Restar : 2Q FY2023 (Apr 2023 – Sep 2023) Consolidated Financial Summary

Note: This document is a translation of a part of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail.

Consolidated Financial Results

for the Six Months Ended September 30, 2023

[Japanese GAAP]

November 14, 2023

Company name: Restar Holdings Corporation

Stock exchange listing: Tokyo

Code number: 3156

URL: https://www.restargp.com/

Representative:

Tomoharu Asaka

Representative Director

Contact:

Atsuki Ishida

Corporate Officer

Phone: [phone]

Scheduled date of filing quarterly securities report: November 14, 2023

Scheduled date of commencing dividend payments: December 5, 2023

Availability of supplementary briefing material on quarterly financial results: Yes

Schedule of quarterly financial results briefing session: Yes

(Amounts of less than one million yen are rounded down.)

1. Consolidated Financial Results for the Six Months Ended September 30, 2023 (April 1, 2023 to September 30, 2023)

(1) Consolidated Operating Results

(% indicates changes from the previous corresponding period.)

Net sales

Operating profit

Ordinary profit

Profit attributable to

owners of parent

Six months ended

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

September 30, 2023

245,264

2.3

7,098

(16.0)

3,955

(53.3)

3,367

(27.0)

September 30, 2022

239,795

24.5

8,445

147.1

8,474

161.5

4,613

16.6

(Note) Comprehensive income:	Six months ended September 30, 2023:	¥	4,267	million	[ 11.7	%]
		Six months ended September 30, 2022:	¥	3,821	million	[ 12.2	%]
		Basic earnings	Diluted earnings per
		per share	share
Six months ended		Yen			Yen
September 30, 2023		111.99		111.22
September 30, 2022		153.45		152.41

(Note) At the end of the previous consolidated fiscal year, the Company finalized the provisional accounting treatment for business combinations, and the amounts for the six months ended September 30, 2023, are based on the amounts after reflecting the said revision.

(2) Consolidated Financial Position

	Total assets		Net assets	Capital adequacy ratio	Net assets per share
As of	Millions of yen		Millions of yen	%	Yen
September 30, 2023	286,282			88,575	28.7	2,736.94
March 31, 2023	269,427			85,095	30.0	2,686.31
(Reference) Equity: As of	September 30, 2023:	¥	82,294	million
As of	March 31, 2023:	¥	80,772	million

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2. Dividends

				Annual dividends
	1st	2nd	3rd		Year-end	Total
	quarter-end	quarter-end	quarter-end
	Yen		Yen	Yen		Yen	Yen
Fiscal year ended March 31, 2023	-		40.00	-		75.00	115.00
Fiscal year ending March 31, 2024	-		55.00
Fiscal year ending March 31, 2024				-		60.00	115.00
(Forecast)
(Note) Revision to the forecast for dividends announced most recently:	No

3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2024(April 1, 2023 to March 31, 2024)

(% indicates changes from the previous corresponding period.)

Net sales

Operating profit

Ordinary profit

Profit attributable to

Basic earnings

owners of parent

per share

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Yen

Full year

500,000

2.6

10,000

(30.7)

7,000

(41.9)

7,000

(1.2)

232.80

(Note) Revision to the financial results forecast announced most recently:

No

* Notes:

(1) Changes in significant subsidiaries during the six months ended September 30, 2023

(Changes in specified subsidiaries resulting in changes in scope of consolidation):

No

New

－

(Company name:

)

Exclusion:

－

(Company name:

)

(2) Accounting policies adopted specially for the preparation of quarterly consolidated financial statements:

No

1. Changes in accounting policies, changes in accounting estimates and retrospective restatement
2. 1. Changes in accounting policies due to the revision of accounting standards: No
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No
3. Total number of issued shares (common shares)
4. 1. Total number of issued shares at the end of the period (including treasury shares):

September 30, 2023:	30,072,643	shares
March 31, 2023:	30,072,643	shares
2) Number of treasury shares at the end of the period:
September 30, 2023:	4,636	shares
March 31, 2023:	4,568	shares

3) Average number of shares outstanding during the period:
Six months ended September 30, 2023:	30,068,039	shares
Six months ended September 30, 2022:	30,068,318	shares

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1. Qualitative Information on Quarterly Financial Results

(1) Explanation of Operating Results

Forward-looking statements in the text are based on judgments made as of the end of the second quarter of the current consolidated fiscal year.

