JP-HOLDINGS,INC.

The accelerating decline in the birthrate and the spread of remote work may make it difficult to secure enrolled children in the future. Since revenue from the childcare support business fluctuates with the number of children accepted, failure to secure the expected number of enrollees could affect operating results and financial condition. As a countermeasure, the Group is pursuing differentiation by adding value to global education through the placement of ALTs (Assistant Language Teachers) and the introduction of international education programs.

Revenue from the childcare support business is centered on subsidies from national and local governments, such as officially set prices, meaning the business's revenue foundation is heavily dependent on the subsidy system. If the national or local governments revise the subsidy system, the Group's business performance could be directly affected. Given the business structure's high dependence on subsidies, the risk of system changes has a significant impact on performance.

Securing nursery teachers, instructors, and related staff is essential to the operation and quality improvement of childcare support services, but the shortage of nursery teachers is becoming increasingly severe across the industry. Delays in securing personnel or increases in recruitment costs could affect performance through delays in the operation of existing facilities or the opening and acquisition of new facilities. The Group is promoting measures to strengthen recruitment and curb employee turnover, including enhanced new graduate and mid-career hiring and the development and expansion of internal training systems.

Contract periods for after-school clubs (gakudo clubs) and children's centers are fixed, and competition at the time of contract renewal, as well as cost-reduction requests arising from local government fiscal austerity, may make it difficult to continue operating currently contracted facilities or to secure new contracts. For Tokyo Metropolitan Government-certified after-school clubs, the company must find its own sites, and there is a risk that openings may not proceed as planned due to property availability and leasing conditions. Delays in openings or increased investment costs could affect the progress of business plans and operating results.

The Group's business is subject to a wide range of legal regulations, including the Child Welfare Act, the Act on Support for Children and Child Rearing, the Worker Dispatching Act, the Immigration Control Act, and the Food Sanitation Act. Enactment or revision of related laws and changes in local government operating standards could constrain business activities and affect performance. In the ALT dispatch and global education business, tightened regulations such as the Immigration Control Act could also affect personnel procurement and operating costs. If licenses are revoked or business suspension orders are imposed, this could result in a significant loss of social credibility and materially affect performance and financial condition.

If a serious accident occurs in the operation of childcare support facilities, factors such as business suspension or the transfer of children to other facilities could affect performance. Regarding food safety, if a serious problem such as food poisoning or contamination by foreign objects occurs, this could also affect performance. The Group divides the country into two blocks and assigns childcare division managers and after-school program managers to promote safety and hygiene measures, while implementing strict food ingredient and hygiene management based on the Food Sanitation Act.

As the Group primarily operates childcare support facilities in the Tokyo metropolitan area, large-scale natural disasters such as earthquakes and fires could cause severe damage to facilities, users, and employees. During outbreaks of infectious diseases such as influenza or COVID-19, mass employee absences or facility closures could make operations difficult, and the resulting decline in revenue and increase in countermeasure costs could affect performance. The Group has implemented disaster preparedness manuals at all facilities, conducts regular disaster drills, has formulated business continuity plans, and promotes infectious disease prevention measures centered on a nursing committee.

Nursery schools, after-school clubs, children's centers, and the childcare support platform "Codomel" hold personal information of users and guardians, and any leakage could damage social credibility and affect facility contracting. In addition, if inappropriate conduct or misconduct by employees occurs, this could lead to a decrease in the number of children using the facilities, loss of contracting opportunities from local governments, and claims for damages, potentially having a material impact on performance and financial condition. The Group continuously conducts compliance training and has established an incident management system through the establishment of a childcare committee and a safety management committee.

The Group plans to expand its existing and new businesses through M&A, but there is a possibility that returns commensurate with the investment may not be obtained, or that expected synergies may not be realized. Although the Group has a policy of carefully selecting M&A deals and thoroughly verifying investment returns, there remains a risk that expected results may not be achieved due to post-acquisition integration risks or changes in the market environment.

Depending on the performance of nursery schools, losses may arise from the application of impairment accounting for fixed assets, and upon closure of a facility, losses on disposal related to initial investments such as interior construction may occur. In addition, funds required for equipment at new openings are procured through borrowings from financial institutions, and if financial conditions such as interest rate trends change or funds cannot be procured as planned, the opening of new nursery schools may become difficult, affecting performance and financial condition. The Group addresses this by implementing profit improvement plans on an area-by-area basis and building stable, long-term relationships with financial institutions.