Koshidaka Holdings 1H FY8/2025 slides: Record operating profit amid expansion push

Introduction & Market Context

Koshidaka Holdings Co Ltd (TSE:2157), a leading karaoke and entertainment company in Japan, presented its first half fiscal year 2025 results on April 17, 2025, highlighting record operating profits despite challenges with rising costs. The company continues to execute its Entertainment Innovation Plan (EIP), focusing on aggressive domestic and international expansion while developing new revenue streams.

Executive Summary

Koshidaka reported a record first half operating profit, exceeding 5 billion yen for the first time in company history. Net sales grew 11.2% year-over-year to 34,004 million yen, while operating profit increased 5.8% to 5,114 million yen. However, ordinary profit and profit attributable to owners declined by 4.4% and 18.1% respectively, primarily due to one-time factors including a Singapore subsidiary liquidation loss and comparison against non-operating income from the previous year.

As shown in the following consolidated results summary:

The company’s karaoke business, its primary revenue driver, saw sales increase by 11.2% due to new store openings and growth in existing store customer numbers. Despite these gains, rising expenses, particularly in personnel and electricity costs, created some margin pressure.

Quarterly Performance Highlights

Koshidaka’s performance shows a strong recovery and growth trajectory since the COVID-19 pandemic. The following chart illustrates the consistent upward trend in both net sales and operating profit over recent years:

A key driver of growth has been the company’s existing store performance, with sales up 3.5% compared to the same period last year. Customer numbers increased by 6.3%, though sales per customer decreased by 2.5%, indicating some pricing pressure following peak periods.

The company’s operating profit growth was driven by increased sales but partially offset by rising costs. Personnel expenses increased by 939 million yen (+12.8%), while rent and utilities rose by 644 million yen (+12.7%) and 288 million yen (+18.3%) respectively. This breakdown of factors affecting operating profit provides insight into the company’s cost structure challenges:

Koshidaka’s balance sheet remains strong, with total assets increasing to 64,563 million yen as of February 28, 2025, primarily due to non-current asset growth from new store openings. The equity ratio improved to 52.7% from 49.2%, while net interest-bearing debt decreased to 3,295 million yen, resulting in a lower debt-equity ratio of 0.10 times.

The company announced plans to increase its annual dividend to 24 yen per share, up 6 yen from the previous year, marking the fourth consecutive year of dividend growth. The following chart shows Koshidaka’s consistent dividend growth pattern:

Strategic Initiatives

Koshidaka continues to execute its EIP with several key strategic initiatives. The company is doubling the pace of store openings, particularly in prime locations in the Tokyo Metropolitan area, while also expanding in the Kinki region and Nagoya area to raise brand awareness.

International expansion remains a priority, with rapid store openings in Southeast Asia, particularly in Malaysia and Thailand. The company is also preparing to establish a subsidiary in the Philippines and open its first store in the United States, where it plans to export its Family Karaoke business model.

Koshidaka is also transforming its business model by converting traditional karaoke rooms into private entertainment rooms (PER) that offer various entertainment services beyond karaoke. The company’s E-bo entertainment platform will be installed at all outlets by December 2025, with enhanced content and non-karaoke functions.

The company is developing new revenue streams through its content business and leveraging its extensive network of 682 karaoke outlets and over 15 million application users for market research opportunities:

Forward-Looking Statements

For the full fiscal year 2025, Koshidaka forecasts net sales of 71,057 million yen (+12.3% YoY) and operating profit of 11,578 million yen (+13.9% YoY). The company expects to reach its intermediate EIP goal of 65 billion yen in sales in FY8/2025 and remains confident in achieving its final goal of 100 billion yen by FY8/2027.

The company has established clear KPI targets for FY8/2027, including net sales of 100 billion yen, operating profit of 17 billion yen, and maintaining strong financial metrics such as a 25-30% payout ratio and ROE above 15%:

Koshidaka’s management is already looking beyond the current EIP, with studies underway to identify additional business opportunities beyond karaoke that can drive future growth. The company remains committed to its mission of establishing a worldwide network of stores providing various entertainment services to enhance people’s leisure time.

Full presentation:

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