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 2020
RESULTS HIGHLIGHTS

#

*

•

Gross pay-ins were ¥42,082 million (or HK$3,083 million#), recording a decreaseof 40.5% as compared with the same period last year;•

Revenue was ¥8,302 million (or HK$608 million#), recording a decrease of 42.3%
as compared with the same period last year;•

Loss before income tax was ¥1,738 million (or HK$127 million #), recording adecrease of ¥2,631 million (or HK$193 million) as compared with the same
period last year;•

Loss for the period attributable to shareholders of the Company was ¥1,648
million (or HK$121 million#), recording a decrease of ¥2,144 million (or HK$157
million) as compared with the same period last year;•

Basic loss per share of the Company was ¥1.38 (or HK$0.10 # ) (2019: basic
earnings per share was ¥0.41);•

The Board has resolved not to declare an interim dividend for the six months
ended 30 September 2020 (Six months ended 30 September 2019: ¥0.10 per
share); and•The Group operated 53 halls as at 30 September 2020.
Translated into Hong Kong dollar at the rate of ¥13.65 to HK$1.00, the exchange rate prevailingon 30 September 2020 (i.e. the last business day in September 2020).

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 2020 together with the comparative figures for the six
months ended 30 September 2019 as follows:
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Note

Six months ended
30 September
2020
2019
¥ million¥ million(Unaudited)(Unaudited)

Revenue

4

8,302

14,391Other income
Other gains/(losses), net
Hall operating expenses
Administrative and other operating expenses
Impairment loss on loan to an associate

5
5
6
6

392
137
(7,950)(1,679)
(271)

441
(52)
(10,850)(2,348)–(1,069)

1,582

47
(716)

31
(720)

7

(669)

(689)

8

(1,738)
(14)

893
(516)

(Loss)/profit for the period(1,752)377(Loss)/profit for the period attributable to:
Owners of the Company
Non-controlling interest(1,648)
(104)

496
(119)

(1,752)

377

Operating (loss)/profit
Finance income
Finance costs
Finance costs, net(Loss)/profit before income tax
Income tax expense

–2–

Note

Other comprehensive (loss)/income
Items that have been reclassified or may besubsequently reclassified to profit or loss
Currency translation differences
Items that will not be reclassified to profit or loss
Change in value of financial assets throughother comprehensive income

Six months ended
30 September
2020
2019
¥ million¥ million(Unaudited)(Unaudited)

(26)

(20)

24

(124)

Total comprehensive (loss)/income
for the period(1,754)233

Total comprehensive (loss)/income
attributable to:
Owners of the Company
Non-controlling interest(1,650)
(104)

351
(118)

(1,754)233(1.38)

0.41(Loss)/earnings per share for (loss)/profit
attributable to owners of the Company— Basic and diluted (expressed in ¥ per share)–3–9CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITIONASSETS
Non-current assets
Property, plant and equipment
Right-of-use assets
Investment properties
Intangible assets
Prepayments, deposits and other receivables
Interest in an associate
Financial assets at fair value through othercomprehensive income
Deferred income tax assets

Current assets
Inventories
Trade receivables
Prepayments, deposits and other receivables
Financial assets at fair value through profit or loss
Bank deposits with maturity over 3 months
Cash and cash equivalents

Assets classified as held for sales

Total assets–4–

30 September
2020
Note
¥ million(Unaudited)

31 March2020¥ million(Audited)

21,85331,902
620
1,562
4,826
–

22,25732,072
630
1,601
5,119
–

600
2,807

565
2,822

64,17065,066

114
92
1,208
104
75
15,865

40
48
1,026
100
750
14,12817,45810

16,092–

17,46816,092

81,63881,158

11
12
11
11

13

30 September
2020
Note
¥ million(Unaudited)

31 March2020¥ million(Audited)

EQUITY
Equity attributable to shareholdersof the Company
Share capital
Reserves

3,000
21,5703,000
23,220Non-controlling interest

24,570(525)

26,220(421)

Total equity

24,04525,7998,660
31,726
2,260
22

9,853
32,0352,270
2242,66844,180

106
8,001
2,910
3,297
4
607

114
3,233
2,542
4,404
4
882

14,925

11,179Total liabilities

57,59355,359Total equity and liabilities

81,63881,158LIABILITIES
Non-current liabilities
Borrowings
Lease liabilities
Provisions and other payables
Derivative financial instruments

15
12

Current liabilities
Trade payables
Borrowings
Lease liabilities
Accruals, provisions and other payables
Derivative financial instruments
Current income tax liabilities

14
15
12

–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 (together, the“Group”) are principally engaged in pachinko and pachislot hall operations, hotel and restaurant
operations in Japan; amusement arcade operations in Southeast Asian countries; and restaurant
operations in China. The Company listed on the Main Board of The Stock Exchange of Hong Kong
Limited.
This condensed consolidated interim financial information is presented in millions of Japanese Yen(“¥”), unless otherwise stated.
This condensed consolidated interim financial information was approved for issue on 20 November
2020.

