ES CON JAPAN : Summary of Financial Results for the first quarter 2022

Summary of Accounts for First Quarter of Fiscal Year Ending December 2022

(Japanese GAAP) (Consolidated)

April 27, 2022

Name of listed company: ES-CON JAPAN Ltd. Code: 8892 Representative: (Name) Takatoshi Ito Contact for inquiries: (Name) Minoru Nakanishi

President & Representative Director
Senior Managing Director TEL: [phone]
Scheduled date for submission of periodic securities report:	April 27, 2022
Scheduled date for start of dividend payment:	－
Supplementary explanatory materials created for accounts?	Yes/No:	No
Accounts briefing meeting held?	Yes/No:	No

Listing exchange: Tokyo Stock Exchange URL:https://www.es-conjapan.co.jp/english/

(Position) (Position)

(Amounts are rounded down to the nearest million yen)

1.

Consolidated results for first quarter of fiscal year ending December 2022 (from January 1, 2022 to March 31, 2022) (1) Consolidated operating results (cumulative)

(% 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 quarter of fiscal year ending Dec. 2022 First quarter of fiscal year ended Dec. 2021	million yen 12,706 12,436	% 2.2 (70.5)	million yen 863 1,207	% (28.5) (87.5)	million yen 582 920	% (36.7) (90.1)	million yen 235 647	% (63.6) (89.9)

Note:

Comprehensive income First quarter of fiscal year ending Dec. 2022:

135 million yen [-80.3%]First quarter of fiscal year ended Dec. 2021:

688 million yen

[-88.7%]

Basic earnings per share	Diluted earnings per share
First quarter of fiscal year ending Dec. 2022 First quarter of fiscal year ended Dec. 2021	yen 2.47 9.45	yen 2.46 9.42

(Note)

"Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29; March 31, 2020), etc. have been applied from the beginning of the first quarter of the fiscal year ending December 2022, and the figures for the first quarter of the fiscal year ending December 2022 are the figures after applying the accounting standard, etc.

(2) Consolidated financial position

Total assets	Net assets	Equity ratio	Book value per share
First quarter of fiscal year ending Dec. 2022 Fiscal year ended Dec. 2021	million yen 275,837 252,771	million yen 59,100 62,628	% 21.5 24.8	yen 620.60 657.50

Reference:

Equity

First quarter of fiscal year ending Dec. 2022: 59,263 million yenFiscal year ended Dec. 2021:

62,780 million yen

(Note)

"Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020), etc. have been applied from the beginning of the first quarter of the fiscal year ending December 2022, and the figures for the first quarter of the fiscal year ending December 2022 are the figures after applying the accounting standard, etc.

2.

Dividends

Annual dividend
End of first quarter	End of second quarter	End of third quarter	Year-end	Total
Fiscal year ended Dec. 2021 Fiscal year ending Dec. 2022	yen － －	yen 0.00	yen －	yen 38.00	yen 38.00
Fiscal year ending Dec. 2022 (Forecast)	0.00	－	38.00	38.00

(Note) Revisions from latest dividends forecast: None

3.

Consolidated earnings forecast for fiscal year ending December 2022 (from January 1, 2022 to December 31, 2022)

(% figures for the full fiscal year show the rate of increase (decrease) compared with the previous fiscal year, and % figures for the first two quarters 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	Basic earnings per share
First two quarters (cumulative) Full fiscal year	million yen 36,300 100,000	% 45.3 26.6	million yen 4,700 14,000	% 83.5 34.9	million yen 3,800 12,200	% 96.5 34.1	million yen 2,600 8,300	% 87.3 39.2	yen 27.23 86.92

(Note) Revisions from latest earnings forecast: None

* Explanatory notes

• (1) Changes in significant subsidiaries during the first quarter (Changes in specified subsidiaries resulting in change in scope of consolidation):

  None

  Newly included: － companies (Company name) － Excluded: － companies (Company name) －

• (2) Application of accounting treatments specific to preparation of quarterly consolidated financial statements:None

• (3) Changes in accounting policies, changes in accounting estimates, and restatement

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

  (Note) For details, please see "Attachment; 2. Quarterly Consolidated Financial Statements and Key Notes; (3)

Notes to Quarterly Consolidated Financial Statements (Changes in Accounting Policies)" on page 15.

(4) Number of shares issued and outstanding (common shares)

• 1) Number of shares issued and outstanding

  (including treasury shares) at end of period

• 2) Number of treasury shares at end of period

• 3) Average number of shares during period (cumulative)

First quarter of fiscal year ending Dec. 2022	98,580,887 shares	Fiscal year ended Dec. 2021	98,580,887 shares
First quarter of fiscal year ending Dec. 2022	3,087,700 shares	Fiscal year ended Dec. 2021	3,096,900 shares
First quarter of fiscal year ending Dec. 2022	95,489,887 shares	First quarter of fiscal year ending Dec. 2021	68,533,745 shares

Note: The number of treasury shares at end of period includes shares of ES-CON JAPAN held in a board benefit trust for executives and a share-based payment benefits-type ESOP trust (first quarter of fiscal year ending December 2022: 851,000 shares in the board benefit trust for executives and 224,500 shares in the share-based payment benefits-type ESOP trust). In the calculation of the average number of shares during period, the treasury shares to be subtracted in that calculation includes shares of ES-CON JAPAN held in the board benefit trust for executives and the share-based payment benefits-type ESOP trust (first quarter of fiscal year ended December 2021: 1,075,866 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 11.

• ○ 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 ............................................................................................................................. 11

(4) Explanation of Consolidated Earnings Forecast and Other Forward-Looking Information ....................................... 11

• 2. Quarterly Consolidated Financial Statements and Key Notes ....................................................................................... 12

  (1) Quarterly Consolidated Balance Sheet .................................................................................................................... 12

  (2) Quarterly Consolidated Statement of Income and Quarterly Consolidated Statement of Comprehensive Income.. 14

  (Quarterly Consolidated Statement of Income) ............................................................................................................ 14

  First quarter of fiscal year ending Dec. 2021 ............................................................................................................ 14

  (Quarterly Consolidated Statement of Comprehensive Income) .................................................................................. 15

  First quarter of fiscal year ending December 2022 ................................................................................................... 15

  (3) Notes to Quarterly Consolidated Financial Statements ........................................................................................... 16

  (Notes on Going Concern Assumption) ........................................................................................................................ 16

  (Notes on Substantial Changes in the Amount of Shareholders' Equity) ..................................................................... 16

  (Changes in Accounting Policies) ................................................................................................................................ 16

  (Additional Information) ................................................................................................................................................ 16

  (Segment Information, Etc.) ......................................................................................................................................... 19

  (Significant Subsequent Events) .................................................................................................................................. 20

• 3. Other ............................................................................................................................................................................. 21

  Status of Contracts and Sales ....................................................................................................................................... 21

Attachment

1. Qualitative Information on Quarterly Results

• (1) Business Risks

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

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

• (2) Explanation of Operating Results

  In the first quarter, although the sixth wave of COVID-19 arrived and the number of cases surged, the increase in cases settled in March 2022 and restrictions and border measures are being gradually loosened, including the fact that the pre-emergency measures to prevent the spread of the disease implemented in 18 prefectures have been lifted. These lead to the expectation that economic and social activity will normalize and the Japanese economy will recover.

In the real estate industry in which the ES-CON JAPAN Group operates, the real estate market remained strong with housing demand being pushed up by work-style reform and new lifestyles such as working from home, partly due to the supportive effect of the continuation of monetary easing measures.

On the other hand, there is a sense of uncertainty due to the situation in Ukraine, and it is very difficult to predict the impact of rising raw material prices and fluctuations in financial and exchange markets on future trends in the real estate market. Accordingly, there is a need also in the real estate business to proceed with caution regarding development.

Despite such business environment in which the future outlook is extremely uncertain, we formulated "IDEAL to REAL 2023," the fourth medium-term management plan (targeting the three-year period from the fiscal year ended December 2021 through the fiscal year ending December 2023) in February 2021, and are striving to achieve record-high profits this fiscal year, the second year of the plan, based on the basic policy of "transformation and rapid progress."

ES-CON JAPAN became a consolidated subsidiary of Chubu Electric Power Co., Inc. (hereinafter "Chubu Electric Power") on April 5, 2021. As a result, our corporate credit standing has dramatically increased and we have established a flexible and stable fundraising base backed by acquisition of credit ratings from external institutions. In addition, collaboration with Chubu Electric Power has also progressed and synergy with the company is being demonstrated.

In October 2021, we made Picasso Co., Ltd., which owns numerous outstanding revenue-generating properties, and its seven group companies (hereinafter "Picasso and seven companies") subsidiaries and realized "transformation" of revenue structure stated in the fourth medium-term management plan.

In January 2022, we made FUEL Inc. (hereinafter "FUEL"), whose businesses include managing online funds and providing computer systems to crowdfunding businesses in accordance with the Act on Specified Joint Real Estate Ventures of Japan, a subsidiary, with an aim of strengthening and expanding the asset management business of the ES-CON JAPAN Group and as participation for future participation in real estate financial business. As such, we are making progress in expansion of the Group's business domain.

Also, on April 4, 2022, we transitioned to the Prime Market due to the reorganization of the Tokyo Stock Exchange, Inc.'s market segments.

1)Progress of the Fourth Medium-Term Management Plan "IDEAL to REAL 2023"

Fiscal 2022, the second year of the Fourth Medium-Term Management Plan, has been progressing smoothly as a year of "rapid progress."

In the fiscal 2021, the first fiscal year of the plan, the investment plan progressed at a pace higher than the initial plan, and rapidly realized a "transformation" in the revenue structure by securing stable leasing income. Accordingly, we revised some of the management indicators, such as the share of profits from leasing for the fiscal year ending December 2023, which is the final fiscal year of the medium-term management plan. Details of the revisions are described in "5. Management Targets" below.

By realizing this "transformation," we plan to renew record-high profits this fiscal year and the next fiscal year, aiming for further "rapid progress."

The details of the fourth medium-term management plan are as follows.

• 1. Basic Management Strategy Policies ・ Establishing business foundations able to withstand unexpected changes in economic conditions

  Establish a sound business and financial standing that can maintain its fundraising abilities under any economic environment.

  ・ Simultaneously change the revenue structure and expand business domains

  Transform 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

• 2. Basic Policy: Transformation and Rapid Progress Transformation

  ・Proactive investment in long-term revenue-generating real estate and improvement of balance sheet

  structure

  ・Transform the focus of management from flows to stock

  Rapid Progress

  ・Demonstrating synergies within 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

  • ・ Transformation to a structure of sustained and stable profit revenues

  • ・ Stable growth in existing core businesses through business diversification and area strategies

  • ・ Growing new businesses into core businesses through business diversification and area strategies

  • ・ Taking on the challenge of new business domains

  • ・ Enhancing synergies with the ES-CON JAPAN Group

  • ・ Expanding business bases, primarily in the five major urban areas

  • ・ Enhancing synergies with the Chubu Electric Power Group

  • ・ Promoting ESG initiatives

• 4. Performance Plan

(Unit: million yen)

Fiscal year ended Dec. 2021	Fiscal year ending Dec. 2022	Fiscal year ending Dec. 2023
Actual	Plan	Difference from plan	Increase/ decrease	Plan	Initial plan	Difference from initial plan	Increase/ decrease	Plan
Net sales	79,017	80,000	(982)	(1.2%)	100,000	98,000	2,000	2.0%	110,000
Operating income	10,381	10,800	(418)	(3.9%)	14,000	14,000	－	－	16,000