| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥12569.0B | ¥11999.4B | +4.7% |
| Operating Income | ¥1603.3B | ¥1443.0B | +11.1% |
| Ordinary Income | ¥1821.6B | ¥1751.2B | +4.0% |
| Net Income | ¥1008.0B | ¥919.2B | +9.7% |
| ROE | 6.7% | 6.3% | - |
The results for the fiscal year ended March 2026 (FY2026) closed with revenue of 12,569.0B (YoY +569.6B, +4.7%), Operating Income of 1,603.3B (YoY +160.3B, +11.1%), Ordinary Income of 1,821.6B (YoY +70.4B, +4.0%), and Net Income attributable to owners of the parent of 1,008.0B (YoY +88.8B, +9.7%), achieving both revenue and profit growth. Operating margin improved to 12.8% (up +0.8pt from 12.0% the prior year) and gross profit margin improved to 31.7% (up +0.8pt), indicating higher profitability. The core Security Service continued stable growth, while Disaster Prevention Business (+5.0%), Insurance Business (+10.0%), and Geospatial Information Services (+4.0%) drove margin improvement. Non-operating income included steady equity-method gains of 93.5B, while gains on private equity fund investments declined from 212.0B in the prior year to 88.4B, causing Ordinary Income growth to lag Operating Income growth. Operating Cash Flow was 2,035.7B (YoY +21.3%), Free Cash Flow was 1,149.6B, and cash and deposits remained at 3,949.8B even after shareholder returns of dividends 411.5B and share buybacks 600.0B.
[Revenue] Revenue reached 12,569.0B (YoY +4.7%), marking the fourth consecutive year of revenue growth. The Security Service segment accounted for 6,737.9B (+4.2%), or 53.6% of total, with stable recurring Security Contract Revenue of 5,551.3B (+4.6%) steadily accumulated. By segment, Disaster Prevention Business 1,899.1B (+5.0%), Insurance Business 686.1B (+10.0%), Medical Services 921.7B (+6.8%), and Geospatial Information Services 608.7B (+4.0%) contributed to revenue increases. BPO & ICT Business was largely flat at 1,396.4B (+0.4%). Regional revenue composition was Japan 94.6% (11,886.6B) and Other regions 5.4% (682.4B), with overseas revenue slightly decreasing (YoY -1.6B).
[Profitability] Gross profit was 3,988.0B (gross margin 31.7%), up 268.5B YoY, with gross margin improving by +0.8pt. Selling, general and administrative expenses were 2,384.7B (SG&A ratio 19.0%), up 117.6B YoY; salary and allowances increased to 851.1B (prior year 817.3B) and rents to 137.9B (prior year 132.7B), but SG&A ratio rose only marginally by +0.1pt. Operating Income was 1,603.3B (Operating margin 12.8%), up 160.3B YoY (+11.1%), a double-digit increase, with Operating margin improving +0.8pt. Non-operating income totaled 267.4B, including steady equity-method gains of 93.5B (prior year 86.3B), while gains on private equity fund investments shrank significantly to 88.4B from 212.0B in the prior year. Non-operating expenses were 49.1B, including interest paid of 14.8B. Ordinary Income was 1,821.6B (YoY +4.0%), lagging Operating Income growth. Extraordinary items were net -20.8B (extraordinary gains 7.9B, extraordinary losses 28.8B), including impairment losses of 14.9B and business restructuring costs of 4.1B. Income taxes were 519.7B (effective tax rate 28.9%), and non-controlling interests were 154.4B, resulting in Net Income attributable to owners of the parent of 1,008.0B (YoY +9.7%). In summary, price adjustments in the core business and improved utilization boosted margins, enabling operating strength to absorb fluctuations in non-operating items and deliver revenue and profit growth.
The core Security Service segment recorded revenue of 6,737.9B (+4.2%), Operating Income of 1,238.3B (+7.7%), and margin of 18.4% (improved +0.2pt from 18.2%), with accumulation of Security Contract Revenue and price revisions contributing to margin improvement. Disaster Prevention Business posted revenue of 1,899.1B (+5.0%), Operating Income 247.5B (+23.1%), margin 13.0% (up +1.9pt), delivering substantial profit growth with robust orders for firefighting equipment. Insurance Business recorded revenue 686.1B (+10.0%), Operating Income 59.7B (+41.2%), margin 8.7% (up +2.0pt), maintaining high growth due to product competitiveness and risk selection. Geospatial Information Services had revenue 608.7B (+4.0%), Operating Income 54.0B (+55.9%), margin 8.9% (up +3.2pt), with significant margin improvement. Conversely, BPO & ICT Business revenue was 1,396.4B (+0.4%) with Operating Income 89.9B (-1.9%), margin 6.4% (down -0.1pt), underperforming as project profitability improvement remains a challenge. Medical Services had revenue 921.7B (+6.8%), Operating Income 62.4B (+15.6%), margin 6.8% (up +0.5pt), capturing expanded demand for home medical care. Other Businesses posted revenue 626.8B (+6.8%), Operating Income 92.9B (+7.6%), margin 14.8%, with stable contributions from real estate leasing, etc. Corporate expenses increased to -241.3B (prior year -216.9B), resulting in consolidated Operating Income of 1,603.3B.
[Profitability] Operating margin 12.8% (prior year 12.0%) and Net margin 8.0% (prior year 7.7%) show improvement. ROE 6.7% (prior year 6.3%) exceeded the 3-year average of 6.5% and improved modestly but remains low. ROIC (Operating Income ÷ (Equity + Interest-bearing Debt)) is approximately 7.1%, near the cost of capital, indicating room to improve capital efficiency. [Cash Quality] Operating Cash Flow / Net Income ratio is 181.3% (prior year 164.6%), indicating high cash quality, and Operating Cash Flow / EBITDA ratio is 87.3% (Operating CF 2,035.7B ÷ EBITDA 2,331.9B), a healthy level. The accrual ratio ((Net Income - Operating CF) ÷ Total Assets) is -4.1%, a negative accrual, reflecting strong cash backing of earnings. [Investment Efficiency] Total asset turnover is 0.564x (prior year 0.559x), slightly improved but still low. Capital expenditures of 704.9B were below depreciation of 739.1B, indicating a steady, maintenance-focused investment level. [Financial Soundness] Equity Ratio is 67.2% (prior year 67.5%), interest-bearing debt (short-term borrowings 287.4B + long-term borrowings 96.5B + corporate bonds 24.1B) totals 383.9B, Debt/EBITDA is 0.16x, and interest coverage (Operating Income ÷ Interest expense) is 108.4x, reflecting a very conservative capital structure. Current ratio is 242.1% and quick ratio 236.8%, showing ample liquidity; cash and deposits of 3,949.8B amount to 1.37x short-term liabilities of 2,878.5B.
Operating Cash Flow was 2,035.7B (YoY +357.2B, +21.3%), derived from Operating CF subtotal 2,331.9B less working capital outflows of approximately 153.2B (increase in trade receivables -62.6B, increase in inventories -89.6B, increase in trade payables +59.0B, etc.) and income taxes paid -506.4B. The Operating CF / Net Income ratio of 181.3% indicates high quality, and excluding non-cash charges including depreciation of 739.1B, real cash generation is strong. Investing Cash Flow was -886.1B, mainly consisting of CAPEX -704.9B, intangible asset acquisitions -200.8B, and acquisition of investment securities -336.9B, partially offset by proceeds from sale/redemption of securities +467.5B. Free Cash Flow was 1,149.6B (Operating CF 2,035.7B + Investing CF -886.1B), indicating ample liquidity. Financing Cash Flow was -1,181.1B, mainly due to dividends paid -411.5B (including dividends to non-controlling interests -46.3B), share repurchases -600.0B, and lease obligation repayments -51.1B. Cash and cash equivalents at period-end were 4,066.8B (opening 4,084.0B), nearly flat, with a positive foreign exchange impact of 14.2B. The increase in working capital appears temporary due to business expansion, but management of receivables and inventories will affect future cash conversion efficiency. Overall, stable growth in Operating CF and allocation of surplus funds to shareholder returns and growth investments demonstrate a healthy cash cycle.
Earnings quality is generally favorable. Of operating revenue, Security Contract Revenue of 5,551.3B accounts for 44.2% of total, indicating a business driven by recurring revenue. Non-operating income of 267.4B represents only 2.1% of revenue, and gains on private equity funds of 88.4B have significantly shrunk from 212.0B in the prior year, reducing reliance on temporary items. Equity-method gains of 93.5B account for 5.1% of Ordinary Income and provide a stable income source. Extraordinary items were net -20.8B and were minor, including impairment losses of 14.9B and business restructuring costs of 4.1B, all non-recurring. The accrual ratio of -4.1% indicates negative accruals and that earnings are backed by cash. The Operating CF / Net Income ratio of 181.3% demonstrates high realizability of profits. The difference between Comprehensive Income 1,612.9B and Net Income 1,008.0B of 604.9B is mainly composed of other securities valuation differences 277.3B and actuarial adjustments related to retirement benefits 42.4B; excluding non-controlling interests of 167.4B, Comprehensive Income attributable to owners of the parent is 1,445.5B. Valuation differences are temporary fluctuations and do not directly affect core earnings power. Overall, accumulation of recurring earnings and high cash conversion efficiency support a high quality of earnings.
The forecast for the fiscal year ending March 2027 (FY2027) is revenue 13,135.0B (YoY +4.5%), Operating Income 1,655.0B (YoY +3.2%), Ordinary Income 1,760.0B (YoY -3.4%), and Net Income attributable to owners of the parent 1,058.0B (YoY +5.0%). Operating margin is expected to slightly decline to 12.6% from 12.8% in the current period, reflecting a conservative plan. The anticipated decline in Ordinary Income is due to the normalization of non-operating income such as gains on private equity fund investments. Progress rate (Current period result / Full year forecast) stands at Revenue 95.7%, Operating Income 96.9%, and Ordinary Income 103.5%, already exceeding the full-year forecast levels, suggesting upside potential for the Ordinary Income forecast. EPS forecast is ¥261.58 (current period actual ¥276.17), reflecting suppression of dilution through share buybacks. Dividend forecast is annual ¥60, down from current period annual ¥100 (interim ¥50 + year-end ¥50, after consideration of stock split), but accounting for the 2-for-1 stock split effective October 1, 2024, the real dividend level is maintained. Achieving the full-year forecast will depend on continued accumulation of contracts in the Security Service in H2 and sustained growth in Disaster Prevention and Insurance businesses.
The dividend policy for FY2026 paid an interim dividend of ¥50 and a year-end dividend of ¥50, totaling ¥100 annually, with a payout ratio of 37.5% (total dividends 411.5B ÷ Net Income attributable to owners of the parent 1,008.0B × average shares outstanding during the period 407,947 thousand shares ÷ issued shares 466,600 thousand shares). Note that a 2-for-1 stock split of common shares was implemented on October 1, 2024; on a split-adjusted basis the effective annual dividend is 97.5 (interim 47.5 + year-end 50). With Free Cash Flow of 1,149.6B and total dividends of 411.5B, FCF coverage is 2.79x, indicating high sustainability. Additionally, share buybacks of 600.0B were executed, bringing total shareholder returns to 1,011.5B (dividends 411.5B + share buybacks 600.0B), and the Total Return Ratio reached approximately 100.3% based on Net Income attributable to owners of the parent. However, this is sufficiently covered by FCF of 1,149.6B. Treasury shares at period-end totaled 62,138 thousand shares (13.3% of issued shares), contributing to improved capital efficiency. Dividend forecast for FY2027 is annual ¥60, aiming to maintain the effective, split-adjusted level. The total return policy is expected to remain flexible, including tactical share buybacks, and capital policy aimed at improving ROE is expected to continue.
Business Concentration Risk: The Security Service accounts for 53.6% of revenue and a large portion of Operating Income, creating concentration risk; intensified competition or lagging technological innovation in this segment could materially impact overall performance. If cancellations or price competition emerged in Security Contract Revenue of 5,551.3B, maintaining an 18.4% Operating margin could become difficult.
Labor Cost Inflation Risk: Salary and allowances of 851.1B (prior year 817.3B, +4.1%) indicate rising personnel costs. Continued tightness in the labor market could increase labor cost ratios and compress margins. To sustain an Operating margin of 12.8%, price pass-through and productivity improvements are essential, but there is also risk of service quality deterioration due to labor shortages.
Market Valuation Risk of Investment Securities: The company holds investment securities of 4,808.2B (21.6% of total assets), and other securities valuation differences of 277.3B have boosted Comprehensive Income; market deterioration could produce valuation losses and erode equity. Also, variability in non-operating income such as private equity fund gains (e.g., 88.4B this period vs. 212.0B prior period) can affect Ordinary Income, increasing volatility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 12.8% | 8.1% (3.6%–16.0%) | +4.7pt |
| Net Margin | 8.0% | 5.8% (1.2%–11.6%) | +2.2pt |
Both Operating Margin and Net Margin exceed the industry medians, placing the company in the upper tier within the industry in terms of profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 4.7% | 10.1% (1.7%–20.2%) | -5.4pt |
Revenue growth rate is below the industry median, indicating lower growth relative to peers.
※ Source: Company aggregation
Expansion of a recurring revenue base: Security Contract Revenue of 5,551.3B, up +4.6% YoY, has accumulated and the high-margin Security segment (Operating margin 18.4%) continues stable growth. The contract-accumulation business model and room for price revisions form the basis for medium-term profit growth.
Continued improvement in capital efficiency: Share buybacks of 600.0B were executed, achieving a Total Return Ratio over 100%, and this was sufficiently covered by FCF of 1,149.6B. With low leverage (Debt/EBITDA 0.16x), there is ample scope for capital policy. Improving ROE from 6.7% toward the 8% range is a medium-term theme, requiring focus on both margin expansion and capital efficiency.
Improved balance across segments: Disaster Prevention (margin 13.0%, +23.1% profit growth), Insurance (margin 8.7%, +41.2% profit growth), and Geospatial Information Services (margin 8.9%, +55.9% profit growth) continued high growth, while BPO & ICT (margin 6.4%, -1.9% profit decline) underperformed. Restoring profitability and growth trajectory in BPO & ICT will contribute to further improvement in consolidated margins.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly available financial statements. Investment decisions are your responsibility; please consult a professional advisor as necessary before making investment decisions.