English translation
This is a translation of the original release in Japanese. In the event of any discrepancy, the original release shall prevail.

Consolidated financial results (Japanese Accounting Standards)
for the Second Quarter of the fiscal year ending March 31, 2020
Company
name:

IMAGICA GROUP Inc.

Filing date: October 31, 2019
Stock exchange listings: Tokyo 1st section

Securities code:

6879

URL:

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

Representative:
Nobuo Fuse, President
Tel:+81-3-6741-5742
Inquiries:
Masakazu Morita, Director and Managing Executive Officer
Quarterly report filing date(as planned):
October 31, 2019
Dividend payment date(as planned):－
Supplemental material of quarterly
Yes
results:
Convening briefing of quarterly results:
Yes(In millions of yen)

1. Consolidated Financial Results for the Second Quarter ending March 31, 2020
(April 1, 2019 - September 30, 2019)(1) Consolidated Operating Results(Percentage represents change from the same period of the previous fiscal year.)Net sales

Operating income

Net income attributableto owners of the parent

Ordinary income

Millions of yen%

Millions of yen%

Millions of yen%

Millions ofyen%

6 months ended Sept 30, 201947,422

13.2

275

－

(192)

－

865

－

6 months ended Sep 30, 2018

41,904

(0.8)

(710)

－

(649)

－

(164)

－

(Note) Comprehensive income:2nd quarter ended September 30, 2019: 10 millions of yen /－%2nd quarter ended September 30, 2018: (1,207) millions of yen /－%Earnings per shareof common stock

Diluted earnings
per share ofcommon stock

Yen

yen

6 months ended Sept 30, 2019

19.64

－

6 months ended Sept 30, 2018(3.71)－(2) Consolidated Financial Position
Total assets

Net assets

Shareholders' equity
ratio to total assets

Millions of yen

Millions of yen

2nd quarter ended Sept 30, 201959,25527,644

42.9

Year ended March 31, 2019

64,72527,897

38.9(Reference) Shareholders’ equity:%

2nd quarter ended September 30, 2019: 25,443 millions of yen
Year ended March 31, 2019: 25,150 millions of yen

2. Dividends

Dividend per share

1st quarter- end

2nd quarter- end

3rd quarter- end

Year ended March 31,2019

－

0.00

－

5.00

5.00

Year ending March 31,2020

－

0.00
－

5.00

5.00

yen

Year ending March 31,2020(Forecast)

yen

yen

－

(Note) Changes in dividends forecast from the latest disclosed information: No

1

Year-endyen

Annualyen

English translation
This is a translation of the original release in Japanese. In the event of any discrepancy, the original release shall prevail.

3. Consolidated forecast for the fiscal year ending March 31, 2020
(April 1, 2019 - March 31, 2020)(Percentage represents change from the same period of the previous fiscal year.)Net sales
Millions of yen
Year ending March 31,2020

Operating income%

95,000

5.0

Ordinary income

Net income
attributableto owners of theparentEarnings per
shareof commonstock

Millions of yen%

Millions of yen%

Millions of yen

%

yen

1,680

81.0

1,200

52.0

1,800

-

40.86

(Note) Changes in earnings forecast from the latest disclosed information： No(Reference) It is included goodwill amortization 1.1 billion yen due to the acquisition as an expense in the operating income.

* Notes(1) Material changes in subsidiaries during this period (Changes in scope of consolidations resulting from change
is subsidiaries): Yes(Name) IMAGICA TOTAL SERVICE(2) Applying 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 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)
As of September 30, 201944,531,567 shares

As of March 31, 201944,531,567 shares

As of March 31, 2019478,341 shares

2) Number of treasury stock at the end of fiscal year
As of September 30, 2019468,341 shares

3) Average number of shares
As of September 30, 201944,056,942 shares

As of September 30, 2018

44,200,631 shares(Explanation about the appropriate usage of business prospects and other special notes)
・The above-mentioned business forecasts were based on the information available as of the date of the release of this report.
・Future events may cause the actual results to be significantly different from the forecasts.
(Disclaimer)This document is a translation of the Japanese original. The Japanese original has been disclosed in Japan inaccordance with Japanese accounting standards and the Financial Instruments and Exchange Act. This document
does not contain or 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 theJapanese original and this document, the Japanese original is assumed to be correct.

2

English translation
This is a translation of the original release in Japanese. In the event of any discrepancy, the original release shall prevail.

