| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥465.9B | ¥427.1B | +9.1% |
| Operating Income | ¥46.7B | ¥44.8B | +4.2% |
| Ordinary Income | ¥48.2B | ¥46.3B | +4.1% |
| Net Income | ¥22.9B | ¥17.4B | +31.3% |
| ROE | 5.7% | 5.1% | - |
For the fiscal year ended May 2026, Revenue was ¥465.9B (YoY +¥38.8B +9.1%), Operating Income was ¥46.7B (YoY +¥1.9B +4.2%), Ordinary Income was ¥48.2B (YoY +¥1.9B +4.1%), and Net Income was ¥22.9B (YoY +¥5.5B +31.3%), representing year-on-year revenue and profit growth. Revenue progressed steadily and operating profit increased, but an increase in SG&A (+13.0%) compressed the operating margin from 10.5% to 10.0% (-0.5pt). Net margin improved from 4.1% to 4.9% (+0.8pt), and at the bottom line there was a significant profit increase due to improvement in extraordinary items and reduced tax burden. For FY 2027 (year ending May 2027), management forecasts Revenue ¥490.0B (+5.2%), Operating Income ¥53.0B (+13.5%), and Net Income ¥37.0B (+61.6%), planning accelerated profit growth via cost absorption and margin improvement.
[Revenue] Revenue of ¥465.9B (+9.1%) showed solid growth. Gross profit was ¥157.1B, yielding a gross margin of 33.7%, an improvement of 0.3pt from 33.4% in the prior year. Optimization of project mix and pricing contributed to simultaneous top-line expansion and profitability. As the company operates a single segment (Comprehensive Construction Consultancy Business), detailed segment breakdowns are not disclosed, but company-wide order expansion and project execution likely drove revenue growth.
[Profitability] SG&A was ¥110.3B (+13.0%), increasing at a pace above revenue growth, and the SG&A ratio rose 0.8pt from 22.9% to 23.7%. Major drivers were personnel-related costs: salaries and allowances ¥37.2B (+6.1%), bonuses ¥9.2B (+17.2%), and statutory welfare expenses ¥8.7B (+9.2%). Rent ¥8.6B (+13.8%) and goodwill amortization ¥3.9B (+30.3%) also increased. As a result, Operating Income remained ¥46.7B (+4.2%), and Operating Income margin declined by 0.5pt. Ordinary Income was ¥48.2B (+4.1%); non-operating income totaled ¥3.1B (interest income ¥0.3B, dividend income ¥0.4B, equity-method profit ¥0.6B, etc.) and non-operating expenses ¥1.6B (interest expense ¥0.9B, etc.), yielding a net non-operating contribution of +¥1.5B, slightly lifting core business profit. Extraordinary items were net +¥1.9B (extraordinary gains ¥3.1B, extraordinary losses ¥1.2B), primarily gain on sales of investment securities ¥2.9B. Profit before income taxes was ¥50.1B (+1.9%), and after income taxes ¥16.4B (effective tax rate 32.8%), Net Income was ¥22.9B (+31.3%). Tax burden eased year-on-year (prior effective tax rate 34.9%) and improvement in extraordinary items (prior net +¥2.9B) also contributed, accelerating the bottom-line profit growth. In conclusion, while revenue and profit increased, cost growth compressed operating-level margins and improvement in extraordinary items and tax burden amplified the final profit increase.
[Profitability] Operating Income margin of 10.0% declined 0.5pt from 10.5% a year earlier, while gross margin improved 0.3pt to 33.7% from 33.4%. The rise in SG&A ratio (22.9% → 23.7%) pressured the operating margin. ROE of 5.7% improved from 5.1% but remains low relative to the industry median. EBITDA margin is approximately 12.8% (Operating Income ¥46.7B + Depreciation ¥9.2B + Goodwill amortization ¥3.9B = ¥59.8B ÷ Revenue ¥465.9B), indicating that core operating earning power excluding goodwill amortization is at a certain level.
[Cash Quality] Operating Cash Flow (OCF) was ¥30.5B, 1.33x Net Income ¥22.9B, so cash backing of profits is generally satisfactory, though OCF declined 26.1% from ¥41.3B in the prior year. The OCF subtotal was ¥50.8B (before working capital changes); changes in working capital (decrease in contract liabilities -¥10.8B, increase in inventories -¥3.9B, etc.) and tax payments -¥20.3B were cash outflows. Cash conversion (OCF ÷ EBITDA) was low at 0.51x, with working capital impacts sizable. Free Cash Flow (FCF) was ¥23.5B, which sufficiently covered dividends of ¥11.3B, yielding an FCF coverage of 2.08x and indicating sound coverage.
