presentation materials for the fy2016 results briefing...densan system co., ltd. presentation...

Densan System Co., Ltd.

Presentation Materials for the FY2016 Results Briefing

Securities Code: 3630 Tokyo Stock Exchange, First SectionNagoya Stock Exchange, First Section

情報サービス事業

1

Ⅰ. FY2016 Summary of Results* Figures in tables and graphs are expressed in units of one million yen, with amounts less than one million yen rounded down

* Values expressed as a per cent are rounded off to two decimal places

2

FY2015Actual Plan Actual

Sales 28,956 31,500 30,369 1,412 4.9% -1,130 -3.6%Operating income 1,042 1,270 1,125 83 8.0% -144 -11.4%

Operating profitmargin 3.6% 4.0% 3.7% 0.1 -0.3

Ordinary income 1,071 1,278 1,157 85 7.9% -120 -9.5%Ordinary profit

margin 3.7% 4.1% 3.8% 0.1 -0.2Net income 660 810 732 71 10.9% -77 -9.6%

Year-over-year(YoY) change

Compared to planFY2016

Consolidated

Sales

Operating income

Sales rose around 5% from the previous FY but missed plan by somewhat over 3% due to weakness in 2H.

Favorable operating income in 2H compared with the previous FY covered for 1H but failed to attain plan.

FY2016 Financial Summary

Unit: million yen (Amounts less than one million yen are rounded down)

<FY2016 Full-year Earnings Highlights>

31H and 2H compared with the previous FY and Plan

14,149 14,777

14,808 15,591

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

FY2015 FY2016

Sales

2H

1H

14,733 14,777

16,766 15,591

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Plan for FY2016 Actual for FY2016

Sales

2H

1H

475 409

794 715

0

200

400

600

800

1,000

1,200

1,400

Plan for FY2016 Actual for FY2016

Operating income

2H

1H

Year-over-year change Compared to plan

465 409

576 715

0

200

400

600

800

1,000

1,200

FY2015 FY2016

Operating income

2H

1H

4

Sales of information services were almost flat compared with the previous FY, missing plan.However, sales of payment agency services developed to plan, contributing to the increase in consolidated sales.

While operating income from information services missed plan, payment agency services posted favorable growth in operating income both compared with the previous FY and relative to plan, contributing to consolidated earnings. The reason was a rising number of transactions due to the Company's strength in paper invoices.

Sales

Operating income

FY2015

Actual Plan Actual Change ％ Change ％

Information servicesSales 15,122 16,500 15,320 197 1.3% -1,179 -7.2%Operating income 484 700 516 32 6.6% -183 -26.2%Profit margin 3.2% 4.2% 3.4% 0.2 - -0.9 -Payment agency servicesSales 13,834 15,000 15,049 1,214 8.8% 49 0.3%Operating income 543 600 643 99 18.3% 43 7.2%Profit margin 3.9% 4.0% 4.3% 0.3 - 0.3 -

FY20151H actuals Plan Actual

Adjustments for segmentincome -52 -30 -34

Compared to planSegment

Year-over-year changeFY2016

FY2016

Net sales and Operating Income by SegmentUnit: million yen

5

FY2015

Actual Plan Actual

Net sales 15,122 16,500 15,320 197 1.3% -1,179 -7.2%(breakdown by service)

SI and softwaredevelopment 9,053 9,823 9,040 -12 -0.1% -782 -8.0%

Information processingservices 4,553 5,560 5,034 481 10.6% -525 -9.5%

Product sales 1,515 1,116 1,245 -270 -17.9% 128 11.5%Operating income 484 700 516 32 6.6% -183 -26.2%

Informationservices business

FY2016 Year-over-year change Compared to plan

59.0%32.9%

8.1%FY2016 Sales by Type of Service

SI and software developmentInformation processing servicesProduct sales

１ In information processing services, sales rose steadily in agency services for issuing invoices and processing for local public organizations, etc., additionally aided by newly started gift processing services.

２ In SI and software development, cloud related services such as G Suite (the previous Google Apps for Work), as well as projects such as automatic auction systems and ERP packages performed well. Even so, however, sales declined mainly due to the absence of the large-scale equipment sales to local public organizations booked on consolidated accounts in the previous fiscal year.

