Year ending December 31, 2021

Year ending December 31, 2021 Second Quarter of FY2021 Nonconsolidated Financial Results

August 4, 2021
(All financial information herein has been prepared in accordance with accounting principles generally accepted inJapan. This document is an English translation from the original Japanese-language document. This translation is
not subject to auditing standards in the U.S.)
Listed company name:
Original Engineering
Stock listing: Tokyo Stock Exchange, Second
Consultants Co., Ltd.
SectionCode number:
4642(URL https://www.oec-solution.co.jp)
Representative:
Contact person:

Title President & Representative Director
Name: Nobuhiko Suga
Title Director & General Manager ofName: Kaoru Kira
Financial Affairs Division
Planned submission date of quarterly earnings report:
August 5, 2021
Date of scheduled payment of dividends: ―Quarterly earnings supplementary explanatory documents: None
Quarterly earnings presentation: None

Tel: (03) 6757-8800(Amounts less than ¥1 million are truncated)
NON-CONSOLIDATED FINANCIAL RESULTS FOR THE SECOND QUARTER OF FY 2021 (January 1,
2021 to June 30, 2021)(1)
Non-Consolidated Operating Results (cumulative)(Percentages represent year-on-year changes)

1.

Net sales
Million yen%

Operating income
Million yen%

Ordinary income
Million yen%

Six-month period
ended June 30, 2021

3,481

-4.2

621

-10.5

665

Six-month period
ended June 30, 2020

3,632

-3.0

694

-19.8

662

Profit per share forthe quarter
Yen
Six-month period
ended June 30, 2021
Six-month period
ended June 30, 2020
(2)

%

0.4

434

0.7

-22.2

431

-23.4

Profit per sharediluted for thequarter
Yen

74.39

–

74.18

74.14

Non-consolidated Financial Position
Total assets

Net assets

Million yen

Million yen

As of June 30, 2021
7,597
5,959
As of December 31,
7,022
5,699
2020
(Reference) Shareholders’ equity: As of June 30, 2021: ¥5,959 million
2.

ProfitMillion yen

Shareholders’equity ratio
%
78.4
81.2
As of December 31, 2020: ¥5,699 million

DIVIDENDS

Dividends per share
End of third Fiscal year(Record date)
Interimquarter
end
Yen
Yen
Yen
FY 2020
0.00
–
32.00
FY 20210.00
FY 2021 (Forecast)–
32.00(Note) Revision to the recently announced forecast of dividends: None
End of firstquarter
Yen––

Full year
Yen
32.00
32.00

3.

FORECAST OF NON-CONSOLIDATED RESULTS FOR FY 2021 (January 1, 2021 to December 31, 2021)(Percentages represent changes from the same period of the previous fiscal year)
Net sales
Operating income Ordinary income
ProfitProfit per share
Million yen % Million yen % Million yen % Million yen%
Yen
Full year
6,400 2.0
680 2.3680
5.0
430 14.5
73.63(Note) Revision to the recently announced forecast of results: None

* NOTES(1) Application of accounting treatment unique to the preparation of quarterly non-consolidated financial
statements:: None
(2) Changes in accounting policies, changes in accounting estimates and retrospective restatements:(i) Changes in accounting policies in accordance with revision of accounting standards:: None(ii) Changes in accounting policies other than (i) above:: None(iii) Changes in accounting estimates:: None(iv) Retrospective restatements:: None
(3) Number of outstanding shares (Common stock)(i) Number of shares outstanding at end of period, including treasury stock
As of June 30, 2021: 7,796,800 shares
As of December 31, 2020: 7,796,800 shares(ii) Number of shares of treasury stock at end of period
As of June 30, 2021: 1,955,241 shares
As of December 31, 2020: 1,956,441 shares(iii) Average number of shares outstanding for each period (cumulative second quarter)
As of June 30, 2021: 5,840,816 shares
As of June 30, 2020: 5,814,503 shares* The summary of quarterly financial results is not subject to quarterly reviews by certified public accountants or audit
corporations.
* Note regarding forecasts and forward-looking statements
The Company has not modified its forecast of the results for fiscal 2021, which it announced on February 5, 2021. The
forecasts presented above are based on information available to the Company at the present time, and, accordingly,
actual results may differ from any future performance expressed herein due to various factors. For matters relating toresults forecasts, please refer to “(3) Explanation Regarding Future Forecasts such as Forecasts of Results” on page 4.

