www.nichiigakkan.co.jp

NICHIIGAKKAN CO., LTD.

Financial Results Briefing Document
for the Fiscal Year Ended March 31, 2018
May 15, 2018

Overview of Financial Resultsfor Fiscal Year Ended March 31, 2018

© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

Financial Results Highlights (Consolidated)
Net sales, operating income and ordinary income increased,
but net income declined due to the posting of extraordinary losses.
（Unit:million yen）

FY2018.3

FY2017.3
AmountNet Sales
Operating Income%

Ordinary Income%
Net income attributableto owners of parent%

AmountAmountyoy

276,659（Forecast）
300,000

283,767

7,107

4,206

9,300

7,630

3,423

1.5%

3.1%

2.7%

-

1,429

6,000

3,628

2,199

0.5%

2.0%

1.3%

-

1,403

3,000

854

▲ 548

0.5%

1.0%

0.3%

-

© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

2

Financial Results Highlights (Non-Consolidated)
In non-consolidated results,
all items including net income maintained an upward trend.
（Unit:million yen）

FY2018.3

FY2017.3
AmountNet Sales
Operating Income%

Ordinary Income%
Net income attributableto owners of parent%

AmountAmountyoy

239,776（Forecast）
259,400

243,588

3,811

3,542

8,300

6,241

2,699

1.5%

3.2%

2.6%

-

2,639

7,000

4,939

2,300

1.1%

2.7%

2.0%

-

3,044

4,700

3,300

255

1.3%

1.8%

1.4%

-

© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

3

Financial Results Highlights
1. Net sales hit a record high for the 10th consecutive fiscal year thanks to the promotion of businesses that met local needs.
► The long-term care business maintained an upward trend in sales (net sales up 3,740 million yen year onyear)• A rise in occupancy rates in residential care services made a contribution (sales up 8.2% year on year)► Sales increased significantly in the child care business (net sales up 3,416 million yen)
• Active deployment of corporate-run child care centers on the back of support for women’s advancement insociety

Number of child care facilities
as of end of March 2018

203 facilities(up 81 facilities year on year)

2. Profitability improved due to the success of measures to improve productivity (up 3,423 million yen year on year).
► Profitability improved in the medical support and the long-term care businesses.
• Progress of negotiations for contract optimization and improvement in operations in the medical
support business• Improved efficiency of facility operation in the long-term care businessChanges in quarterly operating incomein the child care business
219(Unit: million yen)-262 -235► Loss reduced in the child care business as a result of recovering prior investments.
 Quarterly income turned to profitability in 4Q, making progress in restoring profitability.

-146 -138

-157

-55

-571

FY2017.3

FY2018.3

3. Net loss was recorded due to the posting of extraordinary losses, but cash flows improved.
► The China business posted extraordinary losses of 788 million yen including evaluation loss related to goodwill of local
subsidiaries (627 million yen).
► Cash flows from operating activities recovered to an all-time high.
© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

4

Financial Results Highlights by Segment(Consolidated Net Sales and Operating Income)
Profitability improvement made progress, mainly in the core businesses.
（Unit:million yen）

Net Sales（Unit:million yen）

Operating

FY2016.3

FY2017.3

yoy

Medical Support

108,325

107,339▲ 986

Medical Support

8,012

8,876

863

Long-term care

144,416

148,156

3,740

Long-term care

11,183

14,516

3,332

Child Care

5,949

9,365

3,416

Child Care

▲ 781

▲ 564

216

Health Care

2,926

3,082

155

Health Care

615

69

▲ 546

Education

12,771

13,072

301

Education▲ 4,647▲ 4,620

26

377

404

27

Therapy

▲ 107

▲ 419

▲ 311

China Business

2,007

2,388

381

China Business▲ 1,416▲ 1,417

▲1

Other

1,303

1,933

630

Other

285

204

▲ 81

Elimination▲ 1,417▲ 1,976▲ 558

Elimination▲ 8,937▲ 9,013

▲ 75

Total

273,583

283,767

7,107

Total

4,206

7,630

3,423

TherapyincomeFY2016.3

FY2017.3

yoy© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

5

Summary of Balance Sheet (Consolidated)
The current ratio improved 17.9 percentage points (to 112.3%)
as a result of focusing on financial improvement.
End of March 2017

End of December
2018

Difference

Current assets

64,72367,924

3,201

Fixed assets

126,984

122,318▲4,665

191,708

190,243▲1,464Current liabilities

68,53060,459▲8,071

Non-current liabilities

85,252

92,127

6,874

Total liabilities

153,783

152,587▲1,196

Total net assets

37,92437,656▲268

Total liabilities andnet assets

191,708

190,243▲1,464

Total assets© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

6

Summary of Cash Flows (Consolidated)
Cash flows from operating activities and free cash flow improved significantly
due to greater profitability.
(Unit：million yen）

End of March 2016 End of March 2017

Difference

Cash flows from Operating activities

2,546

9,379

6,832

Cash flows from Investing activities▲ 6,250▲ 3,5672,682

Free cash flow

▲ 3,703

5,811

9,514

Cash flows from Financial activities

5,381▲ 4,246▲ 9,628

Cash and cash equivalents at end of year

14,373

16,1891,816© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

7

Changes in Consolidated Cash Flows
Cash flow from operating activities rose to a level close to that in FY2012.3.
Free cash flow marked a record high.
Operating CF
16,12815,802 million yen

Record-high line

Free CF13,904
million yen

Record-high line

10,98802008.32009.32010.32011.32012.32013.32014.32015.32016.32017.32018.3© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

8

FY2019.3 Earnings Forecast© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

Review (Achievements and Challenges)
Achievements

Toward restoring “strong Nichii” with no weak points• Fostered energy to return to growth by changing the organizational climate.
• Confirmed the effect of the increased earnings power of the core businesses.
• New forward-looking lineup based on the mutual complement of Gaba and COCO Juku Junior• Rebuilt a framework for creating the long-term care market in China.

Challenges

Toward strengthening the enterprise power necessary to be committed
to achieving the plan

• Realize profit growth associated with growth in the top line of the core businesses.
• Strengthen the profit refilling power of the BS businesses.
• Book an impairment loss of goodwill in the China business unavoidably and restore profitability by
reducing the burdens.
• Develop systems for consolidated subsidiaries and dispose of unprofitable businesses.

© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

10

The Restoration of “Strong Nichii” Begins with
the Realization of Growth on the Top Line.
Organizational reforms for strong Nichii• Strengthening of business constitution (strengthening of power toachieve the plan)• Stabilization of employment of employees on business frontlines(improvement in autonomy on business frontlines)• Structural reforms of the education business (restructuring)• Maintenance of the consolidated subsidiaries and disposition of
unprofitable businesses

2000.3

05.3

10.3

15.3

18.3

2025.3© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

11

Strengthening of Business Constitution able to be
Committed to Achieving the Plan (1)Sales reforms
Establish a Sales and Marketing Headquarters under the direct control of the president.
Gear up for growth on the top line by promoting chained sales of all businesses andcross-selling.
Key strategies• Expand the market share by strengthening the proposal power of the hospital department
and the clinic department.
• Strengthen the sales power of medical administration courses and long-term care courses.
• Acquire customers in the housekeeping support business (Nichii Life, Sunny Maid).
• Strengthen product sales marketing (long-term care PB products, child care products).
• Strengthen sales of corporate-run childcare centers.
• Build a new corporation channel and acquire corporation customers.

© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

12

Strengthening of Business Constitution able to be
Committed to Achieving the Plan (2)Enhancement of the executive officer system
Enhancement of the appointment of executive officers by business and area and theactive appointment of young employees
Incentive reforms
Introduction of the restricted stock compensation plan
(performance target committed-restricted stock plan)

Purpose: Amplification of the driving force of the medium-term management plan
“VISION 2025”
Target: Directors of the Company and its wholly-owned subsidiaries in Japan(excluding outside directors) and executive officers of the Company
Period: Implemented for 7 years until FY2025.3© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

13

Strengthening of Foundations of Human Resourcesthat Provide Services
Stabilization of employment of employees on business frontlines
Support to make workers regular employees, the promotion of indefinite-term employment, theenhancement of measures for improving the treatment of employees and the improvement of theirwork environment

Strengthening of supply power
Strengthening of sales of staff training courses
and the development and provision of
livelihood supporter training, etc.

Utilization and cultivation of foreign staff
Housekeeping support business by foreign staff in the National
Strategic Special Zone
Building of a scheme for acquiring human resources
and the expansion of recruitment
Technical Intern Training Program
Acceptance of interns from the Philippines and China (planned)© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

14

Structural Reforms in the Education Business
Structural reforms in the education business• Definition of brands in light of customer needs
COCO Juku Junior: Group English lessons (elementary, juniorhigh and high school students)
Gaba: One-to-one English lessons (adults)• Class restructuring tailored to area needs
Expansion of deployment area of Gaba Studio
Deployment of satellite classrooms of COCO Juku Junior• Building of a cooperative operation scheme
Promotion of greater efficiency in classroom operation, staff
management and sales cooperation

COCO Juku Junior Kagoshima School“Aquarium exploration in English”• Promotion in line with area characteristics
Area development with fields as the core© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

15

Education Business: Customer Satisfaction
Gaba

COCO Juku Junior2018 Oricon CS Report
English conversation school: Ranked first2018 iid AwardChildren’s English class (elementary school
students): Ranked first[Evaluation items in which we are ranked first]“Staff”
Ranked first“Instructor”
Ranked first“Classroom atmosphere”
Ranked first“Lessons”
Ranked first“English proficiency level”
Ranked first[Evaluation items in which we are ranked first ]“Instructor”
Ranked first“Effect”
Ranked first“Reliability”
Ranked first[Simultaneous award]
2018 Oricon CS Report
English conversation school for corporations:
Ranked first© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

16

Maintenance of the Consolidated Subsidiaries andthe Disposition of Unprofitable Businesses
Restructuring of the Nichii global network
SELC ENGLISH LANGUAGE CENTRE CANADA LTD.
SELC CAREER COLLEGE CANADA LTD.

