SECOM CO., LTD. SEMIANNUAL REPORT 2015
For the Six-month Period Ended September 30, 2015
PROFILE
to society through its business activities. Today, SECOM is a leading organization comprising the parent company and the companies of the SECOM Group.
Our overarching mission is to provide security and peace of mind and help make life more comfortable and convenient. Accordingly, we are pressing ahead with efforts to realize our vision for the future, the Social System Industry, which describes a framework of distinctive, integrated services and systems. These include capitalizing on our extensive busi- ness portfolio, which today includes security services, fire protection services, medical services, insurance services, geographic information services, information and communication related services, and real estate and other services, to create a solid foundation for future growth.
We also continue to broaden the scope of our operations by promoting the 'ALL SECOM' concept, which focuses on rallying Group strengths to create uniquely SECOM services and systems that enhance comfort and convenience and provide security and peace of mind to maximize Group synergies. Through these efforts, we encourage people to turn to SECOM with the confidence that doing so will help them resolve security and other concerns.
Over the years, our geographic focus has expanded beyond Japan. Currently active in 21 countries and territories in Asia, Europe, Oceania and the Americas, where we provide high-grade security services, fire protection services, medical services and geographic information services customized to reflect local needs and sensibilities, we will continue to strengthen and grow our overseas operations.
Notes: 1. Comparisons of operating results in this semiannual report are between the six-month periods ended September 30, 2015 and 2014.
2. SECOM's semiannual report presents information on its consolidated operating results, calculated in accordance with accounting principles generally accepted in Japan (Japanese GAAP).
CONSOLIDATED FINANCIAL HIGHLIGHTSSECOM CO., LTD. and Subsidiaries Six-month periods ended September 30, 2015, 2014 and 2013
In millions of yen
In thousands of U.S. dollars
2015 | 2014 | 2013 | 2015 | |
Revenue ................................................................................ | ¥408,890 | ¥393,380 | ¥392,319 | $3,407,416 |
Operating profit ..................................................................... | 60,206 | 59,611 | 56,799 | 501,716 |
Ordinary profit ....................................................................... | 63,062 | 70,251 | 62,403 | 525,516 |
Net income attributable to owners of the parent .................. | 40,045 | 41,181 | 35,445 | 333,708 |
Net income per share (yen and U.S. dollars) ......................... | ¥ 183.47 | ¥ 188.68 | ¥ 162.39 | $ 1.52 |
Notes: 1. Net income per share figures are in exact yen and U.S. dollars.
All dollar figures herein refer to U.S. currency. Yen amounts have been translated, solely for the convenience of the reader, at the rate of ¥120=US$1, the rate prevailing on the Tokyo Foreign Exchange Market on September 30, 2015.
Net income per share amounts are based on the average number of shares outstanding during each period.
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TO OUR SHAREHOLDERSOperating Results
Despite a trend toward improvement in both corporate earnings and in employment and personal income levels, the Japanese economy came to somewhat of a standstill in the six months ended September 30, 2015. Contributing factors included weaker exports-a consequence of decelerating growth in Asian emerging economies, notably the People's Republic of China (PRC)-and sluggish consumer spending.
In this environment, we continued working to address ever more diverse and sophisticated needs for security and peace of mind-in keeping with our mission to provide safety and security, as well as comfort and convenience-with the aim of realizing our Social System Industry vision. Accordingly, we focused on offering high-grade ser- vices and systems that respond to customers' needs in our security services segment, as well as in our other segments: fire protection services, medical services, insurance services, geographic information services, information and communication related services, and real estate and other services. We also proceeded with efforts to apply the ALL SECOM concept, which emphasizes cooperation among our various independent businesses to strengthen the Group as a whole. Under the ALL SECOM banner, we also promoted the development of new services in line with three key themes: security, a super-aged society and disaster preparedness/business continuity planning (BCP)/ environmental preservation.
Calculated according to accounting principles generally accepted in Japan (Japanese GAAP), consolidated revenue in the period under review increased 3.9%, to an all-time high of ¥408.8 billion. Consolidated operating profit rose 1.0%, to ¥60.2 billion, also a record. In contrast, consolidated ordinary profit fell 10.2%, to ¥63.0 billion, owing mainly to ¥168 million in net losses on private equity investments, compared with net gains of ¥8.2 billion on such invest- ments, primarily in the United States, in the corresponding period
of the previous fiscal year. Consolidated net income attributable to owners of the parent declined 2.8%, to ¥40.0 billion.
In light of our solid performance in the period under review, with the aim of enhancing returns to shareholders, on November 9, 2015, the Board of Directors approved the payment of an interim dividend of ¥65.00 per share, up ¥5.00 from the interim dividend paid in the previous fiscal year.
Segment Results
Security Services
The security services segment comprises electronic security services, other security services, and merchandise and other. Electronic security services consist of on-line commercial and home security systems and large-scale proprietary security systems. Other security services include static guard and armored car services. The merchandise
and other category encompasses sales of a wide range of security products, including security camera systems, access control systems, automated fire extinguishing systems and external monitoring sys- tems. We also offer high-grade security services in overseas markets through a network of local subsidiaries and affiliates.
In the period under review, revenue in this segment increased 2.2%, to ¥234.7 billion, and operating profit rose 2.9%, to ¥56.2 billion. Principal factors behind these results included brisk sales of on-line security systems for commercial and residential use and of security camera systems and other merchandise.
For commercial subscribers in Japan, we stepped up marketing of high-value-added on-line security systems such as SECOM LX, which combines an on-line security system with access control functions that help improve business efficiency, and SECOM FX, an energy- and labor-saving security and facility control system. We also launched SESAMO IDf, a compact finger vein authentication-based access control system with significantly enhanced verification capabilities.
For home security subscribers, we sought to enhance SECOM Home Security G-Custom, which combines home security with a variety of lifestyle support features-thereby delivering not only security and peace of mind, but also comfort and convenience-to accommodate an ever more diverse range of residential environments and family configurations.
Fire Protection Services
This segment focuses on automatic fire alarm systems, fire extinguishing systems and other fire protection systems for a wide range of applications, including office buildings, plants, tunnels, cultural properties, ships and residences. Thanks to active marketing efforts and large-scale orders, segment revenue advanced 15.8%, to ¥57.1 billion, and operating profit increased 28.1%, to ¥4.5 billion. Income in this segment tends to be concentrated toward the end of the fiscal year, as the fire protection services business is influenced significantly by trends in the construction industry.
Medical Services
The medical services segment encompasses home medical services, which include pharmaceutical dispensing and home nursing services, as well as sales of medical equipment and pharmaceuticals, the operation of residences for seniors, the provision of remote image diagnosis support services, electronic medical report systems and personal care services, and the leasing of real estate for hospitals and healthcare-related institutions. The segment reported a 7.7% increase in revenue, to ¥30.5 billion, reflecting brisk sales of pharma- ceuticals and of medical equipment and other products. An improved cost of sales ratio was one of several factors that boosted operating profit 18.2%, to ¥2.7 billion.
Insurance Services
We believe that both security services, which are preventative by nature, and non-life insurance, which looks after people should misfortune strike, are essential to our ability to provide customers with security and peace of mind. Our extensive lineup includes fire insurance policies for commercial premises and homes, a comprehensive automobile insurance policy and MEDCOM, an unrestricted cancer treatment policy that covers the entire cost of
medical treatment. While revenue in this segment advanced 8.2%, to ¥19.4 billion, underpinned by firm sales of fire insurance policies and of MEDCOM, operating profit fell 69.0%, to ¥431 million, owing to losses attributable to typhoon damage.
Geographic Information Services
Our geographic information services segment includes the use of high-precision measuring equipment and surveying technologies to provide a variety of geospatial information services to public sector entities, including national and local governments, and private sector
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