Basic Corporate Management Policy
The NESIC Group is a corporate group whose strengths lie in its: (i) unique technological capabilities from ICT technologies essential for communication to comprehensive construction capabilities covering a broad range of telecommunications infrastructure construction, electrical and air-conditioning equipment, and building facility equipment construction; (ii) business development capabilities based on nationwide diverse support services system and infrastructure including operations centers that provide unified services ranging from help desk support to the operation, monitoring and maintenance services of networks, and comprehensive technical centers that offer extensive supply chain management such as the procurement and storage of network equipment and ICT products, system settings, repair services, technical assessments and evaluations and shipping in addition to nationwide sales network; (iii) ability to provide a broad range of services able to provide consistent services from the planning and introduction to operation, maintenance and outsourcing of systems corresponding to multi-venders at a high-quality level unique to the NEC Group by utilizing the above; and (iv) broad customer base and diverse areas of operation, from the ocean floor to the far reaches of outer space, starting with corporate ICT, as well as a wide range of customers such as companies, government agencies, social infrastructure providers and telecommunications carries.
We will seek to enhance our growth power and earnings capability by further honing these unique strengths to boost our expertise and competitiveness. We will strengthen our platforms and systems to create new businesses through far-sighted changes in our business structure and the use of state-of-the-art technologies, while accelerating innovation.
In January 2017, we established the NEC Networks & System Integration Corporation Group Statement that clearly set forth the values and DNA we have cultivated, as well as our long-term vision and corporate image. It says, “The NEC Networks & System Integration Corporation Group enables communities throughout the world to enjoy a safe, secure and plentiful tomorrow by continually facilitating more welcoming and convenient communications, and supporting a connected society, from the floor of the ocean to the far reaches of outer space, with proven technologies and reliable services cultivated over many years.”
Based on this statement, we will contribute to the realization of a more comfortable and convenient communication society as a communication services orchestrator that harnesses our strengths to produce a new value chain in collaboration with our partners. We will provide services that will give greater satisfaction to customers as their essential partner and aim to enhance our corporate value as a company that will exert its presence with strong competitiveness and earnings capabilities.
In the fiscal year ending March 31, 2020, the Japanese economy is expected to continue to sustain a moderate recovery, given the effect of economic measures by the government and an improvement in employment and income conditions. However, there are concerns that the domestic economy could be influenced by developments in trade and the impact of related fluctuations in the financial and capital markets.
In the area of ICT, our business field, a fall in the willingness of companies to invest would be a concern in any domestic economic slowdown, but appetite for investment in areas related to work-style innovation and the capital expenditures of telecom carriers in network infrastructures, particularly in base stations, are expected to expand. However, the demand is expected to remain weak in areas related to the central and local governments and the public domain, given that the competitive environment will remain harsh with major investment themes unlikely.
In this environment, we expect net sales to increase year on year in the fiscal year ending March 31, 2020, reflecting our initiatives in areas related to work-style innovation and businesses for telecom carriers.
In terms of income, we expect that operating income, ordinary income and net income attributable to owners of the parent will increase year on year, given the effect of higher sales and further improvements in efficiency, although we will invest in growth more aggressively to strengthen our response to cutting-edge technologies including DX (Digital transformation), cultivate human resources, and reorganize offices for new work-style innovation, with our sights set on medium- to long-term growth.
Medium- to Long-Term Management Strategies and Issues the Company Faces
Barriers such as nationalities, industry sectors and existing frameworks are today disappearing as the world becomes more borderless. To increase international competitiveness and accelerate the speed of management in this environment, societies and companies must innovate their business models and processes, labor productivity and work styles. In the area of technology, a wave of sweeping changes such as the advancement of digital technology including CAMBRIC (Cloud computing, AI, Mobility, Big data, Robotics, IoT and Cyber security) and the acceleration and sophistication of network technologies represented by 5G is fast approaching.
To cope with this wave of change, we have been taking strategic steps to strengthen our growth power beyond our current limits by seeking cooperation with advanced companies, starting up digital-related businesses, offering advanced services, promoting new partnerships, and creating a framework to collaborate with startups.
Based on this, we will aim to realize sustainable growth with efforts to strengthen our growth potential and earnings capability by changing our business structure with a view to the future era of “digital x 5G,” strengthening the infrastructure and system to create new businesses using state-of-the-art technologies, and accelerating innovation throughout the Group. We will do this based on the recognition that technological innovation is an excellent opportunity to expand our business, and we will help to resolve social issues through these business activities.
In the era of “digital x 5G,” innovative changes and services and businesses beyond the existing paradigm are expected to be created in business and social life, as digital technology and network technology become more closely related. We believe that in this environment, we see a dramatically enlarged role for NESIC, which has a strong business creative faculty that has pioneered EmpoweredOffice, a work-style innovation solution, with business platforms able to provide a full range of services from the creation of mission-critical networks for telecom carriers and social infrastructures to ICT services for companies as its core competences. We will further strengthen our expertise and competitiveness in the era of “digital x 5G” by honing these core competences.
Based on this perspective, we reformed our business fields into the following three businesses in April 2019: Digital Solutions, Network Infrastructures, and Engineering & Support Services.
In the Digital Solutions business, we will evolve the work-style innovation-related business into the business transformation business by utilizing the latest digital technologies. To that end, we will accelerate commercialization by seeking further collaboration with companies that possess state-of-the-art technologies and adopting new technologies ourselves.
In the Network Infrastructures business, we will expand business for telecom carriers by harnessing our comprehensive system integration capabilities, which encompass everything from mobile base stations to core networks, by strengthening our technological capabilities for more sophisticated telecommunications technologies including 5G. At the same time, we will strengthen our business development in the field of 5G technology application services, including those for companies, and provide our own solutions with a combination of state-of-the-art technologies like 5G in the field of highly public networks such as social infrastructures. We will also strengthen our business related to submarine communications, demand for which is expected to increase in the future, given a rise in the communication traffic.
In the Engineering & Support Services business, we will strengthen the business potential of common, company-wide functions such as construction and maintenance and improve the efficiency of business operation by consolidating and unifying the field engineering and maintenance systems in Japan and overseas. To that end, we will step up efforts to develop engineers in these areas in all companies, improve the quality of projects and bolster our management capabilities.
In addition, as a part of our management innovation activities, we will accelerate our efforts for work-style innovation and office innovation to accelerate innovation. We will take on the challenge of cutting-edge work-style innovation beyond the existing concept of offices by introducing the latest digital technologies, practicing process and institutional reforms on our own and reorganizing offices into a decentralized office by function. We will also evolve the EmpoweredOffice into a business that will innovate customers’ business itself, to further reinforce our efforts through the creation of new businesses based on collaboration adopting open innovation.
We will also continue to strengthen and promote our management innovation activities with the aim of further strengthening our earnings capability. We will strengthen our management to streamline outsourcing costs and reduce equipment and material costs through the standardization and consolidation, promote standardization, and eradicate back tracking costs, in addition to boosting earnings with higher sales through sustained improvement activities for the streamlining of the operating process and a lower cost structure.
By adopting these strategies, we will seek to achieve net sales of 310 billion yen and operating income of 20 billion yen (operating margin of 6.5%) as medium-term management targets for the fiscal year ending March 31, 2022, the final year of the medium-term management plan, by bolstering our business scale and earnings capability. In terms of capital efficiency, we aim to achieve ROE (return on equity) of 10% or more.
Reinforcing Compliance and Internal Control
We believe that ensuring compliance is fundamental to all corporate activities and that compliance-oriented management holds the key to our sustainable business activities and business development. The Group, comprised of the Company and its consolidated subsidiaries, will strive as a whole to participate thoroughly in corporate activities based on corporate ethics and a law-abiding spirit, with priority placed on compliance.