セコム（9735） – SECOM Report 2021

SECOM REPORT2 0 2 1Year ended March 31, 2021Profi lefrom concerns.SECOM was established in 1962 as Japan’s first security services provider. Since then, the Company has sought to create pioneering services that benefit society as a whole, in line with its mission of helping achieve a society free Corporate Philosophy Today, SECOM, comprising the parent company and the companies of the SECOM Group, boasts a business portfolio encompassing security services, fire protection services, medical services, insurance services, geospatial Mission (Our role and raison d’être)information services, business process outsourcing and information and communications technology (BPO and ICT) services, and other services. By striving to create services and systems that deliver safety and peace of mind, as well as make life more comfortable and convenient, whenever and wherever necessary, for anyone and everyone, the Company is working to realize its Social System Industry vision, which describes a framework of distinctive, integrated services and systems. In this era of amplified uncertainties, to accelerate the realization of its Social System Industry vision, SECOM has formulated the SECOM Group’s Vision for 2030. Guided by this vision, the Company is collaborating with partners who share its philosophy to create the ANSHIN* Platform, a service infrastructure designed to provide peace of mind to people in their everyday lives, as well as to society as a whole, by resolving key social issues. Through these and other efforts, SECOM continues working to maximize its corporate value. SECOM has also expanded outside Japan. Currently active in 17 countries and territories, the Group extends distinctively SECOM security services, fire protection services, medical services, geospatial information services, and BPO and ICT services customized to reflect local needs and sensibilities.*ANSHIN is Japanese for “peace of mind.”Financial Information and References57 Financial Review62 Consolidated Financial Statements69 Other Financial Data73 Corporate Information77 Regarding Publication of SECOM Report 2021CONTENTS 1 Corporate Philosophy 2 Financial Highlights 4 A Message to Stakeholders10 The Path to Value Creation12 SECOM at a Glance14 The Value Creation Process16 SECOM’s Core Competitive Advantages17 Initiatives Aimed at Maximizing Income18 The SECOM Group’s Vision for 203022 Special Feature24 SECOM Today38 Sustainability40 ESG Initiatives56 SASB IndexMissionWe see our mission as being to help achieve a society free from concerns. Accordingly, throughout our history we have sought to create services and systems that benefit society as a whole.Vision (Our ideal view of SECOM in the future)VisionIn 1989, we declared our commitment to the Social System Industry. We continue to promote bold initiatives with the aim of realizing this vision.ValuesValues (Our shared beliefs and guiding principles)Since our establishment, we have adhered to SECOM’s Philosophy, which emphasizes contributing to society through our business activities. Ideas and principles of conduct, including this philosophy, which are shared by all employees, guide everything we do and have nurtured a uniquely SECOM identity that remains crucial to our ability to achieve our mission.The Social System IndustryOur Social System Industry vision describes a framework of innovative and integrated services and systems that deliver safety and peace of mind, as well as make life more comfortable and convenient, whenever and wherever necessary, for anyone and everyone.SECOM’s PhilosophySECOM’s Philosophy has been passed down through generations of employees since our establishment and continues to be the driving force behind all we do. This philosophy emphasizes a refusal to be content with the status quo and a commitment to doing what is appropriate. The first element expresses our determination to provide innovative services and systems by challenging accepted norms, while the second means judging the legitimacy of our actions by examining whether they are just, fair and beneficial not only to SECOM but also to society as a whole. We have published SECOM’s Philosophy in the form of a handbook, which has been distributed to employees in Japan and overseas, and continue to capitalize on training and other opportunities to share the philosophy and advance its implementation.SECOM REPORT 20211Financial HighlightsU.S. GAAPSECOM CO., LTD. and SubsidiariesFor the years ended/as of March 31Net sales and operating revenueOperating incomeNet income attributable to SECOM CO., LTD.Total assetsTotal SECOM CO., LTD. shareholders’ equity2021¥1,135,339135,80989,9132,137,8061,142,3232020¥1,132,632129,62787,1362,081,1201,088,7382019¥1,087,355123,30789,6861,879,7101,044,1842021$10,228,2791,223,505810,02719,259,51610,291,198In yenIn U.S. dollarsPer share of common stock:Net income attributable to SECOM CO., LTD.Cash dividends(Interim dividend)SECOM CO., LTD. shareholders’ equity¥ 411.95170.00 85.00 5,233.74¥ 399.23170.00 85.00 4,988.25¥ 410.91160.0080.004,784.12$ 3.711.53 0.77 47.15Notes: 1. Yen amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the approximate rate of ¥111=US$1, the rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2021. 2. Net income attributable to SECOM CO., LTD. per share of common stock is based on the average number of shares outstanding during each period, less treasury stock. treasury stock.3. SECOM CO., LTD. shareholders’ equity per share of common stock is based on the number of shares outstanding at the end of each period, less 4. Cash dividends per share of common stock are based on dividends approved and paid in each fi scal year. At the general shareholders’ meeting held on June 25, 2021, approval was granted for a proposal to pay a year-end dividend of ¥85.00 for the year ended March 31, 2021.In millions of yenIn thousands of U.S. dollarsYears ended March 31Year ended March 31Japanese GAAPSECOM CO., LTD. and SubsidiariesFor the years ended/as of March 31In millions of yenIn thousands of U.S. dollarsYears ended March 31Year ended March 31Pursuant to the applicable Japanese law, SECOM is required to publish results in line with accounting principles generally accepted in Japan (Japanese GAAP). Key fi nancial highlights calculated using Japanese GAAP are shown below for reference.RevenueOperating profi tOrdinary profi tNet income attributable to owners of the parentTotal assetsTotal net assets2021202020192021¥1,035,898136,925138,99074,6811,864,1791,229,824¥1,060,070142,858 151,356 89,080 1,815,121 1,172,494 ¥1,013,823130,213144,889 92,0091,765,1051,125,954$ 9,332,4141,233,5591,252,162672,80216,794,40511,079,495Per share of common stock:Net incomeCash dividends(Interim dividend)Net assetsIn yenIn U.S. dollars¥ 342.17170.00 85.00 4,958.18¥ 408.14170.00 85.00 4,742.58 ¥ 421.56165.0080.004,562.08$ 3.081.53 0.77 44.67Note: Cash dividends per share of common stock are based on dividends the record dates for which fall in each fi scal year. The consolidated dividend payout ratio for the year ended March 31, 2021, was 49.7%.Net income attributable to SECOM CO., LTD. Net income attributable to owners of the parent 96.691.484.189.787.189.9(U.S. GAAP)(In billions of yen)100806040200(Japanese GAAP)(In billions of yen)10084.287.092.089.177.074.7806040200201620172018201920202021201620172018201920202021Note: In the year ended March 31, 2021, net income attributable to SECOM CO., LTD., advanced ¥2.8 billion, to ¥89.9 billion, notwithstanding the negative impact of COVID-19 in certain areas. This refl ected an increase in operating income, which was bolstered by favorable results in the