Presentation to Investors Stock code: 7649 TSE 1, NSE 1 Sugi Holdings Co., Ltd. Industry & Company Overview ober, 212 1 PROFILE Company name Head office Establishment Founded March 1982 Paid-in capital Fiscal year-end Number of shares outstanding Sugi Holdings Co., Ltd. 1-8-4, Mikawaanjo-cho, Anjo-City, Aichi Pref. Sugi Pharmacy was established in December 1976 to sell prescription drugs and OTC drugs. JPY15,434,588, End of February 63,33,838 shares Number of stores 846 (as of August 31, 212) Number of employees Net sales Operating Profit Description of business 4,134(full-time) (as of August 31, 212) JPY327,267 m (FY ended Feb. 29, 212 - consolidated) JPY17,215 m (FY ended Feb. 29, 212 - consolidated) Management of subsidiaries engaging in businesses including pharmacy business, drug store business, and in-home nursing care business 7 Restructured Japan Co., Ltd. into subsidiary Restructured Iizuka Yakuhin into subsidiary 6 '1 Listed on Part 1, TSE 2 2 (stores) 8 4 ' Listed on NASDAQJ 9 Number of Stores and Sales Status 9 5 No. of Stores 1 2 3 Consolidated net sales 11, Sugi Pharmacy merger with Iizuka Yakuhin Divested 3 clinical research subsidiaries Aug. '8 Sugi Holdings established '6 Opened the first store in Tokyo '4 Opened the first store in Osaka 4 5 6 7 8 9 (in 1 million yen) 1 1 1 3, 2, 1, Overview of Sugi Group Sugi Holdings Co., Ltd 846 locations(as of August 31, 212) Japan Co., Ltd. 151 stores Sugi Pharmacy Co., Ltd. 685 stores Sugi Medical Co., Ltd. In-home nursing care stations: 1 locations Industry Trends Local residents / consumers 3 4
Situation of Drug stores with Sales Floor Areas of 9-tsubo or Greater Market size (1 millions of yen) 4, 35, 3, 25, 2, 15, 1, 5, 1994 1995 1996 1997 1998 1999 2 21 Source: Drug store directory of calligrapher 29 published by Home Center Institute (HCI). 5 22 23 24 Net Sales Number of stores 25 26 27 28 29 21 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 2,1 Number of companies 116 18 28 23 29 315 332 322 337 325 317 3 294 282 278 265 255 Number of stores 561 1,15 1,38 1,755 2,119 2,897 3,769 4,468 5,246 6,2 6,639 7,62 7,625 8,7 8,566 8,962 9,238 Net sales (1 millions of yen) Drug stores with sales floor areas of 9-tsubo or greater (1 tsubo = 3.36 sq meters) 2,41 5,6 7,215 8,54 9,35 11,192 14,665 17,635 19,28 22,7 23,579 27,18 29,45 31,333 33,653 35,568 37,225 Number of stores Market shares of drugstores (Source: Commercial statistics of METI 28) Market size of retailers of drugs and cosmetics Matsumotokiyoshi HD(TSE388 3/212) 434,597 Sundrug (TSE9989 3/212) 386,836 SUGI Holdings (TSE7649 2/212) 327,267 Cocokara fine HD (TSE398 3/212) Tsuruha HD (TSE3391 5/212) 32,969 Kosumosu (TSE3349 5/211) 237,174 Kawachi (TSE2664 3/212) 222,322 Create SD HD (TSE3148 5/211) 154,875 CFS (TSE8229 2/212) Annual sales (Million Yen) 8,472,373 Total of the top 1 listed DgS 2,782,459 321,954 Growell HD (TSE2794 8/211) 27,816 15,649 Share (%) 1.% 32.8% 5.1% 4.6% 3.9% 3.8% 3.8% 3.2% 2.8% 2.6% 1.8% 1.2% All 1 listed prescription-only pharmacies : 5.7% All 16 listed drugstores chains 37.2% Top 1 listed DgS 32.8% Total of 255 drugstore chains with 3 m2 or larger sales floor 43.9% 6 Previous Growth Factors Focus on characteristics of a convenience store (focus on fashion items) Emphasis on cosmetics and home products (foods) Focus on characteristics of a discount store Competition for low prices Future Growth Factors Rapid growth 7 8
