SEIBU HOLDINGS (9024) FY2026 Q3 Earnings Report

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Executive Summary

Although Seibu Holdings secured revenue growth, Operating Income declined by double digits due to deteriorating profitability in the Hotel & Leisure and Urban Transportation & Lines businesses, while Net Income also fell sharply owing to the reversal of the large extraordinary gain recorded in the same period of the previous year. Revenue was ¥3882.2B (+1.9% year on year), Operating Income was ¥449.0B (-11.0%), Ordinary Income was ¥446.7B (-5.9%), and Net Income attributable to owners of the parent was ¥324.4B (-64.6%). The sharp decline in Net Income was primarily attributable to the reversal of the large extraordinary gain recorded in the same period of the previous year, which included a ¥540.96B gain on the recognition of negative goodwill related to Seibu Realty Solutions. Extraordinary income and losses in the current period contributed a net gain of only ¥33.2B.

Factors Affecting Financial Performance

【Revenue】Revenue increased across all segments, bringing consolidated Revenue to ¥3882.2B (+1.9% year on year). The Hotel & Leisure Business generated Revenue of ¥1872.3B (+2.7%) and accounted for the largest share of consolidated Revenue (48.2%), followed by the Urban Transportation & Lines Business at ¥1170.4B (+2.2%), the Real Estate Business at ¥639.0B (+4.7%), and Other Businesses at ¥441.6B (+8.3%). During Q3, the Hotel & Leisure Business included Ace Group International LLC and 19 subsidiaries in the scope of consolidation, contributing to the expansion of Revenue.

【Profit and Loss】Operating Income was ¥449.0B (-11.0%), and the Operating Income Margin was 11.6%, down 1.7pt from 13.2% in the same period of the previous year. Segment profit in the Hotel & Leisure Business was ¥185.6B (-17.5%; margin 9.9%, versus 12.3% in the previous year), while the Urban Transportation & Lines Business recorded segment profit of ¥117.5B (-19.0%; margin 10.0%, versus 12.7% in the previous year). The decline in both core businesses was the primary factor behind the decrease in the company-wide profit margin. Meanwhile, the Real Estate Business posted segment profit of ¥107.7B (+8.7%; margin 16.9%), partially offsetting the decline. SG&A expenses increased to ¥351.9B (+7.7% year on year), outpacing Revenue growth, and the benefit of higher Revenue did not translate into improved profitability. Ordinary Income was ¥446.7B (-5.9%), representing only a small divergence from Operating Income, whereas Net Income was ¥324.4B (-64.6%) due to the reversal of the large extraordinary gains, including the gain on recognition of negative goodwill, recorded in the same period of the previous year. In conclusion, the company experienced higher Revenue but lower profit.

Segment Analysis

The Real Estate Business maintained both Revenue and profit growth, with Revenue of ¥639.0B (+4.7%) and segment profit of ¥107.7B (+8.7%); its profit margin also improved from 16.2% to 16.9%. The Hotel & Leisure Business recorded higher Revenue of ¥1872.3B (+2.7%), but segment profit declined to ¥185.6B (-17.5%), and its profit margin decreased from 12.3% to 9.9%. The Urban Transportation & Lines Business increased Revenue to ¥1170.4B (+2.2%), but segment profit declined to ¥117.5B (-19.0%), with its profit margin falling from 12.7% to 10.0%. Other Businesses recorded Revenue of ¥441.6B (+8.3%) and profit of ¥41.3B (+7.5%), maintaining a profit margin of 9.3%, broadly in line with the previous year. The company-wide decline in profitability was attributable to cost increases in the two core businesses exceeding the benefit of higher Revenue.

Key Financial Indicators

【Profitability】The Operating Income Margin was 11.6%, down from 13.2% in the same period of the previous year, while the Net Profit Margin was 8.4%. Annualized ROE was 7.9%, reflecting the relatively high dependence on financial leverage against the backdrop of a capital-intensive business structure.【Cash Flow Quality】Extraordinary income of ¥641.6B and extraordinary losses of ¥608.4B were recorded, resulting in a net contribution of ¥33.2B to profit. Accordingly, reported Net Income includes a meaningful amount of one-time factors. Comprehensive Income was ¥409.7B, and the difference from Net Income of ¥324.4B was primarily attributable to a positive ¥163.7B change in valuation difference on securities and a negative ¥67.8B foreign currency translation adjustment.【Investment Efficiency】Investment securities amounted to ¥1166.5B, an increase of ¥299.8B from the previous year, indicating a higher weighting of marketable assets in the asset composition.【Financial Soundness】The Equity Ratio improved to 33.4% from 30.6% in the same period of the previous year. However, Current Liabilities of ¥2703.3B exceeded Current Assets of ¥1644.3B, requiring attention to short-term funding balance. Interest-bearing debt remained high, centered on Long-Term Borrowings of ¥5119.7B.

Cash Flow Analysis

As cash flow statement items have not been disclosed, the flow of funds is analyzed based on balance sheet trends. Cash and deposits were ¥769.5B, a decrease of ¥1583.7B from ¥2353.2B in the same period of the previous year, confirming a substantial decline in cash holdings. Meanwhile, Investment Securities increased to ¥1166.5B, up ¥299.8B from the previous year, and Intangible Assets expanded to ¥418.9B, partly due to an increase in goodwill associated with the acquisition of Ace Group International LLC. Long-Term Borrowings were ¥5119.7B, slightly down from ¥5350.6B in the previous year, suggesting a pattern of allocating cash to large-scale M&A and asset investments. Treasury Stock increased to ¥2339.4B from ¥1854.9B in the previous year. As a result of allocating funds to both shareholder returns and growth investments, cash on hand was compressed.

Quality of Earnings

Extraordinary income of ¥641.6B and extraordinary losses of ¥608.4B in the current period resulted in a net contribution of ¥33.2B to profit and included a ¥55.6B gain on the sale of fixed assets and ¥17.6B in impairment losses. In the same period of the previous year, a large extraordinary gain, including a ¥540.96B gain on recognition of negative goodwill by Seibu Realty Solutions, boosted Net Income to ¥915.6B. As a result of this reversal, Net Income for the current period was ¥324.4B (-64.6%), indicating that fluctuations in Net Income were substantially larger than the change in recurring earnings power. Non-operating income included ¥58.1B of income, including ¥15.2B in dividend income and ¥21.8B in foreign exchange gains, against expenses of ¥60.4B, primarily ¥51.6B in interest expense, resulting in a net expense excess of ¥2.3B. While the difference between Ordinary Income and Operating Income was small, the difference from Net Income was attributable to extraordinary income and losses. Accordingly, in assessing performance for the current period, greater emphasis should be placed on the trend in profit at the Ordinary Income level, excluding extraordinary items.

Earnings Forecasts and Guidance

The full-year earnings forecasts are Revenue of ¥5110.0B, Operating Income of ¥420.0B, and Ordinary Income of ¥410.0B. The Q3 cumulative progress rates were 76.0% for Revenue, 106.9% for Operating Income, and 109.0% for Ordinary Income, indicating that the profit metrics were progressing at a pace already exceeding the full-year forecasts. The company revised its earnings forecasts during the current quarter, and the full-year profit forecast (-85.7% year on year) reflects the reversal from the elevated level recorded in the previous year due to the large extraordinary gains. Given that profit progress has exceeded the forecasts, the outlook for Q4 and the realization of extraordinary income and losses should be monitored as factors that may affect the full-year results.

Shareholder Returns

The Q2 dividend was ¥20 per share, and the full-year dividend forecast is ¥40 per share, with no revision to the dividend forecast during the current quarter. The forecast Payout Ratio against forecast EPS of ¥112.65 is approximately 35.5%. This Payout Ratio covers dividends only and should be distinguished from the Total Return Ratio, which includes share repurchases. Treasury Stock increased by ¥484.5B to ¥2339.4B from ¥1854.9B in the previous year. Together with dividends, this constitutes part of shareholder returns; however, a comprehensive review should also take into account the substantial year-on-year decrease in Cash and deposits.

Risk Factors

1. Deteriorating profitability in core businesses: Segment profit in the Hotel & Leisure Business declined -17.5% year on year, while the Urban Transportation & Lines Business declined -19.0%; their profit margins decreased by 2.4pt and 2.6pt, respectively. The two businesses accounted for 67.1% of combined segment profit of ¥452.1B, making a recovery in profitability key to the company-wide profit margin.

2. Short-term funding balance: Current Liabilities were ¥2703.3B against Current Assets of ¥1644.3B, while Cash and deposits decreased by ¥1583.7B year on year. Under a structure of interest-bearing debt centered on Long-Term Borrowings of ¥5119.7B, the short-term funding position should be monitored continuously.

3. M&A integration risk: In the Hotel & Leisure Business, the acquisition of Ace Group International LLC resulted in the inclusion of 19 subsidiaries in the scope of consolidation, increasing goodwill. Progress in integrating and monetizing the overseas hotel business could affect the valuation of Intangible Assets and future earnings.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (transport)

Profitability and Returns

The Operating Income Margin is well above the industry median, while the Net Profit Margin is below the industry median due to the reversal of extraordinary income and losses.

Growth and Capital Efficiency

The Revenue growth rate is below the industry median, placing the company toward the slower-growth end of the industry.

※Source: Compiled by the company

Key Points from the Earnings Results

1. Despite Revenue growth, the Operating Income Margin declined 1.7pt year on year. The recovery of profitability in the core Hotel & Leisure and Urban Transportation & Lines businesses is therefore a structural focus that will determine future profitability.

2. The -64.6% year-on-year decline in Net Income was primarily attributable to the reversal of extraordinary gains, including the gain on recognition of negative goodwill, recorded in the previous year. The difference between the trend in profit at the Ordinary Income level (Ordinary Income -5.9%) and the fluctuation in Net Income must be distinguished as a factor arising from extraordinary income and losses.

3. The substantial decline in Cash and deposits and the situation in which Current Liabilities exceed Current Assets should be monitored as part of the funding balance, together with the allocation of funds to M&A, Investment Securities, and Intangible Assets.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,892–¥2,003 at Cost of Equity ±1%, and ¥1,939–¥1,951 at ω±0.1.

Notes:

• Because progress of Net Income against the full-year forecast (111%) exceeds the standard level (75%), forecast EPS has been adjusted upward within a maximum range of +10% (because companies with progress ahead of schedule tend to exceed forecasts. In businesses with strong seasonality, the adjustment may be excessive).
• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Net assets as of the end of the quarter are used (there is a timing difference relative to the full-year forecast).
• Because Net Assets include Non-Controlling Interests, the theoretical value may be calculated somewhat higher.

(Calculation model: Residual Income Model (Ohlson-type, explicit 5-year fade) / Interest-rate reference month: 2026-07 / Mechanically calculated using only publicly disclosed data; this is not a forecast of the market share price or a recommendation of any specific investment action, and does not predict or guarantee future share prices.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmark is reference information compiled by the company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional where necessary.

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