exchange difference -1,447 Difference effect of yen appreciation North America (wigs) Hair Club: million AHG (wigs, wholesale): million Europe (wigs): + 70 million Bosley: million North America (wigs) Hair Club: million AHG (wigs, wholesale): - 88 million Europe (wigs): million -194 Others 37,860 Fiscal 2016 First Two Quarters Fiscal 2017 First Two Quarters -6-

7 Analysis of Consolidated Operating Income for the First Two Quarters of Fiscal 2017 Successful efforts to control costs in Japan could not compensate for lower sales starting point. Overseas operations showed sales decrease after conversion of local currencies into yen. (Millions of yen) Fiscal 2016 First Two Quarters Fiscal 2017 First Two Quarters 459 Domestic Operations Overseas (Bosley Business, Wig Business) -707 Decrease in domestic gross profit 516 Decrease in domestic SG&A expenses -1,004 1, Increase in overseas SG&A expenses Others Decrease in overseas gross profit Decrease in overseas SG&A expenses, yen appreciation -7-

8 Results for Each Reporting Segment, EBITDA for the First Two Quarters of Fiscal 2017 Aderans Business increase EBITDA. Overseas Wig Business nearly stable in flat EBITDA. (Millions of yen) Aderans Business Fontaine Business Bosley Business Overseas Wig Business Other Operations First Two Quarters of Fiscal 2016 First Two Quarters of Fiscal 2017 YOY Change (%) Sales 14,503 14, % EBITDA (EBITDA to sales ratio) 3,572 (24.6%) 3,732 (26.3%) 4.5% Sales 3,958 3, % EBITDA (EBITDA to sales ratio) 44 (1.1%) (145) (-%) - Sales 6,143 5, % EBITDA (EBITDA to sales ratio) 356 (5.8%) 103 (1.9%) % Sales 14,117 13, % EBITDA (EBITDA to sales ratio) 1,260 (8.9%) 1,215 (9.0%) - 3.6% Sales 1, % EBITDA (EBITDA to sales ratio) (303) (-%) (605) (-%) - -8-

9 Domestic Wig Business: (1) Aderans Business (Custom-made wigs) Sales to men reflect increase in online inquiries and a rally in demand from new clients. Sales to new female clients retreated, paralleling poor attendance at try-on fairs inside department stores. (Millions of yen) First Two Quarters of Fiscal 2016 First Two Quarters of Fiscal 2017 YOY Change (%) Sales Male Female New male clients % Repeat male clients 4,996 5, % New female clients 2,468 1, % Repeat female clients 6,396 6, % Total Operating income (Operating income to sales ratio) EBITDA (EBITDA to sales ratio) Male 5,638 5, % Female 8,865 8, % Total 3,384 (23.3%) 3,483 (24.5%) 2.9% Total 3,572 (24.6%) 3,732 (26.3%) 4.5% -9-

10 Domestic Wig Business: (2) Fontaine Business (Ready-made wigs) Sales at general merchandise stores (GMS) moved in favorable direction, but sales through department store channel continued to fall. (Millions of yen) First Two Quarters of Fiscal 2016 First Two Quarters of Fiscal 2017 YOY Change (%) Department stores 3,047 2, % Sales Directly operated salons % GMS (General Merchandise Store) % Total 3,958 3, % Operating loss (Operating loss to sales ratio) EBITDA (EBITDA to sales ratio) Total (45) (-%) (226) (-%) - Total 44 (1.1%) (145) (-%)

11 Overseas Business: (1) Bosley Business Promoting hair transplantation services in North America through 26 clinics and 44 consultation offices (as of June 30, 2016). Decrease New consultation number Decrease Hair transplantation Procedures and operations showed sales decrease after conversion of local currencies into yen. First Two Quarters First Two Quarters YOY Change of Fiscal 2016 of Fiscal 2017 Number of hair transplantation procedures (Millions of yen, %) (Thousands of US$) (Millions of yen) (Thousands of US$) (Thousands of US$) Sales 6,143 50,998 5,502 49,225-1,773 Operating income (Operating income to sales ratio) 259 (4.2%) 2, ,018 Depreciation/ Amortization EBITDA (EBITDA to sales ratio) 356 (5.8%) 2, ,017 First Two Quarters of Fiscal 2016 First Two Quarters of Fiscal 2017 YOY Change (%) 2,843 2, % FUE (no scalpel required) % Breakdown of Hair Transplantation Procedures in U.S. Market (2014) 51.0% 0.5% 48.5% FUE FUT その他 Others FUT (scalpel used) 2,555 2, % Exchange rates: Fiscal Q $ = , Fiscal Q $ = Source: International Society of Hair Restoration Surgery -11-

