Presentation of Financial Results
FYE June 30, 2019
September 2, 2019
Nippon Koei Co., Ltd.
Representative Director and President
Ryuichi Arimoto

I: Accounting Report(July 2018 -June 2019, FYE19/6)

1

Results for FYE June 30, 2019
Orders and Net sales hit a record high, and operating income fell.
(Millions of yen)

FYE18/6
Results

FYE19/6
Results

YoY Change

Amount%FYE19/6
Plan

vs. PlanAmount%Orders104,350

118,085

13,734113.2%

125,000- 6,914

94.5%

Net sales

106,023

108,589

2,565

102.4%

115,000- 6,41094.4%

Gross profit

32,35932,962602

101.9%

34,400- 1,437

95.8%

Operating
Income

6,561

5,110

- 1,451

77.9%

6,200

- 1,089

82.4%

Ordinary Income

6,721

5,584

- 1,137

83.1%

6,100

- 515

91.5%

Profit attributable toowners of parent

4,555

3,318

- 1,237

72.8%

4,100

- 781

80.9%

◼ Orders received and net sales: Although orders received and net sales increased year on year due
mainly to strong performance in the Domestic Consulting segment, results fell short of the plan.
◼ Operating income and ordinary income: Due to lower earnings in International Consulting and upfront
expenses related to new businesses, operating income and ordinary income decreased from theprevious year and fell short of the plan.
◼ Net income: Net income declined year on year due mainly to the realignment of offices, in addition to
the above factors, and fell short of the plan.
2

Consolidated Profit and Loss Summary
Selling, general and administrative expenses increased due to personnel expenses and upfront
investment in new businesses.
(Millions of yen)

FYE18/6
Results

YoY Change

FYE19/6
Results

Amount%Orders104,350

Ratio(vs sales)

118,085

Ratio(vs sales)

13,734113.2%Net sales

106,023100.0%

108,589

100.0%

2,565

102.4%

Cost of sales

73,664

69.5%

75,627

69.6%

1,962

102.7%

Gross Profit

32,35930.5%

32,96230.4%

602

101.9%

SG&A

25,79724.3%

27,851

25.6%

2,053

108.0%

Operating income

6,561

6.2%

5,110

4.7%

- 1,451

77.9%

Non-operating
income/expenses

159

0.2%

473

0.9%

314

296.8%

Ordinary income

6,721

6.3%

5,584

0.4%

- 1,137

83.1%

Extraordinary
income/loss

443

0.4%

0

-

- 443

-

4,555

4.3%

3,318

3.1%

- 1,237

72.8%

Profit attributable toowners of parent

3

Profit/Loss Analysis
Increased due to higher sales in
Domestic Consulting and Urban & Spatial
Development

4,555

+792

■ Profit factor ■ Loss factor

Increases mainly in personnel
expenses and upfront
investment associated with new
businesses(Millions of yen)Previous year's
recording of profit fromthe sale of fixed assets- 189- 2,054

Reaction to expenses
related to relocation ofhead
office
- 382

+314

+343
- 1,276

FYE18/6
Net Profit

increased
sales

Improved
cost ofsales ratio

SG&A

3,318

+833

NonExtraordinary Extraordinary
operatingincomeloss
balance

Taxes
increased

FYE19/6
Net Profit
4Balance sheet / Cash Flows
Balance sheet (millions of yen)Total
assets84,110Liabilities
31,128

Capital 59,449(Equity Ratio 51%)

Equity ratio was maintained at the target level of 50%
Total assets
113,890(Cash 16,392)

Liabilities 54,440(Interest-bearing
debt20,984)

Capital 52,981(Equity Ratio
63%)

FYE2015(before NK-AIM)

Cash Flows (millions of yen)

FYE2015(before NK-AIM)+35%(Cash 13,147)

Liabilities 52,969(Interest-bearing
debt19,721)

+75%

-3%

Capital 59,449(Equity Ratio 51%)

Capital 60,205(Equity Ratio 52%)

(Interest-bearing
debt1,690)(Millionyen)(Cash12,148)

Total assets
113,175

-1%

+12%

+1%
FYE2019

FYE2018

Aggressive investment in technology and human resources

FYE2018

FYE20195

Results by Business Segment (Orders/Net Sales)
FYE18/6
Results

FYE19/6
Results

YoY Change

vs. Plan

Power Engineering

104,350
48,52926,716
15,943

118,085
52,85528,482
15,411

Amount13,734
4,326
1,765
- 531

Urban & Spatial Development

12,855

20,5107,655

159.5%

4,510

128.2%

EnergyPower Engineering

179
106,023
46,59528,88915,762

723
108,589
49,59324,928
16,531

544
2,565
2,997
- 3,960
769

403.3%
102.4%
106.4%
86.3%
104.9%- 3,276- 6,410
5,593- 6,071- 3,468

18.1%
94.4%
112.7%
80.4%
82.7%

Urban & Spatial Development

13,04015,3592,319

117.8%- 1,140

93.1%

Energy

354
1,381
6,561
4,279
2,649
1,873

719
1,456
5,110
4,990
841
2,089

364
75
- 1,451710- 1,807215

202.8%
105.4%
77.9%
116.6%
31.8%
111.5%- 1,780456- 1,089
1,490- 1,558
- 510

28.8%
145.6%
82.4%
142.6%
35.1%
80.4%

173

151

- 21

87.4%

- 448

25.3%

- 18
- 2,396- 365- 2,597

- 346
- 201

-

- 265
202

-

(millions of yen)OrdersDomestic Consulting
International Consulting

Net sales
Domestic Consulting
International Consulting

Real Estate Leasing/Others

Operating income
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate Leasing/Others%
113.2%
108.9%
106.6%
96.7%

Amount- 6,914
6,855- 15,517
1,411

%
94.5%
114.9%
64.7%
110.1%

6

Domestic Consulting◼ The amount of orders received significantly exceeded both the level of the previous fiscal year and the plandue to disaster countermeasures and marked a record high.
◼ Net sales were significantly higher than those of the previous fiscal year and the plan, thanks to the active
initiatives taken for projects related to disaster prevention and mitigation, and national resilience.
◼ Operating income was higher than both the level of the previous fiscal year and the plan due to higher net
sales and a decrease in unprofitable projects resulting from quality assurance and productivity improvements.

