• Orders booked 641.4 MHRK
• Sales revenue 284.7 MHRK
• Gross margin 19.1%,
• Operating profit 24.8 MHRK
• Profit before financial cost and income tax expense (EBIT) 44 MHRK
• Net profit 35.2 MHRK
• Earnings per share 26.7 HRK
• Return on sales before tax 15,5%
• Cash flow from operating activities -112.4 MHRK
  

„The key business indicators related to Ericsson Nikola Tesla’s operation during the first quarter 2007 are in line with our expectations. The company’s focus on strengthening of the partnership with our customers, offering new products and services and continuous improvements of our ways of working effectuated further growth of profitability. We concluded several valuable strategic contracts in Croatia and in our export markets, which strengthened our position as a regional ICT market leader.

 

In the dynamic contemporary business environment the changes of the business strategy are unavoidable. Ericsson Nikola Tesla has a long tradition of efficient planning and strategic leadership so that the company’s engagement in new areas of work have been planned and aligned with the corporate guidelines and values. Mobile and fixed broadband, managed services, converged networks, multimedia and IP enterprise systems came into the company’s focus as a prerequisite of our further successful operation.

 

One of good examples of our innovative approach to the market and technological changes and our positioning as a strong system integrator is the project of implementation of our solution for the Integrated Information System of Primary Health Care. This project has a special importance for the corporation and is especially pointed out in the Ericsson Social Responsibility Report. We are proud to have implemented this system in Croatia as for the company, as a global expert center for e-health in Ericsson, there are further possibilities to position ourselves in this segment in other markets as well,” pointed out Gordana Kovačević, president of Ericsson Nikola Tesla.

 

In comparison with the first quarter last year, Ericsson Nikola Tesla has performed as follows: Sales revenue is lower by 8.7% and it amounts to 284.7 MHRK, while orders booked increased by 80.9%, which is a solid platform for realizing the goals defined for the 2007. The strong growth of orders booked is based on the continued successful operation with the Belarus operator JMC Velcom, but important jobs were also contracted with customers in Croatia, Bosnia and Herzegovina, Montenegro and in internal Ericsson’s market.

 

In the home market the sales revenue increased by 10.9%, amounting to 116.2 MHRK. The traditional partnerships with Vipnet and T-HT were continued resulting in new jobs. Good results were also achieved in the enterprise segment. The successful cooperation with Tele2 was continued in relation to the building of the GSM and UMTS network.

 

Good results were achieved in Bosnia and Herzegovina and Montenegro where sales revenues grew by 43.1%, amounting to 45.5 MHRK.

 

In the markets of the Commonwealth of Independent Countries (CIS) the sales revenues amount to 31.5 MHRK which is a significant decrease in comparison to the same period last year when it amounted to 91.5 MHRK. However, a strong increase of the sales revenues in these markets is expected in the second part of the year when the effects of the Belarus and other contracts get included in the company’s business result. To continue successful operation in the CIS markets the company enhances its offer of the newest products and solutions to the existing and new customers, especially within the area of IP telephony, 3G systems, etc.

 

Additional responsibilities that Ericsson Nikola Tesla has obtained from the corporation, first and foremost within the areas of R&D and total solutions and with relation to the Global Service Delivery Center and other expert centers, created an increase in the volumes of the export to the internal Ericsson market. The sales revenues amount to 91.4 MHRK, which is an increase by 15%.

EBIT is higher by 17.9% in comparison to the 1st Q last year and amounted to 44 MHRK, which was positively affected by the foreign exchange differences. Namely, during 2007 the company realized positive exchange rate differences amounting to 1.6 MHRK while at the same time last year the negative foreign exchange differences were -8.9 MHRK. The increased EBIT was also influenced by the growth of gross margins (19.1% in comparison to 18.5% realized in 2006), which is a consequence of a more favorable product mix.

 

As far as financial activities are concerned, the interest revenues reached the last year’s levels and the depreciation of reserves for Impairment receivables (collection) has been significantly reduced. This resulted in the lower income from financial activities in comparison to the last year’s Q1.

 

The return on sales before tax (ROS) is 15.5% (2006: 11.5%). Net profit is higher by 23% than in the last year’s Q1.

 

The company’s liquidity is strong although during the first quarter quite substantial funds were invested in equipment to be implemented within the Belarus contract, which has created a negative cash flow from operating activities.

During the Q1/2007 in the home market Ericsson Nikola Tesla was quite successful. In the first place, the company put into operation the Integrated Information System of Primary Health Care. The project involves development and implementation of the solution of the Central Information Primary Health Care System, which puts the company into focus as a competent supplier within a complex system integration project.

 

Over the same period Ericsson Nikola Tesla’s cooperation with Vipnet has been further strengthened within the project of introduction of the advanced HSDPA (High Speed Downlink Packet Access) functionality into this operator’s network providing faster Internet access than ADSL. Vipnet is the first operator in Europe to provide his end users with this functionality. Ericsson Nikola Tesla supplied the software solution and supported the network configuration and optimization of the radio access network.

 

The continued cooperation with T-HT involves the modernization of their fixed network, enabling broadband access and the IP based network. Early this year the system integration specialists from Ericsson Nikola Tesla successfully finished the upgrading project for the existing FileNet platform in T-HT. The documents archiving functionality was extended with the advanced functionalities for business processes and corporate contents automatization and management.

 

The sales of enterprise systems were successful, too. Ericsson Nikola Tesla and the Port of Rijeka Authority contracted an end-to-end radar and communications system of sea shipping management, i.e. the Automatic Identification System and VHF system as well as the communication system connecting different locations within the Port of Rijeka Authority. The project will be carried out in cooperation with a Norwegian partner, Kongsberg Norcontrol IT. This is the first end-to-end radar and communications system of sea shipping management to be implemented in Croatia.

 

The company Ericsson Nikola Tesla contracted with T-Mobile Montenegro the delivery of 3G and 2G equipment, which is the first 3G contract outside Croatia. It includes the necessary implementation services, equipment integration, including the solution and project management, as well as the IP Broadband Network Design (IPBN Network Design).

 

In CIS markets the contract signed in Belarus with JV MDC Velcom, the first GSM mobile operator in the Republic of Belarus deserves to be pointed out. The contract covers the infrastructure expansion and upgrade of the Velcom’s GSM core network and BSS. The contract is valued at 241.76 MHRK. Several smaller contracts were also signed in Moldova, Russia and Uzbekistan.

 

As far as the internal Ericsson’s market is concerned the ETK GSDC was granted the responsibility to manage and coordinate the projects within the South EMEA area and thus gained the “primary contact” status. Additional responsibility was also granted to the ETK R&D center and they are related to the I&V services and IP competences. As part of our cooperation on the international projects within the corporation, Ericsson Nikola Tesla’s experts for total communications solutions participate in the project in Japan that involves first ever in the world commercial implementation of Ericsson’s IMS solution over 3G for the operator Softbank Mobile.

 

Communication Ericsson Nikola Tesla