Business results of Ericsson Nikola Tesla Group for the first nine months of 2019
Gordana Kovačević, the President of Ericsson Nikola Tesla, commented: „In the first nine months of 2019, Ericsson Nikola Tesla Group sales revenue increased in all markets and amounted to MHRK 1,253.3, up by 16% year-over-year.
The leading global and Croatian operators have been significantly investing in network modernization, digital transformation and preparation for 5G. Globally, 5G technology is developing faster than expected. In Croatia dynamics of investments in 5G development will depend on the model and conditions of the spectrum allocation. 5G is the next generation of mobile networks that will enable greater data transfer speeds, low latency and better network safety characteristics. With 5G technology, we are creating a new platform for innovations that will revolutionize business and society at large and enable new revenue streams and business optimization to our customers.
With the operator A1 Hrvatska we have been successfully cooperating ever since they entered the Croatian market. This September we signed a frame agreement till the end of 2023 that encompasses modernization and expansion of their radio access network by using the latest technology solutions from Ericsson Radio System (ERS) portfolio.
With the operator Hrvatski Telekom intensive activities are ongoing on the modernization of the entire mobile network, which will significantly increase network capacity and enable the introduction of 5G technology. So far, more than 90% of the network was modernized and significantly higher transfer speeds were achieved.
In the segment of ICT for Industry & Society, we continued our activities in the field of e-Health, e-Business (Land Registry and Cadaster) and Public Safety (State Border Control).
In export markets, the implementation of mobile networks modernization projects is ongoing for our customers in Bosnia and Herzegovina, Montenegro, Kosovo, and Belarus. I would like to highlight a frame agreement with the strategic partner HT Eronet for the expansion of LTE network across the entire territory of Bosnia and Herzegovina. Ericsson Nikola Tesla is a single vendor of radio access network to HT Eronet, and owing to radio system equipment which is ready for 5G and IoT, HT Eronet will be able to transit smoothly to 5G in the future.
Business performance in Ericsson market has been continuously growing owing to new responsibilities in the field of 4G/5G mobile systems, quality of performed activities and competencies of our experts from R&D Center and Services and Solutions Expert Centers.
For five years, our daughter company, Ericsson Nikola Tesla Servisi, has been providing services of design, rollout, monitoring and maintenance of telecommunications network infrastructure of Hrvatski Telekom, within the Managed Services segment. Until now many demanding goals were achieved in the area of planning and rollout, connecting users to optical infrastructure as well as on expanding capacities and coverage of Mobile Broadband (MBB).
In terms of financial results, gross profit is up by 7.2% year-over-year as a result of growth in sales revenue. Operating profit is up by 9.9% as a result of gross profit increase, while maintaining total sales and administrative costs almost at the same level year-over-year. Gross margin is 0.9 percentage points lower due to intensive engagement of working capital on projects with key customers. Profit before tax increased by 11.2% as a result of increase in operating profit and a positive financial impact of foreign exchange differences, while net profit, along with the mentioned impacts and the impact of tax relief, increased by 29.6%, amounting to MHRK 80.8. Cash flow from operating activities amounted to MHRK 86, and at the end of Q3, total cash and cash equivalents, including short-term financial assets amounted to MHRK 157.8. Working Capital Efficiency, expressed in Working Capital Days (WCD), was 40 days, and if we exclude services to Ericsson, Working Capital Efficiency was 102 days. Cash conversion rate was 54%.
During Q3, Ericsson Nikola Tesla held its 19th Summer Camp where 54 students from Croatia and neighboring countries participated, 13 of whom from ERASMUS++ project BENEFIT in which our company is the industry partner. With the help of their mentors, the students worked on projects concerning 5G Radio Access, Artificial Intelligence, Automation, Robotics and IoT. Furthermore, within the cooperation with scientific and educational institutions, I would like to highlight the activities on founding a new joint Traffic and Logistics Data Science Lab with the Faculty of Transport and Traffic Sciences (FPZ), University of Zagreb.
Our strategy is focused on long-term strengthening the market leader position in the existing and new segments. We continue to invest in new technologies and competencies strengthening in order to provide quality support to our customers. In Q3, we have closed several important business deals that will strengthen our market position in the upcoming period.
We continue to implement the Digital Transformation program at Ericsson Nikola Tesla Group level, with the aim to additionally simplify the Company's processes and managing business/projects by using advanced technologies and automation.
In order to secure further business development and remain competitive, we continue to focus on cost and operating efficiency, and strategic risk management.“
Communications Ericsson Nikola Tesla