ASNOVA (9223) FY2026 Q3 Earnings Report

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Executive Summary

The key point for the nine months ended Q3 of FY2026 is that the Company fell into a net loss despite higher revenue, due to increased SG&A expenses and interest payment burdens. Revenue increased to ¥36.2B (+15.1% YoY), while Operating Income remained at ¥0.2B (-80.7% YoY). Ordinary loss was ¥-0.4B, and the quarterly net loss attributable to owners of the parent was ¥0.95B, compared with net income of ¥0.4B in the previous year period. The primary driver of revenue growth was the contribution from the Overseas Other Rental Business following the newly consolidated Qool Enviro Pte. Ltd. The existing Domestic Scaffolding Rental Business declined slightly YoY, while losses in the Overseas Scaffolding Rental Business expanded.

Factors Affecting Performance

【Revenue】Revenue was ¥36.2B, up +15.1% YoY. The Domestic Scaffolding Rental Business generated ¥30.8B (85.1% composition ratio), essentially flat with a 0.6% YoY decline. The Overseas Scaffolding Rental Business contracted to ¥0.2B, down 63.0% YoY, while the newly consolidated Overseas Other Rental Business generated ¥5.2B and accounted for most of the revenue increase. Growth in the existing businesses has stagnated, and the substance of the revenue increase depends on the expansion of the consolidation scope through M&A.

【Profit and Loss】Gross profit was ¥9.7B, with a gross margin of 26.7%, improving by 340bp from 23.3% in the previous year period. However, SG&A expenses increased to ¥9.5B (SG&A ratio of 26.2%, up 610bp from 20.1% in the previous year period), offsetting the improvement in gross profit. Against total segment profit of ¥4.99B, unallocated corporate expenses and other items reached ¥4.80B, compressing consolidated Operating Income to ¥0.2B. In addition, non-operating expenses of ¥1.2B, including interest expenses of ¥0.75B, exceeded Operating Income, resulting in an ordinary loss of ¥-0.4B and a net loss of ¥-1.0B after recording tax expenses of ¥0.6B. The Company is experiencing a pattern of higher revenue but lower profit, with corporate expenses and financial costs offsetting the profitability of the core existing business.

Segment Analysis

The Domestic Scaffolding Rental Business forms the earnings core, with revenue of ¥30.8B, segment profit of ¥5.8B, and a profit margin of 18.8%. However, it weakened somewhat YoY, with revenue down 0.6% and profit down 7.8%. The Overseas Scaffolding Rental Business generated revenue of ¥0.2B (down 63.0% YoY) and recorded a segment loss of ¥1.2B, expanding from a loss of ¥-0.9B in the previous year period; losses are deepening amid a contraction toward equilibrium. The newly consolidated Overseas Other Rental Business (Qool Enviro Pte. Ltd.) generated revenue of ¥5.2B, segment profit of ¥0.4B, and a profit margin of 8.0%, contributing positively from its first year. However, the purchase price allocation has not been completed, and the goodwill of ¥9.6B has been recorded on a provisional basis, which warrants attention.

Key Financial Metrics

【Profitability】The Operating Income margin was 0.5%, down 2.7pt from 3.2% in the previous year period, while the net profit margin turned negative at -2.6%, compared with +1.1% in the previous year period. ROE (annualized) was -4.4%. 【Cash Flow Quality】Comprehensive income was ¥-0.4B, broadly in line with the net loss attributable to owners of the parent of ¥0.95B. The foreign currency translation adjustment of +¥0.6B was a factor contributing to the positive variance. 【Investment Efficiency】The total asset turnover ratio remained low, and asset efficiency temporarily declined as intangible assets surged to ¥13.4B, including goodwill of ¥9.4B. 【Financial Soundness】The Equity Ratio was 24.3%, improving from 23.0% in the previous year period. However, current assets of ¥24.5B were below current liabilities of ¥37.7B, resulting in a current ratio below 100%, while cash and deposits declined to ¥10.6B. Interest-bearing debt remained high, centered on long-term borrowings of ¥52.1B, and interest payment burdens relative to Operating Income were substantial.

Cash Flow Analysis

Although no cash flow statement has been disclosed, the movement of funds can be inferred from changes in the balance sheet. Cash and deposits decreased by ¥21.3B, from ¥31.8B in the previous year period to ¥10.6B. During this period, intangible assets increased by ¥13.0B, primarily due to goodwill of ¥9.6B, suggesting that investment expenditures associated with the acquisition of Qool Enviro Pte. Ltd. were the primary cause of the decline in cash. Short-term borrowings were reduced by ¥14.0B, from ¥22.0B to ¥8.0B, while long-term borrowings remained high at ¥52.1B. This indicates that the funding structure shifted from short-term financing toward long-term financing and investment. Trade receivables of ¥8.8B and inventories of ¥2.2B also increased, and the accumulation of working capital associated with business expansion further pressured cash levels.

Earnings Quality

In terms of earnings quality, the gross margin improved to 26.7%, but the SG&A ratio rose to 26.2%, leaving Operating Income at only ¥0.2B. Non-operating income of ¥0.6B consisted primarily of other non-operating income and was not strongly recurring in nature. Of non-operating expenses of ¥1.2B, interest expenses of ¥0.75B accounted for the majority, equivalent to approximately four times Operating Income and causing the loss to emerge at the ordinary income level. No extraordinary gains or losses were identified. Accordingly, the divergence between ordinary loss and net loss was primarily attributable to the burden of income taxes and other taxes of ¥0.6B. The fact that the effective tax rate is negative relative to the loss before tax may include temporary factors reflecting the Company’s tax position, such as net operating loss carryforwards. Comprehensive income was -¥0.4B, broadly consistent with net loss, and no significant distortion in earnings quality was observed apart from foreign currency translation differences.

Earnings Forecasts and Guidance

Progress against the full-year company forecasts was 73.5% for revenue, against a forecast of ¥49.3B, and approximately 76.0% for Operating Income, against a forecast of ¥0.25B (¥0.2B in the data). These levels broadly meet the standard 75% progress benchmark. However, the Company has planned a full-year ordinary loss of ¥0.7B and a full-year net loss attributable to owners of the parent of ¥1.46B, indicating that the loss trend is expected to continue from Q4 onward. The earnings forecast was revised during the current quarter, apparently reflecting a downward revision from the initial plan. The dividend forecast was not revised and remains at ¥2.00 per share.

Shareholder Returns

The Q2 dividend was ¥1.00 per share, and the full-year dividend forecast remains unchanged at ¥2.00 per share. Against the full-year forecast net loss attributable to owners of the parent of ¥1.46B, total dividends are expected to be approximately ¥0.25B based on the number of shares issued, indicating that dividends are expected to continue despite the recognition of a loss for the period. Because the Company is in a loss position, calculating the Payout Ratio using net income as the numerator would not be meaningful as an indicator. Dividend funding is highly dependent on retained earnings of ¥21.6B and the financial base. Treasury shares were minimal at 1 thousand shares, no share repurchases were conducted, and shareholder returns are evaluated solely on the basis of dividends.

Risk Factors

1. Risk of deteriorating profitability in overseas operations: Revenue from the Overseas Scaffolding Rental Business contracted to ¥0.2B (-63.0% YoY), while the segment loss expanded to ¥1.2B. The fixed-cost burden amid a shrinking business scale is a factor behind the widening loss, and developments in the review of the business structure warrant attention.

2. Financial soundness and interest payment burden risk: Cash and deposits stood at only ¥10.6B against current liabilities of ¥37.7B, while interest-bearing debt, including long-term borrowings of ¥52.1B, remained high. Interest expenses of ¥0.75B substantially exceeded Operating Income of ¥0.2B, indicating weak interest coverage through Operating Income.

3. Goodwill and acquisition-related risk: Goodwill of ¥9.4B was recorded in connection with the consolidation of Qool Enviro Pte. Ltd., accounting for 32.2% of net assets of ¥29.2B. The purchase price allocation remains incomplete and the amount is provisional. Depending on the final determination and the realization of earnings from the business, goodwill amortization or impairment may occur.

Industry Benchmark (Reference; Company Analysis)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the Operating Income margin and net profit margin were significantly below the industry median, placing the Company’s profitability toward the lower end of the industry.

Growth and Capital Efficiency

The revenue growth rate exceeded the industry median, and top-line growth was relatively high within the industry.

※Source: Company aggregation

Key Points from the Financial Results

1. The primary driver of revenue growth was the newly consolidated Overseas Other Rental Business. The slight YoY decline in the existing Domestic Scaffolding Rental Business and the expanded losses in the Overseas Scaffolding Rental Business are noteworthy in evaluating the substance of growth.

2. While the gross margin improved by 340bp, the SG&A ratio rose by 610bp, causing the Operating Income margin to decline to 0.5%. The Company’s limited ability to absorb costs is determining the trend in profit margins.

3. The structure in which interest expenses of ¥0.75B exceed Operating Income of ¥0.2B directly led to losses at the ordinary income and net income levels. Management of financial leverage and interest payment burdens will be a key focus in future financial results.

Theoretical Share Price (Reference Value)

Sensitivity: ¥140–¥148 at Cost of Equity ±1%, and ¥141–¥146 at ω±0.1.

Notes:

• Because forecast ROE is below the Cost of Equity, the theoretical value is below Book Value per Share.
• Goodwill represents a high percentage of net assets, and the assumptions would change significantly if impairment occurred.
• Net assets as of the end of the quarter are used; there is a timing gap 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 / This is a mechanically calculated value based solely on publicly disclosed data and is not a forecast of the market share price or a recommendation of any specific investment action, nor does it 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 release data. It does not recommend investment in any specific security. The industry benchmarks are reference information aggregated by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting a professional as necessary.

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