Fujitsu Limited (6702) Earnings Call Transcript & Summary

I would like to thank you for taking the time to attend the announcement of our fiscal 2019 financial results. First of all, I would like to offer my deepest condolences to the victims of the new coronavirus infection and offer our deepest sympathy to the bereaved families. I would also like to express my deepest compassion to all affected people and wish them a speedy recovery. In addition, I would also like to express my gratitude to all the medical professionals who are working hard every day on the front lines. In order to prevent the spread of COVID-19, we decided to hold our session online. We apologize for any inconvenience this may cause. Under the title of Toward the Creation of a Sustainable Society, I would like to share with you the status of our response to the new coronavirus, our newly formulated purpose, which will be significant to Fujitsu's existence, the results of our activities in fiscal 2019 and our initiatives going forward. This time, we will refrain from providing a financial forecast for this fiscal year because economic outlook is uncertain due to the outbreak. However, we will announce our fiscal 2020 earnings forecast and review our management policies at another opportunity, as appropriate. I will first report on our response to COVID-19. In responding to COVID-19, we are thinking along the following lines. Our first priority is the safety of the lives of our customers, partners, our employees and their families. While working to prevent infections and stop the spread of infections, we will focus on business continuity activities and making sure that we uphold our social responsibilities. We are working to leverage our technologies and our talent to the maximum extent in order to help maintain social functions and the business activities of our customers. As for our employees, they are working from home under the guidance of governments in their countries. I would like to discuss a few of our initiatives. In Japan, we have provided our CHORDSHIP AI chatbot to authorities in the Minato-ku district of Tokyo and other local governments so that they can respond 24/7 to inquiries from the residents on COVID-19 infections. In addition to prefectural authorities, including Miyagi Prefecture and Nagasaki Prefecture, we are providing data on public health center reports on people infected with the virus and people they have exposed to the virus. And to Nagasaki Prefecture, we are providing clinical management data from hospitals and data on health check-ups by cruise ship employees. We have also started to provide researchers with free access to one of Japan's largest data repository services for scientific and technical literature to enable them to conduct searches of scientific, technological, medical and pharmacological papers as well as informational researchers both inside and outside Japan. For the purpose of developing diagnostic kits for COVID-19 and providing information to staff on how to avoid becoming infected, more than 70 institutions, including universities, research institutes and health care institutions to date, have asked to register. In addition, we are also supporting home-based learning for elementary and junior high school students as well as supporting telecommuting deployments by providing free access to virtual desktop service. Outside of Japan, in Spain, to accommodate patients with less severe symptoms, when an outside facility was converted into a 5,000-bed hospital in 2 days, Fujitsu built the required IT infrastructure in a mere 7 hours. In the U.K., Fujitsu and Polarisqb have begun discussion of whether our jointly developed drug discovery platform using Fujitsu's Digital Annealer for dengue fever can be expanded to also cover research into COVID-19. In addition, we support activities that promote granting free access to intellectual property for the purpose of bringing an end to the COVID-19 pandemic. And Fujitsu is providing free licenses to approximately 40,000 patients. Furthermore, for institutions that are responsible for maintaining vital public infrastructure, including governmental institutions and financial institutions, Fujitsu is working to provide support, including remote support for operational continuity. I would now like to discuss the situation within Fujitsu. We have implemented a policy of working from home, including for employees outside of Japan. Fujitsu is also using online conferencing and other tools to provide remote support for customers. For employees who provide on-site maintenance and support services at customer production facilities and other locations, we are working to create the safest possible environment such as working on off-hours and observing social distancing. We have also established an internal portal for employees to share among themselves the latest information from Fujitsu as well as a platform through which employees can freely post video messages and other messages. These are shared company-wide, including outside Japan. These types of ongoing efforts will continue. This time, as