Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong
Limited take no responsibility for the contents of this announcement, make norepresentation as to its accuracy or completeness and expressly disclaim any liability
whatsoever for any loss howsoever arising from or in reliance upon the whole or any
part of the contents of this announcement.

(Incorporated in Japan with limited liability)(Stock Code: 1245)

INTERIM RESULTS ANNOUNCEMENTFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018
RESULTS HIGHLIGHTS#•

Gross pay-ins were ¥71,189 million (or HK$4,899 million#), recording an increaseof 1.4% as compared with the same period last year;•

Revenue was ¥14,438 million (or HK$994 million # ), recording an increase of
10.1% as compared with the same period last year;•

Profit before income tax was ¥1,393 million (or HK$96 million #), recording an
increase of ¥1,497 million (or HK$103 million) as compared with the same period
last year;•

Profit for the period attributable to shareholders of the Company was ¥878
million (or HK$59 million #), recording an increase of ¥1,099 million (or HK$76
million) as compared with the same period last year;•

Basic earnings per share of the Company was ¥0.73 (or HK$0.050#) (2017: basic
loss per share was ¥0.18);•

The Board has resolved to declare an interim dividend of ¥0.08 (or HK$0.006)
per share for the six months ended 30 September 2018 (Six months ended 30
September 2017: Nil); and•The Group operated 55 halls as at 30 September 2018.
Translated into Hong Kong dollar at the rate of ¥14.53 to HK$1.00, the exchange rate prevailingon 28 September 2018 (i.e. the last business day in September 2018).

Note: The above % increases and decreases refer to the changes in respect of the Japanese Yenamounts but not the translated amounts in Hong Kong dollar.
*

For identification purpose only

–1–The board (the “Board”) of directors (the “Directors”) of NIRAKU GC HOLDINGS, INC.*(the “Company” or “NIRAKU”) is pleased to announce the unaudited condensed
consolidated results of the Company and its subsidiaries (the “Group”) for the six
months ended 30 September 2018 together with the comparative figures for the six
months ended 30 September 2017 as follows:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended
30 September
Note
2018
2017
¥ million¥ million(Unaudited) (Unaudited)
Revenue

4

14,438

13,108Other income
Other gains/(losses), net
Hall operating expenses
Administrative and other operating expenses

5
5
6
6

319
36
(11,166)(2,011)323(1)(11,478)(1,824)

Operating profit

1,616

128

Finance income
Finance costs

24
(247)

25
(257)

Finance costs, net

7

(223)

(232)

Profit/(loss) before income tax
Income tax expense

8

1,393
(538)

(104)
(117)

Profit/(loss) for the period

855

(221)

Profit/(loss) for the period attributable to:
Owners of the Company
Non-controlling interest

878
(23)

(221)
–

855

(221)

–2–

Six months ended
30 September
Note
2018
2017
¥ million¥ million(Unaudited) (Unaudited)
Earnings/(loss) per share for profit/(loss)
attributable to owners of the Company— Basic and diluted (expressed in ¥ per share)

0.73(0.18)

(5)
173

(88)
–

Total comprehensive income/(loss)
for the period

1,023

(309)

Total comprehensive income/(loss)
attributable to:
Owner of the Company
Non-controlling interest

1,049
(26)

(309)
–

1,023

(309)

Other comprehensive income/(loss)
Items that have been reclassified or may besubsequently reclassified to profit or loss
Change in value of financial assets through othercomprehensive income
Currency translation differences–3–9

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONASSETS
Non-current assets
Property, plant and equipment
Investment properties
Intangible assets
Prepayments, deposits and other receivables
Financial assets at fair value throughprofit or loss
Financial assets at fair value throughother comprehensive income
Deferred income tax assets
Long-term bank deposits

Current assets
Inventories
Trade receivables
Prepayments, deposits and other receivables
Current income tax recoverable
Bank deposits with maturity over 3 months
Cash and cash equivalents

Total assets–4–

30 September
Note
2018
¥ million(Unaudited)

31 March2018¥ million(Audited)

25,401
659
1,662
3,617

26,207
662
1,571
3,751

100

52

945
1,558
–

953
1,565
47

33,94234,808

279
60
1,127
–
123
17,491

57
57
1,312
300
43
15,59419,08017,36353,022

52,171

11
11
11

12

30 September
2018¥ million(Unaudited)

31 March2018¥ million(Audited)

EQUITY
Equity attributable to shareholdersof the Company
Share capital
Reserves

3,000
25,082

3,000
24,176

Non-controlling interest

28,082(66)

27,176(40)

Total equity

28,01627,136

10,080
2,888
2,150
6

10,854
3,247
2,111
8

15,124

16,220

308
4,106
770
4,352
1
345

247
3,886
888
3,793
1
–

9,882

8,815

Total liabilities

25,00625,035

Total equity and liabilities

53,022

52,171Note

LIABILITIES
Non-current liabilities
Borrowings
Obligations under finance leases
Provisions and other payables
Derivative financial instruments

14
15

Current liabilities
Trade payables
Borrowings
Obligations under finance leases
Accruals, provisions and other payables
Derivative financial instruments
Current income tax liabilities

13
14
15

–5–

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION
1GENERAL INFORMATION
株式会社二ラク•ジー•シー•ホールディングスNIRAKU GC HOLDINGS, INC.* was incorporated inJapan under the Japan Companies Act with limited liability on 10 January 2013. The address of its
registered office is 1-39 Hohaccho 1-chome, Koriyama-shi, Fukushima, Japan.
The Company is an investment holding company. The Company and its subsidiaries comprising theGroup (together, the “Group”) are principally engaged in pachinko and pachislot hall operations,hotel and restaurant operations in Japan, and entertainment and amusement arcade operations in
Asia countries.
The Company has its primary listing on The Stock Exchange of Hong Kong Limited.
This condensed consolidated interim financial information is presented in millions of Japanese Yen(“¥”), unless otherwise stated.

