About TOKAI Group
June, 2019
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 new
structure the following year. Currently in 9th 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

24 consolidated subsidiaries, 5 affiliates (as of March 2019)

Sales, operating profit¥191.6 billion, ¥13.1 billion (FY2018)

Employees

4,001

Changes in management
structure1950 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

Performance of major businessClassified into six segments: gas and oil, information and communication services, CATV, building andreal estate, aqua, and others.
The scale of the business is net sales of ¥191.6 billion and operating profit of ¥ 13.1 billion (FY2018
results)
Gas and oil (40.7%) and information and communication services and CATV (42.6) account for over
80% of sales, and these are the mainstays of business

6.8

4.8
7.0 （2.5%）

Operating profit（3.7%）

20.1（10.5%）

30.5

Gity gas
1.1

Aqua
Buliding
Othersand real
estateLP gas
65.6

Sales
CATV

（15.9%）

3.8

5.0

13.1 bn¥

Communication for corporate users
System development
Data center

78.0

2.6

（40.7%）¥191.6bn

Communication for corporate users
System development
Data center
Mobile19.5
Broadband
4.8
26.9

LP gas
5.7
City gas
12.4

1.6
0.8

Broadband
3.0

51.2（26.7%）

Mobile-0.6

Gas and oil

Information and communication

CATV

Building and real estate

Aqua

OthersIndirect cost
-1.1

Gas and oil-4.9

Information andcommunication

CATV

building and realestateAqua

Other
adjustments

2

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
Elderly ratio reaches 1 in 4
(2014)

Revision to the NTT Law(2001)Aqua

2007

Security

1984

1970
City gas

1950

WWW

WWW

Cable TV

Internet

ADSL/FTTH

Mobile

1988

1996

2001

2006

CATV

1959

1972

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

SIer

Systemdevelopment

Data center

1983

1985

Telecoms
network

2001

2011

2016
Transition to a holing company structure

HousingNursingcare

2011

Toward the realization of TLC (Total Life Concierge)

Electricity

1973

BridalCity Gas
liberalization (2017)
Electric power
liberalization (2016)

Insurance

LP gasPresent3

Stable revenue model with charge accumulation
2.90 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

Customers
Aqua

3,500
（Thousand）

16

Gas（LP・City
gas）

2.90mnOthersas of Mar. 201940

68

Shizuoka

3,000

CATV 106(Broadcast 79)

2.90mn customers
as of Mar. 31, 2019
By areas

as of Mar. 31, 2019
By services

The gas and CATV business has strong
connection with the community andcustomer is more than half

2,500

123

Breakdown of

Breakdown of

2.90mn customers

127

100
2,000

Kanto

Communications (Hikari Collaboration +conventional ISP + Mobile + LIBMO)

1,500

740
thousandin FY03/01

1,000

500

-

4

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 (28.1%).
（Yen/Month・Item）※Results at the end of March 2019

8,000

7,000

6,696

100.0%
90.0%

6,414

80.0%

6,000

70.0%
5,000

4,476

60.0%
3,890

4,000

3,000

2,000

50.0%
40.0%

2,547

30.0%

66.5%
60.2%
48.3%

1,000

85.8%
31.0%

20.0%
28.1％
10.0%

2017 Basic Survey on
Corporate Activities by
Department of Ministry of
Economy.
(Based on actual results for
FY2016)
Average for retailers

0.0%

0

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

City gas

Aqua

CATV

Sales per item

Gross profit ratio per item

Hikaricollaboration

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
Multiple contract rate is 33.1%(17.8% in the whole company)

Two in three households in
Shizuoka Prefecture are ourcustomers

ShizuokaPrefecture

Kanto area

33.1%

8.3%

(TOKAI Group household contracts)

940 thousand(Households in Shizuoka Prefecture)

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

1,470 thousand※

City gas

CATV

LP gas

62.8%

80.7%

34.9%

(As of March 2019)※ The number of households in Shizuoka Prefecture is as of April1, 2019 according to “Shizuoka
Prefecture Population Statistics, by City, Ward, Town, and Village,” Shizuoka Prefectural Government.
Contracts by the TOKAI Group as of March 31, 20196

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 2.90 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 800,000805
757（Thousand）
699

Group
Services

LP Gas

◎
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◎Intellig
House
Securient Aqua
Renov
ty
home
ation

Basic points

491

306

City Electri Intern
LIBMO CATV
Gas cityetKasatoku
points* Started in May
2017

End of
End of
End of
End of
End of
End of
End of
End ofMarch 2013 March 2014 March 2015 March 2016 March 2017 March 2018 September March 2019
2018

◎

◎

◎

◎

◎

◎

◎

◎



※ 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 about
30%

- 50%
9

Direct 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.
(Thousand)Number of acquisition (registration)
M&A

