| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥503.0B | ¥511.4B | -1.6% |
| Operating Income | ¥44.6B | ¥50.7B | -11.9% |
| Ordinary Income | ¥46.0B | ¥51.0B | -9.8% |
| Net Income | ¥14.8B | ¥31.3B | -52.8% |
| ROE | 4.3% | 9.4% | - |
For the fiscal year ended March 2026, revenue was ¥503.0B (YoY -¥8.3B, -1.6%), Operating Income was ¥44.6B (YoY -¥6.0B, -11.9%), Ordinary Income was ¥46.0B (YoY -¥5.0B, -9.8%), and Net Income was ¥14.8B (YoY -¥16.5B, -52.8%), resulting in a decline in both sales and profits. Net income attributable to owners of the parent was ¥27.6B (YoY -¥3.0B, -9.7%), with non-controlling interests depressing consolidated Net Income. The core Human Resource business remained resilient with Revenue +1.3%, while the CRO business contracted sharply by -17.1%, dragging on overall results. Operating margin declined to 8.9% from 9.9% a year earlier (-1.0pt), and an increase in SG&A (¥7.11B, prior ¥6.67B) pressured profitability. With ¥2.2B recorded as income attributable to non-controlling interests, consolidated Net Income fell well below the parent-attributable figure of ¥27.6B.
[Revenue] Revenue of ¥503.0B (-1.6%) marked a slight decline. By segment, the Human Resource business recorded ¥435.8B (+1.3%), maintaining modest growth and accounting for 86.6% of total sales, serving as the mainstay. It comprised temporary staffing at ¥429.4B and recruitment at ¥6.1B. Conversely, the CRO business decelerated to ¥67.6B (-17.1%), with both domestic companies at ¥50.8B and overseas companies at ¥16.8B contracting YoY. Domestically, timing delays in winning safety information management projects impacted performance; overseas, reduced utilization across development activities was a factor. Revenue composition was concentrated (Human Resource 86.6%, CRO 13.4%), and the CRO slowdown could not be fully absorbed, resulting in group-wide top-line decline.
[Profitability] Operating Income of ¥44.6B (-11.9%) fell double digits. Gross profit was ¥115.8B (gross margin 23.0%), near prior-year ¥117.4B (gross margin 23.0%), so gross margin was maintained to cover revenue decline. However, SG&A rose to ¥71.1B (SG&A ratio 14.1%) from ¥66.7B (13.1%) a year earlier, up 6.6%, with upfront hiring/training costs and corporate expenses weighing on profits. By segment, Human Resource delivered Operating Income of ¥43.0B (+6.4%, margin 9.9%), securing profit growth, while CRO reported ¥10.5B (-30.7%, margin 15.5%) and recorded a significant profit decline. Although CRO is high margin, reduced revenue and adverse project mix lowered profitability, dragging group operating margin down by 1.0pt. Ordinary Income was ¥46.0B (-9.8%), with non-operating income of ¥1.4B (including subsidies of ¥0.98B) and non-operating expenses of ¥0.0B, making non-operating items immaterial. Extraordinary gains were ¥0.5B (gain on business transfer ¥0.5B) and extraordinary losses ¥0.6B (loss on disposal of fixed assets ¥0.6B), netting -¥0.1B with minimal impact. Pre-tax income was ¥45.9B and income taxes were ¥16.1B (effective tax rate 35.0%), yielding Net Income of ¥14.8B (-52.8%). After deducting non-controlling interests of ¥2.2B, Net Income attributable to owners of the parent was ¥27.6B (-9.7%). In summary, CRO revenue decline and higher SG&A presented headwinds at the operating level, leading to lower revenue and profit.
The Human Resource business recorded Revenue ¥435.8B (+1.3%) and Operating Income ¥43.0B (+6.4%, margin 9.9%), delivering both revenue and profit growth. Temporary staffing at ¥429.4B was the core, supplying specialized personnel across scientific research roles, engineering technical roles, and general clerical positions. Stable utilization and unit price improvements supported profitability. The CRO business posted Revenue ¥67.6B (-17.1%) and Operating Income ¥10.5B (-30.7%, margin 15.5%), reflecting declines in both sales and profit. Domestic revenue ¥50.8B was hit by timing delays in safety information management projects, while overseas revenue ¥16.8B suffered from reduced utilization in development operations. The contraction of the high-margin CRO diluted consolidated margins, and an increase in corporate expenses to ¥8.8B (prior ¥4.9B) further pressured profits. Segment profit totalled ¥53.5B, which reconciles to consolidated Operating Income of ¥44.6B after deducting corporate expenses.
[Profitability] Operating margin of 8.9% fell 1.0pt from 9.9% last year, primarily due to higher SG&A and CRO slowdown. Gross margin remained steady at 23.0%. ROE 4.3% (Equity Ratio 80.9%) dropped substantially from an estimated 9.9% last year, reflecting lower Net Income margin and slower asset turnover. ROE on a parent-attributable Net Income basis is estimated at approximately 8.0%, which is low relative to the company’s historical performance.
