FY2021 May
Financial Results
Briefing Materials
I.K Co., ltd.
July 13, 2021

TSE 1st: 2722

Index01 Business Description
02 FY2021 Financial Results
03 FY2022 Performance Forecasts

04 Future strategies
05 Appendix
2

01 Business Description

3

Business Description

Group Business Structure Diagram
BtoBtoC
Co-op
Wholesale to nationwide Co-op and is
IK’s founding business. Currently the
top share in overall Group sales

Mail-order
Wholesale to department store mailorder and online mail-order companies

IT Solutions
Sales and development of IT products,
centering on chat system 「M-Talk」 andcall recording system 「Voistore」

BtoC
TV
Sales of in-house developed products
through TV shopping. It is a highly
profitable market and the pillar of theGroup's growth business. Aim to securestable profits throughout the year bycreating multi-genre hit productsEC

Wholesale to retail stores such as
drugstores and variety stores

Subscription and Recurring sales on selfowned EC sites. By strengthening thesubscription type in particular, we aim tosecure stable profits

Overseas

SHOP

Retail Store

Sales of cosmetics, mainly in China
andSoutheast Asia. Foundedsubsidiaries in both China and Hong
Kong in 2017

Sales of cosmetics in self-owned retailstores of Korean cosmetics brands"SKINFOOD" and "OLIVE YOUNG."
Currently 23 stores, mainly in urban
department stores nationwide
4

Business Description

Marketing Manufacturer Concept Diagram
Marketing Manufacturer
I.K Co., Ltd is a “Marketing
Manufacturer” that conducts
integrated business activities
including product planning,
manufacturing, sales anddistribution through its
original promotion strategy.
By continuing to rotate bothaxes of "BtoC" and "BtoBtoC"
sales, we rotate the gears of
product development, the coreof this concept. We call such abusiness model a “Marketing
Manufacturer."5

02 FY2021 Financial Results

6

FY2021 Financial Results

Annual Performance Highlight
Increased Sales and Profit
for 2 consecutive years
 Sales increased by 12.3% YoY (33.6% increase
for TV, 7.8% for Co-op, 5.9% for Mail-order) Operating profit increased by 19.4% (17.0%
decrease for BtoC, 83.3% increase for BtoBtoC)
 BtoC operating profit decreased by 17.0% due toan increase in the number of test marketing on TV
shopping Income attributable to owners of parent has
decreased due to extraordinary losses※ of 173
million yen

Impact from COVID19
 The demand for “stay at home” and the rise inpublic attention to "health" and "safe/secure“ dueto the spread of COVID19has lead to increased
sales and profit in TV shopping, EC, Co op, andmail orders
 On the other hand, wholesales to retail stores andsales of SKINFOOD cosmetics stores decreased
significantly
 As non-store channels account for more than 80%
of sales, the overall sales and profit increased

Sales
Gross Profit

Unit: Million Yen （YoY）

20,754
10,613705

Operating Profit

Income attributableto owners of parent※A total of 173 million yen in extraordinary losses, including impairment losses of 58 million yen, customer compensation expenses of 41 million yen,provision for customer compensation expenses of 17 million yen, provision for surcharges of 47 million yen, etc.

321（+12.3％）（+19.3％）（+19.4％）（▲16.3％）7

FY2021 Financial Results

Breakdown of Sales by Channel
The share of BtoC sales in overall sales have risen to 40% due to the TV shopping sales sharerising to 31%. Sales in SHOP and retail stores decreased due to the impact of COVID19. Salesof Co-op and mail orders increased, but their shares decreased.

