Last Wednesday Ericsson Nikola Tesla published its 2024 business performance and financial results. Although revenue recorded a significant drop due to non-renewal of a managed services contract with Hrvatski Telekom, other segments came up and contributed to profitability improvements. Therefore, we bring you a detailed overview of Ericsson NT’s 2024 performance and insights into its outlook for 2025.
Starting off with the top-line, Ericsson Nikola Tesla Group recorded total sales revenue of EUR 249.5m in 2024, marking an 18.5% YoY decline. This drop was primarily due to the non-renewal of a managed services contract with Hrvatski Telekom, which transferred the service to its newly established entity, HT Servisi. Consequently, revenue from the Managed Services segment dropped from EUR 80m in 2023 to just EUR 3m in 2024. However, excluding this, total sales revenue increased by 11.3% YoY, driven by a 32% growth in the operator segment in export markets and a 60% surge in the Digital Society segment. Meanwhile, revenue from the Ericsson market remained stable, dipping slightly by 0.7% YoY to EUR 140.7m, reflecting increased engagement of experts in the Services and Solutions Center on projects for the non-related customers. Notably, revenue from R&D activities grew by 7% YoY, solidifying Ericsson Nikola Tesla’s position as one of Ericsson’s top-rated R&D centers which is employing more than 1,500 employees. Moreover, the company expanded its R&D team by more than 100 experts in 2024, with further growth planned for 2025.
Looking more closely at business segments, in the domestic market sales revenue amounted to EUR 66.4m, down 49% YoY due to aforementioned non-renewal of contract with HT. Still, Ericsson focused on continued cooperation with HT on the modernization and extension of the radio part of mobile network and implementation of dual-mode 5G Core for 4G/5G core networks. Additionally, a partnership with A1 Hrvatska facilitated the extension of 5G coverage and modernization of the core network.
The Digital Society segment continued to expand, with major contracts signed with Croatian government entities and ministries for e-Health, land administration, transportation solutions and digital infrastructure projects. The Company has also advanced its international footprint with the replacement and modernization of the land administration information system in Cyprus.
With that we move on to export markets operations where sales revenue amounted to EUR 42.4m, with the Company successfully completing Telekom Kosova’s radio access network modernization six months ahead of schedule and continuing the advancement of other key projects including network upgrades for IPKO, HT Mostar and Crnogorski Telekom. Export markets remain one of the top priorities for Ericsson NT.
Moving on, gross profit amounted to EUR 28.4m, a 10.7% YoY decline, due to lower sales revenue in the domestic market in the operator segment. However, gross margin increased to 11.4% compared to previous year’s 10.5% as a result of business mix and activities focused on efficiency improvement and cost optimization. Operating profit also decreased as a result of lower sales revenue and gross profit, amounting to EUR 22.1m (-10.6% YoY) but the operating margin also improved from 8.1% to 8.9%. Net profit amounted to EUR 15.6m, down by 29.7% YoY, partially also due to lower sales but also due to additionally calculated one-time tax expense from the previous years due to subsequent change in interpretation of cost eligibility for tax deduction. Therefore, return on sales decreased from 7.3% to 6.3%.
Ericsson Nikola Tesla’s key financial indicators (2024 vs 2023, EURm)
Source: Ericsson Nikola Tesla, InterCapital Research
As for the 2025 outlook, Ericsson Nikola Tesla anticipates a continued operator investment slowdowns in network modernization, as companies focus on monetizing existing 5G infrastructure. However, the Company remains committed to product development, diversification and continued expansion in the Digital Society activities, specifically regarding transport solutions, national and public safety, as well as focusing on growth in export markets while solidifying domestic market dominance.
Lastly, in terms of dividends, while the Company has not yet made any official announcements, we expect an 85% dividend payout ratio, which on a per-share basis would imply a dividend of some EUR 10.00, implying a DY of around 5.4% at the current price.