Net sales
Cost of sales
Gross profit
SG & A
Operating income

FYE18/6
Results
Ratio
48,529(vs. Sales)
46,595100.0%
33,743
72.4%
12,851
27.6%
8,571
18.4%
4,279
9.2%

◼ Orders◼ Net sales(millions of yen)Orders17/6 18/6 19/6

17/6 18/6 19/6

FYE19/6
Results
Ratio
52,855(vs. Sales)
49,593100.0%
35,61871.8%
13,974
28.2%
8,984
18.1%
4,990
10.1%

◼ Operating income

17/6 18/6 19/6

YoY Change
Amount%FYE19/6
Plan

vs. PlanAmount%4,326

108.9%

46,0006,855

114.9%

2,997
1,874
1,122
412
710

106.4%
105.6%
108.7%
104.8%
116.6%

44,00032,206
11,793
8,293
3,500

5,593
3,412
2,181
691
1,490

112.7%
110.6%
118.5%
108.3%
142.6%

Progress of business strategy
 Further strengthening of the management base
Decision made to incorporate GeoplanNamtech Inc. into theGroup → Page 28
 Supporting global expansion
Launch of part of domestic and overseas cooperation measures Business creation
Business divisions worked together in implementing initiatives forbusiness expansion
 Promotion of efficient business management
Promoted performance management and meeting efficiency
enhancement
7

Project Case Study / Domestic Consulting
Yamba Dam related project
ClientKanto Regional Development Bureau, Ministry of Land,
Infrastructure, Transport and Tourism

Contract value

370 million yen (for the year ended June 2019)

Summary of
project

At Yamba Dam, a wide range of work was carried out inconjunction with the dam construction, including dam
design, geological analysis, study of the stability andmonitoring plan of the slope around the reservoir, studyof mountain stream disaster-prevention facilities, andstudy of tourism promotion plan.
Initial impoundment is scheduled for October 2019.
Photographed in August 2019

Disaster recovery operations following the
Hokkaido Eastern Iburi Earthquake
ClientHokkaido Regional Development Bureau, Hokkaido,
Sapporo City, etc.

Contract value

470 million yen (total)

Summary of
project

Following the Hokkaido Eastern Iburi Earthquake(magnitude 6.7; maximum seismic intensity 7 (Atsuma
Town)) in September 2018, carried out the following:
Identification and monitoring of the present state oflandslide disasters and river channel blockage,liquefaction damage, damage to embankments andbridges, and traffic disturbance caused by long-term
power failure from landslides and other wide-ranging
disasters; investigation, examination and design fordisaster recovery; and preparation of discussion
materials with related organizations.

Handling the blockage of the
Hidaka-Horonai River Channel

Source: Website of the Ministry of Land, Infrastructure, Transport
and Tourism
8

Project Case Study / Domestic Consulting
Bridge design using BIM/CIM technology
ClientNagano National Highway Office, Kanto Regional Development Bureau

Contract value

60 million yen

Summary of project• Detailed bridge design work for the National Highway No. 158 MatsumotoHata Road (motorway)• In addition to improving design quality by utilizing BIM/CIM technology,
improved construction quality by utilizing the technology at the construction
stage• Received the Kanto Regional Development Bureau Chief's Award

Commissioning of survey on the development of amain water distribution system in the Tama district
ClientContract value
Summary of project

Tama Waterworks Reform Promotion Center, Bureau of Waterworks, Tokyo
Metropolitan Government
20 million yen• Formulation of future plans for water distribution areas and facilities in theTama district• Analyzed a water supply network in the study area and formulated a
wastewater pipe renewal and realignment plan that ensured proper waterpressure and took into account the efficient replacement of aged pipes andnon-earthquake-resistant pipes(Use of GPN’s Smallworld)
9International Consulting◼ The amount of orders received was higher than the level of a year earlier, although it fell short of theplan due to a lag in the timing of receiving large orders.
◼ Net sales decreased due to a delay in receiving an additional contract for the Vietnam railway project
and fell short of the plan.
◼ Operating income decreased mainly as a result of a lower operating rate caused by a lag in the timingof receiving orders.
YoY Change
vs. Plan
FYE19/6
FYE18/6
FYE19/6(millions of yen)
Results
Plan
Amount%Amount%Results
26,716 (Percentage
to sales)Net sales
28,889100.0%
Cost of sales
21,191
73.4%
Gross profit
7,698
26.6%
SG & A
5,049
17.5%
Operating income
2,649
9.2%
Orders◼ Orders◼ Net sales

28,482 (Percentage
to sales)
24,928100.0%
18,600
74.6%
6,328
25.4%
5,487
22.0%
841
3.4%

