In H1 2023, Ericsson NT recorded a revenue decrease of 2% YoY, an EBITDA growth of 44.3%, and a net profit of EUR 12.2m, a 34.3% YoY increase.

In total, the Company’s sales revenue amounted to EUR 138m, representing a decrease of 2.2% YoY. The Company noted that this development is positive in light of the current macroeconomic situation, as it shows the stable operations of the Company. They also noted that the delivery of services to Ericsson has continuously grown, and has offset lower sales revenue in the domestic and export market which was caused by reduced operators’ capital investment.

Breaking the sales down further, the domestic market accounted for 37.6% of the total revenue, or EUR 51.8m. In this segment, Ericsson NT notes that from 2024, the technology unit for the construction and maintenance of HT’s network will transfer from Ericsson Nikola Tesla Servisi d.o.o. to HT, which is a result of their development strategy. Until the end of 2023, the company will work on the realization of obligations under the existing contract for the construction and maintenance of HT’s network, while partnership with HT continues in other segments. Also, the company signed several contracts with existing and new customers thus securing a continuation of good business performance and a significant level of orders booked. In the Digital Society segment, they also pointed out the contract with the Ministry of Tourism and Sport, the Ministry of Justice and Public Administration, the State Geodetic Administration, the Croatian Pension Insurance Institute, the Ministry of Labor and a few others. Further, the Company noted that intense sales activities on new business opportunities are ongoing.

Next up, looking at the most prominent segment, i.e. services to Ericsson, which accounted for 52.4% of the total revenue (or EUR 72.2m). In this segment, the company noted one of the most important projects in Ericsson Nikola Tesla’s R&D Center is the development of a new RAN Computer product family generation, where the main objective is to increase capacity compared to the current generation. This big and complex project will deliver a new product that will ensure Ericsson’s even stronger position as 5G technology leader.

The last revenue segment, export markets, which accounts for 10% of the total revenue (or EUR 13.9m). Ericsson emphasized that they continued strong cooperation with the operators HT Mostar, Crnogorski Telekom, Telekom Kosova and IPKO on the expansion and modernization of mobile networks. National regulatory authorities for postal and electronic communications have awarded 5G licenses to IPKO and Telekom Kosovo, and investments are expected in the upcoming period.

Ericsson NT sales revenue breakdown (Q1 2017 – Q1 2023, EURm*)

*Converted using CNB’s EUR/HRK average exchange rate for the quarters in question

Gross profit amounted to EUR 18.4m, an increase of 34.3% YoY as a result of the business mix and operational and cost efficiency, but also due to the fact that the previous year was affected by one-off costs item of contract termination, as a result of geopolitical sanctions. This would also imply a gross profit margin of 13.3%, an increase of 3.6 p.p. YoY. Moving on to EBITDA, it amounted to EUR 17.8m, also representing a solid increase of 30.8%. This would also mean that the EBITDA margin amounted to 12.9%, an increase of 3.2 p.p. YoY. In terms of OPEX, it amounted to EUR 126m, which is a decrease of 5.5% YoY. This was achieved due to the fact that Material costs managed to stay flat and amounted to EUR 60.9m, while staff costs increased by 7% YoY combined with negative changes in inventories (-UR 10.7m).

Meanwhile, the op. profit amounted to EUR 14.7m, an increase of 44.3% YoY, implying an EBIT margin of 10.7%, an increase of 3.4 p.p. YoY. The net financial result was a non-material, but positive at EUR 120k, which means that the EBT amounted to EUR 14.8m. Finally, the net profit of the company amounted to EUR 12.2m, a 34.3% YoY increase.

Ericsson NT key financials (Q1 2017 – Q1 2023, EURm*)

Source: Ericsson NT, InterCapital Research

*Converted using CNB’s EUR/HRK average exchange rate for the quarters in question

Ericsson NT also noted that the improvement in net profit levels meant that return on sales (ROS), too, improved and amounted to 8.8% (H1 2022: 6.4%).

Taking a quick look at the balance sheet, the total assets amounted to EUR 163.9m, decreasing by only 1.6% YoY compared to YE 2022, as a result of the lower level of cash and customer receivables. Cash and cash equivalents, which include short-term financial assets, amounted to EUR 65.8m at the end of H1 2023, representing 40.2% of the total assets. They have recorded a decrease of 11% during the first half of the year, which Ericsson notes is in line with regular activities.