Presentation of Financial Results
FYE June 30, 2017
August 23, 2017

Nippon Koei Co., Ltd.
Representative Director and President
Ryuichi Arimoto

I:

Accounting Report(July 2016 - June 2017, FYE17/6)

1

Results for FYE June 30, 2017
NK marked highest records ever in Orders, Net Sales, Operating & Ordinary Incomes.
■Orders:

Surpassed the budget target and last year's result owing to good performance of Domestic andInternational Consulting businesses.
■Net sales:
Recorded maximum in the past 3 accounting periods in a row. But fell short of the budget target
because completion of big projects of International Consulting and Power Engineering will bedelayed within the next period.
■Operating Income:Achieved a record by the contribution of Domestic and International businesses, though
underran the budget target.
■Ordinary Income:Hit the highest after 2-year downturn.
■Profit attributable to owners of parent: Substantially exceeded the record of previous year, but not reached thebudget target.
YoY Change

Reference
ValuesFYE17/6※(Millions of yen)

FYE17/6
Results

Orders104,019

117,442

13,422 112.9%

114,000

3,442

103.0%--Net sales

81,865

101,338

19,472 123.8%

105,000- 3,661

96.5%

86,990106.3%

Gross profit

22,35930,937

8,577 138.4%

29,5001,437

104.9%

24,269108.5%

Operating Income

4,723

5,464

741 115.7%

6,000

- 535

91.1%

5,383

114.0%

Ordinary Income

4,365

5,958

1,592 136.5%

6,300

- 341

94.6% ※Excluded the Urban &Profit attributable toowners of parent

1,823

3,288

1,464 180.3%

3,600

- 311

91.3% segment（単位：百万円）

Amount%FYE17/6
Forecast

vs. Plan

FYE16/6
Results

Amount%YoY(%)

Spatial Development* NK has changed the calculation standard for orders starting this period. Results for FYE June 30, 2016 are also based upon figures calculated
according to the same standard.
** BDP altered the closing date from the end of March to June this year. Therefore, the fiscal year ending June 2017 is composed of 15 months.
2

Consolidated Profit and Loss Summary(Millions of yen)

FYE16/6
Results
Ratio(vs sales)

Reference
ValuesFYE17/6※

YoY Change

FYE17/6
Results

YoY(%)

Amount%Ratio(vs sales)

13,422112.9%--

Orders104,019

Net sales

81,865100.0% 101,338

100.0%

19,472123.8%

86,990106.3%

59,50572.7%

70,40069.5%

10,894118.3%

62,721105.4%

Gross profit

22,35927.3%

30,937

30.5%

8,577

138.4%

24,269108.5%

SG&A

17,63621.5%

25,472

25.1%

7,836

144.4%

18,885107.1%

4,723

5.8%

5,464

5.4%

741

115.7%

5,383

114.0%- 357- 0.4%

493

0.5%

851

Cost of sales

Operating income

Non-operating
income/expenses

117,442

the Urban &- ※Excluded
Spatial Development
segment

Ordinary income

4,365

5.3%

5,958

5.9%

1,592

136.5%

Extraordinary
income/loss- 333- 0.4%- 764- 0.8%- 431-

Profit attributable toowners of parent

1,823

2.2%

3,288

3.2%

1,464

180.3%
3

Profit/Loss Analysis(Millions of yen)

4,000■Profit factor ■Loss factor

Improvement in cost rate by
0.6pts owing to efforts for cost
reduction in International
Consulting

3,500

Reduction offoreign exchange
losses

- 42

+510

- 389

- 1,249

3,000

3,288
+303

+851
+81
+1,400

2,500

2,000

Increase inpersonnel expenses
by increasing
headcount

1,823

1,500

Operating income
gained by absorption of
BDP (Urban & Spatial
Development)

Loss compensation
for group companies,
fixed-asset
impairment, et al.

1,000

500
0
FYE16/6
2016年6月期
Net Profit
当期純利益

Gain
on
売上増
Sales

Improving
原価率改善
Cost Rate

Urban &
Increasing 都市空間利益
Decreasing
一般管理費
営業外収支
SpatialAdministrative
NonDevelopment
Expenses
operative
ProfitLoss

Decreasing
特別利益
Extraordinary
ProfitIncreasing
特別損失
Extraordinary
Loss

Taxes
税金等
Increased

FYE17/6
2017年6月期
Net Profit
当期純利益*The amount of change in the values from sales to administrative expenses consists of yoy difference of existing businesses, excluding Urban& Spatial Development.
4

Results by Business Segment(Millions of yen)OrdersDomestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
OthersNet Sales
Domestic Consulting
International Consulting
Power Engineering

Urban & Spatial Development
Real Estate Leasing
OthersOperating income
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
Real Estate Leasing
Others/Recondilations

FYE16/6
Results

104,019
44,10928,876
14,716
16,251
64
81,86540,77822,07017,522
514
979
4,723
2,956
1,156
3,048
386
- 2,824

FYE17/6
Results

117,442
48,265
41,57314,087
13,46055
101,338
43,51624,491
17,577
14,347
473
931
5,464
3,298
1,887
2,683
81
401
- 2,886

