| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥5970.3B | ¥5518.8B | +8.2% |
| Operating Income | ¥469.2B | ¥402.0B | +16.7% |
| Ordinary Income | ¥499.1B | ¥431.1B | +15.8% |
| Net Income (attributable to owners of parent) | ¥271.3B | ¥245.7B | +10.4% |
| ROE | 6.4% | 6.5% | - |
For the fiscal year ending March 2026, Revenue was ¥5970.3B (YoY +¥451.4B, +8.2%), Operating Income was ¥469.2B (YoY +¥67.2B, +16.7%), Ordinary Income was ¥499.1B (YoY +¥68.0B, +15.8%), and Net Income attributable to owners of parent was ¥271.3B (YoY +¥25.6B, +10.4%). Revenue growth was driven by accumulation of contract revenue and price revisions in the core Security Business and expansion of FM construction revenue. Operating margin improved to 7.9% (up 0.6pt from 7.3% a year earlier). Improvements in profitability in the Care Business and efficiency gains in domestic operations reduced SG&A ratio to 16.1% (from 16.4%, △0.3pt) and gross margin expanded to 24.0% (from 23.7%, +0.3pt). The gap between Ordinary Income and Net Income reflects an effective tax rate of 30.8% and non-controlling interests of ¥19.5B; the net impact of one-off items (negative goodwill gain ¥13.6B, impairment losses ¥5.6B, etc.) was limited. Operating Cash Flow was ¥537.9B (YoY +26.1%), indicating solid cash generation.
[Revenue] Revenue of ¥5970.3B (+8.2%) comprised contract revenue ¥5030.8B (share 84.3%, +4.3%), construction revenue ¥397.5B (share 6.7%, +14.1%), and sale revenue ¥541.9B (share 9.1%, △1.3%). By segment, the Security Business was ¥4211.1B (+7.4%) representing 70.5% of total, supported by unit price revisions and contract increases in on-site security and electronic security. FM and related businesses were ¥934.4B (+16.6%), aided by expanded construction revenue, and the Care Business was ¥552.5B (+3.5%) remaining resilient. Overseas operations were ¥279.8B (+4.3%), slightly recovering from the prior year but still small in scale. Region breakdowns are not disclosed, but sales to domestic customers are estimated to exceed 90% of consolidated sales, indicating domestic demand expansion as the main driver of revenue growth.
[Profitability] Cost of sales was ¥4539.7B (cost ratio 76.0%), yielding gross profit ¥1430.6B (gross margin 24.0%, up 0.3pt from 23.7%). SG&A was ¥961.4B (SG&A ratio 16.1%, improved △0.3pt from 16.4%), resulting in Operating Income ¥469.2B (Operating margin 7.9%). Non-operating income totaled ¥66.6B (dividends received ¥9.5B, insurance dividends ¥3.0B, equity-method gains ¥28.4B, etc.) and non-operating expenses ¥36.6B (interest expenses ¥19.4B, etc.), for net non-operating +¥29.9B, producing Ordinary Income ¥499.1B (Ordinary margin 8.4%, up 0.6pt from 7.8%). Extraordinary gains were ¥20.4B (negative goodwill gain ¥13.6B, step acquisition gain ¥1.7B, fixed asset sale gains ¥0.6B, etc.) and extraordinary losses were ¥11.0B (impairment losses ¥5.6B, loss on disposal of fixed assets ¥4.3B, valuation losses on investment securities ¥3.6B), netting to +¥9.4B and yielding profit before income taxes ¥508.6B. Income taxes were ¥156.4B (effective tax rate 30.8%), and after deducting non-controlling interests ¥19.5B, Net Income attributable to owners of parent was ¥271.3B (+10.4%). In summary, the company achieved higher revenue and profit, with improvements in both Operating and Ordinary margins driven by core operations.
The Security Business posted Revenue ¥4211.1B (+7.4%), Operating Income ¥454.2B (+12.6%), and margin 10.8% (up 0.5pt from 10.3%), driven by unit price revisions and contract increases in electronic and on-site security. FM and related businesses (building comprehensive management and disaster prevention) recorded Revenue ¥934.4B (+16.6%), Operating Income ¥112.8B (+23.0%), margin 12.1% (up 0.7pt from 11.4%), aided by expanded construction revenue and efficiency in facilities management. The Care Business had Revenue ¥552.5B (+3.5%), Operating Income ¥22.4B (+49.5%), margin 4.1% (up 1.0pt from 3.1%), reflecting workforce optimization and the effect of care fee revisions. Overseas operations had Revenue ¥279.8B (+4.3%) and an Operating loss of △¥11.1B (worse from △¥5.5B), margin △4.0%; the widened loss reflects start-up costs and initial investment burdens, with profit improvement from H2 onward being a key challenge. Segment profit total was ¥578.2B, less corporate expenses △¥109.0B, resulting in consolidated Operating Income ¥469.2B.
[Profitability] Operating margin 7.9% (up 0.6pt from 7.3%), Ordinary margin 8.4% (up 0.6pt from 7.8%), ROE 6.4% (down 1.5pt from 7.9%). The Operating margin improvement was driven by gross margin +0.3pt and SG&A ratio △0.3pt (operating leverage). ROE declined because net assets increased +13.5% (including valuation gains and remeasurements of retirement benefits) outpaced profit growth of +10.4%. [Cash Quality] Operating Cash Flow ¥537.9B is 1.98x Net Income ¥271.3B, indicating high quality. OCF/EBITDA (EBITDA = Operating Income before goodwill amortization + depreciation = ¥717.3B) is 0.75x, somewhat weak, possibly reflecting working capital movements (inventory △¥15.5B, trade receivables △¥22.7B, trade payables △¥18.5B) and pension-related cash outflows as temporary factors. Operating Cash Flow/Revenue is 9.0%. [Investment Efficiency] Total asset turnover 0.88x (down from 0.96x) declined due to asset increases from capital expenditures. ROIC (NOPAT ÷ invested capital) is not fully disclosed, but Operating Income growth +16.7% roughly matched total asset growth +17.9%, suggesting stable capital efficiency. [Financial Soundness] Equity Ratio 63.2% (down 2.5pt from 65.7%), Debt/Equity ratio 0.11 (interest-bearing debt ¥513B ÷ shareholders’ equity ¥4,269B) indicating low leverage. Current ratio 213.5% and quick ratio 213.5% show ample liquidity. Short-term borrowings ¥372.3B (up 198% from ¥124.8B) and long-term borrowings ¥124.1B (up 835% from ¥13.3B) increased sharply, but Debt/EBITDA 0.71x and interest coverage (Operating Income ÷ interest expense) 24.2x keep leverage within conservative ranges.
Operating Cash Flow was ¥537.9B (YoY +26.1%), starting from profit before income taxes ¥508.6B, adding non-cash expenses depreciation ¥213.9B, goodwill amortization ¥34.2B, etc., and adjusting for working capital movements (inventory △¥15.5B, trade receivables △¥22.7B, trade payables △¥18.5B), increase in pension assets △¥47.9B, and income taxes paid △¥140.4B. Investing Cash Flow was △¥392.1B, primarily due to capital expenditure △¥353.1B (prior year △¥148.5B). Tangible fixed asset acquisitions increased significantly, including land +¥154B, with intangible asset acquisitions △¥38.3B, acquisitions of subsidiary shares △¥6.7B, and purchases of investment securities △¥16.7B. Proceeds from acquisitions of subsidiaries ¥20.3B and sales of investment securities ¥5.4B partially offset outflows. Free Cash Flow was ¥145.7B (Operating CF + Investing CF). Financing Cash Flow was △¥77.5B, driven by net increase in short-term borrowings △¥4.7B, long-term borrowings procured +¥145.3B, lease repayments △¥63.1B, dividend payments △¥135.9B, and share repurchases △¥150.0B. Cash increased from ¥600.2B at the beginning of the period to ¥668.1B at period end, +¥67.9B, and after exchange effects △¥0.3B, ending balances were cash & deposits ¥777.6B and short-term securities ¥12.5B. Operating CF / Net Income 1.98x indicates strong cash generation, while CapEx / Depreciation 1.65x shows a growth-investment bias; utilization rates and payback periods will be key for cash returns going forward.
