Interim report
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Consolidated Financial Statements ( Japanese Accounting Standard ) ( For the three months ended June 30 , 2026 ) Name of Company Listed : Leopalace21 Corporation Code Number : 8848 Name of Contact Person : Representative : URL : https://www.leopalace21.co.jp/english/ Position : President and CEO Stock Listing : Tokyo Stock Exchange Location of Head Office : Tokyo Name : Bunya Miyao Position : Director , Executive Officer and Chief of the Corporate Management Headquarters Name : Shinji Takekura Telephone : + 81-50-2016-2907 Scheduled Date of Commencement of Dividend Payments : Supplemental Explanatory Material Prepared : Yes Results Briefing Held : Yes ( for institutional investors and security analysts ) 1 . Results for the Three Months ended June 30 , 2026 ( April 1 , 2026 – June 30 , 2026 ) ( 1 ) Consolidated financial results August 7 , 2026 ( Amounts less than JPY 1 million are omitted ) Net sales Operating profit ( The percentage figures indicate rate of gain or loss compared with the same period in the last fiscal year ) Net income attributable to shareholders of the parent Recurring profit JPY million % JPY million % JPY million % JPY million % Three months ended June 30 , 2026 115,902 3.7 12,123 ( 1.1 ) 12,279 6.2 7,034 Three months ended June 30 , 2025 111,717 2.6 11,563 555 12,253 ( Note ) Comprehensive income in the three months ended June 30 , 2026 : JPY 7,646 million [ - % ] Comprehensive income in the three months ended June 30 , 2025 : ( JPY 400 million ) [ - % ] Net income per share Diluted net income per share JPY JPY Three months ended June 30 , 2026 22.14 22.14 1.60 Three months ended June 30 , 2025 1.23 ( Note ) The changes in accounting policies have been made from the beginning of the three months ended June 30 , 2026 , and each figure for the first three months ended June 30 , 2025 is presented after retrospective application . The rate of gain or loss compared with the same period in the last fiscal year is not presented . ( 2 ) Consolidated financial position As of June 30 , 2026 As of March 31 , 2026 Total assets JPY million 182,754 178,331 Net assets JPY million Equity ratio % 53,244 26.3 48,150 23.8 ( Reference ) Ownership equity as of June 30 , 2026 : JPY 48,138 million ; as of March 31 , 2026 : JPY 42,416 million ( Note ) The changes in accounting policies have been made from the beginning of the three months ended June 30 , 2026 , and each figure for the fiscal year ended March 31 , 2026 is presented after retrospective application . 2. Dividend Status End of Q1 JPY End of Q2 JPY Dividend per share End of Q3 JPY End of FY Annual JPY JPY FY ended March 31 , 2026 5.00 5.00 10.00 FY ending March 31 , 2027 FY ending March 31 , 2027 5.00 ( Estimate ) 10.00 15.00 ( Note ) Change from the latest dividend forecast : No 3. Consolidated Earnings Forecasts for the Fiscal Year ending March 31 , 2027 ( April 1 , 2026 - March 31 , 2027 ) ( The percentage figures for full fiscal year indicate rate of gain or loss compared with the previous FY ; Those for the six - month period represent the change compared with the same term in the previous FY . ) Net sales Operating profit Recurring profit Net income attributable to shareholders of the parent Net income per share JPY million Six months ending September 30 , 2026 231,900 % 4.5 JPY million % 21,400 JPY million 21,200 % 11.3 JPY million % JPY 12,300 162.4 38.71 FY ending March 31 , 465,000 4.5 38,500 6.3 38,100 8.5 22,200 47.0 69.87 2027 ( Notes ) 1. Change from the latest earnings forecast : No 2. The change compared with the same term in the previous FY has been applied retrospectively due to changes in accounting policies , and is presented in comparison with the figures after retrospective application .
