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ASSESSMENT OF JAPANESE NTT DATA


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Integral service around a transaction
BY : Diego GutiérrezDecember Fri, 2019

Earlier this month, NTT Data announced the acquisition of Flux7, an IT company that seeks to streamline and optimise business operations through a cloud-based technology solution.

Amazon Web Services partner Flux7 will assist the Japanese company in its expansion and growth of cloud migration services to its customers.

GETTING TO KNOW NTT DATA

NTT Data Corporation is a global Japanese technology services company..

Its history goes back to 1967, when the rise of telecommunications led to the creation of the DATA Communications Bureau by NTT (The Nippon Telegraph and Telephone Public Corporation).

Since that time, he has led the telecommunications industry to success in numerous large-scale projects, using one of the most innovative technologies of the day.

By spinning off from NTT a decade later, it managed to become Japan's largest telecommunications company.

With the aim of providing a valuable service to its customers, it gradually adopted technology in its operations and came to regard itself as an IT company.

This path led it to pioneer the introduction of numerous technologies.

These are now facilitating the daily lives of citizens and improving security in Japan.

These are some of them, such as the so-called Smart cardsor online shopping centres.

Today, in order to adapt to the ever-changing world we live in and the ever-increasing presence of technology, it has taken the necessary steps to become an innovative global IT company.

In this way, NTT Data's transition from a focus on IT for Japan can be seen: developing a long-term strategy towards major global markets such as North America, Europe or Asia-Pacific.

DIFFERENT SEGMENTS

The company's structure is divided into three distinct segments:

  • Public & Social Infrastructureprovides high value-added IT services to the public and healthcare sectors.

It does so through the digitisation of government services or the use of big data in a cross-cutting manner.

  • FinancialJapan is experiencing a peculiar financial situation of negative interest rates, heavy regulation and other political tensions.

It is therefore vital for the financial sector to expand into new markets and optimise its operations, where NTT Data offers its services.

  • Enterprise & SolutionsThe company is focused on business operations such as manufacturing, distribution or payment platforms, and offers technological solutions that apply to these fields.

With a customer-driven business model, teamwork and vision NTT Data has been able to establish good long-term relationships with its customers.

So much so, in fact, that it has achieved the status of the world's fifth largest technology services management company.

THE PURCHASE OF FLUX7

Recently, it announced the procurement from Flux7.

It is a IT services providerThe company's IT implementation and the migration and modernisation of cloud-native platforms enables the optimisation of processes.

Primarily, as premier consulting partner from Amazon Web Servicesoffers cloud implementation, migration, automation and DevOps services for customers in sectors such as finance, pharmaceuticals and retail.

This operation is in line with the strategy NTT Data has followed in recent years.

It uses the mergers and acquisitions to grow and increase its turnover abroad.

This trend is expected to continue in the future and will allow the incorporation of companies in those regions where NTT Data has the greatest interest, as well as the best fit with the services it offers.

With this in mind, there is no doubt that Flux7 fits perfectly with this vision.

It strengthens the services that NTT Data offers in the field of AWS, DevOps y Agile DevelopmentThe company is acquiring a company with a recognised brand and a large customer base in the United States.

ASSESSMENT OF NTT DATA

Now, we examine and we value from the point of view of the corporate finance NTT Data's financial statements.

FINANCIAL ANALYSIS

ASSESSMENT OF JAPANESE NTT DATA

ASSESSMENT OF JAPANESE NTT DATA

NTT Data's sales are growing at a pretty good pace, especially considering that this has been the case for 30 years since the company was founded.

The increase in recent years is mainly due to the robust and sustained increase in turnover in Japan.

It is also expanding into other international markets, such as North America.

As is evident, expenses grew due to the larger scale of the business, however, they did not keep pace with sales.

This has allowed the Japanese company to maintain its good margins and even improve them.

Capex declined due to a decrease in investment in the segments Financial y Enterprise & SolutionsDepreciation and amortisation were kept at constant levels.

All this explains the increase in EBITDA in recent years.

BALANCE

This is reflected in the increase in ROE, which has grown strongly in the last year thanks to the increase in operating profit and net profit.

On the balance sheet, there was a notable increase in current assets, mainly due to cash and accounts receivable, in line with the increase in sales.

The increase in total assets comes mainly from goodwill generated on acquisitions, financial assets and R&D intangible assets.

Similarly, liabilities increased relative to sales, which is not a cause for concern.

Equity, on the other hand, also increased thanks to the reserves obtained from the good results in previous years.

As can be seen, NTT Data shows a strong financial position and is expected to continue to grow in the coming years.

NEW OPPORTUNITIES

The strategic direction of expansion into other geographic areas, moving away from their focus on Japan in recent years, will allow them to gain new customers, improve margins and explore new avenues of business.

Acquisitions in these markets will undoubtedly help this expansion process by facilitating and accelerating it.

They will, of course, be supported by their good financial health as well as their good future prospects.

In addition, the environment we are in is conducive to NTT Data's business model.

Companies are increasingly demanding this type of services in today's globalised, competitive and changing world.

NTT Data appears to be well positioned to continue to grow and take advantage of market opportunities that may arise.

It has been doing so in recent years.

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