| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2562.3B | ¥2627.3B | -2.5% |
| Operating Income / Operating Profit | ¥344.8B | ¥230.4B | +49.7% |
| Ordinary Income | ¥357.7B | ¥234.8B | +52.3% |
| Net Income / Net Profit | ¥262.9B | ¥175.1B | +50.1% |
| ROE | 19.8% | 16.0% | - |
The fiscal results for the year ended March FY2026 recorded Revenue ¥2562.3B (YoY -¥65.0B -2.5%), Operating Income ¥344.8B (YoY +¥114.4B +49.7%), Ordinary Income ¥357.7B (YoY +¥122.9B +52.3%), and Net Income attributable to owners of parent ¥262.9B (YoY +¥87.8B +50.1%), achieving a significant profit increase despite a decline in sales. Although revenue slightly declined, the gross profit margin on completed construction improved from 15.7% to 21.9% (+6.2pt), and the operating margin rose from 8.8% to 13.5% (+4.7pt). SG&A ratio increased to 8.4% from 7.0% (+1.4pt), but the substantial improvement in gross margin absorbed this, resulting in a net profit margin improvement to 10.3% (prior 6.7%) (+3.6pt). Extraordinary income totaled ¥22.9B including gain on sale of investment securities ¥21.8B, extraordinary losses were ¥5.7B including impairment losses ¥3.4B, and non-operating items contributed a net +¥12.9B (including foreign exchange gains ¥5.8B), supporting the profit increase. ROE reached 19.8%, with improved profitability driving a substantial rise in capital efficiency.
[Revenue] Completed construction revenue was ¥2562.3B (YoY -¥65.0B -2.5%) and completed construction gross profit increased significantly to ¥560.8B (YoY +¥147.3B +35.6%), with the completed construction gross margin improving to 21.9% from 15.7% (+6.2pt). Normalization of material prices and subcontracting costs, a higher proportion of high-margin projects, and rigorous cost control are presumed to have driven gross margin improvements. Segment information is omitted as the company operates a single segment: the facilities construction business. The sales decline appears due to timing differences in order execution, but the qualitative improvement in profits is notable.
[Profit & Loss] Operating Income rose substantially to ¥344.8B (+49.7%). The contribution from gross margin improvement was large. SG&A increased to ¥216.0B (from ¥183.1B prior, +¥32.9B +18.0%), outpacing the sales decline, but the expansion of gross margin by +6.2pt sufficiently absorbed the rise in SG&A ratio to 8.4% (prior 7.0%). Ordinary Income was ¥357.7B (+52.3%); non-operating income included dividend income received ¥4.5B and foreign exchange gains ¥5.8B totaling ¥14.8B, while non-operating expenses included interest expenses paid ¥1.1B totaling ¥1.9B, resulting in a net +¥12.9B that boosted ordinary income. Extraordinary items comprised extraordinary gains ¥22.9B mainly from gain on sale of investment securities ¥21.8B, and extraordinary losses ¥5.7B including valuation losses on investment securities ¥5.7B and impairment losses ¥3.4B, yielding a net +¥17.2B that reinforced final profit. After deducting corporate taxes etc. ¥105.5B (effective tax rate 28.1%), Net Income attributable to owners of parent was ¥262.9B (+50.1%), closing as a case of lower sales but higher profits.
[Profitability] Operating margin improved to 13.5% (prior 8.8% +4.7pt), and net margin improved to 10.3% (prior 6.7% +3.6pt). ROE reached 19.8%, driven primarily by margin improvements. [Cash Quality] Operating Cash Flow (OCF) ¥584.4B is 2.22x Net Income ¥262.9B, and cash conversion ratio (OCF/EBITDA) is 1.63x, indicating extremely high quality. The accrual ratio ((Net Income - OCF)/Total Assets) is -13.8%, negative, showing strong cash backing of profits. [Investment Efficiency] Total asset turnover is 1.10x (down from approx. 1.22x prior). Capital expenditures were ¥8.0B, yielding a CapEx/Depreciation ratio of 0.56x (Depreciation ¥14.3B), indicating restraint. There is significant room for human and digital investment. [Financial Soundness] Equity Ratio 57.3% (prior 50.7%), current ratio 190.2%, interest-bearing debt compressed to ¥35.2B, Debt/EBITDA ratio 0.10x, and interest coverage 325x—extremely conservative. Cash and deposits ¥832.0B vs. short-term borrowings ¥28.0B yields net cash +¥797.0B, ample liquidity.
Operating Cash Flow was ¥584.4B (prior ¥124.0B, +371.2%)—a substantial increase. OCF subtotal (before working capital changes) was ¥669.1B, with collections of trade receivables ¥164.1B and increases in other current liabilities ¥136.4B (of which consumption tax received in advance +¥111.2B) contributing significantly. A decrease in accounts payable -¥53.7B was a headwind, but receivables collection and increases in advance receipts (uncompleted construction received in advance increased from ¥69.4B to ¥106.5B +¥37.1B +53.5%) improved working capital. After corporate taxes paid -¥89.2B, OCF remained at a high level. Investing Cash Flow was +¥4.2B: CapEx -¥8.0B, proceeds from sale of investment securities +¥32.1B, purchases -¥9.5B, other investing +¥11.2B resulting in net inflow. Free Cash Flow was ¥588.5B (prior ¥115.7B, a large increase). Financing Cash Flow was -¥285.0B, mainly due to net repayment of short-term borrowings -¥201.3B and dividend payments -¥83.6B. Cash and cash equivalents increased from ¥509.3B at the beginning of the period to ¥819.3B at year-end (+¥310.0B), further strengthening liquidity.
Recurring earnings improvement was mainly driven by the completed construction gross margin improvement of +6.2pt; of the ¥344.8B increase in Operating Income, approximately ¥147.3B was attributable to gross margin improvement. The ¥32.9B increase in SG&A appears to be proactive investment during a sales decline, reflecting a change in the recurring cost structure. Temporary factors include extraordinary gains ¥22.9B (of which gain on sale of investment securities ¥21.8B) and extraordinary losses ¥5.7B (impairment losses ¥3.4B, valuation loss on investment securities ¥5.7B), with a net +¥17.2B equal to 0.67% of revenue—limited in scope. Non-operating items included foreign exchange gains ¥5.8B but were relatively small. Accrual quality is strong with OCF/Net Income 2.22x and cash conversion ratio 1.63x; the quality of earnings is very high. Comprehensive income was ¥312.3B, exceeding Net Income ¥262.9B by +¥49.4B; other comprehensive income contributions included actuarial adjustments for retirement benefits +¥32.9B, foreign currency translation adjustments +¥6.0B, and valuation differences on available-for-sale securities +¥3.9B. After tax-effect adjustments, the substantive quality of earnings can be assessed on an ordinary income basis, and core earnings growth is evident.
Against the full-year guidance (Revenue ¥2650.0B, Operating Income ¥360.0B, Ordinary Income ¥365.0B, Net Income attributable to owners of parent ¥270.0B), results reached 96.7% of Revenue, 95.8% of Operating Income, 98.0% of Ordinary Income, and 97.4% of Net Income—generally on plan. Although revenue slightly declined, improvements in gross margin supported stable operating, ordinary, and net income, and deviations from company guidance remained within ±5%. Contributions from extraordinary items and FX were limited; the main drivers of plan achievement were cost improvements and qualitative improvement in project mix. Going forward, materials prices, labor cost trends, and sustainability of the order structure will be key to the outlook.
Dividends were an interim ¥82 and year-end ¥56, totaling ¥138 for the year, resulting in a payout ratio of 71.1% (dividend per share total ¥138 ÷ EPS ¥207.33 × average shares outstanding during the period)—a high level. Note that on January 1, 2026, a 3-for-1 stock split for ordinary shares was implemented, and the year-end dividend ¥56 is stated on a post-split basis (equivalent to ¥168 on a pre-split basis). Share buybacks were minimal (Financing CF -¥0.0B), so shareholder returns are dividend-focused. With Free Cash Flow ¥588.5B and dividends paid ¥83.6B, FCF coverage is about 7.0x, indicating strong capacity to sustain dividends. The payout ratio exceeds the company's usual standard (normally expected 40–50%), but with net cash ¥797.0B and ample liquidity, there is significant room to maintain or increase dividends in the short-to-medium term.
Risk of renewed increases in material prices and labor costs: While the completed construction gross margin improved to 21.9% from 15.7% (+6.2pt), a reversal in raw material markets or wage pressure from skilled labor shortages could compress gross margins and squeeze operating margins. Loss on construction contracts reserves are low at ¥2.0B (from ¥12.2B prior, -83.9%), but cost estimation variances on large projects could necessitate reserve increases.
Risk of increased SG&A and deterioration in operating leverage: SG&A rose to ¥216.0B (YoY +18.0%), growing at a pace that significantly exceeds the sales decline (-2.5%), raising concerns about weakening operating leverage in a revenue-stagnant environment. SG&A ratio rose to 8.4% (prior 7.0% +1.4pt); if future sales growth slows, the scope for further operating margin improvement may be limited.
Working capital volatility and receivables collection risk: Accounts related to uncompleted construction receivables ¥782.2B and electronic recorded monetary claims ¥75.5B are large, with advance receipts for uncompleted construction ¥106.5B. Cash flow seasonality could be significant depending on project progress and timing of receivables collection. While collections of receivables +¥164.1B boosted OCF during the period, deterioration in collection trends in subsequent periods could pressure liquidity via working capital deterioration.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 13.5% | 5.5% (3.5%–7.2%) | +7.9pt |
| Net Margin | 10.3% | 3.5% (2.5%–4.4%) | +6.7pt |
Profitability is outstanding within the construction industry, with operating and net margins both well above the median and at a top-tier level.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -2.5% | 9.8% (-2.1%–15.1%) | -12.3pt |
Revenue growth rate lags the industry median, influenced by short-term timing differences in order execution, but profitability quality improvements have maintained earnings power.
※Source: Company compilation
A substantial improvement in completed construction gross margin of +6.2pt enabled an operating margin of 13.5% and ROE of 19.8%, bringing capital efficiency to a top industry level. Rigorous cost management and acquisition of high-margin projects have strengthened the earnings base, providing substantial room to maintain or improve margins in the short-to-medium term. However, in the event of renewed rises in material prices and labor costs, gross margins could be pressured; the ability to pass on costs and strengthen added value will be key to sustainability.
With strong cash generation—OCF ¥584.4B and Free Cash Flow ¥588.5B—the company maintains an extremely conservative financial position with net cash ¥797.0B and Debt/EBITDA 0.10x. CapEx is being restrained (CapEx/Depreciation 0.56x), yet there is ample capacity for growth investments in digital, human capital, and energy-saving solutions, which could accelerate shareholder value creation. Although the payout ratio is high at 71.1%, FCF coverage of 7.0x provides room to balance stable dividends with potential dividend increases.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are compiled by the Company based on publicly disclosed financial statements and are provided for reference. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional advisor.