SERAKU_Summary of Consolidated Financial Results

for the Second Quarter of the Fiscal Year Ending August 31, 2021

(Six Months Ended February 28, 2021)

[Japanese GAAP]

April 13, 2021

Company name: SERAKU Co., Ltd.

Listing: Tokyo Stock Exchange (First Section)

Stock code:

6199

URL: http://www.seraku.co.jp

Representative:

Tatsumi Miyazaki, Representative Director

Contact:

Tomoharu Kozeki, Executive Director, General Manager of Corporate Management Division

Tel: +81-(0)3-3227-2321

Scheduled date of filing of Quarterly Report:

April 14, 2021

Scheduled date of payment of dividend:

-

Preparation of supplementary materials for quarterly financial results: Yes

Holding of quarterly financial results meeting:

Yes

(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the Second Quarter Ended February 28, 2021 (Sep. 1, 2020 to Feb. 28, 2021)

(1) Consolidated results of operations

(Percentages represent year-on-year changes)

Net sales

Operating profit

Ordinary profit

Profit attributable to

owners of parent

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Six months ended Feb. 28, 2021

7,268

11.0

716

62.3

1,110

148.9

703

147.0

Six months ended Feb. 29, 2020

6,550

24.0

441

128.9

446

125.0

284

161.9

Note: Comprehensive income (millions of yen)

Six months ended Feb. 28, 2021:

701

(up 144.9%)

Six months ended Feb. 29, 2020:

286

(up 164.3%)

Net income per share

Diluted net income per

share

Yen

Yen

Six months ended Feb. 28, 2021

51.00

50.48

Six months ended Feb. 29, 2020

20.67

20.65

(2) Consolidated financial position

Total assets

Net assets

Equity ratio

Millions of yen

Millions of yen

%

As of Feb. 28, 2021

7,986

4,070

50.9

As of Aug. 31, 2020

7,342

3,429

46.7

Reference: Shareholders' equity (millions of yen) As of Feb. 28, 2021: 4,066 As of Aug. 31, 2020: 3,425

2. Dividends

Dividend per share

1Q-end

2Q-end

3Q-end

Year-end

Total

Yen

Yen

Yen

Yen

Yen

Fiscal year ended Aug. 31, 2020

-

0.00

-

4.60

4.60

Fiscal year ending Aug. 31, 2021

-

0.00

Fiscal year ending Aug. 31, 2021 (forecast)

-

5.60

5.60

Note: Revisions to the most recently announced dividend forecast: None

3. Consolidated Earnings Forecast for the Fiscal Year Ending August 31, 2021 (Sep. 1, 2020 to Aug. 31, 2021)

(Percentages represent year-on-year changes)

Net sales

Operating profit

Ordinary profit

Profit attributable to

Net income per share

owners of parent

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Yen

Full year

15,020

9.1

1,370

20.8

1,650

41.6

957

46.3

69.51

Note: Revisions to the most recently announced consolidated earnings forecast: None

* Notes

  1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes in scope of consolidation): None

Newly added: -

Excluded: -

  1. Application of special accounting methods in the preparation of the quarterly consolidated financial statements: None
  2. Changes in accounting policies and accounting estimates, and restatements
    1. Changes in accounting policies due to revisions in accounting standards, others: None
    2. Changes in accounting policies other than 1) above: None
    3. Changes in accounting estimates: None
    4. Restatements: None
  4. Number of shares issued (common shares)
    1. Number of shares issued as of the end of the period (including treasury shares)

As of Feb. 28, 2021:

13,818,000 shares

As of Aug. 31, 2020:

13,767,200 shares

  1. Number of treasury shares as of the end of the period

As of Feb. 28, 2021:

84 shares

As of Aug. 31, 2020:

62 shares

3) Average number of shares during the period

Six months ended Feb. 28, 2021:

13,785,640 shares

Six months ended Feb. 29, 2020:

13,767,180 shares

  • The current financial report is not subject to quarterly review by certified public accountants or auditing firms.
  • Explanation of appropriate use of earnings forecasts and other special items
    Forecasts of future performance in these materials are based on assumptions judged to be valid and information available to the management of Seraku at the time these materials were prepared, but are not promised by Seraku regarding future performance. Actual results may differ significantly from these forecasts for a number of reasons. For discussion of the assumptions and other factors considered by Seraku in preparing the above projections, please refer to page 4 of the attachments "1. Qualitative Information on Quarterly Consolidated Financial Performance, (3) Explanation of Consolidated Earnings Forecast and Other Forward-looking Statements."

