Stable results, growth of revenue and total export
- Sales revenue amounts to MHRK 2,242; up by 1.7% year-over-year
- The share of export in the total revenue is 56.7%, which confirms the company’s leading position in the ranking of Croatian exporters.
- Operating profit amounts to MHRK 128.5, down by 31.1% year-over-year, however, if we exclude the one-off impact of the termination of eHealth contract in Belarus, operating profit decreased by 15% and amounts to MHRK 158.4.
Ericsson Nikola Tesla Group successfully navigated many challenges caused by unstable geopolitical and economic situation and, despite the turbulent business environment, achieved solid business results in 2022.
“In 2022, Ericsson Nikola Tesla Group achieved a stable business performance with sales revenue of more than 2.24 billion HRK, 1.7% more compared to the record 2021. The share of export in the total revenue remained at a high level of 56.7%, which confirms the company’s leading position in the ranking of Croatian exporters. In line with our strategic directions, we have focused on excellence in the realization of many projects for customers in the domestic and export markets. By finding new business opportunities, we have tried to offset the negative impact of sanctions imposed on Belarus on our business performance. We had a strong focus on monitoring and mitigating the impacts of many risks, primarily the effect of inflation that manifested in the increase of prices of materials and raw materials, significant growth of energy prices and increase of labor costs.” stated Gordana Kovačević, president of Ericsson Nikola Tesla, and continued: “The domestic market was marked by the continuation of investments of the leading operators, Hrvatski Telekom and A1 Hrvatska, in the build of fiber and 5G network, in which we support them as the long-term reliable partner. However, due to the increase of electricity prices and inflation, the operators have optimized their investment dynamic in certain business segments, which had an impact on our sales revenue. In Digital Society segment, we have signed several contracts aimed at further digital transformation of public services, which partially offset lower revenues in the operator segment. We worked intensely on projects in e-Health, e-Business, public security, transport and on innovative solutions for Industry 4.0, which resulted in cooperation agreements with the Ministry of Justice and Public Administration of the Republic of Croatia, Ministry of Culture and Media of the Republic of Croatia, Croatian Institute for Public Health, State Geodetic Administration, Ministry of the Interior of the Republic of Croatia, City of Split, etc.
In the neighboring markets, we have continued a quality cooperation with the operators HT Mostar, Crnogorski Telekom and Ipko Kosovo. I would like to highlight a contract that was signed at the end of 2022 with a new customer Telekom Kosova, with which we started the cooperation related to the modernization of core and radio network. This partnership strengthens our position in the Kosovo market, where we have been present for many years, and since 2013 we have an office in Priština, which we plan to expand.
As the consequence of the imposition of EU sanctions on Belarus, we had to terminate the contract for the project of implementation of eHealth of the Republic of Belarus and to stop all new sales activities in this market. We have continued to perform the contractual obligations from the contracts in the operator segment that had been signed before the sanctions, strictly adhering to the decisions of sanctions that were introduced by EU institutions. In accordance with the new situation, we have completely restructured our office in Belarus.
A significant part of our business refers to services to Ericsson through activities of our research and development center and other expert centers. This business segment has been recording a continuous growth and accounted for almost 46% of the sales revenue. By working on products and projects that secure Ericsson's technology leadership, our Research and Development Center (R&D) has positioned itself as one of the top-rated centers within the global corporation. We would like to highlight the contribution of our experts in the development of new features in 5G, as well as taking over new responsibilities in Cloud. Our experts in other expert centers for solutions and services also record excellent results on many projects worldwide and significantly contribute to the company's results.” said Gordana Kovačević.
In regard to key performance indicators, sales revenue increased by 1.7% year-over-year, primarily owing to sales growth in services to Ericsson, as well as Digital Society in the domestic market. Gross margin decreased to 8.2%, as a result of sanctions in Belarus, but also due to business mix, increase in labor costs, increase of the prices of services as well as energy, raw materials and materials. Operating profit decreased by 31.1% to MHRK 128.5. If we exclude the one-off impact of the termination of eHealth contract in Belarus, gross margin was 9.7% compared to 11.5% in 2021, while the operating profit decreased by 15% to MHRK 158.4. Cash flow from operating activities was MHRK 187.0, which is better than planned, considering the market environment. We concluded the year with a solid balance sheet, with equity ratio of 34.7%. Cash and cash equivalents, including the short-term financial assets at the end of the year amounted to MHRK 557.5 (44.4% of the total assets), while at the end 2021, they amounted to MHRK 510.5 (42.4% of the total assets).
Ericsson Nikola Tesla is the largest software design center in Croatia and beyond. Out of more than 3,500 employees of Ericsson Nikola Tesla Group, more than 1,800 experts work on software design in our R&D Center and other expert centers. In 2022, we hired more than 350 experts who, with quality mentoring, quickly become involved in the company's business processes.
In her closing remarks on the results for 2022, Gordana Kovačević highlighted: “Considering that business challenges that marked 2022, such as high inflation, geopolitical conflicts, and macroeconomic uncertainty, are also impacting business operations this year, our strong focus remains on risk management, profitability and cash flow, and corporate social responsibility.
In 2023, we expect the trend of growing demand for ICT solutions to continue, which opens new opportunities for our company on the market. Therefore, we continue to implement our strategy, with an emphasis on investing in research, development and implementation of modern ICT solutions, the development of employees' knowledge and skills, and our own digital transformation. By hiring and retaining talented experts and investing in people, we will be able to respond to market demands and secure the long-term sustainability of business.
We are also committed to further strengthen the company’s culture based on integrity, ethics and compliance, and we are certain that with the highest standards in the area of compliance, we secure additional competitive advantage and sustainability.
Our long-term strategic positioning in ICT technologies, innovative solutions, strong leadership and employees’ competences provide an excellent position for further growth and success of the company and create additional value for our stakeholders.”