Exeo Group, Inc. Integrated Report 2023

2023

Integrated ReportPurpose & Vision
Carbon-neutral
society

Global society where
diversity is appreciatedPurposeBring the benefits ofconnectivity to all

2030 Vision

Exeo Group believes access to infrastructure should
be universal.
Everyone everywhere deserves the basic support
functions to pursue happiness on their own terms.

Connecting our world - to all our tomorrows

This is the world we’re aiming for.
Working closely with our partners in a rapidly
evolving world, we’re betting on technology andSociety without poverty
or inequality

combined expertise, from hardware to software, tobring the benefits of connectivity to all.

Corporate philosophy

Cultivating technological capabilities,
seeking affluence, and contributing to society
The utmost ground for existence is the Group’s technological capabilities.
Throughout its existence, the Group has aimed to be a corporate group that always anticipates andpursues better technologies at the forefront of leading-edge technologies.
The technological capabilities cultivated through these efforts will help create more affluent living
environments for people.
The Group intends to be a valuable enterprise by contributing to society through activities in the
pursuit of state-of-the-art technologies.

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Exeo Group Integrated Report 2023

A smart society where
people live healthyand vibrant lives

Exeo Group Integrated Report 2023

2

Carbon-neutral
society

Turning unused timbermaterial into energy
Expanding the usage of renewable energy has become imperative since
the Japanese government set its goal of achieving carbon neutrality by 2050.
Utilizing technology developed in the design and construction of biomass
facilities, the Group is building its own woody biomass power plants
and woody biomass gasification power plants in two locations—one in Fukushima Prefecture and the other in Tochigi Prefecture.
These plants will generate a total of approximately 72 million kWhof energy per year.
We are aiming to have these plants begin commercial operations in 2024.

A smart society where
people live healthy and vibrant lives

Stable indoor
telecommunications
infrastructure for Indonesia
Data traffic has surged in Indonesia as the population continues to grow, but the country now faces issues withbuilding and improving its telecommunications environments in buildings such as offices and shopping malls.
Leveraging our expertise honed in the construction and operation of telecommunications infrastructure,
the Group operates indoor telecommunications infrastructure sharing in Indonesia. Local telecom carriers have
hailed this business as an efficient way to expand their service areas while keeping capital investments down.

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Exeo Group Integrated Report 2023

Exeo Group Integrated Report 2023

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Contents
Message fromthe President

Our value creation

Value creation strategy

7 Message from the President

13 History of our value creation

27 Medium-Term Management Planand progress

15 Value creation process
17 Value creation capitaland strengths

29 Message from the CFO
33 Group management

19 Our business

35 DX implementation

21 Materiality

37 Safety, quality & BCP

25 Financial andnon-financial highlights

39 Environmental management
41 Human resources strategy

Editorial policy
Referenced guidelines

Governance

Data section

49 Summaries by segment

61 Conversation on governance

77 Eleven-year major financial data

51 Telecom carriers business

65 Board of Directors

53 Urban infrastructure business

67 Corporate governance

79 Analysis of operating results
and financial status
83 Corporate data

55 Feature 1
Developing our renewableenergy business
57 System solutions business
59 Feature 2
Strengthening ourglobal business

External evaluation• International Integrated Reporting Framework (IFRS Foundation)

Nadeshiko Brand

D&I Award

Digital Transformation Certification• Company-Investor Dialogue for Collaborative Value Creation (Ministry of Economy, Trade and Industry of Japan)

The Group has been recognized by the Ministry of
Economy, Trade and Industry and the Tokyo Stock
Exchange for three consecutive years, withselection as a Nadeshiko Brand in 2020 and as a
Semi-Nadeshiko Brand in 2021 and 2022.

The Group was awarded the highest designation“Best Workplace for Diversity & Inclusion” in D&IAward 2022*1 which recognizes the efforts ofcompanies that strive toward diversity and inclusion.

Exeo Group was recognized as a certified DX (digitaltransformation) operator in March 2022 based on
the Digital Transformation Certification System of
the Ministry of Economy, Trade and Industry.

Top Hundred Telework Pioneer

PRIDE Index

Nikkei Smart Work

The Group was selected in fiscal 2018 as a “TopHundred Telework Pioneer,” one of thecompanies and organizations
recognized by the Ministry ofInternal Affairs andCommunications as having
achieved sufficient introduction
and utilization of telework.

The Group received silver
certification in the PRIDE Index
2022*2 that evaluates workplace
initiatives related to LGBTQ andother sexual minorities.

We achieved a 4 star rating in the 6th Nikkei
Smart Work Management Survey, which
recognizes companies that are utilizing humanresources to their maximum potential and thus
pioneering innovationand new markets bycreating diverse, flexible
work styles.

• GRI Sustainability Reporting Standards (Global Reporting Initiative)• SASB Standards (Sustainability Accounting Standards Board)

Scope of reporting

Strategy bybusiness field*1 Operated by JobRainbow

Period: April 2022 to March 2023 (includes some information relating to before or after the reporting period)
Scope: Exeo Group, Inc. and its consolidated subsidiaries (in some cases Exeo Group, Inc. only)

IssuedAugust 2023 (Next scheduled issue: August 2024)

Notice on
forward-looking
statements

This corporate report contains forward-looking statements such as the future business performance outlook of the Group. As
these statements are based on the information available at the time of the preparation of this report, the actual results may differ
materially from the content described or suggested therein due to various factors.
As this corporate report is not intended for the purpose of soliciting investment, all users of this report are advised to undertake
decisions concerning investment at their own discretion. The figures stated in units of ¥100 million and ¥1 million are rounded down.

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Exeo Group Integrated Report 2023

*2 Formulated by volunteer nonprofit
organization “work with Pride”

Exeo Group Integrated Report 2023

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Message from the President

Tetsuya Funabashi

Message fromthe President

Our value creation

Strategy bybusiness field

Value creation
strategy

Governance

Data section

Leveraging “connectivity” to boost
our capability to deliver solutions
for social issues seeking to further
boost the value of our businessPresident and CEO

Identifying our materiality

Deciding the key issues to focus on throughbroad-perspective considerations

Top
Message7

Exeo Group Integrated Report 2023

In May 2023, we announced our materiality, the key issues on which we should focus ourefforts as a corporate group. We have positioned “solutions to social issues” as ouruniversal mission in order to achieve the four visions for society advocated in our 2030
Vision announced in 2021. I believe that this clarification of our materiality will enable us toform a shared awareness within the Group of what kind of group we want to be and what
we should pursue to accomplish this mission, while giving our stakeholders a better
understanding as well.

Our materiality

Value creation

Solutions to social issues by“connectivity throughengineering”

Creating
workplace environments
in which diverse

human resources
can thrive

Fosteringa company culture thatgenerates

innovation

Foundationof value creation

Fair, highly transparent

governancep21-24 Materiality

Exeo Group Integrated Report 2023

8

Message from the President

In the materiality that we identified, we expressed the value that our Group creates as“connectivity through engineering that generates solutions to social issues.” In theapproximately 70 years since its founding, our Group has been leveraging the diverse
experience, knowledge, and skills accumulated through the business of building
telecommunications infrastructure to expand our business domain. The driving force behindthat is the benefits of connectivity linking businesses with businesses and people withpeople. “Connectivity” is also a keyword in our purpose which we announced in May
2022, to “Bring the benefits of connectivity to all,” and I believe that it expresses themeaning of our social existence.
What we particularly emphasized in identifying our materiality was to include andintegrate broad perspectives as much as possible. When determining these issues, wereferred to international guidelines such as the GRI Standards and SASB Standards, while
also organizing workshops for participation by Group companies and business divisions tohold successive discussions about what is important for our Group and society to be able togrow sustainably. Incorporating the opinions expressed by external stakeholders andoutside officers into these as well, we ultimately decided on the materiality at a meeting of
the Board of Directors.
Going forward, we plan to link each of these key issues to our actual business activities
and determine the specific items to work toward. At the same time, we will set KPIs for thequantifiable items and manage the progress of the related activities. Rather than keeping
these items fixed, we plan to revise them periodically to keep them up-to-date withchanges in the external environment and our business structure.

Creating a new company culture

Promoting transformation of the organizational culture
to generate innovation
We have broadly established three definitions to this materiality as the foundation for ourpractical value creation. These are “creating workplace environments in which diverse
human resources can thrive,” “fostering a company culture that generates innovation,”and “fair, highly transparent governance.” All three of these are of course important, butwhat we emphasize most as upper management in terms of creating new company cultureis the power to make innovation happen.
Our Group’s greatest strength lies in the various advanced technical capabilities that
we have cultivated through our experience in many fields, and in the integrity to never run
away or give up prematurely when facing difficulties. I am certain that the strong level oftrust which we have earned from our customers through these strengths is the very
foundation of our growth. However, along with technological capabilities and integrity, inorder to continue growing in the business environment of today that changes at blinding
speed, it will also be important to offer greater value to customers through ideas unlike any
before, and to move swiftly in entering unknown areas of business.
From this standpoint, I have been emphasizing the importance of innovation at every
opportunity since assuming the role of President and CEO. We have also made efforts
toward changing attitudes internally, such as establishing the new Innovation Promotion
Office that aims to create new business domains, and introducing employee learning
programs geared toward developing innovation personnel.
The important thing is for all Group employees to have the attitude that it’s OK to try

9Exeo Group Integrated Report 2023

Message fromthe President

Our value creation

Value creation
strategy

Strategy bybusiness field

Governanceworking on new products or services that nobody has ever heard of. Each business division
has launched efforts to challenge themselves in new fields, including expansion into therenewable energy field in the urban infrastructure business, and internationally entering therefurbishments*1 and digital trade platforms*2 businesses. These efforts have gradually
begun producing results.
However, I believe that we are still only halfway to the situation that I want us toreach. Progress has been limited particularly in our R&D strategy, for which there is still little
awareness internally and we still have not formed a team structure of taking it uponourselves to grow the seeds of new value creation. Because of this, in fiscal 2023, weorganized the R&D Task Force which has begun to engage in activities. With this team andthe aforementioned Innovation Development Unit working together, I would like to gather
the various seeds rolling around at workplaces in each Group company and department,
and grow them into new business creation.

Data section*1 Refurbishments
Services to repair and rework IT
devices such as computers andsmartphones which are either
used or considered defective,
and offer them as refurbishedproducts. Also, those refurbishedproducts themselves.
*2 Digital trade platforms
Services to provide businessflows from procurement topayments and finance throughdigitalization and easy access to
information and resources.

Progress in Medium-Term Management Plan

Growth strategies in the three business segments
are gradually advancing
In the Medium-Term Management Plan (FY2021-FY2025) we are currently working on, we
have declared numerical targets of ¥630.0 billion in net sales, ¥47.0 billion in operating
profit, ROE of 9.0% or higher, and ¥280 or higher in EPS to be achieved in fiscal 2025, thefinal year of the plan, while also clarifying the challenges we face in each of the threebusiness segments of telecom carriers, urban infrastructure, and system solutions, as wework to implement growth strategies.
Our ¥625.6 billion in orders received (up 5% year-on-year) and ¥627.6 billion in net
sales (up 6% year-on-year) in fiscal 2022, the second year of the Medium-Term
Management Plan, were both record high levels. Looking at business by segment, revenues
in the telecom carriers business decreased due to the effects of curtailed investments bymobile operators. However, revenues increased in the urban infrastructure business as we
steadily captured booming data center-related demand, and our system solutions businessalso recorded higher revenues due to expansion of IT managed services*3 including
operations and maintenance. In our global business (segment-wise, included in the systemsolutions business) which is a strategic field, we also achieved more growth than
anticipated through the effects of M&A and other factors.
On the other hand, profits declined significantly to ¥32.5 billion (down 23% year on year).
This was attributable to the effects of unprofitable projects that arose and surging costs ofmaterials, as well as effects that we did initially anticipate such as the completion of the
Project on Promoting Advanced Radio Environment Improvements, curtailed investments bymobile operators, and less construction for reception of 700 MHz. The unprofitable projects
were themselves unfortunate, but they occurred since more expenses arose than we
anticipated in taking on work in fields where we had little experience, so we see this in apositive light as something that will contribute to growth from next year onward.
In fiscal 2023, the business environment is expected to remain uncertain, including theongoing risks of delayed goods and surging materials costs, but we will focus on expanding
our urban infrastructure business and system solutions business while continuing to workon structural reforms primarily in our telecom carriers business. Based on this, we areforecasting our net sales to increase to ¥630.0 billion and our operating profit to increasep27-28
Medium-Term Management
Plan and progress*3 IT managed services
Business for round-the-clock,year-round monitoring
operations and supporting thefull life cycle of IT devices all theway through disposal

Exeo Group Integrated Report 2023

10

Message fromthe President

Message from the President

to ¥34.0 billion. We plan to achieve the net sales target in our Medium-Term Management
Plan two years early.

Medium- to long-term outlook

Expanding our business domain in each field and further increasing
profitability

p49-60Strategy by business field*4 Cable jointers
Power line connection engineers
with the expert knowledge andspecialized technologies tohandle high-voltage cables thatare essential for connecting gridsof electric power lines*5 Self-owned power lines
Electric power lines necessary forrenewable energy and offshore
wind power generation, installedby those other than general
power distribution companies

Many unanticipated circumstances such as the COVID-19 pandemic and the conflict in
Ukraine have arisen over the past few years, and these have had more than a small impact
on our business operations. We believe that unpredictable risk factors such as these willarise in the future. Therefore, we intend to fully verify and properly address every individual
risk while facing the issues in each business domain head-on and steadily implementing
strategies geared toward continuous growth.
Our highest priority issue in the telecom carriers business, our largest segment, is
improving profitability. Seeking to make ourselves more flexible to accommodate thechanging investment circumstances of telecom carriers, we worked on multi-skilling ourengineers and revamping our organizations and locations in each area. In July 2023, we
unified our organizational structure for mobile construction which had previously operated
separately for each carrier.
In the urban infrastructure business, integrating many types of engineering is an issue.
For example, in data center projects we will broaden our range of services beyond justelectrical equipment and into peripheral domains such as LAN/WAN and othertelecommunications environments, racks and servers, air conditioning, storage batteries,
and building maintenance, expanding our earnings by taking on the operations ofcustomers’ entire buildings. At the same time, we will accelerate our charge into new
domains such as renewable energy. Many new projects are already under way, including
construction of woody biomass power plants, professional development of cable jointers*4
to build self-owned power lines*5 for offshore wind power generation, joint tests for “solar
sharing” solar power generation on agricultural land, and our partnership with the NTT
Group for business in storage batteries.
In system solutions business, we will make further efforts at breaking away fromcontracted business by expanding our high value-added services that begin with consulting,Illustration of business portfolio changes
2020

27%
26%

2022

31%

2030

43%

47%
26%
Continuo

Systemsolutions

Telecom
carriers

us grow

Urban
infrastructurethSales ratios of the threesegments will be 1:1:1

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Exeo Group Integrated Report 2023

Our value creation

Value creation
strategy

Strategy bybusiness field

Governance

Data section

and by expanding our IT managed services and other recurring business. Reorganizations
including for Group companies have also produced effects, business earnings are steadily
increasing, and profit margin is also trending higher, but our absolute shortage ofdevelopment personnel is an issue. We are steadily acquiring and developing humanresources centered on newly established companies Exeo Digital Solutions, Inc. and Exeo
System Management, Inc. as the two core companies.
Globally, our refurbishments business for the utilization of IT devices and our indoor
infrastructure sharing business in Indonesia are steadily growing, while we are also getting
large-scale engineering projects for railroads and redevelopment, as we have now
transitioned from the upfront investment phase to the profit contribution phase. Our policy
is to continue actively investing for additional growth going forward as well. We will plot
our expansion with a close eye on the balance between expanded operations, including
capital demand and profit creation.
In 2030 Vision, which we announced two years ago, we set the goal of roughly equal
net sales (1:1:1) among all three of our segments in 2030. Transformation of our businessportfolio is accelerating thanks to healthy growth in urban infrastructure and systemsolutions business, and our net sales in fiscal 2022 broke down to 43% in telecom carriers,
26% in urban infrastructure, and 31% in system solutions. We expect our businessportfolio to get even closer to an even 1:1:1 in fiscal 2023, and we thus consider it possible
to achieve this goal even before 2030.

Message to stakeholders

Being a corporate group capable of greater contributions
toward solutions for wide-ranging social issues
The upheaval caused by the COVID-19 pandemic is finally settling down, and economic
activity is trending toward recovery all over the world. Although the aforementioned chaos
in supply chains and surging raw materials costs including energy prices are still ongoingissues, investments in energy and environmental fields geared toward a sustainable future
are increasing, and demand for upgrading aging social infrastructure is robust. As a result,
we now have even more opportunities to harness the strengths of our Group.
We believe that all the businesses we operate in a wide variety of domains are either
directly or indirectly linked with solutions to social issues. Through the further expansion
and evolution of our business domains, we feel that we will contribute toward various
issues concerning the entire planet as indicated in the SDGs. As a business operator in theconstruction industry, we are pursuing sustainable growth and increases in business value
by forming stronger, deeper “connections” not only with our customers but also with ourpartners cooperating with us in each business and with our colleagues who comprise ourGroup, with safety and security first and foremost. I look forward to our stakeholders’continued understanding and support for our Group.

August 2023

President and CEO

Exeo Group Integrated Report 2023

12

Message fromthe President

History of our value creation

Our heritage and our future:
Delivering value by connecting people¥
Changed the company
name to Kyowa Exeo
Corporation

627.6 billion

2018

C-Cube, Seibu Electric Industry,and Nippon Dentsu madeGroup companies

1998

Entered the network
integration business

1982

Entered the system
integration business

2021

1986

May 1954

Listed on the First Section of
the Tokyo Stock Exchange

Established Kyowa Densetsu Kaisha, Ltd.

1954

1960

1970

• Rapid economic growthSocietaltrendsChange the company
name to EXEO Group, Inc.

Entered theenvironment
business

1972

Data section

GovernanceNet sales in FY2022 (consolidated)

1991

The strength that we have honed since our establishment is the technological capability to build
high-quality information and communications infrastructure.
As we have adapted this strength according to the needs of the times, we have expanded intobusiness domains such as electrical, civil, and environmental infrastructure, network integration,and systems integration, while at the same time enriching people’s lives and contributing tosolutions for a variety of social issues.

Strategy bybusiness field

Value creation
strategy

Our value creation

1980

1990

2000

2010

2020

• Privatization of NTT• Liberalization of telecommunications• Emergence of mobile phones• Spread of the Internet• Increasing severity of climate change• Internet of Things

1954-

1980s

1990s

2000s

2010s

2020s

As Japan entered a period of rapid
economic growth, its telecommunications
network, particularly telephones, became
an indispensable aspect of its infrastructure.
We were responsible for the construction of
telecommunications facilities throughout
Japan, contributing to the development of
the telecommunications network.

With the liberalization of telecommunications, the telecommunications industry
entered a new era in which multiple
operators competed to provide better
services. We worked to diversify ourbusiness and meet the diverse needs oftelecommunications carriers.

In addition to the widespread use of cell
phones, there was growing demand forhigh-standard telecommunication networks
such as optical fiber communication anddigital communication. With this businessenvironment providing a tailwind, we
strengthened our construction capabilities
to handle large-scale projects.

Amid growing public concern about theenvironment, we expanded our services toprovide integrated construction, operation,and maintenance of waste treatment
facilities and biomass boilers. This enabled
us to take advantage of our technicalcapabilities, cultivated through telecommunications construction.

As businesses ramped up their efforts toadapt to the IoT era, characterized by the
spread of smartphones and tablets and theshift to cloud services, we pivoted to
become a total ICT solutions provider.

As the domestic market matured, we
expanded business with a base in Singapore
to seek further growth opportunities. We
are active in the three fields of urban
infrastructure including telecommunications
facilities, system solutions, and new
business.

Construction of electrical &telecommunications facilities for high-risebuildings
Integrated construction of cellular basestations
Began ensuring two days off per week
Implemented environment management
system (ISO 14001)

Developed a work management systemcompatible with i-mode
Built a broadband network
Implemented a compliance program
Implemented information security
management system (ISMS)

Construction of woody biomass boilers
Launched mega solar power generation
business operations
Appointed outside directors
Opened a training center for local
engineers in the Philippines

Development of a high-quality
telecommunication infrastructure network across Japan

Expansion of business domains
following liberalization of
telecommunications businessResponsible for the spread ofmobile communications andthe upgrading of communication networks

Expanding business in theenvironmental field to contribute to environmental issues

Shift to a total ICT solutions
providerExpanding global business torapidly growing overseas
markets

Materiality and related efforts
Construction of telecommunications
facilities for highways
Overhead laying of optical fiber cables
Implementing the shield tunneling methodin tunnel construction
Value creation

13

Basis of value creation

Exeo Group Integrated Report 2023

Construction of satellite communication
stations
Optical fiber construction
Cable television construction
Construction of microwave transmission lines

Local 5G
Offshore wind power generation business
Established Human Resources Development
Department
Established Innovation Development Unit

Exeo Group Integrated Report 2023

14

Message fromthe President

Value creation process

Our value creation

Value creation
strategy

Providing wide-ranging value to society
using engineering capabilities cultivatedfor almost seven decades
Capital and

INPUTS strengths1Formidable
financialstrength2

Proventechnologicalcapabilities

Social issues• Environmental
destruction, depletionof resources• Aging infrastructure &natural threats• Depopulation andhollowing-out due toa declining population

3

Utilizing DX
for safety &quality control

Changes in industry
and society• Rapid technologicalinnovation• Change from goods
to experiential
services• Changes in social
awareness

Corporatethat
4 culturevalues diversity

Businesses, products,

OUTPUTS & services

Telecom carriers business• Optical fiber cabling• Network facilities construction• Telecommunications civil engineering• Mobile base station installation & maintenance• Telecommunications & electricity facility projects

Urban infrastructure business• Electrical & air conditioning equipment projects• Social infrastructure construction• Urban civil engineering (pole-free, pipe
jacking, etc.)• Waste treatment plant construction &maintenance• Facilities related to renewable energy & smart
energySystem solutions business• Software development on consignment• Business support solutions• IT infrastructure architecture (servers, wirelessLAN, etc.)• Managed services (system operations &maintenance, etc.)• Global business (telecommunications, urban
infrastructure, various solutions)

Value creation capabilities (ESG)

5

Combined
capabilities of
the Group &our partners

p17-18 Value creation capitaland strengths

Management guidelines

15

Exeo Group Integrated Report 2023

• Safety, quality & BCP• Environment & energy• Human resources strategy• Group management• DX implementation

Strategy bybusiness field

Data section

Governance

Carbon-neutral
society

OUTCOMES Value provided
Enabling an advanced ICT society• Continued upgrading of broadband telecommunications• Building infrastructure that is resilient to natural disasters• Increasing the population coverageof communications areas• Developing next-generation infrastructure inunderpopulated areas

A smart society where
people live healthy &vibrant lives

Enabling a convenient urban lifestyle• Landscapes of globally comparable standards by
undergrounding overhead power lines• Expanding public investments for building national
resilience• Renewal of aging waste disposal plants• Advancing use of renewable & smart energy sources• Promoting “barrier-free” access for people with disabilities

Realizing a prosperous society
through digital technologies• Reforming industrial structures through the cloud, IoT,
big data, etc.
• Promoting more extensive communication• Solutions for advanced security• Providing the environment for work style reforms &productivity improvement• Providing ICT environments for high-quality education

2030 Vision

Connecting our world to all our tomorrows

Increasing our business value
while helping to achieve the SDGs
Global society
where diversity
is enjoyed• Organizational culture that prioritizes safety & quality• Addressing climate change through environmental
management• Corporate culture in which
diverse human resources thrive• Creating synergies through Group-wide collaboration• Strengthening our business infrastructure through DX

p19-20 Our business

Materiality
Medium-Term Management Plan (FY2021-FY2025)

p21-24 Materiality

Society without
poverty or inequalityp27-28 Medium-Term Management Plan and progress

Exeo Group Integrated Report 2023

16

Value creation capital and strengths

Message fromthe President

Our value creation

Value creation
strategy

Strategy bybusiness field

Governance

Data section

Bolstering our non-financial capital,
the source of our value creation
Capital and strengths

Financial capital1

Formidable financial
strength

For business improvement and strength

Our strength lies in having little interest-bearing debt and maintaining a high level ofshareholders’ equity to total assets. Based on this sturdy financial foundation, we invest
in growth through a three-pronged approach of M&A, innovation, and investing in DX.
Our policy for shareholder returns is to continue paying stable dividends with a target
DOE (dividend on equity) of 4.0% while buying back shares in a flexible manner.

• Generating Group-wide synergies to boost earning power• Focusing on investment in growth areas and on strengthening
businesses while maintaining appropriate balance between capitaland liabilities• Continuously providing stable shareholder returns

Our telecom carriers business provides a full range of services from planning and design
to construction, operation, and maintenance throughout Japan. Our urban infrastructurebusiness leverages electrical, civil engineering, and other technologies that we havedeveloped through telecommunications construction. Our system solutions businessdelivers solutions that address the diverse needs of our customers. We create value thatharnesses the technological capabilities of each Group company in these three businesses.

• Making our organizational operating mindset even more conducive
to innovation• Building internal systems for working on DX and R&D• Multi-skilling and better HR development that is up-to-date on newtechnology

In the areas of engineering solutions (telecom carriers, urban infrastructure) and systemsolutions in which we do business, the use of DX to strengthen and rationalize safety andquality control has been an important topic. We are actively utilizing DX to improve
operational efficiency and accuracy, such as by deploying AI in safety and quality
inspections for telecommunications construction work.

• Automating and improving the efficiency of business processes with
ServiceNow, RPA, etc.
• Using tools such as network cameras and AI to improve safety
and quality control• Enhancing security to operate business more securely

In this era of uncertainty and turbulent changes referred to as VUCA, it is essential toestablish work environments where diverse human resources such as mid-career hires
and female and international employees can harness their capabilities, in order to secureand develop human resources capable of navigating sudden technological innovations
and market changes. The Company promotes diversity and inclusion as a top
management priority while also making focused investments in training and other HR
development, and has been selected as a Nadeshiko Brand and Semi-Nadeshiko Brand
for three consecutive years starting in fiscal 2020.