2

BASIS OF PREPARATIONThe condensed consolidated interim financial information for the six months ended 30 September
2018 have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim
Financial Reporting” issued by the International Accounting Standards Board (“IASB”). The
condensed consolidated interim financial information should be read in conjunction with the annual
financial statements for the year ended 31 March 2018, which have been prepared in accordancewith International Financial Reporting Standards (“IFRSs”).

3

ACCOUNTING POLICIESExcept as described below, the accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 March 2018, as described in those annual financial
statements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable toexpected total annual earnings.
(i)

New standards and amendments to standards adopted by the GroupA number of new or amended standards became applicable for the current reporting period. Of
these, IFRS 15 “Revenue from contracts with customers” is relevant to the Group’s condensed
consolidated interim financial information.
The impact of the adoption of IFRS 15 is disclosed below. The other new or amended
standards did not have any material impact on the Group’s accounting policies.

–6–

(ii)

New standards and amendments to existing standards issued but not yet adopted by theGroup
IFRS 16 “Leases” was issued in January 2016. It will result in almost all leases being recognisedon the balance sheet, as the distinction between operating and finance leases is removed.
Under the new standard, an asset (the right to use the leased item) and a financial liability to
pay rentals are recognised. The only exceptions are short-term and low-value leases.
The accounting for lessors will not significantly change. The standard will affect primarily theaccounting for the Group’s operating leases. As at the reporting date, the Group has noncancellable operating lease commitments of ¥10,247 million. However, the Group has not yet
determined to what extent these commitments will result in the recognition of an asset and aliability for future payments and how this will affect the Group’s profit and classification of cash
flows. Some of the commitments may be covered by the exception for short-term and lowvalue leases and some commitments may relate to arrangements that will not qualify as leases
under IFRS 16.
The standard is mandatory for first interim periods within annual reporting periods beginning on
or after 1 January 2019. The Group does not intend to adopt the standard before its effective
date.

(iii) Adoption of IFRS 15, “Revenue from contracts with customers”
The Group has adopted IFRS 15 from 1 April 2018 which resulted in changes in accounting
policies and adjustments to the amounts recognised in the condensed consolidated interim
financial information. In accordance with the transitional provisions in IFRS 15, the Group has
adopted the modified retrospective approach and comparative figures have not been restated.
The accounting policies were changed to comply with IFRS 15. IFRS 15 replaces the provisionof IAS 18 “Revenue” and IAS 11 “Construction Contracts” that relate to the recognition,
classification and measurement of revenue and costs.
The effect of the adoption of IFRS 15 is related to presentation of contract liabilities within“Accruals, provisions and other payables” recognised in the consolidated statement of financial
position as at 1 April 2018 to be consistent with the terminology used under IFRS 15:—

Contract liabilities recognised for unutilised balls and tokens was previously presented
within “Accruals, provisions and other payables”.

—

Contract liabilities recognised for vending machine rental receipt in advance was previously
presented within “Accruals, provisions and other payables”.

The adoption of IFRS 15 has no material impact to the Group’s net assets as at 31 March 2018
and the condensed consolidated results, earnings per share (basic and diluted) and interim
condensed consolidated statement of cash flows for the period ended 30 September 2018.

–7–

4

REVENUE AND SEGMENT INFORMATION(a)

RevenueSix months ended
30 September
2018
2017
¥ million¥ million(Unaudited)(Unaudited)(b)

Revenue
Gross pay-ins
Less: gross pay-outs

71,189(57,972)

70,236(57,560)

Revenue from pachinko and pachislot hall business
Revenue from amusement arcades
Vending machine income
Revenue from hotel operation
Revenue from restaurant operations

13,217
768
258
77
118

12,676–272
83
77

14,438

13,108Segment information
Management has determined the operating segments based on the reports reviewed by thechief operating decision maker that are used for making strategic decisions. The chief operating
decision-maker is identified as the executive directors of the Company. The executive directors
consider the business from a service perspective and assess the performance of the operating
segments based on a measure of adjusted profit before income tax before unallocatedcorporate expenses for the purposes of allocating resources and assessing performance. These
reports are prepared on the same basis as this condensed consolidated interim financial
information.
Management has identified three reportable segments based on the types of services, namely (i)pachinko and pachislot hall operations, (ii) amusement arcade operations and (iii) others,
representing hotel and restaurant operations.
Segment assets consist primarily of property, plant and equipment, investment properties,
inventories, trade receivables, prepayments, deposits and other receivables, bank deposits withmaturity over 3 months and cash and cash equivalents. They exclude deferred income tax
assets and assets used for corporate functions including financial assets at fair value throughprofit or loss and financial assets at fair value through other comprehensive income.
Capital expenditure comprises additions to property, plant and equipment, investment
properties and intangible assets. Unallocated corporate expenses and income tax expenses are
not included in segment results.

–8–

The segment information provided to the executive directors for the six months ended 30
September 2018 and 2017 are as follows:
Six months ended 30 September 2018
Amusement
Pachinko andarcadepachislot halloperations
operations
Southeast
Others
Japan
Asia
Japan
Total
¥ million¥ million¥ million¥ million(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Segment revenue from externalcustomers over time
Segment results
Corporate expenses

13,475768

195

14,438

1,586

79

(49)

1,616
(223)

Profit before income tax
Income tax expense

1,393
(538)

Profit for the period

855

Other segment items
Depreciation and amortisation
expensesFinance income
Finance costs
Capital expenditures(1,139)
22
(243)
304

(126)
2
(4)
62

(26)
–
–
76

(1,291)
24
(247)
442

Six months ended 30 September 2017
Amusement
Pachinko andarcadepachislot halloperations
operations
Southeast
Others
Japan
Asia
Japan
Total
¥ million¥ million¥ million¥ million(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Segment revenue from externalcustomers over time
Segment results
Corporate expenses

12,948–160

13,108

242

–

(62)

180
(284)

Loss before income tax
Income tax expense

(104)
(117)

Loss for the period(221)

Other segment items
Depreciation and amortisation
expensesFinance income
Finance costs
Capital expenditures(1,124)
25
(257)
693

–9–

–
–
–
–

(19)
–
–
74

(1,143)
25
(257)
767

The segment assets as at 30 September 2018 and 31 March 2018 are as follows:

As at 30 September 2018
Segment assets (Unaudited)
Unallocated assets
Deferred income tax assets

Pachinko andpachislot halloperations
Japan¥ million(Unaudited)

Amusement
arcadeoperations
SoutheastAsia¥ million(Unaudited)

OthersJapan¥ million(Unaudited)

42,666

1,061

1,175

Total assets
As at 31 March 2018
Segment assets (Audited)
Unallocated assets
Deferred income tax assets

Total¥ million(Unaudited)
44,902
6,562
1,558
53,022

42,247980

1,108

44,335
6,271
1,565
52,171

Total assets

The total non-current assets other than financial instruments and deferred tax assets, analysedby location of the assets, is as follows:

Japan, country of domicile
Southeast Asia

As at
30 September
2018¥ million(Unaudited)

As at
31 March2018¥ million(Audited)

30,723616

31,609629

31,33932,238No single external customer contributed more than 10% revenue to the Group’s revenue for thesix months ended 30 September 2018 and 2017.

– 10 –

5

OTHER INCOME AND OTHER GAINS/(LOSSES), NET
Six months ended
30 September
2018
2017
¥ million¥ million(Unaudited)(Unaudited)
Other income
Rental income
Income from expired IC and membership cards
Dividend income
Income from scrap sales of used pachinko and pachislot machines
Others

82
15
27
179
16

74
16
30
191
12

319

323

Six months ended
30 September
2018
2017
¥ million¥ million(Unaudited)(Unaudited)
Other gains/(losses), net
Loss on disposal of financial assets at fair value through profit or loss
Gain on fair value for interest rate swaps
Loss on disposal of property, plant and equipment
Loss on disposal of investment properties
Net exchange gain

6

(2)
3
(9)
(7)
51

(2)
1
(1)
–
1

36

(1)

OPERATING PROFIT
Operating profit is stated after charging the following:
Six months ended
30 September
2018
2017
¥ million¥ million(Unaudited)(Unaudited)
Employee benefits expenses— Hall operations— Administrative and others
Operating lease rental expense in respect of land and buildings
Depreciation of property, plant and equipment
Depreciation of investment properties
Amortisation of intangible assets
Pachinko and pachislot machines expenses (Note)

2,716
823
1,523
1,248
10
33
3,374

2,588
783
1,348
1,117
10
16
4,339

Note: Pachinko and pachislot machines are expensed off in the condensed consolidated statementof comprehensive income upon installation. The expected useful lives of these machines areless than one year.

– 11 –

7

FINANCE COSTS, NET
Six months ended
30 September
2018
2017
¥ million¥ million(Unaudited)(Unaudited)
Finance income
Bank interest income
Other interest income

Finance costs
Bank borrowings
Obligations under finance leases
Provision for unwinding discountFinance costs, net
8

2
22

1
24

24

25

(96)
(98)
(53)

(81)
(120)
(56)

(247)

(257)

(223)

(232)

INCOME TAX EXPENSE
Six months ended
30 September
2018
2017
¥ million¥ million(Unaudited)(Unaudited)
Current tax— Japan— Other Asian countries

507
27

151
–

Deferred income tax

534
4

151
(34)

538

117

Taxation has been provided at the appropriate rates prevailing in the countries in which the Group
operates. The Group is subject to national corporate income tax, inhabitant tax and enterprise tax inJapan, which, in aggregate, resulted in effective statutory income tax rates of approximately 30.2%(30 September 2017: same) for the period ended 30 September 2018. Taxation on Asian countries
in which the Group operates. These rates ranges from 17.0% to 20.0% (30 September 2017: N/A).
No provision for Hong Kong profits tax has been made for the six months ended 30 September 2018and 2017 as the Group did not generate any assessable profits arising in Hong Kong during both
periods.

