| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥1502.6B | ¥1398.7B | +7.4% |
| Operating Income | ¥86.9B | ¥86.8B | +0.1% |
| Ordinary Income | ¥105.1B | ¥90.9B | +15.5% |
| Net Income | ¥74.9B | ¥63.5B | +18.0% |
| ROE | 9.9% | 9.1% | - |
For the fiscal year ended March 2026, the Nippon Kanzai Group reported Revenue of ¥1502.6B (YoY +¥103.9B +7.4%), Operating Income of ¥86.9B (YoY +¥0.1B +0.1%), Ordinary Income of ¥105.1B (YoY +¥14.1B +15.5%), and Net Income of ¥74.9B (YoY +¥11.4B +18.0%). Top-line growth was driven by expanded contracts in the core Building Management & Operations business and the Environmental Facilities Management business, while operating-level performance was flat due to rising personnel costs and deteriorating profitability in the Residential Management segment. Non-operating improvements—higher interest & dividend income and a narrowing of equity-method losses—led to substantial increases below Ordinary Income, improving EPS to ¥196.03 (YoY +¥38.41 +24.4%) and ROE to 9.9% (prior year 8.6%). Operating margin was 5.8% (down -0.4pt from 6.2%), and Net Margin was 5.0% (up +0.5pt from 4.5%), highlighting a structure where non-operating income supplements compressed operating margins. By segment, Building Management & Operations was the largest driver with Revenue ¥946.7B (+10.6%) and Profit ¥89.3B (+12.9%), while Environmental Facilities Management maintained high profitability with Revenue ¥154.7B (+4.4%) and Profit ¥22.5B (+9.6%). Conversely, Real Estate Fund Management declined sharply to Revenue ¥31.3B (-37.4%) and Profit ¥5.1B (-63.6%), and Residential Management, despite revenue growth, turned to lower profit of ¥13.6B (-2.5%). Operating Cash Flow was ¥101.0B (YoY +494.3%) and Free Cash Flow was ¥77.3B. Financial soundness remained very high with an Equity Ratio of 70.9% and a Current Ratio of 325%.
[Revenue] Revenue reached ¥1502.6B (YoY +7.4%), achieving solid growth. Segment composition: Building Management & Operations 63.0% (prior 61.2%), Residential Management 22.9% (prior 23.0%), Environmental Facilities Management 10.3% (prior 10.6%), Real Estate Fund Management 2.1% (prior 3.6%), Other 1.7% (prior 1.6%). Core Building Management & Operations grew to ¥946.7B (+10.6%) driven by price revisions for existing building management contracts and new contract wins. Environmental Facilities Management at ¥154.7B (+4.4%) was supported by additional long-term public facility contracts, and Residential Management at ¥344.6B (+7.1%) benefited from increased condominium management units. Real Estate Fund Management shrank to ¥31.3B (-37.4%) due to declines in anonymous association investment balances and a pause in new fund formation. Geographically, domestic operations account for over 90% of revenue; tangible fixed assets at the U.S. subsidiary were ¥14.2B (prior ¥11.7B), indicating limited overseas expansion.
[Profitability] Operating Income of ¥86.9B (YoY +0.1%) was effectively flat, with an Operating Margin declining to 5.8% (down -0.4pt from 6.2%). Aggregate segment profits totaled ¥132.5B (pre-allocation), against Company-wide allocations of ¥45.6B (prior ¥42.9B, +6.3%), reflecting increased headcount in headquarters management and higher amortization of system investments. By segment, Building Management & Operations Profit ¥89.3B (+12.9%) and Environmental Facilities Management Profit ¥22.5B (+9.6%) contributed to profit growth, while Residential Management Profit ¥13.6B (-2.5%) suffered from rising personnel and maintenance costs, and Real Estate Fund Management Profit ¥5.1B (-63.6%) contracted sharply with scale reduction. In non-operating items, Interest & Dividend Income of ¥6.0B (estimated prior ~¥4.0B, +about ¥2B) and Equity-method loss of ¥1.9B (improvement of ¥7.7B from prior loss of ¥9.6B) materially supported Ordinary Income, lifting it to ¥105.1B (+15.5%). Pre-tax income of ¥105.7B less Income Taxes ¥30.7B (effective tax rate 29.0%) resulted in Net Income of ¥74.9B (+18.0%). Non-controlling interests decreased to ¥3.7B (prior ¥5.2B), contributing to higher Net Income attributable to owners of the parent of ¥71.2B. Goodwill amortization increased to ¥6.03B (prior ¥5.29B) but remained about 6.0% of EBITDA of approximately ¥99.8B, indicating amortization burden is within manageable range. Extraordinary items were a minor loss of ¥0.6B, and recurring profitability structure was largely maintained. In conclusion, despite flat operating-level performance, improvements in non-operating income produced double-digit growth in Ordinary and Net Income, resulting in a revenue-up, profit-up fiscal year.
