| Metric | Current Period | Prior Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1411.4B | ¥1374.3B | +2.7% |
| Operating Income / Operating Profit | ¥73.5B | ¥70.2B | +4.7% |
| Ordinary Income | ¥72.0B | ¥67.3B | +7.0% |
| Net Income / Net Profit | ¥30.8B | ¥32.7B | -5.8% |
| ROE | 13.1% | 14.4% | - |
For the fiscal year ended March 2026, Revenue was ¥1411.4B (YoY +¥37.1B +2.7%), Operating Income was ¥73.5B (YoY +¥3.3B +4.7%), Ordinary Income was ¥72.0B (YoY +¥4.7B +7.0%), and Net Income attributable to owners of the parent was ¥30.8B (YoY -¥1.9B -5.8%). While the company achieved revenue and operating-level profit growth, Net Income declined. Operating margin improved to 5.2% (up +0.1pt from 5.1% prior year) and Ordinary Income margin improved to 5.1% (up +0.2pt), indicating gradual improvement in core profitability. However, recognition of Special Losses of ¥11.5B (including impairment losses of ¥7.5B) pushed Net Income below the prior year. By segment, the core Medical Business (Revenue composition 52.3%) delivered steady Revenue of ¥738.3B (+3.7%) but Operating Income declined to ¥41.7B (-4.9%) due to rising personnel costs. In contrast, the Elderly Care Business achieved a substantial Operating Income increase to ¥27.5B (+24.0%), improving margin to 4.9% (prior year 4.0%) and contributing to company-wide profit improvement. The Children Business also grew steadily with Revenue of ¥112.9B (+4.2%) and Operating Income of ¥4.1B (+2.5%).
[Revenue] Revenue was ¥1411.4B (+2.7%), with all three businesses achieving top-line growth. Segment composition by Revenue: Medical 52.3%, Elderly Care 39.7%, Children 8.0%. The Medical Business delivered ¥738.3B (+3.7%), the largest contributor, led by medical outsourcing at ¥656.7B (+4.2%), while medical dispatch was ¥63.1B (-5.0%) and affected by labor market trends. The Elderly Care Business was ¥559.8B (+1.2%), a modest increase supported by nursing care fee revisions and improved occupancy. The Children Business was ¥112.9B (+4.2%), aided by new licensed nursery openings. Revenue from customer contracts was ¥1411.0B (99.9% of total), indicating stability of the business model. No detailed disclosure by region or service, but medical, nursing care, and childcare all show domestic-centric stable order structures.
[Profitability] Cost of sales was ¥1178.5B (83.5% of Revenue), Gross Profit was ¥232.9B (Gross Margin 16.5%, up +0.2pt from 16.3% prior year), reflecting absorption of personnel cost pressures through price adjustments and productivity gains. SG&A was ¥159.5B (11.3% of Revenue), up ¥5.6B from ¥153.8B prior year, but within acceptable range given Revenue growth. Goodwill amortization was ¥16.4B, representing 18.6% of EBITDA, acting as a JGAAP-specific profit-compressing factor. Operating Income was ¥73.5B (Operating margin 5.2%, +0.1pt YoY) — a slight improvement. Non-operating income and expenses netted to -¥1.5B (Non-operating income ¥3.9B, Non-operating expenses ¥5.3B). Interest expense of ¥2.6B decreased from ¥2.9B prior year due to reduction in long-term borrowings. Ordinary Income was ¥72.0B (Ordinary Income margin 5.1%, +0.2pt YoY), helped by lower finance costs. Special items included Special Losses of ¥11.5B (impairment losses ¥7.5B, valuation losses on investment securities ¥0.8B, etc.), which reduced pre-tax profit to ¥63.6B (prior year ¥64.5B). After Corporate taxes of ¥26.2B (effective tax rate 41.2%), Net Income attributable to owners of the parent was ¥30.8B (Net margin 2.2%, down -0.2pt from 2.4% prior year). In conclusion, while Revenue growth and improvement at the ordinary-profit level were achieved, one-off impairment losses caused a decline in Net Income — a full-year result of higher Revenue and ordinary-profit growth but lower final Net Income.
