Financial Results for
Q2 of the Fiscal YearEnding in September 2020
CANDEAL CO., Ltd.
TSE1 :1446
May 15, 2020

Copyright (C) CANDEAL CO., Ltd. All Rights Reserved.

We would like to express our sincere condolences andsympathy to those who passed away due to the newcoronavirus (COVID-19) infection and their families andrelated parties, and to all those who have been affectedby this disease.
We would also like to express my sincere thanks to all of
the health care professionals who are working hard totreat and prevent the spread of infection.
2

CONTENTS
1

Performance Highlights

2

FY9/20 Q2 Business Results3

Impact of COVID-19, Our Response, andBusiness Forecasts for FY9/20

4

TOPICS
3

1
Performance Highlights

4Performance Highlights

FY9/20 Q2 Lower sales and profits<Factors>
FY20 Q2

Plan

ResultNet sales
Operatingincome6,617 million yen

96.9% YoY

324 million yen

91.6% YoY

Planned to catch up on decline in operations and delayed projects that are
expected during FY19 Q4 through FY20 Q1 due to a flood disaster and otherfactors.

We were able to catch up the delay in the projects during FY19 Q4 through FY20 Q1.
However, the impact of COVID-19 became apparent in late February, and there were
delays in the construction period and cancellations of project particularly in theConstruction services for the commercial environment.

5

2
FY9/20 Q2 Business Results6FY9/19 Business Results (Consolidated)
FY20.Q2

FY19.Q2
Results(Million yen)

Profit ratio

Results

Profit
ratio

YoY

▲209

96.9%

36.7%

▲18

99.3%

324

4.9%

▲29

91.6%

5.2%

290

4.4%

▲62

82.3%

197

2.9%

148

2.2%

▲48

75.2%

293

4.3%

244

3.7%

▲48

83.4%

6,617

Net sales

6,827

Gross profit

2,446

35.8%

2,428

Operating income

353

5.2%

Ordinary income

353

Net income
Net income before
amortization of
goodwill

7

Analysis of Changes in Consolidated Ordinary Income-18% YoY

400
350
300
250

FY19.Q2
Ordinary
incomeDecrease inprofits due tolower sales

Decrease inpersonnel
expenses(SG&A)

353

▲18

+22

Increase in SG&A
(Excluding
personnel
expenses)▲33(Million yen)
Decrease innonoperating
income▲4

Increase in
non-operating
expenses▲27

FY20.Q2
Ordinary
income

290

200
150
100
50
0

Increase in the number of offices
Increased shareholder management costs
due to an increase in the number ofshareholders
Increase in listing expenses
due to market changes

8Sales by Service(Million yen)

FY19.Q2
Results

Composition
ratio

FY20.Q2
Results

Composition
ratio

YoY

Repair service

2,588

37.9%

2,616

39.5%

+27

101.1%

Construction
services for living
environments

1,728

25.3%

1,624

24.5%

▲103

94.0%

Construction
services forcommercial
environments

2,129

31.2%

1,955

29.6%

▲173

91.8%

Merchandise
sales

380

5.6%

420

6.4%

+40

110.7%

Total

6,827

▲209

96.9%

6,617

9

Status of Repair Service
Although the number of new housing starts declined due to a reactionary fall in demand following theconsumption tax hike, demand for our services remained firm, reaching 101.1% YoY.
(Million yen)
FY19.Q2
Results

Repair service

Repair for detachedhousesRepair for
condominiums

Composition
ratio

FY20.Q2
Results

Composition
ratio

YoY

2,588

37.9%

2,616

39.5%

+27

101.1%

1,931

28.3%

1,985

30.0%

+54

102.8%

657

9.6%

631

9.5%

▲26

96.0%

* Source: Ministry of Land, Infrastructure, Transport and Tourism (October 2019-March 2020) No. of new housing starts: 97.8% YoY; No. of condominium starts: 87.0% YoY.
* Source: Real Estate Economic Research Institute (October 2019-March 2020) Number of condominium sales (Tokyo and Kinki areas): 79.9% YoY

10

Status of Repair Service
Repair for detached houses

Repair for condominiums

In 2Q, the volume of orders was expected to be sufficient tocatch up with the impact of the flood disaster and other events
during FY19 Q4 through FY20 Q1, but in the second half of Q2,
the impact of COVID-19 became apparent and the number oforders decreased. Sales growth was limited to 102.8% YoY.

