UNICON Holdings Co., Ltd.

The Construction-Related Business, which accounts for the majority of the Group's sales, is highly dependent on public works. Although the current trend remains solid due to national resilience-building policies, given Japan's fiscal circumstances, the continuation of order volumes over the medium to long term remains uncertain. If public works are reduced more than expected, this could have a material impact on business performance. As countermeasures, the Group seeks to mitigate this risk by securing stable orders from existing clients based on its long track record and technical capabilities, and by expanding new business through the utilization of the corporate group system.

The Construction-Related Business, the Group's core business, holds a special construction business license, which enables it to enter into subcontracting agreements of ¥5,000 million or more per contract (¥8,000 million or more for building construction work). If this license were revoked for any reason, it could hinder business activities and have a material impact on business performance. The Group seeks to mitigate this risk by thoroughly complying with relevant laws and regulations and renewing its license as appropriate.

Following listing on the Standard Market of the Tokyo Stock Exchange, the tradable share ratio is expected to be at a level close to the listing maintenance criteria, and if the Group fails to meet the listing maintenance criteria for any reason, it may become unable to maintain its listing. In addition, Endeavor United No. 2 Investment Limited Partnership, the largest shareholder, holds 94.9% of the total number of issued shares, and depending on its holding and disposal policy, this could affect the liquidity of the shares and the formation of the share price. The Group's policy is to increase the number of tradable shares by, among other measures, requesting partial sell-downs by major shareholders.

Because public works contracts are awarded through bidding, there is a risk that price competition may intensify due to prevailing low-price bidding and excessive competition, which could affect business performance through a decline in the gross profit margin on completed construction contracts. This risk can arise at any time and is not concentrated in specific ordering periods. The Group seeks to mitigate this risk by strengthening its technical capabilities in its specialty construction methods and leveraging its technological superiority.

In the construction industry, individual construction contract amounts are large, and payment is made at or after the delivery of the completed work. If an ordering party, joint construction partner, or subcontractor faces credit concerns or financial difficulties before payment is received, this may result in an inability to collect funds or delays in construction, which could affect financial condition and business results. As countermeasures, the Group seeks to mitigate this risk by thoroughly conducting credit investigations of business partners and accelerating the collection of payments through the appropriate receipt of advances on uncompleted construction contracts.

If a serious accident, personal injury accident, or material non-conformance with contractual requirements occurs during construction, in addition to restoration costs, construction delays, and damages, the Group may lose order opportunities due to suspension of designation or business suspension, which could affect business performance and corporate evaluation, including construction performance ratings. The Group seeks to mitigate this risk by establishing safety management departments at each operating company to conduct safety patrols and safety education, as well as by confirming construction details before work begins and conducting regular internal inspections during construction.

Most of the Group's construction work is concentrated in the Tohoku region, and if a large-scale natural disaster occurs in the region or public works are significantly reduced there, this could directly affect business performance. The Group seeks to mitigate this risk by improving utilization rates through group synergies and expanding order-taking activities outside the Tohoku region.

As of June 30, 2024, the Group has recorded goodwill of ¥1,796,750 thousand as a result of past investments and group reorganizations, accounting for 15.9% of total assets. Because the Group applies IFRS, straight-line amortization of goodwill is not required; however, if the recoverable amount falls below the carrying amount due to a deterioration in the business performance of the target company or other factors, impairment losses may need to be recognized, which could affect business results and financial condition. The Group seeks to mitigate this risk by regularly monitoring the business plans of investee companies and providing guidance and support.

In the course of its business operations, the Group handles important information such as customers' technical data and customer data. If information is leaked due to unauthorized access or other causes, this could damage customer trust and give rise to liability for damages, adversely affecting business results and financial condition. The Group seeks to mitigate this risk by establishing internal regulations and manuals related to information security, communicating them to officers and employees, and providing security education.

Due to unstable international conditions and the effects of yen depreciation, resource and energy prices continue to rise, and price increases stemming from subcontractors' requests for higher fees and increased material demand may affect business performance and financial condition in the short term. As countermeasures, the Group seeks to mitigate this risk by securing multiple subcontractors and material suppliers to restrain price increases, and by negotiating appropriate price pass-through with clients.