Cash flow and financial covenants are the top priorities in assessing going-concern status

FY2026 full-year revenue was ¥3,152,892 thousand, with an operating loss of ¥1,438,401 thousand, an ordinary loss of ¥1,591,004 thousand and a net loss attributable to owners of the parent of ¥5,135,249 thousand. Interest-bearing debt accounted for 55.4% of total assets, with an outstanding balance of ¥2,780,964 thousand, while operating activities generated a cash outflow of ¥1,104,676 thousand. The simultaneous deterioration in the three areas of losses, debt and operating cash flow provides the starting point for assessing the next results.

In FY2027-Q1, revenue was ¥630,000 thousand, the operating loss was ¥460,000 thousand, the ordinary loss was ¥504,000 thousand and the quarterly net loss was ¥514,000 thousand. Net assets were ¥940,000 thousand and the equity ratio was 14.0%, an improvement on the 4.9% reported for FY2026, but this reflected factors including capital raising rather than profit generation, so it cannot be regarded as evidence that financial soundness has taken hold. The Q1 financial summary does not show the cash and deposits balance, so FY2027-H1 should separately verify cash, short-term borrowings and the breakdown of unpaid liabilities.

The FY2026 full-year disclosure stated that some financial covenants had been breached and that the company was discussing with its lending financial institutions how to avoid losing the benefit of time. Recent news has also reported a ¥109,931 thousand repayment default involving FitFounder, the seizure of deposit receivables and the seizure of ¥38,697 thousand in social insurance premiums. Key items to verify are whether these matters had been resolved by FY2027-H1, whether the outstanding balances, interest or repayment deadlines had changed, and whether any new seizures or notices of loss of benefit of time had occurred.

Whether the planned monetisation through the sale of stores and the sale of subsidiary interests is executed as planned is also directly linked to the cash-flow assumptions. In FY2027-H1, the closing cash balance, operating cash flow, debt balance and equity ratio should be reviewed together with the terms agreed with financial institutions, any disclosure of material uncertainty related to the going-concern assumption, and the receipt status of sale proceeds.