12 Overseas Business: (2) Overseas Wig Business Providing custom-made wigs and healthy hair-growth services, mainly through HC (USA) and Aderans Hair Goods. Developing wig business in North America, Europe and Asia. Europe and Asia increase showing favorable sales results on local-currency basis. First Two Quarters of Fiscal 2016 First Two Quarters of Fiscal 2017 YOY Change (Millions of yen) (Local currency) (Millions of yen) (Local currency) (Local currency) North America (Thousands of U.S. dollars) Europe (Thousands of euros) Sales 11,152 92,574 10,623 95,034 2,460 Sales 2,606 19,465 2,488 20, Asia Sales Sales 14,117-13, Total Operating loss (Operating income to sales ratio) (520) (-%) - (357) (-%) - - EBITDA (EBITDA to sales ratio) 1,261 (8.9%) - 1,215 (9.0%) Exchange rates: Fiscal Q $ = , = Fiscal Q $ = , =

13 Performance Trends at HC (USA) Hair Club Developing custom-made wig business and healthy hair-growth services in the United States and Canada. Depreciation burden addressed, leading to higher sales, a return to operating profit and improved EBITDA, on a local currency basis. First Two Quarters of Fiscal 2016 First Two Quarters of Fiscal 2017 YOY Change (Millions of yen) (Thousands of US$) (Millions of yen) (Thousands of US$) (Millions of yen) Sales 9,979 82,840 9,710 86, Operating income (loss) (190) 1, , Depreciation/ Amortization 1,275 10,585 1,082 9, EBITDA 1,084 9,005 1,229 11, Exchange rates: Fiscal Q $ = , Fiscal Q $ =

14 (3) Other Operations (Sales) Sale of wigs through domestic beauty supply route, mainly beauty salons, access to medical-related services at in-hospital salons, and sale of wigs and beauty products by mail order. Drop on beauty route caused by change in wholesaler and dealer sales channels. In-hospital salons charting higher sales, thanks to effect of new locations opened last year. (Millions of yen,) First Two Quarters of Fiscal 2016 First Two Quarters of Fiscal 2017 YOY change (%) Beauty supply route % In-hospital salons % Mail order % -14-

15 Change in Quarterly Consolidated Net Sales, Operating Income (Loss) and EBITDA (Millions of yen) Consolidated Net Sales Fiscal 2015 Fiscal 2016 Fiscal ,000 20,000 19,131 18,729 15,000 10,000 5, Q 2Q 3Q 4Q (Millions of yen) 2,000 1,500 1, ,000 Consolidated Operating Income (Loss) Fiscal 2015 Fiscal 2016 Fiscal Q 2Q 3Q 4Q (Millions of yen) Consolidated EBITDA 3,000 2,500 2,000 Fiscal 2015 Fiscal 2016 Fiscal ,645 1,500 1, Q 2Q 3Q 4Q -15-

16 Fiscal 2017 Full-Year Forecast -16-

17 Underlying business environment Structural changes appear in women s wig market Changes in domestic business environment Expanding women s market Background More women are falling into the age group that is our primary target. Notable development: Active senior segment target customer group is expanding Wigs are becoming accepted as a fashion item. Huge inflow of low-priced products (mainly via TV e-commerce catalogue sales) Fiscal 2013 Fiscal 2014 Fiscal 2015 Demand from women surpasses demand from men 70.7 billion (+1.1%) 71.1 billion (+0.6%) Impacted well-established wigmakers carrying product in high-price range Impacted high-price custom-made wigs Business chances Up More companies entering market, Intensifying price competition Impacted high-end ready-made wigs sold at department stores -17-

