ｓｓｓ
October 31, 2016

TOKAI Holdings Corporation
Katsuhiko Tokita, President & CEO(Code No. 3167 Tokyo Stock Exchange First Section)
To whom it may concern

Financial Results for the First Half of the Fiscal Year Ending March 31, 2017
Record-High Profits, Upward Revision to FY Earnings Forecasts, and Upward Revision to Dividend Forecasts

TOKAI Holdings Corporation (hereinafter, the “Company”) today announced its financial
results for the first half of the fiscal year ending March 31, 2017 (April 1, 2016 to September 30,2016).
(Millions of yen)
1H FY03/17

1H FY03/16

Initial Forecast(April 1, 2016 to(April 1, 2015 to(April 1, 2016 to

September 30, 2016)

September 30, 2015)

September 30, 2016)

Year-on-year

Vs. Initial
Forecast

Sales

82,201

84,77385,300-2,571-3,098Operating profit

4,406

1,856

3,380

+2,549+1,026

Recurring profit

4,428

1,779

3,270

+2,649+1,159Quarterly net

2,384

277

1,120

+2,107+1,264

21.00

2.39

9.89

+18.61+11.11incomeEPS (Yen)

1. Significantly Higher Profits Led to Record-High Profits
In comparison to earnings forecasts for the first half announced in May 2016 (operating profit toincrease from 1.9 billion yen in 1H FY03/16 to 3.4 billion yen in 1H FY03/17), operating profit
demonstrated progress of over 1.0 billion yen more than forecasts (up 30.4%), significantly higher(+2.5 billion yen, up 137.4%) than the 1H FY03/16 results; all profit indicators posted historic highs
during 1H FY03/17.
Active sales promotion activities conducted for Hikari Collaboration1—an area of focus during
FY03/17—during the previous fiscal year were successful, resulting in a 1.3 billion yen
improvement, and the Aqua (bottled water delivery) business also showed an 800 million yen
improvement and achieved profitability, owing to factors such as a shift in the sales strategy. For
these reasons, operating profit increased significantly, by 2.5 billion yen year-on-year.

2. Upward Revision to Full-Year Earnings Forecasts
Under the “Innovation Plan 2016 ‘Growing’” (hereinafter “IP16”) medium-term management
plan announced in June 2014, the period from the fiscal year ended March 31, 2015 to the fiscal
year ending March 31, 2017 has been positioned as a period to enhance business profitability, andthe current fiscal year is the final year.
Concerning full-year earnings results for the fiscal year ending March 31, 2017, initial forecasts
announced in May 2016 projected that all profit indicators would post historic highs, with operating
profit of 12.6 billion yen, recurring profit of 11.8 billion yen, and net income of 6.2 billion yen.
As stated above, operating profit for the first half demonstrated progress ahead of initial
forecasts, and full-year earnings results are projected to exceed initial forecasts even afterincorporating some cost factors expected during the second half, such as additional upfront costs forcustomer base expansion toward the fiscal year ending March 31, 2018 onward. As a result,full-year earnings forecasts have been revised upward as follows.
(Millions of yen)
FY03/17

FY03/16

InitialForecast

Results

Forecast(April 1, 2016 to(April 1, 2015 to(April 1, 2016 to

March 31, 2017)

March 31, 2016)

March 31, 2017)

Year-on-year

Vs. Initial
Forecast

Sales

179,700

180,940

187,100-1,240-7,400Operating

12,7508,245

12,560+4,505+190

12,3608,150

11,830+4,210+530

Net income

6,500

3,458

6,240

+3,042+260

EPS (Yen)

57.23

30.01

55.13

+27.22+2.10

profitRecurringprofit3. Upward Revision to Dividend Forecasts (Increase of 14 yen per share versus annual dividends of
14 yen per share during the fiscal year ended March 31, 2016)
As stated above, full-year earnings forecasts were revised, and the goals set forth in the “IP16”
medium-term management plan are within sight. To respond to the support of shareholders,
year-end dividends for the fiscal year ending March 31, 2017 shall be a total of 17 yen per share,including an ordinary dividend of 11 yen and an “IP16 achievement” commemorative dividend of 6yen.
In line with the above, annual dividends will be revised from 22 yen per share to 28 yen, an
increase of 14 yen (double) versus the fiscal year ended March 31, 2016.
FY03/17

FY03/16

FY03/17(Forecast)

Results(Initial Forecast)End of Q2

11.00

6.00

11.00

8.00

11.00

17.00
Year-end(Ordinary dividend: 11.00)(Commemorative dividend: 6.00)

Annual dividend total

28.00

14.00

22.00

Consolidated payout ratio

48.9%

46.7%

40.0%

For details, please see the attached materials, entitled “Financial Results for the First Half of
the Fiscal Year Ending March 31, 2017.”
Furthermore, for the Company’s first half earnings announcement for the year ending March 31,2017 please see the following URL.
http://tokaiholdings.co.jp/english/ir/library/earnings.html
1: ISPs that provide self-branded optical broadband service via fiber optic lines provided by NTT.

