FY2027 Q1: Profit plunged on the delayed recognition of major construction projects; H1 will be the test of whether the full-year plan is achievable.

Revenue for FY2027 Q1 was ¥1,733 million, down 4.9% year on year. Operating profit was ¥4 million, ordinary profit was ¥5 million and net profit attributable to owners of the parent was ¥2 million, down 91.8%, 91.3% and 94.2%, respectively. Revenue declined by only around ¥88 million from ¥1,821 million in the year-earlier quarter, but operating profit fell from ¥54 million to ¥4 million, taking the operating margin from approximately 3.0% to approximately 0.3%, a decline of around 2.7 percentage points.

The company attributed the decline in revenue and profit primarily to the completion of major construction projects being pushed into Q2 and beyond, together with the absence of the major construction projects received in the previous fiscal year. In fact, the construction business reported revenue of ¥258.3 million, down 33.2% year on year, and a segment loss of ¥3.536 million in Q1. By contrast, the security business reported revenue of ¥827.4 million, up 3.0%, and segment profit of ¥97.240 million, while the building management business reported revenue of ¥415.1 million, down 1.5%, and segment profit of ¥35.058 million. Some core operations avoided a decline in profit.

The full-year forecasts remain unchanged at revenue of ¥8,392 million, operating profit of ¥117 million, ordinary profit of ¥124 million and net profit of ¥68 million. As of Q1, progress was only 20.7% for revenue, 3.4% for operating profit, 4.0% for ordinary profit and 2.9% for net profit, clearly indicating that profit is ramping up later than revenue. If H1 is compared with a simple 50% benchmark for the full-year plan, operating profit of around ¥58.5 million would be one reference point, although the company has not provided a quantitative explanation of seasonality or project recognition timing.

At the next results announcement, the focus should be not only on whether major projects have been completed, but also on the revenue generated by completed projects, their contribution to gross profit or segment profit, and the balance of incomplete projects. The Q1 summary report does not disclose order intake, order backlog or a breakdown by contributing factor, so even if the construction business turns profitable in H1, additional explanation will be needed to determine whether this reflects the unwinding of a temporary timing mismatch or an improvement in the order environment. If recognition is pushed back further beyond Q2, reliance on the second half to achieve the ¥117 million full-year operating profit forecast will increase further.