Octobcr 31, 2017

TOKAI Holdings Corporation
Katsuhiko Tokita, Prcsidcnt & CEO(Codc No. 3167 Tokyo Stock Exchangc First Scction)
To whom it may conccrn

Financial Rcsults for thc First Half of thc Fiscal Ycar Ending March 31, 2018
Lowcr Profits on Upfront Costs to Acquirc Customcrs, but Stcady Progrcss with
Earnings Basc Expansion

TOKAI Holdings Corporation (hcrcinaftcr, thc “Company”) today announccd its financial
rcsults for thc first half of thc fiscal ycar cnding March 31, 2018 (April 1, 2017 to Scptcmbcr 30,2017).
1. Customcr Numbcrs Up Sharply by Morc than 260 Thousand
In May 2017, thc Company announccd its third mcdium-tcrm managcmcnt plan Innovation
Plan 2020 “JUMP” and growth stratcgics to attain plan targcts. This cntails invcsting a total of 100
billion ycn ovcr four ycars in M&A and pursuing an aggrcssivc alliancc stratcgy in addition to
making progrcss with cxisting prioritics such as incrcasing thc numbcr of continuing customcrs
and multiplc contracts bascd on thc “Total Lifc Concicrgc” (TLC) conccpt and cxpanding scrvicc
arcas. Thc plan targcts roughly doublc thc numbcr of customcrs, salcs, and opcrating profit in thc
fiscal ycar cnding March 31, 2021 vcrsus thc fiscal ycar cndcd March 31, 2017.
In thc first half of thc fiscal ycar cnding March 31, 2018, thc Company spcnt upfront costs to
implcmcnt an aggrcssivc salcs program to incrcasc thc numbcr of customcrs, which forms its
carnings basc, with a vicw to attaining mcdium-tcrm managcmcnt plan targcts. As a rcsult, thc
customcr count was 2,827 thousand as of Scptcmbcr 30, 2017, incrcasing by 263 thousand (10.3%)
from March 31, 2017, to cxpand thc Company’s carnings basc.
Thc customcr count cxcccdcd thc initial targct duc to bringing forward thc M&A of Tokyo Bay
Nctwork Co., Ltd. In addition, thc nct incrcasc in customcr count at cxisting busincsscs (notincluding ncwly acquircd companics) was morc than doublc thc nct incrcasc during thc fiscal ycar
cndcd March 2017.
Thc nct incrcasc in customcr count brokcn down by main scrviccs is as follows: Gas (LP and citygas) 6,149 (vcrsus a nct dccrcasc of 227 in thc first half of thc prcvious fiscal ycar); CATV 261,353(vcrsus a nct incrcasc of 11,682), duc in part to thc cffcct of acquiring Tokyo Bay Nctwork; and Aqua
6,057 (vcrsus a nct incrcasc of 1,503). Thc nct dccrcasc in customcrs of thc Information andCommunications busincss was limitcd to approximatcly 40% ycar-on-ycar thanks to thc
contribution of ncw customcrs of thc LIBMO MVNO scrvicc launchcd in Fcbruary 2017.

2. Upfront Spcnding to Expand Earnings Basc by Aggrcssivc Salcs Program
In thc first half of thc fiscal ycar cnding March 31, 2018, salcs wcrc up by 2.7 billion ycn (3.3%)
ycar-on-ycar to 84.9 billion ycn duc to an incrcasc in customcr numbcrs and Tokyo Bay Nctwork
M&A cffcct, although opcrating profit was down by 1.3 billion ycn (29%) to 3.1 billion ycn duc toincrcascd costs to acquirc ncw customcrs and prcvcnt scrvicc canccllations as cxpcctcd.
Opcrating profit camc in 400 million ycn ahcad of thc initial consolidatcd carnings targct
bccausc of strongcr-than-cxpcctcd pcrformancc of thc CATV busincss and communications scrviccs
to corporatc customcrs.
(Millions of ycn)
1H FY03/18

1H FY03/17

Forccast(April 1, 2017 to
Scptcmbcr 30, 2017)(April 1, 2016 to
Scptcmbcr 30, 2016)(April 1, 2017 to
Scptcmbcr 30, 2017)

