HOUSEDO Co, Ltd. (3457)
President Masahiro Ando
Masahiro Ando
Corporate Profile
Code No.
Real estate business
Masahiro Ando
Headquarters: 11F, Marunouchi Trust Tower North, 1-8-1 Marunouchi, Chiyoda-ku, Tokyo
Head Office: 670 Tearaimizu-cho, Nakagyo-ku, Kyoto-shi, Kyoto
End of June
Stock Information
Share Price Number of shares issued Total market cap ROE (Actual) Trading Unit
¥1,314 8,474,000 shares ¥11,134 million 41.1% 100 shares
DPS (Est.) Dividend Yield (Est.) EPS (Est.) PER (Est.) BPS (Actual) PBR (Actual)
¥17.00 1.3% ¥84.45 15.6times ¥255.83 5.1times
* The share price is the closing price on September 9, 2016. The number of shares issued was taken from the brief financial report for the latest period. ROE and BPS are those for the previous term.
Consolidated Earnings Trends
Fiscal Year Net Sales Operating
Net Income EPS DPS   
Jun. 2013 (Actual) 8,251 180 112 80 100.36 0.00
Jun. 2014 (Actual) 13,309 276 204 155 45.21 0.00
Jun. 2015 (Actual) 14,573 617 513 353 48.60 35.00
Jun. 2016 (Actual) 17,275 1,277 1,182 741 88.31 16.00
Jun. 2017 (Forecast) 16,322 1,247 1,100 715 84.45 17.00
* The forecasted values were provided by the company.

This report provides the outlines of HOUSEDO Co., Ltd., the description of its mid-term managerial plan, and the interview with President Ando, among others.
Key Points
Company Overview
From the viewpoint from customers, HOUSEDO aims to "develop a new distribution system for housing" in the realty industry. As of the end of Aug. 2016, it has 389 franchisee stores, ranking first in the section of real estate brokerage-specialized franchise. The company pursues a growth track based on "recurring revenue-type business," including Franchisee business, House-leaseback business, and Real estate finance business. HOUSEDO is highly evaluated for its capability of instructing franchisees to brush up their ability to reel in customers. It is also characterized by its high ROE and share price evaluation.
1-1 Corporate history
President Masahiro Ando started up real estate brokerage business in Apr. 1991 after the collapse of the Japanese economic bubble. He was surprised to see a lot of people buying houses while taking advantage of the drop in prices and low interest rates, while many real estate companies, which had been thriving, went into bankruptcy. Then, he became certain that "If you attend to your customers, you won't imperil your company."
Strongly doubting the situation in which services are enterprise-oriented while they should be customer-oriented, such as the lack of transparency, he responded to the needs of customers appropriately, and offered a lot of information on property speedily, winning the trust of customers and then improving business results.
When he visited the U.S. to see the realty industry there, he was deeply impressed by a franchisee real estate broker conducting community-based business competing with large companies while caring about customers. He felt that doing this business in Japan is meaningful and valuable, because it would lead to the reform of the Japanese realty industry, and started developing a franchise chain for real estate brokerage in Japan.
In Feb. 2006, he launched Franchisee business. When he approached real estate brokers, they were reluctant at first, but he gave careful instructions to personnel in other fields, including architecture and renovation, who have keen interests in real estate. His business was highly evaluated, partially because there were no companies that teach real estate practice, and the franchise chain grew healthily. In Jan. 2009, he established HOUSEDO Co., Ltd.
As its business expanded, its brand power was strengthened steadily, and HOUSEDO was listed in Mothers of Tokyo Stock Exchange in Mar. 2015.
1-2 Corporate ethos, etc.
Its brand mantra, corporate ethos, and managerial policy are as follows.
All of them are based on President Ando's awareness and thoughts about the current Japanese realty industry.
1-3 Business description
Under the above ethos, HOUSEDO conducts "Franchisee business," "Real estate business (composed of Buying and selling business of real estate and House-leaseback businesses)," "Real estate brokerage business," and "Housing and renovation business." In addition, the company started "Real estate finance business" in the term ended Jun. 2016.
(The business segments to be reported for the term ended Jun. 2016 are "Franchisee business," "Real estate business," "Real estate brokerage business," and "Housing and renovation business." Real estate finance business is categorized into "Others.")
(1) Franchisee business
HOUSEDO provides small and medium-sized real estate firms that require a brand or network and enterprises that plan to launch real estate distribution business with the know-how of real estate brokerage and trading (including strategies for attracting customers and motivating employees, IT strategies, education and training).

For the purpose of popularizing its brand throughout the market, the company has implemented brand strategies while featuring Mr. Atsuya Furuta, who is a former professional baseball player and coach and currently a baseball commentator, since Jul. 2013. HOUSEDO has been advertised actively via TV and radio commercials, signboards, flyers, the mass media, websites, etc., announcing consistent brand strategies. By superimposing Mr. Furuta's personality, working attitude, and sincerity onto the image of HOUSEDO, the company won the trust of customers, making them feel secure.

By developing a nationwide chain, HOUSEDO aims to increase the transparency of information and create reliable, convenient contact points with customers under the corporate ethos.
Since its franchise system provides franchisees with a variety of methods for reeling in customers for increasing sales based on the experiences of its headquarters and directly managed stores and the practical know-how to educate personnel, even enterprises that have no experience of real estate brokerage can start the business, and so it is highly evaluated. From the commencement of Franchisee business to the end of Jun. 2016, many enterprises from different industries became franchisees, accounting for 70%.
HOUSEDO offers various services, including "DO NETWORK!," a system for managing websites, property, customers, etc., education, training, national events, store managers' conferences, and e-learning systems. Supervisors directly visit each franchisee store to support them throughout Japan.
Through these efforts, the company has developed close networks among the headquarters, directly managed stores, and franchisee stores.

The number of franchisee stores approximately doubled in the past 5 years. The company first aims to increase the number to 1,000 in Japan.
The royalties the company receives from franchisees are monthly fixed, without fluctuations.
(Major services)
Provision of website systems
HOUSEDO offers practically useful systems that have been nurtured in business scenes since its inception, including the systems information provision, including online search, support for sales and business operation, and matching.
"DO NETWORK!," which is aimed at increasing and retaining customers efficiently and streamlining business operation to the maximum degree, is equipped with various functions for producing original flyers, managing property, customers, and sales staff to reduce the burden of routine work.
Training for franchisee stores
As for education, HOUSEDO carries out sales training, through which even inexperienced real-estate agents can learn the fundamentals and become competent sales people, and trains staff for IT-based sales activities, financial planning, and property assessment, to support franchisee stores in improving their business capabilities.
In training, the company utilizes "DO CHANNEL!," which has website-based learning functions/e-learning systems, in addition to group learning. This system has over 1,000 contents, and trainees can attend necessary courses online anytime.
After franchisee stores are opened, supervisors give appropriate instructions and regional study sessions are held regularly. Supervisors give strategic guidance for marketing, attracting customers, managing sales activity records and sales, reviewing store management, etc.

At "HOUSEDO! National FC Conference," which is attended by the staff of all franchisee stores, they share the corporate targets and goals of the next fiscal year and the latest information on real estate, and excellent stores are commended, for motivating employers and employees. At the session, they share the successful cases of franchisee stores each other, and brush up themselves through friendly competition.
(2) Buying and selling business of real estate
HOUSEDO acquires real estate, adds value, and sells them to general customers and investors - the company buys, renovates, and sells used houses, builds and sells new housing, develops residential land, renovates and sells buildings for investment.
For procuring real estate, the company gathers information from its directly managed stores, franchisees, and "Project Partner System," which is a collaborative business with real estate agents.
Since HOUSEDO operates both the real estate brokerage and sales businesses in an integrated manner, it has a good grasp of the needs from sellers and buyers, and owns contact points throughout Japan. Accordingly, it can procure and sell real estate while considering regional characteristics and demand.
(Major services)
Services for corporations
Under the policy of "taking full advantage of good real estate information," HOUSEDO operates collaborative systems and business models with franchisee stores and real estate agents around Japan.
"JV Partner System" (joint purchase of real estate) is a new business model for purchasing and selling real estate by combining the information gleaned from directly-managed and franchisee stores and realty firms nationwide and HOUSEDO's financial power and sales capabilities.
