2015 Full-Year Results

From June1, 2015 to May 31, 2016

ERI Holdings Co., Ltd.
July 13, 2016
Listed on Tokyo Stock Exchange (Code 6083)
http://www.h-eri.co.jp
1

Contents
1. Results in fiscal year Ended May 2016
2. Topics
3. Forecasts for the fiscal year Ending May 2017
4. Our new medium-term management plan

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2

ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Summary
Although sales and income increased in the full year,
these gains slowed in the second half and targets
in the revised forecast were not reached.








Although the number of new housing starts recovered gradually, growth of owner-occupied
housing was low.
The number of Building Confirmations rose slightly, while Final Inspections fell 2.8% due tothe impact of lower housing starts in the previous fiscal year.
New services (Route 2 Structural Examination and Pre-completion Tentative Approval)
introduced after the revision of the Building Standard Law performed well.
Sales in the Housing Performance Evaluation business were solid, in part due tothe Point System for Energy Saving Homes (which expired in the first half).



Services related to existing buildings expanded significantly.



BELS orders increased due to the expanded subsidy program and the start of residential BELS.



Seismic Retrofit Evaluation services contracted due to the expiration of the evaluation period
under the Act on Promotion of Seismic Retrofitting of Buildings.

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3

ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Consolidated results(Millions of Yen)

ChangeFY2014FY2015(Jun. 2014 - May 2015)(Jun. 2015 - May 2016)

11,949(10,883)

11,470(11,356)

▲478
(473)

▲4.0%
(4.4%)

Operating Income

292

569

277

95.1%

Operating Income Ratio

2.4%

5.0%

-

-

Ordinary Income

331

625

294

88.8%

Ordinary Income Ratio

2.8%

5.5%

-

-

Profit Attributable to
Owners of Parent

18

414

395

-

Net Income per Share (Yen)

2.37

52.96

50.59

-

Gross Sales(Net Sales *)Amounts

Ratio* Net sales is subtracted peer check fee, which is paid to the other bodies through ERI group, from gross sales. Due to the revision of Building Standard Law in June
2015, applicants directly apply to structural calculation review body and, from FY 2016, our group sales result in the same number that was previously net sales.
Although in this financial year, pre-revision orders from 1Q are still included, and both gross- and net-sales are described. Tokyo Bldg-Tech Center Co., Ltd (TBTC),
consolidated subsidiary, changes account closing date from end of March to end of May and its 14-months results is consolidated. In above consolidated results,
TBTC’s net-sales is counted and this net-sales doesn’t match with the numbers disclosed last year.
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ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Consolidated results by segment
FY2014FY2015(Millions of Yen)

ChangeAmounts

Ratio

Operating
IncomeChangeBuilding Confirmation
and Inspection(Net Sales*1)

7,032(6,001)［55.2%］

6,088(5,980)［52.6%］

▲943
(▲21)

▲13.4%(▲0.4%)

298

267

Housing Performance
Evaluation and its
related services

2,691［24.7%］

2,914［25.7%］

222

8.3%

66

3

Others(Net Sales*1)

2,224(2,190)［20.1%］

2,467(2,462)［21.7%］

242
(271)

10.9%
(12.4%)

205

6

Gross Sales Total

11,949［100.0%］*2

11,470［100.0%］*2

▲478

▲4.0%

569

277

*1 Net sales is subtracted peer check fee, which is paid to the other bodies through ERI group, from gross sales. Due to the revision of Building Standard Law in June
2015, applicants directly apply to structural calculation review body and, from FY 2016, our group sales result in the same number that was previously net sales.
Although in this financial year, pre-revision orders from 1Q are still included, and both gross- and net-sales are described. Tokyo Bldg-Tech Center Co., Ltd (TBTC),
consolidated subsidiary, changes account closing date from end of March to end of May and its 14-months results is consolidated. In above consolidated results,
TBTC’s net-sales is counted and this net-sales doesn’t match with the numbers disclosed last year.
*2 Structural ratio [ ] is calculated using Net sales. (FY2014 10,883 million yen, FY2015 11,356 million yen)
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ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Key service figures | Consolidated(Cases)ChangeFY2014FY2015(Jun. 2014 - May 2015)（Jun. 2015 - May 2016）

