PERSOL HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥752.74B
• Operating Income: ¥36.60B
• Net Income: ¥24.84B
• EPS: ¥10.93

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

FY2026 Q2 was a solid quarter with broad-based improvement in profitability and strong cash generation. Revenue rose 4.9% YoY to 7,527.41, while operating income grew faster at 14.0% YoY to 366.03, indicating operating leverage. Net income increased 12.1% YoY to 239.76, with EPS (basic) at 10.93 yen. Gross profit reached 1,747.13, putting gross margin at 23.2%. Operating margin improved to about 4.9% (366.03/7,527.41). EBITDA came in at 539.55 with a 7.2% margin, supported by 173.52 of D&A. We estimate operating margin expanded by roughly 40 bps YoY given operating profit growth outpaced sales (14.0% vs 4.9%). Net margin stands at 3.2%, implying an estimated ~20 bps YoY expansion, consistent with the positive operating leverage. Earnings quality is healthy: OCF of 335.93 is 1.40x net income, and FCF was 260.20 even after 19.02 in capex. The balance sheet is sound with an equity ratio of 37.1% and reported D/E of 1.49x (near the conservative threshold but still manageable). Intangible assets remain meaningful (goodwill 711.91; other intangibles 506.27), requiring continued vigilance for impairment risk. Equity-method income is small at 1.66, confirming limited reliance on non-operating sources. ROE is a respectable 10.6%, driven more by asset turnover (1.338x) and leverage (2.49x) than by margin, which remains thin. The reported payout ratio of 90.3% looks elevated, but FCF coverage is 1.20x, suggesting dividends are currently serviceable. The quarter’s cash conversion and FCF strength provide flexibility for reinvestment and shareholder returns. Forward-looking, sustained pricing discipline, utilization, and working-day effects will be key to preserving the margin gains. Wage inflation and client hiring cycles remain the main variables for 2H performance. Overall, the company enters 2H with improved profitability, solid cash flow, and adequate balance sheet headroom, albeit with thin margins typical of staffing businesses.

Profitability Analysis

ROE (10.6%) = Net Profit Margin (3.2%) × Asset Turnover (1.338x) × Financial Leverage (2.49x). The structure indicates returns are primarily supported by efficient asset use and moderate leverage, with margin still modest. Among these drivers, the improvement this quarter most likely came from margin (operating profit +14.0% vs revenue +4.9%), implying positive operating leverage. Business-wise, tighter SG&A control versus gross profit growth and mix/pricing in staffing likely lifted the operating margin. This appears sustainable if pricing holds and wage inflation is contained; however, staffing margins are inherently thin and cyclical, so gains may be incremental rather than step-change. No clear evidence of SG&A growth exceeding revenue is present (SG&A level reported at 1,408.92 but no YoY disclosed), and operating leverage looks positive. Overall, ROE quality is acceptable, but reliance on leverage (2.49x) underscores the need to maintain steady cash generation and working capital discipline.

Growth Assessment

Top-line growth of 4.9% indicates steady demand in core staffing/solution segments. Profit growth outpaced sales (operating +14.0%, net +12.1%), pointing to mix/pricing improvements and expense control. Current margins: gross 23.2%, EBITDA 7.2%, operating ~4.9%, net 3.2%. Given the spread between revenue and operating profit growth, we estimate ~40 bps YoY operating margin expansion and ~20 bps net margin expansion. Equity-method income contributed only 0.5% of profit, so growth was operationally driven. ROIC at 11.2% exceeds the 7–8% benchmark, suggesting disciplined capital allocation and efficient asset use. Outlook hinges on labor demand resilience, wage pass-through, and execution in higher-margin solutions; absent macro shocks, mid-single-digit revenue growth with slight margin accretion appears achievable.