３ Earnings rose thanks to high-margin projects in SI and software development, covering for pressure on income at information processing services affected by cost increases from the newly launched gift processing services as well as price competition surrounding pre-existing services.

Information Services SegmentUnit: million yen (Amounts less than one million yen are rounded down)

6

85 198 176 275 737

1,458 938

1,915

0

200

400

600

800

1,000

1,200

0

500

1,000

1,500

2,000

2,500

Mid-term Term end Mid-term Term end

FY2015 FY2016

Million yen Cloud services sales breakdownGoogle事業

Google事業以外のクラウドサービス

Number of companies with installations

Cloud services other than Google business

Google business

Effects from the collaboration with Google further strengthened.Likewise, trade inquiries and introductions of large-sale projects in cloud-driven signage systems have been expanding to leisure facilities and traffic advertisement, with growth expectations for the current FY.

7,396 81.7%

1,656 18.3%

FY2015

ＳＩ・ソフト開発

クラウドサービス

SI and software development

Cloud services

6,849 75.8%

2,190 24.2%

FY2016

ＳＩ・ソフト開発

クラウドサービス

SI and software development

Cloud services

9,0499,05332.2％

+ ¥534 million

Cloud ServicesCloud services for system integration

and software development

Cloud Services● Net sales:

¥534 million, +32.2% YoY● In SI and software development:

2014 2015 201615.1% → 18.3% → 24.2%

Cloud services are growing steadily.

Google Business● Companies with installations:

1,040 companies, +18% YoY● Net sales: ¥457 million, +31.3% YoY

7

39,000

7,435

22,478

37,668

51,053

0

10,000

20,000

30,000

40,000

50,000

60,000

Term end Cumulativeas of 1Q

Mid-term Cumulativeas of 3Q

Term end

FY2015 FY2016

1,000 operationsYoY Comparisons of Number

of TransactionsOrder

acceptance agency services

1%Data entry

services19%

Printing agency services (invoice printing)

45%

Issuing invoices agency services

12%

Other services

23%

Percentage of processed items by service type

2,324

516

1,215

1,901

2,720

0

500

1,000

1,500

2,000

2,500

3,000

Term end Cumulative asof 1Q

Mid-term Cumulative asof 3Q

Term end

FY2015 FY2016

Million yen YoY Comparisons in BPO Net Sales ● Gift processing for large-lot

customers launched in 4Q of the previous FY contributed to sales and the number of transactions on a full-year basis with higher growth rates. However, partly due to start-up cost rising above budget, earnings declined relative to plan.

Up 17%

Up 31%

BPO Segment (business process outsourcing)

8

1. The acquisition of new customers including local governments developed successfully. Despite fluctuations in monthly growth rates unseen in a normal year caused by factors such as the earthquake in Kumamoto and the sequence of public holidays, results throughout the FY were generally favorable.

2. Moreover, the number of stores adopting at-the-counter remittance services for supermarkets and drugstore chain stores increased almost to plan.

FY2015

Actual Plan Actual

Net sales 13,834 15,000 15,049 1,214 8.8% 49 0.3%(breakdown by service)Payment services sales 13,461 14,332 14,499 1,038 7.7% 166 1.2%

Paper invoice services 11,843 12,486 12,718 874 7.4% 232 1.9%Paperless services 1,063 1,256 1,173 110 10.4% -82 -6.6%Account transfer services 554 590 607 53 9.6% 16 2.9%

Payment innovation sales* 373 667 550 176 47.3% -117 -17.5%

Operating income 543 600 643 99 18.3% 43 7.2%

Payment agencyservices business

FY2016 Year-over-yearchange Compared to plan

Paper invoice services84.5%

Paperless services

7.8%

Account transfer services

4.0%

Payment innovation

2.7%

FY2016 Sales by Type of Service

* Payment innovation comprises smart remittances, international remittances, and at-the-counter remittance services.

Payment Agency Services Segment (by service)Unit: million yen (Amounts less than one million yen are rounded down)

9

6,114 6,191 6,766 7,183

12,368 12,564 13,724

15,049 145,439 151,622

167,535 182,116

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

FY2013 FY2014 FY2015 FY20160

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

Net Sales and Number of Transactions

Net sales (first half) Net sales (full year)

No. of transactions (full year: in 1,000's)

Sales: million yen

3,681 4,031 4,389 4,531

3.9%

9.4%9.0%

3.0%2.7%

11.0%

6.7%7.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0

1,000

2,000

3,000

4,000

5,000

FY2013 FY2014 FY2015 FY2016

Growth rate (%)Companies Number of Business Partners

No. of partners Growth rates (private sector businesses)Growth rates (local public organizations)

Up 8.1%

Up8.8%

6.8%

1.6%

8.7%

7.4%

8.1%

-12.2%

22.2%

10.3%

5.2%2.8% 6.9%

9.6%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

FY2013 FY2014 FY2015 FY2016

YoY Comparison of Net Sales by Service

払込票決済サービス

ペーパーレス決済サービス

口座振替サービス

Paper invoice services

Paperless services

Account transfer services

● Payment services overall posted growth in excess of 8% both for sales and the number of transactions.

● Among the individual services, the high income-margin business in account transfer services posted gains.

● The decline in the growth rate for the number of business partners (contrasting with the year-over-year increase in the number of newly acquired customers) reflects the elimination of inactive accounts (termination).

Payment Services

Operations: in 1,000’s

10

320

0

50

100

150

200

250

300

350

0

100,000

200,000

300,000

400,000

500,000

600,000

2013 2014 2015 2016

Net sales: million yen

No. of operations

Sales of remittance services

Sales

No. of remittances

230

0

500

1,000

1,500

2,000

2,500

0

50

100

150

200

250

2013 2014 2015 2016

No. of storesSales/¥1 millionCounter Payment Collections

Sales

No. of stores with installations

0

5

10

15

20

25

30

35

40

45

50

0

50,000

100,000

150,000

200,000

250,000

2013 2014 2015 2016

No. of stores

No. ofremittances

Number of Remittances and Stores with Will Call

Pre-registered remittancesNo. of Will Call remittancesStores with Will Call

Up 75.2％

Up 72.0％

Up 18.8％

Down 3.3％

Up 62.5％

Up 26.4%

Up 2.8％ ● In remittance services, contributions came from growth in smart remittances (domestic remittance services). (The higher number of account transfer transactions and growth in remittance services both significantly contributed to the attainment of operating income targets.)

● In at-the-counter remittance services, sales and store numbers increased strongly from introductions at large drugstore chains.

Payment Innovation Segment

11

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Fe

b. 2

012

Ma

r. 2

012

Ma

y 20

12Ju

l. 2

012

Sep

. 201

2N

ov. 2

012

Jan.

20

13M

ar.

201

3M

ay

2013

Jul.

201

3S

ep. 2

013

Nov

. 201

3Ja

n. 2

014

Ma

r. 2

014

Ma

y 20

14Ju

l. 2

014

Sep

. 201

4N

ov. 2

014

Jan.

20

15M

ar.

201

5M

ay

2015

Jul.

201

5S

ep. 2

015

Nov

. 201

5Ja

n. 2

016

Ma

r. 2

016

Ma

y 20

16Ju

l. 2

016

Sep

. 201

6N

ov. 2

016

Dec

. 201

6

People

Registered Users for International Remittances (Cumulative Total)

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Noc. Dec.

No. permonth

Number of RemittancesNo. of remittances in 2013 (per day) No. of remittances in 2014 (per day)No. of remittances in 2015 (per day) No. of remittances in 2016 (per day)

0

200

400

600

800

1,000

1,200

1,400

Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Noc. Dec.

Million yen

Value of Remittances (Monthly)

2014 month-basis 2015 month-basis 2016 month-basis

●Growth slowed in the numbaer of pre-registered users due to the introduction of the personal tax number system, with a decline in the number of remittance transactions at stores offering Will Call.

●Lower growth rates in the number of transactions due to remittances put on hold owing to yen depreciation.

●Intensified market competition from competitors.

As a result of the above factors, growth in international remittances posted a mild decline.

International Remittance Services

12

FY2015 FY2016Year-end Year-end

Current assets 25,509 39,746 14,236

Non-current assets 4,555 5,244 689

30,064 44,991 14,926

Current liabilities 21,230 35,012 13,782

Non-currentliabilities 859 1,365 505

Total liabilities 22,090 36,377 14,287Shareholders'equity 7,657 8,284 626Accumulated othercomprehensive income 209 159 -209Equity of non-controllingshareholders 107 169 62Net assets 7,974 8,613 638

30,064 44,991 14,926Total liabilities andnet assets

Consolidated balance sheet

[Reason for increase]Money held in trust 12,908 million yenCash and deposits 　　 703 million yenGoodwill 429 million yenNotes and accountsreceivable-trade 336 million yen

[Reason for decrease]Short-term loans payable 212 million yen[Reason for increase]Payment collectiondeposits 13,356 million yenLong-term loans payable,including current portion 560 million yenOther currently liabilities 274 million yen

[Reason for increase]Retained earnings 497 million yen[Reasons for decrease]Teasury shares 125 million yen

Change Main reasons for change

Total assets

Financial Information (1) Balance Sheet

Unit: million yen

13

8,444 5,244

169

9,243

5,873

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Assets Capital

Million yen

8,444 5,244

169

27,738

2,766 2,889

30,504

6,354 5,873

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Assets Capital

Million yen

68.765.1 64.7 65.7 65.7 66 65.5 64.5 64 61.3 59.9 60.9 61.4 58.3

28.8 25.819

31.2 31.225.5

32.426.4 28.5 27.7 25.8 26.2 23.5

18.8

0

10

20

30

40

50

60

70

80

1H Full yr. 1H Full yr. 1H Full yr. 1H Full yr. 1H Full yr. 1H Full yr. 1H Full yr.

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

％Trends in the Equity Ratio

Equity ratio (vs. debt + equity)

Equity ratio (vs. total balance sheet,from quarterly earnings reports)

(Cash and deposits)

(Money held in trust)

(Payment collection deposits)

* The decline is magnified by the unusually large portion of payment collection deposits in FY2016.

[Reference] Equity Ratio Details

The equity ratio (after excluding any payment collection deposits) has been running at an average of 60% or higher.

Current assets

Non-current assets

Liabilities

Equity

14

FY2015 year-end FY2016 year-end

Cash flows fromoperating activities 806 1,354

[Increased funds]Income before income taxes 1,169 million yenDepreciation 492 million yenIncrease in other current liabilities 194 million yen[Decreased funds]Income taxes paid 336 million yenIncrease in notes and accountsreceivable-trade 189 million yen

Cash flows frominvesting activities -685 -1,118

[Increased funds]Sale of investment securities 52 million yen[Decreased funds]Expenditures for the acquisition ofshares in subsidiaries associated withchanges in the scope of consolidation 382 million yenPurchase of property, plant and equipment 373 million yenPurchase of intangible assets 325 million yen

Cash flows fromfinancing activities -335 18

[Increased funds]Proceeds from long-term loans payable 820 million yen[Decreased funds]Repayment of long-term loans payable 439 million yenPayment of cash dividends 234 million yenNet decrease in short-term loans 212 million yen

Increase (decrease) incash and cash equivalents 205 255Cash and cash equivalentsat the start of the period 2,746 2,531Cash and cash equivalentsat the end of the period 2,531 2,787

Financial Information (2) Cash FlowsUnit: million yen


15

Ⅱ. FY2017 Earnings Forecast

16

The reasons for the lower growth in income relative to sales growth are mainly proactive budgeting for M&A starting with the current FY as well as anticipated special costs. Moreover, the lower net income compared with the previous FY is due to extraordinary gains recognized in the previous FY and effects from the equity percentage held in share of subsidiaries.

