Consolidated Financial Statements for the Fiscal Year ended March 31, 201926-Apr-2019
These financial statements have been prepared in accordance with accounting principals generally accepted in Japan.

NEC Networks & System Integration Corporation

Stock exchange listing: Tokyo
Code number:
1973

https://www.nesic.co.jp/english/index.html
1. Consolidated Results for the Fiscal Year ended March 31, 2019
(Rounded down to the nearest million yen.)(1) Net Sales and Incomes(Percentages represent change compared with the same period of the previous fiscal year.)
Net income
attributable to
Net sales
Year-on-year
Year-on-year Ordinary income Year-on-year change
Year-on-year
owners of thechange (%)(¥ million)change (%)
change (%)(¥ million)(%)
parent(¥ million)
18.9
8,885
20.8
FY ended March/19
277,949
3.7
12,774
15.5
13,023
9.8
7,357
12.3
FY ended March/18
267,939
3.9
11,057
10.9
10,957（Note) Comprehensive income : FY Mar.2019 : ¥9,383 million (7.7%) ; FY Mar.2018 : ¥8,712 million (51.4%)
Operatingincome(¥ million)

Profitper share (¥)

Profit per
share(diluted) (¥)

Return on
equity (%)

Ordinary
Operatingincome/ Total income/ Net
assets (%)
sales (%)

FY ended March/19
179.02
—
8.7%
6.1%
4.6%
5.4%
4.1%
FY ended March/18
148.23—
7.6%（Reference) Equity in earnings (losses) of affiliates : FY Mar.2019 : ¥23million ; FY Mar.2018 : (¥25million)(2) Financial Position
Total assets(¥ million)

Net assets(¥ million)

Owner's equity
ratio (%)

Net assets per
share (¥)

31-Mar-19
216,171
107,60848.5
2,113.19
31-Mar-18
207,643
101,73247.9
2,004.04
c.f. Owner's equity: 31/3/2019 ¥104,888million ; 31/3/2018 ¥99,473million(3) Cash FlowsFY ended March/19
FY ended March/18

Net cash provided by (used Net cash provided by (usedin) operating activities
in) investing activities(¥ million)(¥ million)
8,396(5,604)4,779(2,802)

Net cash provided by (used in)financing activities(¥ million)(5,615)(4,366)

Cash and cash equivalents
at end of year(¥ million)
54,35457,281

Total dividends
paid(full year)
3,673
3,871

Payout ratio
Dividends/(consolidated Net assets) (%)(consolidated
49.9
3.8
43.6
3.8

2. Dividends

FY ended 3/2018
FY ended 3/2019
FY ending 3/2020（Projected)

1stquarter———

Dividends per share (¥)
3rd
InterimYear-endquarter
37.00
—
37.00
38.00
—
40.00
40.00

—

40.00

Full year
74.00
78.00
80.00

44.6

3. Financial Forecasts for Fiscal Year ending March 31, 2020

Net sales(¥ million)
6 Months ending
9/2019FY ending 3/2020(%)(Percentages represent change compared to the previous corresponding period.)
Net income
attributable
Net income attributable toOperating income
Ordinary income
to owners ofowners of the parent
the parent
per share(¥ million)(%)(¥ million)(%)(¥ million)(%)(¥)

130,000

6.1

2,700

2.6

2,900

0.0

1,600

(16.3)

32.24

295,000

6.1

13,0001.8

13,100

0.6

8,900

0.2

179.31

Cautionary Statement
Forecasts of results mentioned in this document are future estimates and are thus inclusive of risks and uncertain factors since they are not based
ondefinite facts. Please be aware that a variety of factors could cause actual results to differ significantly from those projected. The major factors affecting
actual results include the economic climate and social trends surrounding the business of this Company’s group, consumer trends vis-a-vissystems andservices provided by this Company’s group, as well as pressure to lower prices and ability to cope with the market in response tointensifiedcompetition.Factors affecting results are not limited to the ones mentioned above.

4. Business Results(1) Business Results for the Fiscal Year Ended March 31, 2019
During the fiscal year ended March 31, 2019 (the period from April 1, 2018, to March 31,2019), the Japanese economy continued a moderate recovery amid improvement in
employment and income conditions. However, there were worrying trends in areas such as
trade and associated fluctuations in the financial and capital markets and, recently, weakness
in some aspects of exports and production have also been evident.
Under these economic conditions, disparities were observed in different segments of theinformation and communication technology (ICT) market, the business domain where NEC
Networks & System Integration Corporation (hereinafter “the Company”) operates.
In the enterprises market, companies maintained a high level of investment in management
improvements, such as work-style innovation and strengthening their competitiveness, andstepped up capital expenditure in response to rising inbound tourism. In addition, interest in
cutting-edge technologies, including DX (digital transformation) such as artificial intelligence(AI), the Internet of Things (IoT), Robotic Process Automation (RPA) and data analysis, hasbeen rising. In the telecom carrier business, investment in network infrastructure showed arecovery. In the central and local government and public interest-related markets, investment
in improving urban infrastructure such as broadcasting and CATV remained active. Meanwhile,effects have been observed from investments in firefighting commander systems, as the year
was a transitional period. Overseas markets showed signs of recovery, including an increasein demand for telecommunication facilities in ASEAN regions in response to improvements inurban infrastructure, as well as the resumption of capital expenditure which had been
postponed in some regions due to the impact of factors such as crude oil prices.

In this market environment, the Company and its consolidated subsidiaries (hereinafter the “Group”)
continued to step up their initiatives in businesses related to work-style innovation, including“EmpoweredOffice (*),” in response to a growing trend to change work styles. At the same time, the Grouphas proactively proceeded with growth investment such as R&D and verification of new solutions, including
a verification test for the DX technology field, as well as investment in venture enterprises through the CVC
fund established in January 2018. We also responded actively to demand for improvements in network
infrastructure in step with to hotel construction, which has been more active in recent years. In addition,
the Group bolstered its systems to expand businesses for telecommunications carriers whose capitalspending is expected to recover, which included the establishment of a new company jointly with KDDI
Corporation and the rebuilding of a base station construction system. The Group also stepped up initiatives
to expand operations including an effort, jointly with Sony Network Communications Inc. and ORIX
Corporation, to launch a business for a new standard of low-power wide-area (LPWA) networks. The LPWA－

1 －is expected to expand rapidly in the future with their application to the IoT.

As a result, the Group posted the following consolidated results for the year under review:¥277,949 million

3.7%

increase year on year

Operating income¥12,774 million

15.5%

increase year on year

Ordinary income¥13,023 million

18.9%

increase year on year

Net income attributable¥8,885 million

20.8%

increase year on year

¥284,739 million

1.1%

decrease year on year

Net sales

to owners of the parent＜Reference＞
Orders received

Net sales increased 3.7% year on year, to ¥277,949 million. The result reflected growth insales achieved in the Enterprise Networks business and the Carrier Networks business centeredon fields related to work-style innovation and the development of networks for hotels and otherservice providers. Orders received remained mostly flat, edging down 1.1% year on year, to¥284,739 million, reflecting an expansion in orders for ordinary enterprises centered on hoteland other service providers and finance companies as well as orders for telecom carriers, inaddition to large-scale orders received overseas, despite the negative effects associated with afall in reaction to orders for large projects received in the previous fiscal year and the cancellationof orders for mega solar projects.
Looking at profits, operating income rose 15.5% year on year, to ¥12,774 million, ordinary
income grew 18.9% year on year, to ¥13,023 million, and net income attributable to owners of
the parent expanded 20.8% year on year, to ¥8,885 million, respectively. These results
reflected, in addition to net sales expansion, an increase in the ratio of projects with highadded value to net sales and improved cost effectiveness in the Enterprise Networks
business, together with a substantial improvement in the cost of sales ratio due mainly to cost
cutting effects in the Social Infrastructures business, although proactive investment in growth
was made.

－

2 －Operating results by business segment were as follows:（Million yen）

Net sales by business segment
Enterprise

CarrierSocialNetworks

Networks

Infrastructures

Other

Total

Fiscal 2019.3

122,775

70,52977,2607,383

277,949

Fiscal 2018.3

110,887
11,88864,902
5,627

85,192(7,932)

6,957
426

267,939
10,009

10.7

8.7

(9.3)

6.1

3.7

Increase (decrease)
Ratio of increase(decrease) (%)（Million yen）

Reference: Orders received by business segment
Enterprise

CarrierSocialNetworks

Networks

Infrastructures

Other

Total

Fiscal 2019.3

122,456

73,02080,285

8,976

284,739

Fiscal 2018.3

125,826

68,54387,046

6,414

287,831

Increase (decrease)(3,369)4,477(6,761)

2,562(3,091)

(2.7)

6.5

(7.8)

39.9

(1.1)

Ratio of increase(decrease) (%)

1. Enterprise Networks business
As ICT investment in work-style reform remained active, sales for almost all of thesectors expanded centering on work-style innovation related business. As a result, net
sales increased 10.7% year on year, to ¥122,775 million.
2. Carrier Networks businessNet sales for the business rose 8.7% year on year, to ¥70,529 million, reflecting the growthin business for telecommunications carriers and non-carrier businesses such as network
development for service industries.

3. Social Infrastructures businessNet sales for the business decreased 9.3% year on year, to ¥77,260 million, as a reactionary
fall in civil engineering for development in large projects for constructing mega solar power
plants and decreased sales in businesses for overseas markets offset growth in the
broadcasting and CATV segment.

－

3 －*EmpoweredOffice:EmpoweredOffice is our office innovation solution. It combines our strengths in ICT and
facility installation to enable more intellectual and creative styles of work through process
reforms. It also proposes new methods and places of work that enable customers to fulfill
their social responsibilities, such as the strengthening of security and environmental
responsiveness.

<Outline of Business Segments>
Business Segment

Descriptions of Main Businesses
Service integration of ICT solutions, mainly for the enterprises market
Total office solutions based on ICT with securities or environmental

Enterprise Networks

solutionsand related operation/monitoring services, as well as outsourcing
services using our own contact centers and data centers
Service integration mainly for telecom carriers’ ICT platforms (frommobile communications base stations to core networks), including
systems integration, installation, and related services such as

Carrier Networks

operations and monitoring.
Systems integration of large-scale, wide-area, carrier-grade ICT
platforms and data centers and related operations, monitoring services
Development, manufacturing, sales and systems integration of network
equipment and other equipment.
Service integration of ICT infrastructure for governments and public
utilities (broadcasters, electric power companies, etc.), such as systems

Social Infrastructures

integration, installation, operation, and monitoring, and operations inmarkets other than the Tokyo, Nagoya, and Osaka areas. Overseas
subsidiaries

Others

Mainly sales of purchased equipment(2) Outlook for the Fiscal Year Ending March 31, 2020
In the fiscal year ending March 31, 2020, the Japanese economy is expected to continue amodest recovery due mainly to the effect of government stimulus measures and improvement in
the employment and income conditions. However, there is concern that factors such as tradeissues and associated fluctuations in financial and capital markets could cause a downturn in theJapanese economy.
In the ICT market, which is the Company’s business domain, there is concern that a downturnin the Japanese economy will make businesses less willing to invest in ICT. Nonetheless,increased appetite for investment in areas related to workstyle innovation and expansion of－

4 －investment in base stations and other network infrastructure among telecom carriers are
forecast. However, in the central and local government and public interest-related markets, nomajor investment themes can be expected and, with competition remaining fierce, demand is
expected to remain weak.
Under these conditions, in the fiscal year ending March 31, 2020, the Company expects topost net sales of ¥295 billion by strengthening initiatives in areas related to workstyle innovation
and business for telecom carriers.
Looking at profits, the Company expects to record operating income of ¥13 billion, ordinary
income of ¥13.1 billion and net income attributable to owners of the parent of ¥8.9 billion throughthe effect of increased sales and the promotion of further improvements in efficiency, despite
actively making further investments in growth, including strengthening its response to DX andother cutting-edge technologies and the development of human resources in anticipation of
future medium and long-term growth.

Net sales¥295 billion

6.1% increase year on year

Operating income¥13.0 billion

1.8% increase year on year

Ordinary income¥13.1 billion

0.6% increase year on year

Net income attributable¥8.9 billion

0.2% increase year on year

to owners of the parent(3)Profit Distribution Policy and Dividends for the Fiscal Year Ended March 2019 and the Fiscal

Year Ending March 2020
We view the distribution of a reasonable share of profits to shareholders as one of our top
management priorities, and make every effort to reinforce the Company’s managementfoundation, strengthen its financial standing, and increase its earning capacity. While wealso place a great deal of importance on increasing our corporate value through growth byaccelerating strategic investment in M&A, strengthening the business foundation andcreating new businesses that will allow us to expand our future businesses that will beareas of focus, we strive to continually meet the expectations of our shareholders in our
profit distribution.
On that basis, we decided that since net income attributable to owners of the parent
exceeded our forecast and that, as a result, owner’ equity also increased more than
anticipated, we would revise our year-end dividend for the fiscal year ended March 31,
2019 to ¥40.00 per share, which is ¥2.00 increase from our previous forecast. This
combined with the interim dividend already paid brings our annual dividend to ¥78.00 per
share, which is an increase of ¥4.00 from the previous year.
The dividend per share for the fiscal year ending March 31, 2020 is expected to be ¥40.00
for both the interim and year-end periods, increasing our annual dividend to ¥80.00.

－

5 －5. Consolidated Financial Statements(1) Consolidated Balance Sheets
As ofMarch 31, 2018
AssetsCurrent assets
Cash and cash equivalents
Notes and accounts receivable
Electronically recorded obligations
Purchased goods,materials and supplies
Work in process
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures (net)
Machinery and vehicles
Accumulated depreciation
Machinery and vehicles (net)
Furniture and fixtures
Accumulated depreciation
Furniture and fixtures (net)Land
Construction in progress
Other
Accumulated depreciation
Other (net)Total property and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Asset for retirement benefits
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Notes and accounts payable
Electronically recorded obligations
Short-term bank loans
Current installments of long-term debt
Accrued income taxes
Accrued consumption taxes
Advanced received
Accrued bunuses to directors and corporate auditors
Accrued warranty on products
Accrued losses on sales contracts
Other current liabilities
Total current liabilities
Long-term liabilities
Long-term debt
Liabilities for retirement benefits
Other liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized holding gain on other securities
Foreign currency translation adjustments
Accumulated adjustments for retirement benefits
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets(Millions of yen)
As ofMarch 31, 201957,281103,911
494
2,379
5,858
5,414
(121)
175,218

54,354
106,553
606
6,354
6,827
6,423
(82)
181,036

9,763(5,849)
3,914
182
(150)
31
14,826(11,358)
3,467
2,410
222
258
(212)
45
10,093

10,033(6,205)
3,828
173
(142)
30
15,016(11,774)
3,242
2,410
499
392
(187)
204
10,217

1,394
3,990
5,384

1,146
5,088
6,234

516
444
12,7143,309(37)
16,94732,425
207,643635
364
13,6004,144(62)
18,68235,134
216,171

39,574
728
4,086
3,171
3,768
2,415
3,811
102
116
557
14,541
72,87440,274
807
2,284
231
3,175
2,185
6,290
117
113
1,980
14,86872,328842
30,428
1,765
33,037
105,9113,896
30,6091,729
36,234
108,562

13,122
16,65574,357(276)
103,858

13,122
16,65979,520(279)
109,02242(374)(4,053)(4,385)
2,258
101,732
207,64331(471)(3,694)(4,134)
2,719
107,608
216,171(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(Millions of yen)
FY Mar/2018

