Sekisui House : Section４ Mid-Term Management Plan

Section 1

Section 2

Section 3

Section 4

Section 5

Section 6

Section 7

SEKISUI HOUSE Value Report

56

Value Creation Story

Mechanisms and Catalysts

Strategies and Initiatives

Mid-Term Management Plan

Management Foundation

ESG Management

Data

CONTENTS

for Creating Value

for Sustainable Growth

4Section

Mid-Term Management Plan

1. Development of Our Strategies and Positioning of the Fifth Mid-Term Management Plan
2. Progress of the Fifth Mid-Term Management Plan
3. Businesses
   59  Built-to-Order Business 61  Supplied Housing Business 63  Development Business 65  Overseas Business

Section 1

Section 2

Section 3

Section 4

Section 5

Section 6

Section 7

SEKISUI HOUSE Value Report

57

Value Creation Story

Mechanisms and Catalysts

Strategies and Initiatives

Mid-Term Management Plan

Management Foundation

ESG Management

Data

CONTENTS

for Creating Value

for Sustainable Growth

Development of Our Strategies and Positioning of

the Fifth Mid-Term Management Plan

We formulated our Fifth Mid-Term Management Plan for the three years from FY2020 to FY2022 to help realize our global vision to make home the happiest place in the world. We are working to implement growth strategies with a fundamental policy of further strengthening core businesses and embarking on new businesses. We will further strengthen our current core businesses by honing our sensitivity and adaptability to market needs, and develop new business by promoting the Platform House Concept of equipping houses with services supporting the health, connectedness and learning that will underpin new lifestyles, as well as initiatives such as utilizing the Internet of Things (IoT).

• We will also invest in the expansion of new businesses, including an overseas rollout of the Sekisui House technologies we have been cultivating, and work for sustainable growth by strengthening our foundation through open innovation and other measures.

FY2020-FY2022

Fifth Mid-Term Management Plan

Management Direction

Deployment of growth strategies focused on the residential business domain

Fundamental Policy

Further strengthening core businesses and embarking on new businesses

FY2014-FY2016

Third Mid-Term

Management Plan

Fundamental Policy

Strengthening Group synergies and

taking on new challenges in the

residential-related business

Key Measures

Built-to-order business		Supplied housing business
Enhance product appeal, ability to	Enhance cooperation within the
make proposals and construction	Group
capabilities
Development business
Conduct quality community and
town development
Build brands overseas
Establish asset value for the future

Main Management Indicators (FY2016 Results)

		(Billions of yen)
Net sales		2,026.9
Operating income		184.1
Ordinary income		190.9
Profit attributable to	owners	121.8
of parent
EPS		¥175.48
ROE		11.3%

FY2017-FY2019

Fourth Mid-Term

Management Plan

Fundamental Policy

Building the foundation for the

residential-related business

toward BEYOND 2020

Key Measures

Built-to-order business		Supplied housing business
Lead the industry as the top	Expand the business domain
brand and take on the challenge	by creating new markets, taking
of a new built-to-order business	advantage of existing houses

Development business		Overseas business
Focus on balance between		Increase business opportunities
growth investments and the asset		by providing high-value-added
turnover ratio		houses and housing environments
		in overseas markets

Main Management Indicators (FY2019 Results)

		(Billions of yen)
Net sales		2,415.1
Operating income		205.2
Ordinary income		213.9
Profit attributable to	owners	141.2
of parent
EPS		¥205.79
ROE		11.5%

