NEC Australia writes down CSG investment by $67 million

NEC Australia has written down the goodwill value of its 2012, $227.5 million CSG technology solutions acquisition by $67.7 million, its latest financial report has revealed. 

The impairment loss saw the services provider post a $78.95 million comprehensive loss for the year ending 31 March 2018, compared to a loss of $52.5 million last year.

"The impairment loss is a result of changing industry conditions and competitive pressures within the information and communications technology industry, which led to a decrement in the cash flow projections," NEC Australia's director's report stated.

"As a consequence, the recoverable amount was lower than the carrying value of the goodwill. The impairment loss recognised does not impact on the company's ability to service their customers."

The acquisition of CSGs consulting and services arm by NEC Australia in 2012 saw 850 staff integrated into the solutions provider.

NEC Australia's preferred metric for financial performance is operational profit, which comprises earnings before interest, tax, customer base amortisation and non-operating costs.

Based on this, the company's operational profit of $1.39 million constituted a significant turnaround from a $19.3 million loss the previous year.

The solutions provider posted revenue of $431.44 million, down from $432 million in 2017. Revenue earned from goods sales was $144.85 million, up from $98.7 million, while services revenue was $286.6 million, down from $333.36 million.

NEC attributed its operational profit to a number of profit improvement initiatives, including a company restructure, the introduction of greater project governance and controls, offshoring a number of back-office roles and the review and closure of two unprofitable business units, unified communications solution NEC Cloud Collaboration and mobile communications platform Mobile Access Controller.

The restructure was aimed to create a “functional-based organisation” which grouped sales, solutions and delivery capabilities.

Looking ahead, NEC Australia considers the current financial year to be one of consolidating the groundwork put in place toward greater profitability, highlighting in particular that revenue streams from its appointment onto the Western Australian Government's GovNext outsourcing panel would be realised.

"The company will continue to pursue additional revenue growth opportunities, closely manage sales and administrative expenses as well as conclude a number of cost saving initiatives within the operational delivery function," NEC Australia said.

"There are also major growth prospects in the public safety business, opportunities through our artificial intelligence and biometrics technologies, while the channel part of our business also continues to perform strongly."

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

Last month, NEC Australia exited $47 million biometrics contract with the Australian Criminal Intelligence Commission, which terminated the project due to delays and costs blowing out by some $40 million.