Skylark : Consolidated Financial Report For the Three-month Period Ended March 31, 2021 (IFRS)

Consolidated Financial Report

For the Three-month Period Ended March 31, 2021 (IFRS)

		May 14, 2021
Company Name	SKYLARK HOLDINGS CO., LTD.	Stock Exchange Listing: Tokyo Stock Exchange, 1st Section
Securities Code	3197	URL: http://www.skylark.co.jp

Representative	Makoto Tani, Chairman, President and Chief Executive Officer
Contact for enquiries	Minoru Kanaya, Corporate Director, Managing Executive Officer and Managing	(TEL) 0422-51-8111
Director of Finance Division
Quarterly statement filing date (as planned)	May 14, 2021
Dividend payable date (as planned)	-
Supplemental material of quarterly results	Yes
Convening briefing of quarterly results	Yes (for analysts and institutional investors)

(Millions of yen; amounts are rounded to the nearest million yen)

1. Consolidated Financial Results for the Three-month Period Ended March 31, 2021

(1) Consolidated Operating Results								(Percentages represent	year-on-year changes)
								Income before				Net income	Total comprehensive
	Revenue			Operating profit		Net income	attributable to owners
								income taxes				of the Company	income
	(Millions	(%)		(Millions	(%)	(Millions	(%)		(Millions	(%)	(Millions		(%)	(Millions		(%)
	of yen)				of yen)		of yen)			of yen)		of yen)			of yen)
Three-month period	64,832	(25.3)			(1,264)	-	(2,826)	-		(1,888)	-	(1,888)		-	(1,575)		-
ended March 31, 2021
Three-month period	86,739	(7.6)			40	(99.3)	(812)	-		248	(90.8)	248		(90.8)	219		(91.6)
ended March 31, 2020
	Basic earnings per share		Diluted earnings per share
					(Yen)				(Yen)
Three-month period ended					(9.56)				(9.56)
March 31, 2021
Three-month period ended					1.25				1.25
March 31, 2020
(Reference)
EBITDA	Three-month period				10,551 million yen	(-18.7%)	Three-month period	12,970	million yen	(-27.7%)
ended March 31, 2021			ended March 31, 2020
Adjusted EBITDA	Three-month period				11,965 million yen	(-16.7%)	Three-month period	14,370	million yen	(-22.9%)
ended March 31, 2021			ended March 31, 2020
Adjusted net income	Three-month period			(1,888) million yen	(-%)	Three-month period	248 million yen	(-91.7%)
ended March 31, 2021		ended March 31, 2020

(Note) We use EBITDA, adjusted EBITDA and adjusted net income to evaluate the results of its operations. Refer to "* Notes for using forecasted information and other matters (3) - (5)" below for details.

(2) Consolidated Financial Position

				Equity attributable to	Ratio of equity attributable to
	Total assets		Total equity	owners of the Company
		owners of the Company
				to total assets
	(Millions	of yen)	(Millions of yen)	(Millions of yen)	(%)
As of March 31, 2021		444,473	112,186	112,186	25.2
As of December 31, 2020		441,672	113,761	113,761	25.8

2. Dividends

			Dividends per share
	First quarter	Second quarter	Third quarter	Fourth quarter	Total
	(Yen)	(Yen)	(Yen)	(Yen)	(Yen)
Year ended December 31,	-	0.00	-	0.00	0.00
2020
Year ended December 31,	-
2021
Year ended December 31,		-	-	-	-
2021 (Forecasted)

(Note) Revision of dividend forecast: None

The dividend forecast for the year ended December 31, 2021 has not been determined at this time.

