クリエイトＳＤホールディングス（3148） – [Delayed]Consolidated Financial Results for Nine Months Ended February 28, 2022 (Japanese GAAP)

This document is an English translation of a statement written originally in Japanese. The Japanese original should be considered as the primary version. Consolidated Financial Results for Nine Months Ended February 28, 2022 (Japanese GAAP) Name of Listed Company: CREATE SD HOLDINGS CO., LTD. Securities code: 3148 Representative: Taizo Hirose, Representative Director and President Contact: Tetsuya Yamazaki, Executive Officer and General Manager, Finance and URL: https://www.createsdhd.co.jp/English/tabid/129/Default.aspx April 4, 2022Listing: Tokyo Stock ExchangeAccounting Dept. Scheduled filing date of Securities Report: April 8, 2022 Supplementary materials for the financial results: None Quarterly results briefing sessions: None Tel: +81-45-914-8241 Scheduled date of start of dividend payment: ― 1. Consolidated Third Quarter Results for Fiscal Year Ending May 31, 2022 (June 1, 2021 to February 28, 2022) (1) Consolidated Operating Results (Figures in percentages denote the year-on-year change)Profit attributable to owners of parent Ordinary profit Net sales Operating profit Millions of yen % (Millions of yen) % (Millions of yen) %% (Millions of yen) ％ (Figures are rounded down to the nearest million yen)260,636 252,374 3.3 8.5 13,240 –8.2 13,606 –7.8 9,227 –7.9 14,426 19.1 14,752 19.1 10,014 19.4 (Note) Comprehensive income: Nine months ended February 28, 2022: ¥9,234 million (–8.3%) Nine months ended February 28, 2021: ¥10,070 million (19.4%) Earnings per share Diluted earnings per share Yen 145.95 158.40 Yen － － The Company applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 revised March 31, 2020) effective from the beginning of the first quarter of the fiscal year ending May 31, 2022. Said standard has been applied to financial statement data contained herein for the nine months ended February 28, 2022. (2) Consolidated Financial Position Total assets Total net assets Equity ratio Millions of yen 166,896 163,824 Millions of yen 103,013 96,638 % 61.7 59.0 As of February 28, 2022 As of May 31, 2021 (Reference) Net assets: As of February 28, 2022: ¥103,013 million As of May 31, 2021: ¥96,638 million The Company applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 revised March 31, 2020) effective from the beginning of the first quarter of the fiscal year ending May 31, 2022. Said standard has been applied to financial statement data contained herein for the nine months ended February 28, 2022. Nine months ended February 28, 2022 Nine months ended February 28, 2021 Nine months ended February 28, 2022 Nine months ended February 28, 2021 1 2. Dividend Payments Fiscal year ended May 31, 2021 Fiscal year ended May 31, 2022 Fiscal year ending May 31, 2022 (forecast) Dividends per share First quarter Second quarter Third quarter Year-end Annual Yen － — Yen 21.00 23.00 Yen － — Yen 23.00 23.00 Yen 44.00 46.00 (Note) Revisions to most recently announced dividend forecast: None 3. Consolidated Financial Forecast (From June 1, 2021 to May 31, 2022) Preliminary remarks on consolidated financial results forecasts Net sales Operating profit Ordinary profit (Figures in percentages denote the year-on-year change) Profit attributable to owners of parent Earnings per share Full-year Millions of yen 352,600 % Millions of yen 19,380 4.2 % Millions of yen 19,800 4.0 % Millions of yen 12,770 3.9 % 3.2 Yen 202.00 (Notes) 1. Revisions to most recently announced financial results forecast: None 2. The Company applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 revised March 31, 2020) effective from the beginning of the first quarter of the fiscal year ending May 31, 2022. Said standard has been applied to the above consolidated financial results forecasts. 2 Notes (1) Significant changes of subsidiaries in nine months ended February 28, 2022 (changes in specific subsidiaries accompanied by a change in the scope of consolidation): Newly consolidated: ― companies (company name(s)); Deconsolidated: ― companies (company name(s)) None Notes on significant changes of subsidiaries during period (2) Application of accounting treatments specific to preparation of quarterly consolidated financial statements: Not applicable Notes on application of accounting treatments specific to preparation of quarterly consolidated financial statements (3) Changes in accounting policies, changes of accounting estimates and restatement (i) Changes in accounting policies due to amendments to accounting standards: Yes (ii) Other changes in accounting policies: (iii) Changes in accounting estimates: (iv) Restatements: None None None Notes on changes in accounting policies (4) Issued shares (common shares) (i) Issued shares (including treasury shares) at period-end: (ii) Treasury shares at period-end: 3,600,755 shares 3,600,728 shares (iii) Average issued shares during period: 63,218,596 shares 63,218,650 shares 66,819,342 shares 66,819,342 shares Nine months ended February 28, 2022 Nine months ended February 28, 2022 Nine months ended February 28, 2022 Fiscal year ended May 31, 2021 Fiscal year ended May 31, 2021 Nine months ended February 28, 2021 Note on issued shares This financial summary is not subject to a quarterly review by certified public accountants or audit firms. Cautionary statement regarding business results forecasts and special notes (Notes concerning forward-looking statements, etc.) The financial forecasts and other forward-looking statements contained herein are based on currently available information and certain assumptions considered by the Company to be reasonable. Actual financial results may differ materially due to various factors. Refer to “(3) Overview of Consolidated Financial Results Forecast and Future Expectations” on page 3 of the supplementary material for the underlying assumptions and proper use of the forecasts. 3 Contents 1.. Qualitative Information Related to Consolidated Financial Results ……………………………………………………2 (1) Overview of Operating Results………………………………………………………………………………………… 2 (2) Overview of Financial Position………………………………………………………………………………………… 3 (3) Overview of Consolidated Financial Results Forecast and Future Expectations ……………………………………… 3 2. Consolidated Financial Statements and Notes……………………………………………………………………………4 (1) Consolidated Balance Sheet …………………………………………………………………………………………… 4 (2) Consolidated Statements of Income and Comprehensive Income………………………………………………………6 (3) Notes to Consolidated Financial Statements…………………………………………………………………………… 8 Going concern assumption …………………………………………………………………………………………… 8 Notes in case of significant changes in shareholders’ equity ………………………………………………………… 8 Application of specific accounting treatment in the preparation of consolidated financial statements ……………… 8 Changes to accounting policies……………………………………………………………………………………… 8 Additional information………………………………………………………………………………………………… 9 3. Supplemental Information ……………………………………………………………………………………………… 10 (1) Production, Orders Received, and Sales Supplemental Information ……………………………………………10 – 1 – 1.Qualitative Information Related to Consolidated Financial Results (1) Overview of Operating Results During the first nine months of the fiscal year ending May 31, 2022, the future of the Japanese economy remained uncertain due to heightened geopolitical risks on top of the ongoing difficult circumstances arising from the COVID-19 pandemic. The business environment in the drug store industry remains harsh due to the entry of new competitors from other industries and an increase in consolidation and restructuring on top of new store openings by competitors and intensification of price Under these circumstances, the Group will promote comprehensive health care support for regional contribution in the domains of daily life, prevention, medical care, and nursing care. competition. Drug Stores In the drug store business, our top priority is the safety and security of our customers, patients, and employees. While voluntarily refraining from sales promotions that would create waves of customer attraction, we have been promoting everyday low prices (EDLP) in which we provide products at attractive prices no matter when customers come to our stores. In addition, in order to address the need for one-stop shopping in which the necessities for daily life are available in one place, we worked to renovate our stores to improve food sales, including enhancing our fresh and frozen food offerings. At the same time, we promoted in-store prescription drug stores and continued to focus on improving convenience and expertise in small trade areas. In regard to the impact of COVID-19, there was a reactionary drop in demand in response to expanded demand in the previous year driven by products to prevent the spread and stay-at-home products, but due in part to the resurgence of COVID-19 caused by the spread of the Omicron variant starting in January, net sales were strong, driven by food products. We established a Sustainability Promotion Committee chaired by the President and Representative Director to engage in efforts to promote sustainability management. The committee established a Basic Policy on Sustainability and identified material issues (materiality). We also worked on strengthening the governance structure, including by establishing a Nomination and Remuneration Committee as an advisory body to the Board of Directors. During the period, we opened 20 new drug stores. Meanwhile, we also closed one for which the contract expired. Moreover, we opened 32 new in-store prescription drug stores and two dedicated prescription drug stores. This total of 34 openings surpassed the number of drug store openings. Meanwhile, we also closed one dedicated prescription drug store for which the contract expired. Nursing Care As society ages, we are operating paid assisted living facilities characterized by delicious meals for elderly people that want to live safely and securely under the care of nursing staff as well as an adult day care center characterized by functional maintenance and recovery training for living at home for those who want to live at home as long as possible. During the first nine months of the fiscal year ending May 31, 2022, we took care to prevent the spread of COVID-19 in our paid assisted living facilities and adult day care services while also pouring effort into customer service, which is one of the distinctive characteristics of our Group, to increase user satisfaction and improve operating rate. In addition, in order to improve the profitability of adult day care services, we increased the capacity per facility. Owing to the efforts above, as of the end of the first nine months of the fiscal year ending May 31, 2022, the number of the Group’s drug stores came to 678, the number of dedicated prescription drug stores to 37, and the number of in-store prescription drug stores to 258, for a total of 295 stores in the drug store business. The Group also has five stores in the supermarket business and two paid assisted living facilities and 39 adult day care service centers in the nursing care business. As a result of the above, the financial results for the first nine months of the fiscal year ending May 31, 2022 were as follows: Net sales came in at ¥260,636 million (up 3.3% year on year), operating profit was ¥13,240 million (down 8.2%), ordinary profit was ¥13,606 million (down 7.8%), and profit attributable to owners of parent was ¥9,227 million (down 7.9%). The Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) has been applied as of the beginning of the first quarter of the fiscal year ending May 31, 2022. For this reason, the figures for comparison with the previous year are based on calculation methods set forth under different standards. See “(3) Notes to Consolidated Financial Statements (Changes to accounting policies)” under “2. Consolidated Financial Statements and Notes” for details. – 2 – (2) Overview of Financial Position decrease in cash and deposits. Total assets as of February 28, 2022 were ¥166,896 million, up ¥3,071 million from the end of the previous fiscal year. The main factors were a ¥588 million increase in merchandise and a ¥4,909 million increase in non-current assets as well as a ¥2,143 million Total liabilities as of February 28, 2022 were ¥63,882 million, down ¥3,303 million from the end of the previous fiscal year. The main factors were a ¥938 million decrease in accounts payable, a ¥3,440 million decrease in provision for point card certificates, and a ¥1,624 million decrease in accrued income taxes. Total net assets as of February 28, 2022 were ¥103,013 million, up ¥6,375 million from the end of the previous fiscal year. The main factors were a ¥2,908 million decrease in dividends paid and recording of ¥9,227 million in profit attributable to owners of parent. (3) Overview of Consolidated Financial Results Forecast and Future Expectations At this time, no changes have been made to the forecasts for the fiscal year ending May 31, 2022 announced on July 12, 2021. – 3 – (Millions of yen) FY2020 (As of May 31, 2021) 3Q of FY2021 (As of February 28, 2022) 2. Consolidated Financial Statements and Notes (1) Consolidated Balance Sheet Assets Current assets Cash and deposits Accounts receivable – trade Merchandise Other Total current assets Non-current assets Property, plant and equipment Buildings and structures, net Land Other, net Total property, plant and equipment Intangible fixed assets Goodwill Other Total intangible assets Investments and other assets Long-term loans receivable Leasehold and guarantee deposits Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets Liabilities Current liabilities Accounts payable – trade Accrued income taxes Accrued bonuses Provision for bonuses for directors (and other officers) Provision for point card certificates Asset retirement obligations Other Total current liabilities Non-current liabilities Net defined benefit liability Asset retirement obligations Provision for loss on subleasing Other Total non-current liabilities Total liabilities – 4 – 39,282 9,682 33,456 8,663 91,084 20,898 15,272 4,504 40,675 712 885 1,598 9,776 10,867 9,867 (45) 30,466 72,740 41,699 3,297 328 128 3,596 19 10,700 59,769 2,708 3,238 32 1,438 7,416 67,186 37,138 10,356 34,044 7,705 89,246 22,079 17,196 4,381 43,658 623 918 1,541 9,722 11,172 11,597 (43) 32,450 77,650 40,760 1,672 1,545 112 155 19 11,888 56,154 2,973 3,371 39 1,344 7,728 63,882 163,824 166,896 (Millions of yen) FY2020 (As of May 31, 2021) 3Q of FY2021 (As of February 28, 2022) Net assets Equity capital Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Remeasurements of defined benefit plans Total accumulated other comprehensive