Looking back on my first year as
President of Nippon Koei

Should they be evacuated to safer areas within Ukraine or should
they be considered for evacuation outside the country? Since
human lives were at stake, we had to consolidate information fromvarious sources and make a final decision as a company. ThisA year in which we faced major changes in society
When I was appointed President of Nippon Koei in July 2021, thebusiness environment, which had been transformed by themade me feel a greater sense of responsibility as a chief executive,
a completely different level from in the past. Without a doubt, it was
the most memorable year of my career.

COVID-19 pandemic, was still in a state of chaos with no signs ofOn the other hand, looking at the results of the past year, wesettling down. Six months before that, there was a political upheaval

have made a very good start as the first year of the new Medium-in Myanmar, where major economic growth was expected due toterm Management Plan (hereinafter “Medium-term Plan”). Since thisdemocratization, and the future of business development in

was also the first year of the Long-term Management Strategy

Myanmar, where we had been expecting business growth, became(hereinafter “Long-term Strategy”) for the three Medium-term Plan

uncertain. In February 2022, Russia launched an invasion of Ukraine.

periods, I was determined that the Company make a fresh start. As

Looking at this and other events, I think it was a year in which wea member of top management, I have been mindful of how to makefaced major changes in the current era.

the start of the new fiscal year a good one. Although ourAs two of our urban development projects were underway inperformance itself was affected by the COVID-19 pandemic, we

Ukraine, the Company was faced with a major decision: How dotook measures in anticipation of changes in the business

we ensure the safety of the people involved in these projects?

environment and were able to make a significant jump in

7 NIPPON KOEI GROUP INTEGRATED REPORT 2022

Message from the President

We aim to achieve long-term goals in both financial
and non-financial areas of our businesswhile moving past milestones on our roadmap
one by one in order to realize our aspirationsin 10 years ahead.
Hiroaki Shinya
Representative Director and President

performance over the previous year. As a result, I am proud to saysolving social issues. Currently, urban development projects

that we are off to a good start as planned.

designed to solve or prevent social issues caused by climatechange are increasing on a global scale, and I see this as a great

Overcoming both short-term and long-term risks

opportunity for our company. For example, the foundation of urban

The major social turmoil brought about by the COVID-19

development is the world of civil engineering. Over that foundation,

pandemic is finally coming to an end as man has learned to live

there are buildings that serve as bases for people's activities, and“with Corona.” I expect that geopolitical risks, including the conflictenergy is necessary for an entire city to operate. These three

in Myanmar and Ukraine, will be resolved in the short- to medium-

requirements (civil engineering, buildings, and energy) lead to theterm based on a long-term perspective. Companies are required to

discussion of the development of “smart cities” for which various

have a strong management base that can withstand theseissues, such as global environmental issues, are taken into account.

unforeseeable short- to medium-term risks, but at the same time

In the world of investment, which is indispensable for urban

they must also face long-term risks such as climate change thatdevelopment projects, ESG investment is becoming thecannot be resolved after just a few years.

mainstream. In order to attract ESG investment, Nippon Koei itself

At the Nippon Koei Group, we believe that climate change willmust be a corporate group that is committed to sustainable

continue to exist as a major risk and opportunity as we strive tomanagement. I feel firsthand that the world is changing dramaticallyachieve our major goal of continuing our business for the next 100

in a direction that demands such sustainable management.

to 200 years. Climate change is both a risk and an opportunity
because, quite simply, we are a company that is in the business of

Our Management Philosophy is “Act with integrity and contributeto society through technology and engineering.” As a company, we

NIPPON KOEI GROUP INTEGRATED REPORT 2022 8

Message from the President
are proud that our business itself is benefiting the world, and I

UK will be completed in due course. We can expect further growth

personally believe that the pinnacle of our mission, vision, andas these projects start running.

values is serving the world and serving others. I believe that thegreatest strength of our Group is that all employees share the same
mindset of acting with integrity and contributing to society throughtechnology and engineering.

Human resource development is the key tosustaining strong business performance
I recognize that human resource development is the key tomaintaining our strong business performance in the future. Since

Performance in the fiscal year ended
June 2022

the way we work has changed dramatically due to the COVID-19
pandemic and especially now that the awareness of workers haschanged dramatically, I feel that we cannot respond to changes insociety if we think of human resource development as an extension

Achieving record high profits
We achieved record high profits during the fiscal year ended Juneof our pre-COVID approach to human resource development. In a
consulting Group like ours, the performance of each employee is2022. While the amount of orders that we received was almost thedirectly linked to the overall performance of the Group, so it issame as in the previous fiscal year, other indicators increased tonecessary to reconstruct a human resource development system

record highs. As a result, Nippon Koei has already approachedthat matches the current social situation and worker awareness.

targets established for the second year of the Medium-term Plan

We define “hybrid human resources” as human resources whoduring the first year of the plan. However, according to our analysis,

are well versed in both domestic and overseas businesses. I believe

this result was largely helped by the business environment. In

that the ideal balance should be that 40% of our human resources

Japan, the public works field was relatively strong and supported

consist of these hybrid human resources, 30% consist of specialists

our overall business results. Overseas, where measures for living

specializing in overseas business, and 30% consist of specialists

with the COVID-19 pandemic are more established than in Japan,

specializing in domestic (Japan-based) business. If the hybrid

economic activity returned to the same level as before thehuman resources, which ideally make up 40% of employees, canpandemic and various business conditions improved, such as theflexibly switch between domestic and overseas business balance

rapid expansion of opportunities for our overseas staff for whichby standing up to the risks of the moment, such as infectious

they can play an active role. I think that the ability to take advantage

disease outbreaks and regional conflicts, I believe that we can bothof these trends was a major factor in achieving record profits. My

maximize profits through flexible organizational management andappointment as President during the COVID-19 pandemic mademanage organizational risks.

me strongly realize how important it is to link solutions to various

In addition, one of the things I would like to see us focus on in thesocial issues around the world to our businesses, which in turn

future in terms of human resource development is the development

leads to the sustainability of our business.

of education and training systems on a global scale. Until now,

Looking at the results by segment, steady growth in thealthough employees in Japan have been able to receive nearly theConsulting Business supported our overall business. In the Urban &same type of education and training, there was no common

Spatial Development Business, both BDP, based in the UK, andeducation and training platform that could be operated overseas.

Quadrangle, based in Canada, performed well, contributing

Since employees of overseas Group companies are very motivatedsignificantly to record profits. In July 2022, we merged our Urban &to advance their careers and skills, we plan to create an e-learning

Spatial Development Business with Tamano Consultants Co., Ltd.

platform for new employee training and other types of training thatto start Nippon Koei Urban Space Co., Ltd. With this move, I am

everyone should take, and make it accessible from all over thelooking forward to a great leap forward for us in the Japanese

world so that they can receive the same education and training as

market. In the Energy Business, the manufacturing departments

in Japan. We intend to make the educational content, which isbehind our mainstay products for electric power companies are

currently only available in Japanese, available in English, Spanish,currently being restructured to improve production efficiency andPortuguese, and other languages in the future, and to makestrengthen management systems. In other words, to transformstratified training available from countries around the world.

them into smart factories, which is a priority issue for the current

Ultimately, each employee will be able to see for themselves how

fiscal year. In addition, while the soaring prices of crude oil andthey have grown and also visualize how they are being evaluated.

natural gas have become a problem, the energy management

We are building a new platform NKG Global Academy to realize thisbusiness is preparing to respond to the rising demand for energy,

kind of human resource development and are currently making theespecially in Europe. The aggregation services we have been

fundamental parts of the academy carefully one by one.

developing in Belgium and the UK, where we have actively invested,
are currently constructing energy storage facilities that will serve as
the foundation for these services. One location is scheduled to becompleted in Belgium in January 2023. Two more locations in the

9 NIPPON KOEI GROUP INTEGRATED REPORT 2022

Transition to a pure holding company
and Group management
Aiming for the independence of three business fields
In August 2022, the Nippon Koei Group announced the transition
to a new group structure centered on the holding company
Integrated Design & Engineering Holdings.
There are three main objectives of the transition to a pure holding
company. The first is to “strengthen governance and expedite
decision-making.” The second is the promotion of “autonomy &synergy.” By collaborating with each other, each of the operatingcompanies, which are independently profitable and self-supporting,will create unprecedented added value, and each company will aim
to achieve sustainable growth and increase corporate value overthe medium to long term. The third objective is to “ensure diversity.”
Through matrix management based on cooperation between thebusiness axis and regional axis, we will build a global governancesystem that allows each organization within the Group to make themost of its individuality and realize solutions to issues in eachregion.
Personally, I am particularly looking forward to the results
stemming from the second and third objectives, the synergies thatwill be generated by strengthening cooperation and ensuring
diversity through the spin-off of the operating companies. Amongthe three resilience measures set forth in the Medium-term Plan,“Promote business based on the independence of our threebusinesses” is positioned at the top of the list, and each of theConsulting Business, Urban & Spatial Development Business, andstronger than ever before. One of the expectations and challenges
is collaboration among operating companies. Until now, the threebusiness segments have been cooperating like siblings. After the
spin-off, however, it will be necessary for the segments to respect
each other and deepen cooperation through an independent“partner-style” relationship. In addition, we will actively invite newcolleagues from outside the Group through M&A and businessalliances in the future, and have them bring in values that have notbeen previously seen in the Nippon Koei Group, which will stimulate
business and create new social value. I hope that such new
relationships and work environments will be created. Since theholding company structure is designed to improve the quality ofservice and corporate value for our customers, we must make surethat our customers are pleased with service that is “better than
before.” I believe that the key to this is strengthening cooperation
among operating companies.
We plan to gradually transition to a pure holding company from
July 2023. Our long-term strategy and Medium-term Plan are
based on this transition. I would like for the entire plan, including theachievement of each goal of the Medium-term Plan, to be
implemented with a sense of speed faster than planned.

