Premium Group Co., Ltd

The Company's primary funding sources are bank borrowings, affiliated loans, and securitization of financial receivables, and its loan agreements include financial covenants. If business performance deteriorates, creditworthiness declines due to inadequate corporate governance, or financial market disruption occurs, new financing may be restricted, potentially affecting business continuity. The Company seeks to reduce this risk by securing liquidity through commitment lines and other means.

Most of the Company's borrowings carry fixed interest rates, but some are at floating rates, meaning that a rise in market interest rates would increase funding costs. Since existing Auto Credit (Affiliated Loan Method) contracts are fixed-rate, the direct impact is limited, but for newly originated contracts, higher funding costs could affect profitability. The Company strives to secure margins by appropriately reflecting funding conditions in credit fees charged to customers.

The Company hedges bad debt risk on installment receivables and other receivables by entering into trade credit insurance and guarantee-agency-type credit insurance contracts with multiple non-life insurance companies. Economic downturns or an increase in personal bankruptcy filings could increase insurance premiums and allowances for doubtful accounts, and if bad debt losses exceed insurance payout limits or credit insurance contracts cannot be maintained, this could have a material impact on business performance. The Company recognizes allowances for doubtful accounts for expected credit losses in accordance with IFRS 9.

The credit business requires registration as an individual credit purchase intermediary business operator under the Installment Sales Act (renewed every three years, with the next expiration date of April 19, 2028), and the Company also holds multiple licenses under the Secondhand Articles Dealer Act, the Road Transport Vehicle Act, and other laws. Future revocation or non-renewal of licenses, changes in laws, regulations, or policies, increased compliance costs, or grounds for contract cancellation or invalidity under the Consumer Contract Act and similar laws could affect business performance. At present, no events constituting grounds for license revocation have occurred.

The Company processes large volumes of personal credit information through its core credit systems, automated screening systems, warranty management systems, and other systems, and system outages or malfunctions caused by natural disasters, cyberattacks, unauthorized access, computer viruses, or similar events could disrupt operations. While the Company has implemented measures such as system redundancy, dual data centers, and use of multiple telecom carriers, unforeseen events or major revisions to system development plans could affect business performance.

Given the nature of its business, the Company acquires, holds, and uses large volumes of personal information, primarily personal credit information, and any leakage, loss, or unauthorized use could result in reputational damage, liability for damages, or administrative sanctions. Two major subsidiaries have obtained Privacy Mark certification, and the Company has established a framework including network security enhancement, management of outsourcing partners, employee training, and internal audits. Information leakage from outsourcing partners could also affect business performance.

In FY2026 (ending March 2026), the used car sales market was flat, affected by price increases stemming from a shortage of used car inventory and production adjustments and supply restrictions by some manufacturers. If used car sales volumes decline going forward, competition is expected to intensify in the Finance Business and Warranty Business, and a decline in profit margins or market share could affect business performance.

The Warranty Business operates on a business model in which the Company provides free repairs in the event of vehicle malfunction in exchange for warranty fees received, and repair costs could significantly exceed initial estimates due to an increase in malfunctions of higher-priced vehicles or a surge in the price of vehicle parts. A sharp rise in repair costs would directly squeeze the profitability of the Warranty Business and affect the Group's overall business performance and financial position.

Goodwill and intangible assets recorded upon the acquisition of all shares of Premier Co., Ltd. in June 2015 account for the majority of the Group's goodwill and intangible assets, with goodwill of ¥4,197 million and non-amortizing intangible assets of ¥4,581 million recorded as of the end of the current consolidated fiscal year. As the Company applies IFRS, these are treated as non-amortizing assets and are not subject to periodic amortization each period; however, if future profitability declines, an impairment loss may be recognized, which would affect business performance and financial position.

The Company conducts auto finance, warranty, vehicle maintenance, and consulting businesses in Thailand, the Philippines, and Indonesia, which inherently involve country risks such as changes in tax systems, foreign capital regulations, political events, terrorism, infectious diseases, sudden changes in labor conditions, and inadequate infrastructure. Should such events occur, they could affect the Group's business results and financial position.