Nec Corporation · TSE:6701
Nec — Investor Day (May 2021)
48 slides from Nec's investor day presentation, May 12, 2021
Slide 1: Mid-term Management Plan 2025
Mid-term Management Plan 2025 May 12, 2021 NEC Corporation http://www.nec.com/en/global/ir © NEC Corporation 2021Mid-term Management Plan 2025 May 12, 2021 NEC Corporation http://www.nec.com/en/global/ir © NEC Corporation 2021
Slide 2: Agenda
1. Purpose management 2. Mid-term Management Targets 3. Strategies Business Strategies Financial Strategies 4. Culture 5. Summary1. Purpose management 2. Mid-term Management Targets 3. Strategies Business Strategies Financial Strategies 4. Culture 5. Summary
Slide 3: Agenda
1. Purpose management 2. Mid-term Management Targets 3. Strategies Business Strategies Financial Strategies 4. Culture 5. Summary1. Purpose management 2. Mid-term Management Targets 3. Strategies Business Strategies Financial Strategies 4. Culture 5. Summary
Slide 4: Orchestrating a brighter world
\ Orchestrating a brighter world NEC creates the social values of safety, security, fairness and efficiency to promote a more sustainable world where everyone has the chance to reach their full potential.
Slide 5: Purpose: Seize the Future Together
Purpose Seize the Future Together We are fulfilling our Purpose by connecting digital technologies and human hopes to implement a vision of a brighter future world. Strategy Culture 5 © © N NE EC C C C o orrp po orraatt io ion n 2 2 00 22 11Purpose Seize the Future Together We are fulfilling our Pur
Slide 6: NEC 2030VISION
NEC 2030VISION Life Bringing people together and filling each day with inspiration Nurturing prosperous cities with inclusive and harmonious societies Society Creating sustainable societies by shaping new industries and workstyles Sharing hopes that transcend time, space, and generational boundaries
Slide 7: NEC 2030VISION: Environment
NEC 2030VISION Environment Living harmoniously with the earth to secure the future Realization of a decarbonized society Implementation of global warming countermeasures Guaranteeing food and water security 7 © NEC Corporation 2021NEC 2030VISION Environment Living harmoniously with the earth to secu
Slide 8: NEC 2030VISION: Society
NEC 2030VISION Nurturing prosperous cities with inclusive and harmonious societies Society Creating sustainable societies by shaping new industries and workstyles Sharing hopes that transcend time, space, and generational boundaries Democratization of data use / Cities without traffic congestion and
Slide 9: NEC 2030VISION: Life
NEC 2030VISION Life Bringing people together and filling each day with inspiration Fostering mental and physical well-being and long life Improvement of lifestyle Free and open learning opportunities 9 © NEC Corporation 2021NEC 2030VISION Life Bringing people together and filling each day with inspi
Slide 10: Agenda
1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5. Summary1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5.
Slide 11: Agenda
1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5. Summary1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5.
Slide 12: Looking Back on 2020 Mid-term Management Plan
NEC’s current situation: Looking Back on 2020 Mid-term Management Plan Achieved 6.0% OP ratio by improving our execution capability and ensuring profitability that enabled continuing investments in our growth Global growth and further improving the profitability of our business in Japan Reform of pr
Slide 13: Mid-term Management Targets (1/2)
Mid-term Management Targets (1/2) Purpose Strategy Culture EBITDA Growth rate: 9% Annual average 50% Engagement score (FY2020-25) (FY2025) Accelerate global growth and business Transformation to a company that transformation in Japan by leveraging pursues innovation and brings together strengths in
Slide 14: Mid-term Management Targets (2/2)
Mid-term Management Targets (2/2) (Billions of Yen) FY2020 Results FY2025 Targets Revenue 2,994.0 3,500.0 (Growth rate from FY2020) - 3.2% Adjusted Operating Profit 178.2 300.0 (Revenue %) 6.0% 8.6% Adjusted Net profit 149.6 185.0 (Revenue %) 5.0% 5.3% *1 EBITDA 295.8 450.0 (Revenue %) 9.9% 12.9% *2
Slide 15: Agenda
1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5. Summary1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5.
