NEC Australia returns to black by banking AU$20 million in operating profit during FY20

Attributing the turnaround on revenue growth and realisation of staff-related cost savings.
Written by Aimee Chanthadavong, Contributor

NEC Australia has reported a significant turnaround from last financial year, recording AU$19.7 million in operating profit after last year's AU$2.2 million loss for the 12 months to 31 March 2020.

The company attributed the AU$22 million jump to year-on-year revenue growth and the realisation of staff-related cost savings that was undertaken the previous financial year following its employee redundancy initiative.

Total revenue for the 12 months came in at AU$417 million, an increase from last year's AU$403 million. Of that, managed services accounted for more than half of that, coming in at AU$247 million. This was followed by the sales for goods including hardware, software, network infrastructure, enterprise network solutions, system devices, and lighting equipment, which earned the company AU$90 million during the financial year. The remainder was made up of other services and professional services.

Some of the specific contracts that NEC won during the year included AU$39 million deal with the Western Australian Police Force for the transformation of its wide area network, local area network, and IP telephony environments across every site, and delivering the Tasmanian government a new triple zero emergency response platform.

While NEC Australia did not disclose the number of employees that still remain at the company following the redundancy initiative, the amount dedicated to salaries and wages was down to AU$159 million from last year's AU$162 million. Similarly, redundancy termination benefits were reduced to AU$1.55 million versus AU$7.1 million in during FY19.

During FY20, NEC Australia recorded an income tax expense of AU$3 million based on 30% of its $10 million pre-tax profit but that number was wiped out by prior tax losses and resulted in a AU$1.3 million benefit. The company said it still has potential benefits from previous losses amounting to AU$122 million on its books.

Looking ahead, NEC Australia said it would continue to "refine its structure and offerings" to ensure efficient operations. It added that it has plans to focus on cost reduction and maintenance and renewal of current contracts to achieve another positive result in the next financial year.

"The ongoing focus of the group is to continue to pursue additional revenue growth opportunities, closely manage sales and administrative expenses as well as drive to conclusion a number of cost saving initiatives within the operational delivery function," the company stated.

The company also noted the coronavirus pandemic did not have any material impact on the company's financial position as of 31 March 2020, but believes if "economic impacts in key regions and restrictions on the movement of people and product are prolonged, there may be adverse implications for profitability, the carrying values of non-current assets and the recoverability of receivables".

NEC Australia is 100% owned by Japan-based NEC Corporation, which is the parent entity and ultimate controlling entity. Since March 2019, NEC Australia has reported directly to NEC Corporation. 

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