Presentation of Performance
Presentation
Performance
for31,theFiscal Year
FiscalofYear
Ended March2007
Ended March 31, 2007
May 17, 2007

— Contents —I. Overview of Performance for the Fiscal Year Ended March 31, 2007
1. Highlights of Performance3

2. Highlights of Performance (Net Sales and Operating Income)4

3. Details of Growth in Net Sales by Segment

5

II. Business Operations in the Fiscal Year Ending March 31, 2008
1. Medium-term Management Plan

6

2. Net Sales and Operating Income Performance and Mid-Term Plan Figures7

3. Management Policies for the Fiscal Year Ending March 31, 2008

8

4. Business Plan for the Fiscal Year Ending March 31, 20089III. CHD Growth Strategy
1. Growth Strategy for NTT Group Business

101-1. Trends in NTT Group Business by Area, and Directions for the Future111-2. Market Trends in the DoCoMo Business

12

2. Non-NTT Business Growth Strategy

132-1. Future Development of Non-NTT Business

142-2. Measures to Expand NCC Business15

3. Our Thinking on CHD Growth16

IV. Our Thinking on Revenue Growth17

1. Successes and Issues with COMSYS-Style Kaizen (Improvement)

18

2. Improving Cost/Performance Ratios through Consolidation of Joint Operations

19

V. A Vision for CHD Growth20VI. Shareholder Returns and Acquisition of Treasury Stock21

I-1. Highlights of Performance
S Major growth in revenues and profits in comparison with the previous fiscal year S(Unit: ¥100 million)

Orders Received

Net Sales

Operating Income

Recurring Profit

Net Income

FY March 2007
Performance

3,341

Comparisons withPrevious Fiscal Year+241
(7.8% growth)

+291

3,365

(9.5% growth)

192

+29

Operating Margin: 5.7%

Up 0.4 percentage points

211+24

Recurring Profit Margin: 6.3%

Up 0.2 percentage points

123+23Net Profit Margin: 3.7%

Up 0.4 percentage points

3Main reasons for increase/decrease• Sweeping growth in mobile
communications construction• Expansion of the volume of opticalcommunications construction• Sales growth• Gain on sales of fixed assets• Gain on sales of investment securities

I-2. Highlights of Performance (Net Sales and Operating Income)
Performance outstrips previous fiscal year and revised projections
Year-on-year growth in MNP projects (DoCoMo and NCC) and optical communications projects.
Both DoCoMo and NCC unexpectedly exceed projections from the second half forward.

[Performance for the Fiscal Year]

3,365

Unit: ¥100 million

Net Sales+115

3,250+176+291

3,074

Performance in Previous Fiscal Year
(FY March 2006)

Revised Projections(FY March 2007)

Performance this Fiscal Year
(FY March 2007)

Operating Income

Unit: ¥100 million

192 (5.7%)( ): Operating Margin+12180 (5.5%)+17163 (5.3%)

Performance in Previous Fiscal Year
(FY March 2006)+29

Revised Projections(FY March 2007)4

Performance this Fiscal Year
(FY March 2007)

I-3. Details of Growth in Net Sales by Segment
Strong performance in the B FLET’S, FOMA, and NCC businesses
Front-loaded and completed major projects for government organizations(Regional government FTTH projects)
Unit: ¥100 million

Non-NTT+10.1%

NTT DoCoMo+9.0%+126

Non-NTT
+0.6%

3,365

3,074+1063,250• Unexpected growth in mobilecommunications projects for both
DoCoMo and NCC in the second half
• Front-loaded and completed
regional governments FTTH
• In IT Solutions, SI performed poorly(+9.5%)

Comparisons with Previous Fiscal Year• MNP effect (DoCoMo and NCC)
• Strong sales in B FLET’S

Performance inPrevious Fiscal Year
(FY March 2006)+115(+3.5%)

Comparisons with Projections+291+165+9NTT DoCoMo+5.6%

Performance(FY March 2007)

5Revised Projections(FY March 2007)

II-1. Medium-term Management Plan
This fiscal year the rolling of the medium-term management plan will be postponed.
The infrastructure business is in a period of transition this fiscal year.
In accordance with the medium-term management plan,
the following continued in the fiscal year ended March 31, 2007.
1. Prevent NTT business from contracting...net sales maintained at ¥190 billion(as of the release of interim financial statements on November 14, 2006)

2. Net sales goal of the non-NTT business is ¥160 billion for
the fiscal year ending March 31, 2009.
3. Maintain non-NTT business at 50% of net sales.
4. Strive to keep the operating margin above 6.0%.

Establish a medium-term management plan based on analysisof trends in the infrastructure business.
6II-2. Net Sales and Operating Income Performance and Mid-Term Plan Figures
Unit: ¥100 million
Establish another medium-term
management plan for next fiscal year.
[Business plan target figures for FY March 2008][Performance]
+35

3,365

3,400
3,450+291

+215
3,300

3,074

[Fiscal 2006 medium-term management plan figures]

+178

3,150

2,896
Net Sales(5.7%)(5.7%)

2,762

192(5.3%)(4.8%)

163

195+3+29200+25138
Operating Income(3.5%)[Business plan target figures for FY March 2008][Performance]

+134

185
170

(5.8%)(5.6%)(5.4%)+4098

FY March 2004

[Fiscal 2006 medium-term management plan figures]

FY March 2005

FY March 2006

FY March 2007

7

FY March 2008

FY March 2009

FY March 2010

II-3. Management Policies for the Fiscal Year Ending March 31, 2008
The management and operational environments are changing significantly.
Market Environment

Management Environment◊ Safety, quality, delivery, price◊ Information disclosure and compliance◊ Fourth quarter financial results◊ Internal controls system◊ CSR◊ The decline in the NTT Group’s infrastructure investment◊ Expansion of the NTT peripheral business◊ Growth in investment in infrastructure by NCCs
◊ Changes in the construction business environment◊ Growth in the IT solutions business◊ Sales ratio of products created by new businesses
reflected in management◊ Enhance productivity in every business◊ Remaining the company of choice for all stakeholders

Management policy for the fiscal year ending March 31, 2008
1. Make concrete progress in raising the level of stakeholder satisfaction.
2. Develop NTT Group peripheral business and restructure non-NTT business to achieve steady growth.
3. Increase productivity by raising the skill level of employees and COMSYS-style kaizen (Improvement).
8

II-4. Business Plan for the Fiscal Year Ending March 31, 2008
This is the inaugural year of operational improvement—a turning point!
Important measures(1) Strengthening the business front line
(COMSYS-style kaizen [improvement] takes hold)(2) Enhancing the integration of group operations(3) Strategic investments(kaizen [improvement], restructuring of internal systems, etc.)

I. Expansion of the scope of operations
and rising productivity
II. Reviewing the management ofconsolidated subsidiaries

Division of roles, evaluation methods, dividend policy, etc.

III. Securing and utilizing human resources

Hiring, training, evaluation, assignment, systems, etc.

FY March 2007
Performance

FY March 2008
Business Plan

Orders Received

3,341

Net Sales

3,365(Unit: ¥100 million)

ChangePercentage
Change3,350+9+0.3%3,400+35+1.0%

Operating Income (Margin)

192(5.7%)

195(5.7%)+3+1.6%

Recurring Profit (Margin)

211(6.3%)

215(6.3%)+4+1.9%Net Income (Margin)

123(3.7%)

125(3.7%)+2+1.6%

9

III-1. Growth Strategy for NTT Group Business

Achieve net sales in the NTT
Group business of over ¥190 billion.
Opening peripheral businesses
Training IP engineers
Establishing ubiquitous business
Expanding maintenance business10

III-1-1. Trends in NTT Group Business by Area, and Directions for the Future
B FLET’S

ADSL

ISDN
First generation (Analog)

Third generation (FOMA)

Second generation (PDC)Net Sales (Unit: ¥100 million)

MobileIncreased construction
for number portability
Rapid increase intower construction

AccessD60, D70

Conversion ofconventional
telephone lines
to optical cable
Removal ofconventional
telephone lines

Shield projects

CC BOX

B FLET’S
New nodes

Intra-office

Linking regional
relay stations
with optical cableCompletion ofdigitization
NTT’s mobilecommunications
network commences
operations

Privatizationof NTT

Introduction ofcomprehensive
project execution
systemInfrastructure
Reorganization ofNTT and establishmentof holding company

CHD management
integration

0’77

’80

’83

’86

’89

’92

’95

’98

’01

’04

’07
CHD consolidated figures

COMSYS non-consolidated figures

11’10

III-1-2. Market Trends in the DoCoMo Business
Reasons for substantially exceeding forecasts
in last fiscal year’s revised plan(Unit: %)100

Share of cumulative net increase 30.0%

Trends in NTT DoCoMo capital investments5.3%) 9,344
8,871 (+(-19.7%)
15,700
NTT DoCoMo
capital investments
7,500)%
1.05(+10,600
10,40080(-3Since immediately after
the commencement of MNP,
its share of the net increase
has been inadequate.

2.5KDDI (au+TU-KA)

%)

60

MNP

NTT DoCoMo

40

Quality problems emergedin the FOMA area.

Net increase inFOMA base stations(Stations)20A rapid (short construction period) method is needed.
• 800M overlay project• Frontloading of inbuilding mobile communication
system and base station projects

SoftBank0-20

Nippon COMSYS (non-consolidated)orders received

Fiscal 2006

06/4 56789101112 07/1 2

3783

928

749

[2006.3][2007.3][2008.3]

A high volume was completed.

[Source: NTT DoCoMo IR materials]

Market Trends
2006.32007.32008.32009.32010.32011.3[Total number of FOMA base stations]

NTT DoCoMo

30,40056,70046,100Introduction of HSDPA

WIMAX demonstration experimentIntroduction of a new frequency band (1.7G)
Introduction of the 800Mz overlay
3G

3.5G
Number portability
Entry of new firms into the field (EMOBILE Ltd.)12Super 3G
introduction project

4G introduction
project

III-2. Non-NTT Business Growth Strategy¥160 billion target for net sales
in the non-NTT business sector.
Expansion of the NCC business
Establishment of CHD as a project execution system

Expansion of the IT solutions business
Developing COMSYS brand products
Headhunting human resources

Developing a construction business model
Expanding operations through M&A and alliances13

III-2-1. Future Development of Non-NTT Business
CC Boxes and other generalcivil engineering projects
Net Sales (Unit: ¥100 million)

NCC infrastructure

1,233

800

1,490

1,358

1,600

Generating profits through selective
acceptance of orders

Construction
business

685

666
646

IT solutions business(Network integration,systems integration,maintenance)

Climbing into the black as
a business division

Up +400

Up

Non-NTT+

23%

13%

378

NCC business

435
370

332
307
260

Up +

Up +128%

1.4%
Expand share through strengthening ofproject execution system
Maintain top share of NCC business

Fiscal 2006 medium-term management plan0’96’98

Draft a new medium-term management
plan in the next fiscal year

CHD management
integration

NTT became aholding company

’00

’02

’04

’06

’07

’08

(H19.03)(H20.03)
CHD consolidated figures

COMSYS non-consolidated figures

14’09

2010

(H21.03)(H22.03)

III-2-2. Measures to Expand NCC BusinessMeasures to Increase Orders Received

Fixed communications
KDDI

Weight inorders received(30%)

Tokyo Electric Softbank

Mobile communications
auWill com(55%)

Softbank Mobile
e-Mobile

Manufacturers and vendors (15%)

Strengthening SANCOM Project System

FY March 2006

• Vigorous growth, centered on FTTH
• Strong response to 3G and area expansion• Expanding high-speed broadband services• Strong response to area growth nationwid• Focused response to next generation networks

FY March 2007

FY March 2008¥33.2 billion¥37.0 billion

FY March 2009

FY March 2010

[ Net Sales ]¥26.0 billion

It is urgent to bolster the nationwide marketingand project execution system.
• Transfer in personnel from Nippon COMSYS (shifting management resources)

