| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥27097.5B | ¥26253.6B | +3.2% |
| Operating Income / Operating Profit | ¥3977.9B | ¥3727.3B | +6.7% |
| Ordinary Income | ¥3133.2B | ¥2902.6B | +7.9% |
| Net Income / Net Profit | ¥2718.5B | ¥2460.7B | +10.5% |
| ROE | 8.0% | 7.5% | - |
For the fiscal year ended March 2026, revenue totaled ¥27097B (YoY +¥844B, +3.2%), Operating Income was ¥3978B (YoY +¥251B, +6.7%), Ordinary Income ¥3133B (YoY +¥231B, +7.9%), and Net Income ¥2719B (YoY +¥258B, +10.5%). The Leasing business (Revenue ¥9597B +7.0%, Operating Income ¥1816B +2.9%) strengthened the stable earnings base, while the Management business (Revenue ¥6100B +5.7%, Operating Income ¥809B +12.9%) and Facility Operations business (Revenue ¥2450B +9.1%, Operating Income ¥463B +20.0%) delivered higher revenue and profit, supporting overall performance. Property Sales recorded Revenue ¥7293B (▲3.8%) but maintained high margin with Operating Income ¥1435B (+0.4%) and a margin of 19.7%. Extraordinary gains of ¥1035B (gain on sales of investment securities ¥517B, gain on sales of fixed assets ¥518B) boosted Net Income, while Operating Cash Flow of ¥1453B (YoY ▲75.8%) and an increase in inventories for sale slowed cash conversion. The operating margin improved to 14.7% (prior 14.2%, +0.5pt) and ROE was 8.0% (prior 7.9%), marking a year of revenue and profit growth with improved profitability.
Revenue was ¥27097B (+3.2%). By segment, Leasing was largest at ¥9597B (+7.0%), Property Sales ¥7293B (▲3.8%), Management ¥6100B (+5.7%), Facility Operations ¥2450B (+9.1%), and Other ¥3115B (+1.9%). Leasing grew steadily both domestically and overseas through portfolio expansion and maintained occupancy. Property Sales declined due to cautious timing of deliveries for residential condominiums for individuals and investor-oriented units, but increased revenues from property management/brokerage in Management and demand recovery in hotels and sports facilities in Facility Operations supported overall growth. Revenue by region: Domestic ¥23639B (+2.5%), Other (overseas) ¥3459B (+8.4%), increasing overseas revenue ratio to 12.8% (prior 12.1%). Gross margin improved to 24.9% (prior 24.2%, +0.7pt), supported by high occupancy in Leasing and Facility Operations and a high-profit mix in Property Sales.
Operating Income was ¥3978B (+6.7%), outpacing revenue growth. SG&A was ¥2770B (+5.6%), restrained below revenue growth, keeping SG&A ratio at 10.2% (prior 10.0%, +0.2pt). Operating margin improved to 14.7% (prior 14.2%, +0.5pt), demonstrating operating leverage. Ordinary Income was ¥3133B (+7.9%) as operating improvement flowed through; interest expense was ¥770B (prior ¥823B, ▲¥53B) showing a decline but still sizable. Equity in earnings of affiliates was ▲¥43B (prior ▲¥25B), deteriorating due to losses at unconsolidated investees. Extraordinary gains ¥1035B (gain on sales of investment securities ¥517B, gain on sales of fixed assets ¥518B) and extraordinary losses ¥198B (impairment losses ¥198B) led to Pre-tax Income ¥3970B (+9.4%). After income taxes ¥1252B and non-controlling interests ▲¥68B, Net Income attributable to owners of the parent was ¥2787B (+12.0%). Net profit margin improved to 10.3% (prior 9.4%, +0.9pt), with extraordinary gains contributing to the increase.
Leasing: Revenue ¥9597B (+7.0%), Operating Income ¥1816B (+2.9%), margin 18.9%. Rental income from office buildings and retail facilities remained robust, aided by domestic and overseas portfolio expansion.
Property Sales: Revenue ¥7293B (▲3.8%), Operating Income ¥1435B (+0.4%), margin 19.7%. Delivery timing delays for residential and investor units reduced revenue, but a maintained mix of high-profit projects kept margins high.