• Implementing new work styles not dependent on location(normalizing telework)• Employee learning & development and assignments according toeach individual’s capabilities and career path
(Overseas trainees, developing transformation leaders, etc.)• Human resources development based on our shared Group-wide
Career Development System (CDP)

Our Group includes companies that operate community-based businesses, and we havestrong bases of operations in regions throughout Japan. In order to harness this strength
to the fullest, we are building systems that can flexibly utilize human resources within theGroup. We are also dedicating energy to establishing the foundations of good
relationships with partner companies working together with us on-site in order to provide
high-quality solutions to our customers.

• Horizontal rollouts of Group products and mutual support in sales
and construction• Standardized, more efficient business processes throughcommonized systems• Building stronger relationships with co-creation and collaboration
partner companies• Creating new projects in collaboration with universities
and technical colleges

Data & achievements

Shareholders’equity tototal assets

Dividends

11

52.5%

consecutive years ofdividend increases

p29-32 “Message from the CFO”

Intellectual capital

technological
2 Proven
capabilities
p35-36 “DX implementation”
p41-48 “Human resources strategy”

Manufacturing capital

DX for safety
3 Utilizing
and quality control

Number of ESPs*1
and VE*2 proposals

9,456*1 ESP: Exeo Solution Proposals*2 VE: Value Engineering

Nikkei Smart WorkManagement Survey

Holders of technology
related professional
qualifications(cumulative total)

28,836

Digital Transformation
Certification

p37-38 “Safety, quality & BCP”

Human capital

culture4 Corporatethat values diversity
p41-48 “Human resources strategy”

Social & relational capital

5

Combined capabilitiesof the Group andits partners

p33-34 “Group management”

17

Exeo Group Integrated Report 2023

Selected as
Nadeshiko Brand

Number of
consolidated
subsidiaries

PRIDE Index 2022

Number of consolidated
employees

135 16,772
Exeo Group Integrated Report 2023

18

Message fromthe President

Our business

Value creation
strategy

Our value creation

Strategy bybusiness field

Governance

Data section

Diverse businesses that support
the prosperity of society
SystemSolutions

Telecom
carriers

43%

31%

Telecom carriers
business
Net sales

FY2022

Sales composition
by business

Urban
Infrastructure

26%

Operatingprofit¥271.1 billion ¥17.3 billion

Urban Infrastructure
Business
Operatingprofit margin

6.4 %Net sales

Operatingprofit¥165.3 billion ¥10.2 billion

Operatingprofit margin

6.2 %System Solutions
Business
Net sales

Operatingprofit¥191.0 billion ¥4.8 billion

Operatingprofit margin

2.6 %Our business
Leveraging the track record we have established over theyears and our unsurpassed technological capabilities, we
provide high-quality, integrated services nationwide all in
one, from planning and design to construction, operations,and maintenance, for the telecommunications facilities of alltelecom carriers.

Our businessWe provide an integrated system from design andconstruction to maintenance, covering communication
infrastructure including cable television and railroad
communication facilities, electrical facilities for officebuildings and data centers, as well as a variety of
infrastructure works including pole-free facilities.

Our businessWe provide a full range of ICT-based solutions for theconstruction, maintenance, and operation of various
corporate systems, from communication network systems tocore systems for the manufacturing industry, as well as
educational and medical applications.

Main customers
Telecom carriers (cell phones, land lines)

Main customers
Cloud operators / general contractors / local government
agencies / railways, etc.

Main customers
IT business operators / education & medical / overseas
business operators, etc.

Examples of value provided to society
We support the infrastructure for an advanced informationsociety by building and operating stable power supply
systems and data centers that require advanced information
security management.

Examples of value provided to society
Through implementations of cloud services, we help tocreate office environments that improve work efficiency andallow people to work comfortably anywhere, anytime.

Targets for FY2030
Sales ratios of the three segments
will be 1:1:1

SystemSolutions

Telecom
carriers

FY2030

Sales composition
by business

Examples of value provided to society
We support telecommunications infrastructure throughconstruction of a variety of telecommunications facilities,
from optical fiber networks to servers and routers, including
5G—the next-generation standard in mobile
telecommunications.

(Target)Urban
Infrastructure
In order to establish solid business infrastructure thatcannot be swayed by economic and social circumstances,
we will further expand our business in urban infrastructureand system solutions and grow our sales in each segment toroughly equal proportions in fiscal 2030.

19

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20

Message fromthe President

Materiality

Strategy bybusiness field

Value creation
strategy

Our value creation

Data section

Governance

We identified our materiality as
business challenges
Sustainability in our Group management

Our materiality

Based on the concept of “Engineering for Fusion: Connecting
our world - to all our tomorrows,” we have made it ourGroup’s universal mission to deliver solutions to social
issues based on our “four visions for society” (p2).
To facilitate those efforts, the Group has establishedthe Sustainability Committee chaired by the President andCEO and also established the Sustainability Promotion
Office as a dedicated organization for sustainability. We
are working to deliver solutions to ongoing social issues
through our business, and to contribute toward achievinga sustainable society alongside the continuous growth of
our Group.

Our Group’s materiality is broadly comprised of fourmaterial topics, which are further divided into 17 material
subtopics. Going forward, we will prepare specific actions
for each of these, and plot our continuous growth bydelivering solutions to these issues through our businessactivities. We will also flexibly accommodate futurechanges in society by making periodical revisions to themateriality identified here.

Our materiality
E

Environment

S

Social

G Governance

The process to determine our materiality
To determine our materiality, we first referred tointernational standards such as the GRI Standards andidentified social issues. After that, we involved Group
employees in scoring and workshops to rate theimportance of issues along the two axes of “importance tostakeholders,” and “importance to our company.”
Based on the proposals created through these efforts,
we consulted with outside experts, outside directors, andoutside statutory auditors, and then reflected theiropinions in preparing the final proposal. Afterconsiderations in the Management Council and Board of
Directors, we made the official decision on May 19, 2023.

The process
STEP

1

STEP

2

STEP

3

STEP

4

Value creation

Identify social issues
Identified 52 issues after referencing the GRI Standards, SASB
Standards, etc.

Solving social issues
through “engineeringthat connects”

Value creation

Prioritize the issues

Solutions to social issues byPrioritized the issues through scoring by Group employees andholding workshops, then selecting the proposals“connectivity throughengineering”

Dialogues with internal and external stakeholders
Exchanged opinions with outside experts, consulted with outside
directors and statutory auditors, and prepared the final proposal

Decision by management
Official decision made by the Management Council and Boardof Directors

Materiality matrix (according to the results of “Scoring by Group employees” in Step 2)

E

Environment

S

SocialCreating
workplace environments
in which diverse

human resources

G Governancecan thrive

Achieving a carbon neutral society
Contributing to circular economies
S Building and maintaining
infrastructure that serves as thefoundation of society
S Contributions and building good
relationships in local communities
S Advancing digital transformationin construction
E
E

Fosteringa company culture thatgenerates

innovation

Foundationof value creation

Bolstering information security for both physical items and people

Importance to stakeholders

Ensuring thorough risk management and complianceFair, highly transparent

governance

Safety and health for
all working people

Respecting human rights

Respecting diversity and creating workplaces
conducive to working with vitality

Alliances and collaboration
with diverse partners

Achieving a carbon neutral society

Developing and promoting humanresources who drive value creation

Contributions and building good
relationships in local communities

Building and maintaining infrastructure thatserves as the foundation of society

Ensuring soundness and transparency
in governanceEncouraging quests into the unknown anddiligent technological self-improvement
Establishing brand value as a Group

Contributing to circular economies
Boosting productivity by advancing DX
Advancing digital transformation in construction

Importance to our company

Foundation of value creation

Creating workplaceenvironments in which
diverse human resources
can thrive

Fostering a company
culture that generates
innovation

Fair, highly transparent
governance

Developing and promoting humanresources who drive value creation
S Safety and health for all working
peopleS Respecting diversity and creating
workplaces conducive to working
with vitality
S Boosting productivity
by advancing DX

S

Encouraging quests into theunknown and diligent
technological self-improvement
S Establishing brand value as a GroupS Opening up new possibilities as a
global player
S Alliances and collaboration withdiverse partners

G Ensuring soundness andStransparency in governance

G Ensuring thorough risk management

and compliance

G Bolstering information security forSboth physical items and people
Respecting human rights

Note: “Opening up new possibilities as a global player” was added in Step 3, and is therefore not included in this chart.

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22

Message fromthe President

Materiality

Our value creation

Strategy bybusiness field

Value creation
strategy

Governance

Data section

ESG goals in our Medium-Term
Management Plan
Rationale for determining our materiality and examples of initiatives
Material subtopic

Why is it important?

Relevant page(s)Solving social issues through “engineering that connects”

ValuecreationE

Achieving a carbon neutral society

Operating an environment-related business that helps to reduce greenhousegas emissions and reducing the environmental impact of our own businessactivities are pressing social issues

p55-56“Developing our renewableenergy business”

E

Contributing to circular economies

Efforts toward waste reduction and efficient resource usage and recycling aresocial expectations on a global level

p58“Vision of society in 2030”

S

Building and maintaining
infrastructure that serves as thefoundation of society

Our Group’s mission is to continue providing the infrastructure that supports
industry and people’s lives, leveraging the high product quality and strength inbuilding information and communications infrastructure honed since ourestablishment

p51-52“Telecom carriers business”
p53-54“Urban infrastructure business”

S

Contributions and building good
relationships in local communities

Work to deliver solutions to environmental and social issues facing local
communities through our business, and help to energize and revitalize
communities

S

Advancing digital transformationin construction

Leverage DX to reform construction processes, improving operational
efficiency while providing new added value to make the construction industry
itself more appealing—

Our Group defines “practicing ESG management” as a key
challenge in our 2030 Vision. In the Medium-Term
Management Plan (FY2021-FY2025) currently in progress,
we also emphasize “strengthening our business
infrastructure” in parallel with the expansion of ourbusiness. Throughout the Group, we are working together
toward the six key topics of safety, quality & BCP,
environment & energy, human resources strategy, financial
strategy, Group management, and DX implementation.
Based on these business plans, we are fully engaged
in building robust business infrastructure by tackling

Medium-Term Management Plan (FY2021-FY2025) numerical targets
FY2020actualFY2022
actualPurchase of electricity fromrenewable energy sources

—

73.2%

100%

Company-managedsites of Exeo Group, Inc.

Rate of adoption of EVs and other
low-emission vehicles

91.4%

96.1%

100%

Passenger vehicles of
Exeo Group, Inc.

CO2 emissions (Scope 1 & 2)

86,583t-CO2

76,877t-CO2

10% reduction
from FY2020 level

Consolidated

Use of eco-friendly green
products

Green product usage rate

64.8%

78.0%

Year-on-yearincrease

Exeo Group, Inc.

Contribution to a resource
recycling-oriented society

Final disposal rate of industrial waste

5.6%

3.2%

50% reduction
from FY2020 level

Exeo Group, Inc.

Ensuring safety and quality
in business

Serious bodily injury and serious
equipment accidents

7

4

Aim for zero

Exeo Group, Inc. and its
five major subsidiaries*

20

27

1.5 times
compared to
FY2020Exeo Group, Inc.

34

42

—

Exeo Group, Inc. and its
five major subsidiaries*

307

328

25% increaseover FY2020

Exeo Group, Inc.

509

560

—

Exeo Group, Inc. and its
five major subsidiaries*

7.3%

17.5%

20%

Exeo Group, Inc.

64.0%

76.0%

80%

Exeo Group, Inc.

61.3%

71.5%

—

Exeo Group, Inc. and its
five major subsidiaries*

Challenges to address

p35-36“DX implementation”

Shift to renewable energy

Creating workplace environments in which diverse human resources can thrive
Developing and promoting humanresources who drive value creation

Achieve continuous growth by creating opportunities to develop employees’capabilities from a medium- to long-term perspective and working dedicatedly
on human resources development

p41-48“Human resources strategy”

S

Safety and health for all working
peopleStriving to eliminate occupational accidents and create workplace environments
where employees can work with both physical and mental health is the highest
priority in our business operations

p37-38“Safety, quality & BCP”

S

Respecting diversity and creating
workplaces conducive to working
with vitality

Harness the capabilities of individuals in fair workplaces where nobody is eversubjected to disadvantageous treatment due to their gender, nationality, raceor due to disabilities or life events such as childbirth or parenting

p41-48“Human resources strategy”

S

Boosting productivity by advancing
DX

Raise productivity by reforming work processes and shift resources tovalue-creating work to contribute to solutions for customers’ issues while
making business more efficient

p35-36“DX implementation”

SE

Environment

Initiatives toward
decarbonization, reductionof CO2 emissions

Encouraging quests into theunknown and diligent
technological self-improvement

Provide solutions to social issues such as climate change, aging infrastructure,and declining populations by using cutting-edge technologies to tackle newchallenges

S

Establishing brand value as a Group

Increase promotional communication internally and externally to boost ourbrand value as a Group and expand business opportunities while raising
employee engagement

p33-34“Group management”

S

Opening up new possibilities as a
global player

Contribute to society on a global level by pioneering means for solutions tomany types of social issues by solving the problems facing each country andcommunity

p59-60“Strengthening our global
business”

S

Alliances and collaboration withdiverse partners

Build and maintain partnerships based on trust to boost business efficiency,
expand new business, and grow together with our partners

—

S

p9
“Message from the President”

S

SocialG

Drive continued growth and increased business value for the Group throughefforts to ensure soundness and transparency in our business operations

G

Ensuring thorough risk
management and compliance

Accurately classifying and judging business-related risks and taking measures
to counter them while continuously working to observe laws, regulations, andcorporate ethics is the foundation of corporate management

G

Bolstering information security forboth physical items and people

Ensuring information security is fundamental to business operations andprerequisite for continuity in an information society where the entire world is
linked instantaneously

S

Respecting human rights

Respecting the basic rights of all people and not tolerating discrimination isthe basis of a company’s very existenceGp67-76“Corporate governance”

Promotion of diversity &inclusion
Number of female employees

Percentage of male employees
taking childcare leave

Fair, highly transparent governance
Ensuring soundness andtransparency in governance

KPI

Number of women in
management positions

Fostering a company culture that generates innovation
Foundationof valuecreation

important social problems and actively participating in therelated businesses, and by generating our own creativeideas and driving innovation. We position human resources
strategy as particularly important among these topics. As
we continue to engage the work styles of the new era, wewill acquire and develop the talent to execute new business.
In order to quantify these efforts and goals, we haveset environmental, social, and governance KPIs
respectively, as we work systematically and continuously toachieve the final targets for fiscal 2025 in theMedium-Term Management Plan.

GovernanceTargets for
FY2025

Scope of data

Driving work style reforms

Percentage of paid leave used

Achieving transparent
management (Ensured
diversity in the Board of
Directors and Board of
Statutory Auditors)

Number and percentage ofoutside directors

4/12

4/11

1/3 or more

Number and percentage ofoutside auditors

2/4

3/5

More than half

Serious violations of laws andregulations

0

0

Aim for zero

Consolidated

Serious information security incidents

00

Aim for zero

Consolidated

Rate of risk assessment
implementation for cases
involving significant business risks

100%

100%

100%

Consolidated

Ensuring strict compliance

Ensuring thorough risk
management

Exeo Group, Inc.

* Five major subsidiaries: C-Cube, Seibu Electric Industry, Nippon Dentsu, Daiwa Densetsu, and Exeo Tech

23

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24

Message fromthe President

Financial and non-financial highlights

Financial625.6 billion 5

Net sales

Change year on year

+

¥

%

Orders received (¥Billion)

627.6 billion 6

631.0
556.3

+

300.4

324.1

¥

%

595.3

32.5 billion 23

573.3

594.8

−

627.6

300.9

287.4

−

Profit attributable to owners of parent (¥Billion)

42.3

40.2

32.5

31.1

18.3

27.7

20.8

18.4

24.1
14.9

0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(FY)

ROE

7.3% 2.1−

ROE (%)

0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(FY)

ROA

4.0% 1.3

Change year on year−

Shareholders’ equity (¥Billion)

263.8

ROA (%)

266.4

285.6

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(FY)

Earnings per share

Change year on year

points¥pointsTotal assets (¥Billion)

204.98 18−535.6

303.3 303.1

17.9
12.2

15.6

13.7

12.1

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

¥

%

102 6
+

%

Dividend per share (¥)

Payout ratio (%)

96
390.25

146.2

150.7

157.8

217.0

228.4

238.3

243.4

70

261.3

217.3380

189.42147.75123.83 125.90

145.24204.98139.75242013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(FY)

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(FY)

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Non-financial

CO2 emissions (Scope 1 & 2)

16,772 676,877t-CO 3.7

Change year on year

+

2

%

Number of consolidated subsidiaries (Companies)

13,151

7,903

8,074

13,88238

46

50

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(FY)

15,847

Exeo Group Integrated Report 2023−

1.73% 0.11

Percentage of annual paid leave taken

71.5% 9.4

Change year on year+%

CO2 emissions (t-CO2)

16,772

Change year on year

points+pointsExeo Group, Inc. (%)

Exeo Group, Inc. (%)

Consolidated (%)

Exeo Group, Inc. and five major subsidiaries* (%)

86,583

14,37479,872

76,877

Scope 2

26,18318,184

14,152

Scope 160,40061,68862,725

2020

2021

2022

8,331

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

25

Ratio of women in managerial positions

Change year on year

Number of consolidated employees (People)

7,988

(FY)

32

* Five major subsidiaries: C-Cube, Seibu Electric Industry, Nippon Dentsu, Daiwa Densetsu, and Exeo Tech

Number of consolidated employees

7,553

102

82

444.9
250.64

135.3

(FY)

Change year on year

577.9

491.5

175.5

22.2

Dividend per share

Change year on year

Earnings per share (¥)

416.4

%

25.6
20.7

312.6

298.8

22.2 billion 20

Change year on year

36.6
31.7

423.7
318.5

¥

%

Operating profit margin (%)

524.5

325.0

Profit attributable to owners of parent

Change year on year

Operating profit (¥Billion)

700000
625.6

424.3
301.4

Operating profit

Change year on year

Net sales (¥Billion)

700000304.2

Data section

Governance

Scope of data collection: Exeo Group, Inc. and its consolidated subsidiaries

Orders received¥

Strategy bybusiness field

Value creation
strategy

Our value creation

(FY)

(FY)

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(FY)

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(FY)

Exeo Group Integrated Report 2023

26

Message fromthe President

Medium-Term Management Plan and progress

Dedicated to boosting profit margin andstrengthening business infrastructure toachieve our plan for fiscal 2025
In Medium-Term Management Plan (FY2021-FY2025), we
have set numerical targets which we are working toward
after clarifying our aims in each of the three businesssegments of telecom carriers, urban infrastructure, andsystem solutions. We made steady progress in fiscal 2022
in our urban infrastructure and system solutions businesses,
both of which we have positioned as growth fields,
resulting in record high net sales of ¥627.6 billion—justshy of our medium term target of ¥630.0 billion.
The challenge going forward will be profitability. We
will accelerate our efforts to achieve our profit plan by
improving productivity in existing fields, shifting resources
to growth fields, and going to even greater lengths tomaximize synergies among Group companies. Concurrently,
we will actively make future-oriented investments inhuman resource development and R&D to improve thecontinuity of our business while producing a steady streamof solutions to social issues—which we consider to be theuniversal mission of our Group.

Theme• Achieving a stable financial
base

Financialstrategy

Telecom
carriers

Urban
infrastructure

Net sales

¥

627.6

billion¥Operatingprofit32.5

billion(Operating profit margin 5.2%)

ROE

7.3

EPS

¥

Systemsolutions• Stable and flexible
shareholder returns%

FY2025 (Target)

¥

630.0

billion¥• Flexible and agile Groupmanagement

Groupmanagement

47.0

billion

9.0% or more

205 ¥280

DX
implementation

Developing new fields /Advancing digitaltransformation inconstruction• Entering the environment andenergy businesses• Strengthening the infrastructure
renovation business• Actively utilizing AI, BIM/CIM, etc.
• Pursuing new technologies,
advancing the DX of customers• Developing XaaS engineers• Offshoring, improving development
processes• Practiced diligent business
management post-M&A• Created value by providing
new solutions• Advanced digitaltransformation (DX) in
construction through AI,
BIM/CIM, etc.
• Responding to changes in thebusiness environment

or more• Fostering anorganization/culture that
supports safety and quality• Addressed new business risks• Active contribution toenvironment-related business

Tactical approaches• Developing many skills• Digital transformation, offshoring• Integrating operations• Synergies utilizing theGroup’s strengths• Increased productivity by
improving business processes(Operating profit margin 7.5%)

Safety,quality& BCP

Constructing 5G
infrastructure /Improve profitability
and productivity

Focusing on highvalue-added
business / Expanding
recurring business• Active investment for growth

Performance-related achievements and targets
FY2022 (Achievements)

Becoming a partner thatbuilds optimalcommunications
environments forcustomers• Promotion of the use ofrenewable energy

Environment& energy• Reducing the Company’s CO2
emissions• Promoting energy-saving
activities• Enhancing adaptability toenable human resources toadapt to changes in thebusiness environment

Providing engineering
to enhance resilience

Evolving into a solution
providerValue creation
strategy

Strategy bybusiness field

Governance

Data section

Strengthening our business infrastructure

Strategy by segment
Our aims

Our value creation• Increasing labor productivity

Human
resources
strategy• Developing a culture where
diverse values are respected• Responding to new ways ofworking in the new normal
created by the COVID-19
pandemic• Raised employee engagement

Key achievements in FY2022

Relevant page (s)• Conducted approximately ¥30.0 billion in M&A
cumulative over three years starting in fiscal 2021
• Invested heavily in human resources and DX, which
are our business infrastructure• Raised the DOE of our dividend policy from 3.5% to
4.0%. Planning a dividend increase for the twelve
consecutive years (FY2023)• Bought back treasury shares in a flexible manner (inFY2022: approx. ¥7.5 billion)

p29-32“Message fromthe CFO”• Reorganized Group companies in the systemsolutions field by function• Strengthened Group-wide collaboration, including
functional reorganization by area
• Increased the joint procurement capabilities of theGroup• Made business processes more efficient by
establishing common systems• Promoted implementation of Group standardized
network & security infrastructure

p33-34“Groupmanagement”• Established digital implementation project teams
and assigned DX Implementation Leaders in eachorganization• Bolstered horizontal roll-outs of DX implementation
cases• Established training systems for developing DX
human resources

p35-36“DX
implementation”• Used network cameras to improve the efficiency ofcommunication with worksites and better support
them• Introduced safety equipment and other checking
functions through the use of AI• Conducted practical training for preparedness
against cyberattacks

p37-38“Safety, quality& BCP”• Built our own woody biomass power plants (twolocations) generating approximately 72 million kWhof power per year
• Participated in testing for solar power generation
facilities on agricultural land (solar sharing)• Switched to electricity from renewable sources atour sites (in FY2022: 73.2%)• Promoted switching to EVs and other low-emission
vehicles (in FY2022, for passenger vehicles: 96.1%)• Introduced & implemented a transformation leader
development program• Introduced & implemented an overseas trainee system• Worked on multi-skilling & reskilling employees• Earned outside recognition & awards for efforts
toward diversity & inclusion (in FY2022: awarded
the PRIDE Index silver certification, and the highest
designation of the D&I Award “Best Workplace forDiversity & Inclusion”• Established work environments that make it easierfor employees to thrive, normalizing remote work
while also introducing a flextime system, remote
work location system, etc.

p39-40“Environmental
management”
p55-56“Developing ourrenewable energy
business”

p41-48“Human resources
strategy”

p49-60 “Strategy by business field”

27

Exeo Group Integrated Report 2023

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28

Message fromthe President

Message from the CFO

Emphasizing capitalefficiency while
implementing financial
strategy to maximize
business value
Shigeki Hayashi
General Manager of Accounts & Finance Division,
Director and Operating Officer, CFO

Summary of fiscal 2022 performance
In my first year as CFO, in fiscal 2022, we recorded ¥627.6
billion in net sales, up 6% year-on-year, and a construction
balance forward of ¥625.6 billion, up 5% year-on-year,
both of which were new record highs as we steadily built
on our upward trajectory. On the other hand, operating
profit fell 23% year-on-year to ¥32.5 billion and profit
attributable to owners of parent fell 20% year-on-year to¥22.2 billion, both representing significant decreases.
This year we announced our first plan with a profit
decrease in 13 years, factoring in decreases in demand

Net sales

Orders received
Orders received (¥Billion)

Operating profit &operating profit margin

Net sales (¥Billion)

Our value creationthat were anticipated at the start of the fiscal year
including the completion of the advanced radio business,curtailed investments by mobile carriers, and lessconstruction for reception of 700 MHz. However, theextent of the decline in profit was larger than we
anticipated due to factors such as unprofitable projects
that arose in the urban infrastructure and system solutions
businesses, and surging prices for raw materials andenergy that rose higher than anticipated during the year.
Thus, the overall performance results werenumerically unfavorable, but I am confident that we wereable to continue steadily advancing our initiatives in termsof financial strategy. Effects emerged from the M&A wehave been actively pursuing in the urban infrastructure andsystem solutions businesses which we positioned as
growth fields, and we were able to steadily grow sales.
Excluding the aforementioned unprofitable projects andsurging costs of parts and materials, I assess that profits inthese two segments are trending upward. In our global
business which is included in the system solutions
segment, net sales more than doubled year-on-year, andin terms of profitability, I consider us to have transitioned
from the upfront investment phase to the harvesting phase.

