UT Group Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥83.30B
• Operating Income: ¥4.94B
• Net Income: ¥6.60B
• EPS: ¥84.17

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

UT Group (2146) delivered mixed FY2026 Q2 results under JGAAP on a consolidated basis: revenue declined 6.8% YoY to ¥83.3bn, but operating income rose 37.0% YoY to ¥4.94bn, demonstrating effective cost discipline and operating leverage despite a softer topline. Gross profit of ¥15.20bn translated to an 18.3% gross margin, while the operating margin improved to roughly 5.9%, indicating better cost absorption and/or pricing/mix improvements. Ordinary income of ¥4.99bn slightly exceeded operating income, suggesting modest net non-operating gains offsetting interest expense of ¥62m. Net income was ¥3.25bn, down 49.3% YoY, implying substantial below-ordinary-line impacts (e.g., extraordinary items, tax effects, or minority interest changes) despite the strong operating performance. ROE (DuPont) was 10.04%, built on a 3.90% net margin, 1.303x asset turnover, and 1.98x leverage, consistent with a capital-efficient dispatch/services model. Liquidity appears robust with a current ratio of 236.7% and working capital of ¥31.34bn; the firm’s business model (low inventories) naturally supports a high quick ratio. Based on total equity of ¥32.37bn and total assets of ¥63.94bn, the implied equity ratio is roughly 50.6% (the reported equity ratio of 0.0% is undisclosed rather than economic reality), indicating a conservative balance sheet. Interest coverage is strong at 79.6x, reflecting low financial risk from debt service. Operating cash flow of ¥3.46bn slightly exceeded net income (OCF/NI 1.06x), pointing to reasonable earnings quality in the period. Reported investing and cash balances are undisclosed; therefore, free cash flow cannot be reliably calculated from the provided data. Dividend per share is shown as ¥0.00 with a 0% payout, suggesting either a suspension or timing-related non-disclosure of distributions. The divergence between higher operating income and sharply lower net income is the key analytical focal point; identifying the specific extraordinary/tax/minority drivers is essential to gauge the sustainability of earnings. Overall, UT Group is demonstrating resilient operating execution and strong liquidity, though headline net profit volatility introduces uncertainty. Sector-wise, the metrics are consistent with a staffing/outsourcing operator experiencing cyclical revenue pressure but defending margins through flexible cost structures. Data gaps (investing CF, cash balance, detailed extraordinary/tax items) limit full cash flow and bottom-line attribution analysis. Monitoring order trends, utilization, and client exposure in manufacturing remains critical given the revenue decline.

Profitability Analysis

ROE of 10.04% decomposes into a 3.90% net margin, 1.303x asset turnover, and 1.98x financial leverage. The 18.3% gross margin versus an operating margin of roughly 5.9% indicates SG&A intensity around 12–13% of sales, and the YoY operating income growth despite lower revenue signals improved operating leverage via cost control, mix, pricing, or utilization gains. EBITDA of ¥5.70bn yields a 6.8% margin, consistent with a people-intensive services model with limited depreciation (¥760m) and minimal capital intensity. Ordinary income (¥4.99bn) above operating income (¥4.94bn) implies small net non-operating gains outweighing interest expense of ¥62m. The net income decline (-49.3% YoY) juxtaposed against a stronger operating line implies non-operating or below-the-line drags (e.g., extraordinary losses or higher tax/minority charges). Interest coverage of 79.6x confirms minimal financing cost burden; profitability is driven by operations, not financial engineering. Asset turnover at 1.303x is healthy for the sector, indicating efficient use of assets to generate revenue. Given the revenue contraction, the margin performance suggests management successfully flexed costs, underscoring inherent operating leverage and disciplined SG&A management.

Growth Assessment

Revenue decreased 6.8% YoY to ¥83.3bn, indicative of softer demand, likely tied to cyclical end-markets in manufacturing and technology staffing. Despite the topline decline, operating income rose 37.0% YoY to ¥4.94bn, highlighting improved cost efficiency and possibly favorable business mix or pricing. Ordinary income slightly exceeded operating income, suggesting stable non-operating income dynamics. Net income fell 49.3% YoY to ¥3.25bn, pointing to one-off items or tax/minority effects; absent detail, we cannot attribute the decline precisely. Sustainability of the operating improvement depends on visibility into orders, headcount utilization, and client capex cycles; the topline softness introduces risk to near-term growth. Medium-term, the asset-light model and moderate leverage support reinvestment capacity when demand recovers. With EBITDA margin at 6.8% and ROE at ~10%, the franchise exhibits acceptable returns but remains sensitive to macro/sector cycles. Outlook hinges on stabilization in manufacturing dispatch demand, retention of improved cost structure, and the absence of recurring extraordinary losses; if the period’s below-the-line drags are non-recurring, headline profit growth could normalize.