Index of the Attachment
1.

QUALITATIVE INFORMATION REGARDING SECOND QUARTER FINANCIAL RESULTS ................2(1) Explanation Regarding Business Results............................................................................................................2(2) Explanation Regarding Financial Position..........................................................................................................3(3) Explanation Regarding Future Forecasts such as Forecasts of Results ..............................................................42.

QUARTERLY FINANCIAL STATEMENTS AND PRIMARY NOTES .............................................................5(1) Quarterly Balance Sheets ....................................................................................................................................5(2) Quarterly Statements of Operations ....................................................................................................................7
Cumulative Second Quarter ................................................................................................................................7(3) Quarterly Statements of Cash Flows...................................................................................................................8(4) Notes Regarding the Quarterly Financial Statements .......................................................................................10(Matters Affecting the Assumption of a Going Concern) .................................................................................10(Notes Regarding Significant Changes in Shareholders’ Equity) .....................................................................10(Segment Information) ......................................................................................................................................10

1

1.

QUALITATIVE INFORMATION REGARDING SECOND QUARTERFINANCIAL RESULTS(1)

Explanation Regarding Business Results

According to a provisional calculation of the Cabinet Office, Japan’s water and sewerage infrastructure assets
amount to approximately ¥130 trillion, which indicates that the water and sewerage infrastructure stock is the second
largest infrastructure stock in the country by sector after the road infrastructure stock. Among these, most of the
population has access to water supplies, with the total length of water pipes reaching around 670,000 kilometers acrossJapan. However, the national average annual rate of renewing water pipes is as low as 0.75%, which means that it willtake almost 130 years to renew all of these pipes. The statutory useful life of water pipe is 40 years, but they are expected
to deteriorate further due to the slow progress in renewing the water pipe infrastructure, much of which was built during
the high-growth period. Therefore, renewing aged water pipes has become an important issue for the stable supply ofsafe water.
In the sewage field, 91.7% of the population of Japan has access to sewage treatment facilities (as of the end of
FY2019), but only 79.7% has access to sewers, which means nearly 10,480,000 people still live without access to sewage
treatment facilities; promoting sewage services needs to be accelerated. While the need to construct new facilities is on
the decrease, a great number of water and sewage facilities that were rapidly built during the high-growth period arereaching the end of their useful lives every year. Maintenance and renewal of these infrastructure assets, which are
indispensable for ensuring a safe, secure, and culturally strong living environment, are thus in demand. In addition, needs
are growing for flood control measures to protect human lives and assets from localized torrential rainfall and large
typhoons, which have occurred frequently in recent years, anti-seismic measures such as quake-resistant toilet facilities,
and measures for reinforcing water and sewerage systems to make them tsunami resistant.
Out of Japan’s national budget for FY2021, passed and enacted in March 2021, the total amount to be allocatedto “General Social Infrastructure Development,” including the water and sewage budget, which is closely connected withthe business of the Company, is a national expenditure of ¥1,467 billion. This amount is broken down to ¥837.6 billion
for disaster prevention and safety subsidies and ¥629.5 billion for general social infrastructure development subsidies.
Since where subsidies will be spent is left to the discretion of local government, the allocated amount dedicated to waterand sewage operations is not known, but the amount of the related budget, though unofficially announced, is expected to
grow a little, compared with the previous fiscal year. On the other hand, the total of sewage operational costs in ordinancedesignated cities with a large budget across the country and the Tokyo metropolitan area is ¥612.1 billion, a decrease of
1.4% from the beginning of the previous year.
The Company, in this operating environment, has been working aggressively to win orders mainly in the watersupply field, particularly for services related to asset management in line with the Water Supply Division of the Ministryof Health, Labour and Welfare’s new water supply vision that focuses on the key words of “safety, strength, sustainability,
collaboration and challenge.” In the sewerage field, the Company pursues orders in line with the seven major themes set
by the Sewerage and Wastewater Management Department of MLIT: Strengthening earthquake recovery andreconstruction support and implementing national measures for safety and peace of mind; early reduction of areas lacking
sewerage infrastructure; promoting water environmental management; improving facilities management and operations;strengthening sewerage management; promoting measures to achieve a low-carbon, recycling-oriented society; and,promoting international water businesses through globalization and private-public initiatives. We also make efforts toobtain orders for services related to support by the Ministry of Internal Affairs and Communications for introducing local
public enterprise-based accounting into small-scale water supply and sewerage operations, in accordance with the Local
Public Enterprise Act, as well as operations including sewerage operations management strategy formulation operations.
In the domestic market, we are doubling down on sales activities to cultivate new fields and customers, based on our longtrack record, while capturing project orders that have high order-repeat rates through offering fine-tuned technological
proposals and flexible customer service. We do this on the back of our superiority resulting from an accumulated
knowledge of the status of facility development and operational issues in local public entities who are our existingcustomers. In overseas markets, the Company has been working to win orders by tapping into projects in emerging nations
through public-private partnerships.
On the other hand, with regard to its internal work environment, the Company has provided 90% of its employeeswith smartphones and notebook PCs and created an office environment with free address (no assigned seating) andwireless LAN to provide a telework environment, allowing employees to work anywhere not only in the office but also2