Management: Revenue ¥6100B (+5.7%), Operating Income ¥809B (+12.9%), margin 13.3%. Non-asset businesses such as property management, brokerage, and asset management performed strongly, improving operating margin from 12.4% last year (+0.9pt).
Facility Operations: Revenue ¥2450B (+9.1%), Operating Income ¥463B (+20.0%), margin 18.9%. Hotels, resorts, and sports & entertainment businesses benefited from demand recovery, driving revenue and profit.
Other segments (including new-build contracting): Revenue ¥3115B (+1.9%), Operating Income ¥80B (+67.7%), margin 2.6% — modest growth. After corporate adjustments of ▲¥625B, consolidated Operating Income was ¥3978B, driven by profit increases in Leasing, Facility Operations, and Management.
Profitability: Operating margin 14.7% (prior 14.2%, +0.5pt), Net margin 10.3% (prior 9.4%, +0.9pt), led by gross margin 24.9% (prior 24.2%, +0.7pt). ROE 8.0% (prior 7.9%), ROA on Ordinary Income basis 3.1% (prior 3.0%) — slight improvement in capital efficiency.
Cash Quality: Operating CF / Net Income 0.52x (prior 2.44x) substantially declined, mainly due to an increase in inventories for sale (Operating CF adjustment ▲¥1510B). Operating CF / EBITDA was 0.26x (Operating CF ¥1453B vs EBITDA ¥5488B), indicating weak cash conversion.
Investment Efficiency: Total asset turnover 0.268x (prior 0.266x) slight increase; ROIC estimated at approximately 4.2%, remaining low.
Financial Soundness: Equity Ratio 33.5% (prior 33.2%), Debt / EBITDA 5.74x, Debt / Capital 48.2% — leverage is relatively high. EBITDA interest coverage 7.13x (EBITDA ¥5488B / interest expense ¥770B), interest coverage (EBIT/interest) 5.17x (EBIT ¥3978B / interest ¥770B), indicating adequate interest-bearing capacity. Current ratio 175.6% and Quick ratio 175.6% indicate good liquidity, but Cash / Short-term debt 0.10x (Cash ¥823B / short-term borrowings ¥7923B) is tight, making management of maturity mismatch due to increased short-term borrowings (+38.2%) important.
Operating CF was ¥1453B (prior ¥5993B, ▲75.8%), a large decline. Operating CF subtotal was ¥3308B, with an increase in inventories for sale of ▲¥1510B (prior a decrease of ¥403B) as the main factor, with inventory buildup straining cash. Income taxes paid ▲¥1267B and interest paid ▲¥754B also reduced CF. Investing CF was ▲¥1790B (prior ▲¥3220B); capital expenditures ▲¥2364B were partially offset by proceeds from sales of securities and fixed assets ¥1354B (proceeds from sale of investment securities ¥730B, proceeds from sale of fixed assets ¥1,354B). Free CF was ▲¥337B (prior +¥2773B), turning negative as inventory strategy and weak cash conversion surfaced. Financing CF was ▲¥591B (prior ▲¥2694B): while short-term borrowings increased by ¥6190B and long-term borrowings by ¥4875B, repayments of short-term borrowings ▲¥6137B, long-term repayments ▲¥4851B, and bond redemptions ▲¥1048B limited net increases. Dividend payments ▲¥915B and share buybacks ▲¥999B yielded total shareholder returns of approximately ¥1914B; since Free CF was ▲¥337B, returns exceeded free cash flow and were funded by borrowing. Ending cash balance was ¥823B (prior ¥1641B, ▲49.8%), reducing on-hand liquidity and tightening financing flexibility amid higher short-term debt dependence.