insurance services, BPO and ICT services, and geospatial information services segments, as well as a gain on other-than-temporary impairment of investment securities, compared with a loss in the previous fi scal year. In the year ended March 31, 2020, net income attributable to SECOM CO., LTD., decreased ¥2.6 billion, to ¥87.1 billion, despite operating income growth led by the fi re protection services segment. This was primarily due to a loss on private equity investments, compared with a gain on such investments in the previous fi scal year, and an increase in income taxes that refl ected a larger reversal of the valuation allowance in the preceding period. contributing to this result included the application of a new accounting standard whereby gains or losses on equity investments are now charged to income for the period, which resulted in an increase in loss on other-than-temporary impairment of investment securities; investments to reinforce SECOM’s operating foundation with the aim of ensuring sustainable growth; and the impact of multiple major natural disasters on results in the insurance services segment.In the year ended March 31, 2019, net income attributable to SECOM CO., LTD., was down ¥6.9 billion, to ¥89.7 billion. Principal factors 2SECOM REPORT 2021SECOM REPORT 20213 Adhering to SECOM’s Philosophy and making forward-looking investments in growth to increase Returns to shareholdersA Message to Stakeholderscorporate valueResponding to COVID-19 The socioeconomic impact of the pandemic has been We would like to begin by extending our deepest sympathies to everyone who has been affected by COVID-19. As always, we are especially grateful to the medical professionals and others who are working tirelessly and at considerable danger to themselves to help curb the spread of the virus. significant worldwide. The Basic Policies for Novel Coronavirus Disease Control, published by Japan’s government, designates SECOM’s medical, security, building maintenance, data center and insurance services, among others, as social infrastructure necessary for safety and security and has requested their continuation even when the country is under a state of emergency. Against this backdrop, we believe that the greatest contribution we can make to society is to do our utmost to maintain services while placing the highest priority on the Consolidated operating resultsIn the fiscal year ended March 31, 2021, the Japanese economy remained challenging, owing to a significant decline in corporate earnings attributable to COVID-19, with both trends in the spread of the pandemic worldwide and fluctuations in global financial markets requiring constant monitoring. With the socioeconomic activities gradually resuming, the economy has begun to rally, despite the ongoing need for strict measures to curb infections, owing to the positive impact of various strategic measures and improvements in overseas economies. efforts to realize our Social System Industry vision, in accordance with our goal of delivering safety and peace of mind, as well as making life more comfortable and convenient, whenever and wherever necessary, for anyone and everyone. To this end, we continued to concentrate on extending high-grade services and systems optimized to meet the increasingly diverse and sophisticated needs of customers in our security services, fire protection services, medical services, insurance services, geospatial information services, BPO and ICT services, and real estate and other In this environment, we pressed forward with ongoing safety of customers and employees. We have established a COVID-19 headquarters and put in place a number of critical measures to prevent infection, thereby ensuring business continuity and our ability to provide services without interruption. We have also created the COVID-19 Risk Response Committee, which spans our International Business Division and overseas subsidiaries, to protect the health of overseas SECOM Group employees, helping prevent infection and ensure business continuity. measures to limit the further spread of infection and to extend services as appropriate given local conditions, while not causing customers untoward trouble, in line with our abiding commitment to delivering safety and peace of mind and making life more comfortable and convenient. Going forward, we will continue to promote stringent Notwithstanding the negative impact of COVID-19 in services businesses. We also accelerated these efforts by clarifying initiatives to be implemented in line with the SECOM Group Road Map 2022 with the goal of achieving the SECOM Group’s Vision for 2030. certain areas of the security services, fire protection services and medical services segments, consolidated net sales and operating 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 an increase in the BPO and ICT services segment and to 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. 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.Seeing the provision of fair returns to shareholders as a crucial management task, we determine our consolidated dividend payout ratio and internal reserves based on an overall assessment of efforts to expand our businesses and trends in our consolidated operating performance, in line with our policy of ensuring a consistent and stable distribution of profits. At the Ordinary General Meeting of Shareholders on June 25, 2021, the payment of a year-end dividend of ¥85.00 per share was approved. As a consequence, dividends for the full term—the record dates for which fall in the period under review—amounted to ¥170.00, level with the previous fiscal year.Initiatives in the period under review and efforts to thrive in the new normalOwing to the rampant spread of COVID-19, we faced significant difficulties, including restrictions on business activities such as sales and installations, and cautious customer attitudes toward purchases. In response to these difficulties, we took decisive steps to enhance the stability of business continuity, adopting a sales configuration and developing products that make effective use of information technologies (IT), and building an effective telework system. It is also important to note that the impact of the pandemic has not been entirely negative. In the security services business, sales of surveillance cameras, access control systems and other merchandise and revenue from the installation of systems decreased, but the influence on on-line security systems and other businesses based on fixed monthly fees was limited, despite concerns prompted by the integration and downsizing of retail premises. Moreover, with many convenience stores and factories that used to operate around the clock now opting to close at Promoting four priority strategiesExpand monitoring servicesRecognizing that needs for assistance with care for seniors vary depending on age group and have become increasingly diverse as a consequence of changes in family structure, we added a number of new selections to our lineup of remote monitoring services. Specifically, in addition to SECOM Senior Care Phone Service, an emergency monitoring service that combines emergency medical alert, health consultation and safety confirmation functions, and Mago Channel with SECOM, a service that encourages communication with parents living apart while providing unstructured monitoring, we began offering SECOM Monitoring Service for Seniors, an option to SECOM Home Security subscribers that includes a cloud-based smartphone app. Family members living apart can check up on their parents in a nonintrusive manner to confirm any variations in the frequency or nature of daily activities by accessing information captured by SECOM Home Security sensors installed in the parents’ home. By installing an optional night, needs for security when premises are empty have risen, underscoring increased public awareness of safety and security and the firmness of demand for on-line security systems. In our fire protection services and medical services businesses, the impact of COVID-19 has indeed largely been adverse, but our BPO and ICT services business has benefited from growing demand for data center services and special demand for contact center services arising from the emergence of new lifestyles and the greater use of telework arrangements. With a view to thriving during COVID-19, as well as in the post-pandemic world, we continued to implement our four ongoing priority strategies, which are to expand monitoring services, reinforce our BPO and ICT services business, strengthen our overseas operations, and improve productivity.dedicated sensor, subscribers can also monitor the indoor temperature and humidity changes at their parents’ home from a smartphone using a dedicated application. SECOM emergency response personnel will be sent as necessary to check on the parents directly if, for example, the security sensors detect no movement over a certain period of time. Family members can also use the app to ask SECOM to dispatch emergency response personnel to check in person. We are also currently developing a new sensor that detects changes in posture, falls and whether the individual is breathing to enable more careful monitoring for parents requiring closer observation. In addition, we are working to verify the value of new services that link SECOM Home Security with the Apple Watch, thereby making effective use of monitoring information, with the aim of achieving commercialization in the fiscal year ending March 31, 2022. One of these services stores pedometer, calorie expenditure counter, exercise time, heart rate and sleep quality data from the subscriber’s Apple Watch, together with information on the frequency or nature 4SECOM REPORT 2021SECOM REPORT 20215A Message to Stakeholdersof daily activities detected by SECOM Home Security, in the cloud*1 for analysis and viewing. In addition to enabling family members to monitor parents living apart, these services also assist parents in managing their own health. Monitoring services in the future will require advanced technological capabilities, in addition to the ability to promptly dispatch emergency response personnel when circumstances demand. In our drive to deliver peace of mind, as well as make life more comfortable and convenient, we will not only promote in-house development but also collaborate actively with various partners who have crucial technologies and devices under our strategy of open innovation. Going forward, we will continue working to help monitor the health of families by combining advanced technologies and human sensibilities to provide distinctively SECOM services that ensure our ability to be there for customers whenever we are needed. Reinforce BPO and ICT services businessWe continue to develop services to meet the diverse BPO and ICT needs of our customers and to take decisive steps in the period under review to accelerate the growth of this business. Our data center business is expanding steadily thanks to the increased use of advanced digital technologies, including artificial intelligence (AI), the Internet of Things (IoT) and cloud-based services, and we continue striving to enhance our capabilities in this area. Subsidiary At Tokyo Corporation, one of Japan’s largest data center operators, opened two data centers in the Kansai region in 2020. In light of robust demand, the company also plans to open a new hyperscale urban data center in 2023, while in 2025 Secom Trust System Co., Ltd., plans to open a new data center on a site adjacent to an existing facility. Investment in the two new data centers is expected to be in the area of ¥40 billion. We will continue to expand our data center business in response to rapid digitalization to create a disaster-resilient infrastructure. demand for contact center services, including from local governments seeking to set up COVID-19 helpdesks. Telework arrangements, which have become increasingly widespread due to the pandemic, are likely to become the new normal. With the steady decline in Japan’s labor force, a structural issue, expected to continue, the need to realize work style reforms and improve operational efficiency will remain common themes for companies in the years ahead. Given such trends, we expect our BPO business to continue expanding steadily. Accordingly, core BPO services company TMJ, Inc., will spearhead further efforts to combine optimal state-of-the-art technologies with the front-line administrative competency and ability to refine services it has fostered to offer distinctively SECOM BPO services that In the area of BPO services, we saw a temporary jump in deliver safety and peace of mind and in so doing respond to demand arising from the need to rely on others. In ICT services, we are endeavoring to bolster sales of IT products that are also effective in differentiating our on-line security systems. We have also assigned employees with advanced IT skills to regional headquarters to oversee sales promotions, as well as to support and provide direction to regional sales staff, with the aim of expanding the scale of IT product sales. Additionally, we are stepping up efforts to integrate BPO and ICT services with security systems to boost customer convenience. Strengthen overseas operationsWith the goal of extending the reach of our security services business in Asia, between September 2020 and February 2021, we acquired ADT Services (M) Sdn. Bhd. in Malaysia, ADT Integrated Security Solutions Pte. Ltd. in Singapore, and ADT Alarm Monitoring Hong Kong Ltd., all of which became wholly owned subsidiaries. This positions us well to expand operations in promising markets, including services for the region’s growing wealthy and middle classes, and accelerate efforts to extend the scope of our overseas operations. These three companies provide cloud-based services and systems via the Internet and will work to enhance smartphone-linked interactive and smart home functions in Asian markets. With Japan’s population expected to continue shrinking over the long term, we believe that strengthening our operations in promising overseas markets is essential to our sustainable growth going forward. In the PRC and Thailand, we have launched projects aimed at cultivating businesses and developing products suited to local needs that incorporate advanced technologies. In early 2021, we also embarked on focused marketing activities designed to broaden awareness of the SECOM brand and enlarge our customer bases in countries and territories where we already have operations. Improve productivityWe recognize higher productivity as vital to our ability to absorb cost increases associated with additional investments in growth in the years ahead. We are advancing measures aimed at reinforcing in-house IT systems to boost the productivity of individual employees so that we are positioned to handle even a significant surge in work volume resulting from higher subscriber numbers and the expansion of services with current staffing levels. optimize regional sites by merging SECOM control centers and shifting the sales and administrative functions of smaller offices to larger offices. Additionally, we reorganized sales and operational departments to clarify their roles, In the fiscal year ended March 31, 2021, we sought to expedite decision making and eliminate waste with the objective of breaking down organizational silos. We will continue working as one to further improve productivity, guided by the concept of refusing to be content with the status quo,*2 a key element of SECOM’s Philosophy.