Financial Results for the First Half of theFiscal Year Ending March 31, 2017
TOKAI Holdings Corporation(Code: 3167)
November 2, 2016

Significantly higher profits led to record-high profits◎ Progress exceeded initial forecasts (Operating profit: +30.4%; Net income: +112.9%)◎ Profitability improved steadily in Hikari Collaboration and Aqua, areas of focus for the current
fiscal year (the two businesses combined, improvement of 2.1 billion yen versus forecast of 1.6
billion yen), contributing to earnings. Aqua achieved profitability over the interim period◎ Effect on sales of price revisions resulting from lower prices of raw materials for gas was minus
4.8 billion yen year-on-year(Sales and profits: Millions of yen, EPS: Yen)
1H
FY03/171H
FY03/16

InitialForecasts

Sales

82,201

84,773Operating profit

4,406

Of which, Hikari
Collaboration

YoY

Vs. Initial Forecasts

Amount ofChange

Percent
Change (%)

Amount ofChange

Percent
Change (%)

85,300-2,571-3.0-3,098-3.6

1,856

3,380+2,549+137.4+1,026+30.4-182-1,512-505+1,330-+324-Of which, Aqua

201-616-65+817-+267-Recurring profit

4,428

1,779

3,270+2,649+148.9+1,159+35.4

Net income

2,384

277

1,120+2,107+760.2+1,264+112.9(EPS)(21.0)(2.39)(9.89)(+18.61)(+777.6)(+11.11)(+112.3)*Operating profit for Hikari Collaboration and Aqua are before elimination of indirect expenses

1Market conditions for raw materials prices◎ Against a backdrop of oversupply in the global oil market, crude oil prices havecontinued to decline since 2014
◎ In line with this, LPG and LNG prices are also trending downward◎ Prices of raw materials for LP gas are at 64% of those seen during 1H FY03/16, while
LNG is at 57%; the effect of price revisions on the Company sales is minus 2.3 billion
yen in LP gas and minus 2.5 billion yen in city gas
1H FY03/17

LPGLNG

1H FY03/16

Year-on-year

CPaverage

309 $/ton

426 $/ton-117 $/ton

Avg.
exchange rate

107.9 yen/$

121.5 yen/$-13.6 yen/$

CP x exchange
rate

33,341 yen/ton

51,759 yen/ton

40,14470,817-30,673 yen/tonyen/tonyen/ton(56.7% vs. 1H FY03/16)

CIF
average*-18,418 yen/ton(64.4% vs. 1H FY03/16)*Source: “Trade Statistics,” Ministry of Finance2

Full-year results to outperform in light of 1H◎ 1H outperformed forecast by 1.0 billion yen due to the following factors
Margins improved due to lower prices of raw materials for gas
1) LP gas (+200 million yen):
Profits up due to steady net gains in customer numbers
2) CATV (+300 million yen):
3) Hikari Collaboration (+400 million yen): Overall market lagged versus estimates and net increase incontracts was 53 thousand, about 30% lower (-19 thousand) than
expected, leading to lower acquisition costs◎ Although the following costs will be added during 2H, results are projected to meet the initial forecasts
1) Hikari Collaboration (-400 million yen): As a similar business environment will continue, negative effects
arising from lower contract acquisitions in 1H are incorporated2) LP gas (-200 million yen):
Costs to rise to recover customers lost to competitors during 1H3) CATV (-200 million yen):Upfront costs to expand customer base in FY03/18 onward
Operating profit
Vs. 1H Forecasts
Vs. 2H Forecasts
Vs. FY Forecasts

LP gas+ 200 million yen- 200 million yen

Information andcommunications(Hikari Collaboration)+ 400 million yen- 400 million yen

