Summary of Consolidated Financial Results for FY2017(Year ended March 31, 2018)〔Japanese GAAP〕
April 24, 2018
Company name:SOGO MEDICAL CO., LTD.

Stock exchange listings:

Tokyo 1st Section

Securities code:

4775

Representative:(Title) Representative Director, President and Chief Executive Officer(Name) Kenji Sakamoto

Inquiries:(Title) General Manager, Finance and Accounting Department(Name) Osamu Inoue

Tel: +81-92-713-7611

E-mail: ir@sogo-medical.co.jp

URL: http://www.sogo-medical.co.jp/english/

Date of general shareholders’ meeting (as planned) : June 22, 2018
Dividend payable date (as planned) : June 25, 2018
Annual securities report filing date (as planned) :June 22, 2018
Supplemental material of annual results is available.
There will be a convening briefing of annual results for institutional investors and analysts.
(Amounts are rounded down.)

１．Consolidated Financial Results (from April 1, 2017 to March 31, 2018)（１）Consolidated operating results
Net sales
FY2017FY2016
Notes: Comprehensive income(% indicates year-on-year change.)
Profit attributable
Ordinary income
to owners of parent

Operating income

Millions of Yen%

Millions of Yen%

Millions of Yen%

Millions of Yen%

135,431
122,216

10.8
1.2

7,189
6,248

15.1
2.6

7,228
6,440

12.2
3.9

4,243
3,779

12.3
63.0

FY2017 ¥4,432 million (12.3%)
FY2016 ¥3,945 million (80.4%)

Yen

FY2017FY2016

Net income toshareholders’equity ratio

Diluted net
incomeper share

Net income
per share
141.74126.26

Yen－－

Ordinary income
to total assets
ratio

Operatingincome to net
sales ratio

%

%

%

12.3
12.2

8.2
8.0

5.3
5.1

References: Investment profit (loss) on equity method: ¥－for FY2017 :¥－for FY2016
Note: Dated April 1, 2018, Sogo Medical has instituted a 2-for-1 common stock split. Consolidated net income per share has been calculated assuming that thestock split was instituted at the start of the previous fiscal year.

（２）Consolidated financial positions
Total assets

Net assets

Capital adequacy
ratio

Net assets per share

Millions of Yen

Millions of Yen%

Yen

89,74886,76036,52632,88040.4
37.6

1,210.69
1,089.23

FY2017FY2016

References: Owner’s equity: ¥36,241 million for FY2017 :¥ 32,605 million for FY2016
Note: Dated April 1, 2018, Sogo Medical has instituted a 2-for-1 common stock split. Consolidated net assets per share has been calculated assuming that the stock
split was instituted at the start of the previous fiscal year.

（３）Consolidated cash flows
Cash flows fromoperating activities
FY2017FY2016

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and equivalents,
end of period

Millions of Yen

Millions of Yen

Millions of Yen

Millions of Yen

10,63010,931(2,963)(9,933)(3,871)
3,301

14,45010,655

２．Dividends
Dividend per shareFirst quarter

Second quarter
Yen

Yen

－
－
－

FY2016FY2017FY2018(forecast)Third quarter
Yen

－
－
－

25.00
27.50
13.75

FY2016FY2017FY2018(forecast)

Yen

Yen

25.00
32.50
13.75

50.00
60.00
27.50

Ratio of total amount ofdividends to net assets(Consolidated)

Payout ratio(Consolidated)

Total dividend paid

AnnualYear end

Millions of Yen

%

%

748
898

19.8
21.2
24.2

2.4
2.6

The breakdown of the year-end dividend for the fiscal year ending March 31, 2018 is 27.50 per common share plus 5.00 yen per share as a commemorative
dividend.
Note: Dated April 1, 2018, Sogo Medical has instituted a 2-for-1 common stock split. The interim dividend and the year-end dividend for the fiscal year ending
March 31, 2019(estimate base) are therefore stated adjusted for the effects of the stock split.

３．Consolidated forecasts for FY2018 (from April 1, 2018 to March 31, 2019)(% indicates year-on-year change.)

Net salesInterim
Full-year

Operating income

Profit attributable toowners of parent

Ordinary income

Net income
per share

Millions of Yen%

Millions of Yen%

Millions of Yen%

Millions of Yen%

Yen

69,534
144,928

4.6
7.0

2,263
5,762

(27.0)(19.8)

2,188
5,800

(29.8)(19.8)

1,284
3,405

(30.2)(19.8)

42.89
113.74

Note: Dated April 1, 2018, Sogo Medical has instituted a 2-for-1 common stock split.

４．Others（１）Material changes in subsidiaries during this period(Changes in scope of consolidations resulting from change is subsidiaries): None
（２）Changes in accounting policies and accounting estimates, retrospective restatement① Changes in accounting policies based on revisions of accounting standard: None
② Changes in accounting policies other than ones based on revisions of accounting standard : None
③ Changes in accounting estimates: None
④ Retrospective restatement: None
（３）Number of issued and outstanding shares (common stock）① Number of issued and outstanding shares
FY2017: 30,680,312sharesat the end of fiscal year (including treasury stock):② Number of treasury stock at the end of fiscal year:
FY2017: 745,686shares③ Average number of shares:
FY2017: 29,934,678shares

FY2016: 30,680,312shares
FY2016: 745,550shares
FY2016 : 29,934,762shares

Note: Dated April 1, 2018, Sogo Medical has instituted a 2-for-1 common stock split. The number of shares in issue (including treasury stock) at the end of the fiscal year underreview, the number of treasury stock at the end of the fiscal year under review, and the average number of shares in issue during the fiscal year under review have been calculated
assuming that the stock split was instituted at the start of the previous fiscal year.

(Reference）Summary of Non-consolidated Financial Results
１．Non-consolidated Financial Results (from April 1, 2017 to March 31, 2018)（１）Non-consolidated operating Results
Net sales
FY2017FY2016

Operating income(% indicates year-on-year change.)

Ordinary income

Net income

Millions of Yen%

Millions of Yen%

Millions of Yen%

Millions of Yen%

94,19992,019

2.4
(2.2)

4,441
4,703

(5.6)
0.2

4,832
5,170

(6.5)
6.9

3,161
3,380

(6.5)
142.1

Net income per share

Diluted net income
per shareYen

FY2017FY2016105.62112.94

Yen－－

Note: Dated April 1, 2018, Sogo Medical has instituted a 2-for-1 common stock split. Consolidated net income per share has been calculated assuming thatthe stock split was instituted at the start of the previous fiscal year.

（２）Non-consolidated financial positions
Total assets
FY2017FY2016

Net assets

Capital adequacy ratio

Net assets per share

Millions of Yen

Millions of Yen%

yen

79,95675,39732,217
29,67040.3
39.4

1,076.28
991.17

References: Owner’s equity: ¥ 32,217 million for FY2017 :¥ 29,670 million for FY2016
Note: Dated April 1, 2018, Sogo Medical has instituted a 2-for-1 common stock split. Consolidated net assets per share has been calculated assuming that thestock split was instituted at the start of the previous fiscal year.

※This summary of consolidated financial results is not subject to examination by a certified public accountant or audit by anauditing firm.
※Explanation on the Appropriate Use of Forecasts, and Other Matters of Special Note
The forecasts set forth herein are based on information currently available to Sogo Medical as of the date these materials were released.
Accordingly, actual performance may vary due to various factors. For notes on the assumptions underlying the forecasts herein and the useof these forecasts, refer to “1. Operating Results (4) Forecasts page 8 of the attachment.

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

Contents
1. Operating Results ..............................................................................................................................2(1) Analysis of Operating Results .....................................................................................................2(2) Analysis of Financial Positions ...................................................................................................6(3) Cash flows ...................................................................................................................................7(4) Forecast for FY2018....................................................................................................................8
2. Management Policies ......................................................................................................................10(1) Basic management policy..........................................................................................................10(2) Management indicators which serve as goals ...........................................................................10(3) Medium/long-term corporate strategy .......................................................................................10
3. Basic Approach to Selection of Accounting Standards ................................................................... 11
4. Consolidated Financial Statements .................................................................................................12(1) Consolidated Balance Sheet ......................................................................................................12(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income .......14(3) Consolidated Statements of Change in Net Assets ....................................................................16(4) Consolidated Statements of Cash Flows ...................................................................................18(5) Notes to Consolidated Financial Statements .............................................................................20(Note on the Going-Concern Assumption) .............................................................................20(Basic Information of Consolidated Financial Statements) ....................................................20(Segment Information) ............................................................................................................23(Per Share Information) ..........................................................................................................25(Significant Subsequent Events) .............................................................................................26

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SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

1. Operating Results(1) Analysis of Operating Results(in millions, except percentages)
FY2016

Sales

Margin¥122,216

Medical practice support

FY2017%¥ 135,431

MarginChange%Change¥13,215

10.8%

25,30524,548

(756)

(3.0)

Consulting

2,035

2,247

212

10.4

Rental

6,836

5,676

(1,159)(17.0)

Leasing and Installment Sales

10,153

9,700

(452)

(4.5)

Others

6,280

6,923

642

10.2

Pharmacies

95,966109,918

13,951

14.5

944

964

20

2.1

OthersOperating Income

6,248

5.1

7,189

5.3

940

15.1

986

3.9

884

3.6

(101)

(10.3)

Pharmacies

6,069

6.3

7,139

6.5

1,070

17.6

Others

(52)

(5.6)

(22)

(2.3)

29

-

Reconciliation

(754)

-

(811)

-

(57)

-

Ordinary Income

6,440

5.3

7,228

5.3

787

12.2

Profit attributable to owners of parent

3,779

3.1

4,243

3.1

463

12.3

Medical practice support

We launched Action 2020, a three-year, medium-term management plan in April 2017.
In FY2017, which is the first year of this plan, we implemented the development of a regional
comprehensive healthcare system to actualize a Japanese healthcare business model, which is thetheme of our medium-term management plan. We carried out healthcare mall development, hospitalmanagement support, and the creation of valuable pharmacies, and also undertook the addition offunctions to, and strengthening of existing businesses, and the expansion of business domains tohealthcare related fields to achieve our vision for FY2027.
In the fiscal year ended March 31, 2018 (FY2017), we posted net sales of ¥135,431 million, an
expansion of 10.8% year-on-year. This overall growth was driven by the pharmacy business. In the
profit front, operating income totaled ¥7,189 million, a rise of 15.1%, ordinary income was ¥7,228
million, an increase of 12.2%., and profit attributable to owners of the parent was ¥4,243 million, an
improvement of 12.3%.

