Financial Results for the FYE March 31, 2016 andEarnings Forecast for the FYE March 31, 2017

TOKAI Holdings Corporation(Code: 3167)

May 10, 2016

FY03/16 Consolidated Performance2Consolidated Performance in FY03/16
 The sales decrease was attributable partly to falling gas prices (a combined ¥10.3 billion for city gas and LPgas).
 We spent ¥3.0 billion on sales expansion of Hikari Collaboration, but an increase in retail customers
and income generated through a lag in the timing of gas price reductions kept the drop in operating
profit to ¥800 million. All profit categories exceeded the initial forecast announced in May 2015.

FY03/15

FY03/16

YoY

Forecast
Announced in
May 2015¥187.5bn¥180.9bn-¥6.6 bn

¥192.2bn

Operating profit¥9.0bn¥8.2bn-¥0.8 bn

¥7.8bnRecurring profit¥8.5bn¥8.2bn-¥0.4bn¥7.4bnNet income¥3.9bn¥3.5bn-¥0.5bn¥3.2bnIncome pershare¥34.16¥30.01-¥4.15¥28.04

Sales

3

Segment Performance in FY03/16 (YoY Comparison)
 Sales decreased in the Gas and Petroleum segment due to falling gas prices (negative 11.1% impact). However,sales rose due to customer increases in the Information and Communications (Hikari Collaboration up by 215
thousand), CATV (up by 20 thousand), and Aqua (up by 3 thousand) segments.
 These customer increases boosted profit, as did a contribution from the time lag on LP gas (¥2.1 billion).

Sales

Operating Profit

FY03/16

YoY

Gas andPetroleum¥80.7bn-13.2%¥9.0bnInformation andCommunication¥44.2bn+10.3%¥2.3bnCATV¥24.6bn+1.0%¥2.0bn+¥0.3bn

Construction/
Real estate¥21.0bn+4.8%¥1.3bn+¥0.2bn

Aqua¥5.5bn+10.7%-¥1.1bn+¥0.2bn

Others/Adjustments¥4.9bn- 2.2%¥-5.2bn-¥0.2bn¥180.9bn-3.5%¥8.2bn-¥0.8bn

Total

Note: Stated operating profit is before the allocation of indirect expenses.

4

FY03/16

YoY+¥1.3bn-¥2.6bn(Of which, -¥2.8bn for
Hikari Collaboration)

Group Customers
 In fixed-line communications, we made progress on transitioning 215 thousand customers to Hikari
Collaboration, and customers increased by a combined 20 thousand in the Gas and CATV businesses.

(Unit: thousand customers)

Mar. 31, 2014 Mar. 31, 2015 Mar. 31, 2016

YoY

Gas (LP/city gas)

628

626

634

+8

Information and communications(fixed-line/wireless)

854

864

852

-12

<Of which, Hikari Collaboration>

―

<4>

<219>

<215>

Information and communications(mobile)

227

235

236

+1

ＣＡＴＶ
Aqua

693
122

690
130

710
133

+20
+3

Security

19

18

18

-0

2,519

2,537

2,558

+20

Total

Note: Numbers below 1,000 have been rounded. Overlaps in communication services
between Information and Communications (fixed-line/wireless) and CATV have been
eliminated from the total.
5Consolidated Financial Indicators
 Interest-bearing debt was ¥71.4 billion, continuing to improve YoY. Although negatively affected by thedevaluation of investment securities (down ¥1.2 billion YoY), the equity ratio remained essentiallyunchanged.
 We maintained EBITDA at ¥25.0 billion, down YoY due to a ¥3.0 billion investment in Hikari
Collaboration.

Mar. 31, 2014

Mar. 31, 2015

Mar. 31, 2016

YoY

Total assets¥173.6bn¥165.7bn¥160.3bn-¥5.4bn

Total liabilities¥135.3bn¥122.2bn¥118.3bn-¥3.9bn

Total net assets¥38.3bn¥43.5bn¥42.0bn-¥1.5bn

Interest-bearing debt

¥85.8bn¥73.1bn¥71.4bn-¥1.7bn

Equity ratio

21.6%

25.7%

25.6%

-0.1%

EBITDA¥24.9bn¥26.2bn¥25.0bn-¥1.3bn

6

Provision of 100% of Profits to Shareholders(Dividends + Share Buyback) In line with the policy of paying back 100% of profits to shareholders in FY03/16, in addition to paying dividends the Company boughtback an additional ¥1.8 billion in treasury shares (3.3 million shares).
 Also, as income was higher than initially forecast, the Company decided to increase dividends for the first time since its transition to aholding company (¥12/year→¥14/year).
 Furthermore, to dispel shareholder concern about future share dilution, the Company cancelled 10% of its treasury stock, or
15.52 million shares (down from 39.19 million shares, or 25.3%, on September 30, 2015).