Increasing ROE
Fiscal 2023 is third year of our Medium-Term Management
Plan, representing the halfway point. This plan sets
numerical targets of ¥630.0 billion in net sales, ¥47.0
billion in operating profit (7.5% or higher profit margin),

Earnings per share (¥)
ROE (%)

Operating profit margin (%)

627.6

625.6
631.0

595.3

620.0
573.3

594.8

Strategy bybusiness field

Data section

Governanceand ROE of 9.0% or higher for fiscal 2025. Since
achievement of this net sales target is already in reachpartly as a result of effects produced by our M&A
transactions to this point, the focus will now be on how
close we can get to each of our targets for operating
profit, profit margin, and investment efficiency (ROE).
I particularly consider ROE to be an important metric forbusiness valuation, and I recognize that we must endeavor
to manage with a greater awareness of capital efficiency.
I consider growing profits, in other words boostingearning power, to be the basis for increasing ROE. One of
the keys to that is to accelerate the transformation of ourbusiness portfolio. We need to further increase theproportion of our overall sales comprised by the two
growth field business segments, while at the same timeincreasing profitability on a per-business basis. In terms offinance, our intention is to continue actively investing in
growth in both the urban infrastructure and systemsolutions segments, while shifting our business resources
including human resources.
Another key is raising the combined capabilities of theGroup. I believe there is plenty of room for growth in thisarea. We have been implementing measures to strengthen
our Group operations by transforming our organizations,but going forward we will aim to further eliminate
inefficiency and waste in management while linking thisalso with initiatives such as DX implementation to becomea leaner organization that generates more profit throughless effort.

Measures to increase ROE

Earnings per share & ROE

Operating profit (¥Billion)

Value creation
strategy630.0

More orders &net sales

Bolster & expand existing business
Shift personnel to growth fields & invest in human resources

Increase grossprofit margin

Consolidate operations and maximize DX usage
Secure stable earnings by bolstering recurring business

Reduce SG&A

Drastic operational overhauls and reforms
Maximum use of internal Group resources beyond the scope of individual companies

630.0

Profit

250

42.3
36.6

ROE

280

47.0
217

32.5 34.0

205

Sell unnecessary Make maximum use of real estate holdings and swiftly sell unnecessary assets
assetsContinuously scale down cross-shareholdings

Earnings per share

224

M&A

Shareholders’ equity

M&A emphasizing effects of investment and profitability

Utilize interest-bearing debt
Shareholders’equity2020 2021 2022 2023
(Plan)

29

Exeo Group Integrated Report 2023

(FY)

2020 2021 2022 2023
(Plan)

2025(Target)(FY)

2020 2021 2022 2023
(Plan)

2025(Target)(FY)

2020 2021 2022 2023
(Plan)

2025(Target)(FY)

Consecutive dividend increases based on policy of 4.0% DOE
Ongoing purchases of treasury shares

Exeo Group Integrated Report 2023

30

Message fromthe President

Message from the CFO

M&A strategy
M&A is extremely important to expanding our earnings
and boosting our earning power. I would say that our
M&A in recent years has been proceeding well on thewhole as we also utilize lessons learned from past failures.
Multiple companies acquired through past M&A also
underpinned our overall performance in fiscal 2022. I also
want the finance department to continue their involvement
in M&A transactions form the initial due diligence stage andthoroughly check the overall flow, including everything up
to the monitoring of post-merger integration.
Our top candidates for M&A in the urban infrastructurebusiness are in the fields of electrical, environment, andrenewable energy. Demand is currently quite robust in thismarket, including for data centers, and we lost out on
more than a few opportunities in fiscal 2022 due to ourinability to fully accommodate this demand. From fiscal
2023 onward, I believe that we can definitely not only
increase our sales but also boost our business profitability
by expanding our ranks in this field through M&A andcapturing a solid portion of the growing demand.
Our profit margin in the system solutions business isstill currently low, but we expect it to rise each year going
forward as our upfront investments bear fruit. M&A
candidates in that business are companies that cancontribute to strengthening our managed services. Like
Telistar Solutions of Singapore which was added to ourGroup in fiscal 2022, we will bring aboard even morecompanies with strength in this field and channel theiradditions into stable business profitability growth andhigher ROE for the Group as a whole.
We are conscious not to inflate shareholders’ equity,
the denominator of ROE, any more than necessary. Whenneeding to raise additional funds for large-scale M&A, ourpolicy is to invest in growth by flexibly utilizing outside
capital such as interest-bearing debt, while being mindful
to maintain our current rating.

Cash allocation policy
In my opinion, the biggest responsibility of a financeprofessional is to effectively allocate capital that is raisedfor the purposes of business growth and increasing
business value, as well as the cash that a company has
earned—in other words, cash allocation. In the current
medium-term plan, we have announced our cash
allocation policy for the cumulative five years of2021-2025. Funded primarily by operating cash flow andinterest-bearing debt, we are planning for upwards of¥120.0 billion overall in growth investments and roughly¥100.0 billion in shareholder returns over the five years.
Included in the growth investments is around ¥70.0
billion that we plan to invest in building foundations for
growth, including investments in DX which forms business
infrastructure, and real estate investments which are essential
for business. Going forward, our policy is to increase funds
allocated to human resources and R&D in particular.
We are planning for at least ¥50.0 billion in M&A
investments over the five years, of which we have invested• Strategically identify M&A targets to attain an even 1:1:1 business portfolio• Select investments with consideration for the resulting effects and profitability, and build
systems to monitor them
• Rebuild our asset portfolio by selling cross-shareholdings

To our shareholders and investors
We regard the return of profits to our shareholders as oneof the most important challenges for management. We
have had a basic policy to pay stable, continuous shareholder
dividends in light of our business performance trajectory,financial standing, future business outlook, and otherfactors, but starting in fiscal 2023 we raised our dividends
on equity (DOE) from the previous level of 3.5% to 4.0%.
We reached that decision because five years had passed

Interest-bearing
debt¥45.0 billion +• Maintain financial soundness• Raising funds with consideration
for ESG• Reduce WACC through low-costprocurement

100.0

Main investment results in fiscal 2022
Business field

Strategy

Urban infrastructure• Bolster our energy business• Develop our renovations business• Expand business scale• Iseki Poly-Tech• Sanetsu Corporation• Accelerate managed services• Expand our refurbishments business• Acquire trailblazing technologies• Transition to regional bases/utilize
offshoring• Sanden System Engineering
Corporation*• Procurri Corporation Ltd.
• Telistar Solutions Pte Ltd.

System solutions(including global)* Changed name to Exeo Core Innovation Co., Ltd.

31

Exeo Group Integrated Report 2023

• Build foundations for growth suchas DX
Anticipating around ¥70.0 billion
over the five years• Continue growth through M&A
Upward of ¥50.0 billion
domestically & overseas• Actively allocate cash to humanresources/R&D

Growthinvestment

Sell assets¥120.0 billion +EBITDA

Shareholder
returns¥225.0 billion¥100.0 billion(¥45.0 billion / year)

Operating profit
margin (%)

Data section

GovernanceCash allocation policy (cumulative FY2021-FY2025)

Performance of subsidiaries acquired
via M&A
Net sales (¥Billion)

Strategy bybusiness field

since the last time we raised the level of our DOE, our sales
levels have recently been increasing, and in terms of profit,
we expect to revert to increased profit in fiscal 2023. Thus
we plan to pay a shareholder dividend of ¥120 per sharein fiscal 2023, an increase of ¥18 from the previous period.
As part of our of returns to shareholders, we will also
continue conducting share buybacks. In fiscal 2022, wepurchased a total of around ¥7.5 billion in treasury shares,
and our policy is to also flexibly conduct more buybacks
going forward while comprehensively taking capitalefficiency and the business environment into consideration.
In closing, I would like to mention that I assumed therole of director by resolution in the Board of Directors
meeting in June 2023. Since I will now have more
opportunities to engage in direct discussions with outside
directors in the Board, in addition to serving my role as
CFO, I am also determined to take a broader view overmovements throughout the Group. I will do my best to
engage in constructive discussions that lead to increases inbusiness value. I look forward to the continued support ofour shareholders, investors, and all other stakeholders.

around ¥30.0 billion to this point. The size of ourremaining budget is therefore around ¥20.0 billion. M&A
is in some ways has a life of its own, and we believe there
will be some fluctuations over the remaining two and ahalf years, with some doing better than planned andothers worse. From increases in our EBITDA to increases in
our interest-bearing debt, the progress of our M&A canhave accompanying impacts that are both positive andnegative. Therefore, as a finance professional, I want tomake decisions flexibly with an eye on overall balance.

• Scale down cross-shareholdings• Swiftly sell unnecessary real estate

Basic policy on M&A strategies

Value creation
strategy

Our value creation• Generate cash flow throughsteady growth• Achieve returns that exceed thecost of capital• Consecutive dividend increases
with dividends at 4.0% DOE• Ongoing purchases of treasury
shares• Further improve capital efficiency

Various tax
payments, etc.
Generate cash

5.0

Cash allocation

Annual dividend

FY2022 investments

12 consecutive years ofdividend increases (planned)

Dividend amount (¥)

70

0

20

22

24

2011

2012

2013

32

38

46

50

2016

2017

120
80

82

2019

2020

96

102

2021

2022

0
2019

2020

2021

2022

2023

(FY)

(plan)

Note: Totals of subsidiaries added to the Group from fiscal
2018 onward.
However, these figures exclude C-Cube, Seibu
Electric Industry, and Nippon Dentsu.

2014

2015

2018

2023

(FY)

(plan)

Exeo Group Integrated Report 2023

32

Message fromthe PresidentGroup management

Group management
Supporting productivity improvements at eachcompany in multifaceted ways to maximize
the business value of the Group as a whole
Yuichi Koyama
Director and Managing and Operating Officer, General Manager ofGroup Business Promotion Division

Mission of the Group Business
Promotion Division
The number of consolidated subsidiaries in the Group
totaled 135 (76 domestic, 59 overseas) as of March 2023,
generating 58% of our consolidated operating profit. The
mission of the Group Business Promotion Division is to
apply the appropriate governance for this group ofcompanies while finding ways to maximize growth andearnings for the Group as a whole and achieve our
maximum value. To accomplish this, the division isbolstering its support for Group companies together withbusiness units and other staff organizations based on thethree focal points of (1) creating business synergies
through cooperation and collaboration, (2) optimizing
business resources and making them more efficient, and(3) handling changes in the environment and business risks
appropriately, while at the same time leveraging thestrengths and characteristics of each Group company.
Specifically, this means supporting the formulationand execution of each company’s business strategy
according to directives established by congregating eachcompany’s senior management and business unit leaders
together under one roof, learning about their businesscircumstances and challenges, and building consensus
about their business strategies. In addition to basic support
for management such as finance, business management,
human resources, and DX, we are also working toward
effective distribution of the Group’s business resources,
promoting shifts to growth fields, and creating newsynergies based on the rapid changes in social
requirements such as ESG and the business environment inrecent times. At the same time, we are also learning about
new business risks such as cyber risk and doing what we
can to mitigate them.

33

Exeo Group Integrated Report 2023

Integrating & reorganizing Group companies
In order to harness the maximum potential of thecompanies newly added to the Group, it will be essential
to realize an efficient business scale, multi-skill and utilize
resources to the fullest, and increase our presence. To
accomplish that optimally, we are integrating andreorganizing our Group companies.
In fiscal 2022, we reorganized existing subsidiaries
along with companies we had acquired through M&A andestablished two core companies to accommodate ourcustomers’ diversifying needs in system solutions. One is
Exeo Digital Solutions, Inc. which plays a central role in thesystem development function. The other is Exeo System
Management, Inc. which plays a central role in system
operations and maintenance along with customer support.
In the telecom carriers business, we integrated Group
companies in the Hokkaido and Tohoku areas into one
company in each area in fiscal 2021, and integrated
existing subsidiaries in the Kansai, Chugoku, and Hokuriku
areas into one company in fiscal 2022 in order tostrengthen local collaboration in both the access andmobile businesses. In security and general civilengineering, we also integrated companies into one single
company that operates nationwide.

Support for generating synergies andreforming business structures
We are also engaged in efforts to help generate synergies
among Group companies and reform their businessstructures. In sales, we engage in sales activities with
consulting teams that play a leading role in making
proposals to horizontally roll out products of Group
companies. In construction, we have pooled ourtechnological capabilities and resources in efforts tohandle things within the Group in order to compensate forbusiness fluctuations in particular areas.

Value creation
strategy

Our value creation

Taking into consideration enhancement of cybersecurity as well as soaring prices for devices, we also
revamped our procurement supply chain for devices suchas computers and smartphones which we had beenprocuring externally. Examples include utilizing therefurbished devices sold by Group company Arco Japanand providing an internally-offered subscription service
that combines the kitting and maintenance capabilities of
Exeo System Management, Inc. These efforts havebolstered our security while also containing our cash
outlays by doing business internally.
To stay ahead of changes in the businessenvironment, we are also aggressively working on
reskilling efforts between our Group companies. Doing so
is enabling us to flexibly shift human resources to growthfields and improve productivity by boosting motivation.

Support for making business processes
more efficient
Making business processes at Group companies more
efficient through digital technology is one of the initiatives
we are focusing on.
In outsourcing agreements with many of our partnercompanies, there are situations where business is still
being done through physical paper and stamping
processes. We are revising those processes and systems,
and in addition to going paperless and stampless, we arealso advancing in digitalization through AI. This is
improving our operational efficiency while reducing costs.

Strategy bybusiness field

Data section

GovernanceFor better governance, we are actively implementing
and operating data-based digital workflows for preparing
and signing off on documents and giving approvals. In
addition to shortening time taken to prepare and sign off
on documents and improving operational efficiency, this isalso leading to process improvements utilizing accumulated data, and swifter decision-making.

Standardizing our IT environments & businessTo standardize our IT environments and business, we are
installing and integrating our own standard Group-wide
network and security infrastructure. Having a unified
security infrastructure enables us to fortify our cybersecurity while reducing operations costs. Throughcentralized monitoring, we are also now able to swiftly
detect and respond to security incidents, increasing theresilience of the Group as a whole.
Accordingly, we are working to equip more common
core IT systems throughout the Group. We expect this toenable smoother coordination between systems and easier
sharing and utilization of resources and information
belonging to management.
Rules pertaining to employees and finance are also
subjects of our standardization efforts. In addition to
improving compliance and management systems, weare committed to these efforts with the idea that they
will also boost the motivation of employees at ourGroup companies.

Group companies that were reorganized & integrated since April 2022
Company

EstablishedPrevious company nameBusiness activities

July 2022

Kyoei Densetsu Kogyo Corp.
Sankyo-Techno Inc.

Design, construction, maintenance, and the related information
processing and sales of equipment and other products fortelecommunications, electrical, and civil engineering, etc.

KYOWA SECURITY SYSTEM CORPORATION

August 2022

KYOWA SECURITY SYSTEMCORPORATION
Kyokuyo Co., Ltd.

Security, temp staffing

Denken Co.,Ltd.

April 2023

Nagasaki Denken Industrial Co.,Ltd.
Nishi Kyushu Denken Co., Ltd.

Information and communication, public and private demand (electricalengineering), sales and construction of solar power generation
systems, general civil engineering, etc.

EXEO Infra CO., LTD.

April 2023

EXEO Infra CO., LTD.
Infra Techno Co., Ltd.

Telecommunications civil engineering, mobile communications
construction

Exeo Engineering West Japan Co.,Ltd.

Companies added to the Group since April 2022
Company

Added

Business domains

Business activities

JUST Engineering Co., Ltd.

April 2022

Telecom carriers
System solutions

Hardware, software, infrastructure services, etc.

ISEKI Poly-Tech, Inc.

April 2022

Urban infrastructure

Construction equipment, (manufacturing, sales, and rentals of boringmachines used in pipe jacking), construction work (pipe jacking, pipe
roofing, shielding, etc.)

Sanetsu Corporation

October 2022

Urban infrastructure

Design, construction, tuning, & maintenance for instrumentation andautomatic control systems
Construction and sales for air conditioning, sanitation, and electricalequipment

April 2023

System solutions

Systems development, operations and maintenance, and package
systems sales and architecture

January 2023

GlobalIT managed services provider

Exeo Core Innovation Co., Ltd.
(previously Sanden System Engineering Corporation)

Telistar Solutions Pte. Ltd

Exeo Group Integrated Report 2023

34

DX implementation has entered phase two
As we enter an age of upheaval, we are forging ahead in
our contributions to turning the four visions for society
advocated in our 2030 Vision into a reality. DX in
particular helps to make engineering more efficient andadvanced. It can even be considered essential for
innovating business processes and reforming value chains.
I believe that DX implementation can not only expand andaccelerate solutions to social issues through business, but
it can also light the path to our sustainable growth andmaximize our business value.
The Digital Transformation Strategic Division
established in April 2019 builds IT infrastructure and serves
the Center of Excellence (CoE) function for the entire
Group, plotting the course to internal digitalization. They
are also implementing operational reforms utilizing
cutting-edge technologies such as IoT and AI as our initial
phase of DX draws to a close. In this initial phase, we
focused on making business processes more efficient andsaving labor. ServiceNow has been used to make various
internal inquiries and procedures more efficient, while
implementing robotic process automation (RPA) has
reduced workload to save labor. AI has been used to
improve safety at construction sites, while introducing
tablets at the sites has improved work efficiency andhelped shift to paperless. These are just a few examples.
Based on these results from the initial phase, we
decided that we had reached the stage of evolving into
our next phase. Then, the digital implementation project
team led by myself as Chief Digital Officer (CDO) launchedin February 2023, tasked with making specificimprovements. These are to strengthen our DX
implementation system, horizontally roll out successful DX
cases, and develop DX human resources.

35

Exeo Group Integrated Report 2023

Strengthening measure 1:
Strengthen our DX implementation system
To this point, we have been making our company-wide
processes more efficient and making the IT transitions
needed for that to happen in our initial DX phase under
the lead of our Chief Information Officer (CIO). Eachorganization also made their own transitions to IT in theinitial phase targeting DX.
Then, in addition to Group-wide DX andper-organization DX measures, in January 2023, we
appointed DX Implementation Leaders to each organization
to integrate these measures and spearhead DX organically.
DX Implementation Leaders are not only responsible for
their organization’s transition to IT, but also to DX. We will
also open up communication links between the DX
Implementation Leaders in organizations and the Digital
Transformation Strategic Division which is the CoE tocollaborate smoothly as a digital implementation project team.
Through these efforts, our Group will be working together toengineer business transformations that accommodate DX andother changes in the external environment that lie ahead.

Strengthening measure 2:
Horizontally roll out successful DX cases
Each respective organization has made various improvements
and advanced their DX by implementing the latest
technologies at construction sites. Other organizations canutilize many of these efforts with a certain degree ofcustomizations, added functions, and changes. The digital
implementation project team plays the lead in rolling theseout horizontally to other organizations. I believe this has
enabled us to effectively utilize DX-related assets that had
previously been localized internally.
For example, we are horizontally rolling out
digitalization of drawings at construction sites utilizing
tablets, usage of AI to check for safety at construction

Policies to develop DX human resources byhierarchical level

All employees understand the true meaning of DX, understand transformation,
and act accordingly
SkillsBehaviors

Communication to learn thetechnologies needed fortransformation and convey themaccurately
Ability to accurately
comprehend business andtechnology trends andreport them tomanagement, ability toalso act on own
initiative

Management

Spearhead measures toovercome struggles that
accompany transformation

Managers
DX Implementation
Leaders

Continuous upskillingneeded for DX on
the front lines ofbusiness

Chart 2

Accurately understand changes
in the external environment andmake business decisions

Repetitions of taking
specific actions

Employees

Approach to DX implementation

DX Implementation Leaders
assigned to each organization

Digital implementation project team

Digital Transformation
Strategic Division

Operating Officer, Deputy General Manager of Solutions Headquarters
Chief Digital Officer (CDO)

Chart 1

Organization

Hitoshi Takanashi

As shown in, the digital implementation project
team is conducting training in cooperation with the
Human Resources Development Department and Digital
Transformation Strategic Division in order to develop all
Group employees into DX human resources. DX is notnecessarily limited to IT. It means flexibly adapting tochanges in the business environment with the goal of
business transformation. Therefore, as opposed to just IT
engineers, all Group employees need to understand DX
and become leaders who spearhead transformation.
For that purpose we are conducting a broad range oftrainings for various levels and ranks, from DX training for
all employees to mindset transformation training primarily
for DX Implementation Leaders, culture creation training
for executive-class personnel to help then acceleratetransformation, and more. We will develop all Group
employees into true DX human resources by continuously
conducting trainings such as these, and channel thatmomentum into future business growth.
Chart 2
illustrates the initiatives and system that I
have described. The Digital Transformation Strategic
Division will advance DX throughout the Group, while thedigital implementation project team will be providing eachorganization with attentive support for the DX they needwhile also cooperating with the Human Resources
Development Department to build DX mindsets among all
Group employees.
Through these initiatives, I believe we will adapt tothis era of uncertainty and turbulent changes referred toChart 1

as VUCA and to the ever-changing external environment,
and channel these adaptations into greater business value.

Organization

We revamped our implementation system
to promote autonomous DX activity ineach organization

Strengthening measure 3:
Develop DX human resources

Data section

Governance

Organizationsites, and business process improvements through processvisualizations on iGrafx which is sold exclusively in Japanby one of our domestic subsidiaries.

Strategy bybusiness field

Organization

DX implementation

Value creation
strategy

Organization

DX implementation

Our value creation

Human Resources
Development Department

Message fromthe President

Points to strengthen by establishing the digital implementation project team
• Providing consultations and support by establishing a cross-organizational digital
implementation project team• The project team rolls out DX measures implemented at organizations into otherorganizations and opens up communication with the Digital Transformation Strategic
Division which handles DX requirements and development for each organization• Clarify who is the DX implementer at each organization by assigning DX
Implementation Leaders• Fostering transformation (DX) mindsets through cooperation between the project teamand Human Resources Development Department

Role of DX Implementation Leaders
DX Implementation Leaders have the role of leading organizations together with the organizational heads to facilitate the growthof each organization by spearheading true DX transitions (business and operational transformation) that solve the fundamental
problems of our organizations without being restrained by the status quo.
Specifically, they visualize and analyze their own organization’s business processes, identify the issues, and propose andexecute concrete measures while cooperating with the Digital Transformation Strategic Division which has expert knowledge aswell as with the digital implementation project team.
As the first step to making initiatives like this more effective, the important thing is to take action. In my opinion, anotherimportant role of DX Implementation Leaders is to give the employees in charge of the actual work a stronger sense of ownershipand promote mindset transformation.
Kohei Saegusa
With support from the digital implementation project team as well, leaders are cooperating with each other more extensively. Manager, First Facilities
Construction Department
This includes forming teams connected across organizations through their DX Implementation Leaders, and establishing more
Business Engineering
concrete plans for advancing discussions. Through inter-organizational connections such as these, I hope we can help to accelerate
Headquarterstransitions to DX not only in our own organization but throughout the Group as a whole.

Exeo Group Integrated Report 2023

36

Message fromthe President

Safety, quality & BCP

Safety, quality & BCP
Occupational safety and health
Initiatives to promote a safe andquality-oriented culture
The Group strives on a daily basis to prevent theoccurrence of bodily injuries and equipment accidents atconstruction worksites by taking every possible initiative toensure safety and quality, and by strengthening
management.
Since 2016, we have been working to create systems
for each and every employee to understand theimportance of safety and quality and put it into practice intheir behavior, under the slogan “return to the basics of asafety and quality-oriented culture.” Then, with thefive-year slogan of “evolve (enhance/develop) our safety
and quality-oriented culture” starting in fiscal 2021, weare bolstering our efforts to improve quality and create
added value in addition to eliminating accidents, with theaim of being “a company and group that can be relied on
for safety and security.”
As for measures to mitigate safety risks, we are
eliminating and revamping dangerous work and giving
primary consideration to eliminating and mitigating risks
starting in the work planning stages (essential measures),while prioritizing facilities-related measures (engineering
measures) including for heavy machinery.
We are also deploying network cameras and other ICT
to make communication between worksites and desks more
efficient and deliver better support, and we are actively
taking management measures such as human resources
development for foremen and others in charge at worksites.
In addition, we are also focusing on measures to form
habits of safe behavior by actively uncovering and publicizing
cases deserving recognition through more extensive
conversational patrols. Having acquired certification for
our Occupational Health and Safety Management System
and Quality Management System, we are continuously
engaged in improving our safety and quality.

There were no financial losses in fiscal 2022 resulting fromlegal proceedings related to accidents or allegations
pertaining to faultiness or safety.

Managerial post

Governance

Data section

Applicable job title

Role• Approve the Group’s occupational safety and health management policies and goals• Give instructions for improving results of implemented priority measures

General Manager of Safety andQuality Management Headquarters• Supervise safety and health management of the entire company• Formulate occupational safety and health management policies, goals, and priority measures related
to the Group’s occupational safety• Roll out priority measures for the Company’s headquarters/branches and major subsidiaries(hereinafter referred to as “each organization”), and report the results to representatives of the Group• Stay up to date with laws and regulations related to safety and health, the construction industry, andaccidents

General manager ofhealth supervision

General Manager of Human
Resources Department• Supervise health management and operation• Formulate occupational safety and health management policies, goals, and priority measures for theGroup’s health• Roll out priority measures for each organization and report the results to representatives of the Group• Stay up to date with laws and regulations related to health* Total occurrences of occupational accidents and accidents causing injury or death to
third parties

Supervisor of
occupational safety
and healthHead of each organization• Implement priority measures and report the results• Formulate and implement internal measures• Stay up to date with regulations of the local government having jurisdiction over occupational safety
and health

Status of bodily injury accident occurrences

Manager ofoccupational safety
and health

Safety and quality control department
manager at each organization
General Manager of General Affairs• Manage occupational safety and health management tasks carried out by each organization• Identify hazards in buildings, equipment, and work areas and implement preventive measures• Improve work conditions and health at facilities

Manager of internal
auditsSafety Center Director• Implement management inspections/on-site inspections and report the results to representatives of
the Group

The number of accidents occurring in 2022 decreased
compared to the previous year, but there was one fatal
accident that occurred at a Group company. We arethoroughly implementing recurrence prevention measures
to ensure that such an accident does not occur again.
Additionally, the occupational accident rates in Exeo Group,
Inc. in 2022 were 0.39 frequency rate and 0.03 severity rate.
We will continue working with a strong sense ofdetermination to maintain these numbers at low levels.

