Summary of Consolidated Financial Results for the Three-Month Period ended June 30, 2018 Japanese GAAP July 24, 2018

Transcription

1 for the Three-Month Period ended June 30, 2018 Japanese GAAP July 24, 2018 Company name: SOGO MEDICAL CO., LTD. Stock exchange listings: Tokyo 1st Section Securities code: 4775 URL: Representative: (Title) Representative Director, President and Chief Executive Officer (Name) Kenji Sakamoto Inquiries: (Title) General Manager, Finance and Accounting Department (Name) Osamu Inoue Tel: Quarterly securities report filing date (as planned) : August 10, 2018 Dividend payable date (as planned) : - Supplemental material of quarterly results is available. There will not be a convening briefing of quarterly results for institutional investors and analysts. (Amounts are rounded down.) 1.Consolidated Financial Results (from April 1, 2018 to June 30, 2018) (1)Consolidated operating results (% indicates changes from the same period of the previous year.) Net sales Operating income Ordinary income Profit attributable to owners of parent Three-month period ended Millions of Yen % Millions of Yen % Millions of Yen % Millions of Yen % June 30, , June 30, , , , Notes: Comprehensive income Three-month period ended June 30, million (-46.4%) Three-month period ended June 30, million (57.0%) Net income per share Diluted net income per share Three-month period ended Yen Yen June 30, June 30, Note: Dated April 1, 2018, Sogo Medical has instituted a 2-for-1 common stock split. Consolidated net income per share has been calculated assuming that the stock split was instituted at the start of the previous fiscal year. (2)Consolidated financial positions Total assets Net assets Capital adequacy ratio Millions of Yen Millions of Yen % As of June 30, ,943 36, As of March 31, ,748 36, References: Owner s equity As of June 30, ,210million As of March 31, ,241million 2.Dividends Dividend per share First quarter Second quarter Third quarter Year end Annual Yen Yen Yen Yen Yen FY FY FY2018(forecast) Note: Correction of dividend forecast from the most recent dividend forecast:none Note: Dated April 1, 2018, Sogo Medical has instituted a 2-for-1 common stock split. Consolidated net income per share has been calculated assuming that the stock split was instituted at the start of the previous fiscal year.

2 3.Consolidated forecasts for FY2018 (from April 1, 2018 to March 31, 2019) Net sales Operating income Ordinary income Millions of Yen % Millions of Yen (% indicates year-on-year change.) Profit attributable to Net income owners of parent per share % Millions of Yen % Millions of Yen % Yen Interim 69, , , , Full-year 144, , , , Note:Corrrection of dividend forecast from the most recent dividend forecast:none 4.Others (1)Material changes in subsidiaries during this period (Changes in scope of consolidations resulting from change is subsidiaries): None (2)Applying of specific accounting of the consolidated quarterly financial statements: None (3)Changes in accounting policies and accounting estimates, retrospective restatement 1 Changes in accounting policies based on revisions of accounting standard: None 2 Changes in accounting policies other than ones based on revisions of accounting standard : None 3 Changes in accounting estimates: None 4 Retrospective restatement: None (4)Number of issued and outstanding shares (common stock) 1 Number of issued and outstanding shares at the end of fiscal year (including treasury stock): June30,2018: 30,680,312shares March31,2018: 30,680,312shares 2 Number of treasury stock at the end of fiscal year: June30,2018: 745,666shares March31,2018: 745,686shares 3 Average number of shares: June30,2018: 29,934,641shares June30,2017: 29,934,752shares Note: Dated April 1, 2018, Sogo Medical has instituted a 2-for-1 common stock split. Consolidated net income per share has been calculated assuming that the stock split was instituted at the start of the previous fiscal year. The quarterly financial results are exempt from a quarterly review by certified public accounts and audit corporations. Notes for using forecasted information and others These forecasts are based on currently available information.acrual financial results could differ from the forecast due to varipus factors.plese refer to page 7 (3)Qualitative Information on Consolidated Financial Forecasts for FY2018 for assumptions and cautions on the use of these financial forecasts.

