NAC CO.,LTD. FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, Revenue was ¥589.2B (YoY -¥8.7B -1.5%), Operating Income was ¥24.8B (YoY -¥5.2B -17.4%), Ordinary Income was ¥24.9B (YoY -¥5.3B -17.7%), and Net Income was ¥8.6B (YoY -¥7.6B -46.6%). Revenue was dragged down by declines in the Housing Business (-12.6%) and Architectural Consulting Business (-8.4%), and increases in the Clicla Business (+2.9%) and Rental Business (+0.5%) were insufficient to offset the declines, resulting in a slight revenue decrease. Operating Income declined as SG&A ratio rose from 42.0% to 44.0% (+2.0pt) and the Other segment widened its loss from ¥0.27B to ¥2.31B, causing Operating Margin to deteriorate from 5.0% to 4.2% (-0.8pt). Net Income declined 46.6% despite a significant reduction in extraordinary losses (current period special gains/losses net -¥0.4B vs prior year special losses of ¥6.3B for impairment, etc.), due to lower operating profit and reduced profit before tax.

Drivers of Performance

【Revenue】 Revenue of ¥589.2B (YoY -1.5%) reflects steady performance in core Clicla Business ¥160.5B (+2.9%) and Rental Business ¥179.4B (+0.5%), while declines in Housing Business ¥116.9B (-12.6%) and Architectural Consulting Business ¥49.3B (-8.4%) pulled down overall sales. Other segment revenue increased substantially to ¥19.3B (+51.0%) but remains low in profitability with an operating loss of ¥2.31B. Segment revenue composition: Clicla 27.2%, Rental 30.5%, Housing 19.8%, Architectural Consulting 8.4%, Beauty & Health 11.4%, Other 3.3%. Gross profit was ¥283.8B with a gross margin of 48.2% (prior year 47.1%, +1.1pt), improved mainly due to reduced special losses and mix effects.

【Profit & Loss】 Operating Income ¥24.8B (YoY -17.4%) decreased primarily because SG&A expenses rose to ¥259.0B (YoY +3.0%) despite lower sales, worsening the SG&A ratio to 44.0% (prior year 42.0%, +2.0pt). Major SG&A items: Salaries and allowances ¥75.8B, Other SG&A ¥98.3B, Rent ¥17.1B. Operating margin fell to 4.2% (prior year 5.0%, -0.8pt). Ordinary Income ¥24.9B (YoY -17.7%) was nearly neutral on non-operating items (net ¥0.1B), reflecting the decline in operating income. Extraordinary items: Special gains ¥1.7B (gain on sale of investment securities ¥0.7B, etc.), Special losses ¥2.1B (impairment losses ¥0.6B, valuation losses on investment securities ¥0.5B, etc.), net -¥0.4B. Prior year special losses were ¥6.3B, so extraordinary losses narrowed substantially this period. Profit before tax was ¥24.4B (prior year ¥24.0B, +¥0.4B) — a slight increase — but lower corporate taxes ¥8.1B (prior year ¥10.4B) resulted in Net Income of ¥8.6B (prior year ¥16.2B, -46.6%). The main reason for the decline in Net Income is that prior-year Net Income ¥16.2B corresponded to EPS ¥31.82, while current EPS is ¥39.03 (+22.7%) — earnings per share increased due to a reduction in shares outstanding (share buybacks). In conclusion, the company had lower revenue and lower operating/ordinary profits, but reduced tax burden and narrower extraordinary losses left Net Income lower YoY while EPS improved.