Income per Share (¥/share), Dividends (¥/share)
and Payout Ratio (%)
80.0%

65.00

50

60.0%

Net Income (¥bn) and Dividends (¥bn)

45

3.9

55.00

40

52.9%
45.00

44.2%

40.2%

40.0%

3.5

46.7%
35

3.1

20.0%

34.16

30

2.7

2.6

35.00

30.01

29.85

27.17

15.00

12

12

0.0%

25

Dividend
increase

22.67

25.00

Share buy back

35.1%

-20.0%

12

12

14-40.0%

Total payout of
100%*

20

15

1.2

1.3

1.4

1.4

10
-60.0%

55.00-80.0%

0

FY03/12

FY03/13

FY03/14

FY03/15

FY03/16

Income per share

7

FY03/12

FY03/13

FY03/14

FY03/15

FY03/16-100.0%(5.00)

Dividend per share

Payout ratio* (Total dividends (excluding subsidiaries) + treasury share purchases)÷ net income = 98.35%

Net income

Dividends■Share buyback

1.8

1.6

Performance Forecast for FY03/17

8

Consolidated Performance Forecast for FY03/17
 In FY03/17, we anticipate increase in sales and profits (with all profit categories reaching historic highs). We expect
sales to grow for the first time in three years and profit to increase for the first time in two, leading to major increases
in all profit categories.
 In the final year of IP16 “Growing” (announced in May 2014), we expect to achieve the plan’s final-year profit targets.

FY03/16

FY03/17

YoY

FY03/17 under
IP16 “Growing”¥180.9bn¥187.1bn+¥6.2bn¥209.5bn

Operating profit¥8.2bn¥12.6bn+¥4.3bn¥12.6bn

Recurring profit¥8.2bn¥11.8bn+¥3.7bn¥11.8bn

Net income¥3.5bn¥6.2bn+¥2.8bn¥6.2bn¥30.01¥55.13 +¥25.12¥54.06

Sales

Income per share9

Segment Performance in FY03/17 (YoY) These figures incorporate the impact of gas price decreases in the previous year (-6.1%), but sales are forecast to rise due to morecustomers in the Gas (16 thousand), Hikari Collaboration (138 thousand), CATV (21 thousand) and Aqua (5 thousand) segments.
 Profit is forecast to rise thanks to higher profits due to increased customers in the Communications (Hikari Collaboration) and
CATV businesses, with a move into the black in the Aqua segment also contributing.

Sales

Operating profit

FY03/17

YoY

FY03/17

YoY¥75.9bn¥51.8bn¥25.4bn- 6.0%+17.1%+3.1%¥9.0bn¥4.2bn¥2.4bn+¥0bn+¥1.9bn+¥0.4bn

Construction and Real estate¥22.5bn+7.2%¥1.5bn+¥0.2bn

Aqua¥5.8bn

+6.4%

¥0bn

+¥1.1bn

Others

¥5.7bn+16.9%-¥4.6bn+¥0.6bn

Total¥187.1bn+3.4%¥12.6bn+¥4.3bnGas and Petroleum
Information andCommunications
CATV

Note: Stated operating profit is before the allocation of indirect expenses.

10Promotion of the Hikari Collaboration ModelIn the ISP and NTT Hikari line portions, we will enjoy a full year of operations since the start of TNC Hikari(Shizuoka Prefecture) and ＠T COM Hikari (nationwide), as a one-stop provider of service, support, and billing.



