FY2014 Consolidated Business Results and Forecasts...Media（DMS） 35 Kita-Kanto 209 Media（DMS） 111 Reuse（DMS） 36 WAREHOUSE 5 Minami-Kanto 249 media 887 958 1001 Media（DMS）

FY2014 (from April 1, 2013 to March 31, 2014)

Consolidated Business Results Consolidated Business Results and Forecasts

GEO HORLDINGS CORPORATION May 2014May 2014

www.***.comhttp://www.geonet.co.jp/

Changes to our business segments and disclosure methodg g

We have omitted the disclosure of our amusement segment in our Japanese financial filings and financial announcements from FY2014 as GEO DINOS which was previously one of our Group FY2014 as GEO DINOS, which was previously one of our Group companies operating in the amusement segment, has been removed from our Group as of January 16, 2014. Consequently, the volume of our retail business segment now accounts for the volume of our retail business segment now accounts for greater than 90% of the total assets of our Group.

Furthermore we recognize the current term as the start of Furthermore, we recognize the current term as the start of medium to long term business restructuring, and have decided to make changes to our earnings announcement presentation materials in order to allow our stakeholders to better understand materials in order to allow our stakeholders to better understand the entire picture of our business restructuring process.

2


Executive Summary

Financial summary

FY2014 Business Results From FY2015 onward

Forecasts for FY2015

Achieved record high sales

F ll h f fi

y

Revenue of ¥270 bil.

O ti fit f ¥7 bilFell short of profit targets

Expand the reuse businessMidterm restructuring & our strategies

Operating profit of ¥7 bil.

Overview of various strategies Viewpoint of medium term restructuring

• New concept store deploymentStore opening targets nearly achieved

New business launched and

New concept store deployment

• Organizational restructuring and

investments in human resourcesmedia shops evolved

Omni-channel launched: O2O developed

investments in human resources

• Accelerate store openings in attractive

locations and scraping stores

3

locations and scraping stores

• Promote a network strategy


FY2014 fi i lFY2014 financial summary

4


Consolidated Financial Summary for FY 2014

（millions of yen）

03/2013 03/2014

i t

Profits fall short of targets despite record high sales

results sales ratio results sales ratio YOY variance YOY (%)

variance to FY2014

forecasts

achievement (%)

FY2014 forecasts

sales ratio

Sales 259,288 262,324 3,036 101.2% -676 99.7% 263,000

Gross profit 110,690 42.7% 110,022 41.9% -668 99.4% -1,378 98.8% 111,400 42.4%

SG&A 94,725 36.5% 100,819 38.4% 6,093 106.4% 118 100.1% 100,700 38.3%

Operating income 15 965 6 2% 9 203 4 1% -6 761 57.6% -1 497 86.0% 10 700 4.1%Operating income 15,965 6.2% 9,203 4.1% 6,761 57.6% 1,497 86.0% 10,700 4.1%

Ordinary income 15,643 6.0% 9,347 4.2% -6,296 59.8% -1,652 85.0% 11,000 4.2%

Income before income taxes and minority interests

14,665 5.7% 7,729 3.7% -6,935 52.7% -1,976 79.6% 9,705 3.7%minority interests

Net income 8,380 3.2% 3,839 2.1% -4,540 45.8% -1,661 69.8% 5,500 2.1%

・Record high sales achieved on the back of increases in new store openings

・Reasons for the shortfall in profits1) Lackluster sales growth of media goods2) Weaker sales and increased cost in Q4 3) devaluation of some inventories (to be explained later)

5

・Main factors influencing net income1) ¥0.5 bil. loss on sales of stocks in subsidiary2) ¥0.2 bil. loss arising from the repeal of the special corporate tax for reconstruction


Weakness in Q4

Q1 Q2 Q3 Q4 variance to FY2013 Q4

Sales 57,919 64,336 72,170 67,897 1,761Cost of products sold 30 934 36 531 43 605 41 230 3 116

Quarterly Consolidated SG&A

Cost of products sold 30,934 36,531 43,605 41,230 3,116Gross Profit 26,985 27,805 28,564 26,666 -1,354

Transportation expenses 248 267 276 309 74

Advertising expenses 703 939 901 885 66

Promotion expenses 252 298 321 299 120

P i i t 219 235 245 294 208Processing consignment expenses 219 235 245 294 208

Total of Cost of Sales 2,090 2,500 2,540 2,514 543Total of personnel expenses 10,776 11,051 11,436 11,485 253