◼ Operating income

1,765 106.6%- 3,960 86.3%- 2,591 87.8%- 1,369 82.2%
438 108.7%- 1,807 31.8%

44,00031,00022,787
8,212
5,812
2,400

- 15,517- 6,072- 4,187- 1,884- 325- 1,559

64.7%
80.4%
81.6%
77.1%
94.4%
35.1%

Progress of business strategy
 Strengthening the production system
Achieved targets in terms of both the number ofregistered regional engineers and the assignment to NK
projects

 Initiatives for Non-ODA projects
Achieved the target in terms of the total amount of orders
received for the segment

 Thorough risk management
17/6 18/6 19/6

17/6 18/6 19/6

17/6 18/6 19/6

Continued activities by task forces such as the LargeScale Project Support Unit
10

Project Case Study / International Consulting
Kampala Flyover Construction in Uganda
Location

Kampala, the capital of Uganda

Contract
periodSeptember 2018 to June 2024

Contract
value

924 million yen

Structure

JV among three firms: Nippon Koei (manager),
Eight-Japan Engineering Consultants Inc., andICS-Engineering & Environment (local company
in Uganda)• A project aimed at helping to improvelogistics and achieve economic revitalizationin the Greater Kampala Metropolitan Area byimproving traffic in the city and promoting
urban traffic

Summary of
project• Starting with the Kampala urban traffic
survey in the 1990s, Nippon Koei has
continuously contributed to improving traffic in
the Kampala urban area by improving city
highways and intersections free of charge• Since 2010, master planning and feasibility
studies were carried out, and after a partial
detailed design (funded by the counterparty
government), this project wascommercialized with ODA loans

11Project Case Study / International Consulting
Construction of New Taketa Bridge in Myanmar
Location

Yangon City, Myanmar

Contract
periodJuly 2014 to September 2018

Contract
value

326 million yen

Structure

JV between two firms: Nippon Koei
(manager) and ORIENTAL CONSULTANTS
Co., Ltd.

Summary of
project• Taketa Bridge, located on an importantroute connecting the city of Yangon withThilawa Port and Thilawa Industrial Park,
was newly built to eliminate bottlenecks inlogistics• Bridge length: 253 m (total length of theconstruction site including the access roadwas 620 m)• Road width: 20 m (four lanes)• Myanmar's first extradosed bridge with aless oppressive feel was introduced inconsideration of economic efficiency andvehicle mobility• Highly evaluated by Myanmar and JICA,
namely for the fixed-point observation
using drones adopted during construction
and the transfer of technology to relevant
parties in Myanmar through OJT and other
means
12

Power Engineering◼ The amount of orders received was slightly down from the previous fiscal year but exceeded the plan,
thanks to large orders acquired in the fourth quarter.
◼ Net sales increased year on year due to the progress in existing operations from the previous fiscal
year, but fell short of the plan.
◼ Operating income increased year on year due to higher sales and thorough cost reductions.
YoY Change
vs. Plan
FYE19/6
FYE18/6
FYE19/6(millions of yen)
Results
Plan
Amount%Amount%Results(Percentag

15,943 e to sales)
Net sales
15,762100.0%
Cost of sales
10,835
68.7%
Gross profit
4,927
31.3%
SG (Million
&A
3,053
19.4%
yen)
Operating income
1,873
11.9%
Orders(Percentag

15,411 e to sales)
16,531100.0%
11,374
68.8%
5,157
31.2%
3,067
18.6%
2,089
12.6%

- 531
769
539
230
14
215

96.7%
104.9%
105.0%
104.7%
100.5%
111.5%

14,00020,00013,961
6,038
3,438
2,600

1,411 110.1%- 3,469 82.7%- 2,587 81.5%- 881 85.4%- 371 89.2%- 511 80.4%

Progress of business strategy◼ Orders◼ Net sales◼ Operating income Expansion of consulting business for mechanical andelectrical services
Received orders for two private mega solar plants

 Strengthening group cooperation (overseas expansion)
Promoted alliances and tie-ups with overseas manufacturers
 Improving price competitiveness and marketing
capabilities through cost reduction
Introduction of Kaizen Methodology

17/6 18/6 19/6

17/6 18/6 19/6

17/6 18/6 19/6

 Promotion of product and technology development
Decision was made at TEPCO Power Grid to adopt a newtransmission system with an improved substation gateway
13

Project Case Study / Power Engineering
Examination of a plan for maintenance and management of road machineryand equipment within Nagoya National Highway service area
ClientNagoya National Highway Office, Chubu Regional
Development Bureau

Summary of
project• Nagoya National Highway Office manages a great
deal—approximately 1,600 units—of road machineryand equipment. It had been pointed out that there was alack of adequate preventive measures against the aging
of machinery and equipment.

Area managed by Nagoya National Highway Office(management extended 436.8 km)• Noticing that most of the road machinery and equipment
was “in operation on a daily basis," a reliability analysis
was carried out, we worked to optimize maintenancemethods, and we drafted a new maintenancemanagement methodology.
• Prepared a draft manual for the inspection, maintenance,and renewal of Nagoya National Highway Office's roadrelated machinery and equipment and delivered a
database system.

Source: Nagoya National Highway Office

Higashi-Kawasaki Substation 275 kV facility remote control project
ClientTEPCO Power Grid, Inc.

