Summary of Consolidated Financial Results for the Second Quarter Ending of the Fiscal Year June 30, 2020 [Based on IFRS]
February 7, 2020
Company name: ZERO CO., LTD.
Stock code:
9028
URL: http://www.zero-group.co.jp/
Representative:
President & CEO
Takeo Kitamura
Inquiries:
Director and Manager of Group Strategies Headquarters
Toshihiro Takahashi
Scheduled Date of Submission of Quarterly Report:
February 10, 2020
Scheduled date to commence dividend payments:
March 10 , 2020
Preparation of supplementary material on quarterly financial results:
No
Holding of quarterly financial results meeting:Yes (for analysts)

Stock Exchange Listing: Tokyo
TEL 044-520-0106(Amounts less than one million yen are rounded down)
1. Consolidated financial results for the second quarter ending of the fiscal year June 30, 2020 (From July 1, 2019 to December 31, 2019)(1) Consolidated operating results (cumulative)

Sales revenue

2Q FY2019
2Q FY2018

Operating income

Profit before tax(Percentages indicate year-on-year changes)
Profit attributable toTotal comprehensive
equity shareholders
income of the quarterof the company

Quarterly income

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen

46,25943,179

7.1
12.0

2,101
764

174.8
∆60.4

2,114
741

185.2
∆61.5

1,353
∆44

-

1,347
∆45

Basic quarterly earnings per share

%

-

-

1,448
∆323

Diluted quarterly earnings per share

Yen
80.73
∆2.75

2Q FY2019
2Q FY2018% Millions of yen

Yen
80.57
∆2.75

(2) Consolidated financial position
Total assets
Millions of yen
44,67239,5542Q FY2019
FY2018Equity attributable to equity
shareholders of the company

Total capitalMillions of yen
24,202
23,072Equity ratio attributable to equity
shareholders of the company

Millions of yen
24,17923,056

%
54.1
58.3

2. Cash dividends
1st quarter-end
Yen
FY2018FY2019Annual dividends per share
3rd quarter-end

2nd quarter-end
Yen
4.00
15.00

-----

FY2019 (forecast)Fiscal year-end

Yen

Total

---

Yen
20.90

Yen
24.90

---

19.60

34.60

(Note) Amendment from the most recently announced dividend forecast: No
3. Forecast of consolidated financial results for the year ending June 30, 2020 (From July 1, 2019 to June 30, 2020)

Sales revenue
Full year

Millions of yen
95,000Operating income%
5.3

Millions of yen
4,000(Note) Revisions from the most recently released business forecast: No(Percentages indicate year-on-year changes)
Profit attributable toequity shareholders
Basic earnings per shareof the company

Profit before tax%
21.0

Millions of yen
3,980

%
20.8

Millions of yen
2,300

%
38.7

Yen
138.33

(Note)(1) Changes in significant subsidiary companies during the current quarter (Changes in the specific subsidiary companies following changes in the scope of
consolidation): No
New  Co. (Company name),
Exclusions  Co. (Company name)(2) Changes in accounting policies, changes in accounting estimates Changes in the accounting policies required by IFRS
: Yes
 Changes in the accounting policies due to other reasons: No Changes in the accounting estimates: Yes(Note) For details, please refer to the attached page. See “2. Summary of the Quarterly Consolidated Financial Statements and Major Notes, (6) Notes regarding
Summary Quarterly Consolidated Financial Statements (Changes in Accounting Policy), (Changes in Accounting Estimates)” on page 12-13.
(3) Number of issued shares (common shares)
 Total number of issued shares at the end of theperiod (including treasury shares)
 Number of treasury shares at the end of the period
 Average number of shares during the period(total up to this quarter)

2Q FY201917,560,242 shares

FY201817,560,242 shares

2Q FY2019
2Q FY2019

1,020,369 shares
16,685,873 shares

FY20182Q FY2018

1,030,369 shares
16,626,875 shares

Earnings summary is not within the scope of the quarterly review by a certified public accountant or auditor
Explanation of the proper use of financial results forecast and other notes
The earnings forecast, and other forward-looking statements herein are based on the information currently available to the Company and certain assumptions that theCompany considers reasonable. The actual results may differ significantly from these forecasts due to a wide range of factors such as economic status of the majordomestic and international markets or exchange rates fluctuation.

o Attached Documents – Table of Contents
1.

