Business results of Ericsson Nikola Tesla Group in Q1 2017

Business results of Ericsson Nikola Tesla Group in Q1 2017Gordana Kovačević, President of Ericsson Nikola Tesla, comments: “In Q1 2017, sales revenue of Ericsson Nikola Tesla Groups increased by 9% year-over-year due to continuous revenue growth in services for Ericsson and a significant growth in revenue in the domestic market. This neutralized the decline in revenue in CIS markets and the markets of South East Europe. We have kept the position of the largest Croatian ICT exporter and the largest exporter of knowledge. In line with our expectations, Ericsson market records a positive trend, primarily due to expanding responsibilities as well as competences of our experts in new technological areas.”

Gross profit increased by 9.3%, while operating profit equals the profit level realized in Q1 2016. Profit before tax decreased by 8.4% year-over-year to MHRK 26.2 due to negative currency deviations. Although operating profit is at the same level as in Q1 2016 amounting to MHRK 29.2, net profit declined by 29.4 to MHRK 19.9. Unfavorable current legislation regarding R&D incentives, i.e. the absence of tax incentives, has directly impacted the decrease in net profit.
 
The end of Q1 was concluded with a lean balance sheet and equity ratio of 41.2 percent. Working capital efficiency, measured by the Working Capital Days (WCD) performance indicator further improved to 26 days. Total cash and cash equivalents, including short term financial assets, at the end of Q1 amount to MHRK 208.8. In line with expectations, a negative cash flow from operating activities was realized, mainly due to decreased inflows from customers and variable compensation payment to employees related to Company's good performance in 2016. Given the quarterly volatility, the cash flow should be observed at the annual level. We expect a return to a positive cash conversion rate in the upcoming quarters.

In the domestic market, a significant increase in sales revenue was recorded, mainly due to successful implementation of the Republic of Croatia border control system. This project, as well as our solutions for healthcare digitalization and the Joint Information System of Land Registry and Cadaster (JIS), is one of those projects that provide the platform for the wider structural reforms in Croatia. Sales growth on the domestic market neutralized the decline in sales on CIS and Southeast Europe markets. In these export markets, we continue with intense marketing and sales activities and expect new business in the upcoming period.

As part of our marketing and sales activities, the delegation of Ericsson Nikola Tesla, accompanied by numerous customers, visited Mobile World Congress 2017 (MWC) in Barcelona. I would like to highlight that also this year, our experts have contributed significantly to Ericsson solutions related to digital transformation. Their contribution was related to backbone of Ericsson’s offer aimed at datacenters for work in a cloud characterized by high scalability. Another solution that was presented was the optimization of video content within the framework of Ericsson’s cooperation with the leading Chinese video streaming service (iQIYI) and the most important telecom operator China Unicom.

Our company, as well as global Ericsson, continues with transformation processes and organizational and structural changes. By efficiently implementing transformation programs, we aim to strengthen business performance in strategic segments (4G/5G, Managed Services, OSS and BSS, Cloud solutions, Industry& Society) and on Ericsson’s internal market and continuously invest in development of knowledge and competences. We have established a model of firm compliance between innovative ideas and strategic initiatives to support business growth and improve our way of working. Strengthening profitability and cost reductions continue to be our key priorities.

It is expected that economic uncertainty and business challenges will continue throughout 2017. Therefore, continuous adjustments to technological and market conditions, responsible risk management and optimal use of all resources remains in our focus.“

Communications Ericsson Nikola Tesla