3. Forecasts on the Consolidated Financial Results for the Year Ended December 31, 2021 (January 1, 2021 - December 31, 2021)

(Percentages represent year-on-year changes)

	Revenue		Operating profit		Income before income	Net income attributable to	Basic earnings per share
							taxes		owners of the Company
	(Millions of		(%)	(Millions of		(%)	(Millions of		(%)	(Millions of	(%)	(Yen)
	yen)		yen)		yen)		yen)
Year ended	285,000		(1.2)	5,000		-	1,000		-	400	-	2.03
December 31, 2021

(Note) Revision of forecasts on the results of operations: Yes

(Reference)

Adjusted net income Year ended December 31, 2021 (Forecasted)400 million yen (-%)

The forecasts above have been revised from the forecasts in the Summary of Financial Results for the year ended December 31, 2020 (announced on February 12, 2021). For details, refer to "Notice Regarding the Revisions of the Consolidated Financial Forecast and Dividend Forecast for the Year Ended December 31, 2021" announced today (May 14, 2021).

• Notes
• 1. Changes in status of significant subsidiaries during the period (changes in specified subsidiaries accompanying changes in scope of consolidation): No
     Number of subsidiaries newly consolidated: -
     Number of subsidiaries excluded from consolidation: -
  2. Changes in accounting policies and accounting estimates

(i) Changes in accounting policies required by IFRSs:

No

1. Changes in accounting policies other than those in (i): No

(iii) Changes in accounting estimates:

No

1. Number of issued shares (common stock)
2. 1. Number of issued shares (including treasury stock)
   2. Number of treasury stock
   3. Average number of issued shares during the period

As of March 31, 2021	197,502,200	As of December 31, 2020	197,502,200
As of March 31, 2021	-	As of December 31, 2020	-
Three month-period ended	197,502,200	Three month-period ended	197,502,200
March 31, 2021	March 31, 2020

• This quarterly financial report is not subject to quarterly review procedures by certified public accountants or independent auditors.
• Notes for using forecasted information and other matters
• 1. We have adopted International Financial Reporting Standards (IFRSs).
  2. The forecasts above are based on information available as of the date of this report and certain assumptions deemed to be reasonable. We does not provide any assurance as to achievement of these forecasts. In addition, the actual results may vary materially from the forecasts due to various factors. Refer to page 5 of Appendix "1. Qualitative Information on the Consolidated Financial Results for the Three-month Period Ended March 31, 2021 (3) Explanation of the Forward-looking Statements including the Forecasts on the Consolidated Financial Results" for further details and disclaimer regarding the use of the forecasts and certain assumptions used in developing those forecasts.
  3. Refer to page 2 of Appendix "1. Qualitative Information on the Consolidated Financial Results for the Three-month Period Ended March 31, 2021 (1) Explanation of the Consolidated Operating Results" for the details of EBITDA, adjusted EBITDA and adjusted net income.
  4. EBITDA, adjusted EBITDA and adjusted net income are not measures prescribed in accordance with IFRSs but are financial measures that we believe are useful for investors to assess the operating results of our business. These financial measures exclude the effect of non-cash items and non-recurring expense items, such as expenses related to listing and offering, loss on redemption of borrowings before the repayment date and gain or loss on the associated hedge transactions, and gain or loss on modification of financial liabilities in accordance with the adoption of IFRS 9, Financial Instruments (2014) (including readjustment of the amount of impact from the retroactive application of changes in accounting policies), that we do not consider to be indicative of the results of its normal operations or comparable to its competitors' operating results.
  5. The EBITDA, adjusted EBITDA and adjusted net income may not be comparable to those of other companies in the same industry due to the difference in the calculation method, and, as a result, their usefulness may decrease.

(Appendix) Table of Contents

1. Qualitative Information on the Consolidated Financial Results for the Three-month Period Ended March 31, 2021………..	2
(1)	Explanation of the Consolidated Operating Results ……………………………………………………..…..…………	2
(2)	Explanation of the Consolidated Financial Position ……………………………………………………………………	3
(3)	Explanation of the Forward-looking Statements including the Forecasts on the Consolidated Financial Results …...…	5
2. Condensed Interim Consolidated Financial Statements and Notes ……………………………………………….…………..	6
(1)	Condensed Interim Consolidated Statements of Financial Position …………………………………………….………	6
(2)	Condensed Interim Consolidated Statements of Income ……………………………………….……………….………	8
(3)	Condensed Interim Consolidated Statements of Comprehensive Income ………………………………………………	9
(4)	Condensed Interim Consolidated Statements of Changes in Equity ……………………………………………………	10
(5)	Condensed Interim Consolidated Statements of Cash Flows ……………………………………………………...……	12
(6)	Notes on the Going Concern Assumption ………………………………………………………………………………	13
(7)	Notes to Condensed Interim Consolidated Financial Statements ………………………………………………………	13

