Ericsson Nikola Tesla Group Annual Report 2018 General report 25
2018 financial highlights
Ericsson Nikola Tesla Group Ericsson Nikola Tesla d.d. 2018 2017 2016 2018 2017 2016
Income statement and cash flow items (in HRK million)
Sales revenue 1,558 1,482 1,592 1,374 1,465 1,576 Selling and Administration expenses -68 -80 -78 -66 -78 -76 Operating profit 118 76 114 116 71 112 Profit for the year 114 68 111 112 64 110 Operating cash flow 75 108 187 81 103 181
Year-end position (in HRK million) Total assets 840 822 808 819 795 772
Cash, cash equivalents and liquid financial 236 244 288 231 230 276 assets
Capital employed 326 266 329 305 244 303 Equity 305 236 287 291 223 278
Per share indicators Earnings per share (EPS) in HRK 85 51 83 84 48 83 Dividends per share 32,5 90 32,5 90 Number of shares outstanding, average (in 1,332 1,330 1,329 1,332 1,330 1,329 millions)
Other information (in HRK million) Additions to property, plant and equipment 40 26 33 39 26 25 Depreciation of property, plant and equipment 34 40 48 29 36 44
Alternative Performance Measures (APMs) Gross margin 10.4% 10.2% 11.9% 11% 9.9% 11.8% Operating margin 7.6% 5.1% 7.2% 8% 4.8% 7.1% EBITDA Margin 9.8% 7.9% 10.2% 10.6% 7.3% 9.9% Cash conversion 38.9% 68.2% 96.7% 44% 69.4% 100.0% Return on equity (ROE) 42.0% 26.0% 37.2% 43.5% 25.5% 37.9% Return on capital employed (ROCE) 38.4% 22.9% 33.7% 40.7% 23.4% 35.8% Return on sales (ROS) 7.3% 4.6% 7.0% 8.1% 4.4% 7.0% Equity ratio 36.3% 28.7% 35.5% 35.5% 28.1% 36.0% Capital turnover 5.3 5.0 4.8 5.0 5.4 5.2 Current ratio 1.3 1.1 1.2 1.2 1.1 1.2 P/E ratio 11.8 23.6 14.0 12.0 24.9 14.0 26 General report Annual Report 2018 Ericsson Nikola Tesla Group
Balance sheet structure (in MHRK)
Equity 1,800 Cash, cash equivalents and 1,600 liquid financial assets 1,400 536 Other current assets 586 Non-current assets 1,200 193 Liabilities 1,000 213 800 411 366 600 236 400 244 200 236 305 0 2017 2018
Operating profit (in MHRK), ROCE and ROS (in percentages) Operating profit Return on capital employed (ROCE) Return on sales (ROS)
118 120 114 50%
91 40% 90 76 30%
60
20%
30 10%
0 0% 2015 2016 2017 2018 Ericsson Nikola Tesla Group Annual Report 2018 General report 27
Development of liquid assets and operating profit (in MHRK)
233 225
Cash and cash equivalents 159 188 Liquid financial assets Operating profit
114 118 91 85 76 63 54 48
2015 2016 2017 2018
Change in liquid assets (in MHRK)
108
-32 -120 Cash and liquid financial assets 244 Operating activities 236 Investing activities Financing activities
2017 2018
Sales revenue by market (in percentages)
100% 90% 60% 55% 62% 61% Ericsson 80% Domestic market 70% Export 60% 50% 40% 17% 22% 24% 30% 19% 20% 28% 18% 19% 10% 15% 0% 2015 2016 2017 2018 Luciano
28 General report Annual Report 2018 Ericsson Nikola Tesla Group
Financial performance in 2018
Business results achieved in 2018 indicate a continuation of solid financial performance. Despite meeting many challenges, we managed to realize key business opportunities and plans, ending the year with a strong net profit, lean balance sheet and solid cash position with an effective working capital management. Business activities in the domestic market record a strong growth, which is primarily the result of an increased Damir Bušić number of network modernization projects. Ericsson market Acting Finance Director continuously records growth and contributes to the overall business stability. Contrary to sales growth in the domestic and Ericsson market, export markets recorded slightly lower as well as higher investment in its own assets, the company sales revenue. Unfavorable impact of the political and maintained an adequate level of cash and cash equivalents. economic situation as well as delays in certain operators’ As expected, the effects of adopting new IFRS in 2018 investments resulted in the ramping down of network did not have any considerable impact on the Company’s modernization projects and the slower dynamics of project retained earnings and net result when compared with implementation. previous years. As at the date of transition, 1 January Cost and operational efficiency, capital efficiency and 2018, the impact of IFRS 15 on retained earnings was risk management in our business activities on demanding HRK 72 thousand, and the biggest changes in 2018 reflect markets are continuously the focus of attention at our on extended warranties, agency agreements and given company as well as a way in which we strengthen the discounts. As at the date of transition, 1 January 2018, the already solid financial foundation of our company. Through impact of IFRS 9 was HRK 1,016 thousand, and during 2018 said activities we further reduced costs and used the existing the impact of applying the new model was noticeable with resources more efficiently, which had a positive impact on regard to cash and cash equivalents, deposits, receivables the margin. Provisions on two projects (the strategic project and contract asset. of digital transformation in the CIS market and network modernization project in Croatia) had an unfavorable It is expected that the biggest impact of adopting IFRS 16, impact on the margin. which has been applied since 1 January 2019, is to be made in the accounting of operating leases used by the Group for a With a strong focus on cash collection and lean use of working capital, we produced a solid cash flow from significant number of immovable assets and vehicles. operating activities and managed to maintain the necessary Due to results achieved and with absolute confidence in our cash position. The year ended with a lean balance sheet capabilities, the Company is ready to continue implementing which was at the same level as the year before. Despite its business strategy, further ensuring in this way a high prolonged, complex and substantial investment in projects return for its shareholders. Ericsson Nikola Tesla Group Annual Report 2018 General report 29
Information for shareholders
Shares of Ericsson Nikola Tesla d.d. are traded in the Regular Market of the Zagreb Stock Exchange under the ticker symbol ERNT-R-A.