– 12 –

9

EARNINGS/(LOSS) PER SHARE
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to shareholdersof the Company by the weighted average number of ordinary shares in issue during the six months
ended 30 September 2018 and 2017.
Six months ended
30 September
2018
2017
(Unaudited)(Unaudited)
Profit/(loss) attributable to shareholdersof the Company (¥ million)
Weighted average number of shares for the purposeof calculating basic earnings per share (thousands)
Basic and diluted earnings/(loss) per share (¥)

878

(221)

1,195,850

1,195,850

0.73(0.18)

Diluted earnings/(loss) per share is the same as basic earnings/(loss) per share as there was nopotential dilutive shares during the six months ended 30 September 2018 and 2017.
10

DIVIDENDS
During the six months ended 30 September 2018, the Company paid dividend of ¥143 million (¥0.12
per ordinary share) to their shareholders in respect of the year ended 31 March 2018.
The Board proposes the payment of an interim dividend of ¥0.08 per ordinary share totalling ¥96
million in respect of the six months ended 30 September 2018 (30 September 2017: Nil). The
condensed consolidated interim financial information does not reflect this dividend payable.

11

PROPERTY, PLANT AND EQUIPMENT, INVESTMENT PROPERTIES AND INTANGIBLE ASSETS
During the six months ended 30 September 2018, the Group incurred expenditures of approximately¥426 million, ¥15 million and ¥1 million for property, plant and equipment, investment properties andintangible assets, respectively (Six months ended 30 September 2017: ¥764 million and ¥3 million
for property, plant and equipment and intangible assets, respectively.)
No impairment loss for property, plant and equipment was incurred by the Group for the six months
ended 30 September 2018 (Six months ended 30 September 2017: Nil).
During the six months ended 30 September 2018, the net book amounts of disposed property, plantand equipment and investment properties amounted to approximately ¥9 million and ¥7 million,
respectively (Six months ended 30 September 2017: ¥1 million for disposed property, plant andequipment). During the six months ended 30 September 2018, there was no disposal of intangible
asset (Six months ended 30 September 2017: Nil).

– 13 –

12

TRADE RECEIVABLES
30 September
2018¥ million(Unaudited)

31 March2018¥ million(Audited)

60

57

Trade receivables

Trade receivables represent income receivable from vending machines. The credit terms granted by
the Group generally ranged from 0 to 30 days.
The ageing analysis of the trade receivables, based on invoice date, is as follows:

Less than 30 days
31 days to 90 days

30 September
2018¥ million(Unaudited)

31 March2018¥ million(Audited)

60
–

53
4

60

57

As at 30 September 2018 and 31 March 2018, no trade receivables were past due or impaired.
13

TRADE PAYABLES
The ageing analysis of the trade payables, based on invoice dates, were as follows:

Less than 30 days
31–90 days
Over 90 days

– 14 –

30 September
2018¥ million(Unaudited)

31 March2018¥ million(Audited)

212
83
13

72
162
13

308

247

14

BORROWINGS
30 September
2018¥ million(Unaudited)

31 March2018¥ million(Audited)

2,590
7,490

2,761
8,093

10,08010,854

862
3,244

813
3,073

4,106

3,886

14,186

14,74030 September
2018¥ million(Unaudited)

31 March2018¥ million(Audited)

Gross finance lease liabilities — minimum lease payments
No later than 1 year
Later than 1 year and no later than 2 years
Later than 2 years and no later than 5 years
Later than 5 years

909
430
1,105
2,046

1,041
817
1,206
1,985

Future finance charges on finance leases

4,490
(832)

5,049
(914)

Present values of finance lease liabilities

3,658

4,135

Non-current portion
Bank loans
Syndicated loans

Current portion
Bank loans
Syndicated loans

Total borrowings
15

OBLIGATIONS UNDER FINANCE LEASES– 15 –

The present values of finance lease liabilities are as below:
30 September
2018¥ million(Unaudited)

31 March2018¥ million(Audited)

No later than 1 year
Later than 1 year and no later than 2 years
Later than 2 years and no later than 5 years
Later than 5 years

770
376
817
1,695

888
683
918
1,646

Total obligations under finance leases
Less: Amount included in current liabilities

3,658
(770)

4,135
(888)

Non-current obligations under finance leases

2,888

3,247

Assets arranged under finance leases represent buildings for pachinko and pachislot halls, andgaming machines for amusement arcades. The average lease term range from 1 to 20 years. No
arrangements have been entered into for contingent rental payments during the reporting periods.
16

BUSINESS COMBINATION
Acquisition of Dream Games Singapore Pte. Ltd.
On 20 November 2017, the company has completed the acquisition of 100% issued share capital ofDream Games Singapore Pte. Ltd. and its subsidiaries (“Dream Games”) at a cash consideration of¥1,870 million. Dream Games is engaged in the operation of entertainment and amusement facilities
in Cambodia and Vietnam. The Acquisition represents a strategic opportunity for the Group toestablish its leading presence in gaming and entertainment industry in Southeast Asia and broaden
the types of entertainment provided by the Group.
In respect of the acquisition, during the year the Group has finalised the fair value assessments forthe net assets acquired from the business combination. On completion of the fair value assessments,
adjustment made to the provisional calculation of identifiable assets and liabilities amounted to ¥20
million, with an equivalent decrease in the reported value of goodwill. The changes mainly represent
finalisation of the fair value of property, plant and equipment and intangible assets.

