&Do Holdings Co.,Ltd. FY2026 FY Earnings Report

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Executive Summary

Although both revenue and profit contracted substantially, net income exceeded the previous year due to the recognition of extraordinary income, resulting in earnings of mixed quality. Revenue was ¥49.62B (-23.4% YoY), Operating Income was ¥1.12B (-57.3%), and Ordinary Income was ¥1.12B (-61.9%), indicating a significant decline in the profitability of the core business. Net income, meanwhile, was ¥1.45B (+13.7% YoY), but this was boosted by ¥1.396B in extraordinary income, including a ¥1.38B gain on the sale of shares in a subsidiary. Excluding extraordinary income from Profit Before Tax of ¥2.47B, core earnings remain on a contractionary trend. The primary causes of the revenue decline were reduced transactions in the House Leaseback Business (revenue -50.7%) and the Real Estate Sales Business (-10.8%).

Factors Affecting Earnings

【Revenue】Revenue was ¥49.62B, down -23.4% YoY. The Real Estate Sales Business, which had the largest composition ratio (70.8% of revenue), declined to ¥35.25B (-10.8%), while the House Leaseback Business contracted substantially to ¥9.59B (-50.7%); both businesses were the primary causes of the Company-wide revenue decline. Meanwhile, the Franchise Business maintained revenue growth at ¥3.32B (+3.5%), and the Finance Business at ¥0.64B (+13.9%), resulting in divergent performance across the business portfolio.

【Profit and Loss】Operating Income was ¥1.12B (-57.3%). The gross profit margin declined from the previous year to 21.7%, while the SG&A expense ratio increased to 19.5%, causing the Operating Income margin to deteriorate to 2.3%. By segment, the Franchise Business (¥1.93B, 58.0% margin) was the largest earnings contributor Company-wide, partially offsetting declines in the House Leaseback Business (¥0.89B, -60.7%) and the Real Estate Sales Business (¥1.71B, -32.7%). Ordinary Income was limited to ¥1.12B, as non-operating income of ¥0.98B and non-operating expenses of ¥0.98B nearly offset each other, while interest expenses of ¥0.84B placed a significant burden on earnings. Extraordinary income of ¥1.396B, primarily consisting of a ¥1.382B gain on the sale of shares in a subsidiary, lifted Profit Before Tax to ¥2.47B, resulting in net income of ¥1.45B (+13.7%). The earnings structure was therefore characterized by lower revenue and operating profit, but higher net income due to temporary factors.

Segment Analysis

By segment, the Franchise Business had an exceptionally high profit margin of 58.0% and served as a pillar of Company-wide earnings. The Finance Business also had high profitability, with a 40.9% margin, but its revenue scale was small at ¥0.64B. In contrast, the Real Estate Sales Business (4.9% margin) and the House Leaseback Business (9.3% margin), which have high revenue composition ratios, generated low margins and recorded substantial profit declines from the previous year, thereby weighing on Company-wide earnings. Attention is required because segment classifications have changed from the previous fiscal year due to the Real Estate Sales Business being renamed from “Real Estate Distribution” in the previous year and the Renovation Business being reclassified into “Other.”

Key Financial Metrics

【Profitability】The Operating Income margin of 2.3% and net profit margin of 2.9% both declined from the previous year (4.0% and 3.6%, respectively), reflecting a combination of the decline in the gross profit margin to 21.7% and the increase in the SG&A expense ratio to 19.5%. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥5.13B, exceeding net income of ¥1.45B, which appears favorable at first glance. However, the primary factor was a ¥5.94B decrease in inventories, indicating dependence on one-time cash recovery from inventory reduction. Free Cash Flow (FCF) was substantial at ¥5.65B. 【Investment Efficiency】ROE was 7.6%, consisting of a 2.9% net profit margin × 0.73 total asset turnover × 3.56 financial leverage; deterioration in asset turnover weighed on the overall result. 【Financial Soundness】The Equity Ratio was 28.1%. Although long-term borrowings were reduced to ¥14.56B, down -27.6% YoY, cash and deposits stood at only ¥9.33B against current liabilities of ¥32.94B, indicating a level at which short-term liquidity should be monitored.

Cash Flow Analysis

OCF was ¥5.13B, approximately 3.5 times net income of ¥1.45B, indicating apparently strong cash-generation capacity. However, the subtotal before changes in working capital was ¥7.28B, to which the ¥5.94B decrease in inventories made a positive contribution, while corporate income taxes paid of ¥1.28B and interest paid of ¥0.88B were deducted. This structure indicates a high degree of dependence on the temporary factor of inventory reduction. Investing Cash Flow was +¥0.52B because proceeds of ¥1.5B from the sale of shares in a subsidiary exceeded capital expenditures of ¥0.83B; on a recurring basis, investing activities remain in a net outflow position. Financing Cash Flow was -¥4.57B, as repayment of long-term borrowings took precedence and funds were allocated toward deleveraging. As a result, FCF was substantial at ¥5.65B, securing the resources for dividends and debt repayment during the current period. However, attention should be paid to the potential reversal of the inventory-reduction effect from the next fiscal year onward.

Earnings Quality

Of Profit Before Tax of ¥2.47B for the current period, Ordinary Income, which reflects recurring earnings power, was limited to ¥1.12B; a substantial portion of the remainder was attributable to ¥1.396B in extraordinary income, primarily the ¥1.382B gain on the sale of shares in a subsidiary. Non-operating income of ¥0.98B and non-operating expenses of ¥0.98B nearly offset each other, with interest expenses of ¥0.84B representing the main expense item. Net income increased +13.7% YoY to ¥1.45B, but this resulted from dependence on temporary extraordinary income. Given the -57.3% decline in Operating Income, there is a clear divergence between core earnings power and bottom-line profit. Since OCF exceeded net income, no issue is apparent from an accrual perspective. However, because the primary driver was the decrease in inventories, attention is required to the one-time nature of earnings quality characteristic of an inventory-adjustment phase.

Earnings Forecast and Guidance

The Company’s plan for the next fiscal year calls for Revenue of ¥45.0B (-9.3% YoY), Operating Income of ¥1.40B (+25.0%), and Ordinary Income of ¥1.35B (+20.5%), indicating an expectation of margin improvement despite lower revenue. Net income attributable to owners of the parent is projected at ¥0.891B, and forecast EPS is ¥44.62, representing a decline from current-period net income of ¥1.45B. This is consistent with the one-time nature of extraordinary income recognized during the current period. Based on the projected dividend of ¥46.0, the Payout Ratio against forecast EPS of ¥44.62 would exceed 100%, making the degree of achievement of the earnings plan a key focus going forward.

Shareholder Returns

The Payout Ratio for the current period was 63.2%, up from 37.9% in the previous year. The annual dividend was ¥46 (implemented from ¥0 in the previous year), and the coverage of total dividends of ¥0.90B by FCF of ¥5.65B was sufficient. However, based on the Company’s next-period net income plan of ¥0.891B, maintaining the same dividend of ¥46 would result in a calculated Payout Ratio exceeding 100%. Attention is therefore required, as the degree of achievement of the earnings plan will affect the sustainability of the Company’s future dividend policy. No disclosure regarding share buybacks has been identified.

Risk Factors

1. Risk of an inventory-dependent business model: The combined value of real estate held for sale and real estate under development was ¥39.597B, accounting for 58.4% of total assets of ¥67.80B. This structure means that fluctuations in real estate market conditions directly affect asset values and turnover speed.

2. High leverage and interest-rate resilience: The Company had long-term borrowings of ¥14.56B and short-term borrowings of ¥15.47B. Given interest expenses of ¥0.84B and Operating Income of ¥1.12B, monitoring is required from the perspective of interest-rate resilience. The Equity Ratio remained limited at 28.1%.

3. Concentration of the business composition: Revenue from the House Leaseback Business contracted substantially by -50.7% YoY, while profit declined -60.7%. Company-wide earnings are concentrated in the Franchise Business, which has the largest profit composition ratio; changes in the performance of this business could have a significant impact on Company-wide earnings.

Industry Benchmark (For Reference; Compiled by the Company)

Profitability and Returns

Growth and Capital Efficiency

※Source: Compiled by the Company

Key Points of Note in the Earnings Results

1. Net income increased +13.7% YoY, but its source was extraordinary income of ¥1.396B, primarily the gain on the sale of shares in a subsidiary. Operating Income declined -57.3%, clearly indicating a deterioration in core earnings power. Distinguishing among the components of profit and loss is important for understanding the earnings results.

2. OCF of ¥5.13B was supported by a ¥5.94B decrease in inventories, reflecting a temporary cash-recovery effect from inventory reduction. The trend in inventory levels will be the key to determining whether cash generation at a similar level can continue from the next fiscal year onward.

3. The Company’s next-period plan calls for higher profit despite lower revenue (+25.0% Operating Income), making whether the Company can transition to an earnings structure that does not depend on temporary gains and losses a key focus of future earnings results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥826–¥871 at Cost of Equity ±1%, and ¥845–¥850 at ω ±0.1.

Notes:

• Goodwill amortization of ¥5.5 per share has been added back to earnings (due to its non-cash nature and for 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 5-year fade) / Interest-rate reference month: 2026-07 / Mechanically calculated solely from publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and 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 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 responsibility, after consulting with a professional as necessary.

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