YoY Change

Amount13,422
4,155
12,696- 629- 2,790-8
19,472
2,738
2,420
54
- 40
- 47
741
341
730
- 364
14
- 62

vs. Plan%

112.9%
109.4%
144.0%
95.7%
82.8%
86.3%
123.8%
106.7%
111.0%
100.3%
92.1%
95.1%
115.7%
111.6%
163.2%
88.0%
103.9%-

Amount

3,442
265
5,573
- 1,912- 539
55- 3,661- 1,483- 1,508
- 922
347
- 26
- 68
- 535
98
287
- 416
- 518
1
13

%

103.0%
100.6%
115.5%
88.0%
96.1%
96.5%
96.7%
94.2%
95.0%
102.5%
91.1%
103.1%
118.0%
86.6%
13.5%
100.3%
5

Domestic Consulting–

Order amount surpassed the budget target and last year's result owing to good performance of prioritizedbusinesses and winning bids of national projects as a result of strengthening technical competitiveness.
– Sales amount exceeded the one of previous period, with the elevation of orders received, fell short of thebudget target, on the other hand, due to the delay of big-project completion by consolidated subsidiaries.
– Ordinary income went beyond figures of both previous year and budget target, by productivity enhancement
and an increase of profitable projects from the government.
(Millions of yen)Orders
Net sales*
Cost of sales

Gross profit
SG & A
Operating income

FYE16/6
Results
44,109 Ratio(vs. Sales)
40,778100.0%
29,801
73.1%
10,976
26.9%
8,020
19.7%
2,956
7.3%

FYE17/6
Results
48,265 Ratio(vs. Sales)
43,516100.0%
31,834
73.2%
11,681
26.8%
8,383
19.3%
3,298
7.6%

YoY Change

Amount
4,155
2,738
2,033
704
363
341

%
109.4%
106.7%
106.8%
106.4%
104.5%
111.6%

FYE17/6
Plan
48,00045,00033,40011,6008,400
3,200*Net sales represent sales to external customers.

■Orders■Net sales■Operating income（ Millions of yen ）6

Project Case Study (Domestic Consulting)
Bridge Maintenance Business
It is urgently needed to cope with aging road facilities. Maintenance is provided to keep roads in good condition, to ensure safe
and smooth transportation, and to prevent/alleviate accidents/inexpediency for stakeholders, such as roadside residents,
drivers, et al.

New Technology (CIM): Streamlining and advancement of dam maintenance
Facilitating streamlined management by using CIM to create and utilize athree-dimensional model of civil engineering structures; Discussed,
developed, and introduced CIM contributing to streamlining, laborsaving,
and advancing maintenance

What is CIM?
CIM stands for “Construction Information Modeling.” Facilitates
streamlining and advancement of a series of construction production
systems by sharing information mainly on three-dimensional models
Penetrating inside a dam body7

International Consulting–––

Order amount substantially surpassed the budget target and last year's result with contribution of big-project.
Sales amount exceeded the one of previous period, however, underran the budget target due to the delay ofcompletion of some projects.
Ordinary income exceeded figures of both previous period and budget target, owing to profitability
improvement by the introduction of revenue-management systems.
(Millions of yen)

FYE16/6
Results

FYE17/6
Results

YoY Change

Amount%FYE17/6
Plan

Orders28,876 Ratio(vs. Sales)

41,573 Ratio(vs. Sales)

12,696144.0%

36,000Net sales*

22,07016,917
5,153
3,996
1,156

24,491
17,950
6,540
4,653
1,887

2,420
1,033
1,387
656
730

111.0%
106.1%
126.9%
116.4%
163.2%

26,00019,700
6,300
4,700
1,600

Cost of sales

Gross profit
SG & A
Operating income

100.0%
76.7%
23.3%
18.1%
5.2%

100.0%
73.3%
26.7%
19.0%
7.7%

*Net sales represent sales to external customers.

■Orders■Net sales■Operating income（ Millions of yen ）8

Project Case Study (International Consulting)
Dhaka MRT Line-6 Development Project
Construction of Bangladesh’s first full-scale high-speed urban rail network (20km length elevated route comprising 16 stations)
Demonstrating comprehensive strength throughcollaboration among business divisions and groupcompanies

NKDM Association
Nippon Koei Co., Ltd.
Nippon Koei India Pvt. Ltd.
Delhi Metro Rail Corporation Ltd.
Mott Macdonald Limited
Mott Macdonald Pvt. Limited
Development Design Consultants Ltd.

[Project overview]■Contract period: 2016 – 2018
■Contract amount: Approx. JPY8 billion (including reserves)■Contractee: Dhaka Mass Transit Company Limited■Contractor: JV consisting of Nippon Koei, Nippon Koei India, and fourother companies■ Work contents: Bid support, Construction supervision, Oversight andsupport for operations and maintenance management
9Power Engineering–––

Order amount fell short of the last period’s record and budget target, due to the delay of contracting procedures forlarge-scale projects.
Sales amount is at almost equivalent level of the previous period; as for the budget target, however, notsatisfactorily attained due to the delay of contract conclusion for large-scale projects.
Operating income underran both figures of the last year and budget target, caused by personnel increase
corresponding to extraordinarily high domestic/international demand for hydropower business, in spite of thoroughcost reduction efforts.
(Millions of yen)Orders
Net sales*
Cost of sales

Gross profit
SG & A
Operating income

FYE16/6
Results
14,716 Ratio(vs. Sales)
17,522100.0%
11,718
66.9%
5,804
33.1%
2,756
15.7%
3,048
17.4%

FYE17/6
Results
14,087 Ratio(vs. Sales)
17,577100.0%
11,885
67.6%
5,692
32.4%
3,009
17.1%
2,683
15.3%

YoY Change
Amount
%

- 629
54
167
- 112
252
- 364

95.7%
100.3%
101.4%
98.1%
109.2%
88.0%

FYE17/6
Plan
16,00018,50012,500
6,000
2,900
3,100

*Net sales represent sales to external customers.

