Revenue growth is not translating into operating profit growth, making Q4 the focus for achieving the FY2026 full-year targets

Revenue for the nine months was ¥5,498 million, up 22.1% from ¥4,503.834 million in the year-ago period. However, operating profit was ¥396 million, almost unchanged from ¥396.756 million a year earlier. Operating profit has not increased in line with revenue growth, making whether growth this fiscal year is accompanied by profit growth the key issue for the full-year results.

The operating margin calculated from these figures declined by approximately 1.6 percentage points, from approximately 8.8% in the year-ago period to approximately 7.2% this period. The company says that higher amortisation of goodwill and other costs associated with M&A pushed down operating profit, but it has not disclosed the amounts attributable to goodwill amortisation, PMI costs or cost savings from bringing activities in-house. At the next results announcement, it will be necessary to confirm which services or subsidiaries generated the ¥995 million increase in revenue and the extent to which it was offset at the profit level.

Progress against the full-year forecasts was approximately 70.5% for revenue, 89.1% for operating profit, 109.4% for ordinary profit and 95.6% for net profit attributable to owners of the parent. To reach the full-year forecasts, the company needs approximately ¥2,302 million in revenue and approximately ¥48 million in operating profit in Q4. As ordinary profit already exceeds the forecast, the company needs to sustain the additional profit, while approximately ¥12 million in net profit is required. The previous fiscal year's Q4 revenue was approximately ¥1,599 million, calculated by subtracting ¥4,503.834 million for the nine months from full-year revenue of ¥6,103 million. Revenue in this fiscal year's Q4 therefore needs to exceed the year-ago level.

At the second-quarter results, the full-year forecasts were revised to ¥7,800 million in revenue, ¥445 million in operating profit, ¥425 million in ordinary profit and ¥270 million in net profit, and these forecasts were maintained at the third-quarter results. The forecast full-year operating margin is approximately 5.7%, below the approximately 7.2% achieved for the nine months, suggesting that the forecast incorporates seasonality and expenses expected to be recorded in Q4. However, the company has not disclosed standalone Q4 revenue and profit plans or service-by-service outlooks. At the full-year results, we will closely track the sustainability of revenue growth, recovery in the operating margin, whether goodwill amortisation and other costs are temporary, and whether the forecasts are revised.