ANNUAL REPORT 2018 TORIDOLL Holdings Corporation CONTENTS 02 CORPORATE PHILOSOPHY 03 MESSAGE FROM PRESIDENT 04 FINANCIAL HIGHLIGHTS 06 GLOBAL PRESENCE 07 AFFILIATED COMPANY 08 CORPORATE STRATEGY 10 FLAGSHIP BRAND 12 OUR BRANDS IN JAPAN 14 OUR BRANDS WORLDWIDE 16 LIFESTYLE BUSINESS 17 M&A 18 HISTORY 19 SOCIAL INITIATIVES 20 CORPORATE GOVERNANCE 22 MANAGEMENT DISCUSSION & ANALYSIS 24 CONSOLIDATED FINANCIAL STATEMENTS 28 COMPANY OVERVIEW 29 INVESTOR INFORMATION 01 CORPORATE PHILOSOPHY From the moment we meet our customers, we strive to fulfill our customers’ satisfaction and create memorable moments that make our customers happy. In doing so, we continually challenge ourselves to reach the next level and onward to the future. 02 MESSAGE FROM PRESIDENT “Delicious” has no borders The passion for food is what made me start my business. An appetizing aroma that stirs the appetite, the master chef’s amazing culinary skills, the heat from the kitchen as food is being prepared in front of you… all of these elements come together to create a “deliciousness” that is experienced (enjoyed/appreciated) with all the five senses instead of just with your tongue… It is our desire to bring this passion for food to as many customers as possible, and our mission is to spread it to the entire world. With each bite we want you to smile and think, “This is delicious!” We don’t speak the same language, but our customers’ smiles tell us their emotions. We, at TORIDOLL, are proud to be a company that continues to cherish these values. With our commitment to world-class hospitality, we will develop business models that respect the cultural and regional differences of each country. With our origins in Japan, we aim to become a leading global company in the restaurant industry. I believe we can open up a future of unlimited opportunities in the global market. Takaya Awata President & Founder TORIDOLL Holdings Corporation 03 FINANCIAL HIGHLIGHTS Years Ended March 31, 2018. TOTAL TRADING TRANSACTIONS Other Brands 10.4 (10.3%) Overseas Brands (Billions of yen) 10.4 (10.2%) Total trading transactions TONICHI 116.5 3.2 (3.2%) 116.5 billion YEN billion YEN TORIDOLL 2.0 (2.0%) MARUGAME SEIMEN 90.4 (88.8%) NUMBER OF STORES (Stores) Number of restaurants outside Japan 1,600 Number of restaurants in Japan 1,400 Number of stores 1,200 1,540 1,000 STORES 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 *Figures for fiscal 2014 and fiscal 2015 represents net income attributable to owners of the parent company, while International Financial Reporting Standards has been introduced from fiscal 2015. 04 FINANCIAL HIGHLIGHTS Years Ended March 31, 2018. 2014 2015 2016 2017 2018 IFRS IFRS IFRS IFRS IFRS For the year (Millions of yen) Total trading transactions 78,318 87,294 95,587 101,779 116,504 Cost of sales (18,907) (22,309) (24,105) (26,216) (30,860) Gross profit 59,411 64,986 71,482 75,563 85,644 Selling, general and administrative expenses (54,342) (58,605) (62,347) (66,280) (77,685) Operating profit 2,643 4,175 8,733 8,619 7,635 Profit for the year 978 2,011 5,242 5,585 4,663 At year end (Millions of yen) Total assets 52,885 59,019 57,793 64,011 110,212 Total equity 18,094 25,359 30,872 35,006 37,246 Per share data (Yen) EPS 24.81 48.84 120.56 129.89 107.44 BPS 459.94 586.10 692.48 788.44 834.13 Cash dividends 8.00 10.00 24.00 26.00 26.50 Major indicators (%) Equity ratio 34.2% 42.9% 51.9% 53.4% 32.9% ROE 5.5 9.1 18.9 17.5 13.2 PER 39.5 34.1 18.8 18.6 36.0 Payout ratio 32.3 20.5 19.9 20.0 24.7 *The Company Group has applied International Financial Reporting Standards (IFRS) starting from the consolidated year ended March 31, 2015. *Figure for the previous year is also disclosed adhering to IFRS. 05 GLOBAL PRESENCE Our multi-portfolio strategy to reflect diverse regional food cultures. Opened 1,575 restaurants globally *As of July 30, 2018. 28 22 STORES STORES Japan 26 China 16 STORES 75 1,045 STORES STORES STORES 36 STORES Other Asia countries 59 33 STORES STORES Hong Kong Malaysia 118 70 STORES STORES 47 STORES NUMBER OF STORES IN MAJOR COUNTRIES AND REGIONS Japan 1,045 Hong Kong 118 China 75 Malaysia 70 Indonesia 47 Taiwan 33 Other Asia countries 59 Portugal 36 UK 22 Other European countries 26 USA 16 Other countries 28 0 20 40 60 80 100 120 (Stores) 06 AFFILIATED COMPANY TORIDOLL HOLDING LIMITED TORIDOLL BEIJING CORPORATION Fast Beauty TORIDOLL USA CORPORATION MAJU LINTAS SDN BHD MARU P LLC Crackin' Kitchen USA LLC TORIDOLL HANGZHOU CORPORATION MARU A LLC Balloon, Inc. TORIDOLL SUZHOU CORPORATION NOM NOM ENTERPRISE LLC TORIDOLL ITALIA S.R.L. TORIDOLL WUHAN CORPORATION Wok To Walk International SL TORIDOLL SINGAPORE PTE. LTD. TORIDOLL CHONGQING CORPORATION Wok