fy2019 financial results briefing · 2020-05-18 · ）haccp：hazard analysis and critical control...

FY2019Financial Results Briefing

FUJITSU FRONTECH LIMITEDMay 18, 2020

Copyright 2020 FUJITSU FRONTECH LIMITED

Table of Contents


1. Summary of FY2019 Consolidated Financial Results

2. Consolidated Earnings Forecast for FY2020

3. For Our Future Growth

1

1. Summary of FY2019Consolidated Financial Results

Copyright 2020 FUJITSU FRONTECH LIMITED2

Net sales

Operating Income

OrdinaryIncome

Extraordinary loss

Net income Attributable to

Owners of parent

Net income

per share

FY2019 90.9 1.2 0.9 -1.5 -0.7 -30.40 yenFigures announcedin January 2020 101.0 2.7 2.2 0.3 10.43 yen

Changes from the figures announced in January 2020 -10.1 -1.5 -1.3 -1.0

FY2018 102.3 2.6 2.7 -0.1 1.6 65.28 yenYear-on-year -11.4 -1.4 -1.8 -1.4 -2.3

[Billion yen]


Operating IncomeRecord foreign

exchange loss-0.3 billion yen

Extraordinary lossRecord expense for cost structure reform

-1.5 billion yen

Comparison with the previous fiscal year

Comparison with the previous announcement

Consolidated Results of Operations

Deterioration in business performance due to the expansion of COVID-19・Delay and suspension of the supply of mechanical components due tosuspension of operation in the Philippines plant and supply chain stagnation

・Postponements of business deals mainly in China, Europe and America・Unfavorable effects in domestic public racing business, due to races without spectators and suspension of ticket office outside fields.

Postponements and declines in domestic financial business, delay in launch of new service business, and postponements and declines in mechanical component business due to reconsiderations of investment by our customers in large deals.

3

Sales by Regions[Billion yen]

FY2018 FY2019 Change

Japan 72.6 64.7 -7.9Outside Japan

(Raito of salesoutside Japan)

29.7(29.1％)

26.3(28.9％)

-3.5

Americas 14.7 13.5 -1.2

Europe 9.7 8.2 -1.5

Asia 5.3 4.6 -0.7

（China) (2.1) (1.2) (-0.9)

Total 102.3 90.9 -11.4


1USD= 111 yen 109 yenAverage exchange rate during period

4

Sales and Operating Income by Business Segment[Billion yen]


FY2018 FY 2019 Change

Net sales Operating income Net sales Operating

income Net sales Operating income

Global ProductBusiness

60.1

1.4

51.8

0.1

-8.3

-1.3Mechatronics 29.2 24.9 -4.3

System Products 30.9 26.9 -4.0Solution & Service

Business40.2

3.0

37.4

2.6

-2.7

-0.4Service Integration 28.7 27.4 -1.4

Frontline Solutions 11.4 10.1 -1.3Other/Corporate

(Including strategic investment)

2.0 -1.8 1.7 -1.5 -0.3 +0.3

Total 102.3 2.6 90.9 1.2 -11.4 -1.4

5


Decline of Bill Recycling Units (BRU) for Europe and America

Suspension of operation of the Philippines plant and postponement of shipment and business deals of BRU due to COVID-19

Investment for development of next-generation BRU

Sales [Billion yen]

Operating Income [Billion yen]

Mechatronics

System Products Growth of adjustment machine business Decrease of ATM sales due to purchase restraint

before the reminting of 500 yen coins Decrease of banking terminals due to demand cycle Decrease of sports lottery terminals after the peak

of orders Decrease of operating revenue of public racing fields

caused by holding no-spectator races and suspension of ticket offices outside fields, due to COVID-19

30.9 26.9

29.224.9

FY2018 FY2019

System Products

Mechatronics

60.1

Global Product Business

FY2018 FY2019

１.４０.１

51.8

Sales and Operating Income by Business Segment(Comparison with the previous fiscal year)

Sales -3.1Operating income -1.0

※Quantitative impact caused by COVID-19

6

Service Integration

Frontline Solutions


Expansion of cloud-based cash management services

Growth of auction system for used car markets Growth of SI business for mobility companies and

online banks Decrease of the number of operating ATM

services for retail stores

Steady performance of settlement solution Increase in palm vein authentication sales in

and outside Japan Decline of mobile terminals after the peak of

large orders in FY2019 Postponement of RFID business deals outside

Japan due to COVID-19

11.4 10.1

28.7 27.4

FY2018 FY2019

FrontlineSolutions

Service Integration

40.2 37.4

FY2018 FY2019

3.0 2.6

Solution & Service Business

Sales [Billion yen]

Operating Income [Billion yen]

Sales and Operating Income by Business Segment(Comparison with the previous fiscal year)

7

Total Assets

TotalLiabilities

TotalEquity

Capital AdequacyRatio

FY2019 67.5 21.3 46.2 67.6%

FY2018 73.7 26.1 47.6 63.8%

Change -6.2 -4.8 -1.4

C/F fromoperating activities

（A）

C/F frominvestingactivities（B）

Free C/F（A＋B）

C/F fromfinancingactivities（C）

Ｃ/Ｆ（A+B+C）

Cash and cash

equivalents at the end of

year

FY2019 4.8 -2.3 2.5 -1.6 0.9 16.2

FY2018 0.1 -3.4 -3.3 -1.6 -4.9 15.4

Change +4.8 +1.0 +5.8 ±0.0 +5.8 +0.8


Consolidated Financial Positions and Cash Flows[Billion yen]Consolidated Financial Position

[Billion yen]Consolidated Cash Flows

8


2. Consolidated Earnings Forecastfor FY2020

9


Consolidated Earnings Forecast for FY2020

・Difficulty of materials procurement from suppliers in and outside Japan.・Suspension of operation of the Philippines plant.

Due to the expansion of COVID-19, the following effects on sales have already occurred on.

In addition, ・Reconsideration or postponement of investments by clients in and outside Japan.

・Decrease of operating revenue of public racing fields caused by holding

no-spectator races, continuous suspension of ticket office outside fields,

increase of suspension of races.

These effects are expected to continue, and it is difficult to rationally calculate the effects and predict business results at this time.

We will announce the earnings forecast for FY2020 as soon as we are able to forecast them.

10

Dividend

Dividend Policy：

Interim Year-end Full year

FY2019 11 yen 11 yen(planned)

22 yen (planned)

Placing a focus on stable dividend payouts, dividends are decided in consideration of profits in each fiscal year and future business developments.


※The dividend forecast for FY2020 is undecided at this time, because it is difficult to calculate earnings forecasts.We will disclose it immediately, as soon as we can forecast it.

11

３. For Our Future Growth


Our Vision


Touch

Connect

Change

By interacting with “Mono (product) and Koto (service oriented way of thinking)” provided by FUJITSU FRONTECH,

we will create new connections between people, companies and society and realize safe and secure society where everyone live snugly

Frontline product, solution and service provided by FUJITSU FRONTECH

Innovate “B to B to Front” field with ICT

Advanced Technology of FUJITSU FRONTECH

Retail MedicalFinancial Public Logistics

Network

Mobility

Commonalization of hardware, Unification of architecture

DX Company at the Forefront of Customers

13


Business expansion with solution services that anticipate changes in customer needs

１

Creating solution businesses based on unique technologies and developing distinctive LCM services

２

Expanding the scope of the mechanical component business

３

Key Strategies and Key MarketsKey Strategies

Domestic Financial Business

Domestic RetailBusiness

Global Retail Business

Global Biometric Business

Domestic PublicBusiness

Key Markets

１

2

3

4

5

14


①Domestic Financial Business (1/2) Business Environment

Market scale and Potential

Needs to develop operational efficiency related to decrease in the number of visitors at bank branches, reconsideration of the roles of counters at bank branches and ATMs

The issue of new 500 yen coins (reminting planned in 2021) and new banknotes (reminting planned in 2024）

At the market of banking terminal system, where we have the top share in the number of operative units in Japan, for measures against decrease in the number of visitors, further improvements in operational efficiency (Self and Semi-self banking counter) are expected.

At the ATM market, reduction in the number of installations is expected, however, based on the operation experience of more than 30,000 ATMs mainly in the financial institutions in Japan, demand for modification or replacement of ATM equipment is also expected toward the reminting of 500 yen coins in 2021 and banknotes in 2024.

15

Expansion of work reform solutions for bank branches☞ Developing efficiency in store further, using Quick-Counter, Recycle Casher

Steady development of banking terminals and ATMs, including coping with the reminting of 500 yen coins.☞ Remodeling and replacing teller cash recyclers and ATM for the reminting.

Considering a next-generation ATM solution☞ Planning and considering a new ATM solution which can meet the needs

of reduction in operating costs.


Direction to be pursued With the advantage of our banking terminal systems whose units in operation are

the highest number in Japan, in cooperation with Fujitsu Ltd., we will promote next-generation solution services that are flexible enough to respond to market changes.

☞ Providing hardware, software and services that make up “Finplex Digital Branch”, the financial solution of Fujitsu, Ltd.

Efforts for FY2020

①Domestic Financial Business（2/2）

16


Fujitsu Digital Channel ServiceFinancial Solution “Finplex Digital Branch”

Back-Office ZoneIn-Branch Zone

Out-Branch Zone

Automation

Remote CounterCompany

Individual

Self-Terminal

Support the Innovation of Bank Branch Work “Digital Branch”

Digital Process Management

Fujitsu Frontech’s hardware, software and services that make up "Digital Branch“ of Fujitsu Ltd.

Digitalizing procedurecreates flexible store formats and reduce costs

Semi-Self CounterTerminal formini bank

ConsultationBooth

Concentrationin back-office work

17


②Domestic Retail Business（1/2） Business Environment

With the expansion of unmanned settlement (register-less) in preparation for the cashless society, major retailers are beginning to test the Amazon Go style of unmanned stores. (Lawson Fujitsu Shin-Kawasaki TS)

On the other hand, there are needs to develop efficiency further in cash management work, because we surely use cash also in the future.

In addition, as HACCP(※) becomes mandatory, it is becoming necessary to develop systems to automate and refine food sanitation management mainly in the retail industry.

Market scale and PotentialDemand for settlement business continues (150,000 units per year), influenced by the

cashless vision of METI of Japan (the target of cashless payment ratio of 40% in 2025) and Points Return System by My Number (September, 2020)

Settlement

BiometricAuthentication

CashManagement

IoT Sensor

Accelerating the trend to develop efficiency in store management due to the spread of work style reforms and the deepening of labor shortage

（※）HACCP：Hazard Analysis and Critical Control Point

The biometric authentication (including face, finger veins, and fingerprints) market in Japan has a market size of nearly 800,000 units and is growing year by year. And our palm vein authentication terminals are expected to be around 200,000 units per year (including use other than retail).Demand for systematization of cash management at about 240,000 stores in Japan is

expected, as mechanization of security transportation to resolve chronic labor shortages and renewal of cash deposit machine and cash dispenser accompanying the issue of new 500 yen coin and banknotes are proceeding.In preparation for mandator of HACCP(June, 2020), demands for sensor solution is

expected to grow at about 100,000 stores, including IoT temperature management, staff location (motion line) management for work style reform and manpower shortage countermeasures.

18

Continuing to increase sales of settlement terminals handling IC credit cards and developing e-money and code settlement business

Establishing and expanding palm vein authentication and settlement (multi-modal) business in cooperation with Fujitsu Ltd.

Developing and expanding new cash deposit machines for major security transport companies and expanding cash management service business for large-scale mass retailers by marketing large-sized cash deposit machines

Developing HACCP-compliant business for stores and promoting cooperation with platform manufacturers such as refrigeration equipment vendors


Direction to be pursued

Efforts for FY2020

②Domestic Retail Business（2/2）

security transportcompanies

■Cash deposit machineand cash managementservice

■Palm vein authentication solution

Promoting solution that reduces the number of staff and increases efficiency, in preparation for a smart store trend in the retail market1. Settlement solution2. Palm vein authentication solution3. Cash management service4. Temperature and location management solution

■Temperature and location management solution

■Settlement solution

19


③Domestic Public Business（1/2） Business Environment Increase of demand for provision of solutions to increase visitors to racing

fields, to improve fan services and to drive efficiency in operation Handling measures against gambling addiction Expansion of online betting

Market Scale and Potential ICT investments are increasing related to growing sales in the public racing

industry. However, development of new demands is our issue in the face of changes such as holding of no-spectator races due to COVID-19.

Top share in the number of public racing fields that introduce devices(Approx. 14,000 units in operation)

【 Source: Our research 】2015 2016 2017 2018 2019

4.7 trillion yen 5.8 trillion yen

Sales trend in the public racing industry

【 Source: Industry Sales Announcement Information】

Our company56%

Share of our totalizator terminals by number of public racing fields

20


Direction to be pursued Continuing as a steady business Providing new solution to improve operational efficiency, increase

visitors, and improve fan services Developing new markets by utilizing technologies cultivated in terminals

for public racing

③Domestic Public Business（2/2）

Efforts for FY2020Developing comprehensive management service, by adding new solution business, based on existing businesses such as totalizator terminals.

