COMPANY RESEARCH AND ANALYSIS REPORTRIZAP Group, Inc.
2928
Sapporo Securities Exchange Ambitious

3-Oct.-2017
FISCO Ltd. Analyst

Hiroyuki Asakawa

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Earnings increased above forecast in FY3/18 Q1; conducted large-scale upfront investment. ....................

01

2. RIZAP-related businesses are currently achieving record highs;
RIZAP GOLF has entered a period of rapid expansion. ...............................................................................

01

3. Is also making steady progress in improving results at Group subsidiaries;
the plan is for all listed subsidiaries to be profitable for the full fiscal year...................................................

01■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 02
1. History and business domain.......................................................................................................................

02

2. Overview of the Group and its business segments. .....................................................................................

03■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 04
1. Overview of the FY3/18 Q1 results. . ....... ......................................................................................................

04

2. Details of the upfront investment........... ......................................................................................................

06

3. Improvement in earnings at subsidiaries. .....................................................................................................

08■Medium to long-term growth strategy and the progress made------------------------------------ 10
1. Overall image of the growth strategy and the progress made. .....................................................................

10

2. RIZAP body shaper business................. ......................................................................................................

10

3. RIZAP GOLF’s progress......................... ......................................................................................................

13

4. Trends in the other RIZAP-related businesses. ............................................................................................

14

5. The approach for fund raising................ ......................................................................................................

15■Business outlook-------------------------------------------------------------------------------------------------------------------------------------------------------- 16■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 19

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/██SummaryAccelerating growth from the twin axes of “RIZAP-related
businesses” and “Group companies”
RIZAP Group, Inc. <2928> (hereafter, also “the Company,” formerly named Kenkou Corporation) started with amail-order business and subsequently expanded its business fields and scope while actively utilizing M&As with anemphasis on “health.” The Group covers the “self-investment industry” as its business domain and operates beautyand health, apparel, housing and lifestyle, and entertainment businesses.
1. Earnings increased above forecast in FY3/18 Q1; conducted large-scale upfront investment
In FY3/18 Q1, revenue was ¥28,652mn (up 44.5% year on year (YoY)) and operating income was ¥2,701mn (down
27.5%). Profits declined as the result of the Company conducting upfront investment in order to accelerate growthin the future, and it is not a cause for concern. Instead, we should pay attention to the high level of progress madetoward achieving the 1H forecasts, including 66.6% of the operating income forecast. The positive factors were
the steady expansion of the RIZAP-related businesses and the headway made in the restructuring of the Group
companies, and steady progress is being made for the growth strategies on both of these two axes.
2. RIZAP-related businesses are currently achieving record highs; RIZAP GOLF has entered a period of rapid
expansion
Within the approximately ¥3bn of upfront investment in Q1, around ¥2.6bn was invested in the RIZAP-related businesses. By reflecting on this, we can get a sense of this significant profit potential of the RIZAP-related businesses.
In these businesses, the Company is steadily developing various measures for the body shaper business, which isan existing business, including to improve LTV and productivity and for the fully fledged deployment of the corporate
program. Each of the new businesses is also steadily expanding, but among them, RIZAP GOLF has entered thesame rapid-growth stage that the body shaper business went through in the past. In a situation of waiting lists tobecome members, the Company plans to secure trainers through holding its own golf tournament and to rapidly
establish and maintain a human resources structure.
3. Is also making steady progress in improving results at Group subsidiaries; the plan is for all listed
subsidiaries to be profitable for the full fiscal year
Steady progress is also being made in improving management at Group subsidiaries. In Q1, DREAM VISION CO.,LTD.<3185>, PASSPORT Co., Ltd. <7577>, and Maruko Corporation <9980> became profitable, while profits also
greatly increased at IDEA INTERNATIONAL CO., LTD. <3140>, whose fiscal year ends in June, following repeated
upward revisions to its forecasts. The other listed companies are also working on cost structure reforms and othermeasures, and the plan is for all listed subsidiaries to be profitable for the FY3/18 full year. IDEA INTERNATIONAL and
Maruko have raised funds to accelerate their growth strategies, but the Company should be able to raise sufficient
funds internally for the RIZAP-related businesses. Fund-raising for the other subsidiaries has also settled down andit seems that the focus now is on implementing growth strategies.

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.

3-Oct.-20172928 Sapporo Securities Exchange Ambitious

https://ir-english.rizapgroup.com/

Summary

Key Points
The size of the upfront investment once again points to the significant profit potential of the RIZAP-related
businesses• Profits at listed subsidiaries are steadily improving. All listed subsidiaries are expected to become profitable andrecord operating income in FY2017.
• RIZAP GOLF has entered the same period of rapid expansion as that experienced by body shaper. It is dealing
with the issue of securing trainers by holding its own golf tournaments, and this business is expected to be
profitable in this fiscal period.
•㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻔¥㼙㼚㻕㻾㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕㻔¥㼙㼚㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼕㼚㼏㼛㼙㼑㻌㻔㼞㼕㼓㼔㼠㻕㻝㻢㻜㻘㻜㻜㻜

㻝㻢㻘㻜㻜㻜
㻝㻟㻘㻜㻝㻜

㻝㻞㻜㻘㻜㻜㻜

㻝㻞㻘㻜㻜㻜

㻝㻜㻘㻞㻝㻞

㻤㻜㻘㻜㻜㻜

㻝㻡㻜㻘㻞㻜㻞

㻤㻘㻜㻜㻜

㻡㻘㻜㻢㻢
㻥㻡㻘㻞㻥㻥

㻠㻜㻘㻜㻜㻜

㻞㻘㻝㻜㻤
㻝㻘㻝㻞㻣

㻜

㻞㻟㻘㻥㻝㻜

㻲㼅㻟㻛㻝㻠

㻠㻘㻜㻜㻜㻡㻡㻘㻠㻠㻤

㻟㻥㻘㻝㻜㻝
㻜㻲㼅㻟㻛㻝㻡

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㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Source: Prepared by FISCO from the Company's financial results██Company profile
Based on its management philosophy of “Proving that ‘people canchange,’” the Company is growing rapidly in its business domain of
the self-investment industry
1. History and business domain
The Company was established as the Kenkou Corporation in April 2003 for the purpose of mail order sales of healthfoods. From this start in “health,” it has expanded its business domain and content while actively utilizing M&A. In
July 2016, the Company transferred the mail-order sales business to the operating company through a company
split, and it became a pure holding company. At the same time, it changed its company name to RIZAP Group Inc.
It is currently developing four businesses; beauty and health, apparel, housing and lifestyle, and entertainment.

