| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥617.7B | ¥605.6B | +1.9% |
| Operating Income | ¥43.4B | ¥47.0B | -7.7% |
| Ordinary Income | ¥43.4B | ¥46.9B | -7.4% |
| Net Income | ¥27.5B | ¥29.5B | -6.8% |
| ROE | 6.8% | 7.3% | - |
For the fiscal year ended March 2026, Revenue was ¥617.7B (YoY +¥12.1B +1.9%), achieving top-line growth, but Operating Income was ¥43.4B (YoY -¥3.6B -7.7%), Ordinary Income ¥43.4B (YoY -¥3.5B -7.4%), and Net Income ¥27.5B (YoY -¥2.0B -6.8%), resulting in a profit decline. Gross margin improved to 54.7% (YoY +1.6pt), but SG&A ratio rose to 47.7% (+1.1pt), driving Operating Margin down to 7.0% from 7.8% a year earlier (-0.7pt). The core Medical Services segment delivered a solid Revenue of ¥418.3B (+3.3%), but segment profit slowed by -6.2% YoY. Interior Health recorded Revenue ¥196.9B (-0.5%) and segment profit down -10.8%, reflecting softened consumer demand. Operating Cash Flow (OCF) was ¥63.3B, 2.3x Net Income, indicating strong cash backing of profits, but decreased -15.0% YoY due to working capital headwinds from Accounts Payable decline and Accounts Receivable increase. Against full-year guidance (Revenue ¥634.0B, Operating Income ¥46.0B), progress rates were 97% for Revenue and 94% for Operating Income, trailing plan; SG&A control and working capital management will be the focus in H2.
[Revenue] Revenue of ¥617.7B (+1.9%) was driven by Medical Services at ¥418.3B (67.7% of total, +3.3%). Rental and sales of medical and nursing-care beds and linen supply to hospitals performed steadily, supported by structural demand from aging. Conversely, Interior Health at ¥196.9B (31.9%, -0.5%) saw modest decline due to weak consumer sentiment affecting door-to-door sales of beds/furniture and wholesale. Other business was ¥5.7B (0.9%, -2.4%), slightly down from real estate leasing, etc. By segment, Medical’s share rose from 66.9% to 67.7%, increasing the company’s dependence on the Medical portfolio.
[Profitability] Cost of sales was ¥279.6B (Cost of Sales Ratio 45.3%), yielding Gross Profit ¥338.1B and Gross Margin 54.7% (up +1.6pt YoY). Stable procurement terms and price maintenance measures likely contributed. However, SG&A was ¥294.8B (SG&A Ratio 47.7%), up ¥11.2B YoY (+3.9%), materially outpacing Revenue growth (+1.9%), resulting in Operating Income ¥43.4B (-7.7%). The SG&A increase was not detailed but likely reflects higher personnel, logistics, and marketing expenses. Non-operating income totaled ¥2.1B (interest income ¥0.7B, dividend income ¥0.1B, etc.), while non-operating expenses totaled ¥2.1B (including interest expenses ¥0.7B), largely offsetting each other; Ordinary Income ¥43.4B (-7.4%) was nearly the same as Operating Income. Extraordinary losses included loss on disposal of fixed assets ¥0.5B, business restructuring costs ¥0.8B, and valuation loss on investment securities ¥0.2B, totaling ¥0.8B, leaving Profit Before Tax ¥42.5B. After income taxes of ¥15.1B (effective tax rate 35.5%), Net Income was ¥27.5B (-6.8%). Comprehensive income was ¥24.1B, ¥3.4B below Net Income, primarily due to actuarial adjustments related to retirement benefits of -¥3.7B. In summary, despite revenue growth, rising SG&A ratio eroded operating leverage and led to higher revenue but lower profit.
Medical Services: Revenue ¥418.3B (+3.3%), Segment Profit (on Ordinary Income basis) ¥33.7B (-6.2%), with a margin of 8.1% (down 0.8pt from 8.9%). Structural tailwinds in medical and nursing demand supported Revenue, but subdued utilization rates and higher indirect costs pressured profitability. Interior Health: Revenue ¥196.9B (-0.5%), Segment Profit ¥9.5B (-10.8%), margin 4.8% (prior 5.4%, -0.5pt). Weak consumer demand and increased promotional spending weighed on both top and bottom lines. Other business (real estate leasing, etc.) recorded Revenue ¥5.7B (-2.4%) and Segment Profit ¥0.0B, remaining small and flat. Medical Services’ share reaching 67.7% underscores that improving profitability in this segment is critical to company-wide recovery.
[Profitability] Operating Margin 7.0% decreased 0.7pt from 7.8%, as SG&A ratio increase (+1.1pt) offset Gross Margin improvement (+1.6pt). Net Margin 4.4% fell 0.5pt from 4.9%. ROE was 6.8%, below prior 7.4%, primarily due to contraction in Net Margin. ROA was 4.0% (prior 4.1%), largely flat. [Cash Quality] OCF/Net Income was 2.3x, indicating solid cash backing of profits. However, OCF/EBITDA was 0.68x (Operating CF ¥63.3B / EBITDA ¥93.7B [Operating Income ¥43.4B + Depreciation ¥50.3B]) and missed the benchmark, with working capital burden depressing cash conversion efficiency. [Investment Efficiency] Capital expenditure ¥51.3B was roughly in line with Depreciation ¥50.3B, indicating maintenance/renewal-focused spending. Goodwill ¥2.2B (0.6% of Net Assets) and Intangible Assets ¥9.6B (1.4% of Total Assets) are very low, limiting goodwill impairment risk. [Financial Soundness] Equity Ratio 59.3% (prior 57.3%, +2.0pt improvement), Debt/EBITDA 0.55x (Interest-bearing debt ¥51.7B / EBITDA ¥93.7B), Current Ratio 260%, Quick Ratio 220%—balance sheet is very solid. Short-term debt ratio 29.8% implies limited maturity mismatch. Cash ¥63.5B + Short-term investment securities ¥85.0B totaling ¥148.5B exceeds Current Liabilities ¥135.7B, indicating no short-term liquidity risk.
Operating CF was ¥63.3B (prior ¥74.5B, -15.0%). Starting from Profit Before Tax ¥42.5B, add non-cash charges including Depreciation ¥50.3B and Goodwill amortization ¥2.3B, then adjust for working capital changes and income tax payments. On working capital: Inventory decrease +¥12.3B, Accounts Receivable increase -¥4.7B, Accounts Payable decrease -¥13.8B — shortened AP terms and delayed AR collections squeezed cash. Income tax payments -¥25.6B also increased (prior -¥9.0B), contributing to OCF/EBITDA 0.68x and weaker cash conversion. Investing CF was -¥43.2B, driven mainly by Capital Expenditure -¥51.3B (hospital and nursing facility equipment and rental asset renewals), redemption of investment securities +¥60.0B, purchase of investment securities -¥45.0B, netting to capital spending centered at -¥51.3B. Included were subsidiary share acquisition -¥1.0B and proceeds from sale of securities +¥2.5B. Free Cash Flow was ¥20.1B (OCF ¥63.3B + Investing CF -¥43.2B), covering Dividends Paid ¥13.8B by 1.5x. Financing CF was -¥28.8B, with lease liabilities repayment -¥29.0B, share buybacks -¥15.0B, long-term borrowings repayment -¥2.9B, and dividends paid -¥13.6B as main items. Sale-and-leaseback proceeds +¥31.8B supported liquidity. Ending cash was ¥123.6B, down ¥8.7B from ¥132.2B, but combined with short-term investment securities ¥85.0B, liquidity assets of ¥208.6B were maintained.
Of Ordinary Income ¥43.4B, Operating Income ¥43.4B is the core, and non-operating items netted nearly zero (Non-operating income ¥2.1B - Non-operating expenses ¥2.1B). Recurring non-operating income comprised interest income ¥0.7B, subsidy income ¥0.3B, equity-method investment income ¥0.2B, etc. Non-operating expenses were mainly interest expense ¥0.7B, indicating limited interest burden. Extraordinary losses ¥0.8B (loss on disposal of fixed assets ¥0.5B, business restructuring costs ¥0.8B, valuation loss on investment securities ¥0.2B) are temporary, though business restructuring costs may recur and warrant monitoring. Comprehensive income ¥24.1B was ¥3.4B below Net Income ¥27.5B, mainly due to retirement benefit adjustment -¥3.7B (actuarial differences). Valuation gain on securities +¥0.1B and deferred hedge gains +¥0.2B were positive but outweighed by retirement benefit impact. OCF ¥63.3B is 2.3x Net Income ¥27.5B, supporting earnings quality. However, working capital swings (AP decrease -¥13.8B, AR increase -¥4.7B) depressed cash, and OCF/EBITDA 0.68x shows subpar cash conversion. Accrual metrics suggest extended inventory days and AR collection days, so some caution on earnings quality is warranted.
Full-year guidance: Revenue ¥634.0B (+2.6%), Operating Income ¥46.0B (+6.1%), Ordinary Income ¥47.0B (+8.3%), Net Income ¥30.7B (+11.8%), EPS ¥92.00. Comparing actuals (Revenue ¥617.7B, Operating Income ¥43.4B, Net Income ¥27.5B, EPS ¥82.04) yields progress rates: Revenue 97.4%, Operating Income 94.3%, Net Income 89.6%, indicating underperformance across profit stages. To achieve H2 targets (assumed remaining: Revenue ¥16.3B, Operating Income ¥2.6B, Net Income ¥3.2B), substantial SG&A cuts and normalization of working capital are required. Given year-end inventory, AP, and AR positions, meeting guidance is not assured. The company is expected to discuss progress and measures at an earnings briefing (scheduled June 4); based on current progress and working capital metrics, downside revision risk to guidance merits vigilance.
Annual dividend is ¥41 (Interim ¥17 + Year-end ¥24), unchanged from prior year. Payout Ratio is 50.0% (Dividend ¥41 against basic EPS ¥82.04), indicating a stable return stance. Total dividends amounted to ¥13.8B, covering 68.7% of Free Cash Flow ¥20.1B, so standalone dividend sustainability is high. Share buybacks of ¥15.0B were executed during the period, with treasury stock increasing from -¥2.1B at the beginning to -¥17.0B at year-end. Total shareholder returns (Dividends ¥13.8B + Share buybacks ¥15.0B) were ¥28.8B, ¥8.7B above Free Cash Flow ¥20.1B. The excess was funded by drawing down short-term investment securities (beginning ¥100.0B → ending ¥85.0B, -¥15.0B) and beginning cash (¥72.2B → ending cash ¥63.5B, -¥8.7B). Cash + Investment securities fell from ¥172.2B at the start to ¥148.5B at year-end (-¥23.7B), but liquidity of ¥208.6B remains, so return capacity is adequate. The company emphasizes stable dividends and is expected to maintain dividends. Share buybacks are viewed as tactical/cyclical, to be executed flexibly based on cash generation and inventory reduction progress.
Working Capital Efficiency Deterioration: CCC 132 days (Inventory Days 105 + AR Days 71 - AP Days 44) has lengthened, pressuring OCF/EBITDA 0.68x. Simultaneous AP decrease -¥13.8B and AR increase +¥4.7B reduced OCF by approximately ¥18B. Inventory ¥54.8B (8.9% of Revenue) improved from ¥65.2B but DIO 105 days remains high. Strengthening credit control and inventory optimization are urgent; failure to improve will continue to impede cash generation.
SG&A Ratio Increase: SG&A ¥294.8B (47.7% of Revenue) rose ¥11.2B YoY (+3.9%), outstripping Revenue growth +1.9% and reducing Operating Margin by 0.7pt. Likely drivers are higher personnel, logistics, and promotional costs, with limited scope to cut fixed costs. Inadequate SG&A control could sustain margin pressure and crystallize risk of missing full-year guidance.
Business Concentration Risk: Medical Services accounts for 67.7% of Revenue, and slowdown in its segment profit (¥33.7B, -6.2%) directly hit company profit. If nursing-care insurance revisions, reimbursement price changes, or intensified competition depress utilization or pricing, portfolio concentration will amplify earnings volatility. Interior Health’s modest -0.5% Revenue decline weakens diversification benefits.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 7.0% | 7.8% (4.6%–12.3%) | -0.7pt |
| Net Margin | 4.4% | 5.2% (2.3%–8.2%) | -0.7pt |
Profitability is slightly below the manufacturing median and sits around mid-to-lower quartile within the industry. Rising SG&A has pushed performance below industry averages; cost management improvement is key to relative performance.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 1.9% | 3.7% (-0.4%–9.3%) | -1.8pt |
Growth lags the industry median by 1.8pt, ranking mid-to-lower. Structural demand in Medical Services is supportive, but weak Interior Health performance and SG&A burden constrain growth relative to peers.
※Source: Company compilation
SG&A Ratio Normalization is prerequisite for margin recovery: SG&A ratio rose to 47.7% (+1.1pt), driving Operating Margin to 7.0% (-0.7pt). Productivity improvements in personnel, logistics, and marketing to restore SG&A to the mid-46% range are the tipping point for hitting full-year guidance and margin recovery. H2 SG&A trends and specific measures to be disclosed at the investor briefing (June 4) are key.
Correcting Working Capital is key to restoring cash generation: CCC 132 days and OCF/EBITDA 0.68x show weakened cash conversion; AP decrease -¥13.8B and AR increase +¥4.7B reduced OCF by about ¥18B. If inventory optimization, stricter credit collection, and extension of AP terms can turn working capital positive, OCF recovery to the ¥70B range is feasible. Restoring OCF/EBITDA to >0.9x is a condition to sustain combined dividend + buyback returns.
Improving Medical Services profitability is the company-wide inflection point: The core segment (67.7% of Revenue) saw margin decline to 8.1% (-0.8pt), driving company-wide profit decline. If measures responding to nursing-care fee revisions, optimizing pricing and utilization, and more efficient operation of lease/rental assets can restore segment margin to the 9% range, company Operating Margin could surpass the industry median 7.8%. Strong balance sheet (Equity Ratio 59%, Debt/EBITDA 0.55x) supports dividend stability, but shareholder value enhancement requires profit growth and normalized cash generation.
This report was auto-generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as needed.