2

BASIS OF PREPARATIONThis condensed consolidated interim financial information for the six months ended 30 September
2020 has 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 does not include all the notes of the typenormally included in an annual financial report. Accordingly, this condensed consolidated interim
financial information should be read in conjunction with the annual financial statements for the year
ended 31 March 2020, which have been prepared in accordance with International Financial
Reporting Standards (“IFRSs”).

3

ACCOUNTING POLICIESExcept as described below, the accounting policies adopted are consistent with those of the annual
financial statements for the year ended 31 March 2020, as described in the annual financial
statements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable toexpected total annual earnings.
(a)Amendments to standards adopted by the GroupThe following amendments to standards have been issued and are effective for annual periods
beginning on 1 April 2020:
Amendments to IFRS 3
Amendments to IAS 1 and IAS 8
Amendments to IAS 39, IFRS 7 and IFRS 9
Conceptual Framework for Financial
Reporting 2018

Definition of a Business
Definition of Material
Hedging Accounting
Revised Conceptual Framework for
Financial Reporting

The adoption of the amendments to standards did not have any material impact on the Group’s
accounting policies.

–6–

(b)

New and amended standards, improvements and interpretations to existing standards(collectively, the “Amendments”) not yet adopted by the Group
Effective foraccounting
periods
beginningon or after
Amendments to IFRS 16
IFRS 17
Amendments to IFRS 3
Amendments to IAS 16
Amendments to IAS37
Annual improvements to
IFRSs 2018-2020
Amendments to IAS 1
Amendments to IFRS 10
and IAS 28

COVID-19 Related Rent Concession
Insurance Contracts
Update reference to conceptual framework
Proceeds before intended use
Onerous contracts — cost of fulfillinga contract
Amendments to IFRS 1, IFRS 9, IFRS 16
and IAS 41
Classification of Liabilities as Current or
Non-current
Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture

1 June 2020
1 January 2021
1 January 2022
1 January 2022
1 January 2022
1 January 2022
1 January 2023
To be determined

The Group is currently assessing the impact of the adoption of these Amendments and is of theview that they would not have a material impact on the Group’s results of operations andfinancial position.
4

REVENUE AND SEGMENT INFORMATION(a)

RevenueSix months ended
30 September
2020
2019
¥ million¥ million(Unaudited)(Unaudited)
Revenue
Gross pay-ins
Less: gross pay-outs
Revenue from pachinko and pachislot hall business
Revenue from amusement arcades
Vending machine income
Revenue from hotel operation
Revenue from restaurant operations–7–

42,082(34,598)

70,770(57,993)

7,484
526
150
20
122

12,777
901
245
82
386

8,302

14,391

(b)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 (loss)/profit before income tax before unallocated corporate
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.
During the year ended 31 March 2020, management had changed its internal performance
review to align more closely with the Group’s strategic decision and development of which theprevious operating segment of “others” was separated into two operating segments, namely“other operations”, representing hotel and restaurant operations in Japan and “restaurant
operations” in China. The comparative amounts of the segment information for the six months
ended 30 September 2019 has been reclassified to reflect such change.
Management has identified four reportable segments based on the types of services, namely (i)pachinko and pachislot hall operations in Japan, (ii) amusement arcade operations in Vietnam
and Cambodia (collectively “Southeast Asia”), (iii) restaurant operations in China and (iv) otheroperations, representing hotel and restaurant operations in Japan.
Segment assets consist primarily of property, plant and equipment, investment properties,
right-of-use assets, intangible assets, inventories, trade receivables, prepayments, deposits andother receivables, bank deposits 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, financial assets at fair value through other comprehensive income andinterest in an associate.
Capital expenditure comprises additions to property, plant and equipment, right-of-use assets,
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 2020 and 2019 are as follows:

Pachinko andpachislot halloperationsin Japan¥ million
Segment revenue fromexternal customers
Over time
Segment results
Corporate expenses
Share of results of an associate

Six months ended 30 September 2020
Amusement
arcadeoperations
Restaurant
Other
in Southeast
operations
operations
Asia
in China
in Japan¥ million¥ million¥ million

Total¥ million

7,634

526

–

142

8,302

(1,161)

(87)

(65)

(113)

(1,426)(312)–

Loss before income tax
Income tax expense(1,738)(14)

Loss for the period(1,752)Other segment items
Depreciation and amortisation expenses
Impairment loss on right-of-use assets
Impairment loss on property,
plant and equipment
Finance income
Finance costs(2,151)
(8)

(225)
–

(10)
–

(10)
–

(2,396)
(8)

(172)
46
(668)

(17)
1
(48)

–
–
–

–
–
–

(189)
47
(716)

Pachinko andpachislot halloperationsin Japan¥ million
Segment revenue fromexternal customers
Over time
Segment results
Corporate expenses
Share of results of an associate

Six months ended 30 September 2019
Amusement
arcadeoperations
Restaurant
Other
in Southeast
operations
operations
Asia
in China
in Japan¥ million¥ million¥ million(Restated)(Restated)

Total¥ million

13,022

901

162

306

14,391

1,350

77

(212)

(23)

1,192
(299)
–

Profit before income tax
Income tax expense

893
(516)

Profit for the period

377

Other segment items
Depreciation and amortisation expenses
Finance income
Finance costs(2,448)
31
(674)

–9–

(207)
–
(46)

(7)
–
–

(36)
–
–

(2,698)31(720)

The segment assets as at 30 September 2020 and 31 March 2020 are as follows:

As at 30 September 2020
Segment assets
Unallocated assets
Deferred income tax assets

Pachinko andpachislot halloperationsin Japan¥ million

Amusement
arcadeoperations
in SoutheastAsia¥ million

Restaurant
operationsin China¥ million

Other
operationsin Japan¥ million

69,199

2,122

760

410

Total assets
Addition to non-current assets
other than financial instruments
and deferred tax assets

As at 31 March 2020
Segment assets
Unallocated assets
Deferred income tax assets

72,491
6,340
2,807
81,6382,099

160

Pachinko andpachislot halloperationsin Japan¥ million

Amusement
arcadeoperations
in SoutheastAsia¥ million

68,234

2,130

–

–

Restaurant
operationsin China¥ million(Restated)

Other
operationsin Japan¥ million(Restated)

970

696

2,259

Total
¥ million

72,0306,306
2,822
81,158

Total assets
Addition to non-current assets
other than financial instruments
and deferred tax assets

Total¥ million

1,221

580

469

229

2,499

The total non-current assets other than financial instruments and deferred tax assets, analysedby location of the assets, are as follows:Japan
Southeast Asia
China

As at
30 September
2020¥ million(Unaudited)

As at
31 March2020¥ million(Audited)

54,703
1,202
527

59,314
1,536
829

56,432

61,679No single external customer contributed more than 10% revenue to the Group’s revenue for thesix months ended 30 September 2020 and 2019.

– 10 –

5

OTHER INCOME AND OTHER GAINS/(LOSSES), NET
Six months ended
30 September
2020
2019
¥ million¥ million(Unaudited)(Unaudited)
Other income
Rental income
Income from expired IC and membership cards
Dividend income
Compensation and subsidies (Note)
Income from scrap sales of used pachinko and pachislot machines
OthersOther gains/(losses), net
Gain on release of lease liabilities
Gain on fair value of financial assets through profit or loss
Loss on fair value of derivative financial instruments
Loss on disposal of property, plant and equipment
Others

77
8
14
189
44
60

230
15
28
1
153
14

392

441

132
4
–
(16)
17

–
2
(1)
(54)
1

137

(52)

Note:
During the six months ended 30 September 2020, compensation and subsidies were mainly received
from the Government of Japan as a financial aid to Japanese corporations during the COVID-19
pandemic.
6

OPERATING (LOSS)/PROFIT
Operating (loss)/profit is stated after charging the following:
Six months ended
30 September
2020
2019
¥ million¥ million(Unaudited)(Unaudited)
Employee benefits expenses— Hall operations— Administrative and others
Short-term operating lease rental expense in respect ofland and buildings
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Depreciation of investment properties
Amortisation of intangible assets
Impairment loss on property, plant and equipment
Impairment loss on right-of-use assets
Pachinko and pachislot machines expenses (Note)– 11 –

2,456
570

2,785
896

76
997
1,363
10
26
189
8
1,533

150
1,325
1,329
10
34
–
–
3,222

Note:
Pachinko and pachislot machines are expensed off in the interim condensed consolidated statementof comprehensive income upon installation. The expected useful lives of these machines are lessthan one year.
7

FINANCE COSTS, NET
Six months ended
30 September
2020
2019
¥ million¥ million(Unaudited)(Unaudited)
Finance income
Bank interest income
Interest income from lease receivables
Other interest income

Finance costs
Bank borrowings
Lease liabilities
Provision for unwinding discountFinance costs, net
8

1
19
27

3
–
28

47

31

(108)
(498)
(110)

(105)
(566)
(49)

(716)

(720)

(669)

(689)

INCOME TAX EXPENSE
Six months ended
30 September
2020
2019
¥ million¥ million(Unaudited)(Unaudited)
Current tax— Japan— Other Asian countries

10
(3)

551
39

Deferred income tax

7
7

590
(74)

14

516

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 29.9%
for the six months ended 30 September 2020 (For the six months ended 30 September 2019:29.9%).

– 12 –

Taxation on other Asian countries profits has been calculated on the estimated (loss)/profit for theyear at the rate of taxation prevailing in the countries in which the Group operates. These rates range
from 17.0% to 20.0% for the six months ended 30 September 2020 (For the six months ended 30
September 2019: same).
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 2020 and 2019.
Six months ended
30 September
2020
2019
¥ million¥ million(Unaudited)(Unaudited)(Loss)/profit attributable to shareholders of the Company (¥ million)
Weighted average number of shares for the purpose of
calculating basic (loss)/earnings per share (thousands)
Basic and diluted (loss)/earnings per share (¥)(1,648)496

1,195,850

1,195,850(1.38)

0.41

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 2020 and 2019.
10

DIVIDENDS
For the six months ended 30 September 2019, the Company paid dividend of ¥84 million (¥0.07 perordinary share) to their shareholders in respect of the year ended 31 March 2019. No dividend was
paid during the six months ended 30 September 2020.
The Board has resolved not to declare an interim dividend for the six months ended 30 September
2020 (For the six months ended 30 September 2019: ¥0.10 per ordinary share).

11

PROPERTY, PLANT AND EQUIPMENT, INVESTMENT PROPERTIES AND INTANGIBLE ASSETS
During the six months ended 30 September 2020, the Group incurred expenditures of approximately¥812 million and ¥25 million for property, plant and equipment and intangible assets, respectively(For the six months ended 30 September 2019: ¥650 million and ¥50 million, respectively.)
During the six months ended 30 September 2020, the net book amounts of disposal of property,
plant and equipment amounted to approximately ¥32 million (For the six months ended 30
September 2019: ¥73 million for properties, plant and equipment). During the six months ended 30
September 2020, there was no disposal of intangible asset and investment property (For the six
months ended 30 September 2019: Nil).
As at 30 September 2020, property, plant and equipment and investment properties of ¥11,168
million and ¥620 million, respectively (31 March 2020: ¥10,475 million and ¥630 million), were
pledged to secure bank borrowings.

– 13 –

The Group carried out reviews of the recoverable amounts whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. The reviews were
performed at cash-generating unit (“CGU”) level, which is determined as each individual pachinko
and pachislot hall, a pachinko and pachislot hall with hotel business, restaurant and amusement
arcade.
For the six months ended 30 September 2020, in view that some of the CGUs have performed
below management’s expectation or were loss-making during resumption of operation after the
mandatory shutdown announced by local government, the directors have reviewed the recoverabilityof the relevant carrying amounts of these CGUs.
The recoverable amount of a CGU is determined based on the fair value less cost of disposal orvalue-in-use of calculation, whichever is higher. These calculations use pre-tax cash flow projections
over the CGUs useful lives which based on financial budgets approved by management covering athree-year period. Cash flows beyond the three-year period are extrapolated using the estimatedgrowth rates stated below. The key assumptions used in the value-in-use calculations for the six
months ended 30 September 2020 and 2019 are as follow:
Six months ended 30 September
2020
2019
Revenue
Revenue
growth rate Discount rate
growth rate Discount rate
Pachinko and pachislot hall operations
Amusement arcade operations

0%
0%

9%
19.7%

0%
N/A

8.5%
N/A

The discount rates applied by the Group are rates that reflect current market assessment of the timevalue of money and the risk specific to the CGUs. Revenue growth rate is based on past practices
and expectations on market and operational development.
The fair value less cost of disposal calculation is based on the valuation carried out by independent
professionally qualified valuers who hold recognised relevant professional qualifications and haverecent experience in the locations and segments of the properties valued. The valuations were
determined using the market approach, which largely used observable and unobservable inputs,
including unit price per square meter of sales comparable for land. The fair values of all CGUs
subject to fair value less cost of disposal calculation are within level 3 of the fair value hierarchy.
The Group’s finance department includes a team that reviews the valuations performed by the
independent valuer for financial reporting purposes. This team reports directly to the executive
directors. Discussions of valuation processes and results are held between the valuation team andvaluer at least annually.
For the six months ended 30 September 2020, as a result of the impairment review, impairment lossof approximately ¥189 million (For the six months ended 30 September 2019: Nil) has beenrecognised. No impairment loss for investment properties and intangible assets was incurred by theGroup for the six months ended 30 September 2020 (For the six months ended 30 September 2019:
Nil).
If the forecast discount rate was increased by 1.5%, with all other variables held constant, thechange of result would be insignificant.

– 14 –

12

LEASES
During the six months ended 30 September 2020, the Group entered into a number of leaseagreements for the use of equipment, staff quarters and vehicles, and therefore recognised the
additions of right-of-use assets of ¥1,013 million.
During the six months ended 30 September 2020, the Group received rent concessions in the formof a discount on fixed monthly rental payments during the period of severe social distancing andtravel restriction measures introduced to contain the spread of Coronavirus Disease 2019(“COVID-19”). The Group has not early adopted the amendment to IFRS 16 “COVID-19-related rent
concessions” and has accounted for the rent concessions as lease modifications.
For the six months ended 30 September 2020, as a result of the impairment review, impairment lossof approximately ¥8 million has been recognised on right-of-use assets.
Amounts recognised in the interim condensed consolidated statement of financial position are as
follows:

Right-of-use assets
Buildings
Leasehold improvement
Equipment and tools
VehiclesLease liabilities
Current
Non-current

13

30 September
2020¥ million(Unaudited)

31 March2020¥ million(Audited)

30,5981,198
55
51

30,565
1,438
69–

31,902

32,072

2,910
31,726

2,542
32,03534,636

34,57730 September
2020¥ million(Unaudited)

31 March2020¥ million(Audited)

92

48

TRADE RECEIVABLES

Trade receivables

Trade receivables represent commission income receivable from vending machines and income
receivables from hotel and restaurant operations. The credit terms granted by the Group generally
ranged from 0 to 30 days.

– 15 –

The ageing analysis of the trade receivables, based on invoice date, is as follows:

Less than 30 days
31 days to 90 days

14

30 September
2020¥ million(Unaudited)

31 March2020¥ million(Audited)

91
1

48
–

92

48

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

15

30 September
2020¥ million(Unaudited)

31 March2020¥ million(Audited)

12
91
3

114
–
–

106

114

30 September
2020¥ million(Unaudited)

31 March2020¥ million(Audited)

2,838
5,822

3,365
6,488

8,660

9,853

1,206
6,795

1,427
1,806

8,001

3,233

16,661

13,086

BORROWINGS

Non-current portion
Bank loans
Syndicated loans

Current portion
Bank loans
Syndicated loans

Total borrowings– 16 –

MANAGEMENT DISCUSSION AND ANALYSIS
BUSINESS OVERVIEW
Following the outbreak of Coronavirus Disease 2019 (“COVID-19”) starting in the
beginning of 2020, the global economy has experienced the deepest recession. Under
this circumstance, the Group’s performance was inevitably affected, not only locally inJapan, but also impacted the Group’s investments in Southeast Asia and China. As anaftermath, the revenue of the Group for the six months ended 30 September 2020
suffered from a steep fall by 42.3% from ¥14,391 million for the six months ended 30
September 2019 to ¥8,302 million in current period. The Group’s revenue margin was
shrunk by 0.3%, and the net margin changed from a profit margin of 2.6% for the six
months ended 30 September 2019 to a loss margin of 21.1% in current period, resulting
in a net loss attributable to owners of ¥1,648 million for current period as compared toa net profit attributable to owners of ¥496 million for the same period in 2019. The
Group had implemented various cost controls to minimise the impact of COVID-19
including control of labor costs, slow-down of pachinko machines replacement, freezing
recruitment and advertising activities. These measures led to a 27.0% decrease in costin 2020 as compared to the same period in 2019. As the development of COVID-19 isunpredictable, the Group remains high alert in response to the volatile market conditions
and adjusted its business strategies to maintain a stable sales turnover. Despite theforegoing, the Group maintains a healthy cash flow and financial position and has
sufficient cash to meet its business needs.
BUSINESS SEGMENT ANALYSIS
Pachinko business
The COVID-19 pandemic had further dampened the pachinko business which had
already been vulnerable. Under the state of emergency declaration, the government ofJapan requested citizens to self-isolate and avoid physical social interaction. Following
the government directive in April 2020, the Group temporarily suspended the operationof all pachinko halls. Although most of the halls were subsequently re-opened in late
May 2020, the customer recovery has yet to rebound to pre-pandemic level as the
pandemic deeply affected people’s consumption behaviour. This negative impact had
resulted in drastic drop in pachinko revenue from ¥12,777 million for the six months
ended 30 September 2019 to ¥7,484 million in current period. To strive for a fiscal
balance, various cost controls were executed by the management during the interim
period. These measures included control labor costs, slow-down the machine
replacement exercise, bargain for rental concession and minimise unnecessary
spending. Through these measures, hall expenses were dropped by 26.7% ascompared to the same period in 2019.

– 17 –

Amusement arcades businessDream Games has 10 outlets in Vietnam and 2 outlets in Cambodia, providing assorted
gaming facilities to kids and their families. The performance of this business segment
was seriously affected in the first quarter of this financial year as local governments
announced lockdown and social distancing restrictions in late March 2020. Revenue
generated from amusement arcades business recorded a 41.6% drop from ¥901 million
for the six months ended 30 September 2019 to ¥526 million in current period as aresult of the temporary closure of all outlets. Following the loosen of restrictions andresumption of business, Dream Games’s performance gradually recovered. Throughcontinue alliance with big and reputable shopping mall operator, Aeon, management isconfident to secure a stable business growth.
Restaurant business
The Group’s restaurant business comprises 3 franchised Spanish restaurants under thename “LIZZARAN” and 2 franchised cafés under the name “KOMEDA” which are all
located in Japan; and an array of Japanese restaurants named “YOKOCHO” in
Shenzhen Upper Hills commercial building in China. Food and beverage business
continued to be severe as social distancing and lockdown measures had refrained
people from dinning in. Though take-away service was provided by LIZZARAN, thenumber of patrons was low as take-away habit was less popular in Japan. A good sign
was that KOMEDA’s recovery was on track and rebounded to profit in June 2020.
Since the outbreak of COVID-19 in late December 2019 followed by the lockdown policy
in January 2020, YOKOCHO has suspended its operation. Resumption of business will
depend on the progress of facility enhancement carried out by the complex, though theGroup expects it will be reopened in the coming financial year.
PROSPECT AND FUTURE DEVELOPMENT
The business environment continues to be challenging as the pandemic is expected topersist and creates uncertainty. With over 60 years’ experience in pachinko industry,
the Group is resilient to market change, and is confident in achieving moderate recoveryof hall traffic through providing a variety of game machines, and ensuring a safe andcomfortable playing environment. In August 2020, a new hall equipped with over 1,000
game machines was opened in the Koriyama city, the main market of the Group,
allowing the Group to strengthen its market base and achieve competitive advantage.
Aligning with the Group’s medium to long-term business strategies, 5 loss-making
pachinko halls are scheduled to cease operation in the third quarter of this financial
year. Resources from these halls will be allocated to other areas. Through resources reallocation, the management believes this could create more value and deliver higher
returns to shareholders.

– 18 –

Outlets expansion and allying with large Japanese shopping mall developer continue tobe the main business strategies of the Group in its Southeast Asian investments. The
management is planning to open 2 new game centres in Vietnam in the second half of
this financial year. This not only will broaden the local market share, generating newrevenue, but also will strengthen Dream Games’s branch presence.
The concept of accommodating café inside the vicinity of pachinko hall has proven tobe successful as the two KOMEDA cafés continue to generate profits.
For eSports business, since the outbreak of COVID-19 and social distancing measures
imposed in Hong Kong, its operation was in a static position as majority of the offline
game events were put off with no schedule of re-opening. The Group is convinced thate-sports’ popularity would not ease, and the management is seeking every opportunity
in launching e-sports business in the domestic market.
In spite of the unpredictable development of the pandemic causing global economic
uncertainty, the Group is ready to confront every challenge and endeavor to promote
the Group’s motto — “Happy, Time, Creation”; bring joy to customers and establish arapport, long-term relationship with customers and business partners; and strive forhigher returns to shareholders.
FINANCIAL REVIEWRevenue from Pachinko and Pachislot Business
Revenue from pachinko and pachislot business is derived from gross pay-ins nettedwith gross pay-outs.
Revenue from pachinko and pachislot business recorded a drastic decrease of ¥5,293
million, or 41.4%, from ¥12,777 million for the six months ended 30 September 2019 to¥7,484 million for the same period in 2020. The plunge is due to the declaration of thestate of emergency by the government of Japan restricting social activities and peopleto-people contact to curb the spread of COVID-19. Following the state of emergency
declaration, all pachinko and pachislot halls of the Group were temporarily closed
between mid-April 2020 and late May 2020. Though the restriction was lifted
subsequently, customers had low intention to visit the pachinko halls during the
pandemic. These factors had drastically dampened the revenue for the six months
ended 30 September 2020.
Gross pay-ins
Gross pay-ins recorded a significant drop of ¥28,688 million, or 40.5%, from ¥70,770
million for the six months ended 30 September 2019 to ¥42,082 million for the same
period in current year.