Ycar-on-ycar

Vcrsusforccast

Salcs

84,911

82,20186,000+2,709-1,089Opcrating profit

3,114

4,406

2,710

-1,291+404

Rccurring profit
Quartcrly nct
incomcEPS (Ycn)

3,143

4,428

2,650

-1,284

+493

1,246

2,384

1,080

-1,137

+166

9.76

21.00

8.52

-11.24+1.24

3. Ongoing Progrcss with Improvcmcnt of Financial Position
Thc Company improvcd its cquity ratio by 1.5 pcrccntagc points from 34.5% at thc cnd of thc
prcvious fiscal ycar to 36.0% as a rcsult of booking quartcrly nct incomc and progrcss with thc
convcrsion of convcrtiblc bonds.
Frcc cash flow was down ycar-on-ycar, bccausc of upfront spcnding to aggrcssivcly build up thc
customcr basc, but thc balancc of intcrcst-bcaring liabilitics has only incrcascd marginally sincc
thc start of thc fiscal ycar cnding March 31, 2018 owing to thc convcrsion of convcrtiblc bonds. Thc
Company has maintaincd an intcrcst-bcaring dcbt/EBITDA ratio at around 2.0x, thc samc lcvcl as
thc prcvious fiscal ycar.
4. Consolidatcd Earnings and Dividcnd Forccasts for thc Fiscal Ycar Ending March 31, 2018
As announccd on May 9, 2017, forccasts for thc fiscal ycar cnding March 31, 2018 anticipatc
opcrating profit of 11.4 billion ycn (down 1.3 billion ycn ycar-on-ycar) on invcstmcnt to incrcasc thc
carnings basc for futurc growth, such as LP gas scrvicc arca cxpansion, promotion of ncw scrviccs
in thc Information and Communications busincss, and mcasurcs to prcvcnt rctail customcr
canccllations. Thc Company has madc no changcs to thc consolidatcd carnings and dividcnd
forccasts for thc fiscal ycar cnding March 31, 2018.
Thc Company plans to maintain an annual dividcnd total of 28 ycn pcr sharc (thc annual
dividcnd total in thc fiscal ycar cndcd March 31, 2017 was 28 ycn pcr sharc, including acommcmorativc dividcnd of six ycn pcr sharc).

(Millions of ycn)
YoY

FY03/18 Forccast

FY03/17 Rcsults(April 1, 2017 to March 31, 2018)(April 1, 2016 to March 31, 2017)

Salcs

189,400

178,631+10,769+6.0%

Opcrating profit

11,41012,750-1,340-10.5%

Rccurring profit

11,36012,775-1,415-11.1%

Nct incomc

6,450

7,337

-887

-12.1%EPS (Ycn)

50.88

64.46

-13.58-21.1%

FY03/18 (Forccast)

ChangcPcrccnt Changc

FY03/17

End of Q2 (Ycn)

14.00

11.00

Ycar-cnd (Ycn)

14.00

17.00

Annual dividcnd total (Ycn)

28.00

28.00

Consolidatcd payout ratio

55.0%

43.4%

Notc: Thc ycar-cnd dividcnd for FY03/17 was an ordinary dividcnd of 11.00 ycn plus a commcmorativc dividcnd of 6.00 ycn.

For dctails, plcasc scc thc attachcd matcrials, cntitlcd “Financial Rcsults for thc First Half ofthc Fiscal Ycar Ending March 31, 2018.”
Furthcrmorc, for thc Company’s first half carnings announccmcnt for thc ycar cnding March 31,
2018, plcasc scc thc following URL.
http://tokaiholdings.co.jp/cnglish/ir/library/carnings.html
Contact: Yoshihiro Taniguchi
Public Rclations and Invcstor Rclations Officc
TEL: +81-(0)54-273-4878
Email: ovcrscas_IR@tokaigroup.co.jp

Financial Results for the First Half of the
Fiscal Year Ending March 31, 2018
TOKAI Holdings Corporation(Code: 3167)
October 31, 2017

