FTGroup CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥15.91B
• Operating Income: ¥3.80B
• Net Income: ¥2.67B
• EPS: ¥89.97

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

FTGroup (2763) reported FY2026 Q2 consolidated IFRS results showing top-line contraction and profit compression against a solid balance sheet and strong cash position. Revenue was 159.15 billion yen, down 10.2% YoY, indicative of softer demand or a shift in business mix. Gross profit was 72.29 billion yen, translating to a gross margin of 45.4%, which remains healthy for an asset-light solutions mix. SG&A was 31.35 billion yen; however, operating income of 37.99 billion yen implies roughly 2.95 billion yen of other operating items (e.g., other operating expenses or IFRS reclassifications) beyond SG&A. Operating income fell 32.2% YoY, outpacing the revenue decline, signaling negative operating leverage. The operating margin was about 23.9% (operating income/revenue), while net income declined 32.5% to 26.74 billion yen, yielding a net margin of 16.8%. Profit before tax was 39.14 billion yen, implying a high effective tax rate of 41.7%, which weighed on bottom-line conversion. Total comprehensive income was 33.13 billion yen, exceeding net income due to positive other comprehensive income, likely from fair value gains on financial assets or FX-related items. DuPont analysis shows a calculated ROE of 8.3%, driven by a 16.8% net margin, asset turnover of 0.385x, and low financial leverage of 1.29x, highlighting profitability as the primary ROE driver rather than leverage. The balance sheet is strong with total assets of 412.93 billion yen and equity of 321.18 billion yen, resulting in an equity ratio of 77.8% and a low liabilities-to-equity ratio of 0.33x. Cash and equivalents were substantial at 198.17 billion yen, providing strong liquidity and strategic flexibility despite the earnings decline. Working capital appears robust with minimal inventories (2.45 billion yen) and receivables of 73.45 billion yen; accounts payable were 32.37 billion yen, suggesting a short cash conversion cycle. Although ordinary income and operating cash flows were not disclosed, the high cash balance and low leverage mitigate near-term financial risk. The reported payout ratio of 62.4% implies dividends of roughly 16.7 billion yen on half-year earnings of 26.74 billion yen, corresponding to an indicative DPS near the mid-50 yen range based on current shares outstanding, although dividend data were not directly reported. Overall, FTGroup’s profitability remains solid on an absolute margin basis but is under pressure from revenue contraction and a high tax rate. The company’s liquidity and solvency are very strong, which supports flexibility for investment, shareholder returns, or cushioning cyclical pressures. Data limitations (notably in cash flows, debt detail, and segment drivers) restrict deeper root-cause analysis of the YoY contraction, but the core message is a resilient balance sheet juxtaposed with cyclical/operational headwinds to growth and margins.

Profitability Analysis

ROE_decomposition: ROE 8.3% = Net margin 16.8% x Asset turnover 0.385x x Financial leverage 1.29x. Profitability, not leverage, is the key contributor to ROE, while low asset turnover caps overall return. margin_quality: Gross margin is 45.4% (72.29/159.15), indicating a value-added, service-heavy or solution-oriented mix. Operating margin is ~23.9% (37.99/159.15), but down YoY as operating income fell 32.2% vs. revenue -10.2%, indicating deleveraging and likely less contribution from other operating items. Net margin is 16.8%; a high effective tax rate of 41.7% depresses NOPAT conversion. operating_leverage: Revenue declined 10.2% while operating income dropped 32.2%, pointing to negative operating leverage in the period. The delta between GP-SG&A and reported operating income (~2.95) suggests other operating expenses or reduced other operating income under IFRS, exacerbating the profit decline.

Growth Assessment

revenue_sustainability: Revenue contracted to 159.15 (-10.2% YoY), suggesting weaker demand, pricing pressure, or a pivot away from lower-quality sales. The asset-light profile (low inventories) suggests services/recurring components, but current period performance signals short-term headwinds. profit_quality: Despite a solid gross margin, the step-down in operating income indicates pressure from mix, pricing, or lower other operating income. The high tax rate (41.7%) further drags net income, and without OCF disclosure, cash conversion cannot be corroborated. outlook: Short-term outlook is cautious given negative operating leverage and revenue decline. That said, the high cash balance and minimal leverage offer capacity to support organic initiatives or bolt-on M&A to stabilize growth. Normalization of the tax rate would be a tailwind if achievable.