Slide 16: NEC's Growth Model
NEC’s Growth Model Achieve growth by providing customer value through NEC technology, focusing on our two global business pillars of DG/DX and 5G, and transforming our IT business in Japan Biometrics DIGITAL GOVERNMENT CORE DX AI DIGITAL FINANCE 5G/TOMS Cloud IT SERVICES & + + M M& &A A Security GLO
Slide 17: Earnings growth through growth and base businesses
Achieve earnings growth through both growth businesses and base businesses Revenue Adjusted Operating Profit 3,500.0 billion Yen 300.0 billion Yen *3 Compared to FY2020 +506.0 billion Yen) (Compared to FY2020 +147.3 billion Yen) *1*2 Component ratio OP ratio Growth business of growth business 8.6％ C
Slide 18: EBITDA Growth Drivers
EBITDA Growth Drivers EBITDA Growth Rate 450.0 Annual (Billions of Yen) Average 減価 Depreciation/ EBITDA 9% 償却費・ amortization, 償却費 etc. *3 300.0 295.8 *1 Others Core DX コアDX Growth business Adjusted Depreciation/ E EB BIIT TD DA A 減価 Global５G Global５G Operating *2 amortization, 償却費・ Profit DG/DF 2025
Slide 19: Growth: Digital Government/Digital Finance
Growth Digital Government/ Digital Finance *1 Transform into a top-class Vertical SaaS vendor in the global DG/DF market *1 SaaS for specific industry Mid-term targets Acquired companies’ assets NEC’s assets Technology Engineering SaaS Platform Software (Billions of Yen) 300.0 (Biometrics/AI) capabi
Slide 20: Growth: Global 5G Business
Growth Global 5G Business Aim for 20% market share in the Open-RAN market in 2030, including expansion in the Japanese market from primarily a base station hardware provider to a full software and hardware solution provider. Mid-term targets Establishment of Open-RAN vendor position in overseas mark
Slide 21: Growth: M&A Accomplishments and Future Direction
Growth M&A Accomplishments and Future Direction *1 Continue to pursue M&A focused on areas of growth and aiming to generate global synergies M&A accomplishments before FY2010 (≥10B JPY) Recent M&A accomplishments (≥10B JPY) *2 *3 Year / Amount IRR Year / Amount EBITDA margin 20% 30.0% FY2005 FY2017
Slide 22: Base Growth: Japan IT Business/Social Infrastructure Business
Base Growth Japan IT Business/ Social Infrastructure Business ■ Transformation(DX) of Japan IT Business ■ Maintain and develop Social Infrastructure Business ■ Improve profitability of Base Businesses Adjusted Japan IT High, medium Social Infrastructure Core DX OP ratio profit Business Business Busi
Slide 23: Transformation of IT Business (DX) in Japan
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Slide 24: Expand value proposition through Core DX approach
Base Growth ■ Transformation of IT Business (DX) in Japan Expand our value proposition through a comprehensive Core DX approach encompassing consulting to delivery 1 Business ■ Expanding value through the combination of ABeam's approximately 5,000 consultants and delivery capabilities Mid-term targe
Slide 25: Strengthen competitiveness through hybrid IT
Base Growth ■ Transformation of Japan IT Business (DX) Strengthen competitiveness through hybrid IT Core DX (cloud / DC/ On-Premises) alliances and in-house optimization 3 Business ■ Combine mega-cloud and NEC's cloud through global strategic collaboration with AWS (Amazon)/Azure (Microsoft) to stre
Slide 26: Maintenance and Development of Social Infrastructure Business
Base ■ Maintenance and Development of Social Infrastructure Business Maintain and develop deep domain knowledge based on long-term customer relationships and provide a full layer of value in sensing/NW/IT Co-create future concepts for customers based on domain knowledge of public infrastructure, spa
Slide 27: Improve Profitability of Base Business
Base ■ Improve Profitability of Base Business Maintain profitability above our competitors for our high- and medium-profit base businesses Improve profitability by establishing a monitoring system for low-profit businesses Adjusted Low-profit business monitoring system OP ratio High, medium profit B
Slide 28: Creation of future growth businesses
Growth Creation of future growth businesses Create growth businesses that will realize the NEC 2030VISION with strong technologies and inbound innovation Accelerate business development through fusion of R&D and NEC 2030VISION business development Disruptive technologies Unique technologies that cou
Slide 29: Future Growth: Healthcare and Life Science
Bringing people together and filling each day with inspiration Future Growth Aimed at Social Value Creation: Healthcare and Life Science Leverage AI and other strong technologies to expand our healthcare and life science business segment including advanced personalized therapies, integrated hospital
Slide 30: Future Growth: Carbon-Neutrality-Related Business
Living harmoniously with the earth to secure the future Future Growth Aimed at Social Value Creation: Carbon-Neutrality-Related Business Foreseen expansion in power demands due to uptake of EV/all-electric housing towards achieving carbon neutrality; Realize efficiency and optimization by market-mat
Slide 31: Agenda
1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5. Summary1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5.