[Cash Quality] Operating Cash Flow (OCF) was ¥27.9B, 1.9x Net Income of ¥14.8B, a healthy level. However, OCF/EBITDA (EBITDA = Operating Income ¥44.6B + Depreciation ¥3.6B = ¥48.2B) was 0.58x, low due largely to corporate tax payments of ¥18.4B. Although OCF/Net Income multiple is high, cash conversion efficiency deteriorated YoY.
[Investment Efficiency] Capital expenditure (CAPEX) was ¥38.0B, 10.6x depreciation of ¥3.6B, indicating an aggressive investment phase. CAPEX/Sales ratio was 7.6%, reflecting progress on large projects such as the head office building. Free Cash Flow (FCF) was -¥11.5B, negative, likely a temporary result of front-loaded investments.
[Financial Soundness] Equity Ratio 80.9% (prior 75.6%), Current Ratio 376% (Cash ¥174.3B / Current Liabilities ¥66.2B), and Debt-to-Equity 0.24x indicate a very conservative balance sheet. Cash and equivalents of ¥174.3B represent 41.1% of total assets, providing strong short-term financial resilience.
OCF was ¥27.9B, down -36.0% from ¥43.7B a year earlier. From pre-tax income of ¥45.9B, adding back depreciation ¥3.6B and other adjustments produced a subtotal of ¥46.1B, but corporate tax payments of -¥18.4B weighed heavily, with a higher tax burden YoY (prior -¥8.8B). Working capital movements were modest: accounts receivable collection ¥1.6B, inventories change ¥0.1B, accounts payable increase ¥0.4B, showing no significant operational adjustments. Investing Cash Flow was -¥39.4B, led by CAPEX -¥38.0B (head office building, land, etc.), acquisition of investment securities -¥1.5B, and intangible asset acquisition -¥0.2B. Financing Cash Flow was -¥20.7B, comprised of dividend payments -¥12.5B, share buybacks -¥7.3B, lease liability repayments -¥0.4B, and dividends to non-controlling interests -¥0.6B. FCF was OCF ¥27.9B − Investing CF ¥39.4B = -¥11.5B. Net decrease in cash was -¥31.5B (including foreign exchange impact +¥0.7B), leaving year-end cash of ¥174.3B. Although FCF was temporarily negative due to active investment, abundant cash balances can absorb this. Future focus is on investment returns and CRO recovery to improve OCF.
The bulk of revenue derives from recurring staffing services and CRO sales. Non-operating income was ¥1.4B (0.3% of sales), and net extraordinary items were -¥0.1B, indicating limited impact from one-off items. Non-operating income mainly comprised subsidies of ¥0.98B; foreign exchange losses were ¥0.0B and financial costs negligible. Extraordinary items (gain on business transfer ¥0.5B vs. loss on disposal of fixed assets ¥0.6B) largely offset each other, effectively neutral. OCF/Net Income = ¥27.9B / ¥14.8B = 1.9x, indicating accounting profit is supported by cash. However, OCF/EBITDA of 0.58x is low, with higher tax payments and the investment phase suppressing cash conversion. Comprehensive Income was ¥31.0B (parent ¥28.7B), substantially higher than Net Income ¥14.8B, aided by positive FX translation adjustments ¥0.9B, valuation differences on marketable securities ¥0.1B, and retirement benefit adjustments ¥0.2B. The divergence between Comprehensive Income and Net Income is modest and does not indicate accrual-quality issues. The difference between Ordinary Income ¥46.0B and Pre-tax Income ¥45.9B is explainable by extraordinary items of -¥0.1B. Overall, operating income dominates results and one-off impacts are limited; quality of earnings is generally satisfactory.
For FY ending March 2027, the company forecasts Revenue ¥514.4B (+2.3%), Operating Income ¥46.4B (+3.9%), Ordinary Income ¥46.6B (+1.4%), Net Income ¥15.4B (+4.0%), and Net Income attributable to owners of the parent ¥27.7B (+0.7%), implying modest profit growth. Forecast EPS is 144.50円, and forecast dividend is 37.50円, implying a payout ratio of approximately 26% (based on forecast EPS). While expecting revenue and profit growth, forecasts are conservative, assuming a cautious recovery pace in the CRO business, effective SG&A control, and maintenance of utilization in Human Resource. The company has built a conservative scenario, so achievability is reasonably high, but downside risks include delayed CRO project wins and accelerating wage inflation. Upside potential would come from earlier-than-expected CRO contract wins and tighter control of SG&A growth.
Annual dividend is 62.50円 (interim 25.00円, year-end 37.50円 forecast), a substantial increase from the prior dividend of 24円 (XBRL note / quarterly data assumption). Total dividends amount to approximately ¥12.3B (based on weighted-average shares outstanding of 19,450 thousand shares), and with Net Income attributable to owners of the parent of ¥27.6B, the payout ratio is about 44.6% (reported payout ratio 40.2%), a neutral range. Additionally, share buybacks of ¥7.3B were executed, making total returns approximately ¥19.6B (dividends + buybacks), and the Total Return Ratio is about 71%. With FCF at -¥11.5B, total returns were funded from internal resources and cash on hand. Given cash of ¥174.3B, short-term sustainability is high, but continued investment means return capacity is tied to OCF improvement and CRO recovery. The dividend forecast of 37.50円 is based on the company’s FY2027 plan, implying a forecast payout ratio of about 26% (based on EPS forecast 144.50円), which is conservative, but the company appears to aim to maintain an effective payout ratio in the 40–45% range.
Segment concentration risk: The Human Resource business accounts for 86.6% of Revenue, so demand-supply shifts in the staffing market, regulatory changes (e.g., amendments to the Worker Dispatching Act), and high sensitivity to economic cycles directly affect group performance. Intensifying competition for specialized personnel and wage inflation could compress margins, posing a risk of structural operating margin decline. Staffing revenue is highly correlated with labor market conditions, and downturns can swiftly lead to reduced dispatch demand and lower sales and profits.
Revenue volatility in the CRO business: Although relatively small at ¥67.6B in Revenue, CRO has a high margin of 15.5%. Project win timing, pharmaceutical clients’ R&D budgets, and regulatory changes can materially affect utilization and orders, and the -17.1% decline YoY illustrates the risk of double-digit swings in a single year. Both domestic safety information management and overseas development operations are exposed to external factors, reducing predictability. CRO contraction dilutes consolidated operating margins and increases earnings volatility.
Cash conversion efficiency decline due to front-loaded investment: CAPEX of ¥38.0B (CAPEX/Depreciation 10.6x) driven active investment led to FCF of -¥11.5B. OCF/EBITDA of 0.58x is low, and if investment recovery is delayed or utilization targets are not met, there is a risk of persistent weakening in cash generation and deterioration in ROE and capital efficiency. Although cash on hand is ample, sustaining both continued investment at this level and current returns requires OCF improvement; the timing of monetization of investment projects is therefore critical.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.9% | 8.1% (3.6%–16.0%) | +0.8pt |
| Net Margin | 2.9% | 5.8% (1.2%–11.6%) | -2.9pt |
Operating margin exceeds the industry median by 0.8pt, reflecting the value-add of specialized personnel. Net margin trails the median by 2.9pt, with non-controlling interests and tax burden as relative disadvantages.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | -1.6% | 10.1% (1.7%–20.2%) | -11.7pt |
Revenue growth is 11.7pt below the median, underscoring the impact of CRO deceleration. While the industry trend shows solid growth, the company experienced a revenue decline.
※ Source: Company compilation
Linkage between CRO recovery scenario and group margin improvement: CRO is highly profitable (margin 15.5%) but a -17.1% decline shaved 1.0pt off the consolidated operating margin. FY2027 projects modest profit growth, but CRO order and utilization recovery pace is pivotal. If project wins are brought forward and utilization improves, consolidated operating margin could return to the high-9% range. Conversely, delayed recovery would limit SG&A reduction potential and compress the margin upside. Quarterly disclosure of CRO quantitative KPIs (order backlog, utilization rates) is worth close monitoring.
Monetization of aggressive investments and FCF conversion: CAPEX ¥38.0B (CAPEX/Depreciation 10.6x) aims to expand productivity and contract capacity via projects such as the head office building, but caused near-term cash outflow (FCF -¥11.5B). The timing for utilization and revenue contribution post-investment (assumed FY2027–2028) is critical; if on plan, Operating CF and capital efficiency should improve. However, failure to meet utilization targets or delayed payback risks prolonged weakness in ROE and cash generation. Monitor for improvement from OCF/EBITDA ~0.6x.
Financial conservatism and sustainability of total returns: With Equity Ratio 80.9% and cash ¥174.3B, the financial base is solid and short-term capacity for total returns is ample. Maintaining a payout ratio of 40–45% and Total Return Ratio around 70% is feasible, but if FCF deficits persist, sustained use of cash reserves to fund returns may be constrained in the medium-to-long term. The FY2027 forecast dividend of 37.50円 (payout ratio ~26% vs. forecast EPS 144.50円) is conservative; there appears to be room for returns, but improvement in Operating CF and CRO recovery are preconditions. Cash on hand supports downside protection, but improving capital efficiency (ROE) requires accelerating profit growth.
This report was automatically generated by AI analyzing XBRL financial statement data and is an earnings analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company from public financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.