FY19 Asia IR Presentation Material (Telephone Conference) March - - PowerPoint PPT Presentation

Building a better, brighter future together

Total ICT Solutions: Contributing to the Realization of a Brighter Future by Bringing People Together and Forming Connections with Society

FY19 Asia IR

March 2020

Presentation Material

(Telephone Conference)

Contents

－1－

• 1. About Us

(8) Urban Infrastructure ・・・ 21 (1) Corporate Profile ・・・ 2 (9) System-Solutions ・・・ 22 (2) Company History ・・・ 3 (3) Performance Highlights ・・・ 4

• 4. Our M&A Strategy

(4) Segment Overviews ・・・ 5

(1) Development Direction by Business Segment

・・・ 24 (5) Group Structure and Business Bases ・・・ 9 (6) Public evaluation ・・・ 10

• 5. Intitatives for ESG and SDGs

(1) ESG Initiatives ・・・ 25

• 2. Medium-term management plan

(2) SDGs Initiatives ・・・ 26 (1) Medium-term vision ・・・ 11 (2) Basic Policies ・・・ 11

• 6. Raising Shareholders’ Value

(3) Performance Target for FY20 ・・・ 11 (1) Shareholder Return Policy ・・・ 27 (4) Objective and Growth Picture ・・・ 12 (2) Plan for shareholder returns for FY19, etc. ・・・ 28

• 3. Overview of FY19 Q3 Earnings Results
• 7. Topics

(1) Performance Figures ・・・ 13 (1) Our company Employee Wins Gold Medal at Skills Competition ・・・ 29 (2) Orders Received ・・・ 14 (2) Our company selected as "Nadeshiko Brand" ・・・ 30 (3) Net Sales ・・・ 15 (4) Operating Income ・・・ 16 (5) NTT Group (Access/Network) ・・・ 17 (6) NTT Group (Mobile) ・・・ 18 (7) NCCs ・・・ 19

Established May 17, 1954 Paid-in capital ¥6,888 million Stock listing Tokyo Stock Exchange (First Section) Securities Code: 1951 Unit of trading: 100 Total common stock issued: 117,812,419 shares Representatives Chairman: Fuminori Kozono President and CEO:Tetsuya Funabashi Consolidated net sales (FY 2018) ¥423.7 billion Number of employees (as of Sep. 31, 2019) Consolidated total: 13,714 Head office 3-29-20 Shibuya, Shibuya-ku, Tokyo 150-0002, Japan Number of business

• ffices

Branch offices: 13 Sales offices: 21 Consolidated subsidiaries 90 Fiscal year-end March 31

(1) Corporate Profile

• 1. About Us

－2－

50 100 150 200 250 300 350 400 450 500

1954 1960 1970 1980 1990 2000 2010 2020

1952: Nippon Telegraph and Telephone Public Corporation launched

1972: Listed on Tokyo Stock Exchange (First Section)

1985: Telecom liberalization; NTT goes private 1997: Japan’s telecom network fully digitized 2001: Optical access service launched 1979: Nationwide automation for telephone line switching completed

1954: Company established

2006: Mobile number portability launched

1982: Entered the SI business 1986: Entered the environment business 1998: Entered the NI business 1991: Changed company name to KYOWA EXEO CORPORATION

Sales (on a consolidated basis from 1992) 2010: LTE service launched

• 1. About Us

(2) Company History

Net Sales (consolidated) (¥bn) 2001: Merger with Showa Technos 2004: Daiwa Densetsu made a Group company Wako Engineering made a Group company 2005: KANAC made a Group company 2010: Ikeno Tsuuken made a Group company 2011: ICOMSYSTECH made a Group company Wako, Daiwa Group, and Ikeno Tsuuken became wholly owned subsidiaries 2014: Advanced Information Design made a Group company 2018 : C-Cube, Seibu Electric Industry and Nippon Dentsu made a Group company KOHKEN made a Group company 2019 : DeClout & KDT & SUN PLANNING SYSTEMS & Winner Engineering & CPU made a Group company

－3－

(3) Performance Highlights

－4－

• 1. About Us

Orders Received Net Sales Operating Income

Net income attributable to owners of parent

EPS

301.4 300.4 324.1 325.0 424.3 495.0 300.9 287.4 298.8 312.6 423.7 495.0 18.3 18.4 20.8 25.6 31.7 32.0 plan plan plan plan plan 12.2 12.1 13.7 17.9 40.2 21.8 (¥bn) (¥bn) (¥bn) (¥bn) (¥)

