Presentation of Performance

Transcription

1 Presentation of Performance Fiscal Year Ended March 31, 2018 May 11, 2018

2 Contents I. Overview of Performance for the Fiscal Year Ended March 31, Highlights of Performance for the Fiscal Year Ended March 31, Details of Orders Received by Segment 5 3. Details of Net Sales by Segment 6 4. Details of Operating Income 7 5. Contract Backlogs 8 II. Business Plan for the Fiscal Year Ending March 31, Business Plan for the Fiscal Year Ending March 31, Forecasts of Orders Received by Segment Forecasts of Sales by Segment Trends in NTT Fixed-Line Related Business Trends in NTT Mobile Business Trends in NCC Engineering Business Trends in IT Solutions Business Trends in Social System-Related and Other Business 17 III. Medium- and Long-Term Growth Strategy 1. Progress of COMSYS VISION IT Business Company Growth Targets Social System Business Company Growth Targets Business Expansion through M&A Measures to Improve Productivity by Centralizing Operations Profit Improvement Results Following Management Integration Management Integration with Three Telecommunications Construction Companies in Western Japan 25 IV. Shareholder Returns Policy 1. Shareholder Returns Policy (Dividends and Acquisition of Treasury Stock) 27

3 I. Overview of Performance For the Fiscal Year Ended March 31, 2018

4 I-1. Highlights of Performance for the Fiscal Year Ended March 31, 2018 All-time highs recorded for orders received, net sales, and operating profit Orders received surpassed the billion mark for the first time as the Social Systems-Related and Other business remained strong Net sales achieved forecasts backed by extensive contract backlogs, recording all-time high net sales Marked an all-time high profit for the first time in three years, with profit rising above the 30.0 billion level as targeted in the mid-term plan Performance Comparisons with the previous term Comparisons with forecasts Orders Received 4, Net Sales 3, Operating Income Operating Margin 8.0% +0.5 percentage points +0.5 percentage points Note: Figures are rounded down to the nearest whole unit. Profit margin, and percentages of increase and decrease are calculated using a base unit of yen. Figures are rounded to the nearest first decimal place. 4

5 I-2. Details of Orders Received by Segment The Social System-Related and Other business advanced rapidly, including the effect of M&As. NTT Engineering business: despite a significant year-on-year decline in reaction to special demand, orders received were higher than forecast due to MB orders received ahead of schedule NCC Engineering business: orders received rose due to au base station construction and TV reception improvement projects IT Solutions business: although corporate solution business fell short of forecasts, total orders received increased year on year due to alliance business and software development Social System-Related and Other business: orders received increased as a result of the consolidation of Kando Co., Ltd. and the acquisition of large-scale construction projects Performance Comparisons with the previous term Comparisons with forecasts NTT Engineering 1, NCC Engineering IT Solutions Social System- Related and Other 1,

6 I-3. Details of Net Sales by Segment The Group steadily completed a large volume of construction projects and achieved its forecasts. NTT Engineering business: sales increased due to favorable progress of MB projects, offsetting decline in sales due to reduction in AC maintenance processes NCC Engineering business: recorded substantial sales growth due to strong orders received IT Solutions business: although corporate solution business fell short of forecasts, total sales increased year on year due to software development Social System-Related and Other business: recorded substantial sales growth due to the consolidation of Kando Co., Ltd. but fell short of forecasts due to delays in solar construction business, etc. Performance Comparisons with the previous term Comparisons with forecasts NTT Engineering 1, NCC Engineering IT Solutions Social System- Related and Other

7 I-4. Details of Operating Income Operating income was up significantly, with an increase in productivity due to the high volume of construction projects. Standardization of quarterly workload volume of construction projects progressed and productivity increased due to high level of contract backlogs Effect of measures such as work-style innovation contributed to profit growth SG&A expenses reduced through cuts in personnel expenses and office expenses at Ecosystem Japan Net sales growth Productivity improvements Effect of measures taken +6 Kando SG&A expense reduction SG&A expense reduction Kando Net sales growth Productivity improvements Workflow standardization and centralization of operations Work-style innovation Harnessing of IT Flexible personnel movement within Group (+21.2%) +18 (+6.5%) Performance in Previous Term Performance Target 7

