1. Qualitative Information Concerning Consolidated Business Results(1) Information about operating results
During the six months ended September 30, 2016 (April 1 to September 30, 2016), theJapanese economy continued to improve employment situation and income statistics;
in addition, personal consumption is reaching the end of its decline. However, theunstable financial market and unseasonable weather during summer are regarded asrisks that affects the Japanese economy.
The housing industry, our core operating domain, is recovering gradually from the endof last year, and the number of housing starts continuously measured a million house(seasonally adjusted annual rate) per year. Furthermore, owner-occupied housing
including custom-built house and subdivided housing unit show a gradual recovery.
On the other hand, in the retail and services industries, personal consumption isimproved due to the declines in rising price rate and employment situation eventhough there are risks such as the fall in share price and adverse weather.
Against this backdrop, the Nac Group aggressively performed sales promotion in eachof the operating segments.
As a result, consolidated results for the six months ended September 30, 2016 included
sales of 34,361 million yen (down 5.9% year on year), operating loss of 2,272 million yen(compared with a loss of 1,094 million yen in the six months ended September 30, 2015) andordinary loss of 2,266 million yen (compared with a loss of 1,089 million yen a yearearlier). Loss attributable to owners of parent was 1,810 million yen (compared with aloss of 912 million yen a year earlier).
Operating results by business segments were as follows.
In addition to the operating income or loss of each segment, the Nac Group posted 650
million yen as corporate expenses not attributable to any particular segment.
[CreCla Business (Bottled Water)]In the six months ended September 30, 2016, the rush to enter the market bycompanies such as major soft drink manufacturers and providers of one-way bottles
have slowed down. On the other hand, industry reorganization is advanced more andmore. Hence, we expect that less companies will go out of business in the future.
Our direct managed stores continuously worked on sales promotions to increase newcustomers. As a consequence, sales increased year on year.
In our affiliated stores, we strengthened sales promotions during the summer peakdemand season, so the sales of bottles increased. As a result, sales rose year on year.
Operating income increased year on year due to an increase in sales and revisions tomanagement costs.
As a result, during the six months ended September 30, 2016, the CreCla Businesssegment posted sales of 6,858 million yen (up 3.0% year on year), and operating incomeof 14 million yen ( compared with a loss of 219 million yen in the six months ended
September 30, 2015).
Moreover, CreCla business concluded memorandum of understanding with Aqua Clara
Ltd. in August, 2016 in order to provide high-quality products and services.
[Rental Business]
The mainstay dust control products business focused on M&A and existing customers.
Consequently, the number of customers and contract termination rates held steady.
What is more, we continuously worked on the expansion of total care services to extend
customer basis, so sales increased year on year.
In our With-branded pest-control devices and regular cleaning plan for business,directly managed stores reinforced sales activities nationwide. Moreover, there areincreases in referrals of new customers by existing customers. As a result, sales roseyear on year.
Operating income decreased year on year owing to increases in personnel expenses andsales and general administrative expenses.
Consequently, during the six months ended September 30, 2016, the Rental Businesssegment posted sales of 6,455 million yen, up 2.5% year on year, and operating incomeof 824 million yen down 9.6% year on year.
[Construction Consulting Business]
Although the housing industry shows a gradual recovery, situations of the construction
and delivery are still weak. Thus, the condition of local construction market remained
harsh. Under these conditions, we actively worked on developments of original
products and evolutions of existing products. However, sales declined year on year.
The construction materials business, which is focused on solar energy systems,
concentrated the new housing market by the use of “Zero energy house”. Furthermore,
we have begun to make serious efforts to construct network building so as to utilize
management resources in Eco & Eco. Nevertheless, sales decreased year on year due tothe influence of market deterioration.
On the whole, operating income decreased year on year owing to sales decreases.
As a result, during the six months ended September 30, 2016, the Construction
Consulting Business segment posted sales of 2,640 million yen, down 3.9% year onyear, and operating income of 234 million yen including goodwill amortization costs
related to Eco & Eco, down 55.2% year on year.
[Housing Sales Business]
During the six months ended September 30, 2016, the housing market experienced agradual recovery, and the number of owner-occupied homes increased for theconsecutive 8 months.
Against this backdrop, Leohouse, Ltd. performed effective sales promotion aggressively
to increase orders received and orders in hand. Meanwhile, we offered diverse valueadded products such as “CoCo as a lineup of Dai-ninki no ie” in order to provide a wide
range of customers with many selections. As a consequence, the number of orders
received rose year on year. Moreover, we acquired KDI Co., Ltd. in May, 2016 to explore
new customers in metropolitan area and entry into the real estate business (in thefinancial report, a day as regarded as the acquisition date is June 30, 2016).
Nevertheless, sales declined year on year because of a decrease in orders in hand as ofthe end of the previous fiscal year and the delay of the construction and delivery.
Operating income declined year on year due to the effect of lower sales.
Regarding orders received under review, we implemented appropriate sales strategies
such as an effective use of trademarks that we won customer’s satisfaction No.1 inthree categories last year. Therefore, the number of orders received and orders in handrose year on year, 1,134 homes (compared with 920 a year earlier) and 1,385 (comparedwith 1,057 a year earlier), respectively, as of September 30, 2016.
J-wood Co., Ltd., establishes the popular customer attraction model with “Housingcafes”, and the number of orders received and orders in hand continuously rose year onyear to 102 homes (compared with 71 a year earlier) and 172 homes (compared with
121 a year earlier), respectively.
J-wood Co., Ltd., opened a new model display site in Koriyama, so we carried out asales promotion campaign aggressively. Thus, operating profit declined year on year.
Eventually, during the six months ended September 30, 2016, the Housing Sales
Business posted sales of 13,388 million yen (down 15.7% year on year), and operating
loss of 2,214 million yen (compared with a loss of 1,297 million yen a year earlier,including goodwill amortization costs related to J-wood Co., Ltd., and KDI Co., Ltd.).
Regarding store openings, during the second quarter, J-wood Co., Ltd., opened a 1 salesbase.

[Mail-order Business]
At JIMOS Co., Ltd., the mainstay Macchia Label brand produced strong results
because of an increase in loyal customers resulting from the development of newcustomers.
Furthermore, sales of the Coyori brand of skin and hair care products made fromnatural ingredients grew year on year as a result of a steady increase in the number of
new customers. On the other hand, sales decreased year on year in the wholesaling
business.
Operating income declined year on year due to aggressive investments in advertisingand promotions.
As a result, during the six months ended September 30, 2016, the Mail-order Businessposted sales of 5,022 million yen (up 1.3% year on year), and operating loss of 481
million yen (compared with a loss of 451 million yen a year earlier, including goodwill
amortization costs related to JIMOS Co., Ltd.).