Services for individuals and corporations
HOUSEDO directly buys real estate by utilizing nationwide networks with its directly managed and franchisee stores.
When requested by a customer, staff can visit the customer on that day, and suggest a price on the spot. This is one of the reasons why HOUSEDO is highly evaluated.
Assessed prices are suggested in three stages: "price for selling in about 3 months," "price for selling in about 1 month," and "price for immediate purchase" in brokerage.
Under the brand mantra of increasing the transparency of information, the company discloses the nearby cases by using "DO TOUCH! MAP," which is a system for disclosing information on real estate, so that general customers can trust the company and have transactions without anxiety.
Operation of stores
HOUSEDO operates stores as "Store for buying houses and other real estate."
Its stores are operated also as annexes to Satellite Stores for real estate distribution business, and suggest purchase prices, while selling real estate as brokers.
(3) House-leaseback business
HOUSEDO concentrates on House-leaseback business as one of the future core businesses. President Ando came up with the concept that "you can keep living in your house even after selling it" and aired it by radio, causing greater repercussions than expected. Therefore, he started commercialization, and completed it in a few months.
(What is House-leaseback?)
"House-leaseback" means a sales and leaseback system with which real estate owners can keep living in their houses in accordance with a lease contract with HOUSEDO after selling the houses to the company.
Going beyond the conventional purchase system, which only provided an option to "sell real estate," the company offers services under the concept of "utilizing real estate."
(Background of the growth of House-leaseback business, and the market environment)
House-leaseback business is in demand for the following reasons:
For elderly people and inheritance-related needs
For seniors who wish to enjoy their lives in their dear old homes until their final days.
For seniors who wish that their children or grandchildren inherit their assets not in the form of real estate, but in cash before demise.
Needs for funds
For customers who do not wish to relocate to the outside of the school districts of their children.
For customers who face difficulty in repaying long-term loans.
For customers who want to buy a new house, but who cannot afford to make a down payment.
In addition, sole proprietors and representatives of small and medium-sized enterprises can sell their real estate for business, including land, stores, houses, buildings, and factories, to HOUSEDO, and allocate the money received to their business.
This system offers a significant advantage - they can continue their business using business assets while paying lease fees in accordance with lease contracts. This business category was named "Asset-leaseback," and it was launched in Aug. 2015.

According to "Statistical Survey on Housing and Land 2013" (the Ministry of Internal Affairs and Communications), the number of households and the ratio of homeowners in Japan are as tabulated below.
The national average ratio of homeowners is 61.7%, but the ratio for people aged 60 or over is 80.0%.
As birthrate is declining and nuclear families are increasing, the necessity to own houses declines if there are no heirs or the number of family members is small. Accordingly, it is expected that more seniors will have cash for leading more affluent lives, and then the ways of living of elderly people will change considerably. The trend of such changes can be verified by the fact that 3 megabanks have recently started "reverse mortgage," which means that customers borrow money from financial institutions by pledging their houses and when they die, the financial institutions foreclose and sell the houses through auction, to recoup the money. It is expected to grow considerably like House-leaseback business.
(House-leaseback business of HOUSEDO)
HOUSEDO, which launched House-leaseback business in 2013, excels at evaluating markets based on its assessment skills, which have nurtured for many years, selling products, and dealing with transactions with a nationwide network of stores.

This business is attractive to HOUSEDO in the following aspects:
It is possible to procure real estate at low cost.
Demand gets stronger in recession.
It is possible to hoard real estate for sale. (Actually, about one out of 100 stocks is sold every month.)
From procurement to sale, the company can earn at 3 stages: "commission at the time of purchase," "income from monthly rents," and "capital gain at the time of sale."
The situation of House-leaseback business is as follows:
The total amount of houses for this business is 4.4 billion yen as of the end of Jun. 2016, about 4 times the amount a year ago. The number of houses for this business is 274, about 4 times up from the previous year.
The Tokyo Metropolitan Area accounts for 45%, while the 3 major urban areas of Tokyo, Nagoya, and Osaka make up 67.5%.
