Relo Group,Inc. FY2027 Q1 Earnings Report

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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

1. 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.

2. 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.

3. 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

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

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

1. 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.

2. 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.

3. 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.

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)

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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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