FY2020

FY2021

Overseas

Overseas

Retail2%

Retail

1%

TV

10%

Mail-

26%

Mail-

7%

order

order

31%

12%

12%

Total

18,483
SHOP
7%
Co-op

39%

TV

Total

20,754

EC
3%

Co-op

SHOP

37%

4%

EC
6%
8

FY2021 Financial Results

Key Management Indicators / Financial Status
Gross Profit Margin(Million Yen, ％)Operating Profit Margin (Million Yen, ％)705

10,613
7,974

Total Assets/Total Equity

8,898

6,818

590

7,369

(Million Yen)

7,226

431
3,557

51.1

45.3
FY20192.5
FY2020Adjusted EBITDA※
795

FY2020FY2019FY2021(Million Yen)

3.2
FY2020CCC※

FY2021（Days）

944

593

FY2019

2,688

3.4

48.1

2,809

FY2019FY2020

FY2021

95.8

88.3

83.4

FY2019FY2020

FY2021

ROA/ROE

（％）

13.7

ROE
ROA

10.1

8.9
8.5

9.0

FY2020

FY2021

6.4

FY2021※ Adjusted EBITDA
EBITDA（Operating Profit＋Depreciation）＋ M&A related fee※ CCC（Cash・Conversion・Cycle）
Inventory Cycle Term＋Accounts Receivable Cycle
Term－Accounts Payable Cycle Term

FY20199

FY2021 Financial Results

FY2021 4Q Annual Performance
4Q Consolidated Performance
FY2021 4Q

FY2021（March 2021 ～ May 2021）（June 2020 ～ May 2021）

 Sales and gross profit decreased for by
YoY and QoQ
 SG&A increased but sales were
unaffected due to an increase in thenumber of test marketing on TV
shopping Decrease in TV sales efficiency of
existing hit products such as “STEP 8”
and “AIR YAWN” is also the cause

Annual Consolidated Performance

SG&A

2,180

ratio(%)

50.2％

 Annual sales were a record high 20.7
billion yen
 Promising sales of TV shopping in 2Q and3Q was the main contributing factor
 Increased sales in the profitable TV
business contributed to the increase ofsales and profit
 Income attributable to owners of parent
has decreased due to extraordinary
losses※ of 173 million yen（百万円）
Million Yen

ResultYoY

QoQ

ResultFY2020

YoY

Sales

4,339

▲6.1％

▲18.5％

20,754

18,483+12.3％

Gross Profit

2,062

▲6.7％

▲24.0％

10,613

8,898+19.3％

51.1％

48.1％

+3.0pt

9,908

8,307

+19.3％

47.7％

45.0％

+2.7pt705

590+19.4％

3.4％

3.2％+0.2pt321

384▲16.3％

1.5％

2.1％▲0.6ptmargin(%)

47.5％

Operating
Profit▲117

margin(%)

ー ％Incomeattributable toowners of parent

ratio(%)

▲101

+8.2％

－ ％

－ ％

▲10.1％

ー ％

ー ％

ー ％

※A total of 173 million yen in extraordinary losses, including impairment losses of 58 million yen, customer compensation expenses of 41 million yen,provision for customer compensation expenses of 17 million yen, provision for surcharges of 47 million yen, etc.

10

FY2021 Financial Results

Consolidated Sales, Operating Profit, PB Ratio Trends
Unit: Million Yen, ％Consolidated Performance Trends

Quarterly Sales Trends

Sales Trends
20,754

 Increased both sales and operating
profit for 2 consecutive years
 Increased sales of Speed Heatthrough TV shopping in 2Q and 3Q
was a contributing factor
 FY2021 sales continued to exceed
QoQ until 4Q

6,254
4,964 5,053

17,614FY2018FY2019FY2020

FY2021

1Q

2Q

3Q

4Q

1Q

FY2020Private Brand Ratio Trends

4,339

3,846

18,483

18,337

5,323

4,619 4,837

Operating Profit Trends

3Q

4Q

FY2021PB Ratio
65.4

898

 PB ratio has increased for 3
consecutive years
 Record high 65.4％ this year The sales of PB products throughTV was a major contributing factor
 We aim for 80% PB by enhancing
sales through TV

2Q

59.5

705
590

49.9

431

40.3

FY2018FY2019FY2020

FY2021FY2018FY2019FY2020

FY2021

11

FY2021 Financial Results

Financial Results by Segment
Increased Sales in all Segments Increased sales in all segments
 Operating profit decreased in BtoC
business due to decreased sales
through TV in 4Q. Profit increasedfor BtoBtoC and other channels,
resulting in an overall increase.
 Profit increased due to improved
profit margins

Increased Sales in
BtoBtoC Food Business Increased sales in Co-op due to a risein the number of members
 Increase sales in Co-op and Mail-orderdue to the demand for self-quarantine
 Although cosmetics sales havedecreased, the increased food sales
have significantly contributed to theoverall increase in sales and profit Significant decrease in retail sales forcosmetics

Million Yen

BtoC

BtoBtoC

Other

Consolidated

Sales

8,467

11,885402

20,754(YoY)+27.2％+3.0％+40.0％+12.3％

Gross Profit

5,943

4,530

144

10,613(YoY)+32.4％+4.7％+56.8％+19.3％

Gross Profit
Margin

70.2％

38.1％

35.9％

51.1％

(YoY)

+2.7pt+0.6pt+3.8pt+3.0ptOperating
Profit

298

324

52

705

(YoY)

▲17.0％+83.3％+1472.9％+19.4％

Operating
Profit Margin

3.5%

2.7％

13.0%

3.4%

(YoY)

▲1.9pt+1.2pt+11.9pt+0.2pt12

FY2021 Financial Results

Selling, General and Administrative Expenses by Segment
Increase inAdvertising Costs
 Advertising Costs were 4.306 billion
yen, a YoY increase of 21.5%, due toexpansions of broadcasting slots for TV
in 2Q and 3Q
 Sales ratio of advertising costs
increased by 1.6pt to 20.8% due toincreased test market products in 4Q

Reform and Increased
Costs in Logistics
 Logistic costs are continuously rising Due to increased TV sales, the shipping oflarge products have increased, resulting in
the increase of logistic costs ratio After recruiting a logistic specialist in 1Q
and reforming the logistic system andwarehouse operations, the sales ratio wasminimalized to an increase of 1.0pt to
8.4%

Million Yen

Labor Costs
Ratio to Sales

BtoC
500

BtoBtoC
936

Other

Consolidated

63

1,500

5.9％

7.9％

15.9％

7.2％

(YoY)

(▲1.6pt)(▲0.0pt)(▲6.0pt)(▲0.8pt)

Advertising
Costs

3,022

1,278

3

4,306

Ratio to Sales

35.7％

10.8％

0.8％

20.8％

(YoY)

(+2.8pt)(▲1.1pt)(▲0.7pt)(+1.6pt)

702

1,041

0

1,744

Logistic
Costs
Ratio to Sales

8.3pt

8.8pt

0.0％

8.4％

(YoY)

(+2.0pt)(+0.6pt)(▲0.0pt)(+1.0pt)

Other

1,418

949

24

2,356

Ratio to Sales

16.8％

8.0％

6.1％

11.4％

(YoY)

(+1.4pt)(+0.0pt)(▲1.3pt)(+1.0pt)

SG&A

5,644

4,206

91

9,908

Ratio to Sales

66.7％

35.4％

22.8％

47.7％

(YoY)

(+4.6pt)(▲0.6pt)(▲8.0pt)(+2.8pt)

13

FY2021 Financial Results

BtoC Business
Unit: Million Yen

Increased Sales
for TV Shopping Route Hit products such as “Speed Heat,” “STEP 8,”
and “AIR YAWN” account for the majority ofoverall sales
 Sales and sales efficiency have increased for
Speed Heat in FY2021 with an annual MR3.6
 12 test marketing products for FY2021
 Operating Profit has decreased due to the
expansion of test marketing in 4Q
 Sales efficiency for STEP 8 and AIR YAWN has
peaked out

Sales Trends
8,467

359

6,656

5,991

298

61

FY2019FY2020

FY2021FY2019FY2020

FY2021

FY2020

FY2021

Sales of Key Products

Impact of COVID19 on Retail Retail sales for SKINFOOD cosmetics
decreased by 38.3％ due to self-quarantine
 Launched PB cosmetics OLIVE YOUNG in 2Q
 OLIVE YOUNG sales have excelled in pop-up
stores and EC