Financial Health

Liquidity is strong: current assets of ¥54.27bn versus current liabilities of ¥22.93bn yield a current ratio of 236.7% and quick ratio of 236.7% (inventories are not disclosed, typical for a staffing model). Working capital stands at ¥31.34bn, providing ample buffer for receivables timing and payroll cycles. Total assets are ¥63.94bn, equity is ¥32.37bn, implying an equity ratio around 50.6% and assets-to-equity leverage of ~1.98x. Debt-to-equity is shown at 0.93x, indicating moderate use of debt; coupled with interest coverage of 79.6x, solvency risk appears low. The balance sheet structure aligns with an asset-light services company, with limited fixed assets (D&A ¥760m) and financial flexibility to manage cyclicality. While reported cash is undisclosed, liquidity metrics and OCF positivity suggest adequate funding capacity in the near term. No red flags on covenant stress are evident from interest coverage and leverage metrics provided.

Cash Flow Quality

Operating cash flow of ¥3.46bn is modestly above net income of ¥3.25bn (OCF/NI 1.06x), indicating reasonable earnings-to-cash conversion in the period. The staffing model’s working capital typically revolves around receivables; the positive OCF suggests either stable collections or beneficial working capital timing. Depreciation and amortization of ¥760m versus EBITDA of ¥5.70bn underscores low capital intensity. Investing cash flow is not disclosed, so free cash flow cannot be fully assessed; any M&A or growth capex activity is unknown from the data. Financing cash flow was -¥6.13bn, implying net outflows due to debt repayment, share repurchases, or dividends (the latter appears undisclosed at ¥0.00 DPS), but detail is not provided. Given these constraints, period cash generation from operations looks sound, but medium-term FCF durability depends on capex/M&A cadence and working capital discipline, which are not fully observable here.

Dividend Sustainability

Reported DPS is ¥0.00 and payout ratio 0.0%, which may reflect non-disclosure or a temporary suspension; it cannot be treated as an economic zero. With ROE at ~10% and strong liquidity, capacity for distributions exists in principle, but the 49.3% YoY decline in net income and unknown extraordinary/tax factors complicate payout visibility. Free cash flow coverage cannot be assessed due to undisclosed investing cash flows; OCF strength is a positive, but FCF is the appropriate anchor for sustainable dividends. Policy-wise, staffing companies often balance dividends with growth investments and M&A; given current topline softness and bottom-line volatility, management may prioritize balance sheet resilience and selective reinvestment. Near-term dividend outlook hinges on normalization of below-the-line items and confirmation of stable FCF after capex/M&A. Without explicit guidance or historical policy detail, sustainability assessment remains constrained by data gaps.

Risk Assessment

Business Risks:

• Cyclical demand from manufacturing and technology end-markets affecting utilization and order flow
• Client concentration risk common in dispatch/outsourcing models
• Labor market tightness impacting hiring, retention, and wage inflation
• Regulatory changes in labor dispatch laws and compliance requirements in Japan
• Pricing pressure from competitors in staffing/outsourcing services
• Execution risk in M&A/integration if growth is pursued via acquisitions

Financial Risks:

• Potential for extraordinary losses or tax/minority swings driving net income volatility
• Working capital timing risk (receivables collections vs. payroll obligations)
• Refinancing and interest rate risk despite currently strong coverage
• FCF uncertainty due to undisclosed investing cash flows and potential M&A outlays

Key Concerns:

• Sharp divergence between strong operating income growth and a 49.3% YoY decline in net income
• Revenue contraction (-6.8% YoY) indicating end-market softness
• Lack of disclosure on investing cash flows and cash balance limiting FCF and liquidity visibility

Investment Implications

Key Takeaways:

• Operating leverage and cost control drove a 37% YoY increase in operating income despite a 6.8% revenue decline
• ROE of ~10% reflects solid asset turnover and moderate leverage
• Liquidity is strong (current ratio ~2.37x; implied equity ratio ~51%), and interest coverage is robust (79.6x)
• Net income volatility suggests material below-the-line impacts that need clarification
• Cash conversion is reasonable (OCF/NI 1.06x), but FCF cannot be assessed without investing CF

Metrics to Watch:

• Order intake, headcount utilization, and bill rates by segment/client vertical
• Extraordinary items, minority interests, and effective tax rate drivers
• DSO and working capital trends affecting OCF
• Capex and M&A spending to gauge FCF and capital allocation
• Leverage (net debt/EBITDA) and interest coverage as rates evolve
• Margin trajectory (gross and operating) amid revenue softness

Relative Positioning: Within Japanese staffing/outsourcing peers, UT Group appears operationally resilient with healthy margins and liquidity, though its near-term topline softness and bottom-line volatility place it mid-pack on growth visibility but above-average on balance sheet strength and interest coverage.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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