About TOKAI GroupJune, 2018
TOKAI Holdings Corporation(Code: 3167)

Overview 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 8th 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 dateApril 1, 2011

Group companies

23 consolidated subsidiaries, 5 affiliates

Sales, operating profit¥186.1 billion, ¥11.0 billion (FY2017)

Employees

3,870

Main businesses（FY2017）
Note: Percentage figuresindicate proportion oftotal sales
Changes in management
structure

Gas and Petroleum:40.9%(sales: ¥76.1 bn; operating profit: ¥7.4 bn)

TOKAI, TOKAI GASInformation andCommunications:27.4%(sales: ¥50.9 bn; operating profit: ¥3.2 bn)

TOKAI COM

CATV:15.3%(sales: ¥28.4 bn; operating profit: ¥3.6 bn)

TCN

Building and Real Estate

:

10.6%

(sales: ¥19.8 bn; operating profit: ¥1.3 bn)

TOKAI

Aqua:3.3%(sales: ¥6.2 bn; operating profit: ¥0.2 bn)

TOKAI

Other:2.5%(sales: ¥4.7 bn; operating profit: —¥4.7 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 established1

Diversify business related to living with gas as the starting point
Expanded our own infrastructure services while responding to social issues, population structurechange, consumer needs
Provided "Energy" "Information and communication" "Housing equipment" "Security" "Insurance""Nursing care" and others
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 baby
boom (1971–1974)

2000s

2010s

Present

Elderly ratio reaches 1 in 4(2014)

Revision to the NTT Law(2001)

Electric power
liberalization (2016)

Electricity
Nursingcare

1973

2016

2011

Aqua

2007

Security

Transition to a holing company structure

Housing1984

1970
City gas

1950

WWW

WWW

Cable TVInternetADSL/FTTH

Mobile

1988

1996

2001

2006

CATV

Bridal1959

1972

Developed LP gas distribution
system using large-scalecomputers, providing theopportunity to promote Information
and Communications businessToward the realization of TLC (Total Life Concierge)

Insurance

LP gasCity Gas
liberalization (2017)

SIer
Systemdevelopment

Data center

1983

1985

Telecoms
network

2

2001

Achievements of IP13 and IP16 （PL）
Transformed from "individual management" to "group management" by holdings structure.
Made remarkable results through “improvement of finance” at IP13 and “strengthening of profitability”
of IP16 “growing”.
Achieved operating income of 12.8 billion yen (record high) in FY 2016.
Net income tripled. (5.1 billion yen increased) (2.2 billion yen ⇒ 7.3 billion yen)
Earnings per share are more than doubled (30.48 yen ⇒ 64.46 yen)Three times more than inFY2010
LPG purchase, BB · Aqua upfront
cost increased

Improve profitability byeliminating upfront costs

2.2
12.8
10.8

10.9
9

8.9
7.4

FY20102.7

3.1

FY2011FY20122.6
FY2013

7.3
3.9

3.5

FY2014FY2015Net Income（¥bn）
8.2
More than doubled level !

FY2010FY2011FY2012FY2013

FY2014FY2016FY2015

Operating Income（¥bn）

30.48

27.17

29.85

FY2010FY2011FY2012

64.46

34.16

30.01

FY2014FY201522.67

FY2016FY2013

Earnings per share (Yen)FY20163

Achievements of IP13 and IP16 (BS)Transformed from "individual management" to "group management" by holdings structure.
Made remarkable results through “improvement of finance” at IP13 and “strengthening of profitability”
of IP16 “growing”.
Interest bearing debt halved. -69.9 billion yen (124 billion yen ⇒ 54.1 billion yen)
Equity ratio improved significantly （7.7％⇒34.5％）
Market capitalization is more than doubled (52.7 billion yen ⇒ 119 billion yen)
34.5
14.3

7.7

18.6

21.6

FY2012FY201325.725.6

FY2014FY2015

Half balance after HDstructure

124.0
105.7

FY2010FY2011

93.7

Equity ratio（%）

85.8
73.1

71.4

398

340

586

521326FY201685635154.1
119.0

More than doubled level !

FY2010FY2011FY2012FY2013

FY2014FY201552.761.7

FY2010FY201150.5

54.4

FY2012FY201380.8

81.5

FY2014FY2015FY2016

Interest bearing debt（¥bn）

Market capitalization(¥bn) /Stock price(Yen)FY2016※Including own shares

4Stable revenue model with charge accumulation
2.88 million customers nationwide, customer share in Shizuoka prefecture overwhelming(3 households and 2 households are our customers)
Gas and CATV business occupying more than half are strongly connected with customers and being
foundation of stable earnings

2.88mnCustomers
Aqua
3,500
（Thousand）

as of Mar. 2018

Gas（LP・Citygas）

15

Others38
Shizuoka

66
3,000

CATV 103

Breakdown of

Breakdown of

as of Mar. 31, 2018
By areas

as of Mar. 31, 2018
By services

2,500129
Communications (HikariCollaboration + conventional
ISP + mobile)740
thousand1,500

in FY03/01

1,000500

Kanto

200
thousandin FY03/90

The gas and CATV business has
strong connection with thecommunity and customer is morethan half

104
2,000120

2.88mn customers

2.88mn customers-5TLC model which can be established in Shizuoka prefecture
It is our basic strategy to promote multiple contracts by community-based sales
Gas and CATV business is the basis for TLC because customer contact points
are strong, and providing a high rate of multiple service contracts
Of these, 16.7% use twoor more services (nationwide: 8%)

Two in three households inShizuoka Prefecture are ourcustomers

ShizuokaPrefecture

Kanto area

16.7%

1.9%

(TOKAI Group household contracts)

930 thousand(Households in Shizuoka Prefecture)

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

1.46 million※City gas

CATV

LP gas

37.2%

32.8%

23.4%

(As of March 31, 2018)※ The number of households in Shizuoka Prefecture is as of April 1, 2018 according to “Shizuoka
Prefecture Population Statistics, by City, Ward, Town, and Village,” Shizuoka Prefectural Government.
Contracts by the TOKAI Group as of March 31, 20186

Group vision "TLC"
Basic concept of service provision by TLC (Total Life Concierge)
Provide diversified lifestyle related services at one stop · one contract · one call center

TLC (Total Life Concierge) offers various
lifestyle-related services on a one-stop basis

Contract,
inquiries,
payments＋
Point benefits

One Call Center

Customers

One contract

City gas

ＬＰ gas

Housing

Aqua

WWW

CATV

Nursing
Care

Cable TVADSL/FTTH

BridalSecurity

MobileInsurance

Electricity

7

The TLC is effective for continuing transactions, multiple contracts
Institutionalized in December 2012 to further promote long-term continuity and multiple
transaction (cross-selling) measures for 2.88 million customer base.
TLC points are awarded according to the usage fee of group service (1 point of basic point
per monthly usage fee of 200 yen) and the number of contracts of service (bonus points 50
to 500 points according to the number of contracts).
As a new cross-selling measure, TLC Kasatoku-plus, which provides customers with multiple
incentives, started in May 2017
TLC Members exceeded 700,000 806（Thousand）

GroupServices

LP GasCity Electri Intern
LIBMO CATV
Gas cityetIntellig
HouseSecuri
ent Aqua
Renovtyhomeation699
◎
586

◎

◎◎◎

◎

◎

*Give 1 TLC point per 200 yen of monthly usage fee for target 6 service(City gas requires two or more contracts including city gas and other designated services)◎366
Bonus points

92

Basic points

491

306

◎

Kasatokupoints* Started in May
2017

End of March End of March End of March End of March End of March End of March End of March
2013
2014
2015
2016
2017
2018
2019(plan)◎◎◎◎◎◎◎◎※ Receive TLC points according to the number of contracts of the target 9 service
2 contracts → 50 points · 4 contracts → 300 points
3 contracts → 150 points · 5 contracts → 500 points◎◎◎◎◎◎◎◎◎※ Present TLC points if you newly subscribe to the target service of the group
200 points a month for each new contract◎

8

By cross-selling, the cancel rate be halved
The contribution to the cancel rate is a decrease of 50%, which is 5.8%
for multi-trading customers, with a rate of 11.0% for single
TLC members cancel rate is 8.3%, non-members are 11.0%, about 30% less. With
TLC membership system, cancellation can be suppressed.

Cancel rate of multiple trading customers (Result of FY2017)
MemberNot a member

Total

Multiple trading
customers（a）

5.3%

7.0%

5.8%

Single trading
customers（b）

9.9%

11.3%

11.0%

計

8.3%

11.0%

10.3%

（b/a）

The cancel rate is reduced by about30%

- 50%
9

The main services are characterized by a high profit margin
Monthly sales and gross profit ratio per one main service
Our all major services are above retail average (28.6%).
（Yen/Month・Item）

100.0%※Results at the end of March 2018

8,000

90.0%

6,838

7,000

6,377

80.0%

6,000

70.0%
5,000

60.0%

4,305

4,061

4,000

3,000

2,000

40.0%

2,536

71.5%

50.0%

30.0%
62.0%

85.8%

1,000

29.4%

40.6%

20.0%
28.6％
10.0%

2017 Basic Survey on
Corporate Activities byDepartment of Ministry ofEconomy.
(Based on actual results for
FY2016)
Average for retailers

0.0%

0LP gas* Sales and gross profit margin of LP gas and city
gas include equipment sales etc. in addition togas sales

City gasAqua

CATV

Sales per item

Gross profit ratio per item

Hikaricollaboration

10Direct sales capability to acquire 300,000 customers per year
In the LP gas business, operate in existing areas and new areas.
In the CATV and city gas business, operate around the service area.
In the information and telecommunications business, mainly operate at ourown booth in a major home electronics store.
In the aqua business, operate at our own booth such as in Aeon (Facility ofmajor retailers in Japan) and other large commercial facilities.

Number of acquisition (registration)
M&A 225 Thousand（LCV 121 Thousand ）（KCT 104 Thousand ）(Thousand)M&A 273 Thousand(Tokyo Bay Network 259 Thousand)(TV Tsuyama 13 Thousand)544

Existing 274 Thousand

547

Existing 319千件

292

FY2007357

320

FY2008FY2009FY2010343

FY2011

321

315

FY2012FY2013277

279 247

FY2014FY2015FY2016FY2017

11

Sales and service structure rooted in areas and customers
A total of 1,500 managers meet customers face-to-face and propose solutions
Call centers help reduce cancellations and proactively support contract
acquisitions

129sales locations** Including three overseas locations (Shanghai, China;
Taipei, Taiwan; Yangon, Myanmar)

40 million

Yangon, Myanmar
Shanghai, China

customer contact points

Taipei, Taiwan

1,600

Headquarters
Branch sales offices

regional managers
LP gasSales person

630

Delivery239

Meter reading/Collection money

444

Security

276

Total

1,589

434

TG
63

Call center

CATV
133

Around400

operators atnine locations throughout Japan

12Own competitive optical trunk line 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

The total distance of the optical trunk line,
which is the backbone of the group's
information and telecommunications businessand CATV business:
Approx.

6,000km( Breakdown of total laying distance )*As of March 31, 2018
Telecommunication business 2,608 km
CATV business
3,527 km

LCV Data Center※Including trunk and branch line (excluding lead-in line)

NagoyaOkayamaAtsugi Otemachi
OsakaYaizu

Okayama Data Center
Shizuoka Data Center13

Data Center Alliance
Alliance with data center operators nationwide to realize a wide range ofBCP and DR services※ As of the end of March 2018
There are 23 member companies
・BSN INET Co.

