NetOne Report 2014 Vol.32

Securities Code: 7518
Shareholder Information
Basic Information
Procedures Relating to Share Transactions
Shareholders who have an account with a securities firm
Stock Listing
First Section of Tokyo Stock Exchange
Securities Code
7518
Procedures, inquiries, etc.
Share Unit
(Trading Unit)
100 shares
Securities firm or equivalent
where you hold your account
Fiscal Year
April 1 through March 31
esignating/changing the
D
dividend receipt method
Requests to purchase
fractional shares
Annual Shareholders
Meeting
June
Dates of Record
•
S ending and return of
mailed material
Dividends after the
payment period
Shareholder Registry
Administrator
Sumitomo Mitsui Trust Bank,
Limited
1-4-1, Marunouchi, Chiyoda-ku,
Tokyo, 100-8233, Japan
Annual Shareholders Meeting March 31
Year-End Dividend March 31
• Interim Dividend September 30
•
Method of Public
Notice
Electronic public notice (NetOne website)
Announcement URL http://www.netone.co.jp/
Public notices of the Company shall be made
via electronic notification. In the event that this
method is not available due to accidents or
other circumstances, the Company will publish
announcements via the Nihon Keizai Shimbun.
Contact address
14
April 1, 2014 to September 30, 2014
Vol. 32
S hares registered in special accounts (shareholders who do not have
an account with a securities firm)
Contact address
Procedures, inquiries, etc.
Postal address and telephone
contact number
Special Account Management
Institution
Sumitomo Mitsui Trust Bank,
Limited
1-4-1, Marunouchi, Chiyoda-ku,
Tokyo, 100-8233, Japan
Stock Transfer Agency Business
Planning Dept., Sumitomo Mitsui
Trust Bank, Limited
2-8-4 Izumi, Suginami-ku, Tokyo
168-0063, Japan
Tel: 0120-782-031 (toll free
within Japan)
CONTENTS
Net One Systems Co., Ltd.
JP TOWER, 2-7-2 Marunouchi, Chiyoda-ku, Tokyo 100-7024, Japan
Tel: +81-3-6256-0615 (Investor Relations)
http://www.netone.co.jp/english.html
To Our Shareholders
P. 1
Strategic Progress in FY2014
P. 3
Operating Results
P. 5
Consolidated Financial Statements
P. 7
Net One Systems Co., Ltd.
Stock Information / Corporate Data
P. 9
Securities Code: 7518
To Our Shareholders
Initiatives in the First Half
Promoting an Evolution from a Professional
Group That Merely “Connects” to One That Is
“Fully Utilized”
I am pleased to report about the progress of our business and
future strategy through this NetOne Report covering the first half
of FY2014, ending March 31, 2015.
President & CEO
Takayuki Yoshino
Highlights from the First Half of FY2014
Performance in the first quarter failed to meet forecasts, resulting in a first half
that did not live up to expectations
performance fell below expectations and we were
company-wide matrix sales structure, shifting from a
unable to recover and make up for this drop in the
sector-specific approach to a vertical region-based
second quarter. Two major factors were responsible
and horizontal market-based approach. During the
for this result.
first half, our efforts in the Public Sector (PUB
Sector) began to pay off, but we found that more
First, in the Enterprise Sector (ENT Sector), due to
the end of support for Windows XP, we saw robust
time was required to prepare for sales and
investment for replacement PCs between April and
marketing activities under the new structure
May, but other IT investment was largely held in
for the ENT Sector and the Telecom Carrier Sector
check. Our projects were therefore slow to take
(SP Sector).
