Nippon Commercial Development : Results of Operations for the Fiscal Year Ended December 31, 2020 (Supplementary Materials for Financial Results)

Results of Operations

for theFiscal YearEnded December 31, 2020

March 4, 2021

Securities code: 3252 (TSE/NSE, First Sections)

https://www.ncd‐jp.com/

Contents

1. FY12/20 Summary of Consolidated Financial Results
2. Estimates for 12‐month Period Ending March 2021
3. Explanation of Financial Position
4. Real Estate for Sale as of December 31, 2020-Diversification of Areas and Use
5. Long‐term Leasing Business Increases the Stability of NCD's Operations
6. Growth of JINUSHI REIT Assets
7. FY12/21 Consolidated Forecast

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(Millions of yen, unless otherwise stated)

1. FY12/20 Summary of Consolidated Financial Results

 In FY12/20, NCD changed its fiscal year end from March 31 to December 31, resulting in a nine‐month transitional fiscal period (April 1 to December 31, 2020) in FY12/20.

 No tenants have vacated stores or asked for rent reductions during the COVID‐19 crisis. Sales were strong due to further increasing popularity of the JINUSHI Business.

				FY3/20	FY12/20
				(12‐month fiscal period)	(9‐month fiscal period )
		Net sales	74,187	29,886
		Operating profit	5,244	2,420
		Ordinary profit	4,599	2,157
		Profit attributable to owners of parent	3,177	1,644
		Total assets	75,054	71,220
			of which cash and deposits	21,850	20,897
			of which real estate for sale	43,493	38,387
			of which property, plant and equipment	522	3,436
		Total liabilities	51,184	46,379
			of which borrowings	46,473	43,189
		Net assets	23,870	24,841
		Shareholders' equity (%)	31.8	34.9
		Net income per share (Yen)	174.59	89.94
		Net assets per share (Yen)	1,305.43	1,358.52

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2. Estimates for 12‐month Period Ending March 2021 (1)

Profit in the 12‐month period ending in March 2021 is expected to be firm based on the solid earnings in the nine‐month transitional fiscal period that ended in December 2020.

					(Millions of yen)
		FY3/19 (Results)	FY3/20 (Results)	FY12/20 (Results)	FY3/21 Estimates
	Net sales	39,834	74,187	29,886	50,900
	Operating	4,446	5,244	2,420	4,500
	profit
	Ordinary	4,327	4,599	2,157	4,100
	profit
	Profit	2,684	3,177	1,644	3,000

*Note concerning estimates

Estimates are calculated by adding actual performance in nine‐month transitional fiscal period in FY12/20 to the estimates for the first quarter of FY12/21 (January‐March 2021). This is only an estimate that not been audited by the independent auditor. Furthermore, these estimates are not guarantees by NCD of performance in the first

quarter of FY12/21.

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2. Estimates for 12‐month Period Ending March 2021 (2)

• Sales temporarily increased in FY3/20 because properties were sold earlier than initially planned in order to increase financial soundness.
• The sales and profit estimates for the 12‐month period ending in March 2021 are higher than actual sales and profit in FY3/19 as NCD expects growth in sales and earnings despite the COVID‐19 crisis.

		Net sales			Profit
(Millions of yen)	(Millions of yen)
80,000		3,500

	74,187		3,177
70,000			3,000
		3,000
60,000			2,684
		2,500
50,000			50,900
		2,000
	39,834
40,000		1,644
		29,886	1,500
30,000
20,000			1,000
10,000			500
0			0

FY3/19	FY3/20	FY12/20	FY3/21	FY3/19	FY3/20	FY12/20	FY3/21
		(9‐month fiscal period) Estimate			(9‐month fiscal period) Estimate

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3. Explanation of Financial Position (1)

