| Metric | Current | Prior | YoY |
|---|---|---|---|
| Revenue | ¥105.4B | ¥94.0B | +12.1% |
| Operating Income | ¥13.0B | ¥10.1B | +28.5% |
| Ordinary Income | ¥14.6B | ¥10.5B | +39.6% |
| Net Income | ¥9.0B | ¥6.5B | +39.9% |
| ROE | 6.3% | 4.8% | - |
FY2026 Q2 results: Revenue 105.4B yen (YoY +12.1%), Operating Income 13.0B yen (YoY +28.5%), Ordinary Income 14.6B yen (YoY +39.6%), Net Income 9.0B yen (YoY +39.9%). The company delivered strong double-digit revenue growth with operating margin expanding to 12.3% from 10.7% in the prior year period, representing a 1.6pt improvement. Operating cash flow of 9.8B yen (+15.5% YoY) exceeded net income, confirming cash-backed earnings quality. Free cash flow of 6.7B yen provides ample capacity for both growth investments and shareholder returns. The profit growth substantially outpaced revenue growth, driven by operational leverage in the core Green business segments and favorable foreign exchange impacts contributing to non-operating income.
Revenue increased 11.4B yen to 105.4B yen, with Green business representing the primary growth engine. Within the Green segment, Kanto Area Green revenue grew 623.8M yen to 38.5B yen, Kansai Area Green expanded 231.2M yen to 16.8B yen, and Overseas Green increased 200.1M yen to 16.7B yen. Green Service revenue (installation and maintenance) showed particularly strong momentum across all geographies. Retail segment revenue rose 96.2M yen to 28.8B yen (+3.5%), while Wholesale segment declined marginally by 12.7M yen to 7.8B yen. The overseas expansion through M&A contributed to both revenue growth and goodwill increase of 133.1M yen from the Plant Detail Inc. business acquisition during the period.
Operating income surged 2.9B yen to 13.0B yen, significantly outpacing revenue growth. Gross profit margin stood at 61.8% (65.1B yen gross profit on 40.2B yen cost of sales), while SG&A expenses were controlled at 49.5% of revenue (52.2B yen). The operating leverage effect was pronounced, with the incremental operating margin exceeding 25%, indicating strong fixed cost absorption. Segment profitability varied considerably: Kanto Area Green achieved 23.7% operating margin (+6.9pt YoY), Kansai Area Green delivered 25.4% margin (+1.9pt), while Overseas Green posted a negative 9.4% margin (deteriorated from negative 7.5%). Wholesale improved to 11.4% margin from 8.4%, and Retail recovered to near breakeven at negative 0.1% from negative 3.9%.
Non-operating income contributed 1.8B yen, including foreign exchange gains of 1.1B yen and interest income of 0.2B yen, which amplified ordinary income to 14.6B yen. This represents a substantial 4.1B yen increase in ordinary income versus 2.9B yen operating income growth, with the 1.2B yen difference primarily attributable to FX gains. Income tax expense of 5.6B yen resulted in an effective tax rate of 38.4%, yielding net income of 9.0B yen. This represents a revenue up, profit up pattern with exceptional profit growth leverage.
The Green business segment comprises three geographic areas with total revenue of 71.9B yen and operating income of 11.8B yen, representing the core business at 68.2% of consolidated revenue. Kanto Area Green is the largest contributor at 38.5B yen revenue and 9.1B yen operating income (23.7% margin), demonstrating the strongest profitability profile. Kansai Area Green generated 16.8B yen revenue with 4.3B yen operating income at 25.4% margin, the highest margin among all segments. Overseas Green contributed 16.7B yen revenue but posted negative 1.6B yen operating loss (negative 9.4% margin), indicating ongoing integration challenges and investment phase for international operations.
Retail segment recorded 28.8B yen revenue with essentially breakeven operating performance (negative 0.0B yen, negative 0.1% margin), showing significant recovery from the prior year's negative 3.9% margin. Wholesale segment delivered 7.8B yen revenue and 0.9B yen operating income at 11.4% margin, representing stable but lower-margin ancillary operations. The material margin differential between domestic Green operations (23-25%) and Overseas Green (negative 9%) highlights the profitability disparity and suggests that overseas expansion remains in investment mode. The domestic Green segments drive the majority of absolute profit contribution while overseas operations remain dilutive to consolidated margins.