Building
confirmations

56,61756,68467

0.1%

Final inspections

49,707

48,321▲1,386▲2.8%

Housing design
performance
evaluations ofdetached house

18,03918,690651

3.6%

Housing design
performance
evaluations ofcollective house

23,62024,672

1,052

4.5%

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AmountsRatio

ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Trends in housing market
Changes in new housing starts by category of housings The total number of( an average of the past two months, including present month )new housing starts
increased by 5.6% inthis period.

 Housings for owner-

occupation increasedby 2.8%. Steady 4.6%
in first half, andslowdown to 0.8% in
second half.

New housing starts
Housings for rent
Housings for sales(Single-detached)
80%

60%

40%

 Housings for rent20%

 Housings for sales

0%

increased by 9.6%.

(Single-detached)increased by 5.2%.
Only 1.1% in first halfand expanded to
9.7% in second half.

Housings for Owner-Occupation
Housings for sales(Condominiums)

-20%

-40%
Dec

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Jan Feb Mar
2015

Apr May Jun

7

Jul

Aug

Sep

Oct

Nov Dec

Jan Feb Mar
2016

Apr May

ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Trends in housing market
Changes in new orders of detached housesby Major house builders

 New orders ofdetached houses(order amount basis)by major housebuilders since lastJune showed volatileswings and also
showedconsiderable
difference company
by company.

 Given the trend

shifting to thehigher price zone,
the number of new
housing orders did
not increase.

New housing starts

A

B

C

D

( Year-on-Year )
E

F

40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Dec

Jan Feb
2015

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan Feb
2016

Mar

Apr

May

*New housing starts are on the basis of the number of houses , and the results of major house builders

are on the basis of amounts of money which was disclose on each company’s website.

*Only the chart of new housing starts is an average of the past two months, including present month.

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8

ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Trends in housing market
 The whole market number of Building Confirmation increased 1.0%(Apr-Dec 2015)
 The number of Building Confirmation by ERI group increased 2.1%(Apr-Dec 2015)
 As a results, the market share of ERI group slightly up to 7.7%.

(Both Categories I – III and Category Ⅳ increased 0.1% respectively)
Number of building confirmation and market share by ERI group

Cases

Number of building confirmation by ERI group (category Ⅳ)
Total Market Share
Market share of buildings in category Ⅳ

Number of building confirmation by ERI group (categories Ⅰthrough Ⅲ)
Market share of buildings in categories Ⅰthrough Ⅲ

50,00025%

40,00020%

30,000

17.2%

17.0%

17.1%

17.7%

17.8%

20,00010,000

15%
10%

7.4%

7.3%

7.3%

7.6%

7.7%

3.7%

3.8%

3.7%

4.0%

4.1%

0
FY2011FY2012FY2013

FY2014* FY2015

5%
0%*Fiscal year end of this chart is March*The market share data of ERI group in FY2015 were added up until the end of 3Q, because 4Q’s data was not available as of July 11, 2016.
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9

ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Breakdown of Building Confirmation
FY2014 Japan ERI’s results of Building Confirmation by category of buildings.(exc. plan change cases)(Cases, Millions of Yen）

Housing

Non-Housing(Educations, Lodgings and more）

OthersTotal

Hospitals, Welfares

Factories, Warehouses

Offices, StoresCollective Houses

Detached Houses
27,912
4.2%

6,549
-0.8%

3,431
-4.8%

1,971
1.6%

1,150
-9.3%

1,184
7.9%

42,197
2.2%

66.1%

15.5%

8.1%

4.7%

2.7%

2.8%

100.0%

617.3
0.9%
2.4%

579.7
4.1%

442.5
-2.8%

423.3
190.7
7.2%
-16.9%
0.7%

214.5
17.7%

2,468.3

25.0%
23.5%
Proportion（Reference; April 2015 - March 2016)
Growth rate of national
2.1%
newly built floor space(construction starts)
63.1%
Proportion

