CERESPO CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.01B
• Operating Income: ¥103M
• Net Income: ¥60M
• EPS: ¥11.06

Income Statement

Balance Sheet

Cash Flow Statement

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

Cerespo Co., Ltd. reported FY2026 Q2 (standalone, JGAAP) revenue of ¥6,013 million, up 16.3% year over year, indicating solid top-line momentum despite a challenging cost environment. Gross profit was ¥1,646 million, implying a gross margin of 27.4%, which is reasonable for a project-based services model but leaves limited room to absorb fixed costs. Operating income declined 12.5% YoY to ¥103 million, translating to a thin operating margin of 1.7% and signaling margin compression despite higher sales. Ordinary income was ¥104 million, and net income was ¥60 million, equating to a net margin of 1.0%, supported by low interest expense and a tax benefit. EPS printed at ¥11.06. The company booked a negative income tax of ¥24 million, implying an effective tax benefit this period (the provided “0.0%” rate is a placeholder and not indicative of the actual benefit). DuPont analysis shows ROE of 0.66%, driven by a very low net margin (1.0%), modest asset turnover (0.458x), and conservative financial leverage (1.45x). On the balance sheet, total assets were ¥13,119 million and total equity ¥9,061 million, implying an equity ratio around 69% by calculation; the reported equity ratio of 0.0% is a non-disclosure placeholder. Liquidity appears strong with a current ratio of 366% and working capital of ¥6,474 million, suggesting ample short-term solvency. Operating cash flow was deeply negative at -¥1,247 million, a sharp contrast to positive earnings and indicative of a large working capital outflow during the half. Financing cash flow was a modest inflow of ¥117 million, potentially supporting working capital needs. Several items are undisclosed in the XBRL feed (e.g., cash balance, inventories, investing cash flows, dividends and share data), which limits precision in cash and capital allocation assessments. EBITDA was ¥130 million (margin 2.2%), underscoring tight operating leverage. Altogether, Cerespo delivered robust revenue growth but faced profitability headwinds and a significant OCF draw, implying project timing effects and/or receivables and advance balances swings typical in event/production businesses. The financial position appears solid from an equity and liquidity standpoint, yet near-term cash conversion bears watching. Given multiple unreported data points, conclusions center on available figures and standard industry dynamics for project-based services.

Profitability Analysis

ROE of 0.66% reflects: net margin 1.0% × asset turnover 0.458× × financial leverage 1.45×. The weakest link in the DuPont chain is the very slim net margin, more than leverage or turnover. Gross margin at 27.4% provides a reasonable spread over direct costs, but SG&A absorbed most of it: implied SG&A ≈ ¥1,543 million (gross profit ¥1,646 million minus operating income ¥103 million), or about 25.7% of sales and roughly 93.7% of gross profit. Operating margin of 1.7% and EBITDA margin of 2.2% indicate limited operating leverage in 1H, with incremental sales not translating proportionally into profit; this aligns with operating income down 12.5% YoY despite +16.3% revenue growth. Interest burden is minimal (interest expense ¥1.8 million; EBIT/interest ≈ 58x), so financing costs are not constraining profitability. The negative tax expense (benefit of ~¥24 million) lifted net income versus pre-tax, but this is non-core and may not recur. Ordinary margin is 1.7%, similar to operating margin, indicating negligible non-operating gains/losses. Overall, profitability is currently constrained by high overhead intensity and possibly mix/timing effects typical in project businesses.

Growth Assessment

Revenue growth of +16.3% YoY suggests healthy demand and/or improved project flow through H1. However, operating income declined 12.5% YoY, indicating adverse mix, higher delivery costs, or elevated SG&A that outpaced gross profit growth. Gross margin at 27.4% provides a base for profitability, but the conversion to operating income (1.7% margin) was weak, implying cost inflation (e.g., subcontracting, logistics, labor) or increased pre-sales/business development spend. Net income stability (flat YoY at ¥60 million) benefits from a tax credit/benefit this period, masking weaker underlying operating performance. Sustainability of revenue growth will depend on order intake, event calendar normalization, and client budget trends; these are not disclosed here, so growth durability cannot be fully assessed. Given the OCF outflow, growth appears to be consuming working capital—consistent with project timing, receivables build, or lower advances—which can weigh on near-term cash returns. Near-term outlook hinges on H2 execution and margin recapture; with low fixed-cost absorption in H1, sequential improvement is possible if project mix and volume normalize, but evidence is not provided in the disclosed figures.

Financial Health

Calculated equity ratio is approximately 69.1% (equity ¥9,061m / assets ¥13,119m), denoting a strong capitalization; the reported 0.0% is an undisclosed placeholder. Debt-to-equity of 0.43x indicates modest leverage on a total-liability basis and likely conservative interest-bearing debt. Liquidity is ample with current ratio 366% and working capital of ¥6,474m, suggesting strong coverage of short-term obligations. Quick ratio equals current ratio due to non-disclosure of inventories, so true quick liquidity cannot be confirmed but appears robust given the large current asset buffer. Interest coverage is very strong (≈58x on EBIT), and interest expense is de minimis at ¥1.8m. Solvency risk appears low given high equity and low financing costs. However, the significant OCF deficit raises short-term cash management considerations, especially with cash and equivalents undisclosed; reliance on working capital facilities or collection cycles may be material.

Cash Flow Quality

Operating cash flow of -¥1,247 million versus net income of ¥60 million yields an OCF/NI ratio of -20.8x, signaling very weak cash conversion in the half. This is likely driven by working capital outflows (e.g., receivables growth, contract assets, timing of advances/billings), which are common in event/project businesses but still warrant scrutiny. EBITDA was ¥130 million, so most of the OCF shortfall stems from non-EBITDA working capital movements rather than poor operating earnings per se. Investing cash flow is undisclosed (shown as 0), preventing a reliable free cash flow calculation; the provided “FCF: 0” is a placeholder. Financing inflow of ¥117 million suggests some draw to support operations or lease/other funding, but scale is small relative to the OCF outflow. Depreciation and amortization are modest at ¥26.7 million, indicating a light asset base and limited non-cash earnings; earnings quality is therefore particularly sensitive to revenue recognition and working capital. Overall, earnings quality is mixed: accounting profit is positive, but cash realization was negative in the period due to substantial working capital needs.

Dividend Sustainability

Dividend information (DPS, payout) appears undisclosed in this dataset; the reported DPS and payout of 0 should be treated as placeholders, not actual figures. With EPS of ¥11.06 and a modest net profit, a dividend—if paid—would likely be small to maintain coverage, but there is insufficient data on policy or historical practice in this feed. Free cash flow cannot be reliably computed due to undisclosed investing cash flows, so FCF-based coverage cannot be assessed. The strong equity base suggests capacity for stable distributions in steady states, but the large OCF outflow this half reduces near-term distributable cash absent working capital reversal. Until cash conversion normalizes and FCF is observable, dividend sustainability cannot be robustly evaluated from the provided data.

Risk Assessment

Business Risks:

• Project timing risk leading to volatile revenue recognition and cash flows
• Cost inflation in subcontracting, logistics, and labor compressing margins
• Client budget cyclicality and macro sensitivity affecting event volumes
• Execution risk on large events (scope changes, penalties, rework)
• Seasonality and concentration of projects in specific periods
• Potential event cancellations or external shocks impacting demand

Financial Risks:

• Significant working capital outflows causing negative OCF in the half
• Dependence on receivables collection and advance billing timing
• Limited buffer from operating margins (low-single-digit) if volumes soften
• Information gaps on cash balances and investing flows
• Potential need for short-term financing to bridge project cycles

Key Concerns:

• Operating income down 12.5% YoY despite +16.3% revenue growth
• OCF/Net income at -20.8x indicates poor cash conversion in H1
• EBITDA margin only 2.2%, leaving little cushion for setbacks
• Net margin of 1.0% and reliance on a tax benefit to sustain bottom line
• Undisclosed items (cash, investing CF, inventories, dividend data) limit visibility

Investment Implications

Key Takeaways:

• Top-line growth is solid, but operating leverage is currently negative
• Margins are thin at every level (OP margin ~1.7%, EBITDA margin ~2.2%)
• Balance sheet strength (calc. equity ratio ~69%) mitigates solvency risk
• Cash conversion was weak with a large working capital drain in H1
• Interest burden is minimal; financing capacity appears available if needed

Metrics to Watch:

• Order backlog and pipeline conversion (if disclosed)
• Gross margin trend and SG&A ratio to sales
• Operating cash flow and OCF/NI convergence
• Receivables days, contract assets/liabilities, and advance receipts
• Ordinary income margin vs operating margin (non-operating stability)
• Leverage and liquidity buffers (net cash, short-term borrowings)
• H2 seasonality effects on utilization and margin recovery

Relative Positioning: Within project-based services, Cerespo exhibits conservative leverage and strong liquidity but thinner margins and more volatile cash conversion in the period; sustained improvement hinges on mix, execution, and working capital normalization.

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