Financial Health

Equity ratio is 37.1%, indicating a moderate capital structure. Reported D/E is 1.49x, near the conservative ceiling but not excessive; vigilance is warranted if leverage inches higher. Liquidity ratios (current, quick) are not calculable due to unreported current liability details; therefore, no explicit current ratio warning is triggered. Cash and equivalents are 979.89, and accounts receivable stand at 1,773.35 versus accounts payable of 974.61, consistent with working capital intensity typical for staffing. Maturity mismatch risk cannot be fully assessed given the lack of disclosure on short-term debt and current liabilities; however, positive OCF supports near-term coverage. No off-balance sheet obligations are disclosed in the provided data.

Cash Flow Quality

OCF of 335.93 is 1.40x net income, comfortably above the 0.8x threshold—indicative of solid earnings quality. FCF of 260.20 (after 19.02 capex) is robust and supports both reinvestment and shareholder returns. The provided FCF coverage of dividends is 1.20x, suggesting distributions are covered by internally generated cash. Working capital appears well-managed given positive cash conversion despite sizable receivables; no signs of aggressive working capital release are evident. With modest capex needs, recurring FCF should be sustainable barring a sharp downturn in demand or elongation in DSO.

Dividend Sustainability

The reported payout ratio is 90.3%, which is elevated versus the <60% benchmark and would typically be a caution flag. However, cash-based metrics are more reassuring: OCF comfortably exceeds net income (1.40x), and FCF coverage of dividends is 1.20x per the data. Dividends paid were -110.93, and FCF was 260.20 in the period, indicating current coverage headroom. Sustainability thus depends on maintaining current earnings and cash conversion; with D/E at 1.49x and an equity ratio of 37.1%, the balance sheet can support stable dividends, but scope for aggressive hikes may be limited if payout remains near ~90%. Policy clarity (target payout or DOE) was not disclosed in the dataset.

Risk Assessment

Business Risks:

• Macroeconomic sensitivity of staffing demand (hiring slowdowns can compress volumes and pricing).
• Wage inflation and pass-through risk pressuring gross margin.
• Client mix and contract renewal risk impacting utilization and bill rates.
• Regulatory changes in labor/dispatch laws affecting flexibility and margins.
• Impairment risk given sizable goodwill (711.91) and other intangibles (506.27).

Financial Risks:

• Leverage near threshold (D/E 1.49x) reduces buffer if earnings weaken.
• Liquidity ratios not disclosed—potential maturity mismatch cannot be ruled out.
• Receivables concentration and DSO elongation risk in downturns.
• Potential increase in financing costs if interest rates rise (interest expense not disclosed).

Key Concerns:

• Thin operating margin (~4.9%) leaves limited cushion against shocks.
• High reported payout ratio (90.3%) may constrain reinvestment if cash flow softens.
• Intangibles represent a large share of equity, heightening sensitivity to impairments.
• Data gaps (current liabilities, interest expense) limit full assessment of liquidity and coverage.

Investment Implications

Key Takeaways:

• Quality beat on profitability: operating profit grew 14.0% vs sales +4.9%, implying margin accretion.
• Healthy cash conversion: OCF/NI at 1.40x and positive FCF of 260.20.
• ROE of 10.6% is supported by solid asset turnover and moderate leverage.
• Balance sheet is adequate (equity ratio 37.1%), but D/E at 1.49x warrants monitoring.
• Dividend currently covered by FCF (1.20x), though reported payout ratio is high at 90.3%.

Metrics to Watch:

• Operating margin trajectory and SG&A efficiency.
• DSO/receivables trends and OCF/NI ratio.
• Wage inflation pass-through and billing rate mix.
• Leverage (D/E) and any change in interest coverage once disclosed.
• Goodwill/intangibles to equity and impairment indicators.

Relative Positioning: Within domestic HR and staffing peers, Persol exhibits steady top-line growth and improving operating leverage, with ROIC at 11.2% above typical sector benchmarks; margins remain thinner than asset-light recruiting platforms, but cash conversion is solid and reliance on non-operating income is low.

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
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis