| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥267.1B | ¥227.6B | +17.3% |
| Operating Income | ¥37.4B | ¥41.3B | -9.4% |
| Ordinary Income | ¥37.1B | ¥41.0B | -9.4% |
| Net Income | ¥19.7B | ¥21.5B | -8.2% |
| ROE | 8.2% | 11.6% | - |
For the fiscal year ended March 2026, Revenue was ¥267.1B (YoY +¥39.5B +17.3%), Operating Income was ¥37.4B (YoY -¥3.9B -9.4%), Ordinary Income was ¥37.1B (YoY -¥3.9B -9.4%), and Net Income was ¥19.7B (YoY -¥1.8B -8.2%). Rapid expansion of the Investment Business (Revenue +130.3%) drove top-line growth; however, gross margin declined to 76.7% from 85.3% a year earlier (-8.6pt) and operating margin deteriorated to 14.0% from 18.1% (-4.1pt). In addition to a change in business mix, SG&A increased to ¥167.6B (YoY +¥14.7B +9.6%), outpacing revenue growth and representing the primary reason for profit decline. A negative goodwill gain of ¥1.1B was recorded as an extraordinary gain, partially offsetting downward pressure on bottom-line profit.
[Revenue] The primary driver of revenue growth was expansion of the Investment Business, which surged to Revenue of ¥55.5B (YoY +130.3%). Recognition of large-scale projects in the real estate investment business contributed, and the segment mix expanded from 10.6% to 20.8% year-over-year. The core Consulting Business remained resilient with Revenue of ¥211.8B (+4.1%), accounting for 79.2% of total Revenue. Continued growth in advisory clients, centered on business succession and M&A advisory, is forming a stable recurring revenue base.
[Profitability] Gross margin decreased to 76.7% (down 8.6pt YoY). The main cause was a shift toward a business mix with relatively higher cost rates as the Investment Business increased its share. SG&A rose to ¥167.6B (YoY +¥14.7B +9.6%); although SG&A ratio improved to 62.7% from 67.2% a year earlier (-4.5pt), the absolute increase outpaced gross profit growth (+5.5%). As a result, Operating Income fell to ¥37.4B (-9.4%) and operating margin declined to 14.0% (-4.1pt). By segment, Consulting Business Operating Income declined sharply to ¥25.8B (-18.7%), with margin compressing to 12.2%. Conversely, Investment Business recorded Operating Income of ¥11.6B (+21.5%) with a high margin of 20.9%, partially offsetting the company-wide profit decline. Ordinary Income was ¥37.1B (-9.4%), showing a similar decline rate to Operating Income. Non-operating income included interest income of ¥0.4B and investment partnership returns of ¥0.2B, while non-operating expenses included commission expenses of ¥0.8B, interest expenses of ¥0.4B, and foreign exchange losses of ¥0.3B, resulting in a net non-operating loss of ¥0.3B. Extraordinary items included a negative goodwill gain of ¥1.1B (related to acquisition of stake in Daikoku Building LLC), securing a pre-tax profit of ¥38.1B. After deducting corporate taxes of ¥9.0B and non-controlling interests of ¥0.1B, Net Income was ¥19.7B (-8.2%), and net margin declined to 7.4% from 9.5% a year earlier (-2.1pt). In conclusion, the pattern is revenue growth with profit decline driven by Investment Business expansion.
The Consulting Business posted Revenue of ¥211.8B (+4.1%), Operating Income of ¥25.8B (-18.7%), and margin of 12.2% (-3.4pt). Revenue maintained stable growth, but margin was pressured by higher personnel costs and increased sales costs to win projects. The Investment Business reported Revenue of ¥55.5B (+130.3%), Operating Income of ¥11.6B (+21.5%), and margin of 20.9% (-11.1pt). Large-scale real estate investment projects drove Revenue, but margin declined from 32.0% a year earlier due to changes in project mix and increased SG&A associated with inventory buildup. Contribution to company-wide Operating Income of ¥37.4B was 69.1% from Consulting and 30.9% from Investment, with Investment’s profit contribution rising more than 10pt YoY.