Commercializing solutions for various
social issues through the new structure
Reflecting the solutions to social issues that need tobe resolved in our materiality
As I mentioned, solving social issues as a business is very

Energy Business, which were previously business divisions ofimportant for our sustainability. Therefore, as a specific

Nippon Koei, are now recognized by the world as a single

methodology, we have tied the various social issues that we need

corporate organization respectively. I believe that making each of

to solve to the materiality (key issues) defined in our long-term

them independent will make the business axis of the entire Groupstrategy. Each business division establishes “priority measures”

NIPPON KOEI GROUP INTEGRATED REPORT 2022 10

Message from the President
every year, checks the relationship between the priority measures

Further promotion of sustainability management

and materiality, and makes sure that it is heading in the right

It goes without saying that we also set many milestones related

direction, making the measures pillars of our business plan.

to ESG and sustainability. In September 2021, we established theOn the other hand, we hold TRM (Total Risk Management)

Sustainability Promotion Committee and formulated our Basic

meetings as needed to discuss our own risk management, tying it

Sustainability Policy in February 2022. Serving as a guideline forto the materiality of management activities, which is set insolving social issues through our business activities, this basic

conjunction with the materiality for business activities. Concerns

policy shows that our business and sustainability are inseparable.

about information security, which is growing in line with the

To date, the Group has developed tools for evaluating thedestabilization of the world situation, and workplace-basedsustainability activities and progress of SDGs in national and local

harassment, which has become an issue along with the raising

governments as well as private companies, which are ourawareness of human rights, are among the top operational risks forcustomers. Thus, we have developed the skills of evaluating thethe Group. Before the terms CSR and sustainability were firmly

initiatives and progress of other companies as necessary for ourestablished in Japan, business risks were the risks thatbusiness. In the future, we will use the skills we have developed to

management needed to face. However, in modern corporate

diagnose our own sustainability activities and SDGs initiatives, andmanagement, dealing with ESG and sustainability-related risks haveevaluate ourselves to see how much we have achieved this year

become more fundamental to the survival of a company.

compared to our vision for the Group. In addition, we will consider

In any case, in order to continue promoting businesses that solve

quantifying growth targets in non-financial fields such as ESG andsocial issues under the new group structure, I believe that it issustainability in an easy-to-understand manner as KPIs andfundamental for each operating company that will be independent

incorporating them into our long-term strategy and Medium-term

after the conversion to a holding company to thoroughly address

Plan. At the same time, we will promote sustainability initiatives,materiality.

such as endorsing the TCFD recommendations and complying withthe revised Corporate Governance Code, that are required of

Toward achieving our long-term
strategy
Making it past milestones one by one
In order to enhance the feasibility of our long-term strategy forcompanies listed on the Prime Market of the Tokyo Stock
Exchange.

To our stakeholders
When I was appointed President one year ago, I declared that I

2030, we plan to draw a roadmap to achieve our goals andwould make Nippon Koei become “by far the No.1 consulting andestablish milestones for each point to be addressed. These

engineering firm in Japan and indispensable to the world.” In order

milestones include various management indicators, such as

to achieve this, I feel that it is of utmost importance to fulfill ourrevenue, orders received, and ROE, that are easy to understand bysocial responsibilities as a Group, such as contributing to the SDGs

people outside the Group. However, we also establish milestones

and resolving social issues, as well as achieving the goals of eachthat enable employees to feel their own growth within the company,

management index, which has traditionally been emphasized. Oursuch as the extent to which business process innovation has

business operations are linked to almost all of the 17 goals and 169

progressed through DX.

targets of the SDG agenda. For the Group, sustainability is nothing

Recently, in particular, changes in the world have been

more than achieving each of the indicators indicated in the 169

accelerating, and I think that the line between firms that are unabletargets of the SDGs through our business. Our strength has always

to take advantage of these changes and remain stagnant, and firms

been our ability to solve social issues and grow together withthat are rapidly growing by taking advantage of the current trends

society through our sustainable business activities. We will continue

has become clearer than ever. Digital transformation (DX) is one of

to do so without making any changes to our Management

those changes. Since most of our work involves the visualization ofPhilosophy “Act with integrity and contribute to society throughideas and blueprints on paper, we have a relationship with digitaltechnology and engineering.” I would like to ask all of ourtechnology that makes it indispensable. For this reason, in the paststakeholders for their continued support as we look forward to thefew years there has been a strong sense of crisis that if we fail to go

future of our Group, which will be reborn as ID&E Holdings in July

ahead with digitalization we will be eliminated from the market.

2023.

Without the implementation of advanced digital technology to theextent that we can say “We can take on everything as a one-stop
provider”, I fear that we will never reach our goal to be “by far theNo.1 consulting and engineering firm in Japan and indispensable to
the world,” and that it will be difficult to even remain at the top of
the Japanese market.

11 NIPPON KOEI GROUP INTEGRATED REPORT 2022

Introduction

Strategy

Sustainability/ESG

Review of Operations

Status of the Company

Transition to a Holding Company Structure
Transition to a holding company
structure - background and objectives

Group structure after transition to aholding company

The Group aims to achieve solid growth in the future
by strengthening independent activities that takeadvantage of the characteristics of each businessWe will spin off each business, expand theauthority of major Group companies, and createa strong group of operating companies

The Nippon Koei Group has decided to transition to aholding company effective July 2023. In our Long-term

Integrated Design & Engineering Holdings Co., Ltd., which
will be the new pure holding company, will place under its

Management Strategy toward 2030, continuing to respond tocontrol the business management subsidiary (Nippon Koei

social issues as the basis of our strategy, we have positioned

Business Partners Co., Ltd.) as well as Consulting Business“Consulting,” “Urban & Spacial Development,” and “Energy” assubsidiary (Nippon Koei Co., Ltd.), two Urban & Spatial

the three core businesses and aim for their further growth. In

Development Business subsidiaries (Nippon Koei Urban Space

order to strengthen our business competitiveness while

Co., Ltd. and UK-based architectural design company BDP

responding to changes in the external environment, it isHoldings Limited), and Energy Business subsidiary (Nippon

necessary to create an organizational culture that respects the

Koei Energy Solutions Co., Ltd.) as primary businessdiversity of each organization within the larger group by taking

companies. The four companies responsible for these majoradvantage of their individual characteristics, and to aim atbusinesses and functions are positioned as “Major Group

creating a system that allows them to operate independently

Companies,” and the authority of each company will be(autonomously). In order to achieve this, we have determined

expanded to enable accurate and prompt decision-making.

that the best way to create a platform for the Group to make aleap forward is to transition to a holding company. Under thisdecision-making, and the coexistence of diversity. The
organizational structure of the holding company was designed
as a company with a nominating committee, etc. Afterestablishing a supervisory structure with the Nominating,Compensation, and Audit Committees, in which outside
directors constitute the majority, we will specialize in groupmanagement, determine the appropriate allocation ofmanagement resources and the design of functions andsystems to maximize value as a group, and formulate
strategies and plans as a group. We will deepen the
management of the Group from a medium- to long-term
perspective and aim for solid growth in the future.

Naming of the holding company
For integrating various fields and increasing our
new friends

Integrated Design & Engineering Holdings Co., Ltd.

structure, we will strive for autonomy & synergy, faster

Group Structure (from October 2023)
Consulting Segment
Nippon Koei Co., Ltd.

Group Companies

Urban & Spatial Development Segment
Nippon Koei
Urban Space Co., Ltd.

Group Companies

BDP Holdings Ltd.

Group Companies

Energy Segment
Nippon Koei Energy
Solutions Co., Ltd.

Group Companies

Nippon Koei Business
Partners Co., Ltd.

Timeline

We decided to name the pure holding company Integrated
Design & Engineering Holdings Co., Ltd. The words “Design”
and “Engineering” represent our company as an integrated civil

July 2022

Nippon Koei’s Urban & Spatial Development
Business is merged with Tamano Consultants Co.,
Ltd. to launch Nippon Koei Urban Space Co., Ltd.

September 2022

Resolution at the General Meeting of
Shareholders on the share transfer plan andamendment to the articles of incorporation

July 2023

Establishment of Integrated Design &Engineering Holdings Co., Ltd.
Spin-off of Nippon Koei Business Partners Co., Ltd.

October 2023

Spin-off of Nippon Koei Energy Solutions Co., Ltd.

engineering consulting firm that has promoted civil engineeringand architecture, while also expressing our desire to integrate(using the word “Integrated”) various fields in the future andpromote the Company as a one-stop business. In addition, the
new name was chosen to signify that the Group will expand to
become larger than ever with the addition of new friends.
Name of the new holding company

Integrated Design & Engineering Holdings Co., Ltd.

NIPPON KOEI GROUP INTEGRATED REPORT 2022 12

Nippon Koei Group Value Creation Process

Strengths of Nippon Koei Group
Solving society’ s constantly evolving needs utilizing ourabundant human resources and reliable technologies

P.22

▲

P.57

▲

Awarenessof External
Conditions

Consulting
Business■ Climate change and lackof resources

Integrated
Capabilities■ Intensification ofdisasters

P.19

Technology
P.18▲■ Changes in demographic
structure▲

Human
Resources▲

P.17■ Rapid urbanization

Urban & Spatial
Development
Business■ Digital transformation

P.61

P.59

▲

EnergyBusiness▲■ Shift in global economic
power■ Changing work styles
P.21▲

Materiality● Development of a safe and reliable infrastructure

Business
activities● Creating attractive cities● Development of smart societies● Challenge to decarbonization● Enhancement of governance● Human resource development andManagement
Philosophy

Management technical development
activities ● Work environment where humanrights are respected and job
satisfaction is high“Act with integrity and contribute to society
through technology and engineering.”

13 NIPPON KOEI GROUP INTEGRATED REPORT 2022

Introduction

Strategy

Sustainability/ESG

Review of Operations

Status of the Company

ement of Stre
ngth
ReinforcsSocial Contribution

Customers

Development of Safe andReliable Regions

Shareholders,investors

Long-Term
Management Strategy

Urban and Regional
Revitalization

SuppliersNKG Global Strategy 2030

Solutions for
Urban Issues

MISSION▲

P.21

Number of
employees

Medium-Term
Management Plan

National and local
governments,
industry groups

Building Resilience 2024

“Making the world
a better place”
Energy solutions

▲

P.27

Regional
Society
Academicgroups,research
institutes

Environmental Measures
Infrastructure Development

Smart City Development

The Nippon Koei Group has a foundation for creating value that has been cultivated since its
establishment, and our Management Philosophy “Act with integrity and contribute to society throughtechnology and engineering” is the basis for our actions in any era.
Based on a business environment in which opportunities and risks come at the same time, we will
determine materiality, face a mountain of social issues, and work to demonstrate our comprehensive
capabilities through human resources and technologies, which have been the strengths we havecultivated since our founding, and cooperation between segments.
By providing solutions to society and customers, we create environmental as well as social value, andaim to realize the Group's Mission of “Making the world a better place.” By achieving this, we will
enhance our competitive advantage and enhance our strengths, which will lead to our own sustainablegrowth.
In order to continue to have a presence in society as being an indispensable organization, we will createsocial and economic value by solving social issues associated with the development of each country andregion around the world through our business activities.

NIPPON KOEI GROUP INTEGRATED REPORT 2022 14

Creating Value through Nippon Koei Group
Capital and its Utilization
Important Aim of Capitalin Value Creation

Financial
capitalAchieve a balance between
growth and returns bybuilding a strong financialbase and achieving highcapital efficiency that allows
for flexible investment

Policy for Medium/Long-term Enhancement
Realization of medium/long-term growth● Review and enhance investment screening criteria as well as establish and enhanceinvestment screening system

Ensure financial soundness● To ensure financial soundness, maintain an equity ratio of approximately 40% even during
periods of concentrated investment
Provide capital efficiency to achieve a balance between growth and returns● Aim for an ROE of 9% in the Medium-term Management Plan
● Aim for a payout ratio of 30%● Buyback/cancellation of treasury stock as necessary to achieve an appropriate total return ratio

Manufacturing
capitalIntellectual
capitalCreate a safe and secure
infrastructure by providing
services in more than 160
countries, in all prefecturesin Japan, and throughoverseas offices around theworld

Accumulate advanced
intellectual capital throughthe foundation of advanced
technology research at the
Research & Development
Center and knowledge
gained through advanced
operations while creating
new value throughinnovation

Drive all types of value
creation through a diverse
workforce of highly
specialized domestic andinternational professionals

Promote workplace reform● Develop a post-Covid-19 workplace environment

Improve quality of information systems● Enhance support for diverse work styles● Enhance financial and accounting systems● Establish shared platform for group companies
Enhance information security● Implement cybersecurity measures based on the concept of Zero Trust
Development and utilization of DX technologies● Expand DX investment

Business development investment● Conduct research and development for new business development from a medium- tolong-term perspective● Conduct research and development for the creation of new business areas such as smart
city business development, SDGs business development, and climate change business

Develop and improve employee skills● Establish “NKG Global Academy” in FYE June 2024 which all group employees can use toraise the level of human resource capabilities of the entire group● Visualize knowledge and develop leaders by effectively utilizing knowledge management,

talent management, and various data

● Expand regional engineer system (a training system that enables engineers from local

subsidiaries to work in countries other than their countries of origin or Japan)

Human capital

Enhance recruitment● Increase the number of employees by more than 1,600 on a consolidated basis during theperiod of the Medium-term Management Plan by strengthening the recruitment of new
graduates and career employees
Promotion of Well-Being Management● Promote work styles that respect diversity

Social capital

Natural capital

Stable and continuous
value creation through asolid client base andstrengthened relationships
with partner companies,
etc. based on a long history
and track record of
supporting developing
countries through domestic
infrastructure and ODA
Contribute to thepreservation of the global
environment by contributing
to environmental
preservation and reducing
environmental impact
through our business

15 NIPPON KOEI GROUP INTEGRATED REPORT 2022

Co-creation with other companies including those in different industries● Create stable and long-term cooperative relationships with partner companies in Japan andoverseas

Transfer technologies to developing countries● Develop human resources in developing countries through “NKG Global Academy” andcollaborate with academic institutions
Strengthen social activities● Enhance opportunities for dialogue with stakeholders

Enhance sustainability promotion● Establish Sustainability Promotion Committee

Focus on business creation through co-creation by linking materiality and businessstrategy

Introduction

Strategy

Sustainability/ESG

FYE June 2022 Main Initiatives(Input)● Secure long-term borrowings by executing investment

projects● Ensure financial soundness based on an awareness of ourequity ratio● Build and strengthen a new monitoring system afterinvestment execution

Review of Operations

Status of the Company

FYE June 2022 Results(Output)● 44.9% equity ratio (45.3% in the previous period)● 8.8% ROE (6.7% in the previous period)● 28.6% payout ratio (25.0% in the previous period)● Rating and Investment Information, Inc. (R&I) rating of BBB+ (same rating to be

maintained from November 2020)● Eliminated losses characteristic of the first half of each fiscal year to return the Groupto profit● Improve workplace environment● Promote digitization of various documents● Strengthen remote access● Introduce cybersecurity measures based on the concept of● Promoted the utilization of four satellite offices● Continued a system that enables remote access for all employees● Promote remote work through the computerization of stamping and paper-based● Search for/develop key themes that will lead to new● Number of certified professional engineers (consolidated): 1,743 (1,727 in the

Zero Trust

businesses in the DX field● Promote collaboration to create business models● Establish platform for sharing technical information ontechnology and sales

work processes● Realize no information system failures that have significant social impact

previous period)● R&D expenses: ¥1.24 billion (¥1.07 billion in the previous period)●C onducted several demonstration tests with the Tokyo Metropolitan Government andmunicipalities in Tochigi Prefecture, etc. for the practical application of automated driving● Conducted study on adaptation to digitalization of disaster assessment as a task of

the Kyushu Regional Development Bureau of the Ministry of Land, Infrastructure,
Transport and Tourism● Developed DNA tracer technology in collaboration with Yamaguchi University andturn it into intellectual property● Opened a metaverse (virtual space) to promote tourist attractions in cooperation with
Ureshino City, Saga Prefecture and other organizations● Strengthen development of qualification and humanresource development programs●M anage employee work attendance rate during the COVID-19
pandemic using a workplace hoteling system and RPA● Improve productivity through DX (RPA, AI, etc.)● Health management: Implement vaccination programs inworkplaces● Enhance the recruitment of new graduates and career
employees● Turn Aichi Tamano Information System Co., Ltd. into a
special subsidiary of Nippon Koei to provide more
employment possibilities for people with disabilities● Promote collaboration in the field of disaster prevention andmitigation using advanced technologies● Promote business alliances in the smart city andtransportation fields with local governments andcompanies in Japan and overseas● Provide consulting services for greenhouse gas reduction,

climate change adaptation measures, and biodiversity
conservation● Implement disaster countermeasure projects utilizing newtechnologies such as AI● Promote research on green infrastructure andenvironmental risks● Number of employees (consolidated): 6,163 (5,936 in the previous period)● Recognition as an Outstanding Health and Productivity Management Organization

2022 (White 500) for four consecutive years● In-house release of similar business estimation service utilizing RPA and AI● Recruitment Numbers

Number of new graduates recruited: 151 (162 in the previous period)
Number of career employees recruited: 48 (43 in the previous period)● Employment rate of disabled persons: 2.69% (2.09% in the previous period)● Equity participation in space development venture Q-shu Pioneers of Space, Inc.
● Formed a partnership agreement with Iwaki City in Fukushima Prefecture for thepromotion of river basin flood control● Created business alliances with Surbana Jurong Private Limited (Singapore), DHI(Denmark), PT Jakarta Lingko Indonesia and PT Aino Indonesia (Indonesia), andsocial enterprise Siem Reap Tourism Club (STC) (Cambodia)● Nippon Koei India received an Award for Excellence at the Rail Analysis Innovation &Excellence Summit 2022
● BDP Quadrangle received a Canadian Governor General’s Medal in Architecture● Nippon Koei employees received the Ozawa Award for Distinguished Service
Overseas for their long-term contributions to land development overseas● Published the results of joint research in an international academic journal on therelaxing effect of diverse insect sounds● Released the beta version of “TSUMUGI@”, an SDG diagnostic tool for municipalities● Our research team comprised of members from the R&D Center and other locations

won the Hydraulic Engineering Paper Award for their research contributing to theunderstanding of water resource risks and countermeasures

NIPPON KOEI GROUP INTEGRATED REPORT 2022 16

Human Resources and Technologies that
Support Our Business Model
The greatest strength of the Nippon Koei Group is that it has experts in various fields and excellent professional humanresources as an integrated civil engineering consulting firm. We are working to create businesses that attract such humanresources and further strengthen our excellent human resource development system.
As a group of professionals united in our Mission of “Making the world a better place,” we aim to achieve a higher level ofresults by enabling all of our employees to always use their abilities and skills to accomplish our Mission.

The Group is focusing on theacquisition of diverse humanresources, including new graduates,
mid-career recruits, and foreigners. In
recent years, we have been
strategically increasing the number of
new graduate hires every year andhave a policy of developing excellent
professionals based on a long-term
perspective. In addition, in order toachieve the goal of increasing the ratioof female managers to 15% by 2030,
we have set the ratio of female
employees at the time of hiring new
graduates as a KPI.

We aim to provide new employees withan environment where they can learn
the basics of civil engineering toacquire professional engineer
certification, the highest qualification
for a consultant in this business.
In addition, we have established avariety of other courses and arebuilding a system to make thesecourses available to all employees.

Human Resource
Development
Order
Securement Human Resourceof Diverse and Technological Reception and
Productivity
Human
Growth Cycle
Enhancement
Resources

We realize the growth cycle of theorganization as a whole by enabling
employees to gain experience inchallenging projects for individual
growth.
We will enhance the attractiveness of
the Group as an organization that candevelop expertise and work on anumber of challenging projects thathighly contribute to society.

Individual/
Organizational
GrowthWe will increase orders for projects
based on technical proposals, avoiding
price competition, and enhance
corporate competitiveness.
At the same time, employees can growwith a sense of speed by being
involved in many social contribution
projects that require technical skills
from when they are young employees.

