Ikka Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥5.21B
• Operating Income: ¥-46M
• Net Income: ¥-157M
• EPS: ¥-7.35

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

FY2026 Q2 shows solid top-line momentum but continued bottom-line weakness for the consolidated group. Revenue rose 14.7% YoY to ¥5,215m, signaling demand recovery and/or contribution from new units or pricing. Gross profit reached ¥3,022.7m, with a high gross margin of 58.0%, indicating strong unit-level contribution or effective COGS management. Despite this, operating income was a loss of ¥46m, essentially flat YoY, highlighting persistent SG&A/fixed cost pressure. Ordinary loss widened to ¥69m, reflecting financing costs (interest expense ¥14.8m) and limited operating buffer. Net loss was ¥52m (EPS -¥7.35), albeit aided by a negative tax charge (tax benefit) of ¥72.9m. EBITDA was positive at ¥74.0m, but the EBITDA margin was only 1.4%, and EBIT-based interest coverage remained negative (-3.1x), evidencing insufficient profitability to comfortably service debt. On the balance sheet, assets were ¥6,008m and equity ¥925m; this implies an equity ratio around 15% (despite a reported 0% placeholder) and financial leverage of 6.5x per DuPont. Liquidity is marginally adequate with a current ratio of 1.11x and working capital of ¥202m, but headroom is thin for a consumer-facing, fixed-cost business. Operating cash flow was negative at ¥191m despite positive EBITDA, implying sizable working capital outflows and/or non-cash adjustments overwhelming operating inflows. Financing cash flow was positive at ¥507m, suggesting reliance on external funding to bridge operating shortfalls and investments; investing cash flow is not disclosed in this dataset. The DuPont ROE is -5.62% driven by a -1.0% net margin, relatively solid asset turnover (0.868x), and high leverage (6.5x), indicating margin improvement is the critical swing factor for equity returns. The company paid no dividend (DPS ¥0) and recorded a 0% payout ratio, appropriate given negative earnings and OCF. Overall, the quarter reflects improving sales traction but continued pressure from operating leverage and financing costs, with cash conversion proving weak. Sustaining revenue growth while tightening SG&A and enhancing store-level efficiency will be essential to return to profitability and positive free cash flow. Given several unreported items (e.g., cash balance, inventories, investing CF), the analysis focuses on available non-zero figures and derived metrics.

Profitability Analysis

ROE_decomposition: DuPont ROE is -5.62%, driven by Net Profit Margin -1.00% × Asset Turnover 0.868 × Financial Leverage 6.50. The negative margin is the primary drag; leverage amplifies the impact of small margin movements on ROE. margin_quality: Gross margin is high at 58.0% (¥3,022.7m GP on ¥5,215.0m revenue), suggesting healthy unit-level economics or favorable mix/pricing. However, the translation to operating margin is weak at -0.9% (¥-46m), indicating SG&A and fixed costs absorb gross profits. Ordinary margin is -1.3% and net margin -1.0%, with a tax benefit partially offsetting operating and financing losses. operating_leverage: Positive EBITDA (¥74.0m) alongside a small operating loss implies high operating leverage: modest revenue growth could swing results to break-even/profit, but conversely downside in sales can quickly deepen losses. Interest expense of ¥14.8m combined with negative EBIT results in negative interest coverage (-3.1x), indicating limited buffer until operating margins turn positive.

Growth Assessment

revenue_sustainability: Revenue growth of +14.7% YoY is robust and suggests recovering traffic, price/mix improvements, and/or footprint expansion. Sustainability will depend on maintaining same-store growth and operational execution through seasonally softer periods. profit_quality: Despite top-line growth, profit quality is weak: net margin -1.0%, ordinary loss ¥69m, and EBITDA margin 1.4% provide little cushion for shocks. The presence of a tax benefit (¥72.9m) helped net results, but core profitability remains challenged. outlook: If sales momentum persists and SG&A efficiency improves, small incremental gains could restore positive EBIT. Key to the outlook are cost discipline, labor and utilities efficiency, and stabilization of input costs. Given the high operating leverage, guidance (not provided here) will likely hinge on H2 traffic and cost normalization.

