Sekisui House : Second Quarter of FY2021 Financial Results Summary

Sekisui House, Ltd.

Second Quarter of FY2021

(February 1, 2021 through July 31, 2021)

- Summary of Consolidated Financial Results -

1. Overview
2. Financial Position
3. Segment Information Built-to-Order Business Supplied Housing Business Development Business Overseas Business
4. Full-YearPlan for FY2021

September 9, 2021

Fundamental Policy of Fifth Mid-Term Management Plan

Further strengthening core businesses

and embarking on new businesses

Sekisui House's Goals

Expand domestic and overseas businesses through offering integrated proposals of technologies, lifestyle design and services

Realize sustainable growth of Sekisui House Group through the organic growth of six business pillars.

1 Overview

Overview

Net sales hit a record high for the first six months and operating income increased significantly, despite tough business conditions due to the spread of COVID-19.

The full-year forecasts have been revised upward, reflecting improvements in financial results in the first six months, strong orders both in Japan and abroad, and an increased profit ratio, among other factors.

In terms of shareholder returns, the expected year-end dividend will be increased by 2 yen to make the total dividend for the year 88 yen per share.

Highlights

■ Built-to-OrderBusiness: Net sales and income increased in the custom detached houses business and rental housing business, reflecting strong orders continuing from the previous period. Profit margins improved significantly. The ASP per building continued to rise. Orders received were strong, reflecting the continued implementation of the three brand strategies and lifestyle design proposals in the custom detached houses business, as well as initiatives focused on sales from the Sha Maison ZEH rental housing and properties for corporate use in the rental housing business.

Sales in the architectural/civil engineering business fell in reaction to sales from large projects in the previous fiscal year.

■ Supplied Housing Business: Sales in remodeling business continued to improve significantly for proposal-based remodeling corresponding to lifestyle changes and environment-based remodeling, such as energy-saving. The ratio of large-scale orders also rose. High occupancy rates and rents were maintained in the real estate management fees business with the offering of high quality buildings in good locations, coupled by residents first- oriented building management and services. Stable growth continued.

■ Development Business: Net sales and orders received increased in the houses for sales business due to the continuous procurement of high-quality land and the strengthening of the sales structure in response to strong demand.

The condominiums business made progress as planned in delivery. Orders received were strong.

In the urban redevelopment business, occupancy rates for offices and houses remained solid and the progress in property sales as planned. Earnings from the operation of hotels declined.

■ Overseas Business: The homebuilding business and master-planned community business in the United States posted significant increases in sales and income. In the multifamily business, one property was sold.

In the overseas business as a whole, sales and income increased due to strong business in the United States, while sales and income decreased in China.

								(¥ billion)
	FY2020			FY2021
	(20/2-20/7)		(21/2-21/7)
	Results		Margin	Results	Margin		YOY
			Amount	%
Net sales	1,167.9			1,223.6			55.6	4.8%
Built-to-Order	493.9			487.2			(6.7)	(1.4%)
Supplied Housing	346.0			371.1			25.1	7.3%
Development	151.1			178.2			27.1	18.0%
Overseas	140.5			149.5			8.9	6.4%
Gross profit	230.4		19.7%	252.7	20.7%		22.2	9.7%
Built-to-Order	101.8		20.6%	112.1	23.0%		10.3	10.1%
Supplied Housing	63.8		18.5%	72.6	19.6%		8.8	13.8%
Development	31.4		20.8%	30.9	17.4%		(0.4)	(1.4%)
Overseas	31.0		22.1%	34.1	22.8%		3.0	10.0%
SG&A	137.8			143.0			5.2	3.8%
Operating income	92.6		7.9%	109.6	9.0%		17.0	18.4%
Built-to-Order	48.3		9.8%	57.9	11.9%		9.5	19.7%
Supplied Housing	32.5		9.4%	39.8	10.7%		7.2	22.4%
Development	19.2		12.7%	16.4	9.2%		(2.7)	(14.4%)
			(Non-operating income/expenses)
Overseas	15.6		11.1%	18.1	12.1%		2.5	16.2%
			・Equity in earnings (losses) of affiliates: ¥
Non-operating	(1.9)			1.6			3.6	－	▶	(0.1 billion) (down ¥1.0 billion YOY)
income/expenses
									・Foreign exchange gain(loss): ¥1.1
Ordinary income	90.6		7.8%	111.3	9.1%		20.6	22.8%
			billion(up ¥4.5 billion YOY)
Extraordinary income	－			0.7			0.7	ー		・Interest expenses: ¥1.4 billion (up ¥0.0
Extraordinary loss	1.4			0.9			(0.5)	(37.5%)		billion YOY)
Profit
attributable to owners of	59.4		5.1%	72.5	5.9%		13.1	22.1%
parent
EPS (yen)	87.10			106.90

	State of Orders								(¥ billion)
		Consolidated orders			Order backlog
	FY2020	FY2021	YOY		FY2020	FY2021 2Q	Change
	(20/2-20/7)	(21/2-21/7)	Amount		％	(Jan. 31, 2021)	(Jul. 31, 2021)	Amount		％
	1,135.4	1,342.1	206.7		18.2%	1,363.4	1,481.9	118.5		8.7%

Sheet 1

2 Financial Position

Consolidated Balance Sheets

							(¥ billion)
(Assets)	FY2020	FY2021 2Q	Amount	(Liabilities and	FY2020	FY2021 2Q	Amount
(Jan. 31, 2021)	(Jul. 31, 2021)	changed	net assets)	(Jan. 31, 2021)	(Jul. 31, 2021)	changed
Total current assets	1,780.7	1,867.0	86.3	Total current liabilities	835.7	829.0	(6.7)
Real estate for sale *	923.9	1,039.3	115.3	Total long-term liabilities	421.2	435.9	14.7
Total noncurrent assets	845.1	843.6	(1.4)	Total liabilities	1,256.9	1,264.9	7.9
				Total net assets	1,368.8	1,445.7	76.8
Total assets	2,625.8	2,710.7	84.8
Total liabilities and net	2,625.8	2,710.7	84.8
				assets

* Total of Buildings for sale, Land for sale in lots, and Undeveloped land for sale.

[Main factors of change]

• Assets: Accounts receivable from completed construction contracts decreased.

Real estate for sale increased.（including the impact of exchange rate fluctuations of ¥41.0 billion）

• Liabilities and net assets: Interest-bearing debts increased, including the impact of exchange rate fluctuations. Translation adjustments increased.

Real estate for sale by segment

Houses for sale： ¥136.3 billion (As of Jan. 31, 2021: ¥120.8 billion) Condominiums： ¥166.9 billion (As of Jan. 31, 2021: ¥146.4 billion)

Urban redevelopment： ¥53.1 billion (As of Jan. 31, 2021: ¥46.9 billion) Overseas：¥682.8 billion (As of Jan. 31, 2021: ¥609.7 billion)

State of Interest-bearing Debts

	FY2020	FY2021 2Q	Amount
	(Jan. 31, 2021)	(Jul. 31, 2021)	changed
Interest-bearing debts (¥ billion)	562.9	567.3	4.3
D/E ratio	42.4%	40.5%	(1.9p)
taking into account hybrid bonds	36.3%	34.7%	(1.6p)
Equity ratio	50.5%	51.7%	1.2p

State of Cash Flows

			(¥ billion)
	FY2020	FY2021	Amount changed
	(20/2-20/7)	(21/2-21/7)
Net cash provided by (used in) operating activities	39.7	75.4	35.6
Net cash provided by (used in) investing activities	(40.8)	(39.8)	0.9
Free cash flow	(1.0)	35.5	36.6
Net cash provided by (used in) financing activities	(33.2)	(58.8)	(25.6)
Net increase (decrease) in cash and cash equivalents	(39.2)	(9.3)	29.9
Cash and cash equivalents at beginning of period	583.2	600.2
Increase (decrease) in cash and cash equivalents resulting	ー	2.1
from change of scope of consolidation
Cash and cash equivalents at end of period	544.0	593.1

[Main factors of change]

•(Increase) decrease in inventories: Previous period ¥10.0 billion, Current period: ¥(41.6 billion)

•(Increase) decrease in notes and accounts receivable: Previous period ¥(5.7 billion), Current period: ¥26.5 billion

State of Investment

	FY2020	FY2021	Amount
	(20/2-20/7)	(21/2-21/7)	changed
Capital expenditures	34.0	47.7	13.7
Depreciation and amortization	10.4	11.8	1.4

(¥ billion)

