FRANCE BED HOLDINGS (7840) FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, the Company recorded higher revenue but lower earnings, as SG&A expenses increased at a rate exceeding revenue growth and pressured profitability. Revenue increased to ¥61.77B (up +1.9% year on year), while Operating Income declined to ¥4.34B (down -7.7%), Ordinary Income to ¥4.34B (down -7.4%), and Net Income to ¥2.75B (down -6.8%). Although the core Medical Services Business drove revenue growth, the increase in SG&A expenses exceeding the improvement in gross margin was the primary factor behind the decline in Operating Income.

Factors Affecting Performance

【Revenue】Revenue increased 1.9% year on year to ¥61.77B. The Medical Services Business (¥41.83B, up +3.3%), which accounted for 67.7% of the revenue mix, drove revenue growth, while the Interior & Health Business (¥19.38B, down -0.5%) reported lower revenue.

【Profit and Loss】The gross margin improved from the previous year to 54.7%; however, SG&A expenses increased 3.9% year on year to ¥29.48B, outpacing revenue growth, and the Operating Margin declined to 7.0%. An extraordinary loss of ¥0.08B (including business structural reform expenses) was recorded as a temporary factor. Segment profit declined in both segments, by -6.2% for the Medical Services Business and -10.8% for the Interior & Health Business, resulting in higher revenue but lower earnings.

Segment Analysis

The Medical Services Business remained the core business, with revenue of ¥41.83B (up +3.3% year on year), segment profit of ¥3.37B (down -6.2%), and a profit margin of 8.1%. However, despite higher revenue, segment profit declined, highlighting the challenge of absorbing rental asset operating costs, personnel expenses, and logistics expenses. The Interior & Health Business was weak on both fronts, with revenue of ¥19.38B (down -0.5%), segment profit of ¥0.95B (down -10.8%), and a profit margin of 4.9%. Given the Company’s structural dependence on the Medical Services Business for 67.7% of revenue, improving the profitability of this segment will be key to recovering consolidated earnings. Segment profit is based on Ordinary Income and therefore differs from consolidated Operating Income by the amount of company-wide expenses and adjustments.

Key Financial Indicators

【Profitability】The Operating Margin declined to 7.0% from 7.8% in the previous year, while the Net Profit Margin contracted to 4.5% (4.9% in the previous year). The gross margin improved to 54.7%; therefore, the deterioration in profitability was attributable to an increase in the SG&A ratio (47.7%, up approximately +2pt year on year). 【Cash Quality】Operating Cash Flow (OCF) was ¥6.33B, approximately 2.3 times Net Income of ¥2.75B, indicating solid cash backing. However, the OCF conversion rate relative to EBITDA of ¥9.37B remained at approximately 0.68x. 【Investment Efficiency】ROE was 6.8%, total asset turnover was approximately 0.91x, and financial leverage remained conservative at 1.69x. 【Financial Soundness】The Equity Ratio was 59.3%, while the current ratio was approximately 260%, providing a substantial financial buffer. Interest-bearing debt was limited, and Debt/EBITDA also remained at a low level.

Cash Flow Analysis

OCF declined 15.0% year on year to ¥6.33B but remained substantially above Net Income of ¥2.75B. A decrease in inventories of ¥1.23B contributed to cash generation, while an increase in trade receivables of ¥0.47B and a decrease in trade payables of ¥1.38B resulted in a cash burden from working capital. Investing Cash Flow was -¥4.32B, primarily due to capital expenditures of ¥5.13B, and the Company continued renewal and expansion investment slightly exceeding depreciation and amortization of ¥5.03B. Financing Cash Flow was -¥2.88B, with share repurchases of ¥1.50B and dividend payments being the main cash outflows. As a result, Free Cash Flow was ¥2.01B, providing a certain degree of capacity to fund dividends and capital expenditures.

Earnings Quality

OCF reached approximately 2.3 times Net Income, indicating that current-period earnings were generally supported by cash generation. Non-operating income and expenses were both ¥0.21B and were nearly balanced, limiting their impact on the recurring earnings structure. The extraordinary loss of ¥0.08B consisted of temporary factors such as business structural reform expenses and should be distinguished from recurring earnings power. Meanwhile, the OCF conversion rate relative to EBITDA remained at approximately 0.68x. Tax payments of ¥2.56B and working capital factors, including the increase in trade receivables and decrease in trade payables, restrained cash generation and should be noted when assessing earnings quality. Comprehensive Income was ¥2.41B, below Net Income of ¥2.75B, primarily due to an adjustment related to retirement benefits of -¥0.37B.

Earnings Forecasts and Guidance

The Company forecasts revenue of ¥63.40B (up +2.6% year on year), Operating Income of ¥4.60B (up +6.1%), Ordinary Income of ¥4.70B (up +8.3%), Net Income of ¥3.07B (up approximately +11.8%), EPS of ¥92, and dividends of ¥42. The plan calls for Operating Income growth to exceed revenue growth, making improvement in the SG&A ratio, which deteriorated during the current period, a prerequisite for achieving the forecast. The forecast Operating Margin is approximately 7.3%, incorporating a recovery from the current-period result of 7.0%.

Shareholder Returns

Annual dividends totaled ¥41, comprising an interim dividend of ¥17 and a year-end dividend of ¥24, with the Company-disclosed Payout Ratio at 49.9%. Total dividend payments of ¥1.36B represented approximately 49.6% of Net Income of ¥2.75B, and dividends were sufficiently covered by Free Cash Flow of ¥2.01B. Including share repurchases of ¥1.50B, total shareholder returns amounted to ¥2.87B, resulting in a Total Return Ratio of approximately 104.3% relative to Net Income, exceeding the earnings level. The dividend forecast for the next fiscal year is ¥42, representing a planned ¥1 increase from the current period. Dividends alone are at a sustainable level; however, if share repurchases continue, the capacity for shareholder returns will depend on future earnings and cash generation.

Risk Factors

1. Business concentration risk: The Medical Services Business accounts for 67.7% of revenue. Despite revenue growth (+3.3%), segment profit declined by -6.2%, meaning that trends in nursing-care reimbursement and rental asset operating costs could have a significant impact on consolidated performance.

2. Risk of continued profitability deterioration: SG&A expenses increased at a rate (+3.9%) exceeding revenue growth (+1.9%), causing the Operating Margin to decline to 7.0%. If the increase in the SG&A ratio continues, the Company may fail to achieve the next fiscal year’s forecast Operating Margin of 7.3%.

3. Working capital efficiency risk: The OCF-to-EBITDA conversion rate remained at approximately 0.68x, with the increase in trade receivables and decrease in trade payables weighing on cash generation. If improvement in working capital efficiency is delayed, Free Cash Flow available for capital expenditures and shareholder returns could be affected.

Industry Benchmark (For Reference; Company Analysis)

Industry Benchmark (manufacturing)

Profitability and Returns

The Company’s profitability was below the industry median for both metrics, with the Net Profit Margin gap of 1.4pt being relatively significant.

Growth and Capital Efficiency

Revenue growth was also below the industry median, positioning the Company toward the slower end of the industry’s growth range.

※Source: Company compilation

Key Takeaways from the Earnings Results

1. While the gross margin improved to 54.7%, SG&A expenses increased at a rate exceeding revenue growth, causing the Operating Margin to decline to 7.0% from 7.8% in the previous year. Controlling SG&A expenses will be key to restoring profitability.

2. Despite revenue growth (+3.3%), the core Medical Services Business posted a -6.2% decline in segment profit. Since this business accounts for 67.7% of the revenue mix, its profitability recovery will determine the Company-wide earnings trend.

3. OCF was approximately 2.3 times Net Income, indicating solid cash backing for earnings. However, the working capital efficiency reflected in the OCF conversion rate of 0.68x, including trade receivables and trade payables, warrants close monitoring when evaluating future cash-generation capacity.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,133–¥1,197 at Cost of Equity ±1%, and ¥1,163–¥1,165 at ω±0.1.

Notes:

• Goodwill amortization of ¥7.0 per share has been added back to earnings (to reflect a non-cash expense and improve comparability with IFRS companies).
• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated value based solely on publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting with professionals as necessary.

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