outside the office. The Company has worked to distribute profits to employees and increase revenue by boostingproductivity and reducing costs through the following measures: facilitating prompt information-sharing between
different levels, on which the Company has worked to raise awareness internally; speedily responding to departmental
issues by checking management benchmarks by department when necessary; conducting appropriate budget management,
process control, progress management, and outsourcing management for orders received for projects; upgrading in-houseengineers’ skills; securing and fostering young employees who will lead the next generation; reducing overtime to comply
with the revised Labor Standards Act; promoting health management; utilizing internal systems, such as a staggered
working hours system; and promoting the use of paid leave. These allow each employee to work flexibly according tohis/her own circumstances.
During the quarter under review, the impact of COVID-19 has stayed in Japan and overseas. In response, theCompany has continued its business activities while giving due consideration to employees’ safety and security by taking
infection-preventive measures, such as having employees work from home and using staggered working hours. In
addition, since the telework environment has been in place and everyone is familiar with remote work, the Company has
implemented measures to maintain productivity without employees coming to their respective offices.
During the period from April, in which the fiscal period of government agencies started, the budget execution of
local governments, which was related to the Company, was underway as scheduled, leading our activities for capturing
project orders to progress as expected. However, mainly due to the impacts of declarations of a state of emergency andquasi-emergency measures pursuant to the Act on Special Measures against COVID-19, progress in operational work
has been hampered and construction schedules have been postponed. This was because on-site research and in-person
meetings, which are difficult to conduct online, fell behind schedule in the face of a number of difficulties including
restrictions on comings and goings from large cities where many of our engineering staff reside to regions where manyof our customers are situated. In addition, we have been in the situation where we are not allowed to go overseas toproceed with overseas projects, causing difficulty for our business.
As a result, orders received during the first six months under review amounted to ¥2,538 million, an increase of
4.8% compared with the same period of the previous fiscal year. Net sales decreased 4.2% to ¥3,481 million. Operating
income amounted to ¥621 million, a decrease of 10.5% compared with the same period of the previous fiscal year, andordinary income increased 0.4% to ¥665 million. Profit amounted to ¥434 million, an increase of 0.7% compared withthe same period of the previous fiscal year.
Results by operating division were as follows.
[Engineering Consultant Department]
The Engineering Consultant Department received orders totaling ¥2,170 million during the first six months underreview, a decrease of 4.0% compared with the same period of the previous fiscal year. Sales by the department decreased
2.8%, to ¥3,219 million.
[Information Processing Department]
In the Information Processing Department, orders received increased 128.2%, compared with the same period of
the previous fiscal year, to ¥368 million. Sales by the department decreased 18.1%, to ¥262 million.

(2)

Explanation Regarding Financial Position

1)
Status of Assets, Liabilities and Net Assets(Current assets)
Current assets for the second quarter under review amounted to ¥6,057 million (up 8.3% from the end of theprevious fiscal year). The main factors contributing to this change included an increase in cash and deposits due to thereceipt of payment for operations and a decrease in accounts receivable-completed operation.
(Noncurrent assets)
Noncurrent assets for the second quarter under review stood at ¥1,539 million (up 7.7% from the end of theprevious fiscal year). The main factors contributing to this change included an increase in investments and other assets
as a result of acquisition of investment securities.
(Current liabilities)
Current liabilities for the second quarter under review stood at ¥1,422 million (up 29.8% from the end of theprevious fiscal year). The main factors contributing to this change included increases in income taxes payable, advances3

received on uncompleted contracts due to the receipt of payment for operations, and others due to the posting of accrued
expenses for summer bonuses.
(Noncurrent liabilities)
Noncurrent liabilities for the second quarter under review stood at ¥215 million (down 4.9% from the end of theprevious fiscal year). The main factors contributing to this change included a decrease in provision for retirement benefits.
(Net assets)
Net assets for the second quarter under review amounted to ¥5,959 million (up 4.6% from the end of the previous
fiscal year). The main factors contributing to this change included an increase in retained earnings by the posting of a
profit.
2)

