1. Qualitative Information Concerning Consolidated Business Results(1) Information on operating results
During the six months ended September 30, 2018(April 1 to September 30, 2018),
the Japanese economy recovered gradually based on the improvement of
employment environments and corporative earnings. Nevertheless, there weresome concerns such as unstable financial market, American trade policy, andgeopolitical risks in East Asia.
The housing industry, our core operating domain, is expected to recover gradually
toward the consumption tax hike in October 1, 2019. On the other hand, thecurrent number of housing starts remains weak.
In the retail and services industries, despite the downward tendency caused bynatural disasters, personal consumption was on a recovery trend owing toimprovement in employment and income environments.
Under the circumstance, the Nac Group of companies aggressively worked on
developments of new products, promotion of new services, improvement ofcustomer satisfaction and expansion of business areas.
As a result, consolidated results for the six months ended September 30, 2018
included sales of 37,835 million yen (down 0.8% year on year), operating loss of
1,204 million yen (compared with a loss of 1,561 million yen in the six months
ended September 30, 2017) and ordinary loss of 1,220 million yen (compared with aloss of 1,561 million yen a year earlier). Loss attributable to owners of parent
company was 999 million yen (compared with a loss of 1,429 million yen a yearearlier).
Operating results by business segments were as follows.
In addition to the operating income or loss of each segment, the Nac Group ofcompanies posted 512 million yen as corporate expenses not attributable to any
particular segment.
[CreCla Business (Bottled Water)]During the six months ended September 30, 2018, the condition of market
remained harsh since a price hike in delivery charge affected providers of one-way
bottles and competition became more intense.
Under the circumstances, the CreCla business enhanced bland power throughimprovement of customer services. In addition, we carried out various measures(e.g. development of new products named ZiACO utilizing “hypochlorous acidwater”, improvements of customer retention rate and increases in the bottleconsumption per customer).
In our direct managed stores, customer retention rate improved through thesteadily growth of participation rate in the new service called “CreCla SecuritySupport” from September, 2017. What is more, record-setting heatwave thissummer increased bottle consumption per customer. Thus, sales rose year on year.
In our affiliated stores, we continuously focused on customer services and support
programs in order to increase number of customers and sales per customer.
Consequently, sales increased year on year.
Operating income increased significantly year on year thanks to sales increases inboth direct managed and affiliated stores and reducing the sales promotion
expenses.
As a result, during the six months ended September 30, 2018, the CreCla Businesssegment posted sales of 6,925 million yen (up 3.7% year on year), and operating
income of 458 million yen (compared with income of 131 million yen during the six
months ended September 30, 2017).
[Rental Business]
In view of the super-aged society, the Rental business worked on expansion of thesales network and reinforced customer services to address variety customer
demand.
The mainstay dust control products business opened a new store and focused on
existing customers, so the number of customers and sales per customer rose
gradually. In relation to this, we supply total care services (i.e. the housekeeping
service, exterminator and gardener) that are intended for elderly people andexpand business areas to increase customer base. Taken together, the mainstay
dust control products business increased sales year on year.
With-branded pest-control devices business strengthened sales promotions before
the summer peak demand season, so the number of customers and sales per
customer rose gradually. As a result, sales increased year on year.
Earnest Co., Ltd. that provides regular cleaning plan for business improved profit
margin. Sales were about the same level year on year.
Operating income increased year on year thanks to a solid increase in sales overall.
Consequently, during the six months ended September 30, 2018, the Rental
Business segment posted sales of 7,145 million yen, up 5.3% year on year, andoperating income of 946 million yen up 1.9% year on year.
During the six months ended September 30, 2018, we opened new stores in themainstay dust control products business and With-branded pest control devices
business, respectively.
[Construction Consulting Business]
Although consumption tax hike is going to revitalize the local construction market,
the market remains stagnant because of several reasons such as the lack ofcraftspeople and decreases in the number of household.
Under these conditions, the construction know-how systems actively reinforced
support programs for small and midsize building contractors. Sales were about thesame level year on year.
The construction materials business, which focused on solar energy systems,
reinforced sales promotions regarding solar powered house (e.g. new-built house) in
the housing market. And to date our efforts have met with some success.
Nevertheless, sales decreased year on year owning to the delay in delivery ofcommodities, which was affected by Revised-FIT and natural disasters including
the torrential rain in western Japan.
Eco & Eco Co., Ltd. have conducted an overhaul of income structure, sales
promotions and process management in fiscal 2017, so sales improved year on year.
Operating income decreased year on year due to decreased in sales of theconstruction materials business and increase in selling, general, andadministrative expenses related to promoting new products in the construction
know-how systems.
As a result, during the six months ended September 30, 2018, the Consulting
Business segment posted sales of 2,427 million yen, down 5.1% year on year, andoperating income of 197 million yen, down 17.3% year on year.
[Housing Sales Business]
During the six months ended September 30, 2018, the number of housing starts
remains sluggish. Reasons behind this were a slump in the real estate investment
market and declines in demand for saving inheritance tax. However, housing
industry is expected to recover gradually toward the consumption tax hike.
Against this backdrop, Leohouse Co., Ltd. rebuilt a solid sales system andenhanced employee training programs through the replacement of topmanagement. And we reduced fixed costs through the closure of unprofitablebranches and managed business resources appropriately. Additionally, we
performed effective sales promotions aggressively by the use of trademarks that wewon customer’s satisfaction about selling price for 3 straight years.
As a result, during the six months ended September 30, 2018, the number of orders
received and orders in hand are 1,007 homes (compared with 981 a year earlier)and 1,317 (compared with 1,294 a year earlier), respectively. In addition, sales
declined year on year owing to the delay of the construction and delivery caused bynatural disasters including the torrential rain in western Japan, typhoons,earthquakes. Operating income also decreased year on year due to decreases insales and the rise in construction costs that was affected by the lack of craftspeople.
J-wood Co., Ltd. made use of the popular customer attraction model with “Housingcafes” to get new customers. However, the sales decreased year on year due toreduced backlog in the beginning of the fiscal year.
KDI Co., Ltd. increased sales significantly year on year thanks to reinforcements ofinformation collection methods regarding purchase and human resource
development.
KUNIMOKU HOUSE Co., Ltd. worked on purchase of housing sites andreinforcements of sending out information through the social network service.
Suzukuri Co., Ltd. broaden its customer base through business alliance withpartners in different industries.
To sum up, during the six months ended September 30, 2018, the Housing Sales
Business posted sales of 16,860 million yen (down 2.1% year on year), andoperating loss of 2,195 million yen (compared with a loss of 1,974 million yen a year
earlier, including goodwill amortization costs at 37 million yen related to J-wood
Co., Ltd., KDI Co., Ltd. and KUNIMOKU HOUSE Co., Ltd.).
Regarding store openings, during the first quarter, Leohouse Co., Ltd. andSuzukuri Co., Ltd. opened new sales bases, respectively.
[Beauty and Health Business]
At JIMOS Co., Ltd., the mainstay MACCHIA LABEL brand increased newcustomers through the new cosmetic series called “CLEAR ESTHE LINE”, but
sales decreased year on year resulting from reduction in the repeat rate.
The Coyori brand of skin and hair care products that is made from naturalingredients increased new customers through the new cosmetic series called“SAISEI LINE” declined sales year on year because of the decline in the repeatrate.
Operating income improved year on year since we managed investments inadvertising and promotion efficiently to maintain stable profits.

BELAIR Co., Ltd. develops comprehensive services by the use of management
resources for the society of the aged and expands sales network.
As a result, during the six months ended September 30, 2018, the Beauty andHealth Business posted sales of 4,494 million yen (down 9.1% year on year), andoperating loss of 99 million yen (compared with a loss of 291 million yen a year
earlier, including goodwill amortization costs at 283 million yen related to JIMOS
Co., Ltd. and BELAIR Co., Ltd.).