English Translation

This document is a translation of the Japanese original. The Japanese original has been disclosed in Japan in accordancewith Japanese accounting standards and the Financial Instruments and Exchange Act. This document does not containor constitute any guarantee and the Company will not compensate any losses and/or damage stemming from actions
taken based on this document. In the case that there is any discrepancy between the Japanese original and thisdocument, the Japanese original is assumed to be correct.

Consolidated financial results (Japanese Accounting Standards)
for the Second Quarter of the fiscal year ending March 31, 2021

Company name:IMAGICA GROUP Inc.

Securities code:

6879

Filing date: October 30, 2020
Stock exchange listing: Tokyo 1st section
URL:

https://www.imagicagroup.co.jp/en/

Representative:
Nobuo Fuse, President
Inquiries:
Masakazu Morita, Director and Managing Executive Officer
Quarterly report filing date (as planned):
October 30, 2020
Dividend payment date (as planned):－
Supplemental material of quarterly results:
Yes
Convening briefing of quarterly results:
Yes

Tel:+81-3-6741-5742(Millions of yen, rounded down)
1. Consolidated Financial Results for the Second Quarter of the fiscal year ending March 31, 2021
(April 1, 2020 – September 30, 2020)(1) Consolidated Operating Results(Percentage represents change from the same period of the previous fiscal year.)
Net income attributable
Ordinary income
to owners of the parent

Net sales

Operating income

Millions ofyen%Millions of yen%

Millions of yen%

Millions of yen%

6 months ended Sept 30, 2020

35,835(24.4)(2,628)－(2,928)－(1,952)－6 months ended Sept 30, 201947,422

13.2

275

－

(192)

－

865

－

(Note) Comprehensive income: 2nd quarter ended September 30, 2020: (2,435) millions of yen /－%2nd quarter ended September, 2019: 10 millions of yen /－%Earnings per share ofcommon stock
Yen

Diluted earnings
per share ofcommon stockYen

6 months ended Sept 30, 2020

(44.05)－6 months ended Sept 30, 2019

19.64

－

(2) Consolidated Financial Position
Total assets
As of Sept 30, 2020
As of March 31, 2020

Net assets

Millions of yen

Millions of yen

56,957
62,15422,02627,478(Reference) Shareholders’ equity: As of September 30, 2020: 20,828 millions of yen
As of March 31, 2020: 25,066 millions of yen

Shareholders' equity
ratio to total assets

%

36.6
40.3

English Translation
2. Dividends

Dividend per share
1st quarter- end

2nd quarter- end

3rd quarter- end

Year-end

Annual

yen

yen

yen

yen

yen

Year ended March 31,2020

－

0.00

－

5.00

5.00

Year ending March 31,2021

－

0.00
－

0.00

0.00

Year ending March 31,2021(Forecast)(Note) Changes in dividends forecast from the latest disclosed information: Yes

The previously undetermined interim and year-end dividends have been set at zero dividends.

3. Consolidated forecast for the fiscal year ending March 31, 2021
(April 1, 2020 - March 31, 2021)(Percentage represents change from the same period of the previous fiscal year.)Net salesYear ending March 31,2021

Operating income

Net income
attributableto owners of theparentOrdinary income

Earnings per
shareof commonstock

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen%

yen

84,000(10.7)(2,200)－(2,650)－(1,150)－(25.91)(Note) Changes in earnings forecast from the latest disclosed information： Yes
The financial forecast for consolidated fiscal year ending March 31, 2021 was previously undetermined. We have now calculated the financial forecast basedon information and projections available at present. Please refer to “1. Qualitative Information on Results in the Second Quarter, (3) Explanation ofConsolidated Forecasts and Other Forward-looking Information” on page 5 of the supplemental material for further details.

*Notes:(1) Material changes in subsidiaries during this period (changes in scope of consolidations resulting from change insubsidiaries): None
(2) The application of specific accounting of the consolidated quarterly financial statements: None
(3) Changes in accounting policies, accounting estimates and retrospective
1) Changes in accounting policies based on revisions of accounting standards: None
2) Changes in accounting policies other than ones based on revisions of accounting standards: 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)
As of September 30, 2020

44,741,467 shares

2) Number of treasury stock at the end of fiscal year

As of September 30, 2020

3) Average number of shares

As of September 30, 2020

353,231 shares

44,312,754 shares

As of March 31, 2020

44,741,467 shares

As of March 31, 2020

468,341 shares

As of September 30, 201944,056,942 shares*Consolidated quarterly financial results are exempted from quarterly review by a public certified accountant or an
auditing firm.
(Explanation regarding the appropriate usage of financial forecasts and other special instructions)
Forward-looking statements, such as financial forecasts, presented in this document are based on information available
and certain assumptions deemed to be reasonable to the Company at the time of publication, and are not to be read as
guarantees of future performance by the Company. For preconditions of the assumptions and special instructions
regarding the appropriate use of financial forecasts, please refer to “1. Qualitative Information on Results in the Second
Quarter, (3) Explanation of Consolidated Financial Forecast and Forward-looking Statements” on page 3 of the
supplemental material.

English Translation

Table of Contents
1.

2.

Qualitative Information on Results in the Second Quarter

2(1) Explanation of operating results

2(2) Explanation of Financial Position

3(3) Explanation of consolidated forecasts and other forward-looking information

4

Quarterly Consolidated Financial Statements

5(1) Quarterly Consolidated Balance Sheets

5(2) Quarterly Consolidated Statements of Income and Statements of Comprehensive Income

7(3) Notes to Quarterly Consolidated Statements

9(Notes regarding ongoing concern assumption)

9(Notes concerning material changes in the amount of shareholders’ equity)

9(Segment information and others)

91English Translation

1. Qualitative Information on Results in the Second Quarter(1) Explanation of operating results(Overview of the second quarter of consolidated fiscal year ending March 31, 2021)
During the first half of consolidated fiscal year ending March 31, 2021, there was no end in sight to the spread of the novel coronavirus (COVID-19)
and both social and economic activities were restricted. The IMAGICA GROUP also implemented steps to prevent the spread of the virus to the
maximum extent possible as business activities were resumed. While signs of gradual improvement have been seen in each business segment,
COVID-19 is still having a major impact on Group business conditions.
The Group’s financial performance for the first half of fiscal year ending March 31, 2021 resulted in net sales of 35,835 million yen (a decline of
24.4% year-on-year), an operating loss of 2,628 million yen (compared to an operating income of 275 million yen in the first half of the previous
fiscal year), an ordinary loss of 2,928 million yen (compared to an ordinary loss of 192 million yen in the first half of the previous fiscal year), and a
net loss attributable to owners of the parent of 1,952 million yen (compared to a profit of 865 million yen in the first half of the previous fiscal
year).

