Revenue is tracking to plan, but operating profit is materially behind schedule

Revenue in Q1 of the fiscal year ending March 2027 was ¥40,310 million, up 1.4% from ¥39,745 million in the same period a year earlier. Operating profit, however, fell 51.9% from ¥3,269 million to ¥1,572 million. The operating margin declined by approximately 4.3 percentage points, from approximately 8.2% in the year-earlier period to approximately 3.9%, indicating that higher revenue has not translated directly into profit. The key point to monitor in FY2027-H1 will be whether this changes.

The full-year forecasts are revenue of ¥162,000 million, operating profit of ¥10,000 million, ordinary profit of ¥13,500 million, and net income attributable to owners of the parent of ¥9,000 million. Q1 progress was 24.9% for revenue, compared with 15.7% for operating profit, 20.8% for ordinary profit, and 34.1% for net income. Revenue is close to a simple quarterly allocation, while operating profit is clearly behind. If 50% of the full-year forecast is used as a simple half-year benchmark, FY2027-H1 revenue of ¥81,000 million and operating profit of ¥5,000 million provide comparison points. However, the company has not explicitly stated these as half-year targets, so seasonality must also be taken into account.

The company attributed the decline in operating profit to a decrease in underlying revenue excluding foreign-exchange effects, temporary cost increases resulting from the review and standardisation of accounting policies and changes in accounting treatment following the integration in April, and increases in various expenses. However, it has not disclosed an operating-profit bridge breaking down the foreign-exchange impact, the decrease in underlying revenue, total integration-related temporary costs, and other expense increases. It is therefore not yet possible to determine whether the low Q1 margin reflects a temporary integration burden or persistent factors including weaker demand and higher costs.

In FY2027-H1, the focus will be not only on whether operating profit reaches ¥5,000 million, but also on how far the margin recovers relative to revenue growth. If the margin fails to improve from approximately 3.9% in Q1 and the gap with the approximately 6.2% margin implied by the full-year forecast remains, achieving full-year operating profit of ¥10,000 million will place a disproportionate burden on the second half. Conversely, if revenue progress remains broadly on plan and the operating margin returns to around 6%, the possibility increases that the impact of the temporary expenses identified by the company is beginning to fade.