Ericsson Nikola Tesla Business results for 2014 in public

The business results achieved in 2014 and the forecast for 2015 were published at the press conference.

Gordana Kovačević, the President of Ericsson Nikola Tesla commented on the Company’s performance:

„Ericsson Nikola Tesla business results in 2014 show a continuous stable business performance. Sales revenues decreased by 2% year-over-year. Ericsson market records a significant increase in sales revenues, while the revenues are stable in the domestic market, thus neutralizing the revenue decrease in CIS and Southeast Europe markets. We have maintained our position among the Croatian leading exporters, especially when it comes to the export of knowledge/services.

A significant part of our activities relates to research &development and professional services in Ericsson market. This business segment records a continuous growth, and accounts for 48% of sales revenues. In 2014, our Research and Development Center was evaluated as one of the best and most reliable research centers within the Ericsson Group. The evaluation of the collaboration and achieved results represents an excellent foundation for further partnership, increased responsibility and sales growth. I would like to highlight that during 2014 we employed 174 new professionals, primarily in this segment.
In the domestic market, a stable sales trend was achieved, despite an unfavorable economic situation. The operators' capital expenditure was directed towards core network modernization and optimization, 3G and 4G radio access network expansion, fixed access network modernization, as well as investments in additional radio spectrum. The operators' focus on increased efficiency in running the business indicates a trend towards outsourcing of construction and maintenance of telecommunications infrastructure (managed services). 

As one of main activities in 2014, I would like to highlight the successfully finished negotiations with Hrvatski Telekom (HT) on collaboration in managed services segment.  Ericsson Nikola Tesla Servisi d.o.o. (EHR), a newly founded Ericsson Nikola Tesla daughter company, provides maintenance of HT fixed and mobile network, within a five year contract. With 638 employees transferred from HT into the newly established company Ericsson Nikola Tesla Group now employs around 2,500 employees.

During 2014, a successful collaboration with strategic partner Vipnet continued, primarily in the segment of mobile telecom network expansion and modernization, including the mobile networks fourth generation (LTE). Vipnet and Ericsson Nikola Tesla are the winners of the Global Telecom Business Innovation Award 2014 for introducing PSI coverage energy efficient solution in the radio access network segment.
I would also like to highlight a successful realization of the project One Stop Shop for Joint Information System of Land Registry and Cadaster, as well as the project realization for the Agency for Medicinal Products and Medical Devices of Croatia. Both projects were financed by the European Union IPA programs. The service ePrescription, which we implemented in the health care system, is the winner of the “ICERIAS Customers' Friend“ recognition, and thus this service also positioned Croatia among the best countries in Europe, according to the “European Health Consumer Index“ for 2014. 

Despite unfavorable economic and political developments in our major export markets, we have managed to use new business opportunities. I would like to highlight the continuous quality collaboration with the customers in the Bosnia and Herzegovina market in the segment of providing support service and upgrades of mobile and fixed networks, and in Belarus with our long time customer Velcom. 

Net profit amounting to MHRK 87.4 was achieved, representing a 6.6% return on sales. The gross margin is lower year-over-year, as a result of changes in business mix and continuous price pressure. The selling and administrative expenses were decreased year-over-year. We had clear business and financial goals, focused on improvements of working capital, cash conversion and risk management. Pursuant to that, we finalized the year with a solid balance sheet, and equity ratio of 48%. A strong cash flow from operating activities was also realized, amounting to MHRK 176, so that, despite an extraordinary dividend paid in 2014, cash assets, including short term financial assets, amount to MHRK 231. 

In line with our strategic plan, we stay focused on strengthening our position/ sales in new and targeted areas:  IP networks, Cloud, TV and media, Industry & Society and OSS (Operations Support System) and BSS (Business Support System). We have started several strategic initiatives for 2015, focused on business development in all markets and improvement of profitability thorough cost efficiency and business excellence.

Our solid balance sheet enables us to continue to implement our strategy and quality returns to our shareholders. The Supervisory Board of Ericsson Nikola Tesla approved the Managing Director's proposal to propose to the Annual General Meeting of Shareholders ordinary dividend payout in the amount of 20 HRK per share and extraordinary dividend to the amount of 70 HRK per share. “

Communications Ericsson Nikola Tesla