17.9%

17.2%

7.7%

8.7%

100.0%

-6.1%

7.6%

-24.3%

9.2%

0.7%

9.6%

13.9%

5.2%

8.3%

100.0%

Number of Building Confirmation

Year-on-Year
Proportion
Net Sales
Year-on-Year

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10

1.5%

ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Trends in housing market
 ERI group’s market share of Housing Design Performance Evaluation of detachedhouses fell 1.8% while the whole market number increased 8.9%.
 ERI group’s market share of Housing Design Performance Evaluation of collective
houses decreased 0.3% while the whole market number decreased 3.4%.
Number of Housing Design Performance and market share by ERI group
Housing design performance evaluationof detached houses by ERI groupMarket share of detached houses

35,00035.0%

30,00030.0%

25,000
Cases

Housing design performance evaluationof collective houses by ERI groupMarket share of collective houses

23.7%

20,00015,000

24.8%
20.5%

22.8%
20.2%

24.0%
21.7%

22.4%
20.9%

25.0%

22.1%
19.1%

20.0%
15.0%

16.6%

10,000

10.0%

5,000

5.0%

0

0.0%
FY2010FY2011FY2012FY2013

FY2014FY2015*Fiscal year end of this chart is March

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ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Key service figures | Consolidated
FY2015

ChangeAmounts

Cases（Millions of Yen）

Cases

Amounts（Millions of Yen）

Building Confirmations for medium to large sizebuildings (over 500 sqm)

5,227

1,350

144

10

Housing Performance Evaluations ofdetached houses*1

18,690

720

652

14

Technical Assessments for Long-Life Quality
Housings*2

22,001

345

562

▲2

Inspections for Housing Defect Liability
insurance*3

23,892

286

2,214

18

Evaluations of seismic capacity andSeismic retrofitting plans

291

98

▲248

▲73

Structural evaluations of high-rise buildings( Skyscraper and/or Base isolation)

93

112

▲31

▲51

*1 Cases and amounts by housing design performance evaluation.
*2 The number of cases which the certification of Long-Life Quality Housing were issued.
*3 Jutaku Anshin Hosyo’s cases and amounts.
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12

ERI Holdings <6803> Fiscal year ended May 2016

1. Results in fiscal year Ended May 2016

Sales breakdown | Consolidated
FY2015FY2014
Others20%

Housing
performance
evaluation andits related
services
25%

Newly built
non-houses,
37%

Existingbuildings,
6%

Newly built
houses,57%

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Existingbuildings,
9%

Others,22%

Building
confirmationand inspection
55%

Newly built
non-houses,
32%

Newly built
houses,59%

Building
confirmationand inspection,
52%

Housing
performance
evaluation andits related
services,
26%

13

ERI Holdings <6803> Fiscal year ended May 2016

2. Topics

Demand for energy saving-related services picks up
in earnest


The Building Energy Conservation Act was partially enacted in April 2016, and programs
incentivizing compliance with Energy-Saving Standards began.

Incentiveplans(1) Requirement that companies selling or renting buildings make their best efforts to indicate energy-saving
performance (start of residential BELS). Labeling based on third-party certification→ Assessment of Compliance with the BELS(Building-Housing Energy-efficiency Labeling System)(2) Program to certify and indicate compliance with standards (energy-saving renovation for existingbuildings). Energy saving standards compatibility certification mark→ Technical inspection service(3) Program for Approval of Plan for Energy-Saving Performance Improvements (to ease building volume
regulations). Building Energy-saving Performance Improvement Plan → Technical inspection service

Once the subsidy program requiring display of BELS certification began, it spread at a fast pace.
Subsidy
programEnergy-saving Promotion Projects for Existing Buildings, Leading Projects for Sustainable Buildings, etc.
(CO2 reduction type), Regional Residence-Greening Projects (zero energy, prime buildings), Model Projects
to Promote CO2 Reductions in Rental Housing, Projects to Promote Innovative Energy-efficiency Technologies
for Housing and Buildings (ZEH, ZEB), etc.

