Nareru Group Inc.

As of the end of October FY2025, the ratio of goodwill to total assets stood at an extremely high 57.3%, arising mainly from the acquisition of shares in World Corporation in November 2019. Since the Group adopts IFRS, periodic amortization is not required; however, if the profitability of the acquired business declines, an impairment loss may be recognized, and the impact on business results and financial position is explicitly stated to be significant. The company is working to improve the profitability of the business, but impairment risk continues to exist.

The Group's core business is staffing services for the construction industry, and fluctuations in domestic construction investment trends directly affect its business results. If public and private construction works decline due to a deterioration in economic conditions, this could lead to reduced working hours and early termination of staffing contracts, increasing the burden of personnel costs for the large number of permanently employed engineers. As a countermeasure, the company is diversifying risk by expanding staffing into fields such as plant engineering, BIM, and IT.

Securing engineering talent is fundamental to growth, and against the backdrop of Japan's continuously declining total population, the supply-demand balance for engineers remains tight. Intensifying competition in the recruitment market may make it difficult to secure supply commensurate with demand, or may increase recruitment costs. The company is responding through the use of its proprietary recruiting media (Sekokan NEXT), diversification of recruitment channels, measures to reduce turnover rates, and expansion of training programs.

With approximately 4,000 dispatched engineer employees, labor management regulations have been strengthened, including the overtime work cap regulations applied to the construction industry since April 2024. Legal violations due to inadequate labor management, or occupational accidents at client worksites, could lead to compensation liabilities and loss of social credibility. The company is working to strengthen its compliance-focused labor management system and to identify risks in working environments.

The Group's business premises on the worker dispatching business license (valid until March 31, 2026) and the fee-charging employment placement business license for construction work (valid until October 31, 2026). If, for any reason, these licenses were revoked or business suspension were ordered, it would seriously impede business activities. In addition, if disguised contracting issues were to arise in SES operations, this could also pose a risk of loss of social credibility. As of now, no grounds for revocation have arisen.

Ryo Kobayashi, the founder and Representative Director, possesses extensive experience and knowledge in staffing services for the construction industry and plays a key role in determining management policy and business strategy. If he were to become unable to continue his duties, this could affect the Group's business results and financial position. Following the election of directors at the ordinary general meeting of shareholders scheduled for January 29, 2026, and a change in Representative Director at the board of directors, the company plans to build a structure that moves away from dependence on the founder.

As of the end of October FY2025, borrowings accounted for 19.8% of total assets, and the floating-rate portion could affect business results in the event of rising interest rates. In addition, the loan agreements include financial covenants, and a breach could result in a demand for lump-sum repayment of the borrowings. The company regularly checks financial covenant figures and works to secure stable profits and funds.

The Group holds a large amount of personal information belonging to engineers, employees, job applicants, and others, and any external leakage could lead to compensation liabilities and loss of social credibility. The company has established and operates personal information protection regulations, implements security measures for its information systems, and conducts ongoing education and training for officers and employees.

The AP Fund (managed by Advantage Partners, Inc.) holds 17.8% (1,560,600 shares) of the total number of issued shares, and depending on its future disposal policy, this could affect the liquidity of the shares and share price formation. In addition, the interests of the AP Fund may differ from those of other shareholders. The company has been informed by the AP Fund that it will respond in a manner that minimizes impact on the market price as much as possible.

As part of its growth strategy, the Group may pursue mergers and acquisitions, business alliances, establishment of new companies, and the like, and if outcomes deviate significantly from initial plans, this could affect business results and financial position. The company has a policy of conducting thorough prior research and consideration when implementing such initiatives, but uncertainty remains.