Waste-treatment plant Optical fiber Mobile base stations Agriculture ICT Cloud/ data center FTTH Optical fiber connected offices Solar power generators SOA, billing CCTV and digital signage Network/servers, Wi-Fi, security HEMS, smart community

(4) Segment Overviews

• 1. About Us

Segment

Net Sales FY18 ENGINEERING

• SOLUTIONS

Telecom carriers NTT Group

203.6

NCCs

38.0

Urban infrastructure

108.6

System-Solutions

73.4

Total

423.7

NTT Group Urban infrastructure System Solutions

Sensor networks (social infrastructure)

(¥ bn)

NCCs 9.0%

Civil engineering (reduction of above-street wiring) Networks for telecommunication

• ffices

Mobile base stations Constructing electrical and air-conditioning facilities Mega solar power station CATV Railroad communications

－5－ 25.6% 17.3% 48.1%

Total 57.1%

(4) Segment Overviews — Telecom carriers

• 1. About Us

◆ Kyowa Exeo’s core business, nurtured since the company was founded more than 60 years ago ・NTT Group We build and maintain telecommunications facilities for NTT Group companies. ・NCCs

We design, construct, and maintain telecommunications facilities for KDDI, Softbank, Rakuten. We lay optical fiber and cable between phone exchanges and homes and

• ffices and provide

construction and maintenance services. We install switchers and routers/servers at exchanges and construct and maintain related electrical facilities. We design, construct, test frequencies, and maintain mobile base stations and in-building mobile communication systems.

【Access engineering】 【Network engineering】 【Mobile engineering】

Home

Home Networking Communications cables (optical fiber) Mobile phone base station Communications tunnels (underground conduits, service tunnels) In-station facilities of telecommunications carriers

53.5% 9.0%

NCCs

－6－

48.1%

NTT Group

(after) (before)

Waste-treatment plant Constructing electrical facilities

【Water- and waste-treatment plants】 【Constructing electrical and air- conditioning facilities】 【Renewable energy】 【Reduction of above-street wiring】

Mega solar power station Reduction of above-street wiring

◆ Using the electrical and civil engineering skills developed in our telecommunications infrastructure business to build a more convenient society

・Building and maintaining telecommunications facilities for local governments and cable TV, railway, and other companies ・Solar power generators, biomass boilers, and other renewable energy technologies ・Constructing electrical and air-conditioning facilities for office buildings, apartments, and data centers ・Eliminating utility poles by laying electrical and telecommunications cable in underground conduits ・Designing, constructing, operating, and maintaining water and waste-treatment plants

(4) Segment Overviews — Urban infrastructure

• 1. About Us

【Road telecommunications construction】

－7－

25.6%

【Network integration (NI)】 【System integration (SI)】

◆ Using information and communications technology to provide total solutions in the NI and SI fields

・ Network Integration (NI) Offering network solution services covering servers, wireless networks, security, cloud computing, imaging, EMS , and sensors ・System Integration (SI) Provision of large-scale entrusted development for the public sector, telecommunications, manufacturing, and the financial industry and provision of a solution to business process reform and operation support ・Overseas projects Construction and maintenance of overseas telecommunications infrastructure, provision of network solutions services

Customer service center

(4) Segment Overviews — System Solutions

• 1. About Us

【Overseas projects】 Seminars to discuss examples of system architectures for businesses －8－ Access works in the Philippines 17.3%

■

• ■

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

• ▲

▲ ▲ ▲ ▲ ▲ ▲ ▲ ▲ ■ ■ ▲

• ■ Group Structure (as of March 1, 2020)

KYOWA EXEO CORPORATION

Net Sales: ¥279.0 billion（Non-consolidated figures）

■ Business Bases

Major Consolidated Subsidiaries (5 companies)

Exeo Tech Net Sales: ¥22.6billion Daiwa Densetsu Net Sales: ¥16.4 billion

Other Consolidated Subsidiaries（85 companies）

■ Domestic bases

• Bases of Five Major Consolidated Subsidiaries

▲ Bases of Other Consolidated Subsidiaries 【Overseas Bases】

(5) Group Structure and Business Bases

• 1. About Us

Philippines Thailand Singapore

C-Cube Net Sales: ¥64.0billion Seibu Electric Industry Net Sales: ¥56.0 billion Nippon Dentsu Net Sales: ¥34.0 billion

