Consolidated Financial Report For the Nine-month Period Ended September 30, 2021 (IFRS)

Consolidated Financial Report

For the Nine-month Period Ended September 30, 2021 (IFRS)

		November 12, 2021
Company Name	SKYLARK HOLDINGS CO., LTD.	Stock Exchange Listing: Tokyo Stock Exchange, 1st Section
Securities Code	3197	URL:http://www.skylark.co.jp

Representative	Makoto Tani, Chairman, President and Chief Executive Officer
Contact for enquiries	Minoru Kanaya, Corporate Director, Managing Executive Officer and Managing	(TEL) 0422-51-8111
Director of Finance Division
Quarterly statement filing date (as planned)	November 12, 2021
Dividend payable date (as planned)	-
Supplemental material of quarterly results	Yes
Convening briefing of quarterly results	Yes (for analysts and institutional investors)

(Millions of yen; amounts are rounded to the nearest million yen)

1. Consolidated Financial Results for the Nine-month Period Ended September 30, 2021

(1) Consolidated Operating Results								(Percentages represent year-on-year changes)
								Income before					Net income		Total comprehensive
		Revenue		Operating profit	Net income		attributable to owners
									income taxes				of the Company		income
		(Millions	(%)	(Millions	(%)	(Millions	(%)	(Millions		(%)	(Millions		(%)	(Millions	(%)
		of yen)			of yen)			of yen)			of yen)			of yen)			of yen)
Nine-month period ended	189,566	(11.2)		7,420	-		4,271		-	2,371		-		2,371		-	3,113	-
September 30, 2021
Nine-month period ended	213,563	(25.1)		(21,143)	-	(23,710)		-	(14,624)		-	(14,624)		-	(14,595)	-
September 30, 2020
		Basic earnings per share		Diluted earnings per share
			(Yen)				(Yen)
Nine-month period ended			11.29				11.29
September 30, 2021
Nine-month period ended			(74.05)				(74.05)
September 30, 2020
(Reference)
EBITDA	Nine-month period ended	43,067 million yen	(149.3%)	Nine-month period ended	17,273	million yen	(-70.6%)
September 30, 2021	September 30, 2020
Adjusted EBITDA	Nine-month period ended	45,168	million yen	(76.8%)	Nine-month period ended	25,552	million yen	(-57.8%)
September 30, 2021	September 30, 2020
Adjusted net income	Nine-month period ended		2,490 million	yen		(-%)	Nine-month period ended	(14,624) million yen		(-%)
September 30, 2021			September 30, 2020

(Note) We use EBITDA, adjusted EBITDA and adjusted net income to evaluate the results of its operations. Refer to "* Notes for using forecasted information and other matters (3) - (5)" below for details.

(2) Consolidated Financial Position

				Equity attributable to	Ratio of equity attributable to
	Total assets		Total equity	owners of the Company
		owners of the Company
				to total assets
	(Millions	of yen)	(Millions of yen)	(Millions of yen)	(%)
As of September 30, 2021		445,693	159,741	159,741	35.8
As of December 31, 2020		441,672	113,761	113,761	25.8

1

2. Dividends

			Dividends per share
	First quarter	Second quarter	Third quarter	Fourth quarter	Total
	(Yen)	(Yen)	(Yen)	(Yen)	(Yen)
Fiscal year ended	-	0.00	-	0.00	0.00
December 31, 2020
Fiscal year ending	-	0.00	-
December 31, 2021
Fiscal year ending
December 31, 2021			-	14.00	14.00
(Forecasted)

(Note) Revision of dividend forecast: Yes

Concerning the revision of dividend forecast, please refer to the "Notice Regarding the Revisions of Consolidated Financial Forecast and Dividend Forecast for the Year Ending December 31,2021" announced on November 12, 2021.

3. Forecasts on the Consolidated Financial Results for the Year Ending December 31, 2021 (January 1, 2021 - December 31, 2021)

(Percentages represent year-on-year changes)

Revenue

Operating profit

Income before income

Net income attributable to

Basic earnings per share

taxes

owners of the Company

(Millions of

(%)

(Millions of

(%)

(Millions of

(%)

(Millions of

(%)

(Yen)

yen)

yen)

yen)

yen)

Fiscal year ending

260,000

(9.9)

21,000

-

17,000

-

10,000

-

46.64

December 31, 2021

(Note) Revision of forecasts on the results of operations: Yes

(Reference)

Adjusted net income

Fiscal year ending December 31, 2021 (Forecasted)

10,120

million

yen

(-%)

The above Forecasts on the Consolidated Financial Results has been changed from the Forecasts on the Consolidated Financial Results in the "Consolidated Financial Report for the Three-month Period Ended March 31, 2021" announced on May 14, 2021.

Please refer to "Notice Regarding the Revisions of Consolidated Financial Forecast and Dividend Forecast for the Year Ending December 31,2021" announced on November 12, 2021, for further detail.

.

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• Notes
• 1. Changes in status of significant subsidiaries during the period (changes in specified subsidiaries accompanying changes in scope of consolidation): No
     Number of subsidiaries newly consolidated: -
     Number of subsidiaries excluded from consolidation: -
  2. Changes in accounting policies and accounting estimates

(i) Changes in accounting policies required by IFRSs:

Yes

1. Changes in accounting policies other than those in (i): Yes

(iii) Changes in accounting estimates:

No

1. Number of issued shares (common stock)
2. 1. Number of issued shares (including treasury stock)
   2. Number of treasury stock
   3. Average number of issued shares during the period

As of September 30, 2021	227,502,200	As of December 31, 2020	197,502,200
As of September 30, 2021	-	As of December 31, 2020	-
Nine month-period ended	210,023,707	Nine month-period ended	197,502,200
September 30, 2021	September 30, 2020

• This quarterly financial report is not subject to quarterly review procedures by certified public accountants or independent auditors.
• Notes for using forecasted information and other matters
• 1. We have adopted International Financial Reporting Standards (IFRSs).
  2. The forecasts above are based on information available as of the date of this report and certain assumptions deemed to be reasonable. We do not provide any assurance as to achievement of these forecasts. In addition, the actual results may vary materially from the forecasts due to various factors. Refer to page 5 of Appendix "1. Qualitative Information on the Consolidated Financial Results for the Nine-month Period Ended September 30, 2021 (3) Explanation of the Forward-looking Statements including the Forecasts on the Consolidated Financial Results" for further details and disclaimer regarding the use of the forecasts and certain assumptions used in developing those forecasts.
  3. Refer to page 2 of Appendix "1. Qualitative Information on the Consolidated Financial Results for the Nine-month Period Ended September 30, 2021 (1) Explanation of the Consolidated Operating Results" for the details of EBITDA, adjusted EBITDA and adjusted net income.
  4. EBITDA, adjusted EBITDA and adjusted net income are not measures prescribed in accordance with IFRSs but are financial measures that we believe are useful for investors to assess the operating results of our business. These financial measures exclude the effect of non-cash items and non-recurring expense items, such as public offering-related expenses, loss on redemption of borrowings before the repayment date and gain or loss on the associated hedge transactions, and gain or loss on modification of financial liabilities in accordance with the adoption of IFRS 9, Financial Instruments (2014) (including readjustment of the amount of impact from the retroactive application of changes in accounting policies), that we do not consider to be indicative of the results of its normal operations or comparable to its competitors' operating results.
  5. The EBITDA, adjusted EBITDA and adjusted net income may not be comparable to those of other companies in the same industry due to the difference in the calculation method, and, as a result, their usefulness may decrease.

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(Appendix) Table of Contents

1. Qualitative Information on the Consolidated Financial Results for the Nine-month Period Ended September 30, 2021……..	2
(1)	Explanation of the Consolidated Operating Results ……………………………………………………..…..…………	2
(2)	Explanation of the Consolidated Financial Position ……………………………………………………………………	4
(3)	Explanation of the Forward-looking Statements including the Forecasts on the Consolidated Financial Results …...…	5
2. Condensed Interim Consolidated Financial Statements and Notes ……………………………………………….…………..	7
(1)	Condensed Interim Consolidated Statements of Financial Position …………………………………………….………	7
(2)	Condensed Interim Consolidated Statements of Income ……………………………………….……………….………	9
(3)	Condensed Interim Consolidated Statements of Comprehensive Income ………………………………………………	10
(4)	Condensed Interim Consolidated Statements of Changes in Equity ……………………………………………………	11
(5)	Condensed Interim Consolidated Statements of Cash Flows ……………………………………………………...……	13
(6)	Notes on the Going Concern Assumption ………………………………………………………………………………	14
(7)	Notes to Condensed Interim Consolidated Financial Statements ………………………………………………………	14

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1. Qualitative Information on the Consolidated Financial Results for the Nine-month Period Ended September 30, 2021

1. Explanation of the Consolidated Operating Results
   The business environment for the nine-month period ended September 30, 2021 was, as during the previous term, still affected by the spread of the COVID-19 pandemic. Also, due to increased "home-nesting" during the Tokyo Olympics as well as bad weather conditions, we saw a decline in dine-in sales. However, in this harsh business environment, we have undertaken efforts to strengthen our business foundations by further lowering our break-even point.
   Specifically, we reduced fixed personnel and utility costs by closing restaurants during late-night business hours, reduced promotion costs, improved store productivity through the introduction of digital menu books, reduced store rent and modified contracts regarding the amount or the percentage of revenues applied to rents for restaurants with the support from the owners, reduced headquarter expenditures, and reduced selling, general and administrative expenses by suspending unnecessary and non-urgent expenditures. In addition, as a means of reducing costs, we reduced the purchasing unit price by increasing the volume per ingredient through the modularization of ingredients and products, improved productivity of production lines of company-owned manufacturing centers and changed delivery routes and frequencies. As a result, for the nine-month period ended September 30, 2021, we reduced selling, general and administrative costs by approximately 5.4 billion yen compared to 2020 and reduced cost of goods by approximately 2.5 billion yen.
   With respect to dining trends that have affected our revenue, while the frequency of eating out has decreased due to the ongoing COVID-19 pandemic, we believe that our customers increasingly view eating out as more of a special occasion rather than a routine event and an opportunity to spend quality time in a relaxing atmosphere. As such, within our portfolio of brands, performance has been relatively strong for our highly specialized brands and brands with a cozy ambiance. Examples of better performing brands include Musashino Mori Coffee which has a highland resort ambiance, Totoyamichi, a gourmet sushi restaurant, La Ohana, a Hawaiian themed restaurant, and Bamiyan, our affordable and casual Chinese restaurant.
   In addition, our delivery and take-out sales have increased significantly from the rise in demand during the COVID-19 pandemic as well as increase in "home-nesting" households during the Tokyo Olympics. For the nine-month period ended September 30, 2021, our delivery sales was 129% compared to the same period in the previous year (174% compared to 2019) and our take-out sales was 124% compared to the same period in the previous year (265% compared to 2019).
   We remain focused on increasing our delivery and take-out sales, and as of September 30, 2021, we offer delivery services at 2,300 stores, and our household coverage rate in Tokyo and its adjacent three prefectures is 94%.
   To increase the convenience of our customers and enhance our marketing capabilities by unifying our separated customer bases, we have added mobile ordering and pre-payment system for take-out orders in the Skylark App. This has been introduced to brands such as Gusto, Bamiyan, Syabu-yo,Jonathan's, Yumean, and Karayoshi, which spans across approximately 2,760 restaurants. The time made available by reduction of cashier work for pre-settled mobile orders is utilized to improve customer satisfaction through offering better hospitality, smooth ushering of customers to tables, and serving hot food without delay. In addition, we plan to integrate our Skylark App membership base of approximately 7.8 million members with approximately 1.9 million members of our take-out website and approximately 2.2 million members of our delivery website by unifying both services into the Skylark App, with the aim of strengthening of our digital marketing capacities utilizing the app.
   With regards to store development, in July 2021, we opened a Bamiyan restaurant in Sapporo, Hokkaido after approximately 13 years. Since our withdrawal from Hokkaido in 2008, we have continued reforming the Bamiyan brand to meet market needs, and the Sapporo store marks our second opening after the brand's reentry into the Hokkaido market. At the same time, Karayoshi also opened its first store in Hokkaido, delivering specialty store quality karaage to the Hokkaido people.
   In September, we opened the first Syabu-yo restaurant in the United States in Chicago, Illinois. Syabu-yo is a brand where customers can enjoy high-quality meat and fresh vegetables in a healthy, all-you-can-eat style, and the brand has already been successful in Taiwan and Malaysia. While leveraging our group's management resources and know-how, we will
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