Sales of new condominiums were sluggish in reaction to theconsumption tax hike, but productivity per worker increased by
12.5% YoY due to higher unit prices and other sales measures.

Unit price of orders received: +5.6%
Orders received: -2.6%

80,00070,00060,00050,00029,17566,19230,796

Total number of workers: -14.7%

QoQ
105.6％
30,00064,461

Productivity per worker: +12.5% YoY

QoQ
97.4％
20,00040,00040,00025,22929,34425,01910,00020,00025,00020,00020,00030,00022,417

QoQ
112.5％
30,000QoQ
85.3％
15,00010,0005,000

10,00000FY19.Q2
Unit price of orders
received (yen)FY20.Q2
Number of orders
received

00

FY19.Q2
Profitability per worker(yen)

FY20.Q2
Number of workers

11Status of Construction Services for Living Environments
・ Sales were 94.0% YoY, due to a decrease in interior installation demand and a decline in refit
services, despite robust after-sales periodic inspection services.

・ As for the service to visit residences, some projects were postponed or cancelled as some customers
began to avoid face-to-face contact due to concerns about the spread of COVID-19.
(Million yen)
FY19.Q2
Results

Construction services
for living environments

Composition
ratio

FY20.Q2
Results

Composition
ratio

YoY

1,728

25.3%

1,624

24.5%

▲103

94.0%

Periodic after-sales
inspections

483

7.1%

546

8.3%

+62

112.9%

Small-scale repair andconstruction works, etc.*1

992

14.5%

907

13.7%

▲85

91.4%

Refit

252

3.7%

171

2.6%

▲81

67.8%

1. Minor repairs and various construction/inspection/viewing services

12Status of Construction Services for Living Environments:

Periodic After-Sales Inspection

50,00013,015

13,51840,00030,00037,17540,409QoQ
103.9％
QoQ
108.7％
10,00020,0005,000

Despite delays in projects during FY19 Q4 through
FY20 Q1 due to flood disaster and the impact of
COVID-19, the order remains favorable.

Unit price of orders received: +3.9%

Due to an increase in the number of contracted companies

Number of new contracts: +13.1%

10,00000FY19.Q2
Unit price of orders
received (yen)FY20.Q2
Number of orders
received

Number of inspection: +8.7%
13

Periodic After-Sales Inspection Results
Number of inspections

Industry leader
Last 13 years
CAGR 36.91%

0

0

FY19
Sales

FY19.Q2

1,024 million

FY20.Q2

1,200,000

1,050,000
yen0

FY19.Q2
750,0000

600,000

00

FY20.Q2

450,0000
300,0000
150,000

00

FY19
Number of annual
inspections

Cumulative number ofunits undermanagement

Sales (Million yen)

QoQ
108.4%

21,94324,828Cumulative number ofunits under management

FY19

0

FY06

37,69040,871

Number of new contracts

900,000

0*1

FY20.Q2

346,809371,637

QoQ
113.1%
Around thedoorCounting

Qtd107.2%*1: In case of multiple visits per house, the actual number of visits is counted.

14

Status of Construction Services for Housing Environments:
Small-scale repair and construction works, etc.

,000

21,240

,000

,000

QoQ
94.8％

25,00020,135Decline in demand for interior installation due tothe condominium market downturn

20,00046,72745,054QoQ
96.4％
15,000,000
10,000

,000

5,000

,000

Total number of workers:+3.6%

Productivity
per worker:

-5.2%

0

0

FY19.Q2
Profitability per worker(yen)

FY20.Q2
Number of workers* Small-scale repair and construction works, etc.: Small-scale repairs and construction
work, inspection and preview services

15

40,000

30,000Status of Construction Services for Housing Environments:
Refit
25,00030,00020,00014,94915,168QoQ
101.5％
15,00020,00016,865

10,00010,00011,2770

Due to a decrease in the number of project

Number of orders: -33.1%

QoQ
66.9％
5,000

0

FY19.Q2
Unit price of orders
received (yen)FY20.Q2
Number of orders
received* Demand for refit services is difficult to predict as it is a recall
support service.