Japan - the World s Fastest Aging Society Years taken for the senior (over 65) ratio to rise from 7% to 14% France Sweden U.S.A U.K. Germany Japan 115 years 85 years 7 years 45 years 4 years 25 years Ratio of people aged 65 or older France Germany Sweden Japan U.K. U.S.A Projected figures 195 1955 196 1965 197 1975 198 1985 199 1995 2 25 21 215 22 225 23 235 24 245 25 9 Increase in Lifestyle-Related Diseases Other 36.1% Diabetes High Blood 1.3% pressure.6% Senescence 2.3% Cerebrovas cular disease 13.2% Malignant neoplasm 31% Lifestyle-related diseases Cardiac diseases 15.5% Death from senility: only 2.3% Over 6% deaths are caused by lifestyle-related diseases. 6% of diseases are preventable. Source: Annual Total of Monthly Reports on Vital statistics by the Ministry of Health, Labour and Welfare 11 4% 35% 3% 25% 2% 15% 1% 5% % Japan A rapidly aging society 4% 35% 3% 25% 2% 15% 1% 5% % 7.9% 7.1% 4.9% 5.3% 5.7% 6.3% 195 197 Aging society 1955 196 1965 197 1975 198 1985 1994 Progress in aging and future forecast 14.5% 12.% 1.3% 9.1% 34.7% 35.7% Aged society Advanced aged society33.2% 17.3% Source: FY23 White Paper on Aging Society 1 19.9% 22.5% 27.8% 28.7%29.6% 26.% 199 1995 2 25 21 215 22 225 23 3.9% Ratio of people aged 65 or older 235 24 245 25 年 To Prevent Redundant Medications and Other Risks dentistry ophthalmic hospital Checking redundant medications internal medicine surgery Family pharmacy Ministry of Health, Labor and Welfare promotes family pharmacies that centrally manage prescriptions. 12
Growth Factors for Drugstores Previous growth factors Low price Convenience An aging population with lower birth rate Special knowledge 13 + Medical system reform Low price + Future growth factors Convenience Only Pharmacy Has Special Knowledge to Leverage. Licensing classification Qualified person to sell drugs Pharmacy Retail stores Pharmacist Registered sales representative (Non-pharmacist) Prescription filling Category 1 Category 2 Category 3 S-OTC etc Switch OTC products: Drugs that were previously sold to medial facilities but are now available at pharmacies. 14 Prescription Filling Market 15 Growth factor : Growing Prescription Filling Market National healthcare program reform has promoted the separation of prescribing and dispensing functions. Number of Pharmacies Total:53,34 outlets (As of 28) 3 As of FY 211 Separation rate National 2 average 64.6% Tokyo 74.1% Change in the rate of separation of 1 Aichi 55.7% prescribing and dispensing functions Osaka 51.3% Source: Japan Pharmaceutical '9 '91 '92 '93 '94 '95 '96 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 Association Data 16 % 7 6 5 4 FY211 Separation rate: 64.6% Prescription filling market: Y6,227bn +8.1% Number of Prescriptions: 743.96million
Separation Rate 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 % % % % % % % % % % % % % % % % % % % % % Hokkaido 13.1 14.4 17.1 2.4 23.9 26.8 3. 35.9 41.8 46.5 52.1 56.3 59.3 61.8 62. 64.1 65.8 67.9 7.1 72.9 74.1 Akita 3. 29.5 31.4 34.5 37.5 39.9 43.5 49. 56.1 62.9 67.6 7.8 71.7 72.9 71.4 73.5 75. 77.3 77.8 8.8 82.2 Ibaragi 4.8 6.2 8.6 12.4 16.7 21.2 26.3 33.1 38.1 43. 48.2 53.3 56.1 58.1 57.6 6.1 61.8 63.9 65.3 67.5 69.1 Saitama 11.7 13. 15.1 17.8 2.1 22.8 27.3 32.4 36.7 41.9 47.4 52.4 55. 57.6 58.2 6.4 61.8 63.5 65.1 67. 68.8 Chiba 15.2 17.4 2.6 23.8 26.4 29.2 32.9 37.3 41.5 47.5 53. 56.6 59.3 61.4 61.2 62.9 63.9 65.5 66.3 68.5 7.2 Tokyo 23.6 25.8 28.5 31.4 34.1 37.2 41. 45.4 49.3 53.3 57.9 61.7 63.7 65.4 65.2 66.4 67.7 69. 7.1 72.6 74.1 Kanagawa 26. 28.1 3.1 32.7 35. 37.5 41.2 45.4 5.1 56.2 61.7 65.9 68.6 7.7 7.3 71.2 72.1 73.9 74.7 77.1 78.2 Gifu 1.7 2.2 3.4 4.9 6.2 8.7 13.3 2.2 25.1 3.2 35.7 41.4 45.8 48.5 48.8 5.2 51.5 53.6 55.3 57.5 59.2 Shizuoka 9.9 1.9 12.4 14.5 17.5 2.3 24.3 3. 35.5 4.9 46.6 51.6 54. 56.3 56.6 58. 59.7 61.8 63. 65.6 67. Aichi 4.3 4.6 5.3 6.1 7.2 8.6 11.8 17.5 22.7 27.2 31.9 36.6 4.2 42.3 43.7 45.7 47.3 49.4 51.6 54.3 55.7 Mie 6.9 7.9 9.4 1.5 12. 13.9 15.9 19.4 23.2 28.2 34.8 38.6 41.5 43.7 44. 45.1 46.4 48.1 49.2 51.6 53.6 Shiga 5.1 5.9 7.3 8.8 1.9 12.6 15.4 2.2 24.1 28.2 33.4 39.7 42.7 45.6 46.6 49.6 51.9 55.5 57.2 59.8 61.6 Kyoto 1.4 1.5 1.8 2.2 2.9 4.2 6.8 1.8 15.1 19.2 22.4 25.7 28.1 3.8 32.3 34.1 35.4 37.9 4. 42.8 44.7 Osaka 5.1 5.7 6.7 7.6 8.8 1. 12.5 15.6 18.9 23.2 28. 32. 35. 37.3 38.6 4.7 42.5 44.7 47. 49.5 51.3 Hyogo 12. 13. 14.7 16.7 19.3 21.5 25.1 29.5 33.6 38.4 43.1 46.9 49.1 51.4 52.3 53.8 55.6 57.5 59.5 61.5 62.8 Nara 1.8 2.2 2.9 4.4 5.4 7.5 12. 17.2 21.9 24.9 28.9 32.6 35.9 37.9 39.6 41.2 42.5 45. 48.2 5.1 51.9 Nationwide 12.8 14. 15.8 18.1 2.3 22.5 26. 3.5 34.8 39.5 44.5 48.8 51.6 53.8 54.1 55.8 57.2 59.1 6.7 63.1 64.6 Source: Japan Pharmaceutical Association Data 17 Environments surrounding independent pharmacies Decline in drug-price margins Majority of shares occupied by ma-and-pa pharmacies Lowering NHI drug prices Top ten listed dispensing pharmacies Promotion of in-home care services Out-of-hours service fees 91.6% Revision of dispensing fees Reduction of basic fees High burden of inventory 18 8.4% For the reduction of medical expenses Average age of independent pharmacies owners 58. years old Source: Japan Pharmaceutical Association s data in fiscal 21 and Statistics in fiscal 21 by the Ministry of Health, Labour and Welfare Promotion of GE Trends in the Number of Prescriptions and Price per Prescription (pieces) 5, 48, 46, 44, 42, 4, filling (yen) 38, 36, Number of 34, prescriptions 32,Price per prescription (yen) 3, 28, 26, 24, 22, 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, ( 年月 ) 1998 Sales from prescription Price per prescription (right axis) 23, prescription FY212/2 Full Year 32,74million 3,48,128 9,596 Growth +31.8% +25.1% +5.4% About 15 times Number of prescriptions filled by Sugi Pharmacy (left axis) 1999 2 21 22 23 24 25 26 27 28 29 3.4 million prescriptions FY 22/2 FY 23/2 FY 24/2 FY 25/2 FY 26/2 FY 27/2 FY 28/2 FY 29/2 FY 21/2 FY 211/2 FY 212/2 Number of prescriptions 418,241 52,725 751,55 975,791 1,249,877 1,521,497 1,75,61 2,1,444 2,346,349 2,725,13 3,48,128 Avg. price / prescription (yen) 5,735 6,149 7,95 7,45 7,98 7,838 8,344 8,569 9,115 9,17 9,596 Note) The above-mentioned number of prescriptions added up the number of Sugi Pharmacy and Sugi Medical. 19 21 211 13 12 11 1 9 8 7 6 5 4 3 (Yen) Prescription Filling Market - Entry Barriers and Benefits Benefits of entering the market A huge market Improved gross profit Securing of regular customers Differentiation Entry Barriers Change in business licensing Securing of pharmacists Training of pharmacists Perceptions among patients and medical practitioners 2
Business Model of Drug Store Position of Other Drug Stores Relative to Sugi Pharmacy 21 Convenience store-style drug stores Emphasis on services & customer courtesy Low Sales ratio of H&BC products High Food and daily item discounting drug stores Emphasis on low prices Counseling-oriented H&BC drug stores Discount H&BC drug stores 22 Business Model of Sugi Pharmacy Emphasis on services & customer courtesy Sugi Pharmacy Low Sales ratio of H&BC products High Business Model of Sugi Pharmacy D C Emphasis on low prices B A 23 24
Business Model of Sugi Pharmacy Sugi Pharmacy will continue pursuit of high value-added business operations. Emphasis on services & customer courtesy Sugi Pharmacy Low Sales ratio of H&BC products High Emphasis on low prices 25 Business model of Sugi Pharmacy Health Consultation by Professional Pharmacists. Sick prevention Daily lifestyle improvement proposal Providing community healthcare information Providing healthcare educational seminars Prescription filling 365-day operation with night shift Risk management--- Inquiries to prescribing doctors Medication history Medication counseling Privacy protection Counseling-based sales of OTC drugs and health food Home Care Guidance for in-home medication Home Health Care Service--- TPN Providing in-home nursing care goods Pharmaceutical Care Confirmation of the effectiveness of medication Improve QOL during course of medication Community Total Healthcare Pharmacy 26 Benefits provided to customers by Sugi Pharmacy Checks for potential side effects and cross interactions Prevention of dose overlaps dentistry ophthalmic hospital Family pharmacy internal medicine surgery Ministry of Health, Labor and Welfare promotes family pharmacies that centrally manage prescriptions. Sugi Pharmacy open drug stores in residential areas aiming to obtain dominant influence. Medication risk management by checking abundant medication and interaction of dispensed drugs. OTC Drug Section Each Sugi Pharmacy unit has at least three pharmacists stationed. Many customers visit us for pharmacist advice. 27 28