we are working to respond to COVID-19 with people from various backgrounds such as the governments, customers across industries and our company's 130,000 employees in Japan and abroad, I felt that the rapid advancement of the online system and digitization is bringing about a major change in society's norm and people's way of thinking. In the past, it was assumed that people would gather in the same space and proceed with their lives and business face-to-face, but now it is becoming a standard to conduct such activities online. As more and more data are connected with people at the center, it is necessary to create a society that is safe and convenient. This is also the kind of society we are aiming to realize as a DX company. We believe that we will be able to play a major role as a company that has the perspective and the experience and understanding of various industries. We'll contribute using digital technology. For example, in drug discovery, where further speed will be required in the future, the process can be accelerated by using Digital Annealer for narrowing down compounds and by utilizing a supercomputer, applying the Fugaku technology for the structural analysis of viruses. In order to speed up the drug discovery process by utilizing Digital Annealer, we started a joint research with PeptiDream Inc. In the field of medical care, we would like to contribute to the safety of people in the medical field by combining and developing the electronical medical record system, HOPE, which has the #1 market share in Japan, with other solutions. We will provide solutions that support the prevention of infections in hospitals by reducing contact between staff and patients at medical institutions, including online medical care. We also hope to support the advancement and efficiency of medical care by using AI to improve the accuracy of diagnosis. In the government sector where digitization is an urgent issue, we would like to promote a wide range of measures for government agencies to local governments, including the offering of highly reliable clouds for government administration and smart administration solutions that improve the convenience of residents. To accelerate and support the changes in society and people's lives, we will also develop a specialized system for solutions that utilize 5G. The new company in Japan, starting in the future, will be central in promoting domestic activities. In countries outside Japan, we will identify our role and priorities in change, taking proactive measures. I will now discuss our financial results for fiscal 2019 and our ongoing efforts. Since my appointment as CEO, I have been telling that we are transforming Fujitsu from an IT company to a DX company. We are now making steady progress on transforming all aspects of Fujitsu, including our business as well as our systems and corporate culture. Thanks to the support of everyone, we will celebrate our 85th anniversary this year. Over many years, as a global company that aims to deliver value to our customers through technology, our responsibility has been to proactively contribute to transforming society for the better. Today, the world is connected in even more complex ways, and we are entering into an uncertain time of fast-pace changes. To resolve the difficult challenges facing the world today, we need to adopt new ways of thinking and acting as well as new methods. We have thought again about what kind of a company Fujitsu should become, and we have come up with a definition of Fujitsu's reason for being and our purpose. Our purpose is to build trust in all parts of society through innovation and to create a sustainable world. Fujitsu is becoming a purpose-driven company, and our purpose will be tied in an integral way to our management direction and business strategy. To achieve our purpose, we will transform ourselves, we will embrace diversity, empathize with people's issues and improve our essential technologies and capabilities. Next, with people at the center, we will generate innovation by connecting data and things and, thereby, create value for our customers and society. By taking these steps, we will build trust throughout society and contribute to achieving a sustainable world. We will place this philosophy at the heart of all our business activities. On a company-wide basis, our financial results in fiscal 2019 were revenue of JPY 3,857.7 billion, and operating profit of JPY 211.4 billion. We achieved higher revenue and profits in our core business of technology solutions with revenue of JPY 3,163.2 billion and operating profit margin of 5.9%. Surpassing our original expectation, I believe that we have made a good start to our first year in achieving our fiscal 2022 management targets. For details on our financial results, please read the overview of our financial results from our CFO, Takeshi Isobe. I will now discuss some of our major initiatives in fiscal 2019. In Japan, our service business expanded steadily in a wide range of industries, including manufacturing, distribution and public sector. In addition to this, business in