Revenue is up, but margins are narrowing; the focus in Q3 is recovery from the interim period's 8.7%

FY2026-H1 revenue rose 7.7% year on year to ¥11.113 billion, while operating profit fell 17.1% to ¥968 million, ordinary profit fell 16.6% to ¥967 million, and interim net income attributable to owners of the parent fell 17.0% to ¥658 million. Revenue growth did not translate into profit growth, resulting in a typical pattern of higher revenue but lower earnings. Operating profit was ¥1.168 billion and the operating margin was 11.3% in the year-earlier period, compared with an operating margin of 8.7% in the current interim period.

However, the deterioration narrowed on a quarterly basis. Revenue for the Q2 period was ¥6.301 billion, gross profit was ¥2.124 billion, and operating profit was ¥830 million, representing a year-on-year decline of only 4.8%. The operating margin for Q2 alone was 13.2% and the gross profit margin was 33.7%, both above the cumulative operating margin of 8.7% and gross profit margin of 31.6%. First-quarter operating profit was ¥138 million, so Q2 alone generated most of the H1 operating profit of ¥968 million, although it has not yet been confirmed whether the quarterly recovery will be sustained on a cumulative Q3 basis.

The decline in profitability was partly attributable to the cumulative gross profit margin falling 1.5 percentage points year on year. The earnings presentation explained that, although gross profit increased from both existing and new customers, the lower gross profit margin, increased investment in personnel, and growth investments pushed down operating profit. Accordingly, in Q3 it will be necessary to assess not only revenue growth but also the project mix, cost management including outsourcing costs, and the burden of investment separately.

The full-year forecasts remain unchanged at revenue of ¥23.750 billion, operating profit of ¥2.248 billion, and net income attributable to owners of the parent of ¥1.638 billion. H1 progress rates were 46.8% for revenue, 43.1% for operating profit, and 40.2% for net income, leaving ¥1.280 billion still required to achieve the full-year operating profit forecast. In the Q3 release, the focus will be on whether the cumulative operating margin exceeds 8.7%, whether profitability around the 13.2% recorded in Q2 alone continues, and whether the full-year forecasts are revised.