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Business results of Ericsson Nikola Tesla Group in Q1 2016
Categories: Business Results
Gordana Kovačević, the President of Ericsson Nikola Tesla, comments: „Business results in Q1 2016 show a continuation of stable business performance. Sales revenues grew by 7% year-over-year. We continue to register a significant growth of revenue in the Ericsson market due to expansion of business activities and taking over of new responsibilities, thus neutralizing the revenue decrease in other markets. Revenue from research & development activities and sale of services in the Ericsson market, including Managed Services, account for 64.2% of total revenue. In Q1, we continued hiring and at Ericsson Nikola Tesla Group level employed 53 experts to work on projects that are relevant to the realization of the Networked Society strategy.
Unfavorable economic trends in the local and foreign markets, delays and a cautious approach of our customers when it comes to capital expenditures, continue to significantly burden our business. These are precisely the reasons why we recorded a decrease in sales revenue in the markets of Southeast Europe and in the local market. Fierce competition, consolidation & centralized procurement of our global customers/operators, present additional challenges to our business.
Despite a demanding business environment, new opportunities have emerged in the operator segment and in the e-health segment in the market of the Commonwealth of Independent States (CIS). I would like to point out that we have contracted new business related to LTE network construction with our customer the Moldavian operator Interdnestrcom (IDC) and with a new customer, the Armenian operator Ucom. The implementation of the national eHealth system in Armenia was successfully completed during the first quarter.
Almost all the Key Financial Performance Indicators show positive movements in Q1 2016. Operating profit increased by 20.6% year-over-year to MHRK 29.2, while net profit grew by 12.3% to MHRK 28.2. Gross margin is slightly lower year-over-year due to business mix changes. Our continuous focus on cost efficiency has brought solid cost savings. Sales and administrative costs decreased by 10.9% year-over-year, thus ensuring a solid operating profit growth. Cash and cash equivalents, including short term financial assets amount to MHRK 250.2. The working capital efficiency, measured by the performance indicator Working Capital Days (WCD) is 31 days. In line with expectations, a negative cash flow from operations was recorded amounting to MHRK 25.3, mainly due to variable compensation payment to employees and decreased inflows from customers. Given its quarterly volatility, the cash flow should be viewed on a full-year basis. We expect to return to a positive cash conversion rate in the coming quarters.
The company continues its partner collaboration with universities and scientific institutions through joint projects, including EU co-funded projects. In Q1, two of the EU co-funded projects from the Operational Program “Regional Competitiveness 2007-2013” within the call RC.2.2.08 “Capacity Building for Research, Development and Innovation” were completed. Both projects, with the combined value of almost MHRK 11 had 16 months duration during which participants demonstrated that the efficient collaboration of the scientific research community and business gives creative and useful results.
In line with our strategy, we are focused on increasing sales revenue in our core business (radio access, core and transport networks and telecom services) and in targeted growth areas (IP networks, Cloud, TV & Media, OSS and BSS and Industry & Society – healthcare, public safety, transport, utilities). At the recently held Mobile World Congress (MWC) in Barcelona, Ericsson presented new solutions that drive digital transformation in the Networked Society thus demonstrating its technology leadership in 5G and the Internet of Things (IoT). It should be noted that, once again, our experts significantly contributed to the presented solutions. We are particularly pleased that presentations in Barcelona included our HDS 8000, Hyper-scale Datacenter System, the state-of-the-art scalable system for data centers based in the cloud that was developed, integrated and tested in our Research & Development Centre located in Zagreb and Split. Furthermore, in cooperation with our partner Deutsche Telekom, the latest solution for virtualization of Customer Premises Equipment (CPE) that enables advanced services in the cloud and completely new business models was showcased.
Accelerated technological changes and end-user needs require continued transformation and adaptation both for us and our customers. These processes are further intensified by the introduction of 5G, Internet of Things and Cloud technologies that are drivers of the new phase of industrial development. Ericsson announced a series of organizational and structural changes aimed at securing a more efficient Networked Strategy implementation and business and profitability growth. Our company, as a part of the global Ericsson, will continue the implementation of transformation processes to respond to needs of diverse business and market segments, secure further business development and remain competitive.”
Communications Ericsson Nikola Tesla
Despite a demanding business environment, new opportunities have emerged in the operator segment and in the e-health segment in the market of the Commonwealth of Independent States (CIS). I would like to point out that we have contracted new business related to LTE network construction with our customer the Moldavian operator Interdnestrcom (IDC) and with a new customer, the Armenian operator Ucom. The implementation of the national eHealth system in Armenia was successfully completed during the first quarter.
Almost all the Key Financial Performance Indicators show positive movements in Q1 2016. Operating profit increased by 20.6% year-over-year to MHRK 29.2, while net profit grew by 12.3% to MHRK 28.2. Gross margin is slightly lower year-over-year due to business mix changes. Our continuous focus on cost efficiency has brought solid cost savings. Sales and administrative costs decreased by 10.9% year-over-year, thus ensuring a solid operating profit growth. Cash and cash equivalents, including short term financial assets amount to MHRK 250.2. The working capital efficiency, measured by the performance indicator Working Capital Days (WCD) is 31 days. In line with expectations, a negative cash flow from operations was recorded amounting to MHRK 25.3, mainly due to variable compensation payment to employees and decreased inflows from customers. Given its quarterly volatility, the cash flow should be viewed on a full-year basis. We expect to return to a positive cash conversion rate in the coming quarters.
The company continues its partner collaboration with universities and scientific institutions through joint projects, including EU co-funded projects. In Q1, two of the EU co-funded projects from the Operational Program “Regional Competitiveness 2007-2013” within the call RC.2.2.08 “Capacity Building for Research, Development and Innovation” were completed. Both projects, with the combined value of almost MHRK 11 had 16 months duration during which participants demonstrated that the efficient collaboration of the scientific research community and business gives creative and useful results.
In line with our strategy, we are focused on increasing sales revenue in our core business (radio access, core and transport networks and telecom services) and in targeted growth areas (IP networks, Cloud, TV & Media, OSS and BSS and Industry & Society – healthcare, public safety, transport, utilities). At the recently held Mobile World Congress (MWC) in Barcelona, Ericsson presented new solutions that drive digital transformation in the Networked Society thus demonstrating its technology leadership in 5G and the Internet of Things (IoT). It should be noted that, once again, our experts significantly contributed to the presented solutions. We are particularly pleased that presentations in Barcelona included our HDS 8000, Hyper-scale Datacenter System, the state-of-the-art scalable system for data centers based in the cloud that was developed, integrated and tested in our Research & Development Centre located in Zagreb and Split. Furthermore, in cooperation with our partner Deutsche Telekom, the latest solution for virtualization of Customer Premises Equipment (CPE) that enables advanced services in the cloud and completely new business models was showcased.
Accelerated technological changes and end-user needs require continued transformation and adaptation both for us and our customers. These processes are further intensified by the introduction of 5G, Internet of Things and Cloud technologies that are drivers of the new phase of industrial development. Ericsson announced a series of organizational and structural changes aimed at securing a more efficient Networked Strategy implementation and business and profitability growth. Our company, as a part of the global Ericsson, will continue the implementation of transformation processes to respond to needs of diverse business and market segments, secure further business development and remain competitive.”
Communications Ericsson Nikola Tesla
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