(people)Serious injuries*1

Deaths15

Light injuries*2

14

10

Third parties

1

General manager ofoccupational safety
and healthmanagement

6
8
2

5

3
2
1

0

2018

8

7
2
3

3
7
2020

4

3
1

3
1

2021

2022

2
2019

1

Business continuity plan (BCP)
Basic policy(FY)

Scope of data: Exeo Group, Inc. and its five major subsidiaries (C-Cube Corporation,
Seibu Electric Industry Co., Ltd., Nippon Dentsu Co., Ltd., Daiwa
Densetsu Corp., and Exeo Tech Corporation)*1 Hospitalized for two weeks or more and 30 or more days of temporary absence*2 Lost time the following days after the incident

Breakdown of bodily injury accidents
Dropping ofsuspended loads 1

4 in total

Crashes/falls 2

Our business continuity plan (BCP) is our basic policy tomaintain the minimum necessary business operations
based on predetermined roles in the event of a disaster(major earthquake, new pandemic, etc.) in order to ensure
the future continuation of our business and prevent or
minimize resulting damage to the business value of ourGroup. We have designated the order of priorities forwork operations in advance, taking into consideration thatin-house resources could be limited when a disaster occurs.

FY2022

Order of priorities when disasters occur
Heavy machinery 1

Occupational accident rates (Scope of data collection: Exeo Group, Inc.)
Severity rate

0.4

2021

(1) Ensure life safety• Protect the lives and safety of employees (including
contract employees) and their family members, andcheck their safety• Assist the injured(2) Minimize the financial impact and damage tocustomer value• Activities to minimize any decline or worsening in theGroup’s earnings• Activities to keep loss of our Group’s credibility to aminimum

0.6

0Exeo Group Integrated Report 2023

Strategy bybusiness field

PresidentGroup representative

Status of bodily injury accident* occurrences

0.2

37

Value creation
strategy

Occupational safety and health management structure

Frequency rate

Financial losses from legal proceedings

Our value creation

2022(Year)

Disaster response
The Group has defined provisions for how to deal withpotential natural disasters such as typhoons and earthquakes,
and man-made disasters such as cyber terrorism, pandemics,
and armed attacks. When disasters occur (including when
they might occur) we establish an information coordination
preparatory office according to the circumstances of thedisaster and begin coordinating information while smoothlytransitioning to an information coordination office, disaster
response task force, or crisis response task force depending on
the scale and expectations of the damage and engaging inrecovery activities.
We also support swift recovery by coordinating withthe disaster response organizations at each branch andGroup company.
Human resources development & training
We conduct training at the time they are transferred andon a regular basis at least once per year for employees andothers (including contractors) to enable them to executeprocesses when disasters occur and tasks at the time ofactivation without delay. In addition, we conduct drills atleast once per year for processes when BCP is activated(including checking safety). Measures are taken for issues
discovered in the drills, and the issues are utilized in
improving the plan.
In fiscal 2022, we also conducted drills (exercises) for
responding to cyberattacks.

Exeo Group Integrated Report 2023

38

Message fromthe President

Environmental management

Environmental management (report based on TCFD recommendations)
The Group considers environmental problems such as
climate change to be important issues for management toaddress. Thus, we have defined “practicing ESG
management” as one of the three challenges in our 2030
Vision. We also set KPIs for each of these in our
Medium-Term Management Plan (FY2021-FY2025), which
we are working systematically and continuously to achieve.
In terms of governance, the Sustainability Committee
chaired by the President and CEO deliberates on direction
and matters such as key issues as an advisory body to theManagement Council while also monitoring the status ofinitiatives and deliberating and reporting on these details
in the Management Council and Board of Directors. The

Our value creation

Value creation
strategycommittee met twice in fiscal 2022.
Risks related to climate change are identified andevaluated primarily in the Sustainability Committee and thenaddressed in concert with the Business Risk Management
Committee which serves as the Group-wide risk manager.
Additionally, in December 2021, we declared our
support for the recommendations of the TCFD (Task Force on
Climate related Financial Disclosures) and also joined the
TCFD Consortium. The Group will continue making information
disclosures according to the TCFD Framework going forward.

1.5°C scenario (scenario in which the necessary measures were taken to keep temperature rises to 1.5°C compared to pre-industrial levels)
Type

The Group has defined and is monitoring the following metrics and goals for managing climate-related risks and opportunities.
(Unit: t-CO2)(Scope of data: consolidated)

FY2022Difference% change−9,706−11.2%

Scope 1 & 2 (our own)

86,58376,877

Scope 1 (direct emissions)60,40062,725

2,325

3.8%

Scope 2 (indirect emissions)26,183

14,152−12,031−45.9%

1,728,553

1,594,294−134,259−7.8%

Category 1 (purchased goods and services)275,913

195,614−80,299−29.1%

Category 2 (capital goods)

41,49051,742

10,252

24.7%

Category 3 (fuel- and energy-related activities)

12,652

13,958

1,306

10.3%

Category 5 (waste generated in operations)

2,429

5,279

2,850

117.3%

Category 6 (business travel)

1,869

2,180

311

16.6%

Scope 3 (supply chain)

Category 7 (commuting)
Category 11 (use of sold products)

3,398

3,965

567

16.7%

1,389,872

1,320,757−69,115

−5.0%

930

799

−131

−14.1%

Category 13 (downstream leased assets)

Scope1・2
Scope3

Target year

(t-CO2)

Carbonneutrality

Consolidated

Scope 2 26,183—

Consolidated

FY205086,58350,218 (−42%)

1,728,553

1,296,414 (−25%)

Submetrics
FY2025(Target)Climate change
factorImpact on the GroupFY2022

100% sites of Exeo Group, Inc.
100%

—

33.6％

73.2%

Adoption of EVs and other
low-emission vehicles

91.4%

95.5％

96.1%

−11.2%

Type−42%
50,2182020

62,7252022(Actual)Carbonneutrality

2030(Target)2050(Target)(FY)* Greenhouse gas emitted by the Group is CO2 (carbon dioxide).
* Numerical values for the base year could be subject to change if applicable scope or calculation methods change as we make these calculations more sophisticated going forward, or if an
event that exceeds the course of our business growth occurs.

39

Exeo Group Integrated Report 2023

• Shift to the use of renewable energy for the electric
power used in business activities (Switching to therenewable energy menu, purchasing renewable energy
certificates, PPA, etc.), switching to eco-friendly cars
• Efforts to save energy in business activities (switching to
LED lights, setting proper temperatures for air conditioners,
promoting eco-driving, use of accelerants, etc.)• Increase in taxation such as instituting a carbon tax (taxed
according to CO2 emissions from business activities)

Medium /Long

9Emissions controls• Increase in cost to buy credits for CO2 emissions (emissions
quotas) that fail to reduce enough volume

Medium /Long

2

Shifting to renewableenergy (renewableenergy measures)• Soaring renewable energy procurement prices if renewableenergy is not supplied in sufficient volume

Short /
Medium /Long

0.1

Surging raw
materials prices• Increased cost of stocking materials made from natural resources

Short /
Medium /Long

Obligation todisclose information• Increase in costs to comply with expanded obligations todisclose information related to greenhouse gas emissions

Short /
Medium /Long

Changing customer
preferences• Preferences shift toward companies that have done more for theenvironment, and declining sales for those who miss this trend
due to business relationships being severed or losing market
share to other companies

Short /
Medium /Long—

Stakeholder
assessments• Business value (stock price) falls due to negative assessments ofmeasures against climate change (insufficient information
disclosures, failure to reach CO2 emissions targets, etc.), making
it harder to raise funds and secure human resources

Short /
Medium /Long—

Products and services• Expansion of business due to increased demand for renewableenergy such as offshore wind power generation• Expansion of smart grid business due to changes in power distribution
systems (ability to newly enter the power distribution business)• Expansion of energy storage plant construction and maintenancebusiness due to increasing needs for storage batteries• Expansion of solar sharing business to use land at sites where
solar power plants are installed as agricultural land

Short /
Medium /Long• Actively pursue business in renewable energies such as
solar power, offshore wind power generation andbiomass, and expand orders for EPC projects(mutually complementary resources through business
partnerships, expand construction domains throughcapital contributions, etc.)

Market expansion• Markets for renovation construction and cloud services due toincreased demand for disaster response and mitigation• Solutions market for decarbonization efforts generated by usage
of ICT• Markets for the development of infrastructure such as networks
as urban digitalization advances• Market for refurbishments geared toward creating circular economies

Short /
Medium /Long• Expand our urban infrastructure and refurbishments
businesses

Adaptation toclimate change• Stronger resilience by switching to telecommuting and otherflexible work styles not dependent on location, in response to
climate change

Short /
Medium /Long• Make further efforts toward flexible work styles

Stakeholder
assessments• Decarbonization efforts lead to higher business value, more
opportunities to raise funds from financial institutions and thebusiness growth that entails, create opportunities to receive
orders from new clients, and create opportunities to securetalented human resources

Short /
Medium /Long

Climate change
factorImpact on the Group• Achieve reduction targets by implementing the CO2
emissions reduction measures shown above• Strive to mitigate risk of cost increases by passing themon in prices for construction work—

1

• Avoid increased costs to handle emissions calculations
by implementing DX in the calculation operations• Increase our business value with activities todecarbonize our Group from within and with social
contributions through our business (improve ourassessments from environmental ratings agencies)—

Time line Level ofof impact*1 impact*2(Acute) Intensifying
weather• Emerging risk of flood damage to residential and otherbuildings as well as the commensurate increase in damage
insurance premiums, worsening work environments• Supply chain disruptions due to intensified weather,interruptions to procurement and deliveries, lost chances tomake proposals to customers or receive orders from themMedium /Long• Increase our business value with in-house decarbonization
activities and with social contributions through ourbusiness (improve our assessments from environmental
ratings agencies)• Raise funds through means such as Sustainability-Linked Loans(Chronic) Higher
temperatures• Worsening labor shortages in construction due to increased
health risks (heatstroke, etc.) and worsening work
environments at outdoor construction sites• Lower work efficiency, delayed completion of construction,and increased cost of provisions due to heat stressMedium /
Long

20-22

Key response measures• Better BCP preparedness in the event of a disaster,
regular hazard risk assessments for properties owned

Risks

Company-managed(Actual)Key response measures

4°C scenario (scenario in which measures to counter climate change are insufficient, and temperatures rise by approximately 4°C compared to pre-industrial levels)

14,152

Scope of data

Passenger vehicles of
Exeo Group, Inc.

Time line Level ofof impact*1 impact*2

Introduction ofcarbon tax

86,583 76,877

Scope 1 60,400

FY2021

Switch to electricity fromrenewable energy sources

Opportunities

Scope of data

FY2030 (vs. base year)

FY2020Assurance report from a third party

Schematic of GHG emissions (Scope 1 & 2)
reduction

Goal
Base year(FY2020)

Data section

We use scenario analyses to anticipate what the world will be like in 2030 to ascertain the impact that climate change will
have on our Group’s business. The primary information sources for our analyses were the 1.5°C scenario by the International
Energy Agency (IEA), and the 4°C scenario by the Intergovernmental Panel on Climate Change (IPCC).

Metrics and goals

Base year(FY2020)

Governance

Strategy

Risks

Metric & actual (GHG emissions by Scope)

Strategy bybusiness field

8• Ensure and improve operating efficiency of worksites
by taking thorough measures against heatstroke(utilizing ICT in safety management for work sites) andadvancing digital transformation (DX) of work sites• Secure sufficient construction periods*1 Short time line: 3 years or less, Medium time line: Over 3 and up to 10 years, Long time line: Over 10 years*2 Financial impact (profit) on business activities of the Group in fiscal 2030 is calculated under the assumption of certain conditions. Anticipating the relative magnitudes, risks are expressedas “(large),” “(medium),” and “ (small),” and opportunities as “(large),” “(medium),” and “ (small).” Impact scale in financial terms is (large): ¥10.0 billion
or more, (medium): From ¥1.0 billion to less than ¥10.0 billion, and (small): Less than ¥1.0 billion
Exeo Group Integrated Report 2023

40

Message fromthe President

Human resources strategy Displaying initiatives and data pertaining to Exeo Group, Inc. unless otherwise specified.

Human resources strategy
Establishing work environments where
everyone can feel even more energizedand power the ongoing growth of the Group
Naoko Furukawa
Operating Officer, General Manager,
Human Resources Development Department

Pursuing a human resources strategy basedon our business strategy
The mission of our Human Resources Development
Department is to secure and steadily develop human resources
who are capable of dealing with rapid technological innovationand market changes, according to our basic philosophy
regarding employees as the Group’s primary assets.
In this era of an uncertain future and turbulentchange, we will be implementing growth strategies ineach business field while also striving to transform ourbusiness structure itself according to our 2030 Vision andMedium-Term Management Plan (FY2021-FY2025) inorder to stay on top of diverse customer needs and rapid
technological innovations.
As we take on new business domains and expand ourbusiness globally, bolstering the capabilities of our humanresources who get us there will be essential. Human
resources strategy is also one of the most important areasfor us to strengthen during the current Medium-Term
Management Plan. We will implement a human resources
strategy that contributes to the ongoing growth of theGroup while linking it with our business strategy.

Developing leaders who propel our Group
into the future
In the Human Resources Development Department, wecreate a Career Development Program (CDP) for every
specialization, based on which we find ways to improve theknowledge and skills of each individual in close collaboration
with the Human Resources Department. For employee
development we strive to deliver an extensive training
system including new employee training comprised of amultifaceted curriculum, position-based training according
to position and years of continuous service, and upskilling
for technical jobs. Moreover, we are also dedicated tosupporting self-development, such as incentive programs for

41

Exeo Group Integrated Report 2023

acquiring qualifications and correspondence courses.
Another thing we particularly focus on for humanresources development is building the flexibility, autonomy,
and independence to adapt to turbulent changes in theenvironment. The attitude to think and act on your own
and carve out your own future is essential for generating
new value in an environment that is changing at lightning
speed. From that standpoint, we launched a new initiative
called the Transformation Leader Development Program in
fiscal 2022. In this program, we select future management
candidates from among all business divisions includingGroup companies, and conduct coaching for each of them
respectively. In conjunction, we have also instituted new
training for middle managers that combines a Coaching
Program for six months with a two-day Coaching
Workshop to accelerate the development of our next
generation of leaders who drive transformation.

Addressing business globalization andtechnological evolution
In fiscal 2022, we also launched an overseas trainee system
to bolster our development of global human resources. In
this system, we accept applicants from among all
employees of the Group every year and select a number ofthem to work at overseas Group companies for roughly
one year. In addition to gaining work experience, this helps
build their language and intercultural communication skills.
At the same time, we are also putting emphasis on
bolstering technological capabilities, which can be consideredthe very core of our Group’s value creation. For technicaltraining, we are pushing forward with acquisition of
professional skills needed for business expansion, including
advanced engineering skills and cutting-edge IT skills, under
the lead of each business division. The Human Resources
Development Department also supports employees seeking
to acquire high-difficulty qualifications such as for

Our value creation

Value creation
strategy

professional engineers, and assists in self-development
including for correspondence courses. Employee
multi-skilling and reskilling have also increased in importancealong with the evolution of our business domains and shift
in our business structure. To facilitate the acquisition of theseskills, we are focusing efforts on training and development
as well as measures to boost motivation. Multi-skilling
conducted thus far has resulted in more than a few
employees being immediate contributors in shifting fromthe telecom carriers business to the urban infrastructure andsystem solutions businesses. As we check on the aspirationsof our younger employees, we are also reskilling some ofthem for solutions business through short-term intensive
training aimed at upskilling over a short period of time.
Aside from that, in promoting digital transformation(DX), we are extending our DX basic training throughout
the Group, and the Corporate Planning Division is playing
a leading role in organizing DX Activity Plan Presentations
for all of our organizations with the aims of implementing
DX in actual business and transforming mindsets. DX
training will also be held for organizational heads in fiscal
2023 as we aim to further transform mindsets.

Strategy bybusiness field

Data section

Governancework of those managers, but the gradual changes inmindsets of others involved was also highly meaningful.
With a low overall number of female human resources withtechnical backgrounds on the job market, we were able toraise our ratio of females among new graduate hires to
25% in fiscal 2023 through aggressive hiring efforts.
The key to promoting D&I is psychological safety. Thismeans having an environment where differing opinions
can be expressed openly and comfortably. In order toeliminate various types of unconscious bias (assumptions),
the Human Resources Development Department holds
training for superiors who have female subordinates, inaddition to training about approaches and key points in
one-on-one meetings, as well as company-wide training topromote LGBTQ understanding.

Establishing organizational environments
where everyone can feel energized

Promoting diversity and inclusion (D&I) is anotherimportant mission of the Human Resources Development
Department. New ideas are born through the collision andfusion of diverse personalities, experiences, and thoughts.
In this sense, D&I is a requirement for companies to grow.
With that in mind, the Diversity Promotion Office wasestablished in our Group in 2017 and has been working tofoster an organizational culture of mutual acceptanceamong people with different values.
One important issue in D&I is supporting women’s
career advancement. In 2021, we set the goal of raising ourexisting goal of 20 women in management positions to 30
by fiscal 2025. As a result of various measures subsequently
implemented, the number has steadily risen to 27 as ofMarch 2023. This was of course attributable to the hard

The importance of employee engagement in relation totheir company has been increasingly pointed out in recent
years. The typical turnover of employees in their initial
three years with a company is said to be around 30%, but
ours has been steady at less than half of that number. In
addition to our tutor system in which more tenured
employees continue looking after employees in their first
three years through discussions and other means, we
believe this also due to positive effects including the strong
sense of unity established between trainees who undergo
our long duration new employee training together.
We also believe that being able to choose work styles
according to each person’s values and lifestyle is anotherkey element to higher engagement. Remote work has
already become established for desk work employees not
at construction sites. We will continue striving to create
workplaces where everyone can feel energized and harness
their capabilities to the fullest by implementing a flextime
system, a remote work system, and mechanisms forthriving beyond the frameworks of the Group. Doing so,
we hope to raise our employee engagement even higher,
and channel it into the continued growth of our Group.

Number and percentage of women in management positions

Number and percentage of female employees hired by year

Note: As of the end of each fiscal year

Note: As of the end of each fiscal year

Organizational culture that promotes
diversity & inclusion(People)40

Of which, general manager positions
Of which, manager positions

30
20
10
0

13
1
2018

14

14

2.5

30

27

22

20

17

14

Percentage (%)

18

60

3

6

4

3

2020

2021

2022

1.0

0

2025

(Target)Percentage (%)
20.0

(FY)

15.0

40

36
27

20

0.5

2019

Of whom are mid-career hires
Of whom are new graduate hires

2.0
1.5

24

(People)

0

18

30
15
3

2018

20

6

7

2019

2020

10.0

25

18
14
4
2021

14
11
2022

5.0
0

(FY)

Exeo Group Integrated Report 2023

42

Message fromthe President

Human resources strategy Displaying initiatives and data pertaining to Exeo Group, Inc. unless otherwise specified.

Exeo Group Integrated Report 2023

152

100.0%

100.0%

84

0

2018

2019

2020

2021

2022

(FY)

Initiatives at Group companies

Basic approach and promotion system
Based on the policy of regarding employees as our primary
assets, the Group provides a variety of training programs
such as new employee training, position-based training,technical training, the transformation leader development
program, and the culture transformation program.
Moreover, we also provide support for self-development,such as incentive programs for acquiring qualifications andcorrespondence courses, and are committed to providing
growth opportunities and encouraging employees toproactively take advantage of them.
To adapt to rapid technological innovations andchanging markets, we are also hiring and developing
human resources who are capable of quickly adapting to
the business environment.

We want all employees at our 172 Group companies (135consolidated subsidiaries, 17 non-consolidated subsidiaries,
and 20 affiliates), including those overseas, to be able towork with a sense of fulfillment. Our top priority is to build
one new team to enable this. We see this as an essential
step toward developing our human resources for the future,reforming our work styles and increasing diversity. Based on
the Group’s common operational measures, in addition to
playing the role of a “go-between” for expanding theexcellent initiatives of our Group companies, we will further
promote the establishment of one strong team that takes on
the challenge of new businesses and responds to changes.

Group employee Toru Ebihara (center) wins gold medal at WorldSkills
Competition 2022

Training system
Rank

New employee
development /Newly promoted

Classificationof officers

Career advancement /Career paths

Leader development
program

Mindsettransformation

Specialization /Particular field

Diversity

Newly appointed
officer training

17.9
14.4

10
5
0

2020

2021

2022

Nursing care seminars / Childcare support system

Training for employing people with disabilities/LGBTQ training

Strengthening DX

Basic sales training

Cross-industrial socialization &training for selected employees

Communicating with younger employees
On-site leader
training (mid-level)

Training superiors who have female subordinates

10th year
training

Leadershiptraining(Entry level)
Coaching
programOn-site leader training(newly appointed)

18.2
14.6

Manager training

Organizational leadership training / Strategic human resources development

14.0

BusinessschoolDiversity promotion activities

Female17.6

Femaleleaders

Training for newly
appointed managers

Team building

15

Male

Senior manager
training

4th year training

20(Seniorlevel)
Coaching
programMiddle manager training

Average years of continuous service(Year)

One-on-one training

Four hiring & human resources development policies• Strive to pursue the sustainable growth of the Groupby flexibly hiring human resources according tobusiness requirements.
• Develop human resources as required to expand andshift our business by improving employee knowledge,
capabilities, and skills systematically and in a timely
manner through the Career Development Program(CDP) and training.
• Implement measures for diversity and inclusion tobuild work environments that make it easier for
diverse human resources to thrive.
• Foster an open, liberated culture and comfortableworkplaces that enable each employee to better
harness their capabilities.

Globalhuman
resources

HR-related
training

General manager
candidate training

Section manager
candidate training

Evaluator training

100.0%

89

159

95

Overseas trainees

FY2022130
46

DMM Eikaiwa (English school)

FY2021

Human resource development

Fair evaluations and treatment

43

FY2020

40

129
43

50

Toru Ebihara, an employee at Exeo Group, Inc. entered
the Information Network Cabling skills category
representing Japan and won a Gold Medal at theWorldSkills Competition 2022 held at Miyako Messe
convention center (Kyoto) from October 15 to 18.
Ebihara went up against competitors from 12
countries and regions in the skill of Information
Network Cabling, which tested abilities in theconstruction and measurement skills required forbuilding information network infrastructure. We aredetermined to continue strengthening and improving
our technical skills, developing outstanding engineers,and contributing to society.

47

For management

Implementation rate of discussions

42

138

100

In our business activities, we place great importance on respectfor human rights and conduct training to raise and improve
human rights awareness in order to provide a workplaceenvironment in which each and every employee can workwith vitality. In addition, through training and other activities
to promote compliance, we show that we do not tolerate
any kind of discriminatory treatment on gender, beliefs,
nationality, status of disability, sexual orientation, gender
identity or other basic human rights. We strongly advocate
for respecting the dignity and individuality of every person.

As a system to reward employees for their efforts by fairly
evaluating outcomes, employees hold bi-annual
discussions with their superiors to discuss their progress
and achievement of self-established goals. We are helping
to ensure the evaluations are convincing by providing
feedback on the results of the evaluations to employees.
In addition, all employees are given an opportunity totalk with their supervisors once a year about their job
satisfaction, career plans and other matters.

150

Careers for female employees

Goal
discussion

Those who were
newly promoted

Respect for human rights

Data section

GovernanceGroup employee wins gold medal at
WorldSkills Competition 2022

206

194

200

2nd yeartraining

Changing attitudes
toward workstyles /Reforming rules

Evaluation
feedback

Those hired from other companies

Fair evaluations
and treatment

Promotingdiversity

Outcomediscussion

New
employeetraining

Human resource
development andprofessionalism

Mid-term
discussion /Self-assessment

Mid-career

250

Executive

Respect forhuman rights

Goal
discussion

New graduate(people)Manager

Policy regarding employees as the Group’s primary assets /Workstyle reforms

June

Deputy manager

Creating sourcesof growth

April

General employment

Revitalization of theorganization

OctoberManagers

Sustainable growth
Enhanced productivity
and profitability

April

General employees

Our employees are invaluable assets. Based on our humanresources philosophy regarding employees as the Group’s
primary assets, we pursue prosperity for both our employees
and the Company through diligent practice of respect forhuman rights, fair evaluations and treatment, humanresource development, and professionalism. Based also on
the idea that it is essential to our future ongoing growth
to secure and develop talented human resources andcreate workplaces where everyone can work with vitality
and harness their capabilities to the fullest, we are
implementing work style reforms to change attitudes
toward work styles, reform rules, and promote diversity.

Strategy bybusiness field

Number of new hires

Discussion schedule

Basic approach to human resources

Value creation
strategy

Our value creation(FY)

Exeo Group Integrated Report 2023

44

Message fromthe President

Human resources strategy Displaying initiatives and data pertaining to Exeo Group, Inc. unless otherwise specified.

Work style reform
Basic approachWith the aim of proper management of working hours andrectifying long working hours, labor representatives and top
management have issued a joint declaration and areworking on reforms to comply with labor related laws andregulations, promote flexible work styles, improve
operational efficiency across the organization, and maintainand promote physical and mental health by raising
employee awareness and implementing specific measures.
We are also working to realize diverse and flexible work
styles through means such as the establishment of aregional key position system (a system for regionallyassigned employees) and a teleworking system. For the newlifestyles and new working styles recommended by theJapanese government, we are striving to create a work
environment where everyone can work with peace of mind
and enthusiasm through efforts including: (1) review ofoperations (business inventory, business evaluation, etc.), (2)improvement of the environment (PC, work environment,etc.), (3) consideration for health and wellbeing(development of a system for supporting mental health,etc.), (4) enhancement of systems (review of commuting
styles, establishment of an expenses policy for working fromhome and for working from remote locations, etc.).
Boosting productivity through digital transformation
Utilizing IT infrastructure, AI technologies, and othercommon tools across the Group including Office 365*, weare working to improve sales capabilities, businessefficiency, quality, safety, and comfort while aiming toboost productivity in a noticeable way, not only for
employees but for our partners as well.
* Office 365 is a registered trademark of Microsoft Corporation in the U.S. and othercountries.

Health and productivity management initiatives
Nothing is of greater importance to achieving our purpose(the role that the Group should fulfill in society) “Bring thebenefits of connectivity to all” and our continued
expansion and growth than the physical and mental healthof all our Group employees and their families in Japan andthroughout the world. Based on this approach, our entire
Group is engaging in health and productivity
management—promoting new work styles and work-lifebalance in addition to building workplace environments
where employees are physically and mentally healthy andfeel energized on the job.

45

Exeo Group Integrated Report 2023

In order to continue being an enterprise that
contributes even more to society and is recognized bysociety as a valuable presence, the Group, labor union,and health insurance association are working together tomaintain and promote employee health.

