Can H1 reverse the margin squeeze seen in Q1, when profit fell despite higher revenue?

Operating revenue in FY2027-Q1 rose 4.6% year on year to ¥88,742 million, but operating profit fell 28.3% to ¥13,869 million, ordinary profit fell 27.4% to ¥13,743 million, and net profit attributable to owners of the parent fell 29.1% to ¥8,196 million. Compared with operating revenue of ¥84,878 million and operating profit of ¥19,339 million in the year-earlier period, revenue expanded but the operating margin fell 7.2 percentage points, from approximately 22.8% to approximately 15.6%.

The decline in profit was not uniform across the business. The Motion Picture business reported higher revenue and profit, with operating revenue of ¥43,381 million and operating profit of ¥9,598 million. The Theatrical business also reported operating revenue of ¥5,908 million and operating profit of ¥475 million. By contrast, the IP and Animation business generated operating revenue of ¥18,255 million but operating profit of only ¥520 million, while the Real Estate business generated operating revenue of ¥20,425 million and operating profit of ¥5,556 million. The earnings presentation explained that consolidation adjustments related to the corporate split of TOHO Global and the advance recognition of expenses related to overseas revenue weighed on operating profit.

FY2026 full-year operating revenue was ¥360,663 million, operating profit was ¥67,889 million, and the operating margin was 18.8%, meaning that FY2027-Q1's 15.6% was also below the previous full-year level. The Q1 earnings release did not separately disclose the impact of the consolidation adjustments arising from the corporate split or the breakdown of overseas-related expenses at a level of detail sufficient to distinguish them from the company's key consolidated financial figures. The H1 supplementary materials will therefore need to clarify whether the decline in profit was a one-off effect of the timing of consolidation for accounting purposes or a recurring cost burden associated with expanding overseas operations.

In FY2027-H1, we will assess whether operating profit can exceed the ¥19,339 million recorded in the year-earlier period, how far the operating margin improves from 15.6%, and how long expenses in the IP and Animation and overseas businesses continue to be recognized. In particular, whether the amounts of the corporate-split adjustments, expenses related to overseas revenue, and increases in SG&A are disclosed by segment or classified as one-off versus recurring will be important in assessing the appropriateness of the ¥62,000 million full-year operating profit forecast.