NEC Fielding Announces Consolidated Financial Results for the First Quarter Ended June 30, 2005.Tokyo, Japan, July 28, 2005 - (JCN JCN Japan Corporate News JCN Journal of Cognitive Neuroscience JCN Journal of Cardiovascular Nursing JCN Journal of Christian Nursing JCN Job Control Number JCN Journal of Child Neurology JCN joint communications network (US DoD) Newswire) - NEC (NEC Corporation, Tokyo, www.nec.com, www.necus.com) An electronics conglomerate known in the U.S. for its monitors. In Japan, it had the lion's share of the PC market until the late 1990s (see PC 98). NEC was founded in Tokyo in 1899 as Nippon Electric Company, Ltd. Fielding (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). : 2322), a leading IT support and maintenance company and member of the NEC Group, today reported consolidated financial results for the first quarter ended June 30, 2005. The IT support service market, the Group's principal business domain, enjoyed increased demand for security services Security services are state institutions for the provision of intelligence, primarily of a strategic nature, but also including protective security intelligence. Examples include the Security Service (MI5) and the Secret Intelligence Service (MI6) in the United Kingdom, and the in response to personal information protection legislation that took effect on April 1, 2005,yet a difficult situation nevertheless persisted due to stiffening stiff·en tr. & intr.v. stiff·ened, stiff·en·ing, stiff·ens To make or become stiff or stiffer. stiff competition and price collapses across the IT industry as a whole. The first quarter's principal activity comprised measures to build a system enabling maximization of the effects of decisive management improvement action taken in the preceding fiscal year. With the objective of expanding the business of operational support and others with prospects for high added value Added value in financial analysis of shares is to be distinguished from value added. Used as a measure of shareholder value, calculated using the formula:
The foregoing activities are beginning to show results, but not yet to the point of offsetting the impact of order unit price declines and diminution Taking away; reduction; lessening; incompleteness. The term diminution is used in law to signify that a record submitted by an inferior court to a superior court for review is not complete or not fully certified. in large projects. First quarter sales thus came in down by 11.9% from year-ago quarter to 50,751 million yen. Recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. profit rose by 15.7% to 1,806 million yen on the results of management improvements that included lower outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. expenses by proceeding in-house work and continuation and reinforcement reinforcement /re·in·force·ment/ (-in-fors´ment) in behavioral science, the presentation of a stimulus following a response that increases the frequency of subsequent responses, whether positive to desirable events, or of reductions in maintenance materials costs. The quarter's net profit rose by 22.7% to 1,185 million yen. In sales by segment, those of Proactive maintenance Proactive maintenance is a maintenance strategy for stabilizing the reliability of machines or equipment using Proactive maintenance services. Its central theme involves directing corrective actions aimed at failure root causes, not active failure symptoms, faults, or machine wear declined by 10.7% to 24,688 million yen. Initial estimates foresaw a decline in contract-based maintenance in conjunction with sifting to open architecture trends in equipment, but efforts to expand maintenance service for software support- and cooperative work-driven multi-vendor equipment did not fully achieve targets. Overall Fielding solution segment sales declined by 13.1% to 26,062 million yen. System Deployment The deployment of a mechanical device, electrical system, computer program, etc., is its assembly or transformation from a packaged form to an operational working state. Deployment implies moving a product from a temporary or development state to a permanent or desired state. Services decreased due to lower unit prices amid stiff competition, while Supply Services also decreased with the counter-movement in machine replacement due to the issuance of new currency notes in the previous fiscal year. There was expansion in Operational Support Services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services along-side 'i Solution base' deployments with close linkages in local areas. This period saw the start of business of the newly consolidated subsidiaries Fielding Supportcrew, Ltd., and NEC Fielding Information Technology Services (Beijing) Co., Ltd, but this had only a minor effect on the Group's consolidated operating results. 1. Consolidated Financial Summary for the Six Months Ended September 30, 2003
(Units: millions of yen)
First Quarter Previous Quarter Previous FY
1 April 2005 to 1 April 2004 to 1 April 2004 to
30 June 2005 30 September 2004 31 March 2005
% change % change
Net Sales 50,571 (11.9) 57,616 4.6 241,539
Operating Income 1,648 17.9 1,397 (53.8) 11,458
Ordinary Income 1,806 15.7 1,562 (49.9) 11,693
Net Income 1,185 22.7 966 (40.1) 4,340
EPS (yen) 21.75 17.72 79.27
Fully Diluted
Net Income per Share -- -- --
Financial Position
Total Assets 113,744 118,618 123,343
Shareholders' Equity 57,071 54,185 56,721
Equity Ratio (%) 50.2 45.7 46.0
EPS (yen) 1,046.41 993.51 1,039.68
Cash Flows
Cash Flow from 4,528 (3,121) (1,175)
Cash Flow from
Investing Activities (968) (1,410) (4,127)
Cash Flow from
Financing Activities (787) (397) (1,223)
Cash and Cash Equivalents
at Period End 5,610 4,436 2,838
The full first quarter financial statement and fact sheet are available at MultexNet, Reuters Research, Thomson One Analytics or at the NEC Fielding IR website: www.fielding.co.jp/ir/e/index.html Qualitative Assessment of Consolidated Business Results In the first quarter of the fiscal year ending March 2005, an increase in capital investment driven mainly by private-sector demand and other developments led to a rebound in Japan's economy, but the outlook was still highly uncertain because of the rise in materials prices (particularly oil prices) and continued declines in product prices. Conditions remained challenging also because companies carefully considered the impact of their investments. In this environment, the NEC Fielding Group (consisting of NEC Fielding Ltd. and consolidated subsidiary NDEC NDEC National Data Evaluation Center (ongoing literacy research project at The Ohio State University) NDEC National Disaster Education Coalition NDEC Nursing Diagnosis and Extension Classification Co., Ltd.) focused its resources on After-Installations IT support services and continued to strengthen its business base centered on customer satisfaction. One topic in the quarter under review was the continued effort to improve the quality of service provided to customers. Of our iSolution hosting facilities nationwide, iSolution Kanazawa acquired ISMS ISMS Information Security Management System ISMS Integrated Safety Management System ISMS Illinois State Medical Society ISMS In-flight Safety Monitoring System ISMS Indian Society for Medical Statistics ISMS Integrated Environmental, Safety, and Health Management System Conformity Assessment Conformity assessment is any activity to determine, directly or indirectly, that a process, product, or service meets relevant standards and fulfills relevant requirements. Scheme (Ver. 2.0) certification after iSolution Saitama did in the previous fiscal year. In addition, to expand our support services, the Company established a DC Nobeoka Support Center to provide maintenance and operations services for the city of Nobeoka in Miyazaki prefecture. We also expanded our service offerings to include one-stop services for nationwide VoIP phone See IP phone and softphone. systems, including installation consulting, design, setup, installation work, and maintenance, as well as prompt, low-priced security assessment services for servers. To further promote social responsibilities as a company, the Company also participated in the UN Global Compact to put into practice internationally determined standards regarding human rights, labor, and the environment. In pursuing these activities, we increased sales for the quarter year on year but decreased profit. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight in Proactive Maintenance Operations totaled 27,643 million yen, a decrease of 4.6% year on year, as a decline in maintenance fees stemming from lower hardware prices resulting from a shift of Main-flame systems to Open systems and a decline in number of repairs because of improved product quality were not offset by adopting new approaches such as software support, and maintenance for non-NEC equipment. In the Fielding Solutions Operations, sales totaled 29,972 million yen, an increase of 14.9% year on year, thanks to strong upgrades of IT equipment in conjunction with the increase in companies' capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. , and higher revenue from IT management services. As a result, overall sales totaled 57,616 million yen, an increase of 4.6% year on year. Ordinary income totaled 1,562 million yen, a decrease of 49.9% from the year-ago quarter, and the ratio of ordinary income to sales was 3.0 points lower than a year ago because of a decline in sales in the profitable Proactive Maintenance Operations and in the Fielding Solutions Operations, stepped-up requests for lower prices from customers seeking to improve their returns on investment, and the slow startup of operations support services because of drawn-out negotiations. Net income for the quarter totaled 966 million yen, a decrease of 40.1% year on year. Qualitative Discussion of Consolidated Financial Position Cash and equivalents ("cash") totaled 4,436 million yen at the end of the first quarter, an increase of 1,399 million yen from the year-ago quarter. Cash flows for the quarter and the factors contributing to their change are described below. Cash Flows from Operating Activities Net cash used by operating activities during the quarter totaled 3,121 million yen, a 1,991 million yen increase year on year. Sales credit declined 11,629 million yen, compared with an increase of 1,191 million yen in the year-ago quarter, and although income taxes paid totaled 5,367 million yen, a decrease of 1,638 million yen from the year-ago quarter, pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. totaled 1,562 million yen, a decrease of 1,445 million yen year on year. In addition, purchase liabilities declined by 8,774 million yen, an increase of 2,563 million yen from the year-ago quarter. Cash Flows from Investing Activities Net cash used in investing activities during the quarter amounted to 1,410 million yen, an increase of 768 million yen from the year-ago quarter as a result of investments in new hardware and software for internal IT systems to enhance customer service and strengthen the base of operations Noun 1. base of operations - installation from which a military force initiates operations; "the attack wiped out our forward bases" base air base, air station - a base for military aircraft army base - a large base of operations for an army . Cash Flow from Financing Activities Cash Flow from Financing Activities A category in the cash flow statement that accounts for external activities such as issuing cash dividends, adding or changing loans, or issuing and selling more stock. Net cash used in financing activities during the quarter totaled 397 million yen, a decrease of 113 million yen year on year. Although 119 million yen of borrowings were repaid in the year-ago quarter, dividends paid in the quarter under review totaled 397 million yen. Qualitative Discussion of Consolidated Forecasts (FY Ending March 31, 2006) Despite the underlying improvement in economic conditions in Japan and other major countries, the business environment remains challenging for the NEC Fielding Group. Price competition stemming from the shift to open systems has quickly spread from the hardware market to the IT support services market, and competition among IT service providers has intensified in·ten·si·fy v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: further. Projected Results for the Year Ending March 31, 2006 (Units: millions of yen)
(yen millions)
First Half Ended Forecast for
March 31, 2005 March 31, 2006
Net Sales 120,000 250,000
Ordinary income 6,000 14,000
Net Income 3,900 9,000
EPS (yen)
Net income -- 165.02
In such an environment, the Group continued to base its business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets on customer service. Nevertheless, profit for the quarter under review declined year on year, even though sales increased. To successfully compete on price and achieve the first-half and full-year estimates announced on April 28, 2004, NEC Fielding intends to strengthen efforts to expand sales, including revenue from high value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. provided to maintenance-contract customers; reduce costs by further bolstering low-cost work activities; and continue moving ahead with management reform projects to revamp re·vamp tr.v. re·vamped, re·vamp·ing, re·vamps 1. To patch up or restore; renovate. 2. To revise or reconstruct (a manuscript, for example). 3. To vamp (a shoe) anew. n. our cost structure and substantially improve productivity. Copyright [c] 2005 JCN Newswire. All rights reserved. A division of Japan Corporate News Network K.K. |
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