7840.T

Mid-Term Interim Operational Results & Capital Actions

• The company completed a 1.5 billion yen treasury share purchase (approximately 1.18 million shares) in May 2025 to improve capital efficiency and enhance shareholder returns.
• The Medical Service business completed a large-scale customer succession of 4,300 welfare equipment rental accounts in June 2025, expanding the business base and strengthening competitiveness.
• The Interior Health business launched structural reform in a tough market, with plans to strengthen its profit base through production base consolidation and subsidiary restructuring in FY2026.
• Overall consolidated results: Revenue rose 9 million yen YoY to 29.259 billion yen; ordinary income fell 17.7% YoY to 1.765 billion yen, and net income fell 20.9% YoY to 1.047 billion yen. Excluding the subsidiary fiscal year change impact, underlying revenue rose 1.4% YoY, while underlying ordinary income fell 14.8% YoY. Rising selling, general and administrative (SG&A) costs (driven by wage increase-related personnel costs, advertising, and freight) outpaced gross profit growth, driving the decline in profit.

Strategic Priorities for Medical Service Business

• Concentrate resources in urban areas: Strengthen welfare equipment rental supply infrastructure in the Kansai region, planning to open 1 new service center and 2 service depot warehouses during the next medium-term management plan to meet growing demand in major metropolitan areas.
• Improve labor productivity via DX: Digitize traditional paper-based documentation for welfare equipment rental services to reduce administrative work, cut costs, and eliminate inefficiencies from resubmissions due to manual errors.
• Accelerate customer business transfers: Continue to actively acquire customer accounts from small businesses facing succession issues and large companies pursuing business portfolio focus, following the successful 4,300-account transfer completed in June 2025.

Strategic Priorities for Interior Health Business

• Cut fixed costs via structural reform: Improve profitability by closing underperforming showrooms, consolidating factories, and integrating bed frame models to offset weak demand for retail furniture sales.
• Expand sales base via EC channel strengthening: Grow e-commerce sales by developing parcel-shippable EC-exclusive products, expanding digital content (such as product videos) for EC sites, and optimizing logistics, leveraging existing 105% YoY growth in EC sales.

Cross-Enterprise Long-Term Goal

• Target to increase the share of rental revenue in total consolidated revenue to 50% or higher by March 2029, to drive sustainable stable growth by leveraging the company's core rental capability.

• Full-year 2026 March fiscal year guidance is maintained unchanged from the May 2025 announcement: The company expects full-year revenue to grow 2.8% YoY to 62.3 billion yen, ordinary income to grow 1.3% YoY to 4.75 billion yen, and net income to reach 3.05 billion yen.
• Interim progress is below 50% of full-year plan, and management acknowledges there is a meaningful hurdle to hitting full-year targets, but expects to achieve the plan due to the company's historical pattern of concentrated sales in the second half/year-end, paired with planned execution of the targeted growth strategies.
• Dividend guidance is maintained unchanged: The company continues to target a 50% consolidated payout ratio, and aims to gradually increase dividend levels over time. Flexible, timely treasury share purchases will continue.
• Full-year capital expenditure guidance is held at 48.4 billion yen, with 39.6 billion yen allocated to care-related rental assets and 350 million yen allocated to the new Kansai service center infrastructure.

1. Medical Service Business: Reported revenue increased 1.7% year-over-year, ordinary income fell 12.7% YoY to 1.443 billion yen (a 210 million yen decrease). Excluding the 2-month fiscal year change impact from subsidiary Home Care Service Yamaguchi, revenue rose 3.9% YoY (747 million yen increase) and ordinary income fell 8.6% YoY. Within the segment: Welfare equipment rental revenue grew 6.4% YoY, hospital/facility sales revenue grew 3.3% YoY, and linen supply revenue grew 4.1% YoY. The segment contributes approximately 81% of total consolidated ordinary income. 2. Interior Health Business: Revenue decreased 3.4% YoY, ordinary income fell 30.9% YoY to 337 million yen (a 151 million yen decrease). Within the segment: Furniture retail store transaction revenue fell 5.8% YoY, while hotel sales grew 25.2% YoY due to increased inbound tourism and Osaka-Kansai Expo-related investment. The segment contributes approximately 19% of total consolidated ordinary income.

• Rising general business costs (personnel, advertising, freight) cannot be easily passed through to rental prices under the Japanese long-term care insurance system, creating sustained pressure on profit margins and making productivity improvement an urgent priority.
• The Medical Service business faces structural risk from potential future changes to the long-term care insurance system that could negatively impact demand and pricing.
• The Interior Health business faces persistent headwinds from a shrinking domestic furniture market, declining consumer sentiment for durable goods, and falling new housing starts, which have driven weak retail bed sales.
• In the Medical Service linen supply segment, unexpected operational bottlenecks and unplanned cost increases from rapid demand growth hurt interim profitability, creating near-term profit execution risk.
• Government policy to reduce total hospital bed counts creates a long-term structural headwind for hospital/facility sales, with unclear negative impact after current subsidy programs for labor-saving investment end.

Q: What is management's view on the impact of the government's policy to reduce total national hospital bed counts? / A: Management states that the long-running trend of bed reduction is fundamentally a negative for the company's hospital sales segment. Currently, however, government subsidy programs for labor-saving equipment investment (such as IoT-enabled care beds) are offsetting this negative trend and supporting demand. The long-term impact after these subsidies end remains unclear. The company will maintain its existing focused strategy of serving urban hospitals, leveraging its strength in providing beds that connect hospital and home-based care to navigate this headwind.