Operating Profit

Million Yen

YoY

Speed Heat

2,902

1,080

+168.7％

STEP 8

1,687

2,027

▲16.8％AIR YAWN

1,651

294

+461.6％※ Sales listed above are TV shopping sales only

14

FY2021 Financial Results

BtoBtoC Business
Unit: Million Yen

Increased Sales and Profit
for Co-op and Mail-order Sales increase Co-op 7.8％, Mail-order 5.9％
 Demand increased for Co-op due to its image of“Safe/Secure” during COVID19
 “Mini-bubble” for Co-op business as people await for
Co-op membership Increased sales for sundry health products
 For Cosmetics, makeup sales decreased, and skincare
continued to slightly decrease By strengthening sales for food products, sales andprofit increased significantly due to decreased
demand for eating outside
 Although Co-op is under critical logistic conditions,sales expanded significantly due to IK–made mailorder product slots that undertakes logistics as well

Impact of COVID19 on
Wholesale to Retail/Overseas Wholesale to retail stores decreased by 18.3%
due to self-quarantine
 Hit collaborations with Anime and Characters Lack of local visits and lack of communication
between subsidiaries due to COVID19
negatively affected sales in China

Sales Trends

Operating Profit
11,53911,354

11,885

349

324
176

FY2019FY2020

FY2021FY2019FY2021

FY2020

FY2020

FY2021

Sales by Genre
Million Yen

YoY

Sundries

3,322

3,254

+2.1％

Cosmetics

4,344

4,891

▲11.2％

Food

4,217

3,394

+24.2％※ Sales listed above are overall BtoBtoC sales only

15

03 FY2022 Performance Forecasts

16

FY2022 Performance Forecasts

Change in Business Segment Naming
From FY2022 May, IK Group has changed the names of its business segments as follows.

Past Segments

BtoC Business
TV, EC, SHOP business

BtoBtoC Business
Co-op・Mail-order,
Retail, Overseas Business

Other

New Segments

Direct Marketing Business
TV, EC, SHOP business

Sales Marketing Business
Co-op・Mail-order, Retail, Overseas Business

IT Solution Business

IT Solution Business17

FY2022 Performance Forecasts

Performance Forecasts Summary
Unit: Million Yen

Consolidated Sales Trends

Sales

22,000

Sales Marketing
Direct Marketing

Million Yen（+6.0％）

Operating Profit

880

Million Yen（+24.8％）18,483

20,748IT Solution

8,468

9,776

11,53911,877

11,803

FY2020(Result)

FY2021(Result)

FY2022(Budget)6,656

Ordinary Profit

870

Consolidated Operating Profit Trends
Million Yen（+19.2％）22,000Million Yen（+71.3％）

▲0.6％

890

703
590

+24.8％

Income attributable to owners of parent

550+15.4％FY2020(Result)

FY2021(Result)

FY2022(Budget)18

FY2022 Performance Forecasts

Performance Forecasts
Sales For BtoC, we plan to increase sales by
15.4% in consideration of continued
investment in TV shopping andincreased sales in retail For BtoBtoC, irregular demands that
arose from COVID19 seems to havesettled down. However wholesales toretail are expected to re-expand, and aminimal change of a decrease in sales
by 0.6% is expected.

Operating Profit and Other For BtoC, we will launch new hit
products that were tested in theprevious year to improve profitability by
optimizing TV slots
 For BtoBtoC, in addition to stable Co-op
profits, we expect increased profit inretail wholesales and overseas market,
which were affected by COVID19

Shareholder Return Active investment in growthbusinesses, aiming for 20% dividend
payout ratio

FY 2021（百万円）
Million Yen

FY 2022

Ratio toSales

ResultRatio toSales

BudgetYoY

20,754100.0

22,000

100.0

+6.0％

Operating
Profit

705

3.4

880

4.0

+24.8％

Ordinary
Profit

730

3.5

870

4.0

+19.2％

Incomeattributable toowners of parent

321

1.5

550

2.5

+71.3％

Sales

Dividend per
share

12円

12円

19

04 Future Strategies

20Future Strategies

Diversification that started with wholesale to Co-op,
then to Mail-order companies and Retail storeswith a Sales Marketing model, then to TV and EC
with a Direct Marketing model, and also toOverseas market targeting mainly China

・Catalog (mainly
department stores）

・Flyers

・Subscription
・EC specialized
products
・Synergy with TV

・Entering the
TV Shopping
Industry

Retail Route・Catalogs
・Jointpurchases
・Flyers

Mail-order RouteEC Route

TV Route

Current/Past
Business Model

Co-op Route

Recent/Future
Business Model

・Variety Shops
・Drugstores

SHOP

・SKINFOOD（Exclusive
distributor
contract inJapan）

Innovative
IK Group
diversificationthat is not
restricted bypast businessmodelsCo-op Route・Catalogs
・Jointpurchases
・Flyers

Mail-order Route・Catalog
・Flyers
・E-commerce
・TV wholesale

Overseas Route・Cross-border EC・Foundedsubsidiary in China
・Wholesale toChinese Retail

Retail Route・Variety Shops
・Drugstores・Homeimprovement store
・Electronics store

SHOP
・SKINFOOD
・OLIVE YOUNG
・E-commerce21

Future Strategies

Future Trends of TV ShoppingMR, the unit of sales efficiency for TV
shopping, has risen on average for threeconsecutive years, and the number of
products over MR2 is also increasing.
The target audience for TV shopping is 50’s～
70’s, and is expected to continue increasingover the next few years.
Although the younger generation is viewing less
TV, the demand from the target audience is
not expected weaken in the future. We plan tocontinue selling 5 to 6 hit products regularly
in order to optimize TV shopping slots. We willcontinue to invest in this growth businessfor the group.

Trend of broadcast time

Annual MR Trends

Number of products with over MR2

Temporary rise due
to one-shot products

1.8

1.7

2.6

2.7

2.1

Increase in one-shotbroadcoast slots in 3Q（time）

5,982
4,901

2015

2016

2018

2019

Record high sales due to the
3 best hit products Speed Heat,
STEP 8, and AIR YAWN

4,808

2,795

1,998
593
2015

1,238

2016

942

2017

582
2018

2019

2020

2021（FY）

5
Built a portfolio by owning various
hit products by seasons and genres

2015

821

789

2016

2017

2018

2019

50’s～70’s Population Trends

2020

2021 （FY）（1,000 people）

50,00049,000

4
48,0001.7※MR＝（Sales/Media Cost）

2017（Million Yen）

6,422

2,562

2
0.8

6,310

TV shopping sales trends

2020

2021 （FY）

47,0002

46,000

1

2015

0

0

2016

2017

45,0002017 2018 2019 2020 2021 2022 2023 2024 2025 2026

2018

2019

2020

2021（FY）※ Reference: Statistics Bureau, Ministry of Internal Affairs and Communications“Population of unknown age and nationality proportionally distributed (reference table)"22

Future Strategies

Direct Marketing Business

TV Shopping
In order to increase ad placement, a new series will be added to Speed Heat, which was a big hit
last year. In addition, in order to create new hit items, we will expand the TV slot for products thathave succeeded in test marketing and will stabilize our growing expansion with multiple items.

Sales Trends+16.1％（Million Yen）

7,459
6,422

4,808

Key Strategies Create hit items by test marketing 10～
12 items per year
 Maximize the response by optimizing TV slots
according to the product categories andrecreating the videos of existing products.
Sales Expansion of Speed Heat New Series

2,795

 Plan to exceed YoY broadcasting
amount for Speed Heat Vest, a big hit
product last year, by launching a newseries this autumn
FY2019FY2020

FY2021

FY2022Develop Subscription Products
 LTV measures to develop new regular
products and increase the continuation
rate※※LTV: Acronym for Life Time Value

23

Future Strategies

Direct Marketing Business

EC Business

SHOP Business

As an ordering tool for TV shopping, we aim to maximize profits
while measuring synergies with TV. In addition, from thisterm, we will establish a department dedicated to EC, start ECspecialized promotions and product developments,and make a full-scale entry into the EC market.