Contact: Yoshihiro Taniguchi
Public Relations and Investor Relations Office
TEL: +81-(0)54-669-7676
Email: overseas_IR@tokaigroup.co.jp

Financial Results for the First Half of the
Fiscal Year Ending March 31, 2017
TOKAI Holdings Corporation(Code: 3167)
October 31, 2016

Significantly higher profits led to record-high profits◎ Progress exceeded initial forecasts (Operating profit: +30.4%; Net income: +112.9%)◎ Profitability improved steadily in Hikari Collaboration and Aqua, areas of focus for the current
fiscal year (the two businesses combined, improvement of 2.1 billion yen versus forecast of 1.6
billion yen), contributing to earnings. Aqua achieved profitability over the interim period◎ Effect on sales of price revisions resulting from lower prices of raw materials for gas was minus
4.8 billion yen year-on-year(Sales and profits: Millions of yen, EPS: Yen)
1H
FY03/171H
FY03/16

InitialForecasts

Sales

82,201

84,773Operating profit

4,406

Of which, Hikari
Collaboration

YoY

Vs. Initial Forecasts

Amount of
ChangePercent
Change (%)

Amount of
ChangePercent
Change (%)

85,300-2,571-3.0-3,098

-3.6

1,856

3,380

+2,549+137.4+1,026

+30.4

-182

-1,512-505+1,330-+324-

Of which, Aqua

201

-616

-65

+817

-

+267

-

Recurring profit

4,428

1,779

3,270

+2,649+148.9+1,159+35.4

Net income

2,384

277

1,120

+2,107+760.2+1,264+112.9(EPS)(21.0)(2.39)(9.89)(+18.61)(+777.6)(+11.11)(+112.3)*Operating profit for Hikari Collaboration and Aqua are before elimination of indirect expenses

1Market conditions for prices of raw materials for gas◎ Against a backdrop of oversupply in the global oil market, crude oil prices havecontinued to decline since 2014
◎ In line with this, LPG and LNG prices are also trending downward◎ Prices of raw materials for LP gas are at 64% of those seen during 1H FY03/16, while
LNG is at 57%; the effect of price revisions on the Company sales is minus 2.3 billion
yen in LP gas and minus 2.5 billion yen in city gas
1H FY03/17

LPG

LNG

1H FY03/16

Year-on-yearCPaverage

309 $/ton

426 $/ton-117 $/ton

Avg.
exchange rate

107.9 yen/$

121.5 yen/$-13.6 yen/$

CP x exchange
rate

33,341 yen/ton

51,759 yen/ton

40,14470,817-30,673 yen/ton

yen/tonyen/ton(56.7% vs. 1H FY03/16)

CIF
average*-18,418 yen/ton(64.4% vs. 1H FY03/16)*Source: “Trade Statistics,” Ministry of Finance2

Full-year results to outperform in light of 1H◎ 1H outperformed forecast by about 1.0 billion yen due to the following factors
Margins improved due to lower prices of raw materials for gas
1) LP gas (+200 million yen):
Profits up due to steady net gains in customer numbers
2) CATV (+300 million yen):
3) Hikari Collaboration (+400 million yen): Overall market lagged versus estimates and net increase incontracts was 53 thousand, about 30% lower (-19 thousand) than
expected, leading to lower acquisition costs◎ Although the following costs will be added during 2H, results are projected to meet the initial forecasts
1) Hikari Collaboration (-400 million yen): As a similar business environment will continue, negative effects
arising from lower contract acquisitions in 1H are incorporated2) LP gas (-200 million yen):
Costs to rise to recover customers lost to competitors during 1H3) CATV (-200 million yen):Upfront costs to expand customer base in FY03/18 onward
Operating profit
Vs. 1H Forecasts
Vs. 2H Forecasts
Vs. FY Forecasts

LP gas+ 200 million yen- 200 million yen

Information andcommunications(Hikari Collaboration)+ 400 million yen- 400 million yen

CATV+ 300 million yen- 200 million yen

Other+ 100 million yen
Total+ 1.0 billion yen- 800 million yen+ 200 million yen

3Expansion of gas business customer base
◎ New accounts were up 25% YoY during 1H (from 14 thousand to 17 thousand), with projections
for a 30% gain over the full year (34 thousand to 44 thousand). Both existing and new areas areprogressing ahead of plans◎ Although cancellations increased in 1H due to competition with peer companies, momentum has
slowed after countermeasures were put in place. As 1H results were favorable, costs (200 million
yen) will be added during 2H to strengthen acquisition sales toward growth in FY03/18 onward

Customer Dynamics (YoY)(Thousands of customers)
44
27
34
20
17
14
18
15
13
12

New Customer Acquisition Targets(Thousands
70 of customers)
60

+1
1H
FY03/162H
FY03/16

New
subscriptions

26.9%

30.0%

14.6%

23.5%

20.0%

30
20

15.0%

6.4%

10.0%

10

5.0%

0

0.0%

FY03/16
Results

2H
FY03/17

35.0%

25.0%

40

-0
1H
FY03/17

31.9%

29.7%

50

+12
+7

BudgetForecast
39 thous. -> 44 thous.

FY03/17
BudgetFY03/18
Plan

FY03/19Plan

FY03/20Plan

FY03/21Plan(Est.)

Cancellations

Net increase/ decrease

New acquisitions

New areas

Composition of new areas 4

Customer numbers up in CATV◎ Versus the net increase of 20 thousand customers (6 thousand in broadcasting and 14 thousand in
telecommunications) during FY03/16, customer numbers are increasing steadily by 24 thousand during
FY03/17 (8 thousand in broadcasting and 16 thousand in telecommunications)◎ In addition to the effects of limiting cancellations through individual visits that started during FY03/16, contracts
for telecommunications, telephones, and other value-added services captured during visits are contributing tohigher profits◎ Aim for growth in FY03/18 onward by promoting sales activities to capture new customers in 2H throughadditional spending

Customer Dynamics (YoY)

New Customer Acquisition Strategy(Thousands of customers)

29

26

28

27

Develop new detached homeacquisition channels(Home builders / construction companies route)

18

16
+12

+8
1H
FY03/1615

2H
FY03/1615+121H
FY03/17+122H
FY03/17

Begin sale of “Hikari TV Plus”(Switching product for households watching
television via antennas)(Est.)

New
subscriptions

Cancellations

Net increase/ decrease5Full-year forecast (Revised)◎ Full-year earnings forecasts announced in May called for record highs of 12.6 billion
yen in operating profit and 6.2 billion yen in net income◎ Based on full-year estimates in light of the interim period results, initial forecasts wererevised to 12.8 billion yen in operating profit (+1.9 billion yen) and 6.5 billion yen in net
income (+260 million yen)
(Sales and profits: Millions of yen, EPS: Yen)

Revised
FY03/17
Forecasts

FY03/16

InitialForecasts

Sales

179,700

180,940

Operating profit

12,750Of which, Hikari
Collaboration

YoY

Vs. Initial Forecasts

Amount of
ChangePercent
Change (%)

Amount of
ChangePercent
Change (%)

187,100-1,240-0.7-7,400

-4.0

8,245

12,560+4,505

+54.6

+190

+1.5

-442

-3,007-728+2,566-+286-

Of which, Aqua

301

-1,11912+1,420-+289+2,317.4

Recurring profit

12,3608,150

11,830+4,210

+51.7

+530

+4.5

Net income

6,500

3,458

6,240

+3,042

+88.0

+260

+4.2

(EPS)

(57.23)(30.01)(55.13)(+27.22)(+90.7)(+2.10)(+3.8)

6*Operating profit for Hikari Collaboration and Aqua are before elimination of indirect expenses

Revised dividend forecasts (Dividend increase)◎ Interim dividends to be 11 yen per share, as planned (a dividend increase of 5 yen versus 6 yen per
share in 1H FY03/16)◎ As achievement of full-year earnings forecast is within sight, year-end dividends are planned to be 17
yen per share, including the originally planned dividend of 11 yen per share combined with an IP16
achievement commemorative dividend of 6 yen◎ Plan for two consecutive fiscal years of dividend increase and an annual dividend of 28 yen (14 yen
per share during FY03/16), a twofold increase
30

30

25

25

20

20

28 yen per share

22 yen per share

14 yen

8 yen

+

+

14 yen per share
15

10

15 share
12 yen per share12 yen per share12 yen per share12 yen per

6

6

6

10

6

YoY
(Initial plan)

6

6

6

6

FY03/12

FY03/13

FY03/14

FY03/15+5 yen600

2016/3月
FY03/16期

Interimdividend

11

17
11

YoY
(Upward revision)

8

5

5

6

Year-end
dividend

Interimdividend

11

11+Commemorative
dividend

2017/3月
2017/3月Est.
FY03/17
FY03/17
期当初
期予想(Initial)(Revised)Commemorative
dividend

7

Appendix(1) Consolidated results(2) Sales by segment(3) Operating profit by segment(4) Consolidated financial indicators(5) Consolidated cash flows(6) Group customer count(1) Consolidated results(Millions of yen)

1H FY03/12
Results

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

82,586

83,61084,31587,274

84,77382,201

Operating profit

2,200

2,573

411

1,816

1,856

4,406

Recurring profit

1,646

2,155

303

1,585

1,779

4,428

-39

331

-354

225

277

2,384

-0.39

3.32

-3.10

1.96

2.39

21.00

Sales

Quarterly net
incomeEPS (Yen)9(2) Sales by segment(Millions of yen)

1H FY03/12
Results

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

Gas andPetroleum

41,84442,60041,84642,75437,95832,496

Information andCommunications

18,30518,48818,86819,546

20,42523,750CATV

12,108

11,84012,04912,144

12,212

12,560

Building and Real
Estate

6,216

6,541

7,250

8,197

9,301

8,040

Aqua

1,776

1,929

2,102

2,423

2,746

2,929

Others

2,334

2,211

2,196

2,207

2,128

2,423

82,586

83,61084,31587,274

84,77382,20110Total(3) Operating profit by segment(Millions of yen)

1H FY03/12
Results

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

Gas andPetroleum

1,298

1,812

1,173

2,028

2,661

2,838

Information andCommunications

2,737

2,629

1,958

2,389

1,086

1,910

CATV

1,033

834

904

843

968

1,451

Building andReal Estate

126

69

249

143

347

324

Aqua

-531

-393

-1,318

-979

-616

201

-2,462-2,379-2,556-2,608-2,590-2,318

2,200

2,573

411

1,816

1,856

4,406
11

Others,adjustments
Total*Prior to elimination of indirect expenses

(4) Consolidated financial indicators(Millions of yen)

1H FY03/12
Results

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

Total assets

185,770

171,914168,296

164,477

160,237

153,384

Total liabilities

161,352

144,911

134,983

125,521117,722

109,380

Total net assets

24,41827,00233,313

38,95642,51444,004

Balance ofinterest-bearing
debt

116,845

100,715

90,48780,93076,25365,761

EBITDA

11,057

11,2889,168

10,494

10,231

12,217

Equity ratio

12.7 %

15.2 %

19.3 %

23.1 %

25.9 %

28.2 %
12(5) Consolidated cash flows(Millions of yen)

1H FY03/12
Results

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

Operating cashflow

11,493

12,533

10,043

11,476

4,412

12,039Investment cashflow

-4,824-4,657-5,049-4,515-5,289-4,668

Free cash flow

6,669

7,876

4,994

6,961

-876

7,370

Financing cashflow

-10,283-7,717-6,378-8,021236-8,83313

(6) Group customer count(Thousands of customers)

1H
FY03/13
Results

1H
FY03/14
Results

1H
FY03/15
Results

1H FY03/16
Results

1H
FY03/17
ResultsGas (LP and city gas)

668

635

629

626

627

634

Previous ISP
model, etc.

729

785

841

861

742

565

HikariCollaboration

－

－

－

－

117

272

180

202

221

231

234

234

909

986

1,062

1,093

1,093

1,071

CATV

727

686

693

690

698

722

Aqua

95

102

120

132

132

135

Security

21

20

19

18

18

17

2,398

2,405

2,498

2,535

2,543

2,554

Information andCommunications

1H
FY03/12Results

MobileSubtotal

Total*The number of customers under a thousand are rounded to the nearest thousand. Information and Communications and
CATV both offer communications services, and so their numbers are excluded from total figures.

The performance forecasts and forward-looking statements in these materials are
based on information currently available to the company, and include potential risks anduncertainties. Please be aware that due to changes in a variety of factors, actual results
may differ materially from the projections and other forward-looking statements in thesematerials.

Please contact us with any questions regarding these materials.
Public Relations and Investor Relations Office
TOKAI Holdings Corporation
2-6-8, Tokiwa-cho, Aoi-ku, Shizuoka 420-0034, Japan
Phone: +81- (0)54-669-7676
Fax: +81- (0)54-275-1110
http://tokaiholdings.co.jp/english/
e-mail： overseas_IR@tokaigroup.co.jp

14