Sohgo Security Services : Consolidated Financial Results for the First Quarter Ended June 30, 2020

Consolidated Financial Results for the First Quarter Ended June 30, 2020

Prepared in Conformity with Accounting Principles Generally Accepted in Japan (Japanese GAAP)

English Translation of the Original Japanese-Language Report

SOHGO SECURITY SERVICES CO., LTD.	(Code No.2331, TSE 1st Sec.)
URL https://www.alsok.co.jp/en/ir/index.html
Representative:	Yukiyasu Aoyama, President and Representative	Director
Financial and accounting:	Koji Kishimoto, Senior Executive Officer	(Phone: [phone])

1. Summary of the consolidated financial results for the first quarter ended June 30, 2020 (April 1, 2020 - June 30, 2020)

(1) Consolidated operating results				(Figures rounded down to the nearest million)
	Net sales		Operating income	Ordinary income	Profit attributable to
		owners of parent
	Millions of yen		%	Millions of yen	%	Millions of yen	%	Millions of yen	%
Three months ended
June 30, 2020	110,188		0.7	7,378	2.7	7,664	(0.7)	4,503	(1.0)
June 30, 2019	109,423		4.7	7,181	21.0	7,717	26.9	4,547	31.3

Note 1: Percentage shown in net sales, operating income, ordinary income, and profit attributable to owners of parent above represent the changes from the previous fiscal year.

Note 2:

Comprehensive income

Three months ended June 30, 2020

¥ 6,071 million

31.9%

Three months ended June 30, 2019

¥ 4,604 million

17.1%

Net income per share

Diluted net income per share

Three months ended

Yen

Yen

June 30, 2020

44.48

-

June 30, 2019

44.92

-

(2) Consolidated financial conditions

Total assets

Net assets

Equity ratio

Net assets per share

Millions of yen

Millions of yen

%

Yen

Three months ended

459,794

272,507

53.8

2,443.21

June 30, 2020

Fiscal year ended

428,796

270,432

57.3

2,425.02

March 31, 2020

Reference:

Equity capital

Three months ended June 30, 2020

¥ 247,339 million

Year ended March 31, 2020

¥ 245,497 million

2. Dividend

Dividends per share

End of 1Q

End of 2Q

End of 3Q

Year-end

Annual

Yen

Yen

Yen

Yen

Yen

Fiscal year ended

March 31, 2020

-

34.50

-

35.50

70.00

March 31, 2021

-

Fiscal year ending

35.00

-

35.00

70.00

March 31, 2021(Forecast)

Note : Revisions to the dividend forecast in this quarter: No

3. Forecasts for the consolidated financial results for the fiscal year ending March 31, 2021 (April 1, 2020 - March 31, 2021) (Figures rounded down to the nearest million)

		Net sales		Operating income	Ordinary income	Profit attributable to	Net income per share
			owners of parent
		Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
Interim		232,000	3.0	15,800	(2.6)	16,600	(3.8)	9,900	(6.4)	97.9
Annual		485,000	5.4	37,600	2.2	39,200	0.8	24,700	2.2	243.99
Note :	Revisions to the forecast of financial results in this quarter: No

4. Others

1. Changes in consolidated subsidiaries (Changes in scope of consolidation) : No

Added:

-

Removed:

-

1. Application of accounting which is simplified or exceptional for quarterly consolidated financial statements: Yes
2. Changes in accounting policies, changes in accounting estimates, and restatement

a Changes arising from revision of accounting standards	: No
b Changes arising from other factors	: No
c Changes arising from accounting estimate	: No
d Restatement	: No

(4) Number of shares outstanding (Ordinary shares)

a Number of shares issued	Three months ended	102,040,042 shares	Year ended	102,040,042 shares
(including treasury stock)	June 30, 2020		March 31, 2020
b Number of shares of treasury stock	Three months ended	804,878 shares	Year ended	804,877 shares
	June 30, 2020	March 31, 2020
c Average number of ordinary shares	Three months ended	101,235,176 shares	Three months ended	101,235,424 shares
throughout the fiscal year	June 30, 2020		June 30, 2019

• This summary of financial results is exempt from quarterly review procedures.
• Explanation for Appropriate Use of Forecasts and Other Notes

The forward-looking statements such as operational forecasts contained in this summary of financial results are based on the information currently available to the Company and certain assumptions which are regarded as legitimate, and the Company does not promise the achievement of these results. Actual results may differ significantly from these forecasts due to various factors.

