MEDIUS HOLDINGS Co.,Ltd. FY2026 FY Earnings Report

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Executive Summary

Despite higher revenue, both operating income and net income declined due to a lower gross margin and a high effective tax rate. Revenue was ¥3023.4B (+4.7% year on year), operating income was ¥17.8B (-5.1%), ordinary income was ¥23.1B (-4.8%), and net income was ¥9.4B (-40.7%). The primary factors depressing net income were the decline in profitability of the core Medical Equipment Sales Business, extraordinary losses including an impairment loss of ¥3.5B, and the increase in the effective tax rate to 55.3%.

Factors Affecting Earnings

【Revenue】Revenue increased 4.7% year on year to ¥3023.4B. By segment, the core Medical Equipment Sales Business generated ¥2960.4B (97.9% of total revenue, +4.7% year on year), while the Nursing Care and Welfare Business generated ¥63.1B (2.1% of total revenue, +5.2% year on year). Both businesses secured revenue growth.

【Profit and Loss】Operating income declined 5.1% year on year to ¥17.8B. The gross margin declined 0.1pt year on year to 11.8%, while the SG&A ratio improved slightly to 11.3%; however, this was insufficient to offset the decline in gross profit. By segment, profit from the Medical Equipment Sales Business declined 7.5% year on year to ¥96.7B, with profitability deteriorating to a 3.3% margin, whereas the Nursing Care and Welfare Business expanded at a high margin, with profit increasing 13.9% year on year to ¥5.9B and a 9.3% margin. Ordinary income declined 4.8% year on year to ¥23.1B, a decrease broadly in line with operating income, while net income fell substantially by 40.7% to ¥9.4B. The factors were the deterioration in extraordinary gains and losses (extraordinary losses of ¥3.9B, including an impairment loss of ¥3.5B, and extraordinary gains of ¥1.9B, resulting in a net loss of ¥2.0B) and the temporary increase in the effective tax rate to 55.3% (income taxes of ¥11.7B against profit before tax of ¥21.1B). In conclusion, revenue increased while profit declined.

Segment Analysis

The Medical Equipment Sales Business is the core business, accounting for 97.9% of revenue; however, segment profit declined 7.5% year on year to ¥96.7B, with the profit margin falling to 3.3%. The Nursing Care and Welfare Business expanded at a higher margin than the core business, with revenue of ¥63.1B (+5.2% year on year), profit of ¥5.9B (+13.9%), and a profit margin of 9.3%, thereby contributing to an increase in the Company-wide profit margin. Adjustments to consolidated operating income were substantial at -¥84.7B (including corporate expenses, goodwill amortization, and other items), creating a structure in which goodwill amortization and the allocation of corporate expenses relative to total segment profit weigh on the consolidated operating margin. Revenue was generated entirely in Japan, with no overseas revenue.

Key Financial Indicators

【Profitability】The operating margin remained low at 0.6% (0.6% in the prior year), while the net profit margin was 0.3% and ROE was 4.6%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥3.7B, only 0.4 times net income of ¥9.4B, indicating weak cash conversion. Trade receivables increased by ¥40.5B, representing the primary use of funds. 【Investment Efficiency】Capital expenditures were ¥7.5B, below depreciation and amortization expense of ¥19.3B, indicating a restrained level of investment. 【Financial Soundness】The equity ratio was 18.4%, with net assets of ¥207.5B against total assets of ¥1125.9B, indicating a financial structure highly dependent on interest-bearing debt.

Cash Flow Analysis

OCF declined sharply by 94.7% year on year to ¥3.7B, resulting in free cash flow of -¥8.9B. The increase in trade receivables (-¥40.5B) and the increase in inventories (-¥7.2B) tied up funds. Although this was partially offset by an increase in trade payables (+¥21.0B), OCF contracted substantially. Investing cash flow was -¥12.6B, of which capital expenditures were ¥7.5B, a level below depreciation and amortization expense of ¥19.3B. Financing cash flow was -¥34.0B, primarily due to debt repayments. As a result, cash and deposits at the end of the period declined from the previous year to ¥100.5B. The combination of weak operating cash generation and financing cash outflows indicates a trend toward reduced on-hand liquidity.

