Financial strategy

For information on the Itoki Group‘s actions to achieve cost of capital and stock price conscious management, as well as a collection of financial and non-financial data, please refer to the following.

In fiscal 2022, sales increased due to strong demand for office spaces, including renovations, despite the small number of new buildings completed. In addition, we improved our earning power through sales strategies, and operating income increased by 79% year on year for the second consecutive year. As a result, we were able to improve our earning capacity significantly. 
Initiatives related to sales reforms include thoroughly implementing a pricing strategy that provides good products at appropriate prices, reducing burdens through streamlining logistics costs, and controlling SG&A, such as improving sales efficiency of general expenses like sales promotion expenses. In the future, we will continue to strengthen customer contact capabilities by promoting DX, expand sales by acquiring new potential customers, improve profit margins, and acquire operating cash flows.

With regard to production and supply initiatives, we further accelerated cost reductions that we had continued since the integration of sales and manufacturing by implementing production system restructuring in a phased manner, including the establishment of the AP Center, a new assembly and production site. We will also continue to reduce costs by pursuing increased production efficiency and responding to rising raw material prices and energy costs going forward.
As for the direction of the Itoki Group’s capital investment, we will make strategic investments in the development of products and services based on the Smart Office Concept in our mainstay workplace business, advancement of the DX required to promote the development, and improvement in production efficiency. In addition, we will work to expand production capacity and productivity in the equipment field, where growth is expected, and aim to further increase our profits.

As part of our efforts to improve asset efficiency, we are working to reduce total assets with a strong focus on improving ROE and ROIC, as with other structural reforms. In fiscal 2022, we further advanced the sale of cross-shareholdings. We also promoted efficiency mainly in the sale of non-business assets that do not significantly contribute to business earnings; for example, the former factory site in Neyagawa, Osaka Prefecture. 
Consequently, we generated extraordinary gains which led to a significant increase in net income for the fiscal year under review. Profit attributable to owners of parent increased by 353.9% year on year, setting a record high, which resulted in further strengthening our financial base.
On the other hand, we actively implemented the amortization of assets and goodwill mainly of overseas subsidiaries, which had been an issue, and the disposal of old system assets associated with the introduction of ERP in the main unit. By doing so, we reduced the cost burden for the next fiscal year and beyond. 
As a result, we increased ROE significantly to 11.1%. In addition, we substantially improved our cash flows and financial situation to the point where we were practically debt free. 
We are working to reduce total assets by streamlining our assets. However, with the cash retained in the form of gains on sale of fixed assets, the total assets at this time appear to be increasing instead. We understand that as the next step we must figure out the ways to utilize the cash in the form of growth investments and shareholder returns as our primary objective.
Based on the financial base improved through the structural reform project, we will invest in the medium- and long-term growth areas and DX promotion within an appropriate scope, strengthen our business portfolio, and enhance shareholder returns. 
Cross-shareholdings have been reduced to about half since fiscal 2015 when the Corporate Governance Code was applied. In the future, we will continue to reduce them after judging the rationality of holdings in a comprehensive manner, while making efforts to improve capital efficiency and financial strength.

With regard to returns to shareholders, our basic policy emphasizes the continuous and stable distribution of dividends as a key management measure. In addition, we are implementing a dividend policy targeting a dividend payout ratio of 30% or higher in consideration of our consolidated performance.
In fiscal 2022, we increased the ordinary dividend per share from 15 yen to 17 yen, an increase of 2 yen. Adding a special dividend of 20 yen per share on top of the ordinary dividend made a total of 37 yen per share and a dividend payout ratio of 31.6%.
Furthermore, for fiscal 2023, we intend to increase our annual dividend forecast per share by 8 yen from the ordinary dividend of 17 yen to 25 yen, aiming at the payout ratio of 30.6%
In recent years, the Company has continued to pay stable dividends without reducing ordinary dividends, even amid difficult earnings conditions. We will continue to implement shareholder returns that benefit all our shareholders, including capital policies such as share buybacks that contribute to the medium- and long-term corporate value, based on the above policy and in comprehensive consideration of factors such as strengthening profitability and financial standings.

The Itoki Group is implementing various structural reforms as part of its medium-term management plan, which ends in fiscal 2023, and is committed to achieving sustainable growth and increasing corporate value over the medium and long term. The Group will work to be in line with the Tokyo Stock Exchange’s requirement to improve PBR and further strengthen its earning power while implementing the medium-term management plan. At the same time, the Group will steadily implement measures to improve capital costs, including capital policies, and a timely and appropriate disclosure of information mainly of ESG. These measures will help to improve the equity spread (ROE - capital cost) as well as PBR.
Specifically, we will improve profitability by strengthening our capability to generate profits through our growth strategy and reduce total assets by strengthening our financial and capital policies. We will also actively implement IR activities such as strengthening the communication of our equity story of PER which is multiplied by ROE in the formula of “theoretical PBR.”

While working to further strengthen its earning power, the Group will steadily implement measures to improve capital costs, including capital policies, and a timely and appropriate disclosure of information mainly of ESG. These measures will help to improve the equity spread (ROE - capital cost) as well as PBR.

• Securing a regrowth trajectory by shifting and expanding business areas of core businesses
  • Market expansion by proposing next-generation offices based on the Smart Office Concept
  • Strengthening earning power by expanding sales resources and promoting new sales activities utilizing DX
• Early development of business fields that will become the second pillar
  • Business expansion by strengthening the equipment business for research and logistics facilities and other promising businesses

• Cost optimization through supply chain reforms starting with the new manufacturing site (AP Center)
• Improving management efficiency by promoting operational process reforms and digitalization accompanying the renewal of core systems

• Promotion of asset efficiency and effective use, including disposal (e.g., sale) of non-business assets
• Reduce cross-shareholdings
• Stable dividends and shareholder returns targeting a dividend payout ratio of 30% or higher
• Examining capital policies such as share buybacks after comprehensive consideration of the market, stock price situation, the Company’s business performance, cash position, etc.
• Focusing more on human capital investment, considering the strengthening of human resources as a source of value creation

• Eliminating information asymmetry with investors by expanding and improving information disclosure
• Strengthening communication of equity stories through active interviews with investors
• Strengthening dissemination of human capital investment and sustainability business models through ESG briefings and website disclosure
• Quarterly disclosures, including English versions, and enhancement of IR materials
• Renewal of the website and IR site both in Japanese and English
• Improving external communication capabilities by leveraging digital tools, etc.
• Eliminating the investor expectations gap by sharing the information on IR activities within the Company