Business model transition from the advertising SP business to the media business

「Our Group, comprising the Company and its affiliates, consists of the Company, 4 consolidated subsidiaries and 1 associate, and operates as a single Media Advertising Business segment covering the publication and operation of the Happy Media(R) free magazines, advertising agency services, the planning and operation of sales promotion initiatives, and related operations.」

「Our Group has a single segment, the Media Advertising Business, and therefore omits disclosures by segment.」

「As part of this process, we decided to integrate the EC division, which belonged to Other, with the Media Advertising Business to improve the efficiency of the administrative structure. As a result of this change, our Group became a single segment, and segment information for the cumulative first-quarter periods of the previous and current fiscal years has been omitted.」

「In 1994, we launched the local free magazine Kanisan club and transformed our business into an advertising company with proprietary media. Since then, our management policy has been to strengthen our proprietary media business and stabilise our earnings base by expanding circulation and publication areas through new launches, additional printings and VC* agreements.」

「Our Group operates the Media Advertising Business as a single reporting segment, with the departments responsible primarily for planning, sales, editing and publishing our proprietary Happy Media(R) and the sales promotion departments responsible for broad-area sales of our proprietary media and sales promotion using third-party media and printed materials working together to contribute to the revitalisation of regional economies and resolve local issues.」

「Under the philosophy of contributing to local communities through advertising, our Group operates 1) the media business, which publishes various Happy Media(R) proprietary media, including the door-to-door distributed Community-Close Lifestyle Information Magazine(R); 2) the sales promotion business, which provides sales promotion services such as advertising, publicity and customer acquisition, as well as management solution products for companies and organisations; and 3) other businesses, including the EC and IT businesses.」

「To expand nationwide the Happy Media publications issued by our Group as proprietary media, the editorial offices operating at the local free-magazine publication bases and the sales promotion divisions work together to conduct sales activities in the Media Advertising Business.」

「During the first quarter accounting period, we reorganised the organisation to strengthen the sales function. Accordingly, while consolidating the former Media Business and Advertising Sales Promotion Business as the Media Advertising Business, we classified the EC Business and other operations formerly included in the Media Business as Other.」

「To address the shortage of human resources needed to secure earnings, we worked to restore earning power by strengthening and consolidating the Sales Division, including improving workflows and internal systems to enhance the efficiency and reduce the workload of sales personnel, and integrating the creative Development Headquarters into the Sales Headquarters.」

「We will consolidate the nationwide sales promotion business and broad-area advertising sales operations into the Innovation Business Division.」

「During the fiscal year, we substantially expanded the media business centred on local free magazines, reallocating and investing management resources, including transferring personnel from the advertising sales promotion business, and established bases and launched new local free magazines.」

「We are integrating the advertising sales promotion business with the media business. During the fiscal year, we substantially transferred human resources to the media business and promoted the transition to a sales structure for broad-area proposals, with proprietary media centred on free magazines as the main products.」

「The advertising industry in which we operate is highly susceptible to economic conditions. To pursue growth while responding to changes in those conditions, we have been transforming our business from the conventional advertising sales promotion business into a media business that creates advertising media itself. We will continue to actively promote the media business to enhance corporate value.」

「During the cumulative nine-month period ended 31 December 2016 (1 April 2016 to 31 December 2016), we worked to expand our nationwide free-magazine business, Happy Media(R)'s Community-Close Lifestyle Information Magazine(R) (the "free magazine"),」

「During the cumulative six-month period ended 30 September 2016 (1 April 2016 to 30 September 2016), we launched 1 magazine in Aichi Prefecture in the first quarter and 1 magazine in Nagano Prefecture in the second quarter to expand our core free-magazine business, Happy Media(R)'s Community-Close Lifestyle Information Magazine(R) (the "free magazine").」

「In our core free-magazine business, Happy Media(R)'s Community-Close Lifestyle Information Magazine(R) (the "free magazine"), we launched 1 magazine in Aichi Prefecture in June 2016.」

「The advertising industry in which our Group operates is highly susceptible to economic conditions. To pursue growth while responding to changes in those conditions, we have been transforming our business from the conventional advertising sales promotion business into a media business that creates advertising media itself. We will continue to actively promote the media business to enhance corporate value.」