Credit Saison Co.,Ltd. FY2027 Q1 Earnings Report

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Executive Summary

The first quarter posted increases in both revenue and profit, with growth in the Finance Business and the Global Business's return to profitability driving improved profitability. Revenue was ¥128.49B (¥122.85B in the previous year, YoY+4.6%), profit before tax was ¥31.34B (¥22.87B in the previous year, YoY+37.1%), and quarterly profit attributable to owners of the parent was ¥21.75B (¥16.10B in the previous year, YoY+35.1%). As the company applies IFRS, there is no concept of ordinary income; performance is evaluated based on profit before tax. The primary drivers of profit growth were the expansion of operating profit in the Finance Business and the reduction and elimination of losses in the Global Business, which more than offset increases in finance costs and impairment losses on financial assets.

Factors Affecting Performance

【Revenue】Revenue was ¥128.49B (YoY+4.6%), with all segments reporting higher revenue. The Payment Business was the largest component, with revenue from external customers of ¥70.47B (approximately 54.8% of the total), followed by the Finance Business at ¥23.39B (18.2%, YoY+29.9%) and the Global Business at ¥19.20B (14.9%, YoY+43.9%), both of which showed strong growth. The Entertainment Business, which existed in the previous year (¥9.58B), was reclassified into the Payment Business and excluded from consolidation following the transfer of Concerto shares; caution is therefore required when making simple year-on-year comparisons.

【Profit and Loss】Profit before tax increased to ¥31.34B (YoY+37.1%), while business profit expanded to ¥30.44B (¥22.93B in the previous year, YoY+32.8%). Finance costs increased to ¥15.43B (¥12.12B in the previous year, YoY+27.3%), and impairment losses on financial assets increased to ¥16.73B (¥14.99B in the previous year, YoY+11.6%). However, profit growth in the Finance Business and the Global Business more than offset these cost increases. Share of profit of investments accounted for using the equity method also made a stable contribution of ¥4.56B. Temporary items, including gains on the sale of property, plant and equipment of ¥1.27B, made a limited net contribution of approximately ¥0.9B to profit before tax; the main driver of profit growth was the expansion of core earnings. In conclusion, both revenue and profit increased.

Segment Analysis

By segment business profit, the Finance Business showed the largest increase at ¥13.85B (YoY+53.3%), becoming the primary contributor to company-wide profit. The Payment Business reported a decline in profit to ¥11.69B (YoY-3.7%), while the Real Estate-Related Business also posted lower profit at ¥1.73B (YoY-8.7%). Meanwhile, the Global Business turned from a loss of ¥0.87B in the previous year to a profit of ¥2.28B (YoY+362.8%), clearly demonstrating the results of portfolio improvement. The Leasing Business posted a modest increase in profit to ¥1.12B (YoY+3.2%). Overall, growth in the Finance and Global Businesses offset declines in the Payment and Real Estate-Related Businesses.

Key Financial Indicators

【Profitability】The net profit margin (profit attributable to owners of the parent ÷ revenue) was 16.9%, improving by +3.8pt from 13.1% in the previous year, while the business profit margin also increased to 23.7% (18.7% in the previous year). 【Cash Quality】Cash and cash equivalents were ¥103.90B, down from ¥112.32B at the end of the previous fiscal year, while trade and other receivables increased to ¥393.46B (+¥6.93B from the end of the previous fiscal year). 【Investment Efficiency】Quarterly ROE was 2.8% (the Equity Ratio remained at 15.4%, unchanged from the previous year), and caution is required when making a simple annualized comparison because this is a quarterly figure. Basic quarterly earnings per share increased significantly to ¥151.42 (¥108.85 in the previous year, YoY+39.1%). 【Financial Soundness】Bonds and borrowings increased to ¥366.90B (+¥86.13B from the end of the previous fiscal year), and operations continue to be conducted with a high debt-to-equity ratio. Meanwhile, the Equity Ratio remained stable at 15.4%, unchanged from the end of the previous fiscal year.

Cash Flow Analysis

As the financial results summary does not disclose a statement of cash flows, funding trends are analyzed based on balance sheet movements. Cash and cash equivalents decreased from ¥112.32B at the end of the previous fiscal year to ¥103.90B at the end of Q1, while trade and other receivables increased by +¥6.93B, from ¥386.53B to ¥393.46B, indicating rising working capital requirements accompanying business expansion. Correspondingly, bonds and borrowings increased by +¥8.61B, from ¥358.28B to ¥366.90B, indicating that the company continues to support asset expansion through debt financing. Investment property accumulated to ¥204.86B (¥193.59B at the end of the previous fiscal year, +¥11.27B), and continued investment in rental assets is also contributing to funding needs. Business profit of ¥30.44B exceeded finance costs of ¥15.43B, indicating that core earnings currently provide sufficient coverage of funding costs.