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2 (Notes) (1) Significant changes in the scope of consolidation during the period: No (2) Use of accounting procedures specific to the preparation of quarterly consolidated financial statements: Yes (Note) For details, please refer to 2. Consolidated Financial Statements and Notes (3) Notes Regarding Consolidated Financial Statements (Application of accounting methods specific to the preparation of quarterly consolidated financial statements) in p. 10. (3) Changes in accounting policies, procedures or reporting methods used in preparation of financial statements and restatements (i) Changes in accounting policies accompanying revision of accounting standards, etc.: No (ii) Changes in accounting policies other than (i) above: Yes (iii) Changes in accounting estimates: No (iv) Restatements: No (Note) For details, please refer to 2. Consolidated Financial Statements and Notes (3) Notes Regarding Consolidated Financial Statements (Notes regarding changes in accounting policies) in p. 10. (4) Total number of outstanding shares (common stock) (i) Total number of outstanding shares at term end (including treasury stock) As of June 30, 2026: 334,415,678 shares, As of March 31, 2026: 334,415,678 shares (ii) Total treasury stock at term end As of June 30, 2026: 16,672,664 shares, As of March 31, 2026: 16,712,064 shares (iii) Average number of outstanding shares during the period Three months ended June 30, 2026: 317,728,655 shares, Three months ended June 30, 2025: 347,820,784 shares – Review of the Japanese -language originals of the attached quarterly consolidated financial statements by certified public accountants or an audit firm: No – Explanation on the proper use of the business forecasts, and other special notices: (Note on the business forecasts and other forward-looking statements) The business forecasts and other forward -looking statements contained in this report are based on information currently available to Leopalace21 (hereinafter the “Company”) and on certain assumptions that the Company has judged to be reasonable. Readers should be aware that a variety of factors might cause actual results to differ significantly from these forecasts. Please refer to “1. Summar y of Business Results, (3) Explanation of Consolidated Earnings Forecasts and Other Forward -Looking Statements” on p. 5 of the attached document for the assumptions used in forecasting business results and precautions regarding the use of business results forecasts. (Method for the acquisition of supplemental explanatory material) Supplemental Explanatory Material is planned to be posted on the Company’s website on August 7, 2026.
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3 [Table of Contents] 1. Summary of Business Results .............................................................................................................................. 4 (1) Analysis of Business Results ................................................................................................................................ 4 (2) Analysis of Consolidated Financial Position.......................................................................................................... 5 (3) Explanation of Consolidated Earnings Forecasts and Other Forward-Looking Statements ................................. 5 2. Consolidated Financial Statements and Notes ................................................................................................... 6 (1) Consolidated Balance Sheets ............................................................................................................................... 6 (2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income .......................... 8 Consolidated Statements of Income ................................................................................................................. 8 Consolidated Statements of Comprehensive Income ....................................................................................... 9 (3) Notes Regarding Consolidated Financial Statements ........................................................................................ 10 (Notes regarding the premise of the Company as a going concern) .............................................................. 10 (Notes related to the significant changes in the amount of shareholders equity) ........................................... 