3 Contents 1. Qualitative Information on Financial Results... 2 (1) Qualitative Information on Consolidated Operating Results... 2 (2) Qualitative Information on Consolidated Financial Position... 7 (3) Qualitative Information on Consolidated Financial Forecasts for FY Quarterly Consolidated Financial Statements... 8 (1) Quarterly Consolidated Balance Sheet... 8 (2) Quarterly Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (3) Notes to Quarterly Consolidated Financial Statements (Note on the Going-Concern Assumption) (Note on Significant Changes in Shareholders Equity) (Additional information)

4 1. Qualitative Information on Financial Results (1) Qualitative Information on Consolidated Operating Results (in millions, except percentages) 1Q FY2017 Margin 1Q FY2018 Margin Change Change Sales 33,191 % 35,155 % 1, % Medical practice support 6,092 8,936 2, Consulting Rental 1,539 2, Leasing and Installment Sales 2,334 2,231 (102) (4.4) Others 1,729 4,072 2, Pharmacies 26,853 25,977 (876) (3.3) Others (2) (1.1) Operating Income 1, (554) (40.0) Medical practice support Pharmacies 1, (650) (46.5) Others (6) (2.5) (11) (218.2) Reconciliation (87) - (63) Ordinary Income 1, (466) (35.0) Profit attributable to owners of parent (376) (46.7) The business year ending March 2019 marks the second year of the Action 2020 medium-term management plan. Building a Japanese healthcare business model is one of the themes being pursued by our company under the medium-term management plan. Based on this theme, we will continue to work on healthcare mall development, hospital management support and creation of high-value pharmacies. As a way to attain the vision set for the 50th accounting term, we will add new functions to existing businesses and also strengthen the functions of existing businesses, while expanding our business fields by further branching out into peripheral medical businesses. By doing so, we aim to solidify the foundation for establishing a regional healthcare network. In the first quarter of the current year, consolidated sales from medical practice support increased due to higher sales following Bunkyo Corp. s incorporation into the Sogo Medical Group, and higher revenues from consulting and equipment rental businesses. These positive factors more than offset a decrease in revenue in the pharmacy business against the backdrop of the April 2018 revisions to standard fees paid to dispensing pharmacies and standard pharmaceutical prices, resulting in overall first-quarter sales of 35,155 million yen, up 5.9% from the corresponding period of the previous year. 2

5 On the income front, operating income in the first quarter plunged 40% from a year earlier to 832 million yen, dented by the price revisions that affected the pharmacy segment. Ordinary income amounted to 866 million yen, down 35.0%, while profit attributable to owners of parent totaled 430 million yen, down 46.7%. 3

6 Segment financial results were as follows: 1 Medical practice support A. Consulting The number of medical doctors who were registered with our doctor-to-doctor (D to D) medical practitioner support system (succession planning for medical practices, overall healthcare coordination and practice change support) stood at 76,028 as of the end of the first quarter, up 1,130 from the end of March In the development of healthcare malls, which serve as bases for providing medical and nursing services to local people to help them continue to live in the towns they have grown accustomed to without worry we have established new projects. The number of healthcare malls developed by our company totaled 96 as of the end of the first quarter, up 2 from the end of March Sales from doctor consulting aggregated 586 million yen in the first quarter, representing a 19.9% gain from a year earlier, aided by higher revenues from the development of healthcare malls and leasing of hospital facilities. Our project to support the transfer of medical practices to third parties for the succession of such practices and also for the continued provision of medical services in local communities, undertaken using the D to D system, received an award from the Minister of State for the Promotion of Overcoming Population Decline and Vitalizing Local Economy in Japan, a category of the second Nihon Service Award sponsored by the Japan Productivity Center Service Productivity & Innovation for Growth (SPRING). (June 28, 2018) B. Rental Sales from equipment rental totaled 2,045 million yen in the first quarter, showing a 32.9% increase from the corresponding quarter of the previous year. The strong performance was attributed to an increase in the number of television systems rented and higher sales of products in connection with a number of large-scale projects. As part of our efforts to enhance operational efficiency, we introduced tablets in April 2018 for use by rental service staff in charge of collecting rental fees. C. Leasing / Installment On the contract front, the business environment remained severe during the first quarter of the current business year. However, we received new contracts for supporting the start of medical practices and contracts for replacing new medical equipment and devices. As a result, the value of contracts concluded during the first quarter reached 2,247 million yen, up 18.9% from a year 4

7 earlier. Sales from the leasing and installment businesses increased but sales for goods and supplies decreased, resulting in a year-to-year fall of 4.4% to 2,231 million yen in the overall leasing and installment segment. D. Others Bunkyo Corp., which operates merchandise shops and restaurants at hospitals, was incorporated into the Sogo Medical Group on April 26, 2018 through a 100% equity transfer to our company. The acquisition of Bunkyo contributed greatly to expanding our first-quarter sales in the other category, which soared by 135.5% to 4,072 million yen. Consequently, sales from medical practice support totaled 8,936 million yen in the first quarter, showing a year-on-year increase of 46.7%. Operating income in the segment swelled to 153 million in the quarter under review, a gain of 120.0%, reflecting higher revenues from the consulting and rental businesses and Bunkyo s incorporation into our group. 2 Pharmacy We have strived to have our pharmacies continue to serve as general healthcare stations that are chosen by local communities, under the theme of creation of high-value pharmacies, one of the priority policy measures set under the Action 2020 medium-term management plan. Standard fees paid to dispensing pharmacies and standard pharmaceutical prices were revised in April Under its policy of establishing a comprehensive regional healthcare system, diversifying and reinforcing medical service functions, and promoting the establishment of a collaborative medical-function system, the government has asked for pharmacies to foster so-called primary care pharmacists while contributing to local healthcare services. Under the April revision, a basic fee cut was implemented at dispensing pharmacies which were found to have received concentrated sales orders in connection with prescriptions from specified medical institutions. The revision apparently reflected the government s policy of reassessing pharmacies operating in the neighborhood of hospitals, dealing a severe blow to our group and pharmacy chain operated by our group. In an attempt to increase the number of primary pharmacists and primary pharmacies, the Sogo Medical Group will continue efforts to foster highly professional pharmacists who can respond to advanced pharmaceutical management needs, while increasing the number of pharmacies which can lend support to local medical care. (The number of pharmacies certified as capable of lending such support stood at 92 at the end of the first quarter of the current year.) The number of dispensing pharmacies operated by our group has risen to 691 following the opening of four outlets during the first quarter, including one outlet that became part of our 5

8 group due to its acquisition. Sales in the pharmacy business came to 25,977 million yen in the first quarter, down 3.3%, and operating income in the segment fell to 749 million yen, down 46.5%. Our group implemented measures to respond to the revised standard fees paid to dispensing pharmacies and the revision of standard pharmaceutical prices. But the measures did not generate the intended results during the third quarter, resulting in the poor showing of the pharmacy business. 3 Others Sales in the other category amounted to 242 million yen in the first quarter, falling by 1.1% from the same quarter of the previous year. This category sustained an operating loss of 6 million yen in a turnaround from the operating income of 5 million yen in the first quarter of the previous year. 6

9 (2) Qualitative Information on Consolidated Financial Position Analysis of Assets, Liabilities, and Net Assets (in millions except percentages and ratios) March 31,2018 June 30,2018 Change Total Assets 89,748 89, including Cash and Deposits 14,538 13,576 (961) Liabilities 53,221 53, including Interest-Bearing Debt *1 23,529 25,829 2,299 Net Assets 36,526 36,496 (30) Shareholders' Equity Ratio (%) (0.1) Net Debt-to-Equity Ratio (times) * *1.Interest-Bearing Debts include lease obligations and accounts payable-installment purchases. *2. Net Debt-to-Equity Ratio = (Interest-Bearing Debts-Cash and Deposits) / Shareholders' Equity Total assets at the end of the first quarter stood at 89,943 million yen, rising by 194 million yen from the end of March Total current assets were given as 44,225 million yen, falling by 3,259 million yen mainly due to a decline of 2,496 million yen in notes and accounts receivable-trade and a decline of 961 million yen in cash and deposits. Total noncurrent assets increased by 3,453 million yen to 45,717 million yen, mostly traced to an increase of 2,549 million yen in goodwill. Total liabilities stood at 53,447 million yen at the end of the first quarter, increasing by 225 million yen from the end of the fourth quarter of the previous year. Total current liabilities came to 31,950 million yen, down 1,647 million. Total noncurrent liabilities grew by 1,873 million yen to 21,496 million yen, reflecting an increase of 1,073 million yen in long-term loans payable and a gain of 473 million yen in long-term accounts payable-installment purchase. Interest-bearing liabilities, including leasing liabilities and account payable-installment purchase, rose by 2,299 million yen to 25,829 million yen. The debt equity ratio, calculated by dividing interest-bearing liabilities minus cash and deposits with net worth, stood at 0.34 at the end of June, up 0.09 of a point from three months earlier. Total net assets decreased by 30 million yen to 36,496 million yen, affected by a fall of 486 million yen due to dividend payments, which offset an increase of 430 million yen as a result of the quarterly booking of profit attributable to owners of parent. The capital adequacy ratio stood at 40.3% at the end of the first quarter, dropping by 0.1 of a point from the end of March (3)Qualitative Information on Consolidated Financial Forecasts for FY2018 There are not any changes in consolidated financial forecasts for FY2018 which were announced on April 24,

