Revenue declines from the Expo aftereffects continue, making security-services profitability the focus for the first half

Consolidated revenue in Q1 of FY2027 was ¥8,753 million and operating profit was ¥545 million, down ¥2,974 million and ¥367 million, respectively, from ¥11,727 million and ¥912 million in the same quarter of the previous year. The operating margin declined 1.6 percentage points, from approximately 7.8% to approximately 6.2%, while operating profit fell 40.3%, considerably more than the 25.4% decline in revenue. The cumulative first-half figures will need to be checked to determine whether the decline reflects more than the simple aftereffects of the lower revenue scale, including a possible deterioration in the absorption of fixed personnel and operating costs.

The FY2026 earnings presentation disclosed ¥7,451 million in Expo-related on-site security revenue, ¥4,979 million in Expo-related subcontracting costs, ¥600 million in Expo-related personnel expenses and ¥688 million in Expo-related property expenses. These were specific amounts that lifted FY2026 results, but the Q1 summary report did not show the amount of Expo-related revenue that fell away from the year-earlier period. As a result, it is currently impossible to break down how many millions of yen of the current revenue decline were attributable to the event aftereffect and how much came from changes in existing operations.

Security services generated revenue of ¥6,091 million and segment profit of ¥384 million in Q1, down 34.0% and 49.8%, respectively, year on year. The company says existing operations excluding Expo-related business remained firm, but it has not disclosed amounts for existing security revenue, contract prices or the order backlog. Building management, meanwhile, posted higher revenue and profit of ¥2,494 million and ¥131 million, partly absorbing the decline in security services, but the security-services segment will have a major bearing on any assessment of the recovery in consolidated profit.

For the first half of FY2027, the practical benchmarks will be whether the consolidated operating margin can maintain Q1's 6.2% and whether the security-services segment margin stays at or above approximately 6.3%, calculated as ¥384 million divided by ¥6,091 million. Quantitative disclosure of security-services revenue or the order backlog excluding Expo-related business would also make it easier to determine whether the aftereffects of the event have run their course. Conversely, if the decline in security-services profit again exceeds the decline in revenue in the first half and the related amounts are not broken down, attention should be paid to the possibility that profitability has deteriorated for reasons beyond the event aftereffect.