– 16 –

The following table summarises the consideration paid for Dream Games, and the fair value of theassets acquired and liabilities assumed at the acquisition date.
As at date ofacquisition¥ million

17

Recognised amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents
Prepayments, deposits and other receivables
Inventories
Property, plant and equipment
Deferred tax assets
Intangible assets
Provision and other payables
Borrowings and obligation under finance leases
Deferred tax liabilities
Current income tax liabilities

117
236
21
583
15
430
(170)
(351)
(94)
(5)

Total identifiable net assets
Goodwill

782
1,088

Net assets acquired

1,870

Purchase consideration settled in cash

1,870

SUBSEQUENT EVENT
On 8 November 2018, a wholly-owned subsidiary of the Group entered into an agreement to
subscribe for 20,000 shares, representing 40% equity interests, of a newly incorporated Hong Kong
entity, Yes! E-Sports Asia Holdings Limited (“YEAH”) at a cash consideration of USD40,000. YEAH isestablished to be a hub for developing and expanding the e-Sports business in Asia.
In addition to the capital contribution, the Group has also entered into a loan agreement with YEAH
to provide it with a US$3,200,000 loan with interest rate at 4% per annum. The loan was provided
on 15 November 2018 and is repayable every six months by installments over four years. The Group
has the right to demand for full repayment by the time YEAH has surplus funds (defined as any
amount of funds, including cash and cash equivalents, in excess of debt of debt-like liabilities suchas lease obligations) that exceed US$3,200,000, the principal amount of the loan.

– 17 –

MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS OVERVIEW
Pachinko business
For the six months ended 30 September 2018, gross pay-ins and revenue frompachinko and pachislot business amounted to ¥71,189 million and ¥13,217 million,
respectively. Despite of continual recession in pachinko industry, the Group hadrecorded an increase in gross pay-ins and revenue by ¥953 million (or 1.4%) and ¥541
million (or 4.3%), respectively, as compared to the six months ended 30 September
2017. The rise in revenue was mainly attributable to the Niraku Hitachi-omiya hall, which
was opened in December 2017. Total revenue derived from this suburban hall amounted
to ¥134 million for the six months ended 30 September 2018. Furthermore, the Group
continued in optimising the pay-out ratio to improve the revenue margin. This strategic
measure had proven its success as the revenue margin had gone up to 18.6% in
current period, an increase of 0.6% as compared to same period in 2017.
Amusement arcade business
On 20 November 2017, the Group acquired Dream Games Singapore Pte. Ltd. (“Dream
Games”) and its subsidiaries, which engages in amusement arcades operation in
Vietnam and Cambodia. Dream Games is a young company established in 2013,nevertheless, since its inception, its business strategy is to ally with large Japanese malldevelopers, focusing on opening amusement arcades in new shopping arcades. For thesix months ended 30 September 2018, this sector had contributed ¥768 million ofrevenue to the Group.
Restaurant business
The Group is currently operating two restaurants, located in Shinbashi and Nishi
Shinjuku, as a franchisee of Spanish restaurant chain “Lizarran” developed by the
Spain-based Comess Group, which operates restaurants mainly in Europe. For the six
months ended 30 September 2018, revenue derived from these restaurants amounted
to ¥118 million, a significant increase of ¥41 million was noted as compared to thesame period in 2017. The core reason for the surge being the new revenue stream from
Nishi Shinjuku which was opened in early August 2017.
CHALLENGES FACED, RECENT DEVELOPMENT AND FUTURE PLANS
The pachinko industry as a whole continues to be severe, and is moving towards apolarised market, since it is expected that small to medium scale pachinko halls aregoing off the market. The pachinko industry is further dampened with the launch of new
regulations over gaming elements in pachinko and pachislot machines; as well as thepassage of the “Act on the Promotion of the Development of Integrated Resort Areas”
which inevitably imposed pressure on pachinko operators to counter the gambling
addiction issue associated with the legalisation of casinos, as well as stringent
restrictions on pachinko advertising and promotion activities.

– 18 –

To tackle these challenges, the Group has been carrying out various measures which
include streamlining cost structure, increasing customers return rate, providing agaming environment to meet the needs of diverse fans, and opening new halls. “Niraku
Hitachi-Omiya hall”, as mentioned above, is a hall opened in late 2017 which isdesigned based on the concept of community space in the area and is a new style forthe future. The Group has made every effort to accommodate the needs of local
communities, create halls where visitors can spend a relaxing and enjoyable time,encourage those who are not keen on pachinko games would also pay a visit. Close to
the end of September 2018, we closed down an underperformed suburban hall, the“Niraku Mizuho hall”. Its closure would allow the Group to better allocate resources
between each existing hall. As a result, the number of pachinko halls at present
amounted to 54 stores (excluding the “Niraku Tomioka hall”, for which the prospect ofresumption of business has yet to be determined due to nuclear disaster).
Moving forward, the Group will continue to make improvements on replacing machines
in each hall to match customer preference, improve gaming environment, strengthen
the organisation through promotion and advertising, streamline the cost structure, andwork closely within the Group and the communities to deliver better service andincrease support from the locals.
The Group stepped its foot in Southeast Asian countries in November 2017 after theacquisition of Dream Games, a company which operates amusement arcades inVietnam and Cambodia. Seeing the fast-growing economies and their young
demography populations which lead to high demand in amusement facilities, during thecurrent period, the Group opened a new amusement arcade in Cambodia. As a result,the number of amusement arcades in total moved from 7 to 8 halls. The management isconfident that steady inflow of income will be generated and which has evidenced by amonth-on-month increase in revenue. The Group’s future strategy is to capture theeconomic growth of Asian countries and continue to increase its market share inamusement business.
Apart from pachinko and amusement businesses, the Group also persists in seizing
every opportunity in restaurant business. The Group is convinced that, with its profoundexperiences in entertainment and customer service industry, it can take full advantageof the efficient store management and operation, service and quality maintenance. As a
new move, concept of accommodating a café inside the vicinity of pachinko hall was
introduced during the current period. “Komeda Café” provides a cosy place for bothpachinko and non-pachinko players to enjoy a drink and light meals. The Group plans
to continue rolling out more restaurants (Lizarran brand and Komeda Café brand) inJapan.

– 19 –

FINANCIAL REVIEW
Gross pay-ins
Gross pay-ins recorded an increase of ¥953 million, or 1.4%, from ¥70,236 million forthe six months ended 30 September 2017 to ¥71,189 million for the same period incurrent year. The rise was attributable to the inflow of revenue from a new hall which
was opened in December 2017 despite of the slump in pachinko industry.
Gross pay-outs
Gross pay-outs, being the aggregate cost of G-prizes and general prizes exchanged bycustomers, increased by ¥412 million, or 0.7%, from ¥57,560 million for the six months
ended 30 September 2017 to ¥57,972 million for the same period in 2018, which
generally mirrored the increase in gross pay-ins.
Revenue and revenue margin from pachinko and pachislot business
Revenue from pachinko and pachislot business ascended from ¥12,676 million for thesix months ended 30 September 2017 to ¥13,217 million for the same period in current
year. The increase of ¥541 million was primarily due to additional revenue derived fromthe new hall as discussed above.
The revenue margin increased by 0.6% from 18.0% for the six months ended 30
September 2017 to 18.6% for the same period in current year. The increase in revenue
margin was due to the effect of drop in pay-out ratio which led to positive impact onrevenue margin in current period.
Revenue from amusement arcade business
In November 2017, the Group acquired 100% of equity interest in Dream Games, acompany engages in the operation of entertainment and amusement facilities in
Cambodia and Vietnam. As a result of the acquisition, the financial results of Dream
Games and its subsidiaries were consolidated into the Group’s financial statements.
For the six months ended 30 September 2018, the revenue contributed fromamusement arcade business amounted to ¥768 million, of which ¥655 million and ¥113
million were derived from Vietnam and Cambodia, respectively.

– 20 –

Other revenue
Other revenue represents incomes from vending machines, hotel and restaurant
operations.
Vending machine income amounted to ¥258 million for the six months ended 30
September 2018. The decrease of ¥14 million or 5.1% as compared to ¥272 million forthe same period in 2017 was resulted from the decrease in customer visits.
Income from hotel operations noted a slight decrease of ¥6 million from ¥83 million forthe six months ended 30 September 2017 to ¥77 million for the six months ended 30
September 2018. The drop is due to higher competition in hotel business which led todecrease in average occupancy rate by 4.7%.
Revenue from restaurant under the brand “LIZARRAN” amounted to ¥118 million for thesix months ended 30 September 2018. The surge of ¥41 million as compared to thesame period in 2017 is mainly attributable to the opening of the third Spanish restaurantin August 2017 which generated additional revenue.
Hall operating expenses
Hall operating expenses decreased by ¥312 million, or 2.7%, from ¥11,478 million forthe six months ended 30 September 2017 to ¥11,166 million for the same period incurrent year. Major components of hall operating expenses are pachinko and pachislot
machine expenses, staff cost for hall staff and rental expenses, amounting to ¥3,374
million, ¥2,716 million and ¥1,480 million, respectively, for the six months ended 30
September 2018 (30 September 2017: ¥4,339 million, ¥2,588 million and ¥1,307
million, respectively).
The decline in hall operating expenses is mainly resulted from plunge in pachinko andpachislot machine expenses netted with increase in utilities and maintenance expenses.
Administrative and other operating expenses
Administrative and other operating expenses increased by ¥187 million, or 10.3% from
¥1,824 million for the six months ended 30 September 2017 to ¥2,011 million for thesame period in 2018. The hike in expenses is due to increase in staff cost andadvertising expense, and extra costs were incurred for closure of a hall in late
September 2018.
Finance costs
Finance costs, net recorded a decrease of ¥9 million, or 3.9%, from ¥232 million for thesix months ended 30 September 2017 to ¥223 million for the same period in 2018. The
drop is resulted from the decrease in total borrowings for the six months ended 30
September 2018 as compared to the same period in 2017.

– 21 –

Profit/(loss) attributable to owners of the Company, basic earnings/(loss) per
share and dividend
Profit attributable to owners of the Company of ¥878 million was recorded for the six
months ended 30 September 2018, as compared to the loss attributable to owners of¥221 million for the six months ended 30 September 2017. The turnaround from loss to
profit was mainly attributable to additional revenue driven from the new pachinko halland Dream Games business, together with the decline in machine expenses.
Basic earnings per share was ¥0.73 (basic loss per share for the six months ended 30
September 2017: ¥0.18). The Board has declared an interim dividend of ¥0.08 (orHK$0.006) per share for the six months ended 30 September 2018 (30 September
2017: Nil). The interim dividend will be payable on 8 January 2019 to the shareholdersof the Company (the “Shareholders”) whose names appear on the register of membersof the Company at close of business on 7 December 2018.
CAPITAL STRUCTURE
The Group principally meets its working capital and other liquidity requirements througha combination of capital contributions, including cash flow from operations and bankborrowings. The Group’s daily operation is mainly financed by operating cash flows, andrelied on short- and long-term borrowings for financing working capital, future expansion
plans and unexpected needs. The Group’s treasury objective is mainly to ensure there
is sufficient cash flow to meet the payment of expenses, loans and to fund any capital
expenditure and commitment that the Group may have from time to time. The Group’s
cash surpluses are placed in short-term and long-term fixed deposits to maintainliquidity. The Group has not experienced any difficulty in repaying its borrowings.
The Group’s principal business activities are carried out in Japan, with income,expenditure, assets and liabilities mainly denominated in Japanese Yen, as such, theGroup does not have any material foreign exchange exposure.

