SPACE (9622) FY2026 Q1 Earnings Report

クイックビュー

Executive Summary

Q1 of the fiscal year ending December 2025 recorded revenue of ¥182.4B (YoY +¥3.8B +2.1%), operating income of ¥18.6B (YoY +¥1.5B +8.8%), ordinary income of ¥18.6B (YoY +¥1.5B +8.9%), and net income attributable to owners of the parent of ¥12.8B (YoY +¥1.6B +14.1%), resulting in revenue and profit growth. Operating margin improved to 10.2% (prior year 9.5%), up 0.7pt; SG&A ratio fell to 4.0% (prior year 4.5%), down 0.5pt, with cost efficiency contributing to margin improvement. Progress versus the full-year plan was standard on revenue at 25.3%, while operating income progress was 36.9%, ordinary income 36.9%, and net income attributable to owners of the parent 38.9%, indicating front-loaded profit performance and a strong start to the year.

業績変動要因

【Revenue】Completed-contract revenue was ¥182.4B (YoY +¥3.8B +2.1%), an increase. As a single-segment Display Business, project deliveries for mass retailers, commercial facilities, and events progressed. Gross profit was ¥25.9B (YoY +¥0.8B +3.3%), and gross margin improved to 14.2% (prior year 14.0%) up 0.2pt, reflecting favorable project mix. Costs on uncompleted construction contracts were ¥60.3B (YoY +¥11.2B +22.8%), indicating front-loading of project backlog at the start of the fiscal year.

【Profitability】SG&A was restrained at ¥7.3B (YoY -¥0.7B -8.5%), lowering the SG&A ratio to 4.0% (prior year 4.5%) down 0.5pt. As a result, operating income increased to ¥18.6B (YoY +¥1.5B +8.8%), and operating margin improved to 10.2% (prior year 9.5%) up 0.7pt. Non-operating income/expenses were a net +¥0.1B (interest income ¥0.1B, interest expense ¥0.0B), minimal, leading to ordinary income of ¥18.6B (YoY +¥1.5B +8.9%). Extraordinary gains/losses netted neutral, as ¥0.1B gain on sale of subsidiary shares offset ¥0.1B valuation loss on investment securities. Profit before income taxes was ¥18.7B; with an effective tax rate of 31.4%, net income was ¥12.8B (YoY +¥1.6B +14.1%), improving net margin to 7.0% (prior year 6.3%) up 0.7pt. Comprehensive income was ¥13.7B (YoY +¥3.3B +31.2%), exceeding net income; other securities valuation differences contributed +¥1.0B, and foreign currency translation adjustments +¥0.1B, while adjustments related to retirement benefits were a small negative -¥0.2B. In conclusion, revenue and profit growth were achieved through simultaneous gross margin improvement and SG&A restraint.

主要財務指標

【Profitability】Operating margin 10.2% (prior year 9.5%, +0.7pt) and net margin 7.0% (prior year 6.3%, +0.7pt) improved. ROE 3.7% (annualized) is a solid level against equity of 349.7B. Gross margin 14.2% (prior year 14.0%) is low, but efficiency in SG&A at 4.0% (prior year 4.5%) sustained double-digit operating margin. 【Cash Quality】Cash and deposits ¥129.9B (prior year ¥148.7B) remain ample, absorbing front-loaded investment in costs on uncompleted construction contracts of ¥60.3B (prior year ¥49.1B). A large increase in bonus reserves to ¥7.2B (prior year ¥1.7B) indicates accrual increases, but reflects early recognition and assessment of expected cash outflows during the period. Allowance for expected contract losses increased to ¥0.2B (YoY +¥0.2B), showing a conservative approach to project profitability. Other current liabilities decreased to ¥25.1B (YoY -¥9.7B), supporting liquidity via short-term liability reduction. Non-current liabilities decreased to ¥4.8B (YoY -¥1.8B), reducing long-term debt burden. With ample cash and minimal borrowings (¥0.5B), the company is well positioned to absorb working capital increases and additional reserves.

【Investment Efficiency】Total asset turnover 0.40x (annualized 1.61x) reflects construction industry characteristics. The turnover of costs on uncompleted construction contracts temporarily slowed as work-in-progress increased (+22.8%) outpacing revenue growth (+2.1%). 【Financial Soundness】Equity ratio 77.1% (prior year 77.2%), current ratio 317.4% (prior year 326.5%) remain extremely healthy. Interest-bearing debt ¥0.5B (D/E ratio 0.2%) effectively means net debt-free, and interest coverage is 1,145x, indicating very high interest-rate resilience.

キャッシュフロー分析

Cash and deposits decreased to ¥129.9B (YoY -¥18.8B), primarily due to working capital increases driven by front-loaded costs on uncompleted construction contracts of ¥60.3B (YoY +¥11.2B). Bonus reserves surged to ¥7.2B (YoY +¥5.6B), implying early recognition of personnel expense outflows. Allowance for expected contract losses increased to ¥0.2B (YoY +¥0.2B), reflecting a conservative stance on profitability management. Other current liabilities decreased to ¥25.1B (YoY -¥9.7B), compressing short-term liabilities and supporting liquidity metrics. Non-current liabilities fell to ¥4.8B (YoY -¥1.8B), easing long-term debt burden. The abundant cash balance and minimal borrowings (¥0.5B) provide sufficient capacity to absorb the cash tied up in increased WIP and higher reserves.

収益の質

The difference between operating income of ¥18.6B and ordinary income of ¥18.6B is ¥0.0B, minimal; non-operating items contributed only slightly via interest income of ¥0.1B, indicating profit generation is driven by core business. Extraordinary items net to neutral (¥0.1B gain on sale of subsidiary shares offset by ¥0.1B valuation loss on investment securities), so one-off factors did not impair earnings quality. Comprehensive income of ¥13.7B exceeded net income of ¥12.8B by ¥0.9B, driven by other securities valuation differences +¥1.0B (market value gains on held equities) and foreign currency translation adjustments +¥0.1B, partially offset by retirement benefit adjustments -¥0.2B. The uptick in comprehensive income is unrealized but enhances the quality of net assets through increased unrealized gains on held assets. From an accrual perspective, the sharp increase in bonus reserves (+¥5.6B) and the build-up of allowance for expected contract losses (+¥0.2B) act to compress reported profits, reflecting a conservative accounting stance.

業績予想・ガイダンス

Full Year / FY forecast remains unchanged: revenue ¥720.0B (YoY +0.7%), operating income ¥50.4B (YoY +4.3%), ordinary income ¥50.4B (YoY +3.3%), net income ¥33.0B. Q1 progress rates were 25.3% for revenue, a standard start, while operating income 36.9%, ordinary income 36.9%, and net income attributable to owners of the parent 38.9% indicate front-loaded profit progress. The primary driver was operating margin improvement (Q1: 10.2% vs full-year assumption 7.0%), supported by SG&A efficiency and gross margin improvement. The buildup of costs on uncompleted construction contracts (+22.8%) suggests revenue contribution in the second half, providing a foundation to achieve the full-year plan. However, the low gross margin structure at 14.2% and the increase in allowance for expected contract losses imply that variability in project profitability could swing margins; cost control in the second half will be key to achieving the plan.

株主還元

Annual dividend forecast is unchanged at ¥36.0 per share (ordinary dividend ¥28.0 + special dividend ¥8.0). Payout ratio versus expected EPS of ¥134.57 is 26.8%, conservative; ample cash balance of ¥129.9B and minimal interest-bearing debt of ¥0.5B support dividend sustainability. Retained earnings at the end of Q1 were ¥286.0B (YoY +¥0.4B), indicating accumulated reserves and ample capacity for dividends. No share buyback has been disclosed; shareholder returns will continue to focus on dividends.

リスク要因

1. Profitability volatility risk due to low gross margin structure: Gross margin of 14.2% is below industry median, making the company sensitive to cost overruns (material costs, subcontracting, labor). The increase in allowance for expected contract losses to ¥0.2B (prior year ¥0.0B) suggests profitability pressure on certain projects. The buildup of costs on uncompleted construction contracts to ¥60.3B (YoY +22.8%) increases the difficulty of cost and delivery management, amplifying P&L impact if estimation variances occur.

