Financial Results for the First Half of the Fiscal Year Ending...

Financial Results for the First Half of the Fiscal Year Ending March 31, 2017(FY2016)

November 1, 2016

NEC Capital Solutions Limited

CONTENTS1. Financial Results for the First Half of FY2016

1）Highlights of Consolidated Financial Statements

2）Business Environment

3）Consolidated Financial Summary

4）Consolidated Revenues by Business Segment

5）Contracts Executed by Business Segment (Consolidated)

6）Leasing/Installment Sales Business (Consolidated)

7）Finance Business(Consolidated)

8）RISA Business (Operating Income)

9）Operating Asset Balances (Consolidated)

10）Procurement Funds (Consolidated)

11）Credit Costs (Consolidated)

2. Forecasts for March 2017 Term(FY2016)

1）Consolidated Earnings Forecasts

3. Status of Progress in the Medium-Term Plan 2014

1. Financial Results for the First Half of FY2016

5 © NEC Capital Solutions Limited 2016


【Business Environment】・Total value of leasing contracts slightly higher than same period last year・Conditions for procuring funds remained favorable・Number of bankruptcies and total liabilities in bankruptcy stayed at low levels

【Sales Top Line】・In leasing/installment Sales Business, Contract executed and New transactionsboth decreased Y/Y ・Finance Business increased Y/Y＜ Leasing/Installment Sales Business ＞ * Figures in parentheses are on a non-consolidated basis

Contracts executed： down 21.9%（ down 22.9%）

New transactions ： down 6.4% （ down 7.0%）

＜ Finance Business ＞

Contracts executed： up 23.9%（ up 41.4%）

New transactions ： up 23.9%（ up 41.3%）

【Business Performance】・Ordinary income increased significantly Y/Y on increased gross profits in RISA

business, and gains due to exchange rates

・Net income was significantly higher than in the same period last year

1） Highlights of Consolidated Financial Statements



Total Leasing Contracts:- Mainstay Information and Communication Equipment leasing declined by

5.2% Y/Y- Total leasing contracts grew by 2.0% Y/YBankruptcies:- The number of bankruptcies in 2Q was the lowest since the 2008 financial crisis.

- Total liabilities in bankruptcy were also the lowest since FY2000.

2）Business Environment

▌Bankruptcies (total liabilities/number of bankruptcies)

-40

-30

-20

-10

0

10

20

30

40

50

60

13/1Q 13/2Q 13/3Q 13/4Q 14/1Q 14/2Q 14/3Q 14/4Q 15/1Q 15/2Q 15/3Q 15/4Q 16/1Q 16/2Q

▌Year-on-year change in total leasing contracts

Volume of leasing

contracts

Information and communication

equipment

(Source: Lease statistics of the Japan Leasing Association)

Construction machinery

0

2,000

4,000

0

100

200

300

400

500

600

700

14/1Q 14/2Q 14/3Q 14/4Q 15/1Q 15/2Q 15/3Q 15/4Q 16/1Q 16/2Q

(Source: Bankruptcy information on the website of Teikoku Data Bank; liabilities of companies that filed for bankruptcy)

(Billions of Yen)

Total liabilities(Left axis)

（ Right axis ）

Number of bankruptcies

(Number)


(Billions of Yen)

FY2015 FY2016

2Q 2Q Y/Y Change

Revenues 100.2 95.8 -4.4%

Operating Income 2.5 2.8 12.3%

Ordinary Income 2.6 4.2 65.0%

Profit attributable to owners of parent 1.8 2.9 64.2%

Net Income per Share (Yen) 82.72 135.81 －

Operating Asset Balance 727.4 745.4 2.5%

Net Assets 99.9 103.7 3.9%

Shareholders' Equity 75.2 78.7 4.7%

Equity Ratio (%) 9.4 9.5 0.1

Interim Dividend per Share (Yen) 22 22 －


Revenues: Fell by 4.4% Y/Y due to healthcare-related asset salesOrdinary Income: Surged by 65.0% Y/Y due to growth in the RISA

business, and gains due to exchange rateEquity Ratio: 9.4％（Sep.2015）→9.5％（Sep.2016）

3） Consolidated Financial Summary

▌Main Reasons for Y/Y Increase/Decrease in Ordinary Income

ＦＹ20152Q

FY20162Q

2.6

4.2 0.3

0.3 0.2 0.2

0.4 0.4

1.4 Last FY’s impairments,

etc.

Non-operating income increased （Profit and loss on exchange-rate fluctuation）

▌Performance measures

SG&A increased

Profit on othersincreased

RISA Businessincreased

Loans revenuedecreased

Creditcostsincreased

(Billions of Yen)


(Billions of Yen)

FY2015 FY2016

2Q 2Q Y/Y Change

Revenues 82.3 83.9 1.9%

Gross Profit 5.5 6.0 8.4%

Operating Income 2.1 2.0 -5.8%

Revenues 2.5 2.3 -9.5%

Gross Profit 2.1 1.8 -13.3%

Operating Income 1.1 1.1 -3.7%

Revenues 5.7 4.0 -29.8%


Operating Income -0.0 0.3 -

Revenues 9.7 5.7 -40.9%



Revenues 100.2 95.8 -4.4%



Total

Leasing/

Installment

Sales

Business

Finance

Business

RISA

Business

Other

Business

▌Revenues by Business Segment


4） Consolidated Revenues by Business Segment

▌Revenues by Business Segment >

・Revenues increased by 1.9% Y/Y・Operating income fell by 5.8% Y/Y on booking provision of allowance for doubtful accounts

>・Revenues decreased by 9.5% Y/Y・Operating income decreased by 3.7% Y/Y due to the large dividend income received inthe same period last fiscal year

>・Revenues decreased by 29.8% Y/Y due to sales last year of operational investment securities

Operating income increased Y/Y on items such as income from bond investments

>・Revenues decreased by 40.9% Y/Y on sales of healthcare-related real estate held for resale in the same period last fiscal year・Operating income increased by 223.3% Y/Y as new businesses became profitable

*Excluding adjustment amount


(Billions of Yen)

FY2015 FY2016

2Q 2Q Y/Y Change

97.3 91.0 -6.4%

Leasing Business 93.8 88.8 -5.3%

Installment Sales 3.5 2.2 -37.0%

Finance Business 162.0 200.7 23.9%

Loans 113.7 156.2 37.4%

Bulk Factoring 48.3 44.5 -8.0%

Other Business 2.3 2.7 20.3%

Total 261.5 294.5 12.6%

Leasing/ Installment Sales

Business

(Billions of Yen)

FY2015 FY2016

2Q 2Q Y/Y Change

67.0 52.4 -21.9%

Leasing 62.9 50.0 -20.4%

Installment Sales 4.1 2.3 -43.9%

Finance Business 161.0 199.5 23.9%

Loans 112.7 155.0 37.5%

Bulk Factoring 48.3 44.5 -8.0%

Other Business 2.0 1.8 -13.2%

Total 230.1 253.6 10.2%

Leasing/ Installment Sales

Business


5） Contracts Executed by Business Segment (Consolidated)

▌Contracts Executed by Business Segment ▌New Transactions by Business Segment

>・Although various measures are progressing in the Leasing/Installment Sales Business, contracts executed fell by 21.9% Y/Y as launches were delayed in our core Public Sector segment・Contracts executed in the Finance Business increased by 23.9% Y/Y on things like growth in individual factoring and overseas businesses

>・Leasing/Installment Sales Business recovered, focused on the Public Sector (down 28.4% at end 1Q)


(Billions of Yen)

FY2015 FY2016

2Q 2Q Y/Y Change

47.8 35.1 -26.6%

Computer Hardware 21.7 15.9 -26.8%

Computer Software 25.2 18.1 -28.1%

Telecommunications Equipment 1.0 1.1 16.4%

Office Equipment 2.0 2.7 39.6%

Other 17.2 14.5 -15.8%

Total 67.0 52.4 -21.9%

Information and Communication

Equipment

(Billions of Yen)

FY2015 FY2016

2Q 2Q Y/Y Change

30.3 24.6 -18.8%

Private Sector 36.7 27.8 -24.5%

Services 9.4 7.6 -19.2%

Distribution 9.6 7.1 -26.4%

Manufacturing 13.4 8.1 -39.3%

Other 4.3 4.9 14.8%

Total 67.0 52.4 -21.9%

Public Sector: Government &

Municipal

(Billions of Yen)

FY2015 FY2016

2Q 2Q Y/Y Change

59.4 58.8 -1.0%

Private Sector 37.8 32.2 -14.9%

Services 9.2 8.3 -10.0%

Distribution 9.9 10.3 3.3%

Manufacturing 10.6 8.0 -24.2%

Other 8.1 5.6 -30.5%

Total 97.3 91.0 -6.4%

Public Sector: Government &

Municipal


6） Leasing/Installment Sales Business (Consolidated)

▌(For ref.) Contracts Executed by Equipment Type

▌Contracts Executed by Customer Sector ▌New Transactions by Customer Sector

・By Customer Sector, contracts executed fell Y/Y on delayed executions in the Public Sector, etc.

Overall, Contracts Executed decreased by 21.9% Y/Y

・New transactions increased Y/Y in 2Q, reducing the decline seen in 1Q

Overall, New Transactions decreased by 6.4％ Y/Y


(Billions of Yen)

FY2015 FY2016

2Q 2Q Y/Y Change

4.9 3.7 -26.0%

61.4 98.6 60.5%

38.1 48.0 26.1%

8.3 4.8 -42.0%

112.7 155.0 37.5%

Business Loans

Reimbursements,APF, Installment

Sales Transaction-Backed

Individual Factoring

Other

Total

(Billions of Yen)

FY2015 FY2016

2Q 2Q Y/Y Change

0.4 0.1 -68.8%

Private Sector 112.3 154.9 37.9%

Services 7.6 11.7 53.3%

Distribution 7.1 6.9 -3.2%

Manufacturing 66.9 105.7 58.1%

Financial 12.7 8.4 -34.1%

Real Estate 5.2 12.4 139.9%

Other 12.8 9.8 -23.5%

Total 112.7 155.0 37.5%

Public Sector:

Government&Municipal


7） Finance Business (Consolidated)

▌Contracts Executed by Form of Contract ▌Contracts Executed by Customer Sector

・By form of contract, contracts executed in the Finance Business as a whole increased by 37.5% Y/Y, on growth in Business Loans, Individual Factoring and contributions from overseas businesses

・By customer sector, contracts executed in the Private Sector grew by 37.9% Y/Y on growth in the Manufacturing and Real Estate segments


(Billions of Yen)

FY2015 FY2016

2Q 2Q

Asset Business Revenues 3.7 1.6 -57.0%

Gross profit 1.0 1.4 41.7%

Operating income 0.4 0.7 80.1%

Real Estate Revenues 1.7 2.1 22.4%

Gross profit 0.3 0.3 -0.7%

Operating income 0.1 0.1 -7.1%

Advisory Revenues 0.3 0.4 17.2%

Services Gross profit 0.3 0.3 21.2%

Business Operating income -0.0 0.1 ―

Goodwill Revenues 0.0 -0.0 ―

Other Gross profit -0.0 -0.1 ―

Operating income -0.5 -0.6 ―

Total Revenues 5.7 4.0 -29.8%

(Consolidated) Gross profit 1.6 2.0 28.8%

Operating income -0.0 0.3 ―

Y/Y Change

Business


8） RISA Business (Operating Income)

Profit growth Y/YConsolidated operating income grew taking into

account goodwill depreciation

>

・Profit grew on growth in income from bond investments

>

・Income increased on sales of real estate held for resale

・Income and profit increased on growth in M&A-related transaction income



>

・ The operating asset balance in the Leasing/ Installment Sales Business was roughly unchanged

・The operating asset balance in the Loans was 9.5% or JPY15.8bn higher

⇒The Loans operating asset balance increased on the valuation of financing denominated in foreign currencies associated with development of global businesses

・The balance in Other Business wasdecreased JPY1.8bn⇒ The asset balance of healthcare-related real estate for resale declined

423.3 452.1 451.9

138.5166.9 182.7

26.6

27.0 24.1 39.2 37.3

44.6

42.2 49.2

641.8

727.4 745.4

0

200

400

600

800

Sep.2014 Sep.2015 Sep.2016

RISA

Business

Other

Business

Bulk

Factoring

Loans

Leasing /

Installment

Sales

Business

9）Operating Asset Balances (Consolidated)

(Billions of Yen)


(Billions of Yen)

FY2015 FY2016

2QComposition

Ratio2Q

Composition

RatioY/Y Change

Short-term Borrowings 19.8 3.0% 58.7 8.6% 38.9

Long-term Debts 497.7 76.0% 441.1 64.8% -56.6

Commercial Paper 71.0 10.8% 102.0 15.0% 31.0

Bonds 50.0 7.6% 60.0 8.8% 10.0Payable Under

Securitized Lease

Receivables16.6 2.5% 19.0 2.8% 2.4

Total 655.1 100.0% 680.8 100.0% 25.7

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Sep.2014 Sep.2015 Sep.2016

・The funding cost ratio was 0.05 percentagepoints lower than 1st half of FY2015, at 0.67％⇒Declined due to a Commercial Paper shift

on long-term debt, lower fund procurementspreads, and various other measures

・The direct funding ratio grew from 21.0％（Sep.2015) to 26.6％ (Sep.2016)

⇒Increased on the balance of commercialpaper


0.85%

0.72%

0.67%

0.6%

0.7%

0.8%

0.9%

1.0%

FY2014(2Q) FY2015(2Q) FY2016(2Q)

資金原価率（%）

＝資金原価÷有利子負債平残

Short-termborrowings

Long-termDebts

Securitized Lease

Receivable

CommercialPaper

BondsDirect

funding

Ratio

26.6%

10） Procurement Funds (Consolidated)

▌Funding Cost Ratio

▌Composition of Interest-bearing Debt

▌Composition of Interest-bearing Debt

Funding cost ratio (%)= Cost of

funding / Average Balance of

Interest-bearing debt



-0.0

-0.0 0.2

-0.1

-0.2

0.3

-0.1

0.2

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

FY2015 2Q FY2016 2Q

Except Loan business

Loan Business

RISA Business

(Billions of Yen)

11） Credit Costs (Consolidated)

・ Credit costs increased by JPY 0.3bn Y/Y

2. Forecasts for March 2017 Term (FY2016)


(Billions of Yen)

Actual Forecast

FY2016 FY2016 FY2016

(1H) (1H)

Revenues 95.8 97.0 205.0

Operating Income 2.8 2.5 6.0

Ordinary Income 4.2 2.5 6.0

Profit attributable to owners of parent 2.9 1.5 3.5

Net Income per Share (Yen) 135.8 69.66 162.54

(Yen)

Interim Year-end Annual

FY2016 Forecast 22.00 22.00 44.00

22.00 22.00 44.00 FY2015 Actual

2. Forecasts for March 2017 Term (FY2016)

1） Consolidated Earnings Forecasts

▌Consolidated Forecast

▌Dividend per Share

Although ordinary income and net income in 2Q significantly exceeded forecasts, this was mostly due to exchange rate gains. Full-term forecasts were not revised, as the actual base of operating income was in line with initial forecasts.

3. Status of Progress in the Medium-Term Plan 2014


1) New Businesses under CSV Management

▌Our company is poised to establish new businesses in 4 areas that have large potential for new entrants to expand, where deregulation and policy support are being provided to address social problems Japan needs to solve.

2014 2023

Year 1–3

Year 4–6

Year 7–10Complete core area ＋ Set up new

businesses toward

realizing vision

Expand core areas

＋ Take profit in new

businesses for achieving

vision

Rebuild core area

foundation

＋ Build “system” to

realize vision

Our new businesses

Renewable energy

Healthcare Agriculture

Tourism


supplier demander

Government offices, Schools, etc.

Medical institutions, Care providers

Commercial facilities

Households

Regional energy operator

coal,gas, hydropower

renewable energy(solar energy ,wind energy)

biomass ,hydro, geothermic, hydrogenation, etc.

Regional PPS

（governments）PPSenergy generationpower consumption ・

energy saving

Purchase local energy that doesn’t rely on the grid

Supplies cheap, safe energy

2) Measures to Develop New Business ① Renewable Energy

▌Energy generation

Balance of JPY 24.8bn in 68 solar energy, wind energy, biomass projects

▌Regional PPS (Power Producer and Supplier) Initiatives

Hamamatsu Shin-Denryoku Ltd. began energy sales in April 2016

• Supplies electricity within Hamamatsu City to 149 junior and middle schools, households and other users.

Business tie-ups with related businesses, establish system to promote lateral expansion to local governments


3）Measures to Develop New Business ② Agriculture

▌Proposal for establishing farming companies

To attempt large-scale rice manufacturing that can accommodate the TPP coming into effect, producing rice by outsourcing farm work from farmers and leasing farmland

Develop proposal for operating model for agricultural businesses that brings together farmland, agricultural machinery and workersAfter that, aim for business adding value to agricultural output (6th industrialization of agriculture)

Capital investment, tie-ups etc.