– 22 –

The table below sets forth the information regarding the cash and cash equivalents,bank deposits, bank borrowings, obligations under finance leases, working capital, total
equity and gearing ratio of the Group as at 30 September 2018 and 31 March 2018,
and operating cash flows before movements in working capital of the Group for the six
months ended 30 September 2018 and 2017, respectively:

Cash and cash equivalents
Bank deposits

Bank loans
Syndicated loans
Obligations under finance leases

Working capital
Total equity
Gearing ratio

As at
30 September
2018¥ million

As at
31 March2018¥ million

17,491
123

15,59490

17,614

15,684

3,453
10,733
3,658

3,574
11,166
4,135

17,844

18,875

9,198
28,016
63.7%

8,548
27,136
69.6%

For the six months ended
30 September
2018
2017
¥ million¥ million
Operating cash flows before movements
in working capital

2,955

1,246

Net current assets of the Group totalled ¥9,198 million as at 30 September 2018 (31March 2018: ¥8,548 million), and current ratio was 1.93 as at 30 September 2018 (31March 2018: 1.97). As at 30 September 2018, there were cash and cash equivalents of¥17,491 million (31 March 2018: ¥15,594 million), in which ¥16,292 million was
denominated in Japanese Yen, ¥799 million was denominated in United States dollar,¥247 million was denominated in Hong Kong dollar, ¥136 million was denominated in
Vietnam Dong and ¥17 million in other currencies. The Group had total borrowings of¥17,844 million as at 30 September 2018 (31 March 2018: ¥18,875 million). Current
portion of borrowings and current portion of obligations under finance leases amounted
to ¥4,876 million as at 30 September 2018 (31 March 2018: ¥4,774 million).

– 23 –

The Group’s bank borrowings during the current period comprised bank loans andsyndicated loans. As at 30 September 2018, the total bank borrowings amounted to¥14,186 million (31 March 2018: ¥14,740 million), with average effective interest rates
on bank borrowings ranged from 1.02% to 1.91% (31 March 2018: 0.8% to 1.1%) per
annum. Approximately 4.8% of bank borrowings as at 30 September 2018 were fixed
rate borrowings.
HEDGING OF FLOATING RATE BORROWINGS AND FOREIGN EXCHANGE
As at 30 September 2018, the Group had one floating to fixed interest rate swap
contract with a bank in Japan (i.e. the Group pays fixed interest rates and receive
interests at floating rate). This interest rate swap contract was entered into as ameasure to manage interest rate risk in relation to loans of the Group. As interest rates
of some of the Group’s loans are on a floating rate basis, the floating to fixed interest
rate swap contracts enabled the Group to reduce the volatility in the amount of interest
being paid. For the six months ended 30 September 2018, the gain on fair value forinterest rate swap contracts amounted to ¥3 million.
The Group’s debts were primarily denominated in Japanese Yen. After the acquisition ofDream Games, the Group maintains an appropriate level of external borrowings in
Vietnam Dong for natural hedging of Vietnam Dong attributed to projects in Vietnam.
The Vietnam Dong exposure of the Group is mainly derived from the translation of noncurrent assets and liabilities of the Vietnam subsidiary with functional currency ofVietnam Dong and the Vietnam Dong deposits held for future development costs. As at
30 September 2018, the translation of non-current assets and liabilities of subsidiaries
with functional currency other than Japanese Yen to Japanese Yen by using exchange
rates at that day resulted in a gain of ¥56 million is recognised in equity. Apart from this,the Group does not have any material foreign exchange exposure.
GEARING RATIOThe gearing ratio, defined as the aggregate of interest-bearing loans and obligations
under finance leases, divided by total equity, was 63.7% as at 30 September 2018 (31March 2018: 69.6%). The plunge of 5.9% as compared with that of the year ended 31
March 2018 was mainly due to decrease of total equity of ¥880 million, netted withdecrease of total borrowings of ¥1,031 million.

– 24 –CAPITAL EXPENDITURE
Capital expenditure mainly comprised of expenditure for (i) the purchase of property,
plant and equipment mainly used for construction of buildings, and (ii) the purchase of
equipment and tools for the expansion and maintenance of our pachinko and pachislot
hall and amusement arcade operations. The table below shows a breakdown of thecapital expenditure for the indicated periods:

Property, plant and equipment
Investment properties
Others

As at
30 September
2018¥ million

As at
31 March2018¥ million

426
15
1

1,915
3
1

442

1,919

CHARGES ON ASSETS
As at 30 September 2018 and 31 March 2018, the carrying values of charged assets
were as below:

Property, plant and equipment
Investment properties
Deposits and other receivables

As at
30 September
2018¥ million

As at
31 March2018¥ million

9,209
659
581

8,340
662
582

10,4499,584

CONTINGENT LIABILITIESThe Group did not have any material contingent liabilities as at 30 September 2018 and
31 March 2018.

