Financial Information and References

ESG Initiatives

Financial Review

SASB Index

We have prepared a report under Sustainability Accounting Standards Board (SASB) guidance for theProfessional & Commercial Services sector, which most closely aligns with the business of SECOM. This

Overview

report can be accessed from the IR section of our corporate website.

In the fiscal year ended March 31, 2021, SECOM CO., LTD. andits consolidated subsidiaries (collectively, “the Company”)
sought to provide high-quality services and products that
respond to the diverse needs of customers in its core security
services segment, as well as in its fire protection services,
medical services, insurance services, geospatial information
services, BPO and ICT services, and real estate and otherservices segments.
Notwithstanding the negative impact of COVID-19 incertain areas of the security services, fire protection services
and medical services segments, consolidated net sales andoperating revenue in the period under review edged up 0.2%,
or ¥2.7 billion, to ¥1,135.3 billion, and operating income rose
4.8%, or ¥6.2 billion, to ¥135.8 billion. This was due to anincrease in the BPO and ICT services segment and to net
realized investment gains (including a gain on other-thantemporary impairment of investment securities) in theinsurance services segment, compared with net realized
investment losses in the previous fiscal year. Despite a loss
from discontinued operations, net of tax, net income attributable
to SECOM CO., LTD., advanced 3.2%, or ¥2.8 billion, to ¥89.9
billion, underpinned by an increase in operating income, as well
as by a gain on other-than-temporary impairment of investment
securities, compared with a loss in the preceding period.

SECOM’s SASB Index
Professional & Commercial Services Sector Sustainability Indicators
Topic

Code

Workforce Diversity &Engagement

Description of approach to identifying and addressing data security risks

SV-PS-230a.2

Description of policies and practices relating to collection, usage, and retentionof customer information

SV-PS-230a.3(1) Number of data breaches, (2) Percentage involving customers’ confidential
business information or personally identifiable information, (3) Number ofcustomers affected

SV-PS-330a.1

Percentage of gender and racial/ethnic group representation for (1) executive
management and (2) all other employees

SV-PS-330a.2(1) Voluntary and (2) involuntary turnover rate for employees

SV-PS-330a.3

Employee engagement as a percentage

SV-PS-510a.1

Description of approach to ensuring professional integrity

SV-PS-510a.2

Total amount of monetary losses as a result of legal proceedings associatedwith professional integrity

Professional Integrity

Topic

Accounting Metric

SV-PS-230a.1

Data Security

Code

SV-PS-000.A
Activity metrics

SV-PS-000.B

Activity Metric

Data*

Number of employees by:(1) full-time and part-time(1) Full-time employees:

14,602(2) temporary(2) Temporary employees:

1,332(3) contract(3) Contract employees:

1,688

Employee hours worked, percentage
billable

Employee hours worked:

29,866,147

Percentage billable:

N/A*Data for “Activity metrics” is for SECOM CO., LTD., and is as of March 31, 2021, or for the fiscal year ended March 31, 2021. Because billing for electronic security
services, our principal business, is based on fixed monthly fees, “percentage billable” is not applicable.

56

Operating Results

SECOM REPORT 2021

Net Sales and Operating Revenue
Consolidated net sales and operating revenue in the period
under review edged up 0.2%, or ¥2.7 billion, to ¥1,135.3 billion,
notwithstanding the negative impact of the pandemic oncertain areas of the fire protection services, security services
and medical services segments, and reflected an increase in
the BPO and ICT services segment, together with net realized
investment gains (including a gain on other-than-temporary
impairment of investment securities) in the insurance services
segment, compared with net realized investment losses in
the previous fiscal year. (For further information, please see
Segment Information below.)
Costs and Expenses
Total costs and expenses slipped 0.3%, or ¥3.5 billion, to ¥999.5
billion. Cost of sales was down 0.6%, or ¥5.0 billion, to ¥790.3
billion, and was equivalent to 69.6% of net sales and operating
revenue, compared with 70.2% in the preceding period.
Contributing factors included net realized investment gains(including a gain on other-than-temporary impairment ofinvestment securities) in the insurance services segment,
as well as an increase in net sales and operating revenue
and a decrease in the cost of sales ratio—attributable tothe presence of profitable projects—in the BPO and ICT
services segment.
Selling, general and administrative (SG&A) expenses, at¥201.7 billion, were down 0.7%, or ¥1.5 billion, and equivalent
to 17.8% of net sales and operating revenue, slightly better thanthe previous fiscal year’s 17.9%, reflecting cost-cutting efforts
and the voluntary suspension of business travel as a measure
to prevent the spread of COVID-19, among others. The Company
also reported an impairment loss on goodwill (in the security

services business) of ¥5.7 billion, up ¥4.9 billion. In contrast,
impairment loss on long-lived assets fell ¥857 million, to ¥95
million, and loss on sales and disposal of fixed assets, net,slipped ¥990 million, to ¥1.8 billion.
Operating Income
Operating income rose 4.8%, or ¥6.2 billion, to ¥135.8 billion,
as favorable results in the insurance services, BPO and ICT
services, and geospatial information services segments
outweighed declines in the security services, fire protection
services and medical services segments, while corporate
expenses and eliminations decreased. The operating margin
improved to 12.0%, from 11.4%. (For further information, pleasesee Segment Information below.)
Other Income and Expenses
Other income increased ¥2.3 billion, to ¥12.1 billion, while otherexpenses fell ¥3.6 billion, to ¥2.8 billion. Net other income thus
amounted to ¥9.3 billion, up ¥5.9 billion. This was primarily
attributable to a more encouraging investment environment,
as a consequence of which the Company reported a gain onother-than-temporary impairment of investment securities of¥4.6 billion, compared with a loss on other-than-temporary
impairment of investment securities of ¥3.7 billion in thepreceding period. The Company had also reported a ¥2.3 billion
gain on sales of securities, net, in the previous fiscal year, as
the result of the sale of a U.S. subsidiary in the geospatial
information services business.
Income Taxes
Income taxes amounted to ¥47.6 billion, up ¥6.8 billion, owing tohigher income from continuing operations before income taxes
and equity in net income of affiliated companies, as well as to anincrease in the income tax expense rate, reflecting the increasein impairment loss on goodwill. This was equivalent to 32.8% ofincome from continuing operations before income taxes andequity in net income of affiliated companies, compared with30.7% in the preceding period.
Equity in Net Income of Affiliated Companies
Equity in net income of affiliated companies edged down ¥76
million, to ¥6.6 billion.
Loss from Discontinued Operations, Net of Tax
In December 2020, all issued shares in consolidated subsidiary
Secom Home Life Co., Ltd., were transferred to a third party. As
a consequence, Secom Home Life and its subsidiary, previously
included in the real estate and other, and security services
segments, were excluded from the scope of consolidation andtheir operations classified as discontinued. Accordingly, theoperating results of these companies are reported in income(loss) from discontinued operations. Figures for prior periods
have been restated. As a consequence of this and otherfactors, loss from discontinued operations, net of tax, in the
period under review was ¥2.6 billion, compared with income
from discontinued operations, net of tax, of ¥975 million in thepreceding period.

SECOM REPORT 2021

57

Financial Information and References/Financial Review

Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests declined¥1.0 billion, to ¥11.6 billion. The principal factor behind thisresult was a decrease in operating income in the fire protection
services segment.
Net Income Attributable to SECOM CO., LTD.
Net income attributable to SECOM CO., LTD., advanced 3.2%,
or ¥2.8 billion, to ¥89.9 billion, equivalent to 7.9% of net
sales, rising from 7.7% in the preceding period. Net income
attributable to SECOM CO., LTD., per share was ¥411.95, up from¥399.23. The figure of ¥170.00 for cash dividends per share thatappears in the consolidated financial statements represents
cash dividends approved and paid to shareholders during theperiod under review, namely, an ¥85.00 per share year-end
dividend for the fiscal year ended March 31, 2020, approved at
the Ordinary General Meeting of Shareholders held on June 25,
2020, and an ¥85.00 per share interim dividend determined by
the Board of Directors and paid to shareholders of record as of
September 30, 2020. Cash dividends for the fiscal year ended
March 31, 2021, approved at the Ordinary General Meetingof Shareholders held on June 25, 2021, were also ¥85.00
per share.