Establishment of the NKG Global Academy, a human resources development
共創のためのプラットフォーム
institution where all Nippon Koei Group employees
can grow together
未来のグローバルリーダー

Training young engineers, passing on skills to the next generation, andenhancing technical capabilities are a key issue forNKG
ourグローバルアカデミーの概
company. As asolution, in June 2020 we established NK Academy,an日本工営グループの全社員がin-house
定義
ともに成長するためのtraining program for young technical employees of the Nippon
Koei
目 的 NKG従業員全体の底上げGroup. We have started initiatives to share and deepen
knowledge in
トップクラス人財の育成
each specialized field efficiently in a short period of time byestablishing courses taught by in-house instructors and introducing
Careerthe Learning Management System (LMS).
キャリア
advancement
アップ
In order to expand this initiative to include the entire Group, we areaiming to establish the NKG Global Academy. By consolidating
キャリアアップを幅広くサポート
training within the Group, collaborating with academic
institutions,
NKGグローバルアカデミーでは、さまざまな階層、
expanding learning content through multilingual support,
and sharing
職種に必要な学習コンテンツを提供します。
knowledge, we will raise the level of the abilities and skills of all
employees. We are currently preparing the content in stages with theaim of establishing the academy in the fiscal year ending
June 2024.
対象は日本工営グループ社員全員
The Nippon Koei Group is also looking to make it NKGグローバルアカデミーの学習コンテンツ
available to other
は、
日本工営グループの社員なら誰でも視聴、
companies in 2030 as a place where people from学習することができます。
all over the world
さまざまな分野のコンテンツに触れることで、新しい業務
can gather and learn.
へのチャレンジをサポートします。

17 NIPPON KOEI GROUP INTEGRATED REPORT 2022

NK 事業部門

NKGブランドを体現する人財へ

Toward世界
world's top
トップクラスのclass human
人財へ
resources
External
training

外部研修

Group
グループ
company
会社研修
training

世界トップクラスの人財

Department
Individual 部門独自の
specific skill
self個の自律
スキル研修
training
development
成長支援
supportStratified
階層別研修

めまぐるしく変わるビジネス
世界で活躍するために必要な情報を学習できる環境を提グループの共創を実現しまtraining

日本工営グループの研

日本工営グループ共通の研研修、グループ会社独自の研アップ研修、
外部機関の研修な
研修を一元的に提供します。

グループ内でナレッ

世界で活躍している日本工
さまざまな専門家が培ったナ
各業界の最新情報をコンテ
一般的に入手できない実践的
できます。

いつでも、
どこでも、
好き

ネットワークがつながるところ
も、
どこでも、PCでもスマホでとが可能です。

NK スタッフ部門

NK 国内グループ

NK 海外

Introduction

Strategy

Sustainability/ESG

Review of Operations

Status of the Company

Human Resources Strategy
Increase recruitment of new graduates
In order to respond to Japan’s national resilience plan and the global demand for infrastructure, we are
increasing the number of our employees. Specifically, we established a plan to significantly increase thenumber of new graduates who will be responsible for the future of the Group from 2019 to hire more than150 employees every year. The Nippon Koei Group continues to recruit on this scale and is expanding its

Number of new university graduates hired(total for Group companies in Japan)(persons)
250
200

post-entry training programs.

206

205

21/6

22/6

187

173

150

Increase the number of certified professional engineers

100

105

Construction consulting services in Japan are required to be performed by certified professional
engineers. Therefore, in order to bid on a large number of projects, it is necessary to secure certified
professional engineers. The Nippon Koei Group has 1,743 professional engineers in its construction,
comprehensive engineering supervision, applied science, and water supply and sewerage departments,
boasting the highest number of certified professional engineers in the industry. We support individuals
seeking to become certified professional engineers by offering annual preparation seminars for thecertification examination.

50
0

18/6

19/6

20/6

Number of certified professional engineers(total for Group companies in Japan)(persons)

Hybrid human resource development
We call human resources engaged in both domestic and overseas operations “hybrid humanresources” and plan to increase the ratio of this human resource type. In addition to aiming for global
expansion throughout the organization, we are efficiently allocating personnel resources from theperspective of risk hedging to realize operations that minimize the impact of risks. From the perspectiveof work-life balance, we aim to be a corporate group that can work in a variety of ways according to life
stages.
On the other hand, since the way business is conducted in Japan and overseas differs greatly, it isexpected that issues specific to hybrid human resources will arise. Therefore, we are promoting thedevelopment of labor and personnel evaluation, etc., by understanding actual conditions throughquestionnaires. We are also strengthening training in language, project management (PM), safety
management, and other areas necessary for overseas operations.

1,800

1,656
1,621

1,600

1,584
1,534

1,500

1,400

17/6

18/6

20/6

21/6

22/6

(Millions of yen)
1,600

1,100

1,243

1,195
1,070

913

800

Promote technology strategies
In addition to technological development in each business division, since the fiscal year ended June

19/6

R&D expenses (consolidated)

1,200

Technology Strategy

1,743

1,727

1,700

700

400

2017, the Group has been promoting technology policies in which multiple divisions work together todevelop technologies across the company. Under the Technology Committee under the Management0

Council, themes are established with the goal of “developing technologies and businesses that have an

17/6

impact on Nippon Koei.” In order to derive business from these strategies, we hold a meeting once a year

In November 2022, we formulated the NKG DX Vision in order to enhance the momentum of DX

issues, such as smart city services, and innovate internal productivity to build a sustainable society.

22/6

NKG-DX Vision KPI

Total DX investment during the
Medium-term Management Plan

¥1.5 billion

FYE June 2024
Number of digital human resources*

100%

Enhanced support for BIM/CIM
In principle, BIM/CIM* will be applied to all designs and works ordered by the Ministry of Land,

21/6

A leader in digital innovation

initiatives within the Group. We are working to raise awareness by holding DX related briefings andevolve our Consulting and Engineering businesses, create and develop new businesses that solve social

20/6

To become a company thatsolves problems for the future

DX promotion

discussions for all employees and setting KPIs. We will use an in-house common digital platform to

19/6

NKG-DX Vision

to present the results of their implementation and are working to link the developed technology to theadvancement of more businesses.

18/6* Employees who use RPA and AI in their normal work

Infrastructure, Transport and Tourism starting in 2023. We are further strengthening our response to the

Number of Business Orders related to
BIM/CIM (non-consolidated)promotion of BIM/CIM and productivity improvement as a must-achieve goal that must be realized as(orders)

soon as possible.

156

160

BDP, a group company, has the most advanced technology in the BIM field not only in the U.K. but
also in all of Europe, and has achieved productivity improvements. Therefore, we send our mid-career

137

120

and young employees to BDP for several months of training as a way to actively share technology within
the Group. In March 2022, we established the BIM/CIM Promotion Working Group within the Group for

87

80

the preparation and monitoring of BIM/CIM promotion plans for each field and branch. The Nippon Koei
Group has also launched a BIM/CIM internal qualification system to motivate and inspire employees, and53

40

has now started training and certification programs for acquiring entry-level qualifications.
* BIM (Building Information Modeling): A method of performing virtual construction work on a computer by combining a 3D model of the project and adesign information database
CIM (Construction Information Modeling): A method of managing the construction, maintenance, and production processes of civil infrastructure

0

62

31

17/6

18/6

19/6

20/6

21/6

22/6

NIPPON KOEI GROUP INTEGRATED REPORT 2022 18

Integrated Capabilities of the Nippon Koei GroupThe Nippon Koei Group deploys the integrated capabilities of experts in various fields to meet the increasingly sophisticatedand complex needs of our age to solve social issues.

Track record of development in 160 countries overseas
The Nippon Koei Group has been involved in the development of social infrastructure overseas sincereceiving an order for the planning of the Baluchaung Hydropower Plant in Burma in 1954, which served as
the first step in the globalization of the Nippon Koei Group. We have continued to build infrastructure thatutilizes various Japanese technologies, including technologies for hydroelectric power plants, roads,
railways, bridges, and agriculture, and have continued a business model that simultaneously transfers
technology to the local community and realizes economic development.
While handling a number of overseas government projects such as ODA, we have established local
companies around the world, with the current number of overseas bases standing at 73. The knowledge
accumulated through our understanding of the characteristics and customs of countries and regions
around the world through projects since our founding is one of the strengths of our Group.
In our long-term management strategy, we have positioned the growth of overseas subsidiaries as thesource of profit growth, and are promoting measures such as strengthening the production systems of
local subsidiaries and group companies overseas to stabilize regional management, and training
management personnel for independent operation.

Number of Overseas
Orders (consolidated)

No. 1* in the industry
Countries and Regions
Track record in

160 countries
Overseas Bases

73 locations* “Sales ranking of engineering consulting firms inJapan,” Nikkei Construction, April 20, 2022

Matrix management that provides one-stop services across regions
Under the current Medium-term Management Plan, we have established a group management structure that operates using a matrix consistingof a business axis based on three domains (Consulting, Urban & Spatial Development, and Energy) and a regional axis. With the Business
Promotion Headquarters at its core, branch offices, overseas offices, and Group companies rooted in Japan and around the world identify local
needs and provide one-stop services for business domains across regions. Each of our companies overseas operates independently and realizes
our motto, “Think globally, Act locally” for social issues and various needs around the world. In other words, they grasp issues from a global
perspective and solve them locally, proposing optimal solutions with a sense of urgency.
Through these efforts, we plan to increase our overseas sales ratio from the 37% (current level) to 44% in the fiscal year ending June 2024 and to
50% in the fiscal year ending June 2030.

Matrix Management
Structure

The overseas revenue ratio target for
the fiscal year ending June 2024 
EnergyUrban & Spatial
Development

Regional Axis

Southeast Asia

Consulting

Japan

Business Axis

South Asia
Sub-Saharan Africa

Matrix Management
Two axes exist - A vertical businessaxis and a horizontal regional axis

Europe, Central Asia, Middle East, and Northern Africa
Americas

Americas
7%

44%

Other
1%

Sub-Saharan Africa
3%
Europe, Middle East,
Central Asia, and Northern Africa
13%

FYE June 2024
Ratio of Revenue
by Region Plan

Japan
56%

South Asia
11%
Southeast Asia,
East Asia, and Oceania
9%Collaboration with diverse external partners
We aim to be a corporate Group that contributes to the realization of a society in which people canfeel that their lives have been enriched by providing new value through the exploration of knowledge andNumber of MOUs
the innovation and integration of technology through collaboration with diverse internal and external
Signedpartners in order to reach the universal goal of realizing a sustainable world.
(Memorandum of Understanding)In order to promote co-creation, we have been operating NARRES (NK Alliance Record Registration
System), an information management system that centrally manages various types of NKG alliance(as of June 2022)
information, since July 2022. Because of the confidentiality of alliances with external parties, there havebeen issues such as the inability to utilize alliances that have already been concluded widely. Thissystem solves these issues and realizes the centralized management of alliance information within theGroup.
Going forward, we will continue to aim for new collaborations and expansion of business possibilities from a Group-wide perspective.

22

19 NIPPON KOEI GROUP INTEGRATED REPORT 2022

Introduction

Strategy

Sustainability/ESG

Review of Operations

Status of the Company

Various Projects that Demonstrate Our Integrated Capabilities
Case 1

Miwa Power Station - An example of how our one-stop Services in the Energy Businesscan be utilized

Our Energy Business has the advantage of being able to provide one-stop services for all
stages from planning and research to design, construction, equipment manufacturing, andmaintenance and management for power and electric facilities in Japan and overseas. The
realization of these services will bring various benefits to customers, such as reducing businesscosts as well as shortening construction periods and power generation shutdown periods.
One example of this is the large-scale renovation of Miwa Power Station, which we received
an order for from the Nagano Prefectural Enterprise Bureau in 2020. The project involves thelarge-scale renovation of the location’s aging 12,200 kW dam-type power generation facilities
using new categories under the FIT (Feed-in Tariff) scheme. The design and construction
method (EPC) has been introduced. The Nippon Koei Group was highly evaluated for its trackrecord and experience in power generation and EPC utilizing its one-stop services as well as for
its proposal to introduce new technologies.
In addition to these services, we are promoting business development centered on energy storage facilities in Europe, where the electricity market is ahead ofJapan. By utilizing this knowledge and providing one-stop services from EPC (engineering, procurement and design) to operation, we are developing solutions thatmeet the needs of our customers.

Case 2

Railway project in Dhaka, Bangladesh - An example of what our civil engineering andarchitectural services can provide

In Dhaka, Bangladesh, which is one of the most densely populated cities in the world, theNippon Koei Group has received and implemented several Dhaka Metro Rail projects (Line 6,
Line 5 (Northern Route), and Line 1). For Line 5 (Northern Route), BDP, an architectural design
company which is part of the Nippon Koei Group, was responsible for the design of the stationbuilding. The railway project includes station construction, rail line development, MaaS and TOD(Transit Oriented Development: urban development that is based on public transportation andaims for a society that is not dependent on automobiles). We are promoting collaboration within
our group in this area where we can take advantage of our strength in integrating civilengineering and architecture.
The Japanese government's Official Development Assistance (ODA) to Bangladesh is thesecond largest in the world after India, causing a boom in infrastructure development. In orderto respond to this strong demand for infrastructure development in Bangladesh, the Nippon
Koei Group established a local subsidiary in Bangladesh in 2018 and is currently involved in over 30 projects there. Our Head Office in Tokyo and the local staff ofour subsidiary in Bangladesh are working together on projects. By training the local staff ourselves, we are contributing to the development of Bangladesh bytransferring Nippon Koei's technology to grow the subsidiary.

Case 3“ Bosuke” - A disaster prevention platform utilizing knowledge accumulated in eachdepartment of Nippon Koei

Currently, too much disaster prevention information is provided from various sources, making
it difficult for local governments to access effective information, grasp the extent of damage, andmake appropriate decisions on evacuation orders for local communities. For this reason, we
have developed “Bosuke,” a water disaster prevention platform which enables centralizedvisualization of only the best data from this wide variety of information. The platform is equippedwith basic functions to display rainfall, flow rate, water level, and inundation depth in real timewith map data that incorporates topographical data, and can be customized with a high degreeof freedom to add AI analysis, AR/VR, and other features. In the development of this platform,
the company-wide technology strategy framework was utilized, and the specialized
technologies and knowledge from related departments were accumulated before the platform
was released in 2021. Since its release, we have been promoting its adoption and joint
development in various fields.
Currently, with the cooperation of Fujimino City, Saitama Prefecture, NTT Advanced
Technology Corporation, Toshiba Corporation, and Nippon Telegraph and Telephone East
Corporation, it utilizes highly accurate, real-time rainfall and flood prediction data. Since August
2022, we have been conducting field trials on the effectiveness of disaster response operations
by local government officials. In addition, the partnership agreement that the Group formed with
Iwaki City in Fukushima Prefecture for the promotion of river basin flood control in April 2022
aims to reduce flooding damage by promoting watershed flood control through demonstration
experiments using this platform.

Satellite
data

Accumulation ofvarious types of data
enables centralizedvisualizationRiver
camera data

Alarm data

SNS data

Floodsensor data

NIPPON KOEI GROUP INTEGRATED REPORT 2022 20

Long-Term Management Strategy
Mission and Materiality
The Nippon Koei Group believes that in order to achieve sustainable growth in light of surrounding business conditions, it isimportant to attract diverse human resources and co-create value in cooperation with external resources. Based on thisrecognition, we have established a Mission, Vision, and Values to widely share the direction in which our Group is headedwith those inside and outside the Group. In order for the Group to address global issues through its business activities and togrow sustainably with society, we have established materialities (key issues) that we will preferentially address by leveraging
our strengths.
Materialities of the Nippon Koei Group

Making the world a better place ▶

MissionVision

A company that provides unique value ▶

Values

Act with integrity andcontribute to society throughtechnology and engineering

Business Activities-based Materiality
1. D evelopment of infrastructures that allow people tolive safely and with peace of mind
2. D evelopment of a social infrastructure that allows all
people to freely interact and engage in activities
3. C reating attractive cities with a diverse range of
people and industries
4. P reservation of the global environment through therealization of decarbonized societies
Management Base Materiality
5. Enhancement of governance
6. W ork environment where human rights arerespected and job satisfaction is high7. H uman resource development and technicaldevelopment

Materiality and Related SDGs
Materiality

Business activities

Examples of initiatives for each materiality

Development of a safe and reliableinfrastructure● Develop high-quality infrastructures in a wide array of fields● Provide both “hardware” and “software” based
services for disaster prevention and mitigation2

Development of smart societies● Realization of a mobility society through thedevelopment of airports, railroads, and othertransportation hubs/networks● Development of electric power infrastructure inareas with no power supply located overseas

3

Creating attractive cities● Development of smart cities by co-creating
through our Consulting, Urban & Spatial
Development, and Energy businesses

4

Challenge to decarbonization● Provide consulting services for climate change
adaptation measures● Expand renewable energy business in Japan and overseas

5Enhancement of governance● Review of organizational design● Enhance compliance activities

6

Work environment where humanrights are respected and job
satisfaction is high● Further promotion of well-being management

7

Human resource development andtechnical development● Cultivate human resources that embody the Nippon
Koei Group brand through the NKG Global Academy● Create new added value by utilizing DX

1

Management activities

Main related SDGs

Identifying materiality
Level of impact on society

We have integrated and reorganized the content of “issues that have a significant impact on society andare of high importance to the Nippon Koei Group,” and summarized them into seven materiality items:
Four items that contribute through business and three items of management that serve as the foundation
for business continuity.
Later, in order to verify the appropriateness of materiality items from an external perspective, we conductedinterviews with experts. Based on the opinions we received, selected material items were presented to theBoard of Directors for final section.

Issue Mapping
High

ImportantMateriality Items

Level of important to the Nippon Koei Group

21 NIPPON KOEI GROUP INTEGRATED REPORT 2022High

Introduction

Strategy

Sustainability/ESG

Review of Operations

Status of the Company

Assumed values
We at the Nippon Koei Group have been working to solve
numerous social issues that have existed since the era that our
founder, Yutaka Kubota, lived. The entrepreneurial mindset ofconnecting people and creating projects to solve social issues is
our starting point.
Inheriting the spirit of our founder, the Group has grown to thepresent day by continuing to provide business solutions to various
global and social issues that change with the times through theaccumulation of “wisdom,” as represented by our technologies. We
believe that our strength is our “integrated capabilities” based on
our human resources and technology, and that the source of ourstrength is the “wisdom” of each and every employee, which isbased on their “smarts,” “knowledge,” “skills”, and “outstanding
human qualities.”

The Company has been contributing to the world as an essential
business that contributes to the betterment of people's lives
through the collective “wisdom” of our employees, who look atsocial phenomena, determine the essence of issues, and findoptimal solutions with a sincere attitude by making full use of avariety of technologies.
We believe that it will become more important to create anenvironment that nurtures the “wisdom” - the assets of each
employee, makes it easier to share that wisdom throughout theGroup, and engages society as a whole with a “sense of creating
together.”Society

NIPPON KOEI GROUP

Society’s needs areconstantly evolving

Commercialize solutions
for social issues
Changes to meet new needs

Continue to provide solutions through the accumulation of“wisdom” represented by our technologies

Integrated Capabilities
Demonstrating integrated
capabilities based on our humanresources and technologies

Human Technology
Resources

Awareness of market conditions
The global trends of 2030, the target year of our long-term
management strategy, and beyond include the increasing intensityand frequency of disasters due to global climate change; changes
in demographic structure due to the aging of the population indeveloped countries and the population explosion in developing
countries; and rapid urbanization triggered by a lack of resources
and technological advances. Some of these risks are alreadymanifesting themselves in the form of rapid changes in the social
environment, geopolitical risks, and social risks.
In line with this, the need for the creation of a sustainable society
is expected to increase in the future, including the development ofsocial infrastructure that allows people to live safely and securely, thedevelopment of social infrastructure that allows all people to freely
interact and play an active role, and the creation of attractive cities
with a diverse range of people and industries, and the conservationof the global environment by creating a decarbonized society.

Megatrend

Against this backdrop, we recognize that the challenge given to
global companies is to respond to these needs by emphasizing
SDGs and ESG perspectives, as well as by making full use of
cutting-edge technologies such as digital technology, which isexperiencing accelerated development. In addition, the current
environment is becoming more and more complex, so we need tochange, not only to provide solutions to individual issues but also toderive optimal solutions to multiple issues. To achieve this, we need
to become engineers who have an image beyond that ofconsultants and transcend preconceived notions by combining DX
with the strengths that the Nippon Koei Group currently possesses:
our “integrated capabilities.”
For example, we recognize that we need project management
skills to be able to work on large projects around the world, and theability to produce new businesses such as subscription-based
businesses and concession business.

Nippon Koei Group response

Rapid urbanization

Railway business and urban space facilities business in Asia

Climate change and lack of resources

Promote water source development, renewable energy, and storage battery businessChanges in demographic structure

Secure production system and strengthening localization

Shift in global economic power

Create private businesses (new businesses)

Technological advancement

Promote collaboration with other industries

NIPPON KOEI GROUP INTEGRATED REPORT 2022 22

Long-Term Management Strategy
Opportunities and Risks Arising from Changes in the External Environment
Nippon Koei Group formulates its long-term management strategy based on an understanding of changes in the external
environment as well as risks and opportunities, and implements initiatives to continue sustainable growth.

