Sun Frontier Fudousan : Consolidated Financial Results for the Fiscal Year Ended March 31, 2022

Consolidated Financial Results for the Fiscal Year Ended March 31, 2022

	May 13, 2022 released
Company name:	Sun Frontier Fudousan Co., Ltd.
Stock listing:	Tokyo Stock Exchange Prime Section
Code number:	8934
URL:	https://www.sunfrt.co.jp
Representative:	Seiichi Saito, President
Inquiries:	Takeshi Hirahara, Executive Officer, General Manager of Corporate Planning Department
	(Phone: [phone])

Scheduled date of general meetings of shareholder: June 21, 2022

Scheduled date of dividend payment commencement: June 22, 2022

Scheduled date of securities report submission: June 22, 2022

Supplemental materials for the financial results: Yes

Presentation to explain for the financial results: Yes

*Amounts are rounded down to millions of yen.

1. Consolidated Performance in the Fiscal Year Ended March 31, 2022

1. Consolidated Operating Results

(Percentage figures indicate year-on-year changes.)

				Net Sales			Operating Profit			Ordinary Profit		Profit Attributable to Owners of
										Parent
			Millions of yen		%	Millions of yen			%		Millions of yen		%	Millions of yen		%
	FY2022			71,251		19.5	12,217			53.3		12,215		62.3	7,415		73.5
	FY2021			59,632		△18.6	7,912			△52.3		7,524		△53.3	4,274		△59.9
(Note) Comprehensive income	FY2022: 7,738 millions of yen (93.1%)
(Note) Comprehensive income	FY2021: 4,006 millions of yen (△62.3%)
			Earnings per Share		Fully Diluted Earnings per			ROE			ROA		Operating Income Margin
					Share
					yen			yen			%				%			%
	FY2022		152.26			152.12			10.8				9.3			17.0
	FY2021		87.77			87.73			6.5				5.8			13.3
Reference) Income on investments based on equity method	FY2022: △23 millions of yen
Reference) Income on investments based on equity method	FY2021: △55 millions of yen

1. Consolidated Financial Position

Total Assets	Net Assets	Equity Ratio	Net Assets per Share

	Millions of yen	Millions of yen	%	yen
FY2022	136,512	74,452	52.2	1,463.74
FY2021	127,485	69,773	52.3	1,368.14

(Reference)Total Equity	FY2022: 71,282 millions of yen	FY2021: 66,627 millions of yen
（3）Cash Flows
		Cash Flows from		Cash Flows from	Cash Flows from	Cash and Cash
		Operating Activities		Investing Activities	Financing Activities	Equivalents at Year-End
			Millions of yen		Millions of yen	Millions of yen	Millions of yen
	FY2022		17,443		△9,386	449	29,951
	FY2021		4,733		451	△1,150	21,319

2. Cash Dividends

		Cash Dividends per Share			Payout ratio	Net asset
	1st quarter	2nd quarter	3rd quarter	Year	Annual	Total Dividends	dividend rate
	(Consolidated)
	end	end	end	end	Total		(Consolidated)
	yen	yen	yen	yen	yen	Millions of yen	%	%
FY2021	-	0.00	-	42.00	42.00	2,047	47.9	3.1
FY2022	-	21.00	-	23.00	44.00	2,145	28.9	3.1
FY2023(Forecast)	-	23.00	-	23.00	46.00		27.0

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3. Forecast for Consolidated Financial Results for FY2023 (April 1, 2022 to March 31, 2023)

(Percentage figures indicate year-on-year changes.)

Net Sales

Operating Profit

Ordinary Profit

Profit Attributable to Owners of

Earnings per

Parent

Share

Millions of yen

％

Millions of yen

％

Millions of yen

％

Millions of yen

％

yen

FY2023

84,000

17.9

13,300

9.7

12,800

4.8

8,300

11.9

170.44

• Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changing scope of consolidation): None
   New companies: -
   Excluded companies: -
2. Changes in accounting policies, estimates and restatement

1)	Changes in accounting policies due to changes in accounting standard:	Yes
2)	Changes in accounting policies other than 1) above:	None
3)	Changes in accounting estimates:	None
4)	Retrospective restatement:	None

1. Number of outstanding shares (common stock)
2. 1. Number of outstanding shares at the end of the period (including treasury stock):

As of March 31, 2022:	48,755,500 shares
As of March 31, 2021:	48,755,500 shares

1. Number of shares of treasury stock at the end of the period:

As of March 31, 2022:	56,644 shares
As of March 31, 2021:	56,644 shares

1. Average number of shares for the period:

As of March 31, 2022:	48,698,856 shares
As of March 31, 2021:	48,698,856 shares

Reference: Overview of Non-consolidated Performance

1. Non-consolidated Performance in FY ended March 31, 2022(from April 1, 2021 to March 31, 2022)

（1）Operating Results

(Percentage figures indicate year-on-year changes.)

	Net Sales			Operating Profit	Ordinary Profit		Profit Attributable to Owners of
				Parent
	Millions of yen		%		Millions of yen	%	Millions of yen		%	Millions of yen	%
FY2022	59,563		41.8		14,300	78.4	14,356		79.6	9,284	74.7
FY2021	42,002		△34.9	8,017	△54.9	7,994		△52.5	5,314	△52.2
	Earnings per Share		Fully Diluted Earnings per Share
			yen			yen
FY2022			190.65			190.47
FY2021			109.12			109.07

(2) Financial Position

			Total Assets		Net Assets	Equity Ratio	Net Assets per Share
			Millions of yen	Millions of yen	%	yen
	FY2022		124,800	74,432	59.6	1,527.80
	FY2021		114,729	68,204	59.4	1,400.21
(Reference)Total Equity	FY2022: 74,402 millions of yen	FY2021: 68,188 millions of yen

*This Summary of Consolidated Financial Results is not subject to review processes under the Financial Instruments and Exchange Act.

*Explanation for appropriate use of forecast and other special matters

Forward-looking statements, such as forecast of consolidated financial performance, stated in this document are based on information currently possessed by the Company as well as certain assumptions deemed rational. It does not mean that the Company assurances that the contents mentioned in these forward-looking statements will ever materialize. Actual financial performance may be significantly different from such expectations due to various factors.

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Accompanying Materials
Contents
1. Financial Highlits for the Fiscal Year Ended March 31, 2022	.............................................................. 2
(1)	Business Performance ...............................................................................................................................	2
(2)	Consolidated Financial Position ................................................................................................................	5
(3)	Consolidated Cash Flow............................................................................................................................	6
(4)	Outlook for the Fiscal Year Ending March 31, 2023.................................................................................	7
2. Basic views on the selection of accounting standards ..............................................................................	7
3. Quarterly consolidated financial statements and key notes ......................................................................	8
(1)	Consolidated balance sheet........................................................................................................................	8
(2)	Consolidated statements of income and comprehensive income	............................................................ 10
(3)	Consolidated statement of changes in equity ..........................................................................................	12
(4)	Consolidated statement of cash flows .....................................................................................................	14
(5)	Notes to consolidated financial statements..............................................................................................	15
(Notes to assumption of going concerns) ...................................................................................................	15
(Change of accounting policies) .................................................................................................................	15
(Segment information, etc.) ........................................................................................................................	16
(Per share information) ...............................................................................................................................	18
(Significant subsequent events) ..................................................................................................................	18

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1. Financial Highlights for the Fiscal Year Ended March 31, 2022

(1) Business Performance

Although the Japanese economy showed signs of recovery after the state of emergency was lifted at the end of September 2021, the number of people infected with COVID-19 expanded toward the end of the current consolidated fiscal year due to the impact of the COVID-19 variant. As a result, the business environment surrounding corporate earnings continued to be severe, particularly in the accommodation and tourism industries. In the global economy, while the impact of this new variant continues, the rise in raw material prices due to the invasion of Ukraine by Russia and other factors has spurred a rise in consumer prices. Consequently, there has been increasing speculation in various countries that monetary easing will be scaled down and monetary tightening will be implemented. It is necessary to pay attention to fluctuations in financial and capital markets going forward.

Even though the deterioration in the average vacancy rate in the Tokyo business district (5 Wards of the Central Tokyo: Chiyoda, Chuo, Minato, Shinjuku, and Shibuya), where the Company operates Office Building Business, seems to have bottomed out in December 2021, it has been fluctuating since January (according to a survey by a private research institution). In addition, the average rent was 20,366 yen (unit price per tsubo), falling for the 20th consecutive month (total 2,648 yen / approximately 11.5%). The overall office market remained weak. In the real estate investment market, although institutional investors' demand remains strong, the outlook remains unpredictable due to the global monetary tightening phase.

Under these business environment the Company is steadily expanding its business based on the medium-term management plan announced in May 2021. During the consolidated fiscal year under review, even in the pandemic of COVID-19, the Company's core business, Real Estate Revitalization Business, is resulting in steady sales of real estate due to the progression of commercialization with high-margin and high-quality. Moreover, business performance expanded steadily in the Real Estate Service Business. On the other hand, in Hotel Operation Business, losses were recorded in the current consolidated fiscal year due to the impact of the declaration of a state of emergency and start-up expenses.

As a result, net sales amounted to 71,251 million yen (up 19.5% YoY), operating profit amounted to 12,127 million yen (up 53.3% YoY), ordinary profit amounted to 12,215 million yen (up 62.3% YoY), and profit attributable to owners of parent amounted to 7,415 million yen (up 73.5% YoY).

Due to partial change in the reportable segment from the beginning of the first quarter ended June 30, 2021, actual results for the consolidated fiscal year under review and the same period of the previous fiscal year have been reclassified into the new segment classification. The background and outline of the segment change are as follows. In November 2020, in order to utilize the know-how in Hotel Operation Business for the "Hotel Development Business" and enhance profitability in an integrated manner, the Company changed the organizational structure by transferring Hotel Development Business from Sun Frontier Fudousan Co., Ltd. into Sun Frontier Hotel Management Inc. Accordingly, the business segment will reflect this change and is renamed the reportable segment "Hotel and Tourism Business." Also, in order to strengthen further the coordination of each business segment in the real estate services field, the Company consolidated related business segments such as Conference Room Rental Business and Rent Guarantee Business into "Real Estate Service Business".

The results of each segment are as follows. (Real Estate Revitalization Business)

In the Real Estate Revitalization Business, we are engaged in (1) Replanning Business and (2) Rental Building Business.

1. In the Replanning Business, all processes from purchase of buildings to planning and development, tenant placement, sales, and subsequent support are offered in-house. During the fiscal year under review, sales are making

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steady progress against the backdrop of strong investment appetite among investors. On the other hand, the Company carefully selects and purchases properties while closely monitoring the impact of macroeconomic fluctuations on real estate market conditions and interest rate trends. In commercialization, we aim to create an office that can be chosen even in the new normal due to the fitness to a hybrid working style while keeping a close eye on changes in the city, office and work style. In addition, through coordinating with the leasing brokerage division, which has expanded its branch network in central Tokyo and conducts community-based sales activities, we promoted the attraction of tenants even during the COVID-19 pandemic and made our real estate products high- occupancy with high-added value which then we could sell as products that meet the expectations of a wide range of clients in Japan and overseas. As a result, the number of units sold in Replanning Business increased steadily to 21, and both net sales and profit increased significantly compared with the previous fiscal year.

1. In Rental Building Business, with the aim of building a stable revenue base, we are working to increase rent income in the medium to long term by utilizing the operational capabilities cultivated in the Real Estate Service division while maintaining the number of properties in commercialization in Replanning Business. However, compared with the previous fiscal year, both net sales and income decreased due to the sale of mid-to-long term large buildings with high utilization rates.

As a result, net sales amounted to 55,958 million yen (up 54.2% YoY) and segment profit amounted to 16,262 million yen (up 78.5% YoY) for the total of Real Estate Revitalization Business.

(Real Estate Service Business)

In the Real Estate Service Business, we are engaged in (1) Property Management Business, (2) Building Maintenance Business, (3) Sales Brokerage Business, (4) Leasing Brokerage Business, (5) Conference Room Rental Business, and (6) Rent Guarantee Business.

By bringing together the expertise that each of these business divisions has cultivated in the field, they coordinate and work with each other on the small and medium-sized office buildings areas of central Tokyo. By also multiplying in a chain reaction, the expertise cultivated through creating on site, they create added value and work as the basis for creating high profitability in the Replanning Business.

1. In Property Management Business, the Company has achieved high-occupancy and high-profitability building management by working with the leasing brokerage division to attract tenants and revise the conditions for appropriate rent. At the same time, we are working with the building maintenance division and the construction division to quickly support the recovery of building facilities in the event of earthquakes, typhoons, and other disasters, thereby providing safe and secure building management for owners and tenants. Although the number of buildings under management was maintained, revenue was sluggish due to a decline in occupancy rate. As a result, both net sales and profits declined slightly from the previous fiscal year.

	End of March 2020	End of March 2021	End of March 2022
Number of	392 buildings	397 buildings	421 buildings
Managing Buildings
Occupancy Rate	98.6%	94.4%	91.5%

1. In the Building Maintenance Business, we are promoting business based on our strengths in cleaning high places using swings for exterior windows and exterior walls, waterproofing work, and exterior wall repair work. In the previous fiscal year, we acquired 100% of shares in Japan System Service Inc., another company in the same industry, in an effort to strengthen the foundation of its cleaning business in central Tokyo. In the fiscal year under review, both net sales and profits increased significantly compared with the previous fiscal year, as a result of a rebound from a decrease in orders from clients due to the impact of COVID-19, as well as an increase in entrusted properties and the addition of sales and profits from Japan System Service Inc.

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