Segment Information
Security Services
Security services include electronic security services, whichcenter on on-line security systems; other security services;and merchandise and other. In the fiscal year ended March 31,
2021, net sales and operating income in this segment declined
1.2%, or ¥7.0 billion, to ¥566.4 billion. Excluding intersegment
transactions, segment net sales and operating income were¥563.3 billion, representing 49.6% of overall net sales andoperating revenue, down from 50.3% in the previous fiscal year.
In addition to on-line commercial and home security
systems, electronic security services include large-scale
proprietary security systems, which focus on surveillance at
subscribers’ premises. On-line commercial and home security
systems use sensors, controllers and other equipment installedat subscribers’ premises to detect events, including intrusions,fires and equipment malfunctions. Equipment is linked toa SECOM control center via telecommunications circuits tofacilitate around-the-clock monitoring. Should an irregularity be
detected, relevant information is relayed to the control center,
where staff dispatch emergency response personnel to takeappropriate measures. If necessary, control center staff also
notify the police, fire department or other emergency services.
The Company employs a rental format, whereby it maintains
ownership of security equipment and provides it to subscribers
on a rental basis. This minimizes initial costs for subscribers
and guarantees the quality and stability of its services. The
initial contract period for security services is five years, with
contracts renewed automatically each subsequent year.
Depreciation for security equipment is computed using thedeclining balance method principally over five years.
The Company takes full responsibility for all aspects of
its on-line commercial and home security systems, from
R&D through to equipment manufacturing, security planning,
installation, around-the-clock monitoring, emergency response
services and equipment maintenance. This integrated approachleverages the Company’s half-century-plus of experience andknowhow in providing electronic security services, together with
its R&D team’s ability to recognize and address false alarms, toensure highly efficient operations.

58

SECOM REPORT 2021

Net sales and operating income from electronic security
services edged up 0.1%, or ¥198 million, to ¥347.4 billion.
In overseas markets, net sales and operating income in thiscategory fell, hindered by the spread of COVID-19 and a weakyen. In contrast, net sales and operating income in this category
in Japan rose, underpinned by increased sales of high-valueadded on-line security systems such as System Security
AZ, which boasts superb expandability, as well as peripheralservices, and of SECOM Home Security NEO and other home
security services that address growing needs for help in caring
for vulnerable members of society.
Other security services include static guard and armoredcar services. Net sales and operating revenue generated bystatic guard services, which are provided by highly trained
professional security guards for systems requiring humanjudgment and flexible responsiveness, decreased 1.0%, or ¥684
million, to ¥69.4 billion. Armored car services, which involve thetransport of cash, securities and other valuables using speciallyfitted armored cars and security professionals, generated net
sales and operating revenue of ¥62.8 billion, down 1.2%, or ¥761
million, mainly due to changes in the operations of financial
institutions.
The merchandise and other category encompasses a wide
range of security products, including security camera systems,
access control systems, automated fire extinguishing systems
and external monitoring systems, which can be freestandingor linked to on-line security systems. Net sales and operating
revenue in this category declined 6.1%, or ¥5.4 billion, to ¥83.7
billion, largely owing to the negative impact of the pandemic onmerchandise turnover.
Operating income in the security services segment
decreased 5.6%, or ¥6.1 billion, to ¥102.6 billion. The operating
margin was 18.1%, slipping from 18.9% in the preceding
period. These results mainly reflected an impairment loss on
goodwill of ¥5.7 billion, up ¥4.9 billion, and lower sales in themerchandise and other category.

Fire Protection Services
The fire protection services segment focuses on high-grade,tailored, automatic fire alarm systems, fire extinguishingsystems and other fire protection systems for a wide range ofapplications, including office buildings, plants, tunnels, culturalproperties, ships and residences. In the period under review,
Nohmi Bosai and Nittan, two of Japan’s leading domestic
fire protection services providers, sought to leverage theirrespective business foundations and product development
capabilities to secure orders.
Net sales and operating revenue in this segment declined
7.7%, or ¥12.0 billion, to ¥143.9 billion. Principal factors behind
this result included the impact of COVID-19 and the fact thatmajor projects had pushed up results in the previous fiscal year.
Operating income fell 26.5%, or ¥4.7 billion, to ¥13.1 billion,
reflecting the absence of the concentrated number of profitableprojects that had buoyed results in the preceding period. The
operating margin was 9.1%, down from 11.4%.
Medical Services
Medical services include the provision of home nursing services,
pharmaceutical dispensing services, support for affiliatedmedical institutions in Japan, sales of medical equipment,
the operation of a general hospital in India, the operation ofresidences for seniors and other personal care services, healthand preventative care services, and ICT-based services, which
include electronic medical report systems. Additionally, thissegment includes the operations of variable interest entities(VIEs) of which the Company is the primary beneficiary, which
manage hospitals and health care–related institutions.
Segment net sales and operating revenue, at ¥182.8
billion, was down 2.4%, or ¥4.5 billion. This was primarily due
to a decline in the number of patients at affiliated medical
institutions, a consequence of the pandemic, which hindered
net sales and operating revenue of VIEs, as well as a reduction
in revenue reported by a hospital operated by the Company inIndia. Operating income fell 36.8%, or ¥2.3 billion, to ¥3.9 billion,
while the operating margin decreased to 2.2%, from 3.3% in theprevious fiscal year.
Insurance Services
The insurance services segment continued to expand sales ofan extensive lineup of distinctive non-life insurance policies,
including the Security Discount Fire Policy, a commercial fire
insurance policy, and SECOM Anshin My Home, a comprehensive
fire insurance policy for homes—both of which extend discounts
on premiums to customers who have installed on-line security
systems, recognizing this as a risk-mitigating factor—and
SECOM Anshin My Car, a comprehensive automobile insurance
policy that offers onsite support services provided by SECOM
emergency response personnel should the policyholders
be involved in an accident, and MEDCOM, an unrestricted
cancer treatment policy that covers the entire cost of medical
treatment for cancer.
Net sales and operating revenue in this segment climbed
30.8%, or ¥14.4 billion, to ¥61.4 billion, bolstered by brisk
sales of MEDCOM and automobile insurance policies, aswell as by net realized investment gains (including gains onother-than-temporary impairments of investment securities)of ¥7.7 billion, compared with net realized investment lossesof ¥4.1 billion in the preceding period. Thanks to net realized
investment gains, the segment reported operating income of¥9.3 billion, compared with an operating loss of ¥4.3 billion.
Geospatial Information Services
The geospatial information services segment centers on thecollection of geographic data using commercial satellites,
aircraft and surveying using proprietary vehicles, among
others, which is integrated, processed and analyzed to provide
geospatial information services to public-sector entities—
including national and local governments—and customers in
the private sector in Japan. These services are also offered
to government agencies overseas. Segment net sales andoperating revenue edged up 0.7%, or ¥376 million, to ¥54.1
billion, bolstered by an increase in revenue from domestic
public-sector customers, to which the provision of surveying
services employing aerial lasers expanded. Operating income
climbed 46.6%, or ¥1.4 billion, to ¥4.4 billion, while theoperating margin rose to 8.2%, from 5.6%, owing mainly to an
improvement in the cost of sales ratio in the area of services fordomestic public-sector customers, a result of higher revenue
and enhanced production efficiency, as well as to declines in
SG&A expenses attributable to the optimization of services foroverseas customers and efforts to adapt sales processes to aremote environment.
BPO and ICT Services
BPO and ICT services, which focus on the provision of data
center services, also encompass distinctively SECOM BCP
support, telework support, information security and cloudbased services, and BPO services, which include the operationof contact centers. Net sales and operating revenue in thissegment advanced 7.6%, or ¥8.4 billion, to ¥119.3 billion, thanksprincipally to special demand associated with COVID-19 andexpanded revenue in the area of BPO services, underpinned byefforts to cultivate customers, and in the data center services
business. Operating income, at ¥13.6 billion, increased 28.4%,
or ¥3.0 billion, while the operating margin rose to 11.4%, from
9.6%, reflecting an improvement in the cost of sales ratio, with
contributing factors including higher net sales and operating
revenue in the data center business, and a number of profitable
BPO services projects.
Real Estate and Other Services
The real estate and other services segment comprises realestate leasing, construction, installation and other services.
Segment net sales and operating revenue was down 7.1%,
or ¥2.1 billion, to ¥28.1 billion, owing to a decrease in major
construction projects and the absence of real estate sales
that boosted results in the preceding period, among others.
Operating income was up 1.6%, or ¥86 million, to ¥5.4 billion,
reflecting an improvement in the cost of sales ratio in the areaof maintenance services. The operating margin improved to19.3%, from 17.6%.

SECOM REPORT 2021

59

Financial Information and References/Financial Review

Financial Position
Total assets as of March 31, 2021, amounted to ¥2,137.8 billion,
an increase of ¥56.7 billion from the end of the previous fiscal
year. Total current assets climbed ¥35.0 billion, to ¥979.4 billion,
and accounted for 45.8% of total assets. The current ratio was
2.3 times, compared with 2.2 times a year earlier. Current
assets included cash and cash equivalents of ¥502.2 billion, up¥87.5 billion. (For further information, please see Cash Flows,which follows this section.) Notes and accounts receivable,
trade, at ¥153.4 billion, were down ¥13.2 billion, owing to suchfactors as a decline in net sales and operating revenue in thefire protection services segment. Notes and accounts receivable,
trade, are affected by the fact that income in the fire protection
services and geospatial information services businesses tends
to be concentrated toward the end of the fiscal year. Cashdeposits for armored car services decreased ¥2.0 billion, to¥138.9 billion. These cash deposits are funded primarily throughbank overdrafts and deposits and their use by the Company
is restricted. Inventories fell ¥24.5 billion, to ¥31.8 billion,
a consequence of the exclusion of consolidated real estatedevelopment and sales subsidiary Secom Home Life, all issued
shares in which were transferred to a third party.
Investments and long-term receivables, at ¥347.7 billion,rose ¥22.4 billion, and represented 16.3% of total assets.
Investment securities advanced ¥19.3 billion, to ¥214.1 billion.
The key factor behind this was the purchase of new corporate
bonds and other debt securities following the redemption andsales of the corporate bonds and other debt securities due
within one year.
Property, plant and equipment, less accumulated
depreciation, amounted to ¥429.1 billion, an increase of ¥3.6
billion. This accounted for 20.1% of total assets.
Other assets decreased ¥4.2 billion, to ¥381.6 billion,
and were equivalent to 17.8% of total assets. Owing to an
improvement in the investment environment, prepaid pension

and severance costs rose ¥7.7 billion, to ¥39.5 billion. In
contrast, deferred income taxes fell ¥6.4 billion, to ¥19.3
billion, and long-term deferred charges declined ¥3.1 billion, to¥13.9 billion.
Until the fiscal year ended March 31, 2020, all costs related
to installation services for security equipment used in theprovision of on-line security systems were included in deferredcharges in other assets. Effective from the fiscal year ended
March 31, 2021, the portion of these costs to be amortizedwithin one year was shifted to short-term deferred charges incurrent assets. (For further information, please see note 2 (13)of Notes to Consolidated Financial Statements.)
Total liabilities as of March 31, 2021, were ¥846.7 billion, adecrease of ¥7.1 billion from a year earlier, and represented
39.6% of total liabilities and equity. Total current liabilities, at¥420.0 billion, were down ¥11.2 billion and accounted for 19.6%
of total liabilities and equity. This primarily reflected a ¥5.2
billion decline in bank loans, to ¥33.9 billion, due mainly to a
reduction in bank loans related to armored car services, and a¥4.2 billion decrease in notes and accounts payable, trade, to¥44.3 billion.
Total long-term liabilities rose ¥4.1 billion, to ¥426.7 billion,
equivalent to 20.0% of total liabilities and equity. This was due
to a ¥9.2 billion increase in long-term debt, to ¥53.5 billion,
largely the result of an increase in long-term debt held by VIEs
managing hospitals and other healthcare-related institutions.
Until the fiscal year ended March 31, 2020, lump-sum
payments for residences for seniors were presented as
guarantee deposits in long-term liabilities. Effective from thefiscal year ended March 31, 2021, these payments are included
in long-term deferred revenue in long-term liabilities. (Forfurther information, please note 2 (26) of Notes to Consolidated
Financial Statements.)

Total SECOM CO., LTD. shareholders’ equity advanced ¥53.6
billion, to ¥1,142.3 billion. Retained earnings rose ¥52.8 billion,to ¥1,070.4 billion, owing primarily to net income attributable

to SECOM CO., LTD., and the payment of dividends. As aconsequence, the equity ratio was 53.4%, up from 52.3% at theprevious fiscal year-end.

Cash Flows
The Company is committed to maintaining sufficient liquidity
to allow flexibility in its operations and ensure a solid financial
foundation. To the best of its ability, the Company is also
firmly committed to financing strategic investments with cash
generated by its operating activities.
In the fiscal year ended March 31, 2021, net cash provided
by operating activities amounted to ¥188.7 billion. The principal
components of this were net income of ¥101.5 billion anddepreciation and amortization, including amortization ofdeferred charges—a non-cash item—of ¥78.7 billion. Net
cash provided by operating activities was ¥4.3 billion higher
than in the fiscal year ended March 31, 2020, as a decrease
in receivables and due from subscribers, net of allowances,of ¥14.3 billion, compared with an increase of ¥10.6 billion in
the preceding period, pushed up cash provided by operating
activities, while an increase in inventories of ¥787 million,
compared with a decrease of ¥9.3 billion, and decreases innotes and accounts payable and accrued income taxes of ¥4.1
billion and ¥935 million, respectively, compared with increasesof ¥2.4 billion and ¥5.1 billion in the previous fiscal year boosted
cash used in operating activities.
Net cash used in investing activities was ¥52.9 billion.
The main applications of cash were payments for purchasesof property, plant and equipment of ¥50.1 billion, applied topurchases of equipment necessitated by rising security services
subscriptions; payments for purchases of intangible assets of¥10.7 billion; and acquisitions, net of cash acquired, of ¥7.1
billion. In contrast, cash proceeds from sale of subsidiaries, netof cash and cash equivalents disposed of, provided ¥14.6 billion.
Net cash used in investing activities was down ¥13.7 billion fromthe previous fiscal year, with contributing factors including a¥13.0 billion decline in payments for purchases of property,
plant and equipment, and a ¥12.0 billion increase in proceedsfrom sale of subsidiaries, net of cash and cash equivalents
disposed of. In contrast, cash used for acquisitions, net of cash
acquired, was up ¥6.4 billion. Investments in the insurance
services segment and private equity investments in the
United States yielded an increase in net proceeds from sales
and redemptions of investment securities of ¥1.1 billion, downfrom ¥3.6 billion.
Net cash used in financing activities amounted to ¥47.7
billion, mainly reflecting dividends paid to SECOM CO., LTD.
shareholders of ¥37.1 billion. Net cash used in financing
activities was ¥5.2 billion less than in the preceding period, due
principally to higher net proceeds from long-term debt in the
medical services segment.
Owing to the Company’s operating, investing and financing
activities in the period under review, cash and cash equivalents
at end of year amounted to ¥502.2 billion, up ¥87.5 billion fromcash equivalents at beginning of year, which were ¥414.7 billion.

Percentage of Consolidated
Net Sales and Operating Revenue*

SECOM CO., LTD.
Shareholders’ Equity per ShareTotal Assets

Depreciation and Amortization

Purchases of Property, Plant andEquipment and Intangible Assets

Cash Flows(Year ended March 31, 2021)(In yen)(In billions of yen)

(In billions of yen)

(In billions of yen)

(In billions of yen)

9.7%

2.4%

4.7%
5.1%

Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities

6,000

2,500

5,000

100

80

75

60

200
150

2,000

49.6%
16.1%

100

4,000
1,500

12.4%
3,000
Security Services
Medical Services
Geospatial Information
Services
Real Estate and Other
Services

Fire Protection Services
Insurance Services
BPO and ICT Services*Pie chart shows percentage of consolidated net
sales and operating revenue (excludingintersegment transactions)

60

SECOM REPORT 2021

50

40

25

20

50

1,000
0

2,000
500

1,000

-50

0

0
2017 2018 2019 2020 2021

02017 2018 2019 2020 2021

-100

02017 2018 2019 2020 2021

2017 2018 2019 2020 2021

2019

2020

2021

SECOM REPORT 2021

61