New	Zone B: Expanding existing businesses			Zone D: Expanding new businesses
	Strengthening	Strengthening brands			Rolling out Sekisui House technology overseas
	CRE/PRE business	for the mass market
	Accommodating	Reinforcing			Large-scale exterior construction and landscaping business
	elderly residents	high-end brands				Selling services externally
Market
Zone A: Strengthening existing businesses			Zone C: Developing new businesses
	Strengthening lifestyle	Strengthening the most				Platform House Concept
	proposals	focused S area
		Strengthening ZEH			• In-Home Early Detection Network (HED-Net)
	Promoting exterior business			• Services focused on connectedness and learning
Existing		rental housing
Managing corporate housing	Strengthening Trip			Providing services for residents using blockchain
Base business
	Existing	Organizational capabilities/Technologies	New
	Main Management Indicators						(Billions of yen)
		FY2020 (Results)		FY2021 (Plan)*	FY2021 (Results)		FY2022 (Plan)*
	Net sales	2,446.9	2,553.0	2,589.5		2,787.0
	Operating income	186.5	220.0	230.1		236.0
	Ordinary income	184.6	218.0	230.0		234.0
	Profit attributable to	123.5	148.0	153.9		158.0
	owners of parent
	EPS	¥181.18	¥218.65	¥227.37		¥236.99
	ROE	9.5%	10.7%	11.0%		10.5%

* Figures are the most recent revised values based on the business environment and progress since the Fifth Mid-Term Management Plan was announced.

Section 1

Section 2

Section 3

Section 4

Section 5

Section 6

Section 7

SEKISUI HOUSE Value Report

58

Value Creation Story

Mechanisms and Catalysts

Strategies and Initiatives

Mid-Term Management Plan

Management Foundation

ESG Management

Data

CONTENTS

for Creating Value

for Sustainable Growth

Progress of the Fifth Mid-Term Management Plan

Key Measures

Built-to-order

business

Supplied housing

business

• Implement three brand strategies
• Promote focused S and A* area marketing
• Actively deploy proposal-based and environment-based remodeling
• Strengthen rental housing management and brokerage business through change in company name to "Sekisui House Real Estate"

Development

business

Overseas business

• Pursue ROA management
• Generate stable profit by improving turnover and acquiring prime land
• Start the global rollout of Sekisui House technologies and advance to the next stage

*Areas in cities that the Company classifies as strategic locations for business development

FY2021 Progress by Business

Built-to-order business

Development business

Orders were strong for ZEH, Family Suite and other high-value-added proposals backed by our technological capabilities for both detached houses and rental housing. Despite the impact of higher material prices, the profit margin improved and both sales and operating income increased. The architectural/civil engineering business achieved its plan for operating income even though sales decreased amid the severe business environment.

In the houses for sale business, success in purchasing high-quality land and strengthening the sales organization resulted in substantial increases in sales and operating income. Sales in the condominiums business were strong, including high- end condominiums, and closings proceeded as planned, resulting in increases in sales and operating income. Sales and operating income in the urban redevelopment business were as planned.

Supplied housing business

In the remodeling business, the profit margin increased as orders for large-scale projects increased due to proactive promotion of proposal-based and environment-based remodeling projects. The real estate management fees business has continued to grow steadily, maintaining high occupancy rates and rent levels by providing high-quality buildings in prime locations, as well as building management and services that put tenants first.

Overseas business

Sales and operating income increased due to continued strong performance in the United States by the homebuilding business and the master-planned community business and the sale of three properties by the multifamily business, as planned. In December 2021, we made Holt a consolidated subsidiary, expanding our business area. In Australia, sales and operating income decreased due to a delay in recovery of the real estate market. In China, we progressed as planned toward completion of our projects.

Other

The exterior business strengthened proposals integrating housing and exteriors for detached houses, rental housing and other buildings, and conducted the Gohon no Ki Project that proposes the planting of tree species native to each area.

	Section 1		Section 2		Section 3
	Value Creation Story	Mechanisms and Catalysts		Strategies and Initiatives
CONTENTS		for Creating Value		for Sustainable Growth
	Businesses
	Built-to-Order Business
	Custom detached houses business	Rental housing business

Architectural/Civil engineering business

This business builds custom detached houses, rental housing and other properties under contract on land owned by the customer. The custom detached houses business promotes three brand strategies according to price range that offer added value in housing as well as high-quality,high-performance products. The rental housing business and architectural/civil engineering business provide high- quality, hotel-like rental housing, commercial buildings and other properties centered on urban areas, their priority strategic focus.