Japan was strong overall, as there were some large-scale projects, mainly for public sector customers, including national government agencies and local governments. For our business outside of Japan, we are continuing to work on structural reforms to make our operations profitable. At the Augsburg factory in Germany, we are going through the necessary procedures to enable us to cease operations in September. In addition, for efficient delivery of services in Europe, we have unified our delivery system around our global delivery centers. We have also made progress on our internal transformation. To strengthen our talent management, we have implemented a job-based HR system. We have also been hiring highly skilled talent. I also want to point out some major achievements. In our system platforms unit, a prototype of the supercomputer Fugaku won first place in a ranking, demonstrating the world's highest energy-saving performance. And as planned, in January of this year, we established a new company that will drive our digital transformation business, Ridgelinez. It has started operations as of April. We have also been placing a lot of emphasis on 5G, and we'll build a customer and partner collaboration lab within our facilities to demonstrate 5G solutions. Here are 3 new formations to accelerate the DX business. As I mentioned earlier, Ridgelinez started its business in April with 250 employees. New initiatives such as a problem-solving approach to customer executives and a system of talent management different from Fujitsu will drive DX for customers and serve as a reference for Fujitsu's vision. With the threat of COVID-19 and the future uncertain, the ability to observe and analyze the international situation and technology trends across the board is becoming more important. The Fujitsu Future Studies Center was established as a new think tank to strengthen the formulation and implementation of the group's medium- to long-term strategy. A new company will be established to strengthen business rooted in the Japanese market. We have planned to start the business on July 1 but decided to postpone it in order to prioritize efforts to support customers' business continue to using ICT. We will announce the start of the organization at a later date. The new company will be in charge of the public sector, education, health care and a mid-sized consumer market. Japan is said to be an advanced country with significant social issues such as population decline, low birth rate and an aging population. We'll work to solve these issues through our business with customers. In addition to the initiatives that produced results in fiscal 2019, we will undertake the following initiatives on an ongoing basis in fiscal 2020 and beyond. To advance our business in accordance with a globally integrated strategy, we'll rebuild the strategy for our business outside Japan, including our product offerings and support organization. As a Japanese technology company, by resolving issues facing society and supporting the business activities of our customers, we will directly contribute to the advancement of Japan. To do so, we will strengthen our problem-solving capabilities. We will further accelerate our digital transformation business to become a DX company that customers select. We will be responsible for the stability of our customers' systems so that our customers can advance their businesses with confidence. We will apply digital technologies to Fujitsu to further strengthen data-driven management decision-making. Through internal enhancements and inquiring external talent, we aim to convert our human resources into a digital transformation workforce. We'll pursue continuous improvements in the way we work and our productivity. We'll pursue our own internal digital transformation with the full participation of all employees and move forward by building ecosystems in which we collaborate with innovative outside companies and individuals. As I mentioned at the beginning, we have decided not to disclose the forecast for fiscal 2020 and the progress review of the management direction in September last year because the impact of COVID-19 is still unclear. We will make announcements as soon as we can make a reasonable estimate. Although uncertainties remain in many countries, we'll remain committed to contributing to solving social issues using our technology. In fiscal 2020 and beyond, we will continue to make every effort to implement measures aimed at achieving growth. Thank you for listening to my presentation. Through innovation, we aim to build trust in society and make the world more sustainable. As the world is changing in an unstable situation due to the impact of COVID-19, we will give top priority to contributing to solving social issues as a company offering various technologies.

I will now begin the financial results announcement presentation for full year fiscal 2019. Please look at the presentation materials. For those of you who have downloaded the slides, we have entered the page number at the bottom of each slide in the middle, so please follow along with the materials as you listen. Slide 3. This is a summary of the consolidated financial results for fiscal 2019. I will break my explanation of our results into 3 parts: our results, excluding restructuring and special items; the impact of business restructuring; and one-off special items. Please look at the bolded section. At the top are our results, excluding restructuring and special items. Revenue for the period was JPY 3,857.7 billion, an increase of JPY 135.2 billion from the previous year or 3.6%, excluding the impact of foreign exchange movements. Revenues from our businesses in Japan grew significantly, centered on services and PCs. We recorded an operating profit of JPY 225.2 billion, with an operating profit margin of 5.8%. This was an increase of JPY 84.9 billion over the previous year due to both the effects of higher revenue from our businesses in Japan and continued improvements in profitability. I will give a breakdown of the changes to our operating profit with a waterfall chart a little later on. Second is the impact of business restructuring. The negative impact of no longer including certain revenues in our consolidated results was JPY 182 billion. This is due not only to the impact of the restructuring of the semiconductor sales company and the electronic components manufacturers conducted in the fourth quarter of the previous year, but also due to no longer including results from the semiconductor Mie plant and the consolidated results starting from the second half of this fiscal year. Third, we have one-off special items, which amounted to negative JPY 13.7 billion. I will now explain the positive and negative items. The positive items are the profits related to the sale of businesses totaling JPY 9.6 billion. This consisted of 3 factors. First, as part of the sale of the PC business, an earnout clause was included in the agreement, resulting in a onetime gain of JPY 5.1 billion. Second, there was a onetime gain of JPY 2.2 billion related to the sale of the Mie plant. Third, there was a onetime gain of JPY 2.3 billion on the sale of manufacturing locations we shut down last year. The negative items are business model transformation expenses totaling JPY 23.4 billion. There were 2 main factors here. First, there were expenses related to structural transformation outside Japan totaling JPY 8.2 billion. These primarily consisted of expenses relating to the restructuring of our business in North America. A portion of the expenses from the program we implemented in Europe last year extended into fiscal 2019, but there were also gains from the sales of businesses in countries we exited to local partners and others, resulting in a net amount that was slightly positive. Second, there were restructuring expenses for our manufacturing locations in Japan of JPY 15.2 billion. This consisted of JPY 10 billion in our electronic components business and JPY 5 billion in our system products business. At the bottom of the table, you will see we recorded a consolidated operating profit of JPY 211.4 billion, with an operating profit margin of 5.5%. Excluding restructuring and special items, the increase in operating profit over the previous year was JPY 81.2 billion. Please turn to Slide 5. My previous explanation was broken into 3 parts, but this page shows the usual consolidated totals for profit and loss. I would like to give a further explanation of everything showing below operating profit. Please look at the upper table, right in the middle. Financial income is JPY 17 billion, down JPY 14.4 billion from the previous year. This is primarily because of the onetime gain posted last year on the sale of the PC business. At the very bottom, our profit for the period was JPY 160 billion. Next, please turn to Slide 7. I will comment on the factors impacting operating profit in comparison with last year. On the far left, operating profit in fiscal 2018 was JPY 130.2 billion. Excluding restructuring and special items totaling negative JPY 10 billion, last year's operating profit was JPY 140.2 billion. This is our starting point, and subsequent arrows will reflect increases and decreases in operating profit in fiscal 2019 compared to the previous year. The first upward arrow is the increase in operating profit of JPY 37.5 billion, resulting from the increase in revenue of JPY 135.2 billion. Revenue from Japan, which has been strong since the fourth quarter of last fiscal year, continued to be strong for the full year, resulting in a big increase in revenue. The second upward arrow is the increase of JPY 32.4 billion from improvements in profitability. In services, in addition to greater development efficiencies in solution SI, there was also greater efficiencies in maintenance and operational support for infrastructure services in Japan. In system products and ubiquitous solutions, there were profitability improvements stemming primarily due to the lower cost for lower prices of key components. The third upward arrow is JPY 15 billion from lower expenses, which includes the negative impact of foreign exchange movements. The impact of limiting