| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥405.9B | ¥383.5B | +5.8% |
| Operating Income | ¥15.7B | ¥15.9B | -1.8% |
| Ordinary Income | ¥15.0B | ¥16.9B | -11.3% |
| Net Income | ¥9.4B | ¥9.6B | -2.8% |
| ROE | 1.7% | 1.7% | - |
For Q1 of the fiscal year ending March 2026, Revenue was ¥405.9B (YoY +¥22.3B, +5.8%), Operating Income was ¥15.7B (YoY -¥0.3B, -1.8%), Ordinary Income was ¥15.0B (YoY -¥1.9B, -11.3%), and Net Income was ¥9.4B (YoY -¥0.3B, -2.8%). Revenue grew 3.5% driven by strong performance in the Hotel Business (+10.6%) and Foodservice Business (+5.5%), but Operating Income declined due to an increase in SG&A ratio. At the Ordinary Income level, equity-method investment income contracted from ¥2.9B in the prior year to ¥0.9B, resulting in double-digit decline.
[Revenue] Revenue increased to ¥405.9B (YoY +5.8%). By segment, the Hotel Business recorded ¥101.0B (+10.6%) with double-digit growth, Foodservice Business ¥167.1B (+5.5%), and Food Products Business ¥15.1B (+36.9%) performed well. Contract Business was ¥121.9B (-0.1%), slightly down. Gross margin remained stable at 70.9% (prior year 70.9%), with progress in price pass-through and mix improvement.
[Profitability] Operating Income declined to ¥15.7B (YoY -1.8%). Cost of sales ratio was steady at 29.1% year-on-year, but SG&A rose to ¥272.1B (prior year ¥255.97B), an increase of +6.3%, pushing the SG&A ratio to 67.0% from 66.7% (approx. +30bp). Rising labor and energy costs made SG&A absorption difficult, and Operating Margin fell to 3.9% (prior year 4.2%). Non-operating results saw equity-method investment income drop materially to ¥0.9B from ¥2.9B a year ago, and interest expense of ¥3.0B persisted, causing Ordinary Income to decline to ¥15.0B (-11.3%). Extraordinary items were net -¥0.4B (Extraordinary Income ¥2.3B, Extraordinary Loss ¥2.7B) with limited impact; Pre-tax Income was ¥14.6B, and after corporate taxes of ¥5.2B, Net Income was ¥9.4B (-2.8%). In summary, the company reported revenue growth but profit decline.
Foodservice Business: Revenue ¥167.1B (+5.5%), Segment Profit ¥6.4B, margin approx. 3.8%. Royal Host recorded ¥110.7B and Tenya ¥31.1B, with both customer counts and spend per customer remaining solid, but margin remained low due to rising labor costs. Contract Business: Revenue ¥121.9B (-0.1%), Segment Profit ¥6.1B, margin approx. 5.0%. Main channels are airport terminal and highway店舗 (terminal and highway stores), while revenue declines in entertainment-facility outlets weighed on overall results. Hotel Business: Revenue ¥101.0B (+10.6%), Segment Profit ¥13.9B, margin approx. 13.8%, the highest, supported by recovery in accommodation demand and higher room rates. Food Products Business: Revenue ¥15.1B (+36.9%), Segment Profit ¥1.1B, margin approx. 7.3%, driven by new contributions from a snack delivery business. After corporate adjustments (Corporate/Elimination -¥13.7B), Ordinary Income was ¥15.0B.
[Profitability] Operating Margin was 3.9% (prior year 4.2%), deteriorating ~30bp; Net Margin declined to 2.3% (prior year 2.5%). ROE was 1.7% (prior year 1.8%), slightly lower. ROE decomposition: Net Margin 2.3% × Asset Turnover 0.306 × Financial Leverage 2.42x, with the decline in Net Margin as the main driver. [Cash Quality] Operating Cash Flow/Net Income was 2.19x, indicating good quality, but Operating CF/EBITDA was low at 0.59x. Factors included increased corporate tax payments (¥25.9B), a decrease in trade payables (¥5.1B) leading to cash outflows and other timing effects. Days Sales Outstanding 92 days, Inventory Days 90 days, indicating room for turnover improvement. [Investment Efficiency] ROIC was 1.8%, well below the cost of capital. Capex/Depreciation was 0.73x, indicating restrained investment and a preference to prioritize cash preservation for the time being. [Financial Health] Equity Ratio was 41.3% (prior year 40.9%), remaining in a stable range. Current Ratio 105.8%, Quick Ratio 95.6% indicate thin short-term liquidity and underscore the importance of working capital management. Debt/EBITDA was 4.61x, somewhat elevated, but interest coverage (EBIT / Interest Expense) was 5.31x and EBITDA-based coverage 11.86x, indicating sufficient interest payment capacity.
