INES : Consolidated Financial Statements for the First Half of the Fiscal Year Ending March 31, 2023

Please note this report is a summary of disclosure documents prepared for the convenience of shareholders and other investors outside Japan. In the event of any discrepancy between the translation and the Japanese original, the latter shall prevail.

October 31, 2022

Consolidated Financial Statements for the First Half of the Fiscal Year

Ending March 31, 2023 [Japanese standard]

INES Corporation

Listing:	Tokyo Stock Exchange (Code: 9742)
Representative:	Koichi Yoshimura, President & Representative Director
Contacts:	Satoshi Numazaki, Assistant General Manager, Corporate Staff Division
	Tel: [phone]
Head Office:	3-10-1, Harumi, Chuo-ku, Tokyo 104-0053, Japan
	Tel: [phone]
URL:	https://www.ines.co.jp/en/

1. Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2023 (April 1, 2022 to September 30, 2022)

(1) Consolidated Operating Results

(Million yen, figures in percentages denote year-on-year changes.)

		Net sales			Operating profit		Ordinary profit		Profit attributable to
							owners of parent
Six months ended Sep. 30, 2022		19,987	5.6			1,525	80.3		1,563	74.9			991	98.3
Six months ended Sep. 30, 2021		18,923	(4.0)			846	(38.0)		894	(35.7)		500	61.0
(Note) Comprehensive income	Six months ended September 30, 2022: ¥895 million (29.3%)
	Six months ended September 30, 2021: ¥692 million (81.7%)
		Profit per share (Yen)			Fully diluted profit per share
					(Yen)
Six months ended Sep. 30, 2022			47.68							―
Six months ended Sep. 30, 2021			21.16							―
(2) Consolidated Financial Position																(Million yen)
			Total assets						Net assets				Equity ratio (%)
As of September 30, 2022			46,627						35,104								75.3
As of March 31, 2022			46,827						34,620								73.9
(Reference) Shareholders' equity	As of September 30, 2022: ¥35,104 million
	As of March 31, 2022: ¥34,620 million
2. Dividends
									Dividends per share (Yen)
		End of Q1		End of Q2	End of Q3		Fiscal year end		Annual
Year ended March 31, 2022			―				20.00			―					20.00		40.00
Year ending March 31, 2023			―				20.00
Year ending March 31, 2023 (Forecast)												―					20.00		40.00

(Note) Revisions to dividend forecasts published most recently: No

3. Forecasts for Consolidated Financial Results for the Fiscal Year Ending March 31, 2023 (April 1, 2022 to March 31, 2023)

(Million yen, figures in percentages denote year-on-year changes.)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Profit per share
		owners of parent	(Yen)
Full year	43,000	7.4	3,300	68.1	3,300	60.2	2,000	53.8	96.17
(Note) Revisions to results forecasts published most recently: No

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* Notes

1. Significant changes in subsidiaries during the first half under review (changes in subsidiaries causing a change in the scope of consolidation): No
2. Application of special accounting treatment to the preparation of consolidated financial statements: Yes
3. Changes in accounting policies and changes or restatement of accounting estimates
4. 1. Changes in accounting policies associated with the revision of accounting standards, etc.: Yes
   2. Changes in accounting policies other than 1.: No
   3. Changes in accounting estimates: No
   4. Restatement: No
5. Number of shares outstanding (common shares)
6. 1. Number of shares outstanding at the term end (including treasury shares)

FY2023/3 H1:	20,900,000 shares
FY2022/3:	23,900,000 shares

2. Number of treasury shares at the term end

FY2023/3 H1:	104,259 shares
FY2022/3:	3,107,001 shares

• 3. Average number of shares outstanding FY2023/3 H1: 20,794,180 shares FY2022/3 H1: 23,635,523 shares

• Quarterly consolidated financial statements are placed outside the scope of quarterly reviews performed by a certified public accountant or an audit corporation.
• Explanation regarding the proper use of results forecasts and other important notes

(Disclaimer regarding forward-looking statements)

Forward-looking statements such as results forecasts provided in this document are prepared based on currently available information and assumptions that are deemed reasonable, but the Company does not intend to guarantee their achievement. Moreover, actual results may differ significantly from the above forecasts for a variety of reasons, such as the impact on the world economy of Russian invasion into Ukraine and the spread of COVID-19 infections. For conditions regarding the assumptions for results forecasts and notes on the use of results forecasts, etc., please refer to page 4 of the accompanying materials "1. Qualitative Information on Financial Results for the First Half of the Fiscal Year Ending March 31, 2023, (3) Explanation on future forecast information such as consolidated results forecasts."

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1. Qualitative Information on Financial Results for the First Half of the Fiscal Year Ending March 31, 2023

1. External environment and the Company's initiatives in the first half under review

During the first half under review, there were signs of recovery in the Japanese economy, reflecting the effects of policy measures and a change in phase of the COVID-19 pandemic to a phase of living with COVID-19 where infection control is balanced with social and economic activities. Meanwhile, risk factors for the global economy emerged, including the prolonged Russia-Ukraine war, price hikes, supply constraints, and fluctuations in the financial and exchange markets. In the information service industry, as shown in the Bank of Japan's Tankan survey (Short-Term Economic Survey of Enterprises in Japan), corporate investment in software was little affected by short-term macroeconomic trends and remained firm as companies addressed long-term challenges, including digitalization.

Under these circumstances, the Company stepped up efforts to develop solutions to promote digital transformation (DX) at customers and enhance marketing and sales. Meanwhile, the Company developed its organization and structure to prepare for the standardization of local governments' systems planned to be implemented by the end of FY2025.

On the human capital front, the Company made steady efforts to cultivate human resources. In conjunction with the iCD (i Competency Dictionary) tool it has been using since 2016 as an index for the development of IT human resources, the Company received the gold (single star) status of the "iCD User Company Certification Program"* in April 2022 in recognition of efforts and achievements that it made with the use of the tool.

Meanwhile, the Company made many different proposals and conducted demonstration experiments in the DX field, while promoting alliances with other companies, including the Mitsubishi Research Institute Group, with which the Company has concluded a business and capital tie-up agreement. The Company expanded sales of solutions using AI for local governments and provided educational support service to develop local government employees' DX skills. Going forward, starting with the promotion of DX for local governments, the Company will provide strong assistance to local governments, helping them to take steps to ensure digital transformation is implemented by local communities and the private sector as well.

It will also ensure that DX solutions are adopted by a broader range of customers while also accelerating preparations for the reorganization of the Group companies scheduled for April 2023 with a view in particular to improving operation business efficiency.

1. • The iCD User Company Certification Program is sponsored by the Skill Standards User's Group for the purpose of popularizing the iCD tool. Six types of certification are provided according to the use level of iCD and achievements thereof. The gold certificate is given to companies that have achieved concrete results through the application of the iCD.
2. Details of operating results

Consolidated net sales for the first half under review increased 5.6% year on year, to ¥19,987 million (please refer to "Consolidated net sales and operating profit in the first half for the past five years" and "Consolidated net sales by sector," which are shown in the tables below). In the Public sector, net sales rose 4.7% year on year, to ¥7,890 million, reflecting BPO projects related to COVID-19 vaccinations and welfare benefits. Net sales in the Financial sector declined 2.9% year on year, to ¥5,415 million, mainly reflecting the reduction of life insurance system development projects. Net sales in the General Industry sector increased 22.8% year on year, to ¥4,090 million, attributable to recovery in IT investment demand mainly in the retailing industry. At Group companies (posted under "Other" in the "Consolidated net sales by sector" section), net sales increased 4.7% year on year, to ¥2,591 million in the first half under review, mainly due to the strong performance of cloud service projects.

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On the profit side, consolidated operating profit came to ¥1,525 million (up 80.3% year on year), and consolidated ordinary profit was ¥1,563 million (up 74.9% year on year) in the first half under review, reflecting an increase in sales chiefly in the Public and General Industry sectors. As a result, the Company recorded a profit attributable to owners of parent of ¥991 million (up 98.3% year on year).

Net sales and operating profit in the first half for the past five years				(Million yen)
			1H of FY2018			1H of FY2019		1H of FY2020		1H of FY2021		1H of FY2022
	Net sales	17,655			19,822	19,716	18,923	19,987
	Operating profit	597			1,495	1,363	846	1,525
Consolidated net sales by sector							(Million yen)
			Six months ended September 30, 2021		Six months ended September 30, 2022
	Category/Term											YoY change (%)
		Amount		Composition ratio		Amount		Composition ratio
				(%)			(%)
	Public		7,537			39.8		7,890		39.5		4.7
	Financial		5,578			29.5		5,415		27.1		(2.9)
	General industry		3,331			17.6		4,090		20.4		22.8
	Other		2,476			13.1		2,591		13.0		4.7
	Total		18,923			100.0		19,987		100.0		5.6
Consolidated net sales by product/service							(Million yen)
			Six months ended September 30, 2021		Six months ended September 30, 2022
	Category/Term											YoY change (%)
		Amount		Composition ratio		Amount		Composition ratio
				(%)			(%)
	System development		7,516			39.8		7,749		38.8		3.1
	System operation		6,302			33.3		7,429		37.2		17.9
	System maintenance		2,462			13.0		2,388		11.9		(3.0)
	Sales of information		474			2.5		449		2.3		(5.2)
	equipment
	Other		2,169			11.4		1,970		9.8		(9.1)
	Total		18,923			100.0		19,987		100.0		5.6

(3) Explanation on future forecast information such as consolidated results forecasts

The consolidated financial results forecast and dividend forecast published on April 28, 2022 remain unchanged.

(Caution on future forecast information)

Forward-looking statements such as results forecasts provided in this document are prepared based on currently available information and assumptions that are deemed reasonable, but the Company does not intend to guarantee their achievement. Actual results, etc. may be subject to significant change for a variety of reasons, such as the impact on the world economy of the Russian invasion into Ukraine and the spread of COVID-19.

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Quarterly Consolidated Financial Statements and Important Notes

Quarterly consolidated balance sheet

As of March 31 and September 30, 2022

		(Million yen)
	FY2021	2Q of FY2022
	(As of March 31, 2022)	(As of September 30, 2022)
ASSETS
Current assets
Cash and deposits	9,945	11,506
Notes and accounts receivable - trade, and	9,323	7,737
contract assets
Securities	2,300	2,300
Work in process	210	510
Raw materials and supplies	78	59
Prepaid expenses	436	420
Other	41	54
Allowance for doubtful accounts	(13)	(12)
Total current assets	22,323	22,576
Non-current assets
Property, plant and equipment
Buildings and structures	3,630	3,631
Accumulated depreciation	(3,003)	(3,102)
Buildings and structures, net	626	528
Tools, furniture and fixtures	4,676	4,823
Accumulated depreciation	(3,427)	(3,604)
Tools, furniture and fixtures, net	1,248	1,218
Land	3	3
Total property, plant and equipment	1,878	1,750
Intangible assets
Software	2,656	2,446
Other	24	24
Total intangible assets	2,680	2,471
Investments and other assets
Investment securities	13,586	13,321
Long-term prepaid expenses	750	719
Deferred tax assets	4,493	4,533
Other	1,114	1,254
Total investments and other assets	19,945	19,828
Total non-current assets	24,504	24,050
Total assets	46,827	46,627

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