NEC & System Integration : Consolidated Financial Statements for the 2Q FY 2023/3

Consolidated Financial Statements for the First Half of Fiscal Year ending March 31, 2023

28/Oct/2022 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 First Half (April 1, 2022 to September 30, 2022)

						(Rounded down to the nearest million yen.)
(1) Net Sales and Income
	Net sales	Year-on-year	Operating	Year-on-year	Ordinary	Year-on-year
	income	income
	(¥ million)	change (%)	change (%)	change (%)
	(¥ million)	(¥ million)
6 months ended Sep	142,686	1.2	4,643	-39.1	4,762	-39.6
2022
6 months ended Sep	140,961	-6.8	7,621	13.2	7,889	16.4
2021
	Net income			Net income
	attributable		Net income
	Year-on-year	per share
	to owners of	change (%)	per share	(diluted)
	the parent		(¥)	(¥)
	(¥ million)
6 months ended Sep	2,699	-42.6	18.12	-
2022
6 months ended Sep	4,703	18.6	31.58	-
2021

c.f. Comprehensive income: 1H/FY Mar 2023: ¥3,690 million (-36.9 %); 1H/FY Mar 2022: ¥5,849 million (39.0 %)

(2) Financial Position
	Total assets	Net assets	Owner's	Net assets
	equity ratio	per share
	(¥ million)	(¥ million)
			(%)	(¥)
30/Sep/2022	245,905	138,156	54.9	906.13
31/Mar/2022	254,701	138,149	52.9	904.66
c.f. Owner's equity: 30/Sep/2022: ¥134,972 million; 31/Mar/2022 ¥134,742million
2. Dividends
		Dividends per share (¥)
	1st	Interim	3rd	Year-end		Full year
	quarter	quarter
FY ended Mar. 2022	-	19.00	-	24.00		43.00
FY ending Mar.	-	23.00	-	23.00 ※		46.00 ※	※ Forecast
2023(Forecast)
Note: Revisions to projected dividends for the quarter under review: No

3. Financial Forecasts for Fiscal Year ending March 31, 2023 (April 1, 2022 to March 31, 2023)

(Percentages represent change compared to the previous corresponding period.)

	Net sales		Operating income	Ordinary income	Net income attributable	Net income
		to owners of the parent	per share
	(¥ million)		(%)	(¥ million)	(%)	(¥ million)	(%)	(¥ million)	(%)	(¥)
FY ending Mar. 2023	330,000		6.3	22,000	-5.1	22,000	-6.6	13,000	-13.5	87.28
Note: Revisions to projected results for the quarter under review: Yes

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 on definite 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-vis systems and services provided by this Company's group, as well as pressure to lower prices and ability to cope with the market in response to intensified competition.

Factors affecting results are not limited to the ones mentioned above.

4. Consolidated Financial Statements

(1) Consolidated Balance Sheets

		(Millions of yen)
	As of	As of
	March 31, 2022	Sep 30, 2022
Assets
Current assets
Cash and cash equivalents	79,732	82,889
Notes and accounts receivable, and contract assets	111,539	91,314
Electronically recorded monetary claims	987	1,602
Purchased goods,materials and supplies	2,623	2,749
Work in process	8,155	11,694
Other	11,204	11,317
Allowance for doubtful accounts	(80)	(86)
Total current assets	214,161	201,482
Non-current assets
Property and equipment	12,807	12,235
Intangible assets
Goodwill	388	271
Other	3,901	3,703
Total intangible assets	4,290	3,975
Investments and other assets
Deferred tax assets	13,639	13,654
Other	9,853	14,609
Allowance for doubtful accounts	(50)	(50)
Total investments and other assets	23,442	28,213
Total non-current assets	40,540	44,423
Total assets	254,701	245,905
Liabilities
Current liabilities
Notes and accounts payable	40,486	31,726
Electronically recorded obligations	1,217	1,225
Short-term bank loans	9,190	9,208
Current installments of long-term debt	264	231
Accrued income taxes	4,019	2,499
Accrued bunuses to directors and corporate auditors	145	46
Accrued warranty on products	114	137
Accrued losses on sales contracts	2,107	2,887
Provision for compensation for damage	4	4
Provision for office transfer cost	－	453
Other current liabilities	26,087	25,558
Total current liabilities	83,636	73,978
Non-curret liabilities
Long-term debt	3,202	3,086
Liabilities for retirement benefits	27,714	28,643
Other liabilities	1,998	2,041
Total non-current liabilities	32,914	33,771
Total liabilities	116,551	107,749
Net assets
Shareholders' equity
Common stock	13,122	13,122
Capital surplus	16,694	16,708
Retained earnings	105,673	104,798
Treasury stock, at cost	(259)	(251)
Total shareholders' equity	135,230	134,378
Accumulated other comprehensive income
Net unrealized holding gain on available-for-sale securit	1,242	1,905
Foreign currency translation adjustments	(517)	(285)
Accumulated adjustments for retirement benefits	(1,213)	(1,026)
Total accumulated other comprehensive income	(488)	594
Non-controlling interests	3,407	3,183
Total net assets	138,149	138,156
Total liabilities and net assets	254,701	245,905

(2) Consolidated Statements of Income and Comprehensive Income
(Consolidated Statements of Income)		(Millions of yen)
	1H, FY March 2022	1H, FY March 2023
	(6 months ended Sep 2021)	(6 months ended Sep 2022)
Net sales	140,961	142,686
Cost of sales	113,703	116,841
Gross profit	27,257	25,844
Selling, general and administrative expenses	19,636	21,201
Operating income (loss)	7,621	4,643
Non-operating income
Interest income	5	9
Dividend income of insurance	156	164
Other	229	212
Total non-operating income	391	385
Non-operating expenses
Interest expenses	47	79
Loss on disposal of property and equipment	－	77
Other	76	110
Total non-operating expenses	123	267
Ordinary income (loss)	7,889	4,762
Extraordinary income
Gain on sale of investment in affiliates	141	－
Total extraordinary inocome	141	－
Extraordinary losses
Expenses relating to move of the head office	－	519
Loss on liquidation of subsidiaries	－	147
Provision of allowance for compensation for damage	324	－
Total extraordinary losses	324	666
Income (loss) before income taxes	7,706	4,095
Income taxes	2,526	1,600
Net income (loss)	5,180	2,494
Net income (loss) attributable to non-
controlling interests	476	(204)
Net income (loss) attributable to owners of the parent	4,703	2,699
	(Millions of yen)	(Millions of yen)
	1H, FY March 2022	1H, FY March 2023
	(6 months ended Sep 2021)	(6 months ended Sep 2022)
Net income (loss)	5,180	2,494
Other comprehensive income
Net unrealized holding loss on other securities	564	663
Foreign currency translation adjustments	(96)	347
Adjustments for retirement benefit	202	187
Share of other comprehensive income of associates
accounted for using equity method	(1)	(2)
Total other comprehensive income	669	1,195
Comprehensive income (loss)	5,849	3,690
Comprehensive income (loss) attributable to:
Owners of the parent	5,445	3,782
Non-controlling interests	403	(91)

(3) Consolidated Statements of Cash Flows

		(Millions of yen)
	1H, FY March 2022	1H, FY March 2023
	(6 months ended Sep 2021)	(6 months ended Sep 2022)
Cash flows from operating activities
Net income (loss) before income taxes	7,706	4,095
Depreciation and amortization	1,606	1,906
Amortization of goodwill	117	117
Increase (decrease) in allowance for doubtful receivables	(5)	0
Increase (decrease) in asset for retirement benefit	10	(104)
Increase (decrease) in liability for retirement benefits	(228)	134
Increase (decrease) in accrued bonuses to directors and
corporate auditors	(97)	(99)
Increase (decrease) in accurued warranty on products	4	23
Increase (decrease) in accurued losses on sales contracts	(92)	526
Increase (decrease) in provision for compensation for damage	(706)	－
Interest and dividend income	(42)	(37)
Interest expense	47	79
(Increase) decrease in notes and accounts receivable,
and contract assets	30,098	21,252
(Increase) decrease in inventories	(50)	(3,662)
Increase (decrease) in notes and accounts payable	(13,605)	(8,896)
Increase (decrease) in accrued consumption taxes	(2,022)	(1,109)
Other, net	(1,067)	(386)
Subtotal	21,673	13,841
Interest and dividend income received	42	37
Interest paid	(47)	(79)
Income taxes paid	(5,422)	(3,299)
Net cash provided by (used in) operating activities	16,245	10,500
Cash flows from investing activities
Purchase of property and equipment	(2,076)	(820)
Proceeds from sale of property and equipment	3	0
Purchase of intangibles	(363)	(494)
Purchase of investment securities	(143)	(273)
Payments for sale of shares of subsidiaries	189	－
Loans receivable made	(18)	(6)
Collection of loans receivable	0	1
Other, net	(223)	(783)
Net cash used in investing activities	(2,632)	(2,376)
Cash flows from financing activities
Net increase (decrease) in short-term bank loans	1,369	(1,334)
Repayments of long-term debt	(149)	(148)
Net (increase) decrease in treasury shares	21	22
Dividends paid to shareholders	(3,122)	(3,568)
Dividends paid to minority shareholders of subsidiaries	(29)	(25)
Other, net	(146)	(106)
Net cash provided by used in financing activities	(2,056)	(5,161)
Effect of exchange rate changes on cash and cash	(2)	195
Net increase (decrease) in cash and cash equivalents	11,553	3,157
Cash and cash equivalents at beginning of period	68,426	79,732
Cash and cash equivalents at end of period	79,979	82,889

(4) Segment Information

Business Segment Information

First half of fiscal March 2023 (6 months ended September 2022)

(Millions of yen)

		DX Solutions	Network	Environmental &	Others	Adjustments	Total
		Solutions	Social Solutions
Sales
(1)	Sales to third parties	51,915	36,286	50,920	3,563	-	142,686
(2)	Intersegment sales	-	-	-	-	-	-
Total		51,915	36,286	50,920	3,563	-	142,686
Operating income and loss	5,263	3,317	829	83	(4,851)	4,643

First half of fiscal March 2022 (6 months ended September 2021)

(Millions of yen)

		DX Solutions	Network	Environmental &	Others	Adjustments	Total
		Solutions	Social Solutions
Sales
(1)	Sales to third parties	51,257	36,919	49,273	3,510	-	140,961
(2)	Intersegment sales	-	-	-	-	-	-
Total		51,257	36,919	49,273	3,510	-	140,961
Operating income and loss	5,588	3,844	2,228	461	(4,502)	7,621