| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue (Net Sales) | ¥1510.7B | ¥1429.1B | +5.7% |
| Operating Income | ¥308.1B | ¥304.4B | +1.2% |
| Ordinary Income | ¥309.4B | ¥528.6B | -41.5% |
| Net Income | ¥210.3B | ¥438.0B | -52.0% |
| ROE | 24.3% | 62.1% | - |
FY2026 full-year results: Revenue ¥1,510.7B (YoY +¥81.7B +5.7%), Operating Income ¥308.1B (YoY +¥3.8B +1.2%), Ordinary Income ¥324.0B (YoY -¥228.2B -41.3%), Net Income attributable to owners of the parent ¥206.7B (YoY -¥226.5B -52.3%). Although the company achieved higher revenue and operating profit, Ordinary Income and Net Income fell sharply due to the absence of prior-year equity-method investment gain on sale of ¥187.2B. Operationally, the core Outsourcing Business expanded steadily with revenue up 8.8%, maintaining a high Operating Margin of 20.4%. Gross margin was 46.5% (prior 46.4%), essentially flat; SG&A ratio rose to 28.3% (prior 27.9%, +0.4pt), with SG&A growth (+7.2%) outpacing revenue growth (+5.7%).
Revenue breakdown of ¥1,510.7B (+5.7%): Outsourcing Business ¥807.7B (+8.8%, composition 53.5%), Rental Management Business ¥529.6B (+2.3%, composition 35.1%), Tourism Business ¥164.0B (+4.0%, composition 10.9%), Other ¥9.5B (-17.9%, composition 0.6%). The core Outsourcing Business drove company-wide growth, achieving near-double-digit expansion supported by expanded demand for employee benefit administration and outsourcing services. Rental Management remained low-growth and Tourism continued recovery but with limited share. Gross profit was ¥703.1B (+6.0%), with gross margin at 46.5%, a 0.1pt improvement from prior year.
Profitability: Operating Income ¥308.1B (+1.2%) — SG&A increased to ¥427.6B (+7.2%), outpacing gross profit growth and causing Operating Margin to decline to 20.4% (prior 21.3%, -0.9pt). SG&A ratio of 28.3% rose 0.4pt reflecting growth investments and cost inflation. By segment, Outsourcing posted Operating Income ¥229.0B (+3.4%, margin 28.4%) maintaining high margins; Rental Management Operating Income ¥80.1B (-1.9%, margin 15.1%) saw margin deterioration due to rising labor and repair costs; Tourism Operating Income ¥43.4B (+3.5%, margin 26.5%) maintained high profitability amid recovery. Non-operating results were roughly neutral with Financial Income ¥7.2B and Financial Expenses ¥7.8B; equity-method earnings were ¥1.9B (prior ¥36.6B), substantially reduced. The prior-year equity-method gain on sale of investments of ¥187.2B did not recur, leading to Ordinary Income ¥309.4B (-41.5%) and, after corporate taxes of ¥99.1B, Net Income attributable to owners of the parent ¥206.7B (-52.3%). Excluding one-off items, core earnings remained solid, preserving the trend of revenue and operating profit growth.
Outsourcing Business: Revenue ¥807.7B (+8.8%), Operating Income ¥229.0B (+3.4%), margin 28.4%, remaining the high-margin core business contributing about 66% of company operating profit. Stock-type business models such as employee benefit administration, customer benefit administration, and leased company housing management expanded steadily. Rental Management Business: Revenue ¥529.6B (+2.3%), Operating Income ¥80.1B (-1.9%), margin 15.1% down YoY as cost increases in labor and repairs could not be fully passed on. Tourism Business: Revenue ¥164.0B (+4.0%), Operating Income ¥43.4B (+3.5%), margin 26.5%—benefiting from inbound demand recovery and steady demand for hotel and villa timeshare businesses. Other: Revenue ¥9.5B (-17.9%), Operating Loss ¥2.1B, small-scale ongoing loss.
