Whether the first-quarter operating margin of 11% can be replicated for the first half

First-quarter revenue was ¥19,539 million, up 6.4% year on year, operating profit was ¥2,156 million, up 20.9%, ordinary profit was ¥2,201 million, up 16.6%, and net profit attributable to owners of the parent was ¥1,381 million, up 9.6%. The operating margin was 11.0% and the gross margin was 33.4%, representing year-on-year improvements of 1.3 percentage points and 0.6 percentage points, respectively.

By source of profit improvement, Information Solutions revenue was ¥19,074 million and gross profit was ¥6,314 million, up 7.4% and 10.4%, respectively. Services revenue was ¥11,623 million and gross profit was ¥3,917 million; gross profit growth of 21.6% exceeded revenue growth of 13.4%. SI revenue was ¥4,573 million, gross profit was ¥1,713 million and the gross margin was 37.5%, with the mix of high-value-added areas lifting the overall margin.

The full-year forecasts remain revenue of ¥79,500 million, operating profit of ¥8,745 million, ordinary profit of ¥8,845 million and net profit of ¥6,045 million. First-quarter progress was 24.6% for revenue and 24.7% for operating profit, broadly in line with the simple quarterly benchmark of 25%. However, the company has not quantified quarterly seasonality or the allocation of profit between the first and second halves, so simply comparing first-half results with 50% of the full-year forecasts will be insufficient.

The first quarter included a ¥260 million gain on the sale of investment securities, an ¥83 million impairment loss and a ¥172 million special retirement payment as non-operating and extraordinary items. The improvement in operating profit indicates better profitability in the core business, while net profit growth of 9.6% was below operating profit growth of 20.9%. At the next results announcement, it will be important to confirm the standalone second-quarter operating and gross margins, whether profit growth excluding extraordinary gains and losses continues, and whether high-margin Services and SI projects represent a temporary concentration of completions.