Access

Shinyei Tsushin, Suncrex, Ecos Hokuei, Sankyo-Techno, KANAC,

• K. Technos, Sigmax

Networks &Mobile

Exeo Mobile, Toho Communications, Yuai Tuken, Kyoei Densetsu Kogyo, Denseisya, KDT

Civil

Exeo Infra, Infratechno

IT

ICOMSYSTECH, ACCRESCO, AID, WHERE SUN PLANNING SYSTEMS, CPU

Overseas projects

MG EXEO, EXEO ASIA, EXEO GLOBAL, LAE, DeClout, Winner Engineering

Other

KYOWA SECURITY SYSTEM, Kyokuyoh, Shinwa Seisakusyo, Exeo Butsuryuu Service, Exeo Business, ASAHI DENWA KOGYO, KOHKEN

－9－

（Note 1）The net sales of each company are the actual results for the fiscal year ended March 2019. （Note 2）C-Cube, Seibu Electric Industry, and Nippon Dentsu were integrated into group companies in October, but annual net sales were stated for each of the three companies.

■ Approved as a stock in the JPX Nikkei 400

The JPX Group and Nihon Keizai Shimbun (Japanease newspaper)selected 400 "a company that is attractive to investors" that meet various requirements of global investment standards, including efficient use of capital and shareholder-conscious management (Replacement in August every year based on 3-year average ROE, etc.).

■ Approved as a stock in MSCI Japan ESG Select Leaders Index

MSCI selects companies with excellent ESG evaluation from the top 700 stocks in Japan (Currently consists of 246 stocks and is replaced every June)

■ Obtained the Kurumin mark for excellent childraising support

Approved by the Ministry of Health, Labour and Welfare as a child-rearing support company based

• n the Law for Measures to Support the Development of the Next Generation in 2015

■ Obtained “Eruboshi (Top Class)" certification based on the Law for the Promotion of Women's Participation and Advancement

Recognized by the Ministry of Health, Labour and Welfare as an excellent company in 2016 with regard to the promotion of female participation and career advancement.

■ Approved as Nikkei Smart Work Management Survey Star 3.5 (November 2019)

Ranked 3.5 stars in the Nikkei SmartWork Management Survey, which selects leading companies that improve productivity through reformation of working styles

－10－

• 1. About Us

(6) Public evaluation

(1) Medium-term vision

Focus Group strengths to take total solutions to a new growth stage

２. Medium-term management plan（FY16-20）

１．Creation of group synergy with the three integrated companies ２．Acceleration of solution business and expansion of stock business ３. Building of construction formation for the full-scale launch of 5G ４. Development of overseas business with EXEO GLOBAL as a starting point ５．Improvement of productivity through the digitalization of operations and the fostering of highly- skilled IT human resources ６．Increase in shareholder value due to the improvement of capital efficiency

(2) Basic Policies (3) Performance Target for FY20

■ Net sales ¥500.0bn ■ Operating income ¥33.0bn （Operating income margin 6.6%） ■ ROE 8.5％ ■ EPS ¥210

－11－

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

FY15 FY16 FY17 FY18 FY19 Plan FY20 Plan

Growth segment

Aiming for 500 billion yen in sales and further growth

(¥bn)

(4) Objective and Growth Picture

Actively conduct M&A in addition to organic growth

Solution fields including SI and NI Facility fields including power and air conditioning

500 450 400 350 300 250 200 150 100 50

－12－

２. Medium-term management plan（FY16-20）

◆ In addition to the organic growth of performance, the integration of the three companies in western Japan increased sales substantially. ◆Although SG&A expenses increased due to Group company growth, our profit increased significantly

thanks to the contributions made by the three companies in western Japan.

• 3. Overview of FY19 Q3 Earnings Results

(1) Performance Figures

(¥bn)

■ Overview of FY19 Q3 Earnings results (consolidated)

－13－

Actual YOY Progress rate

Plan

YOY A B C C/A C/D D D/B

291.5 424.3 419.8

144% 85%

495.0

117%

247.6 423.7 333.7

135% 67%

495.0

117%

(13.3%) (13.8%) (13.1%) (13.4%)

32.9 58.3 43.7

133% 66%

66.3

114%

(6.9%) (6.3%) (7.8%) (6.9%)

17.1 26.6 26.1

153% 76%

34.3

129%

(6.4%) (7.5%) (5.3%) (6.5%)

15.8 31.7 17.5

111% 55%

32.0

101%

(7.0%) (7.9%) (5.4%) (6.6%)

17.4 33.4 17.9

103% 55%

32.8

98%

(12.0%) (9.5%) (3.2%) (4.4%)

29.7 40.2 10.8

36% 50%

21.8

54%

Net income attributable to owners of parent

SG&A expenses Operating income

1-3Q Full year 1-3Q Full year

FY 2018 FY 2019

Orders received Net sales Gross profit Ordinary income

Notes: 1. All amounts less than ¥100m are disregarded.

