NEC & System Integration : Consolidated Financial Statements for the FY 2023/3_(1)

Consolidated Financial Statements for the Fiscal Year ended March 31, 2023

.	28-Apr-2023

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, 2023
							(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
	Net sales	Year-on-year	Operating income	Year-on-year	Ordinary income	Year-on-year change	attributable to	Year-on-year
	owners of the
	(¥ million)	change (%)	(¥ million)	change (%)	(¥ million)	(%)	change (%)
	parent
							(¥ million)
FY ended March/23	320,802	3.4	22,751	(1.9)	22,970	(2.5)	13,813	(8.0)
FY ended March/22	310,334	(8.5)	23,181	(9.3)	23,550	(7.6)	15,021	(4.6)
（Note) Comprehensive income : FY Mar.2023 : ¥14,676 million/(13.6)% ; FY Mar.2022 : ¥16,978 million/(5.6)%
	Net income	Net income per	Return on equity	Ordinary income/	Operating
	share (diluted)	income/ Net
	per share (¥)	(%)	Total assets (%)
	(¥)	sales (%)
FY ended March/23	92.74		10.0%	8.8%	7.1%
FY ended March/22	100.85	-	11.6%	9.3%	7.5%
（Reference) Equity in earnings of affiliates : FY Mar.2023 : ¥71 million; FY Mar.2022 : ¥27 million
(2) Financial Position
	Total assets	Net assets	Owner's equity	Net assets per
	(¥ million)	(¥ million)	ratio (%)	share (¥)
31-Mar-23	267,000	145,714	52.9	948.23
31-Mar-22	254,701	138,149	52.9	904.66

c.f. Owner's equity: 31/3/2023 ¥141,242 million ; 31/3/2022 ¥134,742 million
(3) Cash Flows
	Net cash provided by (used in)		Net cash provided by (used in)	Net cash provided by (used in)	Cash and cash equivalents at end
	operating activities		investing activities	financing activities		of year
	(¥ million)		(¥ million)			(¥ million)		(¥ million)
FY ended March/23		2,816			(4,934)			(9,243)		68,549
FY ended March/22		22,674			(7,162)			(4,267)		79,732
2. Dividends
					Dividends per share (¥)					Payout ratio		Dividends/
								Total dividends paid		Net assets
											(consolidated)
	1st			Interim		3rd		Year-end	Full year		(full year, ¥million)	(%)		(consolidated)
	quarter				quarter						(%)
FY ended 3/2022	-			19.00		-		24.00	43.00		6,404	42.6			5.0
FY ended 3/2023	-			23.00		-		23.00	46.00		6,851	49.6			5.0
FY ending 3/2024	-			24.50		-		24.50	49.00			52.1
（Forecast)
3. Financial Forecasts for Fiscal Year ending March 31, 2024
									(Percentages represent change compared to the previous corresponding period.)
																	Net income
		Net sales			Operating income	Ordinary income	Net income attributable to owners		attributable to
					of the parent		owners of the
														parent per
																	share
	(¥ million)		(%)		(¥ million)		(%)	(¥ million)		(%)	(¥ million)		(%)	(¥)
FY ending 3/2024	340,000			6.0		24,000		5.5	24,000		4.5	14,000		1.4	93.99

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 and services provided by this Company's group, as well as pressure to lower prices and ability to cope with the market in response tointensified 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	March 31, 2023
Assets
Current assets
Cash and cash equivalents	79,732	68,549
Notes	319	585
Electronically recorded obligations	987	1,165
Accounts receivable	82,554	88,338
Contract assets	28,665	34,372
Purchased goods,materials and supplies	2,623	3,151
Work in process	8,155	12,932
Other	11,204	11,724
Allowance for doubtful accounts	(80)	(85)
Total current assets	214,161	220,735
Non-current assets
Property and equipment
Buildings and structures	10,988	14,888
Accumulated depreciation	(6,787)	(7,897)
Buildings and structures (net)	4,201	6,991
Machinery and vehicles	236	662
Accumulated depreciation	(168)	(190)
Machinery and vehicles (net)	67	472
Furniture and fixtures	16,634	17,677
Accumulated depreciation	(12,499)	(13,310)
Furniture and fixtures (net)	4,134	4,366
Land	1,507	1,546
Construction in progress	2,644	695
Other	677	705
Accumulated depreciation	(425)	(434)
Other (net)	251	271
Total property and equipment	12,807	14,343
Intangible assets
Goodwill	388	153
Other	3,901	3,592
Total intangible assets	4,290	3,745
Investments and other assets
Investment securities	4,180	7,427
Asset for retirement benefits	281	293
Deferred tax assets	13,639	14,172
Other	5,391	6,379
Allowance for doubtful accounts	(50)	(97)
Total investments and other assets	23,442	28,175
Total non-current assets	40,540	46,264
Total assets	254,701	267,000

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 Contract liabilities

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

40,486	44,571
1,217	1,467
9,190	8,653
264	202
4,019	4,493
2,150	1,251
8,229	7,968
145	144
114	161
2,107	515
4	3
－	394
15,707	17,063
83,636	86,890
3,202	3,000
27,714	28,424
1,998	2,970
32,914	34,395
116,551	121,285
13,122	13,122
16,694	16,708
105,673	112,486
(259)	(252)
135,230	142,065
1,242	1,382
－	10
(517)	(284)
(1,213)	(1,930)
(488)	(822)
3,407	4,471
138,149	145,714
254,701	267,000