Regulatory measures will begin in April 2017 (tentative).
Regulatory
measures(1) Mandatory compliance with energy-saving standards for non-residential buildings with floor areas
exceeding 2,000 m2 (tentative) → Conformity Review for Energy Saving Standards(2) Mandatory notification, instructions and orders from government agency with jurisdiction, (3) Ministerial certification
program for special structures and facilities, (4) Top-runner system

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ERI Holdings <6803> Fiscal year ended May 2016

2. Topics

Existing building inspection service continues
to expand Existing building inspection service

Assessment of Compliance with the Building Standard Law
services.
Effective use of buildings and compliance assessments, etc.
 Due diligence services
Robust J-REITs market
 Home inspection services
Establishment of law revising part of the Building Lots andBuilding Transaction Business Act(Millions of Yen)



1200

Sales trend in existing buildings related bussines

1000
800
600

1,075

400
200
0

535

732

238
FY2012FY2013

FY2014FY2015

 Start of building degradation survey service

using UAVs

Subsidiary ERI Solution Co., Ltd. has formed a businessaffiliation with Skyrobot Inc.
The purpose of this affiliation is to establish an efficient
survey method using visible images from a highly accurate
camera and an infrared camera.

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15

ERI Holdings <6803> Fiscal year ended May 2016

3. Forecasts for the fiscal year Ending May 2017

Forecasts for FY 2016
(Millions of Yen)FY2015FY2016

Change(Jun. 2015 – May 2016)(Jun. 2016 – May 2017）

11,470(11,356)

11,879(11,879)

408
(522)

Operating Income

569

632

62

Vs. Gross Sales

5.0%

5.3%

－

Ordinary Income

625

628

2

Vs. Gross Sales

5.5%

5.3%

－

Profit Attributable to
Owners of Parent

414

400

▲13

Net Income per Share (Yen)

52.96

51.15

▲1.81

Dividend per Share (Yen)

30

30

0

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16

ERI Holdings <6803> Fiscal year ended May 2016

4. Medium-term management plan

Changes in management environment【Market Changes】
 Contraction in new construction (flow)

market Expansion of stock market
 Growth in energy conservation market
 Concentration in major urban areas andhollowing out of outlying areas【Reorganization of Industry】【ERI’s Reforms】

 Heightened competition due to market

 Reforms in awareness and action

saturation
 Aging of technicians, labor shortages
 Adaptations to revised laws

 Reformulation of growth strategy
 Development of human resources(managers, women) Stronger Group management

 Introduction of ICT and new technology

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ERI Holdings <6803> Fiscal year ended May 2016

4. Medium-term management plan

Positioning of the medium-term management plan Redefinition of the market
 Reorganization of business baseMedium-term management plan Maturity of market
 Modification of business base Creation of market
 Formation of business base Expansion of market
 Improvement of business base

1999

2009

10 years after founding

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2019

NEXT1018

2029

30 years after founding

ERI Holdings <6803> Fiscal year ended May 2016

4. Medium-term management plan

Concept
We will develop new business models by making active
investments, including M&As, in anticipation of a futurecontraction in the new construction market.
【Basic policy for plan】
The medium-term management plan identifies priority measures enabling ERI to adapt
to the changing management environment. ERI will actively and efficiently invest
management resources into necessary fields to create new value that will be praisedby customers.

