WILL GROUP,INC. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥71.53B
• Operating Income: ¥1.64B
• Net Income: ¥1.14B
• EPS: ¥50.11

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Will Group (6089) reported FY2026 Q2 consolidated IFRS results with modest top-line growth but significant profit recovery. Revenue rose 1.7% YoY to 715.3, while operating income surged 62.4% YoY to 16.38, indicating strong operating leverage despite a low-single-digit sales increase. Gross profit of 147.88 implies a gross margin of 20.7%, broadly consistent for a staffing and outsourcing mix. SG&A was 141.33, and the difference between gross profit and SG&A (6.55) versus operating income (16.38) suggests material other operating income or IFRS reclassifications within operating profit that are not separately disclosed in the dataset. Net income increased 126.5% YoY to 11.47, with an effective tax rate of 23.3% and profit before tax of 15.56. DuPont metrics indicate ROE of 6.4% (net margin 1.6% x asset turnover 1.419 x leverage 2.80x), implying underlying ROA of roughly 2.3% and moderate equity leverage. Operating margin is still slim at about 2.3%, and EBITDA margin stands at 3.7%, underscoring the inherently low-margin nature of labor dispatch businesses. Cash conversion was weak in the period: operating cash flow was only 1.41 (OCF/Net income 0.12x) and free cash flow was -7.12 due to negative investing cash flows of -8.53. The balance sheet shows total assets of 504.21 and equity of 180.12 (equity ratio 35.8%), with liabilities of 325.63 (liabilities-to-equity 1.81x). Accounts receivable of 181.36 and accounts payable of 169.56 reflect the working-capital-intensive profile typical in this sector; current liabilities are not fully disclosed, limiting liquidity ratio analysis. Loans total 66.05 (short-term 40.03, long-term 26.02); with cash and equivalents of 69.36, the company appears roughly net cash on these disclosed items, though other interest-bearing items were not reported. Dividend outflows of 10.10 exceeded OCF, and the calculated payout ratio is high at 88.7%, with FCF coverage negative (-0.70x), pointing to potential stress if cash conversion does not improve in H2. The negative capital surplus (-20.68) is notable but not uncommon given historical equity transactions; it does not on its own indicate distress but warrants monitoring. Overall, the quarter shows encouraging profit recovery and cost discipline, but cash flow conversion and the sustainability of dividends relative to FCF are key watch points. The limited disclosure of several line items (e.g., non-operating income/expense, current liabilities breakdown, interest expense, goodwill) constrains deeper ratio diagnostics. We therefore focus on available metrics and sector context to assess profitability quality, growth sustainability, and financial resilience.

Profitability Analysis

ROE_decomposition: ROE 6.4% = Net margin 1.6% x Asset turnover 1.419 x Financial leverage 2.80x. Implied net ROA ~2.3% (1.6% x 1.419). Leverage (Assets/Equity) of 2.80x is moderate and the main amplifier of a thin margin base. margins: Gross margin 20.7% (147.88/715.30), operating margin ~2.3% (16.38/715.30), EBITDA margin 3.7% (26.63/715.30), net margin 1.6% (11.47/715.30). The spread between gross and operating margins indicates heavy SG&A intensity partly offset by other operating income under IFRS (not separately disclosed here). operating_leverage: Revenue +1.7% YoY versus operating income +62.4% YoY signals strong operating leverage from cost control and mix. Sustaining this will require maintaining gross profit per hour and SG&A discipline as volume grows. quality_comments: Effective tax rate 23.3% aligns with domestic norms. Interest coverage is not calculable due to unreported interest expense, limiting assessment of financial burden on EBIT. Profit expansion appears driven more by cost-side improvements than by robust revenue growth.

Growth Assessment

revenue_sustainability: Top-line growth of 1.7% is modest, consistent with a mature domestic staffing market and potential normalization after prior cycles. The receivables base (181.36) suggests stable billing, but without segment disclosure we cannot assess mix (e.g., light vs. high-value-added staffing). profit_quality: Operating profit growth far exceeded sales growth, implying mix/cost effects and other operating items. Given margins remain low (OPM ~2.3%), incremental improvements are sensitive to utilization and bill-rate vs. wage-rate spreads. outlook: If wage inflation is passed through and SG&A remains contained, mid-single-digit margin uplift is possible; however, the weak cash conversion in H1 tempers confidence. Watch H2 seasonality and any price adjustments with key clients to validate sustainability.