– 25 –

SIGNIFICANT INVESTMENTS, MATERIAL ACQUISITIONS AND DISPOSALS OF
SUBSIDIARIES, AND FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITALASSETS
During the six months ended 30 September 2018, the Group did not conduct any
significant investments, material acquisitions or disposals. Save for those disclosed inthis interim results announcement, the Group had no plan authorised by the Board forother material investments or additions of capital assets as at the date of this interim
results announcement.
EMPLOYEES AND REMUNERATION POLICY
As at 30 September 2018, the Group had 1,453 employees. The remuneration policy of
the Group (including those for directors and employees) is determined by the
Remuneration Committee under the Board as per the performance, qualifications andcompetence of the employees.
CORPORATE GOVERNANCE
During the six month ended 30 September 2018, the Company has adopted andcomplied with all the applicable principles and code provisions of the Corporate
Governance Code and Corporate Governance Report (the “CG Code”) contained inAppendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange (the“Listing Rules”), with the exception for code provision A.2.1, which requires the roles ofchairman and chief executive to be separated and should be performed by different
individuals, and code provision E.1.3, which requires that notice for an annual general
meeting should be sent to the shareholders at least 20 clear business days before themeeting.
Code Provision A.2.1
Under code provision A.2.1 of the CG Code, the roles of chairman and chief executive
should be separate and should not be performed by the same individual. Our Chairman
currently holds both positions. Since April 2010, our Chairman has been the key
leadership figure of our Group who has been primarily involved in the formulation ofbusiness strategies and determination of the overall direction of our Group. He has also
been chiefly responsible for our Group’s operations as he directly supervises our
Executive Officers (other than himself) and members of our senior management. Taking
into account the continuation of the implementation of our business plans, the Directors(including our Independent Non-executive Directors) consider our Chairman is the best
candidate for both positions and the present arrangements are beneficial to and in theinterests of our Company and our Shareholders as a whole.

– 26 –

Code Provision E.1.3
Code provision E.1.3 stipulates that notice for an annual general meeting (the “AGM”)
should be sent to its shareholders by the issuer at least 20 clear business days before
the meeting. The AGM of the Company for the year ended 31 March 2018 was held on
28 June 2018 (“2018 AGM”), while the notice for the 2018 AGM was despatched on 7
June 2018. The above arrangement complied with the articles of incorporation of theCompany (the “Articles of Incorporation”) prepared pursuant to the Companies Act inrespect of the minimum notice period of 21 calendar days for AGM but the notice period
for the 2018 AGM was less than 20 clear business days before the 2018 AGM.
Under the Companies Act and the Articles of Incorporation, the Company is required tohold an AGM within three months after the expiration of each financial year (i.e. on or
before 30 June 2018 for the financial year ended 31 March 2018).
The Companies Act also requires the notice for the AGM to be despatched together
with the audited financial statements under the Japanese Generally Accepted
Accounting Principles, which must be approved by the Board. On the other hand, theannual report must contain audited financial statements prepared under the IFRS as
required under the Listing Rules. As a result, more time was required to finalise theannual report of the Company for the year ended 31 March 2018 which accompaniedthe 2018 AGM notice despatched to the Shareholders.
DIRECTORS’ SECURITIES TRANSACTIONSThe Company has adopted the Model Code for Securities Transactions by Directors of
Listed Issuers as set out in Appendix 10 to the Listing Rules (the “Model Code”) as its
own code of conduct regarding securities transactions by Directors. Having madespecific enquiry with all Directors, the Directors confirmed that they had complied withthe required standard set out in the Model Code and the Company’s code of conduct
during the six months ended 30 September 2018.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIESThe Company did not redeem any of its listed securities during the six months ended 30
September 2018. Neither the Company nor any of its subsidiaries purchased or sold
any of the Company’s listed securities during the six months ended 30 September
2018.
CHANGES TO INFORMATION IN RESPECT OF DIRECTORS
Pursuant to Rule 13.51B(1) of the Listing Rules, the change in information of the
Directors since the date of the Company’s Annual Report 2018 is set out below:•

Mr. Norio NAKAYAMA resigned as the Independent Non-executive Director and amember of each of the nomination committee of the Company and remunerationcommittee of the Company with effect from 31 October 2018.

– 27 –

INTERIM DIVIDENDThe Board has resolved to declare an interim dividend of ¥0.08 (or HK$0.006) per sharefor the six months ended 30 September 2018 (30 September 2017: Nil).
REVIEW OF INTERIM RESULTS
The Audit Committee has reviewed the unaudited condensed consolidated interim
financial information and the interim results for the six months ended 30 September
2018 and discussed the financial related matters with the management. The unauditedcondensed consolidated interim financial information of the Group for the six months
ended 30 September 2018 has been reviewed by the Company’s auditor,
PricewaterhouseCoopers, in accordance with International Standard on Review
Engagements 2410 “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity”.
PUBLICATION OF INTERIM RESULTS ANNOUNCEMENT AND INTERIM REPORTThis interim results announcement is published on the websites of the Stock Exchange(www.hkexnews.hk) and the Company (www.ngch.co.jp), and the interim report of theCompany for the six months ended 30 September 2018 will be dispatched to theshareholders of the Company and will be published on the respective websites of theStock Exchange and the Company in due course.
On behalf of the BoardNIRAKU GC HOLDINGS, INC.*
株式会社ニラク ジー シー ホールディングス
Hisanori TANIGUCHI(also known as JEONG Seonggi)
Chairman, Executive Director and Chief Executive Officer
Fukushima, Japan, 22 November 2018
As at the date of this announcement, the executive Director is Hisanori TANIGUCHI (alsoknown as JEONG Seonggi); the non-executive Director is Hiroshi BANNAI; and the
independent non-executive Directors are Hiroaki MORITA, Michio MINAKATA andYoshihiro KOIZUMI.
*

for identification purpose only

– 28 –