8 I-5. Contract Backlogs The contract backlog increased further due to a growth of orders received in the Social System-Related and Other business. The contract backlog increased significantly due to last-minute solar construction projects (EPC) and new orders received for private-sector DC projects Orders received from au grew, and the NCC Engineering business increased significantly The contract backlog in the NTT-MB business increased further as orders scheduled to be received next fiscal year were brought forward 1, , , Social System -Related and Other * IT NCC NTT FY March 2014 Beginning of Term FY March 2015 Beginning of Term FY March 2016 Beginning of Term FY March 2017 Beginning of Term Beginning of Term Beginning of Term *Kando Co., Ltd., which joined the Group in the fiscal year ended March 31, 2018, has no contract backlog because orders received and net sales are the same amount. 8

9 II. Business Plan For the Fiscal Year Ending March 31, 2019

10 II-1. Business Plan for the Fiscal Year Ending March 31, 2019 Planning on sales and profit growth due to high volume of contract backlog Orders received will remain at billion, despite falling below previous fiscal year s level Aiming to achieve the mid-term target thanks to extensive contract backlogs Operating income is projected to rise for the third fiscal year in a row and record an all-time high Performance Targets Comparisons with Orders Received 4,022 4, Net Sales 3,800 4, Operating Income Operating Margin 8.0% 8.0% 0.0 percentage points 10

11 II-2. Forecasts of Orders Received by Segment Planning an increase in orders received in growth segments NTT Engineering business: forecasting a decrease due to impact of MB orders received brought forward in fiscal year ended March 31, 2018 NCC Engineering business: forecasting a decrease due to decline in TV reception improvement projects IT Solutions/Social System-Related and Others businesses: planning increase with growth in orders received forecast due to effect of new consolidation and business company system Performance Targets Comparisons with NTT Engineering 1,845 1, NCC Engineering IT Solutions Social System- Related and Other 1,180 1,

12 II-3. Forecasts of Sales by Segment Forecasting sales growth due to effect of new consolidation, etc. NTT Engineering business: forecasting decline in sales, factoring in reduced capital expenditure at NTT Group NCC Engineering business: forecasting decline in sales with anticipated decrease in TV reception improvement projects IT Solutions business: Forecasting sales growth due to new consolidation of VACSLAB Social System-Related and Others business: forecasting sales growth due to recovery in solar construction projects completion delays and full-year consolidation of Kando Performance Targets Comparisons with NTT Engineering 1,859 1, NCC Engineering IT Solutions Social System- Related and Other 992 1,

13 II-4. Trends in NTT Fixed-Line Related Business Expecting greater demand for optical fiber line construction due to increased investment in conversion to optical fiber Construction repair orders will decrease due to the end of the NTT Group s financial burden mitigation effects based on the past change in its depreciation method, and significant reduction is anticipated Expecting an increase in FLET S Hikari due to migration from ADSL and ISDN service Striving to obtain orders for construction projects for the Tokyo Olympics Orders Received Net Sales Target YoY 1, , NTT Engineering business Access and Network Simple total for five companies* NTT East and NTT West capex 5,479 5,100 5,000 No. of FLET S Subscriptions (including optical fiber collaboration) Note: Number of subscriptions is cumulative (Unit: 10,000 lines) and includes Hikari Collaboration. 2,005 2,051 2,111 NTT EAST NTT WEST 2,738 Investment in fiber optics 1,560 2,500 2,500 Investment in fiber optics 1,530 2,741 2,600 2,500 FY March 2017 Results Forecast Investment in fiber optics 1,610 Target NTT EAST NTT WEST 1,117 1,147 1, FY March 2017 Results Optical fiber collaboration 532 Optical fiber collaboration 341 Forecast Optical fiber collaboration 663 Optical fiber collaboration 458 Target Optical fiber collaboration 768 Optical fiber collaboration 553 [Source: NTT Financial Results Briefing Materials, NTT Business Operation Plan for the Fiscal Year Ending March 31, 2019] *The non-consolidated simple sum data are for the following five companies: Nippon COMSYS Corporation; SANWA COMSYS Engineering Corporation; TOSYS Corporation; TSUKEN Corporation; and COMSYS JOHO SYSTEM Corporation. 13

