Ericsson Nikola Tesla Group business results for 2019 published

Ericsson Nikola Tesla Group business results achieved in 2019 and the forecast for 2020 were published at the press conference.

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

“In 2019, Ericsson Nikola Tesla Group total sales revenue amounted to MHRK 1,779.3, up by 14.2% year-over-year, with sales revenue growth in all markets. During 2019, we focused on network modernization for our customers in Croatia and abroad, development of new solutions in 5G, and strengthening of our technological leadership.
One of the main trends that marked 2019 is the implementation of 5G network, started by the leading European and global operators, which opened a new chapter in ICT industry. Ericsson is a global leader in 5G, and Ericsson Nikola Tesla Group, with more than 1400 R&D experts (out of total 3224 employees), is a part of this global story. Through its activities in 5G technology development it supports Ericsson in global development of the state-of-the-art solutions and services.
The leading Croatian operators follow global trends and last year was marked by investments in network modernization as the preparation for 5G introduction. The start of 5G implementation is expected in H2 2020, following the announcement of conditions and assigning of the necessary radio-frequency spectrum by the regulator. We successfully completed a complex project of radio access network modernization with Hrvatski Telekom (HT), which significantly improved and evened the quality of HT’s mobile services in the entire network and has created preconditions for 5G introduction. Successful cooperation was continued with A1 Hrvatska, by signing a framework agreement that encompasses modernization and expansion of the operator’s radio access network by using the latest technology solutions from Ericsson Radio System (ERS) portfolio. A strong increase in sales revenue in the domestic market was realized also in ICT Industry & Society segment, primarily on the projects in the field of e-Health, e-Business (Land Registry and Cadaster) and Public Safety (State Border Control).
Export markets also recorded growth in sales revenue. Good cooperation with the operators HT Eronet, Crnogorski Telekom, Ipko and beCloud was continued on modernization, expansion and maintenance of telecommunication networks. In ICT segment Industry & Society we contracted the continuation of healthcare system maintenance for the Ministry of Healthcare of Armenia. After completing the phase of managed services of the healthcare system informatization project in Kazakhstan, we started system maintenance.
Year-over-year, gross profit increased by 16%, amounting to MHRK 164.5, while gross margin remained almost the same amounting to 9.2%. Operating profit amounted to MHRK 102.6, down by 14.5%, primarily due to lack of incentives based on the Investment Promotion Act, although positive impacts of this Act in 2019 are visible in the decrease of tax liability, i.e. effective tax rate. Operating profit was lower also due to increased selling expenses for activities related to seizing new business opportunities. Net profit amounted to MHRK 102.6, while return on sales (ROS) was 5.8%. We concluded the year with a lean balance sheet and an equity ratio of 33%. A positive cash flow from operating activities was realized amounting to MHRK 68.9, primarily as a result of realization of strategic projects. At the end of 2019, total cash and cash equivalents, including short-term financial assets, amounted to MHRK 135.8. Group’s Working capital efficiency, expressed in Working Capital Days (WCD), was 41 days, and if we exclude services to Ericsson, working capital efficiency was 110 days as a result of increased engagement on network modernization projects, primarily in the domestic market. Cash conversion rate was 36%.
As a socially responsible company, we pay special attention to sustainable business. An excellent example is an extensive project of energy efficiency of the part of the Company’s buildings and plants, co-funded by the EU. Once the project is completed, the Company shall realize annual energy savings of more than 4.6 million kWh, with the simultaneous reduction of CO2 emissions by almost 1400 tonnes. This project is in line with the conclusions of Ericsson Nikola Tesla’s action plan to reduce its carbon footprint, which was created within the European LIFE Clim’Foot project, in which the Company previously participated.
As part of the Company’s cooperation with universities, Ericsson Nikola Tesla held its 19th Summer Camp, in which 54 students from Croatia and neighboring countries participated, 13 of whom from ERASMUS++ project BENEFIT, in which our company is the industry partner. The Summer Camp follows global ICT trends so that students worked on projects regarding Artificial Intelligence, Automation, Robotics, 5G and the Internet of Things (IoT), with the help of their mentors. Within the cooperation with scientific and educational institutions, we would like to highlight the activities on founding of new joint Traffic and Logistics Data Science Lab with the Faculty of Transport and Traffic Sciences (FPZ), University of Zagreb.
In line with our strategy, we are focused on the development of solutions and services and sales in the field of mobile broadband Internet access (4G/5G mobile solutions), digital transformation, Managed Services and Industry & Society segment (healthcare, public safety, e-Business).We have been intensively working on strategic contracts and have been investing in 5G and new business models, which will impact our margins short term, but will also strengthen our market position in the long term. During January 2020 Ericsson Nikola Tesla Group took over from Ericsson corporation the full responsibility for the Managed Services of build and maintenance of HT’s telecommunications infrastructure.
Furthermore, we have been working on strengthening of our position in Ericsson market through activities of R&D center as well as our expert centers for services and solutions, by focusing on achieving high quality, innovation and cost efficiency. In line with the above, we continue hiring and investing in equipment and development of strategic knowledge and skills. During 2020 we continue to implement the Digital Transformation program at Ericsson Nikola Tesla Group level, with the aim to simplify the Company's key processes and further automation.
In order to secure further business development and remain competitive, we shall continue to focus on cost and operating efficiency, working capital efficiency and strategic risk management.
In 2019, our company marked its 70th anniversary and I would like to thank all employees, customers and partners for their contribution to our successful operation.“

Communications Ericsson Nikola Tesla