FY2021

Full-year plan

100.0

22.0

Sheet 2

3 Segment Information

	Built-to-Order Business					(¥ billion)
				Net sales
			FY2020	FY2021		YOY
			(20/2-20/7)	(21/2-21/7)		Amount	%
Custom detached houses		157.5	167.1		9.5	6.1%
Rental housing		176.3	183.0		6.7	3.8%
Architectural / Civil engineering		160.1	137.0		(23.0)	(14.4%)
	Total		493.9	487.2		(6.7)	(1.4%)
				Operating income
			FY2020	FY2021		YOY
			(20/2-20/7)	(21/2-21/7)		Amount	%
Custom detached houses		14.9	20.3		5.4	36.5%
Rental housing		21.8	25.8		4.0	18.5%
Architectural / Civil engineering		11.6	11.7		0.0	0.7%
	Total		48.3	57.9		9.5	19.7%
				Orders
			FY2020	FY2021		YOY
			(20/2-20/7)	(21/2-21/7)		Amount	%
Custom detached houses		155.3	179.2		23.9	15.4%
Rental housing		178.6	192.7		14.0	7.9%
Architectural / Civil engineering		136.3	157.7		21.4	15.7%
	Total		470.2	529.7		59.4	12.6%

Gross margin

FY2020	FY2021	Change
(20/2-20/7)	(21/2-21/7)
25.0%	26.7%	1.7p
24.0%	25.8%	1.8p
12.5%	14.7%	2.2p
20.6%	23.0%	2.4p
Operating margin
FY2020	FY2021	Change
(20/2-20/7)	(21/2-21/7)
9.5%	12.2%	2.7p
12.4%	14.1%	1.7p
7.3%	8.6%	1.3p
9.8%	11.9%	2.1p
		(¥ billion)
Order backlog
FY2020	FY2021 2Q	Amount
(Jan. 31, 2021)	(Jul. 31, 2021)	changed
183.2	195.4	12.1
372.7	382.3	9.6
362.4	383.0	20.6
918.4	960.8	42.4

	ASP per building (10 thousand yen)	■ Custom detached houses business
	FY2020	FY2021	Amount	Ratio of Green First Zero: 90% (April through July)
	(20/2-21/1)	(21/2-21/7)	changed	Ratio of three- and four-story housing (in value): 9.1%
Custom detached houses	4,138	4,153	15	■ Rental housing business
Rental housing	11,796	12,500	704	Ratio of three- and four-story housing (in value): 77.9%

	Supplied Housing Business					(¥ billion)
			Net sales
		FY2020	FY2021		YOY
		(20/2-20/7)	(21/2-21/7)		Amount		%
Remodeling	68.9	79.7		10.7		15.6%
Real estate management fees	277.0	291.4		14.3		5.2%
	Total	346.0	371.1		25.1		7.3%
			Operating income
		FY2020	FY2021		YOY
		(20/2-20/7)	(21/2-21/7)		Amount		%
Remodeling	9.7	13.2		3.4		35.4%
Real estate management fees	22.7	26.5		3.8		16.9%
	Total	32.5	39.8		7.2		22.4%
			Orders
		FY2020	FY2021		YOY
		(20/2-20/7)	(21/2-21/7)		Amount		%
Remodeling	66.5	81.1		14.5		21.8%
Real estate management fees	277.0	291.4		14.3		5.2%
	Total	343.6	372.5		28.9		8.4%

• Real estate management fees business Number of units under management: 666 thousand
  Occupancy ratio: 98.0% (up 0.3p from the end of the previous year)

Gross margin

FY2020	FY2021	Change
(20/2-20/7)	(21/2-21/7)
27.5%	28.5%	1.0p
16.2%	17.2%	1.0p
18.5%	19.6%	1.1p
Operating margin
FY2020	FY2021	Change
(20/2-20/7)	(21/2-21/7)
14.2%	16.6%	2.4p
8.2%	9.1%	0.9p
9.4%	10.7%	1.3p
		(¥ billion)
Order backlog
FY2020	FY2021 2Q	Amount
(Jan. 31, 2021)	(Jul. 31, 2021)	changed
28.5	29.9	1.3
ー	ー	ー
28.5	29.9	1.3