2

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017① Medical practice support
A. Consulting
As of the end of FY2017, the number of registered doctors wanting to transfer/start-up a practiceusing the DtoD system (a support scheme for the succession, partnership and job-hunting for
medical professionals) totaled 74,898 doctors, an increase of 5,739 people from the end of FY2016.
We are committed to developing regional healthcare malls, which enable local residents tocontinue to live safely and securely in places they are familiar with. As of the end of FY2017, there
are 94 healthcare malls in operation. In the medium-term management plan, we aim to operate 200
healthcare malls by the end of March 2020. We established a system to achieve this goal bystrengthening dedicated healthcare mall departments in the Tokyo area and setting up new
departments in the Kansai area. We also opened a DtoD healthcare mall website(https://www.clinic-mall.com/) to support the opening of new healthcare malls. Meanwhile, as a partof our consulting for medical professionals to support the diverse workstyles of doctors, we
implemented measures to address the various needs of doctors. In addition to traditional medical
practice start-up seminars, to help doctors build an ideal career path, we held seminars aimed atmaking doctor’s dreams become reality and also for female medical professionals.
Note that on October 2, 2017, we opened the Akasaka Toranomon Clinic. This is a specialized
treatment clinic-type healthcare mall that contributes to the division of duties with advanced
acute-phase hospitals. This is our first cutting-edge initiative to support medical practice start-ups
and hospital management.
Owing to these and other measures, sales in the consulting business totaled ¥2,247 million, agrowth of 10.4% versus a year earlier. This reflects an increase in consulting revenue, including thatfor management support, and revenue from consulting on start-ups, including healthcare malls.
B. Rental
In product development, on January 5, 2018 we launched the EAST VIEW, a long TV arm for bed
use by dialysis patients. This is our own original product which features new functions based onrequests from people in the medical frontlines. This is the only product in Japan where the arm has
been integrated as a single unit with the TV.
In the sales front, continuing on from the previous fiscal year, we responded to contract renewal
needs following the transition by hospitals (rental customers) to terrestrial digital broadcasting. Salesof goods (sublease rental), which is recorded as flow income, declined in FY2017 due to impact
from the extension of rental contracts and conversion to a stock-style business. Consequently, net
sales were ¥5,676 million, a decrease of 17.0% year-on-year.

3

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

C. Leasing / Installment
The market environment remains weak due to impact from negative interest rates. We newly
installed and replaced medical equipment at healthcare malls, medical practice start-ups, and hospitalreconstruction projects, by leveraging our consulting strength. Although leasing contracts increased
compared with a year earlier, there was negative impact from a conversion to the stock-stylebusiness for leasing contracts and a decline in sales of goods (sublease rental). Accordingly, sales
totaled ¥9,700 million, a drop of 4.5% year-on-year.
D. Others
Sales totaled ¥6,923 million, an expansion of 10.2% in contrast with a year earlier, in partreflecting an increase in sales related to the design and construction of medical facilities.
In light of the above performance, we posted sales in the medical practice support business of¥24,548 million, a decline of 3.0% year-on-year. Meanwhile, operating income was ¥884 million, adecrease of 10.3%. Although profit in the consulting business rose on the back of an increase in sales,
this was mainly offset by negative impact from the conversion to a stock-style business for rental
and leasing contracts.
② Pharmacy
We undertook our “healthcare station for all” initiative to manage pharmacies that are chosen by
the local community.
We also put into action measures to promote primary-care pharmacists and pharmacies, as
proposed in the Ministry of Health, Labour and Welfare’s “Vision of Community Pharmacies forPatients.” We also undertook the training of pharmacists that specialize in certain areas andhealthcare support pharmacy measures to address the advanced pharmacological management needsof patients. The number of certified healthcare support pharmacies totaled 89 pharmacies, or roughly
10% of pharmacies nationwide as of the end of FY2017. Healthcare support pharmacy measures
included the distribution of healthcare-support leaflets and the hosting of healthcare consultations at
pharmacies.
We are now operating a total of 687 pharmacies, including 18 locations opened in FY2017 (six ofwhich were through M&A).
Consequently, in the pharmacy business, we booked segment sales of ¥109,918 million, a growthof 14.5% versus a year earlier, and operating income of ¥7,139 million, an increase of 17.6%. This
reflects substantial full-year contribution from the acquisition of the Miyonodai Yakkyoku Group (91pharmacies) in December 2016 as well as benefits from primary pharmacist and pharmacy measures,
mainly at existing pharmacies.
4

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017③ Others
Segment sales totaled ¥964 million, a rise of 2.1% year-on-year, and an operating loss of ¥22
million, an improvement of ¥29 million compared with the loss in the same period a year earlier.
(Change in the business segment classification method)
Beginning in FY2017, we aim to carry out business activities propelled by faster decision-making
by developing strategies for each business in accordance with the medium-term management plan.
To this end, we revamped our organizational and management structure so as to pivot around ourbusinesses, and we revised the method we use to classify our business segments. Our reporting
segments are now the “medical practice support,” “pharmacies,” and “others,” as opposed to ourprevious segments (Higashinihon (East Japan), Nishinihon (West Japan), and Kyushu).
We have reshuffled our business segments for the previous fiscal year to make it possible toconduct year-on-year comparisons.

5

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(2) Analysis of Financial Positions(in millions except percentages and ratios)
FY2016FY2017

ChangeTotal Assets¥86,760¥89,748¥2,988including Cash and Deposits

10,83014,538

3,707

Liabilities

53,87953,221(657)

including Interest-Bearing Debt *1

24,59023,529

(1,060)Net Assets

32,88036,526

3,645

Shareholders' Equity Ratio (%)

37.6

40.4

2.8

Net Debt-to-Equity Ratio (times) *2

0.42

0.25

(0.17)*1.Interest-Bearing Debts include lease obligations and accounts payable-installment purchases.
*2. Net Debt-to-Equity Ratio=( Interest-Bearing Debts－Cash and Deposits) / Shareholders' Equity