The business merger with Lavinics Co., Ltd. on April 12, 2022, was accounted for on a provisional basis in the first half of the previous consolidated fiscal year. Since it was finalized at the end of the previous consolidated fiscal year, comparisons and analysis with the same period of the previous consolidated fiscal year use the amounts after the revision due to the finalization of the provisional accounting treatment.

During the first half of the fiscal year under review, the Japanese economy showed moderate improvement due to the new type of coronavirus infection, which became a category class 5, the further easing of restraints on the economy, and a recovery of inbound demand. However, the outlook for the economy remains uncertain, with price increases due to the ongoing depreciation of the yen and soaring energy and resource prices, as well as concerns about economic trends in China and prolonged monetary tightening in the United States.

Under these circumstances, the Company is working to strengthen its management foundation for a new business structure in April 2024 and beyond. In August 2023, the Company resolved to merge three companies, Restar Electronics Corporation, Restar Communications Corporation, and Vitec Enesta Co., Ltd., with the Company as the surviving company. Going forward, we will work to expand our business by optimally allocating management resources and promoting changes in our profit structure to strengthen the Group over the medium to long term.

In July 2023, we made AIT Japan Inc., a subsidiary of WPG Holdings Limited (headquarters: Taipei, Taiwan; "WPG"), a consolidated subsidiary of the Company (classified into Semiconductor and Electronic Components Business), aiming to strengthen the management foundations to meet diversifying customer needs and accelerate global expansion. In addition, for the purpose of expanding line cards and further strengthening our customer base, in September 2023 we entered into a share transfer agreement with TSUZUKI DENKI CO., LTD., to make four companies under TSUZUKI DENKI CO., LTD. -- TSUZUKI EMBEDDED SOLUTIONS CO., LTD., TSUZUKI DENSAN TRADING (SHANGHAI) CO., LTD., TSUZUKI DENSAN HONG KONG CO., LTD., and TSUZUKI DENSAN SINGAPORE PTE. LTD.

• wholly owned subsidiaries. We aim for further growth by leveraging the strengths of newly joining companies and demonstrating synergies with the Group.

(Overview of Consolidated Operating Results)

(millions of yen)	Six months ended	Six months ended	Change
September 30, 2022	September 30, 2023
Net sales	239,795	245,264	2.3%
Operating profit	8,445	7,098	(16.0)%
Ordinary profit	8,474	3,955	(53.3)%
Profit attributable to owners of	4,613	3,367	(27.0)%
parent

- Performance Highlights

Net sales increased in the first half of the fiscal year under review due to solid sales in the Procurement Business, the Environmental Energy Business and the Electronic Equipment Business, despite a decrease in sales in the Semiconductor and Electronic Components Business. Operating profit declined due to a decline in sales in the Devices Business, difference in exchange rate trends, inventory write- downs related to specific customers, allowance for doubtful accounts, and the absence of special demand from the same period of the previous year. As a result of recording of interest expenses due to rising interest rates, ordinary profit decreased, and profit attributable to owners of parent also decreased.

As a result, net sales for the first half of the fiscal year under review were ¥245,264 million, up 2.3% year-on-year, operating profit was ¥7,098 million, down 16.0% year-on-year, ordinary profit was ¥3,955 million, down 53.3% year-on-year, and profit attributable to owners of parent was ¥3,367 million, down 27.0% year-on-year.

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(Operating Results by Reportable Segment)

The Group has four reportable segments for the allocation of management resources and evaluation of business performance. These four segments are the Semiconductor and Electronic Components Business, the Procurement Business, the Electronic Equipment Business, and the Environmental Energy Business.

Effective from the first quarter of the fiscal year, the business segments to be included as reportable have been changed, and comparisons and analysis for the first quarter of the fiscal year are based on the new segments. The segment to which Vitec WPG Limited (located in Hong Kong) belongs has been changed from "Procurement Business" to "Semiconductor and Electronic Components Business.

