| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥528.3B | ¥463.9B | +13.9% |
| Operating Income / Operating Profit | ¥112.2B | ¥134.2B | -16.4% |
| Profit Before Tax | ¥110.2B | ¥126.5B | -12.9% |
| Net Income | ¥71.8B | ¥79.5B | -9.7% |
| ROE | 13.1% | 16.0% | - |
For the fiscal year ended March 2026, Revenue was ¥528.3B (prior year ¥463.9B, +¥64.4B +13.9%), Operating Income was ¥112.2B (prior year ¥134.2B, -¥22.0B -16.4%), Ordinary Income was ¥57.4B (prior year ¥47.8B, +¥9.6B +20.0%), and Net Income Attributable to Owners of the Parent was ¥69.4B (prior year ¥74.7B, -¥5.3B -7.1%). Revenue continued double-digit growth, while at the operating stage SG&A expanded to ¥177.7B (YoY +¥44.1B +33.0%) and the prior-year gain on loss of control of a subsidiary of ¥15.7B was not repeated, causing the operating margin to deteriorate to 21.2% (prior year 28.9%, -7.7pt). At the ordinary level, improved financial income of ¥3.6B and reduced financial expenses of ¥5.6B resulted in a YoY +20.0% increase, and the bottom-line remained relatively resilient at -7.1% YoY after corporate taxes of ¥38.4B (effective tax rate 34.8%). Overall, the company reported higher revenue but lower profits.
Revenue: Revenue of ¥528.3B (+13.9%) increased across all segments. The Publitech Business recorded ¥294.6B (+12.9%), supported by growth in the hometown tax donation platform and solutions for government agencies, maintaining a 55.8% share as the core business. The NEW-IT Transformation Business achieved ¥232.5B (+14.6%) with double-digit revenue growth, but profitability declined due to changes in project mix. Gross profit was ¥288.3B (+11.4%), with a gross margin of 54.6% (prior year 55.8%, -1.2pt), and cost of sales rose to ¥239.9B (+17.1% YoY).
Profitability: Operating Income decreased to ¥112.2B (-16.4%). The main cause was a sharp rise in SG&A, which grew to ¥177.7B (prior year ¥133.6B, +¥44.1B +33.0%), outpacing revenue growth and raising the SG&A ratio to 33.6% (prior year 28.8%, +4.8pt). Impairment losses declined to ¥0.6B (prior year ¥8.0B), and provisions for doubtful accounts decreased to ¥0.2B (prior year ¥1.7B), but the absence of the prior-year gain on loss of control of a subsidiary (¥15.7B) weighed on operating comparisons. By segment, Publitech posted Operating Income of ¥141.6B (+8.5%) with a high margin of 48.0%, while NEW-IT recorded ¥32.6B (-45.6%) with a margin of 14.0% (prior year 29.5%, -15.5pt), a significant deterioration. Ordinary Income rose to ¥57.4B (+20.0%), aided by increased financial income ¥3.6B (prior year ¥0.2B), reduced financial expenses ¥5.6B (prior year ¥7.9B, -¥2.3B), and equity-method investment income ¥1.9B (flat). Profit Before Tax was ¥110.2B (prior year ¥126.5B, -12.9%); after corporate taxes of ¥38.4B (effective tax rate 34.8%), Net Income Attributable to Owners of the Parent was ¥69.4B (-7.1%). Non-controlling interests decreased to ¥2.4B (prior year ¥4.8B). In summary, the company reported higher revenue but lower profits, with deteriorating NEW-IT profitability and sharply higher SG&A depressing operating profitability, though improvements in non-operating items lifted ordinary income above the prior year.
The Publitech Business posted Revenue of ¥294.6B (+12.9%), Operating Income of ¥141.6B (+8.5%), and a margin of 48.0%, maintaining a stable, highly profitable structure. Both the hometown tax donation platform and government-agency solutions drove revenue, producing the majority of consolidated operating income. The NEW-IT Transformation Business achieved Revenue of ¥232.5B (+14.6%) but Operating Income plunged to ¥32.6B (-45.6%), with margin deteriorating to 14.0% (prior year 29.5%, -15.5pt). Factors such as project mix changes, utilization rate impacts, and upfront investment burdens appear to have driven the decline in profitability, contributing most to the contraction in consolidated operating margin. Consolidated adjustments (corporate expenses) expanded to -¥61.9B (prior year -¥56.1B), reflecting increased indirect costs associated with headquarter strengthening and investments.
Profitability: Operating margin was 21.2% (prior year 28.9%, -7.7pt) and net margin 13.1% (prior year 16.1%, -3.0pt), declining but remaining high relative to peers. Gross margin was 54.6% (prior year 55.8%, -1.2pt), still at elevated levels, reflecting pricing power of the platform and government-focused businesses. ROE was 15.8% (prior year 18.5%) at a favorable level; ROA was 5.5% (prior year 4.6%), with return on total assets roughly stable. Cash quality: Operating Cash Flow (OCF) to Net Income ratio was 1.01x (OCF ¥72.5B / Net Income ¥71.8B), slightly above the benchmark (>1.0), indicating generally good cash backing of profits. However, OCF/EBITDA was 0.52x (OCF ¥72.5B / EBITDA ¥138.7B), low, with working capital increases (Accounts Receivable +¥22.0B, Inventory +¥0.8B), tax payments ¥38.0B, and lease payments ¥10.6B suppressing cash conversion. Days Sales Outstanding (DSO) was prolonged at 148 days (Accounts Receivable ¥213.6B / Daily Sales ¥1.45B), and improving collection cycles is a challenge. Investment efficiency: Total asset turnover improved to 0.50x (prior year 0.44x), and capital turnover is 1.14x, maintaining efficiency. Free Cash Flow was ¥44.1B (OCF ¥72.5B - Capex ¥3.8B - Intangible asset investments ¥5.3B - acquisitions), covering dividend payments of ¥14.5B 3.0x; total shareholder returns (dividends ¥14.5B + share buybacks ¥44.9B) were 0.74x of FCF, meaning total returns including buybacks exceeded FCF but were funded by cash on hand of ¥261.8B and financing. Financial soundness: Equity Ratio improved to 44.3% (prior year 39.3%, +5.0pt). Interest-bearing debt (short-term ¥59.9B + long-term ¥217.8B) totaled ¥277.7B, with net debt of ¥15.9B (after deducting cash ¥261.8B). Debt/EBITDA was very low at 0.11x. Interest coverage was about 17.7x (EBIT ¥112.2B / Interest Expense ¥4.1B), indicating strong coverage. Goodwill was ¥292.7B, representing 63.6% of net assets and 27.7% of total assets; intangible assets from M&A materially weigh on the asset base, making impairment monitoring of goodwill important. Current ratio was 199.6% (current assets ¥493.4B / current liabilities ¥247.3B), indicating adequate short-term liquidity and limited short-term liquidity risk.
Operating Cash Flow was ¥72.5B (prior year ¥78.4B, -7.4%). From Profit Before Tax of ¥110.2B, addbacks included depreciation & amortization ¥26.5B, impairment losses ¥0.6B, and equity-method investment losses -¥1.9B. On the working capital side, increases in accounts receivable -¥22.0B, inventory -¥0.8B, and an increase in trade payables ¥0.7B resulted in a net outflow of -¥22.1B. Corporate tax payments ¥38.0B, interest payments ¥4.1B, and lease payments ¥10.6B further reduced cash, bringing the OCF subtotal down from ¥114.0B. Investing Cash Flow was -¥28.4B (prior year -¥140.8B), primarily composed of subsidiary acquisition payments -¥9.9B, tangible fixed assets -¥3.8B, intangible assets -¥5.3B, and acquisition of investment securities -¥9.6B. The prior year included a large M&A (subsidiary acquisition -¥130.8B), so this represents a significant improvement. Free Cash Flow was ¥44.1B (OCF - Investing CF), covering dividend payments of ¥14.5B by 3.0x, indicating high dividend sustainability. Financing Cash Flow was -¥84.2B (prior year +¥13.2B); while there was financing inflow of long-term borrowings ¥14.2B, outflows included long-term borrowings repayment -¥65.2B, dividend payments -¥14.5B, share buybacks -¥44.9B, dividends to non-controlling interests -¥2.1B, and acquisition of interests from non-controlling shareholders -¥6.0B, resulting in substantial cash outflow for total returns and debt repayment. Cash and cash equivalents decreased by ¥40.1B from ¥301.9B at the beginning of the period to ¥261.8B at the end, driven by funding needs for share buybacks and repayment of interest-bearing debt.
Quality of earnings is generally good. Operating Income ¥112.2B had limited one-off items: impairment losses ¥0.6B and provisions for doubtful accounts ¥0.2B were minor, and the prior-year gain on loss of control of a subsidiary ¥15.7B was not repeated, so the YoY decline in operating income includes a one-off reversal. In non-operating items, financial income ¥3.6B (interest and dividends received) and financial expenses ¥5.6B (interest paid and FX losses) largely offset, and equity-method investment income ¥1.9B is small at 0.4% of sales, indicating high core-business dependence. The divergence between Ordinary Income ¥57.4B and Profit Before Tax ¥110.2B reflects the absence of the aforementioned gain on loss of control of a subsidiary and other differences in income statement items. Corporate taxes of ¥38.4B on Profit Before Tax ¥110.2B (effective tax rate 34.8%) are at normal levels. Comprehensive income was ¥74.4B, with Net Income Attributable to Owners of the Parent ¥71.9B; Other Comprehensive Income ¥2.5B (mainly financial assets measured at fair value through other comprehensive income ¥2.5B) had limited impact on Net Income, so there is no large divergence between comprehensive income and net income. Accrual quality is solid with OCF/Net Income 1.01x, but OCF/EBITDA 0.52x indicates cash conversion delay due to working capital build-up (Accounts Receivable +¥22.0B) and tax/lease payments. Overall, earnings are largely recurring and driven by core operations aside from the one-off loss of the prior-year gain; however, prolonged accounts receivable collection cycles are delaying cash realization and slightly weighing on earnings quality.
The company paid a year-end dividend of ¥23 (no interim dividend), for total annual dividends of ¥14.5B. With EPS of ¥99.71 the payout ratio was 23.1%, a conservative level that provides resilience to earnings volatility. The prior year also maintained a year-end dividend of ¥23, indicating a policy focused on dividend stability. Share buybacks of ¥44.9B were executed, and combined with dividends of ¥14.5B total shareholder returns amounted to ¥59.4B, representing 82.7% of Net Income as a total return ratio. Because total returns of ¥59.4B exceeded Free Cash Flow of ¥44.1B, funding was provided from cash on hand ¥261.8B and borrowings/repayments. Cash balances are ample, equity ratio 44.3%, net debt ¥15.9B, and financial flexibility is sufficient, so dividend sustainability is not a major concern. However, if total returns continue to exceed FCF, working capital efficiency and FCF generation will determine future shareholder return capacity.
Segment concentration risk: The Publitech Business accounts for 55.8% of revenue and the majority of operating income, making performance sensitive to external factors such as changes to the hometown tax donation system or government budget cuts. While this business's margin of 48.0% is high, exposure to regulatory and policy risk is elevated.
Deterioration in NEW-IT profitability: Operating Income fell -45.6% YoY and margin deteriorated to 14.0% (prior year 29.5%, -15.5pt). Project mix, utilization rates, and price competition have expanded short-term earnings volatility, and the pace of recovery is uncertain. If profitability improvement in this segment is delayed, it will weigh heavily on consolidated operating profitability.
Working capital and goodwill risk: Prolonged collection of accounts receivable (¥213.6B, DSO 148 days) increases working capital burden and lowers cash conversion efficiency (OCF/EBITDA 0.52x). Goodwill of ¥292.7B (63.6% of net assets) carries impairment risk; deterioration in segment performance or changes in the business environment could trigger impairment losses. Delays in working capital efficiency and earnings recovery would pressure both cash generation and capital efficiency.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 15.8% | 10.1% (2.2%–17.8%) | +5.7pt |
| Operating Margin | 21.2% | 8.1% (3.6%–16.0%) | +13.1pt |
| Net Margin | 13.6% | 5.8% (1.2%–11.6%) | +7.8pt |
ROE, Operating Margin, and Net Margin all substantially exceed industry medians, positioning the company as a high-profitability player in the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 13.9% | 10.1% (1.7%–20.2%) | +3.8pt |
Revenue growth exceeds the industry median, indicating relatively strong growth.
※ Source: Company compilation of public financial statements
Although the operating margin remains high at 21.2%, the large YoY contraction of -7.7pt is attributable to a sharp rise in SG&A ratio (+4.8pt) and margin deterioration in the NEW-IT business (-15.5pt). Publitech’s high-margin structure (48.0%) persists, and recovery in consolidated profitability depends on NEW-IT margin improvement and containment of SG&A growth. The non-recurrence of the prior-year one-off gain (gain on loss of control of a subsidiary ¥15.7B) also contributed to the YoY operating decline, so the comparison base will be easier next fiscal year.
The build-up of working capital (Accounts Receivable +¥22.0B, DSO 148 days) has reduced cash conversion efficiency (OCF/EBITDA 0.52x), indicating a significant opportunity to improve cash generation. While OCF/Net Income 1.01x generally supports profit backing, shortening the collection cycle and improving OCF/EBITDA could expand Free Cash Flow and enhance total return capacity. With cash ¥261.8B, net debt ¥15.9B, and Debt/EBITDA 0.11x, financial soundness is very high and the payout ratio of 23.1% is conservative, limiting downside risk to dividends.
Goodwill of ¥292.7B (63.6% of net assets) requires impairment monitoring; the pace of segment recovery is important. Should NEW-IT margin recovery lag, impairment risk may materialize. Conversely, if Publitech sustains high profitability and NEW-IT margin improves, ROE of 15.8% (industry median +5.7pt) could rise further and capital efficiency improve. For FY2027, cost discipline, project mix improvement, and working capital efficiency gains will be key drivers of performance recovery.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as necessary.
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