Summary of Accounts for Fiscal Year Ended December 2018 (Japanese GAAP)(Consolidated)

Name of listed company: ES-CON JAPAN Ltd.
Code:
8892
Representative:(Name) Takatoshi Ito(Position)
Contact for inquiries:(Name) Minoru Nakanishi(Position)
Scheduled date for next regular general meeting of shareholders:
Scheduled date for submission of periodic securities report:
Scheduled date for start of dividend payment:
Supplementary explanatory materials created for accounts? Yes/No:
Accounts briefing meeting held?
Yes/No:1.

February 8, 2019
Listing exchange: Tokyo Stock Exchange
URL: https://www.es-conjapan.co.jp
President & Representative Director
Senior Managing Director TEL: 06 (6223) 8055
March 26, 2019
March 27, 2019
March 27, 2019No
Yes
(for institutional investors and analysts)(Amounts are rounded down to the nearest million yen)

Consolidated results for fiscal year ended December 2018 (from January 1, 2018 to December 31, 2018)(% figures show the rate of increase (decrease) compared with the previous fiscal year)(1) Consolidated operating results
Profit attributable to
Net sales
Operating income
Ordinary income
owners of parent
million yen%

million yen%

million yen%

million yen

%

yen

yen

%

%

%

million yen

million yen

%

yen

24.9

400.4724.8

315.14

Fiscal year ended
54,325
21.5
11,561
64.2
10,498
75.3
7,226
32.4
Dec. 2018
Fiscal year ended
44,724
30.2
7,042
50.5
5,988
67.5
5,456
38.6
Dec. 2017
Note: Comprehensive income
Fiscal year ended Dec. 2018: 7,211 million yen [32.2%] Fiscal year ended Dec. 2017: 5,453 million yen [37.8%]
Basic earnings
Diluted earnings
Return on
Return on
Operating margin
per shareper share
equityassetsFiscal year ended
105.98105.48
29.6
10.7
21.3
Dec. 2018
Fiscal year ended
81.77
79.81
28.1
7.5
15.7
Dec. 2017
Reference: Share of profit (loss) of entities accounted for using equity method
Fiscal year ended Dec. 2018: －million yen
Fiscal year ended Dec. 2017: －million yen(2) Consolidated financial position
Total assets
Net assets
Equity ratio
Book value per share
Fiscal year ended
109,747
27,359Dec. 2018
Fiscal year ended
86,43521,433
Dec. 2017
Reference: Equity
Fiscal year ended Dec. 2018: 27,358 million yen(3) Consolidated cash flows
Net cash
Net cashprovided by (used in) provided by (used in)operating activities
investing activities
Fiscal year ended
Dec. 2018
Fiscal year ended
Dec. 20172.

Dividends(Forecast)

Net cashprovided by (used in)financing activities

million yen

Cash andcash equivalents
at end of period

million yen

million yen(7,123)223

12,81816,563(10,694)

9,167

3,979

10,644End offirst quarter

Fiscal year ended
Dec. 2017
Fiscal year ended
Dec. 2018
Fiscal year ending
Dec. 2019

Fiscal year ended Dec. 2017: 21,432 million yen

Annual dividend

million yen

Total dividend
Dividend
amountpayout ratio

Dividend on
equityEnd ofsecond quarterEnd ofthird quarter

Year-end

yen

yen

yen

(Total)million yen(Consolidated)%(Consolidated)
%

－

0.00

－

18.00

18.00

1,238

22.0

6.3

－

0.00

－

32.00

32.00

2,209

30.2

8.9

－

0.00

－

35.00

35.00

yen

yen

－ 1 －

Total

30.4

3.

Consolidated earnings forecast for fiscal year ending December 2019 (from January 1, 2019 to December 31, 2019)(% figures for the full fiscal year show the rate of increase (decrease) compared with the previous fiscal year, and% figures for the first two quarters show the rate of increase (decrease) compared with the same period of the previous year)

Net salesFirst two quarters
Full fiscal year*

Operating income

Ordinary income

Profit attributable to
Basicowners of parent earnings per share

million yen%

million yen%

million yen%

million yen%

yen

30,50074,800

23.8
37.7

6,200
12,500

68.2
8.1

5,600
11,200

76.2
6.7

3,800
7,800

76.9
7.9

55.63
115.10Explanatory notes(1) Changes in significant subsidiaries during fiscal year
(Changes in specified subsidiaries resulting in change in scope of consolidation):
Newly included: － companies (Company name) －－ companies (Company name) －Excluded:(2) Changes in accounting policies, changes in accounting estimates, and restatement
1) Changes in accounting policies due to amendment of accounting standards, etc.:
2) Changes in accounting policies other than 1):
3) Changes in accounting estimates:
4) Restatement:

None

Yes
None
None
None

(3) Number of shares issued and outstanding (common shares)
1) Number of shares issued and outstanding
Fiscal year
Fiscal year
71,649,387
71,203,387(including treasury shares) at end of fiscal
ended Dec.
ended Dec.
sharesshares
year
2018
2017
Fiscal year
Fiscal year
2) Number of treasury shares at end of fiscal
3,334,900
3,195,300
ended Dec.
ended Dec.
year
sharesshares2018
2017
Fiscal year
Fiscal year
68,185,053
66,724,613
3) Average number of shares during fiscal year ended Dec.
ended Dec.
sharesshares2018
2017
Note: The number of treasury shares at end of fiscal year includes ES-CON JAPAN shares held in a share-based
payment benefits trust for directors and a share-based payment benefits type ESOP trust (fiscal year ended
December 2018: 487,200 shares in the share-based payment benefits trust for directors and 234,300 sharesin the share-based payment benefits type ESOP trust). In the calculation of the average number of shares
during fiscal year, the treasury shares to be subtracted in that calculation includes ES-CON JAPAN shares
held in the share-based payment benefits trust for directors and the share-based payment benefits type
ESOP trust (fiscal year ended December 2018: 768,063 shares).
*

Presentation regarding implementation of audit proceduresThis summary of accounts is not subject to the audit procedures pursuant to the Financial Instruments and ExchangeAct, and audit procedures have not been completed for consolidated financial statements at the time of disclosure ofthis summary of accounts.

*

Explanation regarding appropriate use of earnings forecasts, and other notes
The earnings outlook and other forward-looking statements contained in this document are based on information
currently available to and certain assumptions that are thought to be reasonable by ES-CON JAPAN. Accordingly,
actual business performance and other results may differ materially due to various reasons. For the conditions
forming the assumptions on which earnings forecasts are based and explanatory notes for use of earnings forecasts,
etc., please see “Attachment 1; 1. Overview of Operating Results, etc.; (1) Analysis of Operating Results” on page 3.

－ 2 －Attachment 1
1. Overview of Operating Results, etc.
(1) Analysis of Operating Results
ES-CON JAPAN Ltd. (ES-CON JAPAN or the Company) concluded a business partnership agreement (“Business
Partnership”) with Chubu Electric Power Co., Inc. (Chubu Electric Power) as of August 28, 2018, based on the
resolution made at the Company's board of directors meeting held on the same day.
The agreement is aimed at maximizing the corporate value of both companies, as it can generate synergistic
effects by taking advantage of our strengths regarding planning and operational expertise, etc. in the real estatebusiness, and utilizing the strengths of the Chubu Electric Power Group in energy supply, customer bases in the
Chubu region and know-how in facility construction works it has fostered through its electric power business, etc.
In terms of capital structure, ESCON-JAPAN became an equity-method affiliate of Chubu Electric Power, as thelatter acquired 22,980,000 shares of the former from Mr. Kouryu Oh, the former largest shareholder and a major
shareholder, Tenma Seiryu Co., Ltd., a former major shareholder, and two other shareholders of the Company.
Furthermore, ESCON-JAPAN plans to establish a Nagoya branch on March 1, 2019. ES-CON Japan intends topromote businesses to satisfy local customers and contribute to regional revitalization of the Chubu region as a corebusiness area comparable to the Tokyo metropolitan area and the Kansai region by mutually utilizing theoverwhelmingly wide customer base of Chubu Electric Power and Chuden Real Estate Co., Inc. of the Chubu ElectricPower Group in the Chubu region along with the real estate development capabilities of ES-CON Japan.
ES-CON JAPAN will focus on the following initiatives through the business partnership with Chubu Electric Power.
1. Initiatives on businesses that should make significant social contributions, such as urban development andregional revitalization
Taking advantage of the Company's planning and operational expertise in its real estate business combinedwith Chubu Electric Power's deep relationship with local residents should allow the Chubu Electric PowerGroup to conduct urban development and create new communities for local residents.
2. Reinforcement of business foundation and enhancement of corporate value by mutually complementing
business areas and real estate business domains
In terms of the real estate business, the Chubu Electric Power Group is involved mainly in real estateleasing primarily in the Chubu region, while ES-CON JAPAN mainly conducts sales of for-salecondominiums and real estate for lease in major cities in the Tokyo metropolitan area, Kansai region andFukuoka. Making the utmost of the high complementarity in their business areas and real estate businessdomains, the two companies will jointly conduct real estate operations as well as endeavor to expand theirbusiness domains and reinforce their business foundation in an effort to further enhance respective
corporate value.
ES-CON Asset Management Ltd., the consolidated subsidiary of ES-CON JAPAN, obtained approval from the Tokyo
Stock Exchange, Inc. on December 25, 2018 to list investment units issued by ESCON JAPAN REIT Investment
Corporation (hereinafter “ESCON REIT”), of which asset management is entrusted to ES-CON Asset Management
Ltd., on the Tokyo Stock Exchange Real Estate Investment Trust Securities Market, and the listing is scheduled totake place on February 13, 2019.
ESCON REIT is a diversified J-REIT which mainly invests in “everyday life-based” commercial facilities closely
associated with their local communities and in land with leasehold interest for such commercial facilities located in thefour major metropolitan areas (*).
ES-CON Japan Group intends to fully support enhancement of earnings and stable growth of ESCON REIT as asponsor and aims for further growth. In addition, Chubu Electric Power has become a support company of ESCONREIT.
*Four major metropolitan areas are Tokyo metropolitan area, Kinki metropolitan area, Chukyo metropolitan area
and Fukuoka metropolitan area. Tokyo metropolitan area refers to Tokyo, Kanagawa, Saitama, Chiba, Ibaraki,
Tochigi and Gunma prefectures; Kinki metropolitan area to Osaka, Kyoto, Hyogo, Nara and Shiga prefectures;
Chukyo metropolitan area to Aichi, Shizuoka, Mie and Gifu prefectures; and Fukuoka metropolitan area to Fukuoka
prefecture.

－ 3 －In the consolidated fiscal year under review (fiscal year ended December 2018), the Japanese economy showed
potential to maintain a moderate recovery due in part to various governmental measures proving effective amid
ongoing improvement in the employment and income situation. The economic outlook remains clouded, however, as
the situation calls for attention to the impact of U.S.-China trade issues on the world economy, uncertainties inoverseas economies including the Brexit issues, the effects of fluctuations in the financial and capital markets and theimpact of natural disasters, among other factors.
The real estate industry in which the ES-CON JAPAN Group operates held resilient and firm due in part to lowinterest rates from monetary easing policies, but the situation warrants no optimism because of such factors as a risein land prices, intensified competition over land acquisitions, the risk of higher interest rates and the consumption tax
rate hike.
In the business environment described above, we proactively developed multifaceted businesses based on thesecond medium-term management plan “IDEAL to REAL 2019” which started from the fiscal year ended December
2017.
In the real estate sales business, which is our core business, we conducted income-generating real estate sales,
etc., and made steady progress in condominium sales, too.
In for-sale projects, construction completed in the fiscal year under review for “Feel Garden MinamiSenri (Suita City,
Osaka Prefecture; 214 units in total),” “Le JADE Southern Gate Toyoda (Hino City, Tokyo; 51 units in total),” “Le JADE
Kawasaki (Saiwai Ward, Kawasaki City; 79 units in total),” “Le JADE Minamimorimachi (Kita Ward, Osaka City; 29
units in total),” “Grand Le JADE Okamoto (Higashi-Nada Ward, Kobe City; 18 units in total)” and “Le JADE
Nagaokakyo (Nagaokakyo City, Kyoto; 35 units in total), which were sold out upon completion. Progress continues
steadily for such for-sale projects as “Grand Le JADE Jiyugaoka (Meguro Ward, Tokyo; 23 units in total),” “Le JADE
Nakano (Nakano Ward, Tokyo; 25 units in total)” and “Le JADE Bio Funabashi Kitanarashino (Funabashi City, Chiba
Prefecture; 50 units in total).”In the commercial development business, tonarie Yamato-Takada, a retail property in Yamato-Takada City, Nara
Prefecture, opened in November 2018 and has been visited by many customers including residents from surrounding
areas, serving as a new local facility for the community.
In addition, ES-CON JAPAN acquired two retail properties (Tsukuba Q't and Tsukuba MOG) in Tsukuba City, Ibarakiin December 2018. ES-CON JAPAN intends to further revitalize the town by promoting Tsukuba Station-front
development.
Furthermore, to promote diversification of for-sale projects, ES-CON JAPAN has participated in a reconstruction
project of “Le JADE Kuzuha (Hirakata City, Osaka Prefecture; 78 units in total)” as a member of condominium
reconstruction association and has started sales. Moreover, ES-CON JAPAN has launched a land readjustment
project to develop a distribution and industrial center (Koga City, Fukuoka Prefecture; total development area ofapproximately 80,000 tsubo) as well as a logistics project to develop a logistics facility (Kato City, Hyogo Prefecture;building area of approximately 13,000 tsubo; scheduled to be completed in September 2019).
Moreover, we have placed our focus on hotel development projects incorporating inbound tourism needs. In the
period under review, 12 projects are underway in Tokyo, Osaka, Kanazawa and Fukuoka, 8 projects started
operations in Chuo Ward, Osaka City, Chiyoda Ward, Tokyo and Kanazawa City, Ishikawa Prefecture, sales
contracts were newly concluded for 7 projects, and sales completed for 7 projects. We also have launcheddevelopment of an exclusively-for-student residence in Suginami Ward, Tokyo eyeing on the increase of foreign
students from abroad.
As such, ES-CON JAPAN conducted business operations in a steady and proactive manner, acquiring new
business sites for 8 projects in the Tokyo metropolitan area, 16 projects in the Kinki metropolitan area and 3 projects
in other areas as well as retail properties in the consolidated fiscal year under review (fiscal year ended December2018), to be used as the site for for-sale, commercial and other multifaceted development.
In the real estate leasing business, efforts are being made to secure stable rental income from retail properties heldby ES-CON JAPAN and to enhance their asset value.
In the real estate planning agency and consulting business, we are focusing on non-asset and profitablebusinesses such as entrustment and planning agency consulting services by utilizing planning abilities as ourstrength.
We have set a new goal to “realize the creation of new value and sustainable growth with the promotion of ESG” in
our growth strategy in the second medium-term management plan “IDEAL to REAL 2019,” and endeavor to reinforce
our activities related to ESG awareness. As part of such activities, we have started initiatives to apply theenvironmentally-friendly Net Zero Energy House (ZEH) concept to the for-sale condominiums we develop, and－ 4 －commenced joint research with Tokyo University of Science regarding environmental design systems. With these
efforts, we will work to enhance our corporate value from the criteria of “environment, society and governance”
awareness.
As a result, business performance for the fiscal year ended December 2018 was net sales of 54,325 million yen (up21.5% compared with the previous fiscal year), operating income of 11,561 million yen (up 64.2% compared with theprevious fiscal year), ordinary income of 10,498 million yen (up 75.3% compared with the previous fiscal year) andprofit attributable to owners of parent of 7,226 million yen (up 32.4% compared with the previous fiscal year).
The following is the business performance by segment.
1)

Real estate sales businessIn the real estate sales business, activities included promoting condominium sales and selling real estate for saleand real estate for sale in process, resulting in net sales of 50,519 million yen (up 22.7% compared with the previous
fiscal year) and segment income of 12,341 million yen (up 54.7% compared with the previous fiscal year).
2)

Real estate leasing businessIn the real estate leasing business, focus was placed on leasing activities and the property management businessin view of enhancement of asset value, including increase in rental income of owned revenue-generating real estate,
resulting in net sales of 3,400 million yen (down 1.7%) and segment income of 2,128 million yen (up 20.8%).
3)

Real estate planning agency and consulting businessIn the real estate planning agency and consulting business, proactive efforts were made in such aspects as

entrustment with planning, consulting and other services by making the best use of planning and multifacetedbusiness building abilities, resulting in net sales of 405 million yen (up 321.4% compared with the previous fiscal
year) and segment income of 369 million yen (up 332.3% compared with the previous fiscal year).
(Earnings Outlook for the Next Fiscal Year and Progress of Medium-Term Management Plan)
The second medium-term management plan “IDEAL to REAL 2019” for the three-year period from the fiscal year
ended December 2017 to the fiscal year ending December 2019 is progressing smoothly and more profits wereachieved than originally planned in the fiscal year ended December 2017 and the fiscal year ended December 2018, thefirst and second fiscal years. For an outline of the second medium-term management plan, please see “Attachment 2;
Management Policy; (2) Medium- to Long-Term Corporate Management Strategy and Management Indicator Targets”
on page 20.
In light of the above, the consolidated earnings forecast for the fiscal year ending December 2019 is net sales of
74,800 million yen, operating income of 12,500 million yen, ordinary income of 11,200 million yen and profit attributableto owners of parent of 7,800 million yen.
Please note that the earnings forecast or outlook and other forward-looking statements contained in this document
are an analysis or judgment based on information available as of the date of this document. Accordingly, actual
business performance and other results may differ materially due to changes in the management environment and othervarious reasons.

－ 5 －(2) Analysis of Financial Position
1)

Assets, liabilities and net assets
Assets at the end of the fiscal year ended December 2018 increased by 23,311 million yen compared with the endof the previous fiscal year to 109,747 million yen. This was mainly attributable to cash and deposits increasing by
5,930 million yen and inventories increasing by 16,978 million yen, respectively.
Liabilities increased by 17,385 million yen in comparison with the end of the previous fiscal year to 82,387 million
yen. This was mainly attributable to long-term loans payable and short-term loans payable increasing by 14,152
million yen.
Net assets and bonds increased by 5,926 million yen in comparison with the end of the previous fiscal year to
27,359 million yen. This was attributable to recording profit attributable to owners of parent of 7,226 million yen
against dividends of surplus paid of 1,238 million yen and purchase of treasury shares of 131 million yen. As a result,the equity ratio was 24.9% (24.8% at the end of the previous fiscal year).
2)

Cash flows
Cash and cash equivalents (“net cash”) in the fiscal year ended December 2018 increased by 5,918 million yen

compared with the end of the previous fiscal year to 16,563 million yen (10,644 million yen at the end of the previous
fiscal year). The following outlines the cash flows and the factors of changes in cash flows in the fiscal year ended
December 2018.
(Cash flows from operating activities)
Cash flows from operating activities in the fiscal year ended December 2018 amounted to net cash used inoperating activities of 7,123 million yen (net cash used in operating activities of 10,694 million yen in the previous
fiscal year). This was mainly attributable to recording profit before income taxes of 10,445 million yen and increase ininventories of 16,489 million yen.
(Cash flows from investing activities)
Cash flows from investing activities in the fiscal year ended December 2018 amounted to net cash provided byinvesting activities of 223 million yen (net cash provided by investing activities of 9,167 million yen in the previous
fiscal year). This was mainly attributable to proceeds from and repayments of guarantee deposits received amounting
to net proceeds of 796 million yen.
(Cash flows from financing activities)
Cash flows from financing activities in the fiscal year ended December 2018 amounted to net cash provided byfinancing activities of 12,818 million yen (net cash provided by financing activities of 3,979 million yen in the previous
fiscal year). This was mainly attributable to proceeds from and repayments of long-term loans payable and short-termloans payable amounting to net proceeds of 14,152 million yen, cash dividends paid of 1,237 million yen andpayments due to purchase of treasury shares of 131 million yen.

－ 6 －

Reference: Changes in cash flow indicators
Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year
ended Dec. ended Dec. ended Dec. ended Dec. ended Dec.
2014
2015
2016
2017
2018
Equity ratio (%)

23.2

24.1

23.6

24.8

24.9

Equity ratio on market capitalization basis (%)

26.5

31.7

41.9

54.0

42.2

Ratio of interest-bearing liabilities to cash flows (%)

－

－

－

－

－

Interest coverage ratio (times)

－

－

－

－

－

Equity ratio: Equity ÷ Total assets
Equity ratio on market capitalization basis: Market capitalization ÷ Total assets
Ratio of interest-bearing liabilities to cash flows: Interest-bearing liabilities ÷ Operating cash flows
Interest coverage ratio: Operating cash flows ÷ Interest paid
Notes: 1. Each is calculated using consolidated financial figures.
2. Market capitalization is calculated by multiplying the closing share price at end of fiscal year by the
number of shares issued and outstanding at end of fiscal year.
3. Operating cash flows are the cash flows from operating activities on the consolidated statement of cash
flows.
4. Interest-bearing liabilities are all of those liabilities recorded on the consolidated balance sheet of which
are liabilities on which interest is payable.
5. Interest paid is the interest expenses paid on the consolidated statement of cash flows.
6. Ratio of interest-bearing liabilities to cash flows and interest coverage ratio are not stated for fiscal years
that have negative operating cash flows.
(3) Basic Policy on Distribution of Profit, and Dividend for the Current Fiscal Year and Next Fiscal Year
Positioning the return of profit to shareholders as a key management task, ES-CON JAPAN makes it a basic policy
to strive for uninterrupted and stable return of profit in line with corporate growth potential based on decisions thattake into account the status of business performance, availability of internal reserves, dividend payout ratio and otherfactors in a comprehensive manner.
For the year-end dividend for the fiscal year ended December 2018, with a 12 yen increase from the initial forecastof 20 yen per share, payment of 32 yen per share is scheduled. In addition, the dividend payout ratio is 30.2%.
Furthermore, in order to realize further stable return to shareholders, a progressive dividend policy is adopted forthe dividend per share (DPS) during the period of the second medium-term management plan (from the fiscal year
ended December 2017 to the fiscal year ending December 2019) based on which the dividend amount will either bemaintained to not fall below the previous fiscal year’s DPS or increased depending on business performance growth(“not decrease the dividend amount” in principle).
By adopting this progressive dividend policy that makes it a clear policy to “not decrease the dividend amount, butrather only maintain or increase the dividend amount” in principle, efforts will be made to realize stable dividends andraise the transparency of future dividend levels to increasingly strengthen return to shareholders and sustain
corporate value enhancement.
For the fiscal year ending December 2019, the dividend forecast is 35 yen per share.

－ 7 －2. Consolidated Financial Statements(1) Consolidated Balance Sheet
Fiscal year
ended Dec. 2017(as of Dec. 31, 2017)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Real estate for sale
Real estate for sale in process
Deferred tax assets
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Other
Total intangible assets
Investments and other assets
Investment securities
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets－ 8 －(Unit: million yen)
Fiscal year
ended Dec. 2018(as of Dec. 31, 2018)

10,667497
4,162
60,057298
4,819
80,504

16,598491
15,30865,890247
6,353
104,890

1,476
(410)
1,066
623
18
(13)
4
129
(93)
35
1,729

1,459
(462)
997
623
9
(6)
2
142
(107)
35
1,658

28
28

30
30

1,901
1,675
600
(4)
4,173
5,930
86,435

2,077
111
1,016
(37)
3,167
4,856
109,747

Fiscal year
ended Dec. 2017(as of Dec. 31, 2017)
Liabilities
Current liabilities
Short-term loans payable
Current portion of long-term loans payable
Current portion of bonds
Lease obligations
Accounts payable - other
Income taxes payable
Advances received
Deposits received
Asset retirement obligations
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term loans payable
Lease obligations
Provision for directors’ share-based benefits
Provision for share-based benefits
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Total accumulated other comprehensive income
Subscription rights to shares
Total net assets
Total liabilities and net assets－ 9 －(Unit: million yen)
Fiscal year
ended Dec. 2018(as of Dec. 31, 2018)

1,953
22,462
40
1
1,615
467
1,467
4,368
－
287
32,664

1,720
23,993
40
0
1,731
1,448
3,051
4,933
33
255
37,210110
31,874
2
82
18
93
155
32,33765,002

270
44,568
1
97
30
77
130
45,17682,387

6,224
1,953
14,322(1,089)21,411

6,259
1,988
20,310(1,207)27,3522020
121,43386,4356
6
1
27,359109,747

(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income(Consolidated Statement of Income)Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Advertising expenses
Sales commission
Directors’ compensations
Salaries and allowances
Provision for directors’ share-based benefits
Provision for share-based benefits
Commission fee
Taxes and dues
Other
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Cancellation income
Reversal of allowance for doubtful accounts
Other
Total non-operating income
Non-operating expenses
Interest expenses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on sales of shares of subsidiaries and associates
Gain on reversal of subscription rights to shares
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Impairment loss
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to owners of parent－ 10 －

Fiscal year
ended Dec. 2017(from Jan. 1, 2017
to Dec. 31, 2017)
44,72433,164
11,559(Unit: million yen)
Fiscal year
ended Dec. 2018(from Jan. 1, 2018
to Dec. 31, 2018)
54,32537,397
16,927

1,501
515
175
963
30
5
224
351
749
4,517
7,042

1,965
459
190
1,126
28
12
373
328
881
5,366
11,561

0
2
24
29
1
58

0
2
12
－
2
17

1,093
18
1,112
5,988

1,020
60
1,080
10,498

372
22
－
395

－
－
0
0

0
150
150
6,232
497
279
776
5,456
5,456

5
47
52
10,445
1,604
1,615
3,219
7,226
7,226

(Consolidated Statement of Comprehensive Income)

ProfitOther 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 parent
Comprehensive income attributable to non-controlling interests－ 11 －

Fiscal year
ended Dec. 2017(from Jan. 1, 2017
to Dec. 31, 2017)
5,456(Unit: million yen)
Fiscal year
ended Dec. 2018(from Jan. 1, 2018
to Dec. 31, 2018)
7,226

(2)
(2)
5,453

(14)
(14)
7,211

5,453
－

7,211
－

(3) Consolidated Statement of Changes in Equity
Fiscal year ended December 2017 (from January 1, 2017 to December 31, 2017)(Unit: million yen)
Shareholders’ equity
Capital stock
Balance at beginning of current period

Capital surplus

6,034

1,763

190

190

Retained earnings
10,417

Treasury shares
(876)

Total
shareholders’ equity
17,338Changes of items during period
Issuance of new shares

380

Dividends of surplus(1,017)(1,017)

Profit attributable to owners of parent

5,456

5,456

Purchase of treasury shares

(748)

(748)

Disposal of treasury shares

2

2

(533)

533

－

Retirement of treasury shares
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at end of current period

190

190

3,905

(212)

4,073

6,224

1,953

14,322(1,089)21,411(Unit: million yen)
Accumulated other comprehensive income
Valuation difference on
available-for-salesecurities
Balance at beginning of current period

Subscription rights
to shares

Total
accumulated othercomprehensive income
22

22

3

Total
net assets
17,363

Changes of items during period
Issuance of new shares

380

Dividends of surplus(1,017)

Profit attributable to owners of parent

5,456

Purchase of treasury shares(748)

Disposal of treasury shares

2

Retirement of treasury shares－

Net changes of items other thanshareholders’ equity

(2)

(2)

(1)

(3)

Total changes of items during period

(2)

(2)

(1)

4,069

Balance at end of current period

20

20

1

21,433－ 12 －

Fiscal year ended December 2018 (from January 1, 2018 to December 31, 2018)(Unit: million yen)
Shareholders’ equity
Capital stock
Balance at beginning of current period

Capital surplus

6,224

1,953

35

35

Retained earnings
14,322

Treasury shares(1,089)Total
shareholders’ equity
21,411

Changes of items during period
Issuance of new shares

70

Dividends of surplus(1,238)(1,238)

Profit attributable to owners of parent

7,226

7,226

Purchase of treasury shares

(131)

(131)

Disposal of treasury shares

13

13

Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at end of current period

35

35

5,987

(117)

5,940

6,259

1,988

20,310(1,207)27,352(Unit: million yen)
Accumulated other comprehensive income
Valuation difference on
available-for-salesecurities
Balance at beginning of current period

Subscription rights
to shares

Total
accumulated othercomprehensive income
20

20

1

Total
net assets
21,433

Changes of items during period
Issuance of new shares

70

Dividends of surplus(1,238)

Profit attributable to owners of parent

7,226

Purchase of treasury shares(131)

Disposal of treasury shares

13

Net changes of items other thanshareholders’ equity

(14)

(14)

0

(14)

Total changes of items during period

(14)

(14)

0

5,926

6

6

1

27,359Balance at end of current period－ 13 －

(4) Consolidated Statement of Cash Flows(Unit: million yen)
Fiscal year
ended Dec. 2018(from Jan. 1, 2018
to Dec. 31, 2018)

Fiscal year
ended Dec. 2017(from Jan. 1, 2017
to Dec. 31, 2017)
Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for directors’ share-based benefits
Increase (decrease) in provision for share-based benefits
Interest and dividend income
Interest expenses
Loss (gain) on sales of non-current assets
Loss on retirement of non-current assets
Loss (gain) on sales of shares of subsidiaries and associates
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in inventories
Decrease (increase) in prepaid expenses
Increase (decrease) in accounts payable - other
Decrease/increase in consumption taxes receivable/payable
Increase (decrease) in advances received
Increase (decrease) in deposits received
Decrease (increase) in other assets
Increase (decrease) in other liabilities
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes (paid) refund
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of investment securities
Proceeds from withdrawal of investment securities
Purchase of non-current assets
Proceeds from sales of non-current assets
Payments for asset retirement obligations
Proceeds from sales of shares of subsidiaries resulting inchange in scope of consolidation
Payments of loans receivableCollection of loans receivable
Proceeds from guarantee deposits received
Repayments of guarantee deposits received
Payments for investments in capital
Net cash provided by (used in) investing activities－ 14 －

6,232
186
150
(73)
28
5
(2)
1,093
(372)
0
(22)
(211)
(18,943)
(529)
532
368
110
2,597
(614)
54
(9,409)2(1,148)(139)(10,694)

10,445
80
47
33
15
12
(2)
1,020
－
5
－
5
(16,489)
(475)
111
(45)
1,584
(220)
(1,548)(1)(5,421)2(1,085)(619)(7,123)(18)
18(1,711)
14(200)
11,651
(0)

(18)
18
(180)
21
(443)
83
－

34

－

－
0
615
(1,232)
(4)
9,167

(37)
0
1,578
(782)
(17)
223

Fiscal year
ended Dec. 2017(from Jan. 1, 2017
to Dec. 31, 2017)
Cash flows from financing activities
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Repayments of lease obligations
Repayments of installment payables
Proceeds from issuance of common shares
Purchase of treasury shares
Cash dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

10,830(13,184)
45,348(37,549)
－
(40)
(4)
(32)
378
(748)
(1,016)
3,979
2,453
8,191
10,644－ 15 －(Unit: million yen)
Fiscal year
ended Dec. 2018(from Jan. 1, 2018
to Dec. 31, 2018)
7,581(7,814)38,884)(24,659)
200
(40)
(1)
(33)
70
(131)
(1,237)
12,818
5,918
10,644
16,563

(5) Notes to Consolidated Financial Statements(Notes on Going Concern Assumption)
Not applicable.
(Segment Information, etc.)
I. Fiscal Year Ended December 2017 (from January 1, 2017 to December 31, 2017)
1. Information on Net Sales, Income or Loss, Assets and Other Item Amounts by Reporting Segment(Unit: million yen)
Reporting segment

Amount on
consolidated
Reconciliation
financial(Note 1)statements(Note 2)

Real estatesales
business

Real estateleasingbusiness

Real estateplanning agency
and consulting
business

41,1683,459

96

44,724－44,724

－

－

－

－

－

－

41,1683,459

96

44,724－44,724

Segment income

7,978

1,761

85

9,825

(2,782)

7,042

Segment assets

68,0455,043

373,092

13,34286,435

－

146

－

146

39

186

－

1,007

－

1,007

－

1,007

－

10

－

10

83

93

Total

Net sales
Net sales toexternal customers
Intersegment net
sales or transfers
Total

Other items
Depreciation
Amount ofinvestment inentities accounted
for using equity
methodIncrease inproperty, plant andequipment andintangible assets(Note 1) Reconciliations are as follows:(1) The reconciliation of segment income of -2,782 million yen is corporate expenses not attributable to any
reporting segment. Corporate expenses are general and administrative expenses not attributable to reporting
segments.
(2) The reconciliation of segment assets of 13,342 million yen is mainly surplus operating funds (cash anddeposits), administrative assets, etc. not attributable to reporting segments.
(3) The reconciliation of depreciation of 39 million yen is depreciation on corporate assets not attributable toreporting segments.
(4) The reconciliation of increase in property, plant and equipment and intangible assets of 83 million yen isincrease in corporate assets not attributable to reporting segments.
(Note 2) Segment income is reconciled with operating income on the consolidated statement of income.
2. Information on Impairment Loss on Non-Current Assets by Reporting Segment

Impairment loss

Real estatesales
business

Real estateleasingbusiness

Real estateplanning agency and consulting
business－

150－－ 16 －(Unit: million yen)
Elimination
and/orTotal
corporate－

150

II. Fiscal Year Ended December 2018 (from January 1, 2018 to December 31, 2018)
1. Information on Net Sales, Income or Loss, Assets and Other Item Amounts by Reporting Segment(Unit: million yen)
Reporting segment

Amount on
consolidated
Reconciliation
financial(Note 1)statements(Note 2)

Real estatesales
business

Real estateleasingbusiness

Real estateplanning agency
and consulting
business

50,5193,400

405

54,325－54,325

－

－

－

－

－

－

50,5193,400

405

54,325－54,325

Segment income

12,341

2,128

369

14,839(3,277)

11,561

Segment assets

85,6416,265

1791,924

17,822

109,747

－

36

－

36

43

80

－

1,039

－

1,039

－

1,039

－

5

－

5

43

49

Total

Net sales
Net sales toexternal customers
Intersegment net
sales or transfers
Total

Other items
Depreciation
Amount ofinvestment inentities accounted
for using equity
methodIncrease inproperty, plant andequipment andintangible assets(Note 1) Reconciliations are as follows:(1) The reconciliation of segment income of -3,277 million yen is corporate expenses not attributable to any
reporting segment. Corporate expenses are general and administrative expenses not attributable to reporting
segments.
(2) The reconciliation of segment assets of 17,822 million yen is mainly surplus operating funds (cash anddeposits), administrative assets, etc. not attributable to reporting segments.
(3) The reconciliation of depreciation of 43 million yen is depreciation on corporate assets not attributable toreporting segments.
(4) The reconciliation of increase in property, plant and equipment and intangible assets of 43 million yen isincrease in corporate assets not attributable to reporting segments.
(Note 2) Segment income is reconciled with operating income on the consolidated statement of income.
2. Information on Impairment Loss on Non-Current Assets by Reporting Segment

Impairment loss

Real estatesales
business

Real estateleasingbusiness

Real estateplanning agency and consulting
business－－－－ 17 －(Unit: million yen)
Elimination
and/orTotal
corporate47

47

3. Other
Status of Contracts and Sales
The performance of contracts in the real estate sales business for the fiscal year ended December 2018 is as follows:
Fiscal year ended Dec. 2018(from Jan. 1, 2018
to Dec. 31, 2018)
Classification
Contract amount during the period
Balance of contracts at the end of the period

Mid- to high-risehousing, etc.

Number of units(units)(Note)

Number of units(units)Amount(million yen)

655

29,200445

18,582－51,051－30,757655

80,252445

49,340

Other
Total

Amount(million yen)

The above amounts do not include consumption tax, etc.

The main performance of sales for the most recent two fiscal years is as follows:
Fiscal year ended Dec. 2017
Fiscal year ended Dec. 2018(from Jan. 1, 2017(from Jan. 1, 2018
to Dec. 31, 2017)
to Dec. 31, 2018)
Name ofsegment
Number Amount
Number Amount
Property nameof units (million
Property nameof units (million(units)yen)(units)yen)

Real estatesales
business

Real estateleasingbusiness
Real estateplanning
agency andconsulting
business

Condominiums

476

19,500539

25,089

－

4,600

－

3,450

2,200

Condominiums
Hayabusa-cho, Chiyodaku
Kitakyuhojimachi, Chuoku
Awajicho, Chuo-ku I

Tonarie Minamisenri

－

4,026

Tonarie Seiwadai

－

3,290

Nihonbashi-kayabacho
Minami 7-jo, Chuo-ku,
Sapporo-shi

－

－

3,420

－

2,200

Awajicho, Chuo-ku II

－

3,420

Oimatsucho, Kurashiki-shi

－

2,121

－

2,910

Oyamamachi, Kanazawa-shi

－

1,800

－

2,030

Hiranomachi, Chuo-ku

－

1,650

－

1,968

Nihonbashi-bakurocho

－

1,520

－

1,850

Kitatsumori, Nishinari-ku

－

1,270

－

1,317

Honkomagome, Bunkuo-ku
2-chome, Kawaguchi, Nishiku
Fukuoka Kasuga
5-chome, Sendagaya,
Shibuya-ku
Fukuoka Kasuga District 7－

