| Metric | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥488.6B | ¥465.9B | +4.9% |
| Operating Income / Operating Profit | ¥26.8B | ¥19.5B | +37.7% |
| Ordinary Income | ¥22.6B | ¥15.2B | +48.1% |
| Net Income / Net Profit | ¥13.0B | ¥12.3B | +5.8% |
| ROE | 4.9% | 4.8% | - |
For the Q2 results for the fiscal year ending March 2026: Revenue ¥488.6B (YoY +¥22.7B +4.9%), Operating Income ¥26.8B (YoY +¥7.3B +37.7%), Ordinary Income ¥22.6B (YoY +¥7.3B +48.1%), Net Income ¥13.0B (YoY +¥0.7B +5.8%). The operating stage delivered a large increase in profit, realizing an operating margin of 5.5% (improvement of +1.3pt from 4.2% a year earlier). Recovery in membership trends and price/mix improvements drove revenue, while operational efficiency and improved gross margin (12.5%, up +0.8pt from 11.7% a year earlier) boosted operating profit. Ordinary Income saw a large increase despite continued interest burden of ¥4.8B, thanks to improvements at the operating level. Net Income growth was limited by special losses of ¥4.3B (store closure losses ¥2.6B, impairments ¥1.7B) and the normalization of tax burden, but Operating Cash Flow was at a high level of ¥34.7B (YoY +68.2%), 2.7x Net Income, indicating strong cash generation.
【Revenue / Net Sales】 Revenue ¥488.6B (YoY +4.9%) was supported by continued recovery of the membership base and pricing initiatives. The company operates in a single segment—sports club management—and the majority of revenue is comprised of membership fees. Cost of sales was ¥427.5B, yielding Gross Profit ¥61.1B and a gross margin of 12.5% (improvement of +0.8pt from 11.7% a year earlier). The improvement in cost ratio was driven by control of variable costs such as personnel and utilities and higher utilization rates leading to better absorption of fixed costs. SG&A was ¥34.3B (SG&A ratio 7.0%, improvement of -0.5pt from 7.5% a year earlier), contributed to by efficiencies in head office costs and advertising/promotional spending.
【Profit / Loss】 Operating Income ¥26.8B (YoY +37.7%), operating margin 5.5% (improvement of +1.3pt from 4.2%), demonstrating operating leverage. Non-operating income was ¥1.0B (interest income ¥0.5B, insurance dividends ¥0.2B, etc.), while non-operating expenses were ¥5.2B, primarily interest expense of ¥4.8B, where interest burden including lease liabilities pressured profits. Ordinary Income ¥22.6B (YoY +48.1%), ordinary income margin 4.6% (improvement of +1.4pt from 3.3%). Extraordinary income ¥1.8B (compensation etc.), extraordinary losses ¥4.3B (store closure losses ¥2.6B, impairment losses ¥1.7B). Profit before tax ¥20.0B, with income taxes and others ¥7.2B (effective tax rate 36.0%). In the prior year tax burden was negative due to reversal of deferred tax assets; this period normalized. Net Income ¥13.0B (YoY +5.8%), net margin 2.7% (slight increase of +0.1pt from 2.6%). In conclusion: revenue and profit increased (large operating profit increase), but special losses and tax normalization limited Net Income growth.