Summary of
project• Higashi-Kawasaki Substation is an important substationthat links a thermal power plant with a 275 kV highvoltage system to stably supply the electricity generated• In conjunction with the introduction of remote control for
275 kV equipment, installed a new type of transmission
equipment employing an IP transmission system• Delivered in March 2019
Deliveredequipment
14

Urban & Spatial Development◼ The amount of orders received increased year on year and achieved the plan, contributed to by thestart of full-scale orders related to Westminster and an additional contract for a large-scale project.
◼ Net sales increased as Quadrangle joined the NK Group, in addition to strong orders received.
◼ Operating income decreased due to upfront selling, general and administrative expenses, including
personnel expenses relating to Westminster, in addition to costs related to the acquisition of
Quadrangle. * The actual exchange rate applied to the results for the fiscal year ended June 30, 2019 was 1 GBP = 143.46JPY (the assumption used in the full-year forecast
was 1 GBP = 149.17JPY)** Amortization for the Urban & Spatial Development business in the fiscal year ended June 30, 2019 was approx. 1 billion JPY (goodwill of approx. 400 million
JPY, and other intangible fixed assets of approx. 500 million JPY).

(Million yen)Orders
Net sales
Cost of sales
Gross profit
SG & A
Operatingincome◼ Orders

17/6 18/6 19/6

YoY Change
Amount%FYE18/6
Results

FYE19/6
Results

12,855 (Percentage
to sales)
13,040100.0%
6,957
53.4%
6,082
46.6%
5,909
45.3%

20,510 (Percentage
to sales)
15,359100.0%
8,584
55.9%
6,775
44.1%
6,623
43.1%

173

1.3%

◼ Net sales

17/6 18/6 19/6

151

◼ Operating income

17/6 18/6 19/6

1.0%

FYE19/6
Plan

7,655
2,319
1,627
692
714

159.5%
117.8%
123.4%
111.4%
112.1%

16,00016,500
8,740
7,759
7,159

- 21

87.4%

600

vs. PlanAmount%4,510 128.2%- 1,141 93.1%- 156 98.2%- 984 87.3%- 536 92.5%
- 449

25.3%

Progress of business strategy
 Maintaining and expanding operations in the UK
Orders received, net sales and operating income were all higher
than the results of the past two years
 Expansion of overseas (outside the UK) businessIncorporated the Canadian company Quadrangle into the GroupNK Group x BDP won five Asian deals; in the process ofpromoting multiple deals
 Acquisition of BIM design technology
Held BIM training and Tokyo Seminar for BDP employees
15Project Case Study / Urban & Spatial Development
Boxpark Wembley, England, UK
ClientBoxpark

Summaryof project• Project completed in FYE June 2019
• An event facility with the concept ofenjoying pop-ups in addition to eating
and drinking• BDP was in charge of interior design andlandscape design in addition toarchitectural design, facility design andstructural analysis

Aberdeen Concert Hall, Scotland, UK
ClientAberdeen Performing Arts

Summaryof project• Project completed in FYE June 2019
• A project to renovate a concert hall with a
190-year history• On top of the main hall, added new
facilities such as a studio, a learningspace, and a modern cafe bar• BDP was engaged in architectural design,
facility design, and structural analysis, aswell as lighting and acoustics
16

Project Case Study / Urban & Spatial Development
Business school of the University of Manchester in the UK

ClientManchester Business School

Summaryof project・Project completed in FYE June 2019
・Two buildings built in the 1970s weremerged to create a new school building
・Attractive multicolored vertical finscontrol solar heat on glass surfaces
・BDP was responsible for architecturaldesign, landscape design and acoustics

Qasr Al-Hosn, UAE
ClientAbu Dhabi Tourism and Culture Authority

Summaryof project・Project completed in FYE June 2019
・Qasr al-Hosn, the oldest building in Abu
Dhabi, was renovated over a period of
10 years and has been turned into a
museum as a cultural center
・BDP was in charge of architecturaldesign in recognition of its technology for
restoring historic buildings

17Energy◼ The amount of orders fell short of the plandue to the time lag in receiving orders for theEuropean EPC business, although progress
was made in renewable energy (solar
power) monitoring services and others.
◼ Net sales fell short of the plan due to theaforementioned time lag in receiving orders,
although revenues from monitoring services
and the domestic power generation
business were recorded.
◼ There was an operating loss due toanticipatory costs for the International
Energy Management business.

vs. Plan
FYE19/6
Plan
Amount%(Million yen)FYE19/6
Results

Orders723 (Percentage
to sales)

4,000- 3,276

18.1%

Net sales

719

100.0%

2,500- 1,781

28.8%

Cost of
sales

845

117.5%

2,092- 1,247

40.4%

Gross profit

- 126

-

407

- 533

-

SG & A

238

33.2%

507

- 269

47.1%

Operatingincome

- 365

-

- 100

- 265

-

Two orders received for the power storage system
EPC (total of 19 MW) in the UK
Client

NEC Energy Solutions

Contract value

Approximately 420 million yen

Summary of
project

Two EPC projects in the UK power storage system businessfunded by the Gore Street Energy Storage Fund.
NEC Energy Solutions, which leads
the EPC, supplied a large-scaleenergy storage system. Nippon
Koei undertook designing andengineering of the entire peripheral
electrical equipment of the energy
storage system, procured
equipment, conducted electricaland civil engineering work, andmanaged on-site construction work.

