Gakken : Consolidated Financial Results for the Six Months Ended March 31, 2021

Consolidated Financial Results

for the Six Months Ended March 31, 2021

[Japanese GAAP]

May 14, 2021

Company name: Gakken Holdings Co., Ltd.

Stock exchange listing: Tokyo Stock Exchange

Securities code: 9470

URL: https://www.gakken.co.jp/

Representative: Hiroaki Miyahara, President, Representative Director

Contact: Ryuji Sawada, General Manager of Financial Strategy Office

Phone: [phone]

Scheduled date of filing quarterly securities report: May 14, 2021

Scheduled date of commencing dividend payments: June 25, 2021

Availability of supplementary briefing material on quarterly financial results: Available

Schedule of quarterly financial results briefing session: Scheduled (for institutional investors and analysts)

(Amounts of less than one million yen are rounded down.)

1. Consolidated Financial Results for the Six Months Ended March 31, 2021 (October 1, 2020 to March 31, 2021)

(1) Consolidated Operating Results			(% indicates changes from the previous corresponding period.)
	Net sales		Operating profit	Ordinary profit		Profit attributable to
			owners of parent
Six months ended	Million yen	%	Million yen	%	Million yen	%	Million yen	%
March 31, 2021	78,077	3.0	4,970	15.8	4,826	13.5	2,344	(1.4)
March 31, 2020	75,838	4.1	4,293	23.0	4,250	21.6	2,377	43.4
(Note) Comprehensive income: Six months ended March 31, 2021: ¥2,821 million [47.9%]
	Six months ended March 31, 2020: ¥1,907 million [105.0%]
	Profit per share	Diluted profit per share
Six months ended		Yen		Yen
March 31, 2021		61.65		60.96
March 31, 2020		64.28		63.57

Effective April 1, 2020, Gakken Holdings Co., Ltd. (the "Company") implemented a 4-for-1 stock split of its common shares. Reflecting this change, the profit per share and the diluted profit per share are calculated by hypothetically assuming that the stock split was executed at the beginning of the fiscal year ended September 30, 2020.

(2) Consolidated Financial Position

	Total assets	Net assets	Equity ratio
	Million yen	Million yen	%
As of March 31, 2021	130,074	46,979	35.7
As of September 30, 2020	103,741	36,239	34.6
(Reference) Equity: As of	March 31, 2021: ¥46,411	million
As of	September 30, 2020: ¥35,895 million

2. Dividends

			Annual dividends
	1st quarter-end	2nd quarter-end		3rd quarter-end	Year-end	Total
Fiscal year ended	Yen	Yen		Yen	Yen	Yen
－	40.00		－	10.00	－
September 30, 2020
Fiscal year ending	－	11.00
September 30, 2021
Fiscal year ending
September 30, 2021				－	11.00	22.00
(Forecast)

(Note) Revision of dividends forecast since the last announcement: None

Effective April 1, 2020, the Company implemented a 4-for-1 stock split of its common shares.

Reflecting this change, the amount of the 2nd quarter-end dividend per share for the fiscal year ended September 30, 2020, represents the amount before the stock split and the total annual dividend is indicated with "-."

3. Consolidated Financial Results Forecast for the Fiscal Year Ending September 30, 2021 (October 1, 2020, to September 30, 2021)

(% indicates changes from the previous corresponding period.)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Profit per share
		owners of parent
	Million yen		%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	147,000		2.4	6,000	18.2	5,700	8.1	2,900	24.9	71.56

(Note) Revision of financial results forecast since the last announcement: Yes

* Notes:

1. Changes in significant subsidiaries during the period under review (changes in specified subsidiaries resulting in changes in the scope of consolidation): No

Newly added: - (Name) -

Excluded: - (Name) -

1. Application of special accounting treatments in preparing quarterly consolidated financial statements: Yes
2. Changes in accounting policies, changes in accounting estimates, and retrospective restatement
3. 1. Changes in accounting policies due to the revision of accounting standards: No
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No
4. Total number of issued shares (common stock)
5. 1. Total number of issued shares at the end of the period (including treasury shares):

March 31, 2021: 44,633,232 shares

September 30, 2020: 42,383,232 shares

1. Total number of treasury shares at the end of the period: March 31, 2021: 1,194,036 shares
   September 30, 2020: 5,289,352 shares
2. The average number of shares during the period:

Six months ended March 31, 2021: 38,026,627 shares

Six months ended March 31, 2020: 36,991,941 shares

Effective April 1, 2020, the Company implemented a 4-for-1 stock split of its common shares.

The total number of issued shares at the end of the period, the total number of treasury shares at the end of the period, and the average number of shares during the period are calculated by hypothetically assuming that the stock split was executed at the beginning of the fiscal year ended September 30, 2020.

The Company has a trust-type employee shareholding incentive plan in place. The total number of treasury shares at the end of the period includes the number of the Company's shares held under this plan by The Nomura Trust & Banking Co., Ltd. (the dedicated trust account for Gakken Employees' Shareholding Association): 457,000 shares at the end of the six months ended March 31, 2021; and 515,000 shares at the end of the fiscal year ended September 30, 2020. The average number of shares during the period is calculated

with the number of treasury shares deducted; the number of treasury shares deducted includes the number of the Company's shares held under the same plan by The Nomura Trust & Banking Co., Ltd. (the dedicated trust account for Gakken Employees' Shareholding Association): 485,686 shares at the end of the six months ended March 31, 2021; and 597,943 shares at the end of the six months ended March 31, 2020.