Work-life balance
Basic approach
We are also engaged in various activities to reduce overall
work hours and create physically and mentally healthy,
efficient workplaces. We are reducing unnecessary andnon-urgent overtime hours by ensuring that meetings areheld at the beginning and end of work. In addition toactivities in the everyday work environment such as
diligently enforcing no-overtime day once per week, weare also promoting the use of annual paid leave days in
combination with long holidays such as Japan’s “Golden
Week” from the end of April to early May, summer
holidays, and year-end/new-year holidays.
Supporting the balance between work and home
To ensure that employees can achieve a balance between
work and child-rearing or work and family caregiving,regardless of gender and continue to work and achieve
success with peace of mind for as long as possible, wehave established balance support schemes that go beyond
statutory requirements. Specifically, we have improved ourparenting support systems such as for payments of allowances
for returning to work early, and we introduced Special
Treatment Leave which can also be used for fertility treatment
as well as a reduced work hours system for undergoing
medical treatments, as we have striven to give employees
what they need to balance work with parenting.
We are actively enhancing systems and holding
briefings to achieve the targets in the action plan (Seventh
Action Plan) that we formulated in April 2022 pursuant to
the Act on Advancement of Measures to Support Raising
Next-Generation Children. We have introduced
company-led childcare facilities along with a babysitter
system, and are actively providing consultations frommidwives as we work to develop
environments that make it easy for
employees to strike a balance between
their jobs and parenting responsibilities,
regardless of gender. In 2015, we earned
the Kurumin Mark, an accreditationfrom the Minister of Health, Labour and Kurumin Mark from
the Minister ofWelfare recognizing companies
Health, Labour andproviding support for childcare.
WelfareValue creation
strategy

Our value creation

General Employer Action Plan based on the Act
on Advancement of Measures to Support Raising
Next-Generation Children

Target(1) Achieve 20% rate of male employees taking childcare leave(2) Maintain childcare leave usage rate of at least 90% amongfemale employees(3) Effectively communicate guidance about how to use the
System for Balancing Medical Treatment with Work which
was newly established in April 2022, and about the related
procedures

Plan period: April 1, 2022 to March 31, 2026 (4 years)

Percentage of employees taking childcare leave
(%)

Male

(%)

25

100

20

80

15

60

10

40

5

20

0

0

2020 2021 2022 2025

(Target)(FY)

FemaleTarget level: Average 90% or more

2020

2021

2022

(FY)

Data section

Governancescheduled and actual overtime work hours using a system
and working to standardize operations. At the same time,
we are proactively reducing overall annual work hours by
improving productivity through DX implementation.
As part of our initiatives to achieve a healthy work-lifebalance, we also seek to develop a comfortable work
environment for employees by setting annual targets foruse of paid leave, promoting consecutive days of leave by
combining annual paid leave with long holidays, summer
holidays, year-end/new-year holidays, and designating ano overtime day for each week.
Average overtime work
hours per month

Number of days of paid leave/
Percentage used

(Hours)(Days)

50

25

100

20

80

40
30

31.8

33.8

30.5

Number ofdays taken

15

12.8

Data on childcare leave (April 1, 2022 to March 31, 2023)
Total number of employees eligible
for childcare leave
Total number of employees who havetaken childcare leave
Total number of employees who havereturned to work after childcare leave
Return to work rate of employees afterchildcare leave
Total number of employees enrolled at theend of 12 months after returning to work*
Retention rate of employees afterchildcare leave
Average number of days of childcare
leave taken

Strategy bybusiness field

Male

Female

78

9

14

9

11

7

100%

100%

7/8

12/12

87.5%

100%

52.8

342.4

Support for balancing work with medical treatment
We have established a new support system for balancing
work with medical treatment so employees can continue
working with vitality even while undergoing treatments. In
addition to treatment of diseases, applicable treatments also
include fertility treatment, and we are working to support
parents in raising the next generation. Specifically, oursupport includes making it possible to receive allocations ofspecial leave of absence, take accumulated annual paid
leave, and use the reduced work hours system, teleworksystem, and shift changes to be able to receive proper
treatment. Through diverse work styles, we actively support
our motivated employees in balancing their medical
treatments with work so they can thrive in the workplace.
Reducing long working hours
As initiatives to reduce long work hours we are visualizing

15.2

60

20

10

40

10

5

20

0

* Total includes employees who returned to work between April 1, 2022, and March
31, 2023.

12.9

Percentage (%)
used

0

2020

2021

2022

(FY)

0

2020

2021

2022

(FY)

Maintaining good labor-management relations
Mutual trust between labor and management isfundamental to the Group’s business. In the view of
pursuing company growth and maintaining and improving
employees’ work conditions, we seek to build stable
labor-management relations through regular discussions
between labor and management.
We hold regular labor-management meetings forexchanging opinions between both sides on the businessplan and other important issues in order to engage inproactive business operations and achieve the healthy
growth of the company, and when changing the personnel
system we provide forums for discussions between laborand management before revisions are made. We also holdmeetings of a committee for improved work hours andconditions where we are setting targets for the total
number of work hours for the year and annual paid leave
to be taken and monitoring the progress. In addition, laborand management are working together on ways to reduce
overtime work and determine specific measures for having
employees take their annual paid leave.
The Central Complaint Handling Committee has been
established as a contact point between labor-management
relations, comprised of members put forward by bothlabor and management to swiftly resolve any allegations
brought up by an employee.

Exeo Group Integrated Report 2023

46

Message fromthe President

Human resources strategy Displaying initiatives and data pertaining to Exeo Group, Inc. unless otherwise specified.

Diversity & inclusion
Diversity & inclusion declaration
Diversity means variety. In other words, promoting
diversity in an organization is a strategy to harness theabilities of various human resources to the fullest. With
the aim of quickly and flexibly meeting the diversifying
needs of our customers, expanding our business, andboosting performance, we are fostering a culture as
Team Exeo that promotes mutual acceptance amongpeople of diverse values regardless of gender, beliefs,
nationality, disability, sexual orientation, gender identity
or other such attributes, and leads to new value
creation free from conventional norms or stereotypes
while continuously growing both as individuals and as
an organization. Diversity promotion does not aim forany particular goal. We aim for the true meaning ofdiversity and inclusion, to energize organizations withnew ideas derived from diverse feelings and values thatenable organizations to generate innovation.
Tetsuya Funabashi President and CEO

whole. Both men and women are being selected bydepartments and branches as their diversity promoters toengage in activities that get their workplaces involved.
Additionally, we engage in various measures aimed atraising the awareness of our female employees, such as
training courses together with superiors for working
together with unified purpose, social events with female
employees of other companies, and events geared toward
all of our female employees, as we create opportunities for
women to thrive and provide them with support.
As a result of these efforts, the Ministry of Health,Labour and Welfare recognized Exeo Group, Inc. in 2016
with its Eruboshi certification, which is awarded tocompanies for outstanding efforts to support the careerdevelopment of women. We have also received recognition
from the Ministry of Economy, Trade and Industry and theTokyo Stock Exchange for three consecutive years, as aNadeshiko Brand in 2020 and as a Semi-Nadeshiko Brand
in 2021 and 2022. These certifications are awarded tolisted companies in recognition of their efforts to support
the career advancement of women.

Supporting women’s career advancement
We have formulated an action plan in accordance with the
Act on the Promotion of Women’s Participation andAdvancement in the Workplace and publish related
information including numerical targets in addition to actively
hiring women—which will also enable us to achieve thesetargets. In order to develop future female executives, theDiversity Promotion Office, Human Resources Department,
and our various departments are also working together on
promoting initiatives to develop female managers,
including considerations for creating development plans.
We also changed the name of our promoters for
women’s career advancement, initiated in 2017 to“diversity promoters” in order to pursue D&I from a
broader range of perspectives throughout the Group as a
General Employers Action Plan based on the Act
on the Promotion of Women’s Participation andAdvancement in the Workplace and our progress
Plan period: April 1, 2021–March 31, 2026 (5 years)

As of the endof March, 2021

47

As of the end Target at the endof March, 2023 of March, 2026

Number of womenin management
positions20

Number of female
employees

307

328

25% increase(384)

Percentage of male
employees taking
childcare leave

7.3%

17.5%

20%

Exeo Group Integrated Report 2023

27

1.5 times(30)

Promoting the employment of people with disabilities
To ensure that all people can demonstrate their capabilities
and aptitude to the fullest extent and lead active, fulfilling
lives regardless of whether or not they have disabilities, ExeoGroup, Inc. actively pursues the employment of people withdisabilities. Employees of the Diversity Promotion Office havecompleted disabled person occupational and lifestylecounsellor certification courses, carefully gather information
about desired workplace, occupation, skills, and disability
considerations when employees are hired, and strive tomatch employees with the right organization. Even after an
employee has joined the company we regularly follow up on
the individual and their assigned department and make every
effort to ensure they are able to succeed in a reassuring
environment. We work to create new occupational fields sothat persons with all kinds of disabilities can flourish while
making active efforts to hire people with specialist skills.
We also provide training to promote deeper
understanding of people with disabilities for employees
who work with them and for management teams,
managers, and others, including at Group companies.
Percentage of employees with disabilities (As of March 31, 2023)
Exeo Group, Inc.

2.29%

C-Cube Corporation

1.84%

Seibu Electric Industry Co., Ltd.

2.91%

Nippon Dentsu Co., Ltd.

1.97%

Daiwa Dentsu Corporation

2.54%

Exeo Tech Corporation

1.89%

Value creation
strategy

Our value creation

Rehiring of retirees

Data section

Governancecontinue to pursue diversity in our hiring going forward.

In order to make use of the skills and experience gained
over the years by employees who are motivated to work
after retirement, we have a system to rehire
retirement-age employees, a registered employee system
to hire retired employees on a temporary basis, and asystem to rehire former employees who have left thecompany due to family circumstances such as family
relocation, marriage, childbirth, and nursing care. Thesesystems provide opportunities for diverse work styles.
These efforts are helping to secure our technologicalcapabilities for the future and ensure that we are able topass on our skills.
Number of retirees who have been rehired

Number of rehired employees

Strategy bybusiness field

FY2020

FY2021

FY2022

249

301

320

Life plan seminars
The Group holds seminars for employees at the ages of 53
and 54 to help them design their postretirement life with adeeper understanding and awareness so that they can leadmaterially, physically, and mentally healthy lifestyles. We
also hold seminars for employees at the age of 58 and 59
to deepen their understanding of post-retirement social
security and pension fund systems.
In fiscal 2022, we began holding seminars to inform
employees in their forties about our internal systems forpost-retirement age and about the social security and pension
fund systems at an earlier stage than before in their careers.
This guidance aims to enable them to enjoy more fulfilling
second careers post-retirement through better planning.

Foreign nationals hired by year
FY2018FY2019FY2020

FY2021

FY2022

New graduate

1

5

0

2

2

Mid-career

0

0

0

1

3

Implementation of diversity promotion training
Training is conducted starting from upper levels of the company
to foster an understanding of the importance of diversity
promotion as a management strategy and to recognize issues
the company faces in doing so. In training aimed at executives
and managers, attendees learn about management
techniques for diverse human resources and approaches
for supporting career development. This knowledge is thenput into practice in the workplace. Moving forward, we
will expand the scope to include a wider range of employees
and conduct training that fosters a culture that promotes themutual acceptance and utilization of a diverse range of values.
As a result of these efforts, our company received
bronze certification in the PRIDE Index 2020 and a silver
certification in the fiscal 2021 and 2022 versions of thisindex established by the organization “work with Pride” toevaluate workplace initiatives related to LGBTQ and othersexual minorities. Aside from that, we were awarded thehighest possible rank “Best Workplace for Diversity &Inclusion” for two consecutive years in fiscal 2021 and2022 by the D&I Award which recognizes companies
making admirable efforts toward diversity and inclusion.

Number of seminar attendees (the past 3 years)* Held in alternating years for each age group

FY2018FY2020

FY202240-49 years old

—

—

1,308

53-54 years old

237

307

404

FY2017FY2019FY2021

105

139

192

(including Group companies)

58-59 years old

Hiring foreign nationals
In order to promote global business, especially in the Asia
region, and to internationalize and invigorate the company,
we are actively hiring foreign students who are expected tobe active both in Japan and abroad. In fiscal 2023, we hired
one foreign national new graduate and three mid-career
foreign nationals. In addition to hiring foreign exchange
students, in fiscal 2022, we hired five employees withspecialized skills who have Philippines nationality. We will

Diversity promotion training (FY2017–FY2022)
Numberofsessions

Content of training
Diversity promotion training for management level*1

4

Diversity management training for managers

31

Diversity management training for newly appointed managers

4

Training for female leaders

4

Career design training for women

6

Diversity training for new recruits

6

LGBTQ training*1*2

5

Training to promote understanding of people with disabilities*1*1 Including Group companies

3*2 Overlaps with training for management level

Exeo Group Integrated Report 2023

48

Message fromthe President

Summaries by segment

Telecom carriers business• Optical fiber cabling• Network facilities construction• Telecommunications
civil engineering• Mobile base station installation &maintenance• Telecommunications &electricity facility projects

Sales composition
by business

289.3

271.1

43%

Operating profit
margin (%)

Operatingprofit (¥Billion)
23.8(¥Billion)

S

Strengths

240.4

17.3

14.3

O

(FY2022)

Opportunities
2021

Urban infrastructure business

2022

2023
(Plan)

(FY)

2021

2022

2023
(Plan)(FY)• Electrical & air conditioning• Urban civil engineering
equipment projects(pole-free, pipe jacking, etc.)• Social infrastructure• Waste treatment plant construction &construction
maintenance• Facilities related to renewable energy & smart energy

Operating profit
margin (%)

Operatingprofit (¥Billion)(¥Billion)

S

Strengths

Sales composition
by business

26%

150.8

165.3

186.3
12.7

(FY2022)

10.2

O

10.5

Opportunities
2021

System solutions business

2022

2023
(Plan)• Software development
on consignment• Business support solutions• IT infrastructure architecture(servers, wireless LAN, etc.)

(FY)

2021

2022

2023
(Plan)(FY)• Managed services (system operations& maintenance, etc.)• Global business (telecommunications,urban infrastructure, various solutions)Operating profit/
Operating profit margin

Net sales

Operating profit
margin (%)

Operatingprofit (¥Billion)(¥Billion)

31%

S

Strengths

203.3

154.6

(FY2022)

2021

49

Exeo Group Integrated Report 2023

O

9.0
5.7

2022

2023
(Plan)(FY)

2021

Opportunities

4.8
2022

2023
(Plan)

Governance

Data section• Track record established in building telecommunicationsrelated facilities since our founding, and unsurpassed
technological capabilities• Integrated services from planning and design toconstruction, operations, and maintenance for thetelecommunications facilities of all telecom carriers• Organizational capabilities to provide the same level ofservice anywhere in Japan• Expansion of mobile base stations due to full-scale
deployment of 5G• Backbone expansion that accompanies increases intelecommunications traffic• Transitioning to optical connections for the “last mile” inurban areas• Demand for facilities renovations as telecommunications
infrastructure ages

W

Weaknesses

T

Threats• Operations of subsidiaries and subcontractors must be
further standardized• Standardizing and commonizing workflows of construction
systems for each individual carrier is a challenge• Increases and decreases in capital expenditures resulting
from business trends among telecom carriers andnational government policy• Slowing of investment in base station construction due
to 4G frequency bands being switched to 5G (shift to
New Radio: NR) and infrastructure sharing(FY)• Able to build a variety of construction projects including
telecommunications, electrical, and urban civil engineering
all in one• Possession of cutting-edge civil engineering technologies
including shield tunneling and pipe jacking• Knowledge in plant construction and operations, including
for biomass power generation• Growth of the renewable energy market on the path toachieving a decarbonized society• Deregulation of the power transmission business offers
greater opportunities for entry• Increasing needs to upgrade aging public infrastructure• Growing demand for data centers along with theadvancement of data usage in societyW

Weaknesses

T

Threats• Not enough engineers to accommodate increased demand• Insufficient track record or brand power to compete in
the same domain as businesses such as large generalcontractors• Lack of risk management experience in new domains• Surging costs of raw materials and longer lead times for
procurement• Entry of foreign-owned business operators into Japanese
domestic markets for energy-related business

SWOT analysis

Sales composition
by business

191.0

Strategy bybusiness field

SWOT analysis

Operating profit/
Operating profit margin

Net sales

Value creation
strategy

SWOT analysis

Operating profit/
Operating profit margin

Net sales

Our value creation• Provide all-in-one services from consulting, design, andconstruction to operations and maintenance• Group companies that specialize in areas such as
education-related products and IoT devices• Cloud engineers who support development/salesorganizations• Advancements in new business domains overseas• Continued appetite for DX implementation among
companies and public offices• Rising demand for security against intensifying
cyberattacks• Increased demand for subscription-based managed
services• Market expansion primarily in Asia PacificW

Weaknesses

T

Threats• Lack of human resources for development• Uneven profitability among business domains• Revenues are comprised of a low proportion of recurringbusiness• Lack of brand power in the IT market• Need for continuous investment in international business• Arrivals of new players and services could make existing
services obsolete• Depletion of IT human resources in Japan, andaccompanying spikes in labor costs• Declining profit margin due to competition with major
systems integrators who have a head start• Abrupt policy changes due to changing government
administrations in Asia-Pacific countries

Exeo Group Integrated Report 2023

50

Message fromthe President

Telecom carriers businessTelecom carriers
business

We provide nationwide services for telecom carriers,
contributing to the enhancement oftelecommunications infrastructure.

Our aims in the Medium-Term
Management Plan
• Construction of 5G
infrastructure• Improve profitability
and productivity

Sales composition by unit
NCC ¥62.3 billion

NTT (Mobile)¥¥¥

153.4 billion(FY2022)21.3 billion

Strategy bybusiness field

Key achievements in 2022

Data section

Governance

Plans for fiscal 2023

• Promoted the completion of backlog
construction projects in mobile• Made progress in multi-skilling• Leveraged DX to improve businessprocesses

Summary of fiscal 2022¥
billion in total

NTT (Networks)

Value creation
strategy• Unify our mobile construction organization(Structural Reform 2.0) (improve productivity,
build flexible construction systems)• Shift even more personnel to growth fields

NTT (Access)271.1

34.0 billion

Our value creation

Main businesses

We provide integrated, high-quality services from planning and design to construction, operation, and maintenance for all communication
facilities of telecommunications carriers throughout Japan. This is backed by a proven track record and best-in-class technical capabilities in
the construction of telecommunications-related facilities, which we have cultivated since our founding. Our advanced technical capabilities
are garnering accolades both at home and abroad, including six gold medals in the Information Network Cabling category at theWorldSkills Competition.
Net sales

NTT Unit (for NTT Group companies)¥

Market environment & strengths

This has been our core business since our founding, where we play a central role insupporting Japan’s telecommunications infrastructure from metal to optical fiber lines.
With our broad array of technologies as a starting point, we have been generating steadyprofits until the present.

271.1

62.5

NCC Unit (for KDDI, SoftBank & Rakuten)
Market environment & strengths

Mobile is now not only limited to being a communication tool, but it has also become
essential as a means of payment, with services expected to evolve even more in the future.
We operate flexibly to accommodate the business development of each telecom carrier.

Access networks fiber
optic cabling installation service

Construction of network facilities

billion

289.3

62.3

42.1
22.3

34.0
21.3

162.2

153.4

2021
NTT (Access)NCT Unit

271.1

2022
NTT (Networks)

240.4
51.4
25.9
20.8
142.3

2023
(Plan)(FY)

NTT (Mobile)

Electric power equipment
installation engineering service

In the telecom carriers business, we swiftly and flexibly
accommodate the requests of each carrier with a presence
that continuously contributes to society by helping to build
and maintain Japan’s telecommunications infrastructure.
Along with the completion of the Project on Promoting
Advanced Radio Environment Improvements which had
been a business driver until fiscal 2021, curtailed capital
investments by mobile carriers also had an impact, but the
decline in demand was even greater than anticipated as
construction projects with some carriers were either
canceled or postponed. Thus, although we had initiallyplanned for lower revenues and profits in fiscal 2022, it
ended up being quite a harsh year in terms of profit.
On the other hand, we moved forward withstandardizations of operations at Group companies andsubcontractors, including systems sharing and usage oftablets to go paperless at worksites. At the same time, we
worked on operational improvements to further improve
productivity and profitability and ensure better safety by
utilizing AI to inspect safety equipment and ensure thesafety of heavy machinery in addition to establishing safety
management systems that combine webcams with asurveillance center.
As we construct next-generation telecommunications
infrastructure for 6G and O-RAN and transition to opticallines for “last mile” connections in apartment buildings andother urban areas in this business, while also removing andupdating aging infrastructure, we will continue contributing
to the maintenance and development of telecommunications
infrastructure that is essential to people’s lives.

Fiscal 2023 plan and forecast
As telecom carriers continue to curtail their investments infiscal 2023 and some remote work demand from the
COVID pandemic dissipates, we anticipate demand for
optical lines will also decrease. On the other hand, theongoing upward trend in mobile telecommunications
traffic will continue as mobile also becomes established asa means of payment and mobile phones become
entrenched an indispensable part of people’s lives. It will
therefore become imperative to build more infrastructuresuch as base stations and backbone networks.
In our Group, we implemented “Structural Reform 2.0”
in July 2023 to bolster the profitability of this business while atthe same time putting a system in place capable of handling
rapid increases in demand. We will eliminate the separate
construction systems employed for each mobile carrier andunify them into one. Concurrently, we will evenly level out
operational deployment through fluctuations in demandand by leveraging Group product iGrafx® (tool for creating
workflows with set writing rules that are easy for anyone tounderstand) to standardize and optimize business processes.
Manpower will be freed up through these structuralreforms, which we can then divert to the growth fields ofurban infrastructure and systems solutions and leverage tocreate business opportunities.
We will continue pursuing more efficient operationsin this business where there is ongoing demand fortransitioning to optical lines for “last mile” connections inapartment buildings and other urban areas, as well as
removing metal lines and 3G facilities that are no longer
needed, and updating aging infrastructure.

Vision of society in 2030
A smart society where people live healthy and vibrant lives

Smart construction using point cloud data
Construction of outdoor mobile
communication base station

51

Exeo Group Integrated Report 2023

Construction of indoor mobile
communication base station

Base station equipment maintenance

Our Group is pursuing higher productivity and safe construction at worksites by creating digital twins atconstruction sites by implementing point cloud (three-dimensional) data and AI in all processes at the sites,
and through the use of drones and autonomous robots.
At the same time, we will leverage our proven technologies honed over the years while striving tocreate new value through smart construction to help create a sustainable, efficient, and comfortable society.

Delivering high added-value designand construction through the use of point clouddata (rendering)Exeo Group Integrated Report 2023

52

Message fromthe President

Urban infrastructure business

Urban infrastructurebusiness

We provide services related to telecommunications,electricity, civil engineering, and the environment,
contributing to the realization of a society inwhich people can live comfortably.

Sales composition by unit
Facilities &Infrastructure¥

21.5 billion

PublicInfrastructure¥

66.2 billion

Our aims in the Medium-Term
Management Plan

Value creation
strategy

Strategy bybusiness field

Key achievements in 2022

• Develop new businessfields• Advance digitaltransformation inconstruction

Data section

Governance

Plans for fiscal 2023

• Further expanded orders for data center
construction• Received orders in new energy markets such as
direct current (DC) power supply facilities• Verified woody biomass gasification power plants• Develop smart energy-related business• Expand the domain of our data center
business• Further bolster efforts to secure &develop engineers

Energy165.3¥

73.2 billion

Summary of fiscal 2022¥
billion in total(FY2022)

Energy Unit

Net sales

Main businesses

Construction and maintenance of electrical and air conditioning
equipment, smart energy-related facilities including data centers,
and waste treatment plants

¥

2022

2021

83.8

2023
(Plan)(FY)

Data centers

Net sales

Main businesses

Telecommunications construction and urban civil engineering
related to public offices, local government agencies, cable
television, and transport-related (wireless-activated disasterwarning systems, construction work to eliminate utility poles)

billion

56.0

Renewable energy business is expected to expand along with therobust demand for data centers. Based on the knowledge ourGroup has honed over the years in the construction and operationof electrical equipment and plants, we will accurately discern thegrowing needs and continue our growth.

Public Infrastructure Unit

73.2

73.2

Market environment & strengths

¥

66.2
59.8

billion

66.2

75.8

Market environment & strengths

We expect to see robust demand for upgrading telecommunications
infrastructure of highways and railways, and for updating aging
public infrastructure. Bidding for projects is common in thisintensely competitive field, but we will increase our added value byimplementing construction DX and channeling it into business growth.

Facilities & Infrastructure Unit
Construction of various telecommunication facilities for use inhomes or by specific customers outside of the public sector(company internal local 5G, network architecture, etc.)

Exeo Group Integrated Report 2023

2023
(Plan)(FY)

Railway telecommunications
construction

The urban infrastructure business is a segment where wewill pursue business expansion by integrating our diverse
technological capabilities in areas such as
telecommunication, electrical, civil engineering, and theenvironment. In fiscal 2022, business was strong inelectrical construction, including construction projects forlarge data centers which are increasingly in demand due tothe trend toward digitalization. Business performance wasalso solid in orders received for facilities renovations andlong-term management plus maintenance of treatment
plants that handle large-sized waste. Electrical and civilengineering subsidiaries added to the Group through fiscal
2022 are steadily growing, including synergies generated
with various other Group companies, as they bolster our
performance in the segment.
With renewable energy becoming more widespread
as a result of government energy policies, our Groupvigorously pushed forward with various businesses such as
woody biomass gasification power generation, solar power
generation on agricultural land, and installations of electricvehicle chargers and energy storage plants. We also
continued efforts geared toward future business growthsuch as training engineers at connecting powertransmission lines, which has been ongoing since fiscal
2022. It was a tough fiscal year in terms of profits, due tothe impacts of construction wrapping up for the receptionof TV signals in the 700 MHz frequency band in addition
to soaring materials prices, but we made steady progress
toward future growth.

