IR Discussion Materials

About the TOKAI GroupWe anticipate the needs of daily life andprovide people with security and safety,
convenience and comfort, and joyful andmeaningful lives.

TOKAI Holdings Corporation(Code: 3167)
Please visit our updated website:
tokaiholdings.co.jp/english/

Table of contents
Part1 Overview of TOKAI Group
Overview of TOKAI Holdinos
Strivino to Meet the Needs of Society and Customers
TOKAI Group Strenoths
Trends in Group Customer Numbers
Our Fundamental Strenoth: (1) Customer BaseOur Fundamental Strenoth: (2) Comprehensive Services
Our Fundamental Strenoth: (3) Aoility
Successful TLC Model Leveraoino Reoional Ties
Our TLC Vision and Expansion Scenario
The Group’s Fiber Optic Network

Part2 Results of Holdinos Company
Path to a Holdino Company Structure
Holdinos Structure Medium-term Manaoement Plans
Holdinos Structure Achievements

P.2
P.3
P.4
P.5
P.6
P.7
P.8
P.9
P.10
P.11
P.12

P.13
P.14
P.15
P.16

1

Part1 Overview of TOKAI Group

2Overview of TOKAI Holdings—Established in 1950. Decision to change to a holding company structure in 60th year, transition to newstructure the following year. Currently in 6th year——Merger between TOKAI CORPORATION (First Section), a provider of LP gas,
and VIC TOKAI (JASDAQ), a communications and CATV subsidiary—Company nameTOKAI Holdings Corporation

President and CEO

Katsuhiko Tokita

Stock market listingFirst Section, Tokyo Stock Exchange (code no. 3167)

Listing date

April 1, 2011

Group companies

22 consolidated subsidiaries, 4 affiliates

Sales, operating profit¥180.9 billion, ¥8.2 billion (FY03/16)

Employees

3,856

Main businesses
Note: Percentage figures indicate
proportion of total sales

Changes in management
structure

Gas and Petroleum:44.6%(sales: ¥80.7 bn; operating profit: ¥9.0 bn)

TOKAI, TOKAI GASInformation andCommunications

:

24.4%

(sales: ¥44.2 bn; operating profit: ¥2.3 bn)

TOKAI COM

CATV

:

13.6%

(sales: ¥24.6 bn; operating profit: ¥2.0 bn)

TCN

Building and Real Estate:11.6%(sales: ¥21.0 bn; operating profit: ¥1.3 bn)

TOKAI

Aqua

:3.0%

(sales: ¥5.5 bn; operating profit: —¥1.1 bn)

TOKAI

Other:

2.7%(sales: ¥4.9 bn; operating profit: —¥5.2 bn)

1950 Established as Yaizu Gas Co., Ltd.
1987 Listed on First Section of Tokyo Stock Exchange, name changed to TOKAI CORPORATION
2011 TOKAI Holdings Corporation established3

Striving to Meet the Needs of Society and Customers—Started in the gas business, then expanded infrastructure services to respond to social issues anddemographic changes——Offering services that provide people security and safety,
convenience and comfort, and joyful and meaningful lives—
1950s

1960s

1970s

Post-war expansion in housing
volume (through 1970)1980s
Property crime peaks(1985)

1990s

Convergence of broadcasting
and telecommunications (2005)Windows95
release(1995)

Second generation babyboom (1971–1974)

2000s

2010s

Present

Elderly ratio reaches 1 in 4(2014)

Revision to the NTT Law(2001)

Electricity

1973
Aqua

2011

2016

2007

Security

1984

1970
City oas

1950

WWW

WWW

Cable TV

Internet

ADSL/FTTH

Mobile

1988

1996

2001

2006

CATV

LP oasBridal1959

1972

Developed LP gas distribution
system using large-scalecomputers, providing theopportunity to promote Information
and Communications business

SIerSystemdevelopment

Data center

1983

1985

Transition to a holing company structure

HousinoNursinocare

Telecoms
network

Toward the realization of TLC (Total Life Concierge)

Insurance

Electric powerliberalization (2016)

2001

TOKAI Group Strengths
We continue to provide “lifeline services” essential for people’s lives for 2.56 million
customers, starting with gas (from 1950) and subsequently moving into cable television(from 1988), Internet (from 1996), and Aqua (bottled water delivery) (from 2007).
In Shizuoka Prefecture, we have a strong customer base of 1.15 million households in thegas, Internet, cable television, and Aqua segments. We also have 1.08 million customers in
the Kanto region, and further nationwide expansion is in progress.
Through these services, we have created a robust earnings base that yields monthly fee
income on an ongoing basis.
With stable revenue in gas at its base, we have expanded into growth businesses such as
information and communications, Aqua, renovations, and nursing care.
Cross-selling within the above product lineup makes further earnings expansion possible.

4Trends in Group Customer Numbers－ An increase of 1.42 million customers (2.2x increase) between 2002 and 2015 －－ Net increase of 70 thousand per year under IP13, but 20 thousand per year with IP16 －2002

2003

2004

2005

2006

2007

2008

2009

2010

20112012

2013

2014

2015

2016
Est.

LP oas

523

551

553

575

618

632

633

627

622

596

577

575

572

580

592

City oas

49

50

51

5252

52

52

52

52

52

53

53

53

54

54

Total oas

572

601

604

627

670

685

685

679

674

648

629

628

626

634

646

Information andcommunications

278

375

440

471

471

501

556

614

684

758

816

854

864

852

826

CATV

271

307

333

360

378

410

433

685

740

722

691

693

690

710

734

Aqua

－－－－－

12

39

57

71

97

102

122

130

133

137

Mobile－－－－

38

79

115

145

171

193

213

227

235

236

238

Security

20191922

23

24

23

22

21

20

19

19

18

18

17

1,141

1,301

1,396

1,480

1,580

1,710

1,849

2,190

2,343

2,415

2,445

2,519

2,537

2,558

2,575

254

161

95

84

100

130

139341

153

72

30

73

192017Total
Net increase*Made LCV and KCT subsidiaries*Made Toco Channel
Shizuoka a subsidiary*Sold Kumaoaya Cable

Our Fundamental Strength: (1) Customer Base－2.56 million customers use our products and services nationwide——Strong connections with customers in Shizuoka Prefecture and the Kanto region,plus increasing customer count due to expansion into new areas——Steady progress in increasing number of members as part ofinitiatives to secure earnings over a customer’s lifetime and promote cross-selling－Customers(Thousands)

Aqua

3,000

13
CATV

2,500

71

Point Club Memberships to Exceed 500 thousand

2.56mnGas (LP, city gas)
Other

32

63

Shizuoka

Points accrue based onmonthly usage amounts. Usersof multiple services receive
additional bonus points.

in FY03/16

Breakdown of

Breakdown of

2.56mn customers

2.56mn customers115
as of Mar. 31, 2016as of Mar. 31, 2016108

Can be used as e-money at
170 thousand affiliated shops,
with links to other pointservices.

109
2,000

Communications (HikariCollaboration + conventional
ISP + mobile)

Kanto

1,000

740
thousand700

in FY03/01

500

200
thousandin FY03/90

600

Memberships

600

400
500

Successful in reducing
cancellation rate by half.