2.

Qualitative information on the quarterly financial results

2(1) Explanation regarding the operating results

2(2) Explanation regarding the financial position

3(3) Explanation on future forecast information, such as consolidated earnings forecast

4

Summary of the consolidated financial statements and major notes

5(1) Summary of the quarterly consolidated financial position

5(2) Summary of the quarterly consolidated profit and loss statement

7(3) Summary of the quarterly consolidated comprehensive income statement

8(4) Summary of the quarterly consolidated statement of changes in equity

9(5) Summary of the quarterly consolidated statement of cash flows

10(6) Notes regarding summary quarterly consolidated financial statements

12(Notes on going concern assumption)

12(Changes in accounting policy)

12(Changes in accounting estimate)13(Segment information)

14

－

1 －

1.

Qualitative information on the quarterly financial results(1) Explanation regarding the operating results
Japan’s economy during the consolidated cumulative period of the second quarter continued to recovergradually; personal consumption also improved with a steady employment and income environment, but
economic environment remain unclear due to the uncertainty of the foreign economic situation, beginning withthe trade problem in the US and China.
In the domestic automotive market, the total number of new vehicles sales decreased at 96.1% (statistical data of
the Japan Automobile Manufacturers Association) as compared to the consolidated cumulative period of the samequarter from the previous year (hereinafter referred to as the same quarter from the previous year).
As compared to the first quarter of the fiscal year from the previous year the total number of new vehicles sales
increased at 108.1% because of the last minute surge in demand of the consumption tax rate increase.
On the other hand as compared to the second quarter of the fiscal year from the previous year the total number of
new vehicle sales decreased dramatically at 83.7% due to holding-off purchase in anticipation of upcoming newmodel vehicles and the Subsidies for Safety Support Cars in addition to the reaction from the last minute surge aswell as the occurrence of natural disasters.
The number of registered used cars in which similar movement with new vehicle was observed has continued its
slight increase compared to the same quarter from the previous year.
On the other hand, the business environment of the logistics industry is in serious circumstances withinsufficient drivers due to the background of a strained supply and demand in the labor market as well as cost
increase factors such as increased wages, increased hiring costs, continued high fuel expenses, and complianceresponse.
Under such circumstances, our group devised a 3-year mid-term plan from July of 2018 until June of 2021,
and are proceeding with the following 5 topics: (1) development of new businesses in anticipation of a reductionof the domestic automobile market and next generation mobility society, (2) Expansion of human resourcesbusiness corresponding to the strained supply and demand in the labor market and decreasing working age
population, (3) Expansion of overseas business in anticipation of economic growth such as in ASEAN countries,(4) Maximization of effect to establish regional block companies through promotion of transportation reform in
the vehicle transportation business, and (5) Creation of group synergy including subsidiaries and cooperatingcompanies and promotion of optimization.
As a result, the business results of our group are as follows: sales revenue of 46,259 million yen (107.1%
compared to the same quarter from the previous year) and operating profit of 2,101 million yen (274.8%
compared to the same quarter from the previous year). Also, the profit before taxes was 2,114 million yen(285.2% compared to the same quarter from the previous year), and the profit of the quarter attributable to theequity shareholders of the company was 1,347 million yen (quarter loss of 45 million yen in the same quarter
from the previous year).
Number of units related to domestic distribution of automobiles
July of 2019 to December of
2019

Compared to theprevious year*12,381,989

2,291,367

96.2%

*1

(280,036)(254,901)(91.0%)*2

157,602150,42995.4%

2,539,591

2,441,796

96.1%

*3

1,854,771

1,864,972

100.5%*4

1,459,883

1,482,820

101.6%

3,314,654

3,347,792

101.0%

93,632

94,098100.5%

July of 2018 to December of
2018

July of 2019 to December of
2019

Compared to theprevious year

2,435,914

2,412,642

99.0%

Domestic
Number of newvehicles soldDomestic
manufacturer(out of this, Nissan
Motor)
Foreign manufacturer
Total of new vehicle
sales
Number of used vehicle
registrations
Registered vehicles
Light vehicles
Total number of used
vehicles registered
Number of vehicles
permanently deleted*3

ExportNew vehicles ofdomestic

Units: vehicles

July of 2018 to December of
2018

*1

－

2 －

manufacturers
Used vehicles(registered vehicles)

723,555*5732,119101.2%*1 Calculated from Japan Automobile Industry Association statistics*2 Calculated from Japan Automobile Importers’ Association
statistics*3 Calculated from Japan Automobile Dealers Association statistics*4 Calculated from Japan Mini Vehicles
Association statistics*5 Trial calculated from the number of export deleted registered vehicles in the Japan Automobile Dealers
Association statistics－

3 －The segment business results are as follows.
①

Automobile related businesses

For vehicle transportation, which is the core business, the number of units for transportation contracts for new/ used vehicles increased the start of Mitsubishi Motors’ vehicle transportation business in the middle of Augustof 2019. There was an overall increase in revenue for automotive-related businesses due to the favorable
transition of the used vehicle export business for Malaysia as well as vehicle transportation business.
The restructuring of the transportation system including cooperating companies has been accelerated with theimpetus of establishment of regional block companies in the vehicle transportation business, and thoroughimplementation of cost management is being conducted while aiming to achieve a systematic allocation andoptimum distribution network throughout Japan. Profits increased in the automotive business due to the revision oftransportation charges from January of 2019, review of the depreciation period of car carriers to match the actual
life expectancy, and drop in unit price of fuel expenses compared to the same period of the previous year, in the
midst of business challenges such as promoting initiatives for work style reforms to create a rewarding company
and decrease the total work hours, increased labor costs and recruitment costs to deal with driver shortages, andincreased vehicle costs due to the increased number of vehicles and the measures against aging of car carriers.
As a result, the overall sales revenue in the automobile related businesses was 33,086 million yen (106.3%
compared to the same quarter from the previous year), and the segment profit was 2,840 million yen (216.1%
compared to the same quarter from the previous year).
②

Human resource businessWith tightening of the labor demand accompanying the economic recovery and increasing personnel expenses,
the difficulty in employment in major cities has become a serious matter; therefore, the Group has promoteda regional shift from the major cities to smaller cities and reinforcement of the sales system, and has reviewed its
product portfolio strategically and continuously. In addition to the fact that the existing pick up service and driverdispatch business have transitioned steadily, participation in the newly entered airport related business, and the factthat temporary job listing advertising costs are no longer necessary has increased revenue; and profit has increased
with the restructuring of non-profitable business and cost reduction.
As a result, the sales revenue of the overall human resource business was 9,808 million yen (105.8% comparedto the same quarter from the previous year), and the segment profit was 504 million yen (444.3% compared to thesame quarter from the previous year).
③

General cargo business

Revenue in the transport / warehousing business increased due to the increased cargo volume from the lastminute surge in demand of the consumption tax rate increase in clients mainly handling household equipment, andthe revenue in the port cargo handling business increased due to increased construction-related cargo. Furthermore,
the CKD business was launched and contributed to the sales revenue increase, increasing the revenue in the overall
general cargo business as well.
Profit increased with the increased revenue in the transport / warehousing business, but revenue decreased in
the port cargo business due to the difference in the product mix. Furthermore, expenses related to the launch of
the CKD business have continued, and there was a significant decrease overall in profit in the general cargobusiness.
As a result of the above, the sales revenue of the overall general cargo business was 3,364 million yen (121.1%
compared to the same quarter of the previous year), and the segment loss was 259 million yen (segment profit of
374 million yen in the same quarter of the previous year).
Furthermore, the company expenses not included in the abovementioned report segment (expenses affiliatedwith our company’s management division), etc. are allocated as an item in the “adjustment amount” as indicated in“2. (Segment information) in the summary of consolidated statements for the quarter,” and totaled 982 million yen.
(2) Explanation regarding financial position① Status of assets, liabilities, and equity(Assets)
Current assets decreased 521 million yen (2.9%) compared to the end of the previous consolidated
fiscal year and were 17,656 million yen.
This was mainly because, cash and cash equivalents increased 143 million yen, but the operatingreceivables and other receivables decreased by 560 million yen.
Non-current assets increased by 5,638 million yen (26.4%) compared to the end of the previous
consolidated fiscal year to 27,015 million yen.
This was mainly due to an increase of tangible fixed assets of 5,653 million yen resulting from anincrease of assets of right to use, etc.
As a result, total assets increased by 5,117 million yen (12.9%) compared to the previous
consolidated fiscal year to 44,672 million yen.
(Liabilities)
Current liabilities increased 1,327 million yen (10.6%) compared to the end of the previous
consolidated fiscal year to 13,889 million yen.

－

4 －This was mainly due to trade liabilities and other liabilities decreasing by 725 million yen, while otherfinancial liabilities increased by 2,213 million yen due to an increase of lease liabilities.
Non-current liabilities increased by 2,659 million yen (67.8%) compared to the end of the previous
consolidated fiscal year to 6,580 million yen.
This was mainly due to an increase of 2,842 million yen in other financial liabilities due to lease liabilities,etc.
As a result, total liabilities increased by 3,987 million yen (24.2%) compared to the end of theprevious consolidated fiscal year to 20,469 million yen.
(Equity)
Total equity increased by 1,129 million yen (4.9%) compared to the end of the previous consolidated
fiscal year to 24,202 million yen.
This is mainly because retained earnings increased by 1,068 million yen due to the recording ofquarterly profits attributable to equity shareholders of the company.
② Cash flow status
Cash and cash equivalents (hereinafter referred to as “funds”) at the end of the consolidated
accounting period of the second quarter increased by 143 million yen compared to the end of the previous
consolidated accounting fiscal year to 3,609 million yen.
Each cash flow status category during the consolidated cumulative period of the second quarter andtheir causes are as follows.
(Cash flow through operating activities)
Funds obtained as a result of operating activities were 3,073 million yen (there were expenditures of
546 million yen during the same period of the previous year).
The main cause of the increase in funds were 1,353 million for profit from quarterly profits and 2,067
million yen for depreciation and amortization expenses which are non-fund expenses; the main cause of
the decrease in funds was 766 million yen for payment of corporate income. To compare this withconsolidated cumulation period of the previous second quarter, depreciation and amortization haveincreased due to the adoption of IFRS16 “lease”, etc.
(Cashflow through investment activities)
Net cash used in investment activities was 905 million yen (expenditures of 1,145 million yen during
the same period of the previous year).
The main itemization breakdown for expenditures was 828 million yen for acquisition of tangible fixed
assets and investment property.
(Cashflow through financial activities)
Funds used as a result of financing activities were 2,025 million yen (income of 276 million yen in theprevious year).
The main itemization breakdown for income was 7 million yen for short-term borrowings, and themain itemization breakdown for expenditures were 1,601 million yen lease liabilities payments and 345
million for dividends. To compare this with consolidated cumulation period of the previous second quarter,
expenditures due to lease liability payments (payment of finance / lease liabilities for the consolidate
cumulative period of the previous second quarter) have increased due to the adoption of IFRS16 “lease”,
etc.,.

(3) Explanation regarding the future forecast information such as consolidated business forecast
Mainly, In the domestic vehicle market, the influence of freight raising due to the Sox regulation and thedown trend for 2nd quarter’s vehicle market are still uncertain, we have not made any amendments to theconsolidated earnings forecast announced on August 8, 2019.

－

5 －

2.

Summary of the consolidated financial statements and major notes(1) Summary of quarterly consolidated statement of financial position(Unit: million yen)
End of the previous consolidated
accounting year (June 30, 2019)

End of the consolidated accounting
period of the second quarter(December 31, 2019)

Cash and cash equivalents

3,465

3,609

Trade and other receivables

13,281

12,721922

1,005

Other financial assets

4

11

Other current assets

503

308

18,177

17,656

Tangible fixed assets

11,931

17,584

Goodwill and intangible assets

2,803

2,742

Investment properties

3,393

3,334

986

981

1,629

1,723

Other non-current assets

291

342

Deferred tax assets

341

307

Total non-current assets

21,37727,015

Total assets

39,554

44,672

AssetsCurrent assets

Inventories

Total current assets
Non-current assets

Investment accounting processed withequity method
Other financial assets－

6 －(Unit: million yen)
End of the previous consolidated
accounting year (June 30, 2019)

End of the consolidated accounting
period of the second quarter(December 31, 2019)

Trade and other payable

6,976

6,250

Loans

1,283

1,261

Other financial liabilities

720

2,934

Income taxes payable, etc.

901

787

2,679

2,655

12,561

13,889154

97

Other financial liabilities

1,519

4,362

Retirement benefits liabilities

1,725

1,488

Other non-current liabilities

306

288

Deferred tax liabilities

214

342

Total non-current liabilities

3,920

6,580

Total liabilities

16,481

20,469

Capital

3,390

3,390

Capital surplus

3,362

3,395

Treasury stock

△687

△681

236

252

16,754

17,822

23,05624,17916

22

Total Equity

23,072

24,202

Total liabilities and equity

39,554

44,672

Liabilities and Equity
Liabilities
Current liabilities

Other current liabilities
Total current liabilities
Non-current liabilities
Loans

EquityOther component of funds
Retained earnings
Total equity attributable to the equity
shareholders of the company
Non-controlling interest

－

7 －

(2)

Summary of quarterly consolidated profit and loss statement(Unit: million yen)
Consolidated cumulative period Consolidated cumulative period
for the previous second quarterof this second quarter(from July 1, 2018(from July 1, 2019
to December 31, 2018)
to December 31, 2019)

Sales revenue

43,17946,259

Cost of sales△38,156△39,906

Gross Profit

5,022

6,353

△4,670△4,454

Other income

457

228

Other expenses

△44

△25

764

2,101

6

6

Financial expenses

△23

△32

Investment gain / loss through equity method

△5

38

741

2,114

△786

△760

△44

1,353

△45

1,347

0

6

△44

1,353

Basic quarterly earnings per share (△ loss)
(yen)

△2.75

80.73

Diluted quarterly earnings per share (△ loss)
(yen)

△2.75

80.57

Selling, general and administrative expenses

Operating profit
Financial profit

Profit before tax
Corporate income tax expenses
Profits of the quarter (△ loss)

Attribution of the profits of the quarter (△ loss):
Equity shareholders of the company
Non-controlling interest
Profits of the quarter (△ loss)

Quarterly earnings per share(△ loss)

－

8 －

(3)

Summary of quarterly consolidated statement of comprehensive income(Unit: million yen)
Consolidated cumulative period
Consolidated cumulative period
for the previousof this second quartersecond quarter (from July 1,(from July 1, 20192018
to December 31, 2019)
to December 31, 2018)

Profits for the quarter (△ loss)

△44

1,353

Remeasurement of defined benefit system

△83

79

Financial assets measured by fair value
through other comprehensive income

△196

59

△279

138

0

△43

0

△43

△279

94

△323

1,448

△324

1,441

0

6

△323

1,448

Other comprehensive income
Items not transferring over to profit or loss:

Total of the items not transferring over toprofit or loss
Items which may be transferred over to profit
or loss
Other comprehensive income equity ofaffiliated company accounted for by theequity method
Total of the items which may be transferredover to profit or loss
Other comprehensive income after tax
deduction
Comprehensive income for the quarter

Attribution of the comprehensive income for thequarter:
Equity shareholders of the company
Non-controlling interest
Comprehensive income for the quarter

－

9 －

(4)

Summary of quarterly consolidated statement of changes in equity
Consolidated accounting period of the second quarter (from July 1, 2018 to December 31, 2018)(Unit: million yen)
Equity attributable to equity shareholders of the company
Other components of funds

Balance on July 1, 2018

CapitalCapitalsurplusTreasury
stock

3,390

3,305

△687

Cumulative effect amountdue to change ofaccounting method
Carrying amount with thechange in accounting 3,390
method reflected

3,305

Conversion
differenceof businessactivities
overseas

Fluctuationof fair valueof financial
assetswhich canbe sold

Financialassetsmeasuredby fairvaluethroughothercomprehensive
profits

△47

464

-

△464

464

-

464

△687

△47

Remeasurementofdefinedbenefitsystem-Total equity
Nonattributing to controlling
Retained the equity
interest
Total otherearnings shareholders
componentsof theof funds
company-

Profit /Loss of thequarter
Other comprehensive
income0Comprehensive
income of thequarter

-

-

0

-

-

416

15,682

22,10822,119

-

△18

△18

416

15,66422,08911

22,101

-

△45

△45

0

△44

△18

△196

△83

△279

△196

△83

△279

△45

△324

-

△282

△282

△282

-

29

29

-

△0

△0

-

Dividends of surplus
Share-based paymenttransactions, etc.

11

Total
equity

29

△279

△279
0

△323

Other
Acquisition of treasury
stock

△0

Transfer from othercapital component to
Retained earnings

83

83

△83

-

Total transactions,etc. with theowners

-

29

-

-

-

-

83

83

△365

△252

-

△252

Balance on December 31,
2018

3,390

3,335

△687

△47

-

268

-

220

15,252

21,512

12

21,524

Consolidated accounting period of the previous second quarter (from July 1, 2019 to December 31, 2019)(Unit: million yen)
Equity attributable to equity shareholders of the company
Other components of funds

Balance on July 1, 2019

CapitalCapitalsurplusTreasury
stock

3,390

3,362

△687

Conversion
differenceof businessactivities
overseas

Fluctuationof fair
value offinancialassetswhich canbe sold

Remeasurementofdefinedbenefitsystem

△50

286

-

Profit /Loss of the quarter
Other comprehensive income
Comprehensive income ofthe quarter

-

-

-

33

236

16,75423,05616

23,072

-

1,347

1,347

6

1,353

△43

59

79

94

△43

59

79

94

1,347

1,441

-

△345

△345

△345

-

△13

26

26

-

0

0

0

△79

△79

79

-

-

Dividends of the surplus
Share-based paymenttransactions

Total equity
attributing to Non-controlling Total equity
interests
Retained the equity
Total otherearnings shareholders
componentsof theof funds
company

5

OtherTransfer from other capitalcomponent to retained
earnings

94

94
6

1,448

Total of transactions, etc.,with the owners

-

33

5

-

-

△79

△79

△278

△318

-

△318

Balance on December 31, 2019

3,390

3,395

△681

△93

346

-

252

17,822

24,17922

24,202－10 －(5) Summary of quarterly consolidated cash flow statements(Unit: million yen)

Consolidated cumulative period Consolidated cumulative period
for the previous second quarterof this second quarter(from July 1, 2018(from July 1, 2019
to December 31, 2018)
to December 31, 2019)
Cash flow from operating activities
Profits of the quarter (△ loss)

△44

1,353

Depreciation and amortization costs

835

2,067

Interest income and dividend△5△6Interest expense

22

25

Investment gain / loss through equity method

5

△38

786

760

Increase / decrease of trade receivables (△ isan increase)

△428

493

Increase / decrease of inventories (△ is anincrease)

△391

△83

Increase / decrease of trade payables(△ is a decrease)

△154

△127

Increase / decrease in retirement benefits
liabilities (△ is a decrease)

△233

△135

Other

251

△449

Subtotal

642

3,859

5

6

△22

△25

△1,171

△766

△546

3,073

Payment for acquisition of tangible fixed assets
and investment properties△1,120△828

Proceed from sales of tangible fixed assets andinvestment properties

2

7

Payment for intangible assets

△119

△66

Payment for loans receivable△0△9Proceed from loans receivable

3

8

89

△15

△1,145△905

Corporate income tax expenses

Interest and dividend received
Interest paid
Corporate income tax paid
Net cash provided by (used in) operating
activities

Cash flow from investment activities

Other
Net cash provided by (used in) investment
activities

－

11 －

Consolidated cumulative period Consolidated cumulative period
for the previous secondof this second quarter
quarter (from July 1, 2018(from July 1, 2019
to December 31, 2018)
to December 31, 2019)
Cash flow from financing activities
Net increase or decrease of short-term loans(△ is a decrease)

1,000

7

Repayment of long-term loans

△151

△86

Repayment of finance lease debts

△289

-

-

△1,601△282△345

Payment for acquisitioning of treasury stock△0-

Cash flow through financing activities

276△2,025△1,415

143

5,273

3,465

3,857

3,609

Repayment of lease debts
Dividend paid

Increase / decrease in of cash and cash
equivalents (△ is a decrease)
Cash and cash equivalents at the beginning of
the quarter
Balance of cash and cash equivalents at the endof the quarter

－

12 －

(6) Notes regarding summary of quarterly consolidated financial statements(Notes on going concern assumption)
There are no applicable matters.
(Changes in accounting policies)
The important company policies that our group applies to this quarterly consolidated financial
statement summary will be the same company policies applicable to the consolidated financial statementsof the previous consolidated accounting year excluding the below.
(1) Application of IFRS No. 16 (lease)
Our group has applied the following standards starting from the first quarter of the consolidated accounting
period.
Standard

Name of the standard

IFRS No. 16

Lease

Summary
Definition of lease and revision of accounting
process

In the application of IFRS No. 16 “Lease (announced in January of 2016, hereinafter referred to as
IFRS No. 16), a method which is approved as a transitional measure that recognizes the cumulative amountof financial impact due to the application of this standard to be recognized on the day the application isstarted (retroactive revision approach), is being adopted. Therefore, revised comparison information is notshown again, and the cumulative effect of the application of IFRS No. 16 is recognized on the initial
application date, which is July 1, 2019.
In the previous consolidated accounting year, our group has classified all substantial risks and lease contracts
with economic benefit as finance lease. Lease assets are initially recognized at the fair value or the current valueof the total amount of minimum payment lease fee. Lease contracts other than finance leases are classified as
operating leases and are not appropriated in the consolidated statement of affairs of our group. The payment
lease fee of operating leases is recognized as an expense throughout the lease period based on the straight-line
method.
During this consolidated accounting year, our group did not categorize borrower leases as financeleases or operating leases in accordance with IFRS No. 16, has introduced a single accounting model, andhas recognized lease debts which show the obligation to pay the right-of-use asset and lease fee whichshow the right to use the underlying assets as a general rule for all leases, excluding cases of short termleases with a lease period shorter than 12 months or small amount assets leases.
Accompanying the application of IFRS No. 16, for borrower lease transactions, our group has measured
the right to use asset at acquisition cost and the lease debt at the current value of the total amount of
unpaid lease fees at the lease commencement date. The acquisition cost of the right to use asset is initiallymeasured by adjusting the prepaid lease payment, etc. to the initial measured amount of the lease debt. In
the summary of consolidated financial status statement for the quarter, the right-of-use asset is shown as
included in the “tangible fixed assets,” and the lease debt is included in the “other financial debts.” Thedepreciation of the right-of-use assets and interest costs related to the lease debt are appropriated after
recognizing the right-of-use assets and the lease debts.
Our group estimates the lease period of the right-of-use asset by adding a reasonably certain time period
in which executing an option to extend the lease or executing an option to cancel the lease will not be
exercised during the irrevocability period of the lease. Also, the discount rate applied to the lease debts related
to the applicable right-of-use assets utilize the borrowing interest rate of the borrower. The right-of-use assets
are depreciated using the straight-line method over the useful life period of the underlying asset if theownership of the underlying asset is to be transferred to the borrower, over the shorter of either the useful life
period or the lease period for other cases.
Also, our group utilizes the following practical expedients in applying the IFRS No. 16.
 Regarding leases in which the lease period is to be concluded within 12 months of the application startdate, the same accounting process method of short-term leases
 Exclude the initial direct cost from the measurement of right-of use as of the date of initial application
 Carry over the past decision of whether the transaction is a lease or not for the contracts signed before
the previous consolidated accounting year
 Utilize ex post facto decisions in the case of calculating the lease period for contracts which include
extension or cancellation options(2) Effect on the summary of the consolidated financial statements of the quarter
For the company group, 8,871million yen for right-of-use assets and 8,720 million yen for lease debts areappropriated in the summary of consolidated financial status statements for this quarter on July 1, 2019. Thisis mainly an influence of the lease fee classified as an operating lease in IAS No. 17 being appropriated as an
asset and debt upon application of IFRS No. 16. Furthermore, there is no effect on the accumulated earnings
at the beginning of the term because right-of-use assets that is the same amount as the lease debts (however,advance lease fee is revised) is recognized when the lease debt is recognized.
The average of the added borrowing interest applied to the lease debts at the time of the application
start date was 0.2%.
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13 －Also, the cash flow due to sales activities increased, and the cash flow due to financial activities
decreased in conjunction with the change, etc. of display in the operating lease cost.
The difference between the total of the minimum lease fee of the irrevocable operating leases at thelast date of the fiscal year immediately before the application start date, and the lease debt recognized in
the summary of the consolidated financial status statement for the quarter as of the application start date,is as follows.
(Million yen)AmountTotal amount of future minimum lease fees for irrevocable operating lease (June 30, 2019)
1,965
Total amount of future minimum lease fees for irrevocable operating lease after discount (July 1,
1,946
2019)
Lease debts classified in the finance leases (June 30, 2019)
2,149
Effects, etc., from the review of lease period due to the application of IFRS No. 16
4,624
Lease debts recognized in the summary of the consolidated financial status statement as of the
8,720
application start date (July 1, 2019)(Change of accounting estimates)
In creating the summary of the consolidated financial statements for the quarter conforming to IFRS,
managers are required to apply the accounting policy as well as to determine, estimate, and presume the effectthereof on the assets, debts, profits, and cost amount. The actual business results may differ compared tothese estimates.
The estimate and the assumptions which become the base of the estimates will be continuously reviewed.
The effect from the accounting estimate review is recognized in the accounting period in which the estimate isreviewed as well as in the future accounting period thereafter.
Excluding the accounting estimate changes indicated below, the estimate and decisions significantly
affecting the amount in the summary of the consolidated financial statements in the quarter are the same as
the consolidated financial statements in the previous consolidated accounting year.
(Change in life expectancy)
Regarding the group’s sales vehicles in the automobile related business by our company (some excluded),
it became clear that long-term usage can be expected through regular maintenance, etc. Due to this, the life
expectancy has been revised from the conventional 7 years to 10 years starting the first quarter of theconsolidated accounting period going forward.
Due to this, 154 million yen has been added to the sales profit and pre-tax profits for this second quarter ofthe consolidated cumulative period compared to the case of using the conventional useful life period. Also, theeffect on the segment information is indicated in the applicable portions.

