Revenue growth but operating profit decline: cost absorption is the key issue for FY2027-H1

In the first quarter of the fiscal year ending March 2027, revenue was ¥7,937 million, operating profit was ¥741 million, ordinary profit was ¥679 million, and net income attributable to owners of the parent was ¥636 million. Revenue increased 3.6% year on year, but operating profit fell 19.7%, ordinary profit fell 22.5%, and net income fell 21.3%, making clear that revenue growth was not translating into profit growth. The operating margin calculated simply from revenue and operating profit was approximately 9.3%, although the cover page of the earnings release did not state a revenue operating margin.

The company attributed the revenue increase to the start of operations at Koraku Garden Hotel, while explaining that higher costs, including new-opening costs and variable rent, reduced operating profit. However, it did not show how many millions of yen each of new-opening costs, variable rent, and other personnel and operating expenses affected profit. Accordingly, the second-quarter results and subsequent disclosures will need to clarify how much of the ¥741 million operating profit would have remained excluding the one-time burden of new-opening costs, and whether higher variable rent will continue in line with future revenue growth.

The full-year forecasts remain unchanged at revenue of ¥31,000 million, operating profit of ¥3,400 million, ordinary profit of ¥3,200 million, and net income of ¥1,950 million. First-quarter progress against the full-year forecasts was 25.6% for revenue, 21.8% for operating profit, and 32.6% for net income. With 25% of the fiscal year elapsed, revenue was broadly in line with the passage of time, while operating profit was 3.2 percentage points behind. The cumulative first-half figures will be important in determining whether the full-year plan reflects seasonality or whether profit is concentrated in the second quarter.

The simple half-year benchmarks are revenue of ¥15,500 million, operating profit of ¥1,700 million, and net income of ¥975 million, but these are merely mechanical benchmarks set at 50% of the full-year forecasts, not company forecasts for the first half. In the next results announcement, the key points will be whether first-half cumulative operating profit approaches ¥1,700 million, whether the operating margin improves from 9.3%, the amounts affected by new-opening costs and variable rent, and whether the full-year forecasts are revised.