(Thousands)

1,500

306

491

500

Mar. 31,2016

Apr. 30,
2016

366

300
200
100

92

0
-Mar. 31,2013

Mar. 31,2014

Mar. 31,2015

Mar. 31,2017

7

Our Fundamental Strength: (2) Comprehensive Services—TLC (Total Life Concierge) is the core concept of our service provision—－We offer customers convenience and economic benefits by combining multiple services in line with our strategy toincrease ARPU－—We offer competitive prices compared with other companies in our industries.
Our strength is the ability to provide services as a set—

Using Other Companies’
Services

Using Our Services

Separate contracts

One-stop provision of reliable services

Company A

LP gas

One contract

Customers

Company B
Contract,
payments,
inquiries

WWW

ADSL/FTTH

Contract,
inquiries,
payments＋Point benefits

One Call center

Contract,
payments,
inquiries

City gas

HousingAqua

WWW

CATV

Nursing
care

Cable TVADSL/FTTH

BridalSecurity

MobileInsurance

Electricity

Provide additional benefits
by offering multiple
services in a set menu
contract (discounts anddouble TLC points*)

Company CContract,
payments,
inquiries

MobileLP gas* Points not available for mobile and insurance8

Our Fundamental Strength : (3) Agility－A total of 1,500 managers meet customers face-to-face and propose solutions——Call centers help reduce cancellations
and will proactively expand operations to support contract acquisitions—

127sales locations** Including three overseas locations (Shanghai, China;Taipei, Taiwan; Yangon, Myanmar)

40 million

Yangon, Myanmar
Shanghai, China

customer contact points

Taipei, Taiwan

1,500

Headquarters
Branch sales offices

regional managers

Call centerAround400

operators atnine locations throughout Japan9

Successful TLC Model Leveraging Regional Ties
－Our core strategy is to promote multiple service contracts through sales based on regional ties——The gas business is the basis for TLC because customer contact points
are strong, providing a high rate of multiple service contracts—

Two in three households inShizuoka Prefecture are ourcustomers

Of these, 15.8% use twoor more services (nationwide,6.7%)(TOKAI Group household contracts)

920 thousand

ShizuokaPrefecture

Kanto area

15.8%

1.0%

(Households in Shizuoka Prefecture)

1.43 million

Of this figure, gas customers are especiallyeffective targets for cross-selling the Group’s
other services

City gas

LP gas

36.8%

23.1%

1 Contracts by the TOKAI Group as of March 31, 2016 (Gas: 230 thousand; CATV: 390 thousand; Information and Communications: 470 thousand, Aqua: 70 thousand)
2 The number of households in Shizuoka Prefecture is as of April 1, 2016, according to “Shizuoka Prefecture Population Statistics, by City, Ward, Town, and Village,”
Shizuoka Prefectural Government. Calculations for monthly reporting of population statistics in Shizuoka Prefecture are based on preliminary national census figures(population as of October 1, 2016).

10

Our TLC Vision and Expansion Scenario—Conduct a full-fledged rollout into other areas, under the TLC strategy of providing each customer
household with multiple products and services—－We intend to accelerate the expansion of new products and services by developing new businesses
ourselves and through alliances with other companies—

Area expansion anddominance through TLC

Also looking at new businesses andservices in the private/public project sector

Education

City gas
Medical care
Tourism
LP gasNursing care

Electricity

Aqua

JoyfulMeaningful

SportsSecurity
SafetyBridalEnvironment
Security

Convenience
ComfortInsurance

Agriculture
Housing

WWW

CATV

ADSL/FTTH

MobileCable TV

CLOUD
CLOUD

AIAI

Expanding worldwide

IoT-related

AI-related

Inner circle: Existino service
Outer circle: New Service※Presented in a “orowth strateoy for the nominal GDP600 trillion yen” announced on April 19, 2016 at the 26th industrial competitiveness conference11

The Group’s Fiber Optic Network－ Built a proprietary fiber optic network spanning 6,000 km －－ Constructed to connect the high-demand Kanto Region to Okayama, passing through Tokyo,
Nagoya, and Osaka－－ Expanding the information and communications business and the CATV businessunderpinned by this fiber optic network－Total network distance:
Approx.

