Financial Results for the First Six Months ofthe Fiscal Year Ending March 31, 2020
November 1, 2019
TOKAI Holdings Corporation(Securities Code: 3167)

Overview of 1H FY03/20
Katsuhiko Tokita
President & CEO
TOKAI Holdings Corporation

1

Key Points of 1H FY03/20 Financial ResultsCore businesses steadily expandedcustomer baseAchieved record high growth and plansto enter a phase of substantial profit
growth2

M&A strategy under Innovation Plan 2020 “JUMP”

Invest ¥100 billion over four-year period
Strengthen core businesses
Further expand LP gas, city gas, CATV, and Information andCommunications businesses

Acquire new services
Acquire new services to drive future growth3

Results of M&A in 1H FY03/20(Four acquisitions and two business alliances)

4

Steady progress in wide-area development of city gas business
In March 2019, acquired preferential negotiation rights on a gas business operated by the city ofNikaho, Akita Prefecture; concluded a business transfer contract for the gas business in May 2019;and scheduled to take over the business in April 2020
This was the second M&A in the city gas business and the Group's first entry into Akita Prefecture
Based on the Group's Total Life Concierge (TLC) vision, we will provide a variety of life-related
services in order to contribute to the realization of a more affluent lifestyle. We also aim to further
expand the scope of our city gas businessTotal Life Concierge
Providing various
TOKAI Group services

AomoriPrefecture

EnergyRenewableenergyElectricity

Information andcommunications

Iwate
Prefecture
Akita
Prefecture

City gas

LP gasLow-cost
mobile carriersInternetCATV

NikahoRealization of an affluent lifestyle＋Expansion of the scope ofthe city gas businessSelected as a preferred negotiator for the transfer of Nikaho gas business inMarch 2019Concluded a business transfer contract for the gas business in May 2019
Business takeover scheduled for April 2020

Facilities

Residential

Facilityequipment

Renovation

Security

Insurance

Security

Healthcare
Aqua
Agriculture

Medicalcare

Nursingcare

Education

5

Creating synergy in CATV business
Acquired a CATV business covering a part of eastern Shizuoka Prefecture operated by Shioya Limitedin April 2019 (took over the business in October)
TOKAI’s CATV business has been transitioning to FTTH since 2006, anticipating a trend toward theintegration of broadcasting and communications. FTTH supports advanced 4K and 8K broadcasting,which will likely become widespread in the next few years
TOKAI expects to create synergy with other businesses based on the Total Life Concierge (TLC)
concept while providing advanced CATV services

TOKAI Cable NetworkCorporation

Business transfer
contract

Shioya Limited

CATV business
TOKAI’s CATV business

Covering a part of eastern
Shizuoka Prefecture

Delivers a community channel withhigh-quality content
Provides ultra-high-speed
communications through FTTH

Variety of lifestyleservices based onthe TLC vision

Synergy creation

Supports advanced 4K and 8K
broadcasting

6

Creating synergy in Information and Communications business
Acquired AM’s Brain Inc. in July 2019, which offers information services such as contracted softwaredevelopment and systems operation and maintenance
TOKAI provides one-stop optimized solutions for corporate clients by embracing cutting-edge
technology such as AI and IoT and leveraging its data centers and fiber-optic networks
Create synergy by combining strengths to expand the scale of our Group’s Information andCommunications business and increase the variety of its offerings
Infrastructure supporting TOKAI’s corporate information communication businessOkayama Data Center

AM’s Brain Inc.

LCV Data Center

Tsuyama

Contracted softwaredevelopment
Systems operation andmaintenance

NaganoNagoya
OkayamaOkayamaTokyo

Shizuoka

Kurashiki(Okayama Prefecture)

Shizuoka Data Center
TOKAI fiber-optic network (approx. 7,000km installed)

Note: Green denotes areas with other Groupbusinesses

Mutually combine strengths to create synergy effects
Further expand and enhance the Group’s Information and Communications business7

Expand into new regions as a general construction company
Acquired Nissan Tri Star Construction, Inc., which operates a community-based general construction
business in Gifu Prefecture
Nissan Tri Star exhibits strength in public works projects in particular. It has a large number of highly
qualified personnel and a solid reputation earned over many years
TOKAI will leverage Nissan Tri Star’s technical prowess to expand as a general construction company
into Shizuoka Prefecture and the Chukyo and Kanto areas

Nissan Tri Star Construction, Inc.

