FY2027 fiscal-year operating breakeven remains dependent on the second half as of Q1

FY2027-Q1 revenue was ¥619 million, down ¥36 million, or 5.4%, from ¥655 million in the year-earlier period. Meanwhile, the operating loss narrowed by ¥21 million, from ¥113 million to ¥92 million, meaning that revenue declined while the operating loss narrowed. On an approximate basis, the operating margin improved from approximately negative 17.3% in the year-earlier period to approximately negative 14.9% in the current period, indicating that profitability deteriorated less than revenue in the short term.

However, the full-year forecasts are revenue of ¥3,032 million and operating profit of ¥122 million, while revenue had reached only approximately 20.4% of the full-year forecast as of Q1. Since the company posted an operating loss of ¥92 million at the Q1 stage, it is significantly behind the full-year plan on a simple progress-rate comparison. Achieving full-year operating profitability will require the company to halt the decline in student numbers in its education and sports businesses or reverse the Q1 loss structure in the second half through fixed-cost reductions and the effects of withdrawing from businesses.

In FY2026-H1, revenue was ¥1,426 million and the operating loss was ¥50 million. The first test in FY2027-H1 will be whether the company can at least maintain or exceed this revenue level and whether the operating loss narrows year on year. The company has provided a full-year forecast, but has not disclosed the revenue and profit allocation between H1 and H2 or the amounts attributable to specific measures underpinning the return to profitability. Accordingly, the feasibility of the full-year forecast will vary significantly depending on the size of the loss remaining in H1.

The explanation for the deterioration in performance cites pressure on real incomes from rising prices, consumers’ cost-consciousness and stagnation in the cram-school market due to the declining birthrate. These factors may not be resolved in the short term, and the company’s explanation focuses on external conditions without quantifying the contributions from price revisions, new enrollments, withdrawal rates or fixed-cost reductions at individual schools. In FY2027-H1, in addition to revenue and operating results, it will be necessary to assess whether average student numbers, profitability improvements by business and costs associated with the withdrawal from the food-service business are consistent with the assumptions underlying a return to full-year operating profitability.