1st half
160,667
82,511
Revenue (unit: million yen)
2nd half
154,582
73,092
1st half
2nd half
140,000
146,216
(estimated)
157,633
154,869
72,256
87,881
73,188
(estimated)
Operating income (unit: million yen)
1st half
136,000
142,427
(estimated)
2nd half
79,010
77,029
(estimated)
8,451
FY2011
1
81,490
73,959
FY2012 FY2013
66,812
FY2014
69,752
FY2011
76,997
63,417
FY2012 FY2013
58,971
FY2014
6,245
FY2011
building a network and cloud-based information
Aichi Prefecture, as disclosed in January 2014. This
infrastructure for storing and securing data over the
prefecture is working to eliminate large computers
Internet. At the same time, we expanded our reach
(general-purpose machines) and rebuild its
into domains where we can be “fully utilized,” in
information systems to cut costs and achieve more
addition to those where we merely “connect.” Since
stable operations. Aichi Prefecture was highly
launching our new sales system in April, we have
impressed with our proposal for boosting reliability
been addressing the challenge of creating a
and cutting costs while enhancing efficiency across
standardization structure, while reinforcing our
the government’s entire system. These sales and
proposals for effective and stable utilization based
marketing activities focused on unified platform
on the keywords of “shared” and “virtualization”
infrastructures are also beginning to take hold in
(a technology enabling computers to be used
efforts aimed at the ENT Sector and SP Sector.
and stable manner).
Initiatives in the Second Half and the Annual Outlook
Accelerating efforts in many markets under the keywords of “shared” and
“virtualization”
3,142
4,595
In the ENT Sector, investments in new PCs have
second half and beyond for the SP Sector, because
run their course and demand should now rise for
capital expenditures (capex) for network
conventional system improvements. We are stepping
development were lagging. However, central and
up sales and marketing to expand cloud builder
local governments are beginning to implement
services that help customers to construct their own
unified platform infrastructures to respond to the
private clouds, and we are expanding cloud broker
rollout of new systems, such as the “my number”
services that connect customers’ private clouds with
national identification number system. At the same
the public clouds of Google or Amazon.
In this manner, our efforts that started several
connects Japan’s residential registration system,
years ago to develop domains where we can be
social insurance, and tax data. We anticipate that
“fully utilized” are expected to deliver results in the
PUB Sector sales will pick up robustly heading into
second half and beyond.
the next fiscal year, in line with the new keywords of
3,856
78,155
and remote backup system that we developed for
time, plans are in place to develop a platform that
15,229
8,984
77,871
An example of this is the private cloud platform
to develop the platform business, centered on
We anticipated that sales would remain weak in the
hold, resulting in weaker sales.
Bookings (unit: million yen)
Several years ago, we began stepping up our efforts
simultaneously by multiple users in a more effective
Second, since April we have organized a
During the first half of FY2014, first-quarter
Reinforcing value-added proposals to fully utilize the network
3,800
(estimated)
3,164
3,840
(estimated)
–22
–40
FY2012 FY2013
FY2014
“unified platform infrastructure.” We are seeing a
growing trend in which local governments are
introducing our system of office environments to
boost employee productivity.
Consolidated Earnings Outlook for FY2014
Revenue
Operating
income
Ordinary
income
Net income
¥136,000
¥3,800
¥4,000
¥2,300
million
million
million
million
(down 4.5% yoy)
(up 20.9% yoy)
(up 13.1% yoy)
(up 133.9% yoy)
NetOne Report 2014
2
To Our Shareholders: Strategic Progress in FY2014
Develop human resources
FY2014
Strategy
Adapt to market changes
Shift from Capex to Management of Operating
Expenditure (Opex)
Responding appropriately to the
needs of users to improve
operating efficiencies
The ICT industry where we operate represents a
Improve business
processes
Develop
human resources
Improve business processes
Our Initiatives to Improve Productivity
We introduced a new ERP system in
April 2014
We have established our own in-house system using
packaged software fully compliant with global
standards. When this system was rolled out, I said
world that fuses together the completely different
that we should operate about 80% of our existing
technologies of computers and networks. Since our
business processes on this new system, and so we
establishment, we have developed network
infrastructure that connects these two technologies.
used our existing business processes without
modification on this new system. Such an approach
The future of network infrastructure indicates a shift
was the conventional thinking of a Japanese
from capex for building future systems to a
company, but we decided to dispense with this
reduction in opex for operating these systems, due
to Japan’s progressive population aging and the
declining birthrate, as well as technological
advances that have reduced equipment prices. Opex
process and start over. To this end, we decided to
fully utilize the new system after fundamentally
rethinking our business processes.
