ES CON JAPAN : 【SUMMARY】Accounts for First Two Quarters of Fiscal Year Ending December 2021

Summary of Accounts for First Two Quarters of Fiscal Year Ending December 2021

(Japanese GAAP) (Consolidated)

				July 29, 2021
Name of listed company:	ES-CON JAPAN Ltd.		Listing exchange: Tokyo Stock Exchange
Code:	8892			URL: https://www.es-conjapan.co.jp/english/
Representative:	(Name)	Takatoshi Ito	(Position)	President & Representative Director
Contact for inquiries:	(Name)	Minoru Nakanishi	(Position)	Senior Managing Director TEL: [phone]
Scheduled date for submission of periodic securities report:	July 29, 2021
Scheduled date for start of dividend payment:		－
Supplementary explanatory materials created for accounts? Yes/No:	No
Accounts briefing meeting held?		Yes/No:	Yes (for analysts)

(Amounts are rounded down to the nearest million yen)

1. Consolidated results for first two quarters of fiscal year ending December 2021 (from January 1, 2021 to June 30, 2021)

(1)

Consolidated operating results

(% figures show the rate of increase (decrease) compared with the same period of the previous year)

Net sales

Operating income

Ordinary income

Profit attributable to

owners of parent

First two quarters of fiscal

million yen

%

million yen

%

million yen

%

million yen

%

24,980

(54.6)

2,561

(75.8)

1,934

(80.8)

1,388

(80.1)

year ending Dec. 2021

First two quarters of fiscal

54,968

81.8

10,595

56.1

10,070

62.5

6,990

62.8

year ended Dec. 2020

Note:

Comprehensive income

First two quarters of fiscal

First two quarters of fiscal

year ending Dec. 2021:

1,361 million yen

[-79.9%]

year ended Dec. 2020:

6,774 million yen

[55.6%]

Basic

Diluted

earnings per share

earnings per share

First two quarters of fiscal

yen

yen

17.07

17.02

year ending Dec. 2021

First two quarters of fiscal

102.14

101.99

year ended Dec. 2020

(2)

Consolidated financial position

Total assets

Net assets

Equity ratio

Book value per share

First two quarters of fiscal

million yen

million yen

%

yen

183,587

57,824

31.6

610.12

year ending Dec. 2021

Fiscal year ended Dec.

149,423

38,627

25.8

563.07

2020

Reference: Equity

First two quarters of fiscal

Fiscal year ended

year ending Dec. 2021:

58,067 million yen

Dec. 2020:

38,589 million yen

2. Dividends

Annual dividend

End of

End of

End of

Year-end

Total

first quarter

second quarter

third quarter

yen

yen

yen

yen

yen

Fiscal year ended Dec. 2020

－

0.00

－

38.00

38.00

Fiscal year ending Dec. 2021

－

0.00

Fiscal year ending Dec. 2021

－

38.00

38.00

(Forecast)

(Note) Revisions from latest dividends

forecast: None

3. Consolidated earnings forecast for fiscal year ending December 2021 (from January 1, 2021 to December 31, 2021)

(% figures for the full fiscal year show the rate of increase (decrease) compared with the previous period)

	Net sales		Operating income	Ordinary income	Profit attributable to	Basic
		owners of parent	earnings per share
	million yen		%	million yen	%	million yen	%	million yen	%	yen
Full fiscal year	80,000		3.5	10,800	(11.5)	9,400	(15.8)	6,200	(19.1)	70.21

(Note) Revisions from latest earnings forecast: None

* Explanatory notes
(1) Changes in significant subsidiaries during the first two quarters
(Changes in specified subsidiaries resulting in change in scope of consolidation):	None
Newly included:	－ companies (Company name) －
Excluded:	－ companies (Company name) －

1. Application of accounting treatments specific to preparation of quarterly consolidated financial statements: None
2. Changes in accounting policies, changes in accounting estimates, and restatement

1)	Changes in accounting policies due to amendment of accounting standards, etc.:	None
2)	Changes in accounting policies other than 1):	None
3)	Changes in accounting estimates:	None
4)	Restatement:	None