Share trading and price trend the orderbook was -39.8% lower, while the bonds were +86.6% higher, which in the end resulted in -24.2% lower At the end of 2018, Ericsson Nikola Tesla’s market turnover within the orderbook. The total turnover was capitalization was MHRK 1,345 (2017: MHRK 1,603.3). As -22% lower compared to 2017. regards the free float market capitalization, Ericsson Nikola Market capitalization decreased by -4% to HRK 132.7 Tesla is ranked tenth on the Zagreb Stock Exchange, with billion. At the end of 2018, the indices were mostly MHRK 684.7, representing 2.2 percent of the total free float negative: CROBEX and CROBEX10 were corrected by market capitalization. At the end of 2018, Ericsson Nikola -5%, while CROBEXtr, which also includes the dividends, Tesla’s share weight in CROBEX Index was 6.4 percent. was corrected by -2.8%. An optimistic start of 2018 at the Zagreb Stock Exchange, The liquidity was mostly concentrated in a smaller and a positive trend from the last quarter of 2017 were number of shares, and approximately 40% of the total not sufficient for the overall turnover statistics to be turnover is creditable to 10 shares with the biggest better when compared to 2017. Shares turnover within turnover.
Average ERNT-R-A share price trend 2014-2018 (in HRK)
1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800
I XII XII XII XII XII 2014 2014 2015 2016 2017 2018
Share price and turnover 2014 2015 2016 2017 2018
Highest (HRK) 1,659 1,390 1,179.99 1,444 1,240 Lowest (HRK) 1,250 930 940 1,066.51 976 Last - end of the year (HRK) 1,299 1,045 1,164 1,203.99 1,010 Turnover (in MHRK) 174.2 79.4 53.2 55.1 39.3 Trade volume 116,379 68,888 49,628 43,312 36,116 Dividend per share (HRK) - regular 20 20 20 32.5 70.6* - extraordinary 70 80 70 - -
* Proposed dividend amount submitted to Ericsson Nikola Tesla Annual General Meeting 30 General report Annual Report 2018 Ericsson Nikola Tesla Group
ERNT-R-A share price movement as compared to Zagreb ERNT-R-A Stock Exchange share indices in 2018 CROBEX CROBEX10 CROBEX industry
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30% 1.1.2018 1.2.2018 1.3.2018 1.4.2018 1.5.2018 1.6.2018 1.7.2018 1.8.2018 1.9.2018 1.10.2018 1.11.2018 1.12.2018
ERNT-R-A share trading volume and average price trend in 2018 (in HRK) ERNT-R-A average price Trade volume
1,800,000 1,300
1,600,000
1,200 1,400,000
1,200,000 1,100 1,000,000
800,000 1,000 600,000
400,000 900
200,000
0 800 1.1.2018 1.2.2018 1.3.2018 1.4.2018 1.5.2018 1.6.2018 1.7.2018 1.8.2018 1.9.2018 1.10.2018 1.11.2018 1.12.2018 Ericsson Nikola Tesla Group Annual Report 2018 General report 31
Share capital As at 31 December 2018, the share capital of the joint- stock company Ericsson Nikola Tesla amounted to HRK 133,165,000 distributed in 1,331,650 ordinary registered series A shares. Every share carries one vote at the Annual General Meeting. The total number of treasury shares at the end of 2018 was 211, representing 0.016% of the share capital. The shares were owned by 6,843 shareholders.
Ericsson Nikola Tesla d.d. major shareholders as at 31 December 2018
Number of % of share Shareholders shares capital
Telefonaktiebolaget LM Ericsson 653,473 49.07% Addiko Bank d.d. / Raiffeisen mandatory pension fund, B category 123,514 9.28% OTP banka d.d. / Erste Plavi mandatory pension fund, B category 44,415 3.34% Addiko Bank d.d. / PBZ Croatia osiguranje mandatory pension fund, B category 16,810 1.26% PBZ d.d. / The Bank of New York as custodian 13,752 1.03% Zagrebačka banka d.d./ Unicredit Bank Austria - clients account 12,981 0.97% Zagrebačka banka d.d./ State Street and Trust company, Boston 12,428 0.93% PBZ d.d. / custodian client account 9,734 0.73% OTP banka d.d. / OTP Index fund - open-end alternative investment fund with public offering 8,312 0.62% Addiko Bank d.d. / Raiffeisen voluntary pension fund 7,934 0.60% Other shareholders 428,297 32.17%