At 3Q, full-year sales are tracking below forecast, while operating profit is ahead of pace

Cumulative 3Q revenue was ¥6,851 million, representing approximately 69.9% of the full-year forecast of ¥9,800 million. This is approximately 5.1 percentage points below the 75% implied by the elapsed period at 3Q, meaning that based on revenue alone, the company is on a pace that requires above-normal contributions in 4Q. Revenue was ¥6,036 million in the same period of the previous year, so growth remains on track at 13.5% year on year, but achieving the full-year forecast requires an additional ¥2,949 million over the same period of the previous year.

Cumulative 3Q operating profit was ¥2,993 million, reaching 82.0% of the full-year forecast of ¥3,650 million. The operating profit required in 4Q is ¥657 million, implying a simple required operating margin of approximately 22.3% against the required ¥2,949 million in revenue. Cumulative 3Q operating profit increased substantially from ¥1,441 million in the same period of the previous year, and profit is clearly ahead of revenue in terms of progress. However, this progress includes a gain on the transfer of a business, so it would not be appropriate to assess full-year earnings power based solely on the operating profit progress rate.

The company's presentation materials indicate that the period from 3Q to 4Q is the peak season, with sales tending to increase due to summer pest and vermin control, grass cutting, and recovery from typhoon damage in early autumn. However, higher peak-season sales do not necessarily translate directly into profit, so the increase in cost of sales and fixed costs accompanying the expansion of the in-house construction business, as well as the level of advertising expenses, must be reviewed at the same time. In particular, it is important to determine whether the pattern of operating profit outpacing full-year revenue forecasts will continue in 4Q.

At the next results announcement, we will review standalone 4Q revenue and operating profit, quarterly revenue breakdowns for the platform and in-house construction businesses, and a bridge from operating profit excluding the gain on the transfer of a business. Even if the full-year forecast is achieved, the assessment of FY2027 (year ending September 2027) will differ substantially depending on whether the revenue shortfall was covered by a one-off gain or whether ordinary-business earnings power improved.