Steadily increasing the number ofrestaurants with a Sato Bar/Sato Café!
Financial Results Explanatory Material for theSRS HOLDINGS CO.,LTD. First Half of the Fiscal Year Ending March 2018 (FY3/18)(Securities Code: 8163)

November 8, 2017

Contents
1H FY3/18 Overview of Financial Results andRevisions to Earnings Forecasts
Financial Highlights

4

Consolidated Statement of Income

5

Changes in Operating Profit

6

Existing Restaurant Sales

7

SRS Group Restaurants

8

Revisions to FY3/18 Earnings Forecasts

9

Medium-term Business Plan andFuture Outlook
Transforming Restaurant Composition
from a Diamond to a Pyramid

17

Medium-term Business Plan andActual Results

19

The SRS Group Vision20

Progress Report on Restaurant Initiatives

Appendix

Washoku Sato/Santen

11

Transition to a Holding Company Structure

22

Nigiri Chojiro/CHOJIRO, Miyamoto
Munashi, Katsuya

12

Activities of the Future Operations
Creation Department

24

Progress Report on Other Initiatives

13

Consolidated Balance Sheet

25

Sato Bar/Sato Café

14

Santen Issues and Actions

152

1H FY3/18
Overview of Financial Results andRevisions to Earnings Forecasts

3

1H FY3/18 Financial Highlights

 Net sales ¥21,695 million +¥1,403 million YoY +6.9% YoY• The sale of the Sushi-han business reduced sales, but this was offset by the opening of newrestaurants and M&A (net sales of Miyamoto Munashi from April to September: approx. ¥1.5billion).

 Operating profit
Ordinary profit¥260 million +¥200 million YoY¥256 million +¥391 million YoY• Operating profit increased due to growth in sales and a decline in expenses because of theadvisory fee one year earlier involving M&A.
• Ordinary profit also improved due to the reversal from the previous fiscal year’s foreignexchange loss to a foreign exchange gain.

 Profit attributable toowners of parent¥215 million +¥726 million YoY• Gain on sales of shares of subsidiaries of ¥284 million was recorded due to the sale of Sushi-hanbusiness.
4

1H FY3/18 Consolidated Statement of Income (PL)Sales and earnings were below the plan
• Sales of existing restaurants in core businesses were sluggish mainly because of unfavorable weather. Sales were also
held down by an increase in closings for renovations to add the “Sato Bar/Sato Café” to Washoku Sato restaurants
earlier than planned.
• The gross margin was as planned mainly because of a reduction in food and other supplies that are unused anddiscarded. But the operating profit was less than planned due to the significant negative impact of the below-plansales.

(Ref.)
1H FY3/17

1H FY3/18(Millions of yen)Vs. plan(ratio)Vs. plan(amount)

PlanResults

22,00021,695

98.6%

(305)

20,291

Operating profit

450

260

57.7%

(190)

59

Ordinary profit

400256

64.0%

(144)

(134)

Profit attributable toowners of parent

280

21576.7%(65)(511)

Net sales

Results5

1H FY3/18 Changes in Operating Profit(Millions of yen)
Menu
Profitimprovements Increase inincrease atTighterand restaurant personnel
newcontrol
offood loss expenses due
restaurants/ Higher
personnel
to higher
Munashi procurement reduction
expenses
wages
expensesbrand+100
End of M&A
expenses+110(70)+70(100)+100

Sato Bar/
Sato Café
expenses,etc.
End of data Decrease inmigration taxes andOthers
dues
expenses+30(100)+20+40260

40560
1H FY3/17

1H FY3/186

1H FY3/18 Existing Restaurant Sales• At Washoku Sato, an increase in sales of seasonal menu items in August and all-you-can-eat items in September kept
sales per customer above the prior-year level.
• At Nigiri Chojiro, customer traffic recovered in part due to extensive customer service training programs. Sales percustomer were higher than one year earlier due mostly to the popularity of limited-time-only items.
• Typhoons in August and September caused sales to decline.
Washoku Sato: YoY change at existing restaurants
adjusted for characteristics of day of week%%

2Q

1Q

Nigiri Chojiro: YoY change at existing restaurants
adjusted for characteristics of day of week

105

105

100

10095

95

9090

April
4月

May
5月
Sales
売上高

June
6月

July
7月
Number客数 ofcustomers

August8月

September
9月

Average
客単価 sales
per customer

April
4月

1Q

May
5月
Sales
売上高

2Q

June
6月

July
7月
Number of客数customers

August8月

September
9月

Average sales
客単価percustomer

7

1H FY3/18 SRS Group Restaurants
Restaurants atthe end ofFY3/17(Mar. 31, 2017)

Restaurants
opened/closed during
1H FY3/18Opened(A)Closed

1

1202-

-

40

1-

58

Washoku Sato

202

Santen40

Nigiri Chojiro/CHOJIRO

57

Miyamoto Munashi

69(7)

-

366

Katsuya36(19)

2*

335--

1--

21-

13(1)

Meotozenzai

1

Home Delivery Sushi(Nigiri Chujiro/Miyakobito)

21

Sushi-han13

Overseas restaurants

6(4)-445(45)

4Group total(14)

Restaurants
planned to open
during FY3/18(B)Restaurants at theend of 1H FY3/18(Sep. 30, 2017)

2(1)

13

Contracts for new
restaurants signed
during 1H FY3/18(C)

50%0(5)

7

Restaurant
opening
progress vs. plan((A) + (C)) / (B)

(1)

54%

3

033%

(6)

1

1100%

(16)

5(3)

1(1)

20%

---

(14)

---------

6(4)

1

1100%

20429

(41)

25

Note: Numbers in parentheses represent franchised restaurants (domestic)
and joint venture restaurants (overseas).

(8)

9(2)

44%

* Two newly opened Katsuya restaurants are not included in the calculation of restaurant
opening progress ratio because they were converted from franchised to directly managed.

Stores opened: Washoku Sato: 1 (Tokoname Branch), Nigiri Chojiro: 1 (Itami Branch), Contracts signed for 9 new restaurants (44% of the FY3/18 plan)
Stores closed: Washoku Sato: 1 (Soka Hanaguri Branch); Miyamoto Munashi: 3 (Fujiidera Ekimae Branch, Nankai Sakai Higashi Ekimae Branch,
Hankyu Ikeda Ekimae Branch); Katsuya: 1 (Sakai Chuo Kanjo Branch); Sushi-han: 13 (Business sold at April 1, 2017)8

Revisions to FY3/18 Earnings Forecasts(Millions of yen)

FY3/17
Results

FY3/18Initial forecast

Vs. FY3/17Results

FY3/18
Revised forecast

43,35445,000+1,64644,000(1,000)+646

Operating profit

405

1,100+695750(350)+345

Ordinary profit

416

1,100+684700(400)+284

Profit attributable toowners of parent(234)450+684

270(180)+504

Net sales

Vs. initial
forecast

Vs. FY3/17
Results

Reasons for FY3/18 forecast revisions:• Lower sales forecast because of a conservative estimate of existing restaurant sales based on first half
performance• Lower operating profit forecast due to the outlook for higher prices of key ingredients like sea food, rice andalcoholic beverages although progress with cost cutting is continuing, such as purchasing new kitchen equipment
to reduce food loss
9

Progress Report on Restaurant Initiatives

10

FY3/18 Progress Report on Restaurant Initiatives
Main Categories

1 Washoku SatoInitiatives and Progress◆ Added Sato Bar/Sato Café at all locations(1) New self-service beverage and alcoholic beverage bar offering all-you-can-drink service at areasonable price, creating new reason for people to visit a Washoku Sato restaurant(2) Using a new, more refined design for a new Washoku Sato branding strategy→176 restaurants with a Sato Bar/Sato Café as of the end of 1H FY3/18◆ Installed dispensers for udon noodle broth and soup stock→Dispensers improve and stabilize quality, boost employee productivity and raise the gross margin.
◆ Named a manager to oversee the full-scale start of franchising operations→There are currently two franchise partners (Aichi, Tokushima).
→The second franchised Santen is scheduled to open in January 2018 in Tokushima city.
→The Kansai, Kanto, Tokai, Sanyo and Shikoku areas are the primary regions for franchised restaurants.

2Santen◆ Increase marketing activities (continue ¥390 price for Prawn Tendon; start creating new types ofmenu items)→Testing curry dishes, more children’s menu items and other new ideas→Targeting families and young people◆ Further strengthen profitability to build a base for operating a large number of Santen restaurants→Improvements in the gross margin and personnel expenses ratio◆ Started the Santen Step-up Project (see page 15)
11

FY3/18 Progress Report on Restaurant Initiatives
Main CategoriesInitiatives and Progress◆Most new restaurants are in the Kansai area (retain position as the leading brand in Kansai for gourmet
conveyor belt sushi)→Opened one restaurant on August 5 (Itami Branch, Hyogo prefecture)3

Nigiri
Chojiro/CHOJIRO◆Opened CHOJIRO Hozenji restaurant as the flagship location for foreign tourists→Updated the global website (added Chinese and Korean language), continuing measures for overseas
media exposure→Registered with Dantame travel agent-restaurant matching service; started selling Hozenji-don(distributing video, too)
◆Remodeling restaurants to create a new look (bright, clean interiors to serve a larger range of customersegments)→29 restaurants remodeled as of the end of 1H FY3/18; sales up 5% to 7% at remodeled locations

4MiyamotoMunashi◆Adding new products with substantial added value (raises sales per customers and the gross margin)→Added 17 menu items during the first half (hamburger cutlet, cheese chicken salsa and others)◆Plan to open a directly operated restaurant for the first time in eight years in the third quarter→The new location will use new concepts, such as many types of new equipment, an open kitchen, andamenities for foreign tourists.
◆Continuing to open directly operated and franchised restaurants in the Kansai area
→Contract for one restaurant has been signed.

5Katsuya◆Increasing the profitability of existing restaurants→Making menu items more appealing and serving food faster after an order is received
12

FY3/18 Progress Report on Other Initiatives

6

Main Categories

Initiatives and Progress

Optimized main
office operations◆Sale of the Sushi-han business made operations more efficient, primarily the merchandising department→Improvements to begin in the second half
◆Established the Corporate Governance Department on April 1, 2017

7

Strengthenedgovernance◆Switched from a company with a board of corporate auditors to a company with an audit andsupervisory committee on June 29, 2017
◆Changed to a holding company structure on October 1, 2017
(Faster decision-making by separating the management strategy and business operation functions)89

Organization
restructuring

Overseasbusiness◆Established the Future Operations Creation Department on October 1, 2017(1) Ideas for ending labor-intensive business activities(2) Goal is restaurant operations that do not rely on people→Achieve both higher productivity and effective labor management◆The third restaurant in Taiwan is scheduled to open in March 2018
→The new restaurant will feature a new concept with many items used for the first time at an SRS Groupoverseas restaurant: a drink and dessert bar, touch screens, an improved waiting system and otheramenities.
◆The third restaurant in Thailand is scheduled to open in 201813

Sato Bar/Sato Café
All Washoku Sato restaurants, with a few exceptions, will have a Sato Bar/SatoCafé by the end of November 2017→176 Washoku Sato restaurants had a Sato Bar/Sato Café as of the end of 1H FY3/18(1) Using alcoholic beverages as an incentive to increase sales and attract more customers(2) Using self-service format to reduce volume of work (no need to serve drinks, etc.)(3) Improving standards of service (no waiting time, shortening the time of food delivery, etc.)(4) Using a new, more refined design for a new Washoku Sato branding strategy

Web marketing using SNS communication style to show the appeal of Sato Bar/Sato Café

14

Santen Issues and Actions
 Issues• Santen is the SRS Group’s biggest source of growth• This business model must be taken to a higher level in order to continue growing(1) Flavors and quality(2) Prices and menu items(3) Restaurant system/layout(4) Quality of services(5) Sales promotion activities

Make improvements in all components of thebusiness model= Started the Santen Step-up Project The Santen Step-up Project• To use all of the SRS Group’s knowledge, this project also includes managers from other grouprestaurants.
→The primary goals are more appealing products, more effective promotions andan improved sales system.
<Objectives of the Santen Step-up Project>
I. Increase the ratio of repeat customers and serve a larger range of customer segments while
maintaining the minimum price of ¥390
II. Advance restaurant operations to the next generation
III. Started trials in FY3/18 and plan to begin opening new-format restaurants in FY3/1915

Medium-term Business Plan
and Future Outlook
Five-year Medium-term
Business Plan (announced in 2014)
5ヵ年中期経営計画（2014年発表）

Next 来期fiscal year
Fifthyear
5年目

Current今期
fiscal year
Previous前期
fiscal year
Thirdyear
3年目
Secondyear
2年目Firstyear
1年目

FY3/152015年3月期（2014年4月～2015年3月）(Apr. 2014 – Mar. 2015)

Fourthyear
4年目

FY3/192019年3月期（2018年4月～2019年3月）(Apr. 2018 – Mar. 2019)

FY3/182018年3月期(Apr.
2017– Mar. 2018)（2017年4月～2018年3月）

2017年3月期
FY3/17（2016年4月～2017年3月）(Apr. 2016 – Mar. 2017)

FY3/162016年3月期（2015年4月～2016年3月）(Apr. 2015 – Mar. 2016)16

Transforming Restaurant Composition froma Diamond to a Pyramid
From a diamond to a house to a pyramid

Initial shape

HighFuture

Current
Changing to apyramid withbroader coverage

Diamondshape

Fast-casual

Number ofrestaurants

HouseshapePyramid

Low price segment
Fast-casualLow price segment
Fast-casualLow price segment

PricesFast-casualLow price segment

Larger number of restaurants
SantenKatsuya

Miyamoto Munashi

17Transforming Restaurant Composition froma Diamond to a Pyramid

Low

Low

Hospitality provided by people

Price sensitivity

Use of systems, mechanicalprocesses and AIHighHighHigh

In the nearfeaturePyramid

High

PricesLow

Number of restaurants18Medium-term Business Plan and Actual Results(Millions of yen)

Medium-term BusinessPlan (FY3/17)

Vs. plan(amount)

FY3/17Results

Vs. plan(ratio)

Net sales

44,70043,354(1,346)

97.0%

Operating profit

1,500405(1,095)

27.0%

Ordinary profit

1,400416(984)29.7%

Profit550(234)

(784)

-○

• Sales of existing restaurants in core businesses surpassed the plan×• Restaurant openings in the fast-casual sector were slower than planned
Number of restaurants: Plan 462 stores → Results 445 stores (-17 stores)• Higher personnel expenses (about 3 pct. points vs. sales, up about ¥1.2 billion)
About ¥500 million for improving the work environment, ¥500 million for higher wages
and ¥200 million for higher social insurance payments(SRS Holdings estimates)

Productivity must continue to rise due to the outlook for even higher wages.
19

The SRS Group Vision
Become the world’s leading Japanese cuisine restaurant group-Start with operations in western Japan Make each business unit self-reliant (Use holding company structure to achieve autonomous, self-sustaininggrowth)• Raise the number of restaurants to at least 100 in every business!
(First, at least make each restaurant brand number one in western Japan)• Goal for all businesses = Raise productivity (profitability)
Established the Future Operations Creation Department with the following goals
End labor-intensive business model and streamline tasks performed at all restaurants(customer payments, dish washing, etc.)
 Invest in machines and other equipment for tasks where people cannot add value and wheremachines can perform tasks with more reliability and accuracy than people can Invest in training programs for the carefully selected tasks that people should perform(SRS Group must end labor-intensive operations in order to offer more competitive prices) Use M&A for business growth and higher profitability•
Focus acquisitions mainly on businesses that will be the base of the pyramid•
Enhance the SRS Group’s presence, mainly in western Japan
Continue to aim for growth in other countriesUse business growth and the focused use of resources to make the SRS Group’s operations more efficient(improve profitability)
20Appendix

21

Transition to a Holding Company StructureGroup structure prior to the transitionConsolidated

SATO RESTAURANT SYSTEMS CO., LTD.
(Washoku Sato Business Division, Santen Business Division,
Global Business Division, Meotozenzai Business Division)

100%

100%

51%100%100%

18.55%*

19%

FOODSNET Corporation

MIYAMOTO MUNASHICO., LTD.

SATO·ARCLAND
FOODSERVICE CO.,LTD.

SRS Taiwan Company
LimitedSpace Supply Co., Ltd.

PT INDOSATO JAYAMAKMUR

Nippon Tei Sato Co., Ltd.

(Shareholding ratio)

Consolidated

Consolidated

Consolidated

・(*As of the end of June 2017)22

Transition to a Holding Company StructureGroup structure after the transition
Consolidated

SRS HOLDINGS CO.,LTD.

(Administration Division, SRS Group Store Development
Division, SRS Group Merchandising Department,Corporate Governance Department)(Shareholding ratio)

100%

51%

100%

100%

18.55%*

19%

MIYAMOTO MUNASHICO., LTD.

SATO·ARCLAND
FOODSERVICE CO.,LTD.

SRS Taiwan Company
LimitedSpace Supply Co., Ltd.

PT INDOSATO JAYAMAKMUR

Nippon Tei Sato Co., Ltd.

SATO FOODSERVICE
CO.,LTD. (SFS)(Washoku Sato Business Division,Santen Business Division, Global
Business Division, Meotozenzai
Business Division)(newly established)

Consolidated

100%

FOODSNET Corporation

100%

Consolidated

Consolidated

Consolidated・(*As of the end of June 2017)23Activities of the Future Operations Creation Department
 Objective• Create and implement systems and equipment that can improve productivity and reduce the need forpeople at restaurants.
→Using these systems and equipment will enable restaurants to deal with the expected continuation ofgrowth in personnel expenses and labor shortage.

First steps:
Examine all the tasks performed by employees and the actions of customers at restaurants in order to determine
areas that are suitable for using new systems and equipment.
Restaurant staff – Reception, provision of guidance, reservations, processing payments, dish washing, training
programs, etc.
Customers – Confirming whether tables are open, initial reception procedure, placing orders, payment, etc.
The department’s goal is to build systems capable of linking restaurants, employees and customers.
 The current action plan
• Operation system for when customers enter a restaurant (reception, provision of guidance, etc.)= Example: Use AI for reception• Operation system for when customers leave (payment, etc.) = Example: Automated payment unit
• Systems for tasks performed by employees (dish washing, training, etc.) = Example: Fully automated dishwashing and other cleaning equipment24

Consolidated Balance Sheet(Millions of yen)

FY3/17(As of Mar. 31, 2017)

Second quarter of FY3/18(As of Sep. 30, 2017)

Current assets

10,906

12,232+1,325

Non-current assets

20,44918,362(2,086)

Current liabilities

7,592

7,285(307)Non-current
liabilities

9,565

9,017(547)

Net assets

14,284

14,389+104

Total assets

31,44330,692(750)

ChangeCurrent assets: increased mainly due to an increase in cash resulting from the sale of Sushi-han Business
Non-current assets: decreased mainly due to a decrease in land resulting from the sale of Sushi-han Business
25Contact InformationSRS HOLDINGS CO.,LTD.
Corporate Planning and General Affairs Dept. (Natsui, Furube, Ohta)
TEL: +81-6-7709-9977
E-mail: 873@sato-rs.jp
The business performance forecast in this material is based on information that was available at the time of this presentation. Contained within
are many uncertain elements and due to various factors may differ substantially from the earnings outlook presented. Please understand thatyour decision to invest in our company is based upon your judgment.

26