1. Qualitative Information on the Results for the Three-month Period Ended March 31, 2021

1. Explanation of the Consolidated Operating Results
   The business environment for the three-month period ended March 31, 2021 was, as during the previous term, still affected by the spread of the COVID-19 pandemic. However, we have undertaken efforts to further lower the break-even point to strengthen business fundamentals and secure sufficient cash on hand to continue stable business activities.
   Specifically, we reduced fixed personnel and utility costs by closing restaurants during late-night business hours, reduced employee bonuses and director remunerations, reduced promotion costs, improved store productivity through the introduction of digital menu books, reduced costs of benefits for shareholders, reduced store rent and modified contracts regarding the amount or the percentage of revenues applied to rents for restaurants with the support from the owners, reduced headquarter expenditures, and reduced selling, general and administrative expenses by suspending unnecessary and non- urgent expenditures. In addition, as a means of reducing costs, we reduced the purchasing unit price by modularizing ingredients to increase product serving volume per item and improved productivity of production lines of company-owned factories and changed the delivery route and frequency. As a result, we reduced costs by approximately 3.9 billion yen compared to 2020.
   With respect to dining trends that have affected our revenue, while the frequency of dining out has decreased due to the ongoing COVID-19 pandemic, we believe that our customers increasingly view eating out as more of a special occasion rather than a routine event and an opportunity to spend quality time in a relaxing atmosphere. As such, within our portfolio of brands, performance has been relatively strong for our highly specialized brands and brands with a cozy ambiance. Examples of better performing brands include Musashino Mori Coffee which has a highland resort ambiance, Totoyamichi, our gourmet sushi concept, La Ohana, our Hawaiian themed restaurant, and Bamiyan, our affordable and casual restaurant which serves Chinese cuisine.
   In addition, our delivery and take-out sales have increased due to an increase in the number of work-from-home workers and an increase in demand from "home-nesting" households that spend a substantial amount of time within the home, both as a result of the ongoing COVID-19 pandemic. Our delivery sales and take-out sales increased by 147% and 234%, respectively, as compared to the same period in the previous year. Brands with strong delivery and take-out sales, such as Gusto and Karayoshi, have been performing relatively well.
   In the COVID-19 market environment, we are advancing the following management strategies for expansion of delivery and take-out sales as well as further reinforcing our specialty brands.
2. 1. Strengthening of delivery and take-out sales
      As of March 31, 2021, our group provides delivery services at approximately 2,000 restaurants, and our area household coverage rate in Tokyo and its adjacent three prefectures has reached 94%. We also offer take-out services at approximately 3,000 restaurants. During the COVID-19 pandemic, delivery and take-out sales have increased dramatically. To grow sales further, we are: implementing initiatives such as brand conversions to concepts that have strong delivery sales; eliminating delivery white space areas by reorganizing our delivery areas; shortening delivery times by reducing the delivery area of each store to a smaller commercial area; and furthermore we plan to introduce a hassle-freepre-payment system for take-out orders.
      In addition, we opened a new type of store that focuses exclusively on delivery and take-out in Shin-Nakano in February 2021. This store serves menus from three brands, Gusto, Bamiyan and Karayoshi, and offers not only menus from each of these brands, but also offers special menus where foods from different brands can be enjoyed together, such as combo meals with Cheese-IN Hamburg, a signature menu item from Gusto, and Bamiyan's popular gyoza dumplings. As business performance and customer feedback have been positive for this new type of store, we are planning to open seven more stores of the same kind by the end of 2021.
   2. Brand conversions leveraging the strengths of having a wide portfolio of brands
      We have a diverse portfolio of more than 20 brands, and continued to respond to changes in customer needs by developing brands and converting existing restaurants to different brands that respond to changes in respective markets.