*1 In addition to information from SECOM sensors, information from devices in the home manufactured by other companies can be stored in the cloud and used to enhance monitoring of daily activities and health.*2 The concept of refusing to be content with the status quo expresses our determination to offer innovative services and systems by challenging outdated beliefs and accepted norms. Transformation of the security services businessCOVID-19 has brought far-reaching, fundamental changes to society, including business practices, consumer behavior and work styles. With many of these changes likely to remain even after the pandemic has eased, our future depends on responding effectively to survive and thrive in what is emerging as the new normal. At the same time, we must also continue to address challenges associated with a super-aged society and a declining labor force. We are excited at the potential for such socioenvironmental changes to stimulate new needs and create promising business opportunities. New needs include those for enhanced troubleshooting and security as a result of reduced staff numbers or a shift to an unattended format for retail facilities, as well as those for personnel management–related systems compatible with telework and other work style reforms, information security and document digitalization. With people spending more time at home and making frequent use of delivery services, we are also seeing increased needs for safe and secure home environments, monitoring services that help protect elderly parents and other family members, and remote healthcare. Acknowledging that we have a responsibility to advance social change in this new era, we are striving to develop and offer services that accurately address these and other emerging needs. The security services business is expected to enter a period of fundamental transformation. Factors behind this include the spread of AI, the IoT and 5G mobile communications technologies, and rapid advances in the area of sensing technologies,*1 which are forecast to support the development of IoT services that respond to various social imperatives. The linking of these to security services will greatly expand the scope of services available to customers. We also anticipate the realization of services that leverage data science to extract information of value from that captured by sensors installed at subscribers’ premises. In the security services industry of the future, we believe Promoting ESG initiativesBased on the belief that the services we provide to During the investment phase of the SECOM Group Road that the key to growth will be our ability to create a service framework based on a new concept that involves the use of these technologies. Map 2022, we promoted investments to reinforce our business infrastructure and secure individuals with the high-level skills necessary to work in IT in preparation for the digital era. We currently have more than 2.4 million on-line security subscribers in Japan. By offering a software as a service (SaaS)*2 on-demand service model, we will make it possible for subscribers to access highly convenient IoT and other new services that leverage new technologies. To this end, we must install security equipment with functions and performance features compatible with these services at subscribers’ premises. society should both be revolutionary and utilize sophisticated technologies, we will systematically replace subscribers’ existing security equipment with new models compatible with the new technologies of today and the future. This combination of state-of-the-art equipment with our around-the-clock monitoring services will continue to ensure our ability to offer new value by extending reliable services that improve convenience. In addition to enhancing customer convenience, these sophisticated technologies will also boost the efficiency of our operations. We see this period of transformation as an important business opportunity. To ensure sustainable growth over the long term, we are working to build next-generation business models—an effort spearheaded by the Business Design Laboratory, which was established in-house in August 2020—and advancing measures to sharpen our competitive edge under the banner of “SECOM DX.” *1 Sensing technologies are technologies that measure and quantify information acquired by sensors.*2 SaaS is a subscription-based delivery model whereby services are accessed via the Internet. Since our establishment, we have sought to fulfill our responsibility to society through our business activities, acknowledging the importance of sustainability for ourselves and for society. The key to our ability to deliver safety and peace of mind, as well as make life more comfortable and convenient, is the human resources who are responsible 6SECOM REPORT 2021SECOM REPORT 20217A Message to StakeholdersFurther, we endeavor to encourage a managerial for providing our services. With our operating environment expected to undergo major changes in the years ahead, owing to the emergence of a new normal in the wake of COVID-19 and the coming period of transformation for the security services business, securing and training people who excel in terms of adaptability to change, ability to create value and desire to contribute to society, will become an increasingly critical management challenge. To attract human resources who are a good fit for SECOM and capable of performing at a high level over the long term, it is vital that we offer attractive employment conditions in terms of pay scale, work-life balance and employee welfare, and maintain a high degree of employee motivation by striving constantly to bolster job satisfaction. We thus strive to guarantee safe working environments, create employee-friendly workplaces, offer training to foster employees with superior ethical standards and skills, and advance diversity and inclusion. mindset, that is, to nurture individuals who understand our corporate philosophy, including our mission, and are capable of independent judgment and action. To this end, senior management is leading efforts to maximize employees’ capabilities and inspire them to fulfill their potential by creating a virtuous circle rooted in job satisfaction and stepping up implementation of our Tri-ion initiative, which seeks to ensure that SECOM’s Philosophy fully penetrates every aspect of our operations. Rigorous corporate governance is indispensable to our ability to earn public trust and fully leverage our competitive edge. Our core business is security services. As such, we appreciate the importance of each and every employee discharging his or her duties in good faith and in keeping with the spirit of related laws. For this reason, we view compliance as an integral component of our day-to-day operations. All employees are required to act in accordance with the SECOM Group Code of Employee Conduct and the Behavioral Guidelines Based on SECOM’s Philosophy and to ensure compliance. Preserving confidentiality is also critical to the provision of security services. We have established an information security policy and rules for the handling of various types of information that are applicable to all SECOM employees and promote the scrupulous protection of data and information. We also work actively to reinforce our corporate governance system, recognizing that