teno.Holdings Company Limited

Specialized personnel such as nursery teachers, cooks, nurses, and caregivers are essential to business operations, and if the securing of human resources fails to keep pace with the increase in the number of facilities, this may affect business performance. As countermeasures, the Company is promoting multi-channeling such as expanding transactions with staffing agencies and enhancing its own recruitment strategy, but the tight supply-demand balance for specialized professionals is a structural issue.

The Childcare Business is operated under licenses based on the Child Welfare Act, the Nursing Care Business under designations based on the Long-Term Care Insurance Act and the Health Insurance Act, and the worker dispatching and employment placement businesses under permits granted by the Minister of Health, Labour and Welfare. If a license revocation or business suspension order were issued, business continuity would become difficult. Although no grounds for revocation currently exist, business activities could also be constrained by the enactment or revision of related laws and regulations. Since the Company holds numerous licenses and permits across multiple segments, the scope of regulatory risk is broad.

The Group's core business is childcare services primarily targeting children aged 0 to 5 years old, and if the market contracts significantly due to a rapid acceleration in the declining birthrate, the number of children enrolled at operated facilities may decrease, potentially affecting business performance and financial condition. The declining birthrate is a structural and long-term domestic trend and poses a risk that threatens the very foundation of the business.

The outstanding loan balance at the end of the consolidated fiscal year was ¥5,575 million, representing 53.5% of total assets, indicating a high degree of dependence on external borrowing. Since the Company relies on borrowing from financial institutions for the capital expenditure necessary to open new facilities, if fund procurement as planned becomes impossible due to sharp interest rate fluctuations or changes in financial conditions, this may constrain the opening of new facilities and affect business performance.

If the performance of the Childcare Business deteriorates significantly, impairment of tangible fixed assets related to childcare facilities may become necessary. In addition, since the Company promotes M&A as one of its growth strategies, if an acquired company fails to secure profits as planned, an impairment loss on goodwill may occur, potentially having a material impact on business performance.

If a serious accident occurs in the operation of childcare facilities, etc., a business suspension order may be issued by the authorities, and a situation in which many children and users withdraw from the facilities is anticipated. Although the Company takes utmost care to prioritize safety, the impact on business performance in the event of an accident is severe and would directly lead to a loss of social trust.

If infectious diseases such as novel influenza, norovirus, or COVID-19 spread, the operation of nurseries may become difficult due to a significant decrease in users or a large number of employee absences. For the Group, which operates numerous facilities, the spread of infectious diseases poses a risk of simultaneously affecting a wide range of facilities.

Childcare facilities hold the personal information of a large number of users, and if a leak occurs, in addition to loss of trust from users, it would lead to a decline in social credibility. As a result, this could also hinder business development, such as affecting the opening of new nurseries, etc., and may affect business performance.

In the small-amount short-term insurance business, the Company underwrites risks related to natural disasters such as typhoons, and if natural disasters occur at a frequency or scale exceeding the assumptions made when setting premiums, this may affect business performance and financial condition. Although catastrophe loss reserves, etc. are set aside in accordance with the Insurance Business Act, the reserves may not be sufficient relative to actual insurance claim payments.

Hiroko Ikeuchi, the President and Representative Director, has served as the chief executive officer since the Company's founding and plays a critical role in everything from determining management policies and strategy to driving business operations and sales measures. If any unforeseen circumstance were to occur to her or if she were to step down, this may affect business performance and business development. As a countermeasure, the Company is proceeding with the assignment of directors and department heads responsible for each business area and delegating authority, aiming to reduce dependence on any specific individual.