Customer count up a sharp 260 thousand from start of FY03/18◎ Net increase of customer count in existing businesses (excluding M&A) of more than
2.0x from 6 thousand in full-year FY03/17 to 13 thousand in 1H FY03/18◎ Exceeded initial target on bringing forward M&A of Tokyo Bay Network◎ Will lead to earnings growth due to increase in customer paying monthly fees from Q3
onward(Thousands of customers)

2,415

Net increase of
263 thousand(+10.3%)Gas+6 thousand
CATV +261 thousandAqua+6 thousand(and others)

2,445

2,519

2,537

2,827
263

2,558

2,564
250
Net increase of
more than 2.0x

72
FY03/1230
FY03/13
Net increase73
FY03/14

純増件数（既存）(existing businesses)

19

20

6

13

FY03/15

FY03/16

FY03/17

1H FY03/18

Net increase

純増件数（M&A）(M&A)

Customer count at

期末顧客件数the end of term

1

Lower profits on higher sales as expected in 1H◎ Sales up by 2.7 billion yen (+3.3%) YoY, due in part to Tokyo Bay Network M&A effect(700 million yen)
◎ Operating profit down due to 2.0 billion yen in upfront spending to acquire newcustomers and launch new services, but exceeded initial target by 400 million yen(14.9%) on stronger-than-expected growth of customer base and performance of
CATV and communications services to corporate customers(Sales and profits: Millions of yen, EPS: Yen)YoY change
1H FY03/18
Results

1H FY03/17
Results

Versus initial forecasts

Initial forecasts
Amount ofchangePercentchange (%)

Amount ofchangePercentchange (%)

84,911 82,201 86,000 +2,709+3.3 -1,089-1.3

Operating profit

3,114

4,406

2,710 -1,291

-29.3

+404

+14.9

Recurring profit

3,143

4,428

2,650 -1,284

-29.0

+493

+18.6

Net income

1,246

2,384

1,080 -1,137

-47.7

+166

+15.4

EPS (Yen)

9.76

21.00

8.52 -11.24

-53.5

+1.24

+14.6

Sales

2

Taking advantage of strengthened equity capital to invest for growth◎ Equity ratio up on progress with conversion of convertible bonds and sustained quarterly net
profit growth◎ FCF: 2.0 billion yen upfront spending to acquire new customers and launch new services, andaggressive investment in business expansion such as 1.2 billion on Tokyo Bay Network M&A◎ Maintains interest-bearing debt/EBITDA ratio at 2.0x

Equity ratio

34.5

%

As of March 31, 2017

Balance of interestbearing debt
Operating cash flow

54.1

billionyen

As of March 31, 201712.0

billionyen

1H FY03/17

Investment cash flow

-4.7

billionyen

1H FY03/17

Free cash flow

7.4

billionyen

1H FY03/17

Interest-bearing
debt/EBITDA ratio

2.0 X
FY03/17

➡
➡
➡
➡
➡
➡

36.0

%

As of September 30, 2017

55.0

billionyen

As of September 30, 2017

7.9

billionyen

1H FY03/18-6.9

billionyen

1H FY03/18

1.0

billionyen

1H FY03/18

2.0 X
1H FY03/18

3

Full-year forecast◎ Forecasts 1.3 billion yen year-on-year operating profit decline in FY03/18 due to upfront
spending on expanding service areas, sales promotion of new information services, andpreventing service cancellations by retail customers with a view to expanding earnings base for
future growth◎ No change to full-year consolidated earnings forecast announced on May 9, 2017
(Millions of yen)

YoY

FY03/18 Forecast FY03/17 Results(April 1, 2017 toMarch 31, 2018)(April 1, 2016 to
March 31, 2017)

189,400

178,631+10,769+6.0％

Operating profit

11,41012,750-1,340-10.5％

Recurring profit

11,36012,775-1,415-11.1％Net income

6,450

7,337

-887

-12.1％EPS (Yen)