Nichii China Co., Ltd.
Nichii Shanghai Co., Ltd.
Nichii Hong Kong Limited• Partial restructuring of joint venture companies in China• Gradual improvement in earnings of SELC Australia and
SELC Canada• Development of bases for human resources in thePhilippines• Transfer of shares in Nichii International Clinic

SELC-GLOBAL CENTERPHILIPPINES CORPORATIONSELC AUSTRALIA PTY LTD.

© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

17

Financial Results Forecasts for FY2019.3
Net sales: Toward the 300 billion level
Operating income: Aim for a record high（Unit:million yen）

Consolidated

ＦＹ2018.3 3Q

ＦＹ2019.3 3Q

AmountChange (%）

283,767
7,630

314,500
14,700+30,733+7,070

10.8%

2.7%

4.7%

-

-

3,628

10,500+6,872

189.4%

%

1.3%

3.3%

-

-

Profit attributable toowners of parent

854

6,300

+5,446637.7%

%

0.3%

2.0%

-

-

Net Sales
Operating Income%

Ordinary Income

92.7%© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

18

Net Sales Forecast by Segment（Unit:million yen）

Net Sales

Total

ＦＹ2018.3 3Q

ＦＹ2019.3 3Q

Change (%）

AmountMedical Support

107,272

113,200

5.5%+5,928Long-term care

149,811

162,100

8.2%+12,289

Child Care

9,365

13,00038.8%+3,635

Core businesses

266,449

288,300

8.2%+21,851

Health Care

1,398

3,500

150.4%+2,102

Education

12,06817,00040.9%+4,932

Therapy
Balance Supply
businesses
Global businesses

373

1,400

275.3%+1,027

13,84021,90058.2%＋8,060

3,574

4,400

23.1%

+826

Others

1,933

1,900

-1.7%

-33

Elimination-2,030-2,000--+30

283,767

314,500

10.8%+30,733* From FY2019.3, PB product sales will be transferred from the Health Care segment to the Long-term Care segment.
The Global segment will be newly established, and the China business and overseas services will be transferred from eachsegment.
For FY2018.3, values are posted retroactively in line with the new segments.

© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

19

Operating Income Forecast by Segment（Unit:million yen）

Operating Income

ＦＹ2019.3 3Q

Change (%）

AmountMedical Support

8,899

10,80021.4%+1,901Long-term care

14,81015,0001.3%+190Child Care

-564

400

--

+964

Core businesses

23,144

26,20013.2%+3,056

Health Care

-223

-770

--

-547

Education-4,474-900--+3,574

Therapy
Balance Supply
businesses
Global businesses

-340

40

--

+380

-5,039-1,630--+3,409-1,665-500--+1,165

204

250

22.5%

+46

-9,014-9,620

--

-606

7,630

14,70092.7%+7,070

OthersElimination
Total

ＦＹ2018.3 3Q* From FY2019.3, PB product sales will be transferred from the Health Care segment to the Long-term Care segment.
The Global segment will be newly established, and the China business and overseas services will be transferred from eachsegment.
For FY2018.3, values are posted retroactively in line with the new segments.
© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

20

Shareholder Return
Plan to increase dividends by 8 yen per share to convey the message
that we will definitely achieve the business plan.

Annual dividend

30yen
22yen

22yen

22yen

22yen

FY2015.3

FY2016.3

FY2017.3

FY2018.3

FY2019.3(Forecast)© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

21

Medium-Term
Management Plan
VISION 2025

© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

22

Nichii Vision
社会課題への貢献とContributing to theresolution of social issues, realizing
stable long-term profit growth,
長期利益の安定成長を実現し、
and aiming to become an excellent company
that makes a contribution globally© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

23

Framework of Vision 2025
Basic policy• Stable long-term profit growth by creating a strategic
事業構成比
triangle

Strategic triangle

Organizational reforms to restore strong Nichii• Strengthen strategy execution systems• Strengthen business bases and the power of branch
offices• Strengthen the organization linkage function
Business reforms and the strengthening offoundations to restore strong Nichii• Creation of added value• Promotion of earnings structural reforms• Strengthening of global readiness• Strengthening of the human resources foundation• Strengthening of the financial base© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