Fiscal 2023 plan and forecast
In fiscal 2023, we will aim to both broaden our businessscope and also achieve profit growth on the path toachieving the Medium-Term Management Plan. Demandremains robust in the construction of large data centerswhich drove our business performance in recent years.
Going forward, we will pool the capabilities of subsidiaries
newly added to the Group to go beyond our previous focus
of electrical facilities construction and expand our applicable
scope to include all facilities within these buildings, fromtelecommunications to air conditioning, LAN/WAN and
more, in the pursuit of orders to handle everything
all-in-one. We will actively divert resources freed up by
structural reforms in the telecom carriers business to be
deployed in this business domain as we aim to capture
additional business opportunities. As we shift resources awayfrom the telecom carriers business where structural reforms
are under way, we are freeing up manpower. We will
actively deploy these engineers in order to avoid missing out
on business opportunities. Meanwhile, in the energy-related
business where we anticipate full-scale businessdevelopment from fiscal 2023 onward, we will team up withpartner businesses including the NTT Group to leverage thevarious specializations of our Group companies in pursuit ofadditional growth as an integrated engineering enterprise.
As we keep a watchful eye on the impacts of turmoil in
supply chains and soaring prices of materials, we willcontinue initiatives aimed at medium- to long-term growthsuch as construction DX and handling more design work
offshore as we strive to generate added value.

Net sales¥

21.5

Vision of society in 2030

billionCarbon-neutral society

31.6

Market environment & strengths

Construction for the reception of 700 MHz TV signals has mostly
wrapped up but the movement toward even more sophisticatedtelecommunications facilities continues, including more testing for
local 5G. Leveraging the technological capabilities intelecommunications at our core, we will meet our customers’ needs.

2022

2021

Main businesses

53

Our value creation

2021

21.5

24.5

2022

2023
(Plan)

Successful demonstration test of woody biomass gasification power generation(FY)

Electrical & air conditioning
construction for office buildings

We finished testing at the woody biomass gasification power plant we have been building in Furudono in Fukushima
Prefecture, and completed the designated performance verification. Equipped with groundbreaking plant technologies
designed overseas, wood chips made from domestic timber materials can also be used as fuel in this low-waste plantwith combustion furnaces capable of treating the wood tar that it generates.
Through cooperation with local governments, we are pushing forward with power plant construction aimed at afull-scale launch of operations in 2024 as an initiative to contribute to environmental conservation (CO2 reduction)
through renewable energy usage and the creation of a recycling-oriented society (SDGs).

Woody biomass gasification power
plant aiming to launch full-scale
operations in 2024 (Furudono in
Fukushima Prefecture)

Exeo Group Integrated Report 2023

54

Message fromthe President

Urban infrastructure businessFeature 1

Developing our renewable energy business

Noriyuki Watabe

We are constructing a woody biomass power
plant that uses fuel consisting of unused forest
materials and pruned tree branches fromroadside trees and parks in Ashikaga, Tochigi
Prefecture, and another fueled by unused
forest materials in Furudono in Fukushima
Prefecture, both of which are scheduled to
begin operation in 2024.

power generated at our company-owned plants in 2024.
Along with Tokyu Land Corporation, we are also
participating in field tests for solar power generation on
agricultural land (solar sharing). Since solar power generation
on agricultural land that makes effective use of farmland is
expected to expand throughout Japan going forward, weare engaged in the related sales activities utilizing our
expertise gained from the construction of facilities.
We are also working to build self-owned power lines(transmission cables) in offshore wind power generation.
Connecting cables requires the services of cable jointerswith expert knowledge and special skills, and developing
these technical professionals has been a major challenge.
Thus, we entered into a business alliance with SWCC
Corporation which owns cutting-edge cable connecting
technologies and were granted a license by having our
employees undergo their technical training. Since theconstruction work is large in scale and high in difficulty,
we intend to first build experience in construction work for
self-owned power lines in onshore wind power andincrease orders to a level of roughly ¥10 billion byaround 2028.

Renewable energy implementation status and goals
according to the Agency for Natural Resources and Energy

336–353 billion kWh

Director and Executive Operating
Officer, General Manager ofElectrical, Environment, andSmart Energy Headquarters

Value creation
strategy

Strategy bybusiness field

Biomass
Geothermal
heat
Hydropower

198.3 billion kWh

Related video on
YouTubeData section

GovernanceBusiness locations
Furudono, Fukushima Prefecture

Woody biomass power
generation

Accelerating business expansion that
contributes to carbon neutrality and GX
As concerns over global warming have risen, we havebeen contributing toward carbon neutrality and green
transformation (GX) while positioning renewable energy
business as a pillar of our urban infrastructure businesswith the aim of constructing robust business infrastructurethat is not at the mercy of economic and social trends.
One specific business is our woody biomass gasification
power generation utilizing forest resources. Utilizing
technology developed in the design and construction of
woody biomass power plants, we are building
company-owned power plants with the aim of generating
steady sales and profitability over the next 20 years
through Japan’s Feed-In Tariff (FIT) scheme. Woody
biomass gasification power plants are expected to spreadas distributed power sources for local production and local
consumption, and they also help to invigorate forestry andestablish circulation cycles in forests. We plan to begin selling

Our value creation

Anticipated power generated per year

Approx.

15.23

million kWh(equivalent to combined annual power
consumption of 3,500 households)

Business locations
Ashikaga,Tochigi Prefecture
Anticipated power generated per year

Approx.

56.80

million kWh(equivalent to combined annual power
consumption of 13,300 households)

Solar power generation on agricultural land(solar sharing)
Together with partners including Tokyu Land Corporation, we built andlaunched operation of a pilot facility for solar power generation on
agricultural land which uses land equipped with a solar power plant as
farmland in Higashi Matsuyama, Saitama Prefecture. As we acquire dataand expertise, we will aim to spread and expand solar sharing.
Businesses schemes and achievements sought
Joint partners

×Field testing / Promoting understanding of cutting-edge
technologies / Developing and improving new technologies
Local decarbonization / Local partnerships / Agricultural support, etc.

Building self-owned power lines inoffshore wind power generation
Our Civil Engineering Headquarters and Group companies possess
various telecommunications civil engineering technologies.
Throughout Japan, we handle installation of pipes for extra highvoltage cables using the Earth Shuttle Method for undergroundexcavation without damaging the sea floor, as well as
construction of self-owned power lines (design andconstruction of pipes, jacking, and undergroundstructures) that extend all the way to the grid.

Wind power
Earth Shuttle Method

Solar power

2020

2030 (Target)(FY)

Source: Agency for Natural Resources and Energy, “Renewable Energy Policy in the Future”
Note: From the Sixth Strategic Energy Plan

55

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Exeo Group Integrated Report 2023

56

Message fromthe President

System solutions business

System solutions
business

In addition to providing ICT-based solutions in theJapanese market, we also operate a wide variety ofservices in overseas markets.

Services¥

13.2 billion

191.0

¥

120.7 billion

Data section

Governance

Plans for fiscal 2023

Key achievements in 2022
• Launch of a core company for systems
development, operations & maintenance• Utilized M&A to develop global business

Summary of fiscal 2022¥
billion in total(FY2022)

Information Systems Unit

Net sales

Main businesses

Contract development of large-scale systems, business support
solutions, network integration (servers, wireless LAN, security,
cloud, etc.)

¥

120.7
120.5

billion120.7 118.4

Market environment & strengths

Making maximum use of all-around technologies and expertisefrom consulting to design, development, and operations for various
types of solutions, we assist customers in overcoming their issues
and implementing DX in order to create new added value geared
toward the realization of a digital society.

Services Unit
Operations and maintenance of customers’ systems, sales andmaintenance of various licenses, providing other managed services

2022

2021

2023
(Plan)(FY)

Integrated information systems
support from consulting to design,development, and operations

Net sales

Main businesses¥

13.2

billion
16.2

13.2

Market environment & strengths

We need to provide all types of services, from various forms ofsubscription agreements and system operations and monitoring torecovery operations and end user support, all in one place. We
will provide services that leverage the knowledge of eachcompany in the Group.

8.8

2022

2021

2023
(Plan)(FY)

In the system solutions business, we worked toward
creating new business opportunities and boosting earnings
by providing efficient services that leverage economies ofscale, from high-level consulting to operations andmaintenance, all in one—with the two core companies
established through business reorganization (Exeo Digital
Solutions, Inc., Exeo System Management, Inc.) playing acentral role.
Utilizing competitive tools such as ServiceNow andiGrafx, we implement DX at local governments and atcompanies and help to optimize systems. At the sametime, we also continue to provide services that leverage
the strengths of our Group for projects in the educational
field, including for elementary, junior high, and high schools.
In global business, we are steadily growing not only in
our core area for new value creation in Asia Pacific, butalso throughout the world. We operate in the field of
solutions including digital trade platforms, and engineeringbusiness for electrical and air conditioning, in addition to
our refurbishments business for used IT devices, and ourindoor telecommunications infrastructure sharing businessin Indonesia, along with other businesses that create newvalue. Furthermore, with the addition of Telistar Solutions
to the Group, we are also establishing an organizational
system for stronger recurring business internationally.

Offering round-the-clock managed
services

Global Unit

• Bolster resources, including through reskilling• Expand refurbishments business• Improve global business profitability
through operational reforms

Construction for telecommunications, electrical, and air
conditioning equipment, and providing various types of solutionsin the Asia-Pacific region and other overseas markets

Exeo Group Integrated Report 2023

As the midpoint year in our Medium-Term Management
Plan, we aim to further improve our productivity andprofitability in fiscal 2023 by building up our all-in-one
services from consulting to operations and maintenance inorder to grow this business into a pillar of our Group’s
overall business.
We plan to create even more opportunities andexecute a shift into higher value-added business domains
by bolstering our human resources through reskillingwithin the Group, and by acquiring skills and talentthrough means such as M&A and mid-career hiring.
With our two IT core companies playing a central role,
we will leverage the economies of scale in the Groupoverall to provide services more swiftly and efficiently andstrengthen our organizational system for operations andmaintenance. Doing so, we will make progress toward
expanding our managed services and also provide newvalue-added services.
In our global business, important challenges in fiscal
2023 will be to boost earning power by shifting from theupfront investment phase to the profit contribution phasealong with the development of the business and to reform
operations in the businesses we have acquired. We willbalance these with investment in growth businesses suchas refurbishments and infrastructure sharing while striving
toward continued growth.

¥

56.2

Carbon-neutral society

Procurri Corporation supports life cycle managementof IT devices

billion

56.2

66.5

Singapore-based Procurri operates a maintenance business to extend the useful life of computers,
smartphones, and other IT devices, in addition to IT asset disposal (ITAD) to properly erase the data on suchdevices once they are no longer used. They also operate in refurbishments to restore and re-circulate IT
devices from which data has been adequately deleted. Their refurbished products are garnering a great dealof interest as a business that helps to reduce environmental impact since it emits less CO2 than the
production of new IT devices and reuses the materials in the devices.

Market environment & strengths

With our global business management headquarters Exeo Global
playing a central role, we aggressively challenge ourselves to undertake
business that would be unfeasible in Japan and create value on a
global level with the aims of pursuing new business opportunities andmaking ourselves more competitive, including in overseas markets.

Fiscal 2023 plan and forecast

Vision of society in 2030
Net sales

Main businesses

57

Strategy bybusiness field

Value creation
strategy

Information
Systems

Global56.2 billion

Our aims in the Medium-Term
Management Plan
• Focus on high value-added
business• Expand recurring business

Sales composition by unit¥

Our value creation

23.4

2021

2022

2023
(Plan)

Data deletion being performed on IT devices(FY)

Offering various solutions, primarily in
the Asia-Pacific region

Exeo Group Integrated Report 2023

58

Message fromthe President

System solutions businessOur value creation

Value creation
strategy

Strategy bybusiness field

Data section

Governance

Southeast
Asia
Feature 2

IT managed services

Strengthening our global business(system solutions field)
Singapore-based Telistar operates in the IT
managed services business. They improvecustomers’ operational efficiency whileeliminating their information security risk
when disposing of devices by handling aseries of cumbersome administrative tasks
for them, from introducing IT devices
through deleting data at the time of disposal.

Cultivating markets in rapidly growing
Southeast Asian economies
Exeo Global Pte Ltd which oversees our global business
was established in Singapore in November 2018 andoperates in the three fields of urban infrastructure including
telecommunications facilities, system solutions, and new
business. Targeting Southeast Asia which is undergoing
continuous economic growth and is home to roughly 670
million people—just under 10% of the world’s population—
we are expanding our new growth opportunities while
also distributing risk and making ourselves more competitive.
In the urban infrastructure business which has a highdegree of affinity with our domestic business, we aredelivering proposals for high value-added projects such as
construction of overseas data center facilities that leverage
our expertise honed in Japan. We are also increasing ourcompetitiveness by incorporating methods such as BIM and
DFMA which raise the efficiency of construction projects.
Additionally, we own indoor antenna apparatus at more

Fumitoshi Imaizumi

Director and Managing
Operating Officer, General
Manager of Global Business
Department
Managing Director andPresident, Exeo Global Pte. Ltd.

than 1,300 facilities in Indonesia, and we are the country’s
largest business operator providing shared-use services tomobile carriers. These services also contribute to earnings
stability since they generate steady recurring revenue.
In the field of system solutions, we operate arefurbishments business for IT devices. Demand forsustainable use of IT devices is increasing, as are needs forusage of devices even after they are no longer supportedby the manufacturers. This has mainly been happening
overseas, but these needs are now emerging in Japan aswell. We are launching new IT managed services forcustomers to use in subscription format that offer evenmore added value by combining maintenance and callcenter support with the IT devices among our Group assets.
In terms of new business fields, we are investing inbusinesses such as digital trade platform services thatcan serve as new revenue bases, as well as newtechnologies that show promise for future synergies with
our existing businesses.
Our current goal is for global business to comprisearound 10% of both the net sales and operating profit
targets in the Medium-Term Management Plan
(FY2021-FY2025). Next fiscal year’s plan calls for sales of¥66.5 billion, so the path to achieving this goal is taking
shape. As we work toward efficiency improvements inexisting businesses and turning new business profitable
quickly along with transitioning from the investment phaseto the profit generation phase, we will be fully dedicatedto achieving this goal.

M&E for electrical, air conditioning, and signals(urban infrastructure field)
Teaming up with Singapore-based companies LAE, Winner,and 68 Systems, we have been active in many types ofprojects including subway construction. Our ability to handle
all types of construction related to electrical, air conditioning,and signals ourselves is a major advantage.

Indoor neutral
hosting(urban infrastructure field)
dhost owns antenna transmission systems
for cell phones inside facilities where large
numbers of people gather, includingIndonesian shopping centers, hotels, officetenants, hospitals, universities, and airports.
We provide these as shared-use services tomobile carriers.

Group companies in our global business
Number of consolidated subsidiaries
Non-consolidated companies & affiliates(Companies)

65

34
22

19
5

20

14
2018

59

Exeo Group Integrated Report 2023

2

2019

2020

36
2

3

32

33

2021

Trade platforms(new business field)

6

GUUD provides platforms that digitalize global
business transactions, facilitating a path awayfrom conventional models that rely on manual
work while improving operational efficiency. Theirdigital trade platforms currently being provided in
Singapore have a 20% market share, making
them the largest business operator in the field.

59

2022

(FY)

Exeo Group Integrated Report 2023

60

Message fromthe President

Conversation on governance

We will strive to raise the effectivenessof our Board of Directors
and strengthen our governance
Just how has our corporate governance evolved thus far, and what type of governance should
we seek to further increase our business value?
Certified Public Accountant Tomoko Aramaki, who has been an Outside Statutory Auditor
for Exeo Group, Inc. since June 2018, has a conversation with President and CEO Tetsuya Funabashi.*

Tetsuya Funabashi

Tomoko Aramaki

Assumed the role of Vice President and Representative
Director of Exeo Group, Inc. in 2018 after previously
serving as Senior Executive Vice President, NTT
Communications Corporation. Became President and
CEO in 2019.

Certified Public Accountant. Established Aramaki CPA
Office in 2006. Became an outside statutory auditor of
Exeo Group, Inc. in 2018 (vacated role in June 2023).

President and CEO

Outside Statutory Auditor* This conversation was recorded in April 2023. In June 2023, Tomoko Aramaki completed her term as outside statutory auditor and newly assumed a role as outside director.

61

Exeo Group Integrated Report 2023

Our value creation

Value creation
strategy

Strategy bybusiness field

Governance

Data section

Five years in which the Group’s businessdomains broadly expanded

Evolving the way meetings proceed
to facilitate better discussions

Funabashi • Five years have already passed since you
became an outside statutory auditor here. Looking backon these past five years, what are your impressions?
Aramaki • In short, my impression is that I have witnesseda major turning point for this company. We established
new domains in urban infrastructure and system solutions
to transform a business structure that had previously been
centered on telecommunication facility construction, laying
a foundation of expertise honed in building
telecommunications infrastructure while steadily
expanding our business realm. We are also aggressively
expanding globally, and our nimble M&A investments arealso increasing. With those big movements taking place, I
have tried to monitor in a constructive manner as a
statutory auditor with an understanding of the aims andintentions of the business execution.
Funabashi • The larger our realm of business grows, as
you mentioned, the more important it is to get specialist
expertise from the outside and advice from objective
viewpoints. Particularly for M&A, I think we really needoutside officers pointing things out and giving advice fromvarious perspectives, including about how much risk totake on. Not only is there M&A to supplement thetechnologies and domains that we lack, but there are also
cases where we want to further enhance our corestrengths. I feel that you have been thinking together withus about approaches to increase our business value, taking
the various industry and market environments into
consideration.
Aramaki • The primary function of a statutory auditor isto ascertain the risk involved in business execution and try
to avoid damaging the company’s business value. At thesame time, I have come to realize that as the content of
the work grows broader, we will not be able to accomplishthat mission without having a broad range of knowledge
and the latest information related to each business andstrategy in addition to my own fields of expertise infinance and accounting. Every day, I try to raise myknowledge level by staying up to date on what ishappening in various fields, everything from ICT industry
trends to geopolitical risks in different parts of the world.

Aramaki • The atmosphere in our Board of Directors andBoard of Statutory Auditors really is conducive toparticipants freely speaking their mind. We outside officers
also speak up about our ideas time and again with nohesitation (laughing). You also chair the Board of Directors
meetings. What do you keep in mind to make themeetings more active?
Funabashi • Being CEO might make me the highest
ranking on the executive side, but I definitely do not consider
it best for 100% of the motions raised by the executive side
to be passed. The most important function of the Board of
Directors is to thoroughly debate matters with outside
perspectives and expert knowledge also being represented.
To make that happen, what we need are level-headedness
and rationality. We on the executive side feel strongly about
our own plans, and we are prone to getting heated about
them. As chair, I believe that my biggest mission is to havethe level-headed outlooks of our statutory auditors andoutside directors keep that passion checked and receive
strategic advice from them while leading discussions toward
rational conclusions that benefit our growth and our future.
That is why I make it a point to facilitate discussion among
everyone at the meetings and only make comments myself
as CEO in the most critical moments.
Aramaki • That makes sense. Sometimes in meetings,
opinions are divided and discussions get heated, but fromyour perspective then, these are healthy debates. Is that right?
Funabashi • That is correct. If any of the participants have
lingering anxieties or doubts, the meetings should notproceed without resolving them. Particularly when making
risk judgments, I think we need to heavily emphasize thelevel-headed perspectives of our outside members and do
everything we can to discuss until we reach a consensus
among all participants whenever possible.
Aramaki • Over these past five years, it feels like the way
Board of Directors meetings are run has evolved
significantly. Now, the meetings really are a forum where
everyone can engage in focused discussions on the truly
important topics.
Funabashi • That is the result of improvements we havemade in response to things you have all pointed out. Oneof these was to continuously request efforts on theexecutive side to thoroughly provide easy-to-understandExeo Group Integrated Report 2023

62

Message fromthe President

Conversation on governanceexplanations that clarify the main points throughface-to-face briefings rather than simply distributing thematerials in advance. We are also taking care to attentively
answer the questions received from participants in theadvance briefing sessions and have them prepared for the
meetings with a good understanding of the backgrounds
and aims of the agenda items.
Aramaki • Indeed, it does seem that the presentations andmaterials preparations are done in a far better manner thanwhen the advance briefings first began. Since we also receive
compiled reports at the beginning of meetings about which
directors had which questions and got which responses in
the advance briefing Q&A sessions, everyone is able toengage in substantial discussions in the actual meetings.

Continuously monitoring M&A transactions
from the initial stages
Aramaki • Various types of agenda items are deliberated
in the Board of Directors, but where I think evolution has
been particularly evident compared to five years ago is thehandling of M&A transactions. When I first arrived here,
many M&A cases were being brought up for discussion in
the stage immediately before going through with thepurchase after due diligence was finished, and in many cases,
the events leading up to that point were not particularly
clear. In response, I asked to have information provided alittle earlier on, and recently the Board has been sharing
information in each phase starting with the identificationof each target and all the way through the due diligenceand closing phases. I consider that to be a major evolution.
Funabashi • Recently our M&A cases have been growing
in number, and unfortunately, some of those cases havenot gone very well. Having experienced that myself,
I thought it would be important to also share the details
with outside officers from the early stages and have themincluded in the deliberations in order to prevent those
failures from repeating. Now, we take your advice and thethings you point out very seriously, and we are thoroughabout delivering feedback in Board of Directors meetings
after discussing them in greater depth internally among
the executives when necessary.
Aramaki • It seems that greater emphasis has also beenplaced on the post-acquisition integration process, theso-called PMI, over the past few years, and the way that
we handle it has also evolved. However, I am a bit worried
that with more than 130 companies now consolidated,administrative departments which play the leading roles inhandling PMI are chronically short-staffed. One potential
way to solve this is to preemptively compile all of thepoints that seem likely to cause problems after the merger
such as things related to human resources systems orinformation systems, incorporate these into contracts, clarify
the conditions, and push forward with these until closing.
Funabashi • Thank you for the advice. That means
incorporating the PMI perspective ahead of time into
pre-M&A transaction processes. Indeed, our M&A is still inthe developmental stages in that area. Going forward,
I would like to standardize our approach to negotiating
conditions to a certain degree, and find ways to make ouradministrative departments more efficient by handling PMI
in a systematic manner.

Vector Meetings to understandthe company more deeply
Aramaki • One distinctive feature of our Board of Directors
is the unique meeting called the “Vector Meeting.” I consider
this an excellent operating mechanism.
Funabashi • We began that when we had the idea to lookat matters in the phase before they become agenda items—in gardening terms, like radishes growing in the field while
they are still covered in mud—and explore what direction

63

Exeo Group Integrated Report 2023

Our value creation

Value creation
strategy

we could take our proposals. For example, in an M&A case,
we would say in the investigative phase before getting
involved, “We have this potential target, what do you think?”
and have the others look at it, then if we got the impressionthat it could be taken up in actual Board meetings, we would
properly prepare it among the executives as an agenda
item and bring it up in a Board of Directors meeting.
Aramaki • Quite a broad range of topics other than M&A
have also been discussed at Vector Meetings. Sometimes
there have been brainstorming workshop-type activities tobring up major global trends or issues that many
companies face and consider how we would deal withthem if they happened here. I feel that excellent
discussions have taken place at these meetings, about an
extremely wide range of topics.
Funabashi • Since fiscal 2022, we have also offered more
opportunities for site visits to our different business divisions foroutside officers to gain a deeper understanding of our Group.
Aramaki • Being able to see the places where actual work
is being done and speak directly with the people whowork there really is a great learning opportunity for us
outside officers. In January 2023, I made my first site visit
to an underground tunnel built by our Group, and it gave
me a deep sense of our social significance and just how
we are contributing to the world. I would love the chance
to see various other worksites and gain an even deeper
understanding of our Group’s business going forward.

Boosting visibility and brand power
as a company will also be critical
Funabashi • If you have noticed any issues with our Boardof Directors or governance, please take this opportunity toshare them.
Aramaki • Thank you, I actually would like to discuss capital
policy and allocation of funds in greater depth. We havebeen investing more in M&A to expand our businessdomains and grow globally in recent years, but various otherpossible directions for growth investment exist, such as
different types of capital investments, R&D, or DX. The
Company also actively pursues shareholder returns, including
through share buybacks. It would be great if you could shareyour basic policy on cash allocation in that regard, and thenwe could consider various growth strategies based on that.
Funabashi • Our CFO (director in charge of finance) was
added to the Board of Directors starting fiscal 2023, so I

Strategy bybusiness field

Governance

Data section

also hope that we can engage in more intensive in-depth
discussions about overall capital policy and financial
strategy. For cash allocation as well, I would like toseparate out set periods of maturity and discuss with ourofficers while sharing with them the story of how we willraise and allocate funds by what dates.
Aramaki • Another thing I would like to mention is that
our Group needs to raise its profile in society. Having a low
profile is said to be the fate of B-to-B companies, but withhaving revamped our name and now increasingly
expanding our business into new domains while broadly
contributing to society, I think it would be highlymeaningful to be recognized by more people. In addition
to the effects on human resources strategy going forward,that would also definitely boost the pride and motivationof employees who work for the Group and lead to greaterbusiness value. I think it would be a good idea tocommunicate more broadly about the combined
capabilities of the Group, not just about our businessdescriptions and performance but also about non-financial
initiatives such as ESG.
Funabashi • Thank you, yes, I also feel strongly thatraising our social profile as a corporate group is one of our
top management priorities. In addition to public relations
and IR activities targeting a broad range of stakeholders,
I also want to dedicate more energy to branding activities
within the Group and show the world various scenes of
our Group employees working together to accomplish
great things. I look forward to your ongoing support.

Exeo Group Integrated Report 2023

64

Message fromthe President

Board of Directors (As of June 23, 2023)

Directors

Value creation
strategy

Our value creation

Strategy bybusiness field

Governance

Data section

Statutory auditors
Outside Independent

Newly appointed

Tetsuya Funabashi

Yasuo Otsubo

Shigeki Hayashi

President and CEO
Born in 1956
Director tenure: 5 years
Number of the Company’s shares held: 33,500

Director and Operating Officer,
General Manager of Accounts andFinance Division Operating Officer, CFO
Born in 1967
Director tenure: Appointed in June 2023
Number of the Company’s shares held: 1,500

Koichi Mino

Yasushi Kohara

Standing Statutory Auditor
Born in 1959
Statutory Auditor tenure: 1 year
Number of the Company’s shares held: 28,000

Outside Independent
Director and Executive Operating
Officer, General Manager of Corporate
Planning Division
Born in 1960
Director tenure: 3 years
Number of the Company’s shares held: 28,800

Director
Born in 1953
Director tenure: 5 years
Number of the Company’s shares held: 2,300

Noriyuki Watabe

Naoko Iwasaki

Director
Born in 1975
Director tenure: 4 years
Number of the Company’s shares held: 0

Yuichi Koyama

Tatsushi Mochizuki

Statutory Auditor
Born in 1963
Statutory Auditor tenure: 2 years
Number of the Company’s shares held: 0

Newly appointed Outside Independent

Newly appointed

Shinji Kojima

Eiko Osawa

Standing Statutory Auditor
Born in 1960
Statutory Auditor tenure: Appointed in June
2023
Number of the Company’s shares held: 4,500

Outside Independent
Director and Executive Operating
Officer, General Manager of Electrical,
Environment, and Smart Energy
Headquarters
Born in 1958
Director tenure: 1 year
Number of the Company’s shares held: 11,000

Kimiko Takahashi

Statutory Auditor
Born in 1963
Statutory Auditor tenure: Appointed in June
2023
Number of the Company’s shares held: 0

Outside Independent

Shinnosuke Yamada

Statutory Auditor
Born in 1956
Statutory Auditor tenure: 3 years
Number of the Company’s shares held: 0

Outside Independent
Director and Managing Operating
Officer, General Manager of Group
Business Promotion Division
Born in 1959
Director tenure: 6 years
Number of the Company’s shares held: 20,300

Skills matrix of directors and statutory auditors

Director
Born in 1956
Director tenure: 3 years
Number of the Company’s shares held: 1,100

Name

Corporate
management& ESG

Innovation& DX

Engineering

Marketing &global business

Finance &accounts

Legal, humanresources &labor relations

Tetsuya Funabashi
Koichi Mino
Noriyuki Watabe
Yuichi Koyoma

Outside Independent

Takafumi Sakaguchi

Director and Managing Operating
OfficerPresident and Representative Director,
Seibu Electric Industry Co., Ltd.
Born in 1964
Director tenure: 2 years
Number of the Company’s shares held: 6,300

Keiji Yoshida

Director
Born in 1953
Director tenure: 2 years
Number of the Company’s shares held: 1,800

Takafumi Sakaguchi
Directors

Fumitoshi Imaizumi
Shigeki Hayashi
Yasushi Kohara
Naoko Iwasaki
Tatsushi Mochizuki
Keiji Yoshida

Newly appointed Outside Independent

Fumitoshi Imaizumi

Director and Managing Operating
Officer, General Manager of Global
Business Department
Managing Director and President,
Exeo Global Pte. Ltd.
Born in 1963
Director tenure: 1 year
Number of the Company’s shares held: 6,700

Tomoko Aramaki

Tomoko Aramaki

Director
Born in 1968
Director tenure: Appointed in June 2023
Number of the Company’s shares held: 0

Yasuo Otsubo
Shinji Kojima
Statutory
Auditors

Shinnosuke Yamada
Kimiko Takahashi
Eiko Osawa

Note: These are the skills that directors and statutory auditors are particularly expected to have, and this table does not comprehensively indicate their entire skillsets.

65

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Exeo Group Integrated Report 2023

66

Message fromthe President

Corporate governance

Strategy bybusiness field

Value creation
strategy

Our value creation

Governance

Data section

Corporate governance
Officers’ activities in FY2022

Governance system and rationale for adopting this systemNamesupervises business execution. Operating officers execute
operations based on the Board of Directors’ decisions.
Furthermore, in our Management Council we discuss
important matters pertaining to business execution.

The Company has adopted a Company with Audit andSupervisory Board format, having determined this system
to be the most conducive to ensuring appropriate
corporate governance. Members of the Board of Statutory
Auditors attend meetings of the Board of Directors andother important meetings in accordance with the audit
policy and audit plan. They observe, from a perspective of
fairness and impartiality, the execution of duties by the
Board of Directors and audit the business and financial
conditions of major offices and Group companies.
We have also adopted an operating officers system toseparate the management decision-making and supervisory
function from the business execution function, to achieve
prompt and appropriate decision-making and businessexecution while further strengthening our corporate
governance. The Board of Directors, chaired by the President
and CEO, makes decisions on important matters andSimplified chart of corporate governance system
FormatCompany with Audit andSupervisory Board

Directors

12(including 5 outside directors)

Auditors5(including 3 outside auditors)

Directors—

100% (14/14)

100% (3/3)

Takafumi Sakaguchi

100% (14/14)

100% (2/2)

Fumitoshi Imaizumi

100% (10/10)

Tomohiro Kurosawa

100% (4/4)

100% (1/1)—

Hideo Higuchi

100% (4/4)

100% (1/1)—

Yasushi Kohara

100% (14/14)

100% (3/3)

100% (3/3)——

100% (2/2)—

100% (3/3)

—

—

—

—
100% (1/1)—

100% (2/2)

—
—
—

—

Yes

100% (14/14)

100% (3/3)

100% (3/3)—

31

Yuki Sakuyama

100% (4/4)——

100% (5/5)

Nomination Committee andCompensation Committee

Yasuo Otsubo

100% (10/10)——

100% (9/9)

Masato Suwabe

100% (14/14)——

100% (14/14)

Tomoko Aramaki

100% (14/14)——

100% (14/14)

Shinnosuke Yamada

100% (14/14)——

100% (14/14)

Kimiko Takahashi

100% (14/14)——

100% (14/14)

Appointment/Dismissal

Appointment/Dismissal
Determination of the appropriatenessof accounting audits

Board of Corporate Auditors
Statutory auditors

Report

Audit

ReportReportReportAudit

Consultation, Directions

Response, Report

Internal Control Committee

Note: Numbers in parentheses are times attended/number of meetings held during term as director. Discrepancies in number of meetings held are results of differences in time of
appointment and/or leaving the position.

ReportDirections

ReportInstructions

Corporate Lawyer

Sustainability Committee

Femaledirectors

Composition of the Board of Directors

Measure2023

Increased the number of outside directors(from 4 to 5)
Outside officers now chair both theNomination Committee andCompensation Committee

7 inside
5 outside

12 in total

2

2021

Increased proportion of outside directors

7 inside
4 outside

11 in total

1

2020

Increased the number of outside directors(from 3 to 4)
The majority of the members of theNomination Committee and Compensation
Committee are outside members

8 inside
4 outside

12 in total

1

2018

Increased the number of outside directors(from 2 to 3)

12 inside
3 outside

15 in total

1

2015

Increased the number of outside directors(from 1 to 2)
Using a third-party organization, conducted
a questionnaire for evaluating theeffectiveness of the Board of Directors

9 inside
2 outside

11 in total

1

2014

Appointed an outside director (1)11 inside
1 outside

12 in total

1

2009

Adopted an operating officers system

8 inside

8 in total

0

2003

Established Nomination Committee andCompensation Committee

18 inside

18 in total

0

Information Security Committee

Group companies

Outside director

Transition to a stronger governance system

Collaboration

Collaboration

Exeo Group Integrated Report 2023

100% (14/14)

Kenji Asano

100% (1/1)

Keiji Yoshida

Risk Management Division [Support Division/Internal Audit Division]

67

Yuichi Koyoma

100% (2/2)—

Business Risk Management Committee

Internal audit—

100% (3/3)

Business and administrative departments and branches
Report100% (10/10)

100% (3/3)

Compliance Committee

Supervision

100% (14/14)

Noriyuki Watabe

100% (3/3)

Management Council

Operating officers and organizational heads
Representatives of Group companies

Koichi Mino

100% (3/3)

President

Report—100% (14/14)

ReportDirections, Supervision—

100% (14/14)

100% (14/14)

Independent Auditor

Supervision—

Tetsuya Funabashi

Tatsushi Mochizuki

Statutory
Auditors

Directors

Response

Board ofCorporate Auditors

Naoko Iwasaki

Internal units of the Board of Directors

Audit

Compensation
Committee

14

Operating officers

Board of Directors

Nomination
Committee

Number of Board of Statutory Auditors
meetings held this fiscal year

General meeting of shareholders

Consultation

Board of Directors

14

Our corporate governance system (As of June 23, 2023)

Nomination Committee
Compensation Committee

Chair or committee chair

Number of Board of Directors
meetings held this fiscal year

Operating officers system

Appointment/Dismissal

Independent officers

Exeo Group Integrated Report 2023

68

Message fromthe President

Corporate governanceNomination Committee and Compensation
Committee
We have established a Nomination Committee andCompensation Committee comprised of directors including
independent outside directors who were appointed in the
Board of Directors, where we build common understandingon the evaluation criteria and compensation standards ofeach director and improve their supervisory function. Eachcommittee is comprised of a majority of independent
outside directors.
The Nomination Committee deliberates on matters suchas the nomination of candidates for directors and dismissalof directors. The Compensation Committee deliberates onmatters such as remuneration and bonuses for Directors.
Each reports relevant items to the Board of Directors.
During fiscal 2022, the Nomination Committee held
discussions on the composition of the Board of Directors withthe perspective of diversity in mind, and the director candidates
selected as a result of these discussions were deliberated.
The Compensation Committee for fiscal 2022 referred
to governance surveys and other information to observe
trends at other companies and investor perspectives andheld discussions with the aim of bettering our disclosuresrelated to officer compensation. They also proceeded withconsiderations for awarding stock-based compensation toGroup companies and provided a report in a Board of
Directors meeting.
Meetings in fiscal 2022
Nomination Committee

3 meetings

Compensation Committee

3 meetings

Composition of the Nomination Committee for fiscal 2023
Committee
chairmanMochizuki

Committee members

Mino

Hayashi

KoharaIwasakiComposition of the Compensation Committee for fiscal 2023
Committee
chairman

KoharaCommittee members

WatabeOutside director

69

Exeo Group Integrated Report 2023

KoyamaYoshidaAramaki(honorifics omitted)

Value creation
strategy

Our value creation

Strategy bybusiness field

Governance

Data section

Board of Statutory Auditors

auditors participated in these activities.

Evaluating the effectiveness of the Board of Directors

In the Board of Statutory Auditors, we consider auditing
policies and audit plans, the development and operational
status of internal control systems, the appropriateness ofaccounting audits, and agreements on the evaluations andcompensation of accounting auditors. In fiscal 2022, theBoard of Statutory Auditors received detailed explanations
from the Finance Department and accounting auditors,
held lively discussions, and expressed opinions aboutchanging the categorization of our reporting segmentsfrom corporate group to business domain, and about
considerations for Key Audit Matters (KAM).
For statutory auditor audits, they conduct audits
according to the auditing policy and audit plan in compliance with the statutory auditor audit standards determinedby the Board of Statutory Auditors. Specifically, they attend
important meetings such as the Board of Directors, audit
the proceedings and resolutions, and express opinions
when necessary. Aside from that, they conducted 71
interviews and field visits with the representative director,
head office executives, main business locations, andsubsidiaries (in fiscal 2022, the planned number of fieldvisits was limited and shifted primarily to online meetings
due to the COVID-19 pandemic), and audited business
operations and financial conditions.
Standing statutory auditors report to the Board of
Statutory Auditors on the results of their active communication and information sharing with related departments
on important decision-related documents viewed, deliberations in the Management Council, and on the various
issues. In everyday auditing activities, they gather information internally to comprehend the issues in our businessgroups and share information and opinions with outside
statutory auditors in a timely manner. Outside statutory
auditors express opinions from broad perspectives in the
Board of Directors and Board of Statutory Auditors basedon their extensive range of work experience and high-level
expertise. Exchanging opinions also with the President andCEO, they receive explanations of management policies andleverage their expertise and experience to express theiropinions from an outside perspective.
In fiscal 2022, outside directors and outside statutory
auditors observed worksites, visited business locations, andexchanged opinions with general managers and younger
executive-class personnel to gain a deeper understandingof the business being done. Three outside statutory

Internal Control Committee

To enhance the function of the Board of Directors andbusiness value, we evaluate the effectiveness of our Board of
Directors based on the results of questionnaire surveys among
all Directors and Statutory Auditors, which are collected andanalyzed by an external organization to ensure objectivity.
Based on the results of the analysis and discussion in the
Board of Directors, it was confirmed that our Board of
Directors has adequate scale and structure and is appropriately
operated to ensure proper decision-making on importantmanagement agendas and supervision of business execution.
As part of our efforts to strengthen our governance, we areworking to increase our ratio of female officers. Since June
2023 we have one additional female independent outside
director. Now with two female independent outside directors
and two female independent outside statutory auditors for a
total of four, women now hold 24% of our officer roles.
In addition, we continued to distribute Board of Directors’
meeting materials as early as possible, to enhance theexplanations that we provide in advance to independent outside
directors and independent outside statutory auditors, and toarrange for site visits by independent outside directors. During
fiscal 2022 under review we also conducted “Vector Meetings,”
for 19 projects, in which all business units get on the same pageby discussing their business strategies among other matters at an
early stage. The Sustainability Committee also holds sufficient
discussions on initiatives to improve sustainability such as ESG and
the SDGs, and reports to the Board of Directors on a regularbasis. Outside directors and outside statutory auditors actively
make sound comments from an independent standpoint
grounded in sufficient insight in discussions at meetings of theBoard of Directors. We see the undeniable effects of these efforts
in the strengthened effectiveness of the Board of Directors.
Going forward, based on these results of Board of
Directors effectiveness evaluations and opinions, theCompany’s Board of Directors will fully consider measures for
improving its effectiveness and continue to implement
initiatives for enhancing its functions.

Based on our Basic Guideline for Establishing Internal Control
Systems, we established an Internal Control Committee(Committee chair: President and CEO) tasked withestablishing organizational systems to ensure observance oflaws and regulations, operational effectiveness andefficiency, and the reliability of our financial reports, inaddition to comprehending and evaluating the overall
operational status of the applicable internal control systems.
Related committees have been established under theInternal Control Committee. These are the Compliance
Committee, Business Risk Management Committee, andInformation Security Committee.
Meetings in fiscal 2022
Internal Control Committee

2 meetings

Compliance Committee

4 meetings

Business Risk Management Committee

15 meetings

Information Security Committee

4 meetings

Sustainability Committee
Chaired by the President and CEO, the Sustainability
Committee is positioned as an advisory body to theManagement Council and has the stated purpose of“deliberating on our direction, important issues, goal setting,and information disclosure in terms of sustainability andmonitoring the status of initiatives as part of the Group’sbusiness strategy,” in the overall scheme of our operations.
In principle, this committee meets twice per year todeliberate and report to the Management Council and
Board of Directors on policies and the results of initiatives.
Organizational system for sustainability
Board of Directors
Deliberate, ReportManagement Council
Deliberate, Report

Sustainability Committee
Chair: President and CEO
Office: Sustainability Promotion Officein the General Affairs Department

Director appointment, composition, anddevelopment of successors
Desired qualities and appointment process
Our method for choosing candidates for directors is tohold deliberations in the Nomination Committee, aninternal unit of the Board, on those with excellent character

Exeo Group Integrated Report 2023

70

Message fromthe President

Corporate governanceand insight, strong moral character, the energy to drive
transformation, leadership skills, and the ability to makeaccurate decisions. The representative director then gives
recommendations, suitability of the candidates is deliberated
in the Board of Directors, after which offers are made andmotions sent to the General Meeting of Shareholders.
Appointments and dismissals of representative directors andexecutive directors are decided in the Board of Directors.
If there is a director who should be dismissed, theBoard of Directors raises a motion for dismissal of thedirector in the General Meeting of Shareholders.
To choose candidates for statutory auditors, therepresentative director recommends those with business
management experience, expertise in finance and accounting,and the high-level insight needed to fulfill the role of a statutory
auditor. Motions are then sent to the General Meeting of
Shareholders after approval by the Board of Statutory Auditors.
Composition of the Board of Directors
We are committed to improving the activity level andgovernance of our Board of Directors by ensuring balanceand diversity among their backgrounds areas of expertise.
Based on the belief that our number of directors can enable
us to swiftly and accurately accommodate drastically changing
business environments, we employ an operating officers
system in order to further accelerate our decision-making.
Successor planning
We promote and attract management personnel from theoutside in addition to internally. From among these
personnel, our representative director identifies individuals
who deeply understand our Group philosophy andmanagement vision, have high ethical standards, leadership
qualities, and the capability to drive the ongoing growth of
the Group, and selects them as successors. Decisions onthese successors are then made after deliberation in the
Nomination Committee and Board of Directors.
Composition of director compensation(excluding outside directors)

To decide the amounts of compensation for directors and theapplicable calculation methods, we have a three-pronged
basic policy of “effectively-functioning incentives to drive
medium- to long-term growth in business value,” “setting
levels that enable us to secure and retain outstanding talent,”
and “decision-making processes that are transparent andfair.” Our policy concerning decision-making is deliberated
by the Compensation Committee, which is comprised of
directors including independent outside directors appointed
by the Board of Directors (chaired by an independent
outside director), and then determined by resolution of theBoard of Directors.
Compensation for directors (excluding outside
directors) consists of base compensation, bonuses, andrestricted stock, the ratios for which are as indicated below(ratios include employee salaries and bonuses in the caseof directors who also serve as employees).

Since outside directors and statutory auditors are
independent from the execution of business, theirremuneration is limited to base compensation.
Delegated determinations
The President and CEO determines the specific amount ofcompensation for each individual director in the Group basedon authority delegated by resolution of the Board of Directors.
Such authority, which governs the determination of theamount of base compensation and bonuses for each director,

Bonuses are paid to directors (excluding outside directors)
as performance-linked compensation. Amounts paid aredetermined based on a comprehensive consideration of
the business environment and other factors, with the basic
principle of linking bonuses to business performance
during the fiscal year under review.
Metrics used for calculating bonuses are consolidated
net sales, consolidated operating profit, and profit attributableto owners of parent. The reasoning behind the use of these
metrics is that directors have responsibility as managers for theoverall consolidated performance. For calculation, we multiplybase compensation by an index that accounts for achievementlevel of the business plan and a qualitative evaluation.

MetricTarget¥600.0 billion

FY2022 actualClassification of officers

Consolidated operating profit¥38.5 billion¥32.5 billion

60%

Profit attributable to ownersof parent¥25.6 billion¥22.2 billion

Total amount of
remuneration,etc. (¥Million)

Total amount of remuneration, etc. by type (¥Million)
Monetary remuneration
Base compensation

Numberof eligible
officers

Long-term incentive compensation

Bonus

Restricted stock

Director (excluding outside directors)

212

106

71

35

9

Statutory auditors(excluding outside statutory auditors)

40

40

—

—

3

Outside directors

48

48

—

—

4

Outside statutory
auditors

28

28

—

—

3

Outside officers

Note: 1. Amounts are rounded down to the nearest million yen.
2. The above figures include two directors and one auditor who retired at the conclusion of the 68th Ordinary General Meeting of Shareholders held on June 24, 2022.
3. Since outside directors and statutory auditors are independent from the execution of business, their remuneration is limited to base compensation.

Components of long-term incentive compensation
Performancelinked metrics

Type

Overview and rationale for selection as metrics

Performancelinked restricted
stock

Consolidated
operating profit

This stock is granted in accordance with the rank of the employee, based on linkage with the achievement of business results
through medium- to long-term consolidated profits, for the purpose of providing medium- to long-term incentives for continued
increases in our business value and promoting the sharing of value with shareholders. We use consolidated operating profit as theperformance-linked metric since it is directly linked to the achievement of performance targets and sharing of value withshareholders.

Continuous
service-linked
restricted stock—

The condition for waiving the restriction on transfer is that the employee continuously serves as one of our directors or in a certain
other position for a certain period of time.

Matters concerning resolutions of the General Meeting of Shareholders regarding remuneration, etc. of directors and statutory auditors

Director¥627.6 billion

Fixedcompensation(base compensation):

Data section

Total amount of remuneration, etc. for directors and statutory auditors

Performance-linked compensation (bonus)

Consolidated net sales

30%

Compensation for outside directors and statutory auditors

Fixed compensation (base compensation)
Base compensation is aligned with the rank of the position
and is fixed at an appropriate level based on considerationof the business environment and market rates.

Governancewas delegated to the President and Representative Director
on the grounds that the President and Representative
Director is the most suitable person to evaluate, in thecontext of the Company’s overall performance, each of
the businesses for which directors are responsible.
The Board of Directors has made it a condition of theabove delegation that the Compensation Committee shallconfirm that details such as the amount of base compensationfor each director are appropriate, to ensure that the above
authority may be properly exercised by the President andRepresentative Director. Since the amount of remuneration foreach individual director has been determined through suchconfirmation procedures, the Board of Directors has determinedthe content to be in line with the decision-making policy.
The Compensation Committee, which conducts theabove procedures, met three times during the fiscal year
under review.

As long-term incentive compensation,14,700 shares of restricted
stock have been issued to six directors (excluding outside
directors). Restricted stock consists of performance-linked
restricted stock and continuous service-linked restricted stock.

Classification

10%

Performance-linked
compensation (bonus):Long-term incentive compensation (restricted stock)

Remuneration of officers

Performance-linked compensation calculation metrics,
targets, and results

Long-term incentive
compensation(restricted stock):

Strategy bybusiness field

Value creation
strategy

Our value creation

Statutory
auditors

Type of compensation

Maximum
compensation amount

Monetary remuneration

Up to ¥350 million/year*1

Remuneration for
performance-linked restricted
stock

Up to ¥50 million/year,
up to 50,000 shares/year*2

Remuneration for continuous
service-linked restricted stock

Up to ¥50 million/year,
up to 50,000 shares/year*2

Monetary remuneration

Up to ¥80 million/year

Resolutions at the General
Meeting of Shareholders

Number of officers
at time of resolution

June 23, 2009
55th Ordinary General Meetingof Shareholders

8

June 21, 201965th Ordinary General Meetingof Shareholders

12 (excluding outside directors)

June 23, 2009
55th Ordinary General Meetingof Shareholders

5*1 Not including employee salaries in the case of directors who also serve as employees*2 Outside directors are not eligible

71

Exeo Group Integrated Report 2023

Exeo Group Integrated Report 2023

72

Message fromthe President

Corporate governanceUse of outside directors and auditors

Discussions with shareholders and investors

The Company has five outside directors and three outside
statutory auditors. The functions and roles that outside
directors and outside statutory auditors should carry out in thecorporate governance of the Company are as follows. Outside
directors fulfill the function of supervising and monitoring themanagement of the Company from an independent andneutral standpoint, providing comments based on theirabundant experience and wide-ranging knowledge. Outside
statutory auditors fulfill the management monitoring
function by auditing from an objective standpoint, offeringa perspective informed by advanced expertise, abundant
experience, and wide-ranging knowledge.
Regarding the criteria or policies concerning
independence for appointing outside directors or outside
statutory auditors, the Company secures independent
directors and auditors in accordance with Article 436-2
and Article 445-4 of the Securities Listing Regulations ofTokyo Stock Exchange, Inc., and the criteria for
determining independence stipulated by the same
exchange (“Guidelines for Listing Management, etc.”).

We disclose information about our Group in a fair, timely,
and appropriate manner while also proactively engaging in
IR activities that are easy to understand with the aim ofpromoting understanding of our Group among shareholders,investors, and all other stakeholders, and earning fairevaluations and trust from them.
Organizational system for IR activities
Three dedicated personnel for IR are assigned to the
Corporate Communications Office of the Corporate
Planning Division, where they engage in daily IR activities.
Additionally, the President and CEO, General Manager of
the Corporate Planning Division, and other executives
attend financial results briefings and various other eventsand engage in dialogues whenever necessary.
We also facilitate cooperation to promote dialogues
with the Corporate Planning Division, Accounts & Finance
Division, Risk Management Division, and other related
divisions, business divisions, and subsidiaries of the Groupto ensure the effectiveness of our IR activities.

State of IR activities
In our everyday IR activities, we actively engage in individualinterviews with both sell-side and buy-side analysts. For
overseas shareholders and investors with whom we cannot
easily communicate on an everyday basis, we are also
increasing our dialogue by participating in conferences
hosted by securities companies and making individual
visits. We also actively organize events such as financial
results briefings. Descriptions of our main activities during
fiscal 2022 are as shown in the table below.
Activities in fiscal 2022
Meeting

Name
Yasushi
Kohara73

Job title
Director

Reasons for selection

2018

Having gained deep experience and insight in corporate management at the Toyota Group, Mr. Kohara has
provided appropriate advice and recommendations in important management decisions of the Company,
appropriately fulfilling his role as an outside director.

Naoko
IwasakiDirector

2019

Ms. Iwasaki is a leading international researcher and expert on digitalization in international relations, national
and local government administration, disaster countermeasures and BCP, aging society, and women’s careeradvancement. She has provided appropriate advice and recommendations in important management decisionsof the Company, appropriately fulfilling her role as an outside director.

Tatsushi
Mochizuki

Director

2020

Mr. Mochizuki has been involved in key positions in central government ministries and local governments formany years. With the insight he has accumulated through his career, he has provided appropriate advice andrecommendations in important management decisions of the Company, appropriately fulfilling his role as an
outside director.

Keiji
YoshidaDirector

2021

Mr. Yoshida has a wealth of experience and insight in corporate management as an officer of JFE Engineering
Corporation and other companies. He has provided appropriate advice and recommendations in importantmanagement decisions of the Company, appropriately fulfilling his role as an outside director.

TomokoAramakiDirector

2023

Ms. Aramaki has a wealth of experience and expertise in finance and accounting as a CPA and tax accountant,in addition to being involved as a director and statutory auditor at other listed companies aside from ours andpossessing insight in business management, with which she can be expected to contribute to strengthening theoversight function of the Board of Directors and provide appropriate advice and recommendations in importantmanagement decisions of the Company.

Shinnosuke
YamadaStatutory
auditor

2020

Possessing a wealth of experience and expertise in finance and accounting as a CPA, Mr. Yamada has been
auditing the business execution of directors from an independent standpoint while also appropriately fulfilling
his role as an outside statutory auditor.

KimikoTakahashi

Statutory
auditor

2021

Possessing a wealth of experience and expertise in finance, accounting, and law as a CPA and attorney, Ms.
Takahashi has been auditing the business execution of directors from an independent standpoint while also
appropriately fulfilling her role as an outside statutory auditor.

