New Fourth Medium-Term Management Plan Fiscal 2020-22...2019/12 2023/3...

New

Fourth Medium-Term Management Plan

Shaping the Next Decade

Fiscal 2020-22

All Rights Reserved, Copyright © Tokyo Century Corporation

February 6, 2020

All Rights Reserved, Copyright © Tokyo Century Corporation 2

Contents

(1) Positioning of New Fourth Medium-Term Management Plan

(2) Management Indicator of Tokyo Century Group

(3) Capital Policy and Shareholder Returns Policy [1]


(5) Continually Evolving “Finance x Services x Business Expertise” Business Model

(6) Target for Segment Assets

(7) Promotion of Collaboration Business with Nippon Telegraph and Telephone (NTT)

Through Capital and Business Alliance

(8) Acceleration of Growth in Aviation Capital Group (ACG）

(9) Strategic Alliance with Advantage Partners (AP)

(10) Elements of New Fourth Medium-Term Management Plan

(11) Key Themes, Policies, and Performance Targets by Operating Segment

(12) Strengthening the Management Base: Key Themes and Policies

(13) Sustainability Management [1]


(1) Positioning of New Fourth Medium-Term Management Plan


Fourth Medium-Term Management Plan (2019)

Build platform for growth

Next 10 years

Future 2022–2030

First to Fourth Medium-Term

Management Plans

Past 2009–2019

∎ Expanded business domain into promising growth

fields

∎ Became a comprehensive financial services

company focusing on assets

∎ Changed company name (Oct. 2016)

∎ Developed business with focus on asset efficiency

∎ Pursued viable business initiatives taking advantage

of management freedom

First to Third Medium-Term Management Plans

(2010–18)

3

Ordinary income: 130 billion yen or more

Net income: 80 billion yen or more

Build strong business

platform for the next 10 years

Basic Policies

∎ As a company with financial capabilities,

establish a global platform for stable

business, including viable business with

partner companies

∎ Tirelessly create new financial services in

response to changes in the business

environment and build a solid, high-quality

business portfolio

∎ Build the management base supporting the

improvement of corporate value over the

medium to long term

∎ Raised asset efficiency and steadily

worked toward sustainable growth

Become a trusted

service/business partner

Contribute to resolution of

social issues

Achieve stable and

sustainable growth

A global corporate group

bringing together diverse

personnel playing active roles

Present 2020–2022

New Fourth Medium-Term

Management Plan:

Shaping the Next Decade


(2) Management Indicator of Tokyo Century Group

Ordinary income ¥130bn

Net income attributable to owners of parent ¥80bn

Shareholders' equity ratio 12%

ROE 12%

2015年度 2016年度 2017年度 2018年度 2022年度

計画

¥73.5bn ¥79.0bn

¥86.3bn

¥68.0bn

¥130bn

Targets in the New Fourth Medium-Term Management Plan （Targets for FY2022)

New item

2015年度 2016年度 2017年度 2018年度 2022年度

計画

¥43.7bn

¥52.3bn

¥40.0bn

¥51.3bn

¥80bn

Ordinary income Net income attributable to owners of parent

Period immediately before merger (FY2008) *2

*1 Figures in yen indicated in above □: EPS *2 Period immediately before merger (FY2008 ended March 31, 2009): Simple sum of the figures of former Century Leasing System, Inc. and Tokyo Leasing Co., Ltd.

Net income attributable to owners of parent : ¥100bn

EPS：¥94.05

FY2015 FY2016 FY2017 FY2018 FY2022 (Plan)

FY2015 FY2016 FY2017 FY2018 FY2022 (Plan)

EPS ¥379.34 ¥413.51

¥494.93

Approx.

¥650

¥486.09

32円 40円

44円 48円

52円

65円

80円

100円

114円

124円

134円

予定

2009年度 2010年度 2011年度 2012年度 2013年度 2014年度 2015年度 2016年度 2017年度 2018年度 2019年度 2020年度 2021年度 2022年度

13.4%

18.0% 17.9% 17.6% 16.7%

20.1%

21.1%

24.2% 23.5%

25.1%



∎ Improve payout ratio based on stable long-term return of profits while ensuring balance with investment in future growth

Dividends and Payout Ratio FY 2022 Payout Ratio

Aiming for 30%

Payout ratio

Dividends

5

Shareholder Returns Policy

FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022

¥32

¥65

¥80

¥52 ¥48

¥44 ¥40

¥134 (projected)

¥124

¥114

¥100

EPS

¥239.57 ¥ 221.80

¥ 245.82

¥ 272.32 ¥ 311.64

¥ 322.84

¥ 379.34

¥ 413.51

¥ 486.09

¥ 494.93

¥ 512.81

Approx.

¥650

∎ Invest in sustainable growth and further enhance profitability

∎ Strengthen asset control with emphasis on asset efficiency

∎ Reinforce efforts to improve ROA based on appropriate risk

management



∎ Reinforce fund procurement capabilities to

support stable financial base

∎ Ensure risk resilience by issuing hybrid

securities

∎ Continue sound, disciplined financial

management based on appropriate risk

controls, and maintain and enhance

independent ratings

∎ Utilize capital increase through third-party

allotment of new shares as opportunity to

build up equity

∎ Maintain or improve ROE at levels

exceeding the cost of equity

∎ Maintain a balance among investment in

growth, shareholder returns, and internal

reserves

6

*Optimal level of interest-bearing debt, capital amount, and capital composition required to support business

Create a virtuous cycle and

aim to sustainably enhance corporate value

Balance sheet management based on optimal capital structure*

Build a

virtuous cycle

Investment in growth businesses

Strengthening of financial base Rebuilding of equity

Liabilities Capital

Assets

(5) Continually Evolving “Finance x Services x Business Expertise” Business Model


∎ Management environment free from

regulatory constraints

∎ Global partnership strategy making the

most of extensive customer base

∎ Creative thinking in response to change

Tokyo Century’s advantages A trusted service/business partner

April 2009 March 2020 March 2030

“Business Expertise”

profits

“Services” profits

“Finance” profits

Financial services company Company with financial capabilities Comprehensive financial

services company

7

∎ Contribute to resolution of social issues

∎ Be a company capable of achieving stable

and sustainable growth

Net income

Globally expand business in diverse business

fields while maintaining core operating lease

business

Next Decade Past Decade

Type of profits Digital

Mobility

Electric vehicles (CASE)

Subscription

Towards new business

domains

Develop new business

models

New Fourth Medium-Term

Management Plan

Aviation Fleet and mobility

(domestic and overseas) Real estate

Renewable energy Principal investment

Deep mining of growth

businesses

Operating lease Finance lease and loan

Grow beyond existing

business domains

March 2023

Keywords

FY2020-22: Build strong business platform for the next 10 years

（6）Target for Segment Assets


Segment assets:

¥5 trillion level

Ordinary income:

¥130 billion

Net income:

¥80 billion

Equipment Leasing:

¥1.4 trillion (30%)

Specialty Financing:


Mobility & Fleet Management:


International Business:


March 31, 2023

(Final fiscal year

of the plan)

Expand business

domains

Aviation

Fleet and mobility

(domestic and overseas)

Real estate

Renewable energy

Principal investment

Emphasize asset efficiency

in business portfolio

management

Manage assets efficiently

Appropriately control risk

Establish strong and stable

financial base

Strengthen strategic

partnership

Enhance corporation and

collaboration with alliance

partners

Reinforce global business

Accelerate transformation of

business, etc. (incubation)

Segment assets:

¥4.7 trillion

as of Dec. 31, 2019

Mobility

& Fleet

Management

Global business

Establish a joint company, which undertakes leasing and finance businesses


Purpose and goal of the capital and business alliance

TC acquires 50% shares in the new company, which will be engaged in the leasing and global businesses

to be curved out from NTT Finance, a core company of NTT Group’s financial business

NTT Acquires 10％ shares in TC (through third-party allotment and becomes No.3 major shareholder)

Integrate the strengths of both companies and Expand leasing and finance business and business fields with

growth potential by promoting collaboration

2. The 1st step of capital and business

alliance: Enhance and expand leasing

and finance business

3. Consider further development of business fields

with growth potential through collaborations

Integrated the automobile

leasing business in 2005

and become a leading

company in the industry Respond to the asset business where expansion is expected

Resolve social

issues to

create a

sustainable

society

Details of the capital and business alliance

Solid customer base in and outside Japan

Global brand power and human resources

The world’s top-level ability in research

and development

Highly specialized financial expertise

Capability in evaluation and

management of assets

Flexible and diverse services and

solutions

Mobility

& Fleet

Management

Equipment

Leasing

Specialty

Financing

International

Business

1. Existing business collaboration:

Fleet & mobility management

business

Real estate, renewable energy business

Mobility business

Digital business

Equipment

Leasing

(7) Promotion of Collaboration Business with Nippon Telegraph and Telephone (NTT) Through Capital and Business Alliance

