Seiko : Consolidated Financial Statements for the six months ended September 30, 2023

Consolidated Financial Results

for the Six Months Ended SEPTEMBER 30, 2023

(Under Japanese GAAP)

			November 14, 2023
Company name:	SEIKO GROUP CORPORATION	Listing: Tokyo
Securities code:	8050	URL: https://www.seiko.co.jp/en/
Representative:	Shuji Takahashi, President
Inquiries:	Masanobu Minami, General Manager, Accounting Department	Telephone: [phone]

Scheduled date to file quarterly securities report:

November 14, 2023 (in Japanese)

Scheduled date to commence dividend payments:

December 5, 2023

Preparation of supplementary material on quarterly financial results:

Available

Holding of quarterly financial results briefing:

Scheduled (for institutional investors and analysts)

(Yen amounts are rounded down to millions, unless otherwise noted.)

1. Consolidated financial results for the six months ended September 30, 2023 (from April 1, 2023 to September 30, 2023)

(1) Consolidated operating results (cumulative)

(Percentages indicate year-on-year changes.)

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

131,295

1.1

8,160

(7.8)

9,247

(3.3)

6,281

18.7

September 30, 2022

129,921

17.7

8,847

156.2

9,567

168.7

5,292

343.5

Note: Comprehensive income

For the six months ended September 30, 2023:

16,062 million

[22.1%]

For the six months ended September 30, 2022:

13,152 million

[136.7%]

Basic earnings

Diluted earnings

per share

per share

Six months ended

Yen

Yen

September 30, 2023

152.13

-

September 30, 2022

128.29

128.29

(2) Consolidated financial position

Total assets

Net assets

Equity-to-asset ratio

As of

Millions of yen

Millions of yen

%

September 30, 2023

373,307

146,268

38.6

March 31, 2023

355,915

131,748

36.5

Reference: Equity

As of September 30, 2023:

144,028 million

As of March 31, 2023:

129,792 million

2. Cash dividends

Annual dividends per share

First quarter-end

Second quarter-end

Third quarter-end

Fiscal year-end

Total

Fiscal year ended

Yen

Yen

Yen

Yen

Yen

March 31, 2023

-

37.50

-

37.50

75.00

Fiscal year ending

-

37.50

March 31, 2024

Fiscal year ending

-

37.50

75.00

March 31, 2024

(Forecast)

Note: Revisions to the forecast of cash dividends most recently announced: None

3. Consolidated financial forecast for the fiscal year ending March 31, 2024 (From April 1, 2023 to March 31, 2024)

( Percentages indicate year-on-year changes.)

	Net sales		Operating profit	Ordinary profit		Profit attributable to	Basic earnings
			owners of parent	per share
Fiscal year ending	Millions of yen	%	Millions of yen	%	Millions of yen		%	Millions of yen	%	Yen
March 31, 2024	268,000	2.9	12,000	6.8	12,000		7.5	8,000	59.1	193.72

Note: Revision to the financial forecast most recently announced: None

* Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaies resulting in the change in scope of consolidation): Not applicable

Newly included: Not applicable

Excluded: Not applicable

1. Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements: Not applicable
2. Changes in accounting policies, changes in accounting estimates, and restatement

i) Changes in accounting policies due to revisions to acounting standards and other regulations	: Not applicable
ii) Changes in accounting policies due to other reasons	: Not applicable
iii) Changes in accounting estimates	: Not applicable
iv) Restatement	: Not applicable

1. Number of issued shares (common shares)
2. 1. Total number of issued shares at the end of the period (including treasury shares)

As of September 30, 2023	41,404,261	shares /	As of March 31, 2023	41,404,261	shares
ii) Number of treasury shares at the end of period	99,683				132,337
As of September 30, 2023	shares /	As of March 31, 2023	shares
iii) Average number of shares outstanding during the period (cumulative from the beginning of the fiscal year)
Six months ended September 30, 2023		41,288,186	shares
Six months ended September 30, 2022		41,252,302	shares

(Note) For the purpose of calculating the number of treasury shares at the end of period and the average numbers of shares outstanding during the period, treasury shares held in the Board Benefit Trust (BBT) are included in the treasury shares deducted in the calculation.

• Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.
• Proper use of earnings forecasts, and other special matters

(Cautionary statements with respect to financial forecast)

The financial forecasts which appear in this report have been prepared based solely on the information which was available to the Company as of the date on which the report was released and the Company does not in any way guarantee the achievement of the forecasts. Actual results may differ significantly from the forecasted figures due to a number of factors. For assumptions used in the financial forecasts and instructions to use the financial forecasts, refer to (3) Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2024 (FY2023), 1. Business Results, for detail.