■Orders■Net sales■Operating income（ Millions of yen ）10

Project Case Study (Power Engineering)
Ikari Hydroelectric Power
Station — Renewal project for privately owned power station —民間企業保有の水力発電所更新』プロジェクト
Development planning and process management for renovation of privately-owned hydroelectric power station based uponfeed-in-tariff (FIT) scheme for renewable energy.

■Ikari Hydroelectric Power Station(Established in 1907)
Location: Kazuno City, Akita Prefecture
Power Output: 1,800kW
Construction in a small building with relatively
fragile architecture

Water turbine generator control system

Water turbine assemblyPower-generation rotor
11Project Case Study (Power Engineering)
Development of monitoring control system for electric power systems
In the field of switching equipment/system, core business of Power Engineering Operations, launched development of nextgeneration monitoring control systems. Addressing tasks of cost reduction, international standardization, et al. Nippon Koei
targets expansion of sales to electricity firms/overseas.

Next-generation monitoring control systems
Data center 1

Data center 2

Overseas business development

Data center 3
2

Six companies agreed to a
strategic alliance.

3

Wide area network

Substation
Gateway
Facility

Branch, control center, maintenance area

Development of Substation Gateway Facility

Remote monitoring
control device

・・・・・・・
Substation

Substation

Substation

Nippon Koei has organized amonitoring control system forelectric power systems by
developing substation gateway
facility that interconnects local
substations with wide-areadate network.
12

Urban & Spatial Development––

Both orders and sales are rather slumping because of delaying order issuance of public works for educationrelated facilities, backed by ambiguous climate of public administration in Britain due to Brexit.
Operating income has been negatively affected by stagnant sales and weak pound sterling.

FYE17/6
Results

FYE17/6
Plan

OrdersRatio
13,460 (vs. Sales)

14,000Net sales*

14,347 100.0%

14,000

Cost of sales

7,678

53.5%

8,800

Gross profit

6,668

46.5%

5,200

SG & A

6,587

45.9%

4,600

81

0.6%

600

(Millions of yen)

Operating income

Progress of business strategy in practice・Despite the impact of Brexit, gross profit of BDP was largely inline with its plan for 15 months in a row.
・BDP secured orders from private companies in ASEAN as aresult of cooperative sales promotion with Nippon Koei.
* BDP altered the closing date from the end of March to June this year.
Therefore, BDP’s FYE June 30, 2017 is composed of 15 months.
** The amount of amortization expenses for FYE June 30, 2017 isapproximately JPY 1 billion (Amortization of goodwill: approximately JPY 500
million; Other intangible fixed assets: Just over JPY 500 million).
*** Fixed rate of exchange for FYE June 30, 2017 results: 1 GBP = 145.16 JPY(Rate used in the plan for the FYE June 30, 2017 was 1 GBP = 160 JPY)

BDP has altered its official closing date from the end of March to June since 2017.
【Reference】 Quarterly Performance of Urban & Spatial Development FYE June 30, 2017
(Millions of yen)Orders
Net sales
Operating Income

2016.4-6
(1Q)
2,806
3,260
76

2016.7-9 2016.10-12
(2Q)
(3Q)
2,749
1,970
2,733
2,615
0
- 26

2017.1-3
(4Q)
2,996
2,973
22

2017.4-6

2,939
2,766
9

FYE17/6
Results
13,46014,34781

FYE17/6
Plan
14,00014,000600
13Project Case Study (Urban & Spatial Development)
Palace Of Westminster Refurbishment
Received an order in July 2017 for architectural design of a major refurbishment project of the Palace of Westminster following
the order received for refurbishment project of the temporary relocation site of the House of Parliament (The Northern Estate
Programme) in November 2016.

Partial view of the temporary relocation site
(inside Northern Estate)
The Northern Estate Programme Project
overview
Contractee: The House of CommonsContractee: The Parliament of the United Kingdom
Work contents: Overall architectural design services related to therefurbishment project (including aging diagnosis, security measures, and fire
protection)
14

Balance sheet
・Current assets increased due mainly to an increase in cash and deposits.
・Current liabilities decreased while non-current liabilities increased due primarily to refinancing short-termborrowings to long-term borrowings.
・Net assets increased attributable to an increase in capital surplus and retained earnings.
(Millions of yen)

FYE16/6
Results ※FYE17/6
Results

YoY

100,989

113,865

12,875Current assets

46,15354,798

8,645

Physical fixed
assets24,561

24,535- 25

Intangible assets

16,62013,900- 2,720

Investments andother assets

13,654

20,6306,976

Liabilities

49,52958,991

9,462

Current liabilities

43,10730,341- 12,766

6,421

28,65022,22851,46054,874

3,413

AssetsNon-current
liabilities
Net assets(*) For the FYE 16/6 balance sheet, BDP’s financial results as of April 1, 2016 were consolidated.
15

Cash Flows
・Cash flow from operating activities increased owing largely to the increase in advances received in addition
to net income before income taxes.
・Cash flow used for investing activities totaled JPY 4.1 billion mainly due to acquisition of fixed assets andinvestments in new businesses.
・Cash flow from financing activities totaled JPY 4.8 billion owing mainly to long-term borrowings.

(Millions of yen)

Net cash provided by(used in) operating
activities
Net cash provided by(used in) investing
activities
Net cash provided by(used in) financing
activities
Net increase(decrease) in cash andcash equivalents
Cash and cash
equivalents at the endof period

FYE16/6
Results

FYE17/6
Results

YoY

379

6,376

5,996

- 17,705- 4,172

13,533

15,1994,846- 10,353- 2,272

6,925

9,197

9,400

17,083

7,686
16

Ⅱ：Progress of Medium-Term
Management Plan NK-AIM

17

Group Vision
To provide services that are of value in building safe and reliablesocial infrastructure and comfortable living spaces.

18

Long-Term Management Strategy (July 2015 – June 2021)
Continue evolution toward a global consulting and engineering firm
FYE21/6 Numerical Targets
Consolidated Net
Sales¥140.0 billion

Operating income¥14.0 billion

Operating margin
10%

ROE
10%

¥140.0 billion
Growth by new business+¥40.0 billion¥100.0 billion¥80.0 billion
1st
Step

2nd
Step

Sustainable growth ofexisting business+¥20.0 billion¥80.0 billion  ¥100.0 billion

3rd
Step

NK-AIM
FY2008FY2012FY2015FY2018FY2020In order to meet the requirement of sophisticated and complicated urban functions as well as
to resolve urban issues in developing countries, exploit urban space business and other new businesses
toward a global and highly profitable corporation
19

Medium-Term Management Plan (NK-AIM)
Basic policies
Sustainable growth of three core businesses,
Generation and expansion of new businesses,
Autonomy and collaboration

Key Challenges(1) Further evolution of global
expansion→ Advance globally(2) Further expansion ofbusiness fields andimprovement of profitability byintensifying existing corebusinesses→ Intensify in Japan(3) Demonstrating true merits ofaggregated technologies forestablishing new business areas

Demonstrate→ Merits

Corporate-wide measures to address key challenges(1) Technology• Develop next-generation coretechnologies• Further improvement oftechnical strengths andproductivity(2) Human Resources

Strengthen human resources,
recruitment and training(3) Organization

Promote collaboration andenhance corporate governance

FYE18/6 Numerical Targets (after the revision, August 2016)
Consolidated Net Sales

Operating income

Operating marginROE¥115.0 billion¥7.4 billion

6.4%

7.5%
20

Progress of Medium-Term Management Plan NK-AIM
Advance globally(Advance)

Make Intense efforts inJapan (Intense)

Demonstrate our true
Merit (Merit)

Accelerate global expansion

Secure stable profitability

Generate new business areas■International Consulting■Domestic Consulting■Power Engineering■Urban & Spatial Development UK projects came to a temporary
standstill due to Brexit and impactof the election
 Business development in ASEAN
countries (en route) Group-wide roll-out of BIM
technology (en route) Marked the record order backed by
the “Initiative for Promoting Quality
Infrastructure Investment”

 Reduced customer complaints andcontinuously improved businessperformance rating Expanding group collaboration andtaking concrete steps for settlinghuman-resource allocation systems
to register and distribute regional
engineers Growth of core businesses Advancement of new businessbuilding■Energy Improving competitiveness throughcost reduction and value
engineering Development, operation, andmaintenance of domestic andinternational power-generation
business (en route) Organizational provision for
demand side management(DSM) Practical application andcommercialization of powersources, rechargeable batteries,
VPP, and more (en route)21

Progress of Medium-Term Management Plan NK-AIM
Human Resources

Technology

Organization

Strengthening of humanresource recruitment andtraining

Development of next-generationcore technologies, and further
improvement of technicalstrengths and productivity

Promotion of collaboration andenhancement of corporate
governance Increased headcount by 230/year(consolidated, growth rate: 5.3%)

 Some of initial targets areunachieved yet Singapore office established in
May 2017

 Delay in designing humanresources development program To promote technologicaladvancement while observing
market trends, future forecasts,
and frontline application oftechnologies

 Reinforced ties between groupcompanies/members throughannual technical forum andgroup company liaison
meetings

 Comprehensive reform of
personnel systems including
working rules (en route) Established new work-life-balance
committee

 Enhanced internal control ofgroup companies Strengthened system of global
accounting governance22

Ⅲ： FYE 18/6 Activities(July 2017 - June 2018)23

FYE June 2018 Forecast
Focusing upon building basement to realize development targets set forth in the next mid-term management
plan, under the slogan of “Investment and Cooperation,” NK will expand investment in technologicalimprovement, human resource development, strengthening marketing structure and new business frontiers.
（単位：百万円）(Millions of yen)Orders
Net sales
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
Energy/Real Estate/Others

Operating Income
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
Energy/Real Estate/Others

