Revenue growth but an operating loss: Q3 focus shifts to moving beyond one-off net profit

Consolidated revenue for the first half was ¥466 million, up 4.8% from ¥444 million in the same period of the previous year. However, operating income deteriorated from a ¥9 million loss in the same period of the previous year to a ¥66 million loss, while ordinary income also swung from a ¥157 million profit to a ¥46 million loss. With the operating loss widening despite revenue growth, it is still too early to conclude that the business has returned to a structure in which higher revenue translates into profit.

The quality of earnings also warrants attention. Interim net income attributable to owners of the parent was ¥137 million, but the company recorded ¥143.692 million in gains on sales of fixed assets, ¥62.961 million in reversal gains on stock acquisition rights, and ¥14.298 million in compensation received as extraordinary income. Total extraordinary income was approximately ¥220.952 million, far exceeding the ¥0.292 million impairment loss recorded as an extraordinary loss. It is therefore inappropriate to regard the core business as having recovered based solely on the net profit, and Q3 results need to be reviewed separately for operating income, ordinary income, and operating cash flow.

By segment, the real estate investment business supported the group with revenue of ¥212.618 million and operating income of ¥40.005 million. In contrast, operating income was only ¥8.337 million in construction consulting and ¥13.073 million in the fashion brand business. Gross profit for the first half was ¥115 million, down 39.4% year on year. The simple gross margin on revenue of ¥466 million was approximately 24.7%, indicating that the rise in the cost ratio was a primary cause of the operating loss.

For Q3, the key question is how much operating income excluding extraordinary income has recovered from the interim operating loss of ¥66 million. The full-year forecast subsequently announced by the company includes an upward revision and a return to profitability in the core business, but offsetting the first-half loss in the second half will require simultaneous improvement not only in revenue recognition but also in the gross margin on property sales, project profitability in construction consulting, and the level of selling, general and administrative expenses. The next materials should also be checked for additional disclosure of extraordinary income, the breakdown of non-operating income and expenses, and operating income by segment.