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Takamatsu Construction Group consists of 21 companies. Can you tell us about the Group as well as how you view the Group's strength in comparison to your competitors?

 Our Group operates in the construction, civil engineering and real estate industries. Takamatsu Group, with Takamatsu Corporation at its core, focuses on the real estate utilization business in the private construction sector, while Asunaro Aoki Group, with mid-sized general contractor Asunaro Aoki Construction. at its core, deals more in the public civil engineering sector. These two groups cooperate to create synergistic effects for the Group.
 Our Group has two strengths. First, our real estate utilization business operated by Takamatsu Corporation provides a firm and fast-growing core. Second, we are highly adaptive to environmental changes thanks to our balanced portfolio of Group companies with strengths in different fields, achieved through M&A. Takamatsu Group, with its focus on the private sector, and Asunaro Aoki Group, with strengths in the public sector, also strike a balance between architecture and civil engineering. The combination of the two Groups works to stabilize revenue and profit, even in the constantly changing economic and environmental climate.

Please tell us about the business model of Takamatsu Corporation, the core and founding company of the Group.

 In the 1960s we entered into the field of purpose-built rental condominium construction through acting as an agent of our clients to apply for public housing loans, which generated a huge amount of attention as well as revenue growth. We realized a number of successful construction projects by focusing on consulting, which we developed as our unique business model combining consulting and construction, which we call the "C&C" (consult & construct) method or "development sales." Our work in consultation started with construction and financing, but later extended into other fields like taxation, legal affairs and post-construction areas such as renting, maintenance and repair.

 The key to our business model is not price, but rather how much value we can propose to our clients, thus our tremendously successful track record has proven to be of great advantage. In addition, another strength of the C&C method is that we are able to accept orders as a solo contractor, while other construction firms mostly win orders through a bidding procedure. In addition, by being able to control the timing of the start of construction, our method enables us to efficiently control the construction schedule as well as secure necessary materials, leading to smooth cooperation between us and our partner companies. At the same time, this business model requires patience and imposes a significant financial burden because we sometimes must wait for years without a business outcome after a proposal. In this sense, our business model is not something every company can follow.

Please tell us about the Mid-Term Plan announced in May 2019 and its growth strategies.

 Our Mid-Term Plan "Create ! 2022" plans to create a bright future based on five "Creates."
1) Create a high-growth, high-profit Group
2) Create new business domains
3) Create a Group culture that embraces diversity and compliance
4) Create synergy effects
5) Create value for the economy, society and environment

You have listed "Create a high-growth, high-profit Group" as the first of the five "Creates." How do you view the domestic construction market and the Group's performance going forward?

 The construction market in Japan is expected to remain relatively firm for two to three years following the 2020 Tokyo Olympics, but we believe the market will gradually soften thereafter, accompanied by a decline in the amount of new construction. On the other hand, the current tight market trend for construction related to the real estate utilization business, including build-to-rent condominiums, is anticipated to continue in the near future.

 Amid this market outlook, we believe continued growth is an important mission for our Group. TCG as a whole continues to grow at an annual rate of 6% or more, with the aim of improving its operating income margin to 6.0% in the fiscal year ending March 2022. By maintaining this rate of growth, we envision ourselves becoming one of the larger general contractors in Japan.

 Takamatsu Group will continue its high rate of growth, not only through construction of condominiums for rent, but through strengthening non-condominium businesses, such as office buildings, commercial buildings and hospitals, with a geographical focus on the urban centers of Tokyo, Osaka and Nagoya. In recent years, we have seen the design period prolonged in accordance with an increase in larger non-condominium buildings, but we will properly control this phenomena and aim to achieve revenue of 140 billion yen and operating income of 11 billion yen in the fiscal year ending March 2022.

 On the other hand, civil engineering and government-related business is expected to continue to be rather tight for some time, but is estimated to shrink after 2022. Thus, Asunaro Aoki Group will continue its stable growth with more emphasis on profitability improvement, resulting in revenue of 160 billion yen and operating income of 8 billion yen in the fiscal year ending March 2022.

 In this way, Takamatsu Construction Group plans to achieve revenue of 300 billion yen and operating income of 18 billion yen in the fiscal year ending March 2022, with Takamatsu Group continuing to be the main engine for growth, while Asunaro Aoki Group continues to achieve stable growth and improved profitability.

Although you have positioned Takamatsu Corporation as the main engine for growth, recent news reports indicate the rental condominium market is overheated. What is your outlook?

 Although the population of Japan has started to decrease, the number of households is expected to increase until 2023 and then gradually start to go down. However, for Osaka, Nagoya and especially Tokyo, where we focus our activities, the number of households is expected to continue to increase even after 2023, when the number of households in Japan as a whole begins to decline. Thus, we expect the tight market to continue for at least the next 10 years.

As the second of your "Creates" you have listed "Create new business domains." Please tell us your views about M&A.

