Business results of Ericsson Nikola Tesla Group for the first six months of 2021

Excellent results of Ericsson Nikola Tesla for the first six months

Gordana Kovačević, the President of Ericsson Nikola Tesla, commented:

"Ericsson Nikola Tesla Group has continued to achieve outstanding business results, despite a very challenging market environment. Compared to H1 2020, all key business indicators are growing. Sales revenue increased by 5%, recording growth in all market segments. Gross margin recorded a strong growth to 15.2% (H1 2020: 7.8%), as a result of lower transition and transformation costs, the effect of cost efficiency programs and favorable business mix. Accordingly, operating profit increased by 179.1% year-over-year to MHRK 119.3, while net profit increased by 190% to MHRK 101.4. A strong cash flow from operating activities was also realized, amounting to MHRK 141.8, and at the end of H1 2021, cash and cash equivalents, including short term financial assets amounted to MHRK 436.3.

The uncertainty caused by the COVID-19 pandemic has remained present during H1 2021, and is likely to continue to some extent. Although the emergence of new variants of the virus is causing caution, at the local and global level restrictions of movement are being eased and the global economy is slowly opening up. However, the political situation in certain markets in which we operate, such as in Belarus, continues to worsen. Most of our activities on the Belarusian market are in the operator segment. In Q4 2020, we entered in the Industry and Society segment by signing an agreement covering the implementation of the central software platform of the centralized eHealth system of Belarus, the implementation of which is ongoing as planned.

Considering the new circumstances, Ericsson Nikola Tesla Group has been continuously monitoring and estimating potential risks, with a strong focus on quality and timely delivery of contracted business deals, maintaining business continuity and collection of receivables. Our focus on risk perception and mitigation is best reflected in our business results. An important basis for overcoming risks in Ericsson Nikola Tesla Group is the process of an integrated business risk management system (Enterprise Risk Management), which has been an integral part of our management system for many years. The focus on all forms of compliance remains a continuous priority for our Group. The driving force behind our organizational culture are high ethical standards in business, ensuring that all decisions are made transparently and with integrity.

In the domestic market, at the end of May, the Croatian Network Regulatory Agency (HAKOM) launched the long-awaited public auction procedure for issuing licenses for the use of RF spectrum for the fifth generation (5G) mobile communications networks, and allocation of licenses are expected soon. With our partners HT and A1 Hrvatska, we have continued the activities on the implementation of strategic projects, in order for them to be able to offer their users real gigabit 5G network of high quality, capacity and low latency. In the ICT segment for Industry and Society, we have been working intensively on innovative solutions in the field of e-health, e-business and public safety, which strengthened our overall business results. With the State Geodetic Administration and the Ministry of Justice and Public Administration, we have signed a two-year framework agreement related to the maintenance services of the Joint Information System of Land Registry and Cadaster (JIS). We are proud of our team of experts, who developed and tested the upgrades of the CEZIH system in an extremely short time and, in cooperation with the Ministry of Health and the Ministry of the Interior and partners, integrated it into a complete solution for the EU digital COVID certificate. In this way they contributed to positioning Croatia as the first EU member that secured prerequisites, tested and implemented the system for issuing and border control of COVID certificate. Regarding export markets, I would like to highlight the contract with the operator HT Eronet, which includes the implementation of the latest technological version of the IP Multimedia Subsystem (IMS), which continues our successful long-term cooperation.

The delivery of services to Ericsson has been continuously growing, and all activities and deliveries are ongoing as planned. I would like to highlight the contribution of many of our experts, who consciously and productively work for the global organization on research and development, and other expert activities. Their contribution to Group's results has been stable and significant.

Our employees and their health have been and remain our priority. During the COVID-19 pandemic we have approached to solving many challenges strategically and responsibly, and in the moment when it was possible, we have organized the vaccination of Ericsson Nikola Tesla Group's employees at the Company's premises. A team of doctors vaccinated approximately 700 employees, and many employees have been vaccinated in the meantime in accordance with the national program of vaccination. With the desire to act timely and long-term, and take a comprehensive approach to employees’ health, the company had decided to take a step further, and launched a program PrevENTion. The program includes a series of activities aimed at preventing and improving mental and physical health and increasing the balance between private life and work.

The results achieved in the first six months, as well as a large number of important and complex projects on which we work on, as well as the knowledge, motivation and commitment of our employees, strengthen our belief in achieving the Group's targets for 2021. More than ever before, the strategic role of ICT industry for the development of society as a whole and the acceleration of reforms through digital transformation has been recognized which makes us optimistic about new business opportunities. We continue to invest in 5G and new technologies, Industry 4.0 in the field of health, land registry and cadaster, transport, agriculture, environment, smart cities, etc., the Group's digital transformation, retaining key employees and attracting new talents, as well as competence development, because only through technological leadership and with excellent and motivated experts we can create and implement modern ICT solutions that accelerate the digital transformation of the society and contribute to the economic recovery and raising the competitiveness of Croatia.”