Financial Health

liquidity: Current assets ¥2,071.7m vs current liabilities ¥1,869.4m yield a current ratio of 1.11x and working capital of ¥202.3m, indicating tight but positive short-term liquidity. Quick ratio is reported equal to current due to unreported inventories; true quick ratio may be lower if inventory exists. solvency: Total liabilities ¥4,812.8m against equity ¥925.0m imply a debt-to-equity of 5.20x and an equity ratio around 15.4% (computed; reported equity ratio 0% is an unreported placeholder). Interest expense ¥14.8m with negative EBIT results in weak coverage (-3.1x). High leverage and thin margins elevate solvency risk if operating performance does not improve. capital_structure: Assets ¥6,008m vs equity ¥925m reflect financial leverage of 6.5x. Positive financing cash flow (+¥506.7m) suggests increased borrowings or equity-related inflows to support operations and commitments.

Cash Flow Quality

earnings_quality: OCF of -¥190.8m versus net loss of -¥52.0m produces an OCF/Net Income ratio of 3.67, but this reflects a deeper cash shortfall relative to accrual earnings (both negative). Positive EBITDA alongside negative OCF indicates working capital outflows and/or other adjustments are significant. FCF_analysis: Free cash flow is not determinable from this dataset because investing cash flow is unreported (shown as zero). Given negative OCF and reliance on ¥506.7m of financing inflows, underlying FCF is likely negative in the period. working_capital: With operating loss modest (-¥46m) and D&A ¥120.0m, the swing to -¥190.8m OCF implies a sizable working capital build (estimated outflow roughly ¥260–¥280m). Inventory and cash details are unreported, limiting granularity; receivables and payables movements likely drove the outflow.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0.00 with a payout ratio of 0%, appropriate given negative net income (-¥52m). FCF_coverage: With OCF negative and investing CF unreported, coverage of any prospective dividend by FCF cannot be demonstrated; prudence dictates retention until sustained positive OCF is achieved. policy_outlook: Given losses, thin liquidity, and high leverage, maintaining a conservative dividend stance appears likely until profitability and cash generation stabilize. Potential reinstatement would require improved EBIT, positive OCF, and clearer deleveraging capacity.

Risk Assessment

Business Risks:

• High operating leverage: small revenue fluctuations materially impact operating income.
• Cost inflation risk in labor, ingredients, and utilities pressuring margins.
• Execution risk in SG&A discipline and store-level efficiency needed to convert high gross margin into operating profit.
• Demand volatility and seasonality in consumer-facing operations.
• Competitive intensity potentially affecting pricing power and traffic.

Financial Risks:

• Elevated leverage (D/E 5.20x; financial leverage 6.5x) increasing sensitivity to earnings volatility.
• Negative EBIT-based interest coverage (-3.1x) indicating limited debt-servicing headroom.
• Negative operating cash flow requiring external financing (+¥506.7m financing inflow in the period).
• Tight liquidity (current ratio 1.11x) with limited buffer for shocks.
• Potential covenant pressure if profitability does not improve (not disclosed but a plausible risk with high leverage).

Key Concerns:

• Conversion of strong gross margin (58.0%) into sustainable operating profit remains unresolved.
• Working capital outflows driving OCF negative despite positive EBITDA.
• Reliance on financing inflows to support operations amid losses.
• Data limitations (cash balance, inventories, investing CF) constrain visibility on near-term cash runway.

Investment Implications

Key Takeaways:

• Top-line growth is robust (+14.7% YoY), but profitability remains negative (operating margin -0.9%, net margin -1.0%).
• High gross margin underscores potential earnings power if SG&A is optimized.
• High leverage (D/E 5.20x) and negative interest coverage elevate financial risk.
• OCF is negative (-¥190.8m), implying weak cash conversion and likely negative underlying FCF.
• Liquidity is thin but positive (current ratio 1.11x; working capital ¥202m).

Metrics to Watch:

• Same-store sales and ticket/traffic trends to gauge sustainability of revenue growth.
• SG&A-to-sales ratio and labor/productivity metrics to assess operating leverage.
• Monthly OCF trajectory and working capital movements (receivables, payables, inventory).
• EBIT and EBITDA margins vs interest expense to restore positive coverage.
• Net debt and leverage ratios (D/E, net debt/EBITDA) as financing support normalizes.

Relative Positioning: Within consumer-facing, fixed-cost businesses, the company exhibits stronger recent revenue growth but weaker profitability and cash conversion versus a typical steady-margin peer, coupled with above-average leverage that heightens sensitivity to execution.

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