[Profitability] Operating margin of 14.0% decreased 4.1pt from 18.1% a year earlier and is below the three-year average of 15.8%. Gross margin of 76.7% worsened by 8.6pt from 85.3%, primarily due to mix shift from Investment Business growth. ROE was 8.2%, down from 10.4% last year, reflecting contraction in net margin and slower total asset turnover. [Cash Quality] Operating Cash Flow / Net Income was -1.07x (prior year -0.08x), deteriorating sharply. Working capital expanded due to large increases in inventories (-¥9.1B) and accounts receivable (-¥4.8B), resulting in Operating Cash Flow of -¥21.0B versus Net Income of ¥19.7B. Operating CF excluding working capital changes totaled -¥8.7B, with corporate tax payments of -¥12.3B being a drag. [Investment Efficiency] Total asset turnover was 0.80x (prior year 0.97x), and inventory turnover days stretched to 252 days (prior year 90 days), indicating pronounced inventory build-up. Increased investment in real estate and marketable securities within the Investment Business diluted asset efficiency. CAPEX / depreciation was 1.6x, indicating continued foundational investment, but tangible fixed assets were ¥7.5B (2.3% of total assets), keeping fixed-asset burden modest. [Financial Soundness] Equity Ratio was 72.0% (prior year 79.2%), remaining high but down 7.2pt due to an increase in short-term borrowings of ¥48.96B. Current ratio was 344.9% and quick ratio 293.9%, indicating ample liquidity, with cash and deposits of ¥105.1B far exceeding short-term liabilities of ¥84.2B. Net cash was ¥56.7B against interest-bearing debt of ¥48.96B, effectively in a net debt-free position.
Operating Cash Flow was -¥21.0B (prior year -¥1.7B). Operating CF before working capital changes was -¥8.7B, with corporate tax payments of -¥12.3B weighing on cash, while working capital movements were a further burden: inventory increase -¥9.1B and trade receivables increase -¥4.8B, only partially offset by trade payables increase +¥1.5B. Inventories rose to ¥42.9B from ¥14.1B a year earlier (+¥28.8B +203%), reflecting buildup of real estate and marketable securities in the Investment Business. Investing CF was -¥20.6B, with major outflows including CAPEX -¥2.9B, acquisition of subsidiary shares -¥11.4B, and purchase of investment securities -¥3.4B. Free Cash Flow was -¥41.6B (prior year -¥9.6B), widening the deficit as capital was deployed into investment projects while Operating CF weakened. Financing CF was +¥52.2B, primarily driven by an increase in short-term borrowings of +¥32.96B, exceeding dividend payments of -¥14.7B. Cash and deposits increased by ¥11.3B to ¥105.1B from opening balance ¥93.8B, with foreign exchange effects contributing +¥2.5B. The negative turn in Operating CF is attributable to temporary inventory buildup; future cash generation will depend on monetization progress of investment projects.
Core recurring earnings are centered on Operating Income of ¥37.4B, driven by Consulting (¥25.8B) and Investment (¥11.6B). Non-operating income of ¥1.3B includes interest income of ¥0.4B and investment partnership returns of ¥0.2B, while non-operating expenses of ¥1.6B (commission expenses ¥0.8B, interest expenses ¥0.4B, foreign exchange losses ¥0.3B) resulted in a modest net non-operating deficit. Extraordinary gain of negative goodwill ¥1.1B was recorded, reflecting a temporary profit from the difference between acquisition price and net assets at the time of acquiring stake in Daikoku Building LLC. This extraordinary gain helped secure pre-tax profit of ¥38.1B, and after applying an effective tax rate of 23.6%, approximately ¥0.8B contributed to Net Income of ¥19.7B. Operating CF of -¥21.0B lags Net Income of ¥19.7B significantly, with Operating CF / Net Income at -1.07x and an accrual gap of ¥40.7B, indicating delayed cash realization of profits. The primary cause is inventory accumulation of +¥28.8B, signifying a build phase of real estate and investment assets in the Investment Business. The divergence between Ordinary Income and Net Income is limited, but the ¥1.1B extraordinary gain is non-recurring, so sustainable business profit is better reflected by Ordinary Income of ¥37.1B.
The full-year forecast targets Revenue ¥269.0B, Operating Income ¥45.0B, Ordinary Income ¥43.5B, Parent Company Net Income ¥29.0B, EPS ¥151.00, and Dividend ¥38.00. Versus actuals, Revenue achievement ratio was 99.3% (Actual 267.1 / Forecast 269.0), almost on plan, while Operating Income achievement ratio was 83.1% (37.4 / 45.0) and Ordinary Income achievement ratio was 85.3% (37.1 / 43.5), indicating profit shortfalls. Parent Company Net Income achievement ratio was 99.8% (28.95 / 29.0), nearly achieved, with non-recurring items such as negative goodwill complementing final profit. Revenue approached forecasts thanks to progress in recognizing Investment Business projects, but lower gross margins and higher SG&A caused operating-level margins to fall short of expectations. Year-over-year: Revenue +17.3%, Operating Income -9.4%, Ordinary Income -9.4%, Parent Company Net Income +0.4%, clarifying a revenue-up, profit-down trend. Variances against full-year guidance are likely driven by timing of Investment Business projects and delayed inventory turns, as well as margin deterioration in the Consulting Business. Going forward, accelerating monetization of investment projects and optimizing Consulting pricing and utilization are key to margin recovery.