16

Status of Construction Services for Commercial
Environments and Merchandise Sales
COVID-19 had a significant impact on the performance.
Sales of this business were 91.8% YoY due to construction delays and cancellations, particularly at hotels.

(Million yen)

FY19.Q2
Results

Composition
ratio

FY20.Q2
Results

Composition
ratio

YoY

Construction services forthe commercial environment

2,129

31.2%

1,955

29.6%

▲173

91.8%

Interior installation

1,522

22.3%

1,329

20.1%

▲193

87.3%

Furniture assembly

294

4.3%

316

4.8%

+21

107.5%

Lifting, etc.

312

4.6%

309

4.7%

▲2

99.2%

380

5.6%

420

6.4%

＋40

110.7%

Merchandise
sales

17

Status of Construction Services for Commercial Environment:Interior Installation
Interior installation FY20.Q2 Sales: 87.3% YoYExternalfactor

We were not able to catch up with the delayed project during FY19 Q4 through FY20
Q1, and was also impacted by COVID-19, causing delays in construction andcancellation of projects at hotels and commercial facilities.

Internalfactor

The environment for recruitment and securing partner companies was severe, andit struggled to secure engineers until early March.

■YoY change in project scale

FY20.Q2
Result

FY19.Q2
Result(Million yen)

YoY

Large

386

282

▲104

73.1%

Medium

593

510

▲83

86.0%

Small

543

537

▲6

98.9%

Total

1,522

1,329

▲193

87.3%

18

FY9/20 Q2 Top 20 Clients

Hajime Construction Co., Ltd

Repair service

Construction
services for living
environments●●

Asahi Kasei Homes Corporation
HASEKO NAVIE CORPORATION

Haseko Corporation
Daiwa House Industry Co., Ltd.

●

●
●

●

●

●
●

Handy Crown Co., Ltd.
HEIWA MANNEQUIN CO. LTD.
Sumitomo Realty & Development Co.,Ltd.

Merchandise
sales

●

IKEA JAPAN CO., LTD.
Aim Create Co., Ltd.

Construction
services forcommercial
environments

●
●

●

●

●

●

●

●

Top 11th-20th
A Factory Co., Ltd. / Panasonic Interior Building Products Co., Ltd. / TACT HOME CO.,LTD. / YOSHICHU MANNEQUIN CO.,LTD.
NISHIMATSU CONSTRUCTION CO.,LTD. / Daito Trust Construction Co., Ltd. / Obayashi Corporation / DesignArc Co.,Ltd. / KOTOBUKI SEATING CO.,LTD. / YKK AP Inc.
Newly top 10 clients for FY20 Q2

19Construction system policies and trends in thenumber of in-house engineers
Until
now

Policy1,173

Independent
support

Focus on hiring in-house engineers

In-houseengineers↓
Training as sitemanagers

・ Provide independent support for our engineers,strengthen our relations with partner companies, andmake cost labor costs as a variable cost.
・ Training of in-house engineers as site managers

Number of in-houseengineers(Direct employment)
FY19

Partnercompanies

93.4%

from the end of
previous term

FY20.Q2

1,095

(-78)

1,118 1,128(Number ofengineers)

968

976

100.1% 100.8%

(+1)

1,056
1,001

105.5%

102.6%(+55)

105.9%(+62)

100.9%(+10)

128.0%

1,178 1,173
104.4%(+50)

99.6% 1,125

(-5)

95.9%

(-48)

1,095
97.3%

(-30)

(+25)

(+8)

FY18 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY19 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY20 Q1 FY20 Q2Partnercompanies

from the end of
previous term(+142)

FY20.Q2649 companies(Total of 3 subsidiaries)20

3
Impact of COVID-19, Our Response, andBusiness Forecasts for FY9/20

21

Impact of COVID-19 and Our Response
1. Prospects for current impact① Impact on net sales: Down by 239 million yen
Impact of flood disaster and COVID-19 as of March 2020
(delay in project: 201 million yen/ cancellation of project: 38 million yen)

② Utilization rate of direct hiring engineers (April 2020):
Approx. 83% YoY③ Total number of holidays (April 2020): 471 man-days
22

Impact of COVID-19 and Our Response
2. Changes in business environment① The impact of the turbulence in supply chain is gradually recovering
There were delays in imports of equipment and materials due to the shutdown of the Chinese plant.
Currently on a recovery track.