Single-family houses account for 75%.
As for the reasons for using this service, fund procurement accounts for 57%, while the reduction in the loan amount makes up 18%.
As for customer's age, 60 years old or over accounts for 63%, while 50 years old or over makes up 86%.
As mentioned later, it is estimated, in the mid-term managerial plan, that House-leaseback business will account for 19.8% of sales and 23.5% of operating income in the term ending Jun. 2019, becoming the second largest earning pillar after Franchisee business.
(4) Real estate brokerage business
In Real estate brokerage business, HOUSEDO introduces not only "ready-built houses," "used houses," and "land," but also proposes the combinations of "land and new house construction," "used houses and renovation," "selling plans and relocation," etc. while accurately grasping the needs of customers.
Also for financial plans and insurance, the company gives proposals to customers from the early stage, and comprehensively supports customers in buying their houses without worry.

HOUSEDO aims to reform the Japanese realty industry drastically, and develop a new distribution system for housing, so that customers can move into their ideal houses according to their life stages. It hopes to transfer the initiative from the realty industry to customers who live in houses.

Accordingly, the company aims to establish a highly transparent, flexible distribution system for trading real estate without anxiety after understanding property, by disclosing information on real estate and delivering information within 24 hours after receiving an inquiry.
In detail, the company swiftly provides customers with the latest information on real estate with various methods, including the online media such as the Internet and websites, newspaper inserts, housing magazines, and the posting system for distributing flyers to each household around each store.
(Major services)
Website for retrieving real estate
The company operates "," which enables customers to search for the real estate managed by franchisee stores and directly managed stores throughout Japan, and "Do-search!," a realty search engine exclusively for each store.
"" is a portal site operated by the FC headquarters of HOUSEDO, which features recommendable houses in each area, around each railroad line, or in the vicinity of each station and finds desirable real estate based on the date of stores nationwide. It is aimed at introducing a wide array of houses to customers around Japan.
"Do-search!" enables customers to search for real estate managed by each store, and respective stores take the initiative in operating it. It is aimed at offering information to local customers swiftly based on community-based sales activities combining flyers, ads directly put into mailboxes, etc.
Operation of stores
HOUSEDO brokers real estate deals via "Housing information mall," a roadside large-scale store, and "Satellite Store," a directly managed store specializing in sales and brokerage. The company not only introduces real estate, but also proposes renovation, financial plans, and insurance at the early stage, to offer one-stop services at the "Housing information mall".
(5) Housing and renovation business
This is composed of "housing business," which undertakes the construction of new houses, and "renovation business," which renovates housing.
(Outline of the housing business)
"The housing business" is based on the following three: (1) "Architect Produce Japan" for creating original homes with architects, (2) "Afternoon Home" that propels you to stay in a living room in the afternoon, and (3) "Do! Select" for creating houses from the 20s, under the concept: "Each home has a story. Rather than creating an unprecedented thing, we create houses for existing families. We will select new homes for families."
(Outline of services)
New construction brand site
According to each customer's preference and budget, they can freely choose from (1) a fully-customized house to be created with an architect, (2) a customized house focused on a living room, and (3) a customized house that can be arranged by combining preferable plans from 100 plans.
Operation of stores
HOUSEDO receives orders for the construction of new houses at Kyoto Chuo Showroom, Kyoto Kita Showroom, and Housing information mall, which is directly managed by the company.
(Outline of the renovation business)
In the 21st century, the company set up the concept of "recology," which is coined by fusing "recycle" and "ecology," and aims to renovate housing for the coming 100 years. The company has a service menu for a broad range of customers and prices, including the repair for restoring used houses to their original states, the large-scale remodeling or renovation for adding new value, such as functions and design, after-sale maintenance, and minor remodeling for dealing with troubles.
As standard services, the company inspects houses and checks earthquake resistance, and has an enriched guarantee system (issuing a warranty for every construction work, offering a warranty for up to 10 years, taking out a liability insurance contract for up to 100 million yen, guaranteeing the operation of housing equipment for up to 10 years, and so on). These services allow customers to feel secure.
(Outline of services)
Operation of websites
In addition to the portal site for all kinds of renovation services, the company operates a website for the remodeling of plumbing, roofs, and outer walls.