FY2016

Full-year actuals Full-year plan Variance Growth rate

Sales 30,369 33,700 3,330 11.0%Operating income 1,125 1,170 44 3.9%Ordinary income 1,157 1,180 22 2.0%Net income 732 675 -56 -7.7%

ConsolidatedFY2017

FY2017 Earnings Forecast


<Highlights of the FY2017 Full-year Earnings Forecast>

17

1H14,777

1H15,987

2H15,591

2H17,712

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FY2016 actuals FY2017 plan

Sales

1H409

1H470

2H715

2H699

0

200

400

600

800

1,000

1,200

1,400


Operating Income

1H432

1H479

2H724

2H701

0

200

400

600

800

1,000

1,200

1,400


Ordinary Income

1H287

1H267

2H444 2H

408

0

100

200

300

400

500

600

700

800


Net Income

FY2017 Forecast (with first/second half details)

18

1H actuals 2H actuals Full-year actuals 1H plan 2H plan Full-year plan

Information servicesSales 7,362 7,957 15,320 7,980 9,519 17,500 2,179 14.2% 617 8.4% 1,562 19.6%Operating income 106 410 516 183 436 620 103 20.1% 77 73.2% 26 6.3%Payment agency servicesSales 7,414 7,634 15,049 8,006 8,193 16,200 1,150 7.6% 591 8.0% 559 7.3%Operating income 306 336 643 257 292 550 -93 -14.5% -49 -16.1% -44 -13.1%Adjustments for segmentincome -2 -31 -34 29 -29 0

SegmentFY2016 FY2017

1H 2HFull yearYear-over-yearYear-over-year

30,369 30,369

2,179 1,150 3,330

20,000

22,000

24,000

26,000

28,000

30,000

32,000

34,000

36,000

FY2016 actuals Informationservices

Payment agencyservices

FY2017 plan

Million yen Sales

1,125 1,125

103

-93

34 44

-200

0

200

400

600

800

1,000

1,200

1,400

FY2016 actuals Informationservices


HQ adjustments FY2017 plan

Million yen Operating Income

FY2017 Earnings Forecast by Half and Segment


19

106 183

410 436 306

257

336 292

-2

29

-31 -29 -100

0

100

200

300

400

500

600

700

800

FY2016 1H actuals FY2017 1H plan FY2016 2H actuals FY2017 2H plan

Operating IncomeHead office adjustment cost

Operating income from payment agencyservicesOperating income from informationservices

7,362 7,980 7,957 9,519

7,414 8,006 7,634

8,193

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,000

FY2016 1Hactuals

FY2017 1H plan FY2016 2Hactuals

FY2017 2H plan

SalesSales of payment agency servicesSales of information services

1H plan

45.6%

2H plan

54.4%

Info. Sales

1H plan

49.4%

2H plan

50.6%

Pymt. Sales

1H plan

29.6%2H plan

70.4%

Info. Op. Income

1H plan

46.8%2H

plan53.2%

Pymt. Op. Income

FY2017 Earnings Forecast by Half and Segment

20

In SI and software development, expectations are for contributions to full-year sales from newly consolidated GOGA, Inc., whose synergy effects should lead to a higher growth rate in the Google business handled thus far. Moreover, given strong demand surrounding development as well as active order inflow for digital signage, caught in a lull last FY, estimates call for 14% growth in sales.


Sales

Operating income

1H actual 2H actual Full-year actual 1H plan 2H plan Full-year plan Change %

Net sales 7,362 7,957 15,320 7,980 9,519 17,500 2,179 14.2%(breakdown by service)

SI and software development 4,368 4,671 9,040 5,137 6,087 11,225 2,185 24.2%Information processing 2,379 2,655 5,034 2,270 2,821 5,092 57 1.1%

Product sales 614 630 1,245 572 609 1,182 -63 -5.1%Operating income 106 410 516 183 436 620 103 20.1%Operating profit margin 1.4% 5.2% 3.4% 2.3% 4.6% 3.5% 0.2 -

Information servicesbusiness

Year-over-year (full year)FY2016 FY2017

Without the red figures from maintenance projects posted last FY and given the shift to projects with high income margins since 2H of last FY, as well as strong demand for development services curbing unused human resources, projections are for a 20% earnings expansion.

Forecast by Individual Information ServiceUnit: million yen (Amounts less than one million yen are rounded down)

21

1H actuals 2H actuals Full-year actuals 1H plan 2H plan Full-year plan Change %

Sales 7,414 7,634 15,049 8,006 8,193 16,200 1,150 7.6%Payment services 7,183 7,315 14,499 7,721 7,855 15,577 1,078 7.4%(breakdown by payment service)

Paper invoice services 6,289 6,428 12,718 6,795 6,938 13,734 1,016 8.0%Paperless services 596 577 1,173 604 589 1,194 21 1.8%Account transfer services 298 309 607 321 327 648 40 6.7%

Payment innovation 230 319 550 284 337 622 72 13.1%Operating income 306 336 643 257 292 550 -93 -14.5%Operating profit margin 4.1% 4.4% 4.3% 3.2% 3.6% 3.4% -0.9% -


FY2017FY2016 Year-over-year (full year)

For payment innovation, plans take into account constraints on international remittances due to the continuing effects of the personal tax number. However, set targets anticipate coverage coming from growth in domestic remittances and at-the-counter payment agency services. Growth assumptions take into account the effects from special factors in paperless payment services.

The outlook is for significant improvements in the red figures from international remittances. However, the virtual platform creation and transition work in payment agency system scheduled for the current FY, and plans for full-scale overseas initiatives and M&A budgeting, will have significant impact on income going forward, with an expected decline in segment earnings.

Forecast by Individual Payment Agency Service


Sales

Operating income



22

Ⅲ. Progress status of the Medium-Term Management Plan (2017 - 2019)

and PLAN 2020

23

FY2016 FY2017 FY2018 FY2019

Actual Plan Plan Plan

Sales 30,369 33,700 37,500 41,300 10.8%Operating income 1,125 1,170 1,500 1,800 17.4%Ordinary income 1,157 1,180 1,510 1,810 16.6%Net income 732 675 872 1,047 13.8%

Growth rate(YoY)

Consolidated(Average rate)

Medium-term plan (FY2017 to FY2019)

3.7%

3.5%4.0%

4.4%3.8%

3.5%4.0%

4.4%

2.4%2.0%

2.3% 2.5%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

FY2016 FY2017 FY2018 FY2019

Profit MarginsOperating profit marginOrdinary profit marginNet profit margin

Medium-term Business Plan (3-year plan: FY2017 to FY2019)

Unit: million yen

Highlights of the FY2017–FY2019 3-year Plan

Driving structural transformation● Primary actions

・Overseas development・From a "flow business" to a "stock business“・Proactive M&A

24

15,320 17,500 19,900 22,300

15,04916,200

17,600

19,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

FY2016 FY2017 FY2018 FY2019

SalesInformation services business

Payment agency services business

516 620 800

1,040643 550

700760

-34

3.4%3.5%

4.0%4.7%

4.3%

3.4%4.0% 4.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

△ 100

100

300

500

700

900

1,100

1,300

1,500

1,700

1,900

FY2016 FY2017 FY2018 FY2019

Operating Income営業利益（情報）営業利益（収納代行）

Adjustments for segment income Operating profit margin (Info.)Operating profit margin (Pymt.)

Operating income (Info.) Operating income (Pymt.)

Operating income: million yen

Information services

Payment agency services

3-year Plan by Segment: FY2017 to FY2019

Unit: million yen Operating profit margin: %

<Highlights of 3-year Earnings Outlook (FY2017–FY2019)>

・ Expanding the BPO business.・ Expanding the cloud services business.・ Increasing the relative weight of our stock businesses.

・ Promoting overseas business development.・ Increasing the convenience of our offerings through growth in at-the-counter

services for payments and remittances.・ Enhancing our initiatives towards new payment collection methods (FinTech).

-

25

ＰＬＡＮ２０２０

戦略３分野８事業

ストック型ビジネス

８割で実現

● Business processing field (5) BPO business(6) Development, operation

and maintenance business(7) Agribusiness(8) Medical business

● Payment field(1) Payment agency services

business(2) Remittance services

business(3) New settlements business

● Cloud field(4) Cloud services business

Progress status of the Long-term Management Plan (PLAN 2020)

Unit: million yen

1997Start of payment agency services

2020Net sales:¥50 billion

Information services business

Information services business

Payment agency

services business

Payment agency services

business

Cloud services business

1986Opened Tokyo Office

2008IPO

2013 Cloud service started

2012Listed on

first section

2020

Sales (unit: ¥100 million)

Remittances infrastructure

Information infrastructure

(business platform)

Founded 1967Founding spirit of

"Independence, uniqueness, and creativity"

Business structure up until now

Formation of a three-pronged business structure

Information and communication

technology

PLAN 20203 strategic fields

with 8 businessesStock-type

business 80% realized

26

March 10, 2016Signing of the MoA with CBCI

at the Ogaki Techno Center of the Company

Meralco Head Office CBCI Bayad Center Store

Payment business field (promotion of overseas initiatives)

Philippines selected as first country for overseas initiatives

Conclusion of a memorandum of agreement on cooperation with CIS Bayad Center, Inc., the largest operator in the Philippines with at-the-counter payment collection in 4,400 locations countrywide and a 30% transaction handling share.

FY2016 Progress StatusDevelopment of the Biz@gent system for the

Philippines with operations start-up under preparation As to development, the Biz@gent server (telecommunications and management) has as

of the end of 2016 passed user testing at the location, with the environment for actual operations being under preparation.

27Efforts in the payment business field going forward

Electronic bar code

Fintech Overseas initiatives

New payment collection methods

28

About GOGA, Inc.Established in 2006 and from the first approved as partner in the map development of Google. As a frontrunner in Google Map business application services, active as developer of location-based services.

Acquisition of the share capital of GOGA, Inc. (integration as subsidiary)

Efforts geared at ONE Google

×

Case examples from the track record of GOGA, Inc.●Seven & i Food Systems Co., Ltd.

Operator of the nationwide "Denny’s" restaurant chain in Japan, adopted the GOGA Store Locator comprised of the "Denny’s" website and store search system.

●NTT DOCOMO, INC.For the "Docomodake" design wrapped-trolley buses operated in Hawaii by the international business division of NTT DOCOMO, INC., creation of a system for visually checking on the bus locations at all times.

Cloud business field

Google Business Solutions

(Advertisement)

Strengthen

Enter

Market size of the geolocation information industry in Japan *

(Trillions of yen)

(Estimate)

Category Case examples from fields of application

Mining and manufacturing

Agricultural, forestry, and fishery production

Retailing

Services

Transportation and logistics

Construction, real estate, and infrastructure

Automated mining, IT driven resource search, robotics, etc.

Automated agriculture, sensor-based dairy farming, IT driven forestry and fishery production

Sales promotion (promotion, O2O, etc.)

Tourism, metered automobile insurance, personal property security, surveillance, geo-position information games, etc.

Navigation (optimal-route search), traffic regulations, unmanned driving, automated warehousing, etc.

Computerized construction (automated construction), real estate trading, infrastructure management, etc.

* Market size is defined as sales turnover of products and services related to the geolocation information industry.

Source: "Geospace × ICT Promotion Conference Report," Ministry of Internal Affairs and Communications

© BBT Research Institute

29Business expansion

What can be done with maps:Location information, static and dynamic IOT

These are actively used across all types of industries

[Transportation]- Real-time display of

moving objects such as trucks, etc.

- Display of shortest routes- Display of traffic

congestion information

[Retailing]- Real-time display of map-

linked sales data- Marketing strategies- Inventory checks

[Self-governing bodies]- Information sharing and

visual display in case of accident

- Management and joint use of own facilities

- Pipeline simulations- Power grid plotting- Tie-ins with pre-existing

systems

[Construction consulting][Electric power and resource development]

- Plotting travel locations on maps- Sharing and practical use of

completed drawings and simulation results

- Support tools for sales people- Display of object data- BCP creation (verification that

employees are unharmed, etc.)

[IT, real estate, business agency]

30Efforts in the cloud business field going forward

One Google-based business expansion

Business platform enhancement by using the Company's data center

Cloud transitioning of the SI business

31

In November 2016 the Company concluded a share underwriting agreement for a capital participation and cooperative arrangement with Works Applications Co., Ltd., a leading company in the ERP package industry.

