Business results of Ericsson Nikola Tesla Group in Q1 2018

Gordana Kovačević, the President of Ericsson Nikola Tesla comments: “In Q1 2018, Ericsson Nikola Tesla Group sales revenue amounted to MHRK 341, down by 5.4% year-over-year. In line with expectations, there was a continuous revenue growth from services to Ericsson, primarily driven by expansion of responsibilities in our R&D center and other competence centers. We hired 73 new experts in Q1, and thus at the end of Q1 Ericsson Nikola Tesla Group had 3,088 employees.”

At the event “Focused on the future”, we made public our gaining of new responsibilities in the development of the fifth-generation of mobile communications (5G), which will result in the expansion of our R&D activities in Osijek along with the existing locations in Zagreb and Split. This is an investment that will enable hiring of a substantial number of experts, and activities at a new location, with all their positive influence, will contribute to the economic and technological development of Slavonia. With its 1,300 employees, the company’s R&D center represents the largest R&D center in Croatia that already creates advanced solutions for customers worldwide. New activities will additionally strengthen our position in Ericsson and other markets. The “Focused on the future” event also featured the first live demonstration of 5G technology in Croatia. It is the development of new solutions, products and services based on 5G technology that will enable new business models to our partners, operators and other industries and at the same time create opportunities for new job openings. By entering a new technology cycle, the company will need to make additional significant investments.

Despite lower sales revenue on domestic market, in Q1 we signed several strategic contracts, which has strengthened our market position and created prerequisites for better positioning in the future periods. With Hrvatski Telekom, we signed a contract for further mobile network modernization using the latest Ericsson mobile networks solutions. We continued to cooperate with Vipnet on the implementation of a multi-year framework agreement that includes the modernization and extension of the radio access network. With the Ministry of Healthcare of the Republic of Croatia, we signed a contract related to a number of solutions which will enable a more efficient management of the healthcare system.

In the export markets, slow economic development and regulatory environment affected the level and dynamics of operators’ investments. Marketing and sales activities are ongoing on several projects in the telecom segment, as well as in the Industry & Society segment.

Almost all key performance indicators show a positive trend compared to Q1 2017. Our continued focus on operational excellence improvements enabled cost savings, which in turn improved the margin and reduced our operational expenses.

Gross margin increased to 17.7%. Operating profit increased by 45.1% to MHRK 42.4, as a result of higher gross margin and lower sales and administrative costs. Net profit rose by 52% to MHRK 30.3. Q1 was closed with a lean balance sheet and an equity ratio of 34.7%. Working capital efficiency, expressed in Working Capital Days (WCD), was 27. A proactive collection of receivables resulted in a positive cash flow from operating activities. At the end of the quarter, total cash and cash equivalents, including short-term financial assets, amounted to MHRK 239.6.

At the Mobile World Congress (MWC) in Barcelona, Ericsson presented new developments and potential for business growth enabled by innovations in 5G, IoT and Digital business. One of demos in the area Innovate together showed the intelligent care system for the elderly, which was developed in Ericsson Garage Croatia. This system, called “Intelligent Care Assistance” can detect patterns in an elderly person’s habits based on the data collected from unobtrusive sensors by using advanced machine learning algorithms. 

The company continues to strengthen partnerships with Universities, start-ups and other scientific-research institutions by implementing joint projects, some of which are funded by the EU. During Q1, the following projects were implemented: Ensuring Optimal Healthcare for People with Mental Health Problems, Development and Implementation of the IT System for the Monitoring of the General Administrative Procedure Act (ZUP), and the first phase of the project WaterQ.

The European Commission’s new study analyzed the impact of EU-Funded ICT research and development projects on active and healthy ageing. Three projects, in the development of which our company significantly contributed, were among the top 25 most influential projects in the last 11 years. These projects are: Carewell that enables multi-layer integration for patients with complex needs, eWALL that delivers innovative home environment, and UNIVERSAAL that supports an open platform for the so called Ambient Assisted Living.

In line with our strategy, we continue to strengthen our position in important areas: 4G/5G, OSS/BSS, Digital Transformation, Managed Services, and IoT through efficient implementation of transformation programs. In Ericsson internal market, our aim is to keep the existing responsibilities and expand them, while maintaining high quality of delivered services.

It is quite certain that economic uncertainty and business challenges will mark the entire year. Therefore, our strong focus remains on continuous adjustment to technological and market conditions, responsible risk management and optimal use of all resources."

Communications Ericsson Nikola Tesla