First-half earnings forecast raised, but extraordinary loss to weigh on net income

In the first quarter of the fiscal year ending March 2027, revenue was ¥34.6 billion, up 1.5% year on year; operating profit was ¥5.322 billion, up 9.1%; ordinary profit was ¥5.340 billion, up 8.7%; and net income attributable to owners of the parent was ¥3.574 billion, up 7.3%. Progress against the full-year forecast was approximately 24.6% for revenue and approximately 26.0% for operating profit, indicating that the quarter got off to a broadly on-plan start. The operating margin also rose by approximately 1.1 percentage points, from approximately 14.3% in the same period last year to 15.4%.

For the six months ending September, the forecast for consolidated ordinary profit was raised from ¥9.6 billion to ¥10.2 billion, slightly above the ¥10.1 billion recorded in the same period last year. The full-year ordinary profit forecast, however, remains unchanged at ¥20.7 billion, so the first-half upside is not expected to translate directly into a full-year upward revision. At the next earnings announcement, it will be important to determine how much profit the company expects in the second half against interim ordinary profit of ¥10.2 billion, whether it views the first-half upside as one-off, and whether it has conservatively estimated operating hours and recruitment expenses for the second half.

The interim net income forecast for the six months ending September has reportedly been revised down to ¥3.9 billion following the recognition of an extraordinary loss. Based solely on the information provided, however, the specific amount of the extraordinary loss, the assets involved, the tax effect and whether it will result in a cash outflow cannot be confirmed. In FY2026, the company recorded an impairment loss of ¥620 million due to the suspension of use of a large training facility in the previous fiscal year, while it recorded a ¥637 million gain on the sale of non-current assets after completing the sale of the facility and other assets in the current fiscal year. Net income consequently rose 18.1% year on year to ¥15.051 billion. The FY2027 net income forecast is ¥13.9 billion, ¥1.151 billion, or 7.7%, below the previous year's actual result. The extraordinary loss, together with the disappearance of the one-off factors, will therefore push down the earnings level.

At the next earnings announcement, the highest-priority items to confirm will be the amount of the extraordinary loss by item, its impact on interim net income of ¥3.9 billion, and a bridge to final profit or loss including income taxes and other taxes. It will also be important to determine whether the company will maintain its full-year forecasts of ¥20.5 billion for operating profit and ¥13.9 billion for net income, or revise them in light of the first-half upside in ordinary profit. If the operating profit upside depends on lower costs resulting from a decline in headcount, higher recruitment and assignment expenses in the second half would reduce the repeatability of the earnings. The quality of core operating profit therefore needs to be examined alongside the extraordinary loss.