NEC Australia reveals losses, cuts and restructure

NEC Australia has reported an operating loss of $19.3 million and engaged in a company restructure that saw redundancies and the elimination of two business lines, costing an additional $22 million to the IT supplier’s bottom line.

After non-operating adjustments, including interest costs and customer base amortisation, NEC reported a total comprehensive loss before tax of $52.5 million for the year ending 31 March 2017.

In its financial report posted to the corporate regulator ASIC, the director’s report highlighted a comprehensive market and business review that took place throughout 2016/2017, which sought to assess optimal business structure, determine viability of specialist businesses within NEC and review the costs of certain unprofitable projects.

Among the changes actioned were the restructuring of the business into a “functional-based organisation” which grouped sales, solutions and delivery capabilities. The company also transitioned several back office roles to an offshore shared services provider, spelling redundancies to the tune of $4.8 million.

The biggest restructuring costs were related to NEC Cloud Collaboration, a unified communications solution billed as “an easy-to-use, enterprise-grade collaboration solution delivered as a service” and Mobile Access Controller, a mobile communications platform designed for vehicle fleets in emergency services and field work. Deemed non-core to the greater NEC, the two businesses resulted in a $5.8 million loss and were axed, with associated restructuring costs hitting $17.1 million.

The managerial review hoped to settle unprofitable business sectors and practices as the company gears up to make the most of its place on the Western Australian GovNext ICT panel, where new revenue streams are expected for 2018.

“Under GovNext, the current 60+ government data centres and server rooms will be consolidated; a whole of government data and communications network will be rolled out to connect department and agencies; and government bodies will increasingly user public and private cloud services of major projects scheduled to commence in the next financial year,” the company reported.

NEC Australia also identified growth prospects in the public safety business, citing opportunities through its artificial intelligence and biometrics technologies. The company expects a brighter outlook for the next financial year through the measures undertaken.

“The future financial results will include the benefit of exiting the two specialised loss making business, staff cost savings related to the business restructure and offshoring and better project governance,” the director’s report read.

NEC Australia says its key metric of success is its operating loss or profit. This year’s loss of $19.3 million falls from 2016’s operating profit of $4.3 million. Revenue was flat, dipping slightly from $443 million in 2016 to $442 million in 2017.   

2016’s total comprehensive losses amounted to $8.2 million, which was an improvement on the previous year's $35 million loss.

NEC Australia shares the WA GovNext ICT panel with Datacom and Atos. The trio were officially appointed in January 2017.