1Q: Profit growth leads; will high margins persist in H1?

In the first quarter of the fiscal year ending March 2027, revenue was ¥1,269 million, operating profit was ¥206 million, ordinary profit was ¥208 million, and profit attributable to owners of the parent was ¥137 million. Revenue increased 2.5% year on year, while operating profit rose 77.0%, ordinary profit 74.5%, and net profit 193.7%, representing profit improvement well above the increase in revenue. The operating margin calculated from revenue and operating profit rose by approximately 6.8 percentage points, from approximately 9.4% in the same quarter of the previous year to 16.2%.

The full-year forecast remains unchanged at revenue of ¥5,096 million, operating profit of ¥480 million, ordinary profit of ¥491 million, and net profit of ¥320 million. 1Q progress was 24.9% for revenue, compared with 42.9% for operating profit, 42.2% for ordinary profit, and 43.0% for net profit, indicating that profit progress is clearly ahead of revenue progress. However, this comparison assumes a simple quarterly allocation, and the timing of real estate sales and fee revenue varies. In H1, it will therefore be necessary to check not only the progress percentages, but also the cumulative first-half margins and the profit required in the second half.

The composition of the margin improvement also requires attention. The 1Q gross profit margin declined by 0.2 percentage points year on year to 97.1%, while SG&A expenses were ¥1,026 million and SG&A as a percentage of revenue was 80.9%. The company explained that personnel expenses, rent, goodwill amortization, and amortization of customer-related assets declined following the sale of its walk-in insurance shop business, which reduced SG&A expenses. Thus, the entire improvement cannot necessarily be regarded as a permanent gain from higher productivity in the sales organization. Operating profit is forecast to decline 23.0%, from ¥623.948 million in FY2026 to ¥480 million in FY2027, so the 1Q operating margin of 16.2% is not assumed to be maintained throughout the year.

In H1, we will check whether operating profit exceeds the simple half-year benchmark of ¥240 million and the extent to which the operating margin exceeds the full-year forecast of 9.4%. The company also did not prepare a quarterly consolidated cash flow statement for 1Q, and cash flow from operating activities was not disclosed. Key issues for additional review at the next results announcement will be whether the early profit progress is accompanied by cash generation, whether the SG&A reduction reflects the disappearance of one-off expenses, and the level of underlying earnings power excluding changes in fee structures and the timing of real estate sales.