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 2017
RESULTS HIGHLIGHTS#•

Gross pay-ins were ¥70,236 million (or HK$4,727 million#), recording a decreaseof 5.2% as compared with the same period last year;•

Revenue was ¥13,108 million (or HK$882 million # ), recording a decrease of
11.7% as compared with the same period last year;•

Loss before income tax was ¥104 million (or HK$7 million #), recording a decreaseof ¥680 million (or HK$46 million) as compared with the same period last year;•

Loss for the period attributable to shareholders of the Company was ¥221 million(or HK$15 million #), recording a decrease of ¥584 million (or HK$39 million) as
compared with the same period last year;•

Basic loss per share of the Company was ¥0.18 (or HK$0.012 #) (2016: basic
earnings per share was ¥0.30);•

The Board has resolved not to declare an interim dividend for the six months
ended 30 September 2017 (Six months ended 30 September 2016: ¥0.09 per
share); and•The Group operated 54 halls as at 30 September 2017.
Translated into Hong Kong dollar at the rate of ¥14.86 to HK$1.00, the exchange rate prevailingon 29 September 2017 (i.e. the last business day in September 2017).

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”) would like to announce the unaudited condensed
consolidated results of the Company and its subsidiaries (the “Group”) for the six
months ended 30 September 2017 together with the comparative figures for the six
months ended 30 September 2016 as follows:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended
30 September
2017
2016
Note
¥ million¥ million(Unaudited) (Unaudited)
Revenue

4

13,108

14,847

Other income
Other losses, net
Hall operating expenses
Administrative and other operating expenses

5
5
6
6

323
(1)
(11,478)(1,824)421(116)(12,000)(2,280)Operating profit

128

872

Finance income
Finance costs

25
(257)

27
(323)

7

(232)

(296)

8

(104)
(117)

576
(213)

(221)

363

(0.18)

0.30

Other comprehensive loss
Change in value of financial assets through othercomprehensive  income

(88)

(37)

Total comprehensive (loss)/income for the period
attributable to the shareholders of
the Company

(309)

326

Finance costs, net(Loss)/profit before income tax
Income tax expense(Loss)/profit for the period attributable toshareholders of the Company(Loss)/earnings per share for (loss)/profit
attributable to shareholders of the Company— Basic and diluted (expressed in Japanese Yen
per share)–2–

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–3–

30 September
2017
Note
¥ million(Unaudited)

31 March2017¥ million(Audited)

26,053
671
166
3,780

26,406
678
182
3,866

52

104

1,084
1,728
41

1,210
1,656
35

33,575

34,137

15
54
1,220
50
232
14,152

20
88
1,457
55
252
13,404

15,723

15,27649,29849,413

11
11
11

12

30 September
2017
Note
¥ million(Unaudited)

31 March2017¥ million(Audited)

EQUITY
Equity attributable to shareholdersof the Company
Share capital
Reserves

3,000
24,1543,000
24,499Non-controlling interest

27,154
5

27,499–Total equity

27,15927,499

8,440
3,603
2,018
10

8,656
4,048
1,989
11

14,071

14,704

251
3,096
1,039
3,681
1

123
2,394
1,160
3,532
1

8,068

7,210

Total liabilities

22,13921,914

Total equity and liabilities

49,29849,413

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

13
14
15

–4–

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.
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
2017 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 2017, 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 2017, as described in those annual financial
statements.
The following new standards and amendments have been issued and effective for annual periods
beginning on 1 April 2017 with no impact on the Group’s results of operations and financial
positions:
Amendment to IAS 12
Amendment to IAS 7
Amendment to IFRS 12

Income tax
Statement of cash flows
Disclosure of interest in other entities

There are no other standards or amendments that are effective for the first time for the six months
ended 30 September 2017 that could be expected to have a material impact on this Group.

