NEC Australia back in the red for FY19 and reducing employee count

NEC Australia has done a back-flip of its performance from last year, going from an operating profit of AU$1.4 million last year to losing AU$2.2 million for the 12 months to 31 March 2019. 

The AU$3.6 million swing into the red was driven by a sales and administrative cost base that was too large relative to its profit base, the company reported, in addition to losses from businesses which NEC Australia has since exited. 

To reduce its cost base, NEC Australia reported that it has begun simplifying its operations and product set, with one of the key moves to be a reduction in employee numbers which it forecasts will deliver annualised savings of AU$12 million in the next financial year. 

Notably, for the 12 months to March, the company's redundancy expenditure increased five-fold to AU$7 million from AU$1 million in the year prior.

Tax-wise, NEC Australia will pay AU$2 million in income tax for the 12-month period, comprised solely of deferred tax.

Yearly revenue for the 12 months to March totalled AU$403 million, down from AU$431 million recorded last year. This comprised of AU$71 million from the sale of goods and AU$332 million for the rendering of services.

The company also claimed a AU$37 million impairment on its balance sheet that was in relation to its 2012 acquisition of CSG Services and CSG Solutions.

The Australian subsidiary of Japan-based NEC Corporation reported that its local activities for the year comprised of the provision of information and communications technology solutions and services in multi-vendor environments -- much like in years prior.

One project currently underway locally for NEC Australia is a AU$23 million contract with WA Health to upgrade its IT systems and provide a connectivity platform, as part of the state's GovNext program.

The company is also appointed onto a panel of three suppliers as part of the WA GovNext program, which is worth AU$3 billion over 10 years. The government digital transformation project was created to allow the state to concentrate on delivering government services, by handing the IT heavy-lifting to NEC, Datacom, and Atos.

NEC Australia is also currently in a legal battle against the Australian Criminal Intelligence Commission (ACIC) in an attempt to recoup costs and expenses after its contract to deliver the Biometric Identification Services (BIS) project was cancelled in June 2018.

The AU$52 million BIS project, awarded to NEC Australia, kicked off before the July 2016 creation of the ACIC, but the project was terminated in June last year "for convenience".

A report published earlier this year by the Australian National Audit Office (ANAO) blasted the execution of BIS project, labelling it deficient in almost every way. In its report, ANAO said the NEC BIS project encountered difficulties at an early stage, blaming the ACIC for not effectively managing the BIS project.

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