1) Semiconductor and Electronic Components Business

Reportable Segment	Business			Business Description
			Sales of semiconductors, electronic components, and related products in Japan and
Semiconductor and			overseas; system proposals with a variety of line card combinations; provision of high-
Devices	value-added solutions and technical support for liquid crystal systems and overseas
Electronic
		products; design and	manufacturing; LSI design development	and support; and
Components
		reliability test service
Business
		Electronics manufacturing service for electronic components, modules, etc., with
	EMS	cutting-edge technology, procurement, production management and quality assurance
			at our factories
(millions of yen)			Six months ended		Six months ended		Change
		September 30, 2022		September 30, 2023
Net sales			177,199		165,279		(6.7)%
Devices			167,077		157,730		(5.6)%
EMS			10,122		7,548		(25.4)%
Segment profit			7,808		4,320		(44.7)%

- Performance Overview

In the devices business, sales declined due to a decrease in sales for servers, PCs and communication equipment although sales for industrial equipment and in-vehicle devices continued growing. In the EMS business, sales declined due to the sluggishness in the mainstay smartphone/tablet market. Segment profit decreased due to decline in sales in the devices business, the impact of foreign exchange rates caused by differences in the range of fluctuations in the yen's depreciation, the absence of special demand in the same period of the previous year, as well as inventory write-downs and allowance for doubtful accounts related to specific customer, and a sales decrease in the EMS business.

As a result, the Semiconductor and Electronic Components Business recorded net sales of ¥165,279 million, down 6.7% year-on-year, and segment profit of ¥4,320 million, down 44.7% year-on-year.

2) Procurement Business

Reportable Segment	Business		Business Description
Procurement	Procurement	Operation and proposal of optimal supply chain management through global
Business	procurement/trading for electronics and entrustment service for related operations
(millions of yen)			Six months ended	Six months ended	Change
		September 30, 2022	September 30, 2023
Net sales			45,380	61,341		35.2%
Segment profit			1,532	1,642		7.2%

- Performance Overview

In the procurement business, sales increased due to strong performance of in-vehicle products, and expansion of sales channels. Segment profit increased due to higher sales.

As a result, the Procurement Business recorded net sales of ¥61,341 million, up 35.2% year-on-year, and segment profit of ¥1,642 million, up 7.2% year-on-year.

―4―

3) Electronic Equipment Business

Reportable Segment	Business		Business Description
			Proposal, design, construction, and maintenance of solutions for video, audio,
	Electronic	communications, and measurement in various fields such as broadcasting, business,
	equipment	education, medical care/life sciences, public facilities, factory automation/ security,
Electronic			and electronic measuring instruments
		Development and manufacture of cashless payment terminals that combine our basic
Equipment Business
		digital and communications technologies with near-field communication (NFC)
	System equipment	technologies and sales of overseas made payment terminals; application development;
			development, manufacture, and sales of Japanese Government Individual
			Identification Number card authentication-related devices
(millions of yen)			Six months ended	Six months ended		Change
		September 30, 2022	September 30, 2023
Net sales			9,707	10,160			4.7%
Electronic equipment		8,055	8,519			5.8%
System equipment			1,652	1,641			(0.7)%
Segment loss			(166)	(105)			－

- Performance Overview

In the electronic equipment business, sales increased due to growth in medical products and an increase in education-related demand. In the system equipment business, sales decreased slightly due to a fall in special demand for Individual Identification Number authentication related devices, despite increased sales of overseas-made payment terminals and other products. Segment profit improved due to a better product mix.

As a result, the Electronic Equipment Business recorded net sales of ¥10,160 million, up 4.7% year-on-year, and segment loss of ¥105 million.

4) Environmental Energy Business

Reportable Segment	Business		Business Description
			Community coexistence-based operation and management services for the introduction
	Energy	and popularization of renewable energy from our own solar power stations (in Japan
			and overseas) and wind power stations, etc.
Environmental	Power producer	Electric power supply to public facilities and private-sector companies primarily using
renewable energy, and	electric power consulting including	local production and
Energy Business	and supplier (PPS)
consumption of the power for community revitalization
			Production and sale, as well as system consulting, of vegetables made in completely
	Vegetable factory	closed vegetable factories to commercial and retail markets including convenience
			stores, supermarkets, and food service chains
(millions of yen)		Six months ended September	Six months ended September		Change
		30, 2022	30, 2023
Net sales			7,506	8,483		13.0%
Energy			2,317	2,326		0.4%
Power producer and supplier (PPS)		4,538	5,527		21.8%
Vegetable factory			651	629		(3.4)%
Segment profit (loss)			(498)	2,348		－

- Performance Overview

The energy business remained strong due to the expansion of power generation at overseas solar power plants and the domestic power purchase agreement (PPA) business. In the PPS business, sales increased owing mainly to the demand from the government sector. In the vegetable factory business, sales decreased slightly despite efforts to increase the yield of conventional varieties while working on high- value-added vegetables. Segment profit increased owing to the contribution by owned power sources in the PPS business, the firm energy business and improved profit of the vegetable factory.