–5–

4

REVENUE AND SEGMENT INFORMATION(a)

RevenueSix months ended
30 September
2017
2016
¥ million¥ million(Unaudited)(Unaudited)(b)

Revenue
Gross pay-ins
Less: gross pay-outs

70,236(57,560)

74,057(59,617)

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

12,676272
83
77

14,440295
82
30

13,108

14,847

Segment 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 two reportable segments based on the types of services, namely (i)pachinko and pachislot hall operations and (ii) 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, long-term bankdeposits, bank deposits with maturity 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 through profit or loss and financial assets at fair value through othercomprehensive 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.

–6–

The segment information provided to the executive directors for the six months ended 30
September 2017 and 2016 are as follows:
Six months ended 30 September 2017
Pachinko andpachislot halloperations
OthersTotal¥ million¥ million¥ million(Unaudited) (Unaudited) (Unaudited)
Segment revenue from external customers
Segment results
Corporate expenses

12,948160

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 expenses
Finance income
Finance costs
Capital expenditures(1,124)
25
(257)
693

(19)
–
–
74

(1,143)
25
(257)
767

Six months ended 30 September 2016
Pachinko andpachislot halloperations
OthersTotal¥ million¥ million¥ million(Unaudited)(Unaudited)(Unaudited)
Segment revenue from external customers

14,735112

14,847

Segment results
Corporate expenses

1,004

(38)

966
(390)

Profit before income tax
Income tax expense

576
(213)

Profit for the period

363

Other segment items
Depreciation and amortisation expenses
Finance income
Finance costs
Capital expenditures–7–(1,229)
27
(323)
229

(11)
–
–
46

(1,240)
27
(323)
275

The segment assets as at 30 September 2017 and 31 March 2017 are as follows:

As at 30 September 2017
Segment assets (Unaudited)
Unallocated assets
Deferred income tax assets

Pachinko andpachislot halloperations¥ million

Others¥ million

Total¥ million

39,005750

39,755
7,815
1,728

Total assets

49,298As at 31 March 2017
Segment assets (Audited)
Unallocated assets
Deferred income tax assets

40,437636

41,0736,684
1,656
49,413

Total assets

No single external customer contributed more than 10% revenue to the Group’s revenue for thesix months ended 30 September 2017 and 2016.
The Group is domiciled in Japan and all non-current assets of the Group as at 30 September
2017 and 31 March 2017 are located in Japan.
5

OTHER INCOME AND OTHER LOSSES, NET
Six months ended
30 September
2017
2016
¥ million¥ million(Unaudited)(Unaudited)
Other income
Rental income
Income from expired IC and membership cards
Dividend income
Compensation and subsidies
Income from scrap sales of used pachinko and pachislot machines
OthersOther losses, net
Loss on disposal of financial assets at fair value through profit or loss
Gain/(loss) on fair value for interest rate swaps
Loss on disposal of property, plant and equipment
Net exchange gain/(loss)

–8–

74
16
30
–
191
12

71
17
30
2
280
21

323

421

(2)
1
(1)
1

–
(8)
(13)
(95)

(1)

(116)

6

OPERATING PROFIT
Operating profit is stated after charging the following:
Six months ended
30 September
2017
2016
¥ 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
Provision for impairment loss on property, plant and equipment
Pachinko and pachislot machines expenses (Note)

2,588
783
1,348
1,117
10
16
–
4,339

2,615
790
1,444
1,213
10
17
197
4,245

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.
7

FINANCE COSTS, NET
Six months ended
30 September
2017
2016
¥ million¥ million(Unaudited)(Unaudited)
Finance income
Bank interest income
Other interest income

Finance costs
Bank borrowings
Bond interest expense
Obligations under finance leases
Provision for unwinding discountFinance costs, net

–9–

1
24

1
26

25

27

(81)
–
(120)
(56)

(130)
(1)
(147)
(45)

(257)

(323)

(232)

(296)

8

INCOME TAX EXPENSE
Six months ended
30 September
2017
2016
¥ million¥ million(Unaudited)(Unaudited)
Current tax— Japan corporate income tax
Deferred income tax

151
(34)

168
45

117

213

Japan corporate income tax has been calculated on the estimated assessable profit for the six
months ended 30 September 2017 and 2016 at the rates of taxation prevailing in Japan in which theGroup operates.
No provision for Hong Kong profits tax has been made for the six months ended 30 September 2017and 2016 as the Group did not generate any assessable profits arising in Hong Kong during both
periods.
9(LOSS)/EARNINGS PER SHARE
Basic (loss)/earnings per share is calculated by dividing the (loss)/profit attributable to shareholdersof the Company by the weighted average number of ordinary shares in issue during the six months
ended 30 September 2017 and 2016.
Six months ended
30 September
2017
2016
(Unaudited)(Unaudited)(Loss)/profit attributable to shareholders of the Company (¥ million)

(221)

363

Weighted average number of shares for the purpose of calculating
basic (loss)/earnings per share (thousands)

1,195,850

1,195,850(0.18)

0.30

Basic and diluted (loss)/earnings per share (Japanese Yen)

Diluted (loss)/earnings per share is the same as basic (loss)/earnings per share as there was nopotential dilutive shares during the six months ended 30 September 2017 and 2016.
10

DIVIDENDS
During  the six months ended 30 September 2017, the Company paid dividend of ¥36 million (¥0.03
per ordinary share) to their shareholders in respect of the year ended 31 March 2017.
The Board has resolved not to declare an interim dividend for the six months ended 30 September
2017 (Six months ended 30 September 2016: ¥0.09 per share).

– 10 –

11

PROPERTY, PLANT AND EQUIPMENT, INVESTMENT PROPERTIES AND INTANGIBLE ASSETS
During the six months ended 30 September 2017, the Group incurred expenditures of approximately¥764 million and ¥3 million for property, plant and equipment and investment properties, respectively(Six months ended 30 September 2016: ¥272 million and ¥3 million for property, plant andequipment and intangible assets, respectively).
No impairment loss for property, plant and equipment was incurred by the Group for the six months
ended 30 September 2017 (Six months ended 30 September 2016: ¥197 million).
During the six months ended 30 September 2017, the net book amounts of disposed property, plantand equipment amounted to approximately ¥1 million (Six months ended 30 September 2016: ¥13
million). During the six months ended 30 September 2017, there was no disposal of intangible assets
and investment properties (Six months ended 30 September 2016: Nil).

12

TRADE RECEIVABLES
30 September
2017¥ million(Unaudited)

31 March2017¥ million(Audited)

54

88

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

30 September
2017¥ million(Unaudited)

31 March2017¥ million(Audited)

54

88

As at 30 September 2017 and 31 March 2017, no trade receivables were past due or impaired.

– 11 –

13

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

Less than 30 days
31–90 days

14

30 September
2017¥ million(Unaudited)

31 March2017¥ million(Audited)

84
167

42
81

251

123

30 September
2017¥ million(Unaudited)

31 March2017¥ million(Audited)

1,786
6,654

1,922
6,734

8,440

8,656

684
2,412

939
1,455

3,096

2,394

11,536

11,050

BORROWINGS

Non-current portion
Bank loans
Syndicated loans

Current portion
Bank loans
Syndicated loans

Total borrowings– 12 –

15

OBLIGATIONS UNDER FINANCE LEASES
30 September
2017¥ million(Unaudited)

31 March2017¥ 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

1,222
889
1,433
2,121

1,364
999
1,709
2,264

Future finance charges on finance leases

5,665(1,023)

6,336(1,128)Present values of finance lease liabilities

4,642

5,208

30 September
2017¥ million(Unaudited)

31 March2017¥ 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

1,039
741
1,121
1,741

1,160
835
1,371
1,842

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

4,642(1,039)5,208(1,160)Non-current obligations under finance leases

3,603

4,048

The present values of finance lease liabilities are as below:

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

SUBSEQUENT EVENT
On 31 October 2017, the Company entered into the sales and purchase agreement with all theexisting shareholders of Dream Games Singapore Pte. Ltd (“Dream Games”) to purchase 100% of
equity interest in Dream Games, a company engaged in the operation of entertainment andamusement facilities in Cambodia and Vietnam. The Company has also agreed to provide fund toDream Games to repay a shareholder loan. On 20 November 2017, the acquisition is completed at
an estimated cash consideration of approximately ¥1.87 billion, which is subject to adjustment within
60 business days from the completion date.

– 13 –

MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS REVIEW
Pachinko industry continues to be severe following the effect of new regulations
imposed by pachinko industry associations which require pachinko operators to replacepachinko machines of higher gaming element with pachinko machines of lower gaming
element, which attracts less hall traffic. For the six months ended 30 September 2017,
the Group’s gross pay-ins from pachinko and pachislot business amounted to ¥70,236
million, comprising revenue from suburban halls of ¥66,729 million and urban halls of¥3,507 million, representing a decrease of 5.3% and 2.1%, respectively, as comparedto same period in 2016. The Group experienced an adverse financial results with loss
attributable to shareholders of ¥221 million for the six months ended 30 September
2017 as compared to profit attributable to shareholders of ¥363 million for the same
period last year. The setback is attributable to the replacement of machines of highgaming element to low-gaming element which in turn generates less revenue than highgaming element machines; and strategic increase in pay-out ratio to trigger higher
customer visits while this would lower the gross profit in the short term.
Key performance indicators for the six months ended 30 September 2017 and 2016 aresummarized as below:
For the six months ended
30 September
2017
2016
¥ million¥ million
Gross pay-ins— Suburban halls— Urban halls

66,7293,507

70,474
3,583

Gross pay-outs— Suburban halls— Urban halls(54,803)(2,757)(56,817)(2,800)

Revenue from pachinko and pachislot business— Suburban halls— Urban halls

11,926750

13,657783

12,676

14,440

17.9%
21.4%

19.4%
21.9%

Revenue margin— Suburban halls— Urban halls– 14 –

For the six months ended
30 September
2017
2016
Machine utilisation rate
— Pachinko— Pachislot

23.6%
24.2%

23.9%
23.1%

Number of machines— Pachinko— Pachislot

18,293
10,104

18,441
10,35528,397

28,796

47
7

48
7

54

55

(1.7%)(0.18)

2.4%
0.30

Number of halls— Suburban halls— Urban halls

Net (loss)/profit margin(Loss)/earnings per share (in ¥)CHALLENGES FACED AND STRATEGIES TAKEN

Apart from the market downturn and the change in pachinko regulations, the passageof the “Act on the Promotion of the Development of Integrated Resort Areas” (the “IR
Promotion Act” or the “Act”) also impacts the Group.
With the passage of the “IR Promotion Act” in December 2016, establishment ofcasinos resorts in Japan becomes legitimate. Despite the Act creates an opportunity forpachinko operators to step in the casino resorts business, it is likely to trigger
discussion of the “gambling addiction problem” and strong calls for the pachinko
industry to take initiatives and actions to address the social issues, including othergambling activities currently exist.