[Investment Efficiency] Total asset turnover was 0.82x (prior year 0.82x). Capital expenditures were ¥8.2B, below depreciation expense ¥9.2B, keeping capital efficiency flat. Goodwill was ¥28.2B (7.0% of net assets), and annual amortization expense of ¥3.9B has a limited profit impact.
[Financial Soundness] Equity Ratio was 71.0% (improved 5.5pt from 65.5% prior year), current ratio 423.5%, and quick ratio 376.7%, indicating very high liquidity. Interest-bearing debt was ¥69.5B against cash and deposits ¥246.6B, resulting in net cash ¥177.1B. Debt/EBITDA ratio was 1.16x and interest coverage was 50.2x, indicating extremely strong creditworthiness.
OCF was ¥30.5B, down ¥10.8B (-26.1%) YoY, but remained above Net Income ¥22.9B. The OCF subtotal (before working capital changes) was a solid ¥50.8B, but the largest cash outflow driver was the decrease in contract liabilities -¥10.8B (prior year was an increase of +¥4.4B). This suggests a decline in advance receipts, likely influenced by timing of project progress and changes in billing terms. Inventories increased by -¥3.9B (prior year -¥3.3B), and trade receivables decreased by +¥4.7B (prior year +¥10.3B increase), indicating improved receivables collection but accumulation of in-process inventories consumed cash. Corporate tax payments -¥20.3B (prior year -¥13.0B) increased with higher profits and expanded cash outflows. Investing cash flow was -¥7.0B, mainly capital expenditures -¥8.2B and intangible asset acquisitions -¥3.8B; no M&A outlays occurred. Financing cash flow was +¥13.2B: inflows included long-term borrowings ¥76.4B and share issuance ¥31.2B, while outflows included long-term borrowings repayment -¥5.2B, dividend payments -¥11.3B, and treasury stock purchases -¥1.4B. FCF ¥23.5B far exceeded total shareholder returns of ¥12.7B (dividends plus treasury stock), supporting sustainability of shareholder returns. Cash and cash equivalents increased from ¥201.4B at the beginning of the period to ¥239.1B at period-end (+¥37.7B), further strengthening liquidity. Capex/Depreciation ratio was 0.89x, modest and within maintenance/replacement investment scope.
Against Ordinary Income ¥48.2B, extraordinary items were net +¥1.9B, indicating core business income forms the earnings base. Extraordinary gains ¥3.1B were largely from gain on sales of investment securities ¥2.9B and represent one-time asset sale gains rather than recurring earnings. Extraordinary losses ¥1.2B comprised impairment losses ¥0.7B and loss on retirement of fixed assets ¥0.6B, both non-recurring. Of non-operating income ¥3.1B, interest income ¥0.3B and dividend income ¥0.4B are recurring financial income, while equity-method profit ¥0.6B depends on associates’ performance and carries volatility. Comprehensive income ¥43.1B exceeded Net Income ¥22.9B substantially; Other Comprehensive Income (OCI) ¥20.2B included actuarial adjustments related to retirement benefits ¥8.3B, valuation difference on available-for-sale securities ¥0.5B, and OCI share of equity-method affiliates ¥0.7B. The large increase in actuarial adjustments stems from higher valuation of pension assets and actuarial assumption differences and is not cash income. The difference between OCF ¥30.5B and Net Income ¥22.9B (accruals +¥7.6B) was mainly due to working capital changes (decrease in contract liabilities, etc.), and does not raise material doubts about earnings quality. Overall, core business profitability is healthy, the impact of extraordinary items and OCI is limited, and earnings quality is within acceptable bounds.
Full year forecast for FY ending May 2027: Revenue ¥490.0B (+5.2%), Operating Income ¥53.0B (+13.5%), Ordinary Income ¥53.0B (+9.8%), Net Income attributable to owners of the parent ¥37.0B (+61.6%), and EPS ¥205.83. Compared with first-half results (Revenue ¥465.9B, Operating Income ¥46.7B, Ordinary Income ¥48.2B), progress toward the full-year plan is high: Revenue 95.1%, Operating Income 88.1%, Ordinary Income 91.0%, with second-half uplifts assumed of Revenue +¥24.1B, Operating Income +¥6.3B, Ordinary Income +¥4.8B. Full-year Operating Income margin is projected at 10.8%, an improvement of 0.8pt from the first-half result 10.0%, assuming control of SG&A and margin recovery. The large projected increase in Net Income (+61.6%) appears to assume normalization of extraordinary items and an appropriate tax burden. Dividend forecast is annual ¥30 (interim ¥25 including commemorative dividend ¥5, year-end ¥47 including commemorative dividend ¥5) — note: original text lists an inconsistency in components; the annual ¥30 is management’s forecast — and payout ratio versus EPS forecast ¥205.83 is 14.6%, conservative. Revenue growth forecast +5.2% is slower than prior year +9.1%, and the strategy is to secure bottom-line growth via a 0.8pt improvement in Operating Income margin.
Annual dividend is ¥69 (interim ¥25, year-end ¥44), with total dividends ¥11.3B against Net Income ¥22.9B, implying a payout ratio of 32.8%, an appropriate level. This is a substantial increase from prior year dividend ¥25, showing a more proactive shareholder return stance. Treasury stock acquisition was ¥1.4B, small in scale, and Total Return Ratio was 35.9%, conservative. Against FCF ¥23.5B, total shareholder returns ¥12.7B yield FCF coverage 1.85x, and abundant cash holdings ¥246.6B support very high dividend sustainability. FY 2027 dividend forecast is annual ¥30 (including commemorative dividend ¥10), which on a normal dividend basis equals roughly ¥20 and thus effectively appears as a cut, but excluding the commemorative dividend there remains room for a substantive increase. Forecast payout ratio 14.6% is conservative, and medium-term scope for dividend increases is significant.
Risk of further pressure on Operating Income margin due to rising SG&A ratio: SG&A ¥110.3B (+13.0%) outpaced revenue growth +9.1%, lifting SG&A ratio to 23.7% (+0.8pt). Main causes include personnel costs (salaries +6.1%, bonuses +17.2%), rent +13.8%, and goodwill amortization +30.3%. If intensified competition for talent and increased office costs persist structurally, there is a risk of further decline in Operating Income margin from 10.0%. The FY 2027 plan assumes recovery to 10.8%, but the effectiveness of cost-absorption measures is critical.
Risk of contract liabilities decrease and OCF volatility: Contract liabilities decreased from ¥28.1B to ¥17.3B (-¥10.8B, -38.5%), and reduced advance receipts contributed to deceleration in OCF to ¥30.5B (YoY -26.1%). Timing of order intake, project progress delays, and changes in billing terms could continue to cause significant working capital volatility. Cash conversion (OCF ÷ EBITDA) 0.51x is low, and stability of cash generation requires attention.
Risk to competitiveness from low R&D investment: R&D expense ¥2.3B (0.5% of Revenue) is very low; insufficient investment in technological innovation or digitalization could impair differentiation and delay productivity improvements in the mid-to-long term. In the construction consultancy industry, DX, surveying technology, and advanced simulation capabilities are sources of competitive advantage, so continuous in-house development and technology investment are necessary.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 10.0% | 8.1% (3.6%–16.0%) | +1.9pt |
| Net Income Margin | 4.9% | 5.8% (1.2%–11.6%) | -0.9pt |
Operating Income margin exceeds the industry median by 1.9pt, indicating solid profitability, but Net Income margin is 0.9pt below the median and the advantage at the bottom line is limited due to tax burden and financial costs.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 9.1% | 10.1% (1.7%–20.2%) | -1.0pt |
Revenue growth rate is 1.0pt below the median, indicating a moderate growth pace within the industry.
※Source: Company aggregation
Potential for Operating Income margin recovery and effectiveness of cost absorption: The FY 2027 plan targets Operating Income margin of 10.8%, contingent on restraining SG&A ratio. Given ongoing structural increases in personnel and rent, achieving margin recovery will depend on improving project unit prices, operational efficiency, and rigorous project profitability management.
Stabilizing cash generation and working capital management: The decline in contract liabilities is the main cause of OCF slowdown; order backlog growth and normalization of project progress in subsequent periods will directly affect cash conversion improvement. Confirmation of an improvement trend from cash conversion 0.51x would support sustained FCF growth and greater shareholder return capacity.
Dividend capacity and scope for more proactive shareholder returns: With a payout ratio of 32.8%, FCF coverage 1.85x, and cash deposits of ¥246.6B, dividend sustainability is very high. The FY 2027 dividend forecast of ¥30 (including commemorative dividend) is conservative, but there is substantial medium-term room to increase dividends or expand share buybacks, which are options to strengthen shareholder returns.
This report was automatically generated by AI analyzing XBRL financial statement disclosure data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; please consult specialists as needed before making investment decisions.