| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥3385.8B | ¥3121.6B | +8.5% |
| Operating Income / Operating Profit | ¥206.2B | ¥217.3B | -5.1% |
| Ordinary Income | ¥210.4B | ¥220.3B | -4.5% |
| Net Income / Net Profit | ¥120.2B | ¥150.8B | -20.3% |
| ROE | 5.0% | 6.4% | - |
For the fiscal year ended March 2026, Revenue was ¥3,385.8B (YoY +¥264.2B +8.5%), Operating Income was ¥206.2B (YoY -¥11.1B -5.1%), Ordinary Income was ¥210.4B (YoY -¥9.9B -4.5%), and Net Income was ¥120.2B (YoY -¥30.6B -20.3%), resulting in higher revenue but lower profitability. Revenue growth was sustained for the third consecutive year driven by the core Lease & Finance Business (93.4% of sales) which grew +8.0% YoY, but gross margin declined to 14.8% (from 15.5%, -0.7pt) and operating margin fell to 6.1% (from 7.0%, -0.9pt). SG&A rose to ¥295.5B (+10.2%), outpacing sales growth, where increases in credit-related costs (provision for doubtful accounts ¥20.2B, prior year ¥11.4B) and fees/commissions pressured margins. Extraordinary items included impairment losses of ¥16.0B (including goodwill impairment of ¥14.1B in the Services Business), resulting in a substantial decline in final profit. ROE decreased to 5.0% (prior year 6.9%), highlighting the need to improve capital efficiency.
[Revenue] Revenue expanded solidly to ¥3,385.8B (+8.5% YoY). By segment, the core Lease & Finance segment led with ¥3,163.9B (+8.0%, 93.4% share), supported by increased volumes in finance leases, operating leases, and lending activities. The Services segment recorded ¥103.0B (+9.9%, 3.0% share) with growth in billing/collection agency services and nursing care facility operations. The Investment segment grew to ¥118.9B (+20.0%, 3.5% share) with double-digit growth driven by expansion in solar power and real estate-related activities. Gross profit reached ¥501.7B (+3.3%), leaving a gross margin of 14.8% (down -0.7pt from 15.5%). Margin compression was driven by higher funding costs from rising interest rates and accumulated credit costs.
[Profitability] Operating Income declined to ¥206.2B (-5.1%). SG&A rose to ¥295.5B (+10.2%), exceeding sales growth (+8.5%), driven by increased credit-related costs (provision for doubtful accounts ¥20.2B, prior year ¥11.4B), higher fees and outsourcing expenses (¥68.2B, prior year ¥61.8B), and goodwill amortization (¥2.7B). By segment, Operating Income was down across the board: Lease & Finance ¥208.3B (-2.1%), Services ¥11.0B (-12.7%), Investment ¥17.9B (-13.5%). After deducting corporate expenses of ¥31.0B, consolidated Operating Income was ¥206.2B. Non-operating income included dividend income ¥4.4B and investment partnership income ¥3.2B, totaling non-operating income of ¥10.3B, while interest expense increased to ¥3.6B (prior year ¥1.7B), reflecting higher financing costs. Ordinary Income was ¥210.4B (-4.5%). In extraordinary items, the company recorded gains on sale of investment securities ¥4.2B but recognized impairment losses ¥16.0B (including goodwill impairment of ¥14.1B in Services) and valuation losses on investment securities ¥3.4B, totaling extraordinary losses of ¥19.4B, reducing pre-tax income to ¥191.0B (-14.7%). After income taxes of ¥62.8B (effective tax rate 32.9%), Net Income was ¥120.2B (-20.3%), resulting in a revenue-up/profit-down finish.
The Lease & Finance Business remains the core segment with Revenue ¥3,163.9B (+8.0%) and Operating Income ¥208.3B (-2.1%, margin 6.6%). Increased volumes in finance leases, operating leases, and lending drove revenue, but higher credit costs and financing burden slightly reduced the margin from 6.7% in the prior year. Segment assets increased to ¥1兆1,728.9B (prior year ¥1兆1,133.0B) reflecting continued expansion of lease receivables and investment assets. The Services Business posted Revenue ¥103.0B (+9.9%) and Operating Income ¥11.0B (-12.7%, margin 10.7%). Growth in billing/collection agency services, medical/nursing care fee factoring, and nursing facility operations supported revenue, but goodwill amortization ¥2.7B and impairment losses ¥1.9B (including goodwill impairment ¥14.1B) pressured profits. Segment assets increased to ¥756.2B (prior year ¥638.7B). The Investment Business delivered Revenue ¥118.9B (+20.0%) and Operating Income ¥17.9B (-13.5%, margin 15.0%); revenue grew double digits from expanded investments in solar power and residential rental/real estate, but higher depreciation expense (¥42.5B, prior year ¥34.4B) weighed on profits. Segment assets expanded to ¥1,735.3B (prior year ¥1,629.7B).
[Profitability] Operating margin 6.1% (down -0.9pt from 7.0%), Net margin 3.6% (down -1.3pt from 4.8%), reflecting deteriorating profitability. ROE declined to 5.0% (prior year 6.9%). Dupont decomposition shows structure of Net margin 3.6% × Total Asset Turnover 0.231 × Financial Leverage 6.06x. Rising interest burden and higher SG&A ratio are pressuring profitability. [Cash Quality] Operating Cash Flow (OCF) was negative ¥-517.2B, with OCF/Net Income at -4.3x, indicating challenges in converting profits to cash. The main driver is drawing down working capital associated with increases in lease receivables and investment assets — a structural factor tied to growth investment. Interest coverage (EBIT / interest expense) remains comfortable at 57.4x, but interest expense increased +2.1x YoY. [Investment Efficiency] Capex (increase in tangible and intangible fixed assets) was ¥859.6B (prior year ¥1,173.3B), maintaining a high investment pace at about 3.4x depreciation (¥252.5B). Total Asset Turnover edged up to 0.231x (prior year 0.227x). [Financial Soundness] Equity Ratio is 16.5% (down -0.5pt from 17.0%), D/E ratio 5.06x (prior year 4.85x), Debt/Capital ratio 74.2% (prior year 73.0%), indicating a high leverage structure. Current ratio remains high at 321.9% (prior year 344.9%), providing solid short-term liquidity. Cash / Short-term Debt ratio improved to 0.47x (prior year 0.10x), but reliance on roll-over of CP and long-term borrowings due within one year (¥1,605.0B) remains high, making maturity management important.
Operating Cash Flow was ¥-517.2B (improvement from ¥-943.96B prior year) and the subtotal of operating cash flow was ¥-361.1B (prior year ¥-859.4B) after deducting corporate tax payments of ¥94.2B. The main cause was working capital demand from increases in lease receivables and investment assets, characteristic of a growth investment phase. Increases in allowance for doubtful accounts ¥3.5B and increases in trade payables ¥15.8B partially mitigated cash outflows. Investing Cash Flow was ¥-132.3B (prior year ¥-122.7B), centered on investment in tangible and intangible fixed assets. Free Cash Flow was ¥-649.5B, with financing activities filling the funding gap. Financing Cash Flow was a positive ¥708.2B (prior year ¥1,030.5B), securing funds through long-term borrowings ¥1,788.0B and bond issuance ¥428.2B, and covering long-term borrowings repayments ¥1,270.0B, bond redemptions ¥500.0B, dividend payments ¥58.7B, and CP reduction ¥180.0B. Cash and deposits rose to ¥72.1B at year-end (prior year ¥13.5B, +¥58.6B), indicating continued working-capital negative OCF funded by external financing.
Ordinary Income was ¥210.4B while Net Income was ¥120.2B, widened by extraordinary losses of ¥19.4B (impairment losses ¥16.0B, valuation losses on investment securities ¥3.4B). Most impairment was goodwill impairment in the Services Business of ¥14.1B, which appears to be largely a one-time factor. Of the ¥10.3B non-operating income, dividend income was ¥4.4B and investment partnership income was ¥3.2B, indicating limited contribution from non-core activities. Comprehensive income was ¥133.4B (Net Income ¥128.2B + Other Comprehensive Income ¥5.2B), reflecting net additions of valuation differences on available-for-sale securities ¥7.4B, deferred hedge losses -¥3.4B, and retirement benefit adjustments ¥1.2B. The gap between Net Income ¥128.2B and Comprehensive Income ¥133.4B is small, signaling limited impact from valuation gains/losses. OCF of ¥-517.2B highlights difficulties in cash conversion of earnings, driven by working capital needs tied to growth investment, while persistent increases in credit costs and interest burden should be monitored as structural profit compression risks.
For the fiscal year ending March 2027 the company projects Revenue ¥3,700.0B (YoY +9.3%), Operating Income ¥176.0B (YoY -14.7%), Ordinary Income ¥174.0B (YoY -17.3%), Net Income ¥119.0B (YoY -1.0%), and EPS ¥386.06. While revenue is expected to grow in the double digits, operating income is guided to decline double digits, implying a conservative assumption with operating margin falling further to 4.8%. Full-year progress rates versus actuals are Revenue 91.5%, Operating Income 117.2%, Ordinary Income 121.0%, indicating the current period is progressing ahead of forecast, but the company appears to assume additional credit cost provisioning, continued rise in interest burden, and higher depreciation. Dividend guidance is annual ¥128 (interim N/A, year-end N/A), with payout ratio 33.2% maintaining an appropriate range. The company indicates continuation of special dividends, assuming interim/year-end ordinary dividend ¥93 + special dividend ¥35 each. Detailed forecast assumptions are disclosed in the attached materials.