• 2. Figures in parentheses are ratio to net sales.

291.5 419.8

18年度 3Q累計実績 19年度 3Q累計実績

◆ Orders increased significantly thanks to strong performance in each segment and

a large order in urban infrastructure. The three companies in western Japan also received orders steadily. ＋128.3

(2) Orders Received

(¥bn)

Note: All amounts less than ¥100m are disregarded.

← Existing Exeo G Actual

Urban Infrastructure +18.1 NTT Group

• 1.4

NCCs +3.6 System- Solutions +12.7 Seibu Electric Industry +34.2 Nippon Dentsu +22.0 C-Cube +39.1

▲ Access ▲ Network ○ Mobile ▲ KDDI ○ SB ○ Rakuten ○ Telecommunications facilities ○ Electricity supply ○ Urban Civil engineering ▲ Environmental engineering ○ SI ○ NI ○ Global

Existing Exeo G （＋33.0）

Three companies in western Japan （＋95.3）

• 3. Overview of FY19 Q3 Earnings Results

（288.2） （255.2）

FY18 3Q FY19 3Q －14－

247.6 333.7

18年度 3Q累計実績 19年度 3Q累計実績

◆ Although construction periods were extended in some segments, sales performed

well against the background of strong orders. （220.6）

Note: All amounts less than ¥100m are disregarded.

(3) Net Sales

＋86.1

Urban Infrastructure +3.5 NTT Group

• 6.8

NCCs

• 2.0

System- Solutions +14.0 Seibu Electric Industry +22.1 Nippon Dentsu +18.8 C-Cube +36.5

▲ Access ー Network ▲ Mobile ▲ KDDI ▲ SB ○ Rakuten ○ SI ○ NI ○ Global

Existing Exeo G （＋8.7）

Three companies in western Japan （＋77.4）

(¥bn)

← Existing Exeo G Actual

－15－

• 3. Overview of FY19 Q3 Earnings Results

（211.9）

FY18 3Q FY19 3Q

ー Telecommunications facilities ○ Electricity supply ○ Urban Civil engineering ▲ Environmental engineering

15.8 17.5

18年度 3Q累計実績 19年度 3Q累計実績

Note: All amounts less than ¥100m are disregarded.

◆Operating Income increased due to the contribution of the three companies in western Japan, despite the deterioration in mix and an increase in SG & A expenses resulting from M & A.

(4) Operating Income

(¥bn)

＋1.7

Existing Exeo G （-1.3）

Three companies in western Japan （＋3.5）

Up due to increase in sales +1.2 Sales mix

• 0.7

Amortization of goodwill,etc.

• 0.5

Seibu Electric Industry +0.1 Nippon Dentsu +0.9 C-Cube +2.5

Increase in SG&A expenses due to new subsidiaries

• 1.4

M&A cost, etc. （-0.5）

← Existing Exeo G Actual

－16－

• 3. Overview of FY19 Q3 Earnings Results

FY18 3Q FY19 3Q

（13.0） （14.3）

Overseas subsidiary

• 0.6

Integration synergy +0.2

70.7 71.0 77.1 79.1 76.0 14.3 41.0 41.1 46.7 38.7 40.1 18.2 111.8 117.7 115.8 151.8 168.5 15年度 16年度 17年度 18年度 19年度 3Q累計実績

従来エクシオG 3Q累計実績 西日本3社 3Q累計実績 従来エクシオG 4Q分 西日本3社 4Q分

(5) NTT Group (Access/Network)

(Source: Created by Kyowa Exeo based on NTT presentation material)

■ Trend of number of subscribers to NTT Group's fixed-line broadband

10,000s of subscribers

■ Net sales of NTT Group (fixed-line network, consolidated) ◆ Net sales from work to open an optical network are steady, and maintenance and construction for disaster countermeasures have gradually been increasing in recent years. ◆ In line with the increase in mobile traffic, NTT Building’s network constructions are steady.