10 (Application of accounting methods specific to the preparation of quarterly consolidated financial statements) ..................................................................................................................................................... 10 (Note regarding changes in accounting policies) ............................................................................................ 10 (Notes regarding the consolidated statements of cash flows) ........................................................................ 10 (Segment Information) .................................................................................................................................... 11 (Business combinations) ................................................................................................................................. 13
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4 1. Summary of Business Results The changes in accounting policies have been made from the three months ended June 30, 2026, and figures after retrospective application have been used in the comparative analysis with the three months ended June 30, 2025 and the fiscal year ended March 31, 2026. For details, please refer to “(3) Notes Regarding Consolidated Financial Statements (Note regarding changes in accounting policies)” under “2. Consolidated Financial Statements and Notes.” (1) Analysis of Business Results (JPY million) Three months ended June 30, 2026 Three months ended June 30, 2025 Difference Percentage change Net sales 115,902 111,717 +4,184 +3.7% Cost of sales 89,391 86,612 +2,778 +3.2% Gross profit (ratio) 26,511 [22.9%] 25,105 [22.5%] +1,406 +5.6% [+0.4 p] Selling, general and administrative expenses 14,388 12,851 +1,536 +12.0% Operating profit (loss) (ratio) 12,123 [10.5%] 12,253 [11.0%] (130) (1.1%) [(0.5 p)] EBITDA (Operating profit (loss) + Depreciation) 13,133 13,347 (213) (1.6%) Recurring profit (loss) 12,279 11,563 +715 +6.2% Net income (loss) attributable to shareholders of the parent 7,034 555 +6,479 +1,166.2% Net sales for Q1 of the fiscal year ending March 2027 amounted to JPY 115,902 million, up 3.7% YoY, due to an increasing trend in the average unit rent. Operating profit was JPY 12,123 million, down 1.1% YoY, as a result of the increase in SG&A expenses associated with human capital investment, such as an increase in the number of employees and improvements to employee compensation and benefits. EBITDA decreased by 1.6% YoY to JPY 13,133 million. Recurring profit was JPY 12,279 million, up 6.2% YoY, net income attributable to shareholders of the parent was JPY 7,034 million, up 1,166.2% YoY, mainly due to the recording of JPY 4,930 million in income taxes resulting from a partial reversal of deferred tax assets and others in association with expected decrease in tax loss carried forward. Results by segment are as follows: (JPY million) Net sales Operating profit (loss) Three months ended June 30, 2026 Three months ended June 30, 2025 Difference Three months ended June 30, 2026 Three months ended June 30, 2025 Difference Leasing Business 112,019 107,883 +4,136 14,422 14,251 +170 Elderly Care Business 3,404 3,412 (7) (405) (355) (50) Other Businesses 478 422 +56 (680) (622) (58) Adjustments – – – (1,212) (1,020) (191) Total 115,902 111,717 +4,184 12,123 12,253 (130) (i) Leasing Business During Q1 of the fiscal year ending March 2027, the occupancy rate at the end of the period was 87.08% (up 1.02 points from the end of the same period of the previous fiscal year), with an average occupancy rate of 87.23% (up 0.98 points YoY). The index of average unit rent for new contracts (the index in April 2016 deemed to be 100) at the end of the period was 123, up 11 points from the end of the same period of the previous fiscal year. Consequently, net sales for Q1 of the fiscal year ending March 2027 increased by 3.8% YoY to JPY 112,019 million due to the higher occupancy rate and elevated average unit rent. Operating profit was JPY 14,422 million, a growth of 1.2% YoY, due to increased revenue and improved profitability resulting from the favorable cost structure, despite a rise in property maintenance expenses.