(4) Number of shares issued and outstanding (common shares)
1) Number of shares issued and outstanding	First two quarters	98,580,887	Fiscal year ended	71,961,887
of fiscal year
(including treasury shares) at end of period	shares	Dec. 2020	shares
	ending Dec. 2021
	First two quarters	3,407,100	Fiscal year ended	3,428,400
2) Number of treasury shares at end of period	of fiscal year
shares	Dec. 2020	shares
	ending Dec. 2021
3) Average number of shares during period	First two quarters	81,333,676	First two quarters	68,439,758
of fiscal year	of fiscal year
(cumulative total of first two quarters)	shares	shares
ending Dec. 2021	ended Dec. 2020

Note: The number of treasury shares at end of period includes shares of ES-CON JAPAN held in a share-based payment benefits trust for directors and a share-based payment benefits-type ESOP trust (first two quarters of fiscal year ending December 2021: 851,000 shares in the share-based payment benefits trust for directors and 225,800 shares in the share-based payment benefits-type ESOP trust). In the calculation of the average number of shares during period (cumulative total of first two quarters), the treasury shares to be subtracted in that calculation includes shares of ES-CON JAPAN held in the share-based payment benefits trust for directors and the share-based payment benefits-type ESOP trust (first two quarters of fiscal year ending December 2021: 1,080,846 shares).

• This quarterly summary of accounts is not subject to quarterly review of certified public accountant or Audit Corporation.
• Explanation regarding appropriate use of earnings forecasts, and other notes
  The earnings outlook and other forward-looking statements contained in this document are based on information currently available to and certain assumptions that are thought to be reasonable by ES-CON JAPAN. Accordingly, actual business performance and other results may differ materially due to various reasons. For the conditions forming the assumptions on which earnings forecasts are based and explanatory notes for use of earnings forecasts, etc., please see "Attachment; 1. Qualitative Information on Quarterly Results; (4) Explanation of Consolidated Earnings Forecast and Other Forward-Looking Information" on page 9.

• Contents of Attachment

1. Qualitative Information on Quarterly Results ....................................................................................................................	2
(1)	Business Risks............................................................................................................................................................	2
(2)	Explanation of Operating Results ...............................................................................................................................	2
(3)	Explanation of Financial Position ................................................................................................................................	8
(4)	Explanation of Consolidated Earnings Forecast and Other Forward-Looking Information .........................................	9
2. Quarterly Consolidated Financial Statements and Key Notes........................................................................................	11
(1)	Quarterly Consolidated Balance Sheet .....................................................................................................................	11
(2)	Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Comprehensive Income..	13
(Quarterly Consolidated Statement of Income).............................................................................................................	13
(Quarterly Consolidated Statement of Comprehensive Income)...................................................................................	14
(3)	Quarterly Consolidated Statement of Cash Flows ....................................................................................................	15
(4)	Notes to Quarterly Consolidated Financial Statements ............................................................................................	16
(Notes on Going Concern Assumption).........................................................................................................................	16
(Notes on Substantial Changes in the Amount of Shareholders' Equity) ......................................................................	16
(Additional Information) .................................................................................................................................................	16
(Segment Information, Etc.) ..........................................................................................................................................	18
(Significant Subsequent Events) ...................................................................................................................................	18
3. Other...............................................................................................................................................................................	19
Status of Contracts and Sales ........................................................................................................................................	19

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Attachment

1. Qualitative Information on Quarterly Results

1. Business Risks

There are no business risks that newly arose in the second quarter.

In addition, there are no significant changes in the business risks stated in the previous fiscal year's securities report.

1. Explanation of Operating Results

In the first two quarters, the Japanese economy is still in a harsh situation as the spread of COVID-19 infection cannot be contained. The outlook is unforeseeable, although the economy is expected to recover due to the effects of various policies and improvement in overseas economies if COVID-19 vaccination progresses smoothly.

In the real estate industry in which the ES-CON JAPAN Group operates, the real estate market showed relatively stable performance with no substantial deterioration as the policies and measures related to tackling COVID-19 and monetary easing measures continued. However, it is extremely difficult to predict how COVID-19 developments will impact the Japanese economy and overseas economies as well as the real estate market amid resumption of social and economic activities in phases while preventive measures against the spread of COVID-19 are taken across the country and vaccination is promoted.

Despite the difficult business environment described above, we made strategic moves towards expansion of new business fields and sustainable growth by taking the current situation as an opportunity to develop our business.

