Matters related to the operations and financial statements of the PARK24 Group that could have a significant impact on the decision-making of investors are described below. Forward-looking statements are based on the judgment of the PARK24 Group as of the end of the fiscal year ended October 31, 2020, and business risks are not limited to those listed below.
Business risks related to COVID-19
- (i) Risk of deterioration in the PARK24 Group’s financial position due to decreased demand
Regarding the consolidated earnings forecasts for the fiscal year ending October 31, 2021, the Company preliminarily calculated the impact of COVID-19 on its business performance, based on the assumption that business would be impacted by the infection but would gradually recover towards the end of the fiscal year ending October 31, 2020. However, there are many uncertainties in the assumptions used for the estimates. The Group’s financial condition, results of operations and cash-flow situation may be affected by the time that it takes for COVID-19 to be contained and changes in the impact on economic conditions.
In such circumstances, the Group will endeavor to minimize the decline in earnings by continuing to implement countermeasures such as restructuring of each business, improving productivity and reducing costs.
- (ii) Risk of transmission among customers
The PARK24 Group’s mobility services are services of car sharing. Consequently, to reduce the risk of transmission among customers, employees regularly deep clean the insides of vehicles with disinfectant and put disinfectant sprays inside vehicles so that customers can also disinfect the inside of vehicles themselves. However, if a customer who uses the Company’s services catches the virus, the Group’s business performance may be impacted as others increasingly tend to avoid using the Company’s services.
- (iii) Risk of transmission among employees and business continuity risk
To ensure the health and safety of employees working at each site, the PARK24 Group aims to reduce employees working onsite appropriately and has put in place systems to enable employees to stagger their working hours or work from home. The Group is also endeavoring to reduce unnecessary movement and contact by changing ways of working and conducting meetings online or via telephone. However, if an employee catches the virus or the virus spreads throughout the company through contact between employees, the Group may need to take action such as closing sites or partially suspending business operations.
- (iv) Risk of demand collapse and default due to deterioration in the financial situation of customers
If the PARK24 Group’s customers struggle to continue operating after their financial situation deteriorates due to COVID-19, the Group may lose previously stable business and may also struggle to recover receivables from these customers.
Risk Associated with Changes in Economic Conditions
An economic recession, globally or regionally, could cause a decline in consumer spending and could reduce the traffic volume. The resulting decline in demand for parking and mobility services may have an adverse impact on the PARK24 Group’s business, operating performance and financial condition.
In addition, if future economic conditions have an impact on various factors such as fuel and energy prices, interest rates, and tax rates, the Group’s business, operating performance and financial condition could be significantly influenced.
Risk of Disasters
Any damage to the PARK24 Group’s parking facilities and/or vehicles for the mobility service due to natural disasters such as an earthquake, tsunami, flood, typhoon, snowfall and volcanic eruption, may affect the provision of relevant services. The Group has been diversifying areas where it operates parking facilities and mobility services in its effort to avoid risks. However, if there is devastating damage to its facilities such as the management center and information center, the Group may have difficulty providing services to customers. Moreover, the Group’s business, operating performance and financial condition may be adversely affected due to large costs for restoration and replacement, among other factors.
Risk Associated with the Parking Business in Japan
(i) Contract Cancellation Risk in the Parking Business
The PARK24 Group’s mainstay Parking Business in Japan consists mainly of sublet parking facilities leased from the land or parking facility owner under a lease contract without owning the land or facilities. The Group has been developing small-scale parking facilities to provide sublet parking facilities in the STANDARD Business. In the PARTNER SERVICE Business, it has been facilitating collaboration with the Group’s other services to develop parking facilities in which lease contracts are unlikely to be cancelled and through such efforts has been working on the solidification of its business bases. Despite that, if there are cancellations of lease contracts for a number of highly profitable facilities, the Group’s business and operating performance may be adversely affected.
(ii) Risk of Rising Land Prices
A rise in land prices could have an impact because land owners may be inclined to sell their land (and cancel the lease contracts), or the PARK24 Group may deal with higher land rents in the phase of new development. This may have an adverse impact on the Group’s strategy as it works to increase the number of parking facilities. The Group has never experienced higher rents attributable to higher land prices because it undertakes development in areas where higher land prices are unlikely to affect rents. Still, a rise in cancellation rates or in rents could have an adverse impact on the Group’s business and operating performance.
