| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥311.0B | ¥309.3B | +0.6% |
| Operating Income / Operating Profit | ¥7.3B | ¥12.8B | -42.9% |
| Ordinary Income | ¥6.8B | ¥12.8B | -47.2% |
| Net Income / Net Profit | ¥2.8B | ¥6.7B | -58.7% |
| ROE | 1.5% | 3.5% | - |
For the six months ended February 2026 (Q2 cumulative), revenue was ¥311.0B (YoY +¥1.8B +0.6%), Operating Income was ¥7.3B (YoY -¥5.5B -42.9%), Ordinary Income was ¥6.8B (YoY -¥6.0B -47.2%), and Net Income was ¥2.8B (YoY -¥3.9B -58.7%). While revenue edged up slightly, the company recorded double-digit declines in profits and a marked deterioration in profitability. Gross profit margin was 20.1%, down 0.3pt year-on-year; SG&A ratio rose to 17.7%, up 1.5pt year-on-year; and operating margin fell to 2.3% (down 1.8pt from 4.1% a year earlier). By segment, the Outsourcing Business swung to an operating loss of ¥1.9B (prior year operating profit ¥3.7B), significantly dragging down consolidated profits. Conversely, the Wholesale Business supported results with operating income of ¥4.1B (+11.9%). The declines in Ordinary Income and Net Income exceeded the deterioration at the operating level, pressured by higher interest expense (¥0.5B, prior year ¥0.3B), goodwill amortization of ¥4.0B, and an elevated effective tax rate of 58.7%. On cash flow, Operating Cash Flow (OCF) was -¥12.4B (prior year +¥8.7B), a substantial outflow driven mainly by decreases in advances received -¥11.1B, increases in inventories -¥3.7B, and increases in accounts receivable -¥2.6B. Together with Investing Cash Flow of -¥13.1B (of which capital expenditures -¥10.6B), Free Cash Flow was -¥25.5B, and the company supplemented this by raising short-term borrowings of +¥22.5B in Financing Cash Flow.
[Revenue] Revenue of ¥311.0B (+0.6%) was only slightly higher year-on-year. By segment, the Outsourcing Business maintained the largest sales scale at ¥129.5B (+7.2%), recording an increase of ¥8.7B YoY. The Wholesale Business was largely flat at ¥80.7B (+0.9%), and the Staffing Business was slightly down at ¥44.0B (-0.5%). Meanwhile, the E-commerce & TC Support Business posted a significant decline to ¥42.8B (-15.9%), a decrease of ¥8.1B YoY that restrained overall company growth. Other segments grew modestly to ¥20.6B (+11.7%). Gross profit was ¥62.4B with a gross margin of 20.1% (prior year 20.4%, -0.3pt), while SG&A rose to ¥55.1B (prior year ¥50.3B), an increase of ¥4.8B. The SG&A ratio rose to 17.7% (prior year 16.3%, +1.5pt), and cost increases outpaced revenue growth, compressing profitability.
[Profitability] Operating Income was ¥7.3B (-42.9%), a substantial decline. Operating margin deteriorated to 2.3% (prior year 4.1%, -1.8pt), highlighting weakened profitability. By segment operating results, the Outsourcing Business swung to an operating loss of ¥1.9B (prior year operating income ¥3.7B), with a margin deteriorating to -1.5% (prior year +3.0%). The Staffing Business improved to operating income of ¥2.3B (+34.3%), with margin rising to 5.2% (prior year 3.8%). The E-commerce & TC Support Business posted operating income of ¥2.8B (-22.0%), margin 6.5% (prior year 7.1%), sustaining a certain level of margin despite lower sales. The Wholesale Business delivered operating income of ¥4.1B (+11.9%), margin 5.1% (prior year 4.6%), contributing materially to support consolidated results (largest contributor of ¥4.1B). Ordinary Income was ¥6.8B (-47.2%), falling more than Operating Income. Non-operating income fell to ¥0.3B (prior year ¥0.7B), while non-operating expenses rose to ¥0.9B (prior year ¥0.7B). Interest expense increased to ¥0.5B (prior year ¥0.3B) as short-term borrowings expanded. Extraordinary income of ¥0.9B (gain on sale of investment securities) supported pre-tax income, but extraordinary losses of ¥0.1B (including ¥0.2B impairment on investment securities) were recorded, resulting in Pre-tax Income of ¥6.7B (prior year ¥13.5B). Income taxes of ¥3.9B were recorded, leaving an effective tax rate at 58.7%, and after deducting non-controlling interests of ¥0.9B, Net Income attributable to owners of the parent declined to ¥1.8B (-68.0%). In summary, despite marginal revenue growth, the swing to an Outsourcing loss and higher SG&A led to a significant decline in profits — a revenue-up, profit-down result.
The Outsourcing Business secured revenue of ¥129.5B (+7.2%) but swung to an operating loss of ¥1.9B (prior year operating income ¥3.7B). The margin worsened to -1.5% (prior year +3.0%), representing a ¥5.6B decline in contribution to consolidated operating profit — the largest factor in the profit downturn. The Staffing Business recorded revenue of ¥44.0B (-0.5%) but improved operating income to ¥2.3B (+34.3%), with margin improving to 5.2% (prior year 3.8%, +1.4pt). The E-commerce & TC Support Business saw revenue decline to ¥42.8B (-15.9%) and operating income of ¥2.8B (-22.0%), with margin 6.5% (prior year 7.1%), showing reduced sales and profits. The Wholesale Business posted revenue ¥80.7B (+0.9%) and operating income ¥4.1B (+11.9%), maintaining growth in both sales and profits, with margin improving to 5.1% (prior year 4.6%, +0.5pt). Its contribution to consolidated operating profit was the largest (¥4.1B), offsetting the Outsourcing loss. Other segments recorded revenue ¥20.6B (+11.7%) and operating income ¥0.1B (-34.8%), remaining small but profitable. In segment composition, Outsourcing accounts for 41.6% of revenue but is loss-making, while Wholesale accounts for 25.9% of revenue and is the largest positive contributor to profit, indicating significant room to improve business mix.
[Profitability] Operating margin 2.3% (prior year 4.1%, -1.8pt), Net margin 0.9% (prior year 1.8%, -0.9pt) — profitability deteriorated across the income statement. ROE 1.5% (prior year 3.3%) is well below the company’s historical level. Gross profit margin 20.1% (prior year 20.4%) declined slightly, but the rise in SG&A ratio to 17.7% (prior year 16.3%) compressed operating margin. [Cash Quality] OCF was -¥12.4B, substantially below Net Income of ¥2.8B (OCF/Net Income = -4.43x), indicating poor cash realization of earnings. EBITDA was ¥11.6B (Operating Income ¥7.3B + Depreciation ¥4.3B); OCF/EBITDA = -1.07x, signaling weak cash conversion efficiency. The increase in working capital (advances received -¥11.1B, inventories -¥3.7B, accounts receivable -¥2.6B) was the main driver, and Days Sales Outstanding was prolonged at 133 days (Accounts receivable ¥113.2B / Revenue ¥311.0B × 365 days). [Investment Efficiency] Total asset turnover was low at 0.75x (Revenue ¥311.0B / Total assets ¥417.4B). Tangible fixed asset turnover was relatively high at 5.95x, though goodwill of ¥57.97B and intangible assets of ¥69.84B weigh on overall asset efficiency. Goodwill / Equity was somewhat high at 30.9%. [Financial Soundness] Equity Ratio was 45.0% (prior year 46.4%), a moderate level. Current ratio was 183% (Current assets ¥264.5B / Current liabilities ¥144.5B) and Quick ratio 177%, indicating solid liquidity. Interest-bearing debt totaled ¥108.9B (short-term borrowings ¥23.5B + long-term borrowings ¥70.1B + current portion of long-term borrowings ¥13.7B + lease liabilities ¥2.0B), and Debt/EBITDA was high at 9.37x, warranting caution on leverage. Cash and deposits of ¥121.9B versus short-term borrowings of ¥23.5B yields Cash/Short-term Debt ratio of 5.19x, indicating ample immediate liquidity.
