| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥2476.3B | ¥2452.7B | +1.0% |
| Operating Income | ¥144.4B | ¥123.4B | +17.0% |
| Ordinary Income | ¥144.4B | ¥123.4B | +17.0% |
| Net Income | ¥122.4B | ¥134.9B | -9.3% |
| ROE | 4.8% | 5.5% | - |
The 2026 FY results showed Revenue of 2,476.3B (YoY +23.6B, +1.0%), Operating Income of 144.4B (YoY +21.0B, +17.0%), Ordinary Income of 144.4B (YoY +21.0B, +17.0%), and Net Income of 122.4B (YoY -12.5B, -9.3%). While the company delivered revenue growth and higher profit at the operating level, final net income declined. The operating margin improved to 5.8% (up +0.8pt from 5.0%), supported by improved profitability in the Card & Loan segment and the Installment Sales (Single-item) segment. The decline in Net Income was primarily due to the reversal of prior-year special gains from pension plan amendments; Ordinary-level profitability remained robust. Operating Cash Flow (OCF) increased sharply to 221.2B (YoY +744.7%), 1.8x Net Income, indicating strong cash generation. Free Cash Flow was a small positive at 9.6B; Investment CF was ▲211.6B and Financing CF was ▲680.4B, resulting in year-end cash of 1,545.8B (YoY ▲622.3B, ▲28.7%). Total assets were 2.84T, total equity was 257.19B, and Equity Ratio was 9.0%, maintaining a high-leverage structure consistent with the credit and guarantee business model.
[Revenue] Revenue of 2,476.3B was a slight increase of +1.0% YoY. By segment, Card & Loan 716.1B (composition 28.9%), Installment Sales (Single-item) 770.0B (31.1%), Bank Guarantee 376.1B (15.2%), Payments & Guarantee 260.1B (10.5%) were the core businesses, followed by Overseas 125.0B (5.0%) and Others 83.9B (3.4%). Compared with the prior year, steady performance in Card & Loan and Installment Sales supported revenue, but overall growth remained low. Revenue arising from contracts with customers was 600.3B (24.2% of Revenue), and other revenue (financial income, etc.) was 1,730.9B (69.9%), indicating a revenue structure dominated by financial income.
[Profitability] Operating Income of 144.4B was +17.0% YoY, and the operating margin improved to 5.8% (up +0.8pt from 5.0% a year ago). SG&A was 2,030.7B, representing an SG&A ratio of 82.0% (improved ▲2.4pt from 84.4%), with expense control contributing to margin improvement. By segment Operating Income, Card & Loan contributed the most at 600.1B (margin 83.8%), followed by Installment Sales (Single-item) 387.7B (50.4%), Bank Guarantee 208.9B (55.5%), and Payments & Guarantee 116.7B (44.9%). Overseas recorded an operating loss of ▲21.9B, weighing on consolidated profit. Ordinary Income matched Operating Income at 144.4B, with equity-method income of 5.6B and other non-operating income making a small positive contribution; non-operating items including interest expense remained limited. Special items comprised Special Income 1.1B (including gain on sale of investment securities 16.4B) and Special Loss 3.8B (including impairment on investment securities 2.7B), netting ▲2.7B, which is minor. Profit before tax was 141.7B; after deducting income taxes of 19.3B (effective tax rate 13.6%) and allocating non-controlling interests of ▲6.5B, Net Income was 122.4B, down ▲9.3% YoY. Net income margin declined to 4.9% (▲0.6pt from 5.5%), but the prior year included one-off special gains from pension plan amendments that boosted pre-tax profit, so the current-year decline was mainly a temporary reversal. In summary, despite revenue and operating profit growth, the reversal of prior-year one-off gains led to a decline in final Net Income.
Card & Loan recorded Revenue 716.1B and Operating Income 600.1B, with an exceptionally high margin of 83.8%, serving as the main pillar of consolidated Operating Income. Installment Sales (Single-item) posted Revenue 770.0B and Operating Income 387.7B (margin 50.4%); while it is the largest in Revenue, its margin lags Card & Loan. Bank Guarantee delivered Revenue 376.1B and Operating Income 208.9B (margin 55.5%), contributing stable earnings. Payments & Guarantee recorded Revenue 260.1B and Operating Income 116.7B (margin 44.9%), showing steady performance. Overseas generated Revenue 125.0B but an operating loss of ▲21.9B (margin ▲17.5%), acting as a drag on consolidated profitability; achieving profitability in overseas operations is a key challenge. Others delivered Revenue 83.9B and Operating Income 29.9B (margin 35.6%), a small but positive contributor. Overall, high-margin segments Card & Loan and Installment Sales drive profits, and reducing overseas losses is critical for future margin improvement.