Operation of stores
HOUSEDO offers this service at Kyoto Chuo Showroom, Kyoto Kita Showroom, and Housing information mall, which is directly managed by the company.
(6) Real estate finance business
HOUSEDO offers realty-backed loans to individuals and corporations so that they can procure funds by utilizing their real estate.
Some customers who inquired about House-leaseback service can pledge their real estate, and some other customers do not need to dispose of their real estate for procuring necessary funds.
In addition, the company meets various needs for the funds for the trading between relatives or parents and children, whose trading price tends to become opaque making it difficult to receive loans from banks, the funds for purchasing a second house or real estate for investment, the funds for business operation and equipment investment of enterprises, by offering realty-backed loans based on the appropriate, speedy evaluation with reference to the information on real estate around Japan, using HOUSEDO Chain.
As the business that complements House-leaseback business, it is expected to grow.
1-4 Characteristics and strengths
(1) Ability to supervise franchisee stores
What matters most to franchisee stores is "how to reel in many customers?" in Franchisee business, which is the mainstay of HOUSEDO. President Ando insists that the ability to supervise the stores for attracting customers is the most significant strength of HOUSEDO.

The improvement of the ability to reel in customers means the practice of the corporate ethos since its inauguration: "Customers' needs can be satisfied by providing them with a lot of information swiftly." The provision of know-how via the online system "DO NETWORK!" and franchisee training is highly evaluated by franchisee stores, and considerably facilitates the growth of the franchise chain.
The ROE for the term ended Jun. 2016 was extremely high at 41.1%. Taking into account the values in the mid-term plan to be described later, leverage is estimated to increase by 0.2 points in a period till the term ending Jun. 2019, and the ratio of net income to sales is projected to rise 2.5% due to the expansion of the recurring revenue-type business, but ROE is forecasted to decline to about 28%, as total asset turnover will decrease about 1 point.
Nevertheless, ROE will be still high. Because of this, share valuation (PER and PBR) is relatively high in the real estate field.
Fiscal Year June 2016 Earnings Results
Because the core Franchisee business is healthy, sales and profit grew, marking a record high
Sales were 17,275 million yen, up 18.5% year on year. The core Franchisee business and Buying and selling business of real estate contributed.
Operating income was 1,277 million yen, up 107.0% year on year. Gross profit increased 23.2% year on year, thanks to the sales growth of Franchisee business, which is profitable, etc. SG&A expenses, including personnel and advertising expenses, augmented, but were offset by the sales growth.
As the company received 16 million yen as insurance premiums refunded cancellation and the company was free from the cost for going public, which amounted to 11 million yen in the previous term, ordinary income increased 130.4% year on year to 1,182 million yen.
(1) Franchisee business
Sales and profit grew.
As for Franchisee business, which is the mainstay of the recurring revenue-type business of HOUSEDO, the company promoted real estate agents to join its franchise chain, advertised its services with TV and radio commercials, etc., and improved its reliability and corporate brand value by getting listed in the stock market. Consequently, the number of new franchise contracts is 119, and the cumulative number of franchise contracts is 377. As the number of franchisees rose, the company employed more supervisors from directly managed stores, strengthened the follow-up system for franchisee stores with experienced workers, and enriched the contents of services in cooperation with leading enterprises in this field. As a result, the number of newly opened stores is 100, and the cumulative number of stores is 317.
(2) Buying and selling business of real estate
Sales and profit grew.
Partially because mortgage interest rates remained very low, actual demand remained healthy. The sale of real estate procured in the previous term and the term before it progressed steadily, indicating the effects of enhanced procurement and sale through the increase of procurement staff in the areas of directly managed stores in the term before the previous term, in addition to "Store for buying house and other real estate." The company followed the policy of procuring real estate that could meet the needs for brokerage of directly managed stores, and the sale of inventory was healthy, shortening the period between procurement and sale. The number of transactions increased 63.5% year on year to 322.
(3) House-leaseback business
Sales and profit dropped.
Inquiries and transactions increased, thanks to the effects of the advertisement with TV and radio commercials and the improvement of reliability after listing in the stock market. The number of contracts grew 183.8% year on year to 227, and the number of pieces of real estate increased 296.4% year on year to 222. Eleven pieces of real estate were sold, and sales amounted to 409 million yen. The cumulative total number of real estate owned is 274, which is worth 4,427 million yen in total. Consequently, the company has accumulated stocks steadily, and leased them.
(4) Real estate brokerage business
Sales declined, but profit grew.
The number of brokerage transactions increased 3.9% year on year to 2,699. The company strived to attract customers to directly managed stores by the strategies of online advertisement, including websites, media advertisement, including newspaper inserts, TV and radio commercials, and community-based flyers put into mailboxes.
At present, the company is shifting manpower to the real estate business (Buying and selling business of real estate and House-leaseback business), but sales did not change from the previous year significantly, and profit rate improved.
(5) Housing and renovation business
Sales decreased, but profit increased.
The renovation business section cooperated with Real estate brokerage section, and actively held the event for renovation and construction titled "Housing Festival," reeling in customers. The numbers of orders received and completed houses declined 7.5% and 2.6%, respectively, from the previous term, but sales grew 18.4% year on year due to the improvement of average sales per customer. As for the housing (new single-family housing) business, the company concentrated on the measures for utilizing the synergetic effects among the businesses of the HOUSEDO group, including brokerage, renovation, construction, and purchase. The number of orders for new construction, the number of completed houses, and sales decreased 62.3%, 43.9%, and 54.1%, respectively, from the previous term.
(6) Other business
Sales dropped, causing an operating loss.
As HOUSEDO spent that term for acquiring the money-lending license and preparing for the full-scale business, the company offered realty-backed loans in cooperation with House-leaseback section.
Current assets grew 1,803 million yen from the end of the previous term, due to the increases in cash and deposits through the collection of sales proceeds and inventories (real estate for sale), etc. Due to the increase of House-leaseback transactions, property, plant and equipment grew, and noncurrent assets rose 2,889 million yen from the end of the previous term. Consequently, total assets grew 4,693 million yen to 12,895 million yen.
Since short and long-term interest-bearing liabilities augmented for increasing real estate for sale and House-leaseback transactions, total liabilities increased 3,963 million yen to 10,725 million yen.
Due to the increase in retained earnings, net assets grew 729 million yen from the end of the previous term.
As a result, equity ratio dropped by 0.8% from 17.6% at the end of the previous term to 16.8%.
Operating CF rose further, due to the increase in net income before taxes and other adjustments, etc.
As the expenditure for acquiring property, plant and equipment augmented, both investing CF and free CF declined further. Due to the increase in short and long-term debts, financing CF increased. The cash position improved.
Fiscal Year June 2017 Earnings Estimates
HOUSEDO to concentrate on investment. Sales and profit estimated to decline.
Sales are estimated to be 16,322 million yen, down 5.5% year on year. It is forecasted that Franchisee business will keep growing and House-leaseback business will increase its sales, but Buying and selling business of real estate, Housing and renovation businesses, which account for a significant portion of sales, will decrease their sales.
Sales are projected to decline, but gross profit is estimated to rise 8.6% year on year due to the growth of the highly profitable Franchisee business.
Since the company will invest in personnel and advertisement for expanding its business, SG&A expenses will augment. Accordingly, operating income is forecasted to drop 2.3% year on year to 1,247 million yen.
In the term ending Jun. 2017, the company plans to secure the position of Buying and selling business of real estate for capital gain, and invest to shift to the recurring revenue-type business, including Franchisee and House-leaseback businesses.
The company plans to increase the dividend by 1 yen/share to 17.00 yen/share from the previous term. Payout ratio is estimated to be 20.1%.
(1) Franchisee business
Sales and profit are estimated to grow.
The company will keep striving to increase contracts and stores.
Based on the synergy between Real estate brokerage and purchase businesses, the company will promote the parallel establishment of "Satellite Store" and "Store for buying house and other real estate."
The number of franchise contracts is estimated to grow 95 year on year to 472, and the company plans to increase the number of newly opened stores by 71 to 388.
(2) Buying and selling business of real estate
Sales and profit are estimated to decline.
