SEYFERT LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥1.43B
• Operating Income: ¥-93M
• Net Income: ¥17M
• EPS: ¥-96.94

Income Statement

Balance Sheet

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: FY2025 Q3 was weak with an operating loss and a sizable net loss despite high gross margins and ample liquidity. Revenue came in at 14.29 (−10.2% YoY), with gross profit of 9.37, implying a strong gross margin of 65.6% but insufficient to cover SG&A of 9.13. Operating income deteriorated to −0.93 (−80.0% YoY), and ordinary income was −0.94 as non-operating items were small (income 0.07, expense 0.05). Notably, profit before tax was reported positive at 0.27, yet net income was −1.28, indicating significant below-the-line losses (likely extraordinary items) of roughly −1.45 after tax, which materially swung bottom-line results. Asset efficiency remained modest with asset turnover of 0.932, and combined with negative margin (−9.0%) and moderate leverage (1.70x), ROE printed at −14.2%. Operating margin is currently −6.5% (operating loss of 0.93 on sales of 14.29), reflecting SG&A absorption issues amid revenue decline. We cannot quantify YoY basis-point changes for gross/operating margins due to limited prior-period margin disclosure, but directionally margins compressed at the operating level given the shift to loss. Earnings quality assessment is constrained because operating cash flow was unreported; thus, we cannot corroborate the accrual result with cash conversion. Liquidity is a relative positive: current ratio is 258%, quick ratio 255%, and cash is high at 9.68 versus current liabilities of 4.48. Solvency is acceptable with D/E of 0.70x, but interest coverage is very weak at −30.74x due to the operating loss. The effective tax rate of 35.8% juxtaposed with a net loss underscores the influence of non-recurring items and/or non-deductible expenses. The balance sheet shows low receivables (0.68) and inventories (0.13), suggesting limited working capital risk, while intangible assets are meaningful at 1.84. Forward-looking, management must either restore topline growth or execute SG&A right-sizing to return to breakeven; cash reserves buy time but do not resolve profitability. Investors should monitor any disclosure on extraordinary items and restructuring, as these drove the gap between pre-tax profit and net loss. With dividends unreported this quarter and negative earnings, payout visibility is low until cash flow data and policy updates are provided. Overall, the near-term focus should be margin restoration and cost discipline, while the solid liquidity base mitigates immediate financial stress.

Profitability Analysis

ROE decomposition: ROE −14.2% = Net Profit Margin (−9.0%) × Asset Turnover (0.932x) × Financial Leverage (1.70x). The margin component is the clear drag; even with moderate leverage and reasonable asset turnover for a service business, a negative net margin overwhelms returns. We lack prior-period component data, so we cannot quantify which component changed the most YoY; however, directionally the decline in operating profitability (operating margin −6.5%) and the impact of extraordinary losses were likely the dominant negatives. Business drivers: revenue contracted by 10.2% YoY while SG&A remained high (9.13), implying deleveraging of fixed costs and adverse operating leverage. The positive pre-tax profit versus net loss indicates sizable one-time/extraordinary charges below ordinary income, degrading net margin independently of core operations. Sustainability: the SG&A absorption issue is structural unless revenue recovers or costs are resized; the extraordinary loss impact appears one-time, but recurrence risk depends on the nature of those items (undisclosed here). Concerning trends include revenue decline outpacing any visible cost reductions, interest coverage at −30.7x, and the inability to cover overheads despite a high gross margin.

Growth Assessment

Topline contracted 10.2% YoY to 14.29, signaling demand softness or client loss. Gross margin remains robust at 65.6%, suggesting pricing and mix are not the core issue, but volume deleverage is pressuring profitability. Operating income fell to −0.93, reflecting negative operating leverage as SG&A (9.13) did not flex with revenue. Non-operating items were small and could not offset the operating loss; below-the-line items likely turned the quarter to a deep net loss (−1.28). With unreported cash flow data, we cannot validate whether the decline reflects timing/working capital effects or underlying demand weakness. Outlook hinges on either a recovery in sales or SG&A rationalization; given high cash balances, management has runway to invest in growth initiatives or restructuring. Near-term, expect earnings volatility until extraordinary factors subside and cost actions materialize. Without segment data, sustainability of gross margin cannot be fully assessed.

Financial Health

Liquidity is strong: current ratio 258.3% and quick ratio 255.4% well above benchmarks; no warning for Current Ratio (<1.0) is triggered. Cash and deposits of 9.68 exceed current liabilities of 4.48, limiting short-term refinancing risk. Working capital stands at 7.09, and receivables (0.68) plus inventories (0.13) are modest, reducing collection/inventory risk. Solvency: D/E is 0.70x (within conservative range <1.5x). Total liabilities are 6.33 against equity of 9.00, and we have no explicit breakdown of interest-bearing debt (unreported). Interest coverage is weak at −30.74x due to operating loss; while cash provides a buffer, sustained losses would raise medium-term financing risk. Maturity mismatch risk appears low as current assets exceed current liabilities significantly. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

Operating cash flow was unreported, so OCF/Net Income cannot be assessed; as such, we cannot flag or clear earnings quality via cash conversion metrics. Free cash flow and capex are also unreported, limiting visibility into reinvestment needs and coverage of potential dividends. Working capital levels (low receivables and inventories) suggest limited scope for aggressive working capital management this quarter, but without cash flow detail we cannot confirm. Given the net loss and negative operating margin, near-term cash generation from operations is likely weak absent non-cash charges or favorable working capital timing. Sustainability of any dividends or growth investments therefore depends on cash balance (currently ample) and potential external financing rather than recurring FCF, pending evidence to the contrary.

Dividend Sustainability

Dividend data were unreported this quarter, and the calculated payout ratio figure is not reliable without knowing declared DPS and with negative earnings. With net income at −1.28 and OCF unreported, we cannot assert FCF coverage of dividends. Balance sheet cash (9.68) comfortably exceeds current liabilities and could fund dividends in the short term, but sustainability would depend on restoring operating profitability and demonstrating positive OCF. Absent policy guidance, we assume a cautious stance: preserving cash to support turnaround or restructuring would be prudent if losses persist.

Risk Assessment

Business Risks:

• Revenue decline of 10.2% YoY indicating potential demand weakness or client churn
• High SG&A (9.13) relative to sales leading to negative operating leverage
• Dependence on one-time items: extraordinary losses materially impacted net income
• Execution risk around cost reductions and margin restoration

Financial Risks:

• Interest coverage at −30.74x, implying vulnerability if losses persist
• Potential cash burn from operating losses if OCF mirrors accrual loss (OCF unreported)
• Limited visibility on debt structure and maturities (interest-bearing debt breakdown unreported)

Key Concerns:

• Mismatch between positive pre-tax profit (0.27) and net loss (−1.28) suggests significant below-the-line charges
• Lack of cash flow disclosure obscures earnings quality and dividend capacity
• Intangible assets of 1.84 could be subject to impairment risk if performance remains weak

Investment Implications

Key Takeaways:

• Operating loss (−0.93) on reduced revenue (14.29) highlights negative operating leverage
• Net loss (−1.28) driven not only by operations but also sizable extraordinary items
• Liquidity strong (current ratio 258%, cash 9.68) providing near-term buffer
• Solvency acceptable (D/E 0.70x), but earnings coverage of interest is poor
• Gross margin robust at 65.6%, indicating potential margin recovery if SG&A is right-sized or sales rebound

Metrics to Watch:

• Operating margin trajectory and SG&A trend versus revenue
• Disclosure of extraordinary items and any restructuring charges
• OCF and FCF once reported; OCF/NI ratio target >1.0
• Interest-bearing debt details and interest expense trend
• Order intake or pipeline indicators to gauge revenue recovery

Relative Positioning: Within small-cap domestic service peers, the company shows superior liquidity but weaker near-term profitability and earnings visibility due to extraordinary items and the absence of cash flow disclosure; recovery potential exists given high gross margins, but execution risk on cost control and demand stabilization is elevated.

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