Ordinary income
Profit attributable to owners of parent

Operating margin（％）
ROE（％）

FYE18/6
Forecast

FYE17/6
Results

103,000
114,000
47,20031,80021,20012,000
1,800
7,700
3,500
2,400
3,500
50
- 1,750
7,800
4,900

117,442
101,338
43,51624,491
17,577
14,347
1,405
5,464
3,298
1,887
2,683
81
- 2,485
5,958
3,288

6.8
8.7

5.4
6.2

YoY Change

Amount%- 14,442
12,662
3,684
7,309
3,623
- 2,347
395
2,236
202
513
817
- 31
735
1,842
1,612

87.7%
112.4%
108.4%
129.8%
120.6%
83.6%
128.1%
140.9%
106.1%
127.1%
130.4%
61.7%
130.9%
149.0%

FYE18/6
Reference ※103,000
104,000
43,00028,20019,10012,000
1,700
5,800
2,700
2,000
2,800
50
- 1,750
6,000
3,600

※ Estimated budget target June 2018, based uponprevious standard (completed-contract method)※Effective from the Fiscal Year Ending June 30, 2018, the Group changes the primary method of revenue recognition from completedcontract method to percentage of completion method. . For details, please see page 38.
24

① Advance globally - Accelerate overseas development International Consulting
Marketenvironment

•

•
•
•

Japan’s ODA budget expanded to approx. JPY 2 trillion.
Robust demand for expansion of railway networks in developing countries.
Booming consulting business for infrastructure development owing to growing demand for all-in-one
utility export.

More strategic development ofmarketing resources

Net sales received by subsidiaries havegrown to account for approx. 40% of
overseas business; Focus onestablishing a more region-based system
1.
2.
3.
4.
5.

•
•
•

Middle East/North Africa
Sub-Saharan Africa
Southwest Asia
Southeast Asia
Latin America

Enhancement of production systems
Strengthening organizational
functions of group companies while
evolving inter-collaboration models
Providing operational basis for risk
management

①
③

④

⑤

②
B

Dhaka International Airport Expansion Project

Record of BIM utilization(small hydropower project)
25

② Make Intense efforts in Japan - Secure stable profitabilityDomestic Consulting
・ Prioritized budget allocation for ‘Building National Resilience’ and extending life-span of social infrastructure continues,
while growth of total budget for public works remains stagnant.
Market・ Business group discussion on institutional reform of labor practice within construction industry will potentially reach theenvironment
level of implementation process, in line with the government campaign of “Work Style Reform.”
・ Wide-spreading application of i-Construction, BIM/CIM and big data analyses.

■Operational reforms■Business expansion and starting
new businesses■Pursuit of bigger market share■Provision of good working environment■Proactive use of group alliances

MLIT business evaluation points for
non-consolidated Nippon Koei

Priority businesses:
Trends of orders (¥100 million)

1.43
times

FY2014FY2015

1.62
times

FY2016

Power Engineering・ Price competition and cost reduction demand, including the growing number of competitive bids, will continue to intensify.
・ Demand for refurbishment and renewal is expected to be stable for the next two to three years to ensure stable supply ofMarketelectricity.
environment ・ Self-sufficiency rate of regional electricity is expected to increase backed by growing ratio of renewable energy.
・ Diversified sources of electric power energy, resulting consequence of “Electricity Systems Reform” attracted andfacilitated new entries into the market.

■Enhancement of price competitiveness and sales
capabilities■Strengthening of group ties

■Development promotion of products and technologies■Expansion of electromechanical business consultation
26

③ Demonstrate our true Merit - Exploit new business domains Urban & Spatial Development
Marketenvironment

・ International market trends indicates architectural industry is growing and occupies a large share of
total industry revenue (approx. 25%).
・ While market conditions have become uncertain in the UK due to Brexit, demand for urban
development remains robust in emerging countries, mainly in Asia.

■ Enhancement of business structure
•
•
•

BDP
Sales share by
field in the UK

Response to Brexit
Acquisition of repeat orders from prime customers
Expansion of share in transportation-related facilities
and the housing field✓ Projecting an expansion of refurbishment/rebuilding markets
Effective use of BDP’s knowhow in construction/refurbishment

Sample interior design

Sample interior design

Sample interior design27

③ Demonstrate our true Merit - Exploit new business domains BDP Global Sales
composition
by region

Urban & Spatial Business■ International business evolution••

Cooperative interconnection between regional hubs:
Singapore, Delhi and Shanghai
Prospective entry into markets of Canada and Tokyo

BDP Asia Business Plan

Singapore

South Asia Region

Tokyo
Shanghai
Delhi





Office was opened in September 2017. Residential staff of BDP
will be allocated.
Joint sales promotion by Nippon Koei and BDP to the private
sectorDevelopment of sales route to the private sector, such as
forming business alliance with local firms

Delhi, Shanghai
 Integrated offices of Nippon Koei and BDP in India (December
2016) Activation of existing human resources for cost competitiveness Transactions of projects in ASEAN and Japan to be handled by
Shanghai office

Singapore
ASEAN Region<Future plan> Tokyo, Canada【Canada】 To establish a branch office in Toronto, the largest city in
Canada28

③ Demonstrate our true Merit - Exploit new business domains Urban & Spatial Development■ Further advancement of BIM technology••

Quality maintenance of BIM Level 2 and development of BIM
Level 3
Group-wide roll-out of BDP’s leading-edge BIM application
technology in Europe

What is BIM?
BIM stands for “Building Information Modeling.”
Simulating three-dimensional models with building specifications andperformance data on computers to be used from designing tomaintenance stage.

Energy Business■ Evolution of power generation business■ Promotion of energy management business

Small-scale thermal power plant
fueled by coal and biomass in
the Philippines
29

Companywide measures to address key challenges
Technology• Develop next-generation core technologies•✓ /Further
improvetechnical strengths
productivity
Installationof a cross-sectionalframework andfor specifictopics,engaging in the development of next-generation technologies

R&D Center

Human Resources•

Strengthen human resource recruitment and training✓ Active recruitment of new graduates (implementation ofseminars and an internship program)✓ Rebuilding of the human resources development program✓ Improvement in long work hours, workstyle reform,
improvement in productivity

Organization•

Enhance corporate governance and compliance/risk management✓ Establishment of a Nomination and Compensation
Advisory Committee

Investment policy•

Skill enhancement workshop

Make appropriate investment observing sustainability of growthin each existing business unit, to support foundation,
stabilization, and expansion of new businesses

Investment projects

BudgetCapital investment

JPY1.4Bn

Energy business

JPY2.9Bn

Business development for
new businesses

JPY2.1Bn

Total

JPY6.4Bn
30

Capital Policy/Dividend Policy
Capital policy•

Enhance corporate value through the improvement of capital efficiency and businessexpansion by making investments for future growth

Securing offinancialsoundness

Enhancementof corporate
value

Stable dividends/
enhancement ofshareholder return

Improvement of
capital efficiency

Investments for
future growth•Retirement of Treasury Stock✓

Cancelled 1,436,731 shares (8.29% of the total number of shares outstanding before cancellation) on August 31.
The number of treasury stock after cancellation is expected to be null (0).
* The number of treasury stock after cancellation was calculated based on the number of treasury stock as of June 30,
2017.

•

Introduction of a restricted stock compensation plan

Dividends (yen)Payout ratio (%)

Dividend policy•

Stable dividends and enhancement ofshareholder return in line with increases in profit✓ Planning to pay a dividend of ¥75.0 for FYE 18/6.
FYE 15/6

FYE 16/6

FYE 17/6

FYE 18/6(Plan)*Past dividends are recalculated based on the ratio after share consolidation.
31

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

This presentation is provided for informational purposes only and is not intended to solicit any action. Nippon Koei prepared thispresentation (including forecasts of financial results) based on credible information available at the time of publication and certain
assumptions the Company believes to be reasonable. Various factors may cause actual results to differ materially from the projected
results or other expectations implied or expressed in this presentation.

IR-related inquiries
Nippon Koei Co., Ltd.
Corporate Communication Office Corporate Planning Divisionkoei-ir＠n-koei.co.jp
www.n-koei.co.jp/english/

32

(Reference) Change of BDP’s Account Closing Date (from June 2017)
BDP has altered its official closing date from the end of March to June since 2017.
■Purposes• To promote efficient business operations, keeping accordance with the long-term strategic vision, byconsolidating account closing date of all the group companies• To deliver and capture management information promptly and accurately• To enhance management transparency by timely and proper information disclosure■Impacts on the closing of FYE June 30, 2017
• Consolidation by importing data of 15-month (from April 2016 to June 2017) transactions of BDP business• Amount of amortization expense is approx. JPY 1 billion (for 12 months. goodwill: 500 million/to be depreciatedover 20 yrs.; other intangible fixed assets: 500 million) plus JPY 250 million (for 3 months extra)

FYE17/6
June

Sept

Dec

FYE18/6
March

Consolidation

1Q

2Q

3Q

BDP

2Q

3Q

4Q

1Q

June

Sept

4Q

Dec

March

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

Closing of FYE June 30, 2017 includes 15-month transactions【Reference】 Quarterly Performance of Urban & Spatial Development FYE June 30, 2017
(Millionsof yen)2016.4-6(1Q)

2016.7-9(2Q)

2016.10-12(3Q)

2017.1-3(4Q)

2017.4-6

Orders

2,806

2,749

1,970

2,996

2,939

13,46014,000

Sales

3,260

2,733

2,615

2,973

2,766

14,347

14,000

76

-0

- 26

22

9

81

600

Operating
Income15-month
BudgetAccumulation FYE June 2017

* Fixed rate of exchange for FYE June 30, 2017 results: 1 GBP = 145.16 JPY (Rate used in the plan for the FYE June 30, 2017 was 1 GBP = 160 JPY)
33

(Reference) On changes in calculation standards for Sales (from June 2018)
Effective from the Fiscal Year Ending June 30, 2018, the Group changes the primary methodof revenue recognition from completed-contract method to percentage of completion method.
Calculation by “Percentage of Completion Method”(Sales Amount)=(Estimated Total Revenue)× Progression Rate – (Cumulative Salesby the End of Previous Period)
Progression Rate ＝

Costs occurred (operational, outsourcing, travel, etc.)