Consolidated Balance Sheets			(Millions of yen)
				As of March 31, 2020	As of June 30, 2020
	Assets
	Current assets
	Cash and deposits	56,382	52,165
	Cash for Transportation Security Services	87,503	91,533
	Notes and accounts receivable-trade	56,043	46,239
	Short-term investment securities	618	719
	Raw materials and supplies	7,032	7,560
	Costs on uncompleted construction contracts	383	570
	Advances paid	6,235	6,193
	Other	15,519	23,651
	Allowance for doubtful accounts	(231)	(246)
	Total current assets
	229,486	228,388
	Noncurrent assets
	Property, plant and equipment	90,439	104,390
	Intangible assets
	Goodwill	19,346	32,403
	Other	13,252	12,987
	Total intangible assets
	32,598	45,390
	Investments and other assets
	Investment securities	39,855	42,182
	Other	36,847	39,850
	Allowance for doubtful accounts	(432)	(408)
	Total investments and other assets
	76,270	81,625
	Total noncurrent assets
	199,309	231,406
	Total assets
	428,796	459,794
Liabilities
	Current liabilities
	Notes and accounts payable-trade	25,326	18,055
	Short-term loans payable	18,856	38,940
	Income taxes payable	6,935	1,702
	Provision	2,402	1,655
	Other	44,915	49,944
	Total current liabilities
	98,435	110,297
	Noncurrent liabilities
	Long-term loans payable	4,713	6,266
	Net defined benefit liability	27,545	28,071
	Provision for directors' retirement benefits	1,622	1,598
	Asset retirement obligations	465	478
	Other	25,581	40,573
	Total noncurrent liabilities
	59,928	76,989
	Total liabilities
	158,363	187,286

Consolidated Balance Sheets		(Millions of yen)
			As of March 31, 2020	As of June 30, 2020
	Net assets
	Shareholders' equity
	Capital stock	18,675	18,675
	Capital surplus	34,243	34,031
	Retained earnings	203,375	204,283
	Treasury stock	(1,070)	(1,071)
	Total shareholders' equity
	255,222	255,918
	Accumulated other comprehensive income
	Valuation difference on	4,609	5,423
	available-for-sale securities
	Revaluation reserve for land	(4,281)	(4,281)
	Foreign currency translation adjustment	(167)	(255)
	Remeasurements of defined benefit plans	(9,886)	(9,465)
	Total accumulated other comprehensive income
	(9,725)	(8,579)
	Minority interests
	24,935	25,168
	Total net assets
	270,432	272,507
	Total liabilities and net assets
	428,796	459,794

Consolidated Statements of Income		(Millions of yen)
			Three months ended	Three months ended
			June 30, 2019	June 30, 2020
	Net sales	109,423	110,188
	Cost of sales	82,852	82,531
	Gross profit
	26,571	27,656
	Selling, general and administrative expenses
	19,389	20,278
	Operating income
	7,181	7,378
	Non-operating income
	Interest income	45	42
	Dividends income	197	193
	Equity in earnings of affiliate	57	58
	Gain on sales of investment securities	3	1
	Dividend income of insurance	268	202
	Penalty income	94	247
	Other	455	358
	Total non-operating income
	1,122	1,105
	Non-operating expenses
	Interest expenses	357	489
	Financing expenses	77	59
	Loss on sales of investment securities	5	-
	Other	146	270
	Total non-operating expenses
	586	819
	Ordinary income
	7,717	7,664
	Extraordinary income
	Gain on step acquisitions	26	-
	Total extraordinary income
	26	-
	Extraordinary loss
	Loss on valuation of investment securities	29	16
	Loss on sales of non-current assets	102	-
	Total extraordinary losses
	132	16
	Income before income taxes
	7,611	7,648
	Income taxes
	2,669	2,775
	Net Income
	4,942	4,872
	Profit attributable to non-controlling interests
	394	368
	Profit attributable to owners of parent
	4,547	4,503