・New Solution Linked to Terminals・New AI Solution・New Solution Collaborated with Internet Companies

TotalizatorTerminals

New Ticket Office

Outside fieldsAncillaryFacilities

New AI Solution

New SolutionLinked toTerminalsNew Solution

collaboratedwith InternetCompanies

Comprehensive Management

Service ※

※Comprehensive Management ServiceA service that undertakes management comprehensively, such as maintenance, operation, security, cleaning, and advertising etc., except for clerical work related to races

21

Promoting business of automation of cash handling and self-service at storefront, and expanding cash management business for back office (including mechanical components and devices)

Strengthening business organization in the field of storefront in North America

Launching new small-sized cash handling device (Cash Box Module) and hybrid SCO in the storefront

Launching new large-sized recycler for cash management in back office

Developing new partner in Europe, America, and India

Direction to be pursued

Efforts for FY2020

④Global Retail Business

Cumulative Introduction in North America (number of units)

SCO 18,700

Back officemachine (BRU) 14,100

（As of end of March, 2020）


(SCO: Self Check-Out、CBM: Cash Box Module)

Strengthening the portfolio of self-service solution of storefront settlement

Expanding back-office cash management (Recycler) business further with strategic partner, Revolution Retail Systems・Promoting a transition from SmartSafe to Recycler

Handling digital transformation of store operation・ Utilizing AI/RFID/Mobile/Biometric Authentication

22

$-

$2,000

$4,000

$6,000

$8,000

$10,000

2017 2018 2019 2020 2021 2022 2023

Financial ServicesHealthcareRetailEnterpriseConsumer ElectronicsGovernment

Financial Services: $752M→$2,541M(CAGR22.5%)


⑤Global Biometric Business（1/2） Business Environment

Market Scale and Potential

The increase in needs for more advanced authentication technology in financial institutions and medical institutions

Biometrics are used to check criminal records and background check records in North America, when applying for a specific job or buying a firearm.

Strong growth in financial and medical markets requiring high security

Growth potential in the enterprise and the retail markets

Global Biometric Market is expected to grow nearly 3-fold in 5 years （CAGR 22.0%)

USA leads the market with 23% share of total

2018 → 2023 CAGRAmericas $ 6.2 → $ 17.1 22.5%Europe $ 3.7 → $ 9.9 22.0%APAC $ 2.5 → $ 6.7 22.4%Other $ 1.1 → $ 2.5 18.0%World total $ 13.5 → $ 36.2 22.0%

US Market $ 3.1 → $ 8.5 22.5%

US$MUS$B

[Source: Our research] [Source: Our research]

23

In addition to palm vein authentication of Fujitsu Frontech, Fulcrum Biometrics, LLC has its multi-modal authentication platforms that use multiple biometric authentication methods, such as fingerprints and faces to collate and products and solutions that are operable with the LiveScan system, a personal background check system in the United States. It has experiences in various industries such as finance, medical, retail and government, and a large overseas customer base.

With this acquisition, Fujitsu Frontech will be able to develop and expand biometric solution that meets demands in various markets globally in the field of biometric business that is expected to grow in the future.

Acquisition of Fulcrum Biometrics, LLC（April, 2020）and Direction to aim

⑤Global Biometric Business（2/2）

Identity Solutions for a Better, Safer World


Business Application of clients（Financial, medical, retail, government, and so on）

Development ofapplication

including system Handling LiveScan

Supporting multiplebiometrics

authentications thatmeets demandof customers

Integration of biometrics authentication into

a variety of vertical applications

High security,contactless and

hygienic palm veinauthentication

Applicationof Fulcrum LLC

Multi-modal biometrics authentication platform of Fulcrum LLC

Palm veinauthentication

Irisauthentication

Faceauthentication

Fingerprintauthentication

24

<Notes Regarding Forward-Looking Statements>

This material contains certain statements about projections and forecasts for thefuture plans, strategies, and performance based on assumptions made usinginformation available to Fujitsu Frontech at that time.

In addition, this material contains various risks and uncertainties (includingeconomic trend, fierce competitions in the related industries, market demands,informed that the actual results may materially differ from the forecasts madeby the Company.

<Trademark>The proper herein including product names are the trademarks or

Registered trademarks of the respective companies.


fy2019 financial results briefing · 2020-05-18 · ）haccp：hazard analysis and critical control...

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