OCF was -¥12.4B (prior year +¥8.7B), a significant cash outflow. Adjusting from Pre-tax Income of ¥6.7B, add-backs included Depreciation +¥4.3B, Goodwill amortization +¥4.0B, Interest income -¥0.1B, Interest expense +¥0.5B, and Gain on sale of investment securities -¥0.9B, producing a subtotal for OCF before working capital changes of -¥5.6B. Working capital movements pressured cash: increase in accounts receivable -¥2.6B, increase in inventories -¥3.7B, decrease in advances received -¥11.1B, and corporate tax payments -¥6.4B resulted in a large negative OCF. Investing Cash Flow was -¥13.1B, comprising purchase of tangible fixed assets -¥10.6B, purchase of intangible assets -¥2.3B, proceeds from sale of investment securities +¥0.5B, and net decrease in lease deposits -¥0.1B. Capital expenditures materially exceeded depreciation (¥4.3B), indicating ongoing growth investment. Free Cash Flow was -¥25.5B (OCF -¥12.4B + Investing CF -¥13.1B). Financing Cash Flow was +¥23.3B, primarily reflecting net increase in short-term borrowings +¥22.5B, long-term borrowings raised +¥9.8B, long-term debt repayments -¥6.5B, dividend payments -¥3.4B, dividends to non-controlling interests -¥0.4B, and proceeds from sale-and-leaseback transactions +¥1.5B. Cash and cash equivalents at period-end were ¥117.1B (opening ¥116.8B), roughly flat, indicating the company is covering declining cash generation with external financing.
Of Ordinary Income ¥6.8B, Operating Income ¥7.3B is the main component, so core operating profitability can be evaluated at the operating level. In non-operating items, interest income ¥0.1B and dividend income ¥0.0B sum to ¥0.1B of recurring financial income, while interest expense ¥0.5B is a recurring cost. Including other non-operating income ¥0.1B and other non-operating expenses ¥0.4B, non-operating activities produced a net loss of -¥0.5B. Extraordinary income ¥0.9B (gain on sale of investment securities) is a one-off and not part of recurring earning power; extraordinary loss ¥0.1B (including impairment on investment securities ¥0.2B) is also one-off. Comprehensive income was ¥3.0B, ¥0.2B higher than Net Income ¥2.8B, driven mainly by foreign currency translation adjustments +¥0.2B; changes in valuation of securities were negligible at -¥0.0B. Comprehensive income attributable to owners of the parent was ¥2.0B, ¥0.2B above Net Income attributable to owners of the parent of ¥1.8B, so other comprehensive income had a limited effect. From an accrual perspective, OCF -¥12.4B is far below Net Income ¥2.8B (difference -¥15.2B), and working capital increases have degraded earnings quality. The decrease in advances received -¥11.1B suggests either accelerated revenue recognition or project delays, inventory increase -¥3.7B indicates inventory buildup risk, and accounts receivable increase -¥2.6B reflects longer collection terms — all pointing to challenges in converting earnings to cash.
The full-year forecast is unchanged: Revenue ¥662.8B (+4.2%), Operating Income ¥28.0B (+12.2%), Ordinary Income ¥28.1B (+12.2%), and Net Income ¥13.0B. Progress through Q2 as a percentage of full-year forecast: Revenue 46.9% (¥311.0B / ¥662.8B), Operating Income 26.0% (¥7.3B / ¥28.0B), Ordinary Income 24.0% (¥6.8B / ¥28.1B), Net Income 21.5% (¥2.8B / ¥13.0B). Revenue is roughly in line with typical mid-year progress (~50%), but profits lag materially behind typical cadence, reflecting a second-half weighted plan. To meet full-year guidance, the company must achieve Operating Income of ¥20.7B in H2 (Full-year ¥28.0B - H1 ¥7.3B), Ordinary Income of ¥21.3B in H2 (Full-year ¥28.1B - H1 ¥6.8B), and Net Income of ¥10.2B in H2 (Full-year ¥13.0B - H1 ¥2.8B). This implies large improvements H2 vs H1: Operating Income +2.84x, Ordinary Income +3.13x, Net Income +3.64x. Key to H2 achievement are profit recovery in the Outsourcing Business, revenue recovery in E-commerce & TC Support, and normalization of working capital to improve OCF. No forecast revisions have been made; the company maintains a turnaround scenario for H2.