LCV 121 thousand
KCT 104 thousand

Dream Wave Shizuoka
46 thousand

225

Tokyo Bay Network 259 Thousand
TV Tsuyama 13 Thousand（Currently Toco channel Shizuoka）

273

46

Shimonitamachi
1 thousand

1292

FY2007

320

319

311

FY2008FY2009FY2010Start of Aqua business

343

321

315

FY2011FY2012FY2013Nationwide sales of Aqua business

257
277

279

FY2014FY2015247

274

FY2016

Start sales of Hikari collaboration

FY2017FY2018

10

LIBMO sales started

Sales and service structure rooted in areas and customers
A total of 1,600 managers meet customers face-to-face and propose solutions
Call centers help reduce cancellations and proactively support contract
acquisitions(As of April 2019)133

sales 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

641

Delivery236

Meter reading/Collection money

444

Security

276

Total

1,597

437

TG
59

Call center

CATV
145

Around400

operators at

9 locations throughout Japan11

Own competitive optical trunk line network
Built a proprietary fiber optic network spanning 7,000 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 business
and CATV business:
Approx.

7,000km( Breakdown of total laying distance )*As of March 31, 2019
Telecommunication business 2,630 km
CATV business
4,211 km

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

NagoyaOkayamaAtsugi Otemachi
Osaka

Yaizu

Okayama Data Center
Shizuoka Data Center

12

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 in
FY2010LPG purchase, BB · Aqua upfront
cost increased

Improve profitability byeliminating upfront costs

2.2

2.7

3.1

FY2011FY2012

7.3
3.9

3.5

FY2014FY2015

2.6

12.8
10.8

FY2010

10.9
9

8.9
7.4

FY2013Net 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)FY201613

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

FY2012FY201325.7

25.6

FY2014FY2015

Half balance after HD
structure

124.0
105.7

FY2010FY2011

93.7

Equity ratio（%）

85.8
73.1

71.4

398

340

521
326

586

FY2016
856

351

54.1
119.0

More than doubled level !

FY2010FY2011FY2012FY2013

FY2014FY2015Interest bearing debt（¥bn）

52.7

61.7

FY2010FY201150.5

54.4

FY2012FY201380.8

81.5

FY2014FY2015FY2016

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

14

New Medium-Term Management Plan
IP20 “JUMP”

15Mid-term Plan to double the levelversus FY2016 in four years
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 of
13% by management focused on capital efficiency.
(Billions of yen)

FY03/17

FY03/18

FY03/19

FY03/20

FY03/21

ResultResult(Traget)Result(Traget)

Forecast(Target）

Sales

178.6

186.1

(189.4)

191.6(202.0)200.8(224.4)(+90%)

393.3

Operating profit

12.8

11.0

(11.4)

13.1(14.0)

14.2(16.2)(+80%)

22.5

Net income

7.3

6.6

(6.4)

7.8

(7.9)

8.2

(8.7)

(+60%)

11.5

Total assets

161.1

166.4

(169.8)167.6(173.8)－(191.2)(+80%)

283.4

1.9x

1.9x

(2.0x)

1.8x(1.7x)－(1.8x)

2.6x

Equity ratio

34.5%

36.3%

(33.9%)

35.6%(35.6%)－(34.9%)

31.6%

ROE

15.2%

11.4%

(11.1%)

12.6%(12.8%)－(13.0%)

13.0%

Customer numbers(millions)

2.56

2.88

(2.88)

2.90(2.99)

3.0(3.72)

Interest-bearing
debt/EBITDA ratio

Target(+70%)

Over 4.32＊Effective from the beginning of the fiscal year under review, the Company has applied "Partial Changes in Accounting Standard for Tax Effect Accounting" (ASBJ Statement
Note: () denotes increase versus FY03/17
No. 28, February 16, 2018), and the consolidated financial indicators for the previous fiscal year have been adjusted retrospectively to reflect these accounting standards.

16

M&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

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., Ltd

Tuyama City

（Customers about 10,000）

Chuo
Ward
Koto
Ward

Kurashiki City

（Okayama Pref.）（Tokyo 23 wards）

Continue selecting target company “Aggressively”

18First step in the broadening of the city gas business
In April 2018, we signed a contract on the transfer of the gas business operated by Shimoda-machi,
Gunma Prefecture, and in October we acquired approval from the Kanto Bureau of Economy, Tradeand Industry for business acquisition. Business inheritance from April 2019.
We took the first step towards broadening the city gas business.

Contract concluded on Shimonita-machi
gas business transfers.
Acquisition of approval for business
transfer in October 2018
Business inheritance from April 2019

Gunma Pref.

Shimonita-machi（Gunma Pref.）Shizuoka Pref.

Broadening of the city gas business19

Steady progress in wide-area development of city gas business
In March 2019, acquired preferential negotiation rights on a gas business operated by Nikaho-shi,
Akita Prefecture, and scheduled to succeed the business in April 2020.
This will be the 2nd M&A case in the city gas business as a Group's first entry into Akita Prefecture.
Based on the Group's TLC (Total Life Concierge) vision, we will also provide a variety of life-related
services in order to contribute to the realization of a more affluent lifestyle.