Profitability: Operating Margin 20.4% (prior 21.3%) declined 0.9pt due to higher SG&A ratio but remains high versus industry levels. ROE 27.1% (prior 81.1%) fell significantly due to the prior-year one-off equity-method gain, but core earnings still demonstrate high capital efficiency. Gross Margin 46.5% stable, indicating steady cost control. Cash Quality: Operating Cash Flow (OCF) ¥225.4B equals 1.07x Net Income ¥210.3B, indicating healthy cash-based earnings generation. Days Sales Outstanding (DSO) approximately 245 days (Accounts receivable ¥1,012.1B ÷ Daily sales ¥4.1B) has lengthened, suggesting room to improve working capital efficiency. Investment Efficiency: ROIC estimate (EBIT ¥308.1B ÷ (Net assets ¥845.8B + Interest-bearing debt ¥506.4B) ≒ 22.8%) indicates high returns on invested capital. Total asset turnover is low at 0.47x, reflecting the stock-type business model of the Outsourcing Business. Financial Soundness: Equity Ratio 26.1% (prior 22.5%) improved; D/E 2.75x (Interest-bearing debt ¥506.4B ÷ Net assets ¥845.8B × 0.976) indicates high leverage but Interest Coverage approx. 39.5x (EBIT ¥308.1B ÷ Financial Expenses ¥7.8B) demonstrates very strong interest payment capacity. Current Ratio approx. 132% (Current assets ¥1,803.5B ÷ Current liabilities ¥1,366.5B) secures short-term liquidity.
OCF ¥225.4B (YoY -13.1%) — this is after deducting corporate taxes paid ¥94.9B from OCF subtotal ¥321.6B. OCF subtotal including depreciation etc. ¥187.1B was solid, but increases in trade receivables ¥111.2B and inventories ¥17.3B negatively impacted working capital. The increase in accounts payable ¥87.0B partially offset this, but overall working capital outflow amounted to ¥-41.6B. Investing Cash Flow was ¥-88.7B, mainly capex ¥47.5B, acquisition of investment properties ¥77.5B, and proceeds from sale of investment properties ¥59.9B. Free Cash Flow (FCF) was ¥136.7B (OCF ¥225.4B - Investing CF ¥88.7B), covering dividend payments ¥62.8B and share buybacks ¥55.0B (total ¥117.8B) by 1.16x. Financing Cash Flow was ¥-149.5B: net increase in short-term borrowings ¥13.0B and proceeds from long-term borrowings ¥18.5B were offset by long-term borrowings repayments ¥80.2B, dividend payments ¥62.8B, and share buybacks ¥55.0B. Cash and cash equivalents at year-end were ¥634.0B (YoY -¥6.2B), a slight decrease with liquidity well maintained. A positive foreign exchange translation effect of ¥6.5B contributed modestly; improving working capital efficiency is key to CF improvement.
Overall quality of earnings is generally good. Operating Income ¥308.1B was generated from recurring business activities; one-off items such as gains on sale of fixed assets included in Other income ¥36.4B account for roughly 12% of total operating income and are limited. The prior-year equity-method gain on sale of investments ¥187.2B boosted Pretax Income last year but did not recur; Pretax Income ¥309.4B this year is close to core earnings. OCF ¥225.4B is 1.07x Net Income ¥210.3B, indicating strong linkage between profit and cash. From an accrual perspective, increases in trade receivables ¥111.2B and inventories ¥17.3B led to a total working capital increase of ¥128.5B, creating timing lag between profit recognition and cash collection. Increased accounts payable ¥87.0B partially offset this, but net working capital outflow was ¥-41.6B and prolonged DSO (approx. 245 days) suggests scope to improve cash conversion. Given steady operating income and OCF generation, earnings sustainability is assessed as high.
Full-year guidance projects Revenue ¥1,650.0B (vs. current +9.2%), Operating Income ¥340.0B (vs. current +10.3%), Net Income attributable to owners of the parent ¥225.0B (vs. current +8.9%), expecting higher revenue and profits. Progress through the current fiscal year stands at Revenue 91.6%, Operating Income 90.6%, Net Income 91.9% — broadly on track. The plan assumes Operating Income growth outpacing Revenue through SG&A control and realization of scale benefits in the core Outsourcing Business. Forecast EPS is ¥148.56, an 8.4% improvement from current actual ¥137.11. Forecast dividend is ¥34.50, implying a Payout Ratio around 23.2%, a conservative level. As the first year of the 4th medium-term management plan "Operation Olympic", the strategy targets expansion of B2B Outsourcing and growth in Rental Management and Tourism by capturing regional revitalization and inbound demand. Management believes efficiency in resource allocation and strengthened inter-business synergies make the targets achievable.
Year-end dividend was ¥69 per share (including ordinary dividend ¥38 and special dividend equivalent ¥4), with total dividends of ¥62.8B. Payout Ratio is approximately 50.3% (Total dividends ¥63.7B ÷ Net Income ¥206.7B, excluding ¥0.1B dividends on treasury shares held in the stock compensation trust) and considered an appropriate level. No share repurchases were conducted this period (prior ¥55.0B); disposals of treasury shares ¥30.2B reduced treasury share balance to ¥25.3B. Total Return Ratio, calculated as dividends + share buybacks of approximately ¥117.8B / Net Income ¥210.3B ≒ about 56.0% (on prior-period basis), indicates a good balance with growth investments. Forecast dividend for next term-end is ¥34.50; if presented as full-year it would be a cut versus current year, but assuming no interim dividend, the year-end amount may represent roughly half-year and the underlying dividend policy appears unchanged or on a gentle upward trend. Cash equivalents ¥634.0B and FCF ¥136.7B generation provide room for continued dividends and opportunistic share repurchases.
Business concentration risk: The Outsourcing Business accounts for 53.5% of company revenue and about 66% of operating profit; demand volatility, intensified competition, or pricing pressure in this business would directly affect company performance. Although the B2B stock-type model is stable, loss of large customers or weakening external demand for benefit DX outsourcing could materially change profitability.
Working capital risk: Trade receivables ¥1,012.1B (DSO approx. 245 days) have lengthened; in the event of customer credit deterioration, bad debt losses could increase and compress OCF. Inventories ¥90.6B rose +23.7% YoY; continued deterioration in working capital efficiency could restrain FCF, the source of growth investment and shareholder returns.
Financial leverage risk: Equity Ratio 26.1% and D/E 2.75x indicate high leverage; in a rising interest rate environment or economic downturn, interest burden could rise and reduce flexibility in capital policy. Although Interest Coverage is currently strong at approx. 39.5x, continued declines in Operating Margin could rapidly erode interest-bearing resilience.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 27.1% | 10.1% (2.2%–17.8%) | +17.0pt |
| Operating Margin | 20.4% | 8.1% (3.6%–16.0%) | +12.3pt |
| Net Margin | 13.9% | 5.8% (1.2%–11.6%) | +8.1pt |
ROE, Operating Margin, and Net Margin all materially exceed industry medians, indicating top-tier profitability within the IT & Communications sector.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.7% | 10.1% (1.7%–20.2%) | -4.4pt |
Revenue growth rate trails the median, reflecting a mid-to-conservative growth pace in the industry. The company prioritizes profitability-focused, steady expansion.
※Source: Company compilation
Stability of core earnings power: Net Income fell sharply due to the non-recurrence of prior-year equity-method gain on sale ¥187.2B, yet Operating Income grew +1.2% and Operating Margin remained high at 20.4%. The core Outsourcing Business expanded 8.8% while sustaining margin 28.4%, indicating durable high-margin structure and solid recurring earnings capacity. Next fiscal year guidance targets Operating Income +10.3% indicating accelerated profit growth, consistent with the medium-term plan’s first-year objectives to balance growth and profitability.
Balance between working capital efficiency and shareholder returns: OCF ¥225.4B and FCF ¥136.7B funded dividends ¥62.8B and share buybacks ¥55.0B (prior), with Payout Ratio 50.3% and Total Return Ratio about 56.0% considered appropriate. However, prolonged DSO (approx. 245 days) and accumulated working capital (net outflow ¥-41.6B) are constraining OCF; improving working capital efficiency is key to enhancing cash conversion and expanding shareholder return capacity. Cash equivalents ¥634.0B and robust Interest Coverage approx. 39.5x support flexibility for growth investment and shareholder returns.
High-profitability profile and industry advantage: ROE 27.1%, Operating Margin 20.4%, Net Margin 13.9% substantially exceed IT & Communications medians (10.1%, 8.1%, 5.8%), demonstrating top-class capital efficiency and profitability. Revenue growth 5.7% lags median 10.1%, highlighting a strategy that emphasizes profitability over growth. High leverage (D/E 2.75x) combined with Outsourcing Business concentration (Revenue 53.5%, Operating Income ~66%) drives returns, but business diversification and working capital efficiency improvements are prerequisites for sustaining long-term growth.
This report is an earnings analysis document automatically generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference data compiled by the Company based on published financial statements. Investment decisions are your responsibility; please consult a professional advisor as necessary.