CHALLENGES

Issues to be Addressed

In the elevator and escalator maintenance industry, business opportunities are increasing due to an increase in the number of elevators and escalators resulting from an increase in the supply of real estate and the cost reduction demands of property owners and building management companies, etc. On the other hand, the growing social demand for the safe operation of elevators and escalators requires the provision of high-quality services.
While the Japanese economy is showing signs of a pickup in economic trends due to the normalization of economic activities as a result of the easing of action restrictions caused by the new coronavirus infection, the outlook remains uncertain due to the prolonged situation in Ukraine and rising prices associated with the rapid depreciation of the yen, etc. Therefore, the need for companies to reduce costs is expected to increase more than ever. Since the Group's maintenance business for elevators and other equipment is a service necessary to maintain social life, we continue to operate our business while paying attention to the spread of the new coronavirus infection. In this business environment, we recognize that the main issues to be addressed by the Group are as follows.

(1)

Build and expand domestic business base

We recognize that building and expanding our business base is a challenge for the Group to achieve stable growth.
Specifically, we believe it is most important to increase the number of maintenance contracts, which will lead to ongoing revenue and expansion into repair and modernization operations.

(2)

Secure and develop human resources

The foundation of the Group's business competitiveness is human resources capable of providing the high-quality maintenance services required for the safe operation of elevators, and we believe that securing and training such personnel is essential for the future growth of our Group.
The Group will continue strengthening the training it has provided to employees and establish an in-house technical and quality certification system to develop human resources with high skill levels.
In addition, the Group will seek to improve public awareness of the Group and working conditions, actively increase the number of new graduates and mid-career hires, and supplement its workforce as appropriate through the use of subcontractors that can guarantee the quality demanded by the Group.

(3)

Develop overseas business

We believe that demand for high-quality maintenance services exists widely not only in the Japanese market but also in overseas markets. By leveraging the Group's technical capabilities to handle elevators from multiple manufacturers and its expertise in education and training, which it has cultivated in the Japanese market, the Company intends to expand and grow in overseas markets.

(4)

Consideration of capital and business alliances for business expansion

We will consider acquiring other companies, forming joint ventures or business alliances with other companies that would contribute to improving the corporate value of our group.

(5)

Promotion of research and development

The JES Innovation Center (JIC), a research and development facility equipped with a 50-meter elevator test tower, and the JES Innovation Center Lab (JIL), located adjacent to the JIC, promote research and development activities such as elevator modernization. In particular, JIL is strengthening various R&D activities, focusing on expanding production capacity in the modernization business and increasing the number of models compatible with "Quick Renewal," a low-cost, quick-delivery service.

(6)

Stabilization of financial base

The future expansion of the Group's business will require upfront and ongoing investment to accommodate evolving technologies relates to elevators, including research and development, investment in human resources, and expansion of training facilities. To prepare for future capital needs, the Company shall secure internal reserves and stabilize its financial position by raising funds through borrowings and other means.