(Millions of yen)	Real estate for sale				Borrowings

 Interest in the real estate market in	80,000		73,693
the JINUSHI Business has increased
significantly even during the COVID‐	60,000		69,516
19 crisis. Loans decreased by ¥3,284				46,473	43,189
million as sales are consistent with	40,000	40,993
the plan, including sales of the new	41,049			38,387
company. There was a big
			43,493
improvement in the equity ratio and	20,000
other indicators of financial
soundness.	0
 Real estate for sale was sold quickly
	FY3/18	FY3/19	FY3/20	FY12/20
and other actions were taken to
improve financial soundness. In	(Millions of yen)	Net assets	Equity ratio
addition, ¥2,867 million of real	30,000				34.9%	40.0%
estate for sale was reclassified as				31.8%	35.0%
25,000
non‐current assets due to the start	30.2%			24,841
			30.0%
of the long‐term leasing business.	20,000		21,611	23,870
20,304		25.0%
As a result, real estate for sales
	21.7%
decreased by ¥5,105 million.	15,000				20.0%
	10,000					15.0%
	5,000					10.0%
					5.0%
	0	FY3/18	FY3/19	FY3/20	FY12/20	0.0
						6

3. Explanation of Financial Position (2)

• Financial indicators such as the net debt‐to‐equity (D/E) ratio (*1) and DCR (*2) significantly improved due to the measures to enhance the financial soundness.
• Continuing to benefit from a virtuous cycle: Improving financial soundness
• • Flexible and stable fund procurement
  • Expanding the JINUSHI Business

				FY3/19		FY3/20		FY12/20
	Net profit margin	6.7%		4.3%	5.5%
	Equity ratio		21.7%		31.8%	34.9%
	Net D/E ratio			2.54 times		1.04 times		0.90 times
	DCR (Debt		354%		205%	176%
	Coverage Ratio)

*1 Net D/E ratio:

*2 DCR (Debt Coverage Ratio)

Net interest‐bearing debt (interest‐bearing debt minus cash and deposits) divided by net assets

Interest‐bearing debt divided by the sum of cash and deposits, investment securities, and property, plant and equipment

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3. Explanation of Financial Position (3) JINUSHI Business and Stronger Financial Position

A powerful business model and financial position that can withstand a broad range of crises (COVID‐19, global financial crisis and others)

Stability and safety of the

JINUSHI Business scheme

Income with long‐term stability

• Stable earnings even during the global financial crisis because of long‐term contracts with fixed terms.
• No tenant has vacated a store and there have

been no rent reductions. About 80% of all tenants sell products that are household necessities. No rent reductions even during the COVID‐19 crisis.

No risk exposure involving natural disasters

• No declines in earnings due to natural disasters

(earthquakes, typhoons, floods, etc.) because we do not own buildings.

Asset values are unlikely to decrease

• Tenants pay for the construction of buildings. Upon the completion of a fixed‐term land lease, tenants pay for returning the site to a vacant lot, resulting in the return of the property with the highest possible value.

Used alliance with a large leasing

company to enhance financial soundness

Procuring funds using long‐term

loans

Loans have no financial covenants

Large credit facilities, mainly with

Japan's mega‐banks

Stable cash flows due to rental income

from owned properties

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4. Real Estate for Sale as of December 31, 2020-Diversification of Areas and Use

As of December 31, 2020, about 80% of the tenants of our JINUSHI Business belong to the industry sectors (including the logistics sector) that handle daily necessities such as supermarkets, home improvement stores and drug stores. Most of these tenants have been performing well even during the COVID‐19 crisis.

Diversification	Diversification
of Areas		Overseas		of Use
				(U.S.)
					Other
		Nagoya
		area
				Tokyo		Tenants handling
						area		daily necessities

Osaka area

• Tokyo area ■ Osaka area ■ Nagoya area ■ Other ■ Overseas (U.S.)

Area	Definition
Tokyo area	Tokyo, Kanagawa, Saitama and Chiba
Osaka area	Osaka, Hyogo, Kyoto, Shiga and Nara
Nagoya area	Aichi, Mie and Gifu
	Government‐designed municipalities, core
Other	regional cities and nearby areas (excluding
	Tokyo area, Osaka area and Nagoya area)

■ Home improvement stores	■ Supermarkets	■ Drug stores
■ Distribution, Factories,	■ Large electronics stores
Warehouses	■ Automobile dealers	■ Other*

*Other: Restaurants, memorial service facilities, etc.

Note: Based on monetary value as of December 31, 2020

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5. Long‐term Leasing Business Increases the Stability of NCD's Operations

We plan to increase long‐term ownership of JINUSHI Business real estate investment products in order to increase rent income, which is a consistent source of sales. The goal is to increase this consistent income as a percentage of fixed expenses in order to increase the stability of business operations and establish a framework for steady growth.