We expect customer transfers to move into the black in FY03/17. Higher profits due to a fee hike shouldovercome the increase in expenses to expand sales, resulting in a major improvement.
Anticipating stable net growth this year

400

357

350
300
250
200

123

25

20

219
59

New

New+redirection

Start of year: 160k
End of year: 234k

Start of year: 59k
End of year: 123k

Start of year: 219k
End of year: 357k

10
1.0

+0.1
+1.5 +0.8
0

10

234
160

(¥bn)

Transfers

15

150
100

Covering acquisition costs in eight months for transferring
customers, 24 months for new customers(Monthly net
increase)(Customers)

5

-1.0
-10

50
0

0

-0.7

-0.8

-0.2

-1.5
Profit increase
due to fee hike

-2.2

-0.3

-3.0

+1.1
-20
-2.0

+2.5

Profit increase due
to fee hike

New customers, end of period (cumulative)
Redirections, end of period (cumulative)

11

Net increase (quarterly)

-3.0
-30

FY03/16Gross profit due to increase

SG&A change

Profit increase due
to fee hike

FY03/17

Aqua Business Moving into the Black with Efficiency Focus
Single-digit expansion in customer basesince FY03/15(Rate of growth)(Thousands ofcustomers)

160

50.0%

122

40.0%

130

133

138

120

102

100

30.0%
20.0%

140

80
57

60

10.0%

40

0.0%

20

-10.0%

0
FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17
TOKAI HD customers
Nationwide growth rate*

TOKAI HD growth rate

Improved sales and profits to result inbreakeven with acquisition costs
(¥bn)

6
5
4
3
2
1
0
(1)
(2)
(3)
(4)

5.0

1.4

2.7

2.9

-0.9

-1.3

-2.0

FY03/13Gross profit

3.9

FY03/14Sales

3.5
FY03/15
SG&A

0.0

-1.1

2.4

2.4
FY03/12

2.1

1.9

1.4

-0.9

5.8

4.4

3.8

3.5

5.5

2.8
3.8

FY03/16

FY03/17

Operating profit

Against a backdrop of the growing market, we have sought to reach demand by expanding our sales area, but with thecustomer growth rate slowing and fixed selling costs rising, we will shift toward prioritizing efficiency

Improve sales and profits
through higher profits resulting
from customer increases

12

Identify areas where acquisition
efficiency is low, concentrating
sales capabilities on more
promising areas* According to a study by the Japan Delivery Water & Server Association (JDSA)

Along with area realignment,
revise the sales personnel
structure from the standpoint ofefficiency

Profit Growth Factors (YoY Changes in Operating Profit) We anticipate profit increase of around ¥2.3 billion for Hikari Collaboration and ¥1.1 billion for the Aqua business. We also expect¥0.4 billion in profit in the CATV business, and a ¥0.8 billion decrease in goodwill amortization from the transition to a holdings
structure. Essentially all the expected factors support an increase in profit.
 Absent any major changes in the market environment, we expect to achieve these targets.
★+ ¥2.3 billion as profit
increase from fee hikeexceeds
SG&A expenses
130★Steady pace ofacquisition(11
120
thousand/month in
FY03/17, 18
110
thousand/month in
FY03/16)
100

70

Aqua
HikariCollaboration +1.13

+2.28

90
80

CATV

8.2

50

LP gas customer
increase,area expansion

+0.8

- 0.5

Other

+0.26

+0.43

11.3

★Shift toward
improvements in selling
efficiency• +¥0.3 billion due toincrease in sales volume
in line with customer
increase (+4.9 thousand)• +¥0.4 billion from
improved efficiency inacquisition fees60

End of HD
goodwill
amortization

11.3• +¥0.7 billion fromrise in usage feesin line withcustomer increase(+20.6 thousand)• - ¥0.3 billion fromhigher acquisitioncommissions, etc.

11.3

12.6

• -¥0.2 billion due tomarketing costs (newbase and personnel
costs) to expand areain three prefectures in
the Tohoku and Tokai
region.
• -¥0.3 billion due tohigher costs associatedwith increase incustomer acquisitions• +¥0.43 billion from more
efficient sales structure40

FY03/16 actual

13

FY03/17 forecast

Group Customer Count Forecast We plan to boost our overall number of customers by around 47 thousand, mainly through growth in theGas and CATV businesses (Hikari Collaboration to also progress toward around 140 thousand).

