Among the matters relating to business conditions, accounting status, etc. described in the securities report, the following are factors that may significantly affect investors' decisions.
Forward-looking statements in this document are based on judgments made by the Group as of the end of the current consolidated fiscal year.
Revenue Status
Regarding our core dormitory business, we operate with the mindset of a boarding house manager, developing our business with the motto of providing residents with the same comfort they would experience at home. We partner with educational institutions to provide student dormitories and adopt a system where companies can contract only the necessary number of rooms for employee dormitories based on fluctuations in their workforce. Since most of our business land and buildings are developed through lease agreements with landowners, despite our detailed approach to management, risks associated with significant vacancies belong to our company in cases such as when major educational institutions discontinue their designated dormitory arrangements or when major corporate clients terminate their contracts due to restructuring.
In our hotel business, while the Dormy Inn (business hotel) operation is structured to be less susceptible to occupancy fluctuations due to its ability to accommodate long-term guests and its software and hardware differentiation from competitors, it may still be affected by declining corporate demand due to economic conditions. Additionally, in our resort hotel business, our Group's performance may be impacted if sales during typically high-revenue periods underperform due to economic conditions, unfavorable weather, typhoons, earthquakes, or other natural disasters.
In our foods business, our Group's performance may be affected if restaurant operations experience declining individual demand, or if contracted golf course restaurants and corporate cafeterias have their management contracts terminated.
Financial Condition
Our Group considers the development of dormitory and hotel businesses to be essential elements for sustainable growth. While we utilize various financial methods to maximize effectiveness safely while considering the company's overall financial balance, our performance and financial condition may be affected if development does not proceed according to plan due to real estate market stagnation, asset value depreciation, extreme cash flow reduction from existing development assets, or deteriorating financial conditions.
Legal Regulations and Quality Control
The products and services provided by our Group are subject to various legal regulations and guidance that strongly demand safety, including hygiene management under the Food Sanitation Act, the Personal Information Protection Act, and safety management under the Hotel Business Act and the Fire Service Act. Although our Group regularly confirms compliance through our compliance framework, Risk Committee, and internal control systems, our social credibility and performance may be affected if unforeseen circumstances result in food poisoning, personal information leakage, or other incidents.
Application of "Impairment Accounting"
On August 9, 2002, the Business Accounting Council published the "Opinion on Establishing Accounting Standards for Impairment of Fixed Assets," followed by the Financial Accounting Standards Foundation and Accounting Standards Board of Japan publishing "Guidance on Accounting Standards for Impairment of Fixed Assets" (Guidance No. 6) on October 31, 2003. In response to these standards, if a significant decline in the future profitability of constant business cash flows is recognized due to rapid changes in economic conditions or deterioration of financial circumstances affecting the Group's tangible fixed assets, intangible fixed assets, investment and other assets, or leased assets, the application of "impairment accounting" may affect our performance and financial condition.
Significant Contracts
Regarding our Group's important business facilities, namely dormitory and hotel properties, we primarily lease them from building owners under long-term lease agreements of 10-20 years. Some of these long-term lease agreements cannot be terminated early by either party, and if the operations or revenue at these facilities deteriorate significantly, our company's performance and financial condition may be affected.
As of the end of March 2024, there are 74 facilities with non-cancellable lease agreements, with total non-cancellable lease obligations amounting to 134,107 million yen.
Dependence on Interest-Bearing Debt and Impact of Interest Rate Trends
Our Group finances business operations through its own funds as well as borrowings from financial institutions, with interest-bearing debt accounting for 51.2% of total assets as of the end of March 2024. Meanwhile, we are working to reduce our dependence on interest-bearing debt by utilizing methods such as selling some of our owned properties to investors as properties operated under our management and lease agreements. Additionally, the fixed interest rate financing ratio was 89.4% as of the end of March 2024, limiting the short-term impact during interest rate increases. However, if interest rates rise over the long term in the future and funding costs increase, our Group's performance may be affected.