3175.T

• Overall Financial Performance

  • Consolidated revenue grew 105.2% year-over-year, with domestic same-store sales up 103.5% year-over-year.
  • Operating profit increased by 272 million yen year-over-year, up 1752.5% (18x) from the prior period. Total EBITDA reached 495 million yen, double the prior year level.
  • Net income was 630 million yen, 97.0% of the full year forecast achieved in the first half, boosted by a 438 million yen gain from the sale of subsidiary Real Taste.
  • Operating cash flow increased by 647 million yen year-over-year, investment cash flow increased by 478 million yen driven by the subsidiary sale, and financing cash flow outflow was 977 million yen from accelerated debt repayment.
  • Shareholders' equity increased by 700 million yen year-over-year due to interim net income and restricted share issuance, while total assets decreased 500 million yen and cash holdings decreased 259 million yen from debt repayment.

• Structural Reform of Underperforming Businesses

  • Leadership replaced one-third of senior management starting in 2024 after post-COVID performance under the new management team missed targets. The CEO returned to lead day-to-day operations, and the company paused new investment to focus on turning around struggling businesses.
  • For Kyushu Tsukada Farm: Leadership was replaced, and accelerated PDCA cycles drove improvement. The business has moved from heavy losses to industry average profitability, exiting its period of dragging down group performance.
  • For Hong Kong: Unprofitable store closures were completed in September 2025, all one-time exit costs were recognized in the first half, and the remaining business is now profitable, ending years of annual 100 million+ yen losses that absorbed domestic profit.

• Portfolio Transformation

  • Pre-COVID, 70-80% of revenue came from izakaya concepts. The company has diversified its revenue base, and now has five core revenue pillars: izakaya, specialty stores, restaurants, overseas, and ready-to-eat meals, approaching the company's target balanced portfolio.
  • Strengthened forecast accuracy and budget adherence: Implemented weekly forecast updates for each business unit and monthly reconciliation of forecasts to actual results, with a focus on halting new expansion to prioritize meeting budget targets. The first half came in well above budget, and the company now has a fully established process for reliable forecasting that will be used for future budget setting.

• Tsukada Farm Plus (Ready-to-Eat Meals) Growth Strategy

  • The business has four core competitive advantages: strong brand recognition of the Tsukada Farm name, multi-channel synergy between B2B delivery and retail store sales, high product quality focused on great taste even when cold, and existing capacity to handle large 1,000+ meal bulk orders that few competitors can accommodate.
  • Current production capacity at the Niiki factory is constrained, running 9,000-10,000 meals per day, leading to order rejections and opportunity loss during peak months. The company will invest 480 million yen to expand the factory, with operations starting in summer 2026, targeting 7 billion yen in revenue and 700 million yen in operating profit by the 2031 March term.
  • Growth initiatives include expanding delivery coverage beyond Tokyo's 23 wards, launching wholesale to supermarket chains (starting with Kinokuniya and Jiyugaoka Shell Garden in the next month), and participating in ekiben events at department stores and supermarkets across Japan. The company is strategically increasing the share of high-margin delivery and wholesale in the segment's revenue mix, which currently have operating margins of 10.4% and 16.4% respectively.

• New Growth Initiatives

  • Licensing/franchise business: The company is packaging its existing brands and concepts for franchise licensing, which requires no capital investment from AP Holdings. The first information session attracted 33 participating firms, with 1 franchise application received to date. The 5-year target is 40 stores and 100 million yen in operating profit by 2031, with management planning to upwardly revise the target annually and target 100 stores long-term.
  • AI and DX: Rolled out mobile order to all stores, with ongoing adjustments to improve operational efficiency.

• The full year FY2026 March term net profit forecast is on track to be met, with 97.0% of the full year target already achieved in the first half. Operating profit reached nearly 60% of the full year forecast ahead of the peak third quarter (the most profitable quarter for the food service industry), putting full year results on track to beat expectations.
  • Recent booking data for October-December 2025, including year-end party reservations, is very strong, pointing to a strong full year result.
  • Tsukada Farm Plus targets 3.3 billion yen in revenue and 340 million yen in operating profit for FY2026 March, with 7 billion yen in revenue and 700 million yen in operating profit targeted by FY2031 March after factory expansion.
  • The licensing business targets 40 stores and 100 million yen in operating profit by FY2031 March, with management expecting to revise this target upward over time.
  • Going forward, the company will prioritize investment for growth in the Restaurant, Ready-to-Eat (Tsukada Farm Plus), and Indonesia overseas businesses.

1. Izakaya Segment: Operating profit doubled year-over-year after successful structural reform of the underperforming Kyushu Tsukada Farm division, which included organizational restructuring and improved cost control. Revenue recovered to industry average levels, and the segment still holds a 25% revenue share across the company.
2. Specialty Store Segment: Revenue was 89.8% of the prior year period, impacted by store portfolio changes from internal organizational restructuring. Operating profit improved year-over-year, with operating margin up 1.3 percentage points.
3. Restaurant Segment: Includes shabu-shabu, hot pot, standing sushi, and mid-to-high end dining concepts. Same-store sales grew 107.4% year-over-year, total revenue was 123.5% of the prior year, and operating margin reached a strong 14.3% in the period. In the first half, Restaurant segment profit exceeded Izakaya segment profit.
4. Overseas Segment (Hong Kong): Revenue decreased year-over-year due to the closure of 2 unprofitable stores. Reported operating profit was flat year-over-year, but included 55 million yen in exit costs; the underlying operating loss narrowed to one-third of the prior year level. After closures, the remaining 4 stores have achieved consistent net profit after corporate overhead allocation, ending 37 consecutive months of losses.
5. Ready-to-Eat/Meal (中食) Segment (Tsukada Farm Plus): Revenue grew 116.2% year-over-year, operating margin improved 1.4 percentage points to 10.7%. The segment is operating near full production capacity, with productivity improvements and price hikes offsetting raw material cost increases. In the 2025 March full year, the segment posted 3 billion yen in revenue and 300 million yen in operating profit.
6. Production and Distribution Segment: Focuses on local chicken production and processing. Revenue is growing, with a particularly sharp increase in operating profit, driven by structural reform including processing plant consolidation and fixed cost cuts at subsidiary Jitokko Land. Off-group sales of specialty chicken are also growing steadily, improving the profit base.

• Tsukada Farm Plus (ready-to-eat meal) production capacity is currently constrained, leading to unmet demand and opportunity loss, particularly during peak periods. Capacity constraints could limit growth until the factory expansion is completed in summer 2026.
  • Kyushu Tsukada Farm still has lower profitability than other group businesses, even after restructuring, and has not yet reached the same profit margin level as other core segments.
  • The new licensing/franchise initiative has only received 1 application to date, and the requirement to secure a property location at signing has created a high barrier to entry that may slow expansion.
  • Raw material costs (such as rice) remain a pressure, though price adjustments have so far offset these impacts.

No question and answer section is included in the provided transcript.