First-half earnings surged, driven heavily by realised carried interest; Q3 will be a period for separating recurring revenue.

Revenue in the first half of FY2026 was ¥15,699 million, operating profit was ¥12,748 million, and profit for the interim period attributable to owners of the parent was ¥8,766 million. These figures improved substantially from revenue of ¥4,955 million, operating profit of ¥2,890 million and interim profit of ¥1,701 million in the same period of the previous year, with the increase in revenue reaching ¥10,744 million. However, because the full-year earnings forecast has not been disclosed due to the uncertainty of fair value measurements for investments, first-half results cannot be assessed as a percentage of progress against the full-year plan.

The largest driver of the earnings increase was the realisation of ¥10,983 million in carried interest associated with the sale and distribution of M&I shares and Toyo Engineering shares held by Fund Series 3. On a simple comparison, this amount represented approximately 70.0% of first-half revenue of ¥15,699 million. By reportable segment, revenue from the private equity investment business was ¥14,030 million and segment profit was ¥12,363 million, far exceeding revenue of ¥1,279 million and segment profit of ¥1,054 million from the real estate investment business. The first-half profit mix therefore depended heavily on exits in the private equity business.

Management fees, meanwhile, are moving in different directions by fund vintage. The investment period for Fund Series 5 began in January 2025, contributing six months of fees in the first half of FY2026. For Fund Series 3 and 4, however, the investment balances used as the basis for calculating management fees declined as portfolio investments exited. As a result, the company explained that total management fees received declined slightly year on year. The first-half figures provided do not disclose management fees by fund vintage or the extent to which the contribution from Fund Series 5 offset the decline in Series 3 and 4.

In the next Q3, it will be necessary to confirm whether there were additional exits or distributions following M&I and Toyo Engineering, and the amount of any additional carried interest recognised. At the same time, it will be important to see whether management fees will be disclosed by fund vintage, such as Series 5, 4 and 3, and whether total management fees received resume rising. A key focus for assessing the quality of Q3 earnings will be whether the ¥12,748 million in operating profit can be separated into realised income from exits and recurring income such as quarterly management fees and management support fees.