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21

Contents of Attachments

1. Qualitative Information on Quarterly Consolidated Financial Performance

2

(1)

Explanation of Results of Operations

2

(2)

Explanation of Financial Position

3

(3)

Explanation of Consolidated Earnings Forecast and Other Forward-looking Statements

4

2. Quarterly Consolidated Financial Statements and Notes

5

(1)

Quarterly Consolidated Balance Sheet

5

(2)

Quarterly Consolidated Statements of Income and Comprehensive Income

7

Quarterly Consolidated Statement of Income

For the Six-month Period

7

Quarterly Consolidated Statement of Comprehensive Income

For the Six-month Period

8

(3)

Quarterly Consolidated Statement of Cash Flows

9

(4)

Notes to Quarterly Consolidated Financial Statements

10

Going Concern Assumption

10

Additional Information

10

Significant Changes in Shareholders' Equity

10

Segment and Other Information

10

Material Subsequent Events

11

1

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21

1. Qualitative Information on Quarterly Consolidated Financial Performance

(1) Explanation of Results of Operations

In the first half of the fiscal year ending in August 2021, the worldwide COVID-19 pandemic continued to have a negative impact on the Japanese economy. Economic activity is increasing in stages along with measures to prevent the spread of infections. As a result, the economy is recovering slowly. However, a new wave of infections in Japan that started early in 2021 triggered another state of emergency. Due to this situation, the economic outlook is expected to remain unclear.

In Japan's IT services industry, which is the primary business field of the Seraku Group, there has been rapid growth in the utilization of tools for working style reforms, such as telework, in order to give people a more flexible environment for doing their jobs. There is also a large volume of investments for increasing the efficiency of business processes, upgrading information security and other improvements. Another significant trend is the expansion of activities involving the digital transformation (DX). Examples include the use of digital technologies for IoT services, the cloud, big data and artificial intelligence (AI). As a result, recruiting and training skilled engineers who can meet the requirements of IT service companies are becoming increasingly important.

To provide services with even greater value, the Seraku Group is recruiting and training many highly skilled engineers. There are also even more activities aimed at increasing our market share in the agricultural IT sector by using Midori Cloud with the goal of achieving the digital transformation of a primary industry.

Net sales increased 11.0% year-on-year to 7,268 million yen, operating profit increased 62.3% year-on-year to 716 million yen, ordinary profit increased 148.9% year-on-year to 1,110 million yen, and profit attributable to owners of parent increased 147.0% year-on-year to 703 million yen.

Results by business segment were as follows.

1) System Integration

System Integration includes IT infrastructure and cloud technologies, a business sector with long-term stability that primarily involves IT support in existing technology domains. This segment also provides digital creative services, web operations, web system development and many other services.

In the fiscal year's first half, recruitment and training activities were a priority and there were many initiatives to increase the utilization of external resources by strengthening ties with all of our business partners. The reason is the good prospects for continuing to capture new business involving cloud operations, project management, digital marketing and other business domains.

Sales in the System Integration segment were 5,264 million yen, up 0.6% year on year, and the segment profit was 509 million yen, up 28.2%.

2) Digital Transformation

This segment encompasses many services that utilize advanced technologies. Activities include cybersecurity for protecting the information assets of companies, customer success services that solve the unsolvable problem for Salesforce.com users, the use of robotic process automation (RPA) to make business processes more efficient, and Midori Cloud, which uses IT for the profitability of agricultural businesses.

In the fiscal year's first half, sales increased significantly because of the continuing growth of customers' needs in all technology categories of this segment. To build a base for more growth, we recruited a large number of people to provide digital transformation services.

