NTT New Zealand reports reduced losses but faces challenges

NTT New Zealand Limited has reported its financial results for the year ending 31 March 2024, highlighting a challenging year of losses and operational shifts.

The company, which provides online business solutions, networking services, and security consultancy, recorded a net loss after tax of $17.3 million. This marks a significant improvement from the previous year, where the net loss stood at $38 million. Despite the reduction in losses, the company continues to face financial headwinds, with total equity at year-end showing a deficit of $63.6 million, compared to a deficit of $46.3 million in 2023.

Revenue Performance
NTT New Zealand's total revenue for 2024 amounted to $116.2 million, a decline from the $125.2 million recorded in 2023. The revenue is derived from three main sources: product sales, platforms and managed services, and consulting and technical services.

Revenue from product sales saw a decline from $38.2 million in 2023 to $31.6 million in 2024. Platforms and managed services, which form the core of NTT New Zealand's offerings, remained stable at $69.9 million, slightly up from $69.7 million in the previous year. Meanwhile, consulting and technical services generated $14.7 million in revenue, down from $17.3 million in 2023.

Despite the drop in overall revenue, the company's efforts to stabilise its core business lines appear to have borne some fruit, particularly in managed services, which remains the company's most significant revenue generator. However, the lower product sales and consulting revenues reflect broader market challenges or shifts in customer demand.

Operating Costs and Expenses
The company's cost of sales fell to $71.3 million, down from $80.5 million in the previous year, aligning with the reduced revenue. However, NTT New Zealand continues to face substantial operating expenses, with total operating costs of $133.8 million, only slightly lower than the $138 million incurred in 2023.

Employee benefits remain a significant component of the company's expenses, rising to $37.8 million from $34.7 million in the previous year. The increase in employee costs could be attributed to market conditions or efforts to retain and attract talent in a competitive industry. Additionally, the company's interest expenses jumped considerably, from $3.5 million in 2023 to $6.9 million in 2024, adding pressure to the bottom line.

Depreciation expenses for right-of-use assets also increased from $3 million to $4.3 million, reflecting NTT New Zealand's ongoing investments in leased assets, such as properties and IT equipment. The company did not record any impairment of goodwill this year, unlike in 2023 when a significant goodwill impairment of $24.4 million was posted.

Financial Position and Liabilities
NTT New Zealand's balance sheet paints a picture of a company grappling with liabilities that exceed its assets. Total liabilities for the year stood at $120.4 million, up from $107 million in 2023, while total assets amounted to $56.7 million, slightly lower than the $60.7 million reported in the previous year.

A key challenge for the company remains its borrowings and lease liabilities. NTT New Zealand reported an overdraft of $77.1 million, a sharp rise from the previous year's $60.5 million. Lease liabilities, both current and non-current, also rose, amounting to $18.1 million compared to $15.3 million in 2023. These figures underline the financial strain the company is under, as it continues to fund its operations through debt and leases.

The company's net liabilities stood at $63.6 million at year-end, further deepening from $46.3 million the previous year. Contributed equity remained unchanged at $120 million, but accumulated losses have now reached $183.6 million, up from $166.3 million in 2023.

Cash Flow and Financing
Cash flow from operating activities remained negative, with a net outflow of $11.6 million, though this was an improvement from the $14.6 million outflow reported in 2023. Cash receipts from customers totalled $169.1 million, while cash paid to suppliers and employees reached $174.1 million. The company's interest payments further weighed on its cash flow, as it shelled out $6.9 million in interest expenses.

NTT New Zealand also saw a minor net outflow in its investing activities, amounting to $67,000, primarily due to the purchase of property, plant, and equipment. Meanwhile, the company's financing activities, largely influenced by related party loans and lease payments, resulted in a net outflow of $4.9 million.

Outlook
The directors of NTT New Zealand believe the going concern basis of preparation is appropriate for the company's financial statements, supported by the ongoing commitment of its parent company, NTT Asia Pacific Pte Ltd. The parent entity has pledged continued support through an overdraft facility to ensure the company can meet its financial obligations in the coming year.

While NTT New Zealand has made strides in reducing its losses from the previous year, significant challenges remain, particularly in managing its rising interest costs and accumulated liabilities. The company's ability to stabilise and grow its revenue streams, alongside effective cost management, will be critical as it navigates the next financial year.