Status of Cash Flows
Cash and cash equivalents (hereinafter referred to as “cash”) stood at ¥4,576 million at the end of the first six
months under review, an increase of 72.0% from the end of the previous fiscal year.
The main factors contributing to changes in cash flows during the first six months under review were as follows:(Cash flows from operating activities)
Net cash provided in operating activities amounted to ¥2,215 million (increased 20.9% compared with the same
period of the previous fiscal year). The main factor contributing to this change was the posting of profit before income
taxes for the quarter and a decrease in accounts receivable―trade.
(Cash flows from investing activities)
Net cash used in investing activities amounted to ¥91 million (increased 84.8% compared with the same periodof the previous fiscal year). The main factor contributing to this change was the acquisition, sale and redemption of
investment securities.
(Cash flows from financing activities)
Net cash used in financing activities amounted to ¥209 million (increased 18.1% compared with the same periodof the previous fiscal year). The main factor contributing to this change was the payment of cash dividends.

(3)

Explanation Regarding Future Forecasts such as Forecasts of Results

The Company has not changed its financial results forecast, which was announced on February 5, 2021, but willpromptly release a revised forecast when any correction is needed after examining various factors.

4

2.

QUARTERLY FINANCIAL STATEMENTS AND PRIMARY NOTES(1)

Quarterly Balance Sheets

Category

FY 2020(as of December 31, 2020)
Amount(thousand yen)

2Q under review(as of June 30, 2021)
Amount(thousand yen)

AssetsCurrent assets
Cash and deposits

3,376,196

5,292,165

Accounts receivable—completed
operation

2,145,471

687,620

71,09078,0205,592,758

6,057,807

Property, plant and equipment

497,331

489,095

Intangible assets

131,361

127,492

Investments and other assets

800,994923,2091,429,687

1,539,797

7,022,446

7,597,604

Other
Total current assets
Noncurrent assets

Total noncurrent assets
Total assets

5Category

FY 2020(as of December 31, 2020)
Amount(thousand yen)

2Q under review(as of June 30, 2021)
Amount(thousand yen)Accounts payable—operating

267,263

101,464

Lease obligations

35,16134,300-272

Income taxes payable

116,224

263,414

Advances received on uncompleted contracts

147,743

344,073

Provision for bonuses

39,97370,908Provision for loss on order received

11,583

17,277

Provision for share benefit

11,288

10,772

Other467,335

580,397

1,096,572

1,422,880

Provision for retirement benefits

64,556

51,618Provision for share benefit

20,134

19,166

Lease obligations

84,67087,569Asset retirement obligations

50,07050,062

Other

6,720

6,720

226,152

215,137

1,322,724

1,638,018

Capital stock

1,093,000

1,093,000

Capital surplus

2,865,729

2,865,729

Retained earnings

3,312,171

3,557,845

Treasury stock-1,575,325-1,574,551

Total shareholders’ equity

5,695,575

5,942,023

Valuation difference on available-for-sale securities

4,145

17,562

Total valuation and translation adjustments

4,145

17,562

5,699,721

5,959,586

7,022,446

7,597,604

Liabilities

Current liabilities

Asset retirement obligations

Total current liabilities
Noncurrent liabilities

Total noncurrent liabilities
Total liabilities
Net assets
Shareholders’ equity

Valuation and translation adjustments

Total net assets
Total liabilities and net assets

6

(2)

Quarterly Statements of Operations
Cumulative Second Quarter
Previous cumulative second Cumulative second quarter
quarterunder review(from January 1, 2020 to(from January 1, 2021 toJune 30, 2020)
June 30, 2021)
AmountAmount(thousand yen)(thousand yen)