Segment Analysis

Clicla Business (Revenue ¥160.5B +2.9%, Operating Income ¥18.5B +11.9%, Margin 11.5%) is the largest profit contributor, accounting for 74.5% of consolidated Operating Income, achieving revenue and profit growth with margin improving 0.9pt from 10.6% a year earlier. Rental Business (Revenue ¥179.4B +0.5%, Operating Income ¥14.8B -4.4%, Margin 8.3%) posted slight revenue growth but lower operating profit, with margin down 0.4pt from 8.7%. Architectural Consulting Business (Revenue ¥49.3B -8.4%, Operating Income ¥0.9B -77.1%, Margin 1.9%) saw substantial profit decline alongside revenue decline, margin deteriorated 5.5pt from 7.4% prior. Housing Business (Revenue ¥116.9B -12.6%, Operating Income ¥2.8B -30.5%, Margin 2.4%) experienced revenue and profit declines, margin down 0.6pt from 3.0%. Beauty & Health Business (Revenue ¥66.9B +2.9%, Operating Income ¥2.5B -26.3%, Margin 3.7%) posted revenue growth but operating profit decline, margin down 1.5pt from 5.2%. Other (Revenue ¥19.3B +51.0%, Operating Loss ¥2.3B) achieved large revenue growth but the loss widened from ¥0.27B to ¥2.31B (including impairment loss ¥0.57B). Margin dispersion across segments is large: high-margin Clicla drives the company, while low profitability in Architectural Consulting and Housing and losses in Other dilute consolidated margins.

Key Financial Metrics

【Profitability】Operating margin 4.2% (prior year 5.0%, -0.8pt), Net margin 1.5% (prior year 2.7%, -1.2pt), Gross margin 48.2% (prior year 47.1%, +1.1pt). Despite improved gross margin, higher SG&A ratio 44.0% (prior year 42.0%, +2.0pt) squeezed operating-level profit. ROE 3.7% (prior year 6.1%) fell due to lower Net Income, Equity Ratio 59.5% (prior year 58.6%, +0.9pt) indicates maintained financial soundness. 【Cash Quality】Operating Cash Flow (OCF) ¥13.5B is 1.57x Net Income ¥8.6B; EBITDA including depreciation ¥33.7B yields OCF/EBITDA 0.40x, a low conversion rate driven mainly by working capital absorption: inventory increase ¥9.2B, contract liabilities decrease ¥2.4B, customer advances decrease ¥3.4B. Free Cash Flow ¥9.0B (OCF ¥13.5B - CapEx ¥3.6B) is positive but covers dividends of ¥9.2B by only 0.98x, marginal. 【Investment Efficiency】CapEx ¥3.6B is 0.41x depreciation ¥8.9B, subdued. 【Financial Soundness】Current ratio 210%, Quick ratio 181% are strong; interest-bearing debt ¥52.4B (short-term ¥41.5B, long-term ¥26.0B, net of lease liabilities ¥5.4B) vs EBITDA ¥33.7B gives Debt/EBITDA 1.57x, interest coverage 41.7x (EBITDA ¥33.7B / interest expense ¥0.8B), conservative.

Cash Flow Analysis

OCF ¥13.5B (prior year ¥41.4B, -67.5%) started from profit before tax ¥24.4B plus depreciation ¥8.9B, goodwill amortization ¥1.6B and other non-cash charges to record subtotal OCF ¥23.3B. Working capital movements included inventory increase -¥9.2B (work-in-progress +¥13.6B, etc.), increase in trade receivables -¥2.3B, increase in trade payables +¥1.8B, decrease in contract liabilities -¥2.4B, decrease in construction advances -¥3.4B as main cash outflows. After corporate tax payments ¥9.7B, OCF stood at ¥13.5B. Investing CF was -¥4.5B composed of CapEx -¥3.6B, intangible asset investment -¥1.5B, proceeds from sale of investment securities ¥1.1B, etc. Financing CF was -¥10.0B including share buybacks -¥8.2B, dividend payments -¥9.2B, proceeds from long-term borrowings ¥16.0B, repayments of long-term borrowings -¥15.5B, net decrease in short-term borrowings -¥4.9B, etc. Free Cash Flow ¥9.0B covers dividends by 0.98x and total shareholder return including buybacks ¥17.4B (dividends ¥9.2B + buybacks ¥8.2B) exceeds internally generated funds. Cash and deposits decreased ¥1.1B from ¥85.9B to ¥84.8B YoY.