―5―

As a result, the Environmental Energy Business recorded net sales of ¥8,483 million, up 13.0% year-on-year, and segment profit of ¥2,348 million.

1. Explanation of Financial Position
2. 1. Assets, Liabilities and Net Assets

Total assets at the end of the first half of the fiscal year under review increased by ¥16,854 million from the previous fiscal year to ¥286,282 million. This was mainly due to an increase in cash and deposits of ¥6,119 million, an increase in accounts receivable - trade of ¥6,242 million, a decrease in merchandise and finished goods of ¥3,848 million, and an increase in accounts receivable included in other under current assets of ¥7,102 million.

Liabilities increased by ¥13,374 million from the end of the previous fiscal year to ¥197,706 million. This was mainly due to a decrease of ¥1,568 million in notes and accounts payable - trade, and an increase of ¥13,453 million in short-term borrowings.

Net assets increased by ¥3,480 million from the end of the previous fiscal year to ¥88,575 million. This was mainly due to profit attributable to owners of parent of ¥3,367 million, dividends from capital surplus of ¥2,255 million, an increase of ¥1,949 million in non-controlling interests, and an increase of ¥308 million in foreign currency translation adjustment.

1. Analysis of Cash Flows
   Cash and cash equivalents (hereinafter referred to as "Funds") for the first half of the fiscal year under review were ¥38,982 million. The cash flows and their main factors for the first half of the fiscal year under review are as follows.
   (Cash flows from operating activities)
   Cash and cash equivalents used in operating activities amounted to ¥977 million (¥16,251 million used in the previous fiscal year). This was mainly due to profit before income taxes of ¥5,916 million, a decrease in foreign exchange losses ¥4,414 million, an increase in trade receivables of ¥3,981 million, a decrease in inventories of ¥6,132 million, a decrease in trade payable of ¥5,454 million, and an increase in accounts receivable-other ¥6,969 million.

(Cash flows from investing activities)

Funds obtained from investing activities amounted to ¥2,142 million (¥875 million used in the previous fiscal year). This was mainly due to proceeds from sale of property, plant and equipment of ¥4,196 million and purchase of property, plant and equipment of ¥1,831 million, proceeds from withdrawal of time deposits of ¥1,045 million, purchase of shares of subsidiaries resulting in change in scope of consolidation of ¥805 million, purchase of long-term prepaid expenses of ¥583 million.

(Cash flows from financing activities)

Funds obtained from financing activities amounted to ¥4,313 million (¥10,658 million obtained in the previous fiscal year). This was mainly due to a net increase of ¥8,287 million in short-term borrowings, ¥2,255 million yen in dividends paid, ¥710 million yen in repayments of lease liabilities, and ¥529 million yen in repayments of long-term borrowings.

(3) Explanation of Consolidated Earnings Forecasts and Other Forward-looking Statements

Consolidated earnings forecast for the current fiscal year

There is no change to the consolidated earnings forecast for the current fiscal year.

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Quarterly Consolidated Financial Statements

Quarterly Consolidated Balance Sheets

					(Millions of yen)
				As of March 31, 2023	As of September 30, 2023
Assets
	Current assets
		Cash and deposits		32,987	39,106
		Notes receivable - trade	387	426
		Accounts receivable - trade		79,450	85,693
		Electronically recorded monetary claims -	8,235	10,119
		operating
		Contract assets		58	197
		Merchandise and finished goods	73,062	69,213
		Work in process		883	1,065
		Raw materials and supplies	1,263	1,296
		Other		14,791	22,011
		Allowance for doubtful accounts	(303)	(338)
		Total current assets		210,816	228,791
	Non-current assets
		Property, plant and equipment
		Leased assets	15,704	15,924
		Accumulated depreciation		(7,426)	(7,983)
		Leased assets, net	8,278	7,940
		Other		19,439	19,480
		Total property, plant and equipment		27,717	27,421
		Intangible assets
		Goodwill	6,165	5,846
		Other		4,503	4,257
		Total intangible assets		10,669	10,103
		Investments and other assets
		Investment securities	5,779	4,522
		Deferred tax assets		1,510	1,850
		Bad debts	12,310	13,639
		Long-term prepaid expenses		8,580	9,108
		Other	4,023	4,590
		Allowance for doubtful accounts		(11,979)	(13,746)
		Total investments and other assets	20,224	19,965
		Total non-current assets		58,611	57,490
	Total assets	269,427	286,282

―7―

				(Millions of yen)
			As of March 31, 2023	As of September 30, 2023
Liabilities
	Current liabilities
		Notes and accounts payable - trade	53,921	52,352
		Short-term borrowings	85,409	98,863
		Current portion of long-term borrowings	3,652	3,616
		Lease liabilities	1,354	1,579
		Income taxes payable	1,393	2,868
		Contract liabilities	69	186
		Provision for bonuses	1,281	1,159
		Provision for bonuses for directors (and other	40	424
		officers)
		Other	15,316	15,408
		Total current liabilities	162,439	176,459
	Non-current liabilities
		Long-term borrowings	9,036	8,805
		Lease liabilities	7,314	6,691
		Deferred tax liabilities	1,971	1,978
		Retirement benefit liability	515	692
		Other	3,054	3,079
		Total non-current liabilities	21,892	21,246
	Total liabilities	184,331	197,706
Net assets
	Shareholders' equity
		Share capital	4,383	4,383
		Capital surplus	36,095	33,841
		Retained earnings	37,976	41,478
		Treasury shares	(8)	(9)
		Total shareholders' equity	78,446	79,694
	Accumulated other comprehensive income
		Valuation difference on available-for-sale	631	565
		securities
		Deferred gains or losses on hedges	1	18
		Foreign currency translation adjustment	1,721	2,030
		Remeasurements of defined benefit plans	(28)	(13)
		Total accumulated other comprehensive income	2,325	2,600
	Share acquisition rights	113	121
	Non-controlling interests	4,210	6,159
	Total net assets	85,095	88,575
Total liabilities and net assets	269,427	286,282

―8―

Quarterly Consolidated Statements of Income and Comprehensive Income

Quarterly Consolidated Statements of Income (For the six months)

		(Millions of yen)
	For the six months	For the six months
	ended September 30, 2022	ended September 30, 2023
Net sales	239,795	245,264
Cost of sales	218,972	223,244
Gross profit	20,822	22,019
Selling, general and administrative expenses	12,376	14,920
Operating profit	8,445	7,098

Non-operating income

Interest income

Dividend income

Foreign exchange gains

Insurance claim income

Share of profit of entities accounted for using equity method

Gain on investments in silent partnerships

Other

Total non-operating income

Non-operating expenses

Interest expenses

Loss on sale of receivables

Foreign exchange losses

Other

Total non-operating expenses

Ordinary profit

Extraordinary income

Surrender value of insurance policies

Gain on sale of investment securities

Gain on sale of non-current assets

Total extraordinary income

Extraordinary losses

Special survey costs, etc.

Loss on valuation of investment securities

Other

26	125
22	26
390	-
88	218
70	60
133	165
254	151
987	747
673	1,887
133	585
-	470
152	947
959	3,890
8,474	3,955
42	-
40	143
-	1,817
82	1,960
422	-
269	-
33	-

Total extraordinary losses	725	-
Profit before income taxes	7,831	5,916
Income taxes	3,046	2,249
Profit	4,784	3,666
Profit attributable to non-controlling interests	170	299
Profit attributable to owners of parent	4,613	3,367

―9―

Quarterly Consolidated Statements of Comprehensive Income (For the six months)

		(Millions of yen)
	For the six months	For the six months
	ended September 30, 2022	ended September 30, 2023
Profit	4,784	3,666
Other comprehensive income

Valuation difference on available-for-sale securities

Deferred gains or losses on hedges

Foreign currency translation adjustment

Remeasurements of defined benefit plans, net of tax

Total other comprehensive income

Comprehensive income

Comprehensive income attributable to

Comprehensive income attributable to owners of parent

Comprehensive income attributable to non-controlling interests

(76)	(65)
82	18
(972)	633
2	14
(963)	601
3,821	4,267
3,400	3,641
421	625

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