fixed expenses from the resource shift made a significant contribution. Adding the 3 together, excluding restructuring and special items, operating profit increased by JPY 84.9 billion. From Technology Solutions, our core segment, along with Other/Elimination and Corporate, the increase was roughly JPY 50 billion. The improvement in Ubiquitous Solutions was roughly JPY 30 billion. There was also a slight improvement in Device Solutions. Finally, the downward-facing arrow represents the fall in operating profit of JPY 13.7 billion due to the impact of special items in fiscal 2019. Adding that all together, the total operating profit for the period is JPY 211.4 billion. I would like to comment on the impact on our business in fiscal 2019 from the coronavirus outbreak, COVID-19. The impact on revenue was roughly negative JPY 16 billion. The impact on operating profit was roughly negative JPY 5 billion. In System Platforms, mainly in network products, there were some difficulties in procuring some components. And in Asia, there were some delivery delays stemming from logistical delays. Please turn to Slide 8. I would like to comment further on changes to our revenue, excluding restructuring and special items. Revenue in Japan rose significantly compared to last year. Revenue in Japan rose JPY 218.7 billion, an increase of 9%. Below is a breakdown of that revenue. Revenue from Technology Solutions in Japan grew by 7% over the previous year. In services, revenue growth was centered in Solutions/SI. In System Platforms, revenue from the network business rose because of the start of 5G projects, and revenue from system products also rose because of the start of shipments for the Fugaku supercomputer. Revenue from Ubiquitous Solutions increased 16% over the previous year. In addition to the increase in demand for PCs due to work style transformation, the increase in revenue was also positively impacted by the end of the support period for Windows 7. Next is Slide 9. I would like to give some further information on the status of orders in Japan. For Fujitsu Limited, on an unconsolidated basis, incoming orders for fiscal 2019 rose by 5%. Continuing from the previous years, orders were strong, and orders in every industry segment exceeded the levels of the previous year. Orders in the fourth quarter were unchanged, so we were able to maintain the high level of orders of last year's fourth quarter. Orders in March, too, were roughly unchanged from March of the previous year. For fiscal 2019 orders, we have not seen any specific impact that could be attributed to COVID-19. That said, there are many uncertainties for the new fiscal year beginning in April, and we will need to keep close eye on the progress of deals we expect to close. Next is Slide 10. I would like to comment on the business model transformation expenses as well as the effect of the business model transformation in fiscal 2018. The first point is that business model transformation expenses in fiscal 2019 were JPY 23.4 billion. The expenses were in 2 areas: the restructuring of business outside Japan and the restructuring of manufacturing locations in Japan. First, expenses outside of Japan were JPY 8.2 billion, which are primarily expenses for restructuring our business in North America. In addition to reforming our business portfolio in North America to strengthen our services business, we have decided to exit the products business and eliminate overlaps within the Fujitsu Group for our business with the retail business. Next, expenses for restructuring manufacturing locations in Japan were JPY 15.2 billion. We are restructuring our electronic components business and working to improve efficiencies in the production of system products. Decisions on the direction of the restructuring of our business in North America and system products manufacturing locations in Japan were made in fiscal 2019, and an accounting reserve was taken. The actual restructurings will take place in fiscal 2020, and we expect to see the results of these initiatives starting in fiscal 2021. The second point is that the impact in fiscal 2019 of the business model transformation expenses incurred in the previous year was a benefit of JPY 22.1 billion. I will explain the components of that benefit. First, the impact of the reduction in fixed expenses relating to the resource shift was JPY 20 billion. The breakdown by segment is shown in the table. The impact of measures such as the restructuring of a manufacturing location in Japan was JPY 2.1 billion. The business model transformation in Europe is progressing on schedule. We are working to complete each initiative such as exiting from unprofitable countries and closing the Augsburg plant in the first half of fiscal 2020. And we plan to reap the benefits stemming from the results of these initiatives after that. Continuing on the moves for the previous year in Europe. In fiscal 2019, we made the decision to implement a major restructuring of our business in North America. Going forward, we will strengthen collaboration there with our services units in Japan. That