(Performance by business segment)
The financial results by business segment are as follows.
Please note that Production Services and Media Localization were integrated from the first quarter of consolidated fiscal year ending March 31,
2021, thereby reducing the four reportable segments to three: Content Creation, Production Services, and Imaging Systems & Solutions.
1) Content Creation
The financial performance of the Content Creation Business Segment in the first half of consolidated fiscal year ending March 31, 2021 resulted in
net sales of 7,190 million yen (a decline of 53.5% year-on-year) and an operating loss of 712 million yen (compared to an operating loss of 26 million
yen in the first half of the previous fiscal year).
Some feature film productions were released at the end of the second quarter, but other film productions were postponed to the third quarter orlater, causing the recognition of sales to be postponed to the third quarter or later. While shooting of TV commercials is gradually resuming, live
music performance recordings continue to be suspended or postponed. Conditions also caused changes in animated TV program broadcastingschedules in addition to a decline in the number of TV animation series produced. The above factors resulted in a decline in sales and an expansionof the operating loss in the Content Creation Business Segment.
2) Production Services
The financial performance of the Production Services Business Segment in the first half of consolidated fiscal year ending March 31, 2021 resulted
in net sales of 20,719 million yen (a decline of 12.7% year-on-year) and an operating loss of 2,224 million yen (compared to an operating loss of 751
million yen in the first half of the previous fiscal year).
Media and post-production services*1 continued to secure orders for post-production services for TV programs. Post-production for TV
commercials, digital cinema services, video streaming, and archiving services saw a rebound in orders during the second quarter, compared to thefirst quarter.
Orders for international media services decreased as the lockdowns in various countries in Europe and North America to prevent the spread of
COVID-19 caused suspension of production for new projects.
In human talent services, companies placed restrictions on new hiring activities and this resulted in a decline in demand in the creative talentdispatch and referral business compared to the previous year. In the digital content business, the shift to remote operation for the production ofGame 3DCG maintained sales on par with last fiscal year, despite the decline in operations in the debugging business.
The above factors resulted in a decline in sales and an expansion of the operating loss in the Production Services Business Segment.
Media and post-production services: Refers to the entire range of services relating to video production technology, including post-production
services, E2E services*2, filming, and archiving services.
*1

E2E services: Refers to an integrated end-to-end (E2E) service that covers the entire post-editing process from localization (subtitling/dubbing) to
distribution*3 of feature films, TV dramas, and other source videos.

*2

Distribution refers to a comprehensive service which includes the creation of data from the original version of the completed work, QC anddistribution tailored to the requirements of release/delivery format of visual contents (theater, VOD, DVD/BD, etc.), and the management of theprocess and source materials.

*3

Companies in international media services have a fiscal year-end of December 31. The financial performance for this area during the second
quarter of fiscal year ending March 31, 2021 therefore reflects the results for January 1 through June 30, 2020.
*2

English Translation

3) Imaging Systems & Solutions
The financial performance of the Imaging Systems & Solutions Business Segment in the first half of consolidated fiscal year ending March 31, 2021
resulted in net sales of 8,495 million yen (a decline of 5.1% year-on-year) and operating income of 558 million yen (a decline of 55.3% year-onyear).
In the video systems business area, sales of the online delivery system for TV commercials was strong, while recognition of sales from projects forbroadcasting stations were postponed to the third quarter or later, due to postponement of system equipment deliveries. In the imaging businessarea, conditions were tough for high-speed cameras in Japan, Europe, and the U.S., while sales showed signs of rebounding in the Asian region. In
the mobile solutions area, continued expansion of domestic demand for mobile data communications resulted in sales growth, and sales were alsosteady for video and image processing LSI for Taiwan and China.
The above factors resulted in a decline in sales and profit in the Imaging Systems & Solutions Business Segment.

(2) Explanation of Financial Position(Assets Statement)

Current assets decreased by 4,634 million yen (or 13.1%) from the end of the previous consolidated fiscal year to 30,661 million yen.
This was mainly due to a fall in notes and accounts receivable- trade.
Non-current assets decreased by 563 million yen (or 2.1%) from the end of the previous consolidated fiscal year to 26,296 million yen.
This was mainly due to a decrease in goodwill and stocks of subsidiaries and affiliates.
Consequently, total assets declined by 5,197 million yen (or 8.4%) from the end of the previous fiscal year to 56,957 million yen.
(Liabilities Statement)
Current liabilities increased by 594 million yen (2.3%) from the end of the previous consolidated fiscal year to 26,356 million yen.
This increase was mainly due to an increase in advance payments and short-term loans payable which more than compensated for a decrease innotes and accounts payable-trade, income taxes payable, and provision for bonuses.
Non-current liabilities decreased by 339 million yen (3.8%) from the end of the previous consolidated fiscal year to 8,574 million yen.
This decrease was mainly due to a decrease in long-term loans payable, which more than compensated for an increase in deferred tax liabilities.
The above factors resulted in total liabilities of 34,931 million yen, an increase of 255 million yen (0.7%) from the end of the previous consolidated
fiscal year.
(Net Assets)
Net assets declined by 5,452 million yen (19.8%) from the end of the previous consolidated fiscal year to 22,026 million yen.
This was mainly due to a decrease in capital surplus and retained earnings.

