Expanding the UK Business through the Acquisition of the SFL Group

「大黒屋 Global Holdings Co., Ltd. transferred all shares of AU 79 LIMITED, AG 47 LIMITED and SPEEDLOAN FINANCE LIMITED, and excluded the SPEEDLOAN FINANCE LIMITED Group from the scope of consolidation.」

「The group centred on SPEEDLOAN FINANCE LIMITED in the UK, referred to below as "SFL," is being transferred to Harvey & Thompson Limited, a major UK pawn finance company, and is proceeding with its withdrawal, as previously announced.」

「In light of the withdrawal from the UK's pawnshop business and secondhand jewelry purchase and sale business, the company decided to transfer the business in order to use management resources more efficiently.」

「Existing borrowings were repaid on 23 October 2018. As a result, the company aims to become profitable through lower interest costs, further cost reductions from streamlining head-office functions, and higher pawn loan balances and retail sales from building up inventory.」

「In terms of profit, restructuring associated with the review of the business composition, including the decline in pawnshop revenue and retail revenue, the discontinuation of the foreign exchange business and the downsizing of the remittance business, resulted in gross profit of ¥1,341 million and a gross margin of 54.2%, down from 63.0% in the same period of the previous year.」

「At SPEEDLOAN FINANCE LIMITED, a UK consolidated subsidiary (hereinafter, the SFL Group), existing borrowings were repaid on 23 October 2018 to reduce the interest burden. As the business composition was reviewed again, sales at the SFL Group amounted to ¥1,679 million, down ¥518 million year on year.」

「Once this restructuring is complete and the SFL Group's finance costs have been reduced, we will seek to turn the SFL Group profitable and introduce and promote the business model developed by 大黒屋.」

「In the UK SFL Group, the economic environment in the UK, including an improvement in the European economy, has been stabilizing. However, the SFL Group had only recently completed restructuring, including at its stores, and it was expected to take some time for sales to recover. Sales for the nine-month period were therefore ¥3,400 million, down ¥760 million year on year. In terms of profit, the effects of restructuring carried out in the previous consolidated fiscal year led to an improvement in the gross margin to 63.0% from 55.2%, despite declining sales.」

「Partly due to the effects of the restructuring carried out in the previous consolidated fiscal year, the gross margin improved to 66.2% from 59.3% in the same period of the previous year, despite declining sales. Although the reduction in selling, general and administrative expenses was smaller because the head office was relocated to London in May, the operating margin improved significantly to 4.2% from 0.2%.」

「Following the SFL Group's conversion into a wholly owned subsidiary in October 2015, and because the consolidated fiscal year following the acquisition was effectively its first year, we reassessed areas of operational inefficiency, stationed restructuring specialists at the company and carried out a corporate restructuring covering stores and personnel policies.」

「The SFL Group also opened a store in London, an area with a large affluent population, in July 2016, offering the purchase and sale of secondhand goods based on 大黒屋's business model. Transactions at the store have remained strong despite only minimal sales activity, generating results above those of a standard 大黒屋 store, and the Group plans to continue expanding its stores mainly in the area.」

「The SFL Group also opened a store in London, an area with a large affluent population, in July 2016, offering the purchase and sale of secondhand goods based on 大黒屋's business model, and plans to continue expanding its stores mainly in the area. The SFL Group is expected to increase earnings through higher sales of branded goods, similar to the yen depreciation bubble in Japan, resulting from an increase in foreign tourists following the pound's decline after the UK's withdrawal from the EU, higher collateral values for pawnbroking loans due to rising gold prices, and reduced losses when pledged items are forfeited. It also plans to restructure its head office and stores to improve earnings, and is expected to contribute to consolidated results.」

「After acquiring the four companies mentioned above, collectively referred to as the SFL Group, the Group aims to expand its share in the UK in the shortest possible time by reducing the SFL Group's expenses, strengthening its pawnshop and secondhand goods purchase and sale businesses in the UK using the Group's expertise, and expanding through new store openings and acquisitions of competitors.」