・Hokkaido Telecommunication

・LCV CORPORATION

Network Co., Inc.

・ Hokuden Information System Service Company,Inc.

・Tohoku Intelligent Telecommunication

・Ryobi Systems co., ltd.

Co., Inc.

・Kyuden Infocom Company,Inc.

・LAC Co., Ltd

・Nishitetsu Information System Co.,Ltd

・Data Dock Inc.

・SAKURA KCS Corporation

・Ryomo Internet Data Center Co., Ltd.

・MEIKO TECHNOS

・AGS Corporation

・Okigin SPO

・ITOCHU Techno-Solutions
Corporation
・INFOCOM CORPORATION
・Sakura Information Systems Co., Ltd.
・NTT TechnoCross Corporation
・TOKAI Communications
Corporation・OGIS-RI Co.,Ltd.
・ITEC HANKYU HANSHIN CO.,LTD.
・GMO CLOUD K.K.

：TOKAI Group’s DC： Alliance operator’s DC

14

New Medium-Term Management Plan
IP20 “JUMP”

15

Numerical targets include doubling sales inFY03/21 versus FY03/17
Increase sales by 1.9 times compared with FY2016 to 339.3 billion yen, and operating
profit grow to 22.5 billion yen 1.8 times. And the number of customers is also 1.7 times
as high as 4.32 million.
Target interest-bearing debt/EBITDA ratio of 2.6x, equity ratio of 31.6%, and ROE of13% by management focused on capital efficiency.
(Billions of yen)

FY03/17

FY03/18

ResultResult(Traget)

FY03/19

FY03/20

FY03/21

TargetTargetTarget

Sales

178.6

186.1(189.4)

202.0

224.4

(+90%)

393.3

Operating profit

12.8

11.0(11.0)

14.0

16.2(+80%)

22.5

Net income

7.3

6.6(6.4)

7.9

8.7(+60%)

11.5

Total assets

161.1

166.4

(169.8)

173.8

191.2

(+80%)

283.4

1.9x

1.9x

(2.0x)

1.7x

1.8x

2.6x

Equity ratio

34.5%

36.3%

(33.9%)

35.6%

34.9%

31.6%

ROE

15.2%

11.4%

(11.1%)

12.8%

13.0%

13.0%

2.56

2.88(2.88)

2.99

3.72

Interest-bearing
debt/EBITDA ratio

Customer numbers(millions)(+70%)

Over 4.32

Note: () denotes increase versus FY03/17

16M&A strategy in IP 20 "JUMP"In the four years from FY2017, we will carry out the following M&A strategy.

Investment fund of 100 billion yen for 4 years

Strengthen core business
Further expansion of the LP gas, city gas, CATV,
information and communication businesses.
Expanding customer base through M&A and Alliance.

Acquisition of new service field
Acquire new services to promote future growth.
Not only acquisition but also viewing capital alliance.

17

Promote M&A aggressively with liberalization of city gas
Due to the liberalization of city gas, 197 companies excluding major companies out of 202 companies
in the whole country are targeted.
Already taken over the contract regarding the transfer of gas business in Shimonita-machi Gunma
Prefecture, and took over from April 2019.
Promote TLC by leveraging customer contact power of city gas business.

Contract concluded on Shimonitamachi gas business transfers.
It took over from April 2019

Liberalization of city gas retailingfrom April 2017

Shimonita-machi（Gunma Pref.）Nationwide target
Out of 202 companies,
197 companies excluding majorcompanies

18

Continue to promote M&A to expand customer baseIn the previous fiscal year, Tokyo Bay Network Co., Ltd. and TV Tsuyama Co., Ltd. became
consolidated subsidiaries.
The number of businesses that can not respond with advanced broadcasting such as 4K and large
capacity of communication contents is expected to increase.
Among them, we will chose companies that can utilize our know-how and can expand TLC.

