ANNUAL REPORT 2019 TORIDOLL Holdings Corporation CONTENTS 02 CORPORATE PHILOSOPHY 03 MESSAGE FROM PRESIDENT 04 FINANCIAL HIGHLIGHTS 06 GLOBAL PRESENCE 07 CORPORATE STRATEGY 09 FLAGSHIP BRAND 11 OUR BRANDS IN JAPAN 13 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 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, 2019. TOTAL TRADING TRANSACTIONS Other Brands 13.2% (Billions of yen) Overseas Brands 20.9% Total trading transactions 145.0 145.0 billion YEN billion YEN TONICHI 2.7% TORIDOLL 1.3% MARUGAME SEIMEN 62.0% NUMBER OF STORES (Stores) Number of restaurants outside Japan 1,600 Number of restaurants in Japan 1,400 Number of stores 1,200 1,678 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 2019 *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, 2019. 2015 2016 2017 2018 2019 IFRS IFRS IFRS IFRS IFRS For the year (Millions of yen) Total trading transactions 87,294 95,587 101,779 116,504 145,022 Cost of sales (22,309) (24,105) (26,216) (30,860) (39,117) Gross profit 64,986 71,482 75,563 85,644 105,904 Selling, general and administrative expenses (58,605) (62,347) (66,280) (77,685) (98,634) Operating profit 4,175 8,733 8,619 7,635 2,302 Profit for the year 2,011 5,242 5,585 4,663 221 At year end (Millions of yen) Total assets 59,019 57,793 64,011 111,525 117,833 Total equity 25,359 30,872 35,006 37,470 35,003 Per share data (Yen) EPS 48.84 120.56 129.89 107.44 6.22 BPS 586.10 692.48 788.44 834.13 798.02 Cash dividends 10.00 24.00 26.00 26.50 1.50 Major indicators (%) Equity ratio 42.9% 51.9% 53.4% 32.5% 28.8% ROE 9.1 18.9 17.5 13.2 0.8 PER 34.1 18.8 18.6 36.0 433.8 Payout ratio 20.5 19.9 20.0 24.7 24.1 *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 1,718 restaurants globally *As of July 30, 2019. 40 24 STORES STORES Japan 22 China 55 STORES 68 1,117 STORES STORES STORES 38 STORES Other Asia countries 70 35 STORES STORES Hong Kong Malaysia 126 66 STORES STORES 57 STORES NUMBER OF STORES IN MAJOR COUNTRIES AND REGIONS Japan 1,117 Hong Kong 126 China 68 Malaysia 66 Indonesia 57 Taiwan 35 Other Asia countries 70 Portugal 38 UK 24 Other European countries 22 USA 55 Other countries 40 0 20 40 60 80 100 120 (Stores) 06 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 4.6 billion $, North America with 6,000 restaurants worldwide 1,000 stores 0.9 billion $ *The exchange rate as of July 31, 2019. Japan 2,300 stores 2.1 billion $ Europe & Central & Middle East Asia South America 500 stores 2,000 stores 200 stores 0.3 billion $ 1.2 billion $ 0.1 billion $ 07 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 08 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. 09 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. Udon remains extremely popular in Kagawa Prefecture, which is number one in the production and consumption of Udon. 10 OUR BRANDS IN JAPAN TORIDOLL This is an authentic “Yakitori (grilled chicken)” restaurant where all family members can enjoy together regardless of age. The business name “TORIDOLL” comes from “tori” of “Yakitori”. TORIDOLL was the first business of TORIDOLL Holdings. TONICHI A restaurant chain specializing in katsu-don (pork cutlets over rice) and ton- teki (pork steak) known for the ultimate in savory and tender pork. This restaurant chain is known for its katsu-don featuring freshly deep fried pork cutlet enveloped with egg and special warishita stock and its tonteki teishoku (set meal) featuring pork steak barbequed with special sauce. MARUSHOYA A chain of ramen shops committed to the in-house production of not just the noodles but other ingredients as well. Their extremely flavorful bowls of ramen are possible only because they are elaborately prepared all by hand. NAGATA-HONJYO-KEN A chain of yakisoba restaurants, featuring medium-thick noodles made in-house and rich flavorings typical of Kobe’s old town area. 11 OUR BRANDS IN JAPAN MAKINO This chain of restaurants specialized in a set tempura menu only frying the ingredients after the order is place by the customers, always serving crisp, piping hot tempura. Kona’s Coffee / Lanai Cafe A Hawaiian-style cafe designed with a classic Hawaiian vacation mood. The soft, fluffy pancakes are made by hand in store and cooked fresh to order, while each cup of Hawaii Kona Blend Coffee is brewed to perfection with an aroma that instantly set you in Hawaiian vacation mode. ZUNDO-YA Since opening the first shop in Himeji city in April 2002, we have stores mainly in the Kansai region with our focus in TONKOTSU (rich pork based soup) ramen. Our customers can choose from two kinds of fine noodles that are carefully hand-made. Our TONKOTSU soup is made only from water and pork bones in a process of over 20 hours, giving it its unique taste. BANPAIYA Since opening our first store in 2009, we have established our business mainly in Tokyo.