【Period covered by medium-term management plan】
From FY2016 to FY2018

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ERI Holdings <6803> Fiscal year ended May 2016

4. Medium-term management plan

Growth strategy for ERI Group
Business strategy

Existing core business<Strengthen profitability>

New growth businesses<Increase in investments>

Business in new fields<Expand business sphere>

Business fieldBasic policy Building Confirmation andInspection
 Housing Performance
Evaluation（Japan ERI ）Improve profitability by optimizing the allocation of management
resources and promoting the efficiency of operations.
Accurately identify reorganization opportunities in the industry andexpand market share through M&As.

 Structural Calculation
Review （TBTC）

Establish systems and reach top of industry.

 Structural Evaluation

Use technical strengths to maintain high share of market.

 Services related to energy
conservation

View energy conservation requirements as an opportunity and expand
energy conservation-related services to drive a growing share ofexisting core business.

 Building stock（ERI Solution）

Actively invest management resources to create third core business.
Utilize M&As, including securing human resources (full-scale entry into
non-destructive inspections).

 Information and educationrelated services

Establishment of stable revenue foundation for ERI Academy

 Infrastructure stock

Utilize M&As, expanding business sphere from buildings to
Infrastructures.

 Overseas

Continue to collect information to accurately identify opportunities forbusiness expansion.

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ERI Holdings <6803> Fiscal year ended May 2016

4. Medium-term management plan

Numerical targets in the final fiscal year of
medium-term management plan for FY2016-2018
Results of FY2015

Targets of FY2018

Net Sales

11.47 billion yen

More than 16 billion yen

Operating Income

0.57 billion yen

More than 1.2 billion yen

Operating Income /Net Sales

5.0%

More than 7.5%

ROE

18.9%

More than 20%

Dividend

30.00 yen

Keep up stable dividend

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(incl. M&A’s contribution about 3 billion yen)(More than 30% dividend payout ratio)21

ERI Holdings <6803> Fiscal year ended May 2016

4. Medium-term management plan

Appendix : Deterioration of the Social Infrastructure
Ratio of social capital which passed 50 years after construction*All the number below are around figure

QuantityMar. 2013

Mar. 2023

Mar. 2033

Road bridges

400,000

18%

43%

67%

Tunnels

10,000

20%

34%

50%

River management facilities

10,000

25%

43%

64%

Sewer imaginaries

Total extension
45,000 km

2%

9%

24%

Harbor quay-walls

5,000

8%

32%

58%

(within 700,000 bridges with more than 2 m long)(Water gates, etc.)(Water depth of 4.5 m or deeper)

Source: MLIT “WHITE PAPER ON LAND, INFRASTRUCTURE, TRANSPORT AND TOURISM IN JAPAN 2015, Chapter Ⅰ Section Ⅰ” (June 2016)

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22

ERI Holdings <6803> Fiscal year ended May 2016

4. Medium-term management plan

Appendix : Market of the Social Infrastructure
Cost estimation of maintenance and renewal in the future(Social Infrastructure administrated by MLIT *All the number above are around figure)

FY2013

FY2023

FY2033

3.6 trillion yen

4.3～5.1 trillion yen

4.6～5.5 trillion yen

1.5 times
Source: MLIT “WHITE PAPER ON LAND, INFRASTRUCTURE, TRANSPORT AND TOURISM IN JAPAN 2015, Chapter Ⅰ Section Ⅰ” (June 2016)

Cost estimation of maintenance and renewal in the future (Nationwide)(Total stock of country foundation including other than MLIT jurisdiction )Estimation

New construction and reform cost

Trillion yen

Renewal cost
NearlydoubleMaintenance cost
Disaster restoration cost(*1) Under the assumption that new construction cost will be zero after
2011(*2) Official Statistics for new construction and reform costs from 2008 to2010 are not available, the estimation was made using a trend of
public works-related budgets of this period for the calculation.

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23

Source:： MLIT” The long-term prospects of the country – Interim Summary”(February 2011)
ERI Holdings <6803> Fiscal year ended May 2016

IR Contact
ERI Holdings Co., Ltd.
Investor Relations and Public Relations Dept.
info@j-eri.co.jp

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24

ERI Holdings <6803> Fiscal year ended May 2016