Quick View
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥38.96B | ¥35.74B | +9.0% |
| Operating Income | ¥7.17B | ¥6.42B | +11.8% |
| Profit Before Tax | ¥7.52B | ¥6.42B | +17.1% |
| Net Income | ¥5.30B | ¥4.49B | +18.0% |
| ROE | 6.6% | 5.2% | - |
Executive Summary
In Q1 of FY2027, revenue and income increased due to the expansion of the core Outsourcing Business and improved cost efficiency. Revenue was ¥38.96B (¥35.75B in the same period of the previous year, YoY +9.0%), Operating Income was ¥7.17B (¥6.42B, YoY +11.8%), Profit Before Tax was ¥7.52B (¥6.42B, YoY +17.1%), and quarterly Net Income attributable to owners of the parent was ¥5.23B (¥4.41B, YoY +18.4%). The Operating Income margin improved to 18.4% from 17.9% in the same period of the previous year, while an increase in financial income also contributed, resulting in profit growth exceeding revenue growth.
Factors Affecting Performance
【Revenue】Revenue was ¥38.96B, representing a YoY increase of +9.0%. By segment, the core Outsourcing Business showed the largest increase, reaching ¥22.16B (56.9% of external revenue, YoY +11.0%), while the Rental Management Business also achieved double-digit growth at ¥13.01B (33.4% share, YoY +10.1%). Meanwhile, the Tourism Business was ¥3.65B (9.4% share, YoY -0.1%), remaining essentially flat.
【Profit and Loss】Operating Income was ¥7.17B (YoY +11.8%), and the Operating Income margin improved to 18.4% from 17.9% in the same period of the previous year. Although the gross margin declined slightly to 46.1% from 46.4%, the SG&A expense ratio improved to 28.6% from 29.0%, supporting profitability. Profit Before Tax was ¥7.52B (YoY +17.1%), with financial income of ¥0.48B exceeding financial expenses of ¥0.20B and providing an incremental contribution above Operating Income. One-off factors equivalent to extraordinary gains and losses were limited. Quarterly Net Income attributable to owners of the parent reached ¥5.23B (YoY +18.4%), resulting in higher revenue and profit.
Segment Analysis
The Outsourcing Business generated segment profit of ¥6.26B (YoY +11.4%, profit margin 28.2%), making it the largest earnings contributor on a consolidated basis and accounting for approximately 75% of the ¥8.35B total profit of the reportable segments. The Rental Management Business recorded profit of ¥1.59B (YoY +22.0%, profit margin 12.2%, improved from 11.0% in the same period of the previous year), demonstrating the highest profit growth rate. The Tourism Business posted profit of ¥0.50B (YoY +5.3%, profit margin 13.7%); although revenue was essentially flat, profitability improved slightly. Corporate adjustments expanded to -¥1.09B from -¥0.91B in the same period of the previous year, partially offsetting the ¥0.76B increase in consolidated Operating Income relative to the ¥1.28B profit growth of the reportable segments in total.
Key Financial Metrics
【Profitability】The Operating Income margin was 18.4% (17.9% in the same period of the previous year, +approximately 47bp), while the Net Income margin attributable to owners of the parent was 13.4% (12.3% in the same period of the previous year, +approximately 107bp). This reflects a structure in which the slight decline in the gross margin (46.1%, compared with 46.4% in the previous year) was absorbed by an improvement in the SG&A expense ratio (28.6%, compared with 29.0% in the previous year). 【Cash Flow Quality】Operating Cash Flow was ¥10.57B, approximately 2.0 times quarterly profit of ¥5.30B, indicating strong cash-generation capacity supporting earnings. 【Investment Efficiency】ROE was 6.6%. 【Financial Soundness】The Equity Ratio was 24.7%, down from 26.1% in the same period of the previous year. Interest-bearing debt (the total of bonds and borrowings and lease liabilities) was ¥80.88B, approximately in line with equity attributable to owners of the parent of ¥78.27B. Against financial expenses of ¥0.196B, interest coverage based on Operating Income was approximately 36.6 times, indicating substantial capacity to absorb interest expenses. Goodwill was ¥18.58B (up ¥1.50B from the previous fiscal year-end, +8.8%), equivalent to 23.1% of net assets of ¥80.35B.
Cash Flow Analysis
Operating Cash Flow was ¥10.57B, increasing by YoY +40.5% from ¥7.53B in the same period of the previous year. The primary positive factor was a decrease in trade and other receivables (+¥5.96B), while inventories increased by ¥1.03B. Cash Flow from Investing Activities was -¥4.69B, with the principal outflows consisting of ¥1.32B for the acquisition of property, plant and equipment and ¥2.11B for the acquisition of investment property. As a result, Free Cash Flow (Operating CF + Investing CF) remained positive at ¥5.88B. Cash Flow from Financing Activities was -¥14.02B. Although proceeds from long-term borrowings amounted to ¥24.81B, the principal outflows were ¥24.09B in bond redemptions and ¥10.36B in dividend payments. Cash and cash equivalents decreased by ¥7.99B from ¥63.40B at the beginning of the period to ¥55.41B at the end of the period. Free Cash Flow alone was insufficient to cover dividend payments and bond redemptions, which were supplemented by borrowings and cash on hand.
Quality of Earnings
The increase in profit for the current period was primarily driven by higher Operating Income. The net contribution from other income of ¥0.38B and other expenses of ¥0.03B was small, and the impact of one-off factors was limited. Below Operating Income, financial income of ¥0.48B exceeded financial expenses of ¥0.20B, boosting Profit Before Tax. Comprehensive income was ¥5.55B (¥5.47B attributable to owners of the parent), exceeding quarterly Net Income attributable to owners of the parent of ¥5.23B by ¥0.24B. The primary factor was a positive ¥0.27B contribution from foreign currency translation adjustments of foreign operations. Operating Cash Flow of ¥10.57B was approximately 2.0 times quarterly profit of ¥5.30B, indicating good consistency between earnings and cash flow. From an accrual perspective—the divergence between accrual and cash accounting—the quality of earnings is also considered high.
Earnings Forecast and Guidance
The Q1 progress rates against the full-year forecasts (Revenue of ¥165.00B, Operating Income of ¥34.00B, EPS of ¥148.56, and dividends of ¥75.00) were 23.6% for Revenue, 21.1% for Operating Income, and 23.2% for Net Income attributable to owners of the parent (against the forecast of ¥22.50B). Compared with the 25% benchmark for simple, evenly distributed quarterly progress, the progress of Operating Income was somewhat slower. As of the current quarter, no revisions had been made to the earnings or dividend forecasts.
Shareholder Returns
Dividend payments recorded in the statement of cash flows for Q1 were ¥10.36B. The full-year dividend forecast is ¥75.00 per share, implying a Payout Ratio of approximately 50.5% based on the full-year EPS forecast of ¥148.56. Free Cash Flow for the current quarter was only ¥5.88B, below the ¥10.36B of dividends paid during the period. Accordingly, dividend funding was supplemented by seasonal timing differences in Operating Cash Flow, cash on hand, and borrowings. Regarding treasury shares, the disposal of treasury shares associated with the redemption of convertible bonds with share acquisition rights was recorded, but no new share repurchases were identified.
Risk Factors
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Concentration of earnings in the core business: The Outsourcing Business accounts for approximately 75% (¥6.26B) of the ¥8.35B total profit of the reportable segments, meaning that contract renewal terms and pricing trends in this business have a significant impact on consolidated performance.
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Working capital fluctuations: Inventories increased by ¥1.03B from the previous fiscal year-end, while trade receivables decreased by ¥5.96B, indicating progress in collections. Fluctuations in both assets and liabilities could become a source of volatility in future Operating Cash Flow.
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Refinancing trends for interest-bearing debt: During the current quarter, the Company raised ¥24.81B through long-term borrowings while redeeming ¥24.09B of bonds. Changes in interest rates and financing conditions could affect future financial expenses.
Industry Benchmark (For Reference; Compiled by the Company)
Industry Benchmark (it_telecom)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 18.4% | 8.1% (2.3%–15.9%) | +10.3pt |
| Net Income Margin | 13.6% | 5.9% (1.6%–10.7%) | +7.7pt |
Both the Operating Income margin and Net Income margin were well above the industry median, placing profitability in the upper tier of the industry.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 9.0% | 9.3% (0.4%–16.9%) | −0.3pt |
The Revenue growth rate was approximately in line with the industry median, placing the Company at an average level in terms of growth momentum.
※Source: Compiled by the Company
Key Points from the Earnings Results
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The Operating Income margin improved to 18.4% from 17.9% in the same period of the previous year, confirming a structure in which expansion of the high-margin Outsourcing Business contributed to improved profitability through a better business mix.
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Operating Cash Flow reached approximately 2.0 times quarterly profit, providing solid support for earnings. However, Free Cash Flow of ¥5.88B was below the ¥10.36B of dividends paid during the current quarter, indicating the seasonality of cash flows.
-
Operating Income progress against the full-year forecast was 21.1%, somewhat slower than Revenue (23.6%) and Net Income (23.2%). Expense trends and business-specific seasonality in the second half of the fiscal year may determine future progress.
