Cumulative 2Q of the Fiscal Year Ending June 30, 2021 (FY2021)
Results of Operations
Explanatory Material
February 12, 2021
HOPE, INC.
[6195]
Corporate Philosophy
Providing new value to citizens through local governments, and promoting growth of the company and its people
Company Overview
Company name
HOPE, INC.
Established
Feb. 2005 (fiscal year-end: Jun.)
Representative
Takayasu Tokitsu, CEO
Securities code
6195 (listed on the TSE-Mothers/FSE Q-Board on Jun. 15, 2016)
Employees
(consolidated)
173 (as of the end of Dec. 2020, including temporary employees)
Business
Services created specifically for local governments
(Advertising Business, Energy Business, Media Business)
Head office
MG Yakuin Building 1-14-5, Yakuin, Chuo-ku, Fukuoka, Japan
History
Feb. 2005Founded
Jun. 2006Launched SMART RESOURCE SERVICE
Sep. 2013Launched SMART CREATION SERVICE "Machilet"
Jul. 2014
Launched "Machiiro," an app that connects local governments and local residentsAug. 2014Started B-to-G marketing business
Jun. 2016Listed on TSE-Mothers and FSE Q-Board
Dec. 2017Issued the first edition of"Jichitai Works"
Mar. 2018Registered as an electricity retailer and launched "GENEWAT"
May 2020Started Jichitai Works HAxSH
Aug. 2020Announced the medium-term management plan [HOPE NEXT 3]
Oct. 2020Established a wholly owned subsidiary HOPE ENERGY, INC.
Nov. 2020Developed AI for forecasting market prices of electricity (energy business) Started supplying Kai, a web conferencing tool created in Japan
Contents
I. Cumulative 2Q FY2021 Financial Highlights
II. Topics
III. FY2021 Outlook
IV. Growth Strategies
V. 2020 VISION
VI. Appendices
I. Cumulative 2Q FY2021 Financial Highlights
Application of the netting method in the energy business
• Unless specified otherwise, all figures in this presentation use the netting method* that is expected to be used due to the application of the Accounting Standard for Revenue Recognition (Accounting Standards Board of Japan Statement No. 29).
• The use of this standard is required beginning with the fiscal year ending in Jun. 2022. However, because the performance of the energy business, which is a major component of consolidated results of operations, has a significant effect on investment decisions, both net and gross figures are shown in this presentation in order to facilitate easy comparisons with performance in prior years and to provide a thorough explanation of results of operations.
• The application of the netting method will have no effect on earnings at all levels.
• With the netting method, in accordance with the renewable energy feed-in tariff system in Japan, fees received from customers (sales) and payments to the cost adjustment organization (cost of sales), which are equal to fees received, offset each other, resulting in the recognition of net revenue. Figures that do not use netting are designated in this presentation as using the gross recognition method.
Start of consolidated financial statements
• Due to the establishment of HOPE ENERGY, INC., which is a wholly owned subsidiary, HOPE, INC. changed from non-consolidated to consolidated financial statements beginning with the second quarter of the fiscal year ending in Jun. 2021. As a result, this presentation has both consolidated and non-consolidated financial information.
• Numbers are rounded down and percentages are rounded up or down to the first decimal place.
Impact of COVID-19
Response to COVID-19
Started a COVID-19 Response Team
Monitors health of employees and makes preparations for responses to outbreaks.
Established a teleworking infrastructure
Created an environment that facilitates teleworking for a broad range of tasks.
Online activities and no outings for business
As a rule, the internet is used for all meetings with people outside the company.
Effect on business operations
Advertising/Media Business
No significant effect at this time, but some companies may start to reduce their advertising activities. There is also a risk that financial difficulties at advertisers may delay payments for some receivables or make it impossible to collect some receivables.
Energy Business
Although the downturn in the demand for electricity associated with temporary closings of schools and other public-sector buildings has stopped, the COVID-19 crisis may continue to have effects on electricity demand and the purchases of electricity.
Cumulative 2Q FY2021 Financial Summary (Jul. - Dec. 2020)
Sales were up 177.9% from one year earlier to an all-time cumulative 2Q high. Big negative impact on operating
Cumulative 2Q |
profit from the sharp increase in the cost of electricity |
Results |
˙Net sales ¥11,718 million (up 177.9% YoY) |
(consolidated) |
ʪGross recognition method: ¥14,044 millionʫ |
(¥(40) million in cumulative 2Q FY2020)
˙Operating profit ¥259 million
Advertising Business
Sales down due to measures to achieve the proper size of this business but segment profit improved
Energy Business
Big increases due to the higher cost of purchasing electricity as the price on the Japan Electricity Power Exchange (JEPX) increased rapidly in the second half of December
Media Business
Sales and earnings growth due to an increase in B-to-G marketing orders
˙Net sales
¥657 million (down 19.1% YoY)
˙Segment profit
¥22 million (up 154.3% YoY)
˙Net sales ¥10,989 million (up 226.6% YoY)
ʪGross recognition method: ¥13,314 millionʫ
˙Segment profit
¥390 million (up 297.5% YoY)
˙ Net sales
¥70 million (up 85.8% YoY)
˙ Segment profit
¥12 million
(¥(110) thousand in cumulative 2Q FY2020)
Cumulative 2Q FY2021 Income Statement Highlights: YoY Change
• Changed to consolidated financial statements in the second quarter following the establishment of wholly owned subsidiary HOPE ENERGY.
(Millions of yen)
Cumulative 2Q FY2020
Results (non-consolidated) | Comp. |
4,216 ʪ4,832ʫ | |
422 | 10.0% ʪ8.7%ʫ |
462 | 11.0% ʪ9.6%ʫ |
(40) | (1.0)% ʪ (0.8)%ʫ |
(42) | (1.0)% ʪ (0.9)%ʫ |
(50) | (1.2)% ʪ (1.0)%ʫ |
(9.01) yen * Adjusted to reflect the 1-to-4 stock split effective on Jan. 1, 2020 |
Cumulative 2Q FY2021
Results (consolidated) | Comp. | YoY change |
11,718 ʪ14,044ʫ | +177.9% | |
738 | 6.3% ʪ5.3%ʫ | +74.8% |
479 | 4.1% ʪ3.4%ʫ | +3.6% |
259 | 2.2% ʪ1.8%ʫ | |
243 | 2.1% ʪ1.7%ʫ | |
158 | 1.4% ʪ1.1%ʫ | |
26.29 yen |
*ʪ ʫis figures using the gross recognition method. *Cumulative 2Q FY2020 (non-consolidated) figures are the revised figures announced on May 13, 2020.
Cumulative 2Q FY2021 Income Statement Highlights: Performance vs. Forecasts
• Although the earnings forecasts were increased on Dec. 14 because of the performance of the energy business, the sharp increase in the price of electricity on the JEPX that started on Dec. 16 caused the cost of sales to increase dramatically. As a result, earnings at all levels ended up at the bottom of the initial forecast range.
Cumulative 2Q FY2021
(Millions of yen)
Net sales
Gross profit
SG&A expenses
Operating profit
Ordinary profit
Profit attributable to owners of parent
Net income per share
Results (consolidated) | Initial forecast (non-consolidated) (announced on Aug. 11, 2020) | Revised forecast (non-consolidated) (announced on Dec. 14, 2020) |
11,718ʪ14,044ʫ | 12,200ʪ14,450ʫ | 11,610ʪ13,970ʫ |
738 | ||
479 | ||
259 | 250 - 490 | 900 - 950 |
243 | 230 - 470 | 886 - 936 |
158 | 150 - 320 | 620 - 655 |
26.29 yen | 25.09 - 53.53 yen | 102.79 - 108.60 yen |
*ʪ ʫis figures using the gross recognition method.
(Reference) More information is in the Jan. 15, 2021 news release titled "Effect on HOPE, INC. of the Rapid Increase in the JEPX Price of Electricity and Upcoming Actions" (Japanese version only).https://ssl4.eir-parts.net/doc/6195/tdnet/1919946/00.pdf
Quarterly Sales
1Q
1Q
2Q
3Q
4Q
FY2019 (non-consolidated)
*ʪ ʫis figures using the gross recognition method.
1Q
2Q
3Q
4Q
FY2020 (non-consolidated)
(non-consolidated)
2Q
(consolidated)
FY2021
Quarterly Operating Profit
• A ¥427 million operating loss in 2Q FY2021 because of the significant negative impact of the higher cost of electricity in the energy business.
• Corporate expenses were about the same as in 2Q FY2020.
1,200
1,000
800
(Millionsofyen)
600
400
200
0
(200)
(400)
(600)
*Standards for the allocation of corporate expenses were revised to more accurately show segment earnings. As a result, segment earnings and corporate expenses have changed beginning with 1Q FY2020. The changes were not applied to FY2019 because the effect is negligible. The new standards have no effect on total earnings.
Sales by Segment
• Productivity continues to improve because of measures to achieve the proper size of this business.
(Millionsofyen)
1Q
2Q
3Q
4Q
FY2019 (non-consolidated)
1Q
2Q
3Q
4Q
FY2020 (non-consolidated)
1Q
(non-consolidated)
2Q
(consolidated)
FY2021
Energy Business Sales by Segment
1Q
1Q
2Q
3Q
4Q
FY2019 (non-consolidated)
˙ Winning Bids
*As of confirmation of result of bids
FY2019
FY2020
FY2021
ˎ ˎ
1Q (Jul.-Sep.) | 2Q (Oct.-Dec.) | 3Q (Jan.-Mar.) | 4Q (Apr.-Jun.) | Total |
1Q
2Q
3Q
4Q
FY2020 (non-consolidated)
(non-consolidated)
2Q
(consolidated)
FY2021
*ʪ ʫis figures using the gross recognition method.
Not disclosed | Not disclosed | Not disclosed | Not disclosed | 142 |
70 | 96 | 337 | 77 | 580 |
177 | 201 | 378 |
Media Business Sales by Segment
• Orders from companies for online seminars and other services increased because of activities to strengthen the Jichitai Works brand.
90
(Millionsofyen)
80
70
60
50
40
30
20
10
0
1Q
1Q
2Q
3Q
4Q
FY2019 (non-consolidated)
1Q
2Q
3Q
FY2020 (non-consolidated)
*The first issue of Jichitai Works magazine was Dec. 22, 2017 and the magazine's new design and format started in Jun. 2020.
4Q
(non-consolidated)
2Q
(consolidated)
FY2021
2Q FY2021 Balance Sheet Highlights
2Q FY2020
2Q FY2021
(Millions of yen)
Results
(non-consolidated)
Comp.
Results (consolidated)
Comp.
Change
Cash and deposits
48.4% +3,606
Accounts receivable-trade
752 1,365
23.0% 41.8% 9.1%
4,358 3,746
41.6% +2,381
Inventories
298
252
2.8% (46)
Current assets
2,580
78.9% 21.1% 100.0%
8,515
94.5% +5,934
Non-current assets
5.5% (196)
Total assets
690 3,270
493 9,008
100.0% +5,737
Accounts payable-trade
1,437
4,710
52.3% +3,272
Short-term borrowings
Current portion of long-term borrowings
266
3.0% (13)
Current liabilities
326 279
43.9% 10.0% 8.6%
ʔ
ʔ (326)
2,271
69.4%
5,389
59.8%
+3,118
Bonds payable
ʔ
ʔ
1.1% +100
Long-term borrowings
520
15.9%
100 563
6.3% +43
Non-current liabilities
7.4% +143
Total liabilities
520 2,791
15.9% 85.3%
663 6,053
67.2%
+3,261
Total net assets
Total liabilities and net assets
479 3,270
14.7% 100.0%
2,955 9,008
32.8% 100.0%
+2,475 +5,737
*2Q FY2020 (non-consolidated) figures are the revised figures announced on May 13, 2020.
• Operating cash flows were positive in the first and second quarters.
1 Cash flows
Cumulative 2Q FY2020
Cumulative 2Q FY2021
(Millions of yen)
(non-consolidated)
(consolidated)
Change
2
Exercise of share acquisition rights sold through a third-party allotment
HOPE, INC. announced on Aug. 11, 2020 the sale of 4,000 share acquisition rights (400,000 shares of stock) through a third-party allotment. As of the end of Dec. 2020, 3,000 rights had been exercised (300,000 shares of stock), resulting in proceeds of about ¥1.6 billion.
(Reference) • Jan. 4, 2021 news release "Notice of Monthly Exercise of the Seventh Issue of Share Acquisition Rights Sold Through a Third-party Allotment
(with Provisions for Exercise Price Revisions and Permission for Exercise of Rights)" (Japanese version only)https://ssl4.eir-parts.net/doc/6195/tdnet/1916857/00.pdf
• Dec. 1, 2020 news release "Notice of Monthly Exercise of the Seventh Issue of Share Acquisition Rights Sold Through a Third-party Allotment
(with Provisions for Exercise Price Revisions and Permission for Exercise of Rights)" (Japanese version only)https://ssl4.eir-parts.net/doc/6195/tdnet/1910320/00.pdf
• Actions under consideration to improve financial soundness.
Assumptions and Major Expected Risk Factors
• Expect a large operating loss in the third quarter because of the rapid increase in the JEPX price of electricity that started in the middle of Dec. 2020
• Financial risk will increase because of the upcoming need to make pay power shortage imbalance fees. These fees are required when a company selling electricity is unable to supply the required amount of electricity over any 30-minute period and must purchase electricity from a utility to cover the shortfall.
Actions
1 Stabilize energy business earnings
2 Stabilize cash flows
• Market price volatility risk
Proposals for new risk management policies to reduce vulnerability to the volatility of market prices of electricity, such as by adjusting the volume of electricity purchased on the JEPX and other sources for each area and season
• Installment payments of the Jan. 2021 imbalance fee
After meeting the requirements of the Ministry of Economy, Trade and Industry program for imbalance fee payments, we plan to apply for this program and pay the imbalance fee in five installments beginning in Apr. 2021
* For more information about the Ministry of Economy, Trade and Industry response on Jan. 29, 2021 to the sudden increase in the price of wholesale electricityhttps://www.meti.go.jp/press/2020/01/20210129002/20210129002.html
• Measures concerning debt covenants
Discussions are under way with financial institutions to prevent the exercise of the acceleration clause, requiring the immediate repayment of all debt
• Procurement of funds
Discussions are under way with financial institutions to increase the overdraft facility and receive additional loans. We are also considering many other ways to procure funds, including the sale of stock using a third-party allotment.
II. Topics
Topic 1. Kai - A web conferencing system created in Japan for local governments
The Kai web conferencing service started on Nov. 16, 2020
Conferences / Interviews / Meetings
Digital support for many types of local government meetings and other activities
Main feature | Easy to start using - No registrations and only a single link This system increases the convenience of local government services and other activities for residents and is expected to become widely used. The goal is expansion to nationwide use |
Contributes to the local government digital transformation and functions as an information infrastructure
The first step of the Government Employee Platform Concept
(Reference) More information is in the Nov. 16, 2020 news release titled "HOPE, INC. Formed a Business Alliance with NEOLAB for Supporting the Local Government Digital Transformation - Aiming for the Widespread Use of the Kai Web Conferencing Tool Created in Japan that Local Governments Can Use with Confidence" (Japanese version only).https://ssl4.eir-parts.net/doc/6195/tdnet/1906927/00.pdf
Topic 2. HOPE, INC.'s First Alliance with a Local Government
• A private-public sector alliance agreement between HOPE, INC. and the city of Ogori (Fukuoka prefecture) was signed on Dec. 23, 2020.
• This was HOPE, INC.'s first public-sector alliance and activities will continue to establish more alliances.
˙ Planned alliance activities
1 Trial for Kai
Trial for using Kai for online government services,meetings with people in other locations, and other purposes
2 Assistance for efficient data collection involving public-private sector alliances
Use of Jichitai Works HAxSH by all employees of the city of Ogori
3 Seminars
Seminars led by HOPE INC.'s employees for employees of the city of Ogori
4 Distribution of information about the alliance with Ogori
An interview with the mayor, activities based on this alliance and other information will be distributed using Jichitai Works, and Jichitai Works Web
(Reference) More information is in the Dec. 23, 2020 news release titled "HOPE, INC. and City of Ogori in Fukuoka Prefecture Sign a Public-Private Sector Alliance Agreement - The First HOPE INC.'s Public-Private Sector Alliance with Activities for More Alliances" (Japanese version only).https://ssl4.eir-parts.net/doc/6195/tdnet/1915113/00.pdf
III. FY2021 Outlook
FY2021 Forecast
• We are no longer announcing earnings forecasts for FY2021 because of the difficulty of determining an outlook due to the effects of the sharp increase in the price of electricity on the JEPX that started in Dec. 2020.
(Millions of yen)
FY2021 non-consolidated forecast
(announced on Aug. 11, 2020)
FY2021 consolidated forecast
(announced on Jan. 29, 2021)
(Reference) FY2020 results
Net sales | Operating profit | Ordinary profit | Profit attributable to owners of parent |
25,300 ʪ29,900ʫ | 1,250 r 1,750 | 1,230 r 1,730 | 830 r 1,170 |
25,320 ʪ29,920ʫ | |||
12,470 ʪ14,407ʫ | 1,020 | 1,012 | 665 |
*ʪ ʫis figures using the gross recognition method.
* There are no differences between the consolidated and non-consolidated forecasts for FY2021.
(Reference) More information is in the Jan. 29, 2021 news release titled "Revisions to Non-consolidated Forecast and Announcement of Consolidated Forecast Due to Start of Consolidated Financial Statements" (Japanese version only).https://ssl4.eir-parts.net/doc/6195/tdnet/1924250/00.pdf
FY2021 Plan (Income Statement)
FY2019
FY2020
FY2021
(Millions of yen)
Plan (consolidated) | YoY change |
25,320 ʪ29,920ʫ | +103.0% ʪ+107.7%ʫ |
* More information is in the Jan. 29, 2021 news release titled "Revisions to Non-consolidated Forecast and Announcement of Consolidated Forecast Due to Start of Consol-idated Financial Statements" (Japanese version only).https://ssl4.eir-parts.net/doc/6195/tdnet/1924250/00.pdf *ʪ ʫis figures using the gross recognition method.
* Net income per share is adjusted to reflect the 1-to-4 stock split effective on Jan. 1, 2020.
Consistent Sales Growth
30,000
25,000
(Millionsofyen)
20,000
15,000
10,000
5,000
0
ʪ14,407ʫ |
3,654 ʪ3,862ʫ |
87 142 198 331 512 695 635 1,142 1,592 2,269 1,774 |
FY2008
FY2009
FY2010
FY2011
FY2012
Non-consolidated
* FY2014 was an irregular nine-month period because of a change in fiscal year-end.
*ʪ ʫis figures using the gross recognition method.
25,320
ʪ29,920ʫ
Consolidated
FY2021 Business Segment Sales Plan
30
25
(Billionsofyen)
20
15
10
5
0
FY2021
*ʪ ʫis figures using the gross recognition method.
FY2020
IV. Growth Strategies
Business Development and Growth Phases
Market Summary
• HOPE, INC created a new market with its advertising business, the company's original activity, and has provided advertising services to local governments for about 16 years.
• HOPE, INC's share of this market is about 12.8%.
*1 Source: Survey of Selected Service Industries (Nov. 2020), Ministry of Economy, Trade and Industry *2 Estimate of target market size assuming that all local governments used advertising services
Approx. ¥1.8 billion *3
*3 FY2020 advertising business sales (excluding contract production of public info publications)
Target market
About 12.8% of the target market
FY2021 Policy
• Continuing to achieve the proper size of this business to make advertising a profit-generating business.
• Gross profit per medium is decreasing, but the goal is to use SG&A expenses more efficiently.
˙ Gross profit per medium
Net sales*
Gross profit per medium
(Millionsofyen)
2,500
2,000
1,500
1,000
500
0
FY2018 Non-consolidated
FY2016
FY2017
*Advertising business sales (excluding contract production of public information publications)
FY2019
FY2020
FY2021
Consolidated
0.6
0.5
0.4
0.3
(Millionsofyen)
0.2
0.1
0
Advertising Business Business Strategy
• Achieve the proper size of this business (sales, people) to continue improving profitability Make advertising a profit-generating business
• Over a medium term, reduce the tendency for the 4Q to account for most sales and earnings, use expenses more efficiently, and increase the unit price of individual orders in this business
(Millionsofyen)
FY2016
(Millionsofyen)
FY2017
FY2018
FY2019
FY2020
FY2021
FY2022
FY2023
Non-consolidated
Consolidated
*FY2016 and FY2017 segment profit are provisional figures using the same basis as for the current segment profit because no segment profit was announced in these two fiscal years.
Energy Business Market Summary
Leverage current business with local governments
Submit bids for new contracts by taking advantage of existing vendor registrations with the local governments and other measures
Approx. ¥33.8 billion *3 target market
Target market
HOPE, INC. serves less
than 3.3% of the
*1 Source: Electricity and Gas Market Surveillance Commission *2 The target market as defined by HOPE, INC.
*3 Expected total sales of energy supplied for contracts received in FY2020
FY2021 Policy
• In FY2020, the number of energy contracts open for bidding was much higher than expected.
• In FY2021, we expect only a small increase in the number of energy contracts open for bidding.
˙ Number of bids submitted (only contracts where HOPE, INC. was eligible)
FY2020 plan/actual (contracts)
FY2021 plan (contracts)
Successful bids
Plan
Total : Approx. 4,500
Bids submitted
Did not submit bids
Total : Approx. 6,000
Total : Approx. 6,300(estimate)
Media Business Market Summary
• Substantial public-sector demand and still considerable growth potential
*3 FY2020 media business sales
The market for promotions targeting local governments still has much more potential, including public-private sector matching and measures to become more competitive
Market for promotions targeting local governments
Approx. ¥15.2 billion
Local govt. | Companies |
Approx. ¥8.68 trillion * 1
Approx. ¥1.52 trillion * 2
Approx. ¥0.13 billion * 3
1%
Assumes about 1% is used for promotional activities
(market for promotions targeting local governments)
Approx. ¥15.2 billion
*1 Calculated by HOPE, INC. using Summary of Guide to Contracts in the Public Sector - FY2018, The Small and Medium Enterprise Agency
*2 HOPE, INC. estimates based on FY2018 Administrative Project Review, Ministry of Internal Affairs and
Communications
Position this business at the very top of upstream information flows to serve as a link for public-private sector collaboration and for ties between local governments
Contribute to market growth
Provide many types of services
• Broad range of activities using the Jichitai Works brand
• More matching by using the internet, telemarketing and other methods
Business Strategy
The preeminent upstream source of local government information
Business strengthening, support and creation made possible by the local government database
Use the Jichitai Works brand to distribute information
Reexamination of the HOPE NEXT 3 Medium-term Management Plan
• We plan to create a new HOPE NEXT 3.
˙ Assumption
• The original HOPE NEXT 3 (announced on Aug. 11, 2020) was based on the assumption that the energy business will be a very significant component of HOPE, INC.'s business portfolio.
˙ Reason and stance for a new plan
• Although the Dec. 2020 surge in the JEPX price of electricity was a highly unusual event, we must revise our plans to incorporate the possibility of a reoccurrence of this type of event.
• We will reinforce energy business risk management and build business and governance frameworks with the goal of consistent profitability of the energy business.
˙ Other items
• There is no change at this time in the 2020 VISION goals for FY2030: sales of ¥100 billion, operating profit of ¥10 billion, and a business portfolio with at least 10 services.
• There are no revisions to the expected business environment changes or business policies regarding the advertising business and the media business.
(Reference) More information is in "Medium-term Management Plan HOPE NEXT 3" announced on Aug. 11, 2020.https://ssl4.eir-parts.net/doc/6195/tdnet/1873672/00.pdf
FY2021 Investor Relations Activities
• Plan to continue increasing the number of meetings with institutional investors by using online meetings and expanding English-language disclosure activities.
˙ Number of institutional investor meetings
.FFUJOHT
FY2017
FY2018
*Includes online meetings and telephone calls
FY2019
FY2020
FY2021
V. 2020 VISION
2020 VISION Expansion of Core Competence
• Enlarge local government relations, HOPE, INC.'s core competence, to encompass the entire government employee sector.
Local govt.
Current corecompetence
Local govt.
Local govt.
Core competence enlargement
39
Expansion of Core Competence
Positioning of Business Units
• Enlarge every business domain and increase actions for the expansion of HOPE, INC.'s core competence.
Measures for providing value
Additional local government revenuePublic-private sector collaborationLocal government DX
…
Enlargement of targeted domains
2020 VISION
FY2030
¥ 100 billion
¥ 10 billion
10 services
2020 VISION Initiatives
• Start and implement initiatives for accomplishing the FY2030 goals of the 2020 VISION: Sales of ¥100 billion, operating profit of ¥10 billion and a business portfolio with at least 10 services.
FY2021 3 services
FY2030
More than 10 services
Actions
• Improve profitability of existing businesses
• Develop new businesses
• Use all existing businesses as a base for new businesses
• M&A
• Financial and investment strategies
VI. Appendices
Business Segments and Servicest
*Beginning with FY2020, Machiiro has been moved from the media segment to others.
Advertising Business
Corporate Philosophy
Providing new value to citizens through local governments
•Public info publications, local govt. websites
•Information distributed to residents
•Use of media space
•Free joint local government/ HOPE, INC. publications
Additional localgovernment revenue
Advertising Business 1 SMART RESOURCE SERVICE
Local governments sell ad space in their publications
A new source of revenue for local governments
˙ Business model
Purchase of ad space
Payment for ad space
Sale of ad space
Payment for ad space
˙ Examples of media
Public info publications
˙ Ad in a public info publication
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໊Ờͷબܧଓͷ࠾ܾ͕ߦ ΘΕỏࢍଟͰՄܾ͞Ε· ͨ͠Ố ·ͨỏגओ૯ձͱͯ͠ͷඞཁ ࣄ߲Ͱ͋Δ֤ใࠂܾٞͷޙ ʹ ỏୈ ೋ ෦ ͱ ͠ ͯ ỏΑ Γ ϗ ồ ϓͷཧղΛਂΊ͍ͯͨͩ͘ ͨΊͷύồτ༻ҙ͞Ε·͠ ͨỐ · ͣ ỏ ֤ ෦ ॺ ͷ Ͱ ͋ Δ $5
ͷ෦ॺͷࠓظඪ͕ỏτỽϓࣗ Βͷݴ༿Ͱגओͷօ͞ΜʹޠΒ Ε·ͨ͠Ố ଓ͍ͯͷ ৽ ଔ ͷ ѫ ࡰ Ͱ ỏ ͷօ͞Μ͕ࣗݾհͱ ࠲ ӈ ͷ Λ ỏ ۓ ு ͷ ໘ ࣋ ͪ ͳ ͕Β͠ỳ͔Γͱͯ͘͠Ε ·ͨ͠Ố ࣾͱ͞Μ͕ຊͳ͠ͷΞ υϦϒͰ͍͑ͯ͘ͱ͍͏ܗ Ͱỏϗ ồ ϓ ͷủࠓỨΛ ג ओ ͷ օ͞Μʹ͑Δͱͳ Γ·ͨ͠Ố ্ ͞ Μ ࢘ ձ ͷ ͱ ỏ ࣾ ͷ ѫ ࡰ Ͱ ࢝ · ỳ ͨ ג ओ ૯ ձ Ố দ ࢁ ࠪ ͔ Β ͷ ࠪ ใ ࠂ ỏ ֤ αồϏεͷݱگΛ͑Δࣄۀ ใࠂͷޙỏ ࠓճͷٞͰ͋Δऔక ໊ ớࣾऔక ໊wࣾ֎औక ໊ Ờ ͷ બ ܧ ଓ ͷ ࠾ ܾ ͕ ߦ Θ Ε ỏ ࢍ ଟ Ͱ Մ ܾ ͞ Ε · ͨ͠Ố
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໊Ờͷબܧଓͷ࠾ܾ͕ߦ ΘΕỏࢍଟͰՄܾ͞Ε· ͨ͠Ố ·ͨỏגओ૯ձͱͯ͠ͷඞཁ ࣄ߲Ͱ͋Δ֤ใࠂܾٞͷޙ ʹ ỏୈ ೋ ෦ ͱ ͠ ͯ ỏΑ Γ ϗ ồ ϓͷཧղΛਂΊ͍ͯͨͩ͘ ͨΊͷύồτ༻ҙ͞Ε·͠ ͨỐ · ͣ ỏ ֤ ෦ ॺ ͷ Ͱ ͋ Δ $5
݄ ớ ਫ Ờỏ ά ϥ ϯ υ ϋ Π ΞỽτԬʹ͓͍ͯỏגࣜձ ࣾϗồϓୈ ճఆ࣌גओ૯ձ ͕ࣥΓߦΘΕ·ͨ͠Ố ্͞Μ࢘ձͷͱỏࣾͷ ѫࡰͰ࢝·ỳͨגओ૯ձỐদ ࢁ͔ࠪΒͷࠪใࠂỏ֤ αồϏεͷݱگΛ͑Δࣄۀ ใࠂͷޙỏ ࠓճͷٞͰ͋Δऔక ໊ ớࣾऔక ໊wࣾ֎औక
ͦ ͠ ͯ ࠷ ޙ ʹ ỏ ࣾ ͱ ͞ Μ ʹ Α Δ ର ஊ Ố લ ظ ͱ ࠓ ظ ͷ มԽݱࡏͷ՝͍͔ͭ͘ ͷ ς ồ Ϛ ʹ ͭ ͍ ͯ ỏ ࣾ ͱ ͞Μ͕ຊͳ͠ͷΞυϦϒͰ ͑ ͯ ͍ ͘ ͱ ͍ ͏ ܗ Ͱ ỏ ϗ ồ ϓ ͷủࠓỨΛ ג ओ ͷ օ ͞ Μ ʹ͑ΔͱͳΓ·ͨ͠Ố ্ ͞ Μ ࢘ ձ ͷ ͱ ỏ ࣾ ͷ ѫ ࡰ Ͱ ࢝ · ỳ ͨ ג ओ ૯ ձ Ố দ ࢁ ࠪ ͔ Β ͷ ࠪ ใ ࠂ ỏ ֤ αồϏεͷݱگΛ͑Δࣄۀ ใࠂͷޙỏ ࠓճͷٞͰ͋Δऔక ໊ ớࣾऔక ໊wࣾ֎औక ໊ Ờ ͷ બ ܧ ଓ ͷ ࠾ ܾ ͕ ߦ Θ Ε ỏ ࢍ ଟ Ͱ Մ ܾ ͞ Ε · ͨ͠Ố · ͨ ỏ ג ओ ૯ ձ ͱ ͠ ͯ ͷ ඞ ཁ ࣄ߲Ͱ͋Δ֤ใࠂܾٞͷޙ ʹỏୈೋ෦ͱͯ͠ỏΑΓϗồ ϓͷཧղΛਂΊ͍ͯͨͩ͘ ͨΊͷύồτ༻ҙ͞Ε·͠ ͨỐ
ଓ͍ͯͷ ͨ͠Ố
৽ ଔ ͷ ѫ ࡰ Ͱ ỏ
Ad
Advertising Business 2 SMART CREATION SERVICE (Machilet)
Production and supply of local government pamphlets for various fields with space for ads
Free joint production of pamphlets with even more useful info
˙ Business model
Agreement
Production and supply of pamphlets
Sale of ad space
Payment for ad space
Energy Business
Corporate Philosophy
Providing new value to citizens through local governments
Lower cost of electricity
Energy Business
Start of the electricity sales business
GENEWAT uses the new perception of "electricity as a generic product" for supplying electricity at a lower price in order to help local governments reduce costs.
Electricity
• Sale of electricity
*Business does not include generation and distribution
˙ Business model
Payments
• HOPE, INC. posts sales/cost of sales based on monthly utilization
Media Business
Corporate Philosophy
Providing new value to citizens through local governments
Public-privatesector collaboration
Media Business 1 Jichitai Works
A HOPE, INC. publication with useful info and ideas for the jobs of local government employees
Collect
information
Provide information
Interaction with local govt.
Payment for ad space
˙ Issued four times every year (Standard editions)
1 One of the largest circulations in Japan
A comprehensive info magazine for local government employees; circulation of up to 70,000, one of the largest in Japan in this category
2 Extensive coverage
Distributed at no charge to 1,788 municipalities and all 47 prefectural governments
3 Upgrading sharing of knowledge
Magazines include examples of innovative ideas, a variety of know-how and other content for improving government services throughout Japan
˙ Issued as needed
(Special editions)
Each special edition has a single advertiser and all
˙ Jichitai Works Web
content involves the advertis- er's products and services
Articles in the printed edition of Jichitai Works magazine are also posted on the internet.
Market need survey, holding seminars and sales services for local governments
Leveraging our relationships with local governments
Support for companies with products and services for local governments.
Seminars, sales agent, research, other services
Reports, other info
Requests for assistance
˙ 2Q contracted services
• Seminars for local government employees and other services
Employee seminar x 2 times 320 people Seminar on attracting people x 4 times 108 people
• Distribution of e-magazines
1,000 municipalities x 1 time 360 municipalities x 1 time 286 municipalities x 1 time
• Direct mail marketing
300 municipalities x 3 times 100 municipalities x 4 times 1,500; 1,100; 338; 200 municipalities x 1 time
• Telemarketing
100 municipalities x 9 times 333; 300; 165; 110; 66; 50 municipalities x 1 time
• Distribution of marketing materials and others
1,000 municipalities x 4 times 1,788; 216 municipalities x 2 times 3,576; 498 municipalities x 1 time
Seminars for local government employees Government-company collaboration
Support for companies with products and services for local governments
˙ Outline of the seminars (including planned seminars)
• B-to-G seminar
What types of results do residents want to see from "local government x company" co-creation?
• B-to-G seminar
What approaches are best for leading-edge benefits from local government business?
A discussion for obtaining ideas for solving various issues
• Online seminar for local government employees
Regional revitalization by using "private sector x e-commerce site digital innovation" - Reform local industries by using simple e-commerce platforms
• Only for local government employees
Free on-line Jichitai Works seminar
Seminar for explaining revised guidelines for data security measures for local governments
Seminars are held online for safety during the COVID-19 crisis. Seminars covering themes that reflect current events have been very successful.
More seminars will take place on a regular basis.
Jichitai Works HAxSH
Jichitai Works
Companies providing services
Register their own servicesSharing of information of person who downloaded their documentsService searches and examinations
Payment of fees
Local governments personnel
Collaboration with local | Solve problems by |
governments creates new | using private-sector |
opportunities | services |
Media Business 4 Machiiro
•Nationwide local government public info publications
•Sends the latest info from the registered local governments •Content for local governments and regions
Contracts with Local Governments and Number of Pamphlets Issued
SMART RESOURCE SERVICE
SMART CREATION SERVICE (Machilet)
(Contracts)
500
400
300
200
100
0
FY2018
(Pamphlets)
1,000
800
600
400
200
FY2019
FY2020
0
Cumulative2Q
FY2021
*For two or more different contracts with the same local government, each contract is counted separately.
*The number of Machilet pamphlets is the number issued during each fiscal year. A different definition is now used to count the number of pamphlets in each fiscal year and the numbers have changes as a result.
SMART RESOURCE SERVICE
SMART CREATION SERVICE (Machilet)
1 Bids used to purchase products
•Big swings in bids (cost of purchases)
•Risk of inability to purchase a sufficient volume due to bids of other companies, etc.
1
Most production and sales at the same time of the year
The production and sales period starts after signing contracts with local governments
2 Seasonal nature of purchases and inventory risk
•Most SMART RESOURCE purchases are single transactions for an entire year (Apr. to Mar.), resulting in risk for holding large inventories
3 Effect on the next fiscal year
•Most purchases using bids submitted during the peak season for governments contract bids will have an effect on the next fiscal year all the way to Mar.
2 Large pct. of sales in the fourth quarter
About 80% of pamphlets are issued between Apr. and Jun.
⾣Most sales and cost of sales are recorded in the fourth quarter
300
(Pamphlets)
200
250
100
150
50
0
Pamphlets issued in FY2020
Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
Apr. May. Jun.
2019
2020
Apx.3 Energy Business
1 Contracts are received by submitting bids
• Business may be lost to competing bids of other companies when new bidding takes place every year
2 Vulnerability to the economy and weather
• Electricity sales may vary depending on the health of the economy, unseasonable summer or winter weather, and other weather events
• Wholesale prices of electricity may vary depending on the cost of buying electricity, the cost of fuel, and the balance between the supply and demand of electricity
3 A low-cost business
• When determining bids, the energy business utilizes bidding expertise acquired over many years in the advertising business
Media Business Jichitai Works Magazine Issues
(Issue)
10
12
2
8
4
• Tourism/Foreign Tourist Edition Vol. 2
• Disaster Readiness/Crisis Management Edition Vol. 2
• Education and ICT Edition
• Tourism/Foreign Tourist Edition Vol. 3
• Disaster Readiness/Crisis Management Edition Vol. 3
5
6
3
4
2
0
Cumulative 2Q FY2021
FY2019
FY2020
Apx.5 Additional Local Government Revenue
Since HOPE, INC.'s inception, the advertising business has
generated revenue of about ¥ 8.29 billion for clients
•SMART RESOURCE SERVICE has paid local governments about ¥7.52 billion
•Machilet has reduced local government costs by about ¥ 0.76 billion
(From HOPE, INC.'s inception through 2Q FY2021)
Cost reduction of about ¥ 23.8 billion since the start of the energy business
(Estimated cost reduction during the entire length of all current contracts)
Apx.6 Main Shareholders
(As of Dec. 31, 2020)
˙ Number of shares and shareholders
Total number of authorized shares | 18,848,000 shares |
Number of shares issued | 6,002,800 shares |
Number of shareholders (with voting rights) | 5,616 |
˙ Shareholder distribution by category
˙ Top 10 shareholders
No. | Name of shareholders | Number of shares held |
1 | E.T. Co., Ltd. | 1,340,000 shares |
2 | Takayasu Tokitsu | 1,253,000 shares |
3 | Masaki Kuge | 240,000 shares |
4 | Custody Bank of Japan, Ltd. (Trust Account) | 211,400 shares |
5 | Shimpei Mori | 119,000 shares |
6 | SBI Securities Co., Ltd. | 114,094 shares |
7 | BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC) | 96,797 shares |
8 | Individual shareholder | 91,600 shares |
9 | JAPAN SECURITIES FINANCE CO., LTD. | 74,800 shares |
10 | NOMURA PB NOMINEES LIMITED OMNIBUS-MARGIN (CASHPB) | 62,000 shares |
Apx.7 Stock Information
Period Jun. 15, 2016 to Dec. 31, 2020
IPO price
¥350
Initial price
¥805 (Jun. 15, 2016)
Highest price since IPO* 7,910 (Nov. 11, 2020)
Lowest price since IPO* ¥220 (Dec. 25, 2018)
* Including stock prices during trading hours.
* Stock prices are adjusted to reflect a 1-to-4 stock split.
FY2015 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 | |
ROE | 23.7% | 23.9% | 3.2% | (25.4)% | 15.7% | 75.4% |
FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
PER* | 27.9x | 116.3x | 32.3x | 30.5x |
* Calculated based on the stock price on the settlement date.
FY2019 | FY2020 | FY2021 |
Apx.8 HOPE, INC. Major Media Exposure
Date
Summary
Jun. 7, 2016 | Investment Information - New IPO Stocks, Nihon Keizai Shimbun |
Sep. 1, 2016 | Included in an article in the October issue of Project Design magazine |
Sep. 25, 2016 | Information about HOPE, INC. on the TBS TV program Gacchiri Monday! |
Nov. 7, 2016 | Interview with the HOPE, INC. president in Michishirube, Nihon Keizai Shimbun |
Jan. 10, 2017 | Interview with the HOPE, INC. president in Dash Venture, Nihon Sangyo Shimbun |
Jan. 16, 2017 | Interview with the HOPE, INC. president in Fuji Sankei Business i. |
Feb. 23, 2017 | Interview with the HOPE, INC. president in God of Happiness Diary, Kabushiki Shimbun |
Mar. 24, 2017 | Included in The First Companies 2017, an article about newly listed companies |
May 12, 2017 | Included in Gatchiri Monday! The Secret of Making Money on 40 Little Known Companies |
Aug. 3, 2017 | Interview with the HOPE, INC. president in CEOs Explain Management Strategies, Nikkei Sangyo Shimbun |
Date
Summary
Aug. 7, 2017 | Information about HOPE, INC. in Japan Digest, Nihon Keizai Shimbun |
Jan. 18, 2018 | Information about HOPE, INC's electricity sales business in the economy section of the Yomiuri Shimbun |
Feb. 15, 2018 | Information about the Machiiro app for checking how much money is coming, Nonstop TV program of Fuji Television |
Apr. 23, 2018 | Information about HOPE, INC. on the TV Asahi Bakumon Fund! Money Success Graph |
May 21, 2018 | HOPE, INC. president featured in a daily column on business executives in the Nihon Keizai Shimbun |
Oct. 31, 2018 | Information about a HOPE, INC.'s Halloween event on NHK TV programs Rokuichi! Fukuoka, NHK News 7, News Watch 9, and News 11 |
Dec. 1, 2019 | Information about HOPE, INC. in an article about innovative companies in Nikkei Veritas |
Dec. 31, 2019 | Included in an article about companies with the biggest market cap increases of 2019, Nihon Keizai Shimbun |
Jan. 31, 2020 | Information about the condolence guidebook of HOPE, INC's Machilet, Chunichi Shimbun |
Sep. 4, 2020 | Interview with the HOPE, INC. president on the Nikkei CNBC program Hiru Express |
Disclaimer
Information in this presentation includes forward-looking statements that are based on the current outlook, forecasts and assumptions vulnerable to risk factors. As a result, this information incorporates uncertainties that may cause actual performance to differ from these statements.
Risk factors and uncertainties include economic trends in Japan and other countries, such as changes in industries and markets, interest rates, and foreign exchange rates.
HOPE, INC. has no obligation to update or revise forward-looking statements in this presentation even in the event of new information or events.
IR contact
HOPE, INC.
E-Mail:ir@zaigenkakuho.com
URL:https://www.zaigenkakuho.com/en/ir
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Hope Inc. published this content on 03 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 March 2021 07:01:00 UTC.