FY27 Q1 revenue and profit declined, but progress toward the full-year plan is broadly on track

FY27 Q1 revenue was ¥1,936 million, down 1.5% year on year; operating profit was ¥419 million, down 7.0%; ordinary profit was ¥454 million, down 3.4%; and quarterly net income attributable to owners of the parent was ¥259 million, down 9.2%. Both revenue and profit were below the year-earlier levels, but operating profit represented 23.3% of the ¥1,796 million full-year forecast and revenue represented 23.7% of the ¥8,174 million forecast, not materially diverging from the 25% elapsed-quarter rate.

Profit margins deteriorated slightly. Revenue was ¥1,936 million and operating profit was ¥419 million, compared with revenue of ¥1,966 million and operating profit of ¥451 million a year earlier, causing the operating margin to decline by approximately 1.3 percentage points, from approximately 22.9% to approximately 21.7%. Going forward, the focus will be not only on whether the revenue decline continues, but also on whether higher personnel costs, system maintenance and security expenses, depreciation and amortisation, and goodwill amortisation can be absorbed through a recovery in revenue and an increase in higher-value projects.

FY26 results were revenue of ¥7,647 million, operating profit of ¥1,673 million and an operating margin of 21.9%. The FY27 company plan calls for revenue of ¥8,174 million, operating profit of ¥1,796 million, ordinary profit of ¥1,834 million and net income attributable to owners of the parent of ¥1,082 million, representing expected year-on-year growth of 6.9% in revenue and 7.4% in operating profit. After Q1, the remaining plan is revenue of ¥6,238 million and operating profit of ¥1,377 million. In FY27 H1, revenue of ¥4,087 million and operating profit of ¥898 million, equivalent to 50% of the full-year plan, will provide one benchmark for assessing progress.

At the next earnings release, we will assess whether cumulative Q2 revenue and operating profit are approaching half of the full-year plan and whether the operating margin can remain around 21.9%. In addition, as the company did not prepare a quarterly cash flow statement for Q1 and did not disclose operating cash flow or the period-end cash balance, it will be important to see whether H1 disclosure covers cash generation, investment spending and financing outlays. Any revision to the full-year forecasts of ¥8,174 million in revenue and ¥1,796 million in operating profit, or to the annual dividend forecast of ¥56, will also help determine whether the weak performance is temporary or structural.