First-quarter revenue rose, but the operating loss widened; meeting the full-year earnings plan is the next focus

FY2027-Q1 revenue rose 14.0% year on year to ¥2,329 million, but progress against the ¥12,200 million full-year forecast was only 19.1%. This is 5.9 percentage points below the assumption of a simple 25% contribution from each quarter. However, the company has previously explained that revenue tends to be weighted toward the second and fourth quarters because of factors such as capital expenditure budgets at large companies. Rather than judging full-year performance based on a single quarter, it is necessary to monitor whether the order backlog converts into revenue in FY2027-H1.

On the earnings side, the operating loss widened from ¥8 million in the prior-year quarter to ¥98 million. The operating margin calculated against revenue deteriorated from approximately -0.4% to approximately -4.2%, a decline of about 3.8 percentage points. The operating margin for the previous full year was 5.2%, indicating that the benefits of price pass-through and high-margin projects achieved in FY2026 have not yet been fully repeated in FY2027-Q1. The ordinary loss was ¥28 million, while the net loss attributable to owners of the parent was ¥38 million, leaving all three levels—operating, ordinary and net income—in the red.

The company cited higher material prices resulting from geopolitical risks, higher purchase prices for imported products due to the weaker yen, human capital investment, head office relocation costs and M&A-related advisory fees as factors behind the decline in earnings. One-time costs, including head office relocation and M&A-related expenses, have been quantified at approximately ¥65 million, but the increases in material costs, imported purchase prices and human capital investment have not been disclosed separately. Foreign exchange gains of ¥66 million reduced the ordinary loss, while derivative valuation losses of ¥6 million were also recorded. Operating loss improvement therefore needs to be considered separately from improvement in ordinary earnings.

Using a simple half-year benchmark for FY2027-H1, revenue would be ¥6,100 million and operating profit ¥331 million. Starting from the FY2027-Q1 operating loss of ¥98 million, the company would need operating profit of ¥429 million in Q2 alone to reach cumulative first-half operating profit of ¥331 million. Even allowing for seasonality, this appears demanding. At the next results announcement, the reliability of the ¥662 million full-year operating profit forecast will depend on whether the company can disclose not only revenue progress but also the gross margin, SG&A expenses, human capital investment, remaining head office relocation and M&A costs, and the amount of price pass-through achieved.