(2) Consolidated Statements of Income and Comprehensive Income
(Consolidated Statements of Income)		(Millions of yen)
		FY Mar/2022	FY Mar/2023
Net sales	310,334	320,802
Cost of sales		246,861	254,257
Gross profit		63,473	66,545
Selling, general and administrative expenses		40,292	43,794
Operating income		23,181	22,751
Non-operating income
Interest income	14	16
Dividend income of insurance	156	164
Reward income	99	77
Insurance income	44	72
Share of profit of entities accounted for using equity	27	71
Other		353	256
Total non-operating income		696	657
Non-operating expenses
Interest expenses	101	219
Other		225	218
Total non-operating expenses		327	438
Ordinary income		23,550	22,970
Extraordinary income
Gain on sale of investment in affiliates		141	－
Total extraordinary inocome		141	－
Extraordinary losses
Expenses relating to move of the head office	－	571
Loss on liquidation of subsidiaries	－	147
Loss on revision of retirement benefit plan	－	106
Compensation for damage		324	－
Total extraordinary losses		324	825
Income before income taxes		23,367	22,145
Income taxes - current	7,572	7,536
Income taxes - deferred		737	(272)
Income taxes	8,310	7,264
Net income	15,057	14,880
Net income attributable to non-controlling interests		35	1,067
Net income attributable to owners of the parent	15,021	13,813
			(Millions of yen)
		FY Mar/2022	FY Mar/2023
Net income	15,057	14,880
Other comprehensive income
Net unrealized holding loss on other securities	1,072	140
Deferred gains or losses on hedges	－	10
Foreign currency translation adjustments	(16)	362
Adjustments for retirement benefit	866	(716)
Share of other comprehensive income of associates
accounted for using equity method		0	(1)
Total other comprehensive income		1,921	(204)
Comprehensive income		16,978	14,676
Comprehensive income attributable to:
Owners of the parent	16,976	13,479
Non-controlling interests	2	1,196

(3) Consolidated Statements of Cash Flows

		(Millions of yen)
	FY Mar/2022	FY Mar/2023
Cash flows from operating activities
Net income before income taxes	23,367	22,145
Depreciation and amortization	3,279	4,170
Amortization of goodwill	271	235
Expenses relating to move of the head office	－	571
Loss (gain) on liquidation of subsidiaries	－	147
Loss (gain) on revision of retirement benefit plan	－	106
Increase (decrease) in allowance for doubtful receivables	(11)	47
(Increase) decrease in asset for retirement benefit	27	(189)
Increase (decrease) in liability for retirement benefits	(302)	(208)
Increase (decrease) in accrued bonuses to directors and corporate	(13)	(1)
auditors
Increase (decrease) in accurued warranty on products	30	46
Increase (decrease) in accurued losses on sales contracts	1,599	(1,756)
Increase (decrease) in accurued compensation for damage	(707)	0
Interest and dividend income	(54)	(47)
Interest expense	101	219
(Increase) decrease in notes and accounts receivable,	12,513	(10,486)
and contract assets
(Increase) decrease in inventories	730	(5,309)
Increase (decrease) in notes and accounts payable	(5,179)	4,187
Increase (decrease) in accrued consumption taxes	(1,251)	(1,192)
Other, net	(1,419)	(2,315)
Subtotal	32,982	10,371
Interest and dividend income received	54	47
Interest paid	(101)	(214)
Income taxes paid	(10,259)	(7,386)
Net cash provided by (used in) operating activities	22,674	2,816
Cash flows from investing activities
Purchase of property and equipment	(3,427)	(1,309)
Proceeds from sale of property and equipment	19	0
Purchase of intangibles	(962)	(1,144)
Purchase of investment securities	(849)	(1,381)
Payments for sale of shares of subsidiaries resulting in change	189	－
in scope of consolidation
Loans receivable made	(18)	(7)
Collection of loans receivable	0	19
Other, net	(2,114)	(1,111)
Net cash used in investing activities	(7,162)	(4,934)
Cash flows from financing activities
Net increase (decrease) in short-term bank loans	2,270	(1,782)
Repayments of long-term debt	(3,298)	(264)
Proceeds from long-term dept	3,000	－
Net (increase) decrease in treasury shares	20	22
Dividends paid to shareholders	(5,949)	(6,990)
Dividends paid to minority shareholders of subsidiaries	(30)	(25)
Other, net	(280)	(202)
Net cash provided by used in financing activities	(4,267)	(9,243)
Effect of exchange rate changes on cash and cash equivalents	61	178
Net increase (decrease) in cash and cash equivalents	11,305	(11,182)
Cash and cash equivalents at beginning of period	68,426	79,732
Cash and cash equivalents at end of period	79,732	68,549

(4) Segment Information

Business Segment

Year ended March 31, 2022

(Millions of yen)

		DX Solutions	Network	Environmental &	Others	Adjustments	Total
		Solutions	Social Solutions
Orders received	119,454	84,339	128,682	4,282	---	336,759
Sales
(1)	Sales to third parties	107,971	81,874	115,033	5,455	---	310,334
(2)	Intersegment sales	---	---	---	---	---	---
Total		107,971	81,874	115,033	5,455	---	310,334
Operating income (loss)	13,027	10,831	8,177	869	(9,724)	23,181

*Our business segments were reorganized in April 2022 in line with corporate strategy. Segment information related to the fiscal year ended March 2022 was reclassified for disclosure to reflect the changes in this event.

Year ended March 31, 2023

(Millions of yen)

		DX Solutions	Network	Environmental &	Others	Adjustments	Total
		Solutions	Social Solutions
Orders received	122,651	92,107	132,653	8,630	---	356,043
Sales
(1)	Sales to third	114,244	79,217	119,241	8,099	---	320,802
(2)	Intersegment sales	---	---	---	---	---	---
Total		114,244	79,217	119,241	8,099	---	320,802
Operating income (loss)	13,210	9,756	10,683	302	(11,202)	22,751