Funai Soken Incorporated : Consolidated Financial Results for the First Half of the Fiscal Year Ending December 31, 2021

Consolidated Financial Results for the First Half of the Fiscal Year Ending December 31, 2021

(January 1, 2021 - June 30, 2021)

		August 3, 2021
Company name:	Funai Soken Holdings, Inc.	Stock Exchange listing: Tokyo Stock Exchange
Stock code:	9757	URL: https://hd.funaisoken.co.jp
President & CEO:	Takayuki Nakatani
	Takahisa Okumura, Director and senior vice president,
Contact:	Head of Management Administration Divisional Headquarters
	Telephone: [phone]

Scheduled date of payment of dividend:	August 12, 2021
Scheduled date of filing quarterly report:	August 26, 2021
Supplementary materials compiled to explain 1st-half financial statements?		Yes	/ No
Briefing to be held to explain 1st-half financial results?		/ No	(For institutional investors and analysts)
Yes

(Figures are rounded to the nearest million yen; fractions of one million discarded rather than rounded up or down)

1. 2021 1st Half Consolidated Financial Results (January 1, 2021 - June 30, 2021)

(1) Consolidated Results of Operations		(Percentages represent change from the same period last year)
	Net sales		Operating income	Ordinary income	Net income attributable to
		owners of the parent
Six months ending	Million yen		%	Million yen	%	Million yen	%	Million yen	%
Jun. 30, 2021	13,887		13.5	3,276	26.8	3,313	25.5	2,255	29.2
Jun. 30, 2020	12,234		1.2	2,584	(10.1)	2,640	(9.4)	1,745	(9.0)

Notes:	Comprehensive income:	2,276 million yen (up 36.1%) in the six months ending Jun. 30, 2021
			1,672 million yen (down 15.4%) in the six months ending Jun. 30, 2020
		Earnings per share	Earnings per share
			(basic)	(diluted)
Six months ending		Yen	Yen
Jun. 30, 2021		45.66	45.15
Jun. 30, 2020		35.06	34.68
(2) Consolidated Financial Position
			Total assets	Net assets	Equity ratio
			Million yen	Million yen	%
As of Jun. 30, 2021		28,684	24,489	83.0
As of Jun. 30, 2020		27,951	23,688	82.4
Reference:	Shareholders' equity:	23,817 million yen as of Jun. 30, 2021
			23,041 million yen as of Jun. 30, 2020

2. Dividends

		Dividend per share
	1Q-end	2Q-end	3Q-end		Year end	Total
	Yen	Yen	Yen		Yen	Yen
Year ending Dec. 31, 2020	－	20.00	－		25.00	45.00
Year ending Dec. 31, 2021	－	21.00
FY2021 forecast			－		25.00	46.00
Notes: *Amendments to dividend numbers compared to most recently announced figures?	None

3. Forecast Consolidated Financial Results for FY2021 (January 1, 2021 - December 31, 2021)

(Percentages represent year-on-year change)

	Net sales		Operating income	Ordinary income	Net income attributable	Earnings per
		to owners of the parent	share
	Million yen		%	Million yen	%	Million yen	%	Million yen		%	Yen
Full year	29,000		15.9	6,400	28.5	6,450	26.7		4,300		22.9	87.07
Notes: Amendments	to performance	numbers compared to most recently announced forecasts?	Yes

Please refer to the Notice Regarding Upward Revision to Earnings Forecast released on August 3, 2021 for our consolidated performance forecast for the year ending December 31, 2021 (FY2021).

Remarks

1. Changes in consolidated subsidiaries in 1Q and 2Q: Changes in scope of consolidation:
   No. of new companies added: Names of new companies added:
   No. of companies removed: Names of companies removed:

None

None

None

1. Application of specific accounting procedures when compiling 2Q consolidated financial statements: None
2. Changes in accounting policies; changes in estimates; re-statement of amendments

1)	Changes in accounting policies caused by revision of accounting standards:		None
2)	Other changes in accounting policies:				None
3)	Changes in accounting estimates:				None
4)	Re-statement of amendments:				None
(4) Number of issued shares (common stock)
1) Number of shares issued at end of six-month period	Jun. 30, 2021	52,500,000	Dec. 31, 2020	52,500,000
	(including treasury stock)
2) Number of treasury shares at end of six-month period	Jun. 30, 2021	3,119,896	Dec. 31, 2020	3,011,772
3) Average number of shares during six-month period
Jun. 30, 2021	49,388,207	Jun. 30, 2020	49,779,095
	(cumulative total)

Notes: This financial summary is excluded from quarterly review by a CPA or auditing company.

Statement Regarding the Use of Forward-Looking Statements

Forecasts in these materials regarding future performance are based on reasonable judgments made in accordance with information currently available. Actual results may differ greatly from these forecasts for a number of factors. Please refer to "Results of Operations" on page 2 of the appendix for further information concerning the conditions on which these forecasts are based and further cautions with respect to the use of forward-looking statements.

Appendix Contents

1. Qualitative Information Regarding the Six Months Ending Jun. 30, 2021……………………………………………………2
   (1) Results of Operations…………………………………………………………………………………………………………2
   (2) Financial Position……………………………………………………………………………………………………………..4
   (3) Consolidated Forecast and Other Forward-Looking Information…………………………………………………………….5
2. Consolidated Financial Statements and Notes…………………………………………………………………………………6
   (1) Consolidated Balance Sheet…………………………………………………………………………………………………..6
   (2) Consolidated Statements of Income and Comprehensive Income……………………………………………………………8
   (3) Consolidated Cash Flow Statement………………………………………………………………………………………….10
   (4) Notes on Consolidated Financial Statements………………………………………………………………………………...11 Notes on Going Concern Assumptions……………………………………………………………………………………..11 Notes on Significant Changes to Shareholders' Equity……………………………………………………………………․11 Segment Information………………………………………………………………………………………………………․11
3. Other Information……………………………………………………………………………………………………………..12
   (1) Orders and Sales……………………………………………………………………………………………………………...12

―1―

1. Qualitative Information Regarding the Six Months Ending Jun. 30, 2021

(1) Results of Operations

During the six months under review (January 1, 2021 to June 30, 2021), the Japanese economy continued experiencing difficult conditions due to the impact of COVID-19, although positive signs began appearing in economic activities as progress was gradually made in the vaccination rollouts by local governments and companies. With the promotion of new normal workstyles through digitalization and the use of non-face-to-face channels, some sections of the economy saw recovery while continuing to implement infection prevention measures. The economic outlook, however, remains unpredictable due to concerns over the further spread and lengthening of the infectious disease fueled by the increasing number of positive cases caused by the spread of COVID- 19 variants.

In this situation, the Funai Soken Consulting Group (the "Group") proactively offered online seminars, further promoted consulting services using online conference systems, and worked to improve our digital transformation (DX) consulting menu to respond to the growing needs of our clients. Furthermore, the Group endeavored to continue business activities through the promotion of teleworking and other alternative workstyle options.

As a result, the Group posted 13,887 million yen in net sales (up 13.5% year on year), 3,276 million yen in operating income (up 26.8% year on year), 3,313 million yen in ordinary income (up 25.5% year on year), and 2,255 million yen in net income attributable to owners of the parent (up 29.2% year on year) for the six months to June 30, 2021, achieving record results exceeding the results we had achieved in the same period of the previous year in the business environment during the COVID-19 crisis as well as the results of the same period two years ago before the COVID-19 crisis.

I. Net sales: 13,887 million yen (up 13.5% over the same period of the preceding year)

Net sales increased in the monthly consulting support service of the business consulting business segment. In addition, net sales in online advertisement agency services continued their steady growth. Net sales also steadily grew in physical distribution operations in the logistics business.

Consequently, net sales rose 13.5% over the same period of the previous year to 13,887 million yen.

II. Operating income: 3,276 million yen (up 26.8% over the same period of the preceding year)

Cost of sales grew from 8,081 million yen in the same period of the previous year to 9,173 million yen with an increase in the cost of sales in online advertisement agency services. Travel expenses and venue hiring expenses, among other expenses, however, fell significantly in consulting activities. SG&A expenses also declined from 1,568 million yen in the same period of the previous year to 1,436 million yen.

Consequently, operating income rose 26.8% over the same period of the previous year to 3,276 million yen.

III. Ordinary income: 13,313 million yen (up 25.5% over the same period of the preceding year)

Non-operating income was 44 million yen, compared with 65 million yen in the same period of the previous year, reflecting factors such as gains on sales of investment securities, while non-operating expenses were 7 million yen, compared with 9 million yen in the same period of the previous year.

Consequently, ordinary income rose 25.5% over the same period of the previous year to 3,313 million yen.

IV. Net income attributable to owners of the parent: 2,255 million yen (up 29.2% over the same period of the previous year)

With income taxes totaling 1,048 million yen for the quarter under review, compared with 890 million yen in the same period of the previous year, net income attributable to owners of the parent rose 29.2% year on year to 2,255 million yen.

Segment-Specific Performance

The performance of each business segment is outlined below.

1. Consulting
   In the consulting business, both net sales and income recovered significantly compared with the same period of the previous

―2―

year. This was attributable to a steady increase in orders received online and the strong orders received during the period from the participants of seminars and management study groups, which provided us avenues to receive orders for consulting contracts as the channels to receive orders began developing mainly online. By industry sector, net sales grew steadily in the consulting service for the housing and real estate industries and for the medical and aged care industries. In addition, net sales increased smoothly in the DX consulting service mainly through the provision of online sales solutions to manufacturing businesses.

In addition to the increase in revenue, income increased significantly due to a large reduction in travel expenses and venue hiring expenses through the promotion of online seminars, online workshops, and remote support services using online conference systems.

Consequently, net sales increased 17.8% year on year to 10,688 million yen, and operating income rose 20.1% year on year to 3,018 million yen.

II. Logistics

In the logistics operations, strong performance of e-commerce related operations in our corporate clients and an increase in new orders received online resulted in a considerable increase in revenue compared to the same period of the previous year. On the other hand, revenue declined in logistics consulting services due to the cautious stance our corporate clients adopted toward investment activities, although orders received were in a recovery trend. Revenue in logistics trading operations also increased due to higher sales prices, although fuel sales volume shrank following a downturn in business and individual movements. Income declined as the ratio of the more profitable logistics consulting services to total net sales fell.

Consequently, net sales rose 16.9% year on year to 1,495 million yen, while operating income fell 9.8% year on year to 149 million yen.

III. Direct Recruiting

In the direct recruiting business, revenue fell year on year due to a reduction in recruitment advertisements following the reduced level of hiring by companies as a result of COVID-19's impact. Although an operating loss was recorded for the six months under review, the amount of operating loss decreased thanks to cost reduction and more efficient advertisement operations.

Consequently, net sales shrank 20.8% year on year to 1,075 million yen, and we posted an operating loss of 15 million yen, compared with an operating loss of 66 million yen in the same period of the preceding year.

IV. Other Information

In other businesses, both net sales and income significantly grew year on year in the contact center consulting business due to the widespread adoption of remote channels for training and support services. In the IT consulting business, however, revenue shrank due to the difficulties in receiving new orders. Net sales in the system development business increased thanks to the recovery in orders received.

Consequently, net sales rose 19.9% year on year to 615 million yen and an operating income of 23 million yen was posted compared with an operating loss of 51 million yen in the same period of the previous year.

―3―