18 Strategy to Return Women s Wig Business to Profitability: 1) Invigorate existing operations Enhance hair-volumizing service Hair Up Offer relaxed hair-volumizing services Boost interest in custom-made wigs Spur demand for custom-made wigs Reinforce maintenance services to handle other companies products Offer services through industry s best network 536 salons to maintain wigs, even those made by other companies, as a frontline activity in hair consulting services Apply flexible pricing for custom-made wigs Enhance after-sales services Stimulate demand for ready-made wigs -18-

19 Strategy to Return to Profitability in Women s Wig Business : 2) Attract new customers, attract interest from wider age range Reinforce efforts web-based advertising Advertising and promotions are vital to brand strategy Emphasize cost-effectiveness of approaches but focus on web-based media Optimize try-on events at department stores Utilize shopping malls as sales channels Increase in customers underpins return to profitability Build customer base Higher sales Return to profitability stable revenue Number of customers Bigger customer base Cultivate new sales channels, such as mail order, GMS and new department store routes Number of customers (sales) Mail order membership Number of GMS locations Department store presence Up Mail order GMS (General Merchandise Store) Department stores + + Hi-Net, with strong department store presence, came under Group umbrella (Oct. 2016) -19-

20 Turned Hi-Net into 100% Subsidiary (October 1, 2016) Strengthens Women s Wig Business Main Business Makes and markets wigs and hairpieces Developing store presence, at department stores and specialty shops across Japan Also makes and markets medical wigs for people who have lost hair due to sickness or injury Headquarters 40-23, Nukui 3-chome, Nerima-ku, Tokyo Paid-in Capital 50 million Net Sales 3.8 billion (as of April 2016) Anticipated effects (1) Expanded presence at department stores (most vital sales channel for women s wigs) 157 salons + 89 salons = 246 salons (As of October 1, 2016) (2) Enhanced lineup of women s wigs *Seek to boost store operating efficiency through shared use of administration department and improve profitability through synergy with Aderans Group s sales network. *Enhanced presence with wigs for younger customers through eight NAVANA shops. -20-

21 Fiscal 2017 Performance Forecast Given first-half results, performance forecast revised. Full-out effort to achieve recovery in earnings Continue to invest in sales promotions and advertising activities to spur recovery in domestic sales to women (attract new clients and win over users of other companies' products boost repeat ratio) Anticipate lower sales at Hi-Net due to one-time costs. Overseas: Maintain investment to support U.S. operations, namely, stable growth at HC and higher sales at Bosley, and consider impact of exchange rate fluctuations. (Millions of yen) Fiscal 2016 (Actual) First Half Second Half Full Year First Half (Actual) Fiscal 2017 (Forecast) (Revised) Second Half (Forecast) Full Year (Forecast) Second Half Initial Targets Full Year Net sales 39,842 39,310 79,153 37,860 39,540 77,462 41,300 81,300 Operating income (loss) 459 (584) (125) 169 (538) (370) Ordinary income (loss) Net income (loss) attributable to owners of the parent company 821 (1,370) (548) (1,245) (275) (1,520) (2,209) (1,860) (1,319) (581) (1,900) Exchange rates: Fiscal 2016 $ = , = Fiscal 2017 (Initial plan) $ = , = Fiscal 2017 (Revised forecast) $ = , =

22 Consolidated Capital Expenditures and Depreciation/Amortization Depreciation/ Capital 減価償却費 EBITDA 設備投資 Amortization expenditures (Millions of yen) 6,766 7,204 4,032 3,953 2,919 4,621 4,623 3,701 4,072 1,249 1,782 2,011 4,323 4,748 4,752 3,149 1,170 1,061 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 (Target) 2012 年 2 月期 2013 年 2 月期 2014 年 2 月期 2015 年 2 月期 2016 年 2 月期 2017 年 2 月期 ( 計画 ) -22-