14 II-5. Trends in NTT Mobile Business High project volume of full-scale construction of 3.5GHz band base stations now proceeding NTT DODOMO capital investment will decline slightly year on year Reinforcing construction business structure as projects forecast to be focused on Tokyo metropolitan area Orders for 3.4GHz band and 5G projects expected to be issued from second half of fiscal year ending March 31, 2019 Orders Received Net Sales Target YoY NTT Engineering business Mobile Simple total for five companies 5,971 NTT DOCOMO capex (IFRS)* (IFRS) 5,779 5,700 Trends in Main Process Volumes (forecasts by COMSYS) Allocation of additional frequencies for 4G Allocation of frequencies for 5G Tokyo Olympics and Paralympics Mar Mar Mar Mar Mar Mar Communications business Other than above 5,762 5,472 5, FY March 2017 Results Results Target [Source: Source: NTT DOCOMO Results Briefing Materials] LTE LTE-A *NTT DOCOMO applied IFRS in the first quarter of the fiscal year ending March 31, 2019 replacing the previous U.S. GAAP. 800MHz 1.5GHz 1.7GHz 2GHz CA 3.5GHz 700MHz 3.4GHz 5th generation (5G) 14

15 II-6. Trends in NCC Engineering Business Aiming to increase au and Softbank project participation Despite expansion in areas of TV reception improvement projects, the number of projects that COMSYS engages in is expected to decline au and Softbank base station construction project volume forecast to be at high level, continuing on from last year Aim to secure orders for full-scale facility construction from 2019 in view of market entry by Rakuten Orders Received Net Sales Target YoY NCC Engineering business consolidated KDDI Capex (payment) Softbank Capex (Telecommunications business in Japan) 5,194 5,300 5,300 Mobile (Includes UQ) 3,250 3,300 3,300 3,205 3,703 3,700 Fixed line, etc. 1,943 2,000 2,000 FY March 2017 Results Forecast by COMSYS Forecast by COMSYS FY March 2017 Results Results Forecast by COMSYS [Source: KDDI Results Briefing Materials] [Source: Source: Softbank Group Results Briefing Materials] 15

16 II-7. Trends in IT Solutions Business Strengthening alliances and focusing on sectors with expanding markets Focusing on growth sectors such as cloud computing and teleworking by strengthening alliances Seeking to create new businesses utilizing AI Orders Received Net Sales Target YoY Portion of increase in orders received due to business company system effects 3.0 billion IT Solutions business consolidated 40,000 20,000 Forecast Trend in ICT-Related Market Size Trend in Japanese cloud market size Private cloud Public cloud SI Categories to Focus on in Each Sector Cloud (Office365) IoT-related (camera and device-related) 0 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 [ Source: MM Research Institute, Ltd. ] Impact (market size) of IoT and AI on economic growth up to 2030 (Unit: trillion) 1,300 1,070 1,129 1,180 1,224 1, [Source: WHITE PAPER Information and Communications in Japan, 2017] NI Software Olympics-related infrastructure construction Disaster prevention and earthquake countermeasures-related network construction Monitoring and maintenance Creation of new businesses related to AI 16