SEIKO GROUP CORPORATION

Consolidated Financial Statements: 6M FY2023

Page 3/18

Contents

1. Business Results

(1)	Overview	4
(2)	Financial Condition	6
(3)	Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2024
	(FY2023)	8

2. Quarterly Consolidated Financial Statements and Major Notes

(1)	Quarterly Consolidated Balance Sheets	9
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income	12
(3)	Quarterly Consolidated Statements of Cash Flows	14
(4)	Notes to Quarterly Consolidated Financial Statements	16
(Going concern assumption)	16
(Significant changes in shareholder's equity)	16
(Segment information)	17

SEIKO GROUP CORPORATION

Consolidated Financial Statements: 6M FY2023

Page 4/18

1. Business Results

(1) Overview

During the six-month period ended September 30, 2023, a slowdown in the European economy became more apparent due to continuation of monetary tightening caused by continuous high inflation, especially in Europe and the U.S. In China, adjustments continue to be made in the real estate market, and there are concerns about a prolonged economic slump.

In Japan, personal consumption is resuming even amid an inflationary trend, and demand from inbound tourists continues to recover.

				(Millions	of yen)
	6M FY2021	6M FY2022	6M FY2023	Variance	Variance
	(a)	(b)	①	① - (a)	① - (b)
Net sales	110,395	129,921	131,295	20,899		1,373
Operating profit	3,453	8,847	8,160	4,706		(	687)
%	3.1％	6.8％	6.2％	3.1pt		0.6)pt
Ordinary profit	3,561	9,567	9,247	5,686	(	(	320)
%	3.2％	7.4％	7.0％	3.8pt	(	0.4)pt
Profit attributable to owners of parent	1,193	5,292	6,281	5,088		989
%	1.1％	4.1％	4.8％	3.7pt		0.7pt
Exchange rate (v. JPY)
USD	109.8	134.0	141.1	31.3			7.1
EUR	130.9	138.8	153.5	22.6			14.7

Amid these circumstances, in the "Emotional Value Solutions Business," the Watches Business and WAKO Business for the Japanese market recorded significant net sales growth against the backdrop of a recovery in personal consumption and demand from inbound tourists. The Watches Business for overseas markets also grew, mainly in Europe and Asia, and net sales were higher year on year. In the "Devices Solutions Business," net sales were significantly lower year on year amid an uncertain recovery of the business environment, which had deteriorated since the third quarter of the previous fiscal year due to factors such as prolonged stagnation of the Chinese economy and inventory adjustments in the electronic devices market. In the "Systems Solutions Business," net sales were higher year on year, thanks to ongoing successful efforts to diversify business and expand the stock business. As a result, for the sixth-month period ended September 30, 2023, the Group reported consolidated net sales of 131.2 billion yen, a year-on-year increase of 1.1%.

On an overall consolidated basis, domestic net sales came to 67.2 billion yen (a year-on-year increase of 5.9%), and overseas net sales were 64.0 billion yen (a year-on-year decrease of 3.6%). Net sales in overseas comprised 48.8% of net sales overall.

SEIKO GROUP CORPORATION

Consolidated Financial Statements: 6M FY2023

Page 5/18

Advertising and promotion expenses for the six-month period ended September 30, 2023 increased by approximately 10% from the same period of previous fiscal year, resulting in a year-on-year increase of 3.5 billion yen in selling, general and administrative expenses. Operating profit was 8.1 billion yen (a year-on-year decrease of 7.8%), a deterioration of 0.6 billion yen year on year, due to deceleration of the Devices Solutions Business. Although non-operating income and expenses improved year on year due to factors including increases in interest income and dividend income, ordinary profit decreased by 0.3 billion yen year on year to 9.2 billion yen (a year-on-year decrease of 3.3%). Information security expenses of 0.2 billion yen were posted as extraordinary losses in response to unauthorized access to the Company's servers. However, profit attributable to owners of parent increased by 0.9 billion yen year on year to 6.2 billion yen (a year-on-year increase of 18.7%), mainly due to a decrease in income taxes - deferred in conjunction with the improvement of revenue in domestic operating companies.

The average exchange rates for the six-month period ended September 30, 2023 were 141.1 yen to 1 US dollar and 153.5 yen to 1 euro.

Results by Segment

Results for each segment are as follows:

a. Emotional Value Solutions Business (EVS Business)

Net sales under the EVS Business came to 89.9 billion yen, a year-on-year increase of 6.8 billion yen, or 8.2%.