Theoretical Stock Price (Reference Value)
This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market price or a recommendation of any specific investment action.
| Scenario | Theoretical Stock Price |
|---|---|
| bear | ¥818 |
| base | ¥856 |
| bull | ¥903 |
| Calculation Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥516 |
| Adjusted Forecast EPS | ¥155.8 |
| Cost of Equity r | 9.27% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 0.50%) |
| Residual Income Persistence Coefficient ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 50.5% |
| Forecast EPS Confidence Adjustment | ×1.049 (based on the historical guidance achievement rate of peer companies in the same industry) |
| Implied PBR / PER | 1.66x / 5.5x |
Sensitivity: ¥832–¥881 at cost of equity ±1%; ¥847–¥869 at ω ±0.1.
Notes:
- Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
(Calculation model: Residual income model / Interest rate reference month: 2026-07 / This value does not predict or guarantee future stock prices)
This report is an earnings analysis document automatically generated by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own responsibility, after consulting with a professional as necessary.
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AI Financial Analysis
Executive Summary
Relogroup delivered a strong FY2027 Q1 result, with broad-based revenue growth, operating-margin expansion and faster growth in profit attributable to owners. Revenue rose 9.0% year on year to ¥38.96bn. Operating income increased 11.8% to ¥7.17bn, exceeding the pace of sales growth. Profit attributable to owners increased 18.4% to ¥5.23bn, and basic EPS rose to ¥34.48 from ¥29.50. The consolidated operating margin expanded by 50bp to 18.4% from 17.9%. Gross margin declined modestly by around 30bp to 46.1%, indicating some cost-of-sales pressure. However, the SG&A-to-revenue ratio improved by roughly 40bp to 28.6%, more than offsetting the gross-margin movement and demonstrating favorable operating leverage. The outsourcing business remained the core earnings engine, producing ¥6.26bn of segment profit and accounting for approximately 75% of aggregate segment profit before corporate costs. Rental management also improved materially, while tourism generated a modest profit increase on broadly flat revenue. Earnings quality was strong in the quarter: operating cash flow of ¥10.57bn was 2.02x net income of ¥5.23bn attributable to owners. Cash conversion was aided by a ¥5.96bn reduction in receivables, although the receivables balance remains structurally large at ¥95.57bn. Free cash flow was positive at ¥5.88bn after capital expenditures of ¥1.32bn. Financial leverage remains the principal balance-sheet concern, with D/E of 2.94x and an equity ratio of 24.7%. The Q1 dividend cash payment of ¥10.36bn exceeded quarterly free cash flow, reducing cash and equity, although this payment timing does not by itself indicate the full-year dividend burden. Management retained its full-year forecast, and Q1 operating-income progress of 21.1% is below the standard 25% run rate but remains within a 10 percentage-point range. The key implication is that the company has started the year with solid operating momentum, but sustained delivery should be assessed against receivables discipline, leverage reduction and the conversion of revenue growth into recurring cash flow.
Profitability Analysis
The reported annualized ROE is 26.0%, an excellent level relative to the 15% benchmark. The DuPont decomposition is net profit margin of 13.4% multiplied by annualized asset turnover of 0.492x and financial leverage of 3.94x. Profitability is underpinned by an excellent net margin and high financial leverage rather than rapid asset utilization. The 18.4% EBIT margin is also excellent and increased by 50bp year on year, reflecting positive operating leverage as SG&A grew 7.5%, below 9.0% revenue growth. Gross profit increased 8.4% to ¥17.96bn, slightly trailing revenue growth because gross margin eased to 46.1% from approximately 46.4%. The resulting margin improvement was therefore generated below gross profit, through SG&A efficiency rather than pricing or procurement gains alone. The tax burden was 0.695, consistent with an effective tax rate of 29.6%. The interest burden was 1.048x because finance income of ¥0.48bn exceeded finance costs of ¥0.20bn; consequently, pre-tax profit of ¥7.52bn exceeded EBIT. This favorable net finance contribution is positive but smaller than the operating-profit base and does not dominate earnings. By segment, outsourcing delivered a 28.2% segment margin, broadly stable from 28.1% in the prior-year quarter. Rental management's segment margin improved to 12.2% from 11.0%, while tourism improved to 13.7% from 13.0%. The main profitability risk is that a high 26.0% annualized ROE partly reflects 3.94x financial leverage, so the return profile is more sensitive to balance-sheet changes than a similarly profitable low-leverage peer.
Growth Assessment
Revenue growth was supported principally by outsourcing, where external revenue rose 11.0% year on year to ¥22.16bn and segment profit increased 11.4% to ¥6.26bn. This is the core business based on its largest operating-income contribution and its high 28.2% segment margin. Rental management external revenue increased 10.0% to ¥13.01bn, while segment profit grew 22.1% to ¥1.59bn, showing particularly favorable profit conversion. Tourism revenue was nearly flat at ¥3.65bn, but segment profit rose 5.3% to ¥0.50bn, reflecting a modest margin improvement. Aggregate segment profit increased 14.2% to ¥8.27bn, although higher corporate and consolidation adjustments reduced the amount recognized as consolidated operating income. The full-year sales forecast is ¥165.0bn, placing Q1 progress at 23.6% versus a standard 25% pace. Operating-income progress is 21.1% against the ¥34.0bn full-year target, while attributable-profit progress is 23.2% against the ¥22.5bn target. These are modestly below a straight-line quarterly run rate but not sufficiently divergent to indicate a material forecast shortfall. Full-year forecast operating-income growth of 10.3% requires continued margin discipline and sustained expansion in outsourcing and rental management. The mix of high-margin outsourcing growth and improving rental-management profitability supports revenue quality, while tourism remains a smaller, less material contributor.
Financial Health
Liquidity is adequate but not conservative. The current ratio is 1.20x, based on current assets of ¥168.04bn and current liabilities of ¥139.73bn, remaining above 1.0x but below the 1.5x healthy benchmark. The quick ratio is approximately 1.13x after excluding inventories, indicating that liquid current assets are sufficient to cover current obligations. Cash and cash equivalents were ¥55.41bn at quarter-end. Current bonds and borrowings were ¥14.70bn and current lease liabilities were ¥11.01bn; these are covered by cash and the broader current asset base, limiting immediate maturity-mismatch risk. However, the D/E ratio of 2.94x exceeds the 2.0x warning threshold and signals an aggressive capital structure. This high-leverage alert reflects liabilities of ¥236.11bn relative to equity of ¥80.35bn and raises sensitivity to earnings volatility, refinancing conditions and asset-value changes. Total lease liabilities were substantial at ¥31.98bn, comprising ¥11.01bn current and ¥20.97bn non-current obligations. Bonds and borrowings totaled ¥48.90bn, with ¥34.20bn classified as non-current. During the quarter, the company raised ¥24.81bn of long-term borrowings and redeemed ¥24.09bn of bonds, indicating active liability refinancing rather than a material net expansion of debt. Equity declined by ¥6.23bn from the fiscal year-end, primarily because the ¥10.45bn dividend distribution exceeded Q1 attributable profit. Goodwill represented 23.1% of equity and 5.9% of assets, remaining within the stated healthy goodwill-to-equity benchmark below 30%.
Cash Flow Quality
Cash-flow quality was strong in FY2027 Q1. Operating cash flow of ¥10.57bn was 2.02x profit attributable to owners of ¥5.23bn, well above the 0.8x quality-warning threshold. The accruals ratio of negative 1.7% also supports favorable cash conversion. Operating cash flow rose from ¥7.53bn in the prior-year quarter despite higher cash taxes of ¥4.35bn. The main positive working-capital contributor was a ¥5.96bn reduction in receivables, compared with a ¥2.42bn reduction in the prior-year period. A ¥1.62bn increase in payables also supported cash flow, although this contribution was smaller than the prior year's ¥4.08bn. Inventory increased by ¥1.03bn, creating a cash outflow that should be monitored if it persists. Free cash flow was positive at ¥5.88bn after ¥1.32bn of capital expenditures. Investing cash outflow totaled ¥4.69bn and included ¥2.11bn of investment-property purchases, ¥0.64bn of subsidiary acquisitions and ¥0.55bn of intangible-asset purchases. The quarterly cash balance fell by ¥7.99bn to ¥55.41bn because positive operating cash flow was more than offset by investment outflows and ¥14.02bn of financing outflows. The strong OCF-to-income relationship is favorable, but the high receivables balance and 224-day DSO remain important working-capital risks.
Dividend Sustainability
The full-year forecast dividend of ¥75.00 per share implies a forecast dividend payout ratio of approximately 50.5% against forecast EPS of ¥148.56. This is within the stated sustainable benchmark of below 60% and leaves meaningful earnings retention capacity. The FY2027 Q1 cash dividend payment was ¥10.36bn, equivalent to almost 198% of Q1 profit attributable to owners and about 176% of Q1 free cash flow of ¥5.88bn. As the payment is concentrated in the first quarter, this quarterly comparison should not be interpreted as the full-year payout ratio. Nevertheless, the payment contributed materially to the reduction in retained earnings and total equity during the quarter. Positive free cash flow and the forecast payout ratio support the baseline capacity for dividends. The main constraints on dividend flexibility are the 2.94x D/E ratio, the 24.7% equity ratio and the need to preserve liquidity while refinancing debt and lease obligations. No share buyback cash outflow is identified in the quarter, so the analysis is focused on the dividend payout ratio rather than a total return ratio.
Risk Assessment
Business risks include Outsourcing business execution risk: the core outsourcing segment generated ¥22.16bn of external revenue and ¥6.26bn of segment profit; any slowdown in corporate welfare, relocation-support or outsourced housing-management demand would have a disproportionate earnings effect., Rental-management and property-market exposure: rental management revenue was ¥13.01bn, making earnings sensitive to transaction volumes, construction demand, occupancy conditions and real-estate market activity., Tourism demand volatility: tourism revenue was broadly flat at ¥3.65bn, leaving this business exposed to discretionary consumer spending, travel demand and operating-cost inflation., Receivables collection risk: DSO of 224 days is substantially above the 60-day alert threshold. Although receivables declined by ¥5.96bn during Q1, the closing receivables balance of ¥95.57bn remains 30.2% of total assets and requires continued collection discipline..
Financial risks include High leverage: D/E of 2.94x exceeds the 2.0x warning threshold. This indicates aggressive debt-funded capital structure and increases downside sensitivity if profitability, asset values or financing conditions weaken., Equity-buffer risk: the equity ratio declined to 24.7% from 26.1% at the prior fiscal year-end, while total equity fell to ¥80.35bn following dividend distributions., Lease-obligation exposure: total lease liabilities of ¥31.98bn are material and create fixed payment commitments alongside bonds and borrowings of ¥48.90bn., Cash-balance pressure: cash declined by ¥7.99bn during the quarter to ¥55.41bn because dividends, investment spending and debt-related financing cash flows exceeded operating cash generation..
Key concerns include HIGH_LEVERAGE alert: D/E of 2.94x suggests a capital structure reliant on liabilities relative to equity. This is more aggressive than the stated 2.0x threshold, constrains financial flexibility and makes deleveraging, refinancing execution and interest-cost resilience important to the investment thesis., HIGH_RECEIVABLE_DAYS alert: DSO of 224 days indicates a long cash-conversion cycle relative to the 60-day benchmark. The Q1 receivables reduction supported operating cash flow, but the absolute ¥95.57bn receivable balance means renewed receivables growth could materially weaken future cash conversion., Dividend and capital-allocation balance: ¥10.36bn of dividends paid in Q1 exceeded both Q1 attributable profit and free cash flow, reducing equity. The forecast payout ratio is sustainable on an annual basis, but the company needs continued operating cash generation to support dividends alongside investment and leverage management., Goodwill valuation risk is contained rather than elevated: goodwill of ¥18.58bn equals 23.1% of equity, below the 30% benchmark, but still requires successful integration and sustained performance of acquired operations..
Investment Implications
Key takeaways include Q1 revenue, operating income and attributable profit grew 9.0%, 11.8% and 18.4%, respectively, demonstrating positive operating momentum., Consolidated operating margin improved 50bp to 18.4%, with SG&A efficiency offsetting a modest gross-margin decline., The outsourcing segment is the principal earnings driver, combining 11.0% revenue growth with a 28.2% segment margin., Cash conversion was favorable, with operating cash flow of ¥10.57bn and OCF/net income of 2.02x., The principal trade-off is strong profitability versus elevated balance-sheet risk, reflected in annualized ROE of 26.0% but D/E of 2.94x., The maintained full-year forecast requires an acceleration from Q1's 21.1% operating-profit progress rate toward the full-year target..
Metrics to watch include Operating margin and SG&A-to-revenue ratio, to confirm that Q1 operating leverage is sustainable., Outsourcing revenue growth and segment margin, as the largest contributor to segment profit., Rental-management margin progression following the increase to 12.2%., DSO and the ¥95.57bn receivables balance, particularly whether Q1 collection gains are sustained., D/E ratio, equity ratio, long-term refinancing activity and cash balances., Free cash flow relative to annual dividends, investment-property spending and acquisition cash outflows., Progress toward full-year operating income of ¥34.0bn and attributable profit of ¥22.5bn..
Regarding relative positioning, The company exhibits profitability above the stated benchmark, with an 18.4% operating margin, 13.4% net margin and 26.0% annualized ROE. Its relative financial profile is less conservative because the high ROE is supported partly by 3.94x financial leverage and a 2.94x D/E ratio. Goodwill concentration is comparatively manageable at 23.1% of equity, while liquidity is adequate rather than strong with a 1.20x current ratio.