Of Operating Income ¥3978B, recurring earnings were mainly driven by revenue and profit increases in Leasing, Management, and Facility Operations. One-off items — Extraordinary gains ¥1035B (gain on sales of investment securities ¥517B, gain on sales of fixed assets ¥518B) — boosted Net Income; approximately 37.1% of Net Income ¥2787B was attributable to one-off items. Extraordinary losses comprised impairment losses ¥198B; the gap between Ordinary Income ¥3133B and Net Income ¥2787B is due to extraordinary items and tax adjustments. Non-operating income was ¥151B (0.6% of revenue), a small contribution, while equity in earnings of affiliates was ▲¥43B, a negative contribution from non-consolidated investees. Operating CF ¥1453B was only 0.52x of Net Income ¥2787B, with an increase in inventories for sale (▲¥1510B) impeding cash realization. The accrual ratio ((Net Income ¥2787B – Operating CF ¥1453B) / Total Assets ¥10,1035B) ≈ 1.3% is favorable, but low absolute OCF warrants attention on earnings quality. Comprehensive income was ¥3184B (Net Income ¥2787B + Other Comprehensive Income ¥466B), with valuation gains on securities ¥244B and retirement benefit adjustments ¥112B contributing positively; comprehensive income exceeded net income by +14.2%. Earnings sustainability depends on stable leasing income, planned reductions in Property Sales inventory deliveries, and lower reliance on gains from asset sales.
Full-year guidance: Revenue ¥28000B, Operating Income ¥4100B, Ordinary Income ¥3150B, Net Income ¥2850B, EPS ¥105.50, Dividend ¥18.50. Variance vs actual: Revenue ▲3.2% (¥27097B / ¥28000B), Operating Income ▲3.0% (¥3978B / ¥4100B), Ordinary Income ▲0.5% (¥3133B / ¥3150B), Net Income ▲2.2% (¥2787B / ¥2850B) — slight misses. Primary causes are delayed deliveries in Property Sales and conservative inventory strategy, as well as volatility in extraordinary gains. Dividends paid were ¥35.00 (assumed the ¥18.50 forecast is on a next-fiscal-year basis), with a payout ratio of 34.7% considered sustainable. The minor shortfall vs guidance can be seen as the result of conservative operations premised on planned inventory disposal and stable leasing revenue; recovery in Property Sales inventory deliveries will be key to performance rebound next fiscal year.
Annual dividend ¥35.00 (interim ¥17.00, year-end ¥18.00), up ¥20 from prior year dividend ¥15.00. Payout ratio 34.7% (Net Income ¥2787B vs total dividends approx. ¥965B; note the difference vs dividend payments ¥915B reflects intra-period variations) — a profit-based sustainable level. Share buybacks ¥999B were implemented, bringing total shareholder returns (dividends + buybacks) to approximately ¥1914B. Total return ratio was about 68.6% of Net Income ¥2787B — high, but since Free CF was ▲¥337B, returns significantly exceeded free cash flow and were supplemented by borrowing. Treasury stock balance increased to ¥384B (prior ¥122B, +214.8%), producing a 1.4% reduction effect against outstanding shares of 2.76B shares (treasury 38M shares). EPS was ¥101.04 (prior ¥89.26, +13.2%), reflecting both dividend increases and buybacks. Dividend sustainability depends on recovery of Operating CF (progress in deliveries of inventories for sale) and stability of leasing income. Going forward, balancing total returns with Free CF and restraining borrowing dependence will be key to sustaining shareholder returns.
Delivery timing risk in Property Sales: Inventories for sale total ¥13787B (13.6% of total assets) — high inventory levels — so timing of deliveries for residential condominiums and investor units and changes in sales market conditions directly affect performance. This fiscal year revenue declined ▲3.8% and inventory increases pressured Operating CF by ▲¥1510B. Days inventory outstanding (Inventories for sale / Revenue × 365) is approximately 186 days, improved from 206 days last year, but demand slowdown from market weakness or rising interest rates could cause inventory stagnation and impairment risk. While Property Sales margin is high at 19.7%, volatility is large and a material driver of performance fluctuations.
