Higher revenue but personnel costs weigh on profit, making recovery in the FY2027-H1 operating margin the focus

FY2027-Q1 revenue was ¥1,461 million, an increase of ¥109 million, or 8.1%, from ¥1,352 million in the same period of the previous year. However, operating profit fell ¥19 million, from ¥230 million to ¥211 million, and the operating margin declined approximately 2.5 percentage points, from approximately 17.0% to 14.5%. The company cited higher labour costs resulting from employee wage improvements as a factor behind the decline in profit. The key change this time is that revenue growth did not translate directly into profit growth.

By revenue category, application services generated ¥1,019 million, up 3.8% year on year, while AMO and SO services generated ¥441 million, up 19.5%. Although revenue by service category was disclosed, operating profit, margins and the increase in labour costs for each category were not. Accordingly, revenue figures alone do not indicate whether the increase in AMO and SO revenue was accompanied by profitability or how much stable application revenue supported profit.

In FY2026, the company secured operating profit of ¥1,021 million and an operating margin of 18.0%, but the former full-year forecast at FY2027-Q1 was operating profit of ¥700 million, a planned decline of 31.5% year on year. Q1 operating profit of ¥211 million represented 30.1% of the former full-year forecast, while revenue of ¥1,461 million represented 25.2% of the full-year revenue forecast of ¥5,800 million. Confirming whether first-half operating profit of ¥350 million and revenue of ¥2,900 million, the simple six-month progress benchmarks, can be exceeded will help measure the pace at which the personnel cost burden is absorbed.

The company also positions investment in human resources and price revisions as prerequisites for growth. It will need to maintain margins not only by containing higher costs but also through price pass-through and an improved service mix. In FY2027-H1, we intend to confirm whether the operating margin returns to 15.0% or higher, whether the increase in labour costs from wage improvements and the revenue increase from price revisions are disclosed, and the difference in profitability between spot projects and recurring maintenance projects. If the margin remains around 14.5%, further confirmation of improved project profitability in the second half will be necessary to assess the profit level following the upward revision to the full-year forecast.