Financial Results Presentation for the First Half of the Year … · 2019. 11. 25. · Material for the Financial Results Presentation for the First Half of the Fiscal 2020 Million

2018年3月期決算説明会資料

© TOPPAN FORMS CO.,LTD. 2017 : CONFIDENTIAL © TOPPAN FORMS CO., LTD. 2019: CONFIDENTIAL

November 7, 2019

Financial Results Presentation for

the First Half of the Year Ending

March 31, 2020

Securities Code: 7862



1

Material for the Financial Results Presentation for the First Half of the Fiscal 2020

Million yen

* The method of calculating the depreciation of property, plant and equipment was changed from the declining-balance method to

the straight-line method in the year ending March 31, 2020.

As a result, operating income, ordinary income, and income before income taxes increased by 405 million yen, respectively.

Consolidated Financial Results

First half of the year

ended

March 31, 2019


ending

March 31, 2020

YoY

Change Rate of change

Net sales 110,780 112,827 +2,046 +1.8%

Operating income 2.3 2,501 3.7 4,218 +1,717 +68.7%

Ordinary income 2.5 2,808 3.7 4,214 +1,405 +50.1%

Profit attributable to

owners of parent 1.5 1,633 1.9 2,128 +495 +30.3%



2


Million yen


ended March 31, 2019


ending March 31, 2020 Change

Net sales Operating

income Net sales

Operating

income Net sales

Operating

income

Data & Document 75,204 3,839 78,392 5,429 +3,188 +1,589

IT Innovation 14,121 1,443 14,308 1,359 +186 (84)

Business Products 13,700 (122) 13,426 (100) (273) +21

Global 7,753 112 6,699 315 (1,053) +203

Elimination of inter-

company transaction (2,773) (2,784) (11)

Consolidated total 110,780 2,501 112,827 4,218 +2,046 +1,717

+4.2

+1.3

(2.0)

(13.6)

+41.4

(5.9)

–

+180.3

+1.8 +68.7

事業別実績 Business Performance by Business Segment



3


Net sales increased due in part to a steady increase in contracts for transactional communication and direct mail, capturing of demand for DPS and BPO related to economic measures associated with the hike in the consumption tax rate, increased sales of digital solutions, and temporary demand in BF reflecting the anticipated change of imperial era name and the hike in the consumption tax rate.

Operating income increased significantly due to reductions in manufacturing costs including IT costs and the change in depreciation method, in addition to increase attributed to sales increase, offsetting the impact of increase in SG&A that resulted from upfront investment in growth fields.

Data & Documents Business

Net sales increased but operating income declined, despite expansion of payment services, due in part to the impact of a decline in sales from system operation management services and an increase in manufacturing costs related to IoT and cards.

IT Innovation Business

Net sales decreased but profitability improved thanks in part to the rush demand for information equipment before the consumption tax hike, offsetting the impact of falling revenue from office supply products such as copy paper and a rise in their purchase prices.

Business Products Business

Net sales decreased significantly due to a decline in sales attributable to the liquidation of a subsidiary in Hong Kong, which offset growth in orders for DPS, BPO and cards mainly from financial institutions in Hong Kong. On the other hand, operating income increased significantly thanks in part to profit improvement attributed to subsidiary liquidation and manufacturing cost reduction in Thailand.

Global Business

Earnings Highlights by Business Segment



4


Operating income increased thanks to an increase in profit due to structural reform and the impact of the

change in depreciation method, in addition to an increase in net sales from the Data & Document

Business and the reduction of manufacturing costs including IT costs.

2,501 2,501 2,256 2,256

3,056

3,856 3,968 4,218

405 650 800

800

250



Million yen

Increase in

net sales


ending March 31, 2020

Cost

increases

Cost

reductions

Decrease of

SG&A and

others

Impact of

change in

depreciation

method

Up ¥1,717 million

112

Analysis of Change in Operating Income Increase in

profit due to

structural

reform



5


国内市場

市場環境

It is becoming apparent that system integrators and data processing centers terminate or transfer print

outsourcing services after re-establishing core systems or replacing printers, although a digital shift is

occurring to business forms and digital printing services with increasing speed.

More advanced technologies such as AI and RPA are being used and more business processes are being

outsourced, reflecting the efforts of concentrating resources on core operations.

IoT is being used more broadly by a range of industries, including manufacturing and logistics.

The electronic payment market continues to enjoy rapid growth reflecting a variety of incentive measures

and brisk demand from inbound tourists.

Demand for ID cards is expected to grow due to the requirements of the health insurance certificate and

security businesses.

While mainstay supply products are being commoditized, demand for labor saving products, those related to

information security, and disaster-related products is expected to increase.

Domestic Market

Demand for color prints in DPS remains steady despite a rapid digital shift taking place in business forms

and digital printing services.

