Operating profit is ahead in Q1, but full-year earnings mix awaits gains on property sales

In FY2027-Q1, revenue was ¥5.099 billion, up 1.7% year on year; operating profit was ¥1.629 billion, up 10.2%; ordinary income was ¥1.739 billion, up 12.6%; and quarterly net income attributable to owners of the parent was ¥1.207 billion, up 12.5%. The operating margin rose from approximately 29.5% in the year-earlier quarter to approximately 31.9%. The company explained that progress in re-leasing office buildings, rent revisions, lower repair and depreciation expenses, and higher dividend income contributed to the increase. Commercial facilities, logistics warehouses and other properties, meanwhile, reported lower revenue because of the sale of the Asakusa Station-front building.

The latest full-year forecasts are revenue of ¥20.5 billion, operating profit of ¥5.5 billion, ordinary income of ¥4.5 billion and net income of ¥7 billion. Comparing Q1 results simply with the full-year forecasts gives progress rates of 24.9% for revenue, 29.6% for operating profit, 38.6% for ordinary income and 17.2% for net income. Operating and ordinary income were ahead of revenue after three months, but net income was low. This reflects the expected recognition in FY2027-H1 of approximately ¥5.9 billion in gains on the sale of fixed assets relating to the Shijo Kawaramachi building in Nakagyo Ward, Kyoto, meaning that the timing of profit generation differs from that of core operating profit.

For FY2027-H1, mechanical benchmarks based on an even half-year allocation are operating profit of ¥2.75 billion, ordinary income of ¥2.25 billion and net income of ¥3.5 billion. However, net income may vary substantially depending on the timing of recognizing the gain on sale, the cost of the sale and the tax burden, so it must be evaluated separately from operating profit and ordinary income. At the next results announcement, we will check completion of the sale of the Shijo Kawaramachi building and the actual gain on sale, cumulative operating profit progress, and changes in interest expense and equity-method and investment income. No cash flow statement was prepared for Q1, so the conversion of profit into cash remains to be confirmed in FY2027-H1.