FY27-Q1: Profit margin fell sharply due to TOB-related costs despite revenue growth

FY27-Q1 revenue rose 17.0% year on year to ¥25,700 million, but operating profit fell 5.6% to ¥6,884 million. Compared with revenue of ¥21,958 million and operating profit of ¥7,288 million in the same quarter of the previous year, revenue increased by ¥3,742 million, while operating profit declined by ¥404 million. On a simple calculation, the operating margin fell 6.4 percentage points, from approximately 33.2% in the same quarter of the previous year to approximately 26.8%.

The company attributed the decline in operating profit to an increase in one-off professional fees paid to financial advisers, lawyers and others in connection with the TOB, despite higher profit in each segment. However, the first-quarter results do not separately disclose the amount of these one-off costs or their impact on other operating expenses. The four segments generated a simple combined profit of ¥9,916 million, compared with consolidated operating profit of ¥6,884 million, but the segment table alone does not show the breakdown of the ¥3,032 million difference.

In FY26, revenue was ¥94,127 million, operating profit was ¥27,243 million and the operating margin was 28.9%. Although revenue growth continued in FY27-Q1, the operating margin was below the full-year result, indicating that growth investment and one-off costs continue to outweigh the benefit of higher revenue. At the next results announcement, key points will be adjusted operating profit excluding TOB-related costs, the expense categories in which those costs were recorded, and comparisons with the same quarter of the previous year and the preceding quarter.

In particular, for FY27-H1, it will be necessary to determine whether TOB-related costs will also arise in the second quarter and whether the operating margin will recover to around 28.9% as one-off costs peak and decline. Even if the company does not clearly separate one-off costs, it will be necessary to track changes in professional fees, commissions paid and other expenses within operating expenses, distinguishing the profit contribution from revenue growth from the downward pressure caused by exceptional factors.