| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥613.9B | ¥502.8B | +22.1% |
| Operating Income | ¥49.1B | ¥36.1B | +36.0% |
| Ordinary Income | ¥48.0B | ¥36.9B | +30.0% |
| Net Income | ¥18.6B | ¥17.2B | +8.1% |
| ROE | 9.6% | 10.7% | - |
The FY2026 full-year results recorded Revenue of ¥613.93B (YoY +¥111.18B +22.1%), Operating Income of ¥49.14B (YoY +¥13.00B +36.0%), Ordinary Income of ¥48.01B (YoY +¥11.07B +30.0%), and Net Income attributable to owners of parent of ¥40.75B (YoY +¥18.24B +81.0%), delivering significant top-line and bottom-line growth. The primary drivers of revenue expansion were solid growth in the Creative Business (Japan) (+12.2%), M&A contributions in the CRES Business (+7,544.2%), and margin expansion in the Medical Business (+9.0%). Operating margin improved to 8.0% from 7.2% a year ago (+0.8pt), indicating realization of operating leverage. Net income was boosted by special gains of ¥6.82B including government subsidies of ¥6.19B, resulting in an +81.0% increase; however, Operating Cash Flow (OCF) of ¥20.89B remained low relative to net income due to working capital pressure from Accounts Receivable increase (+¥53.36B), with cash conversion of 0.51x versus net income, suggesting caution on earnings quality.
[Revenue] Revenue of ¥613.93B (+22.1%) was primarily driven by the core Creative Business (Japan) at ¥396.10B (+12.2%), maintaining double-digit growth, and the CRES Business emerging as a new revenue pillar at ¥62.77B (+7,544.2%) following an additional acquisition of T&W Office Co., Ltd. The Medical Business continued stable growth at ¥57.87B (+9.0%) and supported group profitability as a high-margin business with an Operating Income margin of 24.8%. Conversely, Creative Business (Korea) remained marginally up at ¥31.06B (+0.9%) but saw profitability deterioration with an operating loss of ¥0.39B (versus ¥0.11B loss prior year). The Accounting & Legal Business recorded revenue of ¥23.48B (-4.2%) and Operating Income of ¥1.00B (-14.2%), reflecting declines. By geography, Japan accounted for ¥582.31B (composition 94.8%), Korea ¥31.06B (5.1%), China ¥0.40B, and the US ¥0.17B, indicating limited overseas exposure.
[Profitability] Gross profit was ¥223.27B (gross margin 36.4%), down 0.5pt from 36.9% a year ago, but Selling, General and Administrative expenses (SG&A) were restrained at ¥174.12B (SG&A ratio 28.4%, prior year 29.7%), resulting in Operating Income of ¥49.14B (Operating margin 8.0%), a +0.8pt improvement YoY. Non-operating income was ¥1.54B (interest income ¥0.50B, foreign exchange gains ¥0.29B, etc.), and non-operating expenses were ¥2.67B (interest expense ¥1.67B, equity-method investment losses ¥1.01B, etc.), yielding Ordinary Income of ¥48.01B (+30.0%). Special gains of ¥6.82B (government subsidies ¥6.19B, gain on sale of investment securities ¥0.81B) and special losses of ¥1.47B (impairment losses ¥0.74B, valuation losses on investment securities ¥0.40B, inventory valuation losses ¥0.90B, etc.) were recorded, resulting in Profit Before Tax of ¥53.37B (+50.4%). Income taxes ¥11.77B (effective tax rate 22.1%) and non-controlling interests ¥0.85B were deducted, producing Net Income attributable to owners of parent of ¥40.75B (+81.0%). The divergence between Ordinary Income and Net Income is attributable to net special gains of ¥5.35B and a lower effective tax rate; therefore, core operating strength should be evaluated on an Ordinary Income basis. Comprehensive income was ¥41.88B, with a ¥1.13B difference from net income due to Other Comprehensive Income items (foreign currency translation adjustment -¥0.15B, valuation differences on available-for-sale securities ¥0.29B, etc.). In conclusion, the company delivered revenue and profit growth with operating leverage, but attention is required due to special gains and working capital-driven delays in cash generation.
The Creative Business (Japan) is the core segment with Revenue ¥396.10B (+12.2%), Operating Income ¥28.91B (+14.1%), and an Operating margin of 7.3%, generating 58.8% of group Operating Income; demand from video, gaming, and web agencies remained robust. The Medical Business posted Revenue ¥57.87B (+9.0%), Operating Income ¥14.38B (+32.7%), and Operating margin 24.8%, delivering significant profit contribution at 29.3% relative to its scale. The CRES Business recorded Revenue ¥62.77B (+7,544.2%), Operating Income ¥6.44B (+1,367.3%), and Operating margin 10.3%, with material initial contributions from business succession and M&A advisory deals. Goodwill in this segment increased by ¥4.77B to a balance of ¥6.54B, remaining at a healthy level of 0.12x versus EBITDA. The Accounting & Legal Business had Revenue ¥23.48B (-4.2%), Operating Income ¥1.00B (-14.2%), and Operating margin 4.3%, reflecting market contraction. Creative Business (Korea) posted Revenue ¥31.06B (+0.9%) and an operating loss of ¥0.39B (worsened from a ¥0.11B loss prior year). Other segments (IT, Fashion, etc.) recorded Revenue ¥48.37B (+7.1%) and an operating loss of ¥1.06B (worsened from a ¥0.91B loss prior year). Segment composition: Creative (Japan) 64.5%, CRES 10.2%, Medical 9.4%, Other 7.9%, Korea 5.1%, Accounting & Legal 3.8%, indicating high dependence on two domestic core businesses.
[Profitability] Operating margin was 8.0% (prior year 7.2%, +0.8pt), Net margin was 6.6% (prior year 4.5%, +2.1pt), reflecting improved profitability. ROE was 9.6% (DuPont decomposition yields 21.0% as Net margin 6.6% × Total asset turnover 1.31 × Financial leverage 2.41, though disclosed value is 9.6%). ROA was 13.0%, down from 14.1% prior year. EBITDA is ¥54.93B (approx. Operating Income ¥49.14B + Depreciation ¥6.04B - Goodwill amortization ¥1.92B), giving an EBITDA margin of 8.9%. [Cash Quality] OCF of ¥20.89B is 1.13x versus Net Income ¥18.56B but only 0.51x versus Net Income attributable to owners of parent ¥40.75B, indicating cash generation constrained by working capital expansion (Accounts Receivable +¥53.36B, Accounts Payable +¥19.07B). OCF/EBITDA ratio is 0.38x, low. Days Sales Outstanding (DSO) extended to 69 days (prior year 45 days), Days Payable Outstanding (DPO) shortened to 19 days (prior year 5 days), and Cash Conversion Cycle (CCC) worsened to 51 days (prior year 41 days). [Investment Efficiency] Capital expenditures of ¥4.60B are modest at 0.76x of depreciation ¥6.04B. Including goodwill amortization ¥1.92B, total amortization of intangible and tangible assets is ¥5.88B, indicating restrained investment. Total asset turnover declined to 1.31x (prior year 1.86x), showing some deterioration in asset efficiency. [Financial Soundness] Equity Ratio is 41.4% (prior year 59.1%, -17.7pt), and current ratio is 133.7% (prior year 202.2%), indicating reduced short-term liquidity. Interest-bearing debt totaled ¥114.47B (short-term borrowings ¥111.73B, long-term borrowings ¥2.74B), Debt/EBITDA is 2.08x, and Net Debt/EBITDA is -1.15x (cash and deposits ¥176.96B exceed borrowings). Short-term borrowing ratio is 97.6%, indicating maturity concentration and potential refinancing risk. Cash and deposits of ¥176.96B cover short-term borrowings ¥111.73B by 1.58x, maintaining near-term liquidity.
Operating Cash Flow was ¥20.89B (prior year ¥29.58B, -29.4%). Operating cash flow before working capital changes totaled ¥38.20B, adjusted for working capital movements including increase in trade receivables -¥58.56B (Accounts Receivable +¥53.36B, contract assets +¥1.44B, etc.), increase in accounts payable +¥19.07B, increase in inventories -¥0.71B, increase in other current liabilities +¥22.29B, and payment of income taxes -¥16.24B, resulting in OCF of ¥20.89B. The primary cause was Accounts Receivable expansion due to rapid revenue growth, leaving OCF/Net Income (attributable to owners of parent) at 0.51x. Investing Cash Flow was -¥0.38B (prior year -¥17.65B), relatively minor, with capital expenditures -¥4.60B, intangible asset acquisitions -¥1.55B, acquisition of subsidiary shares -¥0.59B, and acquisition of investment securities -¥9.42B offset by net increase/decrease in time deposits +¥103.19B (deposits -¥105.63B, withdrawals +¥103.19B) and net increase in lease deposits -¥5.52B, etc. Free Cash Flow (FCF) was ¥20.51B (OCF + Investing CF). Financing Cash Flow was ¥17.30B, financed by net increase in short-term borrowings +¥26.00B and net increase in long-term borrowings +¥2.78B (borrowings +¥3.00B, repayments -¥0.22B), offsetting dividend payments -¥8.92B, share buybacks -¥9.95B, and other adjustments +¥0.79B. Cash and cash equivalents increased by ¥37.82B from ¥90.19B at the beginning of the period to ¥128.01B at period-end, strengthening liquidity. With depreciation ¥6.04B and capital expenditures ¥4.60B, investment was restrained, and FCF of ¥20.51B covered dividends and buybacks of ¥18.87B, leaving cash post-distribution. However, extended DSO and increased reliance on short-term borrowings indicate room for improving liquidity management.
Earnings quality considerations: while Operating Income of ¥49.14B was generated by recurring business activities, Profit Before Tax of ¥53.37B included special gains of ¥6.82B (government subsidies ¥6.19B, gain on sale of investment securities ¥0.81B, etc.), which temporarily boosted Net Income. Non-operating income was modest at ¥1.54B (0.25% of Revenue), comprised of interest income ¥0.50B, foreign exchange gains ¥0.29B, dividend income ¥0.13B, etc., and is not a sustainable structural source. The divergence between Ordinary Income and Net Income is mainly due to net special gains of ¥5.35B and a low effective tax rate of 22.1%. Accrual analysis shows OCF ¥20.89B is significantly below Net Income attributable to owners of parent ¥40.75B (OCF/NI 0.51x), primarily due to Accounts Receivable increase of +¥53.36B, indicating delayed cash conversion. The ¥1.13B difference between comprehensive income ¥41.88B and Net Income ¥40.75B is due to Other Comprehensive Income (foreign currency translation adjustment -¥0.15B, valuation differences on available-for-sale securities ¥0.29B, etc.), reflecting accounting valuation differences. The inventory valuation loss of ¥0.90B is relatively large given inventory scale of ¥0.10B, highlighting inventory management issues. Overall, while Ordinary Income suggests stable growth, dependence on special gains and working capital expansion is suppressing earnings quality via low cash conversion.
Company guidance forecasts Revenue ¥655.00B (YoY +6.7%), Operating Income ¥52.50B (YoY +6.8%), Ordinary Income ¥51.50B (YoY +7.3%), and Net Income attributable to owners of parent ¥33.50B (versus prior-year net income ¥18.56B +80.5%, versus current-period Net Income attributable to owners of parent ¥40.75B -17.8%), with EPS of ¥158.32. The Revenue plan of +6.7% indicates deceleration from this year’s +22.1%, assuming full-year contribution from CRES and steady demand in the core Creative (Japan) business. The Operating Income plan +6.8% assumes maintaining an Operating margin of 8.0% and continuation of this year’s operating leverage. The Net Income plan of ¥33.50B implies a -17.8% decline from this year’s Net Income attributable to owners of parent ¥40.75B, reflecting conservative assumptions that exclude this year’s special gains of ¥6.82B. Dividend guidance is listed as ¥0.00, which requires reconciliation with the prior-year actual dividend of ¥50; confirmation is needed. Key to achieving the plan will be continued orders in the CRES Business, stable organic growth in core segments, normalization of Accounts Receivable collections to reduce working capital burden, and reduction of losses in Korea and other segments.
Dividend policy: a year-end dividend of ¥50 (interim ¥0) was paid, totaling ¥8.92B, with a payout ratio of 28.2% (calculated versus Net Income attributable to owners of parent ¥40.75B), a sustainable level. Share buybacks of ¥9.95B were executed, bringing total shareholder returns to ¥18.87B and a Total Return Ratio of 46.3% (dividends + buybacks / Net Income attributable to owners of parent). FCF of ¥20.51B covers total returns ¥18.87B by 1.09x, leaving remaining cash capacity post-distribution. The dividend policy emphasizes stable dividends supplemented by flexible buybacks. The guidance listing Dividend ¥0.00 requires confirmation; if maintained at ¥50, payout ratio would be 31.6% (¥50 dividend versus forecast EPS ¥158.32), remaining sustainable. However, given high short-term borrowings of ¥111.73B and working capital expansion, careful balance with retained earnings will be required next fiscal year.
