August 5, 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 Quarter of the Fiscal Year Ending March 31, 2017
Record-High Profits in All Categories

TOKAI Holdings Corporation (hereinafter, the “Company”) today announced its financial
results for the first quarter of the fiscal year ending March 31, 2017 (April 1, 2016 to June 30, 2016).
(Millions of yen)
Year-on-year

Q1 FY03/17

Q1 FY03/16(April 1, 2016 to June 30, 2016)(April 1, 2015 to June 30, 2015)

Sales

41,61842,672-1,054-2.5%

Operating profit

2,870

1,708

+1,161+68.0%

Recurring profit

2,900

1,649

+1,251+75.9%

Quarterly net

1,766

714

+1,052+147.2%

15.60

6.18

+9.42

+152.4%

ChangePercent Change

incomeEPS (Yen)

1. Consolidated First Quarter Results (P/L) Strong Towards Achieving 4.3 Billion Yen Profit
Increase; All Profit Indicators Post Historic Highs
Towards full-year consolidated earnings forecasts, which project a substantial profit increase(operating profit of 8.3 billion yen in the year ended March 31, 2016 to operating profit of 12.6
billion yen in the year ending March 31, 2017), operating profit for the first quarter was up 1.2
billion yen year-on-year (up 68.0%), demonstrating strong progress.
Sales fell by 1.1 billion yen year-on-year (down 2.5%). This was primarily due to the effect of 2.4
billion yen in price reductions in line with lower gas procurement prices implemented during theprevious fiscal year (these effects are factored into full-year earnings forecasts).
Concerning profits, active sales promotion activities conducted for Hikari Collaboration1 during
the previous fiscal year were successful, resulting in a 400 million yen improvement, and the Aqua(bottled water delivery) business also showed a 200 million yen improvement in the balance
between revenues and expenses. In addition, increase of the number of customers and cost
reductions in the CATV business contributed 200 million yen, and the 200 million yen in theamortization of goodwill stemming from a business merger incurred during the first quarter of theprevious fiscal year was not incurred this year. For these and other reasons, operating profit
increased significantly, by 1.2 billion yen year-on-year.
2. Hikari Collaboration Progressed as Planned, ARPU2 Improved, High Profitability Realized
Amid a stagnant broadband market, Hikari Collaboration is a product that can be expected tosee improved ARPU and higher earnings. By promoting this service, the Company plans to realize
high profitability in its Broadband business.
The number of Hikari Collaboration customers at the end of the first quarter of the year ending
March 31, 2017 was 251 thousand, an increase of 32 thousand compared to the beginning of the
fiscal year ending March 31, 2017 (increase by 13 thousand new customers and 19 thousandtransferred customers). The Company aggressively promoted a shift towards high unit price andhigh profitability services.
As a result, ARPU in the Broadband business improved 38% year-on-year and monthly
operating profit per contract increased 58%, contributing to higher sales and profits.
For Hikari Collaboration, operating profit in the first quarter improved by 400 million yen
year-on-year. Progress was as planned toward the initial forecast of improving the balance between
revenues and expenses by 2.3 billion yen for the year (1.0 billion yen in the first half of the fiscal
year and 1.3 billion yen in the second half).
3. At the Aqua Business, Balance Between Revenues and Expenses Steadily Improved Toward
Achieving Profitability this Fiscal YearThe number of customers in the Aqua business as of the end of the first quarter of the fiscal year
ending March 31, 2017 was up by 1 thousand from the beginning of the fiscal year, to 134 thousand.
In addition to the 100 million yen profit increase that resulted from the higher number ofcustomers, the Company was able to limit its acquisition cost per customer to 73% of the firstquarter of the previous year’s levels, despite new customer count increasing by 17% year-on-year.
SG&A expenses were also down by 100 million yen owing to lower advertising expenses. These
factors caused operating profit to improve by 200 million yen year-on-year.
The effects of measures implemented during the second half of the previous fiscal year, such asconcentrating sales resources in areas with higher customer acquisition efficiency and revisingsales personnel structures from an efficiency viewpoint began to produce results during the firstquarter of this fiscal year.
Progress was as planned toward the initial forecast of improving the balance between revenues
and expenses by 1.1 billion yen (500 million yen in the first half of the fiscal year and 600 million
yen in the second half) to achieve profits for the year.

