| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥3865.4B | ¥3666.4B | +5.4% |
| Operating Income | ¥223.7B | ¥222.6B | +0.5% |
| Ordinary Income | ¥234.3B | ¥227.5B | +3.0% |
| Net Income (attributable to owners of parent) | ¥134.4B | ¥125.0B | +7.5% |
| ROE | 11.6% | 9.3% | - |
The cumulative Q2 results for the fiscal year ended April 2025 closed with Revenue of ¥3865.4B (YoY +¥199.0B, +5.4%), Operating Income of ¥223.7B (YoY +¥1.1B, +0.5%), Ordinary Income of ¥234.3B (YoY +¥6.8B, +3.0%), and Net Income attributable to owners of parent of ¥134.4B (YoY +¥9.4B, +7.5%). While revenue and profit growth continued, Operating Income growth slowed as SG&A increased (¥412.6B → ¥443.2B, +7.4%), restraining operating leverage. By segment, the Construction Business led with Revenue of ¥1641.2B (+8.6%) and Operating Income of ¥172.2B (+11.8%) delivering double-digit profit growth, while the Real Estate Leasing Business showed moderate growth with Revenue of ¥2210.3B (+3.3%) and Operating Income of ¥142.4B (+0.7%). Operating margin was 5.8% (down 0.3pt from 6.1% a year ago), and net margin was 3.5% (up 0.1pt from 3.4%). Increased SG&A compressed operating profitability, but results below operating level remained firm.
[Revenue] Revenue totaled ¥3865.4B (YoY +5.4%). By segment, Construction Business at ¥1641.2B (＋8.6%) was the main driver, and Real Estate Leasing Business at ¥2210.3B (＋3.3%) sustained stable growth. Construction reported billings on completed contracts of ¥1641.1B, with a gross margin of 30.8% (down 0.5pt from 31.3% last year); although margin narrowed slightly, expanded revenue scale yielded gross profit of ¥505.7B (up from ¥472.7B, +7.0%). Real Estate Leasing accounted for 57.2% of revenue and remained the core segment, supported by stable rental income and accumulation of the sublease management service. Other businesses declined to ¥29.6B (¥39.6B prior year, -25.2%), impacted by contraction in advertising agency services and golf course/hotel operations.
[Profitability] Operating Income was ¥223.7B (YoY +0.5%). Gross profit totaled ¥667.0B (gross margin 17.3%, unchanged YoY), rising with revenue, but SG&A increased to ¥443.2B (¥412.6B prior year, +7.4%) at a pace exceeding revenue growth, which constrained operating income expansion. The SG&A increase was mainly due to corporate headquarters administrative expenses (company-wide costs in segment notes rose from ¥74.3B → ¥91.6B, +23.3%), reflecting organizational expansion and higher personnel costs. By segment, Operating Income was ¥172.2B (margin 10.5%) for Construction and ¥142.4B (margin 6.4%) for Leasing, with Construction’s higher margin supporting consolidated earnings. Non-operating items netted +¥10.6B (non-operating income ¥12.1B, non-operating expenses ¥1.5B), with interest and dividend income of ¥1.5B and insurance income of ¥3.2B contributing. Ordinary Income was ¥234.3B (YoY +3.0%), outpacing Operating Income growth. Extraordinary items netted -¥5.0B (extraordinary income ¥8.1B, extraordinary losses ¥13.1B), with impairment losses of ¥8.5B and loss on disposal of fixed assets of ¥4.5B recorded, partially offset by ¥4.6B gain on sale of fixed assets. After deducting corporate taxes of ¥67.7B, Net Income attributable to owners of parent was ¥134.4B (YoY +7.5%), delivering a year-on-year increase on higher revenue and profit.
Construction Business: Revenue ¥1641.2B (YoY +8.6%), Operating Income ¥172.2B (YoY +11.8%), Operating Margin 10.5% (improved 0.3pt from 10.2%), driven by price pass-through and improved process management. Completed contract gross margin was 30.8% (31.3% prior year), slightly down, but gross profit increased by +7.0% due to larger revenue scale. Real Estate Leasing Business: Revenue ¥2210.3B (YoY +3.3%), Operating Income ¥142.4B (YoY +0.7%), Operating Margin 6.4% (down 0.2pt from 6.6%), supported by accumulation of the sublease management service but pressured by higher management costs and vacancy countermeasure expenses. Other Businesses: Revenue ¥29.6B (YoY -25.2%), Operating Income ¥0.5B (YoY -62.5%), Operating Margin 1.5% (3.0% prior year), showing significant revenue and profit decline with limited contribution.
[Profitability] Operating margin 5.8% (down 0.3pt from 6.1%), Net margin 3.5% (up 0.1pt from 3.4%), ROE 11.6% (down 0.8pt from 12.4%), with SG&A increases suppressing operating profitability while results below operating remained firm. Gross margin was 17.3% (unchanged YoY), indicating appropriate cost-of-sales management, and Construction’s gross margin of 30.8% boosted consolidated gross profit. [Cash Quality] Operating Cash Flow / Net Income was 1.46x (OCF ¥195.7B / Net Income ¥134.4B), indicating good cash backing for earnings; the accrual ratio was -1.6%, showing appropriate cash conversion. Conversely, Operating CF / EBITDA (Operating Income + depreciation) was 0.80x (OCF ¥195.7B / EBITDA ¥243.1B), somewhat modest, with corporate tax payments of ¥93.0B and accounts receivable increase of ¥25.2B restraining cash conversion. [Investment Efficiency] Total asset turnover was 1.79x (Revenue ¥3865.4B / Total assets ¥2156.6B), EPS ¥1,238.21 (up from ¥1,173.64, +5.5%), and BPS ¥10,481.12, with share buybacks (¥295.8B) improving capital efficiency. [Financial Soundness] Equity Ratio 54.0% (down 4.5pt from 58.5%), Current Ratio 189% (current assets ¥1364.9B / current liabilities ¥722.0B), and liquid assets on hand ¥1184.7B (equivalent to 3.1 months of Revenue). Aggressive share repurchases reduced the Equity Ratio, but liquidity remains robust.
Operating Cash Flow was ¥195.7B (prior year ¥227.1B, -13.9%), a level after deducting corporate tax payments of ¥93.0B from subtotal cash flow before tax adjustments of ¥282.5B. Accounts receivable rose ¥25.2B (prior year +¥29.1B), and work-in-progress payments decreased slightly by ¥1.1B, pressuring working capital, while increases in accounts payable ¥29.2B (prior year +¥5.6B) and advances received on construction in progress ¥5.1B (prior year -¥5.0B) partially offset the pressure. Investing Cash Flow was -¥39.2B (prior -¥37.3B), with capital expenditures ¥31.6B and intangible asset acquisitions ¥10.2B as primary outflows, and long-term loan recoveries ¥22.5B as inflow. Free Cash Flow was ¥156.4B (Operating CF ¥195.7B - Investing CF ¥39.2B), sufficient to cover dividend payments of ¥41.6B. Financing Cash Flow was a large outflow of -¥337.5B (prior -¥33.7B), primarily due to share buybacks of ¥295.8B, resulting in cash and cash equivalents declining ¥181.0B during the period to ¥1168.4B. OCF/Net Income at 1.46x indicates good cash backing for profits, but YoY increased tax payments and higher accounts receivable weighed on Operating CF.
Comparing Operating Income of ¥223.7B, non-operating items netted +¥10.6B with interest received ¥1.5B and insurance income ¥3.2B as main components, indicating a highly repeatable composition. Non-operating income was 0.3% of Revenue, well below 5%, confirming an operating-driven earnings structure. Extraordinary items netted -¥5.0B (extraordinary income ¥8.1B, extraordinary losses ¥13.1B), with impairment losses of ¥8.5B and loss on disposal of fixed assets ¥4.5B recorded; this is about 2% of Ordinary Income ¥234.3B, so one-off items have not materially distorted recurring earnings. Accrual quality is favorable with OCF/Net Income 1.46x and accrual ratio -1.6%, and accounts receivable increase ¥25.2B and accounts payable increase ¥29.2B are in reasonable balance. However, OCF/EBITDA at 0.80x is somewhat modest, with corporate tax payments of ¥93.0B and accounts receivable increases suppressing cash conversion efficiency. Comprehensive income was ¥166.2B (Net Income ¥134.4B + Other Comprehensive Income ¥4.6B), with a ¥5.0B positive adjustment related to retirement benefits contributing; divergence from Net Income was limited.
Full-year guidance is Revenue ¥4082.2B (YoY +5.6%), Operating Income ¥201.8B (YoY -9.8%), Ordinary Income ¥211.1B (YoY -9.9%), and Net Income attributable to owners of parent ¥145.7B (YoY -9.9%), representing a plan for higher revenue but lower profits. The Q2 cumulative achievement ratios are Revenue 94.7%, Operating Income 110.9%, and Ordinary Income 111.0%; Operating/Ordinary results have already exceeded full-year plan progress, but management appears to adopt a conservative assumption for H2 incorporating expected rises in materials and labor costs and higher vacancy-countermeasure costs in the leasing business. Full-year operating margin guidance is 4.9% (H1 actual 5.8%), implying an expected margin decline of about 0.9pt in H2; given H1 results, there is upside potential if cost control and utilization improvements proceed.
Dividend is a year-end lump sum of ¥360 (interim ¥0), with payout ratio 28.1% (dividend total ¥44.4B / Net Income ¥134.4B × (13.05k shares / 13.47k shares)), at a healthy level. FCF coverage is 3.5x (FCF ¥156.4B / dividend ¥41.6B), indicating ample dividend-paying ability, and cash on hand ¥1184.7B supports continuation of dividends. Meanwhile, the company executed share buybacks of ¥295.8B this period; combined with dividends, total shareholder returns were about ¥340B, substantially exceeding Net Income ¥134.4B. Total Return Ratio was 253% ((dividends ¥44.4B + share buybacks ¥295.8B) / Net Income ¥134.4B), a high level, and treasury stock increased materially to ¥29,793 million (prior year ¥211 million), with treasury stock representing 17.6% of outstanding shares (2,371k shares / 13,472k shares). Aggressive returns reduced shareholders’ equity to ¥1163.5B (down 13.0% from ¥1337.5B prior year), but liquidity is maintained. Dividends remain profit-linked and sustainable, while share buybacks are managed flexibly; future return policy will depend on balancing capital efficiency and cash on hand.
Concentration risk in Real Estate Leasing: Real Estate Leasing accounts for 57.2% of revenue and is highly sensitive to vacancy rates and rent levels. This period, its Operating Margin fell to 6.4% (from 6.6% prior year), with lower utilization and higher management costs depressing margins. The advance-receipt structure (advances received on construction in progress ¥132.3B and work-in-progress payments ¥21.9B) bolsters working capital, but weakness in leasing occupancy could also impact cash flows.
Rising costs and weakening operating leverage: SG&A rose +7.4% YoY, outpacing revenue growth of +5.4%, leading to Operating Margin of 5.8% (down 0.3pt). Headquarters administrative expenses jumped from ¥74.3B → ¥91.6B (+23.3%), with organizational expansion and higher personnel costs driving structural cost increases. The full-year plan assumes an operating margin of 4.9% and further margin erosion in H2, so effective cost management is critical.
Balancing an aggressive capital return policy with liquidity: Share buybacks of ¥295.8B reduced the Equity Ratio from 58.5% → 54.0% (down 4.5pt), and Total Return Ratio is high at 253%. Cash on hand decreased by ¥181.1B to ¥1184.7B (prior year ¥1365.8B), though Current Ratio remains strong at 189%. Continued high levels of returns could erode the liquidity buffer, so the sustainability of dividends and buybacks and the trade-off between returns and capital strength must be closely monitored.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.8% | 5.5% (3.5%–7.2%) | +0.2pt |
| Net Margin | 3.5% | 3.5% (2.5%–4.4%) | -0.0pt |
Both operating and net margins are around the industry median, maintaining average profitability within the construction sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 5.4% | 9.8% (-2.1%–15.1%) | -4.5pt |
Revenue growth lags the industry median by 4.5pt, indicating a more moderate growth pace within the sector.
※ Source: Company compilation
High margins in Construction (10.5%) and the advance-receipt structure (advances received on construction in progress > work-in-progress payments) support revenue and cash flow stability. In the Q2 cumulative, Construction achieved Operating Income of ¥172.2B (YoY +11.8%), with price pass-through and improved process management contributing. Advances received on construction in progress ¥132.3B support short-term revenue visibility, but attention is needed to a slight margin contraction in completed contract gross margin to 30.8% (down 0.5pt from 31.3%).
While capital efficiency improvements and aggressive shareholder returns (Total Return Ratio 253%) are progressing, Equity Ratio fell from 58.5% → 54.0% and cash on hand decreased by ¥181.1B. Current Ratio remains strong at 189%, but continued high returns require monitoring of the trade-off with liquidity. Dividends are profit-linked and likely sustainable, whereas share buybacks are flexibly deployed; future return policy will hinge on balancing capital efficiency and financial soundness.
The full-year plan is for higher revenue but lower profits (Operating Income -9.8%) and is conservative, incorporating expected H2 increases in materials and labor costs and higher vacancy-countermeasure expenses in leasing. Q2 cumulative Operating Income progress was 110.9% of plan, exceeding expectations, but the full-year operating margin guidance of 4.9% versus H1 actual 5.8% assumes about a 0.9pt margin decline in H2. If cost control and utilization improvements succeed, upside exists; however, SG&A growth (+7.4%) exceeding revenue growth (+5.4%) indicates weakening operating leverage, and SG&A ratio trends will be key for future profitability.
This report was generated automatically by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as appropriate.