Digitalization is making rapid progress in Singapore.

The BPO market continues to grow despite an increase in personnel costs.

Demand for cards for financial institutions is solid, at least during the year under review.

Hong Kong and ASEAN Market

Market Environment Surrounding the Company



6


Establish presence as a

DigitalHybridTM Company.

市場環境

Setting our business on a growth trajectory again by creating new value

1

Create new businesses and

develop new markets.

2

Implement structural reforms

decisively on a group-wide

basis.

3

Facilitate the implementation

and continuous improvement

of CSR activities.

4

Aim to create a strong company while simultaneously nurturing a corporate

culture that embraces innovations.

Basic Policy



7


Consumers execute procedures with financial

institutions individually using application forms,

online services, or applications.

Consumers Financial

institutions Consumers

Financial

institutions

Notifications

(Address change, etc.)

Direct debit registration

Reporting the latest

transaction information

(Anti-money laundering

measures)

Toppan Forms

Conventional procedures Procedures through AIRPOST

The Company creates forms,

develops applications, and

implements other tasks.

Accepting platform

usage fees

Consumers can execute procedures with multiple financial

institutions at once by accessing AIRPOST via +Message.

Measures to strengthen from Digital Solutions - 1

AIRPOST, a platform for standardized procedure

We will launch AIRPOST, a platform for standardized procedure which enables to execute procedures

with multiple companies at once, in March 2020.

Enhancement of procedures that can be executed on the platform, such as changes of address, direct

debit registration, and online identification, and expansion of financial institutions participating in the

platform, are planned to be implemented subsequently.



8


Company

Representative of the outsourcing

services

Mobile phone carriers Consumers Toppan Forms

Outsourcing

the delivery Via API Delivering

messages

to mobile

phone

numbers

• Creation of data for communication

• Creation of content including

images and personalized videos

• Creation and management of

scenarios for automatic responses

to consumers

• Aggregating and reporting

message delivery logs

Measures to strengthen from Digital Solutions - 2

Solution for optimizing message delivery

Make effective use of +Message with this solution for optimizing message delivery, which enables

bidirectional communication between companies and consumers. This service will be launched in January

2020.

The Company helps improve the appeal of messages by providing outsourced multi-channel

communication services, including the creation and delivery of personalized videos, that delivers variable

video to individuals as well as hybrid delivery of such videos with DPS (paper communication) and the

provision of services coupled to call centers.



9


シンカクラウドへの接続端末台数の推移

2018/3末 2018/9末 2019/3末 2019/9末 2020/3末

160,000

Expected to increase by

approx. 8 times in 2 years

60,000

20,000

QR code-based payment on a vending machine

Reinforcing the Foundation of Payment Services

Growth of demand reflecting progress in the spread of cashless payments

The number of terminals connected to Thincacloud cloud-based payment platform is expected to increase

approx. eight times in two years from March 31, 2018 to March 31, 2020.

Promote measures to increase manpower, equipment, and other elements, aiming for safer, smoother

operation of the platform as a cashless payment infrastructure

Full-scale operation of QR code-based payment services

Start to provide the services in the second half of the year ending March 31, 2020 and expand the

services to vending machines, amusement equipment, and others, subsequently, for full-scale operation.

End of

Mar. 2018

End of

Sep. 2018

End of

Mar. 2019

End of

Sep. 2019

End of

Mar. 2020

Number of terminals connected to Thincacloud



10


• Accurately detects target items only

• Reads multiple tags quickly at once

• Space-saving and lightweight

• No need for installation construction

Collaboration with a drone business operator

• Collaboration with Blue innovation Co., Ltd., a drone system developer

• Developed a solution for labor savings when taking warehouse

inventories by having drones read RFID tags

Examples of introduction

are increasing in the

medical industry.

Promoting Expansion of IoT Solutions

Capturing the growing demand for RFID

Due to the spread of IoT, the applications of RFID are being expanded beyond management in closed

environments such as warehouses to applications in open environments, including management after

shipment.

Continue to develop new projects targeting medical, manufacturing, and logistics industries.

Create demand, with a focus on applications including process/inventory management, by introducing

highly functional media and equipment and sharing introduction examples horizontally.

Developing solutions in new domains

Focus efforts on developing solutions which combine RFID, LPWA, sensors, drones, and others.

Gate-type RFID reader



11


About RDS

Company name PT. Reycom Document Solusi

Location Jakarta (Indonesia)

Established 2003

Capital 32,500,000,000 Indonesian rupiah (Approx. 250,000,000 yen)

Sales 3,450,000,000 yen (2018/Consolidated)

Number of

employees

1,662 (As of December 31, 2018/Total number of employees

of all eight group companies)

Business

descriptions DPS, BPO, system development, general printing services

Business

locations

Indonesia, Vietnam, Singapore (including business locations

of group companies)

Signing ceremony with RDS

Entry to a New Region

Market development in the ASEAN region, where economic growth continues

The Company acquired shares in PT. Reycom Document Solusi (RDS), a company engaged in DPS,

BPO, system development, and other businesses in Indonesia and other areas in the ASEAN region. As a

result, RDS became an equity method affiliate of the Company.

Take advantage of system development capability of RDS and its competitive edge in businesses in

financial and insurance industry in Indonesia to strengthen DPS and BPO of overseas Group companies

and promote development of infrastructure for digital solutions.



12


Due to these structural reforms, profit amounting to ¥3.0 billion is expected to be generated

by the year ending March 31, 2022.

• Advanced security environment including vein authentication and

turnstiles

• First Toppan Forms Group facility in Japan to have a day-care center

for employees’ children on the premises

• Business continuity ensured by its disaster-resistant location featuring

firm ground, high altitude, and others

Implementation of Structural Reforms

Reorganization of the BPO promotion structure

On October 31, the BPO business of J-SCube Inc. was integrated into Toppan Forms. The Company aims to

expand operations and improve profitability by strengthening solutions and consolidating overlapping

functions.

At the same time, the Company promotes the structural reform of the BPO business through initiatives

including the strengthening of earnings and process management, the reorganization of offsite centers, and

quality improvement.

Consolidation of manufacturing bases

Fukuroi Factory, which consolidates six bases including ones in the Tokai area, was completed on October

31.

Strive to improve BF production efficiency, enhance the production system for IoT-related products, and

improve logistics efficiency.



13


San-eki Ichijo

- Tria Juncta in uno -

Contributions

DigitalHybrid®

Management Philosophy

People-Friendly Digitalization “No one will be left behind”

Business Activities in Line with the Founder’s Spirit

Achieve sustainable growth by practicing the management philosophy of

“San-eki Ichijo - Tria Juncta in uno - Contributions.”

Constant improvement of CSR activities

• Since 2010, the Company has continued to implement the Tokyo Greenship Action, activities

in coordination with the Tokyo Metropolitan Government and non-profit organizations for the

protection of the woodland near Takiyama Factory.

• The city government of Fukuroi and Toppan Forms Tokai have concluded an agreement on

emergency support in the event of a disaster.

Creation of innovation businesses aimed at solving social issues

Health issues (healthcare)

• The Company supported the establishment of a Hirotsu Bio Science Inc. inspection center,

aiming to commercialize a cancer screening test.

• The Company is implementing a monitoring survey aimed at commercializing Watashi-no-

Ondo, a healthcare IoT service of measuring body temperature rhythms.

Environmental issues (countermeasures against waste plastics)

• The Company promotes the use of biodegradable plastics in its products and also research

and development for the realization of marine biodegradation with its proprietary technologies.



14


Million yen

市場環境 Performance Forecast for Fiscal 2020

Year ended

March 31, 2019

Year ending

March 31, 2020

YoY

Change Growth

rate

Net sales 225,810 223,000 (2,810) (1.2%)

Operating income 3.0 6,706 3.8 8,500 +1,793 +26.7%

Ordinary income 3.2 7,206 3.9 8,700 +1,493 +20.7%

Profit attributable to

owners of parent 1.6 3,567 2.0 4,400 +832 +23.3%



15


6,706

8,500

1,000 1,200

500

306

700

1,500

600

Year ended

March 31, 2019

Impact of

exchange

rates, etc.

Increase in

profit due to

structural

reform

Million yen

Change in

composition

of sales

Year ending

March 31, 2020

Cost

increases

Cost

reductions

Increase in

SG&A

Impact of

change in

depreciation

method

Up ¥1,793 million

Forecast for Change in Operating Income



16


Compound

Average

Growth Rate

+0.3%

+0.3%

+7.7%

+0.5% 153,208 151,000 153,000 155,500

28,456 31,000 32,500 35,000

29,755 29,000 29,500

30,000

14,390 12,000 13,000

14,500

100,000

150,000

200,000

250,000

Result for the yearended March 31, 2019

Forecast for the yearending March 31, 2020



Data & Document Business IT Innovation Business

Business Products Business Global Business

Million yen

225,810 223,000 228,000

235,000

Three-Year Outlook of Net Sales



17


6,706

8,500

10,000

11,500

3.0%

3.8%

4.4%

4.9%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Result for the yearended March 31, 2019




Operating income

Operating income margin

* The forecasts for the year ending March 31, 2020 and beyond include the impact of the change in the method of depreciation.

Million yen

Three-Year Outlook of Operating Income



18


We will allocate profits primarily to research and development, capital expenditures,

and business investments, aiming for a sustained improvement in corporate value.

For dividends, we will attach importance to continuity and stability and will keep the

amount unchanged even in a difficult business environment.

Shareholder Returns

Interim dividend: ¥12.5 (Planned amount of annual dividend: ¥25.0)

We will set a budget of 30 billion yen and promote investments continuously.

We will target a wide range of domains with a focus on IT and the Frontier Business.

We will continue business investments in accordance with the growth strategy,

including minor investments in start-ups .

Business Investments


© TOPPAN FORMS CO.,LTD. 2017 : CONFIDENTIAL © TOPPAN FORMS CO., LTD. 2019: CONFIDENTIAL 19 Material for the Financial Results Presentation for the First Half of the Fiscal 2020

Reference



20


Reference

Management Philosophy

“San-eki Ichijo - Tria Juncta in uno - Contributions”

A philosophy that states benefits to our social community, our company, and

our personal happiness must be regarded as if they were a single benefit

(ichijo), without prioritization, and without the absence of any of them.

To Our Social Community

Let us always be pioneers in Information Handling, and play an important role in the

growth of local economy.

To Our Company

Let us always be pioneers in information Handling and devote ourselves to the

prosperity of our company.

To Our Personal Happiness

Let us always be pioneers in Information Handling and endeavor to achieve happiness

of our own.

About the Management Philosophy “San-eki Ichijo - Tria Juncta in uno - Contributions”



21


Reference

080-xxxx-xxxx

User is Identified at the time of

the conclusion of the contract

with the carrier.

SIM card on which the

mobile phone number is

written

The service can be used only

with the mobile phone number

on the SIM card.

A high level of security Compliant with RCS

* GSMA, or GSM Association, is the largest mobile communications industry association, established in 1995 for the purpose of

spreading GSM, a 2G mobile phone system. It consists of more than 1,000 companies from 220 countries, including approx. 800

mobile phone carriers.

About +Message

+Message is a service featuring evolved functions of Short Message Service (SMS), which

permits NTT Docomo, KDDI, and SoftBank mobile phone users to exchange messages

based solely on their mobile phone numbers. It complies with Rich Communication

Services (RCS), a global standard set by GSMA*. It began to be used for message

exchanges between individuals in May 2018. Official account service for corporate

customers began to be launched subsequently in June 2019.



22


Million yen

Million yen

Reference

Financial Status and Cash Flows

Total Assets and Net Assets

Status of Cash Flows




ending March 31, 2020 Change

Net cash provided by

operating activities 6,703 7,366 +662

Net cash used in

investing activities (5,426) (10,192) (4,765)

Net cash used in

financing activities (1,429) (1,748) (319)

Cash equivalents 63,622 54,509 (9,112)

March 31, 2019 September 31, 2019 Change

Total assets 224,103 221,848 (2,254)

Net assets 171,830 171,716 (114)

Equity ratio 75.4% 76.2% +0.8p



23


Result for first half of the year


Forecast for the year


Capital

Expenditure 7,240 million yen

* Excluding business investments

14,000 million yen * Excluding business investments

Depreciation 2,988 million yen

* Including 405 million yen reflecting the impact of

change in depreciation method

6,800 million yen * Including 1,000 million yen reflecting the impact of change

in depreciation method

Major capital

expenditures

• Reorganization of manufacturing facilities including the construction of the Fukuroi Plant: ¥5.2 billion

• Improvement of production facilities in the Data & Document Business ¥0.4 billion

• Infrastructure related to digital solutions ¥0.2 billion

• Reorganization of manufacturing facilities including the construction of the Fukuroi Plant: ¥6.2 billion

• Improvement of production facilities and digital solution infrastructure in the Data & Document Business ¥5.0 billion

• Infrastructure development and production equipment in IT Innovation Business ¥1.3 billion

• Investment in IT system equipment for business infrastructure development ¥0.5 billion

• Improvement of information system infrastructure for the optimization of business management ¥0.6 billion

Reference

Capital Expenditure and Depreciation



24


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0.00

5.00

10.00

15.00

20.00

25.00

30.00

99/3 00/3 01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3 17/3 18/3 19/3 20/3

Dividend Consolidated Payout Ratio

Yen

Reference

Amount of Annual Dividend and Consolidated Payout Ratio


© TOPPAN FORMS CO.,LTD. 2017 : CONFIDENTIAL © TOPPAN FORMS CO., LTD. 2019: CONFIDENTIAL 25 Material for the Financial Results Presentation for the First Half of the Fiscal 2020

Note on Forward-Looking Statements

Please note that performance forecast and future outlook contained

in this presentation material are forward-looking statements made

by the Company based on currently available information, and its

actual business performance may differ from such statements

depending on the future business environment.