23 Aderans Noteworthy Features and Strengths -23-

24 Huge Share of Domestic Hair Care Market Backed by Enduring Customer Trust (Share of women s market hovers near 38%) Other companies 31.9% Share of Domestic Hair Care Market (Men) Company D 4.2% Men s hair care market in Japan valued at 69.1 billion in 2015 Company C 6.2% Company B 7.8% No major changes in share status of manufacturers since 2012 Aderans 16.0% Company A 33.9% Source: Hair Care Market Report Overview 2016, Yano Research Institute Other companies* 22.0% Company E 3.3% Company D 3.9% Company B 4.2% Share of Domestic Hair Care Market (Women) Hi-Net 5.9% (Became subsidiary in October 2016) Women s hair care market in Japan valued at 71.1 billion in 2015 Aderans 37.9% Company A 22.8% *Low-priced ready-made wigs from companies in industries outside hair care sector (pharmaceuticals, cosmetics, beauty salons) and small wig makers (about 300 companies) Wig makers and companies entering from other industries with low-priced ready-made wigs are expanding shares through their own distribution channels -24-

25 Japan s Largest Sales Network Supported by Solid Customer Base (439 salons, as of August 31, 2016) Developing regional bases across the country Changes in number of salons by genre in Japan Directly operated salons 413 salons * *As of August 31, 2016 (Excluding in-hospital salons) Chugoku 17 salons Kansai 72 salons Hokkaido 24 salons Tohoku 29 salons Kanto 160 salons Men s 男性サロン salons Women s 女性サロン salons Salons for men and 男女併設サロン women Department 百貨店 stores Directly 直営店 operated salons GMS GMS In-hospital 病院内サロン salons Kyushu Okinawa 46 salons Shikoku 12 salons Chukyo 53 salons We can provide the best hair-related consultation services because we maintain points of contact close to customers Feb. 29, 年 2013 Feb. 28, 年 2014 Feb. 28, 年 2015 Feb. 28, 年 2016 Feb. 29, 年 May , 年 Aug , 年 月末 月末 月末 月末 月末 月末 月末 -25-

26 Business Rapidly Expanding Worldwide Presence in Japan and 15 other countries and regions, as of August 31, Overseas sales exceed domestic sales in fiscal Europe 7 countries * Japan (headquarters) North America 2 countries * 3.3 billion Europe 5.1 billion Asia 6 countries * 1.5 times Asia 850 million 13.1 billion 3.0 times 280 million North America 34.7 billion 2.6 times Feb Feb Feb Feb Feb Feb 年 2015 年 *Europe: 12 月期 12 月期 United Kingdom, Sweden, France, Germany, Benelux region (Belgium, the Netherlands, Luxembourg), Norway, Denmark 2010 年 2015 年 *Asia: 12 月期 12 月 China, Taiwan, Singapore, Thailand, the Philippines, Laos 2010 年 2015 年 *North 12 月期 America: 12 月期 United States, Canada -26-

27 Overseas Business Expansion Through Effective M&A Activity Steadily expanding overseas operations fueled by vigorous merger and acquisition activity, especially in the United States. M&A (Acquired in August 2001) Expanding business (Billions of yen) 11.8 (Acquired in April 2013) FY2013 年 FY2014 年 FY2015 年 FY2016 年 2 月期 2 月期 2 月期 2 月期 Hair-related businesses Close contact with clients ensures ready access to necessary services and consultations Overseas Wig Business 24.0 (Billions of yen) 28.3 (Apr. 2013~) 17.9 M&As useful in securing wider customer base and business presence and in cultivating demand 5.2 FY2013 年 FY2014 年 FY2015 年 FY2016 年 2 月期 2 月期 2 月期 2 月期 -27-

28 No.1 Wig Brand in Growth Market United States Contributes about 39% to Aderans consolidated sales (as of fiscal 2016) United States <Growth market> Market scale *1 $1.4 billion 70 million people Share *2 13% (No.1) *1 Estimated by L.E.K. Consulting, March 2012 *2 Company estimate for year ended December 2015, excludes hair-transplantation market Hair transplantation business Clinics 26 Consulting offices 44 Net sales Net sales: Fiscal 2016, $= Number of salons: As of June 30, ,897 million Market scale * billion 12 million people Japan <Mature market> Aderans share 28% (Fiscal 2016) Biggest custom-made wig company in North America Directly operated salons 90 Net sales 20,345 million (Company estimate for fiscal 2014, men s market only) *3: Hair Care Market Report Overview 2016, Yano Research Institute -28-