[Profitability] Operating margin improved to 5.8% (up +0.8pt from 5.0%), aided by a reduction in SG&A ratio. Net income margin was 4.9% (down ▲0.6pt from 5.5%), but the decline was mainly due to the reversal of prior-year special gains; ordinary-level profitability remained solid. ROE was 4.8% (down from 5.8% prior year), primarily reflecting the decrease in Net Income. [Cash Quality] OCF/Net Income was 1.81x, indicating good cash backing for profit, and the accrual ratio was ▲0.3%, reflecting high cash quality. OCF/EBITDA was 0.64x, suggesting room to improve cash conversion efficiency due to working capital timing and interest payments. [Investment Efficiency] EPS was 75.30円 (down ▲7.6% from 81.45円 prior year) and BPS was 1,463.12円 (up +4.7% from 1,397.90円 prior year). Capex/Depreciation was 0.86x, indicating somewhat restrained, maintenance-level investment. [Financial Soundness] Equity Ratio was 9.0% (slightly up from 8.5% prior year) but leverage remains high: D/E ratio 10.06x, Debt/EBITDA 30.2x, reflecting a capital-efficiency focused structure. Current ratio was 179%, indicating solid short-term liquidity, but Cash/Short-term liabilities was 0.90x, reflecting high reliance on short-term roll-over funding.
OCF was 221.2B (up from 26.2B prior year, +744.7%), 1.81x Net Income, showing strong cash generation. Within OCF, subtotal before working capital changes was 511.5B, while increases in trade receivables ▲296.0B and decreases in trade payables ▲55.0B negatively impacted working capital; inventory reduction +10.8B and increases in other liabilities (estimated) supported cash inflows. Major cash outflows were corporate taxes paid ▲58.4B and interest paid ▲240.3B. Investing CF was ▲211.6B, with acquisitions of tangible and intangible assets ▲171.7B and purchases of investment securities ▲36.5B as primary outflows, while collection of long-term loans +21.4B provided inflows. Depreciation was 200.2B versus capex 171.7B, yielding Capex/Depreciation 0.86x at maintenance levels. Free Cash Flow was a small positive 9.6B, insufficient to cover dividend payments of 68.7B, so returns were funded via OCF and beginning cash. Financing CF was ▲680.4B: large repayments of long-term borrowings ▲4,126.8B and bond redemptions ▲400.0B were refinanced by new long-term borrowings +4,008.3B and bond issuance +397.9B; short-term borrowings decreased ▲255.9B; CP increased +59.0B; dividends paid ▲68.7B; and share buybacks ▲1.1B were executed. Cash and cash equivalents declined from beginning 2,168.1B to ending 1,545.8B (▲622.3B), as cash deployment and repayments reduced balances.
Recurring earnings are centered on Operating Income 144.4B, with equity-method income 5.6B and other non-operating income making small positive contributions. Non-operating income mainly comprised interest and dividend receipts of 8.4B, indicating limited dependence on speculative income. Special items were minor net ▲2.7B; Special Income included gain on sale of investment securities 16.4B (0.7% of Revenue), but the impact on overall earnings structure was small. The prior year included Special Income of 9,434百万円 from pension plan amendments, which significantly boosted pre-tax profit, so the current-year Net Income decline was mainly a one-off reversal. Accrual quality is high: OCF/Net Income 1.81x and accrual ratio ▲0.3%, indicating good cash backing of profits. The 15.2% divergence between Ordinary Income 144.4B and Net Income 122.4B is explainable by income taxes 19.3B and non-controlling interests ▲6.5B, with no abnormal divergence observed. Comprehensive Income was 179.6B, exceeding Net Income by +57.2B, mainly due to actuarial gains on retirement benefit plan adjustments +53.5B reflecting mark-to-market gains on pension assets. Cash conversion (OCF/EBITDA 0.64x) shows room for improvement, with working capital timing and interest burden influencing performance.
