NEC New Zealand reports over $1m loss for FY24 amid revenue growth

NEC New Zealand, a provider of technology-based business solutions and electronic imports for the New Zealand market, has reported a pre-tax loss of $1.098 million for the fiscal year ended 31 March 2024.

This contrasts with a profit of $914,000 recorded in the previous financial year, reflecting the challenges faced by the company in a turbulent business environment.

The company's revenue, however, showed positive momentum, increasing by 9.2% to $25.854 million compared to $23.666 million in FY23. This growth was driven by stronger sales across its hardware, software, and services divisions, although it was not sufficient to prevent the overall decline in profitability.

Revenue Breakdown
NEC New Zealand's revenue from continuing operations rose to $25.193 million in FY24 from $23.161 million the previous year. The revenue stream is composed of:

• Hardware and software sales: $5.666 million, up from $2.035 million in FY23
• Support and maintenance services: $6.161 million, down from $9.721 million
• Biometric services: $10.041 million, a significant increase from $5.087 million
• Platform services: $3.154 million, down from $6.014 million
• Other operating revenue: $173,000, down from $261,000 in FY23

The sharp increase in biometric services revenue was a notable highlight for the company, driven by growing demand for advanced security and identification solutions.

However, declines in support, maintenance, and platform services partially offset these gains.

Expenses and Profitability
The company's operating expenses increased significantly, resulting in a net loss for the year. Total expenses surged to $26.953 million, up from $22.752 million in FY23. A breakdown of key expenses includes:

• Cost of inventories: $15.156 million, a steep increase from $9.222 million in the previous year
• Employee benefits: $8.937 million, down from $10.414 million in FY23
• Other expenses: $1.751 million, down from $2.064 million

The considerable rise in inventory costs was a primary contributor to the company's financial challenges, reflecting increased expenditure on electronic imports and related components.

Depreciation and amortisation expenses were stable, amounting to $1.038 million compared to $1.020 million in FY23. An onerous contract expense of $70,000 was also recognised, up from $33,000 in the previous year, adding further pressure to the company's bottom line.

Despite these challenges, the company's cash position remained robust, with cash and cash equivalents of $3.135 million as of 31 March 2024, although down from $5.264 million in the prior year. Short-term deposits also declined to $8.716 million from $12.596 million.

Taxation and Comprehensive Income
NEC New Zealand's tax position improved, with an income tax credit of $305,000 recorded for FY24, compared to an expense of $289,000 in FY23.

The tax benefit partially mitigated the pre-tax loss, resulting in a net loss attributable to shareholders of $793,000, a reversal from the net profit of $625,000 achieved in the previous year.

The company also reported $15,000 in items that will not be reclassified to profit or loss, leading to a total comprehensive loss of $779,000 for the year.

Financial Position
The company's total assets stood at $27.892 million as of 31 March 2024, down from $30.352 million in the prior year. Current assets, including cash, receivables, and inventories, decreased to $25.827 million from $27.412 million in FY23. Non-current assets also saw a decline, totalling $2.064 million, compared to $2.940 million the previous year.

Liabilities reduced during the year, with total current liabilities amounting to $5.137 million, down from $6.380 million in FY23. Non-current liabilities also dropped to $403,000, compared to $843,000 previously. The company's net assets now stand at $22.351 million, slightly lower than $23.130 million in FY23.

Outlook
Despite the financial challenges faced in FY24, NEC New Zealand continues to focus on its core business of providing advanced technology and electronic solutions to the New Zealand market.

The company has navigated through a period of rising costs and shifting market demand, with biometric services showing strong growth potential. As it looks to the future, the company remains well-positioned to leverage its expertise in IT solutions and digital services, though it will need to manage expenses carefully to return to profitability.

The directors did not declare any dividends for FY24, consistent with the previous year's decision. Looking ahead, NEC New Zealand will likely focus on improving operational efficiencies and optimising its product and service mix to bolster its financial performance.