to Walk Franchise B.V. TORIDOLL TAIWAN CORPORATION TORIDOLL CHENGDU CORPORATION Wok To Walk US Holdings. Inc. TORIDOLL KOREA CORPORATION TORIDOLL SHENZHEN CORPORATION WOK TO WALK US MANAGEMENT. INC. GEORGE'S CORPORATION TORIDOLL GUANGZHOU CORPORATION WOK TO WALK US FRANCHISE SYSTEMS LLC SONOKO Co., Ltd. Marugame noodle (iSQUARE) Co., Ltd. JAPANESE COFFEE LOVERS PTE. LTD. Chulala Co., Ltd. Marugame (Le Fu) Co.,Ltd. P.T. Selera Prima Lestarindo Serendip Inc. Marugame (Kang Yi) Co.,Ltd. UTARA 5 FOOD AND BEVERAGE SDN BHD ASIA BEAUTY & COSMETICS GROUP LIMITED Marugame (HK) Limited MARUGAME UDON USA LLC 荘能子化粧品貿易(上海)有限公司 Marugame (Big Ben) Co.,Ltd. WTW PACIFIC HOLDINGS LLC TORIDOLL DINING CORPORATION Marugame (Kang Shan) Co.,Ltd. BOAT NOODLE SDN BHD TORIDOLL DINING CALIFORNIA, LLC Marugame (Kowloon East) Co.,Ltd. PINKIPEDIA SDN BHD Tokyo Table Holdings, LLC Marugame face (Xi Shen) Co.,Ltd. SIAM STREET CUISINE SDN BHD TON-ICHI USA, LLC Marugame (Luk Yeung Galleria) Co.,Ltd. NIT NOI NOODLE SDN BHD Jointed-Heart Catering Holdings Limited Toridoll and Heyi Trading (Singapore) Pte. Ltd. SANKEE RESOURCES SDN BHD Jointed-Herat Limited Toridoll and Heyi (Singapore) Pte. Ltd. MAJU LINTAS SDN BHD New Huge Corporation Limited 上海多泰餐饮管理有限公司 7 NOKITA SDN BHD active source Inc. 上海稻瑞多餐饮管理有限公司 SAKAGURA UK LTD TORIDOLL AND HEYI GROUP COMPANY LIMITED Marugame (HR) Limited SHORYU HOLDINGS LTD Toridoll and Heyi Holding Limited NODU FOODS Co., Ltd. YKKO TORIDOLL MYANMAR Co., Ltd. TORIDOLL SHANGHAI CORPORATION TORIDOLL CAMBODIA COMPANY LIMITED 07 CORPORATE STRATEGY MID TO LONG-TERM VISION NEXT LIFESTYLE INCUBATOR Started out as a restaurant company evolving into a global lifestyle company Restaurant Health care NEXT LIFESTYLE INCUBATOR HomemadeHomemade meals,meals, BeautyBeauty take-awaytake-away CosmeticsCosmetics MID-TERM GOAL We aim for consolidated net sales of 4.5 billion $, with 6,000 restaurants worldwide *The exchange rate as of August 10, 2018. Sales 4.5 billion $ (500 billion YEN) Overseas business New domestic business 2.6 billion $ Existing domestic business 4,000 restaurants 0.7 billion $ 700 restaurants 1.2 billion $ 1,300 restaurants Present 2025 08 CORPORATE STRATEGY BUSINESS STRATEGY Establish a cycle of creating new businesses and expanding the business base to exploit our existing business base Domestic Overseas restaurants restaurants Health care Beauty TONICHI BANPAIYA The business base of Further growth of Creation of our business base a new business base Existing main business THE BUSINESS BASE With our concept of “freshly hand-made”, we achieved rapid growth. As a result, we developed unique strengths NEW BUSINESS RESTAURANT Operation Product Development Restaurant Development Corporate Culture Procurement Forming a trinity with the producer Turning inefficient into efficient 100 restaurants annually Overwhelming volume and the manufacturer Passion and speed 09 FLAGSHIP BRAND MARUGAME SEIMEN TORIDOLL Group’s flagship brand, MARUGAME SEIMEN, is a self-service restaurant chain specializing in Sanuki udon. Since its first restaurant opened in Japan in November 2000, MARUGAME SEIMEN has been committed to serving the tasty, genuine “freshly handmade” udon. With a noodle machine installed at each restaurant, we make the best dough each day from carefully selected domestic wheat, salt and water. Fresh noodles are cooked right away for “freshly kneaded and boiled taste”. By cooking in front of our customers in an open kitchen, we aim to create an authentic restaurant with the ambience of a noodle-making factory in Kagawa prefecture, home of Sanuki udon. Today, MARUGAME SEIMEN has become a popular brand that is supported by many customers young and old, totaling more than 150 million people a year. Since our establishment, we have steadily expanded our restaurant network, reaching about 800 restaurants in all prefectures, and we are actively expanding not only in Japan but also around the world. With a reach unsurpassed by other companies, we have the absolute No.1 position in the udon industry, both in sales and number of restaurants. 10 FLAGSHIP BRAND What is “Sanuki Udon”? Udon is a type of thick wheat flour noodle, used frequently in Japanese cuisine. In the past, Udon was a special food that people eat at ceremonies and celebrations. It has become a popular staple food in Japan as an alternative to rice. There are numerous varieties of Udon today, and Sanuki Udon is recognized as one of the three most famous types of Udon. Named after the old name of Kagawa prefecture in the south-west of Japan, Sanuki Udon is known for its firm, al-dente texture. The thick long flour noodle is perfectly nice and chewy, yet so soft and silky to slurp.