The time has come to start the meeting regarding the acquisition of Thales Railway Systems. Thank you very much for participating, despite your very busy schedules today. First of all, I'd like to talk about the materials that will be used today. Please refer to the news release site of Hitachi, Ltd. I would now like to introduce the speaker to you. The speaker will be Alistair Dormer, Executive Vice President and the Chief Environment Officer of Hitachi, Ltd. Today, Mr. Dormer will be making a presentation, and after that, we will start the Q&A session. Mr. Dormer, please. We'll be switching over the screen now. Dormer-san, please. Thank you very much. Good afternoon and good morning for those in Europe, ladies and gentlemen. My name is Alistair Dormer, Executive Vice President for the Mobility Sector in Hitachi and Chief Environment Officer for Hitachi, Ltd. Today, I am super excited to announce that Hitachi, Ltd. has agreed to purchase Thales' Ground Transportation Systems business for an enterprise value of EUR 1.66 billion, approximately JPY 215 billion. I have a short presentation to introduce the business and will then be very happy to take your questions. Please turn to page two. Thales GTS is a business I've admired for many years and is a perfect fit for Hitachi Rail's business growth strategy. As long ago as 2016, after the successful acquisition of AnsaldoBreda and Ansaldo STS, our Chief Executive, Higashihara-san, announced the ambition for Hitachi Rail's business to become a JPY 1 trillion top-line business. With this acquisition, we will deliver on this promise by 2026, with double-digit operating income. We have conservatively calculated run rate synergies of EUR 100 million from 2026. The closing of the transaction will take around 18 months to complete the standard regulatory and antitrust clearances. During this time, GTS will be carved out from the parent group, so the requirement for cash out from Hitachi is forecast to be in late FY 2022. This deal is at the core of our railway business strategy to focus our growth in our digital and railway control or signaling segment, rather than the lower profitability rolling stock sector. The GTS business is extremely complementary from a geographic perspective, with key bases in Germany, France, and Canada, and key references in Asia, notably Hong Kong and Singapore. This is a nice fit with Hitachi's strength in Japan, U.K., and Italy, and growth in the U.S. We are impressed with GTS's digital capability, particularly in ticketing or revenue collection systems, which when combined with Hitachi's GlobalLogic capability, can lead the technological revolution to digital mobility as a service. From an environmental perspective, rail is a key sector for green infrastructure and contributes towards CO2 reduction. We will be acquiring some excellent energy-saving technology, such as GreenSpeed Driver Advisory System, which calculates and advises drivers of the optimum energy-saving speed to meet the timetable. Finally, we expect the trend of revenue and EBIT growth to continue, so that by deal closing, the implied EV/EBIT valuation multiple will be around 10. Please turn to page three. Please see the overview of the acquisition. GTS employs around 9,000 people and operates in 42 countries around the world, with segment headquarters in Germany, Canada, and France. The company's portfolio of products and services includes main line signaling, urban or metro signaling, integrated communication systems, and revenue collection systems. The agreed valuation of EUR 1.66 billion, or approximately JPY 215 billion, will be adjusted at closing, as is normal in M&A deals. As mentioned before, the deal is expected to close later in FY 2022 and will be paid in cash. Please turn to page four for a reminder of our railway strategy. We are focused on the transformation of our product mix to boost profitability and strengthen our market position. Over the last 12 months, as well as supporting our customers through the pandemic, we have been winning new orders in the U.S. and expanding operations. Our future long-term focus is to grow and strengthen our core rail control technology with digital to expand into Mobility as a Service. Please turn to page five. Here you can see the relative market position of the company and our target market position. We are a full lineup player with the huge potential of exploiting wider synergies across the Hitachi Group with Digital. Scale is important in the rail sector, as you can see by the two large players' relative profitability. We are more focused on the digital and rail control part of our capability, which commands higher margins. This acquisition will position Hitachi as the global leader in the rail control sector. Please turn to page six. Page shows the four main lines of business within GTS. Main line signaling includes European Train Control System technology, as well as rail control systems. Urban signaling includes computer-based train control, interlocking, and energy-saving driver advisory systems. ICS, or integrated communication systems, includes operational control, rail telecoms, preventative maintenance systems, and light rail control systems. Finally, revenue collection systems includes automated systems for railway fare collection, road charging, and car park payments, which has huge potential for expansion into mobility as a service. In summary, over 50% of the business is digital and gives access to new markets for Hitachi's wider portfolio. Please turn to page seven. This slide shows Hitachi's strategy on a page as we progress our mobility technology on a digital journey from the edge of the smart grid, supported through synergy with GlobalLogic. In summary, this acquisition will create the global leader in railway control systems and is 100% in line with our wider Hitachi strategy to focus on the digitization of our core