INES : Consolidated Financial Statements for the Fiscal Year Ended 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.

April 28, 2023

Consolidated Financial Statements

for the Fiscal Year Ended 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 Fiscal Year Ended March 31, 2023 (April 1, 2022 to March 31, 2023)

(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
	Fiscal year ended March 31, 2023			42,404		5.9%			3,801			93.7%	3,882		88.4%					2,541	95.4%
	Fiscal year ended March 31, 2022			40,033		(3.7%)		1,963			(29.5%)	2,060		(29.6%)				1,300	(9.2%)
(Note) Comprehensive income	Fiscal year ended March 31, 2023: ¥2,492 million (76.1%)
			Fiscal year ended March 31, 2022: ¥1,415 million (-23.9%)
				Profit per share (Yen)		Fully diluted profit		Profit/	Ordinary profit/			Operating profit/
						per share (Yen)		Shareholders' equity	Total assets				Net sales
	Fiscal year ended March 31, 2023				122.20						―			7.2%				8.1%			9.0%
	Fiscal year ended March 31, 2022				57.23						―			3.5%				4.2%			4.9%
(Reference) Equity in earnings of affiliated companies	Fiscal year ended March 31, 2023: ¥― million
							Fiscal year ended March 31, 2022: ¥― million
(2) Consolidated Financial Position																					(Million yen)
						Total assets					Net assets	Equity ratio (%)					Net assets per share
																(Yen)
	As of March 31, 2023					48,523						36,286			74.8							1,744.92
	As of March 31, 2022					46,827						34,620			73.9							1,665.00
(Reference) Shareholders' equity				As of March 31, 2023: ¥36,286 million
						As of March 31, 2022: ¥34,620 million
(3) Consolidated Cash Flow Situation																			(Million yen)
						Cash flows from					Cash flows from	Cash flows from						Cash and cash
														equivalents at end of
						operating activities				investing activities	financing activities
															period
	Fiscal year ended March 31, 2023			2,422					(2,143)		(849)							9,162
	Fiscal year ended March 31, 2022			6,427					(1,422)		(5,641)							9,731
2. Dividends
							Dividends per share (Yen)		Total dividends		Dividend payout	Dividends/
																					ratio				Net assets
															Fiscal year				(annual)
			End of Q1	End of Q2		End of Q3			Annual		(consolidated)	(consolidated)
					end			(million yen)
																			(%)				(%)
	Fiscal year ended March		―	20.00				―				20.00			40.00		876							69.9	2.4
	31, 2022
	Fiscal year ended March		―	20.00				―				25.00			45.00		935							36.8	2.6
	31, 2023
	Fiscal year ending March		―		―				―				―			50.00									40.0
	31, 2024 (Forecast)

(Note) The year-end dividends for the fiscal year ended March 31, 2023 have been revised to ¥25 per share, ¥5 more than the forecast ¥20 per share. For details, please refer to the Notice of Revision of Dividend Forecast (Dividend Increase) for the Fiscal Year Ended March 31, 2023 published on April 28, 2023. The dividend forecasts for the end of the second quarter and the end of the fiscal year ending March 31, 2024 are to be determined.

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3. Forecasts for Consolidated Financial Results for the Fiscal Year Ending March 31, 2024 (April 1, 2023 to March 31, 2024)

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

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Profit per share (Yen)
		owners of parent
Full year	43,000	1.4	4,000	5.2	4,000	3.0	2,600	2.3	125.03

* Notes

1. Significant changes in subsidiaries during this fiscal year under review (changes in subsidiaries causing a change in the scope of consolidation): No
2. Changes in accounting policies and changes or restatement of accounting estimates
3. 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
4. Number of shares outstanding (common shares)
5. 1. Number of shares outstanding at the term end (including treasury shares)

	Fiscal year ended March 31, 2023:	20,900,000 shares
	Fiscal year ended March 31, 2022:	23,900,000 shares
2.	Number of treasury shares at the term end
	Fiscal year ended March 31, 2023:	104,676 shares
	Fiscal year ended March 31, 2022:	3,107,001 shares
3.	Average number of shares outstanding
	Fiscal year ended March 31, 2023:	20,794,815 shares
	Fiscal year ended March 31, 2022:	22,723,039 shares

• These financial statements are not subject to audit procedures performed by certified public accountants or audit corporations.
• 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. Actual results may differ significantly from the above forecasts for various reasons. For conditions regarding the assumptions for results forecasts and notes on the use of results forecasts, etc., please refer to page 5 of the accompanying materials "1. Outline of Operating Results, (3) Future Outlook."