3

English Translation(3) Explanation of consolidated forecasts and other forward-looking information

The impact of COVID-19 on business activities made it difficult to calculate a reasonable financial forecast for fiscal year ending March 31, 2021 andwe therefore did not disclose a forecast. We have now calculated the financial forecast based on information and projections available at present,
and are therefore disclosing the forecast.
During the first quarter of consolidated fiscal year ending March 31, 2021, voluntary restraints on economic activity to prevent the spread of
COVID-19 had a serious impact on the various business activities of the IMAGICA GROUP. Business activities gradually resumed during the second
quarter. Orders for post-production for television programs rebounded, and sales of high-speed cameras and sales of video and image processing
LSI in the Asian region rebounded. Performance is also expected to improve in the third quarter onward due to the scheduled release of featurefilm productions that have been ordered and anticipated orders for projects from broadcasting stations in the video systems business.
Based on these projections, the Group forecasts consolidated financial performance as follows: Net sales of 84,000 million yen, an operating loss of
2,200 million yen, an ordinary loss of 2,650 million yen, and a net loss attributable to owners of the parent of 1,150 million yen. The financial
forecast provided above may change, depending on the conditions and timing of gaining control over COVID-19.
* (Reference) The operating loss noted above includes approximately 1,300 million yen for amortization of goodwill, etc..
The Group has entered a major period of transformation in our core imaging business due to an environment and social changes precipitated by the
recent spread of the novel coronavirus in addition to rapid advancement in technological innovation.
The Group is accelerating reforms aimed at accomplishing “Integration to 2021” by seizing the business opportunities presented by these changes
in the environment to take on the challenge of offering new types of entertainment through imaging, producing visual content that suits new
lifestyles, using imaging in non-entertainment fields such as healthcare and education, and other initiatives to transform our business model andcreate new businesses.
<Dividend forecast>
The Group considers the return of profits to shareholders as an important management objective. Our basic policy is to distribute earnings in linewith consolidated results. We target a consolidated payout ratio of 30% and aim to maintain stable dividends and increase the level of dividends.
We project a net loss attributable to owners of the parent for this fiscal year. We have therefore decided to declare zero year-end dividends basedon the basic policy stated above.

4

English Translation

2.

Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheets(Thousands of yen)March 31, 2020

September 30, 2020

AssetsCurrent assets
Cash and deposits

7,339,777

5,871,379

Notes and accounts receivable- trade16,609,098

11,661,475

Inventories

9,734,028

10,816,774

Other

1,665,660

2,364,964

Allowance for doubtful accounts(53,471)(53,534)

35,295,092

30,661,059

Buildings and structures

3,343,459

3,226,095

Machinery and equipment

133,153

114,780

1,705,819

1,705,819

Lease Assets

735,973

632,057

Construction in progress

341,285

151,637

Other

1,563,637

1,680,987

Total Property, plant and equipment

7,823,328

7,511,377

Software1,242,332

1,150,710

Goodwill

3,167,870

2,864,123

Other

4,085,856

3,874,802

Total Intangible assets

8,496,059

7,889,636

Investment securities

2,296,170

2,617,035

Stocks of subsidiaries and affiliates

2,691,296

2,437,383

Long-term loans receivable

1,986,264

1,982,584

Lease and guarantee deposits

1,466,390

1,446,265

Deferred tax asset

1,852,835

2,175,208

Total current assets
Non-current assets
Property, plant and equipment

Land

Intangible assets

Investments and other assets

Other375,336

359,073

Allowance for doubtful accounts(128,070)(121,983)

