Intensifying Competition, Price Declines and Quality-Related Costs

「Revenue expanded substantially as negotiations to revise prices to appropriate levels, which had continued since the previous fiscal year, largely took hold. On the profit front, in addition to revenue related to the Expo, profit was boosted by the elimination of M&A expenses and the burden of upfront investment related to the Expo incurred in the previous fiscal year, as well as improvements in the earnings structure resulting from the disposal of unprofitable projects. All profit measures increased substantially.」

「Although revenue temporarily declined in the previous fiscal year following a review of the transaction policy for a major unprofitable customer, profitability improved as the renovation proposal process and ongoing price increase initiatives became established.」

「In the building management business, construction work overall, including large-scale renovation projects, struggled, and the pass-through of higher expenses to prices was delayed.」

「Although labor costs increased due to the higher minimum wage and outsourcing costs remained elevated because of delays in bringing work in-house, collaboration with 東洋テック following the integration of the building maintenance subsidiaries also generated benefits. Revenue, excluding intersegment sales and transfers, was ¥7,367 million, an increase of ¥635 million, or 9.4%, from the same quarter of the previous fiscal year, while segment profit was ¥94 million, an increase of ¥69 million, or 278.3%.」

「On the profit front, in addition to the effects of price increases, the benefits of integrating 2 cleaning companies in the building management business took effect. Operating profit was ¥393 million, an increase of ¥206 million, or 110.7%, from the same quarter of the previous year, while ordinary profit was ¥427 million, an increase of ¥151 million, or 55.0%.」

「Price increase negotiations that had been pursued since the previous fiscal year, together with the significant contribution from the inclusion of Godai Tech Co., Ltd. in the group from the end of the first quarter of the previous fiscal year, resulted in the security services business driving overall performance. Revenue was ¥7,394 million, an increase of ¥789 million from the same quarter of the previous year.」

「In the security services and building maintenance industries, in addition to difficulties recruiting personnel, the increase in people infected during the eighth wave of COVID-19 has made it difficult to address labor shortages.」

「Meanwhile, the outlook remains uncertain due to the impact of the sharp depreciation of the yen and other factors, soaring prices for consumer goods and food products, and the minimum wage increase. In addition, as the burden of costs associated with the weaker yen and rising labor costs has increased, passing these additional costs through to prices has become a challenge.」

「On the profit front, the operating loss was ¥40 million, a ¥239 million decline from the same quarter of the previous year, due in part to one-time factors including the minimum wage increase, higher temporary costs associated with the integration of 4 subsidiaries (such as relocation expenses), and M&A fees.」

「Operating profit was ¥848 million, up ¥151 million, or 21.8%, from the previous period, as the building management business increased profit through higher revenue, cost controls and price increases, while the real estate business also increased profit through the sale of a large property held for sale.」

「The building management business continued to perform well as 株式会社新栄ビルサービス and 株式会社明成 joined the TOYO TEC Group in the previous consolidated fiscal year, generating further group synergies. Segment profit was ¥170 million, up 196.8% year on year, due to higher revenue and cost controls.」

「Segment profit, or operating profit, was ¥75 million, down 46.2% year on year, as property-related expenses increased due in part to the resumption of upgrades to aging equipment that had been deferred in the previous fiscal year amid the spread of COVID-19.」

「Segment profit was ¥170 million, down 49.3% year on year, as personnel expenses increased following improvements in employee compensation and the hiring of more new employees than in a typical year.」

「Segment profit was ¥97 million, down 61.5% year on year, as personnel expenses increased following improvements in employee compensation and the hiring of approximately 30 more new employees than in a typical year.」

「Revenue increased substantially following the conversion of 株式会社新栄ビルサービス into a wholly owned subsidiary, but the business struggled overall due to the suspension and postponement of routine work caused by the COVID-19 pandemic. Revenue excluding intersegment sales or transfers increased 15.2% year on year to ¥1,927 million, but segment profit declined 47.0% to ¥4 million as prioritizing employment retention increased the burden of personnel expenses and reduced the profit margin.」

「Revenue in the building management business increased substantially following the conversion of 森田ビル管理株式会社 into a subsidiary, but the business was unable to offset cost increases, including those resulting from higher minimum wages, through price increases and new orders. As a result, revenue increased ¥1,258 million, or 22.2%, to ¥6,914 million, while segment profit declined ¥57 million, or 32.9%, from the previous consolidated fiscal year to ¥117 million.」

「Segment profit was ¥336 million, down 32.0% year on year, as personnel expenses increased substantially due to the implementation of measures to improve employee compensation, including pay raises, promotions and higher recruitment rates, as well as the advance hiring of personnel ahead of the launch of the transport services prime-contractor business.」

「Segment profit was ¥252 million, down 9.7% year on year, as personnel expenses increased substantially following the implementation of measures to address labor shortages and work-style reform.」

「Personnel expenses increased substantially as the company implemented measures to improve employee compensation, including base-pay increases, larger bonus funding, and pay raises and promotions, in response to labor shortages and work-style reform. As a result, operating profit was ¥146 million, down 32.2% year on year, and ordinary profit was ¥204 million, down 26.8%.」

「Personnel expenses increased due to recent labor shortages and measures to address work-style reform, while outsourcing expenses also rose with the expansion of sales. However, thorough improvements in operational efficiency made a significant contribution to reducing costs.」

「In the security services business, although there were factors that had reduced revenue in the previous fiscal year in mechanical security, transport security and other security services, revenue excluding intersegment sales increased 4.7% year on year to ¥12,613 million, supported by continued strength in construction and equipment sales and on-site security services. In terms of earnings, personnel and outsourcing expenses increased as the business expanded, but the benefits of cost controls focused on property-related expenses resulted in segment profit, or operating profit, of ¥495 million, up 21.7% year on year.」

「Although outsourcing expenses and personnel expenses increased, cost controls for property-related expenses and other costs took effect, and the high-margin real estate business also contributed. Operating profit increased 11.4% year on year to ¥430 million.」

「Although outsourcing expenses increased with higher revenue, cost controls for property-related expenses and personnel expenses were effective, and the contribution from the higher-margin real estate business also helped. Operating profit was ¥215 million, up 28.5% year on year.」

「Personnel expenses increased due to on-site responses for M&A transactions, labor shortages and measures to address work-style reform, while expenses including amortization of goodwill also increased. However, thorough operational efficiency improvements at affiliated companies and the contribution from the real estate business resulted in operating profit of ¥959 million, up ¥300 million, or 45.6%, from the previous period.」

「During the nine months ended, the group reported higher revenue year on year, supported by the contribution from the security services business acquired through a business transfer in the previous fiscal year and the solid performance of the group companies' building management businesses, which recovered from the weakness seen in the previous fiscal year. Operating profit and ordinary profit also increased year on year, particularly in the building management business, as ongoing negotiations for price increases and more efficient personnel allocation absorbed increases in personnel and other expenses.」

「In the building management business, stronger integrated sales capabilities, which have been pursued since the previous fiscal year, together with expense control, resulted in revenue, excluding intersegment sales and transfers, of ¥2,763 million, up 5.5% year on year. Segment profit, or operating profit, was ¥68 million, compared with a segment loss, or operating loss, of ¥37 million in the same quarter of the previous fiscal year, as cost-cutting measures implemented by the Group's companies since the previous fiscal year and negotiations for price increases proved effective.」

「Although personnel and other expenses continued to increase, the results of group-wide cost controls undertaken since the previous fiscal year contributed to operating profit of ¥167 million, up 49.6% year on year.」

「The operating environment surrounding the group remains difficult in both the security services and building management businesses. Intense competition with industry peers continues, while persistent requests for lower prices from existing customers and declines in contract prices have intensified price competition. At the same time, higher personnel, other operating and outsourcing expenses associated with increases in the minimum wage and other factors have continued to raise costs.」

「In the security services industry, demand for security services is increasing amid heightened vigilance against terrorism and serious crime, but the operating environment remains difficult due to higher costs, including personnel expenses.」

「Due in part to higher expenses associated with the launch of the new office administration system (T-LINK) and higher personnel costs at affiliated companies resulting from increases in the minimum wage, operating profit was ¥244 million, down ¥93 million, or 27.6%, year on year.」

「In addition to higher personnel costs at affiliated companies due to increases in the minimum wage, there were temporary increases in property-related expenses, including uniform replacements. As a result, operating profit was ¥112 million, down ¥3 million, or 3.4%, year on year.」

「Intense competition with industry peers continues, while persistent requests for lower prices from existing customers and declines in contract prices have intensified price competition. At the same time, the company continues to face difficult earnings conditions as higher personnel and other expenses, as well as the deployment of information terminals, have increased costs in efforts to improve product and service quality.」