Financial Information and References

Financial Review

Operating Results
Overview
In the fiscal year ended March 31, 2022, SECOM CO., LTD. and its
consolidated subsidiaries (collectively, “the Company”) sought toprovide high-quality services and products that respond to thediverse 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 other services segments.
Consolidated net sales and operating revenue for the period
under review amounted to ¥1,166.1 billion, rising 2.7%, or ¥30.8
billion, while operating income advanced 15.2%, or ¥20.6 billion,to ¥156.4 billion. This primarily reflected higher net sales andoperating revenue, and operating income, in the security
services segment, which were underpinned by increases forelectronic security services in Japan and overseas, and forstatic security guard services, as well as in the fire protection
services segment, which benefited from a concentration of
profitable projects during the period, and the medical services
segment, which was bolstered by improvements in the earningsof partner hospitals in Japan and a general hospital in India. Net
income attributable to SECOM CO., LTD., climbed 19.8%, or ¥17.8
billion, to ¥107.7 billion.
Net Sales and Operating Revenue
Consolidated net sales and operating revenue rose 2.7%, or¥30.8 billion, to ¥1,166.1 billion, owing to increases in all
segments except insurance services. (For further information,please see Segment Information below.)
Costs and Expenses
Total costs and expenses were up 1.0%, or ¥10.2 billion, to¥1,009.7 billion. Cost of sales, at ¥802.4 billion, increased 1.5%,
or ¥12.2 billion, and accounted for 68.8% of net sales andoperating revenue, compared with 69.6% in the preceding
period. Factors contributing to the cost of sales ratio included
improvements in the earnings of partner hospitals in Japan anda general hospital in India, which lowered the cost of sales ratio
in the medical services segment, as well as to a concentrationof profitable projects in the fire protection services segment.
Selling, general and administrative (SG&A) expenses
increased 1.2%, or ¥2.5 billion, to ¥204.2 billion, equivalent to17.5% of net sales and operating revenue, an improvement from
17.8% in the previous fiscal year. While the impairment loss on
goodwill improved to ¥268 million, down ¥5.4 billion, loss on
sales and disposal of fixed assets, net, rose ¥918 million, to¥2.7 billion.
Operating Income
Operating income advanced 15.2%, or ¥20.6 billion, to ¥156.4
billion, owing mainly to increases in the security services, fire
protection services and medical services segments. The

operating margin improved to 13.4%, from 12.0%. (For further
information, please see Segment Information below.)
Other Income and Expenses
Other income declined ¥2.5 billion, to ¥9.7 billion, while otherexpenses increased ¥1.5 billion, to ¥4.4 billion. Net other income
thus amounted to ¥5.3 billion, a decrease of ¥4.0 billion. Thiswas due largely to a loss on other-than-temporary impairmentof investment securities of ¥848 million, compared with a gainon other-than-temporary impairment of investment securitiesof ¥4.6 billion in the previous fiscal year. The Company also
reported a ¥3.1 billion gain on private equity investments,
compared with a ¥302 million loss on private equity investmentsin the preceding period.
Income Taxes
Income taxes amounted to ¥49.2 billion, up ¥1.6 billion, although
this was equivalent to 30.4% of income from continuing
operations before income taxes and equity in net income ofaffiliated companies, down from 32.8% in the previous fiscal
year. Factors contributing to the decrease in income taxes as apercentage of income from continuing operations before income
taxes and equity in net income of affiliated companies included
the decline in impairment loss on goodwill.
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests slipped ¥149
million, to ¥11.4 billion. This was due mainly to the fact that
Secom Joshinetsu Co., Ltd., was made a wholly owned
subsidiary, although the impact of this was partially offset byincreases in operating income in the fire protection services
segment and posted by overseas Group companies.
Net Income Attributable to SECOM CO., LTD.
Net income attributable to SECOM CO., LTD., climbed 19.8%, or¥17.8 billion, to ¥107.7 billion, equivalent to 9.2% of net sales
and operating revenue, rising from 7.9% in the previous fiscal
year. Net income attributable to SECOM CO., LTD., per share was¥492.83, up from ¥411.95. The figure of ¥175.00 for cash
dividends per share that appears in the consolidated financial
statements represents cash dividends approved and paid toshareholders during the period under review, namely, an ¥85.00
per share year-end dividend for the fiscal year ended March 31,
2021, approved at the Ordinary General Meeting of Shareholders
held on June 25, 2021, and a ¥90.00 per share interim dividend
determined by the Board of Directors and paid to shareholdersof record as of September 30, 2021. The year-end cash dividend
for the fiscal year ended March 31, 2022, approved at theOrdinary General Meeting of Shareholders held on June 28,2022, was also ¥90.00 per share.

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Financial Information and References/Financial Review

Segment Information
In December 2020, all issued shares of Secom Home Life Co.,
Ltd., previously a consolidated subsidiary, were transferred to athird party, as a result of which the company was excluded fromthe scope of consolidation. As a consequence, the name of thesegment to which the company was allocated, real estate andother services, was renamed “other services.” This change did
not prompt any adjustments to segment classification.
Subsequently, a review of segment classification was conductedfrom the perspective of similarity and relevance of businessactivities. As a result, certain services previously included in the
security services segment were reclassified to the BPO and ICT
services and the other services segments. Segment results
figures for prior periods have been restated to conform with the
new classification. (For further information, please see Note 28.)
Security Services
Security services include electronic security services, whichcenter on on-line security systems, other security services, andmerchandise and other. In the fiscal year ended March 31, 2022,
net sales and operating revenue in this segment increased 1.5%,
or ¥8.6 billion, to ¥566.7 billion. Excluding intersegment
transactions, segment net sales and operating revenue were¥563.6 billion, representing 48.3% of overall net sales andoperating revenue, down from 48.9% 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 to a
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 generally five
years, with contracts renewed automatically each subsequentyear. 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 approach

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leverages the Company’s half-century-plus of experience andknow-how in providing electronic security services, together
with its R&D team’s ability to recognize and address false
alarms, to ensure highly efficient operations.
Net sales and operating revenue from electronic security
services advanced 1.1%, or ¥3.9 billion, to ¥348.7 billion. This
primarily reflected firm sales of on-line commercial andhome security systems in Japan and increases in sales byoverseas Group companies, as well as the impact of currency
exchange rates.
Other security services include static guard and armored car
services. Net sales and operating revenue generated by static
guard services, which are provided by highly trained
professional security guards for systems requiring humanjudgment and flexible responsiveness, rose 8.8%, or ¥6.1 billion,to ¥75.5 billion, owing mainly to the Company’s provision of
security services for competition venues and other facilities for
the Olympic and Paralympic Games Tokyo 2020, held during theperiod under review. Net sales and operating revenue generated
by armored car services, which involve the transport of cash,
securities and other valuables using specially fitted armoredcars and security professionals, edged down 0.6%, or ¥374
million, to ¥62.5 billion, due principally to changes in theoperations 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 freestanding or
linked to on-line security systems. Net sales and operating
revenue in this category declined 1.3%, or ¥1.0 billion, to ¥76.9
billion, as COVID-19 prompted customers to curb investments,
negatively impacting turnover.
Operating income in this segment rose 12.2%, or ¥12.3
billion, to ¥113.4 billion, while the operating margin improved to
20.0%, compared with 18.1% in the preceding period. Principal
factors behind this result included a decrease in impairment
loss on goodwill, to ¥63 million, from ¥5.7 billion, and anincrease in sales of high-margin electronic security services.
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, at ¥152.1
billion, advanced 5.7%, or ¥8.2 billion. Principal factors behind
this result included an increase in Nohmi Bosai’s revenue fromfire alarm systems. Operating income rose 10.9%, or ¥1.4 billion,to ¥14.5 billion, reflecting a concentration of profitable projects
during the period. The operating margin was 9.5%, up from 9.1%.
Medical Services
Medical services include the provision of home nursing services,
pharmaceutical dispensing services, support for affiliatedmedical institutions in Japan, sales of medical equipment, theoperation of a general hospital in India, the operation ofresidences for seniors and other personal care services, healthand preventative care services, and ICT-based medical services,which include electronic medical report systems. Additionally,
this segment 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 rose 7.3%, or¥13.3 billion, to ¥196.1 billion, while operating income soared
246.3%, or ¥9.7 billion, to ¥13.6 billion. These increases were
attributable to improvements in the results of partner hospitals
in Japan and a general hospital in India. The operating marginclimbed to 7.0%, from 2.2%.
Insurance Services
The insurance services segment continued to expand sales of an
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), the
MEDCOM unrestricted cancer treatment policy, which covers theentire cost of medical treatment for cancer, 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.
Net sales and operating revenue in this segment declined
10.5%, or ¥6.5 billion, to ¥54.9 billion, despite brisk sales of
MEDCOM, owing to net realized investment losses (including
losses on other-than-temporary impairments of investment
securities) of ¥1.2 billion, compared with net realized investment
gains of ¥7.7 billion in the preceding period. Segment operating
income, at ¥8.5 billion, was down 8.2%, or ¥762 million, primarilyreflecting the aforementioned net realized investment losses,
although this factor was partially offset by a decrease in losses
due to natural disasters.

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 theprivate sector in Japan. These services are also offered togovernment agencies overseas. Segment net sales andoperating revenue advanced 4.5%, or ¥2.5 billion, to ¥56.6
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, at¥3.9 billion was down 12.8%, or ¥569 million, a consequence
mainly of the inclusion of head office relocation expenses andrising personnel expenses resulting from an expanded numberof employees, as well as of a reversal of the provision for loss
on construction contracts for large-scale projects for overseas
customers in the previous period. The operating margin
declined to 6.8%, from 8.2%.
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 cloud-based
services, and BPO services, which include the operation ofcontact centers. Net sales and operating revenue in thissegment were up 2.4%, or ¥2.9 billion, to ¥124.8 billion, thanksprincipally to increased revenue in the BPO services business,underpinned by efforts to cultivate customers and higher orders
from existing customers, as well as in the data center services
business. Owing to higher net sales and operating revenue,
operating income edged up 0.5%, or ¥67 million, to ¥14.6 billion.
This was despite a negative rebound in the BPO services
business, which benefited in the previous period from thepresence of profitable projects, combined with upfront expenses
associated with the expansion of the contact center network toaccommodate growing demand, as well as higher utility costs
attributable to fuel cost adjustments at data centers. The
operating margin dipped to 11.7%, from 11.9%.
Other Services
The other services segment encompasses real estate leasing,as well as construction and installation services. Segment net
sales and operating revenue rose 4.3%, or ¥1.4 billion, to ¥35.4
billion, owing to a full year of lease income from real estate
projects completed in the previous fiscal year, as well as to anincrease in revenue from construction projects. Operating
income, at ¥6.1 billion, was up 1.2%, or ¥74 million, while theoperating margin was 17.3%, down from 17.8%.

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Financial Position
Total assets as of March 31, 2022, amounted to ¥2,183.5 billion,
an increase of ¥45.7 billion from the end of the previous fiscal
year. Total current assets climbed ¥47.2 billion, to ¥1,026.7
billion, and accounted for 47.0% of total assets. The current ratio
was 2.4 times, compared with 2.3 times a year earlier. The
principal component of current assets, cash and cash
equivalents, was ¥531.6 billion, up ¥29.4 billion. (For further
information, please see Cash Flows, which follows this section.)
Notes and accounts receivable, trade rose ¥12.0 billion, to¥165.4 billion, reflecting such factors as higher net sales andoperating revenue in the fire protection services segment. Notes
and accounts receivable, trade, are affected by the fact that net
sales and operating revenue in the fire protection services andgeospatial information services businesses tends to beconcentrated toward the end of the fiscal year. Cash deposits forarmored car services declined ¥2.4 billion, to ¥136.5 billion.
These cash deposits are funded largely through bank overdrafts
and deposits and their use by the Company is restricted.
Inventories rose ¥6.4 billion, to ¥38.2 billion, owing primarily tothe purchase of real estate for sales and steps taken to increase
inventories of components for fire protection services–related
products to circumvent procurement difficulties.
Investments and long-term receivables, at ¥349.5 billion,
were up ¥1.9 billion, and represented 16.0% of total assets.

Cash Flows

Property, plant and equipment, less accumulated depreciation,amounted to ¥424.8 billion, down ¥4.3 billion, accounting for19.5% of total assets. Other assets rose ¥837 million, to ¥382.4
billion, equivalent to 17.5% of total assets.
Total liabilities as of March 31, 2022, amounted to ¥838.5
billion, a decrease of ¥8.1 billion from a year earlier, andrepresented 38.4% of total liabilities and equity. Total current
liabilities, at ¥419.2 billion, were down ¥837 million, andaccounted for 19.2% of total liabilities and equity. Total longterm liabilities declined ¥7.3 billion, to ¥419.4 billion, equivalent
to 19.2% of total liabilities and equity.
Total SECOM CO., LTD. shareholders’ equity advanced ¥67.2
billion, to ¥1,209.5 billion. Retained earnings increased ¥69.4
billion, to ¥1,139.9 billion, with contributing factors including net
income attributable to SECOM CO., LTD., and the payment ofdividends. Additional paid-in capital decreased ¥11.6 billion, to¥63.0 billion, owing mainly to the acquisition of the ownershipinterests of Secom Joshinetsu via a tender offer, undertakenwith the aim of making it a wholly owned subsidiary. Owing toyen depreciation, foreign currency translation adjustments werea positive ¥2.9 billion, compared with a negative ¥8.1 billion asof the end of the preceding period. The equity ratio was 55.4%,
up from 53.4% at the previous fiscal year-end.

The Company is committed to maintaining sufficient liquidity toallow 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, 2022, net cash provided byoperating activities amounted to ¥185.3 billion. The principal
components of this were net income of ¥119.2 billion, anddepreciation and amortization, including amortization ofdeferred charges—a non-cash item—of ¥78.5 billion. Net cash
provided by operating activities was down ¥3.4 billion from thefiscal year ended March 31, 2021, despite an increase in net
income of ¥17.7 billion, as a ¥10.5 billion increase in receivables
and due from subscribers, net of allowances, compared with adecrease of ¥14.3 billion in the preceding period, pushed down
cash generated by operating activities.
Net cash used in investing activities was ¥60.4 billion. The
principal applications of cash included payments for purchasesof property, plant and equipment of ¥55.1 billion, used primarily
for purchases of equipment necessitated by rising subscriptions
for security services, and payments for purchases of intangible
assets of ¥10.8 billion. Net cash used in investing activities wasup ¥7.4 billion from the previous fiscal year, owing principally tothe absence of ¥14.6 billion in proceeds from the sales ofsubsidiaries, net of cash and cash equivalents disposed of, and¥7.1 billion in acquisitions, net of cash acquired, which had asignificant impact in the preceding period. Investments in theinsurance services segment and private equity investments in
the United States yielded higher net proceeds from sales andredemptions of investment securities of ¥1.6 billion, up from
¥1.1 billion.
Net cash used in financing activities amounted to ¥97.3
billion. This largely reflected dividends paid to SECOM CO., LTD.
shareholders of ¥38.2 billion; payments for acquisition of sharesof consolidated subsidiaries from noncontrolling interest
holders of ¥28.6 billion, related mainly to the acquisition of theownership interests of Secom Joshinetsu; and an increase intreasury stock, net, of ¥11.2 billion, owing to the purchase oftreasury stock on the open market in accordance with aresolution of the Board of Directors. Net cash used in financing
activities was up ¥49.6 billion from the preceding period, aconsequence primarily of increases in payments for acquisitionof shares of consolidated subsidiaries from noncontrollinginterest holders and purchases of treasury stock and a decline
in proceeds from long-term debt.
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 ¥531.6 billion, up ¥29.4 billion fromcash equivalents at beginning of year of ¥502.2 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, 2022)(In yen)(In billions of yen)

(In billions of yen)

(In billions of yen)

(In billions of yen)

9.9%

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

3.0%
6,000

4.8%
4.4%

2,500

5,000

80

75

60

200
150

2,000

48.3%
16.8%

100

100

4,000
1,500

12.8%
3,000

50

40

25

20

50

1,000
Security Services
Medical Services
Geospatial Information
Services
Other Services

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

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SECOM REPORT 2022

0

2,000
500

1,000

-50

0

0
2018 2019 2020 2021 2022

0
2018 2019 2020 2021 2022

-100

02018 2019 2020 2021 2022

2018 2019 2020 2021 2022

2020

2021

2022

SECOM REPORT 2022

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