6,000km*As of March 31, 2016

Atsugi Otemachi

OkayamaOsakaNagoyaYaizu

Part2 Results of Holdings Company13

Path to a Holding Company Structure
Throuoh transitionino to a holdino company in 2011, we created a system that canoffer comprehensive proposals coverino each oroup businessThorouoh strenothenino of manaoement structure in the first three years <IP13>➡Expanding service areas for Aqua, Internet, and information and communications; new entry into renovations
and nursing care; launch of TLC Membership System; unified fund management; consolidation oftelecommunications business; spinoff of cable television; spinoff of personnel and accounting departments

Enhancino profitability durino the next three years <IP16>➡Expanding LP gas into neighboring areas (Miyagi, Aichi, and Gifu Prefectures); new entry into Hikari
Collaboration; achieving profitability in Aqua and nursing care; strengthening cross-selling initiatives via TLC

All profit indicators achieved record hiohs in FY2016.
Realized sionificant improvement in financial standino. Halved interest-bearino debt
while the equity ratio increased fourfold.

Holdings Structure Medium-term Management Plans◆IP13 (2011 to 2013) Strengthening management structure•

Launched TLC (Total Life Concieroe) concept (Launched TLC Membership Service / Point System)•

Expanded domestic and overseas service areas, made new entries
Nationwide expansion for Aqua; Expanded into Shanohai (Established TOKAI (Shanohai)/Fujishioen/Stylish server production)
Tohoku base for broadband, expanded into West Japan and Taiwan in the information and communications businessEntered nursino care and comprehensive renovations business
Strenothened CATV Community Channels (TOCO Channel, hioh school baseball, Shizuoka festival, street performance)•Inteorated the Group’s telecommunications business into TOKAI Communications, spun off CATV business•Launched CMS (Cash Manaoement Service) to unify fund manaoement•

Introduced personnel and accountino departments shared services (established TMS) to increase structural efficiency
and strenothen personnel development◆IP16 (2014 to 2016) Enhancing business profitability
••
•••
•

Achieved record hiohs for all profit indicators durino the final year
Realized TLC concept (strenothened cross-sellino)
Recovery to net increase in customer numbers for LP oas and cable broadcastino
New orowth in the broadband business throuoh Hikari Collaboration
Achieved profitability in the Aqua and nursino care businesses
Adjustments in the bridal business (Closino of Bouquet Mishima and Bouquet Gotemba)

Results were progressing well and financial standing improved significantly

Holdinos Structure Achievements
For FY2016, forecast of ¥12.8bn in operating profit, a record highNet income increased by three times by ¥4.3bn (from ¥2.2bn to ¥6.5bn)
Interest-bearing debt halved with a decrease of ¥61.8bn (from ¥124.0bn to ¥62.2bn)
Equity ratio increased by four times (from 7.7% to 30.8%)
LPG purchase and hioher upfront costs for BBand Aqua

10.8

Profitability recover as initial costs
are reduced

12.8

10.9
8.9

7.4

9.0

Threefold increase vs. FY2010!
Income per share (Yen)
30.48
29.85
27.17
22.67

57.23

34.16 30.01

6.5

8.2
2.2

2.7

3.1

2.6

3.9

3.5

2010
20112012
2013
2014
2015
2016
FY2010FY2013
年度 FY2011
年度 FY2012
年度
年度 FY2014
年度 FY2015
年度 FY2016年度

2010
20112012
2013
2014
2015
2016
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
年度
年度年度
年度
年度
年度
年度

Operating profit (JPYbn)

Net income (JPYbn)
Fourfold increase since becomino aholdino company!

Balance halved since becomino aholdino company!
124.0
105.7

93.785.8

14.3
73.1

71.4

62.2

18.6

21.6

25.7

25.6

30.8

7.7

2010
2011
2012
2013
2014
2015
2016
FY2010FY2013
FY2014FY2015FY2016
年度 FY2011
年度 FY2012年度
年度年度年度年度201020112012
2013
2014
2015
2016
FY2010
年度 FY2011
年度 FY2012
年度 FY2013
年度 FY2014
年度 FY2015
年度 FY2016年度

Balance of interest-bearing debt (JPYbn)

Equity ratio (%)