29 R&D + Industry-Academic Collaboration Supports Capabilities Leading-edge research and results through industry-academic collaboration Industry leader in number of patents acquired Research on hair care Collaboration with universities Hair-volumizing, healthy hair-growth techniques More than 40 40年 以上 years 5 件 件 research themes patents Phase Ⅱ (As of August 31, 2016) Clinical trials with human subjects have reached Phase II Note: Number of published domestic patents (as of August 31, 2016; according to survey by Japan Platform for Patent Information) Aderans R&D website:

30 Growth Strategy -30-

31 Aderans Basic Strategies Profitability High Beauty market North America Europe AGA Hair care consulting Medical salons Market scale Reinforced profitability and expanded scope of business Asia Big Domestic Men s wig business Domestic Women s wig business Growth Sales -31-

32 Priorities: Return to Profitability in Domestic Women s Wig Market, Expand Overseas Operations Changes in Domestic Women s/men s Hair Care Markets Domestic markets have matured but demand for women s hair care products and services has eclipsed that of men s market (Rate of growth in women s market exceeded that of men s market in 2013) Changes in Domestic/Overseas Sales Overseas sales, particularly from U.S. subsidiaries, is steadily expanding Recently, overseas sales neck and neck with domestic sales (Hundred million yen) (Hundred million yen) Female 699 Annual average growth rate +0.9% Japan Male 689 Annual average growth rate -0.4% Overseas 年 年 年 年 年 年 年 年 年 年 (plan) (plan) (plan) (plan) (plan) ( 予定 ) ( 予定 ) ( 予定 ) ( 予定 ) ( 予定 ) Source: Hair Care Market Report Overview 2016, Yano Research Institute Feb 年 Feb 年 Feb Feb. 年 2016 Feb 年 2 月期 2 月期 2 月期 (Target) 2 月期 Source: Aderans -32-

33 Improve Profitability of Domestic Women s Wig Business, Make Inroads into Beauty Market Material consumption Consumption based on intangible value Stimulate demand for mainstay custom-made wigs Promote Hair Up hair-volumizing service for women Add new price range categories and reduce average prices Enhance ability to provide services through salon network Invigorate existing business Reinforce maintenance services for wigs made by other companies Extend scope to include women who have purchased ready-made wigs from other companies Take opportunity to reemphasize Aderans services and high quality Make inroads into beauty market Brought women s wig company Hi-Net into Aderans Group (October 2016) Attract new customers Reinforce women s wig business Cultivate market Highlighting advanced beauty Genuine beauty support Diversify ready-made wig sales channels Such as GMS (general merchandise stores) and online sales Expand activities such as Pink Ribbon Campaign (breast cancer treatment) Awaken and inspire a heightened sense of fashion -33-

34 Revitalizing the Men s Wig Business: Strengthen Existing Business and Enhance Hair-Growth Treatments (for androgenetic alopecia) Promote new growth/maintain healthy hair Volumize/Vitalize Suggest use of wig Aderans has struggled to boost sales to men over the past few years due to heightened competition from adjacent markets offering such products as tonics and oral treatments to promote hair growth and maintain healthy hair. But many consumers are not getting effective results, leading them to seek alternatives, which in turn has recharged Aderans sales to new clients. Enhance services, particularly treatments to promote new growth for androgenetic alopecia (AGA), or male pattern hair loss Expand presence at edge of market, such as scalp care services Boost repeat ratio (lower fixed cost ratio) Spur demand for total solutions to hair-related concerns Boost repeat ratio (lower fixed cost ratio) Sustained demand for services/products to promote new hair growth and maintain healthy hair Attract more clients by expanding presence in peripheral fields Total solution capabilities: Wigs, hair-volumizing products, hair transplantation -34-

35 Strengthen Medical-Use Wig Business The Aderans Group supports the Pink Ribbon Campaign Expand presence in medical-use wig business by increasing the number of in-hospital salons where patients can enjoy hair care services in a relaxed setting Provide medical-use wigs and operate hair care salons Provide beauty salon function + = Wider popularity of medicaluse wigs and bigger market JIS-certified medical-use wigs Develop network of salons inside hospitals providing medical-use wigs and hair care services Japan Hair Industry Association certification Mark signifying products are JIS-compliant As of July 2015, A total of 20 medical-use wigs from Aderans are JIS-compliant Give patients who need medical-use wigs as well as treatment providers peace of mind Improve quality of life First step toward insurance/medical deduction eligibility From Hokkaido to Kyushu Nationwide 26 salons (As of August 31, 2016) In Tokyo - Keio University Hospital - Cancer Institute Hospital - Tokyo Medical Center - Tokyo Teishin Hospital - Tokyo Metropolitan Cancer and Infectious Diseases Center Komagome Hospital -35-

36 Overseas Strategies Win Over Customers in Growth/Expanding Markets Expand global market share and secure stable profitability Reforms 2016 Leap forward 2017 United States Europe Asia Move from stability to great leap forward HC (USA): Accelerate store openings and reinforce business for women s market Bosley: Increase global presence, expand surgical business Aderans Hair Goods: Expand sales channels Move from stability to great leap forward Enter uncharted territory Enhance lineup of custommade wigs Reinforce wig-related after-sale services Reverse course to growth Firm footing for hair solutions business Stability 2018 Sustainable growth Offer new services utilizing strengths in surgical procedures performed by physicians, promote in other countries, and enhance healthy hair-growth services. Reinforce after-sale services in the wig/hair-volumizing market to meet demand from African- Americans. Strengthen response by custommade wig salons, accelerate entry into countries where presence has yet to be established, and maximize solid reputation for excellence to capture No.1 share in all regions. Establish hair solution business, acclerate growth in China, and open new locations in the ASEAN region. -36-

37 Overseas (1): United States Growth Drivers (market cultivation, extensive presence in hair-related businesses) First Stage Improve access to market, mainly through acquisitions Second Stage Cultivate market Wigs (2013) Hair transplantation (2001) Men s Market Expansion Women s Market Creation No.1 Share 13% (Company estimate, excludes hair transplant market) Salons in New York and elsewhere 116 salons (As of June 30, 2016) -37-

38 Overseas (2): Europe, Asia Next Stage of Overseas Business Growth in Markets with Good Prospects Europe Promising market for ready-made wigs Spur demand Launch custom-made wigs Asia Southeast Asia showing amazing economic growth, particularly in Thailand and Singapore Cultivate demand for hair-related products and services, especially healthy hair-growth services and hair transplantation procedures -38-

39 Supplementary Data -39-

40 Aderans: Leading Company in Hair Industry with Total Solutions Providing comprehensive range of products and services, from wigs, hair-volumizing options and healthy hair-growth services to hair transplantation No.1 in hair industry Strong brand image with women (No.1 in domestic women s market, with about 38% share) Quick to pursue business opportunities abroad Global presence (Overseas sales higher than domestic sales) New face of men s hair-volumizing and healthy hair-growth services: Actor, Kenichi Endo Debuts in television commercial airing from October 1, 2016 (As of fiscal 2016) -40-

41 Clients Providing Total Hair Solutions Providing a comprehensive range of products and services to meet clients hair-related needs Hair Care Market Comprises Range of Business Segments Total Hair Solutions Hair transplantation (medical field) Hair transplantation Wigs Wigs Custom-made wigs Ready-made wigs Medical-use wigs: Obtained JIS-compliant rating in April 2015 写真 Volumized/revitalized hair Volumized/revitalized hair New hair growth /healthy hair growth Hair artificially volumized Hair care New hair growth/healthy hair growth Use scalp care treatments to create environment that promotes healthy hair growth 41