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1. Outline of Operating Results

(1) Outline of Operating Results for the Fiscal Year ended March 31, 2023

(i) External environment in the fiscal year ended March 31, 2023

During the fiscal year under review, although higher prices put downward pressure on consumption, the Japanese economy continued to see the moderate recovery, reflecting the progress of the normalization of the economy due to the policy change for the endemic COVID-19 era, that is, the measures to prevent COVID-19 infections while revitalizing social and economic activity. Looking at the global economy, there was a significant risk of a downturn due to concerns about social conditions caused by the continuing uncertainty surrounding the situation in Ukraine, globally rising prices, particularly energy prices, and the increase of interest rates. The future of the global economy is more likely to affect the Japanese economy.

(ii) Initiatives in the fiscal year under review

In these circumstances, the Company strove to transform itself into a digital transformation (DX) corporate group that contributes to the creation of a sustainable society, leveraging its strengths: a strong customer base, an extensive lineup of services, and the capabilities of the Group as a whole.

In business related to local governments, the Company's core business area, the Company was changing its system for local governments, WebRings, to standardize it by the end of fiscal year 2025 in line with the specifications for the standardization of governmental services systems based on the Local Government Digital Transformation (DX) Promotion Plan formulated by the Ministry of Internal Affairs and Communications. Meanwhile, the Company strove to promote the use of AI and RPA by local governments and promote local governments' online administrative procedures and provided a range of solutions.

Meanwhile, the Company promoted alliances with 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 in the DX field. The Company strengthened its organization dedicated to promoting alliances in April 2023. 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.

As a DX company, the Company aims to cultivate the human resources that underpin sustainable management. To this end, the Company focused on improving DX literacy under a technical human resources development system and strengthening and developing DX human resources by providing intensive education to selected human resources. The Company implemented human resources development initiatives steadily and used the iCD (i Competency Dictionary) tool as an index for the visualization of the development of IT human resources.

The Company reorganized the Group in April 2023. The Company aims to improve operational efficiency in the BPO business and operating business by consolidating operations within the Group and to enhance the expertise and agility of its human resources, thereby increasing profitability. The Company will strengthen its governance and business foundation through reorganization within the Group.

(iii) Operating results of the fiscal year under review

Consolidated net sales in the fiscal year under review increased 5.9% year on year, to ¥42,404 million due mainly to rises in revenues in the Public sector and the General Industry sector. Consolidated net sales on a sector-by-sector basis are as shown in the table below.

In the Public sector, net sales rose 6.2% year on year, to ¥17,705 million, reflecting BPO projects related to COVID- 19 vaccinations and new welfare system development projects.

Net sales in the Financial sector declined 4.0% year on year, to ¥10,965 million, mainly reflecting the reduction of life insurance system development projects.

Net sales in the General Industry sector increased 18.4% year on year, to ¥8,217 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 10.2% year on year, to ¥5,515 million in the fiscal year under review, mainly due to the strong performance of cloud service projects.

Looking at sales by product and service category, sales from system development increased chiefly due to new welfare system development projects in the Public sector.

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On the profit side, operating profit rose 93.7% year on year, to ¥3,801 million, ordinary profit increased 88.4% year on year, to ¥3,882 million, and profit attributable to owners of parent climbed 95.4% year on year, to ¥2,541 million. All the profit figures above exceeded the pre-COVID levels, the results in the fiscal year ended March 31, 2020, and achieved record highs. These results chiefly reflected increases in sales mainly in the Public sector and the General Industry sector and a review of software investment strategy, for which a one-time expense was posted in the previous fiscal year, in anticipation of the national government's move toward standardizing local government systems.