【Profitability】Operating margin 5.5% (prior year 4.2%), net margin 2.7% (prior year 2.6%), ROE 4.9% (prior year 5.4%). Operating-level profitability clearly improved, but net margin remained flat due to special losses and tax burden, and ROE declined year-on-year due to an increase in equity. EBITDA ¥41.1B (Operating Income ¥26.8B + Depreciation ¥14.9B - partial adjustment for lease depreciation) giving an EBITDA margin of 8.4%. 【Cash Quality】Operating Cash Flow ¥34.7B is 2.7x Net Income ¥13.0B, indicating solid cash backing of earnings. OCF/EBITDA is 0.83x, a high level, although a decrease in contract liabilities (deferred revenue) of ¥2.5B was a partial headwind. Free Cash Flow ¥19.4B (Operating CF ¥34.7B - CapEx ¥17.7B) is ample and comfortably covers dividend payments of ¥5.6B. 【Investment Efficiency】CapEx ¥17.7B / Depreciation ¥14.9B = 1.19x, indicating continued renewal/refurbishment investment. Total asset turnover 1.16x (Revenue ¥488.6B / Total Assets ¥422.8B), signaling stable asset efficiency. 【Financial Soundness】Equity Ratio 62.9% (prior year 62.8%) is solid; current ratio 109%, quick ratio 107% secure short-term payment ability. Debt/EBITDA 0.10x (Interest-bearing debt ¥6.6B / EBITDA ¥41.1B, excluding leases), Interest Coverage 5.6x (Operating Income ¥26.8B / Interest Expense ¥4.8B), indicating healthy finances. However, the interest burden coefficient (Interest Expense ¥4.8B / Operating Income ¥26.8B) is 17.9% and remains high; monitoring is needed as interest expense accounts for about 18% of EBIT.
Operating Cash Flow ¥34.7B (YoY +68.2%) was generated by adding back Depreciation ¥14.9B to Profit before tax ¥20.0B. Changes in working capital included a headwind from a decrease in contract liabilities (deferred revenue) of ¥2.5B, partly offset by an increase in other payables of ¥2.6B. After deducting corporate tax payments of ¥5.2B, Operating CF subtotal of ¥44.2B resulted in final Operating CF of ¥34.7B. Investing CF was -¥15.4B, primarily due to CapEx ¥17.7B (mainly renovations/updates of existing stores), plus other investing activities of -¥1.2B. Free Cash Flow ¥19.4B (Operating CF ¥34.7B - Investing CF ¥15.4B) remains ample, leaving strong cash on hand after investments. Financing CF was -¥9.5B, including dividend payments ¥5.0B (interim dividend), repayment of long-term borrowings ¥4.4B, new borrowings ¥4.0B, and lease liability repayments. As a result, Cash and Deposits increased to ¥63.6B (year-end +¥9.8B), further improving liquidity.
Ordinary Income ¥22.6B vs Net Income ¥13.0B shows a divergence of ¥9.6B, attributable to extraordinary losses ¥4.3B and income taxes ¥7.2B. The extraordinary losses consist of store closure losses ¥2.6B and impairment losses ¥1.7B, judged as one-time costs related to withdrawal from unprofitable stores and asset removal. The majority of non-operating expenses ¥5.2B is interest expense ¥4.8B, a structural interest burden including lease liabilities. Non-operating income ¥1.0B from insurance dividends and interest income is structurally small, but the quality of recurring income at the ordinary level is high. Comprehensive Income ¥12.8B is almost unchanged from Net Income ¥13.0B after foreign currency translation adjustment -¥0.1B and valuation difference on securities +¥0.1B. From an accrual perspective, Operating CF ¥34.7B significantly exceeds Operating Income ¥26.8B, and except for the decrease in contract liabilities, working capital movements are healthy; cash conversion of earnings is good. There is a risk of recurring special losses, but operating-level earnings are assessed as having high sustainability.
Full Year forecast: Revenue ¥505.0B (YoY +3.3%), Operating Income ¥31.5B (YoY +17.5%), Ordinary Income ¥27.0B (YoY +19.6%), Net Income ¥14.2B (YoY +9.2%). Progress against the full-year plan at the Q2 cumulative level: Revenue 96.8% (¥488.6B / ¥505.0B), Operating Income 85.1% (¥26.8B / ¥31.5B), Ordinary Income 83.6% (¥22.6B / ¥27.0B), Net Income 91.5% (¥13.0B / ¥14.2B). The high revenue progress likely reflects business seasonality concentrated in the first half; progress for Operating Income and Ordinary Income is healthy. The high Net Income progress suggests the company expects smaller extraordinary losses in H2 than the H1 actual ¥4.3B. The company plan assumes further improvement in gross margin and operating margin and a reduction in special losses; based on current progress, achievement appears highly likely.
Interim dividend ¥20.0 per share, year-end dividend forecast ¥20.0 per share, annual dividend ¥40.0. Against full-year EPS forecast ¥131.24, the payout ratio is 30.5% (¥40 / ¥131.24), within a healthy range. The interim dividend ¥20.0 against Q2 cumulative EPS ¥114.7 results in a progress-based payout ratio of 17.4%, while full-year forecast basis is 30.5% as noted above. Interim dividend payment ¥5.0B against Free Cash Flow ¥19.4B gives FCF coverage of 3.9x, indicating ample headroom and high sustainability of dividends. Cash and deposits ¥63.6B are abundant; additional shareholder returns depend on balancing investment opportunities (refurbishment and new store openings). There is no disclosure of share buybacks; current return policy is dividend-focused.
Low gross margin structure risk: Gross margin is 12.5% and improving but remains low, making profit sensitive to increases in utilities and personnel costs. Fixed-costs (facility maintenance, personnel, utilities) comprising 87.5% cost ratio are the majority, so declines in utilization or intensified price competition could cause significant swings in operating income.
Interest burden risk: Interest expense ¥4.8B accounts for 17.9% of Operating Income ¥26.8B, and interest burden including lease liabilities (current ¥4.2B + non-current ¥34.8B = total ¥39.0B) is structurally heavy. In a rising interest rate environment, increased interest payments could compress Net Income. Interest Coverage is 5.6x and manageable for now, but vulnerability could surface if operating income growth slows.
Continued store closure / impairment risk: In Q2, extraordinary losses of ¥4.3B (store closure losses ¥2.6B, impairment ¥1.7B) were recorded. Ongoing withdrawals from unprofitable stores and asset removals may intermittently occur and undermine Net Income stability. Asset retirement obligations ¥21.3B (13.6% of total liabilities) are recorded as liabilities, leaving the risk of realization of future restoration/removal costs.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.5% | 8.1% (3.6%–16.0%) | -2.6pt |
| Net Margin | 2.7% | 5.8% (1.2%–11.6%) | -3.2pt |
Profitability is below the industry median, with low gross margin and high fixed-cost structure suppressing margins.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 4.9% | 10.1% (1.7%–20.2%) | -5.2pt |
Revenue growth is below the industry median, but the membership base’s stable growth and recurring revenue model provide high sustainability.
※Source: Company compilation
Trend of improved operating profitability: Operating margin improved from 4.2% to 5.5% (+1.3pt), and gross margin rose from 11.7% to 12.5% (+0.8pt). Recovery in membership trends, pricing initiatives, and operational efficiencies are taking hold, laying a foundation for mid-term margin improvement. The full-year plan operating margin of 6.2% (¥31.5B / ¥505.0B) appears achievable; focus going forward will be on raising gross margin into the 13% range and continued compression of SG&A ratio.
Cash generation and financial flexibility: Operating CF ¥34.7B is 2.7x Net Income, Free CF ¥19.4B is ample, and cash after dividends (interim ¥5.0B) and CapEx (¥17.7B) increased. Equity Ratio 62.9% and Debt/EBITDA 0.10x indicate extremely healthy finances and significant capacity for additional investment. If structural compression of interest burden is realized (progress in repayment of lease liabilities and decline in interest expense ¥4.8B), further improvements in net margin and ROE can be expected. Store portfolio optimization (reducing special losses) and continuation of utilization and price improvements are key to mid-term earnings power enhancement.
This report is an earnings analysis document automatically generated by AI analyzing XBRL earnings release data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your responsibility; consult with a professional advisor as needed before making investment decisions.