The primary source of Ordinary Income ¥499.1B was Operating Income ¥469.2B; non-operating income ¥66.6B (equity-method gains ¥28.4B, dividends received ¥9.5B, insurance dividends ¥3.0B, etc.) represents 1.1% of Revenue, indicating low reliance on non-core activities. Net extraordinary items were +¥9.4B, with negative goodwill gain ¥13.6B (temporary gain where acquisition price was below fair value of net assets), step acquisition gain ¥1.7B, and fixed asset sale gains ¥0.6B offset by impairment losses ¥5.6B (goodwill ¥4.9B, machinery ¥0.3B, etc.), valuation losses on investment securities ¥3.6B, and loss on disposal of fixed assets ¥4.3B; the net one-off impact on Net Income was limited. The gap between Ordinary Income and Net Income is mainly due to an effective tax rate of 30.8% and non-controlling interests ¥19.5B; differences between taxable income and accounting profit are within acceptable range. Comprehensive Income was ¥604.3B versus Net Income ¥271.3B, boosted by Other Comprehensive Income ¥250.1B (remeasurements of retirement benefit obligations ¥205.7B, valuation differences on securities ¥48.6B, foreign currency translation adjustments △¥2.0B, etc.), where actuarial gains on retirement benefits significantly lifted comprehensive income. These remeasurement gains are largely driven by improvements in interest rates and investment returns and carry reversal risk. The accrual ratio [(Net Income △ Operating CF) ÷ Total Assets] = (271.3 △ 537.9) ÷ 6,750.2 = △3.9% is negative, indicating Operating CF exceeded Net Income, a healthy structure. Goodwill amortization ¥34.2B is modest at 4.8% of EBITDA (Operating Income + depreciation + goodwill amortization = ¥717.3B), and while JGAAP’s amortization is a source of profit compression, its impact on earnings quality is limited.
Full-year guidance is Revenue ¥6375.0B (YoY +6.8%), Operating Income ¥557.0B (YoY +18.7%), Ordinary Income ¥585.0B (YoY +17.2%), EPS forecast ¥76.75, and dividend forecast ¥16.50. Against the current period Operating margin of 7.9%, the full-year forecast Operating margin is 8.7% (forecast Operating Income ¥557B ÷ forecast Revenue ¥6375B), implying an improvement of approximately +0.8pt. Assumptions include continued price revisions, efficiency gains in electronic and on-site security, margin management in FM construction, maintenance of Care Business profitability, and reduction of overseas losses. Progress rate is Operating Income ¥469.2B ÷ forecast ¥557.0B = 84.2%, meaning about ¥87.8B (+18.7%) of incremental Operating Income is required in the remaining period. Accumulation of contract revenue (stock-type revenue) supports H2 stability, while the pace of overseas loss reduction and personnel cost inflation remain upside/downside risks. The dividend forecast ¥16.50 implies a cut from the realized annual dividend ¥29.2, which may indicate a reporting inconsistency; reconciliation with actual dividends (annual ¥29.2: year-end ¥14.6 + interim ¥14.6) should be confirmed.
Annual dividend was interim ¥14.6 + year-end ¥14.6 = ¥29.2 (prior year included year-end ¥12.4 plus a commemorative dividend ¥1.0). Dividend payout ratio versus EPS 68.49 is 42.6%. Total dividend amount was ¥135.9B (weighted average shares outstanding during the period 485.7M shares × ¥29.2). Share repurchases totaled ¥150.0B, making total return approximately ¥286B and Total Return Ratio about 105% (Total return ¥286B ÷ Net Income attributable to owners of parent ¥271.3B). Payout ratio considering dividends only is 50.1% (dividend total ¥135.9B ÷ Net Income ¥271.3B). While dividends of ¥135.9B are largely covered by Free Cash Flow ¥145.7B, total shareholder returns including ¥150.0B buybacks equal 53.2% of Operating CF, reflecting a return policy supported by a low-leverage balance sheet. The discrepancy with the full-year dividend forecast ¥16.50 may be a reporting inconsistency; evaluation is based on actuals.