income Total net assets Liabilities and net assets 1,000 934 99,114 (4,393) 96,655 23 (40) (17) 96,638 163,824 1,000 934 105,481 (4,393) 103,022 22 (31) (9) 103,013 166,896 – 5 – (2) Consolidated Statements of Income and Comprehensive Income Consolidated Statement of Income First nine months of the fiscal year ending May 31, 2022 3Q of FY2020 (From June 1, 2020 to February 28, 2021) (Millions of yen) 3Q of FY2021 (From June 1, 2021 to February 28, 2022) 252,374 182,777 69,597 3,546 21,954 1,372 94 373 2,638 11,159 14,031 55,170 14,426 73 0 66 226 101 469 0 3 129 8 142 2 2 3 2 5 14,749 4,735 10,014 － 10,014 Net sales Cost of sales Gross profit Selling, general and administrative expenses Provision for point card certificates Salaries and allowances Provision for bonuses Provision for directors’ bonuses Retirement benefit expenses Depreciation and amortization Total selling, general and administrative expenses Gain on receipt of donated non-current assets Rent income Land/office rent Other Operating profit Non-operating profit Interest income Dividend income Other Total non-operating income Non-operating expenses Interest expenses Compensation expenses Total non-operating expenses Rental expenses Other Ordinary profit Extraordinary profit Subsidy income Total extraordinary income Extraordinary losses Loss on retirement of non-current assets Loss on tax purpose reduction entry of non-current assets Total extraordinary losses Profit before income taxes Income taxes Profit Profit attributable to non-controlling interests Profit attributable to owners of parent – 6 – 260,636 190,017 70,619 155 24,013 1,482 103 334 2,794 11,934 16,560 57,378 13,240 69 0 35 229 162 498 － 0 127 4 132 － － 3 － 3 13,602 4,375 9,227 － 9,227 14,752 13,606 Consolidated Statement of Comprehensive Income First nine months of the fiscal year ending May 31, 2022 Profit Other comprehensive income Valuation difference on available-for-sale securities Remeasurements of defined benefit plans, net of tax Total other comprehensive income Comprehensive income Comprehensive income attributable to: Owners of parent Non-controlling interests 3Q of FY2020 (June 1, 2020 – February 28, 2021) (Millions of yen) 3Q of FY2021 (June 1, 2021 – February 28, 2022) 10,014 6 49 55 10,070 10,070 － 9,227 (1) 8 7 9,234 9,234 － – 7 – (3) Notes to Consolidated Financial Statements Going concern assumption Not applicable Notes in case of significant changes in shareholders’ equity Not applicable Application of specific accounting treatment in the preparation of consolidated financial statements (Calculation of tax expenses) We make a reasonable estimate of the effective tax rate to be imposed on profit before income taxes in the fiscal year ending May 31, 2022, including the first nine months, after applying tax effect accounting and perform the calculation by multiplying profit before income taxes by the estimated effective tax rate. Changes to accounting policies (Adoption of accounting standard related to revenue recognition) The Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) has been adopted as of the beginning of the first quarter of the fiscal year ending May 31, 2022. The amount to be received in exchange for goods or services is recognized as revenue at the point when control of the promised goods or services is transferred to the customer. The main changes resulting from this are as follows: (1) In regard to the points program operated by the Company, the Company previously recorded the expenses expected in relation to future redemption as a provision, but this has been changed to a method in which the points are recognized as performance obligations, and the recording of revenue is deferred in cases where they provide important rights to the customer. (2) In regard to revenue from purchasing for consumption, the Company previously recognized the entire amount as revenue, but this has been changed to a method in which the net amount is recognized as revenue after determining the role (principal or agent) in providing the goods or services to the customer. In regard to application of the Accounting Standard for Revenue Recognition, following the transitional treatment set forth in the proviso in paragraph 84 of the Accounting Standard for Revenue Recognition, the Company has applied a new accounting policy from the beginning of the fiscal year ending May 31, 2022 in which the cumulative effect is added to or subtracted from retained earnings at the beginning of the first quarter when a new accounting policy is applied retroactively from the beginning of the first quarter. Because the Accounting Standard for Revenue Recognition was applied, some of the provision for point card certificates presented under current liabilities in the consolidated balance sheet for the previous fiscal year is included under contract liabilities as of the first quarter of the fiscal year ending May 31, 2022. Following the