In the customer success business, activities were focused on salesforce retention support because of the increasing need for this support as the digital marketing activities of companies grow. In addition, we added the Tableau retention support service to the lineup of services in this business.

For Midori Cloud, we are continuing to conduct many activities to increase the number of users while increasing the number of sales agents for Farm Cloud, which provides solutions for the agriculture and fisheries sector and

2

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21

the livestock sector.

Sales in the Digital Transformation segment were 1,778 million yen, up 59.2% year on year, and the segment profit was 183 million yen, up 167.3% year on year.

3) Mechanical Design and Engineering

This segment is the operations of consolidated subsidiary P's Engineering. This company provides 3D CAD technologies, designs machines, dies and other items for other companies, and provides technologies for experiments, performance tests and other aspects of quality assurance activities.

Orders continued to decline because of the negative effects of the COVID-19 pandemic on market conditions. P's Engineering is continuing to target new business fields, mainly communication infrastructure construction, machine tools and robots.

While taking actions to attract new customers, P's Engineering is assigning employees in the initial stage of training to participate in actual projects in order to become productive employees quickly. This training succeeded at raising the percentage of the utilization of the workforce.

Sales in the Mechanical Design and Engineering segment were 227 million yen, up 12.0% year on year, and the segment profit was 22 million yen, compared with a loss of 20 million yen in the same period of the previous fiscal year.

4) Others

This segment is the operations of consolidated subsidiary Seraku ECA, which is primarily engaged in job placement and temporary staffing services and services for training IT engineers.

During the first half, the recruiting requirements of many client companies continued to decrease and these companies reduced, suspended or postponed recruiting activities because of the COVID-19 crisis.

Due to the downturn in the business climate, the Seraku Group plans to reexamine the operations of Seraku ECA and determine actions to take.

Sales in the Other segment were 2 million yen, down 83.3% year on year, and the segment profit was 38 thousand yen, compared with a loss of 4 million yen in the same period of the previous fiscal year.

  1. Explanation of Financial Position 1) Balance Sheet Position
    Assets

Total assets increased 643 million yen from the end of the previous fiscal year to 7,986 million yen as of the end of the second quarter. The main reasons were increases of 485 million yen in cash and deposits, 130 million yen in work in process, 82 million yen in other under investments and other assets and 20 million yen in buildings, while there were decreases of 46 million yen in deferred tax assets and 43 million yen in notes and accounts receivable-trade.

Liabilities

Total liabilities increased 3 million yen to3, 915 million yen. The main reasons were increases of 109 million yen in accounts payable-trade, 92 million yen in other current liabilities, 80 million yen in accounts payable-other and 55 million yen in provision for bonuses, while there were decreases of 271 million yen in in accrued consumption taxes, 34 million yen in current portion of long-term borrowings and 33 million yen in long-term borrowings.

Net assets

Total net assets increased 640 million yen to 4,070 million yen. The main reason was an increase of 639 million yen in retained earnings.

3

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21

2) Cash Flows

Cash and cash equivalents (hereinafter "net cash") at the end of the second quarter of the current fiscal year amounted to 4,767 million yen.

Cash flows and the main reasons for changes are as follows.

Cash flows from operating activities

Net cash provided by operating activities totaled 739 million yen (compared with 238 million yen provided in the same period of the previous fiscal year).

Although there were negative factors including income taxes paid of 340 million yen, a decrease in accrued consumption taxes of 271 million yen, an increase in inventories of 159 million yen and an increase in prepaid expenses of 11 million yen, there were positive factors including profit before income taxes of 1,098 million yen, increases in trade payables of 109 million yen, accounts payable-other of 84 million yen and provision for bonuses of 55 million yen, a decrease in trade receivables of 43 million yen, depreciation of 14 million yen and loss on valuation of investment securities of 11 million yen.

Cash flows from investing activities

Net cash used in investing activities totaled 129 million yen (compared with 99 million yen used in the same period of the previous fiscal year).