FY Mar/2019

Net sales

267,939

277,949

Cost of sales

223,674

230,268

Gross profit

44,26547,681

Selling, general and administrative expenses

33,20834,906

Operating income

11,057

12,774Non-operating income
Interest income

3540Dividend income of insurance

197

193

Insurance income

41

70

Other

161

256

Total non-operating income

435

560

Interest expenses

127

95

Loss on disposal of property and equipment

120

53

Foreign exchange losses

51

43

Non-operating expenses

Business reconstruction expenses for subsidiaries

56

Other

179

119

Total non-operating expenses

535

312

10,957

13,023

Ordinary income-

Extraordinary income
Gain on sale of non-current assets

283-

Gain on sale of investment in affiliates

38-

Total extraordinary income

322

Income before income taxes

11,27913,023

Income taxes - current

4,548

4,894

Income taxes - deferred

-

(790)

(1,052)

Income taxes

3,757

3,842

Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

7,521
164

9,180
295

7,357

8,885

(Millions of yen)

(Millions of yen)

FY Mar/2018
Net income

FY Mar/2019
7,521

9,180

Other comprehensive income
Net unrealized holding loss on other securities

7

(11)

Foreign currency translation adjustments

81

(143)

1,101

359

Adjustments for retirement benefit
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive income

0

(1)

1,190

203

8,712

9,383

8,486

9,136

225

247

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

(3) Consolidated Statements of Cash Flows

Cash flows from operating activities
Net income before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful receivables(Increase) decrease in asset for retirement benefit
Increase (decrease) in liability for retirement benefits
Increase (decrease) in accrued bonuses to directors and corporate auditors
Increase (decrease) in accurued warranty on products
Increase (decrease) in accurued losses on sales contracts
Interest and dividend income
Interest expense(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividend income received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangibles
Proceeds from sale of intangibles
Purchase of investment securities
Loans receivable madeCollection of loans receivable
Proceeds from sales of investments in affiliates
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term bank loans
Repayments of long-term debt
Proceeds from long-term deptNet (increase) decrease in treasury shares
Dividends paid to shareholders
Dividends paid to minority shareholders of subsidiaries
Proceeds from share issuance to non-controlling shareholders
Other, net
Net cash provided by used in financing activities
Effect of exchange rate changes on cash and cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period(Millions of yen)
FY Mar/2018

FY Mar/2019

11,279
2,526
251
12
310
872
34
(7)
(90)
(46)
127
(13,061)
266
3,801
451
1,874
8,604
47
(127)
(3,744)
4,779

13,023
2,764
247
(11)
251
517
14
(2)
1,422
(58)
95
(2,934)(4,951)
824
(236)
2,960
13,92758(95)(5,495)8,396(1,628)386(1,532)
11
(27)
(2)
3
74
(87)
(2,802)(1,922)5(2,578)
15
(162)
－
1
－
(962)
(5,604)

(111)
(171)
－
(4)
(3,620)
(23)
－
(435)
(4,366)22(2,366)
59,64857,281(1,750)(3,186)3,300(2)(3,717)
(27)
245
(474)
(5,615)(104)(2,927)57,28154,354

(4) Segment Information
Business Segment

Year ended March 31, 2019
(Millions of yen)Enterprise Networks

Orders received
Sales(1) Sales to third(2) Intersegment sales
Total
Operating income (loss)

Carrier Networks

Social Infrastructures

OthersAdjustments

Total

122,456

73,02080,285

8,976---

284,739

122,775--122,775
13,40870,529--70,529
4,714

77,260--77,260
3,454

7,383
--7,383276------(9,078)

277,949--277,949
12,774

Year ended March 31, 2018
(Millions of yen)Enterprise Networks

Orders received
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income (loss)

Carrier Networks

Social Infrastructures

OthersAdjustments

Total

125,826

68,54387,046

6,414---

287,831

110,887--110,887
10,79764,902--64,902
5,021

85,192--85,192
3,399

6,957
--6,957263------(8,424)

267,939--267,939
11,057