Revenue growth is squeezing margins; the focus is on a recovery in H1

Q1 revenue was ¥5,796 million, up 23.0% year on year, while operating profit was ¥900 million, down 7.4%, ordinary profit was ¥887 million, down 7.1%, and net income attributable to owners of the parent was ¥525 million, down 21.0%. The operating margin was approximately 15.5%, down 5.1 percentage points from approximately 20.6% in the year-earlier period. Revenue growth did not translate directly into profit growth, making the trend in the operating margin the first issue to monitor in FY2027-H1.

Meanwhile, the earnings presentation stated that Q1 revenue was 2.5% above plan and operating profit was 20.4% above plan. Thus, two assessments coexist: profit declined year on year but exceeded the company’s internal plan. The company cited expansion into new locations, stronger sales efforts in the Tokyo metropolitan area, and sales contributed by K-net株式会社 as revenue growth drivers, while stating that strategic investment, credit-related costs associated with the expansion in contract volume, and higher administrative fees charged to real estate companies weighed on operating profit. However, the impact of these cost factors on consolidated operating profit was not disclosed.

The full-year forecasts remain revenue of ¥24,859 million, operating profit of ¥3,856 million, ordinary profit of ¥3,825 million, and net income of ¥2,522 million, with no revision as of Q1. On a simple calculation, Q1 revenue and operating profit each represented approximately 23.3% of the full-year plan, but the earnings presentation did not provide an official cumulative 2Q progress rate or the profit required in H1. Simply subtracting Q1 results from the full-year forecasts leaves required revenue of ¥19,063 million and operating profit of ¥2,956 million for the remainder of the year, but these are merely mechanical differences for monitoring progress, not the company’s H1 plan.

In FY2027-H1, it will be necessary to monitor not only whether revenue growth is sustained, but also whether the operating margin recovers from 15.5%, or whether continued increases in strategic investment and credit-related costs lead to a further year-on-year decline in profit. In particular, it will be important to determine whether the benefit from lower-than-planned personnel and other expenses, including the review of advertising expenses and litigation-related costs, continued through cumulative 2Q or was limited to a temporary effect.