As a measure to increase capital for proactive business development, we procured funds amounting to 20.4 billion yen by implementing capital increase through third-party allotment (hereinafter the "capital increase through third-party allotment") with Chubu Electric Power Co., Inc. (hereinafter "Chubu Electric Power") as the allotee on April 5, 2021. With the capital increase through third-party allotment resulting in Chubu Electric Power owning 51.54% of the voting rights, ES-CON JAPAN is now a consolidated subsidiary of Chubu Electric Power.

We assessed that becoming a consolidated subsidiary of Chubu Electric Power, which boasts strong corporate credit standing, through the capital increase through third-party allotment will allow diversification of fundraising methods and reduce fundraising costs by improving our creditworthiness. The move will also enable participation in large-scaleurban-development projects through further business partnerships with the Chubu Electric Power Group. This will make it possible for us to increase our corporate value still further by stabilizing and expanding our earnings base, enhancing management stability, and so forth.

In conjunction, we formulated "IDEAL to REAL 2023," the fourth medium-term management plan, for the three-year period from the fiscal year ending December 2021 through the fiscal year ending December 2023. The new medium- term management plan sets "Establishing business foundations able to withstand unexpected changes in economic conditions" and "Simultaneously changing the revenue structure and expanding business domains" as management strategies. The detailed plans are as follows.

1. Overview of Fourth Medium-Term Management Plan
2. 1. Basic Management Strategy Policies
   1. Establishing business foundations able to withstand unexpected changes in economic conditions Establishing business and financial standings that would be sound and enable us to maintain our fund-raising abilities under any economic conditions
   2. Simultaneously changing the revenue structure and expanding business domains
      Transforming the revenue structure from one based on flows to one based on stock by strengthening the real estate leasing business while at the same time realizing business diversification and expanding business territories
   1. Basic Policy: Transformation and Rapid Progress Transformation
   • Proactive investment in long-termrevenue-generating real estate and improving the structure of the balance sheet
   • Transforming the focus of management from flows to stock

- 2 -

Rapid Progress

• Developing synergies in the Chubu Electric Power Group
• Achieving net sales of 110 billion yen and operating income of 16 billion yen (in the final fiscal year of the medium-term management plan)

3. Management Strategies

1. Transformation to a structure of sustained and stable revenues
2. Stable growth in existing core businesses through business diversification and area strategies
3. Growing new businesses into core businesses through business diversification and area strategies
4. Taking on the challenges of new business domains
5. Enhancing synergies within the ES-CON JAPAN Group
6. Expanding bases, primarily in the five largest urban areas
7. Enhancing synergies within the Chubu Electric Power Group
8. Promoting ESG initiatives

4. Performance Plan

(Unit: million yen)

Fiscal year ended

Fiscal year ending

Fiscal year ending

Fiscal year ending

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

Actual

Second quarter

Full fiscal year

Plan

Plan

Actual

Plan

Net sales

77,308

24,980

80,000

98,000

110,000

Operating income

12,202

2,561

10,800

14,000

16,000

5. Management Targets

Fiscal year ended

Fiscal year ending

Fiscal year ending

Fiscal year ending

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

Actual

Plan

Plan

Plan

Share of profits from leasing *1

14.2%

23.0%

24.0%

26.0%

Return on equity (ROE)

21.2%

12.0%

13.0%

13.0%

Return on invested capital

6.6%

4.0%

4.0%

4.0%

(ROIC) *2

Equity ratio

25.8%

29.0%

26.0%

23.0%

Share of long-term earnings

9.5%

12.0%

14.0%

18.0%

from real estate *3

Net assets

38.6

billion yen

61.0 billion yen

66.0 billion yen

72.0 billion yen

(Note 1)

Share of profits from leasing:

Leasing segment profits ÷ Segment total profits (not including adjustments)

(Note 2)

Return on invested capital (ROIC):

After-tax operating income ÷ (Shareholders' equity + Interest-bearing liabilities)

(Note 3)

Share of long-term earnings from real estate:

Real estate generating leasing revenues recorded as non-current assets ÷ Net assets

6. Investment Plan

(Unit: million yen)

Fiscal year ending

Fiscal year ending

Fiscal year ending

3-year cumulative

Dec. 2021

Dec. 2022

Dec. 2023

total

Plan

Plan

Plan

Plan

Investment in revenue-

30,000

40,000

60,000

130,000

generating real estate

Investment in other

25,000

30,000

35,000

90,000

development

Gross investment

55,000

70,000

95,000

220,000

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