[Profitability] ROE of 6.3% remains modest relative to the company's growth trajectory, operating margin of 12.3% improved from 10.7% YoY representing a 1.6pt expansion, net profit margin of 8.6% increased from 6.9% YoY. [Cash Quality] Cash and cash equivalents of 51.0B yen provide coverage of 20.6x against short-term debt of 2.5B yen, operating cash flow of 9.8B yen represents 1.08x coverage of net income confirming high-quality earnings. [Investment Efficiency] Total asset turnover of 0.58x remains relatively low reflecting the asset-intensive nature of rental operations, inventory turnover of 6.84 days, receivables turnover of 94.8 days indicates room for working capital improvement. [Financial Health] Equity ratio of 78.0% represents a highly conservative capital structure, current ratio of 373.0% and quick ratio of 344.0% indicate exceptionally strong liquidity position, net cash position (cash exceeds debt) eliminates financial leverage concerns.
Operating cash flow of 9.8B yen represents 1.08x of net income, confirming cash-backed earnings quality. Operating cash flow before working capital changes was 14.0B yen, with working capital movements consuming 4.2B yen primarily from receivables increase of 4.4B yen, partially offset by inventory reduction contributing 0.5B yen and payables increase of 0.4B yen. Income taxes paid of 4.4B yen align with the reported tax expense. Investing cash flow of negative 3.1B yen comprised capital expenditures of 3.8B yen, representing 1.85x depreciation of 2.1B yen and indicating ongoing growth investment. Financing cash flow of negative 3.1B yen primarily reflected dividend payments with negligible share repurchases. Free cash flow of 6.7B yen provides ample capacity for shareholder distributions and strategic investments, with FCF coverage ratio of 2.55x demonstrating financial flexibility. The cash balance increased moderately from 46.8B yen to 51.0B yen, reflecting disciplined capital allocation while maintaining strong liquidity reserves.
Ordinary income of 14.6B yen versus operating income of 13.0B yen shows a positive non-operating net contribution of approximately 1.6B yen. This comprises primarily foreign exchange gains of 1.1B yen, interest income of 0.2B yen, and other non-operating income of 0.4B yen, offset by minimal non-operating expenses of 0.1B yen. Non-operating income represents 1.7% of revenue, with the FX gains contributing 1.0% and representing a potentially non-recurring element. Operating cash flow of 9.8B yen modestly exceeds net income of 9.0B yen, yielding an OCF to net income ratio of 1.08x which indicates healthy earnings quality. However, the cash conversion ratio (OCF to EBITDA) of 0.65x falls below the typical threshold of 0.90x, suggesting working capital efficiency challenges. The receivables increase of 4.4B yen consumed significant operating cash flow, resulting in days sales outstanding of approximately 95 days. While core operational earnings demonstrate solid cash generation, the working capital absorption and material FX contribution to ordinary income warrant monitoring for earnings sustainability.
Progress versus full-year guidance shows revenue at 46.1% (105.4B yen actual vs 228.4B yen forecast), operating income at 43.2% (13.0B yen vs 30.0B yen forecast), and ordinary income at 47.9% (14.6B yen vs 30.5B yen forecast) of annual targets at the halfway point. Revenue tracking slightly below the standard 50% benchmark suggests modest second-half weighting, while operating income progress at 43.2% indicates higher earnings concentration expected in the latter half. The company maintained its full-year guidance without revision, implying confidence in achieving FY2026 targets of revenue 228.4B yen (+11.4% YoY), operating income 30.0B yen (+13.2%), and ordinary income 30.5B yen (+15.4%). No revisions were made to earnings or dividend forecasts during this quarter. The forecast implies second-half revenue of 123.0B yen and operating income of 17.0B yen, representing sequential acceleration in both top-line and profitability metrics.
Annual dividend forecast stands at 13.0 yen per share for FY2026, following a 2-for-1 stock split effective January 1, 2026. The dividend represents a payout ratio of 28.7% based on forecast EPS of 218.28 yen (calculated as forecast net income of 20.1B yen divided by average shares outstanding), indicating a sustainable and conservative distribution policy. No interim dividend was declared, with the full amount payable at fiscal year-end. Share repurchases during the period were negligible at less than 0.1B yen. The total payout ratio remains comfortably below 30%, providing ample retained earnings for growth investments while maintaining shareholder distributions. Cash reserves of 51.0B yen and free cash flow generation of 6.7B yen in the first half amply support the dividend commitment. The conservative payout ratio allows flexibility for M&A activities and overseas expansion funding while protecting dividend sustainability.