a robust configuration is crucial for related measures to have teeth. We are also taking steps to enhance the diversity and effectiveness of our Board of Directors, including appointing a female outside director in June 2020. Recent years have seen natural disasters generally associated with climate change, including large-scale forest fires and heavy rain incidents, occurring with greater frequency around the world. Seeing our mission as being to help achieve a society free from concerns, we strive to be a company that is capable of providing enduring peace of mind while at the same time fulfilling our responsibilities as a member of society and reducing the impact of our operations on the environment. With the belief that protecting the environment is essential to our ability to deliver security and support comfortable lifestyles, we incorporate environmental conservation into all aspects of our business activities. For example, we provide on-line security system equipment to security services subscribers mainly on a rental basis. We are thus able to collect all installed equipment after use, recycle what can be repaired and reused, and appropriately dispose of what cannot, a zero–resource waste business model that dates back half a century. In our security services business, which uses a significant number of service vehicles, we have largely completed the planned introduction of fuel-efficient vehicles. We plan to upgrade to electrified vehicles with an even lower environmental impact in the years ahead, and have already replaced a number of vehicles with hydrogen-powered models. In our data center services business, which uses a considerable amount of electric power, our efforts have earned designation by the Tokyo prefectural government as demonstrating particular excellence in the implementation of initiatives to counter global warming. Seeking to further our goal of helping achieve sustainability for society, in July 2019, we declared our support for the Task Force on Climate-related Financial Disclosures (TCFD), pledging to disclose related information in line with TCFD recommendations. In July 2021, we announced our intent to achieve carbon neutrality by 2045 and set a target for reducing CO2 emissions by 45% from the fiscal year ended March 31, 2019, by the fiscal year ending March 31, 2031. These targets earned certification as science-based targets (SBTs) from the Science Based Targets initiative. In line with these targets, we also joined Renewable Electricity 100% (RE100), a global renewable energy initiative, with the aim of shifting entirely to electricity generated using renewable energy by 2045. Our day-to-day business activities, into which we incorporate consideration for the expansion of business opportunities and the reduction of business risks, are structured to both nurture continued growth and resolve environmental, social and governance (ESG)-related issues. We believe that increasing corporate value by expanding our business activities directly improves our ability to address ESG issues, which in turn enables us to contribute to the achievement of the United Nations’ Sustainable Development Goals (SDGs). These achievements have earned solid marks, as evidenced by our continued inclusion as a constituent of all four ESG investment indices* for Japanese equities used by Japan’s Government Pension Fund (GPIF). Going forward, we will continue working to enhance our provision of ESG- and sustainability-related information to our diverse stakeholders. Ensuring unwavering, sustainable growthWe continue to operate in an environment characterized by significant upheaval and unprecedented uncertainty, caused by factors such as a declining labor force, climate change and the impact of COVID-19. At the same time, we expect that the rapid digitalization of society, underpinned by the evolution of advanced AI, IoT and 5G mobile communications technologies, and by the rising prevalence of cloud-based services, will drive demand for services utilizing smartphones and wearable mobile equipment. Against this backdrop, we have begun to offer cloud-based and interactive services that accumulate, analyze and visualize information detected by sensors installed at the premises of security service subscribers. The rapid evolution of sensing technologies is expected to fundamentally transform the security services business in the years ahead. As a consequence, our security services in the future must necessarily evolve into sophisticated high-grade services that combine advanced digital technologies and human support. For this reason, we must evolve as a “tech” company with capabilities in such areas as health tech. SECOM Group companies will also actively introduce new technologies to optimize our performance and ensure unwavering growth. With Japan’s labor force expected to continue shrinking, we also recognize that further globalization is essential to the sustainability of our * The four indices used by the GPIF are the FTSE Blossom Japan Index, the MSCI Japan ESG Select Leaders Index, the MSCI Japan Empowering Women Index (WIN) and the S&P/JPX Carbon Efficient Index.growth. We have taken the first steps toward a full-scale reinforcement of our overseas operations. We are confident that measures implemented will yield positive results in the near future. Achieving the goals we have set for ourselves will require continued and decisive investment in growth. We will explore priorities while continuing to promote key investments, including in M&As. Given the dramatic changes in our operating environment and the increasingly uncertain outlook, securing sufficient capital assets has also taken on greater importance. With the aim of enhancing returns to shareholders, we will continue working to improve corporate value and maintain a stable dividend payout ratio of between 40% and 45%, as set forth in the SECOM Group Road Map 2022. The Olympic and Paralympic Games Tokyo 2020 will be held this year in the shadow of COVID-19. It is our hope that the efforts and commitments of the athletes will bring inspiration and joy to people around the world. We are committed to playing our part in ensuring the secure and successful staging of the games. In this as well as our other endeavors, we look forward to the ongoing support and guidance of our many stakeholders. July 15, 20218SECOM REPORT 2021SECOM REPORT 20219Makoto IidaFounderYasuo NakayamaChairman and Representative DirectorIchiro OzekiPresident and Representative DirectorThe Path to Value CreationEstablished as Japan’s fi rst security services company, SECOM has pioneered the creation of services that deliver safety and peace of mind. Going forward, we will continue to develop and provide innovative services and systems that accelerate the realization of our Social System Industry vision. Security service industrySafety (“ANZEN”) industrySocial System Industry1962Established as Nihon Keibi Hosho Co., Ltd. (name was later changed to SECOM CO., LTD.)1974Lists on the Second Section of the Tokyo Stock Exchange1981 Introduces My Alarm (currently SECOM Home Security), Japan’s fi rst home security system Establishes presence in the United Kingdom and Malaysia Introduces the SECOM AED Package Service1975 Commences operation of the world’s fi rst computerized security system (CSS)1978Moves up to the First Section of the Tokyo Stock Exchange Establishes joint venture Korea Security System Co., Ltd. (currently SI Corporation) in the Republic of Korea (ROK) 1983Changes name from Nihon Keibi Hosho Co., Ltd. to SECOM CO., LTD. Launches information security services198119851988 Establishes presence in Thailand1989Declares 1989 the fi rst year of the Social System Industry vision1978–Overseas security services1991–Medical servicesEstablishes joint venture Taiwan Secom Co., Begins providing visiting nurse Ltd., in Taiwan, its fi rst overseas marketservices1974–Fire protection servicesForms business alliance with Nohmi Bosai Kogyo Co., Ltd. (currently Nohmi Bosai Ltd.), Japan’s top provider of fi re protection services1983–BPO and ICT servicesBegins providing information and communications-related services1998–Insurance servicesInvests in Toyo Fire and Marine Insurance Co., Ltd. (currently Secom General Insurance Co., Ltd.)1964 Provides security services at the Olympic Village during the fi rst Tokyo Olympics1966 Develops SP Alarm, Japan’s fi rst on-line security system1962–Security ServicesEstablished as Japan’s fi rst commercial security services provider Security services Overseas security services Fire protection services Medical services Insurance services Geospatial information services BPO and ICT services199119921994199419961998200020012001 Establishes presence in the PRC, Singapore and Australia Establishes presence in Indonesia Begins off ering Japan’s fi rst remote image diagnosis support service Commences management of residences for seniors Launches certifi cation authority business Establishes the Secure Data Center Develops and releases the COCO-SECOM mobile security system200420042006200620072007 Launches the SECOM Safety Confi rmation Service Acquires all outstanding shares in Nittan Co., Ltd., Japan’s third-largest fi re protection services provider, making the company a consolidated subsidiary Acquires newly issued shares in Nohmi Bosai, which becomes a consolidated subsidiary Acquires At Tokyo Corporation, one of Japan’s leading data center services fi rm Establishes presence in Vietnam Establishes presence in Myanmar Launches ground surveying services using synthetic aperture radar (SAR) satellite images Opens Sakra World Hospital, a general hospital, in India Commences operation of private fi nance initiative (PFI) correctional facility Acquires Asahi Security Co., Ltd., a leading provider of cash collection and delivery services, which becomes a consolidated subsidiary Acquires BPO services fi rm TMJ, Inc. Establishes presence in Turkey201220122014 2014201520172019 Launches MEDCOM, Japan’s fi rst unrestricted cancer treatment policy2011 Establishes presence in New Zealand1999–Geospatial information servicesInvests in Pasco Corporation, a leading provider of aerial surveying servicesNet sales and operating revenue¥1,135.3 billion1962196519701975198019851990199520002005201020152021Note: As indicated in the legend, this graph shows net sales and operating revenue for each fi scal year at the time of announcement. Figures have not been readjusted. However, data for periods up to and including the fi scal year ended November 30, 1977, is nonconsolidated revenue for SECOM CO., LTD., calculated using Japanese GAAP, while from the fi scal year ended November 30, 1978 through the fi scal year ended March 31, 2004, the Company reported “revenue and other income.” Owing to a change in the Company’s settlement date, the fi scal year ended March 31, 1990, was a transitional four-month period. 10SECOM REPORT 2021SECOM REPORT 202111Security ServicesFire Protection ServicesMedical ServicesGeospatial InformationServicesBPO and ICT ServicesPrincipal operationsCompetitive advantages On-line security systems Static guard services Armored car services Merchandise and other• Integrated approach to providing on-line security systems• Solid technological foundation made possible by proprietary research and development configuration• Nationwide network of 2,700 emergency depots, facilitating swift response in the event of an • Rental format that minimizes initial costs for subscribers and enables SECOM to take responsibility emergency and appropriate operational controlfor equipment maintenance and upkeep• Solid income foundation (attributable to stable recurring revenue-based businesses) and robust • Extensive lineup of security merchandise, including surveillance cameras and access control systems• Overseas operations centered on the provision of on-line security systems that reflect local market Principal Group companies*1SECOM CO., LTD.*2Secom Joshinetsu Co., Ltd.*3Asahi Security Co., Ltd.Secom plc• Two Group companies with the largest and third-largest shares of the Japanese fire protection Fire alarm systems Fire extinguishing systems Maintenance services• Comprehensive lineup of services that respond to a broad range of customer needs• Integrated service configuration encompassing R&D and planning, equipment design and production, installation and maintenance• Stable demand for equipment that complies with Japan’s Fire Service Act• Ability to extend renovation proposals that draw on a wealth of experience• Expertise in fire extinguishing systems for tunnels and other large-scale structuresNohmi Bosai Ltd.*2Nittan Co., Ltd.customer baseneedsmarket Home medical services Operation of residences for seniors Medical services that leverage ICT Sales of medical equipment and pharmaceuticals Support for affiliated medical institutions Fire insurance policies Automobile insurance policies Cancer treatment policies• Conviction that protecting health and life is the ultimate expression of the SECOM commitment to delivering safety and peace of mind• Experience and extensive know-how in the provision of diverse medical services• Strong collaboration with local communities aimed at realizing effective comprehensive community • ICT-based services that leverage expertise accumulated in the provision of medical services and healthcare systemsSECOM’s management resourcesSecom Medical System Co., Ltd.• Belief in the need for both security services, which are preventative by nature, and non-life insurance, which looks after people in the event of misfortune• Development and provision of unique policies that take into account the risk mitigating factors of • Development and provision of an automotive insurance policy that includes access to emergency Secom General Insurance Co., Ltd.• Development and provision of a cancer treatment policy that features full coverage for all treatment on-line security systemsresponse servicescosts Services for public sector entities Services for private sector entities Services for overseas customers• Service configuration overseen by the leading company in Japan’s aerial surveying and geographic • Ability to provide geospatial information based on geographic data collected by commercial satellites, information system (GIS) marketsaircraft, drones, vehicles and ships• Technological capabilities and expertise in the integration, processing and analysis of geographic and related data to provide geospatial information• Active efforts to cultivate new geospatial information servicesPasco Corporation*2 Data center services Large-scale disaster preparedness services Information security services Cloud-based services BPO services• Highly secure facilities and equipment and tailored support, as well as data center facilities boasting excellent connectivity that are among Japan’s largest• One of Japan’s leading disaster management support services• Seamless information security services encompassing the formulation of strategies, monitoring, implementation of countermeasures and restoration• ICT services that reflect technological prowess, operational capabilities and know-how that facilitates the construction and operation of network systems that leverage extensive experience in the provision of security services• Provision of high-grade contact center and other BPO services that deliver safety and peace of mindSecom Trust Systems Co., Ltd.At Tokyo CorporationTMJ, Inc.12.4%Insurance ServicesSECOM at a GlanceSegmentNet Sales and Operating Revenue¥1,135.3 billion(Breakdown is based on consolidated net sales and operating revenue (excluding intersegment transactions) for the fi scal year ended March 31, 2021.)49.6%67.3%Operating income¥135.8 billion(Breakdown is based on total operating income for seven segments, prior to adjustment for corporate expenses and eliminations (¥152.4 billion).)8.6%6.1%2.9%8.9%3.6%9.7%2.4%2.6%16.1%5.1%4.7% Security Services Fire Protection Services Medical Services Insurance Services Geospatial Information Services BPO and ICT Services Real Estate and Other Service12SECOM REPORT 2021*1 For more information, please see pages 73–76. *2 Listed on the First Section of the Tokyo Stock Exchange *3 Listed on the Second Section of the Tokyo Stock Exchange*4 Owing to the transfer of all issued shares in Secom Home Life Co., Ltd., which spearheaded the Real Estate and Other Services business, as of December 22, 2020, the company was excluded from the scope of consolidation.SECOM REPORT 202113Real Estate andOther Services*4 Construction and installation services Real estate leasing Home services• Provision of integrated services, from the design and installation of air conditioning, plumbing and electrical systems to building maintenance.• Extensive maintenance and management services for leased buildings, primarily in Tokyo.• Provision of lifestyle support services that deliver safety and security and make life more comfortable and convenientThe Value Creation ProcessIn addition to promoting business reforms through SECOM Digital Transformation (DX), we remain committed to providing enduring peace of mind by keeping abreast or where possible ahead of the times. By reinforcing our relationship with society and addressing increasingly diverse social imperatives and ESG-related issues, we continue working to maximize our corporate value and grow together with society.Business model based on the resolution of issuesMegatrends continue to drive the evolution of social imperativesDemographic changeTechnological evolution Increasingly severe environmental issues Shift of global economic center/urbanization(Growth of Asian economies)Social imperativesCrimes/accidentsIllness/agingCyber crimesNatural disastersSECOM Group Road Map 2022The SECOM Group’s Vision for 2030MegatrendsPriority strategies Expand monitoring services Reinforce BPO and ICT services business Strengthen overseas operations Improve productivityBusiness areasStrategies for creating the ANSHIN PlatformEnhanced valueConnectionCollaborationALL SECOMSecurityservicesOther servicesFireprotectionservicessESGinitiativesBPO and ICTservicesMedicalservicesGeospatialinformationservicesInsuranceservicesManagement foundation and strengthsResolution of social issuesResolution of ESG-related issuesReform of businesses through SECOM DXHuman Resources A corporate philosophy shared by all employees 64,119 Group employees*1Organization An integrated portfolio that marshals diverse businesses 182 Group companies in six business areas*2 Operations in 17 countries and territories overseasTechnologies Business model that fuses people and technologies Approximately 2,700emergency depots in Japan Around 60,000,000security sensors installed at subscribers’ premisesPerformance Close ties with society and a strong track record More than 3,510,000security service subscribers Over 7,500,000SECOM Safety Confi rmation Service usersKnowledge Know-how cultivated in Japan Deployment overseas of initiatives developed in Japan, a front runner in addressing challenges associated with a super-aged society and natural disasters*1 Employees of SECOM Group companies (excluding variable interest entities), as of March 31, 2021*2 The parent company, consolidated subsidiaries and equity-method companies, as of March 31, 2021ValuesA uniquely SECOM identity(Philosophy, code of conduct, organizational culture)MissionHelp achievea society free fromconcernsVisionRealize the Social System IndustryContributing to the success of the SDGs14SECOM REPORT 2021SECOM REPORT 202115SECOM’s Core Competitive AdvantagesInitiatives Aimed at Maximizing IncomeWe continue to leverage three competitive advantages—a powerful brand, a recurring revenue–based business model, and Group strengths—to respond to the expectations of both individual and corporate customers, as well as to ensure sustainable growth.A powerful brandSince our establishment, we have consistently kept abreast apprehensions has earned us a reputation for reliability and of society’s evolving needs by providing—and promoting contributed to the rise of the SECOM brand. Recognition of unceasing efforts to improve and evolve—on-line security SECOM as the leader of this country’s security services and other services and systems. At present, we continue to industry also positions us well to secure and foster talented enjoy the leading share of Japan’s market for on-line human resources and maintain an edge over the competition.security systems. Our ability to resolve customers’ A recurring revenue–based business modelWe are engaged primarily in recurring revenue–based Variable and Fixed Costs for On-Line Security Systemsbusinesses. In addition to securing new contracts, we endeavor to ensure that existing customers are content to leave contracts in place. In our core on-line security systems business, all employees—from emergency response Variable costspersonnel and control center staff to sales, technology, and administrative personnel—work together to increase customer satisfaction by providing services that exceed our subscribers’ expectations. We will continue to invest cash generated by recurring revenue–based businesses as necessary to accommodate new contracts, as well as to 3Dispatch SECOM emergency response personnelreinvest in growth to further bolster our competitive edge and ensure sustainable growth, enhancing our ability to Fixed costsdeliver seamless safety and peace of mind.SubscriberSecurity equipment is provided on a rental basis(SECOM assets)1Alert using telecommunications circuitsSECOM Emergency Depot (Approximately 2,700 across Japan)SECOM Control Center (Major locations across Japan)2Alert SECOM emergency response personnelGroup strengthsWith the aim of realizing our Social System Industry vision, services, BPO and ICT services, and other services. In as well as to boost per-customer income, we continue addition to expanding offerings and streamlining sales working to address concerns through a business portfolio activities in each business, we will further fortify encompassing security services, fire protection services, collaboration across the Group, as well as invest in M&As medical services, insurance services, geospatial information with the goal of further reinforcing Group strengths.16SECOM REPORT 2021Priority issuesTechnological advancesDeclining labor forceExpansion and evolution of services Priority strategiesGrowth of customer baseIncrease in opportunities for customers to use servicesPromotion of efforts to reduce labor requirementsImprovement of performanceIncrease in efficiencyImprovement of skills and capabilitiesIncrease in motivation and disciplineExpansion of monitoring services Amplify lineup of services that resolve diverse concerns Drive evolution of monitoring services through use of advanced P27–P28technologies and collaboration with other companiesReinforcement of BPO and ICT services Enlarge data centers Enhance and expand the sale of services that capitalize on optimal state-of-the art technologies Leverage data science to create new servicesStrengthening of overseas operations Develop services tailored to local markets Accelerate growth through M&AsImprovement of productivity Ensure meticulous cost awareness Review business processes Upgrade administrative IT systemsMaximization,syevrus noitcafsitas boj eeyolpme ,evitaitinI noi-irT srehtodna snoitarepoot *)APR ( noitamotua ssecorp citobor fonoitacil ppa esitrepxedezilaiceps dnadecnavdahti w secruoser namuheruces ot stroffE P36–P37P28–P29P21Per-customer incomeNumber of customersContinuation of contractsIncrease in productivityProvision of services that exceed customers’ expectationsIncrease in value provided to customersContinuous expansion of incomeReinvestment in growthImprovement of capital efficiency* RPA is a form of business process automation technology whereby software robots (bots) perform tasks previously performed by humans, including operating computers. SECOM REPORT 202117The SECOM Group’s Vision for 2030Operating in an environment characterized by significant upheaval, dramatic change, and rising uncertainty, we are proceeding with initiatives aimed at realizing the SECOM Group’s Vision for 2030 and the SECOM Group Road Map 2022Conceptual framework of the ANSHIN Platform For both companies and individuals, the occurrence of Guided by the SECOM Group’s Vision for 2030, formulated in an unanticipated crime or disaster can interrupt daily May 2017, we are working to create the ANSHIN Platform, a rhythms. For companies, productivity can fall sharply. service infrastructure through which we strive to provide Moreover, the greater the damage is, the longer it takes to services that deliver seamless peace of mind for anyone and recover. Society faces significant risks associated with everyone whenever and wherever necessary.crimes, accidents, cyber crimes, natural disasters, illnesses Anchored in the relationship of trust that we have and aging. In addition to recognizing the importance of cultivated with society, the ANSHIN Platform seeks to provide routine advance preparation, we provide comprehensive peace of mind to people in their everyday lives, as well as to services designed to address potential risks by helping society as a whole through collaboration with partners in customers accurately grasp conditions, minimize impact and industry, government and academia who share our mission achieve restoration. These four approaches, which comprise to help achieve a society free from concerns and who have what we call the SECOM ANSHIN Flow, enable us to provide diverse technologies and expertise.seamless peace of mind.Tha ANSHIN Platform Service InfrastructureThe SECOM ANSHIN FlowInIneverydayeverydaylifelifeAdvancepreparationInInthe event ofthe event ofan emergencyan emergencyGraspthe situationInInthe event ofthe event ofan emergencyan emergencyMinimizedamageAfterAfteran emergencyan emergencyRestoreoperationsAI, IoT and Big DataOperations/emergency response servicesRisks mayks mayoccuroccursimultaneouslyltaneouslyRather than stand-alone services, we strive toprovide integrated packages that deliver seamless safety andpeace of mind and provide added value that makes lifemore comfortable and convenient egarevocevisnetxESafety and peace of mindLife/health/assets/informationReal-worldCrimes and accidentsCyber crimesNatural disastersIllnesses/agingsksir esreviDInIneverydayeverydaylifelifeComfort and convenienceIssues to be addressed18SECOM REPORT 2021Everyday concernsconvenient.Need to improve efficiencyNeed to reduce costsNeed to rely on othersr e i n f o r c i n g S E C O M’s relationships with customers and societyt h e rruFConnectionEnhanced valuet h e A N S H I N P l a t f o r mfonCre ati oALL SECOMCollaborationStrategies for creating the ANSHIN PlatformTo create the ANSHIN Platform, we are currently promoting Targeting sustainable growth: Devising the SECOM Group Road Map 2022initiatives in line with four core strategies. The “ALL SECOM”In May 2018, we introduced the SECOM Group Road Map strategy focuses on rallying SECOM Group strengths to 2022, devised using backcasting,* to clarify the challenges maximize synergies. Through our “Collaboration” strategy we must address to achieve the SECOM Group’s Vision for we are endeavoring to promote open innovation and create 2030. In the road map, we have positioned responses to new value by integrating the business ideas and technologies technological advances and a declining labor force—both of of various partners who share our mission. Our “Connection”which become threats for both companies and society in strategy emphasizes leveraging Big Data analysis, which general—as priority issues. We believe that evolving needs makes use of advanced information technologies, to respond for solutions to these issues will lead to major business to latent needs and strengthen our relationships with opportunities that will allow us to contribute to the customers, while our “Enhanced value” strategy revolves improvement of social productivity.around addressing everyday concerns by adding greater value to services that make life more comfortable and * Backcasting is a planning method that starts with envisioning a desirable future and working backward from there to identify steps necessary to attain that future.SECOM REPORT 202119The SECOM Group’s Vision for 2030The challenge of service innovation Technological advances have brought an increase in the Owing to a declining labor force, companies face growing addition, we are actively allocating funds to efforts to Our fundamental commitment is to offer services that variety of connected devices. This is driving a variety of pressure to outsource noncore functions, which enables them develop innovative services and products that respond to anticipate what is needed to ensure sustainability for society, profound changes, including the expanded use of drones to concentrate on core businesses. With the rising prevalence needs engendered by technological advances and a rather than simply providing services that will sell in any and robots, the increasing prevalence of unattended of families in which both parents work outside the home, we declining labor force, as well as to replace existing market. This is why people and technology will always be retail facilities and cashless transactions, and the rising are also seeing an increase in demand related to the care of subscribers’ security equipment with new models given top priority. Looking ahead, we will continue working popularity of smart homes. Such changes are expected children and seniors. In response to expanding demand compatible with new technologies.tirelessly to enhance our ability to make effective use of to push up demand related to the need for security in a related to the need to rely on others, we will continue working Our investments to enhance human resources these intangible assets, as well as to promote service connected society, which involves the fusion of physical and to extend distinctive services that deliver safety and peace of emphasize the reinforcement of critical capabilities. In innovation that helps create new value.cyber security.SECOM Group Road Map 2022Targets for the fiscal year ending March 31, 2023 (Japanese GAAP) (Provided for reference only)Consolidated revenue: ¥1.1 trillionConsolidated operating profit: ¥155.0 billionROE: 8% plusDividend payment ratio: 40%—45% Consolidated revenue Consolidated operating profitConsolidated revenue ¥970.6 billionConsolidated operating profit ¥135.4 billionInvestment phaseHigh-growth phaseConsolidated revenue ¥1.1 trillionConsolidated operating profit ¥155.0 billionC A G R