Main Changes in the External Environment
Rapid urbanization
The urban population as a percentage of the world's population wasless than 30% in the 1950s and is now projected to rise to 50%. In
2015, there were 22 megacities in the world with populations of 10
million or more, and the world's urban population is expected toincrease by approximately 72% by 2050.
(According to the Population Division of the Department of Economic and Social Affairs of the United
Nations)

Opportunities
Expansion of opportunities for the development ofsmart infrastructure and smart cities● Support for integrated projects by leveraging integrated strengths

Increase in transportation & urban planning fieldprojects● Transportation system development and response to MaaS andTOD utilization

Climate change and lack of resources

Creation of businesses related to climate change

Climate change and lack of resources will have an increasingly
severe impact on the economy with energy demand and water
intake projected to increase by 50% and 40%, respectively, by
2030*.
There are concerns that climate change will cause frequent extreme
weather events and rising sea levels that will make agriculture andother activities using traditional methods difficult in some areas.

● Increased demand for decarbonization and carbon neutrality and* “Global Trends 2030: Alternative Worlds”, US National Intelligence Council

an increase in projects that can take advantage of renewableenergy-related technologies and know-how cultivated to date

Large-scale natural disasters measures● Increased disaster prevention and mitigation measures to copewith disasters caused by climate change

Creation of projects related to energy and resource
shortages● Increased consulting needs for resource conservation, circular

economy, agricultural reform, and food value chain

Changes in demographic structure

Improvement of productivity through work style reform

Changes in demographic structure will vary widely from country tocountry with concerns that rapid aging in some countries will put
pressure on the labor force as it will comprise a smaller portion of
the total population.
On the other hand, growing countries are expected to see thelargest labor force and consumer markets ever.

● Pursuit of optimal work styles including telework● Improvement of business efficiency and productivity through theuse of IT tools

Expansion of urban revitalization projects and publicprivate partnerships● Increase in compact city planning that consolidates urban

functions to cope with declining/aging populations● Expansion of concessions, PPP/PFI projects, etc.

Local subsidiary business expansion● Increase in projects and workers in emerging countries

Shift in global economic power

Growth and expansion of scale in emerging markets

Emerging economies such as the BRICs, which have provided large
amounts of labor and production functions in the past, have begun
to shift to a consumption-based economy and are now exporting
capital, human resources, and innovative technologies, which ischanging the flow of capital.
As emerging markets grow and expand in size, connections throughtrade and investment are being created at a fast pace among
emerging economies.

● Expansion into emerging markets by leveraging Nippon Koei's

operational know-how

Local subsidiary business expansion● Increase of projects in emerging countries, development of young

workforce, and maintenance of diversity

Create private businesses (new businesses)● New customer development and business creation

Technological advancement

Business creation utilizing DX

Breakthroughs in the field of technology and cutting-edge
technologies in other R&D areas will increase the likelihood ofcommercialization and provide increased opportunities for new
investment.

● Expansion of the utilization of BIM/CIM, 3D models, big data, etc.

Expansion of alliance opportunities● Promotion of collaboration beyond industry and regionalboundaries

23 NIPPON KOEI GROUP INTEGRATED REPORT 2022

Introduction

Strategy

Sustainability/ESG

Review of Operations

Risks
Increase in multiple large-scale projects

Status of the Company

Related Initiatives● Increasing sophistication and complexity of project management● Expansion of Railways operations in Asia●P
 rovision of one-stop solutions by integrating the Group's fields ofCompliance● Expansion of Urban & Spatial Development Business● Acquisition of project management/construction management

and quality issues● Violation of related laws and regulations in Japan and overseas

and occurrence of serious accidents

Increased conflicts and political tensions overresources● Temporary suspension of projects and supply chain disruptions

Business continuity● Insufficient preparation for large-scale natural disasters

Shortage of workers● Amount of human resources with expertise for securing andtraining workers is insufficient● Loss of human resources due to overwork and harassment● Loss of labor productivity and exodus of human resources

Partner companies● Insufficient securing of partner companies● Decline in productivity and quality in the Group, including partnercompanies

Changes in competitive environment● Declining competitiveness in mature markets, intensifying

competition with competitors possessing different attributes thanpreviously seen
● Delayed adaptation of own brand and positioning

Group governance● Fraud risk and inappropriate behavior, lack of synergy from M&A

alliances

Increase in cyber attacks● Leakage of confidential information such as customer informationand our confidential information● Delays in project progress due to large-scale failuresexpertisetechnology● Strengthening of internal control systems including those at eachGroup companies● Proactively respond to projects that contribute to climate change

countermeasures (transportation infrastructure development,
environmental conservation, renewable energy-related projects,etc.)● Proactive response to disaster prevention/mitigation, infrastructure
maintenance and management (aging countermeasures), andother disaster countermeasure projects● Acquisition of new energy technologies and promotion of storage
battery business● Improvement of working environment by maximizing the use of AI

and ICT● Full-scale expansion into the business management field●E stablishment of NKG Global Academy to develop world-classhuman resources throughout the Group● Operation of a regional engineer system to enable overseas

human resources to be active in third countries● Actively recruit new employees and strengthen the post-

employment training system● Regular labor monitoring● Support for autonomous management of regions promoting

matrix management● Diversification of markets (business areas and regions) andcustomers (especially private-sector customers)● Active promotion of local human resources● Careful selection of new investment targets and strengthening ofmonitoring of existing businesses in which we have invested● Transition to a pure holding company to improve management

efficiency, strengthen governance, and realize coexistence ofdiversity● Establishment of NKG Global Academy to develop world-classhuman resources throughout the Group● Realization of DX● Promotion of both “offensive” DX (providing added value throughthe use of BIM/CIM, 3D models, big data, etc.) and “defensive”
DX (improving productivity and business efficiency throughin-house DX)● Acceleration of needs-driven technology development

NIPPON KOEI GROUP INTEGRATED REPORT 2022 24

Concept behind our Longterm Management Strategy

Working together
toward a future
without boundaries

In order to respond to increasingly complex social issues and accelerating innovation,
it is necessary not only to enhance the power of each employee and mobilize internal
capabilities but also to collaborate with external partners who possess advanced
technologies and unique know-how and to work together with local people to solve
problems. The concept that emerged from this is “Working together”. Within the Nippon
Koei Group, each company will use its own discretion to grow by making the most of its
own individuality, wisdom, and technologies. We will implement measures with the aim of
becoming a Group that is an aggregate of such companies. Furthermore, we will aim tocreate and develop new strengths together with new colleagues.

Three Long-term Management Strategy co-creation measures
In our Long-term Management Strategy, we have positioned “Consulting,” “Urban & Spacial Development,” and “Energy” as the three corebusinesses of the Group and are aiming for their further growth. To promote autonomy and collaboration, we are transitioning to a new groupmanagement structure. By further strengthening group governance and deepening group management from a medium- to long-term perspective,
we will further ensure future growth.

Co-creation Measure1

Reorganization of business segments

New development of three business domains

Full-scale expansion into the business management field

In order to respond to a wide range of social needs, we will
establish a structure based on three business domains: Consulting,
Urban & Spatial Development, and Energy. Through seamlessintegration and collaboration without segmenting by region orcompany, we aim to create a business structure that can provide a
one-stop shop for services in each domain across the board.

By maximizing and integrating the technologies developed by eachof the three domains, we will make a full-scale entry into the business
management field, including infrastructure management, urban
management, the energy business, and data business.

Co-creation Measure2

Promote autonomy and collaboration and build a one-stop system

Transition to a pure holding company
Group companies formed by business domain and region will
manage autonomously while building an organization with a strong
centripetal force based on the mission, technology, and governance of
the Nippon Koei Group.
We will improve the profitability of each business, expedite decisionmaking, strengthen our risk structure, and build a flexible and robust
governance system.

Build a one-stop system through collaboration withother business segments
Through seamless integration and collaboration without segmenting
by region or company, we aim to create a business structure that can
provide a one-stop shop for services in each domain across theboard.

Implementation of matrix management based on bothbusiness and geographic regions
We will realize a matrix management system that operates andmanages the businesses of our three domains and the businesses ofeach region.
The Company will address global and regional social issues as wellas propose optimal solutions to diverse needs with a sense ofurgency.

Matrix management target areas
Europe, Central Asia, Middle East,and Northern Africa

South
Asia

Americas

Japan
Southeast
Asia

Sub-SaharanAfricaCo-creation Measure3

Establish the Nippon Koei brand and Nippon Koei Group quality

Developing world-class human resources incoordination with our technology strategy
Human resources are the most important management resource of
the Nippon Koei Group. In addition to expanding educational
opportunities and programs that are closely aligned with ourtechnology strategy, we will actively hire local human resources andpromote diversity at our bases in each country to develop excellent
human resources.

Realization of digital transformation (DX)We will provide optimal solutions using DX technology. The
Company will develop promising technologies in-house as well as
through alliances with external companies, and apply them to ourbusinesses.

25 NIPPON KOEI GROUP INTEGRATED REPORT 2022

NKG Global Academy
By establishing the NKG Global Academy to cultivate world-classhuman resources throughout the Group, we will foster humanresources who embody the Nippon Koei brand at each of our basesin various countries where we do business.

Introduction

Strategy

Sustainability/ESG

Review of Operations

Status of the Company

Quantivative targets for FYE June 2030
Revenue

Operating profit

Operating Margin

ROE¥250 billion¥25 billion

10%

15%

Long-term Growth Graph and Positioning of the Medium-term Management Plan
With our long-term management strategy, we aim to increase revenue by approximately 1.7x through sustained growth in our three main businesses and growththrough new businesses, and to increase revenue in overseas markets from approximately one-third of the current level to approximately half, thereby making aleap forward to become a global and highly profitable Group.
In order to achieve this, we are establishing Medium-term Management Plans that span over three-year steps.
billion
The three-year period from the fiscal year ended June 2022 to the fiscal year ending June 2024, which is the firststep, is positioned as a “period of change” to solidify the foundation for achieving the plan. This is the Mediumterm Management Plan “Building Resilience 2024” which we have established and are promoting.
New Business¥250.0

Expansion+¥48.0 billion

Approx. ¥155.0 billion¥117.8 billion

FYE June 2025

FYE June 2027

FYE June 2030

Composition ratios of Net Sales for FYE June 2021

¥202.0 billion

Composition ratios of Net Sales for FYE June 2030

Overseas Sales Ratio

Overseas Sales Ratio
Approximately 50%

36.1%

Revenue

Revenue¥250.0 billion¥117.8 billion■ Consulting BusinessContinuous Growthof Our Three Core
Business Segments

Step

Step

Step
FYE June 2022

3rd

2nd

1st

■ Consulting Business

80.0

140.0

■ Urban & Spatial Development Business 20.2

■ Urban & Spatial Development Business 65.0

■ Energy Business■ Energy Business

16.6

45.0

Business strategy by segment
Consulting Business

2030 Revenue Target¥140 billion

Becoming a world-class consulting firm handling everything from consulting to management

Market strategy: In the Japanese market, we aim to expand into the private sector and management field with a focus on public works projects. In theinternational market, we aim for non-ODA-oriented growth at Group companies with a focus on Japanese ODA projects. In regard to regions, we will promoteentry into new market areas (Middle East, North America, etc.) while securing stable earnings in Asia as a region of particular importance.
Technology strategy: Accelerate the development of next-generation core technologies and needs-driven technology.
Human resources/organizational strategy: We will develop hybrid human resources who can play an active role both in Japan and overseas based on flexible
responses to changes in the market environment and employee work-life balance. At our companies overseas, we will promote the training of regional engineersthat can be active in third countries.

