Hakuhodo DY : Consolidated Financial Highlights for FY2020

May 13, 2021

Company Name: Hakuhodo DY Holdings Inc.

Representative: Masayuki Mizushima, President

(Code number: 2433; TSE First Section)

Inquiries: Atsushi Yoshino

Executive Manager, Investor Relations Division

(Tel: [phone])

Consolidated Financial Highlights for FY2020

１．Income Statements (FY2020: April 1, 2020 to March 31, 2021)

																						(Millions of JPY)
												FY2019									FY2020	YoY Comparison
																						Change		(%)
Billings												1,466,249	1,297,947	(168,301)		-11.5%
Gross profit												332,499									313,217	(19,281)		-5.8%
（Gross margin）		(22.7%)	(24.1%)	(+1.5%)
SG&A expenses											277,367								268,184	(9,183)		-3.3%
Operating income										55,131							45,033	(10,098)		-18.3%
(Operating margin)*		(16.6%)	(14.4%)	(-2.2%)
Non-operating income									4,357						5,633	1,276		29.3%
Non-operating expenses								1,388					1,072	(315)		-22.7%
Ordinary income							58,100				49,594	(8,506)		-14.6%
Extraordinary income						24,696			14,658	(10,037)		-40.6%
Extraordinary loss					7,925		10,582	2,657		33.5%
Net income before income taxes		74,871	53,669	(21,201)		-28.3%
and minority interests
Net income attributable to owners			44,893	26,479	(18,413)		-41.0%
of parent
* Operating margin = Operating income / Gross profit

During the consolidated fiscal year under review, the Japanese economy experienced a decline in the first quarter that was greater than that of the Financial Crisis, as economic activities stagnated worldwide due to the impact of the spread of the COVID-19. From the second quarter onward, the recovery trend continued until autumn due to the recovery of foreign demand and the support of the government's economic measures, however, the economic recovery began to stagnate in the fourth quarter due to the re-spread of the infection through the year-end and new year holidays and the re-declaration of a state of emergency from January. The domestic advertising market (Note 1) was affected by COVID-19 to a greater extent than the economy, however, the extent of the decline has been shrinking from third quarter. By service category, Internet media continued to outperform the previous year's results from the third quarter onward, however, there were large differences in the state of recovery among categories.

Amid such an environment, the Hakuhodo DY Group continued to pursue proactive business development. As a result, although billings in the second half of the year recovered to 97.5% compared with the same period

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of the previous fiscal year, billings decreased by 11.5% to 1,297,947 million due to the weak performance in the first half. The billings in the domestic business decreased by 12.2% to 1,146,303 million, and in the overseas business decreased by 5.7% to 151,643 million yen due to the impact of the COVID-19.

By service area, billings in all category were lower than the same period last year, but in the third quarter, there was a recovery trend, such as an increase in "Internet media", "Newspapers", and "Creative" compared to the same period of the previous year. In the fourth quarter, "Television" also increased from the same period of the previous year, and "Marketing/promotion" billings also turned positive from the same period of the previous year due to the contribution of the large-scale projects.

By clientsʼ industry, most of them fell below the level of the same period of the previous fiscal year, with "Transportation/Leisure" and "Automobiles/Related Products," which were significantly affected by COVID- 19, were down from the same period of the previous fiscal year. However, billings of "Government/ Organizations" and "Game/ Sporting goods/ Hobby supplies, which had been down from the same period of the previous fiscal year until the third quarter, increased from the same period of the previous fiscal year for the full fiscal year. (Note 2)

Gross profit decreased by 19,281 million from the previous fiscal year to 313,217 million (down 5.8% year- on-year). In Selling, general and administrative (SG&A) expenses despite an increase due to the expansion of the scope of consolidation, operating income decreased by 18.3% to 45,033 million and ordinary income decreased by 14.6% to 49,594 million as a result of the commencement of cost structure reforms and cost control measures such as controlling activity expenses. As a result, operating income decreased by 18.3% to 45,033 million and ordinary income decreased by 14.6% to 49,594 million

Factoring in extraordinary gains of 14,658 million and extraordinary losses of 10,582 million, income before income taxes and minority interests fell 28.3%, to 53,669 million, and profit attributable to owners of parent declined 41.0%, to 26,479 million.

Notes 1. According to the Survey of Selected Service Industries (Ministry of Economy, Trade and Industry, Japan). 2. Based on internal management categories and data compiled by the Company.

２．Balance Sheets (March 31, 2021)

					(Millions of JPY)
	March 31, 2020	March 31, 2021	Comparison with
	March 31, 2020
	Amount	Share	Amount	Share	Change	(%)
Current assets	595,080	69.2%	626,731	66.6%	31,651	5.3%
Fixed assets	264,807	30.8%	314,372	33.4%	49,564	18.7%
Total assets	859,887	100.0%	941,103	100.0%	81,216	9.4%
Current liabilities	395,721	46.0%	416,338	44.2%	20,617	5.2%
Non-current liabilities	148,017	17.2%	162,625	17.3%	14,607	9.9%
Total liabilities	543,739	63.2%	578,964	61.5%	35,224	6.5%
Total shareholders' equity	261,142	30.4%	276,197	29.3%	15,055	5.8%
Accumulated other comprehensive	28,060	3.3%	54,228	5.8%	26,168	93.3%
income
Subscription rights to shares	218	0.0%	247	0.0%	28	13.1%
Noncontrolling interest	26,726	3.1%	31,466	3.3%	4,739	17.7%
Total net assets	316,147	36.8%	362,139	38.5%	45,992	14.5%
Total liabilities and net assets	859,887	100.0%	941,103	100.0%	81,216	9.4%

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３．Consolidated Forecasts of Performance for Fiscal 2021 (April 1, 2021 to March 31, 2022) and Dividends

						(Millions of JPY）
	FY2020		FY2021		YOY
	Actual		Forecast		Change			（％）
Billings ※1	1,297,947	1,460,000		162,052			12.5%
Revenue ※2	-	782,000		-			-
Operating income	45,033	47,000		1,966			4.4%
Ordinary income	49,594	50,000		405			0.8%
Net income attributable to owners	26,479	26,500		20			0.1%
of parent
Dividend per share (@JPY/share)	30.0		30.0			0.0

* Including a mid-term dividend of 15 per share.

※1 Billings are based on the previous accounting standard, which is different from "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020). Hakuhodo DY Group will apply ASBJ No.29 from April 1, 2021.

※2 After applying Accounting Standard for Revenue Recognition.

(About the Full ‒ Year Forecasts)

Japanese economy and the advertising market remain uncertain outlook. The above forecast is based on the assumption that the spread of corona infection will gradually come to an end and that even if there is a temporary increase in infection, the impact on the economy will be limited. The Consolidated Forecast numbers are estimated based on the following ideas:

1. The top line will grow faster than the market growth and aim to recover to the level of the fiscal year ending March 2020.
2. At the same time as working on cost structure reforms, we expect to make upfront investments on the scale of 10,000 million for medium/long-term growth.
3. As a result, operating profit growth will be slower than the top line.

Please note that these assumptions are subject to change due to the impact of COVID-19, and in such cases, we may revise the forecast accordingly.

(About the Dividend Forecast)

Hakuhodo DY Group's basic policy on shareholder returns is to steadily and continually provide dividends to shareholders. In determining the dividend amount, we comprehensively take into account the circumstances regarding demand for capital expenditure, the Company's business performance, the maintenance of sufficient internal reserves, and other factors.

We will pay an annual dividend of 30.0 per share (Note) for the fiscal year ending March 31, 2021, and an annual dividend of 30.0 per share for the following fiscal year ending March 31, 2022.

(Note) This includes the mid-term dividend (15 yen per share) paid in December 2021.

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