“Total Life Concierge”
AomoriPrefecture

Akita
Prefecture

City gas

LP gas

Iwate
Prefecture

Providing various
services of our Group

EnergyElectricity

RenewableenergyInformation &communications
Internet

Budget mobile
services

ＣＡＴＶ

Realizing affluent
lifestyles
Nikahoshi

Residential

Facilities

Facilityequipment

Renovation

Security

Insurance

Security

Healthcare

Selected as a preferred negotiator for the transfer of Nikaho-shi
gas business in March 2019.
Business succession scheduled in April 2020.

Aqua
Agriculture

Medicalcare

Nursingcare

Education

20

No. of contracts for continued service expected to increaseby 2.5 times through promotion of TLC
A cross-selling rate of city gas business in Shizuoka Prefecture is much higher at 62.8% than that of thewhole Group, which is 17.8%, showing that the city gas business deeply associated with communities is
optimal for the promotion of TLC.
In Shimonitamachi, where a business is already launched, the number of contracts for continued service permonth is also expected to increase by 2.5 times through active promotion of TLC

Cross-selling rate: 17.8%(for the entire Group)
Cross-selling rate of city gas businessin Shizuoka Prefecture is as high as
62.8%.
City gas business deeply associatedwith communities is a base businessfor TLC with a high cross-selling rate.

Active promotionof TLC

Nikahoshi

Shimonita
machi

62.8%
City gas

No. of contracts for continued service
per month multiplies by 2.5 times 21

Create synergies in the information andtelecommunications fieldBecoming a consolidated subsidiary company CYZE Co., Ltd., which is mainly engaged in theprovision and development of questionnaire systems
Concluded a capital and business alliance agreement with "TRIPLEIZE" company, which has
strengths in advanced technology fields such as AI, IoT and block chains
Combine each other's strengths to create synergies and further expand the group's information andtelecommunications business(Strength · Area)
In-house developed
questionnaire system
Extensible, custommade

M&A

Capitaltie-up(Strength · Area)
Network line service
Data center operation
service
System development(Strength · Area)
Advanced technology
such as AI, IoT, blockchainsCombine each other's strengths to create synergies

Further expansion of group information and telecommunications business 22

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.) otherthan the LP gas business.
This term has already been in Mie Prefecture (Tsu City). Plans to enter Aichi Prefecture (Aisai City)
during this term.
Expand the sales area steadily and share of the number of customers while engaging in M & A.
MiyagiTajimi office
New Area (FY 2015)

3 bases

New Area (FY 2016)

2 bases

New Area (FY 2017)

2 bases

New Area (FY 2018)

1 baseNew Area (FY2019)2 bases

Sendai office

Iwaki office

Gifu office

NaganoGifu

Tokyo
Already established area (LPG)

Kyushu office

Okayama

Aichi

Already established area (Other than LPG)

Shizuoka

Osaka

Toyokawa
officeMie
Nishi Mikawa
officeFukuoka

Tsu Office
Okayama office

Aisai office（tentative）

Planned area

Entered area (other than LPG)
NaganoInsurance Division

Osaka

Aqua Division23

Progress of "ABCIR + S" strategy
A(AI), B(Big Data) , C(Cloud) , I(IoT) , R(Robotics) + S(Smart Phone)
Strategies for the Group's technological innovation.
A coined word of each initial letter.

24

ABCIR+S strategy deliberation progress
In addition to marketing capabilities accumulated since the Company was founded, the use of
ABCIR+S to focus efforts on strengthening customer contact, developing new businesses,
and improving operational efficiency will be an important strategy going forward.
Deliberations are being advanced by a dedicated organization, the Head Office for NextABCIR+S concept
Generation Business Strategy.
IoT

Marketingcapabilities

CATV

Cloud

SurveillancecameraBig data
AI
Network（traditional strength)
AI speaker

Robotics
Smartphone

Focus on "expanding new customer base" "strengthening competitiveness""development of new service"
Strengthen the structure of the Next-Generation Business Strategy Headquarters,
a dedicated organization, and promote the construction of a
“Digital Marketing Platform"
25

Customer approach using “Digital Marketing Platform"
Digital Marketing Platform (Degima) derives individual trend by integrating data of our group
customer DB and web browsing information on a per customer basis
Based on this information, we will improve the efficiency and competitiveness of sales activities
and anti-cancellation activities.

Expandedfunctions

WEB browsing
information
Servicewebsites“Home”→“Home+Individual”
New marketing methods

Digitalmarketingplatform

CustomerDB
Matching
customer
information

Our Group

Customers

TLC Points app

Grasp personal tendency (hobby taste, cancellation sign, etc.)

Realization of efficiency and competitiveness of sales activities
and anti-cancellation activities26