Eiko
Osawa

Statutory
auditor

2023

Possessing a wealth of global experience and expertise in finance and accounting as a CPA at a major auditing
firm, Ms. Osawa can be expected to properly execute her duties as a statutory auditor.

Exeo Group Integrated Report 2023

Number of times, etc.

President and CEO

2

Small meetings

President and CEO

7

Individual meetings

General Manager ofCorporate Planning
Division25

IR representative106

ESG meetings

Head of relevant
division ororganization

3

Attend conferences
hosted by securities
companies

President and CEO

1 (3 sessions)

President and CEO

2 (12 sessions)

General Manager ofCorporate Planning
Division

1 (7 sessions)Individual investor
briefings forshareholders

IR representative

2 (around 200
attendees each time)

Business briefings

IR representative

1

Visit overseas investors(including online)

Strategy bybusiness field

Governance

Data section

basis. We are also continuously working to provide reports
to the Board of Directors on what transpired in financial
results briefings and overseas investor visits in particular,
and utilize the information for discussions in the Board of
Directors by also sharing it with outside directors.
Particularly regarding capital policy, we have held
discussions referencing opinions shared by stakeholders
and customers in the Board of Directors and othermeetings, and these have been reflected in actions such as
cancellations of treasury shares that began in fiscal 2021.
Shareholders’ meeting

Speaker

Financial results
briefings

Reasons for selection of outside directors
Year
appointed

Value creation
strategy

Our value creation

Additionally, from the perspective of fair disclosures,
we are continuously disclosing not only legally mandated
disclosures such as financial results summaries on our
website, but also various other types of IR materials suchas financial results briefing materials, supplemental
financial results materials, monthly order status tables, andmore. At the same time, we have also created an English
language site for overseas shareholders and investors,
which displays virtually the same information as shown on
the Japanese site.
Providing feedback internally
Results of dialogues in IR activities and various reports
written by outside analysts are provided as feedback to
relevant organizational heads and others on a regular

The Company views the meeting as an important forum
for communicating with its shareholders, and engages ininitiatives accordingly including the following.
• Avoiding days with high concentrations of othershareholders’ meetings• Early dispatch of the convocation notice• Disclosure of the convocation notice prior to dispatch• Exercise of voting rights online• Participation in the voting rights exercise platform• Introduction of a smartphone-based voting right exercise
service• Holding hybrid interactive and virtual shareholders’meetings• Disclosure of an English-language convocation notice
The scale of the meetings had been reduced in recent
years due to social distancing measures during the
COVID-19 pandemic, but along with the reclassification of
COVID-19 as a Class 5 disease, the Ordinary General
Meeting of Shareholders held on June 23, 2023 returnedto the past scale of the meetings while at the same timetaking sufficient precautions.
Designation of a quiet period
We have designated the four weeks leading up to the dayof our financial results announcement as a quiet period inorder to prevent leakages of information that could impact
our stock price and to ensure fairness. During this period,
we refrain from responding to comments and questions
pertaining to our financial results. However, if we findduring the quiet period that our actual earnings forecast
differs from the forecast we had announced by an amountgreater than what is specified in the Timely Disclosure
Rules, we will swiftly disclose that information.

Exeo Group Integrated Report 2023

74

Message fromthe President

Corporate governanceRisk management

Basic policy(1) When setting strategies and business performancetargets and engaging in efforts to achieve them, weseek integration of strategies and risk managementby considering risk profiles, risk appetite, risk
capacity and risk tolerance.
(2) By recognizing risks clearly at an earlier stage andpromptly providing as many choices as possible forrisk management, we reduce the possibility ofunachieved business targets, losses, accidents, andfailures.
(3) By monitoring risks on a regular basis, we address
any deviation from intended performance swiftly
and with consistency.
(4) With a grasp of our comprehensive and consistentrisk portfolio, we seek optimum allocation of theGroup’s resources.

Risk management system
Major risks we are aware of that could significantly impact
the financial standing, operating results, and cash flow
status of our Group are as follows.
We listed these major risks as what we should address
with priority based on level of impact and frequency ofoccurrence among those risks that we regularly identify

and evaluate within the Group. However, what is listed
below does not comprehensively cover all of the risks
relevant to our Group. Other pertinent risks do exist. Anyof the applicable risk factors could have repercussions.
For our Group’s risk management system, we haveformulated the Risk Management Rules that specify thebasic points involved in risk management and haveestablished risk categories in addition to the Risk
Management Division that handles them. We have alsoestablished the Business Risk Management Committee as
the Group-wide risk manager, as we build and operate
systems to identify and evaluate risks on a Group-wide level.
Business Risk Management Committee
As the Group-wide risk manager, the committee wasestablished to provide the risk management systems
required to accomplish strategies and businessperformance targets in the process of creating,
maintaining, and realizing value and to steadily provide theGroup’s stakeholders with reasonable expectations thatrisks can be controlled to a tolerable amount. The standing
members of the Committee are the General Manager of
the Corporate Planning Division, the General Manager of
the Group Business Promotion Division, the General
Manager of the Accounts & Finance Division, and theGeneral Manager of the Risk Management Division.
The number of meetings held in fiscal 2022 was 15.

Our value creation

Value creation
strategy

Compliance
Everybody on our management team maintains a highstandard of ethics when conducting business. Furthermore,individual directors and employees take principled actions
grounded in compliance to fulfill their social responsibility.

Strategy bybusiness field

Governance

Data section

tailored to the management side. We also raise awarenesseffectively by incorporating compliance into positionbased training and providing training on the content ofeach job position.

Information security
Organizational system

Exeo Group Basic Actions Declaration
Based on the Exeo Group Compliance Program, theofficers and employees of the Group presuppose
compliance with not only laws and regulations but also
corporate ethics, including the spirit underlying thoseethics, and engage in activities with high social value,
thereby contributing to society.
Given that a company is part of society, it is aprerequisite for all stakeholders in a company,irrespective of whether they are officers or employees of
the company, to comply with laws and corporate ethics
when carrying out the company’s business operations.
Such compliance is also to be expected of us asindividual members of society.
In addition, ensuring such compliance is
indispensable for the company to maintain the trust ofsociety and realize the Group’s corporate philosophy of“Contributing to Society.”
In light of the above, we shall without hesitation
prioritize laws, regulations, and corporate ethics in case
we are forced to choose between earnings or ethics inour own activities.

In the course of its business operations, the Group handles
important information, such as technical data andcustomer data owned by customers. We are working tostrengthen our information security, given the increasingly
critical importance of appropriate information
management, amid the spread of cloud services, social
media, and other forms of networks.
In terms of our system, we are improving ourmanagement system by assigning an officer in charge as
the chief information security officer (CISO), as well asassigning an information management officer andinformation manager for each organization. In addition,
under the supervision of the Information Security
Committee, we determine policy for the Group's efforts,monitor the overall status of the efforts, consider measures
to prevent recurrence in the event of an accident, conduct
training via e-learning systems, evaluate the status of
improvement, and promote continuous improvement.
Training & development

Large• High dependence on
specific clients/partners• Risk of natural disasteroccurrences

MediumRisks deemed important• Information security (information leakage, cyberattacks)• Violations of legal regulations or ordinances• Changes to the business environment or competitive circumstances
after completing M&A or entering business alliances (application of
accounting impairments)• Changes in political or economic conditions in overseas business• Serious bodily injury or equipment-related accidents• Problems with quality• (faulty workmanship,
non-conformity with
contract)• Developing & securing human resources (shortage of engineers,
securing subcontractors)• Unprofitable construction projects (worsening profitability inconstruction)• Inadequate labor management (working long hours, overwork)• Credit insecurity of clients/partners• Climate change• Materials procurement & priceincreases (procurement prices ofsemiconductors & materials)

Small

Level of impact

Risk heat map• Intellectual property rights
infringements

Small• Lagging behind at technological innovation• Declining valuation of assets held (securities, etc.)• Impact of interest & exchange rate fluctuations on businessperformance
MediumLikelihood of occurrence

75

Exeo Group Integrated Report 2023

• The COVID-19 pandemic

Large

Training & development
Basic training and lectures on compliance in our Group are
conducted for all Group employees (including contract andtemp staff) soon after entering the company.
In addition to the above, compliance training is also
conducted every year for all employees. We deliver
learning content to raise awareness of compliance among
all employees, bringing up topics pertinent to the times
and also featuring content related to stopping corruption
including insider trading and corporate fraud.
In training for management, we invite outside experts
according to the topic to conduct training more specificallyTraining topics for management
FY

Training & development on information security andpersonal information protection is conducted annually, for
all Group employees, at each division. In this training weoffer learning through repetition, featuring explanations
with case examples on the “ten basic tenets of preventing
information leaks” covering topics such as the importanceof protecting information, the roles and responsibilities ofeach employee, the results that can be anticipated if an
incident or accident is caused, and security measures.
Additionally, the Group conducts mock exercises to
respond to targeted email attacks, and various security checks.
Number of information security training attendees
2020

2021

2022

13,91815,505

20,861

Topic

2022

Amended Whistleblower Protection Act

2021

Business & human rights

2020

Compliance, management systems

Exeo Group Integrated Report 2023

76

Message fromthe President

Eleven-year major financial data

Strategy bybusiness field

Value creation
strategy

Our value creation

Data section

GovernanceUnit

FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

Orders received¥Million

317,862304,201

301,446

300,438

324,102

325,029424,318

556,321631,088595,373625,689

Net sales of completed construction
contracts¥Million

301,319

318,513300,912287,437

298,825

312,669

423,727

524,574

573,339594,840

627,607

Gross profit on completed construction
contracts¥Million

36,11338,54335,74035,79538,48043,35458,33768,32775,86584,323

81,837

Selling, general and administrative
expenses¥Million

18,067

17,80917,382

17,382

17,607

17,732

26,62037,226

39,241

41,94249,285

Operating profit¥Million

18,046

20,734

18,35818,412

20,87325,621

31,716

31,10036,62342,38032,552

Ordinary profit¥Million

18,11920,602

18,58918,512

21,40926,44833,431

30,66938,18645,217

33,771

Profit attributable to owners of parent¥Million

11,313

14,91012,264

12,184

13,78917,99340,21915,60324,192

27,76622,233

Capital expenditures¥Million

3,360

7,372

4,219

13,215

7,139

4,256

3,945

15,855

12,23920,802

15,263

Depreciation¥Million

2,308

2,264

2,660

3,001

3,251

3,272

4,725

6,473

6,789

7,414

8,700

Total assets¥Million

200,412217,091

228,422238,301

243,438

261,305

416,483

444,905

491,574

535,617577,941

Property, plant and equipment¥Million

47,70750,76752,00559,83062,002

62,664

97,955

107,677

113,375

126,900

135,635

Net assets¥Million

122,387

135,687

146,768

151,241

158,280

176,101

267,811

270,109288,884

307,053

307,941

Balance of interest-bearing debt
(balance of loans payable, bonds payable, etc.)¥Million

9,908

13,374

8,679

16,29912,825

11,43518,04947,16757,52080,619115,716

Item
Operating results

Financial status

Cash flow status
Cash flows from operating activities¥Million

7,160

9,888

23,167

5,389

15,50424,80012,77017,2996,301

26,406

5,483

Cash flows from investing activities¥Million(2,160)(7,477)(2,828)(13,907)(6,027)(4,538)(17,609)(17,085)(9,249)(20,388)(13,332)

Free cash flow

¥Million

4,999

2,411

20,338(8,518)9,477

20,262(4,839)213(2,947)

6,018(7,849)Cash flows from financing activities¥Million(3,038)(905)(12,343)313(10,230)(5,137)(4,924)4,227(1,750)

5,023

3,298

Cash and cash equivalents at end of
period¥Million

14,611

16,21324,291

16,037

15,241

30,343

41,46946,012

41,24653,72750,204Per share data
Earnings per share¥109.25147.75123.83125.90145.24

189.42

390.25139.75217.33250.64204.98

Net assets¥

1,199.86

1,350.05

1,482.82

1,569.09

1,668.29

1,842.97

2,343.43

2,395.16

2,576.78

2,748.21

2,832.22

Cash dividend

¥

22

24

32

38

46

50

70

80

82

96

102

Payout ratio

%

20.1

16.2

25.8

30.2

31.7

26.4

17.9

57.2

37.7

38.3

49.8

Operating profit margin

%

6.0

6.5

6.1

6.4

7.0

8.2

7.5

5.9

6.4

7.1

5.2

Profit attributable to owners of parent to
net sales

%

3.8

4.7

4.1

4.2

4.6

5.8

9.5

3.0

4.2

4.7

3.5

Return on equity (ROE)

%

9.6

11.6

8.7

8.2

8.9

10.8

18.3

5.9

8.8

9.4

7.3

Return on assets (ROA)

%

5.9

7.1

5.5

5.2

5.7

7.1

11.9

3.6

5.2

5.3

4.0

Equity ratio

%

60.9

62.3

64.0

63.3

64.8

66.6

63.4

59.9

58.1

56.6

52.5

Highest stock price

¥

1,079

1,495

1,494

1,543

1,744

3,075

3,410

3,135

3,030

3,065

2,482

Lowest stock price

¥

690

944

1,141

1,096

1,142

1,559

2,309

1,906

2,182

2,261

2,034

People

7,521

7,553

7,988

7,903

8,074

8,331

13,151

13,882

14,374

15,847

16,772Financial indices

Stock price

Other
Number of consolidated employees

77

Exeo Group Integrated Report 2023

Exeo Group Integrated Report 2023

78

Message fromthe President

Analysis of operating results and financial status

Operating results
During this fiscal year (April 1, 2022 through March 31,2023) the Japanese economy showed a moderate recovery
trend along with the relaxation of restrictions on social andeconomic activity due to the COVID-19 pandemic. On theother hand, we must remain vigilant about risks that put
downward pressure on the economy such as monetary
tightening throughout the world as the conflict in Ukraine
becomes protracted, soaring prices for electricity and otherforms of energy plus inflation concerns due to escalating
prices of goods, and trends in supply chains including forsemiconductors.
In the information and communications field in which
the Company does business, we must provide services thatoffer stability as the most fundamental form of
infrastructure supporting all types of social and economic
activities as the whole of society shifts toward
digitalization. The resilience of networks inaccommodating increased traffic is a key issue in this field.
Demand for data is also certain to grow, including for
digitalization to solve social issues in communities. Data
centers to store and process vast amounts of data are also
becoming increasingly important. In the field ofconstruction, prices of materials continue to soar, but
private capital investment is recovering and we forecast
that public investment for upgrades and maintenance ofinfrastructure such as roads will remain steady. In the
renewable energy-related business, we anticipate

accelerated investment in storage batteries andinfrastructure for electric power transmission anddistribution geared toward expanding the use of renewableenergy on the path to achieving a decarbonized society.
In this business environment we operated ourbusiness with both caution and flexibility, making
maximum use of in-house environments for teleworking
while we continued making efforts to prevent the spreadof COVID-19. As a result of these efforts, we made steadyprogress at expanding business in both the urban
infrastructure and system solutions segments, and net
sales increased by ¥32,766 million from the previous fiscal
year to ¥627,607 million (up 5.5% year-on-year).
Profit-wise, our operating profit decreased by ¥9,828
million from the previous fiscal year to ¥32,552 million(down 23.2% year-on-year) as highly profitable projects
decreased, materials prices soared, and multiple
unprofitable projects arose. As a result, ordinary profit
decreased by ¥11,445 million from the previous fiscal yearto ¥33,771 million (down 25.3% year-on-year), and profit
attributable to owners of parent decreased by ¥5,532
million from the previous fiscal year to ¥22,233 million(down 19.9% year-on-year). Return on equity (ROE)
decreased by 2.1 percentage points to 7.3%, and earnings
per share (EPS) decreased by ¥45.66 to ¥204.98.
Note that the impact of the COVID-19 pandemic in
the current fiscal year was limited.

Our value creation

Strategy bybusiness field

Value creation
strategy

Financial status

Governance

Data section

year-on-year). This was mainly due to increases inlong-term borrowings, notes payable, and accounts
payable for construction contracts.
Net assets increased by ¥888 million from the end of
the previous fiscal year to ¥307,941 million (up 0.3%
year-on-year). This was mainly due to an increase inretained earnings.

Assets increased by ¥42,323 million from the end of theprevious fiscal year to ¥577,941 million (up 7.9%
year-on-year). This was mainly due to an increase in notes
receivable, accounts receivable from completed
construction contracts and in goodwill.
Liabilities increased by ¥41,434 million from the endof the previous fiscal year to ¥269,999 million (up 18.1%

Analytical chart of assets (¥Million)

As of March
31, 2022

535,617
Cash and deposits(3,407)
Notes receivable, accounts receivablefrom completed construction contracts
Costs on construction contracts in progress

Total current
assets

14,923
7,683

27,063 UP
7,864

Other current assets

8,735

Property, plant and equipment

9,363

Intangible assets(2,838)Investments and other assets

As of March
31, 2023

Total non-current
assets15,260 UP

Year over year

577,941¥42,324 million UP

Analytical chart of liabilities and net assets (¥Million)
Analytical chart of factors affecting operating profit (¥Billion)
As of March
31, 2022
Fiscal 2021

535,617
Notes payable, accounts payable
for construction contracts
Income taxes payable

42.3

5,454
(6,175)

Total liabilities(6.5)

Profit decrease in telecom carriers

Profit increase in system solutions
Lump-sum goodwill amortization
for unprofitable projects

Fiscal 2022

79

Exeo Group Integrated Report 2023

32.5

6,528

Other liabilities(1.7)

Profit decrease in urban infrastructure(19,634)

Capital surplus

0.6

11,411Retained earnings
Treasury shares(2.3)

Other net assets

Year over year

¥9.8 billion DOWN

As of March
31, 2023

41,435 UP

35,626Long-term borrowings

577,941

Total net assets

7,215

888 UP

1,894
Year over year

¥42,324 million UP

Exeo Group Integrated Report 2023

80

Message fromthe President

Analysis of operating results and financial status

Strategy bybusiness field

Value creation
strategy

Our value creation

Data section

GovernanceAnalytical chart of cash flows from operating activities (¥Million)

Cash flow status

The funds of our Group companies are centrally managed
by the Company, and we are working to improve theefficiency of funds within the Group and liquidate them.

Cash and cash equivalents (hereinafter referred to as“funds”) at the end of the current fiscal year decreased by¥3,523 million from the end of the previous fiscal year to¥50,204 million.
The capital demand of the Group includes ordinary
working capital, as well as capital investment funds forbuilding the foundations for growth such as DX and M&A
investment funds for expanding business. Regarding
distribution of returns to shareholders, our basic policy is
to actively continue ensuring stable dividends, and weflexibly conduct share buybacks while employing a dividendon equity (DOE) of 4.0% as the benchmark percentage.
The source of the Group’s funding is cash earned
through operating activities, but when there are shortages,
we raise funds mainly from liabilities while considering how
to maintain a sound financial position. We deal with any
temporary lack of funds through short-term borrowings
from financial institutions, and if long-term demand forinvestment funds or other types of funds arises, we mainly
consider handling it through sustainable finance.

Cash flows from operating activities
Funds provided by operating activities were ¥5,483 million(¥26,406 million provided in the previous fiscal year). Thiswas mainly due to profit before income taxes and income
taxes paid.
Cash flows from investing activities
Funds used in investing activities were ¥13,332 million(¥20,388 million used in the previous fiscal year). This was
mainly due to acquisition of property, plant andequipment expenses.
Cash flows from financing activities
Funds obtained through financing activities were ¥3,298
million (¥5,023 million obtained in the previous fiscal year).
This was mainly due to increases in long-term borrowingsand dividend payments.

37,430

Profit before income taxes

8,700
Increase in trade receivables
Other increases in assets(5,373)(20,643)

Income taxes paid
Other total

Depreciation(7,121)(7,508)5,483 UP
Analytical chart of cash flows from investing activities (¥Million)

Purchase of property, plant and equipment(11,356)

Proceeds from sale of investment securities

5,199

Expenditures to acquire shares of subsidiaries
accompanying changes in scope of consolidation
Other total(6,662)(514)

13,332 DOWN
Analytical chart of cash flows from financing activities (¥Million)

Analytical chart of cash flow status

36,717(¥Million)

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Cash and cash equivalents at end of period

Purchase of treasury shares

Free cash flow

(6,206)53,727(8,468)50,20450,00040,000

Expenditures to acquire shares of subsidiaries not accompanying changes
in scope of consolidation

Other total

3,298 UP46,012
41,469(7,503)(11,240)

Dividends paid

60,000

Proceeds fromlong-term borrowings

41,24630,00026,40620,000Capital expenditure status

17,29912,77010,000

4,227

6,301

6,018

5,483

213

0

(1,750)(4,924)–10,000(2,948)(9,249)(4,839)–10,000

3,298

5,023

(17,609)(7,849)(17,085)(20,388)(13,332)–30,000

2018

81

Exeo Group Integrated Report 2023

2019

2020

2021

2022

(FY)

The total amount of capital expenditures in the current
fiscal year was ¥15,263 million, mainly due to constructionof branch office and other buildings and woody biomass
power plants. There was no retirement or sale ofimportant equipment in the current fiscal year.
We have formulated a cross-Group utilization plan for
the newly installing and retiring equipment based on
medium-term usage needs and trends to promoteutilization in a systematic and efficient way. There are also
no plans to retire any important equipment.

Changes in capital expenditure(¥Million)
25,00020,80220,00015,85515,00015,263
12,23910,000

5,000

3,945

0

2018

2019

2020

2021

2022

(FY)

Exeo Group Integrated Report 2023

82

Message fromthe President

Corporate data

Our value creation

Corporate data (As of March 31, 2023)

Stock information (As of March 31, 2023)

Company name

Exeo Group, Inc.

Shareholding

EstablishedMay 17, 1954

Paid-in capital¥6,888 million

Common stock
authorized

300,000,000 sharesFiscal Year-end

March 31

Issued109,812,419 shares

Stock listing

Listed on Prime Market of Tokyo Stock Exchange

President and CEO

Tetsuya Funabashi

Total number ofshareholders

Net sales¥627.6 billion (consolidated) (fiscal year ended March 31, 2023)

Number of employees

16,772 (consolidated) (As of March 31, 2023)

Head office29-20, Shibuya 3-chome, Shibuya-ku, TokyoWest Japan head office2-10, Uchihonmachi 2-chome, Chuo-ku, Osaka

Number of business offices

Headquarters and branch offices: 14, Sales offices: 23

Consolidated subsidiaries

135 companies(Excludes non-consolidated subsidiaries (17 companies) and affiliated companies (20 companies))

Correspondent banks

Value creation
strategy

Data section

Governance

Major shareholders
Number of Percentage
shares heldof total(thousand)(%)

The Master Trust Bank of Japan, Ltd.
(Trust Account)

35,114

Shareholding structure
Treasury shares
2.5%
Individuals and others
24.5%

Foreign companies
23.6%

Strategy bybusiness field

As ofMarch 31,2023

Mizuho Bank / Sumitomo Mitsui Banking Corporation / MUFG Bank
Other corporations
7.9%

Financial
institutions
39.4%

16.16

Custody Bank of Japan, Ltd. (Trust Account)

10,171

9.50

Exeo Group, Inc. Employee Shareholding
Association

4,804

4.49

NORTHERN TRUST CO. (AVFC) RE
SILCHESTER INTERNATIONAL INVESTORSINTERNATIONAL VALUE EQUITY TRUST

2,323

2.17

Sumitomo Life Insurance Company

2,296

2.15

Sumitomo Realty & Development Co., Ltd.

2,081

1.94

SSBTC CLIENT OMNIBUS ACCOUNT

1,988

1.86

1,834

1.71

(Sumitomo Electric Industries, Ltd. Retirement Benefit Trust
Account reentrusted by Sumitomo Mitsui Trust Bank, Limited)

1,500

1.40

J.P. MORGAN BANK LUXEMBOURG S.A. 381572

1,311

1.23

Custody Bank of Japan, Ltd.
(Mitsui Sumitomo Trust & Banking Co., Ltd. Retirement Benefit
Trust Account)

Securities
companies
2.1%

17,297

Custody Bank of Japan, Ltd.

Note: The Company holds 2,759 thousand shares of treasury stock although thoseshares are not included in the above table.
Treasury shares are also excluded from calculation of equity stake.

Group companies (As of July 1, 2023)
Stock price range and trading volume on the Tokyo Stock Exchange
Major subsidiaries
Stock price
(¥)
4,000

C-Cube Corporation

Seibu Electric Industry Co., Ltd. Nippon Dentsu Co., Ltd.

Daiwa Densetsu Corporation

Exeo Tech Corporation
3,500

Other consolidated subsidiaries
3,000

Telcom carriers-related

Urban infrastructure-related

System solutions-related

Shinyei Tsushin
SuncrexExeo Mobile
Exeo Engineering Hokkaido
Exeo Engineering Tohoku
Exeo Engineering West Japan
Just Engineering
Kanac
Denseisha
K.Technos
Hikari Progress

Exeo Infra
Ryosei
Kidoh Construction
KohkenIseki Poly-Tech
Koyo Engineering
Sanetsu
DenkenAshikaga Eco Power
Furudono Ronden Eco Power

Exeo Digital Solutions
Exeo System Management
Advanced Information Design
Sun Planning Systems
CPU
KDT
Where

2,500

Trading volume(Million shares)

2,000

20

1,500

15

1,000

10

500

5

Other subsidiaries

Other subsidiaries

Other subsidiaries

Group companies (overseas)
Exeo Global Pte. Ltd.
MG Exeo Network, Inc.
Leng Aik Engineering Pte. Ltd.
Exeo Asia Co., Ltd.

83

Exeo Group Integrated Report 2023

DeClout Pte. Ltd.
Aeqon Pte. Ltd.
dhost Pte. Ltd.
Arco Pte. Ltd.

Ascent Solutions Pte. Ltd.
Winner Engineering Pte. Ltd.
68 Systems & Project Engineering Pte. Ltd.
GUUD Pte. Ltd.

0

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
2019
2020

7 8 9 10 11 12 1 2 3 4 5 62021

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
2022
2023

0

Exeo Group Integrated Report 2023

84