| Indicator | This Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥932.9B | ¥872.4B | +6.9% |
| Operating Income | ¥61.1B | ¥43.4B | +40.7% |
| Ordinary Income | ¥73.6B | ¥34.4B | +113.9% |
| Net Income | ¥8.8B | ¥-18.9B | +291.3% |
| ROE | 11.0% | -27.6% | - |
For the fiscal year ended February 2026, Revenue was ¥932.9B (YoY +¥60.5B +6.9%), Operating Income was ¥61.1B (YoY +¥17.7B +40.7%), Ordinary Income was ¥73.6B (YoY +¥39.2B +113.9%), and Net Income attributable to owners of the parent was ¥27.9B (YoY +¥46.7B turned to profit). Revenue increased for the second consecutive year, driven mainly by solid growth in the Domestic Business (+8.7%). Operating Income rose substantially due to an improvement in gross margin (+74bp) and containment of SG&A. Ordinary Income more than doubled year-on-year, supported by ¥18.2B of foreign exchange gains in non-operating income. Although Net Income turned from a loss of ¥18.9B in the prior year to a profit, Special Losses of ¥23.3B including impairment losses of ¥20.2B weighed on earnings, limiting the magnitude of the profit increase. The Operating Margin improved to 6.6% from 5.0% a year earlier (+1.6pt), with domestic profitability gains driving performance.
Revenue rose 6.9% YoY to ¥932.9B; the Domestic Business accounted for 81% of revenue and grew +8.7%, ASEAN continued scale expansion at +15.5%, while the China Business declined sharply by -41.0%. Domestically, expansion from new store openings and improved operating rates at existing stores contributed, and in ASEAN network expansion drove higher sales. China’s withdrawals and downsizing due to deteriorating store profitability suppressed sales. Gross margin improved to 14.1% from 13.4% (+74bp), aided by domestic price optimization and mix improvement. SG&A was contained at ¥70.6B (7.6% of sales) despite revenue growth, realizing operating leverage. As a result, Operating Income rose 40.7% YoY to ¥61.1B and Operating Margin improved 1.6pt to 6.6%. In non-operating items, ¥18.2B of forex gains accounted for the bulk of non-operating income of ¥24.6B, outweighing non-operating expenses of ¥12.2B including interest expense of ¥10.1B, pushing Ordinary Income up to ¥73.6B (+113.9%). Special Losses totaled ¥23.3B, primarily impairment losses of ¥20.2B (Domestic ¥3.4B, ASEAN ¥6.4B, China ¥10.4B). Impairments related to the rationalization of unprofitable stores, with a review of the store portfolio underway especially in China. The effective tax rate remained high at 46.9%, producing tax expense of ¥24.0B on pre-tax profit of ¥51.1B, resulting in Net Income of ¥8.8B (prior year -¥18.9B) — a return to profit but limited in magnitude. Overall, strengthened operating profitability domestically and favorable non-operating forex effects led to this revenue and profit increase.
The Domestic Business reported Revenue of ¥755.2B (YoY +8.7%), Operating Income of ¥70.2B (+13.0%), and a margin of 9.3%, maintaining stable profitability as the core segment. Scale expansion from new store openings and improved utilization at existing stores drove revenue growth, and operating leverage improved margins. The ASEAN Business continued scaling with Revenue of ¥152.2B (+15.5%) but Operating Income fell sharply to ¥4.7B (-60.9%), lowering the margin to 3.1%. The decline was driven by labor and rent inflation, local currency depreciation impacts, and recording of impairment losses of ¥6.4B. By country, Malaysia was the largest market with Revenue of ¥57.8B, while Thailand, the Philippines, Indonesia, and Vietnam also faced common cost pressures. The China Business contracted significantly to Revenue of ¥28.5B (-41.0%) and posted an Operating Loss of ¥13.7B (the deficit narrowed -55.2% YoY) with persistent structural losses. An impairment of ¥10.4B was recorded as part of a comprehensive review and selective withdrawal of unprofitable stores. Overall, the Domestic Business generates most corporate profits, while overseas operations are a mix of growth investment stage (ASEAN) and restructuring/contraction stage (China), contributing to earnings volatility.
