| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥673.1B | ¥623.4B | +8.0% |
| Operating Income / Operating Profit | ¥29.8B | ¥29.5B | +1.0% |
| Ordinary Income | ¥36.7B | ¥35.0B | +4.9% |
| Net Income / Net Profit | ¥18.8B | ¥17.9B | +5.4% |
| ROE | 9.9% | 10.0% | - |
FY2026 full-year results: Revenue ¥673.1B (YoY +¥49.8B +8.0%), Operating Income ¥29.8B (YoY +¥0.3B +1.0%), Ordinary Income ¥36.7B (YoY +¥1.7B +4.9%), Net Income attributable to owners of the parent ¥18.8B (YoY +¥1.0B +5.4%). Revenues were broadly solid with growth across the three businesses—Childcare Support, General Staffing, and Nursing Care—but Operating Income was essentially flat and operating margin declined to 4.4% (from 4.7%, -0.3pt). In the Childcare Support Business cost increases (personnel, utilities, etc.) materially compressed margins, while non-operating items—net gains from interest and subsidies—contributed net non-operating income of ¥6.9B, lifting results at the ordinary income level. Net margin was 2.8% (roughly flat from 2.9% prior year), and ROE remained near 10% at 9.9%. Operating Cash Flow (OCF) was ¥49.7B (YoY +31.4%), about 2.6x net income, demonstrating strong cash generation; Free Cash Flow (FCF) was ¥31.5B, enabling dividends of ¥11.7B and capex of ¥18.4B to be funded with internal cash. Long-term borrowings were reduced from ¥50.1B to ¥29.8B (a 40% reduction), maintaining a conservative capital structure with Debt/EBITDA of 1.03x.
Revenue: Revenue ¥673.1B (+8.0% YoY) with growth across all three segments. Childcare Support services ¥358.1B (+8.4%), 53.2% of sales, supported by expansion of licensed daycare and after-school clubs and higher utilization of contracted childcare. General Staffing services ¥223.6B (+6.2%), 33.2% of sales, driven by recovery in staffing and outsourcing demand and expansion of client relationships. Nursing Care-related services ¥93.8B (+9.5%), 13.9% of sales, benefited from increased facility residents and revision of service pricing. Other businesses ¥17.5B (+19.0%), 2.6% share, small but high-growth. Gross profit was ¥92.6B with a gross margin of 13.8% (from 14.1%, -0.3pt), reflecting slower absorption of higher personnel and utility costs and initial opening costs in Childcare Support.
Profitability: Operating Income ¥29.8B (+1.0%) with operating margin compressed to 4.4% (from 4.7%, -0.3pt). SG&A was ¥62.8B (+7.2%) representing 9.3% of sales (from 9.4%, -0.1pt), including rental expenses ¥5.0B and goodwill amortization ¥0.14B. While sales grew +8.0%, Operating Income rose only +1.0%, indicating limited operating leverage. Ordinary Income was ¥36.7B (+4.9%); non-operating income ¥8.7B (interest income ¥0.2B, other including subsidies ¥0.5B) exceeded non-operating expense ¥1.9B (including interest expense ¥1.7B), producing net non-operating income ¥6.9B that supported ordinary income. Income before income taxes was ¥36.8B (+7.3%); income taxes ¥13.5B (effective tax rate 36.7%) resulted in Net Income attributable to owners of the parent ¥18.8B (+5.4%). Net margin 2.8% was largely unchanged from 2.9% prior year. Extraordinary items were immaterial, with extraordinary gains ¥1.8B (asset sale gains, etc.) offset by extraordinary losses ¥1.7B (impairment losses ¥0.3B, asset disposal losses ¥0.1B). In conclusion, the company achieved revenue and net income growth, but operating margins contracted and were offset by non-operating income.
Childcare Support services: Revenue ¥358.1B (+8.4%) and Operating Income ¥19.2B (-11.9%), margin 5.4% (from 6.6%, -1.2pt), a significant decline. Revenue growth was supported by increases in licensed daycare and after-school facilities and higher utilization of contracted childcare, but margin was pressured by rising personnel, utilities, rental costs and start-up costs for new facilities. General Staffing services: Revenue ¥223.6B (+6.2%) and Operating Income ¥16.8B (+11.7%), margin 7.5% (from 7.1%, +0.4pt), an improvement driven by recovery in staffing and outsourcing demand plus efficiency gains and improved mix. Nursing Care-related services: Revenue ¥93.8B (+9.5%) and Operating Income ¥3.7B (+39.8%), margin 4.0% (from 2.7%, +1.3pt), a substantial improvement from higher occupancy, utilization and operational efficiencies. Other: Revenue ¥17.5B (+19.0%) and Operating Income ¥2.2B (+56.4%), margin 12.3%—small scale but high profitability. Overall decline in consolidated operating margin was primarily due to margin deterioration in the core Childcare Support business, which was not fully offset by improvements in Staffing and Nursing Care.