17 II-8. Trends in Social System-Related and Other Business Working to expand solar construction business and orders received for other renewable energy projects Aiming to obtain orders received for EPC projects utilizing COMSYS know-how for biomass power generation business Aiming to expand orders received for projects dealing with countermeasures for aging plant electrical facilities, expressways, etc. Actively engage in plans by local governments all over Japan to introduce undergrounding of electric wires through PFI Orders Received Net Sales Target YoY 1, , Portion of increase in orders received due to business company system effects 1.2 billion ISocial System-Related and Other business consolidated Focus Areas in Each Sector Trends in orders received for renewable energy business Electrical Facilities Civil Engineering Water treatment plant electricity Expressway aging countermeasures Private-sector data centers Water supply and sewerage Civil engineering for agricultural water Undergrounding of electrical wiring Expand business areas leveraging track record on Metropolitan Expressway Planning to receive orders for Ministry of Land, Infrastructure, Transport and Tourism PFI pilot projects Solar construction 221 Promote orders received 170 In the solar construction business, aim to secure more orders by cultivating new customers and providing diverse kinds of installation Renewable Energy Self-contained solar power (carport, floating, agricultural-type) Hybrid system business (wind power and solar power) Operation and maintenance (O&M) Small-scale wind power Biomass power Other Renewable Energy Target Biomass power generation market will expand sharply with an annual average 17.1% growth rate, increasing approximately 1.9 fold by

18 III. Medium- and Long-Term Growth Strategy

19 III-1. Progress of COMSYS VISION 2020 Aiming to achieve net sales and operating income targets one year early Achieve billion in net sales through growth strategy of IT solution business and Social System-Related and Other businesses Achieved operating income target in fiscal year ended March 31, 2018 and plan further profit growth Operating Income (Operating Margin) 275 (8.3%) 276 (8.4%) 238 (7.4%) 250 (7.5%) 303 (8.0%) 320 (8.0%) Move Forward Mid-Term Targets 300 (7.5%) Net sales 3,313 3,286 3,206 M&A 3,341 3,800 4, ,000 Growth Sectors 927 1, Telecommunications Carriers 2,386 2, Change from FY ended March 31, 2014 FY March 2014 FY March 2015 FY March 2016 FY March 2017 Target FY March 2020 Mid-Term Targets Launched COMSYS WAY a COMSYS VISION

20 III-2. IT Business Company Growth Targets Focusing on strengthening alliances and market expansion Focusing on high growth rate alliance market Taking on development of new software, including AI and RPA Venturing into new business sectors, such as IoT-related activities in the corporate solution business Profitability Mar billion Mar FY Mar Up 7% Up 3% Mar Mar FY Mar Up 1% IT Solutions Business Trend in Orders Received 60.4 billion 64.0 billion Mar.2017 Mar Mar (Target) Up 13% Growth Rate in Orders Received by Target Corporate Solutions Sector (1) (Public sector, education, and nationwide rollout) Corporate Solutions Sector (2) (IoT and security) Maintenance Business (see above) Mar Mar FY Mar Up 5% Up 15% Software Sector (AI and RPA) Mar Mar Mar Up 12% Alliance Sector (Cloud computing, IT infrastructure, and data centers) Mar Up 29% FY Mar Up 16% FY Mar Up 10% Growth 20

21 III-3. Social System Business Company Growth Targets Focusing on maximizing and optimizing business by strengthening Group collaboration Focusing on expanding existing business and plant electrical facilities projects in telecommunications sector Expanding underground infrastructure construction sector, including undergrounding of electrical wiring (PFIbased) and water supply and sewerage Expanding renewable energy sector centered on solar construction and wood biomass power generation Profitability Growth Rate in Orders Received by Target Telecommunications sector (Expressways, plant electrical facilities, and reconstruction of government buildings) Mar Mar Up 24.5% Up 0.3% FY Mar Renewable Energy Sector (Solar power, biomass power, and wind power) Mar Mar Up 39% FY Mar Down 11% Social System-Related and Others Trend in Orders Received billion 82.8 billion billion Mar.2017 Mar Mar (Target) Infrastructure and Other Sectors Mar (Undergrounding of electrical wiring, water supply and sewerage, and agricultural engineering) Mar Up 57% FY Mar Up 21% Growth 21