4. Consolidated Earnings and Dividend Forecasts for the Fiscal Year Ending March 31, 2017
As announced on May 10, 2016, forecasts for the fiscal year ending March 31, 2017 anticipate
operating profit of 12.6 billion yen, recurring profit of 11.8 billion yen, and quarterly net income of
6.2 billion yen, posting historic highs in all profit categories. The Company also decided
substantially higher dividends.
(Millions of yen)
YoY

FY03/17 Forecast

FY03/16 Results(April 1, 2016 to March 31, 2017)(April 1, 2015 to March 31, 2016)

Sales

187,100

180,940+6,160+3.4%

Operating profit

12,5608,245+4,315+52.3%

Recurring profit

11,8308,150+3,680+45.1%

Quarterly net
income

6,240

3,458

+2,782+80.4%EPS (Yen)

55.13

30.01

+25.12+83.7%

FY03/17 (Forecast)

ChangePercent Change

FY03/16

End of Q2

11.00

6.00

Year-end

11.00

8.00

Annual dividend total

22.00

14.00

Consolidated payout ratio

40.0%

46.7%

Based on the Company’s dividend policy that aims for a dividend payout ratio of 40%, it plans toincrease its annual dividends per share from the previous 12 yen (14 yen per share in the previous
fiscal year after a two yen increase) to 22 yen per share (11 yen at the end of the second quarter and11 yen for year-end).
For details, please see the attached materials, entitled “Financial Results for the First Quarterof the Fiscal Year Ending March 31, 2017.”
Furthermore, for the Company’s first quarter 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 services using fiber optic lines provided by NTT.
2: ARPU: Short for average revenue per user, referring to monthly sales generated per contract.

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 Quarter of the
Fiscal Year Ending March 31, 2017
TOKAI Holdings Corporation(Code: 3167)
August 5, 2016

Q1 FY03/17 Earnings Highlights
1.

Steady progress towards full-year forecasts of a significant profit increase; all profit indicators to post
historic highs
Towards full-year consolidated earnings forecasts, which project a substantial profit increase (FY03/16 operating profit of ¥8.3
billion to FY03/17 operating profit of ¥12.6 billion), operating profit for Q1 was ¥1.2 billion higher YoY, demonstrating strong
progress
The revenue/expense balance in Hikari Collaboration and Aqua improved, and with higher profits in CATV and a decrease inamortization of goodwill, profits increased by ¥1.2 billion (up 68% YoY)

2.

Hikari Collaboration progressed as planned, ARPU improved, and high profitability realized
The Broadband business continued to actively shift from the previous ISP model to high unit price and high profitability Hikari
Collaboration
Operating profit improved by ¥400 million YoY in Hikari Collaboration, progressing as planned towards improving therevenue/expense balance by ¥2.3 billion for the year

3.

Steady improvement in revenue/expense balance towards full-year profitability in Aqua
Concentrating sales resources in areas with higher customer acquisition efficiency and revising sales personnel structures from a
profitability viewpoint began to produce results
Operating profit in Q1 improved by ¥200 million YoY, progressing as planned toward achieving profitability for the year by a ¥1.1
billion improvement in the revenue/expense balance

4.

Significant dividend increase planned, continued focus on returning profits to shareholders
Planned increase of annual dividend from ¥14/share to ¥22/share (¥11/share in 1H and ¥11/share at year-end)
Considering other shareholder returns (share buybacks, etc.) under the same approach as FY03/16

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Steady progress toward ¥4.3 billion YoY profit increase－ Towards full-year forecasts of profit increase (up ¥4.3 billion), Q1 operating profit up ¥1.2 billion－－ Operating profit, recurring profit, and quarterly net income all posted record highs －－ Hikari Collaboration and Aqua, key businesses for higher profits in FY03/17, steadily achieved
improvement in revenue/expense balance －(Millions of yen)YoY

Q1 FY03/17

Q1 FY03/16(April 1, 2016 to June 30,
2016)(April 1, 2015 to June 30,
2015)

41,61842,672-1,054-2.5%

Operating profit

2,870

1,708

+1,161+68.0%

Recurring profit

2,900

1,649

+1,251+75.9%Net income

1,766

714

+1,052+147.2%

EPS (Yen)