Tokyo Bay Network Co., Ltd（Customers about 260,000）

TV Tsuyama Co., LtdTuyama City（Customers about 10,000）

ChuoWard
Kurashiki City（Okayama Pref.）

KotoWard（Tokyo 23 wards）

Continue selecting target company “Aggressively”

19Advancement of Broadcasting in CATV (Toward optical line)
The penetration rate of 4K broadcasting to 40% level by 2020 Tokyo Olympic Games
In order to provide 4K broadcasting in the CATV infrastructure, it is necessary to optical line (FTTH), our Group
have promoted change the line to optical from 2001 . →Cover almost the entire area in 2020.
We assume that many small and medium-sized operators that can not make capital investment will come out inthe near future.
End of 2020
Expansion of demand for 4K
4K (compatible) TV
broadcasting towards the Tokyo Olympic Games
19.77 million units *1(~ July 2020)
Aim for penetration rateof 4K broadcasting 40% *2
June, 2018:
Russia 2018 FIFA World Cup*1 Quoted from Nomura ResearchInstitute "IT Navigator 2018 edition"from "4 K Television Holding
Household Count Forecast".

14.88 million households
at the end of March 20184K tuner built-in TV(Dedicated antenna is*2 Forecasts of the number ofnational households in FY2020(54,107 thousand households) byNomura Research Institute "ITNavigator 2018 edition" "Predictionof number of households held by 4K
television" and National Social
Security and Population ResearchInstitute "Future estimation ofhouseholds in Japan" Calculated
more

required for 4K viewing * 3)
As of the end of March 2017
2.46mn household *1

FY2016FY2017

Business
opportunities

FY20184K Tuner not equipped TV(Requires 4K tuner anddedicated antenna * 3)

FY2019December, 2018: BS/CS4K practical broadcasting start ●FY2020

20July 2020 Tokyo Olympics ●Prioritize areas already expanded or neighboring
Targeting operators in the areas already established in the neighboring of the LP gas
advanced area (blue in the figure below) and group projects (other than insurance, aqua,industrial etc.) other than the LP gas business.
From the viewpoint of population dynamics and consumption, priority is given to thePacific side and the Setouchi district.
MiyagiTajimi office

New area（FY2015 and 2016）5 bases
New area（FY2017）

2 bases

New area（FY2018）

1 baseNew area（Planned）

2 bases

Sendai officeSuwa office（tentative）Iwaki office

Gifu office

NaganoTokyo
Already established area (LPG)

Kyushu office

OkayamaShizuoka

Already established area (Other than LPG)Osaka

New area target

ToyokawaofficeMie
Nishi Mikawa
officeFukuoka

Mie Office（tentative）
Okayama officePlanned area

Entered area (other than LPG)
NaganoInsurance Division

Osaka

Aqua Division

Fukuoka

Industrial, Building Management
Support Department

21

Latest topics

22

ABCIR+S Innovations
AI (A), Big Data (B), Cloud (C), IoT (I), and Robotics (R)+AI

S (Smartphones)

CloudBig DataNetwork

RobotsIoTAI Speaker23

Disruptive Innovation
ABCIR+S
Sales
capabilities(existing strength)

×••
••
•

AI(A)
Big Data(B)Cloud(C)IoT(I)
Robotics(R)+• Smartphones (S)By leveraging ABCIR+S, TOKAI aims to build adeeply connected relationshipwith customers.

24

Established an organization dedicated to ABCIR+S
Established Next-Generation Management Strategy Department at TOKAI Holdings

TOKAI Holdings
Next-Generation
Management Strategy Dept.

Each TOKAI
group company

Promote utilization ofABCIR+S across the group

Improve efficiency ineach business area

Launch new businesses
Improve customer contacts
Devise information utilization
strategies

Advance businesses byutilizing ABCIR+S

Aims for transformation and growth by utilizing information andcommunications technology across the group.
25