High leverage and short-term borrowing dependence leading to liquidity risk: Total borrowings ¥48699B (Short-term ¥7923B + Long-term ¥23579B + Bonds ¥9969B + Bonds maturing within 1 year ¥300B) result in Debt / EBITDA 5.74x and Debt / Capital 48.2% — high leverage. Short-term borrowings increased 38.2% from ¥5732B to ¥7923B, and Cash / Short-term debt is tight at 0.10x (Cash ¥823B). Maturity mismatch has enlarged, making the company sensitive to refinancing conditions (interest rate hikes, credit tightening). EBITDA interest coverage 7.13x gives near-term interest resilience, but interest expense ¥770B (2.8% of revenue) is material and rising rates would increase interest payments and compress development margins. Although current ratio 175.6% is healthy, reduced cash on hand (▲49.8%) and increased short-term debt narrow financing flexibility.
Dependence on gains from asset sales and repeatability risk of earnings: Extraordinary gains ¥1035B (gain on sales of investment securities ¥517B, gain on sales of fixed assets ¥518B) accounted for about 37.1% of Net Income ¥2787B, indicating high reliance on one-off items. Operating CF ¥1453B is only 0.52x of Net Income, and asset sale gains are not fully cash-realized but absorbed by inventory increases. Operating CF / EBITDA 0.26x shows low cash conversion; while leasing income is stable, delays in delivering Property Sales inventory or disappearance of asset sale gains would impair earnings sustainability. Equity in earnings of affiliates ▲¥43B and growing losses at unconsolidated investees increase uncertainty in investment income.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 14.7% | 10.7% (6.8%–17.9%) | +4.0pt |
| Net Margin | 10.0% | 5.8% (2.5%–11.9%) | +4.2pt |
Profitability outperforms industry median by Operating Margin +4.0pt and Net Margin +4.2pt, supported by high occupancy in the leasing portfolio and a high-profit mix in Property Sales.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 3.2% | 12.8% (4.2%–29.2%) | -9.6pt |
Revenue growth lags industry median by ▲9.6pt due to delayed Property Sales deliveries and conservative inventory policy, though robust growth in Leasing, Management, and Facility Operations provided underlying support.
※ Source: Company compilation
Stable earnings base and profitability improvement in Leasing: Leasing (Revenue ¥9597B +7.0%, Operating Income ¥1816B +2.9%, margin 18.9%) remains the principal earnings source and performed steadily. Operating margin improved to 14.7% (prior 14.2%, +0.5pt), confirming profitability improvement. Gross margin 24.9% (prior 24.2%, +0.7pt) benefited from high leasing occupancy and demand recovery in Facility Operations. Versus industry, Operating Margin +4.0pt and Net Margin +4.2pt show industry-leading profitability. Sustained leasing occupancy and rent revision durability, together with continued margin gains in Management, are keys to medium-term earnings stability.
Weak cash conversion and inventory strategy issues: Operating CF ¥1453B (YoY ▲75.8%) was only 0.52x of Net Income ¥2787B, with an increase in inventories for sale ▲¥1510B draining cash. Operating CF / EBITDA 0.26x shows weak cash conversion, and Free CF ▲¥337B is far below dividends + share buybacks ¥1914B, indicating returns were funded by borrowings. High inventory levels ¥13787B (13.6% of total assets) mean improving delivery timing and inventory turnover in Property Sales is essential to restore Operating CF. Dependence on Extraordinary gains ¥1035B (37.1% of Net Income) is also high, posing risks if asset sale gains decline.
Importance of leverage and liquidity management: Debt / EBITDA 5.74x and short-term borrowings ¥7923B (+38.2%) show a trend toward shorter-term debt, with Cash / Short-term debt 0.10x and tight on-hand liquidity. EBITDA interest coverage 7.13x indicates current interest resilience, but interest expense ¥770B is substantial; rate rises could increase interest burden and squeeze development economics. Current ratio 175.6% is healthy, but growing maturity mismatch and changes in refinancing conditions require close monitoring. Payout ratio 34.7% is sustainable, but total returns 68.6% funded by borrowings raise concerns about sustainability without Free CF recovery.
This report was generated by AI analyzing XBRL financial statement data and is an automatically produced financial analysis document. It does not constitute a recommendation to invest in any specific securities. Industry benchmarks are compiled by the company from public financial statements and provided as reference information. Investment decisions are your own responsibility; consult a professional advisor as necessary.