Raw data need to be processed and analyzed
for system operations has increased significantly as
to manage revenue and expenditures more
network usage has risen and virtualization
appropriately, and data management systems should
technologies have been introduced. Moving
be simple if the client wishes to take action using
forward, demand is expected to grow further for
quick cycles. One and a half years have passed since
network operators to reduce opex.
we relocated to our new headquarters, and we are
As an ICT multi-vendor, we have built up our
focused now on making simpler and more
own data on the operations of a range of
meaningful proposals by consolidating business
equipment and accumulated the expertise to
processes, such as those involving demonstrations to
analyze these data. In addition, as reflected in
our customers held in the Solutions Briefing Center.
efforts to boost business efficiency at the Innovative
Our experience gained from completely starting over
Office at the new headquarters, we have put in
will enable us to make better proposals to our
place the means to use our own experience to
customers in the years ahead.
The Current Situation and Future Direction of
Human Resource Investment
When we launched operations in 1988, Japan had
We are reinforcing human resource
development and fundamentally
changing our personnel system
connecting servers and computers in an office
Over the past two years, we have established
systems in the cloud builder domain that combine
computers, storage and software, while promoting
the acquisition of technological certification from
relevant manufacturers for the skills needed to
introduce new business processes. In addition, we
have sent junior engineers to the U.S. headquarters
of several of our partner vendors each year to foster
better interaction and networking with senior level
engineers at the companies.
As for new hires out of university, we used to
place them in positions on the frontlines after they
had completed only three months of classroom
learning, but starting this year we have placed all of
them in the Engineering Division for a period of nine
months after their classroom learning to ensure that
they receive practical on-the-job training. This
system ensures that these new hires are assigned
their first job only after building up a broad range of
experience with customers.
In terms of human resources, starting in April we
changed our compensation system based on a
reclassification of employee roles into (1) people
who actively make proposals, (2) people who
support the execution of such proposals, and (3)
people who engage in standard work. We have also
incorporated a system to rotate in external human
resources and changed our personnel evaluations so
make proposals to customers. Having shifted from a
that they are equally weighted on efforts and
focus on the creation of network infrastructure to
results. This will enable us to make more proactive
its use, as a professional ICT platform group that
investments in the employees who promote and
can be “fully utilized,” we will continue to respond
implement our policies.
rapidly to our customers’ needs to improve their
operating efficiency.
3
Adapt to
market changes
Message to NetOne Shareholders
yet to see the dawn of network development for
environment. Subsequently, the scope of these
connections broadened and connection speeds
increased, and today a high-speed Internet
environment is the norm. As a professional
connector, we have continually advanced and
evolved the network infrastructure since
our establishment.
The world has entered an era of full utilization of
ICT platforms. For example, an emerging need is the
wiser use of external platform and the maximization
of platforms to enhance business efficiencies.
I believe that transforming our business in
these changing times and aiming to become a
professional ICT group that is “fully utilized” will
uncover a great number of potential markets for us
to serve. I would like to thank all shareholders for
your continued cooperation and unwavering
support of NetOne, a group of companies that is
paving the way in the utilization of networks.
Operating Results
Business Overview
Overview by Market Sector
NetOne validates and tests new products from a range of vendors in Japan and overseas using its own
As customer needs diversify, the characteristics of ICT markets vary depending on the region and on
proprietary technologies, and then creates the optimal solution to meet customers’ individual needs. We
corporate conditions.
To closely monitor the markets and provide the solutions best suited to our customers, we broadly divide
support the growth of clients’ businesses by adding our unique value to next-generation ICT platforms,
the markets into four sectors.
combining the latest products and technologies based on our experience and expertise.
Revenue by Product Category
Enterprise:
First half of FY2013
First half of FY2014
¥63,417 million
¥58,971 million
Service businesses 38.1%
17,633
Network products 45.7%
Telecom Carrier:
Platform products 11.7%
First half of
FY2013
First half of
FY2014
Bookings
Revenue
(unit: million yen)
23,184 23,170
Our network products include relay
The mainstay of our platform
Our service businesses offer
devices for controlling data
products consists of highly efficient,
consistent support from consulting
transfers, such as routers and
secure and robust ICT systems for
for introduction of ICT systems to
switches needed to build everything
cloud businesses, comprising
planning, designing, construction,
from large-scale systems for
servers and storage, loaded with
maintenance, operations, and
Public:
telecom and Internet service
virtualization technologies and
optimization services. Across-the-
providers to intra-network systems
security technologies. We also
board services are also available
PUB Sector
for business entities. We also
promote unified collaboration that
for oversight and management
provide a host of other
aids user communication in video
of the entire life-cycle of an ICT
telecommunications equipment,
conferencing and other virtual
system built for multi-vendor
including optical transfer systems
spaces, as part of our drive to help
environments.
and wireless control systems.
customers boost productivity.
Optimize
Prepare
ICT
system
Operate
Implement
Targets
artner businesses
P
P rovision of platform
solutions
First half of
FY2013
First half of
FY2014
Bookings
Revenue
(unit: million yen)
22,344
20,275
12,934
13,455
Breakdown of sales
(first half of FY2014)
Performance
ecrease in bookings due to a
D
continuing drop in capex for
telecommunication lines
34.3%
(first half of FY2014)
Performance
trong bookings from system
S
optimization, unified platform
infrastructure, and authentication
infrastructure projects for
central and local governments
21.9%
Breakdown of sales
First half of
FY2013
First half of
FY2014
Bookings
Revenue
(unit: million yen)
9,236 8,525
10,625
9,373
(first half of FY2014)
Performance
teady revenue from ongoing
S
demand for network building
and support services
15.9%
elayed progress in platform
D
implementation
Breakdown of sales
First half of
FY2013
5
27.8%
Breakdown of sales
NOP
Targets
ecline in both bookings and
D
revenue, reflecting sluggishness
in overall projects
t e a d y p ro m o t i o n o f c l o u d
S
platform development
nified platform
U
infrastructure
Improvements in work style
Net One Partners:
Plan
Design
20,207
17,636
etwork infrastructure
N
S ervice delivery platform
Service businesses
Performance
Increase in collaboration tool
projects for virtualization and
video conferencing
Targets
Platform products
16,195 16,381
L arge-scale ICT systems
Improvements in work style
SP Sector
Network products
(unit: million yen)
20,649
Targets
Service businesses 42.6%
Network products 49.7%
Platform products 12.2%
ENT Sector
Bookings
Revenue
First half of
FY2014
(first half of FY2014)
NetOne Report 2014
6
Consolidated Financial Statements
Net One Systems Co., Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheets (Summary)
As of
September 30,
2013
Consolidated Income Statements (Summary)
(unit: million yen)
As of
March 31,
2014
As of
September 30,
2014
(unit: million yen)
First half
of FY2013
First half
of FY2014
Total assets
Assets
Current assets
78,953
78,580
78,269
Noncurrent assets
11,722
12,043
11,663
Property, plant and
equipment
6,013
5,775
5,697
Intangible assets
1,427
1,860
1,750
Investments and other assets
4,281
4,407
4,214
Total assets were ¥89,932 million,
down ¥692 million from the previous
fiscal year-end, due to a decrease in
notes and accounts receivable-trade,
while cash and deposits and
inventories increased.
Total liabilities
Total liabilities were ¥33,837 million,
up ¥476 million, reflecting a decrease
in notes and accounts payable-trade
and an increase in prepayments.
Earnings position
Revenue
Cost of revenue
Gross profit
Selling, general and
administrative expenses
63,417 (100.0%)
58,971 (100.0%)
48,573
(76.6%)
45,178
(76.6%)
14,843
(23.4%)
13,793
(23.4%)
Revenue decreased by 7.0% year on
year to ¥58,971 million. The drop in
revenue resulted in gross profit of
¥13,793 million. As a result, we recorded
an operating loss of ¥40 million, despite
efforts to rein in SG&A expenses.
14,866
(23.4%)
13,833
(23.5%)
Cash flow from operating activities
(22)
(-0.0%)
(40)
(-0.1%)
87
(0.1%)
129
(0.2%)
Ordinary income
64
(0.1%)
88
(0.2%)
Extraordinary loss
(1,012)
(-1.6%)
(14)
(0.0%)
Net cash provided by operating activities
during the first half of FY2014 was
¥3,524 million, a year-on-year increase
of ¥5,005 million. This was mainly
attributed to an increase in income from
a decrease in notes and trade receivablestrade, a decrease in expenditures from an
increase in inventories, and an increase in
expenditures from a decrease in notes
and accounts payable-trade.
Income (loss) before income
taxes and minority interests
(947)
(-1.5%)
74
(0.1%)
Cash flow from investing activities
Net income (loss)
Operating loss
Non-operating income
Total net assets
Total assets
90,675
90,624
89,932
Liabilities
Current liabilities
Noncurrent liabilities
Total liabilities
29,842
31,537
31,854
1,837
1,823
1,983
31,680
33,361
33,837
Total net assets were ¥56,094
million, down ¥1,168 million, due to
the retirement of treasury stock and
a decrease in retained earnings
reflecting the payment of dividends.
(873)
(-1.4%)
Consolidated Cash Flow Statements (Summary)
Net assets
First half
of FY2013
58,770
57,141
55,736
Capital stock
12,279
12,279
12,279
Capital surplus
19,453
19,453
19,453
Retained earnings
28,555
28,926
25,160
Treasury stock
(1,518)
(3,518)
(1,157)
Accumulated other
comprehensive income
(35)
55
258
Subscription rights to shares
66
66
193
58,995
Shareholders’ equity
Minority interests
Total net assets
31
(0.1%)
(unit: million yen)
First half
of FY2014
Net cash provided by (used in)
operating activities
(1,481)
Net cash used in investing activities
(2,371)
Free cash flows
(3,852)
2,628
Net cash used in financing activities
(1,774)
(1,822)
Net increase (decrease) in cash and
cash equivalents
(5,627)
804
99
Cash and cash equivalents at
beginning of period
29,580
21,183
—
—
Cash and cash equivalents at end
of period
23,952
21,988
57,263
56,094
3,524
(896)
Net cash used in investing activities was
¥896 million, a decrease of ¥1,475 million .
This was primarily due to a decline in
expenditures associated with the acquisition
of plant, property and equipment for
sales and marketing purposes.
Cash flow from financing activities
Net cash used in financing activities
amounted to ¥1,822 million, an increase
of ¥48 million. This was mainly
attributable to an increase in
expenditures from the repayment of
lease obligations.
For further details please visit our corporate website: http://www.netone.co.jp/english/ir.html
Total liabilities and net assets
7
90,675
90,624
89,932
NetOne Systems IR
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NetOne Report 2014
8
Stock Information / Corporate Data
Stock Information (As of September 30, 2014)
Earnings results
announcement and
presentation
Number of Shares Issued———————————————— 86,000,000
Number of Shareholders—————————————————— 26,178
Major Shareholders (Top 10)
Number of Ownership
shares held ratio (%)
Name
Japan Trustee Services Bank, Ltd.
(Trust Account)
6,667,600
7.89
STATE STREET BANK WEST
CLIENT-TREATY
6,477,700
7.66
GOLDMAN SACHS INTERNATIONAL
NORTHERN TRUST CO.
(AVFC) RE NVI01
2,639,141
3.12
2,240,300
Master Trust Bank of Japan, Ltd.
(Trust Account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Meiji Yasuda Life Insurance Company
2.46
1,656,000
1.96
1,440,000
1,438,700
CBNY-ORBIS SICAV
1,359,810
Japan Trustee Services Bank, Ltd.
(Trust Account 4)
2.65
2,080,700
Association of Net One Systems
Employees participating the Employee
Stock Ownership Program
Corporate Data (As of September 30, 2014)
Annual Investor Relations Schedule
1.70
1.70
Fourth
Quarter
3
2
4
Corporate Name Net One Systems Co., Ltd.
First
Quarter
5
1
1.51
February 1, 1988
Capital Stock
12,279 million yen
Business
Activities
Networking business
7
11
10
Third-quarter
earnings results
announcement
and presentation
Third
Quarter
9
8
Annual
Shareholders
Meeting
Number of
Employees
Consolidated: 2,419 (a decrease of 10 year on year)
Non-consolidated: 2,151 (a decrease of 6 year on year)
Major Banks
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mizuho Bank, Ltd.
The Company is established and inaugurated in
Minato-ku, Tokyo.
Oct. 1990
The Ukima Distribution Center (the Quality Control
Center) opens.
Feb. 1991
The Company is registered and certified as a systems
services company (systems integrator) by the Ministry of
International Trade and Industry (currently, Ministry of
Economy, Trade and Industry).
Oct. 1992
The Company is granted a license for a specific
construction business (telecom engineering business) by
the Tokyo Metropolitan Government.
Oct. 1996
The Company registers its stock on the over-the-counter
market of the Japan Securities Dealers Association.
Apr. 2000
Network Service And Technologies Co., Ltd. is
established as a consolidated subsidiary engaging chiefly
in service business.
Dec. 2001
The Quality Control Center gains ISO 9001 certification.
Sumitomo Mitsui Banking Corporation
Second
Quarter
Second-quarter
earnings results
announcement
and presentation
Feb. 1988
Network platform business
Service business
Mitsubishi UFJ Trust and Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
First-quarter
earnings results
announcement
and presentation
Consolidated
Subsidiaries
Net One Partners Co., Ltd.
Xseed Co., Ltd.
Net One Systems USA, Inc.
(subsidiary based in the United States)
Indicators
(FY)
2011
2012
2013
Earnings per share (yen)
94.56
48.89
11.40
Book-value per share (yen)
703.25
699.63
676.65
Dividends per share (yen)
31.00
34.00
34.00
Dividend payout ratio (%)
32.8
69.5
298.2
Return on equity (%)
14.3
6.9
1.7
1.61
1,275,100
Established
6
12
History
Net One Systems Singapore Pte. Ltd.
(subsidiary based in Singapore)
The Company is listed on the First Section of the Tokyo
Stock Exchange.
Mar.2003
The Quality Control Center gains ISO 14001
certification.
Mar.2004
The Company gains ISO 14001 certification.
Nov. 2007
The Expert Operation Center (XOC) opens as a facility
for integrated operation services.
Nov. 2008
Net One Partners Co., Ltd. is established.
Oct. 2009
The Technical Center is relocated and expanded.
Feb. 2010
The Company acquires shares of Xseed Co., Ltd. and
makes it a consolidated subsidiary.
Apr. 2011
The Company takes over Network Service And
Technologies Co., Ltd.
Jul. 2012
The Company acquires System Solution Engineering K.K.
and makes it a wholly owned subsidiary.
Aug.2012
The Company establishes the Singapore
Representative Office.
Jan. 2013
The Quality Control Center and the Service Quality
Center are relocated and merged.
May 2013
The Company relocates its head office to Marunouchi
in Tokyo’s Chiyoda Ward.
The Company updates the corporate logo.
Oct. 2013
The Company establishes Net One Systems Singapore
Pte. Ltd.
Mar.2014
The Company acquires shares of Xseed Co., Ltd.,
making it a consolidated subsidiary.
Directors and Corporate Auditors (As of September 30, 2014)
President & CEO
Takayuki Yoshino
Directors
Shingo Saito
Toru Arai
Shunichi Suemitsu
Tsuyoshi Suzuki
(Note) The Company retains 1,470,825 shares of treasury stock; this amount is not included in
the major shareholder figures above.
(Note) T he Company carried out a 200-for-1 share split on April 1, 2012. The figure for FY2011
in the table above was adjusted for the share split.
Norihisa Katayama
Yoshiharu Horiuchi
Distribution of Shares by Type of Shareholder
Outside Directors
Other domestic corporations
0.94%
Securities companies
1.11%
Treasury stock
1.71%
Financial institutions
24.99%
Individuals and other
43.20%
Overseas corporations and others
28.03%
Kunio Kawakami
Masasuke Naito
Mitsuo Imai
Full-time Corporate Auditor Tadashi Arima
Outside Auditors
Masamichi Kikuchi
Minoru Uchida
Tadashi Nakaoka
Interim Dividend
(1) ¥15 per share (2) Effective date and start date of payment: Tuesday, November 25, 2014
9
NetOne Report 2014
10