As for the real estate for investment and high-priced products mainly in urban areas, which are affected by the rise in realty prices, the turmoil in the financial market, etc., HOUSEDO will secure its position while paying attention to risks, and concentrate on the collaboration with the brokerage division in the target areas of directly managed stores.
The number of transactions is estimated to be 322, unchanged from the previous term.
Inventory assets are projected to be 5 billion yen, on a par with the previous term.
(3) House-leaseback business
Sales and profit are estimated to increase.
The company will brush up personnel and advertisement further, to accelerate its growth.
The number of contracts is estimated to grow 26.9% year on year to 288, and the number of pieces of real estate acquired is projected to increase 29.7% year on year to 288. The cumulative total number of pieces of real estate is estimated to increase twofold to 522, worth 7,861 million yen, up 77.6% year on year.
(4) Real estate brokerage business
Sales are projected to grow, but profit is estimated to decline.
The number of brokerage transactions is forecasted to rise 8.4% year on year to 2,925.
The company will shift human resources to House-leaseback business, while pursuing synergetic effects with related businesses, including purchase, renovation, fire insurance, and mortgages.
(5) Housing and renovation business
Sales and profit are estimated to drop.
The number of contracts for renovation and new house construction and the number of houses delivered are forecasted to decrease from the previous term.
The company will seize a chance to make transactions for used houses, and promote renovation.
(6) Other business
Sales are estimated to grow, putting the business in the black.
In cooperation with House-leaseback section, Real estate finance business will be operated on a full-scale basis.
Mid-term managerial plan
The 3-year mid-term managerial plan was started this year, and is ongoing.
It is outlined as follows.
◎ Growth strategy
HOUSEDO aims to shift from the "labor-intensive earning" based on Real estate brokerage, Buying and selling of real estate and Housing and renovation businesses to the "recurring revenue-type earning" based on Franchisee, House-leaseback and Real estate finance businesses.
The term ending Jun. 2017, which is the first year of the mid-term managerial plan, marks a turning point, and the company will invest in its 3 primary businesses.
This term, the company will invest in the recurring revenue-type business further, and so ordinary income is estimated to decline, but from the following term, profit is projected to grow by double digits, increasing also the ratio of ordinary income to sales to double-digit.
As House-leaseback business will expand, the company will increase noncurrent assets from 5,207 million yen in the term ended Jun. 2016 to 17,967 million yen in the term ending Jun. 2019, by increasing long-term debts and equity capital. As the company will reduce current liabilities, capital-to-asset ratio is estimated to remain in the order of 16%.
Payout ratio is estimated to be 20% or over in the term ending Jun. 2017, 25% or over in the term ending Jun. 2018, and 30% or over in the term ending Jun. 2019.
◎ Trend of each business segment
As for the composition of the recurring revenue-type business, both sales and segment income are estimated to increase significantly as tabulated below.
"Recurring revenue-type business (1): Franchisee business"
HOUSEDO will keep advertising activities, etc. with the aim of achieving 1,000 franchisee stores.
"Recurring revenue-type business (2): House-leaseback business"
Rapid growth is expected in the above mentioned market environment.
"Recurring revenue-type business (3): Real estate finance business"
This business is complementary to House-leaseback business, which is expected to grow considerably in parallel with the growth of House-leaseback business.
"Buying and selling business of real estate"
Real estate will be selected rigorously within the sales range from 5 to 8 billion yen. In cooperation with the brokerage section, this section will keep procuring property steadily in the target areas of directly managed stores.
"Housing and renovation business"
HOUSEDO will propose renovation while selling and remodeling used houses. The company will concentrate on the remodeling with natural materials, and promote home inspection (housing structure assessment) and aseismic reinforcement. The company will also work on the cooperation between Real estate brokerage and House-leaseback sections.
"Real estate brokerage business"
By taking advantage of the governmental policy for "vitalizing the trading of used houses," HOUSEDO will work on the cooperation between the real estate distribution and the renovation sections.
In addition, the company will promote the related businesses, including renovation, mortgage, and fire insurance, by utilizing contract opportunities.