– 19 –

Gross pay-outs
Gross pay-outs, being the aggregate cost of G-prizes and general prizes exchanged bycustomers, dropped by ¥23,395 million, or 40.3%, from ¥57,993 million for the six
months ended 30 September 2019 to ¥34,598 million for the same period in 2020
which corresponded to the decrease in gross pay-ins.
Revenue margin
The revenue margin declined by 0.3% from 18.1% for the six months ended 30
September 2019 to 17.8% for the same period in current year. The decline in revenue
margin was due to slight adjustment of pay-out ratio to stimulate customers’ visit.
Revenue from amusement arcade business
Revenue from amusement arcade business dropped from ¥901 million for the six
months ended 30 September 2019 to ¥526 million for the same period in 2020. The
amount comprised revenue derived from Vietnam and Cambodia amounting to ¥459
million and ¥67 million, respectively (30 September 2019: ¥707 million and ¥194 million,
respectively). The decrease in revenue is due to the lockdown and social distancing
measures imposed by local governments, causing temporary closure of game centres inVietnam and Cambodia for a month.
Other revenue
Other revenue represents incomes from vending machines, hotel and restaurant
operations.
Vending machine income amounted to ¥150 million for the six months ended 30
September 2020. The decrease of ¥95 million, or 38.8%, as compared to ¥245 million
for the six months ended 30 September 2019 was resulted from the negative impact of
COVID-19 as mentioned above.
Income from hotel operation amounted to ¥20 million for the six months ended 30
September 2020, recording a significant drop of ¥62 million, or 75.6%, as compared tothe six months ended 30 September 2019 of ¥82 million. The hit on hotel income iscaused by extremely low occupancy rate of 11% for the six months ended 30
September 2020 as compared to 75% in the same period in 2019, as hotel was closed
for two months during the early outbreak of COVID-19.
Revenue from restaurant operations amounted to ¥122 million for the six months ended
30 September 2020. The decline of ¥264 million as compared to the same period in2019 was resulted from the temporary suspension of business during the outbreak of
COVID-19.

– 20 –

Hall operating expenses
Hall operating expenses decreased by ¥2,900 million, or 26.7%, from ¥10,850 million
for the six months ended 30 September 2019 to ¥7,950 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 depreciation expenses, amounting to¥1,533 million, ¥2,456 million and ¥2,220 million, respectively, for the six months ended
30 September 2020 (30 September 2019: ¥3,222 million, ¥2,785 million and ¥2,265
million, respectively).
The decline in hall operating expenses was resulted from (i) less pachinko and pachislot
machines were purchased during the current period; (ii) cancellation of interim bonus forstaff; and (iii) decrease in variable costs such as repair and maintenance and travelling
expenses, as no business activity was carried out during the business suspension.
Administrative and other operating expenses
Administrative and other operating expenses decreased by ¥669 million, or 28.5% from
¥2,348 million for the six months ended 30 September 2019 to ¥1,679 million for thesame period in 2020. The decrease in expenses was attributable to the decrease in staff
and recruitment expenses and advertising expenses under the cost control measures.
Finance costs
Finance costs, net amounted to ¥669 million for the six months ended 30 September
2020 which was maintained at the similar level of ¥689 million for the same period in
2019.
(Loss)/profit attributable to shareholders of the Company, basic (loss)/earnings
per share and dividend
Loss attributable to shareholders of the Company of ¥1,648 million was recorded forthe six months ended 30 September 2020, as compared to profit attributable toshareholders of the Company of ¥496 million for the six months ended 30 September
2019. The turnaround from profit for the six months ended 30 September 2019 to loss
in the same period in 2020 was due to the significant drop in revenue caused by thenegative impact of COVID-19 pandemic.
Basic loss per share for the six months ended 30 September 2020 was ¥1.38 (basic
earnings per share for the six months ended 30 September 2019: ¥0.41). The Board
has resolved not to declare an interim dividend for the six months ended 30 September
2020 (30 September 2019: ¥0.10 per share).

– 21 –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 bank balances,borrowings, lease liabilities, working capital, total equity and gearing ratio of the Groupas at 30 September 2020 and 31 March 2020, and operating cash flows before
movements in working capital of the Group for the six months ended 30 September
2020 and 2019, respectively:

Cash and cash equivalents
Bank deposits with maturity over 3 months

Bank loans
Syndicated loans
Lease liabilities

Working capital (Note 1)
Total equity
Gearing ratio (Note 2)– 22 –

As at
30 September
2020¥ million

As at
31 March2020¥ million

15,86575

14,128750

15,94014,8784,044
12,617
34,636

4,792
8,294
34,57751,29747,663

2,543
24,045
1.5

4,913
25,7991.3

For the six months ended
30 September
2020
2019
¥ million¥ million
Operating cash flows before movements inworking capital

1,282

4,345

Note 1: Working capital being current assets less current liabilities.
Note 2: Gearing ratio is calculated as total borrowings less cash and cash equivalents divided by equity.