Financial Health

liquidity: Cash & equivalents of 198.17 are high relative to total assets (about 48%). Current assets of 275.87 dwarf accounts payable of 32.37, suggesting strong short-term coverage. Current ratio and quick ratio cannot be calculated due to unreported current liabilities and cash detail within current assets. solvency: Equity ratio is 77.8%, liabilities-to-equity is 0.33x (107.49/321.18), and financial leverage is low at 1.29x (assets/equity). Interest-bearing debt and interest expense are unreported; however, low total liabilities imply conservative leverage. capital_structure: Total equity is 321.18 (retained earnings 279.88, capital surplus 12.34). Absence of detailed debt breakdown limits assessment of refinancing risk, but the balance sheet indicates ample solvency headroom.

Cash Flow Quality

earnings_quality: OCF and FCF were not disclosed, preventing a direct OCF/NI cross-check. Nevertheless, strong cash on hand suggests prior cash generation or conservative capital allocation. FCF_analysis: Capex and investing CF unreported; thus FCF cannot be estimated. With an asset-light model (low inventories) and high cash balance, baseline free cash flow resilience is plausible, but not verifiable this period. working_capital: AR 73.45, inventory 2.45, AP 32.37. Approximate DSO ~84 days, DIH ~4 days, DPO ~56 days, yielding an indicative CCC near 32 days. Calculations are approximate given point-in-time balances and lack of averages.

Dividend Sustainability

payout_ratio_assessment: Reported payout ratio is 62.4% on net income of 26.74, implying dividends around 16.7. This is elevated versus a mid-cycle 30–50% range but not excessive given the strong balance sheet. FCF_coverage: OCF and FCF unreported; coverage cannot be verified. The large cash balance provides a buffer for dividend continuity in the near term despite earnings volatility. policy_outlook: Given high cash and low leverage, maintaining a relatively high payout is feasible near term; however, if revenue softness persists and tax rates remain elevated, the company may need to calibrate payout growth to earnings visibility.

Risk Assessment

Business Risks:

• Demand softness in core solutions and services leading to revenue contraction
• Pricing pressure and potential adverse mix effects reducing gross-to-operating margin conversion
• Execution risk in cost control amidst declining sales (negative operating leverage)
• Regulatory or procurement changes in energy-saving or telecom-related products/services
• Competitive intensity in SME-focused office and infrastructure solutions

Financial Risks:

• High effective tax rate compressing net margins
• Limited visibility on interest-bearing debt and interest expense due to non-disclosure
• Cash flow uncertainty in the absence of OCF/FCF data
• Potential volatility in OCI items that affected total comprehensive income positively this period

Key Concerns:

• Double-digit YoY revenue decline with outsized drop in operating income
• High tax rate (41.7%) depressing bottom-line profitability
• Limited disclosure on cash flows and debt, constraining assessment of earnings quality and coverage metrics

Investment Implications

Key Takeaways:

• Revenue -10.2% YoY to 159.15 with operating income -32.2% indicates negative operating leverage
• Margins remain solid on an absolute basis (GM 45.4%, OM ~23.9%), but compression is evident
• ROE of 8.3% primarily driven by profit margin with low leverage and modest asset turnover
• Very strong balance sheet: equity ratio 77.8%, liabilities/equity 0.33x, cash 198.17
• High effective tax rate (41.7%) is a material drag on net income
• Dividend payout ratio ~62.4% appears supportable near term given cash but sensitive to further profit declines

Metrics to Watch:

• Revenue trajectory and booking/pipeline indicators
• Operating margin trend and SG&A discipline
• Effective tax rate normalization
• Operating cash flow, OCF/NI, and FCF once disclosed
• Working capital efficiency (DSO, DPO) and credit risk in receivables
• Capital allocation uses for cash (dividends, buybacks, M&A, capex)

Relative Positioning: Within Japan’s solutions and services cohort, FTGroup exhibits above-average balance sheet strength and cash liquidity but currently faces weaker growth momentum and negative operating leverage relative to peers that sustained stable top-line trends.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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