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Company profile

The Company considers the Group’s business domain to be “the self-investment industry” and it provides products
and services to satisfy the “desire for self-actualization.” “The self-investment industry” is a market that can expand
without limit, unlike the “industry for necessities for daily life,” and the Company’s basic approach is that if it canlaunch products and services tailored to this market, it will be able to rapidly increase earnings from being highly
profitable and from obtaining highly sustainable profits. This basic philosophy is the theoretical and intellectual pillar
behind COMMIT 2020, its medium-term management plan that sets high targets.
RIZAP Group’s business domain and the “self-investment industry”

Source: The Company's results briefing materials

There are eight listed companies in the Group and it is developing
four businesses, including for beauty and health
2. Overview of the Group and its business segments
The Company started out with the mail-order sales business (mainly carried out by the Kenkou Corporation) andeventually developed the body shaper RIZAP business (mainly carried out by RIZAP). At the same time, it is growing
by acquiring and making subsidiaries of other companies.
When acquiring a company, the viewpoint that the Company always takes is whether it can provide value in thepreviously described “self-investment industry,” or in other words, whether it can generate synergies with the othercompanies in the RIZAP Group. Even in those cases where synergies with the existing businesses are hard to see
at first glance, the Company’s aim and intention for the acquisition can be understood from this viewpoint. In its
previous M&A, it has had a lot of success in raising the value of the companies it acquired, and at FISCO we thinkthat the reason for this can also be found in this viewpoint.
Currently, the Company’s business is constituted of four business segments. The main constituent companies andtheir business forms are as follows.

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Company profile

The “beauty and health business” is mainly carried out by the body shaper business company RIZAP, RIZAP
Innovation that develops new businesses under the RIZAP brand, Kenkou Corporation that conducts the mail-orderbusiness, Japan Gals Co, Ltd., body-shaper underwear company Maruko Corporation <9980>, media business
operator Pado Corporation <4833>, and Hokuto Printing Co., Ltd.
The “apparel business” is conducted by the listed companies of DREAM VISION, Jeans Mate Corporation <7448>,
and Marusho hotta Co., Ltd. <8105>, and also the non-listed companies of maternity ware company Angeliebe
Co., Ltd., luxury ready-made clothing company MARIMURA, women’s and men’s clothing company Auntie Rosa,and MISUZU Co., Ltd.
The “housing and lifestyle business” is comprised of IDEA INTERNATIONAL and PASSPORT, which carry out theplanning, development, manufacture, and sales of lifestyle products, and Tatsumi Planning, which is involved incustom-ordered housing and renovation.
The “entertainment business” is comprised mainly of SD ENTERTAINMENT, Inc. <4650>, which manages entertainment facilities, and NIHONBUNGEISHA Co., Ltd., a publishing company.

██Results trends
Sales increased for the 8th consecutive period
Although operating income declined YoY due to the upfront
investment, achieved 66.6% of the 1H operating income forecast
1. Overview of the FY3/18 Q1 results
In FY3/18 Q1 results, the Company posted revenue of ¥28,652mn (up 44.5% YoY), operating income of ¥2,701mn(down 27.5%), profit before income taxes of ¥2,552mn (down 29.4%), and profit attributable to owners of parentof ¥2,167mn (down 18.7%).
The details are given below, but basically the reason for the decline in profits YoY was that the Company conducted
upfront investment of approximately ¥3bn. So at FISCO, we think this is absolutely no cause for concern, and thatinstead, we should be focusing on the rates of progress for the 1H forecasts. It can be said to have made extremely
steadily progress, achieving 41.5% of the revenue forecast and 66.6% of the operating income forecast.
Overview of FY3/18 Q1 results(¥mn)
FY3/17

FY3/18
YoY growthrate

1H progress
rate vs.
forecast

1H (E)

28,652

44.5%

41.5%

68,986

66.2%

2,701

-27.5%

66.6%

4,053

-36.6%

Q1 results

1H

Full year

Q1

Revenue

19,83441,507

95,299Operating income

3,725

6,393

10,212

Operating margin

18.8

15.4%

10.7%

9.4%

-

-

5.9%

-

Profit before income taxes

3,614

6,064

9,604

2,552

-29.4%

71.7%

3,560

-41.2%

Profit attributable to owners of parent

2,666

4,262

7,678

2,167

-18.7%

95.6%

2,268

-46.8%

Source: Prepared by FISCO from the Company's financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 20

Growth rate

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Results trends

Below we present results by segments.
In the beauty and health business, revenue was ¥14,394mn (up 89.0% YoY) and operating income was ¥764mn(down 46.0%). In the mainstay RIZAP body shaper business, the Company actively conducted advertising in Q1
and the number of new members greatly increased, and cumulative member numbers had reached approximately
87,000 people by the end of June 2017 (89,000 people at the end of July). The contract renewal rate, which at
FISCO we think is the most important KPI, is steadily rising, and it has approximately doubled compared to 2 years
ago in FY3/16 1H. Also, as a result of the launch of the new reservation management system, the utilization rate
and revenue per booth are increasing significantly and continue to play the role of driving the expansion in earnings.
Maruko achieved profitability in Q1 for the first time in 9 fiscal periods. In the RIZAP-related businesses other than the
body shaper business, the number of RIZAP GOLF schools had increased to 12 by the end of July, while member
numbers and revenue are rising in each of RIZAP ENGLISH, RIZAP COOK, and RIZAP KIDS.
In the apparel business, revenue was ¥5,355mn (up 113.1% YoY) and operating income was ¥2,329mn (up 17.0
times). Revenue steadily increased at DREAM VISION, MARIMURA and Angeliebe, all companies that have been in
the Group for some time, while Jeans Mate, which joined the Group in February 2017, helped the apparel businessmore than double its revenue YoY. DREAM VISION improved its operating income by more than ¥800mn (includingfrom negative goodwill on making TRECENTI Co., Ltd. a subsidiary), while profits also greatly increased following
the recording of negative goodwill after Marusho hotta was made a subsidiary.
In the housing and lifestyle business, revenue was ¥6,760mn (down 4.9% YoY) and operating income was ¥168mn(down 80.1%). IDEA INTERNATIONAL continued to steadily expand sales of kitchen appliances, such as hotplates,
and travel goods, and its revenue increased significantly. Since PASSPORT joined the Group in May 2016, it has
been advancing cost structural reforms and other measures, and as a result, it became profitable in Q1. The decline
in revenue and profits was due to the effects of the postponement of a large-scale order in Tatsumi Planning’s
photovoltaic power generation business.
In the entertainment business, revenue was ¥2,940mn (up 6.9% YoY) and the operating loss was ¥53mn (comparedto operating income of ¥1,606mn in the previous fiscal year). SD ENTERTAINMENT worked to accelerate investment
in growth in the fitness business and to implement a strategy to beat the competition in the GAME business.
NIHONBUNGEISHA, a publishing company that joined the Group in April 2016, has been working to further expand
synergies by repeatedly publishing RIZAP-related books. In the same period in the previous fiscal year, profits weresignificantly increased by the recording of negative goodwill on NIHONBUNGEISHA being made a subsidiary, but
results returned to normal in Q1, and profits decreased YoY for this reason.

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.

3-Oct.-20172928 Sapporo Securities Exchange Ambitious

https://ir-english.rizapgroup.com/

Results trends

FY3/18 Q1 business trends by segment(¥mn)
FY3/17

FY3/18
YoY

Q1

Q2

1H

Full year

Q1 results

Beauty and health

7,614

9,778

17,392

38,225

14,394

89.0%

6,779

Apparel

2,512

2,931

5,444

13,042

5,355

113.1%

2,842

Housing and lifestyle

7,110

6,056

13,16733,253

6,760

-4.9%

-349

Entertainment

2,751

3,020

5,772

12,044

2,940

6.9%

188

Subtotal

19,98921,787

41,77696,56629,451

47.3%

9,461

Growth rate

Value

Revenue

Adjustment
Total

-155

-113

-269

-1,266

-798

-

-642

19,834

21,67341,507

95,29928,652

44.5%

8,818

1,414

3,285

4,700

6,920

764

-46.0%

-650

136

-86

50

1,743

2,329

1,602.1%

2,193

Operating income
Beauty and health
Apparel

847

-204

642

1,150

168

-80.1%-678

Entertainment

1,606

7

1,613

1,783

-53

-

-1,659Subtotal

4,004

3,001

7,006

11,5983,209-19.9%-795

Adjustment

-278

-334

-613

-1,385

-507

-

-228

Total

3,725

2,667

6,393

10,2122,701-27.5%-1,023

Housing and lifestyleNote: Segment revenue includes internal transactions.
Source: Prepared by FISCO from the Company's financial results

The size of the upfront investment once again points to the profit
potential of the RIZAP-related businesses
2. Details of the upfront investment
As previously stated, the reason why operating income declined YoY in Q1 was that the Company conducted upfront
investment to increase earnings from Q3 onward. Since the past, it has repeated a pattern of actively conducting
advertising in Q1 and Q2, and then recouping this investment as earnings in Q3 and Q4. In FY3/17, it temporarily
broke this pattern and actively invested in advertising in FY3/16 Q4, but in FY3/18 Q1, it returned to its previous
pattern.

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Results trends

Breakdown of upfront investment in FY3/18 Q1

Source: The Company's results briefing materials

For the RIZAP-related businesses, the investment was for costs to enhance stores and human resources, with anawareness of marketing expenses and increasing losses. FISCO is focusing on how this upfront investment can beread as indicating the extent that the profitability of the RIZAP-related businesses can improve and their potential
for the future.
RIZAP-related businesses are included in the beauty and health business segment and in Q1, operating incomein this segment was ¥764mn. If we add the upfront investment in the RIZAP-related businesses of approximately¥2,630mn, we can estimate that the effective operating income in this segment in Q1 was around ¥3,400mn. So
based on the estimation that ¥3,400mn x 4 quarters = annual segment income of ¥13,600mn, we can get a senseof the strength of the profit potential of the RIZAP-related businesses (this segment’s operating income includes
income from non-RIZAP businesses, such as mail order sales, but most of it would seem to be from RIZAP).
Conversely, in Q1, the Group companies did not invest in marketing expenses, and on totaling the operating loss at
a newly consolidated subsidiary and the impact of factors causing profits to decline at existing subsidiaries. Theseso-called “factors decreasing profits YoY” were around ¥380mn, which in a broad sense can be considered to be
upfront investment. From this breakdown, at FISCO we were surprised that each subsidiary is achieving results fromtheir own efforts, because the Company, in a real sense, did not invest in advertising and other marketing expenses
for these Group companies, so earnings improved at each of them without relying on the support of the Company.
The Company’s policy is to first spend substantively on expenses at subsidiaries only in the phase of fully pursuingGroup synergies. We have great expectations for an expansion in earnings at the point in time when activities are
conducted in earnest as the Group as a whole, such as for investing in marketing expenses and mutual exchangesof customers between Group companies.

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Results trends

Earnings are steadily improving at the listed subsidiaries and all are
expected to be profitable and record operating income in FY2017
3. Improvement in earnings at subsidiaries
The Company has 8 listed subsidiaries and more than 10 non-listed subsidiaries. Looking at those listed subsidiaries
that disclose their financial information, at FISCO we highly evaluate the steady improvement in results that they
are achieving as a whole.
The four companies whose results improved significantly up to Q1 are IDEA INTERNATIONAL, Maruko, DREAMVISION, and PASSPORT. After IDEA INTERNATIONAL joined the Group in 2013, it worked to rebuild its brand andproduct lineup, and as a result it has become firmly established as a profitable company with leading products,
including miscellaneous kitchen goods and travel goods.
Maruko joined the Group in 2016, and it achieved profitability for the first time in 9 years in Q1 as a result of various
efforts, including introducing in-company installment payment sales, launching new brands in a low price range,
and improving sales and production systems. In addition, in the current fiscal year it is forecasting a substantial
increase in profits, up nearly 10 times YoY.
DREAM VISION has been taking drastic measures for its product planning and sales, and thanks to these measures,
profits increased greatly in the existing apparel EC business and it achieved profitability for the first time in a Q1. The
profit amount in this Q1 was increased by the recording of negative goodwill following the acquisition of a subsidiary,
but it is worth noting that as of Q1, it has achieved 97% of its full fiscal year forecast for operating income.
PASSPORT has renewed 11 stores based on a new concept, and revenue rose 10% and customer numbers
increased 22% compared to before this renewal, and as a result it achieved profitability in Q1. Going forward, in
addition to expanding the transition to the new concept to all stores, it is aiming to achieve profitability for the full
fiscal year by strengthening new category products.
Results at the listed subsidiaries
Company name

Code

Completion
date of theacquisition asa subsidiary

IDEA
INTERNATIONAL
CO., LTD.

3140

SD
ENTERTAINMENT,Inc.

FY2016 Q1

FY2016 full year

Revenue

OperatingincomeRevenue

Operatingincome2013/9/25

1,445

-3

6,160

4650

2014/1/16

1,857

-9

DREAM VISION
CO., LTD.

3185

2015/3/31

674

PASSPORT Co.,
Ltd.

7577

2016/5/27

MarukoCorporation

9980

Jeans Mate
Corporation
Pado Corporation
Marusho hottaCo., Ltd.

FY2017 Q1

FY2017 full year E

Revenue

OperatingincomeRevenue

Operatingincome

182

1,493

-19

7,205

401

8,281

188

1,887

-68

8,600

450

-73

3,107

-154

1,293

756

5,283

780

2,619

-381

10,215

-552

2,026

14

10,000300

2016/7/5

2,675

-690

13,401

135

3,398

42

15,000

1,200

7448

2017/2/20

2,145

-149

9,195

-829

2,010

-218

11,550300

4833

2017/3/31

1,646

-133

6,997

-311

1,622

-113

7,400

230

8105

2017/6/28

1,733

29

7,488

86

1,696

-8

7,500

111

Note: A s IDEA INTERNATIONAL's fiscal year ends in June, the FY2017 result represents that for the year ended June 2017. PASSPORT’s FY2016(FY3/17) results were for an irregular fiscal period of 13 months following the change to the fiscal period. Jeans Mate’s FY2017 (FY3/18) results
are for an irregular fiscal period of 13 months 11 days following the change to the fiscal period.
Source: Prepared by FISCO from each company's financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Results trends

Among the remaining four companies that recorded an operating loss in Q1, at SD ENTERTAINMENT, this was dueto the upfront investment conducted in Q1, and results are expected to recover from Q2 onwards. Marusho hottajust joined the Group in June 2017, and an evaluation of the improvement to its results after joining the Group should
be made from Q2 onwards. Previously it was a profitable company, and the operating loss in Q1 was due to one-off
structural-reform expenses, including to integrate offices and systems.
Since joining the Group, Jeans Mate and Pado have been conducting cost structural reforms, upfront investment,
and other measures, and both companies plan to become profitable and record operating income on a full fiscal
year basis. They appear to have made steady progress up to the current time, but it is still early days since theyjoined the Group and this Q1 was too soon for the effects of these measures to become apparent.
The listed subsidiaries have been highly evaluated for their various efforts, including the progress made in improving
earnings and in strengthening returns to shareholders, and overall, their share prices have been trending strongly.
There are subsidiaries whose share prices have risen sharply, but even in the current situation where share prices
have settled down to a certain extent, the listed subsidiaries’ unrealized gains continue to be at high levels.
Valuation gains / losses from the listed subsidiaries
Ownership
stake at the Acquisition
time of theprice (¥)
acquisition

Numberof shares
acquired(shares)

As of Aug. 21, 2017

Acquisition
amount(¥mn)

Shareprice (¥)

Valuation
gain / loss(¥mn)

7,118,400

742

1,000

6,376

Private-placement
capital expansion

89

5,340,000

475

991

4,817

TOB from GEO

192

3,900,000

748

1,415

4,770

Private-placement
capital expansion

456

265,200

121

1,415

254

TOB

Company name

Code

Listed market

IDEA
INTERNATIONAL

3140

TSE JASDAQ

66.25%

104.3

SD
ENTERTAINMENT

4650

TSE JASDAQ

72.03%

DREAM VISION

3185

TSE Mothers

78.50%

Share acquisition
methodPASSPORT

7577

TSE JASDAQ

65.83%

117

9,730,000

1,138

498

3,707

Private-placement
capital expansion

Maruko

9980

TSE-2

63.18%

50

55,000,000

2,750

392

18,810Private-placement
capital expansion

160

5,748,753

920

604

2,552

TOB

Jeans Mate

7448

TSE-1

63.99%Pado

4833

TSE JASDAQ
GrowthMarusho hotta

8105

TSE-2

187

3,450,000

645

604

1,439

Private-placement
capital expansion

71.11%

74

13,513,515

1,000

492

5,649

Private-placement
capital expansion

62.27%

55

35,000,000

1,925

361

10,710Private-placement
capital expansion

10,464

Total

59,084

Source: Prepared by FISCO from each company's materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/██Medium to long-term growth strategy andthe progress made

Growth on the two axes of the RIZAP-related businesses and Group
companies
1. Overall image of the growth strategy and the progress madeThe Company has formulated the COMMIT 2020 medium-term management plan targeting FY3/21 as its final year.
The numerical targets for the plan’s final year are revenue of ¥300,000mn and consolidated operating income of¥35,000mn.
With regards to the Company’s business domain of the self-investment industry, the scale of the market it is targetingis estimated to be ¥7 trillion. For this market, it is implementing 4 growth strategies; 1) growth from existing business,2) launch of new businesses, 3) a business collaboration strategy, and 4) M&A and synergies.
When focusing on the businesses themselves and their content, it is possible to replace these strategies withthe growth axes of “growth of RIZAP-related businesses” and “growth of Group companies.” To ascertain andunderstand the growth strategies in relation to the actual actions of the Company, we can say that it is more useful
to divide them into two in this way.
Up to the present time, clear progress has been made by both the RIZAP-related businesses and the Group
companies. The trends in results at Group companies are described in the “Results trends” section, so to avoid
repeating them here, the description below is mainly of the RIZAP-related businesses.

The focus in the body shaper business is on the new corporate
program
Steady progress is also being made in the other growth strategies
2. RIZAP body shaper business(1) Overall image of the body shaper business growth strategy
As described in the previous report, “RIZAP,” which started from the body shaper business, has expanded its
business domains to become the RIZAP-related businesses of lessons for golf, English, and cooking. These new
businesses are entering periods of rapid growth, but currently it is still widely recognized that the body shaperbusiness constitutes the core of earnings.
At the same time as being the main pillar of earnings, the body shaper business is the main growth engine. As
before, new members continue to increase at a pace of 1,500 to 2,000 people a month, and as of the end of July
2017, cumulative member numbers had reached 89,000 people. Member numbers are a KPI for the Company, andat the same time they are a major asset. Its specific measures to utilize this asset for growth include 1) raising the
lifetime value (LTV) per member, 2) expanding the customer base by capturing seniors as customers, 3) increasing
store sales by improving productivity, and 4) expanding the business for corporations and related customers.

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Medium to long-term growth strategy and the progress madeThe progress made in Q1 for improving LTV and productivity, and for the business for corporations and related,
is described below.
(2) Measures to improve LTV: Introducing the Body Management Program (BMP)The Company had introduced its Life Support Program (LSP) and had been working on measures to raise theLTV of members. Raising the LTV signifies switching the RIZAP business model from a flow type to a stock type.
On the unit of revenue per member, in the case of the standard course only, it is on the scale of hundreds ofthousands of yen, of “entrance fee + ¥298,000 + product sales.” However, by retaining those members who havefinished the standard course as active members through some form of contract renewal, revenue per member
dramatically increases.
The Life Support Program enables members to aim to maintain their body shape and health through receiving
twice monthly counseling from trainers for ¥19,600. In the case of a contract-renewal member, revenue permember becomes “entrance fee + ¥298,000 + product sales + (¥19,600 × number of continuous LSP months).”
Along with the LSP, the Company is also continuing to introduce machine rooms. This entails refurbishing one
part of the booth as a machine room and installing training machines, and members are able to freely use themachines to maintain and improve their body shapes. While there is no direct trainer guidance, in addition to
distributing training sheets so that members can appropriately manage their training themselves, they are provided
with periodic counseling.
As a result of introducing this program, the Company is making steady progress in converting the body shaperbusiness to a stock-type profit structure. Specifically, the percentage of members who renew their contract on
the end of the standard course has approximately doubled compared to one year ago. Also, the percentage ofmembers who remain members one year after they joined has risen by around 2.1 times over the same period.
The Company has unveiled the slogan of “Becoming partners to our guests for their lifetime,” and at the sametime, it developed the aforementioned LSP and has newly introduced the “Body Management Program (BMP).”The content of BMP is essentially unchanged from LSP. At FISCO, we think the focus for BMP should be making
the approximately 1,000 trainers into full-time employees, which can be expected to improve their motivation
and retention rate. Also, we highly evaluate this step as evidence that “Becoming guests’ lifelong partner” is not
merely a slogan or sales catchphrase for the Company, but is something that it is seriously working to achieve.
The before-and-after body shaper TV commercials are extremely impactful and have proven to be very popular,
but we think that making trainers full-time employees will have at least the same effect as these commercials interms of improving the popularity of the business.
(3) Improving productivity: Introducing a new reservation management system
The Company has responded to the continual increase in member numbers in the body shaper business byrecruiting a large number of trainers and increasing the number of stores. Although the extreme situation has
improved, the situation is still that, depending on the day of the week and the time of day, the number of trainers
is not keeping up with customer demand. One reason for this is that the percentage of working-age members(in their 20s to 40s) is high and they tend to train at the same times, of early in the mornings, the evenings, andweekends and holidays. But another reason according to the Company’s own analysis is that its reservation
system has not been sufficiently computerized and this could be causing considerable opportunity loss.

We encourage readers to review our complete legal statement on “Disclaimer” page.

11 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Medium to long-term growth strategy and the progress madeTo solve this problem, in April 2017 the Company launched a new online reservation management system. Its
effects are proving to be greater than initially anticipated. By June 2017, which is around three months after thelaunch of the new reservation system, the utilization rate per booth was around 1.6 times and revenue per booth
was approximately 1.8 times compared to January of the same year, when the old system was still being used.
The new system can be judged to be extremely effective based on the two points: in a typical year, the utilization
rate is high in January due to the New Year holiday period, and that even compared to this month, the utilization
rate greatly increased. Then, the upward trend in the utilization rate has been accelerating since the launch of the
new system. It would seem that there is still room for the utilization rate to rise even higher, and we can expect
it to rise further in conjunction with the Company’s other measures, such as to capture seniors as customers.
(4) Business for corporations and related: The fully fledged start of the “corporate program”
The Company has become even more confident about the effectiveness of the RIZAP method based on the joint
research it has conducted with many universities and medical institutions and the data it has gathered up to thepresent time. From this situation, it has decided to evolve the body shaper business model and to advance from“one-to-one” to “one-to-N” (where “N” stands for “numerous”).
Specifically, it plans to utilize the results of the “RIZAP method” that it has accumulated in the body shaperbusiness and to provide health promotion services to corporations and local governments. While the service toindividuals is one-to-one, for corporations and local governments, it will be in the form of one-to-numerous, inwhich a trainer is dispatched to these organizations to provide guidance for groups.
The Company has so far been providing health seminars based on the RIZAP method to corporations, and in
total, 125 companies and 6,000 people have attended these seminars. Also, in its business for local governments,
it partnered with Makinohara City in Shizuoka Prefecture to provide a health promotion program for the elderly
utilizing the RIZAP method.
Based on this track record, the Company has embarked on a collaboration with Benefit One Inc. <2412> for a
corporate program. Benefit One is a major corporate welfare service provider, and it provides services to 7,170
companies. The Company intends to utilize this customer base and encourage them to introduce its healthpromotion program based on the RIZAP method.
In terms of the content of the corporate program, the basic framework is that the RIZAP trainer visits a company
and provides a group lesson, and in return, the Company collects a fee of several hundred thousand yen pervisit. As the frequency of the lessons and other aspects are set freely according to the client company’s wishes,revenue will vary widely depending on the scale of the company and other factors. But supposing that the trainer
visits 4 times per month, we can estimate annual revenue will be in excess of ¥10 million, based on several
hundred thousand yen x 4 times x 12 months. A major focus point will be the extent to which revenue from thecorporate program, which the Company has now launched fully in collaboration with Benefit One, will increase
in its first fiscal year.

We encourage readers to review our complete legal statement on “Disclaimer” page.

12 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Medium to long-term growth strategy and the progress madeThe golf business is recreating the body shaper business’ period of
rapid expansion
It is dealing with the issue of securing trainers by holding its own
golf tournaments and is expected to become profitable in this fiscal
period
3. RIZAP GOLF’s progress
Among the RIZAP-related new businesses, the golf business, which is developing the RIZAP GOLF brand, currently
has the greatest momentum.
Following the contract with the professional golfer Ryo Ishikawa for him to appear in commercials from this spring,
applications from people wanting to become members have greatly accelerated. There were 12 schools at the endof March 2017 and the plan is to increase this number to 25 by the end of March 2018.
According to the Company, for each of the KPI of the number of inquiries at the current time and the contract
rate, the golf business is achieving the same rapid growth as did the RIZAP body shaper business (specifically, theprocess of increasing store numbers to 50 stores). Therefore, just as was faced by the body shaper business, themost important issue facing the golf business that it must resolve is securing trainers.
In order to acquire trainers, the Company has decided to hold its own golf tournaments. The tournaments are open
to both pros and amateurs, and it intends to recruit excellent trainers from among the competitors. Following thefirst tournament on July 21, it plans to hold 30 major tournaments in half a year. So far, it has recruited an average of
5 trainers per tournament and it intends to recruit 150 to 200 trainers over the 30 tournaments toward establishinga structure of 200 to 250 trainers, when combined with its existing trainers.
At FISCO, we evaluate the Company holding its own golf tournaments to be an extremely effective measure fromthe perspective of recruitment costs per trainer. If the recruitment goes smoothly and it establishes a structure of
200 trainers, it will be able to realize an enhanced network of 25 schools, which is considered to be fully sufficientin order to realize the annual sales of ¥5bn that the Company is aiming for. While timing is an issue, we think thatthe structure will be practically in place by December.
Regarding earnings, the Company itself has announced that it expects RIZAP GOLF to become profitable during
FY3/18. On this point also, we can see it following the same pattern as that followed by the RIZAP body shaperbusiness in the past. For some time, the Company has considered that RIZAP GOLF will be able to reproduce thesuccess of the body shaper business, but others were of a more skeptical view. If in the current period, the numberof schools rapidly increases in response to demand and it becomes profitable, then even though the process is still
underway, it can be said that this is evidence that RIZAP GOLF is following the same path as that followed by the
body shaper business.

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13 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Medium to long-term growth strategy and the progress madeIs steadily developing schools for each of ENGLISH, COOK, and
KIDS
Expectations are also rising for RIZAP Apparel
4. Trends in the other RIZAP-related businesses(1) RIZAP ENGLISH
The Company currently operates two schools in Ikebukuro and Shinjuku. It opened the first school in July 2016
and during FY3/17, it focused on refining methods and operations rather than expanding the school network.
During that time, the number of students steadily increased and it seems the Company has become confident
the time is right for fully fledged business development. In FY3/18, it plans to expand the network.
There was no change in Q1 in the number of schools. The number of sessions has been steadily increasing anda new speaking course was established from August. The establishment of new schools is set to accelerate fromQ2 onwards.
(2) RIZAP COOKIn RIZAP COOK, the cooking lessons began in November 2016 under the R-COOK brand at a school in Jiyugaoka,
based on the concept of “Our commitment to our top-class chefs dramatically improving your cooking in only
two months.” The Company changed the name to RIZAP COOK from June 1, 2017, and decided on the fully
fledged development of a network of multiple schools. It seems to be aiming for a network of 10 schools by theend of March 2018.
There were no major changes in Q1 and this business continues to grow steadily. Member numbers are steadily
increasing. Based on this, a new school was opened in Ikebukuro on August 17, followed by a Kichijoji school on
September 7, while a new Ginza school is scheduled to open at the end of September.
(3) RIZAP KIDSThe Company has opened one school in Denenchofu and is currently conducting a pilot test. The concept is
exercise-guidance studios with an approach that enables children to use their abilities. The basic period, of 16
lessons in 2 months, and the setting of the fees is the same as for the other RIZAP programs.
Revenue has rapidly increased since July 2017 as a result of rotating the PDCA cycle in FY3/17 for programs,
operations, and marketing, and conducting upfront investment in them. Based on this, the plan is to open two
more schools in October and November of this year.
(4) RIZAP Apparel
Until now, the Company has been exploring the market’s reaction through repeatedly conducting sales in temporary stores, including at special booths within department stores. In a situation in which record sales have beenachieved at each of these stores, it became increasingly confident of this business succeeding. Based on this, itplans to open a real store this fall.
Although the specific details, such as where it will open stores, are not yet clear, it seems that the Company will
utilize the store network of the sports goods retail business that it acquired from Yamano Holdings Corporation<7571> in May. At FISCO, we think that RIZAP Apparel might be able to achieve annual sales of ¥500mn to ¥1bn
on a standalone basis, and that the sports goods retail business as a whole could reach annual sales of around¥3bn.

We encourage readers to review our complete legal statement on “Disclaimer” page.

14 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Medium to long-term growth strategy and the progress madeThe prerequisite is that fund raising has a growth story leading to
the expansion of ROE
It is set to settle down, temporarily
5. The approach for fund raising
In order to implement the growth strategy described above, there is the tendency to think it possible that fund raising
will be conducted in the future, but at FISCO, we think this possibility is low. During the results briefing, President
and Representative Director Takeshi Seto stated that the needs of the Company itself for fund raising are low. The
background to this may be the steady acquisition of new members in the RIZAP business, including in the related
businesses. At the same time, it seems that the Company has applied the brakes to the reliance of the subsidiaries
on it as their parent company, and at the current time, fund raising by the Company for its subsidiaries does notseem to be an option.
Within the Group, two subsidiaries, IDEA INTERNATIONAL and Maruko, conducted equity financing (raising funds
through issuing new shares) in Q1, and they raised approximately ¥10bn in total. The background to this is that interms of results, both companies have become wholly profitable (Maruko on a forecast basis), they also both havemultiple investment projects for growth that could improve their ROE (return on equity).
The Company does not intend for the other listed subsidiaries to conduct equity financing unless they have aclear equity story like these two companies. The first option is for each subsidiary to aim to improve its profitability
through cost structural reforms and business reforms, and to work to raise funds internally, and then after that,raising funds externally will be considered at the stage where a story for further growth and to improve ROE has
been clearly depicted.

We encourage readers to review our complete legal statement on “Disclaimer” page.

15 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/██Business outlook
Expects to achieve the initial forecasts from the growth of the
RIZAP-related businesses and improved earnings of Group
companies
For FY3/18, the Company is forecasting that revenue and profits will increase substantially, the same as in theprevious fiscal year, with revenue of ¥150,202mn (up 57.6% YoY), operating income of ¥13,010mn (up 27.4%),
profit before income taxes of ¥11,983mn (up 24.8%), and profit attributable to owners of parent of ¥8,007mn (up4.3%). There has been no change to the initial forecast.
Overview of the FY3/18 forecasts(¥mn)

FY3/17

FY3/18YoY
growthrate

1H
progress
rate vs.
forecast

1H (E)

28,652

44.5%

41.5%

2,701

-27.5%

66.6%

10.7%

9.4%

-

6,064

9,604

2,552

4,262

7,678

2,167

Q1
results

1H

Full year

Q1

Revenue

19,83441,507

95,299Operating income

3,725

6,393

10,212

Operating income margin

18.8%

15.4%

Profit before income taxes

3,614

Profit attributable toowners of parent

2,666

YoY
Growthrate

Full year(E)

68,98666.2%

150,202

57.6%

54,903

4,053-36.6%

13,010

27.4%

2,798

-

5.9%

-

8.7%

-

-

-29.4%

71.7%

3,560

-41.2%

11,983

24.8%

2,379

-18.7%

95.6%

2,268

-46.8%

8,007

4.3%

329

Growthrate

Value

Source: Prepared by FISCO from the Company's financial results

In terms of the approach to the FY3/18 forecasts, fundamentally there has been no change to that described in
the previous report. As is explained below, it is considered that its approach is reasonably explained by the organic
growth of the mainstay RIZAP-related businesses and the expansion of results of the group of consolidated listed
and non-listed subsidiaries.
At the stage of the end of Q1, the point that differs from our expectations at FISCO was the recording of negative
goodwill of ¥1,514mn following Marusho hotta being made a subsidiary (we did not expect negative goodwill tobe recorded in FY3/18). This caused profits to increase, but in Q1, the Company conducted upfront investment of
more than ¥3,000mn, which is around double this negative goodwill amount, and moreover it will conduct additional
upfront investment on a scale of ¥1,000mn in Q2. As the Company has not changed its full fiscal year operating
income forecast, on an actual performance basis, operating income has increased substantively from the initial
forecast and we think it is more likely that full fiscal year forecasts will be achieved.
Revenue is forecast to increase ¥54,903mn YoY. The Company has not disclosed a detailed breakdown of thisincrease, but at FISCO, we estimate it to be as follows; ¥13,000mn to ¥15,000mn from the RIZAP-related businesses, approximately ¥30,000mn from the listed subsidiaries, and ¥10,000mn as the total from other subsidiaries
and M&A. The breakdown for the listed subsidiaries can be easily obtained from adding the results forecasts
announced by each company.

We encourage readers to review our complete legal statement on “Disclaimer” page.

16 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Business outlook

Trend in the RIZAP-related business revenue
Type of business/business format

Business brandNo. of stores
End-FY3/17

Revenue

End-FY3/18 (E)FY3/17

FY3/18 (E)RIZAP

Body shaping

120

120-130

Approx. ¥23,000mn

Approx. ¥28,000mn

RIZAP GOLF

Golf lessons

625

Several hundred
million yen

Approx. ¥4,000mn to¥5,000mn

RIZAP ENGLISH

English conversation school

2

5-10

Tens of millions of yen

Approx. ¥500mn to¥1,000mn

RIZAP COOK

Cooking classes

1

5-10

Tens of millions of yen

Approx. ¥500mn to¥1,000mn

RIZAPSports apparel-Approx. 10

Tens of millions of yen

Approx. ¥3,000mn

RIZAP KIDS

Children’s exercise classes

1

2-3

130

190-200

All RIZAP-related businesses

Millions of yen Tens of millions of yen¥23,200mn¥36,000mn to¥38,000mn

Note: The FY3/18 revenue forecast values are FISCO estimates.
Source: Prepared by FISCO from Company materials and interviews

With regards to profits, there is no doubt that results in Q1 exceeded the Company’s expectations, even on taking
into consideration the fact that there was the special factor of negative goodwill. It allocated this amount to upfront
investment and it plans to conduct additional upfront investment in Q2 as well. As a result of this, at FISCO we think
it is highly likely that profits in Q3 and Q4 will be higher than initially expected. The question is whether or not thiswill be reflected on the PL (profit and loss) statement. If operating income for the current period exceeds the initial
forecast, we consider that it is very possible that this amount will be allocated to upfront investment for the next
fiscal period and onwards.
The segment we should be paying attention to is the beauty and health business segment, which includes the
RIZAP-related businesses. Among these businesses, RIZAP GOLF is worthy of particular attention. If progress ismade in the current fiscal period according to plan, it will become the second business pillar after the body shaperbusiness, and it is expected that from the next fiscal period onwards, it will become a major engine for the sustainablegrowth of earnings. Another point to focus on is the body shaper corporate program. It goes without saying thatthe potential market for this program is huge, and expectations are rising about how much growth it can achieve inthis first fiscal year through the collaboration with Benefit One.
One more point to focus on is the improvement of earnings at the listed subsidiaries. The goal is for all thesecompanies to become profitable in the current fiscal year. At FISCO, we believe that achieving this goal would not
only enhance the Company’s assessment for being able to regenerate companies, it would also eradicate a large
degree of the negative views held about it.

We encourage readers to review our complete legal statement on “Disclaimer” page.

17 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.

3-Oct.-20172928 Sapporo Securities Exchange Ambitious

https://ir-english.rizapgroup.com/

Business outlook

Simplified statements of income(¥mn)
FY3/18

FY3/16 fullyear

FY3/17 fullyear

Q1 results

1H (E)

2H (E)

Full year (E)53,937

95,29928,652

68,986

81,216150,202

-

76.7%

44.5%

66.2%

51.0%

57.6%

32,51346,034

14,518

-

-

-

-

41.6%

42.7%

-

-

-

Gross margin

60.3%

48.3%

50.7%

-

-

-

SG&A expenses

28,63541,73814,486

-

-

-

-

45.8%

75.2%

-

-

-

53.1%

43.8%

50.6%

-

-

-

Other income

227

6,687

2,923

-

-

-

Other expenses

947

770

253

-

-

-

Operating income

3,159

10,212

2,701

4,053

8,957

13,010
27.4%

Revenue
YoY
Gross profit
YoY

YoY
SG&A expenses ratio (to sales)-

223.3%-27.5%-36.6%

134.5%

Operating income margin

5.8%

10.7%

9.4%

5.9%

11.0%

8.7%

Profit before income taxes

2,806

9,604

2,552

3,560

8,423

11,983

YoY

YoY
Profit attributable to owners of parent
YoY
EPS after the stock split (¥)
Dividend after the stock split (¥)-

242.2%-29.4%-41.2%

138.0%

24.8%

1,587

7,678

2,167

2,268

5,739

8,007

-

455.5%-18.7%-46.8%

57.8%

4.3%

6.26

30.13

8.51

8.90

22.52

31.42

-

6.05

-

-

-

6.29

Source: Prepared by FISCO from the Company's financial results

Statement of financial position(¥mn)
IFRS transition
date (Apr. 1, 2015)

End-FY3/16

End-FY3/17

End-FY3/18 Q1

22,72432,52262,08664,736

Cash, deposits and equivalents

8,366

10,48324,64322,150Trade and other receivables

8,974

12,062

20,54420,945

16,40021,25533,562

36,488Property, plant and equipment

9,647

11,331

17,616

19,179Goodwill

2,473

4,675

6,291

6,291

846

689

1,013

1,287

Total assets

39,12553,777

95,648101,225

Current liabilities

Current assets

Non-current assets

Intangible assets

19,89827,296

43,63645,908Trade and other payables

10,766

13,75624,32625,313

Interest-bearing debt

7,820

10,914

15,996

17,24912,286

15,34430,55731,998

10,371

12,85325,20426,751

6,077

10,226

17,01817,367

Capital stock

132

1,400

1,400

1,400

Capital surplus

200

1,799

1,692

1,399

5,720

7,001

13,696

14,359Non-current liabilities
Interest-bearing debt
Total equity attributable to owners of parent

Retained earnings

23

25

228

207

863

910

4,436

5,951

Total equity

6,940

11,13721,454

23,318

Total liabilities and capital

39,12553,777

95,648101,225

Other capital composition items
Non-controlling interests

Source: Prepared by FISCO from the Company's financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

18 20

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.
2928 Sapporo Securities Exchange Ambitious

3-Oct.-2017https://ir-english.rizapgroup.com/

Business outlook

Cash flow statement(¥mn)
End-FY3/16

End-FY3/17

End-FY3/18 Q1

Cash flow from operating activities

868

175

-285

Cash flow from investing activities-3,973

2,914-2,919Cash flow from financing activities

5,137

11,088

727

-27

-18

-16

2,004

14,160-2,493

Cash, deposits and equivalents at the start of the period

8,478

10,48324,643

Cash, deposits and equivalents at the end of the period

10,48324,64322,150Cash, deposits and equivalents conversion difference
Change in cash, deposits and equivalents

Source: Prepared by FISCO from the Company's financial results██Shareholder return policy
Announced a 1:2 share split
In addition to significantly expanding the shareholder benefit
program, the benefit-program yield for existing shareholders will begreatly increased by the share split
The Company positions returning profits to shareholders as an important management issue. While having a basic
stance of returning profits to shareholders and having a shareholder gift program, it strives to strengthen returns,
mainly to individual investors. There has been no change to this stance and policy. In terms of the dividend amount,since FY3/17 the Company has revised the standard for the dividend to a consolidated dividend payout ratio of 20%.
The Company recently announced that it would be conducting a 2 for 1 share split on October 1, 2017, in order tocreate an environment in which individual investors can more easily invest in it. At the current share price level, an
investment of close to ¥200,000 is required to purchase a unit of shares (100 shares), but after the share split, thiswill be reduced to under ¥100,000.
On considering the share split mentioned above, the full year FY3/18 forecast for net income per share is ¥31.42
and the dividend forecast is ¥6.29. Both are essentially unchanged from the previous forecasts. In a comparison
after adjusting for the share split, the dividend will rise ¥0.24 YoY.

We encourage readers to review our complete legal statement on “Disclaimer” page.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

RIZAP Group, Inc.

3-Oct.-20172928 Sapporo Securities Exchange Ambitious

https://ir-english.rizapgroup.com/

Shareholder return policy㻱㼍㼞㼚㼕㼚㼓㼟㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻘㻌㼐㼕㼢㼕㼐㼑㼚㼐㻘㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻔¥㻕㻱㼍㼞㼚㼕㼚㼓㼟㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㻔㼘㼑㼒㼠㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻕

㻟㻥㻚㻞㻑

㻠㻜㻚㻜㻜
㻟㻡㻚㻜㻜

㻠㻜㻚㻜㻑
㻟㻡㻚㻜㻑

㻟㻝㻚㻠㻞

㻟㻜㻚㻝㻟

㻟㻜㻚㻜㻜

㻟㻜㻚㻜㻑

㻞㻡㻚㻜㻜

㻞㻜㻚㻜㻜
㻝㻡㻚㻜㻜
㻝㻜㻚㻜㻜

㻡㻚㻜㻜

㻞㻡㻚㻜㻑

㻞㻜㻚㻝㻑

㻝㻤㻚㻥㻑

㻞㻜㻚㻜㻑

㻞㻜㻚㻜㻑
㻝㻡㻚㻜㻑

㻝㻜㻚㻥㻟
㻤㻚㻜㻑

㻢㻚㻢㻟

㻢㻚㻞㻢
㻟㻚㻤㻜

㻜㻚㻤㻣

㻝㻚㻞㻡

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻢㻚㻞㻥

㻢㻚㻜㻡

㻝㻜㻚㻜㻑

㻡㻚㻜㻑

㻜㻚㻜㻜

㻜㻚㻜㻑

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Note: Reflects the 1:2 share split of October 1, 2017 (scheduled)
Source: Prepared by FISCO from the Company's financial results



The Company has established a shareholder benefits program, in which shareholders listed in the register ofshareholders at the end of the fiscal year (March 31) can choose a RIZAP Group product according to the numberof shares that they hold. Due to the share split mentioned above, the benefit-program yield for shareholders whopurchased the Company’s shares prior to the share split will rise by up to two times.
The Company has also recently made changes that further enhance the appeal of is shareholder benefit program.
The first change is that it has increased the number of products from which shareholders may choose. The numberof companies in the Group has risen through M&A. Reflecting this, it plans to increase the number of productsin the shareholder benefits program from 157 at the end of FY3/17 to more than 300 by the end of FY3/18. The
second change is the increase in the value of the benefit for large shareholders. Previously, shareholders holding
2,000 or more shares (prior to the share split) could choose a product with a maximum value of ¥36,000. But now,
it has newly established a “premium class,” in which shareholders who hold 4,000 or more shares or 8,000 or moreshares (both after the share split) can receive a Group product with values of ¥72,000 or ¥144,000, respectively.

We encourage readers to review our complete legal statement on “Disclaimer” page.

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