TOBISHIMA HOLDINGS Inc. FY2027 Q1 Earnings Report

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Executive Summary

Although revenue and operating income increased in Q1 FY2027, net income declined due to the absence of a temporary factor recorded in the previous year and a higher tax burden. Revenue was ¥302.4B (+1.1% YoY), operating income was ¥16.2B (+5.1%), and ordinary income was ¥14.9B (+6.8%). Meanwhile, net income attributable to owners of the parent was ¥10.2B (-13.4%), mainly due to the absence of the ¥1.3B gain on negative goodwill recognized in the previous year and an increase in the effective tax rate (21%→34%). The gross profit margin improved to 13.5% from 12.4% in the previous year, indicating a steady strengthening of core earnings power.

Factors Affecting Results

【Revenue】Revenue increased slightly by 1.1% YoY to ¥302.4B. By segment, A0Construction (Civil Engineering Business, ¥114.7B, -1.0%) and A0Engineering (Building Construction Business, ¥131.5B, -9.7%) posted declines in revenue, while A0GrowthBusinessAndOther (¥86.0B, +14.2%) led the increase and contributed to overall revenue growth. Revenue from government agencies was ¥12,104M, while revenue from private-sector customers was ¥17,772M, indicating an increase in the private-sector ratio.

【Profit and Loss】Operating income increased 5.1% YoY to ¥16.2B, mainly due to the improvement in the gross profit margin to 13.5% from 12.4% in the previous year. Operating income at A0Construction improved significantly by 22.6% to ¥9.1B, with its margin also rising to 7.9%. In contrast, despite revenue growth, A0GrowthBusinessAndOther posted operating income of ¥5.0B (-14.9%), with its margin declining to 5.9%, suggesting a possible investment-led phase. Ordinary income increased steadily by 6.8% to ¥14.9B, while net income declined 14.0% to ¥10.2B. The absence of the previous year’s extraordinary gain (¥1.31B gain on negative goodwill) and the increase in the effective tax rate (approximately 34%, based on income taxes of ¥5.2B and profit before tax of ¥15.2B) created a divergence between ordinary income and net income. In conclusion, the Company achieved revenue and operating profit growth at the operating and ordinary income levels, but net income declined due to the absence of a temporary factor.

Segment Analysis

The largest core segment by segment profit is A0Engineering (Building Construction Business), which maintained the highest level company-wide with operating income of ¥11.2B and an 8.5% margin. A0Construction (Civil Engineering Business) recorded lower revenue of ¥114.7B (-1.0%), but operating income improved 22.6% to ¥9.1B and its margin improved to 7.9%, suggesting progress in cost control and project profitability. A0GrowthBusinessAndOther was the only segment to achieve revenue growth, with revenue of ¥86.0B (+14.2%), but operating income declined 14.9% to ¥5.0B and its margin fell to 5.9%, acting as a factor diluting the Company-wide margin despite its revenue growth. Corporate expenses (adjustments) were -¥9.0B, broadly unchanged from -¥8.8B in the previous year.

Key Financial Metrics

【Profitability】The operating margin improved to 5.4% from 5.2% in the previous year, and the gross profit margin also rose to 13.5% from 12.4%. However, the net profit margin declined to 3.4% from 3.9%. 【Cash Quality】Accounts receivable from completed construction contracts declined significantly to ¥652.9B from ¥801.4B in the previous year, indicating progress in receivables collection, while advances received on construction contracts in progress remained broadly stable at ¥77.8B (+1.9%). 【Investment Efficiency】ROE was 1.9%, and the equity ratio was 36.6% (33.3% in the previous year). With a low total asset turnover ratio, capital efficiency remains limited. 【Financial Soundness】Short-term borrowings were significantly reduced by 37.6% YoY to ¥190.0B, while total assets contracted to ¥1454.8B from ¥1631.0B, indicating progress in restraining financial leverage.

Cash Flow Analysis

Although the disclosure does not include detailed cash flow statements, changes in the balance sheet provide insight into funding trends. Accounts receivable from completed construction contracts declined to ¥652.9B from ¥801.4B, indicating the release of cash from working capital. Meanwhile, short-term borrowings declined substantially to ¥190.0B from ¥305.0B in the previous year (-37.6%), suggesting that funds were allocated to debt repayment. Cash and deposits increased to ¥225.3B from ¥208.7B in the previous year. Maintaining cash levels while progressing with receivables collection and debt repayment in parallel indicates sound cash management. Capital expenditures were modest, with property, plant and equipment broadly flat at ¥253.8B versus ¥253.6B in the previous year, and no significant investment burden arose.

Quality of Earnings

The core of recurring earnings power in the current period was operating income of ¥16.2B. Non-operating income of ¥0.6B (including ¥0.2B in dividend income) and non-operating expenses of ¥1.9B (including ¥1.4B in interest expense) were small, resulting in an earnings structure highly dependent on the core business. Extraordinary items were limited to extraordinary income of ¥0.3B, including a ¥0.2B gain on the sale of investment securities. In the previous year, however, the Company recorded extraordinary income of ¥1.3B, including a ¥1.3B gain on negative goodwill, and the absence of this temporary factor was one of the main causes of the decline in net income. The divergence between ordinary income of ¥14.9B and net income of ¥10.2B was primarily attributable to the higher tax burden. Income taxes of ¥5.2B represented an effective tax rate of approximately 34% against profit before tax of ¥15.2B, up from 21% in the previous year. Comprehensive income was ¥7.4B, below net income of ¥10.2B, mainly due to deterioration in the valuation difference on securities (-¥2.4B). Accordingly, comprehensive income for the current period was more conservative than net income.

Earnings Forecast and Guidance

Q1 progress against the full-year forecast was 20.2% for revenue (¥302.4B/¥1,500B), 20.3% for operating income (¥16.2B/¥80.0B), and 21.3% for ordinary income (¥14.9B/¥70.0B), all below the simple one-quarter benchmark of 25%. The construction industry has seasonal characteristics, with construction progress weighted toward the second half of the fiscal year; therefore, these progress rates do not necessarily indicate a risk of downward revisions. As of the current quarter, the Company has not revised either its earnings forecast or dividend forecast. The full-year plan anticipates revenue growth of +7.7% and operating income growth of +15.8%, with achievement depending on the accumulation of construction progress in the second half and improved profitability in the Growth Business.

Shareholder Returns

The full-year dividend forecast is ¥110 per share, implying a payout ratio of approximately 44.0% based on full-year forecast EPS of ¥250.11. As of the current quarter, the dividend forecast has not been revised. Based on approximately 19.19M shares outstanding, excluding treasury shares, total annual dividends are expected to be approximately ¥21.1B, a well-covered level relative to cash and deposits of ¥225.3B. Treasury shares were ¥0.33B, down from ¥0.79B in the previous year, and no large-scale share repurchases have been identified.

Risk Factors

1. Dependence on short-term liabilities: Short-term borrowings were reduced to ¥190.0B (-37.6% from the previous year), but the proportion of short-term debt within total interest-bearing debt remains high, and changes in refinancing conditions could affect funding costs.

2. Changes in the profitability mix among segments: A0GrowthBusinessAndOther achieved revenue growth of +14.2%, but operating income declined by -14.9% and its margin fell to 5.9%, exerting a dilutive effect on the Company-wide profit margin.

3. Variability in the tax burden and temporary factors: The effective tax rate increased to approximately 34% from approximately 21% in the previous year. In addition, the ¥1.3B gain on negative goodwill recognized in the previous year was absent in the current period, placing pressure on net income relative to the growth in ordinary income.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

The operating margin exceeds the industry median, while the net profit margin is below the median due to the higher tax burden and the absence of temporary factors.

Growth and Capital Efficiency

The revenue growth rate is significantly below the industry median, indicating that the pace of top-line expansion is relatively moderate within the industry.

Source: Compiled by the Company

Key Points from the Financial Results

1. Through improved gross profit in the core businesses (civil engineering and building construction) and SG&A expense control, the operating margin improved to 5.4%, exceeding the industry median of 4.5%. Whether this improvement resulted from materials prices and cost management or from a temporary effect of the project mix will be an important point to assess in future quarters.

2. The decline in net income was primarily attributable to factors unrelated to operating performance, namely the absence of the previous year’s gain on negative goodwill and the increase in the effective tax rate. The 6.8% increase in ordinary income is therefore an important point in understanding the earnings structure.

3. The Company reduced short-term borrowings by 37.6% from the previous year while maintaining its cash position, indicating ongoing deleveraging of its financial structure. Meanwhile, the revenue increase and profit decline at A0GrowthBusinessAndOther should be monitored as a structural change that may indicate either an investment-led phase or challenges in monetization.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥2,718–¥2,874 at ±1% in the cost of equity, and ¥2,794–¥2,795 at ±0.1 in ω.

Notes:

• Net assets as of the quarter-end were used; there is a timing difference relative to the full-year forecast.
• Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price)

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This report is an earnings analysis document automatically generated by AI based on 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 disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting professionals as necessary.

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