Increased activity in alliances with vendors
Personnel training (Upgrading IP-related skills)
15

III-3. Our Thinking on CHD Growth

1. Maintaining NTT Group business!
Offset infrastructure decline withNTT service-related peripheral businesses.

2. We are looking to non-NTT businesses for growth!
The IT solutions business expands continuously
Expanding NCC business through reinforcementof the project execution system
Entering new areas of the construction business16

IV. Our Thinking on Revenue Growth

Maintain our operating margin at 6.0% or higher
through persistent improvement in productivity!
Ingraining COMSYS-style kaizen (improvement)(Expanding its presence)
Creating a layered structure for consolidated subsidiaries
Upgrading worker skill levels
Avoiding unprofitable projects through selective acceptance of orders
Reducing procurement costs(Establishing a Procurement Division)
Consolidation of joint operations through COMSYS Shared Services17

IV-1. Successes and Issues with COMSYS-Style Kaizen (Improvement)
Developing kaizen for the telecommunications construction industry
Construction sites generate added value for the company. “Location, actual materials, and reality” are the foundation.

Achieving 100% GrowthStreamlining

VisibilityFuture Issues[ 9TS optical fiber project ](Time required per project)• Real-time management• Data flow system

17.6
User

47%

red

uctionTargetAccess
9.3

2006.42006.8100%
growth2007.2

Achieving Reduction by Half

5SWarehouse Management System[ Total 5TS in stock ]
47
Stock

43%

reduct• Increased materials
handling efficiency• Introducing a warehousemanagement system

ion27(Unit: ¥ million)

2006.42006.82007.218

Reductionby half

Reflection inmanagement
indicators

IV-2. Improving Cost/Performance Ratios
through Consolidation of Joint Operations
Minimizing costs in joint indirect operations and focusing management resources in core businesses.
(Consolidation of joint operations in the entire COMSYS Group)

COMSYS Shared Services (CSS) was established in October 2003.
Consolidation of joint administrative services centering on Nippon COMSYS (Compensation, benefits, accounting)Nippon COMSYS Headquarters, all branches

Consolidation

From 215 to 152 (A reduction of 63 people)

10 consolidated subsidiaries

CHD
In April 2007 COMSYS Shared Services became a wholly-owned subsidiary of CHD.
Nippon COMSYS GroupSANCOM GroupTOSYS GroupThe seven companies of the SANCOM Group (32 employees)
Consolidation

The eight companies of the TOSYS Group (29 employees)* Expanding Group-consolidated operations

CSS

Achieving further
reductions in costs

real-estate management operation, staffing operation etc.
19

V. A Vision for CHD Growth

While maintaining NTT Group business,increase the weight of Non-NTT businessin net sales to 50% or higher.

Continue strategic investments
in operational reform.
20VI. Shareholder Returns and Acquisition of Treasury Stock

Dividends are stable, continuous, and linked to performance.
FY March 2007 (Actual)¥17

Cash Dividends per ShareFY March 2008 (Forecast)¥17Treasury Stock
Number of shares held
(As of March 31)
Total value of shares acquired(As of March 31)

4,789 thousand shares

Approximately 9,200
thousand shares (Forecast)

Approximately ¥5.0 billion

Approximately ¥10 billion (Forecast)

Scheduled for acquisition: Up to ¥5.0 billion(Up to 4,500 thousand shares)

Acquired: Approximately ¥1.2 billion(998 thousand shares)

Treasury Stock

Cash Dividends(Total shareholder return ratio)

Approximately ¥5.0 billion(4,789 thousand shares)

Approximately ¥3.8 billion(3,791 thousand shares)

Approximately ¥2.4 billion

Consolidated payout ratio
Approximately ¥2.4 billion
Approximately 20% Approximately 20%(Approximately 30%)

(Approximately 60%)

Applications of treasury stock: At present to be held as treasury stock, in the future to play a role in M&A.

21