 Our Group is one of the rare construction companies in Japan that has expanded through multiple mergers and acquisitions. In the past, it was often said that M&A eventually leads to reduced opportunities to win orders, so it doesn't work in the construction industry. However, we have proactively taken up M&A opportunities, which has resulted in our being able to transform ourselves into a Group comprised of many varied and unique companies.

 In recent years, two companies have joined our Group, due mainly to difficulties in management succession planning. These are Shimada Gumi (2012), which now boasts the top share among non-public companies in Japan for excavation of archaeological sites, and Mibu Corporation (2018). However, prior to these two companies, the main reason for conducting M&A was so called bailout M&A. Among the companies that we welcomed through M&A at the time were Asunaro Aoki Construction, a mid-sized general contractor, Mirai Construction, a marine civil engineering company, and Kongo Gumi, a temples and shrines architecture firm that has more than 1,400 years of corporate history and is often cited as the oldest company in the world. Many companies with distinct features and strengths have joined our Group through M&A.

 There are two criteria for making a bailout-type M&A decision: does the company possess unique strength and is there a good likelihood of turning the company around in terms of profitability? If the answers to these two criteria are positive, we consider the chance of success after M&A to be high. Even if the candidate company is not in good shape, I believe it can be turned around if the management of the company is decisive and firmly believes it has no safe haven to retreat to, thus it must stand up and clean away the debt and downsize the company by letting go of unprofitable domains resulting from past diversification. Therefore, the key is whether we can formulate a successful scenario by going back to the basic strength of the company through selection and concentration.

 In order to continue to achieve a high level of growth in the future, it is essential to continue to complement the business with M&A. We will be primarily looking into new M&A opportunities in the business domain of Takamatsu Group, since it is the main engine for future growth. So far, we have been considering about 50 M&A candidate companies a year. Without slowing this pace, we will conduct one or more M&As per year as well as investing around 50 billion yen for M&A in 10 years. As a result, we aim to increase our revenue by around 90 billion yen in 10 years'time by the newly added companies.

Takamatsu Construction Group USA (TCG USA) was established in October 2017 as the first overseas company. Could you tell us about TCG USA's activities so far and your plans for the future?

 TCG USA was established to examine whether Takamatsu Corporation's business model can be replicated overseas. So far, we have been examining business domains and locations through the acquisition of properties in New York in the United States, and aim to establish a high-profit business model by March 2022. After that, we plan to expand our business through M&A and other means. We expect our overseas business to generate around 10 billion yen per year in 10 years.

In April 2018, Mibu Corporation joined TCG through M&A. Could you tell us about the synergy eect of Mibu Corporation's inclusion into the Group as well as the outlook for the future?

 To conduct a successful M&A, it is vital that the deal is "win-win."

 Mibu Corporation is primarily engaged in real estate trading and brokerage centered on Tokyo's Setagaya district, an area known for its many high net worth individuals.

 Takamatsu Corporation's revenue for the Tokyo metropolitan area has exceeded that of the Kansai area for several years. With a view to further cultivating the Tokyo market, we were confident that Mibu's sales of 4 billion yen per year and its 40 years of corporate history would contribute to the further growth of Takamatsu Corporation. Thus we were also confident about the success of this M&A.

 Within a year after joining our Group, collaborative sales activities between Takamatsu Corporation and Mibu have led to an increase in orders of about 10 buildings for Takamatsu Corporation.

Takamatsu Construction Group founded Takamatsu House in April 2019, and conducted an M&A for the acquisition of Tatsumi Planning. in May 2019, resulting in your full-edged entry into the wooden detached residence business. What are your objectives and plans for the future?

 Tatsumi Planning is a company with a successful track record of over 20 years of constructing wooden detached housing, mainly in the Yokohama and Kanagawa areas. When the M&A targeting Tatsumi Planning was conducted, its real estate development and mega solar businesses were carved out, resulting in only its detached residence construction and renovation businesses joining our Group.

 In addition to the above-mentioned Mibu Corporation, the inclusion of Tatsumi Planning into our Group means that we now have a set of businesses able to sell and construct detached housing focused on the Tokyo Metro area. Takamatsu House was established to plan and manage the operations of Mibu Corporation and Tatsumi Planning.

 Currently, Takamatsu House is positioned as a subsidiary of Takamatsu Corporation. However, we expect Takamatsu House to grow fast and big in the future as the third core pillar after Takamatsu Corporation and Asunaro Aoki.

The third pillar of "Create ! 2022" is "Create a Group culture that embraces diversity and compliance." Could you comment on this?

 The basic reason why TCG could grow through M&A is that we have traditionally had a corporate culture and evaluation system that respects the diversity and independence of Group companies, with their various foundations, growth patterns and business domains.

 After a company joins our Group through M&A, it is essential that it maximize its unique strength. Therefore, it is important to keep the original name of the company, leave its operation to its management and provide job security and regular bonuses to the employees to boost their morale in order to revive the company. This is based on the idea of respecting diversity.

 At the same time, we have emphasized compliance in the governance of Group companies. One of our Management Credo is to "refuse to overly prioritize of profitability, and never use improper or fraudulent methods nor seek speculative profits." We have faithfully upheld this credo for a long time and sincerely believe it is the key to maintaining good relationships with our customers over generations.

 We will continue to uphold this credo in the future through employee training and daily activities.

Please tell us your thoughts on "Create synergy effects" under "Create ! 2022."

 Our Group embraces the diversity and respects the independence of our Group companies. At the same time, creating synergies through collaboration is equally important.

 At this stage, however, we believe that the creation of synergies within the Group is still insufficient and there is room for improvement.

 As mentioned earlier, the tight construction market will not continue forever, and we will need to enhance the Group's competitiveness and resilience to prepare for the risk of a deteriorating market.

 At the same time, we intend to further expand the synergy Interviewmeasures we are currently implementing. Some examples are construction of large-scale logistics centers by way of joint ventures between Takamatsu Corporation and Asunaro Aoki Construction, joint sales activities between Takamatsu Corporation and Kongo Gumi, and collaborative action between Takamatsu Corporation, Takamatsu Estate and Takamatsu Techno Service.

 In addition, when considering synergies, it is also important to unify personnel policies across the Group as well as actively transferring personnel within the Group. However, since our Group companies are diversified within the construction and real estate industries, the functions required by each company are quite varied. Thus, personnel systems for such tasks as recruitment, training and evaluation have not been standardized or unified. Moreover, we admit we have not been so aggressive in terms of personnel exchanges between the Group companies. So we do need to proceed in these fields, albeit cautiously and with careful consideration for the characteristics of each company.

"Create ! 2022" also includes "Create value for the economy, society and environment." Please tell us about your SDG initiatives.

 These days the SDGs are frequently listed as the major management issue. However, we have emphasized contribution to society for a long time, as indicated in our Corporate Philosophy:"We conduct the construction business as a mutually complementary activity vital to society." A good example of our emphasis on contribution to society is our SDG Contribution Revenue index. To create this index, we have examined how much of our revenue clearly contributes to the 17 SDGs. For the fiscal year ended March 31, 2019, it accounted for 25% of total sales, and we plan to raise that figure to 31% in the next three years. SDG Contribution Revenue includes constructing reinforced concrete buildings with their strength exceeding the Buildings Standards Act by more than 15%, as well as revenue earned by Kongo Gumi, often cited as the oldest company in the world, which is carrying on the tradition of craftsmanship of the Miya carpenters from the sixth century.

How will you proceed with work style innovation?

 Both Takamatsu Corporation and Asunaro Aoki Construction are aiming for eight days of construction site shutdown every four weeks by the fiscal year ending March 2022. However, if an increase in site shutdown days results in the lengthening of construction periods as well as increased costs, we will be unable to meet customer expectations. Thus, productivity improvement as well as improving efficiency in all operations are essential. We plan to improve productivity by the active use of ICT equipment, adoption of labor-saving construction methods, workflow review and other measures.

Could you tell us about human resource development? What are your thoughts on promoting women's participation in the workplace?

 Concerning the recruitment of new graduates, TCG as a Group hired 218 new graduates in April 2019, and plans to hire 256 in April 2020. We hired 238 in 2018, 178 in 2017 and 161 in 2016. This level of hiring is comparable to the largest general contractors in Japan. As such, we are conducting rather aggressive hiring, especially when we consider the fact that the total number of our employees as of March 2019 is only 3,915. Our aggressive hiring shows our confidence towards continued growth in the future.

 In recent years we have increased the number of female employees hired. The percentage of women among new graduates has increased as follows: 16.1% for April 2016, 24.4% for April 2017, 24.3% for April 2018 and 24.8% for April 2019. Currently, about one in four new graduates are female. We are actively recruiting female engineers to work in design and on construction sites. I must admit we are far behind in terms of the number of female managers, but I hope that more female employees will continue working and take up leadership positions even as they enter different life stages. We are also conducting training programs for female managers and female mid-level employees.

What are your perceptions of management issues and business risks?

 For Takamatsu Corporation, the rise of interest rates is a risk. Although we have had low interest rates for a long time, if they do rise, it may significantly cool down our customers' enthusiasm for investment towards real estate and its utilization.

Please tell us about shareholder return.

 To respond to the expectations of our shareholders, we have continuously and steadily increased our dividend payout ratio. It rose continuously from 21.1% for the fiscal year ended March 2016 to 23.5% for fiscal 2017, 25.1% for fiscal 2018 and 29.7% for fiscal 2019. We will continue to return profits to shareholders based on our business performance, and announce our target dividend amount as well as dividend payout ratio at the beginning of the fiscal year. For the fiscal year ended March 2020, we aim to achieve a dividend payout ratio of 30%, to be continued for the following years.

 Concerning share buybacks, we will strike a balance between the effectiveness of returning profits to our shareholders and securing liquidity for our shares in the marketplace.

President & Representative Director of the Board