businesses and to grow. Finally, on page eight, we see the roadmap. We expect to close late in FY 2022 after carve-out, regulatory, and antitrust clearance. After closing, we intend to fully integrate the business into Hitachi Rail, as we did with the Ansaldo businesses, to deliver the synergy and leverage the exciting growth potential with the new customer base for mobility and beyond mobility. Thank you. Mr. Dormer, thank you very much. I would like to complement some information. Mr. Dormer said the GTS. As you can see, this is related to the railway business of Thales, as mentioned in the release. We would now like to proceed to the Q&A. In addition to Mr. Dormer, we will have other people joining the Q&A. Tomomi Kato, General Manager of the Financial Strategy Division, as well as Mr. Luca D'Aquila, CFO of the Railway Systems Business Unit. For those of you with questions, please use the Raise Hand button. We will call your name, and when your name is called, please unmute then state your name and affiliation before asking your question. Should you no longer wish to ask the question, please release the button. We will not be showing the video of the person posing the question. First of all, we'll take questions from the Japanese channel, from the media, then institutional investors as well as analysts. Then we will go to the English channel to receive further questions. The floor is now open for the Japanese channel to the press. Hirose-san, please unmute and ask your question. I hope you can hear me. I have two questions. The two companies will mean that MaaS domain can be expanded going forward. Specifically, what kind of service are you contemplating? What kind of technologies will be combined to bring to bear this new strength? I have another question. With Lumada, it can be also combined, I understand that. What do you contemplate in terms of combining Lumada as well as GlobalLogic capabilities in this new initiative? Thank you very much for your question. Regarding mobility as a service, this is a core part of the digitization of the passenger experience from the complete journey. We have been developing a number of technologies within Hitachi, such as what we call Be-In, Be-Out, which is technology to charge people based on where they are in terms of the usage of public transport. This is highly complementary with the Thales GTS revenue collection systems. Thales has got a significant market penetration with regard to fare collection, but also road charging and also car park charging. We believe that the complementary technology within Hitachi Rail and within Thales GTS fits together quite nicely. Ultimately, the combination of Lumada to acquire this full data set and to provide services via the cloud using GlobalLogic technology is the direction that we will be moving. We see a combination of technology from Thales GTS, technology from Hitachi Rail, but underpinned by Lumada and GlobalLogic's chip to cloud technology to really provide the overall digital service to allow people to experience optimum journeys and passenger experience. Question regarding fare collection of, from that point of view, how will the normal consumer feel the service? Can you visualize this from a point of view of a regular passenger? Yes. Currently, at the moment, people will either buy with a smart card, or they will buy a ticket for a journey that they want to take. If there is a combination of different modes of transport, such as rail or bus or taxi, then those are currently completely independent and therefore are charged independently. If you are going on the same journey repeatedly, so you're traveling from one city to the other on a regular basis, sometimes the fares will change, or you would not have the optimum fare. What these kind of systems can do is ultimately can advise you of the lowest form of travel. They can advise you of the integrated nature of that travel. Also from a transport operator point of view, it gives you the ability to adjust the fare depending upon the usage of the train or the bus or the time of day. It becomes an extremely dynamic situation where you can choose in advance where you want to travel and how you want to travel and compare lots of different potential options in terms of your travel. When it comes to traveling, potentially you don't need to buy a ticket. You're charged just according to which form of transport you're using and how by your mobile phone, i.e., where are you, at what time, and in what mode of transport. These kind of digital experience or digital capability will increase the attractiveness of public transportation, will further integrate the modes of public transport, but will also make sure that people are charged the optimum fee for the journey that they want to take. I understand now. Thank you. Thank you for the questions. Let's continue. Takahashi-san, please unmute and start your questions. Takahashi-san, please unmute. We can't hear you. If you could make sure to unmute yourself, please. Excuse me, Mr. Takahashi-san. If you could unmute and state your questions. We're not hearing your voice. Takahashi-san? Our apologies, but we will need to get back to you after adjustment later. There seems to be some audio problems. So let us move on to another person. Osaka-san, please unmute and state your questions. Can you hear me? Yes, we can. Osaka from Toyo Keizai. I have two related questions. My first question is on the IR day in June, FY 2025 revenue to be around JPY 850 billion and Thales business, was that included in that number? That's my first question. Second, FY 2022, when the closing occurs and after acquiring Thales business, what's going to be the size of the revenue post-acquisition? Two questions, please. Thank you for the questions. To address your first question, when we organized Investor Day in June, the number that we mentioned, JPY 850 billion, GTS, this deal was not reflected. This is going to be on top of the number that we mentioned back then. That's our answer to your first question. To respond to your second question. Revenue for the year, if you could take a look at the material. Bear with me for a moment. A little less than JPY 200 billion. That's the size of the annual revenue that will be added on. Of course, we will like to proceed with our plan and see what the number is going to be more precisely. Thank you. [Non-english content] Senbongi-san, please. Please unmute and ask your question. Your question. I have two questions. Regarding the GTS acquisition from Thales, I understand that Hitachi already had a signaling business and receiving orders for this business as well. There is a complementarity in terms of regions that was mentioned. Beyond that, with the signaling business of Thales, inclusive of hardware, functionality, what is the strength? In terms of customer base, as well as in terms of railway operation and supporting system, is there incremental advantage to be provided by GTS? That's my first question. Second question is as follows. PMI will be pursued going forward, what are the challenges you can foresee? That's all. Okay, thank you very much for your question. In terms of Thales, there is some area of overlapping technology in terms of European traffic control and computer-based train control systems. As you pointed out, the customer base is quite different. Thales is extremely strong in Germany and in the U.K., and in Canada. Whereas Hitachi Rail is strong in the U.K., in Italy, and growing business in North America or the U.S. in more particular. We see that a real complementary set of customers that we can work with. Secondly, you know, the technology of today is moving. We are investing in research and development, as is I'm sure Thales GTS business, as signaling becomes more and more digital. We see a huge synergy in terms of the R&D effort as we develop signaling systems going forward. Having said that, signaling is part of the business. The other parts of the business are a number of technologies that we don't have, such as driver advisory systems, such as some elements of overall traffic control and SCADA control. As mentioned by the previous question, the revenue control, road charging and car park charging, which is an expansion beyond our traditional rail business into the adjacencies of mobility. We see from a customer point of view and from a technology point of view, a strong strengthening of our business. With regard to your second question, in terms of post-merger integration, we in the rail business have very successfully integrated the AnsaldoBreda business into Hitachi. In fact, Luca D'Aquila, the CFO of Rail, who's on the call today, joined Hitachi from AnsaldoBreda back in 2015. The management team is now a combination and will be a further combination of the Thales GTS senior executives and the Hitachi Rail senior executives. We will be building the organization together so that we have one seamless business. It's an exciting challenge for us. It's a challenge that we've done before, so I'm super confident that we can make it a success. Thank you. Thank you. Earlier, because of the audio trouble, we were not able to get questions from Takahashi-san. Takahashi-san, once again, please unmute yourself and start your questions. Hello? Yes, we can now hear you. My apologies. I have two questions as well. First regarding financing. The deal size is EUR 16.6 billion. How is this going to be financed? At this moment, what is the plan for financing the deal? Another question, the other question, JPY 10 trillion of revenue and operating income of 10% or so. To achieve that, from what we can see, I don't think you need another acquisition, another M&A deal. What is your view? Are you thinking of revising the numbers upward, going forward? What is the possibility of doing that? Two questions, please. To respond to your first question, the deal is expected to be closed toward the end of FY 2022. There's more than a year to go, so things are not decided. Of course, there will be a combination of cash on hand and borrowings to finance the deal. Mr. Dormer will answer the second question. Do we need this? I think we always need to be in a strong position with all of our businesses. Because this is a challenging market, as is all markets. We have seen some consolidation in the railway sector over the last couple of years, and the formation of some very strong players. This asset is a very rare asset. For these assets to become available is a really, to me, once in a lifetime type opportunity for Hitachi Rail. If we are to cement our long-term future in the rail market and to be the global leader in rail technology, that is an opportunity that we really cannot pass. I'm convinced that this is a great deal for Hitachi. In terms of the overall JPY 10 trillion in OP of 10%, I think this is part of the portfolio of Hitachi and a very important part of Hitachi. I am sure as we formulate our plans going forward, now we have got this acquisition, Keiji Kojima will keep the markets informed as to our future planning. Thank you. We still have some hands up, but at this point in time, we would like to proceed to the institutional investors and analyst questions on the Japanese channel. We will come back to the press later if we have time. Now, at this time, we will field questions from the analysts and institutional investors on the Japanese channel. Please indicate by the Raise Hand button. Kenji Yasui, please. Please unmute and ask your question. I have three questions. I understand that 18 months will be required for closing. It seems long. Is it because of the railway business' nature that makes it so long? Second is a confirmation. In terms of sales, I think you said JPY 200 billion or JPY 100 billion, I'm not sure. Please clarify, 10 x is a multiple that was mentioned, so that's JPY 200 billion. It means EBIT will be around JPY 20 billion. Operating profit margin, 10% or 20%? I want to confirm these numbers once again. Now, third question is the following. Perpetuum was acquired in last year in August, and now GTS will be acquired. Are you eager and enthusiastic to do more M&A? With the climate change is a major theme in the following years going forward, I think railway systems will be increasingly evaluated going forward. On the IR day, this point was emphasized as well. What is the enthusiasm in this market today? Please elaborate. Thank you very much for your question. Let me answer the first question, then Kato-san will answer the second question, then I will answer the third question. Regarding the first question, 18 months is a long period of time. That is because there are multiple jurisdictions that we will need to obtain regulatory clearance, but also the carve-out process from the parent group. That is why it's taking this period of time. Kato-san. Regarding the second question, sorry that we were not clear earlier. In the press release on page three, it is mentioned that GTS three months' performance shown here, sales is EUR 1.7 billion and EBIT is EUR 121 million. That's about EUR 200 billion. Multiple is 10 x. EBIT is 7.3% according to this calculation. Kato, just to add, what I mentioned in my presentation is that the company performance is continuing to improve. We would expect the profitability, by the time we get to close, to be above 9%. A multiple of 10 in this industry compares quite favorably with previous transactions, such as Siemens Invensys or Alstom's acquisition of GE, which was around 17.8 multiple, from memory. I think you're right to point out that railways is becoming a highly evaluated sector. If I look at the relative valuations of our competitors, Alstom is around 18 x EBIT at the moment in terms of valuation. Stadler is around 18 x, 19 x EBIT. These businesses profitability is around 5%, 6%. Our strategy is to drive more into the railway control area, which is traditionally double digit, and a combination of digital. At this moment in time, we do not have any plans for any other acquisitions or certainly any seriously sizable acquisitions such as this in the railway sector, because I think this gives us the correct balance of our portfolio and as a global leading position in railway technology. I think the focus will be in terms of how we drive value from this acquisition, but also how do we drive the synergy from Lumada and GlobalLogic. Thank you. Thank you. Thank you. Next, Yoshizumi-san. Yoshizumi-san, please unmute and state your questions. Yoshizumi from SMBC Nikko Securities. I have three questions, if I may. Impact on performance to the extent that you can share with us, so revenue and income, you have given certain numbers, but goodwill, PPA, and so forth, what would be the impact on those in terms of performance? Second, wouldn't there be additional cost post-acquisition? 50% of Thales GTS business is digital offerings. If you want to combine that with Hitachi's business, will it not lead to greater cost? What would be the cost aspect post-acquisition? Question number three, multiples seem to be reasonable. I think the price of this deal seems to be reasonable, but why was that possible? Why was this price possible given the reasonableness? The first two questions. To address your first question, this is a carve-out deal. The scoping of the balance sheet requires greater precision. We have not been able to achieve that. EPS and goodwill, what will be the impact? We have not been able to ascertain the numbers. Once we do, we will share them with you. The second question, Luca-san, if you could please answer the second question. Mr. D'Aquila, if you could answer the second question. Yes, good morning. Thank you very much. Regarding the expectance of the integration and the potential performance, we have estimated a consistent level of potential synergies that we can capture, not only from revenue's point of view, but also in terms of synergy, in terms of costing specific area like sub cost and in research and development, as Mr. Alistair Dormer mentioned before. In addition to this, we are also evaluating the opportunity to integrate through an accurate program of cost saving, also in terms of improvement of our common deliveries in such a specific geographic area. Regarding the question before, if I can, about the combination of revenues that we asked at the day of closing, wish to stay close to JPY 850 billion at the day of closing. Therefore, as I said in advance, the growing through the reachment of JPY 1 trillion will come through the opportunity to capture the synergy above mentioned, and the increase of our business in the other adjacencies like Mobility as a Service, that Alistair commented before. Thank you very much. Okay. Thank you, Luca. With regard to the final question, regarding the multiple being reasonable, I agree. I guess the question about why we calculated that this was a reasonable offer for the business. The railway sector is fairly consolidated sector, and therefore, how many people can actually buy this business? For us, it's a very attractive business, so we offered what we believe was a fair price. We have to look after the interests of Hitachi shareholders and provide value to them, but equally, put an attractive price on the table, and we were delighted that Thales accepted our offer. Thank you. Understood. Any other questions from our institutional investors and analysts? There seem not. We will now take questions from the English channel. If you have any questions, please indicate by the raise hand button. Any questions from the English channel? There seem not. We will go back to the Japanese channel. Anyone on the Japanese channel can ask a question now. Please indicate if you wish to ask a question by the raise hand button. Nishioka-san, please. Please unmute and ask your question. Question. I hope you can hear me. Yes? Mr. Dormer, you have been talking about consolidation that is taking place in the market today. On the other hand, there is Siemens are also strong in digital and they are also making efforts in similar area. Siemens' MaaS, Mobility as a Service, what kind of advantage do you have against a company like Siemens? Please elaborate furthermore. How did this deal come to your attention? Perhaps consolidation has been taking place in Europe. Is that the reason why this deal has come to your attention? Please elaborate the background. Thank you very much for your question. Regarding the first part of your question. Yes, of course. Siemens are a strong competitor for Hitachi's business. Siemens, like Hitachi, have been improving and increasing and investing in their digital capability. I like competition. Competition drives innovation. It drives better value for our customers. It forces us to keep innovating and keep performing. We really welcome that challenge. In terms of what is the differentiation, this is really an emerging market. It's an emerging technology and an emerging trend. That is something that we will develop, and we are developing now. I think the acquisition of Thales GTS provides us with an asset that's got a lot of experience in the revenue area or revenue collection part of Mobility as a Service and, of course, a lot of customers that are seeking to digitize. The combination of our rail business with GTS, with Lumada, and with GlobalLogic, I think we have the capability within Hitachi to create that competitive advantage in the market. I'm pretty confident that with this asset, we've got a bright future. How did the deal come about? I mentioned at the start that I've wanted to buy this business for many years, because it's a really great business. This has really come to us, my understanding is a strategic review by Thales in terms of their portfolio. We understood that their desire was to focus on aerospace and defense and cybersecurity, therefore they decided that this business was not something that they wanted to keep as core. As soon as we understood that, we were very quick to register our interest. Nishioka-san, did that answer your question? Yes. Thank you. Did the deal emerge and about in the past one or two years? Is that the timing? The deal has emerged this year, so it's been a very quick process. Thales issued a notice to request interested parties earlier this year, and it was a competitive bidding process. We don't know who the other bidders were, but we believe there are other bidders interested in acquiring the asset. We're just very grateful that we were selected by Thales. Thank you for the answer. Thank you. Let's continue. Kawasato. Kawasato, please unmute and state your questions. Kawasato speaking. Can you hear me? Yes, we can. Kawasato from Heavy Industries news agency. I have a question about regional market strategy. The Japanese material, I'm looking at it. At page three, APAC, Singapore, Hong Kong, APAC region. It has track record in providing signaling systems in that region. APAC means Asia Pacific. I understand. If you can elaborate on your strategy for APAC, Singapore, Hong Kong, in these markets, Thales has a track record of running a business and leveraging that. Mainline China, a railway market, you will be entering that and expanding your business there. Is that what this means? If you could please elaborate. Thank you very much for your question. APAC is a important region because it is the growing economy, the emerging economy. APAC region is clearly impacted by further urbanization and population growth. We do see APAC as a key region for investment in railway systems. I think the combination of our turnkey business, where we act as the systems integrator with both signaling, but also with fare collection, with integrated communication systems, adds a wider portfolio to our capability when we are bidding for these kind of opportunities in APAC. Obviously, Hong Kong and Singapore are key references for the Thales signaling systems. Outside of Japan, Hong Kong and Singapore are really the key customers, the key what we would call the blue-chip customers for metro systems with long-established metro systems and excellent performance for both ridership and for safety. I think this is a good reference for us in APAC. To answer your question another way, are we focused on APAC? APAC is an important region to us, but it's not the only region. We have a global business. Japan remains fundamentally important to our railway business, as does Europe, as does growth in North America. Regarding China, Thales GTS does have a joint venture in China, but it's not a huge part of the business. Well, in mainland China, going forward, are you looking to expand your business there? Is that what your plan is? For mainland China, what's your strategy going to be? What's your view on mainland China? Our view on mainland China is that China is a market for predominantly the Chinese players. We do have partnerships in China, but we don't have plans to extend that or expand that. Understood. Thank you. Thank you. Any further questions? There seem not. We would like to bring this meeting to a close. Regarding the Japanese press release, I have some additional information to share with you. On page three, the second paragraph from the bottom, it says that the Thales GTS business revenues of EUR 1.7 billion LTM, last 12 months basis. This is a one year last 12 months basis. That means that 2020 first half of the 2021 all together is EUR 1.7 billion. It's a LTM basis. With this, we would like to bring the explanation meeting regarding the acquisition of the Thales GTS business by Hitachi Rail. Thank you very much for your attendance despite your busy schedule.