• These quarterly consolidated financial results are outside the scope of quarterly review by certified public accountants or an audit firm.
• Explanation of the proper use of financial results forecast and other notes

(Note on forward-looking statements, etc.)

Financial performance forecasts and other forward-looking statements herein are based on information currently available to the Company and certain assumptions it deems rational. The actual results may vary significantly due to various factors. With regard to the assumptions for the performance forecasts and the notes on the use of the performance forecasts, please refer to "1. Qualitative Information on Financial Results for the Period under Review, (3) Consolidated Financial Results Forecast and Other Forward-looking Statements" on page 10 of the Attachments.

Table of Contents - Attachments
1. Qualitative Information on Financial Results for the Period under Review ......................................................................	2
(1)	Explanation of Business Results ....................................................................................................................................	2
(2)	Explanation of Financial Position ..................................................................................................................................	9
(3)	Consolidated Financial Results Forecast and Other Forward-looking Statements .....................................................	10
2. Quarterly Consolidated Financial Statements and Primary Notes ...................................................................................	11
(1)	Quarterly Consolidated Balance Sheets .......................................................................................................................	11
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income .............................................................	13
(3)	Quarterly Consolidated Statements of Cash Flows ....................................................................................................	15
(4)	Notes to the Quarterly Consolidated Financial Statements .........................................................................................	17
(Notes on Going Concern Assumption) ..........................................................................................................................	17
(Notes When There is Significant Changes in Amounts of Equity) ...............................................................................	17
(Application of Special Accounting Treatments in Preparing Quarterly Consolidated Financial Statements) .............	17
(Additional Information) .................................................................................................................................................	18
(Segment Information, etc.) ............................................................................................................................................	20
(Significant Subsequent Events) .....................................................................................................................................	21

―1―

1. Qualitative Information on Financial Results for the Period under Review

(1) Explanation of Business Results

In the educational domain where Gakken Group (the "Group") conducts its business, the government has introduced English language courses into the curriculum of the fifth and sixth grade of elementary school, as well as programming courses. In addition, the Common Test for University Admissions was held, replacing the previous National Center Test for University Admissions. In adult education, the recurrent education market grew in response to changes in work styles. Partly due to the state of emergency declared for the second time from January through March following the spread of the new coronavirus infection, education's digitalization is further accelerating.

While demand for in-person learning remains high in the learning center market, countermeasures to prevent infection have become a turning point to spread online lessons not only in private tutoring but also in group lectures and learning support at home.

Although the publishing industry has faced severe conditions for magazines, demand for reading has increased due to more time spent at home. As a result, the market as a whole appears to have bottomed out, owing mainly to stay-at-home demand for paper publications, massive hits in comic books, and substantial growth in e-book publishing.

In the school education industry, the GIGA (Global and Innovation Gateway for All) School Program that aims to develop the educational ICT environment has been expedited, with a learning device being distributed to every student. In addition, junior high school textbooks following the new revised Courses of Study will be used starting in the academic year 2021.

In the adult education industry, the e-learning market is growing as companies promote remote work and demand for online language training and other types of remote education has grown from increased time for self-learning and in corporate training.

In the elderly care business within the healthcare and nursing domain, needs for elderly care are increasing in association with the "2025 issue" (Japan's baby boomer generation will reach the late elderly age in 2025) and the growing population of the elderly with dementia. In this context, the Ministry of Health, Labour and Welfare is promoting the building of systems that provide comprehensive support and services to communities (Community-based Integrated Care System) that enable people to continue to live their lives in the communities that are familiar to them until the end of life. Meanwhile, securing workers who support elderly care services at the frontline and moves to revise long-term care compensations present challenges that should be watched out.

In the child-care industry, demand for child-care services is increasing due to the increase in households in which both parents work. Although national measures to support child care, such as the New Child-rearing Security Plan and the provision of free preschool education and child care, have increased the number of students admitted to nursery schools and is paving the way for addressing the issue of children on the waiting list for nursery schools, the shortage of after-school children's clubs still continues, and many companies from a wide variety of industries are entering the business.

Elderly care and child-care facilities are required to ensure the safety of residents, children, parents and employees, as well as thorough measures to prevent the spread of the new coronavirus, including providing hygiene products.

Under these circumstances, the Group created the slogan "Establishing an unshakable foundation for growth," and set out the following management policies based on "Gakken 2023," a three-year plan formulated in November 2020: in the educational domain, create new ways of learning and diverse learning opportunities; in the healthcare and nursing domain, contribute to the creation of sustainable communities as we aim to be a leading company; and for the Group as a whole, accelerate the digital transformation (DX) and expand global business.

From the first quarter of the fiscal year ending September 30, 2021, the Group changed its reportable segments and transferred products and services among its businesses. These changes are intended to optimize

―2―