Medical Business: Revenue ¥738.3B (+3.7%), Operating Income ¥41.7B (-4.9%), Margin 5.7% (down -0.5pt from prior year 6.2%). While medical outsourcing grew steadily, rising personnel and recruitment costs pressured profits. The segment’s contribution to company Operating Income was largest at 56.8%, making margin recovery through price adjustments and productivity improvements a focus for the next period.
Elderly Care Business: Revenue ¥559.8B (+1.2%), Operating Income ¥27.5B (+24.0%), Margin 4.9% (up +0.9pt from prior year 4.0%). Improved occupancy and unit-mix optimization contributed, and the segment’s contribution to company Operating Income rose to 37.4%. If the effects of nursing care fee revisions persist, there is room for further profitability improvement.
Children Business: Revenue ¥112.9B (+4.2%), Operating Income ¥4.1B (+2.5%), Margin 3.6% (down -0.2pt from prior year 3.8%). Revenue expansion from new openings continues, but start-up costs constrained margins. The segment’s contribution to company Operating Income was 5.6%, small but expected to be a future growth driver.
Other (real estate leasing, etc.) had Revenue ¥0.4B and Operating Income ¥0.1B, limited in scale.
[Profitability] Operating margin 5.2% (up +0.1pt from 5.1% prior year), Ordinary Income margin 5.1% (up +0.2pt), Net margin 2.2% (down -0.2pt). Gross margin 16.5% (up +0.2pt) shows solid cost control, but SG&A ratio 11.3% remains relatively high. ROE was 13.1% (down -5.3pt from 18.4% prior year), driven by lower Net Income and a slight increase in shareholders’ equity due to treasury share acquisition. ROA (on Ordinary Income basis) improved to 10.6% (up +1.3pt from 9.3%), indicating better asset efficiency and core profitability.
[Cash Quality] Operating Cash Flow (OCF) / Net Income was 2.21x, indicating high quality; accrual ratio was -4.7%, showing cash backing of profit. OCF/EBITDA (pre-goodwill amortization) was 0.65x, indicating somewhat slower cash conversion, affected by an increase in trade receivables of ¥5.6B. Free Cash Flow was ¥62.7B: OCF ¥68.2B less CapEx ¥3.0B, reflecting restrained investment.
[Investment Efficiency] CapEx / Depreciation was 0.20x, low and indicating room for build-out of growth investments. Goodwill / Net Assets ratio was 48.6% (high), and Goodwill / EBITDA was 1.29x, indicating healthy recoverability but necessitating monitoring for impairment risk.
[Financial Soundness] Equity Ratio was 35.4% (up +3.0pt from 32.4% prior year). Current ratio was 133.9% (down -5.5pt from 139.4% prior year), indicating sufficient short-term liquidity. Long-term borrowings were ¥103.8B (reduced -31.6% from ¥151.6B prior year), resulting in Debt/EBITDA (pre-goodwill amortization) of 1.00x and Interest Coverage (Operating Income / Interest Expense) of 28.7x, showing substantial financial capacity. Book Value per Share (BPS) was ¥259.08 (up +5.4% from ¥245.81 prior year). EPS was ¥40.82 (down -4.9% from ¥42.94 prior year).