Progress of business strategy
 Domestic power generation business
Progress in the construction of ahydroelectric power plant went asplanned Overseas power generation business
Iligan Thermal Power Station to startfull-scale operation in December 2019
 Overseas energy managementbusiness
Established the European base NKEE
Decided on a joint venture with aEuropean company

18II: FYE 20/6 Forecast

19Key Points of the FYE June 2020 Forecast(Million yen)

⚫ Year-on-year increase in sales and profits• Orders received: Aiming to conclude contracts for international consulting projects with a gap in termin the current term
• Operating income: Recovery in the International Consulting business• Standardization of accounting standards within the Group by adoption of IFRS (results are disclosed
at the end of the fiscal year)
The primary impact of adopting IFRS is an increase in operating income for the goodwill portion by
900 million yen

Points offorecast

Key points of
the revision inplan⚫ Upward adjustments in orders and sales due to continuous strong performance in theDomestic Consulting business and recovery of contract delays in some large-scale
projects in the International Consulting business⚫ Increase in general and administrative expenses as business expands, including theaddition of new consolidated subsidiaries(Million yen)JapaneseGAAP

FYE19/6 FYE20/6
Results Forecast

YoY

IFRS

FYE20/6 FYE20/6
Correction
Forecast Forecast
rate
After
Initialadjustment

Orders137,400
118,085 ★Record
high+16.4% Orders

125,000 137,400+9.9%

Net sales

127,700
108,589 ★Record
high+17.6% Sales revenue

125,000 127,700+2.2%

Operating Income

5,110

5,800

+13.5% Operating Income

Ordinary Income

5,584

6,200

before+11.0% Income
income taxes

Profit attributable toowners of parent

3,318

3,600

attributable to+8.5% Profit
owners of parent

7,900

6,700

-15.2%

-

7,000

-

5,200

4,500

-13.5%
20

FYE June 2020 Forecast（millions of yen）
OrdersDomestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyNet sales
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate Leasing/Others
Operating income
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate Leasing/Others
Ordinary Income
Profit attributable to owners of parent
Operating margin (%)
ROE (%)FYE 19/6
Results
118,085
52,85528,482
15,411
20,510723
108,589
49,59324,928
16,531
15,359
719
1,456
5,110
4,990
841
2,089
151
-365
-2,597
5,584
3,318
4.7
5.7

FYE20/6
Forecast(Japanese GAAP)

137,400
52,40048,10016,00018,6002,100
127,700
51,30034,50019,60018,800
2,200
1,300
5,800
4,200
2,900
2,200
600
-800
-3,300
6,200
3,600
4.5
6.1

YoY Change
AmountYoY Change%

19,314-455
19,617588-1,9101,376
19,110
1,706
9,571
3,068
3,440
1,480
-156
689
-790
2,058
110
448
-434
-702
615
281

116.4%
99.1%
168.9%
103.8%
90.7%
290.1%
117.6%
103.4%
138.4%
118.6%
122.4%
305.8%
89.3%
113.5%
84.2%
344.6%
105.3%
395.0%
111.0%
108.5%

FYE20/6
Forecast(IFRS)

137,400
52,40048,10016,00018,6002,100
127,700
51,30034,50019,60018,800
2,200
1,300
6,700
4,300
2,900
2,300
1,500
-900
-3,400
4,500
5.2
7.5
21

III: Progress of the Medium-Term
Management Plan andInitiatives for the Year Ending
June 202022

Long-Term Management Strategy and Current Medium-Term
Management Plan NK-Innovation 2021
3rd STEP NK-Innovation 2021
(FYE2019 – FYE2021)
Enhancement of operating system for Railways Business2nd STEP NK-AIM(FYE2016 – FYE2018)
1st STEP(FYE2013 – FYE2015)• Strengthening global
expansion• Development andformation of new
business areas

Overseas expansion of Urban & Spatial Development
Business
Establishment of Energy Business• Sustainable expansionof three corebusinesses• Creation and expansionof new businesses

Creation of businesses and overseas expansion ofConsulting Business
Product development and Overseas expansion of PowerEngineering Business
Establishment of one-stop marketing system

Further progress in global
expansion

Establishment and operationof overseas business sites

Increase profitability bydeepening core businesses

Strengthening existing
business fields andexpanding business areas

Creation of new business
areas

Investment in technologies and human resources
Enhancement of group governance108billion

127billion

FYE2021Net sales(Plan)¥
billionOperating income

106billion

Developing new businessmodels

140

12.6

¥
billionOperating margin
9.0%

81.8billion
Net sales
Basic
Objective
Group Vision

Continue to evolve into a global consulting and engineeringfirm

To provide services that are of value in building safe andReliable social infrastructure and comfortable living spaces.
23Medium-Term Management Plan NK-Innovation 2021 —First Year Progress
Strengthen the structure by increasing the number of Group companies and establishing new organizations, andstart new initiatives one after another
Business strategy
Enhancement ofoperating system
for Railways
Business
Overseas
expansion of
Urban & Spatial
Development
Business

Establishment ofEnergy Business

Key initiatives
Develop and strengthen the production system in alliance, etc., with local companies
Improve project management ability by further evolution of IT tools
Strengthen technological abilities of regional engineers with teaching materials from the head
office and the implementation of OJTDevelop a cooperative structure between the NK Group and BDP local subsidiaries (Singapore,
India and China) to win urban development projects in Asia and specific projects
Strengthen the superiority and uniqueness in smart city development by accumulating trackrecords of projects combining civil engineering and architecture
Construct cooperative structures with each segment and R&D Center led by domestic divisions
for the acceleration of global expansion utilizing domestic know-ho
Engage in investment and business in Europe where liberalization of electric power is under
way to accumulate the know-how for energy management in anticipation of electric powersystem reform
Develop and operate distributed power sources in Japan and Asian region
Efforts in the hydroelectric power concession business

Creation ofbusinesses andoverseas expansionof Consulting
Business
Product
development andOverseas expansionof Power
Engineering
Business

Initiatives in FYE2019• Order received for Dhaka Urban
Transport Development Project• Establishment of a local subsidiary
in Bangladesh, establishment of
Dhaka Metro Development Officeand Logistics Planning Promotion
Office• Incorporation of Canadian
QUADRANGLE ARCHITECTS
LIMITED into the Group• Order received for the Indian
Smart City Project• Establishment of a European
base• Participation in the UK storage
battery EPC Project• Decision to establish a joint
venture with a European
company

Reinforcement of domestic management base and support for the promotion of global
strategies
Promotion of priority business areas(Disaster-prevention/mitigation. Modal connect, local/urban
revitalization, information/energy areas)• Incorporating GeoplanNamtech
Inc. into the Group

Creation of new businesses centered on management techniques to improve the value of
infrastructure
Development of international standard specification products (mainly equipment for substations)
Building a supply chain by securing overseas production bases for hydroelectric products• Delivery of enhanced substation
gateway equipment

Reinforcement of price competitiveness and improvement of productivity in existing business
areas
24

Medium-Term Management Plan NK-Innovation 2021 —First Year Progress
Promote group governance through the introduction of IFRS and the establishment of business
management guidelines
Common Groupwide measures

Establishmentof one-stop
marketingsystemInvestment intechnologies
and human
resources

Key initiatives
Improve the customer satisfaction level by providing solutions
that leverage products and services from all segments

Create businesses in target business areas (smart society)through long-term collaboration and integration with othersegments

Promote technology strategies
Pursue strategic technological development toexpand existing businesses
New business initiatives
Personnel system reform

Strengthen recruitment activities

Initiatives in FYE2019• Roundtable meetings (Singapore, London,
Manila)• Considering entry into the airport businessand hydroelectric power related business• Support for overseas expansion• Review and promote technology strategy
themes• Establishment of Research andDevelopment Planning Office and Center
for Advanced Research and Development• Increasing the number of employees• Promotion of the WLB campaign

Promote work style reform

Enhancementof group
governance

Establish a group governance system
Promote global accounting platforms GAGE and IFRS, andcontinue to support BEPS to reinforce tax compliance• Establishment and implementation ofbusiness management guidelines• Promotion of GAGE, IFRS, and BEPS

25

NK-Innovation 2021 — Priority Issues for FYE June 2020
Enhancement of operating
system for Railways Business➢ Establish local production systems through promoting alliances

Overseas expansion of Urban &Spatial Development
Business➢ Expand operations in the Canadian and Asian markets➢ Develop the Japanese market

Establishment of Energy
Business➢ Pursue business development and accumulate operating results andknow-how in Europe➢ Acquire the hydropower concession business in Japan

Creation of businesses andoverseas expansion ofConsulting Business➢ Promote alliances and accelerate business creation➢ Acquire orders in new technology fields by taking advantage of thesuperiority of domestic technologies

Product development andOverseas expansion of PowerEngineering Business➢ Create new products and services➢ Build domestic and overseas supply chains

Establishment of one-stop
marketing system➢ Promote cross-segment projects such as smart cities

in technologies and humanresources➢ Maintain and improve superior technologies such as disasterprevention/mitigation and maintenance management using AI➢ Expand hiring, strengthen education, and promote early
demonstration of capabilities

Enhancement of group
governance➢ Introduce IFRS and establish a global accounting platform
26

Creation of businesses and overseas
expansion of Consulting Business

Domestic Consulting
Market environment◼
◼
◼

(100 million(Trillionyen) Public works expenses and Orders in Domestic Consulting yen)

Public investment level is flat
Focus on national resilience, extending infrastructure life, andcompact city
Contract value of 50 major construction consulting companies
remained high at 563.8 billion yen in FY2018

Initiatives for business expansion⚫ Further strengthening of the management baseDevelop human resources, expand production system, improve
quality, and secure WLB⚫ Promoting global strategy (collaboration with other businessdivisions)
Promote establishment of a collaboration system⚫ Business creation
Expand business based on business creation-oriented organization⚫ Promotion of efficient business management
Streamline business operations, promote measures to improve
productivity, and continuously reduce costs

Areas Focused On
Disaster prevention/
mitigation

Dam restoration, volcanic disaster prevention, and large-scale
earthquake countermeasures

Modal connection

Large-scale renovation and repair of infrastructure, maximization of
traffic stock, etc.

Regional revitalization

Urban development project for regional revitalization (compact city,
etc.)Management
Information and energy

Compact & network, concession, PM/CM
Productivity improvement by using ICT/AI; renewable energy■Initial Budget □ Revised budget ● Orders in Domestic Consulting(Source) "Points of the FY2019 Public Works Budget of the Ministry of Land,
Infrastructure, Transport and Tourism” December 2018 (Ministry of Finance)

Regions FocusedOn

Customers
Focused On

Further strengthen
cooperation inwestern Japan(Osaka, Shikoku andHiroshima)

Reinforce response
to local governments
and the private
sector while
continuing to attainorders related to thestate government

Be the cornerstone of the global development of NK and become an overwhelming leader in Japan in
the long term27

Priority investment area: Creation of businesses andoverseas expansion of Consulting BusinessIncorporation of GeoplanNamtech Inc. into the Group effective FYE June 2020
GeoplanNamtech Inc.
⚫ An IT consulting company whose main business issales and support of IT information systems for the
network infrastructure field⚫ Engages in the network asset management business
which involves consulting, customization, maintenance,and operation support for the introduction of network
asset management software for electricity, gas, water,
and telecommunications business operators in Japanand overseas

Nippon Koei Group
companies

GeoplanNamt
ech Inc.

Possessing know-how inconstruction consulting andoverseas networks
Business perspective

System development, asset
management,
data analysis and operational
supportIT perspective

Fusion of business and IT perspectives
Analyze and evaluate big data, plan for timely updates andpropose plans to optimize business operations◼ Conceptual Image of Business Development
Existing fields of the Nippon Koei GroupNew business model

Use of data to deepen consulting services

To be an administrator with data

Investigation and planning• Proposal for systematization• Building a business model• Starting the data business

Design and construction
supervision• Interviewing needs• Requirements definition/systemdesign• Data entry/delivery

Operation and maintenance

Expansion and updating• System operation management andmaintenance• Continuous data update operation• Analysis and evaluation of businessefficiency improvement• Deployment to various infrastructure
facilities• Expansion of support for disastercountermeasures• Support for smart cities
28

Strengthening the production
system for the Railway Business

International Consulting

ODA Loans by Sector
Approval Status (FY2017)Market environment◼
◼
◼

ODA, PPP, and private sector expansion due to growing
infrastructure demand
Japan's high-quality infrastructure export strategy continues
Transportation is the main field of ODA loans and India and
Bangladesh are the priority areas

Product loan
31%

Transportation
41%

Initiatives for business expansion⚫ Strengthening the production system
Secure staff members, train and utilize regional engineers, andpromote alliances⚫ Project volume in non-ODA areas expanding
Collaborate with other industries and strengthen production
systems at Group companies⚫ Reinforcement of risk management
Conduct regular technical and safety patrols and proactive risk
management⚫ Stable revenue management
Ensure thorough profit management and reinforce group
governance⚫ Ensuring safety
Establish a safety network with Group companies

Ratio of non-ODA orders in International Consulting
FYE2019
Approximately

24%

Irrigation & flood
control
4%Electrical &Gas
7%(Source)
JICA

Trends in Funds Flow to
Developing Countries

30%(USD million)

Other(Direct investment,
etc.)

1,000,000

35.3%

Non-ODA:
Funds other than
the following

48.2%(FDI, etc.)

600,000ODA

FYE2021 target
Approximately

Social services
12%

16.5%

2003

2009

2015 (Source) OECD

Expand to become Japan’s leading engineering consulting group that can compete globally29

Product development and Overseas
expansion of Power Engineering Business

Power Engineering

Initiatives for business expansion

Market environment◼ The domestic electric power market continues
to cut costs in order to achieve world-classconsignment costs◼ Feed-in-tariffs (FIT)-related laws to be revised
as early as in 2020
◼ Expanding business opportunities throughpower system reforms and digitization⚫ Expansion of the electric power engineering business
Share sales information within the Group and collaborate with the Energy
Business⚫ Expansion of the mechanical and electrical consulting business
Expandinto new areas in addition to securing sales and profits in existing areas⚫ Strengthening group cooperation
Develop hydroelectric power generation, and maintenance and managementbusiness, and pursue overseas deployment⚫ Strengthening price competitiveness and marketing capabilities throughthorough cost reductions
Secure sales profit by reducing construction and product costs, and improve
productivity⚫ Promotion of product and technology development
Develop products with global standard specifications and deploy them in Japanand overseas

Action plans for existing businesses andnew areas• Pursue R&D to upgrade andenlarge existing products• Pursue R&D related to new
products and services(switchboard, etc. withinternational standardtransmission standards)

Strengthen pricecompetitiveness

Create new
products andservices• Pursue thorough cost reductions• Strengthen integrated manufacturing
and sales strategy• Improve productivity

Globalexpansion

Diversificationof customers• Deliver turbine power generation products
to overseas• Secure production bases for hydroelectric
power generation products• Deliver products to the Energy Business• Other power companies, government agencies andentry into the private sector• Expand into the overseas electric power markets

Expand new business opportunities and supplier/business networks
30

Urban & Spatial Development

Initiatives for business expansion

Market environment◼
◼
◼

Increased demand for construction and transport
infrastructure due to urbanization
Expansion of smart city development such as public
transport-oriented development (TOD: Transit Oriented
Development)
Need to bear in mind the impact of increased
uncertainty over Brexit
Sales by Field of Top 164 Survey and Design Companies in
FY2018 (100 million U.S. dollars)Architecture

Overseas expansion of Urban &Spatial Development Business

Traffic and transportation(Source) ENR Magazine⚫ Reinforcement of profit base outside U.K.
Respond to the UK domestic market and minimize impact
Collaborate with the Canadian architectural design company
Quadrangle⚫ Strengthening the business execution system
Share market strategies with Domestic Consulting and International
Consulting, and establish a system for cooperation
Collaborate within the group⚫ Building new business models
Create a market by packaging the civil engineering field andarchitecture redevelopment (Japan)
Exploit markets (overseas) through cooperation between the NKGroup and the BDP Group⚫ Megatrends (rapid increase in urban population) and Asianmarket strategy
Respond to urban development backed by vigorous private
investment
Plan and participate in redevelopment projects centered on urban
transport networks in the Asian region

Growth strategy for the Urban & Spatial
Development business
Phase1

Phase2Phase3Phase4

Promote collaboration between
the Nippon Koei Group and BDP
in existing Asian markets

Reorganize tostrengthen corefunctions

Establish drivers torealize growthstrategies

Manage projects andparticipate as an operating
entityMarkets: UK, Canada, Asia

Markets: UK, Canada, Asia, Japan

Construct a service package that integrates civil engineering and construction, and deploy the
package globally, including in Japan31

Establishment of Energy
Business

Energy Business
Market environment◼ Expanding demand for renewable energy in conjunction with the drive for low-carbon and dispersion of powersource in the global energy market◼ As a result of the above, new markets such as ancillary, peak arbitrage, and capacity markets are expanding◼ The Ministry of the Environment earmarks the introduction of demand-side control equipment as a new project in
the fiscal 2020 budget

Domestic power generation
Development andoperation ofhydroelectric power
generation in Japan

Overseas power generation
Development andoperation of power
generation
overseas➢ Seven hydroelectric power plants in Japanin operation and two plants underconstruction (Fukushima and Yamagata
Prefectures)➢ Small hydroelectric power development in
the Chikaengan River basin, Indonesia➢ Biomass thermal power generation project
under way in Mindanao, the Philippines

Domestic energy management

Overseas energy management

Renewable energy
monitoring andenergy conservation
consulting services➢ Conducted VPP demonstration project(assisted by METI)

Ancillary services
and otherbusinesses andinvestments➢ Developing projects with European
companies

Initiatives for businessexpansion
Power generation business• Increase operational andmaintenance efficiency• Enhance and commercialize
domestic and overseas pipelines

Energy Management Business• Establish structure at NKEE, theEuropean base
• Promptly stabilize the European
business with NKEE at the core
• Build a foundation for energy
management business in Japan• Deploy business in Asia

Establish multi-service support and profit structure for various businesses related to energy
management32

Group-Wide Measures: Investment inTechnology and Human Resources
Technology

Investment in technology
and human resources

R&D budget for the next two years: approximately 2.4 billion yen

Continue investments in 14 technology strategy themes
I. Innovative technology

II. Next-generation
business• Measures against climate• Artificial intelligencechange• New environmental• Disaster prevention/mitigation
survey methods• Data network• Resilience• Analysis, design and proposal• Architecture, cities, andtransportation• Smart cities and towns• Maintenance and management• Big data

III. Internal infrastructure
and productivity• PM-IT• BIM• Production system

Investigation, research and technological development of advanced technologies⚫ Develop advanced technologies such as adopting AI for disaster prevention and mitigation, apply them toexisting business fields, and pursue new business initiatives⚫ Implement open innovation
Advanced development to maintain and improve superior technologies⚫ Return R&D and research results to business fields⚫ Disseminate and penetrate technologies developed

Human Resources

Increase the number of Group employees by approximately 2,000 from FYE
June 2019 to FYE June 2020

Hiring and training of regional engineers overseas⚫ Target registration of 120 persons in FYE June 2020
Personnel system reform⚫ Reconstruct various systems for qualifications, roles, evaluations, and compensation to improve professional
performance and motivation
Career vision⚫ Plan and implement training programs in accordance with the human resource development vision and carryout various related measures
Promoting work-life balance⚫ Improve productivity and promote diverse and flexible working styles (promote various campaign activities andSmooth Biz)
33

Key Points of the Medium-Term Management Plan Projections(Million yen)

FYE2020 Plan

Orders

Net sales¥137.4billion¥127.7billion

FYE 2021 (Final year of the Medium-Term Management Plan) Plan
Operatingincome¥6.7billion

Orders

Net sales¥140billion¥140billion

Operatingincome¥12.6billion■Orders ■Net sales ■Operating income ●Operating ratio

Main points for achieving FYE 2021 targets⚫ Continuing strong performance in Domestic
Consulting⚫ Alliances in the transportation field inInternational Consulting

140,000 140,000
137,400
127,700
118,085
108,589⚫ Urban development and full-scale deploymentof smart cities, etc. in Asia and Japan
12,600⚫ Proceeds from sales resulting from therestructuring of the investment portfolio toestablish a business in the energy sector

6,700
5,110
4.7%
FYE19
Japanese GAAP

9.0%

5.2%
FYE20
Plan

IFRS

FYE21
Plan
34

Capital Policy/Dividend Policy
Capital policy• Conduct appropriate financing in line with the circumstances and improve capital efficiency• Target equity ratio of 50% and maintain at least 40% even during concentrated investment periods• Repurchase treasury stock to improve the per-share value by improving capital efficiency andenhancing shareholder returns. Repurchase of up to 800,000 shares worth up to 2.0 billion yen isplanned by June 2020.

• Strive to increase corporate value by expanding business through growth investments based on
medium- and long-term strategies
Enhancementof corporate
value

Securing offinancial soundness

Investments for
future growth

Improvement ofCapital efficiency

Stable dividends/
enhancement ofshareholder
returns

Dividend policy•

Aim for a dividend payout ratio of 30% and strive to provide
stable dividends and enhance returns to shareholders inline with the rise in the profit level✓ Plan to pay out dividend of 100.0 yen, an increase of 25
yen, in the fiscal year ending June 202035

Act with integrity and contribute to society through technology and engineering.

This material is for information purposes only and is not intended to solicit any action. Nippon Koei prepared this material(including earnings forecast) based on credible information available at the time of publication and on certain
assumptions we deemed reasonable at the time. Actual business results, etc. may vary substantially due to various
factors.

For inquiries about our IR information, please contact:
Corporate Communication Office, Corporate Planning Dept., Nippon Koei Co., Ltd.
c-com@n-koei.co.jp
36