Relo Group,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥72.93B
• Operating Income: ¥14.85B
• Net Income: ¥33.33B
• 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

Relo Group (88760) reported FY2026 Q2 (IFRS, consolidated) results with steady top-line growth but softer operating leverage and a sharp decline in bottom-line profit due to non-operating/tax factors. Revenue rose 4.1% YoY to 729.29, while operating income decreased 5.2% YoY to 148.52, implying some margin pressure and/or adverse business mix. Gross profit of 317.82 (gross margin 43.6%) and SG&A of 190.99 translate to an implied EBIT bridge that includes 21.69 of other operating income (since GP minus SG&A is 126.83 vs EBIT of 148.52), suggesting meaningful contributions from other operating lines under IFRS classification. Profit before tax was 149.18, only slightly above operating income, indicating limited net non-operating impact this period despite sizable reported equity-method income of 35.77; the classification of this line under IFRS vs management’s operating definition may explain the small PBT-EBIT delta. Net income fell 69.2% YoY to 101.66, pointing to large year-ago one-offs or current period non-recurring items and tax effects; the effective tax rate for the period was 30.6%, broadly aligned with Japan’s statutory range, so the decline is unlikely driven solely by tax rate normalization. DuPont deconstruction shows a calculated ROE of 13.6% (net margin 13.9%, asset turnover 0.239, financial leverage 4.09x), indicating acceptable equity returns supported by leverage rather than asset intensity. EBITDA was 235.05, yielding a healthy 32.2% EBITDA margin, and D&A totaled 86.53, highlighting a relatively asset-light profile. The balance sheet remains leveraged with an equity ratio of 23.6% and a debt-to-equity ratio of 3.12x; nonetheless, liquidity looks adequate with cash and equivalents of 640.21, though current liabilities are unreported and limit ratio-based assessment. Accounts receivable is sizable at 891.96 relative to half-year revenue, warranting continued monitoring of collection cycles and customer credit risk. Operating cash flow of 172.34 was solid at 1.70x net income, but free cash flow of 504.90 is inflated by investing cash inflows of 332.56, likely reflecting divestments or asset liquidations rather than purely organic cash generation. Financing cash outflows of -397.27 reflect a combination of shareholder returns (dividends -56.50, buybacks -43.54) and likely debt repayments. Dividend affordability appears comfortable in this period with a calculated payout ratio of 63.2% and FCF coverage of 7.86x; however, coverage is aided by non-recurring investing inflows, so normalized FCF coverage would be lower. Reported ratios such as operating margin and ROA are not available from XBRL, but core profitability can be inferred from disclosed numbers. Overall, the quarter shows resilient underlying margins but negative operating leverage and heavy reliance on leverage to sustain ROE. Cash generation quality is mixed: robust OCF versus earnings, but headline FCF boosted by disposals. Data gaps (e.g., current liabilities, interest expense, DPS) constrain precision in liquidity and interest coverage analysis. We focus forward on normalizing non-recurring items, receivables discipline, and the sustainability of shareholder returns within a leveraged capital structure.

Profitability Analysis

ROE_decomposition: Calculated ROE 13.6% = Net profit margin 13.9% x Asset turnover 0.239 x Financial leverage 4.09x. ROE is primarily supported by leverage and margin strength rather than asset intensity. margin_quality: Gross margin is 43.6% (GP 317.82 / Revenue 729.29). Operating margin is approximately 20.4% (148.52 / 729.29). EBITDA margin runs at 32.2% (235.05 / 729.29). The EBIT bridge implies about 21.69 of other operating income (GP - SG&A = 126.83 vs EBIT 148.52), indicating non-core/other operating contributions helped offset SG&A. Effective tax rate is 30.6%, near statutory norms. operating_leverage: Revenue grew 4.1% YoY while operating income declined 5.2% YoY, indicating negative operating leverage this period, likely due to SG&A growth, mix shifts, and reduced other operating income versus the prior year. D&A of 86.53 suggests stable non-cash expense; however, year-ago comparatives may have included one-offs, given the outsized YoY drop in net income.

Growth Assessment

revenue_sustainability: Top-line growth of 4.1% appears steady. Accounts receivable of 891.96 versus half-year revenue of 729.29 implies elongated collection cycles or billing patterns typical for service contracts; sustainability hinges on maintaining client retention and timely collections. profit_quality: EBIT margin of ~20.4% and EBITDA margin of 32.2% point to solid underlying economics. However, the reliance on other operating income (21.69) and sizable equity-method income (35.77) complicate assessment of purely core profit momentum. Net income decline of 69.2% YoY suggests significant non-recurring effects in either current or prior year. outlook: Assuming stable demand in core services and normalization of non-operating items, mid-teens ROE appears maintainable, but operating leverage will depend on SG&A discipline and mix. Monitoring the persistence of equity-method contributions and any further asset recycling is key for visibility on bottom-line growth.

Financial Health

liquidity: Cash and equivalents are 640.21, providing a substantial cushion. Current assets are 1,670.45, but current liabilities are unreported, so current and quick ratios are not computable. Working capital is shown as 1,670.45 due to unavailable current liabilities data. solvency: Equity ratio is 23.6%, indicating a leveraged balance sheet. Debt-to-equity ratio is 3.12x; interest-bearing debt details and interest expense are unreported, preventing interest coverage analysis. Total assets are 3,049.40 vs total equity 745.38, consistent with the reported financial leverage (4.09x in DuPont, likely using average equity). capital_structure: Financing CF of -397.27, together with dividends (-56.50) and buybacks (-43.54), suggests net debt reduction alongside shareholder returns. Absence of detail on short/long-term loans and interest-bearing debt limits deeper structural analysis.

Cash Flow Quality

earnings_quality: OCF/Net income is 1.70x, indicating earnings are well supported by operating cash flow in this period. EBITDA of 235.05 vs EBIT of 148.52 shows meaningful non-cash D&A, consistent with solid cash conversion from operations. FCF_analysis: Reported free cash flow is 504.90, driven by OCF of 172.34 and investing CF of +332.56. The positive investing CF suggests asset sales or investment liquidations; capex was modest at -28.59. On a more conservative basis (OCF - capex), FCF would be ~143.75, highlighting that headline FCF is uplifted by divestment proceeds rather than purely recurring operations. working_capital: Accounts receivable is high at 891.96 versus 6-month revenue of 729.29, pointing to extended DSOs or billing seasonality. Inventories are modest at 73.22, consistent with a service-heavy model. Current liabilities data are not disclosed, preventing a full working capital cycle analysis.

Dividend Sustainability

payout_ratio_assessment: Calculated payout ratio is 63.2% for the period; total dividends paid were -56.50. This is broadly consistent with maintaining shareholder returns, though the sharp YoY decline in net income suggests sensitivity to earnings volatility. FCF_coverage: FCF coverage is reported at 7.86x. However, since headline FCF includes significant investing inflows, normalized coverage based on OCF - capex (~143.75) would be materially lower, though still adequate relative to dividends of 56.50. policy_outlook: Given leverage (equity ratio 23.6%) and ongoing buybacks (-43.54), sustained distributions likely depend on steady OCF and restrained capex. Clarity on DPS and medium-term payout policy is needed as DPS figures were unreported.

Risk Assessment

Business Risks:

• Negative operating leverage amid modest revenue growth (SG&A pressure and/or mix effects).
• Dependence on other operating income and equity-method gains to support EBIT.
• High accounts receivable relative to period revenue, indicating collection risk and working capital intensity.
• Potential exposure to client churn and contract renewals typical of service businesses.

Financial Risks:

• Elevated leverage (equity ratio 23.6%, D/E 3.12x) with limited visibility on interest-bearing debt structure.
• Dividend and buyback outflows alongside debt reduction increase demands on cash generation.
• Headline FCF inflated by investing inflows; future periods may not repeat asset sale proceeds.
• Interest coverage cannot be assessed due to unreported interest expense.

Key Concerns:

• Sharp YoY decline in net income (-69.2%) despite limited change in operating profit, implying non-recurring or below-EBIT drivers.
• Receivables management and potential DSO normalization.
• Sustainability of equity-method income (35.77) and other operating income (21.69).
• Data gaps (current liabilities, interest expense, DPS) that constrain detailed risk quantification.

Investment Implications

Key Takeaways:

• Solid underlying margins (EBIT ~20.4%, EBITDA 32.2%) but negative operating leverage this quarter.
• ROE of 13.6% supported by leverage; asset turnover remains low at 0.239.
• OCF strong versus earnings (1.70x), yet headline FCF boosted by divestment-related inflows.
• Balance sheet is leveraged (equity ratio 23.6%, D/E 3.12x) but liquidity is supported by 640.21 in cash.
• Shareholder returns remain active (dividends and buybacks), contingent on sustained OCF.

Metrics to Watch:

• Operating margin trajectory and SG&A growth vs revenue.
• Composition and persistence of other operating income and equity-method income.
• OCF ex-working-capital and FCF excluding asset sale proceeds (OCF - capex).
• Receivables days and collection trends (AR 891.96 vs revenue 729.29).
• Leverage and interest burden once interest expense is disclosed; refinancing activity.
• Capital allocation: buyback pace, DPS disclosure, and debt reduction plans.

Relative Positioning: Within Japan-listed service-oriented peers, Relo Group shows above-average EBITDA margins and respectable ROE aided by leverage, but lower asset turnover and higher balance-sheet leverage increase sensitivity to operating slowdowns and working capital swings.

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