[Profitability] Operating Margin 6.6% (prior 5.0%, +1.6pt), Net Margin 3.0% (prior -2.1%, turned positive), Gross Margin 14.1% (prior 13.4%, +74bp), ROE 11.0% (prior -24.4%, large improvement due to return to profitability), ROA (on Ordinary Income basis) 12.5% (prior 6.5%, +6.0pt). The ROE improvement is mainly due to the turnaround in Net Income, but the capital structure is reliant on high financial leverage with Financial Leverage 8.01x (Total Assets ¥642.3B / Net Assets ¥80.1B). Net Margin is sensitive to forex gains and special losses; therefore improvement in Operating Margin (core earning power) is an important indicator. [Cash Quality] Operating Cash Flow (OCF) ¥116.0B (OCF/Net Income = 13.2x) is ample, but OCF/EBITDA = 0.67x (EBITDA = Operating Income ¥61.1B + Depreciation ¥110.9B = ¥172.0B) indicates somewhat weak cash conversion efficiency. Inventory increased by ¥5.6B and working capital growth consumed some cash. Free Cash Flow was -¥32.6B (OCF ¥116.0B - Capex ¥139.1B) due to front-loaded investment, and Capex/Depreciation = 1.25x indicates continued aggressive growth investment. [Investment Efficiency] Total Asset Turnover 1.45x (Revenue ¥932.9B / Total Assets ¥642.3B), Inventory Days 4.4 days (Inventory ¥11.3B / Daily Sales ¥2.56B) — inventory remains light but increased by +61% YoY. No disclosure on backlog. [Financial Soundness] Equity Ratio 12.5% (prior 12.3%, slight increase), Current Ratio 45.1% (Current Assets ¥176.0B / Current Liabilities ¥390.1B), D/E Ratio 7.01x (Interest-bearing Debt ¥562.4B / Net Assets ¥80.1B), Debt/EBITDA 3.27x (Interest-bearing Debt ¥562.4B / EBITDA ¥172.0B). The Current Ratio is at a concerning level, with a mismatch between short-term borrowings ¥175.0B and cash ¥78.2B, highlighting short-term liquidity risk.
OCF was ¥116.0B (prior ¥123.5B, -6.1%) and remained high, though working capital increases and higher tax payments offset part of it. OCF before working capital changes was ¥143.7B, with inventory increase of ¥5.6B and corporate tax payments of ¥18.0B as main deductions. OCF/Net Income = 13.2x indicates strong cash generation, but OCF/EBITDA = 0.67x shows cash conversion below benchmark. Depreciation ¥110.9B and non-cash impairment losses ¥20.2B supported OCF, but sustainable cash generation depends on operating profit growth. Investing Cash Flow was -¥148.6B, primarily Capex of ¥139.1B for new store openings and renovations. Capex/Depreciation = 1.25x shows investment exceeding depreciation, leading to Free Cash Flow of -¥32.6B. Financing Cash Flow was +¥47.2B, mainly from long-term borrowings of ¥66.6B and net increase in short-term borrowings of ¥51.8B, while repaying long-term borrowings ¥37.8B, lease liabilities ¥27.6B, and dividend payments ¥2.0B. Overall, negative FCF from growth investment is being financed by borrowings; cash and deposits rose to ¥78.2B (prior ¥61.7B, +26.8%), but increased reliance on short-term borrowings raises liquidity risk.
The core earnings driver is the Domestic Business Operating Income of ¥70.2B, indicating recurring earning power. One-off items included Special Losses of ¥23.3B (Impairment Losses ¥20.2B, store closure losses ¥1.5B, etc.), which reduced the reproducibility of Net Income. Impairments relate to restructuring of unprofitable stores in China and ASEAN, and may continue intermittently while portfolio reviews proceed. Of Operating Income, non-operating income ¥24.6B included ¥18.2B of forex gains (74% of non-operating income), equivalent to about 2.0% of Revenue and roughly 29.8% of Operating Income, indicating high sensitivity to exchange rates. The prior year recorded forex losses, so swings in non-operating items materially affect Ordinary Income. Among non-operating expenses of ¥12.2B, interest expense of ¥10.1B is a persistent profit headwind, and interest burden is rising with increased interest-bearing debt. The accrual ratio (Net Income - OCF) / Total Assets = -16.7% is negative, indicating cash-led earnings with ample OCF relative to reported profit. However, non-cash charges such as impairments are significant, and OCF/EBITDA = 0.67x shows subpar cash conversion. The effective tax rate remains elevated at 46.9% (tax expense ¥24.0B / Pre-tax Income ¥51.1B), suggesting room for Net Margin improvement through tax optimization. In sum, domestic recurring profitability is solid, but forex, special losses, and high taxes destabilize earnings quality; assessing core profit excluding these effects is important.
Full-year guidance remains unchanged: Revenue ¥980.0B (YoY +5.0%), Operating Income ¥80.0B (+30.8%), Ordinary Income ¥63.0B (-14.4%), Net Income attributable to owners of the parent ¥34.5B (+23.6%). Progress against first-half results is: Revenue 95.2% (slightly behind pace), Operating Income 76.4% (below standard pace), Ordinary Income 116.8% (ahead due to forex gains), Net Income 80.9% (slightly behind pace). The shortfall in Operating Income is due to overseas profit declines and impairment burdens, requiring significant improvement in the second half. Ordinary Income progress is strong owing to large forex contribution, but the full-year forecast assumes a reduced conversion from Operating Income to Ordinary Income (anticipating reversal of non-operating tailwinds), reflecting possible changes to forex assumptions and rising interest burden. Achieving full-year Net Income will require containment of special losses in H2 and normalization of tax expenses. Overall, maintaining domestic operating rates, reducing overseas losses, and cost optimization are keys to meeting forecasts, with forex and one-off expenses being major sources of volatility.
The year-end dividend is ¥15 (interim dividend ¥0), for an annual dividend of ¥15 and a Payout Ratio of 10.6% (Total Dividends ¥2.0B / Net Income ¥8.8B), set at a low level. Prior year dividend was ¥5 with a negative payout due to the loss; this year dividends increased with return to profitability but remain restrained. Free Cash Flow is -¥32.6B, so dividend funding was effectively covered by OCF of ¥116.0B and borrowings. The company prioritizes growth investment and continues aggressive investment (Capex/Depreciation = 1.25x), maintaining conservative dividend policy relative to profit. No share buybacks were executed; total return consists only of dividends. The Payout Ratio of 10.6% is a sustainable level, but if FCF remains negative, preserving dividends will require stable OCF and working capital optimization. The balance is tilted toward investment, and medium-term FCF positivity is a prerequisite for expanding shareholder returns.
Liquidity Risk (Short-term Funding): Current Ratio 45.1% — cash ¥78.2B vs. short-term borrowings ¥175.0B and Current Liabilities ¥390.1B create pressure on short-term liquidity. Cash/Short-term Debt ratio 0.20x and D/E Ratio 7.01x indicate high leverage and reliance on short-term debt, exposing the company to rollover risk and higher interest payments in a rising rate environment (interest expense ¥10.1B). Quantitative impact: +1% in interest rates would increase interest expense by ¥5.6B, equivalent to about 9% of Operating Income.
Earnings Volatility from Overseas Operations: China posts an Operating Loss of ¥13.7B and structural deficits persist; ASEAN Operating Income ¥4.7B (-60.9% YoY) has declined sharply. Of impairment losses ¥20.2B, ¥16.8B occurred overseas, driven by deteriorating store profitability and local currency depreciation. Overseas sales ratio is 19.3% but contribution to Operating Income is negative, dragging down consolidated margins. Quantitative impact: China’s loss of ¥13.7B corresponds to 22% of consolidated Operating Income.
Dependence on Forex and One-off Items: Forex gains of ¥18.2B accounted for 24.7% of Ordinary Income ¥73.6B, showing high sensitivity to exchange rates. The prior year had forex losses, implying ±¥20B swings in non-operating results. Special Losses ¥23.3B (Impairments ¥20.2B etc.) could recur while portfolio reviews continue, reducing the reproducibility of Net Income. Quantitative impact: Core earnings excluding forex and special losses are roughly Operating Income ¥61.1B, highlighting a large gap versus reported Net Income ¥8.8B.
[Industry Position] (Reference data — company analysis) The company is classified in the Information & Communications sector, but in practice operates amusement and leisure facility operations, limiting direct comparability to industry benchmarks. Compared with the Information & Communications industry median (FY2025) as a reference: Operating Margin 6.6% underperforms the median 8.1%; Net Margin 3.0% is below median 5.8%. Equity Ratio 12.5% is far below the median 59.2%, indicating pronounced high leverage (company D/E Ratio 7.01x vs. industry median financial leverage 1.64x). Current Ratio 45.1% is well below the industry median 2.44x, placing short-term liquidity risk high within the industry. Conversely, Total Asset Turnover 1.45x exceeds the industry median 0.89x, showing relatively good asset efficiency. Capex/Depreciation ratio 1.25x greatly exceeds the industry median 0.42x, indicating a clear growth investment posture. Payout Ratio 10.6% is well below industry median 31%, showing restrained shareholder returns. Overall, the model is high-leverage, high-turnover, low-return — growth-investment oriented — and improving relative standing within the industry hinges on liquidity management and improving overseas profitability.
Improvements in domestic operating profitability and realization of operating leverage lifted Operating Margin to 6.6%, with Domestic Revenue growth of +8.7% driving consolidated results. Maintaining existing store utilization domestically and capturing benefits from new store openings will be a basis for stability. Overseas operations remain mixed between growth investment (ASEAN) and restructuring (China), and earnings volatility stems primarily from this mix. Conditions for medium-term margin improvement include narrowing China losses and completion of impairments, and recovery of ASEAN profitability through labor cost and forex measures. On the financial side, Current Ratio 45.1% and Cash/Short-term Debt 0.20x indicate tight short-term liquidity, making rollover risk and interest rate resilience focal points. Despite negative FCF driven by Capex/Depreciation = 1.25x, OCF generation of ¥116.0B is robust and there is scope for FCF improvement via working capital optimization and better investment efficiency. Forex gains of ¥18.2B account for roughly 25% of Ordinary Income, so dependence on exchange rates is significant; a hedging policy and stabilization of non-operating items would improve earnings quality. The Payout Ratio of 10.6% is conservative but reasonable under an investment-prioritized strategy; medium-term FCF positivity is the condition for expanded returns.
This report is an AI-generated financial analysis document automatically produced from XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting a professional advisor.