The following are the principal risks identified by management, among the matters relating to business operations and financial performance disclosed in the Annual Securities Report, that could materially affect the financial position, results of operations or cash flows of the consolidated Group.
Any forward-looking statements in this section reflect the Group's assessments as of the end of the fiscal year under review.
(1) Laws, etc.
(i) Golf Business
Development and use of land for golf courses is regulated by laws concerning land use and development, such as the River Act, the Forest Act, the Agricultural Land Act, the City Planning Act, the National Land Use Planning Act, and the Road Act. Operation of golf course facilities is affected by laws, such as the Food Sanitation Act, and the Public Bath Houses Act, as well as laws related to the environment, such as the Agricultural Chemicals Regulation Act, and the Waste Management and Public Cleansing Act. Thus, if there are any major abolitions or revisions to these laws, or if new laws that regulate the golf business are enacted and enforced, there is a possibility that this will affect the Group’s financial position and operating results.
(ii) Pachinko and Pachislot Machine Business
The pachinko and pachislot machine business is regulated by laws, etc., such as the Act on Control and Improvement of Amusement Business, etc., the Order for Enforcement of the Act on Control and Improvement of Amusement Business, etc., and the Regulations Concerning Authorization and Model Approval for Amusement Machines. Thus, if there are any major abolitions or revisions to these laws, etc., or if new laws that regulate the pachinko and pachislot machine business are enacted and enforced, there is a possibility that this will affect the Group’s financial position and operating results.
(2) Market Environment
(i) Golf Business
As part of the leisure industry, the golf business is sensitive to economic conditions in Japan and to changes in consumer preferences across generations. All members of Japan's postwar baby-boom generation are now aged 75 or older. If Japan's declining birthrate and aging population persist, the number of golfers is expected to fall over time, potentially resulting in an oversupply of golf courses.
Against this backdrop, we operate golf courses and driving ranges designed to appeal to a broad range of customers, from those seeking an accessible, casual experience to those looking for premium facilities and attentive hospitality. We also seek to attract new players, women and golfers returning to the sport.
However, a sharp rise in prices or changes in social and economic conditions could weaken consumer confidence and lead to reduced discretionary spending on leisure activities. Such developments could adversely affect the Group's financial position and results of operations.
(ii) Pachinko and Pachislot Machine Business
In recent years, the number of pachinko parlors and the number of participants in leisure activities has continued to decline due to the effects of diversification of leisure and the declining birthrate and decreasing population, and the operating conditions of pachinko parlors have become more severe. Thus, pachinko parlors are becoming more selective when it comes to the pachinko and pachislot machines they purchase, and pachinko and pachislot machine manufacturers must apprehend players’ preferences and develop more attractive machines. Under these conditions, the Group is working to produce products that are differentiated from other companies, improve product value by designing machines from the players’ perspective, and increase profitability by reducing costs through the reuse of components, etc.
However, the Group’s financial position and operating results may be impacted by further worsening of operating conditions for pachinko parlors and rapidly changing player preferences, etc.
(3) Natural disasters, major accidents, and infectious diseases, etc.
(i) Golf Business
Since we own golf courses throughout Japan, facilities such as golf courses and clubhouses as well as equipment such as golf carts may suffer direct damage from natural disasters including floods, earthquakes, tsunamis, and typhoons, which have grown in scale in recent years. Short-term and localized downpours caused by weather such as typhoons or linear rainbands have a particularly large impact in terms of collapses of golf courses or flooding of riverside courses.
As it takes time to ensure the safety of customers and employees and restore infrastructure such as electricity and water as well as golf courses in the event of a disaster, closure may be necessary for a certain period of time, which would impact the Group’s financial position and operating results.
Furthermore, if there is a major outbreak of an infectious disease such as a new strain of influenza, not only will the Group sustain direct damage, but its financial position and operating results may also be affected by people refraining from leisure activities, etc.
(ii) Pachinko and Pachislot Machine Business
In terms of corporate regulations, we have established Risk Management Rules. We anticipate earthquakes, typhoons, fires, etc. as latent risks to our business activities and have instituted clear procedures for responding to them.
However, if our headquarters, pachinko and pachislot machine development center (Taito-ku, Tokyo), manufacturing center (Isesaki City, Gunma Prefecture), offices, or any pachinko parlors with which we do business incur damage due to a natural disaster that exceeds projections, or if there is a major outbreak of an infectious disease such as a new strain of influenza, this may hamper business activities and impact the Group’s financial position and operating results.
(4) Financial Risks
The golf business obtains financing from financial institutions when additional funds are needed for golf course operations or mergers and acquisitions. The pachinko and pachislot machine business also uses bank borrowings to finance capital expenditures and other funding requirements. After an extended period of low interest rates in Japan, rates have begun to rise following changes in Bank of Japan policy, including the termination of negative interest rates. A substantial further increase in rates could raise interest expenses and the cost of new borrowings and result in less favorable refinancing terms.
On January 31, 2025, the Company acquired PJC Investments Co., Ltd. (now Accordia Golf Holdings Co., Ltd.) as a subsidiary. In connection with the acquisition, the Company entered into a ¥510.0 billion syndicated loan agreement arranged by Sumitomo Mitsui Banking Corporation and Mizuho Bank, Ltd. Consequently, net interest-bearing debt stood at ¥572.155 billion for the fiscal year ended March 31, 2026, while the net debt to Equity ratio:230%.
The principal borrowings of the golf business are subject to financial covenants. If any of these covenants are breached and no new agreement is reached with the relevant lenders, the Group may be required to repay loans before maturity or fulfill guarantee obligations. Lenders may also establish mortgages over certain pledged golf properties or enforce security interests over pledged shares. Any such event could adversely affect the Group's financial position and results of operations.
To mitigate this risk, the Group monitors both businesses to maintain compliance with its financial covenants and seeks to deploy funds efficiently across the Group. We also aim to strengthen financial stability by achieving the objectives of Medium-Term Management Plan 2027.
(5) Procurement of components, etc.
In the pachinko and pachislot machine business, the Group procures certain components used in the manufacturing of pachinko and pachislot machines from multiple external suppliers and relies on particular suppliers for some components. The current global supply shortage of semiconductors and other electronic components has been affecting the Group’s procurement of components. The Group is coping with this by securing the largest quantities possible and promoting the reuse of components.
However, if procurement of components is severely affected by factors outside the Group’s control such as a disaster or changes in policy or bankruptcy among suppliers, this may impact the Group’s financial position and operational results.
(6) Handling of personal information
The pachinko and pachislot machine business handles information about the privacy and reputation of customers, etc. (including personal information, etc.). The golf business handles a large volume of personal information belonging to visitors to golf courses through the Company’s website or other websites using computer systems, etc. The Company complies with the Act on the Protection of Personal Information and the Act on the Use of Numbers to Identify a Specific Individual in the Administrative Procedure (My Number Act) with regard to the personal information of customers, etc., and specific personal information of employees, and has management systems in place for the protection of personal information and specific personal information. However, if information is leaked to an external party due to unforeseen circumstances, costs such as compensation for damage may be incurred, and this may impact the Group’s financial position and operating results such as by affecting the reputation of the Group’s brand.
(7) Information Security
Information systems play an increasingly important role across the Group's operations, and our reliance on IT continues to grow. At the same time, cyberattacks involving ransomware and other malware are becoming more frequent and sophisticated. We regularly review and strengthen our security measures, including system management procedures, information controls and employee awareness programs addressing phishing and other malicious emails.
Nevertheless, unauthorized access, malware infections or other incidents could disrupt our systems and interrupt business operations, potentially adversely affecting the Group's financial position and results of operations.
(8) Impairment of Non-current Assets
The Group holds property, plant and equipment, as well as intangible assets, including goodwill arising from mergers and acquisitions. These assets are subject to the Accounting Standard for Impairment of Fixed Assets under Japanese GAAP. Under this standard, the recoverable amount of an asset group is assessed, and an impairment loss is recognized to the extent that its carrying amount exceeds its recoverable amount. A significant deterioration in the business environment could therefore give rise to impairment losses.
In the golf business in particular, non-depreciable assets such as golf courses and land account for a substantial proportion of total assets. Any impairment losses could therefore be material and adversely affect the Group's financial position and results of operations.
(9) Climate Change
As an outdoor sport, golf is particularly exposed to weather conditions, including extreme heat and snowfall, which have affected operations frequently in recent years. The Group recognizes climate change as an important issue and is working to track and reduce greenhouse gas emissions arising from its operations.
For further information, see Section 2, Business Overview, 2, Sustainability Policies and Initiatives, subsection (2), Climate-related Matters.