1. Qualitative Information on Results in the Second Quarter(1) Explanation of operating results(Overview of the second quarter of the consolidated fiscal year ending March 31, 2020)

Considering growth opportunities and business issues around, the Imagica Group (the “Group”), we have determined
the new mid-term business strategy named “Integration to 2021” by aiming to build a balanced business portfolio alongwith growth potential and profitability, accelerating the Group’s structure reform.
Based on this new mid-term business strategy, we have positioned this fiscal year as a year to regain profitability andhave set “Motivate “Integration to 2021” on imaging” our basic policy. Each business segment has been working on theirown key issues.
In the consolidated cumulative second quarter of the fiscal year ending March 31, 2020, the Group recorded net sales of
47.422 billion yen (up 13.2% year on year), operating income of 275 million yen (operational loss of 710 million yen in thesame quarter of the prior year), ordinary loss of 192 million yen (649 million yen in the same quarter of the prior year),and profit attributable to owners of parent of 865 million yen (164 million yen in the same quarter of the prior year). It
recorded extraordinary gain of 1,658 million yen as a result of fixed asset transfer.

(Performance by Business Segment)1） Content Creation
The financial performance of the contents creation business segment in the consolidated cumulative period of thissecond quarter was net sales of 15.454 billion (+44.5% year on year), operating loss of 26 million yen (compared to 329
million yen in the previous year).
The content creation business segment showed a significant increase in sales. Contributing factors were expanded
scale of theatrical film production, including anime and live action films, and increased number of commercials and concert
recordings, including major live-music performances. These trends remained strong. Operational income improved as aresult of increased gross margin from sales growth. Contributing factors also included, among other things, reduced
production cost of television anime series and reduced amortization cost from the one-time goodwill amortization done at
the end of the prior consolidated fiscal year.
2) Production Services
The financial performance of the production service business segment in the consolidated cumulative period of thissecond quarter was net sales of 12.676 billion yen (-4.4% year on year), operating loss of 57 million yen (compared to 28
million yen in the previous year).
In the area of post-production and E2E services for video content, digital cinema services performed well and postproduction services for feature films and anime remained firm. As a result, sales maintained the same level from theprior year. Additionally, cost control measures proved effective and profit improved. On the other hand, sales and profit
decreased compared to the prior year for the human resource services, caused by the sale of one of the affiliatedcompanies and investment for the expansion of digital content business.
(E2E services: An end-to-end (E2E) service covers an entire process from localization (subtitling/dubbing) to distributionof feature films and other source videos (creation, inspection, and distribution of data tailored to the requirements ofrelease/delivery format).
3) Media Localization
The financial performance of the media localization business segment in the consolidated cumulative period of thissecond quarter was net sales of 11.120 billion yen (-8.4% year on year), operating loss of 692 million yen (compared to
828 million yen in the previous year).
For the media localization business, net sales dropped as two of the consolidated subsidiaries were sold, and as businessremained slow for localization of television programs in Europe. Nevertheless, profit was gained as a result of keeping theimpact of sales loss under control, by maintaining highly profitable production deals as well as by examining the
production system and clearly reducing fixed costs.
Additionally, there has been an ongoing effort to secure increased
volume of new orders for video streaming platforms, by working together with Pixelogic Holdings, LLC, the Group’s equitymethod affiliate since April 2019.
4)
Imaging Systems & Solutions
The financial performance of the imaging systems and solutions business segment in the consolidated cumulative periodof this second quarter was net sales of 8.955 billion yen (+33.6% year on year), operating income of 1.25 billion yen(+86.3% year on year).
The imaging systems and solutions business achieved significant sales and profit.

3

English translation
This is a translation of the original release in Japanese. In the event of any discrepancy, the original release shall prevail.

In the video systems part of the business, a major project was completed in the second quarter, and the sale of onlinetransmission system for commercials continued to do well in line with increasing market needs. In the imaging part ofthe business, sales of the new high-speed camera is continued to grow in Europe and in America.
*Until the previous consolidated fiscal year, this part of the Group’s business was called the “professional video equipmentarea.” To better suit the Group’s updated business category, it was changed to “imaging systems and solutions.”

Explanation of financial position(Assets Statement)
Current assets decreased by 6.217 billion yen (or 15.5%) from the end of the previous consolidated fiscal year to33.901 billion yen. This was mainly due to a fall in notes and accounts receivable- trade and in inventories.
Non-current assets increased by 747 million yen (or 3.0%) from the end of the previous consolidated fiscal year to25.353 billion yen. This was mainly due to a fall in land, while an increase in stocks of subsidiaries and affiliates.
Consequently, total assets declined by 5.469 billion yen (or 8.5%) from the end of the previous fiscal year to 59.255
billion yen.
(Liabilities Statement)
Current liabilities decreased by 3.376 billion yen (or 12.6%) from the end of the previous consolidated fiscal year to23.336 billion yen. This was mainly due to a fall in advance payment and notes and accounts payable-trade.
Non-current liabilities declined by 1.84 billion yen (or 18.2%) from the end of the previous consolidated fiscal year to
8.274 billion yen. This was mainly due to a fall in long-term loans payable.
Consequently, total liabilities decreased by 5.217 million yen (or 14.2%) from the end of the previous consolidated fiscal
year to 31.61 billion yen.
(Net Assets)
Net assets declined by 252 million yen (or 0.9%) from the end of the previous consolidated fiscal year to 27.644 billion
yen. This was mainly due to decrease non-controlling interests, while an increase in retained earnings.

