Can growth in development and operations absorb the decline from the prior-year comparison with large sales projects?

FY2027-Q1 revenue was ¥12,455 million, down 13.0% year on year. According to the company's explanation, revenue increased in the development and operations/construction businesses, while the main reason for the decline was the absence of the more than ¥2.7 billion large sales project for AIT recorded in the sales business in the year-earlier period. Accordingly, the decline may have been driven more by the loss of a one-time large project included in the comparison base than by a sudden slowdown in overall demand, although the company has not disclosed a quantitative bridge covering the full impact of the decline.

By segment, revenue from the development business was ¥6,331 million, up 11.2% year on year, while revenue from the operations/construction business was ¥1,625 million, up 2.4%. The sales business generated ¥4,498 million, down 36.0%. Based on the combined revenue of the 3 businesses, development accounted for approximately 50.8% of the total, operations/construction for approximately 13.0%, and sales for approximately 36.1%. Even if the sales business continues to decline, sustained revenue growth in development and operations/construction could support overall revenue through a shift in the business mix.

However, whether growth in development and operations/construction can fully offset the decline in sales depends on the timing of order intake and revenue recognition in FY2027-H1. FY2027-Q1 orders received were ¥11,447 million and the order backlog was ¥14,554 million, down 1.2% and 4.9%, respectively, year on year. Even if the revenue decline is temporary, a decrease in the order backlog would mean that recovery from the second half onward would depend on new orders.

In the next results announcement, in addition to the extent to which sales revenue recovers from ¥4,498 million, we will look for a year-on-year comparison excluding the impact of AIT's large project and clarification of whether the higher revenue in development and operations/construction came from recurring or new projects. If the company provides additional disclosure on the existence and value of large sales projects, project timing, and the conversion of segment orders into revenue, the likelihood of achieving full-year FY2027 revenue of ¥55,500 million can be assessed more specifically.