Business Concentration Risk: Heavy dependence on the Security Business, which accounts for 70.5% of revenues (and segment profit ¥454.2B representing the majority of corporate profit). A downturn in demand for on-site or electronic security, intensifying price competition, or labor shortages could materially impair profitability. Personnel cost inflation could raise SG&A ratio (SG&A ¥961.4B; SG&A ratio 16.1% improved △0.3pt year-on-year, but high labor intensity may cause lagged effects).
Short-Term Debt Concentration Risk: Of current liabilities ¥1,395.1B, short-term borrowings ¥372.3B and lease liabilities ¥55.0B have risen sharply, with short-term liabilities ratio current liabilities ÷ total liabilities = 1,395.1 ÷ 2,480.8 = 56.2%. Short-term borrowings increased 198% YoY, raising rollover/refinancing dependence. Cash and short-term securities ¥790.1B are 2.1x short-term borrowings, indicating strong immediate payment capacity, but attention is warranted regarding refinancing cost increases in a rising interest rate environment and maturity mismatches.
Worsening Overseas Losses and Delays in Profit Structure Improvement: Overseas operations posted an operating loss of △¥11.1B (worse from △¥5.5B), with revenue ¥279.8B and margin △4.0%. Ongoing start-up costs and initial investments make near-term profit improvement uncertain. If losses widen with scale, consolidated operating margin could be materially affected.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.9% | 8.1% (3.6%–16.0%) | -0.2pt |
| Net Margin | 4.5% | 5.8% (1.2%–11.6%) | -1.3pt |
The company's Operating Margin is marginally below the industry median by △0.2pt and Net Margin is △1.3pt below, but sits within the IQR.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 8.2% | 10.1% (1.7%–20.2%) | -1.9pt |
Company revenue growth +8.2% is 1.9pt below the industry median +10.1% but remains within the IQR, indicating steady growth.
※ Source: Company compilation
Improved Operating Margin from stable domestic security demand and price revisions: The Security Business (Revenue ¥421.1B? Note: intended ¥4211.1B) delivered Revenue ¥4211B (+7.4%) and Operating Income ¥454B (+12.6%) with margin improving to 10.8% (+0.5pt). Accumulation of contract revenue (stock-type) and unit price revisions contributed, lifting consolidated Operating Margin to 7.9% (up 0.6pt). The Care Business improved to 4.1% margin (+1.0pt), indicating continued domestic profitability improvement trends. Full-year guidance anticipates further improvement to 8.7% Operating Margin, suggesting potential upside to ROE.
Solid cash generation and maintenance of positive FCF: Operating CF ¥537.9B (1.98x Net Income) and Operating CF/Revenue 9.0% are high. Despite capital expenditure ¥353.1B (YoY +137%), Free Cash Flow ¥145.7B was maintained and dividends ¥135.9B are largely covered by FCF. Total shareholder returns ¥286B (dividends + buybacks) equal 53% of Operating CF, financed by a low-leverage balance sheet (Debt/Equity 0.11). OCF/EBITDA 0.75x is somewhat weak but primarily due to temporary working capital and pension outflows, not structural cash deterioration.
Watch for widening overseas losses and short-term debt concentration: Overseas operating loss △¥11.1B (worse from △¥5.5B) is driven by start-up costs and may dilute consolidated margins if not improved. Short-term borrowings ¥372.3B (YoY +198%) have raised short-term liability ratios and refinancing dependence. Cash & short-term securities ¥790.1B provide strong short-term coverage but rising interest rates and accelerating overseas cash burn are downside risks. With CapEx/Depreciation 1.65x and investment-led allocation, monitoring utilization rates and payback periods is important.
This report is an earnings analysis document automatically generated by AI analyzing XBRL filing data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm from public financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional advisor.