HITO-TO-HITO Holdings Co.,Ltd.

In a group consisting of a holding company and five operating subsidiaries, if governance does not function properly, risks increase such as compliance violations, invalidation of internal controls, and failure to achieve business plans due to insufficient implementation of management policy. As countermeasures, the Company has appointed four outside directors (more than half of the board), holds monthly Group management meetings, and shares legal compliance status through the Risk and Compliance Committee on a quarterly basis.

If client companies review or scale down the development of large-scale commercial facilities in response to climate change, the Group's revenue opportunities may decrease. In addition, in the event of a large-scale earthquake or typhoon in the Tokyo metropolitan area or the Hanshin region, there is a risk of business suspension at client facilities and human and economic impacts on employees. As countermeasures, the Company is formulating BCP plans, expanding the Human Resources Support Business, which is less susceptible to the effects of climate change, and enhancing operations related to infectious disease countermeasures.

As of the end of FY2026 (ending March 2026), the Company recorded borrowings of ¥4,338 million, procured from financial institutions as LBO scheme and M&A funds. Because the interest rate is contractually reviewed every six months in line with market interest rates, a rise in market interest rates raises concerns about deteriorating performance due to increased interest expense. As countermeasures, the Company continues profitability-focused performance management (hurdle rate system) and ongoing negotiations with financial institutions on interest rate terms, and financial covenants were abolished upon listing in April 2026.

As of the end of FY2026 (ending March 2026), goodwill amounted to ¥5,951 million, representing a high level of 55.0% of total assets. Under IFRS amortization is not required, but an impairment loss could arise if the pre-tax discount rate rises by 6.9% or future cash flows decline by 41.5%. As countermeasures, the Company is promoting continued acquisition of new projects, profitability management based on the hurdle rate, and strengthening shareholders' equity through the accumulation of retained earnings.

The top 10 clients together account for approximately 40% of consolidated revenue, indicating a high degree of dependence on specific customers. If clients decide to scale down or terminate business due to their own decision-making, the Group's revenue could decrease significantly. As countermeasures, in addition to maintaining trusted relationships with major clients, the Company continues to develop new clients leveraging know-how from existing operations.

In a business model dependent on human labor such as security guards, event staff, and temporary staff, the effective job openings-to-applicants ratio for security occupations stands at a challenging 6.12, reflecting a difficult recruitment environment. If outflows of labor or difficulty securing necessary personnel occur going forward, this could adversely affect performance. As countermeasures, the Company is developing attractive workplaces such as professional sports and large-scale commercial facilities, and expanding the pool of applicants by promoting the active participation of women and elderly workers.

In an environment where nominal wages are rising by 2.7%, a significant increase in personnel expenses directly leads to higher cost of sales. If revenue increases or price pass-through cannot keep pace with rising personnel expenses, performance could be adversely affected. As countermeasures, the Company continuously negotiates labor cost pass-through with clients at each contract renewal period, while also promoting profitability management through more efficient staffing allocation.

With advances in AI, robotics, and IoT device technology, substitution is progressing even in operations that were previously difficult to mechanize. While the Company judges it unlikely that its operations will be replaced all at once, accelerating AI advances could result in some operations being replaced by systems. As a countermeasure, the Company itself is also promoting the use of AI and other technologies, with a policy of concentrating resources on operations that should be performed by

The Group is subject to numerous laws and regulations, including the Security Services Business Act, the Worker Dispatching Act, the Employment Security Act, the Waste Management Act, and the Construction Business Act, and violations could result in administrative sanctions such as business suspension or license revocation. Administrative sanctions could make it temporarily or permanently impossible to accept relevant business, leading to decreased revenue, as well as reputational risk. As countermeasures, the Company conducts legal compliance education, regular audits by the internal audit department, and shares compliance status through the Risk and Compliance Committee.

There is a structural seasonal fluctuation in which revenue is concentrated in the first and second quarters, the peak seasons for professional baseball and professional golf, and decreases in the third and fourth quarters. In FY2026 (ending March 2026), operating profit/loss recorded a loss of ¥186 million in the fourth quarter, reflecting pronounced seasonal fluctuation in profit. As countermeasures, the Company is promoting the expansion of B.League operations, expanding temporary event operations in the third and fourth quarters, and expanding the Building Management Business and Human Resources Support Business, which are less affected by seasonal fluctuation.