■ NTT Group’s disaster countermeasures

• 1. Improvement of reliability of

communication networks （including multiple transmission routes）

• 2. Securing of important

communication

• 3. Early

restoration

・ Further strengthening of

communication infrastructure （concentration of communication facilities, etc.） ・ Proactive disaster response ・ Appropriate transmission of information

469 874 1,111 1,269 1,389 1,457 1,131 942 839 779 1,926 2,005 2,053 2,108 2,168

FY15 FY16 FY17 FY18 FY19 Plan

FLET'S HIKARI COLLABO HIKARI

(Full-year plan)

－17－

(¥bn) FY15 FY16 FY17 FY18 FY19 3Q

• 3. Overview of FY19 Q3 Earnings Results

31.4 33.1 34.0 32.6 28.9 1.2 3.1 17.3 17.5 17.5 16.3 1.6 48.7 50.6 51.5 51.7 52.5 15年度 16年度 17年度 18年度 19年度 3Q累計実績

従来エクシオG 3Q累計実績 西日本3社 3Q累計実績 従来エクシオG 4Q分 西日本3社 4Q分

◆ Order of the construction of 4G-enabled base stations for the new frequency (3.4GHz) starts in 2Q. ◆ Start receiving orders for 5G. Preparing a new construction system in case base station construction proceeds ahead of schedule.

(6) NTT Group (Mobile)

■ Net sales of NTT Group (mobile network, consolidated)

(Source: Created by us based on NTT DoCoMo presentation material.)

■ Image of NTT DOCOMO Main Processes (our company's assumption)

END OF SEPTEMBER 2019 END OF JUNE 2020 END OF JUNE 2021 END OF FY24

■ Construction of 5G networks for NTT DOCOMO

3.7GHz 4.5GHz 28GHz

Expansion to 47 prefectures 10,000 40 sites

Advancing the schedule faster than the initial plan

End of September 2019 End of June 2020 End of June 2021 End of FY 2024

(Full-year plan) (¥bn)

－18－

FY15 FY16 FY17 FY18 FY19 3Q

• 3. Overview of FY19 Q3 Earnings Results

15.4 13.3 17.5 19.9 17.9 2.5 8.0 7.8 10.0 10.6 11.5 4.1 23.2 23.3 28.1 38.0 39.5 15年度 16年度 17年度 18年度 19年度 3Q累計実績

従来エクシオG 3Q累計実績 西日本3社 3Q累計実績 従来エクシオG 4Q分 西日本3社 4Q分

(7) NCCs

■ Net sales of NCCs (consolidated)

■ Number of base stations for new frequency bands for 4G (1.7 GHz and 3.4 GHz) planned to be opened

KDDI 28,660(1.7G) SoftBank 23,167(3.4G)

Service to be launched at the end of March 2019 Number of stations planned to be opened by the end of FY25 Service to be launched at the end of March 2020 Number of stations planned to be opened by the end of FY22

Rakuten 27,397(1.7G)

Test service to be launched in October 2019 Number of stations planned to be opened by the end of FY25

◆ Orders from KDDI are a little weak, but orders from Softbank and Rakuten are very strong. ◆ Rakuten's wireless base station construction has started in all area, and we are working with three companies in western Japan to respond.

(Source: Prepared by the Company based on the materials of the Telecommunication Bureau, Ministry of Internal Affairs and Communications)

■ Results of 5G frequency allotment

(Full-year plan) (¥bn)

－19－

FY15 FY16 FY17 FY18 FY19 3Q

• 3. Overview of FY19 Q3 Earnings Results

338.0 325.0 531.4 519.3 560.8 601.7 610.0 FY15 FY16 FY17 FY18 FY19 PLAN

Mobile

365.4 595.2 597.1 577.9 593.7 570.0 FY15 FY16 FY17 FY18 FY19 PLAN

LTE-related

177.0 156.0 154.0 161.0 150.0 583.4 547.9 549.6 541.0 520.0 FY15 FY16 FY17 FY18 FY19 PLAN

Optical fiber

■ NTT DoCoMo

Reference: Investment Trends of Major Telecom Carriers

■ NTT East/West ■ KDDI ■ SoftBank

(¥bn)

(Source: Figures released by the telecommunications carriers)

Plan Plan Plan

412.8 320.5 350.1 380.3 380.0 FY15 FY16 FY17 FY18 FY19 PLAN

Plan

－20－

• 3. Overview of FY19 Q3 Earnings Results

29.8 38.3 40.0 50.0 53.4 7.5 23.1 35.9 29.0 34.5 40.8 10.2 65.7 67.3 74.5 108.6 128.0 15年度 16年度 17年度 18年度 19年度 3Q累計実績

従来エクシオG 3Q累計実績 西日本3社 3Q累計実績 従来エクシオG 4Q分 西日本3社 4Q分

◆ Construction for 700MHzBand TV reception measures is declining, but sales are expected to remain strong. ◆ We have received large orders for the construction of mega solar, and data center, and we aim to win large orders in the future.

