Key Performance Indicators
Earnings Per Share (EPS)
EPS is an important metric that reflects corporate profitability for shareholders. It is used in the denominator of the price-earning ratio (PER). When a company’s PER reaches a certain level, an increase in EPS becomes a key driver of share prices, thus contributing to improved shareholder value.
Net income ÷ Number of shares outstanding
Ichigo 2030 Vision KPIs
As a sustainable infrastructure company, Ichigo is growing and expanding its core real estate and clean energy capabilities into new areas. In Ichigo 2030, Ichigo will work to grow both earnings and earnings stability, expanding beyond real estate to generate new earnings streams that are less sensitive to changes in real estate market conditions.
The KPIs set forth in Ichigo 2030 is as follows:
High Capital Productivity
Return On Equity (ROE) Average ROE >15%
ROE is a measure of profitability that calculates how effectively a company is able to generate earnings with its shareholders' equity. METI's Ito Review states that as an integral element of shareholder value creation, Japanese companies should commit to achieving an ROE of at least 8% and should strive to achieve higher levels than this minimum.
Ichigo is targeting an 11-year-average ROE greater than 15% under Ichigo 2030.
Although Ichigo’s growth investments in IT and new businesses will initially lower ROE, Ichigo believes these investments will increase long-term ROE by driving higher capital productivity and earnings stability. Ichigo is focused on growing long-term EPS as a key driver of shareholder value.
Earnings per share (EPS) ÷ Book-value per share (BPS)
Continuous JPX-Nikkei 400 Index Inclusion
Jointly developed by the Japan Exchange Group, Tokyo Stock Exchange, and Nikkei Inc., the JPX-Nikkei Index 400 is comprised of companies that meet global standards for various matters of importance to investors, such as efficient use of capital and an investor-focused management approach. The quantitative criteria for becoming a JPX-Nikkei 400 constituent are 3-year average ROE, 3-year cumulative operating profit, and market capitalization.
Ichigo is targeting continuous inclusion in the JPX-Nikkei 400 Index for the entire Ichigo 2030 period (11 years).
High Cash Flow Generation
Continuous Economic Operating Cash Flow* > Net Income
Ichigo’s robust cash flows fund both growth investments and shareholder returns, so growing these cash flows is an important business priority. Ichigo is therefore setting a target of its annual Economic Operating Cash Flow exceeding its annual Net Income for the entire Ichigo 2030 period (11 years).
* Economic Operating Cash Flow = Cash Flows from Operations +/- any changes in Real Estate and Power Plants for Sale
High Earnings Stability
FY30/2 Stock Earnings Ratio >60%
Ichigo is targeting increasing its Stock Earnings ratio from FY19/2`s 53% to 60% in FY30/2. It is also working to increase and diversify its Flow Earnings in order to reduce the weighting of profits from Value-Add real estate sales, which can be sensitive to changes in the real estate market. As a result, Ichigo expects to significantly increase both its earnings and its earnings stability over the Ichigo 2030 period.
Shareholder Return Policy
Ichigo will work to drive long-term shareholder value with a shareholder return policy that focuses on 1) dividend stability, transparency, and growth, and 2) flexible share buybacks.
Progressive Dividend Policy
Ichigo will continue its progressive dividend policy, originally adopted in FY17/2, in Ichigo 2030. Ichigo’s progressive dividend policy underscores its commitment to driving continued organic earnings and dividend growth for shareholders. Under this policy, the previous year’s dividend becomes the floor for the current year’s dividend. The dividend will be raised (or kept flat) but not cut, providing shareholders downside protection.
In addition to its progressive dividend policy, Ichigo will continue its policy of a DOE (Dividend on Equity) payout ratio of greater than 3%. Ichigo believes that the combination of a progressive dividend and a DOE-based payout policy will significantly increase the security, certainty, and visibility of its dividend to the benefit of Ichigo’s shareholders.
Flexible Deployment Of Share Buybacks
In addition to the above dividend policies, Ichigo is newly adopting a policy to flexibly conduct share buybacks to optimize its capital structure and drive shareholder value.