An interim dividend of ¥18 per share was paid. Against Q2 cumulative EPS of ¥10.13, the payout ratio is high at 177.7%. With Free Cash Flow of -¥25.5B and dividend payouts of ¥3.4B, FCF coverage is -7.50x, indicating dividends were not covered by cash generated from operating and investing activities in the period. Cash and deposits of ¥121.9B provide sufficient short-term liquidity for payments, but sustainability depends on improved cash generation in H2. Full-year dividend forecast is ¥19.5 (interim ¥18 + year-end ¥1.5), implying a full-year payout ratio of 26.9% against forecast EPS ¥72.58, which is a standard level. However, achieving full-year EPS requires significant profit improvement in H2, and cash generation upon forecast realization will be key to dividend sustainability. No share buybacks were implemented; shareholder returns consist solely of dividends.
Profitability deterioration risk in the Outsourcing Business: Although the Outsourcing Business is the largest segment at revenue ¥129.5B (41.6% of consolidated revenue), it swung to an operating loss of ¥1.9B (prior year operating income ¥3.7B), with margin deteriorating to -1.5%. A YoY contribution decline of -¥5.6B was the main reason for consolidated profit decline. Continued pressure from rising labor costs and deteriorating project margins could make achieving full-year targets and restoring profitability difficult. Monitoring the firm’s ability to respond to industry-specific cost inflation (wage increases, higher social insurance burdens) is critical.
Liquidity risk from working capital expansion: OCF -¥12.4B was mainly caused by decrease in advances received -¥11.1B, inventory increase -¥3.7B, and accounts receivable increase -¥2.6B. DSO is prolonged at 133 days and inventories surged 90% YoY to ¥9.3B. Continued project delays or extended collection periods could further bind working capital and increase reliance on short-term borrowings. With high leverage (Debt/EBITDA 9.37x), rising financing costs could further pressure profitability.
Execution risk on a second-half weighted plan: With expected full-year Operating Income ¥28.0B and H1 results of ¥7.3B (progress 26.0%), the company must deliver a H2 increase of +2.84x in Operating Income, +3.13x in Ordinary Income, and +3.64x in Net Income. This assumes simultaneous realization of Outsourcing turnaround, E-commerce & TC Support stabilization, and SG&A efficiency. Failure to deliver would risk downward revisions to the full-year forecast. Improvement in OCF in H2 is also a precondition for dividend sustainability; delays in working capital normalization would weaken financial flexibility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 2.3% | 14.0% (3.8%–18.5%) | -11.6pt |
| Net Margin | 0.9% | 9.2% (1.1%–14.0%) | -8.3pt |
Profitability is well below industry medians, with an 11.6pt deficit in Operating Margin and 8.3pt in Net Margin. The swing to Outsourcing losses and higher SG&A ratio are primary causes, indicating considerable scope for profit improvement within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 0.6% | 21.0% (15.5%–26.8%) | -20.4pt |
Revenue growth at 0.6% is far below the industry median of 21.0%, a 20.4pt deficit. The decline in E-commerce & TC Support (-15.9%) has suppressed overall growth, and restoring growth momentum is a priority.
※Source: Company compilation based on public financial statements
Priority is restoring profitability in the Outsourcing Business: Contribution to consolidated operating profit fell by ¥5.6B YoY and was the main driver of consolidated profit decline. Because Outsourcing represents 41.6% of revenue, returning its margin to prior-year levels (+3.0%) is a precondition for meeting full-year forecasts. Progress on improving project margins, utilization rates, and cost control should be monitored on a quarterly basis.
Normalize working capital and restore cash generation: OCF -¥12.4B led to FCF -¥25.5B, which was largely financed by net short-term borrowings +¥22.5B. The main drivers—decrease in advances received -¥11.1B, inventory increase -¥3.7B, and accounts receivable increase -¥2.6B—require project progress normalization, inventory turnover improvement, and shortened collection terms. With Debt/EBITDA at 9.37x, improving cash generation is essential to maintain financial flexibility.
Feasibility of the second-half weighted plan and revision risk: With full-year Operating Income guidance of ¥28.0B and H1 progress of 26.0%, H2 must deliver large multipliers (Operating Income +2.84x, Ordinary Income +3.13x, Net Income +3.64x). Achieving this requires Outsourcing to return to profitability, E-commerce & TC Support to bottom out, and working capital to improve concurrently — an execution risk. If Q3 progress lags, downward revision of full-year forecasts and reconsideration of dividend policy are possible.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.