Presentation of Performance for the First Half Fiscal Year Ending March 31, 2013 November 16, 2012
CONTENTS I. Overview of Performance for the First Half of the Fiscal Year Ending March 31, 2013 1. Highlights of the First Half Financial Statements 1 2. Details of the First Half Orders Received by Business Segment 2 3. Details of the First Half Sales by Business Segment 3 4. Details of First Half Operating Income 4 II. Highlights of the Revised Full Year Forecasts for the Fiscal Year Ending March, 2013 5 III. Business Trends 1. Capital Expenditure Trends at Telecommunications Carriers (1) 6 2. Capital Expenditure Trends at Telecommunications Carriers (2) 7 3. Mobile Telecommunications Carrier Business Trends 8 4. Status of New Business Initiatives 9 IV. Maintaining and Deepening Structural Reform (COMSYS WAY) 1. Structural Reform Initiatives and Outcomes 10 2. Reorganization of Group Business Management Structure 11 V. Status of Treasury Stock and Policies for Returns to Shareholders 12
I-1. Highlights of the First Half Financial Statements Achieved growth in revenues and income, compared with both the same period of the previous fiscal year and forecasts 1,644 +198 +244 Net Sales 1,322 +70 +62 Gross Profits 161 +45 +40 Orders Received Gross Profit Margin 12.2% +3.0 percentage points +2.6 percentage points SG&A Expenses 93.3-1.3 +0.3 Operating Income 67.7 +47.1 +39.7 Operating Margin 5.1% +3.5 percentage points +2.9 percentage points Recurring Profit 70.9 +47.4 +40.9 Recurring Profit Margin 5.4% +3.5 percentage points +3.0 percentage points Net Income 38.1 +30.1 +24.1 Net Profit Margin Note: Figures are rounded down to the nearest whole unit. Performance Comparisons with the previous term 2.9% +2.3 percentage points +1.8 percentage points 1 Comparisons with forecasts Topics Orders Received There was a slump in capital expenditure during the same period of the previous fiscal year due to the impact of the Great East Japan Earthquake, and capital expenditure had been forecast to remain sluggish during the current fiscal year. However, orders received showed significantly good performance compared with both the same period of the previous fiscal year and the forecasts, thanks to growth in orders received due to aggressive capital expenditure by mobile telecommunications carriers. Net Sales Net sales exceeded both the same period of the previous fiscal year and the forecasts as construction progressed smoothly because of the increase in contract backlog. This resulted from the growth in projects carried over from the previous fiscal year and the rise in orders received this fiscal year. Income Substantial growth in income was achieved compared with both the same period of the previous fiscal year and the forecasts. This was due to greater efficiency accompanying growth in project volume and the effects of structural reform, which COMSYS has continued to implement for some time, in addition to an enhanced product mix.
I-2. Details of the First Half Orders Received by Business Segment Comparisons with the Previous Term +198 (+13.7%) NTT-G +9.8% NCC +45.7% +77 IT +9.7% +22 Social System-Related and Other +6.9% Increase in solar system construction +10-2 +13 1,644 Social System-Related and Other -1.4% IT +5.7% Increase in server-related business NCC +38.4% +68 NTT-G +20.3% Comparisons with Forecasts +244 (+17.5%) Increase in PBX and server-related business SBM Platinum Band advance orders received au 2GHz band LTE-related projects +87 +164 1,446 SBM Platinum Band au 2GHz band LTE-related projects NTT business Decrease in earthquake reconstruction projects DOCOMO business Increase in LTE-related projects, PDC dismantling and subway projects, etc. NTT business Increase due to CP mast renewal projects and standardization orders DOCOMO business Increase in LTE-related projects, PDC dismantling and subway projects, etc. 1,400 Performance in Previous Term Performance Target 2
I-3. Details of the First Half Sales by Business Segment Comparisons with the Previous Term +70 (+5.6%) NTT-G +11.1% +84 NCC -5.6% -8 IT -0.2% Social System-Related and Other -3.3% -0-4 Slowdown in FTTH projects in Tokyo metropolitan area 1,322 Social System-Related and Other +7.6% +9 IT +9.8% +17 Increase in server-related business NCC -12.1% -20 NTT-G +7.1% +55 Comparisons with Forecasts +62 (+4.9%) 1,251 Lag in timing of project completions 1,260 NTT business Decline in service integration projects, increase due to standardization orders DOCOMO business Increase in LTE-related projects, PDC dismantling and subway projects, etc. NTT business Increase due to equalization orders, including CP mast renewal projects DOCOMO business Increase in LTE-related projects, PDC dismantling and subway projects, etc. Performance in Previous Term Performance Target 3