Construction
Facilities construction
Real estate sales

Kantoarea

General construction(Especially public works)

Chukyoarea

Expand into new regions as ageneral construction company

Area coveredby TOKAI

Promote TLC, aided by synergy
effects with the LP gas business

8A model business alliance with a community-based business
Concluded a capital and business alliance agreement with city gas supplier Isesaki Gas Co., Ltd.
(covering Isesaki, Gunma Prefecture)
TOKAI seeks benefits from partnering with community-based businesses. TOKAI and Isesaki Gas will
cooperate in the city gas and LP gas businesses by sharing management resources and expertise,and promoting the utilization of each other’s services

Operates LP gas business in GunmaPrefecture
In April, took over city gas business in
Shimonita, Gunma Prefecture

Capital alliance

Active development of businessrooted in regional communities

Cooperation in thecity gas business

Provides an essential service supporting
the regional community
Plays a large role in promoting the regional
economyAn essential company in theregional community

Cooperation in theLP gas business

Reciprocal service
referrals

9New business established to expand city gas sales area
In October 2019, TOKAI established T&T Energy Co., Ltd. with TEPCO Energy Partner, Inc.
The companies will develop a city gas retail business in the Tokai area (Aichi, Gifu, and Mieprefectures) by leveraging TEPCO Energy Partner’s city gas retail expertise (especially gas
procurement capability) and TOKAI’s sales network in the Tokai area
The new business aims to acquire 10,000 city gas contracts by next fiscal year while exploring
opportunities to provide various lifestyle services (including electricity and gas) and expanding beyond
the Tokai area

TOKAI

TEPCO Energy
Partner

50%50%

T&T Energy Co., Ltd. (new company)

Tokai area sales
network

Aims to acquire 10,000 city gas contracts by next fiscal year

Gas procurement
capability
City gas retail expertise

City gas sales throughbusiness partners

Exploreopportunities toprovide lifestyleservices including
electricity and gas

Expand beyond
the Tokai area

General customers (households in the Tokai area)

10Ten M&As (acquisitions and business alliances) completed
Ten M&As (acquisitions and business alliances) completed as part of the M&A strategy under theInnovation Plan 2000 “JUMP” medium-term plan
The M&As will expand TOKAI’s earnings base
City gas

City gas

City gas

Shimonita gas
business

Isesaki Gas

Nikaho gas business

April 2019 (took overbusiness)

August 2019 (formedbusiness alliance)

April 2020 (slated to takeover business)

Akita

Building and Real
EstateCATV

Nissan Tri Star
Construction

Tokyo Bay Network

September 2019 (acquired)

July 2017 (acquired)

CATVGunma

TV Tsuyama
February 2018 (acquired)

Gifu

Information andCommunications

Tokyo

CYZE

Okayama
Aichi

Shizuoka

September 2018 (acquired)

Information andCommunications

City gas

CATV

AM’s Brain

T&T Energy

ShioyaOctober 2019 (established as
joint venture)

October 2019 (took overbusiness)

July 2019 (acquired)

11Successful track record of past M&As
Tokyo Bay Network(CATV)
Acquired July 2017TV Tsuyama(CATV)
Acquired February 2018

CYZE(Information andCommunications)
Acquired September 2018

Shimonita gas business(City gas)
Took over business in April 2019

Business development rooted in regional particularities (regionalBWA service)
Provide free Wi-Fi networks reaching large developed areas
Provide high-speed internet services in areas where FTTH installation is difficult

Contributing to the achievement of an advanced informationsociety in regional communities
Build fiber-optic infrastructure (FTTH) and provide new services utilizing it

Synergy creation by mutually leveraging customer bases andbusiness expertise
Expand operations area through active personnel exchange

A model case of the privatization of a public gas utility
Capture large users by strengthening marketing capabilities
Promote Total Life Concierge (TLC) concept through the city gas business

12

ABCIR+S Strategy Progress

An acronym formed by the first letters of AI, big data, cloud, IoT, robotics, andsmartphones. It refers to the Group’s strategy toward technological innovation.
13

