Q1 turned profitable, but profit is slightly behind the full-year plan

Consolidated revenue in Q1 was ¥16,405 million, up 5.4% year on year, while operating profit turned around from a ¥280 million loss in the same quarter of the previous year to a ¥361 million profit. Ordinary profit likewise turned around from a ¥518 million loss to a ¥162 million profit, and profit attributable to owners of the parent was ¥74 million, up 47.4% year on year. The fact that all stages of the income statement returned to profitability is positive, but the operating margin on revenue was only approximately 2.2% based on the calculation.

The full-year forecasts are revenue of ¥68,000 million, operating profit of ¥1,800 million, ordinary profit of ¥900 million and net profit of ¥500 million. On a simple assumption of equal performance across the two half-years, the H1 benchmarks would be ¥34,000 million, ¥900 million, ¥450 million and ¥250 million, respectively. Actual performance is affected by sports club membership trends and seasonality, so the 50% benchmark cannot be treated as the company’s target. However, as of Q1, operating profit was 20.1% of the full-year forecast versus revenue at 24.1%, meaning profit was approximately 4.0 percentage points behind revenue and requires monitoring.

The company cited higher membership fees following price revisions, steady new-member enrollment and the consolidation and acquisition of a care rehabilitation business as factors behind Q1 revenue growth. Personnel expenses increased, however, and profit improvement depended not only on revenue growth but also on selective capital investment and controls on utilities costs. In H1, it will be important to determine from segment profit and expense breakdowns whether the company can maintain operating profitability in Q2 alone and whether the effect of price revisions is translating into sustained gross profit and operating profit.

Although the company stated that it revised its interim forecasts in the Q1 results, the specific amounts and revision rates for revenue, operating profit, ordinary profit and net profit before and after the revision were not disclosed. Accordingly, in the H1 results, it will be important to check not only actual performance but also progress against the revised interim forecasts, whether the full-year forecasts were maintained or revised again, and the feasibility of generating ¥1,439 million in operating profit in H2.