9

2019/12 2023/3

(新・第四次中計最終年度）

Dec. 2019 Mar. 2023

(Period for New Fourth Medium-Term Management Plan)

（8）Acceleration of Growth in Aviation Capital Group (ACG）

Majority of lease assets are narrow body aircraft (single-aisle aircraft, suited for short to medium haul flights)

with high liquidity

Owns platform, including marketing, technical, asset management functions and others for aircraft leasing

Competitive advantage with backlog orders for new aircraft and high placement capability

Strong management structure with solid operation since its establishment in 1989

Owned and

managed:

317

Committed:

162

Narrow body

87%

Based on book value as of September 31, 2019

Strengths of ACG

Engine PDP finance Operating lease JOLCO/JOL

Loan and

guarantee

Airline

MRO Decommissioning Engine leasing

Parts financing

Demonstrating group synergy and

strengthening business alliance

Growth strategy (2)

Enhancing value chain

Expecting to increase segment assets

while continuing a solid operation

(The final year of the New Fourth Medium-Term Management Plan ends

March 31, 2023)

Growth strategy (1)

Expanding segment assets

Approx. ¥1.1 tn

¥1.5 tn level

10

（9）Strategic Alliance with Advantage Partners (AP)

Capital and business alliance

1. Expansion of investment opportunities through mutual utilization of network

2. Cooperation in co-investments

3. Financing and management support services for portfolio companies

Shareholding ratio of TC

14.9％

→ Acquire ordinary shares in Advantage Partners

(H.K.) Limited (“APHK”) and subscribe for its equity financing

→ Envision to make APHK into an equity method

affiliate in the future

Details of main partnership

Strengths and expertise of AP

Commenced its services as the first Japanese buyout fund in1997

Funds served by AP Group hold a leading track record in the private equity market in Japan

Provide management support focusing on the growth of portfolio companies

Offer value-added consulting services with its members with various experiences in management

Provide solutions to mutual customers, including TC’s

diverse customer base of approx.25,000 companies

Joint investment

Assuming long-term retention

corporate investment

Develop corporate investment business jointly with AP to establish it as a new core pillar of TC Group

Respond to business succession needs within small

to medium-sized companies

Respond to curve out needs driven by the focus on

the importance of selection and concentration

process within large enterprises 11

(10) Elements of New Fourth Medium-Term Management Plan


Governance

Risk management

Business strategy

Business model

∎ Become a business company with new forms of

financial capability, while maintaining core

operating lease business

∎ Diversify procurement methods

∎ Improve external credit ratings

∎ Strengthen asset and liability management (ALM)

∎ Enhance shareholder returns

∎ Encourage autonomous management of four

operating segments

∎ Tirelessly strive to develop viable and other new

businesses

∎ Bolster alliance strategy

• Expand business domains

• Accelerate pace of business transformation

(business incubation)

∎ Strengthen group governance on a global basis

∎ Instill compliance policy

∎ Engage with stakeholders

∎ Develop risk management systems in response to

diversification of risk profile

∎ Strengthen capability to develop viable and new

businesses

∎ Continually optimize risk measurement

∎ Reinforce information security measures

∎ Build personnel policies giving employees a sense

of fulfillment

∎ Expand human resource development programs

as a global company

∎ Promote active participation of women and other

diversity initiatives

∎ Promote career design to support employee career

paths and enhance expertise

12

Financial strategy

Human resources strategy

Creation of a sustainable

economy and society

SDGs・ESG

Management

philosophy

Management policy

(11) Key Themes, Policies, and Performance Targets by Operating Segment


∎Maximize the value chain in collaboration with partners

∎Develop new businesses in response to changes in the

operating environment

∎Build organizational platform and infrastructure in

accordance with the global standards

∎Establish PMI and governance in companies acquired

Grasp changing times as an

opportunity to pursue mobility

services that go a step further

Boost value of leasing business

and adapt to digital transformation

∎Enhance customer value and brand power with

unrivalled quality of service

∎Pursue channel and segment strategies aimed at

expanding business base

∎Take innovative initiatives for a new era

∎Strengthen group management systems to support

business expansion

∎Boost value of leasing business and accelerate

business co-creation

∎Create new business domains in response to digital

transformation

∎Optimize organization and improve operational

efficiency to suit changes in business style

Equipment Leasing Mobility & Fleet Management

Respond to expansion of the

digital economy and the mobility

revolution

Further refine businesses with

expertise and creativity

∎Collaborate with leading companies through alliance

strategies

∎Pursue broader and deeper business related to

FinTech and mobility

Specialty Financing International Business

(12) Strengthening the Management Base: Key Themes and Policies


Strengthening the Management Base: Key Themes and Policies

Strengthen consolidated management

Enhance and reinforce the financial base

Emphasize diversity in human resources development and work style reform

Drive business transformation with digital technology

Sophisticate risk management systems

Strengthen corporate governance

∎ Raise level of consolidated management on a global basis

∎ Manage sustainably to help strengthen responsiveness to Sustainable Development Goals (SDGs) and environmental, social, and governance (ESG) issues

∎ Continue examination of operating systems to create systems that contribute to autonomous management of each business domain

∎ Generate creative ideas and new business

∎ Harness digital technology to enhance corporate

value and bolster competitiveness

∎ Drastically revise existing systems to accelerate

digital innovation

∎ Develop systems aimed at promoting digital

innovation

∎ Stabilize fund procurement

∎ Expand foreign currency purchasing capabilities

∎ Raise level of asset liability management

∎ Strengthen risk management in response to

diversification of business investments and other

elements of risk profile

∎ Build risk control framework aimed at efficient

allocation of management resources

∎ Respond to society’s demands for information security,

diverse crisis management, quality control, etc.

∎ Secure diverse human resources

(skilled personnel required by each operating

segment or operation headquarters)

∎ Develop global human resources

∎ Review and reform personnel policies to suit the

characteristics of operating segments and work style

reform

∎ Strengthen management systems contributing to

enhancement of corporate value

∎ Strengthen group governance

∎ Strengthen efforts to improve effectiveness of Board

of Directors

14



through our business activities

Increase

corporate

value

Achieve

sustainable

growth

Strengthen internal base

∎ Improve systems for promoting sustainability

∎ Risk management

∎ Human resources infrastructure

(diversity, work style reform, etc.)

∎ Corporate governance, etc.

Exercise strengths in four

operating segments to

resolve issues

∎ High degree of expertise

∎ Finance x Services x Business Expertise

∎ Global network

∎ Leading partners

∎ Solid customer base

Identify key social issues

∎ Steadily address materiality (key

issues) based on SDGs

∎ Continually identify trends in society

from a medium- to long-term

perspective and take specific initiatives

to resolve issues

Strengthen engagement

∎ Enhance disclosure of

nonfinancial information

∎ Strengthen stakeholder

engagement

Contribute to the creation of a sustainable economy and society

15



Materiality (Key Issues) Priority Materiality Initiatives Examples of initiatives Relevant SDGs

Contribution to low-carbon

society

Contribute to widespread use of clean energy

through climate change and environmental

efforts

Renewable energy business focused

on solar power generation,

Popularization of electric vehicles via

leasing

Creation of new business

driven by technical innovation

Create new businesses by integrating new

technologies into financial services, and

contribute to the digital economy

Subscriptions, Fintech,

New rental car services utilizing

smartphone apps

Contribution to social

infrastructure development

Respond to advances in global mobility

services and cooperate with local

communities to contribute to social

infrastructure development

Rental cars and car sharing,

“Drive Doctor” telematics driving

control service to support safe driving,

Regional revitalization through hotel

business

Sustainable resource use Contribute to development of a circular

economy focused on the value of assets

IT equipment leasing, Refurbishing,

Life cycle management for aircraft,

Automobile leasing

Enhanced work environment,

leading to strengthening of

human resources

Promote human resources development,

diversity, and work style reform that improve

job satisfaction and foster a sense of personal

growth

Introduction and implementation of

telecommuting,

Employee awareness survey,

360-degree evaluation

Shared platforms Utilize diverse partnerships to create new value

Identification of Materiality (Key Issues) and SDGs

16


This document includes forecasts based on

information currently available to Tokyo Century

Corporation. Please note that actual performance

may vary from those forecasts due to various factors.

Disclaimer

Tokyo Century Corporation

Inquiries

Tel: +81-3-5209-6710

Website: https://www.tokyocentury.co.jp/en/

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