Performance trends of RSC <4664>. Looking back at its performance so far, revenue has been steadily stable with its core continuing contract facilities as the axis. Conversely, it can also be evaluated as lacking in growth potential. In recent years, the company has focused on improving its profitability rather than increasing its top line, and it has also been constrained by internal resource limitations due to its labor-intensive business characteristics. In terms of profit, although the company reported operating losses due to prior costs for new contract orders in the fiscal year ending in March 2017, it has since focused on strengthening its profitability and achieved steady profit growth. In particular, in the fiscal year ending in March 2022, after withdrawing from the care service business, which had been delayed in its revenue realization, the company began its security business at Marunouchi Building and achieved its highest operating profit and operating margin of 3.8% since going public. While there was a temporary decline in profits in the fiscal year ending in March 2023 due to prior costs related to M&A, the company achieved a significant increase in profits in the fiscal year ending in March 2024.

When looking at its financial situation, the company's total assets have remained relatively stable with little volatility until the fiscal year ending in March 2022. On the other hand, as the company has steadily accumulated its internal reserves, its self-owned capital ratio has been on the rise. Furthermore, while total assets expanded in the fiscal year ending in March 2023, the self-owned capital ratio declined due to the consolidation of Yuhwa Shokogyo. However, with the self-owned capital ratio secured at around 45% and the goodwill amortization amount related to M&A remaining at 1.22 billion yen (as of the end of March 2024), there are no concerns about the company's financial safety. As for ROE, which indicates capital efficiency, it has followed an improvement trend that is closely linked to the operating margin, reaching nearly 10% in the fiscal year ending in March 2022. Although ROE declined in the fiscal year ending in March 2023 due to prior costs, it improved significantly to 12.4% in the fiscal year ending in March 2024.

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(Written by Fisco Guest Analyst Ikuo Shibata)