15.60

6.18

+9.42

+152.4%

Sales

Amount of
ChangePercent
Change2

Progress in Hikari Collaboration－ Number of Hikari Collaboration customers as of the end of Q1 FY03/17 was 251 thousand, up by 32 thousand (13thousand new customers and 19 thousand transferred customers) compared to the beginning of FY03/17 －－ Amid a stagnant broadband market, shift to higher unit price and higher profitability services progressed－－ ARPU increased 38% YoY, and operating profit per contract increased 58% －Results and forecasts for Hikari Collaboration customer countBroadband sales (top) and operating profit (bottom)
FY03/16 (Previous year)(Thousands of customers)

Hikari Collaboration transfer ratecontinues to exceed the national
average

357

Transfer rate

251

123

219
59

5.1
@2.1
4.7
0.4

72

234

0.5
@210
1.1

-0.6
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
FY03/16 FY03/16 FY03/16 FY03/16 FY03/17 FY03/17 FY03/17 FY03/17
Forecast Forecast

Number of transfers (cumulative)

10.8
@2.3

Number of new customers (cumulative)* Transfer rate: Ratio of contracts transferred to Hikari Collaboration as a proportion of registered Flet’s Hikari contracts

17.8

7.0
@3.0

6.3

3.9
3.1

9.2
1.6

(Billions of yen,
@yen per month)

160 179

29.7
@3.1

24.1
@2.5

TOKAI: 29.1% > National: 21.9％

FY03/15

FY03/17 (Current year)(Billions of yen; @thousands of yen
per month)

0.6
@128

1.0
@105

14.7

15.0

2.7
@279

0.8
@330

4.0

3.4

2.1
1.0

-0.2

-1.5
-3.0

-0.7
Hikari Collaboration:
Improvement of¥400 million YoY

1H
Q1
1H
FY03/16
FY03/17
FY03/16
FY03/17 (Forecast)Previous model
Hikari Collaboration*Operating profit is calculated prior to elimination of indirect expenses

Q1
FY03/16

FY03/17(Forecast)3

Steady profit improvement in the Aqua business－ Customer count at end Q1 FY03/17 was 134 thousand, up 1 thousand from the end of FY03/16 －－ Started seeing effects of strategic shift to secure profits through emphasis on profitability －－ In addition to a ¥100 million increase from higher customer count, ¥200 million improvement via reductionof selling and administrative expenses －Aqua business revenue/expense

Customer count results and forecast

FY03/16 (Previous year)(Thousands of customers)

60(Billions of yen)

FY03/17 (Current year)

5.8

5.5

60

50

50

40

40

2.7

30
20

10

1.2

132

0

-0.8

-0.7

0

-0.6 -1.9

-0.2

-1.1

0
-10

-2.8

-3.6

-20

130

130

0.7

0
-10

133 134

2.8

2.5
0.6

134

20

1.4

1.3

10

138

30

-20

A ¥200 million
improvement in therevenue/expensebalance

-30

-30

-40
FY03/15

Q4
Q3
Q1
Q2
Q3
Q4
Q1
Q2
FY03/16 FY03/16 FY03/16 FY03/16 FY03/17 FY03/17 FY03/17 FY03/17(Forecast) (Forecast) (Forecast)-40

Q1 FY03/16

1H FY03/16
Sales

FY03/16Gross profit

Q1 FY03/17
SG&A

1H FY03/17(Forecast)
Operating profit

FY03/17(Forecast)

4*Operating profit is calculated prior to elimination of indirect expenses

Full-year forecasts for significant profit growth anddividend forecasts－ As announced in May 2016, FY03/17 plans call for significant increase in profits－－ Operating profit, recurring profit, and quarterly net income to post historic highs －－ Dividends to increase significantly, based on the policy of a dividend payout ratio of about 40%－
(Millions of yen)

FY03/17
Forecast

YoY
FY03/16 Results

Amount of
Change(April 1, 2016 to March 31,
2017(April 1, 2015 to March 31, 2016)

187,100

180,940+6,160+3.4%

Operating profit

12,5608,245+4,315+52.3%

Recurring profit

11,8308,150+3,680+45.1%

Quarterly net income

6,240

3,458

+2,782+80.4%EPS (Yen)

55.13

30.01

+25.12+83.7%

Sales

FY03/17 (Forecast)

Percent Change

FY03/16

End of Q2

11.00

6.00

Year-end

11.00

8.00

Annual dividend total

22.00

14.00

Consolidated payout ratio

40.0%

46.7% 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)

Q1 FY03/12
Results

Q1 FY03/13
Results

Q1 FY03/14
Results

Q1 FY03/15
Results

Q1 FY03/16
Results

Q1 FY03/17
Results

41,72743,33943,03844,302

42,672

41,618Operating profit

1,707

1,718

648

1,657

1,708

2,870

Recurring profit

1,504

1,494

549

1,547

1,649

2,900

Quarterly net
income

338

549

149

713

714

1,766

EPS (Yen)

3.39

5.50

1.31

6.21

6.18

15.60

Sales

7

(2) Sales by segment(Millions of yen)

Q1 FY03/12
Results

Q1 FY03/13
Results

Q1 FY03/14
Results

Q1 FY03/15
Results

Q1 FY03/16
Results

Q1 FY03/17
Results

21,98423,36521,94022,513

20,28817,479

Information andCommunications

8,863

9,167

9,414

9,659

9,826

11,780

CATV

6,023

5,888

5,970

6,070

6,074

6,241

Building and Real
Estate

2,788

2,806

3,419

3,728

4,012

3,414

Aqua

772

891

942

1,123

1,320

1,424

Others

1,295

1,220

1,350

1,207

1,149

1,277

41,72743,33943,03844,302

42,672

41,6188

Gas andPetroleum

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

Q1 FY03/12
Results

Q1 FY03/13
Results

Q1 FY03/14
Results

Q1 FY03/15
Results

Q1 FY03/16
Results

Q1 FY03/17
Results

Gas andPetroleum

1,381

1,345

1,049

1,494

1,865

2,197

Information andCommunications

1,344

1,371

826

1,333

691

913

560

421

377

503

498

717

24

-7

135

31

63

81

-357

-212

-523

-511

-227

19

Others,adjustments-1,246-1,201-1,216-1,193-1,182-1,060

Total

1,707

1,718

648

1,657

1,708

2,870
9

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

(4) Consolidated financial indicators(Millions of yen)

Q1 FY03/12
Results

Q1 FY03/13
Results

Q1 FY03/14
Results

Q1 FY03/15
Results

Q1 FY03/16
Results

Q1 FY03/17
Results

Total assets

190,479

176,864

171,202167,262

164,163

155,595

Total liabilities

165,557

149,684

137,619

128,734

120,110113,074

Total net assets

24,921

27,18033,582

38,52844,05342,521

Balance ofinterest-bearing
debt

119,735

103,218

90,176

81,16873,461

67,061

EBITDA

6,098

6,082

5,040

6,030

5,898

6,760

Equity ratio

12.6 %

14.9 %

19.1 %

22.5 %

26.3 %

26.8 %
10(5) Consolidated cash flows(Millions of yen)

Q1 FY03/12
Results

Q1 FY03/13
Results

Q1 FY03/14
Results

Q1 FY03/15
Results

Q1 FY03/16
Results

Q1 FY03/17
Results

Operating cash
flow

7,281

6,703

7,725

8,080

4,285

8,242

Investment cash
flow

-3,503-2,237-3,407-1,844-3,162-2,454

Free cash flow

3,778

4,466

4,318

6,236

1,123

5,787

Financing cashflow

-5,830-3,925-5,368-6,449-1,261-6,21611

(6) Group customer count(Thousands of customers)

Q1 FY03/13
Results

Q1 FY03/14
Results

Q1 FY03/15
Results

Q1 FY03/16
Results

Q1 FY03/17
ResultsGas (LP and city gas)

671

642

629

627

625

634

Previous ISP
model, etc.

704

775

833

858

802

595

HikariCollaboration

－

－

－

－

58

251

175

198

217

229

235

235

879

972

1,049

1,087

1,095

1,081

CATV

740

682

693

692

692

716

Aqua

87

99

105

126

130

134

Security

21

20

19

18

18

17

2,378

2,392

2,471

2,526

2,537

2,557

Information andCommunications

Q1 FY03/12
Results

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

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