22 III-4. Business Expansion through M&A Expecting 60.0 billion contribution to net sales, with the consolidation of Kando Co., Ltd. Inclusion of Kando in the consolidated results will make full-year contribution in fiscal year ending March 31, 2019 with 8.0 billion net sales growth Promoting further M&As with aim of strengthening construction lineup and securing engineers, etc Net Sales ( 100 millon) Net Sales Operating Income Operating Income ( 100 millon) Fiscal Year FY March 2015 FY March 2016 FY March 2017 M&A Results Ecosystem Japan CENTRAL BUILDING SERVICE Kawanakajima Kensetsu Hokkaido Denden Yuso Toa Kenzai Kogyo VACSLAB TOKYO HOSOH KOGYO Kando (Target) Future Targets System integration and software development Air conditioning construction and general construction industry *Performance figure is the simple sum of each company and excludes goodwill and share acquisition expenses, etc. *Kando was consolidated from the second quarter of the fiscal year ended March 31, 2018, so the first quarter s figures were not included in the Group s performance for the fiscal year ended March 31,

23 III-5. Measures to Improve Productivity by Centralizing Operations Aiming for integrated COMSYS Group operations in access-related business Reducing costs by consolidating offices Strengthening prime contractor operations through integrated consolidated subsidiary operation by implementing resource shifting Optimal positioning and systemization of consolidated operation centers for COMSYS Group Standardization of workflow Activation of personnel exchange Centralize area-free operations Consolidated operation center for starting communication service Consolidated operation center for metallic line construction and post-construction process management Quality inspection center (photo inspection) Toward optimization of COMSYS Group Image of Operations Centralization Step 1 (Nippon COMSYS) Step 2 (Nippon COMSYS) Step 3 (COMSYS Group) Operational consolidation for Greater Tokyo area Consolidation of East Japan operations Consolidation of West Japan operations Consolidation of operations within Group Category Construction Service integration construction User construction AC construction General construction management Construction office Shinetsu Utsunomiya Hiroshima Hirabayashi TSUKEN (Sapporo) Design Completion processing Photo inspection Consolidated operation center for starting communication service Consolidated operation center for metallic line construction and post-construction process management East Japan and West Japan Quality Inspection Center Hachioji Sagamihara Toda Koshigaya Ueno Southern Tokyo Tokyo start of service operations consolidated center Fukuoka Nishihara Itano TOSYS (Matoba) COMSYS Operation integrated by business type 23

24 III-6. Profit Improvement Results Following Management Integration Steadily improving rate of profit through structural reform Improving profits by sharing management resources within the Group Promoting streamlining through centralization of operations Going forward, continuing to strive for structural reform and working to improve margins Successful process improvement examples as a result of management integration with TSUKEN Business selection and concentration and elimination of duplicated operations Sharing of systems Other integration effects Merger and reorganization of consolidated subsidiaries Consolidation of NTT-AC business in Hokkaido area at TSUKEN Group Consolidation of NTT-NW business in Hokkaido area at Nippon COMSYS Group Centralization of common operations Sharing of core systems Sharing of construction-related IT systems Sharing of HR and payroll systems Groupware Integration and consolidation of offices Centralized purchasing CMS Management integration (October) TSUKEN Financial Performance Trends % 8.0% % 3.3% Impact of earthquake 1.7% 1.7% 4.9% 5.5% 5.6% 5.6% 5.7% Mar Mar Mar Mar Mar Mar Mar Mar Mar % 2.0% 0.0% Net Sales Operating Margin 24

