Ichigo : FY19/2 Q3 Earnings

Ichigo Preserves and Improves Real Estate

[Provisional Translation Only]

This English translation of the original Japanese document is provided solely for information purposes. Should there be any discrepancies between this translation and the Japanese original, the latter shall prevail.

FY19/2 Q3 Earnings

January 11, 2019

Ichigo Inc. (Tokyo Stock Exchange First Section, 2337)

Representative: Takuma Hasegawa, President

Inquiries: Go Watanabe, Executive Managing Director Telephone: [phone]www.ichigo.gr.jp/en

Submission of the Financial Report (Shihanki Hokokusho): January 15, 2019 (expected) Dividend Payment: N/A

Supplemental Materials to Financial and Business Results: Yes

Financial and Business Results Briefing: Yes (for institutional investors and analysts)

1. FY19/2 Q3 Consolidated Financial Results (March 1, 2018 to November 30, 2018)

(1) Consolidated Financial Results

(YOY = year-on-year % change)

Revenue (JPY million) YOY	Operating Profit (JPY million) YOY	Recurring Profit (JPY million) YOY	Net Income (JPY million) YOY
FY19/2 Q3	58,282 +30.2%	20,553 +24.3%	18,264 +26.3%	12,183 +11.3%
FY18/2 Q3	44,755 -52.3%	16,541 -7.7%	14,461 -5.9%	10,945 -14.7%

Note: Comprehensive Income FY19/2 Q3: JPY 12,393 million (+12.0% YOY)

FY18/2 Q3: JPY 11,069 million (-9.9% YOY)

Net Income per Share (Basic, JPY)	Net Income per Share (Diluted, JPY)
FY19/2 Q3	24.59 +12.2%	24.56 +12.1%
FY18/2 Q3	21.92 -14.3%	21.90 -14.1%

(2) Consolidated Financial Condition

Total Assets (JPY million)	Net Assets (JPY million)	Equity Ratio	Net Assets per Share (JPY)
FY19/2 Q3	324,193	99,670	29.5%	195.84
FY18/2	296,512	92,725	30.1%	180.20

Note: Shareholders' Equity

FY19/2 Q3: JPY 95,698 millionFY18/2: JPY 89,336 million

(3) Consolidated Cash Flows

Cash Flows from Operations (JPY million)	Cash Flows from Investments (JPY million)	Cash Flows from Financing (JPY million)	Cash and Cash Equivalents (JPY million)
FY19/2 Q3	3,469	-12,142	14,026	39,874
FY18/2 Q3	8,015	-3,342	647	45,858

Note: Cash Flows from Operations excluding impact of growth in Real Estate for Sale

FY19/2 Q3: JPY 21,109 million FY18/2 Q3: JPY19,434 million

2. Dividends

Dividend per Share (JPY)					Total Dividend (JPY million)	Payout Ratio (Consolidated)	Dividend on Equity Ratio (Consolidated)
First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Total
FY18/2	-	-	-	6	6	2,974	21.3%	3.5%
FY19/2 (Forecast)	-	-	-	7	7	23.3%

Revisions to the previously announced forecast: None

3. FY19/2 Full-Year Consolidated Earnings Forecast (March 1, 2018 to February 28, 2019)

(YOY = year-on-year % change)

Operating Profit (JPY million) YOY	Recurring Profit (JPY million) YOY	Net Income (JPY million) YOY	Net Income per Share (JPY)
FY19/2	25,000 +19.9%	22,000 +14.7%	15,000 +7.0%	30.10 +7.0%

Revisions to the previously announced forecast: None

Note: Ichigo provides a full-year earnings forecast, but not a half-year forecast, because Ichigo believes the longer full-year forecast is more consistent with global best practice and the focus of Japan's Corporate Governance Code on growing long-term sustainable corporate value. In addition, Ichigo is focused on growing earnings (not revenue), with a particular focus on growing long-term EPS, so from this year Ichigo is not issuing a Revenue forecast.