Section 4	Section 5		Section 6		Section 7		SEKISUI HOUSE Value Report	59
Mid-Term Management Plan	Management Foundation		ESG Management		Data

Review of FY2021 and Strategies Going Forward

In FY2021, both sales and operating income grew as severe business conditions persisted with the impact of COVID-19, rising prices for materials and other factors.

• In the first range of products in the custom detached houses business, orders for Sekisui House noie brand houses gradually increased due to stronger information links with Group companies. At the same time, customer needs for housing increased as requirements for living spaces changed and diversified due to the impact of the COVID-19 pandemic. Under these circumstances, we won new orders for second- and third-range products Family Suite Ouchi Premium and SHAWOOD KOKAGE LOUNGE. Through these new high-added- value products, we address changing lifestyles by proposing spaces where residents can spend time at home in greater comfort. In addition, the adoption rate of our SMART-ECSnext-generation indoor environment control system was a very strong 85%. As a result of these successful value-added proposals,

the price per house continued to rise, improving the profit margin.

• We expect customer interest in housing to continue. Therefore, we intend to pursue new appeal and value through our technologies, lifestyle design and services so residents can feel happiest spending time at home.
• In the rental housing business, although growth was weak in orders for non-residential properties such as hotels and medical and nursing facilities,

orders for residential rental properties were strong due to a rapid increase in the ratio of net zero energy houses (ZEH) and the penetration of the Sha Maison brand, which maintains high occupancy rates and rent levels. The architectural/civil engineering business achieved its plan for operating income even though sales decreased amid the severe business environment.

• To meet the targets of the Fifth Mid-Term Management Plan, the custom detached houses business will conduct its three brand strategies and implement a CRM strategy to attract more new customer inquiries and successfully close new contracts. The rental housing business will further strengthen its sales for corporate real estate (CRE) and public real estate (PRE), supply Sha Maison rental housing through value-added offerings, continue to promote its price leader strategy, and ramp up sales of 3- and 4-story rental properties that use our unique Flexible β System construction method. The architectural/civil engineering business will enhance collaboration with Konoike Construction and improve its proposal capabilities to strengthen its CRE and PRE businesses.

* CRM (customer relationship management) strategy:

A management strategy for ensuring continuous, stable profit by maintaining and improving relationships with customers

Family SuiteOuchi Premium	KOKAGELOUNGE
(Japanese only)		(Japanese only)

Sales

(Billions of yen)

1,200						1,101.0
					998.6
900			872.0	984.9
814.0	774.0	302.8	261.9	327.0
	120.9
600	442.8	416.0	360.0			406.0
	358.7	384.0
300
0	371.1	357.9	390.9	323.3	352.7	368.0
	2017	2018	2019	2020	2021	2022	(FY)
						(Plan)

■ Custom detached houses business ■ Rental housing business

• Architectural/Civil engineering business

Operating Income and Operating Margin

(Billions of yen)						(%)
120				113.6	117.2	40
108.9
	99.3		15.1	15.7
90	92.6	95.3	30
3.7
	16.0
60.8
50.3	49.7		56.0	58.0
60		20
	47.0
13.4	12.0	11.4
9.7	11.4	10.6
30			10
48.0	42.2	45.9	32.2	42.4	43.5
0	0
2017	2018	2019	2020	2021	2022	(FY)
					(Plan)

■ Custom detached houses business (Left scale) ■ Rental housing business (Left scale) ■ Architectural/Civil engineering business (Left scale) ● Operating margin (Right scale)

Section 1

Section 2

Section 3

Section 4

Section 5

Section 6

Section 7

SEKISUI HOUSE Value Report

60

Value Creation Story

Mechanisms and Catalysts

Strategies and Initiatives

Mid-Term Management Plan

Management Foundation

ESG Management

Data

CONTENTS

for Creating Value

for Sustainable Growth

Built-to-Order Business

Custom Detached Houses Business

We provide happiness through value-added offerings driven by leading-edge technologies and comfort and lifestyle design proposals tailored to residents that incorporate new services.