Profitability: Operating margin 4.4%, Net margin 2.8%, ROE 9.9% (from 12.1%, -2.2pt). The ROE decline was driven by an increase in equity from capital issuance (Net Assets from ¥178.0B → ¥190.1B) and slower net income growth (¥17.9B → ¥18.8B, +5.4%). Gross margin 13.8% (from 14.1%, -0.3pt) and Operating margin 4.4% (from 4.7%, -0.3pt) reflect delayed absorption of cost inflation in Childcare Support. EPS ¥121.34 (from ¥109.29, +11.0%) outpaced ROE growth; shares outstanding 20,465 thousand (effective 19,190 thousand excluding treasury stock 1,275 thousand) and no share buybacks means EPS growth was driven by net income increase. BPS ¥990.45 (from ¥927.46, +6.8%) indicates steady accumulation of equity, and assuming price/book near PBR 1.0x, equity accumulation is a positive factor.
Cash Quality: OCF ¥49.7B, 2.6x net income ¥18.8B, OCF/Sales ratio 7.4%, indicating strong cash backing of earnings. Working capital change was modest: trade receivables decreased ¥3.7B, trade payables increased ¥0.2B, showing limited signs of opportunistic working capital management.
Investment Efficiency: Total asset turnover 1.63x, fixed asset turnover 2.88x, overall efficient. Capex ¥18.4B was 1.1x depreciation ¥16.6B, implying a balanced mix of growth and maintenance investment.
Financial Soundness: Equity Ratio 46.1% (from 44.0%, +2.1pt), current ratio 129.4%, Debt/EBITDA 1.03x, interest coverage 27.8x—conservative. Cash ¥99.6B vs. short-term interest-bearing debt ¥55.9B (short-term borrowings ¥18.2B + repayments due within 1 year ¥36.7B), cash/short-term interest-bearing debt ratio 1.78x, indicating low liquidity risk. Long-term borrowings were reduced 40.5% from ¥50.1B to ¥29.8B, enhancing interest-rate resilience and financial flexibility.
OCF ¥49.7B (from ¥37.8B, +31.4%), derived from income before income taxes ¥36.8B plus depreciation ¥16.6B and decrease in trade receivables ¥3.7B, producing pre-tax cash flow ¥55.3B less corporate taxes ¥13.7B and small working capital movements. OCF/EBITDA was 1.07x (EBITDA = Operating Income ¥29.8B + Depreciation ¥16.6B = ¥46.4B), indicating very healthy accrual quality. Investing Cash Flow was -¥18.3B, mainly capex -¥18.4B (primarily new construction/renovation of Childcare Support facilities), offset partially by other investing proceeds +¥0.5B. FCF was ¥31.5B (OCF ¥49.7B - Investing CF ¥18.3B), sufficient to cover dividends ¥11.7B and capex ¥18.4B (total ¥30.1B) from internal funds. Financing Cash Flow was -¥20.2B: long-term borrowings repayment -¥24.2B, new borrowings +¥17.5B, increase in short-term borrowings +¥4.2B, dividends paid -¥11.7B, net reducing interest-bearing debt. Cash balance increased from ¥88.4B to ¥99.6B (+¥11.2B), strengthening liquidity. Subsidy income ¥8.7B (non-operating income) may include temporary elements, so conservative assumptions are appropriate when forecasting next year’s OCF.
Of Ordinary Income ¥36.7B, Operating Income ¥29.8B comprised the bulk, and net non-operating income ¥6.9B equals about 1.0% of sales, not excessive. Breakdown of non-operating income ¥8.7B: interest income ¥0.2B, dividend income ¥0.2B, subsidy income ¥1.3B (estimated from notes), other ¥0.5B; subsidies are likely public grants for Childcare Support and Nursing Care and may have some recurrence, but carry policy change risk. Non-operating expenses ¥1.9B comprised mainly interest expense ¥1.7B; interest burden rose modestly from ¥1.2B prior year to +¥0.5B due to net borrowing levels. Extraordinary items net +¥0.1B (extraordinary gains ¥1.8B, extraordinary losses ¥1.7B) were minor. The gap between Ordinary Income and Net Income is primarily due to income taxes ¥13.5B (effective rate 36.7%), in line with industry norms. The difference between OCF ¥49.7B and Net Income ¥18.8B is +¥30.9B, explained by depreciation ¥16.6B and working capital movements, yielding an accrual ratio of -6.4% (=(Net Income ¥18.8B - OCF ¥49.7B)/Total Assets ¥412.4B), which is very healthy. Although dependence on non-operating items increased, cash-based performance supports that core operations are solid and earnings quality is generally sound.