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5 (ii) Elderly Care Business For Q1 of the fiscal year ending March 2027, net sales decreased by 0.2% YoY to JPY 3,404 million and operating loss amounted to JPY 405 million, an increase in loss of JPY 50 million YoY. The number of facilities at the end of the period was 85. (iii) Other Businesses For Q1 of the fiscal year ending March 2027, net sales increased by 13.3% YoY to JPY 478 million and operating loss amounted to JPY 680 million, an increase in loss of JPY 58 million YoY. (2) Analysis of Consolidated Financial Position (JPY million) June 30, 2026 March 31, 2026 Difference Percentage change Assets 182,754 178,331 +4,423 +2.5% Liabilities 129,510 130,180 (669) (0.5%) Net assets 53,244 48,150 +5,093 +10.6% Equity ratio 26.3% 23.8% – +2.5p Assets at the end of Q1 of the fiscal year ending March 2027 were JPY 182,754 million, an increase of JPY 4,423 million from the end of the previous fiscal year. This was mainly due to increases of JPY 7,811 million in cash and deposits, JPY 601 million in prepaid expenses, and JPY 985 million in others in investments and other assets, whereas trade receivables reduced by JPY 794 million, and deferred tax assets reduced by JPY 4,756 million. Total liabilities amounted to JPY 129,510 million, a reduction of JPY 669 million from the end of the previous fiscal year. T his was mainly due to decreases of JPY 2,195 million in accounts payable, JPY 1,793 million in advances received and long -term advances received, and JPY 558 million in provision for warranty obligations on completed projects, whereas accounts payable - other increased by JPY 1,119 million , provision for bonus payment increased by JPY 1,493 million , and customer advances for construction contracts in progress increased by JPY 983 million. Total net assets increased by JPY 5,093 million from the end of the previous fiscal year to JPY 53,244 million. This was mainly due to payment of dividends of JPY 1,634 million, whereas the recording of JPY 7,034 million in net income attributable to shareholders of the parent. The equity ratio increased to 26.3%, a 2.5-point increase from the end of the previous fiscal year. (3) Explanation of Consolidated Earnings Forecasts and Other Forward-Looking Statements Concerning consolidated earnings forecasts for the consolidated fiscal year ending March 2027, the Company confirms that there are no changes to the forecasts for the six months in FY ending March 2027 and for the full FY ending March 2027 that were announced on May 15, 2026 in “Consolidated Financial Statements For the Fiscal Year 2025.” This forward-looking statement is based on the information which is available on the date of release, but actual results may differ significantly from these forecasts due to various factors.
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6 2. Consolidated Financial Statements and Notes (1) Consolidated Balance Sheets (JPY million) June 30, 2026 March 31, 2026 <Assets> Current assets Cash and deposits 65,719 57,908 Trade receivables 7,132 7,927 Accounts receivable for completed projects 1,645 1,554 Real estate for sale 732 524 Costs on construction contracts in progress 1,160 720 Prepaid expenses 2,834 2,232 Others 5,950 6,779 Allowance for doubtful accounts (2,890) (2,973) Total current assets 82,285 74,674 Non-current assets Property, plant and equipment Buildings and structures (net) 18,122 18,095 Machinery, equipment and vehicles (net) 4,266 4,423 Land 32,424 32,253 Leased assets (net) 2,051 2,199 Construction in progress 584 331 Others (net) 3,417 2,949 Total property, plant and equipment 60,866 60,252 Intangible assets Others 873 923 Total intangible assets 873 923 Investments and other assets Investment securities 4,492 4,152 Long-term loans 462 466 Long-term prepaid expenses 1,404 1,453 Deferred tax assets 28,559 33,316 Others 6,524 5,539 Allowance for doubtful accounts (2,713) (2,447) Total investments and other assets 38,728 42,480 Total non-current assets 100,469 103,656 Total assets 182,754 178,331
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7 (JPY million) June 30, 2026 March 31, 2026 <Liabilities> Current liabilities Accounts payable 7,575 9,771 Accounts payable for construction contracts 777 581 Lease obligations 647 637 Accounts payable - other 10,556 9,437 Accrued income taxes 396 617 Advances received 37,082 38,676 Customer advances for construction contracts in progress 2,091 1,107 Provision for bonus payment 1,493 – Provision for apartment owner reward points 24 – Provision for warranty obligations on completed projects (short-term) 888 941 Provision for apartment vacancy loss (short-term) 2,479 2,181 Provision for fulfillment of guarantees 708 740 Others 3,021 2,966 Total current liabilities 67,744 67,660 Non-current liabilities Long-term borrowings 30,000 30,000 Lease obligations 1,800 1,963 Long-term advances received 4,135 4,335 Lease/guarantee deposits received 5,953 6,075 Provision for warranty obligations on completed projects 4,817 5,322 Provision for apartment vacancy loss 713 731 Provision for stock benefits 2,682 2,434 Liability for retirement benefits 9,539 9,379 Others 2,124 2,277 Total non-current liabilities 61,766 62,520 Total liabilities 129,510 130,180 <Net assets> Shareholders’ equity Common stock 100 100 Capital surplus 15,014 15,015 Retained earnings 33,505 28,106 Treasury stock (8,728) (8,749) Total shareholders’ equity 39,891 34,472 Accumulated other comprehensive income Net unrealized gains (losses) on other securities (258) (234) Foreign currency translation adjustments 7,716 7,335 Remeasurements of defined benefit plans 789 841 Total accumulated other comprehensive income 8,246 7,943 Share subscription rights 22 22 Non-controlling interests 5,083 5,712 Total net assets 53,244 48,150 Total liabilities and net assets 182,754 178,331
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8 (2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income Consolidated Statements of Income (JPY million) Three months ended June 30, 2026 (Apr 2026–Jun 2026) Three months ended June 30, 2025 (Apr 2025–Jun 2025) Net sales 115,902 111,717 Cost of sales 89,391 86,612 Gross profit 26,511 25,105 Selling, general and administrative expenses 14,388 12,851 Operating profit (loss) 12,123 12,253 Non-operating income Interest income 11 10 Dividend income 6 6 Gain on valuation of investment securities 23 30 Foreign exchange gain 130 – Share of profit of entities accounted for using equity method 0 – Others 169 61 Total non-operating income 341 108 Non-operating expenses Interest expenses 156 241 Commission fee – 267 Funding costs 25 74 Stock granting expenses – 83 Foreign exchange loss – 108 Share of loss of entities accounted for using equity method – 12 Others 4 10 Total non-operating expenses 185 798 Recurring profit (loss) 12,279 11,563 Extraordinary income Gain on sale of property, plant and equipment 1 65 Gain on reversal of share subscription rights – 150 Total extraordinary income 1 215 Extraordinary losses Loss on retirement of property, plant and equipment 2 0 Impairment loss 4 78 Loss on cancellation of treasury stock acquisition rights – 10,013 Total extraordinary losses 7 10,091 Income (loss) before income taxes 12,273 1,687 Income taxes 4,930 836 Net income (loss) 7,343 850 Net income (loss) attributable to non-controlling interests 308 295 Net income (loss) attributable to shareholders of the parent 7,034 555
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9 Consolidated Statements of Comprehensive Income (JPY million) Three months ended June 30, 2026 (Apr 2026–Jun 2026) Three months ended June 30, 2025 (Apr 2025–Jun 2025) Net income (loss) 7,343 850 Other comprehensive income Net unrealized gains (losses) on other securities (24) (20) Foreign currency translation adjustments 380 (1,234) Remeasurements of defined benefit plans (52) 4 Total other comprehensive income 303 (1,250) Comprehensive income 7,646 (400) (Breakdown) Comprehensive income attributable to shareholders of the parent 7,338 (695) Comprehensive income attributable to non-controlling interests 308 295
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10 (3) Notes Regarding Consolidated Financial Statements (Notes regarding the premise of the Company as a going concern) There are no relevant items. (Notes related to the significant changes in the amount of shareholders equity) There are no relevant items. (Application of accounting methods specific to the preparation of quarterly consolidated financial statements) (Calculation of tax expenses) Tax expenses are calculated by rationally estimating the effective tax rate after applying tax effect accounting to income before income taxes for the fiscal year ending March 31, 2027 including the Q1 cumulative, and multiplying income before income taxes for Q1 cumulative by the said estimated effective tax rate. However, if the calculation of tax expenses using such estimated effective tax rate would be significantly unreasonable, the statutory effective tax rate is used. (Note regarding changes in accounting policies) (Change regarding the recording of non-current assets) Leasing business equipment that the Company has acquired by purchase and installed in each room were previously expensed as incurred. However, such equipment has been recorded as non -current assets from the three months ended June 30, 2026. This change was made since, as a result of comprehensively taking into account risks associated with procurement through leases from the perspectives of economic rationality and operational manageability, the Group has judged, in light of the shift in the method of procuring leasing business equipment from the traditional lease -based method to the purchase - based one, that recording purchased leasing business equipment as non-current assets and allocating the expenses over its useful life through depreciatio n reflects the Group’s financial position and business results in the consolidated financial statements more appropriately. This change in accounting policies has been applied retrospectively, and is reflected in the quarterly consolidated financial statements for the three months ended June 30, 2025 and the consolidated financial statements for the fiscal year ended March 31, 2026. As a result, compared with the figures before retrospective application, others (net) under property, plant and equipment increased by JPY 2,720 million, deferred tax assets decreased by JPY 964 million, and retained earnings increased by JPY 1,756 million in the Consolidated Balance Sheets for the fiscal year ended March 31, 2026. Furthermore, in the Consolidated Statements of Income for the three months ended June 30, 2025, gross profit, operating profit, recurring profit, and income (loss) before income taxes each increased by JPY 47 million, and net income attributable to shareholders of the parent increased by JPY 29 million. As a result, net income per share has increased by JPY 0.09. Because the cumulative effect was reflected in net assets at the beginning of the previous fiscal year, the beginning balance of retained earnings for the previous fiscal year increased by JPY 1,593 million. (Notes regarding the consolidated statements of cash flows) Consolidated statements of cash flows for Q1 of the fiscal year ending March 2027 were not prepared. Depreciation (including amortization of intangible fixed assets) for the three months ended June 30, 2026 and June 30, 2025 is as follows: (JPY million) Three months ended June 30, 2026 (Apr 2026–Jun 2026) Three months ended June 30, 2025 (Apr 2025–Jun 2025) Depreciation 1,010 1,093
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11 (Segment Information) Three months ended June 30, 2026 (April 1, 2026 – June 30, 2026) 1. Information on net sales including breakdown, profit or loss, liabilities and other items by reportable segment (JPY million) Reportable segments Adjustments (Note 1) Amount stated in Consolidated Statements of Income (Note 2) Leasing Business Elderly Care Business Other Businesses Total Net sales Ancillary services 7,602 – – 7,602 – 7,602 Maintenance works 9,444 – – 9,444 – 9,444 Company housing agency 297 – – 297 – 297 Roof lease solar power generation 799 – – 799 – 799 Construction contracting 1,086 – – 1,086 – 1,086 Others – 3,404 334 3,739 – 3,739 Revenue from contracts with customers 19,231 3,404 334 22,970 – 22,970 Rent income 86,538 – – 86,538 – 86,538 Ancillary services 4,998 – – 4,998 – 4,998 Rental guarantee 851 – – 851 – 851 Furniture insurance 399 – – 399 – 399 Others – – 143 143 – 143 Other revenues 92,788 – 143 92,931 – 92,931 Sales to external customers 112,019 3,404 478 115,902 – 115,902 Inter-segment sales and transfers 7 – 92 99 (99) – Total 112,026 3,404 570 116,002 (99) 115,902 Segment profit (loss) 14,422 (405) (680) 13,335 (1,212) 12,123 Note 1: The segment profit (loss) adjustments of -JPY 1,212 million includes JPY 89 million in eliminated inter-segment transactions and -JPY 1,301 million in corporate expenses that are not allocated to any reportable segment. Corporate expenses mainly consist of general and administrative expenses related to administrative departments that do not belong to any reportable segment. Note 2: Segment profit (loss) is adjusted with operating profit in the quarterly consolidated statements of income. 2. Information on impairment loss of non-current assets by reportable segment In the Elderly Care Business segment, since operating losses have been continuously posted, the book value of shared assets was reduced to the recoverable amount, and the amount of the reduction was recorded as impairment loss of JPY 4 million under extraordinary losses.