Slide 32: Financial Strategy
Financial Strategy (“Maximizing long-term profit” and “Optimizing short-term profit”) Use continuously generated cash flow to fund sustainable growth and enhance corporate value through optimal capital allocation and by building robust financial and non-financial measurement methodologies Shift from
Slide 33: Profit Cycle and Capital Allocation
Profit Cycle and Capital Allocation Balance business growth in response to market expectations with maintenance and improvement of financial soundness, and enhance corporate value through cycling of profits Continue stable, long-term dividends Sustained EBITDA growth (CAGR ９%) Shareholder returns -
Slide 34: Reform profit structure by investing strategic expenses
Reform profit structure by aggressively investing strategic expenses Measure and manage cost-effectiveness of proactive investments of strategic funds in growth strategies and management foundation reforms to achieve substantial progress in FY2025 Strategic expense Quantitative Strategic expenses an
Slide 35: Reinforce non-financial measurement methodologies
Reinforce non-financial measurement methodologies to underpin sustainable growth of company and society Continuously incorporate ESG indexes as indicators of risk minimization and value maximization initiatives Key Theme (Materiality) Main initiatives FY2025 KPI *2 1. Acceleration of environmental 1
Slide 36: Agenda
1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5. Summary1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5.
Slide 37: Transformation of Culture and how we work
Transformation of Culture and how we work Transformation to a company that pursues innovation and brings together diverse and talented people under the NEC Way (common values) “Employer of Choice” Engagement Score 50% * (FY2020 25%) FY2025 Target Transformation Establishment of Creating a shared vis
Slide 38: Transformation of People and Culture
Transformation Bolster diversity as the source of innovation and of People and implement workstyle reforms supporting diverse 1 Culture talents A Ac ct ti iv ve e p pa ar rt ti ic ci ip pa at ti io on n o of f d di iv ve er rs se e t ta al le en nt ts s R Re ef fo or rm m o of f w wo or rk ks st ty
Slide 39: Establishment of Business Infrastructure
Create a Transformation Office directly under the CEO that Establishment of establishes a new foundation for how we work and generates Business competitiveness 2 Infrastructure Reforms in 3 domains: business process, systems, and IT M Ma aj jo or r i in ni it ti ia at ti iv ve es s t to o d da at te
Slide 40: Creating shared vision for a brighter future with customers
Creating shared vision for brighter Dissemination of the future vision for society as a future with our market leader and creation of new customer value 3 customers F Fu ul ll l- -s sc ca al le e l la au un nc ch h o of f T Th ho ou ug gh ht t L Le ea ad de er rs sh hi ip p a ac ct ti iv vi it ti ie
Slide 41: Agenda
1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5. Summary1. Purpose management 2. Mid-term Management Targets Purpose 3. Strategies Business Strategies Financial Strategies Strategy Culture 4. Culture 5.
Slide 42: Summary: NEC's Growth Model
Purpose Strategy Culture EBITDA Growth Rate Annual Average: 9% Engagement Score: 50% NEC’s Growth Model Transformation of people and culture Maximizing long-term profit“ Establishment of business infrastructure and Optimizing short-term profit Creating shared vision for brighter future with Non-fina
Slide 43: Cautionary Statement with Respect to Forward-Looking Statements
Cautionary Statement with Respect to Forward-Looking Statements <Cautionary Statement with Respect to financial statements as of and for the fiscal year ended March 31, 2021 Statements> As of the date of this material, audit on our financial statements as of and for the fiscal year ended March 31, 2
Slide 44: Orchestrating a brighter world
\ Orchestrating a brighter world NEC
Slide 45: Appendix
AppendixAppendix
Slide 46: Growth Business Reference Information: Segment Information
Growth Business Reference Information: Segment Information u Relationship of targets and growth businesses in FY2020 by segment Public Network Global Public Enterprise Others Infrastructure Solutions Services Business About About About About CAGR from FY2020 to FY2025 Flat 0%~1% 1%~5% 3%~8% 4%~6% FY
Slide 47: Results of stockholder returns: NEC's stock price vs TOPIX
Results of stockholder returns: NEC’s stock price vs TOPIX NEC TOPIX 250 NEC：+106% 200 150 TOPIX：+5% 100 50 0 47 © NEC Corporation 2021Results of stockholder returns: NEC’s stock price vs TOPIX NEC TOPIX 250 NEC：+106% 200 150 TOPIX：+5% 100 50 0 47 © NEC Corporation 2021
Slide 48: Track Record of Business Portfolio Transformation
Track Record of Business Portfolio Transformation n Acquisition of key segments 2018/2 2019/2 2019/7 2020/12 n Northgaten KMDn Oncolmmunityn Avaloq Public Services 2018 2019 2020 2019/3 2019/4 2020/6 n Lithium-ion Battery Businessn Lighting Business p Storage Battery (NEC Energy Devices, Ltd.) (NEC