Short-term debt concentration risk: Of interest-bearing debt ¥114.47B, short-term borrowings account for ¥111.73B (97.6%), indicating maturity concentration that could lead to higher refinancing costs and refinancing difficulty in a rising interest rate environment. Cash and deposits ¥176.96B ensure near-term liquidity, but persistent working capital expansion would reduce financial headroom. Debt/EBITDA of 2.08x is within investment-grade range, but shorter maturities reduce financial flexibility.
Working capital management risk: Rapid increase in Accounts Receivable to ¥116.00B (+85.2%) extended DSO to 69 days and maintained low cash conversion (OCF/Net Income 0.51x). If collection delays become structural amid rapid revenue growth, additional working capital financing may be required, increasing financial burden. Reversing the CCC deterioration (51 days vs. 41 days prior) through stronger collection measures and credit management is urgent.
Segment concentration risk and project-based revenue volatility: 64.5% of Revenue depends on Creative (Japan), and CRES revenue is project-based and volatile. Loss expansion in Korea (-¥0.39B) and continued losses in Other segments (-¥1.06B) dilute core profitability and increase performance volatility. Enhanced disclosure on CRES backlog and pipeline is needed to improve investor predictability.
[Industry Position] (reference — company analysis) In the IT & Communications sector (FY2025, median of n=319 companies), the company’s Operating margin of 8.0% is roughly in line with the sector median of 8.1%, and Net margin of 6.6% exceeds the median 5.8% by 0.8pt, indicating sector-comparable profitability. Revenue growth of +22.1% substantially outpaces the sector median +10.1%, placing the company among high-growth peers. Total asset turnover 1.31x exceeds the sector median 0.89x but has declined from 1.86x prior, indicating scope to improve asset efficiency. Equity Ratio 41.4% is 17.8pt below the sector median 59.2%, and financial leverage 2.41x exceeds the median 1.64x, reflecting an aggressive stance. Current ratio 133.7% is well below the sector median 244%, placing the company low on short-term liquidity. DSO of 69 days exceeds the sector median 48.76 days by over 20 days, highlighting working capital management issues. Disclosed ROE 9.6% is slightly below the sector median 10.1%. Cash conversion (OCF/Net Income) 1.13x is below the sector median 1.28x, and versus Net Income attributable to owners of parent is 0.51x, notably low. Payout ratio 28.2% is slightly below the sector median 31%, with total return posture roughly in line with peers. Overall, high growth and profitability are positive, but liquidity, working capital management, and financial conservatism lag sector averages, indicating significant balance sheet improvement opportunities.
Verify sustainability of growth acceleration and ROE improvement: With Revenue +22.1%, Operating Income +36.0%, and ROE 9.6% (DuPont-derived 21.0%), growth and profitability improved simultaneously, but initial M&A contributions in CRES and special gains ¥6.82B (mainly government subsidies) were significant one-off factors. Next fiscal year guidance expects Revenue +6.7% and Operating Income +6.8% (deceleration), so continuity of CRES orders and organic growth in core segments are key to plan execution. Goodwill ¥6.54B (/EBITDA 0.12x) is at a healthy level, but ongoing impairment tests and synergy realization should be monitored.
Normalize working capital and cash generation: Accounts Receivable increase of +85.2% (+¥53.36B) extended DSO to 69 days, with OCF/Net Income attributable to owners of parent 0.51x and OCF/EBITDA 0.38x indicating low cash conversion. It is essential to determine whether collection delays are temporary due to rapid revenue growth or structural; DSO improvement and CCC shortening next year will be the proof point for restoring cash generation. Short-term borrowings concentration ¥111.73B (97.6% of interest-bearing debt) requires measures such as maturity extension and securing commitment lines alongside working capital normalization to enhance financial flexibility.
Optimize segment portfolio and strengthen revenue stability: While the three-pillar structure of Creative (Japan) 64.5%, Medical 9.4%, and CRES 10.2% is emerging, Korea (loss -¥0.39B) and Other (loss -¥1.06B) dilute group margins. CRES project-based revenue is highly volatile; improving disclosure on backlog and pipeline will raise investor predictability. Medical’s high margin (24.8%) and steady growth are pillars supporting ROE, but regulatory risks and market environment monitoring remain important.
This report was 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 responsibility; consult a professional advisor as needed.