10 2. Quarterly Consolidated Financial Statements (1) Quarterly Consolidated Balance Sheet (in millions) As of March 31, 2018 As of June 30, 2018 Assets Current assets Cash and deposits 14,538 13,576 Notes and accounts receivable-trade 20,536 18,039 Accounts receivable-installment sales 2,934 2,876 Lease investment assets 1,098 1,314 Inventories 5,787 6,176 Other 2,643 2,294 Allowance for doubtful accounts (53) (52) Total current assets 47,485 44,225 Noncurrent assets Property, plant and equipment Property for lease, net 5,483 5,974 Buildings and structures, net 12,898 13,095 Other, net 7,058 7,196 Total property, plant and equipment 25,440 26,266 Intangible assets Goodwill 9,119 11,668 Other 1,383 1,352 Total intangible assets 10,502 13,021 Total investments and other assets 6,319 6,429 Total noncurrent assets 42,263 45,717 Total assets 89,748 89,943 8

11 (in millions) As of March 31, 2018 As of June 30, 2018 Liabilities Current liabilities Notes and accounts payable-trade 20,037 18,567 Short-term loans payable Current portion of bonds - 44 Current portion of long-term loans payable 4,429 4,877 Lease obligations Income taxes payable 1, Other 6,527 7,663 Total current liabilities 33,598 31,950 Noncurrent liabilities Bonds payable Long-term loans payable 13,831 14,904 Lease obligations Long-term accounts payable-installment purchase 2,754 3,228 Other 2,306 2,319 Total noncurrent liabilities 19,623 21,496 Total liabilities 53,221 53,447 Net assets Shareholders' equity Capital stock 3,513 3,513 Capital surplus 5,566 5,566 Retained earnings 27,470 27,414 Treasury stock (920) (920) Total shareholders' equity 35,629 35,574 Accumulated other comprehensive income Valuation difference on available-for-sale securities Total accumulated other comprehensive income Non-controlling interests Total net assets 36,526 36,496 Total liabilities and net assets 89,748 89,943 9

12 (2) Quarterly Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Quarterly Consolidated Statements of Income) (in millions) Three-Month Period ended June 30,2017 Three-Month Period ended June 30,2018 Net sales 33,191 35,155 Cost of sales 28,492 30,001 Gross profit 4,699 5,154 Selling, general and administrative expenses 3,312 4,321 Operating income 1, Non-operating income Dividends income Rent income 5 5 Other Total non-operating income Non-operating expenses Interest expenses Loss on valuation of investments securities 37 - Other Total non-operating expenses Ordinary income 1, Income before income taxes 1, Income taxes-current Income taxes-deferred Total income taxes Net income Profit (loss) attributable to non-controlling (5) (0) interests Profit attributable to owners of parent

13 (Quarterly Consolidated Statements of Comprehensive Income) (in millions) Three-Month Period ended June 30,2017 Three-Month Period ended June 30,2018 Net income Other comprehensive income Valuation difference on available-for-sale securities Total other comprehensive income Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of the parent Comprehensive income attributable to non-controlling interests (5) (0) (3) Notes to Quarterly Consolidated Financial Statements (Note on the Going-Concern Assumption) None (Note on Significant Changes in Shareholders Equity) None (Additional information) Partial revisions to the Standards related to Tax Effect Accounting (Corporate Accounting Standards, No. 28, February 16, 2018) were adopted from the start of the fiscal year ending March 31, 2019 (i.e. the start of the first quarter). In accordance with the revisions, deferred tax assets will now be presented under the category investments and other assets and deferred tax liabilities will be presented under noncurrent liabilities. 11