Relo Group,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥72.93B
• Operating Income: ¥14.85B
• Net Income: ¥10.43B
• EPS: ¥67.67

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Solid top-line growth but margin compression led to a softer quarter at the operating line, with bottom-line impacted yet supported by strong cash generation. Revenue rose 4.1% YoY to 729.29, while operating income declined 5.2% YoY to 148.52. Gross profit reached 338.26 and gross margin stood at 46.4%, indicating healthy value-add in the service mix. Operating margin was approximately 20.4% (148.52/729.29), reflecting pressure compared with revenue growth; the YoY margin change in basis points cannot be calculated due to lack of prior-period margin disclosure. EBITDA was 240.13, implying an EBITDA margin of 32.9%, with D&A of 91.61. Profit before tax was 149.18, only slightly above operating income, indicating minimal net non-operating contribution this quarter. Net income was 101.66 (down 69.2% YoY), but this headline decline likely reflects a high base or non-recurring items in the prior year rather than deterioration in ongoing operations; the effective tax rate was 30.1%. Earnings quality was strong, with operating cash flow of 154.06 exceeding net income (OCF/NI 1.52x). Free cash flow was robust at 110.61 after capex of 15.55, easily funding dividends of 62.81 and share repurchases of 43.54. The balance sheet shows low equity buffer (equity ratio 23.6%) and high leverage (D/E 3.09x), warranting attention despite consistent cash generation. Receivables were 855.84 and payables 684.57, consistent with a services-heavy working capital structure; current liabilities are unreported, limiting a full liquidity assessment. ROE calculated at 13.6% is healthy, supported by a 13.9% net margin, 0.239x asset turnover, and 4.09x leverage. Equity-method income was minor at 0.82 and not a major earnings driver. Dividend sustainability looks adequate with a calculated payout ratio of 63.2% and FCF coverage of 1.72x. Forward-looking, we see continued cash flow strength but near-term margin headwinds from SG&A and cost inflation, with leverage a key monitoring point. Overall, the quarter shows resilient fundamentals and cash conversion, but with caution flags around margin pressure and capital structure.

Profitability Analysis

ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 13.9% × 0.239 × 4.09 = ~13.6%. The component most evidently under pressure is the margin leg: revenue grew 4.1% YoY while operating income fell 5.2% YoY, implying operating margin compression (bps change YoY not calculable given missing prior-period margins). The business reason likely reflects higher SG&A intensity (current SG&A at 206.70, ~28.4% of revenue) and cost inflation, partially offsetting gross margin of 46.4%. Non-operating items were minimal (PBT 149.18 vs OI 148.52), so net margin dynamics were driven by core operations and a 30.1% effective tax rate. Leverage (4.09x) supports ROE despite softer margins; asset turnover remains modest at 0.239x, typical for service/outsourcing businesses with sizable intangibles and receivables. Sustainability: margin headwinds from labor and rent could persist near term; however, steady EBITDA margin (32.9%) and strong OCF suggest core profitability remains intact if cost discipline improves. Concerning trends to watch: any acceleration of SG&A growth outpacing revenue would further compress operating leverage; current data already imply negative operating leverage this quarter.

Growth Assessment

Revenue growth of 4.1% YoY to 729.29 appears organic and steady for the group’s service portfolio. Operating income down 5.2% YoY indicates growth is currently not translating to operating leverage due to higher operating costs. EBITDA of 240.13 indicates underlying earnings capacity remains strong despite margin pressure. Equity-method contributions were negligible (0.82), so growth is predominantly from consolidated operations rather than affiliates. The net income decline (-69.2% YoY) likely reflects an outsized prior-year base and/or one-off effects; this quarter’s PBT roughly matches OI, suggesting a cleaner base period now. Outlook: with continued demand in corporate services and relocation/outsourcing, mid-single digit revenue growth is plausible, but margin recovery hinges on SG&A control and pricing. Mix shifts favoring higher-margin services could stabilize operating margin near ~20% if cost pressures ease. Currency and macro sensitivity appear moderate relative to commodity-exposed sectors; client activity levels and retention remain key growth drivers. Overall, growth is sustainable at the top line, with profitability recovery dependent on cost discipline.

Financial Health

Equity ratio is 23.6%, indicating a relatively thin capital buffer. Debt-to-equity is elevated at 3.09x (warning threshold >2.0), pointing to high leverage. Current ratio and quick ratio are not calculable due to unreported current liabilities, limiting direct liquidity assessment; however, current assets total 1,644.37, with receivables at 855.84 and inventories low at 80.97, consistent with a service model. Maturity mismatch risk cannot be fully assessed without short-term debt and current liabilities; payables at 684.57 are material relative to receivables, but net working capital visibility is incomplete. Cash and equivalents were 635.89, offering liquidity support. Interest-bearing debt levels and interest coverage are unreported, so we cannot quantify covenant headroom or coverage. No explicit off-balance sheet obligations were disclosed in the data provided.

Cash Flow Quality

OCF/Net Income is 1.52x, indicating high-quality earnings and solid cash conversion. Free cash flow was 110.61 after modest capex of 15.55, suggesting an asset-light and cash-generative model. OCF exceeded both dividends (62.81) and buybacks (43.54), covering shareholder returns comfortably. Working capital appears well managed given positive OCF alongside revenue growth; receivables are significant but not evidently problematic based on cash generation. No signs of working capital manipulation are evident from the limited data (e.g., OCF remains strong despite margin pressure). Financing cash outflow of -113.04 reflects distributions and potential debt service/repayments (details unreported). Overall, cash flow quality supports operational resilience.

Dividend Sustainability

Calculated payout ratio is 63.2%, slightly above the preferred <60% benchmark but close to sustainable range. FCF coverage is strong at 1.72x, indicating the dividend is covered by internally generated cash after capex. With buybacks of 43.54 also funded within FCF, shareholder returns appear balanced against reinvestment needs. Leverage is elevated (D/E 3.09x), so maintaining dividend growth may depend on continued robust OCF and stable capex. Policy outlook: absent major investment spikes or profit shocks, the current dividend level looks serviceable; upward revisions should be paced with margin recovery and de-leveraging progress. Official DPS figures for the period were unreported; assessment is based on payouts and payout ratio provided.

Risk Assessment

Business Risks:

• Margin pressure from labor cost inflation and SG&A intensity impacting operating leverage
• Client demand cyclicality in corporate services/relocation and outsourcing businesses
• Goodwill and intangible-heavy balance sheet (Goodwill 169.03, Intangibles 94.74) posing impairment risk if growth slows
• Execution risk in integrating services and maintaining service quality at scale
• Pricing power risk if competitive intensity rises

Financial Risks:

• High leverage (D/E 3.09x) and low equity ratio (23.6%) increasing sensitivity to profit volatility
• Liquidity visibility constraints due to unreported current liabilities and interest-bearing debt
• Potential refinancing risk if a meaningful portion of debt is short-term (maturities unreported)
• Interest rate risk affecting financing costs (interest expense and coverage unreported)

Key Concerns:

• Operating margin compression despite revenue growth (OI -5.2% YoY vs revenue +4.1%)
• Net income volatility (reported -69.2% YoY) indicating possible non-recurring effects in comparison base
• Dependence on receivables-driven working capital (AR 855.84) in a services model
• Limited disclosure on non-operating items and debt terms, constraining risk quantification

Investment Implications

Key Takeaways:

• Top-line growth remained resilient at +4.1% YoY to 729.29
• Operating margin around 20.4% with EBITDA margin 32.9%, but evidence of negative operating leverage
• OCF strong at 154.06 (1.52x NI), delivering FCF of 110.61
• Shareholder returns (dividends + buybacks) comfortably funded by FCF in the period
• Capital structure is aggressive: D/E 3.09x and equity ratio 23.6%
• ROE healthy at 13.6%, supported by leverage despite softer margins
• Equity-method income immaterial (0.82), earnings driven by core operations

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of revenue (currently ~28.4%)
• OCF sustainability and receivables collection metrics
• Leverage trend (D/E) and any disclosures on interest coverage or maturity profiles
• Capex discipline relative to growth and service mix
• Any signs of goodwill impairment or revaluation
• Effective tax rate stability around ~30%

Relative Positioning: Within Japan service/outsourcing peers, Relo Group combines steady top-line growth with superior cash conversion but carries higher financial leverage than conservative peers; improving cost discipline and de-leveraging would enhance resilience relative to the sector.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis