The various categories of risk to which the business performance, stock price, financial position, and other aspects of operations of the Hankyu Hanshin Holdings Group are subject are detailed below. Nevertheless, these dangers do not encompass all risks attendant on Group activities and there are risks other than those stated below which are difficult to foresee.
Information about future events that appears in this annual report was determined by the Group to be current as of March 31, 2019.
- Legal Risk
In accordance with the stipulations of Article 3 of the Railway Business Law, the Group must obtain separate permissions from the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) for each category of railway operations on each route that it intends to operate. Moreover, under Article 16 of the Law, a railway operator must obtain the Ministry’s approval for the passenger fares it intends to set and on each occasion when it wishes to change the fares.
Consequently, there is a certain risk that the Group’s railway operations may be constrained in some way by the MLIT’s administration of these regulations.
- Interest-Bearing Debt
- The balance of interest-bearing debt held by the Group as of the end of March 2019, on a consolidated basis, was ¥877,055 million.
As a result of the acquisition of shares in Hanshin Electric Railway through a successful public tender offer (takeover bid) on June 27, 2006, Hanshin Electric Railway has become a consolidated subsidiary of Hankyu Holdings. This acquisition has resulted in an increase in the balance of interest-bearing debt of the Group. On the other hand, management integration between the Hankyu Holdings Group and Hanshin Electric Railway Group has increased cash flows, so the Group is not expected to have any significant difficulty in repaying its debts.
The Group will take measures to diversify its fund procurement methods to deal with an increase in interest-bearing debt resulting from the integration, and will use all possible means to minimise the negative impact of interest rate movements. But in the unlikely event that interest rates rise suddenly and in excess of our projections, this could exert an adverse effect on the business performance and financial position of the Group.
- Decline in the Market Value of Assets Held by Members of the Hankyu Hanshin Holdings Group
- In the case of a substantial decline in the market value of inventory assets, property and equipment and intangible assets, investment securities, and other assets, the recording of impairment losses or valuation losses would likely have a negative impact on the earnings performance and financial position of the Hankyu Hanshin Holdings Group.
- Declining Birth Rate
In the Group’s mainstay Kyoto-Osaka-Kobe area, demographic changes accompanying the declining birth rate are expected to lower demand for railway, bus, and taxi services and other types of passenger transportation and to lower demand in other business areas.
In addition, securing personnel is likely to become difficult as an imbalance between supply and demand develops in the labour market.
Such contingencies could affect the business performance and financial position of the Group.
- Natural Disasters
- Operating as it does across an extremely wide range of businesses in its Urban Transportation, Real Estate, Entertainment and Communications, Travel, International Transportation, and Hotels segments, the Group has a correspondingly large assortment of facilities necessary for the conduct of business, such as railway installations and buildings and retail outlets for rent. In the event of earthquakes or other major disasters, large-scale accidents, or acts of terrorism, the business performance and financial position of the Group could be adversely affected by damage to these facilities, its customers, and/or limitations placed on its business operations.