The company’s full-year plan: Revenue ¥720.0B (+7.0%), Operating Income ¥35.0B (+17.4%), Ordinary Income ¥34.0B (-7.3%), Net Income attributable to owners of the parent ¥25.5B (+35.5%), EPS ¥132.88. Revenue guidance assumes continued growth across the three businesses (+7%). Operating Income guidance targets a significant increase (+17.4%), premised on margin recovery in Childcare Support (price adjustments, utilization gains, faster absorption of opening costs) and maintenance of margins in Staffing and Nursing Care. Ordinary Income guidance is conservative (-7.3%), likely reflecting anticipated reversal of this year’s non-operating positives (subsidies, etc.) and higher financing costs. Net Income is projected to rise substantially (+35.5%), suggesting assumptions of operating improvements and/or lower tax burden, or front-loaded revenue in H2; there may be a back-loaded profit plan. Dividend guidance is ¥30.0 (interim ¥30 + year-end ¥30 = total ¥60) which appears halved relative to current year when considering the planned amount, but could reflect reversion to a stable dividend of ¥30 excluding a commemorative dividend. Progress rates versus plan: Revenue 93.5% (¥673.1B/¥720.0B), Operating Income 85.1% (¥29.8B/¥35.0B), Net Income 73.7% (¥18.8B/¥25.5B); operating performance is somewhat behind plan, and the Net Income shortfall may reflect conservative full-year assumptions or H2 concentration of earnings.
Dividends: interim ¥30.0, year-end ¥30.0, total ¥60.0 (including a ¥2.0 commemorative dividend in the year-end). With Net Income attributable to owners of the parent ¥18.8B and total dividends approximately ¥11.7B, payout ratio is 54.9%, a prudent level. Based on shares outstanding 20,465 thousand (effective 19,190 thousand excluding treasury stock 1,275 thousand), total dividends are calculated on an average share count basis. With FCF ¥31.5B and dividends ¥11.7B, FCF coverage is 2.7x, indicating ample sustainability. No share buybacks were executed; Total Return Ratio equals the payout ratio. Next-year dividend guidance ¥30.0 may look like a 50% cut from this year’s ¥60 total, but could indicate reversion to stable base dividend of ¥30 excluding commemorative payment. Details of dividend policy should be confirmed in the earnings presentation; capacity for dividend increases linked to profit growth exists given financial flexibility.
Margin pressure from cost inflation and pricing lag: In Childcare Support, rising personnel, utilities and rental costs led operating margin to fall from 6.6% to 5.4% (-1.2pt). If minimum wage increases and supply-demand tightness for childcare workers and care workers persist, delayed price revisions (public fees/contract rates) could prolong margin deterioration. Given Childcare Support’s 53.2% share of revenue, this risk materially affects consolidated margins.
Revenue variability from subsidy and public fee system changes: Non-operating income includes approximately ¥1.3B of subsidy income, indicating partial dependence on public support in Childcare Support and Nursing Care. Reward revisions or stricter subsidy eligibility could reduce expected subsidies and negatively impact ordinary income. Monitoring of regulatory changes is essential.
Asset retirement obligations and cash outflows for facility renewals: Asset retirement obligations ¥13.6B (6.1% of liabilities) reflect restoration obligations at lease end for facilities. If exit/renovation of childcare and care facilities intensifies, one-off cash outflows may occur, pressuring investing and financing cash flows. Precise lifecycle and cash planning for facilities is required.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.4% | 8.1% (3.6%–16.0%) | -3.7pt |
| Net Margin | 2.8% | 5.8% (1.2%–11.6%) | -3.0pt |
Operating margin 4.4% is 3.7pt below the industry median 8.1%, and Net margin 2.8% is 3.0pt below the median 5.8%. Heavy fixed-cost burden in Childcare Support and low-margin structure in Nursing Care are primary reasons, placing the company in the lower half of industry profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 8.0% | 10.1% (1.7%–20.2%) | -2.1pt |
Revenue growth 8.0% is 2.1pt below industry median 10.1%; growth is moderate within the sector. All three businesses reported increases, but pace of scale expansion is slightly below peers.
※ Source: Company aggregation
Scope for operating margin recovery and margin restoration scenario: Operating margin 4.4% is well below industry median 8.1%; cost absorption in the core Childcare Support business (current margin 5.4%) is a key challenge. The company’s plan for +17.4% Operating Income implies progress on price revisions (public fees/contract rates), utilization improvements and faster absorption of opening costs. If Staffing and Nursing Care margin trends continue to improve, an operating-level recovery would be a potential valuation inflection.
Strong cash generation and financial headroom to support growth investment: OCF ¥49.7B and FCF ¥31.5B provide cash well above reported profits, enabling dividends and capex to be funded internally—an accounting strength. Cash ¥99.6B and Debt/EBITDA 1.03x indicate ample financial capacity for selective M&A or new facility openings. Allocation of cash between network expansion in Childcare Support/Nursing Care and efficiency investments will be pivotal for medium-term growth.
Dividend policy review and sustainability of shareholder returns: This year’s dividend ¥60 (payout 54.9%) vs. next year guidance ¥30 looks like a cut but may reflect reversion to a stable base dividend ¥30 excluding commemorative payout. With FCF coverage 2.7x, return capacity is adequate and there is scope for dividends to rise with profit growth. Greater clarity and transparency on dividend policy and medium-term return strategy would help stabilize investor sentiment.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are company-compiled references based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.