Revenue increased on acquisition benefits, but the operating margin declined, making first-half earnings recovery the focus

In the first quarter, revenue was ¥6,321 million and operating profit was ¥111 million. Revenue increased by ¥1,177 million from ¥5,144 million in the same quarter of the previous year, while operating profit declined by ¥5 million from ¥116 million. The calculated operating margin was approximately 1.76% for the current quarter versus approximately 2.25% a year earlier, a decline of approximately 0.49 percentage points. The fact that the expansion in revenue has not translated directly into operating profit is the first issue to assess at the next results announcement.

The main factors behind the revenue increase include the TrustGrowth business, which was added to the consolidated accounts from 1 April. The business recorded revenue of ¥931.265 million in the first quarter, but posted a segment loss of ¥28.799 million. The existing Asmo Trading, Asmo Food Service and Asmo Nursing Care Service businesses recorded profits of ¥43.424 million, ¥116.999 million and ¥109.674 million, respectively, but losses at the Asmo business, TrustGrowth business and Hong Kong business weighed on profit.

The company's full-year forecasts for the fiscal year ending March 2027 are revenue of ¥24,768 million, operating profit of ¥574 million, ordinary profit of ¥612 million and net income attributable to owners of the parent of ¥393 million. First-quarter progress was approximately 25.5% for revenue and approximately 19.3% for operating profit, with revenue progress ahead of profit progress. Seasonality must be taken into account, but we will use ¥287 million of operating profit for the first half as a mechanical benchmark and assess whether profit progress catches up with revenue progress.

The first-quarter earnings release explains risks including foreign exchange, raw material prices, labor shortages and economic conditions in Hong Kong, but does not provide bridge figures showing the assumptions incorporated into the full-year forecasts or the integration costs and timing of a return to profitability for the TrustGrowth business. At the next results announcement, it will be important to see whether the company discloses operating profit split between existing and acquired businesses, the factors behind changes in segment earnings, and the amounts of changes in cost of sales and SG&A expenses.