Annual dividend was ¥185 (interim ¥90, year-end ¥95), a significant increase from prior year ¥80 (+131.3%). Payout ratio rose to 45.1% (prior year 35.4%, +9.7pt) with total dividends of ¥58.7B. The interim ¥90 and year-end ¥95 include ordinary and special dividends; the company notes the FY2027 projected dividend of ¥128 assumes ordinary dividend ¥93 + special dividend ¥35, and intends to continue special dividends from FY2027 through FY2032. No share buybacks were conducted this period (prior year ¥4.68B), so shareholder returns are concentrated on dividends. Free Cash Flow of ¥-649.5B does not cover dividends, which are funded via external financing. Considering cash deposits ¥72.1B and equity ¥2,416.8B, the 45.1% payout ratio is sustainable, but ongoing margin improvement and cash conversion enhancement are prerequisites for continued dividend increases.
Interest Rate Risk: Interest expense rose from ¥1.7B to ¥3.6B (+2.1x), making interest burden more apparent. Interest-bearing liabilities exceed ¥1 trillion, including long-term borrowings ¥6,793.0B, bonds ¥1,580.0B, bonds maturing within one year ¥250.0B, and long-term borrowings due within one year ¥1,605.0B. Rising funding rates directly compress net interest margin. Operating margin already declined to 6.1% (from 7.0%, -0.9pt), so a prolonged high-rate environment could further deteriorate profitability.
Upside Credit Cost Risk: Provision for doubtful accounts increased to ¥20.2B (prior year ¥11.4B, +77.2%), pressuring SG&A. Allowance for doubtful accounts stands at ¥71.9B (current assets ¥66.7B, investment and other assets ¥5.2B). If portfolio quality deteriorates, additional provisions will be required. Lease receivables and investment assets expanded to ¥5,971.4B (prior year ¥5,476.4B), increasing risk of collection delays or credit losses in an economic downturn or sector-specific stress.
Liquidity Risk: Cash / Short-term Debt ratio is low at 0.47x, with cash deposits ¥72.1B versus short-term liabilities of ¥2,330.0B (long-term borrowings due within one year ¥1,605.0B, CP ¥570.0B, short-term borrowings ¥155.0B). Although the current ratio is healthy at 321.9%, the funding structure depends on roll-over of CP and borrowings. A deterioration in credit conditions or market disruption could impede refinancing. OCF is persistently negative at ¥-517.2B, indicating continued reliance on external financing for growth investment and dividend payments.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 6.1% | 8.8% (4.0%–20.0%) | -2.7pt |
| Net Margin | 3.6% | 4.3% (0.6%–11.3%) | -0.8pt |
Both operating margin and net margin are below industry medians, placing the company in the lower tier for profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 8.5% | 2.1% (-4.5%–6.9%) | +6.5pt |
Revenue growth significantly exceeds the industry median, ranking the company in the upper tier for growth.
※ Source: Company compilation
Balancing growth investment with margin decline: Revenue grew +8.5% (strong within the industry), but operating margin fell to 6.1% (from 7.0%, -0.9pt) and below the industry median of 8.8%. Investment in tangible and intangible fixed assets was ¥859.6B, about 3.4x depreciation, sustaining growth investment. However, additional credit provisioning (provision for doubtful accounts ¥20.2B, YoY +77.2%) and higher interest burden (interest expense ¥3.6B, +2.1x YoY) are pressuring profitability. Next fiscal year guidance assumes operating income down -14.7%, indicating margin reconstruction is a medium-term challenge. Monitor the balance between growth and margin.
Funding structure dependent on external financing: OCF is persistently negative at ¥-517.2B and Free Cash Flow ¥-649.5B. Dividends ¥58.7B and growth investments are funded by financing cash flow of ¥708.2B (long-term borrowings and bond issuance). Cash / Short-term Debt ratio 0.47x and cash deposits ¥72.1B versus short-term liabilities ¥2,330.0B (including CP and long-term borrowings due within one year ¥1,605.0B) indicate high roll-over dependence. Interest coverage of 57.4x shows adequate interest service capacity, but changes in credit conditions or funding costs directly affect liquidity. Ongoing monitoring of interest trends and funding availability is critical.
Completion of goodwill impairments and sustainability of dividend policy: Goodwill impairment of ¥14.1B in the Services Business reduced goodwill from ¥20.9B to ¥4.1B, lowering goodwill-related impairment risk. However, intangible assets increased to ¥155.0B (prior year ¥113.9B, +36.1%), so amortization burden from systems/platform investments warrants tracking for contribution to earnings. Dividends are ¥185 annually (payout ratio 45.1%), and the company signals continuation of special dividends from FY2027 to FY2032. FCF coverage is -11.1x, so dividends are not covered by cash flow, implying continued reliance on external financing for shareholder returns. Sustainability of dividends depends on stable funding markets and improved asset turnover.
This report was automatically generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your responsibility; consult a professional advisor as necessary.