Global Communication Planning Co.,Ltd. FY2026 Q1 Earnings Report

Financial Highlights

• Net Sales: ¥389M
• Operating Income: ¥-65M
• Net Income: ¥-71M
• Earnings per Unit (EPU): ¥-28.40

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Unit Information

Distribution 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

FY2026 Q1 was weak for GC KIKAKU (4073), with a sharp revenue contraction and a swing to operating and net losses, highlighting both demand softness and cost rigidity. Revenue fell to 3.89 (100M JPY), down 27.4% YoY, while gross profit was 1.56 and SG&A totaled 1.61, driving an operating loss of -0.65. Operating margin printed at -16.7%, ordinary income was -0.71, and net income was -0.71, translating to a net margin of -18.2% and EPS of -28.40 JPY. Gross margin was 40.1%, but negative operating leverage overwhelmed the solid gross spread due to SG&A exceeding gross profit by 0.05. With non-operating income/expenses roughly neutral (0.01/-0.09), core operations drove the loss. Debt servicing capacity looks strained: interest coverage was -26.88x on the quarter, and D/E is elevated at 8.67x, while equity is thin at 2.00 versus total assets of 17.97 (equity ratio approx. 11.1%). Liquidity is adequate near term (current ratio 142.9% and cash 8.15 against current liabilities 11.13), but reliance on debt (short-term loans 6.10 and long-term loans 6.22) raises refinancing and covenant risk if losses persist. ROE calculated by DuPont is -35.5%, reflecting negative margins, low asset turnover (0.216), and high leverage (8.98x). ROIC is -7.4%, well below acceptable thresholds and indicative of value destruction in the period. Earnings quality cannot be assessed fully because operating cash flow was unreported; however, the gap between net loss and cash holdings suggests a buffer in the short run but not a long-term solution. Retained earnings are negative at -4.81, which constrains dividend capacity and highlights accumulated losses. Intangible assets are sizable at 3.75, implying amortization pressure ahead and potential impairment risk if future cash flows disappoint. YoY margin change in basis points cannot be quantified due to unreported prior-period margin details, but the revenue decline and SG&A rigidity clearly compressed operating profitability. Forward-looking, recovery hinges on revenue normalization and disciplined SG&A control to restore positive operating leverage; otherwise, deleveraging or equity reinforcement may be necessary. The combination of high leverage, thin equity, and operating loss makes a near-term focus on cost containment, project execution, and cash preservation critical.

Profitability Analysis

ROE decomposition: Net Profit Margin (-18.2%) × Asset Turnover (0.216) × Financial Leverage (8.98x) = -35.5% ROE. The dominant change driver this quarter is the net margin turning negative, as SG&A (1.61) exceeded gross profit (1.56), producing an operating margin of -16.7%. Asset turnover at 0.216 is low for an IT/services-type model and was likely dragged by the sharp revenue decline (-27.4% YoY) against a relatively stable asset base (17.97). Financial leverage at 8.98x magnifies the negative margin into a steeply negative ROE, highlighting vulnerability to even small operating swings. Business reason: top-line contraction (potential project delays or weaker order intake) met a largely fixed SG&A cost base, creating negative operating leverage; non-operating items were not a material offset. Sustainability: margin pressure should be partially reversible if revenue normalizes and SG&A is trimmed; however, leverage-induced volatility of ROE will persist until the balance sheet is de-risked. Concerning trends include SG&A surpassing gross profit, implying inadequate scale utilization, and ROIC at -7.4%, which is value-destructive. Without YoY SG&A detail, we cannot confirm if SG&A growth outpaced revenue, but the cost structure is clearly misaligned with current volume.

Growth Assessment

Revenue declined 27.4% YoY to 3.89, signaling significant demand softness or timing slippage in projects. Gross margin held at a solid 40.1%, suggesting pricing/mix was not the primary issue; rather, volume shortfall versus a fixed cost base drove losses. Operating income of -0.65 and net income of -0.71 indicate negative operating leverage from SG&A inflexibility. With non-operating items near net zero impact, profit quality hinges on core operations. Outlook depends on order recovery and conversion; cost discipline is needed to reset the breakeven level. The sizable intangible balance (3.75) implies prior investments (e.g., software, platform development) that require revenue scale to earn through amortization; without growth, amortization could keep pressuring EBIT. Absent disclosed backlog or guidance, revenue sustainability is uncertain; near-term improvement would likely come from project starts resuming and better utilization. We lack YoY margin detail and OCF visibility, so we cannot quantify how much of the topline decline is cyclical vs. structural; management commentary would be pivotal to assess the run-rate.

Financial Health

Liquidity: Current assets 15.90 vs. current liabilities 11.13 yield a current ratio of 142.9% (adequate but below the 150% benchmark). Quick ratio is the same at 142.9%, supported by cash of 8.15 and receivables of 3.74. Solvency: Total liabilities 17.35 vs. equity 2.00 produce a D/E of 8.67x (warning) and an equity ratio near 11.1% (thin capital base). Interest-bearing debt is concentrated in short-term loans 6.10 and long-term loans 6.22, indicating meaningful leverage for the asset size. Interest coverage is -26.88x, reflecting inability to cover interest from current earnings. Maturity mismatch: While short-term debt (6.10) is covered by cash (8.15) and receivables (3.74), ongoing losses could erode this buffer; refinancing risk rises if lenders tighten conditions. No off-balance sheet obligations were reported; absence of disclosure prevents further assessment. Explicit warnings: D/E > 2.0 (8.67x) and negative interest coverage warrant close monitoring; current ratio is above 1.0, so no immediate liquidity red flag, but below the >1.5 comfort threshold.

Cash Flow Quality

OCF, investing CF, and FCF were unreported, so we cannot compute OCF/Net Income or FCF coverage. Consequently, earnings quality cannot be triangulated against cash conversion this quarter. Balance sheet suggests a cash cushion of 8.15 against current liabilities of 11.13, which helps near-term liquidity, but recurring losses (-0.71 NI) are not sustainable without cash generation improvement. With accounts receivable at 3.74 and no inventory, working capital appears straightforward; no direct signs of working capital manipulation can be inferred from the limited data. Given the negative ROIC (-7.4%) and operating loss, organic funding of capex and potential dividends is unlikely until profitability recovers. Overall, cash flow quality is indeterminate due to missing OCF data, and sustainability of cash balances depends on reversing operating losses and maintaining lender support.

Dividend Sustainability

Dividend data were unreported this quarter. Retained earnings are negative (-4.81), indicating an accumulated deficit, and equity is thin (2.00), both of which constrain dividend capacity under JGAAP/Japanese corporate norms. Without FCF data, payout coverage cannot be assessed; however, the operating loss and negative ROIC suggest insufficient internal funding for distributions. Any dividend would likely require external funding or drawdown of cash, which would be imprudent given leverage and earnings pressure. Policy outlook should prioritize balance sheet repair (profit recovery and deleveraging) over payouts until sustained positive OCF and earnings are demonstrated.

Risk Assessment

Business Risks:

• Demand volatility and project timing delays causing negative operating leverage (revenue -27.4% YoY).
• Execution risk on projects/products implied by SG&A exceeding gross profit (scale underutilization).
• Intangible asset amortization and potential impairment risk if cash flows remain weak (intangibles 3.75).
• Talent and wage inflation pressure in IT/services potentially elevating fixed costs.
• Customer concentration risk (not disclosed, but common in smaller IT vendors).

Financial Risks:

• High leverage (D/E 8.67x) with thin equity (equity ratio ~11.1%).
• Negative interest coverage (-26.88x) and reliance on debt (ST loans 6.10; LT loans 6.22).
• Refinancing and covenant risks if losses persist and lenders tighten terms.
• Liquidity buffer dependent on cash 8.15; ongoing losses could erode cash.
• Potential limitations on raising equity due to low market capitalization and accumulated deficit (-4.81).

Key Concerns:

• Sustained operating losses (-0.65 OI; -0.71 NI) amid revenue contraction.
• ROIC at -7.4% and ROE at -35.5% indicate value destruction.
• SG&A rigidity relative to current scale; breakeven may be too high.
• Lack of OCF disclosure limits visibility on cash generation and earnings quality.
• Tax benefit (-0.04) amid losses may not recur, adding volatility to bottom line.

Investment Implications

Key Takeaways:

• Sharp revenue decline (-27.4% YoY) led to operating and net losses despite 40.1% gross margin.
• Cost structure misaligned with current volume; SG&A > gross profit.
• Leverage is high (D/E 8.67x) with negative interest coverage, magnifying downside risk.
• Liquidity is adequate near term (current ratio 142.9%; cash 8.15), but sustainability hinges on restoring profitability.
• ROE (-35.5%) and ROIC (-7.4%) underscore the urgency of margin recovery and deleveraging.

Metrics to Watch:

• Order intake/backlog and quarterly revenue trajectory to assess scale recovery.
• Operating margin and SG&A to sales ratio to gauge operating leverage effects.
• Operating cash flow and FCF to confirm earnings quality and debt service capacity.
• Debt levels (short-term vs long-term) and any covenant disclosures.
• Intangible asset amortization/impairment and any write-downs.

Relative Positioning: Relative to small-cap Japanese IT/services peers, GC KIKAKU currently screens weaker on profitability (negative OI/NI), leverage (D/E 8.67x above typical peer ranges), and capital efficiency (ROIC -7.4%), while near-term liquidity is acceptable but less comfortable than peers with current ratios >150% and positive OCF.

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
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis