ALSOK (2331) FY2027 Q1 Earnings Report

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Executive Summary

Margin expansion in the core Security Business resulted in double-digit profit growth accompanied by both revenue growth and improved profitability. Revenue was ¥1,459.0B (¥1,411.5B in the prior year, YoY+3.4%), Operating Income was ¥120.5B (¥104.4B in the prior year, YoY+15.4%), Ordinary Income was ¥132.5B (¥109.0B in the prior year, YoY+21.5%), and quarterly Net Income attributable to owners of the parent was ¥80.9B (¥64.4B in the prior year, YoY+25.8%). The Operating Income margin improved to 8.3%, up +0.9pt from 7.4% in the same period of the prior year, primarily due to a +1.2pt improvement in the gross profit margin. The growth in Net Income exceeded that at the Operating Income and Ordinary Income levels, partly due to a temporary contribution from ¥4.0B in extraordinary income.

Factors Affecting Performance

【Revenue】Revenue was ¥1,459.0B, representing a YoY increase of +3.4%. The core Security Business, which accounts for 82.6% of revenue, was ¥1,034.1B (YoY+0.4%), essentially flat and centered on stable contractual revenue. The Building Management and Disaster Prevention Business (FM, etc.) achieved high growth at ¥207.9B (YoY+16.4%), driven by growth in construction revenue. The Nursing Care Business was ¥142.0B (YoY+4.3%), also benefiting from the consolidation of new subsidiaries (ALSOK Care Life Support and ALSOK Care). The Overseas Business was ¥76.1B (YoY+11.1%), boosted by foreign exchange effects and the expansion of local operations.

【Profit and Loss】The increase in cost of sales was lower than the increase in revenue, improving the gross profit margin to 25.2% from 24.0% in the prior year, a +1.2pt improvement. Although the SG&A ratio rose slightly to 17.0% (+0.3pt), the improvement in gross profit exceeded this increase, expanding the Operating Income margin to 8.3% (+0.9pt). By segment, the Security Business margin improved to 11.8% (+1.2pt), while FM, etc. improved to 11.5% (+2.4pt). In contrast, the Nursing Care Business margin declined to 3.0% (-1.7pt) due to higher personnel expenses, while the Overseas Business continued to report a negative margin of -1.9%, despite reduced losses. In non-operating income, dividends received, equity-method income, and insurance dividends contributed a total of ¥21.1B in income, resulting in Ordinary Income of ¥132.5B (YoY+21.5%). Due to the temporary boost from ¥4.0B in extraordinary income and the effective tax rate remaining broadly in line with the prior year (36.3% versus 36.5% in the prior year), Net Income increased at a faster pace than Ordinary Income. Overall, this can be characterized as high-quality profit growth, combining revenue and profit growth with margin improvement in the core businesses.

Segment Analysis

The Security Business recorded revenue of ¥1,034.1B (YoY+0.4%), Operating Income of ¥121.8B (YoY+11.2%), and a margin of 11.8% (up +1.2pt from 10.6% in the prior year), leading company-wide profit growth through improved profitability despite nearly flat revenue. The FM Business, etc. (Building Management and Disaster Prevention) recorded revenue of ¥207.9B (YoY+16.4%), Operating Income of ¥23.9B (YoY+46.2%), and a margin of 11.5% (up +2.4pt from 9.2% in the prior year), showing the highest growth across the company. The Nursing Care Business recorded revenue of ¥142.0B (YoY+4.3%), but Operating Income declined to ¥4.3B (YoY-32.3%), with the margin falling to 3.0% (down -1.7pt from 4.7% in the prior year), as the impact of higher personnel and commodity costs exceeded revenue growth. The Overseas Business recorded revenue of ¥76.1B (YoY+11.1%) and an Operating Loss of ¥1.4B, improving from a loss of ¥1.8B in the prior year, while the margin remained negative at -1.9%. The Security Business made the largest contribution to company-wide Operating Income, while improved profitability in the Nursing Care and Overseas Businesses remains a potential source of further expansion in the company-wide margin.

Key Financial Metrics

【Profitability】The Operating Income margin improved to 8.3% from 7.4% in the same period of the prior year, a +0.9pt improvement, while the Net Income margin attributable to owners of the parent also rose +1.0pt to 5.6% from 4.6% in the prior year. The gross profit margin was 25.2% (24.0% in the prior year), and the SG&A ratio was 17.0% (16.6% in the prior year). Improvement in gross profit exceeding the increase in costs drove profit growth. 【Cash Flow Quality】Cash flow from operating activities was ¥129.7B, equivalent to 1.6 times Net Income attributable to owners of the parent of ¥80.9B, indicating sound cash support for reported earnings. Capital expenditures of ¥55.2B were approximately equal to depreciation and amortization of ¥53.2B, keeping the scale of investment within the level of depreciation. 【Investment Efficiency】ROE was 2.0% (quarterly result, before annualization), supported by a solid capital base reflected in an Equity Ratio of 65.6%. 【Financial Soundness】The Equity Ratio rose to 65.6%, up +2.4pt from 63.2% in the same period of the prior year. Interest-bearing debt (total short-term and long-term borrowings and bonds) decreased -43.9% to ¥297.8B from ¥530.8B in the same period of the prior year. Current assets of ¥2,622.3B substantially exceeded current liabilities of ¥1,095.8B, indicating considerable short-term financial flexibility.

Cash Flow Analysis

Cash flow from operating activities was ¥129.7B, increasing +126.8% from ¥57.2B in the same period of the prior year. The decrease in trade receivables, which generated a cash inflow of +¥147.2B, made a significant contribution, while the decrease in trade payables of -¥95.1B was a source of cash outflow. Cash flow from investing activities was -¥96.6B, primarily due to capital expenditures of ¥55.2B. Investment was approximately equal to depreciation and amortization of ¥53.2B and remained at a level consistent with replacement investment. As a result, free cash flow (Operating CF + Investing CF) was positive at ¥33.1B. Cash flow from financing activities was -¥28.6B due to dividend payments and other factors, indicating a more conservative capital structure alongside the reduction in short-term borrowings. The generation of Operating Cash Flow above Net Income indicates a relatively favorable level of earnings cash conversion.

Earnings Quality

Earnings are primarily generated by contractual revenue from the Security Business, resulting in a highly recurring revenue structure. Non-operating income of ¥21.1B included dividends received of ¥4.1B, insurance dividends of ¥3.0B, and equity-method investment income of ¥6.0B, all of which have a certain degree of recurrence. Extraordinary income was ¥4.0B, providing a net positive effect compared with extraordinary income of ¥0.7B and extraordinary loss of ¥1.3B in the same period of the prior year, although its impact on the overall earnings level was limited. The effective tax rate was 36.3%, broadly in line with 36.5% in the same period of the prior year. The difference between the growth rates of Ordinary Income (YoY+21.5%) and Net Income (YoY+25.8%) was primarily attributable to the increase in extraordinary income. The fact that Operating Cash Flow exceeded Net Income indicates that reported earnings were supported by cash generation.

Earnings Forecast and Guidance

Progress against the full-year plan (Revenue of ¥6,375.0B, Operating Income of ¥557.0B, Ordinary Income of ¥585.0B, and Net Income of ¥373.0B) was 22.9% for Revenue, 21.6% for Operating Income, 22.7% for Ordinary Income, and 21.7% for Net Income. Compared with a simple one-quarter benchmark of 25%, progress was approximately 2–3pt below that level in each category, with the shortfall somewhat larger at the Operating Income level. Possible background factors include profitability improvements in the Nursing Care and Overseas Businesses and working capital requirements in the first half. There were no revisions to either the earnings forecast or dividend forecast this time, and the company has maintained its current plan.

Shareholder Returns

The full-year dividend forecast is ¥33.00 per share, with no revision from the previous forecast. The Payout Ratio against forecast EPS of ¥76.75 is approximately 43.0% (¥33.00 ÷ ¥76.75). No share repurchase has been disclosed, and shareholder returns are evaluated based solely on the dividend Payout Ratio. Financing CF was -¥28.6B due to dividend payments and other factors. Given the cash and deposits balance of ¥780.4B, financial constraints on continuing dividend payments in the near term appear limited.

Risk Factors

1. Dependence on the core business: The Security Business accounts for 82.6% of Revenue and the majority of Operating Income, creating a structure in which demand trends and price competition in this business have a significant impact on company-wide performance.

2. Deteriorating profitability in the Nursing Care Business: Although Revenue increased YoY+4.3%, Operating Income declined -32.3%, and the margin fell to 3.0% (down -1.7pt from 4.7% in the prior year). Higher personnel and commodity costs are exceeding the benefits of revenue growth.

