​Sending back office offshore helped NEC Australia with FY18 profit

The local arm of NEC turned a AU$19.3 million FY17 loss into a AU$1.4 million FY18 profit after restructuring its business model and sending back office roles offshore.
Written by Asha Barbaschow, Contributor

NEC Australia has made its 2018 financial results available to the Australian Securities and Investments Commission (ASIC), reporting AU$1.4 million in operating profit, up from a loss of AU$19.3 million the year prior.

After suffering the multimillion-dollar loss, NEC restructured into a "functional-based organisation" which included the review and closure of two business units -- including further voluntary redundancies -- and the implementation of an offshoring project that saw back office roles sent overseas.

NEC also said it introduced more "comprehensive" project governance and controls as a result of the loss, and placed further emphasis on the management of sales and administrative expenses.

Yearly revenue for the 12 months to March 31, 2018 totalled AU$431 million, comprised of AU$145 million from the sale of goods and just shy of AU$287 million from the rendering of services.

The company claimed a AU$68 million impairment on its balance sheet related to the 2012 acquisition of CSG Services and CSG Solutions.

"The impairment loss is a result of changing industry conditions and competitive pressures within the ICT industry, which lead to a decrement in the cash flow projections," NEC said. "As a consequence, the recoverable amount was lower than the carrying value of the goodwill."

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

See also: Australia warns G20 leaders the digital economy is 'no tax-free club'

NEC Australia, wholly controlled by NEC Corporation of Japan, described its local activities as the provision of information and communications technology solutions and services in multi-vendor environments.

The company described the solutions and services as including but not limited to: ICT managed services, unified communications and data network solutions, other complex communications and IT application solutions, display solutions, identity management and security solutions, research and development services, software development, systems integration services, professional resources provision services, and after-sales support services.

The company also noted it has been working with Australian businesses and government organisations for 49 years.

One project currently underway locally is with the government of Western Australia.

The behemoth IT project, known as GovNext-ICT, is worth AU$3 billion over the next 10 years. The government digital transformation project is aimed at allowing the state to concentrate on delivering government services, by handing the IT heavy-lifting to NEC, Datacom, and Atos.

NEC's recent results reflect the realisation of revenue streams from being appointed onto the panel, the company said.

It is also working on the Transport for New South Wales Making IT Work For You project; the NSW Police force radio network upgrade; and similarly with the NSW Telco Authority to deliver network management systems and wireless backhaul technology for state emergency services and other public safety agencies as part of the government's Critical Communications Enhancement Program.

NEC Australia was also the contracted supplier for the Department of Education's Australian Apprenticeship Management System project, which was scrapped earlier this year when it was deemed as not meeting "business needs", after the cost of the project blew out to nearly AU$20 million.


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