24

Target Management Indicators for FY2025.3

500 billion yen or more
Operating margin
10% or more
Dividend payout ratio
30% or more
Net sales

Aim to become a company with market capitalization of morethan 1 trillion yen by pressing forward with improvements in
profitability and financial strength over the medium to long term.
© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

25

Realize stable long-term growth by
optimizing the business structure balance.
Business mix■Core ■BS ■Global(Outer ring) Percentage of sales(Inner ring) Percentage of operating income

FY2025.3
FY2018.3

2018.3% of sales

2018.3期% of income

2025.3% of sales% of income

Core

93.9%

100%

Core

70%

50%

BS

4.9%

-

BS

25%

45%

Global

1.3%-

Global5%5%© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

26

(Reference) VISION Progress Project
Promote business reforms centered on business frontlines
with VIPRO as a communication platform.
Vision Progress Project (VIPRO)<Main themes>• Improved profitability through better operational efficiency• Response to customer needs• Creation of attractive workplace and systems<Progress>• Examples full of originality and ingenuity on business frontlines are sharedon a company-wide basis.
• The effect has emerged beyond areas through arrangement and theverification of the effect.
<Expected effects>• Chain of originality and ingenuity• Promotion of autonomous actions on business frontlines• Improvement of customer satisfaction and employee satisfaction© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

27

(Reference) Key Strategies of the Core Businesses
Realize stable growth in an unshakable position
by increasing supply power and added value.
[Recognition of business environment] Increase in demand due social issues such as the advancement of aging and the number of children on the waiting lists forchildcare openings
 Establishment of new professional qualifications and residential qualifications for foreigners to ensure the labor force Stricter selection of focus and improvement in the efficiency of the social security spending policy

Key initiatives
Deployment of bases and services in light of human resources and needs• Improvement in service quality with better skills• Strengthening of response to policies, social issues and needs (stricter selection of focus and improvement in efficiency of social
security)• Improvement in productivity (promotion of greater efficiency through the improvement of operational efficiency and theintroduction of AI and ICT, etc.)• Strengthening of response to area needs (medial exchange, community comprehensive care, etc.)• Cultivation of global human resources by utilizing the Technical Intern Training Program• Promotion of employment of qualified personnel as full-time staff for insurance operations (division from Nichii Life)© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

28

(Reference) Key Strategies of the BS Businesses
Strengthen earnings power through theearly development and expansive deployment of businesses.
[Recognition of business environment] Expansion of needs for housekeeping services associated with increases in the number of double-income households and theelderly Expansion of language needs associated with an increase in foreigners visiting Japan and the cultivation of global humanresources Stable growth of the pet-related market

Key initiatives
Early development and expansive deployment of high value-added businesses• Nationwide deployment of the Gaba brand and the dominant deployment of COCO Juku Junior• Pursuit of service quality and distinctiveness, etc.
• Strengthening of efficient promotion• Promotion of the housekeeping support business by foreign staff in the National Strategic Special Zone (promotion taking
advantage of Nichii Life)• Building of a scheme for acquiring foreign human resources and progress in foundation building• Creation of added value based on the integration of the Company’s know-how and global culture and skills© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

29

(Reference) Key Strategies of the Global Businesses
Steadily acquire a position in the overseas market
by tackling unlimited possibilities in the future.
[Recognition of business environment]
 Active response of the Chinese government to the problem of the aging society and the promotion of the “90-7-3” policy Expansion of areas where an experimental long-term care insurance system is implemented
 Beginning of a search for an appropriate long-term care insurance system for the elderly with dementia

Key initiatives
Dissemination and recognition of Japanese-style long-term care services in China• Enhancing the recognition of Japanese-style long-term care services based on the development of facilities specializing indementia and day services• Guiding to home-visit long-term care through the initiatives above and the strengthening of the matching capability of humanresources• Promotion of scaling up through development in each regional operating company

Pursuit of synergies with domestic businesses• Building the business foundation based on partnerships with local companies, etc.
• Contribution to the inbound and outbound of medical and long-term care services© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.

30

All performance targets and other forecasts, including numbers ofcontracts and users, and goals, contained in this document are
based on information currently available to the Nichii Gakkan Groupand will be affected by uncertain factors, including economic
circumstances, the relaxation of regulations, and employment
conditions. Please note that actual results, numbers of contracts andusers, and other data may be different from the forecasts.

Contact information
NICHIIGAKKAN Co ., LTD.
PR Division, Public Relations Department
Corporate Governance Headquarters
Address: 2-9 Kanda Surugadai, Chiyoda-ku, Tokyo
Tel: 03-3291-3954 (PR Division)
E-mail: nichii-ir@nichiigakkan.co.jp© 2018 NICHIIGAKKAN CO., LTD. All rights reserved.