Segment concentration risk in Green business which represents 68% of revenue and substantially all operating profit exposes the company to cyclical demand fluctuations in the domestic rental green and landscaping services market. Deterioration in corporate real estate demand or office occupancy rates could materially impact core revenue streams. Overseas expansion integration risk from recent M&A activity increased goodwill by 133.1M yen to 19.1B yen total (10.4% of total assets), with the Overseas Green segment posting negative 9.4% operating margin. Failure to achieve expected synergies or market penetration could result in future impairment charges and continued margin dilution. Working capital efficiency deterioration evidenced by DSO of 95 days and cash conversion ratio of 0.65x constrains cash generation relative to reported earnings. If receivables collection weakens further or inventory management deteriorates, the company's ability to self-fund growth and maintain shareholder returns could diminish despite strong reported profitability.
[Industry Position] (Reference - Proprietary Analysis)
Profitability: Operating Margin 12.3% vs Industry Median 14.0% (2025-Q2, 7 companies), Net Profit Margin 8.6% vs Industry Median 9.2%, indicating slightly below-median profitability despite recent improvements. ROE 6.3% vs Industry Median 5.6%, positioning marginally above sector average. Return on Assets 4.9% vs Industry Median 1.9%, demonstrating superior asset utilization relative to peers.
Financial Health: Equity Ratio 78.0% vs Industry Median 60.2%, reflecting a significantly more conservative capital structure. Current Ratio 373.0% vs Industry Median 774.0%, indicating strong but relatively lower liquidity positioning within a highly liquid sector. Net Debt to EBITDA is negative (net cash position) vs Industry Median negative 1.37x, confirming stronger-than-average balance sheet strength.
Efficiency: Asset Turnover 0.58x vs Industry Median 0.35x, substantially exceeding sector efficiency. Receivables Turnover 95 days vs Industry Median 117 days, showing relatively better but still elevated collection periods. Operating Working Capital Turnover indicates room for improvement versus more efficient operators.
Growth: Revenue Growth YoY 12.1% vs Industry Median 21.0%, tracking below sector momentum. EPS Growth 41.5% vs Industry Median 35.0%, exceeding peer earnings expansion due to operational leverage.
Cash Generation: Cash Conversion Ratio 0.65x vs Industry Median 1.22x, materially underperforming sector standards and representing a key area warranting improvement. FCF Yield 0.04 vs Industry Median 0.03, slightly above average.
The company exhibits conservative financial positioning with lower leverage and solid profitability, but lags industry growth rates and cash conversion efficiency. Asset productivity exceeds peers while working capital management requires enhancement to match sector benchmarks.
(Source: Proprietary Analysis, Industry comparison based on prior fiscal period data from comparable companies)
Strong operational leverage driving profit growth substantially ahead of revenue expansion, with operating income rising 28.5% against 12.1% revenue growth, demonstrates effective cost management and scale benefits in domestic Green segments. Operating margin improvement of 1.6pt to 12.3% reflects structural efficiency gains beyond temporary factors. Exceptionally conservative financial position with 78.0% equity ratio, net cash of 49.0B yen (cash 51.0B minus minimal debt 2.0B), and current ratio of 373% provides substantial capacity for strategic investments, M&A acceleration, and shareholder return enhancement without financial stress. Cash conversion efficiency at 0.65x significantly trails industry median of 1.22x and represents the primary operational concern, driven by receivables increasing 4.4B yen during the period and DSO extending to 95 days. Working capital optimization presents material opportunity to unlock cash generation aligned with earnings growth. Overseas expansion strategy reflected in Overseas Green segment negative 9.4% margin and goodwill accumulation of 19.1B yen remains in investment phase with integration risks, but successful turnaround would provide meaningful earnings upside given 16.7B yen revenue base. Dividend policy at 28.7% payout ratio appears sustainable with ample cash reserves, though below-industry revenue growth of 12.1% versus sector median 21.0% suggests potential need for accelerated market share gains or portfolio expansion to maintain growth momentum.
This report was automatically generated by AI analyzing XBRL earnings data as an earnings analysis tool. This is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled from publicly available earnings data. Please make investment decisions at your own responsibility and consult professionals as needed.