Close-Up

Technologies

Lifestyle Design

Services

Quantitative Evaluation of Biodiversity Conservation from the Gohon no Ki

Dynamic Frame System

The high-strength Dynamic Beam Sekisui House has developed enables large-scalepillar-free living rooms- spacious, open areas of approximately 50 square meters or more.

当社標準梁の 約10倍の強度

ダイナミックビーム K

Family Suite Ouchi Premium

A brand that is tailored to lifestyle changes such as the increase in time spent at home due to COVID-19.

PLATFORM HOUSE touch

A smartphone app showing the home's floor plan offers services to confirm conditions in the house, including self-monitored home security, monitoring of the living environment and notifications when other residents enter and exit.

Page 27: PLATFORM HOUSE touch

Project over 20 Years

Since 2001, Sekisui House has been conducting its Gohon no Ki Project to promote the use of indigenous species in landscaping and greening. While taking local ecosystems into account, the project has included

SHAWOOD Construction Method

Our metal joint (MJ) system reinforces the joints, which are considered a weak point of wooden houses. This enables large pillar-free spaces and

atriums, which are difficult to achieve in ordinary wooden structures.

KOKAGE LOUNGE

1. large roof-covered space provides comfort to residents.

Price per house

Suite Concier

Sekisui House carefully selects services in areas including childcare, sleep and relaxation, and lifestyle assistance with the aim of increasing the customer experience value of happiness.

the planting of more than 17 million trees over the 20 years up to 2020. From 2019, we have been working with Kubota Laboratory (Faculty of Science, University of the Ryukyus) and Think Nature Inc. to quantitatively evaluate the contribution to urban biodiversity (conservation and restoration of biodiversity) of the 17,090 thousand trees we have planted with our customers' understanding and cooperation under this project. The findings show a substantial beneficial effect when compared with planting conventional horticultural and non-indigenous

By integrating technologies,		Increase of
2017
lifestyle design and services:	¥4,580 thousand

2021

species. Results included a tenfold increase in the number of tree species native to each region, which is the foundation of regional biodiversity, as well as a doubling of the number of bird species and a fivefold increase in the number of butterfly species that residential

Rental Housing Business, Architectural/Civil Engineering Business

We work for the happiness of owners and tenants by conducting area-specific	marketing that specializes in city-center locations and introducing tenant services in high-quality,hotel-like rental housing.
Technologies	Lifestyle Design	Services

districts can attract.

Sekisui House Nature-Positive Methodology

Flexible ß System

High-strength columns and beams enable larger doors and windows and pillar-free open spaces with spans of up to nine meters.

Our patented technology reduces impact sound from the floor above to about half that of the L-65 floors used in conventional steel-frame construction.

Sha Maison ZEH

Achieves both eco- friendliness and improved profitability.

Tenants can sell electricity generated by photovoltaic power generation system.

Page 104: Promotion of ZEH in Sha Maison Rental Housing

Sha Maison

Premier

This is the highest- grade rental housing in our history, offering the best in quality and value for tenants.

Sha Maison: Quality (Japanese only)

Sha Maison Life CLUB App

This app provides a range of services including access to information useful for daily life and disaster preparedness, and a contact feature for reporting equipment breakdowns or other problems, with further service expansion under consideration.

Cumulative total of over 250,000 registered users

Blockchain-BasedOne-Stop Service for

Renters' Pre-Occupancy Procedures

NEXCHAIN* reduces the burden on new tenants by offering a one-stop service for cumbersome procedures such as onsite inspection, lease preparation and contracts with utilities. The NEXCHAIN platform uses the blockchain to create an environment where users can safely disclose information and receive highly convenient services.

• NEXCHAIN: A consortium for developing an inter-enterpriseinformation-sharing platform that securely links and utilizes data held by various companies