• Cash and deposits totaled ¥20.8 billion as of December 31, 2020. Some cash and deposits were used in the long‐ term leasing business.
• Non‐current assets (land) increased ¥2,879 million mainly because ¥2,867 million of real estate for sale was reclassified as long‐term holdings.

Cash and deposits

(Millions of yen)

25,000
				21,850	20,897
20,000			18,856
15,000	13,794	14,521
10,000
5,000
0	FY3/17	FY3/18	FY3/19	FY3/20	FY12/20
					10

6. Growth of JINUSHI REIT Assets

• NCD has a sponsor support agreement with JINUSHI Asset Management Co., Ltd. and JINUSHI REIT. In accordance with this agreement, NCD sold 11 properties at an aggregate price of ¥12,585 million to JINUSHI REIT on January 8, 2021.
• Sales and earnings from these 11 properties were recorded in the first quarter of FY12/21 and did not contribute to results of operations in the nine‐month transitional period that ended in December 2020.
• JINUSHI REIT has increased its capital for five consecutive years, with the fifth round of payments completed on January 8, 2021. JINUSHI REIT therefore surpassed assets under management of ¥100 billion within five years of its establishment, which was this trust's initial goal. NCD plans to continue providing support with the medium to long‐term goal of raising assets under management to more than ¥300 billion.

Growing to over ¥300.0 billion

Fifth year:

¥109.3 billion

(Billions
of yen)
100	4th year:
	¥82.3 bn
	3rd year:
	¥51.6 bn
50	2nd year:
	¥32.2 bn
	Started with
	assets under
	management of
	¥14.6 bn
0

Jan.2017		Jan.2018		Jan.2019		Jan.2020		Jan. 2021		Medium to
										long‐term plan

*Assets under management are based on appraised values when assets were	11
acquired and amounts below ¥100 million are rounded down.

7. FY12/21 Consolidated Forecast
(1) Planning on growth in both sales	(Millionsofofyen)	Net sales	Profit			(Millions of yen)
80,000		3,177			3,500
and earnings	70,000				3,000
			2,900
 Due to the excellent reputation of		2,684	74,187
60,000
		2,500
the JINUSHI Business even during
50,000
the COVID‐19 crisis, substantial				51,000	2,000
40,000
purchases of real estate for sale are	39,834		1,644		1,500
planned in order to continue the	30,000
		29,886
growth of this business.	20,000				1,000
 Planning on growth of the long‐term
10,000					500
leasing business in order to build a	0					0
business portfolio with even greater	FY3/19	FY3/20	FY12/20	FY12/21
stability.				(9‐month fiscal	(Forecast)
	(Yen)			period)
(2) Maintain a stable dividend	Net income per share	Payout ratio
200.00	36.8%				40.0%
 The basic policy is to consistently pay a
180.00				31.5%	35.0%
stable dividend that reflects results of	160.00
	31.5%	27.8%		30.0%
operations in order to distribute	140.00	149.30	158.59
174.59
earnings to shareholders while	120.00					25.0%
increasing retained earnings in order to	100.00					20.0%
build an even stronger business	80.00			89.94		15.0%
foundation in terms of stability and a
60.00					10.0%
long‐term perspective.	40.00
					5.0%
	20.00
	0.00	FY3/19	FY3/20	FY12/20	FY12/21	0.0%
				(9‐month fiscal	(Forecast)	12
				period)

JINUSHI

Business

On January 10, 2022, the company name will be changed to

地主株式会社

JINUSHI Co., Ltd.

■ Disclaimer

This presentation was prepared for the purpose of providing information to investors about the operations of Nippon Commercial Development Co., Ltd.

This presentation includes forward‐looking statements about the financial condition, results of operations, businesses and other items of the Nippon Commercial Development Group. These statements incorporate risks and other uncertainties because events that may occur in the future could affect the Group's performance. Consequently, the Group's actual financial condition, results of operations, business activities and other aspects of operations may differ significantly from these forward‐looking statements.

Information in this presentation about companies other than members of the Nippon Commercial Development Group is based on information available to the public and other sources. Nippon Commercial Development has not verified in any way the accuracy or suitability of this information and makes no guarantees about the accuracy or suitability of this information.

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