FY2027 H1 focus: Q2 recovery from Q1's low progress

FY2027 Q1 revenue was ¥5,048 million, down 8.0% year on year, while operating profit was ¥204 million, down 55.8%. The full-year forecasts remain unchanged at revenue of ¥21,100 million and operating profit of ¥1,500 million, putting Q1 progress at 23.9% for revenue and 13.6% for operating profit. Revenue was close to a simple quarter of the full-year figure, while profit progress was substantially lower, making a recovery in the first half necessary.

Assuming, mechanically, that the full-year forecast is earned evenly between the first and second halves, the H1 benchmarks are revenue of ¥10,550 million and operating profit of ¥750 million. Based on Q1 results, the required Q2 amounts are revenue of ¥5,502 million and operating profit of ¥546 million. For operating profit, this means generating approximately 2.7 times Q1's ¥204 million in Q2 alone. As these are not official half-year forecasts provided by the company, the actual results should be assessed against the relationship between cumulative results and the full-year forecasts, as well as any forecast revisions.

Revenue by business was ¥2,331 million for the HULFT business, ¥597 million for the data platform business and ¥2,118 million for the systems contracting business. The data platform business increased 23.1% year on year, but the HULFT business declined 5.7% and the systems contracting business declined 16.1%. The 2 businesses with the larger declines account for most of company-wide revenue. Segment profit was ¥955 million for the HULFT business, a loss of ¥777 million for the data platform business and ¥27 million for the systems contracting business. Improvement in the profit mix, not just a recovery in revenue, will therefore be necessary.

Next time, in addition to determining whether standalone Q2 revenue of ¥5,502 million and operating profit of ¥546 million can be exceeded, we will assess whether the basis for maintaining the full-year forecasts is the timing of project recognition or a plan weighted toward the second half. In particular, if cumulative H1 operating profit falls short of ¥750 million, explanations of the assumptions underpinning the full-year profit forecast and the timing of expenses will be important, not just the revenue progress rate.