– 15 –

To tackle with the challenges, the Group intends to steadily promote the developmentof a gaming environment that meets the needs of diversified gaming fans by lowering
the number of high playing cost machines in the halls; and further strengthen existinghalls to improve service flexibility that meet the regional needs. In particular, the Grouphas enhanced general prizes varieties, which is one of the major factors affecting
customers’ selection of halls, through expansion of online prize system which enables
customers to select general prizes from online shopping sites. Other measures include
revamping existing halls to offer more pleasant playing environment to visitors;
promoting “active local engine” marketing campaign to deepen the connection withlocal community, increase customer base, their recognition and loyalty; and continuing
optimising the pay-out ratio to drive in higher traffic. The Group frequently reviews theperformance of existing halls and necessary steps will be taken for halls identified asunderperformed. During the current period, the Group, after careful consideration of its
future profitability, decided to close down a fully impaired loss-making suburban hall in
Gunma area. The Group considered that its closure would allow better resource
allocation within the Group. To maintain stable operating cash flow without being
influenced by macro-economy, the Group will strengthen the revenue driving capabilityof existing halls, streamline the operation, and improve cost efficiency. The Group’s
priority is to build a system capable of responding promptly to changes in theenvironment and efficient decision making, enhancing authority delegation, andconstructing an effective and efficient organisational structure.
RECENT DEVELOPMENT AND FUTURE PLAN
Following the opening of the second Spanish restaurant in Nishi-Shinjuku in September
2016, on 5 August 2017, the third Spanish restaurant under the brand “LIZARRAN” wasopened in Shinbashi, a commercial area and business centre in Tokyo. The new outlet
has brought in ¥18 million revenue to the Group.
Listing on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) in 2015
allows the Group to gain a foothold into Asian market. The continuous economic growthin the Asian countries has increased the demand for leisure and entertainment activities,
which the Group considered it as a good opportunity for business expansion.
Subsequent to the six months ended 30 September 2017, on 31 October 2017, theCompany entered into the share sale and purchase agreement with the owners ofDream Games Singapore Pte. Ltd., a company engaged in the operation ofentertainment and amusement facilities in Cambodia and Vietnam, to purchase 100% of
equity interest of Dream Games Singapore Pte. Ltd. (the “Acquisition”). The Acquisition
represents a strategic opportunity for the Group to establish its leading presence ingaming and entertainment industry in Southeast Asia and broaden the types ofentertainment provided by the Group; and is in line with the overall business strategies
and the expansion plan of the Group to diversify income source. The Acquisition wascompleted on 20 November 2017 at an estimated cash consideration of ¥1.87 billion
which the consideration may subject to further adjustment. The management isconvinced that its profound experience in pachinko operation will prove to be useful inmanaging this new gaming business; and in return, bringing in new revenue andenhancing shareholders’ investment return.
Apart from securing business profits, the Group is endeavour to create mechanisms inorder to establish an organisation that upholds the corporate value — not only in themedium- to long-term, but for the future as well.
– 16 –

FINANCIAL REVIEW
Gross pay-ins
Gross pay-ins recorded a decrease of ¥3,821 million, or 5.2%, from ¥74,057 million forthe six months ended 30 September 2016 to ¥70,236 million for the same period incurrent year. The decline was due to the change in regulations of pachinko industry
associations which require pachinko operators to replace higher gaming element
pachinko machines with machines of lower gaming element, which attracted less halltraffic.
Gross pay-outs
Gross pay-outs, being the aggregate cost of G-prizes and general prizes exchanged bycustomers, dropped by ¥2,057 million, or 3.5%, from ¥59,617 million for the six months
ended 30 September 2016 to ¥57,560 million for the same period in 2017. The drop
generally mirrored the decline in gross pay-ins.
Revenue and revenue margin from pachinko and pachislot business
Revenue from pachinko and pachislot business declined from ¥14,440 million for the six
months ended 30 September 2016 to ¥12,676 million for the same period in current
year. The plunge in revenue by ¥1,764 million was primarily due to shrinkage ofcustomer base as discussed above; and the closure of 1 suburban hall during thecurrent period as discussed under “Business Review”.
The revenue margin decreased by 1.5% from 19.5% for the six months ended 30
September 2016 to 18.0% for the same period in current year. The drop in revenue
margin was due to increase in pay-out ratio to boost up customer visits which, in the
short term, lowered the revenue margin.
Other revenue
Other revenue represents incomes from vending machines, hotel and restaurant
operations.
Vending machine income amounted to ¥272 million for the six months ended 30
September 2017. The slight decrease of ¥23 million as compared to ¥295 million for thesame period in 2016 was resulted from the drop in customer visits.
Income from hotel operations amounted to ¥83 million for the six months ended 30
September 2017 with the average occupancy rate of 77.5%. Income derived from hotel
operation remained at similar level as that for the six months ended 30 September 2016of ¥82 million.
Revenue from restaurant under the brand “LIZARRAN” amounted to ¥77 million for thesix months ended 30 September 2017. The surge of ¥47 million as compared to thesame period in 2016 is mainly attributable to the opening of the second Spanish
restaurant in September 2016 which generated addition revenue.
– 17 –