Interview with President Ando
We asked President Masahiro Ando about his upcoming efforts and what message he would give to investors.
Q: "Please tell us about the recurring revenue-type businesses you are focusing on this year to attain further growth. To begin with, what plans do you have for your main Franchisee business?"
A: "We are striving to quickly get 1000 shops. Doing so would transform the real estate industry and bring great changes to our company's structure."
We're striving to quickly get 1000 franchise shops. If we can make that happen, I believe we will see great changes in several areas.
To begin with, our franchise shops are managed on customer-focused principles. If customers start to come to our 1000 franchise shops, the Japanese real estate industry would begin to make a serious move towards a customer-focused industry. This is our social mission and a big reason why we aimed to get listed on the stock exchange. I would like to get us to 1000 shops as soon as possible.
Furthermore, if we can get to 1000 franchise shops, we would see great changes in our earnings structure. First, if we can provide fire insurance and various other products through that route, we could certainly expect significant revenues and profits.
Next, the advertising contributions from our franchisee stores would exceed a billion yen, so we would be able to develop powerful advertisement activities. That would contribute greatly to the improvement of our brand and speed up the growth of this business.
In addition, various other initiatives would also become possible. We are now preparing to make ourselves not just a real estate company but a "real estate service provider" that can make our customers happy.
In this way, the growth of Franchisee business will not only produce large profits for itself. Rather, it will be an important point in bringing about great changes to both our company and the industry.
Q: "How about House-leaseback business?"
A: "I'm really excited about it. I would like people to have great expectations for it."
We expect significant growth from House-leaseback business, and I'm very excited about this field. Starting from this year, it will start contributing to our revenue and profits.
I would like people to have great expectations for both House-leaseback business and our Asset-leaseback business, which targets business operators.
Q: "What about the Real estate finance business?"
A: "It also has significant room for growth. In the future we're considering setting up a real estate bank as well."
Real estate finance business we started in July 2016 is also promising.
In the sense of suppliers of capital to private individuals, money-lending businesses used to have an overwhelming presence, and peaked in 1986 at 47,000 companies. However, due to social problems, they decreased rapidly, and by 2013 the number was down to 2,217- a twenty-fold decrease in thirty years. Compared to ten years earlier, the number was down by a factor of ten.
Banks are still not proactive when it comes to financing for individuals, so we have a situation where private individuals are perpetually short on funds.
In this situation of insufficient supply, the Real estate finance business will respond to the customers' needs.
We are currently setting up the "HOUSEDO Bank" that will act as a real estate securities loan agent. Over many long years, we have developed strong assessment capabilities. Based on these, we will use artificial intelligence to conduct assessments, and with smart phones utilizing fintech, we can do the work of bank loans. In the future, we will consider going beyond being an agent, and becoming a "real estate bank."
Q: "Finally, could you please give us a message for investors?"
A: "We will deliver solid, stable growth. Please keep that in mind and support us with a long-term perspective."
Within the real estate industry, we understand our customers' needs the best. Unfortunately, the reality is that customers have an extremely low level of trust in the real estate industry. Within that environment, we take a customer-oriented approach, and by building up a franchise network across the country, we will firmly gain the trust of many customers and reform the real estate industry so that it becomes a customer-oriented business, as it should be. In our company, this philosophy is bound up with our actual business.
In order for us to proceed with our focus on recurring revenue-type businesses, we will not produce large revenues or changes in profits in the short term. However, we aim to deliver solid and stable growth. I hope investors will understand this point and support us with a long-term perspective.
According to the mid-term managerial plan, in a period from the term ended Jun. 2016 to the final fiscal year ending Jun. 2019, sales will decrease 6.1% while operating income will grow as significantly as 49.5%.
Since Franchisee business is expected to grow steadily as shown in the graph below, the expansion of House-leaseback business matters. We would like to see whether the company will shift emphasis to the recurring revenue-type business as planned. In addition, we expect the mid-term progress of Real estate finance business, because of its high profitability.
<Reference: Regarding corporate governance>
◎ Corporate Governance Report
The company submitted a latest corporate governance report on Apr. 7, 2016.
As a Mothers company, the company fully follows the 5 items of basic principles of the corporate governance code.
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