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First of all, we would like to once again offer our deepest apologies for the concern and inconvenience caused to our stakeholders regarding the administrative guidance (warning) we received from the Japan Fair Trade Commission on November 28, 2024, for the possibility of violating regulations regarding the content of our logistics outsourcing. Regarding this matter, we have taken corrective measures to ensure fair transactions with logistics companies, and completed our report to the Japan Fair Trade Commission on March 17, 2025.

Compliance Dialogue [1056KB]

I have always told our employees that we must become a company that is respected by society. No matter how good our business performance may be, if the profits are gained by going against the norm, it is meaningless, and I believe that such a company cannot last long.

Despite this, we deeply regret that the main reason this happened was that we were not sensitive enough to changes in society and were unable to change bad business practices that needed to be changed. Naturally, the management team and all employees will strengthen our compliance system more than ever before and continue to thoroughly work to prevent recurrence and change people's awareness to comply with laws and regulations, including the Antimonopoly Act.

The gross profit margin of our core Workplace Business has improved further after a V-shaped recovery. One of the reasons for this is the effectiveness of the price revisions implemented in July 2024. When I came to Itoki, I felt that we were damaging our own value by selling at low prices in a way that prioritized sales. We have broken away from that way of thinking, increased the true value we provide, and shifted to a policy of properly promoting that, which has been successful. However, I am looking at changes in more fundamental areas.

We define the area in which we sell office furniture as "Office 1.0," which currently accounts for 60% of Workplace Business sales. While the figures suggest that furniture sales are still the main focus, the proportion of "Office 2.0," which includes spatial design and interior construction, has increased to form our current business.

In the "Office 2.0" field, it has become standard for spatial designers to propose office layouts and fixtures that realize optimal work styles, based on discussions with customers, and for our company to undertake interior construction work itself. In other words, evolving from a model of selling furniture to a model of providing offices from the upstream stage—even selling the work style itself—has led to high profitability in Workplace Business. Spatial designers are essential in this field. Function and technology are inorganic worlds where logic takes precedence, but the world of design, which appeals to customer sensibilities, is a different story. Even as we move away from price competition, we want to hone our design capabilities and combine logic with design to ensure that our products are chosen for their design. To that end, over the past three years, we have made this department directly under the president and significantly increased our designer staff from 120 to 180. At the same time, we recruited former Sony employee Hirotaka Tako to promote our product brand strategy, and launched a new product brand, "NII," in June 2025.

Another key point is that renovation projects account for over 80% of our sales. Unlike new construction, which can easily become embroiled in price competition at the bidding stage, renovation projects allow us to act as the prime contractor and create added value, resulting in an overwhelmingly higher gross profit margin per project than new construction. Moreover, the more projects we receive from small and medium-sized regional companies, which have been on the rise recently, the more often we are able to be involved in upstream processes and entrust the entire project to them. In addition, with the rise in material prices, there is a trend for more customers to switch from new construction to renovation.

While price revisions have had a major effect on improving gross profit margins in the short term, we believe that in the medium to long term the main factors will be an increase in the proportion of "Office 2.0" and an expansion of renewal projects for regional and small- and medium-sized businesses. As a result, we are currently considering a new challenge: creating a system that can cover the entire country flexibly and efficiently, so that the allocation of resources that has been centered on major metropolitan areas does not become a bottleneck.

Up until now, offices have been designed based on past data and experience. However, going forward, we believe it will be important to verify how offices created based on hypotheses are actually being used and to make improvements. We have defined this area as "Office 3.0" and have released "Data Trekking," a solution that analyzes data obtained through monitoring, proposes and implements office improvement measures to address visualized office issues. We had set a target of 40 orders last fiscal year, but have received 60, exceeding our expectations, and we can sense the high expectations of our customers.

The "Office 3.0" domain is not simply about adding new products. Up until "Office 2.0," it was a flow business where delivery was the end, but if we can go as far as "Office 3.0," where we accompany our customers through the PDCA cycle of office improvements, we will transform from a flow to a stock-based business, and our earning power will become more stable. Furthermore, because it is people who use offices, the way they are used is constantly changing. If we can visualize these changes with data, we believe that the real battle will begin after the office is built, and we will begin to fully implement this transformation of our business model from fiscal 2025 onwards.

Equipment & Public Works-Related Business performed poorly in fiscal 2024. Delays in construction progress at delivery sites due to labor shortages and rising material costs resulted in results falling short of plan.

However, the trend toward unmanned and labor-saving warehouses remains unchanged, and inquiries about SAS (shuttle cart automated warehouse systems) and other systems are increasing, so the company is well positioned to achieve its planned operating profit of 3 billion yen in fiscal 2026, when postponed projects will be concentrated.

The key to this is the reform of the earnings structure of Dalton, a consolidated subsidiary that provides experimental equipment to research facilities. The company accounts for the majority of its sales from Equipment & Public Works-Related Business, and we are applying a value-added model that starts from the upstream, as well as supporting the reform through personnel exchanges with Itoki. As the company originally had great potential, the effects are already apparent, with an increasing number of projects, and we have high hopes for future developments.

Regarding the issue of securing development and engineering personnel, which is a challenge for Equipment & Public Works-Related Business, we are making steady progress in recruiting excellent students from Hanoi University of Science and Technology in Vietnam.

In fiscal year 2024, we introduced a new personnel system based on the keywords "Professional," "Pay for Performance," and "Retention" to create an environment that supports the growth and challenges of each employee. In response to the challenges of "uniform equality, following precedent, and waiting for instructions," we declare our commitment to developing professional human resources, properly rewarding employees who achieve results, and enabling diverse human resources to continue working with enthusiasm. To put this into practice, we have set aside a human capital investment budget of 10 billion yen in this medium-term management plan.

After announcing our medium-term management plan for fiscal 2024, we held a company-wide event called "OUR ITOKI OUR STORY," attended by approximately 1,000 employees, under the catchphrase "This is where each person's 'work' is." Employees were invited to take to the stage to give their own personal talks about WORK-Style to them, and the event aimed to raise awareness among the entire company of people who are working hard and doing good work. It was a very lively event, however, and my true intention was not to focus on what the company can provide, but to foster a culture in which employees themselves think about what they can do for the company, take on challenges, and grow. This is because I believe that developing such human resources will be a driver of increasing corporate value.

As we continue these efforts, I feel that the results of promoting women's participation in the workplace are becoming clearer. When we recruited people hoping to be promoted from general employees to managerial positions, the percentage of female applicants increased significantly, and women accounted for 40% of those who passed the position. Naturally, we do not make any gender-based considerations when promoting people to management positions. I recently attended a training session for new section managers, and I could clearly see a difference in the sparkle in the eyes of our female employees, which I thought was a wonderful change.
Human Resources Strategy Integrated with Business Strategy [1253KB]

We will also make fundamental changes to governance. For a company to grow sustainably, the board of directors must maintain the right level of tension, and if a manager emerges who wields power and privatizes the company, a system must be in place to remove him. To that end, we have made the number of internal and external directors equal from fiscal 2025. Furthermore, to enhance the effectiveness of the board of directors, we have reviewed the members of the external directors based on the skills necessary for Itoki today. To ensure thorough compliance, we have welcomed Toshie Tanaka, former Deputy Superintendent General of the Tokyo Metropolitan Police Department, and invited Yasuyuki Kawasaki, who previously held key positions at Sumitomo Mitsui Financial Group. We expect Kawasaki to drive management that is mindful of capital costs and stock prices.

Furthermore, now in my fourth year as president, I felt it was time to start thinking about developing successors, so I selected 16 people in their 40s, who are just one step away from becoming an executive officer, and established the "Next Generation Managers Academy." In fiscal 2025, we will also begin work on a succession plan, and will build a solid pipeline of management talent to avoid haphazard decisions.
Human Resources Strategy Integrated with Business Strategy [1078KB]

Here, I will summarize our priority issues for fiscal 2025. Simply put, they are "Digital, Design, Group, and Compliance." Regarding the first, "Digital," we will achieve results in the area of "Office 3.0" and, having moved our core systems to the cloud in June, we will begin pursuing operational excellence. Regarding the second, "Design," we will strengthen our efforts known as "Itoki of Design." Regarding the third, "Group," we will expand the successful model implemented at the parent company to group companies and increase consolidated profitability. In particular, we will swiftly complete the transformation of companies that have a certain impact on consolidated performance, such as Dalton and Itoki Marketspace, and strengthen our business portfolio. Regarding the fourth, "Compliance," as I mentioned at the beginning.

Finally, I would like to talk about my future aspirations. I recognize that the ultimate goal assigned to me is to ensure that all employees understand and embody our mission We Design Tomorrow. We Design WORK-Style." In this regard, I believe we are making good progress, as the engagement score not only shows pride in the company, but also dramatically increases in all categories, including company appeal, job satisfaction, and hopes for the future. In order to continue maximizing employee engagement, I will tighten the reins so as not to stop the flow of change, and aim for greater heights.
Human Resources Strategy Integrated with Business Strategy [1084KB]