Revenue growth, but lower margins; cost absorption is the focus for FY2026

Revenue in 1H FY2026 was ¥7,248.775 million, up 16.1% year on year, operating profit was ¥1,520.406 million, up 2.9%, and ordinary profit was ¥1,506.306 million, up 1.4%. By contrast, interim net profit attributable to owners of the parent was ¥832.572 million, down 4.4%. The operating margin was approximately 21.0%, indicating that operating profit growth was limited relative to revenue growth.

Compared with the previous year, revenue increased from ¥6,246.237 million in 1H FY2025 and operating profit from ¥1,477.570 million. While the increase in revenue was ¥1,002.538 million, the increase in operating profit was only ¥42.836 million. The operating margin also declined from approximately 23.7% in 1H FY2025 to approximately 21.0%. Compared with FY2025 full-year revenue of ¥13,269.538 million and operating profit of ¥3,102.587 million, maintaining margins remains a challenge during the growth phase.

One factor behind final profit growing more slowly than operating profit was total income taxes of ¥673.428 million in 1H FY2026, up 9.7% year on year. A profit bridge needs to cover not only operating and ordinary profit, but also below-operating-profit and post-tax factors, including the tax burden, allowance for doubtful accounts, personnel costs and amortisation of goodwill related to acquisitions. Since the accounts report a single segment, it is difficult to determine from the financial statements alone which services generated marginal profit and which costs constrained earnings growth.

At the next results announcement, we will assess not only the revenue growth rate, but also whether the operating margin remained near 21% and how much the approximately 2.7-percentage-point decline from 1H FY2025 was narrowed. We will also track whether the increase in income taxes was temporary, whether increases in the allowance for doubtful accounts, personnel costs and goodwill amortisation continued, and whether service-level revenue growth led to margin improvement, including whether the company provides a breakdown by factor.