Business consignment expenses 623 606 601 611 -155

Travel expenses 144 141 150 171 43

Land and rent expenses 4,818 4,918 4,952 4,955 191

Supplies expenses 769 762 888 1,124 379

Recruiting expenses 42 39 52 77 60

Other expenses 10,853 11,572 11,235 11,657 717SG&A 24,019 25,429 25,474 25,896 2,028Operating income 2,966 2,376 3,090 770 -3,383

Rental 94.9% 100.0% 95.0% 92.2%

Used products 90.3% 89.8% 90.0% 95.7%

Year-on-year average mainstay product sales at existing media shops（mil. ¥）

・ Strong sales of media products during the 1st half and slowed during 2nd half

・ Two heavy snow storms on the weekends compounded by slow recovery in

New products 87.8% 118.3% 97.7% 109.1%

Total 92.0% 102.8% 95.1% 99.1%

Operating incomefell to FY2006 levels

6

・ Two heavy snow storms on the weekends compounded by slow recovery in

demand after the Winter Olympics

・ Increase in SG&A due primarily to renovation of “FAMILY BOOK” stores into GEO brand

fell to FY2006 levels


Valuation decline due to use of conservative inventory valuation method

Year-on-year Gross profit by mainstay products

120.0%

140.0%

60 0%

80.0%

100.0%

1Q 2Q 3Q 4Q

レンタル 107 6% 111 6% 99 9% 62 8%

40.0%

60.0%

レンタル 107.6% 111.6% 99.9% 62.8%

中古 92.2% 76.2% 92.2% 66.6%

新品 106.2% 127.1% 103.5% 74.9%

リユース 108.5% 110.7% 111.2% 111.0%リ % % % %

A devaluation method (half to full amount of value) applied during the second quarter to inventories of some current game consoles and software along with the introduction of a new home use game platforms

7

introduction of a new home-use game platforms


Expansion of reuse business

100%

Gross profit of mainstay products60030,000

Upward trend of reuse business

40%

60%

80%

100%

300

400

500

600

15,000

20,000

25,000

30,000

1Q 2Q 3Q 4Q

タ 12 278 13 412 11 760 11 835

0%

20%

40%

0

100

200

-

5,000

10,000

2011/3 2012/3 2013/3 2014/3

（mil. ¥)

レンタル 12,278 13,412 11,760 11,835

中古 4,408 3,708 4,392 4,737

新品 1,744 2,242 2,837 2,725

リユース 4,483 4,179 5,746 4,554

2011/3 2012/3 2013/3 2014/3

売上 21,415 23,812 25,314 28,434

粗利 14,061 15,600 17,178 18,963

店舗数 340 323 346 368

（mil. ¥)

Growth rate of reuse business（year-on-year）

Net Sales 111.2% 106.3% 112.3%

Gross profit 110.9% 110.1% 110.4%

Reuse business sustained growth over 10% both in sales and gross profit, and its gross profit contribution to the mainstay products marked roughly 20% throughout FY2014.

p

# of shops 95.0% 107.1% 106.4%

8


Overview of Strategies gimplemented in FY2014

9


store opening targets nearly achieved

Hokkaido 135number of stores

※conjoined facilities are double-counted ※Franchises and agencies are included in

block totals

80010001200140016001800 Media (DMS) 84

Reuse (DMS) 30

Tohoku 173Media（DMS） 117Reuse（DMS） 31

2012/3 2013/3 2014/3

media 887 958 1001

0200400600800

Koshinetsu 76Media（DMS） 44Reuse（DMS） 18

Hokuriku 60Media（DMS） 35

Kita-Kanto 209Media（DMS） 111Reuse（DMS） 36WAREHOUSE 5

Minami-Kanto 249Media（DMS） 158media 887 958 1001

FB 43

reuse 187 211 239

conjoined 94 95 88

WAREHOUSE 55 53 11

Media（DMS） 35Reuse（DMS） 14

Chugoku 94Media（DMS） 54Reuse（DMS） 14

Media（DMS） 158Reuse（DMS） 37WAREHOUSE 6

Tokai 225 Media（DMS） 171Reuse（DMS） 37

others 6 4 2

FCs 133 130 123

AGCYs 106 102 99

TDMS 1229 1321 1384 Shikoku 74Media（DMS） 45

Kyusyu 233M di （DMS） 161

Kinki 170 Media（DMS） 109Reuse（DMS） 50

Total 1468 1553 1606

L d th i iti f “FAMILY BOOK” t d di d b i i th K t i



※ con: Each media and reuse shop independently located on a single premise※ TDMS: Total number of Direct Management Shops ( franchises and agencies excluded from the total)※ FB：Familybook converted to media or reuse shops in FY2015 (conversion of 24 stores finished by the end of FY2014)

10

Leveraged the acquisition of “FAMILY BOOK” to expand our media and reuse businesses in the Kanto region (especially northern Kanto), a strategic area for expansion, in combination with steady expansion of directly operated stores in western Japan

※ removal of 40 amusement arcades (as of Jan. 16 2014) operated by GEO DINOS


New business launched and sophistication of media shops

Floor space: a little less than 1,000 square meters

Develop interior and exterior designs that look good at night and give the impression of being clean and not low cost in construction

Keep product display neat and clean and create a display method that

Floor space: over 2,000 square meters

Feature an overwhelming selection of more than 100,000 items, based on the current “2nd STREET” store concept

p p p y p yenhances the relationship between itemsIntroduce game products available at media shops

GEO, matsuzaka otsuka, Mie

Super 2nd Street, kashiwa shonan, Chiba

Launch two “Super 2nd STREET” (SSS) large comprehensive shops in Chiba prefecture

C d & b ld f d h l d d h h l

11

Conduct scrap & build strategies for media shops tailored in accordance with each areal characteristic and trade zone


The first year of omni-channel strategy: O2O formation

Coupon

Diagram of O2O Cycle with GEO Appli

Store StampApplication currency

Mini Games

Review

Product inventory search

Collection Board

Guiding our customers from the application to our shop

Released “GEO Appli” for smart phones in November 2013 as the first step of our omni-channel retailing strategy (To be explained later)

BoardApplication functions

12

(To be explained later)

Acquired 1 million users within 4 months and firmly established O2O


Forecasts for FY2015

13


Forecasts

30,000

35,000

300,000

350,000

売上

営業利益

純利益

（millions of yen）

（left scale）

20,000

25,000

200,000

250,000純利益

（right scale）

5,000

10,000

15,000

50,000

100,000

150,000

2013 2014 2015

results sales ratio results sales ratio forecasts (1st half)

l 270 000

00

Sales 259,288 262,324 270,000 125,200

Operatingincome

15,965 6.2% 9,203 3.5% 7,000 2,200

Ordinaryincome

15,643 6.0% 9,347 3.6% 7,500 2,450

Net income 8,380 3.2% 3,839 1.5% 6,000 2,300

・Maintain growth at existing stores and grow sales through ongoing new store openings

・Conduct upfront investments in consolidation process in order to accelerate revisions in the business portfolio

14

・Conduct upfront investments in consolidation process in order to accelerate revisions in the business portfolio

・New store openings targets: media 30 reuse & integration 50 (including consolidation)


Medium term restructuring and strategiesand strategies

15


Overview of medium term restructuring

Operating profit margin of 6.5% and ROE of 15% targeted for FY2018

Investment in our organization & human resourcesMedia

Facilitate our organizational environment conductive to innovationSecure such human resources as restructuring, and covering the breadth of, our store packages

Store opening strategyAccelerate store openings in attractive locations and scraping Restructuring of our Group

t d t

Review of our supply chain

stores

Network strategyFortify the network strategy for our omni-channel retailing

Acquire new products & businessesTests and horizontal deployment of new products leveraged by our

Proposing new store solutions to customers exceeding the boundaries of

our store formats

management resources and system

Tests and horizontal deployment of new products leveraged by our direct-management operationUtilizing M&A for faster new business acquisitionReuse Amusement

Image of our business portfolio shift (excluding new businesses acquired through M&A)

Media businessReuse businessCombined

16

Combined

2014 FY2015 FY2018


New Concept Shop Deployment

(You can find what you want)

Flagship Shop

A brand new store solution to customers exceeding the boundaries of our store packages

Floor space 2500 square meters

Super 2nd STREER Omiya nisshin store, Saitama

prefecture

Floor space 2500 square meters

17


Investments in our organization and human resouces

Investments in organizational environment and human resources

so as to bring improvements and innovation free of the mold of our past

Compensation structure designed to incentivize contributions to the business performance

Selection for promotion at our subsidiary GEOSelection for promotion at our subsidiary GEO

Flattering the overall structure including the chain of command at our subsidiary GEO

Securing such human resources as restructuring, and covering the breadth of, our store packages

200 personnel to be trained by FY2018 end who can operate both media 200 personnel to be trained by FY2018 end who can operate both media and reuse shops

→ accelerate deployment of customer-value-proposition (CVP) sensitive stores

18


Accelerate store openings in attractive locationsand scraping storesp g

メディア系Media shopPR: Prefectural RouteNR: National Route

Challenge large space stores on main streets within key trade area

Accelerate shop consolidation including resolving

Floor space1,750 square meters

cannibalization of our own stores through“large space stores on main street” strategy

PR270

Sanotakahagi shop Tochigi prefectureSanotakahagi shop, Tochigi prefecture

Super 2nd STREET Kashiwanuma minami store, Chiba Prefecture

リユース・融合系

fill voids

O i t t f i l

Reuse・Integrated shopFloor space1,980 square meters

NR16

Ongoing strategy of opening large stores (more than 1,600 square meters, 500tsubo）

19


Fortifying network for omni-channel retiling strategy

Newly established GEO NETWORKS provides integrated online services for GEO Group

Make GEO Appli more influential in the market with its million user base media value enhanced effectively by movie review and other application functions

Release a reuse smart phone application based on the knowledge and experiences of GEO Appli

Omni Channel BASIC Platform

GEO Appli member’s card

Reuse member’s card

Rental shop A

used items for saleRental DVD

Reuse shop B

GEO Group membership

data

card

GEO Group to centrally manage information of

members

Pre-input of product information

Store A does not have the DVD I want！

New function

New function

Value added service for our customers

Online＋Rental Shop A

Online＋Reuse shop BEither at our shop or your house

Avility to select products online

Purchase can be made either at stores or

booking and pickup at Shop A available through online

either at stores or online

GEOHome GEO

GEO Group online service

Example of GEO

20

Home delivery

DVDrental

GEOSNS service

GEOEC

digital contents mart

Example of GEO omni-channel retailing


A diAppendix

21


Summary of Consolidated SG&A

(millions of yen)

03/2013 04/2014

results sales ratio results sales ratio YOY variance YOY (%)

Total of Sales expenses 8,263 3.2% 9,617 3.7% 1,353 116.4%

Advertising expenses 3,615 1.4% 4,078 1.6% 462 112.8%

Sales promotion expenses 845 0.3% 999 0.4% 153 118.2%

Total of Personnelexpenses

42,114 16.2% 44,692 17.0% 2,578 106.1%

Other expenses 43,125 16.6% 45,484 17.3% 2,359 105.5%

Utilities expenses 5,858 2.3% 6,437 2.4% 579 109.9%

Land and rent expenses 18,660 7.2% 19,990 7.6% 1,330 107.1%

Depreciation 4,039 1.6% 4,581 1.7% 541 113.4%

Supplies expenses 3,090 1.2% 3,172 1.2% 81 102.6%pp p 3,090 % 3,172 % 81 0 6%

Repair expenses 820 0.3% 930 0.4% 109 113.4%

Amortization of goodwill

1,222 0.5% 906 0.3% -316 74.1%

Total of SG&A 94,725 36.5% 100,700 38.3% 5,975 106.3%, , ,

※The above statement shows major expenses in SG&A only.

22


Summary of Consolidated Profit and Loss（5 years）

25,000350,000売上粗利営利純利

(left scale) (right scale)

(millions of yen)

15,000

20,000

200,000

250,000

300,000

5 000

10,000

100,000

150,000

03/2010 03/2011 03/2012 03/2013 03/20140

5,000

0

50,000

Net sales 241,491 253,082 258,244 259,288 262,324

Cost of goods sold (148,257) (148,720) (148,011) (148,597) (152,301)

Gross profit 93 233 104 362 110 232 110 690 110 022Gross profit 93,233 104,362 110,232 110,690 110,022

Operating income 13,287 14,094 18,306 15,965 9,203

Ordinary income 13,845 14,447 16,464 15,643 9,347

Net income 6,665 7,512 6,842 8,380 3,839

23


Summary of Consolidated Balance Sheet（last 5 years）

(millions of yen)

3/31/2010 3/31/2011 3/31/2012 3/31/2013 3/31/2014Balance % Balance % Balance % Balance % Balance %

Current assets 54,353 46.0% 55,397 44.2% 56,240 43.9% 55,166 45.5% 0assets , , , ,

Noncurrent assets 63,824 54.0% 70,045 55.8% 71,834 56.1% 66,186 54.5% 0

Assets 118,177 125,442 128,075 121,353 0

営利

経常

純利

Current liabilities 45,909 38.8% 36,458 29.1% 43,889 34.3% 39,405 32.5% 0

Noncurrent liabilities 32,918 27.9% 40,945 32.6% 30,759 24.0% 23,970 19.8% 0

Liabilities 78,828 66.7% 77,404 61.7% 74,649 58.3% 63,375 52.2% 0

Shareholders’ equity 38,047 32.2% 44,964 35.8% 50,229 39.2% 56,648 46.7% 0

Net assets 39,349 33.3% 48,037 38.3% 53,425 41.7% 57,978 47.8% 0

Liabilities and 118 177 125 442 128 075 121 353 0Liabilities and net assets 118,177 125,442 128,075 121,353 0

Interest-bearing liabilities 47,553 44,129 33,381 28,101 0

Net interest bearing liabilities 28 165 20 830 5 309 3 999 0Net interest-bearing liabilities 28,165 20,830 5,309 3,999 0

BPS 71,212.07 82,856.62 92,690.69 105,331.25 #DIV/0!

