Medium-term Management Plan

Transcription

1 Medium-term Management Plan Create NEW VALUE New Value Creation through Real Estate Solutions- November 2, 2016 JAPANESE PARA-SPORTS ASSOCIATION Official Partner

2 Medium-term Management Plan (From the fiscal year ending March 2017 through fiscal year ending March 2021) 1. Initiatives for Responding to Business Challenges 2. The Daikyo Group s Medium-term Management Plan 3. Business Strategy 4. Management Goals 5. Shareholder Return Policy 6. ESG Initiatives 2

3 Initiatives for Responding to Business Challenges Promoting a radical review to move away from an earnings structure focused on condominium development, which is easily influenced by economic fluctuations Change of Earnings Structure Operating Income Since 2000 (100 million yen) Real estate management business Real estate brokerage business Real estate development and sales business Expansion of Business Enhancement of Profitability Valuing Turnover/Profitability Plan for year ending March 31, Strengthening Financial Base Increasing shareholders equity ratio Reducing Interest-bearing debt Improving D/E Ratio Year ended March 31, 2005 Second bailout (204) (440) Year ended March 31, 2009 Collapse of Lehman Brothers Constructing a Business Base Expanding our Customer Base Enhancing our Business Systems 3

4 Change of Earnings Structure Establishing double-pillar stock and flow businesses style of management, based on a management policy that values consistency and continuity - Stock business - Management Net Sales Ratio Number of condominium units managed Number of facilities managed Year Ended March 31, 2008 Year Ended March 31, 2016 Stock Stock Flow business business 22% Flow business 64% business 36% 78% Approx. 330 thousand units Approx. 90 projects Approx. 530 thousand units Approx. 6,000 projects Brokerage Renovated Condominium Units delivered 0 units 1,236 units - Flow business - Development and sales Inventory Turnover *1 Condominium Gross Profit Margin % % Group Business Locations 123 locations 435 locations *1 Inventory Turnover = Real Estate Marketing Cost Real Estate Inventory 4

5 Strengthening Financial Base Reconstructing our balance sheet achieves our goals. Enabling flexible investment in growth, while maintaining financial soundness Year Ended March 31, 2008 Year Ended March 31, 2016 Shareholders Equity Ratio *1 (Target : 30% or over) 24.2% 60.5% Interest-bearing Debt billion 38.4 billion D/E Ratio *1 (Target : Under 1.2) Ratings Rating and Investment Information, Inc. (R&I) Japan Credit Rating Agency (JCR) BBB (Stable) BBB (Positive) BBB+ (Positive) *2 A (Stable) *2 *1 Target set in year ended March 31, 2011 *2 As of October 31, 2016 and March 31, 2016, ratings were BBB+ (Stable) from R&I, and A- (Positive) from JCR. 5

6 Constructing a Business Base Business Base for a Nationwide Network We are the only* company that conducts development and sales as well as management in all 47 prefectures of Japan. Lifetime Relation System Group wide business system that supports the customer s lifecycle Business Expansion 47 Prefectures Business Locations 435 Locations *Includes 3 overseas countries Suppliers 12,000+ Companies Brokerage Leasing Repair and maintenance Remodelling Ample Customer Base Development Redevelopment Japan s highest total number of condominiums sold and managed Management Number of Condominium Buildings Managed 9,900+ Number of Condominiums Managed 530,000 Facilities Managed 6,000+ Sales Construction *Based on internal research 6

7 Formulation of a Medium-term Management Plan Formulating a medium-term management plan to ensure double-pillar stock and flow businesses style of management, and to progress to the next stage Year Ended March 31, 2016 Ensuring double-pillar stock and flow businesses style of management To the Next Stage Formulation of a Medium-term Management Plan Business Base Change of Earnings Structure Strengthening Financial Base Constructing a Business Base External Environment Changes to the Social Environment Outlook for the Business Environment Management Strategy Growth Strategy Shareholder Return Policy 7

8 1. Initiatives for Responding to Business Challenges 2. The Daikyo Group s Medium-term Management Plan 3. Business Strategy 4. Management Goals 5. Shareholder Return Policy 6. ESG Initiatives 8

9 External Environment Insufficiencies and surpluses will change greatly due to shifts in demographics, diversification of values, and technological progress. Decreasing Population On-site Work Vacant Rooms and Vacant Buildings Working from Home Increasing Roadside Stores Homemakers Foreign Labor PPP/PFI New Houses Local Tax Share XX Residential Property Stock Regional Transportation Infrastructure Children Traffic Accidents Schools Aging Infrastructure Moving toward an age of utilizing social assets effectively Redevelopment Wireless Communication AI/IoT Elderly Nursery and Childcare Facilities Old Earthquake-resistant Buildings Detached Houses Parking Lots Farmland Mountains and Forests Time spent by the Elderly Crematoriums Labor Public/Private and Industry/University Cooperation Natural Energy Housework and Childcare Time Community Surplus Waste Furniture and Appliances Nursing Facilities and Services Fiscal Policies Insufficiency 9

10 External Environment Condominium Management The market for condominium management is expected to steadily expand, as the number of stock condominiums increases. Business Trends Rising demand to stay permanently in the same residence, aging of buildings, increase in condominiums in need of large-scale repair and maintenance work Number of condominium units managed (thousand units) Ratio of Condominium Stock more than 30 Years Old 7,670 7,260 6,770 6,230 50% 40% 32% 24% *1 *2 Large-scale Condominium Repair and Maintenance Market (billions of yen) '15 '20 '25 '30 *1 From the Ministry of Land, Infrastructure, Transport and Tourism s national condominium stock figures. Figures from 2016 onwards rely on internal estimates. *2 Based on internal estimates '15 '20 '25 '30 Based on internal estimates 10

11 External Environment Real Estate Brokerage Pre-owned home sales are expected to keep increasing due to policies of the Japanese government to promote existing home sales and use of vacant homes. International comparison of the average lifespan of houses (years) Japan U.S. U.K. Data related to housing and the economy for fiscal 2015, Ministry of Land, Infrastructure, Transport and Tourism (MLIT) Basic Plan on Housing (excerpts) Development of a new means of recurrent home use that goes beyond the notion of individuals climbing Japan s residence sugoroku ladder of house options Inspections Appraisal methods Promoting use and demolition of rapidly increasing number of vacant homes Relocating to rural areas and alternately living in dual residences Conversion of housing to other uses 220 Pre-owned home sales (thousand units) '13 '14 '15 25 '20 *1 The 2030 Housing Market, Nomura Research Institute (June 7, 2016) *2 Daikyo estimates based on data from the Basic Plan on Housing (Cabinet approval on March 18, 2016) *1 *2 11

12 External Environment Real Estate Development and Sales In major urban areas, the issue of densely populated residential districts is expected to be resolved, while compact city designs become more prevalent in Japan s regional cities against a backdrop of regional revitalization and building of national resilience. Because of these factors, the redevelopment business is expected to grow. Land area of densely populated residential districts that pose extreme danger in the event of an earthquake (ha) 6,000 4,450 Objectives approved by the Cabinet in September 2006 <Mostly eliminated by 2020> Progress behind schedule (currently) Redevelopment projects (Number of districts with projects underway) Mostly resolved (objective) 0 '08 '12 '15 '20 (Preliminary reports) Basic Plan on Housing (Cabinet approval on March 18, 2016) Fiscal 2011 Fiscal 2012 Fiscal 2013 Fiscal 2014 '11 年度 '12 年度 '13 年度 '14 年度 Urban Renewal Association of Japan

13 Aims of Medium-term Management Plan Vision We aim to create new value through real estate solutions, and accumulate social assets that will be passed down to the next generation in order to help make the vision of a stock-oriented society (*) a reality. * Stock-oriented society: A society designed to bring about economic comfort and while minimizing environmental impact through development of longer-lasting housing and other forms of social infrastructure. Profit breakdown Growth strategy Combining consistency with sustainable growth while maintaining a profit balance between real estate management, brokerage, and development & sales Operating income ratio 1. Business domain expansion Products, services, target customers Real estate development & sales Real estate brokerage Real estate development & sales Real estate brokerage 50% 2. Utilization of assets Redevelopment business, ownership of rental properties Real estate management Real estate management 50% 3. Promoting research and development Unmanned operations, mechanization, longerlasting buildings and equipment Fiscal 2015 Fiscal

