Consolidated Financial Statements for the Fiscal Year ended March 31, 2020
28-Apr-2020
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, 2020
(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)
22.4
9,422
6.0
FY ended March/20
303,616
9.2
16,24527.2
15,938
18.9
8,885
20.8
FY ended March/19
277,949
3.7
12,774
15.5
13,023（Note) Comprehensive income : FY Mar.2020 : ¥9,879 million (5.3%) ; FY Mar.2019 : ¥9,383 million (7.7%)
Operatingincome(¥ million)

Profitper share (¥)

Profit per
share(diluted) (¥)

Return on
equity (%)

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

FY ended March/120
189.83 *
—
8.8%
7.1%
5.4%
FY ended March/19
179.02
—
8.7%
6.1%
4.6%
（Reference) Equity in earnings (losses) of affiliates : FY Mar.2020 : (¥18million) ; FY Mar.2019 : ¥23million*\ 63.28 on the assumption that 1:3 stock spirit planned on June 1,
2020
had been previously done(2) Financial Position
Total assets(¥ million)

Net assets(¥ million)

Owner's equity
ratio (%)

Net assets per
share (¥)

31-Mar-20
230,244
113,51047.9
2,223.36 ** **\741.12 on the assumption that 1:3 stock spirit planned on June 1, 2020
had been previously done
31-Mar-19
216,171
107,60848.5
2,113.19
c.f. Owner's equity: 31/3/2020 ¥110,366million ; 31/3/2019 ¥104,888million(3) Cash FlowsFY ended March/20
FY ended March/19

Net cash provided by (used Net cash provided by (usedin) operating activities
in) investing activities(¥ million)(¥ million)
12,935(6,726)
8,396(5,604)

Net cash provided by (used in)financing activities(¥ million)(2,300)(5,615)

Cash and cash equivalents
at end of year(¥ million)
58,32154,354

Total dividends
paid(full year)
3,871
4,070

Payout ratio
Dividends/(consolidated Net assets) (%)(consolidated
43.6
3.8
43.2
3.8

2. Dividends

FY ended 3/2019
FY ended 3/2020
FY ending 3/2021（Projected)

1stquarter———

Dividends per share (¥)
3rd
InterimYear-endquarter
38.00
—
40.00
40.00
—
42.00
TBD

—

TBD

Full year
78.00
82.00
TBD

TBD

3. Financial Forecasts for Fiscal Year ending March 31, 2021
The spread of the COVID-19 coronavirus may affect our short-term performance. Due to the significant level of uncertain factors, we are currently
examining our business forecasts. Meanwhile, we have decided to leave the forecasts undecided. They will be announced promptly as soon as we areready to present reasonable forecasts.
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, 2020
During the fiscal year ended March 31, 2020 (the period from April 1, 2019 to March 31, 2020),
the Japanese economy continued its moderate recovery amid improvement in the employment andincome conditions although worrying trends continued in areas such as trade and associatedfluctuations in the financial and capital markets. However, due to the worldwide spread of the
COVID-19 coronavirus since the end of the fiscal year under review, a significant downward swing
has also become unavoidable in Japan, given restrictions and voluntary restraints on a wide
variety of activities and the fragmentation of supply chains.
Under these economic conditions, each segment of the information communication technology(ICT) market, the business domain where NEC Networks & System Integration Corporation(hereinafter “the Company”) operates, generally remained strong.
In the enterprises market, investments of companies in management improvements, such as
work-style innovation and strengthening their competitiveness, remained firm, and needs for
introducing telework rose sharply due to the effects of the coronavirus. Capital expenditure in
response to rising inbound tourism was also stepped up particularly by hotels. In addition, interestin cutting-edge technologies has remained at a high level, including Digital Transformation (DX)such as the cloud, artificial intelligence (AI), the Internet of Things (IOT) and Robotic Process
Automation (RPA). Capital investment for enhancing telecommunication quality in the telecom
carrier business and investment in sophisticated urban infrastructures by the central and local
governments and public interest-related companies such as the firefighting and disaster prevention
areas and the broadcasting, video and CATV fields all continued.
In this market environment, the Company and its consolidated subsidiaries (hereinafter “theGroup”) actively stepped up investments in the work-style innovation area, the enhancement ofcommunications infrastructures associated with the new construction or reconstruction of hotels
and projects such as firefighting and disaster prevention systems, and broadcasting, video and
CATV.
Moreover, in May 2019 the Company announced, “Beyond Borders 2021,” its Medium-Term
Management Plan, to achieve growth in the medium to long term with a view to changes in theenvironment over the next 10 years. We aim to be a “communication services orchestrator” that
produces new social value in collaboration with our partners, utilizing the strengths of the Group.
We also plan to accelerate a shift to a new business model and new business creation based on
digital and 5G, regarding the resolution of social issues and a wave of technological innovation as
an opportunity for business expansion.
Under this concept, our business units were reorganized in line with business areas of focus in
April 2019 with the aim of demonstrating technical expertise or competitiveness. At the same time,
our organizational capability for future growth was reinforced by consolidating advanced
technologies and business creation functions under newly established the Business Design
Operations Unit. In addition, we developed new services combining the work-style innovation
solution “EmpoweredOffice (*)” and DX technology and self-implemented them proactively. We
also accelerated open innovation initiatives to discover cutting-edge solution services such as
investment in a US venture fund and the facilitation of partnerships with global venture
capitals/accelerators. In October 2019, we launched a distributed work initiative, distributing head
office staff to satellite offices within 30 minutes from their homes to put into practice new working
styles that exploit DX technology ourselves and to translate this into the development of newservices. Moreover, in February 2020, we created a system to inspire changes by opening a new
innovation base in Nihonbashi, Tokyo as a place to create new business and cutting-edge shifts incustomers’ businesses through co-creation with our partners. Incidentally, we are responding
flexibly to the government’s request for voluntary restraint on leaving home to address thecoronavirus by shifting to working arrangements based on working at home, in principle, as anextension of our existing work styles by self-implementing the work-style innovation mentioned－

1 －above.
In terms of the creation of new business, the Group has entered into the onshore fish-farming
business using ICT/digital technologies to expand the area of the Company’s value chain from theexisting ICT area to value-added areas through co-creation with our partners.
As a result, the Group marked a record high in all items and posted the following consolidated
results for the fiscal year under review:

Net sales¥303,616 million

9.2% increase year on year

Operating income¥16,245 million

27.2% increase year on year

Ordinary income¥15,938 million

22.4% increase year on year

Net income attributable¥9,422 million

6.0% increase year on year

¥304,978 million

7.1% increase year on year

to owners of the parent＜Reference＞
Orders received

Net sales increased 9.2% year on year, to ¥303,616 million. This result reflected increased sales
in all segments, with expansion of Digital Solutions Business mainly in ICT services related towork-style innovation and network construction for hotels, and expansion of the Engineering &Support Services Business both in terms of maintenance/operation and construction, such as
firefighting systems, municipal disaster-prevention radio systems, mega-solar and otherinfrastructure in Japan. Orders received also increased 7.1% year on year, to ¥304,978 million.
This result reflected steady expansion in orders in all segments, including the workstyle innovationrelated field and the social public infrastructure field where orders included firefighting systems,
municipal disaster-prevention radio systems, and video and CATV systems, as well as orders forservices for telecom carriers.
Looking at profits, the Digital Solutions Business and Network Infrastructures Business posted
large profit gains due to increased sales that led to greater fixed cost efficiency as well as the
positive effect on profitability of initiatives such as the sharing of human resources to improve
resource efficiency and tighter project management. These gains offset an increase in investments
for growth, such as office realignment and new service development, and deterioration in the
profits of the Engineering & Support Services Business caused by loss-making projects.
Accordingly, operating income rose 27.2% year on year, to ¥16,245 million, and ordinary income
improved 22.4%, to ¥15,938 million. Net income attributable to owners of the parent increased
6.0%, to ¥9,422 million, reflecting the recording of extraordinary losses such as impairment losses
associated with the decision to close a training facility and compensation of damage due to delays
in a domestic construction project.
Operating results by business segment were as follows:－2 －（Million yen）

Net sales by business segment
Engineering &Digital

Network

Solutions

Infrastructures

Support Services

Other

Total

business

Fiscal 2020.3

109,986

83,95399,362

10,314

303,616

Fiscal 2019.3

99,76780,35390,444

7,383

277,949

Increase or (decrease)

10,218

3,600

8,917

2,930

25,667

10.2

4.5

9.9

39.7

9.2

Ratio ofincrease/(decrease) (%)（Million yen）

Reference: Orders received by business segment
Engineering &Digital

Network

Solutions

Infrastructures

Support Services

Other

Total

business

Fiscal 2020.3

112,455

89,00993,483

10,031

304,978

Fiscal 2019.3

104,184

81,03790,541

8,976

284,739

8,270

7,972

2,942

1,054

20,239

7.9

9.8

3.2

11.7

7.1

Increase or (decrease)
Ratio ofincrease/(decrease) (%)

1. Digital Solutions Business：
Net sales increased 10.2% year on year, to ¥109,986 million, mainly reflecting the expansion
of ICT services related to work-style innovation and network construction for hotels.
2. Network Infrastructures Business：
Net sales rose 4.5% year on year, to ¥83,953 million, reflecting expansion in social public
infrastructures.
3. Engineering Support Services Business：
Net sales climbed 9.9% year on year, to ¥99,362 million, reflecting expansion in all domestic
construction business, overseas business and maintenance and operation business.
*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 throughprocess reforms. It also proposes new methods and places of work that enable
customers to fulfill their social responsibilities, such as the strengthening of security andenvironmental responsiveness.