(2) Explanation of consolidated forecasts

The Group has not revised its consolidated forecast for the fiscal year ending March 31, 2020 announced on May 14,
2019.

4

English translation
This is a translation of the original release in Japanese. In the event of any discrepancy, the original release shall prevail.

2. Quarterly Consolidated Financial Statements(1) Quarterly consolidated balance sheets(Thousands of yen)

As of March 31, 2019

As of September 30,
2019

AssetsCurrent assets
Cash and deposits

6,079,172

5,278,143

Notes and accounts receivable- trade

19,043,240

14,698,981

Inventories

11,352,166

10,483,764

Other

3,704,760

3,488,267(60,006)(47,213)

40,119,332

33,901,943

3,502,684

3,293,406

Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Machinery and equipment
Land
Lease Assets
Construction in progress

117,391

122,098

2,944,295

1,705,819

800,677

660,636

60,508

163,780

Other

1,658,500

1,570,419

Total Property, plant and equipment

9,084,058

7,516,160

Software

1,189,223

1,120,381

Goodwill

3,769,751

3,377,962

Other

4,377,450

4,160,593

Total Intangible assets

9,336,425

8,658,936

2,780,364

2,769,395

306,705

2,976,765

Lease and guarantee deposits

1,177,433

1,333,657

Deferred tax asset

1,407,252

1,579,999

624,476

653,041(110,528)(134,280)

Intangible assets

Investments and other assets
Investment securities
Stocks of subsidiaries and affiliates

Other
Allowance for doubtful accounts
Total Investments and other assets

6,185,703

9,178,579

Total Non-current assets

24,606,187

25,353,676

64,725,520

59,255,620

Total assets

5English translation
This is a translation of the original release in Japanese. In the event of any discrepancy, the original release shall prevail.

As of March 31, 2019

(Thousands of yen)

As of September
30, 2019

Liabilities
Current liabilities
Notes and accounts payable- trade

6,657,281

5,366,863

Short-term loans payable

5,375,309

5,918,097

Accounts payable

3,688,369

4,138,153

Income taxes payable

646,989

878,775

Advance payment

5,735,832

2,727,806

Provision for bonuses

1,131,264

898,339

Provision for directors compensations based on profit

146,678

64,580

Provision for loss on order received

73,117

93,281Other

3,257,658

3,250,398

Total current liabilities

26,712,502

23,336,297

6,169,835

4,812,259

Long-term accounts payable-other316,773

180,263

Deferred tax liabilities

493,520461,622

1,356,280

1,190,677

Other

1,779,206

1,629,857

Total non-current liabilities

10,115,616

8,274,680

Total Liabilities

36,828,119

31,610,977

Capital stock

3,244,915

3,244,915

Capital surplus

14,816,170

14,811,781

Retained earnings

7,286,290

7,931,402

Treasury stock(489,754)(479,516)

24,857,620

25,508,583

741,443

560,813

Non-current liabilities
Long-term loans payable

Net defined benefit liabilities

Net assets
Shareholders’ equity

Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges(1,346)(33)

Revaluation reserve for land

(17,933)(17,933)

Foreign currency translation adjustment(442,700)(619,162)

Re-measurements of defined benefit plans

12,91911,157

Total accumulated other comprehensive income

292,382(65,157)－

11,835

Stock acquisition rightNon-controlling Interests

2,747,397

2,189,382

Total Net assets

27,897,401

27,644,643

Total liabilities and Net assets

64,725,520

59,255,620

6

English translation
This is a translation of the original release in Japanese. In the event of any discrepancy, the original release shall prevail.

(2) Quarterly consolidated statements of income and statements of comprehensive income

Quarterly consolidated statements of income(Thousands of yen)

6months ended
September 30, 2018

6months ended
September 30, 2019

Net sales

41,904,658

47,422,306

Cost of sales

31,404,935

36,064,990

Gross profit

10,499,722

11,357,316

Selling, general and administrative expenses

11,210,436

11,081,854(710,713)

275,462Interest income

1,531

62,733

Dividend income

24,41422,305

Rent income

33,72535,575Equity in earnings of affiliates

22,310－Foreign exchange gains

62,379－Other

88,70450,943

Total non-operating income

233,065

171,558

154,658

169,528－

280,735

Operating income (loss)
Non-operating income

Non-operating expenses
Interest expenses
Equity in losses of affiliates－

106,311

Other

Foreign exchange losses

17,04682,820Total non-operating expenses

171,704

639,395(649,353)(192,374)

1,770

1,650,357

Ordinary income (loss)
Extraordinary income
Gain on sales of non-current assets
Gain on investment securities

369,510

7,753

Total extraordinary income

371,281

1,658,110

Extraordinary losses
Loss on sales of non-current assets

24,293－

Loss on disposal of non-current assets

10,463

16,520Loss on sales of investment securities－

13,650

Relocation-related expenses

18,500－Other

14,691

496

Total extraordinary losses

67,94830,666(346,020)

1,435,069

Income taxes

281,926

1,024,996

Profit (loss)(627,946)

410,072

Profit (loss) attributable to non-controlling interests(463,931)(455,305)

Profit (Loss) attributable to owners of parent(164,014)

865,378

Income(loss) before income tax

7English translation
This is a translation of the original release in Japanese. In the event of any discrepancy, the original release shall prevail.

Quarterly consolidated statements of comprehensive income
6months ended
September 30, 2018

(Thousands of yen)
Profit (Loss)

6months ended
September 30, 2019

(627,946)

410,072(356,307)(181,870)

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

1,396

1,312

Foreign currency translation adjustment(223,381)(217,412)

Re-measurements of defined benefit plans(1,192)(1,761)(579,485)(399,730)

Total other comprehensive income
Comprehensive income(1,207,431)

10,341

Comprehensive income attributable to owners of parent(641,946)

507,838

Comprehensive income attributable to non-controlling interests(565,485)(497,496)

8

English translation
This is a translation of the original release in Japanese. In the event of any discrepancy, the original release shall prevail.

(3) Notes to quarterly consolidated statements
I.

Segment information

For the 6 months ended September 30,2018 (from April 1, 2018 to September 30, 2018)
Information about operating revenue and profit (loss) by reportable segment(Thousands of yen)

Production
Services

10,612,807

12,725,565

11,956,521

6,546,958

41,841,852

84,527

540,910

186,649

157,173

969,260

10,697,334

13,266,475

12,143,171

6,704,132

42,811,113(329,550)(28,253)(828,861)

671,196(515,469)

Adjustments(Note 1)

Amount in thequarterly
consolidated
statement ofincome(Note 2)

62,80541,904,658(969,260)

-

Total

(906,455)

41,904,658

Segment profit(loss)(195,244)(710,713)

Net sales
Sales toexternalcustomers
Inter-segment
sales ortransfers
Total
Segment profit(loss)Net sales
Sales toexternalcustomers
Inter-segment
sales ortransfers

Media
Localization

Imaging
Systems &SolutionsContent
Creation

Sub total

Notes:
1.
The Segment profit (loss) adjustment of (195,244) thousand yen consists of 1,002,382 thousand yen in profits ofholding companies (consolidated financial statement-submitting companies) and intersegment transaction eliminationsof (1,197,626) thousand yen.
2.
The segment profit (loss) adjustment is based on the operating income item in the quarterly consolidated statements ofincome.

9English translation
This is a translation of the original release in Japanese. In the event of any discrepancy, the original release shall prevail.

II.

For the 6 months ended September 30,2019 (from April 1, 2019 to September 30, 2019)
Information about operating revenue and profit (loss) by reportable segment
Content
Creation

Net sales
Sales toexternalcustomers
Inter-segment
sales ortransfers

Production
Services

Media
Localization

Imaging
Systems &Solutions

Sub total

15,409,488

12,127,117

11,108,062

8,772,148

47,416,816

44,762

549,139

12,548

182,914789,364

15,454,250

12,676,256

11,120,611

8,955,062

48,206,181(26,420)(57,753)(692,156)

1,250,617(474,287)

Adjustments(Note 1)

Amount in thequarterly
consolidated
statement ofincome(Note 2)

5,490

47,422,306(789,364)

-

Total

(783,874)

47,422,306

Segment profit(loss)(198,824)(275,462)

Total
Segment profit(loss)Net sales
Sales toexternalcustomers
Inter-segment
sales ortransfers

Notes:
1.
The Segment profit (loss) adjustment of (198,824) thousand yen consists of 1,444,478 thousand yen in profits ofholding companies (consolidated financial statement-submitting companies) and intersegment transaction eliminationsof (1,643,303) thousand yen.
2.
The segment profit (loss) adjustment is based on the operating income item in the quarterly consolidated statements ofincome.

10