FY2027-H1 is the point at which to separate M&A-driven revenue growth from growth in the existing business

FY2027-Q1 revenue was ¥6,284 million and operating profit was ¥307 million, up from ¥3,387 million and ¥167 million, respectively, in the same quarter of the previous year. Revenue growth of 85.5% and operating profit growth of 83.1% are substantial, but the company explained that one of the main factors was the consolidation, beginning this quarter, of the results of KGH and MPJ, which became subsidiaries in February 2026. Since the results of both companies were not included in the previous-year quarter, the figures cannot be assessed simply as growth in the existing business.

The FY2027 full-year forecast is revenue of ¥26,000 million and operating profit of ¥1,200 million. As of the first quarter, progress was approximately 24.2% for revenue and 25.6% for operating profit, mechanically reaching almost one-quarter of the full-year forecasts. At the same time, ¥19,716 million of revenue and ¥893 million of operating profit remain to be generated to meet the full-year forecasts. In FY2027-H1, it will be important to check whether first-half cumulative revenue and operating profit, and their progress against the full-year forecasts, have diverged materially from the first-quarter pace.

The factors behind revenue growth include the start of consolidation of KGH and MPJ, as well as the opening of 4 new licensed childcare facilities. However, the first-quarter disclosure does not break out the consolidated contributions from the M&A targets, revenue growth from existing facilities, or the impact of initial opening costs for the 4 new facilities on operating profit. Accordingly, whether FY2027-H1 discloses the two companies’ contributions to revenue and profit, year-on-year growth in the existing business, and the breakdown between acquired and newly opened facilities will be important in assessing the quality of earnings.

Because the denominator for the year-on-year comparison predates the M&A, it would not be appropriate to extrapolate the 85.5% revenue growth rate as the future growth rate. In H1, it will be necessary to assess the organic growth rate excluding the impact of the change in the consolidation scope, the consolidation period for the acquired companies, PMI-related costs, and the number and operating status of facilities, in order to determine whether the ¥26,000 million revenue forecast depends on M&A or is accompanied by an expansion of the earnings base of the existing business.