Operating Cash Flow was ¥20.5B (prior year ¥37.5B, -45.4%), a significant decline. Operating CF subtotal remained ¥49.3B, over five times Net Income, but corporate tax payments increased sharply to ¥25.9B (prior year ¥4.6B) and a decrease in trade payables of ¥5.1B was a cash outflow. Decreases in accounts receivable of ¥5.8B and inventory of ¥5.3B contributed positively, but timing effects were large. Investing CF was -¥15.4B, mainly ¥14.2B in capital expenditures. Free Cash Flow was positive at ¥5.1B, but Financing CF was significantly negative at -¥55.9B. Financing CF included repayment of long-term borrowings ¥29.8B, dividend payments ¥17.4B, finance lease repayments ¥6.1B, while long-term borrowings procured ¥81.0B; net was cash outflow. As a result, Cash and Cash Equivalents declined materially to ¥144.6B (prior year ¥195.7B, -26.0%), and the liquidity buffer decreased markedly.
The divergence between Ordinary Income and Net Income was 37.3%, mainly due to corporate taxes of ¥5.2B. Extraordinary items were net -¥0.4B and limited: impairment losses ¥0.2B, loss on disposal of fixed assets ¥2.5B, and compensation income ¥2.3B. Non-operating items included equity-method investment income of ¥0.9B (down from ¥2.9B prior year) and interest expense of ¥3.0B, which together depressed Ordinary Income. The decline in equity-method profit stemmed from investee performance fluctuations and is a non-recurring factor with uncertain persistence. The accrual ratio (Net Income - Operating CF) / Total Assets was -0.8%, low, indicating good earnings quality. Goodwill amortization under JGAAP was ¥1.2B, about 3.3% of EBITDA, and goodwill-amortization-adjusted EBITDA was ¥36.2B (margin 8.9%). Non-operating income totaled ¥2.8B, mainly equity-method profit and miscellaneous income; non-operating expenses totaled ¥3.5B, largely interest expense.
Full Year plan remains at Revenue ¥1,748.0B (+5.6%), Operating Income ¥89.5B (+16.4%), Ordinary Income ¥88.0B (+11.1%). Q1 progress ratios are Revenue 23.2%, Operating Income 17.5%, Ordinary Income 17.0%, Net Income 16.3%. Revenue is close to the standard 25% and generally within an acceptable range, but Operating Income and below are well below the standard 25%, indicating significant lag in profit progress. Causes include higher SG&A ratio, reduced equity-method income, and continued interest burden. Key to achieving targets will be improved utilization in busy periods from Q2 onward, effective price implementation, and labor productivity improvements. The company has not revised guidance and expects a rebound in the second half.
The dividend forecast for this period is DPS ¥0, maintaining a no-dividend policy. During Q1, dividend payments of ¥17.4B relating to the prior fiscal year were made, representing distributions well in excess of Free Cash Flow ¥5.1B. This materially reduced cash balances, and dividend payments were a short-term burden on cash flow. Note that a 2-for-1 stock split was implemented effective January 1, 2026, and dividends for the fiscal year ended December 2025 are presented on a pre-split basis. If FY cumulative Operating CF increases and investment is restrained, FCF could expand and dividend policy flexibility would improve, but current conditions require improvements in working capital turnover and cash conversion as prerequisites.
Margin compression risk from higher SG&A ratio: SG&A ratio rose to 67.0%, up ~30bp year-on-year, and SG&A growth +6.3% exceeded revenue growth +5.8%. Labor and energy cost increases are the main drivers, and the structure continues to limit operating leverage. If price revisions do not sufficiently pass through costs, further deterioration in Operating Margin is possible.
Liquidity risk: Current Ratio 105.8%, Quick Ratio 95.6% indicate thin short-term liquidity cushion, and Cash and Cash Equivalents contracted to ¥144.6B (YoY -26%). Working capital is thin at ¥16.6B, reducing resilience to seasonal or working capital demand swings. Debt/EBITDA at 4.61x is somewhat high, and without improvement in cash conversion, financial flexibility may deteriorate.
Volatility of equity-method investment income: Equity-method investment income fell to ¥0.9B from ¥2.9B, pressuring Ordinary Income. Investee performance is sensitive to market conditions and utilization and can be a non-continuous earnings swing factor. Prolonged slow recovery at investees would represent sustained headwinds at the Ordinary Income level.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.9% | – | – |
| Net Margin | 2.3% | – | – |
Both Operating Margin and Net Margin lack industry median data, making relative assessment difficult.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 5.8% | – | – |
Revenue growth of +5.8% is solid, but industry median data is lacking for relative positioning.
※ Source: Company aggregation
The Hotel Business high margin (~13.8%) drives corporate profitability, while the low-margin Foodservice Business (~3.8%) continues to suppress corporate ROIC at 1.8%. Achieving full-year targets requires improvements in labor productivity, penetration of menu price revisions, and SG&A absorption in Foodservice and Contract businesses; execution from Q2 onward is the focal point.
Operating CF/EBITDA is low at 0.59x; improving turnover efficiency—DSO 92 days and Inventory Days 90—is key to strengthening cash conversion. Cash balances have declined to ¥144.6B (YoY -26%), and Quick Ratio is 95.6%, indicating a thin liquidity cushion. Monitoring should focus on working capital management considering seasonality and the recovery of financial flexibility through Operating CF accumulation in the second half.
This report was automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm from public financial statements. Investment decisions are your own responsibility; consult advisors as appropriate before acting.