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Message from the Management

株式会社 長谷工コーポレーション代表取締役社長 池上 一夫

We will deliver
social value of the future
by further evolving
as a corporate group
for housing
to create great living.

Haseko Corporation
President and Representative Director
Kazuo Ikegami

Current Outlook for the Condominium Market and Issues to Be Addressed

In and after 2020, the business environment surrounding us, the Haseko Group, is different than in the past, affected by changes in society due to the spread of COVID-19.
In the newly built condominiums market in the Tokyo metropolitan, Tokai and Kinki areas that are our main geographic areas of business, the supply volume significantly decreased in early fiscal 2020 as sales centers and model units suspended operations following the spread of infection. However, a rapid recovery was seen after June when the state-of-emergency declaration was lifted and particularly in the Tokyo metropolitan area, full-year results exceeded those for fiscal 2019.
Entering fiscal 2021, the sales rate of newly built condominiums has been at approximately 70% in the Tokyo metropolitan area and the annual forecasts (for January through December 2021) by HASEKO RESEARCH INSTITUTE, Inc. estimates the cumulative sales rate at 80% and a supply of 35,000 units within the year. The rapid recovery and continued strength of the market may be explained by the fact that increasing demand for a better living environment has stimulated new demand for condominiums, as people spend more time at home due to stay-at-home requests and the expansion of telework amid the COVID-19 pandemic. Also, with the continuing low interest rate, the rising purchasing power of high-income and dual-career households is another factor.
As business issues to be addressed, we think the supply of newly built condominiums will inevitably dwindle in the long term due to the decreasing domestic population and an aging society with fewer children, while the current favorable condition is expected to continue for several years thanks to increasing income level.
Meanwhile, in regional cities, particularly in the seat of the prefectural government, redevelopment projects around stations have been increasing toward the creation of a compact city where commercial facilities and medical institutions necessary for daily life and administrative agencies are concentrated within walking distance. The Haseko Group is participating in such projects as a developer to capture demand of elderly households to move from a detached house to a condominium near a station. By increasing the number of condominium units we manage through expanding the supply of newly built condominiums in regional cities, we aim to capture demand for future renovation and large-scale repairs.
In addition, preparing for changes in the newly built condominiums market, we are making efforts to build a structure for securing profits by increasing orders of rental condominiums and non-residential projects including offices, hotels and distribution facilities in order to maintain the volume of construction works even if the supply volume decreases.
Our concern toward the future is a rise in interest rates. If the current low interest rate begins to rise, the favorable market may cool down. Therefore, we recognize that we should operate our business by continually and closely monitoring movements in interest rates.
Another trend to be observed is decarbonization which is now inevitable even in the construction industry. Recognizing that appropriate responses to environmental issues will impact corporate value, the Haseko Group is making efforts to reduce CO2 emissions through business activities and technical development, take measures with partner companies and other supply chain entities and carry out the service-related business after condominiums are occupied.

Continuing Business and Fulfilling Our Mission amid the COVID-19 Pandemic.

Reflecting changes in the business environment caused by the spread of COVID-19 as mentioned in the beginning, business results for the fiscal year ended March 2021 showed unavoidable declines in revenue and profits; however, a remarkable recovery was seen in the second half.
The business most affected by the COVID-19 pandemic was large-scale repair works and renovation in the service-related business. Following the declaration of the state of emergency, condominium management associations were forced to slow down their activities, leading to a delay of orders and works in progress were suspended at many sites as we received requests from residents to refrain from work to prevent infection.
On the other hand, the real estate-related business saw increases in revenue and profits, as sales of property developer projects have been strong and handovers were smoothly executed during the recovery in the second half.
In the construction-related business led by Haseko Corporation, newly built condominiums were handed over as planned without suspending construction.
This is because each and every employee (including those from partner companies) working at sites and salespeople have worked with a sense of mission and pride, making efforts to prevent infection. As President, I sent an internal message including the mission of the Haseko Group amid the COVID-19 pandemic and asking to continue the business as a corporate group for housing to create great living. I deeply thank all employees who have understood my message and provided their support for the business with a unified mindset.
For the current fiscal year ending March 2022, large-scale repairs and renovations are recovering from stagnation and the number of handovers of newly built condominiums is expected to greatly exceed that for the previous year. Also, in the real estate-related business, we can expect some gains on sales of real state we hold, along with strong sales of large-scale property. In these circumstances, we aim to achieve our profit target of “consolidated ordinary income of 75 billion yen” for the fiscal year ending March 2022.

Progress of Initiatives under the Medium-Term Business Plan

In February 2020, we announced the “Haseko Group Long-Term Vision ~ What the Company Aims to Be for the Fiscal Year Ending March 2030 ~” for the next decade, with consolidated ordinary income of 150 billion yen set as the profit level target. At the same time, as a path leading to the Long-Term Vision, we developed the “Haseko Next Stage Plan (Plan NS) ~Aiming for growth to the Next Stage~” as the medium-term business plan over the five years until the fiscal year ending March 2025, and launched it in the fiscal year ended March 2021.
Focused strategies under the Plan NS include focusing on “Expansion of construction-related business domain,” “Expansion of redevelopment and reconstruction business / response to compact city” and “Continuation and strengthening of service-related business” for strengthening the competitiveness of core businesses as well as “Expansion of investment in real estate related business” and “Investment in overseas business.”
The construction-related business has been increasing market share in the Tokyo metropolitan and Kansai areas, while setting out the direction to expand construction of tower condominiums, in addition to plate type condominiums for which Haseko has strength traditionally in the newly built condominium domain. However, as competition in order-taking for tower condominiums is intensifying, they are less profitable than plate type condominiums, so we aim to secure the volume while striking a balance between the two. Furthermore, we will also work on non-residential projects as mentioned above as a measure to expand our order-taking domains.
The construction-related business is working on production technology innovation by integrating the introduction and utilization of the building information modeling (BIM) with promotion of digital transformation (DX) to reduce construction periods, labor and cost. For BIM, we are promoting development toward the future including a linkage with the next-generation design system which automatically proposes a unit plan with AI technologies. Production technology innovation is steadily generating cost reduction effects and we will increase the locale where these technologies are used, aiming to realize even higher performance.
In the service-related business, we are making efforts to provide sophisticated services by extracting and visualizing lifestyle information of condominium residents collected through sensors using living information modeling (LIM).
For example, LIM may be used to collect data by attaching a seismic sensor to a building for predicting the impact of earthquakes accurately and in detail. Biometric data of residents analyzed by sensors inside a residence may be leveraged to provide health advice. Meanwhile, within Haseko, we will use these technologies combined with DX promotion to improve efficiency for administrative work which requires manpower.
We will verify how we can cut cost of sales using these digital technologies and improve operational efficiency to reduce expenses, and apply them to all Group companies, as a means to secure profits.
Furthermore, the service-related business will focus on the brokerage business, with an eye on expansion of the domestic secondhand house market. Secondhand houses have large potential demand, because they tend to be conveniently located and more affordable compared with new property, and purchasers can renovate them as they like. The market is expected to further grow in the future.
Expansion of investment in the real estate-related business mainly targets expanding the business area for condominium sales business through operating as a developer in regional cities as well as holding and developing rental real estate to secure new revenue sources by, for example, diversifying development projects through the establishment of private placement REIT. While these strategies have rolled out smoothly, we will invest capital, carefully monitoring the risk of an increase in interest rates.
The purpose of investment in the overseas business is to establish a profit base for the future. In California, US, we are participating in development projects for housing for the elderly and rental condominiums in cooperation with a trading company and the posting of gains on sales is expected in the period of Plan NS. We are in the process of absorbing know-how to undertake such overseas projects single-handedly in the future.
The target profit level of Plan NS is “100 billion yen in consolidated ordinary income” for the fiscal year ending March 2025 and “400 billion yen in consolidated ordinary income in aggregate for the five fiscal years.” While we cannot be too optimistic about achievement, the progress to date is fairly satisfactory. We intend to achieve the target by continuing to constantly secure a certain scale of order amounts.

Aiming to Establish CSR Management with Further Growth

Establishing CSR Management is one of our basic policies under Plan NS. We carry out CSR Management as initiatives for solving environmental and social issues through our business, based on ESG factors required for the sustainable growth of the Haseko Group.
As an environmental (E) factor, we developed the proprietary H-BA concrete which reduces CO2 emissions derived from concrete materials by up to 20% compared to conventional products as a new effort to contribute to decarbonization. While conventional environmentally-friendly concrete is limited to underground use, H-BA concrete can be used aboveground. In future, our policy is to adopt H-BA concrete for all newly built rental condominiums where possible. As measures for reducing CO2 emission through cyclical resource use, we launched an initiative of using renewable energy for temporary power onsite, by conducting biomass generation which uses wood waste produced at construction sites as fuel. Internally, we established a working group to develop a framework to endorse the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
As a social (S) factor, for building condominiums adapted to the new normal, we are making efforts to build soundproofed rooms and communal working spaces with a focus on comfort to cater to demands derived from remote working. For building disaster-resilient condominiums, we have installed the Smart Water Tank which stores rainwater for securing drinking water for emergencies. Furthermore, we will continue to promote businesses which support society such as the old traditional house restoration business which contributes to regional revitalization and the Senior Business that addresses aging society.
To address diversity and gender issues related to internal personnel, we intend to take measures under the tagline “the participation and advancement of each individual,” not limited to the so-called “women’s participation and advancement.” We will establish a system for collecting opinions from our employees and reflect them in improving our systems and awareness raising, aiming to create a comfortable working environment where diverse personnel can actively work.
As a governance (G) factor, by actively utilizing monitoring and recommendations by Outside Directors based on their external viewpoints, we will improve the transparency of management and effectiveness of governance, to bring about the enhancement of corporate value. Haseko Corporation has currently 13 Directors, five of which are Outside Directors. They engage in management leveraging the expert insight and experience they individually obtained in a range of areas. Their involvement is making the current Board of Directors very lively, stimulating internal Directors, and active discussions are carried out. Particularly, the overseas business and other domains, where Haseko does not have abundant internal expertise, benefit from their valuable recommendations.
For shareholders and investors who support the business of Haseko Corporation, we will meet their expectations by improving performance to enhance return of profits. In addition, we will perform prompt and precise information disclosure, create opportunities for dialogue through active IR activities and reflect their opinions in our management.
The Haseko Group will continue to evolve as a company providing housing and services indispensable to human life, responding to changes of the times and meeting the demand and trust from society. To that end, sustainable growth is essential and we will steadily promote growth strategies based on the medium-term business plan.