② Postponement and cancellation of services reflecting the self-restraint
due to the State of Emergency
Living environment: To avoid face-to-face contact, the timing of periodic after-sales inspections canbe changed at the customer's request.
Commercial environment: postponement or cancellation of projects due to postponement of
store interior installation, cancellation of events, etc.

③ Web interviews are conducted according to the customer's request④ Securing liquidity on handImpact of COVID-19 and Our Response
3. Status of Internal System Development①The call center operates remotely, taking advantage of the cloud-based
PBX and dedicated VPN
Decentralization through the use of home or each office (shift from 4 offices to 10 offices +teleworking) to thoroughly avoid "Three Cs"*.
*The Three Cs: Crowded places, Close-contact settings, Confined and enclosed spaces.

② All on-site engineers must wear masks and carry soap and disinfectant toensure the safety of themselves, customers, and society.
③ On-site technicians are also restricted to work on the minimum number oflocations by utilizing smartphones, tablets, and cloud-based base systems.
(Candeal Tec plans to switch to a cloud-based base system in October 2020.)④ About 58% of clerical-work staffs are also able to work remotely24Business Forecasts
Due to the spread of COVID-19, there have been many delays andcancellations of projects at construction sites where our company is
involved, making it difficult to rationally calculate the business forecasts
at this time.
As soon as it becomes possible to reasonably calculate theconsolidated forecasts, we will promptly disclose it.
We remain the year-end dividend forecast unchanged.

25

Future Outlook and Policies① Severe economic environment (for commercial facilities, hotels,
condominiums)

Outlook
Changes inmarketenvironment② Change in design concept

Changes to the concept of buildings, such as changing the type and layout of commercial
facilities, changing office layouts, and the conversion of homes into offices due to the
expansion of teleworking.

③ The construction industry at the time of the Global financial crisis
took about two years to recover.
Basic policy: Maintain the construction system and continue business in
preparation for resumption of projects postponed during the current fiscal
year and economic recovery.

Policy① Promote variable costs for engineers by providing independent support and retaining partner companies② Securing profits and stabilizing cash flow by reducing costs and restricting investment throughteleworking and other means (already started)③ Negotiating with banks to increase the commitment line for working capital in preparation forfurther deterioration of the economic environment

26

Initiatives for post-COVID-19 world
We will strengthen our photocatalytic coating service withantiviral and antibacterial effects for housing

Reconaguard “Air Refresh” (Photocatalytic coating)Coating of ceilings, walls, curtains, etc. for a safe and secure space

AntiviralAntibacterial

VOC
removalMold
protection

Stain
protection

Deodorizing

Characteristics

1

特許
技術
特許第3975270号

2
4

Effects last for 24 hours 365 days
× 3 years (patented)

Surprising antibacterial
efficacy and its abundantvalidation data
Abundant track record for
housing and commercial
facilities

3

Effective in both sunlight and fluorescent and LED
lighting

5

Reliable as it uses a material that is friendly to thehuman body and the environment* Inspection agency: Bo-Ken Quality Evaluation Organization Test number: 27120000083

27

Reconaguard “Air Refresh” (Photocatalytic coating)

特許
技術
特許第3975270号

Antiviral

The patented technology called "Apatite CoatedTitanium Dioxide" work 24 hours to provide antiviral
and antibacterial effects
It was jointly developed in 2019 by the Japan Science and Technology Agency and the National Institute ofAdvanced Industrial Science and Technology (AIST), and was successfully put to practical use. (Patent No.
3975270)

Antibacterial

Activity of Titanium Dioxide and Apatite
Reconaguard Air Refresh

Test for falling bacteria in the room
Room with nowork done

Falling bacteria grows
Research by Japan Food ResearchLaboratories

Room where
Reconaguard “Air
Refresh” was done

Inhibits the growth offalling bacteria

Research by Industrial Technology Research Laboratories

Old-type photocatalyst

Titanium Dioxide
EffectApatite (Absorption
effect)Titanium Dioxide
EffectApatite (Absorption
effect)Sunlight