Data management platform (DMP) completed
TOKAI’s key ABCIR+S strategy focuses on developing new services and a new customer base while
increasing competitiveness and continuing to leverage the marketing capabilities it has cultivated since
its founding
TOKAI completed the development of a data management platform (DMP) conducted mainly by theNext-generation Management Strategy Division
ABCIR+S concept

Marketingcapabilities

CATV

IoT

Cloud

SurveillancecameraBig dataAI
Network(traditional strength)

Robotics
AI speaker

Smartphone

Focus on expanding the customer base, becoming more competitive, and developing new services

Complete development of a data management platform (DMP)
created mainly by the Next-generation Management Strategy Division

14Group DMP “D-sapiens”
TOKAI Group DMP【ディー・サピエンス＝略して｢ディーサ｣】From homo sapiens (intelligent humans)
to data sapiens (intelligent data)
Achieve a deeper and more multifaceted understanding of customers
by analyzing customer data using digital tools
A data management platform (DMP) that continuously actualizes
the Total Life Concierge concept through AI and big data15

D-sapiens: Enhance analog and digital marketing
Real data allowing the creation of a highly detailed customer profile based on communication with thecustomer
Deeply analyze customer data using AI to better understand customers and uncover latent demand
Formulate an action plan tailored to customers based on both analog and digital marketing
Marketing database

AI data analysis
Discoverpatterns

Consolidate all customer
data from all Group
services chronologically〉

Automaticallydiscover distinctive
patterns and new
associations in thedata

Make predictions
Predict customer
behavior using
patterns discovered
Build prediction
models based on
customercharacteristics

Understandcustomers
and predict
behavior

Attributes, transaction history,
payment data, member information,browsing history, event attendance
history, etc.

Deeply analyze
customer data

Build a highly detailed
profile of each customer

Price sensitivity, brandpreferences, cancellation
indicators, tendency topurchase multiple
services, etc.

Marketing approach
Find latentcustomers

Devise tailored marketing
approaches after
understanding actions
that trigger cross-sellingor cancellations

Apply prediction
models to new andexisting customers tofind latent customers

Uncover latentdemandOptimal action plan
through analog anddigital marketing〉
EmailApps
Socialmedia

Smartphone

Models predictpurchasing andcancellation activity, etc.

Discover segments witha high propensity topurchase, cancel, etc.

DMOperator

Sales teamIntroduce customers to services theywant when they want them according totheir preferences and lifestyles while
maintaining an appropriate distance

Automate all parts of the process from pattern discovery to approach formulation
Combine analog and digital means to optimize marketing and maximize sales

Essential Points of 1H FY03/20
Financial Results

16Core businesses steadily expanded customer base◎ The number of continuing customers at end-1H was 2,918 thousand, an increase of 16thousand from 2,902 thousand at the beginning of the period.
◎ Mainstay LP gas business, CATV business, and Aqua business steadily expandedcustomer base.
(Net customer increase: Thousands)+14+11+14+11+9+9+6+3+6

LP gasCATV
1H FY03/18

Aqua

1H FY03/19

1H FY03/20

18

Note: Rounded to the nearest thousand; Excluding customer growth from M&A

Sales and all profit categories hit record highs◎ Sales rose by ¥4.2 billion YoY, supported by a higher customer count and favorable
results in the information and communications business for corporate clients.
◎ Operating profit also increased sharply by ¥2.0 billion (+58.3% YoY), reflecting an
increase in monthly fee-paying customers associated with higher customer count, as wellas profit growth in the information and communications business for corporate clients.
◎ All profit categories far surpassed earnings forecasts with double-digit growth.
(Millions of yen)

YoYVersus Forecast

1H FY03/20
Results

1H FY03/19
Results

1H FY03/20
Forecast

Sales

93,01588,84092,500+4,175+4.7%

+515

+0.6%

Operating profit

5,500

3,475

4,410+2,025+58.3%+1,090+24.7%

Recurring profit

5,608

3,580

4,360

+2,027+56.6%+1,248+28.6%Net income

3,492

1,736

2,360

+1,755+101.1%+1,132+48.0%EPS (Yen)

26.67

13.26

18.02

+13.41+101.1%+8.65+48.0%

ChangePercent
ChangeChangePercent
Change19Large increase in monthly fee-paying customers in core businesses◎ Earnings grew on an increase in monthly fee-paying customers due to rising customer
count, which forms the Company’s earnings base.
Monthly fee-paying customers(Thousands of customers)3,126
5,156

5,210

5,268

1,957 1,956 1,955
1,909

5,040
3,063

1,844

+0.25 million (+8.6%)+1.27 million (+31.6%)+0.48 million (+32.9%)

3,010
1,711

4,539
2,950
2,908
2,878 2,878
4,002

1H

2H

1H

FY03/172H

1H

FY03/182H

FY03/19

1H

1H

FY03/20

4,039
1,471

2H

1H

FY03/172H

1H

FY03/18

LP gas2H

FY03/19

1H

1H

FY03/202H

FY03/17

CATV

1H

2H

1H

FY03/182H

FY03/191H
FY03/20

Hikari Collaboration

20Factors causing operating profit increase in 1H◎ Customer count grew from 2.89 million at end-1H FY03/19 to 2.92 million at end-1H
FY03/20, an increase of 20,000 customers. A growth in monthly fee-paying customers
pushed up operating profit by ¥1.6 billion and LIBMO (TOKAI-brand MVNO service)improved ¥100 million.
◎ The impact of temperatures and procurement cost also improved YoY.
Customers
60

2.92

Operating profit(Billions of yen)million+0.1

55

50+0.145

Communication
MVNOCustomers
40+1.6

LIBMO

48.7

Communication
BB-0.3Customeracquisition/retention cost
Gas
CATV
Comm. BB
Aqua

2.89
million+0.1+0.1+0.3+0.1+0.3

Expenditures tostrengthen
corporatestructure, etc.

51.7

5.5

Temperature
impactProcurement
cost impact

Gas

Gas

+0.3+0.1-0.3

Customer growth3530+0.6-0.3+0.1-0.3

3.5

Gas
CATV
Communication(corporate clients)
Building+0.5+0.1+0.7+0.3

251H FY03/19
分類 1Results

分類 2分類 3

分類 5分類 5分類 7分類 7分類 71H 分類
FY03/20
7Results

21

Expand investment on solid shareholders' equity◎ Equity ratio further improved by 1.0pp.
◎ Free cash flow grew rapidly YoY and the interest-bearing debt/EBITDA ratio improved on
an increase in operating profit and collection of receivables and decrease in trade
payables.

37.4

Equity ratio%

As of March 31, 2019

Interest-bearing debt balance

50.6

billion yen

As of March 31, 2019

Operating cash flow

7.2

billion yen

1H FY03/19

Investing cash flow

(7.0)

billion yen

1H FY03/19

Free cash flow

0.2

billion yen

1H FY03/19

Interest-bearing debt/EBITDAratio

1.8

Times

FY03/19

➡
➡

38.4%

As of September 30, 201950.9

billion yen

As of September 30, 2019

➡

10.7

➡

(6.9)

➡

3.8

➡

1.7

billion yen

1H FY03/20
billion yen

1H FY03/20
billion yen

1H FY03/20
times

1H FY03/20

Note: Interest-bearing debt/EBITDA ratio for 1H FY03/20 is based on the full-year EBITDA forecast.

22

Full-year earnings forecast left unchanged◎ TOKAI has left full-year forecast unchanged despite 1H operating profit outstripping
forecasts by ¥1.1 billion (24.7%).

Initial forecasts factored in profit growth in 2H due to anincrease in customer count, as well as expenditures tostrengthen the corporate structure targeting further growth

Expects expenditures stemming from the pursuit of theM&A strategy and plans to review progress in theacquisition of new customers

23Prospect of business performance and future outlook described in this material are ourestimation based on information available as of this moment, and potential risk anduncertainties are included. Therefore, please note that actual business performance ispossibly very different from the described future outlook due to change of various factors.

For inquiry related to this material, please contact us as follows:
IR Office, TOKAI Holdings Corporation
11F Hamarikyu Intercity, Kaigan 1-9-1, Minato-ku, Tokyo 105-0022
TEL: (03)5404-2891
FAX: (03)5404-2786
http://tokaiholdings.co.jp
e-mail: hd-info@tokaigroup.co.jp

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