Operating Cash Flow was ¥68.2B (prior year ¥58.8B, +16.0%), solidly increasing to 2.21x Net Income of ¥30.8B. Pre-tax profit before income taxes ¥63.6B plus Depreciation ¥14.6B, Goodwill amortization ¥16.4B, impairment losses ¥7.5B and other non-cash charges brought subtotal OCF before working capital changes to ¥99.3B. Working capital showed a cash outflow from increased trade receivables of -¥5.6B, while inventory increase was only ¥0.2B and net other payables -¥1.2B was limited. After corporate taxes paid of ¥24.6B, the company maintained strong cash generation. Investing Cash Flow was -¥5.5B, driven by CapEx -¥3.0B and acquisition of intangible fixed assets -¥5.0B. Proceeds from sale of tangible fixed assets were ¥0.0B and proceeds from sale of intangible assets ¥0.1B, so investment recovery was limited. Free Cash Flow was OCF ¥68.2B + Investing CF -¥5.5B = ¥62.7B, ample, and after dividend payments of ¥19.3B the company retained a cash margin of ¥43.4B. Financing Cash Flow was -¥80.6B, primarily due to long-term borrowings repayment -¥47.8B, share buybacks -¥11.3B, dividend payments -¥19.3B, and net decrease in short-term borrowings -¥5.0B. Lease liability repayments -¥2.2B were also included, reflecting active debt reduction and shareholder returns. As a result, Cash and Cash Equivalents decreased by ¥17.9B from ¥140.0B at the beginning of the period to ¥122.1B at period-end, which remains within a comfortable range given robust Free Cash Flow and financial soundness.
Quality of earnings is generally good. Operating Income ¥73.5B demonstrates sustainable core earning power, and the gap to Ordinary Income ¥72.0B was small (non-operating net -¥1.5B), indicating limited impact from non-operating items. Non-operating income ¥3.9B included subsidies of ¥1.9B; while partly transitory, these are subsidies tied to business structure and have high continuity. Of non-operating expenses ¥5.3B, interest expense ¥2.6B is trending down due to debt reduction, allowing room for further improvement at the ordinary-profit level. Special items included Special Losses of ¥11.5B (equivalent to 18.1% of pre-tax profit), with impairment losses of ¥7.5B temporarily depressing Net Income. Special Gains were ¥3.1B, limited in scale, so the divergence between ordinary-profit and Net Income is mainly due to Special Losses. OCF ¥68.2B was 2.21x Net Income ¥30.8B, and OCF / Pre-tax profit before tax and adjustments was 1.07x, confirming solid cash backing. Goodwill amortization ¥16.4B is a JGAAP-specific expense; EBITDA (Operating Income + Depreciation + Goodwill amortization) reached ¥104.4B, indicating high substantive cash-generating capability. Accrual ratio -4.7% (OCF considerably exceeding Net Income) evidences smooth cash realization of profits. Comprehensive Income ¥37.8B compared to Net Income ¥30.8B included a ¥0.4B adjustment related to retirement benefits; other comprehensive income impacts were minimal, so divergence between Net Income and Comprehensive Income is limited. Overall, ordinary-profit level earnings are highly sustainable; one-off Special Losses are a source of noise at the Net Income level, but cash flow and earnings quality remain strong.
This period, the company paid an interim dividend of ¥11 per share (total ¥10.1B) and did not pay a year-end dividend (decision associated with the MBO). In the prior year, an interim dividend of ¥10 was paid, so the interim dividend increased by ¥1 YoY. Payout Ratio based on Net Income ¥30.8B compared to total cash dividends of ¥18.5B (total dividends as per the financial summary) is approximately 60%; on a cash flow basis (dividends paid ¥19.3B) it is approximately 63%. Free Cash Flow ¥62.7B versus dividends ¥19.3B yields a coverage of 3.2x, indicating sustainability. Share buybacks of ¥11.3B were executed, and total return (dividends ¥19.3B + buybacks ¥11.3B = ¥30.6B) relative to Net Income ¥30.8B yields a Total Return Ratio of approximately 99%, an extremely high level. There were no share buybacks in the prior year and the prior-year payout ratio based on dividends only was 46.6%, so the company substantially strengthened shareholder returns this period. Post-treasury share acquisition, outstanding shares were 94.74 million (after deducting treasury shares 4.19 million, 90.55 million shares), which did not dilute per-share earnings or book value and contributed to shareholder value enhancement. Due to the MBO and planned delisting, dividend policy for subsequent periods is undisclosed; however, given cash and deposits of ¥122.1B, Free Cash Flow generation, and low leverage, funding for dividends is sufficiently secured.
Personnel cost escalation risk: The Medical Business saw Operating Income decline by -4.9% YoY, primarily due to rising personnel and recruitment costs. Although Revenue increased +3.7%, gross margin improvement did not keep pace and margin fell to 5.7% (from 6.2% prior year). If competition for talent intensifies or minimum wages rise further, and if price adjustments or productivity gains do not keep pace, company-wide Operating margin could be pressured. As Medical accounts for 52.3% of Revenue and 56.8% of Operating Income contribution, margin deterioration in this segment would materially affect company performance.
Goodwill impairment risk: Goodwill of ¥113.99B represents 48.6% of Net Assets ¥234.6B and is concentrated mainly in the Elderly Care Business (goodwill of consolidated subsidiaries amortized/impairment reduced from ¥136.3B prior year to ¥114.0B this period). The company recorded impairment losses of ¥7.5B this period, but further impairments could arise if business conditions worsen or profitability declines. Goodwill / EBITDA (pre-goodwill amortization) is 1.09x, suggesting healthy recoverability, but nursing care fee revisions or occupancy declines are risk triggers. If impairments occur, Net Income and Net Assets would be significantly reduced, negatively impacting ROE and Equity Ratio.
Growth slowdown risk due to restrained investment: CapEx was ¥3.0B and CapEx / Depreciation was 0.20x, very low and down from ¥4.2B prior year. Acquisition of intangible fixed assets was ¥5.0B (prior year ¥4.1B), limited in scale, suggesting potential restraint in digital investment, new site openings, or system renewal. Revenue growth +2.7% lags industry averages, and underinvestment could lead to mid-term competitive decline or loss of market share. With OCF ¥68.2B and Free Cash Flow ¥62.7B, funding capacity exists, so re-accelerating investment is key to sustaining growth.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating margin | 5.2% | 8.1% (3.6%–16.0%) | -2.9pt |
| Net margin | 2.2% | 5.8% (1.2%–11.6%) | -3.7pt |
Profitability is below industry median. Both Operating margin and Net margin trail the median, reflecting low margins inherent to labor-intensive medical/nursing-care BPO structure and impacts of goodwill amortization and Special Losses.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue growth (YoY) | 2.7% | 10.1% (1.7%–20.2%) | -7.4pt |
Growth is below industry median. Investment restraint and a portfolio focused on stability mean the company does not reach the high-growth levels seen in IT/telecom sectors.
※Source: Company aggregation
Significant profit improvement in the Elderly Care Business (Operating Income +24.0%, margin +0.9pt) suggests structural improvement; the sustainability of nursing care fee revisions and occupancy improvements will be key to continued company margin improvement. Conversely, Medical Business margin fell -0.5pt due to rising personnel costs, so progress on price adjustments and productivity improvements should be monitored. Recovery of profitability in the core business, which accounts for 52.3% of Revenue, is essential for narrowing the gap from current Operating margin 5.2% toward industry levels.
Long-term borrowings were reduced from ¥151.6B prior year to ¥103.8B (a 31.6% reduction), improving Debt/EBITDA to 1.00x and Interest Coverage to 28.7x, indicating progressed financial health. With OCF ¥68.2B and Free Cash Flow ¥62.7B, there is room for further debt reduction, but continued low CapEx / Depreciation of 0.20x suggests ongoing investment restraint; mid-term growth investment acceleration is necessary to maintain competitiveness. Guidance is non-disclosed under the ongoing MBO, but given cash generation and financial capacity, post-delisting growth strategy and portfolio optimization will be areas of focus.
Goodwill remains high at ¥113.99B (48.6% of Net Assets). Even after impairment of ¥7.5B this period, the balance is still large. Goodwill / EBITDA is 1.09x, indicating recoverability in a healthy range, but changes in nursing care or childcare business conditions or occupancy declines could trigger impairments. Operating Cash Flow / Net Income 2.21x and accrual ratio -4.7% show strong cash backing of profits and high cash flow quality, but attention is required for volatility at the Net Income level due to Special Losses.
This report was auto-generated by AI analyzing XBRL financial statement data and is a financial analysis document. It is not a recommendation to invest in any specific security. Industry benchmarks are reference data compiled by the Company based on publicly disclosed financial statements. Investment decisions should be made at your own responsibility; please consult a professional advisor as needed.