Earnings Quality

There was a substantial gap between ordinary income of ¥23.1B and net income of ¥9.4B, attributable to extraordinary gains and losses and the higher tax burden. Extraordinary losses were ¥3.9B, primarily consisting of an impairment loss of ¥3.5B. Extraordinary gains were ¥1.9B, including a gain on the sale of investment securities of ¥1.8B, resulting in a net impact that weighed on profit. Income taxes were ¥11.7B against profit before tax of ¥21.1B, resulting in a high effective tax rate of 55.3% and causing the decline in net income (-40.7%) to substantially exceed the decline in ordinary income (-4.8%). Non-operating income of ¥8.7B consisted primarily of stable items such as dividend income of ¥0.8B and was limited in scale. From an accruals perspective, OCF was below net income, while the accumulation of trade receivables delayed the conversion of earnings into cash. Accordingly, earnings quality deteriorated compared with the previous year.

Earnings Forecasts and Guidance

For the FY2027 full-year outlook, the Company plans revenue of ¥3250.0B (+7.5% year on year), operating income of ¥20.0B (+12.3%), ordinary income of ¥24.0B (+4.1%), EPS of ¥62.95, and a dividend of ¥20.00. The plan calls for higher revenue and profit compared with the current-year results of revenue of ¥3023.4B and operating income of ¥17.8B. Achievement of these targets will require an improvement in the gross margin and a recovery in the weak OCF recorded this fiscal year. If the current-year effective tax rate of 55.3% normalizes from the next fiscal year onward, net income may recover at a pace exceeding the rate of operating income growth.

Shareholder Returns

The year-end dividend was ¥20.00 (annual), resulting in a payout ratio of 47.1%. This increased from 32.3% in the prior year because the Company maintained the dividend despite net income declining 40.7% year on year. Free cash flow was negative at -¥8.9B, meaning that the current-year dividend was not fully covered by cash generated from operating activities alone. Based on projected net income of ¥14.0B for the next fiscal year, the payout ratio is expected to improve; however, sustainability will depend on the recovery of operating cash flow.

Risk Factors

1. Business concentration risk: The Medical Equipment Sales Business accounts for 97.9% of revenue, and its segment profit margin has declined to 3.3%. The high dependence on a single business is therefore the primary driver of earnings volatility.

2. Declining cash generation capacity: OCF declined to ¥3.7B, down 94.7% year on year. Working capital constraints intensified, including a ¥40.5B increase in trade receivables, resulting in negative free cash flow of -¥8.9B.

3. From the perspective of financial soundness: The equity ratio improved slightly to 18.4% from 18.1% in the prior year but remains low. Financing cash flow was an outflow of -¥34.0B due to debt repayments, and cash at the end of the period declined to ¥100.5B.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The Company's profitability is substantially below the industry median, with both its operating margin and net profit margin ranking low within the industry.

Growth and Capital Efficiency

The revenue growth rate is close to the industry median, placing the Company's top-line growth at an average level within the industry.

※Source: Compiled by the Company

Key Points from the Earnings Results

1. Despite revenue growth, the combination of a lower gross margin and an increase in the effective tax rate to 55.3% led to a substantial 40.7% year-on-year decline in net income. The structural decline in profitability occurring beneath the revenue growth is the most notable aspect of these earnings results.

2. OCF contracted to 94.7% below the prior-year level, while the increase in trade receivables tied up funds. Maintaining the dividend amid negative free cash flow was reflected in the higher payout ratio (32.3%→47.1%), making the future trend in cash generation capacity an important point to monitor.

3. By segment, the Nursing Care and Welfare Business expanded with a profit margin of 9.3%, exceeding the 3.3% margin of the Medical Equipment Sales Business. This confirms variation in profitability across the business portfolio.

Theoretical Share Price (Reference Value)

Sensitivity: ¥873–¥924 for a ±1% change in the cost of equity, and ¥896–¥898 for a ±0.1 change in ω.

Notes:

• Goodwill amortization of ¥13.5 per share is added back to earnings (to account for a non-cash expense and comparability with IFRS companies).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.

(Calculation model: Residual Income Model (Ohlson-type; explicit five-year fade) / Interest Rate Reference Month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it 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 summary 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 with a professional as necessary.

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