Net current assets of the Group totalled ¥2,543 million as at 30 September 2020 (31March 2020: ¥4,913 million), and current ratio was 1.17 as at 30 September 2020 (31March 2020: 1.44). As at 30 September 2020, there were cash and cash equivalents of¥15,865 million (31 March 2020: ¥14,128 million), in which ¥14,530 million was
denominated in Japanese Yen, ¥1,007 million was denominated in United States dollar,¥255 million was denominated in Hong Kong dollar and ¥73 million was denominated inother currencies. As at 30 September 2020, the Group had total borrowings of ¥51,297
million (31 March 2020: ¥47,663 million). Current portion of bank borrowings andcurrent portion of lease liabilities amounted to ¥10,911 million as at 30 September 2020
(31 March 2020: ¥5,775 million).
The Group’s bank borrowings during the current period comprised bank loans andsyndicated loans. As at 30 September 2020, the total bank borrowings amounted to¥16,661 million (31 March 2020: ¥13,086 million), with average effective interest rates
on bank borrowings ranged from 0.90% to 1.74% (31 March 2020: 1.08% to 1.80%)
per annum. Approximately 7.2% of bank borrowings as at 30 September 2020 were
fixed rate borrowings.
HEDGING OF FLOATING RATE BORROWINGS AND FOREIGN EXCHANGE
As at 30 September 2020, the Group had three floating to fixed interest rate swap
contracts with banks in Japan (i.e. the Group pays fixed interest rates and receives
interests at floating rate). These interest rate swap contracts were 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 2020, no gain or loss on fair value
for interest rate swap contracts was incurred.

– 23 –

The Group did not carry out significant foreign currency investment and its debts were
all denominated in Japanese Yen as at 30 September 2020. As the functional currencyof certain subsidiaries are different from the Company, the Group will be exposed toforeign exchange risk arising from such exposure, namely in Singapore Dollar,
Vietnamese Dong, Cambodian Riel and Renminbi 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.
GEARING RATIOThe gearing ratio, defined as the aggregate of interest-bearing loans and lease liabilities
less cash and cash equivalents, divided by total equity, was 1.5 as at 30 September
2020 (31 March 2020: 1.3).
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 maintenance of our pachinko and pachislot hall andamusement arcade operations. The table below shows a breakdown of the capital
expenditure for the indicated periods:

Property, plant and equipment
Right-of-use assets
Intangible assets

As at
30 September
2020¥ million

As at
31 March2020¥ million

812
1,013
–

1,473
963
63

1,825

2,499

CHARGES ON ASSETS
As at 30 September 2020 and 31 March 2020, the carrying values of charged assets
were as below:

Property, plant and equipment
Investment properties
Deposits and other receivables– 24 –

As at
30 September
2020¥ million

As at
31 March2020¥ million

11,168620
145

10,475630
178

11,933

11,283

CONTINGENT LIABILITIESThe Group did not have any material contingent liabilities as at 30 September 2020 and
31 March 2020.
SIGNIFICANT INVESTMENTS, MATERIAL ACQUISITIONS AND DISPOSALS OF
SUBSIDIARIES, AND FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITALASSETS
During the six months ended 30 September 2020, 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 2020, the Group had 1,870 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 months ended 30 September 2020, 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 directorsof the Company (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 our shareholders as a whole.

– 25 –

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 2020 was held on
29 July 2020 (the “2020 AGM”), while the notice for the 2020 AGM was despatched on
3 July 2020. 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 (the date of sending and thedate of the meeting shall not be included within this period) for AGM but the notice
period for the 2020 AGM was less than 20 clear business days before the 2020 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 2020 for the financial year ended 31 March 2020). Due to COVID-19, itis permitted by the Ministry of Justice of Japan to hold the 2020 AGM on a day after thedate specified in the Articles of Incorporation.
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 which accompanied the 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 2020.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIESThe Company did not redeem any of its listed securities during the six months ended 30
September 2020. Neither the Company nor any of its subsidiaries purchased or sold
any of the Company’s listed securities during the six months ended 30 September2020.

– 26 –

CHANGE 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 2020 is set out below:•

Mr. Akihito TANAKA has been appointed as an Independent Non-executive Director
with effect from 29 July 2020.

Save as disclosed above, there is no change in information of the Directors since thedate of the Company’s Annual Report 2020 which required to be disclosed pursuant toRule 13.51B(1) of the Listing Rules.
INTERIM DIVIDENDThe Board has resolved not to declare an interim dividend for the six months ended 30
September 2020 (30 September 2019: ¥0.10 per share).
REVIEW OF INTERIM RESULTS
The Audit Committee has reviewed the unaudited condensed consolidated interim
financial information and the Interim Report for the six months ended 30 September
2020 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 2020 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 2020 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
Chairman, Executive Director and Chief Executive Officer
Fukushima, Japan, 20 November 2020
As at the date of this announcement, the executive Directors are Hisanori TANIGUCHI,
Akinori OHISHI and Masataka WATANABE; the non-executive Director is Hiroshi
BANNAI; and the independent non-executive Directors are Michio MINAKATA, Yoshihiro
KOIZUMI, Kuraji KUTSUWATA and Akihito TANAKA.
*

for identification purpose only

– 27 –