Net sales of completed watches in Japan grew year on year due to favorable performance of Global Brands such as Grand Seiko and Seiko Prospex against the background of personal consumption and demand from inbound tourists, which showed a recovery trend. Overseas, net sales increased year on year as Global Brands grew in the U.S., Europe, and Asia, especially for Seiko Presage and Seiko 5 Sports, despite a delayed recovery in China. In the watch movements business, net sales decreased year on year due to the sluggish Chinese economy.

Net sales in the WAKO Business grew significantly year on year against the backdrop of favorable demand from inbound tourists. However, net sales of the clocks business declined year on year due to the sluggish Chinese economy, which caused net sales in overseas markets to struggle.

Operating profit increased by 2.6 billion yen year on year, resulting in operating profit of 9.5 billion yen (a year-on-year increase of 37.4%).

b. Devices Solutions Business (DS Business)

Net sales under the DS Business came to 27.6 billion yen, a year-on-year decrease of 19.6%. Operating profit was 0.2 billion yen, a year-on-year decrease of 93.9%.

Net sales and operating profit decreased significantly year on year due to the prolonged stagnation of the Chinese economy and continued inventory adjustments in the electronic devices market, resulting

SEIKO GROUP CORPORATION

Consolidated Financial Statements: 6M FY2023

Page 6/18

in weak performance for thermal printers, quartz crystals, high-performance metals for semiconductor production equipment, and precision components.

c. Systems Solutions Business (SS Business)

Net sales under the SS Business came to 18.9 billion yen, a year-on-year increase of 4.9%. Operating profit was 2.2 billion yen, a year-on-year increase of 10.9%.

There was growth in businesses related to digital contracts that captured digitalization and legal reforms. In addition, businesses supporting digital infrastructure, such as performance management and businesses including those related to security, expanded, resulting in continued year-on-year growth both in net sales and operating profit for 30 consecutive quarters.

(2) Financial Condition

a. Status of Assets, Liabilities, and Net Assets -Assets-

Total assets at the close of the six-month period ended September 30, 2023 amounted to 373.3 billion yen, an increase of 17.3 billion yen from the close of the previous fiscal year, including the effect of exchange rates. Total current assets came to 178.7 billion yen, an increase of 5.3 billion yen from the close of the previous fiscal year. This was due to factors such as an increase of 6.9 billion yen in inventories. Total non-current assets came to 194.5 billion yen, an increase of 12.0 billion yen from the close of the previous fiscal year. This was due to increases of 5.3 billion yen in total property, plant and equipment and 6.5 billion yen in total investments and other assets.

-Liabilities-

For liabilities, total borrowings came to 124.5 billion yen, due to decreases of 4.9 billion yen in short- term borrowings and 2.7 billion yen in long-term borrowings. In addition, accounts payable - other decreased by 1.9 billion yen, while notes and accounts payable - trade increased 4.1 billion yen, electronically recorded obligations - operating increased 3.0 billion yen, and deferred tax liabilities increased 1.0 billion yen. As a result, total liabilities amounted to 227.0 billion yen, an increase of 2.8 billion yen from the close of the previous fiscal year, including the effect of exchange rates.

-Net assets-

With regard to net assets, total net assets increased by 14.5 billion yen over the close of the previous fiscal year to become 146.2 billion yen, mainly owing to increases of 4.7 billion yen in shareholders' equity and 5.7 billion yen in foreign currency translation adjustment.

SEIKO GROUP CORPORATION

Consolidated Financial Statements: 6M FY2023

Page 7/18

b. Overview of Cash Flows

The balance of cash and cash equivalents at the end of the six-month period ended September 30, 2023 came to 35.9 billion yen, a decrease of 0.2 billion yen relative to the end of the previous fiscal year. This is primarily due to the following factors:

-Cash flows from operating activities-

Net cash provided by operating activities came to positive 17.7 billion yen (compared to a positive cash flow of 3.2 billion yen for the same period of the previous fiscal year), an increase of 14.5 billion yen year on year. This was the result of the Company posting 9.1 billion yen in income before income taxes, factoring in depreciation amounting to 6.3 billion yen, as well as adjustments such as a 3.2 billion yen increase in inventories (posted as a decrease) and a 1.9 billion yen decrease in accounts payable - other (posted as a decrease).

-Cash flows from investing activities-

Net cash used in investing activities came to negative 7.8 billion yen (compared to a negative cash flow of 8.1 billion yen for the same period of the previous fiscal year) due to cash outflows consisting mainly of 6.4 billion yen in purchase of property, plant and equipment (posted as a decrease).