Risk Associated with the Mobility Business
(i) Risk of Competitors’ Operations
The PARK24 Group has been competing not only with industry peers but also companies operating in other industries, such as auto leasing companies and taxi companies, mainly on quality, price, and service. These operations of other companies may have an adverse impact on the Group’s businesses and operating performance.
(ii) Risk of Used Vehicle Market
The PARK24 Group’s sales cycle includes the sale of its vehicles from the mobility service to the used vehicles market. However, any serious change in the used vehicle market may have an adverse impact on the Group’s business and operating performance.
(iii) Risk Associated with the Safety of Services
The PARK24 Group maintains its vehicles for the mobility service through legal inspections and according to its own standards. However, if an accident related to vehicle maintenance were to occur, the Group may suffer loss of the confidence of its customers and its reputation. In addition, the resultant decline in demand in the medium to long term after an accident may have an adverse impact on the Group’s business and operating performance.
Risk Associated with the Parking Business Overseas
Secure Parking and National Car Parks joined the PARK24 Group as affiliates in 2017. Currently, the Group operates the Parking Business in the seven countries of Taiwan, South Korea, Australia, New Zealand, Singapore, Malaysia, and the United Kingdom.
The Group is in the process of building a system of governance in each region to establish appropriate internal controls in areas such as company-wide autonomous initiatives for compliance and risk management. However, if misconduct occurs due to a delay in the implementation of such initiatives, the Group may suffer loss of the confidence of its customers and its reputation. In addition, this may result in a decline in demand for parking facilities and restrictions for the development of parking facilities, adversely impacting the Group’s businesses and operating performance.
The Group has also been making efforts overseas to ensure that risks are identified at the earliest time and concrete and appropriate measures are implemented before such risks become real issues. However, any changes beyond expectations, such as unexpected revisions to taxation systems, laws and regulations, changes in political and economic factors, social and economic confusion due to an epidemic, unpredicted fluctuations in markets and exchange rates, and social and economic confusion due to terrorism or war, may have an adverse impact on the Group’s business and operating performance.
Risk of IT Systems
The PARK24 Group operates businesses that are heavily reliant on systems such as the provision of services to customers and operations incidental thereto. These systems or communication networks may experience serious issues due to natural disasters, accidents, computer viruses, unauthorized access, limited power supply, large-scale power outages, defects and failures. In such a case, the Group may find it difficult to provide services to customers and continue to operate. In addition, the Group’s business and operating performance may be affected adversely due to the loss of credibility.
Risk Associated with the Leak of Customer Information
The PARK24 Group has a large amount of information related to its customers, including membership information on the Times CLUB membership point program and the Times CAR, a car sharing service. The Group is expected to manage such personal information properly pursuant to the Act on the Protection of Personal Information and equivalent laws and regulations enforced overseas.
Risk Associated with Legal Restrictions
The PARK24 Group, while conducting business in Japan, is subject to a range of legal restrictions such as the Parking Lot Act, the Road Traffic Act and the Road Transportation Act. In addition, it is obligated to comply with relevant laws and regulations to develop business overseas. The implementation of revisions to such laws and regulations or unexpected introduction of new laws and regulations may have an adverse impact on the Group’s business, operating performance and financial condition.
Risk Associated with the Securing and Development of Human Resources
With an eye on the enhancement of corporate value through sustainable growth, the PARK24 Group has been nurturing “human resources that can fully demonstrate their individuality and completely fulfil their expected roles while at the same time continuously developing their skills” in line with its human resources vision. It has been developing human resources based on respect for diversity and working on related enhancement in organizational strengths. In addition, with an eye on the development of human resources who are expected to spearhead group-oriented management, the Group has been taking measures to strengthen the leadership skills of employees in top and middle managerial positions who are expected to drive sustainable corporate growth. However, if the Group does not succeed in securing and developing a sufficient number of human resources who can spearhead group-oriented management or possess high-level expertise required for business activities, it may not be able to create an organization with competitive advantages.
Risk Associated with Financial Matters
To operate businesses, the PARK24 Group procures funds through borrowings from banks and the issuance of corporate bonds. However, in case of the deterioration of the Group’s business environment, confusion in financial markets, or changes in taxation and financial policies or governmental financial institutions’ guarantee schemes, the Group’s credit ratings may be downgraded. In such a case, an increase in financing costs, which may result from the Group having difficulties with or losing a chance to raise funds with favorable conditions, may have an adverse impact on the Group’s operating performance and financial condition.