NEC Releases Consolidated Financial Results for the Fiscal Year Ended March 31, 2019

TOKYO, Apr 26, 2019 - (JCN Newswire) - NEC Releases Consolidated Financial Results for the Fiscal Year Ended March 31, 2019

The worldwide economy during the fiscal year ended March 31, 2019 showed a moderate deceleration in growth overall compared to that of the previous fiscal year, due to slow growth in China and Europe, despite steady growth in the U.S.

As for the Japanese economy, the growth was moderate compared to that of the previous fiscal year, due to a series of natural disasters and slow growth in the global economy, despite solid capital investment in an environment marked by a shortage of equipment and labor.

Under these business conditions, the NEC Group implemented a variety of innovative changes that included a "Reform of profit structure," an "Achievement of growth" and a "Restructuring of execution capabilities" as outlined in the "Mid-term Management Plan 2020" announced in January 2018.

During this first year of the "Mid-term Management Plan 2020," the NEC Group implemented drastic profit structure reforms, including a reduction of fixed costs, in order to make the necessary investments to get back on a track to growth in line with the "Reform of profit structure." Specifically, the NEC Group streamlined its workforce by approximately 3,000 personnel by implementing the following measures: voluntary early retirement for employees belonging to back-office departments and particular departments under the hardware business segment, temporary and permanent transfers to companies outside the NEC Group and the transfer of the NEC Group?s lighting business. In addition, profitability improvement measures have been taken in relation to the fiscal year ending March 31, 2020, including the promotion of reduced personnel expenses and other expenditures, such as the optimization of expenses on real estate, the end of operation of Tsukuba Research Laboratories, and the reorganization of production bases belonging to NEC Platforms, Ltd.

As for the "Achievement of growth," the NEC Group promoted businesses engaged in biometrics authentication technologies and artificial intelligence (AI). In particular, the NEC Group's facial recognition systems have been adopted throughout a wide range of fields, including international sports events and the new "One ID" check-in to boarding process introduced by Narita International Airport. Measures utilizing AI include a collaboration with KNI, Kitahara Neurosurgical Institute, to verify changes in the condition of patients in an effort to realize a digital hospital, as well as providing the "Demand and Supply Optimization Platform," which aims to contribute to the resolution of social issues concerning food waste and disposal by optimizing the entire food value chain.

In addition, the NEC Group expanded its business in public safety and digital government. In Europe, the implementation of digital government measures is being promoted in many countries, including Denmark and the UK, which are considered as role models for the implementation of these measures. In February 2019, NEC obtained a business model that leverages platforms in the digital government domain through the acquisition of KMD Holding ApS, the holding company of KMD A/S (KMD), Denmark?s largest IT company. Going forward, NEC aims to create synergies between UK- based Northgate Public Services Ltd., acquired in January 2018, KMD and the NEC Group in order to expand business from northern Europe to the whole of Europe and globally.

Regarding the "Restructuring of execution capabilities," the NEC Group reinforced business development capabilities and introduced an organization that operates with improved execution strength. In terms of reinforcing business development capabilities, the NEC Group established dotData, Inc. in the U.S. in order to utilize external funding to achieve prompt commercialization of new technologies and accelerate the monetization of the NEC Group's competitive technologies. The NEC Group also established NEC X, Inc. in the U.S. as an incubator to accelerate commercialization of its core technologies globally. Regarding improved execution strength, the NEC Group Culture Transformation Division was established and a company-wide project was launched in order to thoroughly reform corporate culture.

Through this project, the NEC Group formulated a "Code of Values" to promote changes toward realization of goals, introduced a new evaluation system for executives and employees, and accelerated the delegation of authority by reviewing operations and processes. Additionally, in order to clarify the responsibilities and authority of management, the NEC Group terminated the employment contracts of executive officers at the end of March 2019, and entered into one-year mandate contracts. These measures were taken to maximize the potential of each and every executive and employee.

The NEC Group recorded consolidated revenue of 2,913.4 billion yen for the fiscal year ended March 31, 2019, an increase of 69.0 billion yen (2.4%) year-on-year. This increase was mainly due to increased sales in the Enterprise business and the Network Services business.

Regarding profitability, operating profit (loss) worsened by 5.4 billion yen year-on-year, to an operating profit of 58.5 billion yen. This was mainly due to business structure improvement expenses recorded for the implementation of voluntary early retirement, despite increased revenue.

Income (loss) before income taxes was an income of 78.0 billion yen, a year-on-year worsening of 8.9 billion yen, mainly due to the gain on sales of available-for-sale financial assets that was recorded in the previous fiscal year, as well as worsened operating profit (loss).
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Net profit (loss) attributable to owners of the parent for the fiscal year ended March 31, 2019 was a profit of 40.2 billion yen, a worsening of 5.7 billion yen year-on-year, primarily due to worsened income (loss) before income taxes.

For the full report visit, https://www.nec.com/en/press/201904/images/2601-01-01.pdf.

About NEC Corporation

NEC Corporation is a leader in the integration of IT and network technologies that benefit businesses and people around the world. The NEC Group globally provides "Solutions for Society" that promote the safety, security efficiency and fairness of society. Under the company's corporate message of "Orchestrating a brighter world," NEC aims to help solve a wide range of challenging issues and to create new social value for the changing world of tomorrow. For more information, visit NEC at https://www.nec.com.

Contact:
NEC Seiichiro Toda s-toda@cj.jp.nec.com +81-3-3798-6511

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