(8) Urban Infrastructure

■ Urban Infrastructure net sales (consolidated) ■ 700 MHz Band TV reception measures

(Source: Created by us based on the HP of Association of 700MHz Frequency Promotion)

Installation

• f filter

Or Install a filter to cancel the radio waves from the 700MHz band mobile phone base stations Replacement

• f booster

Replace a booster with one that amplifies only the bands up to 710MHz (where the situation cannot be addressed with the installation of a filter) Construction areas of the Company

Kanto and Koshinetsu

■ Undertake the earth shuttle method

Okinawa Construction for installation of submarine cable unloading duct line, etc.

Note: Appropriate method for the penetration of the sea, rivers, and mountain areas, etc. Substation Filter plant Fisheries facilities Sea water intake pipe Cable unloading duct line

Coral reef

Wind farm on the sea Water line to an isolated island 海上風力発電施設 Cable duct line Communication base station

(Full-year plan) (¥bn)

－21－

FY15 FY16 FY17 FY18 FY19 3Q

• 3. Overview of FY19 Q3 Earnings Results

24.0 26.1 28.0 30.2 44.2 10.2 37.6

13.8 13.6 14.5 16.7 16.3 37.8 39.7 42.5 73.4 106.5

従来エクシオG 3Q累計実績 西日本3社 3Q累計実績 従来エクシオG 4Q分 西日本3社 4Q分

■ System-Solutions net sales (consolidated) ◆ Continue to focus on the expansion of new solutions such as the cloud and security space. ◆ We will strengthen our global operations through M&A and promote business expansion in the APAC region.

■ Solution Map (added value expansion plan)

(9) System-Solutions

Proprietary package product Sales activity Sales management Paperwork efficiency improvement Securing safety Fostering

• f

engineers Division- specific work

Construction work

Site assistance

Construction companies, local governments

Map information Manager Worker Stakeholders

IT

AI data analysis

Business process transformation solution

Business process management BPM platform solution/RPA solution

(Full-year plan)

management

AI / Analytics

Security Helpdesk

Work details Work Flow

Enhancement of B2B sales ability Productivity improvement

• peration

IT operation optimization

Service management platform

Business visualization

Construction work management, disaster prevention In-memory data processing

Digitalization of work

Communication

Sales ability enhancement Competitiveness enhancement

Design

Construction work

Maintenance

Sales

Digitalization of business process

Business process analysis Sales

Orders

Delivery

Maintena nce

BPM platform API / Data integration

API Management

Data integration

Domestic G system Division-specific system Overseas G system Relationship reinforcement Manager Customer Sales representative

(¥bn)

－22－

FY15 FY16 FY17 FY18 FY19 3Q

• 3. Overview of FY19 Q3 Earnings Results

External view of training center near Manila Singapore

Reference: Global business initiatives

Thailand Philippines

Building business bases in Southeast Asia Philippines , Thailand , Singapore

・ Airport ICT ・ Industrial complex ICT ・ Data center ICT ・ Expressway communication ・ Railway communication

N a m e Leng Aik Engineering Pte.Ltd. L o c a t i o n Singapore B u s i n e s s A c t i v i t i e s Work for electrical and integrated facilities C a p i t a l 1.5 million SGD Number of e m p l o y e e s

• Approx. 260 people

In November 2018, EXEO GLOBAL Pte.Ltd. was established in Singapore to operate and manage

• verseas subsidiaries. A takeover bid is currently underway for all the shares of

DeClout, a global operator of a system solution business.

N a m e DeCLout Limited L o c a t i o n Singapore B u s i n e s s A c t i v i t i e s Sale and service of IT infrastructure and cloud service C a p i t a l 114 million SGD Number of e m p l o y e e s

• Approx. 630 people

On October 31, 2018, the company signed an agreement to acquire all shares of the LAE Group, which engages in work for electrical and integrated facilities in Singapore.

With EXEO GLOBAL as a starting point, expand business in the APAC region MG Exeo (Philippines) has been engaged in construction for communication common carriers for a long time.

・ It undertakes not only access & mobile construction work but also maintenance work for major local telecommunications carriers. ・ It has advanced into the urban infrastructure business, such as railway communication and road-related construction work. Training facility in Japan ... Chuo Training Center (Saitama Pref.) (In July 2019, Mr. Nemoto, Minister of MHLW, visited the training center.)

In collaboration with training facilities in Japan, the center fosters engineers who will work globally. (In July 2018, Mr. Noda, Minister of MHLW at the time, visited the above training center.)

In January 2018, EXEO ASIA was established in Thailand to engage in ICT solutions.

In October 2019, the company signed an agreement to acquire all the shares of Winner Engineering, which engages in air conditioner installation work in Singapore.

N a m e Winner Engineering pte.Ltd. L o c a t i o n Singapore B u s i n e s s A c t i v i t i e s Design and installation work for air conditioners, electrical work C a p i t a l 1.5 million SGD Number of e m p l o y e e s

• Approx. 130 people

－23－

• 3. Overview of FY19 Q3 Earnings Results

Engineering Solutions （NTT Group, NCCs） Engineering Solutions （Urban infrastructure） System Solutions

2011 Wako Engineering 2011

Icom

2010 Ikeno Tsuken 2014

AID

2018 C-Cube 2018 Nippon Dentsu 2018 Seibu Electric Industry 2015

WHERE

2018 ＫＯＨＫＥＮ

Anti- corrosion coating

ＳＩ ＳＩ ＮＩ

Competitors (mainly undertaking NTT's communication facility construction)

Currently: Exeo Tech

Expanding areas of power/air conditioning and maintenance

・M&A in the power/air conditioning field, where synergy can be generated ・M&A in the facility maintenance field

Implementation of system enforcement, maintenance area expansion

・ Generation of synergy with each of the companies merged and previously acquired ・ M&A aiming at enhancing implementation system and expanding maintenance

Expansion of SI, NI, and global fields

・M&A in the IoT, AI, RPA, and BPM fields ・M&A in the fields of facility construction, SI, and NI in the ASEAN region

2011 Daiwa Densetsu

(1) Development Direction by Business Segment

• 4. Our M&A Strategy

2018

LAE

Electricity supply

2019

DeClout

ＮＩ

2019

eiwa-builtech

air conditioning sanitation 2019

SPS

ＳＩ

2019

KDT

2019

Winner E

air conditioning sanitation 2019

CPU

ＳＩ

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Our stocks have been selected for the MSCI Japan ESG Select Leaders Index. (as of June 2019)

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Environment

・Reduction of CO2 emissions ⇒ 1% reduction of power/gasoline use compared to the previous year ・Use of green energy, forest conservation ⇒ Solar power business, Forest of Exeo, and so on ・Promotion of green procurement ⇒ 63% or more of ecological product purchases

Ｓ Society

・ Promotion of DS/WLB※ ⇒ More than 25% new female graduate employment, total reduction of working hours, and so on ・ Securing safety and quality ⇒ Zero serious accidents per year, ensuring and disseminating the quality philosophy ・ Contribution to society and community ⇒ Recovery measures in the case of natural disasters, and community contribution

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Governance

・ Strengthening corporate governance ⇒ Disclosure of the evaluation of the workability of board meetings ・ Ensuring compliance ⇒ Committee, promotion of effectiveness of internal report system ・ Proper risk management ⇒ Specifying risks of processes, enhancement of BCP

• Activities on Forest of Exeo -

Fifty years after Exeo’s foundation, we once again acknowledge the need for global warming protection and community contribution, by currently concluding profit-sharing silviculture agreements* with five regional forest management offices nationwide. Naming each one a "Forest of Exeo," we are promoting activities to protect national forests and develop a friendship between employees and their families.

Conservation activities of national forests on the premise of not cutting them down.

*DS: diversity, WLB: work life balance

(1) ESG Initiatives

• 5. Intitatives for ESG and SDGs

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• 5. Intitatives for ESG and SDGs

(2) SDGs initiatives

① Achievement of a safe and secure society through the infrastructure business

Achieve urban development that is safe and secure for everybody, as well as contributing to building infrastructure that is resilient to natural disasters

② Achievement of an affluent society through the solution business

Resolution of social issues and achievement of an affluent society through IoT technology Promotion of recycling and effective utilization of resources; achievement of a society for the prevention

• f global warming

To meet the expectations of stakeholders, favorable communication will be strengthened to resolve issues

③ Global environment conservation and achievement of a recycling-oriented society ④ Achievement of favorable communication with stakeholders －26－

