ALSOK CO.,LTD. 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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