Consolidated net sales by sector					(Million yen)
			Previous consolidated fiscal year	Consolidated fiscal year
			under review
			From April 1, 2021
			From April 1, 2022	Year-on-year change
	Category/Term		until March 31, 2022
		until March 31, 2023	(%)
			Amount	Composition ratio	Amount	Composition ratio
			(%)	(%)
	Public		16,668	41.6	17,705	41.7	6.2
	Financial		11,419	28.6	10,965	25.9	(4.0)
	General industry		6,942	17.3	8,217	19.4	18.4
	Other		5,003	12.5	5,515	13.0	10.2
	Total		40,033	100.0	42,404	100.0	5.9
Consolidated net sales by product/service				(Million yen)
			Previous consolidated fiscal year	Consolidated fiscal year
			under review
			From April 1, 2021
			From April 1, 2022	Year-on-year change
	Category/Term		until March 31, 2022
		until March 31, 2023	(%)
			Amount	Composition ratio	Amount	Composition ratio
			(%)	(%)
	System development		15,560	38.9	17,333	40.9	11.4
	System operation		14,029	35.0	14,831	35.0	5.7
	System maintenance		5,030	12.6	4,853	11.4	(3.5)
	Sales of information equipment		1,126	2.8	1,080	2.5	(4.1)
	Other		4,285	10.7	4,304	10.2	0.5
	Total		40,033	100.0	42,404	100.0	5.9

(2) Outline of Financial Position for the Fiscal Year Ended March 31, 2023

(i) Situation of assets, liabilities and net assets

Looking at the financial position at the end of the fiscal year under review, total assets stood at ¥48,523 million, an increase of ¥1,695 million from the end of the previous fiscal year.

Current assets stood at ¥24,924 million, an increase of ¥2,600 million, mainly as a result of an increase in accounts receivable - trade. Non-current assets decreased ¥905 million, to ¥23,599 million, primarily due to decreases in software and investment securities.

Current liabilities at the end of the fiscal year amounted to ¥6,414 million, an increase of ¥297 million from the end of previous fiscal year, due mainly to income taxes payable. Non-current liabilities decreased ¥267 million from the end of the previous fiscal year, to ¥5,822 million.

Net assets increased ¥1,665 million from the end of the previous fiscal year, to ¥36,286 million mainly due to the posting of profit attributable to owners of parent. The Company canceled treasury shares worth ¥4,491 million in April 2022. As a result, capital surplus decreased by the same amount. Net assets were not affected by the cancellation of treasury shares.

(ii) Cash flow situation

At the end of the fiscal year under review, cash and cash equivalents ("Cash") decreased ¥569 million from the end of the previous fiscal year, to ¥9,162 million.

The status of each cash flow segment and contributing factors for the fiscal year under review are as follows.

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(Cash flows from operating activities)

Net cash provided by operating activities decreased 62.3% year on year, to ¥2,422 million. This was mainly due to the posting of profit before income taxes of ¥3,699 million.

(Cash flows from investing activities)

Net cash used in investing activities increased 50.7% year on year, to ¥2,143 million. This was mainly attributable to purchase of property, plant and equipment of ¥958 million and purchase of intangible assets of ¥758 million.

(Cash flows from financing activities)

Net cash used in financing activities decreased 84.9 % year on year, to ¥849 million This was primarily due to the payment of ¥831 million for dividends.

(3) Future Outlook

Although conditions in Japan and overseas remain unpredictable, given Russia's prolonged invasion of Ukraine and rising worldwide inflation, particularly rising energy prices, the Company expects that the Japanese economy will continue to recover moderately. Taking these factors into consideration, the Company forecasts that consolidated financial results for the fiscal year ending March 31, 2024 will be as follows.

[Forecasts for consolidated financial results for the fiscal year ending March 31, 2024]	(Million yen)
	Net sales	Operating profit	Ordinary profit	Profit attributable to
	owners of parent
Year ending March 31, 2024	43,000	4,000	4,000	2,600
Year ended March 31, 2023	42,404	3,801	3,882	2,541
Year on year change (%)	1.4	5.2	3.0	2.3

Considering the record profit posted in the fiscal year ended March 31, 2023, the Company has revised its year-end dividend forecast from ¥20 per share to ¥25 per share as announced separately on April 28, 2023. The Company forecasts that annual dividends for the fiscal year ending March 31, 2024 will be ¥50 per share.

		Dividends per share (Yen)
	End of Q2		Fiscal year end		Annual
Year ending March 31, 2024 (Forecast)	―		―		50.00
Year ended March 31, 2023	20.00		25.00		45.00
Increase/decrease	―		―		5.00

(Note) The dividend forecasts for the end of the second quarter and the fiscal year end of the fiscal year ending March 31, 2024 are to be determined.

(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 may differ significantly from the above forecasts for various reasons.

2. Basic Stance regarding Selection of Accounting Principles

In consideration of comparability with industry peers in Japan, the INES Group has the policy to prepare consolidated financial statements according to the Japanese accounting standards in the foreseeable future.

Going forward, the Group will examine the possibility of applying international accounting standards in light of trends and other factors in the application among Japanese companies.

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