Negative factors include purchase of insurance funds of 82 million yen and purchase of property, plant and equipment of 45 million yen.

Cash flows from financing activities

Net cash used in financing activities totaled 125 million yen (compared with 106 million yen used in the same period of the previous fiscal year).

Negative factors include repayments of long-term borrowings of 67 million yen and dividends paid of 59 million yen.

(3) Explanation of Consolidated Earnings Forecast and Other Forward-looking Statements

There are no revisions to the full year earnings forecasts for the fiscal year ending on August 31, 2021 which were announced on October 15, 2020 in "Summary of Consolidated Financial Results for the Fiscal Year Ended August 31, 2020."

4

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21

2. Quarterly Consolidated Financial Statements and Notes

(1) Quarterly Consolidated Balance Sheet

(Thousands of yen)

FY8/20

Second Quarter of FY8/21

(As of Aug. 31, 2020)

(As of Feb. 28, 2021)

Assets

Current assets

Cash and deposits

4,329,351

4,815,066

Notes and accounts receivable-trade

1,826,711

1,783,494

Work in process

19,453

149,969

Raw materials

36,816

65,896

Other

107,482

102,062

Allowance for doubtful accounts

(4,124)

(3,397)

Total current assets

6,315,690

6,913,092

Non-current assets

Property, plant and equipment

Buildings, net

111,892

132,586

Tools, furniture and fixtures, net

22,794

32,152

Other

0

2,942

Total property, plant and equipment

134,686

167,682

Intangible assets

Goodwill

25,093

20,530

Software

8,692

6,490

Other

1,844

1,787

Total intangible assets

35,630

28,808

Investments and other assets

Investment securities

132,702

121,926

Deferred tax assets

383,832

337,253

Leasehold and guarantee deposits

214,613

209,439

Other

125,216

207,867

Total investments and other assets

856,364

876,486

Total non-current assets

1,026,681

1,072,976

Total assets

7,342,372

7,986,068

5

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21 (Thousands of yen)

FY8/20

Second Quarter of FY8/21

(As of Aug. 31, 2020)

(As of Feb. 28, 2021)

Liabilities

Current liabilities

Accounts payable-trade

57,323

166,594

Current portion of long-term borrowings

106,660

72,215

Accounts payable-other

924,007

1,004,279

Income taxes payable

369,631

376,064

Accrued consumption taxes

504,583

232,968

Provision for bonuses

639,927

695,145

Other

170,966

263,444

Total current liabilities

2,773,098

2,810,712

Non-current liabilities

Long-term borrowings

1,005,570

972,240

Retirement benefit liability

133,900

130,163

Other

72

2,551

Total non-current liabilities

1,139,542

1,104,955

Total liabilities

3,912,641

3,915,667

Net assets

Shareholders' equity

Share capital

297,974

299,117

Capital surplus

495,724

496,867

Retained earnings

2,628,218

3,267,907

Treasury shares

(62)

(98)

Total shareholders' equity

3,421,855

4,063,793

Accumulated other comprehensive income

Valuation difference on available-for-sale

65

668

securities

Remeasurements of defined benefit plans

3,647

1,823

Total accumulated other comprehensive income

3,712

2,492

Share acquisition rights

4,162

4,115

Total net assets

3,429,730

4,070,401

Total liabilities and net assets

7,342,372

7,986,068

6

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21

  1. Quarterly Consolidated Statements of Income and Comprehensive Income
    Quarterly Consolidated Statement of Income (For the Six-month Period)

(Thousands of yen)

First six months of FY8/20

First six months of FY8/21

(Sep. 1, 2019 - Feb. 29, 2020)

(Sep. 1, 2020 - Feb. 28, 2021)

Net sales

6,550,727

7,268,451

Cost of sales

4,990,703

5,477,474

Gross profit

1,560,024

1,790,976

Selling, general and administrative expenses

1,118,669

1,074,689

Operating profit

441,354

716,286

Non-operating income

Interest and dividend income

1,226

802

Subsidy income

3,300

392,898

Compensation income

149

-

Other

970

2,960

Total non-operating income

5,646

396,660

Non-operating expenses

Interest expenses

521

2,068

Other

249

1

Total non-operating expenses

770

2,070

Ordinary profit

446,229

1,110,877

Extraordinary income

Gain on reversal of share acquisition rights

144

47

Total extraordinary income

144

47

Extraordinary losses

Loss on retirement of non-current assets

-

571

Loss on valuation of investment securities

-

11,645

Total extraordinary losses

-

12,217

Profit before income taxes

446,374

1,098,707

Income taxes-current

170,589

348,575

Income taxes-deferred

(8,783)

47,117

Total income taxes

161,805

395,693

Profit

284,568

703,014

Profit attributable to owners of parent

284,568

703,014

7

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21

Quarterly Consolidated Statement of Comprehensive Income

(For the Six-month Period)

(Thousands of yen)

First six months of FY8/20

First six months of FY8/21

(Sep. 1, 2019 - Feb. 29, 2020)

(Sep. 1, 2020 - Feb. 28, 2021)

Profit

284,568

703,014

Other comprehensive income

Valuation difference on available-for-sale securities

471

603

Remeasurements of defined benefit plans, net of

1,579

(1,823)

tax

Total other comprehensive income

2,051

(1,220)

Comprehensive income

286,620

701,794

Comprehensive income attributable to

Comprehensive income attributable to owners of

286,620

701,794

parent

8

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21

(3) Quarterly Consolidated Statement of Cash Flows

(Thousands of yen)

First six months of FY8/20

First six months of FY8/21

(Sep. 1, 2019 - Feb. 29, 2020)

(Sep. 1, 2020 - Feb. 28, 2021)

Cash flows from operating activities

Profit before income taxes

446,374

1,098,707

Depreciation

11,123

14,168

Amortization of goodwill

4,562

4,562

Loss on retirement of non-current assets

-

571

Loss (gain) on valuation of investment securities

-

11,645

Increase (decrease) in allowance for doubtful accounts

43

(726)

Increase (decrease) in provision for bonuses

33,432

55,218

Increase (decrease) in retirement benefit liability

20,212

(3,736)

Interest and dividend income

(1,226)

(802)

Subsidy income

-

(392,898)

Interest expenses

521

2,068

Decrease (increase) in trade receivables

(71,536)

43,216

Decrease (increase) in inventories

(25,197)

(159,596)

Decrease (increase) in prepaid expenses

(70,696)

(11,501)

Increase (decrease) in trade payables

28,278

109,271

Increase (decrease) in accounts payable-other

113,541

84,148

Increase (decrease) in accrued consumption taxes

2,552

(271,614)

Other, net

(11,695)

105,610

Subtotal

480,287

688,312

Interest and dividends received

766

684

Interest paid

(516)

(2,008)

Proceeds from subsidy income

-

392,898

Income taxes paid

(241,888)

(340,194)

Net cash provided by (used in) operating activities

238,649

739,693

Cash flows from investing activities

Payments into time deposits

(2,601)

(501)

Proceeds from withdrawal of time deposits

1,500

-

Purchase of property, plant and equipment

(2,164)

(45,662)

Purchase of intangible assets

(3,794)

-

Purchase of insurance funds

(53,587)

(82,650)

Net decrease (increase) in short-term loans receivable

15,000

-

Payments of leasehold and guarantee deposits

(54,013)

(4,321)

Proceeds from refund of leasehold and guarantee deposits

25

3,819

Net cash provided by (used in) investing activities

(99,636)

(129,317)

Cash flows from financing activities

Repayments of long-term borrowings

(65,330)

(67,775)

Repayments of lease obligations

(139)

(25)

Dividends paid

(41,360)

(59,611)

Proceeds from issuance of shares resulting from exercise of

-

2,286

share acquisition rights

Purchase of treasury shares

-

(36)

Net cash provided by (used in) financing activities

(106,830)

(125,162)