Sales Trends
1,427（Million Yen）

1,239

FY2020

Sales Trends
1,275

+4.9％
FY2021（Million Yen）

1,768

1,300

572

FY2019In the SHOP business, in addition to SKINFOOD, we will
focus on selling "OLIVE YOUNG," which was launchedlast year.We also aim to expand store sales while theflow of customers is gradually recovering.

FY2022(予)

1,017

805

FY2019FY2020

FY2021+26.3％FY2022(予)Key Strategies

Key Strategies

 Optimize as an ordering tool for TV shopping
 Implementation of EC specialized promotions
on products being broadcasted on TV shopping;sales expansion via Rakuten / Amazon
 As a stock-type business in EC, we will startlaunching new products around autumn.

 Mutual customer transfer between

SKINFOOD stores and websites
 OLIVE YOUNG PB cosmetics official store
opening Start test sales of combined Koreancosmetics brand format

24

Future Strategies

Sales Marketing Business

Co-op・Mail-order・Retail・Overseas
For sales marketing business, we aim to secure stable profits for the entire group.
In the previous year, the Co-op / Mail-order business grew due to the demand for “stay-home”, but inthe future will move towards stable growth.

Sales Trends（Million Yen）

Overseas422 million yen（+48.6％）

Retail
1,600 million yen（+9.6％）

Co-op・Mail-order
9,781 million yen（▲3.5％）

FY2019 FY2020 FY2021 FY2022

Stay alert of Co-op “mini-bubbles”
Due to the influence of COVID19, the food genre expanded mainly in theprevious year. However, it is expected to shift to sundries / cosmetics genre
in the future, and we aim for a stable overall growth.
In particular, we aim for synergy with the TV business and expand sales to
Co-op and Retail, centering on hit products through TV shopping, resulting
in increased sales and profit of PB products.

Rebuild Retail Business
Maintain the current number of stores and strengthen sales at existing stores
to improve sales efficiency.
Expand sales of genres other than makeup such as "Cocoegg" and "hairremoval milk“. Wholesale hit products from TV and Co-op directly to storesmeasuring synergies within the group.

Rebuild Overseas Business
The director in charge will travel to China to rebuild business operations.
Reform of EC sales channels by strengthening promotions in EC channels
such as T-mall and RED.
Develope new business opportunities in mainland China & officially launch"Cocoegg" in China.
25

05 Appendix
26

Company
Overview
Company Name

Headquarters
Corporate Officers
Established
Capital

Employees

Stock Exchange Listings

I.K Co., ltd.
5th floor of KDX Nagoya Station Building, 3-26-8
Meieki, Nakamura-ku, Nagoya-shi, Aichi-ken

Hiroshi Iida, Chairman & CEO
Shogo Nagano, President & COO
May 1982
620 million yen
241
Tokyo and Nagoya (First section) code 2722
27

History
1982 May

I.K Trading LLC founded1983 Apr.

Started business with Aichi CO-OP Union

1990 Apr.

Changed company name to I.K Co., ltd.

2001 Dec.

I.K Co.,Ltd. listed on the JASDAQ market

2005 Dec.

Launched private brand 「Lowcalo Life」

2009 Jun.

Founded Food Cosmetic Co., Ltd.

2010 Dec.

Made AlfaCom, Ltd. a subsidiary2013 Feb.

Launched make-up brand 「LB」

2014 Sep.

Made Primedirect Inc. a subsidiary2017 Aug.

Founded I.K Trading Company Limited. a subsidiary2017 Nov.

Founded LB(SHANGHAI)COSMETICS Co.,Ltd. (indirect ownership 60%)

2018 Feb.

Listed on the Second Section of Tokyo and Nagoya Stock Exchange market

2020 Dec.

Listed on the First Section of Tokyo and Nagoya Stock Exchange market

28Company
Products
Cosmetics

Sundries

Food
29

The forecasts and future outlook statements contained in thismaterial and this briefing are based on our judgment and assumption
from the information currently available. Due to the uncertainties
inherent in the judgments and assumptions, also the changes inbusiness operations and internal/external circumstances, the actual
results may differ substantially from the forecasts, and we do notguarantee the certainty of any content regarding those futureforecasts. In addition, this material is for the purpose of providing
information, and does not solicit any action.

30