will allow us to expand services that can be applied globally so that we can expand our services business both in and outside Japan. I will now explain differences in operating profit in comparison with our forecast. This is Slide 11. First, I will explain differences compared to our latest forecast in January. Operating profit exceeded the forecast by JPY 11.4 billion, mostly from results excluding restructuring and special items. Technology Solutions, our core segment, along with Other/Elimination and Corporate, results exceeded our forecast by JPY 4 billion. In Ubiquitous Solutions, fourth quarter demand was stronger than expected, and full year results exceeded our forecast by JPY 6 billion. I will explain differences from the forecast we announced at the beginning of the fiscal year. In our forecast for operating profit, at the beginning of the fiscal year, we expected it to be roughly unchanged from fiscal 2018. And our forecast was for JPY 130 billion. We exceeded that forecast by JPY 81.4 billion. At the beginning of the fiscal year, our forecast for special items was negative JPY 15 billion. The actual result was negative JPY 13.7 billion, so it's slightly better than originally expected. Excluding restructuring and special items, actual results exceeded our forecast by JPY 80 billion. Results in Technology Solutions and Other/Elimination and Corporate exceeded our forecast by JPY 43 billion. Demand for our services business in Japan greatly exceeded our expectations. In addition, the decline in prices of components in system products as well as greater-than-anticipated progress in generating returns from our upfront investments contributed to the improvement in profitability. Results in Ubiquitous Solutions exceeded our forecast by JPY 30 billion. In PCs, the expansion in demand, our ability to maintain unit sales prices and the reduction in prices of components all exceeded the expectations reflected in our original forecast. Results in Device Solutions exceeded our forecast by JPY 7 billion. We expected demand for electronic components to be weak throughout the year, but demand in the second half of the fiscal year rebounded, exceeding our expectations. Next is Slide 13. I will now explain operating profit for each segment, primarily in comparison with the previous year's results. The first is Technology Solutions. Revenue was JPY 3,163.2 billion, an increase of 1.3% over the previous year. Operating profit was JPY 248.5 billion, up JPY 60.5 billion from the last year. I would explain the details in my discussion of the subsegments. This is Slide 14, Services. Revenue was JPY 2,671.8 billion, essentially unchanged from the prior year. Excluding the impact of foreign exchange movements, revenue increased by 1.5%. To break that down further, revenue from Solutions/SI was JPY 1,211.7 billion, an increase of 9.4% over last year. Continuing from last year, we again achieved a record level of revenue, greatly exceeding the previous record. In addition to continued growth in revenue from customers in the manufacturing and distribution sectors, revenue from customers in the public sector, which last year was strong because of major projects, exceeded last year's level as we were able to win additional orders. In addition to this, sales in the local government and health care business remained strong. So overall, revenue saw significant growth over last year. Revenue from infrastructure services was JPY 1.460 billion, down 6.2% from the previous year. While revenue in Japan remained strong, particularly in monthly fee services such as outsourcing, overall revenue fell slightly relative to the previous year because of a major deal relating to infrastructure construction in the previous year. Outside of Japan, results were severely influenced by the continued foreign exchange impact of the strong yen against the euro and the pound. Even excluding the impact of foreign exchange movements, revenue declined primarily because of weak results in North America and the impact of exiting unprofitable countries in Europe. Operating profit was JPY 197.1 billion, up JPY 23 billion from the prior year. Excluding restructuring and special items, operating profit increased by JPY 9.8 billion over the previous year. This increase was primarily in services in Japan. Outside of Japan, operating profit slightly fell, primarily in North America. In Japan, operating profit rose significantly due to the effects of higher revenue from Solutions and System Integration as well as improved profitability. In addition to an improvement in the utilization rate of system engineers due to the increase in revenue in Solutions/SI, there was an improvement in profitability in infrastructure services because of factors, including a reduction in maintenance component costs and the standardization of operations support tasks. Operating profit declined slightly outside of Japan as performance in North America continued to be weak. Business model transformation expenses for fiscal 2019 were JPY 9.3 billion, a reduction of JPY 13.2 billion in the burden compared to last year. As