4. Other
(1) Changes in significant consolidated subsidiaries
(material changes in scope of consolidation):	Yes
New subsidiaries (1):	Hakata GK Tokumei Kumiai
Subsidiaries removed from consolidation:	None
(2) Special accounting treatments applied to
consolidated financial statements:	Yes

(3) Changes in accounting standards/principles, changes in accounting estimates, and revisions to previous financial statements

• (i) Changes in accounting standards/principles: None

• (ii) Changes in accounting principles other than the above:

• (iii) Changes in accounting estimates:

• (iv) Revisions of previous financial statements:

None None None

(4) Number of outstanding common shares

(i) Number of outstanding shares including treasury shares

FY19/2 Q3: 504,849,800

FY18/2: 504,484,200

(ii) Number of treasury shares

FY19/2 Q3: 16,186,500

FY18/2: 8,706,500

(iii) Average number of outstanding shares

FY19/2 Q3: 495,435,833

FY18/2 Q3: 499,399,433

Note on Appropriate Use of Forecasts

Forward-looking statements contained in these materials are based on judgments regarding information that was available to Ichigo as of the announcement date. However, these statements involve risk and uncertainties, and actual earnings may differ significantly from the indicated forecasts.

Segment Information

Asset Management generates fee income via the management of Ichigo Office (8975), Ichigo Hotel (3463), Ichigo Green (9282), and providing real estate services related to real estate acquisition, operations, and disposition.

Value-Add preserves and improves real estate. Ichigo receives rental income during the period it carries out its value-add, along with earning gains on sale that reflect the real estate's higher value after the value-add is complete.

Clean Energy is utility-scale solar power production that supplies clean energy and brings productive use to idle land.

Note: From FY19/2, the Other segment has been eliminated and its remaining items allocated to other segments or treated as adjustments, because Ichigo finished selling off the legacy overseas private equity assets that had been the material constituents of Other in FY18/2. To facilitate comparison to FY19/2, the FY18/2 data on pp. 17 & 19 have thus been restated with the Other segment eliminated.

Change in Accounting Treatment of Non-Recourse Loan Expenses from Cost of Goods Sold to Non-Operating Expenses

From FY19/2, non-recourse loan interest expenses (and related costs) are treated as Non-Operating Expenses instead of as Cost of Goods Sold. Treating them as the equivalent of corporate loan interest expenses (i.e., Non-Operating Expenses) will unify and simplify their accounting treatment.

To facilitate comparison to FY19/2, the FY18/2 data on pp. 1 & 7-15 have thus been restated to reflect this change in accounting treatment. Cost of Goods Sold thus decreases by JPY 825 million and Gross Profit and Operating Profit each increase by JPY 825 million. Within Non-Operating Expenses, Interest Expense, Debt-Financing Related Fees, Mark-to-Market Loss on Long-Term Interest Rate Hedges, and Other increase by JPY 749 million, JPY 46 million, JPY 27 million, and JPY 2 million, respectively. Within Cash Flows from Operations, Interest Expense, Decrease (Increase) in Prepaid Expenses, Increase (Decrease) in Accrued Expenses, Other, and Interest Expense Paid increase by JPY 749 million, JPY 147 million, JPY 219 million, JPY 46 million, and JPY 867 million, respectively.

Consolidated Balance Sheet (FY19/2 Q3)

(JPY million)
FY18/2 (Feb 28, 2018)	FY19/2 Q3 (Nov 30, 2018)
Assets
Current Assets
Cash and cash equivalents	45,510	45,067
Trade notes and accounts receivable	1,097	1,440
Operational loan investments	1,324	1,324
Operational securities investments	2	5,166
Real estate for sale	180,789	192,786
Deferred tax assets	342	344
Other	2,643	1,674
Less: allowance for doubtful accounts	-28	-2
Total Current Assets	231,681	247,802
Fixed Assets
Property, Plant, and Equipment
Buildings and structures	14,273	16,698
Depreciation	-3,673	-4,061
Buildings and structures (net)	10,600	12,636
Solar power plant equipment	20,895	20,919
Depreciation	-1,122	-1,906
Solar power plant equipment (net)	19,773	19,013
Land	26,993	34,340
Buildings under construction	97	800
Solar power plants under construction	969	2,497
Other	483	552
Depreciation	-359	-388
Other (net)	124	163
Total Property, Plant, and Equipment	58,558	69,452
Intangible Assets
Goodwill	1,600	1,459
Leasehold rights	135	316
Other	233	286
Total Intangible Assets	1,968	2,062
Investments and Other Assets
Securities investments	2,184	2,332
Long-term loans receivable	10	10
Deferred tax assets	68	145

(JPY million)
FY18/2 (Feb 28, 2018)	FY19/2 Q3 (Nov 30, 2018)
Other	2,132	2,479
Less: allowance for doubtful accounts	-91	-91
Total Investments and Other Assets	4,303	4,876
Total Fixed Assets	64,831	76,391
Total Assets	296,512	324,193