Executive Message

We will pool all of the Group’s efforts into providing total solutions, so as to help create an affluent living environment. Kunio Ishikawa, President

I would like to express my deepest gratitude to all our shareholders for the invaluable and ongoing support you have extended to KYOWA EXEO.

The following is an overview of the consolidated results of KYOWA EXEO for fiscal 2017 (ended March 31, 2018).

Fiscal 2017 Operating Climate and Consolidated Results

During the consolidated fiscal year under review, the Japanese economy rallied at a moderate pace, reflecting continued improvements in corporate revenue as well as in the conditions surrounding employment and income backed by the economic and financial packages of the government and the Bank of Japan. However, there is a risk of an economic downturn arising from economic policies in the United Sates and geopolitical risks.

In these circumstances, the KYOWA EXEO Group made intensive efforts to streamline operations in its core telecom carriers business to boost its earning power in accordance with the medium-term vision of focusing Group strengths on taking total solutions to a new growth stage in the medium-term management plan for the fiscal years 2016 to 2020. In addition, our Group endeavored to restructure its business portfolio. For example, it worked as one to combine existing technologies and services in an effort to expand the urban infrastructure business and the system solutions business.

As part of the actions for increasing productivity and implementing work style reform, we modularized work processes and introduced digital technologies to them to put internal systems on a common platform, and we adopted ICT-based teleworking. In the future, we will be streamlining our operations further through robotic process automation (RPA) and the introduction of new work styles.

Yoshiaki Shimizu, a KYOWA EXEO staff member, won the Gold Medal in the information network cabling category at the 44th WorldSkills Abu Dhabi 2017 competition, which took place in Abu Dhabi in the United Arab Emirates in October 2017. We will continue to train highly skilled engineers to contribute to society with advanced working technologies.

The financial results for the consolidated fiscal year under review are as follows.

KYOWA EXEO FY17 Results (Consolidated)
Orders Received ¥325.0 billion 100% YOY
Net Sales ¥312.6 billion 105% YOY
Operating Income ¥25.6 billion 123% YOY
Net income attributable to owners of parent ¥17.9 billion 130% YOY

The following shows the results in the individual segments for the consolidated fiscal year under review.

① ENGINEERING-SOLUTIONS
Orders Received ¥282.2 billion   99% YOY
Net Sales ¥270.1 billion  104% YOY

In the telecom carriers business, we worked to enlarge facility management services amid a slowdown of growth in optical wiring works in association with fixed-line communication, while telecom carriers are suppressing their capital investment slightly. As for mobile communication, we increased and upgraded base stations at new 4G frequency bands chiefly in major urban areas in view of soaring mobile traffic resulting from the increased use of smartphones, tablets and other smart devices.

In the urban infrastructure business, while infrastructure construction commenced in preparation for the 2020 Olympic and Paralympic Games in Tokyo, we received orders for electrical and other equipment work related to the construction of roads around venues of sporting events. National and local governments are making positive investments and redevelopment projects are active in the Tokyo area. We addressed large-scale projects including the construction of solar power plants, electrical equipment works for large buildings and communication equipment works for expressways.


② SYSTEM-SOLUTIONS
Orders Received ¥42.7 billion 106% YOY
Net Sales ¥42.5 billion 107% YOY

With regard to the system solutions business, following the full-scale arrival of the IoT era, ICT investments are on the increase to strengthen security for information networks and expand cloud services. In this situation, we worked to enlarge new businesses such as business process management (BPM) solutions.

In the areas of new energy solutions, geosolutions, cloud security solutions and global solutions, we carried out positive sales activities. We presented advanced examples of indoor positioning using the EXBeacon and sensor networks at CEATEC JAPAN 2017. We were certified by Microsoft Japan Co., Ltd. as a partner for the introduction of Skype for Business, a communication platform for corporate use.

Apart from this, Energy Viewer, which is provided in collaboration with Tepco Customer Service Corporation, won the ECCJ Chairman Prize in the products and business models category of the 2017 Energy Conservation Award supported by the Ministry of Economy, Trade and Industry. Designed to reduce power consumption for air conditioning with the use of IoT technologies, it was highly regarded for its cloud-based energy control platform technology.

Performance Forecast and Management Policies

 Our Group will further accelerate the strengthening of its earning capabilities by intensively streamlining operations in the core telecom carriers business, and will step up sales activities and establish new solution businesses in a bid to enlarge the urban infrastructure business and the system solutions business. We will thus continue to restructure the business portfolio.

We will respond flexibly to changes in the business environment. We are set to undertake business integration with C-Cube Corporation, Seibu Denki Kogyo Co., Ltd. and Nippon Dentsu Corporation on October 1, 2018. In collaboration with these companies, we will further enhance our strengths of total process, total solutions and readiness for nationwide construction on the basis of our long-nurtured technical capabilities and make efficient use of managerial resources in the group to produce synergy in a bid to develop solid business foundations.

The following discusses the outlook in separate segments for fiscal 2018.


① ENGINEERING-SOLUTIONS

 For the telecom carriers business, we will drastically reconsider the constitution of our group and take other actions to increase the cost competitiveness of our business related to fixed-line communication, while telecom carriers are expected to continuously suppress their capital investment.

 With respect to mobile communications, we will efficiently clear a large backlog of orders for increasing and upgrading base stations in new 4G frequency bands, mainly in major urban areas, in a bid to secure stable revenue.

For the urban infrastructure business, we will step up efforts to win orders in technical fields in which we can demonstrate our strength. In preparation for the 2020 Olympic and Paralympic Games in Tokyo, redevelopment projects will continue to be actively implemented and local governments and other entities will make strong investments, and demand is forecasted to grow for large electrical facilities works, works for TV reception in the 700 MHz frequency band, works for constructing governmental community wireless systems for disaster control, and works for installing utility lines underground to eliminate utility poles.


② SYSTEM-SOLUTIONS

For the system solutions business, we will develop advanced ICT engineers and conduct more positive sales activities in the areas of system integration solutions including BPM solutions, new energy solutions, geosolutions, cloud security solutions and global solutions in the circumstances in which ICT investment is expected to increase following the spread of IoT. We will take the actions mentioned above in order to provide high value-added services.

Thank you again. I look forward to your continued support and backing of KYOWA EXEO into the future.


June 2018
Fuminori Kozono

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