Total Investments and other assets

10,540,222

10,895,566

Total Non-current assets

26,859,610

26,296,579

Total assets

62,154,703

56,957,639

5

English Translation(Thousands of yen)March 31, 2020

September 30, 2020

Liabilities
Current liabilities
Notes and accounts payable- trade

6,060,774

4,240,950

Short-term loans payable

5,004,318

7,055,761

Accounts payable

3,027,865

3,999,151

Income taxes payable

1,504,588

275,699

Advances received

4,939,345

7,145,756

Provision for bonuses

1,245,383

784,347

Provision for directors compensations based on profit

106,568－

Provision for loss on order received

218,878

40,653Other

3,654,716

2,814,563

Total current liabilities

25,762,438

26,356,883

5,510,940

5,047,719

Non-current liabilities
Long-term loans payable
Long-term accounts payable-other

174,097

148,018

Deferred tax liabilities

283,312435,790

Net defined benefit liabilities

1,233,649

1,285,535

Other

1,711,796

1,657,315

Total non-current liabilities

8,913,796

8,574,378

Total Liabilities

34,676,235

34,931,261

Net assets
Shareholders’ equity
Capital stock

3,306,002

3,306,002

Capital surplus

14,871,552

12,562,840

Retained earnings

7,730,081

5,556,559

Treasury stock(479,516)(361,659)

Total shareholders’ equity

25,428,120

21,063,743

187,009406,792－(5,897)

Revaluation reserve for land

(17,933)(17,933)

Foreign currency translation adjustment(529,312)(616,913)

Re-measurements of defined benefit plans(1,082)(1,026)(361,318)(234,977)

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

Total accumulated other comprehensive income
Stock acquisition right

11,484

11,484Non-controlling Interests

2,400,180

1,186,127

Total Net assets

27,478,467

22,026,377

Total liabilities and Net assets

62,154,703

56,957,639

6

English Translation(2) Quarterly Consolidated Statements of Income and Statements of Comprehensive Income
Quarterly Consolidated Statements of Income
6 months ended
September 30, 2019

(Thousands of yen)

6 months ended
September 30, 2020

Net sales

47,422,306

35,835,183

Cost of sales

36,064,990

28,213,928

Gross profit

11,357,316

7,621,255

Selling, general and administrative expenses

11,081,854

10,249,792

275,462(2,628,536)

Interest income

62,733

134,751

Dividend income
Foreign exchange gains

22,305

15,408－12,017

Other

86,519103,158

Total non-operating income

171,558

265,336

Interest expenses

169,528

152,274

Equity in losses of affiliates

280,735

339,691

Foreign exchange losses

106,311－

Other

82,82073,494

Operating profit (loss)
Non-operating income

Non-operating expenses

Total non-operating expenses

639,395

565,460

Ordinary loss

(192,374)(2,928,661)

Extraordinary income
Gain on sales of non-current assets

1,650,357

1,194

Compensation for forced relocation－

121,825

7,753

216

1,658,110

123,236

Other
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Loss on retirement of non-current assets
Impairment loss－

263

16,52029,036－

73,135Other

14,146

16,302

Total extraordinary losses

30,666

118,738

Net income (loss) before income tax

1,435,069(2,924,162)

Income taxes

1,024,996(436,957)

Net income (loss)

410,072(2,487,205)

Net loss attributable to non-controlling interests(455,305)(535,049)

Net income (loss) attributable to owners of the parent

865,378(1,952,155)

7

English Translation

Quarterly Consolidated Statements of Comprehensive Income
6 months ended
September 30, 2019

(Thousands of yen)

Net income (loss)

6 months ended
September 30, 2020

410,072(2,487,205)(181,870)

219,140

Other comprehensive income
Valuation difference on available-for-sale securities

1,312(5,897)

Foreign currency translation adjustment

Deferred gains or losses on hedges(217,412)(161,240)

Re-measurements of defined benefit plans(1,761)55

Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive
interests

incomeattributabletonon-controlling

8(399,730)

52,058

10,341(2,435,146)