750

Tsurunocho, Kita-ku,
Osaka-shiHorikawashinmachi,
Kanazawa-shi
Wakamatsucho 31,
Shinjuku-ku
Minamisenba, Chuo-ku III
5-chome, Sendagaya,
Shibuya-ku
Fukuoka Kasuga

－

413

－

389

Other

－

50

－

231

－

－

91

－

－

46

－

Other

－

81

－

476

41,168Subtotal

Total

539

50,519

3,459

3,400

96

405

44,724(Note 1) There are no transactions between segments.
(Note 2) The above amounts do not include consumption tax, etc.
－ 18 －

Subtotal

Total

54,325

Attachment 2
Management Policy(1) Basic Policy on Corporate Management
How should we live each day and participate in society, how can we contribute to society, and how can we achieve
the happiness we seek as individual human beings through the benefits that our contribution brings to society? The
ES-CON JAPAN Group strives to answer these questions by continually providing meaningful opportunities to its
employees to help and encourage each other in the achievement of their full potential as individuals while
experiencing the joy of contribution to society through their work. This is the management philosophy of the
ES-CON JAPAN Group, the realization of which is pursued by setting and striving to realize the following
management policy.
1)

To create new value that will truly satisfy customers by unleashing the infinite possibilities of real estate throughinformation, planning and product development abilities.

2)

To constantly strive to remain ahead of the competition through aggressive management combined with strong
defensive strategies centering on in-depth control of ROA, cash flows and risk.

3)

To aim to be small teams of highly skilled professionals in order to maintain the ability to adapt quickly andflexibly in today’s rapidly changing social environment.

4)

To build and maintain good cooperative relationships, both internally and externally, based on respect for andgratitude to colleagues and those in other organizations.

5)

To form an open organizational structure in which ideas can flow freely from front-line staff to senior
management, while also enhancing the internal audit system, with compliance and governance in mind.

(Corporate Branding Concept)
IDEAL to REAL ~Making the ideal real, and creating a new future~
Our aim as a life developer is to develop tangible properties as well as imagine and develop happy living for thepeople who will live there. With new unprecedented and think-outside-the-box approaches, we aim to create new
wealth and connect people, communities and the future. We will strive to make the ideal real by exploring theinfinite possibilities of real estate.
(2) Medium- to Long-Term Corporate Management Strategy and Management Indicator Targets
In such an environment, as a challenge for the next stage, the ES-CON JAPAN Group is promoting the second
medium-term management plan “IDEAL to REAL 2019,” which is for the three-year period from the fiscal year ended
December 2017 to the fiscal year ending December 2019.
For the fiscal year ending December 2019, the last fiscal year of the plan, the initial plans have been revised
upward to expect sales and profits that are well above the initial plans, as shown below.
1. Basic Policy of “IDEAL to REAL 2019”: Making the ideal real, and creating a new future
To continue to evolve and grow as a corporate entity required by society by following the basic philosophy ofplacing customers first and ensuring accomplishment of the mission as a “life developer” of developing living
itself.
Corporate Strategy(1) Maximization of corporate value and giving back to shareholders(2) Establishment of firm management foundation that can withstand any kind of economic environment(3) Establishment of business diversity for ongoing and stable growth(4) Building of firm business foundation (quality) rather than expansion of corporate size (quantity)(5) Fulfillment of corporate social responsibilities to give back to shareholders as well as a variety of
stakeholders and society
2. Growth Action Plan
(1) Further strengthening of the core business(2) Enhancement of corporate value through establishment of diversity by having several core businesses(3) Securing of long-term, stable stock earnings through proactive real estate leasing business operations(4) Expansion of the real estate sales business through stable supply of quality properties as the main sponsor
in forming a listed REIT
(5) Expansion of the range and depth of real estate development abilities through enrichment of the real estate
operation business－ 19 －

(6) Enhancement of corporate brand power(7) Realization of the creation of new value and sustainable growth with the promotion of ESG
3. Management Targets
Fiscal year ended
Dec. 2017

Fiscal year ended
Dec. 2018

Fiscal year ending
Dec. 2019

ActualActualPlan

Equity ratio

24.8%

24.9%

22.6%

Return on equity (ROE)

28.1%

29.6%

25.9%

Return on assets (ROA)

6.8%

7.4%

6.1%

Return on invested capital (ROIC)(Note)

8.4%

10.2%

6.9%

81.77 yen105.98 yen

115.10 yen

Earnings per share (EPS)(Note) Return on invested capital (ROIC): After-tax operating income ÷ (Shareholders’ equity + Interest-bearing
liabilities)
4. Performance Targets(Unit: million yen)
Fiscal year
ended

Fiscal year
ending Dec.

Fiscal year ended Dec. 2018

Dec. 2017
ActualNet sales

2019
Plan

ActualCompared with
plan

Plan

44,72455,70054,325-1,37474,80041,16852,60050,519-2,08070,250

3,459

2,900

3,400

+500

4,300

96

200

405

+205

250

Operating income

7,042

9,900

11,561+1,661

12,500Ordinary income

5,988

8,700

10,498+1,798

11,200Real estate sales
business
Real estate leasing
business
Real estate planning
agency andconsulting business－ 20 －