(1) Shareholder Return Policy

• 6. Raising Shareholders’ Value

■ FY2019 planned annual dividend: 80 yen

◆ From the FY2018 dividend, DOE was raised to around 3.5% to strengthen shareholder returns ◆ Plan to acquire own shares of 5 billion yen in 1H FY2019

Item FY16 FY17 FY18 FY19 Forecast DOE 3％ DOE 3％ DOE 3.5% (integrated from 2H) DOE 3.5％ Annual dividends per share ¥46 ¥50 ¥70 ¥80 Total annual dividends ¥4.38 billion ¥4.78 billion ¥7.31 billion ¥8.97billion Payout ratio 31.7％ 26.4％ ※32.9 ％ 41.2％ (1) Purposes of the acquisition: Flexible implementation of capital policy and improvement of capital efficiency (2) Total acquisition: ¥5.0 billion (3) Total number of shares of treasury stock to be acquired: 1.93 million shares (4) Acquisition period: May 15, 2019 to September 30, 2019

*Calculated by subtracting the extraordinary profit (negative goodwill) arising from the management integration.

■ Outline of repurchase of treasury stock in the first half of FY19

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125 145 189 212 ¥195

8.2% 8.9% 10.8% 10.0% 8.1%

FY15 FY16 FY17 FY18 FY19 Plan EPS ROE 3.7 4.3 4.7 7.3 8.9 5.0 3.0 3.0 5.0 8.7 7.3 4.7 10.3 ¥13.9bn

F Y1 5 F Y1 6 F Y1 7 F Y1 8 F Y1 9 P LA N

Total dividends Total acquisition of treasury stock

■ Dividend history (per share)

38 46 50 70 ¥80 FY15 FY16 FY17 FY18 FY19 Plan

(2) Plan for shareholder returns for FY19, etc.

■ Total shareholder return

(Total dividends + total acquisition of treasury stock)

■ EPS/ROE ■ Acquisition of treasury stock

• 6. Raising Shareholders’ Value

Interim 40 Year-end 40

Note)EPS and ROE are calculated by subtracting the special profit (negative goodwill) from the management integration. Plan

5.0 3.0 3.0 ¥5.0bn FY15 FY16 FY17 FY18 FY19 Plan

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Note) The National Skills Competition is a competition in which young technicians under the age of 23 compete in skills by event. This competition has 1,239 athletes participating in 42 job categories. Employees of Ebihara participated in the "information network construction" race, in which they competed in speed competitions of fiber-optic fusion splicing and wiring tasks for buildings during a fixed time of approximately 8 hours in 2 days.

◆ Employees of Ebihara in our company successfully won the gold medal in the information- network construction category at the "The 57 National Skills Competition" held in Aichi- Prefecture for 4 days from November 15, 2019.

■ Our company Employees Win 7th Gold Medal at National Skills Competition for the First Time in 3 Games In addition, our company employees have participated in international competitions held every other year 5 times in the past as representatives of Japan, and have won gold medals in all competitions.

• 7. Topix

(1) Our company Employee Wins Gold Medal at Skills Competition

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(2) Our company selected as "Nadeshiko Brand"

◆ In fiscal 2019, the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange jointly selected listed companies that excel in promoting women's participation and career advancement "Nadeshiko Brand“ ,and our company selected as it’s brand (Announced March 3, 2020).

Note)The "Nadeshiko Brand" is a program launched jointly by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange in fiscal 2012 to promote investment in companies and accelerate the efforts of listed companies by introducing companies that excel in "Promotion of Women's Activities " as stocks attractive to investors who place importance on medium- to long-term corporate value improvement. In fiscal 2019, 46 companies in each industry were selected.

As part of its management strategy, our company is actively promoting diversity. Based on the commitment of top management, we have announced quantitative targets for the promotion of women's participation in the workplace, and are working to improve the awareness of management, male employees, and female employees, as well as implementing various training programs and review of the system. We are also actively working to improve productivity in conjunction with DX (digital transformation) initiatives. －30－

• 7. Topix

A variety of IR materials is available for consultation on our company website.

Management of the Company has made estimates and assumptions relating to financial forecasts based on information available as of the reporting date. Actual results could differ from those estimates. Disclaimer Regarding Forward-Looking Statements

3-29-20 Shibuya, Shibuya-ku, Tokyo 150-0002 JAPAN http://www.exeo.co.jp/overseas/index.html TEL: (81)3-5778-1073

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