Total assets at the end of the fiscal year under review stood at ¥89,748 million, an increase of¥2,988 million versus the end of FY2016. Current assets totaled ¥48,299 million, a decrease of¥3,300 million. This is primarily attributable to an increase in cash and deposits of ¥3,707 million.
Meanwhile, noncurrent assets totaled ¥41,448, a decrease of ¥311 million. This mainly reflects adecrease of goodwill of ¥584 million.
Total liabilities totaled ¥53,221 million, a decrease of ¥657 million versus the end of FY2016.
Current liabilities stood at ¥33,598 million, an increase of ¥369 million. Noncurrent liabilities stoodat ¥19,623 million, a decrease of ¥1,026 million. This was primarily attributable to a decrease oflong-term loans payable of ¥1,340 million.
Note that interest-bearing debt (including (including lease obligations and accounts
payable-installment purchases) totaled ¥23,529 million, a decrease of ¥1,060 million. Reflecting this,the net debt-to-equity ratio (interest-bearing debt less cash and deposits divided by shareholders’equity) was 0.25, a decrease of 0.17 points compared with the end of the previous fiscal year-end.
Net assets at the end of the fiscal year under review stood at ¥36,526 million, an increase of ¥3,645
million versus the end of FY2016. This primarily reflects a decline of ¥785 million due to dividend
payments and an increase of ¥4,243 million owing to a rise in net income attributable to owners of
the parent.
In light of the above performance, the equity ratio stood at 40.4%, a rise of 2.8 points versus 37.6%
at the end of the previous fiscal year.

6

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(3) Cash flows
Cash and cash equivalents ("funds") at the end of the fiscal year under review totaled ¥14,450
million, an increase of ¥3,795 million (35.6%) than at the end of the previous fiscal year. This is
primarily attributable to following factors.
(Cash Flows from Operating Activities)
Net cash provided by operating activities in the fiscal year under review was ¥10,630 million. The
main factors were ¥7,105 in income before income taxes and ¥3,971 million in depreciation andamortization, and ¥1,243 million in amortization of goodwill. Meanwhile, there was a ¥2,778 million
in expenditure for income tax payments.
(Cash Flows from Investing Activities)
Net cash used in investing activities in the fiscal year under review was ¥2,963 million. The main
factors were ¥1,875 million to purchase corporate assets, and ¥745 million in purchase of property
for lease.
(Cash Flows from Financing Activities)
Net cash used in financing activities was ¥3,871 million. Although there were ¥3,000 million infunds from long-term loans, there was ¥4,614 million for the repayment of long-term loans, and¥1,266 million in repayment of installment payables.
(Reference) Cash flow-Related Indicators
FY2013

FY2014FY2015FY2016FY2017

35.7

37.7

39.5

37.6

40.4

44.6

69.8

76.6

72.3

100.9

Interest-bearing debt to cash flows (%)

2.1

2.8

2.6

2.2

2.2

Interest coverage ratio (times)

57.1

45.8

62.7

105.3

94.1

Capital adequacy ratio (%)
Capital adequacy ratio(based on fair value) (%)

Capital adequacy ratio: Shareholders’ equity / Total assets
Capital adequacy ratio (based on fair value): Market capitalization / Total assets
Interest-bearing debt to cash flows: Interest-bearing debt / Cash flows
Interest coverage ratio: Cash flows / Interest paid
(Notes) 1. Each ratio is calculated using consolidated amounts.
2. Market capitalization is calculated using outstanding shares less treasury stock.
3. Cash flows and interest paid are clarified as net cash provided by (used in) operating activities.
4. Interest-bearing debt is all debt for which interest is paid interest.

7

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(4) Forecast for FY2018

FY2017FY2018(Forecasts)

Change(amount)

Change(%)

Millions of Yen

Millions of Yen

Millions of Yen%

135,431

144,928

9,497

7.0

Operating income

7,189

5,762

-1,427-19.8

Ordinary income

7,228

5,800

-1,428-19.8

Profit attributableto owners of parent

4,243

3,405

-838

-19.8

Net income per share (¥)

141.74113.74-28.00-Net sales

FY2018 is the second year of Action 2020, our three-year, medium-term management plan. We
will continue to implement the development of a regional comprehensive healthcare system toactualize a Japanese healthcare business model, which is the theme of our medium-term
management plan. We carried out healthcare mall development, hospital management support, andthe creation of valuable pharmacies, and also undertook the addition of functions to, andstrengthening of existing businesses, and the expansion of business domains to healthcare related
fields to achieve our vision for FY2027.
In FY2018, we forecast net sales of ¥144,928 million, an increase of 7.0% year-on-year. Although
we estimate a decline in sales in the pharmacy segment due to negative impact from revisions t NHI
drug prices and dispensing fees in April 2018, we believe this will be offset by sales in the medical
practice support segment. We anticipate sales growth in each business in the medical practicesupport segment and earnings contribution from the addition of the Bunkyou Corporation (fullyacquired on April 26, 2018) to the Sogo Medical Group.
Meanwhile, in the profit front, we do not expect to absorb in the negative impact from NHI pricerevisions in the pharmacy segment. We therefore anticipate operating income of ¥5,762 million, adecrease of 19.8%, ordinary income of ¥5,800 million, a decline of 19.8%, and profit attributable toowners of the parent of ¥3,405 million, a fall of 19.8%.
On April 1, 2018, we implemented a 2:1 stock split for common shares. The per-share profit
attributable to owners of the parent (EPS) was calculated based on the assumption that this stock
split was implemented at the start of the prior consolidated fiscal year.
Note that the Board of Directors, at a meeting held on March 22, 2018, decided to begin
full-fledged preparations for transition into a holding company (tentatively set for October 1, 2018).
Moving forward, to attain our vision for FY2027 earlier than scheduled, improve our corporate
8

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

value, and achieve continuous growth, we believe it necessary to expand the scale of our business
operations and create new businesses by accelerating the speed of the evolution and progress of ourexisting businesses and through active M&A and alliances. We arrived at the decision that the
optimal method for accomplishing these goals is to switch to a holding company structure. In
addition, from the perspective of strengthening our governance as well, it is our opinion that aholding company structure is suitable for separating oversight functions and business executionfunctions.
The earnings forecasts above were prepared based on information available to use as of the date of
the release of these materials. Actual earnings results may differ from our forecasts due to various
factors.