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14 －

(Segment information)
The segment information of our group is as follows.
Consolidated cumulative period of the previous second quarter (from July 1, 2018 to December, 2018)(Unit: million yen)
Adjustment
amount(note)

Total amounton thequarterly
consolidated
financialstatements

43,179-43,179

197

692

△692

-

9,743

2,975

43,871△692

43,179

113

374

1,802

△1,037764

Automobile
relatedbusinesses

Human
resourcebusinesses

Generalcargobusinesses

31,133

9,268

2,777

19

475

31,152
1,314

Total

Sales revenue
Sales revenue from externalcustomers
Sales revenue between segments
Total
Segment profit (operating profit)(Note) The △1,037 million yen adjustment amount in the segment profits includes the total company cost △1,037 million
yen and 0 million yen of transaction elimination between segments. The total company cost is an expense related
to the management divisions of our company not belonging to the reporting segment.
Consolidated cumulative period of this second quarter (from July 1, 2019 to December 31, 2019)(Unit: million yen)
Adjustment
amount(note)

Total amounton thequarterly
consolidated
financialstatements

46,259-46,259

229

777

△777

-

3,594

47,036△777

46,259Automobile
relatedbusinesses

Human
resourcebusinesses

Generalcargobusinesses

33,086

9,808

3,364

20

526

33,107

10,334

Total

Sales revenue
Sales revenue from externalcustomers
Sales revenue between segments
Total

Segment profit (operating profit)(△is
△259
△982
2,840
504
3,084
2,101
loss)
(Note) 1. The △982 million yen adjustment amount in the segment profits includes the total company cost △982 million yen and 0 million yen of transaction elimination between segments. The total company cost is an
expense related to the management divisions of our company not belonging to the reporting segment.
2. As indicated in “4. Accounting Status; 1. Summary of Consolidated Financial Statements for the Quarter,
Notes of the Summary of the Consolidated Financial Statements for the Quarter; 2. Creation Basics (4)Important Accounting Estimates and the Decision for the Statements,” the life expectancy has been changed
starting from the consolidated cumulative period of this second quarter for the vehicles for sales in ourcompany’s automobile related businesses (excludes some). Due to this change, the segment profit during theconsolidated cumulative period of this first quarter has increased 154 million yen in the automotive related
businesses compared to that of the conventional method.

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15 －