Urban & Spatial
Development
Business

2030 Revenue Target¥65 billion

Comprehensive operations in urban land development, public-private partnerships for urban and regional revitalization,
smart city development, etc.

Market strategy: In the Japanese market, we will focus on architecture, urban redevelopment, public-private partnerships, smart cities, etc. Overseas, we will
actively promote collaboration and alliances with BDP and Nippon Koei Urban Space for large-scale development around transportation hubs in Asia and urban
development and redevelopment in Europe, the United States, and Oceania.
Technology strategy: We aim to utilize BIM and Smallworld (an integrated tool for map information and asset management) to use Nippon Koei Urban Space's
technologies overseas.
Human resources/organizational strategy: We will address environmental improvement and human resources exchange to improve technological capabilities
within the segment, and establish a comprehensive production organization for urban redevelopment.

Energy Business

2030 Revenue Target¥45 billion

Providing one-stop services for power systems associated with stable energy supply

Market strategy: In addition to developing and operating new businesses in line with the deregulation of electric power, we will focus on the international
standardization and sophistication of our core products. Overseas, Nippon Koei plans to establish its energy management business in Europe. In addition, we will
promote the development and operation of microgrids, smart city, and renewable energy power generation businesses in Asia.
Technology strategy: We will improve the performance of our main products, strengthen our competitiveness by reducing costs, and develop systems that
support DX. In addition, we will develop one-stop solutions integrating core technologies with storage battery and aggregation technologies.
Human resources/organizational strategy: We will build a base for strengthening the production structure of manufacturing divisions, building supply chains,and promoting exchanges and collaboration between human resources and departments to provide one-stop solutions.
NIPPON KOEI GROUP INTEGRATED REPORT 2022 26

Medium-Term Management Plan
Building Resilience 2024

Based on our Long-term Management Strategy, we have formulated "Building Resilience 2023," a medium-term management
plan to strengthen the foundation for the co-creation of a sustainable future over a three-year period, keeping in mind ouraspirations for the year 2030.
While maintaining/improving business performance, we plan to make investments for medium- and long-term growth, which
will lead to the future development of our Group.

Three Measures for Strengthening the Company

MeasureMeasure1

3

Establish the Nippon Koei brand and
Nippon Koei Group quality

South Asia
Sub-Saharan Africa
Europe, Central Asia, Middle East, and Northern Africa
Americas

Energy2

 stablish a group management structure thatE
realizes matrix management of business andregions

Southeast Asia

Consulting

Measure1

Regional Axis

MeasureJapan

Urban & Spatial Development

Business Axis

 romote business based on the independencePof our three businesses

Strengthening business and regional axes toestablish brand quality throughout theorganization

Promote business based on the independence of our three businesses
We aim to promote independent businesses through three strengthened domains ( ● Consulting Business,● Urban & Spatial Development Business, and ● Energy Business).
Key initiatives

Materiality● Advancement and global expansion of disaster prevention/mitigation
technologies● Full-scale expansion into the management field

M1. Development of a safe and reliable infrastructure● Expansion of transportation related businesses● Creation of smart city projects with a focus on decarbonization, safety, and security

M2. Development of smart societies● Realization of one-stop services for urban (re)development projects● Expansion of BDP market● Full-scale development into urban management field

M3. Creating attractive cities● Promotion of services that contribute to decarbonization● Establish foundation for power generation and energy management business● Strengthen manufacturing of core products and develop new products● Provide one-stop solutions utilizing diversified and diverse technologies

M4. Challenge to decarbonization

Measure2

Establish a group management structure that realizes matrix management of business and regions
We will strengthen our regional axis, which is the cornerstone of the Group's management structure to realize matrix managementof business and regions.
Key initiatives

Materiality● Establishment of a pure holding company and governance structure to realize
matrix management● Establishment of regional management structure and support for autonomous
regional management● Realization of one-stop services

M5. Enhancement of governance● Work style reform (promotion of well-being management)

M6. Work environment where human rights are respected and job
satisfaction is highMeasure3

Establish the Nippon Koei brand and Nippon Koei Group quality
With our technology strategy, we will grow into a pioneering company that realizes a sustainable society by creating innovativevalue centered on DX. Using our human resources strategy, we will enhance our knowledge management and talent management
systems, which we have built up to date, and establish the NKG Global Academy, a human resources development system.
Key initiatives● DX Promotion● Establishment of the NKG Global Academy

27 NIPPON KOEI GROUP INTEGRATED REPORT 2022

Materiality
M7. Human resource development and technical development

Introduction

Strategy

Sustainability/ESG

Review of Operations

Status of the Company

FYE June 2024 Numerical Targets (IFRS)Revenue

Operating profit

Operating Margin

ROE¥155 billion¥11.5 billion

7%9%Expected Progress● Revenue will grow by approximately 10% over the next three years.
● We anticipate that the operating margin for the fiscal year ending June 2023 will exceed the level expected for the final year of the Medium-termManagement Plan due to special circumstances in the energy sector.
● Operating profit will grow more than 10% growth annually unless impacted by special circumstances.

Operating profit (Billions of yen)/Operating margin (%)

Revenue (Billions of yen)Consulting

Urban & Spatial Development

EnergyConsulting
Operating Margin

Other

Energy

145.0

150

117.8

11.3

155.0
10

130.6

Other
20.0

15

200

11.5
15.0

9.0
7.1

100

5
6.0

50

0

Urban & Spatial Development

6.9

7.8

7.4

10.0

5.0

0
-5
21/6
Results

22/6
Results

23/6
Plan

24/6
Medium-term Plan

21/6
Results

22/6
Results

23/6
Plan

24/6
Medium-term PlanFirst-year Results and Initiatives Carried Out in the Second Year
Review of the results for the fiscal year ended June 2022 (first year)

Measure1

Consulting Business●Sales expanded due to strong progress in large overseas
projects. Started acquiring technology to expand businessareas and laying the foundation for new services●Develop new services using new technologies andpromote business expansion utilizing our co-creation
partners

Urban & Spatial
Development Business●BDP and Quadrangle made good progress on their projects.
Implemented organizational integration with the aim of
expanding the Japanese market●Strengthen integrated operations within the segment topromote collaborative order acquisition. Entry into theNorth American market by BDP

Energy Business●Implemented measures to strengthen the production
capacity of our existing Power Engineering business.
Started construction of energy-related projects in
Europe●Establish a foundation for improving production
efficiency and quality of core products. Implement
specific initiatives to respond to changes in theJapanese energy market

Organizational Strategy●Examined the organizational restructuring execution
scheme and prepared for the transition to a holding
company structure●Enhanced network infrastructure and improved
information security measures●Establishment of regulations and various reorganization proceduresfor HD, operating companies, and business management companies●Formulate policies for capital structure and shareholder returns,
and strengthen accounting functions for Group companies●Formulate and promote strategies for addressing
climate change issues and enhance our response tohuman rights issues

Business Strategy●Continued examination of one-stop marketing system
and regional control●Nippon Koei has not continuously examined/collaborated in developing new markets●Establish basic policies on regional management andcreate a management system●Implement measures to promote orders for domestic
strategic projects, formulate projects led by regions,and promote digital marketing●Make proactive use of business incubation functions

Human Resources
Strategy●Changed the position structure and qualifications for
professional positions●Responded to telework issues●Set numerical targets for 2030 for the ratio of female,non-Japanese and mid-career hires in managerial positions●Promote a telework campaign and use of satellite
offices●Increase the ratio of female managers and promote theemployment of people with disabilities

Human Resources/
Technology Strategy●Planned the overall structure of the NKG Global Academy●Developed technology strategy and implemented ninetechnology measure themes●Developed advanced technologies including digital twin
technology●Implementation of smart city business andestablishment of marketing system●Examine professional occupations (expand number ofpublic qualifications)●Digital business promotion, digital technology
development, productivity innovation, and DX humanresource development●Create the NKG Global Academy based on its basic design●Conduct career development that is linked withexternal conditions

Measure2

Measure3

Initiatives carried out in the fiscal year
ending June 2023 (second year)

NIPPON KOEI GROUP INTEGRATED REPORT 2022 28

Financial Capital Strategy

We aim to expand andstrengthen our businessthrough aggressive growthinvestments to achievesustainable earnings
growth and shareholder
returns.

Yasushi Hirusaki
Director and Managing Executive Officer

The Nippon Koei Group continues to take on further challenges

important period for us to determine the future development policy

and transform both financially and non-financially, such as balancingof our power and energy businesses. For this reason, we haveinvestment for growth with financial discipline and promoting ESG.

made up-front investments needed to conduct business in fields
such as energy management in Europe where progress is being

Continuing growth investments for asolid foothold

made in energy mixing and electricity deregulation. By the fiscal
year ended June 2022, we made asset-holding investments andare promoting a grid storage battery project in Belgium and two in

The Medium-term Management Plan currently underway spans a

the UK. From the fiscal year ending June 30, 2023, we will finally

three-year period to strengthen the Group so that it can achieve its

complete the construction of power storage facilities and enter the

long-term management strategy, or in other words, solidify its

phase of generating profits from the energy management business

foothold, and is in the phase of aggressively making growthand expanding business to other regions.

investments to put new businesses on track and expand them. We

As for the Consulting Business, in the summer of 2022 we

expect to invest approximately 32 billion yen over the three years ofconsolidated ASAP Mobility SDN. BHD., a Malaysian railway system

the Medium-term Management Plan in growth investments,

consulting company, into a subsidiary in order to strengthen the

including new business development and M&A. An example of arailway field, where demand continues to be strong overseas. In thebusiness that we are working to diversify is the Energy Business,railway business, construction consultants are mainly responsible forwhich is undergoing a remarkable business transformation. In the

project management, civil engineering-related work and systems

current energy markets in Japan and Asia are in a transitional(signals, rolling stock, electricity, etc., and their integration). By joining

period of changing to new business forms, involving changes such

the ASAP Group, which specializes in railway systems, we believe

as electricity deregulation, promotion of renewable energy use, andthat we will be able to further strengthen our efforts in the railway

spread of distributed power sourcing. We consider this to be an

business and establish a superior position as a railway consultant.

29 NIPPON KOEI GROUP INTEGRATED REPORT 2022

Introduction

Strategy

Sustainability/ESG

Review of Operations

Status of the Company

In addition, as natural disasters are becoming severer and morefinancial soundness, we have set a target of maintaining an equity

frequent in Japan, we are promoting businesses that utilize satellite

ratio of 50%, which becomes 40% or more even during periods ofdata as an undertaking that contributes to national resilience. Since

intensive investment.

it is essential to acquire high-precision satellite data in real time in

The basic objective of our dividend policy is to provide stablethe event of a disaster, we invested in Institute for Q-shu Pioneersdividends and enhance shareholder returns in line with rising profit levels,of Space, Inc., which is running a SAR satellite constellation project,with a target dividend payout ratio of 30% over the medium to long term.

at the end of 2021. We will continue to focus on disaster prevention

In terms of improving the quality of our balance sheet, we are working

and mitigation initiatives with the aim of providing services withto sustainably increase ROE by improving asset efficiency. By

greater accuracy than ever before.

implementing the growth strategy formulated in the Medium-term

In the Urban & Spatial Development Business, Nippon Koei isManagement Plan, we aim to raise ROE to the 9% level in FYE June

participating in concessions (management rights for public facilities,

2024, the final year of the plan, and to boost it to the 15% level over theetc.) of Meiji Park and Hiroshima Central Park in anticipation oflong term. In achieving the ROE target, we will place emphasis onparticipation in urban redevelopment projects in the future. We plan

profitability and plan to raise the operating margin from 6.9% in FYE

to continue to actively consider PPP/PFI projects for public

June 2022 to 7.4% in the final year of the Medium-term Management

infrastructure where we can utilize our strengths.

Plan, and to 10% in the long term. Combining these plans with flexible
share buybacks, we will continue to consider shareholder returns in

Basic objectives for capital andshareholder return
Based on the aforementioned growth strategy, we recognize theaccordance with conditions in order to improve capital efficiency andachieve an appropriate total return ratio. I would like to show you how
we will put these initiatives together one by one and link them to a cycleof strengthening shareholder returns and investment for further growth.

need to further strengthen our financial strategy as we move
forward with new asset holdings, alliances, M&A, and other

The Group plans to transition to a holding company structure in

investments. Therefore, in our Long-term Management Strategy, we

the fiscal year ending June 2024 as one means of achieving its

are preparing for monitoring using ROIC, etc., further elaboration of

long-term management strategy, which focuses on the fiscal year

fund management, upgrading of the Group's cash management

ending June 2030. Although our organization form will changesystem, and diversification of fund procurement methods according

greatly, we will continue to strengthen our current strategies andto the use of funds. As part of these efforts, we reviewed our

maximize our corporate value on the financial front throughinvestment screening system to strengthen our financial perspective

appropriate and flexible measures tailored to business conditions. I

from the fiscal year ending June 2023. In addition to returns fromwould like to ask for your support as we look forward to the future

investees (dividends, loan repayments, and interest expenses),development of our Group.

Nippon Koei has established a system that enables each businessdivision to conduct independent and autonomous monitoring. We
will effectively and efficiently monitor future investment successthrough qualitative evaluations, such as comparison of forecast andactual results of the income statement and cash flow as well asbalance sheet of the investee, and quantitative evaluations such aschanges in the investment environment as evaluation items. We will
also consider selling investment projects based on the periodical
reviews. In the fiscal year ending June 2023, we transferred a partof our shares in Singapore-based hydropower investment company
Ironmont Hydro Pte. Ltd., in which we invested in the energy
business for the purpose of participating in the creation andoperation of small and medium-sized hydropower projects in Asia.
In this way, we will increase our asset turnover ratio and achieve
profitable growth while being mindful of financial control andimprovement in asset efficiency.
Our basic objective regarding capital is to improve capitalefficiency through medium- to long-term growth investment andraising appropriate capital suitable for such investment. In terms of

NIPPON KOEI GROUP INTEGRATED REPORT 2022 30

At a glance
Financial Highlights
Orders and Revenue

Operating Profitand Operating Margin

As a result of expanding our business domains under the previous long-term management
strategy and reorganizing the portfolio under the current medium-term management plan,
we have continued to grow even in the past few years when there were restrictions on
overseas travel due to the COVID-19 pandemic. * Results until FYE June 2019 with Japanese GAAP

We are also working on measures to improve productivity in order to promote our business efficiently.
In the fiscal year ended June 30, 2022, operating profit reached a record high due tostrong performance by overseas business divisions and improved profits in the energy
business.
* Results until FYE June 2019 with Japanese GAAP(Millions of yen)

(Millions of yen)Orders

Revenue

160,000

145,000

144,871

140,000
120,000

106,023
104,350

131,166 130,674

80,00060,000

10
9
8

9,065

108,441

100,000(%)

11,30010,000117,859
108,589

Operating Margin

140,000

133,304
118,085

Operating profit

12,000

8,000

6.2

6,000

6,561

7.8

7,128
4.7

4.8

5,110

5,245

7

6.9

6

6.0

5
4

4,000

3

40,0002

2,000

20,000

1

0

18/6

19/6

20/6

21/6

22/6

0

23/6
(Plan)

18/6

19/6

Profit attributable to owners of parent

20/6

21/6

22/6

0

23/6
(Plan)ROE (%)The Group is generating stable profits. In the fiscal year ended June 30, 2022, profits
increased due to strong business performance and the effects of the yen depreciation.

We aim to improve capital efficiency through the sale of strategic shareholdings, etc.

*Results until FYE June 2019 with Japanese GAAP
(%)
10.0

(Millions of yen)

8.8

8,000
7,000

6,579

6,700

8.0
6.7

6,000

5.7

6.0
5,000

4,555

4,000

4.6

4,531
3,318

3,000

4.0
3,099
2.0

2,000
1,000
0

8.5

8.1

0.0
18/6

19/6

20/6

21/6

22/6

18/6

19/6

20/6

21/6

22/6

23/6
(Plan)

23/6(Plan)

Overseas Sales Ratio

Annual Dividend and Dividend Payout Ratio

In the past few years, the overseas sales ratio has been in the high 30s% due to strong
business in Japan and the impact of the COVID-19 pandemic. However, in the fiscal year
ended June 2022, the ratio has increased due to an increase in the utilization of projects
in our overseas business divisions.

The basic objective of our dividend policy is to provide stable dividends and provide
shareholder returns in line with rising profit levels, with a target dividend payout ratio of
30% over the medium to long term. Most recently, the dividend per share increased in linewith the Group’s strong business performance.

(%)

(Yen)

50

140.00
42.0

41.2
38.3

40

38.4

Dividend
35.3

40

36.6

125.00125.0028.6

28.1

120.0036.8
100.0030

Payout Ratio (%)

80.00

25.5
75.00

25.0
75.00

75.00

35
30
25

75.00
20

60.00

20

15

40.00

10

10
20.00
0
18/6

19/6

20/6

31 NIPPON KOEI GROUP INTEGRATED REPORT 2022

21/6

22/6

0.00

5

18/6

19/6

20/6

21/6

22/6

23/6
(Plan)

0Introduction

Strategy

Sustainability/ESG

Review of Operations

Status of the Company

Non-financial Highlights
Number of Employees

Number of Certified Professional Engineers

The number of Group employees is increasing due to business expansion. We hire about
150 to 200 new employees every year, including those hired at Group companies in Japan.
* Results until FYE 6/2019 with Japanese GAAPThe number of the certified professional engineers is increasing year by year due to theenhancement of measures to acquire qualifications such as seminars.

Number of employees (Consolidated)(persons)

Number of employees (Non-consolidated)

Ratio of female employees (Non-consolidated)
(%)

7,000

18

6,000
5,000

5,497
4,923

3,000

6,163

16

15.7

14

14.5

13.8

12.9

11.8

4,000

5,936

5,772

12
10

2,703
2,167

2,000

2,750

2,519

2,179

1,000
0

18/6

19/6

20/6

21/6

22/6

(persons)

1,800
1,600
1,400

Number of certified professional engineers (Non-consolidated)

1,584
1,304

1,621
1,334

1,656

1,727

1,362

1,420

1,743
1,466

1,200
1,000

8

800

6

600

4

400

2

200

0

0

Ranked No. 1 in Sales in Japan’s Civil
Engineering Consulting Industry

Number of certified professional engineers (Consolidated)

2,000

18/6

19/6

20/6

21/6

22/6

Recognition as an Outstanding Health and Productivity
Management Organization (White 500) for four consecutive years

Nippon Koei has established a leading position as a civil engineering consulting firm inJapan that is ranked No. 1 in sales.
* Source: “Sales ranking of engineering consulting firms,” Nikkei Construction, April 20, 2022

In order to put the Nippon Koei Group's Management Philosophy into practice, we believethat the first priority is the health of employees and their families, both physically andmentally. This is the reason why we promote health management.

1

Ranked No.
in Sales in Japan’s Civil
Engineering Consulting Industry

CO2 Emissions

Energy Consumption

CO2 emissions are decreasing due to the promotion of energy-saving activities at offices
and factories and the use of solar power generation at factories.
* All Nippon Koei Co., Ltd. offices in Japan

Scope 1

Scope 2(t-CO2)350
300(t-CO2)
331
4,060

3,911

3,958

302

306

4,500

3,163

3,500

2,200

2,186

2,155

3,000

200

2,500

150

2,000
99

100

78

50
0

(kL)
2,300

4,000

3,502

250

In addition to curbing energy consumption, we are working to supply 100% renewableelectricity from the hydroelectric power plants that we operate to three of our company
locations (Head Office, R&D Center, and a manufacturing site).

2,078

2,100

2,020
2,000

1,500
1,000

1,900

1,844

500
18/6

19/6

20/6

21/6

22/6

0

1,800

18/6

19/6

20/6

21/6

22/6

NIPPON KOEI GROUP INTEGRATED REPORT 2022 32