Content of the cooperative arrangementThe arrangement opens the possibility of service provision for small and medium-sized enterprise (businesses with up to 800 employees) regarding the "COMPANY" series for large companies, hitherto available only through direct sales.

* SaaS license will be specially provided for the Company.

COMPANY Human Resources Series

DSK BPO Services×

Support for the introduction and operation of AI-driven ERP packages

Business processing field

32Efforts in the business processing field going forward

Stock business increase through BPO business expansion

Share expansion through improvements to automatic auction platforms

Promotion of business consolidation and augmentation of synergy effects


33

Ⅳ. Stock Information

34

7 8.5 10 11 11 12 127

910 11 12 12 132.5

0

5

10

15

20

25

30

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017…

Special dividend Annual Interim

● ¥25 per share annual dividend on common stock

Ordinary dividend:¥24 → ¥25

Up 4.1% ★ Continuous dividend

increases on ordinary dividend since the stock exchange listing

Ordinary dividend:

¥25

％

28.1

34.8 31.4 31.2

33.9 31.8

36.2

20.022.024.026.028.030.032.034.036.038.0

FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017…

Dividend Payout Ratio

Dividend payout ratioAverage 32.5％

Shareholder Returns

● Dividend payout ratio: 36.2%

Unit: yen

35

48.1%

20.5%

27.2%

1.1% 0.5% 2.5%

End of 50th Period - Distribution of Ownership

Individuals and others

Financial institutions

Other JapanesecorporationsForeign owners

Securities companies

Held by company

株主総数14,401人

15,654shareholders

47.0%

20.2%

28.6%

1.1%0.6%2.5%

End of 49th Period - Distribution of Ownership

14,401shareholders

Number ofshares Ratio

HIROTA Co.Ltd. 890,100 8.87%Densan System employeestock plan 869,566 8.66%

The Juroku Bank, Ltd. 441,900 4.40%Ogaki Kyoritsu Bank Ltd. 424,900 4.23%Masanao Miyachi 414,770 4.13%The Gifu Shinkin Bank 359,900 3.58%Kazuhiro Uchiki 212,670 2.12%TOKAI Corp. 207,180 2.06%TIS Inc. 200,000 1.99%The Master Trust Bank ofJapan, Ltd. 151,500 1.51%

ShareholderOwnership

Stock-related InformationTop 10 Shareholders (as of December 31, 2016)

* Total number of shares issued: 10,040,000* Excluding 254,854 shares held by the company

36

42nd period 43rd period 44th period 45th period 46th period 47th period 48th period 49th period 50th period

FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

Net sales (million yen) 16,872 16,785 19,153 21,027 23,369 24,559 26,494 28,956 30,369

Ordinary income (million yen) 1,013 603 802 829 928 1,021 1,163 1,071 1,157

Net income (million yen) 563 324 422 450 516 593 685 660 732

Net assets (million yen) 5,027 5,172 5,549 5,791 6,207 7,072 7,678 7,974 8,613

Total assets (million yen) 17,277 19,221 19,026 29,998 24,011 26,396 27,350 30,064 44,991Net assets pershare (yen) 1,088.22 1,138.54 1,207.19 1,271.21 1,363.27 723.51 776.68 812.42 866.6

Net income pershare (yen) 145.3 70.81 92.94 99.6 115.07 63.7 70.43 67.81 75.42

Equiry ratio (%) 29.1 26.9 28.8 19 25.5 26.4 27.7 26.2 18.8Return on equity (%) 12.7 6.4 7.9 8.1 8.7 9.1 9.4 8.6 9.0Price-earningsratio (multiple) 3.9 8 8.3 6.9 10.3 22 22.4 28.3 23.2

Marketcapitalization (million yen) 2,605 2,566 3,488 3,095 5,319 13,518 15,795 19,224 17,590

Ordinary profitmargin (%) 6.0 3.6 4.2 3.9 4.0 4.2 4.4 3.7 3.8

Current ratio (%) 128.7 122.9 124.7 113.6 120.7 120.7 121.4 120.2 113.5

Fiscal year

Reference Materials: Business Indicators

Total number of shares issued: 10,040,000Average number of shares during the fiscal year: 9,710,925

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