CATV+ 300 million yen- 200 million yen

Other+ 100 million yen
Total+ 1.0 billion yen- 800 million yen+ 200 million yen

3Expansion of gas business customer base◎ New accounts were up 25% YoY during 1H (from 14 thousand to 17 thousand), with projections
for a 30% gain over the full year (34 thousand to 44 thousand). Both existing and new areas areprogressing ahead of plans◎ Although cancellations increased in 1H due to competition with peer companies, momentum has
slowed after countermeasures were put in place. As 1H results were favorable, costs (200 millionyen) will be added during 2H to strengthen acquisition sales toward growth in FY03/18 onward

Customer Dynamics (YoY)(Thousands oi customers)
44273420171418151312

New Customer Acquisition Targets(Thousands oi customers)
70
60

+11H
FY03/162H
FY03/16

New
subscriptions

26.9%

30.0%

14.6%

23.5%

20.0%

302015.0%

6.4%

10.0%

105.0%

00.0%

FY03/16
Resubts

2H
FY03/17

35.0%

25.0%

40-01H
FY03/17

31.9%

29.7%

50+12+7

BudgetForecast
39 thous. -> 44 thous.

FY03/17
BudgetFY03/18
Pban

FY03/19
Pban

FY03/20Pban

FY03/21Pban(Est.)

Cancebbations

Net increase/ decrease

New acquisitions

New areas

Composition oi new areas 4

Customer numbers up in CATV◎ Versus the net increase of 20 thousand customers (6 thousand in broadcasting and 14 thousand intelecommunications) during FY03/16, customer numbers are increasing steadily by 24 thousand during
FY03/17 (8 thousand in broadcasting and 16 thousand in telecommunications)◎ In addition to the effects of limiting cancellations through individual visits that started during FY03/16, contracts
for telecommunications, telephones, and other value-added services captured during visits are contributing tohigher profits◎ Aim for growth in FY03/18 onward by promoting sales activities to capture new customers in 2H throughadditional spending

Customer Dynamics (YoY)

New Customer Acquisition Strategy(Thousands oi customers)

2926

28

27Develop new detached homeacquisition channels(Home builders / construction companies route)

1816+12+81H
FY03/16152H
FY03/16

15+121H
FY03/17+122H
FY03/17

Begin sale of “Hikari TV Plus”(Switching product for households watching
television via antennas)(Est.)

New
subscriptions

Cancebbations

Net increase/ decrease5Full-year forecast (Revised)◎ Full-year earnings forecasts announced in May called for record highs of 12.6 billion
yen in operating profit and 6.2 billion yen in net income◎ Based on full-year estimates in light of the interim period results, initial forecasts wererevised to 12.8 billion yen in operating profit (+1.9 billion yen) and 6.5 billion yen in net
income (+2.6 billion yen)
(Sales and profits: Millions of yen, EPS: Yen)

Revised
FY03/17
Forecasts

FY03/16

InitialForecasts

Sales

179,700

180,940

Operating profit

12,750Of which, Hikari
Collaboration

YoY

Vs. Initial Forecasts

Amount ofChange

Percent
Change (%)

Amount ofChange

Percent
Change (%)

187,100-1,240-0.7-7,400

-4.0

8,245

12,560+4,505+54.6+190+1.5-442-3,007-728+2,566-+286-

Of which, Aqua

301-1,119

12+1,420-+289+2,317.4

Recurring profit

12,3608,150

11,830+4,210+51.7+530+4.5

Net income

6,500

3,458

6,240+3,042+88.0+260+4.2(EPS)(57.23)(30.01)(55.13)(+27.22)(+90.7)(+2.10)(+3.8)

6*Operating profit for Hikari Collaboration and Aqua are before elimination of indirect expenses

Revised dividend forecasts (Dividend increase)◎ Interim dividends to be 11 yen per share, as planned (a dividend increase of 5 yen versus 6 yen pershare in 1H FY03/16)◎ As achievement of full-year earnings forecast is within sight, year-end dividends are planned to be 17
yen per share, including the originally planned dividend of 11 yen per share combined with an IP16
achievement commemorative dividend of 6 yen◎ Plan for two consecutive fiscal years of dividend growth and an annual dividend of 28 yen (14 yen per
share during FY03/16), a twofold increase
30