Earnings Quality

Recurring earnings primarily comprise business profit of ¥30.44B, centered on the Payment and Finance Businesses. The net contribution of temporary items to profit before tax of ¥31.34B was limited to approximately ¥0.9B, including gains on the sale of property, plant and equipment of ¥1.27B, valuation gains on investment securities of ¥0.04B, impairment losses on non-financial assets of △¥0.06B, and losses on disposal of property, plant and equipment of △¥0.05B; earnings quality is therefore generally centered on core earnings. Share of profit of investments accounted for using the equity method of ¥4.56B represented approximately 14.5% of profit before tax and provided a stable underpinning. The effective tax rate was essentially flat at 29.1% (29.3% in the previous year), and the gap between profit before tax and profit attributable to owners of the parent remained within a natural range attributable to the tax burden, with no structural distortion observed. Comprehensive income was ¥29.29B (¥28.76B attributable to owners of the parent), and the difference from net income of ¥22.13B was primarily attributable to foreign currency translation differences for foreign operations (+¥2.42B) and cash flow hedges (+¥2.79B), which can be viewed as an increment reflecting the underlying business performance.

Earnings Forecast and Guidance

Against the full-year forecast of ¥75.50B in profit attributable to owners of the parent, Q1 actual profit of ¥21.75B represented progress of 28.8%, exceeding the 25% quarterly progress benchmark. Against the full-year forecast of basic earnings per share of ¥525.68, Q1 actual basic earnings per share of ¥151.42 also indicated progress at a similar level. No revisions were made to the earnings forecast or dividend forecast during the quarter. Growth in the Finance Business and the Global Business's return to profitability were the primary drivers of potential upside; going forward, the pace of increases in finance costs and impairment losses on financial assets will require monitoring as factors that could influence second-half progress.

Shareholder Returns

The company has announced an annual dividend forecast of ¥160, implying a Payout Ratio of approximately 30.4% based on the full-year basic earnings per share forecast of ¥525.68. Dividend payments during Q1 amounted to ¥18.85B (¥18.06B in the previous year). No share repurchases were conducted during Q1, with purchases totaling ¥0 (¥8.84B in the previous year). However, the company cancelled ¥68.81B of treasury shares from capital surplus, substantially reducing the treasury share balance from ¥117.29B to ¥48.32B. This cancellation lowered the treasury share ratio relative to the number of shares issued and improved the efficiency of the shareholders' equity structure.

Risk Factors

1. Risk of higher credit costs: Impairment losses on financial assets increased to ¥16.73B from ¥14.99B in the previous year, representing YoY+11.6%, and credit costs could increase further depending on economic conditions.

2. Higher funding costs: Finance costs increased to ¥15.43B (YoY+27.3%), while bonds and borrowings expanded to ¥366.90B (+¥8.61B from the end of the previous fiscal year). Finance costs represented approximately 50.7% of business profit of ¥30.44B, and coverage could decline if the interest-rate environment deteriorates.

3. Highly leveraged structure: The Equity Ratio remained unchanged from the end of the previous fiscal year at 15.4%, with asset growth primarily supported by debt financing. The rollover risk associated with funding the increase in trade and other receivables (+¥6.93B) is a monitoring point.

Industry Benchmark (For Reference; Company Research)

Industry Benchmark (insurance)

Profitability and Returns

The net profit margin is significantly above the industry median and ranks among the higher levels within the industry.

Growth and Capital Efficiency

The revenue growth rate is below the industry median, indicating that top-line growth is relatively moderate within the industry.

※Source: Company research

Key Points from the Financial Results

1. Business profit in the Finance Business showed the largest increase company-wide at ¥13.85B (YoY+53.3%), while the Global Business also turned from a loss in the previous year to a profit of ¥2.28B. Structural changes in the business portfolio were the primary driver of profit growth, indicating a qualitative improvement in the business mix.

2. The company cancelled ¥68.81B of treasury shares, reducing the treasury share balance from ¥117.29B to ¥48.32B. While the efficiency of the shareholders' equity structure improved, bonds and borrowings increased to ¥366.90B, and reliance on debt remains high.

3. Progress against the full-year plan was 28.8% for profit attributable to owners of the parent, exceeding the quarterly progress benchmark. Continued increases in impairment losses on financial assets (YoY+11.6%) and finance costs (YoY+27.3%) will be key points to monitor in assessing the sustainability of profitability from the second half onward.

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This report is an earnings analysis document automatically generated by AI based on XBRL financial results summary data. It does not recommend investment in any specific security. Industry benchmarks are reference information compiled by the company based on publicly disclosed financial results data. Investment decisions should be made at your own discretion and, where necessary, after consulting with a professional advisor.

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