(Unit: thousand customers)

Mar. 31, 2016 Mar. 31, 2017

YoY

Information and Communications(fixed-line/wireless)

634
852

650
857

+16.2
+4.2

<Of which, Hikari Collaboration>

<219>

<357>

<138>

Information and Communications(mobile)

Aqua

236
710
133

237
730
138

+1.3
+20.6
+4.9

Security

18

18

+0.0

2,558

2,604

+46.6

Gas (LP gas, city gas)

CATV

Total

Note: Numbers below 1,000 have been rounded. Overlaps in communication services
between Information and Communications (fixed-line/wireless) and CATV have been
14
eliminated from the total.

作成中
Expanding Service Area to Boost Earnings in the Gas Business
Become Japan’s #3 LP gas retailer,with 580 thousand customers, focusing
on Shizuoka Prefecture and the Kanto
area
Shizuoka Pref. (180 thousand)

7 Kanto pref. + Fukushima Pref.
(400 thousand) LP market: 810 thousandhouseholds
 Our share: 21.7% (top in
Shizuoka Pref.) LP market: 6.23 million
households
 Our share: 6.4% (No. 2 in
Kanto)

Number of new customers (five years)
Increase new area proportion to 30%(Customers)

31.9% 35.0%
29.7%
26.9%
30.0%
23.5%

70,000Miyagi60,00050,00025.0%

40,000

20.0%

14.6%

30,00020,000

15.0%

6.4%

10.0%

10,0005.0%

0Nagano0.0%
FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21
Actual Forecast Target Target Target Target
Existing area

Gifu
(Thousands)

Aichi
Mie

15

<10m3 point charges*>■ ¥6,200–¥6,399■ ¥6,400–¥6,599■ ¥6,600–¥6,799■ ¥6,800–¥7,000■ ¥7,000+

Expand into surrounding areas
Expand in the Kanto area, where competition is fierce
but growth is forecast, and surrounding prefectures,
where profitability is high and room for growth exists.
This combination should lead to a stable earnings base
* Oil Information Center study on LP gas market prices (October 31, 2015)

800
700
600
500
400
300
200
100
0

New area

Percentage new area

Increase number of customers to 800 thousandin five years (approx. 30% increase)800
648 629 628 626 634 650

FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21
Actual Actual Actual Actual Actual Forecast Target Target Target Target

Key Consolidated Financial Indicators for FY03/17
 Through continued financial improvements, we plan to surpass FY03/17 targets under the Innovation
Plan 2016 “Growing,” with year-end interest-bearing debt of ¥62.2 billion and an equity ratio of 30.8%.

Mar. 31, 2011 Mar. 31, 2016 Mar. 31, 2017

FY03/17 under
IP16 “Growing”

Operating cash flow

¥23.5bn¥21.4bn¥24.4bn¥25.5bn

Capital expenditure¥18.7bn¥14.2bn¥17.9bn¥13.2bn

Interest-bearing debt

¥124.0bn¥71.4bn¥62.2bn¥64.7bn

7.7%

25.6%

30.8%

28.6%

¥26.3bn¥25.0bn¥28.3bn¥28.7bn

Equity ratio
EBITDA

Note: Capital expenditure includes intangible assets.

16

Shareholder Returns in FY03/17

17

Shareholder Returns (Higher Dividends)
 In FY03/17, we forecast new historic highs for operating profit (¥12.6 billion) and net income (¥6.2
billion).
 With a dividend policy of attaining a 40% payout ratio, we plan to move from past annual dividendsof ¥12/share (+¥2 in FY03/16 to ¥14/share) to ¥22/share (interim and year-end dividends of¥11/share each).
40.0%
30

44.2%
25

40.2%

52.9%

35.1%

46.7%

30.0%

¥22/share-20.0%

20

15¥12/share¥12/share¥12/share¥12/share¥14/share-70.0%-120.0%10-170.0%50-220.0%FY03/1218

FY03/13

FY03/14

Dividend per share

FY03/15
Payout ratio

FY03/16

FY03/17

Expected Results of theInnovation Plan 2016 “Growing”

19Profitability (Income Statement) The impact of Hikari Collaboration, which was not reflected in IP16, was limited to FY03/15. By the
final year of the plan, FY03/17, we expect net income per share to rise to ¥55.13. This will equate tosuccess on an issue under IP13: enhancing business profitability.

■IP16 ■Actual ■FY03/17 forecast

12.6

100

Income per share (¥)

55.13

12.6

9.7

34.16

60

8.2

30

27.86

3.2

FY03/17

Operating profit (¥bn)
20

30.01
4.0

6.2

30
20
10
0

3.9

20

FY03/16

40

6.2

50
40

FY03/15

34.91

70

8.2
9.0

80

60

54.0650

90

3.5

-10
-20

10

-30

0

-40

FY03/15

FY03/16

FY03/17

Net income (¥bn)

Financial Indicators (Balance Sheet) Just before our transition to a holding company, interest-bearing debt was ¥124.0 billion. We plan tohalve this figure by the final year of the plan.
 In addition to lowering interest-bearing debt, through capital policies (such as disposal of treasury
stock) and retained earnings, we expect to boost our equity ratio from 7.7% before our transition to aholding company to more than 30%.

■IP16 ■Actual ■FY03/17 forecast
850

30.8

32.0

81.8
30.0

800

74.1

750
700

28.0

73.1

650

71.4 64.7

600

62.2

25.7
26.0

25.1

24.0

550

500

28.6

25.6

22.0

23.0

450
400

20.0

FY03/15

FY03/16

FY03/17

Interest-bearing debt (¥bn)
21

FY03/15

FY03/16

FY03/17Equity ratio (%)

Moving to the Next Growth Phase Our current plan, IP16 “Growing,” seeks to address an issue faced during our IP13 plan, namely
enhancing business profitability. In the final year of the current plan, we expect to achieve record
levels of performance.
 In the next year, we will formulate our next four-year plan, leading up to 2020. This will be a year of
putting the Group on a path to future growth.

22“Reinforcing themanagement
structure”“Enhancing businessprofitability”(2011–2013)(2014–2016)

Innovation Plan 2013

Innovation Plan 2016
Growing

Next Mid-Term
Management Plan

Restructure business
Improve finances
Expand the customer baseEnhance profitability of main
businesses
Respond to liberalization
Further strengthen finances

Expand area, pursue M&A
Expand cross-selling
Generate new services“Implementing a
growth strategy”(2017–2020)

The performance forecasts and forward-looking statements in these materials arecalculated according to currently available information, 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

Reference) LP Gas Contract Prices, Past Three Years
Two years ago, the average contract price when purchasing LP gas was $699/ton. Last year, the price(ドル/トン)fell to $396/ton (down $333/ton). Meanwhile, average exchange rates two years ago were ¥108.42/$,
moving to ¥120.75/$.
 As a result, last year the average purchase price per ton of LP gas was ¥28,000 lower (down 37%)
from two years ago.
($/ton)
1,200

1,100

1,100

1,000

FY03/14average

900

$867

800

(¥99.56/$)

Average contract price during fiscal year
Figures in parentheses are the simple average of
exchange rates during the year.

FY03/15
average

$699

700
600

(¥108.42/$)

500

500

FY03/16
average

FY03/17 average(forecast)

$396

$370

(¥120.75/$)315(¥119.42/$)

400
300
200

Down about ¥28,000/ton¥75,790 ➡︎¥47,829

285

Down about¥3,600/tonReference) Share Price in FY03/16 (April 2015 = 100)
 Last August and again early this year, Japanese stock market prices declined due to the effect of plunging Chinese
stock prices, falling crude oil prices, and yen appreciation. The Nikkei Average consequently dropped by 12% from the
beginning of the year into ¥16,000 territory.
 Despite this environment, the Company’s share price sustained high growth levels of more than 10%. (On May 6, theNikkei closed at ¥16,106, down 15% from the beginning of the year. Our stock price was ¥617, up 20%.)120.0%In August, global stock
prices fell, affected by
the plunge in the
Chinese stock market

115.0%
110.0%★

April 1
¥19,034

In January, Japanesestock prices plunged,
affected by a fall in
Chinese stock prices
and lower crude oil
prices

105.0%★

100.0%
95.0%
90.0%

March 31¥586
+113.6% from thestart of the year

April 1
¥516
March 31
¥16,758

85.0%

TOKAI

Nikkei Average-12% from thestart of the year

80.0%
75.0%
4/1/15

5/1/15

6/1/15

7/1/15

8/1/15

9/1/15

10/1/15

11/1/15

12/1/15

1/1/16

2/1/16

3/1/16