Quality of Earnings

Ordinary Income ¥24.9B is primarily from core operations; non-operating income ¥2.4B (non-operating income ratio 0.4%) included dividend income ¥0.2B, investment partnership gains ¥0.1B, etc. Non-operating expenses ¥2.3B included interest expense ¥0.8B, foreign exchange losses ¥0.2B, etc., resulting in net non-operating items of ¥0.1B, neutral. Extraordinary items net -¥0.4B (special gains ¥1.7B - special losses ¥2.1B) substantially narrowed from prior year -¥6.3B (special gains ¥0.1B - special losses ¥6.3B). Special gains mainly from sale of investment securities ¥0.7B; special losses mainly impairment loss ¥0.6B and valuation loss on investment securities ¥0.5B. The gap between Ordinary Income ¥24.9B and Net Income ¥8.6B (-65%) is large, driven by tax burden ¥8.1B and the impact of special losses. Comprehensive income ¥16.0B exceeds Net Income ¥8.6B, affected by valuation difference on other securities -¥0.2B, foreign currency translation adjustment -¥0.1B, and deferred hedge gains/losses -¥0.0B. OCF/EBITDA = ¥13.5B/¥33.7B = 0.40x indicates low conversion; inventory and advance fluctuations are significant. Under JGAAP, goodwill amortization ¥1.6B (4.8% of EBITDA) slightly suppresses profit but the distortion is minor.

Forecasts & Guidance

Full year guidance: Revenue ¥635.0B (YoY +7.8%), Operating Income ¥28.0B (+12.7%), Ordinary Income ¥28.0B (+12.6%), Net Income ¥9.0B (+4.2%). Compared with current results (Revenue ¥589.2B, Operating Income ¥24.8B), an increment of Revenue +¥45.8B and Operating Income +¥3.2B is required. Revenue upside assumptions: recovery in Architectural Consulting and Housing, and stable growth in Clicla and Rental. Improvement in Operating Income (Operating margin assumed to improve from 4.2% to 4.4%, +0.2pt) hinges on SG&A containment and narrowing of Other segment losses. Net Income guidance ¥9.0B is near current Net Income ¥8.6B; EPS forecast ¥40.67 (current ¥39.03) implies slight improvement on a per-share basis. Dividend forecast annual ¥5 (note: this appears inconsistent with later statement of annual dividend; see Shareholder Returns), payout ratio 69.1% is high, but on next-year forecast basis payout ratio is 12.3% (forecast dividend ¥5 / forecast EPS ¥40.67 × average shares 41.8 million ≒ annual dividend total ¥2.09B / forecast Net Income ¥17B ≒ 12.3%) and thus expected to drop substantially. Guidance achievement assumes continued revenue growth in Clicla and Rental, recovery in Architectural Consulting margin, and significant narrowing of Other segment losses.

Shareholder Returns

Dividends: year-end dividend ¥17, interim dividend ¥5, annual total ¥22, a large increase from prior annual ¥5 (+340% YoY). Payout ratio 69.1% (annual dividend ¥22 / EPS ¥31.82 × prior year shares) is high, but with current EPS up to ¥39.03, the effective payout ratio is 56.4% (¥22 / ¥39.03). Total shareholder return including share buybacks ¥8.2B is (dividends ¥9.2B + buybacks ¥8.2B) / Net Income ¥8.6B ≒ 202%, extremely high and not sustainable from internal funds alone; even with Free Cash Flow ¥9.0B, coverage is tight. Dividend sustainability depends on cash and deposits ¥84.8B and recovery of OCF; if this period’s working capital absorption is temporary, dividend may be maintainable with improved OCF going forward. The high total return ratio signals a shareholder-focused stance but continued implementation requires improvement in OCF/EBITDA conversion and normalization of working capital.

Risk Factors

1. SG&A ratio increase risk: SG&A ¥259.0B (YoY +3.0%) rose despite sales decline (-1.5%), pushing SG&A ratio to 44.0% (prior year 42.0%, +2.0pt). The ¥12.3B increase in overall costs and a worsening mix toward low-margin segments (Architectural Consulting, Housing, Other) are primary causes. Persistently high SG&A ratio would worsen operating leverage and constrain ROE improvement.

2. Working capital management risk: Inventory increase ¥9.2B (notably work-in-progress +¥13.6B), contract liabilities decrease ¥2.4B, and construction advances decrease ¥3.4B pressured OCF. Declines in inventory turnover and advances may indicate demand volatility or project progress delays, reducing cash conversion (OCF/EBITDA 0.40x). Prolonged normalization of working capital would constrain dividend capacity and investment flexibility.

3. Segment profitability dispersion risk: While Clicla (margin 11.5%) and Rental (8.3%) are core, Architectural Consulting (1.9%), Housing (2.4%), and Beauty & Health (3.7%) are low-margin, and Other is loss-making (-12.0%). Revenue declines in Architectural Consulting (-8.4%) and Housing (-12.6%) and widening losses in Other (loss ¥2.31B, YoY △9.6x) dilute consolidated margin. If inter-segment profitability divergence widens, improving consolidated ROE will be difficult.

Industry Benchmark (Reference - Company analysis)

Profitability & Returns

Operating margin 4.2% is 3.9pt below the industry median 8.1%, and Net margin 1.5% is 4.4pt below the median 5.8%. Profitability ranks in the lower part of the industry, primarily due to high SG&A ratio (44.0%).

Growth & Capital Efficiency

Revenue growth -1.5% is 11.6pt below the industry median +10.1%, indicating significant underperformance in the sector. Slowdown in Architectural Consulting and Housing is the primary cause; marginal increases in core Clicla and Rental could not offset.

※ Source: Company compilation

Earnings Highlights / Key Considerations

1. Contribution and sustainability of Clicla Business: Operating Income ¥18.5B (74.5% of consolidated) with margin 11.5%, the highest among segments. Achieved revenue and profit growth (Revenue +2.9%, Operating Income +11.9%) and supports consolidated results. Achieving next-year guidance depends on stable growth in Clicla, progress in new customer acquisition and retention of existing customers. Customer-related assets ¥1.92B (Clicla) accumulation suggests future revenue potential.

2. Normalization of working capital and recovery of cash generation: OCF ¥13.5B fell 67.5% from ¥41.4B, with OCF/EBITDA 0.40x at a low level. Main factors: inventory increase ¥9.2B (work-in-progress +¥13.6B), contract liabilities decrease ¥2.4B, construction advances decrease ¥3.4B, suggesting demand variability or project delays. Improvement in inventory turnover and recovery of advances in the next fiscal year are directly linked to dividend sustainability (current high payout ratio 69.1%) and investment capacity. Progress in working capital management will determine future financial flexibility.

3. Room to improve segment mix: Low-margin segments Architectural Consulting (margin 1.9%, Operating Income -77.1%), Housing (margin 2.4%, Operating Income -30.5%), and loss-making Other (-12.0%) dilute consolidated margin. Other segment loss widened from ¥0.27B to ¥2.31B (including impairment ¥0.57B), pushing consolidated SG&A ratio to 44.0% (+2.0pt). Achieving guidance (Operating Income +12.7%) requires significant narrowing of Other losses and recovery of Architectural Consulting margins. Execution of segment-level profit improvement measures (cost cuts, considering withdrawal) is key to returning toward industry-average margins.

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This report is a financial analysis document automatically generated by AI from XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statement data. Investment decisions are the responsibility of the reader; please consult professionals as needed before making investment decisions.