I mentioned earlier, we recorded business restructuring expenses for North America in fiscal 2019. Slide 15, System Platforms. Revenue was JPY 491.3 billion, up 6.8% from the prior year. To break that down further, revenue from system products was JPY 299.7 billion, up 9.6% from the previous year. In addition to an increase in mainframe-related projects, we also began delivery for the Fugaku supercomputer, so revenue rose significantly. Revenue from network products was JPY 191.6 billion, up 2.8% from the previous year. The delivery of 5G base stations began with the delivery of devices for a limited rollout of 5G services in the second quarter. In addition, there was an increase in revenue due to the deals aimed at improving optical transmission networks in advance of the expansion of 5G. Operating profit was JPY 51.4 billion, an increase of JPY 37.5 billion from the previous year. Excluding the previous year's business model transformation expenses as well as this year's restructuring and special items, operating profit increased by JPY 17.1 billion. There are 3 main factors. The first is improvements in the profitability of System Products. This improvement is due not only to improvements in our product mix such as the increase of mainframe projects, but also to cost reductions as a result of lower prices for key components. The second is the effect of increased revenue in network products. The third is continued efficiency improvements in operating expenses. Business model transformation expenses for fiscal 2019 amounted to JPY 4.4 billion, a reduction in expenses of JPY 20.3 billion compared to the previous year. Expenses for fiscal 2019 were related to the restructuring of manufacturing locations in Japan. Next is Slide 16, Ubiquitous Solutions. Revenue was JPY 547.8 billion, up 7.4% from the previous year. Revenue increased significantly due in part to demand from factors such as work style transformation as well as the impact of the end of the support period for Windows 7. In the first half, revenue increased significantly, in part due to the impact of increased purchases prior to the increase in the consumption tax in Japan in October 2019. So we expected that revenue would fall significantly compared to the previous year in the second half, but even the total for the second half exceeded that of the previous year. The segment recorded an operating profit of JPY 31.1 billion, representing an improvement of JPY 51.6 billion from the prior year. Excluding the impact of business model transformation expenses recorded last year and other special items, operating profit increased by JPY 31.2 billion. In addition to the effect of higher revenue, operating profit increased significantly due to improved profitability. As strong demand continued, we were able to maintain sales prices. In addition, on the cost front, we were also able to enjoy significant reductions in costs due to lower prices on key components such as memory. Slide 17, Device Solutions. Revenue was JPY 317 billion. This is a significant decline from the previous year due to the impact of business restructuring. In addition to the impact of the restructuring that occurred in last year's fourth quarter, revenue declined by JPY 175 billion, because starting from the third quarter, results from the Mie plant are no longer consolidated. Excluding that, revenue increased slightly from the previous year due to an increase in demand for electronic components. The segment posted an operating loss of JPY 3.4 billion, a deterioration of JPY 7.9 billion in the previous year. Excluding restructuring and special items, operating profit improved by JPY 3.2 billion, primarily in electronic components. Business model transformation expenses for fiscal 2019 amounted to JPY 10 billion, an increase in expenses of JPY 9.4 billion from the previous year. The operating loss from the exclusion of profits from the consolidated total due to business restructuring was JPY 1.7 billion. Continuing from the previous year's sale of a semiconductor sales company, we completed the sale of the Mie plant in the third quarter of this year, which means that the reorganization of our LSI business has more or less been completed. Slide 18. This is Other/Elimination and Corporate. In this segment, we record upfront investments that are shared company-wide and shared company-wide expenses that cannot be allocated to other segments. Excluding restructuring and special items, the results for this year, as shown at the top, were an operating loss of JPY 74.4 billion, which represents an improvement of JPY 23.5 billion from the previous year. In addition to the effect of lower fixed expenses because of the resource shift, we made progress in reducing indirect overhead costs. Some of our upfront investment projects have also shifted out of the investment phase into the revenue-generating phase while we continue to strengthen profitability management on a project-by-project basis. Below that, you can see one-off special items. In fiscal 2019, we recorded a onetime gain relating to business transfers. Last year's