9

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

2. Management Policies(1) Basic management policy
In accordance with the concept of “Good Medical Practice through Good Management”, the basic
policy of Sogo Medical is to “contribute to building a better society through good medical practice”
underpinned by total healthcare management support which is backed by our consulting business.
(2) Management indicators which serve as goals
We launched Action 2020, a three-year, medium-term plan, from April 2017. The goals for this plan,
which will wrap up in the fiscal year ending March 31, 2020, are as follows.
・Consolidated net sales of ¥160,000 million (organic growth)
・EBITDA margin of 9% or higher
・Appropriation of ¥20,000 million for capital investments during the three years of the plan
(separate capital to be actively used for M&A and partnerships)
・Maintain a dividend payout ratio of 20% or higher(3) Medium/long-term corporate strategy① Positioned as the medium-term management plan for the fiscal year ending March 31, 2028
(FY2027)○Mission
We shall work to contribute to the building of a better society through good medical practice.
○Vision for FY2027
Completion of a Japanese healthcare business model that supports a regional comprehensive
healthcare system○Image of the completed Japanese healthcare business model
Development of an infrastructure for a regional healthcare network by offering hospital management
assistance and ideal healthcare malls through the creation of the DtoD system and valuable
pharmacies○Position of the medium-term management plan Action 2020
This plan aims to realize a Japanese healthcare business model. It is positioned as a three-year planthat is a stepping stone toward the achievement our vision for FY2027.

10

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017②Vision for the fiscal year ending March 31, 2020
Adding home medical and home nursing care functions to healthcare malls, developing a system for
efficient and effective healthcare by dividing healthcare functions, and strengthening primary
pharmacy functions, thereby contributing to the creation of regional comprehensive healthcare
system. In addition, taking into account future population demographics, healthcare demand, andurban development, healthcare malls will support the formation of compact cities.
Promoting the creation of an infrastructure for a regional healthcare network
1.

Developing healthcare malls

Central role in a healthcare complex, which offers
medical and nursing functions, and assistance ineveryday life as a social infrastructure～Growing to 200 healthcare malls～

2.

Supporting hospital management

Assisting in the division of hospital functions andsupporting collaborations to build a regional
comprehensive care system～Offering management support to 37 hospitals～

3.

Creating valuable pharmacies

Supporting regional comprehensive care systems as ahealthcare station for all～Increase by 2.3 million prescriptions (20% rise) owing
to organic growth～4.

To achieve our vision for FY2027

Adding functions to and strengthening existing
businesses and expanding business domains to healthcare
related fields

See our corporate website for details on our medium-term management plan, Action 2020.
(Website)
http://www.sogo-medical.co.jp/information/plan.php

3. Basic Approach to Selection of Accounting Standards
Since the business activities of Sogo Medical Group are currently limited to Japan, consolidated
financial statements are prepared according to Japanese accounting standards. However, Sogo
Medical will consider the implementation of International Financial Reporting Standards (IFRS)
taking into account a rising foreign shareholder percentage in the future as well as circumstances inJapan and internationally.

11

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

4. Consolidated Financial Statements(1) Consolidated Balance Sheet(in millions)
FY2016FY2017( As of March.31, 2017)( As of March.31, 2018)¥ 10,830¥ 14,538

Notes and accounts receivable-trade21,395

20,536

Accounts receivable-installment sales

1,821

2,934

AssetsCurrent assets
Cash and deposits

Lease investment assets

911

1,098

6,557

5,787

811

814

Other

2,710

2,643

Allowance for doubtful accounts

(38)

(53)

44,99948,299Property for lease, net

4,823

5,483

Buildings and structures, net

13,312

12,898

Land

4,720

4,707

Other, net

2,216

2,351

Total property, plant and equipment

25,07225,440Goodwill

9,703

9,119

Other

1,537

1,383

Total intangible assets

11,241

10,502

Investment securities

1,327

1,465

Deferred tax assets

445

361

Inventories
Deferred tax assets

Total current assets
Noncurrent assets
Property, plant and equipment

Intangible assets

Investments and other assets

3,673

3,716

Allowance for doubtful accounts

Other

(0)

(39)

Total investments and other assets

5,446

5,504

Total noncurrent assets

41,76041,448

Total assets

86,76089,748

12

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(in millions)
FY2016FY2017( As of March.31, 2017)( As of March.31, 2018)¥ 20,258¥ 20,037

415

490

4,607

4,429

Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Lease obligations

256

275

Accrued expenses

2,629

2,842

Income taxes payable

1,762

1,837

Deferred profit on installment sales

187

251

Other

3,112

3,433

Total current liabilities

33,22833,59815,171

13,831

920

731

2,160

2,754

2,397

2,306

Noncurrent liabilities
Long-term loans payable
Lease obligations
Long-term
accounts payable-installment purchase
Other
Total noncurrent liabilities

20,65019,62353,87953,221

Capital stock

3,513

3,513

Capital surplus

5,566

5,566

Retained earnings

24,012

27,470Treasury stock

(920)

(920)

Total shareholders' equity

32,17235,629432

611

Total accumulated other comprehensive income

432

611

Non-controlling interests

275

285

Total net assets

32,88036,526

Total liabilities and net assets

86,76089,748

Total liabilities
Net assets
Shareholders' equity

Accumulated other comprehensive income
Valuation difference on
available-for-sale securities

13

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income(Consolidated Statements of Income)(in millions)
FY2016FY2017( to March.31, 2017)( to March.31, 2018)¥ 122,216¥ 135,431

Cost of sales

103,761

115,077

Gross profit

18,454

20,354

Selling, general and administrative expenses

12,206

13,164

Operating income

6,248

7,189

Dividends income

25

26

Rent income

21

22

Dividends income of life insurance

21-

Gain on valuation of investment securities

168

-

Other

209

360

Total non-operating income

447

409

Interest expenses

81

103

Loss on valuation of investments securities-

37

Provision of allowance for doubtful accounts-

51

Loss on valuation of investment securities

35

-

Other

137

178

Total non-operating expenses

254

370

6,440

7,228

Impairment loss

48

123

Total extraordinary loss

48

123

Income before income taxes

6,391

7,105

Income taxes-current

2,452

2,859

Income taxes-deferred

87

(7)

Total income taxes

2,540

2,851

Net income

3,851

4,253

71

10

3,779

4,243

Net sales

Non-operating income

Non-operating expenses

Ordinary income
Extraordinary loss

Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent

14

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(Consolidated Statements of Comprehensive Income)(in millions)
FY2016FY2017( to March.31, 2017)( to March.31, 2018)¥ 3,851¥ 4,253

94

178

94

178

Comprehensive income

3,945

4,432

Comprehensive income attributable toComprehensive income attributable toowners of the parent

3,873

4,421

Comprehensive income attributable tonon-controlling interests

71

10

Net income
Other comprehensive income
Valuation difference on
available-for-sale securities
Total other comprehensive income

15

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(3) Consolidated Statements of Change in Net Assets(in millions)

FY2016（from April 1, 2016 to March 31, 2017）
Shareholders' equity
Capital stock
Balance at the
beginning ofcurrent period

Capital surplus

3,513

Retained earnings

5,566

Total shareholders'equityTreasury stock

20,944(920)

29,104

Changes of
items during the period
Dividends from surplus

(710)

(710)

Profit attributable toowners of parent

3,779

3,779

Purchase oftreasury stock-

Net changes of items
other thanshareholders' equity
Total changes of items
during the period

-

-

3,068

-

3,068

Balance at theend of current period

3,513

5,566

24,012(920)

32,172

Accumulated othercomprehensive income
Valuation difference on
available-for-sale securities
Balance at the
beginning ofcurrent period

Non controlling
Interest

338

203

Net assets

29,646

Changes of
items during the period
Dividends from surplus(710)

Profit attributable toowners of parent

3,779

Purchase oftreasury stock-

Net changes of items
other thanshareholders' equity

94

71

166

Total changes of items
during the period

94

71

3,234

Balance at theend of current period

432

275

32,88016

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

FY2017（from April 1, 2017 to March 31, 2018）(in millions)Shareholders' equity

Capital stock
Balance at the
beginning ofcurrent period

Capital surplus

3,513

Retained earnings

5,566

Treasury stock

24,012(920)

Total shareholders'equity32,172

Changes of
items during the period
Dividends from surplus

(785)

(785)

Profit attributable toowners of parent

4,243

4,243

Purchase oftreasury stock

(0)

(0)

Net changes of items
other thanshareholders' equity
Total changes of items
during the period

-

-

3,457

(0)

3,456

Balance at theend of current period

3,513

5,566

27,470(920)

35,629

Accumulated othercomprehensive income
Valuation difference on
available-for-sale securities
Balance at the
beginning ofcurrent period

Non controlling
Interest

432

275

Net assets

32,880Changes of
items during the period
Dividends from surplus(785)

Profit attributable toowners of parent

4,234

Purchase oftreasury stock(0)

Net changes of items
other thanshareholders' equity

178

10

189

Total changes of items
during the period

178

10

3,645

Balance at theend of current period

611

285

36,52617

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(4) Consolidated Statements of Cash Flows(in millions)
FY2016FY2017( to March.31, 2017)( to March.31, 2018)

Income before income taxes¥6,391¥7,105

Depreciation and amortization

3,902

3,971

Amortization of goodwill

987

1,243

Impairment loss

48

123

Interest and dividends income

(27)

(28)

Capital cost and interest expenses

105

118

Decrease (increase) in notes andaccounts receivable-trade

1,127

1,016

Decrease (increase) in
accounts receivable-installment57(1,048)Net decrease (increase) inlease investment assets

491

(187)

751

846

(670)

(400)

Increase/decrease/ in other assets/liabilities

(193)

310

Other

258

421

Subtotal

13,23013,492

27

28

(103)

(113)

Income taxes paid

(2,222)(2,778)Net cash provided by (used in) operating activities

10,931

10,630Purchase of own-used assets(3,152)(1,875)Purchase of property for lease

(264)

(745)

(6,440)

(485)

(76)

142

(9,933)(2,963)

Net cash provided by (used in) operating activities

Decrease (increase)in inventories
Increase (decrease) in notes andaccounts payable-trade

Interest and dividends income received
Interest expenses paid

Net cash provided by (used in) investing activities

Purchase of investments in subsidiaries
resulting in change in scope of consolidation
Other
Net cash provided by (used in) investing activities

18

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(in millions)
FY2016FY2017( to March.31, 2017)( to March.31, 2018)

Net increase (decrease) in short-term loans payable¥ (224)¥ 71

Proceeds from long-term loans payable

10,933

3,000

Repayment of long-term loans payable(4,446)(4,614)

Net cash provided by (used in) financing activities

Repayments of lease obligations

(324)

(276)

(1,924)(1,266)

(710)

(785)

-

(0)

Net cash provided by (used in) financing activities

3,301(3,871)