42 1968~ Established Launched sales of custom-made wig for men Catalyst of accelerated growth: Men increasingly concerned about thinning hair History On Course to 50th Anniversary in 2018 Meticulously executed search to discover client needs is starting point for corporate growth - Heartfelt omotenashi ~ Catalyst of accelerated growth: Women more concerned about thinning hair and increasingly more beauty- and fashionconscious 1989~ Entered into business of healthy hair-growth services Emphasized as approach to deal with male pattern hair loss Pushed CSR as a corporate strategy Become leading company in hair industry 2001~ United States Acquired Bosley, in the business of hair transplantation Acquired HC, a wig company France Acquired LNEB, a wig company The Philippines, Laos Established production bases Energized overseas operations through M&A activity and construction of production sites 42

43 Five Great Aderans Brands Top share of hair transplantation market in North America Maintains network of 26 clinics and 44 consultation offices (as of June 30, 2016) For men: Custom-made wigs, hair-volumizing products and healthy hair-growth services Sells custom-made wigs to men and women in the United States and Canada. Provides healthy hair-growth services. Promotes wig business with Group companies in North America, Europe and Asia. Five great brands For women: Ready-made wigs For women: Custom-made wigs, hairvolumizing products, hair care and scalp care 43

44 Overseas Business Presence Underpinned by 247 Locations in 15 Countries Expand hair-related businesses around the world Europe Cemented position as No.1 company in the hair industry (as of fiscal 2016) Asia Japan United States Change in Number of Locations by Region Bosley (Surgical offices) Hair BOSLEY( Club (Directly 施術室 operated ) HAIRCLUB( salons and franchises) 直営店 ) Europe 欧州アジア Asia Has captured No.1 share (13%) of high-growth U.S. market and is poised to expand share still further Entering more areas of Europe and Asia to build next stage of growth Dec. 年 月末 Dec 年 月末 Dec 年 月末 Dec 年 月末 Mar 年 Jun 年 月末 月末 44

45 Consolidated Balance Sheets for the First Two Quarters of Fiscal 2017 Millions of yen First Two Quarters of Fiscal 2016 Composition (%) Millions of yen First Two Quarters of Fiscal 2017 Composition (%) YOY Change (Millions of yen) Current Assets 27, , ,933 (Cash and deposits) 11, , Fixed assets 39, , ,491 (Tangible fixed assets) 14, , (Intangible fixed assets) 19, , ,645 Total assets 67, , ,424 Current Liabilities 12, , Fixed liabilities 19, , ,313 Total liabilities 31, , ,893 Total net assets 36, , ,530 Total liabilities and net assets 67, , ,

46 The Aderans Group Ideal (Future) To offer hair-related products and services that people need and be trusted by clients and society around the world Servant Leadership Management Management Philosophy Management Vision Sampo yoshi Management Management Philosophy Our corporate mission, as the Aderans Group, is to utilize our hairrelated businesses to help as many people as possible acquire the physical and emotional qualities that underpin the realization of dreams and promote a good impression, and in doing so, bring smiles to faces and support happy lives. Product excellence Technological excellence Heartfelt omotenashi Management Vision Realizing good company standard Establish management structure which is highly transparent and trusted from inside and outside the company Servant Leadership Management Leadership to support clients and employees Pattern of executive behavior that motivates employees, encourages them to persevere and allows their talents to blossom Sampo yoshi -literally, three-way good - Management ES Employee Satisfaction CS Customer Satisfaction CSR Corporate Social Responsibility Establish ECSR management 46

47 Disclaimer This document has been prepared to enable you to understand the Company better and is not intended to solicit investment in the Company. Forward-looking statements in this document are based on targets and projections and do not constitute any form of promise or guarantee of achievement. Furthermore, please use these materials on the understanding that the Company s future performance may differ from the projections expressed at this time. Statements pertaining to future events, including business results, are based on various data deemed reliable, but the Company does not guarantee the accuracy or certainty of such data. The information in this document is presented on the assumption that it will be used at the discretion of clients to form their own judgments about the Company, even in such cases where the information is used by investors for whatever purpose they choose. The Company will not be held liable for such decisions or actions under any circumstances. October 2016 Contact: Global IR Department TEL: FAX: