Pola Orbis Holdings Inc. · TSE:4927
Pola Orbis — H1 2022 Earnings Presentation
30 slides from Pola Orbis's earnings presentation, 2022
Slide 1: First half FY2022 financial results briefing
Today, we will be discussing the financial results briefing for the first half of fiscal year ending December 31, 2022, forecast of fiscal 2022, and initiative for second half.
Slide 2: Revenue recognition accounting standard note
The accounting standard for revenue recognition has applied from FY2022. Please note that this document is a comparison of actual results, converted to match the accounting standards from the current fiscal year.
Slide 3: Consolidated financial results
Let me begin by explaining our consolidated financial results.
Slide 4: Consolidated results overview
The cosmetics market, as a whole, is on the road to recovery. Domestic consumption, excluding inbound sales, has also shown signs of gradual recovery since the lifting of the COVID-19 measures at the end of March. However, in light of the current COVID-19 infection situation, we recognize that it wi
Slide 5: Consolidated PL
We will now explain consolidated PL. The cost of sales ratio has increased, mainly due to a decrease in the sales composition ratio of low-cost POLA, but still maintains a high gross margin ratio. SG&A expenses decreased mainly in variable costs, such as sales commissions and consignment expenses. A
Slide 6: Operating income to profit attributable to owners of parent
This is about operating income to profit attributable to owners of parent. Non-operating income increased due to foreign exchange gains of approximately JPY3.9 billion. The decrease in income taxes is due to the dissolution and liquidation of the H2O PLUS brand, which was announced in Q1.
Slide 7: Factors behind change in net income
Factors behind the change in net income are as shown. Final income increased significantly due to a decrease in income taxes and other factors.
Slide 8: Status of the segments
Next, I will discuss the status of the segments.
Slide 9: Results by segment
The results by segment are as shown. Revenue in the beauty care business declined, but the extent of the decline was smaller than in Q1.
Slide 10: Results by brand
Here are the results by brand. With regard to sales, the decline in POLA’s revenue had a significant impact on the consolidated results. Operating income decreased due to a decrease in gross profit. From next page, I will explain the status of each brand.
Slide 11: POLA results
In Japan, sales of POLA’s consignment sales channel declined due to a decrease in the number of customers. On the other hand, sales in other channels are on an increasing trend. Overseas sales were significantly affected by the lockdown, a decrease of 13.4% even excluding the impact of suppressed sh
Slide 12: POLA customer structure
Breaking down the structure of sales into purchase per customer and the number of customers, the number of customers has declined significantly by 25%. Regarding the decline in customer numbers, the bar graph on the lower left shows the number of new customers and existing customers, and the number
Slide 13: ORBIS results
ORBIS revenue declined due to the continued decline in the number of customers, as the Company continued to strategically curb discounts and other promotions. Due to the renewal of ORBIS U in this August, we have temporarily curbed the volume of advertising. In addition, the unit price of advertisin
Slide 14: Jurlique and H2O PLUS
Jurlique was affected by the lockdown in China but is making up for its offline struggles through e-commerce, a key channel for the Company. H2O PLUS, which was resolved to be liquidated, is progressing as planned toward liquidation and closed its own e-commerce business at the end of June.
Slide 15: Brands under development
As for brands under development, THREE resumed its own e-commerce operation in April, but even after the resumption, the Company curbed online promotions, resulting in a decline in revenue due to a lack of customer activation. Sales of external e-commerce platforms are growing, and new customer cont
Slide 16: Outlook for current fiscal year
I have explained the results by brand. Next, I will now continue with an explanation of the outlook for the current fiscal year.
Slide 17: Downward revision of full-year plan
As you can see, we have decided to revise our full-year plan downward. In addition to the difference in the plan that occurred in H1, we have revised the plan mainly for POLA after carefully examining the outlook for the pace of recovery in H2 of the fiscal year, based on stricter assumptions about
Slide 18: Details of the forecast revision
POLA accounts for the majority of the revision, since the recovery of the consignment sales channel was less than expected in H1, resulting in a deviation from the plan. We will work to recover in H2, but we have judged that a rapid turnaround is unlikely given the current customer structure. With r
Slide 19: Initiatives for H2 and beyond
Next, I will explain our initiatives for H2 and beyond.
Slide 20: POLA initiatives
POLA’s consignment sales channel is facing a decline in the number of customers. However, there are a number of stores that are effectively utilizing social networking services, such as Instagram and LINE, and are seeing results in attracting new customers. These success stories will be rolled out n
Slide 21: ORBIS initiatives
ORBIS has a major topic regarding product. The brand’s iconic skincare series, ORBIS U, will be renewed. Since its launch, this product has received many best cosmetic awards, but we have enhanced its functionality, such as its moisturizing ability. Large-scale promotion will be held through offline
Slide 22: Jurlique, THREE, DECENCIA initiatives
Jurlique is growing in China, mainly through e-commerce. We will increase brand recognition by focusing on skincare items that are performing well and strengthening the acquisition of new customers. In September, we will launch a cosmetic oil that takes advantage of the Group’s research and developm
Slide 23: Quarterly Segment Results
KkE POL A ORBIS (Appendix) Quarterly Segment Results @ Net sales FY2022 Jan.-Mar. FY2022 Apr.-Jun. FY2022 Jul.-Sep. FY2022 Oct.-Dec (mil. yen) Results Results Results Consolidatednet_ 37,662 (11.9%) 41,085 (6.9%) - : - SS eee oo Real estat 523. (1.4%) 516. (1.2%) other a sos 600 63% 66s 13.1% on cae
Slide 24: Quarterly Results by Brands
KkE POLA ORBIS (Appendix) Quarterly Results by Brands @ Net sales FY2022 Jan.-Mar. FY2022 Apr.-Jun. FY2022 Jul.-Sep. FY2022 Oct.-Dec (mil. yen) Results Results Results Results 36,516 SSIS (HBS) SENSIS (Vash) 21,229 (20.0%) 23,826 (10.2%) Beauty care net sales POLA ORBIS 9,340 (0.7%) «9,720 (6.6%) :
Slide 25: About POLA ORBIS Group
EEE POLAORBIS (appendix) About POLA ORBIS Group Beauty care is the core business of the Group, and nine different cosmetics brands are operated under the Group umbrella. FY2021 Consol. Net Sales ¥178.6 bil. Overseas Flagship Brands under Brands 1 Brands development ¥20,000 t t , High Prestige Jurli
Slide 26: Beauty Care Business Brand Portfolio
KK POLA ORBIS (Appendix) Beauty Care Business Brand Portfolio BkR HOLDINGS Sales 7 . - ve einkee “ ratio® Brand Concept and products Price Main sales channel P fe} L A @ High-prestige skincare Approx. JP: Consignment sales, department stores and e-commerce 60% ™@ Leading-edge technology in aging- ¥1
Slide 27: Improvement in Capital Efficiency and Shareholder Returns
KKK POLAORBIS (Appendix) Improvement in Capital Efficiency aay KKK HOLDINGS and Shareholder Returns Initiatives to Improve Capital Efficiency ROE movement (%) ™@ Operating income CAGR 25% 16.0 14.2 @ Achieve net income growth . . Target for 2023 EPS which is higher than operating ROE 9% (Earnings pe
Slide 28: Long-term Management Plan - VISION 2029
KkE POL A ORBIS (Appendix) Long-term Management Plan - VISION 2029 VISION 2029 Acollection of unique businesses that respond to diversifying values of “beauty” Basic strategy 1 Develop the cosmetics business globally; reform and enhance the brand portfolio Basic strategy 2 Create new value and expan
Slide 29: 2021-2023 Medium-term Management Plan
KE POLA ORBIS (Appendix) 2021 — 2023 Medium-term Management Plan Management Indicators for 2023 ™ Consolidatednetsales = ¥205.0 to 215.0 bil. in FY2023 caGR 6% or higher i % j 15% in FY2020 Net Sales ™ Overseas sales ratio = 20 to 25% in FY2023 (15% in ) CAGR 20 to 25% | ic e- Domestic e-commerce _,
Slide 30: Beauty Care Business Results by Brands
KKK POLA ORBIS (Appendix) Beauty Care Business Results kkk HOLDINGS for FY2019 — FY2021 by Brands FY2019 FY2020 FY2021 (mil. yen) i Results i Results H Results Consolidated net sales 219,920 176,311 Beauty care 214,886 i 171 658 net sales POLA 135,502 102,888 ORBIS 50,726 Jurlique 7,765 j H2O0 PLUS