507,838(1,825,815)(497,496)(609,330)

English Translation(3) Notes to Quarterly Consolidated Statements(Notes regarding ongoing concern assumption)
No relevant matters to be noted.
(Notes concerning material changes in the amount of shareholders’ equity)
The Group acquired additional shares in a consolidated subsidiary during the second quarter of consolidated fiscal year ending
March 31, 2021. This decreased the capital surplus by 2,237,130 thousand yen.
The Group also granted 115,110 shares of treasury stock as restricted stock compensation, based on the resolution passed by the
Board of Directors on June 30, 2020. This decreased the capital surplus by 71,582 thousand yen and treasury stock by 117,856
thousand yen.
The above changes resulted in a capital surplus of 12,562,840 thousand yen and 361,659 thousand yen in treasury stock as of
September 30, 2020.
(Segment information and others)[Segment Information]
I.
For the 6 months ended September 30, 2019 (from April 1, 2019 to September 30, 2019)1.

Information regarding net sales and profit (loss) by reportable segment

Content Creation
Net sales
Sales to externalcustomers
Inter-segment
sales or transfers
Total
Segment income (loss)(Thousands of yen)
Sub total

23,235,180

8,772,148

47,416,816

44,762508,761

182,914

736,438

15,454,250

23,743,941

8,955,062

48,153,255(26,420)(751,200)

1,250,617

472,997

Net sales

Segment income (loss)

Imaging Systems &Solutions

15,409,488

Adjustments(Note 1)

Sales to externalcustomers
Inter-segment
sales or transfers
Total

Production
ServicesAmount in the
Quarterly
Consolidated
Statements of Income(Note 2)

5,490

47,422,306(736,438)－(730,948)

47,422,306(197,535)

275,462

Notes:
1.
The segment income (loss) adjustment of (197,535) thousand yen consists of 1,445,767 thousand yen in incomes of holding companies(consolidated financial statement-submitting companies) and intersegment transaction eliminations of (1,643,303) thousand yen.
2.
The segment income (loss) adjustment is based on the operating profit item in the Quarterly Consolidated Statements of Income.

9English TranslationII.

For the 6 months ended September 30, 2020 (from April 1, 2020 to September 30, 2020)
1.

Information regarding net sales and profit (loss) by reportable segment

Content Creation
Net sales
Sales to externalcustomers
Inter-segment
sales or transfers
Total
Segment income (loss)(Thousands of yen)
Sub total

20,393,202

8,271,045

35,829,410

25,170326,361

224,235

575,767

7,190,332

20,719,563

8,495,281

36,405,178(712,178)(2,224,281)

558,909(2,377,550)

Net sales

Segment income (loss)

Imaging Systems &Solutions

7,165,162

Adjustments(Note 1)

Sales to externalcustomers
Inter-segment
sales or transfers
Total

Production
ServicesAmount in the
Quarterly
Consolidated
Statements of Income(Note 2)

5,773

35,835,183(575,767)－(569,994)

35,835,183(250,986)(2,628,536)

Notes:
1.
The segment income (loss) adjustment of (250,986) thousand yen consists of 1,338,912 thousand yen in incomes of holding companies(consolidated financial statement-submitting companies) and intersegment transaction eliminations of (1,589,898) thousand yen.
2.
The segment income (loss) adjustment is based on the operating loss item in the Quarterly Consolidated Statements of Income.

2.

Note concerning changes in reportable segments

The IMAGICA GROUP previously had four business segments: Content Creation, Production Services, Media Localization, and Imaging Systems &Solutions. The Production Services and Media Localization business segments were integrated from the first quarter of consolidated fiscal year
ending March 31, 2021, thereby reducing the number of reportable business segments to three: Content Creation, Production Services, andImaging Systems & Solutions.
The figures provided in “Information regarding net sales and profit (loss) by reportable segment” for the second quarter of the previous
consolidated fiscal year show the figures after the changes to the reportable segments were made.

10