Credit Saison (8253) FY2026 FY Earnings Report

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Executive Summary

This was a case of higher revenue but lower net income, as increased impairment losses on financial assets and higher finance costs resulted in a decline in final profit. Revenue was ¥5,462.7B (+11.0% YoY), while business profit was ¥1,020.0B (+9.0% YoY), indicating expansion in the core business; however, net income attributable to owners of the parent declined to ¥627.5B (-5.5% YoY). The primary drivers of revenue growth were increased transaction volumes across the Payments, Finance, and Global businesses, while the main factors behind the decline in profit were impairment losses on financial assets of ¥624.2B (+44.2% YoY), finance costs of ¥510.9B (+28.5% YoY), and one-off factors such as remeasurement losses on disposal groups classified as held for sale.

Factors Affecting Performance

【Revenue】Revenue increased 11.0% YoY to ¥5,462.7B. By segment, the Payments Business accounted for the largest share at ¥2,749.7B (50.3% of total, +9.7%), while the Finance Business at ¥844.8B (+14.7%) and the Global Business at ¥624.4B (+21.2%) drove growth. Real Estate-related Business at ¥709.9B (+5.1%), Entertainment at ¥386.2B (+9.0%), and Leasing at ¥147.8B (+10.8%) also contributed to the increase in revenue.

【Profit and Loss】Business profit increased 9.0% YoY to ¥1,020.0B, but profit before tax remained at ¥911.9B (-1.7% YoY). The primary causes of the difference were impairment losses on financial assets of ¥624.2B (+44.2%), finance costs of ¥510.9B (+28.5%), and one-off factors including remeasurement losses on disposal groups classified as held for sale of ¥51.2B and losses related to the sale of shares in affiliated companies of ¥26.6B. Net income attributable to owners of the parent was ¥627.5B (-5.5% YoY). Selling, general and administrative expenses increased 4.8% YoY, below the revenue growth rate, indicating that cost controls have been maintained. In conclusion, the results represent higher revenue but lower profit.

Segment Analysis

The Finance Business was the most profitable segment, with business profit of ¥473.1B (+21.5% YoY) and a profit margin of 56.0%, accounting for 45.9% of total segment business profit. The Real Estate-related Business recorded revenue growth of +5.1% but business profit growth of +18.2%, with profit growth outpacing revenue growth and profitability improving. The Payments Business was the largest segment, with revenue of ¥2,749.7B (50.3% of total), but business profit growth was limited to ¥306.2B (+1.9%), and its profit margin of 11.1% was lower than those of the other segments. While revenue in the Global Business increased by +21.2%, it swung to a business loss of ¥14.3B from a profit of ¥33.8B in the previous fiscal year, resulting in a negative profit margin of 2.3%. The Entertainment Business recovered, with business profit of ¥25.9B (+82.4%), but is scheduled to be consolidated into the Payments Business from the next fiscal year. Improving the profitability of the Global Business, which has not converted revenue growth into profit growth, remains a key segment-level challenge.

Key Financial Metrics

【Profitability】The business profit margin was 18.7%, slightly down from 19.0% in the previous fiscal year. The net income margin attributable to owners of the parent was 11.5%, approximately 2.0pt lower than the previous fiscal year’s 13.5%, mainly due to increased impairment losses on financial assets and higher finance costs.【Cash Flow Quality】Operating CF was negative ¥1,376.6B, and the operating CF-to-net income ratio was negative, mainly due to a ¥2,588.1B increase in trade and other receivables. This represents a use of funds associated with the growth of financial receivables and differs in nature from a deterioration in earnings quality at a general operating company.【Investment Efficiency】ROE was 8.6%, down from 9.4% in the previous fiscal year. Equity-method investment income was ¥127.7B, accounting for 20.3% of net income attributable to owners of the parent, indicating that fluctuations in the performance of investee companies have a certain impact on consolidated profit.【Financial Soundness】The equity ratio improved slightly to 15.4% from 15.1% in the previous fiscal year, while bonds and borrowings increased 5.2% YoY to ¥3 trillion 5,828.5B. Trade and other receivables accounted for 78.0% of total assets, resulting in an asset structure centered on financial receivables.

Cash Flow Analysis

Operating CF was negative ¥1,376.6B, an improvement from negative ¥2,491.7B in the previous year, primarily due to a ¥2,588.1B increase in trade and other receivables. Investing CF was negative ¥259.7B, with major expenditures including capital expenditures of ¥181.3B and the acquisition of investment property of ¥331.1B. Financing CF represented an inflow of ¥1,400.9B, which offset the operating and investing CF deficits through long-term borrowings of ¥4,277.7B, bond issuances of ¥1,120.4B, and other sources. As a result, free cash flow (operating CF + investing CF) was negative ¥1,636.3B, while shareholder returns consisting of dividend payments of ¥180.6B and share repurchases of ¥215.1B also depended on external financing. As long as financial receivables continue to expand, the degree of improvement in operating CF and trends in the financing environment will determine the sustainability of liquidity management.

Earnings Quality

Against business profit of ¥1,020.0B, profit before tax was ¥911.9B, with adjustment items totaling ¥108.1B in net losses creating the difference. Other expenses included remeasurement losses on disposal groups classified as held for sale of ¥51.2B, losses related to the sale of shares in affiliated companies of ¥26.6B, impairment losses on equity-method investments of ¥16.8B, and impairment losses on non-financial assets of ¥11.0B; these one-off factors reduced profit. Meanwhile, other income also included temporary positive factors such as valuation gains on investment securities of ¥8.8B and gains on the sale of property, plant and equipment of ¥7.2B. Finance costs of ¥510.9B represented 9.4% of revenue and substantially exceeded finance income of ¥70.8B. The fact that operating CF was significantly below net income warrants attention from an accrual perspective; however, the primary cause was an increase in financial receivables, and this should be evaluated separately from a simple deterioration in earnings quality.

Earnings Forecast and Guidance

The forecast for the next fiscal year calls for revenue of ¥3,645.0B, operating income of ¥595.0B (+7.1% YoY), ordinary income of ¥660.0B (+6.3% YoY), and net income of ¥440.0B (+20.3% YoY). However, forecast revenue of ¥3,645.0B is substantially below the current fiscal year’s actual revenue of ¥5,462.7B, and consistency between forecast net income of ¥440.0B and the attributable-profit basis for the parent has not been confirmed. The disclosed forecast figures may be affected by changes in profit attribution classifications and business scope, including the consolidation of the Entertainment Business into the Payments Business; therefore, progress will not be evaluated based on a simple year-on-year comparison.

Shareholder Returns

The annual dividend was ¥130 per share, representing a payout ratio of 30.1% against basic EPS of ¥432.17. The total return ratio, including share repurchases of ¥215.1B, was approximately 63.1%, calculated by dividing the sum of dividends of ¥180.6B and share repurchases of ¥215.1B, or ¥395.7B, by net income attributable to owners of the parent of ¥627.5B; this should be distinguished from the payout ratio. Free cash flow was negative ¥1,636.3B, and shareholder returns for the current fiscal year were implemented against the backdrop of the company-wide financing capacity, including borrowings and bonds, rather than operating cash flow. The dividend forecast for the next fiscal year is ¥160 per share; however, because the consistency of the corresponding earnings forecast has not been confirmed, the future payout ratio will not be evaluated.

Risk Factors

1. Higher credit costs: Impairment losses on financial assets increased 44.2% YoY to ¥624.2B. As trade and other receivables expanded to ¥3 trillion 8,653.0B (+6.9% YoY), increases in delinquency and loss rates could place pressure on the profitability of the Finance and Payments businesses.

2. Higher funding costs and high leverage: Finance costs increased 28.5% YoY to ¥510.9B, while bonds and borrowings reached ¥3 trillion 5,828.5B (+5.2% YoY). With an equity ratio of 15.4% and a structure in which the expansion of financial receivables is supported by borrowings and bonds, changes in interest-rate conditions and access to capital markets could directly affect financial costs.

3. Deteriorating profitability in the Global Business: Revenue in the Global Business increased by +21.2%, while business profit swung from a profit of ¥33.8B in the previous fiscal year to a loss of ¥14.3B. The emergence of foreign exchange, regulatory, and credit risks in overseas lending and investment businesses is a concern.

Industry Benchmark (For Reference; Company Research)

Industry Benchmark (insurance)

Profitability and Returns

While return on equity is below the industry median, net income margin exceeds the industry median, indicating a differentiated position in terms of leverage efficiency and profit margins.

Growth and Capital Efficiency

The revenue growth rate is substantially above the industry median, positioning the company among the high-growth companies in the industry.

*Source: Company research

Key Takeaways from the Financial Results

1. While business profit increased 9.0% YoY to ¥1,020.0B, reflecting an expansion of the core earnings base, net income attributable to owners of the parent declined to ¥627.5B (-5.5% YoY) due to increased impairment losses on financial assets, higher finance costs, and one-off losses. The divergence between revenue growth and lower final profit is a defining feature of the current fiscal year.

2. The Finance Business is a major pillar of consolidated profit, with a profit margin of 56.0% and business profit of ¥473.1B. Meanwhile, the Payments Business, which accounts for 50.3% of revenue, had a profit margin of only 11.1%, indicating a significant difference in profitability among segments.

3. Operating CF was negative ¥1,376.6B, primarily due to an increase in financial receivables. The structure of covering this deficit through financing CF inflows continues, and the pace of receivables expansion, credit costs, and changes in the financing environment will be key points for monitoring the quality of earnings going forward.

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This report is an earnings analysis document automatically generated by AI through analysis of 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 available earnings data. Investment decisions should be made at your own discretion and, where necessary, after consulting with a professional advisor.

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