－

3 －<Outline of Business Segments>
Business Segment

Descriptions of Main Businesses
Mainly system integration related to ICT platform andoutsourcing/cloud services for business of enterprises and other

Digital Solutions

customers and provision of solutions/services that are helpful forcustomers’ business transformation by using cutting-edge/digitaltechnologies , and contact center services
Mainly centered on telecom carriers, central and local governments
and social infrastructures service providers, provide system

Network

integration/services related to network infrastructures of a public

Infrastructuresnature with the required high reliability, and thedevelopment/manufacture and sales of network equipment, andprovide system integration.
Construction business in Japan and abroad, provision of support

Engineering &services such as maintenance and operations/monitoring related to

Support Services

ICT systems/services provided by the Company and operations ofbusinesscompany-wide service infrastructures, in addition to technicalsupport using these.

OthersSales of purchased equipment

The Company implemented a reorganization on April 1, 2019. In association with theorganizational change, there were changes in the reportable segments in the first quarter underreview from the Enterprise Networks business, the Carrier Networks business and the Social
Infrastructures business to the Digital Solutions business, the Network Infrastructures business, andthe Engineering & Support Services business.
Information on reportable segments related to the previous fiscal year was reclassified fordisclosure to reflect the changes in this event.

(2) Outlook for the Fiscal Year Ending March 31, 2021
In the fiscal year ending March 31, 2021, the entire global economy is expected to decline due tothe effects of the global spread of the coronavirus. The Japanese economy is also expected todeteriorate significantly, and the poor performance and fall in ICT investments are concerns at
customer companies. However, the need for work-style innovation such as telework to prevent theinfection of the coronavirus is greatly accelerating as an urgent issue. We will work to expand newcustomers in response to this social issue and focus on the needs for systems and services for publicuse, including remote teaching at schools. Among telecom carriers, migration toward 5G is occurring,and capital investment is also expected to remain firm following the expansion of communication
traffic driven by the rise in telework. We will respond to these developments by enhancing
collaboration with carriers. In addition, governments are expected to continue investing in disasterprevention and mitigation, and we will also focus on these areas.
While we will promote business activities as described above, the effects of the coronavirus are
spreading worldwide and do not yet show signs of ending. The Group has decided that it is difficult－4 －to rationally assess its consolidated financial forecasts because of the great uncertainties about
financial results as of this moment, given that the market downturn, as well as concerns about theeffects of the coronavirus on operation such as problems in the procurement of materials and a delay
in projects due to restrictions on entry into the site, if the period until the end of the coronavirus isprolonged. Therefore, we have decided to refrain from determining our consolidated financial
forecasts for the fiscal year ending March 31, 2021 and will announce them as soon as theirdisclosure becomes possible.
(3) Profit Distribution Policy and Dividends for the Fiscal Year Ended March 2020
and the Fiscal Year Ending March 2021
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 we also
place a great deal of importance on increasing our corporate value through growth byaccelerating strategic investment in M&A, strengthening the business foundation and creating
new businesses that will allow us to expand our future businesses that will be areas 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, 2020 to ¥42.00 per share, which
is a ¥2.00 increase from our previous forecast. This combined with the interim dividend alreadypaid brings our annual dividend to ¥82.00 per share, which is an increase of ¥4.00 from theprevious year.
With respect to the dividend per share for the fiscal year ending March 31, 2021, we will
announce dividends for the next fiscal year as soon as the disclosure of our consolidated financial
forecasts for the fiscal year ending March 31, 2021 becomes possible because we have not yet
determined them due to the effects of the coronavirus as stated in the outlook for the next fiscal
year, although we will strive to meet the expectations of our shareholders in our profit distribution.
Dividends per share (¥)
InterimYear end

Total

FY March 2020

40.00

42.00

82.00

FY March 2021 (Forecast)

TBD

TBD

TBD

In addition, at a meeting of the Board of Directors held on April 28, 2020, we resolved to
conduct a share split at a rate of three shares for every one share with June 1, 2020 as theeffective date for the purpose of further expanding the investors base and increasing the liquidityof our shares by decreasing an amount per investment unit of our shares through the share split.
With regard to dividends of surplus stipulated in each item of Article 459, Paragraph 1 of theCompanies Act, our Articles of Incorporation stipulates that we shall distribute dividends of surplus
with the resolution of the Board of Directors in the absence of the resolution at the general
meeting of shareholders, unless otherwise provided for by laws and regulations. Because theeffective date of the share split this time is June 1, 2020, the number of shares before the share
split will be subject to the year-end dividends for the fiscal year ended March 31, 2020 with therecord date on March 31, 2020－

5 －

5. Consolidated Financial Statements(1) Consolidated Balance Sheets
As ofMarch 31, 2019
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
Accrued compensation for damage
Accrued office transfer cost
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
Deferred gains or losses on hedges
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, 2020

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

58,321
112,358
728
4,898
8,259
7,359
(77)
191,847

10,033(6,205)
3,828
173
(142)
30
15,016(11,774)
3,242
2,410
499
392
(187)
204
10,2179,930(6,648)
3,281
161
(135)
26
15,400(12,016)
3,383
1,429
482
605
(266)
339
8,942

1,146
5,088
6,234

899
4,948
5,847

635
364
13,6004,144(62)
18,68235,134
216,171

1,454
168
16,5205,519(56)
23,60638,397230,244

40,274
807
2,284
231
3,175
2,185
6,290
117
113
1,980
－
－
14,86872,32841,666
1,441
4,632
298
3,580
2,625
6,181
139
105
2,159
1,326
218
15,75180,1283,896
30,6091,729
36,234
108,562

3,764
31,215
1,625
36,605
116,734

13,122
16,65979,520(279)
109,022

13,122
16,664
84,972(271)
114,48831－(471)(3,694)(4,134)
2,719
107,608
216,171

30
25
(392)
(3,783)(4,121)
3,143
113,510230,244(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(Millions of yen)
FY Mar/2020

FY Mar/2019
Net sales

277,949

303,616

Cost of sales

230,268

249,242

Gross profit

47,681

54,374

Selling, general and administrative expenses

34,90638,128Operating income

12,774

16,245Non-operating income
Interest income

40

38

Dividend income of insurance

193

117

Insurance income

70

65

Reward income

18

52

Other

238

195

Total non-operating income

560

469

Interest expenses

95

112

Loss on disposal of property and equipment

53

184

Foreign exchange losses

43

95

Impairment loss on investment securities

29

116

Compensation for damage

3

108

Other

86

159

Total non-operating expenses

312

776

13,023

15,938

Impairment loss

－

1,788

Compensation for damage

－

1,253

Office transfer cost－372

Total extraordinary losses

－

3,415

Income before income taxes

13,023

12,522

Income taxes - current

4,894

5,657

Income taxes - deferred(1,052)(2,894)

Income taxes

3,842

2,763

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

9,180
295

9,759
336

8,885

9,422

Non-operating expenses

Ordinary income
Extraordinary losses(Millions of yen)

(Millions of yen)

FY Mar/2019
Net income

FY Mar/2020
9,180

9,759

Other comprehensive income
Net unrealized holding loss on other securities

(11)

(1)

－

25

Foreign currency translation adjustments

(143)

185

Adjustments for retirement benefit

359

(89)

Deferred gains or losses on hedges

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

(1)

0

203

120

9,383

9,879

9,136

9,436

247

443

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
Impairment loss
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
Increase (decrease) in accurued compensation for damage
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
Payments for sale of shares of subsidiaries resulting in change
in scope of consolidation
Loans receivable madeCollection of loans receivable
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/2019

FY Mar/2020

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

12,522
3,572
247
1,788
(13)
208
450
21
(8)
178
1,326
(62)
112
(5,719)
29
2,010
407
1,093
18,16762(112)(5,182)
12,935(1,922)5(2,578)15(162)(3,004)
19
(995)
0
(936)

－
－
1
(962)
(5,604)(68)(2)
1(1,741)(6,726)(1,750)(3,186)3,300(2)(3,717)
(27)
245
(474)
(5,615)(104)(2,927)57,28154,354

2,268
(264)
200
(4)
(3,965)
(23)
3
(514)
(2,300)58
3,967
54,35458,321

(4) Segment Information
Business Segment

Year ended March 31, 2020
(Millions of yen)
Digital Solutions

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

Network
Infrastructures

Engineering & Support
Survices

Adjustments

OthersTotal

112,455

89,00993,483

10,031---

304,978

109,986--109,986
11,00583,953--83,953
9,193

99,362--99,362
6,300

10,314--10,314
511------(10,763)

303,616--303,616
16,245

Network Infrastructures

Engineering & Support
Survices

104,184

81,03790,541

8,976---

284,739

99,767--99,767
8,436

80,353--80,353
5,917

90,444--90,444
7,188

7,383
--7,383311------(9,078)

277,949--277,949
12,774

Year ended March 31, 2019
(Millions of yen)
Digital Solutions

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

OthersAdjustments

Total