Effect of exchange rate change on cash and cash equivalents

0

0

Net increase (decrease) in cash and cash equivalents

32,183

485,213

Cash and cash equivalents at beginning of period

2,723,014

4,282,653

Cash and cash equivalents at end of period

2,755,197

4,767,867

9

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21

  1. Notes to Quarterly Consolidated Financial Statements Going Concern Assumption
    Not applicable.

Additional Information

Impact of the spread of the COVID-19 pandemic on accounting estimates

The COVID-19 pandemic is having an enormous impact on the global economy and the activities of companies. The outlook for the Japanese economy will probably remain unclear for some time. Regarding the impact of this crisis on the performance of the Seraku Group, there is no significant change at this time in the "Impact of the spread of the COVID-19 pandemic on accounting estimates" which was presented in additional information in the summary of consolidated financial results for the fiscal year ended August 31, 2020.

Significant Changes in Shareholders' Equity

Not applicable.

Segment and Other Information

Segment Information

First six months of FY8/20 (Sep. 1, 2019 - Feb. 29, 2020)

Information related to net sales and profit/loss in reportable segments

(Thousands of yen)

Reportable segment

Amount in the

quarterly

System

Digital

Mechanical

Total

Other

Total

Adjustment

consolidated

Transfor-

Design and

(Note 1)

(Note 2)

statement of

Integration

mation

Engineering

income

(Note 3)

Net sales

Sales to external

5,231,936

1,117,154

197,087

6,546,178

4,549

6,550,727

-

6,550,727

customers

Inter-segment

-

-

5,859

5,859

12,478

18,337

(18,337)

-

sales and

transfers

Total

5,231,936

1,117,154

202,946

6,552,037

17,027

6,569,065

(18,337)

6,550,727

Segment profit

397,848

68,763

(20,271)

446,339

(4,985)

441,354

-

441,354

(loss)

Notes: 1. The "Other" business segment consists of activities that are not included in any of the reportable segments, and is primarily engaged in job placement and temporary staffing services and services for training IT engineers.

  1. The adjustment to segment profit (loss) includes corporate costs that are not allocated to any of the reportable segments. Corporate costs mainly include general and administrative expense that cannot be attributed to any of the reportable segments. The adjustment to segment profit (loss) includes inter-segment transaction elimination of minus 18,337 thousand yen.
  2. Segment profit (loss) is adjusted with operating profit shown on the consolidated statement of income.

10

SERAKU Co., Ltd. (6199) Consolidated Financial Results for the Second Quarter of FY8/21

First six months of FY8/21 (Sep. 1, 2020 - Feb. 28, 2021)

Information related to net sales and profit/loss in reportable segments

(Thousands of yen)

Reportable segment

Amount in the

quarterly

System

Digital

Mechanical

Total

Other

Total

Adjustment

consolidated

Transfor-

Design and

(Note 1)

(Note 2)

statement of

Integration

mation

Engineering

income

(Note 3)

Net sales

Sales to external

5,264,875

1,778,091

223,447

7,266,415

2,035

7,268,451

-

7,268,451

customers

Inter-segment

-

-

3,917

3,917

800

4,717

(4,717)

-

sales and

transfers

Total

5,264,875

1,778,091

227,364

7,270,332

2,835

7,273,168

(4,717)

7,268,451

Segment profit

509,948

183,788

22,511

716,247

38

716,286

-

716,286

Notes: 1. The "Other" business segment consists of activities that are not included in any of the reportable segments, and is primarily engaged in job placement and temporary staffing services and services for training IT engineers.

  1. The adjustment to segment profit (loss) includes corporate costs that are not allocated to any of the reportable segments. Corporate costs mainly include general and administrative expense that cannot be attributed to any of the reportable segments. The adjustment to segment profit (loss) includes inter-segment transaction elimination of minus 4,717 thousand yen.
  2. Segment profit (loss) is adjusted with operating profit shown on the consolidated statement of income.

Material Subsequent Events

Not applicable.

This financial report is solely a translation of "Kessan Tanshin" (in Japanese, including attachments), which has been prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers who prefer an English translation.

11

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Seraku Co. Ltd. published this content on 13 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 April 2021 06:02:04 UTC.