transitional treatment set forth in paragraph 89-2 of the Accounting Standard for Revenue Recognition, the Company has not restated the financial results of the previous fiscal year to reflect the new method of presentation. As a result, in the first nine months of the fiscal year ending May 31, 2022, net sales decreased by ¥2,765 million, cost of sales decreased by ¥335 million, selling, general and administrative expenses decreased by ¥2,470 million, while operating profit, ordinary profit, and profit before income taxes each increased by ¥40 million. In addition, the beginning balance of retained earnings increased by ¥48 million. Following the transitional treatment set forth in paragraph 28-15 of the Accounting Standard for Quarterly Financial Reporting (ASBJ Statement No. 12, March 31, 2020), there is no information on a breakdown of revenue from contracts with customers in the first nine months of the previous fiscal year. Application of Accounting Standard for Fair Value Measurement The Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019) has been applied from the beginning of the first quarter of the fiscal year ending May 31, 2022. Following the transitional treatment set forth in paragraph – 8 – 19 of the Accounting Standard for Fair Value Measurement and paragraph 44-2 of the Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019), the new accounting policy set forth in the Accounting Standard for Fair Value Measurement will be applied into the future. This has no impact on the quarterly financial statements. Additional Information There are no significant changes to the assumptions regarding the impact of COVID-19 described in (Additional Information) and (Accounting Estimates for Impact of COVID-19) in the securities report for the previous fiscal year. – 9 – 3. Supplemental Information (1) Production, Orders Received, and Sales 1) Sales results (i) Sales results by product division Sales results by product division during the first nine months of the fiscal year ending May 31, 2022 were as follows: 3Q of FY2021 (From June 1, 2021 to February 28, 2022) Product division Amount (millions of yen) YoY change (%) Drug Stores Medical and health products OTC Prescription drug stores Cosmetics Food products Daily products Other Subtotal Supermarkets Nursing Care Paid assisted living facilities Adult day care services Subtotal Revenue from contracts with customers Other revenue (Notes) Total (Notes) 103.8 97.9 114.9 102.7 104.3 101.6 100.5 103.3 99.1 107.1 97.1 100.5 103.2 － 103.3 69,578 42,754 26,823 31,332 101,091 41,067 12,606 255,675 3,291 565 1,016 1,581 260,548 88 260,636 – 10 – 1. As stated under Changes to Accounting Policies, the Accounting Standard for Revenue Recognition was applied from the beginning of the first quarter of the fiscal year ending May 31, 2022, which changed the accounting treatment related to revenue recognition. As such, sales by product division have also been changed. 2. Other revenue includes rent income based on the Accounting Standard for Lease Transactions (ASBJ Statement No. 13). (ii) Sales results by region Sales results by region during the first nine months of the fiscal year ending May 31, 2022 were as follows: 3Q of FY2020 (From June 1, 2021 to February 28, 2022) 3Q of FY2021 (June 1, 2021 – February 28, 2022) Amount (millions of yen) Share (%) Amount (millions of yen) Share (%) 155,586 36,849 29,765 17,330 12,842 61.6 14.6 11.8 6.9 5.1 162,370 37,110 29,430 18,377 13,347 62.3 14.2 11.3 7.1 5.1 252,374 100.0 260,636 100.0 (Note) As stated under Changes to Accounting Policies, the Accounting Standard for Revenue Recognition was applied from the beginning of the first quarter of the fiscal year ending May 31, 2022, which changed the accounting treatment related to revenue recognition. As such, sales by region have also been changed. (2) Purchase results Purchase results by product division during the first nine months of the fiscal year ending May 31, 2022 were as follows: First nine months of the fiscal year ending May 31, 2022 (From June 1, 2021 to February 28, 2022) Product division Amount (millions of yen) YoY change (%) Kanagawa Tokyo Shizuoka Chiba Other Total Drug Stores Medical and health products OTC Prescription drug stores Cosmetics Food products Daily products Other Subtotal Supermarkets Nursing Care Paid assisted living facilities Adult day care services Subtotal Other revenue 92.5 81.1 117.5 97.7 110.0 103.1 103.1 102.9 101.3 ― ― ― ― 102.8 102.8 41,425 24,990 16,434 19,719 86,664 29,052 9,680 186,543 2,495 ― ― ― ― – 11 – Revenue from contracts with customers 189,038 Total 189,038 (Note) As stated under Changes to Accounting Policies, the Accounting Standard for Revenue Recognition was applied from the beginning of the first quarter of the fiscal year ending May 31, 2022, which changed the accounting treatment related to revenue recognition. As such, purchase results have also been changed.