Hall operating expenses
Hall operating expenses decreased by ¥522 million, or 4.4%, from ¥12,000 million forthe six months ended 30 September 2016 to ¥11,478 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 ¥4,339
million, ¥2,588 million and ¥1,307 million, respectively, for the six months ended 30
September 2017 (30 September 2016: ¥4,245 million, ¥2,615 million and ¥1,382
million, respectively).
The decline in hall operating expenses is mainly resulted from (i) the closure of a
suburban hall in September 2016 which its related cost was not incurred in current
period; (ii) the renewal of tenancy agreements for several halls at a lower rental charge;
and (iii) the carrying out of large scale of repairs and maintenance during the period
ended 30 September 2016 but the same was not incurred in current period.
Administrative and other operating expenses
Administrative and other operating expenses dropped by ¥456 million, or 20.0% from
¥2,280 million for the six months ended 30 September 2016 to ¥1,824 million for thesame period in 2017. The decrease in expenses is due to impairment loss of ¥197
million which was recognised for the six months ended 30 September 2016 in relation
to the loss-making suburban hall which was closed during the current period while nosuch loss was recognised in current period; and tighten cost control measures imposed
enabling a higher cost saving.
Finance costs
Finance costs, net recorded a decrease of ¥64 million, or 21.6%, from ¥296 million forthe six months ended 30 September 2016 to ¥232 million for the same period in 2017.
The drop is resulted from the decrease in total borrowings for the six months ended 30
September 2017 as compared to the same period in 2016.
(Loss)/profit attributable to shareholders of the Company, basic (loss)/earnings
per share and dividend
Loss attributable to shareholders of the Company of ¥221 million was recorded for thesix months ended 30 September 2017, as compared to the profit attributable toshareholders of ¥363 million for the six months ended 30 September 2016. The
turnaround from profit to loss was mainly due to the drop in gross pay-ins by 5.2%; andincrease in pay-out ratio which lower the profit margin in the short term.
Basic loss per share was ¥0.18 (basic earnings per share for the six months ended 30
September 2016: ¥0.30). The Board has resolved not to declare an interim dividend forthe six months ended 30 September 2017 (30 September 2016: ¥0.09 per share).

– 18 –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.
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 2017 and 31 March 2017,and operating cash flows before movements in working capital of the Group for the six
months ended 30 September 2017 and 2016, respectively:

Cash and cash equivalents
Bank deposits

Bank loans
Syndicated loans
Obligations under finance leases

Working capital
Total equity
Gearing ratio– 19 –

As at
30 September
2017¥ million

As at
31 March2017¥ million

14,152273

13,404287

14,425

13,691

2,470
9,066
4,642

2,860
8,190
5,208

16,17816,258

7,655
27,15959.6﹪

8,066
27,49959.1%

For the period ended
30 September
2017
2016
¥ million¥ million
Operating cash flows before movements
in working capital

1,246

2,299

Net current assets of the Group totalled ¥7,655 million as at 30 September 2017 (31March 2017: ¥8,066 million), and current ratio was 1.95 as at 30 September 2017 (31March 2017: 2.12). As at 30 September 2017, there were cash and cash equivalents of¥14,152 million (31 March 2017: ¥13,404 million), in which ¥13,163 million was
denominated in Japanese Yen, ¥342 million was denominated in United States dollar
and ¥647 million was denominated in Hong Kong dollar. The Group had totalborrowings of ¥16,178 million as at 30 September 2017 (31 March 2017: ¥16,258
million). Current portion of borrowings and current portion of obligations under financeleases amounted to ¥4,135 million as at 30 September 2017 (31 March 2017: ¥3,554
million).
The Group’s bank borrowings during the current period comprised bank loans andsyndicated loans. As at 30 September 2017, the total bank borrowings amounted to¥11,536 million (31 March 2017: ¥11,050 million), with average effective interest rates
on bank borrowings ranged from 1.06% to 1.72% (31 March 2017: 1.1% to 1.8%) per
annum. Approximately 5.8% of bank borrowings as at 30 September 2017 were fixed
rate borrowings.
HEDGING OF FLOATING RATE BORROWINGSAs at 30 September 2017, 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 enable the Group to reduce the volatility in the amount of interest
being paid. For the six months ended 30 September 2017, the gain on fair value forinterest rate swap contracts amounted to ¥1 million.
The Group did not carry out any foreign currency investment and its debts were all
denominated in Japanese Yen as at 30 September 2017. Following the Acquisition, as
the functional currency of certain subsidiaries are different from the Company, theGroup will be exposed to foreign exchange risk arising from such exposure, namely in
Singapore Dollar, Vietnamese Dong and Cambodian Riel against Japanese Yen. The
management is assessing the significance of the foreign currency exposures faced by
the Group and will consider adopting appropriate measures to mitigate the risk,
including but not limited to entering into currency hedges.

– 20 –

GEARING RATIOThe gearing ratio, defined as the aggregate of interest-bearing loans and obligations
under finance leases, divided by total equity, was 59.6% as at 30 September 2017 (31March 2017: 59.1%). The increase of 0.5% as compared with that of the year ended 31
March 2017 was mainly due to decrease of total equity of ¥340 million, netted withdecrease of total borrowings of ¥80 million.
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 operations. The table below shows a breakdown of the capital expenditure for theindicated periods:

Property, plant and equipment
Others

As at
30 September
2017¥ million

As at
31 March2017¥ million

764
3

653
5

767

658

CHARGES ON ASSETS
As at 30 September 2017, the carrying values of charged assets were as below:
2017¥ million
Property, plant and equipment
Investment properties
Deposits and other receivables

8,621
671
557
9,849

CONTINGENT LIABILITIESThe Group did not have any material contingent liabilities as at 30 September 2017 and
31 March 2017.

– 21 –

SIGNIFICANT INVESTMENTS, MATERIAL ACQUISITIONS AND DISPOSALS OF
SUBSIDIARIES, AND FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITALASSETS
During the six months ended 30 September 2017, 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 2017, the Group had 1,487 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 AND OTHER INFORMATION
During the six month ended 30 September 2017, 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.
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 directorsof the Company (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 the interests of our Company and ourShareholders as a whole.

– 22 –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 2017.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIESThe Company did not redeem any of its listed securities during the six months ended 30
September 2017. 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
2017.
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 2017 is set out below:•

Mr. Masaharu TOGO retired as the Independent Non-executive Director with effectfrom 29 June 2017.

USE OF NET PROCEEDS FROM LISTING
The net proceeds from the initial public offering in April 2015 amounted to approximately
HK$339 million. As at 30 September 2017, all the net proceeds were utilised according
to the originally planned purposes as set out in the Company’s prospectus dated 24
March 2015.
INTERIM DIVIDENDThe Board has resolved not to declare an interim dividend for the six months ended 30
September 2017 (30 September 2016: ¥0.09 per share).
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
2017 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 2017 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”.

– 23 –

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 2017 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, 24 November 2017
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, Norio NAKAYAMA, Michio
MINAKATA and Yoshihiro KOIZUMI.
*

for identification purpose only

– 24 –