1430.T

Recent Period Operational Performance

• The 2026 May Fiscal Year second quarter is in-line with internal plans, despite year-over-year declines driven by large favorable prior period items in the real estate segment. The company's construction gross margin has recovered strongly following years of downward pressure from rising material and general prices.

Innovation2024 Previous Plan Results

• Innovation2024 was a 3-year plan with 2025 May Fiscal Year as the first year. Both total revenue and profit exceeded plan significantly: construction completed construction volume hit 22.6 billion yen against a 19.7 billion yen plan, though rising construction costs pushed margin lower, while real estate revenue was 5.8 billion yen above plan driven by large project sales, leading to all bottom-line profit metrics coming in far above plan.

First VISION 2031 Mid-Long Term Vision Overview

• The vision targets reaching 100 billion yen in revenue by 2031 May Fiscal Year (the company's 20th founding anniversary), split into two 3-year phases: Phase 1 (current period through 3 years from now) focuses on consolidating foundations and achieving 50 billion yen in revenue with 3.5 billion yen in operating profit and a 7% operating margin; Phase 2 focuses on growth and targets 100 billion yen in revenue with an 8%+ operating margin. The vision centers on "Evolution" and "Leap" as core keywords.

Phase 1 Growth Investment Priorities: Human Capital

• The company targets a 300+ employee headcount by 2031 to support 100 billion yen in revenue, with hiring and headcount growth at both head office and construction sites. Key initiatives include:
  • Hiring: Target 30+ new graduate hires per year, up from single-digit annual hires in recent years; 15 new graduates are scheduled to join in April 2026. The company also conducts career hiring for both experienced roles and development track positions. Average employee compensation is 2.2 million yen higher than industry peers as of 2025, up 34.5% from 2018 levels, supporting strong hiring feasibility.
  • Retention and Development: Target reducing voluntary turnover to 5.5%, with targeted training for general skills (by seniority and level) and role-specific skills for construction and real estate operations, with a focus on creating growth environments for younger employees.
  • New 4K Work Environment Reform: Aligns with the Japanese Ministry of Land, Infrastructure, Transport and Tourism's construction industry work style reform initiative, with the company's own 4 pillars: 1) High compensation: New graduate entry-level annual compensation for construction management roles reaches 5.16 million yen including housing allowance, plus additional allowances, making it highly competitive for young workers; 2) Guaranteed time off: All construction sites follow a 4-day off per 8-week schedule, and the company achieved a 36.6% reduction in overtime hours from 2023 to 2024; 3) Clear future prospects: Robust support for professional certifications to help employees build long-term careers; 4) Attractive workplaces: The Construction Director Group drives DX and system adoption to reduce manual work, and strict site organization creates clean, comfortable working environments.

Phase 1 Business Promotion Priorities: Profitability and Growth

• Expand the company's proprietary "zōchū method" (providing land + construction plans to developers, then securing the construction contract): this model eliminates competitive bidding, allows for high-margin sole-source awards, and improves operational efficiency. Increase the share of joint venture projects for condominium sales with developer partners to capture additional profit opportunities.
• Diversify construction types: Currently 91% of construction revenue comes from condominium projects; the company will expand into other residential and non-residential types (including hotels) by 2031 to reduce concentration risk.
• Strengthen quality and safety management: Third-party audits for core structural elements (ready-mix concrete, piles, rebar) are conducted at the company's expense to enforce strict quality standards, and a dedicated internal department conducts regular safety patrols at all sites. The company's strong quality reputation drives consistent repeat orders from developers.
• Drive operational efficiency: The dedicated Construction Director Group works to streamline business processes and implement DX, which has already substantially reduced overtime for field staff and improved work-life balance.
• Pursue urban redevelopment projects: Leverage the combination of construction and real estate segments to lead overall planning as project developer and also handle construction, enabling full lifecycle participation and supporting community revitalization.
  • Expand in-house development: Gradually grow the portfolio of in-house developed newly built rental condominiums, held as long-term inventory for future monetization.

Sustainability and Shareholder Return

• Sustainability strategy focuses on human capital targets, including increasing professional certification rates and reducing turnover to improve employee retention.
• Cash allocation in Phase 1 will use operating cash flow and external financing to fund human capital investment and real estate investment for Phase 2, while continuing to maximize shareholder returns. The company has maintained a 30%+ dividend payout ratio, will maintain 30% as a lower bound going forward, and is targeting an increase to a 40% payout ratio as a medium-term goal.

• Full-year 2026 May Fiscal Year guidance is maintained at 40 billion yen in total revenue and 2.8 billion yen in operating profit. Second quarter progress rates are 38.1% for revenue and 34.8% for operating profit, which the company considers on schedule, and no changes to full-year targets are planned.
• First VISION 2031 Phase 1 (first 3 years of the plan, including the current fiscal year) guidance: target 50 billion yen in revenue, 3.5 billion yen in operating profit, 7% operating profit margin, with an approximate 50/50 revenue split between construction and real estate segments.
• First VISION 2031 Phase 2 (final 3 years of the plan, ending 2031 May Fiscal Year) guidance: target 100 billion yen in total revenue and an operating profit margin of 8% or higher.

Construction Segment: Completed construction volume increased year-over-year in the second quarter. Gross margin on completed construction recovered significantly from 6.9% in the prior year period to 11.9% in the current period. The improvement comes from the completion of projects where price pass-through was difficult, and new orders are now secured at appropriate prices. Completed construction volume has grown steadily over the past 5 years as construction capacity expanded. Real Estate Segment: 3 property sales were completed in the second quarter, with sales volume tracking steadily. 7 land acquisitions (including contracted purchases) were completed, most of which are condominium development sites expected to be sold in the second half of this fiscal year or subsequent fiscal years. The current reporting period's total consolidated revenue was 15.258 billion yen, operating profit was 0.973 billion yen, and net profit attributable to parent shareholders was 0.615 billion yen, all down year-over-year due to large positive prior period items: a large joint venture completion in the prior year first quarter and a large land sale in the prior year second quarter. For Phase 1 of First VISION 2031, the target revenue split is approximately 50% construction and 50% real estate.

• The construction industry faces persistent industry-wide labor shortages, which has forced First Corporation to turn down 12 projects totaling more than 3 billion yen in revenue year-to-date in the current fiscal year, exceeding the 2.66 billion yen in turned-down projects in the entire prior fiscal year. This unmet demand is the core driver of the company's aggressive human capital investment plan.
• Construction costs remain elevated due to persistent high inflation and yen depreciation, and are expected to continue an upward trend in the future. Urban real estate prices are also rising, increasing land acquisition costs for the real estate segment.
• The company faces ongoing difficulty passing through higher construction material and input costs to customers on legacy fixed-price projects, though this headwind has largely resolved as these legacy projects are completed and new projects are secured at appropriate market prices.

No question and answer section was included in the provided transcript.