50.88

64.46

-13.58-21.1％

Sales

Percent
ChangeChange4

Dividend forecast◎ Interim dividend is 14 yen per share, up 3 yen from 11 yen per share in previous fiscal year
◎ Year-end dividend unchanged from initial forecast of 14 yen per share to maintain previous fiscal
year’s annual dividend of 28 yen per share (previous fiscal year’s year-end dividend of 17 yen
per share was ordinary dividend of 11 yen per share + commemorative dividend of 6 yen per
share)
30

28 yen28 yenper shareper share

6

25

15

10

+3
yen

20

12 yen12 yen12 yen12 yenper shareper shareper shareper share

6

6

6

6

14 yenper share

11

8

6

6

6

6

6

FY03/12

FY03/13

FY03/14

FY03/15

FY03/16

Year-end dividend

+3
11

5

14

yen

14

Interim dividend0Interim dividend

Year-end dividend

FY03/17

Commemorative dividend

FY03/18(Forecast)5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 FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

1H FY03/18
Results

83,61084,31587,274

84,77382,201

84,911

Operating profit

2,573

411

1,816

1,856

4,406

3,114

Recurring profit

2,155

303

1,585

1,779

4,428

3,143

Net income

331

-354

225

277

2,384

1,246

EPS (Yen)

3.32

-3.10

1.96

2.39

21.00

9.76

Sales

7

(2) Sales by segment(Millions of yen)

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

1H FY03/18
Results

Gas andPetroleum

42,60041,84642,75437,95832,49632,777

Information andCommunications

18,48818,86819,546

20,42523,75024,906

CATV

11,84012,04912,144

12,212

12,56013,607

Building and Real
Estate

6,541

7,250

8,197

9,301

8,040

8,349

Aqua

1,929

2,102

2,423

2,746

2,929

3,055

Others

2,211

2,196

2,207

2,128

2,423

2,214

83,61084,31587,274

84,77382,201

84,911Total

8(3) Operating profit by segment(Millions of yen)

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

1H FY03/18
Results

Gas andPetroleum

1,812

1,173

2,028

2,661

2,838

1,562

Information andCommunications

2,629

1,958

2,389

1,086

1,910

1,541

834

904

843

968

1,451

1,769

69

249

143

347

324

388

-393

-1,318

-979

-616

201

135

Others,adjustments-2,379-2,556-2,608-2,590-2,318-2,282

Total

2,573

411

1,816

1,856

4,406

3,114

CATV
Building and Real
EstateAqua*Prior to elimination of indirect expenses

9(4) Consolidated financial indicators(Millions of yen)

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

1H FY03/18
Results

Total assets

171,914168,296

164,477

160,237

153,384

160,497

Total liabilities

144,911

134,983

125,521117,722

109,380

101,674

Total net assets

27,00233,313

38,95642,51444,00458,822

Balance ofinterest-bearing
debt

100,715

90,48780,93076,25365,76155,019

EBITDA

11,2889,170

10,495

10,231

12,217

10,764Equity ratio

15.2 %

19.3 %

23.1 %

25.9 %

28.2 %

36.0 %
10(5) Consolidated cash flows(Millions of yen)

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

1H FY03/18
Results

Operating cashflow

12,533

10,043

11,476

4,412

12,0397,888

Investment
cash flow-4,657-5,049-4,515-5,289-4,668-6,931

Free cash flow

7,876

4,993

6,961

-876

7,370

957

Financing cashflow

-7,717-6,378-8,021236-8,833-1,427

11

(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
Results

1H FY03/18
Results

635

629

626

627

634

648

Previous ISP
model, etc.

785

841

861

742

565

504

Hikari Collaboration

－

－

－

117

272

315

202

221

231

234

234

231

986

1,062

1,093

1,093

1,071

1,050

CATV

686

693

690

698

722

995

Aqua

102

120

132

132

135

141

Security

20

19

18

18

17

17

2,405

2,498

2,535

2,543

2,554

2,827

Information andCommunications

Gas (LP and city gas)

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.

12

The performance forecasts and forward-looking statements in these materials are based on
information currently available to the Company, and include potential risks and uncertainties.
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 these materials.

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)54 275-0007
Fax: +81-(0)54-275-1110
http://tokaiholdings.co.jp/english/
e-mail： overseas_IR@tokaigroup.co.jp