3. Continued losses in the Overseas Business: Although the Operating Loss narrowed to ¥1.4B from ¥1.8B in the prior year, the margin remains negative at -1.9%, and improving the cost structure remains an issue.

Industry Benchmark (For Reference; Compiled by the Company)

Industry Benchmark (it_telecom)

Profitability and Returns

Both the Operating Income margin and Net Income margin slightly exceeded the industry median, placing profitability in the middle to somewhat upper range within the industry.

Growth and Capital Efficiency

The Revenue growth rate was 5.9pt below the industry median, placing the company’s top-line growth rate relatively low within the industry.

※Source: Compiled by the Company

Key Takeaways from the Earnings Results

1. Expansion of the core Security Business margin (+1.2pt) and strong growth in the FM, etc. Business (Operating Income YoY+46.2%) led the +0.9pt improvement in the company-wide Operating Income margin, indicating relatively high-quality profit growth.

2. The Nursing Care Business margin declined to 3.0% (-1.7pt), while the Overseas Business remains loss-making. Accordingly, profitability improvements in non-core areas will be an important focus in assessing future improvements in company-wide profitability.

3. Interest-bearing debt decreased -43.9% YoY (¥530.8B→¥297.8B), while the Equity Ratio also improved +2.4pt, indicating progress toward a more conservative capital structure.

Theoretical Share Price (Reference Value)

This is a mechanically calculated reference range based solely on publicly disclosed data using a residual income model (Ohlson-type model with an explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.

Sensitivity: ¥813–¥861 at ±1% for the cost of equity, and ¥836–¥838 at ±0.1 for ω.

Notes:

• Goodwill amortization of ¥7.2 per share has been added back to earnings (as a non-cash expense and for comparability with IFRS companies).
• Net assets as of the quarter-end have been used (there is a timing difference relative to the full-year forecast).

(Calculation model: Residual Income Model / Interest rate reference month: 2026-06 / This value does not predict or guarantee the future share price.)

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This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting professionals as necessary.

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AI Financial Analysis

Executive Summary

ALSOK delivered a strong FY2027 Q1 result, with profit growth materially outpacing a modest top-line expansion. Revenue increased 3.4% year on year to JPY145.9bn. Operating income rose 15.4% to JPY12.0bn. Ordinary income increased 21.5% to JPY13.3bn. Profit attributable to owners of parent grew 25.8% to JPY8.1bn. The operating margin expanded 80bp year on year to 8.3% from 7.4%. The gross margin increased 190bp to 25.2%, indicating favorable cost control relative to revenue growth. SG&A expenses increased 5.4%, faster than revenue but substantially slower than gross profit growth, allowing operating leverage to emerge. The Security business remained the core earnings engine, contributing JPY12.2bn of segment profit and accounting for more than four-fifths of aggregate segment profit. FM business earnings were the largest positive incremental contributor, while the Care business experienced margin pressure. Operating cash flow of JPY13.0bn exceeded owner-attributable net income of JPY8.1bn by 1.60x, supporting the quality of reported earnings. Free cash flow was positive at JPY3.3bn after JPY5.5bn of capital expenditure. Cash conversion to EBITDA was 0.75x, adequate but below the level that would indicate consistently exceptional conversion. The balance sheet remains conservatively funded, with a 239.3% current ratio, 0.52x debt-to-equity ratio, and 31.9x EBITDA interest coverage. The JGAAP goodwill charge of JPY0.9bn reduced operating profit and net income, although goodwill metrics remain modest relative to equity and EBITDA. The acquisition-related increase in goodwill of JPY1.2bn and cash outflow for subsidiary share purchases of JPY3.3bn make integration execution an important item to monitor. FY2027 guidance implies Q1 progress of 22.9% for sales, 21.6% for operating income, and 21.7% for owner-attributable profit, each moderately below a straight-line 25% first-quarter benchmark but not by a degree suggesting a material shortfall. Overall, the quarter supports an improving earnings trajectory, led by margin expansion and strong cash generation, while tax burden, care profitability, short-term debt composition, and M&A integration remain relevant monitoring items.