Sales Recording by “Percentage of Completion Method”

Progression
Rate: 70%

Completion

1st year

2nd year

3rd year

Total

0

0

3,000

3,000

750

1,350

900

3,000

Case: Project of 3-year contract period, JPY
Progression
30-million value
Rate: 25%

Sales amount is bookedat the end of the Project
Sales amount is booked inproportion to the progressCompletedcontract method% of completion
methodTotal Estimated Costs

3,000×25%

3,000×70%ｰ750

3,000×100%－750－1,350* The figures for Consolidated Financial Results Forecast for the FYE June 30, 2018 is calculated based on the new method.
34

(Reference) On changes in calculation standards for orders (from June 2017)
Previously, amount of orders included the balances of foreign currency translation (*) of outstanding orders
as of the end of the previous period. Starting FYE June 30, 2017, however, orders are settled without
foreign currency translation.
 Previous method of calculation

 Current method of calculation (starting this period)

Loss

Loss

Orders for the current
period include thebalances of foreign
currency translation ofoutstanding orders as ofthe end of the previous
periodOutstandingorders as of theend of theprevious period

Current period
ordersCurrent period
net sales

Orders for the current period
do not include the balancesof foreign currencytranslation of outstandingorders as of the end of theprevious period

Outstandingorders as of theend of the current
periodOutstandingorders as of theend of theprevious period

Current period
ordersBalance of foreign
currencytranslation

Current period
net sales

Outstandingorders as of theend of the current
period* Details on the balances of foreign currency translation of outstanding orders as of the end of the previous period are explained in
the section titled “4. Supplementary Information” on page21, the Summary of Financial Results.
35

IV: Reference36Corporate Profile
Corporate NameNIPPON KOEI CO., LTD.

 FounderDate of Foundation

June 7, 1946

Capital¥7,393 million

Before WWII, Yutaka Kubota was engaged
in the development of hydropower
resources (e.g. Suiho Dam/700MW, in the
Korean Peninsula, one of the world’s
largest at that time).

Number of Employees 4,566 (consolidated)
Consolidated Subsidiaries

Businesses

16

Domestic Consulting
International Consulting (ODA, etc.)
Power Engineering
Urban & Spatial Development

Management Philosophy
Act with integrity and contribute to society throughtechnology and engineering.

Transition of Sales (consolidated, ¥ million)

Yutaka Kubota (1890-1986)

After the War, in a bid to work toward therestoration of Japan and reconstruction ofcountries damaged by the War, he founded
the Company at the age of 56.
Known as the “Father of Overseas Engineering Cooperation”, hewas awarded the Grand Cordon of the First Order of the Rising
Sun in 1985.
He directed projects in many countries throughout the world until
he was 90 years old, contributing to development in developing
countries.

Transition of Operating Income (consolidated, ¥ million)

37

Business Development
Domestic Consulting

International Consulting

Power Engineering

Nippon Koei has implemented approx. 3,000
projects/year to underpin the foundations ofpeople’s daily lives, such as development andmaintenance of social capital including rivers,
roads, etc., and regional reforms to realize
prosperous and safe living.

Nippon Koei has supported the growth ofdeveloping countries in Africa, the Middle
East, Latin America and, especially, in Asia
by providing support in a broad range of fields
including water resources, energy, urban
development, transportation, agriculturaldevelopment, and environment control.

Nippon Koei has worked on the developmentof power sources and the promotion ofbusiness accommodating electricity demand inJapan and overseas. The Company has
engaged in new construction and repairs of
substations, switching stations, power stations,the formation of dam management systems athydroelectric power plants, etc.

Urban & Spatial

FY17/6 Sales distribution ratio

Real Eatate 473（0.5%）
Others 931（0.9%）(Millions of yen)

Nippon Koei strives to create multifunctional,
well-organized, barrier-free, eco-friendly andbeautiful life space in emerging economies in
Asia and other developing countries/regions
through development projects of social
infrastructure design, such as of railway
stations, airport buildings, rearrangement of thestreetscape, etc.

FY17/6 Sales by Geographical Location

Urban & Spatial
14,347（14.2%）
Domestic
43,516
International（42.9%）
24,491（24.2%）

Power
17,577（17.3%）

Others%Latin America%
Africa%Middle East%

Europe
14%

Asia
15%

Japan
%

38

Job Description for Civil Engineering Consultants
Domestic: Mainly involved through the design stage. Core customers are primary government organizations including the
Ministry of Land, Infrastructure, Transport and Tourism, and secondary government organizations including prefectural andother local governments.
Overseas: Involvement varies by project, and can range from planning and construction to construction supervision andmanagement. Core customers include the Japan International Cooperation Agency (JICA), other governmental agencies,
the United Nations and the World Bank.

Planning

DesignPlan and draft,
Basic engineering,feasibility studies Detailed engineering

Construction
Competitive bids,
Providing
Proposals

Bid evaluation and support
for supplier selection

Operation/
Management

Contract supervision and management Operational consulting
Construction supervision andManagement consulting
management

Domestic

Consultant (NK)Construction (General Contractors, etc.)

Overseas

Consultant (NK)Surveillance (NK)Construction (General Contractors, etc.)

Example: Chronic traffic congestion problems in Region A
Planning

DesignConstruction

Provide engineering services forstudies, planning, design and otheractivities.