-Cash flows from financing activities-

Net cash used in financing activities came to negative 11.8 billion yen (compared to a positive cash flow of 7.1 billion yen for the same period of the previous fiscal year) due mainly to repayments of long- and short-term borrowings, as well as dividends paid.

SEIKO GROUP CORPORATION

Consolidated Financial Statements: 6M FY2023

Page 8/18

1. Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2024 (FY2023) During the six-monthperiod ended September 30, 2023, both net sales and operating profit increased year on year in the EVS Business, while both net sales and operating profit declined year on year in the DS Business. From the third quarter onward, we expect the EVS Business to continue to perform steadily. Accordingly, the Company has not changed its consolidated financial forecast but has revised its forecasted results by segment as described below.

■ Forecast for the consolidated business results for the year ending March 31, 2024 (FY2023)

	Current forecast	Year-on-year
	(Billions of yen)	change (%)
Net sales	268.0	2.9
Operating profit	12.0	6.8
Ordinary profit	12.0	7.5
Profit attributable to owners of parent	8.0	59.1
Earnings per share	193.72 yen

■ Forecasted results by segment for the year ending March 31, 2024 (FY2023)

(Billions of yen)	Net Sales	Operating Profit
Current	Previous	Current	Previous
Emotional Value Solutions Business	180.0	177.0	15.0	14.0
Devices Solutions Business	60.0	63.0	2.3	3.6
Systems Solutions Business	39.0	39.0	5.0	5.0
Total for reported segments	279.0	279.0	22.3	22.6
Others	1.0	1.0	0.1	0.1
Consolidated total	268.0	268.0	12.0	12.0

Note: Consolidated total represents figures after consolidation adjustment such as the elimination of inter-segment sales.

The forecasted results which appear in this report have been prepared based solely on the information which was available to us as of the date on which the report was released. As a result, actual results may differ from the forecasted figures due to a number of factors, such as changes in the business environment in the future.

SEIKO GROUP CORPORATION

Consolidated Financial Statements: 6M FY2023

Page 9/18

2. Quarterly Consolidated Financial Statements and Major Notes

(1) Quarterly Consolidated Balance Sheets

				(Millions of yen)
			As of March 31,	As of September
			2023	30, 2023
	Assets
	Current assets
	Cash and deposits		36,324	36,046
	Notes and accounts receivable - trade, and	38,647	40,666
	contract assets
	Inventories	83,776	90,688
	Accounts receivable - other	6,577	3,587
	Other	9,381	9,275
	Allowance for doubtful accounts	(1,297)	(1,476)
	Total current assets		173,410	178,787
	Non-current assets
	Property, plant and equipment
	Buildings and structures	79,280	81,937
	Machinery, equipment and vehicles	86,117	90,956
	Tools, furniture and fixtures	39,233	41,335
	Other		12,699	15,837
	Accumulated depreciation	(163,232)	(170,713)
	Land	54,182	54,404
	Construction in progress	2,867	2,762
	Total property, plant and equipment		111,149	116,520
	Intangible assets
	Goodwill	6,901	6,302
	Other	8,620	9,290
	Total intangible assets		15,522	15,593
	Investments and other assets
	Investment securities	45,490	51,377
	Deferred tax assets	1,923	2,054
	Other	8,572	9,129
	Allowance for doubtful accounts		(153)	(155)
	Total investments and other assets		55,833	62,406
	Total non-current assets		182,505	194,520
	Total assets		355,915	373,307

SEIKO GROUP CORPORATION

Consolidated Financial Statements: 6M FY2023

Page 10/18

			(Millions of yen)
		As of March 31,	As of September
		2023	30, 2023
Liabilities
Current liabilities
Notes and accounts payable - trade	18,790	22,950
Electronically recorded obligations - operating	6,212	9,234
Short-term borrowings		72,598	67,643
Current portion of bonds payable	300	-
Current portion of long-term borrowings	22,117	22,115
Accounts payable - other	11,344	9,356
Income taxes payable	1,793	3,787
Provision for bonuses	4,879	4,992
Other provisions	1,452	1,290
Asset retirement obligations	9	22
Other		22,659	22,926
Total current liabilities		162,157	164,320
Non-current liabilities
Long-term borrowings	37,525	34,802
Deferred tax liabilities	4,285	5,307
Deferred tax liabilities for land revaluation	3,614	3,614
Other provisions	742	732
Retirement benefit liability	6,894	6,849
Asset retirement obligations	1,079	1,075
Other	7,867	10,335
Total non-current liabilities		62,009	62,718
Total liabilities	224,166	227,039