Net increase (decrease) in cash and cash equivalents

4,299

3,795

Cash and cash equivalents at beginning of period

6,356

10,655

Cash and cash equivalents at end of period

10,655

14,450

Repayments of installment payables
Cash dividends paid
Other

19

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(5) Notes to Consolidated Financial Statements(Note on the Going-Concern Assumption)
None.
(Basic Information of Consolidated Financial Statements)
1. Scope of Consolidation
Number of Consolidated Subsidiaries: 31 Companies(Major consolidated subsidiaries)
Somtech Co., Ltd.
Hokendohjinsha Inc.
Sogo Medical Pharmacy Chubu Co., Ltd.
Aoba Pharmacy Co., Ltd.
Maeda & Co., Ltd.
Taikodo yakkyoku honten Co., Ltd.
Beauty Drug Saito Co., Ltd.
Shokando Co., Ltd.
Miyonodai Pharmacy Co. Ltd.
Motoki Pharmacy Co. Ltd.
Sun Villa Co., Ltd.
In the fiscal year under review, we added the following companies to the scope of
consolidation: Kitano Dispensing Pharmacy Co., Ltd. (100% of total shares outstanding
acquired on April 3, 2017), KSmedicine Co., Ltd. (100% of total shares outstanding acquired onJune 1, 2017), Trust Co., Ltd. (100% of total shares outstanding acquired on September 1,2017), Nikki Co., Ltd. (100% of total shares outstanding acquired on September 1, 2017), andTriad Japan ((100% of total shares outstanding acquired on December 26, 2017).
Meanwhile, Nakano Pharmacy Co., Ltd. (merged and absorbed in Sogo Medical on April 2,2017) and Mitsuyasu Dispensing pharmacy Co. Ltd. (merged and absorbed in Sogo Medical on
December 1, 2017) were removed from the scope of consolidation.
2. Equity-Method
None

20

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

3. Fiscal Periods of Consolidated Subsidiaries
Consolidated subsidiaries with fiscal-year ends different from that of the Company:
April 30 One other company in addition to Green Pharmacy Co. Ltd.
May 31 Ai Dispensing pharmacy Co., Ltd.
June 30 Four other company in addition to Pharma Systems Co., Ltd.
July 31 Two other company in addition to GM Co., Ltd.
August 31 One other company in addition to Miyonodai Pharmacy Co. Ltd.
September 30 Two other company in addition to Beauty Drug Saito Co., Ltd.
When preparing consolidated financial statements, financial statements as of March 31, 2018,
are used for these companies.
4. Significant Financial Accounting Principles(1) Valuation basis and method of major assets①Investment Securities
With market value:
By the mark-to-market method based on average market value over a period of one month prior
to the date of settlement of the consolidated accounts (valuation differences are reported as aseparate component of net assets and the sale price is determined by the moving-averagemethod)Without market value:
At cost, using the moving-average method
Investments in a limited investment partnership or a similar partnership (that can be considered
as marketable securities in accordance with the Article 2 (2) of the Financial Instruments andExchange Act) are stated at their net equity value on the most recent financial statements thatare available on the settlement report day as specified in the partnership agreement.
② Inventories
Stated at historical cost mainly based on the weighted average method (Values on the balance
sheet are subject to the book value reduction method based on decreased profitability.)(2)Depreciation① Property for lease
Depreciation is calculated by use of the straight-line method over each rental term of the assets.
② Plant, Property and Equipment and Intangible assets (Excluding rental assets, leased assets(lessee) and plant property and equipment related to pharmacies opened after April 1, 2012)21

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

Depreciation for plant, property and equipment is calculated by use of the declining balancemethod. Depreciation for intangible assets is calculated by use of the straight-line method.
Useful lives of building and structures range from 10 to 47 years.
③Leased Assets (Lessee)
The straight-line method is applied for depreciation where the lease period is taken as useful
economic life and the residual value is zero.
Leased assets are classified as property, plant and equipment and intangible assets. Depreciation
is calculated by use of the straight-line method over each asset’s lease term of the assets andwith no estimated salvage value.
④Plant property and equipment related to pharmacies opened after April 1, 2012
Depreciation is calculated by use of the straight-line method.
(3)Allowance
Allowance for Doubtful Accounts
To provide for losses on doubtful accounts, allowances equal to the estimated amount of
uncollectible receivables are provided for general receivables based on the historical write-off
ratio, and bad receivables for each individual case.
(4)Revenue and Expense Recognition① Financing Leases (Lessor)
Standards for recording revenues related to financing leases
When the Company receives a lease payment, the Company recognizes the sale amount andcost of sale.
② Installment Sales
When the Company delivers a product through an installment contract, the Company
recognizes the full contract amount as accounts receivable-installment sales. When a due datearrives, the Company reports both the installment sale and the installment cost. Additionally,theCompany

recognizes

anunrealized

incomecorresponding

toaccounts

receivable-installment sales for which the due date has not arrived at year end as deferred profit
on installment sales.
(5)Amortization of Goodwill Method and Period
Goodwill is amortized using the straight-line method over a period of no more than 20 years,
with the reasonable period being decided for individual items.