Category
Contracts completed

3,632,679

3,481,466

Cost of completed work

2,284,797

2,203,350

Gross profit

1,347,882

1,278,116

Selling, general and administrative expenses

653,556

656,687

Operating income

694,325

621,428

Interest income

119

52

Interest on securities

50

1,200

Dividend income

4,280

3,083

Dividends from silent partnerships

6,108

2,226

Gain on sales of investment securities

-

1,240

Gain on redemption of investment securities-

38,545

1,215

1,215

128

1,111

Other

2,620

3,612

Total non-operating income

14,52252,287741

1,689

Expenses for securities transactions

5,782

5,957

Loss on valuation of investment securities

39,455

-

162

441

46,142

8,088

662,705

665,627

-

1,067

-

1,067

Loss on retirement of noncurrent assets

966

596

Total extraordinary loss

966

596

Profit before income taxes for the quarter

661,739

666,098

Income taxes―current

236,957

235,364

Income taxes-deferred-6,562-3,757

Total income taxes

230,394

231,606

Profit for the quarter

431,344434,491

Non-operating income

Commission fee
Foreign exchange gains

Non-operating expenses
Interest expenses

Other
Total non-operating expenses
Ordinary income
Extraordinary income
Reversal of provision for warranties for completed
construction
Total extraordinary income
Extraordinary loss

7

(3)

Quarterly Statements of Cash Flows
Previous cumulative
second quarter(from January 1, 2020 toJune 30, 2020)
Amount(thousand yen)

Cumulative second
quarter under review(from January 1, 2021 toJune 30, 2021)
Amount(thousand yen)

Profit before income taxes for the quarter

661,739

666,098

Depreciation and amortization

48,694

57,166

Increase/decrease in provision for bonuses

30,80430,935

Increase/decrease in provision for loss on order
received

1,598

5,694

Increase /decrease in provision for share benefit

-580

-709

Increase/decrease in provision for retirement benefits-14,317-12,937

Interest and dividends income-10,559-6,562741

1,689

1,079,621

1,457,851

3,069

313

-78,719-165,799

151,835

196,330

Other

151,152

109,799

Subtotal

2,025,080

2,339,869

10,563

6,562

-741

-1,689--35,632

Income taxes paid

-202,127-93,181

Net cash provided by (used in) operating activities

1,832,774

2,215,928

Category
Cash flows from operating activities

Interest expenses
Increase/decrease in notes and accounts
receivable―trade
Increase/decrease in costs on uncompleted services
Increase/decrease in notes and accounts
payable―trade
Increase/decrease in advances received on
uncompleted contracts

Interest and dividends income received
Interest expenses paid
Payment of warranties for completed construction

8

Previous cumulative
second quarter(from January 1, 2020 toJune 30, 2020)
Amount(thousand yen)

Cumulative second
quarter under review(from January 1, 2021 toJune 30, 2021)
Amount(thousand yen)

Purchase of property, plant and equipment-6,445-5,424Purchase of intangible assets-37,657-19,670

Payments for lease and guarantee deposits-2,774-1,035759

257-100,000-310,000-

100,862

Proceeds from redemption of investment securities

100,000

146,040

Other payments-4,552-3,717

Other proceeds

1,393

1,621

-49,276-91,066-36-

Repayments of lease obligations-12,530-20,428

Proceeds from exercise of share options

11,550-Cash dividends paid

-176,194-188,817

Net cash provided by (used in) financing activities-177,211-209,246-27

348

1,606,258

1,915,963

3,027,137

2,660,092

4,633,396

4,576,055

Category
Cash flows from investing activities

Proceeds from collection of lease and guarantee
deposits
Purchase of investment securities
Proceeds from sales of investment securities

Net cash provided by (used in) investing activities
Cash flows from financing activities
Purchase of treasury stock

Effect of exchange rate change on cash and cash
equivalents
Net increase/decrease in cash and cash equivalents
Balance of cash and cash equivalents at beginning of theyear
Balance of cash and cash equivalents at the end of thequarter9(4)Notes Regarding the Quarterly Financial Statements(Matters Affecting the Assumption of a Going Concern)
No applicable items.
(Notes Regarding Significant Changes in Shareholders’ Equity)
No applicable items.

(Segment Information)
Previous first six months (from January 1, 2020 to June 30, 2020) and first six months under review (fromJanuary 1, 2021 to June 30, 2021)
Since the Company’s business operations comprising engineering consulting and related services are conductedwithin a single business segment, segment information is omitted.

10