special items consisted largely of onetime profits relating to the revision to the retirement benefit plan and expenses related to the resource shift. Slide 19. This information, combining our results for Technology Solutions and Other/Elimination and Corporate, excluding restructuring and special items, is included for your reference. For fiscal 2019, our operating profit, excluding restructuring and special items, was JPY 187.8 billion. Our operating profit margin was 5.9%, an improvement of 1.5 percentage points from the previous year's 4.4%. We are continuing to work on improving profitability to achieve an operating profit margin of 10%. Slide 20. This slide explains our cash flows. Cash flows from operating activities were JPY 347.2 billion, a net increase in inflows of JPY 247.8 billion from the previous year. In addition to increased profits, excluding restructuring and special items, the level of revenue in the fourth quarter of last year was extremely high. So a collection of those accounts receivable continued this fiscal year in addition to continuing high levels of revenue from the first through the third quarters of fiscal 2019 as well, resulting in an increase in cash inflows from the previous year. Cash flows from investing activities were a net outflow of JPY 114.2 billion, an increase in outflows of JPY 118.3 billion. The major one-off fluctuations were from the sale of businesses and the sale of shareholdings. The previous year saw inflows of about JPY 115 billion while fiscal 2019 saw inflows of about JPY 60 billion. So there was a fall in inflows of JPY 55 billion from the previous year. Free cash flow was JPY 233 billion. As this includes the onetime inflows of JPY 60 billion from investing activities, as mentioned earlier, free cash flow from our business, excluding restructuring and special items, was JPY 170 billion. Slide 21. This is the balance of assets, liabilities and equity. At the end of fiscal 2019, total equity was JPY 1,348.4 billion, an increase of JPY 94.8 billion from the end of last fiscal year. The main reasons for the increase are the increase in profits this fiscal year and fluctuations in the payment of dividends. Equity attributable to owners of the parent ratio, shareholders' equity ratio, was 38.9%. ROE was 13.5%. We aim to ensure financial health suitable for a company supporting the infrastructure of society. And for the last few years, we have worked to make structural improvements. In addition to steadily increasing profits for each period, we have worked to reduce the impact of market movements, pursuing efforts, including changing our retirement benefit structure and selling shareholdings and have been able to achieve a significant improvement in our financial health. Slide 22. I would like to discuss 2 points about the state of shareholder returns. The first point is the dividend for fiscal 2019. As previously announced, the year-end dividend will be JPY 100 per share. Combined with the interim dividend of JPY 80 per share, this results in an annual dividend of JPY 180 per share, an increase of JPY 30 per share over the previous year. Over the past 5 years, we have been able to steadily increase our dividends. Slide 23. The second point is stock buybacks. In January, we comprehensively reviewed specific factors, including the improvement in our financial position and the increase in capital efficiency, and we decided that we would set aside JPY 50 billion for stock buybacks over the course of the next year. Of those buybacks, JPY 30 billion in buybacks were executed during fiscal 2019. Slide 24. This is a summary of the fiscal 2019 results that I have explained so far. First, growth in profits. Although we are still focused on sales in Japan, we were able to significantly improve profitability by steadily increasing sales in our core business and concentrating management resources on technology solutions. We also built a sound financial base in terms of cash and balance sheet. We are steadily strengthening our ability to respond to changes in the business environment. Finally, based on the growth of business and profits, we steadily expanded returns to shareholders. The main points are these 3 points. Slide 25. As mentioned in the CEO's comment at the outset, we have decided not to release our earnings forecast for fiscal 2020 at this point because the impact of COVID-19 on our business is unclear. We will announce the results as soon as a reasonable calculation becomes possible after ascertaining the impact on our future earnings. The same applies to capital allocation policies and dividend forecasts. Although we will not disclose our dividend forecast, we will continue to improve capital efficiency to ensure stable dividends that are not affected by short-term business performance fluctuations. Although there are risks that cannot be foreseen, we will continue to strive for sustainable business growth in fiscal 2020 while maintaining sound business operations based on a strong financial foundation. This concludes today's presentation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]