22

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017(6) Scope of Funds Used to Prepare Consolidated Cash Flow Statements
Funds used to prepare the consolidated cash flow statements (cash and cash equivalents)
include cash on hand, deposits withdrawable at immediate notice, and easily convertible
short-term investments redeemable within 3 months of acquisition with minimal risk offluctuations in value.
(7) Others
Consumption and Local Consumption Tax
The Company applies the tax exclusion method for consumption and local consumption tax.
The consumption tax amount not subject to tax credit related to property, plant and equipment
is classified as an investment and other assets. The other assets are depreciated using thestraight-line method over five years. The other consumption tax amount not subject to tax credit
is classified as a period expense.
(Segment Information)
1. Overview of Segments
Reportable segments are components of the Company for which separate financial information
is available. The Board of Directors regularly evaluates these segments to make decisions about
how to allocate resources and assess performance.
Our businesses consist of management consulting for medical institutions and medical doctors,
DtoD (support system for medical practice succession, medical cooperatives, and practitioner
recruitment), TV rental for patients in hospitals, leasing and installment payment sales of
medical equipment, design and construction of medical institutions, pharmacies, managing
fee-based residential homes for the elderly.
There are three reportable segments are now medical practice support, pharmacy and others toenable us to develop individual segment strategies and facilitate rapid decision-making aboutbusiness operations.
Matters related to the change of reportable segments
We aim to carry out business activities propelled by faster decision-making by developing
strategies for each business starting in FY2018. To this end, we revamped our organizationaland management structure so as to pivot around our businesses, and we revised the method we
use to classify our business segments. Our reporting segments are now the “medical practicesupport,” “pharmacies,” and “others,” as opposed to our previous segments (Higashinihon (EastJapan), Nishinihon (West Japan), and Kyushu).

23

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

Note that segment information for the previous fiscal year was prepared based on theclassification method after revisions. See previous fiscal year figures in 3. Accounting Method
for Segment Sales, Profit (Loss), and Assets.
2. Accounting Method for Segment Sales, Profit (Loss), and Assets
The accounting method for reportable segments is similar to that described in the ‘Basic
Information of Consolidated Financial Statements’.
Each segment profit (loss) is calculated based on operating income.
Intersegment sales and transfer pricing are calculated based on prices for transactions with third
parties.
3. Segment Sales, Profit (Loss), Assets, and Liabilities
FY2016 (from April 1, 2016 to March 31, 2017)(in millions)
Reportable Segments
Medical practicesupportPharmacies

consolidated

Reconciliations

Othersamounts

*1

Total

*2

Sales
Unaffiliated sales¥ 25,305¥ 95,966¥ 944¥ 122,216-¥ 122,216

Intersegment sales

6,278

370

-

6,649

¥ (6,649)

-

Total

31,584

96,337944

128,865(6,649)122,216

Segment profit

986

6,069

(52)

7,003

754

6,248

Segment assets

25,80949,864

1,932

77,606

9,153

86,760Depreciation

2,391

1,186

71

3,649

252

3,902

Impairment loss

77

909

0

987

-

987

3,711

6,712

62

10,486433

10,920

OthersIncrease in assets*1. Reconciliations were as follows:（1） Reconciliation for reportable segment loss (¥-754million) included elimination of intersegment sales(¥114million) and overall corporate expense (¥-868million). The overall corporate expense was classified as
selling general and administrative expenses and was not allocated to reportable segments.
（2） Reconciliation for reportable segment assets (¥9,153 million) included elimination investment against equity(¥-17,598 million) and overall corporate assets (¥26,752 million). The overall assets were classified as parent
company’s deposits and were not allocated to reportable segments.
（3） Assets included property, plant and equipment and intangible assets. Reconciliation of increase of those assets(¥433 million) was classified as head office’s networking systems and allocation of other reportablesegments.
*2. Reportable segment profits were reconsolidated with the operating income of the consolidated income statement.

24

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

FY2017 (from April 1, 2017 to March 31, 2018)(in millions)
Reportable Segments
Medical practicesupportPharmacies

Othersconsolidated

Reconciliations

Total

amounts

*1

*2

Sales
Unaffiliated sales¥ 24,548¥ 109,918¥ 946¥ 135,431-¥ 135,431

Intersegment sales

7,144

411

12

7,567

¥ (7,567)

-

Total

31,693110,329976

142,999(7,567)

135,431

Segment profit

884

7,139

(22)

8,001

(811)

7,189

Segment assets

27,08048,8091,818

77,70912,03989,748Depreciation

2,313

1,305

71

3,690

281

3,971

Impairment loss

77

1,166

0

1,243

-

1,243

Increase in assets

2,739

2,295

57

5,091

110

5,201

Others

*1. Reconciliations were as follows:（1） Reconciliation for reportable segment loss (¥-811million) included elimination of intersegment sales(¥37million) and overall corporate expense (¥-849million). The overall corporate expense was classified as
selling general and administrative expenses and was not allocated to reportable segments.
（2） Reconciliation for reportable segment assets (¥12,039 million) included elimination investment against equity(¥-18,195 million) and overall corporate assets (¥30,234 million). The overall assets were classified as parent
company’s deposits and were not allocated to reportable segments.
（3） Assets included property, plant and equipment and intangible assets. Reconciliation of increase of those assets(¥110 million) was classified as head office’s networking systems and allocation of other reportable segments.
*2. Reportable segment profits were reconsolidated with the operating income of the consolidated income statement.

(Per Share Information)
FY2016FY2017

Net assets per share¥ 1,089.23¥ 1,210.69

Net income per share

126.26141.74

Note: The following is the basis for the calculation of net assets per share.
(in millions)
FY2016FY2017

Net assets¥ 32,880¥ 36,526

Deduction

275

285

(Non-controlling interests)

275

285

32,60536,241

Net assets attributable to common stocks

25

SOGO MEDICAL CO., LTD. (4775)
Summary of Consolidated Financial Results for FY2017

Number of common stocks at end of FY

29,93429,934２ There is no mention of per-share net income after adjustment for residual shares as there are
no residual shares.
３ A 2:1 stock split of common shares was implemented on April 1, 2018. Net assets per shareand net income per share were calculated assuming that the stock split was conducted at thestart of the previous consolidated fiscal year.
４ The following is the basis for the calculation of net income per share.
(in millions)
FY2016
Profit attributable to owners of parent

FY2017¥ 3,779¥ 4,243--

Profit attributable to owners of parent
attributable to common stocks

3,779

4,243

Average number of common stocks

29,93429,934(Preferred dividends)(Significant Subsequent Events)
None.

26