ROA 5.6% 6.2% 5.4% 6.7% 0.0%

ROE 18 8% 18 1% 14 3% 15 6% 0 0%

(yen)

24

ROE 18.8% 18.1% 14.3% 15.6% 0.0%

Total amount of dividend payout 1,330 1,498 1,574 1,630


Summary of Consolidated Cash Flow Statements （last 5 years）

売上

03/2010 03/2011 03/2012 03/2013 03/2014Depreciation and amortization 3,495 5,136 5,399 5,467 5,156Rental asset depreciation 14,244 13,070 15,052 14,244 13,150Asset retirement obligation 0 1 312 0 0 1 218

※Major items in CF statements are selected (millions of yen)

粗利

Asset retirement obligation 0 1,312 0 0 1,218Loss on valuation of goods 0 0 0 0 97Impairment loss 1,317 1,052 1,089 1,529 24

Loss on retirement of property, plant and equipment 211 516 124 453 -13,422

Increase in provision for loss on store closing -50 -182 77 -155 24

営利

経常

純利

Purchase of Rental assets -12,780 -13,936 -16,244 -13,247 -13,422

Increase (decrease) in notes and accounts payable-trade -1,772 -930 1,019 382 -708

Increase (decrease) in other assets 275 737 1,262 -143 295Increase (decrease) in other liabilities 0 0 0 -64 514( ) 0 0 0 6 5

Net cash provided by operating activities 22,226 17,662 25,241 11,457 8,255Purchase of property, plant and equipment -2,235 -7,683 -4,379 -4,454 -4,937Proceeds from acquisition of consolidated subsidiary 0 0 30 0 0Payment for acquisition of consolidated subsidiary 0 -2,148 0 0 -3,391Acquisition of shares of a consolidated subsidiary -3,481 -217 0 -824 -266q y ,Purchase of intangible assets -367 -425 -352 -362 -385Payments for transfer of business -432 -821 -196 -207 -7

Net cash provided by investing activities -9,879 -8,854 -4,364 -5,296 -9,401Increase in short-term loans payable 196 -2,288 3,700 9,050 13,550

Decrease in short term loans payable 0 0 4 113 9 020 -Decrease in short-term loans payable 0 0 -4,113 -9,020 13,630Proceeds from long-term loans payable 13,431 18,790 2,150 6,860 11,200

Repayment of long-term loans payable -15,301 -15,987 -12,191 -11,480 -10,972

Repayment of finance lease obligations -2,437 -2,694 -2,664 -2,350 -1,958Proceeds from disposal of treasury stock 0 125 0 334 0

25

Proceeds from disposal of treasury stock 0 -125 0 -334 0

Net cash provided by financing activities -10,927 -4,111 -15,034 -9,615 -3,790

FCF 12,347 8,808 20,876 6,160 -1,145


Note on Forward-looking Statements

All representations other than historical facts, including forward-looking statements such as performance forecasts, policies, management strategies, targets, plans, understanding, and evaluation of data, as well as outlook on performance and

fdividends, are merely statements of current expectations, assumptions, plans, understanding, evaluations, etc., based on information currently available to the Group. These statements, representations, or hypotheses(assumptions) may be, by their nature, objectively inaccurate and are open to potential risk owing to general

d h l h d d

Please feel free to contact us for more information

conditions, weather, economic climate, or changes in consumer trends, and no guarantee is made that they will be realized in the future.

Please feel free to contact us for more informationIR Division

GEO HOLDINGS CORPORATION

5F, OMC Bld. 8-8 Fujimi-cho Nagoya-shi, Aichi Pref.

Tel.052-350-5711 Fax.052-350-5701

e-mail [email protected]

5F, OMC Bld. 8 8 Fujimi cho Nagoya shi, Aichi Pref.

26

Documents

FY2014 Consolidated Business Results and Forecasts...Media（DMS） 35 Kita-Kanto 209 Media（DMS） 111 Reuse（DMS） 36 WAREHOUSE 5 Minami-Kanto 249 media 887 958 1001 Media（DMS）