How much of the sharp decline in profit in Q1 can be recovered in Q2

FY2027-Q1 revenue was ¥7,937 million, down 11.8% year on year, while operating profit was ¥271 million, down 81.0%. The operating margin fell to approximately 3.4%, a significant deterioration from revenue of ¥9,004 million and operating profit of ¥1,426 million in the same quarter of the previous year. Ordinary profit was ¥372 million and net profit was ¥243 million for the quarter, indicating declines beyond operating profit.

The decline in revenue and profit was not simply the result of weaker demand. The earnings presentation explained that the senior development business sold 2 large real estate projects in the same quarter of the previous year, compared with 1 sale in the current period, making this a factor behind the decline in real estate revenue. In the senior business, initial costs associated with opening 2 new assisted-living homes also weighed on profit. Q1 segment revenue was ¥4,240 million for the senior business and ¥3,746 million for the real estate business, while segment profit was ¥324 million and ¥467 million, respectively.

The company maintained its FY2027 full-year forecasts of revenue of ¥27,941 million, operating profit of ¥1,677 million, ordinary profit of ¥1,778 million and net profit of ¥1,307 million. At the end of Q1, progress was 28.4% for revenue, 16.2% for operating profit, 20.9% for ordinary profit and 18.6% for net profit. Over the remaining 3 quarters, the company needs to generate an additional ¥20,003 million in revenue and ¥1,406 million in operating profit. On a mechanical first-half 50% basis, whether cumulative Q2 operating profit can reach ¥838.5 million will be one point of verification.

Next time, we will check whether operating profit in Q2 alone recovers to at least approximately ¥568 million, whether the number of real estate sales and margins recover, and whether the initial cost burden from new homes declines. The company did not prepare a quarterly cash flow statement for Q1, so it is not yet possible to verify whether the recovery in profit translated into operating cash flow.