Whether margins recover in FY2027-H1 from a position of higher revenue but lower operating income

FY2027-Q1 revenue was ¥101.163 billion, up 7.1% from ¥94.439 billion in the same period of the previous year. Operating income, however, was ¥3.386 billion, down 8.0% from ¥3.683 billion, indicating that revenue growth has not translated directly into earnings growth. Operating margin was approximately 3.35%, calculated by dividing ¥3.386 billion by ¥101.163 billion, down approximately 0.55 percentage points from approximately 3.90% in the same period of the previous year.

The full-year forecasts are revenue of ¥410.0 billion, operating income of ¥16.8 billion, ordinary income of ¥17.8 billion and net income attributable to owners of the parent of ¥13.5 billion, with no revisions as of the end of Q1. Q1 progress was 24.7% for revenue and 20.2% for operating income, meaning revenue progress exceeded earnings progress by approximately 4.5 percentage points. Revenue was close to the proportion of the year elapsed, while operating income had a somewhat slow start against the full-year plan.

The company cited increased orders for BPO and CX services as the reason for higher revenue in Q1, while explaining that growth investment and the contraction of large global projects were factors behind the decline in earnings. However, it has not disclosed the amount of growth investment, the decline in revenue and earnings resulting from project contraction, or when the benefits of the investment are expected to emerge. It is therefore necessary to assess in conjunction with the H1 margin whether the investment burden will continue in Q2 and whether the impact of project contraction is temporary.

In FY2027-H1, it will be important not only to see the cumulative progress against the full-year revenue forecast of ¥410,000 million, but also whether progress against operating income of ¥16,800 million returns to the same pace as revenue. In particular, whether operating margin recovers from 3.35% to at least 4.0%, and whether the company provides specific disclosure of the impact of growth investment and large-project contraction, will help assess the likelihood of achieving full-year operating income of ¥16.8 billion.