FY2027 1Q delivered higher revenue and profit, but the first half will test the sustainability of the full-year plan

In FY2027 1Q, operating revenue was ¥1,077 million, operating profit was ¥304 million, ordinary profit was ¥318 million and quarterly net profit was ¥213 million. Year on year, operating revenue rose 2.1%, operating profit 11.9%, ordinary profit 13.5% and quarterly net profit 12.4%, with profit improving more than revenue. The operating margin was approximately 28.3%, up approximately 2.5 percentage points from approximately 25.8% in the same quarter of the previous year.

The full-year forecast is operating revenue of ¥4,426 million, operating profit of ¥1,136 million, ordinary profit of ¥1,238 million and net profit of ¥830 million, with no revision as of 1Q. Progress was approximately 24.3% for operating revenue and 26.8% for operating profit. Although operating profit was ahead of revenue, the simple first-half benchmark assuming no seasonality would be operating revenue of ¥2,213 million and operating profit of ¥568 million. If the first-half results fall below these levels, it will be necessary to determine whether this reflects seasonality or a concentration in the second half of franchisee revenue and higher costs.

The first-quarter profit increase was supported by higher service fee revenue and a decline in selling, general and administrative expenses following the end of internal training and external consulting expenses incurred in the previous year, as well as a review of some initiatives. On the other hand, the cost of IT services for franchisees increased. The profit increase was therefore supported not only by business expansion but also by the timing of expenses and a temporary reduction in costs following the end of initiatives.

The company operates a single segment, the real estate franchise business, and does not disclose segment revenue or profit in its earnings summary. In FY2027-H1, in addition to operating revenue, operating profit and operating margin, we want to examine trends by category in service fee revenue, IT service revenue, franchise fees, operating costs, and selling, general and administrative expenses to determine whether the first-quarter margin improvement is sustainable or reflects a reversal of previously incurred costs.