Full Year guidance is Revenue 2,600.0B, Operating Income 150.0B (YoY +3.8%), Ordinary Income 150.0B (YoY +3.8%), Net Income 130.0B, EPS 75.95円, and Dividend 0円. Current-year performance is 95.2% of Revenue target (2,476.3B), 96.3% of Operating Income target (144.4B), and 94.2% of Net Income target (122.4B). Operating and Ordinary Income are slightly behind pace, but expense optimization progress is evident. Net Income has largely absorbed the prior-year one-off reversal and is broadly in line with plan, with implemented cost-efficiency measures showing effect. Note that the Full Year dividend forecast of 0円 is inconsistent with the actual year-end dividend of 40円, and an update to forecast figures is likely.
Year-end dividend was 40円, implying a Payout Ratio of 53.3%, within an appropriate range. As the prior-year dividend was 0円, this marks a shift in dividend policy. Share buybacks were modest at 1.1B, making dividends the primary form of shareholder returns. Total Return Ratio (dividends + buybacks) was 53.3%, equal to the Payout Ratio. Free Cash Flow of 9.6B is far below dividend payments of 68.7B, so dividends were not fully covered by Free Cash Flow and were supported by OCF, beginning cash, and Financing CF. Cash balance of 1,545.8B represents 5.4% of total assets, maintaining a funding base for dividend continuation. Assuming next fiscal year Net Income forecast of 130.0B, the current dividend level of 40円 (implied payout approx. 46%) is maintainable from a profitability perspective, but sustaining dividends requires improved cash generation (OCF/EBITDA improvement) and stable market financing conditions.
Continued losses in overseas operations (Operating loss 21.9B, margin ▲17.5%): The overseas segment is a drag on consolidated Operating Income, and exchange rate volatility or upward shifts in local credit costs could enlarge losses. As there is no clear trend of narrowing losses YoY, monitoring with consideration of business model revision or withdrawal is necessary.
High-leverage structure (D/E ratio 10.06x, Debt/EBITDA 30.2x, Debt/Capital 80.2%): While the business model emphasizes capital efficiency, refinancing risk increases if funding conditions deteriorate. Short-term funding is significant: Short-term borrowings 1,721.4B, CP 3,166.0B, and long-term borrowings due within one year 3,836.8B, indicating high rollover dependence. Cash/Short-term liabilities 0.90x provides a limited cushion and could be stressed if market liquidity tightens.
Large off-balance-sheet guarantee obligations (guarantee obligations not recorded on consolidated B/S 2,346,897.0B): In an economic downturn, increased substitute repayments could require higher provisioning and capital, posing risk. These guarantee obligations are disclosed in segment assets and warrant attention to capital absorption capacity under stress.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.8% | 8.8% (4.0%–20.0%) | -3.0pt |
| Net Margin | 4.9% | 4.3% (0.6%–11.3%) | +0.6pt |
Operating margin is 3.0pt below the industry median, but net margin is 0.6pt above, supported by tax burden and optimization of non-operating items.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 1.0% | 2.1% (-4.5%–6.9%) | -1.1pt |
Revenue growth is 1.1pt below the industry median, indicating growth slightly below peer average.
※ Source: Company aggregation
Improvement in operating margin and large increase in OCF: Operating margin improved to 5.8% (up +0.8pt from 5.0%), aided by a lower SG&A ratio. OCF rose to 221.2B (up from 26.2B, +744.7%), and OCF/Net Income was 1.81x, indicating strong cash generation. Improved profitability in Card & Loan and Installment Sales segments drove consolidated profit, and expense management progress is evident. Continued monitoring each quarter of SG&A ratio and credit costs is important to confirm sustainability.
Importance of liquidity management given high leverage: With D/E ratio 10.06x and Debt/EBITDA 30.2x, leverage remains high and Cash/Short-term liabilities 0.90x indicates significant rollover dependence. Year-end cash fell to 1,545.8B (down ▲28.7% YoY), as cash deployment and repayments reduced balances. While the current ratio is 179% reflecting ample short-term liquidity, rollover risk may materialize if market funding conditions change; monitor CP and short-term borrowings balances and financing cost movements.
Overseas profitability and dividend sustainability: Overseas segment continued to record an operating loss of 21.9B, dragging on consolidated results; business model revisions or withdrawal considerations should be monitored. Dividends at year-end 40円 (Payout Ratio 53.3%) are within an appropriate range, but Free Cash Flow of 9.6B cannot cover dividend payments of 68.7B, requiring support from OCF and Financing CF. Assuming next year Net Income 130.0B, dividend continuity is possible, but hinges on improved cash generation and stable market funding conditions.
This report is an AI-generated financial analysis document produced by analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are reference information compiled by the Company based on publicly available financial statements. Investment decisions are your responsibility; please consult advisors as necessary before making investment decisions.