14 Medium-term Management Plan Key Message Re solution (*1) Key message Making Japanese communities more vibrant Re al Estate Re <Vision> ストック型社会(*2) の実現に向け 不動産ソリューションで新たな価値を創造し 次世代に継承される社会の資産を蓄積する ことを目指します We aim to create new value through real estate solutions, and accumulate social assets that will be passed down to the next generation in order to help make the vision of a stock-oriented society(*2) a reality. <Re-Plus> Re Re pair novation Re + Re al Estate solution Re Re Re modeling nt Re development Re search & Development (*1 Resolutions) Solutions that repurpose surpluses to cover insufficiencies in order to help make the vision of a stock-oriented society a reality (*2 Stock-oriented society) A society designed to bring about economic comfort and while minimizing environmental impact through development of longer-lasting housing and other forms of social infrastructure. 14

15 Priority Themes of the Growth Strategy Re <Re-Plus> modeling Re pair Re novation Re modeling Capturing greater market share in the repair and maintenance business and expanding into external markets Entering the business of detached house renovations drawing on our expertise in the realm of renovated condominiums Capturing greater market share in the remodeling business and expanding into external markets Re nt Re development Re search & Development 2016 DAIKYO DAIKYO INCORPORATED, All rights All rights reserved. reserved. Ownership and management of rental real estate properties that contributes to long-term profitability Enhancement of building renewal projects, urban development projects, and redevelopment projects Promotion of property management mechanization and labor-saving solutions using cutting-edge technologies 15

16 1. Initiatives for Responding to Business Challenges 2. The Daikyo Group s Medium-term Management Plan 3. Business Strategy 4. Management Goals 5. Shareholder Return Policy 6. ESG Initiatives 16

17 Re pair Business Domain Expansion Re-Plus (1): Condominium Repair and Maintenance Business We will make full-scale entry into external markets beginning in fiscal We aim to achieve repair and maintenance sales of 50 billion and 10% market share by fiscal Challenges and plan of action toward achieving goals Size of market for large-scale condominium repairs and maintenance (billions of yen)* /Daikyo s share of the market Operational framework Cost competitiveness Sales capabilities Non-Daikyo sales 7.5% Daikyo s share of the market 10% Daikyo s sales: Fiscal 16/32015 期 Fiscal 21/32020 期 Target * Based on internal estimates 17

18 Re novation Business Domain Expansion Re-Plus (2): Renovations Business Enter the renovated detached house business. Increase sales of renovated dwellings to 2,500 units by Fiscal Business environment Detached house vacancies increasing Reduction in home vacancies due to national policies Growing demand for home renovation Sales of renovated dwellings (units) Detached house vacancies (thousand units) 3,000 2,500 2,120 *1 4,500 *2 Moving ahead in the detached housing renovations business 595 1,236 2,500 Detached house Condominiums '03 '08 '13 '21 13/3 期 16/3 期 21/3 期 *1 Basic Plan on Housing (Cabinet approval on March 18, 2016) *2 Based on internal research Fiscal 2012 Fiscal 2015 Fiscal 2020 target 18

19 Re modeling Business Domain Expansion Re-Plus (3): Remodeling Business I In addition to remodeled residences for individual owners, we will enter the remodeling business for residences, rental condominiums, and single buildings owned by corporations and other entities. Cost of construction work performed on residences ordered by private companies and other entities (billions of yen) Remodeling work on single residential buildings entails little involvement of general contractors, but significant involvement of local builders smaller/ shorter B-to-C remodeled residences Amount of sales, period of construction Whole-building remodeling of company housing Large-scale repairs and maintenance larger/ longer New construction Local builders General contractors Fiscal 2011 Fiscal 2015 Building Extension and Renovation Survey, Ministry of Land, Infrastructure, Transport and Tourism (MLIT) 19

20 Re modeling Business Domain Expansion Re-Plus (3): Remodeling Business II Before remodeling After remodeling Example of remodeling work for single residential buildings One building with 36 units and built 37 years ago; Remodeling work schedule: March 2016 to July

21 Re nt Utilization of Assets Re-Plus (4): Rental Property Business We are developing our Rental Property Business, which leverages Daikyo Group resources in areas such as property acquisition and rental management. We are also building a platform for consistent revenue generation by maintaining long-term ownership of holdings in our stock businesses. Performing operations within the DAIKYO Group Up to now Going forward Brokerage Lease management Remodeling Main source of earnings Gains on sales Income from leases Rental properties Duration of ownership Short-term Long-term Means of utilization Sold after remodeling Subleasing Shared residences Remodeling showrooms etc. 21

22 Re development Utilization of Assets Re-Plus (5): Redevelopment Business I There are currently 16 redevelopment projects underway mainly for properties in core regional cities of Japan. From fiscal 2020 onward, our plans anticipate ongoing sales on the scale of 10.0 billion each fiscal year. Completion in fiscal 2016 Redevelopment projects by geographic area Project listings Projects underway Completion in fiscal 2016 Lions Ogaki-ekimae Laurel Tower Ogaki, Gifu (Slated completion September 2016, sold out) Lions Tower Kashiwa Kashiwa, Chiba (Slated completion May 2016, sold out) 22

23 Re development Utilization of Assets Re-Plus (5): Redevelopment Business II We help deliver solutions to challenges faced in local areas as we bring landowners and government officials together, and accordingly provide support for heightening community-wide asset values and achieving sustainable revitalization. Challenges facing local communities and governments Members of local communities Landowners Community associations and shopping districts Addressing needs for disaster preparedness and mitigation (upgrading and fireproofing buildings, widening roads) Generating liveliness and activity (establishing facilities that offer lifestyle conveniences) Providing a high level of social welfare and well-being (bringing together public facilities and urban functions) Government Urban planning decisions Subsidies Tax incentives Re Daikyo Group Development & construction Sales & management Strengths of the Daikyo Group Office network extending to regional cities across Japan Strong brand recognition and a robust financial base Group-wide business system that lends support to customer lifestyles in areas encompassing real estate development, construction, sales and management 23

24 Re development Utilization of Assets Re-Plus (5) Redevelopment III (Case 1) Gifu City, Gifu Prefecture Takashimaya Minami Urban Redevelopment Conceptual Drawing High-rise tower, with retail facilities, public facilities, and residences 35 above-ground floors and 1 basement floor Height: Approx. 130 m Site area: 6,500 m 2 Conceptual Drawing DAIKYO INCORPORATED, All All rights rights reserved. Conceptual Drawing 24

25 Re development Utilization of Assets Re-Plus (5) Redevelopment IV (Case 2) South 2 West 3 South-west District, Chuo-ku Sapporo, Hokkaido Conceptual Drawing High-rise tower, with retail facilities and residences DAIKYO INCORPORATED, All All rights rights reserved. Conceptual Drawing 28 above-ground floors and 2 basement floors Height: Approx. 122 m Site area: Approx. 3,700 m 2 25

26 Re search & Development Research and Development Re-Plus (6) Utilization of ICT Research themes are automation, mechanization, and longer lasting buildings and equipment. With overseas expansion on the horizon, we are also pursuing R&D through corporate alliances and collaboration with universities. Real Estate Tech Automation AI Long Life Robots IoT Mechanization Collaboration with Universities In-house Research Corporate Alliances Global Innovation *1 Image provided by OPTiM Corp. *2 Image provided by Kagawa University 26

27 Re search & Development Research and Development Re-Plus (6) Overseas Expansion At present, we have expanded into 3 overseas countries. We will promote research and investment during the period of this plan, with the aim of expanding our business and contributing to profitability in the next 5 years. Year Ended March 31, 2016 Building a Foundation Year Ending March 31, 2021 Taiwan Market Analysis and Research Identifying businesses that are capable of overseas expansion Selecting countries, investment targets, and partners Business Expansion and Contribution to Profitability Hong Kong Australia Investment in and Development of Personnel Securing foreign personnel from other sectors Selecting global personnel who will accrue local experience 27

28 1. Initiatives for Responding to Business Challenges 2. The Daikyo Group s Medium-term Management Plan 3. Business Strategy 4. Management Goals 5. Shareholder Return Policy 6. ESG Initiatives 28

29 Management Goals Year Ended March 31, 2016 Year Ending March 31, 2021 Growth Potential Operating Income : 18.3 billion 28.0 billion or more Capital Efficiency ROE : 7.8% 9% or more Reference Financial Soundness ROE = Current Profit Shareholders' Equity Ratio (average of beginning and end of period) Shareholders' Equity Ratio : * Based on the assumption that loss carried forward will have no impact (ROE for the year ended March 31, 2016, taking into account loss carried forward: 7.1%) 60.5% 50% or more 29

30 Investment Plan We will be conducting new investments aimed at making progress during the operation of the plan and thereafter. Direct 150 billion to growth investment by the year ending March 31, Investment Field Invested Sum (Total) Relevant Areas Real Estate Investment 100 billion Inventory real estate owned by our Group s development and sales, and brokerage businesses Securing rental assets Strategic Investment Research and Development Investment Total 50 billion About 150 billion* M&A, etc., related to condominium management, building and facility management, detached house brokerage, and repair and maintenance work Research and development related to automation, mechanization, remote work, and longer-lasting buildings and equipment, etc., using AI, and the IoT, etc. *Invested sum (total) is net investment 30

31 Risk Management Policy Monitoring risk from the real estate, business, and finance perspectives. Risk Monitoring System Real Estate Risks are weighted according to the attributes of each piece of real estate and the period of the project. The maximum potential damage to capital is calculated, and this amount is earmarked as the allowance for risk (refer to diagram on the right). The following businesses limit risk to within the scope of surplus capital. Business Balancing non-assets and assets: Operating income from the real estate management segment is 50% or more of total Finance Equity ratio of 50% or higher Surplus Capital Allowance for Risk Core Capital <Diagram> Equity 31

32 1. Initiatives for Responding to Business Challenges 2. The Daikyo Group s Medium-term Management Plan 3. Business Strategy 4. Management Goals 5. Shareholder Return Policy 6. ESG Initiatives 32

33 Shareholder Return Policy (1) Our basic shareholder return policies are stability, continuity, and enhancing sustainable returns. Dividend and Pay-out Ratio % 36.2% *1 Fiscal 2015 Fiscal 2016 Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal % 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Dividend *1 Refer to the next page for details Payout ratio 33

34 Shareholder Return Policy (2) The dividend for common stock for the year ending March 31, 2017 will rise to 6 from the previous forecast of 4. In addition, a total treasury stock acquisition limit of 10 billion has been set. Dividend per Share of Common Stock Results for year ended March 31, 2016 Forecast for year ending March 31, 2017 *1 Revised forecast for year ending March 31, yen 4 yen 6 yen Pay-out Ratio 20.1% 24.1% 36.2% *2 Acquisition of Treasury Stock 10 billion *3 *1 Announced on May 10, 2016 *2 No regard given to reduction in common stock due to acquisition of treasury stock on or after October 1, 2016 *3 Total purchase price limit 34

35 1. Initiatives for Responding to Business Challenges 2. The Daikyo Group s Medium-term Management Plan 3. Business Strategy 4. Management Goals 5. Shareholder Return Policy 6. ESG Initiatives 35

36 ESG Initiatives The Daikyo Group s Management Philosophy Leveraging the collective strengths of the Group, Daikyo strives to create a harmonious living environment through housing products and services that satisfy the needs of all age groups and lifestyles. ESG Diagram Aim The Group aim to create new value through real estate solutions, and accumulate social assets that will be passed down to the next generation in order to help make the vision of a stock-oriented society (*) a reality. Management Brokerage Leasing Sales Business Activities Repair and maintenance Remodeling Construction Development Redevelopment * Stock-oriented society: A society designed to bring about economic comfort and while minimizing environmental impact through development of longer-lasting housing and other forms of social infrastructure. 36

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38 Disclaimer regarding this Document This document was prepared in English for convenience purposes only. The original Japanese document shall take precedence in the event of any discrepancies arising from the translations or interpretations contained in this document. The current plans, outlook, strategies, etc., of the Company contained in this document that are not historical facts are forward-looking statements regarding future performance, and are based on the judgment of the Company derived from the information currently available to the Company. Accordingly, we ask that readers do not place undue reliance on these forward-looking statements only. Please be aware that actual performance may differ materially from these forward-looking statements due to various important factors arising from changes in the external environment and internal environment. Factors that could cause results which differ from these forward-looking statements are contained in the Risk Factors section of the Annual Securities Report the Company submits to the Director of the Kanto Local Finance Bureau, but they are not limited to only these factors. Furthermore, the only purpose of this document is to provide information; it does not have the purpose of soliciting or recruiting investment in the securities issued by the Company.