2. Liquidity strain risk from rising working capital: The sharp rise in costs on uncompleted construction contracts and the large increase in bonus reserves (+337%) have raised short-term working capital needs. Cash and deposits decreased to ¥129.9B (YoY -¥18.8B); if project delays or lengthened collection terms occur, on-hand liquidity could be pressured beyond expectations.

3. Revenue growth slowdown and project concentration risk: Revenue growth of +2.1% is far below the industry median +20.9%, indicating weak top-line expansion. A single-segment Display Business with high project concentration creates structural vulnerability to winning and delivering large projects. If progress or profitability of uncompleted projects deteriorates, the probability of achieving full-year targets declines.

業種ベンチマーク（参考・当社調べ）

収益性・リターン

Profitability exceeds the industry median by a wide margin, and SG&A efficiency has been effective.

成長性・資本効率

Revenue growth lags the industry median by 18.9pt, indicating relatively weak top-line expansion.

※Source: Company compilation

決算上の注目ポイント

1. Sustainability of margin improvement trend: Q1 operating margin improved to 10.2% (prior year 9.5%), up 0.7pt, and outpaced the full-year assumed 7.0%, indicating front-loaded progress. The main drivers were a small gross margin improvement (+0.2pt) and a large SG&A ratio decline (-0.5pt), reflecting cost control effectiveness. However, the low gross margin structure of 14.2% and the ¥60.3B buildup in costs on uncompleted construction contracts (+22.8%) suggest that second-half cost control and project delivery speed will be key to maintaining margins.

2. Strong financial base and dividend stability: Equity ratio 77.1%, effectively net cash (interest-bearing debt ¥0.5B), and cash ¥129.9B provide very high financial resilience. Payout ratio 26.8% is conservative; the annual dividend of ¥36.0 including a special dividend of ¥8.0 is likely sustainable. Even if second-half project profitability or collections deteriorate, the company has capacity to maintain shareholder returns.

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This report is an AI-generated earnings analysis document created by analyzing XBRL earnings disclosure data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed.

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AI Financial Analysis

Executive Summary

FY2026 Q1 was a solid start, with profit growth materially outpacing a modest increase in completed-construction revenue. Revenue increased 2.1% YoY to ¥18.24bn. Operating income rose 8.8% to ¥1.86bn, while ordinary income increased 8.9% to ¥1.86bn. Profit attributable to owners advanced 14.4% to ¥1.29bn, or ¥52.48 per share. Gross profit increased 3.3% to ¥2.59bn. The gross margin improved by approximately 16bp YoY to 14.2%. Operating margin expanded by approximately 62bp to 10.2%, placing it in a good profitability range for the stated benchmark. Net margin expanded by approximately 76bp to 7.1%. Margin improvement was supported by SG&A expenses declining 8.5% YoY to ¥0.73bn despite higher revenue. The SG&A-to-revenue ratio consequently fell by approximately 51bp to 4.0%. Non-operating items were immaterial, and ordinary income was closely aligned with operating income. A ¥0.07bn gain on sales of subsidiary stock modestly supported pre-tax profit, but it was not material to the overall earnings outcome. The effective tax rate was 31.4%, resulting in a tax burden ratio of 0.688. The balance sheet remains highly liquid, with cash and deposits of ¥12.99bn and a current ratio of 317.4%. Management retained its full-year forecasts, and Q1 operating-income progress of 36.8% is meaningfully ahead of the standard 25% pace. The principal operating issue is the structurally low 14.2% gross margin, which leaves earnings sensitive to project pricing, construction-cost inflation, and execution on individual display projects. Overall, the quarter demonstrates positive operating leverage, conservative financial positioning, and an earnings run rate that is ahead of the initial full-year plan, subject to normal project-completion seasonality.

Profitability Analysis

Annualized DuPont ROE was 14.7%, comprising a 7.1% net profit margin, 1.610x asset turnover, and 1.30x financial leverage. This is a good ROE outcome under the stated 10-15% benchmark range and is achieved with limited balance-sheet leverage rather than aggressive debt financing. Profitability improvement was driven primarily by margin expansion: operating margin increased to 10.2% from approximately 9.5% in the prior-year quarter, while net margin rose to 7.1% from approximately 6.3%. Gross margin improved modestly to 14.2% from approximately 14.0%, indicating that gross-profit growth of 3.3% exceeded revenue growth of 2.1%. The larger contributor to operating-margin expansion was cost discipline below gross profit, as SG&A fell 8.5% YoY and its revenue ratio declined to 4.0% from approximately 4.5%. This represents favorable operating leverage because expenses decreased while sales rose. The 5-factor decomposition also shows a near-neutral interest burden of 1.008, consistent with minimal financing costs, and a tax burden of 0.688. Interest coverage of 1,145.0x underscores that interest expense of ¥0.02bn is immaterial relative to EBIT. The quality alert on gross margin remains important: 14.2% is below the 20% benchmark and reflects a business model with relatively high direct project costs. Accordingly, small changes in procurement costs, subcontractor availability, project mix, or tender pricing can have an outsized effect on operating profit. The Q1 margin gains are encouraging, but their sustainability should be judged against subsequent project completions and the ability to retain procurement and execution discipline.

Growth Assessment

Revenue growth was modest at 2.1% YoY, but operating income, ordinary income, and profit attributable to owners grew 8.8%, 8.9%, and 14.4%, respectively. This divergence indicates that the quarter's growth was profit-led rather than volume-led. Gross profit increased faster than sales, and SG&A declined, producing substantial operating leverage. Completed construction revenue accounted for the reported ¥18.24bn of sales, consistent with the group's single display-business segment. Costs on uncompleted construction contracts increased 22.9% YoY to ¥0.60bn, which indicates a larger amount of work in progress awaiting revenue recognition and may support later-period sales conversion. The full-year plan calls for revenue of ¥72.00bn, up 0.7% YoY, and operating income of ¥5.04bn, up 4.3% YoY. Q1 revenue progress was 25.3% of the full-year plan, broadly in line with the standard 25% Q1 pace. Q1 operating-income progress was 36.8%, 11.8 percentage points above the standard pace, while profit attributable to owners reached 39.0% of the full-year target, 14.0 percentage points above the standard pace. The favorable profit progress suggests scope for forecast resilience if project completion trends remain intact, although quarterly construction-related revenue and profit recognition can be uneven. An annualized Q1 revenue run rate is ¥72.97bn and an annualized operating-income run rate is ¥7.42bn; these annualized figures should not be interpreted as a forecast because of project timing and seasonality. Management has not revised its outlook, which implies that it has not yet treated Q1 outperformance as sufficient evidence to raise full-year assumptions. The key growth test is whether the company can sustain its improved gross margin and SG&A efficiency while converting uncompleted project costs into completed-construction revenue.

Financial Health

Financial health is strong. Current assets of ¥31.36bn exceeded current liabilities of ¥9.88bn by ¥21.48bn, producing a current ratio and quick ratio of 317.4%. This provides substantial coverage for short-term obligations and indicates no apparent maturity mismatch between current assets and current liabilities. Cash and deposits totaled ¥12.99bn, equal to 28.7% of total assets and 131.5% of current liabilities. Total equity was ¥34.97bn, representing a 77.1% capital adequacy ratio. Total liabilities were ¥10.36bn, or 22.9% of total assets, demonstrating a conservatively financed capital structure. The reported debt-to-equity ratio of 0.30x is well below the 1.0x conservative benchmark and far below the 2.0x level that would warrant a leverage warning. Noncurrent liabilities were limited at ¥0.48bn. Interest expense was only ¥0.02bn, and interest coverage was exceptionally high at 1,145.0x. Property, plant and equipment totaled ¥10.02bn, including land of ¥7.03bn, giving the asset base a meaningful tangible component. Intangible assets were only ¥0.32bn, or 0.7% of total assets, limiting reliance on acquired intangible values. The financial profile supports operational flexibility through cyclical fluctuations in project activity and direct construction costs.

Notable B/S Changes

Costs on uncompleted construction contracts: +¥0.11bn (+22.9%) to ¥0.60bn - higher work in progress may support subsequent completed-construction revenue, but raises the importance of project completion and cost-control execution. Provision for bonuses: +¥5.56bn (+336.8%) to ¥7.22bn - a substantial increase in accrued employee bonus obligations, contributing to higher current liabilities and requiring monitoring against future personnel-cost recognition and cash settlement. Provision for loss on orders received: +¥0.16bn (+375.8%) to ¥0.21bn - indicates a higher level of expected losses on specific orders and should be monitored as a project-profitability indicator. Accumulated other comprehensive income: +¥0.90bn (+13.3%) to ¥0.77bn - primarily reflects improved securities valuation effects and supports comprehensive income, while also increasing exposure to market-value movements.

Cash Flow Quality

Dividend Sustainability

The full-year dividend forecast is ¥72.00 per share, compared with forecast EPS of ¥134.57. This implies a dividend payout ratio of approximately 53.5%, which is below the 60% sustainability benchmark. The prior fiscal-year dividend per share was ¥27.00, and the disclosed prior-year year-end dividend included a ¥8.00 special dividend. The FY2026 forecast therefore indicates a substantially higher intended ordinary shareholder distribution, subject to the composition of the prior-year payment and final board decisions. Q1 EPS of ¥52.48 represents 39.0% of full-year forecast EPS, which is ahead of the standard 25% progress pace. The company also has a strong capital base, with equity of ¥34.97bn and cash and deposits of ¥12.99bn. With a forecast payout ratio near the middle of the stated sustainable range, the dividend appears aligned with projected earnings rather than dependent on an excessive distribution rate. The main determinant of dividend resilience is whether full-year profitability remains consistent with management's ¥3.30bn profit attributable to owners forecast.

Risk Assessment

Business risks include Low gross-margin exposure: the 14.2% gross margin is below the 20% quality-alert benchmark, making profit sensitive to tender pricing, procurement costs, subcontractor rates, and execution quality on display and construction projects., Project timing and completion risk: completed-construction revenue recognition can vary by project milestone, creating quarterly volatility even where underlying demand is stable., Work-in-progress conversion risk: costs on uncompleted construction contracts rose 22.9% YoY to ¥0.60bn, increasing the importance of timely project completion, customer acceptance, and cost control., Industry-specific labor and materials risk: the display/construction business is exposed to shortages and cost inflation in skilled labor, subcontracting capacity, fixtures, and construction materials..

Financial risks include Investment-market sensitivity: valuation differences on securities increased to ¥0.59bn, and accumulated other comprehensive income reached ¥0.77bn; changes in market values can affect equity and comprehensive income., Tax-rate sensitivity: the Q1 effective tax rate was 31.4%, and movements in tax costs can affect the conversion of operating profit into net profit..

Key concerns include The quality alert for low gross margin is the principal financial-data concern; sustained earnings growth requires continued control of direct project costs., Q1 operating-income progress is ahead of the annual plan, but the unchanged forecast indicates that management may expect normalisation in subsequent quarters., The small extraordinary gain of ¥0.07bn was non-recurring, although it was not material to the quarter's earnings profile..

Investment Implications

Key takeaways include Revenue grew 2.1% YoY, while operating income grew 8.8% and profit attributable to owners grew 14.4%, demonstrating favorable operating leverage., Operating margin improved 62bp YoY to 10.2%, supported by a 16bp gross-margin improvement and an 8.5% reduction in SG&A expenses., Annualized ROE of 14.7% is supported by profitability and asset turnover rather than high leverage, with financial leverage of only 1.30x., Liquidity and solvency are strong: the current ratio is 317.4%, cash totals ¥12.99bn, and debt-to-equity is 0.30x., Q1 operating-income progress of 36.8% versus the full-year forecast is 11.8 percentage points ahead of the standard Q1 pace..

Metrics to watch include Gross margin, particularly whether it can remain above the Q1 14.2% level amid project-cost and pricing pressures., Completed-construction revenue growth and the conversion of ¥0.60bn of uncompleted-construction costs into recognized revenue., SG&A-to-revenue ratio following the Q1 decline to 4.0%., Progress against the ¥72.00bn revenue and ¥5.04bn operating-income full-year forecasts., Movements in securities valuation differences and their effect on comprehensive income and equity..

Regarding relative positioning, The company combines good operating profitability, an annualized 14.7% ROE, and an unusually conservative balance sheet. Relative to businesses with similarly project-based revenue recognition, its liquidity and interest-servicing capacity provide meaningful resilience; however, its below-20% gross margin leaves profitability more exposed to direct-cost inflation and competitive pricing than higher-margin service or software-oriented peers.