Nojima Corporation

The mobile communications market is maturing, and competition is intensifying due to the lengthening of device replacement cycles, the expansion of MVNOs, and the spread of online-only pricing plans. Following the consolidation of Connexio Co., Ltd. (consolidated in February 2023), the proportion of the mobile communications field in the consolidated results of the Nojima Group has increased, and any contraction in this market would have a direct impact on overall business performance. The company closely monitors market trends but states that it is difficult to predict changes with certainty.

The Nojima Group receives commissions, incentives, and support fees based on agency contracts with mobile communications carriers, and these could be substantially changed due to changes in the carriers' sales policies. In addition, the agency contracts include termination clauses, and a material breach of contract terms could result in significant consequences such as contract termination. Plans to open carrier shops also require consultation with each carrier, imposing certain constraints on business development.

The Nojima Group positions M&A as a primary means of business expansion and intends to continue considering it going forward; however, sudden changes in the external environment or misalignment of interests between parties may prevent the expected results from being achieved. Due to limitations in due diligence and analysis, there is a risk that contingent or unrecognized liabilities may come to light after the fact, and if the performance of an acquired company deteriorates, impairment of goodwill or other assets and additional costs may arise. In the past, the company has acquired Connexio Co., Ltd. and Thunder Match Technology Sdn. Bhd., and depending on the scale of future deals, the financial impact could become significant.

The company is expanding its business primarily in Southeast Asia, having established a local subsidiary in Cambodia and operating a home appliance retail business (Thunder Match Technology Sdn. Bhd. (TMT)) in Singapore and Malaysia. Foreign exchange risk, political instability, differences in laws, regulations and business customs, as well as supply chain disruption risk stemming from U.S.-China tensions and global inflation, could make business promotion difficult. If these factors make it difficult to recover investments, it could affect operating results and financial condition.

As of the end of FY2026 (ending March 2026), the ratio of interest-bearing debt to consolidated total assets is 10.7%, and borrowings associated with store expansion and M&A may increase further going forward. Amid the Bank of Japan's gradual shift in interest rate policy, there is a risk that rising market interest rates will increase funding costs. The company intends to strengthen its financial structure while taking into account its net interest-bearing debt ratio and other factors, but balancing this with its policy of continuing new store openings and M&A remains a challenge.

The company handles large volumes of personal information through mobile membership registration, e-Commerce membership registration, mobile phone activation procedures, and other processes. If information leakage or unauthorized use occurs, it could result in loss of social trust and claims for damages. While the company has established internal management systems and thoroughly informs employees, it states that it is difficult to completely eliminate the possibility of unforeseen incidents. The risk is heightened in particular by the wide variety and volume of personal information handled due to multi-store expansion, including the operation of carrier shops.

New store openings by competitors and entry into digital home appliance sales by companies from other industries are progressing, intensifying price and service competition within trading areas. Because the pace of market change is rapid and difficult to predict with certainty, a delayed response to competitive trends could lead to a deterioration in business performance. In addition, if demand for seasonal products declines significantly due to weather factors such as a cool summer or warm winter, this could also affect operating results.

The company is subject to numerous laws and regulations, including the Large-Scale Retail Store Location Act, the Act against Unjustifiable Premiums and Misleading Representations, the Telecommunications Business Act, the Antimonopoly Act, the Act on Prevention of Improper Use of Mobile Phones, and the Act on the Protection of Personal Information. Any violation could result in a loss of trust, claims for damages, or administrative dispositions such as suspension of business. While the company strives to strengthen its internal management systems, including employee education and awareness activities, future changes to or new enactment of information and communications policy by regulatory authorities could affect business performance. In particular, regulatory changes in the mobile communications field pose a risk that touches on the fundamentals of the business.

Due to multi-store expansion, the company holds a large number of business-use fixed assets, and impairment losses may need to be recognized due to declines in market value or deterioration in future cash flows. In addition, since many stores lease land and buildings, there is a risk that part or all of security deposits and guarantee deposits may become unrecoverable if the lessor's financial condition deteriorates. Early termination of leases may result in partial amortization of security deposits or payment of penalty fees, which could affect the financial condition.

In the VAIO brand PC business (planning, design, manufacturing, sales, and repair) and the private brand "ELSONIC" products, any product defects or accidents could result in brand damage, loss of customer trust, and increased response costs. While the company is working to strengthen its quality control systems, the absolute magnitude of this risk is also increasing as sales expand domestically and internationally. In particular, the VAIO business targets both domestic and overseas PC markets, so the impact could be significant if a quality issue were to develop into a global problem.