Profitability Analysis

Annualized DuPont ROE is 7.5%, comprising a 5.5% net profit margin, 0.894x asset turnover, and 1.52x financial leverage. The principal constraint on annualized ROE is profitability rather than leverage: the balance sheet is not aggressively geared, while the 5.5% net margin is only moderate. The most favorable quarterly change was the 80bp expansion in operating margin to 8.3%, driven by a 190bp rise in gross margin to 25.2%. Revenue growth of 3.4% versus operating-income growth of 15.4% demonstrates positive operating leverage. SG&A increased 5.4% year on year, above revenue growth, but gross profit increased 8.5%, more than offsetting this cost growth. Accordingly, SG&A as a share of sales was broadly controlled at 17.0%, versus 16.6% a year earlier, while the gross-profit improvement created the net margin benefit. The five-factor decomposition shows a 0.593 tax burden and a favorable 1.133 interest burden; profit before tax exceeded EBIT because non-operating income exceeded interest and other non-operating expenses. EBITDA was JPY17.4bn and the EBITDA margin was 11.9%, providing a stronger view of operating cash earnings than the JGAAP operating-income figure. JGAAP goodwill amortization was JPY0.9bn, or 5.0% of pre-goodwill-amortization EBITDA of JPY18.2bn, representing a moderate accounting drag rather than a material cross-standard distortion. Segmentally, Security was the core business, with sales of JPY103.4bn, up 0.5%, and segment profit of JPY12.2bn, up 11.2%; its margin rose to 11.8% from 10.6%. FM business sales increased 16.4% to JPY20.7bn and segment profit rose 46.2% to JPY2.4bn, lifting its margin to 11.6% from 9.2%. Care business sales rose 4.3% to JPY14.2bn, but segment profit declined 32.3% to JPY0.4bn and margin compressed to 3.0% from 4.7%. Overseas sales increased 11.1% to JPY7.6bn, while its segment loss narrowed to JPY0.1bn from JPY0.2bn. The margin improvement is encouraging, but sustaining it depends on continued pricing, labor-cost absorption, and recovery in the care operation.

Growth Assessment

Q1 revenue growth was led by FM business and overseas operations, while the large Security business grew only modestly. Contract revenue increased 4.4% to JPY128.8bn and represented 88.3% of consolidated revenue, providing a recurring revenue base and comparatively good sales visibility. Construction revenue was essentially flat at JPY6.6bn, while sale revenue declined 6.1% to JPY10.5bn; this mix shift toward contract income is favorable for revenue stability. The Security segment's profit growth well exceeded sales growth, suggesting that pricing, productivity, or mix improvements were more important than volume growth during the quarter. FM business combined double-digit sales growth with substantial margin expansion, making it the main incremental profit driver. Conversely, the Care business's declining segment profit despite revenue growth indicates cost inflation or unfavorable operating leverage and limits the breadth of the earnings recovery. The overseas business remains loss-making, though its narrower loss is a constructive directional development. Full-year company guidance calls for revenue of JPY637.5bn, up 6.8%, operating income of JPY55.7bn, up 18.7%, and ordinary income of JPY58.5bn, up 17.2%. Q1 sales progress is 22.9% of full-year guidance, 2.1 percentage points below the 25% straight-line benchmark. Operating-income progress is 21.6%, 3.4 percentage points below the benchmark, and owner-attributable-profit progress is 21.7%, 3.3 percentage points below it. These deviations are within normal first-quarter seasonality and do not exceed the 10 percentage point threshold for a material progress warning. The outlook therefore requires an acceleration in the remaining quarters, particularly in the core Security business and continued FM margin delivery.

Financial Health

Liquidity is strong, with current assets of JPY262.2bn against current liabilities of JPY109.6bn, producing a 239.3% current ratio and quick ratio. Working capital totals JPY152.6bn, and cash and deposits of JPY78.0bn equal 4.50x short-term debt. Interest-bearing debt is JPY29.7bn, while the reported debt-to-equity ratio is 0.52x and debt-to-capital is only 6.5%, indicating substantial balance-sheet capacity. Debt/EBITDA is 1.71x and EBITDA interest coverage is 31.92x; EBIT interest coverage is also strong at 22.15x. There is no warning from the current ratio or debt-to-equity thresholds, as neither indicates a liquidity or excessive-leverage concern. However, the short-term debt ratio is 58.4%, above the 40% quality-alert threshold, so refinancing exposure should be monitored even though liquidity coverage is ample. The root cause of the refinancing-risk alert is the concentration of reported interest-bearing debt in short-term loans, rather than an absolute shortage of cash or earnings coverage. This maturity profile is less concerning in the present context because cash exceeds short-term loans by 4.5x and current assets exceed current liabilities by more than two times, but a tightening in bank funding conditions could increase rollover costs. Short-term loans declined JPY23.3bn year on year, or 57.3%, to JPY17.3bn, improving absolute near-term debt exposure. Accounts payable declined JPY9.6bn, or 33.3%, to JPY19.3bn; this reduces supplier-financing support and contributed to operating working-capital cash use. Goodwill of JPY27.8bn equals 6.5% of equity and 1.60x EBITDA, both comfortably within healthy M&A-risk benchmarks. The JPY1.2bn goodwill increase arose from consolidating ALSOK Kaigo Life Support and ALSOK Care, with purchase-price allocation still provisional, making post-acquisition performance and eventual accounting adjustments relevant. Net defined benefit liability is JPY36.5bn, representing a meaningful long-term obligation that should be assessed alongside the JPY90.9bn net defined benefit asset and broader pension assumptions.

Notable B/S Changes

Short-term loans: -JPY23.3bn (-57.3%) year on year to JPY17.3bn - materially lowers absolute near-term borrowing, although short-term maturities still represent 58.4% of debt. Accounts payable: -JPY9.6bn (-33.3%) year on year to JPY19.3bn - reduced supplier-financing balance and contributed to working-capital cash outflow during Q1. Goodwill: +JPY1.2bn from newly consolidated care-related subsidiaries - modest relative to equity at 6.5%, but post-acquisition integration and final purchase-price allocation should be monitored. Property, plant and equipment: +JPY7.4bn (+5.1%) year on year to JPY153.4bn - consistent with continued operating-asset investment, supported by capex slightly exceeding depreciation. Investment securities: +JPY3.3bn (+4.5%) year on year to JPY76.7bn - adds exposure to market-value fluctuations and comprehensive-income volatility.

Cash Flow Quality

Cash-flow quality was favorable in Q1, with operating cash flow of JPY13.0bn equal to 1.60x owner-attributable net income of JPY8.1bn. This exceeds the 1.0x high-quality benchmark and does not trigger the concern threshold of 0.8x. The accruals ratio was negative 0.8%, which is consistent with cash realization rather than aggressive accrual-based earnings recognition. Operating cash flow was supported by a JPY147.2bn decrease in trade receivables, partially offset by a JPY95.1bn decrease in trade payables. The net working-capital effect was therefore a significant cash source, so the level of quarterly operating cash flow should not be extrapolated mechanically without confirming the sustainability of receivables collection and payment timing. Income taxes paid were JPY80.8bn, a material cash outflow that reduced conversion from EBITDA. Cash conversion, measured as operating cash flow divided by EBITDA, was 0.75x: satisfactory and above the 0.7x concern line, but below the 0.9x excellent benchmark. Capital expenditure was JPY5.5bn, slightly above depreciation and amortization of JPY5.3bn, resulting in a 1.04x capex-to-depreciation ratio. This indicates the company is at least maintaining, and modestly adding to, its operating asset base. Free cash flow was positive at JPY3.3bn after capital expenditure. Investing cash flow of JPY9.7bn included JPY3.3bn of subsidiary-share purchases, JPY3.2bn of investment-security purchases, JPY1.6bn of intangible-asset purchases, and JPY5.5bn of capital expenditure, partly offset by other investing inflows. The acquisition cash outflow was only about 2.2% of quarterly revenue, which does not constitute aggressive acquisition intensity, but it creates an integration requirement. Financing cash flow was negative JPY2.9bn, primarily reflecting JPY7.1bn of cash dividends paid and lease-obligation repayments, partly offset by a JPY7.4bn net increase in short-term loans. Cash increased modestly by JPY0.5bn during the quarter, preserving substantial liquidity.

Dividend Sustainability

The full-year dividend forecast is JPY33.00 per share, with no revision disclosed. Based on forecast EPS of JPY76.75, the implied dividend payout ratio is 43.0%. This is below the 60% sustainability benchmark and leaves meaningful earnings retention for investment, debt service, and acquisitions. Forecast owner-attributable net income of JPY37.3bn implies aggregate forecast dividends of approximately JPY16.0bn using average shares of 486.0 million. The Q1 free cash flow of JPY3.3bn alone does not cover this annualized dividend requirement, but quarterly free cash flow is affected by seasonality, tax payments, working-capital movements, and acquisition outlays. Operating cash flow of JPY13.0bn was substantially above quarterly profit and, together with JPY78.0bn of cash and deposits, supports near-term dividend capacity. Cash dividends paid during Q1 were JPY7.1bn, demonstrating that distributions were funded alongside positive operating cash flow. The modest capex-to-depreciation ratio of 1.04x indicates that maintenance and growth investment needs are presently manageable relative to cash generation. Dividend sustainability is therefore underpinned by the forecast payout ratio, strong liquidity, and low debt burden, while sustained care-segment weakness or materially larger acquisitions could reduce future distribution flexibility.

Risk Assessment

Business risks include Labor-cost inflation and staffing availability: security, facility management, and care services are labor-intensive; failure to pass through wage and recruitment costs could reverse the Q1 operating-margin expansion., Care-business profitability: Care segment profit declined 32.3% year on year to JPY0.4bn despite 4.3% sales growth, reducing margin to 3.0% from 4.7%., M&A integration: two subsidiaries were newly consolidated and generated a JPY1.2bn provisional goodwill increase; operating synergies, retention, and final purchase-price allocation remain execution variables., Overseas operations: the overseas segment remains loss-making despite a narrower loss, creating exposure to local demand, execution, currency, and regulatory conditions., Security-industry competition and service-quality risk: contract retention, pricing discipline, and the ability to maintain reliable guard and monitoring service levels are central to the recurring-revenue model..

Financial risks include High tax burden alert: the 0.593 tax burden implies an effective rate of approximately 40.7% of profit before tax, below the 0.60 benchmark. This reduces conversion of pre-tax profit to shareholder earnings; it may reflect tax mix or non-deductible items and should normalize only if the underlying drivers recede., Refinancing-risk alert: 58.4% of debt is short term, above the 40% alert threshold. Liquidity substantially mitigates the risk, with cash/short-term debt of 4.50x, but the company remains exposed to funding-market conditions and short-term borrowing costs., Pension obligation sensitivity: net defined benefit liability of JPY36.5bn can be sensitive to discount rates, asset returns, and actuarial assumptions., Investment-security and comprehensive-income volatility: investment securities total JPY76.7bn and valuation differences on securities contributed to comprehensive income, creating potential equity and earnings-volatility exposure..

Key concerns include Highest priority is whether Q1 gross-margin and FM-margin gains can be sustained while absorbing wage inflation., Second priority is restoration of Care segment profitability, where earnings declined despite sales growth., Third priority is the cash-flow mix: receivable collection supported Q1 operating cash flow, while lower payables offset part of that benefit; subsequent-quarter cash conversion should be assessed for normalization., Fourth priority is acquisition integration and the performance of the newly consolidated care-related subsidiaries., The high tax burden and short-term debt ratio are explicit quality alerts, though both are moderated by strong interest coverage, low debt/capital, and sizable cash holdings..

Investment Implications

Key takeaways include Q1 operating income grew 15.4%, materially ahead of 3.4% revenue growth, supported by an 80bp operating-margin expansion., Security remains the core business and generated JPY12.2bn of segment profit, while FM delivered the strongest sales and earnings growth., Cash earnings are credible: operating cash flow was 1.60x owner-attributable net income and free cash flow was positive., The balance sheet is strong, with a 239.3% current ratio, 1.71x debt/EBITDA, and 31.92x EBITDA interest coverage., The FY2027 dividend forecast implies a 43.0% payout ratio, which appears compatible with forecast earnings and current financial capacity., The main offsets are care-margin deterioration, the elevated short-term debt composition, a high tax burden, and integration execution for newly consolidated subsidiaries..

Metrics to watch include Security segment contract-revenue growth and segment margin, FM segment margin sustainability after the Q1 increase to 11.6%, Care segment profit margin and labor-cost recovery, Quarterly progress against FY2027 operating-income guidance of JPY55.7bn, Operating cash flow relative to EBITDA and normalization of trade receivables and trade payables, Short-term debt ratio, cash/short-term debt, and funding costs, Goodwill balance, goodwill amortization, final purchase-price allocation, and acquired-company earnings contribution, Tax burden and effective tax rate.

Regarding relative positioning, ALSOK presents a defensive, recurring-contract service profile with operating margin at the lower end of the stated good range but with improving profitability, very strong liquidity, and conservative debt capacity. Its annualized ROE of 7.5% remains below the 8% concern threshold, indicating that further margin expansion and/or asset-efficiency improvement would be needed to strengthen shareholder-return quality.