A year-end dividend of ¥39 and an interim dividend of ¥38 were paid, totaling annual dividends of ¥77. Dividend payout totaled ¥14.7B against Net Income of ¥19.7B, representing a payout ratio of 50.9%, a stable level. The total dividend of ¥14.7B exceeded Operating CF -¥21.0B and Free CF -¥41.6B; dividend funding was secured via cash and deposits of ¥105.1B and short-term borrowings of +¥32.96B. Dividend coverage (Operating CF / Dividends) was -1.43x and FCF coverage was -2.83x, both negative, indicating short-term reliance on borrowings and on-hand cash. With an Equity Ratio of 72.0% and net cash of ¥56.7B, financial capacity is substantial and dividend continuity appears feasible, though medium-to-long-term sustainability depends on Operating CF improvement. No share buybacks were executed; Total Return Ratio equals the payout ratio at 50.9%. Actual annual dividend of ¥77 versus forecasted ¥38 represents a doubling, likely reflecting an in-year dividend increase based on business progress. Future expansion of dividend capacity will depend on progress monetizing inventory and normalization of Operating CF.
Inventory build-up and declining capital efficiency risk: Inventory of ¥42.9B (YoY +203%) has extended inventory turnover days to 252 days. If monetization of Investment Business projects is delayed, inventory write-downs or price pressure may occur. Operating CF of -¥21.0B indicates cash generation reversal; continued working capital expansion could increase reliance on short-term borrowings and constrain financial flexibility.
Structural decline in operating margin risk: Operating margin decline to 14.0% (from 18.1% a year earlier, -4.1pt) was driven by Investment Business mix change and SG&A growth, while Consulting Business margin also deteriorated to 12.2% (-3.4pt). Continued margin deterioration in the core business could erode company-wide profitability. Although SG&A ratio improved to 62.7%, absolute SG&A rose faster than gross profit (+9.6%), meaning operating leverage is not working.
Concentration of short-term debt and refinancing risk: Interest-bearing debt of ¥48.96B consists entirely of short-term borrowings. While the current ratio is 344.9% and liquidity appears sufficient, concentration of maturities could lead to deteriorated refinancing terms or strained financing conditions, raising financing costs or liquidity constraints. Cash and deposits of ¥105.1B cover short-term liabilities; however, delayed monetization of inventory increases the risk of short-term debt accumulation.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 14.0% | 8.1% (3.6%–16.0%) | +5.9pt |
| Net Margin | 7.4% | 5.8% (1.2%–11.6%) | +1.5pt |
Operating margin exceeds industry median of 8.1% by 5.9pt, placing the company in the upper range within the industry.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 17.3% | 10.1% (1.7%–20.2%) | +7.2pt |
Revenue growth of 17.3% exceeds industry median of 10.1% by 7.2pt, indicating substantially stronger growth than the industry average.
※Source: Company compilation
Expansion of the Investment Business drove Revenue growth of 17.3%, well above the industry average; however, gross margin fell 8.6pt and operating margin fell 4.1pt, indicating structural margin deterioration. Decline in Consulting Business profitability (-3.4pt) further underscores the need to improve inventory turns and optimize pricing and utilization to lift company-wide profitability.
Operating CF -¥21.0B and FCF -¥41.6B mean cash generation reversed relative to Net Income of ¥19.7B, and dividends of ¥14.7B were funded through short-term borrowings of +¥32.96B and on-hand cash. Inventory stagnation of 252 days suggests a build phase of investment projects, but delayed monetization would constrain financial flexibility and affect dividend sustainability. Progress in asset disposals and CF improvement will be central to value creation.
Short-term borrowings of ¥48.96B comprise all interest-bearing debt, making maturity concentration and refinancing management important issues. While Equity Ratio is 72.0% and net cash is ¥56.7B, delayed monetization of inventory could crystallize short-term debt rollover risk. Increased reliance on non-recurring gains such as negative goodwill of ¥1.1B is also a concern; attention should be paid to sustainability based on Ordinary Income of ¥37.1B.
This report is an earnings analysis document automatically generated by AI from XBRL earnings release data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company from public earnings data. Investment decisions are your own responsibility; please consult professionals as necessary.