Message from the Management

-- To all our shareholders and investors --

Keiichi Yoshii President, CEO and COO Takeshi Kosokabe Executive Vice President, CFO

The Group's net sales and operating income both set new records for the fiscal year ended March 31, 2018 (the final year of our 5th Medium-Term Management Plan)

Under the Group's three-year 5th Medium-Term Management Plan (FY2016–2018), which started in April 2016, we are working to create an operational base that will realize four trillion yen in annual sales by meeting customer demand in the Japanese market and preparing the Group to face the environmental changes that await us in the future.

During the final year of this plan, fiscal 2018, the Group enjoyed an improved performance by its three principal growth drivers—Rental Housing; Commercial Facilities; and Logistics, Business and Corporate Facilities. Thanks to this, total net sales came to 4 trillion 143.5 billion yen and operating income to 372.1 billion yen, while net income attributable to owners of the parent amounted to 237.4 billion yen, all set new records. As a result, we significantly outperformed the initial targets of the 5th Medium-Term Management Plan.

Formulation of 6th Medium-Term Management Plan

We have formulated the three-year Daiwa House Group 6th Medium-Term Management Plan (covering the FY2019–2021 period).

Under the 6th Medium-Term Management Plan, considering a news releases entitled “Notice Concerning Irregularities in the Accounts of a Daiwa House Affiliate in the People’s Republic of China,” (published on March 13, 2019) and a news release entitled “Off-Specification Components in and Remedial Work on Daiwa House Single-Family Houses and Rental Housing.” (published on April 12, 2019), we are giving priority to reinforce our corporate governance system and to leverage our wide-ranging business operations to achieve sustained growth.

We forecast net sales for the final year of the plan ending March 31, 2022 in the amount of 4 trillion 550 billion yen, with operating income of 405 billion yen, and net income attributable to owners of the parent of 267 billion yen.

We intend to press forward with updating the infrastructure of our Single-Family Houses Business and Rental Housing Business, aiming at renewed growth, and to focus efforts on expanding our operations in the fields of Commercial Facilities Business and Logistics, Business & Corporate Facilities Business. Also, we will strengthen our system for supervision of overseas business while making continuous investments in business operations. In addition to investment in growth, including in real estate development, we are also investing in the reinforcement of our technology base.

Turning to the Group's capital policy, we position return on equity (ROE) as one of our top-priority management indicators, and under the 6th Medium-Term Management Plan we have set the ROE target level at 13 percent or higher. As the debt-equity (D/E) ratio is an important indicator of financial stability, we are targeting a ratio of approximately 0.5. By setting and reaching these two targets, we aim to strike a good balance between enhancing enterprise value and maintaining financial discipline, while striving to make investment decisions that are simultaneously positive and carefully considered.

With regard to the return of profits to shareholders, our fundamental policy is to conduct investment in areas essential to growth – including real estate development, overseas projects, M&As, research and development, and production capacity – thereby raising earnings per share (EPS), so as to enhance the Group's shareholder value. We have set the dividend payout ratio at 30 percent or higher, and aim to maintain a stable dividend while returning profit that is linked to business performance. In addition, flexible acquisition of own shares is under consideration.

Going forward, in line with the Corporate Governance Guidelines, we will continue working to achieve a sustainable improvement in enterprise value, as well as enhanced shareholder value.
We look forward to the continued support and encouragement of our shareholders, investors, and all other stakeholders.

Keiichi Yoshii President, CEO and COO Takeshi Kosokabe Executive Vice President, CFO

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