Building Management & Operations (Segment Revenue ¥946.7B, Profit ¥89.3B, Profit Margin 9.4%) secured Revenue +10.6% and Profit +12.9% through renewal of long-term contracts with existing customers and phased increases in contract pricing, becoming the largest contributor to consolidated Operating Income. Residential Management (Revenue ¥344.6B, Profit ¥13.6B, Profit Margin 3.9%) achieved Revenue +7.1% from increased managed units, but faced Profit -2.5% due to recruitment difficulties and rising subcontracting costs, lowering margin by 0.1pt from prior year 4.0%. Environmental Facilities Management (Revenue ¥154.7B, Profit ¥22.5B, Profit Margin 14.5%) performed steadily with Revenue +4.4% and Profit +9.6% underpinned by comprehensive long-term contracts for water and waste treatment facilities, maintaining a high margin of 14.5%. Real Estate Fund Management (Revenue ¥31.3B, Profit ¥5.1B, Profit Margin 16.4%) saw Revenue -37.4% and Profit -63.6% due to decreased fund investment balances, but retained a high Profit Margin of 16.4%. Other (Revenue ¥25.2B, Profit ¥2.0B, Profit Margin 8.0%) including events and printing remained flat year-on-year. Segment assets are concentrated in core businesses: Building Management & Operations ¥524.0B, Residential Management ¥241.3B, Environmental Facilities Management ¥59.1B, Real Estate Fund Management ¥115.0B. Goodwill balances by segment: Residential Management ¥57.3B, Environmental Facilities Management ¥0.8B, Other ¥2.4B, indicating continued amortization from past M&A in Residential Management.
[Profitability] Operating Margin 5.8% (down -0.4pt from 6.2%), Net Margin 5.0% (up +0.5pt from 4.5%), EBITDA approximately ¥99.8B, EBITDA Margin 6.6% (down -0.7pt from approx. 7.3%). Operating-level margins declined even on a depreciation-adjusted basis, but improved tax burden and non-operating income supported a recovery in Net Margin. ROE 9.9% (prior 8.6%) rose due to improved Net Margin and a slight increase in Total Asset Turnover to 1.404x (prior 1.387x). Equity Ratio 70.9% (prior 69.6%) and Financial Leverage 1.41x (prior 1.44x) remained stable. [Cash Quality] Operating Cash Flow (OCF) ¥101.0B was 1.35x Net Income ¥74.9B. Adding Depreciation ¥13.0B gives subtotal OCF ¥131.4B; after working capital changes and taxes, cash-generating ability is strong. OCF/EBITDA ratio is 1.01x, exceeding 1x, and the accrual ratio is -2.8%, indicating high alignment between cash and profits. [Investment Efficiency] Total Asset Turnover 1.404x (prior 1.387x), Capital Expenditure ¥15.6B (1.0% of Revenue), Goodwill Amortization ¥6.03B (6.0% of EBITDA). M&A-related burdens are increasing but remain manageable. EPS ¥196.03 (prior ¥157.62, +24.4%), BPS ¥2,059.94 (prior ¥1,836.01, +12.2%) show healthy per-share growth. [Solvency] Equity Ratio 70.9%, Debt-to-Equity 0.41x, Current Ratio 325%, Quick Ratio 325% indicate very robust balance sheet; Cash & Deposits ¥373.9B represent 35.0% of total assets. Short-term interest-bearing debt is limited to lease liabilities ¥4.3B, minimizing liquidity risk. Including long-term lease liabilities ¥17.5B, total interest-bearing debt is ¥21.8B versus EBITDA ~¥99.8B, a level repayable within one year, and interest expense of ¥0.9B gives an interest coverage on operating income exceeding 96x, indicating ample headroom.
Operating Cash Flow surged to ¥101.0B (prior ¥17.0B, +494.3%). Starting from Pre-tax Income ¥105.7B, adding Depreciation ¥13.0B and Goodwill Amortization ¥6.03B yields OCF subtotal ¥131.4B. After working capital changes (Inventories +¥1.7B, Accounts Receivable +¥1.2B, Accounts Payable +¥11.4B — net improvement of approximately +¥11B) and Income Taxes Paid ¥40.6B, OCF resulted in ¥101.0B. Prior-year OCF of ¥17.0B was heavily constrained by Inventory increase of ¥44.0B and Accounts Receivable increase of ¥7.2B; this year, inventory was essentially flat and working capital pressure was relieved. Investing Cash Flow was -¥23.8B, including purchases of tangible and intangible fixed assets ¥15.6B, acquisition of available-for-sale securities ¥15.7B, proceeds from sales ¥10.3B, and collections of long-term loans ¥0.2B. Free Cash Flow was ¥77.3B (OCF ¥101.0B - Investing CF ¥23.8B), a significant improvement from prior -¥1.4B, covering dividends of ¥19.6B by 3.9x. Financing Cash Flow was -¥44.6B, driven by net short-term borrowings ¥0B, lease liability repayments ¥5.4B, dividend payments ¥19.6B (including ¥3.8B to non-controlling interests), and acquisition of subsidiary interests ¥2.8B. Cash and cash equivalents rose from ¥329.7B at beginning of period to ¥362.9B at end of period, an increase of ¥33.3B, including foreign exchange effects ¥0.6B and changes in consolidation scope ¥4.3B. Ending Cash & Deposits ¥373.9B represent roughly three months of average monthly sales (average monthly sales ¥125B), indicating ample liquidity.
Overall quality of earnings is high. The core recurring revenue streams are contract-based stock revenues from Building Management, Residential Management, and Environmental Facilities Management; about 95% of this period’s Revenue ¥1502.6B is highly recurring. Extraordinary items were a loss of ¥0.6B only, with disposal losses of fixed assets ¥0.3B and losses on sales of investment securities ¥0.6B, which had a limited impact on Pre-tax Income ¥105.7B (<1%). In non-operating income, Interest & Dividend Income ¥6.0B (0.4% of Revenue) and Equity-method loss ¥1.9B (improved by ¥7.7B from prior ¥9.6B) contributed to lifting Ordinary Income to ¥105.1B. The increase in Interest & Dividend Income suggests improved yields on Cash & Deposits ¥373.9B and Available-for-sale Securities ¥129.5B, while the narrowing of equity-method losses reflects a recovery in associate performance; both factors can be considered recurring. Comprehensive Income ¥83.5B exceeded Net Income ¥74.9B by ¥8.6B, driven by Other Securities Valuation Differences ¥3.8B, Foreign Currency Translation Adjustments ¥0.4B, Retirement Benefit Adjustments ¥2.0B, and OCI share of equity-method associates ¥2.3B. Accumulated valuation differences support Net Assets but can reverse in adverse market conditions and should be treated as temporary. An accrual ratio of -2.8% indicates OCF exceeds Net Income, and OCF/EBITDA 1.01x, OCF/Net Income 1.35x show strong cash conversion — overall earnings quality is judged high.
Full Year guidance: Revenue ¥1580.0B (YoY +5.2%), Operating Income ¥90.0B (YoY +3.6%), Ordinary Income ¥108.0B (YoY +2.8%), Net Income ¥73.0B (YoY +2.5%), EPS ¥200.99. Achievement rates versus first-half results are Revenue 95.1%, Operating Income 96.5%, Ordinary Income 97.3%, Net Income 102.6%, indicating generally steady progress. Operating Margin is assumed to be 5.7% (slightly down -0.1pt from actual 5.8%), and Ordinary Income growth is expected to slow as non-operating income increases normalize. Net Income is forecast to continue increasing by +2.5% YoY but at a slower pace, reflecting conservative assumptions on tax burden and non-controlling interests. By segment, contract renewals and new contracts in Building Management & Operations and Environmental Facilities Management are expected to continue in H2; improvement in Residential Management profitability and a recovery in Real Estate Fund Management in H2 are key assumptions. Dividend guidance is Year-end ¥30.0 (Annual ¥57.0), giving a Payout Ratio of 28.4% (based on forecast EPS ¥200.99), broadly in line with the actual payout ratio of 29.1% (based on actual EPS ¥196.03), indicating a prudent shareholder return stance with limited scope for further increases.
Dividends are Interim ¥27.0 and Forecast Year-end ¥30.0, Annual ¥57.0, a substantial increase from prior annual ¥27.0, with a Payout Ratio of 29.1% (based on current EPS ¥196.03). Total cash returns consist of Dividends ¥19.6B only; there were no share buybacks. The average shares during the period were 36,321 thousand shares; outstanding shares 41,180 thousand minus treasury stock 4,859 thousand yields year-end shares 36,321 thousand, essentially unchanged, indicating stable share count. FCF coverage of dividends is 3.9x (FCF ¥77.3B ÷ Dividends ¥19.6B), and dividends represent 19.4% of OCF ¥101.0B. DOE (Dividends ÷ Equity) is approximately 2.6% (Dividends ¥19.6B ÷ Year-end Equity ¥748.2B), indicating sufficient dividend capacity given equity scale. The Payout Ratio of 29.1% is conservative, leaving room for dividend increases as earnings expand. Although total shareholder yield is not presented, Cash & Deposits ¥373.9B and Available-for-sale Securities ¥129.5B totaling ¥503.4B represent about 67% of Market Capitalization (BPS ¥2,059.94 × 36,321 thousand shares ≒ approx. ¥748B), suggesting financial flexibility to enhance returns.
Risk of delayed pass-through of personnel and subcontracting cost inflation to contract pricing: In Residential Management, Revenue grew +7.1% while Profit declined -2.5%, lowering margin to 3.9% (prior 4.0%). If personnel cost growth outpaces contract price revisions, downward pressure on consolidated Operating Margin will persist. Although Environmental Facilities Management maintained a 14.5% margin, public tender environments limit latitude for price increases, and ongoing wage hikes could compress margins. SG&A of ¥45.6B (prior ¥42.9B, +6.3%) is the primary reason for flat operating profit; recovery in profitability requires phased contract price increases and productivity improvements via labor-saving and DX initiatives.
Market dependence and earnings volatility in Real Estate Fund Management: This business declined to Revenue ¥31.3B (-37.4%) and Profit ¥5.1B (-63.6%), reducing contribution to consolidated Operating Income to 5.9% (prior 16.2%). Fund formation and investment balances are sensitive to real estate markets and interest rate environment; this period saw liquidation/collection of anonymous association investments. Although the segment margin is high at 16.4%, scale contraction limits upside to consolidated profits, and earnings volatility will depend heavily on pace of new fund formations. Segment assets ¥115.0B include investment securities and anonymous association investments, exposing the company to market price decline risk.
Impact on Ordinary Income from changes in interest rate environment reducing non-operating income: Ordinary Income ¥105.1B (+15.5%) was materially boosted by increased Interest & Dividend Income ¥6.0B and a narrowing of equity-method losses to ¥1.9B (improvement of ¥7.7B). The improvement in non-operating income reflects higher yields on Cash & Deposits ¥373.9B and Available-for-sale Securities ¥129.5B in a rising rate environment; a future rate decline could reduce interest income and slow Ordinary Income growth. Investments in equity-method associates of ¥66.5B (prior ¥62.9B) are also sensitive to market and performance fluctuations, increasing volatility in non-operating items and, consequently, in Ordinary and Net Income.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.8% | 8.1% (3.6%–16.0%) | -2.3pt |
| Net Margin | 5.0% | 5.8% (1.2%–11.6%) | -0.9pt |
The Company’s Operating Margin of 5.8% is 2.3pt below the industry median of 8.1%, and Net Margin of 5.0% is 0.9pt below the median 5.8%. Within the facilities management industry, profitability ranks from mid-to-lower range, likely due to a high personnel cost ratio and delayed contract price adjustments.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 7.4% | 10.1% (1.7%–20.2%) | -2.7pt |
Revenue Growth Rate of 7.4% is 2.7pt below the industry median of 10.1%; while growth is steady supported by stock-type revenues, the pace is moderate compared with high-growth peers in the industry.
※Source: Company aggregation
Stability of stock revenues and strong balance sheet: Core Building Management & Operations and Environmental Facilities Management are highly recurring, with about 95% of Revenue based on ongoing contracts. Strong cash generation — OCF ¥101.0B and FCF ¥77.3B — combined with Equity Ratio 70.9% and Cash & Deposits ¥373.9B demonstrate resilience to external shocks. Goodwill ¥60.6B / Net Assets 8.0% and Interest-bearing Debt ¥21.8B are at conservative levels, supporting low M&A and financial risk. Key monitoring points are progress on phased contract price increases and labor-saving investments; confirmation of Operating Margin improvement would support shareholder returns and growth investments leveraging financial strength.
Room for operating margin improvement and sustainability of dividend growth: Operating Margin 5.8% is 2.3pt below the industry median of 8.1% and places the company in the mid-to-lower industry range. Deterioration in Residential Management profitability and rising SG&A are headwinds; responding to personnel cost inflation is critical. Conversely, Payout Ratio 29.1% and FCF coverage 3.9x are conservative, so if earnings expand, room for dividend increases is substantial. If guidance of Operating Income ¥90.0B (+3.6%) and EPS ¥200.99 is met, the company could maintain payout ratios while gradually increasing dividends, which is of interest from a mid-term shareholder return perspective.
This report was auto-generated by AI analyzing XBRL financial statement data. It does not constitute an investment recommendation for any specific security. Industry benchmarks are reference information compiled by the Company from public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.