Ericsson Nikola Tesla business results for 2015 published

The business results achieved in 2015 and the forecast for 2016 were published at the press conference.

Gordana Kovačević, the President of Ericsson Nikola Tesla comments:
 
„Business results in 2015 show a stable business performance. Sales revenue increased by 3.8% year-over-year. A significant increase in revenue was recorded in Ericsson market, thus neutralizing the revenue decrease in other markets. If we analyze the relation between internal and external customers from 2010, until 2015, share of internal Ericsson market in the Group revenue increased from 36% to 60%. During 2015, internal Ericsson market share significantly grew due to increased volume in managed services, but also due to new responsibilities within global organization (research and development center, global and regional services centers, as well as customer solutions centers). We have maintained the position as the Croatia’s leading ICT exporter and the leading exporter of knowledge. In 2015 we continued hiring and employed 435 experts. The number of employees working in research and development surpassed 1,000 and at the end of 2015 Ericsson Nikola Tesla Group had a total of 2,789 employees.
 
In other markets, sales revenue decreased as some projects and contracts have been postponed. The factors that slowed down certain processes are slow economic development and, in some markets, political uncertainty. An additional challenge for our business performance is strong competition and global customers/operators centralized procurement & consolidation.
 
On the other hand, new business opportunities are created through the convergence of operators and industry, and their transformation through mobility, broadband and cloud. Our markets recognize an increasing importance and role ICT has on transformation processes in business and society. To our customers we want to be the leading ICT transformation partner. Our significant advantage is a strong position and customers' trust we enjoy in local and regional markets, thus empowering us to be the leading ICT transformation partner to our customers..
 
Almost every key financial performance indicator shows positive trend. Operating profit increased by 12.2% year-over-year to MHRK 91.4, while net profit increased by 4.6% to MHRK 91.3. Gross margin is slightly lower year-over-year, as a result of change in business mix (increase in services to Ericsson) and a continuous price pressure. This change in business mix results in lower margin, however, at the same time it reduces substantially business and operating risks and allow lower levels of working capital to be employed. Our continuous focus on cost efficiency has brought solid cost savings. Sales and administrative costs decreased by 9.1% year-over-year, thus ensuring a solid operating income. A strong cash flow from operating activities of MHRK 243.1, allowed build-up of the total cash balances, including short term financial assets to MHRK 287.1. Continuous focus on working capital efficiency has led to a decrease in the account receivables by 9% year-over-year and inventory levels by 31.5% year-over-year. The working capital efficiency, measured by the performance indicator Working Capital Days (WCD) is 32 days. The cash conversion rate is at high 153%. In 2015, the annual Employee Engagement Survey (Dialog) confirmed the Company’s motivating culture and strong employee engagement. Furthermore, the annual Customer Satisfaction Survey confirmed a high level of satisfaction among our key customers/partners.

We continued partnership with universities and research institutions by implementing joint projects, some of which are funded by the European Union. In 2015 we marked 15 years of Ericsson Nikola Tesla Summer Camp. During this period, more than 600 students from universities in the country and abroad participated in the Summer Camp and realized more than 400 innovative high-tech projects.
 
In line with our strategy, during 2015 we worked on various projects and initiatives focused on business development in all markets, and profitability improvement through cost efficiency and business excellence. 
 
Through the strategic initiative that focuses on business growth in the domestic and export markets (without the internal Ericsson market), we focused on key deals in 2015, as well as defining strategic areas and competence development.
 
During the year, we realized several key deals. Business deals/contracts with Vipnet and Kosovo operator IPKO in mobile network segment, thus keeping the solo vendor position for these operators. In ICT solutions for Industry and Society segment, I would like to highlight contracts regarding the upgrade and expansion of Joint Information System of Land Registry and Cadaster, and maintenance and upgrade of the Republic of Croatia Central Healthcare Information System (CEZIH). For the Ministry of the Interior of the Republic of Croatia for Operational and Communication Center we implemented the solution for assistance in emergency situations. In CIS market, new business opportunities emerged in operators' segment and in eHealth segment, with two new customers in Armenia and Kazakhstan. 
We continued to invest in targeted areas (IP networks, Cloud, TV & Media, Industry & Society, OSS and BSS).  Sales grew by 12% year-over-year, reaching MHRK 194.2, corresponding to 14% of Group sales.
 
An initiative focused on business growth in internal Ericsson market resulted in increase in business volume and new responsibilities. We took over the responsibility and also became the largest development center for the CUDB (Centralized User Data Base) node design. Our experts had an important role in developing one of the most significant Ericsson projects in 2015, HDS 8000 (Hyperscale Datacenter System) and become the Ericsson competence hub for this solution. Development Unit Radio Access gained responsibility for LTE development. In Services organizations, new global responsibilities were obtained for RAN, OSS and Cloud as well as global responsibilities for GRAN (GSM radio access network) network design & optimization and BSP (Blade Server Platform) customer support. 
 
Our Networked Society strategy remains unchanged. Our aim is to strengthen the position / sales in core business, in targeted growth areas and to increase profitability and market competitiveness by cost optimization. Considering the business results, in combination with our ongoing strategic initiatives, we are well positioned to create future value for our customers, shareholders, employees and society“.
 
Communications Ericsson Nikola Tesla