Supervise the work of contractors on behalfof the client (supervision and management)

Completion ofroad・ Should roads or subways be constructed?
・ Is the project economically viable?
・ Propose the optimum construction
methods given the terrain(General contractors, manufacturers, etc.)
Execution of construction work according to thespecifications agreed upon by the contractee andcivil engineering consulting firm

Provided as aservice toresidents
39

Nippon Koei’s Development Along with Social Progress
NipponKoei
XSocietyBusiness
Development

Formulation of business base,
Fostering positive relationshipwith foreign governments

Comprehensive strength anddevelopment capability toencompass various fields

Flexible responses tochanges in environmentand social needs

Stable supply of electricity
Development of infrastructure
for daily life

Establishment of foundation
for industrial growth

Realization of sustainable
society

Dam

Electricity
Production

Rivers anddrainageTransportation

Environmental
systemLong-termManagement
Strategy

NK-AIM
Urban & spatial
development

Maintenanceandmanagement

Building
National
Resilience
Longer operating
lives of infrastructure
Environmental
responses

Advances

Deregulation ofelectricity
business

Infrastructure
exportEstablishment ofsocial capital
Restoration of
infrastructure fordaily livings

Human
Resources

Provision of employment
opportunities for engineers whocame back alive from overseas
territories

Improvement in quality ofengineers,
Training of engineers in extensive
industrial fields

Improving social reputation ofengineering consultants
Transfer of technologies todeveloping countries

Stage

Foundation stage

Growth stage

Maturation stage

Innovation stage

Era

Restoration in the postwar
period1946-1960s

High economic growth
Population increase
1970s-1990s

Collapse of bubble economy
Global warming
1990s-2000s

Great East Japan Earthquake
Urban problems
2011-Present

Recruitment of regional engineers
Paying attention to work-life balance40

Strengths of Nippon Koei
(1) Sustainable business model developed
along with progress in society(Win-win relationship between society and theCompany)

Implementation of transformation to meetmarket needs(2) Japan’s leading engineering consultant(Business domains, technologies, and humanresources)

Comprehensive strength: Capable of solving
sophisticated or complex issues
Human resources: Has the largest number ofengineers in the industry

Commercialization of solutions on social
issuesConsolidated
net sales:¥101.3 billion

No. ofcountries inwhich businessis undertaken:
160

Technologies: Equipped with in-house R&D
facilities and a number of patents

No. of orders
per year: over
4,500

No. of patents
acquired:82

No. of
Professional
Engineers*:
1,534*Certified by the Japanese government

Provide solutions on needs of the era and realize sustainable business expansion
and profitability growth41

Position in Industry
Nippon Koei is Japan’s leading civil engineering consultant.
Rank

Sales (Millions of yen)Company

Segment ofConst. Consultation

Corporate
Total

1

Nippon Koei

44,21460,327

2

Pacific Consultants Co.,LTD.

40,47742,511

3

CTI Engineering Co., Ltd.

32,62634,256

4

Yachiyo Engineering Co., Ltd.

19,426

19,6685

JR East Consultants Company

18,044

20,134

6

Oriental Consultants Co., LTD.

17,41917,644

7

Nihon Suido Consultants Co., Ltd

17,134

17,3658

KOKUSAI KOGYO CO., LTD.

16,32535,022

9

Eight-Japan Engineering Consultants Inc.

15,362

17,531

10

NEWJEC Inc.

15,14915,61320

Tamano Consultants Co., Ltd. (strong point: urban planning)

9,779

11,49987

NIPPON CIVIC CONSULTING ENGINEERS CO.,LTD(strong points: underground spatial planning, tunnels)

1,899

1,933

※ Source: Nikkei Construction, May 8, 2017 edition. Ranking by engineering consultant division sales (according to published financial results)
42

Domestic Consulting
Nippon Koei’s Operating Results in Domestic Consulting(¥ million)

Public Works Expenditures (¥ trillion)

 Initial budget  Supplementary

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017■Orders

FYE
12/3

FYE
13/3

■Net Sales

FYE
14/6

FYE
15/6

■Operating Income

FYE
16/6

FYE
17/6

FYE
18/6
(Plan)
43

International Consulting
Initial ODA Budget in the General Account(¥ billion)

Nippon Koei’s Operating Results in International Consulting(¥ million)■Orders

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FYE
12/3

FYE
13/3

■Net Sales

FYE
14/6

FYE
15/6

■Operating Income

FYE
16/6

FYE
17/6

FYE
18/6
(Plan)
44

Power Engineering
Repair Expenses and Facility Investment and Its
Distribution for Tokyo Electric Power Co., Ltd. (¥ billion)■ Repair Exp.

Nippon Koei’s Operating Results in PowerEngineering Business (¥ million)■Orders■Net Sales■Operating Income■ Facility Inv.

FY 2011

FY 2012FY 2013

FY 2014

FY 2015

FY 2016

FYE
12/3

FYE
13/3

FYE
14/6

FYE
15/6

FYE
16/6

FYE
17/6

FYE
18/6
(Plan)45

Urban & Spatial Development
Sales Trend of Top 164 Research and Designing Companies(Billions of dollars)

Sales of top 164 firms in 2015 by sector(Billions of dollars)■Architecture■Transport■Other

Source of data: ENR Magazine (issued in August 2016)46