Beauty Care (Cosmetics) Section Sugi Pharmacy has around 1.5 beauty advisors stationed. Beauty advisors provide personal counseling for customers. Existing Stores Sales Growth Over Time Sugi Pharmacy Co., Ltd. FY21 +5.6 FY22 +7.4 FY23 +1.1 FY24 +2.3 FY25 +4.5 FY26 +6.9 FY27 +8.2 FY28 +4.2 FY29 +1. FY21 +.4 FY211 +4.4 18.% 16.% 14.% 12.% 1.% 8.% 6.% 4.% 2.%.% '1/1 6 11 4 9 2 7 12 5 1 3 8 '6/1 6 11 4 9 2 7 12 5 1 3 8 '11/1 6 11 4-2.% 29 21 22 23 24 25 26 27 28 29 21 211 212-6.% 3-4.% Same Stores Sales Growth Rate Sugi Pharmacy Co., Ltd. 6 Million Yen 5 4 Average annual sales per store over time (1 years to end of Feb. 29) Three- sales trends by merchandise group Cumulative three- average sales per store by merchandise group Other Commodity goods 3 Beauty care 2 1 1st Year 2nd Year 3rd Year 4th Year 5th Year 6th Year 7th Year 8th Year 9th Year 1th Year 31 1st 3rd 6th 9th 1 year 15th 18th 21th 2 year 27th 3th 33th 3 year Health care Prescription filling 32
Pharmaceutical Training Center and Pharmaceutical Information Center Training System at Sugi Pharmacy 33 34 Pharmaceutical Training Center and Pharmaceutical Information Center Pharmaceutical Training Center A 2-day/year training curriculum at three schools (Tokyo, Nagoya, Osaka) Training provided chiefly in the form of role playing training in small groups. Participation in training programs on a voluntary basis; courses provided in a course credit system. Grade System Core Curriculum Pharmacists take in-house basic training at least for three years Grade system seminar Chief pharmacist seminar TPN seminar Supervising pharmacist seminar Skill improvement seminar for different ailments Pharmaceutical Information Center Issues raised in everyday work as well as information on minor incidents that may otherwise have led to serious incidents are sent to Pharmaceutical Information Center. Issues promptly reflected in textbooks and training programs. Issues at one store to be shared by all stores. Aiming to prevent mistakes in prescription filling by accumulating and utilizing incident information. 35 Prescriptions basic seminar Follow-up training New employee training Training when joining company Introductory training Formula analysis seminar TV dispensing training Prescriptions intermediate seminar Basic training Prescriptions trainer seminar Advanced training by career course 36
Graded System Core Curriculum Dispensing medicine covered by medical insurance Health care Home health care Communication skills Advanced class Intermediate class Drug prescription analysis Patient assessment Reading of medical chart Prescription audit Drug side effects Drug interactions Exercise therapy Physical therapy First aid Emergency treatment of poisoning Preventive medicine Alternative medicine Nutritional science Dietary therapy IVH, HPN, CAPD, HOT Home nursing care goods Bedsore management QOL in home care Counseling 1 Counseling 2 Light counseling Stress management Store Opening Strategy Basic class Fundamentals of medication counseling How to read a drug package insert Medication history And P.O.S. Utilization of patient questionnaire Vitamin and Mineral Herb and Aroma Guidance for in-home care management Nursing care insurance system Pharmacy communication Services and Amenity 37 38 Comparison of Store Location Strategy across Drugstores Shopping areas and terminals Suburban and residential areas Rural areas NSC Sugi Pharmacy Company B Company A Company C Company D Store Opening Strategy Store Formats <Format 1 > Large drugstores (Suburban-type; NSC) Sales floor area: 25-3 tsubo *(1 tsubo = 3.36 sq meters) <Format 2 > Medium drugstores (Urban- and suburban-type) Sales floor area: 15-25 tsubo <Format 3 > Small drugstores (Commercial and shopping areas in large cities; Other) Sales floor area: 7-15 tsubo Future ratios 1% or less 8% or more 1% or less Capital investment: Y7m Payout time: 5 7 years (Target) Intensive store Openings for dominant influence, each covering a population of 2, persons or 6, households. 39 4
Intensive Openings of Medium-Size Sugi Pharmacy Stores for Dominant Influence Geographic Expansion - New Store Openings <Sugi Pharmacy, non-consolidated> Founded, 1976-1987 1988~1997 1998~1999 2~21 1 store 2 41 stores 64 8 stores 16 137 stores 22 23 24~25 26~ 41 175 stores 227 stores 286 328 stores 685stores (as the end of Aug. 212) 42 Favorable Revision of the Pharmaceutical Affairs Act! Impact of the Revision of the Pharmaceutical Affairs Act 43 29 First revision made to the Pharmaceutical Affairs Law OTC in drugs 46 years were classified into 3 categories Category Market size Drug sales Qualification Sales form Prescription drugs Y8,856bn (on NHI drug price basis, FY29) Pharmacist Pharmacy 44 Category 1 Category 2 Y1,167.6bn (28) Category 3 Registered sales representative (Nonpharmacist) Retail stores (Formerly general retailer and secondclass drug seller)
Registered sales representative system: Advantage to drug stores Formerly, only pharmacists could sell OTC drugs in Japan. Pharmaceutical Affairs Act revised in June 29. OTC drugs were classified into 3 categories. Registered sales representatives, who are not pharmacists, can sell Categories 2 and 3 drugs which have minor side effects. One year working experience at drug store is required to be qualified to take the exam. New store openings have been accelerated by the elimination of barriers (qualified pharmacist requirement). Longer business hours have become easier by stationing registered sales representatives. Longer business hours allow drugstores to take night time market shares away from CVS and SM. Stationing lower-waged registered sales representatives in place of pharmacists (who were required to be stationed before the revision of the Act) will lead to cost reduction. Impact of Generic Drugs Only drug store employees and pharmacies are qualified. Large entry barrier for other types of businesses For drugstore industry, registered sales representative system is a short-term growth driver 45 46 Revision in medical service fees encourages use of generic drugs Revision in il 28 Prescription format changed Before the revision, pharmacist could change a drug to a generic drug only when the doctor has placed a signature and seal of approval. After the revision, the doctor s signature and seal of approval is necessary only when changing to a generic drug will cause any inconvenience or problem. Free choice of generic drug brands at pharmacies Before the revision, pharmacies were not allowed to change a generic drug brand to another brand when a specific brand name was indicated on prescriptions. The revision stipulates that pharmacies are free to choose from among equivalent generic drug brands. Additional fee income under the generic dispensing systems 4points(=Y 4) If generic drugs were dispensed for 3% or more of prescriptions received during the last three s, 4 points are added on all prescriptions. M&A Strategy Revision in. 21 and. 212: Change in the extra fee point system Before revision Revision in. 21 Revision in. 212 Generic drug in prescription over 3% +4 points over 2% +6 points over 22% +5 points over 25% +13 points over 3% +15 points over 3% +17 points over 35% +19 points 47 48
Background to acquisition of Japan Co., Ltd. Japan Co.Ltd.: Discount store chain operator with 144 outlets in Kansai and Kanto Purpose of acquisition: Location. Same business model: Operating outlets with local dominance in residential areas. Average sales floor area: 2 tsubo (same store size as our stores). 15, 24: Concluded comprehensive business and capital alliance agreement (shareholding: 9.92%) Dec. 2, 25: Restructured into a consolidated subsidiary (shareholding: 5.1%) following the exercise of stock acquisition rights Mar. 1, 26: Consolidated accounting started Mar. 1, 27: Restructured into a fully-owned subsidiary following share exchange (shareholding: 1.%) <Completed actions> Introduction and expansion of Cosmetics Introduction and expansion of OTC drugs Centralized purchases under the Sugi Group 49 After Acquisition of Japan Co., Million Yen 8, 6, 4, 2, Net Sales (left Axis) Operating income ratio (right axis) FY 25/8FY 26/2 FY 27/2FY 28/2FY 29/2FY 21/2FY 211/2 FY ended Feb.28, 211 Net Sales :Y7,392 m Operating Income:Y 2,57m 5.% 4.5% 4.% 3.5% 3.% 2.5% 2.% 5 Note :Accounting period of fiscal year ended Feb. 26 was six s. Acquisition and Merger of Iizuka Yakuhin Iizuka Yakuhin was merged into Sugi Pharmacy, currently operating 66 stores under the name of Sugi Pharmacy, primarily in Saitama and Gunma Prefectures. Purpose of acquisition: To complement already dominant network. Average sales floor area: 166 tsubo. Operates stores with local dominance in residential locations in Kanto, the new area for us. On Sep 3, 27, Sugi Pharmacy acquired all of Iizuka Yakuhin shares then owned by the company s founder and president totalling 1,764, shares (85.6% of all voting shares). The operation of Iizuka Yakuhin was consolidated into the Sugi Pharmacy operation and it merged with Sugi Pparmacy on Feb.1, 211. <Sales percentage by merchandise group> FY 29/2 Full Term FY 21/2 Full Term FY 211/2 Full Term Net Sales 15,676 16,177 13,597 Prescription Healthcare 11.4%.% 25.1% 24.4% 25.8% 13.6% 18.5% After Acquisition of Iizuka Yakuhin Million Yen 2, 15, 1, Net Sales (left Axis) Operatiing income ratio (right Axis) FY ended Feb.28 211 Net Sales :Y13,597 m Operating Income: Y17 m 1.%.% -1.% -2.% Gross margin 3,457 3,566 3,147 SG&A 4,29 4,53 3,13 Beauty care 28.6% 21.8% 21.3% 5, -3.% -4.% Operating Income Ordinary Income -752-465 17-688 -261 281 Households Others 11.9% 35.8% 51 22.3% 39.5% SUGI Pha(FY 11/2) Iizuka(FY 9/2) Iizuka(FY 11/2) -5.% FY 28/2 FY 29/2 FY 21/2 FY 211/2 52 Note :Accounting period of fiscal year ended Feb. 28 was six s.
Strengthening Corporate Governance 1Restructured to a holding company on September 28. Group Strategy Sugi Pharmacy Japan Iizuka Japan Sugi Holdings 1% 1% 1% 1% 1% 2 Directors reduced from 13 to 5 (including 2 external directors). 3 Nomination and Compensation Committee established, chaired by an external director 4 Executive officer system adopted 5 Compliance Committee established, majority of which comprising experts from outside the Group Sugi Pharmacy Sugi medical Increasing speed and transparency of management by separating management s supervisory and decision-making functions from business execution Strengthening corporate governance of group operation by reducing directors and appointing two external directors Holding company: engaging exclusively in managing group strategies and supervising group companies Subsidiaries; focusing on proper and flexible operation of their businesses. Pursuing optimal and effective use of group management resources and maximum synergy among group cmpanies 53 54 Direction of Sugi Pharmacy group companies Japan Sugi Holdings 1% 1% 1% Sugi Pharmacy Sugi Medical Sugi Pharmacy: Maintain competitive superiority by continuing aggressive new store openings and pursuing specialty, as a core business company Japan, Co., Ltd: Convert from the discount store to a drugstore chain, by stationing registered sales representatives. Japan and the former Iizuka Yakuhin will strive to improve profitability by increasing the sales percentage of OTC drugs and cosmetics. After il 212, the demand-supply gap for