25 III-7. Management Integration with Three Telecommunications Construction Companies in Western Japan Announcing management integration with three companies through share exchange Expanding COMSYS Group net sales to billion and operating profit to 35.0 billion Business consolidation of subsidiaries scheduled for October 1, 2018 Aiming to strengthen market competitiveness and expand management base by restructuring high productivity construction system Company Name Location NDS Co., Ltd. (Securities code: 1956, First Section of Tokyo Stock Exchange and First Section of Nagoya Stock Exchange) Nagoya, Aichi SYSKEN Corporation Hokuriku Denwa Kouji Co., Ltd. (Securities code: 1933, Second Section of Tokyo Stock Exchange, (Securities code: 1989, Second Section of Tokyo Stock Exchange) Fukuoka Stock Exchange) Kumamoto, Kumamoto Kanazawa, Ishikawa Representative Satoshi Tamamura Hidenori Fukumoto Yasuo Mori Paid in Capital 5,676 million 801 million 611 million Date of Establishment May 1954 September 1954 November 1949 Number of Employees 2,787 (Consolidated) 888 (Consolidated) 669 (Consolidated) Consolidated Subsidiaries 23 companies 5 companies 4 companies Main Business Multidiscipline engineering business ICT solution business Housing and real estate business Information and communications construction business Infrastructure construction business Other Telecommunications construction business Information systems business Consolidated Results ( billion) Net Sales Operating Income (Operating Margin) Net Assets Results Target Results Target (4.7%) (4.0%) (3.2%) (2.7%) (1.7%) (1.4%) *Performance figures for the fiscal year ending March 31, 2019 are forecasted figures announced by each company on May 8, Results Target 25

26 IV. Shareholder Returns Policy

27 IV. Shareholder Returns Policy (Dividends and Acquisition of Treasury Stock) Planning to achieve dividend payout ratio of 30% or higher through 10 increase in dividend [167] Net Income (Target) Dividends per Share (annual) March 2014 March 2015 March 2016 March 2017 March 2018 March 2019 (Planned) Interim Year-end 15 Ordinary dividends: 10 + Commemorative dividends: 5 Consolidated Payout Ratio 18.4% 21.0% 25.6% Total Return Ratio Dividends + treasury stock Net income Number of shares of treasury stock at the end of the period* (Ownership Ratio) % 66.2% 77.2% million shares (19.4%) million shares (21.5%) million shares (21.5%) ROE 9.4% 9.0% 7.9% 30.8% [ 26.6% ]* 85.6% [ 74.0% ]* million shares (22.6%) 7.3% [ 8.3% ]* 28.0% 32.7% 67.5% 56.6% million shares (18.7%) *The total number of issued shares changed from million shares to million shares with the cancellation of 4.97 million shares of treasury stock on November 30, Shares of treasury stock decreased by 7.92 million shares (5.6%) as a result of the share exchange with Kando Co., Ltd. on July 1, *Figures in parentheses are estimates assuming no impairment loss on goodwill. 9.4% Treasury stock acquisition Total dividends 27

28 COMSYS Group Management Philosophy At the COMSYS Group, we are united as a Group and strive for strong partnership and collaboration with diverse external players in achieving our management philosophy. We will build a company that customers continue to choose through the construction of diverse infrastructure that carries our era forward. We will contribute to our country and local communities by building social infrastructure that supports affluent lifestyles. We will continue with unrelenting reform in our aim to further increase corporate value. Cautionary Statement with Respect to Forward-Looking Statements Forecast figures contained in these presentation materials are forward-looking statements that assume underlying risks and uncertain factors. Accordingly, it should be recognized that actual results may differ from such forward-looking statements due to a variety of factors. Important factors that could affect results include, but are not limited to, changes in economic conditions and social trends relevant to the Group s business areas, and downward pressure on prices for the services provided by the Group owing to fluctuations in demand and intensified competition. For further information, please contact: IR Department Telephone: (direct) Facsimile: chd-ir@comsys.co.jp URL: