Japan Animal Referral Medical Center Co..,Ltd.

The number of pet animals is affected by demographic and economic trends, and some surveys indicate a flat to slightly declining trend. On the other hand, the diversification of diseases due to the aging of animals, the increasing rate of pet insurance enrollment, and the rise in treatment costs per animal are increasing demand for advanced medical care, but if the business environment deteriorates, it could affect business operations and financial results. The Group continues to expand its advanced medical services while closely monitoring market trends.

The number of animal hospitals is on an increasing trend, and in recent years some secondary veterinary care facilities have also been introducing advanced medical equipment and securing specialist veterinarians, leading to changes in the competitive environment in some regions. The Group differentiates itself as a comprehensive care facility with multiple specialized departments through collaboration among departments, but if such differentiation proves insufficient or the number of consultations decreases due to intensifying competition from new entrants, it could affect financial results.

Securing, developing, and retaining excellent personnel, including highly specialized veterinarians, is a key challenge for business expansion, and if the Group is unable to recruit such personnel or if trained personnel leave the company, it could affect business operations and performance. As countermeasures, the Group is improving treatment conditions through revisions to personnel systems, higher salary and bonus levels, and the establishment of a retirement benefit system, in addition to working on development and retention through training, conferences, and case report meetings.

If malpractice occurs in the provision of animal medical care services, demand for services may decline due to liability for losses and a decline in social reputation. The Group pays close attention to quality control, but if malpractice occurs, it could have a material impact on business operations and performance.

When opening a new facility, since the customer base gradually increases, the facility may record losses until it reaches the break-even point, and there is a risk that the investment amount may exceed the plan or the opening timing may be delayed due to rising construction material prices, labor costs, and labor shortages in the construction industry. In addition, even at existing facilities, capital investment amounts may increase due to rising medical equipment prices and exchange rate fluctuations, and if the number of customers or cases falls below expectations, a decline in the utilization rate may make it impossible to absorb depreciation and other costs, which could affect performance.

If laws and regulations such as the Veterinarians Act, the Veterinary Practice Act, or the Act on Pharmaceuticals and Medical Devices are revised or abolished, or if new regulations are established, it could affect business operations and performance. In response to the Veterinary Nurses Act that came into effect in May 2022, the Group is promoting the enhancement of team-based care systems, and the Legal Affairs Section of the Administrative Division centrally collects information on legal amendments and coordinates responses across departments; however, if the Group is unable to respond appropriately to legal amendments or tightened regulations, it may result in the revocation of licenses, administrative sanctions, or additional response costs.

If personal information or confidential information of customers or business partners is leaked, it could lead to a decline in trust and liability for damages to customers, which could affect business operations and performance. The Group is promoting measures such as establishing internal management systems and providing information management and security education for employees, but it is difficult to completely eliminate risks such as cyberattacks or internal misconduct.

As of the end of March 2026, interest-bearing debt stood at ¥5,163,631 million, with a dependence ratio on interest-bearing debt at a high level of 45.6%, and if interest rate levels rise or funds cannot be raised as planned, it could affect financial results and financial position. Currently, the Group has been able to raise funds smoothly, including through refinancing, but continued attention to changes in the financial environment is necessary.

Some of the loan agreements with multiple financial institutions include financial covenants, and if operating results deteriorate significantly and breach these covenants, the lending financial institutions may demand immediate repayment by accelerating the loss of the benefit of time. In such a case, this could have a material impact on the financial position and performance, and maintaining financial discipline is an important management challenge.

If damage occurs to employees, hospitals, or facilities due to natural disasters such as earthquakes or storm and flood damage, it could adversely affect financial position and performance. In addition, if a serious occupational accident occurs, it could also affect business operations and performance, and the Group has established a Health and Safety Committee to promote safety measures and conduct safety education.