pharmacists in Japan is expected to improve. Japan and the former Iizuka Yakuhin will change to the same business model of Sugi Pharmacy, aiming to increase the profitability of the entire group. Target: in-home nursing care service stations, Sales: 1.5 billion Spinout of clinical research business in May 211. Sugi Medical will concentrate on the local community healthcare support business. Continue aggressive new store openings (Plan: 7 stores in 12/2, and 8 stores in 13/2 ) Target: 5 stores providing in-home nursing care services, Sales: JPY 1.5 billion Gradually convert from discount stores to drugstores by stationing registered sales representatives 55 846Stores; As of August 31, 212 Sugi Pharmacy Co., Ltd. As of Aug,31 212 Pharmacies that supports in-home Japan Co., Ltd. care Sugi visit Nursing care station Ibaraki 2 ( - ) 2 Tochigi 2 ( - ) 2 Gunma 35 ( 1 ) 3 38 Saitama 62 ( 7 ) 27 1 9 Chiba 3 ( 1 ) 3 Tokyo 42 ( 6 ) 5 2 49 Kanagawa 15 ( 5 ) 1 16 Kanto region 161 ( 2 ) 35 4 2 Gifu 38 ( 5 ) 38 Shizuoka 14 ( 1 ) 14 Aichi 257 ( 5 4 ) 2 259 Mie 49 ( 5 ) 49 Chubu region 358 ( 65 ) 2 36 Shiga 23 ( 5 ) 3 26 Kyoto 2 ( 2 ) 14 34 Osaka 85 ( 2 ) 57 4 146 Hyogo 33 ( 7 ) 36 69 Nara 5 ( 2 ) 6 11 Kansai region 166 ( 36 ) 116 4 286 Total 685 ( 1 2 1 ) 151 1 846 56 Total
Operating 846 Stores as of August 31, 212 <NO.58> Store Distribution Target of 215 Sugi Pharmacy Co., Ltd. Japan Co., Ltd. In-home nursing care stations Number of stores 166 116 Kansai region total 286 stores 4 Number of stores Sugi Pharmacy 358 Co., Ltd. In-home nursing care 2 stations Chubu region total 36 stores Sugi Pharmacy Co., Ltd. Japan Co., Ltd. In-home nursing care stations Number of stores Group total 833 stores 57 161 Kanto region total 2stores 35 4 Kansai region 5Stores Osaka Tokyo Nagoya Chubu region 5Stores Kanto region 5Stores 58 FY215 Target FY215 (FY ending Feb. 216) Number of stores: 1,5 stores Net sales: Y5bn Open 1 store for each population of 2, (7, households), primarily in the Kanto, Chubu, and Kansai areas where the senior population is expected to grow. FY 2/1996 FY 2/1997 FY 2/1998 FY 2/1999 FY 2/2 FY 2/21 FY 2/22 FY 2/23 FY 2/24 FY 2/25 FY 2/26 FY 2/27 FY 2/28 FY 2/29 FY 2/21 FY 2/211 FY 2/212 FY 2/213 FY 2/214 FY 2/215 FY 2/216 FY 2/217 FY 2/218 FY 2/219 FY 2/22 FY 2/221 (Billions of yen) 1, 59 9 8 7 6 5 4 3 2 1 FY22 Target Half-way point of our 6,-store target (= [total population in Japan 12m] / [One store for 2, people]) FY22 (FY ending Feb. 221) Number of stores: 3, stores Net sales: Y1,bn FY 2/1996 FY 2/1997 FY 2/1998 FY 2/1999 FY 2/2 FY 2/21 FY 2/22 FY 2/23 FY 2/24 FY 2/25 FY 2/26 FY 2/27 FY 2/28 FY 2/29 FY 2/21 FY 2/211 FY 2/212 FY 2/213 FY 2/214 FY 2/215 FY 2/216 FY 2/217 FY 2/218 FY 2/219 FY 2/22 FY 2/221 (Billions of yen) 1, 6 9 8 7 6 5 4 3 2 1
Business Model of Sugi Pharmacy Co., Ltd. Shifting from drugstores handling both OTC and prescription drugs to drugstores collaborating with community medical service providers Contributing to Community Healthcare 61 In Sugi Pharmacy, the core business company in the Group, we had handled both prescribed drugs and OTC drugs. We had served to customers and patients visiting our stores by providing prescription filling services, selling OTC drugs with consulting, health food, and cosmetics, aiming to contribute to the healthcare in local communities. However, patients receiving care at home or nursing homes are increasing as the number of senior citizens are increasing and due to the the revised national healthcare system. In response to these changes, we have expanded our business range. This includes dispatching stores pharmacists to patients home and nursing homes to deliver medicines and other healthcare goods, and collaborating with local medical providers in providing home nursing care services. By shifting to the new business model of drug stores collaborating with community medical providers, we serve not only visitors to the stores but also in-home patients, their families and all customers and patients in the community. 