Consolidated Statements of Comprehensive Income		(Millions of yen)
		Three months ended	Three months ended
		June 30, 2019	June 30, 2020
	Net income	4,942	4,872
	Other comprehensive income
	Valuation difference on	(569)	828
	available-for-sale securities
	Foreign currency translation adjustment	12	(101)
	Remeasurements of defined benefit plans	272	424
	Share of other comprehensive income of	(53)	48
	associates accounted for using equity method
	Total other comprehensive income	(337)	1,199
	Comprehensive income	4,604	6,071
	（Contents)
	Comprehensive income attributable to	4,240	5,649
	owners of the parent
	Comprehensive income attributable to	364	422
	non-controlling interests

Consolidated Statements of Cash Flows		(Millions of yen)
			Three months ended	Three months ended
			June 30, 2019	June 30, 2020
	Net cash provided by (used in) operating activities
	Income before income taxes	7,611	7,648
	Depreciation and amortization	3,722	3,943
	Amortization of goodwill	443	625
	Increase (decrease) in allowance for doubtful accounts	(14)	(24)
	Increase (decrease) in net defined benefit liability	336	362
	Increase (decrease) in provision for bonuses	(603)	(789)
	Increase (decrease) in provision for directors' bonuses	(61)	(62)
	Interest and dividends income	(242)	(236)
	Interest expenses	357	489
	Equity in (earnings) losses of affiliates	(57)	(58)
	Loss (gain) on sales of noncurrent assets	104	1
	Loss on retirement of noncurrent assets	76	116
	Loss (gain) on sales of investment securities	2	(1)
	Loss (gain) on valuation of investment securities	29	16
	Loss (gain) on valuation of derivatives	37	(2)
	Decrease (increase) in notes and	6,523	11,242
	accounts receivable-trade
	Decrease (increase) in inventories	(479)	(711)
	Increase (decrease) in notes and accounts payable-trade	(3,491)	(8,709)
	Decrease (increase) in net defined benefit asset	(388)	(214)
	Decrease in assets and liabilities for	(3,698)	7,192
	Transportation Security Services
	Other	(2,453)	(3,349)
	Subtotal
	7,754	17,478
	Interest and dividends income received
	437	440
	Interest expenses paid	(359)	(494)
	Income taxes paid	(4,549)	(5,777)
	Income taxes refund	45	0
	Net cash provided by (used in) operating activities
	3,328	11,647

Consolidated Statements of Cash Flows		(Millions of yen)
			Three months ended	Three months ended
			June 30, 2019	June 30, 2020
Net cash provided by (used in) investing activities
	Decrease (increase) in time deposits	797	67
	Payments into long-term deposits	-	2,013
	Proceeds from withdrawal of long-term deposits	-	(14)
	Purchase of property, plant and equipment	(3,008)	(3,844)
	Proceeds from sales of property, plant and equipment	195	3
	Purchase of intangible assets	(3,386)	(287)
	Purchase of investment securities	(180)	(1,509)
	Proceeds from sales of investment securities	123	84
	Purchase of investments in subsidiaries resulting in change	-	(13,689)
	in scope of consolidation
	Proceeds from purchase of shares of subsidiaries resulting	210	-
	in change in scope of consolidation
	Decrease (increase) in short-term loans receivable	(2)	16
	Payments of long-term loans receivable	(11)	(18)
	Collection of long-term loans receivable	19	28
	Proceeds from refund of leasehold and guarantee deposits	-	961
	Other	535	(3,272)
	Net cash provided by (used in) investing activities	(4,708)	(19,461)
	Net cash provided by (used in) financing activities
	Net increase (decrease) in short-term loans payable	5,210	8,203
	Proceeds from long-term loans payable	145	1,748
	Repayment of long-term loans payable	(769)	(850)
	Purchase of treasury stock	(0)	(0)
	Repayments of lease obligations	(1,205)	(1,319)
	Cash dividends paid	(3,544)	(3,594)
	Cash dividends paid to minority shareholders	(424)	(470)
	Payments from changes in ownership interests in
	subsidiaries that do not result in change in scope of	-	(628)
	consolidation
	Proceeds from changes in ownership interests in
	subsidiaries that do not result in change in scope of	-	850
	consolidation
	Net cash provided by (used in) financing activities	(588)	3,937
	Effect of exchange rate change on cash and cash equivalents
	2	(14)
	Net increase (decrease) in cash and cash equivalents
	(1,965)	(3,891)
	Cash and cash equivalents at beginning of period
	43,435	48,790
	Cash and cash equivalents at end of period
	41,470	44,899