LOGOS HOLDINGS INC.

Since the 2021 wood shock, timber, metal materials, other supplies, and labor costs have remained elevated, and if cost reductions or pass-through to sales prices prove difficult, deterioration in profitability or delays in building handover may occur. In FY2023 (ended May 2023), the company recorded a loss due to surging material and subcontracting costs, and it now visualizes property-level profit margins on a monthly basis to enable early detection and response. The company is working to reduce risk through diversification of procurement sources and consideration of alternative materials.

In fiscal 2023 (Reiwa 5), the number of newly started owner-occupied housing units nationwide fell to 219,622 units (down 11.5% year on year), and amid this market contraction, competition with major companies with superior capital strength and brand power may lead to longer sales periods and profitability deterioration due to discounted sales. The group is addressing this by expanding its business area from Hokkaido into the Tohoku and northern Kanto regions and differentiating itself through a one-stop platform combining "custom-built homes" and "land brokerage." The company has adopted a risk diversification policy to avoid excessive concentration in specific areas.

At the end of the current consolidated fiscal year, real estate for sale and real estate for sale in process accounted for 22.5% of total assets, and changes in economic conditions may make it difficult to sell at expected prices, leading to valuation losses from prolonged inventory holding periods or reduced profits from discounted sales. There is also a risk of impairment losses arising from a significant decline in the fair value of income-producing real estate or reduced profitability of housing showrooms. The company implements timely monitoring of sales conditions and verification of appropriate pricing as measures to curb declining profitability.

As of the end of May 2025, the consolidated balance sheet carried goodwill of ¥2,921,708 thousand, and if the valuation of goodwill-related assets falls significantly below book value due to divergence from future business plans or other factors, an impairment loss may be recorded, affecting business performance and financial condition. The company is working to strengthen business profitability under appropriate business plans and currently judges the likelihood of impairment to be low. As the company pursues a growth strategy through M&A, the business performance trends of acquired companies serve as an important management indicator.

In the housing business, the majority of properties recognize revenue at the time of handover, and sales tend to be concentrated in the fourth quarter (March to May); in the current consolidated fiscal year, fourth-quarter sales amounted to ¥15,752,007 thousand, accounting for approximately 43% of the total. Changes in sales plans, shifts in sales trends, or changes in handover timing due to construction delays may significantly affect business performance and financial condition. The company seeks to mitigate seasonal fluctuations by leveling the timing of custom home construction starts and condominium/subdivision handovers.

Securing and developing excellent personnel to support business expansion is essential, and if sufficient personnel cannot be secured amid intensifying labor market competition due to the declining birthrate and aging population, or if existing personnel leave the company, this may affect business performance and financial condition. The company conducts broad-based new graduate and mid-career hiring, actively recruiting those who share its management philosophy while strengthening professional development. As a countermeasure to the shortage of skilled tradespeople, promotion of housing sales using the MCB construction method is also positioned as one response.

Amendments to or abolition of related laws such as the Building Lots and Buildings Transaction Business Act, the Building Standards Act, the Construction Business Act, and the Architects Act, the introduction of new legal regulations, or violations of legal compliance may result in the revocation of licenses or affect business continuity. Currently, no grounds for license revocation have arisen, but the company addresses this through Risk and Compliance Committee meetings, quarterly e-learning training, and a preliminary monitoring system. Each group company (Logos Home, Hoei Construction, GALLERY HOUSE, and Sakai Construction) holds multiple licenses, and ongoing renewal management remains a continuing challenge.

In the event of a large-scale natural disaster such as a fire, earthquake, or typhoon, physical damage to company-owned facilities, construction sites, and buildings not yet handed over, personal harm to employees, and difficulty securing materials and components due to damage to social infrastructure may occur, potentially resulting in significant costs. As Hokkaido is the company's main business area, responding to region-specific weather and earthquake risks is important, and the company maintains stockpiles of materials and components as a countermeasure. The likelihood of this risk materializing and its potential impact on business performance are difficult to estimate, and it is recognized as a risk that is difficult to quantitatively assess.

Endeavor United Fund No. 2 Investment Limited Partnership holds 50.79% (1,987,452 shares) of total issued shares, and as the fund proceeds with share sales, the supply-demand balance of shares may fluctuate in the short term, potentially affecting stock price formation. While 1,346,400 shares were already sold at the time of listing, a certain level of continued holding is expected going forward, and the risk that the timing of sales of remaining shares will affect the market continues. The company operates its business based on independence and autonomy, and the timing of the resignation of the dispatched director will be considered in light of the ownership ratio and other factors.

The company outsources housing construction work to subcontractors, and as the number of properties handled and the sales area expand, it may become difficult to secure construction contractors that meet required standards, or trouble may arise from inadequate control, potentially affecting business performance and financial condition. When selecting subcontractors, the company investigates their financial condition, technical capabilities, and any ties to antisocial forces, and holds reporting meetings to share its management philosophy and ensure thorough safety and quality management. The risk also encompasses loss of credibility due to design or construction defects, unexpected cost occurrence, and delays in development plans.