62 Aging progresses faster in urban areas Percentages of senior citizens (over 65 years old) Prefecture senior population of 215 senior population of 215 Increase Unit:1 persons Increase % 63 Rank Saitama 116 179 +63 +55% 1 Chiba 16 16 +53 +5% 2 kanagawa 149 218 +7 +47% 3 Aichi 125 177 +52 +42% 4 Osaka 165 232 +68 +41% 5 (Tokyo) 233 316 +83 +36% (7) Iwate 34 39 +5 +15% 43 shimane 2 22 +2 +11% 44 Akita 31 34 +4 +11% 45 Yamagata 31 34 +3 +1% 46 Kagoshima 44 48 +4 +1% 47 Japan 2,576 3,378 +82 +31% Sugi pharmacy will open stores in areas where aging progresses rapidly. Deaths per year will increase 1.5 times the current level Change in total population and expected annual changes The total population of Japan will decrease rapidly in the future. However, the percentage of the aged (over 65) will increase rapidly. 18 16 14 12 1 8 6 4 2 26 21 215 22 225 23 235 Data: Institute of Population Problems 24 Death Birth 245 25 255 Death numbers in a year will continue to increase until 24. 64 Year 26 21 215 22 225 23 235 24 245 25 255 Birth 1,9 People(1,) 935 836 773 731 695 645 582 526 485 457 Death 1,13 1,192 1,314 1,429 1,526 1,597 1,646 1,663 1,641 1,593 1,556 Natural Increase -13-257 -478-656 -795-92 -1,1-1,81-1,115-1,18-1,1 % (Vs,Population1,) Natural Birth Death Increas e 8.5 7.3 6.7 6.3 6.1 6. 5.8 5.5 5.2 5.1 5.1 8.6 9.4 1.5 11.6 12.8 13.9 14.9 15.7 16.3 16.7 17.3 -.1-2. -3.8-5.3-6.7-7.8-9. -1.2-11.1-11.6-12.2
Serious shortage in bed numbers in urban areas In rapidly aging urban areas, shortage of nursing homesis unavoidable <NO.68> even if new constructions are increased three times the current level. Short of beds in urban areas. Especially, in Greater Tokyo and Aichi Prefecture Beds for infectious disease patients Beds for TB patients Beds for general patients Beds for recuperation patients Beds for mental disease patients All-Japan average As of.1, 28 Number of senior nursing homes by prefecture (per 1, aged persons (over 65) ) 1 Shimane 37.8 2 Kagoshima 31.3 3 Kagawa 31.2 4 Akita 29.3 5 Nagasaki 29. 43 Chiba 18.1 44 Saitama 17.2 45 Kanagawa 15.6 46 Tokyo 15.1 47 Aichi 13.8 出所 : 厚生労働省 (H2 医療施設 ( 静態 動態 ) 調査 病院報告の概況 ) This table shows the ranking of prefectures, based on the number of senior nursing homes per 1, aged persons (over 65) in each prefecture, lis8ted in the descending order. The top prefecture is Shimane, followed by Kagoshima, Kagawa, Akita and Nagasaki. Saitama, Chiba, Tokyo, Kanagawa Aichi, Mie, Shiga Shimane has the largest numbers of nursing homes followed by Kagoshima, Kagawa, Akita and Nagasaki. Aichi has the fewest (13.8 facilities per 1, persons compared to 37.8 in Shimane; gap of 2.8 times). Tokyo, Kanagawa, Saitama and Chiba (in the Greater Tokyo Area) also have fewer facilities, followed by Osaka, Gifu, Shizuoka, Fukuoka and Miyagi. 65 Data: Institute of Population Problems 66 Drug Stores Collaborating with Local Medical Service Objective of our medical business strategy: To enhance the value of Sugi Pharmacy by establishing and strengthening networking with local medical service providers, centering on Sugi Pharmacy Elderly homes Home Medication management by visiting pharmacist In-home medication management In-home medication management Visiting nursing care Sugi Pharmacy Drug store selling both prescribed drugs and OTC drugs Prescription filling Hospitals Prescription filling A 診療所 Clinics Reference Information Distribution Center Care manager Care service providers (such as visiting care takers and day-care centers) 訪問看護ステーション In home nursing care stations Cooperation between pharmacists and nurses 67 68
Sugi Pharmacy Distribution Center One of the largest retailer DCs in Japan Site area = 14,5 tsubo (48, m 2 ) Sugi Pharmacy Distribution Center Automation technologies to minimize distribution costs 69 7