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12 Three months ended June 30, 2025 (April 1, 2025 – June 30, 2025) 1. Information on net sales including breakdown, profit or loss, liabilities and other items by reportable segment (JPY million) Reportable segments Adjustments (Note 1) Amount stated in Consolidated Statements of Income (Note 2) Leasing Business Elderly Care Business Other Businesses Total Net sales Ancillary services 7,625 – – 7,625 – 7,625 Maintenance works 9,381 – – 9,381 – 9,381 Company housing agency 272 – – 272 – 272 Roof lease solar power generation 774 – – 774 – 774 Construction contracting 353 – – 353 – 353 Others – 3,412 294 3,706 – 3,706 Revenue from contracts with customers 18,407 3,412 294 22,114 – 22,114 Rent income 83,480 – – 83,480 – 83,480 Ancillary services 4,701 – – 4,701 – 4,701 Rental guarantee 875 – – 875 – 875 Furniture insurance 417 – – 417 – 417 Others – – 127 127 – 127 Other revenues 89,475 – 127 89,603 – 89,603 Sales to external customers 107,883 3,412 422 111,717 – 111,717 Inter-segment sales and transfers 4 – 87 91 (91) – Total 107,887 3,412 509 111,809 (91) 111,717 Segment profit (loss) 14,251 (355) (622) 13,274 (1,020) 12,253 Note 1: The segment profit (loss) adjustments of -JPY 1,020 million includes JPY 72 million in eliminated inter-segment transactions and -JPY 1,092 million in corporate expenses that are not allocated to any reportable segment. Corporate expenses mainly consist of general and administrative expenses related to administrative departments that do not belong to any reportable segment. Note 2: Segment profit (loss) is adjusted with operating profit in the quarterly consolidated statements of income. 2. Information on impairment loss of non-current assets by reportable segment In the Leasing Business segment, the book value of assets for lease whose net realizable value has significantly declined was reduced to the recoverable amount, and the amount of the reduction was recorded as impairment loss of JPY 78 million under extraordinary losses. 3. Matters regarding changes in reportable segments, etc. As described in the “Note regarding changes in accounting policies ,” Appliances associated with the Leasing Business that the Company has acquired by purchase and installed in each room were previously expensed as incurred. However, such equipment has been recorded as non-current assets from the three months ended June 30, 2026. This change in accounting policies has been applied retrospectively, and is reflected in the segment information for the three months ended June 30, 2025. As a result, compared with the figures before retrospective application, segment profit of the leasing segment for the three months ended June 30, 2025 increased by JPY 47 million.
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13 (Business combinations) (Transactions under common control) The Company implemented a company split (the “Company Split”) with an effective date of April 1, 2026 based on the resolution at a meeting of its Board of Directors held on January 30, 2026. In th e Company Split, the rights and obligations relating to the Company’s Elderly Care Business have been succeeded to by the Company’s wholly owned subsidiary, Azu Residence Co., Ltd. (“Azu Residence”), by means of an absorption-type company split. 1. Overview of the transactions (1) Details of business subject to the transaction The Company’s Elderly Care Business (2) Date of the business combination April 1, 2026 (3) Legal form of the business combination This is an absorption -type split conducted by the Company as the splitting company and Azu Residence as the succeeding company. (4) Name of entity after the business combination Azu Residence Co., Ltd. (5) Other details regarding overview of the transaction (i) Purpose of the transaction In the Company’s mid -term management plan, “New Growth 2028,” announced on May 9, 2025, the Company set the goal of achieving profitability in its Elderly Care Business at an early stage through stable operations by improving utilization rates. In implementing the company split, the Company transfers the Elderly Care Business to the consolidated subsidiary. It aims to clarify management challenges and enable Azu Residence to enhance profitability and improve operational efficiency. (ii) Details of allocation of shares in the Company Split Since the Company Split has been conducted between the Company and its wholly owned subsidiary, no shares or other consideration are allocated upon the Company Split. 2. Overview of accounting treatment applied The Company has accounted for the business combination as a transaction under common control in accordance with the “Accounting Standard for Business Combinations” and the “Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures.”