◎

◎

◎

×

Natural whiteflorescent lamp

〇

◎

△

×

Incandescent lamp

△

◎

×

×

LED (natural
white)LED (light bulb
color)
Florescent lamp
(daylight)
No light

◎

◎

△

×

〇

◎

×

×

〇

◎

△

×

×(*1）

◎

×

×

(Researched by our company)
Calculated based on peak wavelengths based on various spectral distributions.
Performance evaluation: When the radical dissipative ability in the ultraviolet region is assumed to be 100%◎: 70-100% 〇: 40-70% △: 20-40% ×: 20% or lesser*1: It shows effects after apatite absorbs and collects viruses and bacteria floating in the air for 24 hours.

28Initiatives for post-COVID-19 world: Launched antibacterial agent
Titanium dioxide and sodium percarbonate combined

Antiviral and antibacterial agent CA series
特許
技術
特許第4385115号

Characteristics

This is a patented product containing titanium dioxide, produced by adomestic manufacturer, and is more effective than ordinary antibacterial
agents.
Sterilization System Using UV/Visible Light Activated Catalyst" (Patent No. 4385115)
developed by the National Institute of Advanced Industrial Science and Technology in 2003.

1. Can be used for hand disinfection, interior construction
materials of houses, masks after use, work clothes, andcar, etc.

Example: Antiviral and antibacterial agent CA1100 with titanium dioxide and sodium percarbonate

Avian Influenza

Norovirus

Approx. 297,000 out of approx.
300,000 viruses were inactivated!

30 minutes later, almost no
virus was detected!

Influenza
1 hour later, almost no virus
was detected!

2. Extensive data on the effectiveness of the product against
viruses and bacteria such as avian influenza, norovirus andinfluenza* It has also been tested against envelope viruses covered with a lipid/protein membrane.

3. Safety classified as non-irritant neutral (pH7.5)* Classified as "non-irritant" according to an eye irritation test conducted by a thirdparty organization.

4. The titanium dioxide used in this product is a highly safe
substance that is also used as a food additive.
Livestock Microbiology Class, Department of Veterinary Medicine,
Faculty of Agriculture, Kagoshima University

Japan Food Research Laboratories

Japan Food Research Laboratories

29

4

TOPICS30

Dec. 2019 Transferred to the TSE 1st Section31

Business alliance with Domans,Inc. in Feb. 2020
We aim to create a custom storage furniture service that cannot be
imitated by any other by both niche top companies
With our patented cloud service and construction system, we can solve everything from planning to
manufacturing and assembly at once.
Many patents① Planning② Manufacturing
instructions

Furniture
Manufacturing
Factory③ Manufacturing④ Delivery

Construction companies
General end-users⑤ Assembly32Target Position
The untapped market of “full custom-made furniture but at a low price”<Furniture market in Japan>

Low price<Furniture market in the low price range>

・Custom as you like・Low price but high quality
・Custom-made but fast

Common mass-produced
products
Size order for readymade products
Etc.

Mass-produced
products

Customization

Relatively high-priced
ready-made products

Custom-madefurniture in general

Etc.

<Furniture market in the mid-to high-price range>

High price33

Becoming a company that is indispensable in the building
lifecycle support"CANDEAL" in all buildings

Manual & Technology
34

Disclaimer
This material has been prepared by CANDEAL CO., Ltd. (hereinafter referred to as “the Company") for the
purpose of providing corporate information, etc. to the Company and its group companies (hereinaftercollectively referred to as “the Group") and is not a solicitation to buy or sell shares or other securities issued
by us, whether in Japan or overseas.
This document contains forward-looking statements, including forecasts, plans and targets related to theCompany and the Group. These statements are based on certain assumptions and beliefs in light of theinformation currently available to the Company at the time of preparation of this document. These statements
or assumptions are objectively inaccurate or may not be realized in the future, and therefore, actual results
may differ materially from these forward-looking statements.

35