30

25

25

20

20

28 yen per share

22 yen per share

14 yen8 yen++

14 yen per share
15

1015 share
12 yen per share12 yen per share12 yen per share12 yen per666106

YoY(Initial plan)

6666

FY03/12

FY03/13

FY03/14

FY03/15+5 yen600

2016/3月
FY03/16期

Interimdividend

111711YoY(Upward revision)

8556Year-end
dividend

Interimdividend

1111+Commemorative
dividend

2017/3月
2017/3月Est.
FY03/17
FY03/17期当初
期予想(Initiab)(Revised)Commemorative
dividend

7

Looking Back on IP16 Growing
and Challenges for the Next
Medium-Term Management Plan

8Key Topics
Improving financial standing
Wholesaling NTT Hikari
Stagnation in Bottled Water
Delivery Market
Sluggish Customer Count
GrowthPromoting TLC
9From Improving Financial Standing to Investment in Growth◎ At end-FY03/17, the final fiscal year of IP16, the balance of interest-bearing debt will be 62.2
billion yen, a half the level before the merger in April 2011. Similarly, the equity ratio will improvefrom 7.7% (pre-merger) to about 31%.
◎ From FY03/12 to FY03/17, 40% of operating cash flows was utilized in repayment of interestbearing debt while about 40% was used in investment. However, in the next medium-term
management plan, the Company is considering using the majority of operating cash flows ininvestment
FY03/12 to FY03/17 (Cumulative total)

124.0

Investment CF: 63.8
billion yen＝Operating CF: 153.8
billion yen

25.7 25.6

41.5 %

81.8

23.0

74.1
73.1 71.4

28.2

25.1 26.5

30.8

3530

28.6

25201564.7

7.7

1065.8 62.2

50

FY03/11

FY03/15

FY03/16

1H FY03/17

FY03/17

FY03/11

FY03/15

Balance of interest-bearing debt
(Billions of yen)

FY03/16 1H FY03/16 FY03/17

Equity ratio (%)■IP16 ■Results (FY03/17 are forecasts)

10Profit Contribution from NTT Hikari Collaboration to Continue◎ As fiber optic sales by NTT have shifted from direct sales to wholesaling, TOKAI entered HikariCollaboration (packaged sales of the TOKAI ISP and fiber optic lines) in March 2015
◎ Progress is ahead of the national average, steadily achieving a shift to higher ARPU
◎ By aiming for a higher composition of Hikari Collaboration combined with capturing newcustomers, seek contribution to higher profits during the next medium-term management planHikari Collaboration Progress(Trends in Hikari Collaboration composition)

Effects of shift to
Hikari Collaboration

58.1%

49.0%
38.6%

Broadband Business ARPU
1H FY03/17

3,008
yen / contract

20.4%

24.4%

0.8%
1.4%
FY03/15 1H FY03/16 1H FY03/17
FY03/16
FY03/17
Hikari Cobbaboration composition =2,281
yen / contract

12.3%

TOKAI

1H FY03/16

Up32%

Broadband Business Operating Proiit
FY03/16

1.1

billion yen

FY03/17 Est.

2.9

billion yen

Nationab*Operating profit is prior to elimination of indirect expenses

11Profit Contribution from Bottled Water Delivery Businesswith Efficiency Model◎ As market growth was in single digits from FY03/15 and flattened in FY03/16, a transition was made to efficientcustomer acquisition (emphasis on cost effectiveness) from FY03/17, resulting in profitability over the interim
period◎ While new customer count was largely maintained year-on-year, acquisition costs were reduced by 27%, andfull-year forecasts are projected to be achieved◎ Through a strategy to focus on efficient markets, gradual growth is hoped to result in a steady contribution toprofits

Shift to focus on sales efficiency

Market customer count growth in single
digits since FY03/15(Thousands oi customers)(Rate oi growth)

160

50.0%

12240.0%130133140120102
10030.0%

Newcustomers
Customeracquisition
cost

1H FY03/16

1H FY03/17

12,971

12,463660

480

million yen

million yen

80

20.0%

57

Reduced27%

60

10.0%

400.0%

Aqua Business Operating Profit

20

FY03/16

FY03/17 (Est.)

0-10.0%FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

TOKAI Customers

TOKAI Growth-Nationab Growth**Source: Japan Delivery Water & Server Association

1.1billion yen

300

million yen*Operating profit is prior to elimination of indirect expenses

12Stagnation in Customer Count Growth◎ From a net increase of 70 thousand customers per year from FY03/12 to FY03/14, growth has slowed to a
net gain of 20 thousand customers per year during the past three years.
◎ The primary factor is saturation in the broadband market, which had led the way for customer growth (netincrease of 43 thousand customers per year from FY03/12 to FY03/14; net decrease of 7 thousandcustomers per year from FY03/15 to FY03/17).
◎ The Gas and CATV businesses have already turned their numbers positive, and with two consecutive
years of gains, growth will be actively pursued. Meanwhile, new services will be added for thetelecommunications business.
◎ As a group strategy, TOKAI will hold a policy of actively seeking out growth via M&A.
(Thousands oicustomers)
Trends in Group Customer Count Dynamics

343321

315
277

251

242

+72+70+73

FY03/12

FY03/13

FY03/14

Captured (registered) customers

259

34,91437,80034,44035,830ADSL

CATV13279
248272

Broadband Market Estimates(Thousands oi customers)

26,415259
231+19+20+17

FY03/15

FY03/16

FY03/17Cancellations

FTTHTotab

Net increase *Figures untib end-FY03/16 as announced by the Ministry oi Internab Aiiairs and Communications*End-FY03/17 onward as iorecast by “IT Navigator FY2016,” pubbished by the Nomura Research InstitutePromoting TLC◎ TLC Concept: Providing one-stop, one-contract lifestyle infrastructure services through groupwide promotion◎ By promoting thorough cross-selling to the nationwide customer base of 2.56 million customers, work to increase
ARPU and prevent cancellations through the benefits of TLC Membership Service loyalty points◎ In groupwide cross-selling efforts, TOKAI launched the “Bundle Multiple TLC Services for Points Campaign” inOctober 2016. By increasing the benefits of loyalty points to new customers subscribing to multiple services, aim
to improve recognition and use of the loyalty point service while expanding use of multiple services◎ Since April 2016, promotion has been underway to improve branding and recognition via television commercials
featuring TLC

Customer Base of 2.56 million

Gas: 634 thous.

Launch of Cross-selling Campaign

Launched as a groupwide campaign in October
2016

Aqua: 133 thous. Telecom: 852 thous. CATV: 710 thous.

Higher ARPU and preventing cancellations
by promoting cross-selling to thecustomer base

For additional service contracts during the contract
period, provide 200 points per month for the durationof the contract*For campaign detaibs, pbease see the website, etc.

Serial Television Commercials
The “Tamaranai” series of commercials (seven versions)have been aired since April 2016
Promote the TLC Membership Service and improve its
recognition
Improve recognition of the variety of group services
offered and advertise the “Bundle Multiple TLC Services
for Points Campaign”

1414*Customer count is as oi March 31, 2016

Views on General Framework for theNext Medium-Term Management Plan
PeriodThe four years from 2017 to 2020
Key challenges

Expanding customer base in core businesses
Promoting comprehensive strengths of TLC
Promoting M&AGroupwide policy

Shift from strengthening financial standing to afocus on investment in growth15Appendix(1) Consolidated results(2) Sales by segment(3) Operating profit by segment(4) Consolidated financial indicators(5) Consolidated cash flows(6) Group customer count(1) Consolidated results(Millions of yen)

1H FY03/12
Results

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

82,586

83,61084,31587,274

84,77382,201

Operating profit

2,200

2,573

411

1,816

1,856

4,406

Recurring profit

1,646

2,155

303

1,585

1,779

4,428-39

331-354

225

277

2,384

-0.39

3.32

-3.10

1.96

2.39

21.00

Sales

Quarterly netincome
EPS (Yen)17(2) Sales by segment(Mibbions oi yen)

1H FY03/12
Results

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

Gas andPetrobeum

41,84442,60041,84642,75437,95832,496Iniormation andCommunications

18,30518,48818,86819,546

20,42523,750CATV

12,108

11,84012,04912,144

12,212

12,560

Buibding and Reab
Estate

6,216

6,541

7,250

8,197

9,301

8,040

Aqua

1,776

1,929

2,102

2,423

2,746

2,929

Others

2,334

2,211

2,196

2,207

2,128

2,423

82,586

83,61084,31587,274

84,77382,20118

Totab(3) Operating profit by segment(Mibbions oi yen)

1H FY03/12
Results

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

Gas andPetroleum

1,298

1,812

1,173

2,028

2,661

2,838

Information andCommunications

2,737

2,629

1,958

2,389

1,086

1,910

CATV

1,033

834

904

843

968

1,451

Building andReal Estate

126

69

249

143

347

324

Aqua-531-393-1,318-979-616

201-2,462-2,379-2,556-2,608-2,590-2,318

2,200

2,573

411

1,816

1,856

4,406
19

Others,adjustments
Total*Prior to ebimination oi indirect expenses

(4) Consolidated financial indicators(Mibbions oi yen)

1H FY03/12
Results

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

Totab assets

185,770

171,914168,296

164,477

160,237

153,384

Totab biabibities

161,352

144,911

134,983

125,521117,722

109,380

Totab net assets

24,41827,00233,313

38,95642,51444,004Babance oiinterest-bearing
debt116,845

100,715

90,48780,93076,25365,761

EBITDA

11,057

11,2889,168

10,494

10,231

12,217

Equity ratio

12.7 %

15.2 %

19.3 %

23.1 %

25.9 %

28.2 %
20(5) Consolidated cash flows(Mibbions oi yen)

1H FY03/12
Results

1H FY03/13
Results

1H FY03/14
Results

1H FY03/15
Results

1H FY03/16
Results

1H FY03/17
Results

Operating cash
ibow

11,493

12,533

10,043

11,476

4,412

12,039Investment cash
ibow

-4,824-4,657-5,049-4,515-5,289-4,668

Free cash ibow

6,669

7,876

4,994

6,961-876

7,370

Financing cash
ibow

-10,283-7,717-6,378-8,021236-8,833

21

(6) Group customer count(Thousands oi customers)

1H
FY03/13
Results

1H
FY03/14
Results

1H
FY03/15
Results

1H FY03/16
Results

1H
FY03/17
ResultsGas (LP and city gas)

668

635

629

626

627

634

Previous ISP
modeb, etc.

729

785

841

861

742

565

HikariCobbaboration－－－－117

272

180

202

221

231

234

234

909

986

1,062

1,093

1,093

1,071

CATV

727

686

693

690

698

722

Aqua95102120132

132

135

Security

21

20

19

18

18

17

2,398

2,405

2,498

2,535

2,543

2,554

Iniormation andCommunications

1H
FY03/12Results

MobibeSubtotab

Totab*The number oi customers under a thousand are rounded to the nearest thousand. Iniormation and Communications andCATV both oiier communications services, and so their numbers are excbuded irom totab iigures.

The performance forecasts and forward-looking statements in these materials arebased on information currently available to the company, and include potential risks anduncertainties. Please be aware that due to changes in a variety of factors, actual results
may differ materially from the projections and other forward-looking statements in thesematerials.

Please contact us with any questions regarding these materials.
Public Relations and Investor Relations Office
TOKAI Holdings Corporation
2-6-8, Tokiwa-cho, Aoi-ku, Shizuoka 420-0034, Japan
Phone: +81- (0)54-669-7676
Fax: +81- (0)54-275-1110
http://tokaiholdings.co.jp/english/
e-mail： overseas_IR@tokaigroup.co.jp

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