CEDAR.Co.,Ltd.

In the operation of 28 day service centers, 43 fee-based nursing homes, and 1 group home, failure to satisfy the facility and staffing standards prescribed by the standard ministerial ordinance may result in reduced claims for long-term care benefits. The main risk factors are staff shortages and additional staffing requirements arising from standard revisions, and the company is working to strengthen personnel recruitment and training and improve staff retention rates.

Opening new day service centers and fee-based nursing homes requires substantial funding, and because fixed costs such as personnel expenses are high, losses continue until operations stabilize. If multiple facilities are newly opened around the same time, performance may temporarily deteriorate. In addition, since fee-based nursing homes are selected through public tenders by municipalities and wide-area unions, the company cannot control the timing or number of openings on its own. The company regularly checks administrative facility development plans and gathers land information from various sources.

Approximately 90% of sales depend on long-term care insurance benefits, so revisions to the standard unit rates, unit prices, and benefit limits of long-term care fees, as well as changes in the interpretation of laws and administrative practices, directly affect the profitability of the business. If long-term care insurance finances deteriorate due to reduced premium collection amid economic downturns or a shrinking base of premium payers from the declining birthrate and aging population, an increase in self-pay burdens could suppress service usage. The company conducts internal training on revisions to the Long-Term Care Insurance Act and has established a response framework.

Under Articles 77 and 84 of the Long-Term Care Insurance Act, failure to meet facility and staffing standards, fraudulent claims for long-term care benefits, false reporting, and refusal of inspections, among others, are grounds for revocation of designation, and if such grounds apply, it would have a material impact on business continuity. Designations also have a six-year validity period requiring renewal procedures. At present, no facts falling under grounds for revocation have occurred, and the company continues to develop its business management and legal compliance systems.

As long-term care insurance business expands, demand for qualified personnel is increasing across the industry, making it difficult to secure the necessary human resources, with the risk that training cannot keep pace with the rate of facility expansion. Personnel shortages directly constrain the expansion of new facilities and could affect the overall business expansion plan. The company positions personnel development and improvement of staff retention rates as key priorities and is actively engaged in training initiatives.

Since the implementation of the Long-Term Care Insurance Act in 2000, a diverse range of business entities, including large corporations, companies from other industries, and medical corporations, have entered the long-term care market, and further new entries and expansion by existing operators are expected against the backdrop of an increasing number of certified care recipients due to population aging. If it becomes difficult to acquire users due to intensifying competition, this could affect the group's performance. The company aims to differentiate itself through meticulous support based on its management philosophy.

As of the end of FY2026 (ending March 2026), the balance of interest-bearing debt stood at ¥13,800 million, representing 70.0% of total assets, indicating a high dependence on borrowings, with the ratio of interest expense to net sales at 1.8%. It is estimated that even a 0.1% rise in interest rates would impact operating results by approximately ¥9 million, and the risk of profit pressure increases as borrowings grow. The company is considering diversifying its funding sources, including procurement from capital markets, while aiming to reduce reliance on borrowings by improving profit margins at each facility and strengthening its capital base.

The company holds fixed assets such as buildings and land related to multiple business locations, and if the profitability of a business location deteriorates such that undiscounted future cash flows cannot recover the carrying amount, an impairment loss must be recognized. In the current consolidated fiscal year, an impairment loss of ¥12 million was recorded, and further impairment losses may be recognized in the future. The company aims to improve profitability through community-based operations that leverage the distinctive characteristics of each business location.

Because home care services involve entering users' homes to provide services, there are many opportunities to access extremely sensitive personal information concerning users and their families, and if an information leak occurs, it would lead to a decline in credibility and have a material impact on performance. As the number of users increases, digitization of information and advanced security systems become necessary, which is also expected to increase information management costs. The company plans to continue developing and appropriately operating its internal control systems.

If business operations are suspended or users refrain from using facilities due to natural disasters such as earthquakes, typhoons, heavy rain, or heavy snow, or due to the spread of infectious diseases such as influenza, it may affect the group's performance. Given the nature of the business, which targets elderly people, infectious disease risk in particular could have a significant impact. The company is working on establishing safety confirmation systems, opening facilities as evacuation shelters, and providing early dissemination of infectious disease information along with preventive follow-up measures.