CEDAR. (2435) FY2026 Q3 Earnings Report

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Executive Summary

The key feature of the current period was that, despite a slight increase in revenue, Operating Income and Ordinary Income declined substantially due to deteriorating profitability in the Facility Services Business and higher company-wide expenses, while only Net Income increased as a result of extraordinary income. Revenue was ¥13.68B (+1.8% YoY), Operating Income was ¥0.51B (△32.9% YoY), and Ordinary Income was ¥0.42B (△29.2% YoY). Net Income was ¥0.45B (+19.3% YoY), but this increase was primarily driven by ¥0.21B in extraordinary income from gains on the transfer of a business and does not indicate an improvement in recurring earnings power.

Factors Affecting Earnings

【Revenue】Revenue was ¥13.68B, representing a +1.8% YoY increase. By segment, the Day Services Business grew the most, reaching ¥3.12B (+6.3% YoY); the Facility Services Business was nearly flat at ¥9.60B (+0.6% YoY); and the Home Services Business declined slightly to ¥0.88B (△0.3% YoY). The Facility Services Business is the core business, accounting for approximately 70% of total revenue.

【Profit and Loss】Operating Income declined substantially to ¥0.51B (△32.9% YoY). The gross margin decreased by 161bp to 12.2% (13.8% in the previous year), as the increase in cost of sales (+3.7%) exceeded revenue growth (+1.8%). SG&A expenses also increased by +5.9% YoY, and the SG&A ratio rose to 8.4%. By segment, the Facility Services Business recorded segment profit of ¥1.21B (△13.0% YoY), making it the primary cause of the decline in consolidated earnings; the Home Services Business also saw its loss expand from ¥0.034B to ¥0.098B. These declines were not offset by the increase in profit from the Day Services Business to ¥0.32B (+12.2% YoY). Ordinary Income was ¥0.42B (△29.2% YoY), after bearing ¥0.25B in interest expense. Net Income was ¥0.45B (+19.3% YoY), due to the recognition of ¥0.21B in gains on the transfer of a business as extraordinary income, resulting in an earnings performance characterized by higher revenue but lower recurring profit.

Segment Analysis

The Facility Services Business recorded revenue of ¥9.60B (+0.6% YoY), segment profit of ¥1.21B (△13.0% YoY), and a profit margin of 12.6% (14.5% in the previous year). Although revenue increased, the decline in the profit margin made it the primary cause of the decline in consolidated earnings. The Day Services Business achieved higher revenue and profit, with revenue of ¥3.12B (+6.3% YoY), segment profit of ¥0.32B (+12.2% YoY), and a profit margin of 10.3%. The Home Services Business recorded revenue of ¥0.88B (△0.3% YoY), while its segment loss expanded from ¥0.034B in the previous year to ¥0.098B. Against total segment profit of ¥1.43B (¥1.64B in the previous year), company-wide expenses increased to ¥1.01B (+3.6% YoY), further weighing on consolidated Operating Income.

Key Financial Indicators

【Profitability】Both the Operating Margin, at 3.7% (5.7% in the previous year), and the Net Profit Margin, at 3.3%, declined from the previous year, beginning with the deterioration in the gross margin to 12.2% (13.8% in the previous year). 【Cash Flow Quality】Net Income of ¥0.45B includes ¥0.21B in gains on the transfer of a business. As extraordinary income accounted for approximately 30% of Pretax Income of ¥0.63B, it is important to note that the quality of earnings appears higher than the recurring level. 【Investment Efficiency】Annualized ROE was 32.9%, but this was primarily attributable to financial leverage of approximately 10.9x, versus a Net Profit Margin of 3.3% and Total Asset Turnover of 0.914x; it does not independently demonstrate strong capital efficiency. BPS increased to ¥163.08 (¥132.34 in the previous year). 【Financial Soundness】The Equity Ratio improved to 9.2% (7.4% in the previous year), but remains low, while the Current Ratio was 73.9%, below 1x. The D/E Ratio was 9.90x and Interest Coverage was 2.04x, levels requiring monitoring from both the perspectives of reliance on borrowings and debt-servicing capacity.

Cash Flow Analysis

Although detailed disclosure of the statement of cash flows is unavailable, the movement of funds can be assessed from changes in the balance sheet. Cash and deposits increased to ¥1.74B from ¥1.48B in the previous year, while short-term borrowings increased to ¥4.15B (¥3.74B in the previous year) and long-term borrowings decreased to ¥4.68B (¥5.08B in the previous year). A partial shift from long-term funding to short-term funding is evident. Given the Current Ratio of 73.9% and cash/short-term liabilities of 0.42x, trends in short-term liquidity management and refinancing terms will be key financial considerations going forward. Retained earnings increased to ¥1.14B (¥0.81B in the previous year), indicating continued accumulation of internal reserves.

Earnings Quality

Net Income of ¥0.45B exceeded Ordinary Income of ¥0.42B because ¥0.21B in gains on the transfer of a business was recorded as extraordinary income. Interest expense of ¥0.25B included in non-operating expenses was equivalent to approximately 49% of Operating Income of ¥0.51B, representing a structural burden that reduces Ordinary Income. Extraordinary income accounted for slightly more than 30% of Pretax Income of ¥0.63B, and the +19.3% YoY increase in Net Income was largely attributable to a temporary factor rather than an improvement in recurring earnings. Non-operating income also includes ¥0.11B in subsidy income, which differs in nature from income generated directly by core operations and should therefore be considered when evaluating earnings quality.

Earnings Forecast and Guidance

Progress against the Full-Year forecast was 76.4% for Revenue and 76.4% for Operating Income, broadly in line with the standard progress benchmark of approximately 75%. Meanwhile, cumulative Ordinary Income and Net Income reached 107.1% and 179.3% of their respective Full-Year forecasts, substantially exceeding the forecasts. This was due to the recognition of ¥0.21B in extraordinary income from gains on the transfer of a business. Required Q4 Revenue is ¥4.22B and required Operating Income is ¥0.16B, implying a required Operating Margin of approximately 3.7%, which is at the same level as the cumulative results. The Full-Year forecasts of ¥0.40B for Ordinary Income and ¥0.25B for Net Income are both below the cumulative results, making the treatment of extraordinary gains and losses in the Full-Year results a key focus going forward.

Shareholder Returns

The Q2 dividend was ¥0, while the Full-Year forecast dividend per share is ¥6.00. Assuming approximately 11.22 million shares after deducting treasury shares, the annual total dividend is approximately ¥0.067B, resulting in a Payout Ratio of approximately 268% against the Full-Year Net Income forecast of ¥0.251B, a high level. This Payout Ratio is calculated solely on the basis of cash dividends and does not include share buybacks; it is therefore not the Total Return Ratio. Based on cumulative Net Income of ¥0.450B, the Payout Ratio would be approximately 15%, but caution is required in making a simple comparison because cumulative earnings include gains on the transfer of a business. Although retained earnings have accumulated to ¥1.14B, the sustainability of dividends must be evaluated together with operating cash generation under a capital structure characterized by a Current Ratio of 73.9% and a D/E Ratio of 9.90x.

Risk Factors

1. Deteriorating profitability in the core business: Segment profit in the Facility Services Business declined △13.0% YoY, becoming a factor behind the decline in consolidated Operating Income. Its profit margin decreased to 12.6% from 14.5% in the previous year, and the pace of recovery will determine consolidated earnings going forward.

2. Financial leverage and liquidity: The Current Ratio is 73.9%, the D/E Ratio is 9.90x, and Interest Coverage is 2.04x. Short-term borrowings of ¥4.15B account for approximately 60.7% of current liabilities. This is a capital structure highly sensitive to refinancing terms and interest-rate trends.

3. Expanding losses in the Home Services Business: The segment loss expanded from ¥0.034B in the previous year to ¥0.098B, and delays in improving profitability remain a continuing downward pressure on consolidated profitability.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Both profitability metrics are below the industry median, placing the company in the lower-profitability group within the industry.

Growth and Capital Efficiency

The Revenue Growth Rate is also substantially below the industry median, placing the company in the lower group within the industry in terms of growth.

※Source: Compiled by the Company

Key Points in the Earnings Results

1. Although revenue growth was maintained, Operating Income declined substantially by △32.9% YoY, making profitability improvement in the core Facility Services Business the key to earnings recovery.

2. The increase in Net Income depended on ¥0.21B in gains on the transfer of a business recorded as extraordinary income. Together with the decline in Ordinary Income, it is necessary to distinguish recurring earnings from non-recurring factors.

3. The Equity Ratio improved to 9.2%, but indicators related to liquidity, refinancing, and debt-servicing capacity, including the Current Ratio of 73.9% and Interest Coverage of 2.04x, remain at levels requiring continued attention.

Theoretical Share Price (Reference Value)

Sensitivity: ¥179–¥189 for a ±1% change in the Cost of Equity, and ¥183–¥185 for a ±0.1 change in ω.

Notes:

• Because Net Income progress against the Full-Year forecast (179%) exceeds the standard benchmark (75%), Forecast EPS has been adjusted upward within a maximum range of +10% (because companies ahead of schedule tend to exceed their forecasts; the adjustment may be excessive for businesses with strong seasonality).
• Due to tax burdens, acquisition-related expenses, minority interests, and other factors, Net Income is substantially compressed relative to Operating Income (Net Income ÷ Operating Income 37%). This figure reflects that compression at face value; if the factors are temporary, normalized earnings power may be higher.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the Full-Year forecast).

（Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest-rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices）

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This report is an earnings analysis document automatically generated by AI through analysis of XBRL earnings-release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional where necessary.

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