Ogata Village Farmers

Domestic, foreign

Manufacturing Companies

farming company

General Farmers

operator

Food staple rice

Processed rice

Outsource farm work Lease farmland

Purchase rice (part)

KomachiAssociation

SMBCSMFLAkita Bank

NEC Capital Solutions


4）Measures to Develop New Business ③ Tourism,Healthcare, etc.

▌TourismJointly established the Tourism Revitalization Mother Fund

•Regional Economy Vitalization Corporation of Japan (REVIC)

•Development Bank of Japan Inc.

•RISA PARTNERS INC. (our subsidiary)

Financing 7 entities in partnership with regional financial institutions

Entering into capital tie-ups with businesses that have strong relationships with regional governments

▌HealthcareParticipation in Healthcare REIT

Scale of REIT is JPY 25.0bn, 18 facilities (as of end July)

▌PFI(Private Finance Initiative) Cumulatively dozens of project initiatives to date

Of which 2 bids were successful in the first half


5）Our CSV Management

▌Progress in regional renewal and stimulus, in partnership with local governments, regional financial institutions, regional private companies

PFI

Ogata-mura

Hamamatsu City

Progress in regional renewal and stimulus

Hirono town

Shiretoko

Kitsuki City

NEC Capital Solutions

Renewable energy

Healthcare

Agriculture Tourism

Localgovernments

Regionalfinancial

institutions

Regionalprivate

companies


The presentation materials are solely for the purpose of providing corporate

information of NEC Capital Solutions Limited and not for soliciting purchase, sale, or

investment in securities issued by the Company. We ask for the discretion of

investors in making investment decisions.

The presentation materials contain forward-looking statements pertaining to the

Company’s plans, strategies and financial targets, which are created based on

currently available assumptions, data, or methods and contain a certain level of risk

or uncertain factors.

Investors are advised not to place undue reliance on the forward-looking statements

as they only reflect the Company’s analysis and expectations. A number of important

factors that could cause actual results to differ materially from such statements

include (i) change in general economic conditions and laws/regulations in the

Company’s market, (ii) potential legal liabilities relating to the Company’s business

and operations, (iii) fluctuating demand for and competitive pricing pressure on the

Company’s services, (iv) deterioration of the global economic and financial

environment, (v) downturn of domestic and international stock markets, and so

forth. Risks and uncertainties also include any future events with material

unforeseen impacts.

Forward-looking statements contain the most updated information as of the date of

compilation. New risks and uncertainties constantly arise, and it is impossible for the

Company to predict such events or how they may affect the Company.


本資料に記載されている株主・投資家向け情報は、投資勧誘・保証を目的として作成された

ものではありません。実際に投資を行う際は、ご利用者ご自身のご判断において行われるよ

うお願い致します。

本資料に記載されている当社の計画、戦略および業績見通しは、将来の予測であって、リス

クや不確定な要因を含んでおります。

また、本資料に記載されている経営目標は予想ではなく、将来の業績に関する経営陣の現在

の予想を反映したものでもありません。むしろ、経営陣が事業戦略の実行を通じて達成しよ

うとする目標であります。

実際の業績等は、さまざまな要因により、見通し等と大きく異なる結果となりうることをあ

らかじめご承知願います。実際の業績等に影響を与えうる重要な要因としては、当社の事業

領域を取り巻く経済情勢及び規制や法令の変更、潜在的な法的責任、当社のサービスに対す

る需要変動や競争激化による価格下落圧力などがありますが、これら以外にも様々な要因が

ありえます。また、世界経済の悪化、世界の金融情勢の悪化、国内外の株式市場の低迷など

により、実際の業績等が経営目標その他の見通しと異なる結果となる可能性もあります。

当社による将来予測に関する記述は、その日現在のものであることをご承知おきください。

新たなリスクや不確定要因は随時生じるものであり、その発生や影響を予測することは不可

能であります。また、リスクや不確定要因があるため、将来予測に関して記述されているこ

とが実際には起こらない場合もありえます。これらの記述に全面的に依拠することは控える

ようお願いします。

To be a global solution service company that aims to enhance social value with customers

NEC Capital Solutions Group Vision

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