9740.T

Core Full-Year 2026 Results

• Consolidated sales hit an all-time record high, driven by special demand from Takanawa Gateway City security and equipment installation, Osaka-Kansai World Expo temporary security, and M&A of two regional security firms (Nihon Rengo Security Yamanashi, Sowa Bousai Ibaraki). Core operating and ordinary profit grew year-over-year.
• Net profit attributable to parent shareholders fell year-over-year, due to special losses from a litigation settlement and goodwill impairment on the Nihon Rengo Security M&A, partially offset by special gains from land and policy-held share sales.
• Sales to the JR East Group increased year-over-year, and the proportion of group sales from JR East remained roughly flat despite large growth in non-JR business.

New Strategic Initiatives

• Expanded "Kakehashi" unified area management security system implemented at Takanawa Gateway City, with plans to roll out the model to other new development and existing dense urban districts starting from FY2027.
• Formed a capital and business partnership with Safeey Security to develop next-generation mechanical security, combining CSP's existing image monitoring infrastructure and know-how with Safeey's AI camera technology. The partnership will also expand into non-security use cases for AI image analysis to address new customer needs.
• Launched counter-drone product sales targeting high-security facilities including key government sites, foreign missions, defense facilities, airports, and nuclear power plants, with strong customer inbound inquiries.
• Started proactive smart parking business transformation to shift from reactive on-site troubleshooting to integrated end-to-end parking management, moving the business from a labor-intensive model to a platform model and capturing new revenue opportunities as cashless adoption reduces demand for reactive troubleshooting.
• Entered a business partnership with Hokkaido Clean System (a fully-owned JR Hokkaido subsidiary) to combine Hokkaido Clean System's on-site security strength with CSP's system security expertise, expand market reach in the Sapporo area, and implement smart AI/IoT-enabled security drawing on learnings from the Takanawa Gateway City project.
• Upgraded the mobile emergency alert system "Emerje" with added information signal functionality and consumer-friendly design, with an upgraded version expected to launch by mid-2026.
• Expanded the "Mamororu Rail" joint service with railway operators, which shares location information via Suica/PASMO, to cover users over 18 years old in response to customer demand.

Price Adjustment Progress

• In FY2026, CSP held individual price negotiation with 40% of its on-site security customers, and 75% of negotiated customers agreed to price adjustments. The average price increase across adjusted contracts was 4.9%, and negotiations will continue with remaining customers. The company aims to align price levels with rising market wage costs, particularly minimum wage increases.

• For FY2027 (February 2027 end, 55th term), management forecasts total consolidated sales of 78 billion yen, operating profit of 3.5 billion yen, with an expected operating margin of ~4.5%, representing projected year-over-year decrease in both revenue and profit. The decline is entirely driven by the reversal of large one-time special construction demand from Takanawa Gateway City and OIMACHI TRACKS that boosted FY2026 results, which was fully anticipated by management.
• Higher operating costs are expected from mandatory employee wage increases to respond to significant statutory minimum wage hikes, which will also pressure margins in FY2027.
• The planned annual dividend for FY2027 is 61.00 yen per share, up from 60 yen per share in FY2026, with a projected payout ratio of 37.2%. CSP will maintain its policy of stable increasing dividends, combining payout ratio targets with a return on equity (DOE) focus, and has doubled dividends per share over the past 10 years.
• The projected one-time revenue decline in FY2027 is consistent with the medium-term "Omoi 2030" strategic plan, and management will continue to build out new growth areas (including area management, new technology security, and new business lines) to hit long-term plan targets.

All three core segments grew year-over-year and beat management's prior published forecasts:

1. On-site (Stationed) Security: Revenue increased driven by new full-time stationed security at Takanawa Gateway City and temporary event security for the Osaka-Kansai World Expo. Full-year 2027 guidance calls for continued growth from full-year contributions of the newly opened Takanawa Gateway City and OIMACHI TRACKS, plus planned price increases.
2. Mechanical (Electronic) Security: Revenue grew significantly, primarily due to the M&A of Nihon Rengo Security (Yamanashi), a firm with a large mechanical security business that was not included in the original full-year forecast. 2027 guidance projects broadly flat full-year revenue, as a large expiring major contract will offset new growth gains.
3. Construction & Equipment Sales: Revenue exceeded 10 billion yen for the first time in a single year, driven by strong demand for security cameras, access control systems at Takanawa Gateway City and disaster prevention systems from CSP group company CTI Networks. 2027 guidance calls for a sharp revenue decline due to the reversal of the large one-time special demand from the Takanawa Gateway City and OIMACHI TRACKS construction projects. No explicit revenue contribution percentages per segment were provided in the transcript.

• Litigation related to a historical arson incident committed by a former CSP employee at Kyosan Manufacturing: a 3.5 billion yen damage claim was settled in February 2026 for a 450 million yen settlement payment recorded as a special loss in FY2026. Two additional related claims from insurance companies remained pending as of the April 2026 earnings call, with a settlement reached with one insurer (Aioi Nissay Dowa Insurance) for 400 million yen the day after the call.
• Goodwill impairment of 1.331 billion yen was recorded for Nihon Rengo Security (Yamanashi), acquired in FY2025, as business performance is projected to fall below original acquisition forecasts due to changes in the operating environment post-acquisition.
• M&A integration risk: while Nihon Rengo Security has completed almost full customer and employee transition, continued underperformance could lead to additional losses in future periods.
• Wage cost inflation: large statutory minimum wage increases require mandatory wage hikes that increase operating costs, and failure to fully pass through these costs via price adjustments could pressure margins.

Q: Why is operating profit percentage lower in FY2026 compared to FY2025, what explains the decline, and why is the FY2027 profit percentage forecast even lower? / A: The FY2026 slight margin decline came from one-time cost increases tied to M&A integration and wage inflation, while the projected lower margin for FY2027 is fully expected. It stems from two main factors: the reversal of large high-margin one-time construction special demand in FY2026, and higher operating costs from upcoming mandatory wage increases to meet higher minimum wage standards. The decline is temporary and not a sign of underlying weakening in CSP's core business.

Q: What is CSP's M&A strategy and future policy for acquisitions? / A: CSP's core M&A goal is to expand its national Central Security League network by partnering with established regional security firms that already have existing working relationships with CSP. The company prioritizes acquisitions of firms with a track record of consistent stable profits, to add geographic coverage and grow the group's overall scale. M&A will remain a key strategic focus going forward, even after the goodwill impairment recorded for the Yamanashi acquisition.

Q: Is the projected 1 billion yen revenue decline for FY2027 aligned with the medium-term strategic plan, and how will CSP get back on track for long-term growth? / A: The projected decline is fully in line with the medium-term plan, because management always expected a revenue drop after the large one-time special demand in FY2026 from Takanawa Gateway City and the Osaka World Expo. The key long-term gain from the past year is the successful implementation of the new Kakehashi area management model at Takanawa Gateway City. CSP will continue expanding this model and rolling out its new strategic initiatives one by one to build the base for long-term growth in line with the "Omoi 2030" plan.