Financial Results, Corporate Information
Management's Discussion and Analysis of | ||
Financial Position and Results of Operations | 106 | |
Financial Highlights | 115 | |
Non-Financial Highlights | .......... 117 |
Corporate Data, Board of Directors,
Audit & Supervisory Board and Executive Officers,
Share Information .......... 118 | Chapter9 |
Editorial Postscript, | |
Our Communications at a Glance .......... 119 |
Daiwa House Group Integrated Report 2023 105
Message from the CEO
Long-Term Vision and the 7th Plan
The Story of the Group's
Value Creation
Message from the CFO
Developing
our Businesses
Environmental Vision
Strengthening
our Bases
Governance | Financial Results, |
Corporate Information | |
Chapter 9 Financial Results, Corporate Information
Management's Discussion and Analysis of Financial Position and Results of Operations
[MD&A summary]
I. | Assets increased due to expanding business in the U.S. housing market, strengthening built-for-sale business, | |
and investing in the development of logistics facilities, thereby slightly exceeding the financial benchmark | Financial position | |
II. | Although free cash flows turned negative due to strong investment opportunities, we have raised our hurdle rates for the internal rate of return (IRR), | |
a criterion for investment decisions, in an effort to strike a balance between investing in growth and maintaining financial soundness | Cash flows | |
III. | Although return on equity (ROE) rose due to amortization of actuarial differences in retirement benefits, | Profits and losses |
we remain committed to improving the turnover ratio and profit margin by ensuring the effective use of capital. | ||
IV. | From the perspective of growth potential and profitability, we are building an optimal portfolio | Business results by segment |
V. | We are actively working to invest in human capital and in Digital transformation (DX) and IT, | Investments |
in an effort to expand our revenue opportunities and to strengthen the business foundation. |
P.107
P.108
P.109
P.112
P.113
VI. We strive to maintain stable dividends, achieving dividend increases for 13 consecutive periods | Shareholder returns and stock prices | P.114 |
Note: This section analyzes the financial position and results of operations during the five fiscal years from fiscal 2018 to fiscal 2022. | For the list of financial data, see "Financial Highlights" on pages 115 and 116. |
Daiwa House Group Integrated Report 2023 106
Message from the CEO
Long-Term Vision and the 7th Plan
The Story of the Group's
Value Creation
Message from the CFO
Developing
our Businesses
Environmental Vision
Strengthening
our Bases
Governance | Financial Results, |
Corporate Information | |
I. Financial position
Financial condition
Figure 1 Comparison of balance sheets (¥ billion)
Total assets as of the end of fiscal 2022 increased by ¥620.4 billion from the end of fiscal 2021 to ¥6,142.0 billion. This was mainly due to the increase in inventories following the purchase of real estate for sale, and the increase in property, plant and equipment resulting from the acquisition of investment properties in the Single-Family Houses segment.
Total liabilities increased by ¥342.8 billion from the end of fiscal 2021 to ¥3,753.1 billion. This was mainly due to fund raising through borrowing and bond issuance for the purpose of acquiring real estate for sale and investment properties.
Total net assets increased by ¥277.5 billion from the end of fiscal 2021 to ¥2,388.9 billion. This was mainly because a net income attributable to owners of the parent of ¥308.3 billion was recorded and foreign currency translation adjustments increased due to a weaker yen, which offset the ¥86.0 billion in dividends paid to shareholders.
The balance of interest-bearing debt (excluding lease obligations) increased by ¥424.0 billion from the end of fiscal 2021 to ¥1,849.4 billion. The debt-equity (D/E) ratio came to 0.72*1, which exceeded our financial benchmark of about 0.6, due to aggressive upfront investments for growth. At ¥2,091.6 billion, inventories account for the largest proportion of assets. As assets are expected to grow in the future due to the acquisition of inventories and investment properties, we will seek to maintain financial health by verifying the optimal capital structure.
Current/Fixed classification
Total assets 4,334.0
Total current assets | Total current liabilities | |
1,401.8 | ||
1,921.0 | ||
Long-term | 1,288.4 | |
liabilities | ||
Fixed assets | ||
2,412.9 | Total net assets 1,643.7 | |
As of March 31, 2019
Figure 2
Classification by function
Cash and deposits 279.8 | Trade payables 530.4 | |
Trade receivables | 390.9 | |
Inventories | 955.6 | Other liabilities 1,381.3 |
Other assets | 974.4 | |
Interest-bearing debt 778.5 | ||
Real estate for rent | ||
1,056.0 | Total net assets 1,643.7 | |
Fixed assets | 677.1 | |
As of March 31, 2019
Total assets 6,142.0
Total current liabilities | 1 |
1,526.8 | |
1 Total current assets 3,251.9
Long-term3
liabilities 2,226.3
2 | Fixed assets | 2,890.0 | 2 | ||
3 | Total net assets 2,388.9 | 3 | |||
4 | |||||
As of March 31, 2023 | |||||
1 | |||||
1 | Cash and deposits 358.0 | Trade payables 380.0 | |||
Trade receivables 454.3 | Other liabilities 1,523.6 | ||||
1 | Inventories | 2,091.6 | |||
Interest-bearing debt | |||||
▶ | |||||
Other assets | 1,010.7 | 1,849.4 | |||
3 | Real estate for rent | ||||
1,348.0 | Total net assets 2,388.9 | ||||
3 | Fixed assets | 879.1 | |||
As of March 31, 2023
Figures are compared with the final year of our Fifth Medium-Term Management Plan (fiscal 2018).
1 The current ratio increased from 137% to 213%.
2 The fixed ratio dropped from 151% to
127%.
3 The ratio of fixed assets to long-term capital dropped from 84% to 64%.
4 Net assets excluding non-controlling interests grew from ¥1,595.9 billion to ¥2,284.2 billion.
1 Inventories increased from ¥955.6 billion to ¥2,091.6 billion (see Figure 3 ).
2 Real estate for rent increased from ¥1,056.0 billion to ¥1,348.0 billion (see ).
3 Interest-bearing debt (excluding lease obligations) increased from ¥778.5 billion to ¥1,849.4 billion. As a result, the debt-equity ratio increased from 0.49 to 0.72 (after taking the hybrid financing into account).
*1 Calculated by taking into account the 50% equity credit in the hybrid financing (¥150 billion in hybrid bonds (subordinated bonds) issued in September 2019 and ¥100 billion in hybrid loans (subordinated loans) taken out in October 2020).
Daiwa House Group Integrated Report 2023 107
Message from the CEO
Long-Term Vision and the 7th Plan
The Story of the Group's
Value Creation
Message from the CFO
Developing
our Businesses
Environmental Vision
Strengthening
our Bases
Governance | Financial Results, |
Corporate Information | |
I. Financial position
Analysis of asset increases
Inventories as of the end of fiscal 2022 amounted to ¥2,091.6 billion, an increase of 119% compared to fiscal 2018. Major contributing factors include an increase in purchases of real estate for sale for customers considering buying investment properties. The purchases increased as we strengthened "capacity to offer comprehensive business ideas on optimally leveraging a land property," one of our strengths, and promoted built-for-sale business, especially in the Rental Housing and Commercial Facilities Businesses. The increase in inventories was also due to our business expansion in the U.S. housing market and the development of condominiums for sale in China. Looking by segment, the Single-Family Houses and Condominiums Businesses, which operate built-for-sale business overseas, and the Logistics, Business and Corporate Facilities Business, which is selling off logistics facilities and other assets developed in Japan, accounted for a large proportion of inventories.
Investment properties totaled ¥1,610.8 billion, an increase of 49% over fiscal 2018. This includes ¥1,259.9 billion in real estate available for sale*2, up 71%, and ¥350.9 billion in profit-earning real estate*3, up 2.9%, indicating that the increase in real estate available for sale led to a rise in investment properties. This increase was chiefly due to our expanded investment in the development of logistics facilities, which is a profit driver.
The increase in assets is largely attributable to an increase in inventories and investment properties, which is a result of our aggressive investment for growth. Investment decisions are made based on the internal rate of return (IRR) as an important indicator, thus we believe these properties should help us recoup funds and yield profits when sold. In an effort to improve capital efficiency, we intend to continue selling properties at optimal times based on market conditions and other factors.
*2 Real estate available for sale refers to real estate that becomes readily salable after investment to earn profit from price rise.
*3 Profit-earning real estate means real estate that we developed to earn rental income.
Figure 3 | Inventories | |||||
Inventories (left) | Single-Family Houses | Rental Housing | ||||
Condominiums | Commercial Facilities | |||||
Logistics, Business and Corporate Facilities | ||||||
(¥ billion) | Others (Environment and Energy, other businesses) | (%) | ||||
2,500 | Ratio of inventories to total assets (right) | 34.1 | 35.0 | |||
2,000 | 28.3 | 2,091.6 | 28.0 | |||
9.7 | ||||||
22.1 | 23.7 | 23.2 | 1,562.4 | 417.8 | ||
1,500 | 310.6 | 21.0 | ||||
1,173.6 | ||||||
955.6 | 1,094.8 | |||||
1,000 | 505.4 | 14.0 | ||||
500 | 256.1 | 7.0 | ||||
591.7 | ||||||
0 | 2018 | 2019 | 2020 | 2021 | 2022 (FY) | 0 |
Figure 4 Balance of real estate development
(¥ billion) | Real estate available for sale | |
2,000 | ||
Profit-earning real estate | ||
1,610.8 | ||||
1,500 | 1,290.5 | 1,369.9 | 350.9 | |
1,228.6 | ||||
1,077.9 | 333.0 | |||
367.9 | 344.1 | |||
1,000 | ||||
341.1 | ||||
500 | 946.3 | 1,036.8 | 1,259.9 | |
860.7 | ||||
736.7 | ||||
0 | ||||
2018 | 2019 | 2020 | 2021 | 2022 (FY) |
II. Cash flows
Basic approach
The basic approach to cash management is to invest in line with the amount of cash generated by business operations. While our Seventh Medium-Term Management Plan sets a D/E ratio of about 0.6 as a criterion for financial discipline, we may exceed it temporarily due to frontloaded investment in growth as we must actively invest in attractive opportunities. To control the level of interest-bearing debt at around 0.6 In the medium to long term, we raised the hurdle rates for the internal rate of return (IRR), which we use as investment criteria, from 8.5% to 10%, thereby balancing investment in growth with financial soundness.
Cash flow condition
Cash flows from operating activities during fiscal 2022 decreased by ¥106.1 billion from fiscal 2021 to ¥230.2 billion. The ratio of cash flows from operating activities to net assets excluding non-controlling interests, assuming equity capital to be 1.0, was 0.10, down 0.07 points from 0.17 in fiscal 2021. This was mainly due to the purchase of real estate for sale and the payment of corporate income tax, which offset the ¥440.4 billion recorded in income before income taxes.
Cash flows from investment activities were - ¥505.1 billion, due to the acquisition of real estate for rent, etc. and the implementation of the ¥429.4 billion investment into the real estate development business based on the investment plan under the Seventh Medium- Term Management Plan. As a result, free cash flows (cash flows from operating activities + cash flows from investment activities) were
- ¥274.8 billion, while cash flows from financial activities were ¥287.4 billion due to fund raising through borrowing and bond issuance for the purpose of acquiring inventories and investment properties.
Daiwa House Group Integrated Report 2023 108
Message from the CEO
Long-Term Vision and the 7th Plan
The Story of the Group's
Value Creation
Message from the CFO
Developing
our Businesses
Environmental Vision
Strengthening
our Bases
Governance | Financial Results, |
Corporate Information | |
II. Cash flows
As a result of the above, the balance of cash and cash equivalents at the end of fiscal 2022 was ¥346.1 billion, an increase of ¥19.9 billion from the end of the previous fiscal year.
Figure 5 Cash flows
(¥ billion) Cash flows from operating activities (after bank holiday adjustments)
600 Cash flows from investment activities
Cash flows from financial activities | 1 | .7 | |||||||||||||||||||||||||||||||
02 | |||||||||||||||||||||||||||||||||
300 | Free cash flows | 4 | 1. | 8 | 24.4 | 287.4 | |||||||||||||||||||||||||||
8 | 0. | 0 | 352.7 | 1 | 69 | .1 | 430.3 | ||||||||||||||||||||||||||
278.4 | |||||||||||||||||||||||||||||||||
1 | 10 | .1 | 1 | 29 | .2 | 287.6 | 300.1 | 336.4 | |||||||||||||||||||||||||
0 | 1 | 49 | .2 | 1 | 39 | .4 | 76.0 | 38.7234.7 | 40.3 | 230.2 | |||||||||||||||||||||||
- | 91.1 | -95.5 | - | 202.4 | - | 55.9 | - | 13.5 | -82.4 | - | 130.9 | ||||||||||||||||||||||
313.6 | - | 313.9 | |||||||||||||||||||||||||||||||
- | 240.4 | -235.0 | - | 343.6 | - | - | 317.2 | - | 389.9 | -467.4 | - | 274.8 | |||||||||||||||||||||
-300 | -1 | 30 | .1 | -86. | 9 | ||||||||||||||||||||||||||||
- | 505.1 | ||||||||||||||||||||||||||||||||
-600 | |||||||||||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 (FY) |
Figure 6 Indices to net assets excluding non-controlling interests (as a ratio where net assets excluding non-controlling interests is equal to 1)
Net assets excluding non-controlling interests | ||||||||
Interest-bearing debt | Cash flows from operating activities | |||||||
1.00 | Cash and cash equivalents | |||||||
0.80 | 0.72 | |||||||
0.60 | 0.51 | 0.53 | 0.49 | 0.54 | 0.59 | 0.61 | ||
0.49 | ||||||||
0.42 | ||||||||
0.40 | 0.40 | |||||||
0.24 | ||||||||
III. Profits and losses
Return on equity (ROE)
Return on equity (ROE) was 14.3%, approximately 3 percentage points of which were attributable to a gain of ¥96.6 billion from amortization of actuarial differences in retirement benefits recorded as operating income. Under the Company's Seventh Medium-Term Management Plan, our business objective is to earn an ROE of 13% or more. We will seek to improve capital efficiency through various means, such as optimizing business portfolios and reducing inefficient assets.
Figure 7 | ROE | |||
(¥ billion) | Net income attributable to owners of the parent (left) | (%) | ||
360 | 30.0 | |||
ROE (right) | 308.3 | |||
270 | ||||
237.4 | 233.6 | 225.2 | 20.0 | |
195.0 | ||||
180 | ||||
14.3 | ||||
15.5 | ||||
14.1 | ||||
11.0 | 11.7 | 10.0 | ||
90 | ||||
0 | 0 | |||
2018 | 2019 | 2020 | 2021 | 2022 (FY) |
(Breakdown of ROE) Ratio of net income to net sales
Net income attributable to owners of the parent amounted to ¥308.3 billion and the average annual growth rate for the period of five years starting from fiscal 2018 was 6.8%. Net income margin was 6.3% and trending toward recovery, even excluding the impact from amortization of actuarial differences in retirement benefits. Despite a rise in material prices and fuel costs, the recovery from the impact of COVID-19 led to an improvement in profit margins.
Figure 8 Ratio of net income to net sales
(¥ billion) | Net sales (left) | (%) | ||||||
6,000 | Net income attributable to owners of the parent (left) | 10 | ||||||
Ratio of net income to net sales(right) | 4,908.1 | 8 | ||||||
4,380.2 | 4,439.5 | |||||||
4,500 | 4,143.5 | 4,126.7 | ||||||
6 | |||||
3,000 | 5.7 | 6.3 | |||
5.3 | |||||
5.1 | 4 | ||||
4.7 | |||||
1,500 | 2 | |||
237.4 | 233.6 | 195.0 | 225.2 | 308.3 |
0 | 0 | |||
2018 | 2019 | 2020 | 2021 | 2022 (FY) |
0.20 | 0.20 | 0.21 | 0.22 | 0.22 | 0.22 | 0.16 | 0.23 | 0.17 | 0.15 | |||
0.20 | 0.23 | |||||||||||
0 | 0.15 | 0.13 | 0.16 | 0.16 | 0.17 | 0.14 | 0.16 | 0.10 | ||||
2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 (FY) | |||
Note: Since FY 2019, interest-bearing debt has been shown as an index after taking the equity of hybrid financing into account.
Cost of shareholders' | Return on equity | Ratio of net income to | Total asset | Financial leverage |
equity | (ROE) | net sales | turnover ratio | |
(Our shareholders' equity cost: 5.3%)
Daiwa House Group Integrated Report 2023 109
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Daiwa House Industry Co. Ltd. published this content on 17 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 October 2023 08:26:32 UTC.