Revenue is growing faster than profit, making the first half a test of the recovery in profitability

Revenue in Q1 FY2027 was ¥7,431 million, up 7.0% year on year, while operating profit was ¥540 million, down 10.1%, ordinary profit was ¥540 million, down 11.6%, and net profit attributable to owners of the parent was ¥390 million, down 11.6%. The operating margin was not disclosed directly in the quarterly report, but dividing operating profit of ¥540 million by revenue of ¥7,431 million gives approximately 7.3%, showing that revenue growth did not translate directly into profit growth.

In the previous-year quarter, revenue was ¥6,940 million and operating profit was ¥601 million, implying an operating margin of approximately 8.7%. The latest operating margin was therefore approximately 1.4 percentage points lower. The company cited higher personnel, training and advertising expenses associated with new-graduate recruitment as the reasons for the lower margin, but did not disclose the increase by expense category or a bridge showing how many millions of yen each item reduced operating profit. In the first half, it will be necessary to determine whether recruitment-related expenses are a temporary start-up burden or fixed costs that will continue into the second half and beyond.

For full-year FY2026, revenue was ¥29,083 million, operating profit was ¥3,470 million and the operating margin was 11.9%, up from 11.5% in the previous fiscal year. The company attributed the earlier margin improvement to a shift toward highly profitable projects and thorough project-risk management through PRM activities. The key issues are whether those profitability improvements continue in FY2027 and how much the front-loaded costs in Q1 offset them.

The full-year forecasts remain ¥32,276 million in revenue and ¥3,850 million in operating profit, with no revision to the earnings outlook as of Q1. Simply allocating half of the annual forecasts gives first-half reference figures of ¥16,138 million in revenue and ¥1,925 million in operating profit. These are not half-year forecasts provided by the company, however, so the analysis should focus on cumulative first-half results, the operating margin and the breakdown of higher expenses without assuming seasonality. In particular, the extent to which operating profit recovers from ¥540 million in Q1 and whether the margin can exceed the previous-year level of approximately 8.7% will be key to assessing the achievability of the full-year forecast of ¥3,850 million.