I-4. Details of First Half Operating Income Substantial income growth due to improvement in efficiency accompanying the increase in the volume of projects Comparisons with the Previous Term +47 (+228.9%) Comparisons with Forecasts +39 (+142.0%) 67 +34 +32 20 +13 +8 28 Performance in Previous Term Performance Target 4
II. Highlights of the Revised Full Year Forecasts for the Fiscal Year Ending March, 2013 Upward revision in full-year forecasts on back of positive orders received Orders Received Net Sales Gross Profits Gross Profit Margin SG&A Expenses Operating Income Operating Margin Recurring Profit Recurring Profit Margin Net Income Net Profit Margin Note: Figures are rounded down to the nearest whole unit. Revised Targets 3,100 3,060 377 2,950 +150 3,000 +60 325 +52 12.3% 10.8% +1.5 percentage points 187 190 Initial Targets 185 +2 140 +50 6.2% 4.7% +1.5 percentage points 195 144 +51 6.4% 4.8% +1.6 percentage points 110 85 +25 3.6% 2.8% +0.8 percentage points 5 Difference Topics Orders Received and Net Sales Despite slowing during the second half, orders received are forecast to rise for the full year due to the effect of advance orders received in the first half and standardization orders received throughout the year. Net sales are forecast to increase based on work in progress during the first half. (* Please refer to the detailed data attached for revised orders received and net sales forecasts by business) Income Operating income is forecast to rise by 5.0 billion over the full year. In addition to an increase of approximately 4.0 billion during the first half, efforts to further improve productivity, primarily greater efficiency and structural reform measures, are projected to produce 1.0 billion during the second half.
III-1. Capital Expenditure Trends at Telecommunications Carriers (1) NTT East and West 7,796 7,850 7,500 Source: NTT IR materials Source: NTT IR materials Net Growth in Number of FLET S Hikari Contracts 97 (Unit: ten thousand lines) 82 84 No change to plans Initial: 80 66 65 65 NTT EAST NTT WEST Investment in fiber optics 2,950 4,200 3,900 3,650 3,600 Investment in fiber optics 3,000 Investment in fiber optics 3,000 NTT EAST NTT WEST Mar. 2011 Mar. 2012 Mar. 2013 Target Mar. 2011 Mar. 2012 Mar. 2013 Target Note: Net growth in number of new contracts = number of new contracts number of cancellations NTT s consolidated capital expenditure for the current fiscal year has increased by 30.0 billion from initial plans, to 1,950 billion (includes 14.0 billion at NTT DOCOMO). There are no changes in capital expenditure at NTT East and West (including investment in fiber optics). NTT has announced that the cornerstones of its medium-term management plan are to strengthen its overseas business ( Global Cloud Vision ) and comprehensively strengthen network service competitiveness. Cost reductions of 400 billion by the fiscal year ending March 2015 are to be implemented as a means of substantially increasing the efficiency of capital investment. ( 200 billion in personnel expenses and facility-related expenses + 200 billion in expenses) The number of contracts for FLET S Hikari, the cornerstone of fixed telecommunications, has increased, but the net increase in the number of contracts is tending to slow due to the following circumstances (assumptions). (1) Rapid growth of smartphones (LTE, built-in tethering function) (2) Aggressive discounting of optic fiber and smartphone services by KDDI (3) Emergence of Kansai Electric Power subsidiary (under management of NTT West) NTT East revised net growth target for telephone lines down from 800,000 to 650,000 NTT East and West are implementing strategy to prevent cancellations of FLET S Hikari WiFi platform is being strengthened (rather than simply reducing the burden of WiFi access) 6
III-2. Capital Expenditure Trends at Telecommunications Carriers (2) NTT DOCOMO Source: NTT DOCOMO IR materials KDDI/Softbank Source: KDDI and Softbank IR materials LTE FOMA 7,268 923 3,205 7,350 7,490 Increase 1,730 1,990 2,150 2,060 Peak out 5,168 4,216 KDDI Softbank 4,500 6,124 Increase 4,500 7,000 Other (Information Systems, etc.) 3,140 3,470 3,440 Mobile Mobile 3,042 4,227 3,500 5,000 5,900 3,500 Mar. 2012 Mar. 2013 (Initial Target) Mar. 2013 (Revised Target) Mar. 2012 Mar. 2013 (Initial Target) Mar. 2013 (Revised Target) Capital expenditure revised upwards by 14.0 billion, from 735 billion to 749 billion Capital expenditure shifted sharply away from FOMA into Xi (LTE) Xi (LTE): 26 billion increase in investment (FOMA: 9.0 billion decrease) Target of 30 million contracts revised up to 41 million contracts (fiscal 2015 target) Construction of docomo cloud Extending coverage and further enhancing speed of Xi (LTE) 23,000 Xi base stations by end of current fiscal year 112.5Mbps maximum downlink speed Investment forecasts expected to peak out after the fiscal year ending March 2014 (below 700 billion level in medium term) KDDI has not revised capital expenditure up, but the 215.5 billion in the first half is an acceleration of 46.4 billion compared with the same period of the previous fiscal year KDDI is steadily increasing its number of fiber optic and smartphone (iphone5) service contracts through aggressive expansion of au Smart Value (fixed fiber optic + mobile service) Softbank has revised capital expenditure up by 90 billion due to forward ordering as a result of base station augmentation for Platinum Band (900MHz) and enhancement of FDD-LTE facilities for the strongly performing iphone5 Management integration between Softbank and e-access Ltd., and acquisition of Sprint Nextel Corporation in the U.S. 7
III-3. Mobile Telecommunications Carrier Business Trends March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 FOMA construction Augmentation of capacity of existing base stations accompanying uptake of smartphones DOCOMO Population coverage approx. 75% mova (PDC) dismantling (Greater efficiency through simultaneous construction with LTE) Adoption of 700MHz (Commencement of 15.1 service) au Actual population coverage approx. 96% L800MHz dismantling Softbank (ordinance-designated cities) Other Projects to improve mobile phone dead zones between subway stations 8
III-4. Status of New Business Initiatives Mega-Solar Power Initiative Planned locations for construction of power stations Commercialization finalized Commercialization under study Showa-mura and other locations, Gunma Prefecture Business investment Under investigation Hitachiota City, Ibaraki Prefecture 2.8MW Expansion of Solar Power System Construction (Existing Business) Revision of forecast orders received + 4 billion 6 billion [ Main orders received ] 2.3 billion 2.5 billion Forecast at beginning of fiscal year 5 billion 1.5 billion Actual investment, forecast investment Increase Location Generating capacity Orders Received Yamanashi Prefecture 2.8MW 0.8 billion Hokkaido 2.0MW 0.3 billion 2 billion Ibaraki Prefecture 0.7MW 0.1 billion March 2011 Results March 2012 Results March 2013 Initial Targets March 2013 Revised Targets 9 Kanagawa Prefecture 0.7MW 0.2 billion
IV-1. Structural Reform Initiatives and Outcomes Rationalization of personnel Implementation of career change support system for regular employees employees throughout the Group Streamlining of assets 10
IV-2. Reorganization of Group Business Management Structure Fundamental Approach 11
V. Status of Treasury Stock and Policies for Returns to Shareholders Decision to acquire 2 billion in treasury stock in the second half of the fiscal year in addition to 3 billion in treasury stock acquired during the first half Scheduled for the second half Newly acquired portion 0.99 million shares (Approximately 1.2 billion) 4.96 million shares 9.37 million shares Newly acquired portion 4.38 million shares (Approximately 5 billion) 15.02 million shares Newly acquired portion 5.54 million shares (Approximately 5 billion) 20.27 million shares Newly acquired portion 5.25 million shares (Approximately 5 billion) Use in implementing management integration with TSUKEN Corporation 8.35 million shares 16.12 million shares Newly acquired portion 3.61 million shares (Approximately 3 billion) Newly acquired portion 19.18 million shares Newly acquired portion 3.52 million shares (Approximately 3 billion) 22.34 million shares Interim Results 3.2 million shares (Approximately 3 billion) Mar. 2007 Mar. 2008 Mar. 2009 Mar. 2010 Mar. 2011 Mar. 2012 Mar. 2013 Dividends per Share 17 17 20 20 20 20 20 (Planned) [ Interim ] 7 7 10 (including a 3 commemorative dividend) 12 10 10 10 10 [ Year-end ] 10 10 10 10 10 10 10 Consolidated Payout Ratio 19.5% 20.3% 26.5% 36.2% 27.1% 36.0% 22.8% (Planned)