Sheet 3

3 Segment Information

	Development Business				(¥ billion)
			Net sales
		FY2020	FY2021		YOY
		(20/2-20/7)	(21/2-21/7)		Amount	%
Houses for sale	62.7	86.1		23.4	37.3%
Condominiums	41.7	40.2		(1.5)	(3.7%)
Urban redevelopment	46.5	51.8		5.2	11.3%
	Total	151.1	178.2		27.1	18.0%
			Operating income
		FY2020	FY2021		YOY
		(20/2-20/7)	(21/2-21/7)		Amount	%
Houses for sale	3.6	6.8		3.2	88.9%
Condominiums	6.0	5.9		(0.0)	(1.4%)
Urban redevelopment	9.5	3.6		(5.9)	(61.8%)
	Total	19.2	16.4		(2.7)	(14.4%)
			Orders
		FY2020	FY2021		YOY
		(20/2-20/7)	(21/2-21/7)		Amount	%
Houses for sale	67.2	102.4		35.2	52.4%
Condominiums	28.2	40.9		12.6	44.9%
Urban redevelopment	33.6	66.5		32.8	97.6%
	Total	129.1	209.9		80.7	62.5%

• Urban redevelopment business

Sales from property sales:	¥36.2 billion (Previous period: ¥30.7 billion)
Profit from property sales:	¥5.1 billion (Previous period: ¥8.4 billion)

	Overseas Business					(¥ billion)
			FY2020	FY2021	YOY
			(20/2-20/7)	(21/2-21/7)	Amount		%
Net sales		140.5	149.5	8.9		6.4%
Operating income		15.6	18.1	2.5		16.2%
Orders		160.4	189.6	29.1		18.2%

Gross margin

FY2020	FY2021	Change
(20/2-20/7)	(21/2-21/7)
18.1%	19.2%	1.1p
20.8%	22.3%	1.5p
24.5%	10.6%	(13.9p)
20.8%	17.4%	(3.4p)
Operating margin
FY2020	FY2021	Amount
(20/2-20/7)	(21/2-21/7)	changed
5.8%	7.9%	2.1p
14.5%	14.8%	0.3p
20.5%	7.1%	(13.4p)
12.7%	9.2%	(3.5p)
		(¥ billion)
Order backlog
FY2020	FY2021 2Q	Amount
(Jan. 31, 2021)	(Jul. 31, 2021)	changed
47.7	63.9	16.2
91.6	92.3	0.6
28.9	43.6	14.7
168.2	199.9	31.6

	FY2020	FY2021	Change
	(20/2-20/7)	(21/2-21/7)
Gross margin	22.1%	22.8%	0.7p
Operating margin	11.1%	12.1%	1.0p
	FY2020	FY2021 2Q	Amount
Order backlog	(Jan. 31, 2021)	(Jul. 31, 2021）	changed
(¥ billion)	199.6	239.7	40.1

• Overseas Business / Details by country

		FY2021 (21/2-21/7)
Country	Net sales	Operating	Ordinary		Orders	Exchange
	income	income		rate(yen)
Australia	19.5	0.1	0.1		29.1	82.72
China	10.0	0.2	1.0		13.6	16.63
U.S.A	119.7	18.3	17.6		146.7	107.74
Singapore *			0.2			80.87
U.K.*			(0.1)			149.21
Other	0.0	(0.5)	(0.5)		0.0	ー
Total	149.5	18.1	18.4		189.6	ー
		FY2020 (20/2-20/7)
Country	Net sales	Operating	Ordinary		Orders	Exchange
	income	income		rate(yen)
Australia	10.0	0.1	0.1		13.6	71.84
China	40.7	6.7	7.8		15.6	15.37
U.S.A	89.6	9.1	9.0		131.1	108.43
Singapore *			1.1			77.84
U.K.*			(0.4)			136.97
Other	0.0	(0.4)	(0.4)		0.0	ー
Total	140.5	15.6	17.2		160.4	ー

* Accounted for by the equity method

(¥ billion)

FY2021 2Q (Jul. 31, 2021）

Investment

Order backlog

balance

43.6 154.7

1. 52.5

1. 494.6
   36.3
   3.4

• ー

1. 741.6

FY2020 (Jan. 31, 2021)

Investment

Order backlog

balance

34.0 149.1

1. 52.2

1. 428.4
   45.7
   3.4

• ー

1. 678.9

Sheet 4