Profit growth stalls despite higher sales, putting earnings recovery to the test in FY2027-H1

In FY2027-Q1, revenue was ¥12,567 million, up ¥629 million, or 5.3%, from ¥11,938 million in the previous year. The company cited the contribution from consolidating JBA Holdings, Knowledge Base and aiQ, as well as increased orders for outsourcing services for earnings support and disclosure document preparation and services for investment trusts. Operating income, however, was ¥3,180 million, up only ¥13 million, or 0.4% year on year, creating a substantial gap with revenue growth.

The operating margin calculated from revenue and operating income declined by approximately 1.2 percentage points, from approximately 26.5% in the previous year to approximately 25.3% in the current quarter. In the most recent interim period, FY2026-H1 revenue was ¥18,421 million, operating income was ¥3,018 million and the operating margin was approximately 16.4%, compared with revenue of ¥17,887 million, operating income of ¥3,163 million and an operating margin of approximately 17.7% in FY2025-H1. Accordingly, it is difficult to conclude that profitability has bottomed based solely on the modest increase in operating income in 1Q.

The company explained that costs related to upgrading its disclosure document preparation support system and higher personnel expenses associated with strengthening the sales organization affected FY2027-Q1 profit, but did not disclose the amount attributable to each factor. At the next results, it will be necessary to check not only the increase in cost of sales and SG&A, but also whether system upgrade costs are one-off or represent development and maintenance costs that will continue. In particular, if costs continue to increase at the same pace despite revenue growth, achieving the full-year operating income forecast of ¥3,000 million cannot be explained by higher sales alone.

For FY2027-H1, practical benchmarks will be whether revenue exceeds the previous year's ¥18,421 million and operating income recovers to ¥3,018 million. We will also check whether the operating margin remains at or above approximately 16.4% in the previous year and the extent to which revenue growth from outsourcing and M&A carries contribution profit, by product category. Due to a higher corporate income tax rate in 1Q, quarterly profit attributable to owners of the parent was ¥2,136 million, down 1.9% year on year, so progress in bottom-line profit, including the tax burden, must also be monitored.