Financial Health

liquidity: Current ratio and quick ratio are not calculable due to unreported current liabilities and cash detail. Cash and equivalents are 69.36, and receivables 181.36 provide liquidity, but staffing businesses can see working capital swings around quarter ends. solvency: Equity ratio 35.8% (180.12/504.21) indicates a reasonably capitalized balance sheet. Liabilities-to-equity is 1.81x (325.63/180.12). capital_structure: Reported loans total 66.05 (short 40.03, long 26.02). Based only on disclosed cash (69.36), the company appears near net-cash on loans; however, other interest-bearing debt items are not reported, so true net leverage may differ. other_observations: Negative capital surplus (-20.68) likely reflects historical equity transactions (e.g., treasury stock or reorganization reserves) and is not necessarily a near-term liquidity concern.

Cash Flow Quality

earnings_quality: OCF/Net income is 0.12x (1.41/11.47), indicating weak cash conversion in the period. This may reflect receivables growth, timing of payables, or seasonal payroll/payment cycles typical in staffing. FCF_analysis: Free cash flow is -7.12 (OCF 1.41 + Investing CF -8.53). Financing CF was -2.92, including dividends of -10.10, implying reliance on cash on hand or incremental working capital changes to fund shareholder returns. working_capital: Receivables (181.36) and payables (169.56) are large relative to sales, consistent with sector dynamics. Lack of detailed current liability data prevents calculation of DSO/DPO and the current ratio, limiting deeper diagnostics. depreciation_amortization: D&A is 10.25, below EBITDA by 16.38, consistent with a people-heavy model; capex not disclosed prevents assessment of maintenance vs. growth investment.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 88.7%, elevated relative to a 6.4% ROE and 1.6% net margin. This leaves limited internal buffer for shocks. FCF_coverage: FCF coverage is negative (-0.70x), as dividends (10.10) exceeded free cash flow (-7.12). Dividend outflow also exceeded OCF (1.41), indicating dependence on cash reserves or balance sheet for coverage in the half. policy_outlook: Without full-year guidance in this dataset, sustainability hinges on H2 OCF normalization and profit durability. If working capital reverses seasonally, coverage can improve; otherwise, management may need to balance payout with reinvestment and cash preservation.

Risk Assessment

Business Risks:

• Wage inflation and difficulty passing costs to clients, compressing gross margins
• Demand cyclicality in key end-markets affecting volumes and utilization
• Regulatory changes to labor dispatch laws and social insurance affecting cost structure
• Client concentration or pricing pressure in large accounts
• Talent acquisition/retention risk in a tight labor market
• Execution risk in M&A and integration (goodwill/intangibles not disclosed here)

Financial Risks:

• Weak cash conversion (OCF/NI 0.12x) and negative FCF in the period
• Potential reliance on short-term financing given large receivables and payables base
• Exposure to interest rate increases on variable-rate loans (interest expense not disclosed)
• High payout ratio relative to cash generation, reducing flexibility
• Information gaps (unreported current liabilities, interest-bearing debt details) hinder precise leverage assessment

Key Concerns:

• Sustainability of operating margin improvement amid modest revenue growth
• OCF and FCF shortfall versus dividend outflows
• Thin EBITDA and operating margins leave little room for operational shocks

Investment Implications

Key Takeaways:

• Revenue grew 1.7% YoY to 715.3 with operating income up 62.4% to 16.38, evidencing strong operating leverage.
• Margins remain thin: OPM ~2.3%, EBITDA margin 3.7%, net margin 1.6%.
• ROE is 6.4% driven by moderate leverage (2.80x) on low ROA (~2.3%).
• Cash conversion was weak (OCF/NI 0.12x); FCF was -7.12.
• Balance sheet is moderately leveraged with equity ratio 35.8%; disclosed loans total 66.05 versus cash 69.36.
• Dividend payout is high (88.7%) and not covered by FCF in H1.

Metrics to Watch:

• OCF/Net income and working capital swings (DSO/DPO when disclosed)
• Gross margin and SG&A ratio to sales
• Operating margin trajectory and other operating income items
• Net interest-bearing debt and interest coverage (once interest expense is available)
• Equity ratio and liabilities-to-equity trends
• Dividend payout and FCF coverage through H2 seasonality

Relative Positioning: Within Japan’s staffing/HR services peer set, Will Group exhibits sector-typical low margins and high working-capital intensity, with a middle-of-the-pack equity ratio. Profit recovery is notable versus modest sales growth, but cash conversion and dividend coverage trail best-in-class operators.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis