Flat first-quarter sales and lower margins; absorbing the investment burden is the focus for the first half

First-quarter sales were ¥9,652 million, down ¥20 million, or 0.2%, from ¥9,672 million in the same period last year. Operating profit fell by ¥196 million, from ¥1,009 million to ¥812 million, representing a 19.5% decline. The operating margin fell 2.0 percentage points, from approximately 10.4% in the same period last year to 8.4%, indicating that the issue in the quarter was profit conversion rather than a change in sales scale.

Gross margin improved by 0.3 percentage points year on year to 27.0%. The decline in first-quarter profit was therefore driven less by gross-margin deterioration than by higher SG&A expenses. The earnings presentation cited base-pay increases, which return value to employees, and strategic investment to develop and secure talent, and showed SG&A of ¥1,792 million, including ¥20 million in higher personnel expenses and ¥196 million in other SG&A. The interim results should clarify, by expense category and amount, whether these were temporary upfront investments or a continuing structural increase in fixed costs.

The full-year forecast remains unchanged from the previous forecast at sales of ¥42,000 million, operating profit of ¥4,500 million, ordinary profit of ¥4,550 million, profit attributable to owners of the parent of ¥3,000 million and EBITDA of ¥4,850 million. First-quarter progress was 23.0% for sales, 18.0% for operating profit and 16.8% for net profit, meaning profit was progressing more slowly than sales against 25% of the year elapsed. However, quarterly seasonality and the timing of project recognition have not been disclosed, so the simple 50% benchmark is only a reference point.

The company did not prepare a quarterly consolidated cash flow statement for Q1, and operating cash flow was not disclosed. In FY2027-H1, it will be necessary to monitor not only profit recovery but also cumulative profit against the full-year operating profit forecast of ¥4,500 million, the increase in SG&A, and whether operating cash flow is disclosed.