Tobu Railway : Annual Report 2022

ANNUAL REPORT

2022

TOBU RAILWAY CO., LTD.

Management Philosophy and Policy

(1) Tobu Group Management Philosophy

The Tobu Group has set forth the concepts of "dedication," "enterprising spirit" and "affinity," as the corner stone for its management.

Dedication:	The Tobu Group will contribute to materializing an affluent society based on the profound
	awareness that all of its businesses are supported by society.

Enterprising spirit: The Tobu Group will keep taking up challenges with a pioneering spirit to pave the way to a new

	era through constant self-improvement without complacency.
Affinity:	The Tobu Group will contribute to the evolution of society by promoting its business as well as
	the welfare of its employees based on the concept of congeniality among people and harmony
	with the environment.

(2) Tobu Group Management Policy

The Tobu Group will operate diversified and composite businesses on the basis of safety and security, including "transportation," "leisure," "real estate" and "retail distribution" as a corporate group contributing to the development of the areas along its railway lines through businesses that closely support customers' daily lives.

We will provide innovative and inventive services of high quality based on the customer's viewpoint, thereby aiming to create attractive destinations full of energy along the Tobu lines, providing the residents with a comfortable lifestyle.

Tobu Group will fulfill its corporate social responsibility through achieving sustainable growth along with local communities, as a corporate group that supports customers' lives by promoting ecofriendly management while constantly generating profit from its business operations.

Contents
Message from the President...............................................	1
Medium-Term Business Plan..............................................	2
Our Current Situation.........................................................	4
Review of Operations.........................................................	5
Financial Review (Consolidated).........................................	9
Corporate Governance.....................................................	10
Risks to which the Company's Business is Subject..........	12
Five-Year Summary..........................................................	15
Consolidated Balance Sheets...........................................	16
Consolidated Statements of Income and
Comprehensive Income...............................................	18
Consolidated Statement of Changes in Equity..................	19
Consolidated Statements of Cash Flows..........................	21
Corporate Directory..........................................................	22

Attention regarding forward-looking statements

The reader is advised that this report contains forward-looking statements, including statements relating to the Company's future policies and strategies, and estimates of future business development. As opposed to statements of historical fact, these constitute estimates or projections made by the Company's management on the basis of facts known to them as of the time of writing, and actual results may therefore differ substantially from such statements, due to a wide variety of possible risk factors. Page 12 contains a list of the principal categories of risk to which the Company's business operations are subject.

Message from the President

The economic picture remained uncertain in fiscal 2021, including ups and downs in consumer spending arising from such factors as trends in COVID-19 infections and repeated issuing and lifting of states of emergency.

The business environment is expected to remain unpredictable in fiscal 2022, but we will put every effort into supporting the lives of our customers, primarily through the railway business, which is part of the social infrastructure, and promoting further social progress.

The business environment surrounding the Group has changed significantly. In addition to changing behavioral patterns arising from the pandemic and advances in digital technology, the services and initiatives required of companies are changing day by day in response to such developments as the growing social concern over environmental issues. Although the future is uncertain due to COVID-19, the Group aims to build a robust management structure capable of posting steady profits while responding to changes in the business environment. It was for this purpose that we established our medium-term business plan centered on cost control covering the period from fiscal 2022 to fiscal 2024. Under this business plan, we are promoting three priority strategies, namely business structure reform and restructuring of the business promotion system, expanding profitability through a new business model, and expanding revenue by promoting businesses that address social challenges as needs.

In regard to business structure reform and restructuring of the business promotion system, we will strengthen our management structure and improve productivity by working

on such efforts as a fundamental review of our business in conjunction with the changes in the business environment and reducing fixed costs and manpower through the utilization of digital technology.

In regard to expanding profitability through a new

business model, we will analyze customer information used in our TOBU POINT and TOBUPO Mile Group point services to provide personalized service proposals as we work on expanding revenue through digital marketing.

In regard to expanding revenue by promoting businesses that address social challenges as needs, we will continue to work on both solving social issues as we have done since the Group was founded and developing our business as we aim for sustainable growth together with the local community.

While leveraging the characteristics and management resources of our railway lines, we will continue to create new value into the future by solving social issues and realize human friendliness in a society in which people and communities shine together based on mutual support among families and local community members as we aim to become a corporate group that is indispensable to society.

Yoshizumi Nezu

President and Representative Director

ANNUAL REPORT 2022 1

Medium-Term Business Plan

Road Map

FY2017 to FY2019

FY2020 to FY2021 (2 years)

FY2022 to FY2024

FY2025-

Previous

Medium-Term

Business Plan

Business Structure

Reform

(implement short-term

measures, review/ prepare medium- to Long-term measures)

New Medium-Term
Business Plan	Next Medium-Term
(Shift to robust	Business Plan
management structure	(New growth
capable of handling	stage-Sustainable
changes in business	development)
environment)

Secure consolidated recurring income

Reduce interest-bearing debt

Target

Indicator	Target
Interest-bearing debt balance	Around 800 billion yen at end of FY2024
Interest-bearing debt/EBITDA multiple	7x range at end of FY2024, reaching 6x range ASAP
Shareholder return	Aim to return dividends of 40 yen per share ASAP, and consider
return through purchase of treasury stock

Policy for Medium-Term Business Plan

Promote business structure reform focused on controlling costs in response to changes in business environment and strengthen management structure to generate steady profits

Expand profitability through new business model utilizing digital technology and data

Take advantage of business areas such as suburbs where value is being reconsidered, characteristics of railway lines, and management resources, approach social challenges as needs, and realize expanded revenue and human friendliness in a society in which people and communities shine

together

2 TOBU RAILWAY CO., LTD.

Policy and Vision of Medium-Term Business Plan

• Business structure reform and restructuring of business promotion system
  Lower ratio of fixed costs to revenue in railway business to 70% in FY2019
  Reduce personnel at Tobu Railway head office by 30%
  Review/consideration of railway revenue based on demand and social climate
  Restructuring and review of operational structure at group companies

Main initiatives

• Promotion of one-man operations and introduction of remote station system
• Review of operations and utilization of digital technology
• Verification of peak distribution effect from introduction of off-peak miles

Robust management structure

Flexible organization capable of adapting to changes in business environment

• Expand profitability through new business model

Enhancement of revenue based on digital customer contact points

Promotion of businesses that increase permanent residents along railway lines and create nonresident/connected populations

Cultivation/strengthening of profit-makingnon-railway businesses

Main initiatives

• Launch of EC mall
• Redevelopment of West exit of Ikebukuro Station
• Launch of new limited express Spacia operations
• Urban development in Minami-Kurihashi and Dokkyodaigakumae

Improvement of value along railway lines and further increasing of resident/ nonresident populations

Expansion of profitability in retail and real estate businesses

• Expand revenue by promoting businesses that address social challenges as needs
  Sustainable development of local communities
  Brand development and revenue production through reduction of environmental burden
  Improvement of diverse employee skills and capabilities

Main initiatives

• TOBU POINT child raising support program
• Promotion of NIKKO MaaS use and train operations based on virtually 100% renewable energy
• Promotion of diversity and cooperation with startup

Realization of human friendliness in a society in which people and communities shine together

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