Shin Maint Holdings Co.,Ltd.

In the fiscal year ended February 2025, sales to the restaurant industry accounted for 70.0% of net sales. If the business conditions in the restaurant industry deteriorate or price competition intensifies due to heightened competition, there is a risk that maintenance requests will decline, leading to a deterioration in business performance. While the Group is pursuing diversification into retail, elderly care facilities, hotels, hospitals, and other sectors, if customer acquisition in new markets does not proceed as planned, the impact on business performance could expand further.

In the fiscal year ended February 2025, the top 10 customers in the restaurant, retail, and elderly care facility sectors accounted for 44.2% of net sales and 41.9% of gross profit. If the Group loses orders from or terminates contracts with these customers, or if fluctuations occur in maintenance demand from them, it could have a direct and material impact on business performance. Although the Group strives to build favorable relationships, this concentration risk has not been eliminated.

The Group outsources most of its maintenance operations to Maintenance Keepers (outside contractors). If a Maintenance Keeper's capabilities decline, its management deteriorates, or it provides inadequate service, this could lead to customer complaints, liability for damages, and a decline in the Group's reputation. Delays in developing new Maintenance Keepers or deterioration in the maintenance and management status of existing ones could also affect business performance. The Group addresses this risk by comprehensively screening and managing Maintenance Keepers based on qualities, skills, qualifications, and track record.

In the maintenance market, the Group faces intense competition from domestic industry peers, construction contractors, and maintenance service providers, and there may be competitors that have an advantage over the Group in certain areas such as response speed, repair technology, and personnel. If the competitiveness of the Group's Maintenance Keepers declines, it may become difficult to acquire and retain customers, which could affect business performance.

If customers strengthen in-house maintenance of their stores and facilities and reduce orders placed with the Group, there is a risk that sales and profits will decline directly. Changes in customers' outsourcing policies are an external factor beyond the Group's control, and if major customers change their policies, the impact on business performance could be significant. Conversely, an increase in the outsourcing ratio would be a factor increasing sales and profits.

Refrigeration and air conditioning equipment used in the restaurant industry experience increased load during the summer months (June to August), a seasonal factor that increases demand for the Emergency Maintenance Service. Since maintenance demand fluctuates depending on summer weather conditions, there is a risk that the Group's business performance could decline in years with cool summers or other unfavorable weather conditions. Long-term effects of climate change may also alter demand structures.

If the maintenance system goes down due to human error, natural disaster, power outage, or other causes, there is a risk that arranging Maintenance Keepers and billing operations will be disrupted, impeding service provision. Although the Group has established a system backup structure and an early recovery system through its system vendor, if a failure exceeding the scope of a large-scale disaster occurs, it could lead to a decline in service levels and adversely affect business performance.

The current management team, including founder Hideo Naito, has extensive experience and knowledge regarding maintenance operations and related administrative work, and plays an important role in formulating and executing management policies and profit plans, as well as in managing Maintenance Keepers. If any of these directors were to leave the company due to unforeseen circumstances, it could affect business performance. The Group is working to build an organizational structure that does not depend on specific directors.

The Group grants restricted stock to officers and employees and plans to continue doing so going forward, which may reduce the market liquidity of the Company's shares. While this system is intended to enhance corporate value over the medium to long term and share value with shareholders, reduced liquidity could constrain trading opportunities for investors.

Since the majority of officers and employees are concentrated at the headquarters of the Company or its subsidiaries, if a severe disaster such as an earthquake, typhoon, or tsunami, or an infectious disease such as terrorism or a highly virulent strain of influenza occurs, business continuity could be disrupted. In addition, if Maintenance Keepers are affected by a large-scale disaster, service provision may become difficult, which could affect business performance through a decline in orders and other factors.