Stable business performance continues, realization ongoing as planned

• Sales revenue amounted to EUR 52 million, net profit amounted to EUR 6.4 million
• A positive cash flow from operating activities was realized, amounting to EUR 1.1 million, as well as a solid level of orders booked for the continuation of the business year    

In her statement about the company's results in Q1 2024, Gordana Kovačević, President of Ericsson Nikola Tesla, highlighted: “We started the year by contracting new business deals in the operator segment in Croatian and export markets, as well as in the Digital Society segment, thus ensuring a solid level of orders booked for the continuation of the business year. However, as we have previously commented, non-renewal of the contract with Hrvatski Telekom regarding managed services had an impact on the decline of sales revenue year-over-year. Additionally, the decline of sales revenue was impacted by the operators’ cautious investments in network modernization and the dynamics in the implementation of contracted activities, which was partially offset by growth in other business segments. Despite all the challenges and the demanding market environment, we kept the leading market position, and we remain a strong strategic partner for our customers and partners.“

In the domestic market in the operator segment, we would like to highlight the cooperation agreement with Hrvatski Telekom (HT) based on which we will be the supplier of the radio part of HT's mobile network (RAN) until the end of 2027. We are pleased to continue our cooperation on the introduction of the 5G standard into HT’s mobile network, which began in 2018 and resulted in several achievements in 5G mobile network on the Croatian market. In accordance with the multi-year contract with our partner A1 Hrvatska, we have been working on additional expansion of coverage and capacity of the 5G radio network as well as core network modernization.

We have continued to strengthen our position in the Kosovo market by signing a framework multi-year contract with the operator Telekom Kosova, related to the modernization and maintenance of the complete radio network of this operator. We have also continued the cooperation with our long-term partner IPKO on the core network modernization and maintenance, among which we would like to single out the introduction of functionalities VoLTE and Mobile Number Portability. In other export markets, we signed contracts for mobile networks modernization and maintenance, among which the contract with HT Mostar for the implementation of the latest technological version of the Ericsson Evolved Packet Core (EPC) and Diameter Signaling Controller (DSC) solutions should be mentioned.

In the Digital Society segment, we have signed several new contracts related to the digital transformation of healthcare, land administration, public administration and security, which will positively affect the availability and quality of public services and thus support the further development of the economy. In this business segment we have additionally strengthened business development and R&D teams. In Q1, we would like to highlight the contracts with the Croatian Employment Service (CES) and the Ministry of the Interior of the Republic of Croatia.  With CES, we have contracted the delivery of a system to support the basic CES processes, the e-Advisor system, and improved user profiling. With the Ministry of the Interior, we have contracted the delivery of mobile systems for green border monitoring.

Our R&D Center has continued with a quality performance and achieved good results. We have expanded our capacities in radio access network (RAN) development to work on Network robustness testing and have been working to additionally position ourselves in the Business Cloud Software & Services segment. Furthermore, we are focused on the development of E2E capability in the area of 5G software/modules and, accordingly, we are preparing in an organizational sense to position ourselves even stronger in the long-term.

Compared to Q1 2023, gross margin increased slightly to 16.8%, as a result of profitability program and business mix. However, due to lower sales revenue, gross profit decreased to EUR 8.7 million. Although selling and administrative expenses remained at the same level year-over-year, amounting to EUR 2.8 million, selling expenses increased due to intense activities on new business opportunities, while administrative expenses are lower. Operating profit decreased by 22.7% to EUR 7.4 million, while net profit decreased by 18.3%, amounting to EUR 6.4 million, due to lower gross profit. We concluded the end of Q1 with a solid balance sheet and an equity ratio of 42.7%. A positive cash flow from operating activities was realized, amounting to EUR 1.1 million compared to EUR -7.1 million in Q1 2023. Cash and cash equivalents, including the short-term financial assets, amounted to EUR 76.8 million, which accounts for 41.7% of the total assets.

In her closing remarks on the results, Gordana Kovačević said: “In order to achieve the company's long-term growth, we continue to invest in new business segments and customers, the development of ICT solutions based on the latest technologies, business diversification in R&D segment, our employees' competencies and digital transformation of Ericsson Nikola Tesla Group. We are considering potential acquisitions, as well as a stronger application of artificial intelligence in creating new business opportunities and increasing internal efficiency. Furthermore, we remain focused on timely recognition and mitigation of risks, operational efficiency, cost management, sustainability, and high ethical standards in business.

As the company that celebrates 75 years of successful, responsible and sustainable business this year, we will remain committed to the continuous development of knowledge, expertise and innovation potential of our employees, as well as dedicated to the success of our customers.“
 

Communications Ericsson Nikola Tesla